More recently, the Virginia Supreme Court looked at CGI`s Fed. Inc., c. FCi Fed, Inc., registration number 170617 (Va. S. Ct. 2018) with an association agreement stipulating that the proposed subcontractor would receive a 41% share of the work. Without the knowledge of the subcontractor, the prime contractor submitted a revised proposal proposing an 18% work share for the proposed subcontractor. After the government awarded the contract to the prime contractor, the parties entered into subcontracting negotiations in which the prime contractor refused to offer a share of more than 22% of the work. The Virginia Supreme Court ruled that the formation of a subcontract was contingent on the success of future negotiations and therefore did not create a binding agreement despite the defined portion of the work. Ultimately, association agreements need to be carefully drafted and concerns about the choice of law are of paramount importance in terms of applicability. In the context of a rational analysis of the rules, on the other hand, the government reviews all relevant facts to determine the overall competitive impact of a particular cooperation. It is a “soft investigation” whose purpose and details vary depending on the type of agreement and market conditions.
`The central question is whether the agreement in question is likely to harm competition by cost-effectively increasing the ability or incentive to raise prices above or prices, or [b] to reduce production, quality, service or innovation below what would probably prevail without the relevant agreement.` Ultimately, this analysis aims to balance potential pro-competitive benefits versus potential anti-competitive harm in order to determine the overall impact on competition. However, there are antitrust considerations that make legal advice essential when a law firm is considering entering into an association agreement. In this article, you will find a detailed description of association agreements versus joint venture agreements. Association agreements (between a proposed manager and a subcontractor) often include exclusivity language such as the following: Since association often takes place very early in the acquisition process, when requirements are still largely undefined, prime contractors strive to maintain sufficient flexibility to adjust their strategy as the requirements of the call solidify. Similarly, prime contractors are solely responsible for performance risk when awarding the contract. However, subcontractors may also be required to make significant investments with the Prime in pursuing the contract and often agree to exclusivity provisions that prevent the subcontractor from working with other teams to compete for the requirement, so they must ensure that their interests are protected. To balance these needs, a mid-road approach is needed that includes provisions that are specific enough to be enforceable, but that gives the prime contractor flexibility to submit a successful bid and any subsequent negotiations with the client. Conversely, the U.S. Court of Appeals for the Third Circuit, applying Pennsylvania law, found that a prime contractor breached its contract when it subcontracted to another supplier in violation of an exclusive association agreement, and concluded that the mutual promises of the association agreement, including the agreement to cooperate solely in the preparation of a proposal, were sufficient for the formation of the contract. “. The association agreement between the defendant and the plaintiffs constituted an enforceable contract with sufficiently specific conditions of performance, notwithstanding the absence of a definitively signed document proving the agreement of the parties. ATACS Corp.c.
Trans World Comm`n, Inc., 155 F.3d 659, 663 (Cir. 3, 1998). Paragraph 52.203-6 (a) prohibits contractors from entering into an agreement with an actual or potential subcontractor “that has or may have resulted in the sale of items or processes (including computer software) manufactured or supplied by the subcontractor under this agreement or any subsequent production contract that is directly submitted to the Government.” Paragraph 52.203-6(b) then states that this prohibition “does not prevent the Contractor from asserting rights that are otherwise authorized by law or authority.” So I`ve heard about a new opportunity coming next year, and I`m in the process of putting my team in place. Currently, there is no request for proposals, draft or otherwise, so there are no FAR clauses to reference. And while I expect to do business with the government, the Association Agreement is a pure agreement between two commercial companies that must comply with the laws of each state. Team arrangements are generally good. See subsection 9.6 of the FAR. As outsidelegalguy pointed out, the contractual clause does not apply to association agreements before the award. However, there are antitrust considerations that make legal advice essential when a law firm is considering entering into an association agreement. The Department of Defense has issued guidance on the potential anti-competitive effects of exclusive association agreements on federal government procurement and has proposed measures that contract agents and auditors should take when confronted with such agreements.
In addition, the Department of Justice and the Federal Trade Commission have jointly published proposals for guidelines for cooperation between competitors. These guidelines set out the Government`s proposed antitrust enforcement policy regarding joint ventures between competitors. An association agreement is a legal contract entered into by a government contractor and another party. These agreements are very common in government contracts and are used by contractors who want to find work with partners who can increase the efficiency of their work(s). Association agreements are governed by the Federal Acquisition Regulation (FAR). Two thumbs up! Our legal team will not even consider an association agreement if an exclusivity clause is buried in it. I`ve only seen one or two in our entire company that may have become legal to even *consider* the request with mucho, mucho, mucho reasoning and dire circumstances. To get a better idea of the positive and negative aspects of an association agreement, you can check out this article. If you think an association agreement is right for you, you should contact a lawyer with jurisdiction in government contracts who specializes in reviewing and drafting those contracts. Publish a project on the ContractsCounsel marketplace to get free quotes from approved lawyers to draft or review an association agreement. In summary, according to the guidelines recently issued by the Department of Defense, if two companies work together exclusively to pursue a DoD contract, and one of these companies is the sole supplier of an essential good or service, the exclusive association agreement is likely to be challenged by those responsible for the contract.
In fact, there have already been Purchases from the DoD where exclusive association agreements have been completely banned. While the guidelines proposed by the FTC and DOJ are not limited to federal cooperation on procurement between competitors, they provide a framework for analyzing the competitive impact of a particular collaboration to determine whether the government would likely question this. Contractors and government officials should familiarize themselves with these documents and pay attention to the publication of the proposed amendment to DFARS and the guidelines proposed by the FTC/DOJ in their final form. You must use an association agreement in the following circumstances: An association agreement is a legally binding agreement between a prime contractor that coordinates directly with a government contact, as opposed to a subcontractor who is actually monitored and supported by the prime contractor. A subcontractor has no connection with the government partner such as the prime contractor. The main differences between the two types of contracts are presented below: In another explanation of the second comment, we do not turn around and do not make double suggestions. We are either prim or sub. The commentary is oriented towards a OCI perspective that addresses unfair access to information and confidentiality rather than exclusivity. I would say that in most cases where people enter the exclusive garbage into the T.A., it should really be removed because the intent is confidentiality and ensures that there is an appropriate non-disclosure agreement in place before moving on to the association. An analysis in itself includes agreements that are so likely to harm competition and that have no pro-competitive advantage that they do not warrant further examination of their likely effects. Instead, such cooperation is challenged as being in itself illegal. These collaborations involve “agreements” that tend to raise prices or reduce production.
Examples include prices, tenders, production agreements, and market-sharing or market-sharing agreements by (a) customers, (b) suppliers, (c) territories, or (d) commercial lines. Read this document if you want to know more about association agreements. The Association Agreement therefore binds the submarine to the Prime for the purposes of a competition in which the submarine could not compete independently and could not offer its products independently. I don`t see any conflict with 52.203-6. Another good point that addresses most team agreements. (for various reasons), however, my company often participates as a subcontractor in requests for which it would technically be able to meet all the requirements. Sometimes, (if there is no exclusive association agreement), we even submit proposals as a prime contractor and subcontractor. Occasionally, we also submit proposals as a Prime with a subcontractor who would be technically able to respond to the entire call for tenders.
I am sure our situation is not entirely unique. The wording of the association agreement that I quote prohibits the subcontractor from responding to the request “independently or jointly with another party”. The Virginia Supreme Court considered the applicability of association agreements in W.J. Schafer Associates, Inc. .
