Non-Disclosure, Teaming, and Subcontractor Agreements
Don’t like reading? Check out my video on the same topic!
First, a quick review of when each is used. The Non-Disclosure Agreement (NDA) is used during preliminary discussions between you and a potential teaming partner. Its purpose is to protect any information that the companies learn about each other during the process of discussing potential bids and teaming arrangements. The Teaming Agreement (TA) is used when you have decided to bid together. It spells out the terms and it ends upon contract award (to you or the other company). The Subcontract (SUBK) is used after the Prime Contractor has won, and it’s your agreement for performing on the contract together as prime and sub.
Who initiates these agreements? In almost all situations, it’s the prime contractor.
Should I have an attorney review all documents? It’s unlikely that you want/can afford to pay your attorney to review every NDA/TA and SUBK that you receive. Instead, have your attorney create templates for you. Even if you are a sub, these documents are a great reference tool when reviewing an agreement received from a prime. Some agreements are written with mutually agreeable terms, while others are written so that one party takes all the risks, liabilities, and has all the restrictions. If they are not balanced, push back. You can use the language in your template for suggested replacement text.
For example, the paragraph on Remedies/Equitable Relief should be worded something like this, “both parties agree that in the event of a breach, the non-breaching party….” And not, “if the Subcontractor breaches the contract, the prime can ...”. You get the idea.
Other things to look for.
Specific to the Teaming Agreement:
· What is stated in terms of required proposal support? Is this what you expected?
· Must the prime name the subcontractor in the proposal? This can be part of the agreement. I noticed larger primes including this in recent years, and suspect it’s the result of lawsuits where a subcontractor had a Teaming Agreement, but was not named.
· Perhaps most importantly, if you have an agreed-upon workshare, is it included in the TA? What about a requirement to include that workshare in any future resulting subcontract (I got burned here once; can you tell?)
Specific to the Subcontract “SUBK”:
· Payment terms. When will you pay (or get paid)? It’s normal for either “30 days after acceptance of an approved invoice” or “pay when paid” – a specific period of time after the prime gets paid by the government. I strongly recommend you use “pay when paid” if you are the prime contractor. Otherwise, it’s likely you will have to pay your subs before you receive payment. If you’re small, and the prime is really big, push for a 30-day payment.
· Workshare – if you have an agreement for workshare in your Teaming Agreement, make SURE it is included in the SUBK. The TA generally terminates upon issuance of a SUBK, so it must be included here too.
· Communication with the Government – Its normal and expected that the SUBK states that only the prime contractor may have any direct communications with the government.
· Insurance – Check to make sure the requirements are reasonable. Sometimes the prime flows down the same insurance requirements that were in their contract, and they may not be applicable to a subcontractor. If not, push back. Insurance is expensive!
One final word, if the prime contract is an IDIQ type contract, it’s a good practice to put an IDIQ type contract in place with subs (or request one if you are sub). Task orders/calls can happen quickly. It’s best to have this (sometimes slow) process already completed, so it doesn’t interfere with execution of the contract.
