Knowledge Center · Product Sourcing
FOB Destination vs. FOB Origin: Who Pays Shipping on a Government Contract?
The supplier’s unit price is only the beginning. Check who pays freight, where delivery ends, and who bears the risk before you quote.
When quoting products to the federal government, you need to know who arranges transportation, who pays the freight, who is responsible for damage, and exactly where the carrier must deliver. The answer often begins with FOB Destination or FOB Origin.
FOB means free on board. The FOB point helps establish transportation responsibilities, but the complete solicitation and incorporated clauses control.
| Term | Contractor’s typical obligation |
|---|---|
| FOB Destination | Arrange and pay transportation to the specified destination; remain responsible for loss or damage before receipt there. |
| FOB Origin | Properly deliver the shipment to the carrier at the specified origin; perform required packaging and loading responsibilities. The government normally takes responsibility for onward transportation. |
What does FOB Destination mean?
Under FAR 52.247-34, the contractor must deliver in good condition to the contractual delivery point and bear the transportation charges and pre-receipt loss or damage responsibility. Packaging, marking, bills of lading, and delivery arrangements also matter. [1]
For a reseller, the acquisition cost therefore needs to include the delivery obligation. Consider this hypothetical supplier quotation:
- Products: $4,000.
- Required packaging: $150.
- Freight to the government location: $650.
Your stated costs total $4,800 before overhead, financing, contingency, or profit. Treating $4,000 as the complete cost would omit $800. Ask what is included before calculating a markup.
What does FOB Origin mean?
FOB Origin still leaves work with the contractor. FAR 52.247-29 requires compliant packing and marking, delivery to the carrier in good condition, and applicable loading, stowing, blocking, or bracing. Liability can remain for improper packing or contractor loading even after the carrier receives the goods. [2]
Check the exact shipping point, carrier arrangements, bill-of-lading instructions, and any variation such as freight prepaid or freight allowed. “Origin” does not mean that every transportation expense or responsibility disappears from your business.
The supplier’s terms do not replace the government’s terms
A common gap is a government requirement for FOB Destination paired with a supplier quote for FOB factory or freight collect. The supplier may be offering exactly what its quotation says, while you still owe the government a more extensive delivery service.
Before submitting a price, ask the supplier or distributor to confirm:
- The exact product, quantity, stock status, and lead time.
- The shipping origin and the government’s complete destination.
- Freight, packaging, and marking charges.
- The carrier service and realistic transit time.
- Liftgate, appointment, limited-access, inside-delivery, or other additional charges.
- Who handles damaged goods, claims, and replacement shipments.
- The quotation’s expiration date and any exclusions.
These are our practical sourcing checks. Keep the supplier’s written answers with your pricing file so another person can see how the delivered cost was calculated.
FOB Destination does not automatically mean delivery inside a room
The standard destination clause generally addresses the receiving dock or unloading platform and specified carrier arrangements. A different clause, FOB Destination, Within Consignee’s Premises, extends delivery within the doors and to particular rooms when specified. [1] [3]
Read the entire delivery schedule for installation, assembly, stairs, elevators, base access, appointments, multiple locations, and specialized handling. A low freight estimate can become expensive when it assumes a commercial loading dock but the actual destination needs a liftgate and inside placement.
Risk of loss, title, and acceptance are separate questions
Under the standard commercial-contract clause, risk generally transfers at carrier handoff for origin delivery or at the specified government destination for destination delivery, unless the contract says otherwise. Title is addressed separately and ordinarily passes upon acceptance. Do not use one milestone as proof that all other obligations are complete. [4]
A delivery receipt, an acceptance record, and a paid invoice serve different purposes. Preserve each one. Our federal payment guide explains how acceptance and invoicing affect cash flow.
If requirements conflict or delivery details are missing, use the solicitation’s question process before its deadline. Align the government requirement, supplier quote, transportation plan, and submitted price before accepting the order.