Overview
This section prescribes the specific contract clauses that contracting officers must use to either permit or prohibit the assignment of claims by a contractor to a third party (such as a financial institution). It outlines the conditions under which FAR 52.232-23 and 52.232-24 are required based on contract value and agency interests.
Key Rules
- Mandatory Inclusion (52.232-23): The contracting officer must include the "Assignment of Claims" clause in solicitations and contracts exceeding the micro-purchase threshold unless the assignment is specifically prohibited.
- Purchase Orders: The clause is not required for purchase orders, but it may be used for those exceeding the micro-purchase threshold if the contractor accepts in writing and it aligns with agency policy.
- No-Setoff Commitment (Alternate I): If a "no-setoff" commitment is authorized (preventing the Government from deducting other contractor debts from the assigned payment), the clause must be used with its Alternate I.
- Prohibition (52.232-24): The "Prohibition of Assignment of Claims" clause must be inserted if an agency determines that preventing the assignment of claims is in the Government’s best interest.
Practical Implications
- Financing Access: By including FAR 52.232-23, the Government enables contractors to use their contract receivables as collateral for loans, which is a critical tool for small businesses to maintain cash flow.
- Due Diligence: Contractors and financial institutions must carefully check for the presence of FAR 52.232-24 or the absence of 52.232-23, as these conditions would prevent the legal assignment of payments to a lender.