FAR 37.113—Severance payments to foreign nationals.

Waiver of cost allowability limitations.

FAR 37.113-1 addresses when an agency may waive the cost allowability limits in FAR 31.205-6(g)(6) for severance payments to foreign nationals. The section is aimed at contracts that provide significant support services to members of the armed forces stationed or deployed outside the United States, or to executive agency employees posted outside the United States, and that will be performed wholly or partly outside the United States. It explains that only the head of the agency may approve the waiver, and only before contract award, which makes the issue a pre-award planning and acquisition strategy matter rather than a post-award remedy. The section also identifies two categories where waivers are prohibited: military banking contracts covered by 10 U.S.C. 3744(d), and certain DoD service contracts in the Republic of the Philippines where severance results from the termination of U.S. military basing rights. In practice, this rule matters because it determines whether severance costs for foreign national employees can be treated as allowable contract costs, affecting pricing, competition, and contractor staffing decisions on overseas support contracts.

Solicitation provision and contract clause.

FAR 37.113-2 tells contracting officers which solicitation provision and contract clause to use when a procurement is subject to the FAR’s restriction on severance payments to foreign nationals. It covers two related topics: the mandatory use of provision 52.237-8, Restriction on Severance Payments to Foreign Nationals, in solicitations that meet the applicability criteria in 37.113-1(a) and are not excluded by 37.113-1(c); and the mandatory use of clause 52.237-9, Waiver of Limitation on Severance Payments to Foreign Nationals, when the head of an agency has granted a waiver under 37.113-1. In practice, this section is a prescription rule: it does not itself define the restriction, but tells the acquisition team exactly which FAR text to insert into the solicitation or contract depending on whether the restriction applies or has been waived. Its purpose is to ensure offerors are on notice of the severance-payment limitation and, where a waiver exists, to document the authorized exception in the contract. For contractors, this section matters because it affects proposal preparation, employment cost planning, and compliance with any severance-payment limits tied to foreign nationals.