46.705 Limitations
Source: FAR 46.705 on acquisition.gov
Warranties are generally prohibited in cost-reimbursement contracts unless specifically allowed, and warranty clauses cannot limit the Government’s rights regarding defects or fraud.
Overview
FAR 46.705 outlines specific limitations on the use of warranty clauses in government contracts, particularly focusing on cost-reimbursement contracts. The section restricts the inclusion of warranties in these contracts except for certain standard inspection clauses or when specifically authorized by agency regulations. It also clarifies that warranty clauses cannot limit the Government’s rights regarding latent defects, fraud, or gross mistakes, and that warranties generally apply regardless of inspection and acceptance, except in construction contracts.
Key Rules
- Warranties in Cost-Reimbursement Contracts
- Warranties are generally prohibited in cost-reimbursement contracts except for those in FAR clauses 52.246-3 and 52.246-8, or if specifically authorized by agency regulations.
- Government Rights Not Limited
- Warranty clauses cannot restrict the Government’s rights under inspection clauses concerning latent defects, fraud, or gross mistakes.
- Warranty Applicability
- Except for construction contracts, warranties must apply even after inspection and acceptance or other contract terms.
Responsibilities
- Contracting Officers: Must ensure warranties are only included in cost-reimbursement contracts as permitted, and that warranty clauses do not limit Government rights or applicability as specified.
- Contractors: Must comply with warranty terms and recognize that Government rights regarding defects and fraud are not limited by warranty clauses.
- Agencies: Must authorize any exceptions to the general prohibition on warranties in cost-reimbursement contracts per agency regulations.
Practical Implications
- This section prevents inappropriate risk allocation in cost-reimbursement contracts and protects the Government’s rights to address defects and fraud. Contractors should be aware that warranties may still apply after acceptance and that Government rights are preserved regardless of contract terms. Common pitfalls include improperly including unauthorized warranties or misunderstanding the scope of Government rights.
(a) Except for the warranties in the clauses at 52.246-3, Inspection of Supplies-Cost-Reimbursement, and 52.246-8, Inspection of Research and Development-Cost-Reimbursement, the contracting officer shall not include warranties in cost-reimbursement contracts, unless authorized in accordance with agency regulations (see 46.708).
(b) Warranty clauses shall not limit the Government’s rights under an inspection clause (see subpart 46.3) in relation to latent defects, fraud, or gross mistakes that amount to fraud.
(c) Except for warranty clauses in construction contracts, warranty clauses shall provide that the warranty applies notwithstanding inspection and acceptance or other clauses or terms of the contract.