The Assignment of Claims Act is the federal law that allows a government contractor to assign the right to be paid on a federal contract to a third party, such as a bank or a factor. It is what makes government contract factoring possible.
How it works
When a contractor factors a federal invoice, the factor is assigned as the party to be paid, following the procedures in the Federal Acquisition Regulation (FAR). The required notices are filed with the contracting officer and the disbursing office so the agency pays the factor directly. Experienced government-contract factors handle this assignment and notification process during onboarding.
Why it matters
Because the government is an exceptionally strong payer, factoring approval rides on the agency's credit rather than the contractor's — making it available to newer set-aside, 8(a), and small-business firms. The assignment process is simply the mechanism that lets the funder collect.