§2563 Articles and services of industrial facilities: sale to persons outside the Department of Defense

Summary

The Secretary of Defense can sell items and services made in military-owned, working-capital industrial shops to people or companies outside the Department of Defense, but only when those things cannot be bought from a U.S. commercial supplier. This does not apply to Army shops that make large-caliber guns, gun parts, ammunition, or similar items, which follow other rules. The Secretary picks which facilities can make sales. Before a sale happens, the Secretary must decide the item really isn’t commercially available, the buyer must agree to protect and pay back the U.S. for most injury or damage claims (except if there is willful misconduct, gross negligence, or the government failed to meet contract quality, schedule, or cost promises), the facility must be able to do the work itself with only small subcontracting, the sale must serve the public interest, and the sale must not hurt the facility’s military mission or its work for the Department of Defense. For national security reasons, the Secretary can waive the commercial-availability rule for a specific sale but must tell Congress why. Buyers may pay with advance incremental funding (partial payments over time). Sales must at least cover variable costs, capital improvements, and equipment depreciation. Contracts should be firm fixed-price or cost-reimbursement if the buyer agrees. The facility must keep working capital from non-appropriated sources for design, planning, and other costs. Money from sales goes back to the funds that paid the manufacturing costs. Export controls under the Arms Export Control Act still apply. Definitions: advance incremental funding — partial payments before and during work; not available — cannot be obtained in the needed amount, quality, or time from U.S. sources; variable costs — costs that change with how much is produced or how much service is provided.