Legality of Contracting Arrangement Involving Subcontracts

The protester objected to the award of a contract, alleging that the contract violated the Antikickback Act and that the contracting arrangement for subcontracts was an undue restriction on competition. The contract with a prime contractor who had commercial arrangements with potential subcontractors to pay a standard percentage of their invoice fee for finding a buyer did not violate the Antikickback Act because the prime contractor received the fee according to a sliding matrix from the Government only. The contract payment procedure whereby the prime contractor's fee was determined as a percentage of a fixed-price subcontractor proposal did not violate 10 U.S.C. 2306(a), but use of an alternate contract payment procedure, whereby the prime contractor's fee was a percentage of the subcontractor's invoice and there was no requirement for a fixed-price subcontract proposal, did violate that status. The use of a sliding matrix for the percentage fee determination was in violation of the prohibitions in 10 U.S.C. 2306.