United States: New Legislation Would Revamp Suspension And Debarment

Steven Gordon is a Partner in the Washington D.C. office

On October 29, 2013, the House Oversight and Government Reform Committee approved a bill to restructure suspension and debarment from federal procurement and non-procurement programs. The Stop Unworthy Spending (SUSPEND) Act (H.R. 3345) would centralize and modify current suspension and debarment procedures in an effort to make them more uniform and effective.

The SUSPEND Act would create a new Board of Suspension and Debarment (the Board) in the GSA to serve as a central body to manage all federal suspension and debarment activities. Existing suspension and debarment offices in the various agencies would be terminated. Waivers would be granted to agencies with effective programs that have disposed of an average of 50 cases per year for the past three fiscal years. This waiver provision would preserve the existing suspension and debarment programs of the major DOD agencies - the Army, Navy, Air Force, and DLA -- and a few civilian agencies. But more than 70% of civilian agencies and some smaller DOD agencies would cede their suspension and debarment authority to the Board. The Act also provides that the SBA shall maintain its independent authority for suspension and debarment under the Small Business Act.

A new Interagency Suspension and Debarment Committee (ISDC) would be established to coordinate issues among the Board and those agencies which maintain their own suspension and debarment operations. The ISDC would resolve issues regarding designation of a "lead agency" when multiple agencies have an interest in a particular proposed suspension or debarment. It would encourage cooperative efforts among members to pool resources and would recommend future changes to the suspension and debarment system and rules. And it would provide an annual report to Congress summarizing each agency's activities, including the total number of referrals, timeliness of case disposition, and breakdown of discretionary and nondiscretionary cases.

A single, Web-based case management system would be established for all suspension and debarment cases. It would be updated at least monthly and would show the case status and the name of the government employee handling the case.

The Director of the OMB is tasked to develop a single regulation for suspension and debarment which will apply to both procurement and non-procurement programs. The regulation shall provide for advance notice (i.e. a "show cause" letter) to a respondent before any adverse action is taken unless, in a particular case, it is determined that expedient action is necessary to protect the Government's interest. The regulation shall also provide for the public availability of (1) the outcome of all cases referred for potential suspension or debarment, including the rationale for the decision to take or not take an adverse action, and (2) the administrative agreements entered into to resolve a proceeding. The regulation shall provide procedures to strengthen timely referral of cases, and shall require all cases to be disposed of within 6 months after referral, unless the Chair of the Board (or the agency suspension and debarment officer) provides a written explanation. And the regulation shall strengthen the identification and referral of contractors and grantees that repeatedly fail to perform.

Each agency is to appoint a Remedy Coordination Official (RCO) to coordinate criminal, civil, contractual, and administrative remedies for fraud or corruption related to procurement and grant activities. The RCO shall serve as the primary point of contract on behalf of the agency with the Board or the agency suspension and debarment office, as applicable, and plays a key role in ensuring that referrals are made in a timely manner.

Historically, the decision whether to suspend or debar a federal contractor or grantee has been made at the agency level, pursuant to the rules and practices of that agency. Over the past 25 years, the rules have gradually become more uniform until today there are two separate but similar regulatory regimes -- one for procurement programs and one for non-procurement programs. Nonetheless, actual enforcement practices among the different agencies have remained inconsistent and Congress has been rightly concerned about lax enforcement by certain agencies. The SUSPEND Act is a logical response to congressional concerns and should produce greater consistency in the application of suspension and debarment, without imposing rigid and inflexible mandates that would constrain officials in deciding whether a particular contractor or grantee is "presently responsible." 

The logic of the SUSPEND Act -- to centralize and make more uniform the suspension and debarment process -- would suggest a single suspension and debarment authority to handle enforcement for all agencies. But the major DOD agencies and a few civilian agencies already have active and effective (if not uniform) suspension/debarment programs, and the political reality is that they guard their turf very jealously. The waiver mechanism finesses this political issue while implementing a more centralized system of suspension and debarment.

The SUSPEND Act clearly aims to increase the use of suspension and debarment in appropriate cases as part of a coordinated response to fraud and corruption, and to contractors and grantees that repeatedly fail to perform. The new, centralized Board can be counted on to play its role in this process. The potential weak link is ensuring that the agencies refer cases of fraud and non-performance to the Board in the first instance.

Finally, the SUSPEND Act should enhance the transparency and uniformity of suspension and debarment decision-making by requiring a Web-based single case management system and the publication of all case outcomes and the rationale for those decisions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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