Receiving and Acceptance Inspections
The Contractual Requirement for Completing Them
BY GARY D. SWANSON, CPPM, Enterprise Advisory Services, Inc.
Reprinted from the February 1997 issue with corrections, and with apologies
from the production staff for prior inaccuracies.
ave you ever wondered why receiving and acceptance inspections are completed for property
received for government contracts and/or which
contract provision requires them to be completed?
Since all effective Personal Property Management Systems (PPMS) include procedures for receipt and acceptance of government property, this function must also be
an important one.
Some of the answers to the above questions can be
found in the government property clause of the contract.
It says when a contractor is authorized to purchase property under the terms and conditions of a cost reimbursable contract, the title to it passes to and is vested in
the government upon the vendor's delivery of the property (if the contractor is entitled to be reimbursed as a direct
item of cost). It also says the title to all other property, the
cost of which is reimbursable to the contractor, shall pass
to and vest in the government upon 1) issuance of the
property for use in contract performance, 2) commencement of processing of the property for use in contract performance, or 3) reimbursement of the cost of the property
by the government, whichever occurs first.
Since funding levels for the purchase of property are
frequently sparse, it is important that anything procured
meets the requirements of the contract. Therefore, prior to
accepting an item of property into its system, the contractor should ensure it is not damaged and is what was
ordered. This is the practical reason why receiving and
acceptance inspections are completed.
Now that we know the practical reason for receiving
and acceptance inspections, let's explore the contract provision that requires them. The primary reference for
determining the requirement is FAR Part 46, "Quality
Assurance," that says the type and extent of contract quality requirements is dependent on each specific acquisition
and may range from inspection at the time of acceptance
to a requirement for the contractor to implement a comprehensive program for controlling quality.
FAR paragraph 46.202 goes into more detail and
explains that contract quality requirements fall into three
general categories, depending on the extent of quality
assurance needed by the government for the particular
acquisition involved.
H
FAR 46.202-1, "Government reliance on inspection by contractor," describes the lowest level of quality assurance. It says
the government will rely on the contractor to accomplish all
inspection and testing needed to ensure that supplies or services acquired under small purchases (supplies and/or ser-
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vices with an acquisition cost of $25,000 or less) conform to
contract quality requirements before they are delivered to the
government. Any acquisition for which this level of quality
assurance is required will have the contract clause FAR
52.246-1. “Contractor Inspection Requirements” inserted in it.
Inclusion of the clause is necessary to ensure an explicit
understanding of the contractor’s inspection responsibilities.
FAR 46-202-2 “Standard inspection requirements” describes
the next higher level of quality assurance. Acquisitions for
which this level of quality assurance is required will have contract clauses FAR 52.246-2 through -8 or -10 inserted in them.
The clauses, although all different in their specifics, generally
1) require the contractor to provide and maintain an inspection system that is acceptable to the government, 2) give the
government the right to make inspections and tests while
work is in process, and 3) require the contractor to keep complete, and make available to the government, records of its
inspection work.
FAR 46.202-3, "Higher-level contract quality requirements"
describes the highest level of quality assurance. Acquisitions
requiring this level of quality assurance will have the contract
clause FAR 52.311 "Higher-Level Contract Quality Requirement (Government Specification)" inserted in it. Such requirements are appropriate in solicitations and contracts for complex and critical items (defined later in the article) or when the
technical requirements for the contract require 1) control of
work operations, in-process controls, and inspection, or 2)
attention to such factors as organization, planning, work
instructions, documentation control, and advanced technology. If it is in the government's interest to require this type of
quality requirements to be maintained, the contract will
require the contractor to comply with a government-specified
inspection system, quality control system, or quality program
(e.g. MIL-I-45208, MIL-Q-9858, NHB 5300.4(1B), NHB
5300.4(1C), FED-STD 368, or ANSI/ASME NQA-1). The contracting officer is advised to consult technical personnel
before including one of these specifications in a contract.
The extent of quality requirements for a contract will
usually be based upon the classification of the contract
(supply or service) as determined by its technical description, its complexity, and the criticality of its application.
Contract technical descriptions include commercial
(described in commercial catalogs, etc.), Military-Federal
(described in government drawings), or Off-the-Shelf (an
item produced and placed in stock by a contractor, or
stocked by a distributor, before receiving orders or contracts for its sale). Complex items have quality requirements for which contractual conformance must be established progressively through precise measurements, tests,
and controls applied during purchasing, manufacturing,
performance, assembly, and functional operation either
individually or in conjunction with other items. A critical
© 1997 National Property Management Association
April 1997
application of an item is
TABLE 46-1 CONTRACT QUALITY REQUIREMENTS GUIDE
one in which the failure
of the item could injure Item
Type of Contract
personnel or jeopardize
a vital agency mission. Technical
Complexity
Application
Quality
Requirements
Table 46-1, "Contract Description
Quality Requirements
Noncomplex
Noncritical, Common Contractor Inspection (46.202-1)
Guide," shown at right, Commercial
Commercial
Noncomplex
Noncritical, Peculiar
Contractor Inspection (46.202-1)
is provided in the FAR
Commercial
Noncomplex
Critical
Standard Inspection (46.202-2)
as a guide for selecting
Commercial
Complex
Noncritical,
Common
Contractor Inspection (46.202-1)
the appropriate contract
Commercial
Complex
Noncritical,
Peculiar
Standard
Inspection (46.202-2)
quality requirements.
Commercial
Complex
Critical
Higher-level
(46.202-3)
Right about now,
Military-Federal
Noncomplex
Noncritical,
Common
Standard
Inspection
(46.202-2)
you are probably thinkMilitary-Federal
Noncomplex
Noncritical,
Peculiar
Standard
Inspection
(46.202-2)
ing, all of this informaNoncomplex
Critical
Higher-level (46.202-3)
tion is well and good; Military-Federal
Military-Federal
Complex
Noncritical,
Common
Standard Inspection (46.202-2)
however, since I'm not a
Military-Federal
Complex
Noncritical,
Peculiar
Higher-level
(46.202-3)
quality
assurance
Military-Federal
Complex
Critical
Higher-level
(46.202-3)
expert, what does it
Off
the
Shelf
All
Noncritical
Contractor
Inspection
(46.202-1)
mean to me? In the
Off
the
Shelf
All
Critical
Standard
Inspection
(46.202-2)
remaining part of the
article, I'll try to explain
what the above means
The highest level of quality assurance, "Higher-level
in layman's terms.
contract quality requirements," applies only to contracts
At the lowest level of quality assurance, “government
for complex and critical items or when the technical
reliance on inspection by contractor,” the government
requirements of the contract require it. The requirements
relies entirely upon the contractor to perform any inspecare contained in FAR 52.246-11, "Higher-Level Contract
tions or tests it determines necessary to ensure contract
Quality Requirement (Government Specification)." For
requirements are met. There is no requirement for the govcontracts requiring this level of quality assurance, most
ernment to review the contractor’s system to determine its
companies have a Quality Assurance Organization that
sufficiency and only one contract quality assurance clause
establishes and monitors a very detailed and costly prois applicable. At this level, the government basically leaves
gram. It is beyond the scope of this article to address the
it up to the contractor to do whatever it considers adespecifics of such a program. However, it is important to
quate to ensure contract requirements are met.
recognize that the costs involved in a quality assurance
The next level of quality assurance, "Standard inspecprogram for a contract of this type will be significantly
tion requirements" applies to a variety of contract types
higher than the costs for operating and maintaining a
such as fixed-price and cost reimbursement supply, serstandard inspection system.
vice and research and development contracts and faciliTherefore, it is important that a contractor's PPMS
ties contracts. Eight different contract quality clauses are
include provisions for tailoring its receiving and accepapplicable. However, they all have basically the same
tance procedures to meet the varied requirements
requirements. They: 1) require the contractor to establish
described above.
an inspection system that is acceptable to the government
In summary, we learned the practical reason for comand maintain it throughout the life on the contract; 2) give
pleting receipt and acceptance inspections is to ensure the
the government the right to make inspections and tests
property procured with contract funding (frequently limwhile work is in process; and 3) require the contractor to
ited) is not damaged and is what was ordered to complete
keep complete, and make available to the government,
the requirements of the contract. Additionally, we learned
records of its inspection work. This means your Governeach contract has a quality assurance clause requiring
ment Property Administrator (GPA) must find your
some type of receiving and acceptance inspection and
inspection system acceptable and has the right to make
that the requirements are simple or complex, depending
inspections and tests while work is in process on the conupon the nature of the contract. ◆
tract. It also means you must keep records of inspections
and make them available to your GPA. Guidance for what
Gary Swanson is a member of the NPMA Land of Enchantment Chapter and a
Senior Maintenance Engineer for Enterprise Advisory Services, Inc. He previmight be included in procedures for standard inspections
ously worked as a Senior Property Specialist, supporting the Property and
is available in Chapter 3 of the DOD Manual for the PerAdministrative Services Division, Albuquerque Operations Office, U.S. Departformance of Contract Property Administration, DOD
ment of Energy, in personal property management oversight of its direct activities and contractors.
4161.2-M.
April 1997
© 1997 National Property Management Association
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