47.104-2 Fixed-price contracts
Source: FAR 47.104-2 on acquisition.gov
Government transportation rates under 49 U.S.C. 10721 and 13712 only apply to fixed-price f.o.b. origin contracts when the contractor prepays freight and uses a commercial bill of lading with the proper clause.
Overview
FAR 47.104-2 addresses the application of government rate tenders under the Interstate Commerce Act for fixed-price contracts, specifically distinguishing between f.o.b. (free on board) destination and f.o.b. origin arrangements. For f.o.b. destination contracts, government rates under 49 U.S.C. 10721 and 13712 do not apply, as the delivered price includes transportation. For f.o.b. origin contracts, if the government requires the contractor to prepay freight, the contractor must use a commercial bill of lading and will be reimbursed for actual transportation costs. The inclusion of FAR clause 52.247-1 ensures the government receives the benefit of applicable government rates for these prepaid shipments.
Key Rules
- F.o.b. Destination Contracts
- Government rate tenders (49 U.S.C. 10721 and 13712) do not apply; transportation is included in the delivered price.
- F.o.b. Origin Contracts with Prepaid Freight
- Contractors may be required to prepay freight and use a commercial bill of lading; reimbursement is for actual costs, and the government benefits from special rates via clause 52.247-1.
Responsibilities
- Contracting Officers: Determine when to require prepaid freight and ensure clause 52.247-1 is included when applicable.
- Contractors: Use commercial bills of lading for prepaid shipments and invoice actual transportation costs separately.
- Agencies: Ensure compliance with government rate tender requirements and proper contract clauses.
Practical Implications
This section clarifies when government transportation rates apply to fixed-price contracts, impacting how contractors invoice for shipping and how agencies structure contracts. Misapplication can lead to improper billing or missed cost savings for the government.
(a) F.o.b. destination. http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title49-section10721&num=0&edition=prelim" target="_blank">49 U.S.C. 10721 and http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title49-section13712&num=0&edition=prelim" target="_blank">13712 rates do not apply to shipments under fixed-price f.o.b. destination contracts (delivered price).
(b) F.o.b. origin. If it is advantageous to the Government, the contracting officer may occasionally require the contractor to prepay the freight charges to a specific destination. In such cases, the contractor shall use a commercial bill of lading and be reimbursed for the direct and actual transportation cost as a separate item in the invoice. The clause at 52.247-1, Commercial Bill of Lading Notations, will ensure that the Government in this type of arrangement obtains the benefit of http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title49-section10721&num=0&edition=prelim" target="_blank">49 U.S.C. 10721 and http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title49-section13712&num=0&edition=prelim" target="_blank">13712 rates.