The Government Contractor, Vol. 59, No. 8, March 1, 2017
6 Pages Posted: 4 Mar 2017
Date Written: March 1, 2017
This article highlights key aspects of a long-standing contractual covenant in the Federal Acquisition Regulation (“FAR”) that prohibits Government contractors from engaging a person or agency to solicit or obtain a Government contract in exchange for a contingent fee. FAR 52.203-5. This article examines the covenant as a way to further inform recent discussions in the legal and business communities regarding third-party risks and the role of intermediaries and agents in the procurement marketplace. Indeed, companies seeking to enter the U.S. procurement market should take note of both the scope and purpose of this long-standing covenant, which aims to protect the Government against improper influences by scrutinizing and limiting the use of a specific type of agreement — the hiring of an intermediary on a contingent basis to obtain or retain Government business.
In essence, the prohibition restricts “how the contract between the parties may be structured in an effort to prevent corrupt practices.” CapitalKeys, LLC v. Ciber, Inc., 875 F. Supp. 2d 59, 65 (D.D.C. 2012). At the same time, the covenant has long attempted to distinguish the influence peddler from genuine intermediaries who can, and often do, provide legitimate services and benefits to potential contractors. Accordingly, the covenant contains an exception that allows contractors to engage “bona fide employee[s] or agenc[ies]” on a contingent basis. FAR 52.203-5 (b). This exception reflects a policy judgment that an outright ban on contingent arrangements would encroach too heavily on common commercial trade practices.
Keywords: Government Contracts, Public Procurement, Agents, Intermediaries, Fraud, Corruption, Contingent Fees
JEL Classification: K00, K12, K23, K42
Suggested Citation: Suggested Citation
Swan, Collin D. and Harutyunyan, Sati, The 'Influence Peddler' Revisited: A Look at the Evolution of the U.S. Covenant against Contingent Fees in the Procurement Marketplace (March 1, 2017). The Government Contractor, Vol. 59, No. 8, March 1, 2017. Available at SSRN: https://ssrn.com/abstract=2926157