FAR 25.1001—Waiver of right to examination of records.
Plain-English Summary
FAR 25.1001 explains when the Government may waive the normal right to examine contractor records in contracts with foreign contractors, foreign governments, or agencies of foreign governments. It ties that waiver to the audit-and-records clauses at 52.215-2 and 52.212-5, which implement statutory authority under 10 U.S.C. 3841 and 41 U.S.C. 4706. The section tells contracting officers to include the basic clause whenever possible, but allows use of the alternate clause only after reasonable efforts to obtain the basic clause have failed, relevant business factors have been weighed, and the agency head has made a formal determination and findings (D&F). It also explains when Comptroller General concurrence is required and when it is not, including cases where the contractor is a foreign government or is legally barred by local law from making records available. In practice, this section is about balancing audit rights against foreign procurement realities, while ensuring the Government documents why it is giving up or limiting access to records.
Key Rules
Use basic clause when possible
The contracting officer should insert the basic audit-and-records clause whenever possible in negotiated contracts with foreign contractors. The default rule is to preserve the Government’s right to examine records unless there is a valid reason not to.
Alternate clause only after efforts fail
The alternate clause may be used only after the contracting officer has exhausted all reasonable efforts to include the basic clause and has considered alternate sources of supply, added cost, and delivery time. This makes the waiver an exception, not a routine drafting choice.
Agency head D&F required
Before using the alternate clause, the head of the agency must execute a determination and findings that satisfies the content requirements in paragraph (b). This formal approval is a prerequisite to waiving the basic record-examination right.
Comptroller General concurrence generally required
The agency head’s D&F must have the concurrence of the Comptroller General when the alternate clause is used. This adds an external check on the decision to waive audit rights in foreign contracting situations.
Exceptions to concurrence
Comptroller General concurrence is not required if the contractor is a foreign government or agency of a foreign government, or if the laws of the foreign country prevent the contractor from making records available for examination. These are special cases where concurrence is not needed because access is legally unavailable or the counterparty is governmental.
D&F must be specific
The D&F must identify the contract and its purpose, state whether the contractor is a foreign contractor or foreign government entity, describe efforts to include the basic clause, explain the contractor’s refusal, describe U.S. and other-source price and availability, and conclude that use of the alternate clause is in the best interest of the United States.
Responsibilities
Contracting Officer
Try to include the basic audit-and-records clause in negotiated foreign contracts whenever possible. If that is not feasible, document the efforts made, evaluate supply, cost, and delivery considerations, and ensure the proper alternate clause is used only after the required D&F is obtained.
Head of Agency
Issue the formal determination and findings required by the regulation before the alternate clause may be used. The D&F must address all required elements and support the conclusion that waiving the basic clause is in the Government’s interest.
Comptroller General
Provide concurrence on the agency head’s D&F when required for use of the alternate clause. This concurrence is not required in the two stated exceptions involving foreign governments or legal prohibitions under foreign law.
Foreign Contractor
Negotiate the audit-and-records clause and, if refusing the basic clause, provide the basis for that refusal. The contractor may be subject to the alternate clause if the Government completes the required approval process.
Foreign Government or Foreign Government Agency
When acting as the contractor, the entity may be exempt from the Comptroller General concurrence requirement for use of the alternate clause. The contracting officer still must follow the D&F process and determine the appropriate clause.
Practical Implications
This section is a documentation-heavy exception process: if the file does not show reasonable efforts, business-factor analysis, and a proper D&F, use of the alternate clause is vulnerable to challenge.
Contracting officers should not assume foreign status alone justifies waiver; the regulation requires a specific decision based on contract facts, market conditions, and the contractor’s position.
A common pitfall is failing to distinguish between a foreign contractor and a foreign government entity, because the concurrence requirement changes depending on who the counterparty is.
Another frequent issue is overlooking local law restrictions; if foreign law blocks record access, that fact must be recognized and documented, and Comptroller General concurrence is not required.
Because the clause affects audit rights, pricing, and postaward oversight, the decision should be coordinated early with legal, policy, and audit stakeholders rather than left until award time.
Official Regulatory Text
(a) Policy . The clause at 52.215-2 , Audit and Records-Negotiation, prescribed at 15.209 (b), and paragraph (d) of the clause at 52.212-5 , Contract Terms and Conditions Required to Implement Statutes or Executive Orders-Commercial Products and Commercial Services, prescribed at 12.301 (b)(4), implement 10 U.S.C. 3841 and 41 U.S.C. 4706. The basic clauses authorize examination of records by the Comptroller General. (1) Insert the appropriate basic clause, whenever possible, in negotiated contracts with foreign contractors. (2) The contracting officer may use 52.215-2 with its Alternate III or 52.212-5 with its Alternate I after- (i) Exhausting all reasonable efforts to include the basic clause; (ii) Considering factors such as alternate sources of supply, additional cost, and time of delivery; and (iii) The head of the agency has executed a determination and findings in accordance with paragraph (b) of this section, with the concurrence of the Comptroller General. However, concurrence of the Comptroller General is not required if the contractor is a foreign government or agency thereof or is precluded by the laws of the country involved from making its records available for examination. (b) Determination and findings . The determination and findings must- (1) Identify the contract and its purpose, and identify if the contract is with a foreign contractor or with a foreign government or an agency of a foreign government; (2) Describe the efforts to include the basic clause; (3) State the reasons for the contractor’s refusal to include the basic clause; (4) Describe the price and availability of the supplies or services from the United States and other sources; and (5) Determine that it will best serve the interest of the United States to use the appropriate alternate clause in paragraph (a)(2) of this section.