Contingent Fee Government Contract

(b) permit, as an exception to the guarantee, contingency fee agreements between contractors and bona fide employees or bona fide organizations; and the consequences of a conflict with the Covenant against contingency charges can be serious. The clause gives the government the right to cancel a contract without liability or to deduct the full amount of a conditional payment from the contract. A conscious breach of the clause could also expose a contractor to liability under the False Claims Act, which can include significant fines and triple damages. According to the Federal Ordinance on Acquisitions on Contingency Fees, potential contractors must provide a guarantee that they have not entered into prohibited contingency fee agreements as part of their continued contract award. FAR 3.404. Note that the guarantee is not required for all acquisitions, e.B. for acquisitions below the simplified acquisition threshold or for commercial items. FAR 3,404. Similarly, the warranty is not applicable or is not found in their commercial contracts. FAR 52.203-5. See also FAR 3.405(a). (a) The Contractor warrants that no person or agency has been hired or mandated to request or receive this Agreement under any agreement or arrangement in exchange for contingency fees, except an employee or agency in good faith.

In the event of a breach or breach of this warranty, the government shall have the right to cancel this Agreement without liability or to deduct it from the price or consideration of the contract, or otherwise claim the full amount of the success fee. Violation of a contractor`s warranty against contingency fees may result in the rejection of an offer or proposal, cancellation of the contract without charge or liability to the government, or deduction of the full amount of a commission for success from the contract price. Such misrepresentations may also result in the commencement of suspension or exclusion proceedings under a company`s participation agreement 8a and referral to the Department of Justice for possible prosecution of a false statement in connection with the contractor`s certificate that it has not paid a contingency fee (FAR 3,402 and 3,405). The imposition of sanctions such as the rejection of a bid or proposal and referral to the Ministry of Justice does not require the actual award of a contract to the contractor. “Bona fide Agency” means a commercial or sales agency established by a contractor for the purpose of securing business that does not exercise or offer undue influence to obtain or obtain government contracts, nor does it claim to be able to obtain one or more government contracts through undue influence. When the pact was first implemented in 1918, President Woodrow Wilson recognized that a blanket ban on the use of agents would significantly affect normal business practices. As a result, an exception for “bona fide” agents was added to the covenant. In theory, “bona fide” agents provide legitimate services and do not offer to exert undue influence, even if they are hired on a quota basis. 2. The entrepreneur must have sufficient knowledge of his business activities.

Government contractors should ask themselves certain questions when considering hiring a sales agent on a contingency fee basis. The historical basis of the pact dates back more than 150 years, in the Case of Providence Tool Co.c. Norris, issued by the U.S. Supreme Court. The Supreme Court ruled in 1864 that contingency fee agreements with agents should by nature “suggest the use of sinister and corrupt means” and be “uniformly declared invalid.” Simply put, a bona fide agency cannot claim to have an “in” with government buyers. And even if he had an “in”, he is not allowed to use it to control contracts with his customers. The case law dealing with who is a “bona fide” agent under the Potential Costs Convention is based on this concept and focuses on four factors. Federal Acquisitions Regulations (“FAR”) 52.203-5.

This contractual clause, known as the Conditional Fee Clause, prohibits contractors from hiring an agent to apply for or obtain a government contract for a success commission. “Undue influence” means any influence that causes or tends to cause a government employee or official to consider or act in relation to a government assignment on a basis other than the merits of the matter. (2) After the contract is awarded, assert the government`s right to cancel the contract or claim costs. A pass or pass commission is any fee for services rendered, where the fee is payable only if there is a result. For government contracts, these fees for a favorable outcome are likely to be a percentage value of a successfully acquired contract. Concerned about a third party`s ability to use their contacts within government to manipulate a company`s fair access to opportunities and contracts, the U.S. Supreme Court concluded from the outset that “contingency fee agreements with agents should inherently `suggest the use of sinister and corrupt means` and be `uniformly declared invalid.` Providence Tool Co.c. Norris. 69 U.S. 45 (1864). However, it did not take long for the Court to recognize that agency contracts could also include “legitimate professional services.” Oscanyan vs.

Arms Co., 103 U.S. 261 (1880). For enforcement purposes, the authorities shall keep all specific evidence of one or more of the violations referred to in Article 3 405(a), as well as all other relevant data, including a record of the measures taken. Contracting entities may not withdraw or destroy such documents until it is established that they are no longer necessary for enforcement purposes. .