Downsides To Accelerating Contractor Debarment Decisions
It's better to do the right thing slowly than to do the wrong thing quickly. This holds true in the context of suspension and debarment of government contractors. These exclusions are commonly referred to as "the death penalty," because they preclude a contractor from receiving government contracts, and the associated reputational harm can be incalculable.
Accordingly, the Federal Acquisition Regulation, or FAR, requires suspension and debarment officials, or SDOs, to make decisions based on an administrative record, and those decisions are subject to judicial review (and possible invalidation) under the Administrative Procedure Act.
A new U.S. Department of Labor pilot program to speed up suspensions and debarments may raise important concerns for industry. On April 2, 2019, the DOL announced 1 that the goal of the pilot program is "to reduce the processing time on discretionary suspension and debarment actions from months to days[.]"
To do this, the DOL contemplates that its Office of Inspector General will include "additional information" about indictments and convictions when making referrals to the SDO. The implication seems to be that if an OIG referral shows that a contractor has been indicted or convicted of an offense, the SDO can then debar the contractor within days.
The DOL states that this new pilot program, will "protect the federal government from doing business with those who engage in inappropriate or illegal conduct" and "builds on recent steps taken by the Department to enhance its discretionary suspension and debarment efforts in the last few years, including increased coordination and collaboration with the OIG." The DOL also notes that its number of suspensions and debarments has steadily increased, and that referrals to the SDO from the OIG reached a record high in fiscal year 2018. This increased activity may be reason enough for the DOL to revisit the advisability of encouraging speed in debarment decisions.
Below are a number of reasons the DOL might reconsider the pilot plan.
No Demonstrated Need for Speed
It is certainly understandable that an agency would want to act quickly to suspend or debar a company that is not presently responsible, so as to prevent that company from continuing to receive federal awards. But it takes time to render a well-reasoned, defensible decision based on an administrative record.
In the meantime, procuring agencies are not left exposed and defenseless. Contracting officers are required to make a responsibility determination – which includes considering whether the contractor has a satisfactory record of integrity and business ethics – each time they award a contract.2 Additionally, in cases where there the SDO has determined that "immediate action is necessary to protect the Government's interest" the SDO can suspend a contractor.3
With these protections available, the case for speeding up contractor debarments is less clear. In its press release, the DOL gave no indication that it had studied the issue and determined that speeding up debarment decisions would result in increased protections for the government. Nor was there an opportunity for industry comment, given that this pilot program is not a rule change.
Suspension and Debarment Are Discretionary, Not Automatic
The DOL press release suggests that once the OIG makes a referral to the SDO indicating that a contractor has been indicted or convicted of an offense, all that is left to do is for the SDO to suspend or debar the contractor. But, the FAR makes clear that suspensions and debarments are discretionary, meaning the SDO can decline to suspend or debar, despite the existence of cause.4
There can be good reasons for not suspending or debarring a contractor automatically based upon an indictment or a conviction. For instance, a contractor may have implemented significant organizational and management changes following the misconduct that led to its indictment, guilty plea or conviction.
In these cases, suspending or debarring that contractor provides no protective benefit to the government. On the contrary, excluding contractors that have invested in meaningful remedial measures can harm the government by reducing the number of contractors available to compete in upcoming procurements.
Contractors Require a Meaningful Opportunity to Respond
Although the FAR allows an SDO to suspend a contractor without giving prior notice or an opportunity to respond, the FAR requires the SDO to give a contractor notice and an opportunity to respond prior to imposing debarment.5 Contractors facing possible debarment take seriously the opportunity to submit information to the SDO to show that they are presently responsible.
The submissions typically explain the contractor's business history with the U.S. government, describe the misconduct that occurred and the company's response, and provide detailed information about the contractor's ethics and compliance program, and internal controls. Contractors may enlist the help of outside counsel in drafting these submissions, and the process often requires input from various company employees, and review of numerous relevant documents.
Once a draft is complete, it will typically be subject to a thorough internal vetting and review process to ensure accuracy. While SDOs vary in the amount of time given to contractors to provide written submissions, giving the contractor mere days to make a written submission to preserve its eligibility for federal contracts raises issues of fundamental fairness and due process.
Additionally, many SDOs allow contractors to appear in-person following the written submission. This can be a valuable opportunity to answer questions and continue to make the case that the contractor is presently responsible notwithstanding past misconduct. If the DOL will now make debarment decisions in a matter of days, the SDO will almost certainly lose the benefit of having meaningful written submissions and the opportunity to meet with contractor management in person. Finally, there is the possibility that a contractor subject to such an accelerated timeline would seek judicial review of a debarment on the grounds that the agency failed to provide a meaningful opportunity to be heard.
Acting Quickly Can Appear Punitive
The FAR prohibits imposing suspension or debarment as punishment for prior misconduct.6 If the SDO receives an OIG referral and issues a suspension or a notice of proposed debarment within a matter of days, it may appear that the SDO is acting at the behest of government enforcement authorities rather than making an independent determination of a contractor's present responsibility.
Even in cases where the SDO suspends a contractor, which can be done on the basis of an indictment and without giving the contractor notice or a prior opportunity to respond, the FAR nevertheless requires the SDO to first find that "immediate action is necessary to protect the Government's interest."7 If the SDO only gives the contractor a day or two to respond to a referral, this may convey that the SDO's mind is already made up, and that there is little the contractor could submit that would persuade the SDO that the contractor is presently responsible despite prior misconduct.
Acting Quickly Could Chill Voluntary Disclosures
Over the last several years, the SDO community has encouraged contractors to come forward to self-report issues bearing on integrity and responsibility. These early engagements have the potential to be meaningful for both sides. SDOs appreciate the early notice, while contractors appreciate the opportunity to be heard. Making a voluntary disclosure to an SDO helps emphasize that the contractor is presently responsible and committed to operating with integrity. If, however, contractors believe they will be summarily suspended/debarred upon coming forward, they are much less likely to do so.
Difficulty in Measuring Program Success
The DOL press release gives no indication how the agency will review the success of the pilot program, which will end in April 2020. Hopefully success will not be measured by increases in the overall numbers of suspensions/debarments. Focusing on raw numbers increases, particularly where those increases result from setting a deliberate goal to act quickly, may not be the best approach.
There are other indicators of the health of a suspension/debarment program, such as considering the number of voluntary contractor disclosures to the SDO, the number of satisfactory completions of administrative agreements, the number of declinations, and the number of cases resolved through early actions such as responses to requests for information and show causes notices.
See News Release, U.S. Department of Labor Announces New Pilot Program For Discretionary Suspensions and Debarments to Ensure Accountability (April 2, 2019).
FAR 9.406-1(a) ("The existence of a cause for debarment … does not necessarily require that the contractor be debarred; the seriousness of the contractor's acts or omissions and any remedial measures or mitigating factors should be considered in making any debarment decision."); FAR 9.407-1(b)(2) ("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…").
FAR 9.402(b) ("The serious nature of debarment and suspension requires that these sanctions be imposed only in the public interest for the Government's protection and not for purposes of punishment.").