Companies involved in the government contracting industry should take note that the government is honing in on anticompetitive conduct affecting government procurements. The federal government has demonstrated an increased interest in this area, and companies should refresh and audit their compliance programs to avoid hefty civil and criminal penalties and potential prison terms for implicated employees.
In the last month, the United States Department of Justice (DOJ) has announced three sets of indictments in recent months relating to bid-rigging of various government procurements and solicitations, evidencing an increased focus on anticompetitive conduct targeting federal, state and local governments.
Indictment 2: Online Auctions for Surplus Government Equipment
On April 10, 2019, DOJ announced an indictment of and guilty plea by the owner of a company that purchases computers for resale, indicating that the defendant “conspired with others to rig bids at online public auctions of surplus government equipment” between February 2017 and May 2018. See Department of Justice Office of Public Affairs, Texas Bidder Pleads Guilty to Rigging Bids at Online Auctions for Surplus Government Equipment (Apr. 10, 2019). The alleged conspiracy eliminated competition in the auctions and allocated particular lots to particular co-conspirators. Assistant Attorney General Delrahim said about this indictment that “[t]he Department . . . will not tolerate collusion that corrupts online markets and deprives taxpayers and the federal government of the benefits of competition, . . . [and further that DOJ] will work tirelessly to prosecute online bidders who cheat taxpayers for their own benefit.”
Indictment 3: Government Procurement of Insulation Installation Contracts
Just two days earlier, on April 8, 2019, DOJ announced another indictment relating to bid-rigging of insulation installation contracts for various facilities including public universities, hospitals and schools. See Department of Justice Office of Public Affairs, Insulation Contractor Branch Manager Pleads Guilty to Bid Rigging and Fraud (Apr. 8, 2019). Here, the conspirators prepared collusive bids, shared information with competitors and used encrypted messaging apps in an attempt to avoid detection. Assistant Attorney General Delrahim noted here that this investigation “is the result of a coordinated effort . . . to root out collusion and fraud that undermined the competitive process and defrauded hospitals, schools and other victims out of millions of dollars.”
Takeaways for Companies Involved in Government Contracting
An effective compliance program helps employees meet their key performance indicators as well as identify other companies who may not be competing fairly for government contracts. Auditing the company compliance program allows stakeholders to rest assured that the program is working as intended. McDermott’s antitrust and government procurement groups can help companies with all facets of their compliance programs as they relate to government contracting, and can readily assist with developing, instituting and maintaining compliance programs to minimize exposure, while allowing the company to effectively compete within the marketplace.