Common use of MERGERS, ACQUISITIONS, NOVATIONS, AND CHANGE-OF-NAME AGREEMENTS Clause in Contracts

MERGERS, ACQUISITIONS, NOVATIONS, AND CHANGE-OF-NAME AGREEMENTS. ‌ The Anti-Assignment of Contracts Act, 41 USC § 15, (Anti-Assignment Act) prohibits the transfer of any interest in a federal contract to another party unless an exception applies. Therefore, the Master Contract, standing alone, is not a commodity that can be bought, sold or assigned to a brokerage firm or any third-party agent so to arrange transactions between a buyer and a seller of standalone Government contracts. There are conditions, however, where the Government may still recognize a successor-in-interest who, due to certain transfers, is in a position to continue performance in place of the original party to the Government contract. For example, through a (1) Novation Agreement where the sale of all Contractor’s assets, or the entire portion of the assets involved in performing the Master Contract, including any open Task Orders, has occurred. An Assignment that would otherwise be considered ineffective, may be given effect via a novation agreement that substitutes successor-in-interest as the contractor, while requiring that the original party remain obligated for performance. Another example of an exception to the Anti-Assignment Act is through (2) Operation of Law, such as when the Contractor’s interest in the contract is transferred as a result of a stock purchase or bankruptcy order. These exceptions are further discussed below: Novation: The Contractor (Transferor) must always obtain the Government's consent and approval for a Novation, including the Government’s approval of the Acquiring Contractor (Transferee). Although the Transferor and the Transferee may have negotiated their corporate terms and conditions for the terms of assignment or assumption of responsibilities relating to the Government Contract, and agreed to execute a Novation Agreement substantially in conformance with the regulatory requirement, the Novation is not automatically approved by the Government. There are no entitlements or guarantees that the Government must or will consent to any request for Novation. FAR 42.12 describes the procedures necessary to request that the Government recognize a successor in interest to a contract. There are also additional due diligence procedures that GSA may impose, including an evaluation of the Transferee’s technical capabilities, accounting systems, relevant past contract performance, financial capacity, and other Responsibility factors. From the time, the Government receives a completed Novation package request from the Transferor, the process might take three to six months or more for the Government to process the package and provide a decision. The Contractor must continue to fully perform under the terms and conditions of the Master Contract throughout the entire period of time the Novation package awaits a final decision from the Alliant ACO or PCO. If the GSA determines that the Novation requests is not in the Government’s best interest, the Contractor shall remain obligated to perform under the Master Contract. All open Task Orders from the transferor shall also be Novated to the Master Contract’s transferee and to no other party.