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   <concept id="DFARS_242.1204"
            ditaarch:DITAArchVersion="1.2"
            class="- topic/topic concept/concept ">
      <title class="- topic/title ">
         <ph props="autonumber" class="- topic/ph ">242.1204</ph> Applicability of novation agreements.</title>
      <conbody class="- topic/body  concept/conbody ">
         <p outputclass="List3" class="- topic/p ">(i) When a novation agreement
is required and the transferee intends to incur restructuring costs
as defined at <xref href="231.205-70.dita#DFARS_231.205-70"
                  base="i1380041"
                  outputclass="fm:ParaNumOnly"
                  class="- topic/xref ">231.205-70</xref> ,
the cognizant contracting officer shall include the following provision
as paragraph (b)(7) of the novation agreement instead of the paragraph
(b)(7) provided in the sample format at FAR 42.1204(i):</p>
         <p outputclass="List2" class="- topic/p ">“(7)(i) Except as set forth in subparagraph
(7)(ii) below, the Transferor and the Transferee agree that the
Government is not obligated to pay or reimburse either of them for,
or otherwise give effect to, any costs, taxes, or other expenses,
or any related increases, directly or indirectly arising out of
or resulting from the transfer or this Agreement, other than those
that the Government in the absence of this transfer or Agreement
would have been obligated to pay or reimburse under the terms of
the contracts.</p>
         <p outputclass="List3" class="- topic/p ">(ii) The Government recognizes that restructuring
by the Transferee incidental to the acquisition/merger may be in
the best interests of the Government. Restructuring costs that are
allowable under Part 31 of the Federal Acquisition Regulation (FAR)
or Part 231 of the Defense Federal Acquisition Regulation Supplement
(DFARS) may be reimbursed under flexibly-priced novated contracts,
provided the Transferee demonstrates that the restructuring will reduce
overall costs to the Department of Defense (DoD) (and to the National
Aeronautics and Space Administration (NASA), where there is a mix
of DoD and NASA contracts), and the requirements included in DFARS <xref href="231.205-70.dita#DFARS_231.205-70"
                  base="i1380041"
                  outputclass="fm:ParaNumOnly"
                  class="- topic/xref ">231.205-70</xref> are met. Restructuring
costs shall not be allowed on novated contracts unless there is
an audit of the restructuring proposal; a determination by the contracting
officer of overall reduced costs to DoD/NASA; and an Advance Agreement
setting forth a cumulative cost ceiling for restructuring projects
and the period to which such costs shall be assigned.”</p>
      </conbody>
   </concept>
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