§7544 Army Industrial Facilities: Cooperative Activities with Non-army Entities

Summary

Army industrial facilities that use a working-capital fund can make contracts or other cooperative deals with non-Army organizations to do military or commercial projects. These deals can include selling things the facility makes or services it provides, letting a non-Army group do work at the facility, the facility doing work for a non-Army group, sharing work, leasing or letting others use facility space or equipment, or making joint bids with a non-Army partner. The facility must do most of the work itself (only minor subcontracting allowed). The activity must not get in the way of Defense work or the facility’s military mission. It must also serve objectives like better using the facility, lowering ownership or production costs for the Defense Department, or keeping important skills or equipment. The non-Army partner must agree to protect the United States from claims or damages caused by the activity, except when there is willful misconduct or gross negligence, or when a buyer’s claim arises because the U.S. failed to meet agreed quality, schedule, or cost. The facility’s approval authority can use fixed-price or agreed cost-reimbursement contracts, make multiyear deals up to 5 years unless a law allows longer, charge prices that recover full costs (including capital and depreciation), accept incremental payment plans, and accept payment-in-kind. Money from sales goes back to the working capital fund that paid the costs. The approving official is the commander of the major Army command that runs the facility, who can approve single or group agreements. Sales to non-Defense buyers (other than DoD contracts, foreign military sales, or authorized foreign direct commercial sales) are only allowed if no U.S. commercial source can supply what is needed in time, quantity, or quality. Work done by non-Federal workers under these deals is not counted under the depot-level maintenance percentage limit in section 2466(a). This does not change export controls in sections 30 and 38 of the Arms Export Control Act (22 U.S.C. 2770 and 2778) or lease rules in section 2667. Definitions: “Army industrial facility” = examples like ammunition plants, arsenals, depots, and manufacturing plants; “non-Army entity” = other federal agencies, industry, states, or schools; “incremental funding” = partial payments as work progresses; “full costs” = variable plus fixed costs tied to production; “variable costs” = costs that change with the amount produced or used.