Overview
FAR 47.304 establishes the policies and procedures for Contracting Officers to determine the most advantageous delivery terms—typically f.o.b. origin or f.o.b. destination—based on the lowest overall cost to the Government. It provides specific criteria for domestic and international shipments, emphasizing logistical flexibility and the utilization of discounted Government freight rates.
Key Rules
- Cost-Based Determination: Delivery terms must be selected based on overall costs, including transportation and administrative expenses, to ensure the most advantageous delivery point for the Government.
- F.o.b. Origin Preferences: This basis is generally required when destinations are tentative/unknown, when supplies have high security classifications, or for shipments originating in CONUS for overseas delivery to allow for Government-controlled routing.
- F.o.b. Destination Requirements: This basis is mandatory when acceptance must occur at the destination and is typically used for perishables, medical supplies, or bulk commodities (like coal and lumber) that are subject to in-transit deterioration or require specialized handling.
- CONUS Policy: For shipments within the 48 contiguous states, solicitations should generally allow for both f.o.b. origin and destination offers to facilitate a comparison of the lowest landed cost.
- Consultation Requirements: Contracting Officers are required to seek the advice of transportation officers when shipments originate outside CONUS or when unusual conditions, such as transportation disabilities or specific trade customs, exist.
Practical Implications
- Logistical Flexibility: Choosing f.o.b. origin allows the Government to leverage its own "tender" rates and permits the diversion of shipments to new destinations without requiring a formal contract price adjustment for transportation.
- Administrative Burden: Contracting Officers must document the contract file if they deviate from standard delivery policies and must carefully evaluate whether the administrative costs of managing f.o.b. origin shipments outweigh the savings in freight rates.