Tuesday, July 26, 2011

Suspension and Debarment

Two of the most dreaded words in Government contracting are "suspension" and debarment". Suspensions and debarment are invoked to preclude contractors that are not "responsible", from continuing to contract with the Government. The action to suspend or debar a contractor from performing work for the Government can be a fatal blow to the "going concern", especially for companies that relay primarily on Government business.

Suspension and debarment are two separate actions. A suspension is a temporary matter while a debarment is usually permanent. A suspension, under certain circumstances, can lead to a debarment. The consequences however are similar. Agencies are prohibited from doing business with suspended or debarred contractors. Additionally, agencies cannot place additional orders under previously awarded contracts (for example ID/IQ contracts) unless there is a compelling reason for doing so.

The regulations concerning suspensions and debarment are found primarily in FAR 9.406 and 9.407. Beginning today and continuing for the next few days, we will look at the Government's suspension and debarment processes.

A suspension is an action taken by "suspending official". A "suspending official" is defined as an agency head or a designee authorized by the agency head to impose suspension. A suspending official may, in the public interest, suspend a contractor (or subcontractor) for any of the following activities:

  1. Commission of fraud or criminal offense in connection with obtaining, attempting to obtain, or performing a public contract or subcontract,
  2. Violation of federal or state antitrust statutes relating to the submission of offers,
  3. Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, or receiving of stolen property,
  4. Violations of the Drug-Free Workplace Act of 1988,
  5. Intentionally affixing a label bearing a "Made in America" inscription (or any inscription having the same meaning) to a product sol in or shipped to the United States when the product was not made in the United States
  6. Commission of unfair trade practices (as defined in FAR 9.403),
  7. Delinquent federal taxes greater than $3 thousand,
  8. Knowing failure by a principal, until 3 years after final payment on any Government contract, to timely disclose to the Government, in connection with the award, performance, or closeout of the contract, credible evidence of
    • Violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations,
    • Violation of the civil False Claims Act
    • Significant over-payment(s) on the contract, other than over payments resulting from contract financing payments
  9. Commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a Government contractor or subcontractor

Due to the severe consequences of a suspension, Government agencies may only impose a suspension on the basis of adequate evidence. An indictment for any of the preceding causes constitutes adequate evidence for suspension purposes. A suspension applies to a contractor's entire business, not just the division involved in the activity leading to a suspension.

The existence of a cause for suspension does not necessarily require that the contractor be suspended. The suspending official should consider the seriousness of the contractor's acts or omissions and may, but is not required to, consider the following remedial measures or mitigating factors:

  1. Whether the contractor had effective standards of conduct and internal controls or implemented such standards prior to the investigation of the activity cited for debarment,
  2. Whether the contractor cooperated fully with government agencies during the investigation and any court or administrative action,
  3. Whether the contractor has taken appropriate disciplinary action against the individuals responsible for the activity,
  4. Whether the contractor has implemented or agreed to implement remedial measures,
  5. Whether the contractor has conducted a full investigation and made the results available to the debarring official,
  6. Whether the contractor has paid or agreed to pay all criminal, civil, and administrative liability associated with the incidents,
  7. Whether the contractor has instituted or agreed to institute new or revised controls and/or procedures,
  8. whether the contractor has  had adequate time to eliminate the circumstances within the organization that led to the debarment proceedings,
  9. Whether the contractor's management comprehends the seriousness of the situation and has implemented programs to prevent recurrence,
  10. Whether the contractor brought the debarring activity to the attention of the government in a timely manner

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