Government Contractors to Face Increased Scrutiny From DOJ’s New Strike Force
Last month, the U.S. Department of Justice (DOJ) Antitrust Division formally stood up a new initiative – the Procurement Collusion Strike Force (Strike Force).
Intended to deter, detect, investigate and prosecute antitrust crimes in public contracting, the Strike Force will target practices such as bid-rigging, collusion, bid rotation, cover bidding, market share, monopoly, price-fixing and market allocation, which undermine competition in public procurements. The impact of these practices on the competitive process is known to increase costs to governments while at the same time decreasing the quality of goods and services purchased.
The Strike Force will scrutinize public procurement projects at the federal, state and local levels. It will partner with other federal agencies to investigate and prosecute antitrust crimes and to provide additional training to government contracting officers and grants and agreement officers to better detect these practices.
The Strike Force has its own website here. It includes a training video to assist procurement officials in recognizing anti-trust conspiracies, and a document outlining some red flags that could be improper practices. Based on the red flags provided, contractors should expect that increased attention will be given to market sectors with few competitors; similarities among competing proposals (including duplicated typos or those overnight mailed from same account); unexplained price increases and a series of awards being rotated among competitors, with subcontracts being issued to losing offerors.
In addition, anyone can submit a complaint or concerns about potential price-fixing, bid-rigging and related schemes affecting government procurement, grant and program funding to the Strike Force for investigation. Information sought by the Strike Force includes the names of the companies and/or people involved in the suspected antitrust violation(s); the government contract, grant or program affected by the suspected illegal conduct and a description of the conduct believed to be a violation of antitrust law. The information can be submitted through the Strike Force’s online tip center, or sent via email (email@example.com) or regular mail (Procurement Collusion Strike Force Tip Center, Antitrust Division, 950 Pennsylvania Ave., NW, Room 3322, Washington, DC 20530).
Some areas familiar to federal government contractors will be under scrutiny again. Specifically, exclusive teaming arrangements have been a target for antitrust investigation for more than two decades, when the Department of Defense (DoD) issued its policy on exclusive teaming agreements. Since that time, DoD contracting officers have been trained to scrutinize these documents to determine if they contain anti-competitive arrangements. For example, contracting officers were taught to look for exclusive arrangements where one party was the sole provider of an item or service. This type of scrutiny will be reinforced by the Strike Force.
The Strike Force is also expected to focus on teaming arrangements and joint venture agreements where the partners are competitors, particularly where the partners are two of only a few potential offerors or are the most technologically capable in that field. Exclusive teaming arrangements that include a subcontractor with a product or specific technology that will be needed by all prime contractors in order to compete effectively, will also be an area of focus.
Antitrust violations can result in both civil and criminal penalties, such as fines up to $100 million or twice the gain or loss resulting from the misconduct, and up to ten years of imprisonment. In addition, companies risk suspension or debarment from eligibility for federal contracts and grants. Aside from criminal penalties, prevailing private parties are entitled to recover treble damages and attorney fees.
The conduct of contractors and grant awardees in the procurement process will now be more closely analyzed for suspicious, anti-competitive behavior. As a result, contractors are encouraged to conduct antitrust training for all employees involved in government procurement and review their teaming arrangements for terminology that may limit competition. This could include evaluating the exclusivity between the parties, or limiting the use of employee recruiting or poaching.
Taft is available to assist clients with compliance and training programs.
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