Overview
FAR 37.303 outlines the financial structures for dismantling and demolition contracts, specifying whether the Government pays the contractor for services or the contractor pays the Government for salvage rights.
Key Rules
- Payment Direction: The contract can be structured so the Government pays for demolition services, or the contractor pays the Government for the right to salvage and remove materials.
- Government Retention: The Contracting Officer (CO) must identify and expressly designate any salvageable property that is more useful to the Government than its salvage value for retention.
- Title Transfer: The contractor receives title to all salvageable property not specifically designated for Government retention.
- Fair Market Value (FMV): The CO is required to determine the FMV of property transferring to the contractor to properly calculate net payments and potential compensation in the event of a contract termination.
Practical Implications
- Contracting Officers must perform a thorough pre-solicitation assessment of materials to decide if the project should be a service acquisition or a sale of salvage rights.
- Accurate valuation of salvageable materials is critical for price reasonableness determinations and ensures the Government is credited fairly when the contractor retains valuable scrap or equipment.