Suspension & Debarment

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Crowell & Moring is hosting Government Contracts 101 in our Washington, D.C., office on Thursday, October 26, 2017.  This all-day event will last from 8:30 a.m. to 6:30 p.m. at 1001 Pennsylvania Ave, N.W., and provide an overview of the full scope of issues that government contractors face on a daily basis.  We will cover FAR, key statutes and regulations, the bid and proposal process, protests, disputes, cyber requirements, changes, claims, key compliance issues, suspension/debarment, and costs.  The course is designed for those attorneys and business personnel that may be new to government contracting and for those that may need a “refresher.” 

Training is foundational to our business, and it is a part of our Firm’s DNA.  Our founding partners regularly provided government contracts training not just for business development purposes, but also out of a sense of duty to the profession. 

Government contracting is hard.  The rules and regulations can be counter-intuitive.  And perfectly acceptable commercial business practices can be criminal violations in the government contracts setting.  Industry members deserve every opportunity to learn the rules of the road so they can thrive. 

Furthermore, in the current fiscal environment budget pressures can hit government contractors hard.  Training funds can be hard to find.  As a Chambers Band-One rated government contracts practice with more than 60 lawyers working day-in and day-out in the trenches of our industry, we feel an obligation to our profession to provide this foundational training, free of charge, to our clients and to any interested industry member who desires this knowledge.  Join us.  Come, learn, network with your peers, and enjoy a day with us. 

We hope you can join us.

Registration is available here for industry-members interested in attending.

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Suspension and debarment practice in 2017 is very different than it was just five or 10 years ago, and it continues to evolve.  Historically active programs, such as the Department of the Air Force, show few actions initiated in the last three months, while the Environmental Protection Agency has been heavily involved in excluding contractors and awardees.  Awareness of the current activity level and preferences of relevant agency suspension and debarment offices is one key to successfully managing your relationship with key federal agencies.  But successfully navigating the current suspension/debarment landscape is often more complicated than a single agency analysis.

Continue Reading Not Your Grandfather’s Suspension & Debarment: How Contractors Can Prepare For and Defend Against Today’s Exclusions

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Changes in suspension and debarment data reported by the government can provide the American public with substantially more insight into the types of entities (and individuals) excluded through suspensions, proposed debarments, and debarments, including that the overwhelming majority of excluded companies are small businesses.  These changes likely show that more than 90 percent of the businesses excluded by the Department of Defense in Fiscal Year 2016 were small businesses. In this blog post we discuss the current counting method used by the government, and present a revised counting method using recently completed Fiscal Year 2016 exclusion statistics to understand the current state of the government’s suspension and debarment system in a more nuanced way.

Current Counting Method

The statistics reported by the Interagency Suspension and Debarment Committee (ISDC) in the annual ISDC Report cover only total numbers of suspensions, total proposed debarments, and total debarments.  This presentation could easily confuse readers because the aggregated data conceivably “triple counts” exclusions in a given year.  For example, a single individual or company may be suspended, proposed for debarment, and debarred in a given year and the ISDC Report would count that as three (3) separate actions. Continue Reading State of Suspension/Debarment: FY2016 Statistics and the Impact on Small Businesses

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When assessing whether a contractor is eligible for award, contracting officers are required to conduct a meaningful present responsibility determination using the factors contained in FAR 9.1. However, a final rule issued by the FAR Council on September 30, 2016 has inserted a wild card into the process—the agency suspension and debarment official (SDO).

The final rule adopts an interim rule without change, which amends the FAR to establish the following representation and certification requirements:

  • Representation (FAR 52.209-11): Any corporation responding to a federal solicitation must represent whether it: (1) has any unpaid federal tax liability that has been assessed and is not being appealed or paid in a timely manner; or (2) has a felony conviction for a violation under any federal law within the preceding 24 months. There is no de minimus amount for reporting tax delinquencies. Consistent with the Consolidated and Further Continuing Appropriation Acts, an affirmative response to either prong would create an automatic exclusion that precludes the award of federal contracts in a “shoot first, ask questions later” fashion.
  • Certification (FAR 52.209-12): Corporate offerors must certify to tax matters contained in FAR 52.209-12(b) when responding to certain solicitations where the resultant contract (including options) may have a value greater than $5 million. If applicable, contractors must ensure that their certifications are accurate; otherwise additional liability could arise for the submission of false statements.

Continue Reading Tough (Tax) Break: Federal Tax Delinquency and Felony Convictions Could Bar Corporations from Contract Award

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The suspension and debarment regulations at Federal Acquisition Regulation (FAR) Subpart 9.4 are focused on the present responsibility of a contractor.  Yet, the records of past, inactive exclusions are available for public view in perpetuity on the System for Award Management website (SAM.gov).   In a recent article (linked here) published in BNA’s Federal Contracts Report, C&M attorneys explore this important issue.

As discussed in this article, these past records on SAM.gov implicate the present liberty interests of contractors.  Because past exclusions on SAM.gov may be accessed by anyone, contractors are facing more questions than ever about their past exclusions from outside of the federal government.  Many state and local procurement agencies as well as banks and financial institutions are taking the time to review SAM.gov before granting opportunities or financial assistance to individuals and companies.  Accordingly, the intent of FAR Subpart 9.4 is stretching far beyond its purpose, which is to prevent contractors from receiving new contracts or federal financial assistance if they are not “presently responsible.”  “Present responsibility” is not defined in FAR subpart 9.4, but this subpart explicitly states that exclusions do not exist to punish contractors for past misdeeds.  Thus, it may be only a matter of time until a contractor prevails on a due process challenge to SAM.gov archives, as the reputational harm of these records continues to grow. 

 

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LAW360 is reporting here (subscription required) that the VA was recently sued for failing to consider mitigation, remediation and separation of affiliation arising in a suspension matter. The suit also challenges the SDO’s impartiality as a member of the acquisition chain with an IG member also on the debarment committee.

Some quick analysis:

1) The VA has statutory debarment authority with a legislative/regulatory history that causes it to want to “be tough” in these cases and, presumably, not consider mitigation.

2) However, the VA Acquisition Regulation Supplement doesn’t show sufficient rules for accomplishing #1, so they piggyback on the FAR system which encourages (suspension) or requires (debarment) consideration of mitigation and remediation. And it doesn’t work well.

For example, in a prior unrelated case, my colleagues at Shulman Rogers and I tried to reopen a case under FRCP 60(b) to argue that the VA failed to make imputation findings on the face of its exclusion documents, therefore separating the alleged “bad actor” from the company destroyed affiliation and necessitated the end of the incredibly lengthy proposed debarment under the FAR. We inherited the case late and couldn’t get past 60(b) (which is almost never granted). But we felt it was important to try. I hope this aspect of the current case gets a fair hearing. It seems to be an area of exposure for the agency.

3) The impartiality arguments are interesting. This lack of impartiality made a big difference in the recent IRD case, but the 2013 NDAA expressly applied to the agency involved in that case. I will be interested to see if the court deals with this argument and how it’s interpreted. We have express legislative language saying impartiality is required in a subset of agencies. That will be hard for the court to ignore, if it decides to take up the argument.

When agencies fail to administer their suspensions/debarments fairly, companies backed against the wall are increasingly likely to file suit as there are very few viable alternatives. Recent favorable decisions for contractors and grantees, coupled with increasing activity by federal agencies with perhaps less institutional knowledge of the process make these suits more attractive to file. It will be interesting to see what changes to the overall suspension/debarment system result.

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The US District Court for the District of Columbia has just published an order ending IRD’s suspension, and that the suspension was void ab initio (as if it never happened). This is a tremendous development, as void ab initio is an unique remedy reserved for truly egregious conduct and the ruling erases the suspension from the records.

Specifically, the Judge ordered:

“1. Defendants are enjoined to declare plaintiffs’ suspension void ab initio within 1 (one) day of this order

Defendants are enjoined [to] restore plaintiffs’ presuspension access to advance funding within 3 (three) days for all contracts, grants, and agreements under which plaintiffs would be qualified for advance funding but for the now-voided suspension.”
And, (combining other line items in the ruling) USAID shall instruct contracting or agreement officers that they must consider the proposals as if IRD had never been suspended or declared ineligible, that the officers do not have discretion to disregard the proposal based on the “legally invalid and since-lifted suspension,” that the proposals must be considered just as any others, and the “reevaluat[ion]” of IRD present responsibility shall not factor into the analysis. Remarkably, USAID shall also contact certain other parties outside the agency and correct any misstatements about IRD’s status.

As a reminder, in late June, USAID determined that the agency had a conflict of interest pursuant to the 2013 NDAA because its Suspending and Debarring Official was also in USAID’s acquisition chain, contrary to law. After that finding, USAID decided to end IRD’s suspension temporarily and to conduct a separate review with a new SDO [ https://www.devex.com/news/usaid-lifts-ird-s-suspension-says-change-is-on-the-way-86406 ]. However, according to public court filings, the review seems not to have progressed, with confusion in USAID concerning IRD’s status. That confusion apparently caused USAID contracting personnel to refuse to extend awards to IRD, and was compounded by a USAID Inspector General employee who referred to IRD in a fraud briefing in negative light, suggesting the exclusion from contracting/grants was ongoing.
This was a fascinating case with early lessons for both the agency and contractors/awardees.

For Contractors/Awardees who are suspended or proposed for debarment:

1) Keep track of statements made by the government concerning the company, and any predictions of outcomes of a present responsibility review – they may suggest improper prejudgment by the agency rather than an objective review.

2) Explain the robust remedial measures taken after wrongdoing and how it will protect the government. This may be the basis for a claim of improper inaction by the government.

3) Consider filing suit. These suits are high risk-high reward strategies, but this case may suggest new opportunities for companies/grant recipients to force the government to act when the exclusion extends unnecessarily long or the process is less-than-fair. This void ab initio ruling may change that calculus for some contractors, while the relatively limited reach of the NDAA conflict of interest analysis may make future application challenging.

For Agencies:

1) Watch award decisions made immediately before exclusions as they suggest present responsibility.

2) Political pressure cannot lead to debarment under the Kiewit line of cases. In this case, at a minimum there was an impression given that the exclusion decision followed a letter from Congress. That is not a proper reason for a suspension or proposed debarment.

3) Move expeditiously once a course of action is announced or facts change. Companies should not be kept in indefinite limbo.

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In a fascinating development, yesterday’s filing by DoJ in the IRD APA suit to enjoin its suspension announced:

1) that the IRD suspension had been lifted temporarily;
2) that the USAID SDO would move to a different location within the agency; and,
3) that the full record (presumably wtih new mitigation material) will be examined by the new SDO.

As I read this, the agency essentially conceded it didn’t act properly, and would do a better job in a better location. Re-suspending would be foolish. Proposed debarment would be challenging. Be on the lookout for an administrative agreement in the near future.

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I had the good fortune to speak with Molly Anders (twitter https://twitter.com/mollyanders_dev) at Devex, a publication focused on international development, concerning IRD’s APA case seeking to enjoin its suspension by USAID. The focus of the discussion is, if what IRD says in its suit is true, does the company have a chance at overturning its suspension and what does it say about the current state of USAID suspension/debarment practice.

The problem for USAID, if IRD’s statements are true, is the suspension may run afoul of the Keiwit case about Congressional interference in agency decision making. Also, the continual award of new grants and assistance funds up to an including the day before the suspension hit is extremely problematic. Furthermore, the way the agency “announced” publicly its suspension also smacks of punishment. Overturning a suspension is hard — very hard — but there is risk here for USAID. Obviously only one side of the story has been told, but as a former acting Debarring Official, I can’t believe there isn’t an administrative agreement in place yet.

The article is here: See the Devex article here