It is not always possible for one business to accomplish everything on its own. For this reason, business owners often find it beneficial to create teaming arrangements with other businesses.
Understanding Federal Acquisition Regulation
According to the Federal Acquisition Regulation (FAR) 9.602, several benefits exist for both industries and the government when businesses team up. Team arrangements allow each company to complement the other, providing a quality or service that the other cannot. The government benefits because the performance and cost of the product or service is at its most efficient. Additionally, teaming up with other businesses allows each one to acquire new production strategies and research. While traditional subcontract arrangements are commonly used to lead to benefits similar to these, the teaming arrangement is a bit different. It requires different obligations from both parties, as well as more intense coordination and communication.
Agreements Between Contractors and Subcontractors
According to FAR 9.601, contractor team arrangements exist when several companies partner and act as potential prime contractors or when the prime contractor deals with other companies as subcontractors. When multiple contractors agree to behave as prime contractors, the arrangement is called a dual prime contract. In this article, we will examine the most common type of teaming, in which a prime contractor makes agreements with one or more subcontractors.
Under specific conditions, the government agrees to recognize the validity of teaming arrangements according to FAR 9.603. This stands so long as the relationship between the companies is completely disclosed. Additionally, the commitment must be made in writing. Teaming arrangements are typically designated around a common goal. The goals are often short-term and related to just one single goal. Of course, other businesses have strategic goals existing over a longer period of time.
Concerns About Teaming Arrangements
Market conditions are typically the cause of teaming arrangements. Businesses enter the arrangement in order to create a solid business strategy or to offset potential risks. Additionally, small businesses benefit from having the ability to partner with with larger businesses. Team arrangements are often more productive for businesses in need of specific resources when financials are concerned.
One of the major concerns about teaming arrangements is that each business has its own specific goals. For instance, a prime contractor may wish to renegotiate a contract or clause when it finds a more affordable resource. This contractor may also work toward limiting the relationship between subcontractors and competitors or potential competitors. This is a concern for many subcontractors, who may be concerned with locking in arrangements.
Teaming Arrangement Considerations
Asking these questions can help any business considering a teaming arrangement:
- Does your company have the ability to perform the tasks listed in the contract on your own?
- Does your company have the ability to perform the tasks listed with a subcontractor?
- Will teaming complement the expertise of your business?
- What financial concerns do you have about a teaming arrangement?
- How can you make your proposal more competitive than others in this regard?
- Is it less risky for you to create a teaming arrangement?
- Does your teaming partner have experience with these types of contracts?
- If you have previously teamed with this (or any) business before, how did it go?
Deciding To Pursue A Teaming Agreement
Determining whether or not a teaming agreement will be favorable is difficult. Discussing the contract with the agency in question to arrive at common goals and ideas is essential. You should ask the agency about its success and feelings about teaming arrangements. You should also ask your agency whether or not the teaming partner is well-liked and trusted. It is also important that you consider anti-trust violations that may arise with proposed teaming arrangements. American statutes prohibit monopolies and certain restraints on commerce that include unfair competition tactics. These include price-fixing. Companies that violate antitrust laws are subject to criminal and civil penalties.
There have been times where contractors opted to enter informal teaming arrangements without a written contract. These oral agreements are still important, especially as legal obligations may still be valid. Your first step to becoming a valid partner is to consider the analogous relationship you will have with your partner. Are the other company’s financial state, liabilities, assets and abilities in line with yours? What issues do you expect to run into when dealing with this other company?
The research you perform should include looking at previous partners. You can view the List of Parties Excluded from Federal Procurement and Nonprocurement Programs at the website epls.arnet.gov. You can also view newspaper articles and other important documents regarding past partnerships. This allows you to examine the reputation and success of the company you intend to work with.
Gauging Past Performance
You can also gather information via the Freedom of Information Act to determine a company’s performance with past contracts. With this documentation, you may find it easier to determine whether this contractor regularly finishes on schedule and within the assigned budget. You may also become aware of potential problems associated with the contractor. Sometimes the company you intend to work with has a perfect track record but the management style just doesn’t match up. Is it still worthwhile to work with this company? This is a decision you must make by analyzing past experiences.
Teaming Arrangements – Structure and Confidentiality
First, companies often enter preliminary agreements that allow for the free flow of information between companies. Signing confidentiality agreements allows the companies to feel confident that data will not be shared with others. It is wise not to discuss any critical information until both parties have signed a confidentiality agreement.
Creating a Letter of Intent
This letter, often called an LOI, expresses the desire of one party to work with another party. This letter is not a long-term commitment. Rather, it poses a desire to explore the relationship.
Memorandum of Agreement
Teaming arrangements often move to the next step, which is an MOA. This statement is much more formal than the LOI, and it expresses a desire to move forward with the relationship by establishing a solid plan.
The Teaming Agreement
The teaming agreement itself is designed to cement a commitment, detailing each step. This document lists the goal of the agreement as well as the circumstances under which the companies can exit the agreement. This is often a binding document that places certain obligations on each party.
Ultimately, a variety of arrangements are available for any business looking to make an agreement. You may create a licensing, marketing or distribution agreement based on the needs of your business. This page is informative, but every aspects of these requirements require a thorough understanding of the law. The best thing you can do to ensure success is to work with an experienced government contracts attorney.
Ravenhearth Law is Ready To Assist You
Arranging any sort of agreement that can effect the success of your organization is an important step. Ravenhearth law is highly experienced in government contracts counseling and government contracts litigation. If you are interested in pursuing any sort of contractual agreement, contact our firm today and secure reliable professional assistance.
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