F.o.b. Origin-Carload and Truckload Shipments
Contractors must ship in carload or truckload lots when possible and use the lowest applicable freight rates, or risk being liable for increased government costs.
Overview
FAR 52.247-59 establishes requirements for contractors making f.o.b. (free on board) origin shipments in carload or truckload quantities. The clause ensures that shipments are made in the most economical lot sizes, facilitating accurate freight cost evaluation and minimizing transportation costs for the government. It specifies how shipment quantities, weights, and freight rates are to be determined for both evaluation and actual delivery, and holds contractors liable for any increased costs resulting from non-compliance.
Key Rules
- Shipment in Carload/Truckload Lots
- Contractors must ship in carload or truckload lots when the delivery quantity to a destination meets the minimum required for such shipments, unless otherwise directed in writing by the Contracting Officer.
- Freight Rate Evaluation
- For bid evaluation, the agreed weight is the highest minimum weight that yields the lowest freight rate or per car charge, based on tariffs or tenders in effect at bid opening.
- Freight Rate for Actual Delivery
- For actual shipments, the agreed weight is determined by the lowest possible freight rate or per car charge as of the shipment date.
- Single Shipment for Less-than-Minimum Quantities
- If the scheduled quantity is less than the minimum used for evaluation, it must be shipped in one lot.
- Contractor Liability
- Contractors are responsible for any increased government costs due to failure to comply with these requirements.
Responsibilities
- Contracting Officers: Specify when the clause applies, provide written exceptions or directions, and monitor compliance.
- Contractors: Ship in required lot sizes, use correct freight rates for evaluation and delivery, and ensure compliance to avoid liability.
- Agencies: Oversee contract administration and enforce cost recovery for non-compliance.
Practical Implications
This clause ensures cost-effective shipping practices, accurate bid evaluations, and clear contractor accountability. Contractors must understand freight tariffs and shipment sizing to avoid increased costs and potential penalties. Common pitfalls include miscalculating lot sizes or failing to use the correct freight rates for evaluation and delivery.