FAR 47.104-3—Cost-reimbursement contracts.
Plain-English Summary
FAR 47.104-3 explains when special statutory freight rates under 49 U.S.C. 10721 and 13712 may be used in cost-reimbursement contracts, and how the Government ensures it gets the benefit of those lower rates. It covers shipments moving on commercial bills of lading, the requirement that the transportation cost be a direct and allowable cost under FAR part 31, and the special rule for household goods and personal effects of contractor employees relocated for the Government’s convenience and direction. The section also ties those rules to the clause at 52.247-1, Commercial Bill of Lading Notations, which helps preserve the lower rate on the carrier’s paperwork. In addition, it assigns duties to contracting officers to include contract language requiring use of acceptable lower-rate carriers when available and to identify the transportation officer who will support the contractor. Finally, it assigns duties to the transportation office to advise and assist, provide carrier names and rate tender citations, and tell contractors what notation must appear on the bill of lading. In practice, this section is about making sure cost-reimbursement contracts do not lose savings available under Government freight rate authorities and that contractors know how to document shipments correctly.
Key Rules
Use lower statutory rates when Government benefits
49 U.S.C. 10721 and 13712 rates may be used only when the total benefit accrues to the Government. That means the Government must pay the freight charges directly or fully reimburse the party that initially pays them.
Applies to allowable transportation costs
In cost-reimbursement contracts, these rates may be used for shipments on commercial bills of lading when transportation costs are direct and allowable under FAR part 31. If the cost is not allowable or not treated as a direct cost, the special rate authority does not apply.
Covers relocated employee household goods
The same rate authority may be used for household goods and personal effects of contractor employees who are relocated for the Government’s convenience and at the Government’s direction, as long as the Government reimburses the total transportation cost.
Commercial bill of lading notation is required
The clause at 52.247-1, Commercial Bill of Lading Notations, is used to ensure the Government receives the benefit of the lower rates. Proper notation on the bill of lading is essential to preserve the rate tender and avoid billing problems.
Contracting officer must require carrier selection discipline
Contracting officers must include a contract statement requiring the contractor to use carriers offering acceptable service at reduced rates when those rates are available. This prevents unnecessary use of higher-cost transportation options.
Transportation support must be identified
Contracting officers must ensure contractors receive the name and location of the transportation officer who will provide support and guidance when Government rate tenders are used. This gives contractors a clear point of contact for rate and documentation questions.
Transportation office must support and inform
The transportation office must advise and assist contracting officers and contractors, provide the names of carriers offering service under 49 U.S.C. 10721 and 13712 rates, cite the applicable rate tenders, and tell contractors what statement must appear on the carrier’s commercial bill of lading.
Responsibilities
Contracting Officer
Include contract language requiring the contractor to use carriers offering acceptable service at reduced rates when available. Ensure the contractor is given the name and location of the transportation officer who will provide support and guidance on Government rate tenders.
Contractor
Use the lower-rate carrier options when acceptable service is available and the contract requires it. For covered shipments, ensure transportation costs are handled so the Government receives the full benefit of the rate, and make sure the commercial bill of lading contains the required notation.
Transportation Office
Advise and assist contracting officers and contractors on use of 49 U.S.C. 10721 and 13712 rates. Provide carrier names, applicable rate tender citations, and the required bill-of-lading statement for use with commercial bills of lading.
Government
Pay the freight charges directly or fully reimburse the party that initially bears them so the total benefit of the lower rate accrues to the Government. Ensure the cost is treated consistently with FAR part 31 allowability rules.
Practical Implications
This section is mainly about preserving savings: if the contractor or shipping paperwork is handled incorrectly, the Government can lose access to lower statutory freight rates.
The biggest compliance risk is documentation failure, especially missing or incorrect commercial bill of lading notations under 52.247-1.
Contractors should not assume all transportation costs qualify; the cost must be a direct, allowable cost in a cost-reimbursement setting, and the Government must receive the full benefit.
Contracting officers should build the requirement into the contract up front and not rely on informal instructions later.
Transportation offices are a critical support function; if contractors do not know which carriers, tenders, or bill-of-lading statements to use, the shipment may default to higher commercial rates or create billing disputes.
Official Regulatory Text
(a) 49 U.S.C. 10721 and 13712 rates may be applied to shipments other than those made by the Government if the total benefit accrues to the Government, i.e., the Government shall pay the charges or directly and completely reimburse the party that initially bears the freight charges. Therefore, 49 U.S.C. 10721 and 13712 rates may be used for shipments moving on commercial bills of lading in cost reimbursement contracts under which the transportation costs are direct and allowable costs under the cost principles of part 31 . (b) 49 U.S.C. 10721 and 13712 rates may be applied to the movement of household goods and personal effects of contractor employees who are relocated for the convenience and at the direction of the Government and whose total transportation costs are reimbursed by the Government. (c) The clause at 52.247-1 , Commercial Bill of Lading Notations, will ensure that the Government receives the benefit of lower 49 U.S.C. 10721 and 13712 rates in cost-reimbursement contracts as described in paragraphs (a) and (b) of this section. (d) Contracting officers shall- (1) Include in contracts a statement requiring the contractor to use carriers that offer acceptable service at reduced rates if available; and (2) Ensure that contractors receive the name and location of the transportation officer designated to furnish support and guidance when using Government rate tenders. (e) The transportation office shall- (1) Advise and assist contracting officers and contractors; and (2) Make available to contractors the names of carriers that provide service under 49 U.S.C. 10721 and 13712 rates, cite applicable rate tenders, and advise contractors of the statement that must be shown on the carrier’s commercial bill of lading (see the clause at 52.247-1 , Commercial Bill of Lading Notations).