FEDCON Summit: Teaming Arrangements
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FEDCON Summit: Teaming Arrangements FEDCON Summit: Teaming Arrangements Presentation Transcript

  • Dra$ing  Enforceable  and  Helpful   Teaming  Arrangements   Presented  By:     Jackson  W.  Moore     Smith,  Anderson,  Blount,  Dorse=,     Mitchell  &  Jernigan,  LLP   www.smithlaw.com     jmoore@smithlaw.com   (919)  821-­‐6688  
  • Outline   I.  Teaming  Agreement  Basics:    JV’s,  TA’s  and   SubK’s   II.  Cyberlock  and  Teaming  Agreement   Enforceability   III.  Key  ConsideraUons  in  DraVing  a  JV   IV. Key  ConsideraUons  in  DraVing  a  SubK   V.  QuesUons   2
  • I.   Teaming  Arrangement  Basics   3
  • Teaming  Arrangements   Joint Venture (JV) FAR 9.601(1) Teaming Agreement Prime / Subcontract (SubK) FAR 9.601(2) 4
  • Teaming  Agreements:  Joint  Ventures  &   Contracts/Subcontracts     •  Joint  Venture  vs.  contractor/subcontractor     –  JV:    “Two  or  more  companies  form  a  partnership  or  joint   venture  to  act  as  a  potenUal  prime  contractor”  FAR   9.601(1).    This  includes  mentor-­‐protégé  joint  venture   agreements.     –  Contractor/Subcontractor:    “A  potenUal  prime  contractor   agrees  with  one  or  more  other  companies  to  have  them   act  as  its  subcontractors  under  a  specified  Government   contract  or  acquisiUon  program”  FAR  9.601(2).       5
  • Teaming  Agreements:     Why  the  Government  Cares   •  Groupings  to  compete  for  a  government  contract.    FAR  9.602.   –  “[c]omplement  unique  capabiliUes”   –  “[o]ffer  the  Government  the  best  combinaUon  of  performance,  cost,   and  delivery  for  the  system  or  product  being  acquired”   •  Government  allows  teaming  agreements,  so  long  as  they  follow   government  regulaUons.    FAR  9.603.   •  Versus  tradiUonal  B2B  world,  where  joint  ventures  and  prime/subcontract   relaUonships  are:   –  Less  regulated     –  Without  size  standards   –  Without  governmental  oversight.   6
  • Joint  Ventures   •  “[C]ompanies  form  a  partnership  or  joint  venture   to  act  as  a  potenUal  prime  contractor”     •  Key  Word:    Partnership     •  Members  share  profits  and  losses   •  Each  Member  has  authority  to:     –  make  decisions  that  bind  the  joint  venture     –  interact  with  government   •  Joint  Venture  has  the  contract  with  the   government   –  not  each  member   7
  • Pros  &  Cons  of  a  Joint  Venture   •  Pros     –  JV  member  has  increased  stature  (vs.  SubK)     –  Shared  control   –  Individual  firms  can  stay  smaller  longer   •  Cons     –  Joint  responsibility  for  performance  (vs.  SubK)     –  Shared  control     –  Lead/Larger  team  member  gives  up  some   control  to  other  team  member   –  TerminaUon/unwinding  JV  more  complicated   8
  • Contractor/Subcontractor   •  Prime  contractor  enters  into  contract  with   government   –  Prime  subcontracts  with  other  team  member   –  No  “privity”  between  the  government  and   subcontractor   •  Only  Prime  interfaces  with  government   –  Prime  controls  contract   –  DuUes  are  defined  in  SubK   •  No  sharing  of  profits  and  losses   •  Subcontractor  paid  according  to  SubK  only   9
  • Requirements  for  Joint  Ventures   •  Requirements  Vary  by  Type  of  Team   –  SBC/SBC  JV  for  SBC  set  aside.  13  CFR  §  121.103(h) (3)   –  8(a)/non-­‐8(a)  JV  for  8(a)  set-­‐aside.  13  CFR  §   124.513   –  SDVOSB/SBC  JV  -­‐  13  CFR  §  125.15(b)   –  WOSB/SBC  JV  -­‐  13  CFR  §  127.506   –  HUBZone/HUBZone  JV  -­‐  13  CFR  §  126.616   10
  • More  Joint  Venture  Requirements   •  Generally:   –  “Managing  venturer”  must  be  the  small  business.   –  “Project  manager”  must  be  the  small  business.   –  Small  business  must  perform  percentage  of  the  work  (not   including  administraUve  funcUons).   –  A  certain  %  of  profits  may  need  to  go  to  small  business.   –  JV  agreement  may  need  to  include  certain  terms.   –  JV  may  need  to  show  benefit  to  small  business.   –  There  may  be  registraUon  and  reporUng  requirements.   •  In  some  cases,  SBA  pre-­‐approval  required  for  JV   agreement   11
  • III.   The  Cyberlock  Decision   (April  3,  2013)   12
  • Cyberlock   •  A  Detailed  Teaming  Agreement,  and  Not  a  Generic   One,  Is  Needed  Before  the  ParUes  Can  Chase  a   Government  Contract.   •  Lawsuit:    Team  members  agreed,  in  wriUng,  that  if  the   prime  bidder  was  awarded  a  contract,  51%  percent   would  be  performed  by  the  prime  and  49%  by  the   teammate  as  a  subcontractor.    Team  members  did  not:   –  Agree  how  the  scope  of  work  would  be  divided.   –  A=ach  terms  of  subcontract  that  would  be  executed.   •  Agreement  noted  that  it  was  possible  parUes  would   not  be  able  to  agree  on  the  terms  of  a  subcontract.   13
  • Cyberlock   •  Teammates  prepared  proposal  together.    Prime   won  the  contract  but  teammates  could  not  agree   on  terms  of  the  subcontract.     •  Decision:       –  No  contract,  an  “agreement  to  agree”  only.   –  Teaming  agreement  too  indefinite  to  enforce.     •   Virginia  law  applied,  might  be  appealed  to   Fourth  Circuit.   14
  • IV.   Dra$ing  a  JV  Agreement   (Key  ConsideraVons)   15
  • IdenVfy  the  Purpose  and  Scope  of  the  JV   •  IdenUfy  the  specific  contracts  or  projects  the  JV  is   pursuing   •  What  do  you  intend  to  do  and  not  do   •  Is  this  a  “Preference”  JV  with  specific  requirements   •  Number  of  parUes   •  Individuals  vs.  enUUes   •  What  tax  and  other  regulatory  issues  will  be  impacted   •  Is  this  an  InternaUonal  JV  –  what  local  laws  are   implicated   16
  • IdenVfy  the  Form  of  the  JV   •  •  •  •  •  Populated  vs.  Unpopulated   Jointly  owned  corporaUon  or  group  of  corporaUons   Partnership   LLC   Contractual  (non-­‐equity)  JV  –  Informal  and  less   structure   Ø Note:    Issues  affecUng  determinaUon  will  include  tax,   liability,  regulatory,  acquisiUon  strategy,  IP  ownership,   exit  strategies,  etc.   Ø Interim  Le=er  of  Intent  (binding  or  non  binding)   17
  • Governance  of  the  JV   •  How  will  be  the  JV  be  managed  (manager  managed,  joint   venturer  managed,  officers,  board  of  directors,   commi=ee)   •  Authority  of  the  manager  –  business  decisions,  personnel   decisions,  investment,  distribuUons,  etc.   •  Authority  of  the  co-­‐venturers  (Members)  –  replace   managers,  individual  vs  consensus  powers,  Ue  breaker,     •  MeeUngs  –  frequency,  quorum,  iniUaUon,  locaUon,  etc.   •  IdenUfy  acUons  requiring  majority  or  unanimity  approval   of  the  members  or  a  board   18
  • Financial  Decisions  of  the  JV   •  How  will  the  JV  be  financed  –  venturer  financed,  3d   party,  credit  line,  venture  capital,  etc.   •  AccounUng  pracUces  and  accounts   •  DistribuUons  of  profits  and  investment  of  profits   •  Responsibility  for  debt   •  Who  signs  the  checks   •  Audit  procedures   •  Financial  reports  –  format,  responsibility,   frequency,  etc.   19
  • Business  Decisions  of  the  JV   •  •  •  •  •  •    Bid  and  Proposal  responsibiliUes   Who  brings  what  to  the  table   Who  makes  the  criUcal  decisions   Who  prepares  and  who  approves  the  budget   Who  prepares  and  who  approves  business  plans   Insurance  for  the  JV  (separate  policy)   20
  • Share  and  Interest  Transfer     RestricVons  of  the  JV   •  Normally  no  transfers  permi=ed  except  as  provided   in  agreement   •  Transfers  to  affiliates  –  subject  to  agreement,  joint   and  several     •  Call  rights   •  First  Offer/First  Refusal   •  Tag-­‐along/drag-­‐along  rights   •  Buy-­‐sell  rights   21
  • ConfidenVality   •  •  •  •  •  Separate  nondisclosure  agreements  –  Benefits   Protect  Proprietary  InformaUon   Term   Survivability   IP  and  Technology  protecUon   22
  • IndemnificaVon  &  Insurance   •  Mutually  focused  provisions  and  protecUons   •  What  should  be  covered  under  insurance   23
  • NonsolicitaVon  and  Noncompete     •  Most  complicated  and  sensiUve  to  negoUate   •  Address  exposure  of  your  greatest  assets  –   employees   •  Exposure  to  compeUUon   •  Are  restricUons  reasonable   •  DissoluUon   24
  • Exit  and/or  TerminaVon  Rights   •  Triggering  Events:   ü  Default  –  Material  breaches,  change  of  control,   suspension,  debarment,  etc.   ü  No-­‐default  –  Deadlocks,  3d  party  offers,   frustraUon  of  business  intent   •  ProtecUon  for  Minority  Member(s)   •  Treatment  of  JV  debt   •  Ongoing  performance  of  contracts   •  ValuaUon  of  Exit  Share   25
  • Closing  Process  of  the  JV   •  •  •  •  •  Clearly  define  rights  and  obligaUons   ResignaUon  of  seller’s  representaUves   Guarantees  and  Covenants  of  seller/co-­‐venturer   Guarantees  and  Covenants  of  3d  party/buyer   Survival  of  key  terms  in  agreement   26
  •     V.   Dra$ing  a  Teaming  and  SubK   Agreement   (Key  ConsideraVons)   27
  • Teaming  Agreements   •  Set  condiUons  for  SubK   •  Exclusivity   •  Define  contribuUons,  responsibiliUes  and   obligaUons   •  Bid  &  Proposal  costs   •  AffiliaUon   •  Good  faith  and  Ume  limits  for  creaUng  a  SubK   •  NDA  and  confidenUality  provisions   •  Non-­‐compete  &  non-­‐solicitaUon  clauses   28
  • Subcontract  Agreements  I   •  Ensure  it  tracks  prime  contract  (compliance  term,   period  of  performance,  OCI  plans,  etc.)   •  Flow  down  provisions  (term  for  convenience,  term   for  cause,  etc.)   •  Approval  of  2nd  Uer  Subcontractors   •  RelaUonships  with  the  client   •  IP  &  Technology  protecUons  (old  vs.  created)   29
  • Subcontract  Agreements  II   •  •  •  •  •  Breaches   NoUces  to  parUes   TerminaUon  (voluntary  and  involuntary)     Venue  –  will  it  be  exclusive   Choice  of  Law  –  what  law  se=les  disputes   30
  • ConfidenVality   •  •  •  •  •  Separate  nondisclosure  agreements  –  Benefits   Protect  Proprietary  InformaUon   Term   Survivability   IP  and  Technology  protecUon   31
  • IndemnificaVon  &  Insurance   •  Mutually  focused  provisions  and  protecUons   •  What  should  be  covered  under  insurance   32
  • NonsolicitaVon  and  Noncompete     •  Most  complicated  and  sensiUve  to  negoUate   •  Address  exposure  of  your  greatest  assets  –   employees   •  Exposure  to  compeUUon   •  Are  restricUons  reasonable   33
  • Dispute  ResoluVon   •  MediaUon   •  ArbitraUon     Ø  An  express  arbitraUon  clause   Ø  Mandatory?   •  LiUgaUon       •  Venue   •  Exclusive  jurisdicUon   •  Costs   34
  •       Trust,  Trust,  Trust!   35
  • QuesVons?     Smith,  Anderson,  Blount,  Dorse=,     Mitchell  &  Jernigan,  LLP   www.smithlaw.com     Jackson  W.  Moore     jmoore@smithlaw.com     (919)  821-­‐6688