Push for more suspension, debarments receives mixed reactions

Procurement experts say the increased use of this punishment is the \"death penalty\" for the vendors. Lawmakers say agencies need penalize bad actors more aggr...

The push by Congress and the administration for agencies to be more aggressive in suspending and debarring contractors isn’t just another piece in the effort to increase oversight of federal acquisition.

In fact, some say it’s a further sign of the “criminalization” of procurement.

Bill Shook, a federal procurement expert and a lawyer with Shook-Doran, said the memos and hearings on suspension and debarment is the latest signal from the government to vendors that they should not even think about stepping off the legal line. He said it’s having a detrimental effect on the federal acquisition environment.

Bill Shook, lawyer, Shook-Doran (Shook Doran LLP)
“You have to realize suspension and debarment is capital punishment for government contractors,” Shook said. “If you have committed an offense or have an employee make a mistakes, there is no middle ground — either you are suspended or debarred or nothing happens. The government has always been able to use that to threaten contractors to correct what they perceive to be as inappropriate actions. There is no doubt there are contractors who want to abuse the system and take advantage of the procurement process, but they are in the small minority. We go in cycles with government contracting where we make easier to do business with the government and now we are in the cycle of making it extremely difficult and risky.”

New OFPP guidance

Suspension and debarment has been a hot topic as of late. The Office of Management and Budget issued new guidance Tuesday requiring agencies to take specific steps over the next year. The Senate Homeland Security and Governmental Affairs Committee held a hearing Wednesday on this topic as well.

Sen. Susan Collins (R-Maine) expressed frustration over how little agencies are suspending and debarring vendors who break the law. She said agency reluctance to use suspension and debarment isn’t new. When she was a staff member for former Sen. Bill Cohen (R-Maine) in 1981, she helped with a similar hearing then.

Sen. Susan Collins (R-Maine)
“Today there is even less excuse than ever given the new tools available to agencies,” Collins said at the hearing. “One such tool is the Excluded Parties List, which allows for a real-time listing of all contractors who have been suspended or debarred. This GAO report must be a wakeup call to agencies who are failing to protect the interests of taxpayers.”

This was the second hearing this summer. The House Oversight and Government Reform Committee conducted a similar discussion in July.

Additionally the Government Accountability Office and the Interagency Suspension and Debarment Committee issued separate reports on agency use of these tools.

Hostile environment

All of that action, Shook says, is creating a hostile environment during a time when the Office of Federal Procurement Policy is trying to implement the Mythbusters campaign to create more collaboration between industry and government.

“By threatening people with suspension and debarment, the government is creating an atmosphere where no one trusts anyone,” he said. “What I’m concerned about is you will get increased number of suspension notices regarding disputes about contract performance rather than taking it to the courts for proper resolution. We will take breach of contract and turn it into capital punishment. The government will use this to remedy contract disputes and not contract misconduct.”

Joe Hornyak, a partner with the law firm with Holland and Knight and a federal acquisition expert, said the criminalization of procurement isn’t new.

“For many, many years it’s been the case that something that might be an ordinary contract dispute if it were in the commercial world, can actually be a criminal action in the government world,” he said. “What we see now is just more aggressive enforcement by the government, more efforts to uncover those kinds of actions and use the weapons that the government has in its arsenal whether it’s criminal prosecution or civil prosecution for damages or a suspension or debarment.”

Joe Hornyak, partner, Holland and Knight (Holland & Knight)
Hornyak said the increased oversight comes from a decade long increase in contracting and grant making. Agencies award more than $500 billion in contracts and $600 billion in grants the government awards annually.

“The increasing trend over the last few years is toward a more focus on compliance,” Hornyak said. “There are more enforcement actions with suspension and debarment being the death penalty of the various weapons agencies have. It scares the heck out of contractors.”

Over the last decade, several high profile suspensions and debarments have occurred, including two units of Boeing, which lasted almost two years, IBM in 2008, GTSI in 2010 and Iron Bow just a few weeks ago.

But beyond those high profile cases, GAO found many agencies are not using the suspension and debarment process.

OMB’s new memo is trying to change that by requiring new compliance from agencies. OFPP mandates agencies assign a senior official to be accountable for suspension and debarment, improving internal policies and procedures and more training for contracting officers and other acquisition folks.

Legislation needed?

Dan Gordon, the out-going OFPP administrator, said his office will release further guidance and is meeting with agencies regularly.

OFPP also will consider whether the suspension and debarment office needs to be separate from the contracting shop. Gordon said the Federal Acquisition Institute and the Defense Acquisition University are working together to improve training around suspension and debarment.

At the hearing, Collins and Sen. Joseph Lieberman (I-Conn.), chairman of the committee, asked if legislation was necessary to require more use of suspension and debarment.

Gordon said he didn’t think a new law was necessary because agencies had all the tools they needed, and it’s just a matter of better training.

If lawmakers decide to introduce a bill, Gordon said the administration would like to review the draft.

“I think that is something we should take a look at because it is discouraging to see such uneven progress over the years,” Collins said.

Lieberman said he agreed with Collins to see if additional legislation is necessary.

“The implementation of existing law is critical important,” he said. “We will not let this one go. We intend to continue active oversight.”


Agencies more aggressive in suspending, debarring contractors

GAO: Agencies need more policing of contractors

OMB busting contract myths

Agencies cut improper payments by $18 billion

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