Make a Teaming Agreement
Work for you
B03
Lynne Hood
Senior Director, Procurement & Subcontracts
Craig Duppstadt
Senior Director, Contracts
Concurrent Technologies Corporation
March 12, 2015 – 2:00 PM
Objectives
• Equip you to draft and negotiate effective
Teaming Agreements to better achieve
your business goals;
• Provide “Lessons Learned” from both the
Prime and Subcontractor perspectives.
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Agenda
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Introductions
What is a Teaming Agreement
Legally Enforceable
Why Team
Due Diligence
The Four Levels of Alliance
Key Elements of a Teaming Agreement
Considerations and Takeaways
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Introductions
Lynne Hood
Senior Director, Procurement &
Subcontracts
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Craig Duppstadt
Senior Director, Contracts
Over 20 years of experience in
Procurement & Subcontract award
& management, proposal
development, and small business
utilization.
Negotiates Teaming Agreements
with Subcontractors when CTC is
a Prime Contractor.
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Over 20 years of experience in
acquisition, contracts
management, proposal strategy &
Development
Negotiates Teaming Agreements
with Primes when CTC is a
Subcontractor.
What is Teaming?
• A strategy when two or more organizations
agree to jointly pursue an opportunity to
improve their chances of winning.
• In a broad sense, Teaming can range from
a Prime-Subcontractor relationship; to
creating a Joint Venture; to collaborating a
merger of the two organizations.
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What is a Teaming Agreement?
• According to the Federal Acquisition Regulations (FARSubpart 9.6*):
– A Contractor Teaming Arrangement means:
- “Two or more companies form a partnership or joint venture to act as a
potential prime contractor”; or
- “a potential prime contractor agrees with one or more other companies to
have them act as subcontractors under a specified government contract or
acquisition program.”
• Teaming Agreements are recognized by the Government
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.”
* Subpart 9.6 is the only area of FAR that references Contractor Teaming.
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What is a Teaming Agreement? (continued)
• Sets forth the terms and conditions and obligations of the
parties during the proposal and award stages of the
acquisition.
• Is typically superseded by a subsequent negotiated
subcontract after the award is made to the prime.
• Each teaming agreement is unique. Make sure you
protect your interests.
• Needs to be very carefully crafted so that the provisions
reflect: 1) the business relationship and; 2) the legal
relationship.
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Legally Enforceable
• The terms and conditions of a Teaming
Agreement may or may not be legally
enforceable.
• How is the teaming agreement structured –
may depend on what you want:
– Open and unrestricted
– Defined and specific
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Legally Enforceable
• Open and unrestricted will generally be
considered unenforceable as an
“Agreement to Agree.”
• Defined and specific may be considered
enforceable if the teaming agreement is a
bridge to the subcontract.
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Legally Enforceable (Continued)
Open and Unrestricted
Language
Defined and Specific
Language
“ . . . agree to negotiate in
good faith . . . a mutually
acceptable Subcontract”
“The Prime agrees to offer a
subcontract to the team
member covering . . .”
“ . . . use reasonable efforts to
secure Government approval
of use of the Subcontractor for
this Program.”
“ . . . payment to the
subcontractor would be “up to
49% under the government
contract and Prime contractor
and Subcontractor shall work
together on an exclusive
basis.”
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Legally Enforceable
• In a recent case, a teaming agreement was
considered enforceable in Virginia if it
included the following terms:
1. Nature and scope of work
2. Compensation
3. Place of Performance
4. Duration of the Contract
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Legally Enforceable Summary
• Prime contractors will generally want “open
ended” language.
• Subcontractors will generally want “defined
and specific” language.
• Bottom line . . . Think about what you want
to achieve and are bringing to the team
when negotiating your teaming agreement.
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Due Diligence Before Teaming
• Execute a Confidentiality Agreement prior to teaming
discussions / negotiations.
• Understand why you want to team with the other party.
• Research and evaluate potential teammate’s past
performance, relationship with client and financial stability
(Ex: run a Dun & Bradstreet report).
• Read the solicitation for teaming restrictions and general
understanding of the scope of work.
• Vet the potential teammate for Organizational Conflicts of
Interest (OCI) and Anti-trust Risks.
Remember….today’s teammate could be
tomorrow’s competitor.
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Four Levels of Alliance
Structure a relationship that works for you!
• Level 1 – Opportunistic – “Dating” - Solicitation/
Opportunity Specific
• Level 2 – Strategic - “Going Steady” - Specific
to a particular client(s) or market(s)
• Level 3 – Partnerships - “Engagement” - Joint
Ventures (Partnerships, Corporations, LLCs)
(Populated / Unpopulated)
• Level 4 – Acquisitions - “Marriage” - Merger/
Buyout
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Level 1: Opportunistic – “Dating”
• Objectives
– Submit a winning proposal in response to one specific
solicitation – build a winning team for the opportunity.
– Prime/subcontractor relationship
• Considerations:
– Short term and limited scope to this one solicitation
– Teaming with the best organization
– Exclusive vs. Non-Exclusive
– Due diligence
– Teaming agreement satisfies your expectations
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Level 2: Strategic - “Going Steady”
• Objectives
– Market complimentary capabilities to a particular set of clients
and/or markets
– Define longer term prime/subcontractor relationship
– Submit winning proposals on multiple Government solicitations
– Identify a “Go To” teaming partner
• Considerations
– Greater level of trust in partnership required
– Clearly define the markets, roles, relationships & responsibilities
– Longer term relationship – broader term and scope
– Teaming agreement satisfies long term strategy
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Why Team?
Prime
Wants:
• Fill capability gaps
• Competitive pricing
• Meet small business
goals
• Bench strength
• Subcontractor will
exclusively commit
• Subcontractor
approved system
Both
Want:
Subcontractor
Wants:
• Solid past performance
• Similar core values
• Complimentary skill
sets
• Financial stable partner
• No OCI’s
• Client knowledge
& relationship
• Mitigate Risk
• Commitment to
partnership
• Program success
• Guaranteed work
• Reasonable pass-thru
cost
• Introduction to new
client
• Low investment of
B&P funds
• No duplication of
niche capabilities on
team
• A “seat at the table”
To offer the client, what we perceive as the most
attractive overall offer by fulfilling each other’s needs
and to improve your overall chances of getting the
award!
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Key Elements of a Teaming Agreement
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Roles & Responsibilities
Exhibit A – SOW / Work share
Exclusive vs. Non-Exclusive
Limitations of Use of Data and Information
Termination
Organizational Conflicts of Interest
Intellectual Property / Rights in Invention
Remedies and Dispute Resolution
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Roles & Responsibilities
• A Teaming Agreement should clearly define
the roles and responsibilities of both
parties:
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Proposal Preparation Responsibilities
Subcontractor identification in proposal
Communication with the potential client
After award actions (may be good to
incorporate a draft subcontract into the
Teaming Agreement)
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Exhibit A – SOW / Workshare
• Define scope of work that Prime and
subcontractor (proposal & contract).
• Discrete tasking vs. anticipated work share
• ID if Subcontractor is sole provider of
specific skill set or will compete with others
on the team.
• Define workshare - ie: Subcontractor
pursued work. – “Eat what you kill”
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Exclusive Teaming
• Mutually Exclusive –
– Prime Contractor promises to not solicit other
Subcontractors for the same work.
– Subcontractor promises to not participate on another
team.
• “One-way Exclusive –
– Subcontractor agrees to go exclusive with Prime, but
no significant commitment of prime with regard to
exclusivity
• IDIQ’s can be exclusive at the IDIQ or task
order level.
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Exclusive Teaming (Contd.)
• Exclusive at IDIQ (a MAC):
– Subcontractor cannot participate on another
team.
• Task Order Level (a MAC):
– Subcontractor can team with other Prime
Contractors on a MAC. However, if Prime
Contractor is bidding a task order,
Subcontractor cannot participate on other
Prime Contractor IDIQ.
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Anti-Trust Concerns
• Applicable Laws concerning Anti-Trust
– Sherman Act – Ensure fair competition by
prohibiting monopolies, price fixing, kickbacks
– Clayton Act – Amendment to Sherman Act
further prohibiting the suppression of
competition. Grants Government ability to
challenge a merger or acquisition.
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Anti-Trust Concerns
• Alignments
– Horizontal – Company X and Company Y Teaming
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Only two known sources of certain type of radar system
Each source awarded contracts
X (Prime) and Y (Subcontractor) Team for new procurement
Teaming arrangement limited government to only one choice
Government awarded contract to X / Y team, referred matter to DOJ
DOJ filed complaint, alleging conspiracy to suppress and eliminate
competition in violation of anti-trust laws
• Parties settled – both companies fined significant monies and to
implement anti-trust compliance programs.
• X and Y are prohibited from teaming on Radar systems without prior
government advance approval.
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Anti-Trust Concerns
• Alignments
– Vertical – Company A v. Company B
• Company B was the sole source for producing a ground vehicle sub-assembly
• Company A, a subcontractor to Company B, for certain components, became
interested in qualifying as a second source – and eventually became qualified.
• Company B, held an exclusive teaming agreement with another key supplier,
which Company A required components from this 3rd party.
• To compete, Company A made significant investments in tooling to duplicate
the 3rd party’s components.
• Company A brought a private anti-trust enforcement action
• Company B however prevailed, as Company A failed to prove its case.
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DFAR Rules
• 2001 – Proposed rule that exclusive
teaming could violate Anti-trust
• 2002 – Responding to industry criticism,
DOD withdrew proposed rule
• 2004 – NRO issued clause prohibiting
exclusive teaming agreements
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Anti-Trust Takeaways
• Understand why you are teaming
• Consider - exclusive teaming does not
violate Anti-trust.
• If you are unsure, consult your legal
counsel.
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Limitations of Use of Data and
Information
• Advance Confidentiality Agreement (…or an NDA)
– What is it? – A license to use each others’ trade
secrets or other proprietary data to evaluate a
potential teaming agreement
• Protect your data as it pertains to this specific
solicitation/proposal (or broader).
• Mark it properly.
• Specify the remedies of misuse of your data
– Injunctive Relief, Liquidated Damages, Royalties, etc.
• Be sure to incorporate the NDA into the Teaming
Agreement.
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Termination
• An important element is how to exit a Teaming
Agreement when it is no longer viable.
• Rational for terminating a Teaming Agreement:
 Government Cancellation
of Program
 Subcontractor not
approved
 Prime Contractor
discretion
 OCI cannot be resolved
 Subcontract Award
 Mutual agreement to
terminate
 Cannot negotiate
Subcontract
 Prime Contractor
decision to no bid
 Period of performance
of Teaming Agreement
ends
 Did not submit winning
proposal
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Organizational Conflict of Interest
• OCIs can occur as described in FAR 9.5.
• If an OCI is discovered and cannot be mitigated or had
not been disclosed by the offeror, at risk of
disqualification from the procurement or worse…
• Recommendation for Primes: Incorporate OCI language
such as: “The subcontractor does not know or have
reason to know of any conflict of interest that exists to
prevent, or result from, its participation in the proposal
effort…“ and/or require a OCI Certification from your
subcontractors.
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Intellectual Property/Rights in
Invention
• You need to protect your company’s IP!
• Consider and Address:
– Background IP
• What are the parties bringing to the table as part of
the solution?
– IP from prior contracts?
– IRAD?
– Rights Assertions
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Intellectual Property/Rights in
Invention
– Developed IP by one party
• Consider the IP developed during the term of the
Teaming Agreement / Proposal as well as during
the term of the anticipated contract (address further
in future subcontract; however, consider during
Teaming Agreement phase).
– Jointly Developed IP
• Ensure terms include provisions for any potential
joint inventions – Joint ownership / Rights /
Licenses / Royalties
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Intellectual Property/Rights in
Invention
– Ensure you are marking your IP and/or
asserting rights when necessary
– Watch out for: “Works for Hire” – as a
subcontractor specficially, works for hire
means you deliver any developed IP to the
Prime with no rights or ownership.
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Remedies and Dispute Resolution
• Your Teaming Agreement should contain
Terms regarding how the parties will
resolve disputes and remedy
– Specify Terms
– Arbitration, Alternative Dispute Resolution, or
Litigation
– If silent, the only option is to go to court.
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Considerations and Takeaways
• Today’s teaming partners could be
tomorrow’s competitors and vice-versa.
• The other party is a Partner vs. an
Adversary – you both need to have a “winwin” for both parties and client to prosper.
• Know your teaming partner (good & bad)
and understand why you’re teaming.
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Considerations and Takeaways
• A Teaming Agreement is only as
enforceable as it is definite.
• Tailor a Teaming Agreement to meet your
needs and define the scope of what it
covers.
• Exclusivity, Anti-trust, OCI and other risk
factors can undermine your teaming
agreement.
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Questions
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Contact Information
Lynne Hood
Craig Duppstadt
Sr. Director
Procurement & Subcontracts
Concurrent Technologies Corp.
[email protected]
(814) 269-2853
www.ctc.com
Sr. Director
Contracts
Concurrent Technologies Corp.
[email protected]
(814) 269-2550
www.ctc.com
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