FAR 32.802—Conditions.
Plain-English Summary
FAR 32.802 explains when a contractor may assign contract payments under the Assignment of Claims Act and what must happen for that assignment to be valid. It covers the minimum contract payment threshold, who may receive the assignment, whether the contract can prohibit assignment, the scope and exclusivity of the assignment, limits on further assignment, and the notice that must be sent to government and surety officials. In practice, this section matters when a contractor wants to use contract receivables as financing collateral, such as for a bank loan or other funding arrangement. It protects the Government by ensuring assignments go only to qualified financing institutions, are properly documented, and are formally communicated to the right parties before payment is redirected. It also protects lenders by establishing a recognized process for receiving assigned contract proceeds. For contractors, the rule is important because an assignment that does not meet every condition may be ineffective, leaving financing arrangements unsecured or delaying payment processing.
Key Rules
Minimum payment amount
The contract must provide for payments aggregating $1,000 or more before an assignment of claims is permitted. This threshold limits the rule to contracts large enough to justify the administrative and financing process.
Qualified assignee only
The assignment must be made to a bank, trust company, other financing institution, or a Federal lending agency. The rule is designed to ensure the assignee is a legitimate financing entity, not an unrelated third party.
No contract prohibition
The contract itself must not prohibit assignment. If the contract bars assignment, the contractor cannot use this section to assign the payments unless the contract otherwise allows it.
Assignment scope limits
Unless the contract expressly allows otherwise, the assignment must cover all unpaid amounts under the contract, go to only one party, and not be subject to further assignment. A single assignee may act as agent or trustee for multiple financing participants.
Notice requirement
The assignee must send written notice of the assignment and a true copy of the assignment instrument to the contracting officer or agency head, the surety on any applicable bond, and the designated disbursing officer. Proper notice is essential to make the assignment operational for payment purposes.
Responsibilities
Contractor
Ensure the contract meets the $1,000 payment threshold and does not prohibit assignment, then execute an assignment that complies with the scope and exclusivity limits unless the contract expressly permits different terms.
Assignee (bank, trust company, financing institution, or Federal lending agency)
Receive the assignment only if qualified, and provide written notice plus a true copy of the assignment instrument to all required recipients before relying on the assignment for payment.
Contracting Officer / Agency Head
Receive notice of the assignment and recognize it only if the statutory and regulatory conditions are satisfied.
Surety
Receive notice of the assignment when a bond applies to the contract, so it is aware of the change in payment rights and can protect its interests.
Disbursing Officer
Receive notice and a true copy of the assignment instrument so payments can be directed correctly under the contract.
Practical Implications
This section is most often used when a contractor needs financing secured by contract receivables, so it is a key cash-flow tool for federal contractors.
A common pitfall is assuming any lender can take the assignment; the assignee must be a bank, trust company, other financing institution, or Federal lending agency.
Another frequent mistake is failing to send notice to every required recipient, especially the surety or the designated disbursing officer, which can delay or undermine payment processing.
Contract language matters: if the contract prohibits assignment, the contractor cannot rely on this rule unless the contract is changed or otherwise permits it.
Contractors and lenders should verify that the assignment covers the correct payment stream and does not create prohibited split or successive assignments unless the contract expressly allows those arrangements.
Official Regulatory Text
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.