Inspection of Supplies-Fixed-Price
Contractors must implement robust inspection systems and promptly address nonconforming supplies to avoid rejection, financial penalties, or contract termination under fixed-price supply contracts.
Overview
FAR 52.246-2, "Inspection of Supplies—Fixed-Price," establishes the requirements for inspection, acceptance, and correction of supplies delivered under fixed-price contracts. The clause mandates that contractors implement and maintain an inspection system acceptable to the Government, ensuring all supplies conform to contract requirements before tendering them for acceptance. The Government retains broad rights to inspect and test supplies at any stage, reject nonconforming items, and require correction or replacement at the contractor’s expense. The clause also details procedures for notification, recordkeeping, and the consequences of failing to correct deficiencies, including potential contract termination or price reductions. Alternate versions of the clause apply to fixed-price incentive and fixed-ceiling-price contracts, adjusting remedies and cost considerations accordingly.
Key Rules
- Contractor Inspection System
- Contractors must establish and maintain an inspection system, keep records, and make them available to the Government.
- Government Inspection Rights
- The Government may inspect and test supplies at any time or place, including during manufacture, and may reject nonconforming supplies.
- Correction and Removal of Nonconforming Supplies
- Contractors must remove or correct rejected supplies and disclose prior rejections or corrections when resubmitting.
- Notification and Assistance
- Contractors must provide advance notice for Government inspections and reasonable facilities for such inspections.
- Remedies for Noncompliance
- The Government may correct or replace supplies at the contractor’s expense, reduce contract price, or terminate for default if the contractor fails to act.
- Recordkeeping and Disclosure
- Inspection records must be maintained and disclosed as required.
Responsibilities
- Contracting Officers: Oversee inspections, enforce compliance, issue rejection/correction notices, and determine remedies for nonconformance.
- Contractors: Maintain inspection systems, provide records, correct or remove nonconforming supplies, and comply with notification and disclosure requirements.
- Agencies: May conduct reviews, require corrective action, and enforce contract remedies.
Practical Implications
- Ensures supplies meet contract requirements before acceptance, reducing risk of defective deliveries.
- Contractors must be proactive in quality assurance and documentation.
- Failure to comply can result in financial penalties, contract termination, or reputational harm. Common pitfalls include inadequate inspection systems, poor recordkeeping, and failure to disclose prior corrections.