As companies acquire and sell businesses that also have federal government contracts, the facts can be somewhat tricky as to whether the Anti Assignment Act is violated. The novation contract law attorneys at Watson & Associates, LLC bring decades of experience helping buyers and sellers to avoid the common and costly mistakes when purchasing or selling companies with government contracts. Our team of government contract novation lawyers provides nationwide help with the process under FAR 42.1204.
<h3>Novation Agreement Process Under FAR 42.1204
Novation of government contracts follows a unique set of rules in the federal procurement laws. The novation process under FAR 42.1204. may seem relatively simple to many contractors. However, the reality becomes obvious if the contracting officer decides that he or she will not approve your agreement.
A government contract novation commonly becomes a requirement when you are buying or selling a business via an asset purchase sale.
Federal Government Contract Novation Agreement Attorneys Services
With law offices in Washington D.C. and Denver, Colorado, the novation contract law attorneys at Watson & Associates, LLC provides a vast array of government contracting legal services to small business and large DOD contractors. We have successfully provided novation consulting services to clients throughout the United States. When it comes to government contract novation law services, we provide the following:
- Complete oversight of the federal government novation process (this involves oversight of and collaboration with buyers and or seller’s attorneys. Who handles the state law process;
- Drafting contract novation agreement pursuant to FAR 42.1204;
- Assessing how a buyer’s small business size status can be affected (this is a common problem missed by the parties);
- Assessment of mergers and acquisitions of federal government contractors;
- Overseeing asset purchase business sales;
- Transfer of VA contracts
- Working with your local state attorneys through the buying and selling process, and
- Help for small businesses that are SBA 8(a) certified or some other government small business designation such as SDVOSB, HUBZone or others. Learn more about the small business set aside rules.
- Government contract fraud and investigations
- Get help with small business size and bid protest issues involving government novation contract law
What is a Novation Agreement in Government Contracting?
- When a corporation accepts legal responsibility for a contract, it is called novation.
- This usually occurs when the company is bought or sold.
Is a Novation of Contract Required Under FAR 42.12?
FAR 42.1204 suggests that stock purchase sales do not require a novation agreement. However, an asset purchase sale does require a government contract novation and the approval of the contracting officer. In all situations, it is up to the contracting officer’s discretion on whether or not he or she wants to approve the novation of contract agreement. See the difference between government contract assignment Vs contract novation. See information about SDVOSB certification and bid protests.
Under federal contract law, any violation of the FAR 42.1204 and procurement law will void the novation agreement and even create federal criminal liability.
Is Your Novation Agreement in Violation of the Anti-Assignment Act?
Many contractors make the mistake of simply passing on the government contract as the only asset. This can be problematic to the agency’s attorneys. At Watson & Associates, not only do we help you draft the required federal documents and help you to navigate through the government contract novation process, but we also assess all the facts of the transfer novation agreements to make sure that your chances of disapproval are minimized.
Avoid Costly Mistakes in Government Novation Contract Law
When companies tentatively agree to buy or sell a business with government contracts, thinking ahead is critical. Under federal government novation contract law, you want to avoid costly legal mistakes such as:
- Failing to anticipate failure to convince the contracting officer to approve the agreement (near assume that the CO will approve the transfer under FAR 42.1204.)
- Creating an asset purchase agreement with only the contracts as the “assets.”
- Failure to condition the sale upon the government’s approval
- Assuming that the government will always exercise the future option years
- Failure to draft documents that address the buyer’s ability to perform.
- Failure to seriously consider the pros and cons of engaging in a novation of contract agreement.
- If you are buying part of a company or a separate division, considering the potential impact on revenues as a small business.
- Failure to investigate if the newly acquired company complies with the Buy American Act ( this is common for construction companies). – Is the seller or Buyer on the hook once the novation is completed? See More On Buy American Act Frequently Asked Questions
Communicate the Agency CO About the Novation of Contract as Soon as Possible
One of the biggest mistakes the parties can make when planning to execute a novation agreement is to not inform the contracting officer. By informing the contracting officer, you can reduce the surprise and discomfort from the contracting office. At Watson, our government contract novation lawyers strongly suggest that clients communicate with the agency upfront, Agencies do not like to be surprised.
At Watson, our law firm understands the legal issues that arise with novations and the novation of contract process with government contracts and the problems that buying and selling a business can create. Our goal is to provide our client with high-level guidance in the FAR novation process.
Tips about Government Contract Novations
- Avoid the temptation to get a canned agreement template. It may not meet federal contracting requirements.
- You need more than just a simple novation agreement and to have a legal transaction.
- Understand how an asset purchase can severely impact your small business size status as the buyer.
- As the new party, you want to be able to demonstrate that you can perform the contract.
- What happens if your company becomes under investigation while the novation process is moving along? What happens if the newly acquired company comes under government investigation some time after the novation occurs? Then what? Be mindful of this possibility.
You Must Be Flexible
During the process, the parties to the purchase or sale must be flexible. Remember that the transaction also requires the contracting agency to be comfortable after approving your novation agreement.
The government must be convinced that it is in its interest to approve the agreement and be assured that the new owner can manage and complete the contract. The agency may also suggest certain topics that they might be interested in. These are considered the ‘hurting points’ from the government’s perspective.
Contact our Federal Government Contract Novation Lawyers
Now that you are aware that the government is not obligated to approve your novation agreement if you need professional help with the process under FAR 42.1204, call Watson’s law firm today.
Use our Contact Us page to tell our government contract novation consulting team about your specific situation or call toll-free at 1-866-601-5518. FREE INITIAL CONSULTATION.