Compliance and Enforcement Risk Areas for Government Contractors in 2020
Part 1: DOJ’s Procurement Collusion Strike Force
While many of us are preoccupied with news of the coronavirus outbreak, government oversight and enforcement agencies continue to press forward quietly with initiatives that will impact government contractors in the coming months. In this series of blog posts, we suggest a few things that contractors should be paying attention to for the health of their business—in between hand-washing sessions and emergency shut-down contingency planning, of course.
DOJ’s Procurement Collusion Strike Force
Affectionately referred to by the shorthand PCSF, this multi-agency enforcement effort created quite a stir when the Department of Justice (DOJ) Antitrust Division announced the initiative in November 2019.
What is it? The PCSF represents a collaboration between the Criminal Antitrust Division, thirteen U.S. Attorney’s Offices (representing jurisdictions in which government contractors or their projects are concentrated), and Inspectors General from the Department of Defense (DOD), the General Services Administration (GSA), and the U.S. Postal Service (USPS).
What is it doing? Members of the PCSF report that efforts to date have focused on training contracting officers at various agencies about circumstances that might indicate improper agreements between competitors—i.e., potential criminal antitrust violations. Contracting officers are being encouraged to report any suspected collusive activity to the PCSF through the appropriate channels within their organization.
The PCSF is also soliciting reports of suspected wrongdoing from the public through its website. As a practical matter, before the PCSF effort, some tips or leads may have been set aside in favor of other DOJ priorities; through this new lens, the same information may be sufficient to justify opening a grand jury investigation.
Not surprisingly, government officials report that the PCSF has received tips related to other offenses, not just antitrust activity. Officials also have remarked that small to mid-size companies are more likely to become targets of this initiative, mainly because those contractors may not have the same rigorous compliance policies and practices around antitrust risks that larger contractors have developed.
Day-to-day investigative efforts are being carried out mainly at the local level, by whichever U.S. Attorney’s Office has jurisdiction over the conduct, with support and input from the other participants in the PCSF.
What is the significance of the PCSF? Two things: One, the PCSF is only the second major enforcement initiative put forth by DOJ during the current administration. The first was the DOJ Opioid Fraud and Abuse Detection Unit, created in 2017. As the opioid enforcement initiative has shown, a proactive emphasis on particular areas of misconduct can yield extraordinary results, including criminal prosecutions, monetary recoveries, and deterrence of the targeted conduct. Here, contractors can expect to see an uptick in prosecutions of anti-competitive behavior in government procurement.
Second, and perhaps of more immediate importance to most contractors, DOJ’s focus on the government procurement process is likely to uncover a number of pre-award conduct and compliance issues that otherwise may have gone unnoticed. In the course of taking an up-close look at how contractors interact with each other and with government officials in the bid and proposal process, investigations that begin under the PCSF rubric might reveal conduct that implicates government ethics rules (including, for example, improper gifts, gratuities, or bribes), Procurement Integrity Act violations, improper kickbacks, or conflict of interest issues.
How should contractors prepare and respond? The existence of the PCSF provides a good excuse for contractors and their compliance advisors to re-examine and strengthen policies and procedures to address risk areas in the pre-solicitation, teaming, and proposal processes. It is also a convenient hook for companies to remind their business development and contracting professionals about how they can and should respond to on-the-ground situations that present difficult or sensitive issues around these risk areas.
Contractors who find themselves subject to a government investigation may discover, particularly in these still-early stages of the PCSF, that prosecutors and investigators have limited experience with the federal procurement process and the underlying policies and principles that guide it. Where appropriate, and ideally with the assistance of legal counsel, contractors can educate government investigators about conduct or rules that might appear to restrict or impede competition, but in reality help the government obtain the goods and services it needs in an efficient and cost-effective manner.
March 9, 2020