Tread carefully in dealings with vendor teams

It has been said that second marriages are the triumph of hope over experience. In that
sense, choosing teaming partners for information technology is like choosing mates.

Having represented both large and small companies, I have an array of anecdotes that
range from horror stories to tales of bliss.

Integrity and self interest are at the heart of every good partnering arrangement.

Too bad the former is occasionally outweighed by the latter. Often, a small vendor with
an innovative product or service will have a strong relationship with an agency's
managers, but still need a big prime contractor to provide marketing depth and ease any
remaining credibility concerns.

As an agency manager, it's in your interest to help ensure that vendor team members
with whom you trust your dollars and programs have stable relationships.

The best way for a small company to pick such a partner is to base the choice on
personal relationships--if possible, personal friendships--within the five or six
companies that are potential partners. A corporate partner shouldn't be XYZ Corp. It
should be the trusty Bob or Sue who would not sell the small vendor down the river for a
quick advantage.

An old cliche also applies here: The apple doesn't fall far from the tree. Corporations
do have different mores and ethics, which emanate from the executive suite. If the Jolly
Roger is the corporate flag, a small vendor should be careful signing up for the voyage.

Low-ball prime contractors are also dangerous for small vendors. These companies have a
reputation for winning with low bids then coming back to their subcontractors with good
news and bad news.

The good news, of course, is that they won. The bad news is they bid the job at rates
so low that they gave away any profit and want subcontractors' prices reduced to reflect
the reality of the low bid. Subcontractors who don't comply get swapped out. After
subcontractors have lived through this process once or twice, they'll know enough to
listen carefully for stories about such behavior in the McLean, Va., Tower Club and other
swank places where IT executives eat lunch, cheek by jowl, with competitors.

In fact, a small company should interview at least two potential partners, but only
after the big boys have signed strong nondisclosure agreements. When a small company gives
a larger company its version of such a proposed agreement, this often leads to a
revelation--the big company may insist from the start that its own one-sided documentation
be used, which may not adequately protect the small company's interest.

Take a hint from this first set of negotiations as to whether this date has long-term

Ask to see the vendors' written teaming agreement. It should make sure the expectations
of each party will be met. Check to see if the subcontractor has a minimum percentage of
the work under the contract. It should, assuming that team wins the award. The signed
agreement helps prevent the prime contractor from becoming a competitor after the award.

Alternative dispute resolution clauses are a must in teaming agreements. Smaller
companies may want to propose consultation and no-raiding clauses to the teaming or
subcontracting relationship. No-raiding is simple. Prime contractors are most likely to
pick off small subcontractors' star employees during a contract.

Consultation clauses guarantee a dialogue. Prime contractors should clearly communicate
with their subcontractors to decide which direction to take before that position is
communicated to the customer. When they don't, they send a message that the subcontractor
is not valued.

The government has a moral and practical responsibility to discourage fratricide
between prime contractors and subcontractors. On occasion, the government acts like a
child who knows from long experience how to create problems between its mother and father,
and acts out of spite or for a perceived strategic advantage.

For example, the government may legitimately elect to communicate only with the prime
contractor. Fine, but when the government routinely deals with the subcontractor then
switches to the prime contractor to send a message to that subcontractor, it creates
unnecessary stress in the relationship.

When the government takes an unreasonable position with respect to a subcontractor's
work, a good prime contractor won't act like the football doll with the bobbing head,
saying yes to everything, however unreasonable. Those are the days when the good prime
contractor shows its mettle.

Stephen M. Ryan is a partner in the Washington law firm of Brand, Lowell & Ryan. He
has long experience in federal information technology issues. E-mail him at

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