Overview
This section prohibits the federal government from using appropriated funds to contract with "inverted domestic corporations"—formerly U.S. entities that have reincorporated as foreign entities—or their subsidiaries. It establishes a mandatory representation process for offerors to ensure compliance with government-wide funding restrictions.
Key Rules
- The Prohibition: Agencies are generally barred from awarding contracts to any inverted domestic corporation or any subsidiary in which a parent corporation owns more than 50% (directly or indirectly).
- Mandatory Representation: To be eligible for award, an offeror must formally represent that it is not an inverted domestic corporation or a subsidiary of one.
- Contracting Officer (CO) Reliance: The CO may rely on the offeror’s representation unless there is a specific reason to question its validity.
- Exceptions and Waivers: The prohibition does not apply to contracts entered into before the enactment of the underlying Appropriations Act. Agency heads may waive the prohibition for specific contracts if required for national security, provided they notify Congress.
- Required Provisions: COs must include FAR 52.209-2 (Representation) and 52.209-10 (Clause) in all solicitations and contracts for products or services, including construction.
Practical Implications
- Compliance Burden: Offerors must carefully evaluate their corporate structure against the definitions in 6 U.S.C. 395(b) to ensure their certifications in the System for Award Management (SAM) are accurate.
- Performance Monitoring: If a contractor undergoes a corporate inversion during contract performance, the CO must consult legal counsel to determine if the funding prohibition applies to continued performance or future task orders.