Weigh Antitrust Risks When Considering Teaming For Contracts

Teaming on government contracts is a common and often beneficial strategy for companies looking to leverage complementary capabilities. However, teaming can create unique antitrust risks, including conduct the government may view as potential criminal bid-rigging (and risk of civil liability under the False Claims Act).

The Justice Department has an ongoing Procurement Collusion Strike Force focusing on just such issues. A proactive strategy can help reduce these risks.

Teaming Scenario

The following hypothetical provides a helpful framework for considering these risks:

Alpha Company, a government contractor specializing in high-tech services, learns about an upcoming federal procurement that requires a broad range of expertise spanning cybersecurity and artificial intelligence. Alpha realizes it has strong capabilities in some areas but lacks expertise in others and would struggle to meet the contract's full scope alone.

Recognizing this gap, Alpha begins discussions with several other contractors, including Beta Company and Delta Company, both of which, like Alpha, are weighing whether to bid independently as primes or as part of a team. After multiple conversations, the three decide to team rather than submit independent bids.

The Alpha-led team wins. The government is concerned it may not have gotten the benefits of a truly competitive bidding process, and refers the matter to the DOJ Antitrust Division, which opens a criminal bid-rigging investigation.

Now, Alpha, Beta, and Delta face a serious legal question: Was their exclusive teaming arrangement a legitimate business arrangement, or does it amount to illegal bid rigging?

Antitrust Risks

The key issue is whether the agreement to team exclusively was a pro-competitive collaboration (following independent decisions) or a collusive effort to suppress competition.

The Sherman Act prohibits bid rigging, which occurs when competitors agree—explicitly or implicitly—not to compete with one another or to submit coordinated bids to reduce competition and inflate prices artificially. For example, it would be illegal if Beta and Delta explicitly agreed with each other not to submit independent bids, but to join Alpha's team, in order to rig the bidding process and drive up prices.

However, there are numerous legitimate reasons why a contractor would independently choose not to bid as a prime. Beta may not have the internal resources or technical capabilities to support a fully responsive prime bid. Delta may know that Alpha has a key piece of the incumbent work and high customer satisfaction, so its chance of winning any work is too low to justify the bid and proposal costs.

Mitigating Risks

For government contractors, the antitrust risks are, in a sense, twice as high because their conduct is closely monitored by contracting officers and competition advocates at the customer, and by DOJ's Strike Force. Therefore, avoiding antitrust scrutiny requires more than simply following best practices—it demands proactive risk management. Some risk-reducing strategies include:

Establish a documented business justification.
A lack of documentation creates a vacuum that DOJ investigators can fill with their own interpretations—and as advocates, DOJ prosecutors may be inclined to assume the worst.

To reduce such risks, companies should follow an ordinary-course decision-making process that includes contemporaneous records showing the rationale for no-bid decisions, such as:

• Gaps in technical expertise the customer is looking for
• Resource constraints that make it impractical to bid independently
• An objective analysis of the technical or financial challenges of submitting a solo bid
• A clear rationale for choosing specific teaming partners based on complementary capabilities that make the team more competitive against other likely bidders

These records should be created in the ordinary course before an investigation arises, not after the fact, when they may appear self-serving.

Limit the scope of teaming discussions.
Teaming discussions with actual or potential competitors should be narrowly tailored to the specific procurement at hand. A common pitfall occurs when companies discuss multiple procurements, which could suggest coordinated conduct or a quid pro quo situation. For example, if Alpha Company tells Beta Company, "You can be the prime on this contract, if I get to be the prime on the next one," that could be construed as an illegal agreement not to compete.

Best practices include:

• Ensuring each procurement is evaluated independently
• Avoiding explicit or implicit agreements to "trade" contracts
• Keeping records of discussions with teammates to demonstrate focus on legitimate teaming considerations, especially better meeting the customer's needs

Leverage customer-driven requirements.
The government often plays a role in shaping competition, particularly when an agency encourages or accepts exclusive teaming arrangements. If the agency's procurement structure effectively forces contractors to team in order to qualify, that can be a powerful defense against bid-rigging allegations.

To support this defense:

• If the agency encourages or requires exclusive teaming, contractors should retain written communications or procurement documents reflecting this.
• Companies may be able to preview the benefits of the team to the contracting agency. Such transparency demonstrates good faith compliance efforts and gives the customer a chance to raise any concerns.

Teamwork and partnerships between competitors can be beneficial, and sometimes necessary, but it's important to be careful not to cross legal lines during the planning and bidding process.

The best defenses are those built long before any investigation. Creating and reviewing your company's best practices for considering, negotiating, and documenting teaming arrangements can help avoid or reduce risk.

Originally published in Bloomberg Law, June 12, 2025.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.