Inspection of Services-Cost-Reimbursement
Contractors under cost-reimbursement service contracts must maintain a Government-approved inspection system and promptly correct any deficiencies to avoid fee reductions or contract termination.
Overview
FAR 52.246-5, "Inspection of Services-Cost-Reimbursement," establishes the requirements for inspection and acceptance of services under cost-reimbursement contracts. The clause mandates that contractors implement and maintain an inspection system acceptable to the Government, keep thorough records of all inspections, and make these records available for review. The Government retains the right to inspect and test services at any time and place during contract performance, ensuring compliance with contract requirements. If services do not meet contract standards, the Government can require reperformance at no additional cost, demand corrective actions for future performance, or reduce the contractor's fee. Persistent nonconformance may result in the Government performing the services at the contractor's expense or terminating the contract for default.
Key Rules
- Inspection System Requirement
- Contractors must establish and maintain an inspection system that meets Government approval and keep detailed inspection records.
- Government Inspection Rights
- The Government may inspect and test services at any time or place during contract performance without causing undue delays.
- Nonconforming Services
- If services do not meet contract requirements, the contractor must reperform them at no extra cost, or the Government may reduce the contract fee or require corrective action.
- Failure to Correct Deficiencies
- If the contractor fails to correct issues, the Government may perform the services itself (at the contractor's expense) or terminate the contract for default.
Responsibilities
- Contracting Officers: Ensure the clause is included in applicable contracts, monitor contractor compliance, and enforce remedies for nonconformance.
- Contractors: Maintain an acceptable inspection system, keep and provide inspection records, promptly correct deficiencies, and comply with all inspection-related requirements.
- Agencies: Oversee contract performance, conduct inspections, and take corrective action as needed.
Practical Implications
This clause ensures quality assurance in cost-reimbursement service contracts by requiring robust contractor inspection systems and providing the Government with broad inspection and enforcement rights. Contractors must be diligent in maintaining records and addressing deficiencies to avoid fee reductions or contract termination. Common pitfalls include inadequate inspection systems, poor recordkeeping, and delayed corrective actions.