On May 12, 2009, the Department of Justice (DOJ) Antitrust Division released further details regarding its previously announced initiative to help government agencies detect and prevent parties from unlawfully profiting from the Recovery Act projects. This initiative is one of many efforts being undertaken to detect and combat waste, fraud and abuse in connection with the Recovery Act's anticipated wave of spending. See, e.g., " Fraud Enforcement and Recovery Act Nears Passage" and " Overseeing the Bailout: American Recovery and Reinvestment Act of 2009 Establishes Independent Board To Oversee Spending of Stimulus Funds on Federal Contracts." According to DOJ's announcement, this latest initiative seeks to prevent and detect fraud in three ways:
- By providing training to procurement and grant officials, government contractors, and agency auditors and investigators, on techniques for identifying the "red flags of collusion" (discussed below);
- By providing Antitrust Division competition experts to assist agencies in developing "best practices" to protect against fraud, waste and abuse and "maximize open and fair competition"; and
- By committing that DOJ will play a "significant role" in investigating and prosecuting those who "seek to or succeed in defrauding the government's efforts to maximize competition for stimulus funds."
In addition to these efforts, DOJ has issued a checklist of "red flags of collusion" to help detect fraud and collusion. According to this checklist, the following four factors (referred to as "MAPS") should be closely scrutinized to help prevent or detect collusion:
- Market: According to DOJ, an award may be the target for collusion if --
- "There are few vendors in the market that offer the good or service";
- "A small group of major vendors controls a large share of the market"; or
- "The good or service is standardized, so that the determining factor in the award is price rather than other competitive factors (such as design, quality, or service)."
- Applications: According to DOJ, another red flag of potential collusion includes "similarities between vendor applications or proposals," such as --
- similar handwriting, typos, mathematical errors, or last minute changes; or
- delivery of proposals from the same mailing address, e-mail address, fax number, or overnight courier account number, or with the same document properties.
- Patterns: DOJ advises that awards should be analyze to identify patterns over time, such as patterns in which the competing vendors rotate as the award winner, or the vendor that wins the award subcontracts work to losing vendors or to vendors that withdrew their proposals or refused to submit proposals.
- Suspicious Behavior: Finally, DOJ advises agencies to look for evidence of suspicious behavior suggesting that vendors worked together rather than competing for the award.
More details about the red flags checklist and the DOJ initiative can be found at the Antitrust Division website, available here.