While multibillion-dollar transactions grab headlines — such as the combination of Computer Sciences Corp.’s public-sector business with SRA International, the merger of Leidos Holdings Inc. with Lockheed Martin’s information systems and global solutions business, and Harris Corp.’s acquisition of Exelis Inc. — there are a few trends in federal government contracts mergers and acquisitions that have flown under the radar. The use of indefinite delivery/indefinite quantity (IDIQ) vehicles is widespread in the government contract space. Transferring these contract vehicles involves issues that buyers and sellers alike should be aware of to stay one step ahead of the market. In this article, we discuss these issues and also highlight certain compliance issues and potential pitfalls that may occur in government contracts transactions.

Transferring Contract Vehicles -

Significant amounts of government procurement dollars flow through multipleawardee IDIQ vehicles, whether large single-agency vehicles or governmentwide acquisition contracts (GWACs). Although the contracts themselves do not guarantee work for a vendor/contractor, these vehicles have flashy, multibillion dollar ceiling values and provide access to a wide range of task orders from the government. The government selects only a handful of qualified contractors to be on each vehicle and sometimes limits the field to only certain types of small businesses. For those contractors who do not receive such an award, these vehicles have recently developed significant market value. We have seen this value demonstrated in the many asset acquisition transactions that include an IDIQ contract and related assets from an awardee who has struggled to win subsequent task orders. These transactions benefit both the government, by weeding out less competitive awardees, and industry, by allowing contractors who would like to use these vehicles to acquire them. However, you must approach these transactions with careful attention to (1) novation and (2) small business credit.

Originally published in Law360 on August 24, 2017.