A teaming agreement in project management is a formal contract made between a government contractor and another party. Contractors who want to work with partners who can improve the effectiveness of their job frequently use these agreements in government-related contracting. Keep reading, you will learn the key points of teaming agreement in project management.
Table of Contents
What is the Teaming Agreement?
Teaming agreements enable firms with different expertise to create a combined team that can more effectively compete in requests for proposals and design competitions. Teams governed by agreements are not legal entities, but they define the roles of prime and sub-consultants, expected compensation, and backup plans before any project work start.
Although multidisciplinary team arrangements are becoming more prevalent until recently there were no suitable contracts that allowed businesses to collaborate without forming a completely new legal entity.
What Are the Types of Teaming Agreements?
If two or more businesses are thinking about forming a partnership, they must first determine what kind of teaming agreement will serve their interests the best. Teaming agreements usually fall within two basic categories: a “joint venture” agreement or a “prime contractor-subcontractor” agreement.
Joint Venture Agreement
A joint venture agreement is created when two or more companies form a new business entity to act as a prime contractors. Shared property, profits, control, and liability are all aspects of the joint venture.
Contractors who might not be able to provide the necessary financial security or bonding capacity can take an active part in the negotiation of larger construction contracts thanks to joint venture agreements. The fact that each joint venture partner will be responsible for any losses or damages should be noted. A joint venture must also be properly licensed in Florida as a separate organization in order to avoid accusations of unlicensed contracting, even though it may be made up of qualified, licensed businesses. ยง 489.521(2)(a) Fla. Stat.
Prime Contractor-Subcontractor Agreement
When a prime contractor decides to designate one or more businesses to serve as its subcontractor(s), a prime contractor-subcontractor agreement is made. The prime contractor-subcontractor agreement does not involve shared control, shared property, shared profits, or shared liability, unlike a joint venture.
The primary contractor will be solely accountable to the owner for the successful completion of the project and contract performance. According to the terms of the subcontract with the prime contractor, the subcontractor will continue to operate independently from the prime contractor and is only accountable for finishing a portion of the project.
What Are the Benefits and Drawbacks of Teaming Agreements?
If the circumstances are right, teaming agreements can be very advantageous for some contractors, but they can also have drawbacks. Below are some pros and cons of teaming agreements:
Benefits of a Teaming Agreement
- enables a contractor to assemble a team by collaborating with a person or business that can provide resources, expertise, and knowledge in a specific field.
- Parties to a teaming agreement are essentially required to carry out the work they have agreed to do together, without being concerned about the addition of any other employee to the project for the same task.
- The number of means for termination clauses that the parties to the agreement feel are necessary may be added to the contract.
- Without having to start out working for the same organization, people and organizations can contribute their diversity and different perspectives to the task at hand.
- To reduce risks, it is required of the contractors to provide an upfront estimate of the final costs.
- The parties to the teaming agreement will not be considered affiliates as long as subcontracting laws are adhered to, so the temporary employees won’t be concerned about small business regulations.
Drawbacks of a Teaming Agreement
- The sections must be written very carefully or else they might not have legal standing if one of the teammates wants to challenge something in court. There have been instances in the past where this has occurred, and the court determined that some provisions of the agreement were not enforceable.
- The agreements typically only cover one project or set of tasks, necessitating renegotiation whenever a new job is put forth. This implies that a new teaming agreement must be discussed and put in writing every time a new agreement is implemented.
- The process may become challenging if a subcontractor the main (prime) contractor hired cannot be reached on amicable terms.
- Since the prime contractor is the only one who has a contract with the government, he or she will be held accountable if another contractor joins the team to carry out a particular task and performs the task poorly.
What Are the Key Terms in a Teaming Agreement?
The checklist below is a guide for what key topics you should include in a teaming agreement for completeness and effectiveness:
- Purpose – a clearly explained goal with the reason for establishing a partnership to accomplish it.
- Duration – state how long the job will last and what the anticipated start and finish dates are.
- Scope of work – describe in detail what each party will be expected to do and what milestones exist for the completion of selected tasks.
- Pay schedule – state what payments will be made to who and when.
- Exclusive relationship – add a part in the agreement that leaves no room for confusion about whether the same contract is allowed to be worked on elsewhere with someone different.
- Proposal fees and charges – mention how the proposal costs will be paid and who will pay for what.
- Privacy – add notes stating if anything will not be considered confidential information and can be shared or vice versa.
- Legal components – identify and make known all the laws, regulations, and compliance aspects that apply to the teaming agreement members and share how or where they will be used if a reason arises.
- Insurance – include a section that specifies who will be responsible for work-related insurance as well as all details surrounding it such as the total cost and types of coverage.
- Liability limitations – if there will be limits as to the liability that can be placed on one or more team members then this section should be attached to the agreement with specifics on the extent and type of limitations.
- Tax costs – note the amount of taxes and which ones each party will pay and state what penalties one will face if they do not pay as required.
- Assignments – this section should be visible in the agreement so that no one is left wondering whether duties set out can be assigned.
What Are the Differences Between Teaming Agreements VS. Others?
Teaming Agreements Vs. Joint Ventures
Because two or more businesses form a legally distinct business to act as a prime contractors in a joint venture, it differs from a teaming agreement. The joint venture’s partners share an equivalent amount of control, responsibility, and profits.
A teaming agreement, on the other hand, involves just one prime contractor who retains control over a subcontractor who does not share the same level of responsibility for performance, profit, direction, or liability.
Teaming Agreement Vs. Subcontract
In contrast to a subcontractor who is supervised and employed by the prime contractor, a teaming agreement is a legally binding arrangement between a prime contractor who works directly with a government contact. A subcontractor does not have any connection to the government partner like the prime contractor does. Primary differences between the two contracting types are displayed below:
Teaming Agreements
- The company or person must have a GSA schedule and be registered with the SAM federal system.
- Based on the terms of the agreement, obligations are established.
- You can get in touch with the government directly to get work done.
- Payments are made in accordance with the rate specified in the contract, an order, or the GSA schedule.
- Due to the coordinated efforts of all parties involved in the teaming agreement, the work can be finished completely.
Subcontracts
- There is no need to register for SAM or GSA.
- Although there is an agreement on responsibilities, the subcontractor is not held responsible for poor work.
- The subcontractor cannot interact directly with the government and any questions or concerns must go through the prime contractor.
- After making any necessary deductions, payments are made in accordance with the GSA schedule.
- Depending solely on the prime contractor and lacking a larger enterprise may result in a limitation of supplies and services.
When to Use a Teaming Agreement?
You should use a teaming agreement under the following circumstances:
- You as a prime government contractor are seeking a subcontractor to perform a specific task under your direction that is aligned with an active federal contract.
- You and other contractors involved want to bring your skillsets together to find a total solution and have numerous resources at your fingertips.
- Working with well-respected individuals will help you stand out from the competition and improve your status as a contractor.
- A master teaming agreement that will enable you to extend the duration and scope of your federal contract is something you might want to consider joining.
How Flexible is a Teaming Agreement?
A teaming agreement enables your company to collaborate with others on a temporary basis since you don’t want to merge with the other party or enter into a joint venture with them.
A teaming agreement will typically outline the parties’ goals and objectives as well as a schedule for dividing up the work so that a successful tender is most likely. If the tender partners are successful, the teaming agreement won’t go on to specify how the tender work will be distributed. Those will be set out in the:
- The invitation to tender and the main contract between the business offering the tender and the successful bidder (who is identified as the main contractor in the teaming agreement).
- The subcontract between the main contractor and the subcontractor (the parties to the teaming agreement). The subcontract will define the post-tender relationship of the parties to the teaming agreement. The main contract will dictate the subcontractor’s responsibilities, and the subcontract will specify the work that needs to be done.
What Are the Consequences of An Improperly Drafted Teaming Agreement?
It may be deemed impossible to enforce teaming agreements that are not sufficiently precise, definite, and clear. For example, Florida courts have found teaming agreements to be “agreements to agree,” and, therefore, unenforceable, when the “agreement” states that the parties will enter into negotiations for a subcontract after the prime contract is awarded.
It is crucial to have a skilled construction lawyer draft a teaming agreement because of the complexity of these contracts and the precedents mentioned above. This will help to ensure that the agreement is legally binding and clearly outlines the terms of the partnership.
How Does a Business Enter into a Teaming Agreement?
The teaming agreement process is relatively straightforward and involves:
- Finding a tender that is appropriate for your company to bid on can be made easier if you are aware that you have the option of entering a teaming agreement.
- After having identified the tender and its specification, identify the tender partner, if any, that is right for you to team up with in the tender bid.
- Get your commercial solicitor to draw up a draft teaming agreement for approval and once finalized ensure it is executed.
- To increase the likelihood that the tender work will go smoothly, to control expectations, and to lessen the risks of repercussions leading to commercial litigation, have the main contract and subcontract prepared.
Why Not Enter into a Partnership Agreement Rather Than a Teaming Agreement?
If you and a third party are working together on a tender bid, that’s a long way from the long-term nature of a business partnership with all the legal and accounting issues that flow from a formal business partnership. Once the tender process is at an end then the teaming agreement falls away to be replaced with a main contract and subcontract should the bid prove successful. The best choice is therefore to enter into a teaming agreement, which avoids the complications and legal obligations of a partnership agreement while still ensuring that your company benefits from a partner in a tender bid.
Conclusion
Teaming arrangements, also known as teaming agreements, are made with the intention of securing and, if successful, carrying out a construction contract with competitive bidding.
A knowledgeable government contracts attorney who specializes in reviewing and writing them should be contacted if you think a teaming agreement is the best option for you. Post a project in ContractsCounsel’s marketplace to get free bids from vetted lawyers to draft or review a teaming agreement.