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