DoD Instruction 4105.67 - Nonappropriated Fund (NAF) Procurement Policy and Procedure

Department of Defense
INSTRUCTION
NUMBER 4105.67
February 26, 2014
Incorporating Change 2, December 1, 2017
USD(P&R)
SUBJECT:

Nonappropriated Fund (NAF) Procurement Policy and Procedure

References: See Enclosure 1

1. PURPOSE. This instruction:
a. Reissues DoD Directive (DoDD) 4105.67 (Reference (a)) as a DoD instruction (DoDI) in
accordance with the authority in DoDD 5124.02 (Reference (b)) to establish policy, assign
responsibilities, and prescribe procedures for procurements using NAF.
b. Authorizes DoD nonappropriated fund instrumentalities (NAFIs) to enter into certain
contracts and agreements with other federal agencies and instrumentalities in accordance with
the authorities in sections 2484(h)(2)(A) and 2492 of Title 10, United States Code (U.S.C.)
(Reference (c)).
c. Incorporates and cancels DoDI 4105.71 (Reference (d)) and DoDI 7060.03
(Reference (e)).

2. APPLICABILITY
a. This instruction applies to OSD, the Military Departments, the Office of the Chairman of
the Joint Chiefs of Staff and the Joint Staff, the Combatant Commands, the Office of the
Inspector General of the Department of Defense, the Defense Agencies, the DoD Field
Activities, and all other organizational entities within the DoD (referred to collectively in this
instruction as the “DoD Components”).
b. This instruction creates no rights or remedies and may not be relied on by any person,
organization, or other non-governmental entity to allege a denial of any rights or remedies.

3. POLICY. It is DoD policy that:

DoDI 4105.67, February 26, 2014
a. DoD NAFIs governed by DoDI 1015.15 (Reference (f)) are instrumentalities of the United
States and have the inherent authority to enter into contracts and leases using NAF.
b. NAF procurements will be accomplished by trained procurement personnel in a fair,
equitable, and impartial manner, and to the best value for the NAFI. Appropriated fund (APF)
and NAF procurement personnel must perform NAF-funded contract actions in accordance with
NAF procurement procedures and will ensure the actions are not bound by the APF procedures
listed in paragraph 3i of this instruction. However, when in the best interest of the NAFI, as
determined by the NAFI, existing APF contracts may be used to fulfill NAF requirements in
accordance with paragraph 1.a. of Enclosure 2 of this instruction.
c. NAF procurements must be executed in compliance with the requirements of applicable
statutes, regulations, and directives.
d. Personnel accomplishing NAF procurements must comply with DoDD 5500.07
(Reference (g)).
e. Personal service contracts, as defined in Volume 1403 of DoDI 1400.25 (Reference (h)),
are prohibited.
f. The exchange services must implement a program that ensures private label and nonbranded direct-import merchandise is not produced by child or forced labor as requested by
House Report 107-194, which accompanied the National Defense Authorization Act for Fiscal
Year 2002 (Reference (i)), and in accordance with procedures in section 12 of Enclosure 2 of this
instruction.
g. DoD favors and promotes the sale of U.S. merchandise items and services in overseas
NAFIs as prescribed in Enclosure 3 of this instruction.
h. DoD NAFIs will procure sustainable goods and services when they represent the best
value to the NAFI.
i. The following do not apply to NAF procurements:
(1) Federal Acquisition Regulation (Reference (j)), the Defense Federal Acquisition
Regulation Supplement (Reference (k)), or DoD Component supplements.
(2) Chapter 137, “Procurement Generally,” of Reference (c).
(3) Section 631 et seq. of Title 15, U.S.C., also known as “the Small Business Act,” as
amended (Reference (l)).
(4) Sections 8301-8303 of Title 41, U.S.C. ((Reference (m)), also known and referred to
in this instruction as “the Buy American Act (BAA),” and sections 2501-2581 of Title 19,
U.S.C., also known and referred to in this instruction as “the Trade Agreements Act (TAA) of
1979” (Reference (n)), do not apply to NAFI purchases of resale items.

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4. RESPONSIBILITIES
a. Under Secretary of Defense for Personnel and Readiness (USD(P&R)). The USD(P&R)
establishes uniform DoD NAF procurement policy.
b. Assistant Secretary of Defense for Manpower and Reserve Affairs (ASD(M&RA)).
Under the authority, direction, and control of the USD(P&R), the ASD(M&RA) establishes
guidance for the proper administration and management of NAF procurements and monitors
compliance as prescribed in this instruction.
c. DoD Component Heads. DoD Component heads:
(1) Establish NAF procurement procedures consistent with this instruction. They may
delegate the authority to develop procurement procedures to the exchange services.
(2) Establish NAF procurement management oversight and internal control systems.
(3) May establish procurement advisory groups where NAF procurement personnel and
legal counsel supporting NAFIs can meet to discuss means of improving procurement actions.
Advisory groups will consist solely of U.S. Government personnel.
(4) Must review and approve NAF facility leases with an annual cost of $200,000 or
greater before contract award.

5. PROCEDURES. Enclosure 2 provides general procedures for NAF procurements that are in
the best interest of the NAFI and must be followed absent specific prohibition in federal law,
federal regulation, Executive order, or DoD issuance. Enclosure 3 provides procedures for the
international balance of payments program as it applies to NAFIs.

6. RELEASABILITY. Cleared for public release. This instruction is available on the Internet
from the Directives Division Website at http://www.esd.whs.mil/DD/.

7. SUMMARY OF CHANGE 2. The changes to this issuance are administrative and update the
references, a definition, and a URL for accuracy.

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8. EFFECTIVE DATE. This instruction is effective February 26, 2014.

Enclosures
1. References
2. NAF Procurement Procedures
3. NAFI International Balance of Payments Program Procedures
Glossary

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TABLE OF CONTENTS

ENCLOSURE 1: REFERENCES ...................................................................................................6
ENCLOSURE 2: NAF PROCUREMENT PROCEDURES ..........................................................8
PROCUREMENT METHODS .................................................................................................8
PROCUREMENT AUTHORITY .............................................................................................9
TRAINING…… ......................................................................................................................10
SOLICITATION DEVELOPMENT AND CONTRACT FORMATION ..............................10
CONTRACT OFFICER’S REPRESENTATIVE (COR)........................................................10
CONTRACT AWARD ............................................................................................................11
CONTRACT DOCUMENTATION ........................................................................................11
CONTRACT ADMINISTRATION ........................................................................................12
RESOLUTION OF CLAIMS, PROTESTS AND APPEALS.................................................12
FACILITY LEASES ................................................................................................................13
DEFENSE BUSINESS SYSTEMS .........................................................................................13
EXCHANGE SERVICE PRIVATE LABEL AND NON-BRANDED DIRECT-IMPORT
MERCHANDISE ...............................................................................................................13
MWR TELEPHONE SERVICES FOR PERSONNEL IN COMBAT ZONES .....................14
DOD NAF PROCUREMENT WORKING GROUP ..............................................................15
ENCLOSURE 3: NAFI INTERNATIONAL BALANCE OF PAYMENTS PROGRAM
PROCEDURES........................................................................................................................16
PROCUREMENT AND STOCKING .....................................................................................16
General….. .........................................................................................................................16
Foreign Goods For Resale .................................................................................................16
Foreign Goods Not For Resale ..........................................................................................18
CONSTRUCTION, SUSTAINMENT, RESTORATION, AND MODERNIZATION OF
REAL PROPERTY OUTSIDE THE UNITED STATES .................................................18
EXCEPTIONS .........................................................................................................................18
Canada, Korea, and Mexico ...............................................................................................18
Greenland.. .........................................................................................................................18
Excess Foreign Currencies .................................................................................................18
GLOSSARY ..................................................................................................................................19
PART I: ABBREVIATIONS AND ACRONYMS ................................................................19
PART II: DEFINITIONS........................................................................................................19

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CONTENTS

DoDI 4105.67, February 26, 2014
ENCLOSURE 1
REFERENCES

(a)
(b)
(c)
(d)
(e)
(f)

(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)

(r)
(s)
(t)

(u)
(v)
(w)
1
2

DoD Directive 4105.67, “Nonappropriated Fund Procurement Policy,” May 2, 2001, as
amended (hereby cancelled)
DoD Directive 5124.02, “Under Secretary of Defense for Personnel and Readiness
(USD(P&R)),” June 23, 2008
Title 10, United States Code
DoD Instruction 4105.71, “Nonappropriated Fund (NAF) Procurement Procedure,”
February 26, 2001, as amended (hereby cancelled)
DoD Instruction 7060.03, “International Balance of Payments Program – Nonappropriated
Fund Activities,” December 7, 2005 (hereby cancelled)
DoD Instruction 1015.15, “Establishment, Management, and Control of Nonappropriated
Fund Instrumentalities and Financial Management of Supporting Resources,” October 31,
2007, as amended
DoD Directive 5500.07, “Standards of Conduct,” November 29, 2007
DoD Instruction 1400.25, Volume 1403, “Department of Defense Civilian Personnel
Management System: “Nonappropriated Fund (NAF) Employment,” March 20, 2015
House Report 107-194, which accompanied the National Defense Authorization Act for
Fiscal Year 2002, (“Military Exchange Private Label Manufacturers,” page 293) 1
Federal Acquisition Regulation (FAR), current edition
Defense Federal Acquisition Regulation Supplement (DFARS), current edition
Section 631 et seq. of Title 15, United States Code
Title 41, United States Code
Sections 2501-2581 of Title 19, United States Code
DoD Instruction 1330.21, “Armed Services Exchange Regulations,” July 14, 2005
DoD Instruction 1015.10, “Military Morale, Welfare, and Recreation (MWR) Programs,”
July 6, 2009, as amended
DoD Instruction 1015.08, “DoD Civilian Employee Morale, Welfare, and Recreation
(MWR) Activities and Supporting Nonappropriated Fund Instrumentalities (NAFI),”
December 23, 2005
DoD Instruction 1015.11, “Lodging Policy,” October 6, 2006, as amended
Section 107 et seq. of Title 20, United States Code
DoD Instruction 1015.13, “DoD Procedures for Implementing Public Private Ventures
(PPVs) for Morale, Welfare, and Recreation (MWR), and Armed Services Exchange
Category C Revenue-Generating Activities,” March 11, 2004
General Services Administration, “List of Parties Excluded” from federal procurement and
nonprocurement programs, current edition 2
DoD Instruction 7600.06, “Audit of Nonappropriated Fund Instrumentalities (NAFI) and
Related Activities,” November 5, 2012
DoD Instruction 4165.71, “Real Property Acquisition,” January 6, 2005

Copies may be obtained from the internet at http://www.congress.gov/
Copies may be obtained from the internet at https://www.sam.gov

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(x) DoD Instruction 4165.70, “Real Property Management,” April 6, 2005
(y) DoD Instruction 7700.18, “Commissary Surcharge, Nonappropriated Fund (NAF), and
Privately Financed Construction Reporting Procedures,” December 15, 2004
(z) DoD Instruction 1340.25, “Combat Zone Tax Exclusion (CZTE),” September 28, 2010
(aa) Office of the Chairman of the Joint Chiefs of Staff, “DoD Dictionary of Military and
Associated Terms,” current edition

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ENCLOSURE 2
NAF PROCUREMENT PROCEDURES

1. PROCUREMENT METHODS
a. Existing NAF and APF contracts and agreements will be used to satisfy NAF
requirements when such contracts or agreements are available, cost-effective, and meet the needs
of the requiring activity. To encourage cooperative initiatives, DoD NAFIs will authorize other
NAFI organizations to place delivery orders against their contracts to the maximum extent
practical.
b. Procurement methods and procedures that result in firm fixed-price contracts are
preferred, unless otherwise determined by the contracting officer as being in the best interest of
the NAFI.
c. Alternative purchase methods, such as the use of NAF purchasing agreements, master
vendor agreements, purchase cards, and emergency procurement procedures, may be authorized.
NAFIs will use the Government Commercial Purchase Card (GCPC) or other purchase cards for
the purchase of non-resale items and services procured with NAF when appropriate and cost
effective.
d. Pursuant to section 2492 of Reference (c), NAFIs that directly support the operations of
exchange services; military and DoD civilian morale, welfare, and recreation (MWR) programs
or lodging programs are authorized to enter into contracts or other agreements with another DoD
element or another federal department, agency, or instrumentality to provide or obtain items and
services that are beneficial to the efficient management and operation of the exchange services,
military and DoD civilian MWR systems or lodging programs. These NAFIs:
(1) May enter into contracts or agreements to provide or obtain those items and services
specifically authorized for:
(a) Exchange services as defined by DoDI 1330.21 (Reference (o)).
(b) Military MWR activities as defined by DoDI 1015.10 (Reference (p)).
(c) Civilian MWR activities as defined in DoDI 1015.08 (Reference (q)).
(d) Lodging activities as defined in DoDI 1015.11 (Reference (r)).
(2) May enter into contracts or agreements to provide or obtain food services beneficial
to the efficient management and operation of the dining facilities on military installations
offering food services to Service members.

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(3) Will not enter into contracts or agreements with DoD elements or other federal
departments, agencies, or instrumentalities for the provision of items or services that will result
in the loss of jobs created pursuant to section 107 et seq. of Title 20, U.S.C., also known as “the
Randolph-Sheppard Act” (Reference (s)), sections 8501 through 8506 of Reference (m), also
known as the “Committee for Purchase from People Who Are Blind or Severely Disabled
Statute,” or small business programs.
(4) Will not enter into additional contracts or agreements pursuant to section 2492 of
Reference (c) with APF-funded DoD elements, or with other federal departments or agencies,
except as authorized in paragraphs 1.d.(1) and 1.d.(2) of this enclosure. Renewal or extension of
existing contracts or agreements entered into before December 19, 2014 for items or services not
authorized in paragraphs 1.d.(1) and 1.d.(2) of this enclosure is permitted.
(5) Before entering into a contract or other agreement pursuant to section 2492 of
Reference (c), will ensure that the agreement or contract will benefit the NAFI.

2. PROCUREMENT AUTHORITY
a. The DoD Component Head or their designee(s) will prescribe criteria for determining
when central or regional procurement offices will be used to accomplish NAF procurements.
Such criteria will specify, as appropriate, separate offices to serve different Military Services,
programs, dollar thresholds, etc.
b. The contracting authority will:
(1) Prescribe, in accordance with their DoD Component’s procedures, organizational
authority, limitations, and levels of approval for solicitation, negotiation, award, administration
and termination of contracts, resolution of ratifications, and resolution of protests, contractor
claims, and subsequent appeals in accordance with section 9 of this enclosure.
(2) Ensure individual responsibility for properly using NAF resources and preventing
waste, loss or unauthorized use. Procedures regarding individual liability for unauthorized
commitments of NAF resources must be specified.
(3) Delegate and oversee NAF procurement authority, and limit delegation of NAF
procurement authority to federally- or NAFI-employed personnel.
(a) NAF procurement personnel with procurement authority must be designated in
writing, either by name or by position or job title. These written designations may be made via a
certificate of appointment, a letter of appointment, a regulation or similar issuance, or an
equivalent document. These documents will state the scope and limitations of NAF procurement
authority and be posted within public view or made available on request.
(b) Personnel with APF procurement authority are not required to have a separate
NAF procurement authority to support installation NAF contracting offices.

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3. TRAINING. The contracting authority will establish training requirements, continuing
education, and certification requirements for procurement personnel based upon the scope and
complexity of the NAF procurements to be accomplished.

4. SOLICITATION DEVELOPMENT AND CONTRACT FORMATION
a. Each NAF contract will identify the specific NAFI that is party to the contract. The NAF
contract must state no APF of the United States will be obligated, due, or payable to a contractor.
b. NAF contracts must include contract clauses required by applicable statutes, regulations,
or DoD issuances. Each NAF contract will:
(1) Contain clauses governing: changes, examination of records, claims, and
terminations.
(2) Apply the BAA and the TAA to non-resale procurements.
c. NAFIs will use competitive procurement procedures to the maximum extent practicable.
(1) Offers will be solicited from a reasonable number of sources except when noncompetitive procurement is justified.
(2) The DoD Component Head or their designee(s) must prescribe criteria for noncompetitive procurements.
d. Solicitations and resulting contracts to outsource or privatize NAF activities, or for publicprivate ventures (PPVs), will include analysis and approvals to document that the award provides
the best value to the NAFI. The procedures in DoDI 1015.13 (Reference (t)) apply to PPVs.
e. Sources of supply will only be selected from legitimate offerors. In addition to contracts
entered into directly with commercial suppliers, use of other established Government and NAFI
contracts will be considered. These may include the General Services Administration, federal
prison industries, blind licensees under the Randolph-Sheppard Act, AbilityOne-authorized
nonprofit agencies employing people who are blind or significantly disabled under the
Committee for Purchase from People Who Are Blind or Severely Disabled Statute, Defense
Logistics Agency, Defense Commissary Agency, exchange services, and DoD MWR NAFIs.

5. CONTRACTING OFFICER’S REPRESENTATIVE (COR)
a. CORs serve a critical role in assuring contractors meet the performance requirements of
contracts. A COR will be appointed for more complex contracts, usually services and

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construction contracts, where performance cannot be readily monitored by the contracting
officer.
b. A COR does not have the authority to make any commitments or changes that affect
price, quality, quantity, delivery, or other contract terms and conditions, nor to “supervise”
contractor employees.
c. If applicable to contract, the contracting officer will appoint the COR and, if needed, an
alternate contracting officer’s representative (ACOR) before contract award. The contracting
officer will ensure training specified by the NAFI contracting office is completed for CORs and
ACORs before contract award, or within 30 days of their appointment for replacements, and at
least every 3 years thereafter as long as the person is a COR or ACOR.

6. CONTRACT AWARD
a. NAF contracts will be awarded to responsible companies offering the best value to the
NAFI. NAF contracting officers will not award, extend, or exercise option years of contracts to
contractors on the General Services Administration’s list of parties excluded from federal
procurement and non-procurement programs (Reference (u)).
b. NAFIs must ensure sound cash management principles are considered in procurement
decisions. Payment terms will be set in the contract.

7. CONTRACT DOCUMENTATION. The contracting authority will establish standards and
procedures to ensure sufficient documentation of procurement actions.
a. NAFI contracts will be documented in either hardcopy or electronic format. Separate
documentation standards and procedures may be established for resale items.
b. Except for resale items, procurement documentation must contain:
(1) The requirement for the procurement.
(2) Statement of funds availability for non-revenue generating contracts.
(3) Evidence of competition or justification for non-competitive procurement.
(4) Proposals received.
(5) Record of negotiations.
(6) Abstracts or summaries of proposals.
(7) Determination of responsibility.

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(8) Required approvals.
(9) Contract award information.
(10) Record of contract performance.
(11) Any applicable contract modifications, changes, or termination actions.

8. CONTRACT ADMINISTRATION. The contracting authority will:
a. Establish standards and procedures to promote the effective administration of procurement
actions, including monitoring contractor performance and delivery, receipt or acceptance of
items, services, property and facilities, and legal review.
(1) At a minimum, legal review will be required for protests, claims, novations,
ratifications, and terminations.
(2) Legal services may be provided by or through lawyers in the offices of the Judge
Advocates General, lawyers in the offices of the DoD Components’ General Counsel, or legal
staff within the NAFI organization.
b. Prescribe criteria for audit review of NAF contracts. As provided in DoDI 7600.06
(Reference (v)), the Defense Contract Audit Agency may provide audit services to evaluate price
proposals, audit contracts, and review NAF contract claims against contractors.

9. RESOLUTION OF CLAIMS, PROTESTS, AND APPEALS
a. Contracting officers will make reasonable efforts to resolve claims. Contracting officer
decisions on claims will be provided in writing and are considered final unless appealed.
b. In claims that are subject to authority of sections 7101-7109 of Reference (m), also known
as “the Contract Disputes Act (CDA),” the contracting officer’s final decision may be appealed
to the Armed Services Board of Contract Appeals or the U.S. Court of Federal Claims.
c. For protests or claims where the CDA does not apply, the contracting officer’s final
decision in NAF procurements may be appealed to a level above the contracting officer who
issued the decision or other designated authority.
d. Protest appeals of decisions made by the contracting officer may be filed in accordance
with the NAFI’s appeals procedures.
e. The protestor has the right to elevate the appeal to a final authority assigned within the
DoD Component for resolution.

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10. FACILITY LEASES
a. NAF facility leases with an annual cost of $200,000 or greater must be reviewed and
approved by the DoD Component head concerned before contract award.
b. NAF facility leases with annual cost of $1,000,000 or greater must be approved by the
ASD(M&RA) before contract award.
c. NAF facility leases with annual costs in excess of $1,000,000 must also be approved by
the Under Secretary of Defense for Acquisition, Technology, and Logistics pursuant to DoDI
4165.71 (Reference (w)).
d. NAFIs are not authorized to lease general purpose office space in urban areas for
themselves, unless the General Services Administration delegates such authority to them.
e. NAF outleases will be completed pursuant to DoDI 4165.70 (Reference (x)) as applicable.

11. DEFENSE BUSINESS SYSTEMS. Defense business systems that will have a total cost in
excess of $1,000,000 over the period of the current future-years defense program, whether APF
or NAF, must be certified by the Defense Business System Management Committee before
obligation. However, this requirement does not apply to systems used exclusively by and within
DoD exchange services or other DoD NAFIs conducted for the MWR of Service members using
NAFs.

12. EXCHANGE SERVICE PRIVATE LABEL AND NON-BRANDED DIRECT-IMPORT
MERCHANDISE. The contracting authority will ensure that the exchange service implement a
program that assures exchange service private label and non-branded direct-imported
merchandise is not produced by child or forced labor pursuant to Reference (i).
a. The program will include a code of conduct that reflects the values and expectations the
exchange service has of their suppliers.
b. Exchange services will develop an implementation plan for the code of conduct that
includes steps to communicate the elements of the code to internal staff, business partners, and
factory workers and to train them on these elements.
c. Exchange services will develop a monitoring effort to ensure the codes of conduct are
upheld.
d. Exchange services will use government agencies, such as the Departments of State and
Labor, retailers, and the International Labor Organization, as resources for information and
insights that would facilitate structuring their program. Exchange services will establish ongoing

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communications with these organizations to help them stay abreast of information that would
facilitate their implementation and monitoring efforts to assure that exchange service
merchandise is not produced by child or forced labor.
e. Exchange services will pursue efforts to implement a program jointly to minimize costs
where there are opportunities to minimize costs.

13. MWR TELEPHONE SERVICES FOR PERSONNEL IN COMBAT ZONES. Pursuant to
the section 2304 note of Reference (c) titled, “Telephone Services for Military Personnel Serving
in Combat Zones,” the following procedures apply to any proposed new contracts, renewals, or
extensions of existing contracts for, or including, MWR telephone services (as defined in the
Glossary) for military personnel serving in combat zones. These procedures do not apply to
other for-fee telephone services, internet, or television services available through personal
information services.
a. MWR telephone services within combat zones must be procured from commercial
providers using competitive procedures.
b. Before soliciting bids or proposals for new contracts or exercising renewal options on
existing contracts for MWR telephone services in combat zones, the Military Department will
obtain an ASD(M&RA) determination whether it is in the best interest of the Department to
require bids or proposals, or adjustments for the purpose of extending a contract, to include
options that minimize user costs while providing flexibility to use phone cards from other than
the prospective or current vendor.
(1) The Military Department will submit the request for determination to the
ASD(M&RA) at least 270 days before contract expiration.
(2) Determination requests will include documentation that the proposed contract action
is in the best interest of DoD.
(3) The NAFI will not solicit for a new contract or renew or extend an existing contract
until the ASD(M&RA) has informed the Military Department of its determination.
(4) If the ASD(M&RA) imposes the requirement to include these options in the new
contract solicitation, renewal, or extension, and the submitted bids either prove to be costprohibitive to the exchange service or there are no reasonable responses to the solicitation, the
Military Department may request that the ASD(M&RA) reconsider the original determination.
(a) To avoid interruption of telephone service, the Military Department must submit
reconsideration requests to the ASD(M&RA) at least 120 days before contract expiration.
(b) The ASD(M&RA) will make the reconsideration determination based on the best
interest of the DoD.

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14. DoD NAF PROCUREMENT WORKING GROUP. Representatives of the USD(P&R) and
the DoD Components will meet at least annually to review NAF procurement matters and to
address opportunities for cooperation, joint procurement initiatives, and contract standardization.
DoD Component representatives will include key NAF procurement personnel representing the
exchange services, military and civilian MWR programs, lodging programs, and other
supplemental mission programs in accordance with Reference (f). When appropriate,
representatives of the DoD General Counsel and NAFI legal counsel will attend working group
meetings.

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DoDI 4105.67, February 26, 2014
ENCLOSURE 3
NAFI INTERNATIONAL BALANCE OF PAYMENTS PROGRAM PROCEDURES

1. PROCUREMENT AND STOCKING
a. General. Overseas exchange service officers and heads of other overseas procuring NAF
activities will, within the limits of sound business practice, stock U.S. merchandise in preference
to equivalent merchandise from foreign sources, and take the following steps to maximize the
sale of U.S. merchandise by NAF resale activities:
(1) Label and segregate foreign merchandise displays.
(2) Display U.S. merchandise prominently.
(3) Avoid inferior foreign imitations and substitutes of U.S. merchandise.
(4) Respond rapidly to consumer preference for U.S. merchandise through established
exchange service procurement channels.
(5) Cooperate with potential U.S. suppliers in meeting foreign competition where
customer demand in overseas exchange services indicates a shift to foreign products.
b. Foreign Goods For Resale. It is recognized that, when locally available foreign goods are
procured by U.S. personnel in overseas areas, a more favorable effect on the U.S. balance of
payments will result if such items are purchased through U.S.-operated NAF resale activities
rather than procured directly on the local economy or from other foreign outlets.
(1) Restrictions. Overseas NAF resale activities may procure foreign goods available in
the local market for resale to authorized personnel, subject to the same restrictions that apply to
the exchange services contained in Reference (o) and under these conditions:
(a) The price of foreign goods sold in NAF activities will be based on a markup
percentage that is no less than that applied to similar categories of U.S. merchandise. Other
provisions notwithstanding, the resale price of an item need not exceed the local price.
(b) Only foreign goods available on the local market will be sold by NAF
instrumentalities, except under these conditions:
1. Foreign goods purchased with excess foreign currencies may be stocked and
sold.
2. In remote geographic areas where DoD personnel are isolated and where a
local market does not exist, the Combatant Commander may authorize foreign goods to be
stocked to the extent dictated by morale and welfare considerations.

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(c) Transshipment of foreign goods between NAF instrumentalities in different
market areas is authorized where the resale price of the transshipped items, including markup
and transshipment transportation costs, results in significant savings to the authorized patrons
compared to purchase of the items from local importers at the resale area. No appropriated funds
will be used in this transshipment of merchandise, except when commercial transportation is not
available or in contingency operations.
(2) Exceptions to Restrictions. The following categories of foreign goods procured by
overseas NAF resale activities are not subject to the conditions stated in paragraph 1b(1) of this
enclosure.
(a) Perishable subsistence items, beverages, and similar items purchased for
consumption on the premises of NAF activities engaged in serving foods and beverages.
However, these purchases should be reviewed continuously with the view to change to U.S.
sources if feasible and financially advantageous.
(b) Items for which there are no acceptable substitutes of U.S. manufacture and
which are required to operate or maintain customer-owned equipment, such as 220v/110v
transformers; bulbs, sockets and accessories; and repair parts for watches, radios, electronic
equipment, and household appliances.
(c) Infant caskets.
(d) Distinctive unit insignia.
(e) Printed matter such as maps, postcards, magazines, newspapers, travel books,
greeting cards, and newsprint and ink for printing of “Stars and Stripes.”
(f) Soft drinks.
(g) Items of supply and materials for use in connection with hobby craft shop and
craft programs of the Military Departments.
(h) Purchases made or required pursuant to treaty or Executive agreement.
(i) Emergency purchases.
(j) High octane gasoline, kerosene, and heating and cooking fuels which are not
otherwise available from appropriated fund stocks.
(k) Automotive supplies for U.S.-made cars where supplies of American
manufacture are not available from either bonded warehouses or foreign distributors and where
existing facilities preclude these supplies otherwise being made available for the upkeep of
privately owned vehicles.

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DoDI 4105.67, February 26, 2014
c. Foreign Goods Not For Resale
(1) Overseas NAFIs are authorized to buy, but not to sell, foreign goods if procurement
is:
(a) Made pursuant to treaty or Executive agreements.
(b) Estimated not to exceed $100,000 in foreign currency.
(c) Obtainable from foreign sources only and for which it is not feasible to forego
filling the requirements or to provide a U.S.-made substitute for them.
(2) Procurement of other “not for sale” items, except as provided in section 3 of this
enclosure, must be U.S. materials and end products from domestic suppliers provided the cost of
U.S. goods (including transportation and handling costs) is estimated to be no more than 6
percent above the cost of foreign goods if the domestic offer is from a large business or no more
than 12 percent, if the domestic offer is from a small business concern.

2. CONSTRUCTION, SUSTAINMENT, RESTORATION, AND MODERNIZATION OF
REAL PROPERTY OUTSIDE THE UNITED STATES. Nonappropriated-funded construction,
sustainment, restoration, and modernization projects on real property outside the United States
will be accomplished in accordance with the procedures in DoDI 7700.18 (Reference (y)).

3. EXCEPTIONS
a. Canada, Korea, and Mexico. NAF activities located in these countries are authorized to
purchase and sell items produced or manufactured in the respective countries notwithstanding
paragraphs 1b, 1c(1), and 1c(2) of this enclosure.
b. Greenland. NAF activities located in Greenland are authorized to purchase and sell items
produced or manufactured in the Kingdom of Denmark without application of the pricing
provisions of paragraphs 1b, 1c(1), and 1c(2) of this enclosure.
c. Excess Foreign Currencies. NAF activities are authorized to purchase, with excess
foreign currencies acquired from the U.S. disbursing officer, items produced or manufactured in
countries in which the U.S. Treasury holds an excess supply of the currency of the country
concerned. Payments for such procurements may also be made in both local currency and
dollars if the dollar portion is limited to the supplier’s validated direct-dollar costs of the portion
of the procurement that was exported from the United States. Purchase and sale of such items
and services are not subject to the other provisions of this instruction.

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DoDI 4105.67, February 26, 2014
GLOSSARY
PART I. ABBREVIATIONS AND ACRONYMS
ACOR
alternate contracting officer’s representative
ASD(M&RA) Assistant Secretary of Defense for Manpower and Reserve Affairs
APF
appropriated fund
BAA

Buy American Act

CDA
COR

Contract Disputes Act
contracting officer’s representative

DoDD
DoDI

DoD Directive
DoD instruction

GCPC

Government Commercial Purchase Card

MWR

morale, welfare, and recreation

NAF
NAFI

nonappropriated funds
nonappropriated fund instrumentality

TAA

Trade Agreements Act

U.S.C.
USD(P&R)

United States Code
Under Secretary of Defense for Personnel and Readiness

PART II. DEFINITIONS
Unless otherwise noted, these terms and their definitions are for the purpose of this instruction.
appeal. A process by which a protest related to a dispute with the contracting officer’s final
decision is raised to the next higher level for review and decision.
best value. The expected outcome of a procurement that, in the NAFI’s estimation, provides the
greatest overall benefit in response to the requirement.
claim. A written demand or written assertion by one of the contracting parties seeking, as a
matter of right, the payment of money in a sum certain, the adjustment or interpretation of
contract terms, or other relief arising under or relating to a contract. A voucher, invoice, or other
routine request for payment that is not in dispute when submitted is not a claim. The process for
resolving a claim is commonly referred to as “dispute resolution.”
combat zones. Defined in DoDI 1340.25 (Reference (z)).

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DoDI 4105.67, February 26, 2014

competitive negotiation. The method of procurement that permits oral and or written responses
to a solicitation and subsequent negotiation of prices, terms or conditions of the proposed
contract to achieve the best value for the NAFI. This method of procurement allows the
contracting officer the widest latitude in arriving at a fair and reasonable price and mutually
agreed upon terms.
construction. Includes erection, installation, or assembly of a new facility; the addition,
expansion, extension, alteration, conversion, or replacement of an existing facility; the relocation
of facilities and equipment; the adjustment of interior arrangements or other physical
characteristics of a facility; the installation of utilities and equipment made a part of a facility,
and related site preparation, excavation, filling and landscaping or other improvements. It
includes pouring, dredging, excavating, and painting. It does not include installation of carpet,
wall covering, or draperies.
contract. An agreement that creates a legal obligation. The elements of a contract are a mutual
agreement; between competent parties; for a legal purpose; involving the exchange of legal
consideration; and that creates a mutuality of obligation to perform between the parties. The
term contract, as used in this instruction, includes without limitation, formal bilateral contracts,
purchase orders, consignment sales agreements, amendments and modifications thereto, as well
as other agreements entered into by an authorized contracting officer acting within his or her
authority.
contracting authority. The position(s) prescribed by the DoD Component’s procedures (or
exchange procedures if delegated in accordance with paragraph 4c(1) of the responsibilities in
this instruction) as responsible for the procurement authority of the NAFI(s).
contracting officer. An individual delegated with the authority to legally bind the NAFI by
entering into, modifying, administering, and terminating contracts.
COR. An individual authorized in writing by a contracting officer to monitor contractor
performance and/or help administer a contract. This definition applies to contracting officer’s
technical representative and ACORs.
determination of responsibility. The contracting officer’s judgment that a prospective contractor
has adequate financial and technical resources or the capability to get the resources, and a
satisfactory record of performance demonstrating its capacity to perform the contract.
exchange services. The Army & Air Force Exchange Service, the Navy Exchange Service
Command, and the Marine Corps Exchange.
excess foreign currencies. The currencies of countries held by the U.S. Treasury in excess
supply for all U.S. Government needs, and periodically declared to the Office of Management
and Budget by the U.S. Treasury as excess. The lists of countries are transmitted to the DoD
Components from time to time by appropriate DoD issuances.

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DoDI 4105.67, February 26, 2014
final decision. A contracting officer’s written determination in response to a protest or claim.
foreign goods. Items produced or manufactured in a foreign country and physically located
outside the several States, the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, and the territories and possessions of the
United States, including items located in bonded warehouses or foreign trade zones within the
aforementioned areas. This term does not include foreign-made or -produced exchange-type
retail merchandise purchased from sources within the United States.
items. All property (including articles, goods, materials, supplies, equipment, software, and
parts) except facilities, land, or interests in land. Also known as goods.
legitimate. In accordance with law or established legal forms and requirements and conforming
to recognized business principles and accepted business rules and standards. Being exactly as
purposed: neither spurious nor false.
local market. The area surrounding a NAFI that provides services to U.S. personnel who are
served by such NAF activity, as defined by the regional Combatant Commander. Combatant
Commanders will include only the area in which there is effective competition with the NAF
activity.
MWR telephone services. Unofficial telephone calling center services supporting calling centers
provided by an exchange service or any other DoD NAFI, which are conducted for the comfort,
pleasure, contentment, or physical or mental improvement of Service members.
NAF. Defined in Reference (f).
NAFI. Defined in Reference (f).
novation. The act of transferring a contract from one legal entity to another or substituting a new
contract for an old one by mutual agreement between the parties. Transfer of a Government
contract is illegal without the Government’s consent.
personal information services. Include but are not limited to Internet, telephone, and television
access via any delivery method such as wired or wireless mode.
private label merchandise. Includes products carrying the exchange service’s own name or a
name created exclusively for that exchange service or more than one exchange service.
procurement. Includes purchasing, renting, and leasing of real or personal property; construction
(including third-party financed projects), renovation, and alteration of real property; professional
architect or engineer services; and obtaining items, and services for either direct use of the NAFI
or for resale to its authorized patrons. Procurement also includes all functions that pertain to the
selection and solicitation of sources, preparation and award of contracts, and all phases of
contract administration. Procurement does not include the determination of requirements, which

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DoDI 4105.67, February 26, 2014
is the identification of items, services, or property including quality or performance standards,
quantity, and delivery schedule, or the certification of available funds.
procurement action. Includes, but is not limited to: written contracts and purchase orders,
delivery orders, task orders, contract modifications, blanket purchase agreements, orders placed
electronically, and purchases made using purchase cards.
procurement personnel. All personnel assigned to a NAF procurement office, including buyers,
contracting officers, contract specialists, procurement analysts, contract administrators,
purchasing agents, and contracts and procurement clerks. Also includes purchase card holders.
protest. A written objection by an interested party to a solicitation or other request for offerors
for a contract, cancellation of a solicitation or other request, an award or proposed award of a
contract and a termination or cancellation of an award of the contract, if the written objection
contains an allegation that the termination or cancellation is based in whole or in part on
improprieties concerning the award of the contract.
purchase cards. Include NAF purchase cards, GCPC, debit cards, single use cards, and other
Government or commercial purchase cards authorized for use by the contracting authority.
ratification. The act of validating an unauthorized commitment for the purpose of paying for the
supplies or services provided to the Government as a result of the unauthorized commitment.
real property. Defined in the DoD Dictionary of Military and Associated Terms (Reference (aa)).
resale. Defined in Reference (f).
responsible offeror. A responsible offeror must: have, or be able to obtain, the technical
capability to perform contract requirements and adequate financial resources; have a satisfactory
performance record; and be otherwise qualified and eligible to receive an award under applicable
laws and regulations.
termination. The cessation or cancellation, in whole or in part, of work under a prime contract,
or a subcontract there under, for the convenience of or at the option of, the Government, by
mutual agreement at no cost or liability to either party, or due to failure of the contractor to
perform in accordance with the terms of the contract (i.e., default).
unauthorized commitment. An agreement that is not binding solely because the Government
representative who made it lacked the authority to enter into a contract on behalf of the
Government.
U.S. merchandise. Items produced or manufactured in the United States, the District of
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana
Islands, and the territories and possessions of the United States. Also known as U.S. goods.

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