What is a teaming arrangement?

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A teaming arrangement is a form of business arrangement that involves two or more companies coming together and combining resources for a specific purpose.  Companies sometimes utilize teaming arrangements when bidding for contracts awarded by the Federal Government.  Each company in a teaming arrangement has a specific set of responsibilities, with one company generally serving as the prime contractor and one or more companies serving as subcontractors.  Such arrangement may be desirable for businesses looking to complement each other’s capabilities.

Businesses should use care when structuring a teaming arrangement, particularly if they wish to maintain their autonomy and be viewed as separate entities.  Otherwise, the teaming arrangement could be viewed as a joint venture, with participants to the arrangement considered affiliated, or a single entity for size determination purposes. 

Affiliation occurs when one participant to the teaming arrangement is dependent on another for business to such a degree that its economic viability would be in jeopardy without such business.  Factors considered in determining affiliation include who will manage the contract; which participants possess background and expertise for contract performance; the degree of collaboration in preparing and submitting competitive proposals; whether there are discrete tasks to be performed by each participant or commingling of personnel and resources; and the amount and type of work to be performed by each participant.

When a teaming arrangement is deemed affiliated, smaller participants could be at risk for not qualifying as a “small business” under the Small Business Act (“SBA”) and lose the benefits associated with such designation. Consultation with legal counsel is therefore recommended for businesses desiring to enter into a teaming arrangement to ensure the arrangement is properly structured.

 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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