FAR 52.237-4—Payment by Government to Contractor.
Plain-English Summary
FAR 52.237-4, Payment by Government to Contractor, is a special-purpose clause used only in solicitations and contracts for dismantling, demolition, or removal of improvements when the contracting officer decides the Government will pay the contractor in addition to any title to property the contractor may receive. The clause addresses the contract price, progress payments, retention of a percentage of progress payments, release of retained amounts when work is substantially complete, transfer of title to demolished or dismantled property, the Government’s lack of responsibility for the property’s condition or loss, permission to leave acquired property on site, final payment, and the contractor’s release of claims. It also includes Alternate I, which is used when the Government will retain all material resulting from the work, in which case the title-transfer paragraph is deleted. In practice, this clause is important because it combines payment mechanics with property-disposition rules, so both the pricing structure and the handling of salvaged materials must be clear before award. It protects the Government by allowing retention, final withholding, and claim release, while also defining when the contractor acquires title to removed property and when payment becomes due.
Key Rules
Use only for demolition work
This clause applies only to solicitations and contracts for dismantling, demolition, or removal of improvements, and only when the contracting officer determines the Government will make a payment to the contractor in addition to any title to property the contractor may receive. It is not a general payment clause for ordinary construction or service contracts.
Price and consideration must be stated
The clause requires insertion of either "full" or "partial" consideration and a specific dollar amount. This makes clear whether the Government payment is the entire consideration or only part of the contractor’s compensation, with the remainder coming from title to salvage or other property rights.
Progress payments and retention apply
The Government must make progress payments monthly, or more often if the contracting officer decides, based on approved estimates. The contracting officer normally retains 10 percent until final completion and acceptance, but may waive retention for satisfactory progress or for completed units or divisions priced separately.
Substantial completion changes retention
When the work is substantially completed, the contracting officer must retain only an amount considered adequate to protect the Government and may release all or part of any excess. This gives the Government flexibility to reduce withholding once the remaining risk is limited.
Title to property transfers by default
Unless the Government specifically retains the material, title to all property to be dismantled or demolished vests in the contractor upon notice of award, or upon notice to proceed if a performance bond is required after award. The Government is not responsible for the property’s condition or for any loss or damage after title vests.
Leaving property on site requires waiver
If the contractor does not want to remove acquired property from the site, the contracting officer may allow it to remain only upon written request. As a condition of that permission, the contractor must waive any right, title, claim, or interest in the property left behind.
Final payment and release of claims
After all work is completed and accepted, and the contractor submits a properly executed voucher, the Government must make final payment. If requested, the contractor must also release all claims against the Government arising under the contract, except claims specifically reserved in stated amounts.
Alternate I shifts all material to Government
Under Alternate I, if the contracting officer determines the Government will retain all material from the demolition or dismantling work, paragraph (d) is deleted and the remaining paragraphs are renumbered. This means the contractor does not receive title to the removed material.
Responsibilities
Contracting Officer
Determine whether this clause applies, decide whether payment is full or partial consideration, insert the contract price, approve progress-payment estimates, decide whether to retain 10 percent or release some or all of it for satisfactory progress, determine the retention amount at substantial completion, decide whether to allow property to remain on site, and ensure the correct version or Alternate I is used based on who retains the material.
Contractor
Perform the demolition, dismantling, or removal work; submit proper estimates and vouchers; accept progress-payment retention as applicable; remove property acquired under the contract unless permission is granted to leave it on site; and, if requested, execute a release of claims except for specifically reserved claims.
Government
Make progress payments as work proceeds based on approved estimates, make final payment after completion and acceptance and receipt of a proper voucher, and honor the title and property-disposition terms established by the clause and any applicable alternate.
Agency/Program Office
Support the contracting officer by defining the scope of demolition or removal work, identifying any materials the Government will retain, and ensuring the solicitation and contract reflect the intended treatment of salvage, title, and payment.
Practical Implications
This clause is not just about payment timing; it also controls who owns the demolished material, so contractors should verify salvage rights before bidding and performance starts.
The 10 percent retention can materially affect cash flow, but the contracting officer has discretion to reduce or eliminate retention for satisfactory progress or completed units, so contractors should document progress carefully.
If the Government wants to keep all recovered material, Alternate I must be used; otherwise, title may pass to the contractor, creating very different pricing and disposal assumptions.
Contractors who leave acquired property on site without written permission risk losing any claim to it, so any decision to abandon salvage should be documented and approved.
Final payment can be tied to a release of claims, so contractors should identify and reserve any outstanding claims before signing a release to avoid unintentionally waiving them.
Official Regulatory Text
As prescribed in 37.304 (a) , insert the following clause 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: Payment by Government to Contractor (Apr 1984) (a) In ______ [ insert "full" if Alternate I is used; otherwise insert "partial" ] consideration of the performance of the work called for in the Schedule, the Government will pay to the Contractor ______________ [ fill in amount ] . (b) The Government shall make progress payments monthly as the work proceeds, or at more frequent intervals as determined by the Contracting Officer, on estimates approved by the Contracting Officer. Except as provided in paragraph (c) of this clause, in making progress payments the Contracting Officer shall retain 10 percent of the estimated payment until final completion and acceptance of the contract work. However, if the Contracting Officer finds that satisfactory progress was achieved during any period for which a progress payment is to be made, the Contracting Officer may authorize such payment in full, without retaining a percentage. Also, on completion and acceptance of each unit or division for which the price is stated separately, the Contracting Officer may authorize full payment for that unit or division without retaining a percentage. (c) When the work is substantially completed, the Contracting Officer shall retain an amount considered adequate for the protection of the Government and, at the Contracting Officer’s discretion, may release all or a portion of any excess amount. (d) In further consideration of performance, the Contractor shall receive title to all property to be dismantled or demolished that is not specifically designated as being retained by the Government. The title shall vest in the Contractor immediately upon the Government’s issuing the notice of award, or if a performance bond is to be furnished after award, upon the Government’s issuance of a notice to proceed with the work. The Government shall not be responsible for the condition of, or any loss or damage to, the property. If the Contractor does not wish to remove from the site any of the property acquired, the Contracting Officer may, upon written request, grant the Contractor permission to leave the property on the premises. As a condition to the granting of this permission, the Contractor agrees to waive any right, title, claim, or interest in and to the property. (e) Upon completion and acceptance of all work and receipt of a properly executed voucher, the Government shall make final payment of the amount due the Contractor under this contract. If requested, the Contractor shall release all claims against the Government arising under this contract, other than any claims the Contractor specifically excepts, in stated amounts, from operation of this release. (End of clause) Alternate I (Apr 1984) . If the contracting officer determines that the Government shall retain all material resulting from the dismantling or demolition work, delete paragraph (d) from the basic clause and renumber the remaining paragraphs.