FAR 32.806—Contract clauses.
Plain-English Summary
FAR 32.806 tells contracting officers which contract clause to use when dealing with assignment of claims, and when a prohibition on assignment is appropriate. It covers two related but different clauses: the standard Assignment of Claims clause at 52.232-23, including when to use Alternate I for an authorized no-setoff commitment, and the Prohibition of Assignment of Claims clause at 52.232-24 when agency regulations support barring assignment in the Government’s interest. It also distinguishes between solicitations and contracts that exceed the micro-purchase threshold and purchase orders, noting that the standard assignment clause is required in most larger procurements but is not required for purchase orders. In practice, this section matters because assignment of claims affects how contractors can finance performance through lenders, how the Government protects itself against setoff rights, and whether payments can be redirected to assignees such as banks. Contracting officers must match the clause to the procurement’s size, structure, and agency policy, while contractors and financing institutions need to know whether receivables can be assigned and under what conditions.
Key Rules
Use Assignment Clause Generally
For solicitations and contracts expected to exceed the micro-purchase threshold, the contracting officer must insert 52.232-23, Assignment of Claims, unless assignment of claims will be prohibited under FAR 32.803(b). This is the default rule for larger procurements.
No-Setoff Uses Alternate I
If the Government has authorized a no-setoff commitment under FAR 32.803(d), the contracting officer must use 52.232-23 with Alternate I. This alternate addresses the Government’s commitment not to offset certain debts against assigned payments, subject to the authorized terms.
Purchase Orders Are Different
The Assignment of Claims clause is not required in purchase orders. However, it may be included in purchase orders expected to exceed the micro-purchase threshold if the contractor accepts the order in writing and agency policies and regulations allow its use.
Prohibition Clause When Government Interest Requires
The contracting officer must insert 52.232-24, Prohibition of Assignment of Claims, in solicitations and contracts when agency regulations support a determination that prohibiting assignment is in the Government’s interest. This clause is used when the agency has decided assignment should not be permitted.
Agency Regulations Control the Prohibition Decision
The prohibition clause is not a general default; it depends on a formal determination under agency regulations. Contracting officers must follow those agency-specific rules before using 52.232-24.
Responsibilities
Contracting Officer
Insert 52.232-23 in solicitations and contracts expected to exceed the micro-purchase threshold unless assignment is prohibited under FAR 32.803(b). Use Alternate I when a no-setoff commitment has been authorized. Insert 52.232-24 when agency regulations support a determination that prohibiting assignment is in the Government’s interest. Consider, but are not required to use, the assignment clause in qualifying purchase orders only if written acceptance and agency policy permit it.
Agency
Establish and apply regulations governing when assignment of claims may be prohibited and when a no-setoff commitment may be authorized. Ensure contracting personnel have clear policy direction on whether the assignment clause may be used in purchase orders and when the prohibition clause is appropriate.
Contractor
Review the solicitation or contract to determine whether claims may be assigned and whether the standard clause, Alternate I, or the prohibition clause applies. If dealing with a purchase order, provide written acceptance when required for the assignment clause to be used.
Financing Institution / Assignee
Rely on the presence of the Assignment of Claims clause to determine whether receivables may be assigned and whether payments can be directed to the assignee. Confirm whether Alternate I applies and whether any prohibition clause prevents assignment.
Practical Implications
This section directly affects contractor financing, because lenders often require the ability to take an assignment of claims as security for working capital loans.
A common mistake is assuming the Assignment of Claims clause is optional in all cases; for contracts and solicitations above the micro-purchase threshold, it is generally mandatory unless a prohibition applies.
Another pitfall is using the wrong version of the clause: if a no-setoff commitment has been authorized, Alternate I must be used, not the basic clause alone.
Contracting officers should not insert the prohibition clause casually; it requires an agency-regulation-based determination that prohibition is in the Government’s interest.
For purchase orders, the clause is not automatically required, so contracting officers should check both agency policy and whether the contractor has provided written acceptance before including it.
Official Regulatory Text
(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.