Georgia Tech Procurement Assistance Center

Novation agreements under federal contracts

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A unique aspect of doing business with the federal government is the built-in limits on a contractor’s right to assign the contract or the right to payment under the contract to third parties. The Anti-Assignment Act (41 U.S.C. § 6305) prohibits the transfer of a government contract or interest in a government contract to a third party.  An assignment of a contract in violation of this law voids the contract except for the Government’s right to pursue a breach of contract remedies.  What’s a contractor to do when it is acquired/merged with another firm, is restructured, or goes through a variety of other types of corporate transaction?  The Federal Acquisition Regulations recognize that firms involved in government contracts get bought and sold from time to time and include procedures for the novation of contracts in certain situations to avoid a potential violation of the Anti-Assignment Act.

Continue reading at:  Husch Blackwell

DOE rescinds $5 billion award due to contractor sale after bid submission

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GAO-GovernmentAccountabilityOffice-SealA string of recent decisions have found the U.S. Government Accountability Office (GAO) struggling with the impact of corporate transactions on pending proposals.

  • FCi Federal, Inc., B-408558.7, B-408558.8, Aug. 5, 2015, 2015 CPD ¶ 245 (overturning award where “as a result of the sale . . . the original proposal, upon which the award decision was based, no longer reflects the intended approach to performance”).
  • Wyle Labs., Inc., B-408112.2, Dec. 27, 2013, 2014 CPD ¶ 16 (overturning award where the awardee had recently engaged in a corporate reorganization).
  • IBM U.S. Federal, B-409806 et al., Aug. 15, 2014, 2014 CPD ¶ 241 (noting that a corporate reorganization did not appear “to have any significant cost or technical impact on performance of the requirements”).

These decisions have led to significant uncertainty as to what best practices should be adopted by contractors in significant transactions.

Continuing this confusion is yet another case where an apparently successful offeror has lost its contract because of a transaction.  Last week, the National Nuclear Security Administration (NNSA) rescinded the award of a nearly $5 billion contract to a Lockheed Martin company—Nevada Site Science Support and Technologies Corporation (NVS3T)—after learning that the company had been sold to Leidos Innovations Corporation after submission of the bid.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=526492

Government contract novations: Practical practices under the FAR

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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

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