FAR 32.803—Policies.
Plain-English Summary
FAR 32.803 explains the Government’s policy rules for assignments of claims under the Assignment of Claims Act. It covers when an assignment can be further assigned or reassigned to another financing institution, when a contract may prohibit assignment of claims, how assignments work under requirements and indefinite-quantity contracts with multiple ordering and paying activities, and when a designated agency may include a no-setoff commitment. It also explains the Government’s right to set off contractor debts against payments to an assignee when no no-setoff commitment exists. In practice, this section balances two goals: helping contractors obtain financing by assigning contract receivables, while protecting the Government’s interests in debt collection, contract administration, and fiscal control. Contracting officers must pay close attention to agency determinations, Federal Register publication requirements, debt issues, and whether the contract structure affects assignability.
Key Rules
Reassignment Is Allowed
An assignment of claims made to a qualifying financing institution may be further assigned or reassigned to another qualifying institution, but only if the conditions for assignments in FAR 32.802(d) and (e) continue to be met. This preserves financing flexibility while keeping the assignment within the statutory framework.
Assignment May Be Prohibited
A contract may bar assignment of claims if the agency determines that such a prohibition is in the Government’s interest. This is a discretionary protection the agency can use when assignment would create administrative, financial, or program risks.
Multiple-Activity Orders Can Be Assigned
Under requirements or indefinite-quantity contracts that allow ordering and payment by multiple Government activities, amounts due for individual orders of $1,000 or more may be assigned. This rule recognizes that separate orders under the same contract can generate assignable receivables.
No-Setoff Needs Formal Approval
For contracts of designated agencies, a no-setoff commitment may be included only if the head of the agency makes a determination of need under the Presidential delegation and the determination is published in the Federal Register. This requirement does not apply after full payment has been made under the contract.
No-Setoff Is Limited and Purpose-Driven
Guidance suggests no-setoff commitments may be appropriate to support national defense, respond to national emergencies or natural disasters, or facilitate private financing of contract performance. Even then, if the offeror owes significant debts to the United States, the contracting officer should evaluate whether no-setoff is in the Government’s best interest and consult the officials responsible for collecting those debts.
Government May Set Off Other Debts
If there is no no-setoff commitment, the Government may offset against payments to the assignee any contractor liability to the Government that arose independently of the assigned contract and existed when notice of the assignment was received, even if the debt had not yet matured. This protects the Government from losing collection rights because of the assignment.
Responsibilities
Contracting Officer
Determine whether a contract should prohibit assignment of claims when doing so is in the Government’s interest. For designated agency contracts, ensure any no-setoff commitment is supported by the required agency-head determination and Federal Register publication, and consult debt-collection officials when the contractor has significant debts to the United States.
Head of Agency
Make the formal determination of need required before a designated agency contract may include a no-setoff commitment, consistent with the Presidential delegation and any OFPP guidance.
Agency
Decide whether to prohibit assignment of claims in a particular contract when that serves the Government’s interest, and comply with the procedural requirements for no-setoff commitments in designated agency contracts.
Contractor
Use assignments only to qualifying financing institutions and ensure the assignment continues to meet the conditions in FAR 32.802(d) and (e). Understand that assigned payments may still be subject to Government setoff unless a valid no-setoff commitment applies.
Financing Institution / Assignee
Accept assignments only within the statutory and regulatory limits, and recognize that reassignment is permitted only to another qualifying financing institution and only while the assignment conditions remain satisfied.
Government Debt-Collection Officials
Advise the contracting officer when the contractor has significant debts to the United States so the Government can assess whether a no-setoff commitment is appropriate and whether setoff rights should be preserved.
Practical Implications
Assignments can help contractors finance performance, but they are not automatic or unlimited; the contract and agency policy can restrict them.
A no-setoff commitment is a special protection for lenders, not a default rule, and it requires formal agency action plus Federal Register publication for designated agencies.
Even when receivables are assigned, the Government may still collect unrelated contractor debts by offset unless a valid no-setoff commitment exists.
Contracting officers should check for existing contractor debts before agreeing to no-setoff language, because that decision can affect the Government’s ability to recover money.
For multiple-activity requirements or indefinite-quantity contracts, the $1,000 threshold matters at the individual order level, so payment administration should track order-by-order assignability carefully.
Official Regulatory Text
(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.