What is a Teaming Agreement?
Government contracts are a very profitable opportunity for any sized business. Companies get these contracts by first bidding on them. If won, the chosen company may need to outsource help in completing the job. If this is the case a, the two companies will take on the bid and contract together, and a teaming agreement should be established. This agreement will affirm how the work will be divided.
For the most part, a teaming agreement will involve a single large company as the primary contractor and the companies working for them as the subcontractors. In this scenario a teaming agreement protects the primary and sub contractors.
Teaming contracts can be a bit slippery when it comes to enforcing them, at least in California. Because they are usually drawn up before a contract is officially awarded, it’s power is dependent on winning the contract. And so, many courts have decided that teaming agreements are not binding, but just “an agreement to agree” under future circumstances. Since the binding is shaky, a primary contract can hypothetically make a teaming agreement with one subtractor, then hire another when the contract is won, with almost no consequence.
There are ways to make a teaming agreement more enforceable, which is why it is advisable to hire a lawyer to help draft it. Some important clauses to include are:
- Clearly stating the purpose of the agreement and setting a duration for the agreement
- Detailing the exact nature of the work to be done by subcontractors and the estimated cost
- Stating the primary contractor “shall” team up with the subcontractor if awarded the government contract
- Including a provision that allows the primary contractor to terminate the teaming agreement only if the contract is not won
A lawyer should edit, negotiate and review a teaming agreement before it is signed by either party. With these safeguards in place, a party is less likely to violate the teaming agreement. And if they do, you will be more prepared to defend yourself in court.
