Government Contractors Facing Increased Antitrust Scrutiny – Government Contracts, Procurement & PPP

The Procurement Collusion Strike Force, formed by
the Department of Justice in 2019, is ramping up enforcement
pressures against government contractors. The Strike Force brings
together the DOJ Antitrust Division criminal offices, state
Attorneys General, and federal agencies such as the Department of
Defense and Federal Trade Commission.¹ The Strike Force
is an effort to crack down on anticompetitive activities in public
procurement, which the DOJ views as particularly susceptible to the
costs of collusive activity.² The Department was already
devoting significant resources to public procurement
crimes,³ and the Strike Force represents an intensified,
all-hands approach to enforcement.

In order to utilize the diverse expertise and market vantage
points of Strike Force members, enforcers are training these
partners to recognize signs of collusive activity in procurement.
At the April 4, 2022 Enforcers Summit hosted by the FTC and DOJ,
Assistant Attorney General Kanter highlighted this training and the
Division’s investment in procurement enforcement actions, and
panelists shared lessons from interagency procurement
training.⁴

Recent Enforcement Actions

With so many government actors involved in enforcement,
companies in every procurement market face increased scrutiny. The
Strike Force has recently undertaken the investigation and
prosecution of a number of cases of government contract bid
rigging.

In early April, the Antitrust Division obtained a guilty plea in
its ongoing investigation of bid rigging and bribery at California
Department of Transportation (Caltrans).⁵ The plea came
from a Caltrans employee, who is accused of conspiring with at
least two contractors to suppress bid competition in exchange for
cash and gifts.

A day later, the Division announced a grand jury indictment
against three contractors accused of rigging bids for U.S. Army
promotional products, costing the Army millions of dollars over the
five-year scheme.⁶ The indictment alleged multiple forms
of anticompetitive activity, including sharing bids in order to
predesignate a winner, submitting bids on each other’s behalf,
and forming shell companies to submit fake bids. Notably, the
Strike Force’s training materials detail indicia that bids have
been copied or faked.⁷

The Strike Force is equally focused on illegal activity
affecting local government customers. In March, a grand jury
indicted contractors who submitted predetermined-losing bids for
concrete construction with local governments in
Minnesota.⁸ One contractor in the scheme pled guilty
last year.

Teaming Arrangements

Teaming arrangements pose particular risk to government
contractors and are ripe for increased enforcement.⁹
Teaming arrangements can provide competitive advantages in the form
of economic efficiencies and expertise, especially on large
government contracts. But, they present a number of antitrust
hazards to companies without robust compliance programs.

When not in compliance with antitrust guidelines, teaming
agreements can be charged as market allocation or bid
rigging.¹⁰ In addition to more obvious competitive harms
such as removing competitors from the market, the FTC is alert to
the potential for teaming agreements to create conditions for
collusive behavior.¹¹ Companies who engage in teaming
agreements are vulnerable to becoming too familiar with competitors
or allowing cooperation to spill outside of the agreed scope of
work-especially in the typically small supplier markets of
government procurement.

Takeaways

The stakes in enforcement actions are particularly high for
government contractors who risk debarment and license revocation on
top of criminal penalties.¹² With so much on the line,
and more resources than ever devoted to discovering anticompetitive
actors, government contractors must be certain to implement robust
compliance programs. These programs must be continually updated and
reinforced. Prosecutors will subject them to sophisticated and
thorough review early in their investigations-often beginning with
their first grand jury subpoena.

Footnotes

1. Justice Department’s Procurement Collusion
Strike Force Caps Off Successful Inaugural Year by Adding Eleven
New National Partners | ATR | Department of Justice

2. The PCSF (justice.gov)

3. Id.

4. Enforcers Summit | Federal Trade Commission
(ftc.gov)

5. Former Caltrans Contract Manager Pleads Guilty to
Bid Rigging and Bribery | OPA | Department of
Justice

6. Three Florida Men Indicted for Rigging Bids and
Defrauding the U.S. Military | OPA | Department of
Justice

7. See Recognizing Antitrust Conspiracies and Working with
the Antitrust Division (justice.gov)

8. Minnesota Concrete Company and its CEO Indicted
for Rigging Bids for Public Contracts | OPA | Department of
Justice

9. SeeMitigating Antitrust Risk In Defense Deals Amid
Scrutiny – Law360

10. Id.

11. SeeAntitrust Guidelines (ftc.gov) at
2.2.

12. 4 Consequences Of Gov’t Contractor Antitrust
Violations – Law360

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