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FAR and DFARS › FAR Part 32: Contract Financing › Subpart 32.3

FAR 32.304-5 Assignment of claims under contracts.

The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.

In plain English

This section explains when a contractor receiving a guaranteed loan must assign its claims under defense production contracts to the Government. It also says a contractor must assign claims if the guarantor or financing institution asks, and it excludes certain subcontracts or purchase orders from being financed under guaranteed loans.

Applies to: Contractors with guaranteed loans under defense production contracts

What it requires

  • Execute an assignment of claims under defense production contracts if provided a guaranteed loan, unless an exception applies
  • Execute an assignment of claims if requested by the guarantor or the financing institution

Key terms: assignment of claims · guaranteed loan · defense production contracts · assignor · assignee

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

(a) The agency shall generally require a contractor that is provided a guaranteed loan to execute an assignment of claims under defense production contracts (including any contracts entered into during the term of the guaranteed loan that are eligible for financing under the loan); however, the agency need not require assignment if any of the following conditions are present:

(1) The contractor's financial condition is so strong that the protection to the Government provided by an assignment of claims is unnecessary.

(2) In connection with the assignment of claims under a major contract, the increased protection of the loan that would be provided by the assignments under additional, relatively smaller contracts is not considered necessary by the agency.

(3) The assignment of claims would create an administrative burden disproportionate to the protection required; e.g., if the contractor has a large number of contracts with individually small dollar amounts.

(b) The contractor shall also execute an assignment of claims if requested to do so by the guarantor or the financing institution.

(c) A subcontract or purchase order issued to a subcontractor shall not be considered eligible for financing under guaranteed loans when the issuer of the subcontract or purchase order reserves (1) the privilege of making payments directly to the assignor or to the assignor and assignee jointly, after notice of the assignment, or (2) the right to reduce or set off assigned proceeds under defense production contracts by reason of claims against the borrower arising after notice of assignment and independently of defense production contracts under which the borrower is the seller.

← 32.304-4 Guarantee amount and maturity. · 32.304-6 Other collateral security. →

Rule changes for FAR Part 32

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

FAR 32.304-5 Assignment of claims under contracts · SpendQuery