novation contract lawNot every business purchase or selling transaction requires a novation of contract under federal novation regulations. As federal contract novation lawyers and consultants, we help government contractors across the United States avoid costly legal mistakes with FAR 42.1204 legal requirements when they buy or sell a business that involves a government contract. We provide NATIONWIDE Help.

When is a Novation Agreement Required under FAR Part 42?

A novation agreement is required under FAR Part 42 when there is a change in the ownership or control of a contracting party and there is an asset sale or purchase. This may occur due to a merger, acquisition, or sale of a business. The novation process ensures that the new party assumes all the obligations and responsibilities of the contract.

The FAR Part 42.1204 provides guidelines and procedures for novation, including the submission of a proposed novation agreement and supporting documents to the government agency responsible for the contract. The novation agreement must include a detailed description of the transaction, the new entity’s qualifications, and the new entity’s proposed performance of the contract. When looking at novating a government contract, also look at whether you must assess any products for TAA compliance and certification of TAA designated countries.

When submitting the novation agreement package to the contracting officer, you should submit:

(1) An authenticated copy of the instrument effecting the transfer of assets; e.g., bill of sale, certificate of merger, contract, deed, agreement, or court decree.

(2) A certified copy of each resolution of the corporate parties’ boards of directors authorizing the transfer of assets.

(3) A certified copy of the minutes of each corporate party’s stockholder meeting necessary to approve the transfer of assets.

(4) An authenticated copy of the transferee’s certificate and articles of incorporation, if a corporation was formed for the purpose of receiving the assets involved in performing the Government contracts.

(5) The opinion of legal counsel for the transferor and transferee stating that the transfer was properly effected under applicable law and the effective date of transfer.

(6) Balance sheets of the transferor and transferee as of the dates immediately before and after the transfer of assets, audited by independent accountants.

(7) Evidence that any security clearance requirements have been met.

(8) The consent of sureties on all contracts listed under paragraph (e)(2) of this section if bonds are required, or a statement from the transferor that none are required.

(g) If the Government has acquired the documents during its participation in the pre-merger or pre-acquisition review process, or the Government’s interests are adequately protected with an alternative formulation of the information, the responsible contracting officer may modify the list of documents to be submitted by the contractor. See concerns about the M&A process.

Hiring a state contract lawyer that does not understand the FAR Contract Novation regulations can cost you tens of thousands more in the long run.

  • Understand that novation disputes can arise when you least expect them. Even in a bid protest case.
  • Agreements that simply transfer government contracts and nothing else could potentially open your company up for criminal or civil OIG investigation for a violation of the Anti-Assignment Act and pass -through contract fraud schemes. Here, you want to pay attention to the SBA NAICS size standards as a small business.
  • Note that a GSA novation agreement may have a slightly different ‘twist’ that FAR requirements.

See information about buying and selling a government contracting business.

Call Watson’s Government Contract Novation Lawyers

For immediate help with FAR novation requirements,  breach of contract of novation agreement requirements under FAR Part 42.1204, Anti-Assignment Act matters or help with overseeing the purchase or sale of your business involving government contracts, call our government contract novation lawyers at 1-866-601-5518.