Procurement and Contract Law
March 11, 2013
Warranties are not mandatory for the government and it is up to the Contracting Officer (CO) to decide if one is needed for the services or supplies they are procuring. Warranties fall under two categories; express and implied (Feldman, 2012). The Federal Acquisition Regulation (FAR) Subpart 46.7 Warranties covers the requirements and criteria of warranties that the CO must follow. According to FAR 46.703 the CO has to consider the nature and use of the supplies or services, cost, administration and enforcement, trade practice and reduced requirements when deciding to incorporate a warranty into a contract. Factors the CO must take in consideration for nature and use of the supplies and services are complexity and function, degree of development, state of the art, end use, and difficulty in detecting defects before acceptance and potential harm to the Government if the item is defective.
Warranty cost is arises from Government administration and enforcement of the warranty plus the contractor’s charge for accepting the deferred liability created by the warranty (Federal acquisition regulation, 2012). The administration and enforcement factors are nature and complexity of the item, location and proposed use, storage time, distance of the using activity from the source of the item, difficulty in establishing existence of defeats and difficulty in tracing responsibility for defects. If an item is defective that defect should be caught during inspection. If it isn’t or if a defect shows up later it could be considered a latent defect but the government would have to prove that the defect is latent. The government has to demonstrate that the defect existed at time of delivery, the examination or test would have revealed the defect and whether or not the government could reasonably be expected to use that type of inspection (Feldman, 2012). For fraud and gross mistakes the government is accepting the contractor’s service or supplies based on misreprentation or misstatement of information given to them by the contractor. In cases of fraud the government can prosecute the contractor under civil or criminal fraud statutes. The government has to prove intent on the contractor’s part. Unlike fraud the government doesn’t have to prove that contractor intended to deceive the government. Warranties are defined as a promise or affirmation given by the contractor to the government regarding the nature, usefulness, or condition of the supplies or service furnished under the contract (Feldman, 2012). The government mainly uses express warranties. If an express warranty is breach the CO can require the contractor to correct or replace the nonconforming supplies or retain the nonconforming supplies and reduce the contract price. The government can also have the supplies repaired or replaces at the contractors expense. Also unless the contract specifies otherwise the contractor is liable for defects latent or otherwise resulting from fraud and gross mistake even after the expiration date in the warranty clause (Feldman, 2012). Implied warranties are covered by the Uniform Commercial Code (UCC) not the federal procurement statutes and regulations. In case where there is an express warranty the implied warranty is negated. If there is no language in the contract that states “otherwise provided in the contract” the government can use an implied warranty (Feldman, 2012). Express warranties are better for the government because they cover more area when dealing with defects.
(2012). Federal acquisition regulation. (pp. 1140-1141). Chicago, IL: Wolters Kluwer Law & Business. Retrieved from https://www.acquisition.gov/far/current/html/Subpart 46_7.html
Feldman, S. (2012). Government contract guidebook. (4 ed., pp. 591-606). West.
References: (2012). Federal acquisition regulation. (pp. 1140-1141). Chicago, IL: Wolters Kluwer Law & Business. Retrieved from https://www.acquisition.gov/far/current/html/Subpart 46_7.html Feldman, S. (2012). Government contract guidebook. (4 ed., pp. 591-606). West.