(Editor’s Note.  The government’s acceptance and even encouragement of offerors to combine resources of several firms in teaming arrangements is greater now than ever.  At the time we originally addressed the issue of teaming arrangements they were just becoming popular so we asked one of our colleagues Kathy Szymkovicz, a former contracting officer and source selection official and now a consultant and one of our favorite guest authors, to address this issue.  We recently asked her to make any improvements in the article and she said it was fine as is. We asked her at the time to provide some practical insights into how to avoid common problems she is encountering helping contractors form joint ventures as well as some useful pointers on how to help present the team to the government in order to win contracts. This article is not intended to cover all the legal aspects of team arrangements (you will need to work with an experienced attorney) or cost and pricing issues since this was covered in a prior article which we intend to update in a later issue. Kathy is a consultant with The Acquisition Network that provides acquisition assistance and training to federal contractors and can be emailed at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or called at 415-861-0556. Kathy is also a member of our “Ask the Experts” panel.)

Comments

Whether you are a large business looking for a small business to partner with or a small business looking for a large business to help you grow, teaming can be a tricky business. Knowing some of the pitfalls and making wise decisions up front can avoid many of the catastrophes that happen everyday as a result of teaming gone wrong.

Occasionally teaming disasters are a result of actual intent to mislead the other party.  For example, a business might hide an affiliate from its teaming partner, representing itself as small, to have a teaming arrangement for bidding as a small business. When the Small Business Administration investigates and learns the business is large, both members suffer damage to their reputations and pocketbooks. In this situation, the intent to mislead the Government sticks to both firms.

Much more common are simple misunderstandings that occur as the result of differing assumptions by the teaming partners. Too often, short bid periods and unanticipated opportunities that look too good to miss lead firms to jump into teaming arrangements with other firms who are not sufficiently checked out.  For example, if your “partner” fails to pay Davis Bacon rates to its employees, the Department of Labor will look at both of you and while only your partner will suffer the monetary consequences imposed by DOL, the damage to your reputation will stick to you both. Or, if your partner has an inadequate accounting system where contract price is based on cost-based build-up the entire proposal may be rejected. 

Often the agreements are verbal or if written are quite sketchy. Things such as proposal costs, profit and loss sharing, and management control are often not specifically discussed, with both firms thinking the arrangements are obvious. Unfortunately, what is a logical assumption to one firm may not be to another. 

For example:
• Who pays for the preparation of the proposal. This sounds obvious, and often it is the obvious nature of this item that leads to failure to spell out the specific terms. The cost sharing terms for this item should be stated in the written Agreement. More than one small firm has been shocked to receive a substantial five figure bill from a large business that offered to prepare the proposal. The smaller company assumed preparation included covering the costs and never verbalized this assumption for confirmation.
• Profit/Loss sharing and a clear statement of financial responsibility. A small firm may assume limited liability (since the larger firm can more easily incur a greater loss without disastrous consequences) and at the same time expect 50% profit. Obviously the sharing arrangements should be discussed and documented. Many a firm has ended up in court by assuming this type of “obvious” arrangement.
• Responsibility for any space (such as offices or warehouses) or equipment that was leased or purchased prior to submitting the bid. Clarify who will be responsible for lease payments, including if one firm or the other uses the leased location or property.

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