E.  Scope of the Representation

Comment: One respondent requested that the FAR Councils clarify the certification requirement set forth in FAR 52.209-2. Specifically, the comment requested that we clarify the following points:

(1)  Whether a business that was previously an inverted domestic corporation, but no longer one at the time of initial offer, would be eligible for contract award; and

(2)  Whether an awardee can become an inverted domestic corporation during performance of the contract.

The respondent stated that the Councils should not limit an awardees' ability to become an inverted domestic corporation during performance of the contract because it would be an overly broad interpretation and would unfairly punish the shareholders.

Response: The Councils agree that the representation (it is not a certification, but a representation) requires additional clarification. In addition, the Councils agree that a former inverted domestic corporation could be eligible for award of a contract if it is no longer an inverted domestic corporation at the time of initial offer. However, the statute prohibits the expenditure of funds to an awardee that becomes an inverted domestic corporation during contract performance.

Specifically, the public laws at issue in this rule state that "None of the funds appropriated * * * may be used for any Federal Government contract with * * * an inverted domestic corporation * * *" see Public Law 111-117, section 740. This would mean that a company could not be an inverted domestic corporation at the time of initial offer, contract award, or any time after. If a corporation receives a contract and during contract performance becomes an inverted domestic corporation, then payment using restricted funds may constitute a violation of the Anti-Deficiency Act. Consequently, the Councils have added a clause at FAR 52.209-10, Prohibition on Contracting with Inverted Domestic Corporations, to inform a contractor of the potential consequences if the contractor becomes an inverted domestic corporation or a subsidiary thereof at any time during the period of performance of the contract.