Teaming strategies for making money and mitigating risks

Some companies do too much teaming, and some do too little. What’s usually missing in both cases is the right teaming strategy.

Some companies team on every bid. When it becomes routine, there’s a good chance they’re giving away up to half their revenue. Their best growth strategy might not require any new leads. All they may need to do is less teaming. Seriously — I’ve seen companies struggling for year-over-year growth double their goals simply by doing less teaming.

But some companies find success through nothing but subcontracting. They are usually product companies with unique offerings, or extremely specialized services providers. Because they are the only ones who can fill a particular set of requirements, they are brought in by the prime contractors and the two don’t have to worry about stepping on each other’s toes or competing with each other.

Some companies never team. They do what they do, and it just wouldn’t occur to them to include another company. They probably aren’t government contractors. But they are potentially missing the chance to expand their market reach and offer more complete solutions to their customers.

Teaming is full of potential problems and risks. Some of the risks after an award can be mitigated through careful contracts. But not all. Leverage ends up being more important than contracts. Leverage comes from strategy. But your team needs to be in place at the time of proposal submission and well before award. Companies write teaming agreements to try to document their intentions, but if a teaming agreement is merely an agreement to agree later, then it may not even be enforceable. And again, leverage ends up being more important than what it says on the paper.

There are really only three times when you should team with another company to win a bid:

1. When you are forced to. Small business set-asides can make it necessary for larger businesses to team if they are going to play at all. Sometimes companies can't do everything that is required by an RFP, so they are forced to team with other companies in order to submit a compliant bid.
2. When it increases your chances of winning enough to justify the risks. Sometimes it’s worth it to give up a slice of the pie in order to improve your odds of winning the rest of it. But this is also the most common reason given for unnecessary teaming.
3. When it increases your chances of winning other/future opportunities enough to justify the risks. If teaming can get you into new markets (new customers, new industries, new territories, etc.), it might be worth it.

For leverage, it helps to think in terms of checks and balances:

• When there is just one contract and one source of revenue at stake, both parties have more incentive to act selfishly. But when they team strategically, on multiple contractors with more than one customer, then neither wants to let something bad happen on one contract because it might affect the others.
• A truly unique product or extremely specialized service means the prime has to come to you to get it. Most services do not fit in this category, because the prime can hire staff to gain the capability. Just because you might be better qualified doesn’t mean the prime can’t live without you.
• Whoever owns the customer relationship owns the business. If you are a sub and the customer never sees your face, you can be dropped and they may not care at all. If you are a prime and you let the sub have face time with the customer, you have to worry about them trying to replace you.
• Are you both incentivized to do things that end up making you both money? If the things you want to do make your partner profit in addition to yourself, and the reverse is also true, there’s a good chance you’ll get along just fine.

For other sources of leverage, think about why your teaming partner should care if you are unhappy. If you find yourself resorting to contracts and legal actions, then you don’t have any leverage. But if you can do things that will make them equally unhappy, you have the basis for a nice, smooth, working relationship. You are co-dependent, integrated, and not in a position to even think about being exploitive. In fact, just the opposite becomes true.

If you aren’t sure whether to team or not, consider strategies that increase your leverage. If you’re having trouble finding those strategies, you may want to avoid teaming because you don’t have what you need to mitigate the risks.