47.304-1 General
Source: FAR 47.304-1 on acquisition.gov
Contracting officers must carefully determine and specify f.o.b. terms in solicitations to ensure the most cost-effective and advantageous delivery arrangements for the government.
Overview
FAR 47.304-1 outlines the general requirements and considerations for determining Free on Board (f.o.b.) terms in government contracts. The section guides contracting officers on how to select between f.o.b. origin and f.o.b. destination, based on overall cost, government interests, and logistical factors. It mandates that solicitations clearly specify the required f.o.b. terms and provides criteria for when each term is most appropriate, including special considerations for security, unknown destinations, and certain types of supplies. The regulation emphasizes the importance of evaluating freight rates, traffic management benefits, and administrative costs when making these determinations.
Key Rules
- Determining f.o.b. Terms
- Contracting officers must base f.o.b. terms on overall cost and specific criteria in FAR 47.304.
- Solicitation Requirements
- Solicitations must state whether offers should be f.o.b. origin, f.o.b. destination, or allow offerors to choose.
- Evaluation of Delivery Points
- The most advantageous delivery point (origin or destination) must be considered, factoring in freight rates and logistical benefits.
- Special Circumstances
- F.o.b. origin is required when destinations are unknown or for classified shipments needing commercial transport; f.o.b. destination is required when acceptance is at destination or for certain bulk, perishable, or administratively burdensome shipments.
Responsibilities
- Contracting Officers: Must analyze costs, specify f.o.b. terms in solicitations, and justify their choices based on government advantage and regulatory criteria.
- Contractors: Must comply with the specified f.o.b. terms in their offers and performance.
- Agencies: Ensure oversight and compliance with f.o.b. determination procedures and documentation.
Practical Implications
- This section ensures that delivery terms are selected to minimize government costs and maximize logistical efficiency. It impacts how solicitations are structured and how contractors prepare their offers. Common pitfalls include failing to specify f.o.b. terms or not properly evaluating the cost and logistical implications, which can lead to increased costs or administrative burdens.
(a) The contracting officer shall determine f.o.b. terms generally on the basis of overall costs, giving due consideration to the criteria given in 47.304.
(b) Solicitations shall specify whether offerors must submit offers f.o.b. origin, f.o.b. destination, or both; or whether offerors may choose the basis on which they make an offer. The contracting officer shall consider the most advantageous delivery point, such as-
(1) F.o.b. origin, carrier’s equipment, wharf, or specified freight station near contractor’s plant; or
(2) F.o.b. destination.
(c) In determining whether f.o.b. origin or f.o.b. destination is more advantageous to the Government, the contracting officer shall consider the availability of lower freight rates (Government rate tenders) to the Government for f.o.b. origin acquisitions. F.o.b. origin contracts also present other desirable traffic management features, in that they-
(1) Permit use of transit privileges (see 47.305-13);
(2) Permit diversions to new destinations without price adjustment for transportation (see 47.305-11);
(3) Facilitate use of special routings or types of equipment (e.g., circuitous routing or oversize shipments) (see 47.305-14);
(4) Facilitate, if necessary, use of premium cost transportation and permit Government-controlled transportation;
(5) Permit negotiations for reduced freight rates (see 47.104-1(b)); and
(6) Permit use of small shipment consolidation stations.
(d) When destinations are tentative or unknown, the solicitation shall be f.o.b. origin only (see 47.305-5).
(e) When the size or quantity of supplies with confidential or higher security classification requires commercial transportation services, the contracting officer shall generally specify f.o.b. origin acquisitions.
(f) When acceptance must be at destination, solicitation shall be on an f.o.b. destination only basis.
(g) Following are examples of situations when solicitations shall normally be on an f.o.b. destination only basis because it is advantageous to the Government (see 47.305-4):
(1) Bulk supplies, such as coal, that require other than Government-owned or operated handling, storage, and loading facilities, are destined for shipment outside CONUS.
(2) Steel or other bulk construction products are destined for shipment outside CONUS.
(3) Supplies consist of forest products such as lumber.
(4) Perishable or medical supplies are subject to in-transit deterioration.
(5) Evaluation of f.o.b. origin offers is anticipated to result in increased administrative lead time or administrative cost that would outweigh the potential advantages of an f.o.b. origin determination.