New DOJ “strike force” targets bid riggers and antitrust violators involved in government procurements

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The US Department of Justice (DOJ) recently announced a new interagency “strike force” to target bid rigging and antitrust violations linked to government procurements. The strike force will consist of prosecutors from the DOJ’s Antitrust Division and US Attorney’s offices as well as investigators from a variety of agencies, including the FBI and the Department of Defense. Given the vast amount of money the federal government spends each year, the focus on government procurements should be of no surprise. What may come as a surprise, however, is that, according to Assistant Attorney General Makan Delrahim (who runs the Antitrust Division), over one-third of the 100+ active cases being investigated for criminal fraud by the Antitrust Division relate to public procurements or other instances where the government is alleged to be the victim of the anticompetitive behavior.

An important factor driving the DOJ’s focus is the vulnerability of government procurements to collusive or anticompetitive behavior. There are a number of reasons for this. For many government procurements, there are only a few potential offerors, few substitute products and significant repetitive purchases. In many cases, there are also significant barriers to entry, particularly for larger and more complex government procurements. And for emergency government procurements (e.g., disaster relief), the evaluation-and-award process may be accelerated and less robust.

Bid rigging and other anticompetitive behavior affecting government procurements typically falls into one of the following categories: (i) bid suppression; (ii) complementary bidding; (iii) bid rotation; (iv) market division; (v) price fixing; and (vi) exclusive teaming arrangements with suspicious subcontracting relationships. According to the DOJ, some indicators of bid rigging or other anticompetitive behavior are secret meetings among competitors; the submission of a bid by an offeror incapable of performing the contemplated work; last-minute or unexplained bid changes; “courtesy” bids; sudden, simultaneous price changes; and regular suppliers not bidding on work that they typically would bid on. In rooting out fraud, the DOJ also looks for suspicious bidding and pricing patterns, such as where only certain companies bid in certain regions or on certain projects, where there are significant and unexplained differences in winning bids, and where competitors all obtain roughly the same amount of work over a period of time.

Antitrust violations carry steep penalties, including potentially jail time for individual criminal offenders, substantial monetary penalties for companies and individuals, and suspension and debarment from government contracting. The Federal Acquisition Regulation (“FAR”) also requires contractors to certify that their proposals were developed independently, which means that a false certification could also be actionable under the civil (or potentially criminal) False Claims Act.

Notably, the DOJ has a “leniency program” that permits one contractor to self-report certain criminal anticompetitive behavior in exchange for immunity from criminal prosecution and reduced civil liability. Under the program, the first company or individual to self-report obtains immunity so long as they fully cooperate with the DOJ’s investigation and prosecution of any co-conspirators (i.e., a race to the government). Subsequent “self-reporters” can get more lenient penalties, but not immunity.

Given the DOJ’s reemphasis in this area, contractors should assess (and strengthen and update) their internal compliance and compliance training programs at least annually. Contractors that frequently engage in teaming arrangements also should pay close attention to the ground rules set forth in FAR Subpart 9.6 and be particularly mindful of antitrust requirements when entering into teaming agreements. A strong, up-to-date internal compliance program is not only the first line of defense in preventing violations, but also a significant mitigating factor in any charging or sentencing decision, and will likely weigh heavily on an agency’s suspension or debarment decision if a contractor finds itself facing such scrutiny.

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.

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