FAR 52.232-24—Prohibition of Assignment of Claims.
Plain-English Summary
FAR 52.232-24 is a short but important payment clause that bars the contractor from assigning claims under the Assignment of Claims Act of 1940 for the covered contract. In practical terms, it tells the contractor, the contracting officer, and any financing source that the contractor may not transfer its right to receive contract payments to a bank, lender, factor, or other assignee unless some other legal authority specifically allows it. The clause ties directly to the statutory assignment rules in 31 U.S.C. 3727 and 41 U.S.C. 6305, which generally restrict assignment of claims against the Government. Its purpose is to protect the Government from conflicting payment demands, unauthorized transfers, and disputes over who is entitled to payment. For contractors, the clause matters because it can affect financing arrangements and cash flow planning; for contracting officers, it is a clear notice that the contract does not permit assignment of claims. In practice, this clause is a simple prohibition, but it has significant consequences if a contractor tries to pledge or transfer contract receivables without ensuring the arrangement is legally permitted.
Key Rules
Assignment is prohibited
The clause states that assignment of claims under the Assignment of Claims Act is prohibited for the contract. The contractor may not transfer its right to receive contract payments under this contract through an assignment covered by the statute.
Statutory references control
The prohibition is tied to 31 U.S.C. 3727 and 41 U.S.C. 6305, which are the legal authorities governing assignment of claims against the Government. Those statutes define the baseline rule and any exceptions, so the clause must be read in that legal context.
Applies to contract claims
The restriction concerns claims for payment arising under the contract, not every possible business transaction the contractor may enter into. However, any arrangement that effectively assigns the Government payment right should be reviewed carefully for compliance.
No automatic financing right
The clause does not create a right to use contract receivables as collateral or to direct payment to a lender. If a contractor wants to finance performance using contract proceeds, it must ensure the arrangement is otherwise lawful and recognized by the Government where required.
Government pays the contractor of record
Because assignment is prohibited, the Government generally expects to pay the original contractor named in the contract, not a third party. This reduces the risk of multiple claims, unauthorized payment instructions, and disputes over entitlement.
Responsibilities
Contracting Officer
Include this clause when prescribed and ensure the contract clearly states that assignment of claims is prohibited. The contracting officer should also be alert to any attempted assignment or payment redirection and coordinate with legal or finance personnel if a contractor raises financing or receivables-transfer issues.
Contractor
Do not assign contract claims or payment rights under the contract in a way prohibited by the Assignment of Claims Act. Before entering into financing, factoring, or collateral arrangements involving contract receivables, the contractor must confirm whether the arrangement is allowed and whether any Government consent or statutory exception applies.
Government Payment Office
Make payments only in accordance with the contract and applicable law, and do not honor unauthorized payment instructions from third parties. If a purported assignment is presented, verify whether it is legally effective before changing payment practices.
Lender or Financing Source
Do not assume the contractor can assign claims under this contract. Any financing arrangement based on contract receivables must be structured to comply with the statute and the contract terms, or it may not be enforceable against the Government.
Practical Implications
Contractors cannot assume they can pledge federal contract receivables the same way they would private-sector accounts receivable; this clause is a direct warning that the Government may reject an assignment.
A common pitfall is confusing a private financing agreement with a legally effective assignment against the Government. Even if the contractor signs a loan or factoring document, that does not mean the Government must recognize the assignee.
Contracting officers should watch for requests to change payee information, direct payments to lenders, or add assignment language to the contract file, because these may signal an unauthorized assignment issue.
If a contractor needs working capital, it should raise the issue early and get legal review before relying on contract proceeds as collateral.
Because the clause is brief, parties sometimes overlook it; however, it can affect payment processing, financing eligibility, and dispute resolution if ignored.
Official Regulatory Text
As prescribed in 32.806 (b) , insert the following clause: Prohibition of Assignment of Claims (May 2014) The assignment of claims under the Assignment of Claims Act of 1940 "( 31 U.S.C.3727 , 41 U.S.C. 6305 )" is prohibited for this contract. (End of clause)