Teaming Agreements
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Transcript Teaming Agreements
Major Issues in
Teaming Agreements
A I L EEN A . P I SC I O TTA , ESQ .
EXECUTIVE COUNSEL, PLC
THE ASBC
AIMS WORKING GROUP
JULY 7, 2010
Summary
2
Nature and Limits of Teaming Agreements
Two Models of Teaming Arrangements
Joint Venture Model
Prime/Sub Model
SBA Affiliation Issues
Contract Issues in Teaming Agreements
Special Cautions
Aileen A. Pisciotta
July 7, 2010
What is Teaming
3
FAR Subpart 9.6
An agreement
between two or more companies to form a joint venture or
partnership to act as a potential prime contractor (JV Model); or
between a prime contractor and one or more companies proposed to
act as subcontractors under a particular Government contract or
acquisition program (Prime/Sub Model);
Entered into prior to the submission of a proposal in
response to an RFP; and
That must be recognized if disclosed in a proposal, or
after contract award if approved before becoming
effective.
Aileen A. Pisciotta
July 7, 2010
Purpose of a Teaming Agreement
(Different from a Subcontract)
4
Focus is on preparation of a proposal, not performance
under a contract.
Parties promise each other in good faith:
To cooperate in proposal preparation
IF a contract is awarded, to enter into prime (or prime/sub)
agreements that include(s) certain features:
Allocation of task orders
Allocation of profits (JVs)
Project management structure
Teaming Agreement should always automatically
expire:
If contract is awarded – TA will be replaced by a prime or
prime/sub contracts
If no contract is awarded or if RFP is cancelled – no further
contracts are required
Aileen A. Pisciotta
July 7, 2010
Limits of Teaming
5
No protection from antitrust.
Prime contractor(s) in privity with customer always
fully responsible for performance.
No limit to agency’s right to review and consent to
subcontractors.
No insulation from joint venture liability.
Aileen A. Pisciotta
July 7, 2010
Teaming Agreement Models
6
Joint Venture
Teaming
Agreement
Aileen A. Pisciotta
Prime/Sub
Party A
Co-Prime
Customer
Party B
Co-Prime
Teaming
Agreement
Party A
Prime
Customer
Party B
Sub
July 7, 2010
Joint Venture Model
7
Teaming
Agreement
Party A
Co-Prime
Party B
Co-Prime
Customer
Privity with Customer: All parties to the JV
Common Characteristics
Unlimited scope
Proportionate sharing of profits and losses
Forms
Corporate entity (corporation or LLC)
Partnership
Contract
Consequences
Joint liability for all parties for each others’ defaults
Members should indemnify each other
If a legal entity; JV will have to be unwound
Aileen A. Pisciotta
July 7, 2010
Prime/Sub Model
8
Teaming
Agreement
Party A
Prime
Customer
Party B
Sub
Privity with Customer: Prime only
Characteristics
Limited scope and existence
Sub bills for work performed; no sharing of profits
Subs may have to be separately approved by customer
Prime is identified as sole point of contact for the customer
Form - Contract
Consequences
Prime bears ultimate responsibility and sole liability other than
through indemnity by sub for sub’s default.
Sub bears no liability for prime’s default.
Aileen A. Pisciotta
July 7, 2010
SBA Affiliation Rules
9
13 C.F.R., part 121 – “Affiliates”
Entities are “affiliates” of each other when one has the ability or power
to control the other, or when a third party has the ability or power to
control both.
Size determinations of affiliated companies are based on combined
rather than individual measures.
Members of a JV team are always “affiliated”
SBA looks to actual rather than stated relationships –
totality of circumstances:
Ownership
Management
Prior relationships or ties
Control under contract terms (affirmative or negative)
“Deemed” JV
Affiliation rules apply unless there is an exception
Possible loss of size qualifications
Aileen A. Pisciotta
July 7, 2010
Exceptions to Affiliation Rules
for Small Businesses
10
Mentor/Protégé (for 8a companies)
13 CFR 124.513 – Applicable SBA JV regulations
A JV must be pre-approved
May pursue bundled or non-bundled large contracts (not just 8a set asides)
JV is “small” if
the 8a is “small”
The 8a is in the lead
No percentage of work requirements
Mentor may own 40% of the 8a
Bundled Procurements
Each small business meets NAICS code size limits
Then size standards are applied individually, not to the JV
Large Procurements
Each small business meets NAICS code size; AND
Project meets large size requirements:
Revenue based “size” --- $$ value = ½ NAICS size
Employee based “size” -- $$ value > $10 million
Aileen A. Pisciotta
July 7, 2010
Teaming Agreement Provisions
Important to Both Parties
11
Structure
Bi-lateral, not multi-party TAs
Affiliation rules and control issues (totality of circumstances)
Exclusivity with respect to RFP (more important for prime)
Responsibilities for expenses
Protection of confidential and proprietary information
Separate NDA (need not expire with the TA)
Specify IP ownership for individual and joint products
Representations and Warranties: authority, capability, ownership
Covenants: Ethical conduct and OCI obligations
Law and disputes (under the TA, not the customer contract)
Compliance with law
Governing law
Dispute resolution and forum
Mutual protection
Non-solicitation provisions
Termination (automatic, for cause and for convenience)
Mutual indemnities and limitations on liability
Aileen A. Pisciotta
July 7, 2010
Teaming Agreement Provisions
Important to Prime Contractor Parties
12
Maintenance of control
Single point of contact and control over the procurement as well as
performance
Ability to terminate subcontractor if products or services not
provided on terms proposed
Discretion to respond to customer demands in the contract
Add other subcontractors if and when necessary
Obtain clear subcontractor commitments to:
Assist with proposal development and marketing
Provide timely, accurate and complete information reasonably
requested regarding capabilities
Execute subcontract if contract is awarded
Aileen A. Pisciotta
July 7, 2010
Teaming Agreement Provisions
Important to Subcontractor Parties
13
Protection of role
Clear and exclusive task order identification and allocation
Limitations on inclusion of additional team members
Obtain clear prime contractor commitments to:
Include subcontractor share and qualifications in proposal
Facilitate approval of sub by customer
Negotiate subcontract on award
Promptly and accurately share information
Relevant policies requiring compliance
Changes in status of contract and customer requirements
Conflicts of interest
Aileen A. Pisciotta
July 7, 2010
Beware!
14
Exogenous terms (e.g., controlling obligations in mandatory
contract attachments)
Additional terms to be included in subcontracts
FAR clauses
Flow downs from prime contract
Ostensible Subcontractor Rule
Limitations on Subcontracting Rule (small business set asides)
Independent contractor issues generally (1099 vs. W-2)
IRS : multi-factor test (behavioral, financial, relationship)
Many states: “ABC” test
No control of means of performance (only result)
Contracted service is outside scope of normal business operations
Contractor is in business to provide the service
Aileen A. Pisciotta
July 7, 2010
Contact
AILEEN A. PISCIOTTA
EXECUTIVE COUNSEL, PLC
[email protected]
WWW.LINKEDIN.COM/IN/APISCIOTTA
WWW.EXEC-COUNSEL.COM
202-644-0101 OR 703-914-2635