Q: After a corporate procurement director told our agency that we did not win a bidding process that was based mostly on price, we asked the director for a chance to match or beat the winning bid. We were told, "If we did that for you, we would have to do it for all the agencies that bid." When we asked who won, the director declined to tell us for "confidentiality" reasons. Another time, a corporate account eliminated us from consideration because one of our employees had a spouse who worked for the corporation, which wanted to "avoid a conflict of interest." So what law requires corporations to treat all bidders equally, keep the winner's identity confidential and avoid conflicts of interest?
A: With the exception noted below, corporations are legally free to choose suppliers arbitrarily, reveal or conceal the names of any suppliers and award contracts to suppliers with conflicts of interest.
Some corporations may have ethics codes or policies requiring fairness, confidentiality and conflict avoidance, but they are not legal requirements. Even if a request for proposal (RFP) describes how bidders will be treated, it would be extremely difficult to prove that such a description formed a contractual obligation or that you were defrauded by a rigged RFP process.
Although there are laws affecting corporate procurement, they involve much more egregious activity than unfairly giving an advantage to one bidder or refusing to reveal bidders' or winners' names. For example, it is illegal for two or more bidders to agree on transaction fees for the bid, as such conduct is price fixing under the antitrust laws.
In addition, commercial bribery (i.e., a bribe offered by Company A to an employee of Company B in return for the employee's decision to award a contract to Company A) is a crime in 36 states. However, neither the antitrust nor bribery laws require procurement officials to treat all bidders fairly.
There are three exceptions to my advice that almost no laws affect corporate-procurement decision-making:
First, if the corporation is part of a government agency or governmental institution such as a public university, the procurement official must follow the procurement laws and regulations of the federal or state government. The rules governing federal procurement alone are more than 1,780 pages long, and provide uniform policies and procedures for acquisition that must be followed to ensure that the government will "conduct business with integrity, fairness and openness."
Second, if the corporation is a government contractor, it must follow many government-mandated rules, including giving preference to subcontractor travel agencies that are owned by women, minorities and veterans. In some cases, disappointed bidders can file protests with the government if contractors treat them unfairly.
Finally, public companies need to avoid violating the Sarbanes-Oxley Act, which requires accounting controls over all phases of operations, including procurement, thus theoretically discouraging arbitrary behavior and decision-making that cannot be justified. However, disappointed bidders cannot sue under that law.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email himat [email protected].