That is the question. When you’re a government contractor, it’s highly likely that you’ll need to team with another government contractor that may offer different or other specialized services to win a contract. The problem that occurs with teaming arrangements is that essential terms are often overlooked or worse, not even contemplated. Why, you might ask? Well, oftentimes, small businesses think the teaming agreement provided by the prospective prime contractor is a standard form agreement that merely memorializes that both parties will be pursuing government contracts together.
And, while that’s somewhat correct, this presumption is not only costly but can be a big mistake for a number of reasons. The teaming agreement really is the first opportunity to formally begin negotiations since many terms will also be stated in the subsequent subcontract. As a result, it’s really important to understand what should be discussed in the early stages and why.
If you’re not as familiar with team agreements, here are some areas that you should focus on and give serious consideration to:
1) Mutual confidentiality and nondisclosure obligations: Since the prime contractor and subcontractor will be sharing proprietary information and knowledge, data, technology, rates and other information, these clauses are essential. You’ll also want to make sure this clause survives the expiration or termination of the agreement to maximize the protection.
2) Representations regarding exclusivity or nonexclusivity: It’s important that the parties understand and define whether the parties are allowed to subcontract or are only able to work with the partners cited in the subcontract to avoid confusion and problems down the road.
3) Duties: The specifics of each party’s duties that will be performed should be defined such as scope of responsibility, rates, and/or other relevant criteria. Clarity is key.
4) Mutual indemnification: This holds a party harmless from any direct, incidental or consequential damages and/or costs arising from the other’s actions. This clause allows you to seek reimbursement for money you are forced to pay to a third party as a result of an injury caused by the party from whom you seek the reimbursement as a result of their negligence and/or poor performance.
5) Ownership of Work: There must be a clear understanding and agreement of who owns the intellectual property that may be created through the performance of the prime contract. There are often disputes regarding this point, so negotiating this early is important.
6) Disclaimer of Joint Venture: If this is not a joint venture, you should expressly state so. Joint ventures are different from teaming arrangements and present different obligations, responsibilities and liabilities.
7) Assignability: There should be a provision with clear limitations on the assignability of the obligations under the teaming agreement. You may not want a third party stepping into the shoes of one of the parties to the contract as that party could be a competitor or may not have been properly vetted through due diligence.
8) Non-solicitation of Employees: This prevents the parties from raiding each other’s workforce for a certain period of time, helping curb the loss of intellectual property, know-how, trade secrets, and possibly more.
9) Termination: The agreement should be clear as to when the relationship between the parties begins, and ends, as well as rules and specifics on any violations of the contract or if the team fails to win a contract award, and the like.
10) Terms of the Subcontract: The teaming agreement should state that a subcontract will be entered into if a government contract is awarded to the prime contractor and that the responsibilities will be at least as inclusive as the teaming agreement so that you get what you bargained for.