What's Next for Teaming Agreements After Cyberlock?

Because many parties enter into teaming agreements under the assumption that they are enforceable agreements, it may be worthwhile for those parties to consider the implications of the Cyberlock decision before entering into their next teaming agreement.

A recent federal District Court decision holding a teaming agreement between two contractors unenforceable under Virginia law raises questions about the usefulness of these commonly employed agreements—and not just in Virginia.

What Are Teaming Agreements?

Teaming agreements are frequently used by government contractors that have complementary capabilities and intend to propose for work on a prime contractor–subcontractor basis. The agreements reflect the parties' intent that if the government awards a contract to the prime contractor, then the prime contractor will enter into a subcontract with the other team member, and the teaming agreement often allocates the types and amounts of work to be done by each party. One of the reasons that teaming agreements are used is that they avoid the need for the parties to negotiate a detailed subcontract agreement that they may end up not needing if their proposal is not successful. Teaming agreements sometimes include exclusivity provisions that would prevent the parties from teaming with others for the designated project.

The Cyberlock Decision

In Cyberlock Consulting, Inc. v. Information Experts, Inc., ___ F.Supp.2d ____ (2013), 2013 U.S. Dist. LEXIS 49092, 2013 WL 1395742 (1:12cv396 (JCC/TCB) April 3, 2013, the U.S. District Court for the Eastern District of Virginia granted summary judgment to Information Experts, which was resisting the enforcement of a teaming agreement by Cyberlock after the parties were unable to reach agreement on a subcontract relating to a prime contract awarded to Information Experts by the government, as contemplated in the teaming agreement. The court essentially agreed that the teaming agreement was a "mere [agreement] to agree in the future," and therefore unenforceable under Virginia law. The court noted that, unlike an earlier teaming agreement between the same parties, the one at issue did not include a detailed description of the work to be performed by the proposed subcontractor and did not include as an exhibit the subcontract the parties would execute if the prime contract were awarded. In addition, the court noted that the teaming agreement also included a provision calling for termination of the agreement if...