On February 18, 2020, Washington Metropolitan Area Transit Authority (“WMATA”) Inspector General Geoffrey Cherrington announced that special agents from WMATA would be partnering with the Department of Justice’s Procurement Collusion Strike Force (“PCSF”) to prevent and detect fraud affecting WMATA. The announcement portends a growing partnership amongst federal, state, and local entities in the procurement fraud space that could reverberate well beyond the Washington metro area.
The PCSF was announced by the Department of Justice on November 5, 2019. Its stated purpose is to deter, detect, investigate, and prosecute antitrust crimes, including price fixing, bid rigging, market allocation, and labor market allocation/wage fixing. Initially, the PCSF was formed as an interagency partnership between DOJ’s Antitrust Division, prosecutors from thirteen U.S. Attorney’s Offices, FBI investigators, the Department of Defense Office of the Inspector General, the U.S. Postal Service Office of Inspector General, and the General Services Administration Office of the Inspector General. WMATA represents the first reported non-federal entity to join the coalition.
Although we cannot say for sure what the partnership will look like, one of the PCSF’s central missions is to train government officials at all levels of the procurement process to better recognize and avoid procurement fraud. To that end, the PCSF has posted materials to its website that define various procurement offenses and provide red flags that can be used to expose fraudulent practices. A key component of the partnership between the PCSF and WMATA likely will include working together to ensure that WMATA officers understand trends associated with procurement fraud and are prioritizing enforcement in this area.
The precise effect of the expanding coalition on state and local procurement fraud enforcement remains to be seen, but there are some conclusions that seem inevitable. First, the increased training and availability of federal expertise to state and local agencies will heighten the government’s enforcement emphasis on pursuing fraudulent practices and spur more investigations. Second, the PCSF’s new streamlined online whistleblowing process—which can be found on the PCSF website—likely will lead to more whistleblowers, especially as the PCSF enforcement actions garner the attention of industry—and the public in general—going forward.
With the PCSF’s renewed emphasis on detection and enforcement, government contractors at all levels—federal, state, or local—have an extra incentive to strengthen their compliance programs dealing with procurement fraud. This begins with contractors taking an active approach toward fully understanding their compliance obligations. Once contractors understand their duties, they can institute strong compliance programs that include risk assessment techniques, comprehensive training programs, auditing programs, and effective compliance incentives and discipline. Acknowledging that even the best compliance regimes do not achieve complete prevention, it is essential that contractors develop effective protocols for reporting and mitigating its own fraud. Under the Antitrust Division’s Leniency Program, contractors that report their wrongdoing and cooperate in the Division’s investigation may be able to avoid criminal convictions, fines, and prison sentences altogether.
The PCSF and WMATA alliance will be a closely watched test case that should provide insights into the future of joint state and local procurement fraud enforcement. What we know for certain is that the federal government is bringing its resources and expertise to bear on procurement fraud at all levels. All contractors will face increased scrutiny and enhanced threat of enforcement, which may prove especially daunting for state and local contractors who are not accustomed to such intense scrutiny. Government contractors would be wise to ensure that their procurement practices, compliance regimes, and reporting mechanisms are equipped for the oncoming scrutiny.