FAR 37.304—Contract clauses.
Plain-English Summary
FAR 37.304 tells contracting officers which payment clause to use in solicitations and contracts for dismantling, demolition, or removal of improvements. It covers three related situations: when the Government pays the contractor and the contractor may also receive title to property; when the contractor pays the Government because the contractor will receive title to dismantled or demolished property and owes a net amount; and when the Government allows incremental payments with title transferred in stages. The section also addresses the special case where all material from the work is retained by the Government, requiring use of the basic payment clause with Alternate I. In practice, this provision is about matching the contract clause to the ownership and payment structure of the demolition or removal work so that title, compensation, and risk are handled correctly. It matters because the wrong clause can create disputes over ownership of salvaged materials, timing of payments, and when title passes. It also gives the contracting officer discretion to use incremental payment arrangements when that approach would benefit the Government, such as improving competition or increasing small business participation.
Key Rules
Use Government-to-contractor payment clause
Insert 52.237-4, Payment by Government to Contractor, in solicitations and contracts solely for dismantling, demolition, or removal of improvements when the Government will pay the contractor in addition to any title the contractor may receive. This is the default clause for situations where the contractor is compensated by the Government rather than owing money to it.
Use Alternate I when Government keeps materials
If the contracting officer determines that all material resulting from the dismantling or demolition work will be retained by the Government, the basic clause at 52.237-4 must be used with Alternate I. This makes the clause fit the Government’s retention of all recovered material.
Use contractor-to-Government payment clause
Insert 52.237-5, Payment by Contractor to Government, when the contractor will receive title to dismantled or demolished property and a net amount of compensation is due to the Government. This clause applies when the contractor’s receipt of property creates an obligation to pay the Government.
Use incremental payment clause when advantageous
Insert 52.237-6, Incremental Payment by Contractor to Government, when the contractor will receive title to dismantled or demolished property, a net amount is due to the Government, and the contracting officer determines that incremental payments and staged title transfer would benefit the Government. The clause is optional only when that specific advantage is found.
Incremental title transfer tied to payment
Under 52.237-6, the Government transfers title to increments of property only after receiving the corresponding payments. This protects the Government by ensuring title does not pass before payment is made for each increment.
Competition and small business considerations
The contracting officer may find incremental payment appropriate if it encourages greater competition or participation by small business concerns. This gives practical flexibility to structure the sale or demolition arrangement in a way that broadens the vendor pool.
Responsibilities
Contracting Officer
Determine which payment structure applies, select and insert the correct clause, decide whether Alternate I is required, and assess whether incremental payments would be advantageous to the Government. The contracting officer must also ensure title transfer terms match the payment arrangement.
Government
Receive payment when the contract structure requires the contractor to pay a net amount, or retain all material when the contract is structured that way. When using incremental payment arrangements, the Government must transfer title only after receiving each required payment.
Contractor
Pay the Government when the contract requires contractor-to-Government compensation, or receive payment from the Government when the contract uses the Government-to-contractor clause. If incremental payments are used, the contractor must make payments in the required increments to obtain title to corresponding property increments.
Practical Implications
The key day-to-day task is clause selection: demolition and salvage contracts can look similar, but the wrong clause can misstate who owns the material and who owes money.
If the Government intends to keep all recovered material, the contracting officer must remember to use Alternate I; forgetting it can create ambiguity over salvage rights.
Incremental payment arrangements can be useful for marketability and small business participation, but they also require tighter administration because title passes in stages.
Contractors should review whether the solicitation makes them pay the Government, receive payment from the Government, or both, because that affects pricing, cash flow, and salvage value assumptions.
These clauses are especially important in demolition/salvage work where ownership of materials, timing of title transfer, and payment obligations are closely linked and disputes can arise quickly if the contract language is not precise.
Official Regulatory Text
(a) The contracting officer shall insert the clause at 52.237-4 , Payment by Government to Contractor, in solicitations and contracts solely for dismantling, demolition, or removal of improvements whenever the contracting officer determines that the Government shall make payment to the contractor in addition to any title to property that the contractor may receive under the contract. If the contracting officer determines that all material resulting from the dismantling or demolition work is to be retained by the Government, use the basic clause with its AlternateI. (b) The contracting officer shall insert the clause at 52.237-5 , Payment by Contractor to Government in solicitations and contracts for dismantling, demolition, or removal of improvements whenever the contractor is to receive title to dismantled or demolished property and a net amount of compensation is due to the Government, except if the contracting officer determines that it would be advantageous to the Government for the contractor to pay in increments and the Government to transfer title to the contractor for increments of property only upon receipt of those payments. (c) The contracting officer shall insert the clause at 52.237-6 , Incremental Payment by Contractor to Government, in solicitations and contracts for dismantling, demolition, or removal of improvements if (l) the contractor is to receive title to dismantled or demolished property and a net amount of compensation is due the Government, and (2) the contracting officer determines that it would be advantageous to the Government for the contractor to pay in increments, and for the Government to transfer title to the contractor for increments of property only upon receipt of those payments. This determination may be appropriate, for example, if it encourages greater competition or participation of small business concerns.