In this two-part blog series, I will explore issues around suspension and debarment, with Rodney A. Grandon, Managing Director at Affiliated Monitors, Inc., (AMI). During a 27-year career with the US military and government, Grandon served as the Air Force’s Suspending and Debarring Official as well as a wide variety of other functions which gives him subject matter expertise into issues surrounding this topic. Today, I introduce the key components to suspension and debarment. Tomorrow I will consider the convergence of suspension and debarment and compliance.
I – Introduction to Suspension and Debarment
On the GSA website, it states, “The suspension and debarment process protects the federal government from fraud, waste and abuse by using a number of tools to avoid doing business with non-responsible contractors. Suspensions, Proposals for Debarment, and Debarments are the most widely known tools as these actions are visible to the public”.
More generally, suspension and debarment are not civil or criminal matters resulting in a penalty being imposed on a particular party. Suspension and Debarment is an administrative matter. In a civil or criminal matter, the Department of Justice (DOJ) takes the lead in those actions which are contested litigated matters, with civil and criminal rules around evidence and procedure. While suspension and debarment have evidentiary and procedural considerations, they are much more informal. Grandon noted the rules basically say they should be as informal as it as is practicable under the circumstances.
Grandon also reiterated another key difference is the lack of a penalty. Suspension and debarment do not result in a penalty. In fact, the regulations make it very clear. They are used “only as a proactive protective measure, basically to protect the government’s interests from contractors that either don’t have the capability to perform or to provide the goods and services to be a suitable a business partner with the federal government.”
A final major distinction between a civil or criminal matter and suspension and debarment is they are within the hands of the given agency, as opposed to the DOJ or a US Attorney’s offices who have the lead in civil criminal actions. Conversely, when it comes to suspension and debarment, those actions are distributed across the various federal agencies. Each agency has its own Suspending and Debarring officials. Grandon noted they “have a lot of discretion that they can exercise in this process.”
I next inquired about the remedy of suspension and debarment itself: what is the process the government would go through to reach the point where they might invoke one of the remedies? Grandon noted the key in suspension and debarment is to protect the government’s interest. This means “when information is identified within the agency that a given contractor lacks the integrity or we suspect lacks integrity to be a good business partner for the government, or if a contractor fails to perform; the action an agency will begin to develop is a record of the issues involved.” There are a variety of tools an agency will use to develop a record including coordinating resources from the acquisition community, the investigators within the agency and the suspension and debarment community, which in most cases also has a responsibility for the agencies, fraud coordination or fraud remedies program.
The basic flow begins with the information to establish whether or not there is evidence that triggers a cause for the action and if there is evidence, then the decision can be made by the Suspending and Debarring official to initiate that action. Grandon noted, “information flow leads to whether or not to initiate the action. In the case of a suspension, the focus is usually on a matter that is still being investigated, as suspension is a temporary solution.” Debarment is more permanent.
Grandon concluded by noting that suspension and debarment, while being technically different, effectively impose the same conditions on the contractor that is the subject for the action. It is that the contractor is excluded from competing for or receiving award of federal contracts, federal grants and other federal financial assistance. The remedy of suspension and debarment can be very devastating. Grandon specifically said it has been “referred to as a potential death sentence for companies that are dependent on federal dollars for their revenues.” Yet that is not the basis for a decision which is “whether or not there’s a need to protect the government’s interest.”
II-Key differences between a suspension and a debarment
Grandon noted a “suspension is to essentially take steps to protect the government’s interest from a contractor that is believed to be unsuitable as a business partner, until more of the facts can be assembled. Generally, the investigation is underway and there is a need to take protective steps before all the information has been fully gathered.” Grandon emphasized the temporary nature of a suspension while debarment is seen as more permanent, even with the limit of the term.
Procedurally, a suspension requires notice at the time that a party is entered into the exclusive parties list on the System of Acquisition Management (SAM). A notice letter is issued to the contractor advising that the government has initiated the suspension, the factual basis for the suspension and the rights and procedures available to the respondent as it relates to the suspension. The notice usually indicates the exclusion is effective immediately.
A suspension is effective throughout the Executive Branch of the Federal government and applies to procurement and non-procurement programs. A suspended party cannot present offers or be awarded new contracts or contract renewals. Further, offers will not be solicited from, contracts will not be awarded to and existing contracts will not be renewed or otherwise extended, further subcontracts requiring Government approval will not be approved for a suspended company by any agency in the Executive Branch of the Federal government, unless the head of the agency taking the contracting action or a designee states, in writing, the compelling reason for continued business dealings between you and the agency.
A suspension prevents a company from conducting business with the federal government as an agent or representative of other contractors or of participants in Federal assistance programs, nor can they act as an individual surety to other Government contractors. It also prevents any such companies from being subcontractors to approved or at least non-suspended contractors. Finally, all affiliations of a suspended entity with a company doing business will be examined.
A debarment begins with notice of a proposed debarment and again the party is put into SAM on the exclusion list. A notice is sent out at the same time advising the party that they have been excluded from federal contracting under the procurement role. Once again, a debarment is temporary, is usually three years in length and is based upon a preponderance of the evidence, usually a conviction.
Jessica Tillipman, writing in the FCPA Blog, has noted that suspension and debarment “essentially eliminate a company’s access to future government revenue, the consequences can be devastating. A company is not only excluded from future government contracts and subcontracts, it is also rendered ineligible for, among other things, federal grants, loans, and subsidies. In addition, the collateral consequences that stem from S&D can be equally, if not more, destructive. A suspended or debarred company may be precluded from contracting with state and local governments, foreign governments, or international organizations (such as the World Bank). A company may also lose its government security clearances and licenses. The reputational damage caused by the suspension or debarment may harm a company’s commercial interests as well.” Indeed, Grandon said, “It can be very devastating in many cases and it has been referred to as a potential death sentence for companies that are dependent on federal dollars for their revenues.” The bottom line is that suspension and debarment can strike fear into the heart of any federal government contractor.
Some of the reasons for a suspension or debarment can include commission of fraud, embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violating Federal criminal laws, receiving stolen property or an unfair trade practice. A basis can also be if a company fails to perform the contract and, most interestingly, if a contractor knowingly fails “to disclose violation of criminal law”.
In Part II, I will consider the convergences between suspension and debarment and the compliance practitioner.
For a deeper dive into suspension and debarment, check out the five-podcast series, sponsored by AMI, I am running this week on this site and iTunes. A new episode will post daily each day this week. However if you want to download all five episodes and binge out on them at once, they will go up on iTunes, Monday, June 4 at noon and access them by clicking here.
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© Thomas R. Fox, 2018