Stan Soloway

COMMENTARY

Due process for contractors under attack

Too many call for debarment before all facts are known

Stan Soloway (soloway@pscouncil.org) is president and CEO of the Professional Services Council.

I have what is proving to be the increasingly quaint notion that things such as due process and fairness matter. Unfortunately, others disagree and are seeking to change laws in ways that are unfair and poorly thought out.

Specifically, the Commission on Wartime Contracting recommends altering suspension and debarment standards to require that a company be “proposed for debarment” — which means, by definition, the company is immediately prevented from obtaining new contracts — if the company is ever indicted. Last I checked, indictments, though serious, are not convictions. That is tantamount to declaring guilt before all facts are known.

Contrary to the assertion that an indictment is, as one advocate put it, “a pretty good indication” of an unethical corporate culture, it also might well mean nothing of the sort. As such, the immediate, presumptive imposition of such a major penalty violates the most basic presumption of law and fairness even in government contracts.

The commission is not alone in making such proposals. A few months ago, Sen. Bernie Sanders (I-Vt.) excoriated the Defense Department for awarding contracts to companies that, in recent years, had paid administrative fines for a range of violations. The senator did not assess which, if any, cases involved clear and consistent patterns of abuse. Nor did he assess the companies’ responses to the incidents or the relative severity of the violations that led to the fines. Yet all of those factors matter.

To some extent, the disconnect is based in a fundamental misunderstanding of the role and purpose of suspension and debarment. Contrary to popular belief, suspension and debarment are not designed to punish companies for wrongdoing. As explicitly stated in the Federal Acquisition Regulation, they serve as a tool for the government to use when the government determines that a company does not have adequate internal controls and processes to ensure that it can act responsibly and ethically in performing government contracts.

The existence of an indictment or allegation is only one early indicator of potential problems. But it's equally important to consider the severity of an allegation, whether it reflects a broad corporate culture or is reflective of aberrant behavior by an individual or limited group, and whether the company has responded appropriately to the incident. After all, no matter how much emphasis an institution places on ethical business behavior, no one can guarantee that an employee will never violate the law. That’s why the institution’s response to problems is as important as the problem itself.

And that’s what makes the proposed revisions so disturbing. They would require the immediate suspension of a company before the legal process has played out and before appropriate government officials can evaluate answers to other important questions. However short in duration, suspension is significant, costly and, on some levels, indelible.

To its credit, the Obama administration strongly pushed back against the commission’s proposal. Dan Gordon, the administrator of the Office of Federal Procurement Policy, correctly explained to the commission the real purpose of suspension and debarment and expressed the administration’s view that, overall, the processes work as intended, although improvements can and will be made.

All of this comes at a time when many inside and outside government are concerned about a growing tendency to suspend or debar first and dig deeper second. That’s why we would do well to step back from the brink and reassess this trend and the commission’s proposal. Serious questions and concern should arise when legislative proposals gain traction, even when they contradict some of the most basic tenets on which our nation’s legal system was built.

Reader Comments

Tue, Sep 27, 2011 Stan Jenkins Morgantown, West Virginia

Debarment actions are never punitive by definition, and the United States Supreme Court agrees. In Hudson vs The United States (118 S.Ct. 488 (1997)), Rehnquist states "First, neither money penalties nor debarment have historically been viewed as punishment. We have long recognized that [p. 496] "revocation of a privilege voluntarily granted," such as a debarment, "is characteristically free of the punitive criminal element." Helvering, 303 U.S., at 399, and n. 2, 58 S.Ct., at 633 n. 2. Similarly, "the payment of fixed or variable sums of
money [is a] sanction which ha[s] been recognized as enforcable by civil proceedings since the original
revenue law of 1789." Id., at 400, 58 S.Ct., at 633..." The Supreme Court also recognized that federal agencies are the legal administrators of the debarment process: "That such authority was conferred upon administrative agencies is prima facie evidence that Congress intended to provide for a civil sanction. See Helvering, supra, at 402, 58 S.Ct., at 634-635; United States v. Spector, 343 U.S. 169, 178, 72 S.Ct. 591, 596-597, 96 L.Ed. 863 (1952)..."

Thu, Apr 7, 2011 Federal Joe Washington DC

As a Federal employee I am insulted by the contention that "when contractors truly misbehave there is usually a federal manager who failed," as claimed by the March 31 comment. This person, obviously a contractor, provides no evidence. To be polite, he and his ilk are a major part of the problem.

Thu, Mar 31, 2011 PSC Fan's Friend Washington area

To the commenter so chicken hearted he could not even use an alias: One can really love your claim that "when contractors truly misbehave there is usually a federal manager who has failed." Why that's the olde "the-devil-made-me-do-it" and a limp attempt to shed accountability and shun responsibility. And you even want to be able to bid and perform and ignore what another part of your company did. Remember that corporations are in many respects people before the law, and also that bad ethics and lawbreaking tendencies can cut clear across a company. Look at some of our healthcare enterprises that treat multihundred million dollar settlements a cost of doing business that they can budget for. A number of rogue companies come to mind in the contracting biz. . Your way of thinking, chickenhearted contractor, can not pass the smell test, a contracting officer's finding that your firm is responsible and not conflicted, nor withstand a whole lot of compliance checking and law enforcement surveillance. You give the contracting biz a bad name just by showing up.

Thu, Mar 31, 2011

PSC Fan, You are the problem. Thanks for demonstrating it. Firstly, what part of due process do you not understand? You note that the law is so silly that effective action takes too long. So you support a new law that takes a chainsaw through the other mass of tangled law. This is just more messy lawmaking. It is not a solution. Additionally, you ignore that when contractors truly misbehave there is usually a federal manager who failed. And just because Bob Smith from company X might have misbehaved, should another part of the company serving across the federal government in another agency should be effected? Does this really serve the taxpayer? See how we have let the law get in the way of justice?

Thu, Mar 31, 2011

Mr. Soloway is too nice to Congress and their unelected and often ignorant aides. Both in this attack on the contracting community and the federal workforce they take rash action to give folks the impression that they are heroically slaying the dragon. In fact they don't care if they are solving any problem, so long as they fool people into believing them. Congress will take no serious action against the nation's real ill - catostrophic debt burden driven mainly by entitlements. This is because there is no honest leadership in the entire institution. COngress will be the end of the United States in my childrens' lifetime. It was the great flaw in the Constitution.

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