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    How does the contracting officer disposes of the non-conforming supplies?


    FAR Part 46 Inspection and Acceptance (and the clause in your contract) allows the Government to reject supplies or services not conforming in all respects to contract requirements, but contractors should be allowed an opportunity to correct or replace nonconforming supplies. 

    Implied in the question is that there is a contract that specifies conforming supplies and the contractor delivered non conforming supplies.  I presume the contractor was contacted and requested to replace items and the contractor refuses to act. 

    I recommend the following.  Contact the contractor one more time (via certified email or regular mail); Give final notice that, in accordance with the terms of the contract, if contractor does not submit conforming supplies or correct deficiencies that the items will be returned to the supplier at his expense.  Get a reasonable shipper to provide an estimate of reasonable expense to return items and provide that information to the supplier.  Include the personnel cost of doing this work.  Also consider terminating the contract for cause or default.  Be sure to follow the steps insofar as cure notice (which has lapsed) or show cause requirements.  Stress that the post performance evaluation will be unfavorable, a consequence that could have been remedied by prompt and responsible action.  A bad evaluation will sour any further business with the government, something to avoid.  Coordinate this with your attorney because the actions you take may result in legal action.

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