“Pay to Play” Schemes | PNWC’s Government Contracting Update

Back in the 1980s, the Government brought down a huge “pay to play” enterprise in the San Francisco bay area. Buyers (purchasing agents) for several large defense contractors required prospective subcontractors (in this case, machine shop proprietors) to pay up if they expected to get any business from these primes. The machine shops had to invite the buyers over for friendly neighborhood poker games and were expected to lose large sums of money to the buyer. The size of subsequent machining orders were based on the size of their poker losses. “Do you play poker” became the code word for the buyers’ expectations. One machine shop decided not to play and blew the whistle to Government investigators. The Government was never able to calculate the full impact of the scheme but cost-type contracts were increased by millions of dollars.

Source: PNWC’s Government Contracting Update: “Pay to Play” Schemes