A prime contractor was purchased by another company. Due to a conflict of interest, the contract is being sold. As a subcontractor on the original contract, are there any regulations that would "force" the buyer of the contract to keep the subcontractors?

By Anonymous on Tuesday, April 24, 2001 - 09:59 pm:

No. There are no regulations that would force the buyer of the contract to keep the subcontractors.

By John Ford on Wednesday, April 25, 2001 - 08:08 pm:

Anon9:01: There are no specific regulations that require an acquiring company to retain subcontractors. However, there are some contract clauses that may come close to doing that. I am thinking specifically about the small business subcontracting clauses. If the prime was required to have a small business subcontracting plan, the acquiring company may in effect be forced to retain the small business subcontractors, particularly if the subs are SDBs and were named in the original proposal.

By Anonymous on Thursday, April 26, 2001 - 02:35 am:

The small business clauses do not require the contractor to retain any particular subcontractors. The contractor can terminate the original small business subcontractors and replace them with others.

By Loki on Thursday, April 26, 2001 - 09:37 am:

Please tell me more about the proposed process to sell a government contract. What method of advertising or soliciting a buyer for a government contract is being used? I'm particularly interested in this because, generally speaking, government contracts are not for sale.

By Anonymous on Thursday, April 26, 2001 - 09:51 am:

Loki:

It's probably a novation agreement. See FAR 42.12.

By Kennedy How on Thursday, April 26, 2001 - 12:24 pm:

Loki,

We normally see a novation agreement when the original contractor goes out of business or merges with another company to create a new business entity, or just sells that business division. In those cases, the new business agrees to perform on the existing contract(s) IAW the terms of the contract. Then, the novation agreement formally changes the contractor from the old to the new.

I think we did a lot of these when Chrysler Defense was sold to General Dynamics, and we had to novate all of the M1 and M60 tank contracts. In that instance, the Chrysler Defense business was sold as an entity, along with all of the Government contracts of said business; the contracts weren't exactly "sold", but those contracts were an asset to the business.

Kennedy