Prohibitions Against Awards to Inverted Domestic Corporations (IDCs)

Inverted Domestic Corporations (IDCs) are companies that used to be incorporated in the US (or used to be partnerships in the US), but are now incorporated in a foreign country, or are subsidiaries whose parent corporations are incorporated in a foreign country. You can read more about IDCs by clicking here.

FAR 9.108 prohibits the Government from contracting with IDCs. In responding to solicitations, offerors must represent that they are not IDCs. If they can't make such a representation, they are ineligible for award of a contract. The contracting officer is obligated, by the same FAR provision to "rigorously examine circumstances known to them that would lead a reasonable business person to question the contractor's self-certification. After consultation with legal counsel, the contracting officer is required to take appropriate action where that questionable self-certification cannot be verified. Presumable, the appropriate action in this case would be to make that offeror ineligible for award of contract.

With this background, we now come to a recent bid protest decision by the Comptroller General in a case where the protestor claimed that the winning bidder was not eligible for award because it was an IDC (see GAO Bid Protest B-409465 dated May 12, 2014).

The protestor contended that the contracting officer's determination was flawed because the contracting officer had reason to question whether the winning bidder's representation concerning IDC was valid. The protestor argued that the contracting officer had reason to question the representation because it had alerted the contracting officer of the issue in a previous protest.

The contracting officer was indeed aware of the prior protest. In the previous protest, the matter had been submitted for legal review and the counsel issued a detailed factual and legal bases in concluding that the winning bidder was not an inverted domestic corporation. Based on that legal determination, the contracting officer's boss believed the issue had been vetted and resolved though appropriate agency channels. The boss advised the contracting officer that he could rely on the IDC representation.

GAO denied the protest, stating that the contracting officer had done everything required of it and there was no basis for overturning the award.