A Factory Acceptance Test (FAT) clause establishes the process by which a customer verifies that equipment, software, or a system meets specifications before it leaves the vendor's facility or is formally accepted. The FAT typically occurs before the system is shipped to the customer's site and includes defined test procedures, acceptance criteria, documentation requirements, and what happens if the system fails (rework, replacement, or rejection rights). The clause specifies who participates (vendor engineers, customer representatives, sometimes independent inspectors), how long testing takes (often 5-10 business days), what constitutes a "pass," and whether the customer's acceptance of FAT results is binding or provisional. FAT is particularly common in hardware, manufacturing equipment, and complex software implementations where the cost and disruption of discovering defects after delivery is very high.
The practical importance of FAT is that it shifts quality verification to the vendor's location where problems can be fixed quickly and cheaply, rather than discovering issues after the system arrives at the customer's site where rework is expensive and disruptive. FAT creates a clear handoff point: once the customer signs off on FAT results, the vendor's warranty obligations typically begin, and the customer accepts responsibility for the system. However, FAT can be contentious because vendors want to minimize testing scope and duration (to reduce costs and delays), while customers want thorough testing to avoid post-delivery surprises.
If you're the customer, participate actively in FAT planning and execution—don't rely solely on the vendor's testing. Specify in the clause that FAT includes both functional tests (does it work?) and performance tests (does it work well enough?), and that you have the right to observe and request additional tests if initial results raise concerns. Require that any defects found during FAT be documented, that the vendor must fix them and re-test before you sign acceptance, and that your FAT sign-off is conditional on the system performing identically at your site (i.e., you retain rejection rights if performance degrades after delivery). If you're the vendor, propose a clear, time-bound FAT schedule (e.g., 5 business days) and specify that only defects meeting a defined severity threshold (e.g., preventing core functionality) require rework before acceptance. Include language that FAT sign-off is final and binding, and that post-delivery performance issues are the customer's responsibility unless they're identical to issues that existed during FAT.
Frequently Asked Questions
What does this clause mean in simple terms?
A Factory Acceptance Test (FAT) clause establishes the process by which a customer verifies that equipment, software, or a system meets specifications before it leaves the vendor's facility or is formally accepted.
Why should I care about this clause?
The FAT typically occurs before the system is shipped to the customer's site and includes defined test procedures, acceptance criteria, documentation requirements, and what happens if the system fails (rework, replacement, or rejection rights).
What are my options?
The clause specifies who participates (vendor engineers, customer representatives, sometimes independent inspectors), how long testing takes (often 5-10 business days), what constitutes a "pass," and whether the customer's acceptance of FAT results is binding or provisional.
How does this affect small businesses?
FAT is particularly common in hardware, manufacturing equipment, and complex software implementations where the cost and disruption of discovering defects after delivery is very high.