Large federal projects involve a complex series of contractors and subcontractors. How do you manage relationships between all those supply chain players?
In this episode of the Contract Teardown, experienced DC attorney Shavon Smith shares her tips. She walks through an agreement between two major players in federal contracts who aim to secure new projects together.
Smith details:
- The relationships between government contacts, prime contractors, and subcontractors,
- Language for managing communication while getting work done,
- The risks of “agreements to agree” and how to avoid them,
- The difference between agreements for a particular job and agreements to seek as-yet-undefined work, and
- Practical tips for client communication that won’t undo the relationship.
THE GUEST: Shavon Smith is the principal of The SJS Law Firm, PLLC where she counsels business owners, start-ups, and entrepreneurs in the District of Columbia, Maryland, and Michigan on a range of legal issues. She serves a diverse client base across multiple industry segments, including franchisees, government contractors, professional service organizations, technology, construction, and design firms, to name a few. Her clients seek her for guidance on entity formation, commercial real estate lease and acquisitions, business financing, and end-to-end contract support. Additionally, she represents and counsels her clients on a range of employment issues, including compliance, drafting non-disclosure agreements, non-compete agreements, drafting and training on employee handbooks, and dispute resolution.
THE HOST: Mike Whelan is the author of Lawyer Forward: Finding Your Place in the Future of Law and host of the Lawyer Forward community. Learn more about his work for attorneys at www.lawyerforward.com.
If you are interested in being a guest on Contract Teardown, please email us at community@lawinsider.com.
Episode Links
The Contract: Tactical Solution Options Teaming Agreement
Guest’s Links: Website | Email | LinkedIn | Instagram
Interview Transcript
Mike Whelan In this episode, Shavon Smith advises on teaming agreements for government contracts. So let’s tear it down. Shavon Smith, welcome to the Contract Teardown Show. How are you today?
Shavon Smith I am excellent. How are you?
Mike Whelan Pretty good. We are going to dig in to a document that I will share with the folks at home. You are in D.C. We talked about this before. You’re in this weird ecosystem that I didn’t know about; that this document is going to uncover. It is a Tactical Solution Options Teaming Agreement. Shavon, what is the teaming agreement? Where are we going to run into this kind of thing?
Shavon Smith A teaming agreement is an agreement where two, the simplest way to put it, two people coming together to go after some sort of business. Typically you see it in the government contracting space where the government has put out some sort of solicitation, request for proposal- they’re buying a book or buying a service. So people say, Hey, I think we should go after this together because one half of this I do pretty well, one half of that you do pretty well. Let’s team up ie teaming agreement and go after this piece of work together.
Mike Whelan Awesome. And we’ll dig in to that. But before we do. Tell us about you. When you run into this kind of document, where are you at in your practice?
Shavon Smith I run into it because I represent small and medium-sized business owners in the D.C. area. A lot of them are government contractors selling goods and services to state and local government. And so I run into this sort of document a lot, and a lot of my clients tend to be smaller companies, so they are looking for a greater capacity and they gain that by teaming with other companies.
Mike Whelan Awesome. So it sounds like this is sort of joint venture-y. Sometimes it’s targeted to a specific engagement, sometimes it’s not. So we’ll talk about this specific instance. We’re going to start with the recitations at the beginning. I’ve got a bunch of, “whereas-es”, sort of establishing what people’s intentions are. Tell me about the recitations in this section and specifically the one that you highlighted to talk about.
Shavon Smith Yeah. So this recitation is interesting because it highlights that the parties are going after a non-solicited proposal. So it means that they came together and said the government hadn’t put out something specific. But we think we have built, create it, have something that they need. So let’s send a proposal to the government to send that to them. Typically in their recitations you will see a particular opportunity, i.e. whereas the parties are going after name of agency, name of contract number associated with it. So there’s a specific opportunity perhaps that people are going after or maybe a category: we will bid on Department of Defense contracts together or, you know, Health and Human Services or some sort of cyber or a category. So it kinda take different forms.
Mike Whelan Gotcha. So in the government’s elaborate supply chain with a bunch of different players they might put out, we need something. Usually companies will come together and say, let’s go do this. But in this case, it sounds like they’re sort of making an agreement to agree in the future, which we talked about in preparation for this call. So let’s jump to two, because it talks about the party’s responsibility. It’s to your point, sort of a weird context. We don’t know what the job is yet. What is to tell us about what these two parties are agreeing to do?
Shavon Smith Well, it’s interesting, because the the agreement is twofold. One, it’s in good faith. We will draft up and go after this work together. So there’s the work we’re doing right now. But then it is, the what happens later with our responsibility later once we come to the work. So the responsibilities in the agreement are twofold for the parties.
Mike Whelan Hmm. So jumping down to nine, I mean, I’m assuming since we’re dealing with such an elaborate contract, they may do this again, right? They may jump and try to get other people to come work with them. So they’ll put out this this bid with these two companies, but they might have to get other subcontractors later into the future. What is the relationship between this contract and a future contract with the government and future contracts with other vendors? What is Section nine doing?
Shavon Smith So Section nine is saying that if we get this piece of work, we will get a prime contract that will result from it. They’ve already identified in this teaming agreement who was the prime contractor, i.e. who has the direct relationship with the government and who is the subcontractor, i.e. who has the the the sub relationship with the government. So they haven’t contracted directly with the government but are contracted with the priority who is contracted to the government. So it’s almost like a line of contract. So this talks about the subcontract negotiations, i.e. we win the work, the government will award a prime contract and now we need to contract with the other party who was in the teaming agreement with us; let’s negotiate on the subcontract. Here, they put a, you know, Exhibit A which has a statement of work and it gives a lot of detail about what the parties will actually be doing because you don’t want to run into a situation where there is an agreement to agree and not actually an agreement. So you want to get as definite as possible in the terms I mean, it talks about the parties responsibilities if there is a subcontract; to negotiate a subcontract. So one thing that’s also in here is the parties agreeing that if there is a prime contract, you have to work with us to do the work. So you can’t win this contract and they’ll go off and find another party. Sometimes there are contracts that aren’t clear. They will win the work and then try to give it to another subcontractor. That is an issue for some smaller subcontractors. Or you could run into a situation where the government says, yes, we’ll give you the work, but we don’t like that subcontractor and you have to find someone else. So the subcontractors relationship is really with the prime contractor. But here both parties are coming together to say, Well, we’ll help each other when this work.
Mike Whelan I want you to dig into that because I’m looking down at Section 11 and 12, and it talks a lot about the communication between the government and the participants and, you know, the parties to this particular contract. It sounds like risky, right? If somebody in the relationship, as far as the government knows, is The company, does the government usually know about this kind of agreement? Because I assume that the government is making decisions about what’s this capacity before I go and contract with this company versus this company. I need to know that they have the competencies beyond their representations to actually do this thing. Does the government know that there’s actually this agreement and that it’s multiple parties aiming to serve this?
Shavon Smith Yeah, absolutely. And typically there is a clause in the prime contract that talks about their duties to their primes or their subcontractors. So there are payment responsibilities, making sure you pay them, pay them on time, once the government pays you. So there will have obligations to the subcontractor that the the government will put in the prime contract. But what’s interesting about this language is that the prime contractor typically likes to own the relationship with the government, meaning that they want to direct the conversation. Because what happens, especially if you’re dealing with like a service, if the other companies doing all the dealing, then why do we need the prime contractor? So people don’t want to get in a situation sometimes where a contract is stolen, which can happen because they realize which party may be more valuable, or sometimes it’s just to make things streamlined. A prime contractor could have ten subcontractors on the contract, and they want to be able to manage the conversation and flow with their ultimate client as well.
Mike Whelan Hmm. Well, let me read 11, because I think this is really relevant to what you’re saying. They’re talking about the contacts and again, remembering to your point that this is a contract about future contracts as opposed to for a specific, specific deal. So 11 under contacts, it says the prime shall be the sole contact. So of these two, you know, parties to this contract, somebody is going to be the prime somebody is going to be the subcontractor. This is that the Prime will be the sole contact with potential customers concerning the procurement capital P. However, the subcontractor may contact a potential customer concerning the procurement with the prior written approval of the Prime, which shall not be unreasonably withheld. It’s that bit where it’s talking about okay sub, part of the nature of being the sub in this relationship is you’re not the the person who’s doing most of the talking. Is there something about this particular arrangement where they’re not going after a specific thing? Is that why they’re saying subcontractor? Actually, you can talk to people. Does that make sense as it seems like they’re saying sort of contradicting themselves or they’re saying you actually can talk to the customer?
Shavon Smith Yes. But they still want to control the conversation because you need their approval. And it could be that sometimes maybe work is so technical that you need to be able to talk to the sub. But we still need to know about the communication. Say that communication is okay bcc on the communication so you don’t have open flow because your contract isn’t with the government. So we need to still be able to control the conversation. So sometimes, you may not see that without prior written approval. You just say, you know, you can’t speak to the prime or maybe you won’t get that “would not be reasonably unheld”; you just get that without prior written approval. But there’ll be some form of language about controlling the conversation or communication.
Mike Whelan Yeah. And on that 12 continues with that and says that, you know, any communication initiated by the government with the subcontractor is fine, but you just have to let us know that it’s going on. To your point, you know, they’ve got to be able to continue to do the work. And if the the sub is doing the, I don’t know, some weird I.T. thing that only the sub like, why slow this down by having to go through the prime? But the prime needs to be looped into it, it seems like and I’m going to ask at the end of this, it seems like one of the keys with this kind of document is making sure you’re clear who’s building the relationship and who owns that relationship. So we’ll revisit that. Well, let’s go to 18. Again, to your point about, is this just an agreement to agree, termination and expiration seems to matter. How locked in are you into future deals? What do you think that about what they did with section 18 and the termination?
Shavon Smith Yeah, I think again, this is pretty standard. So, you know, the parties can terminate prior to submitting the solicit, the proposal to the government. So we’ve signed this teaming agreement before we’ve actually even initiated it, you know, sending it off; the parties can agree. But what you typically have is it’s terminated automatically if the federal government or whatever state government says, we don’t want this service anymore, so they’ve canceled the solicitation, then that automatically triggers this. Or if they make an award to another group of people that aren’t, these people that will automatically terminate. The agreement, or if they actually do award the agreement to you, then that terminates this agreement because then that triggers the obligation to negotiate in good faith the subcontract.
Mike Whelan Hmm. That’s interesting. All right. Well, let’s jump down to 22. The exclusivity, I’m assuming, to that scenario, the many scenarios you just talked about. What happens in the scenario where the two of them work together, one is the prime, one is the subcontractor, to go and develop this relationship, to chase this deal. And then the government says, you know what, we don’t like Bob, we only like Sally. We only want Sally. That seems to undermine the good faith aspect of this relationship. How are they dealing with that exclusivity and and the future relationship?
Shavon Smith Yes. So in the example you just gave, I’m pretty certain there is language in here that if if the government says we don’t want you as a subcontractor, then that is the final answer on that. But what typically ends up happening is work is awarded. You may have used someone’s work and labor because people, you know, parties are typically bearing their own costs to submit whatever, some sort of proposal. So you use some smaller companies, you know, labor to get something done, you get the contract and then you try to bring in somebody else or cut out some of their work product or really try to cut them out of the arrangement. And so the exclusivity which you want to make sure is that there are somewhere in your team an agreement that says you agree that if you get this work, you will absolutely, you know, sub this out to me unless for some reason you can’t because either federal government or government says you can’t do so. But also the prime wants sometimes to control that you also aren’t bidding on that contract with ten other companies so that you especially if there’s a, you know, the government is buying widgets, they’re looking at ten companies. They don’t want you to then go off and decide with ten other companies to go into a teaming relationship as well, to kind of hedge your bets sometimes, you know, depending on the type of contract and how big it is and how many kind of opportunities there are people will go in with different partners, but typically they want to say, you know, we’re together on this and we’ll have some exclusivity going after this project.
Mike Whelan And then in the last bit you mentioned before in the exhibit, there is a a statement of work. Am I, to ask the child’s question, am I understanding the relationship between it? So there is the contract, hey, we’re going to work together. When the work is awarded, there’s sort of a new agreement under that specific bit of work. And this statement of work is the scope definer that comes after. So is this attached just as an exhibit for this is what our future agreement will look like? Is that what the statement of work is doing here.
Shavon Smith Is doing that and this usually ends up in the subcontract maybe with some tweaks. It is really so the parties know what everyone’s roles and responsibilities are and so that you’re not getting to the subcontract stage and kind of negotiating, especially things like pricing, because you would have had to put that in the actual proposal, personnel like who are you on, if it’s a service agreement, like who are you going to use because that’s going to be very important as well. So the statement of work really becomes a lot of the key terms for the subcontract. It is how you really avoid the agreement to agree because it’s like, well, we’ve already agree on price, you know, delivery – who’s delivering some of the key terms in the partners’ relationship.
Mike Whelan Yeah. And I would point to 3.4 on there. It talks about the subcontractor providing to the prime all this, you know, sort of information, private information, right, about the resumes of qualified current employees and — all this stuff that would need to be communicated to the government, presumably in order to win the bid, you just got to show that you have the right people. So in the background of this sort of the big picture question I want to ask you is about, this seems like a pretty elaborate way not just to manage the relationship of these two parties in terms of the future deal, but also just how they’re going to communicate with the government. Talk to us a little bit about how in this kind of agreement, how important it is to manage those communication, expectations in a way that it doesn’t undermine what they’re trying to do with this deal. That seems to be the key thing is how are you going to talk to the government?
Shavon Smith Yeah, I think that’s definitely an important part because it’s how the parties, the prime and the sub manage their relationship as well. And because the ultimate contract, the payer is is the government, the prime wants to make sure that they manage that relationship well. So that’s why there is all that language about that. So I definitely think the communication is a key aspect of this kind of controlling that communication as well is a key aspect.
Mike Whelan Is there, I’m wondering, is there a contract — this seems to be very targeted to the government situation. Right. Or to something that looks like a government asking for this kind — are there contracts like this where you’re doing these sort of future joint venture, i.e., let’s define how we’re talking to somebody to go after a particular bid. Do you have to have the fairly sophisticated frequent supply chain relationship that you might have with the government? Or is this instructive to other kinds of contracts that business lawyers who were watching this might be dealing?
Shavon Smith No, I think it’s certainly instructive. I mean, we definitely spend time talking about the federal government or government aspect because that’s what this contract is. But you can have a sort of teaming relationship really in any industry. Fortune 500 is often, you know, put out RFPs for things. They’re buying something, they’re buying some sort of technology. And maybe they need somebody to train on the technology, but they need somebody else to install it. And so two companies come together and say, we’re able to do this, you know, together. So I think it’s an opportunity. One, for me, it’s an, I always look at it as, if you are growing smaller business is an opportunity for you to get greater capacity in your work. If you are a larger business, it’s an opportunity for you to gain a skill set without diverting your attention from the things that you already do. Because, you know, SAIC is one of the companies here that’s a huge, you know, billion dollar corporation. So we’re not talking about necessarily a small business in this instance, but we probably are talking about a skill set that they didn’t have or people that they didn’t have or technology that they didn’t have that they wanted to then bring in through a teaming arrangement.
Mike Whelan It’s amazing. Just as an aside coming from law and how sort of socially isolated we are as members of a legal supply chain. Right. Because a lot of lawyers do everything, beginning to end. But we’re working in this context where most of the world spins by a lot of companies collaborating with each other through agreements like this. Well, we will include this agreement in the resources over at lawinsider.com/resources, where you can see a post with the show notes for this video. For people who want to reach out to you, Shavon, and learn more about what you’re doing in DC. What’s the best way to connect with you?
Shavon Smith Our website is theSJSLawFirm.com. I’m on LinkedIn – Shavon J. Smith. I am on Instagram – Shavon J. Smith. You can email me, shavon@thesjslawfirm.com and I would love to hear from you and talk more about contracts.
Mike Whelan Perfect. Will include all those links like I said over at lawinsider.com/resources. If you want to be a guest on the Contract Teardown Show to tear up contracts like this, please email us. We are at community@lawinsider.com. Thanks again, Shavon. We will see you guys next time.
Shavon Smith Thank you.