Overview
FAR 25.206 outlines the mandatory procedures a Contracting Officer must follow when a contractor is alleged or discovered to have used unauthorized foreign construction materials in violation of the Buy American statute. It provides a framework for investigation, contractor notification, and specific enforcement remedies ranging from price reductions to contract termination.
Key Rules
- Mandatory Investigation: The Contracting Officer (CO) is required to review all allegations of Buy American statute violations.
- Contractor Notification: Unless fraud is suspected, the CO must notify the contractor of the unauthorized use and request a formal reply, including a plan for corrective action.
- Remediation Options: If noncompliance is confirmed, the CO may:
- Process a late determination of inapplicability (exception).
- Order the removal and replacement of the unauthorized material.
- Retain the material if removal is impracticable or detrimental to the Government’s interest, provided a written determination is made.
- Reservation of Rights: Retaining noncompliant material does not waive the Government’s right to seek a price reduction, terminate for default, or pursue suspension and debarment.
- Fraud Referral: If the noncompliance appears fraudulent, the CO must refer the matter to criminal investigation officials rather than following standard administrative notification procedures.
Practical Implications
- Financial Risk: Contractors face significant financial exposure because the Government can demand the "rip and replace" of materials at the contractor's expense or insist on a contract price credit in exchange for accepting noncompliant goods.
- Documentation and Compliance: Contractors must maintain rigorous supply chain records, as the CO is legally obligated to investigate any allegation of violation, and "good faith" errors may still result in severe contractual remedies or impacts on past performance ratings.