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FAR 3.4: Contingent Fees

Comptroller General - Key Excerpts

Section 2306(b) of title 10, United States Code, places certain limitations on obtaining contracts under “contingent fee” arrangements. However, the purpose of this limitation, as implemented by Federal Acquisition Regulation (FAR) subpart 3.4, is to prevent the attempted or actual exercise of improper influence by third parties over the federal procurement system. Puma Industrial Consulting v. Daal Assocs., Inc., 808 F.2d 89 (2d Cir. 1987); Quinn v. Gulf & Western Corp., 644 F.2d 89 (2d Cir. 1981); E&R, Inc.--Claim for Costs, B‑255868.2, May 30, 1996, 96-1 CPD para. 264 at 3-4; Howard Johnson Lodge--Recon., B‑244302.2, Mar. 24, 1992, 92-1 CPD para. 305. We have held that the prohibition applies only to situations where an agent agrees “to solicit or obtain” a contract from a procuring agency. Bertsch Constr., B‑253526, Aug. 25, 1993, 93-2 CPD para. 122. The fact that an agent’s fee is contingent upon the contractor’s successful performance of the contract, or even upon receiving the contract award, is not sufficient, by itself, to bring a fee agreement under the contingent fee prohibition; rather, the regulation contemplates a specific demonstration that an agent is retained for the express purpose of contacting government officials, where such contact poses a threat of the exertion of improper influence to obtain government contracts. Convention Mktg. Servs., B‑245660.3, B‑246175, Feb. 4, 1992, 92-1 CPD para. 144. Here, Kola Nut acknowledges that the consultant’s fee agreement is calculated as a portion of the profit resulting from the awardees’ performance of the contract--not in exchange for the awardees’ receipt of contract awards. Kola Nut Protest Submission (Mar. 28, 2005) at 3. Further, the record is devoid of any evidence that the challenged awards reflect any improper influence on government officials. To the contrary, as shown above, the agency selected proposals that offered significantly lower prices and were evaluated equal to, or higher than, Kola Nut’s proposal with regard to the non-price evaluation factors. On this record, Kola Nut’s assertion that the contracts incorporate a prohibited contingent fee agreement is without merit. (Kola Nut Travel, Inc., B-296090.4, August 25, 2005) (pdf)

Comptroller General - Listing of Decisions

For the Government For the Protester
Kola Nut Travel, Inc., B-296090.4, August 25, 2005 (pdf)  

U. S. Court of Federal Claims - Key Excerpts


U. S. Court of Federal Claims - Listing of Decisions

For the Government For the Protester




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