Overview
FAR 46.703 establishes that the use of warranties is discretionary rather than mandatory and provides a specific framework of factors that Contracting Officers must evaluate to determine if a warranty is in the government's best interest.
Key Rules
- Discretionary Use: Warranties are not a default requirement; their inclusion is based on a case-by-case determination by the Contracting Officer.
- Nature of the Item: Evaluation must include the item's complexity, state of development, and the potential harm to the Government if the product fails.
- Cost Analysis: The Government must account for both the contractor’s price for assuming liability and the internal costs of Government administration and enforcement.
- Enforceability: A warranty should only be used if an adequate system exists (or can be created) to report defects and trace responsibility.
- Trade Practices: If an item is customarily warranted in the commercial trade at no additional cost, the Government should include the warranty.
- QA Offsets: A warranty may justify reducing the intensity of Government contract quality assurance requirements if the warranty provides sufficient protection.
Practical Implications
- Contracting Officers must conduct a cost-benefit analysis to ensure the government is not paying a premium for a warranty that is either impossible to enforce due to logistical constraints or covers an item with a low risk of failure.
- Project managers and technical teams must ensure they have the administrative capacity to identify and report defects within the warranty period, otherwise, the cost of the warranty is essentially wasted funds.