Assignment of contracts

Assignment of contracts is the transfer of responsibility for performing all or part of a contract from the original contractor to another party, called the assignee. In Canadian federal procurement, an assignment requires the prior written consent of the Government of Canada, and it does not release the original contractor from its obligations. CanadaBuys contract-management guidance sets out this meaning.

Assignment is a contract-administration and general-conditions clause, not a type of solicitation. It comes up after award, when a contractor wants to transfer a contract because of a corporate reorganization, the sale of a business, a financial restructuring or another change affecting the company. It is different from subcontracting, where the prime contractor stays responsible for the contract while another party performs part of the work.

How assignment differs from subcontracting

An assignment transfers the contract, or responsibility for performance under it, to another entity. Subcontracting leaves the prime contractor responsible for the whole contract. Federal contract language treats the two separately, so a supplier cannot hand over a contract simply by naming the new party as a subcontractor.

CanadaBuys guidance states that an assignment must not impose additional liability on Canada and must not relieve the original contractor of its obligations.

Consent, void assignments and the assignment agreement

A contractor must obtain Canada's written permission before assigning a federal contract. The Public Service Commission's general conditions for service contracts provide that an assignment made without the contracting authority's written consent is void and has no effect. The same conditions state that an assignment becomes effective when an assignment agreement is executed by the parties and the assignee.

Employment and Social Development Canada's general conditions prohibit assignment in whole or in part without the Minister's prior written consent. Departmental purchase orders carry the same rule, as in the Immigration, Refugees and Citizenship Canada purchase order terms, where assignment requires the Government of Canada's prior written consent.

What a supplier must provide for an assignment request

A supplier that wants to assign a federal contract generally has to do the following:

• Obtain prior written consent from the contracting authority or other specified government authority.
• Provide an assignment agreement signed by the relevant parties and the assignee.
• Supply supporting information where the CanadaBuys guidance requires it, including the reasons for the assignment, the contracts affected, their value and the assignee's financial condition.
• Ensure the assignee meets any security requirements specified in the contract.
• Ensure the assignee provides the required certification under the Ineligibility and Suspension Policy and that the assignee and relevant affiliates are eligible.

Approval does not ordinarily release the original contractor from its liabilities. The original contractor remains responsible for its contractual obligations after an assignment, unless the contract or a written agreement provides otherwise.

Assignment in supply arrangements and joint ventures

Assignment provisions appear in requests for proposals and resulting service contracts, in purchase orders, and in supply arrangements. In the PSPC professional audit support services supply arrangement, a change in the membership of a joint venture, including the substitution of another legal entity for an existing member, is expressly treated as an assignment and is subject to the assignment provisions.

What assignment means for a supplier bidding on Canadian public contracts

Plan for assignment before a transaction closes. If your company is being sold, reorganized or restructured, any federal contract you hold needs written consent before it moves to a new entity, and an assignment without that consent is void under federal conditions such as those of the Public Service Commission. Check the assignment clause in each contract, and check the joint venture terms of any supply arrangement you hold.

Prepare the supporting package early: reasons for the transfer, affected contracts and their value, the assignee's financial condition, security clearances and Ineligibility and Suspension Policy certification. Remember that your company stays on the hook for performance even after consent is given.