Oct 132014

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By Dr. Earl R. Smith II

Some of our clients are new to the federal contracting game. Most are established government contractors. They come to us because they want to expand their business with the federal government. This article focuses on one of the many approaches we use to help them do just that.

We begin each engagement with a strategic assessment. The objective is to pull the current quals, past performance, branding and value proposition(s) into focus and then rework each to more closely align them with the strategic vision for the company. You would be surprised how much out of alignment some of these are. Or, maybe not.

One of the most common misalignment is the strategy for getting new business. Many of our clients have spent time and resources bidding on contracts as primes. This is particularly true for many of the smaller companies that we work with. It takes us time and effort to convince them that there is a better way to expand their business base – teaming and subcontracting.

Once we complete our strategic assessment, we settle on the best way forward. It varies with the condition, resourcing, past performance and quals of the company. In this article I will focus on the relatively smaller companies – those with annual revenues between five and twenty million dollars.

For a small businesses, often the best alternative is teaming. This approach can leverage strengths of a smaller company, provide balance for the weaknesses, open opportunities and, under normal circumstances, would remain closed and mitigate threats from competitors. A key benefit is that the arrangement allows larger businesses with more capabilities to take on responsibility and risk in identifying, chasing, bidding and capturing business, while the smaller partners concentrate on contributing to the team once the business is in hand.

Teaming Using a Contractor Teaming Agreement

This form of teaming involves collaboration among team members. For instance, you may have past performance and quals in two or three areas and an interest in pursuing business that requires performance and quals in six or seven. You identify one or two companies that fill in the holes in your card and form a team to pursue the business. This is the simplest of the two alternatives in some ways and the more complex in others. It is simpler in that you work together to win federal business. By combining efforts, you increase the bandwidth and range of perspectives that can be focused on the effort. If you do it right, that will increase your probability of wining. It also spreads risk and liability among team members. The past performance of the entire team supports your bid as other team members fill gaps your company has. But, as I said, teaming has to be done the right way or else it can waste precious time and resources.

Sometimes team members combine, through vehicles such as joint venture agreements or jointly owned subsidiaries, to form the general contractor. They normally do this using something called a Contractor Teaming Agreement or CTA. If you are part of such a team you will act with two or more partners to fulfill a contract by working together, but you will maintain your own relationship with the government client and will not assume responsibility for managing the other company.

Under such teaming arrangements, all companies involved interact with and are paid directly by the government client. They keep their own set of books and invoice systems. There is no central accounting and control system of substance. As a result, there are duplications in accounting, invoicing and reporting structures. This form of teaming can be significantly more expensive than the alternative.

It is important to realize that the CTA is a legal arrangement and that the underlying documents spell out responsibilities of each partner. A CTA will usually designate a particular partner as “team lead” for each phase of contract performance. Most solicitations require that, if a team wishes to bid on a contract, a CTA must be submitted as part of the team’s response to a solicitation and then becomes part of the contract. You can’t do this as a verbal agreement. It must be written and you need to carefully review every paragraph. There are serious legal implications to getting it wrong. The government and courts use the CTA to determine which partner is responsible for performance of each element of the contract.

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