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Teaming for Large Government Contracts

Government contracts are getting bigger. Requirements that were once performed under, say, six to ten contracts might now be performed under only one. Not surprisingly, teaming is becoming more prevalent, especially among companies offering services to government.

For many companies--often too small to win or perform these large contracts alone--teaming has become an integral part of their sales strategy. A successful prime/subcontractor relationship can be as lucrative as a successful contractor/government relationship, and it can be a great way to break into the market in a big way.

The Government's View of Teaming

As with previous installments, the Federal Acquisition Regulations (FAR) concerning teaming will be used as the model for federal, state, and local teaming arrangements.

FAR Subpart 9.6- Contractor Team Arrangements defines the term "Team Arrangement" (i.e., teaming) to mean:

(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 program. Subpart 9.6 goes on to say: Contractor team arrangements may be desirable from both a Government and industry standpoint in order to enable the companies involved to--

  • Complement each other's unique capabilities; and

  • Offer the Government the best combination of performance, cost, and delivery for the system or product being acquired.

Companies normally form team arrangements before submitting an offer. They may enter into an arrangement later in the acquisition process, however, including after contract award. 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, or, for arrangements entered into after submission of an offer, before the arrangement becomes effective.

The essence of what the FAR says on teaming is that the government encourages teaming when it is in its best interest.

Teaming From a Legal Perspective

A joint venture (legal partnership) can be formed to establish a team, but these arrangements can often be expensive to implement and have higher liability risks.

The most common form of a teaming arrangement is a prime contractor/ subcontractor relationship. The prime/sub approach works well in practice, but remember the prime is in control and the sub must realize this in structuring the teaming agreement.

Usually prime contractors select subcontractors and make them a part of their proposals. A subcontractor can often be a key selling point in a prime contractor's proposal, and this should be used in negotiating the teaming agreement.

Your teaming agreement should cover the following points:

  • Is the subcontractor exclusively with the prime or can the subcontractor be a part of other competitor's proposals?

  • Is the subcontractor guaranteed a specific amount of business?

  • What happens if the prime and sub have performance issues?

  • Will the subcontractor participate in negotiations with the government?

  • How will the subcontractor be paid?

  • What defines project completion and what part does the subcontractor play in contract extensions?

  • What are the subcontractor's intellectual property rights?

Teaming From a Sales Perspective

When in doubt, team if you are small or new to government contracting. In most instances putting a team together requires government-contracting experience. So if you are new to the game, try to become a team member.

Subcontracting is an excellent way to gain the experience you need to become an experienced government contractor. It also can significantly reduce the lead-time and investment required to enter the market. For many companies, it is the only practical way to enter the market.

In some situations it is possible for a small company to become the lead company in forming a team.

Suppose your company has identified a large opportunity that requires your capabilities and much more. Also, suppose that you have a relationship with an end-user that would like to work with you in solving the agency's problem. In such situations, it may make sense for you to put the team together and be the prime contractor.

Large contractors usually prefer to prime, so your success in bringing them into the fold will depend on your convincing them of the importance of your relationship with the end-user, and (perhaps to a lesser extent) that your capabilities are a critical component of successful contract performance.

Whether you are the prime or the sub also depends on the size of the opportunity and the uniqueness of your capabilities. In short, it's a power game and how you play it depends on the cards you hold, e.g., government relationships, knowledge of the requirements of the customer, uniqueness of your capabilities, etc.

Often the biggest company ends up the prime. Keep in mind, though, that there is nothing wrong with being a sub as long as your teaming agreement with the prime is airtight and you can continue to nurture your relationship with the end-user.

In a past installment, Finding Subcontracting Opportunities, we presented information on how to find and sell to prime contractors. The following recaps the information in that installment.

  • For complex technology-based projects, agencies usually use a dominant contractor. Sell your capabilities to the dominant contractor if your target agency has one.

  • Contact prime contractors early and sell them personally.

When seeking subcontracts, sell to the prime contractor's "Subcontracting Coordinator" rather than the

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