The U.S. Army Corps of Engineers selected our client for the award of two design-build contracts in excess of $100 million for military family housing at Seymour Johnson AFB. Before the contracts could be executed, our client’s parent company declared bankruptcy, which prevented our client from obtaining the required payment and performance bonds, rendering contract award apparently impossible.

We conferred with our client and designed and presented a plan that permitted our client to retain and ultimately perform both contracts. The plan required three things to happen virtually simultaneously: (i) the award of the contracts to our client; (ii) the approval by the government of the novation of those contracts to a second company; and (iii) the execution of a CM at risk contract between our client and the second company, pursuant to which our client would be paid almost the full value of the awarded government contracts.

The difficulty was persuading the government to accept our plan, because the award of these contracts, immediately followed by a novation of these contracts, was not something the government had previously approved.  We located a 40 year old opinion from the Comptroller General stating that the government had the discretion to approve such a novation, even absent an asset transfer between the two companies, if the government determined it was in its best interest to do so. We were able to persuade the government that it was in its best interest to approve the novation—the government would obtain the designs it wanted based on the proposals it determined to be the best value and the contractor who provided those designs and proposals would still be integrally involved in the construction of the housing projects.

As a result of our plan, and our ability to persuade the government to accept our plan, our client was able to perform and profit from two contracts worth more than $100 million that it would have otherwise lost.