32.803 Policies
Source: FAR 32.803 on acquisition.gov
FAR 32.803 sets clear rules for assigning contract claims to financing institutions, balancing contractor financing needs with the Government’s right to restrict assignments and offset debts.
Overview
FAR 32.803 outlines the policies governing the assignment of claims under government contracts. It specifies the conditions under which claims can be assigned or reassigned to financing institutions, the circumstances in which contracts may prohibit such assignments, and the rules for assigning claims under requirements or indefinite quantity contracts. The section also details when a no-setoff commitment may be included in contracts and the implications if such a commitment is absent. These policies are designed to balance the contractor's ability to secure financing with the Government's interests and rights regarding contract payments and offsets.
Key Rules
- Assignment and Reassignment of Claims
- Claims assigned to financing institutions can be further reassigned if original conditions are still met.
- Prohibition of Assignment
- Agencies may prohibit assignment of claims if it serves the Government’s interest.
- Assignment Under Certain Contracts
- For requirements or indefinite quantity contracts, claims for individual orders of $1,000 or more may be assigned.
- No-Setoff Commitment
- No-setoff commitments may be included only with agency head determination, publication in the Federal Register, and in accordance with Presidential and OFPP guidance.
- Setoff Rights Without No-Setoff Commitment
- If no-setoff is not included, the Government may offset contractor liabilities existing at the time of assignment notice against payments to the assignee.
Responsibilities
- Contracting Officers: Ensure assignments and reassignments comply with FAR 32.802 conditions, determine when to prohibit assignments, and consult on no-setoff commitments.
- Contractors: Ensure assignments are made to eligible institutions and understand the implications of setoff provisions.
- Agencies: Make and publish determinations for no-setoff commitments and provide oversight on assignment prohibitions.
Practical Implications
- This section enables contractors to obtain financing by assigning claims but protects the Government’s interests through assignment restrictions and setoff rights. Contractors must carefully follow assignment procedures and be aware of when setoff provisions may impact payments. Failure to comply can result in delayed or reduced payments, especially if contractor debts exist.
(a) Any assignment of claims that has been made under the Act to any type of financing institution listed in 32.802(b) may thereafter be further assigned and reassigned to any such institution if the conditions in 32.802(d) and (e) continue to be met.
(b) A contract may prohibit the assignment of claims if the agency determines the prohibition to be in the Government’s interest.
(c) Under a requirements or indefinite quantity type contract that authorizes ordering and payment by multiple Government activities, amounts due for individual orders for $1,000 or more may be assigned.
(d) Any contract of a designated agency (see FAR 32.801), except a contract under which full payment has been made, may include a no-setoff commitment only when a determination of need is made by the head of the agency, in accordance with the Presidential delegation of authority dated October 3,1995, and after such determination has been published in the Federal Register. The Presidential delegation makes such determinations of need subject to further guidance issued by the Office of Federal Procurement Policy. The following guidance has been provided:
Use of the no-setoff provision may be appropriate to facilitate the national defense; in the event of a national emergency or natural disaster; or when the use of the no-setoff provision may facilitate private financing of contract performance. However, in the event an offeror is significantly indebted to the United States, the contracting officer should consider whether the inclusion of the no-setoff commitment in a particular contract is in the best interests of the United States. In such an event, the contracting officer should consult with the Government officer(s) responsible for collecting the debt(s).
(e) When an assigned contract does not include a no-setoff commitment, the Government may apply against payments to the assignee any liability of the contractor to the Government arising independently of the assigned contract if the liability existed at the time notice of the assignment was received even though that liability had not yet matured so as to be due and payable.