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Government contract novations: Practical practices under the FAR

August 22, 2016 By Nancy Cleveland

Novation 08.2016Novations are the government contracting equivalent of a merger and acquisition (M&A) in the private sector – the process through which a government contract can be transferred from one business to another (without violating the Anti-Assignment Act).

There are many reasons that a novation might be necessary. A business holding a government contract could be acquired by another business (that now wants to take over and perform the contract). Or a government contractor could divest assets during a bankruptcy proceeding. The common denominator is a material change in the identity of the business that will perform under a contract with the government.

The novation process set out in FAR 42.1204 is deceptively simple. According to this regulation, a formal Novation Agreement is granted when the government determines that the transfer is in the “best interest” of the government and supported by appropriate documentation (set forth in checklist format).

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=519082

Filed Under: Contracting Tips Tagged With: contract transfer, FAR, novation

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