Teaming Agreements, Explained
The initial step in a teaming agreement is the formation of the joint venture, consortium or corporate relationship. A teaming relationship is binding under contract law for both the prime contractor and the subcontractor. The contracting parties create a teaming agreement to clearly articulate the objectives of the joint venture and what will be required of each party to reach those objectives.
The joint venture is not formed until the teaming agreement is effective, at which point the parties proceed to form the corporate entity, limited liability company, or other type of organization they agreed to establish in the teaming agreement .
A teaming agreement is valuable to all companies, large and small, because it is a flexible tool that allows companies to combine their strengths, address their weaknesses and expand their services. Teaming agreements are a powerful tool to help smaller companies gain access to government contracts. Teaming, actually a subset of the greater joint venture umbrella, gives small companies the opportunity to leverage large company resources without making the significant investment of forming a joint venture.
Team agreements lay out the means through which two or more companies will work together to pursue and perform a government contract. A teaming agreement spells out who will do what, when, where and how when bidding on a contract. The only thing a teaming agreement is not – is a contract to submit a proposal.
Key Features of a Teaming Agreement Template
A teaming agreement template should include all the essential components of the much more comprehensive and detail packed teaming agreement. While space may be limited on a teaming agreement template, the most important aspects are typically retained, such as obligations of parties, scope of work (SOW), and terms and conditions.
Scope of Work: The most common aspect of the SOW is the requisite skillset of the subcontractor. They would include, for example, the need for a NYS license or Type A or Type B experience. Specs and drawings should be appended where necessary to further describe the work. This ensures that if the subcontractor has additional overhead and profit not originally accounted for on the prime contract, there will be no misunderstanding as to why.
Obligations of the Parties: Each party to the teaming agreement template should spell out its obligations. It should also provide a sign off sheet indicating that each party understands its role on the project. After all, clarity and warning are always better than later explaining away misunderstanding. Further, where payment is at issue, specifically state that this is not a "pay if paid" arrangement, rather "if funds are released to us from the Owner thereby we will have sufficient funds to pay the subcontractor."
The Advantages of a Teaming Agreement Template
A teaming agreement template can provide many advantages for businesses and organizations seeking to collaborate on contracts or other projects. By utilizing a pre-existing template, you can save time and money that would otherwise be spent on hiring legal counsel to draft a completely new agreement from the ground-up. In most cases, a standard teaming agreement template will contain all of the necessary clauses for a successful agreement, and can be easily modified to suit your specific needs.
The use of a teaming agreement template provides legal clarity for your organization, and can help to reduce the risk of disputes down the line. The typical teaming agreement template contains provisions determining how difficult questions will be answered in advance, including issues related to scope of work, payment, and other vital matters. Being prepared for the difficulties of the contract process can certainly offer protection at every step.
If you are concerned that there might be issues down the line that could lead to legal concerns, a teaming agreement template can help mitigate those risks by addressing complex issues and improving legal clarity. In short, using a teaming agreement template can save you a great deal of time, money, and effort, and can improve your odds of the contract proceeding smoothly.
How to Modify a Teaming Agreement Template
A teaming agreement template is usually a generic document. The process of creating the final agreement is customizing the template to reflect the needs and goals of the parties. If the parties know this up front, before they begin negotiations, they are less likely to be frustrated. What are the issues you need to customize in the template?
Business Name: The template may have placeholders designed for a situation where there is only one business teaming with another business. If your situation involves two or more businesses and the sample language shows only "one party", then the language will need to be changed. In the same vein, be aware of which businesses were included in the template. If your business is not included in the template, you need to add it.
Effective Date: You should make sure the effective date works for the business you represent. You don’t want the agreement to go into effect until after it is finally signed. (Some businesses will sign an agreement, hold it in escrow and not activate the agreement until a later date. If the initial agreement is not to be effective until later, you should be clearly documenting that fact in the agreement.)
Pitfalls in Drafting Teaming Agreements
While a teaming agreement template provides a good starting point for a teaming agreement, too often companies take it off the shelf without further interpretation or customization. This approach can lead to common mistakes that impact a business’ future relationships with their teaming partner.
First, a teaming agreement should clearly indicate the specific team project and set out the key roles and responsibilities of the parties. Each party can have multiple roles they play throughout the teaming relationship but you need to clearly define what you are responsible for during the pre-award phase versus after award. If you do not do this, you may risk under estimating the resources needed for the desired roles.
Second, a teaming agreement template may not necessarily suit your specific situation . While you will almost always have to negotiate some points, you should also be mindful of the way the template is structured and whether that aligns with how you do business. For example, if the teaming agreement is intended to house an export control managed program and the template does not address export control issues, then there should be a separate export control agreement that addresses the parties’ compliance responsibilities while carrying forward the teaming agreement’s terms.
Third, many teaming agreements are not universally drafted and contain internal conflicts of law. In other words, many of them seek to bind the parties to the courts of two different jurisdictions. You should clearly identify which court system applies to the teaming agreement and do not allow conflicting clauses that may be argued in favor of one party over another.
Legal Aspects of Teaming Agreements
When creating a teaming agreement, a number of legal considerations are involved. This means that it’s essential to think through the implications of a teaming agreement before you sign one. Being familiar with these legal implications will help small business owners while they draft teaming agreements.
Regulatory Compliance
One of the primary legal considerations when forming a teaming agreement is regulatory compliance. All team members must ensure that they’re in compliance with the different regulatory requirements of government contracting. If you fail to meet these regulatory requirements, it could result in significant consequences for all teaming members, such as disqualification from the bid process or even criminal prosecution.
Dispute Resolution Mechanisms
The contract negotiation process is known to go long into the night, which makes it very important for all parties to anticipate upcoming disputes and create ways to resolve differences. A dispute resolution mechanism is often included in a teaming agreement, establishing how the contract will be renegotiated in the event that an issue arises among team members. Dispute resolution mechanisms help to clarify the consequences of a breach of contract and should be reasonable in order to ensure that tensions remain low. Some of the common dispute resolution mechanisms that could be listed in a teaming agreement include arbitration, mediation, and doing nothing (in other words, allowing team members to handle the issues without penalty or intervention). A teaming agreement may also require that parties seek assistance from an experienced facilitator that can help to negotiate a final contract.
Teaming Agreement Best Practices
When it comes to negotiating the terms of the agreement, it is important to think about what you want as an individual, as well as your role as a whole in the entire project. This way, everyone’s voice is heard. You don’t want to act like the person that is holding all the cards and only looking out for your own self-interest, which will only serve to sour the relationship before anything even gets started.
It makes sense for you and your potential partners to have negotiated compensation and other incentives that work for everyone. A good job done on a project should be worth more than a bad job done. That only seems fair to me. You don’t get the same award for finishing second as you do for finishing first in a race, should there be any difference here? Ultimately, having a system of checks and balances where everyone involved has a say in how things are done will make the process of executing a teaming agreement go much more smoothly. A boring middle ground can often be better than lots of drama and strife in the business world.
The best way to ensure that the resulting teaming agreement does not end up with too many blank spaces or undecided articles is to start with a good template. These agreements do not need to be unreasonably complicated. In fact, I would argue that the opposite is true for the most part. The fewer pages of legalese there are to read, the better. The only way to know if this is true in your case is to analyze all the factors described above in order to come up with an agreement that suits your needs. When you do that you can rest assured that the resulting document will both 1) contain clear and easy-to-follow sections that 2) have a clear delineation of the scope of the agreement so that 3) no one ends up losing out.
Teaming Agreement Success Stories
To better understand the benefits of effective teaming agreements, let us look at a few examples of how they have played out in real-world situations. One prominent example is the teaming agreement between Lockheed Martin and Raytheon on the $1 billion contract for the Ground Based Interceptor (GBI). This agreement set out a clear division of labor and responsibility that allowed both companies to bring their unique strengths and assets to the table. Lockheed leveraged its expertise in missile defense while Raytheon utilized its industry-leading sensors and discrimination technology to create a market-winning proposal.
Another case study is the teaming agreement between Northrop Grumman and ITT on the N3B Environmental Remediation project . These two companies had previously worked together on other projects and understood the value of seamless collaboration. Their teaming agreement included detailed provisions for cost-sharing, scope definition, and management structure that enabled them to over-perform on critical milestones, deliver on budget, and generate additional work with the client.
These examples illustrate that when teaming agreements are well drafted and specifically tailored to the requirements of the government contract, they can provide a roadmap to a successful partnership and prevent detrimental confusion and miscommunication down the road.
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