On Tuesday, November 6, 2019, the Department of Justice (DOJ) announced the formation of the new Procurement Collusion Strike Force (PCSF). This new unit is aimed at deterring, detecting, investigating, and prosecuting procurement-related antitrust crimes such as bid-rigging and price-fixing conspiracies. The unit will seek to protect taxpayer-funded projects at the federal, state, and local levels from antitrust violations and related crimes. Contracting fraud only serves to drive up government costs and limits the level of competition and participation in government procurement.
The new PCSF will be an inter-agency partnership consisting of prosecutors from DOJ’s Antitrust Division and 13 U.S. attorneys’ offices, FBI investigators, and inspectors general offices of the Defense Department and the Postal Service, among others. In addition to investigating and prosecuting procurement fraud, the PCSF will also engage in training procurement officials nationwide to detect and report suspicious practices.
Procurement officials will be taught the following MAPS analysis for detecting collusion (https://www.justice.gov/atr/red-flags-collusion):
M = MARKET
Who is in the market for this award?
Find out how many vendors could compete for the award and which vendors are best positioned to perform the award. The award may be the target of collusion if:
- There are few vendors in the market that offer the good or service.
- A small group of major vendors controls a large share of the market.
- The good or service is standardized, so that the determining factor in the award is price rather than other competitive factors (such as design, quality, or service).
A = APPLICATIONS
Are there similarities between vendor applications or proposals?
Closely examine the proposals or applications submitted by the competing vendors and look for similarities. The award may be the target of collusion if:
- Two or more proposals contain similar handwriting, typos, or mathematical errors.
- Two or more proposals are sent from the same mailing address, e-mail address, fax number, or overnight courier account number.
- Two or more proposals reflect that last-minute changes (such as white-outs and cross-outs) were made to alter price quotes.
- The document properties of two or more electronic proposals show that the proposals were created or edited by one vendor.
P = PATTERNS
Have patterns developed among competing vendors?
Review the outcome of prior awards for the same product or service to identify patterns over time. The award may be the target of collusion if:
- Over a series of awards, competing vendors rotate as the award winner.
- Over a series of awards, routine competing vendors win the same or similar amounts of work.
- Over a series of awards, one vendor always wins, regardless of competition.
- The vendor that wins the award subcontracts work to losing vendors or to vendors that withdrew their proposals or refused to submit proposals.
- As compared with prior awards, a smaller number of vendors submit proposals for the current award.
S = SUSPICIOUS BEHAVIOR
Have vendors demonstrated behavior that suggests that they worked together on the award?
Keep an eye out for suspicious behavior that indicates that vendors worked together rather than competed for the award. The award may be the target of collusion if:
- A vendor submits a proposal for a procurement or grant award, and you know that the vendor lacks the ability to provide the goods or services requested.
- A vendor brings multiple proposals to an in-person procurement or grant process or submits multiple proposals.
- A vendor makes statements on the phone or by e-mail indicating advance knowledge of a competitor's prices or likelihood of winning the award.
Incentives for Good Behavior
The DOJ provides incentives for companies to comply with antitrust laws, so that a company may avoid prosecution for criminal antitrust violations should they occur.
The Leniency Program provides companies and individuals that meet certain conditions an opportunity to avoid prosecution for criminal antitrust violations. To qualify for leniency, a company must self-report the conduct and fully cooperate with the Antitrust Division’s investigation. Additional conditions are outlined and more details are available here (https://www.justice.gov/atr/page/file/926521/download)
In addition to the Leniency Program, a company may qualify for a deferred prosecution agreement. The company would be required to self-report its offense and demonstrate that it had an robust and effective antitrust compliance program in place at the time of the offense.
What does this mean for contractors?
There are major consequences for public procurement corruption including being barred from government contracting, paying large fines/damages, as well as the possibility of criminal prosecution. The formation of the Procurement Collusion Strike Force will drive increased scrutiny of government procurement as well as better coordination of agencies during investigations.
Contractors should expect an increased chance that their bids may be reviewed and should proactively implement robust and effective antitrust compliance programs.