You have a teammate and all is great! Right? Sometimes, not so much. Let’s look at some of the basics and how to avoid the issues in the first place. Federal Government Contracting is subject to a different set of rules than commercial contracting and is governed by federal law.
Teaming has significantly increased in recent years and is a special type of prime/subcontractor relationship. Sometimes, it is referred to as a Contractor Teaming Agreement or a CTA. It is a relationship between two companies, typically a large and small. The small business serves as the prime contractor in order to be eligible for a specific procurement. It is formalized in writing and set up before an award is made. Teaming agreements are established with a specific procurement opportunity in mind and the written agreement is usually submitted as part of the proposal.
Teaming Agreements should be drafted to specifically address the most common pitfalls such as negotiations, affiliation, work percentage requirements, and exclusivity clauses.
Negotiations with a company need to happen prior to entering into a teaming agreement. An agreement negotiating a future subcontract has been determined by the courts to be unenforceable. (See Cyberlock Consulting, Inc. v. Info. Experts, Inc. (E.D.Va 2013) and Trainco, LLC v. International Business Machines Corp. (3rd Cir. 2008)). These arrangements are “agreements to agree” and therefore, are unenforceable.
Affiliation has significant ramifications – potentially causing the dissolution of a small business size status and thereby losing the small business set aside eligibility. It is important to ensure both companies operate as two completely independent entities. Be cautious about sharing space, employees, resources and equipment. Ensure the small company maintains control and be careful teaming with the same company repetitively.
There are also work percentage issues as discussed in 13 CFR 125.6 – Limitations on Subcontracting. It is important to explicitly state the work percentages to be performed by each company in the agreement. In order for a contract to be awarded under a small business set aside, a small business concern must agree to perform specific work percentages. Keep in mind, firms that are not similarly situated also count towards the subcontracting amount.
Exclusivity Clauses prohibit one (or both) teammates from entering into other teaming arrangements. Large businesses sometimes try to team with as many small businesses as possible in order to increase their chances of winning the award. When that happens, a small business loses its advantage against the competition. In the case of a multiple award contract, small businesses should consider adding language that would prohibit their teammate from teaming with another company under the same multiple award contract. Having an exclusive teaming agreement provides a promise from the prime contractor to not request proposals from other subcontractors for the same work and vice versa.
This list is far from exhaustive. Teaming agreements can be a great thing when done properly. Details are key to making an enforceable teaming agreement and a properly drafted teaming agreement can alleviate many potential issues.