Department Of Justice Expands Scope Of The Procurement Collusion Strike Force

Fox Rothschild LLP
Contact

Fox Rothschild LLP

The U.S. Department of Justice’s Antitrust Division launched a multi-agency law enforcement effort in November 2019 to combat fraudulent and anticompetitive schemes aimed at government procurement, grant and program funding. After a busy first year, DOJ is poised to significantly expand the Procurement Collusion Strike Force both in scope and footprint. Nearly a dozen more U.S. Attorneys’ offices and agencies will join the effort.

This expansion shows that the Antitrust Division is serious in its efforts to crack down on collusion among government contractors. As described in more detail below, the recent expansion of partners involved in the Strike Force means the Division is doubling down on its enforcement efforts.

Now is the time for federal contractors and defense suppliers to ensure that their bidding operations are designed in a way to avoid any conduct that could be construed as a “red flag” that would draw the attention of the Antitrust Division.

Why the Focus on Procurement?

Public procurement is big business, with the government spending more than $550 billion annually on contracts for goods and services. The Strike Force was formed to protect the integrity of that spending by identifying and prosecuting bid-rigging, price-fixing, and market allocation schemes that result in overcharges to the government – overcharges that are paid for by taxpayers. Public procurement fraud is a significant problem facing the Antitrust Division. At the time the Strike Force was announced, more than one-third of the Antitrust Division’s active investigations related to public procurement matters.

What Does the Procurement Collusion Strike Force Do?

The Strike Force has two main objectives: (1) training key constituencies on what these schemes look like; and (2) improving detection of potential criminal activity.

On the training front, the Strike Force works with governmental officials at all levels to teach them what type of conducts should raise “red flags” for them on potential collusion among government contractors. It also works with those officials to structure their contracting process in a way to reduce the likelihood that they could be victims of cartel activity. Additionally, the Strike Force is training government contracting professionals in the private sector in order to raise awareness of the criminal antitrust laws and associated penalties.

Regarding improved detection efforts, the Strike Force is focusing on improving its use of data analytics to detect potential collusion in Government contracting. It will also operate as a clearinghouse for various individual agencies that have developed their own analytics efforts to facilitate the sharing of best practices across interested agencies and offices.

What Does this Mean For Federal Contractors?

There are a number of affirmative steps that contractors can take now to reduce the risk of a potential antitrust problem.

First, contractors should review their Code of Business Ethics and Compliance to ensure that compliance with the antitrust laws is a key component of their programs. This review should also extend to the contractors’ ongoing compliance efforts under Federal Acquisition Regulation 52.203-13. Second, training of procurement employees is critical. Employees need to understand the risks that come with having substantive conversations with competitors. Any conversations about pricing decisions, bidding practices, or segmenting a market are problematic. A seemingly innocent discussion during a cocktail hour at a trade association event can trigger a grand jury investigation and then become the centerpiece of an indictment. Third, employees should also have a way to safely and confidentially report potential antitrust violations to management, and if such reports come in, management must act quickly in conducting an investigation, oftentimes with the assistance of outside counsel, to ascertain whether there is a problem that needs to be addressed.

Who Is Involved In the Strike Force?

While the Antitrust Division is the driving force behind this new enforcement effort, it has organized the group using a “district-based task organization model.” The Division originally partnered with thirteen U.S. Attorneys’ Offices: District of Columbia, Northern District of Texas, Central District of California, District of Colorado, Southern District of Florida, Northern District of Georgia, Northern District of Illinois, Eastern District of Michigan, Eastern District of Pennsylvania, Eastern District of Virginia, Eastern District of California, Southern District of New York, and the Southern District of Ohio.

The Strike Force also started with a number of Inspector General and other investigative offices throughout the U.S. Government: Department of Justice, Federal Bureau of Investigation, Department of Defense, U.S. Postal Service, and the General Administrative Services Office.

What Did the Strike Force Accomplish in Its First Year?

The Strike Force had a busy and productive first year in operation. It trained more than 8,000 people, including several thousand government employees, on how to spot, prevent, and report antitrust schemes in procurement operations. The Antitrust Division also opened more than two dozen active grand jury investigations focused on government contractors who form cartels to defraud the government. While the majority of investigations originated in the districts that are part of the Strike Force, investigations are not limited to those offices, as 25% of investigations were opened in other districts.

The Strike Force also developed a network of federal, state, and local law agencies all committed to sharing information, data analytics, and enforcement resources to detect and ultimately prosecute collusive activity. The Strike Force has grown to include more than 360 agents, analysts, and other law enforcement personnel from 46 unique agencies and offices in the United States.

The Strike Force’s reach is not confined only to the United States, as it also works with agencies that bid U.S. government contracts abroad. The Strike Force coordinates with international counterparts in order to protect the integrity of that spending as well.

How is the Strike Force Expanding in Its Second Year?

After concluding its first year, the Strike Force recently announced an increase in its enforcement reach and footprint within the Department of Justice by adding 11 new agencies and offices to its team. The new U.S. Attorneys’ Office partners are: Northern District of California, District of Maryland, District of Minnesota, Southern District of Mississippi, Eastern District of New York, Middle District of North Carolina, District of Puerto Rico, Eastern District of Texas, and Southern District of Texas. The new Inspector General partners are: Department of Homeland Security and the U.S. Air Force Office of Special Investigations.

What Should Government Contractors Expect Next From the Strike Force?

During the Trump Administration, while some enforcement areas saw a decrease in activity, the Antitrust Division was not among them, as it remained busy pursuing its enforcement agenda. While it is unclear yet who the next Attorney General will be when the Biden Administration takes over next month, there is no reason to believe that the Strike Force will be any less of a priority in the coming years. In fact, given the amount of public procurement dollars available each year, it is likely that the Strike Force will continue to gain prominence within the Antitrust Division. The Strike Force will look to build on its early success and likely see at least some of its active grand jury investigations lead to enforcement actions in 2021.

Resources

The Strike Force website provides access to important resources and information related to its operations.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Fox Rothschild LLP | Attorney Advertising

Written by:

Fox Rothschild LLP
Contact
more
less

Fox Rothschild LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.