How to Protect Your Teaming Agreements from Affiliation Protests
Teaming relationships are important to small business contractors who may benefit from the insight of a more experienced contractor while growing their portfolios. Teaming agreements are valuable tools for government contractors, as they allow the proposed prime contractor and subcontractor to negotiate and agree on operational details prior to competing for opportunities.
However, small business primes teamed with large subcontractors on set-aside contracts are chief targets for size protests. Therefore, all small business primes must ensure that their teaming agreements cannot give rise to a finding of affiliation if such a protest arises. Here are some issues to consider which may ensure that your teaming agreement will avoid making you vulnerable to this problem:
- Make sure that the prime contractor is performing the primary and vital requirements, and has assigned discrete functions to its subcontractors. It is important to be as detailed as possible in describing what the subcontractor will do. If the arrangement is challenged via a size protest, the SBA will look at the teaming agreement. If it gives the impression that the subcontractor will be involved with the project’s every aspect, it will look as if that entity is the lead contractor.
- The teaming agreement must indicate that the prime contractor is in charge of decisions regarding the proposal and the hiring of additional subcontractors. Otherwise, the SBA will find that the subcontractor and the prime are joint venturers and therefore, affiliates, thereby rendering the prime ineligible for the contract. The prime should have responsibility over approving the proposal before submission, negotiations with the government and the execution of performance. It should determine what types and how many subcontractors will be needed.
- A teaming agreement for a set-aside opportunity should specify the subcontractor’s maximum work share, stating that it will perform no more than 50% of the task. According to SBA rules, by assigning more than 50% of the work to the subcontractor, the prime contractor will become ineligible for the contract.
- The subcontractor must not provide more than its services under the teaming agreement. For example, a subcontractor’s subleasing of office space to the prime may be grounds for a charge of affiliation. Likewise, if the agreement indicates that the subcontractor is supplying all resources for preparation of the proposal and an entire team to prepare the proposal, the SBA may find that the prime is unduly reliant upon the subcontractor. That would classify the association as a joint venture, rather than a prime-subcontractor relationship.
- The teaming agreement should avoid business terms that are common to joint ventures, like sharing profits and losses. Although that alone may not give rise to affiliation charges, it may lead to the discovery of other issues of concern to the SBA. Therefore, it’s best to avoid it.
In addition to considering these factors when creating your agreements, you may also want to ask an experienced small business government contracting attorney to assist you in eliminating any red flags.
A carefully worded and fully thought out teaming agreement is essential to your success.