One of the most persistent misconceptions in GovCon M&A is that acquiring a contractor also means acquiring its past performance. Government contractors, investors, and acquirers frequently ask the same questions. Can the buyer use the target’s past performance? Does novation transfer past performance? Can the buyer rely on the target’s corporate experience in future proposals? The answer is sometimes, but not automatically.
An acquisition does not turn the target’s past performance into the buyer’s own experience for every future competition. The critical question is whether the target’s historical performance still predicts how the buyer will perform the new work, and that depends on the solicitation, how the deal is structured, and the continuity of the people, resources, and systems behind the record.
A buyer may value a target largely because of its strong CPARS ratings, deep bench of relevant work, and customer reputation built over many years. In an asset deal, the transaction closes and the target’s government contracts are novated to the buyer’s entity. The buyer may naturally assume that the target’s past performance transferred along with the contracts.
Then the buyer submits a proposal relying on that record. A competitor protests, arguing the buyer cannot claim the predecessor’s experience as its own. GAO agrees. Novation does not, by itself, require an agency to treat a predecessor’s experience as though it now belongs to the successor. That was the result in Sevatec, Inc., B-406784 (Aug. 23, 2012), and it can surprise buyers.
If the buyer acquired the business and assumed its contracts, did it not also acquire its track record? Sometimes. But the better question is whether the agency can reasonably treat the target’s historical performance as relevant and predictive of the buyer’s ability to perform the new work. Put simply, did the transaction capture the capabilities that produced the historical performance, and will those capabilities support the work now being proposed?
Past Performance Is a Prediction, Not an Asset
From a valuation perspective, past performance may look like an asset the buyer acquires along with the business. In a source selection, however, the government treats past performance as evidence supporting a forward-looking judgment about whether the offeror is likely to succeed.
FAR 15.305 expressly allows agencies to consider relevant predecessor company experience. The harder question usually is not whether an agency may consider that experience, but how much weight it deserves. That depends on the solicitation and the connection between the historical performer and the offeror that will actually perform the new work. The closer the connection, the more predictive value the record carries.
The solicitation is the starting point. It defines how the agency will evaluate past performance and may restrict which entities’ experience is eligible for consideration. Operational continuity can explain why predecessor or affiliate experience remains relevant, but it cannot override an express limitation in the solicitation.
What Novation Does and Does Not Do
When government contracts are transferred to a different legal entity as part of an acquisition, the buyer must obtain a novation agreement under FAR 42.1204 for the Government to recognize it as the successor in interest to those contracts. The parties cannot transfer a government contract between themselves and bind the Government to that transfer without the Government’s recognition. Through the novation, the Government recognizes the transferee as the successor contractor, the transferee assumes the contractual obligations, and the successor may administer and continue performing the contracts.
A stock acquisition is different. When a buyer purchases the target’s stock, the target ordinarily remains the same legal entity and continues to hold and perform its contracts. The contracts do not transfer to the buyer, the buyer does not replace the target as the contracting party, and there is no successor for the Government to recognize. FAR 42.1204 therefore provides that novation is unnecessary when a stock purchase causes no legal change in the contracting party and that party remains in control of the assets and continues performing the contracts.
Novation also does not, by itself, require an agency to treat the predecessor’s experience as the successor’s own in a future competition. That is the point GAO made in Sevatec. The novation allowed the successor to assume the rights and responsibilities of the incumbent contract, but it did not entitle the successor to claim the predecessor’s experience in a separate procurement. The evaluation still turned on the solicitation and whether the cited experience belonged to, and was relevant to, the offeror being evaluated.
If the deal depends on using the target’s track record to win future work, the analysis cannot stop at whether the contracts were novated.
Stock Acquisitions vs. Asset Deals
In a stock acquisition, the buyer acquires ownership of the target, but the target remains the contracting party. The target ordinarily continues to hold its government contracts and past performance record. If the target later submits a proposal, it generally relies on the past performance it earned as its own. If the buyer or another entity in the post-closing corporate family submits instead, the target’s record becomes affiliate experience, and the proposal must establish the target’s meaningful involvement in contract performance.
A stock acquisition provides a strong starting point for continuity, but it does not guarantee it. Changes to personnel, management, systems, facilities, or other capabilities may still weaken the predictive value of the target’s historical performance.
In an asset acquisition, the buyer acquires selected assets of the target rather than the target entity itself. If government contracts move to the buyer, the buyer generally relies on the target’s record as predecessor experience rather than as its own. Because the entity that earned the record remains separate, establishing the connection between the predecessor’s record and the successor requires more deliberate documentation.
The buyer should be able to identify which contracts, personnel, systems, facilities, technology, management functions, and other operating capabilities transferred, and explain how those resources relate to both the historical performance being cited and the work now being proposed. Corporate identity makes the past performance story easier to tell in a stock deal. In an asset deal, that connection must be established. Either way, operational continuity, not the transaction documents standing alone, gives historical performance its predictive value.
When Acquired Past Performance Holds Up
Where agencies have credited predecessor experience, the successor typically retained and continued using the personnel, systems, and operational capabilities that generated the historical record. The strongest case is not simply, “we bought the company that did this work,” but rather, “we acquired and still operate the capabilities that performed it, and those capabilities will support the work we are proposing now.”
The connection is generally easier to establish when the same personnel and operational resources continue performing the acquired work. It becomes more difficult when the contracts have ended, the personnel have dispersed, or the relevant capabilities have been divided among different entities.
The paper trail matters too. When an agency credits predecessor experience, its evaluation record should show why that history remains relevant to the offeror’s ability to perform. It is not enough that continuity happened to exist if the proposal and evaluation record never establish the connection.
The Integration Trap
This is where past performance becomes a deal planning problem. As discussed in Part 3 of this series, the value of a GovCon asset depends not simply on whether it exists at signing, but on whether that value will survive the transaction. Deal teams integrate for good reasons, including reducing duplicate overhead, consolidating operations, centralizing management, and moving everyone onto one platform. Each move can make total sense financially. Each move can also weaken the continuity that gives acquired past performance its value.
The founder who built the customer relationship retires. The program manager who ran the flagship contract leaves. A delivery team gets folded into a larger group and no longer resembles the team that earned the ratings. Business systems, delivery processes, and facilities are consolidated or replaced.
Buyers rarely value every past performance reference equally. Many deals have a handful of flagship contracts that drive the value. The relevant integration question is whether the people, systems, and relationships behind those references will remain available when the next proposal goes out. By the time a continuity problem shows up in a lost competition, the integration decisions that caused it may be difficult to reverse.
Affiliate Past Performance: The Hidden M&A Issue
After a stock acquisition, the buyer and target often remain separate legal entities within the same corporate family. If one affiliate seeks credit for another’s past performance, the key question is whether the experienced affiliate will have “meaningful involvement” in contract performance.
An agency can consider an affiliate’s past performance where the solicitation allows it and the proposal shows that the affiliate’s resources, workforce, management, facilities, and systems, will actually be provided or relied upon in performance. Corporate affiliation alone is not enough, and common ownership does not allow every entity in the post-closing family to borrow every other affiliate’s record.
A 2026 decision from the Court of Federal Claims, Noblis MSD, LLC v. United States, 180 Fed. Cl. 667 (2026), illustrates the risk. There, the Navy awarded a roughly $100 million systems engineering contract to Solute, Inc. after crediting Solute’s proposal with a past performance reference from its parent company, Sigma Defense Systems. Solute’s proposal referred to the two companies collectively as “Team Solute,” but did not adequately explain what personnel, systems, resources, or commitments Sigma would contribute to performance. The court concluded that the agency erred in crediting Solute with Sigma’s experience on that record. The practical lesson is straightforward. Owning an affiliate with a strong track record is not the same as making that affiliate’s capabilities available to the proposed contract.
If the target remains a separate subsidiary and retains the personnel and systems that earned its record, it may be the strongest entity to submit the next proposal directly. If another affiliate submits instead, the proposal should explain how the target’s people and resources will support that performance, not merely note that the entities are related.
The target may sometimes participate as a subcontractor instead. FAR 15.305 separately permits consideration of a subcontractor’s past performance when the subcontractor will perform a major or critical part of the requirement and the information is relevant to the acquisition. That is a different path, however, with its own requirements.
Pending Proposals: Where Deals Create Immediate Risk
The risk becomes even more acute when a proposal is already pending at closing. A target may submit a proposal relying on its own history, a predecessor’s experience, an affiliate’s experience, or specific personnel and resources. The deal closes, and something in that picture changes, such as ownership, personnel, resources, or corporate structure.
That raises two questions. Does the proposal still accurately describe who will perform the work? And must the change be disclosed so the agency can consider it in the evaluation?
Changes that look small from a deal perspective can matter a great deal in a procurement. A management restructuring, relocated business unit, departed key personnel, or transfer of resources between affiliated entities may weaken the connection between the past performance cited in the proposal and the company that will actually perform the contract.
GAO has said that offerors may need to advise agencies of material post-submission changes to proposed staffing or resources. The Court of Federal Claims has taken a narrower view in some cases, declining to impose a freestanding duty to update where the solicitation does not require one.
That divide puts buyers in a difficult position. Disclose the change, and the agency may conclude that the proposal no longer accurately describes who will perform the work. Stay quiet, and a failure to disclose may become the basis for a protest if the matter ends up at GAO. There is no clean rule that works in every case. The right answer depends on the specific facts, the solicitation, and legal advice tailored to the transaction.
M&A and source selections run on overlapping timelines more often than deal teams expect. The resulting past performance and disclosure risks deserve the same attention as the affiliation and recertification risk covered elsewhere in this series.
Protecting Past Performance Value Before You Sign
Past performance diligence and integration planning should happen together. Before signing, buyers should identify which contracts and references matter most to the deal, which personnel and customer relationships make those references credible, which systems and resources supported the performance, and whether any pending proposals depend on those same capabilities.
The analysis should also account for the opportunities the buyer expects to pursue after closing. For each important reference, the buyer should understand not only what the target did, but also whether the capabilities behind that performance will remain available to the entity submitting the next proposal. If that entity will rely on an acquired affiliate’s experience, the proposal should identify what the affiliate will contribute to performance. If it will rely on predecessor experience, the proposal should explain the operational continuity between the historical performer and the successor.
The goal is not simply to buy a good CPARS record. It is to acquire the capabilities behind the record and preserve the connections between those capabilities and the history being cited. That requires legal judgment when the transaction, integration plan, and proposal strategy are being developed, not after the critical personnel and structural decisions have already been made.
The Bottom Line
A transaction does not automatically make the target’s past performance available throughout the buyer’s organization.
In a stock acquisition, the target ordinarily retains its own performance record. Another affiliate seeking to use that record must show how the target will be meaningfully involved in the proposed work. In an asset acquisition, novation may allow the buyer to assume the contracts, but it does not automatically make the predecessor’s performance predictive of the successor.
The real question is whether the capabilities that generated the historical performance remain available to support the work being proposed. Deal structure identifies who holds the contracts and who earned the record. Integration decisions determine whether the people, systems, resources, and customer knowledge behind that record remain intact.
What’s Next in The GovCon M&A Playbook:
In Part 5, we take a deep dive into security clearances and foreign ownership, control, or influence (FOCI), another source of GovCon value whose survival after closing can depend heavily on what the transaction does to ownership, control, and governance.
If your firm is evaluating a government contractor acquisition and past performance is central to the deal, the diligence and integration planning are best conducted together, rather than sequentially. Contact Sam Finnerty at sfinnerty@pilieromazza.com to discuss how these issues apply to your deal.
