The number of contractors that are being blacklisted from doing business with the federal government has reached record levels. Even government agencies that historically have not taken such action in the past are getting into the debarment act, warn two recent reports.
A report to Congress issued in March by the Interagency Suspension and Debarment Committee counted a total of 4,812 suspensions, debarments, and proposed debarments in fiscal year 2013 by 24 federal agencies—more than double the 1,836 issued in fiscal year 2009, the first year ISDC started to collect such data.
More agencies are using such disciplinary measures too. Six agencies that showed few or no procurement-related suspensions or debarments in 2009 increased their disciplinary actions on federal contractors to 271 in 2013, according to a separate report published last month by the U.S. Government Accountability Office.
“It’s unmistakable that the numbers are going up,” says Alan Chvotkin, executive vice president and counsel of the Professional Services Council, the national trade association of the government professional and technical services industry. “What’s clear from the report is that agencies in the last couple of years have taken the issue of suspension and debarment more seriously.”
Six agencies including the Departments of Commerce, Department of Health and Human Services, Department of Justice, Department of State, Department of Treasury, and the Federal Emergency Management Agency have newly embraced the idea of suspending and barring federal contractors. “In those agencies, there will continue to be a significant increase in suspensions and debarments as they continue to develop their programs,” says Adam Lasky, a government contracts attorney with law firm Oles Morrison Rinker & Baker.
The State Department made the biggest jump with eight suspension and debarment actions in 2009 to 96 in fiscal year 2013. The Justice Department also blacklisted more service and goods providers, increasing from eight suspension and debarment actions in 2009 to 64 in fiscal year 2013.
In addition to bringing more suspensions and debarments, government agencies also are increasingly coming down hard on larger contractors. Historically, the largest federal contractors essentially were immune from ever being suspended or debarred, Lasky says. Not anymore.
We’re likely to see less immunity and a “higher frequency of large contractors being suspended,” Lasky says. In 2012, for example, the Environmental Protection Agency suspended BP from entering into any new contracts or leases with the federal government following the Deepwater Horizon oil spill. The suspension, finally lifted in March of this year, marks the longest in recent history for any top 100 contractor.
Aside from being blacklisted from bidding on any federal government contract for up to three years, federal contractors with that stain on their record could be put at a significant disadvantage when competing for local and state contracts. “Suspension and debarment can be a corporate death penalty,” says Ronald Schechter, a partner in Arnold & Porter government contracts practice group.
As in past years, the Department of Defense—the Air Force, Army, Navy, and Defense Logistics Agency—continues to show the most activity. According to the ISDC report, the Defense Department issued 726 debarments and 267 suspensions last year. The second most active agency was the Department of Homeland Security, with 281 debarments, but just 32 suspensions. Ranking second to the Defense Department in suspensions was the EPA, with 196 in 2013, and 112 debarments.
Some agencies showed no suspension or debarment activity in 2012 and 2013. These agencies are the Social Security Administration, the Department of Labor, and the Office of Personnel Management, the ISDC report stated.
The ISDC stressed that the overall number of suspensions and debarments should not be construed as a metric of success. “[T]he appropriate level of discretionary suspension and debarment activity in any given year is purely a function of circumstance and need,” the report stated.
More to Come
Suspension and debarment activity started to increase government-wide in 2011, when many agencies, in response to recommendations made by the GAO, begin to implement detailed and effective measures designed to improve their suspension and debarment programs.
Such measures have included:
Putting in place an accountable official who is responsible for suspension and debarment activities, including the adequacy of training and resources;
Taking steps to introduce resources, formal policies, or both—in some cases dedicating staff resources to handle referrals and manage cases; and
Putting in place procedures to refer recommendations to the suspension and debarment official (SDO) for action.
The Justice Department, for example, revamped its program by aligning all suspension and debarment activities under one division. Since 2011, the Justice Department assigned five to six staff members on a part-time basis to handle suspension and debarment actions. “Additional staff members also are available on an as-needed basis,” the GAO report stated.
The HHS created the Office of Recipient Integrity Coordination in 2012 and dedicated four full-time staff positions to this office. Additionally, the Office of Inspector General assigned staff to facilitate the referrals of individuals and entities for possible suspensions or debarments.
It used to be that investigators didn’t share information with SDOs until the investigations ended, says Todd Canni, counsel with law firm McKenna, Long & Aldridge, and former director of suspension and debarment operations for the Air Force. “Now, what you’re seeing is many more cases based on active investigations,” leading to more referrals, he says.
According to the ISDC report, referrals increased from 3,715 in fiscal year 2012 to 3,942 in fiscal year 2013, which is more than triple the referrals received in 2009, the report stated. At the same time, declinations fell from 203 in fiscal year 2012 to 154 in fiscal year 2013.
Prior to a non-compliance event even occurring, it’s important that the federal contractor know who its lead agency SDO is going to be, Canni says. “Then you need to know how that SDO approaches non-compliance events.” What factors are important to them?” The answers to those questions may inform the sort of requests the SDO will make.
Below the GAO reports suspension and debarment actions for fiscal years 2009-2013.
Source: GAO presentation of agency data reported to the Interagency Suspension and Debarment Committee.
“It’s a very in-depth, invasive process,” Canni says. Not only should written submissions to the SDO address all the issues that led to the misconduct to begin with, but the government contractor also will be expected to keep the SDO informed of any new developments, he says.
“One of the most important measures is acknowledgment of responsibility,” Lasky says. The only caveat is that if you choose to contest the allegations, it’s going to be pretty difficult to acknowledge responsibility, he says. “So you have to choose one path over the other pretty early on.”
The most effective way to approach the matter and address the SDO’s concerns is to be candid and complete with written submissions, Canni says. Federal contractors should be prepared to explain how they handled the alleged wrongdoing and what remedial measure they are taking to ensure it doesn’t occur again, he says.
“Even if the facts underlying the suspension or debarments are true,” he says, “that doesn’t necessarily mean you will be suspended or debarred, if you can show you’ve taken the necessary remedial measures.”