If you are a government contractor seeking to purchase or sell a company that performs federal contracts, developing novation contract agreements under FAR 42.12 is one the most important things you must do. This is true if there is an asset purchase or sale. Small businesses, in particular, must understand the risks if the novation of contract is not planned and followed out accordingly.
Having oversight of the moving pieces and various parties involved in essential. The government contract novation lawyers at Watson & Associates, LLC frequently help small businesses and large defense contractors through the novation process.
Watson & Associates, LLC’s lawyers and government contract novation law firm have decades of experience helping small businesses and federal contractors to get through the government contract novation process. Our goal is to apply the legal requirements of FAR Part 42.12. We help clients throughout the United States. As former government staff members, we understand the novation process and concerns under federal novation contracts.
The Federal Acquisition Regulations (FAR Novation Agreements) do not mandate that the Government is obligated to approve your contract novation. The last thing you want to experience is that after substantial negotiations with the buyer or seller, the contracting officer disapproves of your novation contracts.
When is a novation agreement required? Per federal regulations, a government contract novation is unnecessary when there is a change in the ownership of a contractor as a result of a stock purchase, with no legal change in the contracting party, and when that contracting party remains in control of the assets and is the party performing the contract.
However, whether there is a purchase of assets or a stock purchase, there may be issues related to the change in ownership that should appropriately be addressed in a formal agreement between the contractor and the Government
Government Novation Contract Attorney Services
The purchase and sale of a company with federal government contracts can be daunting. Besides drafting the novation agreement form, small businesses must consider other aspects of the sale, such as whether the sale can impact the seller under SBA affiliation rules when there is an asset purchase sale. As part of our FAR 42.12 novation contract law services, we provide:
- Management and oversight of the purchase and sale process for potential FAR violations.
- Coordination with state attorneys involved in the buying and selling process.
- A-Z Government contract novation consulting services
- GSA novation agreement matters and settlement solutions
- Drafting of FAR novation documents
- Filing Pre-novation Disputes Act claims against the government as the successor in interest ( Vought Aircraft Co., 95-1 BCA, r 27,421 at 136,666)
At Watson & Associates, LLC our government contract novation agreement lawyers help clients to develop and propose a more acceptable novation agreements package to the contracting officer. FAR Part 42.12 has specific requirements for the novation of government contracts.
- Avoid costly mistakes with asset transfers and Anti-Assignment Act violations
- Prompt turnarounds with the federal novation of contract actions
What Can You Do to Minimize the Possibility of the Contracting Officer’s Disapproval of the Request for Novation Contract?
As stated before, if your novation does not fall within the purview of what is in the Government’s interest, then the CO does not have to approve your requests. Things that you can do to increase the chances of getting approved include:
- Keeping the CO involved in the initial stages of your negotiations with the buyer or seller. COs don’t want to be surprised with a request for approval.
- When you submit your, you may want to explain how the transfer of your contract to the buyer or seller would arguably be in the government’s interest.
- What past performance does the new owner have that the agency should consider?
- Consider talking about the reduction of risk of non-performance
Potential Pitfalls in the Government Contract Novation Process and How to Avoid Them
There is more to the FAR novation of contracts process than simply filling out forms. We help with the following:
- Make sure that your small business status is still in place
- Assessing whether your asset purchase and transfers are really true assets in the government’s eyes (this is one area where government contract novation attorneys scrutinize your purchase and sale transactions.)
- Assuming that the contracting officer will approve and not providing for contingency if not approved.
Our federal government contract novation agreement consulting team of attorneys can help assess asset purchase sales and prepare our clients to ultimately get through the buying and selling process.
- Understand that the contracting officer is not obligated to approve your agreement
- If your company is performing with a joint venture or teaming arrangement, we help with the transfer process.
Important Points and Considerations
Under federal procurement laws, the FAR Part 42.12 contract novation meaning in law may be somewhat different than in the commercial sector. To novate a government contract is appropriate when the party to the contract somehow assigns their obligations under a current federal contract to a new party. In government contracting, the agency refers to the new part as a successor in interest.
Novating contracts with teaming agreements and joint venture relationships?
This can be a concern of the contracting officer. Our government contract novation consulting services look at all of these commonly overlooked issues when we represent companies involved with government novation contracts.
The Anti-Assignment Act prohibits the sale of government contracts.
In other words, unless the responsible contracting officer decides that it is in the government’s best interest to novate a contract, then the government is not obligated to accept a novation agreement under FAR 42.12.
- If the only asset purchased is a government contract, there could be problems.
- Contractors fail when the contracting officer is suspect of the actual assets sold.
When you are involved in a purchase and sale of a business, it is important to assess the possibility that option years to existing contracts may not be extended. This is a risk for the buyer of a stock purchase contract. When there is such a potential problem, the value of the sale of the business may be impacted.
What happens if the buyer’s small business status expires? Would the small business status be gone?
Generally no. The rule has been that once you were a small business at the initial bidding and award stage, then you should be fine. The transaction should not impact your status as a small business.
Does Your Stock Purchase Sale Mean that The Government Has to Approve Your Novation Agreement Form?
When is a contract novation agreement required? Obviously, FAR Part 42.12 suggests that your novation contract agreement is unnecessary when there is a change in the ownership of a contractor as a result of a stock purchase, with no legal change in the contracting party, and when that contracting party remains in control of the assets and is the party performing the contract. However, under the FAR, when you execute a stock purchase agreement, you should, by all means, seek the approval of the contracting officer ahead of time.
- The key to any approval of a FAR novation agreement is to get the contracting officer involved as soon as possible. Arguably if the government’s interest in jeopardy, there may be an exception.
- Remember that approval of your agreement depends on what is in the best interest of the government.
Contact Our FAR 42.12 Government Novation Contract Law Lawyers
For help with FAR part 42.12 requirements and improving your chances of contracting officer approval when novating a contract, call Watson’s government novation contract law firm at 1-866-601-5518 for immediate help.