Does the government simply absorb the First Article Test cost (as it is a qualification requirement) or is the cost of the First Article Test passed on to the customer?
The following answer is based on the assumption that this question concerns a DLA acquisition.
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In general terms, the cost of First Article Testing (FAT) is always borne by the customer. They would pay for it separately if there was a FAT CLIN in the solicitation and the proposal. There the offeror would have provided the cost for the FAT CLIN. However, if there wasn’t a separate FAT CLIN in the solicitation or proposal, then the cost of FAT would have been included in the cost of the production CLIN it was associated with.
This is all predicated on the fact that note H03 was included in the solicitation and award as directed by the Defense Logistics Acquisition Directive (DLAD).
A discrete answer to this type of question would be predicated on several elements of this acquisition action. None of which are presented in this question. However, assuming again that this is a DLA acquisition, you would find the answer to this question and others such as waivers, exceptions, and additional nuances when the contractor or the government were to perform the FAT, in the DLAD subpart 9.3.