Suspensions and Debarments: A Practical Guide to Navigating Government Contract Exclusion Proceedings

March 2013Articles Bloomberg BNA Federal Contracts Report

Federal exclusion proceedings, that is, the suspension and/or debarment of contractors that violate federal contracting rules, are sharply on the rise. Sparked by a desire to protect taxpayer dollars in this age of unprecedented government spending, the number of suspended and debarred contractors has increased each year since 2009, and all indications are that 2013 is poised to be another record setting year.1 Contractors must be keenly aware of this heightened level of government scrutiny concerning the performance of public contracts and have a practical approach in place to deal with alleged violations.

Reinvestment Act (ARRA) in February 2009, the United States Government has spent an estimated $840 billion dollars in an effort to jumpstart the economy and create jobs. Of those funds, nearly a third, approximately $240 billion, has been spent on contracts, grants, and loans in areas such as: transportation ($35.5 billion); infrastructure ($29.0 billion); and energy and the environment ($26.7 billion).2

In light of the enormity of ARRA spending, Congress has expressed an ongoing interest in ensuring that taxpayer dollars are spent responsibly, and that contracts are awarded only to reliable and dependable contractors capable of satisfactorily performing the work.3 In that regard, among the tools at Congress’s disposal are governmentwide suspensions and debarments — administrative exclusion remedies designed to allow federal agencies to guard against, among other things, abuse, fraud, non-conformity, and waste.4 In simple terms, suspensions and debarments amount to a governmentwide ban. All federal agencies are barred from doing business with an individual contractor or company that has engaged in improper conduct and been found not ‘‘presently responsible’’ to perform on federal procurements for a period of up to three years.5 Although, debarments are, technically speaking, not a punitive action, for contractors whose livelihoods are even somewhat dependent on federal contract performance, debarment is not only undesirable, but could be tantamount to professional and financial ruin.

There are two types of debarment: mandatory (or statutory) debarment and discretionary debarment. The former situation arises when an act of Congress mandates debarment as a sanction for certain statutory violations. For example, an employer found to have violated the provisions of the Davis-Bacon Act with respect to wage rates for laborers and mechanics faces a mandatory three-year debarment.6 Discretionary debarments, however, are less straightforward and contain ample room for interpretation. This article addresses the discretionary debarment provisions of the Federal Acquisition Regulation, as well as the Office of Management and Budget (OMB) Guidelines to Agencies on governmentwide Debarment and Suspension. It also offers practical advice for individuals and organizations in the unfortunate event that they ever face exclusion proceedings, or even think that such events may loom on the horizon.

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Footnotes
  1. Statistics available through the Interagency Suspension and Debarment Committee's (ISDC) reports to Congress for fiscal years 2009, 2010, and 2011.
  2. Statistics are available from http://www.recovery.org
  3. See Council of the Inspectors General on Integrity and Efficiency, Don't Let the Tool Box Rust: Observations on Suspension and Debarment, Debunking Myths, and Suggested Practices for Offices of Inspectors General, September 20, 2011, at 1-2; United States Government Accountability Office (Highlights of GAO-11-739, a report to congressional committees), Suspension and Debarment, Some Agency Programs Need Greater Attention, and Government Oversight Could Be Improved, August 2011; Katie M. Manuel, CRS Report for Congress, Debarment and Suspension of Government Contractors: An Overview of the Law Including Recently Enacted and Proposed Amendments (RL34753), January 6, 2012, at 4. See also, United States v. Bizzell, 921 F.2d 263, 267 (10th Cir. 1990) (Stating that, as a matter of public policy, the federal government seeks to "prevent improper dissipation of public funds" by dealing with only "responsible" contractors); 48 C.F.R. § 9.402(a) (requiring contracting officers on federal projects to "solicit offers from, award contracts to, and consent to subcontracts with responsible contractors only").
  4. Council of the Inspectors General on Integrity and Efficiency, Don't Let the Tool Box Rust: Observations on Suspension and Debarment, Debunking Myths, and Suggested Practices for Offices of Inspectors General, supra, at 2.
  5. Id. See also, 48 C.F.R. § 9.406 (Debarment).
  6. 40 U.S.C. § 3144 (government-wide debarment for failure to pay wages under the Davis-Bacon Act).