Sometimes contractors join forces to prepare a bid and enter into a teaming agreement. Under the teaming agreement, they agree that, at some future date, they will agree on the terms of the contract for the work. The problem arises when the general contractor, after winning the bid, tells the subcontractor that they will not be working together. Sometimes the subcontractor sues to enforce the teaming agreement. And usually, the subcontractor will lose because agreements to agree are not enforceable.
A recent case out of Virginia drives this point home. In that case, Cyberlock entered into a teaming agreement with Information Experts which included language that: if, during the period of this Agreement, a prime contract is awarded to Information Experts as a result of the proposal, Information Experts will, within five (5) business days from the date of award of the Task Order by the Government to Information Experts, enter into the attached subcontract.
The parties then entered into a second teaming agreement that superseded the original teaming agreement. The second teaming agreement only required the parties — post-award of the prime contract — to exert reasonable efforts to negotiate a subcontract for work which might be awarded. Obviously, second teaming agreement was a substantial back pedal from the original teaming agreement.
As the court found, the second teaming agreement was simply a writing that contemplated a future transaction or more formal agreement, and thus is presumed to be an agreement to agree rather than a binding contract. Unfortunately, the court did not weigh in on whether the first teaming agreement created a binding contract.
The lesson to be learned from this case is that teaming agreements, and all agreements for that matter, must show that the parties have agreed to specific terms. It is not enough to show that the parties will negotiate open issues in good faith to reach a contractual objection.