Contract review is one of the most onerous (and important) processes in any due diligence process when buying or selling a company. We all know that those contracts are the backbone of many businesses- they document the relationships and operations of the business and are often the value of what a buyer is purchasing. This review process can get complicated when the selling entity has government contracts that may be governed by special rules known as the Federal Acquisition Regulations System (“FAR”). The FAR was established to set forth uniform policies and procedures for acquisition by all executive branch agencies.
Individual agency acquisition regulations may implement or supplement FAR, in addition to internal agency guidance. For example, the Department of Defense has certain certification requirements in order to establish security clearance for defense contracts. FAR reminds contractors that the government is acting on behalf of the American taxpayer in procuring goods and services for government agencies, and the individual contract officers act on behalf of the government to ensure that each contract benefits the government.
Buyers, sellers, and their advisors should address government contracts as early in the diligence process as possible in order to expedite any required changes which might delay closing.
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