Overview
FAR 32.803 establishes the operational policies for assigning and reassigning contract claims to financing institutions, including the conditions under which the Government may prohibit such assignments. It specifically details the criteria for "no-setoff" commitments, which protect assignees from having payments reduced to satisfy the contractor's unrelated debts to the Government.
Key Rules
- Reassignment: Claims already assigned to a financing institution may be further assigned or reassigned to other eligible institutions, provided statutory conditions continue to be met.
- Discretionary Prohibition: Government agencies maintain the authority to prohibit the assignment of claims if they determine that such a restriction is in the best interest of the Government.
- Indefinite Delivery Contracts: For requirements or indefinite quantity contracts involving multiple government activities, claims may be assigned for individual orders valued at $1,000 or more.
- No-Setoff Commitments:
- Inclusion requires a formal "determination of need" by the agency head, which must be published in the Federal Register.
- Typically reserved for national defense, emergencies, or to facilitate private financing.
- Contracting Officers must consult with debt collection officials if an offeror is significantly indebted to the U.S. before including this provision.
- Government Setoff Rights: Without a no-setoff commitment, the Government can apply contractor liabilities (even those arising independently of the contract) against payments due to the assignee, provided the liability existed when the assignment notice was received.
Practical Implications
- Risk Mitigation for Lenders: Financing institutions prefer contracts with "no-setoff" provisions because they guarantee that the stream of payments won't be diverted to pay off the contractor's unrelated federal tax liens or other debts.
- Administrative Diligence: Contractors and lenders must verify that the specific agency has the authority and the proper "determination of need" on file before assuming a "no-setoff" clause is valid and enforceable.