5 Ways to tell a Contractor Teaming Arrangement from a Subcontracting Agreement
GSA Schedule | 3 Min Read
There are many different avenues a GSA Contractor can take to do business with the federal government. Federal agencies are focused on procuring total solutions, so this often requires businesses to form partnerships in order to win larger opportunities.
Two of the most common methods to create a successful partnership are the Contractor Teaming Arrangement (CTA) and a Prime/ Subcontractor Agreement. However, both of these methods can prove to be very confusing for GSA contractors trying to differentiate between the two.
In order to determine which method is best for you and your organization, you’ll need to answer the following five questions about CTAs and Prime/Subcontracting Agreements:
1. Is it a direct sale or an indirect sale?
With a CTA, two companies commonly work towards a total solution by each offering something slightly different to the project in an effort to complement one another. Often times, a CTA satisfies socioeconomic goals for a contract. A CTA is a direct sale to a federal agency while a subcontract is an indirect sale to a federal agency. In order to set up a CTA, both parties must have a GSA Schedule so that each team member gets credit for the sale on their respective GSA Schedule.
Meanwhile, the GSA Small Business subcontracting program requires businesses labeled as “Other Than Small” to submit subcontracting plans that specify goals and strategies to meet subcontracting quotas. Because there are repercussions for not meeting, or establishing “good faith effort” to meet these goals, many large businesses constantly need to subcontract a portion of their business. In a Prime/Subcontractor agreement only the Prime Contractor needs to have a GSA Schedule. The Prime contractor would consider the transaction a direct GSA sale, whereas the Subcontractor would consider it a commercial sale to the Prime Contractor.
2. Who has privity of the contract with the government?
In a legal sense, the entity that will have the rights to establish the terms and incur the liability has privity over the contract. In a CTA the privity of the contract lies with each team member, and therefore, each team member can interact with the federal government. Because of the agreement, each member is fully accountable for all duties established in the CTA document. This means in the event that the duties of the contract are not fulfilled, both companies can be held fully accountable and can be subject to whatever penalties may incur.
Under Schedule CTAs, contractors complement each other, and it allows teams to compete for orders for which they may not otherwise qualify. GSA encourages the use of CTAs to meet buyer’s requirements.
In a Prime/ Subcontractor agreement the privity of the contract is solely with the Prime Contractor. The Prime Contractor is therefore responsible for all of the products and services performed by the Subcontractor. In this scenario, government purchasing agencies are often encouraged to specify that the Contract Officer (CO) approves using subcontractors before they can perform.
3. How do you assign the work?
In a CTA, the team members mutually agree upon which sections of the proposal they could complete based on the core competencies. An agreement is drafted to state who would be responsible for which activities. The nature of a CTA often lends itself to fairly equal workloads for both companies involved.
It is important to note that when forming a team in response to a small business set-aside, all team members must meet the socioeconomic status for the set-aside and the limitations on subcontracting (FAR 52.219-14) apply.
When you enter into a Prime/ Subcontractor agreement, the Prime Contractor will assign the work that needs to be completed by the Subcontractor. There also may be additional requirements for how much work can be performed by each Partner in a Prime/ Subcontractor relationship, particularly if an opportunity is awarded under a certain Small Business Set Aside.
4. How do you invoice?
For a CTA you may identify one team member who will take care of the administration of the invoices, but each team member must still report the sales on their own GSA Schedule.
Regardless of how the structure of the invoice is set up, the pricing for each product or service must be in line with the pricing awarded on the team member’s GSA Schedule who will either be supplying the products or performing the services.
In a Prime/ Subcontractor agreement the terms, conditions, and awarded pricing will be that which is awarded on the Prime Contractor’s GSA Schedule. If you would like more information about specific small business subcontracting goals for this fiscal year, click here.
5. What range of products/ services can be offered?
When you enter into a CTA to respond to an opportunity, you have the entire breadth of the scope of products/ services on each team member’s GSA Schedule. You enter into CTA’s across different schedules.
For example, and IT Schedule 70 Contractor can partner with a Professional Services Schedule (PSS) Contractor. However, when you enter into an agreement as a Subcontractor you can only offer those services awarded on the Prime Contractor’s GSA Schedule.
The Bottom Line
Both of these channels are excellent ways to expand your footprint in the federal government marketplace. The Contractor Teaming Arrangement is more beneficial for GSA Schedule holders trying to meet their minimum sales requirement, but the Subcontractor agreement can be a great way to gain past performance with agencies you otherwise would not have had access to.
To help small businesses connect with prime contractors, GSA publishes a Subcontracting Directory. The directory lists large business prime contractors working for GSA who, by law, are required to establish plans and goals for subcontracting with small business firms. This means they are actively looking for small businesses to partner with.
For more information or assistance on how to decide which method is best for your organization, contact a member of our team today.
About Carter Bowman
At Winvale, Carter is involved with both the Business Development and Consulting departments where he assists with blog writing, analytical research and marketing for program initiatives and events. While assisting different Winvale teams, Carter has helped draft summaries and reports, worked on a variety of marketing strategies, and contributed to the daily needs and responsibilities of his team members.