CNBC recently reported that the current President of the United States had “bought as much as $5 million in Axon stock” just two weeks before Immigration and Customs Enforcement (ICE) posted a notice seeking a contract which was so specific in its requirements that it appeared to be aimed at Axon products. Even though the contract has yet to be awarded, it brings up the topic of how the government conducts business when taxpayers are footing the bill.
Government contracts
When a federal agency needs goods or services that must be procured through a contract with a company, such as replacing a building’s roof or upgrading computer software, it must go through a standard federal procurement process. For any contract greater than $25,000, an agency must post a solicitation on SAM.gov, which is managed by the U.S. General Services Administration (GSA), where companies can then submit a bid for the contract. The agency is then able to review all the bids and select the “most cost-effective and high-quality commercial products and services.”
State and local governments have similar procedures for posting public notices. For example, the Department of Technology, Management & Budget handles the procurement process for the State of Michigan, so that the “State’s agencies can achieve their missions and get the best value possible for Michigan’s residents.” The City of Detroit has its own website for companies to view open bid opportunities throughout the city.
GSA notes that it helps facilitate over $84 billion in products and services for federal agencies, and this competitive bidding process ensures taxpayer money is well spent.
Dead equals
While competitive bidding can help ensure government contracts remain cost-effective and are awarded based on merit, there are instances where contracts are written so narrowly, like the ICE contract, that there is no real competition. This brings into question the fairness of the entire process.
In Connecticut, a roofing contractor that won a bid to replace an elementary school roof went to court to claim the bidding process was unfairly designed to benefit a single manufacturing company and was costing taxpayers millions more than necessary. The contractor claimed that the way the proposal was written required the company to use a single product to complete the work and that the substitutions listed in the contract weren’t viable substitutes – dubbing them “dead equals.” These dead equals meant that the contracts were “de facto sole source procurement,” which circumvented the state’s bidding rules. Another issue at hand in this specific case was that representatives from the manufacturing company “had a hand not only in drafting the requirements for the project,” but “helped select the winning bidder” as well.
Other types of bid-rigging
Businesses have found ways to game the procurement process as well, inflating costs for taxpayers. In 2013, an Ohio-based company agreed to pay $60.9 million to resolve allegations that it “marketed expensive materials to government purchasers without disclosing the availability of the same materials at lower cost.” This meant that taxpayers were paying more than commercial buyers for the exact same product. In a more recent investigation, two contractors have been charged with bribing a U.S. Army employee over five years by inflating the costs of contracts and sending the money to the employee.
To address such bid-rigging in the procurement process, the Department of Justice created the Procurement Collusion Strike Force in 2019, which has already opened nearly 200 investigations – 100 of which were opened in just the last fiscal year alone. This multiagency task force has “secured more than 85 guilty pleas,” including a shelving company that pleaded guilty to “submitting collusive bids.”
