Overview
This section outlines the authority and conditions under which an agency head may waive cost allowability limitations on severance payments for foreign nationals working on overseas service contracts. It specifically addresses contracts supporting U.S. military or executive agency personnel stationed outside the United States.
Key Rules
- Waiver Authority: The head of an agency has the power to waive the cost allowability limitations found in FAR 31.205-6(g)(6) regarding severance payments to foreign nationals.
- Eligibility Criteria: To qualify for a waiver, the contract must provide "significant support services" to U.S. armed forces or executive agency employees stationed outside the U.S., and performance must occur (in whole or in part) outside the U.S.
- Timing Requirement: Waivers are only valid if they are granted before the contract is awarded.
- Specific Prohibitions: Waivers cannot be granted for military banking contracts or for specific cases in the Republic of the Philippines related to the termination of U.S. basing rights.
- Required Provisions/Clauses:
- 52.237-8: Must be included in solicitations for applicable overseas support services.
- 52.237-9: Must be included in the resulting contract if a waiver has been successfully granted.
Practical Implications
- Contractors bidding on OCONUS (outside the contiguous United States) support contracts must evaluate foreign labor laws regarding severance early in the proposal process to determine if a waiver is necessary for cost recovery.
- Because waivers cannot be granted post-award, the government and the contractor must coordinate the administrative waiver process during the solicitation phase to ensure high-value severance liabilities are not rendered unallowable.