Can the prime contractor transfer the unused software license to the Government at no cost? If so, what FAR provision/clause(s) would we cite?
Technically, you answered this question in the background information you provided within your submission. The contractor can’t transfer an unused software license to the Government at no cost.
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Assuming the contractor is willing, the real question is how you can transfer the license to the Government legally. The answer to that question has to start with the software company. Generally, a license provides “right of use” to an individual/entity that purchases the license. The software company still owns the software and they haven’t given you authority to distribute it. However, commercial software companies generally post software license transfer (LST) rules on their website. So you’d need to determine what flexibilities you have under their policies.
If the contractor is legally able to transfer the license to the Government, then the contract would need to be modified to facilitate that action. It would require a scope review and a bilateral modification that includes Government consideration for receiving the license.