FAR 32.1105—Assignment of claims.
Plain-English Summary
FAR 32.1105 explains how electronic funds transfer (EFT) payment information interacts with an assignment of claims under FAR subpart 32.8. Its core point is that using EFT does not replace the legal requirements for assigning contract payments to a financing institution or other assignee, and payment instructions showing someone other than the contractor as the ultimate recipient are not valid unless there is a proper assignment of claims. The section also ties this issue to the EFT clauses at 52.232-33 and 52.232-34 by stating that, without a valid assignment, such information is treated as incorrect EFT information for purposes of the clauses’ suspension-of-payment provisions. In practice, this means contracting officers, payment offices, and contractors must distinguish between routine banking changes and a formal assignment of contract proceeds, because the legal effect and payment consequences are very different. The section exists to prevent unauthorized redirection of government payments, protect the government from paying the wrong party, and ensure that financing arrangements are documented and processed under the proper FAR procedures.
Key Rules
EFT does not replace assignment
Electronic funds transfer is only a payment method; it does not by itself create or validate an assignment of claims. If a contractor wants the government to pay someone else, the assignment must comply with FAR subpart 32.8.
Proper assignment required
A payment instruction that directs funds to a party other than the contractor is only acceptable when there is a properly executed assignment of claims. Without that formal assignment, the government should not treat the alternate payee as the rightful recipient.
Incorrect EFT information rule
If EFT data identifies an ultimate recipient other than the contractor and there is no valid assignment, that information is considered incorrect EFT information. This matters because the EFT clauses allow payment suspension when EFT information is incorrect.
Suspension-of-payment consequences
Incorrect EFT information can trigger the suspension-of-payment procedures in the EFT clauses at 52.232-33 and 52.232-34. The government may withhold payment until the information is corrected or the assignment issue is properly resolved.
Subpart 32.8 controls assignments
Any assignment of claims must be handled under FAR subpart 32.8, not through informal banking instructions or routine EFT setup changes. The legal validity of the assignment depends on compliance with those procedures.
Responsibilities
Contractor
Must ensure any request to direct payments to a third party is supported by a valid assignment of claims under FAR subpart 32.8. The contractor must also provide accurate EFT information and promptly correct any payment data that could be treated as incorrect.
Contracting Officer
Must recognize that EFT setup alone does not authorize payment to a third party and must ensure any assignment of claims is processed under the proper FAR procedures. The contracting officer should treat unsupported third-party EFT instructions as potentially incorrect EFT information.
Payment Office / Finance Office
Must use the EFT and assignment information provided in accordance with the contract clauses and FAR requirements, and must not redirect payments to a noncontractor recipient without a valid assignment. If EFT information is incorrect, the office must follow the suspension-of-payment procedures in the applicable clauses.
Assignee / Financing Institution
Must obtain and rely on a properly executed assignment of claims if it expects to receive contract payments directly. The assignee should ensure the assignment is legally valid and properly communicated to the government.
Agency
Must administer payment systems and contract files so that EFT data and assignment documentation are consistent. The agency must prevent unauthorized payment redirection and apply the correct FAR rules when an assignment is involved.
Practical Implications
Contractors cannot simply change bank account details or list a lender as the recipient and expect that to function as an assignment of claims; the formal FAR subpart 32.8 process is still required.
A mismatch between the contractor of record and the EFT recipient can stop or delay payment, even if the banking information appears technically complete.
This section is especially important in financing arrangements, where lenders often want direct payment rights; without a valid assignment, the government may treat the EFT data as wrong.
Contracting officers and payment offices should verify whether a third-party payee is supported by assignment documentation before accepting the EFT setup.
The most common pitfall is confusing a routine EFT change with a legal assignment, which can lead to suspended payments, administrative delays, and disputes over who is entitled to receive funds.
Official Regulatory Text
The use of EFT payment methods is not a substitute for a properly executed assignment of claims in accordance with subpart 32.8 . EFT information that shows the ultimate recipient of the transfer to be other than the contractor, in the absence of a proper assignment of claims, is considered to be incorrect EFT information within the meaning of the "Suspension of Payment" paragraphs of the EFT clauses at 52.232-33 and 52.232-34 .