Overview
FAR Subpart 11.7 outlines the policies and procedures for handling variations between the quantity of supplies or services ordered and the quantity actually delivered. It provides flexibility for discrepancies caused by manufacturing processes, shipping conditions, or estimated construction needs, ensuring that contracts account for industry-standard margins of error without necessitating constant formal amendments.
Key Rules
- Supply Contract Limits: Variations in supply contracts must be stated as a percentage. This percentage should align with commercial practices and must not exceed plus or minus 10 percent unless specifically authorized by agency regulations.
- Permissible Causes: For supply contracts, variations are only authorized if caused by loading, shipping, packing, or manufacturing process allowances.
- The $250 Rule for Excess Supplies:
- If a contractor delivers excess items valued at $250 or less, the Government may keep them without paying the contractor.
- If the excess exceeds $250, the Government can either return them at the contractor’s expense or keep and pay for them at the contract unit price.
- Construction Contract Thresholds: In unit-priced construction contracts, an equitable adjustment is required if the actual quantity of an item varies by more than plus or minus 15 percent from the original estimate.
- Construction Time Extensions: If a quantity variation in construction causes a delay, the contractor can request a time extension, typically within 10 days of the start of the delay.
Responsibilities
- Contracting Officers (CO):
- Must determine the appropriate variation percentage based on normal commercial practices for the specific industry.
- Must specify in the contract whether variations apply to the total order or to individual delivery destinations.
- Responsible for inserting the mandatory clauses (52.211-16, 52.211-17, or 52.211-18) based on the contract type.
- Must ascertain facts and negotiate equitable adjustments or time extensions in construction contracts.
- Contractors:
- Responsible for delivering the exact quantity specified within the permitted variation range.
- Must provide written notice to the CO within 10 days if a construction quantity variation requires a performance time extension.
- Must bear the cost of returning excess quantities if the Government chooses not to retain them.
Practical Implications
- Administrative Efficiency: The $250 threshold for excess supplies is a "de minimis" rule designed to prevent the Government from spending more on administrative overhead (processing returns or modifications) than the items are actually worth.
- Risk Mitigation in Manufacturing: This subpart protects contractors in industries where "overruns" or "underruns" are common, such as custom chemical manufacturing or bulk hardware, where hitting an exact count is technically difficult.
- Construction Estimating: Because construction estimates are rarely perfect, the 15% rule provides a safety net for both parties. It prevents the Government from overpaying for bulk materials and protects the contractor from significant losses due to unforeseen site conditions that require more material than anticipated.
- Strategic Clause Selection: Contractors should carefully review Section I of their contracts to see which variation clause is active. If a contract lacks 52.211-16, the Government is generally not obligated to accept or pay for even a 1% overrun.