Teaming Agreements for Federal Contracts: JV vs Sub Decision Guide

Work share allocation. Define the percentage of work each partner will perform, the specific task areas or CLINs each party owns, and the mechanism for adjusting work share if contract scope changes through modifications. For JVs subject to SBA rules, the protege must perform at least 40% of the work — build this requirement into the agreement from the start.

Intellectual property rights. Specify who owns IP developed during proposal preparation, who owns IP created during contract performance, and how pre-existing IP (background IP) is licensed between the partners. Federal contracts add complexity here because the government typically receives unlimited rights in data developed under the contract — your teaming agreement needs to account for this.

CUI and classified information handling. Any teaming arrangement involving Controlled Unclassified Information must specify how CUI flows between partners, what safeguards each party maintains, and who bears responsibility for breaches. This is especially critical as CMMC 2.0 enforcement accelerates. We address this in detail in the next section.

Termination provisions. Define the conditions under which either party can exit the arrangement — both before and after contract award. Pre-award termination should address proposal cost recovery. Post-award termination must account for transition of work, government notification requirements, and the disposition of shared resources. Include cure periods: a 30-day written notice with opportunity to correct deficiencies before termination takes effect.

Exclusivity. Determine whether the teaming arrangement is exclusive — meaning neither party can team with a competitor for the same opportunity — and if so, for how long. Exclusivity protects your competitive position but limits flexibility. Define the scope narrowly: exclusivity should apply to a specific solicitation or program, not to an entire agency or market segment.

Dispute resolution. Specify the mechanism for resolving disagreements — mediation, arbitration, or litigation — and the governing jurisdiction. Many experienced GovCon firms prefer binding arbitration for speed and confidentiality. Whatever you choose, spell it out before a dispute arises.

Key personnel and staffing commitments. If the proposal names specific individuals from a teaming partner, the agreement should obligate that partner to make those individuals available for the duration specified. Include provisions for replacement candidates and the process for government approval of substitutions.

CUI Considerations in Teaming

Controlled Unclassified Information introduces a layer of compliance complexity that many teaming arrangements fail to address adequately. When CUI flows between a prime and subcontractor — or between JV partners — both parties share responsibility for protecting it. The CUI-safe CRM guide covers the systems side in depth, but the teaming agreement itself must establish the contractual framework for CUI protection.

Under DFARS 252.204-7012, prime contractors must flow down the CUI protection requirements to all subcontractors who will handle CUI. This is not optional. The prime is accountable to the government for the entire supply chain's compliance. Your teaming agreement should address the following CUI-specific provisions:

• CUI boundary definition. Specify exactly which data sets, document categories, and systems will contain CUI, and which partner is responsible for each boundary. Map the CUI data flows between partners before the contract starts.
• CMMC certification requirements. Require that each partner maintain the appropriate CMMC level for the CUI they will handle. Include a right-to-audit clause that allows the prime (or the JV managing partner) to verify the other party's compliance posture. Define the consequences for failure to maintain certification.
• Incident response coordination. DFARS requires reporting cyber incidents to the DoD within 72 hours. Your teaming agreement should require the sub to notify the prime within 24 hours of discovering a potential incident, leaving time for the prime to investigate and report to the government. Define the communication channel, escalation path, and each party's responsibilities during incident response.
• Secure collaboration tools. Agree on the specific platforms and tools that will be used to share CUI between partners. Email is almost never appropriate for CUI transfer. Specify approved file-sharing platforms, encrypted communication channels, and access control requirements. This avoids the all-too-common scenario where partners default to consumer-grade tools that violate NIST 800-171 controls.
• CUI disposition at termination. When the teaming arrangement ends — whether through contract completion or early termination — define how CUI will be returned, destroyed, or retained. NIST 800-171 control 3.8.3 requires sanitization of media containing CUI. Your agreement should specify timelines and verification methods for CUI disposition.

One often overlooked issue is CUI in the capture and proposal phase. Even before contract award, teaming partners may share CUI during proposal preparation — particularly if one partner has access to government-furnished information from an existing contract. Ensure your teaming agreement addresses pre-award CUI handling, not just post-award obligations.

Evaluating Potential Partners

The most elegant teaming agreement is worthless if you pick the wrong partner. Effective partner evaluation goes well beyond checking that a company has the right NAICS codes and a SAM.gov registration. Here is a structured evaluation framework:

Past performance verification. Do not take a potential partner's past performance claims at face value. Request specific contract numbers, check CPARS ratings if accessible, and talk to contracting officers and program managers who worked with them. A partner with marginal past performance will weaken your proposal, not strengthen it.

Financial stability. Review the potential partner's financial health. For a JV, you are sharing risk — a financially distressed partner puts the entire venture at risk. For a subcontract, a partner that cannot make payroll will fail to deliver, and you will bear the consequences with the government. Request audited financials, check for liens or judgments, and verify their bonding capacity if relevant.

Compliance posture. Assess the partner's compliance maturity across the areas that matter for your opportunity: CMMC readiness, DCAA-approved accounting systems, facility clearances, quality management certifications (ISO, CMMI), and organizational conflict of interest (OCI) considerations. A partner that cannot pass DCAA audit scrutiny will create problems during contract administration.

Cultural compatibility. This is the factor most GovCon companies underweight, and it is often the factor that determines whether a teaming arrangement succeeds or fails. Evaluate communication styles, decision-making speed, quality standards, and management philosophy. A startup that moves fast and iterates will struggle to team with a legacy defense contractor that requires six levels of approval for every deliverable. Neither approach is wrong, but the mismatch creates friction.

Strategic alignment. Understand why the potential partner wants to team. If your goals are complementary — you want the past performance, they want the set-aside access — the arrangement is inherently stable. If both partners want the same thing (control, customer relationship, follow-on position), the arrangement will produce conflict. The best teaming relationships are built on complementary strengths and aligned incentives.

Capacity and bench strength. Verify that the partner actually has the personnel to perform. Many small businesses commit to multiple teaming arrangements simultaneously, spreading their key people across proposals. If your partner's proposed key personnel are also proposed on three other teams, you have a staffing risk that should be addressed in the agreement through binding commitment clauses.

Organizational conflict of interest review. Before formalizing any teaming arrangement, conduct an OCI analysis. If your potential partner is advising the government on the very program you intend to bid, or if they hold a contract that creates an impaired objectivity or unequal access to information issue, the entire team could be disqualified. OCI issues are disqualifying and often surface late in the evaluation process when it is too late to restructure.

Teaming decisions are not made in isolation — they flow directly from your capture strategy. The opportunities you are tracking, the competitive landscape you have mapped, and the capabilities you have identified as gaps all inform whether you need a partner and what kind of partner you need. A disciplined capture management process surfaces teaming needs early — during the identify and qualify phases — giving you time to evaluate partners, negotiate terms, and build the working relationships that produce winning proposals and successful contract execution.

The companies that win consistently in federal contracting are not necessarily the largest or most technically capable. They are the ones that build the right teams, formalize those teams with airtight agreements, and execute as a cohesive unit. Whether you are forming your first JV or negotiating your fiftieth subcontract, the principles remain the same: choose partners whose strengths complement your gaps, document every obligation, protect your CUI boundaries, and structure the relationship so that both parties have a clear incentive to perform.