In a recent client update, we discussed proposed legislation, entitled the Comprehensive Contingency Contracting Reform Act of 2012, that would provide for the automatic suspension of a contractor in a variety of situations, including when the federal government merely alleges fraud against a contractor in a civil or criminal proceeding related to a federal contract.  We noted that the proposed legislation was roundly criticized by representatives of the affected agencies:  the Department of Defense, the Department of State and the U.S. Agency for International Development.  See "Shift to 'Automatic' Ineligibility Determinations Poses Increased Risk to Federal Contractors". 

Now a new bill changes the automatic suspension into an automatic referral to suspension and debarment officials for final decision making. 

The following persons would be subject to these referrals:

  • A person who has been charged with a federal criminal offense relating to the award or performance of a contract of a covered agency.

  • A person who has been alleged, in a civil or criminal proceeding brought by the United States, to have engaged in fraudulent actions in connection with the award or performance of a contract of a covered agency.

  • A person who has been determined by the head of a contracting agency of a covered agency to have failed to pay or refund amounts due or owed to the federal government in connection with the performance of a contract of the covered agency.

The words "brought by the United States" within the second basis for referral suggest that referrals will not extend to all qui tam cases brought by relators but only to those in which the government has intervened in a qui tam action or has brought an independent lawsuit.  This would be a welcome and rational limitation, assuming this interpretation prevails.

The third basis, however, is cause for contractor concern because it seems to include legitimate disputes over amounts due or owed to the federal government.  It appears agency heads could have the power to force a contractor to drop a good-faith dispute to avoid suspension.  Federal contractors will need to monitor proposed implementing regulations to ensure that referral power cannot be wielded in a way that is unfair or that otherwise undermines existing Contract Disputes Act procedures.

In addition, the bill would require agencies to upgrade their suspension and debarment capabilities, requiring each agency to have at least one dedicated, full-time suspension and debarment official with authority independent from the agency's inspector general or acquisition department.  (Under current law, only the U.S. Navy, the U.S. Air Force, and the Environmental Protection Agency have such officials on staff.)  The bill also would require that agencies limit the duties of suspension and debarment officials to only (1) direction, management, and oversight of suspension and debarment activities, (2) direction, management and oversight of fraud remedies activities, and (3) membership and participation in the Interagency Committee on Debarment and Suspension.

The bill picked up five key sponsors in addition to the original sponsors, Senators Claire McCaskill (D-Mo.) and Jim Webb (D-Va.).  The additional sponsors are Senators Joe Lieberman (I-Conn.), Susan Collins, (R-Maine), Al Franken (D-Minn.), Richard Blumenthal (D-Conn.) and Bernie Sanders (I-Vt.).

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