

A few weeks ago, I spoke at APTAC’s Fall 2020 Conference about SBA’s size and affiliation regulations. In passing, I mentioned the term novation, the process of assigning a federal government contract from one contractor to another.
During the Q&A session, a participant asked if our blog contained any information about that concept. Sheepishly responding that it didn’t, I committed to writing one. I’m making good on that promise today.
Novation is a Latin word meaning “to make new, renew, replace an existing legal obligation with a new one.” Derived from novus, meaning new, novation is more than just another example of lawyers refusing to use an English word when a Latin one will do. It is an important legal concept—especially in the government contracting world.
Let’s start off with the basic principle underlying novation: once a contractor is awarded a federal government contract, that entity cannot transfer that contract to another entity without the government’s consent. The government indicates a consent by granting a novation under FAR Subpart 42.12.
Normally, two circumstances generate the need for a novation:
Now, if a contractor’s ownership changes as a result of a stock purchase, but (1) the contractor remains the same legal entity, (2) the contractor remains in control of the assets, and (3) contractor is still the performing party, then a novation wouldn’t be required.
What is the process for securing a novation?
First, identify the single CO who you will be working with. If you only want to novate a single contract, then work with that contract’s CO. If you need to novate multiple contracts, you’ll still only work with a single CO. The FAR outlines the relatively simple rules for identifying the proper CO in those circumstances.
Second, informally reach out to the CO about your transfer plans. Gauge the CO’s receptivity to the idea, and follow any specific directions.
Third, assemble and submit the mandatory package of documents and other information, which include the following:
After submitting these documents, the government will decide whether to approve the novation. In doing so, it will only consent if the transfer is in the government’s best interests. In other words, the government has total discretion in this arena. Given that deferential standard, it’s difficult to challenge any adverse novation decision. So, be sure that you’re application is thorough and persuasive.
If you’re thinking about a possible novation request to the government, give us a call at