We implemented a plan that allowed our client to perform and profit from contract awards after it lost bonding capacity and became ineligible for award.
The government notified our client that it had selected our client for award of two design-build contracts for military family housing (MFH). The total value of the combined contracts was more than $100 million. However, our client’s parent company declared bankruptcy, leaving our client unable to provide the required bonds. Absent those bonds, our client would lose both contracts.
The plan consisted of three steps:
- Our client would execute a contract with a second company with bonding capacity that would become the prime contractor, while our client would be the subcontractor responsible for performing the work:
- The government would award the MFH contracts to our client; and
- The government would immediately approve a novation of the government contracts to the second company that would provide the bonds.
We negotiated the subcontract between our client and the second company while trying to convince the government that it had the discretion to both award the contracts to our client and then to immediately approve the novation of those contracts to the second company, from which it would obtain the necessary bonds. We persuaded the government it could do so, even absent an asset transfer between the two companies, if the government determined it was in its best interest to do so. We also persuaded the government that it was in its best interest because:
- The government would get the MFH designs it wanted;
- The contractor whose proposal presented the best value would still be performing the work; and,
- There would be no increase in risk or price to the government.
As a result, our client was able to perform and profit from two contracts worth more than $100 million that it would otherwise lost.
