§7544 Army industrial facilities: cooperative activities with non-Army entities

Summary

Army plants that are funded from a working-capital fund may make contracts or cooperate with non-Army parties to do military or commercial projects if certain rules are met. They can sell things or services, have outside firms work at the plant, do work for outside firms, share work, lease or let others use excess space or equipment, or make joint bids with other firms. The plant must do most of the work itself without large subcontracting. The activity cannot interfere with Department of Defense work or the plant’s military mission. The work must either use idle capacity, cut ownership or production costs, lower the cost of DoD products, or keep important skills or equipment. Outside parties must agree to protect the United States from claims or damages, except for willful misconduct or gross negligence, and except where a buyer’s claim is for U.S. failure to meet contract quality, schedule, or cost requirements. The facility commander’s higher-level commander approves the deals. Contracts can be fixed-price (or cost reimbursement if agreed), can run up to five years unless another law allows longer, must charge full costs including capital and depreciation, can use incremental payments, and can accept payment-in-kind. Money from sales goes back into the working-capital fund. This does not change export controls, foreign military sales rules, or lease rules for non-excess property. Depot-level maintenance paid to nonfederal workers under one of these arrangements is not counted under the percentage limit in section 2466(a). Definitions: Army industrial facility — places like arsenals, depots, ammunition plants, and manufacturing plants; non-Army entity — other federal agencies, private industry, states or local governments, and schools or training institutions; incremental funding — partial payments made as work is done until fully paid; full costs — direct fixed and variable costs tied to making the items or providing the services; variable costs — costs that rise or fall with how much is made or used.