FAR Part 46 – Quality Assurance

1. FAR Part 46 – Quality Assurance Presented By: Shannon Carr

2. Subpart 46.1 - General • 46.101 -- Definitions. • Acceptance - the act of an Authorized Representative (AR) of the gov't by which the gov't, for itself or as agent of another, assumes ownership of existing identified supplies tendered or approves specific services rendered as partial or complete perfof the contract. • Conditional acceptance - acceptance of supplies/services that do not conform to contract quality req's (incomplete) - contractor is required to correct/complete by a specified date. • Contract quality req's- the technical req'sin the contract relating to the quality of the product/service & those contract clauses prescribing inspection, & other quality controls incumbent on the contractor, to assure that product/service conforms to the contractual req's. • Critical nonconformance-a nonconformance that is likely to result in hazardous/unsafe conditions for individuals using/maintaining, or depending upon the supplies/services; or likely to prevent perfof a vital agency mission. • Gov't contract quality assurance- various functions, including inspection, performed by the gov't to determine whether a contractor has fulfilled the contract obligations pertaining to quality & quantity. • Major nonconformance-a nonconformance, other than critical, that is likely to result in failure of the supplies/services, or to materially reduce the usability of the supplies/services for their intended purpose. • Minor nonconformance-a nonconformance that is not likely to materially reduce the usability of the supplies/services for their intended purpose, or is a departure from established standards having little bearing on the effective use/operation of the supplies/services. • Off-the-shelf item-an item produced & placed in stock by a contractor, or stocked by a distributor, before receiving orders /ontractsfor its sale. The item may be commercial or produced to military or Federal specs or description. • Patent defect-any defect which exists at the time of acceptance & is not a latent defect. • Testing - that element of inspection that determines the properties/elements, including functional operation of supplies or their components, by the application of established scientific principles & procedures.

3. 46.102 -- Policy. • Agencies shall ensure that: • Contracts include inspection & other quality req's, including warranty clauses when appropriate (Goal: protect the gov't’s interest); • Supplies/services tendered meet contract req's; • Gov't contract QA is conducted before acceptance (except as otherwise provided in this part), by/under direction of gov't personnel; • No contract precludes the gov't from perf inspection; • Nonconforming supplies/services are rejected, except in 46.407; • Contracts for commercial items shall rely on contractor’s existing QA system as a substitute for compliance with gov't inspection & testing before tender for acceptance unless customary market practices permit in-process inspection. Any in-process inspection by the gov't shall be conducted in a manner consistent with commercial practice; & • The QA & acceptance services of other agencies are used when this will be effective, economical, or in gov't’s interest (Subpart 42.1).

4. 46.103 -- Contracting Office Responsibilities. • Contracting offices are responsible for: • Receiving any specs for inspection, testing, & other contract quality req's essential to ensure the integrity of the supplies/services • Including in SOLs & contracts the appropriate req's for the contractor’s control of quality for supplies/services to be acquired; • Issuing necessary instructions to the CAO & acting on recommendations submitted by that office (see 42.301 & 46.104(f)); • When contract administration is retained (see 42.201), verifying that the contractor fulfills the contract quality req's; & • Ensuring that nonconformance is identified, & establishing its significance when considering the supplies/services which do not meet contract req's.

5. 46.104 -- CAO Responsibilities. • When a contract is assigned for administration to the CAO of the contractor’s plant, that office, unless specified otherwise, shall: • Develop & apply procedures for perf gov't contract quality assurance actions with the written direction of the contracting office; • Perform all actions necessary to verify whether the supplies/services conform to contract quality req's; • Maintain, as part of the perf records, suitable records reflecting: • Nature of gov't contract quality assurance actions (# of observations made & # & type of defects); & • Decisions regarding acceptability of products, processes, req's, & action to correct defects. • Implement any written instructions from the contracting office; • Report any defects observed in design or technical req's (contract quality req's); & • Recommend any changes necessary to the contract, specs, instructions, or other req's that will provide more effective operations/eliminate unnecessary costs (see 46.103(c)).

6. 46.105 -- Contractor Responsibilities. • The contractor is responsible for: • Controlling the quality of supplies/services; • Offering to the gov't only those supplies/services that conform to contract req's; • Ensuring that vendors/suppliers of raw materials, parts, components, subassemblies, etc., have an acceptable quality control system; & • Maintaining/providing evidence, when required, that supplies/services conform to contract quality req's. • Contractor may be req’d to provide/maintain an inspection system/program for the control of quality acceptable to the gov't (see 46.202). • The control of quality by the contractor may relate to, but is not limited to: • Manufacturing processes; • Drawings, specs, & engineering changes; • Testing & examination; • Reliability & maintainability assessment (life, endurance, & continued readiness); • Fabrication & delivery of products; • Technical documentation (drawings, specs, handbooks, manuals, technical publications); • Preservation, packaging, packing, & marking; & • Procedures & processes for services. • The contractor is responsible for perf all inspections & test required by the contract except those reserved for the gov't (see 46.201(c)).

7. Subpart 46.2 – Contract Quality req's • 46.201 -- General. • The CO shall include appropriate quality req's. Type & extent depends on the acquisition. • As feasible, SOLs & contracts may provide for alternative (equivalent inspection methods) to obtain wide competition & low cost. The CO may authorize recommended alternatives when in gov't’s interest & approved by responsible activity. • Situations may provide for specialized inspections to be performed solely by gov't which include: • Tests that require use of specialized test equipment/facilities not ordinarily avail in suppliers’ plants or commercial laboratories (ballistic testing of ammunition, unusual environmental tests, & simulated service tests); & • Contracts that require gov't testing for first article approval (Subpart 9.3). • Required contractor testing may be performed in contractor’s/subcontractor’s lab/testing facility, or in any other lab/testing facility acceptable to gov't.

8. 46.202-1 -- Contracts for Commercial Items. • When acquiring commercial items, gov't shall rely on contractors’ existing QAsystemsas a substitute for gov't inspection/testing before acceptance unless customary market practices include in-process inspection. • 46.202-2 -- Gov't Reliance on Inspection by Contractor. • Except as in (b) below, gov't shall rely on contractor to accomplish all inspection/testing needed to ensure that supplies/services acquired at or below the SAT conform to contract quality req's before they are provided to the gov't (46.301). • Gov't shall not rely on inspection by contractor if CO determines that gov't has a need to test supplies/services in advance of acceptance or adequacy of contractor’s internal work processes. The CO shall consider: • Nature of the supplies/services & their intended use, potential losses in event of defects, likelihood of replacement/correction of defective work, & cost of detailed gov't inspection. • 46.202-3 -- Standard Inspection Req's. • Standard inspection req's- 46.302through 46.308, • Clauses referred to in (a) of this section: • Require contractor to provide/maintain an inspection system acceptable to the gov't, give gov't right to make inspections/tests while work is in process, & require contractor to keep complete, & make avail to gov't, records of inspection work. • 46.202-4 -- Higher-Level Contract Quality Req's. • Requiring compliance with higher-level quality standards is appropriate in SOLs/contracts for complex/critical items or when contract requires: • Control of work operations, in-process controls, & inspection, or attention to organization, planning, work instructions, documentation control, & advanced metrology. • When CO finds it is in the gov't’s interest to require higher-level quality standards be maintained, the CO shall use clause 46.311.

9. 46.203 -- Criteria for Use of Contract Quality req's. • Contract quality req's are determined by the following: • Technical description. May be classified as: • Commercial and Military-Federal • Complexity. • Complex items have quality characteristics, not wholly visible in the end item, for which must be established through measurements, tests, & controls applied during purchasing, manufacturing, perf, assembly, & functional operation • Noncomplex items - test of the end item is sufficient. • Criticality. • Critical application - one in which failure of the item could injure personnel or jeopardize a vital agency mission. May be peculiar (only one application or has multiple applications). • Noncritical application - any other application and may be peculiar or common.

10. Subpart 46.3 – Contract Clauses • Subpart describes Contractor Inspection req'sand where to insert clauses and various alternates that can be used in specific circumstances with Fixed Price and Cost Reimbursement Contracts.

11. Subpart 46.4 – Gov’t Contract Quality Assurance (QA) • 46.401 -- General. • Gov't contract (QA) shall be performed at times & places (subcontractors’ plants) to determine that supplies/services conform to contract req's. QA surveillance plans should be prepared in conjunction with prep of the SOW and should specify: • Work requiring surveillance and method of surveillance. • Each contract shall designate place(s) where gov't reserves right to perform QA. • If contract provides for perf of gov't QA at source, place(s) of perf may not be changed without authorization of CO. • If contract provides for delivery/acceptance at destination & gov't inspects supplies at place other than destination, supplies shall not be re-inspected at destination, but examined for quantity, damage in transit, & possible substitution/fraud. • Gov't inspection shall be performed by/under direction/supervision of gov't personnel. • Gov't inspection shall be documented on inspection/receiving report form/commercial shipping document/packing list, under agency procedures (Subpart 46.6). • Agencies may prescribe use of inspection approval/disapproval stamps to identify/control supplies/material that have been inspected for conformance with contract quality req's.

12. 46.402 -- gov't Contract Quality Assurance at Source. • Agencies shall perf contract QA, including inspection at source if: • Perf at any other place would require uneconomical disassembly or destructive testing; • Considerable loss would result from manufacture/shipment of unacceptable supplies or delay in making corrections; • Special req’d instruments, gauges, or facilities are avail at source; • Perf at any other place would destroy/req the replacement of costly special packing/packaging; • Gov't inspection during contract perf is essential; or • It’s determined to be in gov't’s best interest.

13. 46.403 -- gov't Contract Quality Assurance at Destination. • Gov't contract QA can be performed at destination is limited to inspection of supplies/services & can be performed at destination when: • Supplies are purchased OTS & require no technical inspection; • Necessary testing equipment located at destination; • Perishable subsistence supplies purchased within U.S., except those for overseas shipment • Brand name products purchased for authorized resale through commissaries or similar facilities • Products purchased are processed under direct control of NIH or Food & Drug Administration of DOH & Human Services; • Contract is for services performed at destination; or • Determined to be in gov't’s best interest. • Overseas inspection of supplies shipped from U.S. shall not be req’d except in unusual circumstances & when CO determines inspection can be performed or makes necessary arrangements for its perf.

14. 46.404 -- gov't Contract Quality Assurance for Acquisitions at or Below the Simplified Acquisition Threshold. • In determining type/extent of gov't contract (QA) for contracts at or below SAT, CO shall consider application of supplies/services, amount of possible losses, & likelihood of replacement of defective work (46.202-2). • When conditions in 46.202-2(b) apply, the following policies govern: • Unless a special situation exists, the gov't shall inspect contracts at or belowSAT at destination & only for type & kind; quantity; damage; operability; & preservation, packaging, packing, & marking. • Situations may reqmore detailed QA & use of standard inspection/ higher-level contract quality req (46.402& contracts w/ critical applications). • Detailed gov't inspection may be limited to characteristics that are special/likely to cause harm to personnel/property. When repetitive purchases of same item are made from same manufacturer w/ history of defect-free work, gov't inspection may be reduced to periodic check of occasional purchases.

15. 46.405 -- Subcontracts. • Gov't contract (QA) on subcontracted supplies/services shall be performed only when req’din gov't’s interest. Primary purpose: to assist CAO of prime’s plant in determining conformance of subcontracted supplies/services or to satisfy one or more of the factors included in (b) of this section. Does not relieve prime of responsibilities under contract. When appropriate, prime shall be requested to arrange timely gov't access to sub’s facility. • Gov't shall perform QA at subcontract level when: • Item is to be shipped from sub’s plant to using activity & inspection at source is req’d; • Conditions for QA at source are applicable (see 46.402); • Contract specifies that certain QA functions (only at sub’s plant) are to be perfby gov't; or • It is req’dby contract or determined to be in gov't’s interest. • Supplies/services for which certificates, records, reports, or similar evidence of quality are avail at prime’s plant shall not be inspected at sub’s plant unless to verify evidence or when req’dunder (b) of this section. • All oral/written statements & contract terms & conditions relating to gov't QA actions at the sub level shall be worded so as not to: • Affect contractual relationship between prime & gov't, or between prime & sub; • Establish a contractual relationship between the gov't & the subcontractor; or • Constitute a waiver of the gov't’s right to accept or reject the supplies/services. 46.406 -- Foreign gov'ts. Gov't contract QA performed for foreign gov'ts/international agencies shall be administered according to foreign policy/security objectives of the U.S. Such support shall be furnished only when req’dby legislation, executive orders, or agency policies.

16. 46.407 -- Nonconforming supplies/services. • CO should reject supplies/services not conforming to contract req's(46.102). When deviation from is found to be in gov't’s interest, supplies/services may be accepted only as authorized • The CO must give contractor an opportunity to correct/replace nonconforming supplies/services within req’ddelivery schedule, unless contract specifies otherwise (some C-R contracts), correction/replacement must be without additional cost to gov't. Subparagraph (e)(2) at 52.246-2, reserves gov't the right to charge contractor for cost of gov't reinspection & retests • XXX • In situations not covered byparagraph (b), CO mustreject supplies/services when nonconformance is critical, major or otherwise incomplete. Circumstances (reasons of economy /urgency), CO determinesacceptance in best interest of gov't. CO must make this determination, based upon: • Use, safety of item, performance of its intended purpose; • Info regarding nature/extent of nonconformance or incomplete supplies/services; • A request from contractor for acceptance of nonconforming/incomplete supplies/services (if feasible); • A recommendation for acceptance, conditional acceptance, or rejection, with supporting rationale; & • Contract adjustment considered appropriate (adjustment offered by the contractor). • Minor nonconformance, CAO may accept /reject, except where authority is withheld by contracting office of contracting activity. • CO must discourage repeated tender of (major/minor) nonconforming supplies/services, by appropriate action (rejection/documenting perf record). • When supplies/services are acceptedwith critical/major nonconformances, CO must modify contract to provide for equitable price reduction or other consideration. When supplies/services with minor nonconformances are accepted, no modification needed unless it appears that savings to contractor will exceed cost to gov't of processing modification. • Notices of rejection must include reasons for rejection & be furnished promptly to contractor. Notice must be in writing if: • Supplies/services have been rejected at place other than contractor’s plant, contractor persists in offering nonconforming supplies/services for acceptance, or delivery or perf was late without excusable cause.

17. 46.408 -- Single-Agency Assignments of Gov't Contract Quality Assurance. • Gov't-wide responsibility for quality assurance (QA) support for certain commodities are: • For drugs, biologics, & other medical supplies (FDA) • For food, except seafood (Department of Agric.) • For seafood (Nat’l Marine Fisheries Service of the Department of Commerce) • Agencies requiring QA support for acquiring such supplies should request support directly from cognizant office.

18. Subpart 46.5: Acceptance • 46.501 -- General. • Acceptance constitutes acknowledgment that supplies/services conform with applicable contract quality/quantity req's. Acceptance may happen before delivery, at time of delivery, or after delivery, depending on provisions of contract. Supplies/services shall not be accepted before completion of gov't contract QA actions (46.504). Acceptance shall be evidenced by execution of acceptance certificate on inspection/receiving report form/commercial shipping document/packing list. • 46.502 -- Responsibility for Acceptance. • Acceptance of supplies/services is responsibility of CO. When responsibility is assigned to CAO or other agency (42.202(g)), acceptance by that office/agency is binding on gov't.

19. 46.503 -- Place of Acceptance. • Each contract shall specify placeof acceptance. Contracts that provide for gov't contract QA at source (at destination) shall provide acceptance at source (at destination). (Transportation terms: Subpart 47.3.) Supplies accepted at place other than destination shall not be reinspected at destination (should be examined at destination for quantity, damage in transit, & possible substitution or fraud).

20. 46.504 -- Certificate of Conformance. • A certificate of conformance (see 46.315) may sometimes be used instead of source inspection (whether it calls for acceptance at source/destination) at discretion of CO if these conditions apply: • Acceptance on basis of contractor’s certificate of conformance is in gov't’s interest. • XXX • Small losses would be incurred in event of defect; or • Contractor’s reputation or past perf (likely that supplies/services will be acceptable & defective work be replaced, corrected, or repaired w/out contest. In no case shall gov't’s right to inspect supplies be prejudiced.

21. 46.505 -- Transfer of Title & Risk of Loss. • Title to supplies shall pass to gov't upon formal acceptance, regardless of when or where gov't takes possession, unless contract provides for earlier passage of title. • Risk of loss of/damage to supplies shall remain with contractor until, & shall pass to gov't upon: • Delivery of supplies to carrier if transportation is f.o.b. origin; or • Acceptance by gov't or delivery of supplies to gov't at destination specified in contract, whichever is later, if transportation is f.o.b. destination. • Paragraph (b) shall not apply to supplies that fail to conform to contract req's. Risk of loss of/damage to nonconforming supplies remains with contractor until cure/acceptance. After cure/acceptance, paragraph (b) shall apply. • Under paragraph (b), contractor shall not be liable for loss of/damage to supplies caused by negligence of officers/agents/employees of gov't acting within scope of their employment. • The policy expressed in (a) through (d) is specified in 52.246-16, Responsibility for Supplies, prescribed in 46.316.

22. Subpart 46.6 – Material Inspection & Receiving Reports • 46.601 – General. • Agencies shall prescribe procedures & instructions for the use/preparation/ distribution of material inspection/receiving reports/commercial shipping document/packing lists to evidence gov't inspection (46.401) & acceptance (46.501).

23. Subpart 46.7 - Warranties • 46.702 -- General. • Principal purposes of warranty in gov't contract: • To delineate rights/obligations of contractor & gov't for defective items/services; & • To foster quality perf. • A warranty should provide: • Contractual right for correction of defects; & • A stated period of time/use/occurrence of specified event, after acceptance by gov't to assert a contractual right for correction of defects. • Benefits to be derived from warranty must be commensurate with cost of warranty to gov't.

24. 46.703 -- Criteria for Use of Warranties. • Use of warranties is not mandatory. To determine, CO shall consider: • Nature & use of supplies/services • Complexity & function, degree of development, state of the art, end use, difficulty in detecting defects before acceptance, & potential harm to gov't if item is defective. • Cost. Warranty costs arise from: • Contractor’s charge for accepting deferred liability created by warranty; & • Gov't administration/enforcement of warranty (paragraph (c)). • Administration/enforcement. Gov't’s ability to enforce warranty. Adequacy of reporting may depend on: • Nature & complexity of item, location/proposed use of the item, storage time for item, distance of using activity from source of item, difficulty in establishing existence of defects, & difficulty in tracing responsibility for defects. • Trade practice. Many cases, an item is warranted in trade, &, cost of item to gov't will be the same w/ or w/out a warranty . In this case, it would be in gov't’s interest to include such warranty. • Reduced req's. Contractor’s charge for added liability may be partially/completely offset by reducing gov't’s contract QA req's where warranty provides adequate assurance of satisfactory product.

25. 46.704 -- Authority for Use of Warranties. • Should be approved in accordance with agency procedures. • 46.705 -- Limitations. • Except for the warranties at 52.246-3, Inspection of Supplies -- C-R, & 52.246-8, Inspection of Research & Development -- C-R, the CO shall not include warranties in C-R contracts, unless authorized in agency regulations (46.708). • Warranty clauses shall not limit gov't’s rights under an inspection clause (Subpart 46.3) in relation to hidden defects/fraud/gross mistakes. • Except for warranty clauses in construction contracts – should provide that warranty applies regardless of inspection/acceptance or other clauses/terms within.

26. 46.706 -- Warranty Terms & Conditions. • To facilitate pricing/enforcement of warranties, CO shall ensure warranties clearly state: • Exact nature of item & components/characteristics that contractor warrants. Extent of contractor’s warranty (contractor’s obligations to gov't for breach). Specific remedies available to gov't. Scope/duration of warranty. • CO shall consider the following guidelines when preparing warranty T&Cs: • Extent of contractor obligations. • Contractor’s obligations under warranties extend to all defects discovered during warranty period, but do not include damage caused by gov't. • If gov't specifies design of end item & its measurements, tolerances, materials, tests, or inspection req's, the contractor’s obligations for correction of defects shall usually be limited to defects in material/workmanship/failure to conform to specs. If gov't does not specify design, warranty extends to usefulness of design. • If express warranties are included in a contract (notcommercial items), all implied warranties of merchantability & fitness for purpose shall be negated by use of specific language in the clause (52.246-17& 52.246-19). • Remedies. • A warranty shall provide atminimum that gov't may: • Obtain equitable adjustment of contract or direct contractor to repair/replace defective items at contractor’s expense. • (If this is not practical because of nature of item, warranty should provide alternate remedies, such as authorizing gov't to: • Retain defective item & reduce contract price by amount equitable or arrange for repair/replacement of defective item, by gov't or other source, at contractor’s expense.

27. If it is not practical to return item to contractor for repair/remove it to an alternate source for repair/replace, warranty should provide that gov't may repair/require contractor to repair item in place at contractor’s expense. Contract shall provide wheregov't is to accomplish repair, contractor will furnish at place of delivery the material/parts/installation instructions required to successfully accomplish repair. • Unless provided in warranty, contractor’s obligation to repair/replace defective item, or agree to equitable adjustment of contract, shall include responsibility for costs of furnishing all labor/material to: • Reinspectitems that gov't reasonably expected to be defective, accomplish required repair/replacement of defective items, & test/inspect/package/pack/& mark repaired/replaced items. • If repair/replacement of defective items is req’d, contractor shall be req’dby warranty to bear expense of transportation of item from place of delivery (regardless of f.o.b. point or point of acceptance) to contractor’s plant & subsequent return. When defective items are returned to contractor from other than place of delivery specified in contract, or with alternate remedies, contractor’s liability for transportation charges shall not exceed amount equal to cost of transportation by usual commercial method. • Duration of the warranty. Time period/duration of warranty must be specified & established after consideration of: • Estimated useful life of item, nature of item (storage/shelf-life/trade practice), and period specified shall not extend contractor’s liability for patent defects beyond reasonable time after acceptance by gov't.

28. Notice. warranty shall specify reasonable time for furnishing notice to contractor regarding discovery of defects. This notice period shall be long enough for gov't to give notice to contractor. CO shall consider : • Time necessary for gov't to discover the defects, time reasonably req’dfor gov't to take administrative steps & make timely report of discovery of defects to contractor and time req’dto discover/report defective replacements. • Markings. Packaging/preservation req's of contract shall req contractor to stamp/mark supplies delivered or furnish notice with supplies of existence of warranty. Purpose of markings/notice: to inform gov't personnel who store/stock/use supplies that they are under warranty. Markings may be brief but should include: • Brief statement that warranty exists, substance of warranty, its duration, & who to notify if supplies are found defective (46.709). Warranty marking is acceptable if sufficient info is presented for supply personnel/users to identify warranted supplies. • Consistency. COs shall ensure that warranty clause & conditions in contract (in specs or inspection clause) are consistent. All warranties should be expressed in warranty clause.

29. 46.707 -- Pricing Aspects of Fixed-Price Incentive Contract Warranties. • If a F-P incentive contract contains warranty (46.708), estimated cost of warranty to contractor should be considered in establishing incentive target price/ceiling price of contract. All costs to be incurred by contractor in complying w/ warranty shall be considered when estab total final price and shall be at no additional cost to gov't. • 46.708 -- Warranties of Data. • Should be in accordance with agency regulations. • 46.709 -- Warranties of Commercial Items. • CO should take advantage of commercial warranties (extended warranties) where appropriate & in gov't’s best interests, offered by contractor for repair/replacement of commercial items.

30. 46.710 -- Contract Clauses. • Use when warranty is appropriate (46.709- for commercial items). CO may vary T&Cs of clauses/alternates to extent necessary to fit particular circumstances. • This section explains where to put clauses and what alternates to use in specific circumstances. Please read this section of the FAR for more details.

31. Subpart 46.8 – Contractor Liability for Loss of or Damage to Property of the Gov’t • 46.800 -- Scope of Subpart. • Prescribes policies/procedures for limiting contractor liabfor loss/damage to property of gov't that: • Occurs afteracceptance & results from defects/deficiencies in supplies delivered or services performed. • 46.801 -- Applicability. • Applies to contracts other than those for: • IT (telecommunications), construction, architect-engineer services, & maintenance/ rehabilitation of real property. (N/A to commercial items). • Subpart 46.7, Warranties, for policies/procedures concerning contractor liability caused by nonconforming technical data. • 46.802 -- Definition. • “High-value item,”a contract end item that • Has a high unit cost (exceeding $100,000/unit) - aircraft, aircraft engine, communication system, computer system, missile, or ship, & designated by CO as high-value item.

32. 46.803 -- Policy. • General.Gov't will act as self-insurer by relieving contractors of liability for loss/damage to property of gov't that: • Occurs after acceptance of supplies delivered/performed under a contract & results from defects/deficiencies in supplies/services. Gov't will not do so except for high-value items. • High-value items. In contracts req’ingdelivery of high-value items, gov't will relieve contractors of contractual liability for loss/damage to those items. Relief shall not limit gov't’s rights under contract to: • Have defective item or components corrected/repaired/replaced when defect/deficiency is discovered before loss/damage to high-value item occurs or obtain equitable relief when defect/deficiency is discovered after loss/damage occurs. • Exception.Gov't will not provide contractual relief under paragraphs (a) & (b) when contractor liability can be preserved without increasing contract price. • Limitations. Relief provided under paragraphs (a) & (b) does not apply: • To extent that contractor liability is expressly provided under contract clause authorized by this regulation; • When defect/deficiency in, or gov't’s acceptance of, supplies/services results from willful misconduct/lack of good faith on the part of contractor’s managerial personnel; or • To extent that contractor insurance/self-insurance reserve, covers liability for loss /damage suffered by gov't through purchase/use of supplies delivered/services performed under contract.

33. 46.805 -- Contract Clauses. • Contracts that exceed SAT. CO shall insert clause or combination of clauses specified in subparagraphs (a)(1) through (a)(5) when contract amount is in excess of SAT & contract is subject to req'sof this subpart (46.801): • Delivery of end items that are not high-value items • Delivery of high-value items • Delivery of both high-value items & other end items& identify in contract schedule the line items designated as high-value items. • Perfof services • Both perfof services & delivery of end items& identify clearly in the contract schedule any high-value line items. • Acquisitions at or below the simplified acquisition threshold. Clauses prescribed by paragraph (a) are not req’dfor contracts at or below SAT. CO may insert clauses in paragraph (a)(1) or (a)(4) in a contract at or below the SAT & may obtain any price reduction that is appropriate.