Contractor Allowed to Pursue Pre-Novation Claims Against Government
On May 2, 2018, in the Appeal of Cooper-Ports America, LLC, ASBCA No. 61461, the Armed Services Board of Contract Appeals ("ASBCA") rejected the Air Force's position that Cooper-Ports America, LLC did not have the right to pursue claims that accrued before a novation agreement was executed. Under FAR Part 42.1204, a novation is required when a contractor sells his company and existing contracts will be performed by the buyer. The buyer basically assumes all obligations of the seller to perform these pending government contracts.
In this case, the Air Force argued that Cooper-Ports America, LLC (the buyer) cannot pursue claims against the Government that accrued before the novation was executed because it was not in privity of contract with the Government until that time. The Board rejected this position and held that under the novation agreement the Air Force acknowledged that the buyer is "entitled to all rights, titles and interests" of the seller as if the buyer was the original party to the contracts. The Board read this language to include claims that accrued before the novation was executed.
This decision is well reasoned. After all, if the buyer is going to assume all liabilities under an existing government contract, it should also be entitled to all claims against the government as well.
