Aerospace & Defense Series: Leading Antitrust Considerations For Teaming Agreements

This newsletter identifies when "teaming agreements" between contractors are likely to raise antitrust issues, and suggests some practice tips for evaluating or defending those arrangements.

Defense and aerospace contractors often enter into teaming agreements or other collaborative arrangements to jointly pursue contract awards. In most cases, teaming is fully consistent with antitrust law. However, in some circumstances, teaming can raise significant antitrust concerns. This newsletter highlights some of the leading factors contractors should take into consideration when considering teaming agreements.

Just because teaming is commonplace does not mean it is always lawful. Teaming agreements generally involve agreements under which contractors will jointly pursue a procurement and often require the teammate/subcontractor to commit not to bid independently or with another partner. That agreement not to compete may, under certain circumstances, adversely affect competition and can be unlawful. Contractors should avoid a false sense of security based on teaming being a common practice. Teaming agreements can raise criminal concerns under limited circumstances. In most cases, an agreement not to compete independently but to pursue an award only through the team will be viewed as ancillary to an efficiency-enhancing integration of activities. If the parties legitimately integrate their approach, the teaming agreement will be reviewed under the rule of reason. On the other hand, if there is no real combination of resources, but a simple agreement not to compete or to allocate who will win different bids, the team may be investigated as a criminal violation. Companies should be able to articulate how the proposed team combines complementary skills that will benefit the customer. It is not sufficient to state this as boilerplate in a whereas clause. The companies may need to explain to law enforcers how the team is complementary, and accurate contemporaneous documents will aid those discussions. Teaming can be a concern if it combines the two leading bidders for a contract. Understanding what firms are likely to pursue a contract, and which are...