DoD SUSPENSION AND DEBARMENT: PROTECTING THE GOVERNMENT AND PROMOTING CONTRACTOR RESPONSIBILITY Introduction Rodney A. Grandon Deputy General Counsel (Contractor Responsibility) Department of the Air Force As the world s largest consumer of products and services, the United States Government expects that its contractors and subcontractors will conduct themselves responsibly in their business practices. Moreover, it is the policy of the federal government that agencies shall solicit offers from, award contracts to, and consent to subcontracts with responsible contractors only. 1 Defining contractor responsibility, however, can be challenging, as it encompasses all aspects of a business enterprise, starting with the conduct of the individuals that make up a given business enterprise. While there are many factors that must be considered when examining contractor responsibility, those factors can be reduced to a few core elements: integrity, candor, and accountability. When a contractor fails on any these core elements -- when a contractor demonstrates a lack of responsibility -- the government is obligated to examine carefully whether it is in the public s interest to continue the business relationship with that entity. Suspension and debarment are discretionary administrative actions taken pursuant to the Federal Acquisition Regulation (FAR) to protect the public s interest from nonresponsible contractors. 2 Specifically, suspension and debarment are tools available to the government to ensure agencies solicit offers from, award contracts to, and consent to subcontracts with responsible contractors. 3 It is a collective obligation among federal agencies to ensure that the federal government does business with contractors that have the ability to perform the contract, as well as a satisfactory record of integrity and business ethics. 4 As the largest consumer within the United States Government, the Department of Defense (DoD) approaches this obligation most seriously. Through the suspension and debarment process DoD Suspending and Debarring Officials ( SDOs ) are vested with authority to determine that a contractor is ineligible to receive government contracts and subcontracts. 5 Suspension is a temporary, indefinite period of exclusion used when there is an immediate need to protect the government from nonresponsible contractors during an investigation or related legal proceedings. 6 Debarment is a specific term of exclusion used to protect the government from nonresponsible contractors. 7 FAR Subpart 9.4, Defense Federal Acquisition Regulation Supplement ( DFARS ) Subpart 209.4, and individual agency FAR supplements set forth the policies and procedures governing suspensions and debarments by the DoD SDOs. The author thanks Ms. Alix Schroeder, a January 2014 J.D. candidate at The George Washington University Law School, and a legal clerk in the Office of the Deputy General (Contractor Responsibility), Department of the Air Force, for her assistance in preparing this paper.
Given the severe nature of suspension and debarment, SDOs may impose these remedies only in the public interest for the government s protection, and not for purposes of punishment. 8 It is critical to recognize that not every act of misconduct by a contractor needs result in suspension or debarment, as there are many factors mitigating and aggravating that have significant impact on decisions to suspend or debar. Also, under appropriate circumstances, and in the SDO s discretion, DoD components may enter into an agreement (frequently referred to as an administrative agreement) with a contractor in lieu of suspension or debarment. 9 These agreements provide the contractor the opportunity to continue to do business with the government while it takes significant steps to improve its internal practices and controls, and while it implements or improves its ethics program. Contractor Responsibility General elements of contractor responsibility include having adequate financial resources to perform a contract; the ability to perform and deliver in accordance with the terms and conditions of a contract; a satisfactory performance record; a satisfactory record of integrity and business ethics; the necessary organization and experience to perform; and equipment and facilities necessary to perform a contract. 10 Government contracting officers consider these elements as part of every pre-award contractor responsibility determination. 11 When presented with allegations of contractor misconduct or poor performance in the context of a suspension or debarment action the notion of contractor responsibility expands to include consideration of the factors listed at FAR 9.406-1: whether the contractor had effective standards of conduct or internal controls in place at the time of the actively forming the basis for the suspension or debarment; whether the contractor timely disclosed the activity forming the basis for the action to the government; whether the contractor has fully investigated the matter and made the results available to the debarring official; whether the contractor has cooperated with the government during the investigation and legal proceedings; whether the contractor has paid or agreed to pay all criminal, civil, or administrative liability for the improper activity; whether the contractor has taken appropriate disciplinary action against the individuals responsible for the misconduct; whether the contractor has taken or agreed to take appropriate remedial measures; whether the contractor has implemented or agreed to implement new control procedures and ethics training programs; whether the contractor has had sufficient time to eliminate the circumstances in the organization that lead to the cause for debarment; and 2
whether the contractor s management recognizes and understands the seriousness of the misconduct and has implemented programs to prevent recurrence. These factors put the spotlight on three general areas: What did the contractor do to prevent the missteps before the misconduct occurred? What controls did the contractor have in place to identify the misconduct? And, how did the contractor respond once the problem was discovered? For many contractors it will be impossible to prevent acts of misconduct within their enterprise. The more critical questions for SDOs are what did the contractor do to prevent the missteps before the misconduct occurred, what controls did the contractor have in place to identify the misconduct, and how did the contractor respond once the problem was discovered? Robust contractor programs to prevent, identify, and respond to misconduct should be at the core of the business enterprise, as they go to the heart of a responsibility determination under FAR Subpart 9.4. Suspension & Debarment and DoD s Procurement Fraud Remedies Program Suspension and debarment can be effective remedies for responding to, and preventing, fraud, waste, and abuse in government contracting. Suspension and debarment, however, are only one of four available remedies. The other remedies are grouped generally as civil, criminal, and contractual remedies. All of these remedies are most effective when action is taken as quickly as circumstances permit. As it relates to suspension and debarment, delaying the initiation of the action undermines the protective nature of the remedies that is, contractors continue to compete for and to receive new contracts during the period of delay. Within the DoD, the requirement that each component have in place a robust procurement fraud remedies program greatly facilitates the need to initiate suspension and debarment as soon as circumstances permit. These DoD programs establish policies and procedures requiring the timely coordination of criminal, civil, contractual, and administrative (i.e., suspension and debarment) remedies arising from or relating to investigations of fraud or corruption. DoD Instruction 7050.05, Coordination of Remedies for Fraud and Corruption Related to Procurement Activities, mandates that each DoD component shall monitor, from its inception, all significant investigations of fraud or corruption related to procurement activities. 12 The monitoring shall ensure that all possible criminal, civil, contractual, and administrative remedies are identified... and that appropriate remedies are pursued expeditiously. 13 Moreover, when appropriate, contractual remedies or suspension and debarment should be taken before final resolution of the criminal or civil case. 14 Coordination of Procurement Fraud Remedies Expect Parallel Proceedings When misconduct is discovered, contractors should expect the government to pursue all appropriate remedies. For the practitioner, it is critical to recognize that suspension and debarment are only two of the many remedies available to the government to address contractor 3
misconduct. These remedies can be worked sequentially or concurrently. When worked concurrently, these efforts often are referred to as parallel proceedings. In most cases, the Department of Justice (DoJ) will coordinate civil and criminal remedies among the appropriate DoJ divisions and U.S. Attorney offices. Agencies have responsibility for coordinating the other remedies, and for ensuring appropriate coordination with and support for the civil and criminal cases. Fortunately, DoJ also recognizes the need to coordinate remedies, and, where appropriate, pursue parallel proceedings. In a memorandum dated January 30, 2012, the Attorney General reiterated the importance of pursuing appropriate remedies through parallel proceedings: Department policy is that criminal prosecutors and civil trial counsel should timely communicate, coordinate, and cooperate with one another and agency attorneys to the fullest extent appropriate to the case and permissible by law, whenever an alleged offense or violation of federal law gives rise to the potential for criminal, civil, regulatory, and/or agency administrative parallel (simultaneous or successive) proceedings. By working together in this way, the Department can better protect the government s interests (including deterrence of future misconduct and restoration of program integrity) and secure the full range of the government s remedies (including incarceration, fines, penalties, damages, restitution to victims, asset seizure, civil and criminal forfeiture, and exclusion and debarment). 15 Of significance, the Attorney General s memorandum notes the need for the early and appropriate coordination of remedies. 16 From the government s perspective, early coordination is critical to an effective fraud remedies response. First, the coordination of remedies among the government stakeholders allows the government to share and to take advantage of the information developed through various investigations and remedial efforts. For example, information gained through the criminal investigation and related proceedings with the exception of information protected by Rule 6(e) 17 and other information that the government must closely control to preserve the integrity of an investigation can be shared by investigators with agency SDOs and government acquisition officials. Likewise, information gained by acquisition officials and SDOs can be shared with criminal investigators, as well as the government attorneys working the criminal and civil cases. For businesses dependent on federal contracts or other federal funding sources, this coordinated government response presents a potential dilemma. Perhaps the greatest challenge facing contractors is determining the degree to which the contractor will cooperate with the government during investigations or court proceedings. This can be particularly challenging when the contractor is responding to several concurrent activities, including suspension or debarment. The SDO will insist on transparency, candor, and full cooperation from the contractor. Moreover, in determining whether suspension or debarment is 4
necessary to protect the government s interest the SDO will consider factors called out in FAR 9.406, including: (1) whether the contractor brought the activity cited as a cause for debarment to the attention of the appropriate government agency in a timely manner; (2) whether the contractor has fully investigated the circumstances surrounding the cause for debarment and, if so, made the result of the investigation available to the debarring official; and (3) whether the contractor cooperated fully with government agencies during the investigation and any court or administrative action. 18 The contractor must expect that information provided to the SDO will, in turn, be shared with investigators, as well as those government officials working the civil, criminal, or contractual remedies. Conversely, contractors should also expect that the SDO s office will be kept abreast of most developments in the civil or criminal cases. The other significant government benefit arising from early coordination of remedies at least from the procuring agency s perspective is the opportunity to recover dollars the procuring activity can use to correct defective products or compensate for unacceptable contract performance. Agencies are increasingly driven by a desire to achieve procurement fraud remedies particularly dollar recoveries within the applicable federal fiscal law timeframes so that the money may be used by the contract or program impacted by the misconduct. Simply stated, appropriations used to fund products or services generally have limited availability, after which the funds close, and unobligated balances revert back to the U.S. Treasury. 19 Accordingly, for fiscal law purposes, recoveries of amounts paid under a contract tainted by misconduct constitute refunds that may be deposited to the credit of the appropriations charged with the payments only until the appropriation account is closed, at which point the recoveries are deposited to the U.S. Treasury. 20 Because of these appropriation life cycle concerns, agencies increasingly are pushing for early civil and contractual recoveries so that funds may be channeled back to specific contracts and programs adversely impacted by the underlying contractor conduct. This, in turn, will likely expand the number of cases involving parallel proceedings. What does this mean for the practitioner? For the government practitioner, it requires legal counsel to recognize the multiple internal and external stakeholders (e.g., acquisition officials, agency leadership, inspector general offices, investigators, DoJ lawyers, U.S. Attorney offices, and SDOs), and the range of remedies available in a given situation. Practitioners should expect agencies to move expeditiously to coordinate and pursue appropriate remedial measures. This means that agencies are not likely to wait for indictments or convictions before beginning to pursue remedies. Rather, agencies are likely to move as quickly as the evidence and the circumstances permit, particularly as it relates to protecting the public s interest through a suspension or proposed debarment. Private counsel and industry also must recognize the multiple stakeholders, the range of potential remedies, and the increasing pressure on agencies to achieve appropriate remedies as early as possible and within applicable fiscal law limitations. Accordingly, given the intense pressure on the government to move out quickly on parallel remedial paths when programs are impacted by 5
procurement fraud, counsel must consider carefully concurrent engagement with all known government stakeholders. As with their government colleagues, this may include acquisition officials, agency leadership, inspector general offices, investigators, DoJ lawyers, U.S. Attorney offices, and SDOs. Present Responsibility Determinations As noted at the outset, suspension and debarment are tools available to the government to ensure agencies solicit offers from, award contracts to, and consent to subcontracts with responsible contractors. Suspension. SDOs may suspend a contractor to protect the public s interest based on adequate evidence of the commission of specified crimes or other specified misconduct, or the commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a contractor or subcontractor, even where the conduct is unrelated to a government contract (e.g., a matter involving violation of the Foreign Corrupt Practices Act). 21 Indictment for any of the specified causes constitutes adequate evidence for suspension. 22 SDOs may also suspend a contractor upon adequate evidence of any other cause of so serious or compelling a nature that it affects the present responsibility of a contractor or subcontractor. As a general notion, adequate evidence is analogous to probable cause. A suspension is for a temporary, indefinite period, pending the completion of legal proceedings (including appeals) or the government s investigation of the allegations. 23 The suspension may not exceed one year, however, unless (i) the contractor has been indicted, or (ii) the Department of Justice requests an extension for an additional 6 month period so as to enable the completion of the investigation. 24 Debarment. SDOs may propose contractors for debarment or debar contractors based on a conviction or civil judgment for specified crimes and other misconduct. 25 SDOs may also debar contractors based upon a preponderance of the evidence for specified conduct, including willful or repeated violations of the terms of a government contract or subcontract, 26 and for any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor. 27 Debarments shall be for a period commensurate with the seriousness of the underlying causes, but generally, in the absence of a stated exception, should not exceed three years. 28 If suspension precedes a debarment, the suspension period shall be considered in determining the debarment period. 29 Vicarious Liability. In addition to taking action against contractors directly involved in the misconduct, the government can suspend or debar those affiliated with and employed by contractors. 30 Following a determination that a contractor has engaged in actionable misconduct, the SDO may also suspend or debar an affiliate of that contractor, if the affiliate is given notice and an opportunity to respond. 31 Generally, persons and entities are affiliates of each other if either have the power to control the other, or a third party has the power to control both. 32 6
Indicia of control include interlocking management or ownership, identity of interests among family members, shared facilities and equipment, common use of employees, or a business entity organized following the suspension, debarment or proposed debarment of a contractor which has the same or similar management, ownership, or principal employees as the ineligible contractor. 33 An SDO can suspend or debar a person or entity even if the person or entity has not directly committed any misconduct or is not an affiliate of the wrongdoer, based on the imputation to them of the actionable misconduct of others. 34 The fraudulent, criminal, or other seriously improper conduct of any officer, director, shareholder, partner, employee, or other individual associated with the contractor may be imputed to the contractor when the conduct occurred in connection with the individual s performance of duties for or on behalf of the contractor, or with the contractor s knowledge, approval, or acquiescence. 35 Conversely, the fraudulent, criminal, or seriously improper conduct of a contractor may be imputed to any officer, director, shareholder, partner, employee, or other individual associated with the contractor who participated in, knew of, or had reason to know of the contractor s misconduct. 36 Compelling Reason Determination. Contractors debarred, suspended, or proposed for debarment are excluded from receiving contracts, and federal agencies shall not solicit offers from, award contracts to, or consent to subcontracts with the contractors, unless the agency head determines there is a compelling reason for such action. 37 This prohibition extends to placing orders exceeding guaranteed minimum quantities under indefinite delivery, indefinite quantity contracts; placing orders under the Federal Supply Schedule contracts, blanket purchase agreements, or basic ordering agreements; or adding new work, exercising options, or otherwise extending the duration of current contracts or orders unless the agency head determines there is a compelling reason for such action. 38 Federal agencies may enter into new contracts with contractors, even after they are debarred or suspended, if a determination is made that there is a compelling reason to do so. 39 If the property or service is available only from the suspended or debarred contractor, or if the urgency of the requirement dictates use of the suspended or debarred contractor, a factual basis exists for a compelling reason determination. For example, an agency would be able to obtain widgets from Company A even after its debarment, if widgets are critical to the government mission, and there are no other sources of the specific widgets reasonably available in time to meet the government s requirement. Note, however, agencies rarely use a compelling need determination to override a suspension or debarment. Suspension and Debarment Considerations for the Practitioner As noted, suspension and debarment are discretionary actions. It is the SDO s responsibility to determine whether taking action is necessary to protect the government s interest. The existence of a cause for suspension or debarment is not necessarily dispositive. The SDO must consider 7
the seriousness of the contractor s misconduct and any remedial measures or mitigating factors in making his/her decision. 40 The discretionary nature of the process provides an opportunity for a contractor that has discovered a situation within its organization that may implicate its present responsibility to engage early with the appropriate SDO. Early engagement will help the contractor demonstrate many of the factors called out at FAR 9.406-1, especially the factor that considers whether the contractor brought the activity to the attention of the government in a timely manner. Early engagement also will provide an opportunity for the contractor to shape its message, so long as the contractor approaches the SDO honestly and candidly. Early contractor engagement will help eliminate the surprise element. SDOs generally do not want to discover alleged contractor misconduct through news articles. The spotlight public revelations create tends to produce a reactive environment that generally does not provide the contractor or SDO the time or the opportunity until after suspension or debarment actions are initiated to understand the nature of the alleged misconduct, or the steps the contractor had in place to prevent or identify the activity, or how the contractor responded to the incident. All communications with the SDO must be based on open, honest dialogue. Equally important, contractors must avoid a confrontational tone or elusive approach with the SDO. First, such an approach would be at odds with the factors set forth at FAR 9.406-1. Second, this attitude does little to establish that the contractor understands the situation and is willing to accept responsibility for corrective action. It is critical for the contractor to recognize that its response to the alleged misconduct is, in many cases, more important to establishing its present responsibility than disproving or minimizing the alleged misconduct. Initiating the action. Suspensions and debarments generally can be described as being either judicial-based actions (i.e., based solely on an indictment, a criminal conviction, or a civil judgment), or fact-based actions requiring either adequate evidence to support a suspension, or a preponderance of the evidence to support a debarment. Once sufficient evidence is obtained clearing the evidentiary standard required to support either a suspension or debarment, a recommendation to pursue an action, along with supporting evidentiary documentation, is referred to the SDO for consideration. The documentary evidence considered by the SDO constitutes the administrative record. The record generally starts with rather one-sided information developed by the government team recommending the action, but expands as information is presented by the contractor and government stakeholders over the course of the proceeding. Agencies will provide respondents with a copy of the administrative record, 41 but respondents are not entitled to conduct discovery. 42 This holds true even if the respondent files suit in federal district court seeking review of the SDO s decision under the Administrative Procedures Act. 43 The court s review is limited to the administrative record considered by the SDO. 44 Once the SDO determines there is sufficient evidence to support the action, the SDO sends a notice to the contractor thereby initiating the action. Among other requirements, the SDO s notice must advise the contractor of the action being considered, the reasons for the action in 8
terms sufficient to put the contractor on notice of the conduct upon which the action is based, the effects of the suspension or debarment, and the contractor s opportunity to respond to the action. 45 The contractor s name is then posted onto the System for Award Management (SAM) website (www.sam.gov), signifying the person s immediate ineligibility for new contracts. 46 Presentation of matters in opposition. Within 30 days after receipt of the notice, the contractor (often referred to as this point as respondent ) may submit in person or in writing (or both), directly or through a representative, information and argument in opposition to the action. 47 As a practical matter, many SDOs encourage respondents to submit a written response in opposition before conducting a meeting, as having the written submission before the meeting allows for a more informed and productive meeting between the respondent and SDO. Most SDOs will insist on a full and complete disclosure of the circumstances underlying the alleged misconduct, including copies of reports of internal investigations and the identification of all persons involved in the alleged wrongdoing. 48 All documents submitted by the respondent will be included in the administrative record. In any response to the SDO the respondent should make sure that it provides input directly from senior company officials. After all, those officials should be in the best position to address matters pertaining to the company s present responsibility. They should be on top of matters relating to steps taken by the respondent to prevent and to identify the circumstances that led to the action, as well as the company s response to the incident. It does little good for a company s outside counsel to present these matters without the participation of senior company officials, unless the factual assertions presented by counsel are supported by declarations from appropriate company officials. Respondents should expect the SDO to distribute its written submission to the government proponents of the suspension or debarment action, to include the government lawyer(s) handling the action, the contracting officer, and/or the investigator(s) familiar with the proposed action. Likewise, respondents should expect that for in-person presentations the SDO typically will invite the government proponents of the underlying action to the meeting. Respondents should not assume that the government will capture and include in the administrative record information presented during an in-person meeting that the respondent deems critical. Respondents must ensure that critical information introduced during an in-person meeting is reduced to writing and made part of the administrative record in a subsequent written submission to the SDO. Rather than contest the facts alleged in the notice of the suspension or proposed debarment, many contractors choose to focus their submissions on their present responsibility. Such an approach can be effective, particularly where the contractor had robust controls and programs in place to prevent, detect, and respond to the misconduct; where there is no dispute as to the underlying misconduct; or where several years have elapsed between the date of the actionable misconduct and the initiation of the suspension/debarment action. If the misconduct forming the 9
basis for the cause of the suspension or debarment is proven or not in dispute, it is critical to recognize that it is the contractor s burden to demonstrate present responsibility. 49 Fact finding. In actions based on an indictment, conviction or civil judgment, disputes involving the underlying facts raised by the contractor in its submissions will not raise a genuine dispute of material fact, because such judicial actions provide sufficient bases for suspensions and debarments. 50 In a fact-based action, however, if the SDO decides the respondent has raised a genuine dispute of material fact as to each independent basis for a suspension or proposed debarment, then the SDO may conduct, or refer the matter to another official to conduct, a factfinding proceeding and to make findings of fact. 51 The government is obligated to reduce those findings of fact to writing and make the findings part of the administrative record. The SDO must base his/her decision using the findings of fact. In these fact-finding proceedings the respondent shall be given the opportunity to appear with counsel, submit documentary evidence, present witnesses, and confront any person the agency presents. 52 The agency also must prepare a transcript of the proceeding and make a copy of the transcript available to the respondent. 53 SDO Decisions. The FAR contemplates that the SDO will decide a given matter within 30 working days after receipt of information and argument submitted by the respondent. 54 The SDO, however, may extend this period for good cause. 55 In many cases the SDO will extend the period to permit the government and respondent to comment on information submitted by the opposing side. Once that process is completed, the SDO will close the record. After the administrative record is closed, the SDO must determine whether the facts initially alleged in the notice of suspension or notice of proposed debarment continue to meet the required evidentiary standard in light of the information provided by the respondent. If the facts no longer provide adequate evidence supporting a cause for a suspension, or no longer establish a basis for debarment by a preponderance of the evidence, the SDO must terminate the suspension or proposed debarment. If the SDO determines that actionable misconduct did occur and the contractor failed to meet its burden of demonstrating its present responsibility, the SDO will debar or suspend the contractor. If, on the other hand, the contractor proves it is presently responsible through appropriate remedial measures and mitigating factors, notwithstanding the underlying misconduct, the SDO likely will terminate the action. Administrative Agreements Under appropriate circumstances, notwithstanding the conclusion that a contractor is not presently responsible, an SDO may decide suspension/debarment is not necessary to protect the public s interest, provided the contractor is willing to enter into an administrative agreement. 56 Administrative agreements, signed by the SDO and the contractor, generally have a three-year term. The agreements incorporate remedial measures taken, or to be taken, by the contractor which led to the SDO s willingness to enter into the agreement, and require the contractor to prepare and submit audits and periodically provide reports to the SDO to verify compliance. 57 So 10
long as the contractor satisfies the terms of the agreement, the contractor establishes its present responsibility. The contractor acknowledges in the agreement that any violation of the agreement evidences lack of responsibility, and may form a new (and immediate) basis for debarment. The parties should seek to tailor each administrative agreement to address the specific circumstances that led to the underlying action. The terms of the agreement should serve at least one of two general objectives: helping the contractor to implement appropriate controls, practices, and programs to establish responsibility, or providing necessary information to the government to facilitate appropriate oversight of the contractor s efforts. Some of the provisions typically used in the agreements include: requiring the contractor to engage an outside consultant (approved by the SDO) to perform reviews of the contractor s internal controls and ethics programs and to provide those reviews directly to the SDO and to the contractor; requiring the contractor to audit and report its efforts to implement appropriate controls, practices, and programs, to include ethics programs; requiring the contractor to provide periodic summaries of calls to the contractor s Hotline, and measures taken by management in response to such calls; requiring the contractor to describe all ethics and compliance training conducted during specified reporting periods; and requiring the contractor to report all known fraud related litigation and investigations, as well as all known misconduct, regardless of whether it is the subject of litigation or investigation. Conclusion Suspension and debarment are powerful remedies available to the government to respond to contractor misconduct, particularly when exercised within the context of a robust agency procurement fraud remedies program. Contractors should recognize, however, that not every misstep will cost them their opportunity to conduct business with the federal government. SDO s exercise independent discretion to suspend, debar, or to engage in any number of remedies, as appropriate. That discretion is important. For many contractors it will be impossible to prevent every act of misconduct within their operations. Accordingly, while evidence of the alleged misconduct has a significant bearing on whether to suspend or debar, the more critical questions for SDOs are: what did the contractor do to prevent the missteps before the misconduct occurred; what controls did the contractor have in place to identify the misconduct; and how did the contractor respond once the problem was discovered? Robust programs to prevent, identify, and respond to misconduct must be at the core of the contractor s business enterprise, as they go to the heart of a responsibility determination under FAR Subpart 9.4, along with honesty and candor to the customer. When problems arise, the contractor should consider carefully the factors set forth at FAR 9.406-1(a), as well as early, frequent, and candid 11
engagement with the appropriate SDO to establish its present responsibility to be a government contractor. 1 FAR 9.402(a). 2 See FAR 9.402. 3 Id. Contractor is defined as any individual or legal entity that (1) directly or indirectly submits offers for or is awarded, or reasonably may be expected to submit offers for or be awarded, a government contract, or a subcontract under a government contract; or (2) conducts business, or reasonably may be expected to conduct business, with the government as an agent or representative of another contractor. FAR 9.403. 4 This discussion is limited to the application of suspension and debarment in the DoD procurement context. See FAR Subpart 9.4. In accordance with Public Law 103-355, Section 2455 (31 U.S.C. 6101, note), and Executive Order 12689, any debarment, suspension or other government-wide exclusion initiated under the Nonprocurement Common Rule implementing Executive Order 12549 on or after August 25, 1995, shall be recognized by and effective for Executive Branch agencies as a debarment or suspension under FAR Subpart 9.4. Similarly, any debarment, suspension, proposed debarment or other government-wide exclusion initiated on or after August 25, 1995, under FAR Subpart 9.4 shall also be recognized by and effective for those agencies and participants as an exclusion under the Nonprocurement Common Rule. FAR 9.401. 5 See Defense Federal Acquisition Regulation Supplement (DFARS) 209.403 for a list of DoD SDOs. 6 FAR 9.407-4. 7 FAR 9.406-4. 8 FAR 9.402(b). 9 FAR 9.406-3(f); DFARS 209.406-1(a). 10 FAR 9.104. 11 FAR 9.103(b). 12 DoDI 7050.05, para. 4.1. 13 Id. 14 DoDI 7050.05, para. 4.3. 15 Memorandum, Office of the Attorney General, Coordination of Parallel Criminal, Civil, Regulatory, and Administrative Proceedings (January 30, 2012). 16 Id. 17 Fed. R. Crim. P. 6(e) (prohibition against disclosing matters occurring before a grand jury). 18 FAR 9.406-1(a). 19 31 U.S.C. 1552(a). 20 GAO, Principles of Federal Appropriations Law, 3 rd (January 2004), pp. 5-79 80. 21 FAR 9.407-2(a). 22 FAR 9.407-2(b). 23 FAR 9.407-4(a). 24 FAR 9.407-4(b). 25 FAR 9.406-2(a). 26 FAR 9.406-2(b). 27 FAR 9.406-2(c). 28 FAR 9.406-4(a). DoD SDOs have debarred contractors for much shorter periods than three years, based upon a showing of mitigating circumstances, and for decades based upon findings of egregious or repeated misconduct. 29 FAR 9.406-4(a)(2). 30 FAR 9.406-1(b); FAR 9.407-1(c). 31 Id. 32 FAR 9.403. 33 Id. 34 FAR 9.406-5; FAR 9.407-5. 35 FAR 9.406-5(a); FAR 9.407-5. 36 FAR 9.406-5(b); FAR 9.407-5. 37 FAR 9.405(a). 38 FAR 9.405-1(b). 39 FAR 9.405(a). 12
40 FAR 9.406-1(a). 41 DFARS App. H-101: A copy of the record which formed the basis for the decision by the debarring and suspending official will be made available to the contractor. If there is a reason to withhold from the contractor any portion of the record, the contractor will be informed of what is withheld and the reasons for such withholding. 42 See Commercial Drapery Contractors, Inc. v. United States, 133 F.3d 1, 7 (D.C. Cir. 1998). 43 Administrative Procedures Act, 5 U.S.C. 551, et seq. Claims that an SDO s decision are arbitrary, capricious, and in violation of federal regulations and statutes are reviewed under the Administrative Procedures Act, see 5 U.S.C. 706(2)(A), (B), which limits review to the administrative record... except when there has been a strong showing of bad faith or improper behavior or when the record is so bare that it prevents effective judicial review. Commercial Drapery Contractors, at 7, citing, Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 420 (1971); Community for Creative Non-Violence v. Lujan, 908 F.2d 992, 997-98 (D.C. Cir. 1990). 44 Commercial Drapery Contractors, 133 F.3d at 7. 45 FAR 9.406-3(c); FAR 9.407-3(c). 46 The exclusion is immediate; it is not dependent on receipt of notice or any other events. 47 FAR 9.406-3(c)(4); FAR 9.407-(c)(5). 48 See FAR 9.406-1(a)(2). SDO s should consider whether the contractor has fully investigated the circumstances surrounding the cause for debarment and, if so, made the result of the investigation available to the debarring official. As a matter of advocacy, the report of internal investigation provided to the SDO should be the one drafted for management. A sanitized copy prepared for the government will be less persuasive. 49 FAR 9.406-1(a); FAR 9.407-1(b)(2). 50 FAR 9.406-3(b)(2) & (d); 9.407-2(b). 51 FAR 9.406-3(d)(2)(i); FAR 9.407-3(d)(2)(i). 52 FAR 9.406-3(b)(2); FAR 9.407-3(b)(2). 53 Id. 54 FAR 9.406-3(d)(1). 55 Id. 56 DFARS 209.406-1(a). 57 Id. 13