suspension & debarment presented by jon devorechristine v. williams birch horton bittner &...

Suspension & Debarment

PRESENTED BY Jon Devore Christine V. Williams

Birch Horton Bittner & Cherot Davis Wright TremaineWashington, D.C. Anchorage, [email protected] [email protected]

© Birch Horton Bittner & Cherot, P.C. 2015www.birchhorton.com

February 3, 2015

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Presentation Overview

Can this happen to me? Yes! Causes of Suspension & Debarment

What does this mean? Impact of Suspension & Debarment

What is going on? Process of Suspension & Debarment

What can I do? Practice Tips for Prevention & Response

Disclaimer:This presentation is not offering legal advice and is not intended to account for the particular situation of any recipient

of the presentation.© Birch Horton Bittner & Cherot, P.C. 2015 | www.birchhorton.com

3Can this Happen to Me?Causes of Suspension & Debarment

Overview:

Why are government contractors suspended or debarred?

Government contractors can be suspended and debarred from government contracting by agencies for a variety of causes, including ethics violations, conflicts of interests, and other violations.

Small Business-Specific Grounds: In addition to all traditional grounds, Small Businesses are subject to additional grounds for debarment/suspension.

E.g. Violations of the False Claims Act

Traditional: Invoices for services/products not provided

Small Business: False certifications re: SBA program eligibility and size

Small Businesses – Misrepresentations of firm’s status: SBA may suspend or debar firms for misrepresenting their size status or status as 8(a), SDVO SBC, EDWOSB, WOSB, or HUBZone concerns. There are also potential civil and criminal penalties.


4Can this Happen to Me?Causes of Suspension

Causes for Suspension: Indictment or adequate evidence of the following: Commission of fraud or criminal offense re: obtaining, attempting to obtain, or performing a public

contract or subcontract.

Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violating Federal criminal tax laws, or receiving stolen property.

Violations of Drug-Free Workplace Act*

Commission of offense indicating lack of business integrity

Failure to disclose: Knowing failure by a principal, within 3 years after final payment on any Government contract, to timely disclose credible evidence of:

a. Violation of Federal criminal law involving fraud, conflict of interests, bribery, or gratuity violations found in Title 18 of the United States Code;

b. Violation of the civil False Claims Act; or

c. Significant overpayment(s) on the contract.

Others: unfair trade practices, “Made in America” fraud, indication of present non-responsibility, delinquent Federal taxes (greater than $3,000)**, antitrust violations re: submission of proposals.


5Can this Happen to Me?Causes of Debarment

Causes for Debarment: Conviction or civil judgment of the following:

Commission of fraud or criminal offense re: obtaining, attempting to obtain, or performing a public contract or subcontract.

Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violating Federal criminal tax laws, or receiving stolen property.

Violation of Federal or state antitrust statutes, including those relating to submission of offers;

Intentionally affixing a label bearing “Made in America” to a product sold in or shipped to the U.S., when the product was not made in the U.S.; or

Commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the respondent’s present responsibility.


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Causes for Debarment: Preponderance of the evidence for any of the following: Violation of the terms of a Government contract, subcontract, or public agreement so serious as to justify

debarment, such as:

Willful failure to perform in accordance with the terms of a contract; or

A history of failure to perform, or of unsatisfactory performance of a contract;

Certain violations of the Drug-Free Workplace Act

Failure to disclose: Knowing failure by a principal, within 3 years after final payment on any Government contract, to timely disclose credible evidence of:

a. Violation of Federal criminal law involving fraud, conflict of interests, bribery, or gratuity violations found in Title 18 of the United States Code;

b. Violation of the civil False Claims Act; or

c. Significant overpayment(s) on the contract.

Others: “Made in America” fraud, unfair trade practices, delinquent Federal taxes (> $3,000)

Can this Happen to Me?Causes of Debarment


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Causes for Debarment: Preponderance of the evidence for any of the following: (continued)

Non-compliance with Immigration and Nationality Act employment provisions (determination by Secretary of Homeland Security or the Attorney General of the United States).

Catch-all for Responsibility: any other cause so serious or compelling in nature that it affects the present responsibility of the entity/person.

Can this Happen to Me?Causes of Debarment


8What does this mean?Consequences of Suspension & Debarment: Overview

Debarment Official often has Significant Discretion, but the level of discretion depends on the violation

Some violations carry mandatory debarment penalties.

E.g. Wage & Hour – violations of the Service Contract Act and Davis-Bacon Act carry mandatory 3-year debarment unless you can prove that unusual circumstances exist to escape punishment.

There is increasing political pressure to increase the number of violations subject to mandatory debarments and the frequency of suspensions and debarments generally for violations.

Take-away: Contractors should respond promptly and comprehensively to any notices regarding suspension or debarment to ensure the decision-maker has a comprehensive record.


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What does it mean to be suspended or debarred? Past, Present and Future Contracts Will Be Impacted!

Contractors debarred, suspended, or proposed for debarment are excluded from: receiving contracts, and agencies shall not solicit offers from, award contracts to, or consent to

subcontracts with these contractors, unless the agency head determines that there is a compelling reason for such action;

conducting business with the Government as agents or representatives of other contractors; and

acting as individual sureties.

Agencies shall not solicit offers from, award contracts to, or consent to subcontracts with these contractors. Exception: Proposals, quotations, or offers received from any listed contractor shall not be evaluated for

award or included in the competitive range, nor shall discussions be conducted with a listed offeror during a period of ineligibility, unless the agency head determines, in writing, that there is a compelling reason to do so.

What does this mean?Consequences of Suspension & Debarment: Overview


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GSA operates the web-based Excluded Parties List System (EPLS)

EPLS includes information on all contractors debarred, suspended, proposed for debarment, declared ineligible, or excluded or disqualified under the non-procurement common rule.

Contractors included in EPLS have been declared ineligible on the basis of statutory or other regulatory procedures.

Practice Tip: Use the EPLS searches to verify that potential subcontractors, business partners, and potential employees (especially principals) are not suspended or debarred.

Other consequences for violations

Fines and financial penalties

Note: Financial risk is high for small contractors following a 2010 law providing that, if a company incorrectly certifies as “small” for a federal contract, it can be forced to repay the government total value of the contract, plus damages.

Jail time

What does this mean?Consequences of Suspension & Debarment: Overview


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Suspension Overview

Suspension may be imposed on a contractor to protect the public interest for any of the causes outlined in FAR 9.407-2.

The rules for suspension procedures and impact are very similar to those for debarment. As in debarments, affiliates of the suspended contractor may also be suspended.

Period of Suspension

Suspension is Temporary

Imposed for a temporary period pending the completion of the investigation and legal proceedings, unless the suspending official terminates the suspension.

How long can suspension last?

Often imposed for 6 months, while debarments often total 3 years.

If legal proceedings are not initiated within 12 months after the date of the suspension notice, the suspension will be terminated unless the Assistant Attorney General requests an extension.

Cannot last longer than 18 months total.

What does this mean?Consequences of Suspension


12What does this mean?Consequences of Debarment

Impact of Debarment

Termination of Contracts and Loss of Opportunity for Future Contracts in Proposal Pipeline

Scope of Debarment: If a contractor is debarred or proposed for debarment, it is effective throughout the executive branch of the Government, unless the agency head or a designee states in writing the compelling reasons justifying continued business dealings between that agency and the contractor.

Exception: 9.406(c) lists one exception: (23.506(e)), relating to Drug-free workplaces:

A determination under this section to suspend contract payments, terminate a contract for default, or debar or suspend a contractor may be waived by the agency head for a particular contract, in accordance with agency procedures, only if such waiver is necessary to prevent a severe disruption of the agency operation to the detriment of the Federal Government or the general public (see Subpart 9.4). The waiver authority of the agency head cannot be delegated.


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General Rule: Debarment constitutes debarment of all divisions or other organizational elements of the contractor, unless the debarment decision is limited by its terms to specific divisions, organizational elements, or commodities.

Impact on Affiliates

The debarring official may extend the debarment decision to include any affiliates of the contractor if they are specifically named and are given written notice of the proposed debarment and an opportunity to respond.

Control: Persons are affiliates of each other if, directly or indirectly, either one controls or has the power to control the other or a third person controls or has the power to control both.**

What does this mean?Consequences of Debarment


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Period of Debarment

The debarment period will be “commensurate with the seriousness of the causes for debarment.”

Generally, debarments should not exceed 3 years.

Debarments for violations of the Drug-Free Workplace Act of 1988 cannot exceed 5 years, and debarments for noncompliance with Immigration and Nationality Act employment provisions will be for one year unless they are extended under the exception in 9.406-4(b).

Suspension periods preceding debarments will also be considered in determining the debarment period.

Discretion of Debarring Official:

The debarring official can extend debarment periods if the extension is “necessary to protect the Government’s interest.”

The debarring official may also reduce or extend the period of debarment, upon the contractor’s request, supported by documentation, for reasons such as: newly discovered material evidence; reversal of the conviction or civil judgment upon which the debarment was based; bona fide change in ownership or management; elimination of other causes for which the debarment was imposed; or other reasons the debarring official deems appropriate.

What does this mean?Consequences of Debarment


15What’s going on?Suspension & Debarment Process

What is the Process of Suspension & Debarment?

Overview

Request for Consideration

Analysis of Request for Consideration

Decision-Making Process for Action

Rejection of Referral Memo, Show Cause Letter, Issue Notice of Suspension, or Notice of Debarment

Presentation of Matters in Opposition

Fact-Finding Proceeding

Administrative Record

Final Decision


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Request for Consideration: COs, program managers, or other authorized persons notify the S&D Coordinator during or subsequent to execution or performance of a contract where there are indications of fraud or other grounds.

Analysis of Request for Consideration: S&D Coordinator prepares analysis and recommendation (with assistance as needed from OGC, OIG, others) for SDO.

If adequate evidence to warrant further consideration by SDO, coordinator contacts Interagency Suspension and Debarment Committee (ISDC) to request or coordinate lead agency status.

Decision Making Process: SDO must do one of the following:

1. Reject the Referral Memo

2. Issue a Show Cause Letter

3. Issue a Notice of Suspension

4. Issue a Notice of Debarment

What’s going on?Suspension & Debarment Process


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If Agency Issues Notice of Suspension or Notice of Debarment…

Presentation of Matters in Opposition NOTE: A suspension is usually imposed prior to notifying the entity/person and giving them an opportunity to contest

the suspension.

Contractor Response: 30 days unless SDO specifies otherwise.

Timeframe: Upon receipt of the notice, the contractor has 30 days to respond to the Suspension/Debarment Notice

Format of Response: Contractor may respond by submitting a response in person, in writing, or through a representative

Content: What must the response include?

Information and argument in opposition to the suspension, including any additional specific information that raises a genuine dispute over the material facts.

Fact-Finding Proceeding – informal evidentiary hearing that only applies in some situations.

Administrative Record

Final Decision – based on all of the information in the Administrative Record, including any Respondent submissions.

What’s going on?Suspension & Debarment Process


18What’s going on?Suspension & Debarment Decisions & Considerations

The Decision:

The suspending official will issue a decision based on the record.

Outcomes of Suspension/Debarment Notices Vary

Take this step seriously, since the deciding official has discretion to:

modify the terms of suspension/debarment (time, scope, etc.),

terminate the suspension/debarment, or

leave the suspension/debarment in force.

Potential for Settlement

The contractor may also enter into an administrative agreement with the Government to resolve the matter.


19What’s going on?Suspension & Debarment Decisions & Considerations

Spotlight: The Decision: Should/Will the Government Debar the Contractor?

Considerations: The debarment official must determine whether debarment is in the Government’s

interest, because the existence of a cause for debarment does not necessarily require that the contractor be debarred.

“The debarment official may, in the public interest, debar a contractor for any of the causes in 9.406-2,” and his determination should consider:

the seriousness of the contractor’s acts or omissions,

remedial measures, and

mitigating factors.

Practice Tip: Ensure that your Contractor Response highlights why NOT debarring your company/personnel is NOT in the best interests of the Government. If it is not in the “public interest” to debar the contractor, the debarment official may not debar.


20What can I do? Practice Tips: How to Avoid Suspension & Debarment

Prevention: Prevent Problems from Arising

Self-Review - Regularly review your contractor compliance processes

Training - Institute regular training to keep staff updated on new requirements

Independent Audits - Consider independent audits or internal program analysis to find problems/weaknesses before they impact government contracts

Attention: Prompt and Serious Attention to Suspension/Debarment Notices

Take government response deadlines seriously

Try to get suspension/debarment terminated by decision-maker

Get your house in order ASAP (and make a record of it)

Capitulation, Mitigation, and Negotiation

Once suspended or debarred, start working to fix all of the concerns raised by the Government

Document your actions to create a record for reinstatement © Birch Horton Bittner & Cherot, P.C. 2015www.birchhorton.com

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Practice Tips: After receiving a Notice of Suspension or Notice of Debarment, the contractor should: Review the Notice: Carefully review the notice for the causes, reasons for suspension/debarment, and

other pertinent information.

Timely Respond: Provide a timely, written response to the allegations, highlight areas of material fact discrepancies, and describe any actions taken/to be taken by the contractor to mitigate or correct any problem areas.

Consider Alternative Outcomes: Consider striking an administrative agreement with the Government, which may allow the contractor to avoid the delays and costs of the legal proceeding and would provide a good vehicle for incorporating any corrective measures suggested by the Government.

Reach Out: Contact the suspending official to request that the suspension/debarment be cut short if the contractor can provide any new information or evidence that the alleged violations have been resolved. Reach out to contacts and resources to prepare your response – attorneys, mentors, implicated affiliates, etc.

What can I do? Practice Tips: What to consider after receiving a Notice of Suspension or Debarment


22What can I do?Practice Tips: Crafting your Response

Practice Tips:

Goal of Contractor Response: The goal of your response is to persuade the Government that they are better off with you than without you. This requires two major tasks:

Convince the Government that your company has made, makes, and/or will make valuable and unique contributions through federal contracts.

Convince the Government that you have corrected the problem, and the Government is not at risk of reoccurrence or negative consequences.

Remember your audience: In short, no whining! You are a government contractor.

Suspension or debarment will negatively impact your bottom line. Unless there is a public interest reason to mention this, DON’T.

For example: Don’t mention your loss in profits, do mention specific negative economic impacts on jobs, communities, government program resources, etc. if they are persuasive.

However, the focus should be on the solution, i.e. how you have/will fix the problem, mitigate any negative impacts on the Government, and prevent it from reoccurring in the future.


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Practice Tips:

Your response should address, at minimum, the following:

Highlight Unique Contributions of Contractor: Interests of the Government being served by Contractor’s continued performance and eligibility – i.e. if the Government debarred the Contractor, what specific negative impact would that have on the Government?

Current contract performance interruptions

Future contracts – proposals for new contracts that the Government would not be at liberty to consider

Discuss negative impacts such as relative loss of competition, experts, experience, and potential higher costs to the Government with other contractors/loss of competition

Take responsibility: Address the serious nature of the act/omission leading to Government’s concerns.

Be proactive: Discuss remedial measures that the Government may benefit from and any mitigating factors relevant to the situation. These could include: quick internal response of Contractor to define and correct the issue, specific actions taken to prevent similar problems in the future (changes in policy, procedure, additional personnel, training, etc.)

Protect Affiliates: Where affiliates are named and noticed, Contractor should show why debarment official should limit any debarment actions to one entity and NOT its affiliates to avoid spill-over of negative consequences to corporate family members and/or business partners.

What can I do?Practice Tips: Crafting your Response


24What can I do?Best Practices in Subcontracting

Government Requires Contractors to Exercise Due Diligence in Hiring Subcontractors

Duty to Disclose: FAR requires any proposed subcontractor of $30,000 or more to disclose to the Contractor whether at the time of award of the subcontract, the subcontractor or its principals are debarred, suspended, or proposed for debarment.

Risk of Contract Termination, or Suspension & Debarment: Executing a contract with a debarred subcontractor could prompt the Government to terminate the prime Contractor for default, and the Government could take additional action against the prime, such as suspension or debarment.

NOTE: While not advisable in most situations, Contractors may hire debarred/suspended contractors without risking the prime contract by providing the CO specified notice PRIOR to executing the subcontract.


25What can I do?Practice Tips: Careful Subcontracting

Practice Tips:

Before executing any government subcontract, Contractor should search the GSA’s EPLS database for the subcontractor, names of its owners, and top officers.

Contractor should require government subcontractors to certify, in writing, that the subcontractor has not been suspended or debarred.

Certification is important, because:

EPLS may not updated or the search may be imperfect (different name spellings)

If subcontractor falsely certifies, Contractor can terminate the subcontract for default and may be able to recover damages.

If Contractor followed due diligence and subcontractor falsely certified, Government may go easier on the prime Contractor because the subcontractor’s false certification — not Contractor’s failure to follow the FAR — was the primary reason that an ineligible company received the subcontract work.


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Questions?


suspension & debarment presented by jon devorechristine v. williams birch horton bittner &...

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