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Explanatory Notes
Bidding Agreement/Teaming Agreement
B138 Bidding Agreement/Teaming Agreement
EXPLANATORY NOTES
This Bidding Agreement is designed to provide a framework for two companies that wish to co-operate together in a Tender for a project. Our draft assumes that one of those parties, Party A, will lead the Tender and sign the Project Contract if the Tender is successful. Party A will then enter into a subcontract with Party B for Party B's portion of the project. In other circumstances, both parties might sign the Project Contract or they could create a special purpose company, which enters into the Project Contract with the client.
Turning to the specific contract clauses: INTRODUCTION This sets out the basis upon which the two parties intend to co-operate. CLAUSE 1 - CO-OPERATION Clause 1 creates the basic agreement between the parties to co-operate in preparing the Tender. The precise role of each party will need to be clearly defined and this is dealt with by a reference to the Appendix. This clause contains wording which requires the parties to co-operate "in good faith" - i.e. honestly and openly. While the meaning from a legal perspective is somewhat unclear, its does suggest the right spirit for co-operation on a project such as this. CLAUSE 2 - SUBMISSION OF TENDER AND PRE-CONTRACT NEGOTIATIONS This deals in relative detail with the practical aspects of the Tender - Party A will submit the Tender. (As to who should make the submission, this will usually be determined in advance since one of the parties will probably be pre-qualified to bid and the Client will therefore expect to see that party's name on the Tender. Party A will lead the negotiations but - and this is important - it will keep Party B fully informed of what is going on and will try to bring Party B into the negotiations directly with the Client. The clause requires both parties to sign off on the Tender and no change will be made without the consent of both of them. Clearly, this could present problems - if, for example, the Client wants to expand the scope of the project without increasing the price, one of the parties might be more willing to accommodate the Client than the other. Such a situation is not dealt with in this agreement and it may be that there should be a reference to an independent expert or provision for either party to withdraw or seek another party if that happens.
CLAUSE 3 - TENDER PREPARATION COSTS It is usual, as stated here, for each party submitting a Tender to bear its own costs. We do, however, provide in sub-clause 2 for a situation where one party incurs costs which benefits both parties and in such a case, with prior agreement, those costs will be shared. Such a situation could arise, for example, if representatives of Party A fly to a meeting with the Client and Party A wants a contribution towards the air fares. CLAUSE 4 - SUBCONTRACT This clause contains a number of provisions, which are designed to avoid future uncertainty as to the terms of the subcontract. Clearly, until the Tender is accepted and the terms of the Project Contract are known, it is not going to be possible to finalise any subcontract. However, the principles need to be agreed in advance and some of those are contained in this clause. As will be seen, this clause provides for the draft subcontract to be settled, so far as possible, when the Tender is submitted and for it to be initialled at that stage. Later changes will be made by agreement and the subcontract will be entered into as and when the Project Contract is awarded to Party A. The rest of the clause contains reference to some of the key elements in the subcontract arrangements - price, payment, indemnities etc. A Bidding Agreement, which refers to a prospective subcontract, as here, would not necessarily be enforceable: under English law, for example, it constitutes "an agreement to agree" which the courts would be most unlikely to enforce. Clearly, there is a risk that the parties fall out over the terms of the subcontract before it is finally signed. This is a difficult situation and we have not built any mechanism for resolving this into our Bidding Agreement. CLAUSE 5 - FURTHER AGREEMENT For reasons stated above in relation to subcontracts, a further agreement may be appropriate - when the Tender is submitted, a more detailed agreement could be entered into which crystallises the terms on which each party will co-operate. A further agreement might also contain the draft subcontract as an Appendix so that there is certainty at that stage as to the terms of the subcontract. CLAUSE 6 - DURATION A Bidding Agreement tends to be somewhat short-term in nature and, in any event, will expire if the Project Contract is awarded to some third party. We have inserted three other situations, which might result in expiry. CLAUSE 7 - CONFIDENTIALITY Clearly, it is important in any Tendering situation such as this that there should be strict confidentiality rules. We have, in sub-clause 2 provided for sensitive technical proprietary information to be returned by each party to the other if the Tender is unsuccessful. CLAUSE 8 - OBLIGATIONS AND RESTRICTIONS This clause contains some general obligations - to use best efforts to procure the bid, to act in good faith and to act on an exclusive basis. Sub-clause 4 is designed to prevent either party from co-operating with anyone else while this Bidding Agreement is in place. CLAUSE 9 - ASSIGNMENT A Bidding Agreement such as this tends to be somewhat personal in nature and is therefore it is appropriate to restrict assignment and to restrict subcontracting. CLAUSE 10 - GOVERNING LAW & DISPUTES Having stated the governing law in sub-clause 1, we refer to good faith negotiations between senior executives followed by arbitration if that proves to be unsuccessful. For other possibilities with respect to resolution of disputes see our notes under Miscellaneous Documents on our website. OTHER MATTERS Clearly, the basis upon which a Bidding Agreement is entered into will vary depending upon the precise relationship of the parties and the type of Tender. Where, for example, a Tender bond required by the Client, Party A may want some contribution towards the cost of the bond from Party B. A clause on these lines could be inserted: "Party A has submitted a Tender bond for US$[ ] to the Client, committing itself to submitting a compliant Tender by the due date. If the Tender bond is called, then to the extent that this is due to some act or default by Party B, Party A will be entitled to reimbursement of an appropriate amount from Party B upon demand." Where the parties to the Bidding Agreement are in different countries - e.g. Party A is a company established in the country where the Client is based and Party B is a foreign company providing technical support, it may be appropriate to have a clause dealing with visas - e.g.: "Party A will provide Party B with assistance in obtaining entry visas and permits for Party B's personnel into [ ] while this Agreement is in place. In addition, Party A will provide reasonable assistance to Party B in establishing a formal presence in the country if the Tender is successful." This is one of many of our building contracts.
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