TEAMING AGREEMENTS- A CONTRACT TO PURSUE A SOLICITATION AND NEGOTIATE

Posted on October 25, 2020October 25, 2020 by Edward Garber

Teaming agreements are practical and useful agreements on public projects where a prime contractor teams with a subcontractor for purposes of submitting a bid or proposal in response to a solicitation. The prime contractor and subcontractor work together to pursue that solicitation and have the government award the contract to the prime contractor. The teaming agreement allows for information to be confidentially shared (estimating and pricing, construction methodologies, systems, and suggestions, value engineering, etc.) where the subcontractor agrees that it will only pursue the solicitation with the prime contractor. In other words, the subcontractor ideally is not going to submit pricing to another prime contractor proposing or bidding on the same project and is not going to share information the prime contractor has furnished to it. Likewise, the prime contractor is not going to use the subcontractor’s information for purposes of finding another subcontractor at a lower price and is agreeing to use its good faith efforts or best attempts to enter into a subcontract with the subcontractor if it is awarded the project. This is all memorialized in the teaming agreement.

The potential problem lies with language that requires the parties to use their good faith efforts or best attempts to enter into a subcontract if the project is awarded to the prime contractor. In essence, this can become a disfavored “agreement to agree” to a future contract that could allow either party to create an argument to back out of the deal under the auspice that they could not come to terms with the subcontract.

In a partially concurring opinion in Alpha Data Corp. v. HX5, L.L.C. 139 So.3d 907 (Fla. 1^st DCA 2013) (Thomas, J., concurring in part and dissenting in part), dealing with an unsigned teaming agreement, the teaming agreement required the prime contractor to “execute its best effort to negotiate a subcontract agreement that meets the intent of this Teaming Agreement within 30 days after the contract award.” The judge noted that this is nothing more than an “agreement to agree” to something in the future rendering it unenforceable per Florida, Department of Corrections v. C&W Food Service, Inc., 765 So.2d 728, 729-30 (Fla. 1^st DCA 2000) (internal quotations omitted), which found in the context of a renewal provision in a public contract that allowed renewal by mutual agreement:

Even if the contract could be construed to incorporate the good faith negotiation requirement from the manual, C & W would be without a remedy. The obligation to negotiate renewal in good faith is, at most, an agreement to agree on something in the future. Because the parties have not yet agreed on the essential terms for the period in which the contract could be renewed, they do not have an enforceable contract for that period. An agreement to negotiate the terms of a renewal does not create a contractual right to renew. The court could not afford a remedy for the breach of a promise to negotiate a contract, because there would be no way to determine whether the parties would have reached an agreement had they negotiated.

Id. at 729-30 (internal citations omitted).

This does not mean teaming agreements should not be utilized. They absolutely should. What it means is that the teaming agreement should be clear as to obligations and terms. One suggestion is to negotiate the general conditions of the subcontract and attach as an exhibit leaving items such as amount and scope of work to be subject to the teaming communications leading to the bid or proposal, as that will be ironed out during the estimating and scope review process prior to submitting the bid. Importantly, there is authority across the country as to the enforceability of such agreements in that they give rise to the breach of the negotiation aspect in the contract versus purely an agreement to agree to something idefinite in the future, to wit:

[C]ourts have distinguished between “three different but similar types of agreements:” (1) traditional “agreements to agree”—that is, agreements “to do something which requires a further meeting of the minds of the parties and without which it would not be complete;” (2) “agreements with open terms,” pursuant to which “the parties intend to be bound by the key points agreed upon with the remaining terms supplied by a court or another authoritative source;” and (3) contracts to negotiate, pursuant to which “the parties exchange promises to conform to a specific course of conduct during negotiations, such as negotiating in good faith, exclusively with each other, or for a specific period of time.” “In contrast to an agreement to agree, under a contract to negotiate, no breach occurs if the parties fail to reach agreement on the substantive deal. The contract to negotiate is breached only when one party fails to conform to the specific course of conduct agreed upon.”

See Crystal Steel Fabricators, Inc. v. AMEC Foster Wheeler Programs, Inc., 349 F.Supp.3d 1364, 1370 (N.D. Ga. 2017) (internal citations omitted) (discussing teaming agreements and how certain courts around the country treat the enforceability of such agreements as contracts to negotiate).

If entering into a teaming agreement, make sure you work with counsel as to the language in the agreement to ensure it is clear and there is an effort to remove any undefined terms that could be defined at the time of the teaming agreement. This way the objective of the teaming agreement if the public body awards the contract to the prime contractor is either a) a failure to perform a specific obligation under the teaming agreement or b) a failure to negotiate the subcontract per the terms of the teaming agreement.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

THE DIFFICULTY IN PREVAILING IN A BID PROTEST

Posted on August 14, 2011August 14, 2011 by Edward Garber

The difficulty in prevailing in a bid protest is illustrated in the non-construction case of Charlotte County v. Grant Medical Transportation, Inc., 36 Fla. L. Weekly D173a (2d DCA 2011). In this case, Charlotte County solicited bids to provide the County with bus drivers and washers for a transit program for disabled persons. An unsuccessful bidder sued the County arguing that the winning bidder’s bid was nonresponsive because it failed to comply with requirements of the solicitation. In particular, the unsuccessful bidder argued that the bid solicitation required all bidders to acknowledge receipt of any addenda to the bidding documents prior to the close of the bids, i.e., bid opening, and the winning bidder failed to comply with this requirement making its bid nonresponsive. (A bid is nonrespnsive if it materially fails to comply with the solicitation. While minor irregularities can be waived by the public entity, material irregularities cannot in that they impact the integrity of the public procurement process which requires all bidders to be on an equal playing field.) After the bid opening, the County required the winning bidder to confirm its receipt of all addenda to the bid documents. (Notably, material portions of a bid should never be able to be changed after bid opening.)

The unsuccessful bidder moved for a temporary injunction preventing the County from awarding the contract at-issue to the winning bidder. The trial court granted the temporary injunction and the County appealed. At the time the trial court granted the injunction, the County had already contracted with the winning bidder and services had been provided in accordance with the contract.

The Second District relied on the following standard for granting injunctive relief:

“To obtain temporary injunctive relief, the movant must satisfy each of the following elements: (1) the movant has a clear legal right to the requested relief or, in other words, it has a substantial likelihood of success on the merits; (2) the movant will suffer irreparable harm if the trial court refuses to grant the injunction; (3) the movant does not have available another adequate remedy at law; and (4) a public interest will be served by the imposition of the injunction.” Grant Medical citing Snibbe v. Napoleonic Soc’y of Am., Inc., 682 So.2d 568, 570 (Fla. 2d DCA 1996).

The Second District reversed the granting of the temporary injunction primarily because the unsuccessful bidder offered no evidence at the noticed and contested hearing (to determine whether an injunction should be entered) to support any of the above-mentioned elements. Although the Second District noted that the winning bidder failed to confirm its receipt of all addenda prior to bid opening, at the injunction hearing, the Senior Division Manager of the County’s Purchasing Department testified that the winning bidder’s failure to confirm receipt was simply a minor deficiency or irregularity. The Second District also noted that at the time the trial court entered the injunction, the contract between the County and the winning bidder had been finalized, with services starting to be performed pursuant to the contract.

It is exceedingly difficult to satisfy each of the above-mentioned elements for the entry of a temporary injunction, especially in the bid protest arena. This case exemplifies the uphill battle an unsuccessful bidder has to prevent the public entity from awarding the contract to the winning bidder.

First, when a public entity waives a known irregularity with a winning bidder’s bid, it will always claim the irregularity is minor and, thus, waiveable at their discretion. This is the reason the County offered testimony at the injunction hearing to basically acknowledge the deficiency with the winning bidder’s bid but to say “it was not big deal.” Well, if it was not a big deal, then why did the County require the winning bidder to confirm receipt of the addenda AFTER bid opening? From a logical standpoint, it would seem that if it is important enough for the County to require that the winning bidder confirm in writing that it received all addenda to the solicitation after the bids were already opened and they knew who the winning bidder was, then it was a material component of the bid solicitation.

Second, unless something totally egregious transpires during the solicitation process, how can a unsuccessful bidder truly establish each and every element to the entry of injunctive relief at what is ultimately an early stage in the lawsuit when discovery should be ongoing? In other words, unless the movant can establish a substantial likelihood of success on the merits or a public interest will be served by the imposition of the injunction, an injunction should not be entered. In Grant Medical, the trial court actually granted the injunction, but the Second District found reasons to reverse the entry of the injunction.

Finally, if the movant does not act quickly in getting the hearing on a temporary injunction, which should mean little discovery, if any, has been conducted, then the movant risks the public body finalizing and entering into the contract with the winning bidder and the winning bidder starting to perform services pursuant to the contract. A no-win situation for an unsuccessful bidder.

While unsuccessful bidders should certainly explore the possibility of protesting, it is important to consider the uphill battle that will be encountered. If the trial court will consider having a hearing and entering injunctive relief in a an ex parte (and, thus, uncontested hearing), that should be explored to avoid the undesirable situation of the contract being entered and services performed by the winning bidder. For this to take place, legal arguments and factual arguments need to be well framed to establish entitlement to the entry of injunctive relief. If a noticed and contested hearing is required, legal and factual arguments still need to be very well framed, but it is important to offer evidence at the hearing. Specifically, if your protest is based on the argument that the winning bidder’s bid was nonrespnsive, you need to know that the public body will argue that the deficiency was minor so that you are prepared to rebut this argument in order to establish a substantial likelihood of success on the merits. You should also offer evidence to show that the deviation is material in that it affects the public interest by detrimentally impacting the competitive procurement process (i.e., it would affect some material component of your bid such as price or scope, etc.).

PERSPECTIVES ON THE COMPETITIVE (OR NOT SO COMPETITIVE) PUBLIC PROCUREMENT PROCESS

Posted on June 25, 2011June 25, 2011 by Edward Garber

In most circumstances, public entities are required to competitively bid the construction of their projects. Sometimes, competitive bidding is as simple as the public entity publishing an Invitation To Bid (“ITB”) seeking to solicit the lowest, responsible, and responsive bidder. In this solicitation, assuming the bidder is responsible (qualified) and responsive (complies with the invitation to bid in all material respects), the public entity is seeking the lowest cost to perform the construction. The ITB process is commonly referred to as the hard bid process because the public entity knows exactly what it wants and seeks the lowest cost to construct per the plans and specifications.

However, seeking an ITB is not the only way a public entity selects a contractor to construct its project. Another common method is the public entity publishing a Request For Proposals ( “RFP”) whereby cost is a factor, but not the only factor in selecting the contractor. A RFP is typically the solicitation when the public entity wants to utilize the experience and sophistication of the contractor to help it determine what specifically it wants. In other words, the public entity wants to resolve a problem and relies on the contractor to submit proposals with the solution and the costs to implement the solution. The public entity then ranks the proposals based on scoring criteria and selects the contractor that has the preferred or highest ranking.

Contractors that participate in the public procurement process, whether through the ITB, RFP, or another approved method of procurement, can often feel frustrated with the process based on the wide latitude and discretion that are afforded to public entities in the process. This frustration is exemplified in Pensacola Builders, Inc. v. King, 36 Fla. L. Weekly D1304c (1st DCA 2011), which involved a 13 year old dispute over a public project that was not awarded to the plaintiff contractor. In this case, a public entity was soliciting a contractor to build and operate a concession stand on a pier through the RFP process. The plaintiff was the highest ranked contractor in the process and was in the process of negotiating the contract with the public entity. However, the defendant contractor that also participated in the RFP process wrote letters to the public entity threatening litigation (after apparently missing the deadline to file a bid protest) regarding the manner in which the public entity conducted the RFP. Due to the public entities apparent fear of the threatened litigation, it ceased negotiations with its highest ranked contractor, readvertised for proposals, and then ranked the defendant as its preferred contractor. This naturally was perceived as an injustice to the plaintiff.

The plaintiff filed suit against the public entity for breach of an implied covenant of fair dealing based on the public entity readvertising the proposals and selecting the defendant contractor as its preferred contractor. See Santa Rosa Island Authority v. Pensacola Beach Pier, Inc., 834 So.2d 261 (Fla. 1st DCA 2002). The plaintiff’s objective was to force the public entity to reengage in contract negotiations with it. The First District Court of Appeal shot down plaintiff’s lawsuit and objective holding, “Absent evidence of illegality, fraud, oppression, or misconduct, Appellee [plaintiff] is without a remedy for Authority’s [public entity] readvertising for proposals and rearranging the preference order of the parties.” Santa Rosa Island Authority, 834 So.2d at 263. Stated simpler, the plaintiff was out of luck as it is hard to establish the government committed a wrong, even though the public entity readvertised proposals due to threatened litigation from a bidder that apparently failed to timely protest!

The plaintiff, however, did not end its pursuit of seeking redress for what it perceived as injustice in the competitive bidding process. The plaintiff creatively asserted claims against the defendant contractor for, among other things, tortious interference with a business relationship and defamation. The plaintiff’s arguments were premised on letters that the defendant sent to the public entity when plaintiff was in the process of negotiating its contract threatening litigation due to the illegality of the RFP process and accusing plaintiff of certain illegal actions. The trial court ruled in favor of defendant on plaintiff’s claims and, unfortunately, because plaintiff did not properly preserve these issues on appeal, the First District Court of Appeal was not in a position to reverse the trial court’s ruling. (Notably, this case demonstrates the importance of preserving all issues and arguments for appeal.) However, had plaintiff preserved these issues for appeal, there may have likely been meat on the bone as to its arguments against the defendant that ultimately got the public entity not to award the contract to the plaintiff, but, instead, to defendant.

In an economy where private projects are not as booming as they once were and public projects being a main source of revenue for many contractors, bid protests and/or the threat of litigation are measures that are being strongly considered when a perceived injustice occurs in the public procurement process. Although this case did not work out well for the plaintiff, plaintiff’s arguments are still creative and worthy of merit against another bidder in a similar context that overtly hinders a contractor’s efforts in contracting with the public entity.