FAR 52.237-6—Incremental Payment by Contractor to Government.
Plain-English Summary
FAR 52.237-6, Incremental Payment by Contractor to Government, addresses how payment and title transfer work in certain dismantling, demolition, or removal-of-improvements contracts where the contractor is effectively buying property from the Government. The clause is used when the contractor will receive title to dismantled or demolished property and a net amount is due to the Government, or when the contracting officer decides it is better for the Government to transfer title in increments as the contractor makes incremental payments. It covers the timing of the contractor’s initial payment, the schedule and method of later payments, the Government’s transfer of title in proportion to each payment, the transfer of any remaining title at final payment, the Government’s disclaimer of responsibility for the property’s condition or loss after title transfer, and the contractor’s duty to promptly remove acquired property from the site. It also addresses the limited circumstance in which the contracting officer may allow property to remain on site after completion, and the consequence of that permission: the contractor must waive any right, title, claim, or interest in the property left behind. In practice, this clause is important because it protects the Government’s financial interest, ties title transfer to actual payment, and reduces the risk that the contractor will take possession of property without paying for it. It also creates operational obligations for both parties regarding payment administration, title documentation, site clearance, and risk allocation.
Key Rules
Clause applies only in specific cases
This clause is prescribed for dismantling, demolition, or removal-of-improvements contracts when the contractor will receive title to the property and a net amount is due the Government, or when incremental payment and incremental title transfer are advantageous to the Government. It is not a general payment clause; it is tailored to transactions where the contractor is acquiring property from the Government as part of the work.
Initial payment before work begins
The contractor must make the required initial payment within the time stated in the contract, and before proceeding with the work, unless the schedule provides otherwise. The clause requires the contract to specify the amount due and the timing of payment, so the contractor cannot start performance without meeting the payment condition.
Later payments follow the schedule
After the initial payment, the contractor must continue making payments in the amount and frequency stated in the schedule. The contract should clearly identify where checks are payable and to whom they must be forwarded, so payment processing is controlled and traceable.
Title transfers only after payment
The Government transfers title to property incrementally as each payment is received, and only to the extent the contracting officer determines is fair and reasonable for that payment. On final payment, any title not already transferred vests in the contractor unless the schedule specifically reserves it to the Government.
Government disclaims property risk
Once title transfers under the clause, the Government is not responsible for the condition of the property or for any loss or damage to it. This shifts risk to the contractor once ownership passes, making inspection, removal planning, and insurance considerations especially important.
Prompt removal is required
The contractor must promptly remove all property acquired from the site, and the Government will not allow storage on the site beyond the completion date. This requirement is intended to keep the site clear and avoid the Government becoming a storage provider for contractor-owned property.
Leaving property on site is exceptional
If the contractor does not want to remove acquired property, the contracting officer may grant written permission to leave it on the premises. That permission comes with a waiver of any right, title, claim, or interest in the property left behind, so the contractor gives up ownership if it elects not to remove the property.
Responsibilities
Contracting Officer
Determine whether the clause is appropriate for the acquisition, set the initial payment amount, payment frequency, and payment destination in the contract schedule, decide what portion of property title is fair and reasonable to transfer with each payment, and issue written permission if property may remain on site after completion. The contracting officer must also ensure the contract clearly reserves any property the Government intends to retain.
Contractor
Make the required initial and subsequent payments on time, perform the dismantling, demolition, or removal work as required, accept title only as payments are made, promptly remove acquired property from the site, and comply with any waiver conditions if the contractor requests permission to leave property on the premises.
Government
Transfer title only upon receipt of the corresponding payment, retain any property specifically reserved in the schedule, and avoid responsibility for the condition, loss, or damage of property after title passes. The Government must also enforce the site-clearance requirement and completion-date storage restriction.
Practical Implications
This clause creates a payment-for-title structure, so contractors should treat payment deadlines as a condition of performance, not just an accounting detail. Missing the initial payment can delay or bar work from starting.
The contracting officer must draft the schedule carefully. Ambiguity about the amount due, payment intervals, title-retention items, or the office to which checks are sent can create disputes and slow title transfer.
Contractors should plan for removal logistics early because the clause requires prompt off-site removal and generally prohibits storage on the site after completion. If removal is impractical, the contractor should seek written permission before leaving property behind.
Once title transfers, the contractor bears the risk of loss or damage. That means contractors should consider security, insurance, and handling procedures as soon as ownership passes.
If the contractor asks to leave property on site, it should understand that the written permission operates as a waiver of ownership rights in that property. This is a common pitfall for contractors who assume they can return later to claim items they elected not to remove.
Official Regulatory Text
As prescribed in 37.304 (c) , insert the following clause in solicitations and contracts for dismantling, demolition, or removal of improvements (a) if the Contractor is to receive title to dismantled or demolished property and a net amount of compensation is due the Government; and (b) if 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 payment: Incremental Payment by Contractor to Government (Apr 1984) (a) 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] . Thereafter, the Contractor shall make payment to the Government in the amount and frequency specified in the Schedule. Checks shall be made payable to the office designated in the contract and shall be forwarded to the Contracting Officer. (b) Upon the Government’s receipt of each increment of payment, the Contractor shall receive title to such property as the Contracting Officer determines to be fair and reasonable for that increment of payment. Upon receipt of the Contractor’s final payment, all title that has not passed to the Contractor shall vest in the Contractor, unless specifically designated in the Schedule as being retained by the Government. The Government shall not be responsible for the condition of, or any loss or damage to, the property. (c) The Contractor shall promptly remove from the site all property acquired by the Contractor. The Government will 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 this permission, the Contractor agrees to waive any right, title, claim, or interest in and to the property. (End of clause)