§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 by military industrial facilities to people or groups outside the Department of Defense when those things are not available from U.S. commercial sources. The Secretary picks which working‑capital funded facilities may sell. The rule does not apply to Army facilities that make large‑caliber cannons, gun mounts, recoil systems, ammunition, munitions, or their parts, because those are covered by other rules. Sales are allowed only if the Secretary finds commercial sources lack the needed quantity, quality, or timing (unless waived for national security with notice to Congress), the buyer agrees to protect the U.S. against most claims (except for willful misconduct, gross negligence, or failures to meet contract quality, schedule, or cost), the facility can do the work itself with only small subcontracts, the sale is in the public interest, and the sale won’t hurt the facility’s military work. Buyers may use advance partial payments. Prices must cover variable costs, capital improvements, and equipment depreciation. Contracts may be firm fixed‑price or cost reimbursement if the buyer agrees. Money from sales goes back to the funds that paid the manufacturing or service costs. Export controls under the Arms Export Control Act still apply. Definitions (one line each): advance incremental funding — series of partial payments before and during work; not available — not obtainable from U.S. sources in needed amount, quality, or time; variable costs — costs that change with how much is produced or how many services are sold.