Are you looking to land a big-time federal contract but aren't sure if your company can handle the work alone? If so, you may be on shaky ground. Many businesses compete for government contract positions each year.
When you register your business for government contracting, you need to make sure you can compete. Fortunately, there's a way to share the burden of this work with others.
Teaming for government contracts is a widespread practice with many benefits. In this process, two businesses sign a teaming agreement or joint venture that lays out their terms in great detail. One business takes the role of the prime contractor, and the other a subcontractor.
However, many teaming agreements go awry due to a poorly written contract. In several cases, these companies end up going to court with lawsuits. To help you avoid this outcome, we'll guide you through some of the best practices in writing a teaming agreement.
By following these tips, you can ensure your contract remains legitimate and fair. So, without further ado, let's get started!
Agreements That Benefit Your Company
Let's start with the bare essentials. When you draft a teaming agreement between your company and a subcontractor, it must benefit your company.
You might be wondering, "Why would anyone write an agreement that didn't benefit their company?" Well, it goes something like this.
In some cases, two companies draft an agreement to submit for their government contracting bid. However, after they accomplish this step, they enter into a second agreement that legally supersedes the first.
This practice can result in several complications. The most pressing for you as the prime contractor is that it can cause difficulties for the government to determine who should receive the award. Your contract should specify that you, as prime contractor, receive that award.
Moreover, changes in the subcontractor agreement that significantly changes the original contract's terms can potentially bring criminal charges. This scenario is the worst possible outcome.
The best way to avoid these dangers is to write a comprehensive agreement and stick to it. This practice will benefit both you and the subcontractor in the long run.
Don't Fall Into Affiliation
What does affiliation mean, exactly? Affiliation is a designation applied to two or more businesses that the SBA recognizes as a sole entity. No matter what your circumstances may be, work to avoid affiliation.
The Small Business Administration (SBA) has specific rules that measure the size of your business. If it recognizes your business as affiliated with another, it may disqualify you from being a small business. If you have a teaming contract, there is a significant risk you could fall into affiliation.
How, exactly? Usually, prime contractors fall into an affiliation trap when the subcontractor performs the primary and essential work of the teaming agreement. Another way these situations arise is if the prime contractor relies on the subcontractor to an abnormal degree.
As such, when you set out to find a business to team with, check if they are similarly situated to your business. In most cases, it's safer for you as the prime contractor to find subcontractors that are less equipped than you.
This way, you can avoid any charges of affiliation by over-relying on your subcontractor. It helps ensure that your team gets the job done and that you receive the government award.
Differences Between Teaming Contract and Joint Venture Agreement
When trying to establish a teaming agreement, you may notice that it has many seeming similarities to a joint venture agreement. It's worth taking some time to explore the differences between the two.
A joint venture agreement is a business arrangement that states two parties agree to gather their resources to accomplish a specified task. In many cases, businesses enter into joint ventures to enter foreign markets.
Legally, joint venture projects can take several shapes. These include corporations, partnerships, and LLCs, among others.
How do joint ventures differ from a teaming agreement? One crucial way is that they would not qualify as a small business by SBA standards. They would fit every possible definition of affiliation, thereby disqualifying them from SBA government contracting work.
However, teaming agreements and joint ventures have a few things in common. Both projects should spell out the specific terms of the agreement between two businesses. Moreover, both define the exact conditions that would cause the contract to expire.
Send Actual Employees for Vital Personnel in Your Proposal
When it's time to submit your teaming agreement proposal, you will have to indicate certain vital personnel members responsible for overseeing the agreement.
One potential option is for businesses to hire contract staffing services. This course of action employs capable professionals to help oversee your contract between your business and the subcontractor.
Instead of hiring third-party officials, you can also send some of your best employees that you can trust to oversee the project. Encourage your subcontractor to do the same so that your two companies can effectively work together.
However, make sure your agreement clearly states which employees will serve as personnel and which businesses they represent. You don't want your agreement to leave any room for employee raiding.
Employee raiding refers to illegally forcing an employee of one business to leave their employer and join your business. Doing so will essentially render your contract null and void.
Once again, this highlights the necessity of concise and clear contract writing. Leave no room for doubts!
Look for Potential Teaming Partners
If you want to break into government contracting, it's imperative to have reliable partners in your teaming efforts. Once you find them, follow the advice presented in this article. If you follow it well, you can save yourself a lot of legal trouble.
If you're looking for federal contractor jobs Maryland can provide, we can help! We provide aid for a variety of industries, including IT and healthcare. Contact us today to learn more!