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Continuing Government Focus on Fraud Might Lead to Significant Changes in Suspension and Debarment Procedures




by:
Maria L. Panichelli
Michael H. Payne
Cohen Seglias Pallas Greenhall & Furman PC - Philadelphia Office

 
August 2, 2013

Previously published on July 31, 2013

Suspension and debarment procedures have been a hot topic in recent years, and it appears that the issue will remain a focus of congressional debate for the rest of this year as well. On June 12, 2013, Congress heard testimony on the state of the federal government’s suspension and debarment (S&D) system. The testimony was meant to serve as a congressional follow up to two troublesome GAO reports, which emphasized the many problems with the current S&D system.

John Neumann, the GAO’s Director of Acquisition and Sourcing Management, offered testimony at this June 12th hearing. He spoke about the GAO’s recent efforts to alleviate the systematic issues identified in the GAO reports. Neumann’s testimony indicated that he believed the suspension and debarment system was, in fact, improving, and that no major changes to the system were necessary. However, his opinion is far from universal. Most people agree that the S&D system is inescapably flawed, and in need of a dramatic overhaul.

For example, Scott Amey, General Counsel for the Project On Government Oversight (a group that works “to achieve a more accountable federal government”), testified that many agencies “still are not utilizing the suspension or debarment tool” effectively. Amey went on to testify that “history proves” that the current system does not force agencies to employ “top-notch contractors that are not involved in illegal or questionable activities.” In other words, most agencies continue to look the other way, giving business to contractors the agencies know are involved in misconduct, rather than initiating suspension and debarment procedures. Amey cited the Nuclear Regulatory Commission and Social Security Administration as agencies that have “zero suspensions, proposed debarments, debarments, and administrative agreements.” He further identified the Departments of Commerce, Health and Human Services, and Labor as having only a handful of suspensions and debarments. In short, Amey indicated that he does not believe that the current system encourages agencies to diligently prosecute and punish “bad” contractors.

Amey did, however, suggest a possible solution to this systematic underuse, or misuse, of suspension and debarment procedures: the Stop Unworthy Spending (or “SUSPEND”) Act. The SUSPEND Act, which was introduced by House of Representatives oversight committee chairman Darrell Issa several months ago could dramatically overhaul the S&D procedures applicable to federal contractors. Currently, suspension and debarment of contractors is handled by each individual contracting agency, by its respective suspension and debarments office. But under Issa’s SUSPEND Act, these forty-one individual offices would be consolidated into the “Board of Civilian Suspension and Debarment,” which would be overseen by the General Services Administration. In addition to consolidating the forty-one civilian agency S&D offices into one centralized board, the Act would standardize agencies’ S&D policies, and increase transparency.

Proponents of the SUSPEND Act point out that it will result in consistent, uniform application of S&D procedures across various agencies, and thereby put a stop to the underutilization of the S&D process by individual agencies. It will also prevent these agencies from making mistakes with respect to reporting requirements. In Issa’s view, the SUSPEND Act is necessary to combat the award of government contracts to those he described as “fraudsters, criminals, or tax cheats.” However, opponents say that the proposed changes could be detrimental to both contractors and agencies.

Critics point out that a centralized Board of Civilian Suspension and Debarment could result in a bureaucratic behemoth, which would ultimately prove slower for contractors, and result in a more formal process that requires participation of legal counsel. Moreover, the restructuring could deprive agencies of their leverage in negotiating concessions from contractors during debarment negotiations. It might also lead to duplication and inefficiency as the agencies try to coordinate their suspension and debarment activities with a new government entity.

Pro or con, the SUSPEND Act has the potential to become very important in upcoming months, and we will keep you updated on the progress of the bill. Whether or not the bill ultimately passes, it is important to also keep in mind what it signifies. This bill, and the congressional attention paid to the S&D program in general, demonstrate the government’s increased vigilance with respect to contractor fraud. The government’s focus remains on increasing the prosecution of dishonest or fraudulent contractors, and on perfecting S&D procedures used to punish those contractors. As this process continues, it is important for contractors to be aware of the dangers, and consult with legal counsel to avoid any inadvertent infractions.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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