Overview
This section addresses the use of "no-setoff" provisions in government contracts during emergencies to ensure contractors can obtain necessary financing to support national defense or disaster relief efforts.
Key Rules
- No-Setoff Provision: Under the Assignment of Claims Act, the government may agree not to reduce payments to an assignee (such as a bank) to satisfy independent debts the contractor owes the government.
- Trigger Conditions: Use of this provision is deemed appropriate when it facilitates national defense during a national emergency or in response to a natural disaster.
- Cross-Reference: The specific criteria and authority for implementing no-setoff clauses are governed by the procedures in FAR 32.803(d).
Practical Implications
- This provision helps contractors secure private financing more easily because lenders are guaranteed the full payment of the contract regardless of the contractor's other liabilities to the government.
- It serves as a vital tool for maintaining the industrial base's liquidity during urgent response scenarios where rapid mobilization of capital is required.