Novation Agreements – Prime U.S. Government Contracts Whitepaper
A Whitepaper by John C. Shire, CPA, Director, Redstone GCI & Jerome S. Gabig, Attorney, Wilmer & Lee
Although technically 41 USC § 6305 prohibits the transfer of Government contracts from one contractor to another, there are times when the Government realizes it is in its best interest to waive this rule—in a document called a novation agreement. If you want the Government to recognize your transfer, you need to design and execute an agreement that protects the Government while ensuring all parties assume (or waive) rights and obligations where necessary, including those situations where subcontracts are involved. Additionally, finding the Contracting Officer is another key step in the process of executing a novation agreement, especially where contracts are large enough to be administered by DCMA. Lastly, you must ensure that risks are averted in the transfer process, the required documentation is submitted, and the format meets FAR requirements before the Government finally gives its final approval.