This article explains what government contracting teaming agreements are, how they differ from joint ventures, and how primes and small businesses can use them to secure contracts they couldn't win on their own.
Why it matters: Teaming agreements are one of the most practical tools in a GovCon business development strategy — used correctly, they expand your bid pipeline, strengthen proposals, and build the past performance needed to compete for larger contracts over time.
Key Takeaways
- Teaming agreements expand your eligible pipeline: A teaming agreement lets a prime contractor and subcontractor collaborate on a federal bid, giving both access to opportunities neither could pursue independently.
- They're faster to set up than joint ventures: Unlike a joint venture, a teaming agreement requires no new legal entity, no SBA approval, and no shared equity — just a contractual agreement on roles, scope, and pricing.
- GovWin IQ helps you find the right partners: Identifying best-fit teaming partners is easier with market intelligence tools like GovWin IQ, which lets you search analyst-verified subcontracting opportunities in one place.
What is a Teaming Agreement?
A teaming agreement is a contract between a prime contractor and one or more other companies to collaborate on a specific federal government bid or acquisition program.
Under the arrangement, the prime contractor takes the lead on the contract and the government relationship, while the other party — the subcontractor — contributes specific capabilities, resources, or expertise in exchange for a defined portion of the work.
Teaming agreements do not create a new legal entity. They establish a contractual relationship that exists for the purpose of winning and performing a specific government contract. If the prime does not win, the agreement is typically not enforceable.
A typical teaming agreement defines:
- Each party's roles and responsibilities
- The scope of work allocated to the subcontractor
- Pricing terms and compensation structure
- Conditions under which the subcontract will be awarded after contract win
Free Guide
Teaming Agreements 101
Discover how the virtual business environment has changed the way government contractors make connections, best practices for subcontracting, why small businesses should team with larger primes and next steps to get started.
Why Do Teaming Agreements Matter?
Relationships in the procurement space are essential to growth. Whether those relationships are with teaming partners or with government agencies themselves, bigger networks mean more business.
In the federal and SLED government contracting spaces, building these relationships is critically important, and some of the most important are those that allow contractors to form a partnership in order to expand their eligibility to pursue additional contracting opportunities. These include teaming agreements, which can help a small business expand its capabilities or a large business gain access to set-aside contracts.
Teaming with larger businesses is a common avenue for smaller companies that want to support a portion of a contract while building up their past performance so they can tackle bigger projects on their own in the future, and it benefits larger businesses by allowing them access to opportunities they might not otherwise have been able to include in their pipeline.
Prime Contracting vs. Subcontracting: What's The Difference?
When two or more companies are working together to fulfill a government contract, it is important to understand the distinction between the prime contractor and the subcontractor.
According to the U.S. General Services Administration (GSA), a prime contractor is a company that works directly with the government. They take on the responsibility of ensuring the work is completed as expected within the designated time and of managing any subcontractors on the project.
Government subcontractors work with a prime contractor as part of the larger overall agreement. Unlike prime contractors, subcontractors do not work directly with the government; instead, they work for other contractors.
Subcontractors are generally smaller businesses or those with a specific core competency useful to the project. Subcontractors must contract with prime contractors directly to find opportunities to sell to the government. Subcontractors do not need a GSA Schedule contract, but they must comply with the prime contractor's contract terms and conditions.
If you are looking for subcontracting opportunities in the federal market, you know how challenging it can be to find and pursue them. With fewer contractors securing prime dollars, the subcontracting market is increasingly competitive.
Deltek GovWin IQ has introduced a new feature that makes it easier to identify and track subcontracting opportunities by simply running a search. SAM.gov Notices in GovWin IQ have always been individually reviewed by a GovWin analyst, and now that review process includes analyst-verified subcontracting opportunities marked with a searchable subcontracting opportunity tag. This human verification provides GovWin IQ users with a level of accuracy they can't get from other tools that rely on automated algorithms to identify government subcontracting opportunities.
How Primes and Subs Can Collaborate on Proposal Pricing
The ability to craft competitive proposals often hinges on effective teamwork between primes and subcontractors. Nowhere is this synergy more crucial than in proposal pricing. By leveraging the expertise of both parties, prime contractors and subcontractors can create robust strategies that increase their chances of securing lucrative government contracts together.
Specifically, why collaborate on proposal pricing?
- Ensure Competitive Pricing: By working together, prime contractors and subcontractors can leverage their expertise to conduct thorough market research and cost analyses to develop pricing strategies that are both competitive and realistic, increasing the likelihood of maintaining profitability.
- Align with Agency Expectations: Collaboration on pricing enables primes and subs to serve as a check-and-balance on one another, effectively syncing pricing strategies with the RFP's requirements and the proposal's overall technical approach.
Tips for Successful Collaboration on Proposal Pricing
- Agree on Pricing Objectives. Establish clear lines of communication from the outset. Regular meetings ensure that all parties move in the same direction on pricing strategies.
- Define Responsibilities. Clearly articulate the roles each party will play in the pricing process. This will help avoid confusion and ensure that everyone understands their contribution to the overall pricing strategy.
- Seek Win-Win Solutions. Develop pricing strategies that benefit both prime contractors and subcontractors. By finding common ground and aligning incentives, you can create mutually beneficial arrangements that support long-term collaboration for contract wins.
The right technology will help. Deltek ProPricer is a modern SaaS tool that ensures everyone on a pricing team has access to the latest, synchronized cost and pricing data, as well as the ability to generate complex what-if scenarios—a signal that your combined team can anticipate an agency's shifting needs.
Small Business Teaming Agreements
A small business teaming agreement is one that allows a contractor to maintain its status as a small business, while allowing it to bring in another small business – or a larger business – to contribute some of the work on the project.
Small businesses have a distinct advantage when searching for government contracts, as the federal government provides many resources and programs specifically designed to help these firms compete.
Most agencies have offices of small and disadvantaged business utilization (OSDBUs) and/or small business programs that focus on ensuring the agency maximizes opportunities to contract with small businesses in its acquisitions. Many contracts require small businesses to perform a certain amount of the work, creating a need for larger businesses to partner with smaller ones to gain access to these contracts.
Joint Ventures vs. Teaming Agreements
If you are looking for a way to expand your business opportunities and collaborate with other companies, you may have come across the terms joint venture and teaming agreement. But what do they mean, and how are they different?
Joint Ventures
A joint venture is a legal entity formed by two or more companies (generally, one of which is a small business and the other is larger) to undertake a specific project or business activity.
A joint venture is considered a new legal entity that requires approval by the Small Business Administration (SBA). Joint ventures also require a separate federal identification number and a new SAM user account. The companies share the equity, revenues, expenses, and control of the joint venture. A joint venture can be formed to fulfill a single project or for a long-term partnership.
Benefits of joint ventures:
- Joint ventures allow you to access new markets, resources, technologies, and expertise that you may not have on your own.
- Joint ventures can help you share the risks and costs of a complex or large-scale project with your partners.
- Joint ventures can give you more bargaining power and influence with customers, suppliers, and regulators.
- Joint ventures can enhance your reputation and credibility by associating with well-known or established partners.
Drawbacks of joint ventures:
- Joint ventures require a lot of planning, negotiation, and coordination to set up and manage. You may need to hire lawyers, accountants, and consultants to help you with the legal, financial, and operational aspects of the joint venture.
- Joint ventures involve sharing profits and control with your partners, which may limit your autonomy and flexibility. You may also face conflicts or disagreements with your partners over the strategy, management, or performance of the joint venture.
- Joint ventures may expose you to liabilities or risks that your partners bring to the table. You may be responsible for the debts, losses, or breaches of your partners, even if you are not directly involved in them.
- Joint ventures may create competition or conflict of interest with your existing or future business activities. You may have to limit or forego some opportunities to avoid harming or competing with your joint venture.
Teaming Agreements
A teaming agreement is a contract between a potential prime contractor and another company to act as a subcontractor under a specified federal government contract or acquisition program. The purpose of a teaming agreement is to enhance the prime contractor's capabilities and experience by leveraging the subcontractor's resources and expertise.
While the SBA does not have a formal definition of a teaming agreement, it recognizes and authorizes their use for small businesses to subcontract a portion of their set-aside contracts to large and small companies, unless specifically prohibited by statute, regulation, or solicitation.
A teaming agreement usually outlines each party's roles and responsibilities, the scope of work, pricing, and the terms and conditions of the subcontract.
Unlike a joint venture, a teaming agreement does not create a separate legal entity; rather, it establishes a contractual relationship between the parties. Teaming agreements, on the other hand, are a type of subcontracting where two (or more) companies work together on a proposal to win a piece of government business.
Benefits of teaming agreements:
- Teaming agreements enable you to leverage your partners' strengths and capabilities to increase your chances of winning a federal government contract. You can offer a more comprehensive and competitive solution to the government by combining your supplies or services with your partners’.
- Teaming agreements are relatively easy and quick to set up and execute. You do not need to create a new legal entity or share equity or control with your partners. You only need to agree on the terms and conditions of the teaming agreement and the subcontract.
- Teaming agreements are flexible and adaptable. You can tailor the teaming agreement to suit the specific requirements and expectations of the government contract. You can also modify or terminate the teaming agreement as needed, without affecting your other business relationships or activities.
Drawbacks of teaming agreements:
- Teaming agreements are not binding or enforceable until the prime contractor wins the government contract and awards the subcontract to the subcontractor. Until then, the parties have no legal obligation to perform or deliver anything to each other or to the government.
- Teaming agreements may not guarantee the subcontractor a fair or favorable share of the work or the profits. The prime contractor may have the discretion to change the scope, price, or terms of the subcontract after winning the government contract, or to exclude the subcontractor altogether.
- Teaming agreements may create legal or ethical issues if the parties are not careful or transparent about their teaming arrangement. The parties may face allegations or penalties for violating federal procurement laws or regulations, including the False Claims Act, the Anti-Kickback Act, and the Small Business Act.
Both joint ventures and teaming agreements have advantages and disadvantages, depending on your specific goals and circumstances. It is important to consider which option is best for your unique situation and strategy.
How Can I Team with Other Government Contractors?
Whether you are looking for teaming partners as a small business or an enterprise, building professional relationships and partnering with other companies can open critical avenues for new business.
GovWin IQ offers tools to help identify best-fit potential partners as you continue on your government contracting journey – making it easier to find and win more opportunities.
