FAR 15.407-2—Make-or-buy programs.
Plain-English Summary
FAR 15.407-2 addresses make-or-buy programs in negotiated acquisitions and explains when the Government may require a contractor to identify which major items or work efforts it will perform itself and which it will subcontract. The section covers the prime contractor’s overall responsibility for contract performance, the definition of a “make item,” when make-or-buy programs may be required based on contract value and whether certified cost or pricing data are required, and special treatment for research and development acquisitions with no significant follow-on production. It also sets out solicitation requirements, including the need to tell offerors what supporting information must be submitted and what evaluation factors will be used, such as capability, capacity, small business participation, labor surplus area considerations, schedule, interface control, proprietary processes, technical superiority, and technical risk. The section then specifies the content of the contractor’s proposed program, including which items are covered, how items are categorized, what reasons support the categorization, where work will be performed, subcontractor information, and any deferred decisions. Finally, it explains how contracting officers must evaluate and negotiate the program before award and gives guidance on when they normally should not agree to a contractor’s proposed make items, while preserving discretion to do so when it is in the Government’s best interest. In practice, this section is about managing cost, technical risk, industrial capability, and socioeconomic objectives through early visibility into a contractor’s sourcing decisions.
Key Rules
Prime contractor manages performance
The prime contractor remains responsible for planning, placing, and administering subcontracts to achieve the lowest overall cost and technical risk to the Government. A make-or-buy program does not shift that responsibility to the Government; it only gives the Government a mechanism to review and agree to the contractor’s plan when needed.
Make item definition
A “make item” is work or an item produced or performed by the prime contractor or by its affiliates, subsidiaries, or divisions. This definition matters because the rule is focused on the contractor’s internal production versus buying from outside sources.
When programs may be required
For negotiated acquisitions requiring certified cost or pricing data with an estimated value of $20 million or more, contracting officers may require a make-or-buy program, except for certain R&D acquisitions with no significant follow-on production expected. For acquisitions under $20 million, the contracting officer may require the program only if the information is necessary and the file documents why.
Solicitation must explain requirements
If offerors must submit a make-or-buy program, the solicitation must say the program and supporting information must accompany the offer. It must also describe the evaluation factors the Government will use, including technical, schedule, capacity, small business, labor surplus area, and risk considerations.
Program content is limited and specific
The contractor’s proposal should focus on major items or work efforts that warrant management review because they are complex, costly, produced in large quantities, or require additional equipment or real property. Raw materials, commercial products, commercial services, and off-the-shelf items are generally excluded unless their cost or schedule impact is critical, and programs normally should not include items below 1 percent of the total estimated contract price or below an agency minimum dollar threshold.
Required supporting information
The proposal must describe each major item or work effort, classify it as must make, must buy, or can either make or buy, and explain the reasons for each classification. It must also identify the plant or division that will perform the work, note whether the facility is in or near a labor surplus area, identify known subcontractors and their location and size status, and include any recommendations to defer decisions that cannot yet be made.
Evaluation and agreement before award
Contracting officers must evaluate and negotiate proposed make-or-buy programs as soon as practicable after receipt and before award. If the design is not mature enough to identify all major items, the contracting officer must notify the contractor in writing that later-identified items will be added under the Changes or Additions to Make-or-Buy Program clause.
Limits on agreeing to make items
Contracting officers normally should not agree to make items when the contractor does not regularly make or provide them and another source can supply equal or better quality, quantity, delivery, and other essential factors at equal or lower price, or when the contractor does make them but another source can do so at lower price. The contracting officer may still agree if overall Governmentwide cost would be lower or if it is otherwise in the Government’s best interest.
Responsibilities
Contracting Officer
Decide whether a make-or-buy program is needed, document the basis for requiring it when the estimated value is under $20 million, include the required instructions and evaluation factors in the solicitation, evaluate and negotiate the program before award, notify the contractor in writing when later-identifiable items must be added, and determine whether proposed make items should be accepted based on price, capability, and the Government’s best interest.
Prospective Contractor / Offeror
Submit the required make-or-buy program with the offer when the solicitation requires it, provide the detailed supporting information called for by the rule, classify major items or work efforts appropriately, explain the basis for each classification, identify proposed facilities and subcontractors, and recommend deferrals when decisions cannot yet be made.
Prime Contractor
Manage contract performance, including subcontract planning, placement, and administration, and use make-or-buy planning to support cost, technical risk, and performance objectives. If the program is incorporated into the contract, the contractor must update it as required when additional items become identifiable.
Government / Agency
Use make-or-buy review only when needed to support reasonable pricing, satisfactory performance, or socioeconomic policy objectives, and ensure the requirement is applied consistently with acquisition strategy, contract type, and the need for the information.
Practical Implications
This section is most important on large negotiated buys where the Government wants visibility into whether the contractor will self-perform or subcontract major work. Contractors should be ready to justify sourcing decisions with real cost, schedule, technical, and capacity data, not just preference or convenience.
A common pitfall is overbroad make-or-buy programs that try to cover too many low-value items. The rule narrows the focus to major items and generally excludes raw materials, commercial items, and off-the-shelf items unless they are truly critical.
Another frequent issue is weak documentation. If the contracting officer requires the program under $20 million, the file must explain why the information is necessary; if the contractor proposes a classification, the reasons must be detailed enough for meaningful evaluation.
Contractors should pay close attention to solicitation evaluation factors because they signal what the Government cares about most, such as small business participation, labor surplus area impacts, schedule, and technical risk. Those factors should shape the proposal and the supporting rationale.
For contracting officers, the key practical judgment is whether agreeing to a make item actually benefits the Government. The rule does not require acceptance of contractor self-performance just because the contractor prefers it; the officer should compare outside sourcing options and document why the chosen approach is best overall.
Official Regulatory Text
(a) General . The prime contractor is responsible for managing contract performance, including planning, placing, and administering subcontracts as necessary to ensure the lowest overall cost and technical risk to the Government. When make-or-buy programs are required, the Government may reserve the right to review and agree on the contractor’s make-or-buy program when necessary to ensure negotiation of reasonable contract prices, satisfactory performance, or implementation of socioeconomic policies. Consent to subcontracts and review of contractors’ purchasing systems are separate actions covered in part 44 . (b) Definition. " Make item," as used in this subsection, means an item or work effort to be produced or performed by the prime contractor or its affiliates, subsidiaries, or divisions. (c) Acquisitions requiring make-or-buy programs. (1) Contracting officers may require prospective contractors to submit make-or-buy program plans for negotiated acquisitions requiring certified cost or pricing data whose estimated value is $20 million or more, except when the proposed contract is for research or development and, if prototypes or hardware are involved, no significant follow-on production is anticipated. (2) Contracting officers may require prospective contractors to submit make-or-buy programs for negotiated acquisitions whose estimated value is under $20 million only if the contracting officer- (i) Determines that the information is necessary; and (ii) Documents the reasons in the contract file. (d) Solicitation requirements . When prospective contractors are required to submit proposed make-or-buy programs, the solicitation shall include- (1) A statement that the program and required supporting information must accompany the offer; and (2) A description of factors to be used in evaluating the proposed program, such as capability, capacity, availability of small, small disadvantaged, women-owned, veteran-owned, HUBZone, and service-disabled veteran-owned small business concerns for subcontracting, establishment of new facilities in or near labor surplus areas, delivery or performance schedules, control of technical and schedule interfaces, proprietary processes, technical superiority or exclusiveness, and technical risks involved. (e) Program requirements . To support a make-or-buy program, the following information shall be supplied by the contractor in its proposal: (1) Items and work included . The information required from a contractor in a make-or-buy program shall be confined to those major items or work efforts that normally would require company management review of the make-or-buy decision because they are complex, costly, needed in large quantities, or require additional equipment or real property to produce. Raw materials, commercial products, commercial services (see 2.101 ), and off-the-shelf items (see 46.101 ) shall not be included, unless their potential impact on contract cost or schedule is critical. Normally, make-or-buy programs should not include items or work efforts estimated to cost less than 1 percent of the total estimated contract price or any minimum dollar amount set by the agency. (2) The offeror’s program should include or be supported by the following information: (i) A description of each major item or work effort. (ii) Categorization of each major item or work effort as "must make," "must buy," or "can either make or buy." (iii) For each item or work effort categorized as "can either make or buy," a proposal either to "make" or to "buy." (iv) Reasons for categorizing items and work efforts as "must make" or "must buy," and proposing to "make" or to "buy" those categorized as "can either make or buy." The reasons must include the consideration given to the evaluation factors described in the solicitation and must be in sufficient detail to permit the contracting officer to evaluate the categorization or proposal. (v) Designation of the plant or division proposed to make each item or perform each work effort, and a statement as to whether the existing or proposed new facility is in or near a labor surplus area. (vi) Identification of proposed subcontractors, if known, and their location and size status (also see subpart 19.7 for subcontracting plan requirements). (vii) Any recommendations to defer make-or-buy decisions when categorization of some items or work efforts is impracticable at the time of submission. (viii) Any other information the contracting officer requires in order to evaluate the program. (f) Evaluation, negotiation, and agreement. Contracting officers shall evaluate and negotiate proposed make-or-buy programs as soon as practicable after their receipt and before contract award. (1) When the program is to be incorporated in the contract and the design status of the product being acquired does not permit accurate precontract identification of major items or work efforts, the contracting officer shall notify the prospective contractor in writing that these items or efforts, when identifiable, shall be added under the clause at 52.215-9 , Changes or Additions to Make-or-Buy Program. (2) Contracting officers normally shall not agree to proposed "make items" when the products or services are not regularly manufactured or provided by the contractor and are available-quality, quantity, delivery, and other essential factors considered-from another firm at equal or lower prices, or when they are regularly manufactured or provided by the contractor, but are available-quality, quantity, delivery, and other essential factors considered-from another firm at lower prices. However, the contracting officer may agree to these as "make items" if an overall lower Governmentwide cost would result or it is otherwise in the best interest of the Government. If this situation occurs in any fixed-price incentive or cost-plus-incentive-fee contract, the contracting officer shall specify these items in the contract and state that they are subject to paragraph (d) of the clause at 52.215-9 , Changes or Additions to Make-or-Buy Program (see 15.408 (a)). If the contractor proposes to reverse the categorization of such items during contract performance, the contract price shall be subject to equitable reduction. (g) Incorporating make-or-buy programs in contracts . The contracting officer may incorporate the make-or-buy program in negotiated contracts for- (1) Major systems (see part 34 ) or their subsystems or components, regardless of contract type; or (2) Other supplies and services if- (i) The contract is a cost-reimbursable contract, or a cost-sharing contract in which the contractor’s share of the cost is less than 25 percent; and (ii) The contracting officer determines that technical or cost risks justify Government review and approval of changes or additions to the make-or-buy program.