Are Teaming Agreements binding?

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Are Teaming Agreements binding? According to the Federal Acquisition Regulation, Teaming Agreements (or Teaming Arrangement) are (A) two or more companies forming a partnership or joint venture to act as a potential prime contractor;  OR (B) A potential prime contractor agrees with one or more other companies to have them act as its subcontractors under a specified Government contract or acquisition program.

The Government encourages Teaming Agreements to complement each other’s [Contractors] unique capabilities; and to offer the Government the best combination of performance, cost, and delivery for the system or product being acquired.  TAs are most appropriate in complex research and development acquisitions.Are Teaming Agreements binding?

It is most practical to enter into a teaming agreement prior to submission of proposal to the Government.

In practice, Prime Contractors send the teaming agreement to specify the level of cooperation required by the Subcontractor as well as defining the expectation and boundaries for all parties.  Prime Contractors may send out exclusive teaming agreements which can prevent the Subcontractor from also negotiating with other Prime Contract for the same RFP.   Many contractors ask whether this violates FAR 52.203-6(a).Are Teaming Agreements binding?

FAR 52.203-6(A) reads that “Except as provided in, the Contractor shall not enter into any agreement with an actual or prospective subcontractor, nor otherwise act in any manner, which has or may have the effect of restricting sales by such subcontractors directly to the Government of any item or process (including computer software) made or furnished by the subcontractor under this contract or under any follow-on production contract.”   FAR 52.203-6(a) does not come into play until the Prime Contract has been awarded (i.e. the Prime Contract by fully executing the Agreement). Therefore, until Contract award, the Prime Contractor may be able to have an exclusive TA agreement. TAs generally have language that terminates the agreement upon Award of the Prime Contract. Are Teaming Agreements binding?

Recently, a federal court in Virginia decided whether teaming agreements should be enforced.   The court held that TAs are nothing more than agreements to agree, therefore, unenforcable in the State of Virginia.  For more information on the case, please see this link.

What must one do?  If located outside of the State of Virginia, companies can use the another States law using choice of law.  However, this solutions has its own hurdles.  As a colleague of mine once put it “You’d have to be crazy to do business with the Government”


Are Teaming Agreements binding?

Are Teaming Agreements binding?

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