Assignment of claims

Assignment of claims is the procedure under the federal Assignment of Claims Act by which a contractor assigns its right to receive payments under a federal contract to a bank, trust company or other financing institution. It is the mechanism that allows lenders to finance federal receivables, because without it the government generally pays only the contractor of record.

The assignment must follow the contract's assignment-of-claims clause and the regulations: it must be to a qualifying financing institution, cover all amounts payable under the contract rather than selected invoices, and be documented and acknowledged by the contracting officer and the payment office. Once in place, payments go to the assignee until the assignment is released.