The focus of this article is the enforce-ability of Teaming Agreements.

To recap, teaming arrangements (memorialized in a Teaming Agreement) are organized so that one company is the prime contractor and one or more other companies are subcontractors.  The prime contractor generally interfaces with the government.  The prime contractor agrees that if awarded the government contract, it will use the subcontractor’s goods or services.  Conversely, the subcontractor agrees that it will provide the goods and services at the cost proposed in the bid.

Consider a situation in which your company has teamed with another company to bid on a government contract.  Together, you have an attractive bid.   Your team is ultimately awarded the contract.  Now, pursuant to your Teaming Agreement, you must negotiate a subcontract with your team member.  But negotiations are falling apart, as your team member demands greater rights than you initially agreed.  You seek to enforce your team member’s obligations and file a lawsuit.  However, the judge rules that your Teaming Agreement is unenforceable because it is an agreement to agree in the future. The team member backs out of the contract and you lose the award.

You ask yourself, what could have been done to avoid the judge’s ruling?

Generally, Teaming Agreements are found to be unenforceable when the terms of the contract are ambiguous, contain indefinite terms, or otherwise are agreements to agree in the future.

Your Teaming Agreement should be as detailed as possible, containing definite terms and carefully outlining the obligations of each party.  It should also contain a clear statement of work, which defines the responsibilities of each party, and a clear statement of subcontract pricing.

The agreement should obligate the prime contractor to subcontract with the team member, not merely enter into good faith negotiations, and cannot provide that negotiations will take place in the future. For example, in Trianco, LLC v. International Business Machines Corp., 347 Fed. Appx. 808, 2009 WL 3182920 (3rd Cir. 2009), interpreting New York law, the Court found that a provision calling for negotiations in the future was unenforceable.  Moreover, avoid provisions that allow the agreement to be terminated after a set amount of time of good faith negotiations.  The agreement should be terminable by the prime contractor only if the municipal entity terminates the prime contract.

To the extent possible, the parties should provide in the Teaming Agreement that if there is a dispute as to the terms of the subcontract, that corresponding term from the prime contract would flow down to the subcontract.  Attaching a form of the subcontract to the Teaming Agreement as an exhibit could lend support to its enforce-ability.

The Teaming Agreement should also be amended from time to time as more definite terms come into focus, such as the scope of work and pricing.

An exclusivity clause in the Teaming Agreement supports the enforce-ability of the contract because such a provision demonstrates that the team members are committed to one another in the bid. The agreement is less likely to be considered enforceable when a team member is able to jump from one team to another.

If you have any questions regarding Teaming Agreements or if you are contemplating a teaming arrangement, please do not hesitate to contact us.