Teaming agreements in government contracting

Teaming is a common strategy in federal contracting that allows two or more businesses to combine capabilities, past performance, and resources to pursue and perform government contracts that neither could win or deliver alone. For small businesses, teaming can be a path to accessing larger opportunities, building past performance, and gaining agency relationships before competing independently.

How teaming works

In a federal contracting teaming arrangement, one business serves as the prime contractor — the entity that holds the contract with the government and bears primary responsibility for performance — while one or more others serve as subcontractors, performing specific portions of the work under agreement with the prime.

Teaming arrangements are typically formed before a solicitation closes, when businesses identify that combining their respective strengths improves their competitive position. The teaming agreement documents the relationship during the proposal phase. If the team wins the contract, the prime contractor issues subcontracts to the team members.

What a teaming agreement should include

A teaming agreement is a pre-award document between the prime and teaming partners. It is not the subcontract — that comes later if the team wins. A well-structured teaming agreement typically covers:

• Identification of the opportunity — the specific solicitation or contract vehicle the team is pursuing
• Roles and responsibilities — which partner is the prime, which are subcontractors, and what work each will perform if awarded
• Exclusivity provisions — whether the partners agree not to team with competitors on the same opportunity
• Intellectual property protections — how proprietary information shared during proposal development will be handled
• Scope of the subcontract — the anticipated work to be subcontracted to each partner, expressed as a percentage or specific deliverables
• Term and termination — when the agreement expires and under what conditions it can be terminated
• Non-disclosure provisions — protection for sensitive business information shared during the teaming relationship

Subcontracting limits on set-aside contracts

Set-aside contracts have specific limitations on how much work the prime contractor can subcontract to non-eligible businesses. These limitations exist to ensure that the set-aside benefit actually flows to the qualifying business, not primarily to a large subcontractor.

For small business set-aside contracts for services, the prime contractor must perform at least 50% of the cost of the contract with its own employees. For supplies or products, the prime must supply at least 50% of the value from its own facilities or from other small businesses. Limits vary for construction and specialty trade contracts.

For socioeconomic set-asides (SDVOSB, WOSB, 8(a), HUBZone), similar limitations apply, and the qualifying business must be the prime contractor performing the majority of the work. Using a qualifying set-aside status to win a contract and then subcontracting the majority of work to a non-qualifying business — sometimes called "pass-through" or "brokering" — is a violation of federal contracting regulations.

Prime vs. subcontractor — when to pursue each

The right role depends on your business's current capabilities, past performance record, and strategic goals:

Pursue the prime role when your business has the relevant past performance, staffing, and capability to manage the full scope of the contract. The prime bears all contractual obligations to the government and receives the primary benefit of the relationship.

Pursue the subcontractor role when your business can contribute specific skills or capacity but lacks the scale, past performance, or relationships to win as a prime. Subcontracting builds agency relationships, expands past performance, and generates revenue while your business develops the credentials to compete independently.

Mentor-protégé programs

The SBA and several federal agencies operate mentor-protégé programs that formalize teaming relationships between larger experienced contractors (mentors) and eligible small businesses (protégés). These programs can include joint venture arrangements that allow the pair to compete as a team for certain contracts, with specific subcontracting and size exceptions.