Reducing the Risks that Subcontractors Face with Teaming Agreements

The U.S. General Services Administration established a Contractor Team Arrangement (CTA) to allow for two or more contractors to work together to meet ordering activity needs. This teaming arrangement can be an effective strategy for smaller companies to combine their capabilities and compete for work. Below are important issues small businesses should consider prior to signing a CTA. 

CONFIDENTIALITY

A teaming agreement should always include a confidentiality provision that protects confidential or sensitive information. The duration of the confidentiality provision should be considered because procurements can sometimes take years to complete due to delays in government award decisions, protests and agency corrections.

EXCLUSIVITY

Prime contractors often want to include an exclusivity provision in teaming agreements to bar subcontractors from teaming with competitors for the same opportunity. If exclusivity is required, the subcontractor should ensure that this obligation terminates if the team does not receive the award so it has the opportunity to negotiate a subcontract with an awardee.

ENFORCEABILITY

Following a contract award, subcontractors face the risk of being abandoned by their prime contractor for newly available subcontractors. It is critical that subcontractors understand the risk of enforceability and the steps they can take to protect themselves. A teaming agreement should include a subcontract draft that outlines terms and conditions of the eventual agreement between the parties. Companies are often reluctant to take the extra time and expense to negotiate a subcontract when an award of a contract is not guaranteed. Having a draft subcontract highlights any potential roadblocks and helps with the enforceability of the agreement. Companies should understand that characterizing the subcontract in tentative terms, such a “draft” or “term sheet,” may lead a court to conclude the teaming agreement is unenforceable. Even if the parties cannot negotiate a teaming agreement that is sufficiently definitive, there are other steps small business subcontractors can take to protect themselves in the event the prime contractor refuses to give the work promised. The U.S. Small Business Administration requires prime contractors to provide the contracting officer with a written explanation if they fail to give their proposed small-business subcontractors the work upon which they agreed. The regulation provides the prime contractor with the necessary incentive to follow through with its proposed small business subcontractor.