Suspensions, Debarments Hit 10-Year Low

By Frederic M. Levy, Michael Wagner and Michael Pierce

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On April 18, the Interagency Suspension and Debarment Committee released its annual report on its activities across all executive agencies for fiscal year 2020.

While the data are somewhat old, the report nevertheless provides useful insights into suspension and debarment trends relevant to the government contracting community. Below we highlight the report’s three biggest takeaways.

First, combined suspensions and debarments in fiscal year 2020 hit their lowest totals since 2010. There were 1,671 combined suspensions and debarments in 2020, down from 1,921 in 2019. The committee partly attributes the decline to the COVID-19 pandemic, including the government’s remote or socially distanced workforce, delays in mail service, travel restrictions and postponements in court proceedings.

However, this decline is part of a longer-term trend: suspensions and debarments have declined in five of the last six years and are down 56 percent from the 2014 peak of 2,938.

On an agency level, traditionally active agencies reported the highest number of actions in 2020. The Department of Defense — including all its components — continues to generate a large share of the debarment activity, with 621, or 37 percent, suspensions and debarments in 2020.

Other customarily active agencies again account for a significant share of suspension and debarments, including the Department of Homeland Security with 217 or 13 percent, the Environmental Protection Agency with 164 or 10 percent, and the General Services Administration 75 or 4 percent.

The report does not provide visibility into the extent to which contractor self-policing and disclosures — mandatory or otherwise — account for the decline in suspension and debarment activity. While the committee reports the number of referrals it received, it does not identify referral sources or the number of referrals attributed to a particular source.

Second, in addition to pandemic-created conditions, the Interagency Suspension and Debarment Committee also attributes the decline in suspension and debarment actions to increased agency use of “alternative remedies,” which require significant additional time and resources compared to immediate exclusions. Agencies should be commended for striving to use alternative remedies, such as pre-notice letters and administrative agreements, which allow suspension and debarment officials the flexibility to investigate potential present responsibility concerns and protect the government’s interest without immediately triggering the often-devastating consequences and sometimes irreversible impacts of a suspension or debarment.

Although it is encouraging that the committee continues to emphasize alternative remedies, 2020 data suggest use of alternative remedies generally has remained consistent with — and in some cases is down from — historical norms.

The most used form of alternative remedy are pre-notice letters — including show-cause letters — requests for information and similar communications providing recipients with an opportunity to respond to suspension and debarment officials’ concerns prior to formal actions.

The appropriate use of pre-notice letters long has been encouraged both by industry and the committee as a valuable first-step alternative to issuing a notice of proposed debarment.

Heeding this guidance, certain agencies have distinguished themselves in their use of pre-notice letters during the reporting period, including the Navy, 28 pre-notice letters, the EPA at 16, and the DHS at 12.

Pre-notice letters declined from 139 in 2019 to 103 in 2020 — a 26 percent drop — although this may be reflective of the overall decline in suspension and debarment official activity. Still, there is ample room for many agencies to adapt their practices to better align with committee recommendations.

Administrative agreements are another alternative remedy tracked in the report. In 2020, federal agencies entered into 58 administrative agreements, a slight increase from the 54 administrative agreements entered in 2019.

The report notes that eight agencies reported entering into administrative agreements with individual respondents in 2020. This is notable given that agencies historically have struggled to identify an effective form of administrative agreement that would allow individuals to demonstrate present responsibility and avoid an exclusionary action.

Finally, this year’s report suggests that a unified suspension and debarment scheme for procurement and nonprocurement transactions may finally be on its way to becoming a reality. The parallel and not-entirely-consistent regulatory regimes that govern suspension and debarment in the procurement and nonprocurement contexts have confused contractors — and government personnel — for years, and the Interagency

Suspension and Debarment Committee has long aspired to address the disparity between the two bodies of law.

This year’s report indicates that the organization has created a subcommittee to provide recommendations and technical assistance to the Federal Acquisition Regulatory Council as it strives to align the regulation with the Nonprocurement Common Rule. The input is part of FAR Case 2019-15, which will support the issuance of a new proposed rule.

Although it remains to be seen whether and how any proposed rule will address historical inconsistencies between the FAR and Nonprocurement Common Rule, the creation of the subcommittee and FAR Case 2019-15 represent substantial steps toward realizing the committee’s long held objective.

Although the report depicts a decline in suspension and debarment actions in relative terms, the overall number of actions — more than 1,600 suspensions and debarments — shows that this remedy nonetheless remains an important tool. Further, the report serves as a reminder to industry that a present responsibility review is becoming an increasingly variable process with many potential outcomes.

Michael Pierce is an associate, and Michael Wagner and Frederic Levy are partners at the law firm of Covington & Burling LLP.

Topics: Defense Contracting

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