Overview
FAR 7.404 mandates that Contracting Officers include a specific provision in solicitations and contracts whenever the government enters into a lease or rental agreement that includes an option to buy the equipment.
Key Rules
- Mandatory Requirement: The Contracting Officer "shall" (is required to) insert the specified clause into the contract file.
- Trigger Condition: The rule applies specifically to solicitations and contracts involving rental or lease agreements that contain an option to purchase.
- Specific Clause Reference: The language used must be substantially the same as the clause found at FAR 52.207-5, "Option to Purchase Equipment."
Practical Implications
- This ensures that the government and the contractor have a clear, pre-negotiated framework for how equipment title will transfer and how purchase prices will be determined if the government exercises its option.
- It protects the government’s interests by establishing upfront how previous rental or lease payments may be applied as credits toward the final purchase price.