What is a Teaming Agreement: A Comprehensive Overview

What is a teaming agreement? This question stirs up conversation about the crucial aspect of business and contracting: collaboration.

A teaming agreement is a collaborative strategy wherein a smaller company partners with a larger business to jointly pursue contracting opportunities. This approach is beneficial for contracting companies trying to make a mark in the GovCon domain.

Discover teaming agreements, including their advantages and disadvantages, and their abilities to break new grounds for government contracting opportunities.

What is a Teaming Agreement?

A teaming agreement is a formal arrangement that involves two or more contractors bidding on a government contract as one entity. At its core, it establishes a partnership between prime contractors and subcontractors.

It is used when:

1. A potential prime contractor wants to enter into an agreement with other companies to have them act as subcontractors under a federal contract.
2. A government contractor wants to collaborate with other contractors to pool resources, share financial risks, and increase competitiveness in government contracting.

Types of Teaming Agreements

There are two primary types of a teaming agreement: (1) exclusive and (2) non-exclusive.

Exclusive Teaming Agreement

An exclusive teaming agreement is an agreement under which the prime contractor partners exclusively with subcontractors. It is usually offered by prime contractors aiming to increase their chances of winning a contract. 

Additionally, this agreement is beneficial when the government plans to distribute multiple awards under a single contract vehicle. During task order competitions, this strategy perceives the proposed team as favorable to the contracting federal agency. 

Most government contracts, however, do not require prime contractors to maintain the proposed team throughout the contract period. They are simply required to comply with the schedule and cost requirements.

Non-Exclusive Teaming Agreement

A non-exclusive teaming agreement is when two contracting firms combine resources, skills, and expertise to compete for a federal contract, but without exclusive commitment.

This type of agreement is beneficial for subcontractors. Under this arrangement, subcontractors are not limited to working with only one prime contractor, increasing their chances of securing federal contracts either as a prime or subcontractor.

For instance, if one of the prime contractors fails to secure a contract, the subcontractor is still in the competition if they are also part of a team that successfully received an award.

What are the Pros and Cons of a Teaming Agreement?

While teaming agreements offer advantages, they can also come with downsides that contracting companies must carefully consider before entering into such arrangements.

Advantages of a teaming agreement

• It offers access to skilled personnel, equipment, facilities, and other resources.
• It reduces financial and operational risks.
• Companies can partner with equally competitive contractors to build strong teams.
• Contractors can benefit from the varied expertise and strengths of their team members.
• Companies can explore new markets.

Disadvantages of a teaming agreement

• There is no legal obligation to perform or deliver products and services until the prime contractor wins the federal contract.
• It covers only one project or set of tasks. As such, renegotiation for new tasks is necessary unless the agreement is structured for a long-term partnership for multiple projects.
• If another contractor joins the team and performs poorly, only the prime contractor is accountable.
• Subcontractors may not receive a fair share of the work or the profits generated from the contract.

What to Include in the Teaming Agreement

Teaming agreements must include the following, as suggested by the U.S. General Services Administration (GSA).

• Duration of the Teaming Agreement
• Team Leader
• Team Members
• Communications/Points of Contact
• Invoicing and Payments
• Legal Relationship
• Delivery Responsibility
• Confidential information
• Identification of Parties
• Conflicting Terms
• Specific Activities
• Independent Contractors
• Team Member Replacement Procedures
• Performance Evaluation
• Sales Reporting and  Industrial Funding Fee (IFF) Payment
• Pricing 
• Liabilities
• Ordering Procedures

Frequently Asked Questions

What is the subcontractor’s scope of work in a teaming agreement?

The teaming agreement specifies the subcontractor’s scope of work, including the specific tasks, budget, and resources that each party has to provide for contract execution.

What is the difference between a collaboration agreement and a teaming agreement?

A collaboration agreement involves different companies working together on a single project to create a unified outcome. Meanwhile, in a teaming agreement, companies work as one team on related but separate tasks.

What is the difference between a joint venture and a teaming agreement?

In a joint venture, multiple companies establish a separate business to act as a prime contractor, with members sharing control, liability, and profits.

In contrast, a teaming agreement involves one prime contractor overseeing a subcontractor. Unlike joint ventures, the subcontractor holds less responsibility and profit.