Contractor Teaming Agreement: Everything You Need to Know
It is often used as a marketing tool. With this tool, a main contractor and subcontractor agree to combine their resources and bid together on a government job.3 min read
A contractor teaming agreement is often used as a marketing tool. With this tool, a main contractor and subcontractor agree to combine their resources and bid together on a government job.
What Goes Into a Contractor Teaming Agreement?
A teaming agreement will often include the subcontractor's bid as part of the exhibits, and the prime or main contractor may also include its own bid as an exhibit. In cases where a teaming agreement is made, if the bid is accepted, the prime contractor must use the subcontractor on the bid. Both parties are expected to abide by the teaming agreement fully once accepted.
Sometimes teaming agreements are beneficial to smaller businesses that otherwise would not be competitive enough to bid. The tool is also beneficial for a prime contractor, as it allows for greater control over costs.
The Legality of a Teaming Contract
Even though a teaming agreement is used for government bidding, it is not considered a government contract but a contract between two parties that would fall under the Uniform Commercial Code. The agreement will likely not include government acquisitions regulations, as those will be later negotiated in the subcontract.
Even though the agreement is not a government contract, the federal government will have to view the contract as valid as long as the arrangements are identified, and relationships were disclosed in the offer.
For the contract to be valid, the prime contractor must include at least three competitive bids from various subcontractors unless the original subcontractor's bid was already accepted in the first contract. With a teaming agreement in place, this releases the prime contractor from this requirement.
An important thing to note is that even with a teaming agreement in place, the prime contractor will be the one accepting full responsibility for the work performed.
A subcontractor can benefit from having a copy of the teaming agreement sent in with the government bid. In essence, a teaming agreement will serve as a bridge until the final contract is created. It is important to remember that all teaming agreements will need to be replaced with a fully negotiated subcontract.
Teaming agreements are unlike letters of intents in the fact that:
- The final contract rests with a third party.
- All of the provisions that are needed to govern the relationship between the parties must be included.
- A teaming agreement is binding for both parties involved.
What Provisions Should a Teaming Agreement Address?
There are provisions that will need to be outlined in your teaming agreement to make sure it is valid. These include:
- Is the agreement exclusive or does either party have the right to change its mind?
- Does the agreement provide an obligation to award the job to the subcontractor if accepted, and was it negotiated in good faith?
- What extent do the parties' rights to confidentiality need protection?
- How can the agreement be terminated?
- Will the subcontractor be allowed to participate in the negotiation with the customer or the government?
- Does the prime contractor agree to provide compensation to the subcontractor if the work is met with disapproval?
These factors and other legal issues need to be addressed when drafting a teaming agreement. Each agreement may require its own provisions to make sure both parties are fully protected, and the requirements of the job are met.
Background on Contractor Teaming Agreements
There are some requirements that must be met to be considered a team member for a contractor team arrangement including:
- Each member must have a current GSA Schedule contract or be eligible to pursue one.
- Each member must meet all socioeconomic and small requirements.
- Each member must agree in a written agreement to work together on the project.
- The signed written consent cannot cause any other interference with other schedule contracts.
- Members must select a team leader who will be responsible for the negotiations and finalization of the contract with the government.
Though there are no formal rules and regulations that govern the use of contractor teaming agreements, you can seek guidance in forming one on their website as well as find out how they may be established to gain opportunities.
If you need help with a contractor teaming agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.