On November 5, 2019, the Department of Justice announced a new Procurement Collusion Strike Force, to be called “PCSF,” for the purpose of investigating collusion and anti-competitive conduct involving government procurement, grant, and program funding. The PCSF will be focused, for example, on antitrust crimes including bid-rigging agreements and other fraudulent conspiracies. The full press release can be found here and on the PCSF’s website.
The interagency strike force will consist of prosecutors from the Department of Justice’s Antitrust Division and thirteen U.S. Attorneys’ Offices as well as investigators from the FBI, Department of Defense Office of the Inspector General, and other partner federal Offices of Inspector General. The U.S. Attorneys’ Offices currently involved in the strike force include both the District of Columbia and the Eastern District of Virginia as well as others across the country. (This list may expand to include other districts in the future.)
The creation of the PCSF appears to be part of an increased focus on reducing waste in government procurement and follows the recent prosecution of five South Korean oil companies for their involvement in a long-running bid-rigging conspiracy related to contracts for supplying fuel to U.S. military bases in South Korea. Several individuals were also prosecuted for related charges as part of the same scheme. Those press releases can be found here and here.
The PCSF reportedly will train and educate federal, state, and local procurement officials as well as auditors and investigators across the country to recognize anti-competitive or collusive behavior in government funding processes. The officials will also be trained to identify and report potential concerns in the process of awarding contracts and grants. In addition, prosecutors and investigators from the various agencies will work together to investigate and prosecute cases that result from these targeted outreach efforts.
Based on the DOJ’s announcements, we anticipate that the PCSF will train investigators to spot so-called “red flags of collusion” by teaching them: (1) to consider how many vendors are in the market for an award and the extent to which the good or service is standardized in order to determine whether an award is a likely target of collusion; (2) to evaluate the similarities and consistencies between vendor applications, proposals, and metadata; (3) to discern patterns that develop including whether competing vendors rotate as the award winner, uniform and unexplained price increases among bidders, or, after winning a contract, the winning vendor turns around and subcontracts work to a vendor who either withdrew a proposal or refused to submit one for the same prime contract; and (4) to attempt to understand whether vendors demonstrated behavior suggesting that they worked together on an award, such as indicating advance knowledge of a competitor’s prices or submission of multiple proposals.
It is important to remember that these “red flags” do not constitute proof of collusion. Moreover, legitimate business reasons can often explain situations that enforcement authorities find to be facially suspicious. At the same time, for situations where collusive conduct has occurred, a contractor should consider taking advantage of the Antitrust Division's Leniency program, which allows individuals and businesses to avoid antitrust criminal prosecution and penalties through self-reporting.
Our firm will continue to monitor these trends and is available to provide preventative counseling with respect to government procurements, as well as to assess potential procurement fraud liability. If you have any questions, please contact Cormac Connor or Meghan Leibold, or visit our website to reach any members of our firm’s Government Contracts or White Collar and Government Investigations practice groups.
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