By entering into team agreements, potential contractors and subcontractors are able to offer the government the best combination of performance and cost. The cooperation of agreements that contain only an obligation to negotiate a contract of subcontract in good faith runs the risk of entering into unenforceable agreements. In order to avoid this result and ensure the benefits of the team, team agreements should, in the current circumstances, contain as many essential subcontracting conditions as in practice. In its decision, the Tribunal found that the provision of the team agreement that the team leader would perform 51% of the volume of work as a 49% principal contractor as a subcontractor was not intended to fulfil a binding obligation, but rather to define a contractual objective and an agreed framework for the future negotiation of a subcontract. In its decision, the Tribunal found that there was nothing contradictory in finding that a contract clearly includes a non-applicable agreement between two parties. Recently, the U.S. Court of Contracts for the Circuit of Four upheld the District Court`s argument2 Potential subcontractors should be aware of these potential pitfalls when negotiating team agreements. Dan Johnson is a partner in the practice of Covington – Burling LLP. The parties signed an amended agreement on the consolidation of these new conditions, but the other terms of the original team agreement have not changed. With CGI`s help, the FCi prepared a revised proposal to the government. The terms of the CGI-FCi team agreement, as reported by the court, are fairly typical.
For example, it is customary for two contractors to agree to jointly develop a proposal, to outline a post-assignment volume of work and a share of work, and to agree that they negotiate a “good faith” subcontract at the time of award. As the CGI Federal case shows, these common notions can be an almost impenetrable network of barriers to the success of outsourcing. An example of a team agreement that contains these essential concepts can be found in the CE-G. In this case, the agreement states that “if the contract is awarded to [Cube], CE and G will perform certain functions as subcontractors . . . with the functions to be determined when unlocking the [Request For Proposal(RFP)] Following the release of the PSR, the team members shared “the [work statements] based on each company`s skills and areas of expertise,” and the parties explained their division of work into the proposal. With respect to compensation, the team agreement contemplated a cost contract and the two team members presented the government with separate cost proposals that assess the cost of their parts of the work. With respect to duration, the team agreement stipulated that subcontracting would apply for the same duration as any major contract. Although negotiations on subcontractors on the subcontractor`s willingness to accept a cap on indirect rates and termination for accommodation reasons failed, the Tribunal found that the Prime Minister had proposed these bad faith conditions and that disputes between the parties on these issues did not affect their compensation and duration agreement.
The two companies have begun negotiations for subcontracting, with FCi offering only a 22% share of work. They never agreed on a definitive subcontracting, and FCi ended their relationship. CGI sued FCi in Fairfax County, Virginia, Circuit Short, for violating the revised team agreement, unjust enrichment and fraudulent inducements. A jury awarded CGI $3.5 million for breach of contract and $8.5 million for the loss of fraudulent incentives, but the judge struck down both awards and awarded FCi a summary decision on the unjust enrichment application. It remains to be seen whether the Cyberlock court`s analysis of the intent and concrete conditions in Virginia with respect to the written team agreements will become the applicable law.