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Wednesday, November 9, 2016

What Clauses in Your Teaming Agreements Are Enforceable?

If teaming agreements are not enforceable, are they worth the time and effort government contractors spend negotiating them? Ideally, every clause in a procurement staple like a teaming agreement should be enforceable in every courtroom in the country. That is not the case, however. Recently, a judge on the Fairfax County Circuit Court in Virginia refused to enforce a standard teaming agreement clause calling for post-award good faith negotiation of a subcontract between team members.

Government contractors, however, should not misinterpret this decision from one state court dealing with one teaming agreement clause. The decision applies only Virginia legal precedent. The court’s interpretation of the teaming agreement’s post-award “subcontract negotiation” clause did not involve interpretation of pre-award teaming agreement clauses like those protecting a team member’s proprietary bidding information, or requiring team cooperation in preparing a potentially winning proposal. Thus, the decision does not mean that all the terms of any teaming agreement are unenforceable in every court.

The critical take-away here is that a teaming agreement remains a valuable document:
  • A teaming agreement’s pre-award provisions are enforceable in Virginia and other states. 
  • A teaming agreement’s post-award provisions are enforceable in other jurisdictions including Delaware, New York, D.C. 
In addition, the value of teaming agreements to both the government and contractors is acknowledged in FAR 9.602(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. 
Teaming agreements will continue to be valuable documents. The lesson the Virginia decision teaches is that government contractors need to know the limits of a teaming agreement in their jurisdiction and understand how to work within these limits.

Terrence O'Connor is the Director of Government Contracts for Berenzweig Leonard, LLP, a business law firm in the D.C. region. Terry can be reached at toconnor@berenzweiglaw.com.

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