10 U.S.C. § 3864 — Assumption of uninsurable risk on certain contracts
submitted 1 year ago by Pub. L. 119-60 to r/title-10-ARMED-FORCES · 288 words · no verdicts yet
The Department of Defense must protect contractors from certain losses of work in process when classified performance makes commercial insurance unavailable or unable to process a claim. The protection does not cover willful misconduct, bad faith, or workmanship errors.
(a) The Secretary of Defense must ensure that a contractor is not required to bear the risk of loss for “work in process” under a “covered contract” when the contract’s classified nature means the contractor cannot obtain commercial insurance for that risk or a commercial provider cannot process the contractor’s claim for the loss. (b) This protection does not apply to the extent the loss results from willful misconduct or lack of good faith by the contractor’s management, including oversight of subcontractors, or from the contractor’s workmanship error. (c) “Classified contract” means a contract whose performance requires the contractor or its employee to access classified information. “Covered contract” means a classified, fixed-price-type contract for acquiring a product that the Department of Defense entered after this Act was enacted. “Work in process” means an item at any production or manufacturing stage from the start of contract performance until Government delivery and acceptance. “Workmanship error” means damage to work in process caused by incorrectly performing a skill-based task, operation, or action that was originally planned or intended.
The Secretary of Defense shall ensure that a contractor is not required to assume the risk of loss for work in process under a covered contract if, due to the classified nature of the performance of such contractor under such covered contract—
such contractor is unable to obtain insurance for such risk of loss from a commercial provider; or
a commercial provider is unable to process a claim of such contractor for loss of work in process under such covered contract.
Subsection (a) shall not apply with respect to a loss of work in process under a covered contract to the extent that such loss—
is the result of willful misconduct or lack of good faith on the part of the managerial personnel of the contractor, including with respect to the oversight of subcontractors by the contractor; or
is the result of workmanship error by the contractor.
In this section:
The term “classified contract” means a contract the performance of which requires a contractor performing under such contract, or an employee of such contractor, to have access to classified information.
The term “covered contract” means a classified, fixed-price type contract for the acquisition* of a product entered into by the Department of Defense after the enactment of this Act.
The term “work in process” means an item at any stage of production or manufacture at any time from the initiation of contract performance until delivery to and acceptance by the Government.
The term “workmanship error” means damage to work in process that is a result of an incorrectly performed skill-based task, operation, or action that was originally planned or intended.
Source credit: (Added Pub. L. 119–60, div. A, title VIII, § 801(a), Dec. 18, 2025, 139 Stat. 939.)
- 2025Enacted · Pub. L. 119-60 · 139 Stat. 939
A history note hasn’t been published yet. The record shows enactment by Pub. L. 119-60 on 2025-12-18.
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