Suspension & Debarment
PRESENTED BY
Jon Devore
Christine V. Williams
Birch Horton Bittner & Cherot
Washington, D.C.
jdevore@dc.bhb.com
Davis Wright Tremaine
Anchorage, AK
christinewilliams@dwt.com
February 3, 2015
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Presentation Overview

Can this happen to me? Yes! Causes of Suspension & Debarment

What does this mean? Impact of Suspension & Debarment

What is going on? Process of Suspension & Debarment

What can I do? Practice Tips for Prevention & Response
Disclaimer:
This presentation is not offering legal advice and is not intended to account for the particular situation of any recipient
of the presentation.
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Can this Happen to Me?
Causes of Suspension & Debarment
3
Overview:

Why are government contractors suspended or debarred?


Government contractors can be suspended and debarred from government contracting by
agencies for a variety of causes, including ethics violations, conflicts of interests, and other violations.
Small Business-Specific Grounds: In addition to all traditional grounds, Small Businesses are
subject to additional grounds for debarment/suspension.


E.g. Violations of the False Claims Act

Traditional: Invoices for services/products not provided

Small Business: False certifications re: SBA program eligibility and size
Small Businesses – Misrepresentations of firm’s status: SBA may suspend or debar firms for
misrepresenting their size status or status as 8(a), SDVO SBC, EDWOSB, WOSB, or HUBZone concerns.
There are also potential civil and criminal penalties.
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Can this Happen to Me?
Causes of Suspension

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Causes for Suspension: Indictment or adequate evidence of the following:

Commission of fraud or criminal offense re: obtaining, attempting to obtain, or performing a public contract
or subcontract.

Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false
statements, tax evasion, violating Federal criminal tax laws, or receiving stolen property.

Violations of Drug-Free Workplace Act*

Commission of offense indicating lack of business integrity

Failure to disclose: Knowing failure by a principal, within 3 years after final payment on any Government
contract, to timely disclose credible evidence of:


a. Violation of Federal criminal law involving fraud, conflict of interests, bribery, or gratuity violations found in Title 18 of
the United States Code;

b. Violation of the civil False Claims Act; or

c. Significant overpayment(s) on the contract.
Others: unfair trade practices, “Made in America” fraud, indication of present non-responsibility, delinquent
Federal taxes (greater than $3,000)**, antitrust violations re: submission of proposals.
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Can this Happen to Me?
Causes of Debarment

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Causes for Debarment: Conviction or civil judgment of the following:

Commission of fraud or criminal offense re: obtaining, attempting to obtain, or performing a public
contract or subcontract.

Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making
false statements, tax evasion, violating Federal criminal tax laws, or receiving stolen property.

Violation of Federal or state antitrust statutes, including those relating to submission of offers;

Intentionally affixing a label bearing “Made in America” to a product sold in or shipped to the U.S.,
when the product was not made in the U.S.; or

Commission of any other offense indicating a lack of business integrity or business honesty that
seriously and directly affects the respondent’s present responsibility.
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Can this Happen to Me?
Causes of Debarment

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Causes for Debarment: Preponderance of the evidence for any of the following:

Violation of the terms of a Government contract, subcontract, or public agreement so serious as to justify debarment, such as:

Willful failure to perform in accordance with the terms of a contract; or

A history of failure to perform, or of unsatisfactory performance of a contract;

Certain violations of the Drug-Free Workplace Act

Failure to disclose: Knowing failure by a principal, within 3 years after final payment on any Government
contract, to timely disclose credible evidence of:


a. Violation of Federal criminal law involving fraud, conflict of interests, bribery, or gratuity violations found in Title 18 of the
United States Code;

b. Violation of the civil False Claims Act; or

c. Significant overpayment(s) on the contract.
Others: “Made in America” fraud, unfair trade practices, delinquent Federal taxes (> $3,000)
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Can this Happen to Me?
Causes of Debarment

Causes for Debarment: Preponderance of the evidence for any of the
following: (continued)

Non-compliance with Immigration and Nationality Act employment
provisions (determination by Secretary of Homeland Security or the
Attorney General of the United States).

Catch-all for Responsibility: any other cause so serious or compelling in
nature that it affects the present responsibility of the entity/person.
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What does this mean?
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Consequences of Suspension & Debarment: Overview

Debarment Official often has Significant Discretion, but the level of discretion depends on the
violation

Some violations carry mandatory debarment penalties.


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E.g. Wage & Hour – violations of the Service Contract Act and Davis-Bacon Act carry mandatory 3-year debarment
unless you can prove that unusual circumstances exist to escape punishment.
There is increasing political pressure to increase the number of violations subject to mandatory debarments
and the frequency of suspensions and debarments generally for violations.
Take-away: Contractors should respond promptly and comprehensively to any notices regarding
suspension or debarment to ensure the decision-maker has a comprehensive record.
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What does this mean?
Consequences of Suspension & Debarment: Overview

What does it mean to be suspended or debarred? Past, Present and Future Contracts Will Be
Impacted!

Contractors debarred, suspended, or proposed for debarment are excluded from:


receiving contracts, and agencies shall not solicit offers from, award contracts to, or consent to
subcontracts with these contractors, unless the agency head determines that there is a compelling reason
for such action;

conducting business with the Government as agents or representatives of other contractors; and

acting as individual sureties.
Agencies shall not solicit offers from, award contracts to, or consent to subcontracts with these
contractors.

Exception: Proposals, quotations, or offers received from any listed contractor shall not be evaluated for
award or included in the competitive range, nor shall discussions be conducted with a listed offeror during
a period of ineligibility, unless the agency head determines, in writing, that there is a compelling reason to
do so.
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What does this mean?
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Consequences of Suspension & Debarment: Overview

GSA operates the web-based Excluded Parties List System (EPLS)

EPLS includes information on all contractors debarred, suspended, proposed for debarment, declared
ineligible, or excluded or disqualified under the non-procurement common rule.

Contractors included in EPLS have been declared ineligible on the basis of statutory or other regulatory
procedures.

Practice Tip: Use the EPLS searches to verify that potential subcontractors, business partners, and
potential employees (especially principals) are not suspended or debarred.

Other consequences for violations

Fines and financial penalties

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Note: Financial risk is high for small contractors following a 2010 law providing that, if a company incorrectly certifies as
“small” for a federal contract, it can be forced to repay the government total value of the contract, plus damages.
Jail time
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What does this mean?
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Consequences of Suspension


Suspension Overview

Suspension may be imposed on a contractor to protect the public interest for any of the causes outlined in
FAR 9.407-2.

The rules for suspension procedures and impact are very similar to those for debarment. As in debarments,
affiliates of the suspended contractor may also be suspended.
Period of Suspension
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Suspension is Temporary


Imposed for a temporary period pending the completion of the investigation and legal proceedings, unless the
suspending official terminates the suspension.
How long can suspension last?

Often imposed for 6 months, while debarments often total 3 years.

If legal proceedings are not initiated within 12 months after the date of the suspension notice, the suspension will be
terminated unless the Assistant Attorney General requests an extension.

Cannot last longer than 18 months total.
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What does this mean?
Consequences of Debarment
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Impact of Debarment
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Termination of Contracts and Loss of Opportunity for Future Contracts in Proposal Pipeline

Scope of Debarment: If a contractor is debarred or proposed for debarment, it is effective throughout
the executive branch of the Government, unless the agency head or a designee states in writing the
compelling reasons justifying continued business dealings between that agency and the contractor.

Exception: 9.406(c) lists one exception: (23.506(e)), relating to Drug-free workplaces:

A determination under this section to suspend contract payments, terminate a contract for default, or debar or
suspend a contractor may be waived by the agency head for a particular contract, in accordance with agency
procedures, only if such waiver is necessary to prevent a severe disruption of the agency operation to the
detriment of the Federal Government or the general public (see Subpart 9.4). The waiver authority of the agency
head cannot be delegated.
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What does this mean?
Consequences of Debarment
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
General Rule: Debarment constitutes debarment of all divisions or other
organizational elements of the contractor, unless the debarment decision is limited
by its terms to specific divisions, organizational elements, or commodities.

Impact on Affiliates
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The debarring official may extend the debarment decision to include any affiliates of the
contractor if they are specifically named and are given written notice of the proposed
debarment and an opportunity to respond.

Control: Persons are affiliates of each other if, directly or indirectly, either one controls or
has the power to control the other or a third person controls or has the power to control
both.**
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What does this mean?
Consequences of Debarment
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Period of Debarment
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The debarment period will be “commensurate with the seriousness of the causes for debarment.”

Generally, debarments should not exceed 3 years.

Debarments for violations of the Drug-Free Workplace Act of 1988 cannot exceed 5 years, and debarments for
noncompliance with Immigration and Nationality Act employment provisions will be for one year unless they are
extended under the exception in 9.406-4(b).

Suspension periods preceding debarments will also be considered in determining the debarment period.

Discretion of Debarring Official:

The debarring official can extend debarment periods if the extension is “necessary to protect the Government’s
interest.”

The debarring official may also reduce or extend the period of debarment, upon the contractor’s request, supported
by documentation, for reasons such as: newly discovered material evidence; reversal of the conviction or civil
judgment upon which the debarment was based; bona fide change in ownership or management; elimination of
other causes for which the debarment was imposed; or other reasons the debarring official deems appropriate.
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What’s going on?
Suspension & Debarment Process
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What is the Process of Suspension & Debarment?

Overview
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Request for Consideration
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Analysis of Request for Consideration
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Decision-Making Process for Action
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Rejection of Referral Memo, Show Cause Letter, Issue Notice of Suspension, or Notice of Debarment
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Presentation of Matters in Opposition
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Fact-Finding Proceeding
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Administrative Record

Final Decision
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What’s going on?
Suspension & Debarment Process
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
Request for Consideration: COs, program managers, or other authorized persons notify the S&D
Coordinator during or subsequent to execution or performance of a contract where there are
indications of fraud or other grounds.

Analysis of Request for Consideration: S&D Coordinator prepares analysis and recommendation
(with assistance as needed from OGC, OIG, others) for SDO.


If adequate evidence to warrant further consideration by SDO, coordinator contacts Interagency
Suspension and Debarment Committee (ISDC) to request or coordinate lead agency status.
Decision Making Process: SDO must do one of the following:
1.
Reject the Referral Memo
2.
Issue a Show Cause Letter
3.
Issue a Notice of Suspension
4.
Issue a Notice of Debarment
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What’s going on?
Suspension & Debarment Process

If Agency Issues Notice of Suspension or Notice of Debarment…

Presentation of Matters in Opposition
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
NOTE: A suspension is usually imposed prior to notifying the entity/person and giving them an opportunity to
contest the suspension.

Contractor Response: 30 days unless SDO specifies otherwise.

Timeframe: Upon receipt of the notice, the contractor has 30 days to respond to the Suspension/Debarment Notice

Format of Response: Contractor may respond by submitting a response in person, in writing, or through a representative

Content: What must the response include?
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Information and argument in opposition to the suspension, including any additional specific information that raises a genuine dispute over the
material facts.
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Fact-Finding Proceeding – informal evidentiary hearing that only applies in some situations.

Administrative Record

Final Decision – based on all of the information in the Administrative Record, including any Respondent
submissions.
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What’s going on?
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Suspension & Debarment Decisions & Considerations
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The Decision:
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The suspending official will issue a decision based on the record.

Outcomes of Suspension/Debarment Notices Vary

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Take this step seriously, since the deciding official has discretion to:
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modify the terms of suspension/debarment (time, scope, etc.),

terminate the suspension/debarment, or

leave the suspension/debarment in force.
Potential for Settlement

The contractor may also enter into an administrative agreement with the Government to resolve the matter.
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What’s going on?
Suspension & Debarment Decisions & Considerations
Spotlight: The Decision: Should/Will the Government Debar the Contractor?

Considerations:

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The debarment official must determine whether debarment is in the Government’s interest,
because the existence of a cause for debarment does not necessarily require that the
contractor be debarred.
“The debarment official may, in the public interest, debar a contractor for any of
the causes in 9.406-2,” and his determination should consider:

the seriousness of the contractor’s acts or omissions,

remedial measures, and

mitigating factors.
Practice Tip: Ensure that your Contractor Response highlights why NOT debarring
your company/personnel is NOT in the best interests of the Government. If it is not in
the “public interest” to debar the contractor, the debarment official may not
debar.
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What can I do?
Practice Tips: How to Avoid Suspension & Debarment
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Prevention: Prevent Problems from Arising
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Self-Review - Regularly review your contractor compliance processes

Training - Institute regular training to keep staff updated on new requirements

Independent Audits - Consider independent audits or internal program analysis to find
problems/weaknesses before they impact government contracts
Attention: Prompt and Serious Attention to Suspension/Debarment Notices

Take government response deadlines seriously

Try to get suspension/debarment terminated by decision-maker

Get your house in order ASAP (and make a record of it)
Capitulation, Mitigation, and Negotiation

Once suspended or debarred, start working to fix all of the concerns raised by the Government

Document your actions to create a record for reinstatement
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What can I do?
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Practice Tips: What to consider after receiving a Notice
of Suspension or Debarment

Practice Tips: After receiving a Notice of Suspension or Notice of Debarment, the contractor
should:

Review the Notice: Carefully review the notice for the causes, reasons for suspension/debarment, and
other pertinent information.

Timely Respond: Provide a timely, written response to the allegations, highlight areas of material fact
discrepancies, and describe any actions taken/to be taken by the contractor to mitigate or correct
any problem areas.

Consider Alternative Outcomes: Consider striking an administrative agreement with the Government,
which may allow the contractor to avoid the delays and costs of the legal proceeding and would
provide a good vehicle for incorporating any corrective measures suggested by the Government.

Reach Out: Contact the suspending official to request that the suspension/debarment be cut short if
the contractor can provide any new information or evidence that the alleged violations have been
resolved. Reach out to contacts and resources to prepare your response – attorneys, mentors,
implicated affiliates, etc.
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What can I do?
Practice Tips: Crafting your Response
Practice Tips:


Goal of Contractor Response: The goal of your response is to persuade the Government that they
are better off with you than without you. This requires two major tasks:

Convince the Government that your company has made, makes, and/or will make valuable and unique
contributions through federal contracts.

Convince the Government that you have corrected the problem, and the Government is not at risk of
reoccurrence or negative consequences.
Remember your audience: In short, no whining! You are a government contractor.

Suspension or debarment will negatively impact your bottom line. Unless there is a public interest reason
to mention this, DON’T.

For example: Don’t mention your loss in profits, do mention specific negative economic impacts on jobs,
communities, government program resources, etc. if they are persuasive.

However, the focus should be on the solution, i.e. how you have/will fix the problem, mitigate any negative impacts
on the Government, and prevent it from reoccurring in the future.
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What can I do?
Practice Tips: Crafting your Response
Practice Tips:
Your response should address, at minimum, the following:

Highlight Unique Contributions of Contractor: Interests of the Government being served by Contractor’s continued
performance and eligibility – i.e. if the Government debarred the Contractor, what specific negative impact would
that have on the Government?

Current contract performance interruptions

Future contracts – proposals for new contracts that the Government would not be at liberty to consider

Discuss negative impacts such as relative loss of competition, experts, experience, and potential higher costs to the
Government with other contractors/loss of competition

Take responsibility: Address the serious nature of the act/omission leading to Government’s concerns.

Be proactive: Discuss remedial measures that the Government may benefit from and any mitigating factors
relevant to the situation. These could include: quick internal response of Contractor to define and correct the
issue, specific actions taken to prevent similar problems in the future (changes in policy, procedure, additional
personnel, training, etc.)

Protect Affiliates: Where affiliates are named and noticed, Contractor should show why debarment official should
limit any debarment actions to one entity and NOT its affiliates to avoid spill-over of negative consequences to
corporate family members and/or business partners.
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What can I do?
Best Practices in Subcontracting
Government Requires Contractors to Exercise Due Diligence in Hiring Subcontractors

Duty to Disclose: FAR requires any proposed subcontractor of $30,000 or more to disclose to the Contractor
whether at the time of award of the subcontract, the subcontractor or its principals are debarred, suspended, or
proposed for debarment.

Risk of Contract Termination, or Suspension & Debarment: Executing a contract with a debarred subcontractor
could prompt the Government to terminate the prime Contractor for default, and the Government could take
additional action against the prime, such as suspension or debarment.

NOTE: While not advisable in most situations, Contractors may hire debarred/suspended contractors without
risking the prime contract by providing the CO specified notice PRIOR to executing the subcontract.
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What can I do?
Practice Tips: Careful Subcontracting
Practice Tips:

Before executing any government subcontract, Contractor should search the GSA’s EPLS database
for the subcontractor, names of its owners, and top officers.

Contractor should require government subcontractors to certify, in writing, that the subcontractor
has not been suspended or debarred.

Certification is important, because:

EPLS may not updated or the search may be imperfect (different name spellings)

If subcontractor falsely certifies, Contractor can terminate the subcontract for default and may be able to
recover damages.

If Contractor followed due diligence and subcontractor falsely certified, Government may go easier on the
prime Contractor because the subcontractor’s false certification — not Contractor’s failure to follow the
FAR — was the primary reason that an ineligible company received the subcontract work.
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Questions?
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