Definition
The federal process that lets a contractor assign government contract payments to a funder.
Why it matters
It's governed by the Assignment of Claims Act and is required for most federal receivables financing.
Where it shows up in a deal
This arrives the moment a federal prime contract enters a financing file. The contractor delivers a written notice of assignment with a true copy of the assignment instrument to the contracting officer, the disbursing officer and any surety, and payment only redirects once those parties acknowledge it. The process runs under the Assignment of Claims Act and the FAR.
What it affects
- Until acknowledgement is on file, the government keeps paying the contractor whatever the financing documents say.
- The steps take weeks, so promising a funding date before starting them is how federal deals slip.
- A no-setoff clause in the contract materially improves how a funder views the receivable.
- Subcontract receivables fall outside the Act and are assigned as ordinary accounts under Article 9.
The common mistake
Related terms
- Notice of AssignmentA letter telling customers to pay the factor instead of the business.
- UCC-1 FilingA public notice that a lender has a security interest in a business's assets.
- DebtorIn factoring, the customer who owes payment on the invoice.
- Eligible ReceivablesInvoices that meet a funder's criteria for advancing.
Questions about how assignment of claims affects your facility?
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