Publication | BRG
Justice Department Procurement Collusion Strike Force
A Coordinated National Response to Combat Antitrust Crimes and Related Schemes in Government Procurement, Grant, and Program Funding
It is time for government contractors to revisit their compliance programs and ensure they have effective controls that mitigate the risks of potential antitrust violations. The Department of Justice’s (DOJ) recent creation of the Procurement Collusion Strike Force (PCSF) puts government contractors officially on notice that federal law enforcement efforts are focused on antitrust in government contracts and grants.
The PCSF leads a national effort designed to protect taxpayer-funded projects at the federal, state, and local levels from antitrust violations and related crimes, starting with a focus on thirteen districts throughout the country.
COVID-19 Procurement Focus
The PCSF website encourages reporting of COVID-19 suspected antitrust violations. The website includes examples of suspected antitrust situations that provide insight into areas contractors must incorporate into compliance activities, as follows:
“In the wake of devastation caused by the novel coronavirus (COVID-19) pandemic, Federal agencies will be working with state and local government agencies to solicit competitive bids for relief and recovery contracts. Collusion and anticompetitive conduct that subvert the competitive bidding process include:
- Bid rigging: Two or more firms agree to bid in such a way that a designated firm submits the winning bid.
- Price fixing: Two or more competing sellers agree on what prices to charge, such as by agreeing that they will increase prices a certain amount or that they won’t sell below a certain price.
- Customer or market allocation: Two or more firms agree to split up customers, such as by geographic area, to reduce or eliminate competition.
These agreements are generally secret, and the participants defraud customers by holding themselves out as competitors despite their agreement not to compete. They harm consumers and taxpayers by causing them to pay more for products and services and by depriving them of other byproducts of true competition.”
Procurement Collusion Strike Force Remains Active with Large Settlements
The DOJ announced in 2019 a settlement exceeding $200 million for a wide-ranging price-fixing and bid-rigging case involving fuel contracts on US military bases abroad. Defendants SK Energy, Caltex Hundai Oilbank and others, accused of colluding on fuel supply contracts at US military bases in South Korea, agreed to the monetary settlements resulting from violations of the Sherman Antitrust Act and False Claims Act. Another significant settlement for antitrust violations involved a General Services Administration (GSA) Schedule auction contract.
More recently, US Assistant Attorney General Makan Delrahim of the DOJ Antitrust Division described the PCSF to the international community on June 16, 2020, at a virtual meeting of the Organization for Economic Cooperation and Development (OECD). Mr. Delrahim stated: “the PCSF has already shown significant signs of success on a national level and in the 13 U.S. Attorney Office partner districts… We hope the Strike Force can serve as a model for other countries looking for innovative ways to more effectively fight bid rigging and other anticompetitive schemes that impact public procurement, and cheat taxpayers, all over the world.” More than fifty federal, state, and local government agencies have contacted the PCSF seeking training to date, and the PCSF has trained over two thousand contracting officers, compliance personal, and investigators on antitrust matters since its inception.
The PCSF, announced on November 5, 2019, is a coordinated multiagency task force led by Delrahim. It is focused on identifying, investigating, and prosecuting antitrust crimes in the government contracting sector. Led by the DOJ’s Antitrust Division, the PCSF unites the DOJ with thirteen US Attorney offices, Federal Bureau of Investigation, Department of Defense, GSA, and US Postal Service Inspectors General to deter and prevent antitrust crimes through training and to investigate and prosecute antitrust crimes through better law enforcement cooperation. The federal government is taking this effort seriously: “To protect taxpayer dollars, the Justice Department is doing its part to eliminate anticompetitive collusion, waste and abuse from government procurement.”
For experienced government contractors accustomed to successfully selling to government entities and performing on government contracts, the often unique and stringent regulatory compliance and government contract accounting rules are “old hat.” The focus on antitrust enforcement in government contracting, however, is a new development that warrants attention by senior management, general counsels, and compliance officials at government contractors. Indeed, Delrahim noted in November 2019 PCSF remarks that “more than one third of the Antitrust Division’s 100-plus open investigations relate to public procurement or otherwise involve the government being victimized by criminal conduct.”
Antitrust and the FAR
The Federal Acquisition Regulation addresses antitrust in several areas that contractors would be well served to review. For instance, FAR Part 1, “Statement of guiding principles,” states that the Federal Acquisition System will “promote competition” and “conduct business with integrity, fairness, and openness.” FAR Subpart 3.3, “Report of Suspected Antitrust Violations,” specifically addresses antitrust by stating “practices that eliminate competition or restrain trade usually lead to excessive prices and may warrant criminal, civil, or administrative action against the participants.” This subpart provides a list of suspected antitrust activities to be on the lookout for, such as:
- The existence of an “industry price list” or “price agreement” to which contractors refer in formulating their offers
- A sudden change from competitive bidding to identical bidding
- Simultaneous price increases or follow-the-leader pricing
- Rotation of bids or proposals
Other key FAR parts addressing antitrust actions, requirements, and penalties in various respects include FAR Subpart 6.1, “Full and Open Competition,” and FAR Subpart 9.4, “Debarment, Suspension, and Ineligibility.” Finally, Contract Clause 52.203-2, “Certificate of Independent Price Determination,” is an antitrust-related certification for qualifying solicitations; and 52.203-13, “Contractor Code of Business Ethics and Conduct,” requires stringent ethics and business conduct requirements, which include antitrust stipulations.
Antitrust Compliance Programs
With the establishment of the PCSF, contracting officers, senior procurement officials, and inspectors general are receiving crash courses in price fixing, bid rigging, market manipulation, and other monopolistic and antitrust practices. A robust antitrust compliance program is a contractor’s best defense against unwanted scrutiny or enforcement action resulting from antitrust violations.
No two internal compliance programs are alike, but key aspects of an effective antitrust compliance program focus on the prevention and/or early detection of suspected violations. Key examples include:
- Active internal antitrust training and education initiatives that educate business development personnel, proposal writers, and contract administration, compliance, pricing, and program management personnel.
- Internal whistleblower program or reporting mechanisms that enable suspected antitrust activity to be identified as early in the procurement process as possible.
- Enhanced monitoring and auditing techniques of the proposal and contract renewal function by internal audit or other internal watchdog.
- Appropriate incentives for proper conduct, discipline for violations, and pre-planned remediation action lists for suspected and actual violations.
- “Tone at the Top” emphasis by senior management, which facilitates a culture of antitrust compliance.
- Regular review and improvement of antitrust compliance program activities to ensure the program is well designed, is applied in good faith, and assesses its overall effectiveness regularly.
An appropriate antitrust compliance program must also take into account unique industry, competition, and best practices factors; comply with the existing government contract regulatory framework; and consider unique business model or conduct practices impacting antitrust compliance.
Recent high-profile prosecutions, along with Assistant AD Delrahim’s recent antitrust enforcement pronouncements, underscore the importance of antitrust compliance. Government contractors who do not take the PCSF’s enforcement emphasis seriously run the risk of facing the pointy end of the government antitrust enforcement spear.
 DOJ, “Assistant Attorney General Makan Delrahim Presents Procurement Collusion Strike Force to the International Competition Community,” Office of Public Affairs press release (June 16, 2020), available at: https://www.justice.gov/opa/pr/assistant-attorney-general-makan-delrahim-presents-procurement-collusion-strike-force
 DOJ, “Justice Department Announces Procurement Collusion Strike Force: a Coordinated National Response to Combat Antitrust Crimes and Related Schemes in Government Procurement, Grant and Program Funding,” Office of Public Affairs press release (November 5, 2019), available at: https://www.justice.gov/opa/pr/justice-department-announces-procurement-collusion-strike-force-coordinated-national-response
 DOJ, “Assistant Attorney General Makan Delrahim Delivers Remarks at the Procurement Collusion Strike Force Press Conference,” Office of Public Affairs press release (November 5, 2019), available at: https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-procurement-collusion-strike
 FAR Part 3, “Improper Business Practices and Personal Conflicts of Interest”; FAR Subpart 3.3, “Report of Suspected Antitrust Violations.”
 41 USC 3707 and 10 USC 2305(b)(9).