EM Law are experts in drafting, negotiating and advising clients on teaming agreements. Our lead contract lawyer is Neil Williamson who has extensive experience in advising clients on a wide range of commercial law matters.
A teaming agreement is a standard document between two parties who wish to work together on the preparation and submission of a tender. The basis of the agreement is that if the tender is successful, one party will act as the main contractor and will appoint the other as a subcontractor. The benefit of teaming agreements are that they allow parties to pool resources for a limited purpose, without necessarily requiring the establishment of a joint venture entity.
Teaming agreements can be flexible depending on what the parties aims and objectives are. It often includes a schedule which the parties will need to complete to allocate the work between themselves. A teaming agreement does not normally go into detail around operational matters concerning the performance of the parties’ respective obligations should the tender be successful. Operational maters will be set out in the main contract and the subcontract. The main contract, between the client and the main contractor, will be set out in the invitation to tender and there will be limited scope for negotiation with the client. The subcontract will define the parties’ respective obligations and those obligations which will flow down from the main contract. This document assumes that the parties will revisit certain matters dealt with in teaming agreements, should the tender be successful.
Terms to consider including in teaming agreements
Teaming agreements often require parties to undertake to work exclusively with one another for the purposes of preparation and submission of the tender and, if successful, structure themselves as main contractor and subcontractor. Without exclusivity, both parties will be on risk that the other will bring someone else in to work on the tender or even work on a separate tender.
Standard teaming agreements generally provide for mutuality of obligations. For example, either party could be liable to the other for:
Although each party has sole responsibility for the accuracy and adequacy of the content of its “part” of the tender, neither party will be liable to the other should the tender be unsuccessful. However, mutuality of liability may not be appropriate in every case. For example, where the subcontractor is the driving force in the tender process, with the main contractor being little more than a post-box between the client and the subcontractor, it may be reasonable for the subcontractor to assume more of the risk.
As with most agreements, each party will want the other to commit to some level of confidentiality in teaming agreements. When bidding for a tender confidentiality becomes even more important. The parties should consider to what extent a party’s advisers and other third parties should be able to access confidential information concerning the tender.
This is often a difficult clause to agree on. Usually the parties will agree to own the intellectual property rights in materials that they owned prior to working together on the bid. But what about new materials created jointly? The parties can either chose to take joint ownership of these new materials or they can decide that one of them should own them and give the other a wide licence to use them. Usually we prefer the latter option in teaming agreements.
As with most agreements, teaming agreements should contain clauses addressing how it may end. Careful thought will need to go into how the agreement may end in response to what happens with the tender process and any announcements made by the authority running the tender process.
Key clauses to be included in the subcontract agreement
It can be useful for the parties to agree in teaming agreements on some of the key clauses that will be included in the subcontract agreement. This is to avoid lengthy negotiations later on if they are successful in their bid. Key clauses could address, for example, limit of liability, intellectual property and flow down of risk from the head contract through to the subcontract agreement.
For any questions you may have concerning teaming agreements contact Neil Williamson.
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