B-242729, B-242730, B-242731, Apr 2, 1991, 91-1 CPD ***

B-242729,B-242731,B-242730: Apr 2, 1991

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FAR case No. 90-58 is a proposal to revise the contract clause at FAR section 52.246-4 to provide for government inspection at the contractor's or any subcontractor's facility under contracts for services. A similar clause is currently in use for supply contracts. We have no objection to the proposed change. We therefore have no objection to it. Based on work we have been doing on base closings in Europe. We have the following observations. What is likely to occur is a mutual decision following negotiations. Even though the initiative for the closing may have originated with the foreign government. An illustration of this problem is the July 1990 mutual defense cooperation agreement between the United States and Greece.

B-242729, B-242730, B-242731, Apr 2, 1991, 91-1 CPD ***

PROCUREMENT - Socio-Economic Policies - Federal procurement regulations/laws - Revision DIGEST: 1. General Accounting Office has no objection to Federal Acquisition Regulation (FAR) case No. 90-58, a proposal to revise the contract clause at FAR section 52.246-4 to provide for government inspection at the contractor's facility under contracts for services. PROCUREMENT - Socio-Economic Policies - Federal procurement regulations/laws - Severance pay - Eligibility - Foreign nationals 2. General Accounting Office has no objection to Federal Acquisition Regulation (FAR) case No. 90-30 (Item I of Federal Acquisition Circular 90-3), an interim rule that makes unallowable the costs of severance payments to foreign nationals if the termination of their employment results from a request of the host country to close or curtail activities at a U.S. facility located in the host country.

Laurie A. Frazier

FAR Secretariat:

This responds to your letter of January 10, 1991, requesting our comments on Federal Acquisition Regulation (FAR) case No. 90-58, a proposed rule on inspection of services, and FAR case No. 90-30 (Federal Acquisition Circular (FAC) 90-3, Item I), severance pay for foreign nationals under base closures.

FAR case No. 90-58 is a proposal to revise the contract clause at FAR section 52.246-4 to provide for government inspection at the contractor's or any subcontractor's facility under contracts for services, such as ship repair contracts. The contractor would be required to furnish at its expense reasonable facilities and assistance. A similar clause is currently in use for supply contracts. We have no objection to the proposed change.

Item I of FAC 90-3 amends FAR section 37.110(f) and the clause at FAR section 52.237.8(b) to make unallowable the costs of severance payments to foreign nationals if the termination of their employment results from a request of a host country to close or curtail activities at a United States facility located in the host country. The interim rule implements section 311 of the National Defense Authorization Act for Fiscal Years 1990 and 1991, Pub.L. No. 101-189, 103 Stat. 1411. The prohibition does not apply when the closing or curtailment arises from an agreement entered into with the host country before November 29, 1989, the date of enactment of the Act.

Item I of FAC 90-3 accurately tracks the statutory provision, and we therefore have no objection to it. Based on work we have been doing on base closings in Europe, however, we have the following observations. First, it may be difficult to determine when a closing results from a request of a foreign government. What is likely to occur is a mutual decision following negotiations, even though the initiative for the closing may have originated with the foreign government.

An illustration of this problem is the July 1990 mutual defense cooperation agreement between the United States and Greece, providing for the closing of the Hellenikon Air Base in Greece by June 30, 1991. The agreement states that the closing is a decision of the United States. Nevertheless, termination of the prior base agreement in 1988 at the request of the Greek Government-- the Defense and Economic Cooperation Agreement of 1983-- as well as the negotiating history, strongly suggest that the United States decision to leave was a response to initiatives of the Greek government.

Second, it is not clear whether the exception concerning agreements predating the statute applies only to agreements specifically providing for a base closing or curtailment of activities, or whether it also extends to bilateral defense agreements upon whose expiration the United States would have no legal right to continue operating bases. Again, we use the recent Greek situation as an example. The former agreement authorizing United States use of bases in Greece, the 1983 Defense and Economic Cooperation Agreement, terminated in 1988 at the request of the Greek government. Under the agreement, the United States had 17 months to leave its Greek bases. The 1990 agreement, described above, essentially finalized arrangements of the United States and Greece regarding United States bases in Greece.

Although the 1983 agreement did not specifically provide for a base closing, its termination requested the United States to leave Greece. the section 311 exception includes these kind of agreements, there could well be a number of pre-November 29, 1989 agreements to which the 311 restriction would not apply.

Because we have not yet completed our work, we are not in a position to suggest specific language to address the uncertainties we have identified. We would urge, however, that consideration be given to addressing these matters in formulating the final rule.