Small Business and Teaming Agreements, Part II

Disclaimer – I am not licensed to practice law or give legal advice.  The information written in this blog is based on my experience negotiating hundreds of teaming agreements for large and small businesses over my 20+ years in Government Contracting.

In Part I of the blog, I discussed why Government contractors team and how teaming agreements typically work. In Part II I will discuss terms and conditions that I have personally negotiated most often and why they are important to small business owners. This list is not all inclusive and may be different from one organization to the next in terms of importance.

Workshare – Most RFPs will describe work and tasks that are to be performed during the potential contract. Workshare is the portion of work that you will receive if everything goes as planned in the RFP.  Some primes will not guarantee any work prior to winning the contract, if you can negotiate a percentage of workshare in writing that will only assist you with future planning of resources. I mention percentage of workshare versus specific full time employed/equivalent positions (FTEs) because the Government can change or delete tasks during the amendment phase of an RFP and if you have a specific percentage instead of a FTEs, you have a better chance of receiving the same percentage vs losing specific positions.

Exclusivity – The prime contractor will normally require that once you become a team member, that you will not work with any other companies on that particular pursuit.  It is important to ensure that there is no statement that prevents you from teaming with other partners for that same client on different pursuits or providing your normal services to that same client for work outside of this pursuit.

Advertising – Many agreements will require that you get permission from the Prime before you are allowed to advertise the contract win. A win for the Prime is a win for you, and of course you would like to share that information with the world. Requesting that the prime not unreasonably withhold their permission is important in this area.

Indemnity – An indemnity is an obligation by a person (indemnitor) to provide compensation for a particular loss suffered by another person (indemnitee).  As the sub, when you see this clause, you should at the very least ask for the same protection that the prime requires of you in case of an incident.

Proposal Participation – If you can participate with the prime in proposal preparation, it is important that the prime’s expectations are spelled out and you have the resources to contribute whatever you agree to.

Governing Law – Specifies that the laws of a mutually agreed upon jurisdiction will govern the interpretation and enforcement of the terms of the contract. In this case, you would obviously want to have any legal action addressed where your company does business, or in a state that you and the prime can agree upon.

Intellectual Property – A work or invention that is the result of creativity, such as a manuscript or a design, to which one has rights and for which one may apply for a patent, copyright, trademark, etc.  As a sub, you want to retain the rights to any intellectual property that you designed or developed.

Term – This includes the length of the teaming agreement as well as the conditions that would terminate the agreement.  It is important to pay close attention as these items will vary from one teaming agreement to the next.

Teaming Agreements are a very important piece of the puzzle as they can determine what happens down the road with relationships and future business.  It is imperative that you have someone that is familiar with negotiating the key terms and conditions and who can represent your organizations best interest.

 

Recruiters: Managing Search Vendors

Recently, we’ve been diving into the ins and outs of recruiting – when to hire a recruiter and your relationship to your recruiter.  Now, we get into the kinds of recruiters and who to call for what purposes. In my last post, we talked about whether or not you want to own the recruiting process generally or manage professionals who …

Recently, we’ve been diving into the ins and outs of recruiting – when to hire a recruiter and your relationship to your recruiter.  Now, we get into the kinds of recruiters and who to call for what purposes. In my last post, we talked about whether or not you want to own the recruiting process generally or manage professionals who ...

Small Business and Teaming Agreements

Disclaimer – I am not licensed to practice law or give legal advice.  The information written in this blog is based on my experience negotiating hundreds of teaming agreements for large and small businesses over my 20+ years in Government Contracting.

In a perfect world, two parties (prime and sub Government contractors) determine that they have capabilities that complement one another for a particular effort and decide to become a team. A teaming agreement is successfully negotiated, the prime wins the contract, a subcontract agreement is signed between the prime and the sub, and the team goes on to deliver either a great service or product(s) to the Government and they create a long term relationship. There are however instances when a teaming agreement is negotiated and nothing ever happens for various reasons, such as the Request for Proposal (RFP) was cancelled, amended or put on hold, or the prime decides not to pursue the effort.

A teaming agreement is a contract between a (potential) prime and a potential sub in pursuit of a Government contract.  In most cases, the terms and conditions negotiated in the teaming agreement are later incorporated into the subcontract agreement, once the subcontract has been fully executed the teaming agreement then becomes void. Based on this, it is very important that you as a small business sub attempt to negotiate an agreement that is mutually favorable as possible for your business.  I use the word attempt, because in some cases there will be items that the prime will not be open to negotiating regardless of the push back that is received from you.

Teaming agreements can be issued before or after the prime has won a contract.  In most cases, the prime will issue a teaming agreement prior to the release of a RFP but there are times, when the work has already started and because the contract with the Government requires the prime get permission from the Government before bringing a subcontractor onto a project, a teaming agreement will be signed while waiting to receive the OK from the Government.

The terms and conditions that a business considers favorable will vary from one business to another. As a small business owner, you will have to determine what terms and conditions are important to your business. Lastly, as mentioned previously the terms and conditions agreed to in the teaming agreement will more than likely be incorporated into the subcontract agreement, it is helpful if most of the terms and conditions have already been agreed to prior to the subcontract phase. A teaming agreement is legal and binding as is any other contract, it is best to educate yourself or hire someone that can review your teaming agreements prior to signature and acceptance.

In part II of the blog, I will compile a list of some of the terms and conditions that I have seen negotiated most often between the prime and the sub in teaming agreements.

Do I want to own or manage the recruiting process?

In my most recent blog post Debunking the Hunt for a Recruiter, I began breaking down the process by raising questions you should ask before you decide to hire a recruiter. We considered the first question: Why hire a recruiter in the first place? In this post, we’ll dig deeper into your role in the recruitment process. Let’s assume my …

In my most recent blog post Debunking the Hunt for a Recruiter, I began breaking down the process by raising questions you should ask before you decide to hire a recruiter. We considered the first question: Why hire a recruiter in the first place? In this post, we’ll dig deeper into your role in the recruitment process. Let’s assume my ...

Debunking the Hunt for a Recruiter

Graduation season always reminds me of insights I have gained from my favorite graduation speech of all time. In This is Water, David Foster Wallace begins with this anecdote: “There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, ‘Morning, boys, how’s the water?’ …

Graduation season always reminds me of insights I have gained from my favorite graduation speech of all time. In This is Water, David Foster Wallace begins with this anecdote: “There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, ‘Morning, boys, how’s the water?’ ...

Preventing Your Culture From Going to the Dogs!

Early in my career as a marketer, my best friend, Nancy Bauer and I had a marketing/special events company called Maslow & Pavlov. One day, we flipped a coin for who got what philosopher on their license plate and I lost – Nancy ended up with Maslow and I was “stuck” with Pavlov. I was disappointed because Maslow’s hierarchy of …

Early in my career as a marketer, my best friend, Nancy Bauer and I had a marketing/special events company called Maslow & Pavlov. One day, we flipped a coin for who got what philosopher on their license plate and I lost – Nancy ended up with Maslow and I was “stuck” with Pavlov. I was disappointed because Maslow’s hierarchy of ...

Never Lower Your Price

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In a nutshell: If you want to make money, you must value your services or products. And, that means you should never lower your price; merely offer less for less. When your customer wants something at a lesser price, reduce your offering to match the price, and don’t lower the price for a greater-valued service or product. In doing so, your value stays consistent, you will attract the right customers (and conversely, repel the wrong customers) for you, and you will make more profit over the long-term. Never Lower Your Price - Web and Beyond Blog

“Create different levels of service. Some people only buy the most expensive item. Avoid losing sales: offer a stripped down version of your product or service.” ~Beth Silver (in “107 Ways to Leverage Your Small Business Through Marketing & Public Relations”)

Small Business owners early on in their business’ lives find themselves with a particular dilemma. When you are starting your business you consider that any new customer is good for business! So, when they negotiate you down a third of your billable rate or 40% off your retail pricing, you accept with gleeful resignation. You have hopes that business will be different once you have a steady stream of customers. Why? After you have all these customers, you’ll have the bargaining power to raise your rates and really start to turn a profit, right? Sadly, this logic doesn’t hold muster for several reasons: you eat away at your passion by not valuing your most important asset (i.e., you), you attract the wrong customers which develops bigger problems down the road, and you create more financial problems than you solve by operating unprofitably early on in the business.

Consistent Value Is Getting Paid What You’re Worth; Ergo, Never Lower Your Price

Starting a Small Business is no joke, eh? It’s long hours, stressful, energy-consuming, and it can also be genuinely rewarding when you focus on your passion and skills, or your desire to overcome a challenge. You started your business to provide for your family, build a product or service that you can sell with the business and turn a profit, give back to your community, to fill in a gap for your retirement needs, or whatever other reason you had. In order to get up every day and do this, you need to be providing value to your customers but your motivation won’t stay very high if you’re not getting paid what you’re worth. I always tell my clients to price themselves so they are motivated to do the work. Who wants to get subpar work from you because you don’t feel like doing the work for the pay you’re receiving? This does a disservice to your new customers and to you.

The Ones Who Matter Won’t Mind and Those Who Mind Aren’t Worth the Worry

There’s a trick I learned in my teens. You take your 10 closest friends and add up their salaries, then divide by 10; this usually works out to be your salary. It’s remarkable how this works within a small margin of error for most people who earnestly do it. You are similar to the company you keep. And, that means that when you bring in customers who are all discount seekers and not best-value-seeking customers, you build up referrals to other discount seekers. Over the months and years, your business’ value gets eroded as you accumulate customers willing to keep driving down your price, not valuing you, and telling their friends and colleagues that they too can get low prices out of you. This hardly sounds like the best value for your time and effort.

Mo’ Money, Mo’ Problems…Uhm, No. Less Problems, Mo’ Money

For many years, I ran a commodity business. I was constantly pressured to lower prices and deliver the same great service. There were market and regulatory forces in play here that were beyond our control and so I grinned and beared it. Learn from my early mistakes in the business. Don’t lower your price unreasonably to save your business as it won’t actually save your business. I see this often now in coaching and consulting Small Business owners in this downward spiral, before I set them straight. Here’s what happens:
  1. You lose your passion and start cutting corners.
  2. You start to lose your best-paying customers who start to see the lower quality of your work.
  3. The decrease in good business makes you desperate to (a) bring in more underpaying and delinquent paying customers, and (b) not paying yourself and your own bills.
This cycle of lowering prices leads to lost passion, lost productivity, and lost good customers. The gains unfortunately are in greater customer service complaints, attracting worse customers, and more pressure on you to take on anything that comes your way. You’re worth every dollar you’re reasonably charging, so don’t let others tell you otherwise. You should get paid well to do your best work, and nothing less. And, you should work with good people who will refer you to good people, especially those that will pay their bills on time. Anything short of this and your business fundamentals are lacking. So, if you’re currently thinking of starting a business, or if you’re currently struggling, I hope this compels you to never lower your price.

You Really Did Learn Everything in Kindergarten

Glassdoor’s annual list of the “25 Best Jobs in America” would lead you to believe that all you need to succeed in business today is a degree in computer science, statistics, accounting, or math. Undoubtedly, the list, heavily dominated by tech and finance careers, will send thousands of anxious students (and their parents) to career counselors seeking ways to add …

Glassdoor’s annual list of the “25 Best Jobs in America” would lead you to believe that all you need to succeed in business today is a degree in computer science, statistics, accounting, or math. Undoubtedly, the list, heavily dominated by tech and finance careers, will send thousands of anxious students (and their parents) to career counselors seeking ways to add ...