When pursuing government work, contractors frequently team together and combine resources in order to create the most appealing proposal. These arrangements are often memorialized in teaming agreements that set forth terms, including but not limited to, the purpose of the agreement, the relationship between the parties (e.g., prime versus subcontractor), and other general provisions. Importantly, a teaming agreement will often include a provision stating that the parties will execute a subcontract or other document, pending the successful outcome of the proposal. According to a recent decision decided under Virginia law, however, such a teaming agreement may not be enforceable, and a would-be subcontractor could be left without recourse.
In Cyberlock Consulting, Inc. v. Information Experts, Inc., the United States District Court for the Eastern District of Virginia assessed the second of two teaming agreements entered into by the same two parties. The teaming agreement provided that Cyberlock would perform 49 percent of the work awarded to Information Experts in connection with a potential Office of Personnel Management (OPM) contract. In fact, the agreement explicitly provided “that ‘[i]n the event [Information Experts] is awarded a prime contract for the Program, [Information Experts] agrees to execute a subcontracting agreement to provide [Cyberlock] 49 percent of the prime contract for the work anticipated to be performed by Subcontractor.” Despite this language, the court held that the teaming agreement was an “unenforceable agreement to agree” under Virginia law because, when “read as a whole,” the language “was not meant to provide a binding obligation but rather to set forth a contractual objective and agreed framework” for future negotiation. As justification for this conclusion, the court highlighted other terms in the agreement which suggested that: (1) that the award of any work would require the negotiation and execution of a future subcontract; (2) award of any work was subject to the success of such future negotiations; (3) any future subcontract was subject to OPM’s approval; and (4) allocation of work in a future subcontract “could change as it merely was based on the work anticipated to be performed by Cyberlock as then-presently understood by the parties.” As part of this assessment, the court also explicitly corrected one of its prior rulings in the litigation that “failed to take account” of the agreement’s integration clause, and used extrinsic evidence to find that Cyberlock and Information Experts meant the agreement to be more than an “agreement to agree.” In light of this ruling, companies considering a teaming agreement should look carefully at choice of law, dispute resolution, and integration provisions.