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The government's rights to inspect contractor-provided goods or services and to assert warranty claims against contractors in connection with defective goods or services have long provided the government with formidable quality assurance tools. And with sequestration and continuing federal budget woes, the government's inspection and warranty rights have taken on increased significance as the government attempts to stretch its budget and get more performance out of its existing contracts by advancing more aggressive contract interpretations and demanding strict performance where it has not in the past. In this context, the government finds prime opportunities to exercise its substantial inspection and warranty-related rights, and contractors should reacquaint themselves with the government's ability to demand performance under these concepts.
Set forth below is a summary of the government's inspection-related rights (and contractors' obligations that flow from those rights) and a summary of the parties' rights and obligations under various warranty clauses. Interposed between those two concepts is also a discussion of acceptance and how the act of acceptance provides a limited check against the government's substantial inspection rights.
The Government's Right to Inspect and Contractors' Obligations
The government's ability to inspect goods or services is perhaps its most powerful quality assurance tool. At base, the government's ability to inspect allows it to identify nonconformities in goods or services and demand corrective action to bring those goods or services up to the level specified by the government.1 And as can be expected, the extent and scope of the government's ability to inspect comes largely from the numerous inspection clauses contained in the Federal Acquisition Regulation (FAR), with clauses tailored to the nature of the contract and the nature of the goods or services being procured.2 For example, inspection clauses are available for fixed-price construction projects,3 cost-reimbursement supply contracts,4 and various other permutations of government contracts. Although the parties' rights and obligations vary greatly depending on the terms of the clause, most clauses share certain general principles.
In general, the government can inspect goods or services multiple times so long as the inspections are reasonable.5 And absent contractually specified tests, the government can unilaterally determine the inspection or test methodology so long as that method is "accurate and reasonably calculated to determine compliance" with the contract specifications.6 Indeed,...