Friday, March 17, 2017

Contractor Team Arrangements

Contractor team arrangements as used in Government contracting, are where (i) two or more companies form a partnership or joint venture to act as a potential prime contractor or (ii) 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.

Teaming agreements can be desirable from both a Government and industry standpoint in order to enable the companies involved to complement each other's unique capabilities and offer the Government the best combination of performance, cost, and delivery for the system or product being acquired.

The companies involved normally form a contractor team arrangement before submitting an offer. However, they may also enter into an arrangement later in the acquisition process, including after contract award.

The Government is not obligated to accept or recognize the integrity and validity of contractor arrangements. Typically there is some form of Government review of the arrangements. There must be a written agreement between the participating contractors. This agreement will normally contain

  • the name of the venture
  • the customer and solicitation number
  • the names of the participants
  • any limitations on the powers and rights of the participants
  • the contributions that each participant is required to make with regard to the venture's capital, personnel, proposal preparation, etc
  • anticipated subcontract
  • funding requirements
  • responsibilities for record keeping and for the preparation of reports and invoices
  • the designated management
  • limitation of liabilities
  • term of venture and dissolution agreements
  • responsibilities for and restrictions on royalities, patents, copyrights, and property rights arising from venture operations
  • the resolution of disputes among the ventures
  • covenants on how litigation costs will be borne by the participants
  • which state's laws will govern the venture
  • the filings or disclosures required by the state, FAR, etc
  • any technology transfer agreements, and
  • any cost/profit sharing agreements.
If you are contemplating teaming up with another company to pursue a Government contractor, you must ensure that the forgoing points are covered in your formal agreement. We believe that the most important sections is the fifth bullet: the contributions that each participant is required to make with regard to the venture's capital personnel, proposal preparation. Implicit in this feature is the method of accounting that will be used and how indirect rates will be developed and applied. The Government will spend most of its review efforts on this one factor.

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