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Three Things to Negotiate in Your Teaming Agreements (TA)

It takes a village here in GovCon land.  We all know that much of government contracting work is rarely done by one company. Prime/subcontractor relationships are the norm, frequently due to a requirement in the FAR or a need for additional capabilities. During the proposal stage, it is important to have an effective teaming agreement in place, that protects both parties, encourages mutual participation, and sometimes carves out workshare and (in some cases) rates.  Teaming agreements deserve attention from both parties with the prime keeping their business risk in mind, as well as the contract’s performance objectives and the subcontractor evaluating their role and terms of the agreement.

Here are three things to consider when negotiating a teaming agreement:

  1. Exclusivity – Primes usually look at exclusively securing all their team members (Subs) for a competitive bid, whereas subs desire the flexibility to team with others if the prime terminates them or the relationship goes south (i.e. target rates cannot be agreed upon).
    What’s the Solution?

a. For the prime – be willing to limit the scope of the teaming agreement to a specific element of the prime contract such as a task order. This assumes an IDIQ, GWAC or some other vehicle is at play, which is a popular government procurement type.

b. For the sub – Be willing to invest in your teammate by leveraging exclusivity to negotiate specific workshare. Seek a smaller scope for the coverage of the teaming agreement – the entire GWAC is not recommended – and focus on getting specific work outlined.

  1. Workshare – Primes want the flexibility to use discretion in assigning work (subs product or service not being available when needed, is a solid example).

a. Subs should negotiate for as much specific amount of work as possible (i.e. % of the work to be awarded in revenue, # of positions, first right of refusal or combination as applicable).

b.Ideally, subcontractors get an express statement that they will start work in the “X” areas identified upon the prime award. This strengthens the intent of the parties and the overall agreement.

  1. Intellectual property (IP) – It is not recommended to give away IP at the TA phase. Each party should own what they bring and walk away with only what they brought (i.e. use restrictions should be identified).

a. Joint IP should also have use restrictions tailored for the parties.

b. Both parties, the Prime and sub, will most likely have similar end goals here unless one party is knowingly bringing something to the table that is currently cutting edge, innovative, etc.

While these are some basic tips to keep in mind, do remember that there are often post-award rights and obligations.  Subs want non-negotiable specifics that will be identified in the subcontract. Primes want the flexibility to accommodate potential changes (i.e. government requirements, or pricing changes). Always try to be reasonable in these negotiations, good partnerships and agreements lead to good performance and long-term joint efforts.  This is a small industry after all, and the reputation of both parties is key to long term success.

 

BOOST LLC has pertinent experience in traversing the lines between subs and primes. If you’d like to discuss these relationships and the best way to navigate the proposal landscape, send a note to [email protected] to schedule a call.

Women in GovCon | Never Go Against the Family

This week govmates hosted their institute, Women in GovCon, Never Go Against the Family. Alongside expert speakers and one-of-a-kind networking, attendees had the opportunity to get real answers to the very real questions they’ve been asking about growth, teaming, exit strategy and profit maximization.

If you missed the institute, here are a few highlights.
Join govmates today and avoid the FOMO when it comes to the next govmates institute.

Panel 1: It’s Not Personal, It’s Just Business (Growth)
Kim Pack of Wolf Den Associates, Jody Franklin of Global Services and Judy Bradt of Summit Insight

  • GSA Schedule: Have a smart vehicle portfolio.
  • WOSB Status, most businesses have a second or third classification that they leverage for business. It’s not all about the WOSB.
  • “Focus or go broke.” Do your research.
  • IDIQ: inquisitive growth strategies and new on-ramps are your options to get in with your capabilities.

Panel 2: Keep Your Friends Close, and Enemies Closer (Teaming)
Kathleen Kelley of Bean Kinney, Calvin Freeman of CACI and Amy Hernandez of BOOST LLC

  • Teaming Agreements set the stage for your relationships, but the subcontract agreement should be more specific in order for it to be enforceable.
  • Work-share with the big guys: know the Program Manager, they should be your main contact to express any work-share concerns.
  • If you’re a small business, know your skills and strengths. Know what you can specifically provide, know your worth.
  • It’s all about the RELATIONSHIP – If you lawyer up, then it’s not worth it.

Panel 3: I’m Gonna Make Him an Offer He Can’t Refuse (Exit Strategy & Profit Maximization)
Pete Ragone of SC&H, Greg Nossaman of the Mclean Group, Michael Lopes of Bernstein Wealth, Jennifer Mathis of One Degree Capital

  • There are options beyond “just selling.”
  • Build a business that can compete on its own without relying on a status or set aside.
  • Be focused on what YOU need to do. Don’t try to be all things for all people. Be mindful of your investments in the business (don’t over or underspend).
  • You can buy a CONTRACT or a COMPANY.
  • It’s never too early to set yourself up for the next steps based on a due diligence request list (HR, shareholder agreements, accounting, and others).
  • If you are looking to buy a company, don’t get so distracted that you forget about organic growth.
  • Regardless if you’re trying to buy, sell or whatever the next step is for your company, have your financials in order. Make decisions and preparations based on your goals and what you’re looking to achieve long term.

 

Thank you, one more time to the fantastic speakers, partners, and sponsors who help to make this event a success!

If you haven’t already, join govmates today!

Island Life

The ubiquitous aspiration of many a small government contractor is the $100MN revenue mark followed by the sale of their business (no doubt at a lofty multiple) coupled with the purchase of a private tropical island complete with oceanside beverage service.  Much like an old wives’ tale, the reality in such assumptions is lacking but always makes for good fodder at a Tyson’s Corner M&A networking event.

But as you grow your government contracting business, being an island unto your own is exactly the opposite of what your strategy should be. We all covet the position of being the Prime Contractor; subcontractors are always at a disadvantage when it comes to workshare, profitability and customer relationships. However, isn’t having a piece of something better than always going it alone, with zero to show for it?

The government contracting industry is awash with stories of mistreatment by partners, workshare-greedy primes and small businesses who think they simply can do it all.  Most have been subjected to an unfortunate teaming experience that has negatively influenced their thinking, or have bought into the idea that their company is the federal contracting equivalent of Superman and can do anything. Let me be the first to tell you, it’s not. It’s hard to do everything in GovCon, even more so as a small business. Teaming with others will allow you to CREDIBLY expand your capabilities, utilize other’s strengths and provide a more robust solution to the government.

How you choose to find and vet a partner is critical. Are you relying on your business development lead’s Rolodex (and why do we still say Rolodex)? Going to the same group of folks for the same boilerplate response is not innovative, nor compelling. Try relying upon a formulaic and methodical approach for teaming by expanding beyond your network to find other likeminded companies with the past performance or capabilities that you need for a winning bid. govmates, an online teaming platform for growing GovCons, can help with this. Once a potential teammate is identified, really vet the company.  Having a similar bidding style, rate structure and overall corporate culture is critical and will help in execution.

No one likes to go it alone.  There is safety (and revenue) in numbers, especially in the small business federal contracting community.

Need help finding a teammate?  Send me a note at [email protected]