FAR 27.202-5—Solicitation provisions and contract clause.
Plain-English Summary
FAR 27.202-5 tells contracting officers when to include patent and royalty-related solicitation provisions and contract clauses, and which version to use. It covers three main subjects: the Royalty Information provision at 52.227-6, including its Alternate I for common carrier communication services; the Patents-Notice of Government Licensee provision at 52.227-7 when the Government must pay a patent royalty; and the Refund of Royalties clause at 52.227-9 for negotiated fixed-price contracts, with limited use in cost-reimbursement contracts. The section also explains when royalty information may be requested in sealed bid procurements, and when higher-level approval is needed before doing so. In practice, this section is about protecting the Government from unnecessary or excessive royalty costs, ensuring offerors disclose royalty information when needed, and making sure other offerors receive fair notice when a patent license obligation may affect pricing. It matters because failure to include the right provision or clause can lead to incomplete pricing data, avoidable disputes over royalty payments, or missed opportunities to recover improper royalties.
Key Rules
Use Royalty Information provision
Insert a provision substantially the same as 52.227-6 when the solicitation may lead to a negotiated contract and royalty information is desired, and certified cost or pricing data are obtained under FAR 15.403. For sealed bids, use it only if a higher-level official approves the need as necessary to protect the Government’s interests.
Use Alternate I for common carriers
If the procurement is for communication services and facilities by a common carrier, the Royalty Information provision must be used with Alternate I. This ensures the provision fits the special circumstances of common carrier communications acquisitions.
Use Government licensee notice
If the Government is obligated to pay a royalty on a patent involved in the prospective contract, include a provision substantially the same as 52.227-7, Patents-Notice of Government Licensee. This alerts offerors that the Government’s patent-license status may affect the procurement.
Require royalty disclosure if needed
If 52.227-6 is not included, the contracting officer may still require offerors to provide enough information to give notice to the other offerors. This is a fallback tool to preserve transparency when royalty-related information is important to the competition.
Include Refund of Royalties clause
Insert 52.227-9 in negotiated fixed-price solicitations and contracts when royalties may be paid under the contract. The clause is intended to address situations where royalty payments may need to be refunded to the Government.
Adjust clause for incentive contracts
If a fixed-price incentive contract is contemplated, modify 52.227-9 by changing 'price' to 'target cost and target profit' wherever it appears. This aligns the clause language with the structure of incentive contracting.
Limited use in cost-reimbursement contracts
The Refund of Royalties clause may also be used in cost-reimbursement contracts, but only when agency approval of royalties is necessary to protect the Government’s interests. This is not the default rule and requires agency-level justification.
Responsibilities
Contracting Officer
Determine whether royalty information is desired, whether the procurement is negotiated or sealed bid, and whether higher-level approval is required before including 52.227-6. Insert the correct provision or clause, use Alternate I for common carrier communications, require disclosure when 52.227-6 is omitted but notice is still needed, and tailor 52.227-9 for fixed-price incentive contracts.
Agency / Higher-Level Approving Official
Approve use of the Royalty Information provision in sealed bid solicitations only when the need is necessary to protect the Government’s interests. Approve royalty-related use of the Refund of Royalties clause in cost-reimbursement contracts when agency approval is needed to protect the Government’s interests.
Offerors / Contractors
Provide royalty information when the solicitation requires it, especially when certified cost or pricing data are obtained and the Royalty Information provision is included. Ensure royalty-related pricing and licensing information is accurate and responsive to solicitation requirements.
Government Licensee / Patent Rights Stakeholders
Recognize that when the Government is obligated to pay a patent royalty, the solicitation must notify offerors through a provision like 52.227-7 so the procurement reflects the Government’s license obligations.
Practical Implications
This section is a checklist item for solicitation preparation: if the wrong patent or royalty provision is omitted, the Government may lose leverage to evaluate royalty costs or protect itself from paying unnecessary amounts.
The biggest pitfall is assuming royalty provisions are only needed in negotiated procurements; sealed bid solicitations can also require them, but only with higher-level approval.
If the contract type is fixed-price incentive, the clause text must be conformed carefully; leaving 'price' unchanged can create ambiguity about how the refund obligation applies.
When 52.227-6 is not used, the contracting officer may still need enough royalty information to notify other offerors, so omission of the provision does not eliminate the underlying transparency concern.
For cost-reimbursement contracts, use of the Refund of Royalties clause is limited and should be tied to agency approval, so contracting officers should not treat it as routine.
Official Regulatory Text
(a) (1) Insert a solicitation provision substantially the same as the provision at 52.227-6 , Royalty Information, in- (i) Any solicitation that may result in a negotiated contract for which royalty information is desired and for which certified cost or pricing data are obtained under 15.403 ; or (ii) Sealed bid solicitations only if the need for such information is approved at a level above the contracting officer as being necessary for proper protection of the Government’s interests. (2) If the solicitation is for communication services and facilities by a common carrier, use the provision with its Alternate I. (b) If the Government is obligated to pay a royalty on a patent involved in the prospective contract, insert in the solicitation a provision substantially the same as the provision at 52.227-7 , Patents-Notice of Government Licensee. If the clause at 52.227-6 is not included in the solicitation, the contracting officer may require offerors to provide information sufficient to provide this notice to the other offerors. (c) Insert the clause at 52.227-9 , Refund of Royalties, in negotiated fixed-price solicitations and contracts when royalties may be paid under the contract. If a fixed-price incentive contract is contemplated, change "price" to "target cost and target profit" wherever it appears in the clause. The clause may be used in cost-reimbursement contracts where agency approval of royalties is necessary to protect the Government’s interests.