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Subpart 42.12- Novation and Change-of-Name Agreements
42.1200 Scope of subpart.
This subpart prescribes policies and procedures for-
- (a) Recognition of a successor in interest to Government contracts when contractor assets are transferred;
- (b) Recognition of a change in a contractor's name; and
- (c) Execution of novation agreements and change-of-name agreements by the responsible contracting officer.
42.1201 [Reserved]
42.1202 Responsibility for executing agreements.
The contracting officer responsible for processing and executing novation and change-of-name agreements shall be determined as follows:
- (a) If any of the affected contracts held by the transferor have been assigned to an administrative contracting officer (ACO) (see 2.1 and 42.202), the responsible contracting officer shall be-
- (1) This ACO; or
- (2) The ACO responsible for the corporate office, if affected contracts are in more than one plant or division of the transferor.
- (b) If none of the affected contracts held by the transferor have been assigned to an ACO, the contracting officer responsible for the largest unsettled (unbilled plus billed but unpaid) dollar balance of contracts shall be the responsible contracting officer.
- (c) If several transferors are involved, the responsible contracting officer shall be-
- (1) The ACO administering the largest unsettled dollar balance; or
- (2) The contracting officer (or ACO) designated by the agency having the largest unsettled dollar balance, if none of the affected contracts have been assigned to an ACO.
42.1203 Processing agreements.
- (a) If a contractor wishes the Government to recognize a successor in interest to its contracts or a name change, the contractor must submit a written request to the responsible contracting officer (see 42.1202). If the contractor received its contract under Subpart 8.7 under the Javits-Wagner-O'Day Act, use the procedures at 8.716 instead.
- (b) The responsible contracting officer shall-
- (1) Identify and request that the contractor submit the information necessary to evaluate the proposed agreement for recognizing a successor in interest or a name change. This information should include the items identified in 42.1204 (e) and (f) or 42.1205(a), as applicable;
- (2) Notify each contract administration office and contracting office affected by a proposed agreement for recognizing a successor in interest, and provide those offices with a list of all affected contracts; and
- (3) Request submission of any comments or objections to the proposed transfer within 30 days after notification. Any submission should be accompanied by supporting documentation.
- (c) Upon receipt of the necessary information, the responsible contracting officer shall determine whether or not it is in the Government's interest to recognize the proposed successor in interest on the basis of-
- (1) The comments received from the affected contract administration offices and contracting offices;
- (2) The proposed successor's responsibility under Subpart 9.1, Responsible Prospective Contractors; and
- (3) Any factor relating to the proposed successor's performance of contracts with the Government that the Government determines would impair the proposed successor's ability to perform the contract satisfactorily.
- (d) The execution of a novation agreement does not preclude the use of any other method available to the contracting officer to resolve any other issues related to a transfer of contractor assets, including the treatment of costs.
- (e) Any separate agreement between the transferor and transferee regarding the assumption of liabilities (e.g., long-term incentive compensation plans, cost accounting standards noncompliances, environmental cleanup costs, and final overhead costs) should be referenced specifically in the novation agreement.
- (f) Before novation and change-of-name agreements are executed, the responsible contracting officer shall ensure that Government counsel has reviewed them for legal sufficiency.
- (g) The responsible contracting officer shall-
- (1) Forward a signed copy of the executed novation or change-of-name agreement to the transferor and to the transferee; and
- (2) Retain a signed copy in the case file.
- (h) Following distribution of the agreement, the responsible contracting officer shall-
- (1) Prepare a Standard Form 30, Amendment of Solicitation/Modification of Contract, incorporating a summary of the agreement and attaching a complete list of contracts affected;
- (2) Retain the original Standard Form 30 with the attached list in the case file;
- (3) Send a signed copy of the Standard Form 30, with attached list to the transferor and to the transferee; and
- (4) Send a copy of this Standard Form 30 with attached list to each contract administration office or contracting office involved, which shall be responsible for further appropriate distribution.
42.1204 Applicability of novation agreements.
- (a) 41 U.S.C. 15 prohibits 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 14.4042(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.
- (e) When a contractor asks the Government to recognize a successor in interest, the contractor shall submit to the responsible contracting officer three signed copies of the proposed novation agreement and one copy each, as applicable, of the following:
- (1) The document describing the proposed transaction, e.g., purchase/sale agreement or memorandum of understanding.
- (2) A list of all affected contracts between the transferor and the Government, as of the date of sale or transfer of assets, showing for each, as of that date, the-
- (i) Contract number and type;
- (ii) Name and address of the contracting office;
- (iii) Total dollar value, as amended; and
- (iv) Approximate remaining unpaid balance.
- (3) Evidence of the transferee's capability to perform.
- (4) Any other relevant information requested by the responsible contracting officer.
- (f) Except as provided in paragraph (g) of this section, the contractor shall submit to the responsible contracting officer one copy of each of the following documents, as applicable, as the documents become available:
- (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.
- (h) When recognizing a successor in interest to a Government contract is consistent with the Government's interest, the responsible contracting officer shall execute a novation agreement with the transferor and the transferee. It shall ordinarily provide in part that-
- (1) The transferee assumes all the transferor's obligations under the contract;
- (2) The transferor waives all rights under the contract against the Government;
- (3) The transferor guarantees performance of the contract by the transferee (a satisfactory performance bond may be accepted instead of the guarantee); and
- (4) Nothing in the agreement shall relieve the transferor or transferee from compliance with any Federal law.
- (i) The responsible contracting officer shall use the following format for agreements when the transferor and transferee are corporations and all the transferor's assets are transferred. This format may be adapted to fit specific cases and may be used as a guide in preparing similar agreements for other situations.
42.1205 Agreement to recognize contractor's change of name.
- (a) If only a change of the contractor's name is involved and the Government's and contractor's rights and obligations remain unaffected, the parties shall execute an agreement to reflect the name change. The contractor shall forward to the responsible contracting officer three signed copies of the Change-of-Name Agreement, and one copy each of the following:
- (1) The document effecting the name change, authenticated by a proper official of the State having jurisdiction.
- (2) The opinion of the contractor's legal counsel stating that the change of name was properly effected under applicable law and showing the effective date.
- (3) A list of all affected contracts and purchase orders remaining unsettled between the contractor and the Government, showing for each the contract number and type, and name and address of the contracting office. The contracting officer may request the total dollar value as amended and the remaining unpaid balance for each contract.
- (b) The following suggested format for an agreement may be adapted for specific cases:
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