Assignment of Government Contract Proceeds

An advance decision was requested regarding the validity of a defaulted contractor's assignment of contract proceeds to a financial institution. The assignment to the bank of the proceeds of a government contract where the bank's alleged financing was through the intermediary holding company was not recognized as a statutory assignment since there was no showing that either the bank or the intermediary actually provided funds to the government contractor or that the intermediary expended funds for the performance of the contract. The contractor's assignment to the bank of the contract proceeds executed after the contractor's operations ceased was invalid under 31 U.S.C. 203, since the purpose of that statute was to induce financial institutions to lend money to finance contractor's operations. The contractor's grant of a security interest in its accounts receivable to a holding company alleged to be an intermediary for the bank's financing was not a valid assignment under 31 U.S.C. 203, since the holding company did not qualify as a proper assignee.