Inspection of Supplies—Fixed-Price
Also known as: Inspection clause, supply inspection clause
What you do here: Deliver conforming supplies, keep an inspection system, and preserve your test records
At a Glance
- Applies to
- Fixed-price supply contracts (a parallel exists for commercial items in FAR 52.212-4)
- Who inspects
- The government, at source or destination — plus the contractor's own inspection system
- Governing authority
- FAR 52.246-2, prescribed by FAR 46.302
- Government's rights
- Inspect and test before acceptance; reject, require correction/replacement, or accept at a reduced price
- Who bears rework cost
- The contractor — correction or replacement of rejected supplies is at your expense on a fixed-price job
What It Is
FAR 52.246-2, Inspection of Supplies—Fixed-Price, is the workhorse Inspection clause on fixed-price supply contracts. It does three things. First, it requires you to provide and maintain an inspection system acceptable to the government and to keep complete records of your inspection work, available to the government during performance. Second, it reserves the government's right to inspect and test all supplies, to the extent practicable, at all places and times — including during manufacture — before acceptance, without unduly delaying the work. Third, it spells out what happens when supplies don't conform: the government may reject them, require you to correct or replace them at no increase in contract price, or, if it's in the government's interest, accept nonconforming supplies at a reduced price reflecting the reduced value. If you fail to promptly correct or replace rejected supplies, the government can terminate for default or have the correction done elsewhere and charge you. The clause also addresses inspection location (source vs. destination), the effect of inspection or testing (it doesn't relieve you of responsibility for defects), and the important rule that even after acceptance the government retains remedies for latent defects, fraud, or gross mistakes amounting to fraud. In plain terms: you own quality, the government keeps the right to check it, and on a fixed-price contract the cost of fixing nonconforming supplies lands on you.
When You See It
- On fixed-price contracts for supplies (goods, materials, manufactured items) above simplified acquisition levels.
- When the government will inspect at the source (your plant) or at destination (where the supplies are delivered).
- When the contract requires a first article or in-process inspection during manufacture.
- Any time the government finds nonconforming supplies and decides to reject, require correction, or accept at a reduced price.
Key Features
| Feature | What It Means |
|---|---|
| You maintain an inspection system | The clause requires you to provide and keep an inspection system acceptable to the government, with complete records available during performance. |
| Inspect before acceptance | The government may inspect and test supplies, to the extent practicable, at all reasonable places and times before acceptance — including during manufacture. |
| Three remedies for nonconformance | For nonconforming supplies the government may reject them, require correction/replacement at no added price, or accept them at a reduced price. |
| Correction is at your cost | On a fixed-price contract, correcting or replacing rejected supplies is at your expense — there's no price increase for fixing your own defect. |
| Acceptance isn't total forgiveness | Even after acceptance the government keeps remedies for latent defects, fraud, or gross mistakes amounting to fraud. |
The SDVOSB Angle
On a fixed-price supply set-aside, this clause is where a thin margin can vanish: a rejection means you correct or replace the supplies on your own dime, and you still don't get paid until the government accepts. Two moves protect a small prime. First, price realistic scrap, rework, and inspection cost into your bid — the Price-to-Win build-up should assume some rework, not a perfect first run. Second, keep disciplined inspection and test records; if the government questions conformance, contemporaneous records are your evidence, and they also support any claim if a rejection was wrong. If a similarly situated subcontractor makes the supplies, the defect is still yours to cure and yours in CPARS — inspect their work before you tender it, don't after the government rejects it.
How to Handle It
- Stand up and document an inspection system that matches what the contract requires, and keep the records accessible.
- Confirm whether inspection is at source or destination and plan your schedule and shipping around it.
- Inspect your own (and your subs') supplies before tendering them — catch nonconformance before the government does.
- If supplies are rejected, correct or replace promptly to avoid a default termination or a charge for outside correction.
- If you believe a rejection was wrong, document it and pursue an equitable adjustment or a claim rather than silently absorbing the cost.
Watch Out For
- Under-pricing rework and scrap on a fixed-price bid, so a normal rejection turns the job unprofitable.
- Missing that correction/replacement of nonconforming supplies is at no increase in price — you eat the cost.
- Assuming acceptance ends all risk — latent defects, fraud, and gross mistakes survive acceptance.
- Failing to keep inspection and test records, leaving you unable to prove conformance or challenge a rejection.
Run the Numbers
Frequently Asked
What is the Inspection of Supplies—Fixed-Price clause?
FAR 52.246-2, Inspection of Supplies—Fixed-Price, is the standard Inspection clause on fixed-price supply contracts. It requires the contractor to maintain an inspection system and keep records, gives the government the right to inspect and test supplies before acceptance, and lets the government reject nonconforming supplies, require correction or replacement at no increase in price, or accept them at a reduced price. Correction of rejected supplies is at the contractor's expense.
Who pays to fix rejected supplies on a fixed-price contract?
The contractor. Under FAR 52.246-2, if the government rejects nonconforming supplies and requires correction or replacement, that is done at no increase in the contract price — the contractor bears the cost of fixing its own defect. This is why realistic rework and scrap allowances belong in a fixed-price bid: a rejection you didn't plan for comes directly out of your margin, and you still aren't paid until the government accepts conforming supplies.
Can the government inspect supplies at my facility?
Yes. The Inspection clause lets the government inspect and test supplies, to the extent practicable, at all reasonable places and times, including during manufacture and at the source (your facility) as well as at destination. The contract specifies the point of inspection. Source inspection is common for complex or critical items; destination inspection is common for simpler commercial-type items. Either way, the government's inspection doesn't relieve you of responsibility for delivering conforming supplies.
Primary Sources
- FAR 52.246-2 — Inspection of Supplies—Fixed-Price
- FAR 46.302 — Fixed-price supply contracts
- FAR Subpart 46.5 — Acceptance
Plain-English reference, not legal advice. Quality, inspection, acceptance, and warranty rules are fact-specific, and the FAR and agency supplements are amended from time to time — always read the current FAR text, follow the inspection and acceptance requirements in your specific contract clauses, confirm the requirements with the contracting officer, and consult qualified counsel before relying on an inspection, acceptance, rejection, or warranty position.
Change log (1)
- LaunchedPublished the federal contract quality assurance, inspection & acceptance reference covering how the government checks, rejects, accepts, and warrants an SDVOSB's work on a set-aside — government contract quality assurance (FAR Part 46), the Inspection of Supplies (52.246-2), Services (52.246-4), and Construction (52.246-12) clauses, higher-level quality requirements / ISO 9001 & AS9100 (52.246-11), acceptance and its near-finality (FAR Subpart 46.5), the rejection and correction of nonconforming work (FAR 46.407), the latent-defect / fraud / gross-mistake exceptions to conclusive acceptance, and contract warranties (FAR Subpart 46.7 / 52.246-17 to -21) — each with an at-a-glance quick-facts card, a when-you-see-it list, a key-features table, an SDVOSB-specific angle, a how-to-handle-it checklist, watch-outs, FAQPage, Article, Dataset, and BreadcrumbList structured data, primary-source FAR citations, and cross-links into the glossary, regulation explainers, clauses, forms, contract types, payment methods, protest & dispute forums, how-to guides, FAQ, and the limitations-on-subcontracting and price-to-win calculators.