FAR 52.241-9—Connection Charge.
Plain-English Summary
FAR 52.241-9, Connection Charge, is a utility-contract clause that governs how the Government pays for new connection facilities furnished and installed by a contractor, and how the contractor recovers that cost over time through bill credits or, in some cases, through a nonrefundable charge. It addresses the initial connection charge amount, the use of progress payments, advance payments, or a lump-sum payment as permitted by law, and the requirement that the contractor execute a release before final payment. It also covers ownership, operation, maintenance, repair, taxes, and liability for the new facilities, making clear that the facilities remain the contractor’s property even though the Government helped pay for them. The clause then sets out the crediting mechanism against monthly bills, accelerated credits if the facilities are used to serve other customers, repayment of any uncredited balance if the contractor terminates or defaults, and the Government’s rights if it terminates before completion or after completion of the facilities. The alternate version is used when the charge is nonrefundable and no credits are due, in which case the credit and related repayment provisions are deleted and the post-completion termination rules are simplified. In practice, this clause is important because it allocates financing, ownership, and termination risk for utility connection infrastructure and prevents disputes over who owns the facilities, how the Government recovers its contribution, and what happens if the contract ends early or the facilities are used for others.
Key Rules
Connection charge payment
The Government pays a connection charge in exchange for the contractor furnishing and installing the new connection facilities at its expense. Payment may be made by progress payments, advance payments, or a lump sum, but only as agreed by the parties and permitted by applicable law.
Payment limited by cost and salvage
The total amount payable is capped at the lesser of the estimated cost less agreed salvage value, or the actual cost less salvage value. This prevents the Government from paying more than the agreed economic value of the facilities.
Release before final payment
Before final payment, the contractor must execute a release of claims against the Government arising from the installation. This is a condition precedent to closing out the connection-charge obligation.
Contractor retains ownership and responsibility
Even though the Government pays a connection charge, the new facilities remain the contractor’s property. The contractor must operate, maintain, and repair them at its own expense and bears taxes, charges, and liability associated with construction, operation, maintenance, and repair.
Monthly bill credits
The contractor must credit the Government a stated percentage of each monthly bill for service at the location until the credits equal the connection charge. The clause also allows the contractor to give up to a 100 percent credit at any time if it chooses.
Acceleration when facilities serve others
If the contractor uses the facilities to serve any customer other than the Government before contract termination, it must promptly notify the Government in writing. Unless the parties agree otherwise, credits must be accelerated up to 100 percent of each monthly bill until the Government has been refunded the portion of connection costs attributable to the shared use.
Repayment on contractor termination or default
If the contractor terminates the contract or defaults before the Government has received full credit for the connection charge, the contractor must pay the Government the uncredited balance as of the termination or default date.
Government termination before completion
If the Government terminates before the facilities are completed, the contractor is paid for work accomplished, including direct and indirect costs reasonably allocable to the completed work, plus removal costs, less salvage value.
Government termination after completion
If the Government terminates after completion but before full crediting, the contractor may either retain the facilities in place for a stated period subject to continued payment or credit obligations, or remove them at its own expense within a stated period. If the contractor removes them, the Government may buy them at the agreed salvage value and may require facilities on Government property to remain in place if purchased.
Alternate I nonrefundable charge
When the contracting officer determines the charge is nonrefundable and no credits are due, paragraphs on credits and related repayment are deleted. The alternate keeps a simplified post-completion termination structure focused on retention in place or removal of the facilities.
Responsibilities
Contracting Officer
Determine whether the connection charge structure is refundable or nonrefundable, fill in the blanks for estimated cost, salvage value, credit percentage, and time periods, and ensure the payment method is lawful and consistent with the contract. The contracting officer must also enforce the release requirement, administer termination rights, and decide whether Alternate I applies.
Contractor
Furnish and install the connection facilities at its expense, retain ownership, and bear all operating, maintenance, repair, tax, and liability obligations. The contractor must provide bill credits, notify the Government if the facilities are used for other customers, accelerate credits when required, repay any uncredited balance upon contractor termination or default, and comply with removal or retention obligations after Government termination.
Government
Pay the agreed connection charge in the authorized form, receive and track monthly credits, and exercise termination rights only as provided in the clause. If it terminates after completion, the Government must choose whether to allow retention in place or require removal, and it may elect to purchase removable facilities at salvage value where the clause allows.
Legal/Policy Officials
Confirm that the payment structure, advance payment or progress payment method, and any nonrefundable treatment are permitted by applicable law and consistent with agency policy. They should also ensure the clause is used only in appropriate utility or connection-facility situations.
Practical Implications
This clause is mainly about financing and recovering the cost of utility connection facilities, so the blanks matter: if estimated cost, salvage value, credit percentage, or time periods are left unresolved, the clause can become hard to administer and dispute-prone.
Contractors should track credits carefully and document any use of the facilities for third-party customers, because that can trigger accelerated credits or repayment obligations.
The ownership language is easy to overlook: Government payment does not transfer title, so the contractor still carries maintenance, tax, and liability risk unless another agreement changes that result.
Termination timing changes the economics significantly. Before completion, the contractor is paid for work performed; after completion, the contractor may have to keep the facilities in place, remove them, or repay uncredited balances depending on who terminates and whether credits remain outstanding.
When Alternate I is used, the absence of credits means the parties should be especially clear about whether the charge is truly nonrefundable and what happens to the facilities at termination, because the usual refund mechanism is removed.
Official Regulatory Text
As prescribed in 41.501 (d)(3) , insert a clause substantially the same as the following: Connection Charge (Feb 1995) (a) Charge . In consideration of the Contractor furnishing and installing at its expense the new connection facilities described herein, the Government shall pay the Contractor a connection charge. The payment shall be in the form of progress payments, advance payments or as a lump sum, as agreed to by the parties and as permitted by applicable law. The total amount payable shall be either the estimated cost of $ ______ less the agreed to salvage value of $ ______ , or the actual cost less the salvage value, whichever is less. As a condition precedent to final payment, the Contractor shall execute a release of any claims against the Government arising under or by the virtue of such installation. (b) Ownership, operation, maintenance and repair of new facilities to be provided . The facilities to be supplied by the Contractor under this clause, notwithstanding the payment by the Government of a connection charge, shall be and remain the property of the Contractor and shall, at all times during the life of this contract or any renewals thereof, be operated, maintained, and repaired by the Contractor at its expense. All taxes and other charges in connection therewith, together with all liability arising out of the construction, operations, maintenance, or repair of such facilities, shall be the obligation of the Contractor. (c) Credits. (1) The Contractor agrees to allow the Government, on each monthly bill for service furnished under this contract to the service location, a credit of ______ percent of the amount of each such bill as rendered until the accumulation of credits shall equal the amount of such connection charge, provided that the Contractor may at any time allow a credit up to 100 percent of the amount of each such bill. (2) In the event the Contractor, before any termination of this contract but after completion of the facilities provided for in this clause, serves any customer other than the Government (regardless of whether the Government is being served simultaneously, intermittently, or not at all) by means of these facilities, the Contractor shall promptly notify the Government in writing. Unless otherwise agreed by the parties in writing at that time, the Contractor shall promptly accelerate the credits provided for under paragraph (c)(1) of this clause, up to 100 percent of each monthly bill until there is refunded the amount that reflects the Government’s connection costs for that portion of the facilities used in serving others. (3) In the event the Contractor terminates this contract, or defaults in performance, prior to full credit of any connection charge paid by the Government, the Contractor shall pay to the Government an amount equal to the uncredited balance of the connection charge as of the date of the termination or default. (d) Termination before completion of facilities. The Government reserves the right to terminate this contract at any time before completion of the facilities with respect to which the Government is to pay a connection charge. In the event the Government exercises this right, the Contractor shall be paid the cost of any work accomplished, including direct and indirect costs reasonably allocable to the completed work prior to the time of termination by the Government, plus the cost of removal, less the salvage value. (e) Termination after completion of facilities. In the event the Government terminates this contract after completion of the facilities with respect to which the Government has paid a connection charge, but before the crediting in full by the Contractor of any connection charge in accordance with the terms of this contract, the Contractor shall have the following options: (1) To retain in place for _________ months after the notice of termination by the Government such facilities on condition that- (i) If, during such _______ month period, the Contractor serves any other customer by means of such facilities, the Contractor, shall, in lieu of allowing credits, pay the Government during such period installments in like amount, manner, and extent as the credit provided for under paragraph (c) of this clause before such termination; and (ii) Immediately after such ________ month period the Contractor shall promptly pay in full to the Government the uncredited balance of the connection charge. (2) To remove such facilities at the Contractor’s own expense within _______ months after the effective date of the termination by the Government. If the Contractor elects to remove such facilities, the Government shall then have the option of purchasing such facilities at the agreed salvage value set forth herein; and provided further, that the Contractor shall, at the direction of the Government, leave in place such facilities located on Government property which the Government elects to purchase at the agreed salvage value. (End of clause) Alternate I (Feb 1995) . If the Contracting Officer determines that a nonrefundable charge is to be paid and no credits are due the Government, delete paragraphs (c) and (e), renumber paragraph (d) as (c) and add the following as paragraph (d): (d) Termination after completion of facilities. In the event the Government terminates this contract after completion of the facilities with respect to which the Government is to pay a connection charge, the Contractor shall have the following options: (1) To retain in place for ________ months after the notice of termination by the Government. If the Contractor and the Government have not agreed on terms for retention in place beyond ________ months, then the Contractor must remove the facilities pursuant to the terms of paragraph (d)(2) of this clause. (2) To remove such facilities at the Contractor's own expense within _______ months after the effective date of the termination by the Government. If the Contractor elects to remove such facilities, the Government shall then have the option of purchasing such facilities at the agreed salvage value set forth herein; and provided further, that the Contractor shall, at the direction of the Government, leave in place such facilities located on Government property which the Government elects to purchase at the agreed salvage value.