Teaming Agreements and Joint Ventures by tus11922


									Teaming Agreements and Joint Ventures

   Types of Agreements to Work Together
3 Main Methods to Work With
Another Contractor

 •   Traditional Prime/Sub Relationship
 •   Joint Venture Agreement
 •   Teaming Agreement (prime/sub relation)
Traditional Prime/Sub

 • Prime is responsible for ALL aspects of contract
 •   Government has privity of contract only with
 •   Contractor free to shop the bids – No guarantee
     that a specific sub will be hired
Limits on Subcontracting

 • 13 CFR 125.6
 • Prime must perform the following percentages of
    – Services – 50% of cost of contract incurred for
      personnel with its own employees
    – Supplies/Products – 50% of the cost of manufacturing
      the supplies or products (not including the cost of
    – General Construction – 15% of the cost of the
      contract with its own employees (not including cost of
Practice Tips for
Prime/Subcontract Relations

 • Primes are responsible for ALL of the
     subcontractor’s faults
 •   When speaking with the Government, blaming
     subcontractors for problems is akin to blaming
 •   Refrain from documenting and detailing
     subcontractor failures
     – Evidence of prime contract failures
Practice Tips for
Prime/Subcontract Relations

 • Subcontractors can submit requests for
   equitable adjustment to Government
    – Normally, privity prevents a direct suit
    – With a sponsorship agreement with the prime,
      the sub may make these demands directly to
      the Contracting Officer
Joint Ventures

 •   FAR 19.101 defines a Joint Venture as:

     – an association of persons or concerns …concerting to engage in and
       carry out a single specific business venture for joint profit, for which
       purpose they combine their efforts, property, money, skill, or knowledge,
       but not on a continuing or permanent basis
Joint Ventures (cont.)

 • Often Used for Small Businesses
 • Contract is issued in Joint Venture’s name
 • Contract performance responsibility lies with Joint
 •   Joint Venture must be formalized BEFORE submitting a
 •   Agreement must include sharing profits/losses
     proportionate to each party’s contributions to business
Joint Ventures (cont.)

 •   Specific Programs have Specific Requirements
      – SDVOB JVs must have the SD member be the program
        manager and appoint the project manager

 •   A Joint Venture is a separate legal entity (either a partnership or a
      – We recommend a Limited Liability Company

 •   Characteristics include joint ownership, joint management, and
     sharing or profits or losses
Joint Ventures (cont.)

 •   Typically only the JV has privity of contract with the customer

 •   The JV may have its own plant, equipment, facilities, personnel, etc.,
     or it can subcontract its work to its parents

 •   The Government often insists on parent company financial and
     performance guarantees

 •   Once the contract is completed, the joint venture is dissolved along
     with the new company that was formed to perform the contract
Joint Venture Affiliation

 •   The General Rule - 13 CFR 121.103(f):
     – In joint ventures, the joint venture partners are affiliated with
       regards to that procurement, and the revenue/employees will be
       combined to determine size, unless….

 • JV partners will not be found affiliated if:
 Each concern is small and
    1. The procurement is a bundled procurement
   2. The procurement is not bundled but is a large
         (a)Revenue based size standard: the dollar value of the procurement,
           including options, exceeds half the size standard of the procurement
         (b)Employee based size standard: dollar value of the procurement,
           including options, is over $10 M
Summary of 8 (a) Joint Venture
Content Requirements

 • Purpose – Address Duration
 • 8(a) firm as managing venturer
 • 51% of net profits to 8(a) firm
 • Special bank account
 • Itemization of resources
 • Responsibilities of JV parties
 • Commitment to ensure performance
Summary of 8 (a) Joint Venture
Content Requirements (cont.)

 • Quarterly Financials
 • Project End Financials
 • SBA approves modifications and inspects
 •   8 (a) must maintain accounting and
     administrative records
 •   8 (a) must keep all files after completion of
Table of Contents For a Joint
Venture Agreement (27

 1. Definitions
 2. Formation of the Company
 3. Meetings of Members
 4. Contributions to the Company and Capital Accounts
 5. Allocations, Distributions, Elections and Reports
 6. New Members and Transferability
 7. Management of Company
 8. Dissolution and Termination
 9. Representations, Warranties and Covenants
 10.Miscellaneous Provisions and Attachments
Contractor Teaming
Agreements (CTAs)

 • FAR 9.601:    ―Contract team arrangement‖
   refers to:
       (1) Two or more companies form a
   partnership or joint venture to act as a
   potential prime contractor; or
       (2) A potential prime contractor agrees
   with one or more other companies to have
   them act as its subcontractors under a
   specified Government contract or acquisition
Disclosure to Government of
Teaming Agreements

 • FAR 9.602—Generally recognizes their
     acceptability in many situations
 •   FAR 9.603: ―The Government will
     recognize the integrity and validity of
     contractor team arrangements; provided
     the arrangements are identified and
     company relationships are fully disclosed
     in an offer…‖
Essential Principles of Successful
Teaming Agreements

                    First Principle:
 •   Teaming agreements should be in writing
 •   Address the intentions, obligations, and
     responsibilities of the parties
 •   Address all foreseeable problems
     – Agreements/contracts are the rule book when
       things don’t go as planned
     – Run the logical ―what ifs‖ and see how your
       agreement addresses the issue
Essential Principles of Successful
Teaming Agreements
                     SECOND PRINCIPLE:
                 Advance Confidentiality and
                 Non Disclosure Agreements
          Why? Confidentiality and Non Disclosure agreements are
  designed to protect proprietary data when the parties are in the pre-
  formation stages.

            Agreements should be in writing and signed by both parties
  prior to the time a decision is made on whether or not to team.

          The Confidentiality and Non Disclosure agreement should be
  contained in a different document than the teaming agreement.

           The document should contain responsibilities of partners on
  the treatment of proprietary data during the time when the parties are
  evaluating whether to form a team.
Essential Principles of Successful
Teaming Agreements
                        THIRD PRINCIPLE:
                         Notice Of Intent
      Teaming agreement should state whether the prime
  contractor intends to award a subcontract to the potential
  subcontractor if the prime contractor is awarded the contract in

       If not specifically binding, the teaming agreement should state
  if the agreement merely represents a non-binding expression of
  interest to award a subcontract to the potential subcontractor in
  the future.

      Teaming agreements should clearly state if there are any
  conditions relating to whether the prime contractor will award the
  subcontract to the other party should it be awarded the prime
Essential Principles of Successful
Teaming Agreements
                     FOURTH PRINCIPLE:
          Essential Terms Of The Teaming Agreement

         Teaming agreements should contain all of the
  conditions essential to an implementing subcontract

  Teaming agreements should include, but not be limited
      1) explicit subcontractor scope of work;
      2) price and time for payment;
      3) estimated quantity of goods or services
      4) anticipated time of performance;
      5) date of delivery of the work; and,
      6) any foreseeable problems/what ifs
Essential Principles of Successful
Teaming Agreements
                      FIFTH PRINCIPLE:
               Protection Of Intellectual Property

       Address limited disclosure of intellectual
  property and other proprietary data in the
  teaming agreement
Essential Principles of Successful
Teaming Agreements

                      SIXTH PRINCIPLE:
                    Disputes And Damages
         The teaming agreement should contain clauses
  to resolve disputes arising from the teaming
  agreement utilizing alternative dispute resolution
  methods such as mediation and arbitration.

         Both parties should recognize the right of the
  other party to include clauses providing the payment of
  damages for a breach of the teaming agreement.

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