After you bid
What is a novation agreement?
A novation is the government's formal recognition of a new contractor in place of the original one — necessary because a federal contract cannot simply be assigned when a business is sold, merged or restructured.
Also written as: novation agreement, transfer government contract, change of name agreement.
FAR 42.1204 sets out when a novation agreement is appropriate: the transfer of all the contractor's assets, or of the entire portion of the assets involved in performing the contract, by such means as a sale, merger, or incorporation of a partnership or sole proprietorship. The government is not obliged to agree, and it decides whether recognising the successor is in its interest.
The package is substantial — the transfer instrument, corporate authorisations, financial statements, and a signed three-party agreement between the government, the transferor and the transferee — and the process takes months rather than weeks. FAR 42.1203 describes the procedures.
There is a lighter neighbour: where only the name changes and no asset transfer occurs, a change-of-name agreement rather than a novation is the right instrument.
What this means when you bid
If federal contracts are part of the value of a business being bought or sold, start the novation early. It is a condition of the buyer ever getting paid under them.
Where this definition comes from
Federal contracting is one of the few fields where the authoritative answer is free, public and one click away. These are the sources this page is built from — go and read them.
- FAR 42.1204→
Applicability of novation agreements.
- FAR 42.1203→
Processing agreements.
- FAR 42.1205→
Agreement to recognize contractor's change of name.
This page explains a term in plain English and cites the authority it comes from. It is not legal advice, and the regulation governs where this page and the regulation differ.
Free tools for government contractors
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Novation— common questions
- What is a novation agreement?
- A novation is the government's formal recognition of a new contractor in place of the original one — necessary because a federal contract cannot simply be assigned when a business is sold, merged or restructured.
- Why does a novation matter when you are bidding?
- If federal contracts are part of the value of a business being bought or sold, start the novation early. It is a condition of the buyer ever getting paid under them.
Related terms
- CPARS — Contractor Performance Assessment Reporting System
- Past performance
- SAM.gov registration