One of the bedrock principles of federal contracting is the demand for “full and open competition through the use of competitive procedures.” In order to foster competition and reduce costs, the Competition in Contracting Act was passed into law in 1984 in an effort to enhance competition in procurements and thereby reduce costs, eliminate waste and abuse, and protect taxpayer dollars. The effort to root out corruption and promote competition continues with the recent announcement by the Department of Justice (DOJ) of the newly formed Procurement Collusion Strike Force (“Strike Force”), with additional details and training materials—and an imposing antitrust violation complaint form—available on its recently launched website.
The focus of the Strike Force will be to employ complementary strategies to eliminate anticompetitive collusion and fraud and to promote the integrity of government procurement. In addition to aggressive prosecution of criminal violations of bid-rigging and other antitrust violations under Section 1 of the Sherman Act (15 U.S.C. § 1), the Strike Force will employ more expansive application of Section 4A of the Clayton Act (15 U.S.C. § 15(a)), which permits any entity (including the government) to recover treble damages and attorneys’ fees when it is “injured in [its] business or property by reason of anything forbidden in the antitrust laws.” The Strike Force will work with procurement officials and improve data analytics to help recognize and report suspicious conduct in procurement, grant, and funding program processes. Members of the Strike Force will also conduct outreach, education, and training for government contractors to identify and report antitrust “red flags of collusion.” This effort will be undertaken by a team consisting of DOJ’s antitrust prosecutors, 13 U.S. attorneys’ offices, and investigators from the FBI and federal Offices of Inspector General for DOJ, the Department of Defense, the General Services Administration, and the U.S. Postal Service.
While the antitrust laws are not new, the DOJ’s specific and coordinated emphasis on the investigation and prosecution of suspected violations in the government contracting space is a warning and a timely reminder for all government contractors to review and strengthen their compliance and oversight protocols. For example, teaming agreements, joint ventures, and other collaborative arrangements are recognized in the FAR and in procurement practice as useful and pro-competitive means to pursue government contracts and to provide goods and services to the government more efficiently. But these arrangements are also freighted with antitrust risk if they are not set up and managed in a way that prevents unlawful exchanges of information, bid coordination, or other potentially unlawful conduct.
There are many instances in which antitrust consideration should be top of mind for government contractors:
- Mergers/acquisitions or other corporate combinations may raise antitrust considerations that should be fully vetted with counsel—especially when the sole customer is the U.S. government. If a merger/acquisition is likely to lead to price increases for a procuring agency, it is also usually advisable to determine whether that agency is supportive of the proposed deal.
- Contractors can reduce antitrust risk in teaming agreements by proactively advising the procuring agency of the arrangement and obtaining its support and strictly defining the scope of the agreement as well as not permitting unrelated information or personnel bleed into the separate operations of the companies, which might raise questions about unlawful coordination.
- If a subcontractor has an essential technology or product that any prime contractor needs in order to compete fairly, any exclusive agreement between a prime and that subcontractor may be deemed anticompetitive if it excludes other primes or renders them technically incapable of bidding or performing a contract.
These types of issues should spark an internal company dialogue concerning the potential impact of antitrust laws on the contractor’s undertaking. However, that kind of insight may arise only if that contractor has adequately incorporated antitrust training into its compliance program or provided its contract managers/business developers with the knowledge and mechanisms needed to report antitrust concerns (whether observed internally or by others in the market).
The crafting or formation of any teaming arrangement among government contractors, just like an acquisition or sale of a government contractor, is always challenging and sometimes a tricky endeavor. The ample nuance needed to undertake those efforts while avoiding unnecessary risk just became a lot more challenging with the DOJ Strike Force looking over contractors’ shoulders and literally checking their math. While antitrust controls have always been present in the federal contracting process, it is the current emphasis on antitrust violations—along with the routine government contracting clauses and federal regulations—that requires an enhanced understanding of how all these laws intersect to impact contractor collaboration and reporting obligations.