Federal government contractors may believe debarment, which precludes a business entity or individual from federal contracting or receiving grants, loans, or other forms of government assistance for a defined period of time, is not a realistic risk if they have a strong compliance program already in place, provide an indispensible product or service to the government, or are a lower tiered subcontractor or supplier. However, the reality is that debarment can crop up and carries harsh consequences for anyfederal contractor.
These are five tips and takeaways for contractors facing a debarment:
Debarment is the government’s tool for protecting itself against fraud, waste, and abuse in federal contracting. Debarment is based on the circumstances and factors relevant to each case, and is usually for a three year term. During the debarment term, offers will not be solicited from, contracts will not be awarded to, and existing contracts will not be renewed or otherwise extended for a debarred contractor, and a debarred contractor may not conduct business with the Federal government as an agent or representative of other contractors.
Debarment is an administrative procedure, and Federal Acquisition Regulation (FAR) 9.406-2 and OMB’s guidelines, 2 C.F.R. § 180.800, outline the possible bases for debarment. These bases include criminal convictions or civil judgments relating to fraud, embezzlement, theft, bribery, antitrust violations, and tax evasion, but are not limited to concrete offenses; both sections have a catch-all for “any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor.” (FAR 9.406-2(c)).
The debarment process begins with a referral to a Suspending and Debarring Official (SDO) from the lead government agency, which is often the federal agency with which the contractor does the most business or which administers the contract at issue. However, if the basis for debarment is a statutory or regulatory violation, the federal agency overseeing compliance with the law will be the lead (e.g.,the Department of Labor adjudicates debarments based on violations of labor laws such as the Service Contract Act (SCA)).
After the referral, the SDO formally notifies a contractor through a written Notice of Proposed Debarment which alerts the contractor to the specific basis for the proposed debarment. A contractor should carefully read the Notice of Proposed Debarment and any cited FAR provisions referenced in the Notice. The contractor will then have 30 days to submit information to the SDO in opposition to the proposed debarment, or any mitigating evidence or information, so it is important not to sit on the notice, and to consider contacting an attorney as soon as possible. Information a contractor submits in opposition or mitigation will become part of the record for consideration by the SDO. Any response should be tailored to address the specific basis for debarment – the notice and applicable FAR provision provide the ideal framework.
Debarment is designed to exclude federal government contractor entities deemed presently irresponsible. It is not, and cannot, be used as a punishment for prior bad acts. This is an important distinction when responding to the SDO and Notice of Proposed Debarment. A contractor should focus its response in opposition or mitigation around its present responsibility. In other words, a contractor may choose to address the past if appropriate, but should emphasize its current ability to serve the federal government and any remedial measures it has taken to ensure future compliance.
This is not the time to sit back and let the agency investigators dictate the story for the SDO. Agovernment contractor has the burden of demonstrating its present responsibility, and will not be granted any presumptions about its conduct or performance. A submission in opposition to proposed debarment is the contractor’s opportunity to supplement the record to create the full picture. In crafting a response, the contractor should act as a private investigator and submit a robust response to the SDO – dig for mitigating facts that might persuade the government to not go ahead with the proposed debarment, create a record with evidentiary support (as opposed to making unsupported assertions).
Any response or communication with the SDO should not be highly adversarial. A contractor that behaves in a hostile and uncooperative manner toward the SDO may end up reinforcing the idea that the contractor is a difficult business partner for the government. Businesses that are forthcoming with government investigators often fare better before SDOs than ones that are defensive.Craft a persuasive argument supported by facts without being overly aggressive.
If you have been issued a Notice of Proposed Debarment and would like advice on how to navigate the administrative process or legal representation to oppose the Notice, contact the Federal Practice Group for a consultation at www.fedpractice.com.
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