Notifying the Government When There is a Change in Ownership

FAR Clause 52.215-19, Notification of Ownership Changes, is included in most contracts with the Government. It is a required clause for both solicitations and contracts when cost or pricing data is required or whenever any preaward or post-award cost determination will be subject to the FAR Part 31 Cost Principles (for example, cost-reimbursable contracts).

The contract provision requires contractors to notify the contracting officer within 30 days whenever it becomes aware that a change in its ownership has occurred, or is certain to occur, that could result in changes in the valuation of its capitalized assets in the accounting records. This notification must be made in writing. The clause also requires written notification within 30 days whenever changes to asset valuations or any other cost changes have occurred as a result of a change in ownership.

The primary purpose for this notification is to ensure that increased costs as a result of asset write-ups are not passed on to Government contracts. FAR 31.205-52 limits what a contractor can pass on as a result of business combinations.

Under this provision, contractors must:

• maintain current, accurate, and complete inventory records of assets and their costs
• provide the ACO ready access to those records
• ensure that assets, accumulated depreciation, and useful lives are identified accurately before  and after each change in ownership
• retain and continue to maintain depreciation and amortization schedules based on the asset records maintained before each ownership change.

The key point to remember here is that the provision does not apply to every change in ownership. It applies only to situations that result in changes to the valuation of capitalized assets. However, don't wait around for the auditors to "find" it. There are potential consequences including penalties for unallowable costs and violations of the Truth in Negotiations Act.