You signed the NDA and the Teaming Agreement. Then your team won the federal contract! The period of performance is prompt, and you don’t have your subcontract settled just yet, so the Prime offers you either an Authorization to Proceed (ATP) or a Letter Subcontract so you can get to work.
Fantastic! Or is it?
Unratified Purchase Errors. In business-speak we call them procedural missteps, broken processes, or deviations from procedures. Colloquially, we use phrases like “cart before the horse” or “cut across the infield” and “blew it this time”. DCMA calls them “Unauthorized Commitments”.
If you are a GovCon subject to the DFARS Purchasing System rules, you most likely have Unauthorized Commitments from time to time. FAR 1.602-3 defines an Unauthorized Commitment as an agreement that is not binding solely because the representative who made it lacked the authority to enter into that agreement. The most common example is a project manager directing a seller to get to work before authorization from the purchasing department. Sound familiar?
GovCon or no, we have all been there. We have made the bad deal. We signed the paper without really reading and understanding it. Whether we committed to the 3-year deal with the home alarm company with shoddy equipment and worse customer service or signed the exclusive teaming agreement thinking, “This is the ONE!”, only to end up with a one-sided subcontract with a fraction of the work share that we were promised, we have all experienced the rush of wind leaving our sails the moment we realize that we have been had. That rush is the sound of your company’s growth plan moving backwards.
Did you know that most Teaming Agreements self-terminate when the prime and subcontractor agree on the subcontract terms? It is true! A typical termination clause in a Teaming Agreement contains a list of events that signal the end of the Teaming Agreement the moment any of those things occur. For the winning prime and its teammates, the most common termination event is mutual agreement on the subcontract.
Any company that has been a teammate under a FAR Part 9 Teaming Agreement is familiar with negotiating workshare that will be subcontracted to them if the team wins an award. Aren’t those days when we learn we have won a contract/subcontract the best? But later, at some point during the execution of the prime contract, a quick calculation of your cumulative task order values divided by the published prime contract funded values does not measure up to the workshare percentage promised in the Teaming Agreement. So, what gives?
Teaming Agreements tend to follow a basic recipe, but there are two primary types: exclusive and non-exclusive. How should you decide which is best for your company, and what are the risks that come with each option? Some of the driving factors in determining whether to team exclusively include the type of contract the team is pursuing and the anticipated contract term, the workshare distribution, and the fairness of any exclusivity provisions in the Teaming Agreement.
Most of us routinely agree to terms and conditions in our daily lives without even reading them. We tap “I AGREE” to update our phone’s software, sign up for gym memberships, magazine subscriptions, and lawn care services, often without a second glance at the fine print. More importantly, we sign leases, mortgages, and purchase orders for new cars without reviewing the contract or seeking a consultant. Small business owners have more to worry about. They need to sign non-disclosure agreements, teaming agreements, and purchase/task orders, all invoking varying terms and conditions. And without a government contracts consultant, they could become lost in the weeds.
In contract documents, Order of Precedence is a term that establishes a hierarchy among contractual documents. That “pecking order” is defined to resolve conflicts that could occur in the various terms contained in those documents. For example, if your contract terms and conditions offer NET 30 payment terms, but you are issued a purchase order under that contract that has NET 45 payment terms, which document controls the final outcome? It depends on the Order of Precedence in your contract documents.
If you or your key subcontractors are still using a free, public email address, READ THIS ARTICLE. If you think two-factor-authentication is a giant pain, and you can’t wait for it to go away, READ THIS ARTICLE. If your corporate IT budget is dwarfed by your annually expensed meals, READ THIS ARTICLE. If you think […]
DUNS: 054075943
CAGE: 7AYD7
NAICS: 541219, 541611, 541612, 541618, 541990, 561110, 561499, 611430
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