The Balance of Payments Program overseas

← All Insights

1. What the program covers

Subpart 225.75 of the Defense Federal Acquisition Regulation Supplement (DFARS) sets out the policies and procedures of the Balance of Payments Program (DFARS 225.7500). It applies to contracts for supplies for use outside the United States and for construction to be performed outside the United States.

The policy is to acquire only domestic end products for use outside the United States, and to use only domestic construction material for construction performed outside the United States (DFARS 225.7501). The policy expressly includes end products and construction material for foreign military sales. It then lists exceptions in three groups: those decided before the solicitation is issued, those decided after offers arrive, and a public interest exception available at any time.

2. Exceptions decided before the solicitation

The first exception is value. The program does not apply if the estimated cost of the acquisition, or the value of a particular construction material, is at or below the simplified acquisition threshold (DFARS 225.7501(a)(1)). The second is the kind of item (DFARS 225.7501(a)(2)). The program does not apply to articles listed in FAR 25.104, petroleum products, industrial gases, or a brand drug specified by the Defense Medical Materiel Board. It also does not apply to information technology that is a commercial product bought with fiscal year 2004 or later funds.

Spare parts for foreign-manufactured vehicles, equipment, machinery or systems are also excepted, provided the acquisition is restricted to the original manufacturer or its supplier (DFARS 225.7501(a)(2)(iii)). The program also does not apply to acquisitions covered by the World Trade Organization Government Procurement Agreement (DFARS 225.7501(a)(3)). It does not apply where a treaty or executive agreement between governments requires acquisition of foreign end products or construction material (DFARS 225.7501(a)(4)). End products acquired for commissary resale are also outside it (DFARS 225.7501(a)(6)). A separate exception covers acquisitions in support of operations in Afghanistan where a procedure in DFARS 225.7703-1(a) is authorized (DFARS 225.7501(a)(5)).

3. When a foreign source is the best fit

The last pre-solicitation exception rests on the contracting officer’s judgment that a requirement can best be filled by a foreign end product or construction material (DFARS 225.7501(a)(7)). The DFARS lists five examples of such determinations. One is that a subsistence product is perishable and delivery from the United States would significantly impair quality at the point of consumption (DFARS 225.7501(a)(7)(i)).

Another is that an item, by its nature or as a practical matter, can best be acquired in the area concerned (DFARS 225.7501(a)(7)(ii)). The examples given are ice and books, and bulk material such as sand, gravel, soil, stone, concrete masonry units or fired brick. A third is that a particular domestic construction material is not available (DFARS 225.7501(a)(7)(iii)).

A fourth is cost. The contracting officer may so determine where domestic construction material would cost more than 50 percent above foreign construction material (DFARS 225.7501(a)(7)(iv)). That comparison may be made for a particular construction material, or on the comparative cost of applying the program to the whole acquisition. The fifth is that use of a particular domestic construction material is impracticable (DFARS 225.7501(a)(7)(v)).

4. Exceptions after offers and in the public interest

After offers are received, the program does not apply if the evaluated low offer is of a qualifying country end product or an eligible product (DFARS 225.7501(b)(1)). A qualifying country is one listed as such in the Defense Buy American clause, which bases the list on reciprocal defense procurement agreements to remove barriers to purchases (DFARS 252.225-7001). It also does not apply if the low offer is a nonqualifying country end product but applying the program’s evaluation factor would not lead to award on a domestic offer (DFARS 225.7501(b)(1)(iv)). For construction, the program does not apply where the construction material is an eligible product (DFARS 225.7501(b)(2)). The DFARS includes further variations for acquisitions in support of operations in Afghanistan.

At any time during the acquisition, the head of the agency may decide it is not in the public interest to apply the program’s restrictions to the end product or construction material (DFARS 225.7501(c)). Where the program applies, contracting officers follow the procedures in the DFARS procedures, guidance and information at PGI 225.7502 (DFARS 225.7502).

5. Which construction clause is used

Unless the whole acquisition is exempt, construction abroad above the simplified acquisition threshold but below $6,708,000 uses the clause at DFARS 252.225-7044, Balance of Payments Program, Construction Material (DFARS 225.7503(a)). That includes acquisitions of commercial products or commercial components. The basic clause is used unless the acquisition supports operations in Afghanistan, which uses alternate I (DFARS 225.7503(a)(1) and DFARS 225.7503(a)(2)). Alternate II replaces the basic clause, and alternate III replaces alternate I for Afghanistan operations, where the senior procurement executive has approved an alternate domestic content threshold for the whole period of performance (DFARS 225.7503(a)(3) and DFARS 225.7503(a)(4)).

Construction abroad with an estimated value of $6,708,000 or more uses the clause at DFARS 252.225-7045, Balance of Payments Program, Construction Material Under Trade Agreements (DFARS 225.7503(b)). The basic clause applies at $13,296,489 or more, and alternate I applies from $6,708,000 up to that figure, unless the acquisition supports operations in Afghanistan (DFARS 225.7503(b)(1) and DFARS 225.7503(b)(2)). Alternates II and III cover those operations at the two value bands. Alternates IV and V replace the basic clause and alternate I where an alternate domestic content threshold applies, and alternates VI and VII do the same for the Afghanistan alternates (DFARS 225.7503(b)(3) to DFARS 225.7503(b)(8)).

6. Related provisions

The program’s first value exception follows the simplified acquisition threshold, and its excepted items include articles listed in FAR 25.104 (DFARS 225.7501(a)(1) and DFARS 225.7501(a)(2)(i)). How a domestic end product is defined for Defense contracts is covered in what makes an end product domestic. The dollar figures above are those in the DFARS text current as of 29 September 2026.

Key terms

Balance of Payments Program	The Defense rule favoring domestic items for supplies and construction used abroad.
50 percent test	The cost gap above which foreign construction material may be used abroad.
Best-fit determination	A contracting officer finding that a foreign item best fills the requirement.
DFARS 252.225-7044	The clause for construction abroad above the simplified acquisition threshold and below $6,708,000.
DFARS 252.225-7045	The construction clause under trade agreements at $6,708,000 or more.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

How Sentfore supports this

Overseas programs need suppliers and logistics that work in theater. Sentfore works at the delivery end of defense programs in difficult environments, providing secure movement, protective security, facilities and life support. Requirements can be sent through the contact page.