Extent of assignee’s protection
Assignees of government contracts are generally protected from setoff or recovery of payments due to contractor liabilities, especially when a no-setoff commitment is included, but exceptions apply if no financing is provided or payments exceed the financed amount.
Overview
FAR 32.804 outlines the protections afforded to assignees (typically financial institutions) who receive contract payments directly from the government under an assignment of claims. The regulation ensures that, once a contract is properly assigned, the government cannot recover payments made to the assignee due to the contractor’s liabilities, whether those liabilities are related to the assigned contract or arise independently. If the contract includes a no-setoff commitment, the assignee is further protected from reductions or setoffs for most contractor liabilities, including renegotiation, fines, penalties, and tax issues. However, exceptions exist: setoff may still occur if the assignee has not provided financing or if payments exceed the amount financed. This section is crucial for contractors and lenders to understand the extent and limits of payment protections in government contract assignments.