The Veterans Administration failed to inspect an electro-physiology system it purchased as a commercial item within the 30 day window provided in the contract and then used it continually for more than one year.  After a year the VA claimed the system did not meet its detailed specification requirements and hence terminated the contract for cause and sought repayment of the $301,000 it paid plus $137,000 for acquiring a replacement system.

The Appeals Board sided against the VA ruling (1) the agency was wring in saying its failure to inspect the system did not constitute acceptance (2) it is appropriate to turn to the Uniform Commercial Code since the government contract is a commercial item contract where the UCC states the customer (i.e. VA) should assert its post-acceptance rights “within a reasonable time” and (3) inclusion of a detailed technical performance specification in a commercial item contract is inappropriate because the clause for a commercial contract – FAR 52.212-4(a) – reflects the notion that the government has already determined a commercial product meets its needs and hence should rely on the contractor’s quality assurance program as is customary in the commercial marketplace.

As for the last point, though FAR Part 12 allows tailoring of commercial item provisions if the CO determines such tailoring is necessary to meet government needs, incorporation of performance specifications does not appear to be consistent with commercial practices and there is no evidence the VA obtained or even contemplated a waiver to impose such conditions (Fischer Imaging Corp., VABCA, No. 6125-6127).

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