By Matt Handal
Special to Ontario Construction Report
Today, you are in for a treat. I want to give you a complete guide to one of the most difficult strategic decisions: teaming.
Teaming is often a critical component for winning contracts. In some industries, like the design and construction industry, teaming is usually required to win government contracts.
Therefore, teaming strategy isn’t something you throw together. You need to consider your teaming decisions carefully.
As you will see, there is a lot that goes into teaming strategy. A haphazard approach to teaming is going to do you more harm than good.
Before we dive into teaming strategy, let’s discuss a few key terms.
If you are submitting on the contract, you’ll be known as the “prime” (a.k.a. “prime consultant” or “prime contractor”). Your teaming partners will often be referred to as “subs” (a.k.a. “subcontractor” or “subconsultant”).
There are specific categories of subconsultants that may be required to comply with your contract. Here are a few of them:
MBE: Minority-Owned Business Enterprise
WBE: Woman-Owned Business Enterprise
DBE: Disadvantaged Business Enterprise (this often includes MBEs and WBEs)
SDVOSB: Service-Disabled Veteran-Owned Small Business
VOSB: Veteran-Owned Small Business
SBE: Small Business Enterprise
This list covers most of them but is not a comprehensive list.
Each agency will likely have its own rules and regulations regarding which firms can fall into these categories. It’s essential to understand the specific rules regarding these categories held by the client you are submitting to.
Subcontracting goals and requirements
This is a sticky topic. Public agencies often have “goals” regarding how much of the work needs to be performed by certain subcontractors.
For example, you may see an RFP that says there is a 20 per cent DBE goal. That means that 20 per cent of the money from the contract has to go to DBE firms (for work performed). Again, we’re not talking about 20 per cent of the hours billed or people involved. We’re talking about 20 per cent of the money.
Yes, this is a goal: something the agency strives to achieve. And technically speaking, it may be unconstitutional for them to require you to use DBEs.
But my advice is to always treat a subcontracting “goal” as if it were a requirement.
First, meeting your subcontracting goals helps your clients. If you don’t achieve your subcontracting goal, your client may have to provide his/her boss some written justification as to why you didn’t meet your goal. And what client wants to do that?
Second, submitting a proposal that does not meet the identified goal is, more likely than not, extremely foolish. If other firms who submitted can achieve the goal, why should a client choose you?
There is often, but not always, a rule which states the prime must perform 51 per cent of the work. This is an important consideration when choosing how to structure your team.
Be suspicious of any firm that contacts you suggesting that they prime but you do more than 51 per cent of the work.
Passthrough subs and DBE fraud
Often agencies do not allow passthrough subs. For example, let’s say you’re a construction contractor and you team with a DBE rebar supplier to meet your goal.
That DBE firm might only serve as a “broker,” ultimately buying the rebar from a non-DBE firm and delivering to you (rather than stocking rebar in a warehouse). That’s known as a passthrough.
Agencies often frown upon, or disallow, these types of arrangements. You have to be careful to avoid these or any situation that may be considered “DBE fraud.”
Firms have been fined millions of dollars for DBE fraud. I believe people have even gone to jail.
Deciding whether to be the prime or sub
One of the first teaming decisions you’ll make is whether to serve as the prime or the sub. In some “games,” you may even decide to submit as both.
Here are some questions you should ask before you make this decision:
- Are we more likely to win as a prime or sub?
- Do we have an existing relationship with the client?
- Are the services we’re providing the primary services on this contract?
- Can we trust the prime will actually give us the work?
Determining which services to sub out
If you decide to submit as the prime, you’ll have to determine which portions of the scope should be subbed out. How are you going to configure your team?
The configuration you choose has to give you the most significant advantage during the procurement. But it also has to be practical once the work starts.
For example, you might give your DBE sub a portion of the scope that won’t likely be needed during the project. That approach might sound great to a prime, but you’ll never meet the goal once the project starts.
And if you don’t meet the goal during this contract, why would the client believe you will the next time around? Again, treat goals like a requirement.
Here are the questions you need to ask yourself when determining which portions of the scope to sub out:
- Which scope items (if procured separately) would it be tough for us to win?
- Which services will we need to use subs on to meet the client’s goals?
- Which scope items are our subs likely to “knock out of the park?”
Participation goal considerations
When there are specific subconsultant utilization goals, there are additional considerations you have to make.
For example, it’s rarely a good idea to rely on only one DBE/WBE sub to meet your goal. However, teaming with many different firms on the same contract can be a management nightmare.
Here are a few goal achievement considerations:
- Based on what we know of the scope, are we certain we can meet the goal?
- Will Having Multiple DBE or WBE subs help ensure we’ll achieve the goal?
- Can we manage these subs effectively?
- Have we personally verified they are still registered as a DBE/WBE with the client?
Before finalizing your sub selection
Once you have subs in mind, you’ve got to verify that they’re the right choice. You can do that by asking these questions:
- Can they provide something we cannot? (Service, relationship, local presence, goal fulfillment)
- Do we have a successful history working with them?
- Do people we know have a successful history working with them?
- What’s the client’s perception of this firm?
- Do they make our team stronger?
- Are their resumes and experience made up of on-point projects?
- Can they meet some or all of our participation goal?
There are a few other considerations you might need to make while coming up with your teaming strategy.
Is there a potential conflict of interest?
In some instances, firms who hold certain contracts with a client are prohibited from participating in specific, future, contracts. For example, a firm involved in a planning contract may be precluded from participating in an architecture design contract.
And a firm that works with construction contractors might be precluded from participating in an inspection contract (where you’ll be inspecting their client’s work).
It’s important to make yourself aware of any potential or perceived conflicts of interest you or your proposed subs might have.
Do we need to ask for a letter of commitment?
It’s probably best to always ask for a letter of commitment from subs. But some agencies expect you to submit a letter of commitment, from your subs, stating what they’ll be doing and how much of the contract they’ll be getting.
This might seem like a simple thing you can do at the last minute. But getting a letter of commitment requires certain agreements to be made between you and the sub. And if you’re not on the same page as the sub, that can be challenging.
Do we need to arrange/sign a teaming agreement?
In some instances, it might be strategically favourable to sign a teaming agreement with subs. This agreement will bind you to this teaming partner when chasing specific projects or clients.
Matt Handal, based in the Philadelphia area, provides resources for AEC proposal writing and marketing at helpeverybodyeveryday.com. He has helped construction, engineering, architectural, and real estate consulting firms realize tens of millions in fees from projects ranging from $500,000 to $2 billion. He says he welcomes questions from readers about this article and can be reached by email at email@example.com.