FAR 3.404—Contract clause.
Plain-English Summary
FAR 3.404 is a narrow but important implementation rule for the government’s policy against contingent fees in federal contracting. It tells contracting officers when they must include the clause at 52.203-5, Covenant Against Contingent Fees, and it ties that requirement to two key thresholds or exceptions: the solicitation or contract must exceed the simplified acquisition threshold, and it must not be for commercial products or commercial services under parts 2 and 12. In practice, this section is about ensuring the government’s anti-kickback/anti-influence protections are built into larger noncommercial procurements where contingent fee arrangements could create improper incentives. It does not itself define contingent fees or explain the substantive prohibition; instead, it directs the mandatory use of the contract clause that does that work. For contracting officers, the section is a checklist item for solicitation and contract preparation. For contractors, it signals that the covenant clause will be present in covered procurements and that contingent fee arrangements must be reviewed for compliance.
Key Rules
Insert the covenant clause
The contracting officer must include FAR 52.203-5, Covenant Against Contingent Fees, in covered solicitations and contracts. This is a mandatory clause requirement, not a discretionary one.
Applies above SAT
The clause is required only when the solicitation or contract exceeds the simplified acquisition threshold. Procurements at or below that threshold are outside this specific clause mandate.
Commercial items excluded
The clause does not apply to acquisitions for commercial products or commercial services. The section expressly points readers to parts 2 and 12 for the commercial-item framework.
Covers solicitations and contracts
The rule applies at both the solicitation stage and the contract stage. Contracting officers should ensure the clause is included in the solicitation and carried into the resulting contract when the acquisition is covered.
Responsibilities
Contracting Officer
Determine whether the acquisition exceeds the simplified acquisition threshold and whether it is for commercial products or commercial services; if the acquisition is covered, insert clause 52.203-5 in the solicitation and contract.
Contractor
Review the covenant against contingent fees clause when present and ensure any compensation or fee arrangements comply with the clause and related procurement rules.
Agency
Support contracting personnel with acquisition planning and clause selection procedures so the required covenant clause is used consistently in covered noncommercial procurements.
Practical Implications
This is a clause-insertion rule, so the main day-to-day task is clause selection during solicitation and award preparation.
A common pitfall is forgetting that the rule turns on both the simplified acquisition threshold and the commercial-item exception; either one can change whether the clause is required.
Contracting officers should not assume the clause applies to all procurements—commercial products and commercial services are excluded here.
Contractors should treat the clause as a signal to scrutinize any broker, finder, or other contingent compensation arrangement for compliance risk.
Because the rule is brief and cross-references other parts of the FAR, users should pair it with the text of 52.203-5 and the commercial-item definitions in parts 2 and 12 for full compliance context.
Official Regulatory Text
The contracting officer shall insert the clause at 52.203-5 , Covenant Against Contingent Fees, in all solicitations and contracts exceeding the simplified acquisition threshold, other than those for commercial products or commercial services (see parts 2 and 12 ).