Subpart 32.8 - Assignment of Claims

Parent topic: Part 32 - Contract Financing

32.800 Scope of subpart.

This subpart prescribes policies and procedures for the assignment of claims under the Assignment

of Claims Act of1940, as amended, (31 U.S.C.3727, 41 U.S.C.6305) (hereafter referred to as "the

Act").

32.801 Definitions.

Designated agency, as used in this subpart, means any department or agency of the executive

branch of the United States Government (see 32.803(d)).

No-setoff commitment, as used in this subpart, means a contractual undertaking that, to the extent

permitted by the Act, payments by the designated agency to the assignee under an assignment of

claims will not be reduced to liquidate the indebtedness of the contractor to the Government.

32.802 Conditions.

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.

32.803 Policies.

(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.

32.804 Extent of assignee’s protection.

(a) No payments made by the Government to the assignee under any contract assigned in

accordance with the Act may be recovered on account of any liability of the contractor to the

Government. This immunity of the assignee is effective whether the contractor’s liability arises from

or independently of the assigned contract.

(b) Except as provided in paragraph (c) of this section, the inclusion of a no-setoff commitment in an

assigned contract entitles the assignee to receive contract payments free of reduction or setoff for-

(1) Any liability of the contractor to the Government arising independently of the contract; and

(2) Any of the following liabilities of the contractor to the Government arising from the assigned
contract:

(i) Renegotiation under any statute or contract clause.

(ii) Fines.

(iii) Penalties, exclusive of amounts that may be collected or withheld from the contractor under, or

for failure to comply with, the terms of the contract.

(iv) Taxes or social security contributions.

(v) Withholding or nonwithholding of taxes or social security contributions.

(c) In some circumstances, a setoff may be appropriate even though the assigned contract includes a

no-setoff commitment; e.g.-

(1) When the assignee has neither made a loan under the assignment nor made a commitment to do

so; or

(2) To the extent that the amount due on the contract exceeds the amount of any loans made or

expected to be made under a firm commitment for financing.

32.805 Procedure.

(a) Assignments.

(1) Assignments by corporations shall be-

(i) Executed by an authorized representative;

(ii) Attested by the secretary or the assistant secretary of the corporation; and

(iii) Impressed with the corporate seal or accompanied by a true copy of the resolution of the

corporation’s board of directors authorizing the signing representative to execute the assignment.

(2) Assignments by a partnership may be signed by one partner, if the assignment is accompanied by

adequate evidence that the signer is a general partner of the partnership and is authorized to

execute assignments on behalf of the partner-ship.

(3) Assignments by an individual shall be signed by that individual and the signature acknowledged

before a notary public or other person authorized to administer oaths.

(b) Filing. The assignee shall forward to each party specified in 32.802(e) an original and three

copies of the notice of assignment, together with one true copy of the instrument of assignment. The

true copy shall be a certified duplicate or photostat copy of the original assignment.

(c) Format for notice of assignment. The following is a suggested format for use by an assignee in

providing the notice of assignment required by 32.802(e).

Notice of Assignment
To: ___________ [Address to one of the parties specified in 32.802(e)].

This has reference to Contract No. __________ dated ______, entered into between ______ [Contractor’s

name and address] and ______ [Government agency, name of office, and address], for ________

[Describe nature of the contract].

Moneys due or to become due under the contract described above have been assigned to the

undersigned under the provisions of the Assignment of Claims Act of1940, as amended, (31

U.S.C.3727, 41 U.S.C.6305).

A true copy of the instrument of assignment executed by the Contractor on ___________ [Date], is

attached to the original notice.

Payments due or to become due under this contract should be made to the undersigned assignee.

Please return to the undersigned the three enclosed copies of this notice with appropriate notations

showing the date and hour of receipt, and signed by the person acknowledging receipt on behalf of

the addressee.

Very truly yours,

__________________________________________________ [Name of Assignee]

By _______________________________________________ [Signature of Signing Officer]

__________________________________________________ [Titleof Signing Officer]

__________________________________________________ [Address of Assignee]

Acknowledgement

Receipt is acknowledged of the above notice and of a copy of the instrument of assignment. They

were received ____(a.m.) (p.m.) on ______, 20___.

__________________________________________________ [Signature]

__________________________________________________ [Title]

__________________________________________________ On behalf of

__________________________________________________ [Name of Addressee of this Notice]

(d) Examination by the Government. In examining and processing notices of assignment and before

acknowledging their receipt, contracting officers should assure that the following conditions and any

additional conditions specified in agency regulations, have been met:

(1) The contract has been properly approved and executed.

(2) The contract is one under which claims may be assigned.

(3) The assignment covers only money due or to become due under the contract.

(4) The assignee is registered separately in the System for Award Management unless one of the

exceptions in 4.1102 applies.
(e) Release of assignment.

(1) A release of an assignment is required whenever-

(i) There has been a further assignment or reassignment under the Act; or

(ii) The contractor wishes to reestablish its right to receive further payments after the contractor’s

obligations to the assignee have been satisfied and a balance remains due under the contract.

(2) The assignee, under a further assignment or reassignment, in order to establish a right to receive

payment from the Government, must file with the addressees listed in 32.802(e) a-

(i) Written notice of release of the contractor by the assigning financing institution;

(ii) Copy of the release instrument;

(iii) Written notice of the further assignment or reassignment; and

(iv) Copy of the further assignment or reassignment instrument.

(3) If the assignee releases the contractor from an assignment of claims under a contract, the

contractor, in order to establish a right to receive payment of the balance due under the contract,

must file a written notice of release together with a true copy of the release of assignment

instrument with the addressees noted in 32.802(e).

(4) The addressee of a notice of release of assignment or the official acting on behalf of that

addressee shall acknowledge receipt of the notice.

32.806 Contract clauses.

(a)

(1) The contracting officer shall insert the clause at 52.232-23, Assignment of Claims, in solicitations

and contracts expected to exceed the micro-purchase threshold, unless the contract will prohibit the

assignment of claims (see 32.803(b)). The use of the clause is not required for purchase orders.

However, the clause may be used in purchase orders expected to exceed the micro-purchase

threshold, that are accepted in writing by the contractor, if such use is consistent with agency

policies and regulations.

(2) If a no-setoff commitment has been authorized (see 32.803(d)), the contracting officer shall use

the clause with its AlternateI.

(b) The contracting officer shall insert the clause at 52.232-24, Prohibition of Assignment of Claims,

in solicitations and contracts for which a determination has been made under agency regulations

that the prohibition of assignment of claims is in the Government’s interest.