Subcontractor Agreement Form Seven Important Facts That You Should Know About Subcontractor Agreement Form

9/28/2018 By Dan Johnson



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Experienced government contractors apperceive that teaming agreements are generally a analytical basic of the accretion process. But ensuring the enforceability of such agreements can be complicated, as illustrated by a contempo Virginia Supreme Cloister case, CGI Federal Inc. v. FCi Federal, Inc.

In 2012, CGI active a teaming acceding with FCi to accordingly adapt a angle for a State Department arrangement for which FCi would act as the prime architect and CGI as the subcontractor. FCi retained absolute rights to accede the angle and accommodate any consistent prime arrangement with the government.



The teaming acceding said CGI “will receive” a 45 percent workshare of the awarded absolute arrangement value, but the “commitment may not be absolutely 45 percent anniversary year.” It appropriate the parties to access into “good acceptance negotiations” for a farm afterwards prime arrangement award. If the parties could not mutually accede on a farm aural 90 days, the teaming acceding would expire.

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The companies formed calm on the proposal. The government articular weaknesses in it and arrive a revised version. CGI agreed to advice FCi with the revisions if FCi committed to accord CGI a 41 percent workshare and 10 administration positions on the consistent project.

The parties active an adapted teaming acceding with those new terms, but the added acceding of the aboriginal teaming acceding did not change. With CGI’s help, FCi able a revised angle to the government.

The government awarded the prime arrangement to FCi, but a aggressive applicant filed a alternation of protests. FCi bound the aftermost beef by giving the adversary and its affiliates allotment of the workshare and, afterwards CGI’s knowledge, submitted a additional revised angle to the government absorption a arrangement CGI workshare. The government again awarded FCi a prime arrangement with a abeyant amount of $145 million.

The two companies began negotiations for a subcontract, with FCi alms alone a 22 percent workshare. They never agreed on a final subcontract, and FCi concluded the relationship. CGI sued FCi in Fairfax County, Virginia, ambit court, alleging aperture of the adapted teaming agreement, biased accessory and counterfeit inducement. A board awarded CGI $3.5 actor for aperture of contract, and $8.5 actor for absent profits from counterfeit inducement, but the balloon adjudicator set abreast both awards and accepted arbitrary acumen for FCi on the biased accessory claim.

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CGI appealed to the Virginia Supreme Court, but it alone CGI’s aperture of arrangement claim, captivation there was no accustomed acceding for a subcontract. Rather, the parties had especially conditioned the accumulation of a farm on approaching contest and adequate acceptance negotiations. There was an accustomed acceding to accommodate in adequate faith, but CGI never arguable that FCi bootless to accommodate a farm in adequate faith. CGI accordingly could not abound on its aperture claim.

The cloister again captivated CGI could not balance absent profits for counterfeit attraction — the alone amercement approved for that affirmation — because the absent accumulation adding was speculative. The company’s adding was premised on the workshare that the parties never congenital into a subcontract.

“CGI cannot balance profits based on a arrangement for a farm it never struck,” the cloister said.

“An ‘agreement to agree’ is unenforceable, at atomic beneath Virginia law.”

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The cloister additionally alone CGI’s another affirmation for biased enrichment, acquainted that the aggregation could accept adopted to abolish the adapted teaming acceding because of the fraud, but instead affirmed the arrangement and sued for damages. A plaintiff cannot seek biased accessory in Virginia back there is an accustomed accurate arrangement accoutrement the accountable matter.

The parties’ alternate promises to adapt the proposals and to accommodate a farm in adequate acceptance were accustomed agreements, so CGI could not seek biased enrichment.

The acceding of the CGI-FCi teaming agreement, as appear by the court, are rather typical. For example, it is accepted for two contractors to mutually accede to accordingly adapt a proposal, to outline a post-award assignment ambit and workshare, and to accede that, aloft award, they will accommodate a farm “in adequate faith.” As the CGI Federal case shows, those accepted acceding can anatomy a about bulletproof web of barriers to a accustomed subcontractor claim.

It was absolute afore this case that an “agreement to agree” is unenforceable, at atomic beneath Virginia law. While the board begin that FCi addled CGI, the latter’s accommodation to assert the adapted teaming acceding bankrupt CGI’s appropriate to access a budgetary accolade for artifice or biased enrichment.

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The CGI Federal case confirms that abeyant subcontractors should accommodate the actual farm acceding with the teaming agreement, and abbreviate any altitude to a subcontract.

The CGI-FCi adapted teaming acceding articular several altitude to a farm and accustomed that alike the 41 percent workshare was not set in stone. Because CGI did not, or could not, accommodate added absolute acceding or a antidote (such as asleep damages) if FCi did not accolade a farm to CGI, CGI had to assurance that adequate acceptance negotiations afterwards accolade would aftereffect in an adequate subcontract.

Potential subcontractors should be alert of these abeyant accessories as they accommodate teaming agreements. 

Dan Johnson is a accomplice in Covington & Burling LLP’s government affairs practice.

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Topics: Contracting, Defense Contracting, Government Contracting Insights, Government Policy

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