The federal government’s oversight for contract compliance and other factors leading to suspension and debarment of government contractors have increased dramatically over the past few years. The purpose of the regulations is to protect the government and not contractors.
Sometimes companies surprisingly get notices from the government that the company or a specific individual is being recommended for either suspension debarment. If you or your company has been suspended or proposed for debarment you must understand the process and to properly respond.
The difference between debarment and suspension of government contractors will make the difference in how you respond to each action.
FY 2016, there were 718 suspensions, 1855 proposed debarments, and 1676 debarments. By contrast, in FY 2009, there were 417 suspensions, 750 proposed debarments, and 669 debarments.
Government contractors and individuals often find out the disastrous and deadly mistakes when they respond to proposed debarment or suspension actions but fail to address the critical issues that will help the debarring official to make a favorable decision.
- Being placed on the federal debarment list is a more serious action than a suspension
- Either action can be disastrous to a company’s revenues if they can no longer do business with the government
- How you initially respond to either is completely different in substance and depth. There is a deep level of evidence and facts required by an attorney preparing a response given the impact to your business
- The preponderance of the evidence can sometimes be difficult to meet when the stress of being debarred is present
Things You Want to Do to Avoid Suspension Debarment Action Under FAR 52.209-6
The first thing you want to do is get suspension and debarment training for your staff. This is important because your employees’ day-to-day actions or failure to act can lead to either suspension or debarment. Many companies get on the hook for something that one or more its employees did.
- Whether you have provided your employees with the required training can be a substantial factor when the SDO makes a final determination
Second, you want to develop internal policies and controls. When the government recommends to suspend or debar your company, having the right internal policies and controls can be a mitigating factor and can impact the final decision.
- Always perform your due diligence on subcontractors and employees. As a prime contractor, you can be on the hook for any of their actions
For example, you should deploy a viable contractor code of conduct, contractor ethics policies, disclosure policies and rigorous consequences for improper internal behavior. Third, it is not a bad idea to conduct internal corporate investigations.
This can serve as a proactive measure and make the difference between suspension or debarment. If you are recommended for suspension or debarment actions, you must act quickly because your business’ future is at risk. Read more about Administrative Agreements During Suspension or Debarment.
Purpose of FAR 52.209-6 regulations governing federal debarment and suspension of government contractors
As a general rule, the FAR establishes contracting agencies must only contract with “responsible” contractors. In other words, when it comes to debarment and suspension of government contractors under FAR Part 9.4 and FAR 52.209 6, contractors are under greater scrutiny during the performance stage of their contracts.
Your goal is to continue to bring in business for your company. Suspension, although serious, suggests that the government recognizes that your company could quickly do certain things to get your company back on track.
When responding to both a federal debarment and suspension action, the goal is to show the debarring official that your company is a responsible contractor.
- Developing an actual proposed plan to show how you will meet the goal is always helpful.
- Getting professional help responding to either a suspension debarment action goes a long way with the government.
- The suspension and debarment statutes should not be used to punish a contractor.
- As a subcontractor, FAR 52.209 6 allows the government to reach you, although there is no privity of contract. The overall reason is to protect against contracting with non-responsible contractors.
On July 5, 2011, the Federal Government adopted a final rule that expanded the prohibition on subcontracting with suspended and debarred entities. This rule creates limitations on the acquisition of commercial items and commercial off-the-shelf items.
As a federal government contractor, you must be aware of the difference between suspension and debarment. Knowing the difference could improve your response to the debarring official and get a more favorable outcome in your case.
What is the difference between Federal Suspension and Debarment of Government Contractors?
Suspension occurs when the agency acts under Federal Acquisition Regulation FAR 9.407 (and other applicable statutes, Executive orders, and federal debarment regulations) to temporarily disqualify a contractor from doing business with the federal government.
- The is an immediate need when the government wants to suspend your company
- A temporary measure is in place; there is a twelve-month limit but can be renewed
- Suspension occurs when there is a pending investigation or legal proceedings
- Based on adequate evidence, usually an indictment.
Suspension of government contractors means that the company is prohibited from bidding on or participating in government contracting or any type of federal financial assistance awards. A suspension is effective immediately especially when the government is made aware of criminal or administrative proceedings upon which the action is based, or for 12 months or 18 months.
- Suspensions are only for a temporary period of time pending the outcome of an investigation or legal or other administrative proceedings.
- If legal proceedings are not initiated within 12 months after the date of the suspension notice, the suspension shall be terminated unless an Assistant Attorney General requests its extension, in which case it may be extended for an additional 6 months. In no event may a suspension extend beyond 18 months, unless legal proceedings have been initiated within that period.
- The suspending official shall notify the Department of Justice of the proposed termination of the suspension, at least 30 days before the 12-month period expires, to give that Department an opportunity to request an extension.
If there is a government investigation, the suspension will not last longer than 12 months, unless a prosecuting official submits a written request for an extension to the suspending official. As different from a debarment, contractor suspension may not be extended beyond an additional 6 months. In cases where a legal or administrative proceedings have been initiated, such as where an indictment has been filed or where a person has been proposed for debarment, the suspension will continue until the conclusion of those case.
A suspension action can cause a contractor to be ineligible to do business with the government for a temporary period pending the completion of an on-going agency investigation.
FAR 9.4 Federal debarment definition
The federal debarment definition, on the other hand, is when the contracting agency pushes to exclude government contractors from contracting or subcontracting with the federal government for a specified period.
- debarment of government contractors is typically for three years
- Based upon a preponderance of the evidence, usually a conviction
The period of debarment is usually three years but can be longer.
Debarment shall be for a period commensurate with the seriousness of the cause(s). Generally, debarment should not exceed 3 years, except that – (i) Debarment for violation of the provisions of 41 U.S.C. chapter 81, Drug-Free Workplace (see 23.506) may be for a period not to exceed 5 years; and(ii) Debarments under 9.406-2(b)(2) shall be for one year unless extended pursuant to paragraph (b) of this subsection.
(2) If suspension precedes a debarment, the suspension period shall be considered in determining the debarment period.
Being placed on the government debarred list under FAR 9.4 can result from a criminal conviction, being found liable for civil action, environmental violations, contract fraud, receiving stolen property, fraud embezzlement theft forgery bribery, or simply poor performance and providing false statements to the government. Learn more about the debarment process and Debarment Policy for government contractors.
Basics of the Suspension Debarment Process
- Agencies refer suspension debarment cases to the SDO for action. As stated earlier, either the contracting officer or Inspector General’s office may refer the matter for either suspension or debarment.
- After receiving notice, you or your attorney is giving an opportunity to respond.
- You should address each allegation individually and provide as much detail as possible. See how to respond to suspension and debarment notices.
- SDO makes a decision based on the referral
- You want to focus on responding with why your company should be considered responsible. Blame should not be the focus of your response.
Suspension and Debarment Clauses Incorporated into Your Contract FAR Clause 52.209-7 and FAR 52.209-6
For government contractors bidding on federal solicitations after April 22, 2010, contracting agencies must now include a new implementing FAR Clause 52.209-7) to make sure that you are presently responsible to perform the contract. This clause requires that contractors make certain disclosures (certifications). This requirement goes towards contractor responsibility.
This new clause requires vendors submitting proposals for federal contracts with an expected value over $500,000 and having more than $10 million in active contracts and grants at the time of proposal submission to report in FAPIIS certain information pertaining to criminal, civil, and administrative proceedings. According to the FAR 52.209 6 rule, bidders must include and update information in the SAMS database.
Under FAR 52.209, offerors have to report information regarding:
- Criminal Convictions.
- Administrative Proceedings.
- Civil Liability.
Both have a grave impact on your company revenues. It is no secret that if you are unfortunate enough to be recommended for suspension debarment, your company cannot do further business with the federal government. Under 2 CFR 5800.890 you may appeal your debarment decision.
- This applies to companies proposed as subcontractors (with some exceptions.)
- Learning the difference between debarment and suspension helps when you are in a tough situation.
- You want to stay away from both
FAR 52.209-6 — Protecting the Governments Interest When Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment (Language)
As prescribed in 9.409, insert the following clause:
Protecting the Government’s Interest When Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment (Oct 2015)
(a) Definition. “Commercially available off-the-shelf (COTS) item,” as used in this clause–
(1) Means any item of supply (including construction material) that is—
(i) A commercial item (as defined in paragraph (1) of the definition in FAR 2.101);
(ii) Sold in substantial quantities in the commercial marketplace; and
(iii) Offered to the Government, under a contract or subcontract at any tier, without modification, in the same form in which it is sold in the commercial marketplace; and
(2) Does not include bulk cargo, as defined in 46 U.S.C. 40102(4), such as agricultural products and petroleum products.
(b) The Government suspends or debars Contractors to protect the Government’s interests. Other than a subcontract for a commercially available off-the-shelf item, the Contractor shall not enter into any subcontract in excess of $35,000 with a Contractor that is debarred, suspended, or proposed for debarment by any executive agency unless there is a compelling reason to do so.
(c) The Contractor shall require each proposed subcontractor whose subcontract will exceed $35,000, other than a subcontractor providing a commercially available off-the-shelf item, to disclose to the Contractor, in writing, whether as of the time of award of the subcontract, the subcontractor, or its principals, is or is not debarred, suspended, or proposed for debarment by the Federal Government.
(d) A corporate officer or a designee of the Contractor shall notify the Contracting Officer, in writing, before entering into a subcontract with a party (other than a subcontractor providing a commercially available off-the-shelf item) that is debarred, suspended, or proposed for debarment (see FAR 9.404 for information on the System for Award Management (SAM) Exclusions). The notice must include the following:
(1) The name of the subcontractor.
(2) The Contractor’s knowledge of the reasons for the subcontractor being listed with an exclusion in SAM.
(3) The compelling reason(s) for doing business with the subcontractor notwithstanding its being listed with an exclusion in SAM.
(4) The systems and procedures the Contractor has established to ensure that it is fully protecting the Government’s interests when dealing with such subcontractor in view of the specific basis for the party’s debarment, suspension, or proposed debarment.
(e) Subcontracts. Unless this is a contract for the acquisition of commercial items, the Contractor shall include the requirements of this clause, including this paragraph (e) (appropriately modified for the identification of the parties), in each subcontract that—
(1) Exceed $35,000 in value; and
(2) Is not a subcontract for commercially available off-the-shelf items.
Any Options to Suspension or Debarment?
Just because the agency has recommended you for suspension or debarment, the debarment and suspension Official (SDO) may choose to take no action. Depending on the response or arguments made by your attorney, the recommendation can end up being dropped altogether. Oftentimes, the SDO may provide a request for additional information because he or she cannot make a decision based upon the current evidence.
As you can see, suspension and debarment are not all about punishing government contractors. Instead, the SDO has to make a responsibility determination. The process is more of a fact-gathering task so that the SDO can make an informed decision.
Another option that the SDA may make if to have the parties enter into an Administrative Compliance Agreement. This document serves as documentation of remedial options that the contractor can enter into. The Compliance agreement is subject to oversight, audits and may often be published.
Call Watson & Associates for help with federal suspension and debarment appeals and to speak with a FAR 9.4 debarment and suspension lawyer at 1-866=601-5518. FREE CONFIDENTIAL CONSULTATION.