OVERVIEW

This section outlines the procedures to be followed by a State agency to execute the transfer of the rights, obligations, and liabilities under a contract to an individual or organization (“Transferee”) other than the original contracting party having such rights, obligations, and liabilities (“Transferor”). Contractors doing business with New York State may attempt to transfer their rights, obligations, and liabilities under a contract to another individual or organization. Agency contract managers should be aware of all transfers under a contract and that their consent is required for certain transfers.

State Finance Law, Article 9, Section 138 states contracts cannot be assigned, transferred, conveyed, sublet or otherwise disposed of without the prior written consent of the contracting agency officials. State agencies may waive prior written consent when the reason for the transfer is due to a reorganization, merger or consolidation of the contractor’s business. In these situations, where the original contract was subject to Office of the State Comptroller (OSC) approval, OSC must concur with the waiver. This in no way limits the State agency’s right to reject a transfer.

Contract assignments should not be confused with vendor address changes or name changes, which are addressed in Chapter X, Section 1- Guide to Vendor/Customer Management Overview, or with payment assignments, which are addressed in Chapter XII, Section 1- Expenditures Overview of this Guide.

Contract assignment agreements are formal agreements whereby one vendor, the Transferor, transfers the rights, obligations, and liabilities under the contract, including the responsibility for contract performance and right to payment, to another vendor, the Transferee, who must accept those rights, obligations, and liabilities as outlined in the contract. If the original contract was subject to OSC approval, the contract assignment agreement requires approval by the Attorney General and OSC.

A contract assignment may be due to a structural change on the part of the Transferor (a partnership was incorporated or a firm was purchased by another firm). A contract assignment may also occur where responsibility for performing under the contract is transferred to an entity independent from the Transferor. When assessing the appropriateness of a contract assignment agreement the following should be considered:

• Pursuant to Article 9, Section 138 of the State Finance Law, a contract assignment, transfer, conveyance or sublet requires the previous written consent of the agency, department or official that awarded the contract. In addition, if the contract was subject to approval of the Comptroller, the Comptroller’s approval of the contract assignment agreement is required.
• A contract assignment is prohibited where the Transferor is attempting to avoid a lien, tax obligation or other legal responsibility relating to the contract.
• All contract assignments require a vendor responsibility review of the Transferee.
• Contract assignments must be reviewed on a case by case basis and may not be approved if such transfer would be arbitrary and capricious or where the purposes of the competitive bidding statutes would be frustrated. For example, where a service contract was awarded on the basis of a best value determination involving an evaluation of the technical merits of the firms and their personnel, a transfer of an executory contract (i.e., a contract where performance has not begun) could frustrate the purposes of the competitive bidding statutes by permitting an award to a contractor that would not have been ranked as the best value offeror. Therefore, before approving a contract assignment in such case, the agency must verify and document that the transfer will not operate to frustrate the competitive bidding statutes.

Process and Document Preparation:

Contract assignment agreements must include the following elements:

• The Transferor must transfer all rights and responsibilities to the Transferee and the Transferee must accept.
• The contract assignment agreement must re-use the same NYS Contract # as the original agreement.
• The contract assignment agreement must indicate an effective date. Generally, the term of this agreement would commence upon the effective date of the transfer and end on the original agreement end date.
• The contract assignment agreement must state that all other terms and conditions in the original agreement remain unchanged.
• Both the Transferor and the Transferee must sign and have their signatures acknowledged. If the original contracting party has ceased to exist as a business entity, the Transferee must sign the appropriate contract assignment agreement and its signature must be acknowledged.

The contract assignment agreement must be signed by an agency-authorized signatory, approved by the Attorney General's office, and sent to the Comptroller’s Bureau of Contracts for OSC approval, if the contract was originally approved by OSC.

Agencies are reminded that contract assignments are subject to Sections 139-j and 139-k of the State Finance Law. Agencies should ensure the designated agency contact for the contract assignment is provided to the Transferor and Transferee.

For contract assignment agreements requiring OSC approval agencies should use:

1. AC 3276-S (All Parties) when all three parties (State Agency, Transferor, and Transferee) are available, and
2. AC 3276-S (No Transferor) when the Transferor is no longer available (e.g., has ceased to exist as a business entity).

For contract assignment agreements that were not subject to OSC approval (e.g., “T” contracts), agencies are encouraged to use this standard format; however, the reference to OSC and Attorney General approval in the template should be removed. If the assignment involves a disregarded entity, contact the Bureau of Contracts for additional information to include in the assignment agreement and procurement record.

Process and Transaction Preparation Specific to SFS:

Users create the following two transactions in SFS:

1. An amendment transaction against the original agreement that:
   1. modifies the Expire Date in SFS to be the day prior to the effective date of the contract assignment agreement; and
   2. reduces the contract amount in SFS to equal the final total amount of payments made and to be made to the original Transferor/contractor. In order to reduce the contract amount in SFS, the State agency must reduce funds reservation and contract lines on the original agreement, as appropriate.
2. Concurrently, users create a new contract in SFS for the assignee. The agency must re-use the same NYS Contract # as the original agreement. A 25 digit Contract ID will be generated by SFS and will be a unique identifier for the contract.
   1. The contract Begin Date in SFS will be the effective date of the contract assignment agreement and the Expire Date will be the end date of the original agreement.
   2. The Contract Amount of the new agreement in SFS should equal the unexpended balance from the original agreement. Agencies must reserve funds for the new contract as detailed in Section 2.C - Contract Funds Reservation of this Chapter.
   3. The Transferee must have a valid NYS Vendor ID (see Chapter X, Section 1 – Guide to Vendor/Customer Management of this Guide, for more information).

If OSC approved the original contract transaction, the agency must submit the following to OSC for approval: the contract assignment agreement and required procurement record documents, along with a Single Transaction Summary (STS) or  AC 340-S for each of the required two transactions. Agencies should include supporting documentation explaining the transfer and confirming that there are no known liens against the contract or Transferor and no reason to believe there may be any in the future unless the Transferee has agreed to be responsible for them in the contract assignment agreement.

Guide to Financial Operations

REV. 12/22/2022