Part 46 - Quality Assurance

46.000 Scope of part.

Subpart 46.1 - General

46.101 Definitions.

46.102 Policy.

46.103 Contracting office responsibilities.

46.104 Contract administration office responsibilities.

46.105 Contractor responsibilities.

Subpart 46.2 - Contract Quality Requirements

46.201 General.

46.202 Types of contract quality requirements.

46.202-1 Contracts for commercial products and commercial services.

46.202-2 Government reliance on inspection by contractor.

46.202-3 Standard inspection requirements.

46.202-4 Higher-level contract quality requirements.

46.203 Criteria for use of contract quality requirements.

Subpart 46.3 - Contract Clauses

46.301 Contractor inspection requirements.

46.302 Fixed-price supply contracts.

46.303 Cost-reimbursement supply contracts.

46.304 Fixed-price service contracts.

46.305 Cost-reimbursement service contracts.

46.306 Time-and-material and labor-hour contracts.

46.307 Fixed-price research and development contracts.

46.308 Cost-reimbursement research and development contracts.

46.309 Research and development contracts (short form).

46.310 [Reserved]
46.311 Higher-level contract quality requirement.

46.312 Construction contracts.

46.313 Contracts for dismantling, demolition, or removal of improvements.

46.314 Transportation contracts.

46.315 Certificate of conformance.

46.316 Responsibility for supplies.

46.317 Reporting Nonconforming Items.

Subpart 46.4 - Government Contract Quality Assurance

46.401 General.

46.402 Government contract quality assurance at source.

46.403 Government contract quality assurance at destination.

46.404 Government contract quality assurance for acquisitions at or below the simplified acquisition

threshold.

46.405 Subcontracts.

46.406 Foreign governments.

46.407 Nonconforming supplies or services.

46.408 Single-agency assignments of Government contract quality assurance.

Subpart 46.5 - Acceptance

46.501 General.

46.502 Responsibility for acceptance.

46.503 Place of acceptance.

46.504 Certificate of conformance.

46.505 Transfer of title and risk of loss.

Subpart 46.6 - Material Inspection and Receiving Reports

46.601 General.

Subpart 46.7 - Warranties

46.701 [Reserved]

46.702 General.
46.703 Criteria for use of warranties.

46.704 Authority for use of warranties.

46.705 Limitations.

46.706 Warranty terms and conditions.

46.707 Pricing aspects of fixed-price incentive contract warranties.

46.708 Warranties of data.

46.709 Warranties of commercial products and commercial services.

46.710 Contract clauses.

Subpart 46.8 - Contractor Liability for Loss of or Damage to Property of the Government

46.800 Scope of subpart.

46.801 Applicability.

46.802 Definition.

46.803 Policy.

46.804 [Reserved]

46.805 Contract clauses.

Parent topic: Federal Acquisition Regulation

46.000 Scope of part.

This part prescribes policies and procedures to ensure that supplies and services acquired under

Government contract conform to the contract’s quality and quantity requirements. Included are

inspection, acceptance, warranty, and other measures associated with quality requirements.

Subpart 46.1 - General

46.101 Definitions.

As used in this partAcceptance means the act of an authorized representative of the Government by which the

Government, for itself or as agent of another, assumes ownership of existing identified supplies

tendered or approves specific services rendered as partial or complete performance of the contract.

Conditional acceptance means acceptance of supplies or services that do not conform to contract

quality requirements, or are otherwise incomplete, that the contractor is required to correct or
otherwise complete by a specified date.

Contract quality requirements means the technical requirements in the contract relating to the

quality of the product or service and those contract clauses prescribing inspection, and other quality

controls incumbent on the contractor, to assure that the product or service conforms to the

contractual requirements.

"Counterfeit item" means an unlawful or unauthorized reproduction, substitution, or alteration that

has been knowingly mismarked, misidentified, or otherwise misrepresented to be an authentic,

unmodified item from the original manufacturer, or a source with the express written authority of

the original manufacturer or current design activity, including an authorized aftermarket

manufacturer. Unlawful or unauthorized substitution includes used items represented as new, or the

false identification of grade, serial number, lot number, date code, or performance characteristics.

Critical item means an item, the failure of which is likely to result in hazardous or unsafe conditions

for individuals using, maintaining, or depending upon the item; or is likely to prevent performance of

a vital agency mission.

Critical nonconformance means a nonconformance that is likely to result in hazardous or unsafe

conditions for individuals using, maintaining, or depending upon the supplies or services; or is likely

to prevent performance of a vital agency mission.

Design activity means an organization, Government or contractor, that has responsibility for the

design and configuration of an item, including the preparation or maintenance of design documents.

Design activity could be the original organization, or an organization to which design responsibility

has been transferred.

Government contract quality assurance means the various functions, including inspection,

performed by the Government to determine whether a contractor has fulfilled the contract

obligations pertaining to quality and quantity.

Major nonconformance means a nonconformance, other than critical, that is likely to result in failure

of the supplies or services, or to materially reduce the usability of the supplies or services for their

intended purpose.

Minor nonconformance means a nonconformance that is not likely to materially reduce the usability

of the supplies or services for their intended purpose, or is a departure from established standards

having little bearing on the effective use or operation of the supplies or services.

Off-the-shelf item means an item produced and placed in stock by a contractor, or stocked by a

distributor, before receiving orders or contracts for its sale. The item may be commercial or

produced to military or Federal specifications or description.

Patent defect means any defect which exists at the time of acceptance and is not a latent defect.

Subcontractor (see 44.101).

Suspect counterfeit item means an item for which credible evidence (including but not limited to,

visual inspection or testing) provides reasonable doubt that the item is authentic.

Testing means that element of inspection that determines the properties or elements, including

functional operation of supplies or their components, by the application of established scientific

principles and procedures.
46.102 Policy.

Agencies shall ensure that-

(a) Contracts include inspection and other quality requirements, including warranty clauses when

appropriate, that are determined necessary to protect the Government’s interest;

(b) Supplies or services (including commercial services) tendered by contractors meet contract

requirements;

(c) Government contract quality assurance is conducted before acceptance (except as otherwise

provided in this part), by or under the direction of Government personnel;

(d) No contract precludes the Government from performing inspection;

(e) Nonconforming supplies or services are rejected, except as otherwise provided in 46.407;

(f) Contracts for commercial products rely on a contractor’s existing quality assurance system as a

substitute for compliance with Government inspection and testing before tender for acceptance

unless customary market practices for the commercial product being acquired permit in-process

inspection (41 U.S.C. 3307). Any in-process inspection by the Government shall be conducted in a

manner consistent with commercial practice; and

(g) The quality assurance and acceptance services of other agencies are used when this will be

effective, economical, or otherwise in the Government’s interest (see 42.002 and subpart 42.2.

46.103 Contracting office responsibilities.

Contracting offices are responsible for-

(a) Receiving from the activity responsible for technical requirements any specifications for

inspection, testing, and other contract quality requirements essential to ensure the integrity of the

supplies or services (the activity responsible for technical requirements is responsible for

prescribing contract quality requirements, such as inspection and testing requirements or, for

service contracts, a quality assurance surveillance plan);

(b) Including in solicitations and contracts the appropriate requirements for the contractor’s control

of quality for the supplies or services to be acquired;

(c) Issuing any necessary instructions to the cognizant contract administration office and acting on

recommendations submitted by that office (see 42.301 and 46.104(f));

(d) When contract administration is retained (see 42.201), verifying that the contractor fulfills the

contract quality requirements; and

(e) Ensuring that nonconformances are identified, and establishing the significance of a

nonconformance when considering the acceptability of supplies or services which do not meet

contract requirements.
46.104 Contract administration office responsibilities.

When a contract is assigned for administration to the contract administration office cognizant of the

contractor’s plant, that office, unless specified otherwise, shall-

(a) Develop and apply efficient procedures for performing Government contract quality assurance

actions under the contract in accordance with the written direction of the contracting office;

(b) Perform all actions necessary to verify whether the supplies or services conform to contract

quality requirements;

(c) Maintain, as part of the performance records of the contract, suitable records reflecting-

(1) The nature of Government contract quality assurance actions, including, when appropriate, the

number of observations made and the number and type of defects; and

(2) Decisions regarding the acceptability of the products, the processes, and the requirements, as

well as action to correct defects.

(d) Implement any specific written instructions from the contracting office;

(e) Report to the contracting office any defects observed in design or technical requirements,

including contract quality requirements; and

(f) Recommend any changes necessary to the contract, specifications, instructions, or other

requirements that will provide more effective operations or eliminate unnecessary costs (see

46.103(c)).

46.105 Contractor responsibilities.

(a) The contractor is responsible for carrying out its obligations under the contract by-

(1) Controlling the quality of supplies or services;

(2) Tendering to the Government for acceptance only those supplies or services that conform to

contract requirements;

(3) Ensuring that vendors or suppliers of raw materials, parts, components, subassemblies, etc.,

have an acceptable quality control system; and

(4) Maintaining substantiating evidence, when required by the contract, that the supplies or services

conform to contract quality requirements, and furnishing such information to the Government as

required.

(b) The contractor may be required to provide and maintain an inspection system or program for the

control of quality that is acceptable to the Government (see 46.202).

(c) The control of quality by the contractor may relate to, but is not limited to-

(1) Manufacturing processes, to ensure that the product is produced to, and meets, the contract’s

technical requirements;
(2) Drawings, specifications, and engineering changes, to ensure that manufacturing methods and

operations meet the contract’s technical requirements;

(3) Testing and examination, to ensure that practices and equipment provide the means for optimum

evaluation of the characteristics subject to inspection;

(4) Reliability and maintainability assessment (life, endurance, and continued readiness);

(5) Fabrication and delivery of products, to ensure that only conforming products are tendered to

the Government;

(6) Technical documentation, including drawings, specifications, handbooks, manuals, and other

technical publications;

(7) Preservation, packaging, packing, and marking; and

(8) Procedures and processes for services to ensure that services meet contract performance

requirements.

(d) The contractor is responsible for performing all inspections and test required by the contract

except those specifically reserved for performance by the Government (see 46.201(c)).

Subpart 46.2 - Contract Quality Requirements

46.201 General.

(a) The contracting officer shall include in the solicitation and contract the appropriate quality

requirements. The type and extent of contract quality requirements needed depends on the

particular acquisition and may range from inspection at time of acceptance to a requirement for the

contractor’s implementation of a comprehensive program for controlling quality.

(b) As feasible, solicitations and contracts may provide for alternative, but substantially equivalent,

inspection methods to obtain wide competition and low cost. The contracting officer may also

authorize contractor-recommended alternatives when in the Government’s interest and approved by

the activity responsible for technical requirements.

(c) Although contracts generally make contractors responsible for performing inspection before

tendering supplies to the Government, there are situations in which contracts will provide for

specialized inspections to be performed solely by the Government. Among situations of this kind are-

(1) Tests that require use of specialized test equipment or facilities not ordinarily available in

suppliers’ plants or commercial laboratories (e.g., ballistic testing of ammunition, unusual

environmental tests, and simulated service tests); and

(2) Contracts that require Government testing for first article approval (see subpart 9.3).

(d) Except as otherwise specified by the contract, required contractor testing may be performed in

the contractor’s or subcontractor’s laboratory or testing facility, or in any other laboratory or testing

facility acceptable to the Government.
46.202 Types of contract quality requirements.

Contract quality requirements fall into four general categories, depending on the extent of quality

assurance needed by the Government for the acquisition involved.

46.202-1 Contracts for commercial products and commercial services.

When acquiring commercial products (see part 12), the Government shall rely on contractors'

existing quality assurance systems as a substitute for Government inspection and testing before

tender for acceptance unless customary market practices for the commercial product being acquired

include in-process inspection. Any in-process inspection by the Government shall be conducted in a

manner consistent with commercial practice. The Government shall rely on the contractor to

accomplish all inspection and testing needed to ensure that commercial services acquired conform

to contract requirements before they are tendered to the Government.

46.202-2 Government reliance on inspection by contractor.

(a) Except as specified in (b) of this section, the Government shall rely on the contractor to

accomplish all inspection and testing needed to ensure that supplies or services acquired at or below

the simplified acquisition threshold conform to contract quality requirements before they are

tendered to the Government (see 46.301).

(b) The Government shall not rely on inspection by the contractor if the contracting officer

determines that the Government has a need to test the supplies or services in advance of their

tender for acceptance, or to pass judgment upon the adequacy of the contractor’s internal work

processes. In making the determination, the contracting officer shall consider-

(1) The nature of the supplies and services being purchased and their intended use;

(2) The potential losses in the event of defects;

(3) The likelihood of uncontested replacement or correction of defective work; and

(4) The cost of detailed Government inspection.

46.202-3 Standard inspection requirements.

(a) Standard inspection requirements are contained in the clauses prescribed in 46.302 through

46.308, and in the product and service specifications that are included in solicitations and contracts.

(b) The clauses referred to in (a) of this section-

(1) Require the contractor to provide and maintain an inspection system that is acceptable to the

Government;

(2) Give the Government the right to make inspections and tests while work is in process; and
(3) Require the contractor to keep complete, and make available to the Government, records of its

inspection work.

46.202-4 Higher-level contract quality requirements.

(a) Agencies shall establish procedures for determining when higher-level contract quality

requirements are necessary, for determining the risk (both the likelihood and the impact) of

nonconformance, and for advising the contracting officer about which higher-level standards should

be applied and included in the solicitation and contract. Requiring compliance with higher-level

quality standards is necessary in solicitations and contracts for complex or critical items (see

46.203)or when the technical requirements of the contract require-

(1) Control of such things as design, work operations, in-process controls, testing, and inspection; or

(2) Attention to such factors as organization, planning, work instructions, documentation control,

and advanced metrology.

(b) Examples of higher-level quality standards include overarching quality management system

standards such as ISO 9001, ASQ/ANSI E4, ASME NQA-1, SAE AS9100, SAE AS9003, and ISO/TS

16949, and product or process specific quality standards such as SAE AS5553.

46.203 Criteria for use of contract quality requirements.

The extent of contract quality requirements, including contractor inspection, required under a

contract shall usually be based upon the classification of the contract item (supply or service) as

determined by its technical description, its complexity, and the criticality of its application.

(a) Technical description. Contract items may be technically classified as-

(1) Commercial (described in commercial catalogs, drawings, or industrial standards; see part 2); or

(2) Military-Federal (described in Government drawings and specifications).

(b) Complexity.

(1) Complex items have quality characteristics, not wholly visible in the end item, for which

contractual conformance must be established progressively through precise measurements, tests,

and controls applied during purchasing, manufacturing, performance, assembly, and functional

operation either as an individual item or in conjunction with other items.

(2) Noncomplex items have quality characteristics for which simple measurement and test of the end

item are sufficient to determine conformance to contract requirements.

(c) Criticality.

(1) A critical application of an item is one in which the failure of the item could injure personnel or

jeopardize a vital agency mission. A critical item may be either peculiar, meaning it has only one

application, or common, meaning it has multiple applications.
(2) A noncritical application is any other application. Noncritical items may also be either peculiar or

common.

Subpart 46.3 - Contract Clauses

46.301 Contractor inspection requirements.

The contracting officer shall insert the clause at 52.246-1, Contractor Inspection Requirements, in

solicitations and contracts for supplies or services when the contract amount is expected to be at or

below the simplified acquisition threshold and (a) inclusion of the clause is necessary to ensure an

explicit understanding of the contractor’s inspection responsibilities, or (b) inclusion of the clause is

required under agency procedures. The clause shall not be used if the contracting officer has made

the determination specified in 46.202-2(b).

46.302 Fixed-price supply contracts.

The contracting officer shall insert the clause at 52.246-2, Inspection of Supplies-Fixed-Price, in

solicitations and contracts for supplies, or services that involve the furnishing of supplies, when a

fixed-price contract is contemplated and the contract amount is expected to exceed the simplified

acquisition threshold. The contracting officer may insert the clause in such solicitations and

contracts when the contract amount is expected to be at or below the simplified acquisition

threshold and inclusion of the clause is in the Government’s interest. If a fixed-price incentive

contract is contemplated, the contracting officer shall use the clause with its AlternateI. If a fixedceiling-price contract with retroactive price redetermination is contemplated, the contracting officer

shall use the clause with its AlternateII.

46.303 Cost-reimbursement supply contracts.

The contracting officer shall insert the clause at 52.246-3, Inspection of Supplies-CostReimbursement, in solicitations and contracts for supplies, or services that involve the furnishing of

supplies, when a cost-reimbursement contract is contemplated.

46.304 Fixed-price service contracts.

The contracting officer shall insert the clause at 52.246-4, Inspection of Services-Fixed-Price, in

solicitations and contracts for services, or supplies that involve the furnishing of services, when a

fixed-price contract is contemplated and the contract amount is expected to exceed the simplified

acquisition threshold. The contracting officer may insert the clause in such solicitations and

contracts when the contract amount is expected to be at or below the simplified acquisition

threshold and inclusion is in the Government’s interest.

46.305 Cost-reimbursement service contracts.
The contracting officer shall insert the clause at 52.246-5, Inspection of Services-Cost

Reimbursement, in solicitations and contracts for services, or supplies that involve the furnishing of

services, when a cost-reimbursement contract is contemplated.

46.306 Time-and-material and labor-hour contracts.

The contracting officer shall insert the clause at 52.246-6, Inspection-Time-and-Material and LaborHour, in solicitations and contracts when a time-and-material contract or a labor-hour contract is

contemplated. If Government inspection and acceptance are to be performed at the contractor’s

plant, the contracting officer shall use the clause with its AlternateI.

46.307 Fixed-price research and development contracts.

(a) The contracting officer shall insert the clause at 52.246-7, Inspection of Research and

Development-Fixed-Price, in solicitations and contracts for research and development when-

(1) The primary objective of the contract is the delivery of end items other than designs, drawings,

or reports,

(2) A fixed-price contract is contemplated, and

(3) The contract amount is expected to exceed the simplified acquisition threshold; unless use of the

clause is impractical and the clause prescribed in 46.309 is considered to be more appropriate.

(b) The contracting officer may insert the clause in such solicitations and contracts when the

contract amount is expected to be at or below the simplified acquisition threshold, and its use is in

the Government’s interest.

46.308 Cost-reimbursement research and development contracts.

The contracting officer shall insert the clause at 52.246-8, Inspection of Research and DevelopmentCost-Reimbursement, in solicitations and contracts for research and development when (a) the

primary objective of the contract is the delivery of end items other than designs, drawings, or

reports, and (b)a cost-reimbursement contract is contemplated; unless use of the clause is

impractical and the clause prescribed in 46.309 is considered to be more appropriate. If it is

contemplated that the contract will be on a no-fee basis, the contracting officer shall use the clause

with its AlternateI.

46.309 Research and development contracts (short form).

The contracting officer shall insert the clause at 52.246-9, Inspection of Research and Development

(Short Form), in solicitations and contracts for research and development when the clause

prescribed in 46.307 or the clause prescribed in 46.308 is not used.
46.310 [Reserved]

46.311 Higher-level contract quality requirement.

(a) The contracting officer shall insert the clause at 52.246-11, Higher-Level Contract Quality

Requirement, in solicitations and contracts when the inclusion of a higher-level contract quality

requirement is necessary (see 46.202-4).

(b) For each higher-level quality standard, the contracting officer shall fill in the title, number, date,

and tailoring (if any).

46.312 Construction contracts.

The contracting officer shall insert the clause at 52.246-12, Inspection of Construction, in

solicitations and contracts for construction when a fixed-price contract is contemplated and the

contract amount is expected to exceed the simplified acquisition threshold. The contracting officer

may insert the clause in such solicitations and contracts when the contract amount is expected to be

at or below the simplified acquisition threshold, and its use is in the Government’s interest.

46.313 Contracts for dismantling, demolition, or removal of improvements.

The contracting officer shall insert the clause at 52.246-13, Inspection-Dismantling, Demolition, or

Removal of Improvements, in solicitations and contracts for dismantling, demolition, or removal of

improvements.

46.314 Transportation contracts.

The contracting officer shall insert the clause at 52.246-14, Inspection of Transportation, in

solicitations and contracts for freight transportation services (including local drayage) by rail, motor

(including bus), domestic freight forwarder, and domestic water carriers (including inland,

coastwise, and intercoastal). The contracting officer shall not use the clause for the acquisition of

transportation services by domestic or international air carriers or by international ocean carriers,

or to freight services provided under bills of lading or to those negotiated for reduced rates under 49

U.S.C. 10721 or 1 3712. (See part 47, Transportation.)

46.315 Certificate of conformance.

The contracting officer shall insert the clause at 52.246-15, Certificate of Conformance, in

solicitations and contracts for supplies or services when the conditions in 46.504 apply.

46.316 Responsibility for supplies.

The contracting officer shall insert the clause at 52.246-16, Responsibility for Supplies, in
solicitations and contracts for (a) supplies, (b) services involving the furnishing of supplies, or (c)

research and development, when a fixed-price contract is contemplated and the contract amount is

expected to exceed the simplified acquisition threshold. The contracting officer may insert the clause

in such solicitations and contracts when the contract amount is not expected to exceed the simplified

acquisition threshold and inclusion of the clause is authorized under agency procedures.

46.317 Reporting Nonconforming Items.

(a) Except as provided in paragraph (b) of this section, the contracting officer shall insert the clause

at 52.246-26, Reporting Nonconforming Items, in solicitations and contracts - as follows:

(1) For an acquisition by any agency, including the Department of Defense, of–

(i) Any items that are subject to higher-level quality standards in accordance with the clause at

52.246-11, Higher-Level Contract Quality Requirement;

(ii) Any items that the contracting officer, in consultation with the requiring activity determines to be

critical items for which use of the clause is appropriate;

(2) In addition (as required by paragraph (c)(4) of section 818 of the National Defense Authorization

Act for Fiscal Year 2012 (Pub. L. 112-81)), for an acquisition that exceeds the simplified acquisition

threshold and is by, or for, the Department of Defense of electronic parts or end items, components,

parts, or materials containing electronic parts, whether or not covered in paragraph (a)(1) of this

section; or

(3) For the acquisition of services, if the contractor will furnish, as part of the service, any items that

meet the criteria specified in paragraphs (a)(1) through (a)(2) of this section.

(b) The contracting officer shall not insert the clause at 52.246-26, Reporting Nonconforming Items,

in solicitations and contracts when acquiring—

(1) Commercial products and commercial services using part 12 procedures; or

(2) Medical devices that are subject to the Food and Drug Administration reporting requirements at

21 CFR 803.

(c) If required by agency policy, the contracting officer may modify paragraph (b)(4) of the clause at

52.246-26, but only to change the responsibility for the contractor to submit reports to the agency

rather than to Government-Industry Data Exchange Program (GIDEP), so that the agency instead of

the contractor submits reports to GIDEP within the mandatory 60 days.

Subpart 46.4 - Government Contract Quality Assurance

46.401 General.

(a) Government contract quality assurance shall be performed at such times (including any stage of

manufacture or performance of services) and places (including subcontractors’ plants) as may be

necessary to determine that the supplies or services conform to contract requirements. Quality
assurance surveillance plans should be prepared in conjunction with the preparation of the

statement of work. The plans should specify-

(1) All work requiring surveillance; and

(2) The method of surveillance.

(b) Each contract shall designate the place or places where the Government reserves the right to

perform quality assurance.

(c) If the contract provides for performance of Government quality assurance at source, the place or

places of performance may not be changed without the authorization of the contracting officer.

(d) If a contract provides for delivery and acceptance at destination and the Government inspects

the supplies at a place other than destination, the supplies shall not ordinarily be reinspected at

destination, but should be examined for quantity, damage in transit, and possible substitution or

fraud.

(e) Government inspection shall be performed by or under the direction or supervision of

Government personnel.

(f) Government inspection shall be documented on an inspection or receiving report form or

commercial shipping document/packing list, under agency procedures (see subpart 46.6).

(g) Agencies may prescribe the use of inspection approval or disapproval stamps to identify and

control supplies and material that have been inspected for conformance with contract quality

requirements.

46.402 Government contract quality assurance at source.

Agencies shall perform contract quality assurance, including inspection, at source if-

(a) Performance at any other place would require uneconomical disassembly or destructive testing;

(b) Considerable loss would result from the manufacture and shipment of unacceptable supplies, or

from the delay in making necessary corrections;

(c) Special required instruments, gauges, or facilities are available only at source;

(d) Performance at any other place would destroy or require the replacement of costly special

packing and packaging;

(e) Government inspection during contract performance is essential; or

(f) It is determined for other reasons to be in the Government’s interest.

46.403 Government contract quality assurance at destination.

(a) Government contract quality assurance that can be performed at destination is normally limited

to inspection of the supplies or services. Inspection shall be performed at destination under the
following circumstances-

(1) Supplies are purchased off-the-shelf and require no technical inspection;

(2) Necessary testing equipment is located only at destination;

(3) Perishable subsistence supplies purchased within the United States, except that those supplies

destined for overseas shipment will normally be inspected for condition and quantity at points of

embarkation;

(4) Brand name products purchased for authorized resale through commissaries or similar facilities

(however, supplies destined for direct overseas shipment may be accepted by the contracting officer

or an authorized representative on the basis of a tally sheet evidencing receipt of shipment signed

by the port transportation officer or other designated official at the transshipment point);

(5) The products being purchased are processed under direct control of the National Institutes of

Health or the Food and Drug Administration of the Department of Health and Human Services;

(6) The contract is for services performed at destination; or

(7) It is determined for other reasons to be in the Government’s interest.

(b) Overseas inspection of supplies shipped from the United States shall not be required except in

unusual circumstances, and then only when the contracting officer determines in advance that

inspection can be performed or makes necessary arrangements for its performance.

46.404 Government contract quality assurance for acquisitions at or below

the simplified acquisition threshold.

(a) In determining the type and extent of Government contract quality assurance to be required for

contracts at or below the simplified acquisition threshold, the contracting officer shall consider the

criticality of application of the supplies or services, the amount of possible losses, and the likelihood

of uncontested replacement of defective work (see 46.202-2).

(b) When the conditions in 46.202-2(b) apply, the following policies shall govern:

(1) Unless a special situation exists, the Government shall inspect contracts at or below the

simplified acquisition threshold at destination and only for type and kind; quantity; damage;

operability (if readily determinable); and preservation, packaging, packing, and marking, if

applicable.

(2) Special situations may require more detailed quality assurance and the use of a standard

inspection or higher-level contract quality requirement. These situations include those listed in

46.402 and contracts for items having critical applications.

(3) Detailed Government inspection may be limited to those characteristics that are special or likely

to cause harm to personnel or property. When repetitive purchases of the same item are made from

the same manufacturer with a history of defect-free work, Government inspection may be reduced to

a periodic check of occasional purchases.
46.405 Subcontracts.

(a) Government contract quality assurance on subcontracted supplies or services shall be performed

only when required in the Government’s interest. The primary purpose is to assist the contract

administration office cognizant of the prime contractor’s plant in determining the conformance of

subcontracted supplies or services with contract requirements or to satisfy one or more of the

factors included in (b) of this section. It does not relieve the prime contractor of any responsibilities

under the contract. When appropriate, the prime contractor shall be requested to arrange for timely

Government access to the subcontractor facility.

(b) The Government shall perform quality assurance at the subcontract level when-

(1) The item is to be shipped from the subcontractor’s plant to the using activity and inspection at

source is required;

(2) The conditions for quality assurance at source are applicable (see 46.402);

(3) The contract specifies that certain quality assurance functions, which can be performed only at

the subcontractor’s plant, are to be performed by the Government; or

(4) It is otherwise required by the contract or determined to be in the Government’s interest.

(c) Supplies or services for which certificates, records, reports, or similar evidence of quality are

available at the prime contractor’s plant shall not be inspected at the subcontractor’s plant, except

occasionally to verify this evidence or when required under (b) of this section.

(d) All oral and written statements and contract terms and conditions relating to Government quality

assurance actions at the subcontract level shall be worded so as not to-

(1) Affect the contractual relationship between the prime contractor and the Government, or

between the prime contractor and the subcontractor;

(2) Establish a contractual relationship between the Government and the subcontractor; or

(3) Constitute a waiver of the Government’s right to accept or reject the supplies or services.

46.406 Foreign governments.

Government contract quality assurance performed for foreign governments or international agencies

shall be administered according to the foreign policy and security objectives of the United States.

Such support shall be furnished only when consistent with or required by legislation, executive

orders, or agency policies concerning mutual international programs.

46.407 Nonconforming supplies or services.

(a) The contracting officer should reject supplies or services not conforming in all respects to

contract requirements (see 46.102). In those instances where deviation from this policy is found to

be in the Government’s interest, such supplies or services may be accepted only as authorized in this

section.
(b) The contracting officer ordinarily must give the contractor an opportunity to correct or replace

nonconforming supplies or services when this can be accomplished within the required delivery

schedule. Unless the contract specifies otherwise (as may be the case in some cost-reimbursement

contracts), correction or replacement must be without additional cost to the Government. Paragraph

(e)(2) of the clause at 52.246-2, Inspection of Supplies-Fixed-Price, reserves to the Government the

right to charge the contractor the cost of Government reinspection and retests because of prior

rejection.

(c)

(1) In situations not covered by paragraph (b) of this section, the contracting officer ordinarily must

reject supplies or services when the nonconformance is critical or major or the supplies or services

are otherwise incomplete. However, there may be circumstances (e.g., reasons of economy or

urgency) when the contracting officer determines acceptance or conditional acceptance of supplies

or services is in the best interest of the Government. The contracting officer must make this

determination based upon-

(i) Advice of the technical activity that the item is safe to use and will perform its intended purpose;

(ii) Information regarding the nature and extent of the nonconformance or otherwise incomplete

supplies or services;

(iii) A request from the contractor for acceptance of the nonconforming or otherwise incomplete

supplies or services (if feasible);

(iv) A recommendation for acceptance, conditional acceptance, or rejection, with supporting

rationale; and

(v) The contract adjustment considered appropriate, including any adjustment offered by the

contractor.

(2) The cognizant contract administration office, or other Government activity directly involved,

must furnish this data to the contracting officer in writing, except that in urgent cases it may be

furnished orally and later confirmed in writing. Before making a decision to accept, the contracting

officer must obtain the concurrence of the activity responsible for the technical requirements of the

contract and, where health factors are involved, of the responsible health official of the agency

concerned.

(d) If the nonconformance is minor, the cognizant contract administration office may make the

determination to accept or reject, except where this authority is withheld by the contracting office of

the contracting activity. To assist in making this determination, the contract administration office

may establish a joint contractor-contract administrative office review group. Acceptance of supplies

and services with critical or major nonconformances is outside the scope of the review group.

(e) The contracting officer must discourage the repeated tender of nonconforming supplies or

services, including those with only minor nonconformances, by appropriate action, such as rejection

and documenting the contractor’s performance record.

(f) When supplies or services are accepted with critical or major nonconformances as authorized in

paragraph (c) of this section, the contracting officer must modify the contract to provide for an

equitable price reduction or other consideration. In the case of conditional acceptance, amounts

withheld from payments generally should be at least sufficient to cover the estimated cost and
related profit to correct deficiencies and complete unfinished work. The contracting officer must

document in the contract file the basis for the amounts withheld. For services, the contracting

officer can consider identifying the value of the individual work requirements or tasks (subdivisions)

that may be subject to price or fee reduction. This value may be used to determine an equitable

adjustment for nonconforming services. However, when supplies or services involving minor

nonconformances are accepted, the contract need not be modified unless it appears that the savings

to the contractor in fabricating the nonconforming supplies or performing the nonconforming

services will exceed the cost to the Government of processing the modification.

(g) Notices of rejection must include the reasons for rejection and be furnished promptly to the

contractor. Promptness in giving this notice is essential because, if timely nature of rejection is not

furnished, acceptance may in certain cases be implied as a matter of law. The notice must be in

writing if-

(1) The supplies or services have been rejected at a place other than the contractor’s plant;

(2) The contractor persists in offering nonconforming supplies or services for acceptance; or

(3) Delivery or performance was late without excusable cause.

(h) The contracting officer shall provide disposition instructions for counterfeit or suspect

counterfeit items in accordance with agency policy. Agency policy may require the contracting

officer to direct the contractor to retain such items for investigative or evidentiary purposes.

46.408 Single-agency assignments of Government contract quality assurance.

(a) Government-wide responsibility for quality assurance support for acquisitions of certain

commodities is assigned as follows:

(1) For drugs, biologics, and other medical supplies-the Food and Drug Administration;

(2) For food, except seafood-the Department of Agriculture.

(3) For seafood-the National Marine Fisheries Service of the Department of Commerce.

(b) Agencies requiring quality assurance support for acquiring these supplies should request the

support directly from the cognizant office.

Subpart 46.5 - Acceptance

46.501 General.

Acceptance constitutes acknowledgment that the supplies or services conform with applicable

contract quality and quantity requirements, except as provided in this subpart and subject to other

terms and conditions of the contract. Acceptance may take place before delivery, at the time of

delivery, or after delivery, depending on the provisions of the terms and conditions of the contract.

Supplies or services shall ordinarily not be accepted before completion of Government contract

quality assurance actions (however, see 46.504). Acceptance shall ordinarily be evidenced by
execution of an acceptance certificate on an inspection or receiving report form or commercial

shipping document/packing list.

46.502 Responsibility for acceptance.

Acceptance of supplies or services is the responsibility of the contracting officer. When this

responsibility is assigned to a cognizant contract administration office or to another agency (see

42.202(g)), acceptance by that office or agency is binding on the Government.

46.503 Place of acceptance.

Each contract shall specify the place of acceptance. Contracts that provide for Government contract

quality assurance at source shall ordinarily provide for acceptance at source. Contracts that provide

for Government contract quality assurance at destination shall ordinarily provide for acceptance at

destination. (For transportation terms, see subpart 47.3.) Supplies accepted at a place other than

destination shall not be reinspected at destination for acceptance purposes, but should be examined

at destination for quantity, damage in transit, and possible substitution or fraud.

46.504 Certificate of conformance.

A certificate of conformance (see 46.315) may be used in certain instances instead of source

inspection (whether the contract calls for acceptance at source or destination) at the discretion of

the contracting officer if the following conditions apply:

(a) Acceptance on the basis of a contractor’s certificate of conformance is in the Government’s

interest.

(b)

(1) Small losses would be incurred in the event of a defect; or

(2) Because of the contractor’s reputation or past performance, it is likely that the supplies or

services furnished will be acceptable and any defective work would be replaced, corrected, or

repaired without contest. In no case shall the Government’s right to inspect supplies under the

inspection provisions of the contract be prejudiced.

46.505 Transfer of title and risk of loss.

(a) Titleto supplies shall pass to the Government upon formal acceptance, regardless of when or

where the Government takes physical possession, unless the contract specifically provides for earlier

passage of title.

(b) Unless the contract specifically provides otherwise, risk of loss of or damage to supplies shall

remain with the contractor until, and shall pass to the Government upon-

(1) Delivery of the supplies to a carrier if transportation is f.o.b. origin; or
(2) Acceptance by the Government or delivery of the supplies to the Government at the destination

specified in the contract, whichever is later, if transportation is f.o.b. destination.

(c) Paragraph (b) of this section shall not apply to supplies that so fail to conform to contract

requirements as to give a right of rejection. The risk of loss of or damage to such nonconforming

supplies remains with the contractor until cure or acceptance. After cure or acceptance, paragraph

(b) of this section shall apply.

(d) Under paragraph (b) of this section, the contractor shall not be liable for loss of or damage to

supplies caused by the negligence of officers, agents, or employees of the Government acting within

the scope of their employment.

(e) The policy expressed in (a) through (d) of this section is specified in the clause at 52.246-16,

Responsibility for Supplies, which is prescribed in 46.316.

Subpart 46.6 - Material Inspection and Receiving Reports

46.601 General.

Agencies shall prescribe procedures and instructions for the use, preparation, and distribution of

material inspection and receiving reports and commercial shipping document/packing lists to

evidence Government inspection (see 46.401) and acceptance (see 46.501).

Subpart 46.7 - Warranties

46.701 [Reserved]

46.702 General.

(a) The principal purposes of a warranty in a Government contract are-

(1) To delineate the rights and obligations of the contractor and the Government for defective items

and services; and

(2) To foster quality performance.

(b) Generally, a warranty should provide-

(1) A contractual right for the correction of defects notwithstanding any other requirement of the

contract pertaining to acceptance of the supplies or services by the Government; and

(2) A stated period of time or use, or the occurrence of a specified event, after acceptance by the

Government to assert a contractual right for the correction of defects.

(c) The benefits to be derived from a warranty must be commensurate with the cost of the warranty

to the Government.
46.703 Criteria for use of warranties.

The use of warranties is not mandatory. In determining whether a warranty is appropriate for a

specific acquisition, the contracting officer shall consider the following factors:

(a) Nature and use of the supplies or services. This includes such factors as-

(1) Complexity and function;

(2) Degree of development;

(3) State of the art;

(4) End use;

(5) Difficulty in detecting defects before acceptance; and

(6) Potential harm to the Government if the item is defective.

(b) Cost. Warranty costs arise from-

(1) The contractor’s charge for accepting the deferred liability created by the warranty; and

(2) Government administration and enforcement of the warranty (see paragraph (c) of this section).

(c) Administration and enforcement. The Government’s ability to enforce the warranty is essential to

the effectiveness of any warranty. There must be some assurance that an adequate administrative

system for reporting defects exists or can be established. The adequacy of a reporting system may

depend upon such factors as the-

(1) Nature and complexity of the item;

(2) Location and proposed use of the item;

(3) Storage time for the item;

(4) Distance of the using activity from the source of the item;

(5) Difficulty in establishing existence of defects; and

(6) Difficulty in tracing responsibility for defects.

(d) Trade practice. In many instances an item is customarily warranted in the trade, and, as a result

of that practice, the cost of an item to the Government will be the same whether or not a warranty is

included. In those instances, it would be in the Government’s interest to include such a warranty.

(e) Reduced requirements. The contractor’s charge for assumption of added liability may be partially

or completely offset by reducing the Government’s contract quality assurance requirements where

the warranty provides adequate assurance of a satisfactory product.
46.704 Authority for use of warranties.

The use of a warranty in an acquisition shall be approved in accordance with agency procedures.

46.705 Limitations.

(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.

46.706 Warranty terms and conditions.

(a) To facilitate the pricing and enforcement of warranties, the contracting officer shall ensure that

warranties clearly state the-

(1) Exact nature of the item and its components and characteristics that the contractor warrants;

(2) Extent of the contractor’s warranty including all of the contractor’s obligations to the

Government for breach of warranty;

(3) Specific remedies available to the Government; and

(4) Scope and duration of the warranty.

(b) The contracting officer shall consider the following guidelines when preparing warranty terms

and conditions:

(1) Extent of contractor obligations.

(i) Generally, the contractor’s obligations under warranties extend to all defects discovered during

the warranty period, but do not include damage caused by the Government. When a warranty for the

entire item is not advisable, a warranty may be required for a particular aspect of the item that may

require special protection (e.g., installation, components, accessories, subassemblies, preservation,

packaging, and packing, etc.).

(ii) If the Government specifies the design of the end item and its measurements, tolerances,

materials, tests, or inspection requirements, the contractor’s obligations for correction of defects

shall usually be limited to defects in material and workmanship or failure to conform to

specifications. If the Government does not specify the design, the warranty extends also to the

usefulness of the design.
(iii) If express warranties are included in a contract (except contracts for commercial products and

commercial services), all implied warranties of merchantability and fitness for a particular purpose

shall be negated by the use of specific language in the clause (see clauses 52.246-17, Warranty of

Supplies of a Noncomplex Nature; 52.246-18, Warranty of Supplies of a Complex Nature; and

52.246-19, Warranty of Systems and Equipment under Performance Specifications or Design

Criteria).

(2) Remedies.

(i) Normally, a warranty shall provide as a minimum that the Government may-

(A) Obtain an equitable adjustment of the contract, or

(B) Direct the contractor to repair or replace the defective items at the contractor’s expense.

(ii) If it is not practical to direct the contractor to make the repair or replacement, or, because of the

nature of the item, the repair or replacement does not afford an appropriate remedy to the

Government, the warranty should provide alternate remedies, such as authorizing the Government

to-

(A) Retain the defective item and reduce the contract price by an amount equitable under the

circumstances; or

(B) Arrange for the repair or replacement of the defective item, by the Government or by another

source, at the contractor’s expense.

(iii) If it can be foreseen that it will not be practical to return an item to the contractor for repair, to

remove it to an alternate source for repair, or to replace the defective item, the warranty should

provide that the Government may repair, or require the contractor to repair, the item in place at the

contractor’s expense. The contract shall provide that in the circumstance where the Government is

to accomplish the repair, the contractor will furnish at the place of delivery the material or parts,

and the installation instructions required to successfully accomplish the repair.

(iv) Unless provided otherwise in the warranty, the contractor’s obligation to repair or replace the

defective item, or to agree to an equitable adjustment of the contract, shall include responsibility for

the costs of furnishing all labor and material to-

(A) Reinspect items that the Government reasonably expected to be defective,

(B) Accomplish the required repair or replacement of defective items, and

(C) Test, inspect, package, pack, and mark repaired or replaced items.

(v) If repair or replacement of defective items is required, the contractor shall generally be required

by the warranty to bear the expense of transportation for returning the defective item from the place

of delivery specified in the contract (irrespective of the f.o.b. point or the point of acceptance) to the

contractor’s plant and subsequent return. When defective items are returned to the contractor from

other than the place of delivery specified in the contract, or when the Government exercises

alternate remedies, the contractor’s liability for transportation charges incurred shall not exceed an

amount equal to the cost of transportation by the usual commercial method of shipment between the

place of delivery specified in the contract and the contractor’s plant and subsequent return.
(3) Duration of the warranty. The time period or duration of the warranty must be clearly specified

and shall be established after consideration of such factors as (i) the estimated useful life of the

item, (ii) the nature of the item including storage or shelf-life, and (iii) trade practice. The period

specified shall not extend the contractor’s liability for patent defects beyond a reasonable time after

acceptance by the Government.

(4) Notice. The warranty shall specify a reasonable time for furnishing notice to the contractor

regarding the discovery of defects. This notice period, which shall apply to all defects discovered

during the warranty period, shall be long enough to assure that the Government has adequate time

to give notice to the contractor. The contracting officer shall consider the following factors when

establishing the notice period:

(i) The time necessary for the Government to discover the defects.

(ii) The time reasonably required for the Government to take necessary administrative steps and

make a timely report of discovery of the defects to the contractor.

(iii) The time required to discover and report defective replacements.

(5) Markings.

(i) The packaging and preservation requirements of the contract shall require the contractor to

stamp or mark the supplies delivered or otherwise furnish notice with the supplies of the existence

of the warranty. The purpose of the markings or notice is to inform Government personnel who

store, stock, or use the supplies that the supplies are under warranty. Markings may be brief but

should include—

(A)A brief statement that a warranty exists;

(B)The substance of the warranty;

(C)Its duration; and

(D)Who to notify if the supplies are found to be defective.

(ii) For commercial products (see 46.709), the contractor's trade practice in warranty marking is

acceptable if sufficient information is presented for supply personnel and users to identify warranted

supplies.

(6) Consistency. Contracting officers shall ensure that the warranty clause and any other warranty

conditions in the contract (e.g., in the specifications or an inspection clause) are consistent. To the

extent practicable, all of the warranties to be contained in the contract should be expressed in the

warranty clause.

46.707 Pricing aspects of fixed-price incentive contract warranties.

If a fixed-price incentive contract contains a warranty (see 46.708), the estimated cost of the

warranty to the contractor should be considered in establishing the incentive target price and the

ceiling price of the contract. All costs incurred, or estimated to be incurred, by the contractor in

complying with the warranty shall be considered when establishing the total final price. Contractor

compliance with the warranty after the establishment of the total final price shall be at no additional
cost to the Government.

46.708 Warranties of data.

Warranties of data shall be developed and used in accordance with agency regulations.

46.709 Warranties of commercial products and commercial services.

The contracting officer should take advantage of commercial warranties, including extended

warranties, where appropriate and in the Government’s best interests, offered by the contractor for

the repair and replacement of commercial products and commercial services (see part 12).

46.710 Contract clauses.

The clauses and alternates prescribed in this section may be used in solicitations and contracts in

which inclusion of a warranty is appropriate (see 46.709 for warranties for commercial products and

commercial services). However, because of the many situations that may influence the warranty

terms and conditions appropriate to a particular acquisition, the contracting officer may vary the

terms and conditions of the clauses and alternates to the extent necessary. The alternates

prescribed in this section address the clauses; however, the conditions pertaining to each alternate

must be considered if the terms and conditions are varied to meet a particular need.

(a)

(1) The contracting officer may insert a clause substantially the same as the clause at 52.246-17,

Warranty of Supplies of a Noncomplex Nature, in solicitations and contracts for noncomplex items

when a fixed-price supply contract is contemplated and the use of a warranty clause has been

approved under agency procedures. If the contractor’s design rather than the Government’s design

will be used, insert the word "design" before "material" in paragraph (b)(1)(i).

(2) If it is desirable to specify that necessary transportation incident to correction or replacement

will be at the Government’s expense (as might be the case if, for example, the cost of a warranty

would otherwise be prohibitive), the contracting officer may use the clause with its Alternate II.

(3) If the supplies cannot be obtained from another source, the contracting officer may use the

clause with its Alternate III.

(4) If a fixed-price incentive contract is contemplated, the contracting officer may use the clause

with its Alternate IV.

(5) If it is anticipated that recovery of the warranted items will involve considerable Government

expense for disassembly and/or reassembly of larger items, the contracting officer may use the

clause with its Alternate V.

(b)

(1) The contracting officer may insert a clause substantially the same as the clause at 52.246-18,
Warranty of Supplies of a Complex Nature, in solicitations and contracts for deliverable complex

items when a fixed-price supply or research and development contract is contemplated and the use

of a warranty clause has been approved under agency procedures. If the contractor’s design rather

than the Government’s design will be used, insert the word "design" before "material" in paragraph

(b)(1).

(2) If it is desirable to specify that necessary transportation incident to correction or replacement

will be at the Government’s expense (as might be the case if, for example, the cost of a warranty

would otherwise be prohibitive), the contracting officer may use the clause with its Alternate II.

(3) If a fixed-price incentive contract is contemplated, the contracting officer may use the clause

with its Alternate III.

(4) If it is anticipated that recovery of the warranted item will involve considerable Government

expense for disassembly and/or reassembly of larger items, the contracting officer may use the

clause with its Alternate IV.

(c)

(1) The contracting officer may insert a clause substantially the same as the clause at 52.246-19,

Warranty of Systems and Equipment under Performance Specifications or Design Criteria, in

solicitations and contracts when performance specifications or design are of major importance; a

fixed-price supply, service, or research and development contract for systems and equipment is

contemplated; and the use of a warranty clause has been approved under agency procedures.

(2) If it is desirable to specify that necessary transportation incident to correction or replacement

will be at the Government’s expense (as might be the case if, for example, the cost of a warranty

would otherwise be prohibitive), the contracting officer may use the clause with its Alternate I.

(3) If a fixed-price incentive contract is contemplated, the contracting officer may use the clause

with its Alternate II.

(4) If it is anticipated that recovery of the warranted item will involve considerable Government

expense for disassembly and/or reassembly of larger items, the contracting officer may use the

clause with its Alternate III.

(d) The contracting officer may insert a clause substantially the same as the clause at 52.246-20,

Warranty of Services, in solicitations and contracts for services when a fixed-price contract for

services is contemplated and the use of warranty clause has been approved under agency

procedures; unless a clause substantially the same as the clause at 52.246-19, Warranty of Systems

and Equipment under Performance Specifications or Design Criteria, has been used.

(e)

(1) The contracting officer may insert a clause substantially the same as the clause at 52.246-21,

Warranty of Construction, in solicitations and contracts when a fixed-price construction contract

(see 46.705(c)) is contemplated and the use of a warranty clause has been approved under agency

procedures.

(2) If the Government specifies in the contract the use of any equipment by "brand name and model,"

the contracting officer may use the clause with its Alternate I.
Subpart 46.8 - Contractor Liability for Loss of or Damage to

Property of the Government

46.800 Scope of subpart.

This subpart prescribes policies and procedures for limiting contractor liability for loss of or damage

to property of the Government that-

(a) Occurs after acceptance and

(b) Results from defects or deficiencies in the supplies delivered or services performed.

46.801 Applicability.

(a) This subpart does not apply to commercial products and commercial services. This subpart

applies to contracts other than those for—

(1)Information technology, including telecommunications;

(2)Construction;

(3)Architect-engineer services; and

(4)Maintenance and rehabilitation of real property.

(b) See subpart 46.7, Warranties, for policies and procedures concerning contractor liability caused

by nonconforming technical data.

46.802 Definition.

High-value item, as used in this subpart, means a contract end item that-

(1) Has a high unit cost (normally exceeding $100,000 per unit), such as an aircraft, an aircraft

engine, a communication system, a computer system, a missile, or a ship, and

(2) Is designated by the contracting officer as a high-value item.

46.803 Policy.

(a) General. The Government will generally act as a self-insurer by relieving contractors, as specified

in this subpart, of liability for loss of or damage to property of the Government that (1) occurs after

acceptance of supplies delivered or services performed under a contract and (2) results from defects

or deficiencies in the supplies or services. However, the Government will not relieve the contractor

of liability for loss of or damage to the contract end item itself, except for high-value items.

(b) High-value items. In contracts requiring delivery of high-value items, the Government will relieve
contractors of contractual liability for loss of or damage to those items. However, this relief shall not

limit the Government’s rights arising under the contract to-

(1) Have any defective item or its components corrected, repaired, or replaced when the defect or

deficiency is discovered before the loss of or damage to a high-value item occurs; or

(2) Obtain equitable relief when the defect or deficiency is discovered after such loss or damage

occurs.

(c) Exception. The Government will not provide contractual relief under paragraphs (a) and (b) of

this section when contractor liability can be preserved without increasing the contract price.

(d) Limitations. Subject to the specific terms of the limitation of liability clause included in the

contract, the relief provided under paragraphs (a) and (b) of this section does not apply-

(1) To the extent that contractor liability is expressly provided under a contract clause authorized by

this regulation;

(2) When a defect or deficiency in, or Government’s acceptance of, the supplies or services results

from willful misconduct or lack of good faith on the part of the contractor’s managerial personnel; or

(3) To the extent that any contractor insurance, or self-insurance reserve, covers liability for loss or

damage suffered by the Government through purchase or use of the supplies delivered or services

performed under the contract.

46.804 [Reserved]

46.805 Contract clauses.

(a) Contracts that exceed the simplified acquisition threshold. The contracting officer shall insert the

appropriate clause or combination of clauses specified in paragraphs (a)(1) through (a)(5) of this

section in solicitations and contracts when the contract amount is expected to be in excess of the

simplified acquisition threshold and the contract is subject to the requirements of this subpart as

indicated in 46.801:

(1) In contracts requiring delivery of end items that are not high-value items, insert the clause at

52.246-23, Limitation of Liability.

(2) In contracts requiring delivery of high-value items, insert the clause at 52.246-24, Limitation of

Liability-High Value Items.

(3) In contracts requiring delivery of both high-value items and other end items, insert both clauses

prescribed in (a)(1) and (a)(2) of this section, AlternateI of the clause at 52.246-24, and identify

clearly in the contract schedule the line items designated as high-value items.

(4) In contracts requiring the performance of services, insert the clause at 52.246-25, Limitation of

Liability-Services.

(5) In contracts requiring both the performance of services and the delivery of end items, insert the

clause prescribed in paragraph (a)(4) of this section and the appropriate clause or clauses

prescribed in paragraph (a)(1), (2), or (3) of this section, and identify clearly in the contract schedule
any high-value line items.

(b) Acquisitions at or below the simplified acquisition threshold. The clauses prescribed by

paragraph (a) of this section are not required for contracts at or below the simplified acquisition

threshold. However, in response to a contractor’s specific request, the contracting officer may insert

the clauses prescribed in paragraph (a)(1) or (a)(4) of this section in a contract at or below the

simplified acquisition threshold and may obtain any price reduction that is appropriate.