In today’s competitive construction industry, companies are opting to unite with outside parties to pursue government contracts. However, the complexities of any contract must be understood before entering them. It’s always a good idea to enlist the help of a Brandon construction lawyer that can provide invaluable insight on contracts. We’ll give you an overview of teaming agreements and discuss some advantages and disadvantages of these arrangements.
What’s a Teaming Agreement?
A teaming agreement is a type of teaming arrangement consisting of a prime contractor and another company that acts as a subcontractor. Both come together to pursue government contracts. Teaming agreements put companies in better positions when bidding on contracts. This type of agreement can work especially well for smaller companies that want access to contracts they may not be able to obtain alone.
The prime contractor is in charge of the overall project and must ensure the project’s completion. The Subcontractor is responsible for completing specific portions of the project as outlined in the contract. Contractors and subcontractors remain independent instead of operating as a partnership.
Teaming agreements can be a means to success for companies. Teaming up with other parties comes with benefits. Some of them include:
- Parties have limited obligation to one another
- Shared financial risks
- The ability to enter new markets
- Better proposals due to the combined capabilities of the parties involved
Like any business relationship, you should know what you’re getting into. Protecting your company’s interest is a top priority. While not exhaustive, here are several disadvantages of teaming agreements:
- Having to renegotiate every solicitation
- Prime contractor is fully responsible for the completion of the project
- Possibility of not agreeing on subcontract terms
- Subcontractor doesn’t have privity of contract
- Reduced profits due to sharing of profits
- Unanticipated liabilities and commitments
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.