11.701 Supply contracts
Source: FAR 11.701 on acquisition.gov
FAR 11.701 requires that any allowable quantity variation in fixed-price supply contracts be clearly stated, tailored to industry norms, and not exceed ±10% unless otherwise regulated, with specific rules for handling excess deliveries.
Overview
FAR 11.701 addresses how fixed-price supply contracts may allow for variations in the quantity of items delivered, primarily due to factors like loading, shipping, packing, or manufacturing processes. The regulation requires that any permissible variation be clearly stated as a percentage in the contract, with the percentage tailored to industry norms and not exceeding plus or minus 10 percent unless otherwise specified by agency regulations. For contracts involving multiple delivery destinations, the contract must specify if the variation applies per destination. Contractors are responsible for delivering the specified quantity within the allowable variation. If excess quantities are delivered, the contract may include a clause (FAR 52.211-17) allowing the Government to retain small excesses (up to $250) without payment, or to return or pay for larger excesses at its discretion.
Key Rules
- Permissible Quantity Variation
- Contracts may allow for quantity variations due to shipping, loading, packing, or manufacturing, stated as a percentage increase, decrease, or both.
- Industry-Based Variation Limits
- No standard percentage; limits should reflect industry norms and not exceed ±10% unless agency regulations specify otherwise.
- Excess Quantity Handling
- Contracts may include a clause allowing the Government to retain excess quantities up to $250 without payment, or to return/pay for larger excesses at the contract price.
Responsibilities
- Contracting Officers: Must specify permissible quantity variations in the contract, ensure limits align with industry standards, and include appropriate clauses for excess deliveries.
- Contractors: Must deliver quantities within the allowable variation and understand the consequences of delivering excess quantities.
- Agencies: May set different variation limits and must oversee compliance with these provisions.
Practical Implications
- This section ensures flexibility for minor quantity variations while protecting both parties from unreasonable overruns or underruns. Contractors must carefully manage production and shipping to avoid costly excess deliveries, and contracting officers must tailor variation terms to each contract and industry.
(a) A fixed-price supply contract may authorize Government acceptance of a variation in the quantity of items called for if the variation is caused by conditions of loading, shipping, or packing, or by allowances in manufacturing processes. Any permissible variation shall be stated as a percentage and it may be an increase, a decrease, or a combination of both; however, contracts for subsistence items may use other applicable terms of variation in quantity.
(b) There should be no standard or usual variation percentage. The overrun or underrun permitted in each contract should be based upon the normal commercial practices of a particular industry for a particular item, and the permitted percentage should be no larger than is necessary to afford a contractor reasonable protection. The permissible variation shall not exceed plus or minus 10 percent unless a different limitation is established in agency regulations. Consideration shall be given to the quantity to which the percentage variation applies. For example, when delivery will be made to multiple destinations and it is desired that the quantity variation apply to the item quantity for each destination, this requirement must be stated in the contract.
(c) Contractors are responsible for delivery of the specified quantity of items in a fixed-price contract, within allowable variations, if any. If a contractor delivers a quantity of items in excess of the contract requirements plus any allowable variation in quantity, particularly small dollar value overshipments, it results in unnecessary administrative costs to the Government in determining disposition of the excess quantity. Accordingly, the contract may include the clause at 52.211-17, Delivery of Excess Quantities, to provide that-
(1) Excess quantities of items totaling up to $250 in value may be retained without compensating the contractor; and
(2) Excess quantities of items totaling over $250 in value may, at the Government’s option, be either returned at the contractor’s expense or retained and paid for at the contract unit price.