FAR 18.123—Assignment of claims.
Plain-English Summary
FAR 18.123 is a narrow emergency-relief provision tied to the assignment of claims and the use of the no-setoff provision. It states that the no-setoff provision may be appropriate to facilitate the national defense during a national emergency or natural disaster, and it points readers to FAR 32.803(d) for the operative rule. In practical terms, this section does not create a broad new contracting policy; instead, it signals that, in extraordinary circumstances, the Government may choose to limit its normal right to offset debts against assigned contract payments so contractors can obtain financing and continue performance. The section matters because assignment of claims is often used to support cash flow, and the no-setoff provision can make those assignments more attractive to lenders by reducing payment risk. For contracting officers and contractors, the key takeaway is that this is an exception-oriented tool intended for urgent national needs, not a routine feature of ordinary procurements. Readers should use this section together with FAR 32.803(d), which contains the detailed conditions and procedures.
Key Rules
Emergency use only
The no-setoff provision may be appropriate when needed to facilitate the national defense during a national emergency or natural disaster. This means the provision is reserved for exceptional circumstances, not standard contract administration.
Linked to assignment of claims
This section addresses the no-setoff provision in the context of assigned claims, where a contractor assigns contract payments to a financing institution. The practical effect is to protect the assignee from Government offsets that could otherwise reduce the value of the assigned payments.
Refer to FAR 32.803(d)
This section does not stand alone; it directs users to FAR 32.803(d) for the governing requirements. Any decision to use the no-setoff provision must be made under that more detailed authority and its conditions.
Supports continued performance
The policy purpose is to improve contractor access to financing so work can continue during emergencies or disasters. By making payment streams more reliable, the provision can help sustain critical defense-related performance.
Responsibilities
Contracting Officer
Determine whether the circumstances justify use of the no-setoff provision and apply the requirements in FAR 32.803(d). The contracting officer must ensure the provision is used only when appropriate to support national defense needs during a national emergency or natural disaster.
Contractor
If seeking to assign claims, understand that the no-setoff provision is not automatic and depends on Government approval under the applicable rules. The contractor should coordinate with the contracting officer and financing institution to ensure the assignment and payment terms are properly documented.
Financing Institution / Assignee
Rely on the no-setoff provision only when it has been properly authorized under FAR 32.803(d). The assignee should confirm that the assignment is valid and that the Government has accepted the applicable no-setoff arrangement before extending financing.
Agency
Use the provision only in circumstances that support national defense during a national emergency or natural disaster, and ensure agency personnel follow the governing procedures. The agency should maintain consistency with FAR 32.803(d) and any internal approval requirements.
Practical Implications
This section is a signal that payment protections may be expanded in emergencies, which can help contractors obtain financing quickly when performance is urgent.
A common pitfall is treating the no-setoff provision as routine or assuming it applies automatically whenever a claim is assigned; it does not.
Contracting officers should verify the legal and procedural basis in FAR 32.803(d) before agreeing to any no-setoff language.
Contractors and lenders should not rely on this section alone; they need the actual assignment documentation and the specific approval framework.
Because the provision affects the Government’s offset rights, it can materially change financing terms and should be reviewed carefully before execution.
Official Regulatory Text
The use of the no-setoff provision may be appropriate to facilitate the national defense in the event of a national emergency or natural disaster. (See 32.803 (d).)