FAR 52.246-2—Inspection of Supplies-Fixed-Price.
Plain-English Summary
FAR 52.246-2, Inspection of Supplies—Fixed-Price, sets the basic inspection and acceptance framework for fixed-price supply contracts. It covers the contractor’s duty to maintain an acceptable inspection system, prepare and retain inspection records, and tender only conforming supplies; the Government’s right to inspect and test supplies at any place and time practicable before acceptance; the contractor’s duty to provide facilities and assistance for on-site Government inspection; allocation of inspection and reinspection costs; the Government’s right to reject or require correction of nonconforming supplies; removal, correction, replacement, and equitable price reduction procedures; advance notice requirements when Government quality assurance at source applies; prompt Government acceptance or rejection after delivery; and the effect of inspection and acceptance, including the limited circumstances in which acceptance is not conclusive. In practice, this clause is the core risk-allocation provision for supply quality in fixed-price contracting: it tells the contractor that inspection by the Government does not shift responsibility for defects, and it tells the Government how to preserve its rights while avoiding undue delay to performance. It also establishes remedies if supplies are late for inspection, fail reinspection, or remain nonconforming after delivery. For contractors, the clause drives quality control, documentation, and corrective-action discipline; for contracting officers, it provides the authority to inspect, reject, require correction, assess added inspection costs, and pursue default or price reduction when necessary.
Key Rules
Contractor inspection system
The contractor must maintain an inspection system acceptable to the Government and may tender only supplies that have been inspected under that system and found conforming. The contractor must also keep complete inspection records and make them available during performance and for any later period required by the contract.
Government review rights
The Government may review and evaluate the contractor’s inspection system as reasonably necessary to verify compliance, but those reviews must not unduly delay the work. Exercising, or not exercising, this right does not relieve the contractor of its contractual obligations.
Government inspection authority
The Government may inspect and test all supplies, to the extent practicable, at any place and time, including during manufacture and always before acceptance. These inspections must also be conducted without undue delay, and the Government does not assume a duty to inspect for the contractor’s benefit unless another contract clause specifically says so.
Facilities and inspection costs
If Government inspection or testing occurs at the contractor’s or subcontractor’s premises, the contractor must provide reasonable facilities and assistance at no increase in price. If inspections occur elsewhere, the Government generally pays its own costs, except that the contractor may be charged for added inspection costs caused by late readiness or by reinspection/retest after rejection.
Rejection and correction
The Government may reject nonconforming supplies or require correction. Nonconforming supplies include items defective in material or workmanship or otherwise not meeting contract requirements, and the Government may reject them with or without disposition instructions.
Removal, correction, and price reduction
Rejected or required-to-be-corrected supplies must be removed by the contractor, unless the contracting officer permits or requires correction in place at the contractor’s expense. If the contractor does not promptly remove, replace, or correct them, the Government may do the work and charge the cost to the contractor or terminate for default; if the contractor fails to correct or replace within the delivery schedule, the contracting officer may require delivery with an equitable price reduction.
Advance notice for source QA
When the contract provides for Government quality assurance at source and the Government requests it, the contractor must give advance notice of when contractor inspections/tests will occur and when supplies will be ready for Government inspection. The Government’s request must specify the notice period, method, and recipient, and may not require more than 2 workdays’ notice if the Government representative is resident in the plant, or more than 7 workdays otherwise.
Prompt acceptance and contractor risk
The Government must accept or reject supplies as promptly as practicable after delivery unless the contract says otherwise. If the Government delays inspection or acceptance, the contractor is still responsible for nonconforming supplies, and the Government does not become liable merely because it failed to inspect or reject promptly.
Effect of inspection and acceptance
Government inspection and testing do not relieve the contractor of responsibility for defects or other failures discovered before acceptance. Acceptance is generally conclusive, except for latent defects, fraud, gross mistakes amounting to fraud, or other contractually stated exceptions.
Post-acceptance remedies
If acceptance is not conclusive because one of the exceptions applies, the Government retains additional legal and contractual remedies, including requiring correction or replacement at no increase in price and at the original delivery point or the contractor’s plant, as directed by the contracting officer, subject to a reasonable delivery schedule.
Responsibilities
Contractor
Maintain an inspection system acceptable to the Government; inspect supplies before tendering them for acceptance; keep complete inspection records; provide advance notice when required for source inspection; furnish reasonable facilities and assistance for Government inspection at contractor or subcontractor premises; remove, replace, or correct rejected supplies; disclose prior rejection and corrective action when retendering corrected items; bear the cost of correction in place when directed; and remain responsible for defects discovered before acceptance and for post-acceptance liabilities where exceptions apply.
Subcontractor
When Government inspection occurs at a subcontractor’s premises, furnish reasonable facilities and assistance as required through the prime contractor’s flowdown obligations; support inspection, testing, correction, and recordkeeping requirements applicable to the subcontracted supplies.
Contracting Officer
Determine whether the contractor’s inspection system is acceptable; conduct or authorize reviews and evaluations; inspect and test supplies as practicable; require advance notice procedures when source QA applies; charge the contractor for added inspection costs in the specified situations; reject nonconforming supplies or require correction; direct removal, replacement, or correction; authorize correction in place when appropriate; impose equitable price reductions when delivery occurs without correction or replacement; and pursue default or other remedies if the contractor fails to act promptly.
Government Inspectors / Quality Assurance Personnel
Perform inspections and tests without undue delay; inspect at all practicable places and times, including during manufacture; provide source-inspection requests and procedures when applicable; and document acceptance or rejection decisions consistent with the contract and the clause.
Government
Exercise inspection and acceptance rights promptly and in a manner that does not unduly delay performance; bear its own inspection costs when inspections occur away from contractor or subcontractor premises unless the contract provides otherwise; and preserve the limited nature of acceptance by relying on the clause’s exceptions when defects are latent, fraudulent, or otherwise excepted.
Practical Implications
This clause makes quality control a contractor responsibility, not a Government substitute function. Contractors should not assume that Government inspection means the item is acceptable; they need a robust internal inspection system and strong records.
Late readiness for inspection and repeated reinspection after rejection can become a direct cost to the contractor. Scheduling discipline matters, especially for source-inspection contracts and items with long lead times or complex test requirements.
If supplies are rejected, the contractor must act quickly. Delays in removal, replacement, or correction can lead to Government-directed rework, cost recovery, equitable price reductions, or default termination.
Acceptance is powerful but not absolute. Contractors should understand that latent defects, fraud, and gross mistakes can reopen liability after acceptance, so documentation and traceability remain important even after delivery.
For contracting officers, the key pitfall is delay or inconsistent administration. Inspection rights must be exercised promptly and fairly, and any direction for correction, price reduction, or cost charging should be tied closely to the clause and the contract record.
Official Regulatory Text
As prescribed in 46.302 , insert the following clause: Inspection of Supplies-Fixed-Price (Aug 1996) (a) Definition. "Supplies," as used in this clause, includes but is not limited to raw materials, components, intermediate assemblies, end products, and lots of supplies. (b) The Contractor shall provide and maintain an inspection system acceptable to the Government covering supplies under this contract and shall tender to the Government for acceptance only supplies that have been inspected in accordance with the inspection system and have been found by the Contractor to be in conformity with contract requirements. As part of the system, the Contractor shall prepare records evidencing all inspections made under the system and the outcome. These records shall be kept complete and made available to the Government during contract performance and for as long afterwards as the contract requires. The Government may perform reviews and evaluations as reasonably necessary to ascertain compliance with this paragraph. These reviews and evaluations shall be conducted in a manner that will not unduly delay the contract work. The right of review, whether exercised or not, does not relieve the Contractor of the obligations under the contract. (c) The Government has the right to inspect and test all supplies called for by the contract, to the extent practicable, at all places and times, including the period of manufacture, and in any event before acceptance. The Government shall perform inspections and tests in a manner that will not unduly delay the work. The Government assumes no contractual obligation to perform any inspection and test for the benefit of the Contractor unless specifically set forth elsewhere in this contract. (d) If the Government performs inspection or test on the premises of the Contractor or a subcontractor, the Contractor shall furnish, and shall require subcontractors to furnish, at no increase in contract price, all reasonable facilities and assistance for the safe and convenient performance of these duties. Except as otherwise provided in the contract, the Government shall bear the expense of Government inspections or tests made at other than the Contractor’s or subcontractor’s premises; provided, that in case of rejection, the Government shall not be liable for any reduction in the value of inspection or test samples. (e) (1) When supplies are not ready at the time specified by the Contractor for inspection or test, the Contracting Officer may charge to the Contractor the additional cost of inspection or test. (2) The Contracting Officer may also charge the Contractor for any additional cost of inspection or test when prior rejection makes reinspection or retest necessary. (f) The Government has the right either to reject or to require correction of nonconforming supplies. Supplies are nonconforming when they are defective in material or workmanship or are otherwise not in conformity with contract requirements. The Government may reject nonconforming supplies with or without disposition instructions. (g) The Contractor shall remove supplies rejected or required to be corrected. However, the Contracting Officer may require or permit correction in place, promptly after notice, by and at the expense of the Contractor. The Contractor shall not tender for acceptance corrected or rejected supplies without disclosing the former rejection or requirement for correction, and, when required, shall disclose the corrective action taken. (h) If the Contractor fails to promptly remove, replace, or correct rejected supplies that are required to be removed or to be replaced or corrected, the Government may either (1)by contract or otherwise, remove, replace, or correct the supplies and charge the cost to the Contractor or (2) terminate the contract for default. Unless the Contractor corrects or replaces the supplies within the delivery schedule, the Contracting Officer may require their delivery and make an equitable price reduction. Failure to agree to a price reduction shall be a dispute. (i) (1) If this contract provides for the performance of Government quality assurance at source, and if requested by the Government, the Contractor shall furnish advance notification of the time- (i) When Contractor inspection or tests will be performed in accordance with the terms and conditions of the contract; and (ii) When the supplies will be ready for Government inspection. (2) The Government’s request shall specify the period and method of the advance notification and the Government representative to whom it shall be furnished. Requests shall not require more than 2 workdays of advance notification if the Government representative is in residence in the Contractor’s plant, nor more than 7 workdays in other instances. (j) The Government shall accept or reject supplies as promptly as practicable after delivery, unless otherwise provided in the contract. Government failure to inspect and accept or reject the supplies shall not relieve the Contractor from responsibility, nor impose liability on the Government, for nonconforming supplies. (k) Inspections and tests by the Government do not relieve the Contractor of responsibility for defects or other failures to meet contract requirements discovered before acceptance. Acceptance shall be conclusive, except for latent defects, fraud, gross mistakes amounting to fraud, or as otherwise provided in the contract. (l) If acceptance is not conclusive for any of the reasons in paragraph (k) hereof, the Government, in addition to any other rights and remedies provided by law, or under other provisions of this contract, shall have the right to require the Contractor (1)at no increase in contract price, to correct or replace the defective or nonconforming supplies at the original point of delivery or at the Contractor’s plant at the Contracting Officer’s election, and in accordance with a reasonable delivery schedule as may be agreed upon between the Contractor and the Contracting Officer; provided, that the Contracting Officer may require a reduction in contract price if the Contractor fails to meet such delivery schedule, or (2) within a reasonable time after receipt by the Contractor of notice of defects or nonconformance, to repay such portion of the contract as is equitable under the circumstances if the Contracting Officer elects not to require correction or replacement. When supplies are returned to the Contractor, the Contractor shall bear the transportation cost from the original point of delivery to the Contractor’s plant and return to the original point when that point is not the Contractor’s plant. If the Contractor fails to perform or act as required in paragraph (l)(1) or (l)(2) of this clause and does not cure such failure within a period of 10 days (or such longer period as the Contracting Officer may authorize in writing) after receipt of notice from the Contracting Officer specifying such failure, the Government shall have the right by contract or otherwise to replace or correct such supplies and charge to the Contractor the cost occasioned the Government thereby. (End of clause) Alternate I (July1985). If a fixed-price incentive contract is contemplated, substitute paragraphs (g), (h), and (l) below for paragraphs (g), (h), and (l) of the basic clause. (g) The Contractor shall remove supplies rejected or required to be corrected. However, the Contracting Officer may require or permit correction in place, promptly after notice. The Contractor shall not tender for acceptance corrected or rejected supplies without disclosing the former rejection or requirement for correction, and when required shall disclose the corrective action taken. Cost of removal, replacement, or correction shall be considered a cost incurred, or to be incurred, in the total final negotiated cost fixed under the incentive price revision clause. However, replacements or corrections by the Contractor after the establishment of the total final price shall be at no increase in the total final price. (h) If the Contractor fails to promptly remove, replace, or correct rejected supplies that are required to be removed or to be replaced or corrected, the Government may either (1)by contract or otherwise, remove, replace, or correct the supplies and equitably reduce the target price or, if established, the total final price or (2) may terminate the contract for default. Unless the Contractor corrects or replaces the nonconforming supplies within the delivery schedule, the Contracting Officer may require their delivery and equitably reduce any target price or, if it is established, the total final contract price. Failure to agree upon an equitable price reduction shall be a dispute. (l) If acceptance is not conclusive for any of the reasons in paragraph (k) hereof, the Government, in addition to any other rights and remedies provided by law, or under other provisions of this contract, shall have the right to require the Contractor (1)at no increase in any target price or, if it is established, the total final price of this contract, to correct or replace the defective or nonconforming supplies at the original point of delivery or at the Contractor’s plant at the Contracting Officer’s election, and in accordance with a reasonable delivery schedule as may be agreed upon between the Contractor and the Contracting Officer; provided, that the Contracting Officer may require a reduction in any target price, or, if it is established, the total final price of this contract, if the Contractor fails to meet such delivery schedule; or (2) within a reasonable time after receipt by the Contractor of notice of defects or nonconformance, to repay such portion of the total final price as is equitable under the circumstances if the Contracting Officer elects not to require correction or replacement. When supplies are returned to the Contractor, the Contractor shall bear the transportation costs from the original point of delivery to the Contractor’s plant and return to the original point when that point is not the Contractor’s plant. If the Contractor fails to perform or act as required in paragraph (l)(1) or (l)(2) of this clause and does not cure such failure within a period of 10 days (or such longer period as the Contracting Officer may authorize in writing) after receipt of notice from the Contracting Officer specifying such failure, the Government shall have the right by contract or otherwise to replace or correct such supplies and equitably reduce any target price or, if it is established, the total final price of this contract. Alternate II (July1985). If a fixed-ceiling-price contract with retroactive price redetermination is contemplated, substitute paragraphs (g), (h), and (l) below for paragraphs (g), (h), and (l) of the basic clause: (g) The Contractor shall remove supplies rejected or required to be corrected. However, the Contracting Officer may require or permit correction in place, promptly after notice. The Contractor shall not tender for acceptance corrected or rejected supplies without disclosing the former rejection or requirement for correction, and when required shall disclose the corrective action taken. Cost of removal, replacement, or correction shall be considered a cost incurred, or to be incurred, when redetermining the prices under the price redetermination clause. However, replacements or corrections by the Contractor after the establishment of the redetermined prices shall be at no increase in the redetermined price. (h) If the Contractor fails to promptly remove, replace, or correct rejected supplies that are required to be removed or to be replaced or corrected, the Government may either (1)by contract or otherwise, remove, replace, or correct the supplies and equitably reduce the initial contract prices or, if established, the redetermined contract prices or (2) terminate the contract for default. Unless the Contractor corrects or replaces the nonconforming supplies within the delivery schedule, the Contracting Officer may require their delivery and equitably reduce the initial contract price or, if it is established, the redetermined contract prices. Failure to agree upon an equitable price reduction shall be a dispute. (l) If acceptance is not conclusive for any of the reasons in paragraph (k) hereof, the Government, in addition to any other rights and remedies provided by law, or under other provisions of this contract, shall have the right to require the Contractor (1)at no increase in the initial contract prices, or, if it is established, the redetermined prices of this contract, to correct or replace the defective or nonconforming supplies at the original point of delivery or at the Contractor’s plant at the Contracting Officer’s election, and in accordance with a reasonable delivery schedule as may be agreed upon between the Contractor and the Contracting Officer; provided, that the Contracting Officer may require a reduction in the initial contract prices, or, if it is established, the redetermined prices of this contract, if the Contractor fails to meet such delivery schedule; or (2) within a reasonable time after receipt by the Contractor of notice of defects or nonconformance, to repay such portion of the initial contract prices, or, if it is established, the redetermined prices of this contract, as is equitable under the circumstances if the Contracting Officer elects not to require correction or replacement. When supplies are returned to the Contractor, the Contractor shall bear the transportation costs from the original point of delivery to the Contractor’s plant and return to the original point when that point is not the Contractor’s plant. If the Contractor fails to perform or act as required in paragraph (l)(1) or (l) (2) of this clause and does not cure such failure within a period of 10 days (or such longer period as the Contracting Officer may authorize in writing) after receipt of notice from the Contracting Officer specifying such failure, the Government shall have the right by contract or otherwise to replace or correct such supplies and equitably reduce the initial contract prices, or, if it is established, the redetermined prices of this contract.