Overview
FAR 32.802 outlines the mandatory criteria and administrative procedures a contractor must satisfy to legally assign contract payments to a financing institution under the Assignment of Claims Act.
Key Rules
- Monetary Threshold: The contract must aggregate to a value of $1,000 or more.
- Eligible Assignees: Assignments are restricted to banks, trust companies, or other financing institutions, including Federal lending agencies.
- Contractual Permission: The assignment is permitted only if the contract does not explicitly prohibit it.
- Scope and Exclusivity: Unless stated otherwise, the assignment must cover all unpaid amounts, be made to only one party (who may act as a trustee for multiple financiers), and cannot be further assigned.
- Notice Requirements: The assignee must provide written notice and a copy of the assignment instrument to the Contracting Officer (or agency head), the Surety (if any), and the Disbursing Officer.
Practical Implications
- Contractors utilize this provision to secure working capital by using government receivables as collateral for private financing.
- Strict compliance with the notification requirements is critical; failure to properly notify the Disbursing Officer or the Contracting Officer can result in payments being sent to the wrong party, potentially jeopardizing the contractor's financing arrangements.