As part of the Trump Administration’s Revolutionary FAR Overhaul (“RFO”), the Federal Acquisition Regulation (“FAR”) Council has been releasing streamlined Parts of the FAR on a rolling basis.  We have been closely monitoring the RFO and its effects on the acquisition landscape, and publishing updates on the progress.  To date, 25 streamlined FAR Parts have been released on the RFO page of acquisition.gov, the most recent of which were released earlier today: Part 9 – Contractor Qualifications; Part 33 – Protests, Disputes, and Appeals; Part 46 – Quality Assurance; and Part 49 – Termination of Contracts.  Along with the streamlined Parts, revised definitions and contract clauses have been added to Parts 2 and 52, respectively.  And, a host of non-regulatory resources and commentary, from Practitioner Albums to Smart Accelerators is growing.

Notably, FAR Part 42 – Contract Administration and Audit Services, which includes Subpart 42.12 – Novation and Change-of-Name Agreements, has yet to be overhauled, and we wanted to take this opportunity to renew our call for reform of the existing novation process.

Issues With Current Novation Process

Practitioners have long lamented the tedious documentary requirements and ambiguities of FAR Subpart 42.12.  Last summer, we published a blog identifying many of the problems with the existing process.  In brief, the current Subpart 42.12 does not address the range of potential transaction structures, and it creates additional risk that may disincentive industry from structuring transactions as asset-based deals.  The lack of a defined timeline for the government’s review of novation requests or defined evaluation criteria generate inconsistent outcomes.

Subpart 42.12 Is Ripe For Overhaul

The result of these issues is that Subpart 42.12 has been out of touch with the modern M&A landscape for decades and is now well-positioned for the Administration’s RFO efficiency goals.  Public commenters have suggested numerous ways in which the novation process could be improved, from defined timelines for review of novation requests to replacing the listed documents at FAR 42.1204(f)(1)-(3) with a simple certification that the required corporate activities are complete.  We also suggested options for reform, including eliminating the requirement to submit audited financial statements and creating an online portal for novation package submission.  The FAR Council should take heed of prior commentary and seize on the RFO process to upgrade Subpart 42.12 by implementing the types of practical, common-sense changes long awaited by practitioners.