What is the Difference Between a Nondisclosure Agreement and a Teaming Agreement?

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There are several reasons why two or more companies may form a team to submit a proposal in response to a Federal Government RFP. For example, a small business new to government contracting may want to team with a larger business to begin building relationships and past performance experience. Whatever the reason, the legal and contractual side of teaming is a critical part of a successful partnership. The nondisclosure agreement (NDA) and teaming agreement (TA) are two of the documents that must be in place for the companies to work together. While somewhat similar, the NDA and TA actually serve two different purposes. The NDA should be initiated early in the bid cycle, typically during the business development or capture phases.

The NDA is a legal contract between one or more business entities that is established to protect the confidentiality of shared knowledge or materials. It also restricts access by any third parties to this information. NDAs ensure no party to the agreement is permitted to divulge to anyone else the material covered by the agreement, which includes any information, knowledge, or materials not publically known. NDAs cover only information directly divulged from the involved parties; they do not prevent sharing discovered some other way.

A standard NDA includes:

  1. a description of sensitive information to be disclosed
  2. the terms of the agreement including the time period of the its legitimacy
  3. exceptions, consequences, and waivers that affect the agreement
  4. any other information vital to the agreement’s relevancy
  5. the signatures of all parties involved.

The NDA may specifically discuss the methods agreed to for sharing information and for identifying confidential information. The parties may want to consider designating all information exchanged confidential unless otherwise designated, and set a time period during which information will be treated as confidential. The parties may also want to specify whether the partners are free to explore teaming partnerships with other potential bidders.

On the other hand, the TA involves two or more companies combining resources to bid on a government contract. Typically, this involves a large corporation and one or more small businesses, with the large corporation acting as the prime contractor to the government and the smaller company or companies serving as subcontractors to the prime contractor. It is defined by the Defense Contract Audit Agency as “An arrangement between two or more companies, either as a partnership or joint venture, to perform on a specific contract. The team itself may be designated to act as the prime contractor; or one of the team members may be designated to act as the prime contractor, and the other member(s) designated to act as subcontractors.“ The final document that binds the parties to one another for a set period of time should they win the contract, the TA finalizes the confidentiality rules originally stated in the NDA.

The biggest risk encountered in such agreements is that after spending time and effort in preparing the agreement, the smaller company will not receive the share of work expected if the project bid on is awarded. Therefore, it is important that the TA states whether or not the prime contractor intends to award a subcontract to the potential subcontractor if the prime contractor is awarded the contract in question. The agreement should also deal with, among other issues, the protection of proprietary data involved.

A teaming agreement is not a government contract. It is a private contract between two or more parties and is governed by contract law and/or the Uniform Commercial Code, as applicable. No government acquisition regulations (FARS or DFARS) must be referenced in the TA—those are usually negotiated at a later date and included within the subcontract. However, under FAR Subpart 9.601, the Federal Government must recognize the validity of a contractor TA “provided that the arrangements are identified and company relationships are fully disclosed in an offer or, for arrangements entered into after submission of an offer, before the arrangement becomes effective.” Full disclosure of the TA, in other words, must be part of the prime contractor’s bid.

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