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The numbers don't lie: Contractors face greater debarment-suspension risk

Two recent reports throw a bright light on the more aggressive stance agencies are taking on suspension and debarment proceedings. And contractors had better take heed.

According to a new Government Accountability Office report, suspension and debarment actions more than doubled in the past five years, from 1,836 in fiscal 2009 to 4,812 in fiscal 2013.

The GAO pulled its data from a recent report by the Interagency Suspension and Debarment Committee, which reported the same numbers. The committee was formed by an executive order signed by President Reagan in 1986.

The charts below show the steady upward climb of suspensions, proposed debarments and debarments from 2009 though 2013.

So, are contractors twice as corrupt today as they were in 2009? Not quite.

Since 2011, the Office of Management and Budget and the Interagency Suspension and Debarment Committee have been working together to improve suspension and debarment processes and efforts.

The committee has been promoting best practices and mentoring and training. Agencies also have increased staffing, better defining roles and responsibilities, and some agencies have consolidated suspension and debarment functions into one office, GAO said in its report.

So, the uptick looks like better enforcement, not worse behavior.

The committee report describes actions by multiple agencies.

For example, the Air Force has tried to enhance what the committee calls “transparency and due process” through the use of tools such as requests for information, show cause letters and terminations with conditions. A termination with conditions is an administrative agreement that allows a company to do business with the government as long its meets certain conditions.

Between fiscal 2012 and 2013, the number of show cause letters issued by the Air Force soared from 15 to 45.

The State Department created processes in 2012 to track referrals and follow-up activities. The department’s suspension and debarment office now meets quarterly with the State’s office of the inspector general.

The result: Suspension and debarment activities went from 50 in 2012 to 96 in 2013. The 50 in 2012 was more than the number of actions taken the previous three years combined, according to the committee report.

The committee told GAO that the increase they are seeing is because of more management attention from agency leadership, guidance from OMB and more support to the agencies from the committee. The committee, for example, will play a coordinator role if multiple agencies are investigating the same person or company.

OMB also directed agencies in early fiscal 2012 to appoint a senior official responsible for suspension and debarments and assess the resources available to the agency.

Interestingly, GAO is making any recommendations in this report. A 51-page report in 2011 found that the agencies evaluated didn’t have “the characteristics associated with active suspension and debarment programs.” But many of the recommendations made in that report such as assigning dedicated staffing and improving implementation guidance seem to have been successfully put in place.

So, where does that leave contractors?

The simple, straight-forward advice from Robert Tompkins, a partner with the Holland & Knight law firm, is that when you get an atypical call from the government, take it seriously and be proactive.

“There is a lot more collaboration between the various investigative and enforcement components, and the suspension and debarment offices are now part of the mix,” he said.

So, when the government calls about a potential violation, you need to act. "You want to make sure to correct any deficiencies and take a look at your operations," Tompkins said.

If internal controls or procedures need to be enhanced, do it. "The government views those actions favorably, so be an open book and be upfront and honest about what's happened, what you've done about it and what you are going to do about it," he said. "That's generally the right approach to head off a potential action."

It's deadly serious particularly for smaller companies that don't have the same resources that larger companies do.

"It can be a death sentence," Tompkins said, because a suspension or debarment cuts a company off from its customers. And even though it is a civil action, "it can be worse than a criminal fine."

Posted by Nick Wakeman on May 22, 2014 at 1:27 PM


Reader Comments

Fri, May 30, 2014 C.Poe Washington DC

I think everyone understands the need to manage the Government’s acquisition programs. Especially those of us who remember the $435 hammer and the $900 toilet seat, but when ethical, highly regarded, and honest companies like MicroTech are unjustly singled out by the Washington Post because of their amazing success while participating in a Veteran or Minority assistance program has me concerned! When the SBA takes a bigoted and bias series of article from the Washington Post that target a business owner because he is a Veteran and a Minority and uses those articles to build their case against an honest man and a great company, it’s time for us to ask ourselves if the system we have that is designed to weed out bad players has not become a McCarthyism style system that is more interested in meeting quotas, hitting targets and justifying their jobs, than finding fraud. When I read about senior officials in Veteran Affairs manipulating the system to meet their numbers and hundreds of Veterans dying because of it I think about the Agencies who seem to be targeting Veterans entrepreneurs and wonder if they are not also guilty of the same thing – falsely building up their numbers to show they are doing what they are paid to do so everyone thinks their oversight programs are running at 100%. What’s even worse is the SBA case against MicroTech they had to go back 10 years to find an error on a 100 page application that was not really an error and had a different block been checked it would not have had any impact on the outcome, so they could hit their number, cripple MicroTech, and inflict a beating on its Veteran and Minority owner without any due process. Guilty till proven innocent –and they were eventually proven innocent!

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