We help large and small businesses to avoid the most costly legal mistakes in their federal government contract novation agreement under FAR 42.1204. Help for clients nationwide.

ThGovernment Contract Novation Agreement - novation law lawyers attorneys FAR 42.2104e government contract novation process can be tricky when it comes to buying or selling a business that has federal contracts. 

Most companies know that the federal government can novate a contract when it is in the interest of the government. However, many companies still fall short of legal requirements. Thus finding themselves in ‘hot water” with the contracting officer. Executing FAR novation contracts should be a mutual benefit between the contractor and the government.

At Watson & Associates, LLC our federal novation of contract attorneys help small businesses and government contractors throughout the United States to assess and comply with federal procurement law.

  • Immediate help available nationwide for simple or complex government contract novation transactions
  • Some of our attorneys have actually worked for federal contracting agencies
  • Get help from federal novation of contract professionals that understand the process and have had successful results.
  • Save tens of thousands of dollars by avoiding common mistakes with government contract novation agreements

FAR 42.1204 Government Contract Novation Agreement Services

Watson & Associates’ lawyers and consultants have over 30 years of experience in government contracting and are passionate about exceeding our clients’ expectations. When it comes to Federal government contract novation law and novation vs assignment of contract, our attorneys can help with:

  • Complete oversight of the federal government novation process;
  • Drafting compliant novation agreement FAR 42.1204 documents;
  • 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 the contract novation process for asset purchase business sales;
  • Help meeting other FAR government contracts small business requirements in a novation contract;
  • Novation of VA contracts
  • Working with your local state attorneys through the buying and selling process, and
  • Overseeing the purchase and sale transaction from beginning to end.
  • 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.
  • We offer rates at a fraction of what large novation law firms charge.
  • Get help with small business size and bid protest issues
  • Prompt turnaround for buyer or sellers

What is a Novation Agreement?

Under federal procurement regulation, a novation agreement is the agreement, once approved by the contracting officer, allows for the original prime contractor to be substituted by a new contractor. This usually occurs when the company is bought or sold. A novation agreement is not used to simply ‘sell’ a government contract.

When compared to commercial type novations, it is not always true that the original party is out of the picture.

What is a Contract Novation in Federal Government Contracting?

In federal government contracting, companies sometimes purchase other companies as is the case in the commercial sector. However, when it comes to federal procurement regulations when the sale of a business includes an existing contract, the buyer and seller have to conform to certain statutory requirements under the Federal Acquisition Regulations (FAR).

A novation agreement in federal government contract law is a contract governed by the Federal Acquisition Regulations to transfer an existing contract from one contracting party to the other without violating the provisions of the Anti-Assignment Act.

FAR 42.1204 suggests that stock purchases do not require a novation contract. However, an asset purchase sale does require a government contract novation. Nevertheless, in either situation, it is still up to the contracting officer’s discretion on whether or not to approve the assignment of contract through a  novation agreement. See the difference between government contract assignment Vs contract novation.


For immediate help meeting FAR novation agreement requirements under FAR 42.1204, call Watson & Associates’ federal contract novation attorneys at 1-866-601-5518.

Find Our More About the Application of Force Majeure Clauses With COVID-19


Companies should be extremely careful and avoid liability under federal novations law, false representations about business partnerships and operations.  The federal government is now scrutinizing business sales for potential violations of the Anti-Assignment Clause which expressly prohibits selling government contracts. 

  • Keep in mind that even after a novation of contract is approved, the impact can severely harm you in a bid protest if there is a challenge to your small business size. These are areas that we can help you in.
  • Avoid using sample novation agreement template because the facts surrounding your case may not meet the FAR requirements.


With any buy-sell transaction involving FAR government contracts, the buyer and the seller should understand the difference between a government contract novation and assignment of contract. You simply cannot assign the existing contract without the approval of a novation agreement from the contracting officer. The facts of your case should warrant an assignment and not a novation. Watson & Associates, FAR novation of contract attorneys help to:

    • Avoid federal criminal liability and appearance of fraud pass-through schemes
    • Make sure that your transaction complies with FAR novation agreement requirements
    •  Oversee the entire buying or selling process on your behalf.
    • Increase your chances of getting contracting officer contract approval.
    • Show that as the new contractor you have the capability to perform (this is a requirement commonly missed by lawyers)

Companies engaging in mergers and acquisitions where there is a FAR novation agreement involved want to stay clear of the Anti-Assignment Act. A simple buy-sell contract without a full legal analysis can cause unnecessary legal problems. Find out about affirmative defenses to breach of contract.

Under federal novation contract law, any violation of the FAR 42.1204 and procurement law will void the novation agreement and even create federal criminal liability

This just creates unnecessary problems. Many corporate attorneys may choose to help with the buying and selling process.

  • Without a clear understanding of federal government contracting law and FAR 42.12 novation law requirements, making the merger and acquisition process work can be daunting.

If you are involved in allegations of criminal misconduct that involves a government contract novation, call our federal criminal defense attorneys immediately at 1-866-601-5518 now.

FAR 42.1204 Novation Contract Law & Applicability of novation agreements.

      (a) 41 U.S.C.6305 prohibits the transfer of Government contracts from the contractor to a third party. The Government may when in its interest, recognize a third party as the successor in interest to a Government contract when the third party’s interest in the contract arises out of the transfer of-

           (1) All the contractor’s assets; or

           (2) The entire portion of the assets involved in performing the contract. (See 14.404-2(l) for the effect of novation agreements after bid opening but before award.) Examples of such transactions include, but are not limited to-

                (i) Sale of these assets with a provision for assuming liabilities;

                (ii) Transfer of these assets incident to a merger or corporate consolidation; and

                (iii) Incorporation of a proprietorship or partnership, or formation of a partnership.

      (b)A novation 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, whether there is a purchase of assets or a stock purchase, there may be issues related to the change in ownership that appropriately should be addressed in a formal agreement between the contractor and the Government (see 42.1203(e)).

      (c) When it is in the Government’s interest not to concur in the transfer of a contract from one company to another company, the original contractor remains under contractual obligation to the Government, and the contract may be terminated for reasons of default, should the original contractor not perform.

      (d) When considering whether to recognize a third party as a successor in interest to Government contracts, the responsible contracting officer shall identify and evaluate any significant organizational conflicts of interest in accordance with subpart  9.5. If the responsible contracting officer determines that a conflict of interest cannot be resolved, but that it is in the best interest of the Government to approve the novation request, a request for a waiver may be submitted in accordance with the procedures at 9.503.

Mistakes to Avoid in Federal 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 novation (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.

Immediate Help

Watson & Associates LLC has been delivering results for government contractors since we opened in 2003. As government contract law attorneys, we understand the novation legal issues that arise in the novation of contract process with government contracts and the problems that buying and selling a business can create. Our goal is to federal contractors with high-level guidance in the FAR novation agreement process.

We understand the requirements for government contract novations in FAR 42.12 and how to prepare viable novation agreement packages.  We can help each transferor or buyer to adequately prepare the contract novation and to be mindful of the legal definition and meaning of novation in federal procurement. Our goal is to help the client to work with the contracting officer to get the best possible result.

  • 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.

How Court Decisions on Government Contract Novation Law Can Impact Your Novation Agreement FAR 42.1204

The Meso Scale Diagnostics v. Roche Diagnostics case seems to better address federal government contract novation law on the issue of treating reverse triangular mergers as being a  stock purchase. In this situation, a novation contract agreement would not be required.

As a purchaser or seller of a business, you should be aware that the Meso court decision suggests that the reverse triangular merger does automatically convert into an assignment by operation of law, and as an exception to the Anti-Assignment Act.

  • Regardless, under federal rules of novations contract law, it is still up to the contracting officer to be involved in the novation of the contract process.

Do you need a government novation of contract agreement for your type of transaction?

Contact our Federal Government Contract & FAR Novation Agreement Lawyers

Now that you are aware that the government is not obligated to approve your novation contract if you need professional novation legal help with a federal novation agreement and FAR 42.1204 process, call Watson’s law firm today. Use our Contact Us page to tell our government contract novation law lawyers about your specific situation or call toll-free at 1-866-601-5518. FREE INITIAL CONSULTATION.