Examining and Dispelling Common Misconceptions about Suspension and Debarment
Contractors are well aware that being suspended or debarred renders them ineligible for federal contracts and subcontracts. Many contractors may believe that suspension and debarment are not realistic risks for them if they already have a robust ethics and compliance program or strong internal controls. Nevertheless, the risk of suspension and debarment can crop up suddenly and unexpectedly, such as when misconduct has been concealed or errors have gone undetected. For this reason, contractors should have a baseline understanding about what to do if they must engage with a Suspending and Debarring Official (“SDO”). This post explores ten common misconceptions about suspension and debarment, with the aim of helping contractors understand the landscape and respond effectively.
Common Misconception #1: We have already settled with another agency and paid a fine, so we will not be suspended or debarred.
REALITY CHECK: Many contractors that enter into settlement agreements with the government look forward to a fresh start. It can therefore come as a surprise when an SDO then sends a Show Cause Notice or a Notice of Proposed Debarment asking for an explanation of the events that led to a settlement agreement. SDOs can do this because criminal and civil settlement agreements are not binding on them. While criminal and civil settlements resolve liability for past misconduct, suspension and debarment aim to protect the government from the risk of future contracting with entities that are not presently responsible. Thus, when contractors or counsel refer to “global settlement,” this phrase typically expressly excludes suspension and debarment.
The SDO will regard a settlement agreement and payment of a fine as one factor to be weighed in deciding whether to suspend or debar. See FAR 9.406-1(a) (5) (“Before arriving at any debarment decision, the debarring official should consider such factors as the following: … (5) Whether the contractor has paid or agreed to pay all criminal, civil, and administrative liability for the improper activity, including any investigative administrative costs incurred by the government, and has made or agreed to make full restitution.”). A contractor should be prepared to demonstrate that it is presently responsible by providing a fulsome submission addressing its internal controls, ethics and compliance function, management structure, employee training, etc. Simply directing the SDO to a prior settlement agreement as evidence of present responsibility will not work.
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