Teaming Agreement: Pros and Cons

What is a Teaming Agreement?

A teaming agreement is a legal contract entered into by a government contractor and another party. These agreements are very common in government related contracting and are used by contractors who want to find work with partners, pool resources, share risks, and enhance competitiveness in government contracting that can ultimately increase the effectiveness of their job(s). The Federal Acquisition Regulation (FAR) provides guidance on government contracts, which includes subcontracting.

Read this material if you are interested in learning more about teaming agreements.

Pros and Cons of Teaming Agreements

Teaming agreements can be extremely beneficial for some contractors but can also have negative elements depending on the situation. Below are some pros and cons of teaming agreements:

Pros of a Teaming Agreement

• Allows a contractor to build a team by partnering with an individual or firm that can contribute their resources, skills, and knowledge in a particular area.
• Teaming agreement parties are pretty much obligated to perform the work they agree upon with one another without worrying about any other employee being brought into the picture for the same job.
• The parties to the agreement can add as many means for termination sections to the contract as they feel are appropriate.
• Individuals or companies are able to bring their diversity and differing mindsets to the table to get a job done without having to work for the same entity right off the bat.
• The contractors are asked to provide an estimate for what the costs will end up being upfront so that risks are minimized.
• As long as subcontracting laws are followed the teaming agreement parties will not be viewed as affiliates so small business rules will not be of concern for the temporary workers.

Cons of a Teaming Agreement

• The sections need to be very carefully written or they otherwise may not have legal standing in the event one of the teammates wants to dispute a matter in court. There have been prior incidents where this happened and the court found that certain parts of the agreement were not enforceable.
• The agreements typically only apply to one project or group of tasks making it necessary to renegotiate every time a new job is proposed unless you structure the agreement to cover multiple projects or cover a long-term partnership between the parties. If not, this may mean that each time a new agreement is put into place a new teaming agreement will need to be discussed and put into writing.
• A subcontractor who was hired by the main (prime) contractor may not come to agreeable terms which can make the process difficult, which is a risk any time you are working with subcontractors and contractors.
• If a contractor other than the main one becomes part of the team to complete certain work and does not do too great of a job the blame will fall on the prime contractor since this individual is the only person contracted with the government.

To get a better idea of the positive and negative sides of a teaming agreement you can view this article.

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Key Terms in a Teaming Agreement - Checklist

The checklist below is a guide for what key topics you should include in a teaming agreement for completeness and effectiveness:

• Purpose: a clearly explained goal with the reason for establishing a partnership to accomplish it.
• Duration: state how long the job will last and what the anticipated start and finish dates are.
• Scope of work: describe in detail what each party will be expected to do and what milestones exist for completion of selected tasks.
• Pay schedule: state what payments will be made to who and when.
• Exclusive relationship: add a part in the agreement that leaves no room for confusion about whether the same contract is allowed to be worked on elsewhere with someone different.
• Proposal fees and charges: mention how the proposal costs will be paid and who will pay for what.
• Privacy: add notes stating if anything will not be considered confidential information and can be shared or vice versa.
• Legal components: identify and make known all the laws, regulations, and compliance aspects that apply to the teaming agreement members and share how or where they will be used if a reason arises.
• Insurance: include a section that specifies who will be responsible for work related insurance as well as all details surrounding it such as the total cost and types of coverage.
• Liability limitations: if there will be limits as to the liability that can be placed on one or more team members then this section should be attached to the agreement with specifics on the extent and type of limitations.
• Tax costs: note the amount of taxes and which ones each party will pay and state what penalties one will face if they do not pay as required.
• Assignments: this section should be visible in the agreement so that no one is left wondering whether duties set out can be assigned out.

Visit this webpage to learn more about what to include in a teaming agreement.

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Teaming Agreements vs. Joint Ventures

A joint venture differs from a teaming agreement because it involves two or more companies who create a totally separate legal business to assume position as a prime contractor. Members of the joint venture have similar levels of control, liability, and profits.

On the other hand, a teaming agreement consists of only one prime contractor who maintains control over a subcontractor who does not share the same level of responsibility for performance, profit, direction, or liability.

Read this article for a detailed description of teaming agreements compared to joint venture agreements.

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Teaming Agreement vs. Subcontract

A teaming agreement is a legally binding agreement between a prime contractor who coordinates directly with a government contact opposed to a subcontractor who is actually monitored and taken on by the prime contractor. A subcontractor does not have any connection to the government partner like the prime contractor does. Primary differences of the two contracting types are displayed below:

Teaming Agreements

• A GSA schedule must exist and the business or individual must be registered with the federal system known as SAM.
• Responsibilities are determined based on what is in the agreement.
• The government can be directly contacted for work being performed.
• Payments are made based on the rate listed in the agreement, an order, or the GSA schedule.
• Work can be completed in full due to the team efforts of all parties connected to the teaming agreement.

Subcontracts

• No GSA or SAM registration is required.
• Responsibilities are agreed upon but the subcontractor is not held accountable for insufficient work.
• The subcontractor cannot interact directly with the government and any questions or concerns must go through the prime contractor.
• Payments are made in line with the GSA schedule after any relevant subtractions are made.
• Supplies and services may be limited based on relying on only the prime contractor and not having a larger enterprise.

Examples of When to Use a Teaming Agreement

You should use a teaming agreement under the following circumstances:

1. You as a prime government contractor are seeking a subcontractor to perform a specific task under your direction that is aligned with an active federal contract.
2. You and other contractors involved want to bring your skillsets together to find a total solution and have numerous resources at your fingertips.
3. You want to boost your competition and reputation as a contractor by working with others who are highly regarded.
4. You want to possibly become part of a master teaming agreement that will allow you to broaden the duration and scope of your federal contract.

Get Help with a Teaming Agreement

If you believe a teaming agreement is right for you then you should reach out to a knowledgeable government contracts lawyer who specializes in reviewing and writing them. Post a project in ContractsCounsel’s marketplace to get free bids from vetted lawyers to draft or review a teaming agreement.