BUYING ANOTHER CONTRACTOR? MAKE SURE YOU KNOW WHO’S CONTRACT YOU’RE WORKING UNDER
Contractors buy other contractors all of the time. Indeed, having a key contract can be the difference between a sale or no sale. It’s important to remember, however, that regardless of the status of your corporate acquisition, the government considers the original contract holder to be the prime contractor unless a formal novation has taken place. Experienced government contractor Grant Thornton learned this lesson the hard way. While they had already executed an Asset Purchase Agreement to buy OASIS contractor Wyle Labs, Wyle’s novation request had not be completed by GSA. When Wyle bid on an OASIS task order they admitted that Grant Thornton would do 100% of the work (indeed, the even did all of the proposal work). The Department of Homeland Security deemed the offer non-responsive and found considerable risk in the fact that they would not be in privity of contract with the entity actually performing the work. When Wyle protested to the GAO, GAO sided with DHS. Contractors need to be aware of the risks to pending procurements when conducting a transaction. Similarly, although they should be open and candid with contracting officers about pending deals, the risk remains that an agency will disagree and choose not to award a contract until the transaction, including novation, is complete.