52.246-3
Inspection of Supplies-Cost-Reimbursement
In cost-reimbursement supply contracts, contractors must maintain a Government-acceptable inspection system and may have to correct nonconforming supplies after acceptance—sometimes at no cost if the defect stems from misconduct or knowingly careless staffing.
Overview
- FAR 52.246-3 establishes the inspection, testing, acceptance, and correction framework for cost-reimbursement contracts for supplies and for services that require furnishing supplies.
- Its purpose is to ensure the Government can verify conformance before acceptance while defining when the contractor must correct or replace nonconforming supplies and who bears the cost.
Key Rules
- Inspection system and records
- The contractor must maintain a Government-acceptable inspection system covering supplies, fabrication methods, and special tooling, and keep complete inspection records available during performance and afterward as required by the contract.
- Government inspection and acceptance
- The Government may inspect and test supplies at practicable times and places, including during manufacture and at subcontractor plants, and supplies are deemed accepted 60 days after delivery unless accepted earlier.
- Correction or replacement of nonconforming supplies
- Up to 6 months after acceptance (unless the contract specifies another period), the Government may require correction or replacement of supplies that were nonconforming at delivery. Normally, those correction costs are allowable costs, but no additional fee is paid.
- Failure to act and misconduct exceptions
- If the contractor does not promptly correct or replace, the Government may perform the work, reduce fee, require delivery at reduced fee, or terminate for default. If nonconformance results from fraud, bad faith, willful misconduct, or knowingly retaining habitually careless or unqualified employees, correction must be made at no cost to the Government.
Responsibilities
- Contracting Officers: ensure the clause is used in applicable cost-reimbursement supply contracts; enforce inspection rights, acceptance timing, and remedies for nonconforming supplies.
- Contractors: maintain an acceptable inspection system, provide facilities for Government inspection, preserve records, disclose prior correction requirements when retendering supplies, and promptly correct or replace nonconforming items when required.
- Agencies: conduct inspections without unduly delaying work and resolve disputes over increased costs or fee reductions under the contract disputes process.
Practical Implications
- This clause balances Government quality assurance rights with the cost principles unique to cost-reimbursement contracts.
- Contractors should expect oversight at their own and subcontractor facilities and should document inspections thoroughly to defend quality decisions.
- Common pitfalls include weak inspection records, failing to support Government access, retendering corrected items without disclosure, and assuming acceptance eliminates all post-delivery correction risk.