FAR 52.232-23—Assignment of Claims.
Plain-English Summary
FAR 52.232-23, Assignment of Claims, explains when and how a contractor may assign its right to receive contract payments to a financing institution under the Assignment of Claims Act, and what limits apply to that assignment. It covers the types of eligible assignees, the ability of an assignee to further assign or reassign its rights, the requirement that an assignment generally cover all unpaid amounts payable under the contract, and the rule that the assignment may not be made to more than one party except in a limited trustee or agent arrangement for multiple financing parties. The clause also addresses protection of classified information by prohibiting disclosure to an assignee until the contracting officer gives written authorization. In the Alternate I version, the clause may also include a no-setoff commitment, which limits the Government’s ability to reduce or offset payments to the assignee to the extent allowed by the Act. In practice, this clause is important because it enables contractor financing while preserving Government control over payment administration, information security, and the legal validity of the assignment.
Key Rules
Assignment to financing institutions
The contractor may assign its right to be paid amounts due or to become due under the contract to a bank, trust company, other financing institution, or a Federal lending agency. This is the core authority that allows contractors to use contract receivables as financing collateral.
Further assignment by assignee
An assignee may further assign or reassign its rights under the original assignment, but only to another qualifying financing institution. This keeps the financing chain within the class of entities recognized by the Act and the clause.
Assignment must cover all unpaid amounts
Any authorized assignment or reassignment must cover all unpaid amounts payable under the contract. Partial assignments of only selected invoices or amounts are not permitted under this clause, except for the limited trustee or agent structure allowed for multiple financing parties.
Only one assignee, with limited exception
The contractor may not assign the contract to more than one party. The only exception is an assignment to one party acting as agent or trustee for two or more parties participating in the financing of the contract.
No disclosure of classified information
The contractor must not furnish or disclose any classified document, including the contract itself, or other classified information related to the work to an assignee until the contracting officer authorizes disclosure in writing. Financing rights do not override security restrictions.
Optional no-setoff protection
If Alternate I is included, payments to the assignee are not subject to reduction or setoff to the extent specified in the Act, unless the contract states otherwise. This is a financing protection that can improve the lender’s confidence in the receivables stream.
Responsibilities
Contractor
May assign payment rights only to an eligible financing institution and must ensure the assignment complies with the Act and the clause. The contractor must assign all unpaid amounts, avoid multiple assignees except through a permitted trustee or agent structure, and must not disclose classified documents or classified work information to the assignee without written contracting officer approval.
Assignee / Financing Institution
May receive the contractor’s payment rights and, if permitted, further assign or reassign those rights only to another qualifying financing institution. The assignee must understand that its rights are limited to the assignment authorized by law and contract, and that access to classified information is prohibited absent written authorization.
Contracting Officer
Must administer the clause, including authorizing in writing any disclosure of classified information to an assignee when appropriate. The contracting officer also determines whether the contract includes the optional no-setoff language and ensures the assignment is handled consistently with the Act and contract requirements.
Agency / Government
Must recognize valid assignments made under the Act and clause and, when Alternate I applies, honor the no-setoff commitment to the extent required by law. The Government must also protect classified information and maintain payment administration consistent with the assignment terms.
Practical Implications
This clause is mainly a financing tool: it lets contractors pledge contract receivables to lenders, which can improve cash flow and support performance on large or long-term contracts.
A common mistake is trying to assign only part of the payments or naming multiple lenders directly; the clause generally requires one assignee and all unpaid amounts, unless a trustee or agent structure is used.
Contractors and lenders should not assume the assignment gives the assignee access to contract files or classified material; written contracting officer approval is required before any such disclosure.
If Alternate I is included, contractors and lenders should verify whether the contract contains a no-setoff commitment, because that affects the lender’s risk and the Government’s ability to offset debts against payments.
Before relying on an assignment, parties should confirm the assignment document, notice requirements, and any agency-specific payment procedures are properly completed so payments are directed correctly and the assignment is legally effective.
Official Regulatory Text
As prescribed in 32.806 (a)(1) , insert the following clause: Assignment of Claims (May 2014) (a) The Contractor, under the Assignment of Claims Act, as amended, 31 U.S.C.3727 , 41 U.S.C.6305 (hereafter referred to as "the Act"), may assign its rights to be paid amounts due or to become due as a result of the performance of this contract to a bank, trust company, or other financing institution, including any Federal lending agency. The assignee under such an assignment may thereafter further assign or reassign its right under the original assignment to any type of financing institution described in the preceding sentence. (b) Any assignment or reassignment authorized under the Act and this clause shall cover all unpaid amounts payable under this contract, and shall not be made to more than one party, except that an assignment or reassignment may be made to one party as agent or trustee for two or more parties participating in the financing of this contract. (c) The Contractor shall not furnish or disclose to any assignee under this contract any classified document (including this contract) or information related to work under this contract until the Contracting Officer authorizes such action in writing. (End of clause) Alternate I (Apr 1984) . If a no-setoff commitment is to be included in the contract (see 32.801 and 32.803 (d)), add the following sentence at the end of paragraph (a) of the basic clause: Unless otherwise stated in this contract, payments to an assignee of any amounts due or to become due under this contract shall not, to the extent specified in the Act, be subject to reduction or setoff.