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  • Question

    Does the FAR allow for barters or more specifically exchanges wherein a raw ingredient or component is provided in exchange for a finished product with no monetary consideration?


    Answer

    The sticky issue, (pun intended), is that your scenario indicates the government wants to get (i.e. acquire or procure) strawberry jam. The definitions of 'contract' and 'acquisition' at FAR 2.101 both require appropriated funds. As berries are not appropriated funds, it would seem to eliminate berries as a form of payment.  This also does not fit the example of a nonprocurement transaction such as a donation agreement as presented of 'Nonprocurement Common Rule' at FAR 9.403.  Donation agreements are nonprocurement, thus, no getting; only giving.

    Additionally, the transformation of the berries to jam requires the application of resources (labor, additional ingredients, containers, production equipment, etc.).  This would not be 'free'.  Even if it were 'free', the government is prohibited from acquiring supplies or services without paying for them, see again FAR 2.101 definition of 'acquisition'. A contractor would necessarily need to be compensated for their investment to even be able to process the berries. 

    Berries do fit the FAR 45.101 definition of “Material” as property that may be consumed or expended during the performance of a contract, component parts of a higher assembly, or items that lose their individual identity through incorporation into an end-item. 

    There would be no prohibition against the government entering into a contract for strawberry jam. In this situation the government provides the strawberries as 'material' for the contractor to consume or expend during the performance of the contract. Even better for the tax payer, there is high probability the price of the strawberry jam could be lower due to the provision of government material for the contract.

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