F.o.b. Origin-Minimum Size of Shipments
Contractors must maximize shipment sizes to secure the lowest freight rates, or risk being liable for any increased government shipping costs.
Overview
FAR 52.247-61, F.o.b. Origin-Minimum Size of Shipments, requires contractors to ship goods in carload or truckload lots when the quantity for delivery to a single destination during a delivery period meets or exceeds the minimum size for such shipments. The clause aims to ensure the government benefits from the lowest available freight rates by maximizing shipment sizes, unless otherwise directed by the Contracting Officer. If the scheduled quantity is less than the minimum carload or truckload weight, the contractor must still ship the entire quantity in one shipment. Contractors are liable for any increased costs to the government resulting from non-compliance, unless the nature or size of the supplies makes it impossible to meet the minimum weight requirements.
Key Rules
- Minimum Shipment Size Requirement
- Shipments must be made in carload or truckload lots when the delivery quantity meets the minimum size for such shipments, unless otherwise directed in writing by the Contracting Officer.
- Lowest Freight Rate Application
- The minimum weight for carload/truckload is determined by the highest applicable minimum weight that results in the lowest freight rate or per car charge.
- Single Shipment for Smaller Quantities
- If the scheduled quantity is less than the minimum, it must still be shipped in one lot.
- Contractor Liability
- Contractors are liable for any increased government costs due to non-compliance, except when supplies cannot be shipped at the minimum weight due to their size or nature.
Responsibilities
- Contracting Officers: May permit or direct exceptions in writing; ensure compliance with shipment requirements.
- Contractors: Must plan shipments to maximize freight savings, comply with minimum size requirements, and document exceptions or instructions.
- Agencies: Monitor compliance and assess any additional costs incurred due to non-compliance.
Practical Implications
- This clause is designed to reduce shipping costs for the government by leveraging volume freight rates.
- Contractors must carefully coordinate logistics to avoid unnecessary partial shipments and document any exceptions.
- Failure to comply can result in financial liability for increased shipping costs, making compliance critical for cost control and contract performance.