The Virginia Business Litigation Blog
A “teaming agreement” is an agreement between two or more contractors to “team up” by combining their resources to bid on a major government contract, thereby increasing the likelihood of securing the work. Often, they will be drafted to require that the prime contractor use the subcontractor specified in the teaming agreement if the bid is accepted, but this is not always the case. Teaming agreements can be very appealing to smaller subcontractors, or subcontractors who don’t qualify to bid on a particular government contract, because they allow opportunities to work in tandem with larger or more qualified firms to gain access to lucrative government-contract work they would otherwise be excluded from. But are such agreements enforceable? Not always.
A “letter of intent,” like a teaming agreement, is a document signed by the parties that contemplates the formation of a formal contract to be executed at some point in the future. Virginia courts treat such agreements as “agreements to agree,” which basically means that the parties are agreeing to attempt in good faith to negotiate the terms of a formal agreement with respect to a particular subject matter. Letters of intent are typically short and devoid of material terms that would be necessary to make the agreement binding in court. There’s nothing preventing two parties from entering into an actual contract, intending to be bound, and calling it a “letter of intent,” but absent evidence of such an intention to be bound, such agreements will not be enforceable.