Buying and selling receivables, the obligor of which is the United States government, requires consideration of the Federal Assignment of Claims Act (“FACA”).  As is the case with non-government account debtors, the federal government, in its capacity as an obligor, has the ability (with certain limited exceptions) to set off contractual payments owed by it to a seller of the right to receive such payments, against amounts payable to it by such seller for both (x) damages and related payments caused by such seller’s failure to perform under the applicable contract and (y) any other amounts owing to the government by such seller (including federal tax liability).  In the case of non-government obligors, under the terms of the Uniform Commercial Code, a purchaser of the right to receive a contractual payment owing by such obligor may, generally, limit or cut-off the applicable set off rights of the related obligor, by providing a somewhat simple notice to such obligor that the seller has assigned its right to receive such payments.  In order for a purchaser to limit the set off rights of the federal government, however, the purchaser must comply with the more complicated requirements of FACA.
Continue Reading Sale or assignment of US government receivables – FACA considerations