I was thumping through the FAR and came across “Novation Agreement” 42.12, particularly the section that talks about transferring a contract to a successor contractor. Just recently my company acquired a contract from a predecessor that the Government was not pleased with services of that contractor. We were awarded this level of effort type contract to support the agency’s LAN and Help Desk Services program. I was not involve in the negotiation, but was given the contract to administer. After skimming through the text and noting section 42.1200(a) of the FAR where it set forth procedures for “recognition of a successor in interest to Government contracts when contractor assets are transferred” I was wondering should this concern me. That is should some where in the contract or a mod setting forth a “Novation Agreement” be present. We received the contract with a trial period and an option to extend.

By Eric Ottinger on Thursday, January 25, 2001 - 02:29 pm:

Anon,

Is this the same contract with the same contract number?

Or, is this a new contract with the same work.

In the first case, you need to get in touch with the Administrative Contracting Officer (ACO).

In the second case, don't worry about a novation.

Eric

By joel hoffman on Friday, January 26, 2001 - 08:07 am:

Anon - If the original contractor entity no longer exists and if you are doing business with the Government under the contract, using the new corporate name, you DO need to novate the contract. Notify the ACO or KO and begin action, immediately.

There are many legal implications, here. I am not sure that your new firm has legal standing to payment, should the Government stop payment for some reason and the new firm has no right to submit a claim under the new name.

I have just recently been through this with a "super firm" submitting a claim under a new corporate identity. The new corporation hasn't been legally registered in the State it's operating in, preventing them from changing their name with us. They had to recertify the claim, under the legally recognized corporate entity.

By John Ford on Friday, January 26, 2001 - 03:07 pm:

Anon, novations only come into play if the contractor to whom the government awarded a contract attempts to transfer that contract to a new legal entity. The original contractor cannot do this on its own initiative. Instead, this transfer must be accomplished through a three party agreement between the original contractor, the transferee, and the Government. The three party agreement is called a novation agreement.
An award of a successor contract to a different contractor does not call for a novation agreement. Thus, even if you are using all the assets (probably Government property) of the old contractor to perform the new contract, a novation is not required.
In short, Eric is right.

By Anonymous on Friday, January 26, 2001 - 03:35 pm:

Eric

I was told that the prior contract was terminated and a new contract was awarded to my company for the same type of services. Therefore, based on your answer, it appears that there is no worry. On another note, I know that the Government can basically do anything (within reason) but in a case like this what happened to the acquisition planning of full and open competition.

By John Ford on Friday, January 26, 2001 - 03:44 pm:

Anon, you need to find out of the original contract was terminated for default or the convenience of the government. If the termination was for default, the government can award a replacement contract for the executory portion of the terminated contract and charge any excess costs of that new contract to the terminated contractor. In awarding the replacement contract, the government does not have to follow CICA, i.e., obtain full and open competition, if the replacement quantities do not exceed the quantities remaining undelivered on the terminated contract.

By Eric Ottinger on Friday, January 26, 2001 - 03:58 pm:

Anon,

Good question.

I think John has it right.

I thought about that, and decided that issue was the Government’s problem.

Given the circumstances, I would expect that the agency has a pretty good justification for a sole source. If however, there were a protest, you may want your counsel to get involved as intervenor defending the protest.

Even if the agency loses the protest, it doesn’t follow that the GAO will require the agency to terminate the contract.

In short, you have good reason to be curious, but I don’t think you have much to worry about.

I would be concerned if the agency loaded the new contract up with additional period of performance, options, etc. beyond the scope of the previous contract.

Eric

By Anonymous on Friday, January 26, 2001 - 06:51 pm:

Great answers, feed back, and quick responses you all are the best. Thank goodness for this site!!!