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Ethics Corner 

Proposed Bill Seeks to Rein In Fraud, Abuse 

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By Ryan C. Bradel  

Rep. Darrell Issa, R-Calif., chair of the House Committee on Oversight and Government Reform in February issued a “discussion draft” of newly proposed legislation entitled the Stop Unworthy Spending Act, or SUSPEND Act, aimed at reforming the federal suspension and debarment system. 

It took several months for the draft to generate much discussion but it seems that the far-reaching consequences of this proposed legislation have finally registered. Recent weeks have seen a flurry of discourse among industry, government suspension and debarment officials and other stakeholders.

The act seeks to consolidate and unify the federal government’s suspension and debarment function — now managed by individual offices in more than 40 different agencies — into a single board of civilian suspension and debarment under the General Services Administration, and to enact other measures to strengthen the program.

Issa said his bill was designed to ensure “zero tolerance for fraudsters, criminals or tax cheats receiving taxpayer money through grants or contracts” and claimed that the bill would give the government a faster, more effective response to contractor fraud.

The suspension and debarment regime polices government procurement to protect the taxpayer from any contractor that is either unethical or not “responsible.” A suspension or debarment effectively represents a decision that the risk of doing business with a certain company or individual is too great. It is solely a protective measure, not a punitive measure. Indeed, if used to “punish” beyond what is minimally necessary to “protect,” these governmental sanctions are misused and can be corrected by court action.

The federal government’s suspension and debarment regime today is rather atomized. The law vests responsibility for investigating potential wrongdoing and rendering decisions with each individual agency. Each agency is allowed to develop its own rules and procedures for actions, subject to a few minor baselines such as affording the contractor the opportunity to be heard and the right to appear with counsel. The 40-plus different federal agencies have separate procedures, as well as distinct cultures that determine how aggressively investigations are pursued and the measures that are used to mitigate for those companies/individuals that are permitted to return as rehabilitated contractors.

The growing perception among many in Congress and the executive branch is that the government’s suspension and debarment power is underutilized. In October 2011, the House oversight committee held a hearing to investigate why some agencies are so active in suspension and debarment and others are not. Shortly thereafter, the Government Accountability Office issued a report finding that the vast majority of suspension and debarment cases government-wide were concentrated in a small handful of agencies, while many agencies didn’t exercise their power at all. The GAO report further found, perhaps unsurprisingly, that agencies with dedicated suspension and debarment staff, detailed policies and procedures and practices that encourage active referrals of cases for investigation were the ones that initiated the most suspensions and debarments.

Finally, the same day that the GAO issued its report, the Office of Management and Budget directed all federal agencies to appoint a senior agency official to investigate their programs and to review their internal policies to ensure that the programs were effectively protecting the public’s money.

Apart from underutilization, another criticism of the current suspension and debarment system is that lack of sound procedures at some agencies could deprive a contractor of its due process rights.

Enter the SUSPEND Act as the proposed legislative response to the problem. The core provisions of the act suppress the suspension and debarment offices of each federal agency and instead vest government-wide suspension and debarment authority in the board of civilian suspension and debarment. The act tasks the OMB director to issue guidance addressing the board’s “scope and operation,” size and procedures for selecting board members, and processing suspension and debarment cases.

While it appears obvious that a centralized authority with uniform rules will eliminate uneven application across the government, less obvious is whether the second goal of the changes will be borne out — that being a greater use of suspension and debarment to eliminate fraud, waste and abuse.

The SUSPEND Act also generates new processes and goals for the suspension and debarment regime. It mandates measures to enhance public transparency of such actions including making the status, outcome and remedial action ordered in each case publicly available.
Currently, individuals or companies that have been suspended or debarred are listed on the excluded party’s list system but additional information, such as the terms of the suspension or debarment or the administrative agreement entered into to avoid a debarment, is not made publicly available.

Additionally, the act also directs the development of an expedited review process for time sensitive matters. And it seeks to establish more consistent standards applicable regardless of the agency, industry or size of company involved.

Many stakeholders believe the SUSPEND Act is a solution in search of a problem, or worse, an overreaction that could lead to heavy handed enforcement that harms legitimate contractors. Some commentators have pointed out the lack of suspension and debarment actions identified by the GAO report relied on outdated data and that use of such actions has grown significantly. Critics also highlight the fact that agencies with the most robust programs are the ones that spend more money, and the lack of effective programs at some agencies merely reflects that far less is at stake.

Other critics have argued that handing over suspension and debarment responsibility to a quasi-judicial board will lead to more punitive actions that violate the premise that sanctions are solely to protect, and not to punish. Yet others argue that pressure to increase actions may cause the board to overreach in its efforts to please Congress and the executive branch.

And some reason that removing suspension and debarment power from many agencies will mean the end of carefully tailored remedies designed to fit the needs of the agencies involved and the infractions at issue — the “blunt instrument” argument.

Finally, some point to agency program personnel who today are failing to make referrals of suspected wrongdoing to the agency’s suspension and debarment office, and that even fewer will do so now that the activity has been outsourced to another agency.

Ryan C. Bradel is an associate in Greenberg Traurig LLP’s government contracts practice group. The views expressed are solely those of the author. 

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