Terminated, Then Penalized? What Federal Agencies Can and Can't Do
Is it possible for a federal agency to debar or suspend a contractor that has defaulted on one contract or been terminated for convenience?
That was one of the questions put to Angela B. Styles, head of the government contracts group at the legal practice of Crowell & Moring, at a meeting May 2 of the Construction Industry Ethics and Compliance Initiative in Washington, D.C.
The answer was provocative, especially because the power to debar or suspend a contractor puts a very heavy legal cudgel in the government’s hands—and it already has plenty of weapons at its disposal.
“It’s possible under the law,” answered Styles, “but it hasn’t been done yet.”
Debarments and suspension can be triggered by any civil or criminal fraud, or other criminal offense connected to public works. Investigations and settlements also are triggers.
Other triggers include violations of federal or state antitrust laws related to submission of offers, embezzlement, false statements, tax evasion or any office indicating “a lack of business integrity or business honesty,” says Styles, whose practice is based in Washington.
Another category of suspension and debarment triggers includes violation of the terms of a government contract or subcontract, such as willful failure to perform, history of failure to perform or unsatisfactory performance.
In the big picture, federal agencies have stepped up contract compliance enforcement actions, and staff at the U.S. Dept. of Defense and the General Services Administration are “digging through files and sending, or finding new cases,” says Styles.
Federal officials have talked about the new vigilence.
“The pendulum is swinging strongly in the direction of zero tolerance for unethical behavior,” Steve Shaw, the U.S. Air Force Suspension and Debarment Official, said in an interview with LM Today. Defense contractors should understand that “no contractor is so big or so important that it can’t be debarred.”
In addition, Styles says she and her colleagues are seeing “a press from Congress for automatic debarment.”
"Congress is saying, if there is a suspicion of fraud by a government contractor, federal agencies should not do business with that company," says Styles.
But the question remains, can a simple [default] for non-performance trigger debarment?
“As a legal matter, yes,” says Styles. Even if the federal agency terminates your firm for convenience, it is possible, she says. But it hasn’t been done yet.
The Federal Acquisition Regulation refers to history of failure or unsatisfactory performance one or more times.
Sometimes contracting staff at federal agencies will post negative information about a contractor on an internal government website. The idea, says Styles, is to enable contracting offiers to decide, "Is this a business I have confidence in?"
"So if something falls short, there’s a whole system that collects information on how well a contracting officer thinks you did your job," says Styles.
Then the question becomes whether poor performance indicates suspension and debarment. Are public statements from some suspension and debarment officials indicating they would consider debarring based on performance issues? That could mean default for convenience, or for a consistent record of bad perfomance.
