FAR 9.108—Prohibition on contracting with inverted domestic corporations.

Definitions.

FAR 9.108-1 provides the definitions that control how the rest of FAR 9.108 is applied. It defines two key terms: "inverted domestic corporation" and "subsidiary." The first term ties directly to the statutory definition in 6 U.S.C. 395(b), as applied under 6 U.S.C. 395(c), so users must look to that statute for the full legal test rather than relying on the FAR text alone. The second term establishes a majority-ownership standard for identifying a subsidiary, including ownership held directly by a parent corporation or indirectly through another subsidiary. In practice, these definitions matter because they determine which entities are covered by the restrictions and compliance requirements in FAR 9.108, especially in situations involving corporate restructuring, mergers, acquisitions, and complex ownership chains. Contractors, contracting officers, and agency personnel must use these definitions carefully because small differences in corporate structure can change whether a company is treated as covered under the rule.

Prohibition.

FAR 9.108-2 implements the governmentwide prohibition on using appropriated or otherwise available funds to award or continue certain contracts with an inverted domestic corporation or a subsidiary of one. This section explains the core ban, identifies the statutory source and its extension through successor appropriations provisions and continuing resolutions, and states the main exception for contracts entered into before the enactment date of the applicable appropriations act and for task orders issued under those preexisting contracts. It also addresses what contracting officers should do if a contractor becomes an inverted domestic corporation, or a subsidiary of one, during contract performance, namely consult legal counsel to ensure the prohibition is applied correctly. In practice, this section is about award eligibility and continued performance risk: it helps agencies avoid obligating funds in violation of appropriations restrictions and gives contracting officers a process cue when a contractor’s corporate status changes after award. Contractors should understand that corporate restructuring can affect eligibility, and agencies must monitor for changes that could trigger the prohibition or the need to consider the waiver provision in FAR 9.108-4.

Representation by the offeror.

FAR 9.108-3 addresses the offeror’s required representation regarding inverted domestic corporations and subsidiaries of inverted domestic corporations, and the contracting officer’s ability to rely on that representation. In practice, this section is a gatekeeping rule for award eligibility: an offeror must affirm that it is not an inverted domestic corporation and is not a subsidiary of one, or it cannot receive award unless a waiver is granted under FAR 9.108-4. The section also tells contracting officers when they may accept the offeror’s statement at face value and when they must question it. Its purpose is to prevent the Government from awarding contracts to entities that fall within the inverted domestic corporation prohibition while still allowing efficient procurement processing when no red flags exist. For contractors, this means the representation must be accurate and supportable; for contracting officers, it means the representation is generally sufficient unless there is a reason to doubt it.

Waiver.

FAR 9.108-4 provides a narrow waiver authority for the restrictions in FAR 9.108-2 and the requirement in FAR 9.108-3 when a specific contract must proceed despite those provisions. It addresses who may grant the waiver, the standard that must be met, the need for a written determination, the requirement to document the decision, and the obligation to report the waiver to Congress. In practical terms, this section exists to preserve a national-security escape valve while keeping the exception tightly controlled and transparent. It means the normal prohibition and related requirement remain in force unless the agency head personally concludes, in writing, that bypassing them is necessary for national security. For contractors and contracting officials, the section signals that waivers are extraordinary, contract-specific, and not something that can be assumed, delegated casually, or applied broadly across an agency.

Solicitation provision and contract clause.

FAR 9.108-5 tells contracting officers exactly which inverted domestic corporation restrictions must be inserted into solicitations and contracts. It covers two specific prescription requirements: the solicitation representation at 52.209-2, Prohibition on Contracting with Inverted Domestic Corporations-Representation, and the contract clause at 52.209-10, Prohibition on Contracting with Inverted Domestic Corporations. The section applies to acquisitions of products or services, including construction, so it is not limited to one type of procurement. Its purpose is to ensure offerors represent their status up front and that the resulting contract contains the operative prohibition language. In practice, this section is a mandatory checklist item for contracting officers when preparing solicitations and awards, because omitting either the representation or the clause can create compliance problems and weaken the Government’s ability to enforce the restriction.