Streamline your deal governance in legal agreements

How to create outlook signature

thanks for joining us today for Jennifer shouts mythos psnr webinar Wednesday program we are coming to you live from Washington DC our webinars are every Wednesday and are provided complimentary they're recorded and can be downloaded from our website and youtube channel which now holds over 300 of our government contracting webinars and the interest of time we do not take questions so if you have questions for a speaker we will have his information on the last side of the presentation today a special thanks to our educational sponsor the National Veterans small business Coalition for making these webinars possible the nd SPC is the largest nonprofit trade association for veteran visit their website for more information and now about us we work with US federal government contractors including product service and software firms our services range from market analysis reports to contract vehicles and compliance more information is on our website also this Friday April 17th we will be hosting a coab is 19 contracting for federal and state government funding and business opportunities please visit our website for more information we also have opportunities for your organization to advertise an unusual letter we now reach over 17,000 700 subscribers and this includes both contractors and government contact us for pricing information with the email shown on your screen now to introduce our speaker Tony Anika welcome Tony we're glad to have you here with us today and I'll turn the floor over to you thank you very much I appreciate jennifer and team sponsoring this program and it's always a pleasure to be a part of it I am Tony Anna Kath I'm a partner and coach at Williams Mullen and I'm a co-chair of their government contracts practice and also involved on the Cova 19 response team next slide please um today's program is going to focus on creating a sound legal teaming teaming agreement and I want to thank all of you who are taking time out of your day to join me in digging into the niceties of creating a proper and perhaps enforceable teaming agreement considering the unusual business environment in which we all find ourselves I did want to start by saying that I hope you and your colleagues and families are all faring well in these unusual environments although this is not a covin 19 related seminar with some of the rapid-fire deals that we have been advising on over the last few weeks some of the lessons that may be learned today may be helpful next slide please so what we're going to cover today will be to focus on what constitutes a teaming room what's it all about how it should fit into the business continuum of getting business and whether you should team at all what a teaming agreement should look like what are the key issues and enforceability what the different types of teaming agreements and by that I mean what most people would think it was a traditional teaming agreement that's vertical in nature between a prime and a sub and the horizontal teaming agreements which are more in the nature of a joint-venture I would note that although this program is focused on the government contracting community it also applies in many ways to teaming in the private sector next slide please so what is a teaming agreement because we're in the government environment let's look at what the far says and the first thing to know is that the far doesn't define the concept of teaming agreement in common parlance it's essentially a document that will memorializes one's arrangement between two entities what the far does do is break out two types of contract teaming arrangements one as I mentioned before is the horizontal type of arrangement which we'll talk about in a minute which is really a joint venture which could be a partnership an LLC or a corporation it's formed for a specific purpose and carries out under terms like a free-standing corporation the other is a vertical teaming arrangement which is a traditional more traditional concept of two companies or more getting together with a prime at a subcontractor to also engage in specific purposes as a matter of policy the far is pretty wide open and it'll recognize either of these types of Keamy arrangements under two conditions that they if the parties be disclosed and the relationship be disclosed either in the offer or before it becomes effective if a teaming arrangement comes together after offers are submitted turn to the next page please one other distinction we want to draw as a difference between a teaming agreement which is what we're talking about today and a subcontract the farc defines both the subcontract and a subcontractor and the goal of the teaming process of course is to end up with a subcontracting agreement at the end of the process the key is that as subcontract is the agreement enforceable by which an entity provides goods and services to a prime contractor in fulfillment of its prime contract to the government that ties in with the definition of a subcontractor which gives some consternation to suppliers and distributors when they find out that any supplier distributor vendor or firm that furnishes supplies or services to a prime contractor might be considered a subcontractor under the far it's not within the scope of this particular program but there are many vendors out there hardware stores big vendors of roofing equipment things like that who are surprised to see that maybe the far does apply to them next page so let's jump in and start focusing on the teaming process itself I will say that we're often surprised by the calls we get when we're asked simply to draft up a teaming agreement just because that's the way it's done and what we find is that the prospective client really is given very little thought to the why the purpose and and what they're entering into whether and whether one should enter into a teaming agreement or why one should enter into a teaming agreement and what it will look like really should depend on the application of a number of factors that a business person should consider and discuss before proceeding on this page we've set out a number of those factors from the basic to the more nuanced at a basic level the framework that one is going to enter in under a teaming agreement often depends on whether you're the prime or the sub whether you're large or small whether you're experienced a new entrant or whether you have particular leverage because of a unique product or skill that's at a very basic level there are lots of reasons why people should enter into a teaming agreement we've set out the pros and cons here they fall really into two categories the the first category which is really the first five lines under the pros are to expand capability or capacity to meet the requirements of a customer or enter into a new area in other words you might be teaming because somebody else has some unique experience they might have a tie to the customer they might have some unique past performance and the like so that's an expansive approach the second one is much more defensive the last two lines of the pros and that's really to reduce a reduced risk or share cost or in some instances to lock in a partner there is much more of a defensive approach thinking about how to protect oneself on the other hand there are some cons of why you wouldn't enter into it first you certainly have to give up a lot of internal control you have to give up the opportunity for organic growth and it might be that you could develop these skills or capabilities internally by yourself and therefore not have to share in some of this with another entity you give up control and you give up profits and you put your secrets at risk by having to share them and lastly you might be creating a competitor who will be a challenge to you in the future for the smaller entities a particular risk is that you might put in lots of effort because these teaming agreements often require a substantial investment of time and find out that you get shut out at the end of the process if you don't play it right next page please so it's important as I've said before to think about the teaming agreement process as a continuum as you look on this page it is not at the top of the list it's pretty far down and you need to be thinking about a teaming agreement as part of your continuum in applying these factors one needs to put the teaming agreement into the context of your overall consideration of your business goals which are going to vary from circumstances depending on your role your size your plan so the first question is whether you need the team at all can you develop the product or the service yourself can you go hire a new set of employees that would be helpful what are the respective consequences of going alone or teaming there are obviously different ones and that's something you think about before you go down this road what is the business deal or business deals you are chasing is it a one-off deal or might you be setting up to go after a series of deals or an entire program over a period of years that ends up with a a different looking document where you're going to have a multiple set of sub contracts that are probably going to spin off so it's important in making these considerations don't just jump in before you do that even if you've met some company you think that's ideal it's worthwhile doing some market research on the company that you're thinking of teaming with and then going to seeing if there are other companies that might be just as helpful and might be more compatible the way you do business in considering how to do it what are the secrets that you're going to have to share are you going to have to enter into an NDA which is really a critical first document you need to agree to before you get too far down the road you need to decide what that NDA is going to look like how long it's gonna continue and it too is not just a a boilerplate document but should give some thought to it it's important to do due diligence even in this time of social distancing in isolation it's possible to do research on Sam and dun & bradstreet or its replacement it's possible to interview your teammate and see what it's like you can have a zoom conference and interview I will share with you that a week ago we were working with a company who received a proposed subcontract in a situation where they hadn't even done a teaming agreement and it was a draconian subcontract we went back to the other side with some changes and it came back in an even more draconian manner we did some due diligence and found out that there were three current lawsuits for them failing to pay their subcontractors the catch is that they have a unique entree into a particular agency so it's a delicate balance that you have to go through in deciding whether to team with a particular party so hopefully if you go through that process and you decide you're going to enter into a teaming agreement we can move on to the next slide so the first type of teaming agreement we're going to talk about is the vertical teaming agreement which is this traditional prime subcontractor arrangement that that comes together most often in the marketplace so although they are somewhat similar when you look at them each teaming agreement should be unique in reflecting the unique circumstances so there's no cookie cutter solution and those that do them find out that they run into the problems that of enforceability and the tensions that we're going to talk about in one of these agreements each party retains its identity as a company and it sets up as either a prime or one or more sub contracts each with their own interests each of their own goals the goal however of a teaming agreement is that there will be a prime in a subcontract that will will join forces to get business and then in theory the prime will give the subcontract a portion of the prime contract to work on I use the word in theory because the source of most disputes and litigation in the teaming agreement arena is when subcontractor doesn't get the work that it was expecting to get or that it somehow gets excluded and that is why time often needs to be spent in negotiating this most simply most folks don't think through a teaming agreement as much as they should and it should involve some negotiation to address the unique circumstances and internal interests that you have in what you hope to get out of it if I were to generalize it a bit most Prime's want flexibility to delay or escape from a teaming agreement or to switch horses as the process continues subs usually want to enforce or tie down the prime contractor to commit to work having said that however the circumstances of a prime may change dramatically if the subcontractor they're dealing with has a critical technology or critical personnel or critical past performance an example might be a business that has developed a very close relationship with an agency that is now issuing the follow-on program as a small business set-aside the company can no longer go after it so it might team up with a small business or an Alaska Native company to go after that business it needs that entity to to secure the business another that arises in the teaming agreement particularly for smalls is when the process gets drawn out and if you think of protests these processes can go on for quite a while they can get drawn out we've noticed in the past few weeks that the government is so eager to get into a contract that they are now doing advance agreements and advance agreements requires the contractors to begin performance before there's a contract and often at risk prior to the contract in which the government says it'll reimburse you but doesn't commit to do so all of that can put strain on a teaming agreement and something that should be addressed next page please so the big challenge about teaming agreements that one reads about all the time and that's something to be considered is the enforceability of a teaming agreement the fact that it's unenforceable may be fine if all you want a teaming agreement to be is a roadmap to use in planning for your mutual efforts to get a subcontract if that's your goal that's fine but for many who want to have an enforceable agreement you need something more then you have to look at the law which which will govern your rules because they differ across the country for those in this mid-atlantic region for Virginia Maryland to DC the courts are strict in interpreting the teaming agreements and they largely require that the terms of the subcontract be locked in or an objective standard be used for determining what there will be in other words you can't have an agreement to agree or that you will terminate the teaming agreement if after 60 days of negotiation it fails you can't have an undefined statement of work and you can't have pricing TBD you can't really leave significant negotiations to be conducted if the government approves the alternative to perhaps apply a New York law it's a bit looser price can be approved through a defined process that doesn't necessarily need to be as objective in Virginia as it is in Virginia Maryland in DC and then to go to the other extreme California's by far the loosest and the courts have approved even an oral teaming agreement but it's not unlimited one thing to keep in mind in terms of enforceability even if the entire teaming agreement will not be enforced it may be possible by careful crafting that a course will enforce particular provisions of a teaming agreement if you have crafted a careful severability clause and a severability Clause says that if a court strikes down all portions of an agreement it is the in party's intent that the other portions will remain enforceable so that's an important thing to keep in mind all of this says that the negotiation of a teaming agreement and the choice of law can be critical and worth the effort to spend the time on next page please ok key terms for enforceability assuming one desires to enforce a teaming agreement there's several areas that need to be addressed to increase the likelihood of creating an enforceable agreement ones that often forgotten is the preamble or the recital section they're often overlooked or dismissive boilerplate but it is a chance to give context to the agreement and to reflect the desire of the parties and the purpose for which they're undertaking this effort a key aspect is you need to include in your agreement itself a term that specifically incorporates the recitals into the agreement you also need a clause that says that's the intent of the parties that this be a binding agreement and not just a agreement to agree there also should be mutual consideration within the agreement itself all of these kind of terms are things that need to be focused on to make sure that you have something enforceable how long is it going to last that can become important if you're going after multiple deals you don't want it to last forever particularly if you've entered into an exclusive arrangement we've talked about the termination clause a little bit it can't be a termination clause that says we'll agree to a subcontract if we can agree in 60 days otherwise it terminates those kind of clauses are agreed to agreements to agree and the agreement will be knocked down lucidity is something that is often wanted by subcontractors or a prime contractor who's looking to tie somebody in again it needs to be tied to the the duration and term of the teaming agreement the subcontracting language it needs to be mandatory if it's going to be enforceable you can't say we'll negotiate and maybe you have to say that it is the intent of the parties that the subcontractor will receive a subcontract on specified terms and ideally you'll be able to negotiate the statement of work ie a portion of the subcontract a portion of the prime contract which you might include as an attachment you certainly can attach portions of the proposed subcontract to your teaming agreement all of which goes to increase the enforceability similarly price if you can't specifically agree on the price that will be paid under the under the subcontract then you want to try and create an objective standard by which the price will be determined so that it's really plugging in a number rather than a negotiation that leads to that the ideal of course is to attach the subcontract as a attachment or exhibit to the teaming agreement that often is not possible by the time that you go through the process but one can go a long way there and in terms of enforceability the more you put in the better it is I'd like to talk a little bit about remedies given the fact that enforcement of teaming agreements are often difficult parties sometimes try to consider liquidated damages as an alternative to litigation and one might come up with a value the second theory is instead of treating a a breach as a breach of contract argument which is often defeated one might argue that one has breached the obligation of good faith and fair dealing and there is thereby created a constructive trust as the measure of damages let's go on to the next page please okay this is the scope of agreement terms this is how you shape it that there are a variety of terms and often they they look similar but what you need to do is this is going to be the document that sets out the relationship you have leading up to entering into a subcontract and if you're going after multiple vales will continue after your subcontract towards the second and third and fourth so you wanted to find the relationship between the prime and the sub what are the roles going to be who's going to take the lead on drafting what's the subcontractors obligation to commit resources and finances what I P will you be accepted to share if you want to get into the nitty-gritty of the subcontract expectations and the type of clauses that are going to be involved alright what kind of duration do you want it to go on for one of the issues that comes up is communications with a customer now in most the prime contractor is going to take the lead in discussions and negotiations with the government in this type of situation but you may want to include the subcontractor in those discussions and then there's the situations like the one I talked about before where the subcontractor really brought the business to the table and you've got a prime contractor of convenience so to speak in that situation you may have to set up an arrangement where the subcontractor gets to have direct communications with the entity with which it has a good relationship how you frame that out is sensitive and something that is worth spending a little bit of time on the NDA and confidentiality are obviously critical and need to be addressed both in terms of during the the teaming agreement process and how it will flow into the subcontract will the NDA continue into the subcontract period or will the subcontract have its own confidentiality provisions obviously you need to deal with IP and how that's going to be dealt with if that's a sensitive issue one thing about special circumstances where you have a critical teammate if you have a situation where there's some critical technology or Co it may be necessary to set up an escrow to protect that code in case things fall apart if you have a key person how can you tie that person into the agreement and guarantee they'll be there for the subcontract this is one of the areas for due diligence discussion early on next page please so some of these other terms these are more of I'm not going to say generic but once you should spend attention to you want to talk about the hiring and solicit no solicitation clauses and that also becomes particularly important in the subcontract you don't want folks poaching on your folks and you don't want to poach on others the OCI clause is important because as a number of our clients have found out or have asserted there all sorts of conflicts of interest in the government not just because of the relationship that any one company has with the government but based on the people they made hire with the intention of using them on the contract one needs to be careful about hiring former government employees or employees of people who are your competitors they can lead to bid protests and there's something that need to be disclosed the other thing I wanted to talk about it flow downs one doesn't know what the actual flow downs are going to be until the prime contracts negotiated but they will be in the solicitation and it's worthwhile spending some time early on to perhaps include the prospective flow downs in your teaming agreement so that they can be addressed for instance if your prime contract is a cost plus fixed fee or time and materials but you expect that you're going to have sub contracts that are done on a commercial item fixed price basis it may be possible that the flow downs that will go to your sub contract are much more limited under far 52 - 2 4 4 - 6 which have about 15 clauses and you may be able to negotiate that out at least and draft in the early stages the boilerplate are the kinds of clauses that are added you know up until recently I don't think many people paid attention to the force majeure clause it now seems to be somebody that something that everybody looks at again you need to include a clause about the recitals being included in the agreement and the disputes clause and applicable law are also important next page please let's turn briefly to the horizontal teaming agreements and those are the joint ventures the issue of enforceability doesn't apply here because what you're creating is a new entity either a contractual joint venture or an LLC or a corporation and the type of arrangement is that partners are members whoever is going to comprise the JB's really create an organization which is intended to follow a particular purpose for a particular period of time and each party agrees to contribute resources and share liability in some form of negotiated share often related to the percentage of investment or commitment to the organization a big issue in creating a joint venture is whether the joint venture will be populated or unpopulated people often used to have populated joint ventures in the sense that a populated joint venture means that the new legal entity hires its own staff both the both the program people in the administrative staff an unpopulated joint venture means that the joint venture can hire a small administrative staff but the work will be done by employees of the various members I would note that the SBA now bar is populated joint venturers for the various types of approved small business joint ventures because the small that SBA is concerned that the small business folks get shut out of the staff and they don't get the benefit of the small business programs that they're intended to next slide please so the key terms of a JV this is really an area of corporate law that's outside the scope of our discussion today but it's really setting up an organization with an operating agreement it's cut just like the corporate corporate bylaws operating agreement all of those kinds of things a key aspect though is to set out the scope of what the jb is supposed to do two companies come together to go after a certain Defense Department contract or to go after a Defense Department program and series of contracts one talks about the ownership interest who's going to contribute what how are the profits going to be distributed who's going to make the decisions is there negative control who's going to provide management it's important to address succession in these interests because even though one thinks that these entities will continue forever it may be that one entity wants to get out of the agreement what happens especially if you're in the midst of a government contract and the government likes who you are how do you slough off somebody and bring somebody and new liabilities are shared in a negotiated manner and how do you wind up and end the organization and can you kick somebody out of an organization if they engage in improprieties and inappropriate activities the SBA has some special requirements and let's turn the page and talk briefly about them so they're there a number of small business programs the one that's often used is the all small mentor-protege program this has been an evolution of the SBA and it allows an entity other than a small business can apply with a small business to enter into a program where the small business identifies its needs the large business agrees that it will provide that assistance it can own up to 40% of the Protege so you enter into a JV agreement that has to be approved by the SBA you have to submit a plan to the SBA of what you're going to do and then you have to provide annual reports what happens then is that the small business can apply for some set-aside contracts the large business rides along and supports and you as a large business can get business that you otherwise would have been excluded there's an initial three-year term and and with approval and good performance you can extend it what needs to emphasize the risk of non-compliance there have been companies that have taken this loosely and found out to their detriment that if you sign up to one of these things you have to go along with the rules you have to provide the assistance you have to provide the support you have to allow the little company to lead if you don't you may be excluded not just from this program but for other government contracting programs as well lastly the small business set-aside program is similar to small businesses can combine to go after three new programs over two years next page the want to touch on because it's confusing is the GSA contractor teaming arrangements which if you're to GSA Schedule holders you're allowed to combine and enter into a joint venture agreement those agreements are online they're forum agreements which you should tweak to meet your particular needs but you can bring them resources of to GSA Schedule holders together one of them agrees to operate as a managing member but they actually are both prime contractors it's a way to increase business with that let's go into the last slide I want to thank you for spending part of your day with me I know that in these types of seminars where we go kind of quickly at 10,000 feet they're often questions and certainly in this Cove at 19 environment there are all sorts of new business relationships being developed my colleagues and I are happy to answer your questions both in this area and in others and I would note that Williams Mullin on its main page has a Koba 19 legal resources page thank you again for your time good afternoon and stay safe thank you Tony for a great presentation and sharing your time with us and thank you to everyone who joined us the recording will be on our website and YouTube channel within the next 24 hours please join us this Friday as recovery each part is afar and join us next Wednesday for more hot topics and federal contact