When major U.S. defense companies aren’t fiercely competing for Pentagon contracts to build planes, tanks, and ships, they’re often working for another big customer: each other.
The graphic below, developed by Bloomberg Government, shows the relationships. To see a full size version, please visit: http://www.businessweek.com/articles/2014-01-30/defense-contractors-give-a-lot-of-business-to-each-other.
The business of government contracting is a high-risk, high-reward activity. Many contractors, large and small, relish the opportunity to profit while also directly providing critically needed products and services to the government.
That opportunity, however, comes with a risk many would-be government contractors may be unaware of: the increasing presence and aggressiveness of the U.S. Department of Justice (DOJ) in prosecuting bid-rigging, collusion, and price-fixing cases in this area. These criminal cases often result in jail time for the executives of these companies.
This article will focus on the Sherman Act (15 U.S.C. §1), specifically the criminal antitrust considerations that government contractors face. The Sherman Act prohibits competitors from agreeing to fix prices or rig bids. A violation of the Sherman Act is a felony and may be punishable by a fine of up to $100 million and/or ten years in jail.
The implications of the Sherman Act are critical for government contractors to understand because of the unique aspects of their business. Also, these characteristics of the business of contracting with the government make the antitrust analysis more complex. This article will focus on recent cases in this area and the ramifications for contractors. The article will conclude with some practical tips for antitrust and government contract counsel.
Keep reading this article at: http://www.lexology.com/library/detail.aspx?g=01a9b2bf-aeef-4e77-bde1-d044db69d68c
U.S. contractors in war-torn Afghanistan have repeatedly failed to pay their subcontractors, prompting strikes, work stoppages and death threats at a time when U.S. forces are preparing to withdraw, a key inspector general warned on Thursday.
In an alert letter to Secretary of State John Kerry, Defense Secretary Chuck Hagel and regional diplomats, John Sopko, the special inspector general for Afghanistan reconstruction, said that nearly a quarter — 183 out of 753 — of complaints to SIGAR’s hotline from 2009 through October 2012 were about Afghan prime contractor and subcontractor nonpayment issues. As a result, he said, his auditors have opened 52 investigations encompassing $69 million in payments owed. An additional 44 such complaints have been filed with the State Department, the U.S. Agency for International Development, and the Defense Department’s inspectors general over the past six years.
Missed payments have resulted in the delay of projects “promoting the stability of Afghanistan,” a belief among Afghan workers that the lapsed payments are the fault of the U.S. government, a threat by one subcontractor to set himself on fire in front of the U.S. embassy, and one threat to blow up a compound of U.S. contractors and government agencies, the letter said.
Keep reading this article at: http://www.govexec.com/contracting/2013/06/federal-contractors-failing-pay-afghan-subcontractors-ig-finds/65261/?oref=govexec_today_nl
The Defense Department has proposed updating its acquisition regulations to require major contractors subject to cost accounting standards – and their large subcontractors – to have anti-counterfeit avoidance and detection systems in place for electronic parts.
The long-awaited proposal, issued mid-May, would implement requirements from the fiscals 2012 and 2013 national defense authorization acts, passed amid concern that counterfeit milspec electronic parts have made their way into weapons systems, potentially undermining their reliability or making them open to a remote cyber attack – although cybersecurity experts have said the risk presented by the latter possibility is relatively low.
The proposal would require companies with cost-reimbursement contracts subject to cost-accounting standards (a requirement that can’t be valid for contracts worth less than $700,000) to mount an acceptable anti-counterfeiting effort that would include training, inspection, parts traceability, use of “trusted suppliers” and a methodology to rapidly determine whether a suspect part is, in fact, counterfeit. The proposed rule doesn’t define what a trusted supplier would be.
Keep reading this article at: http://www.fiercegovernmentit.com/story/dod-proposes-anti-counterfeit-it-measures/2013-06-04
The Obama administration has directed agencies to make contract payments faster to all their prime contractors for the next year with the understanding that those companies will pass along those accelerated payments to their small-business subcontractors, officials said July 11.
The administration is aiming to get money into the hands of more small businesses, although it’s a short-term relief. Indeed, officials are setting clear expectations for prime contractors by making payment habits a future factor in the bid selection process.
Keep reading this article at: http://fcw.com/articles/2012/07/11/subcontractor-prompt-payment-omb.aspx.
The July 11, 2012 OMB policy directive can be found at: https://contractingacademywebpdf.s3.amazonaws.com/Providing-Prompt-Payment-to-Small-Business-Subcontractors-OMB-07.11.2012.pdf.
