Far Anti-Assignment Surety

Anonymous  Posted on Monday, July 07, 2003 - 04:00 pm

I readily admit I am not as experienced in researching these topics as I should be, but was hoping for some help on this.

What, specifically, are the duties of the Contracting Officer/Agency when processing an invoice on an assigned contract? I have been challenged by a lending institution, who states I am "required" by the ACT to send him the invoice once I have certified it for payment. This doesn't seem right to me...but can't find the darn ACT to check out what it says!!!

Thanks for any help offered....


Anonymous  Posted on Monday, July 07, 2003 - 04:24 pm:

What do you mean by "the ACT"?


Anonymous  Posted on Monday, July 07, 2003 - 04:38 pm:

I am so sorry...

Assignment of Claims Act of 1940...31 U.S.C. 3727, 41 U.S.C. 15

thanks....


Phil C.  Posted on Monday, July 07, 2003 - 05:27 pm:

See FAR 32.8, the "ACT" the lending institution is referring to could be the Assignment of Claims Act.

Anonymous of Monday, July 07, 2003 - 04:00 pm:

Recommend reading FAR part 32 Assignment of Claims and the contract if your not familiar with procedures for processing an assignment of claims. The contract should also contain the Assignment of Claims document. Also, believe that a SF-30 mod is done to notify the payment office to make payments to the financial institution vice the contractor.

Been a few years since I processed payments under an Assignment of Claims, but believe it works something like this......please bear with me not sure if I’ll have all the steps correct.

1. a contractor will enter into an agreement with a financial institution, bank, etc (Assignee). for an Assignment of Claims to improve its cash flow i.e, get "paid" faster. The benefit to the financial institution is that they charge the contractor a fee (I think percentage of invoice amount) for this service.

2. the contractor invoices the Government and the Government certifies the invoice and sends-off to the payment office. If prompt payment applies, payment office must make payment within 30 days (hopefully) or else interest accrues. However, the contractor needs the money now and can’t wait 30 days hence the Assignment of Claims enters at this point.

3. the Assignee by agreeing to the Assignment assumes the contractor's "accounts receivable" for monies due by the Government under contract X. Once the contracting office certifies the invoice, it is sent to the payment office and the Assignee. Can’t recall if the contractor sent the certified invoice to the Assignee, or if the Contracting Office sent it directly. For the Assignee the certification serves as documentation that the contractor is due certain monies from the Government, thus, the Assignee provides "payment" to the contractor in the certified invoice amount less the rate the Assignee is charging the contractor to perform this service.

4. The payment office processes the invoice and makes payment to the Assignee. FAR 32.805(e) contains a requirements if the contractor wants to receive direct payments under the specific contract (Release of Assignment).


Phil C.   Posted on Monday, July 07, 2003 - 05:29 pm:

Sorry by the time I posted the "ACT" was already addressed.


Anonymous  Posted on Monday, July 07, 2003 - 05:59 pm:

Phil...thanks for your response. The process you described is basically what I understood it to be...except sending the certified invoice to the Assignee. I simply have not had alot of experience with this. Here is my problem, specifically...

I failed to send the certified invoice (he has a copy that the contractor provided, but of course it does not have my signature on it and therefore the Assignee is not certain it is correct). Now the Assignee is threatening to "turn me in" because I did not comply with the "ACT", which he claims specifically states I need to send him a certified copy of the invoice as well.

These seems crazy to me....sending the certified invoice to the payment office and then sending it to the Assignee is doubling the work required to process the invoice. I simply thought the payment office, once the assignment is rec'd, sent the monies to the Assignee. I thought this was an arrangement between the Contractor and the Assignee, and that I was not a party to it. I approve the assignment, but to be required to provide the proper paperwork to ensure payment to the contractor was beyond what I thought my responsibility was.

I wanted to verify the requirements of the "ACT" and see if indeed I have violated its terms.

Long post...sorry...but this guy has really gotten under my skin and for the life of me I can't find the specific requirement.

thanks again....


anon2  Posted on Monday, July 07, 2003 - 10:42 pm:

If the "ACT" required you to send a signed invoice to the assignee, the clause would describe the requirement. Let them "turn you in".


anon2  Posted on Tuesday, July 08, 2003 - 08:26 am:

Suggest that you ask the assignee to show you the requirement, since it isn't in the regulations or the clause.


ji20874  Posted on Tuesday, July 08, 2003 - 09:25 am:   

I agree with anon2 -- nicely ask the assignee to cite chapter and verse of the requirement for the contracting officer to provide the assignee with a "certified" copy of the invoice -- I have never heard of this before...


Jerry  Posted on Tuesday, July 08, 2003 - 09:41 am:

Here is the Act in its entirety.

Section 15. Transfers of contracts; assignments; assignee not subject to reduction or setoff

(a) Transfer
No contract or order, or any interest therein, shall be
transferred by the party to whom such contract or order is given to
any other party, and any such transfer shall cause the annulment of
the contract or order transferred, so far as the United States is
concerned. All rights of action, however, for any breach of such
contract by the contracting parties, are reserved to the United
States.
(b) Assignment

The provisions of subsection (a) of this section shall not apply
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, are
assigned to a bank, trust company, or other financing institution,
including any Federal lending agency, provided:
(1) That, in the case of any contract entered into after
October 9, 1940, no claim shall be assigned if it arises under a
contract which forbids such assignment.
(2) That, unless otherwise expressly permitted by such
contract, any such assignment shall cover all amounts payable
under such contract and not already paid, shall not be made to
more than one party, and shall not be subject to further
assignment, except that any such assignment may be made to one
party as agent or trustee for two or more parties participating
in such financing.

(3) That, in the event of any such assignment, the assignee
thereof shall file written notice of the assignment together with
a true copy of the instrument of the assignment with -
(A) the contracting officer or the head of his department or
agency;
(B) the surety or sureties upon the bond or bonds, if any, in
connection with such contract; and
(C) the disbursing officer, if any, designated in such
contract to make payment.
(c) Validity of assignment
Notwithstanding any law to the contrary governing the validity of
assignments, any assignment pursuant to this section shall
constitute a valid assignment for all purposes.
(d) Assignee liability
In any case in which moneys due or to become due under any
contract are or have been assigned pursuant to this section, no
liability of any nature of the assignor to the United States or any
department or agency thereof, whether arising from or independently
of such contract, shall create or impose any liability on the part
of the assignee to make restitution, refund, or repayment to the
United States of any amount heretofore since July 1, 1950, or
hereafter received under the assignment.
(e) Amendment of contract
Any contract of the Department of Defense, the General Services
Administration, the Department of Energy, or any other department
or agency of the United States designated by the President, except
any such contract under which full payment has been made, may, upon
a determination of need by the President, provide or be amended
without consideration to provide that payments to be made to the
assignee of any moneys due or to become due under such contract
shall not be subject to reduction or setoff. Each such
determination of need shall be published in the Federal Register.
(f) Assignor liability arising independent of contract
If a provision described in subsection (e) of this section or a
provision 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 shall not be
subject to reduction or setoff for any liability of any nature of
the assignor to the United States or any department or agency
thereof which arises independently of such contract, or hereafter
for any liability of the assignor on account of -
(1) renegotiation under any renegotiation statute or under any
statutory renegotiation article in the contract;
(2) fines;
(3) penalties (which term does not include amounts which may be
collected or withheld from the assignor in accordance with or for
failure to comply with the terms of the contract); or
(4) taxes, social security contributions, or the withholding or
non withholding of taxes or social security contributions,
whether arising from or independently of such contract.
(g) Accrued rights and obligations
Except as herein otherwise provided, nothing in this section
shall be deemed to affect or impair rights or obligations
heretofore accrued.


So, let them turn you in.


Phil C.  Posted on Tuesday, July 08, 2003 - 10:08 am:

I've read FAR 32.8, 52.232, and 41 U.S.C. 15 and didn't note anywhere where it is "mandatory" that the Government provide a copy of the certified invoice to the Assignee. Possibly someone on the wifcon site knows different.

As others noted above, I would ask the Assignee to cite the specific requirement (chapter and verse) that mandates the contracting office provide a certified copy of the invoice. I would let they Assignee know that I reviewed the "regs" and could not locate his assertion. Certainly wouldn't want the Assignee thinking I was too lazy to read.

However, even if the Assignee could not produce the citation that madates a copy of the certified invoice be sent to them, and their position is that they require one in order to "pay" the contractor, I would provide them the certified copy of the invoice with the contractors knowledge and concurrence.

This seems a trival amount of work to help facilitate the process for the contractor receiving the funds they are properly due. Especially as contracting offices I've worked in had the "electronic" capability to make this a quick and painless process.


Vern Edwards  Posted on Tuesday, July 08, 2003 - 11:32 am:

The word invoice does not appear in either 31 U.S.C. § 3727, Assignments of Claims, or 41 U.S.C. § 15, Transfers of contracts; assignments; assignee not subject to reduction or setoff, thus it seems reasonable to conclude that those sections do not require the government to send a copy of a "certified" invoice to an assignee.

The word invoice does not appear in FAR Subpart 32.8, Assignment of Claims, and it does not say anything about the government sending a copy of a "certified" invoice to an assignee.

The word invoice does not appear in FAR clause 52.232-23, Assignment of Claims, and the clause does not state that the government must provide the assignee with copies of "certified" invoices.

Having said all that, the lending institution is providing financing that helps your contractor to perform, and the government apparently agreed to the assignment. So why not send a copy of the invoice to the lending institution? How long can it take to print a name and address on an envelope, insert a copy of the invoice, and send it off? Refusing and quoting the law only makes you seem like a blockheaded bureaucrat, which I'm sure that you're not. So why not act like a businessperson and cooperate with the other business?


Anonymous  Posted on Tuesday, July 08, 2003 - 12:03 pm:

Wow...thanks so much for all of your help!!! I knew I could count on this site for some assistance.

Vern....without addressing all of your comments...it was the assignee who behaved like a blockhead, not I. He was the one screaming he was going to "turn me in" for failing to comply with the ACT. I processed the invoice timely, but didn't FAX him a copy when it was processed and that ticked him off. Yes, he is providing a service for my small business contractor, but don't think for a minute it isn't his "fee" driving this, as opposed to his concern about my contractor's finances. I did not refuse to do anything, but resent being told I violated the ACT.

Thanks again for your feedback...


Vern Edwards  Posted on Tuesday, July 08, 2003 - 12:11 pm:   

Anonymous:

Of course he's doing what he's doing for a fee.

Your contractor is doing what it is doing for a fee.

You do what you do for a fee (paycheck).

I certainly do what I do for a fee.

I didn't mean to imply that you had actually acted like a blockhead. What I meant was that you would be acting like a blockhead if you wasted time arguing about the law. Yes, the assignee lost his cool, but a lot of people do when dealing with the government.


anon2  Posted on Tuesday, July 08, 2003 - 03:03 pm:   

Anonymous, don't feel guilty. It's fine if you want to help the assignee determine the payout rather than letting the contractor and the assignee to take care of their own business. If you want them to take care of business, that's also ok.


less patient Anonymous  Posted on Tuesday, July 08, 2003 - 03:32 pm:

Normally I might agree with "what is the problem?" and "nicely ask" position. Here it appears the financial institution or some individual in its employ does not understand that they are simply a convenience to a government contractor and not in charge. They certainly do not yank the Government about.

I believe you have other options and means of reminding your contractor and its little helper that you will not be bullied if their demands, beyond what is actually required, become an undue burden on the government.


Phil C.  Posted on Tuesday, July 08, 2003 - 07:04 pm:

Less patient,

I see the situation differently. I do agree that the Assignee got "demanding", but in situations like these my experience is that a "I want to help" from the Government side goes a long towards building the business relationship that Vern spoke to in his 8 Jul 11:32 posting. Moreover, the Assignee is more likely to take a deep breath after the Government makes such a comment and the Assignee would apoligize for the "bullying" behavior. The phrases "one catches more bees with honey than vinegar or don't throw gas on a fire" come to mind. Of course, this doesn't mean as KOs we sit by and watch while a contractor, assignee, or anyone else "rapes" the taxpayer or is abusive to Government employees.

That was my intent in addressing the situation is informing the Assignee

"hey, I looked everywhere FAR/DFAR/The Act and could not find the mandatory certified invoice requiremnt, could you help me out and let me know where it is for future reference. Even if you can't cite the specific, I'm going to have our invoice clerk send you a certified copy as an email attachement each time anyway. Our contracting office is appreciative of the work done by our contractors and their "partners" and we work to foster these business relationships."

Some may see my mindset as kissing the contractors/assignees you know what, but I see it as building a business relationship and acting in good faith i.e.; want the contractor to succeed by providing the required service at a fair and reasonable price and make a fair and reasonable profit.


less patient Anonymous  Posted on Tuesday, July 08, 2003 - 08:53 pm:
 

Then we see the situation differently. I have no problem with working to form good business relationships as long as roles are clearly understood. The individual in or the financial institution in general is confused in that respect.

Here the Government is the source of the business the others seek. The Government has the requirement and the money. Polite accommodation to make things run more smoothly and everyone's life simpler is wonderful; however, it is the role of the contractor to conduct the required business without complicating the customer's life.

That applies to those a contractor bring into the relationship. It applies to subcontractors, personnel and those they bring in to assist them with financial arrangements. When they or their agents begin to be a problem for the Government we have remedies to solve the problem. That should be made clear at the first signs of misunderstanding. It saves a lot of trouble downstream. I would certainly not appear to cave in to a demand outside the scope of the relationship. That is "feeding the tiger" and often brings unpleasant consequences. Now, once positions are clear and presuming the assignee can demonstrate how all our lives will be simpler by doing the extra bit I'll see what we can do. Not otherwise.

The terms for any assignment can be specified in the contract. Approval of assignee is an option in some. Past performance for assignee financial institutions might be a reasonable part of that process. Perhaps assignees who do not grasp the concept should be made aware of the fact that their continued business is at our option, not theirs and not the contractor's.

In my personal business I expect no less when it comes to understanding who is paying and who is providing the service or goods; who is requiring and accepting and who is vending. I find clarity on those points does not hinder good relationships except among those confused about roles. They are then not people with whom I care to maintain any business relationship. I do not do return business with these sorts. Why should I expect less clarity of my Government in its business relationships?


Vern Edwards  Posted on Tuesday, July 08, 2003 - 09:30 pm:

less patient Anonymous:

The assignee erroneously believed that the government was obligated to provide it with copies of invoices that had been approved for payment. Had the government's contract administrator known the FAR and how to look up federal statutes on the internet -- things which all contract administrators ought to know -- then he or she could have explained the rules to the assignee and proceeded from there to make suitable arrangements.

This is why you want knowledgeable and trained people on the government's end. FAR Subpart 32.8 and the FAR clause are very short, and FAR Subpart 32.8 cites the relevant statutes.
A little professional knowledge would have given the first Anonymous the confidence to have dealt with the assignee's representative in the professional manner suggested by Phil C. Lacking that knowledge, he or she let the assignee get under his or her skin.

Under the law and the FAR, a contractor is entitled to assign its claims unless the agency determined before award that assignment is not in the government's interests. See FAR §§ 32.802 and 32.803. The government has a duty to cooperate and contracting officers have a duty to conduct themselves professionally. In my opinion, the assignee's request was reasonable and did not represent an undue burden on the government. If the contract administrator had known his or her business, he or she would have been able to better cope with the misinformed assignee. If the assignee was, in fact, personally abusive, then there are professional ways to cope with that kind of thing. I'm confident that the Anonymous who initiated this thread conducted himself or herself in a professional manner throughout the encounter.

I'm with Phil C.


Phil C.  Posted on Tuesday, July 08, 2003 - 09:48 pm:

Less Patient,

Yes we disagree. I'm certainly not right all the time.

In this case I don't think there is any confusion in the roles on anyone's part,,,,the Assignee clearly knows the Government is "holding the checkbook",,,,,,,the contractor clearly knows the Assignee is "paying" them and picked up their accounts receivables for the contract,,,,,and the government certainly understands that it is the contractor who is providing service.

The Assignee could show some more "business class and rationale behavior", but at times many of us get more demanding than the situation calls for.

I do have some disagreement with your statement "however, it is the role of the contractor to conduct the required business without complicating the customer's life. " as I think it is also a 2 way street, i.e.;, Government has a role to conduct the required business without complicating the contractor's life. FAR 13 and FAR 12 come to my mind as ways Govt. is trying to do this by making it simpler and easier to get business done.

Of course, some contractors have difficulty responding to partnership and working together. Fortunately, we have more "attention getting" tools such as: discrepancy notices, deductions, liquidated damages, cure notice, show cause, and the "big kahuna" T4D.

In this instance, the contractor for whatever reason required an Assignment of Claims as is allowed them under the contract. I see sending the Assignee a copy of the certified invoice as an insignificant cost of doing business and the Govt. doing its part keeping the contract moving along and not complicating the contractor's life. Especially with modern electronic means sending the certified invoice to the contractor is only adding them to the "CC" on an email away.


Phil C.  Posted on Tuesday, July 08, 2003 - 09:50 pm:

P.S.

Of course, the Assignee was wrong saying The ACT required the Govt provide the certified invoice.


less patient Anonymous  Posted on Wednesday, July 09, 2003 - 02:20 pm:

In reality I do not think we disagree all that much, though we may still see the exact situation differently. I largely agree with Vern on this. And Phil, your "Vern's statement 'you don't know things and look things up for yourself, you ask somebody else (usually a lawyer) what to do.' is right on the mark I think for far too many in the 1102 profession" (Professional Reading thread) shows you and I agree on that aspect as well.

I was being too gentle with the originator. One of my first thoughts was if Anonymous had a contract in which a contractor requested assignment why would they not immediately come up to speed on current law and regulation concerning assignment? "I am not as experienced in researching these topics as I should be" is a deficiency that needs remedy. It is not all that complicated, particularly with law and FAR on line subject to electronic search. A basic, very basic, professional skill is to be able to quickly find information.

It is foolish to sit down and just read the FAR cover to cover and try to remember everything all the time. It is wise to know what you have to know for jobs at hand and, particularly when faced with something you know you are not familiar with, be able to selectively read or refresh on specifics. The FAR is reasonably well indexed. A contractor goes for the assignment route. You haven't worked with one in a while or ever. You check the law and FAR on the subject and be prepared to intelligently and accurately discuss any issues before that first invoice. That does not mean you are always right. It simply means you have your facts in order and can discuss issues from that strength.

When the assignee's person called requesting what was requested as an accommodation I would have immediately considered doing so. Actually doing so would depend on whether it fit within the agency's policy and practice. Would doing this for one assignee require special modification of a standard operation involving other agency organizations? Would doing it for one require doing it for all? If it were as simple as making a copy and sending a FAX I would probably do it. If it meant coordinating with another branch to pull one invoice out of a stream I might probably not.

Now, it the assignee was "screaming he was going to 'turn me in' for failing to comply with the ACT" he'd be handed his head in a basket. I'd know, from my prior research, that there was no such requirement and could pull our and read or FAX what Jerry and Vern posted earlier. Since I am indeed less patient, my position would be documented to responsible individuals in both companies. The cover letter would be clear that "screaming" at the Government is unacceptable and has consequences. I would await another call from a suitably contrite assignee employee or his replacement. Then we could get on to establishing a good working relationship with everyone understanding who does what how.

 

The Government has clear obligations. Elsewhere in this forum we have discussions on the result of hindrance and non cooperation. Nowhere does that require a government agency to accept a contractor or those the contractor brings into play becoming a problem for the government with out of scope demands. I use "out of scope" precisely. Not only was the individual out of line, the demand is beyond requirement and anticipated work load. Depending on complications at my end a reasonable accommodation may or may not be made. The assignee would know it is an accommodation and not a right after a very short conversation.

One more point. Yes, "Under the law and the FAR, a contractor is entitled to assign its claims unless the agency determined before award that assignment is not in the government's interests" and I think it reasonable to state up front what an agency will do with respect to process when we are allowing a process. If, as I believe, what was requested would not be so trivial in some agencies' highly structured invoice-financial processes, it is not unreasonable to state how the agency requires contractor and assignee to play their parts in that process. A single paragraph should suffice.

Some misery comes with any contractual relationship. There is no need to compound it by not being well prepared and fully clear before the contract is awarded. My patience is near zero for that as well.


Vern Edwards  Posted on Wednesday, July 09, 2003 - 03:52 pm:

I agree that it is pointless to try to read the FAR cover to cover. Indeed, reading the FAR is a special kind of reading, unlike reading nonfiction narrative or exposition. Reading regulations like the FAR is an acquired skill. Consider the problem that the original Anonymous faced:

First, he had to recognize that assignment of claims is a topic covered in the FAR.

Second, he had to find the FAR coverage.

Third, he had to read and understand the FAR coverage. In order to understand what he read he might require some background information that the FAR does not provide, such as "What is an assignment of claims?" In order to do that he would need Black's Law Dictionary, which defines assignment as: "The transfer of rights or property," or The Government Contracts Reference Book, which explains that an assignment of claims is: "A contractor's transfer or making over to a bank, trust company, or other financing institution, as security for a loan to the contractor, of the contractor's right to be paid by the Government for contract performance." If he wanted to look up the pertinent statutes, he would have to know how to find them on the internet, either at www.gpo.gov or www.findlaw.com, or at one of many other sources.

He would have to read slowly and carefully and make sure that he understood all of the terminology that he encounters.

Then he would have to check his agency FAR supplement, such as DFARS Subpart 232.8. Then he would have to check to see if his agency has issued any "policy letters" or "guidance" about assignments of claims.

Lastly, he might want to read the 1987 Westlaw briefing paper, Assignment of Claims Act, by Raymond E. Vickery, Jr. and Andrew M. Paalborg, which, though old, is probably still informative, since the FAR clause has not changed since 1986.

It might interest Anonymous to know that there is no requirement in FAR for the government to "certify" an invoice and that, to the best of my ability to determine, the term "certified invoice" appears only with reference to contractor certification. See, e.g., FAR § 52.232-4 and 52.232-12. To the best of my knowledge, there is no requirement for the government to provide even a contractor with a copy of a "certified invoice," much less to provide an assignee with one.


Anonymous  Posted on Wednesday, July 09, 2003 - 05:40 pm:

Original Anonymous here.....sorry, duty required that I be out of the office for a bit.

What a lively discussion I started! I have enjoyed reading all the posts and appreciate all the opinions they contain.

For the record tho....the assignee asked if I knew what the "ACT" required, specifically. I admitted that I did not, but I advised his that I did INDEED know what the FAR required, as well as agency specific supps. I did review 31 U.S.C. 3727, 41 U.S.C. 15 (I could find them), and I discovered they contained no such requirement. But, for the life of me, I could not find the Assignment of Claims ACT of 1940 no matter what I tried. So, I stand guilty as charged by some of you. I readily admit here that I do not know what every ACT states, specifically, as it relates to what I try, in the best of my ability, to accomplish.

What my original post should have said was..."Can someone please provide me with a link to the Assignments of Claims Act of 1940?" and leave it at that. So many assumptions were generated on what I can or can't accomplish in my position, how professional or unprofessional I am, how prepared or unprepared I was for the question, that if I let it, I could really be insulted.

Thanks again for all you comments, and please rest assured, I haven't given this guy a second thought the past couple days. Life goes on...


Vern Edwards  Posted on Wednesday, July 09, 2003 - 08:16 pm:

Anonymous:

If you have read 31 U.S.C. § 3727 and 41 U.S.C. § 15, then you have read the Assignment of Claims Act of 1940, as amended. Together, 31 U.S.C. § 3727 and 41 U.S.C. § 15 are the Assignment of Claims Act of 1940 as codified in the United States Code (U.S.C.). The Act changed two earlier assignment statutes. By the way, it's just "the Act," not "the ACT."

When permanent and general laws are enacted by Congress and approved by the president, they are codified (arranged) by insertion into one or more of the titles of the U.S. Code. (A "title" is a collection or set of laws about a certain topic.) Even after codification laws are often referred to by their legislative names, such as the "Federal Acquisition Streamlining Act of 1994," which modified several titles of the U.S. Code, including titles 10, 15, 31, 37, and 41. The legislative name gives the impression of a single text, which is misleading in terms of the law as codified. If you want to see the Assignment of Claims Act of 1940 as originally enacted, as a single body of text, then you have to go to a law library and look it up in the one of the volumes of the U.S. Statutes at Large or the U.S. Code and Administrative News.


joel hoffman  Posted on Wednesday, July 09, 2003 - 08:27 pm:

Orig, don't worry about the critics, concerning your lack of intimate knowledge of the procurement statutes. You shouldn't normally be required to be an expert on the letter of the statutes. The acquistion regulations and agency supplements are supposed to implement the law. There are many bureaucrats in the Secreariats, who interpret and implement statutes in the FAR and its supplements. Many procurement laws are not easily interpreted.

If you don't have access to LEXUS, it is sometimes a real bear to find some of the statutes. Yesterday, I tried unsuccessfully, for at least an hour, to find the Assignment of Claims Act on-line - forgetting that it's downstairs in a book in our law library. I simply got wrapped up in the challenge, dad-gummit.

As an aside, I just read where the DOT is going to implement Prompt Payment procedures which appear to be in conflict with the Prompt Payment Act - unless it was recently revised, again. I thought I was pretty up to date with the PPA - Since 1989, I've read the Act, the OMB Circulars, the FAR Council's repeated attempts to implement it, the Legislative history and intent, the Federal Register Notices, etc.

At any rate, the procurement regs and other agency implementing regs are what we usually use for daily contract admin, not necessarily the verbatim text of the stautes. happy sails! joel hoffman


less patient Anonymous  Posted on Wednesday, July 09, 2003 - 08:41 pm:

Don't get offended or insulted, get the tools.

I just tested a cold start with "Assignment of Claims Act" in a Google Advanced Search that was limited to .gov sites (Under "Domain"). That gave me FAR, agency policy, discussions and several cites. I copied one and searched on: "assignment of claims act" "31 U.S.C. 3727" site:.gov and got more precise hits. Then I just looked for "U.S. Code" site:.gov and found GPO Access as a high probability hit. Sure enough:

Legislative Resources
• View All
• Congressional Bills
• Congressional Record
• Public and Private Laws
United States Code

Entering "Assignment of Claims Act" on the search line gave me four hits, one of which is quoted above. Extras are interesting bits on amendment history. You can also check on what the other mention and cite for "Assignment of Claims" is about by searching "31USC3727" for that text.

Not counting detailing the process here this took less than five minutes from entering Google to hitting the 41USC15 text. Granted, the GPO notes "The general and permanent laws are in effect as of January 2, 2001)" and this is 2003, but it is a good start.

Professionals might also want to bookmark Law Library of Congress where there are links to GPO and other sites with this type of information. Click on "U.S. Code" and you get United States Law,United States Code, Statutes at Large, and Public Laws with the opportunity to "Download the United States Code" no less. Follow the links and you have quite a library at your fingertips. Better yet, most is searchable and you really don't have to download it--someone else is maintaining it for you.

You are definitely not one of the clueless, but your life might be quite a bit easier if you take the time to use Wifcon and all the other great resources for quick cram sessions. No, one should not try to be a lawyer with these materials. Yes, one should be able to check black letter cites when someone tries the stunt that assignee idiot tried with you.

By the way, Bob, if you read this I notice there is no quick link from the forum pages to the main site resources. Some dropping into the forum might not know what a real resource you have over in the "hard" side. How about a banner link?


Vern Edwards  Posted on Wednesday, July 09, 2003 - 08:41 pm:

I disagree with you, Joel, in a case like this, when someone is citing a statute as the basis for claiming that you owe him something and threatening to "turn you in" for breaking the law. The ability to find the text of a statute is useful in such a case, as is an understanding of how our laws are designated, codified and published, if only to enable you to show up the attacker.


joel hoffman  Posted on Wednesday, July 09, 2003 - 10:26 pm:

Vern, I don't necessarily disagree with you. My point is that "original anonymous" shouldn't be expected to be an expert in the law, particlarly at the time he/she was challenged by the assignee. The tone of several posters here appears to chide anon for not knowing the law when challenged. I'm fairly confident that nobody here, including you, was intimately familiar with the law. Anon admitted that he/she isn't an expert at legal research (and doesn't appear to have access to an attorney), used an available resource (WIFCON Forum) asking for assistance here in finding the statute or what it says. Instead, there were several cries of incompetency because anon isn't a trained paralegal.

"Less", I used Google, too. Obviously, I'm not adept at it. Thanks for the lesson. I got over 100 hits, some of which included portions of the statute. I eventually resorted to walking down to the law library and read the US Code. By the way, in citing "the Act in its entirety", one of the experts here included language from the Anti-Assignments Act as well as from the Assignment of Claims Act. It's not always easy to determine the wording of a specific Act when reading the USC, because there may be language from several statutes in the citation. happy sails! joel

happy sails! joel


Vern Edwards  Posted on Wednesday, July 09, 2003 - 11:10 pm:

Joel:

The "Anti-Assignment Act" and the "Assignment of Claims Act of 1940" are one and the same. Some authorities refer to 41 U.S.C. §15 as the "Anti-Assignment Act." But see FAR § 32.800. That's the problem with legislative names. Good luck finding the text of the "Competition in Contracting Act of 1984." It is scattered in several titles of the U.S. Code.

Every contracting officer and contract administrator should know the rudiments of legal research, including how to use the Federal Register and how to search for public laws, sections of the U.S. Code, and sections of the Code of Federal Regulations.

It is kind of you to defend Anonymous. After all: "You can't know everything in the world. Whatever happens, you'll die a fool."

Vern


joel hoffman  Posted on Thursday, July 10, 2003 - 07:58 am:   

"HOKAY... I believe you", as the old song goes!


Eric Ottinger   Posted on Thursday, July 10, 2003 - 11:17 am:

 

 

 

 

Vern,

41 U.S.C. §15 is the Anti-Assignment Act. The Assignment of Claims Act of 1940 is the other anti-assignment act.

Carl Peckinpaugh does a good job of discussing these issues.

http://www.fcw.com/fcw/articles/1996/FCW_060396_348.asp

The Department of Justice also considers 41 U.S.C. § 15 to be the "Anti-Assignment Act."

"c) We argue that government contracts, because of the Anti-Assignment Act, 41 U.S.C. § 15, are not assumable as of right in bankruptcy proceedings."

http://www.usdoj.gov/usao/eousa/foia_reading_room/usam/title4/civ00060.htm

The Court of Claims is also perfectly clear on this point.

See WESTINGHOUSE ELECTRIC CO., v. THE UNITED STATES.

http://www.uscfc.uscourts.gov/Opinions/Firestone/03/FIRESTONE.Westinghouse.pdf

Like some participants in this forum, it appears that Westinghouse put an excessive reliance on assignment by operation of law.

Eric


Vern Edwards   Posted on Thursday, July 10, 2003 - 12:31 pm:   

Eric:

As I told Joel, 31 U.S.C. § 3727 and 41 U.S.C. § 15, together, constitute the "Anti-Assignment Act of 1940," but some authorities refer to 41 U.S.C. § 15 as the "Anti-Assignment Act." Here are some quotes that back me up. I have put references to 41 U.S.C. § 15 in bold to make things easier for you.

Federal Courts

Here is a quote from the U.S. Court of Appeals for the Federal Circuit, in Applied Companies v. U.S., 144 F.3d 1470 (1998):

"Applied relies on the Assignment of Claims Act of 1940, which restricts the government's right to set off funds that are to be paid to an assignee. See 31 U.S.C. § 3727; 41 U.S.C. § 15."
----------
Here is a quote from the U.S. Claims Court in U.S. Fidelity & Guar. Co. v. U.S., 16 Cl.Ct. 541 (1989):

"Before award of the contract, NRPC assigned the contract proceeds to First American Bank of Pensacola (FABP), pursuant to the Assignment of Claims Act of 1940, 31 U.S.C. § 3727, 41 U.S.C. § 15."
----------
Here's one from the 11th Circuit in U.S. v. Dekalb County, 729 F.2d 738 (1984):

"Pursuant to the provisions of the Assignment of Claims Act of 1940, as amended (31 U.S.C. 203, 41 U.S.C. 15), claims for moneys due or to become due from the Government to the Investor under this Contract may be assigned to a bank, trust company, or other financing institution, including any Federal lending agency and may thereafter be further assigned and reassigned to any such institution."

(31 U.S.C. § 203 no longer exists.) I can provide many more such quotes from various federal courts.
----------
----------
Boards of Contract Appeals

Here's a quote from the Corps of Engineers Board of Contract Appeals in First Commercial Funding, L.L.C., Assignee of Power Construction Group, Inc., EGBCA No. 6447, 00-1 BCA ¶ 30,769:

"The Government contends that the Appellant is an assignee pursuant to the Assignment of Claims Act of 1940, 31 U.S.C.§ 3727, 41 U.S.C. § 15, to which the contractor assigned moneys due or to become due under the contract."
----------
Here's one from the Department of Interior Board of Contract Appeals, ICBA No. 2103-N, 92-2 BCA § 24,797:

"The contract contains an Assignment of Claims clause, pursuant to the Assignment of Claims Act of 1940, as amended. That Act had amended two prior anti-assignment statutes, now codified at 31 U.S.C. § 3727 and 41 U.S.C. § 15, to allow for certain authorized transfers to financial institutions of monies due under a Government contract."

I can provide similar quotes from the GSBCA, the VABCA, and countless ones from the ASBCA.
----------
----------
Many cases and authorities refer to 41 U.S.C. § 15 as the Anti-Assignment Act because of paragraph (a), entitled "Transfer," which reads as follows:

"No contract or order, or any interest therein, shall be transferred by the party to whom such contract or order is given to any other party,
and any such transfer shall cause the annulment of the contract or order transferred, so far as the United States is concerned. All rights of
action, however, for any breach of such contract by the contracting parties, are reserved to the United States."

However, paragraph (b) goes on say that that prohibition does not apply to assignments to banks, trust companies, or other financing institutions, and most of the text of the statute discusses such assignments.
----------
----------
Other Authorities

Here's a quote from a 1993 Westlaw Briefing Paper, "Dealing with the Effects of Downsizing," by Raymond S.E. Pushkar, Michael T. Janik, and Margaret C. Rhodes:

"Under the Assignment of Claims Act of 1940, also known as the Anti-Assignment Act, a Government contract may not be transferred to another party; if so transferred, it will be annulled. Exceptions to the prohibition include assignments by operation of law and and assignments for which Government approval is obtained."

In a footnote accompanying the quote, the authors cite 41 U.S.C. § 15, but not 31 U.S.C. 3727.
----------
In the 1987 Briefing Paper that I cited in an earlier post, the authors say:

"The policy against the assignment of claims for work already done at the time of assignment is set forth in what is often called the Anti-Claims Act."

In the footnote accompanying the text, they cite 31 U.S.C. § 3727, but not 41 U.S.C. § 15.
----------
In an article in the Winter 1999 edition of the American Bankruptcy Law Journal entitled, "International Project Finance Transactions: Selected Issues Under Revised Article 9," by Carl S. Bjerre, you will find this quote:

"The restrictions imposed by the Assignment of Claims Act of 1940, 31 U.S.C. § 3727 and 41 U.S.C. § 15, are not relevant here. They affect only the obligations of the federal government as account debtor, rather than the effectiveness of the assignment; moreover, they remain valid under the Supremacy Clause."
----------
Here's one the venerable Nash and Cibinic, which appears in the December 1988 edition of The Nash & Cibinic Report (2 N&CR ¶ 78):

"Banks and other 'financing institutions' may take an assignment of claims from contractors, as security for loans, under the Assignment of Claims Act of 1940, 31 U.S.C. 3727, 41 U.S.C. 15."

However, in an October 1992 article, "The Rights of Performance Bond Sureties: It Depends on the Circumstances," (6 N&CR ¶ 57) they said this:

"For example, in Rodgers Construction, Inc., IBCA 2777, 92-1 BCA ¶ 24503, the board found an implied assignment of the contract to the surety when the notice of assignment was sent to the agency, contract modifications showed the surety as the other party, and progress payments were made to the surety. This reasoning is based on Tuftco Corp. v. U.S., 222 Ct. Cl. 277, 614 F.2d 740 (1980), 22 GC ¶ 113, holding that COs may waive the Anti-Assignment Act, 31 USC § 3727."

They made no mention of 41 U.S.C. § 15.

But in yet another quote, in "Novation Agreements: Is you is or is you ain't my baby?" (4 N&CR ¶ 56) they said this:

"Consistent with the situations in which the Anti-Assignment Act has been deemed inapplicable stands the long-recognized principle that 'Despite the bar of the Anti-Assignment statute (41 U.S.C. § 15), the Government, if it chooses to do so, may recognize an assignment.'"

In that article they made no mention of 31 U.S.C. § 3727.
----------
Here's a quote from the Harvard Law Review, in an article entitled, "Accounts Receivable Financing: A Reappraisal of Validation Statutes in Light of Amended 60A," which appeared in the February 1952 edition:

"Assignment of Claims Act of 1940, 54 STAT. 1029, 31 U.S.C. § 203, 41 U.S.C. § 15 (1946). This statute provides expressly for the assignment of "the moneys due or to become due from the United States or from any agency or department thereof, under a contract."

(Note the reference to 31 U.S.C. § 203, which no longer exists.)
----------
----------
As you can see, courts, boards and legal writers have long referred to 41 U.S.C. § 15 as the "Assignment of Claims Act of 1940." In other contexts they have referred to it as the "Anti-Assignment Act." Which proves my point, that legislative names can be confusing.

Do you get it?


Vern Edwards  Posted on Thursday, July 10, 2003 - 12:47 pm:

Eric:

By the way, if you go to Findlaw's Table of Popular Names for the U.S. Code, you will find both "Anti-Assignment Act" and "Assignment of Claims Act of 1940." There is no link for the Anti-Assignment Act, but if you click on the link to Assignment of Claims Act of 1940, which section of the U.S.C. does it take you to? Guess.

Here's a link for Findlaw's U.S. Code Table of Popular Names:

http://caselaw.lp.findlaw.com/casecode/uscodes/popularnames/2.html

Vern


Vern Edwards  Posted on Thursday, July 10, 2003 - 03:21 pm:

Eric:

Knowing you, I suspect that you're looking for cases and other references that will support your assertion that 41 U.S.C. § 15 is known exclusively the "Anti-Assignment Act" and not the "Assignment of Claims Act of 1940," and that 31 U.S.C. § 3727 is the only true "Assignment of Claims Act of 1940."

In the spirit of cooperative scholarship, I thought that I would let you know that I've found several board decisions which, in referring to the "Assignment of Claims Act of 1940," cite 41 U.S.C. § 15 exclusively, without making any reference to any section in Title 31. See, for example, Hayes Contracting Co., GSBCA No. 565 (1961), in which the board said:

"If the Contractor's claim to amounts payable under the contract has been assigned under the Assignment of Claims Act of 1940, as amended (41 U.S.C. 15), a release may also be required of the assignee at the option of the Contracting Officer."

I only show this to you in an attempt to prove my point that legislative (popular) names are not reliable references to statutes. Have fun.

Vern


joel hoffman  Posted on Thursday, July 10, 2003 - 04:32 pm:

I'm not a lawyer or trained paralegal, but it certainly appears that two separate popularly titled Acts are contained in 41 U.S.C. § 15. What "Jerry" referred to on July 8th as "the Act in its entirety" is more than the Assignment of Claims Act of 1940.

I believe that there are (at least) two separate "topics" or popularly titled "Acts" in the 41 U.S.C. § 15 code. The Assignment of Claims Act of 1940 added the exception to the existing language on prohibition on assignment of contracts and claims, derived from the "Anti-Assignment Act" language, dating from 1862.

Carl Peckinpaugh's article states "Statutorily, there are two different Anti-Assignment Acts. The first, dating from at least 1853, prohibits transfers of any interests in claims against the United States (see 31 U.S.C. ¤ 3727). The second, which dates from 1862, prohibits transfers of any interests in a government contract (see 41 U.S.C. ¤ 15)."

Those Acts precede the 1940 Act, which appears to have incorporated what Peckinpaugh explains are the "exceptions for bona fide financing arrangements" (which I believe is the "Assignment of Claims Act of 1940").

41 U.S.C. 15 contains two separate topical pieces of legislation (plus at least a 1951 amendment), since 1862. The Historical and Statutory Notes for 41 U.S.C. § 15 state that the second and fourth paragraphs were added by "Act Oct. 9, 1940" (the Assignment of Claims Act, I presume). The note on Codifications states "R.S. § 3737 derived from Act July 17, 1862, c. 200 § 14, 12 Stat. 596."

That's my layman's view of it. If I was a paralegal or a lawyer, I could tell you what the legislative history is and what all those footnotes mean. Perhaps a lawyer can explain. John Ford?

happy sails! joel


Anonymous  Posted on Thursday, July 10, 2003 - 06:26 pm:

 

Original Anonymous here...

You guys are awesome!!!! Vern, thanks so much for the little lesson..I actually copied/pasted so I have it for reference.

Less...I use Google as well, but must admit I have never been successful in the Advanced search mode...I will keep trying....

No offense..as I stated earlier. I was just surpized that so many assumptions were made...

Love the site...and, as someone very popular (who may become even more popular in my state)says...

I'LL BE BACK!!!!


Eric Ottinger  Posted on Thursday, July 10, 2003 - 07:18 pm:  

Vern,

I must say that you had this one tangled in a knot, even more than usual.

I agree that popular titles can be misleading. I might even venture the personal opinion that some of the legal authorities that I have read are incorrect, or at least illogical.

I have read a bunch of these cases and I am confident that Carl Peckinpaugh’s usage is the most common and probably the most authoritative. (I’m not a lawyer, etc. etc.)

Usage varies depending on the authority. Sometimes the “Anti-Assignment Act” and the “Assignment of Claims Act” are “acts” and sometimes they are “statutes” or “provisions.” In one instance, presumably for parallelism, the “Anti-Assignment Act” is referred to as the “Assignment of Contracts” Act. Often courts refer to both acts as “Anti-Assignment Act(s).”

Here is a Court of Appeals case.

Fireman’s Fund Insurance Company v. Gordon R. England, Secretary of the Navy

United States Court of Appeals for the Federal Circuit, No. 00-1420, November 27, 2002 313 F.3d 1344

“What is commonly called the Anti-Assignment Act consists of two statutory provisions. Title 41 of the United States Code, Section 15(a) (2000) (which deals with “Public Contracts”) provides that “[n]o contract . . . or any interest therein, shall be transferred by the party to whom such contract . . . is given to any other party, and any such transfer shall cause the annulment of the contract or order transferred, so far as the United States is concerned.” Subsection (b) of that provision states that “[t]he provisions of subsection (a) . . . shall not apply in any case in which the moneys due or to become due from the United States or from any agency or department thereof . . . are assigned to a bank, trust company, or other financing institution, including any Federal lending agency.” “
“Title 31 of the United States Code, Section 3727(a)(1)(b) (2000) (which deals with “Money and Finance”) provides that an “assignment of any part of a claim against the United States Government or of an interest in the claim . . . may be made only after a claim is allowed, the amount of the claim is decided, and a warrant for payment of the claim has been issued.” Subsection (c) makes subsection (b) inapplicable “to an assignment to a financing institution of money due or to become due under a contract” provided certain conditions (not here involved) are met.”
“These two provisions together broadly prohibit (with narrow exceptions discussed below) transfers of contracts involving the United States or interests therein, and assignment of claims against the United States. …”

Joel is on the right track.

Your mistake was to assume that the “Assignment of Claims Act of 1940” is the same as the “Assignment of Claims Act.”

The “Assignment of Claims Act of 1940” adds an identical paragraph to two existing acts (statutes or provisions) -- which happen to be the “Anti-Assignment Act” and the “Assignment of Claims Act.”

Assignment of Claims Act of 1940 (P.L. 76-811)

AN ACT

“To assist in the national-defense program by amending sections 3477 and 3737 of the Revised Statutes to permit the assignment of claims under public contracts.”

“Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That sections 3477 and 3737 of the Revised Statutes be amended by adding at the end of each such section the following new paragraph:”

“The provisions of the preceding paragraph shall not apply in any case …”

For instance, see Section 15--

Section 15. Transfers of contracts; assignments; assignee not subject to reduction or setoff

(a) Transfer
“No contract or order, or any interest therein, shall be transferred by the party to whom such contract or order is given to any other party, and any such transfer shall cause the annulment of the contract or order transferred, so far as the United States is concerned. All rights of action, however, for any breach of such contract by the contracting parties, are reserved to the United States.
(b) Assignment
The provisions of subsection (a) of this section shall not apply …”


Paragraph (a) is normally quoted as the “Anti-Assignment Act.” Paragraph (b) is the paragraph added by the “Assignment of Claims Act of 1940.”

Eric


less patient Anonymous  Posted on Friday, July 11, 2003 - 01:28 am:

Perhaps everyone interested in the discussion on which act gets the most votes as carrying which popular name should note the full notation in the GPO versions. The links to the GPO documents do not work, but go to United States Code: Main Page and enter 41USC15 and 31USC3727, the GPO cite format, in the search line.

Note wording in 41USC15 with my emphasis:

Cross References

Assignment of claims, generally, see section 3727 of Title 31, Money
and Finance.

The opening text dealing with assignment in 41USC15 is not general, it is limited:

(b) Assignment

The provisions of subsection (a) of this section shall not apply 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, are assigned to a bank, trust
company, or other financing institution, including any Federal lending
agency
, provided:

Layman's reading indicates to me that 41USC15 deals with the special case of assignment for financing while 31USC3727 deals with assignment generally. Presence or absence of the cites in any given court case would clearly depend on the nature of and the arguments made in any individual case. For example, if the only issue is assignment of the contract to another entity for performance without any bank, trust company, or other financing institution, including any Federal lending agency being at issue 31USC3727 might be the only cite.

Trying to prove one and only one is entitled to a claim to a name seems akin to that Medieval religious argument about how many angels could dance on a pinhead--and about as profitable. Any lawyer or contracting professional dealing in the subject in detail had better focus on what the code says and how their issue is addressed in each rather than dwell on the popular name.


Vern Edwards  Posted on Friday, July 11, 2003 - 09:21 am:

All:

This part of this thread began when Joel, in a kind attempt to defend Anonymous, criticized Jerry of July 8 at 9:41am as follows: "By the way, in citing 'the Act in its entirety', one of the experts here included language from the Anti-Assignments Act as well as from the Assignment of Claims Act. " (Joel didn't mention Jerry by name, but he was talking about Jerry.) What Jerry had quoted was 41 U.S.C. 15.

ASSIGNMENT OF A FEDERAL CONTRACT

In construction law, including government contracting, a party (assignor) to a contract may “assign” their rights and duties under the contract to another party (assignee) through an assignment agreement. Ideally, the assignor wants the assignee to step into his shoes and assume all of his contractual rights and obligations.

In order for the assignment of a federal contract to be valid, the contract must not prohibit1 assignment, the government must be properly notified, and assignment must not be prohibited by law.

One such law that greatly restricts the ability of a contractor to assign a federal contract is the Anti-Assignment of Contracts Act2 (the Act), which prohibits the transfer of any interest in a federal contract to another party unless at least one of three exceptions applies.

The first exception, allowed by statute, is that federal contracts may be assigned to financial institutions as long as the assignment is made to only one party, for the entire balance due on the contract, and the Assignee provides written notice of the assignment to the Contracting Officer, the sureties, and the Disbursing Officer for payment.

The second exception, as recognized by the courts, allows for assignment if the parties “waive” the restrictions of the Act through “clear assent to the assignment.”3 This waiver is typically done through a “novation” of the contract, where the parties involved agree to sign a new agreement, substituting a new party in place of the contractor under the same terms of the original contract.

The third exception, also recognized by courts, is that an assignment may be made by “operation of law” when a company experiences an event such as bankruptcy, mergers and acquisitions, or reorganization of the company.

A BAD ASSIGNMENT

A recent example of how the Anti-Assignment of Contracts Act operates is the case of American Government Properties.4 In that case, the GSA awarded a contract to American Government Properties (AGP) to design and build an office facility in Louisiana. About one month after award, AGP entered into an assignment agreement with Houma SSA, LLC (Houma), a wholly owned subsidiary of AGP. In the agreement, AGP assigned all of its rights and interests in the contract to Houma, and Houma agreed to take on all of AGP’s duties and obligations under the contract.

After nearly three years of performance and delay issues, the GSA terminated the contract for default. Two years after the termination, AGP submitted a certified claim to the contracting officer, seeking $4.2 million in damages for wrongful termination. The contracting officer later issued a final decision assessing $365,000 in Liquidated Damages and $2.4 million in reprocurement costs, and then filed another final decision denying AGP’s claim.

AGP and Houma then appealed the final decisions to the U.S. Court of Federal Claims. The Government moved to dismiss the case, arguing that the Anti-Assignment of Contracts Act prohibited AGP’s assignment, and that none of the exceptions listed above applied. AGP did not argue that they were a financial institution or that the parties had executed a novation of the contract. AGP did argue, however, that the assignment fit under the “operation of law” exception because the assignment to Houma was like a corporate reorganization.

The court disagreed with AGP, explaining that a transfer by operation of law typically involves a corporation that undergoes a change in form or ownership, while the corporation remains essentially the same. Therefore, the court found that AGP did not assign the contract to Houma by operation of law because Houma was an entirely different entity. The court also pointed out that Houma did not maintain the same management or financial capabilities as AGP. Therefore based on these findings, the court dismissed AGP’s case.

CONCLUSION

The AGP case highlights the importance of knowing the laws and pitfalls involved in assigning a federal construction contract. Because AGP illegally and improperly handled the assignment to Houma, its potential multi-million dollar recovery was dismissed along with its appeal. However, had AGP agreed with the Government and Houma to execute a novation of the contract, the “waiver” exception would have applied and the court would not have dismissed the appeal on those grounds.

As always, it is important to “see” all of the variables that may come into play on an assignment or other seemingly simple transaction. Consulting with an expert who has seen all of the variables in play can be the difference between recovering what is due under the contact, or losing out altogether.

In the end, you will be glad you made the call; by the way, it’s a FREE CALL.

Excell Consulting: “Here Today for Your Tomorrow.”

Author’s note: The information contained in this article is for general informational purposes only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation. – Taylor Benson, Esq., Asst General Counsel

_____________________________

 1 Typically, assignment is allowed unless specifically prohibited by contract language. Contract language may also limit the ability to assign, by restricting to whom, and when a contract may be assigned, for example.
 2 41 U.S.C. 6305.
 3 See American Government Properties v. United States, No. 09-153, 10-541C & 11-486C (consolidated), (Fed. Cl., Aug. 28, 2014).
 4Id.

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