27.202-4
Refund of royalties
FAR 27.202-4 ensures the government can recover royalty costs included in a contract's fixed price if those royalties are not actually paid by the contractor.
Overview
FAR 27.202-4 addresses the procedures for refunding royalties in government contracts. When a contractor's fixed price includes royalties that are not actually paid by the contractor, the government is entitled to recover those amounts. The clause at FAR 52.227-9, Refund of Royalties, is used to implement this process. This ensures that the government does not overpay for intellectual property rights that were not ultimately required or paid for by the contractor. The regulation provides a mechanism for both paying legitimate royalties and recouping unearned royalty costs from the contractor.
Key Rules
- Inclusion of Royalties in Fixed Price
- If a contractor's fixed price includes royalties, but those royalties are not paid, the government can recover the unearned amounts.
- Use of FAR Clause 52.227-9
- The contract must include the clause at 52.227-9 to establish the procedures for refunding royalties.
Responsibilities
- Contracting Officers: Must ensure the inclusion of FAR 52.227-9 in applicable contracts and monitor royalty payments for potential refunds.
- Contractors: Must accurately report royalties paid and refund any unearned royalties included in the contract price.
- Agencies: Oversee compliance and ensure proper recovery of unearned royalties.
Practical Implications
- This section prevents contractors from retaining payment for royalties not actually incurred, protecting government funds.
- Contractors must maintain accurate records of royalty payments and be prepared to refund unearned amounts.
- Failure to comply can result in financial penalties or contract disputes.