Could Common Small Business Teaming Practices Put Contractors at Risk of FAR Collusion Violations?
Picture this scenario: your company, a small business, spots a new federal set-aside opportunity. You’re eager to bid on the job but unsure whether to go after it solo or pursue it with your mentor-protege joint venture. Then, in a staff meeting, someone pipes up with a bright idea: “why not both?”
Why not, indeed? Submitting one proposal in your own name and another in your joint venture’s would seem to increase your chances of success. But before you sign both proposals on the dotted line, there’s something important to consider: the possibility of violating the FAR’s anti-collusion rules.
FAR 3.103 requires most fixed-price solicitations to contain a certificate of independent pricing. That certificate, found at FAR 52.203-2, provides that by submitting its proposal, the offeror certifies that:
(1) The prices in this offer have been arrived at independently, without, for the purpose of restricting competition, any consultation, communication, or agreement with any other offeror or competitor relating to-
(i) Those prices;
(ii) The intention to submit an offer; or
(iii) The methods or factors used to calculate the prices offered.
(2) The prices in this offer have not been and will not be knowingly disclosed by the offeror, directly or indirectly, to any other offeror or competitor before bid opening (in the case of a sealed bid solicitation) or contract award (in the case of a negotiated solicitation) unless otherwise required by law; and
(3) No attempt has been made or will be made by the offeror to induce any other concern to submit or not to submit an offer for the purpose of restricting competition.
It’s easy to see how this could create a problem in our hypothetical situation. If both your small business and your joint venture submit bids, each entity is an “offeror.” And as the small business member of a mentor-protege joint venture, SBA regulations require that you control the JV. Can you honestly say that your small business didn’t “knowingly disclose” its pricing to the joint venture and vice versa? Can you honestly say that your small business and the joint venture each arrived at their bid decision independently? It’s difficult to make that case–after all, the meeting in question was all about deciding which entity would submit the bid!
Our example was about joint ventures, but prime/subcontractor relationships aren’t immune, either. It’s not uncommon, for example, for a major subcontractor to review and comment on the entire proposal, including the pricing. If that subcontractor also submits a bid as a prime contractor, we’re right back to our independent pricing problem.
The FAR’s independent pricing rules are very important, but they’re not the only anti-collusion restrictions contractors should know about. FAR 3.303 more broadly states that “[a]ny agreement or mutual understanding among competing firms that restrains the natural operation of market forces is suspect.” The FAR goes on to list various hallmarks of potentially collusive bids, such as “[a]ny incidents suggesting direct collusion among competitors, such as the appearance of identical calculation or spelling errors in two or more competitive offers . . .”
These rules may sound a bit scary–but does the government actually enforce them? Yes! The FAR instructs Contracting Officers to report potential collusive bids to the Department of Justice. Beyond that, in 2019, the DOJ established the so-called “Procurement Collusion Strike Force,” an interagency partnership to root out collusive contracting practices. Silly name aside (your next staff meeting is unlikely to be interrupted by a Navy SEAL incursion), the existence of the Strike Force demonstrates the government’s commitment to take action against collusive actions.
Perhaps you’re thinking, “I know some companies that submitted bids on multiple-award contracts like CIO-SP4 and also submitted separate bids as teammates–but nobody got in trouble. What am I missing?”
Despite the black-and-white text of the FAR, the government’s practice, particularly when it comes to large multiple-award contracts, sometimes has been to permit the sort of “bidding against yourself” that might otherwise be impermissible. It’s important to note, however, that in these cases, the government tends to make its position clear. For example, in the CIO-SP4 acquisition, NITAAC informed contractors, as part of a formal Q&A, that while an offeror could submit only one proposal in its own name, “[t]his does not preclude an offeror from being a member of a CTA, JV, or in a mentor-protege agreement while also submitting their own standalone proposal as prime contractor.”
Putting aside the interesting (to me, at least!) legal question of whether language like this effectively amends or waives the independent pricing rules, a contractor is very unlikely to be targeted by the “Strike Force” if the contractor is simply following the procuring agency’s guidance. The bottom line: when in doubt about whether a potential bid could be deemed collusive, ask and get the Contracting Officer’s response in writing.
Nothing contained in this article is to be considered as the rendering of legal advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. This article is intended for educational and information purposes only. Although the author strives to present accurate information, the information provided in this article is not guaranteed to be accurate, complete, or up-to-date. Reading this article does not establish an attorney-client relationship with the author.