52.246-3
Inspection of Supplies-Cost-Reimbursement
Contractors under cost-reimbursement supply contracts must maintain robust inspection systems and promptly correct or replace nonconforming supplies, or risk financial penalties and contract termination.
Overview
FAR 52.246-3, Inspection of Supplies-Cost-Reimbursement, establishes the inspection and correction requirements for supplies delivered under cost-reimbursement contracts. It outlines the contractor’s obligation to maintain an acceptable inspection system, the Government’s right to inspect and test supplies at any time and place, and the procedures for correcting or replacing nonconforming supplies. The clause also defines key terms and specifies the responsibilities of both the contractor and the Government regarding inspection, acceptance, and correction of supplies.
Key Rules
- Inspection System Requirement
- Contractors must provide and maintain an inspection system acceptable to the Government, covering all supplies and related processes.
- Government Inspection Rights
- The Government may inspect and test supplies at any time, including during manufacture, and at any location, including subcontractor facilities.
- Correction of Nonconforming Supplies
- The Government can require correction or replacement of nonconforming supplies within 6 months of acceptance (or as specified), with costs generally allowable but no additional fee paid.
- Contractor Assistance
- Contractors and subcontractors must provide reasonable facilities and assistance for Government inspections.
- Special Cases for Correction at Contractor’s Expense
- If nonconformance is due to fraud, willful misconduct, or certain employee conduct, correction or replacement must be at no cost to the Government.
- Remedies for Failure to Correct
- The Government may correct or replace supplies at the contractor’s expense, reduce fees, or terminate the contract for default if the contractor fails to act promptly.
Responsibilities
- Contracting Officers: Ensure inclusion of the clause, monitor contractor compliance, and enforce remedies for nonconformance.
- Contractors: Maintain inspection systems, keep records, cooperate with inspections, and correct or replace nonconforming supplies as required.
- Agencies: Oversee contract performance and ensure proper application of inspection and correction procedures.
Practical Implications
- This clause ensures quality control and accountability for supplies under cost-reimbursement contracts. Contractors must be proactive in inspection and recordkeeping, and be prepared for Government oversight. Failure to comply can result in financial penalties, reduced fees, or contract termination. Common pitfalls include inadequate inspection systems, poor documentation, and delays in correcting nonconforming supplies.