President Obama Authorizes Indemnification for USAID Contractors Combatting Ebola
Companies contracting with the U.S. Agency for International Development (USAID) to combat the Ebola outbreak in West Africa have undertaken extremely hazardous projects in support of USAID’s humanitarian mission. Besides obvious concerns for the health and security of their employees, these companies are wary of unbounded legal exposure from tort claims associated with the spread of Ebola. In a commercial contracting environment, companies would attempt to mitigate that legal risk through contractual indemnification. In federal public contracting, however, the Anti-Deficiency Act prohibits federal agencies from entering into open-ended indemnification agreements, except where expressly permitted by Congress.
P.L. 85-804 grants an exception to this prohibition. Congress enacted P.L. 85-804 to give the President the power to authorize federal agencies involved in the national defense “to enter into contracts or into amendments or modifications of contracts […] without regard to other provisions of law relating to the making, performance, amendment, or modification of contracts, whenever […] such action would facilitate the national defense.” It also gives the President the power to authorize federal agencies to indemnify contractors against unusually hazardous or nuclear risks. Presidents have implemented P.L. 85-804 over the years through Executive Orders, beginning with President Eisenhower’s Executive Order 10789 of Nov. 14, 1958.
Earlier this month, President Obama issued a Presidential Memorandum permitting the USAID Administrator to exercise authority under P.L. 85-804 “with respect to contracts performed in Africa in support of USAID’s response to the Ebola outbreak in Africa where the contractor, its employees, or subcontractors will have significant exposure to Ebola.” The President stated that “[t]his authority may be exercised solely for the purpose of holding harmless and indemnifying contractors with respect to claims, losses, or damage arising out of or resulting from exposure, in the course of performance of the contracts, to Ebola.” In issuing this Memorandum, President Obama concluded that “USAID is exercising functions in connection with the national defense in the course of complying with its humanitarian mandate, and there is a relevant state of national emergency that authorizes use of Public Law 85-804.” He deemed that “the authorization provided in this memorandum and actions taken pursuant to that authorization would facilitate the national defense.”
Indemnification for USAID contractors in the event of damages arising from Ebola exposure is still not automatic. The process for requesting and negotiating P.L. 85-804 indemnification is included in Part 50 of the Federal Acquisition Regulation. Moreover, the President’s grant of authority to the USAID Administrator does not require the agency to indemnify any contractor. Nevertheless, given how rarely the federal government allows for indemnification pursuant to P.L. 85-804, the President’s action is a very welcome development for USAID contractors in West Africa.