214 ORGANIZING SCIENTIFIC RESEARCH FOR WAR 



Notwithstanding the provisions of Section 3679 of the Revised Statutes (31 

 U.S.C. 665), the Office of Scientific Research and Development is authorized, in 

 making contracts for the conduct of investigations or experiments, to agree on 

 behalf of the United States to indemnify the contractor from such funds as may 

 be hereafter appropriated for the purpose, against loss or damage to persons or 

 property arising from such work. 



Pursuant to this authority, OSRD on July i, 1942, inserted the following 

 provision in its standard form contract: 



Indemnity Clause. The Government shall indemnify the Contractor, from such 

 funds as may be hereafter appropriated by Congress for such purpose, against 

 loss or damage to persons or property arising from performance of its undertak- 

 ings hereunder (including settlements made with the written consent of the 

 Contracting Officer) not compensated for by insurance or otherwise, in amounts 

 found and certified by the Contracting Officer to be just and reasonable; Pro- 

 vided, That the Contractor shall give the Contracting Officer prompt notice of the 

 institution of, and permit the Contracting Officer at his election to control the 

 defense of, all law suits instituted against the Contractor with respect to any such 

 alleged loss or damage. 



OSRD appropriation acts for subsequent fiscal years contained the same 

 language relating to indemnity and the above provision accordingly was 

 continued in the standard contracts. The provision was so restrictive and 

 indefinite ("from such funds as may be hereafter appropriated for the 

 purpose") that many OSRD contractors were unwilling to rely on it to the 

 extent of completely omitting ordinary public liability insurance and similar 

 normal business safeguards. 



The problem of protecting contractors against the loss of equipment pur- 

 chased under OSRD contracts and subjected to unique hazards was trouble- 

 some in 1 94 1 and early 1942, when the standard OSRD contract placed on 

 the contractor all risks of loss as to such property. To protect themselves 

 against this contingent liability, contractors usually secured property in- 

 surance (fire, theft, windstorm, comprehensive, etc.), the cost of which 

 was defrayed by the Government. Where operations were hazardous, such 

 insurance was very costly, if obtainable at all. 



To meet this situation, the new standard form contract adopted in Janu- 

 ary 1943, provided in Article 4 that the contractor should be responsible for 

 loss of or damage to equipment purchased under the contract only so far as 

 it was attributable to the willful misconduct or lack of good faith of an offi- 

 cer of the contractor or of a person having substantially complete charge of 

 the establishment where the contract work was performed. Since the Gov- 

 ernment assumed almost complete risk of loss and thus acted in its tradi- 

 tional role of self-insurer, there was no necessity for insurance protection 

 by outside carriers. The provision resulted in a very substantial saving to the 

 Government. 



