Need for More Effective Management of Warranties

PSAD-80-11: Published: Nov 16, 1979. Publicly Released: Nov 16, 1979.

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In administering its construction grants program, the Environmental Protection Agency (EPA) does not evaluate the adequacy of the warranty provisions of contracts awarded by grantees for equipment and supplies used in constructing wastewater treatment systems, nor does it evaluate how well grantees exercise their warranty rights. GAO reviewed 13 grantee projects and identified a number of issues.

EPA has no regulations or guidelines for warranty administration by the grantees or its monitoring by EPA. Major warranty repairs are handled informally between the grantee, a consulting engineer, the general contractor, and his subcontractors/equipment manufacturers. Many grantees have not established procedures to bill contractors for the repair of equipment under warranty. Grantees believe that contractors and/or equipment manufacturers take longer than necessary to repair defective equipment. In cases where grantee personnel assisted the maunfacturers in making repairs, the grantees did not seek reimbursement of their costs from the contractor or maunfacturer. These situations resulted when the warranty provisions appeared to be too general. Warranty benefits are lost because the warranty periods on equipment or major facility segments either partially or completely expire before being placed in operation. Grantees lack adequate records detailing which equipment is currently under warranty or the problems and repair work performed between the time of equipment installation and the end of the warranty period. Often maintenance personnel are inadequately trained to enforce warranties effectively.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Administrator, EPA, should aid grantees and consulting engineers by developing guidance to: make contract warranties more effective by including specific language on such matters as (1) liability of the contractor for reasonable grantee costs incurred in the emergency situations or for minor repairs, (2) right of the grantee to correct or have corrected defects at the contractor's expense when the contractor does not perform promptly, (3) procedures to follow for reimbursement of offsetting such costs against amounts being withheld from contractors pending successful completion of contract work, and (4) starting warranty coverage, where appropriate, at the time facilities/equipments are put into operation, as long as done so within a reasonable period after acceptance; establish procedures and training for adequately documenting historical/contractor/ manufacturer actions concerning warranty claims. EPA should encourage grantees to train its employees in equipment inspection, analysis, and correction of equipment malfunctions to assure a more efficient operation and better warranty enforcement.

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