Novation or name change: when a sale, merger or rename changes a federal contract, and what SAM.gov's record carries

That depends on what legally changed, and this guide cannot decide it for a business. The FAR describes the shapes and the responsible contracting officer applies them. In the rule's terms, a rename with no other change in the party that holds the contract is a change of name. A transfer of the assets that perform the contract to another legal entity, by sale, merger, consolidation or incorporation, makes a successor in interest. The Government may or may not recognize it. A change of owners through a stock purchase that leaves the same legal entity in control and performing needs no novation agreement. Whether a particular transaction is one or another is a question for the contracting officer and, where the business has one, its attorney. The agreement the business signs is a legal document with the Government.

It starts with a written request and a short set of papers. A contractor that wishes the Government to recognize a successor in interest or a name change submits a written request to the responsible contracting officer (FAR 42.1203). For a name change, the contractor forwards three signed copies of the Change-of-Name Agreement. It also forwards one copy each of three documents. The first is the document effecting the name change, authenticated by the State that has jurisdiction. The second is the opinion of the contractor's legal counsel stating that the change of name was properly effected under applicable law, showing the effective date. The third is a list of all affected contracts and purchase orders remaining unsettled between the contractor and the Government. It gives each contract's number and type and the name and address of the contracting office. The officer may add the total dollar value as amended and the remaining unpaid balance (FAR 42.1205).

The Government's lawyer reads it, and then the officer records it on every affected contract. Before the agreement is executed, the responsible contracting officer has Government counsel review it for legal sufficiency. Afterwards the officer sends a signed copy to the contractor and keeps one in the case file. The officer then prepares a Standard Form 30, Amendment of Solicitation/Modification of Contract, that incorporates a summary of the agreement and attaches the complete list of affected contracts. Copies go to the contractor and to each contract administration office or contracting office involved (FAR 42.1203).

A novation asks for more, because the Government is deciding whether to accept a new party. The contractor submits three signed copies of the proposed novation agreement. It also submits one copy each of four things. The first is the document describing the transaction, such as the purchase and sale agreement. The second is a list of all affected contracts between the transferor and the Government as of the date of the transfer, with each contract's number and type, the contracting office, the total dollar value as amended and the approximate remaining unpaid balance. The third is evidence of the transferee's capability to perform. The fourth is anything else the responsible contracting officer asks for. More documents follow as they become available. One is an authenticated copy of the instrument effecting the transfer, such as a bill of sale, a merger filing, a contract, a deed, an agreement or a court decree. Others are copies, in the form the rule describes, of the board resolutions and the stockholder minutes that approve the transfer. Another is an authenticated copy of the transferee's articles of incorporation, if a corporation was formed to receive the assets. The list goes on. It asks for the opinion of legal counsel for the transferor and the transferee that the transfer was properly effected under applicable law, with its effective date. It asks for balance sheets of both parties immediately before and after the transfer, audited by independent accountants. It asks for evidence that any security clearance requirements have been met. And it asks for the consent of sureties on the listed contracts if bonds are required, or a statement that none are. The officer may shorten the list where the Government already has the documents or its interests are adequately protected another way (FAR 42.1204).

The officer asks the other affected offices, then decides whether the new party is good for the Government. The responsible contracting officer notifies every contract administration office and contracting office affected. The officer asks them for comments or objections within the period the rule sets. The officer then decides whether recognizing the successor is in the Government's interest. That decision rests on those comments, the proposed successor's responsibility under subpart 9.1, and any factor about its performance of Government contracts that would impair its ability to perform satisfactorily. Organizational conflicts of interest are evaluated too (FAR 42.1203). How a contracting officer checks a business explains subpart 9.1's standards. When the Government recognizes the successor, the agreement ordinarily provides four things. The transferee assumes all the transferor's obligations under the contract. The transferor waives all rights under the contract against the Government. The transferor remains answerable for the transferee's performance unless a satisfactory performance bond is accepted instead. And nothing in the agreement relieves either party from compliance with federal law. If the Government does not concur in the transfer, the original contractor remains under contractual obligation to the Government, and the contract can be ended for default should that contractor not perform (FAR 42.1204).

The officer who already administers your contracts handles it, or the one with the biggest unsettled balance. If any of the affected contracts have been assigned to an administrative contracting officer, that officer is responsible. When the contracts sit in more than one plant or division, it is the one responsible for the corporate office. If none have been assigned, it is the contracting officer responsible for the largest unsettled dollar balance of contracts. That balance counts unbilled amounts and amounts billed but unpaid. Where several transferors are involved, the rule picks by the same balance (FAR 42.1202). One agreement covers the full list of affected contracts, which is why both agreements ask for that list.

The registration is where the contracting officer gets your name, so the name there is tied to the agreement. Contracting officers use the legal business name or doing-business-as name and the physical address from the contractor's SAM registration, for the Unique Entity ID provided. They use them to identify the contractor in the contract and in every corresponding form and data exchange. They make no changes to the data retrieved from SAM. The rule then ties the registration to subpart 42.12. Say a contractor has legally changed its business name or doing-business-as name, whichever the contract shows, or has transferred the assets used in performing the contract. Say it has not completed the novation or change-of-name requirements. That contractor gives the responsible contracting officer advance written notice of its intention to change the name in SAM, in the time the rule sets. It complies with subpart 42.12, agrees in writing to the officer's timeline and procedures, and provides documentation supporting the legally changed name (FAR 4.1102).

Changing the name in SAM without the agreement has a cost. Say the contractor does not follow the clause at FAR 52.204-13, System for Award Management Maintenance, and no properly executed novation or change-of-name agreement exists. Then SAM information that shows the contractor to be other than the one named in the contract is treated as incorrect information. That is within the meaning of the Suspension of Payment paragraph of the contract's electronic funds transfer clause. The contractor also does not change the name or the address for payments in its SAM record to reflect an assignee of claims; an assignee registers separately (FAR 4.1102). On the registration itself, a legal name change or a physical address change is a fact entered on the record, which Update or renew describes. SAM.gov checks a changed legal name against documentation about the business, as Names and addresses that match explains. Changing your registration mid-year says how to tell Firmenza about a change. Subpart 42.12 does not mention the CAGE code, so what a sale or a merger does to one is not something this guide can say. CAGE codes explained has the basics of a code that is assigned rather than chosen.

It cannot say whether your transaction is a change of name, a novation or neither. It cannot say whether the Government will recognize a successor, or what a particular contracting officer will ask for beyond the rule's lists. It cannot say what the change does to a contract's price, schedule or clearances. Those are questions for the responsible contracting officer and for your own attorney. The agreement itself is between your business and the Government.