Your Washington, D.C. Government Contract Attorney Assists You With Teaming Agreements
In government contracts, companies often team together to leverage their complementary skills and experience. Government contractors pool their resources to compete for procurements that would be beyond their reach if they acted alone. As provided in FAR Subpart 9.6, teaming can be through a prime/subcontractor relationship, or through a joint venture or partnership.
Teaming agreements are used to establish the contractual relationship under which a potential prime contractor and subcontractor work together to prepare and submit a proposal. Typically, teaming agreements set forth the intent of the parties to enter into a subcontract if the prime contractor is awarded the government contract, as well as the workshare of the parties, and exclusivity provisions that prevent competing teaming efforts.
Although teaming arrangements can be an important tool in winning a procurement, companies often view the teaming agreement as mere formality. Boilerplate language is often used in teaming agreements with little consideration or understanding of the potential risks with such an approach. As discussed below, the terms contained in your teaming agreement will determine if it is an enforceable agreement, and may determine whether your team is eligible for award.
Because Virginia and Maryland are home to numerous government contractors, the states are often selected as a teaming agreement’s “choice of law” provision. In several cases the state and federal courts in Virginia and Maryland have addressed what terms are required to make a teaming agreement enforceable. Unfortunately, many, if not most, teaming agreements include terms that make their enforceability extremely questionable.
Federal and state courts have found certain teaming agreements unenforceable because the terms fail to include the binding obligations necessary to create a contract. The courts have referred to them as “agreements to agree” that fall short of an enforceable contract. For example, in Cyberlock Consulting, Inc. v. Information Experts, Inc., 939 F.Supp.2d 572 (E.D. Va. 2003), the United States District Court for the Eastern District of Virginia found a teaming agreement to be unenforceable, and refused to require the prime contractor, Information Experts, to award a subcontractor to its teaming partner, Cyberlock. The U.S. District Court’s decision in Cyberlock is consistent with other decisions regarding the unenforceability of certain teaming agreements.
In order to avoid entering into a teaming agreement that is unenforceable, careful attention should be paid to potentially violative contract language, which may include (i) making the award of a subcontract contingent upon good faith negotiations of the subcontract terms, (ii) teaming agreement work statements that do not identify with any reasonable predictability the work to be performed by the subcontractor, and (iii) pricing provisions that do not set the subcontractor’s pricing or provide a definitive methodology for deriving the pricing.
In addition to crafting a teaming agreement that is enforceable, teaming parties should pay close attention to the terms of their agreement if the procurement is set-aside for small businesses, SDVOSB, HUBZone, WOSB, SDB, 8(a), etc. If the teaming agreement is not properly drafted, the prime contractor could be deemed a large business due to affiliation or in violation of the limitations on subcontracting.
The Whay Law Firm specializes in government contracts and has assisted numerous clients with successful teaming agreements. Ensuring you have an enforceable teaming agreement that does not violate any small business regulations must occur before entering into the agreement. Challenges to the enforceability of a teaming agreement or compliance with small business regulations are unlikely to occur prior to the award of a prime contract. At that point it is too late to amend your teaming agreement.
Please contact us if you have questions or need assistance with your teaming agreement or subcontract.