FAR Cost Principles Revisions

Pursuant to a legislative requirement, GAO reviewed changes to the Department of Defense's (DOD) regulations concerning allowable costs on certain defense contracts. GAO noted that: (1) the new regulation provides that the head of an agency may waive the prohibitions on severance pay to foreign nationals when such payments are required by the host country's laws or a collective bargaining agreement, the contractor has taken steps to minimize the amounts paid to foreign nationals, and nonpayment would adversely affect programs providing significant support services for armed forces members; (2) legislation prohibited payment of severance pay to foreign nationals employed by DOD in the Philippines or reimbursement to contractors for severance payments to foreign nationals when discontinuation of employment resulted from termination of basing rights in the Philippines; and (3) legislation repealed the exception that prohibitions do not apply if the closing or curtailment was pursuant to an agreement entered into with the host country prior to November 29, 1989.