Given that the Federal Government is the largest consumer of goods and services in the world, spending approximately $500 million annually through contracts and grants, it is no wonder why many contractors look to break into the government market. However, many contractors do not have the resources to win these competitive contracts on their own. For these contractors, they must enter into agreements with a subcontractor to competitively bid these government contracts.

A Teaming Agreement is a commonly used tool whereby a prime contractor and subcontractor combine resources to bid on a major government contract. A good teaming agreement covers everything from the exclusivity of the subcontractor to the team and the subcontractor’s role in negotiations to compensation and so much more.

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Teaming Agreement Tips

Any good teaming agreement should include the following:

1. Mutual Confidentiality and Nondisclosure: With the prime contractor and subcontractor sharing proprietary data, technology, and more, confidentiality and nondisclosure obligations must be put down inwriting. Teaming agreements typically also address survival of confidentiality obligations beyond termination and/or expiration of the agreement.
2. Representation: The teaming agreement will define the team members’ exclusive or nonexclusive involvement with the team. The agreement will also cover representations regarding other team member’s resources, performance history and any Organizational Conflicts of Interest which may surface.
3. Mutual Indemnification: This holds one party harmless for any direct, incidental and consequential costs arising from the other party’s actions.
4. No Hire Clause: This prevents either party from hiring the other’s employees for a limited period of time.
5. Acknowledgement: Express acknowledgment that the parties are not in a joint venture. The agreement also covers acknowledgement and understanding regarding ownership of intellectual property arising under the performance of the prime contract.
6. Clear Limitations: The agreement places clear limitations on assignability of the obligations.
7. Scope of Effort: The teaming agreement will seek to clearly define the scope of effort, which will be given to each team member should the award be made to the prime contractor.
8. Subcontract: The teaming agreement states that a subcontract be entered into in the event the prime contractor is awarded the contract which is at least as inclusive as the terms of the teaming agreement.
9. Notice of Reporting to the Contracting Officer: Under new SBA rules, Prime Contractors are required to report to the Contracting Officers when they fail to use a subcontractor “used in preparing the bid or proposal during contract performance.” Prime Contractors are also required to report if it “pays a reduced price to a small business subcontractor” or if payment to a small business subcontractor is more than 90 days past due under the terms of the subcontract. Subcontractor should ensure that they are expressly identified in any proposals to the Government including the scope of work they are to undertake and any pricing contemplated under the contract.

When drafting a teaming agreement, it is advisable to consult an experienced government contracts law attorney. He/she will be able to walk you through the process and ensure your agreement covers exactly what it needs to.

If you have questions about Teaming Agreements or any other Government Contracting matter, please contact Don Walsh at dwalsh@RKWLawGroup.com or (443) 379-4011.  

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