Teaming Agreements in 2017 and Beyond

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2 Teaming Agreements in 2017 and Beyond Breakout Session #: B11 Presented by: Sander Wilson, CFCM, CF APMP Date: Monday, July 24 th, 2017 Time: 2:30PM-3:45PM 1

3 Introductions Sander Wilson, CFCM, CF APMP Director, Business Operations for VOSB LVW Electronics President, Pikes Peak Chapter NCMA, PY 2016/2017 Professional Highlights: - Capture of multiple Federal IDIQ/MATOC Awards with combined ceilings of over $1B - Task/Delivery Order awards ranging from $500K to $11M, working in locations all over the CONUS, Korea, Japan, Hawaii and Alaska - Team building from the simple (prime/key sub) to very complex (prime/dozens of subs/suppliers with key specialties)

4 WHY DO CONTRACTORS TEAM?

5 Why Team? Case Study: Hoover Dam Boulder Dam Project $50M procurement (roughly $700M today) 107 potential bidders 3 substantive proposals

6 The Winning Team (the Big Six ) in 1931 Henry J. Kaiser Co. Bechtel Co. MacDonald and Kahn Utah Construction Co. Morrison-Knudsen Pacific Bridge Company J.F. Shea Why Team? Case Study: Hoover Dam

7 Why Team? Case Study: Hoover Dam The Winning Team (the Big Six ) today Kaiser-Permanente Bechtel Co. BHP Billiton / Fluor URS J.F. Shea Benefit to the Customer: None of these companies could have built the Hoover Dam alone. Benefit to the Contractor: None of them would be where they are now if they hadn t teamed up.

8 Agenda 1.Risks? What risks? 2.Into the woodshed the basics 3.Why contractors team 4.How to team 5.When to team 6.Enforceability 7. Practice - Let s Negotiate a TA 8.Questions / Discussion

9 Risks? What Risks? LITIGATION, LITIGATION, LITIGATION Organizational Conflict of Interest Ostensible Subcontractor Rule / Finding of Affiliation (See 13 C.F.R (h)(4)) Directed / Rejected Subcontracting Loss of Control Failure to Perform

10 INTO THE WOODSHED

11 The Process Dating Non Disclosure Agreements (NDAs) / Proprietary Information Agreements (PIAs) Memos / s / Phone calls Engagement Teaming Agreements (TAs) Proposals / Quotes / Budgetary Estimates Marriage Subcontract / Purchase Order Think of a Teaming Agreement as a prenuptial agreement, but with fewer teeth

12 What s an NDA? Non-Disclosure Agreement Agreement to not share something with others that you ought not to share in the first place Not a complete defense against intellectual property infringement Mostly boilerplate Mutuality is key! Best Practice: It s always fair to ask the other side to make it mutual.

13 What s a TA? Teaming Agreement Agreement to agree May (or may not) be enforceable Typically consists of: A boiler-plate agreement to work together to capture the work An exhibit or attachment that defines the work share, if the contract is won (e.g., Exhibit A, Attachment A, etc.)

14 What s a Subcontract? ALL subcontracts are negotiable. Subcontract Enforceable instrument detailing a legal relationship between two (or more) parties. Consists of some scope of work / product to be delivered for some form and amount of consideration. Consummates the TA in an enforceable, clearly-defined and mutually-agreeable contracting arrangement.*

15 What s a Joint Venture? Joint Venture Separate legal entity made up of two or more distinct firms Has its own tax ID, must register separately in SAM, etc May be able to claim small business status, based on new Mentor-Protégé rules When part of a Mentor-Protégé agreement, can participate as a small business for work that the protégé qualifies as small Otherwise, the sum of the parts is counted towards small business status

16 Government Contracting & Teaming Fun Fact: TAs are generally unenforceable in Federal courts! What does the Government think of teaming? FAR 9.6 Recognizes the integrity and validity of the teaming arrangement Teaming may provide the Government the best combination of performance, cost, and delivery for the system or product being acquired Does not confer enforceability

17 Government Contracting & Teaming Hot button issues: Does the prime overly rely on the sub? Does this team reduce risk or does it increase it? Limitation on Subcontracting / Pass-through Will the team fall apart over disputes stemming from: Conflict of interest? Payment/Debts/Liens/Claims? Patents? Intellectual Property?

18 Government Contracting & Teaming Hot button issues: Mentor-Protégé Changes Now open to ALL small businesses 8(a) still separate, but opened up a bit No populated JVs Tightened up language on employees and performance

19 WHY DO CONTRACTORS TEAM?

20 Theory Public Policy Benefit Parties may begin working together in good faith, without spending time, money, and energy ironing out every detail of a future subcontract Parties are not bound to a surprise subcontract with harmful, indefinite or undecided terms Allows parties to plan for the future and muster their resources accordingly both today and tomorrow 19

21 Practice Pursuit of more and greater opportunities Ability to perform more than any single contractor could be expected to perform Marketing Tactical advantages Strategic goals WINNING Contractor Benefit: There are many reasons to team up. The best is the simplest of all: to WIN. Customer Benefit: A diverse team can perform more work with lower risk, at lower cost.

22 Strategic Alliances Key to long term growth Mentor / Protégé Arrangements Incubators Joint Ventures Dove-tailing Matching one company s strengths with another s weaknesses Limits cross-pollination (i.e., training one s competition)

23 Tactical Considerations Exclusivity Primes want it both ways Subs want it both ways, too, but in a different way Taking competition off the street Filling an immediate gap/weakness Accentuating an existing strength

24 HOW DO CONTRACTORS TEAM?

25 How It s Done Dating Calls, calls, calls Networking industry days, professional organizations, on-line Intelligence Know the market Know the customer Know the competition

26 How It s Done Engagement Negotiating a TA Workshare Commitment

27 Work Share #1 Source of disagreement Usually found in Exhibit/Attachment A Samples: To be determined at task order award. Commensurate with the teammate s skills and abilities at time of award. No more than 40% of the total prime contract value At least 40% of the total contract value

28 Commitment Can vary greatly, whether in written form (in the TA) or in spirit Critical to good teaming Puts skin in the game Forms of commitment: Time Labor Past Performance Technical Ability Cash Bondability

29 WHEN DO CONTRACTORS TEAM?

30 When to Team Opportunity Identification Capture Proposal Response

31 ENFORCEABILITY

32 Enforceability An agreement to agree? Don t assume it s enforceable because it probably won t be Cyberlock Consulting, Inc. v. Info. Experts 2013 Navar, Inc. v. Federal Business Council 2016 A-T Solutions Inc. v. R3 Strategic Support Group Inc Trianco, LLC V. International Business Machines NOT a contract

33 Enforceability How do you give a TA teeth? lessons from Cyberlock and its successors Well-defined work-share % of work, labor categories, number of positions, specific scope, CLINS, etc. Penalties for failing to live up to the agreement Agree on the subcontract and its Ts & Cs when you sign the TA Well-defined commitments / compensation for teaming e.g., Parties will subcontract upon award Exclusivity

34 NOW IT S YOUR TURN

35 Negotiating Exhibit A Teaming Scenario: Customer: Federal Agency XYZ Contract: Multi-Year, Indefinite Delivery / Indefinite Quantity (IDIQ), Multiple Award Task Order Contract (MATOC) Re-competition of previous MATOC Product: Cybersecurity Risk Management and Mitigation Small Business Goals: 10% HUBZone; 3% SDVOSB; 3% WOSB; 3% 8(a)

36 Negotiating Exhibit A Teaming Scenario: Prime Contractor: Ajax Systems Integration (ASI) Incumbent Contractor Industry Leader Can perform 90% of the requirements of the IDIQ as stated in the RFP themselves and has excellent past performance and capabilities Wants an exclusive arrangement

37 Negotiating Exhibit A Teaming Scenario: Subcontractor: Trojan Horse Risk Management (TJRM) Subject matter expert, well-regarded in industry, with excellent past performance in their niche business HUBZone Small Business Can easily perform the 10% of the requirement that the Prime cannot, but not much else. LOTS of interest from other potential prime contractors

38 Negotiating Exhibit A Instructions: 1. Introduce yourself to the firm with whom you ll be negotiating a teaming agreement and decide which one of you will be the prime contractor and which will be the subcontractor. 2. You ll have five minutes to assemble a DRAFT Exhibit A using the sample language snippets I ll provide you. 3. When the time is up, provide your draft Exhibit A to the other firm. You ll have five minutes to come up with notes on the other firm s draft. 4. Now, return the draft Exhibit A to the other firm. You ll now have ten minutes to negotiate a final Exhibit A.

39 Questions / Discussion Share your Experience Was there anything that was particularly difficult to negotiate? Was there anything that was surprisingly easy to negotiate? Other Items for discussion: When might it be a bad idea to team with someone? How would a Contracting Officer determine whether a proposed team will do what they should? How do you quantify the benefit of teaming?

40 THE POINT

41 The Point Good teaming is like a good marriage Good relationships beat good contract language, but it s better to have both Teams that win together tend to keep winning Good teams grow business for the whole team Great teams maximize performance and minimize risk for the team and the customer

42 Thank you Sander Wilson President, Pikes Peak NCMA (719)