Teaming Agreements 101
Team Agreements
A teaming agreement is a contractual agreement between two or more parties to work together on a specific project or opportunity. These agreements are frequently used by businesses that, on their own, do not have the necessary capabilities, capacity, qualifications, past performance, or capital to perform their portion of a contract and so they plan to pursue the contract as part of a team with one or more companies that can provide some or all of the missing elements.
A teaming agreement establishes the baseline terms for the relationship between the businesses. After being awarded a contract, the parties use the teaming agreement to finalize the specific contractual details of their relationship in a subcontractor agreement or prime contract and subcontract agreement .
Although commonly used to address contracts with the federal government, they are also used on many state and local contracts and by prime contractors who are not subject to the federal acquisition regulations.
A teaming agreement will address the party’s roles and responsibilities, information sharing, dispute resolution, intellectual property, duration, and confidentiality. There are a number of additional critical contractual provisions that should also be included in a teaming agreement. Those provisions will be addressed in the undersigned’s blog post, The Ultimate Teaming Agreement Template.
The Advantages of Teaming Agreements
Teaming agreements provide a host of advantages which can prove invaluable for any business application pursuit. More than just a legal formality, they help set the stage for successful partnerships and pave the way for effective collaborations in the years to come. Put simply, teaming agreements are key documents that govern the partnership between two or more companies in a business application or contract. These agreements spell out terms, set expectations, and list rules of engagement. As such, they offer a foundation for future collaboration. While teaming agreements are somewhat formal, they’re also straightforward. They differ from other contractual agreements in that they assume nothing. They don’t make demands or even presume that parties fully understand what their arrangement entails. Nor do they place parties at cross-purposes with one another. Because teaming agreements spell out specific terms and conditions, they prevent the creation of false impressions or unmet expectations. They identify important assumptions, such as whether the parties will bid on the same contract individually. They stipulate how the team will address the contract if it is awarded. They also present specifications regarding how parties will work together to land the contract in the first place. The right team agreement clarifies the relationship between potential partners, setting the groundwork for success. Teaming agreements are invaluable for companies pursuing complex contracts or large business applications. By providing basic structure, they outline expectations and methods of operation, allowing companies to go about their business in an efficient manner.
Key Elements to Include in a Teaming Agreement
While there are several aspects of teaming agreements that may be negotiated, there are certain fundamental components that should be included. These components should clearly define the roles and responsibilities of each team member so that everyone is on the same page as to their expectations.
Your teaming agreement should contain specific terms and conditions for termination. Sure, it is critical how the teaming agreement may be terminated if things go south with the relationship, but having an exit strategy is especially important for members that may be bringing significantly less expertise or capital to the business than others. What happens to these members when the relationship terminates? You need to protect the less experienced members from losing out on all of the capital that they have brought to the table, but also the more experienced members who have made the major investments and sacrifices to get the business to its current level.
The competing interests of members often make confidentiality provisions a topic of concern. While you may want to prevent disclosure of information to any potential competitors, you cannot prevent full disclosure to other members of the team. Each member must be able to share in all of the available information and the decision as to when information can be disclosed should be made by majority rule. This includes financial information or proprietary information, such as software or business concepts.
After you have defined the roles and responsibilities of each member, you need to think about what would happen to the business if there is a dispute. You cannot prevent members from disagreeing on certain issues, so ideally the team will have clear procedures for resolving disputes.
Guide to Developing a Teaming Agreement
When it comes to large procurements, it is not uncommon for a federal government solicitation to receive numerous competing proposals. If your firm decides to submit a proposal, you want to significantly improve your chances for success by teaming with the most capable partners. You want your team to consist of vendors who possess the assets, resources, knowledge, and experience that make them an excellent fit for the scope of services requested by the government.
Once you are ready to make a proposal, you will need to draft a comprehensive teaming agreement that outlines the roles of each party and sets the terms for how the team will work together.
Below is a step-by-step guide for drafting a teaming agreement for an upcoming federal government procurement, including practical advice for small businesses and startups, and tips for ensuring that your agreement will be an asset that helps your proposal stand out from the rest.
Step 1: Conduct Initial Discussions with Your Proposed Team Partners.
Generally, teaming agreements start out with preliminary negotiations, often in the form of meetings and phone calls. Use these discussions to get to know your proposed team. Are they capable partners? What is their expertise, and where would they fit in your overall proposal? What do they want from the deal, and are they aware of what you would like from them in return? Keep in mind that government contracts are highly competitive, so you want to make sure that you are teaming with a reliable vendor that can help you secure the contract.
Step 2: Define the Project’s Objectives and Anticipated Costs.
After you have enjoyed several stimulating conversations with your provisions team, you should have a solid grasp of the project’s objectives. Aim to clearly articulate the services that will be performed, the goals to be achieved, and the problems that will be solved as a result of the project. You will also want to develop a sense of the costs you will incur in terms of labor, materials, and other fees. Having a strong understanding of the relative costs will help you issue a fair compensation request to your team members, as well as negotiate a competitive proposal to the government.
Step 3: Clarify Roles and Responsibilities among Team Members.
During the planning stages, each team member will have distinct services they are responsible for providing, and play a different role as a member of the group. Defining these roles will maximize efficiency. Each vendor should contribute only to the portions of the project that concern their services. This reduces confusion and limit mistakes. Each team should also discuss the amount of control they would like over the project, to ensure that participating vendors are reasonably comfortable during their term.
Step 4: Negotiate Terms that Work for You and Your Team Members.
While some terms may be non-negotiable, there is flexibility in the teaming agreement process. It is in your best interest to work with your team members to negotiate terms that satisfy all parties. Common provisions to consider negotiating include project scope, payments and compensation structure, expenses, project duration, data gathered over the term of the contract, intellectual property, confidentiality, the governing law, and termination rights.
Common Pitfalls with Teaming Agreements
When it comes to forming a teaming agreement, many businesses might think that the primary concern is the working relationship itself. While this is a crucial aspect of the contract, attention also needs to be paid to the drafting process. There are a few common pitfalls businesses run into when drafting a teaming agreement: Vague terms. A vague teaming agreement is of little value to either party. Using general language that can be interpreted in different ways leaves the process up to interpretation and may lead to misunderstandings and even legal problems down the road. It’s important to have a well-defined agreement that does not leave anything up to guesswork. A legal professional should have a hand in the drafting of this document to ensure that all possible outcomes are covered. Inadequate termination clause . It’s not uncommon for businesses to ignore the termination clause. This could be a huge mistake. Take it seriously — it’s what will dictate how the agreement is ended if either side wishes to stop doing business with the other. Under what conditions are you still obligated to serve each other in the future? Many teams, especially those comprised of a large number of parties, have specific details to iron out in the event that any party wants to leave the agreement. The clause should be tailored to cover every potential scenario. Intellectual property. In cases where the teaming arrangement involves working closely together on intellectual property, it’s essential that you lay out every possible detail of how those intellectual property rights will be handled. Be as specific as possible to avoid any future disputes over the matter.
Template for a Teaming Agreement
A teaming agreement template typically includes several key components:
I. Parties. This section lists the names and contact information of the businesses involved in the teaming relationship.
II. Purpose. Here, the parties describe the purpose of the teaming agreement (e.g. outline how they will divide work on certain projects).
III. Work Responsibilities. This section describes in detail the respective responsibilities of each party in the arrangement, for example, who will be responsible for actually performing the services that are outlined in the agreement.
IV. Duration. This section covers how long the teaming agreement is in effect, how it can be terminated and under what conditions.
V. Signature Lines. Signatures lines are included at the end of the document for all parties who have agreed to the teaming agreement.
The template can be easily customized from there.
Achieving Legal Compliance with Teaming Agreements
Ensuring that the teaming agreement complies with legal and regulatory requirements is essential, as non-compliance with federal, state, and local laws can result in legal issues that could jeopardize the entire teaming arrangement or cause costly damages for the teaming partners.
The legality of such agreements is critical when the teaming arrangement is based on a contract with an agency of the federal government. A contractor team which violates the mandatory solicitation provisions of the Federal Acquisition Regulation could render the resultant contract void.
In addition, teaming arrangements must comply with the regulations and requirements of the relevant contracting agency. For example, each agency has specific rules regarding subcontracting, which often grant contracting officers the authority to determine if the contractor is in compliance with those requirements as well as to impose penalties for failure to meet those requirements. For example, the General Services Administration (GSA) has rules governing small business participation on task orders placed under the GSA Multiple Award Schedule Program. The GSA now states that GSA’s Office of Small Business Utilization (OSBU) will determine compliance with the small business subcontracting plan requirements, and that failure to comply with subcontracting goals could result in "administrative remedies including suspension, debarment, or removal from the General Services Administration Advantage!" See GSA’s Small Business Business Subcontracting Plan. These risks make compliance to GSA’s requirements critical for any company that has a GSA Schedules contract and is dividing the work under the contract amongst team members and/or subcontractors.
Agencies that are most likely to enforce mandatory subcontracting requirements include the Small Business Administration, NASA, and DOD. Small business and subcontracting requirements and penalties also apply to private-sector companies. For example, New York City has several local laws (such as City Code 6-108), requiring prime contractors to use Minority and Women-owned Business Enterprises (MWBE) for the performance of a contract with the City of New York. The City Code established the requirements for prime contractors to perform with MWBEs and imposes heavy penalties on the winning bidders that fail to do so.
In addition, teaming partners must ensure compliance with any confidentiality agreements that they enter into, including licensing agreements, that are required for any proprietary materials that are necessary to successfully complete the contract awarded to the team. Finally, partnering panters must negotiate to include any flow down provisions required by the prime contract among themselves, and ensure that each teaming partner complies with those flow down requirements. Even prime contractors can be held liable when a subcontractor fails to comply with the prime contract. For example, in Dynamic Visions, Inc., vs. Smith (No. 2015 OHA1), GAO ruled that the prime contractor was not entitled to complete and submit a Small Business Subcontracting Plan that was required by a prime subcontractor to the Department of Homeland Security, Immigration and Customs Enforcement, in order to be eligible for award to compete for the Green Arrow Reengineering contract.
Final Thoughts
The importance of preparing a well thought-out teaming agreement cannot be overstated. The government contracting world is fraught with teaming agreement pitfalls. This blog has tried to highlight some of those pitfalls and also explain how certain aspects of the teaming agreement are handled by a teaming agreement template . It should be clear that a properly structured teaming agreement will give both teams an opportunity to reach their full potential in a prime-sub relationship. It is a critical part of strategic planning and should be given adequate time and attention. The teaming agreement template allows a contractor or subcontractor to use the quick, efficient process of creating the teaming agreement without sacrificing the core building elements that were outlined in this blog.