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INSIGHT: Federal Agencies Using Different Approaches to Manage Debarments, Suspensions

Dec. 5, 2019, 9:00 AM

The government released its long-awaited Fiscal Year 2018 annual report on federal suspension and debarment activities, and the data reflect a number of trends and developments that should be of keen interest to federal contractors and grantees.

The report, published by the Interagency Suspension and Debarment Committee (ISDC), shows that suspension and debarment remain potent tools that are frequently used across the executive branch, even if the total number of exclusion actions dipped slightly from the previous year.

But the report also demonstrates that federal agencies are adopting increasingly sophisticated approaches to managing suspension and debarment actions, a trend that presents both opportunities and potential pitfalls for the contracting community. Below we highlight the four biggest takeaways from this year’s ISDC report.

Overall Activity Slightly Down, Still Substantial

Total suspension and debarment activity decreased slightly in FY18 from recent years, although the pace of activity still remains high. According to the ISDC report, federal agencies initiated a total of 3,256 suspension– and debarment-related actions in FY18 (480 suspensions, 1,334 debarments, and 1,542 proposed debarments), a decrease of approximately 11% from the 3,640 actions initiated government-wide in FY17.

Still, the report notes that the FY18 data reflects “nearly double the activity reported in FY 2009,” the first year in which government-wide suspension and debarment data was reported.

On an individual agency level, certain agencies that have traditionally been active in the suspension and debarment space once again reported the highest total number of actions in FY18. The Departments of the Army, Navy, Homeland Security, and Housing and Urban Development each reported over 300 total exclusion actions.

Other agencies reporting a notable change in suspension and debarment activity in 2018 include the Department of Transportation (203 total actions, up from 76 in FY17), the General Services Administration (250 total actions, up from 163 in FY17), and the Department of Veterans’ Affairs (26 total actions, down from 90 in FY17).

Agencies Using Alternatives to Traditional Suspension, Debarment

The ISDC’s FY18 report also reflects a growing trend of agencies utilizing alternatives to traditional suspension and debarment tools. The most notable (and commendable) illustration of this trend is the steady increase in use of pre-notice letters (show-cause letters or “requests for information”), which permit agencies to investigate potential present responsibility concerns without triggering the immediate (and often-devastating) consequences of a suspension or debarment.

The appropriate use of pre-notice letters has long been encouraged by industry and the ISDC alike, and this year’s total of 197 pre-notice letters issued government-wide is the second highest ever in a single year.

As might be expected, many of the more active suspension and debarment agencies, including the Army, Navy, DHS, EPA, and GSA, routinely issued show cause letters in FY18. But while show-cause letters are becoming increasingly common in the aggregate, the frequency of their use among individual agencies still varies widely.

On one hand, DHS issued 41 pre-notice letters in FY18, a dramatic increase over a total of just 3 in FY17. On the other hand, the Defense Logistics Agency issued only one pre-notice letter despite initiating over 150 suspension and debarment actions.

Another alternative to suspension or debarment is the negotiation of a bilateral administrative agreement. In FY18, federal agencies entered into 61 administrative agreements, a slight decrease from FY17 but still a substantial increase from FY09, when only 35 administrative agreements were utilized by five agencies.

But again, the prevalence of administrative agreements varies significantly across agencies. For the second year running, the EPA and DOT entered into the most administrative agreements. Meanwhile, DHS entered into just one administrative agreement despite initiating more than 300 exclusions.

Contractors Take Proactive Steps to Mitigate Suspension, Debarment Risks

Significantly, the ISDC’s FY18 report also observes that government contractors continue to proactively engage with Suspending and Debarring Officials (SDOs) to address potential present responsibility matters, particularly when a company discovers possible misconduct within its operations. The report identifies at least 40 “instances of proactive engagement initiated by potential respondents” in 2018.

The report further notes that such early and affirmative outreach by a contractor is appreciated by SDOs and often is productive for both parties: “This activity makes possible even earlier consideration of present responsibility factors by agency SDOs; it allows both sides to focus on corrective measures taken by the company to address the misconduct, along with efforts by the company to improve internal controls, enhance compliance programs, and to promote a culture of ethics.”

New Cybersecurity Subcommittee Reflects Heightened Scrutiny on Cyber Compliance

As every contractor knows, cybersecurity concerns have been the driving force behind an array of regulatory developments in the past five years. More recently, we have seen a corresponding increase in enforcement activity in this area, and cyber-related suspension and debarment actions—as well as a proliferation of cyber-focused legislative enactments with debarment-like effects—have followed suit.

It therefore should come as no surprise that this year’s annual report reveals that the ISDC has established a new subcommittee dedicated exclusively to “tracking and reporting cybersecurity contractor compliance issues and developments.” Although it remains to be seen whether and how this new subcommittee will effect suspension and debarment activity going forward, the mere existence of the subcommittee should erase any question about the relevance of cybersecurity issues to the present responsibility analysis.

Conclusion

In broad terms, the ISDC’s FY18 report offers further evidence of the increasing maturation of suspension and debarment programs across the federal government. The report also serves as a reminder to industry that a present responsibility review is not simply a straight-line path to an inevitable conclusion.

Sophisticated contractors will understand that the suspension and debarment process can play out in a variety of ways—some of which are more disruptive than others—and that successfully navigating this process requires a clear understanding of the range of options and approaches available to contractors.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Mike Wagner helps government contractors navigate high-stakes enforcement matters and complex regulatory regimes. He works closely with contractors across a range of industries to achieve the efficient resolution of regulatory enforcement actions and government investigations, including False Claims Act cases.

Fred Levy, co-chair of the Government Contracts Practice Group, is a leading suspension and debarment lawyer, focusing his practice on the resolution of complex compliance and ethics issues.

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