Interim Internal Purchasing Guidelines > 1 Authority, Responsibility and Policy > 1.8 Contingent Fees

1.8 Contingent Fees

1.8.1 General

A supplier may not pay a fee to an agent contingent upon the agent's soliciting or obtaining the award of a contract. Such a fee arrangement is improper because it may lead to the attempted or actual exercise of improper influence. The prohibition does not apply to contingent fee arrangements between suppliers and bona fide employees or bona fide agencies employed by suppliers to secure business.

1.8.2 Clause

Clause 1-6, Contingent Fees, is incorporated by reference in Clause 4-2, Contract Terms and Conditions Required to Implement Policies, Statutes or Executive Orders, when checked-off by the contracting officer. Clause 1-6 is not to be used in:

1. Contracts for public utility services furnished by a public utility company when the utility company's rates for the services are subject to regulation by a federal, state, or other regulatory body and the public utility company is the sole source of supply.

2. Other contracts, individually or by class, as designated by the VP, SM.

1.8.3 Bona Fide Employee or Agency

1.8.3.a Bona Fide Employee. For the purpose of Clause 1-6, this means an individual employed by the concern in good faith and over whom the concern has the right to exercise supervision and control as to time, place, and manner of performance of work.

1.8.3.b Bona Fide Agency. In determining whether an agency is a bona fide established commercial selling agency employed by the supplier for the purpose of securing business, the factors below must be considered:

1. The fee must be commensurate with the nature and extent of the services and not excessive compared with the fees customarily allowed in the trade for similar services related to commercial business. In evaluating reasonableness of the fee, services of the agent other than actual solicitation should be considered, such as technical, consultant, or managerial services, and assistance in obtaining personnel, facilities, equipment, materials, or subcontractors for the performance of the contract.

2. The agency should be an established concern, with knowledge of the products and the business of the concern represented and other qualifications necessary to sell the products or services on their merits, and there should ordinarily be a continuity of relationship between the supplier and the agency.

1.8.3.c Use of Improper Influence. No employee or agency is bona fide if the employee or agency seeks to obtain or claims to be able to obtain a contract through the use of improper influence.

1.8.4 Misrepresentation or Violation

In case of misrepresentation concerning contingent fees, or violation or breach of Clause 1-6, the VP, SM, may take one or more of the following actions, or other action, as is appropriate:

1.8.4.a If the award has not been made, determine whether the proposal should be rejected.

1.8.4.b If award has been made, take action to enforce the clause, either annulling the contract without liability or recovering the amount of the fee involved.

1.8.4.c Consider suspension or debarment.

1.8.4.d Consider referring the matter to the Attorney General, through the same channels as in 1.7.2.