Anatomy of A Government Team Agreement
by
Joseph Valof, Esq.
OnSite Counsel
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PURPOSE:
The primary purpose of entering into a Government Team Agreement is to
facilitate the bidding process of a Government Prime contractor on a
major systems procurement, where a sub-contractor has a product critical
to the overall system. Like Letters of Intent/Letters of Understanding,
a Team Agreement serves as an interim agreement and sets forth the terms
and obligations of the parties during the proposal and award stages of
the acquisition. It is then superseded by a subsequent negotiated
subcontract after the award is made to the prime.
Unlike Letters of Intent/ Letters of Understanding, however,
Teaming Agreements should always be binding on both parties.
The Teaming Agreement becomes the primary document governing
the subsequent relationship of the parties and needs be very
carefully drafted to ensure that all required provisions necessary to
reflect the business, as well as the legal relationship, are included.
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MARKETING VALUE:
Why enter into a team arrangement?
At some point, a small company might want to consider teaming with
a prime contractor if it desires to market its products to the federal
government. A Teaming Agreement may also be appropriate if a prime
contractor and sub-contractor want to do a competitive 'sell' of their
capabilities to the government. By teaming with an appropriate partner,
a competent small business could successfully compete for government
business that it might not otherwise be able to obtain on its own.
From the prime's perspective, a team arrangement alleviates the need
for the prime to enter into a competition with other potential
subcontractors after award of the prime contract.
If the sub-contractor's product is vital to the overall system,
it would make the team proposal that more competitive. It should be noted,
however, regardless of any team arrangement, the prime contractor is held
fully responsible for contract performance of the prime contract.
The sub-contractor has, of course, responsibilities to the prime under
the subcontract.
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FEDERAL ACQUISITION REGULATIONS [FAR's]:
Team arrangements are authorized and governed by FAR, SUBPART 9.601,
which states in part "the Government will recognize the integrity and
validity of contractor team arrangements; provided, the arrangements
are identified and company relationships are fully disclosed in an offer or,
for arrangements entered into after submission of an offer,
before the arrangement becomes effective. The government will not
normally require or encourage the dissolution of contractor team
arrangements." The sub must ensure that this requirement is clearly
covered as an obligation in the team agreement, as well as covered in
the proposal. It would also be advantageous to the sub to have a copy
of the team agreement submitted to the government as part of the prime's
proposal. A Team Agreement is not considered a 'government' contract,
but a private contract between two or more parties and governed by
contract law and/or the UCC [Uniform Commercial Code], as it may apply
to certain issues of law. There are no government [FAR/DFAR] clauses that
must be included in the Team Agreement; those are generally negotiated
and covered in the subcontract.
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KEY DRAFTING ISSUES:
Some of the other important and critical business provisions that need
to be addressed and included in any Team Agreement are: exclusive vs
non-exclusive vs a walk away by both parties; an obligation on the prime
to award a subcontract vs a requirement that the parties negotiate in
good faith. Case law supports the proposition that an agreement to
negotiate in good faith does not require that any agreement actually
be achieved but only that the "parties work to reach an agreement
actively and in good faith"; confidentiality and data rights
protection; termination [when/how]; participation of the sub in any
discussions with the customer concerning his contribution to the team;
and last, but not least, a provision compensating the sub should the
government disapprove the subcontract for any reason.
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A FINAL WORD:
This brief is designed to give some insight into the complexities
of a government teaming arrangement and highlights only the more
important and critical terms to consider. Each individual situation
is different and requires expert business and legal assistance to
ensure that your business objectives are being met and your legal
rights fully protected.
In the case of a Teaming Agreement, unlike
Letters of Intent/Letters of Understanding, brevity is not recommended.
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