Suspension and Debarment

With every new administration, there is both great uncertainty and opportunity in federal government contracting. To help you navigate the rough seas of doing business with the federal government in this new administration, we have assembled nationally recognized practitioners who will cover topics relevant to government contractors large and small, novice and seasoned. Session topics include:
– Ten Things Every Contractor Needs to Know When Doing Business with the Federal Government
James F. Nagle | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Writing a Winning Technical Proposal – From the Contracting Officer’s Perspective
Mona Carlson, Mary Jo Juarez | PTAC Kitsap Economic Dvlpmnt. Alliance – Navy Contracting Officer (retired) | Kitsap, WA
 
– Keys to Winning Bid Protests and Defending Contract Awards
Adam K. Lasky | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Navigating the Complex Rules Governing Data Rights
Jonathan M. Baker | Crowell & Moring LLP | Washington D.C.
 
– Overlooked Risks of Being a Lower-Tier Government Contractor
Alan C. Rither | Pacific Northwest National Laboratory | Richland, WA
 
– Mistakes to Avoid in the Claims and Litigation Process
Donald G. Featherstun | Seyfarth Shaw LLP | San Francisco, CA
 
– Adapting to Buy American and Domestic Preference Rules in the Trump Administration
Howard W. Roth | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Understanding & Managing the Risk of Suspension & Debarment
Dominique L. Casimir | Arnold & Porter Kaye Scholler LLP | Washington D.C.

Thursday, November 16th 

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Last month, we wrote about the House passing a resolution (H.J. Res. 37) pursuant to the Congressional Review Act to repeal the Fair Pay and Safe Workplaces rule (commonly known as the contractor “Blacklisting” rule). At the time we predicted the resolution would also pass the Senate and be signed by President Trump. On March 6, 2017, the Senate passed the joint resolution, and joint resolution was signed by President Trump yesterday, permanently nullifying the Blacklisting rule before it ever took effect. Continue Reading President Trump Signs H.J. Res. 37 Canceling the Fair Pay and Safe Workplaces (“Blacklisting”) Rule

logo-titleBack in October 2016, we wrote about the Fair Pay and Safe Workplaces rule (commonly known as the contractor “Blacklisting” rule) and how its implementation had been temporarily halted by a federal court in Texas.  The Blacklisting rule would have allowed agencies to essentially debar contractors on a contract-by-contract basis if a contractor had a labor law violation on its record.  Many in the contracting community lobbied hard against this rule, arguing (among other things) that the Blacklisting rule would put contractors at risk of inconsistent disqualification from procurements without the same due process rights that go along with agency suspension and debarment programs.  Well, it now looks like Congress has decided to step in and flex a rarely used law to get rid of the Blacklisting rule for good.

Today, by a vote of 236-187, the House of Representatives passed a disapproval resolution pursuant to the Congressional Review Act to repeal the Blacklisting rule.   Continue Reading House Votes to Repeal the Fair Pay and Safe Workplaces (“Blacklisting”) Rule

Last week we discussed the FY2014 Interagency Suspension and Debarment Committee Report released in April, and discussed how the data in that report is compiled. This week we are breaking down the numbers in the report.  FY 2014 saw an increase in overall numbers of suspensions, proposed debarments, and debarments. There was 5,179 total actions in FY 2014, up from 4,842 in FY 2013, an increase of approximately 7%. Primarily there was an increase in actions from civilian agencies, which indicates that civilian agencies are starting to build more active programs. More active programs means that the trend of increased activity should continue. The civilian agencies with the largest jump in actions were: Departments of Housing and Urban Development (24%) and Treasury (90%). Additionally, in the Department of Defense, the Navy also had a 29% increase in actions. Based on this report, it seems likely that the Department of Defense will continue at the same level and we will continue to see moderate increases in the civilian agencies.

Continue Reading FY2014 Interagency Suspension and Debarment Committee Report: The Numbers Part 2

It’s the time of year again to obsess over numbers that are mostly irrelevant. On April 1, the Interagency Suspension and Debarment Committee released its FY2014 report releasing the number of exclusion actions government-wide that agencies initiated. These numbers include suspensions, proposed debarments, and debarments as well as administrative agreements. It’s important to understand how these numbers are compiled before discussing the numbers themselves.

First, if, for example, Suzy Smith and Bobby Smith own Smith Contractors and all three are proposed for debarment for the same misconduct, those are counted as three actions within the ISDC report’s numbers despite only one act of misconduct. The ISDC itself admits that it “does not consider the overall number of suspension and debarments to be a metric of success.” Because most of the actions behind these numbers are unpublished, it is impossible to tell how many actual instances of misconduct the SDOs reviewed this year. Why do we care about instances of misconduct compared with overall numbers? If one debarment covers fifty individuals in a single case, that single case counts as fifty actions, and it looks like there is far more activity in that agency over the year than there actually is. Continue Reading FY2014 Interagency Suspension and Debarment Committee Report: The Compliance Trend Continues Part 1

In the previous post, the World Bank’s system for debarment was discussed.  This post discusses the collateral impacts of a World Bank debarment in the context of the World Bank’s debarment of Alstom SA.

What did the World Bank debarment of Alstom mean in the broader context of international procurement?  Are there potential collateral consequences for companies and for governments as a result of the World Bank’s actions?

The African Development Bank Group, the Inter-American Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the World Bank have a cross-debarment agreement such that if one bank debars a company or individual, that company or individual is also debarred from pursuing contracts with the other two banks.  Therefore, the World Bank’s debarment of Alstom also applied to the other development banks.

Currently, the United States does not automatically recognize a World Bank debarment and exclude contractors on that account.  A Suspension and Debarment Official could, however, still review the causes for the World Bank’s debarment and make an independent determination that debarment is appropriate for the United States Government.  A company with circumstances similar to Alstom’s could see itself being simultaneously debarred from the World Bank and  United States Federal contracting.

The European Union’s new procurement directives update the current exclusion regime at the member state level to require contractors to self-certify as part of every procurement that there have been no convictions for a company or individual officers of a company for integrity related offenses.  In the Alstom Zambia case, there was no criminal conviction; therefore, a company with similar circumstances would be free to continue to win and perform government contracts.

The current Canadian regime also limits exclusions to convictions or discharges for integrity offenses.  Therefore, the debarment consequences would be very similar to those within the European Union.

Conclusion

As the international suspension and debarment regime grows and continues to become more sophisticated, contractors need to be ever more aware that the consequences of corruption and fraud can have impacts beyond the state where the corruption occurs.  Additionally, it is not just the actions of the legal system such as convictions that can have significant consequences on a business but suspensions and debarments as well.  With the harmonization of debarment regimes, the consequences of one debarment by one government could eventually become an automatic debarment in another.  While this is not currently the case,  the European Union’s new procurement directives and the Canadian debarment system demonstrate the potential avenues that an automatic cross-debarment could take.  If a company is convicted for corruption, even outside of the respective state’s borders, the company is still automatically debarred from government procurement activities for a period of time.  The development banks cross-debarment agreement demonstrates a similar automatic exclusion between governments for debarment actions is practicable and possible.

On February 25, 2015, the World Bank lifted its debarment of Alstom SA.  The company had been debarred after it was discovered it had made improper payments for consultant services to an entity controlled by a former senior government official on a World Bank-finance project in Zambia in 2002.  The terms of the debarment required Alstom subsidiaries, Alstom Hydro France and Alstom Network Schweiz AG, to pay $9.5 million in restitution and prohibited these entities from bidding on World Bank contracts for up to three years.  If these subsidiaries complied with the terms of the agreement with the World Bank, they would be eligible to compete for contracts again in 21 months.  24 months later, following Alstom’s fulfillment of the terms of the agreement, the World Bank lifted its debarment.

While the World Bank does not have the long history of a developed suspension and debarment regime similar to that of the United States, the World Bank has been progressively more aggressive in this area.  Part I of this blog post discusses the World Bank’s system for suspensions and debarments.  Part II discusses the collateral consequences of a World Bank debarment.

What is the World Bank’s debarment process?

In many ways, the World Bank’s debarment process is similar to the United States’ system.  There are three structural levels to the World Bank’s system: the Integrity Vice President (“INT”), the Evaluation Officer, and the Sanctions Board.  The Integrity Vice President refers matters to the Evaluation Officer.  The Evaluation Officer makes a determination regarding the adequacy of the matter for a sanction under the World Bank’s rules.  The Sanctions Board reviews the case if a contractor decides to appeal the Evaluation Officer’s determination. Continue Reading The World Bank Debarment System – Part I

This month I wanted share an article I recently found on the OECD Foreign Bribery Report, written by Richard Bistrong.  Mr. Bistrong is a former international sales executive who himself was convicted of bribery and debarred, and Mr. Bistrong spent 14 ½  months in prison.  Prior to his conviction, Mr. Bistrong acted as a government witness and participated in covert cooperation to uncover Foreign Corrupt Practices Act and other export violations.

Of the 427 cases used by the OECD (Organisation for Economic Co-operation and Development) as a data set, only two cases resulted in debarment, one of which was Mr. Bistrong.  From Mr. Bistrong’s perspective, a debarred person, debarment is both a fair and appropriate measure.  As such he questions why it is not used more frequently.  Mr. Bistrong cites to Professor Brandon Garrett of the University of Virginia, who argues prosecutors and regulators want to avoid debarring companies as they are effectively death penalties for the company.  Mr. Bistrong argues more of these cases should end in debarment as it is a valuable tool for governments.  The OECD report itself encourages countries to debar entities and individuals that have bribed foreign public officials.

So why does it appear this tool has been used so infrequently?  There are several potential reasons.  First, prosecution for foreign bribery and debarment itself has experienced a resurgence of popularity in the last decade.  The OECD report demonstrates a spike in foreign bribery between 2007 and 2013 with a peak in 2011.  Debarment in the United States has existed in some form since the Civil War, but the current form was established in the late 1980s.  Other countries have recently developed models for a debarment regime or updated their existing models.  The timeframe the OECD used (1999-2014) captured the rise in debarment popularity.  Even given that change in conditions, two is still a low number.

Continue Reading Failure to Debar? OECD Foreign Bribery Report Finds Only 2 Debarments Out of 427 Foreign Bribery Cases

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In the not so very distant past, companies mainly needed to worry about exclusion from public contracting in the United States.  However, the exclusion trend has caught on internationally.  Recently, Canada has revised their exclusion policies to require companies to certify that neither the company nor its affiliates have committed a list of criminal offenses anywhere in the world dating back 10 years. Any offense within the 10 year period excludes the company from bidding on the contract.  The first to be notified of its exclusion in Canada was Siemens, which had the well-publicized guilty plea in 2008 for corruption-related offenses in the United States and Germany.  However, many more large companies are faced with potential exclusion.  As exclusion regimes widen in popularity, companies need to be ever more aware that a conviction in one country may have significant collateral effects on their ability to participate in public contracting in another country for an extended period of time.

One of the key differences between the United States’ debarment regime and Canada’s exclusion regime is the concept of present responsibility.  In the United States,  a contractor has the opportunity to demonstrate to the Suspending and Debarring Official that it appreciates the significance of the misconduct and has appropriately remediated the causes such that a similar incident is unlikely to occur again.  The Suspending and Debarring Official then has the discretion to lift the debarment.  In Canada’s Integrity Framework, no similar discretionary provision exists.  Instead, the contractor is automatically excluded for a ten year period from the time of the conviction.  The only exception is a Public Interest Exception, which allows the government to contract with an excluded company on the basis that no other supplier is capable of performing the contract, an emergency, national security, health and safety, or economic harm.   Thus the impact of a conviction on potential work in Canada is more severe than in the United States as Canada’s exclusions are automatic and last for three times as long as average debarments in the United States.

Image Courtesy of Flickr (licensed) by Jamie In Bytown

While suspension and debarment has long been a Federal Government action, state and local governments are starting to adopt the practice as well.  For example, in Cuyahoga County, Ohio, the county contracting code was amended in 2012 to require a 5 year debarment of contractors convicted of bribery and other crimes.  It also allows the county’s inspector general to debar contractors for fail

ing to perform a contract or for having a history of unsatisfactory performance.  The county code was changed in the aftermath of federal corruption scandal that resulted in a complete reorganization of the county’s governmental structure.  As a result of the change to the code 38 individuals and organizations have been debarred by Cuyahoga County in less than a year.  Last week while defending the length of these debarments, the county’s legal department argued that “The intent of the [county] law is to build the trust of the citizens in the contracting system, and we couldn’t afford to have our inspector general to be questioned why you gave this one contractor three years, this other contractor four years or a third contractor five years…That’s why we built in these rigid requirements.”

Most state procurement codes have suspension and debarment regimes, but the programs are either nonexistent or relatively inactive.  With the increased awareness of the federal suspension and debarment regime, it is not surprising that state and local governments are now becoming more active.  Contractors that participate in only state and local government contracting need to be aware they are not immune from debarment simply because they do not participate in the federal contracting sphere.