TIME FOR A TEAMING AGREEMENT CHECK-UP

Contractors need to carefully review Contractor Teaming Agreements (CTA’s) to ensure that they are specific and enforceable.  While a general CTA may be easier and faster to execute, such agreements tend not to hold up in court – precisely when you need it.  According to a client alert recently issued by Steptoe and Johnson, the Virginia Supreme Court recently ruled in CGI Fed, Inc. v. FCi Fed, Inc. that a teaming agreement entered into by the two companies for State Department Visa processing did not create an enforceable obligation to enter into a subcontract with specific terms.  Further, the Court found that CGI could not recover damages on its fraudulent inducement claim because it was not entitled to lost profits under a subcontract in which the final terms were uncertain and unenforceable. While the Steptoe article used hyperbole to make its point (saying that CTA’s are, in essence, doomed), the fact is that companies don’t always put enough time and thought into their teaming agreements.  Indeed, it is difficult to tell in this case, where words such as “subcontractor” are used, whether this is a classical GSA-based CTA or not.  Getting terms right is a frequent short-coming of CTA’s.  CTA’s can be valuable tools that enable contractors to pursue business they otherwise might not have a chance to compete for.  While it is tempting, especially at year end, to wantonly team with another firm, this case underscores the need to ensure that CTA terms are specific and provide your company with the protections you think you are getting.