A Brief Introduction About the Teaming Agreement
Teaming agreement is a contract between two or more parties, either as a partnership or a joint venture to work together under a specific contract. Either the team may be designated as a prime contractor or one of the team members is designated as a prime contractor, and the rest of the team members are designated as the subcontractors (WALDMAN & HARSHA, 1991).
Basically, there is the involvement of two or more organizations that combine their resources to bid for a government contract or tender. Once the prime contractor enters between the third party and the team members, then a subcontract is executed between the team members and other team members under the prime contract. A teaming contract is not considered as a government contract. Instead, it’s considered to be a private contract between the parties involved, which is governed as per the contract law. The government acquisitions are included in the subcontract for negotiations.
Who Takes the Teaming Agreement ?– People Involved
Teaming agreement involves a large organization or a corporation; there is one or more than one small business with a large organization acting as a prime contractor. Widdows, K. (2017). The small companies or businesses serve as subcontractors to the prime contractors, which is the large corporation.
Purpose of the Teaming Agreement – Why Do You Need It?
The purpose of the teaming agreement is to establish a basis for the relationship between the parties that will work together for a common goal of purpose. The aim is to state whether the prime contractor, which is the large organization, plans to award the sub-contractor. This agreement also deals with an issue like the protection of proprietary information involved in the process.
The teaming agreement includes the actual bid of the subcontractor. The prime contractor, in most cases, is bound to take the help of the sub-contractor for work, but only when the bid is accepted, and after that, the parties follow the teaming agreement when they have to finalize the subcontract between the parties.
Reasons, why organizations seek to form team arrangements with other parties, is to attain potential benefits, mitigate common risks in the team formation process. Certain risk mitigation techniques, along with the practices of team formation, turn out to be profitable for the business. Apart from this, the teaming agreement includes notions of control and liability of parties involved. This agreement maximizes the likelihood of providing the right solution as per the requirements of the project, and the parties involved agree to the terms and conditions mentioned in the agreement.
Contents of the Teaming Agreement – Inclusions
The inclusion of the teaming agreement template is as follows: –
- Purpose – The reason why the agreement is being formed. The parties involved have to agree with the terms and conditions as well as the policy details on the agreement. The parties recognize their efficiency of teaming and the purpose of competing for the project.
- Exclusivity – This states that there will be an exclusive agreement between the parties involved.
- Intention to the team – The appropriate resources, support, and development effort provided by the parties involved.
- Proposal Preparation – This is a detailed request for funding the project as per the instructions mentioned in the agreement.
- Allocation of cost – This inclusion states that every party will bear their own cost during the preparation of the proposal.
- Confidential obligation – The purpose of this inclusion is to make sure that the parties agree that any information exchanged will be confidential.
- Terms and conditions – The rules and regulations that all the parties involved in the agreement have to abide by.
- Freedom to market and exclusion – This means that the party will not be precluded from its marketing efforts in relation to the sale of its products and services.
- Intellectual property – The ideas, designs, concepts, and techniques will not be patented by the contractor or the subcontractor (Fleming, 2019).
- Indemnification – The subcontractor under this section will not apply to any kind of infringement that may arise due to modification.
- Limitation of liability – None of the parties will be liable for lost revenue or lost profits.
- Choice of law and forum – The agreement will be governed by the laws of the country where the contractor is located. For instance, in Australia, the teaming agreement will be governed by the laws of the state of territory Widdows, K. (2017).
How to Draft the Teaming Agreement?
- Confidentiality -There should be confidentiality in relation to information shared between parties.
- Dispute resolution – Mandatory pre-filing dispute resolution practices
- The team members will not be liable in case of any damage or loss incurred.
- Intellectual property – During the term of the agreement, who owns the intellectual property assigned from one member to another.
- Liability – The team members will not be liable in case of any damage or loss incurred in relation to product or services, which will be supplied as per the agreement. But the loss or damage which is caused due to the contribution of resources by a team member violating the intellectual property rights (Widdows, 2017).
- Leadership – Who will control the contract process, and how will communication take place?
- Management – The group of representatives from every team which will be the teaming committee will meet regularly to manage the contract (Newton, 1991)
- Circumvention – All the parties involved should act in good faith towards the common goal mentioned under the agreement. The parties will not participate in any kind of independent agreement or project proposals with the third party.
- Relationship between parties -The relationship between the parties that is of the prime contractor and the sub-contractor.
- Contribution of resources – What human and financial resources will the teams involved in the agreement will be required to provide for the tender and whether the team members have the license to use the resources or not.
- Termination – What actually led to termination, along with the notice period, if any.
The strategies that may be used by the team members to negotiate in relation to the budget, timeline, resources, or the cost (Hibner,1982). Basically, it’s a predetermined approach or a plan that aims to attain a specific objective or aim by making an agreement or contract with the parties involved.
Benefits & Drawbacks of the Teaming Agreement
- The teaming agreement provides proof of what was agreed between the parties involved.
- It helps to minimize future misunderstanding or conflicts
- It provides a sense of security as well as peace of mind by having the terms and conditions of the agreement clear and noted (Gutzwiller et al., 2017)
- It allows the business to participate, make a profit from the government contracts, which are otherwise too huge and complicated for an organization to attain on its own.
- The organization can attain firsthand experience on the projects that further help in expanding the skill set.
- It helps the business to develop a strong relationship with other companies and also helps in finding the right partners with whom the company can work together for future projects as per the compatibility and nature of work.
- It reduces the risk regarding payment, timeline, and responsibilities.
- It specified how the conflicts could be resolved
- Lastly, it mentions how the agreement can come to an end.
- The formation of the agreement takes a lot of effort, time, and money.
- Creates an atmosphere of doubt and suspicion, which at times leads to disputes.
- Limits the flexibility of teaming agreement
- Binds the parties involved, which may lead to legal penalties.
- The prime contractor will be completely responsible for the success and completion of the project.
- The profit is reduced as it’s shared between the parties involved
- There is a possibility that the parties do not agree to the terms and conditions mentioned in the subcontract
What Happens in Case of Violation?
Violation of agreement means when a legal action or any such proceeding takes place for the enforcement of the agreement. The non-breaching party will recover from the breaching party the court costs, attorney’s fees, and other various expenses that will be incurred during the proceeding (Rana et al., 2008). In simple terms, violation takes place when the promise is broken by the party involved in the teaming contract or when a party fails to abide by the terms and conditions mentioned in the agreement. Violation of agreement is one of the common reasons. The breaching party will have to bear the following consequences:-
- Compensatory damages(1) will be paid by the breaching party in the form of compensation.
- Certain damages will be paid by the wrongful party in the form of punishment.
- There will be nominal damages, which will indicate that tire was no actual monetary loss (Markovits & Schwartz, 2016).
- Liquidated damages will be mentioned with the reason that might result from a breach.
With the aim of growth and higher profitability, the contractors join together to complete a government project or contract under the teaming agreement. The Teaming contract allows the firms to compete for government contracts because these projects are huge, and it’s not possible for one company to successfully complete the project alone. Thus, to attain the benefits of teaming, its important that the teaming agreement is drafted and followed efficiently.
The limitation with teaming agreements is that these need to be negotiated again with every new prime contract or a new large corporation. Also, there are chances of a risk occurring since a team member can dodge the other team members, along with the third party or the subcontractor involved. This is why the points mentioned above should be considered while preparing the teaming agreement.