Michael W. . Mutek. Senior Counsel. Steptoe & Johnson LLP. firstname.lastname@example.org. March 7, 2018 . 2. Michael W. Mutek . . 1330 Connecticut Avenue, NW. Senior Counsel . Washington DC 20036 . ID: 698978
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Teaming Agreements: Competitive Discriminator or Legal Liability
Michael W. MutekSenior CounselSteptoe & Johnson LLPmmutek@steptoe.comMarch 7, 2018Slide2
Michael W. Mutek
1330 Connecticut Avenue, NW
Washington DC 20036 Steptoe & Johnson LLP TEL: 202.429.1376, 214.673.7197 email@example.comMichael Mutek’s practice focuses on government contracts, including compliance and ethics, bid protests, claims, internal investigations and disclosures, subcontracts, supply chain issues, formation and dissolution of teaming agreements, and dispute resolution. Mr. Mutek also serves as an expert witness on government contract issues.Prior to joining Steptoe, Mr. Mutek served as vice president and general counsel of Raytheon’s Intelligence, Information and Services, a $6 billion business of Raytheon Company, where he was responsible for the legal affairs and worked on several successful acquisitions in order to help create a cybersecurity business. During his 26 years at Raytheon, he held several other business unit general counsel and vice president positions, including vice president of contracts. Early in his career, he served as senior trial attorney on the Air Force’s Trial Team.Mr. Mutek is a frequent writer and lecturer on government contracts and corporate law topics, and has testified on government contract issues before Congress. He is in the American Bar Association’s House of Delegates, a Fellow of the ABA’s Section of Public Contract Law and is a past chair of that Section. Mr. Mutek is also a Life Fellow of the American Bar Foundation. He chaired the ABA’s Services Contracting Best Practices Task Force, which published “Services Contracting Best Practices: A Guide to Successful Services Contracting” and is the author of “Contractor Team Arrangements – Competitive Solution or Legal Liability: The Deskbook for Drafting Teaming Agreements,” published by the ABA. http://www.steptoe.com/professionals-Michael_Mutek.html
– Teaming Agreements – NCMA, March 7, 2018Slide3
Teaming Agreements: Competitive Discriminator or Legal Liability_________________________________________________
What are the Key Benefits and Risks?
What are the Alternatives?FAR FrameworkFAR Subpart 9.6Responsibility DeterminationPast Performance ConsiderationAntitrust ConcernsThe Process
Due Diligence ReviewAgreements Employed
– Teaming Agreements – NCMA, March 7, 2018Slide4
Teaming Agreements: Competitive Discriminator or Legal Liability_________________________________________________
Why be Exclusive?
If not Exclusive, Then What?
5. Enforceability Enforceable Agreement or an Unenforceable “Agreement to Agree” State LawMaterial Terms6. Conclusion
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide5
IntroductionWhy team?Team formation often is a critical aspect of a government contractor’s strategy to win a contract.
A team arrangement can bring together companies that possess complementary capabilities and share a common goal to win a contract.
ommon in government contracting.
Such arrangements can offer a working arrangement that supports collaboration in both the pursuit and performance of the contract.M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide6
Why Team?A team arrangement is more than a purchase order or subcontract issued after the prime contractor is awarded the contract.
the past performance
and personnel of the teaming partner May be essential in the proposal to satisfy the the solicitation’s requirements. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide7
What are the Key Benefits?Teaming arrangements are popular because they can combine complementary skills
assist in developing competitive strategies to address fierce competition for contract awards
– Teaming Agreements – NCMA, March 7, 2018Slide8
What are the Key Benefits?Forming a team is often necessary to enter a new marketplace or win a large program requiring the integration of different skills.
The arrangement may be formed for a specific, limited purpose or,
when appropriate, for a longer period spanning several transactions.
– Teaming Agreements – NCMA, March 7, 2018Slide9
What are the Key Benefits?The most important benefit of a team arrangement is the ability to obtain complementary capabilities required by the opportunity.
– a team arrangement can:
Provide strong performance capabilities,
Share financial/investment risks, Gain a competitive advantage through a teammate’s past performance, Learn from an experienced company such as in a mentor-protégé program. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide10
What are the Key Risks?The legal obligations may limit certain options.
the team arrangement may assure a source for certain work, a benefit,
may inhibit a later desire to “make” rather than “buy.” The first reported teaming dispute involved a company who did not get a subcontract and there was a “make/buy” decision.The court in this 1964 case found that “team membership” on a team meant more than providing one company the opportunity to bid on a subcontract.Air Tech. Corp. v. General Elec. Co., 199 N.E.2d 538, 547 (Mass. 1964).
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide11
What are the Key Risks?Some may believe that forming a team — that may even include companies who also are competitors for other work — is without risk.
ot the case!
The formation of a team presents both opportunities and challenges.
Approach such a “marriage of convenience” carefully. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide12
What are the Key Risks?Companies in a team arrangement may possess legal rights and expectations which, if unfulfilled, can give rise to
Can be a discriminator, but can be a liability – your teammate’s responsibility and past performance will be evaluated.M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide13
Alternatives?The first question to ask is whether a post award subcontract or purchase order will suffice.
In many cases, that is all that is required to work together.
Teammates may desire the comfort of an alliance.
Frequency of teaming indicates that companies desire a stronger bond and commitment.
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide14
2. The FAR FrameworkSubpart 9.6 — “Contractor Team Arrangements” Supports contractor team arrangements –
When the teaming partners complement each other’s capabilities and offer the Government the best combination of performance, cost and delivery.
The Government can hold the prime contractor fully responsible for contract performance.
– Teaming Agreements – NCMA, March 7, 2018Slide15
Subpart 9.6 — “Contractor Team Arrangements” 9.601 Definition.“Contractor team arrangement,” as used in this subpart, means an arrangement in which—
Two or more companies form a partnership or joint venture to act as a potential prime contractor; or
(2) A potential prime contractor agrees with one or more other companies to have them act as its subcontractors under a specified Government contract or acquisition program
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide16
Subpart 9.6 — “Contractor Team Arrangements” 9.602 General.(a) Contractor team arrangements may be desirable from both a Government and industry standpoint in order to enable the companies involved to—
(1) Complement each other’s unique capabilities; and
(2) Offer the Government the best combination of performance, cost, and delivery for the system or product being acquired.
(b) Contractor team arrangements may be particularly appropriate in complex research and development acquisitions, but may be used in other appropriate acquisitions, including production.
(c) The companies involved normally form a contractor team arrangement before submitting an offer. However, they may enter into an arrangement later in the acquisition process, including after contract award.M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide17
Subpart 9.6 — “Contractor Team Arrangements” 9.603 Policy.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
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide18
Subpart 9.6 — “Contractor Team Arrangements” 9.604 Limitations.Nothing in this subpart authorizes contractor team arrangements in violation of antitrust statutes or limits the Government’s rights to—Require consent to subcontracts (see Subpart 44.2);
(b) Determine, on the basis of the stated contractor team arrangement, the responsibility of the prime contractor (see Subpart 9.1);
(c) Provide to the prime contractor data rights owned or controlled by the Government;
(d) Pursue its policies on competitive contracting, subcontracting, and component breakout after initial production or at any other time; and
(e) Hold the prime contractor fully responsible for contract performance, regardless of any team arrangement between the prime contractor and its subcontractors.M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide19
Additional FAR CoverageFAR Subpart 2.1 [not 9.6] – Definitions.“Small Business Teaming Arrangement”--
(1) Means an arrangement where--
(i) Two or more small business concerns have formed a joint venture; or
(ii) A small business offeror agrees with one or more other small business concerns to have them act as its subcontractors under a specified Government contract. A Small Business Teaming Arrangement between the offeror and its small business subcontractor(s) exists through a written agreement between the parties that--
(A) Is specifically referred to as a “Small Business Teaming Arrangement”; and(B) Sets forth the different responsibilities, roles, and percentages (or other allocations) of work as it relates to the acquisition;M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide20
Additional FAR CoverageFAR Subpart 2.1 – Definitions.“Small Business Teaming Arrangement”– (continued)
(i) For civilian agencies, may include two business concerns in a
mentor-protégé relationship when both the mentor and the protégé are small or the protégé is small and the concerns have received an exception to affiliation pursuant to 13 CFR 121.103(h)(3)(ii) or (iii).(ii) For DoD, may include two business concerns in a mentor-protégé relationship in the Department of Defense Pilot Mentor-Protégé Program (see section 831 of the National Defense Authorization Act for Fiscal Year 1991 (Pub. L. 101-510; 10 U.S.C. 2302 note)) when both the mentor and the protégé are small. There is no exception to joint venture size affiliation for offers received from teaming arrangements under the Department of Defense Pilot Mentor-Protégé Program; andSee 13 CFR 121.103(b)(9) regarding the exception to affiliation for offers received from Small Business Teaming Arrangements in the case of a solicitation of offers for a bundled contract with a reserve.[Formatted as found in the FAR]M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide21
Responsibility Determination The FAR states that “[p]urchases shall be
made from, and contracts shall be awarded
to, responsible prospective contractors only.”
The standards for “responsibility” are found in FAR 9.104.
The FAR at 9.104-4(a) makes clear that prime contractors should consider equivalent standards in evaluating and selecting subcontractors: Generally, prospective prime contractors are responsible for determining the responsibility of their prospective subcontractors ... Determinations of prospective subcontractor responsibility may affect the Government’s determination of the prospective prime contractor’s responsibility. A prospective contractor may be required to provide written evidence of a proposed subcontractor’s responsibility. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide22
Responsibility Determination Also, while the FAR makes prime contractors responsible for determining the responsibility of proposed subcontractors,
the CO to directly determine the present responsibility of a potential subcontractor where it is in the Government’s interest to do so.
The government agency’s consideration of a subcontractor’s capabilities is proper where the offeror is proposing performance as a team. See The Analytic Sciences Corporation (TASC), B-259013 (Feb. 28, 1995).M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide23
Responsibility Determination Prime contractors should consider the FAR responsibility standards as a starting point for due diligence review of potential subcontractors.
In addition, primes are well advised to include language in agreements that allows termination if a later determination is made that the potential subcontractor lacks present responsibility.
Where a teaming
agreement is used, this contingency should be addressed in the teaming agreement.
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide24
Responsibility Issues Protest Decision: GAO recently confirmed the Government’s ability to directly address subcontractor responsibility in the face of a contractor challenge
Leidos Innovations Corporation
, B-414289.2, June 6, 2017, 2017 CPD ¶200
: Requirements Relating to Supply Chain Risk rule (DFARS 252.239.7017)Implemented mandates found in the 2011 and 2013 National Defense Authorization Acts (NDAA) Requires DoD agencies use supply chain risk as an evaluation factor & allows the DoD to exclude contractors due to risk related to National Security Systems (NSS) Intelligence Community has a similar rule: ICD 713
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide25
GAO Backs Army Rejection Of SubcontractorLaw360, Washington (July 7, 2017) – The U.S. Army reasonably determined that Leidos’ bid on a $272 million logistics support deal wasn’t responsive to requirements because its proposed subcontractor was ineligible for access to bases where the work would be carried out, the
U.S. Government Accountability Office said in a decision made public Thursday.
Leidos Innovations Corp.
had not shown that the Army’s decision to exclude it from consideration from the deal, despite being the highest-rated offeror, was unreasonable, given the base access restrictions on its proposed subcontractor
, which was expected to carry out a significant portion of the contracted work, the GAO said in its June 6 decision….Leidos was initially in line for the contract award, with both the highest technical rating and lowest evaluated cost. But the CO issued an adverse responsibility determination, finding Leidos ineligible for the task order based on its proposed use of a subcontractor who would carry out a substantial amount of work under the deal.M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide26
The Responsibility Standards (FAR 9.104-1)
(1) Have adequate financial resources to perform the contract (or subcontract) or the ability to obtain them; (2) Be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments;(3) Have a satisfactory performance record; (4) Have a satisfactory record of integrity and business ethics;
(5) Have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them
(6) Have the necessary production, construction, and technical equipment and facilities, or the ability to obtain them; and
(7) Be otherwise qualified and eligible to receive an award under applicable laws and regulations. 26M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide27
Responsibility Issues(FAR 52.209-6) Contractors must ask prospective subcontractors to disclose
“whether as of the time of award of the subcontract, the subcontractor, or its principals, is or is not debarred, suspended, or proposed for debarment by the Federal Government”
Other than in a purchase of commercially available off-the-shelf (COTS) items, may not enter “into any subcontract, in excess of $35,000” with an entity “that is debarred, suspended, or proposed for debarment by any executive agency unless there is a compelling reason to do so.”M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide28
Past Performance ConsiderationsThe FAR makes past performance a factor
in almost all source selections
and includes detailed provisions for collecting
and maintaining contractor performance information.
Past performance information related to proposed subcontractors, particularly key subcontractors, can be an important part of an offeror’s overall past performance rating, and can be a competitive discriminator. .
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide29
Past Performance ConsiderationsFAR
the use of the Federal Awardee Performance and Integrity Information System (FAPIIS
FAPIIS consolidates information from the Excluded Parties List System (EPLS), the Past Performance Information Retrieval System (PPIRS), andthe Contractor Performance Assessment Reporting System (CPARS). M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide30
Past Performance ConsiderationsAlso collects
CO nonresponsibility determinations,
agency defective pricing determinations,
administrative agreements entered into following a resolution of a suspension or debarment, and contractor self-reporting of criminal convictions, civil liability, and adverse administrative proceedings. The Government has implemented the System for Award Management (SAM) at www.sam.gov for the purpose of consolidating the Government-wide acquisition and award support systems, including FAPIIS and EPLS, into one new system. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide31
Past Performance ConsiderationsThe purpose
enable COs to monitor the integrity and past performance of companies.
FAR at 9.104-6(a) requires that, “[b]efore awarding a contract in excess of the simplified acquisition threshold,” the CO “shall review” FAPIIS in the responsibility determination as well as source selection evaluation of past performance. The Excluded Parties list is publicly availableM.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide32
Past Performance ConsiderationsThe publicly available portions of SAM and FAPIIS do not
include past performance information compiled in PPIRS and CPARS.
Therefore, prime contractors can obtain this information only from proposed subcontractors themselves.
Additionally, it is important for contractors to inquire within its organization regarding the past performance of its subcontractors.
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide33
Past Performance ConsiderationsBefore
relying on a potential subcontractor’s past performance
to support the
a prime contractor is well advised to take a look at the subcontractor’s past performance history, particularly if it is a new subcontractor with which the prime contractor has not previously conducted business,to avoid being surprised at the debriefing. (Not a bad idea for a sub to look at the prime’s past performance.)M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide34
Antitrust ConcernsThe agencies charged with policing anticompetitive behaviors, including the Federal Trade Commission and the U.S. Department of Justice, have noted the benefits of collaborative efforts – can be procompetitive.
Recognize that, to compete in today’s marketplace companies that are competitors in some situations might need to collaborate as teammates in other situations.
Exclusive arrangements do raise possible anticompetitive impact,
which should be examined prior to formalizing a teaming relationship.
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide35
Antitrust ConcernsTeaming with a company possessing the same core competencies may flag an examination of anticompetitive issues.
The FAR specifically forbids team arrangements that are “in violation of antitrust statutes.”
In particular, an antitrust
is“[t]he filing of a joint bid by two or more competitors when at least one of the competitors has sufficient technical capability and productive capacity for contract performance.” FAR 3.303(c)(7).M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide36
Antitrust ConcernsTeaming agreements between competitors may appear to be collusive when
they include multiple contracting opportunities – trading back and forth the prime role.
A team arrangement can be challenged on antitrust grounds even if the agency had advance knowledge that the contractors intended to form a team arrangement,
and even if the agency encouraged the arrangement.
But, may be permissible if the team arrangement would combine complementary capabilities and cost structures, which would provide the customer the benefit of enhanced technical capabilities and reduced overall costs. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide37
The ProcessDue Diligence Review
Best practice =
conduct appropriate due diligence
before agreeing to
team. This is true even for a simple arm’s-length purchase order negotiation,and it is far more important when the parties will be working closely together to pursue a contract —especially if they have not previously worked together. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide38
Due Diligence ReviewDue diligence is especially important in the formation of a joint venture,
because each partner may face joint and several liability for the actions of its other partners.
– Teaming Agreements – NCMA, March 7, 2018Slide39
Due Diligence ReviewDue diligence means conducting the type of inquiry that a reasonably prudent company would conduct before entering into a relationship that imposes legal obligations.
Even if a due diligence inquiry does not reveal “show-stopping” red flags, it should provide
into the potential
teammate. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide40
Due Diligence ReviewAn important aspect of due diligence is the identification of any issues that could reduce the team's chances of being selected for award.
legal problems or
ethical lapses or
other issues that could raise responsibility concerns or potentially lead to suspension or debarment would make a company a risky teaming partner and could prevent the team's selection. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide41
Due Diligence ReviewLikewise,
performance problems on prior contracts,
or claims against the potential partner
Would indicate unfavorable past performance. Discover these issues through due diligence!M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide42
Due Diligence ReviewOrganizational conflict-of-interest (OCI) issues and personal conflict-of-interest (PCI) issues should also be considered and evaluated.
An OCI may arise if a teaming partner
has had access to nonpublic information related to the procurement,
had input into the statement of work or specification or
performed Systems Engineering and Technical Assistance (SETA) on the program, or has business interests that could be affected by performance of the contract. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide43
Due Diligence ReviewThe inclusion of a team member with an OCI problem or a team member with employees who may pose PCI problems
could lead to a
of the team unless
adequately mitigated. needs to be examined during the due diligence inquiry. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide44
Agreements EmployedNon-disclosure Agreement
Letter of Intent/Memorandum of Understanding/Exchanges of Emails or Letters on Issues such as Scope of Work
To assist in drafting the Teaming Agreement
Memorialize status of negotiations/intent at a point in time
Teaming Agreement (vertical teaming/prime-subcontractor)Joint Venture Agreement (horizontal teaming)Subcontract
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide45
teaming agreement is not a standard form with boilerplate clauses –
it generally contains tailored provisions resulting from the due diligence inquiry.
Areas requiring such
tailoring typically include ownership of joint intellectual property, exclusivity, proposed work allocations and prime contract flow downs.
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide46
NegotiationFor a team arrangement to be successful, it should be accompanied by an agreement as to how the workshare will be divided
if the team is awarded the contract,
negotiation leverage may change at contract award.
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide47
NegotiationDifferent approaches are possible when considering workshare allocation.
Is the contractual scope of work is well defined?
How to allocate teammate responsibility – by subject area?
ay be difficult in situations where the SoW is evolving (IDIQ contracts). M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide48
NegotiationSome teaming agreements promise a percentage or dollar amount.
his can be problematic. [
The story of the 115% workshare
.]Some agreements may include “eat what you kill” provisions, which are more common for task or delivery orders – reward the teaming partner for its marketing efforts and may have a limited SoW.COULD IMPACT ENFORCEABILITYM.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide49
NegotiationPrime and Sub usually have different goals.
Prime wants to win, push down risks, maximize profit.
Sub wants to win, but limit its risks, maximize profit.
Terms and conditions allocate risk/reward.
Negotiations are more effective if each party understands each other’s needs and goals.M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide50
NegotiationResult may depend on bargaining power – “Who needs whom more?”
Subcontractor may have greater leverage at teaming stage.
Subcontractor’s leverage may diminish after award, if prime thinks that it can perform without subcontractor (perhaps at lower cost).
But situation can be reversed – if subcontractor is essential to contract performance (e.g., unique technology, unique customer relationships).
Consider whether key issues should be addressed in teaming agreement or deferred to subcontract negotiations. What do you do?M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide51
NegotiationEven though a typical teaming agreement will normally not contain all the provisions that will be contained in a subcontract —
A reading of court decisions indicates that teaming agreements must contain sufficient material terms to be enforceable in court.
t is important for the teaming agreement to contain provisions that are critical to the preaward relationship, such as
work scope, limitations on liability, andresponsibility for costs of pursuit.M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide52
ExclusivityWhy be Exclusive?A question that teammates must consider is whether the arrangement should be exclusive—
i.e., whether teammates will be allowed to join different teams in competition for the same contract award.
When companies collaborate to prepare a proposal in response to an RFP, they typically share proprietary information, including pricing and strategies.
Some agencies have rules on exclusivity.
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide53
If not Exclusive, then What?An arrangement that is not exclusive tends to inhibit the free flow of information out of concern that information will leak.
May not want exclusivity if selling a commercial product that could be used by all the competitors.
M&A activity can bring in situations where a company is playing on multiple teams simultaneously.
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide54
If not Exclusive, then What?When a teaming partner plays on multiple teams simultaneously, it may need to consider
isolating proposal writers, and
excluding certain team members from certain strategy sessions.
These alternatives are burdensome at best, and may not be feasible, particularly where small businesses with limited staffs are involved. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide55
EnforceabilityEnforceable Agreement or an Unenforceable “Agreement to Agree”
An question that may accompany the formation of a teaming agreement is:
Do I have an enforceable agreement or merely an unenforceable “agreement to agree”
Although the vast majority of disputes between team members are resolved through negotiation
or the use of alternative dispute resolution mechanisms such as mediation or arbitration, some disputes do proceed into the court system. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide56
Enforceable Agreement or an Unenforceable “Agreement to Agree” The FAR provides a framework for team arrangements; however, the teaming agreement’s governing state’s law will determine the enforceability of the teaming agreement.
A teaming agreement is a “preliminary agreement,” which is an agreement that contemplates the execution of a more definitive agreement, usually a subcontract.
The questions that are examined to determine preliminary agreement enforceability generally are
the parties have manifested a mutual intention to be bound by the agreement; and whether the agreement contains the essential terms of a contract as defined in the governing law?M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide57
Enforceable Agreement or an Unenforceable “Agreement to Agree” The clearer the intent of the parties to be bound and the more definite and specific the agreement’s terms, the more likely it is that a court will hold the teaming agreement to be an enforceable contract.
Generally, a teaming agreement sets forth certain terms such as the specific parties, the purpose of the agreement, the nature of the relationship between the parties, the obligations of the parties, and the intended
A jurisdiction encountering a teaming agreement for the first time often examines its precedent on preliminary agreements. (See ATACS Corp. v. Trans World Communications, Inc., 155 F.3d 659 (1998)). M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide58
State Law Decisions turn on the facts of the particular teaming agreement.
ATACS Corp. v. Trans World Communications, Inc
., 155 F.3d 659 (1998) at 668 (“It is by now hornbook law that ‘the test for enforceability of an agreement is whether both parties have manifested an intention to be bound by its terms and whether the terms are sufficiently definite to be specifically enforced.’“) The teaming agreement was enforceable (Pennsylvania law).
Cyberlock Consulting, Inc. v. Information Experts, Inc., 939 F.Supp.2d 572 (2013) at 580. (“the court finds that the post prime contract award obligations in the second teaming agreement are unambiguous and constitute an unenforceable agreement to agree.”) The teaming agreement was not enforceable (Virginia law).A key fact: In Cyberlock, the parties had a first teaming agreement that included as an attachment the negotiated subcontract and the second teaming agreement, which was the subject of the dispute, did not.
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide59
State LawAlthough the decisions are mixed,
in general a teaming agreement is more likely to be deemed enforceable if
there is a clear intent to be bound, and
sufficient agreement on material terms of the subcontract.
M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide60
QuestionCan a teaming agreement that could be found unenforceable due to lack of material terms still be a valid team arrangement under FAR 9.6?
have been made by competitors via protests.
Unsuccessful.A teaming agreement can be treated as a valid team arrangement under the FAR unless an actual dispute between the teammates could jeopardize the ability of the government to obtain the proposed performance. M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide61
Material Terms Some material terms can be difficult to provide if the program’s requirements are not finalized when the parties negotiate the teaming agreement – for example the SoW.
Reality = team arrangements are often formed early in the competition.
Special issues include IDIQs that will not result in work being awarded until later TOs or DOs.
bottom line is that parties can – but should not – depend on a court to hold the other party’s feet to the fire.Instead, they should come together because a mutual and strong desire to win the award and work together exists.M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide62
Material Terms In fact, due to the difficulty of negotiating material terms before a final contract and time pressure –
are moving the other
way.Looking at simple alternatives to teaming agreements – example: NDA on steroids (contains terms establishing intent to team but without material terms).Despite the fact that alternatives may not be enforceable. Places even greater emphasis on due diligence.M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide63
ConclusionTeam arrangements are common in Government contracts.
FAR supports team arrangements that complement capabilities and offer the Government the best combination of performance, cost, and delivery.
However, the arrangement cannot be used to reduce competition or restrict Government rights.
Such an arrangement may be important in order to satisfy the RFP.
Due diligence is an important aspect of forming a team arrangement to examine responsibility and past performance as well as other issues.Exclusivity should be considered.Enforceability should be kept in mind.M.W.Mutek – Teaming Agreements – NCMA, March 7, 2018Slide64
– Teaming Agreements – NCMA, March 7, 2018
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