32.802 Conditions
Source: FAR 32.802 on acquisition.gov
Contractors may assign contract payments only if specific conditions—including minimum payment amounts, eligible assignees, and proper notification—are strictly met.
Overview
FAR 32.802 outlines the specific conditions under which a contractor may assign payments due or to become due under a government contract, as permitted by the Assignment of Claims Act. The regulation ensures that assignments are only valid if certain requirements are met, protecting both the government and financial institutions involved in contract financing. This section is crucial for contractors seeking to use contract receivables as collateral or to secure financing.
Key Rules
- Minimum Payment Threshold
- The contract must provide for payments totaling $1,000 or more to be eligible for assignment.
- Eligible Assignees
- Assignments can only be made to banks, trust companies, or other financing institutions, including federal lending agencies.
- Contract Prohibition
- The contract must not explicitly prohibit assignment.
- Assignment Scope and Limitations
- Unless the contract allows otherwise, the assignment must cover all unpaid amounts, be made to only one party (with limited exceptions), and cannot be further assigned.
- Notification Requirements
- The assignee must send written notice and a true copy of the assignment to the contracting officer or agency head, the surety on any bond, and the designated disbursing officer.
Responsibilities
- Contracting Officers: Must verify that all assignment conditions are met and process notifications accordingly.
- Contractors: Must ensure all conditions are satisfied before assigning claims and provide proper notification.
- Agencies: Must maintain oversight and ensure compliance with assignment procedures.
Practical Implications
- This section exists to facilitate contractor financing while protecting government interests.
- Contractors must carefully follow the outlined steps to avoid invalid assignments.
- Common pitfalls include failing to notify all required parties or attempting assignment when the contract prohibits it.
Under the Assignment of Claims Act, a contractor may assign moneys due or to become due under a contract if all the following conditions are met:
(a) The contract specifies payments aggregating $1,000 or more.
(b) The assignment is made to a bank, trust company, or other financing institution, including any Federal lending agency.
(c) The contract does not prohibit the assignment.
(d) Unless otherwise expressly permitted in the contract, the assignment-
(1) Covers all unpaid amounts payable under the contract;
(2) Is made only to one party, except that any assignment may be made to one party as agent or trustee for two or more parties participating in the financing of the contract; and
(3) Is not subject to further assignment.
(e) The assignee sends a written notice of assignment together with a true copy of the assignment instrument to the-
(1) Contracting officer or the agency head;
(2) Surety on any bond applicable to the contract; and
(3) Disbursing officer designated in the contract to make payment.