Overview
FAR Subpart 46.5 outlines the procedures and legal implications of "Acceptance" in government contracting, defining it as the formal acknowledgment that supplies or services conform to contract requirements. It establishes the framework for when and where acceptance occurs, who has the authority to grant it, and how it triggers the transfer of title and risk of loss from the contractor to the Government.
Key Rules
- Conformity: Acceptance constitutes acknowledgment that supplies or services meet the quality and quantity requirements of the contract, subject to specific exceptions (such as latent defects or fraud).
- Timing and Documentation: Acceptance can occur before, at, or after delivery but generally must follow the completion of Government contract quality assurance (QA). It is officially evidenced by an acceptance certificate, receiving report, or commercial shipping document.
- Place of Acceptance: Every contract must specify the place of acceptance. Generally, if inspection happens at the "source" (contractor’s facility), acceptance happens at the source; if inspection is at the "destination," acceptance follows at the destination.
- Prohibition of Re-inspection: If supplies are accepted at a source location, the Government may not re-inspect them for "acceptance" at the destination. However, the Government should still check for transit damage, quantity discrepancies, and potential fraud.
- Certificate of Conformance (CoC): At the Contracting Officer’s discretion, a CoC may be used instead of source inspection if it is in the Government's interest and involves small potential losses or a contractor with a high-quality reputation.
- Transfer of Title: Title to supplies passes to the Government upon formal acceptance, regardless of when physical possession is taken, unless otherwise specified.
- Risk of Loss:
- F.O.B. Origin: Risk passes to the Government when delivered to the carrier.
- F.O.B. Destination: Risk passes upon delivery to the destination or acceptance, whichever is later.
- Nonconforming Supplies: Risk of loss remains with the contractor for any supplies that fail to conform until the defect is cured or the Government accepts the items.
Responsibilities
- Contracting Officer (CO): Holds the ultimate responsibility for acceptance. They determine whether to use Certificates of Conformance and specify the place of acceptance in the contract.
- Contract Administration Office (CAO): When delegated by the CO, the CAO (or another agency) is responsible for acceptance, and their actions are legally binding on the Government.
- Contractor: Responsible for providing supplies/services that conform to contract requirements and providing a Certificate of Conformance when authorized. They bear the risk of loss for nonconforming goods.
- Government Inspectors/Receiving Officials: Responsible for completing quality assurance actions before acceptance and examining source-accepted goods at the destination for transit damage or quantity errors.
Practical Implications
- Payment Triggers: Formal acceptance is typically the prerequisite for a contractor to submit an invoice for payment. Delays in the Government's execution of an acceptance certificate (such as the DD Form 250) directly impact contractor cash flow.
- Liability Management: Contractors must realize that the "Risk of Loss" does not transfer for non-conforming goods. If an item is delivered but rejected for defects, and is subsequently destroyed in a fire at a Government facility before being repaired, the contractor—not the Government—ordinarily bears the financial loss.
- Operational Efficiency: The use of "Source Acceptance" is highly beneficial for complex machinery or bulk items, as it prevents the logistical nightmare of the Government rejecting and returning heavy or sensitive equipment after it has already arrived at a remote destination.
- Contractor Reputation: The "Certificate of Conformance" provision provides a tangible benefit to contractors with high past-performance ratings, as it reduces the administrative burden and delays associated with waiting for a Government inspector to arrive on-site.