Assignment & novation of a federal government contract

When a supplier is acquired or restructured, the question is whether its Government of Canada contracts travel with the deal. In Canadian federal procurement the operative rule is in the archived Supply Manual, section 8.90: "the written permission of Public Works and Government Services Canada (PWGSC) is required before any contract assignment" — and the assignee must also meet the contract's security requirements. Novation — the three-party agreement that extinguishes the old contract and substitutes a new one — is the private-law mechanism suppliers reach for, even though the federal instruments themselves do not use the word.

Assignment: the rule you actually hit

Federal contracts are personal to the supplier. The archived Supply Manual (chapter 8, contract administration) conditions any assignment on PSPC's prior written permission, and the current modernized general conditions go further: assignment occurs only if Canada agrees in writing, and the original contractor remains responsible for the assignee's performance. Permission is not a formality — Canada evaluates whether the successor can meet security, financial and performance obligations before consenting.

Novation: what it is and how it appears federally

A novation is the common-law three-party instrument (supplier, successor, Canada) under which the original contract is discharged and a new contract is made with the successor. Federal practice does execute such agreements: when GFL Environmental acquired Waste Management of Canada Corp., a novation agreement was executed and a new contract number was subsequently awarded to GFL to carry the acquired work — visible in the open-government contracts records. But unlike the US FAR (which has an explicit subpart on novation and change-of-name agreements), Canada's Treasury Board Directive on the Management of Procurement, the Supply Manual and the modernized general conditions contain no novation clause: there is no standard form, no automatic right, and — critically — Canada's consent under s. 8.90 style conditions releases nobody, so the seller can stay on the hook.

What it means for vendors

If you are buying or selling a business with federal revenue: inventory every contract and its assignment clause early; approach the contracting authority before closing, not after; expect the security clearance and performance-security checks to re-run against the successor; and price in the risk that Canada says no — or says yes without releasing you. A silent assignment can put payment and performance security at risk and can void the contract.

Common questions

Does a change of name need a novation?

No — a change-of-name amendment suffices where the legal entity continues. Novation is for succession: merger, sale of the business, or transfer to a new legal entity. Contract amendments are processed under the contract amendment rules.

Are provincial contracts different?

Each provincial and municipal contract carries its own assignment clause; some prohibit assignment outright, others permit it on notice. Read the contract's general conditions first — the federal Supply Manual rule does not bind other levels of government.

Related definitions

Supply Manual · Contract amendment vs. change order · Joint venture bidding · Breach, default and termination