Teaming With Controversy Re: Government Contractor Teaming Agreements
In Cyberlock Consulting, Inc. v. Information Experts, Inc., 939 F.Supp.2d 572 (E.D. Va. 2003), the United States District Court for the Eastern District of Virginia granted summary judgment in favor of a prime contractor as to an expected subcontractor’s claims that the prime contractor breached the parties’ teaming agreement after the parties were unable to reach agreement on a subcontract for the work which was awarded to the prime contractor by the Federal Government. The Court agreed with the prime contractor that the post-award provisions of the teaming agreement constituted an “agreement to agree” and were, therefore, unenforceable under Virginia law.
Although commentators have suggested that the ruling raises new questions about the enforceability of teaming agreements under Virginia law, it should not have come as a surprise to anyone familiar with government contracting in Virginia. Mere “agreements to agree” have always been unenforceable under Virginia law, as they are under the laws of Maryland, the District of Columbia, and many other jurisdictions. The teaming agreement at issue in Cyberlock was drafted in terms of a future transaction and contemplated a later, more formal agreement; under the teaming agreement, the parties’ chief post-award obligation was to “exert reasonable efforts . . . to negotiate a subcontract” within certain nebulous guidelines. Moreover, the teaming agreement expressly acknowledged the possibility that such negotiations would fail and provided that the teaming agreement would terminate upon the “failure of the parties to reach agreement on a subcontract after a reasonable period of good faith negotiations.”
Some commentators’ concern that the Cyberlock decision signals Virginia’s inhospitality to teaming agreements is also misplaced. The Cyberlock decision only affects a teaming agreement’s post-award obligations (those obligations which become effective once the prime contractor is awarded work by the Government), not its pre-award obligations (which address how the parties are committed to working together to attempt to secure an award for the prime contractor). Government contractors and their subcontractors can draft agreements with enforceable post-award obligations by simply following well-established contract law principles:
If the parties intend to enter into a subcontract once the Government awards work to the prime contractor, they should (where possible) attach as an exhibit to their teaming agreement a copy of the subcontract they plan to execute. The parties in Cyberlock previously entered into a teaming agreement in which they did just that; that teaming agreement was likely enforceable in both its pre- and post- award obligations.
If the parties cannot attach their entire proposed subcontract, they should attach as much of that subcontract as they can, leaving “blank” only the provisions which cannot yet be included.
The parties should ensure that their teaming agreement clearly sets forth the specific work to be done by each party, where that work is to be completed, the personnel being used to complete the work, and the precise compensation to be paid for the work.
If the parties intend for their teaming agreement to also be their subcontract, they shouldn’t act like they don’t. In Cyberlock, the language of the teaming agreement and the conduct of the parties made clear that they never intended the teaming agreement to fully describe their subcontract relationship.
As expected, the United States Court of Appeals for the Fourth Circuit affirmed this decision, based upon well-settled state contract law. Accordingly, government contractors should ensure that the post-award obligations in their teaming agreements are described with the requisite detail.