Teaming Agreements: Anything more than just an agreement to try and agree?

06/16/2013

Teaming agreements are often used in the bidding or proposal process for construction or service contracts. Two or more companies “team” together to try and take advantage of their individual strengths to better their chances at receiving an award. They are particularly prevalent for Federal procurements. Typically they include terms for how the team is going to bid or propose their offer, and contemplate a subsequent contract of some sort between them if the team receives the award; typically contemplating a subcontract agreement. Virginia attorneys have discussed for years whether these agreements are fully enforceable, and a recent April 2013 decision of the United States District Court for the Eastern District of Virginia, Alexandria Division (Cyberlock Consulting, Inc. v. Information Experts, Inc., Case No. 1:12cv396) calls teaming agreements even further into question.

The specific teaming agreement in question in Cyberlock designated solicitation obligations between the parties, and provided that if the team received the award they would enter into a subcontract with certain generalized terms regarding scope and percentages of work. The teaming agreement did not include specified subcontract terms or attach the agreement into which the parties would enter; but rather left the specific subcontract for negotiation, and further included a provision that if the parties could not agree upon a subcontract, or the procuring client rejected the subcontract, the teaming agreement would terminate. Considering these as a whole, the court held that the teaming agreement was nothing more than “an agreement to try and agree,” and that the teaming agreement was therefore unenforceable.

So is this the end of teaming agreements in Virginia? That is unlikely. They are still a useful tool, and more typically they do not result in disputes. But if they are going to be used, Cyblerlock is a necessary case for any teaming agreement drafter to consider. As with many things in the law, enforceability will depend upon the specific terms of the agreement, and the more certain the terms the better. Some considerations from Cyberlock though to try and hedge enforceability seem to include: a) including as part of the teaming agreement the subcontract into which the parties will agree; b) not making the inability to agree upon future terms a condition of termination; and c) possibly, and subject to multi-jurisdictional issues, using a choice of law provision to make the agreement subject to the laws of other than Virginia, using a jurisdiction that has considered and enforced teaming agreement terms more liberally.

As teaming agreements continue to be used and evolve, so too is the case law likely to evolve. Where it ultimately goes in Virginia will have to be seen. – nsl

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