FAR 52.247-65—F.o.b. Origin, Prepaid Freight-Small Package Shipments.
Plain-English Summary
FAR 52.247-65 sets the rules for small-package shipments moving under f.o.b. origin when the Contracting Officer authorizes prepaid freight. It covers when the clause applies, the types of shipments allowed, destination limits, weight limits, use of prepaid commercial bills of lading or other shipping documents, reimbursement of reasonable freight charges, required bill-of-lading annotations, consolidation of shipments, combining Government and contractor commercial shipments, pro rata sharing of freight costs, delivery of bill-of-lading copies to consignees, the prohibition on dividing quantities into mailable lots to avoid other transportation modes, invoicing requirements, supporting documentation, and Government handling of loss and damage claims. In practice, the clause is designed to let contractors use efficient small-package commercial transportation while preserving Government control over documentation, cost allocation, and claims administration. It matters because it shifts the logistics process away from Government-arranged carriage and places specific administrative duties on the contractor, while still ensuring the Government can verify charges and recover for losses. The clause is limited to nonclassified shipments and domestic destinations, including air and water terminals, and it is intended to prevent misuse of small-package methods to bypass more appropriate transportation modes.
Key Rules
Applies Only When Authorized
The clause operates only when the Contracting Officer authorizes f.o.b. origin prepaid freight shipments. It is limited to shipments that do not have a security classification and are moving to domestic destinations, including air and water terminals.
Weight and Carrier Limits
Individual shipments must stay within carrier restrictions and may not exceed 150 pounds by commercial air or 1,000 pounds by other commercial carriers. The shipment must fit the carrier’s accepted small-package or commercial freight parameters.
Reasonable Freight Reimbursement
The Government reimburses the contractor for reasonable freight charges. The contractor must therefore incur and document freight costs in a way that supports reasonableness and allowability.
Bill of Lading Notations Required
The contractor must annotate the commercial bill of lading as required by the contract clause on Commercial Bill of Lading Notations. Proper notation is part of the shipment record and supports Government oversight and payment.
Consolidation Is Required
The contractor must consolidate prepaid shipments according to procedures set by the cognizant transportation office. The contractor may combine Government prepaid shipments with its own commercial shipments for delivery to one or more consignees, but the Government only pays its pro rata share of total freight costs.
No Dividing Into Mailable Lots
Quantities may not be split into mailable lots just to avoid movement by other transportation modes. This prevents misuse of the clause to route freight through small-package channels when another mode would be more appropriate.
Separate Invoice Support
Transportation charges must be billed as a separate item on the invoice for each shipment. A copy of the relevant bill of lading, shipment receipt, or freight bill must accompany the invoice unless the contract says otherwise.
Government Handles Claims
Loss and damage claims are processed by the Government, not the contractor. The contractor’s role is to preserve shipment records and support the Government’s claims process.
Responsibilities
Contracting Officer
Authorize use of this clause when appropriate, ensure the shipment method is permitted under the contract, and rely on the clause to control reimbursement, documentation, and claims handling.
Contractor
Ship only authorized, unclassified domestic freight under the stated weight limits; use prepaid commercial bills of lading or other approved shipping documents; annotate bills of lading as required; consolidate shipments per transportation office procedures; avoid splitting quantities into mailable lots; bill transportation as a separate invoice line item; and provide the required supporting documents.
Cognizant Transportation Office
Establish consolidation procedures that the contractor must follow and provide transportation guidance needed to administer prepaid small-package shipments efficiently and consistently.
Government
Reimburse reasonable freight charges, pay only the Government’s pro rata share when shipments are combined with contractor commercial freight, and process loss and damage claims.
Consignee
Receive a copy of the commercial bill of lading promptly when shipments are combined or prepaid under this clause, so delivery and receipt records are complete.
Practical Implications
This clause is mainly an administrative and logistics control tool, so missing paperwork can delay payment even when the shipment itself was proper.
Contractors should watch the weight limits closely; exceeding 150 pounds by air or 1,000 pounds by other carriers can make the shipment noncompliant.
Combining Government and commercial freight can save money, but the contractor must be able to allocate the Government’s pro rata share accurately and document the basis for the split.
The prohibition on dividing quantities into mailable lots is a common compliance trap; contractors should not break shipments apart simply to qualify for small-package handling.
Because the Government processes loss and damage claims, contractors should keep shipment records, receipts, and freight bills organized so claims can be supported quickly.
Official Regulatory Text
As prescribed in 47.303-17 (f) , insert the following clause: F.o.b. Origin, Prepaid Freight-Small Package Shipments (Jan 1991) (a) When authorized by the Contracting Officer, f.o.b. origin freight shipments which do not have a security classification shall move on prepaid commercial bills of lading or other shipping documents to domestic destinations, including air and water terminals. Weight of individual shipments shall be governed by carrier restrictions but shall not exceed 150 pounds by any form of commercial air or 1,000 pounds by other commercial carriers. The Government will reimburse the Contractor for reasonable freight charges. (b) The Contractor shall annotate the commercial bill of lading as required by the clause of this contract entitled "Commercial Bill of Lading Notations." (c) The Contractor shall consolidate prepaid shipments in accordance with procedures established by the cognizant transportation office. The Contractor is authorized to combine Government prepaid shipments with the Contractor’s commercial shipments for delivery to one or more consignees and the Government will reimburse its pro rata share of the total freight costs. The Contractor shall provide a copy of the commercial bill of lading promptly to each consignee. Quantities shall not be divided into mailable lots for the purpose of avoiding movement by other modes of transportation. (d) Transportation charges will be billed as a separate item on the invoice for each shipment made. A copy of the pertinent bill of lading, shipment receipt, or freight bill shall accompany the invoice unless otherwise specified in the contract. (e) Loss and damage claims will be processed by the Government. (End of clause)