In federal contracting, today’s competitor is often tomorrow’s teammate. Firms that bid against each other on one opportunity may join forces on the next, and in the fourth quarter those conversations happen fast. Teaming is legal and common, but it brings competitors into contact on exactly the subjects antitrust law cares most about: prices, bids and customers. Here are some common myths and the facts. This is general information; talk to an attorney experienced in antitrust and government contracts about any specific arrangement.
Myth: Once we sign a teaming agreement, antitrust rules no longer apply
Fact: The FAR recognizes contractor team arrangements and says the government will respect them when they are properly disclosed. But the same subpart states plainly that nothing in it authorizes team arrangements that violate the antitrust laws. A legitimate team combines capabilities to submit a stronger offer. An agreement that uses the label of teaming to suppress competition is still a problem.
Myth: Agreeing not to bid against each other is just smart business
Fact: Agreements among competitors about who will bid, who will win or which customers each will serve are among the most serious antitrust violations, and they are often prosecuted as crimes. Recognized forms of bid rigging include bid suppression, where a firm agrees not to bid or to withdraw a bid; complementary bidding, where a firm submits a deliberately high or deficient bid to create the appearance of competition; bid rotation, where competitors take turns winning; and market allocation, where they divide customers or territories. A request to submit a “cover” quote so a buyer can show three quotes is a request to take part in complementary bidding, whoever makes it.
Myth: Teammates can share pricing freely
Fact: Within a genuine team preparing one offer, the prime needs its subcontractors’ prices to build that offer. The risk arises when the same firms compete against each other elsewhere, or when information shared for one bid is used for another. Many fixed-price solicitations include a certificate of independent price determination, in which the offeror certifies that its prices were arrived at independently, without consultation or agreement with any other offeror or competitor, and were not knowingly disclosed to competitors before award. Protect pricing with nondisclosure agreements that limit its use to the specific opportunity, and share it only with the people who need it.
Myth: Antitrust enforcement only targets large companies
Fact: The antitrust laws apply to firms of every size, and public procurement is a long-standing enforcement focus. The FAR directs contracting officers to report evidence of suspected antitrust violations, and it describes practices that can indicate collusion, such as identical bids, rotated low bids and the division of markets among competitors. The Justice Department’s Antitrust Division works with agencies and inspectors general to investigate collusion in government buying.
- Keep teaming discussions focused on the specific opportunity and the roles of each firm.
- Do not discuss your independent bids, prices or bid decisions with competitors outside a documented team arrangement.
- Refuse any request to submit a quote you do not intend to be competitive.
- Train business development staff on these rules before industry days and teaming season.
The FAR’s teaming and antitrust provisions are in Subpart 9.6 and Part 3 at acquisition.gov, and the Antitrust Division publishes guidance at justice.gov.