As published in Law360, here:

A Communication Gap Between Industry, Debarring Officials

Law360, New York (April 17, 2014, 12:41 PM ET) —

Suspension and debarment, alternatively referred to (largely inaccurately) as the “death penalty” for government contractors, arouses passions despite being an area of law and policy without much guidance or substantive case law. This lack of guidance and case law can benefit the contracting community by permitting active, engaged suspending and debarring officials to craft creative outcomes that avoid the worst-case scenarios that might not be possible if “Sentencing Guidelines for Debarments” existed. But that is not commonly known, much less believed, in the contracting community.

It can be challenging for reasonable, rational contractors to trust suspending and debarring officials to do the “right thing” with no guideposts or precedent to guide them, and whether or not they have ever been in the private sector. This fundamental gap in communications between contractors and debarring officials means these interactions are often inefficient, unproductive, and costly.

In order to help bridge the gap, and to the extent the perspective of a former suspending and debarring official (acting), a former contractor, and a current representative of contractors before other suspending and debarring officials is useful, below are three crucial points the government should know about contractors facing suspension or proposed debarment, and three crucial points contractors should know about suspending and debarring officials.

What the Government Needs to Know

1) Business is not an academic exercise to contractors. 

Business dynamics are in constant flux, and while the vast majority of contractors try extremely hard to do the right thing, in hindsight, nearly every contractor could do a better job with nearly every decision. In time, facts develop, issues emerge and circumstances coalesce into more solid information. Although the government judges with 20/20 hindsight, contractors often make decisions with limited information.

Contractors try, hard, to paint the picture at the time of the alleged misconduct for their suspending and debarring officials not to shift blame but to ask the official to understand the dynamics in play at that time. Uncertainty about the business acumen of suspending and debarring officials can drag this process out unnecessarily. This business acumen is present in the government, but not advertised.

Suspending and debarring officials are not caricatures of “bureaucrats” or “ivory tower academics.” They make business decisions daily. Yet, the government needs to do a better job communicating that a contractor may be presently responsible even after making a poor decision with the best of intentions and after checking with appropriately robust legal and ethical support systems.

The government also needs to be more aware of the business environment and not use a suspension or debarment proceeding to seek every last detail of dated misconduct when those details were not available to the contractor at the time of the misconduct. There is little value to determining a contractor’s “present responsibility” in such an effort. Instead, the current business climate, internal controls and level of employee “buy in” should be the focus or the contracting community will continue to believe (incorrectly) that the focus of a suspension or debarment proceeding is either to punish or to conduct an academic exercise for additional details while the business is suffocating.

2) Speed matters, especially when dealing with individuals. 

A contractor can be put out of business with a key employee on the shelf for a short period of time. An individual can be fired and driven into bankruptcy just as quickly, especially in this economic environment. When the misconduct alleged in a suspension or proposed debarment is serious, then the government should and will take the time required to determine whether debarment is appropriate. But when the misconduct is collateral to another inquiry (perhaps as a result of blame-shifting of another respondent), or not threatening substantial dollars, safety or the integrity of the procurement system in a large and meaningful way, then a disproportionately lengthy inquiry risks taking on aspects of punishment than protection. Agencies need to be willing and able to terminate actions quickly when it is appropriate to do so.

3) The vast majority of contractors try hard to do the right thing. 

Even the Organizational Sentencing Guidelines recognize that not every misstep can be prevented, even with the most robust of ethics and compliance systems. And especially in today’s low price, technically acceptable contracting world, each additional dollar invested in compliance and ethics is another overhead dollar that can risk the next contract.

Contractors face challenges finding a balance and instilling a culture that cutting corners is not appropriate and “doing the right thing” matters. This discussion takes substantial time in “C-suites” and results in creative advances in ethical decision making. Seeking profit by finding the appropriate level of overhead investment for business ethics and compliance is not necessarily a negative for a company, and should not be viewed as such.

What Industry Needs to Know

1) Arguments that the business has done everything correctly and that “this is all a misunderstanding” generally are not persuasive. 

Substantial work by multiple government stakeholders goes into suspension and debarment actions. These are not knee-jerk reactions or snap decisions. There is at least a substantial customer relations issue present in each suspension or proposed debarment case. At a bare minimum, the issue could have been found sooner, explained better, or prevented in some way. That needs to be part of the discussion.

Determining present responsibility includes a holistic review of a contractor’s ability to deal openly and honestly with the government customer. If an inquiry can lead to improvements in a contractor’s level of ethical business operations, that needs to be highlighted. That does not mean the contractor has to agree with every statement from the suspending and debarring official. But the contractor does need to be willing to go through a self-evaluation process and figure out how it can improve.

2) Compliance and ethics are worth the investment — at a minimum, it buys additional credibility.

Changes in regulation, law and appropriations levels have caused the pendulum to swing dramatically toward contractor self-disclosure in recent years. Yet self-disclosure can be skewed, incomplete and offered by contractors with an obvious self preservation interest. Some additional measure of trust is important to earn. Compliance initiatives to do the right thing and ethics initiatives to make the right choices can help build trust. Economics can drive decisions, but a company that “stands for something” and will view certain decisions as too risky, or too inappropriate, or too unethical, will have greater credibility in a suspension or debarment proceeding.

3) Restricting comments to the administrative record rather than taking a holistic look at the business can be damaging. 

Contractors facing suspension and debarment proceedings often will address only the information in the administrative record before a suspending and debarring official. That approach has risks. Especially as agencies take earlier, and more fact-based actions, it is entirely possible that an evolving investigation and inquiry can uncover additional misconduct. There are few things that damage a contractor’s credibility more than going through a suspension or proposed debarment response and omitting additional areas or misconduct known to the contractor but not yet uncovered by the government.

For better or worse, so much of a present responsibility determination is based on the debarring official’s trust. That trust is already called into question once a suspension or debarment proceeding begins. Too many contractors risk complete erosion of that trust by failing to view the proceeding as a chance to take a hard look at the business as a whole and make needed improvements.

—By David Robbins, Shulman Rogers Gandal Pordy & Ecker PA

David Robbins chairs the government contracts practice at Shulman Rogers in Potomac, Md. He also served the Air Force General Counsel’s Office as acting suspending and debarring official, co-chaired the U.S. Department of Defense Procurement Fraud Working Group and was a member of the leadership team of the Interagency Suspension and Debarment Committee.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.