Section 1683 of the 2013 National Defense Authorization Act, H.R. 4310, as approved last week by the House Committee on Armed Services, proposes an amendment to the Small Business Act to clarify that misrepresentation as to small business status in order to obtain certain prime contracts or subcontracts is an independent basis for suspension or debarment.  The proposed legislation would remove the requirement that contractors misrepresenting themselves as small businesses be subject to suspension or debarment “on the basis that such misrepresentation indicates a lack of business integrity that seriously and directly affects the present responsibility to perform any contract awarded by the Federal Government or a subcontract under such a contract.”  The revised section 1683 would state only that contractors “be subject to suspension and debarment as specified in subpart 9.4 of title 48.”  Like the provision in the Comprehensive Contingency Reform Act, S. 2139, discussed here and the provisions of the Consolidated Appropriations Act of 2012, discussed here, this legislative mandate could be interpreted to impinge on the discretion granted to suspending and debarring officials (SDOs).

First, because SDO’s already have the ability to consider excluding a contractor that has misrepresented its small business status, it is not clear that the proposed amendment has any real impact.  But to the extent it demonstrates Congressional intent that such violations more frequently result in suspension or debarment, for the reasons discussed in a previous blog post, less flexibility in suspension and debarment considerations is almost uniformly opposed by government contract practitioners, SDOs, and agencies.  Specifically, it is not clear that exclusion is necessary in every instance that a contractor misrepresents itself as a small business, and removing an SDO’s discretion to exclude, improve compliance through an administrative agreement, or take no action arguably would be harmful to the procurement system.

By exercising their regulatory authority, SDO’s not only have the ability to protect the public fisc from contractors lacking the requisite present responsibility, but they also have the ability to influence corporate behavior through administrative agreements.  That flexibility allows agencies to continue contracting with companies that may have erred but offer needed goods or services.  Further, viable alternatives to exclusion allow SDOs to simultaneously protect the government while allowing innocent employees to continue working at contractors that would be put out of business by exclusion.

Also, we note section 1684 of the 2013 NDAA would require the Small Business Administration to annually report to Congress the number of contractors proposed for suspension or debarment, the office that originated the proposed exclusion, the reasons, the outcome, and the number of suspensions or debarments referred to the Inspector General of the SBA or another agency, or to the Attorney General.  This reporting requirement demonstrates a desire by at least some members of Congress to get into the weeds of the suspension and debarment process, placing greater pressure on agencies to increase their use of this powerful administrative tool.