52.241-9
Connection Charge
If the Government pays a connection charge for contractor-owned utility facilities, the contractor must either credit that amount back over time or refund the uncredited balance when specified events—like third-party use, termination, or default—occur.
Overview
- FAR 52.241-9, Connection Charge governs how the Government may reimburse a utility or service contractor for furnishing and installing new connection facilities needed to provide service.
- The clause sets payment limits, establishes ownership and maintenance responsibilities, and requires a crediting or refund mechanism so the Government can recover the connection charge over time or upon certain termination events.
Key Rules
- Connection charge payment
- The Government may pay by progress payments, advance payments, or lump sum, as allowed by law and agreed by the parties. The total payable amount is capped at the lesser of the estimated or actual installation cost, minus agreed salvage value.
- Contractor ownership and responsibility for facilities
- Even if the Government pays the connection charge, the new facilities remain the Contractor’s property. The Contractor must operate, maintain, repair, and bear taxes, charges, and liabilities associated with those facilities.
- Monthly credits and third-party use
- The Contractor must provide bill credits at the agreed percentage until the Government’s connection charge is fully recovered. If the facilities are used to serve other customers, the Contractor must notify the Government and generally accelerate credits up to 100 percent to reflect the Government-funded share.
- Termination and refund obligations
- If the Contractor terminates or defaults before full crediting, it must repay the uncredited balance. If the Government terminates before completion, it pays allowable completed-work and removal costs less salvage value. After completion, the Contractor may retain or remove facilities under specified timelines, with possible Government purchase at salvage value.
- Alternate I
- When the charge is nonrefundable and no credits are due, the clause removes the credit/refund structure and substitutes simplified post-completion termination options.
Responsibilities
- Contracting Officers: determine whether to use the basic clause or Alternate I, negotiate payment method, estimated cost, salvage value, credit percentage, and termination timelines.
- Contractors: install the facilities at their expense initially, execute a release before final payment, maintain and repair the facilities, provide required credits or refunds, and notify the Government if the facilities serve other customers.
- Agencies: ensure payments comply with law, monitor credits against monthly bills, and protect the Government’s recovery rights upon termination or default.
Practical Implications
- This clause exists to let agencies obtain needed utility connections without transferring ownership of the installed facilities.
- It protects the Government by capping reimbursement, requiring credits or refunds, and preserving salvage value.
- Common pitfalls include failing to document actual versus estimated cost, not tracking monthly credits, overlooking written notice when facilities begin serving other customers, and mishandling termination timelines or salvage-value purchase options.