Government contractors shouldn’t be celebrating that the number of suspensions and debarments dropped in fiscal 2015.

While it’s good news that agencies used a tool that many procurement attorneys call “capital punishment for contractors” slightly less last year, what really stands out in the annual report from the Interagency Suspension and Debarment Committee is why the numbers went down.

Source: Interagency Suspension and Debarment Committee’s fiscal 2015 report to Congress.

The real telling number is the 30 percent increase in the use of “show cause” or investigative letters as well as a 25 percent increase in the use of administrative agreements.

Rob Burton, a former Office of Federal Procurement Policy deputy administrator and now an attorney with Crowell & Moring in Washington, said the 30 percent increase in the use of “show cause” is an important change because too often suspension and debarment punish contractors before the trial, basically causing a “guilty until proven innocent” scenario.

“This shows agencies are using best practice to use ‘show cause’ notices and let the contractor respond prior to a suspension and notice of proposed debarment,” he said. “I’ve always thought the lack of due process is a problem when agencies move right to suspension and proposed debarment.”

Dave Nadler, a partner with Blank Rome, offered a related observation of why there is an increase in the use “show cause” letters.

He said the overall decrease in suspension and debarment numbers can be attributed to efforts over the past few years by the interagency committee to train agencies on how to use these tools.

“The ISDC has been working to establish more robust S&D programs and accompanying processes to enhance efficiency and effectiveness at the agency levels,” Nadler said. “In fact, prior to these efforts in the past few years, many agencies lacked the appropriate sophistication to evaluate matters or even lacked a program at all. Having established stronger groundwork, it is not surprising to see a decrease in S&D numbers in 2015 as a result of enhanced training initiatives, more defined and proactive processes and more opportunities for alleged contractors to propose less drastic alternatives to suspension or debarment.”

Nadler said the training to create more robust suspension and debarment processes benefits government and industry equally.

First, agencies improve efficiency and can focus on more serious violations by contractors.

Second, industry now has the opportunity to take “responsibility earlier and potentially avoid the repercussion and stigma of a suspension or debarment, especially when the matter under review may pose less risk to the government and is one that can resolved without formal action and still allow the contractor to perform for the government.”

Burton said the improved dialogue between agencies and contractors remains the most important missing link in the entire procurement process.

He said the government and industry can avoid bid protests, misunderstandings that can lead to False Claims Act lawsuits and suspension or debarment.

Burton, however, warned that the Justice Department remains aggressive in using these tools, and with the upcoming final Federal Acquisition Regulations rule from the Labor Department to implement the Fair Pay and Safe Workplace Executive Order, more challenges are on horizon.

“The thing that struck me is that Labor had no suspensions or debarments in 2012, 2013, 2014 or 2015. That strikes me as odd given the President’s Exec Order on Fair Pay and Safe Workplaces where one of the concerns was to protect the government from contractors who violate labor rules through S&D process,” he said. “If this was serious problem, it strikes me odd that Labor has not taken any S&D action for the last four years. It also raises the question with respect to the President’s EO about the need for other agencies to take S&D actions when Labor hasn’t felt the need to do that. I think it’s rather telling.”

While Labor hasn’t taken any action, the Department of Housing and Urban Development suspended the most contractors (170) across the government last year with the Army second at 137. Five agencies didn’t suspend any contractors, including the departments of Commerce and Treasury, and the Social Security Administration.

The Army debarred the most contractors with 456, while the Homeland Security Department and HUD each debarred more than 240 in 2015.

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