- What Banks Lending to Federal Government Contractors Need to Know about Central Contractor Registration
- June 4, 2004 | Authors: Karen R. Harbaugh; Brooke S. Horiuchi; Ritchie T. Thomas
- Law Firms: Squire, Sanders & Dempsey L.L.P. - Tysons Corner Office ; Squire, Sanders & Dempsey L.L.P. - Washington Office
The Central Contractor Registration, or CCR, is the primary vendor database for the Defense, Transportation, and Treasury departments, and NASA. While prospective vendors must register in the CCR in order to be eligible for contracts from those departments and agencies, all federal government contractors must register in order to be paid by electronic funds transfer (EFT). Thus, it is important for lenders who are financing government contracts to understand the CCR registration requirements and process.
In most cases, the federal government will make payments under its prime contracts by EFT. The government will make such payments based upon the EFT information contained in the CCR database, and the contractor is responsible for the accuracy and completeness of that information. If the EFT information changes, the contractor is responsible for updating the information. If the contractor's EFT information in the CCR database is incorrect, the government will not make payment until the contractor corrects that information.
To remain registered in the CCR database after initial registration, the contractor must review the CCR database at least annually to ensure that the information contained therein is current, accurate and complete. If the contractor fails to review that information at least once a year, its CCR registration will expire (even if the information is still accurate), and the government will withhold payments until the contractor renews its registration.
Banks often secure loans to government contractors by taking a security interest in government contract receivables and, thus, clearly have an interest in assuring that the receivables are paid promptly and into the correct account at the bank. Because the contractor's CCR registration must be active in order to be paid, and because the EFT information in the CCR database must correctly identify the account into which such payments are to be made, the bank should include certain minimum representations and covenants in its loan and security agreements to assure that its customer maintains an active CCR registration with the correct EFT account information.
Sometimes banks will take advantage of the Assignment of Claims Act and require its government contractor customers to assign to the bank all monies due, or to become due, under their government contracts. If a contractor makes such an assignment, the bank also must register in the CCR database and maintain an active registration in order to be paid. While the assignment under the act assures that the government will not make assigned payments to the contractor, the assignment alone does not assure that the bank will receive those payments. The bank also must have an active CCR registration to assure receipt of all assigned contract payments.
When registering in the CCR database, the assignee bank must assign a four-character suffix to its D&B DUNS number (the DUNS plus four numbers) to establish a separate CCR record for identifying the EFT account into which the government is to make payments of the amounts due, or to become due, under contracts that have been assigned by a bank customer to the bank under the Assignment of Claims Act. Thus, while a contractor may only have to register once in the CCR database (assuming that it wants payment under all of its government contracts to be made into one bank account), the bank must register separately for each government contractor customer that has assigned government receivables to the bank pursuant to the Assignment of Claims Act.
Once the bank has registered in the CCR database, the bank also must annually renew its registrations in order to assure that they do not expire. If any of the bank's registrations expire, the government will no longer pay the applicable customer's receivables to the bank, and that customer may not be able to borrow additional funds from the bank until the bank renews the registration and the government restarts paying that customer's receivables to the bank.
Banks should establish procedures to assure that they will remember to renew their CCR registrations annually. The consequences of the bank's failure to do so could be serious. For example, expiration of the bank's CCR registration for a particular customer could result in that customer's inability to obtain an advance against a revolving line of credit needed to make payroll. Even if the bank has no legal liability for allowing its CCR registration to lapse, the damage to its relationship with that customer could be serious, if not terminal.
Banks lending to government contractors should become familiar with the CCR registration requirements, and adopt procedures and practices that will assure that both the bank and its customers maintain active CCR registrations when applicable. This will avoid the potentially serious consequences of having such registrations expire. Banks may obtain information on registration and annual confirmation requirements via the Internet at http://www.ccr.gov, or by calling the CCR Assistance Center at 1-888-227-2423 or 269-961-5757.