Contracting Principles for Enforceable, Effective Teaming Agreements
Breakout Session #: F02 Presented by: Anna Sharova Director, Supply Chain Day & Zimmermann Date: July 25, 2017 Strategies for the ultimate “Contract” Team Sport
Time: 4:00 PM
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Key Considerations of Teaming Agreements
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Scope Implementation Enforceability Maintenance/Survivability
*Disclaimer: Always consult your legal team for legal advice. This material is presented as summary of experienced practitioner approaches and does not constitute legal analysis, advice or recommendation. 2
Defining Scope of Teaming Agreements •
Clearly and appropriately define the scope of the project: what does the TA really cover? – Risks due to execution early in procurement cycle – SB set-aside considerations – Client changing acquisition strategy
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Work-Share Considerations – – – – –
FTE vs. Revenue Specific SOW elements vs. Labor Categories “Swim Lanes” and “Kill/Eat” provisions Enforceability Implications: CONSIDERATION Fallacy of “right of first refusal” 3
Special Scope Considerations - IDIQs •
Traditional Approach: Execute TA for IDIQ capture, follow with IDIQ subcontract – – –
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Execute TAs for each TO proposal (TOPR)s OR Have no contractual coverage for TOPRs SUBCONTRACT CANNOT EASILY COVER THIS GAP: Different jurisdiction uncertainty (federal contract vs. B2B), special provisions
Consider “Umbrella” TAs: TA version of IDIQ agreement – – –
Provides traditional IDIQ TA coverage Provides process & coverage for TOPRs (Exclusivity, scope, participation etc.) POP aligns with IDIQ subcontract: two work hand in hand
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Implementing Teaming Agreements • • • • •
Agreement without path to execution is worth little Pre-negotiating terms & conditions: is it materially helpful? (hint: it depends) Deal-breaker provisions Define process for turning “work-share provisions” into subcontract statement of work De-conflict “Kill/Eat” provisions: opportunity preregistration – Criteria for pre-registration: effort must be put in – Concurrent registration/prioritization 5
Enforceability Key Elements of Enforceability: • A clear statement of work; • Duration (remember the IDIQ agreement dilemma? Check your termination provisions!) • Clear pricing (CONSIDERATION) • COMMITMENT to subcontract (“SHALL” without “out” provisions agreement to negotiate future subk terms may harm this) • Termination for Convenience clause only allows for termination if Government terminates • CHOICE OF LAW – –
Know the case law for TA enforceability VA is famous for un-enforceability, but other states have similar rulings 6
Enforceability: The Cyberlock Case •
Cyberlock Consulting, Inc. v. Info. Experts, Inc., 2013: Typical TA anticipating future negotiation unenforceable under VA law – “Four Corners” of agreement – Intent to execute future agreement makes TA not binding – No specific subcontract negotiated “unambiguously set out an agreement to negotiate in good faith to enter into a future subcontract -unenforceable under Virginia law.1”
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Cyberlock criticizes EG & G, Inc. v. Cube Corp., 63 Va. Cir. 634, 2002: "To the extent that EG & G suggests that teaming agreements are a special arrangement to which Virginia's standard rules of contract interpretation, including the parol evidence rule, do not apply, the Court concludes that that case is incorrect and should not be followed." 7
Enforceability: Other Jurisdictions & Cases A-T Solutions Inc. v. R3 Strategic Support Group Inc. (2016)
VA Eastern District Court(Bench Ruling)
Essentially affirmed Cyberlock findings. Solicitation cancelled & re-issued, TA held unenforceable. Ruling made one day AFTER proposals were due.
X Technologies: Enforceability of Exclusivity Agreements (2012)
Fifth Circuit
Affirmed exclusivity. TA may be enforceable in pre-award stage
CelerityQ (2010)
Sixth Circuit (Ohio)
Similar to Cyberlock with reverse finding – enforceable under Ontario (Canadian) law.
Trianco (2006)
Third Circuit
Similar to Cyberlock, found un-enforceable under NY law on similar grounds
CCT vs LM (2000)
Ninth Circuit
Verbal agreement on terms of TA may be binding: exchange of promises may form an obligation (potential outlier)
W.J. Schafer Associates, Inc. v. Cordant (1997)
VA Supreme Court
Unenforceable due to lack of requisite elements of enforceable contract
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Maintenance/Survivability • • • • •
The best drafted TA in the world can fall prey to administrative oversight: don’t let it expire! Understand what happens with TA requirements & obligations after contract award Modify TA as requirements change or are clarified to support enforceability and operability Make sure your termination provisions don’t “accidentally” terminate your TA before you want it to end Keep clear divide between pre-award and post-award requirements in TA/Subcontract 9
ACTIVITY: TA Enforcement Dispute Smalltimus Prime Corporation (SPC/Prime Contractor) and Big SubKahuna Corporation (BSC/Subcontractor) have entered into a Teaming Agreement for a small business set-aside project in pre-solicitation phase. The Government after a presolicitation conference has decided to roll up this project with another set of requirements and issued a new DRFP as a full & open. SPC asserts the TA still holds. BSC asserts it now has the right to go in as a prime Main Activity: • Group 1: Smalltimus Prime Corporation (SPC): Argue for enforceability • Group Two: Big SubKahuna Corporation (BSC): Argue for non-enforceability Follow-Up: • What could have prevented the dispute? • What issues would the companies face in implementing the TA upon award if it was held enforceable & they reconciled to bidding together? 10
Contact Information ANNA SHAROVA
[email protected] (preferred for non-D&Z business related)
[email protected] LINKED IN: https://www.linkedin.com/in/anna-sharova-cfcm-b3160b14/
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SOURCES & RESOURCES 1.
Steptoe & Johnson LLP (2016). Teaming is Not Dead – But Contractors Must Heed Decisions on Enforceability. Retrieved from http://www.steptoe.com/publications-11040.html
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Arnold & Porter Kaye Scholer LLP (2013). Recent cases address enforceability of teaming agreements”. Retrieved from http://www.lexology.com/library/detail.aspx?g=d4b0ddf8-03ce-4deb-b1ca-6a50ad5e96b7
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2. Duane Morris LLP (2013). What’s Next for Teaming Agreements After Cyberlock?. Retrieved from https://www.duanemorris.com/alerts/what_is_next_for_teaming_agreements_after_cyberlock_4884.html
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