- Who handles it
- The federal contracting officer on each contract, plus the SAM.gov entity registration system
- What gets filed
- A novation request for contracts moved in an asset sale, and an updated SAM registration for the company that holds the contracts
- Timing
- Start before closing, because the government reviews novation requests on its own schedule and the process can take months
Watch for: Closing an asset sale without a plan for novation. Until the government agrees, the seller can stay responsible for the contracts.
This guide is general information and is not tax or legal advice. Confirm every step with your attorney, your CPA and the contracting officer on each contract.
Asset sale versus stock sale
In an asset sale, the buyer takes the business assets, including contracts. The government has to agree to recognize the buyer as the new party, and that agreement is called a novation.
In a stock sale, the company that holds the contracts stays the same, so a novation is usually not needed. The contracting officer may still want to be told about the change in ownership.
What a novation request involves
The seller and buyer submit a package to the responsible contracting officer. It generally includes the documents that move the assets, proof of authority for both companies, and a list of the contracts.
The government can ask for more, and it decides when to act. Plan for months, not weeks, and keep operating the contracts the whole time.
Keep SAM registration current
Federal contractors register in the System for Award Management. After a sale, the registration must match the legal entity that holds the contracts, including its address, owners and points of contact.
Let it lapse and the company can stop getting paid, so assign someone to own the registration through the transition.
Small business status and set asides
If your contracts were awarded because you are a small business, a sale to a larger company may change that status. Ask your attorney how the contracts and any pending bids are affected.
Questions to bring to your attorney
- Which of my contracts need government approval to move?
- Do any contracts have clauses about change of control?
- Will subcontractors and teaming partners stay under the new owner?
- What happens to security clearances and facility approvals?
Timing against the closing date
Many sellers set a closing date and then learn the government has not answered. Ask your attorney whether the deal can close with a plan for the seller to keep performing the contracts for the buyer in the meantime.
That arrangement has its own risks, so get advice before you agree to it. Buyers often want a price adjustment for the uncertainty.
Practical steps for sellers
- List every contract with its value, end date and contracting officer.
- Decide with your attorney whether the deal will be an asset or stock sale.
- Ask the contracting officers what they need before you sign.
- Keep key staff on contract until the transition is done.
See what buyers pay for a government contractor and our note on keeping the sale quiet. Ready to talk numbers? Request a price range. The other seller form guides cover liens and licenses.