Observed

SAW

Think of a simple past tense verb that also names a tool used for cutting wood.

Observed" is a clever play on words where the clue hints at both the literal meaning and a homophone. The word "saw" can mean to have seen something (as in "I saw it happen"), which fits "observed." It also works as a pun since "saw" sounds like the past tense of "see," reinforcing the idea of observation in a concise way.