assignment of claims state government receivables

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40 U.S.C. 121(c) ; 10 U.S.C. chapter 4 and 10 U.S.C. chapter 137 legacy provisions (see 10 U.S.C. 3016 ); and 51 U.S.C. 20113 .

48 FR 42328 , Sept. 19, 1983, unless otherwise noted.

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Subpart 32.8—assignment of claims, 32.800 scope of subpart..

This subpart prescribes policies and procedures for the assignment of claims under the Assignment of Claims Act of 1940, as amended, ( 31 U.S.C. 3727 , 41 U.S.C. 6305 ) (hereafter referred to as the Act ).

[ 48 FR 42328 , Sept. 19, 1983, as amended at 51 FR 2665 , Jan. 17, 1986; 79 FR 24212 , Apr. 29, 2014]

32.801 Definitions.

Designated agency, as used in this subpart, means any department or agency of the executive branch of the United States Government (see 32.803(d)).

No-setoff commitment, as used in this subpart, means a contractual undertaking that, to the extent permitted by the Act, payments by the designated agency to the assignee under an assignment of claims will not be reduced to liquidate the indebtedness of the contractor to the Government.

[ 48 FR 42328 , Sept. 19, 1983, as amended at 60 FR 49730 , Sept. 26, 1995; 66 FR 2132 , Jan. 10, 2001]

32.802 Conditions.

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.

32.803 Policies.

( 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.

[ 48 FR 42328 , Sept. 19, 1983, as amended at 60 FR 49730 , Sept. 26, 1995; 61 FR 18921 , Apr. 29, 1996]

32.804 Extent of assignee's protection.

( a ) No payments made by the Government to the assignee under any contract assigned in accordance with the Act may be recovered on account of any liability of the contractor to the Government. This immunity of the assignee is effective whether the contractor's liability arises from or independently of the assigned contract.

( b ) Except as provided in paragraph (c) below, the inclusion of a no-setoff commitment in an assigned contract entitles the assignee to receive contract payments free of reduction or setoff for—

( 1 ) Any liability of the contractor to the Government arising independently of the contract; and

( 2 ) Any of the following liabilities of the contractor to the Government arising from the assigned contract:

( i ) Renegotiation under any statute or contract clause.

( ii ) Fines.

( iii ) Penalties, exclusive of amounts that may be collected or witheld from the contractor under, or for failure to comply with, the terms of the contract.

( iv ) Taxes or social security contributions.

( v ) Withholding or nonwithholding of taxes or social security contributions.

( c ) In some circumstances, a setoff may be appropriate even though the assigned contract includes a no-setoff commitment, e.g.—

( 1 ) When the assignee has neither made a loan under the assignment nor made a commitment to do so; or

( 2 ) To the extent that the amount due on the contract exceeds the amount of any loans made or expected to be made under a firm commitment for financing.

32.805 Procedure.

( a ) Assignments.

( 1 ) Assignments by corporations shall be—

( i ) Executed by an authorized representative;

( ii ) Attested by the secretary or the assistant secretary of the corporation; and

( iii ) Impressed with the corporate seal or accompanied by a true copy of the resolution of the corporation's board of directors authorizing the signing representative to execute the assignment.

( 2 ) Assignments by a partnership may be signed by one partner, if the assignment is accompanied by adequate evidence that the signer is a general partner of the partnership and is authorized to execute assignments on behalf of the partnership.

( 3 ) Assignments by an individual shall be signed by that individual and the signature acknowledged before a notary public or other person authorized to administer oaths.

( b ) Filing. The assignee shall forward to each party specified in 32.802(e) an original and three copies of the notice of assignment, together with one true copy of the instrument of assignment. The true copy shall be a certified duplicate or photostat copy of the original assignment.

( c ) Format for notice of assignment. The following is a suggested format for use by an assignee in providing the notice of assignment required by 32.802(e).

Notice of Assignment

TO: __________ [ address to one of the parties specified in 32.802(e) ].

This has reference to Contract No. ______ dated ______, entered into between ________ [ contractor's name and address ] and ________ [ government agency, name of office, and address ], for ________ [ describe nature of the contract ].

Moneys due or to become due under the contract described above have been assigned to the undersigned under the provisions of the Assignment of Claims Act of 1940, as amended, ( 31 U.S.C. 3727 , 41 U.S.C. 6305 ).

A true copy of the instrument of assignment executed by the Contractor on ________ [ date ], is attached to the original notice.

Payments due or to become due under this contract should be made to the undersigned assignee.

Please return to the undersigned the three enclosed copies of this notice with appropriate notations showing the date and hour of receipt, and signed by the person acknowledging receipt on behalf of the addressee.

Very truly yours,

[ name of assignee ]

[ signature of signing officer

[ title of signing officer ]

[ address of assignee ]

Acknowledgement

Receipt is acknowledged of the above notice and of a copy of the instrument of assignment. They were received at ____ (a.m.) (p.m.) on ________, 20____.

[ signature ]

On behalf of

[ name of addressee of this notice ]

( d ) Examination by the Government. In examining and processing notices of assignment and before acknowleging their receipt, contracting officers should assure that the following conditions and any additional conditions specified in agency regulations, have been met:

( 1 ) The contract has been properly approved and executed.

( 2 ) The contract is one under which claims may be assigned.

( 3 ) The assignment covers only money due or to become due under the contract.

( 4 ) The assignee is registered separately in the System for Award Management unless one of the exceptions in 4.1102 applies.

( e ) Release of assignment.

( 1 ) A release of an assignment is required whenever—

( i ) There has been a further assignment or reassignment under the Act; or

( ii ) The contractor wishes to reestablish its right to receive further payments after the contractor's obligations to the assignee have been satisfied and a balance remains due under the contract.

( 2 ) The assignee, under a further assignment or reassignment, in order to establish a right to receive payment from the Government, must file with the addressees listed in 32.802(e) a—

( i ) Written notice of release of the contractor by the assigning financing institution;

( ii ) Copy of the release instrument;

( iii ) Written notice of the further assignment or reassignment; and

( iv ) Copy of the further assignment or reassignment instrument.

( 3 ) If the assignee releases the contractor from an assignment of claims under a contract, the contractor, in order to establish a right to receive payment of the balance due under the contract, must file a written notice of release together with a true copy of the release of assignment instrument with the addressees noted in 32.802(e).

( 4 ) The addressee of a notice of release of assignment or the official acting on behalf of that addressee shall acknowledge receipt of the notice.

[ 48 FR 42328 , Sept. 19, 1983, as amended at 51 FR 2665 , Jan. 17, 1986; 52 FR 9039 , Mar. 20, 1987; 62 FR 237 , Jan. 2, 1997; 64 FR 10533 , Mar. 4, 1999; 65 FR 24325 , Apr. 25, 2000; 68 FR 56673 , Oct. 1, 2003; 78 FR 37679 , June 21, 2013; 79 FR 24212 , Apr. 29, 2014]

32.806 Contract clauses.

( 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 FAR 32.803(d)), the contracting officer shall use the clause with its Alternate I.

( 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.

[ 48 FR 42328 , Sept. 19, 1983, as amended at 51 FR 2665 , Jan. 17, 1986; 60 FR 49730 , Sept. 26, 1995; 61 FR 18921 , Apr. 29, 1996]

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CAN YOU SELL A GOVERNMENT CONTRACT: ASSIGNMENT, NOVATION, CHANGE OF NAME AND ASSIGNMENT OF CLAIMS

Contractors frequently ask if they can sell or transfer (assign) their government contract to another company.  The sale or assignment of a purely commercial contract is very common and well recognized at law. But for a Government contract, there are special rules.  Although a transfer can be made through a process known as “novation,” the contract can be annulled if the rules are not carefully followed.

Commercial Contracts May Generally Be Sold: Generally, commercial contracts can be sold or transferred to a third party.  Indeed, Article 2-210 of the Uniform Commercial Code (“UCC”) explicitly permits this, by stating:

§ 2-210. Delegation of Performance; Assignment of Rights.

(1) A party may perform his duty through a delegate unless otherwise agreed [].

(2) Unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract [].

(4) An assignment of “the contract” or of “all my rights under the contract” or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. [].

UCC Article 2 has been adopted by 49 states and the District of Columbia.  Only Louisiana, which has a civil law (not an English Common Law) system, has declined to adopt it.

Government Contracts May Not Be Sold Or Assigned, Except through Novation: The simple answer to the question of the assignment or sale of a government contract, is “NO.”  U.S. law prohibits it, and states that any attempted transfer or assignment will annul the contract:

General Prohibition on Transfer of Contracts . The party to whom the Federal Government gives a contract or order may not transfer the contract or order, or any interest in the contract or order, to another party. A purported transfer in violation of this subsection annuls the contract or order so far as the Federal Government is concerned, except that all rights of action for breach of contract are reserved to the Federal Government.

41 U.S.C. § 6305, known as the “Contracts Act.”  This prohibition, which is repeated in FAR 42.1204, protects the government from secret asssignments, prevents possible multiple claims and makes unnecessary the investigation of assignments. See American Gov’t Properties and Houma SSA v. United States, Fed. Cl. No. 09-153 (Aug. 28, 2014).  There are only two exceptions: (1) where the Government waives the prohbition by giving clear assent to the assignment; and (2) where the assignment occurs by operation of law (e.g., where there was corporate success through merger or consolidation).  In American Gov’t Properties, the Court held that an assignment of the contract violated the Contracts Act since there was no exception, that the contract had been annulled (voided), and that therefore, the Court had no jurisdiction because there was no contract and the Contract Disputes Act did not apply.

Furthermore, as readers know, only responsible contractors may receive contract awards, and when a contractor sells or transfer a contract, unless special provision are made for government review, the Government will have no assurance that the buyer is responsible.

Novation-the proper way to transfer a Government contract:  The FAR does provide for transfer of a contract to a third party through a process called “novation” (substitution of a new contract for an existing one, between different parties).  The government has the option (but is not required) to recognize a third party as a “successor in interest” to a Government contract only when there is a transfer of: (1) all the contractor’s assets; or (2) the entire portion of the contractor’s assets involved in performing the contract. FAR 42.1204(a).

In order to effect a novation, the contractor must carefully following the procedure in FAR 42.1204, by submitting copies of a proposed novation agreement, along with detailed information on all affected contracts, evidence of the transferee’s capability to perform, and any other relevant information requested by the contracting officer.  Certain specific documents must also be submitted (bill or sale or merger; minutes of boards of directors authorizing the transfer, copies of corporate articles, opinion of legal counsel, balance sheets, evidence of security clearances, if required, consent of sureties).  Even more important, the novation agreement must provide that:

(1)   the transferee assumes all the transferor’s obligations under the contract, and is receiving all the assets devoted to the contract

(2)   the transferor guarantees performance of the contract by the transferee (a bond may be used)

(3)   the transferor waives all rights under the government contract

(4)   Both transferor and transferee must comply with all Federal laws.

A sample novation agreement is included in the FAR, and should be used for all novations. FAR 42.1204.  REMEMBER: The novation will not take effect until approved by the Contracting Officer and the Contract is modified, in writing, to acknowledge and accept the novation.  Until that happens, the transferor must continue to perform, and all payments will be made to the contractor whose name appears on the contract.

Change of Name Only: If only a change of the contractor’s name is involved and the Government’s and contractor’s rights and obligations remain unaffected, the contractor may simply forward to the contracting officer copies of the Change of Name Agreement, a list of contracts, the State document effecting the name change, and the opinion of legal counsel.  FAR 42.1205.  Once again, this section of the FAR includes a simple “Change of Name Agreement” which can be used.  Again, this should be memorialized in a modification to the contract.

You Cannot Sell Your Government Contract Invoices:  In the commercial world, invoices can be sold or “factored” to get immediate cash flow.  A financial factor may buy your invoiced receivables at a discount.  Collecting from the customer then becomes the factor’s responsibility. You cannot “sell” or factor your government contract invoices to a third party, because the Contracts Act states “ [the contractor] may not transfer the contract or order, or any interest in the contract or order, to another party”  41 U.S.C. § 6305(a).  But there is another lawful method, outlined in the Contracts Act, and 31 U.S.C. § 3727, the Assignment of Claims Act of 1940, that permits something similar, but not identical.

Under the Assignment of Claims Act, a Government contractor may obtain financing for its contract by borrowing money from a bank or financial institution and then assigning moneys due or to become due under a contract if the assignment is made to a that bank or financial institution, the contract does not prohibit the assignment, and generally, the assignment covers all unpaid amounts payable, is made to only one party, and is not subject to any further assignment.  There is a specific procedure in FAR 32.805, which requires formal submission of the Notice of Assignment to the Contracting Officer, and an acknowledgement of that instrument of assignment by the Contracting Officer.  Once acknowledged, the assignment takes effect.

The contract must then be modified, and all future payments of invoices must be made only to the assignee.  If the Government erroneously pays the contractor, the bank or financing institution may bring a suit against the government to recover any contract payment made to the contractor. Produce Factors Corp. v. United States, 467 F.2d 1343, 1349 (Ct.Cl.1972). An erroneous payment made by the Government is no bar to the rightful claimant, the assignee bank. Central Nat’l Bank v. United States, 91 F.Supp. 738, 741 (Ct.Cl.1950) (citation omitted).

Summary:  While commercial contracts may be sold or assigned to a third party, Government Contracts may not be.   However, government contracts may be transferred through novation, where the government gives its formal written approval after submission of specific information and assurances.  A simple change of the contractor’s name does not require a novation.  Finally, although government contractors may not “sell” their invoices, they may obtain loans from financial institutions and assign the proceeds of the contract to the financial institution granting the loan.

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What You Need to Know About Financing Government Accounts Receivable

While this situation can seem daunting, help is available.  The important thing is to make sure you are educated about bank requirements and your options.

Who should I speak to about financing government receivables?

Find a bank or niche lending company that specializes in government accounts receivable.  For companies in the Washington, D.C. area, this will be very easy because most banks have a specialty unit that deals with government receivables. Companies outside Washington, D.C. can speak with a large national bank or a mid-size bank that has a niche in understanding the intricacies of government receivables.

What are banks’ concerns about government receivables?

First, there are a number of methods contractors can use to bill the government. For instance, contractors may receive advance, progress, or performance-based payments. Most banks will not lend against advance payments because the work is typically not yet performed, nor will they lend against progress payments because the bank would be at risk if the contractor is unable to fulfill the task. Performance-based payments are based on completed work or shipped products so bankers are more willing to lend on these receivables — typically 80 to 90 percent of the invoice amount.

Additionally, it can be difficult for banks to “assign claims” from the government. The assignment of claims is a federal law that allows and specifies the procedures for assigning financial rights to invoices of government contractors.

The Federal Acquisition Regulations contain many rules and regulations by which government contractors need to abide. If any are not followed, the government typically has the right to withhold payment on submitted invoices until the problem is rectified.

Do I need to provide the necessary working capital until amounts are billed?

Not necessarily. Most banks that have experience in this area will lend up to 50 percent of costs expended plus estimated profit for amounts not yet billed. However, in most cases, the contractor has to request such advance rates because banks rarely offer this in their initial dealings with a contractor.

What about factoring government receivables?

Factoring is “selling” the accounts receivable to a third party that collects the payment from the government. Many start-up companies that have limited working capital will find a niche firm that will factor government receivables to mobilize a contract until they have sufficient working capital to finance it internally. Factoring is typically much more expensive than the traditional financing discussed above. To find a lender involved with factoring government receivables, you can simply conduct an Internet search for “Factoring U.S. government accounts receivable.”

How much working capital is typically required for a government contract?

The amount of working capital required depends on the terms of the contract and the goods and/or services being provided. Performance-based contracts are the government’s preferred method of contracting. These are typically billed monthly for goods and/or services delivered.  “Good” contractors will typically be paid 45 to 60 days from the date of the invoice, but initial invoices for new contracts usually take longer to be processed through the system.

Will the government finance the accounts receivable?

In some cases, the government will provide advance payments and/or progress payments against specific contracts. However, due to the high degree of risk, advance payments are the government’s least preferred method of contract financing. FAR Part 32 discusses the process to obtain contract financing from the government, and FAR Part 52.232 discusses various payment methods.

David E. Shaffer can be reached at Email or 215.441.4600.

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31 U.S. Code § 3727 - Assignments of claims

In subsection (a)(1), the words “or share thereof” and “whether absolute or conditional, and whatever may be the consideration therefor” are omitted as surplus. In clause (2), the word “authorization” is substituted for “powers of attorney, orders, or other authorities” to eliminate unnecessary words.

In subsections (b) and (c), the word “official” is substituted for “officer” for consistency in the revised title and with other titles of the United States Code.

In subsection (b), the words “Except as hereinafter provided” are omitted as unnecessary. The words “read and” are omitted as surplus. The words “to the person acknowledging the same” are omitted as unnecessary. The text of 31:203(1st par. last sentence) is omitted as superseded by 39:410. The words “Notwithstanding any law to the contrary governing the validity of assignments ” and the text of 31:203(last par.) are omitted as unnecessary.

In subsection (c), before clause (1), the words “bank, trust company, or other . . . including any Federal lending agency” are omitted as surplus. The words “of money due or to become due under a contract providing for payments totaling at least $1,000” are substituted for “in any case in which the moneys due or to become due from the United States or from any agency or department thereof, under a contract providing for payments aggregating $1,000 or more” to eliminate unnecessary words. The text of 31:203(2d par. proviso cl. 1) is omitted as executed. In clause (1), the words “in the case of any contract entered into after October 9, 1940 ” are omitted as executed. In clause (2)(A), the words “payable under such contract” are omitted as surplus. In clause (3), the words “true” and “instrument of” are omitted as surplus. The words “department or” are omitted because of the restatement. The words “if any” and “to make payment” are omitted as surplus.

In subsection (d), before clause (1), the words “During a war or national emergency proclaimed by the President or declared by law and ended by proclamation or law” are substituted for “in time of war or national emergency proclaimed by the President (including the national emergency proclaimed December 16, 1950 ) or by Act or joint resolution of the Congress and until such war or national emergency has been terminated in such manner” to eliminate unnecessary words. The words “ Department of Energy (when carrying out duties and powers formerly carried out by the Atomic Energy Commission)” are substituted for “Atomic Energy Commission” (which was reconstituted as the Energy Research and Development Administration by 42:5813 and 5814) because of 42:7151(a) and 7293. The words “other department or . . . of the United States . . . except any such contract under which full payment has been made” and “of any moneys due or to become due under such contract” before “shall not be subject” are omitted as surplus. The words “A payment subsequently due under the contract (even after the war or emergency is ended) shall be paid to the assignee without” are substituted for “and if such provision or one to the same general effect has been at any time heretofore or is hereafter included or inserted in any such contract, payments to be made thereafter to an assignee of any moneys due or to become due under such contract, whether during or after such war or emergency . . . hereafter” to eliminate unnecessary words. The words “of any nature” are omitted as surplus. In clause (1), the words “or any department or agency thereof” are omitted as unnecessary. In clause (2), the words “under any renegotiation statute or under any statutory renegotiation article in the contract” are omitted as surplus.

Subsection (e)(1) is substituted for 31:203(4th par.) to eliminate unnecessary words.

In subsection (e)(2), the words “person receiving an amount under an assignment or allotment” are substituted for “assignees, transferees, or allottees” for clarity and consistency. The words “or to others for them” and “with respect to such assignments , transfers, or allotments or the use of such moneys” are omitted as surplus. The words “person making the assignment or allotment” are substituted for “assignors, transferors, or allotters” for clarity and consistency.

Change Number: DFARS Change 07/29/2024 Effective Date: 07/29/2024

Subpart 232.8 - ASSIGNMENT OF CLAIMS

232.803 policies..

(b) Only contracts for personal services may prohibit the assignment of claims.

(d) Pursuant to 41 U.S.C. 6305, and in accordance with Presidential delegation dated October 3, 1995, Secretary of Defense delegation dated February 5, 1996, and Under Secretary of Defense (Acquisition and Sustainment) delegation dated February 23, 1996, the Director of Defense Procurement determined on May 10, 1996, that a need exists for DoD to agree not to reduce or set off any money due or to become due under the contract when the proceeds under the contract have been assigned in accordance with the Assignment of Claims provision of the contract. This determination was published in the Federal Register on June 11, 1996, as required by law. Nevertheless, if departments/agencies decide it is in the Government's interest, or if the contracting officer makes a determination in accordance with FAR 32.803(d) concerning a significantly indebted offeror, they may exclude the no-setoff commitment.

232.805 Procedure.

(b) The assignee shall forward—

(i) To the administrative contracting officer (ACO), a true copy of the instrument of assignment and an original and three copies of the notice of assignment. The ACO shall acknowledge receipt by signing and dating all copies of the notice of assignment and shall—

(A) File the true copy of the instrument of assignment and the original of the notice in the contract file;

(B) Forward two copies of the notice to the disbursing officer of the payment office cited in the contract;

(C) Return a copy of the notice to the assignee; and

(D) Advise the contracting officer of the assignment.

(ii) To the surety or sureties, if any, a true copy of the instrument of assignment and an original and three copies of the notice of assignment. The surety shall return three acknowledged copies of the notice to the assignee, who shall forward two copies to the disbursing officer designated in the contract.

(iii) To the disbursing officer of the payment office cited in the contract, a true copy of the instrument of assignment and an original and one copy of the notice of assignment. The disbursing officer shall acknowledge and return to the assignee the copy of the notice and shall file the true copy of the instrument and original notice.

232.806 Contract clauses.

(a)(1) Use the clause at 252.232-7008 , Assignment of Claims (Overseas), instead of the clause at FAR 52.232-23, Assignment of Claims, in solicitations and contracts when contract performance will be in a foreign country.

(2) Use Alternate I with the clause at FAR 52.232-23, Assignment of Claims, unless otherwise authorized under 232.803 (d).

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• What the Federal Assignment of Claims Act Means for Government Contractors

The Federal Assignment of Claims Act defines how lenders or factoring companies can arrange for payments when federal contracts are part of the accounts receivable or loans made to the contractor. Essentially, if the borrower, or the contractor, uses the business's accounts receivable as collateral, then the Federal Assignment of Claims Act guides how the lender may control the collateral.

The Federal Assignment of Claims Act has been a law since the late 1930s, and it was designed to provide a roadmap for contractors working with the government to finance their projects when working on federal or government contracts. Further guiding the assignment process is the Uniform Commercial Code (UCC), which is a set of standards adopted by most of the United States.

A business that purchases goods or services may be required to send payments to a factoring company if the factoring company sends out a notice that the business’s accounts have been sold to the factoring company. Interestingly, a business may receive a Notice of Assignment form an invoice factoring company with which the business had no prior financial relationship.

How Factoring Helps Contractors Bid on Government Contracts

Government contracts represent a competitive arena where making the right bid can make all the difference in securing a contract or being passed over for another company. A contractor must research the costs of the project and ensure that his or her business can complete the project with the amount of money offered for the project's bid.

With the assistance of a government contract receivables financing company , virtually any government contracting company may bid with confidence on a project. Contractors who provide goods or services for fleet vehicles, disposable goods, and legal assistance may benefit as well as companies that provide technical assistance or which are involved in the transport of goods.

When a business must work under federal regulations and the Federal Assignment of Claims Act. There are a variety of benefits offered by government contract receivable financing. Some of those benefits include AR financing, spot factoring , and bridge financing. A contractor may also seek out same-day funding or PO financing , and enjoy industry-low rates and a quick invoice process.

Obtaining a Lucrative Government Contract

One of the reasons a contractor may seek out work with the government is the excellent pay and the reliability of a steady working relationship with the government. The federal government and the local governments around the country represent the largest employer in the United States, and companies that can secure successive government contracts may enjoy a lucrative income with the federal government as their only client.

In addition to providing the necessary funds to begin work on a government contract, the cash from government contract receivables financing may allow a company to hire additional employees for the project, expand the business, and take on additional contracts. The contractor can also buy additional equipment and ensure all invoices are paid on time.

Government Contractor Financing Solutions

Becoming a government contractor can mean that payment isn't always right around the corner. It's common for the government to offer lengthy payment cycles. A contract that requires a lengthy wait for payment may mean a contractor cannot bid on the project because of a lack of current operating cash. Government contract receivables can eliminate this problem and ensure that you can get paid.

Security Business Capital can help you work through all of your government contracting financing needs. Contact us today for a quote!

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Lending on Government Receivables and Contracts

November 2, 2023

By Carol Apicella and Richard Pollak

Government contractors’ stressors, including, among others, their financial performance, successful contract award, and building the infrastructure to complete the effort, combined with fulfillment of the contract, create pressures much like those when a diamond is created.

But even diamonds have flaws. Some flaws may be readily visible, while others need the aid of magnification to be brought to light. The lender must use its knowledge to identify those flaws that may impact its secured position vs. those that are not harmful to the lending relationship.

Relationships in lending include analysis of borrowers’ past and present business operations as well as understanding requirements linked to successfully perform on contracts. Contract awareness includes, though not limited to, the contract being:

• Fully executed by all parties
• Appropriated for the full contract amount (Base year plus
• Option years)
• Track appropriations-Purchase Orders (PO), Task Orders (TO), Work Orders (WO)
• Verify Periods of Performance
• Terms of Billing and Payment
• Billing vehicles (i.e., WAWF, IPP, Tungsten, etc.)

Familiarity with the contract terms, preparedness for the plethora of government acronyms, and lender vigilance in understanding the borrower’s obligations are all important before wading into the world of government contract finance.

Is Your Institution Properly Secured?

Whether a bank or a finance company in an ABL relationship or purchasing invoices in a factoring relationship, the collateral will be tied to services rendered and/or goods delivered and typically all business assets.

Perfecting the lender’s first lien position under the Uniform Commercial Code (“UCC”) and taking an assignment as allowed by the Federal Assignment of Claims Act (“FACA”) on prime government contracts where applicable, are two action items necessary to being secured.

Under the Uniform Commercial Code (UCC), a secured creditor perfects its security interest in accounts receivables (accounts) by obtaining a security agreement and filing a financing statement in the appropriate jurisdiction. Perfection in this manner works for both commercial accounts and accounts which are subject to the Federal Assignment of Claims Act (FACA). If this is the case, then why should a lender comply with the FACA? Click here  to read the full article. 

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Sale Or Assignment Of US Government Receivables – FACA Considerations

Contributor.

Buying and selling receivables, the obligor of which is the United States government, requires consideration of the Federal Assignment of Claims Act ("FACA"). As is the case with non-government account debtors, the federal government, in its capacity as an obligor, has the ability (with certain limited exceptions) to set off contractual payments owed by it to a seller of the right to receive such payments, against amounts payable to it by such seller for both (x) damages and related payments caused by such seller's failure to perform under the applicable contract and (y) any other amounts owing to the government by such seller (including federal tax liability). In the case of non-government obligors, under the terms of the Uniform Commercial Code, a purchaser of the right to receive a contractual payment owing by such obligor may, generally, limit or cut-off the applicable set off rights of the related obligor, by providing a somewhat simple notice to such obligor that the seller has assigned its right to receive such payments. In order for a purchaser to limit the set off rights of the federal government, however, the purchaser must comply with the more complicated requirements of FACA.

Compliance with FACA generally requires that: (i) the relevant underlying contract specifies payments aggregating $1,000 or more; (ii) the contract does not prohibit assignment; (iii) the assignment covers all unpaid amounts payable under the contract; (iv) the assignment is made only to one party and is not subject to further assignment; and (v) the assignee sends a written notice of the assignment (together with a copy of the assignment instrument) to the contracting officer or the head of the relevant agency, the surety on any bond applicable to the contract, and the disbursing officer designated in the contract.

While failure to comply with FACA will, generally, render the related assignment void, solely as between the seller and the federal government obligor, such failure should have no impact on the validity of the transfer as between the seller and the purchaser (including with respect to any rights of creditors of the seller).

The primary risks, therefore, of non-compliance with FACA are (x) the inability on the part of the purchaser to limit the right of the federal government to set off its contractual payment obligations, against amounts owing by the related seller to the federal government, and not arising under the related contract (including federal tax liability)¹ and (y) payment by the federal government to an account of the seller not controlled by the purchaser.

Dealing with US federal government accounts receivable involve more complicated legal considerations than non-government receivables. Risks and benefits of compliance or non-compliance with FACA should be discussed with your lawyers.

¹ Compliance with FACA, as is the case with the provision of notice of assignment to non-government obligors, allows the applicable purchaser the general ability to limit or prevent set off by the related obligor against general obligations of the applicable seller which arise after compliance (or, in the case of non-government obligors, receipt of notice of assignment), and not relating to claims as a result of the failure by such seller to perform under the related contract (it being understood, that government and non-government obligors generally may, both before and after notice or compliance, as the case may be, continue to set off against claims resulting from the failure of the seller to perform its obligations under the related contract).

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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Federal Assignment of Claims Act

The Federal Assignment of Claims Act, also known as FACA, provides guidance, restrictions, and protections for government contractors who sell their invoices. Before FACA was passed, the law prohibited contractors from assigning their accounts receivable to factoring companies. However, this drastically reduced the amount of work contractors were able to provide because it limited their cash flow.

FACA allows contractors to assign invoices to factoring companies if they meet the following requirements:

• The payment amounts to $1,000 or more.
• The contractor assigns the invoice to a bank, trust company, or other financing institution.
• The contract doesn't prohibit assignment of invoices to another entity.
• The assignment covers the total unpaid amounts.
• The assignment is made to only one party.

If a contractor sells their invoices to a factoring company, FACA states that the government is obligated to make payments directly to the factoring company's bank account. The government cannot recover payments were made in error. FACA prohibits the government contractor, the seller, from redirecting the government payments. Also, FACA allows the factoring company to pursue collection of past-due invoices.

When a federal contractor assigns their invoices to a factoring company, they must send out three copies of the notice of assignment. This notice informs the clients that their accounts have been sold. One copy is sent to the contracting officer or head of the government agency, one is sent to the surety or guarantor on any bond included in the contract, and one is sent to the disbursing officer who is designated to make payments.

The Uniform Commercial Code (UCC) provides some additional guidelines on factoring for federal contractors. Factoring companies must file a UCC-1 statement for all government contract payments. This statement is a declaration of their right to seize assets from debtors who default on their payments.

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Kamala Harris Was Willie Brown's Mistress and He Made Her Career?

Harris long ago distanced herself from the relationship., anna rascouët-paz, published july 25, 2024.

About this rating

Harris dated former Willie Brown in 1994 and 1995. As the state assembly speaker, Brown appointed her to two political posts: the California Unemployment Insurance Appeals Board, and later the Medical Assistance Commission.

While Brown was still married when he and Harris started to date, he and his wife, Blanche Brown, had been separated 13 years by then. Harris' first, successful run for office in 2003 happened eight years after the relationship ended. Since then, Harris and Brown have taken several opportunities to distance themselves from each other.

After U.S. President Joe Biden, the presumptive Democratic presidential nominee, ended his 2024 campaign and endorsed Vice President Kamala Harris in July 2024, old rumors that she had "slept her way to the top" returned:

The claim spread quickly on X , Facebook and TikTok . 

Several people, including former Fox News host Megyn Kelly, insisted that Harris' affair to former San Francisco Mayor and Speaker of the California Assembly Willie Brown was relevant to her White House bid as proof of her "ruthlessness" and "ambition." Indeed, they said, Brown gave her visibility by appointing her to two political posts in the mid-1990s, when they were reportedly "dating."

The claim first appeared in 2020, after Biden nominated Harris as his running mate. At the time, a headline from Teaparty.org story read, "Flashback: Kamala Harris Launched Her Political Career In Bedroom As Mistress Of Married Mayor Willie Brown."

Memes generated during the 2020 Democratic primaries also shared the claim:

The rumors were misleading as they exaggerated both the adulterous aspect of the relationship and the importance of Brown's influence on Harris' career. 

Then 29, Harris dated Brown in 1994 and 1995, but Brown, who was 60 when their relationship began, had been separated from his wife, Blanche Brown, since 1981. Harris was assistant district attorney in Alameda County when they met. Brown then appointed Harris to two political posts while he was speaker of the California Assembly, but that was in 1994 — years before Harris was elected district attorney of San Francisco in 2003. She would remain in that post until 2011, when she won the office of California district attorney. In 2016, she ran for U.S. Senate and was elected. 

Neither Brown nor Harris ever tried to conceal the fact they had been a couple . Brown addressed accusations of favoritism in the San Francisco Chronicle on Jan. 26, 2019 :

Yes, we dated. It was more than 20 years ago. Yes, I may have influenced her career by appointing her to two state commissions when I was Assembly speaker. And I certainly helped with her first race for district attorney in San Francisco. I have also helped the careers of House Speaker Nancy Pelosi, Gov. Gavin Newsom, Sen. Dianne Feinstein and a host of other politicians.

Harris announced she was running in the 2020 presidential election the next day .

The story was also well-known in California media. In 2019, Los Angeles Magazine published :

Willie Brown was a fixture in California politics for years, serving as speaker of the state assembly for 15 years, and known as something of an unofficial deal-maker and influencer. He first met Harris in 1994, when she was an assistant district attorney in Alameda County. … In his capacity as speaker, Brown appointed Harris to two political positions. The first was a six-month appointment to the California Unemployment Insurance Appeals Board; the second was a role on the Medical Assistance Commission, a body tasked with negotiating contracts to control Medi-Cal costs. At the time, Brown had a reputation for filling many openings with his personal associates and inner circle; when Harris vacated the Appeals Board gig, he replaced her with his longtime buddy Philip S. Ryan. Harris ended the relationship – which was conducted in the open and frequently reported on at the time – in late 1995, shortly before Brown was sworn in for his first of two terms as mayor of San Francisco.

For years, Harris fought allegations that Brown had boosted her political career. When she was a candidate to San Francisco district attorney, she told SF Weekly she had long stopped needing Brown's support:

I refuse to design my campaign around criticizing Willie Brown for the sake of appearing to be independent when I have no doubt that I am independent of him — and that he would probably right now express some fright about the fact that he cannot control me. His career is over; I will be alive and kicking for the next 40 years. I do not owe him a thing.

She added , regarding the positions Brown had appointed her to:

These jobs were created before I was born. Whether you agree or disagree with the system, I did the work. I worked hard to keep St. Luke's Hospital [in San Francisco's Mission neighborhood] open. I brought a level of life knowledge and common sense to the jobs. I mean, if you were asked to be on a board that regulated medical care, would you say no?

We deemed this rumor a "Mixture," because while it included some truth — Brown and Harris dated, Brown appointed Harris to two posts — the relationship was not actually adulterous and Brown's influence on Harris' career was exaggerated.

We addressed this claim when it first made the rounds in 2020.

— Snopes' archives contributed to this report.

By Anna Rascouët-Paz

Anna Rascouët-Paz is based in Brooklyn, fluent in numerous languages and specializes in science and economic topics.

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The law applicable to third-party effects of assignments of claims: the UN Convention and the EU Commission Proposal compared

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Spyridon V Bazinas, The law applicable to third-party effects of assignments of claims: the UN Convention and the EU Commission Proposal compared, Uniform Law Review , Volume 24, Issue 4, December 2019, Pages 609–632, https://doi.org/10.1093/ulr/unz032

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In October 2019, the U.S. ratified the United Nations Convention on the Assignment of Receivables in International Trade (the “Convention”) by the US, thus creating a new impetus for the broad adoption and entry into force of the Convention and with that for the facilitation of international receivables finance. In March 2018, the E.U. Commission issued a Proposal for a Regulation of the European Parliament and of the Council on the law applicable to the third-party effects of assignments of claims (the “Commission Proposal” or “Proposal”). The Commission Proposal includes a first draft of the proposed Regulation (the “draft Regulation”). An alignment of the main rule of the draft Regulation with the equivalent rule in the Convention could result in an internationally uniform conflict-of-laws rule on this matter, which would remove the legal divergences existing among legal systems and reduce the uncertainty as to the law applicable to the third-party effects of assignments of claims. The purpose of this article is to compare the relevant rules of the Convention and the draft Regulation, determine whether this coordinated approach is achieved and, if not, make suggestions as to how it can be achieved to the benefit of all parties involved in international receivables finance.

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Harris' border work was on 'root causes' of migration; she wasn't in charge | Fact check

The claim: Kamala Harris was 'put in charge of the border'

A July 21 Instagram post ( direct link , archive link ) by Donald Trump Jr. blames Vice President Kamala Harris for the country's immigration problems.

"She was put in charge of the border and we saw the worst invasion of illegals in our history!!!" reads part of the post, which is a screenshot of a post from X, formerly Twitter.

Similar posts on Threads have described Harris as the Biden administration's "border czar."

The Instagram post was liked more than 200,000 times in a day.

More from the Fact-Check Team: How we pick and research claims | Email newsletter | Facebook page

Our rating: False

The post exaggerates the vice president's role in addressing migration at the southern border. Harris was never put in charge of the border or made "border czar," immigration experts said. President Joe Biden tasked Harris with leading the administration's diplomatic efforts addressing the "root causes" of migration in El Salvador, Guatemala and Honduras.

Harris led effort addressing 'root causes' of migration in Central America

Early in his presidency, Biden tasked Harris with addressing the “root causes” of migration in Central America. The assignment came out of an executive order Biden issued in February 2021 that sought to reduce migration from the Northern Triangle countries of El Salvador, Guatemala and Honduras, where gang violence, trafficking networks and economic insecurity have caused people to flee.

But the vice president’s role was more limited than being put in charge of the southern border, or being named a so-called “border czar,” immigration experts said.

"VP Harris was never made the border czar or charged with managing the border," Andrew Selee , president of the Migration Policy Institute , said in an email. "That role has always been held by the secretary of Homeland Security . She was asked to be the chief diplomatic officer with Central American countries at a time when most of the increase in unauthorized immigration was coming from three countries in Central America and to help lead a private investment strategy in the region."

Homeland Security Secretary Alejandro Mayorkas himself noted the different responsibilities between himself and Harris in June 2021 comments at the El Paso, Texas, border.

"The vice president is leading our nation’s efforts to address the root causes – that fundamental question of why people leave their homes," Mayorkas said. "And it is my responsibility as the secretary of Homeland Security to address the security and management of our border."

In March 2021, Biden announced Harris would lead the administration's diplomatic efforts with the Northern Triangle countries to stem migration to the U.S. southern border and work with these nations to enhance migration enforcement at their borders. Harris said at the time that the administration "must address the root causes that – that cause people to make the trek, as the president has described, to come here."

Aaron Reichlin-Melnick , policy director at the American Immigration Council , said the "root causes" work Harris took on is distinct from border policy because it focuses on different problems and targets.

"Border policy focuses on individuals who have already made the decision to leave home and have made it to the U.S.-Mexico border and aims to either prevent them or to quickly process them for humanitarian relief or deportation once they cross," Reichlin-Melnick said in an email. "By contrast, 'root causes' policy focuses on individuals who have not left their homes yet, and aims to convince them to stay in their home countries either through economic development – which discourages migration for economic opportunities – or through reduction of violence and persecution that forces people to seek protection elsewhere."

The White House released the administration's " Root Causes Strategy " in July 2021. Its implementation was ongoing as of March when the vice president and the Partnership for Central America , a non-governmental organization, jointly announced $1 billion in new private-sector commitments to address the underlying conditions leading to migration in Guatemala, El Salvador and Honduras. The public-private partnership has generated more than $5.2 billion since May 2021 , the White House said.

Fact check : Joe Biden dropped out of presidential race but is finishing term

Elina Treyger , a senior political scientist at the RAND Corporation whose research includes migration and immigration enforcement, also said Harris' diplomatic role with the Central American countries "is in no way a 'border czar'-like position." Treyger said border policy involves many other issues such as enforcement policies, how to process migrants expressing fear of prosecution or torture and how to allocate resources at the border.

U.S. Border Patrol encounters with migrants at the southern border have soared under the Biden administration . Illegal crossings at the U.S.-Mexico border hit a record high of 2.2 million in 2022, and the number of people taken into custody by U.S. Border Patrol has reached the highest levels in the agency's history under Biden, the Washington Post reported .

After a bipartisan border security bill failed to advance in Congress, Biden issued a directive in June to turn away migrants who do not enter the country through legal ports of entry when the number of crossings is high.

Trump, the son of former President Donald Trump, did not immediately respond to a request for comment.

Our fact-check sources:

• Aaron Reichlin-Melnick , July 22, Email exchange with USA TODAY
• Andrew Selee , July 22, Email exchange with USA TODAY
• Elina Treyger , July 22, Email Exchange with USA TODAY
• White House, Feb. 2, 2021, Executive Order on Creating a Comprehensive Regional Framework to Address the Causes of Migration, to Manage Migration Throughout North and Central America, and to Provide Safe and Orderly Processing of Asylum Seekers at the United States Border
• White House, Feb. 6, 2023, FACT SHEET: Vice President Harris Announces Public-Private Partnership Has Generated More than $4.2 Billion in Private Sector Commitments for Northern Central America
• White House, March 24, 2021, Remarks by President Biden and Vice President Harris in a Meeting on Immigration
• White House, June 25, 2021, Remarks by Vice President Harris, Secretary of Homeland Security Mayorkas, Chairman Durbin, and Representative Escobar in Press Gaggle
• White House, July 29, 2021, FACT SHEET: Strategy to Address the Root Causes of Migration in Central America
• White House, March 25, FACT SHEET: Vice President Harris Announces Public-Private Partnership Has Generated More Than $5.2 Billion in Private Sector Commitments for Northern Central America
• White House, July 2021, U.S. Strategy for Addressing the Root Causes of Migration in Central America
• Department of State, Aug. 1, 2023, Central America Forward
• The Washington Post, Feb. 11, Trump vs. Biden on immigration: 12 charts comparing U.S. border security
• U.S. Embassy in Honduras, March 25, FACT SHEET: UPDATE ON THE U.S. STRATEGY FOR ADDRESSING THE ROOT CAUSES OF MIGRATION IN CENTRAL AMERICA
• USA TODAY, July 17, Border security takes center stage at RNC. Here's the actual data under Trump, Biden

Thank you for supporting our journalism. You can subscribe to our print edition, ad-free app or e-newspaper here .

USA TODAY is a verified signatory of the International Fact-Checking Network, which requires a demonstrated commitment to nonpartisanship, fairness and transparency. Our fact-check work is supported in part by a grant from Meta .