The U.S. Department of Justice (DOJ) Procurement Collusion Strike Force (PCSF, or Strike Force) celebrates its third anniversary this month. Formed in November 2019 as an interagency partnership consisting of DOJ’s antitrust prosecutors, lawyers in 13 U.S. attorneys’ offices, and investigators from the FBI and federal Offices of Inspector General, the Department of Defense, the General Services Administration, and the U.S. Postal Service, the Strike Force leverages joint resources to investigate public procurement crimes, employ complementary enforcement and prosecution strategies, eliminate anticompetitive collusion and fraud, and promote the integrity of government procurement. Employing education and state-level liaising, the Strike Force has been remarkably omnipresent and successful in that short time, despite numerous pandemic-related interruptions/delays in the courts. The pace of the Strike Force’s enforcement activity has quickened dramatically in 2022—and shows no signs of slowing in 2023.
In its more traditional role, the Strike Force prosecutes criminal violations for bid-rigging and other antitrust violations under Section 1 of the Sherman Act (15 U.S.C. § 1). This is a no-brainer of sorts, but that’s not all it is capable of pursuing. The PCSF has also employed a more expansive interpretation and 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.” But again, that’s not all.
In fact, the Strike Force has also been successful in prosecuting complex fraud and collusion cases, even when they do not present traditional antitrust causes of action. Indeed, several PCSF cases filed this year did not allege any violation of the Sherman Act or the Clayton Act, underscoring that the Strike Force has broadened its original antitrust mandate to pursue bribery and fraud cases in order to protect the integrity of public procurement. The PCSF has displayed a keen ability to successfully police alleged anti-competitive conduct at all levels of government contracting through interagency investigation and collaboration. Just this year, the Strike Force has announced indictments and secured convictions for anticompetitive activity occurring on the local, state, federal, and international levels. Several of the Strike Force’s investigations have already resulted in substantial convictions, fines, and settlements ranging into eight figures.
While the antitrust laws are not new, the PCSF’s specific and coordinated emphasis on the investigation and prosecution of suspected violations in the procurement space is a warning and a timely reminder to 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 Federal Acquisition Regulation 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 if not done right (or perceived to have been done wrong), 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, improper bid coordination, and 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 de facto price increases for a procuring agency, it is also usually advisable to determine whether that agency supports the proposed deal.
- Contractors can reduce antitrust risk in teaming agreements by proactively advising the procuring agency of the arrangement and strictly defining the scope of the agreement. In addition, contractors should not allow unrelated information and/or personnel to 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. Ultimately, if the arrangement impacts the market available to the government customer, there could be a problem.
These types of issues should spark an internal—and perhaps uncomfortable—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 woven antitrust understanding into its compliance program or provided its contract managers/business developers with the knowledge and mechanisms needed to identify the broadening definition of antitrust concerns and report any such 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 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 these laws intersect to impact contractor operations, collaboration, and reporting obligations.