Anatomy of
A Government Team Agreement

by

Joseph Valof, Esq.
OnSite Counsel

  • 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 It is then superseded by a subsequent negotiated subcontract after the award is made to the prime.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.

  • 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.

  • 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.

  • 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.

  • 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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