Government Contractor Teaming Agreement Ruled Unenforceable
In the world of government contracts, companies frequently team together to put forward the most persuasive bid in response to a Request for Proposal (“RFP”). Such teaming arrangements often result in a teaming agreement between government contractors. A teaming agreement typically sets forth the relationship of the companies, the purposes for which they are teaming together, the rights of the companies and general terms, as well as a provision which sets forth that for a specific project a second document (i.e., a subcontract or work order) will be executed by the parties. Well, what happens if the prime contractor is awarded the contract, but ultimately refuses to sign a subcontract with its teaming partner, the sub? Can the sub successfully sue the prime contractor by relying on the teaming agreement?
In the case of Cyberlock Consulting, Inc. v. Information Experts, Inc. (2013), the United States District Court for the Eastern District of Virginia said “No” to Plaintiff subcontractor’s breach of contract claim and held that the Teaming Agreement in that case was an agreement to agree and thus unenforceable under Virginia law. Cyberlock Consulting, Inc. (“Cyberlock” or “Plaintiff”) entered into two Teaming Agreements with Information Experts, Inc. (“IE” or “Defendant”) for the purpose of assisting IE with work it hoped to get in response to RFPs from the U.S. Office of Personnel Management (“OPM”). The first Teaming Agreement had attached to it a Statement of Work setting forth in detail the work that Cyberlock would perform for IE, the period of performance, place of performance, and project management requirements for the work. The first Teaming Agreement also had attached to it as an exhibit the actual subcontract that the parties agreed they would enter into upon award of the prime contract to IE. IE was in fact awarded the prime contract by OPM and obligations under the first Teaming Agreement were satisfied.
Subsequently, OPM revealed that it would seek bids for a new project and the parties negotiated and entered into a second Teaming Agreement. While the second Teaming Agreement set forth general provisions of the parties’ responsibilities if IE was awarded the prime contract, and even included a Scope of Work document as an exhibit which stated that Cyberlock would perform 49% of the work awarded to IE under a prime contract, [according to the Court] the second Agreement did not specifically set out in detail what work Cyberlock would perform. In addition, unlike the first Teaming Agreement, there was no subcontract attached to the second Teaming Agreement that the parties agreed to sign in the event that IE was awarded the prime contract. As it turns out, IE was awarded the second prime contract. However, after a month of negotiations and several drafts of a proposed subcontract exchanged between the parties, IE terminated the negotiations. Cyberlock sued to enforce the second Teaming Agreement and claimed that it was entitled to 49% of the work awarded to IE in the prime contract.
The Court disagreed, and stated that although there was language in the second Teaming Agreement which indicated the parties’ intent to enter into a subcontract if IE was awarded the work by OPM, there was no specific subcontract that had been negotiated and to whose terms the parties’ had agreed. The Court held that the post-award obligations in the second Teaming Agreement were, at most, an agreement to agree to enter into a yet agreed upon (future) subcontract agreement, and therefore the second Teaming Agreement was unenforceable as a matter of law since agreement to agree contracts are unenforceable under Virginia law.
© Copyright, PCT Law Group 2013, all rights reserved.
EEO Guidelines for Small Businesses with Federal Contracts
Small businesses with Federal contracts have to be especially mindful of ensuring compliance with equal employment opportunity (EEO) requirements. The failure to comply with the EEO guidelines set forth in Executive Order 11246 (which prohibits employment discrimination by Federal contractors and subcontractors as well as federally-assisted construction contractors and subcontractors) may very well result in the cancellation of a contract, termination, suspension (in whole or in part), or the debarment of the contractor. As the Office of Federal Contract Compliance Programs (OFCCP) requires contractors to engage in their own internal EEO compliance analysis, small businesses often run afoul of satisfying their obligations under Executive Order 11246.
To ensure compliance with the basic EEO requirements imposed by Executive Order 11246 -- and to avoid the wrath of the OFCCP – contractors should adhere to the following OFCCP guidelines:
Don’t Discriminate! Contractors must refrain from engaging in workplace employment discrimination on the basis of race, color, religion, sex, or national origin. Although most people think of intentional discriminatory acts, employment discrimination can also arise when a neutral policy or practice has an adverse impact on the members of any race, sex, or ethnic group.
Post an EEO Poster. Federal contractors must post OFCCP’s EEO poster in a location that is easily seen (e.g., a lunchroom, break room, or locker room).
Include an EEO Tag Line in Employment Advertising. Contractors should include a sentence in all solicitations and advertisements for employment stating that “all qualified applicants will receive consideration for employment without regard to race, color, religion, sex or national origin.”
Keep Records. Contractors must maintain their personnel records and employment records including job descriptions, job postings, job offers, applications and resumes, interview notes, tests and test results, written employment policies and procedures, personnel files, and time-keeping records.
Develop and Maintain an Affirmative Action Program. Contractors with 50 or more employees and a contract of $50,000 or more must develop and maintain a compliant affirmative action program (AAP).
Small businesses with Federal contracts should regularly review their EEO policies and procedures to ensure that they are compliant with Executive Order 11246. Certainly, given the potential penalties, it is better to be safe than sorry!
Virginia Business Executive Arrested in Foreign Corrupt Practices Act Bribery Case
The FBI recently arrested twenty-two business executives and employees for violations of the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA), which prohibits any U.S. person from making a corrupt payment to a foreign official for the purpose of obtaining or retaining business. This investigation hits close to home as one of the individuals arrested is the founder and vice president of a Woodbridge, Virginia company that supplies security-related articles for law enforcement agencies and governments worldwide. It is the largest investigation and prosecution against individuals in the history of the law.
The recent arrests are the result of the first extensive use of undercover federal agents related to the FCPA. In this investigation, the FBI undercover agent posed as a sales agent representing the defense minister of an African nation. After making contact with the defendant, the agent relayed that he had been tasked with obtaining a variety of military and law enforcement products for the African nation’s presidential guard. Allegedly, the $15 million deal struck with each defendant included a 10% payment going directly to the defense minister and another 10% going to the “sales agent.” In addition to allegedly attempting to pay the FBI agent improper “commissions,” the indictment also alleges that the undercover agent met the executives in luxury hotels and expensive restaurants, that the executives provided inflated price quotes for the products and wired bribe money to the “sales agent.”
The Department of Justice (DOJ) has clearly become more aggressive in its enforcement of the FCPA. Notably, the DOJ and Securities Exchange Commission (SEC) have brought substantially more cases against individuals in the past couple of years. In 2008, the Corporate Crime Reporter reported the Deputy Chief of the Justice Department’s Fraud Section as stating that prosecution of individuals is on the rise because of explicit Department policy – sending people to jail will have a credible deterrent effect.
Clearly, business executives and owners of companies who engage in international business transactions must operate with a heightened degree of scrutiny and take considerable measures to prevent their companies from violating the FCPA.
Complying with the FCPA
In general, if your company operates internationally, particularly in high-risk countries or industries, then a rigorous FCPA compliance program is warranted. The elements of such a program depend on many factors, but typically include a comprehensive FCPA policy prohibiting improper payment to foreign officials, education of employees regarding the law, monitoring employee actions for compliance, and procedures and policies related to reporting potential violations.
Government Contracting Trends To Watch In 2010
I recently read an interesting post on the ExecutiveBiz blog on the top 10 predictions for government contracting in 2010. Unlike the typical mundane prediction lists that clutter the blogosphere at the beginning of a new year, the predictions in this post consist of quotes from a who’s who of leaders in the government contracting industry. As Virginia (particularly Northern Virginia along the Dulles Technology Corridor) is home to many government contracting businesses, I thought it would be useful to provide a brief summary of a few predictions that caught my attention.
Industry will compete with government
Norm Augustine, the retired Chairman and CEO of Lockheed Martin Corp., predicts that “heightening fiscal pressures” on the procurement process will result in the government contracting industry finding itself “more and more a competitor with government” than a partner.
National security contracts will remain a focus
Paul Cofoni, the President and CEO of CACI, predicts that there will be “continued demand” for “proven solutions to keep our nation safe and implement efficient and cost-effective solutions to modernize federal agencies.”
Collaboration between industry and government will remain strong
Renny DiPentima, the former President and CEO of SRA, predicts that the relationship between industry and government “will continue to be robust over the next decade” as “[g]overnment depends upon contractors in large part to get its jobs done and contractors depend upon government to keep their companies financially sound.”
Government will expect more secure offerings from industry
According to Melissa Hathaway, the President of Hathaway Global Strategies, LLC, the “seams between private networks and government networks will continue to blur” thereby requiring “industry and government to share details on vulnerabilities of and security threats to our infrastructures and information assets.” As such, she predicts that “the government will demand from industry more secure software products and services.”
New cyber czar will help industry challenges
Stan Sloane, President and CEO of SRA, predicts that a new cyber czar will lead to “some progress on the policy front, as well as collaboration with industry on intellectual property protection.”
Modest growth and productivity gains for sector
Ralph Shrader, Chairman, CEO and President of Booz Allen Hamilton, predicts that “2010 will be a year of modest growth and productivity gains for the economy as a whole, and for the government contracting sector.” However, these gains will require industry and government to work together “toward the same goals.”
I concur with many of the predictions expressed by the leaders of the government contracting industry. Although fiscal pressures will continue to squeeze the procurement process in 2010, communication and collaboration amongst all segments of the government contracting industry can mitigate these economic challenges. While the continued demand for efficient measures to address national security concerns will help drive the sector, it will take a unified effort by government and industry alike to realize any gains in 2010.
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