Many Government contracts today are set-aside for small businesses, or certain types of small businesses, and the proportion of set-aside contracts will most likely continue to grow in the future. Indeed, the Biden administration recently stated that it views the Government’s “procurement power” as a means to even the playing field for certain disadvantaged groups, and that it intends to double the share of contracts going to small, disadvantaged businesses. With set-aside contracts on the rise, larger companies are wondering how to gain access to revenue when they are no longer eligible for as many prime contracting opportunities. At the same time, smaller companies competing for these set-aside contracts may have the requisite eligibility, but might not have as much experience or as deep a bench of professionals; they need a help getting a competitive edge if they want to beat their competitors to secure the actual contract award. This is where advanced cooperative contractor relationships – including teaming – come into play.
Small businesses like teaming because it allows them to break into and expand their foothold in the Federal arena, a place where past performance, experienced professional employees, and large-scale technical capabilities can prove critical to securing a contract. Teaming helps small businesses leverage the capabilities of their larger-company partners. At the same time, larger Federal contractors like teaming because it gives them access to revenue flowing from set-aside contracts, which they would otherwise have no access to. Through teaming, these larger companies get to leverage their small business partner’s eligibility, and open new revenue streams. In short, teaming can greatly expand can expand both large and small contractors’ contracting opportunities.
However, teaming is not as simple as some information out there would have you believe. In actuality, the risk of doing things incorrectly is great, and making a mistake in this area can have serious consequences including loss of small business eligibility. Contractors need to have a thorough understanding of the applicable rules and regulations, and a very solid relationship with each other, to successfully employ teaming strategies. They also need to avoid common misconceptions, such as those discussed below.
Teaming is Not Joint Venturing
Many contractors confuse teaming and joint venturing, but these two types of partnerships have some major differences, and raise different types of compliance concerns. “Teaming” is essentially just a special kind of subcontracting, done at a certain time. The small business (i.e. the party that has the small business status, and is therefore eligible to compete for set-aside contracts) serves as the prime contractor; the small business subcontracts a substantial portion of the work to another (often larger) business, i.e. their “teaming partner.” By comparison, joint venturing is when two companies (in the small business set-aside context, often one large and one small) form a joint venture (“JV”), which itself then competes for, and performs, prime contracts. If the JV is formed and structured appropriately, and the appropriate prerequisites (most often, mentor-protégé participation and approval) are fulfilled, the JV itself will be eligible to compete as a “small” business for set-aside contracts. It is critically important to understand the differences between these two frameworks, and how each may impact small business eligibility concerns, including but not limited to affiliation. Contractors should engage in a thorough discussion about which strategy is right for them on any given procurement, considering legal, practical, and administrative concerns.
Teaming is Not Subcontracting
Now, you might be thinking “Wait – I thought you just said teaming was a special type of subcontracting relationship? So…how is teaming different than subcontracting?”. A fair question, and it is an area where many people get confused. It is true that teaming is a special type of subcontracting relationship. But that does not mean that teaming and subcontracting are interchangeable concepts, or that a subcontract agreement is the same as a teaming agreement.
A regular run-of-the-mill “subcontract” relationship is governed by a subcontract agreement, whereby the prime contractor assigns a portion of the prime contractor’s work to a subcontractor. Teaming involves an additional, separate agreement – namely, a teaming agreement. Unlike a regular subcontract, a teaming agreement is entered into during or sometimes even before the bidding or proposal process on a Federal procurement. The idea is that the prime and subcontractor enter into a teaming agreement, promising to work together on the bid/proposal and secure the award, with the understanding that, if the prime contractor actually gets an award from the Government, the prime will thereafter enter into a subcontract agreement with the subcontractor. In other words, it’s a promise to work together to secure a Federal contract award for the prime, in exchange for the prime then giving a portion of the work that was secured to the subcontractor, through a subcontract agreement. Even after entering into a teaming agreement, the parties still need to ultimately execute a separate subcontract agreement governing the actual subcontract work. (Pro Tip: It is often best practices to have that subcontract document negotiated and ready to go, and even attach it as an exhibit to your teaming agreement).
The additional benefit of teaming is that the procuring agency is made aware of the “team” prior to the source selection process because the teaming agreement is customarily submitted as part of the bid/proposal itself. Remember from above a small businesses’ main incentive for teaming: leveraging its large business partner’s capabilities. When a small business makes an agency aware of its teaming agreement, and its intention to subcontract a significant portion of the contract to a large company/teaming partner, in many cases, the agency can consider not only the small business’ capabilities, but also those of the large business teaming partner when deciding who is the most deserving contract awardee. This is a key consideration for many small businesses, and it gives them a leg up on securing awards.
Teaming is NOT Always the Same
Teaming agreements are not all the same, and never could be. Using a template you find online is a huge mistake, but it is one that I see many, many, contractors make. Each teaming agreement needs to be tailored to the specific procurement at issue, and the specific circumstances and preferences of the parties. A teaming agreement for a stand-alone construction contract would need to look very different than a teaming agreement for a GWAC for IT services under which multiple agencies will be able to issue task orders, or even a single-agency IT IDIQ. Every teaming agreement must be proceeded by a thorough discussion of what I call the “three E’s of teaming”. That includes the critically important issues of Exclusivity and Enforceability, and then an overall discussion of each party’s Expectations concerning issues such as work share, bid protest responsibility, non-compete provisions, compliance concerns, etc. These are topics that need to be discussed amongst the parties, but also with each party’s attorney, in order to ensure compliance and avoid future eligibility challenges and protests.
If you are interested in learning more about teaming, and how to correctly employ teaming to increase your contract opportunities, tap more of Maria’s expertise in our on-demand webinar!
Meet the Author: Maria Panichelli, Partner and Chair of the Government Contracting Practice Group.
Maria is a partner and the chair of the Government Contracting department at the law firm of Obermayer Rebmann Maxwell and Hippel. She focuses her practice exclusively on federal government contracting and procurement, guiding her clients throughout the entire lifecycle of their federal contracts. Maria has represented her clients before numerous federal agencies, the Government Accountability Office (GAO), the Contract Boards of Appeals, the Court of Federal Claims and the United States Court of Appeals for the Federal Circuit, and other state and federal courts. Her primary practice areas include: Bid Protest Litigation (both asserting and defending/intervening); REAs, Claims and Claim Appeal Litigation; Performance and Compliance Counseling; Federal Subcontracting (including the negotiation and drafting of FAR-compliant subcontracts, sub/prime dispute resolution, pass-through claims and liquidating agreements); and Small Business Procurement (including eligibility and certification issues, size/status protests, teaming, JVs and the mentor protégé programs). Maria’s clients include prime contractors and subcontractors of various sizes, located across the country and abroad, doing business with a number of federal agencies, across a variety of industries. A frequent lecturer and author on federal procurement and small business-related topics, Maria is thrilled to be partnering with Summit Insight again to deliver quality educational content to federal contractors. Connect with her here.