Suspensions and Debarments of Government Contractors Increase

Last year Congress and the Office of Management and Budget pushed federal agencies to become more aggressive about suspending and debarring contractors.  In October of 2011, a Government Accountability Office report found that six agencies had not suspended or debarred a single contractor from FY 2006 through FY 2010.  GAO recommended that these agencies assign more personnel to suspension and debarment programs and develop guidance to implement debarment policies.  A House Oversight subcommittee hearing that same month criticized agencies for failing to suspend or debar contractors that had engaged in misconduct.  In November the OMB issued a memo directing agencies to take action to invigorate their suspension and debarment programs.

New data show that the agencies are responding -- the number of suspensions and debarments has increased markedly.  The number of active cases on the Excluded Party List System (EPLS) jumped by 1,493 between May and June 2012, increasing faster than at any time in the last year and a half.  Another large increase occurred from July 2012 to August 2012.

It appears that part of the increase in reported cases is due to agencies retroactively placing companies and individuals on the EPLS that should have been listed before but, through error or oversight, were not.  These retroactive listings raise questions about the validity of contracts awarded to companies while they were not yet listed on the EPLS.  Similar questions arise with respect to companies that hired executives subsequently placed on the EPLS, because the employment of such individuals normally would disqualify the company from receiving government contracts.  These retroactive debarment problems will need to be resolved on a case-by-case basis.

Government contractors must pay careful attention to the increased risk of suspension or debarment.  A criminal conviction of a company or one of its executives is likely to trigger a debarment.  Further, agencies are becoming more aggressive about sanctioning contractors for alleged misconduct that does not result in a criminal charge or conviction.  Accordingly, contractors that encounter any allegations (internal or external) of misconduct by their employees need to consider a proactive response geared to assuring the government that they are "presently responsible" and should not be excluded from contracting.