FAR 52.237-5—Payment by Contractor to Government.
Plain-English Summary
FAR 52.237-5, Payment by Contractor to Government, is a specialized clause used in demolition, dismantling, or removal contracts when the contractor will take title to the property being removed and the Government is owed a net payment for that property. The clause addresses who gets title to the property, when title transfers, the Government’s lack of responsibility for the property’s condition or loss after title passes, the contractor’s duty to remove acquired property from the site, limits on storage left on Government premises, and the possibility of the contracting officer allowing property to remain on site only if the contractor waives all rights in it. It also requires the contractor to pay a stated amount within a specified number of days after notice of award, unless the schedule provides otherwise, and directs that payment be made by check to the designated office and forwarded to the contracting officer. In practice, this clause is used where the Government is effectively selling salvage or demolition rights as part of the contract, so the contractor is both performing work and paying the Government for the value of the property received. The clause is important because it allocates title, risk, payment timing, and site-clearance obligations in a way that protects the Government from storage, abandonment, and property-loss disputes. It also gives the contracting officer limited flexibility to structure payment in increments when that is more advantageous to the Government.
Key Rules
Title passes to contractor
The contractor receives title to all property to be dismantled, demolished, or removed except property specifically retained by the Government in the schedule. Title vests immediately upon notice of award, or upon notice to proceed if a performance bond is required.
Government disclaims risk
Once title passes, the Government is not responsible for the condition of the property or for any loss or damage to it. The contractor assumes the risk associated with the acquired property.
Prompt site removal required
The contractor must promptly remove all property acquired under the contract from the site. The Government may not allow storage of acquired property on the site beyond the completion date unless the contracting officer grants written permission.
Leaving property on site waives rights
If the contractor asks to leave acquired property on the premises and the contracting officer approves, the contractor must waive any right, title, claim, or interest in that property as a condition of permission.
Payment due before work starts
The contractor must pay the specified amount within the stated number of days after receipt of notice of award, unless the schedule says otherwise, and must do so before proceeding with the work.
Payment method is prescribed
Checks must be made payable to the office named in the contract and forwarded to the contracting officer. The clause is designed to ensure the Government receives the agreed net compensation in the manner and timing required by the contract.
Incremental payment exception
The clause is not used when the contracting officer determines it is advantageous for the contractor to pay in increments and for the Government to transfer title only for increments of property after each payment is received. That alternative structure changes the timing of title transfer and payment.
Responsibilities
Contracting Officer
Insert the clause when applicable under the prescription, determine whether incremental payment/title transfer is more advantageous to the Government, specify any property retained by the Government in the schedule, set the payment amount and due period, designate the payee office, and decide whether to grant written permission for property to remain on site.
Contractor
Accept title to the property as provided, assume the risk of condition and loss after title passes, remove acquired property promptly from the site, pay the required amount within the stated time before starting work, and comply with any waiver requirement if allowed to leave property on the premises.
Government
Transfer title as stated in the clause, avoid responsibility for the property after title passes, and manage site access and storage restrictions so that acquired property is not left on the premises beyond the completion date unless approved in writing.
Schedule Drafter / Acquisition Team
Clearly identify any property the Government will retain, state the payment amount and timing, and ensure the solicitation and contract reflect whether the standard clause or the incremental-payment alternative applies.
Practical Implications
This clause is common in salvage-value demolition work, so the contractor is not just being paid to perform work; it is also paying the Government for the value of the property it receives. That means pricing, cash flow, and removal logistics all need to be planned together.
A frequent pitfall is misunderstanding when title transfers. If a performance bond is required, title does not vest until notice to proceed, which can affect insurance, security, and responsibility for the property before work starts.
Contractors should not assume they can store salvaged materials on Government property after completion. Unless the contracting officer gives written permission, the site must be cleared, and any permission to leave items behind can eliminate the contractor’s rights in those items.
Contracting officers should be careful to specify exactly what property the Government retains and to set a realistic payment deadline. Ambiguity in the schedule can create disputes over what was sold, when payment was due, and whether work could begin.
If incremental payment and incremental title transfer are used instead of the standard clause, the contract must be structured carefully so payment, title, and removal obligations line up with each increment. Otherwise, the Government may lose leverage or expose itself to avoidable risk.
Official Regulatory Text
As prescribed in 37.304 (b) , insert the following clause 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: Payment by Contractor to Government (Apr 1984) (a) The Contractor shall receive title to all property to be dismantled, demolished, or removed under this contract and not specifically designated in the Schedule 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, upon the Government’s issuing 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. (b) The Contractor shall promptly remove from the site all property acquired by the Contractor. The Government shall not permit storage of property on the site beyond the completion date. 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 of the granting of the permission, the Contractor agrees to waive any right, title, claim, or interest in and to the property. (c) The Contractor shall perform the work called for under this contract and within ________ days of receipt of notice of award, unless otherwise provided in the Schedule and before proceeding with the work, shall pay _________ [ fill in amount ] . Checks shall be made payable to the office designated in the contract and shall be forwarded to the Contracting Officer. (End of clause)