New Contract Opportunities Through Teaming Agreements


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A smaller defense company can create new opportunities by teaming with larger prime contractors. But the company must know how to make the opportunity work and how to avoid the pitfalls

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New Contract Opportunities Through Teaming Agreements

  1. 1. The Teaming Agreement <ul><li>What is a Teaming Agreement? </li></ul><ul><li>Pitfalls of Teaming Agreements </li></ul><ul><li>As A Subcontractor, How Do I Protect My Intellectual Property? </li></ul>Rob Cogan Principal Attorney Continuum Law As presented to the quarterly seminar of the National Defense Industrial Association in San Diego
  2. 2. What is a teaming agreement? <ul><ul><li>It is basically an agreement to cooperate on preparation of a proposal and to work toward closing a contract if you win. </li></ul></ul><ul><ul><li>However, it does NOT by itself guarantee that you will get the subcontract if your team wins. </li></ul></ul><ul><ul><li>Parties agree to negotiate a subcontract in good faith. </li></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  3. 3. Advantages <ul><li>It allows a smaller company to “plug in” to the capital and technical expertise of larger companies. </li></ul><ul><li>It allows you to focus on your core competency while expanding your markets. </li></ul><ul><li>You may gain expertise in the other team member’s “space.” </li></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  4. 4. Pitfalls <ul><ul><li>Prime may have teaming agreements with many subs. </li></ul></ul><ul><ul><li>Surprises could arise in final contract negotiations. </li></ul></ul><ul><ul><li>You may be cut out of the loop. </li></ul></ul><ul><ul><li>The Prime may get the right to use your information. </li></ul></ul><ul><ul><li>You could have an unintended non-competition obligation. </li></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  5. 5. Objectives of the Agreement <ul><li>Avoid costly disputes later on. </li></ul><ul><li>Answer the “what ifs?” when possible. </li></ul><ul><li>Try to establish some certainty regarding your costs and margins. </li></ul><ul><li>Maximize the chance of actually getting a subcontract. </li></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  6. 6. Objectives of the Teaming Effort <ul><ul><li>Identify the specific contracting opportunity and potential follow-ons. </li></ul></ul><ul><ul><li>Identify who is bringing what to the party. </li></ul></ul><ul><ul><li>Identify the scope of effort </li></ul></ul><ul><ul><li>Specify who will do what during the proposal effort </li></ul></ul><ul><ul><li>Set the best possible context for negotiating the subcontract when your team wins </li></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  7. 7. Division of Proposal Tasks <ul><ul><li>The proposal is commonly prepared by prime contractor. </li></ul></ul><ul><ul><li>Parties usually bear their own expenses. </li></ul></ul><ul><ul><li>The subcontractor should make sure proposal accurately reflects its role. </li></ul></ul><ul><ul><li>Be aware of restrictions imposed on your ability to communicate with companies at the same or other tiers. </li></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  8. 8. Identifying the Opportunity – and Whether There Really is One <ul><ul><li>Are you cooperating on a specific solicitation, or are you teaming as to solicitations that may arise under a program? </li></ul></ul><ul><ul><li>Are you the exclusive teaming partner? </li></ul></ul><ul><ul><ul><li>Exclusivity may or may not be proper. </li></ul></ul></ul><ul><ul><li>Will you remain the teaming partner? </li></ul></ul><ul><ul><ul><li>Can the teaming agreement be terminated? </li></ul></ul></ul><ul><ul><ul><li>When does the teaming agreement expire? </li></ul></ul></ul><ul><ul><ul><li>What happens when the Government delays or cancels the solicitation? </li></ul></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  9. 9. Types of Termination <ul><li>Termination for Convenience (T4C) </li></ul><ul><ul><li>Government may cancel and not pay lost profits; the current statute took root at the end of World War II. </li></ul></ul><ul><ul><li>Prime contractors have adapted this clause for their own purposes </li></ul></ul><ul><li>Termination for Default (T4D) </li></ul><ul><ul><li>Requires a clause that will not result in giving the prime contractor too much leverage; not every breach is a default </li></ul></ul><ul><li>Termination Under State Contract Law </li></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  10. 10. Expiration of Teaming Agreement <ul><li>Types of expiration </li></ul><ul><ul><li>When the team wins the award. </li></ul></ul><ul><ul><li>After a set period of time. </li></ul></ul><ul><ul><li>After failure to win – But when does that happen, after award, after protest? </li></ul></ul><ul><ul><li>Upon cancellation of the program – But what if it is just delayed or temporarily withdrawn? </li></ul></ul><ul><ul><li>Upon failure to negotiate a subcontract “in good faith.” </li></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  11. 11. Agreement on certain subcontract terms <ul><ul><li>If Prime is awarded the Contract by the Agency, then prime and sub shall immediately commence good faith negotiation. </li></ul></ul><ul><ul><li>The Government includes “flow-down” provisions in the prime contract automatically applicable to subcontractors </li></ul></ul><ul><ul><li>The more terms agreed upon in advance, the better </li></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  12. 12. Important Terms Often Overlooked <ul><li>Subcontractor shall be pair the price in its proposal </li></ul><ul><li>The type of contract. </li></ul><ul><li>A specific work statement, which can be invaluable later. The DoD Manual on Work Statements is a good tool that simplifies the task. </li></ul><ul><li>Payment details. </li></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  13. 13. Proprietary Agreements <ul><ul><li>Benefits – protecting your information and keeping your options open. </li></ul></ul><ul><ul><li>Pitfalls (if not done right) – </li></ul></ul><ul><ul><li>-- losing your exclusivity; </li></ul></ul><ul><ul><li>-- unintended non-compete obligations; </li></ul></ul><ul><ul><li>-- endless arguments; </li></ul></ul><ul><ul><li>-- delayed or canceled product release. </li></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  14. 14. Types of Legends <ul><ul><li>Commercial legends may take many different forms; these will bind other contractors, e.g., “Proprietary,” “Trade Secret” </li></ul></ul><ul><ul><li>Data submitted to the Government must be marked EXACTLY as specified in the Federal Acquisition Regulation. The law permits the government to ignore any other markings. </li></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  15. 15. Clauses to look out for <ul><ul><li>Some agreements say that all data is protected; this is impossible to administer. </li></ul></ul><ul><ul><li>You should require data to be in tangible form, marked with a suitable restrictive legend. </li></ul></ul><ul><ul><li>Oral disclosures must be reduced to tangible form in a given time and properly marked. </li></ul></ul><ul><ul><li>If you must return all data at contract completion, how will you know what your obligations are? </li></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  16. 16. Handling of Information <ul><ul><li>Who can see it? </li></ul></ul><ul><ul><ul><li>E.g., employees with need to know, consultants under agreement. </li></ul></ul></ul><ul><ul><li>Due care </li></ul></ul><ul><ul><ul><li>Specify a standard of care, such as how the other party treats its own similarly important data </li></ul></ul></ul><ul><ul><ul><li>“ Strictest confidence” isn’t defined; it is not a good standard for protection. </li></ul></ul></ul><ul><ul><li>Archiving information </li></ul></ul><ul><ul><ul><li>A way to avoid returning information and being open to unbounded trade secret claims. </li></ul></ul></ul><ul><ul><li>Enforced under state law </li></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  17. 17. Examples <ul><ul><li>Rights lost - Xerxe Group v. US </li></ul></ul><ul><ul><ul><li>Contractor didn’t mark the data properly. </li></ul></ul></ul><ul><ul><li>Rights protected – Touchpoint Solutions v. Eastman Kodak </li></ul></ul><ul><ul><ul><li>Kodak got data from Touchpoint but later cut out Touchpoint and teamed with IBM. </li></ul></ul></ul><ul><ul><ul><li>Court held that the software Kodak used was not independently developed </li></ul></ul></ul>NDIA SBC Forum Rob Cogan, Continuum Law
  18. 18. <ul><li>Thank You. </li></ul>NDIA SBC Forum Rob Cogan, Continuum Law Rob Cogan Continuum Law (858) 926-5800 [email_address]