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Inside the World's Biggest Buyer
The federal government takes more than $1 trillion per year to operate, with nearly half of its operating budget spent on the acquisition of goods and services. Congress, executive branch political leadership and career federal managers all agree — federal acquisition needs to be a lot more efficient and effective. Federal News Radio's week-long special report, Inside the World's Biggest Buyer, takes a look at acquisition from every perspective: agency, industry, workforce, oversight, and suspension and debarment.
Suspension and debarments rise amid pressure from Congress
Thursday - 6/14/2012, 5:49am EDT
For years, Congress has pressed federal agencies to employ the suspension and debarment process more often to weed out irresponsible contractors. For good or ill, federal statistics strongly suggest agencies are listening.
While sheer numbers may not be the best way to gauge the effectiveness of suspension and debarment, the rate at which agencies have been using the tool in recent years does tell a story: In 2010, the most recent year that governmentwide statistics are available through the Interagency Suspension and Debarment Committee, agencies took 4,200 suspension, debarment and proposed debarment actions, compared with 2,700 in 2009.
In the Defense Department, which provided data to Federal News Radio for 2011 and which accounts for about 70 percent of all government contracting dollars, the trend continued. The military departments and the Defense Logistics Agency took 1,525 actions to bar contractors from government business last year, compared to 1,398 the year before and 1,024 in 2009.
Angela Styles, partner, Crowell and Moring
"We've had a very significant increase in the number of companies and individuals we've been representing in suspension and debarment matters," said Angela Styles, a partner at the law firm Crowell and Moring who also leads the firm's government contracts practice. "We used to have three or four in a year. We probably have 10 or 15 a year now."
Styles said pressure from Congress to increase the use of suspension and debarment is a factor. Also, she said, agencies seem to be using the very broad discretion they have under the federal acquisition regulation (FAR) to a much greater degree. Most companies, she said, used to have to worry about being suspended or disbarred only if they committed misconduct that was directly related to a federal contract. That's no longer the case.
"Suspension and debarment officials really do consider now that they have much greater breadth," she said.
Beyond the black and white
While the FAR spells out several black-and-white circumstances in which agencies can bar a given vendor from future work with the government, it also includes a catch-all provision that gives agencies an extremely wide berth: "any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor" can be grounds for debarment.
While "present responsibility" lies in the eyes of the beholder, Styles said in most cases, companies tend to avoid being placed on the government's excluded parties list if they discuss problems early with their agency suspension and debarment officials, show that they are responsible contractors and present a detailed plan to avoid future problems.
In addition, she said, agencies with mature suspension and debarment programs, including the Defense Department, the Environmental Protection Agency and the General Services Administration, almost always treat companies fairly.
But the push from Capitol Hill to suspend and debar more contractors has caused agencies that don't have a lot of experience in the area to push forward anyway, she said.
"There's a number of agencies that have only suspended or debarred companies under pressure from Congress even though they hadn't suspended or debarred any company in several years," she said. "They didn't understand what the processes were, and there are examples where these agencies put companies out of business. That's not the purpose of the rules."
Not a penalty for misconduct
Under federal law, suspension and debarment in procurement cases can't be used as a penalty for misconduct, whether real or perceived. Its only purpose is to protect the government against potentially unscrupulous contractors.
Nonetheless, experts both inside and outside of government agree that fact is widely misunderstood.
Steven Shaw, deputy general counsel for contractor responsibility, Air Force
"A lot of people think debarment is punishment," said Steven Shaw, the Air Force's deputy general counsel for contractor responsibility. "There are some on the Hill that feel that way as well. It's not punishment. Punishment is great, and it's an important goal. But it's a goal for the Justice Department. It's not a goal of the procurement system."
The Air Force is routinely near the top of government lists in terms of raw numbers of suspensions and debarments. Shaw said that's partly due to the fact that he is one of only three suspension and debarment officials in government that works on the issue full time. He and his staff don't wait for complaints about contractors to flow into their inbox. Instead, they proactively look for signs that it's time to exclude a certain vendor from government work.
"We look at the types of misconduct more broadly than some agencies do," he said. "For example, the Federal Acquisition Regulation says that if there's an indictment or a conviction, that's sufficient as a matter of law to establish a debarment or a suspension. So debarring officials who are concerned about being sued or are concerned about the quality of their staff or whatever might wait to do a debarment or suspension until there's a conviction or an indictment. We don't do it that way in the Air Force. We go out and look aggressively and look at the facts and the underlying evidence. Seventy percent of the cases we do are based on an independent review of the evidence where the Justice Department hasn't done anything yet."
But Shaw said what's more important than the numbers of suspensions and debarments his office issues is the preventative steps it takes, such as routinely visiting contractors to help them build ethics procedures and compliance programs designed to help them avoid misconduct.
Companies that take those steps, he said, are less likely to be immediately barred from government business when a potential issue pops up.
"We favor those kinds of contractors. If there's a contractor that I'm aware of that has a good ethical reputation, I'm much more likely to send out a show-cause letter than a suspension or a proposed debarment in the first instance, because I trust them to do the investigation and to be honest with me," he said.
Excluded parties list system
While suspension, debarment and proposed debarment all accompany different legal standards and serve different purposes for the government, the effect on contractors is the same in each case: they're immediately placed on government's excluded parties list system (EPLS) and generally can't get any new government contracts or task orders until they're taken off by the agency that put them there. States, local governments and even private lenders monitor the publicly- accessible system as well to monitor for shady vendors and potential credit risks.
But that last category, "notices of proposed debarment," presents serious problems for the due process rights of contractors, according to some attorneys who represent government vendors.
"You could go home today and open your mailbox and get a letter that says you've been proposed for debarment. The impact of that is you can't do business with anyone in the federal government as of right now," said Rob Burton, a former official in the Office of Federal Procurement Policy who is now a partner at the Venable law firm. "You have not had the opportunity to present any information to the government. You have not had the opportunity to defend yourself in any way. But the ultimate result is debarment until the process is completed and a final determination is made as to your present responsibility. And it could be a long 'until.' These government folks are busy."
Shaw said courts have upheld the practice, and his office does send out notices of proposed debarment without discussing the matter with a vendor ahead of time. But he said he shares Burton's concern.
"And because of that, we're extremely aggressive about getting to the bottom of these cases very quickly," he said. "The timing on these is really driven by the contractor. There are several cases I can think of right now where we've taken a contractor off of the list within two days because they've come to us with a good story about remedial measures. We look at this very quickly."
Normand Lussier, the associate general counsel for contractor responsibility at the Defense Logistics Agency, is also not persuaded by industry complaints about the fairness of the proposed debarment process.
"Someone who says that this is the first time they've heard of a problem is being somewhat disingenuous," he said. "The reason we would issue a notice of proposed debarment is because they've had a history of poor performance. Most companies know when they've delivered the wrong item over a series of contracts."
DLA is also a huge user of the government's suspension and debarment process. Its numbers were second only to the Army in fiscal year 2011. Lussier said that's partially a result of the fact that DLA does a whole lot of contracting. It buys all of the military's spare parts, all of DoD's fuel and all of its depot-level repairable items. That adds up to 10,000 contracts each day.
"Congress and the American taxpayer, quite rightly, don't want to spend the public's money with contractors who have engaged in misconduct or who are delivering the wrong item over and over again. It's embarrassing, and it's wrong." Lussier said. "There are lots of very good, reliable, legitimate businesses who deliver the right items. So we should avoid those who don't."
Lingering effect of suspension and debarment
But private attorneys say they're seeing more and more suspension and debarment cases that hinge on actions that have nothing to do with current government contracts.
Fred Levy, a partner at the firm McKenna, Long and Aldridge and who co-chairs the American Bar Association's Committee on Debarment and Suspension said he, like Styles, is representing more clients who were suspended or debarred because of issues having nothing to do with procurement.
Fred Levy, partner, McKenna, Long and Aldridge
And sometimes because of issues that took place long ago.
"I've had situations where a company was suspended based on events that happened several years earlier," he said. "Unbeknownst to the suspension and debarment official involved, the company had totally cleaned house. All of the offending employees were gone, all of the officers were gone, even many of the board members were changed over. It was an entirely new company that's implemented extensive ethics and compliance measures. And a year and a half after making all of those changes, they found themselves suspended."
Among the experts interviewed by Federal News Radio on the topic of suspension and debarment both inside and outside of government, one common point is agreed upon: legislative provisions that automatically suspend contractors and take away agencies' discretion are a bad idea.
Several such provisions were inserted by Congress into the 2012 appropriations bills that took effect in January, automatically barring companies and individuals from government work if they were convicted of any criminal offense in the past two years. To get past those particular prohibitions, contractors must prove themselves individually to the suspension and debarment official of any agency they want to do business with.
That's a divergence from the federal government's usual suspension and debarment process in which a "lead agency" takes charge of whether or not a given vendor should be blacklisted for a given period of time.
"It flips what's in place right now," the Air Force's Shaw said. "What's in place right now enables the debarring official to make that determination in advance and with their own discretion. The more we work toward these automatic exclusions, the more difficult it is to fight fraud."
Levy said many agencies aren't sure how they're supposed to follow the new processes, which only applies to certain agencies and varies depending on which slice of the federal appropriations pie went into a given contract.
He said in one recent case, an agency errantly debarred his client because it shared the same name with a company that had accepted a guilty plea to an environmental violation.
"This agency misunderstood, overreached and just said 'company X' can't get work with the government," he said. "This company was in a position of having to almost furlough workers until the fifth agency they had to deal with finally made a determination that it was OK for them to get government work. This has real, practical effects to people who have no involvement with any wrongdoing."
A second legislative proposal that the contracting industry opposed would have automatically suspended contractors who were accused by the government of criminal violations.
On Wednesday, when Sens. Claire McCaskill (D-Mo.), Jim Webb (D-Va.) and several co-sponsors reintroduced their wartime contracting reform bill, that provision was toned down. Aides said lawmakers wanted to make sure the anti-fraud provisions were as strong as possible without hurting the government's mission in contingency operations. Under the revised bill, indicted contractors would be required to go before a suspension and debarment official for consideration, but would not be automatically suspended.