Is a Teaming Agreement for You?

Small businesses are having a hard time acquiring larger government contracts because they usually run the risk of non-performance.  Success entities look to teaming arrangements under FAR 9.6 to improve their chances.

However, teaming should be exercised with caution. Contractors must be aware of the many regulations that can impede an effective teaming arrangement. For example

• Undue reliance on the teaming partner
• Violating the size standard requirement
• Not having effective quality assurance plans
• Not carefully choosing teaming partners

Size standard requirements

When you decide to execute a teaming agreement, you must be sure that your teaming partner does not violate the size standard requirements. If possible, the safe approach is to find a capable partner whose average annual revenues (or employee count), when joined with yours still is under the requirement.

Under the affiliation rules, you can find yourself subject to a bid protest challenging your relationship. A successful protestor can now analyze both companies’ revenues. Thus, violating the size standard requirements.

• Have a detailed review of your teaming partner’s financials and books to ensure that you are safe
• Ensure that if you are the prime that you can perform the required percentage of the contract (generally 51%) without having to rely on the other teaming partners employees
• Make sure that as a prime, you are responsible for the critical parts of the project
• You must disclose your teaming relationship up front
• A subcontract must still be executed in addition to the teaming agreement

Benefits of a teaming agreement

Smaller companies can gain huge benefits from soundly executed agreements

• You can have access to larger contracts
• Gain more past performance
• Generate more revenues

Have a professional draft your teaming agreement

Many contractors make the mistake of using generic templates or cutting and pasting forms. This can be a serious mistake if because you can never be certain that templates completely cover your rights.

·         Have an experience government contract attorney review or draft your teaming agreement

·         Ensure that the lawyer also has the solicitation and statement of work

Recent developments in government contract teaming

Given the push to meet small business goals, many agencies are setting aside many projects for certain small businesses categories such as

• 8a
• HUBzone
• Service Disabled Veterans

Both large and small business should take advantage of this development by fostering genuine relationships with 8a, HUBZOne and service disabled veterans. Federal agencies are well aware of last minute teaming relationships and sometimes question the genuineness.

Teaming with Native American Tribes

Federal procurement regulations and SBA regulations allow Native American Tribal companies to enter into teaming arrangements with both large and small businesses. Many contractors refer to tribal entities as “super 8a” business entities. Under this type of teaming arrangement, the Native American business will be the prime contractor.

Benefits of this Native American teaming arrangement include:

• Unlimited sole source amounts
• Ability to further congressional intent in providing opportunities for tribal entities
• Having access to larger contracts

Your teaming agreement should include the following key points

• Can the teaming partner bid with other contractors or is this an exclusive relationship?
• How much business is guaranteed to the subcontractor?
• Remedies for performance issues (understand that a separate subcontract must be drafted)
• Intellectual property rights of the parties
• Contract extensions – the rights of all parties
• How will the subcontractor be paid?

Find a teaming partner if you are new to government contracting

New federal contractors must be fully aware of the many rules and regulations merged into a government contract. Having a teaming relationship can resolve several experience issues. Although, you don’t have to have past performance with the government to bid on a contract, the reality is that your business may be perceived as a risk to the government. Having a teaming agreement in place can minimize this perception.

• Have a government contract attorney on your side when dealing with teaming agreements
• Have sound consulting services available to guide you through the process 

For more information on government contract teaming agreements contact Watson & Associates, LLC at 720.941.7200
 

Online Resources

Office of Federal Procurement Policy Office of Federal Procurement Compliance Programs Our procurement services Federal Acquisition Regulation Department of Agriculture Armed Services Board of Contract Appeals  Federal Resources For Small Businesses GAO U.S. Supreme Court CFRs NAICS Codes   

Denver, Colorado, Wyoming, New Mexico, Kansas, Nebraska, New York, Los Angeles, San Francisco, Chicago, Illinois, Michigan, Pennsylvania, Virginia, North Carolina, South Carolina, Arkansas, Alabama, Denver, Colorado Springs, Utah, California, Oklahoma, Ohio, Maine, Florida, Texas, Nevada, Maryland, Louisiana, Las Vegas, Georgia, Hawaii, Alaska, Washington, D.C., West Virginia, Florida, Indiana, Washington, Mississippi, Tennessee, Miami, Virgin Islands, Rhode Island, Vermont, Wisconsin, Minnesota, Missouri, Delaware, Connecticut, Arizona, New Hampshire, Massachusetts, and Montana government contract teaming consultants

Service Disabled Veteran Government Contracts

If you are service disabled veteran small business (SDVOSB), the government has now advanced by providign a separate setaside for you. However, like the 8a and HUBzone categories of the FAR, you are not guaranteed a federal contract.

Many large businesses are actively seeking service disabled veteran business for teaming arrangements and joint ventures in hope of landing a government contract. This a favorable result if the veteran has sound consulting of legal counsel. Why is this? Because GAO and the SBA are also flooded with more size appeals and bid protest since the new focus arose a few years ago.

Get sound government contract legal advice

If you are a service disabled veteran now seeking to acquire a government contract, you must also know the affilation rules that could cost you a large contract. Don't fall to the temptation of drafting a quick teaming contract for the simple sake of just presentment to the government.

Remember, anyone can pretty much protest a contract award if they meet the GAO or FAR requirements. although you are a service disabled veteran, you are still subject to the federal procurement rules.

Having a government contract lawyer review or draft a teaming contract or viable subcontract will help because such an agreement should contain the main pitfalls of the ostensible contractor rule.

Should I form a teaming arrangment as a service disabled veteran?

Teaming arrangements are encouraged. However, they can be abused and small service disabled verteran small business must be wary of cold calls from large businesses seeking quick teaming arrangements.

You must still meet the control, performance thresholds set forth in the small business program and federal procurement rules.

Our government contract consultants and attorneys handle a wide array of government small business legal compliance clients across the nation. If you need immediate help, feel free to contact us at (720) 941 7200.

Ostensible Contractor Rule

Government contractors find themselves defending against SBA size protest based on the affiliation and the Ostensible contractor rule. More often than not, the awardee of a government bid looses the contract because of oversight on the relationship of a subcontractor - usually  a large business.

A successful protestor will make the argument that the awadee can not complete the contract by itself and unduly depends on the large business to get the contract. The result is devastating because the two contractors capabilities are joined (income or employees) and the NAICs size standard is blown out of the water. Hence, denial of the bid. Here the basic things the SBA looks for

SBA Definition:

 Where one concern is dependent upon another concern for contracts and business to such a degree that its economic viability would be in jeopardy without such contracts/business. 

13 CFR 121.103 (2008)

• (a)(1) - power to control;


• (a)(2) - ownership, management, previous relationships with or ties to another concern, contractual relationships;


• (a)(3) – control can be affirmative or negative;


• (a)(4) – individual, concern, or entity exercises control indirectly through a third party;


• (a)(5) – totality of the circumstances;


• (c) – stock ownership (individual, concern, or other entity owns or has the power to control 50% or more of a concern’s voting

When you seek out subcontractors or teaming arrangements for purposes of obtaining a government contract you must be sure to not to use the other contractor's employees and key personnel for the upcoming contract, ensure that you ( the prime) can prove that you have pursued the contract, ensure that you have total control and management of the contract and don't use joint advertising, phones, equipment etc.

How you defend a size appeal based on the ostensible contractor rule? The simple answer is to retain counsel that understands governemnt contracts.

Goverment Contract Affiliation

Affiliation and ostensible contractor rules go hand in hand. Seek legal advice on how to best go about forming the relationship with a teaming partner or subcontractor. You must account for more than 51% of the work that includes key aspects.

Our office recieves tons of calls for this aspect of government contracts. Unforunately small businesses are not familiar with the SBA rules and the FAR and are faced with an uphill battle.

Government contract consulting is worth its weight in gold if you seek to form teaming arrangements, subcontractors or joint ventures. Get help immediately.

Performance Based Contracts

The fedeal government has now mandates that certain service contracts be peformed and procured on a performance based basis. This means that the days of telling the contract how to do every single aspect of the contract  are over for the most part.

Performance based contracting has been around for over two decades. However, during 2003 and 2006 there has been more of a push to changing the way the government does business.  As a result training is becoming a large requirement. Our office has stepped up to the plate and is available to provide training to contractors, federal and state agencies in this area.

Many state governments are now struggling to adopt the new concept due to the fact of recieving government grants or other government funding. The nation as a whole is far behind in the concept and there is more of a need for performance based training.

What is performance based contracting?

Peformance based contracts focus on the seven steps to performing the contract. Trainers for these types of acquisitions should focus in this area. As the government post their new opportunites you will see the trend and development in performance based performance work statements (PWS). Some still tell the contractor what to do and how to do pt. However , the government's peformance work statements are getting better overall.

FAR Part 37 governs the majority of guidelines for performance  based contracting. One article claims that performance based contracting is difficult on the commercial industry. However, other studies show that both the government and the contractor saves money. There is an argument to be made that the contractor can benefit form the new guideline as compared to when the government dictated materials, how -to etc. The biggest finding is that the government saves money. If this is true, then an argument can also be made that the economy as a whole wins.

Past performance "report cards" per FAR 42.15 should reflect adherence to performance requirements when a PWS has been used. Performance under PBSC provides better data for evaluation of past performance under other solicitations. A powerful incentive of excellence and customer satisfaction is created when contractors know their performance will influence future award decisions.

There are many critics of performance based contracts against OMB. However, when there is change, there are critics. The truth of the matter is that if the government has been paying more for government contract awards, then change is needed where performance based contracts saves tax payers dollars.

If you are a government contractor that is involved in government service contracts, you may want to get ahead of the game and invest in your performance based contracts training. It will be mandatory soon.

Government Teaming Arrangments

Our office receives tons of calls from government contractors who request " a quick teaming agreement" because they have to bid on a contract in a few days. This can be challenging for attorneys who are not familiar with the GAO rulings on affiliation, teaming arrangement flaws etc.

Teaming Agreements - Who is in Control?

When you decide to enter into a teaming agreement with another government contractor, be sure to analyze who really has control over the situation. Teaming arrangements can create a solid way of doing business with the government. However, if you fail to get them crafted carefully by an articulate government contracts attorney, you may find yourself subject to a size appeal to the SBA or other forms of teaming arrangement allegations.

Make sure that you find an attorney that can understand who is doing what on the team and decide whether it may pass muster if challenge.

FAR 9.6 states

9.601  Definition.

“Contractor team arrangement,” as used in this subpart, means an arrangement in which—

(1) Two or more companies form a partnership or joint venture to act as a potential prime contractor; or

(2) 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.

9.602  General.

(a) Contractor team arrangements may be desirable from both a Government and industry standpoint in order to enable the companies involved to—

(1) Complement each other’s unique capabilities; and

(2) Offer the Government the best combination of performance, cost, and delivery for the system or product being acquired.(b) Contractor team arrangements may be particularly appropriate in complex research and development acquisitions, but may be used in other appropriate acquisitions, including production.

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

9.603  Policy.

The Government will recognize the integrity and validity of contractor team arrangements; provided, the arrangements are identified and company relationships are fully disclosed in an offer or, for arrangements entered into after submission of an offer, before the arrangement becomes effective. The Government will not normally require or encourage the dissolution of contractor team arrangements.

9.604  Limitations.

Nothing in this subpart authorizes contractor team arrangements in violation of antitrust statutes or limits the Government’s rights to—

(a) Require consent to subcontracts (see Subpart 44.2);

(b) Determine, on the basis of the stated contractor team arrangement, the responsibility of the prime contractor (see Subpart 9.1);

(c) Provide to the prime contractor data rights owned or controlled by the Government;

(d) Pursue its policies on competitive contracting, subcontracting, and component breakout after initial production or at any other time; and

(e) Hold the prime contractor fully responsible for contract performance, regardless of any team arrangement between the prime contractor and its subcontractors

Privity and Subcontractors

Legal Authority in Government Contracts

Privity of contract and the lack thereof is one legal phrase that every government contractor gets to learn at some point during performance of a federal contracts. It usually comes about when there is a dispute and contractors get their lawyers involved.

Due to lack of privity of contract between the government and a subcontractor, the courts have consistenlty barred sucbocntractors from direct access to the various boards of contract appeals.

This creates a hardship for government subcontractors when a dispute arises such as on payment from a  prime contractor of some other matter. Our Firm ensures that our clients understands these basis pricipals when merging into the government contract arena.

Most small businesses grapple with the teaming concept. Others submit teaming arrangements that don't address the critical elements. The Native American tribes have unique rules that allow them to take a more adventageous route to high dollar procurements.

If you are seriously considering entering a teaming arrangement, you might want to consider teaming with a Native American tribe. A word of advice is that you must demonstrate a strong capability to successfully perform a government contract. If you need help with this, go to www.theodorewatson.com and contact us for further help.

Small businesses have several avenues and strategies to acquire government contracts. The key is to have someone that knows the rules and laws at your side.

As small businesses venture into the federal government contracting market, they are sometimes faced with a moment of fear that they are too small to handle a large contract. Then the potential government contractor will do one of two things. First, submit an unrealistic proposal that it knows it can not live up to in hope of getting the contract. Second, they simply walk away.

What is the answer?  Each potential bidder must seriously plan for submiting a meaningful response to a government contract solicitation.

Teaming arrangements can be ideal if you believe that you cannot perform on your own. The government rules allow for this avenue for this very reason. You must obviously consider bringing in an experienced consultant or government contract rep tog uide you thorugh this process..

The second thing you should start working on is to write out waht makes your business more competitive than the others. The government contracting officer wants to know this immediately when reviewing your proposal.

It is no secret that the government are skeptical when small businesses submit a response to a high dollar requirement. You have theburden of proving that you will have the staff and capability to be successful. Again, you may want to consult with a government contract expert to learn how to effectively do this.