Teaming Agreements: What to Expect

1
Teaming Agreements What to Expect What to
Avoid

• Marc. F. Efron
• Amy L. OSullivan
• CROWELL MORING LLP

2
Teaming Understanding a Broad Concept

• What do we mean by teaming?
• Teaming Agreements
• Prime/Sub relationships
• Joint Ventures
• Key Factors in Identifying Teaming Partners and
  Type of Relationship Size, Skill, Success,
  Chemistry
• RFP Considerations
• Set-Asides
• Past Performance/Experience Limitations and
  Weighting
• Unique Technical Capabilities
• There is no one size fits all for these
  agreements, but templates are useful guides

3
Teaming Agreements Advance Planning

• DEFINE THE SCOPE CLEARLY one RFP or specific
  program vs. broader alliance
• Ranges of Exclusivity
• Applicable only to Subs portion of the work
• All matters related to the proposal
• All matters related to the alliance
• Anti-trust risks
• Goal Manage relationship and expectations of
  the parties
• Traits to avoid complacency, tyrants

4
Key Issues in Structuring Teaming Agreements

• Clearly defining work share
• Sharing of confidential/proprietary data
• Enforceability/consequential damages
• Exclusivity/anti-competitive teaming
• Recoverability of IRD/BP costs
• Control and communication in proposal development
• Control and involvement in work development and
  management/customer contact

5
Teaming Agreements Forming an Enforceable
Relationship

• Firm and binding obligation v. agreement to
  negotiate in good faith v. agreement to agree
• Teaming Agreements often contain only minimum
  terms necessary to bid submission of proposal
  data, requirement to cooperate, protection of
  proprietary info, promise to negotiate
  subcontract if award
• Results in insufficient detail in key areas
  pricing terms, work allocation, ability of party
  to withdraw prior to award
• Provisions to help ensure enforceability
• Intention to be bound
• Price specific formula or range
• Duration
• Scope well-defined performance obligations of
  parties consistent with RFP and proposal
  consider including attached statement of work
  and/or form of subcontract

6
Teaming Arrangements Prime vs. Sub in
Negotiations

• Exclusivity
• Primes want to maintain options
• Subs prefer exclusive commitments
• Follow-on Contracts
• Primes do not want to commit to subsequent
  subcontracts
• Subs often need or want such commitments
• Work Content
• Primes speak of targets and goals
• Subs seek specific commitments
• Cost Proposals
• Primes want subs to make BAFOs, usually at a
  discount
• Subs are concerned with providing BAFOs unless
  they are involved in negotiations

7
Prime/Sub vs. Joint Venture

• Prime/Sub Advantages
• Easier and quicker to arrange than JV
• More familiar/standard approach
• Reduced need to arrange chains of command
• Dont create separate, new organization
• Necessary for set-asides, unless mentor-protégé
  avoid affiliation issues
• Fewer requirements/responsibilities imposed on
  Sub (good for new/small businesses to learn the
  ropes)

8
Prime/Sub vs. Joint Venture

• Joint Venture Advantages
• Maximum ability to pool resources and strengths
• Agencies frequently request for mentor-protégé
  relationships
• May result in more competitive bidder
• Stronger past performance history (look at
  history of 2 companies instead of 1)
• More competitive pricing
• Single point of contact with customer and more
  centralized management

9
Subcontract Negotiations

• Advice to prime contractors
• Take time to tailor draft agreement use letter
  agreements if necessary to buy time
• Be reasonable avoiding an unfairly one-sided
  agreement sets a good tone for the relationship
  and saves time in negotiations
• Spell out key issues and address historical or
  contract-specific risk areas
• Notice and authority requirements
• Invoicing and payment
• Proprietary information
• Term and termination
• Limitation of liability
• OCIs
• Relationship with customer

10
Subcontract Negotiations

• Advice to Subcontractors
• Invest in help to get it right before signing
  agreement
• Dont assume terms must be accepted simply b/c
  Prime is an experienced government contractor
• Limit/tailor terms to what is relevant/required
• Ensure clauses are even-handed
• Review flowdowns and limit as appropriate (key
  limitations based on dollar thresholds and
  commercial items)
• Clearly define statement of work and
  responsibilities
• Review payment provisions to ensure payments
  cant be withheld unreasonably

11
Special Rules for Set-Asides

• SBA excels at finding attempts to bend the rules
  particularly with size status and affiliation
• Instead of just percentages, consider totality
  of the circumstances and substance over form
• Multiple tests for affiliation
• Ownership own or power to control gt 50 of
  stock
• Control (affirmative or negative)
• Agreements to merge/sell stock given present
  effect
• Common management
• Identity of interest
• Ostensible subcontractor rule
• Newly organized concern rule
• Joint ventures exception for approved
  mentor/protégé
• Consider these issues in negotiating teaming
  agreements

12
Questions?

• Marc F. Efron
• [phone]
• mefron_at_crowell.com
• Amy L. OSullivan
• [phone]
• aosullivan_at_crowell.com
• www.crowell.com