Overview
This section outlines the statutory prohibition against contingent fee arrangements for obtaining Government contracts to prevent improper influence, as established in 10 U.S.C. 3321(b) and 41 U.S.C. 3901.
Key Rules
- Mandatory Warranty: Every negotiated contract must contain a specific warranty by the contractor stating they have not paid, or agreed to pay, a contingent fee to solicit or obtain the contract.
- Permitted Exceptions: Contingent fees are only allowed if the arrangement is with a bona fide employee or a bona fide agency.
- Enforcement Remedies: If the warranty is breached, the Government has the statutory authority to:
- Annul the contract without liability;
- Deduct the amount of the contingent fee from the contract price; or
- Recover the full amount of the fee from the contractor.
Practical Implications
- Contractors must carefully vet third-party "finders" or consultants to ensure they qualify as bona fide agencies before entering into "success-fee" agreements, as non-compliance can lead to contract voidance or significant financial recoveries by the Government.
- The Government maintains powerful leverage to claw back funds or terminate agreements without the usual liabilities associated with a termination for convenience if an improper influence is suspected.