Suspension and Debarment

Suppose last month you received a show cause letter from the contracting officer demanding that you advise her why she should not terminate your company for default for lack of progress. This month’s letter is even worse. You receive by certified mail, return receipt requested, a letter from the contracting officer suspending your company from doing business with the agency. It seems that the agency thinks someone in your company stole government stock footage and used it in a commercial training film.

Welcome to the twilight zone, the world of suspension and debarment. You will have more at stake with fewer rights or protections than in any other area of federal procurement. By the time its over, you will feel as if you’ve lived through the Spanish Inquisition, or at least the Star Chamber.

Suspension is the temporary disqualification of your company or named individuals from contracting with the government for up to 18 months. Debarment is the exclusion from contracting for a fixed period of time, up to three years in all. Suspension is the first step an agency takes. If the suspension is made permanent, you enter debarment. The named individuals will be those persons at your company that the agency thinks are responsible for the violations leading to the suspension.

Suspension begins with a notice that you have been suspended and stating the reasons underlying the suspension. You may request a hearing with the agency to contest the suspension. If your company is under investigation or indictment, however, a hearing may not be granted.

Once you are suspended or debarred by one agency, you may not receive any federal contracts government-wide. GSA will place your company’s name on its list of suspended and debarred contractors. Agencies may not solicit or award to companies on the list. You will also be prohibited from subcontracting with prime contractors. As small consolation, you will be allowed to complete performance on existing contracts, although the government can try to withhold payment if it believes you owe it money arising out of the suspension. The suspension and debarment may apply to your company’s divisions, subsidiaries and affiliates.

Suspension and debarment are a matter of contractual responsibility meant to protect the government from unethical and irresponsible contractors. Your welfare is a minor concern to the government. Thus, unless the suspension would literally put you out of business, a federal judge will rarely enjoin the suspension.

Justification for suspension and debarment includes conviction for fraud or other criminal offense, misrepresentation, false certification, the illegal payment of gratuities, or deliberate or repeated failure to perform contractual obligations. Since suspension is supposed to be a temporary condition leading to your exoneration or debarment, an agency may suspend you on the mere suspicion, upon adequate evidence, of the commission of grounds for debarment.

As a practical matter, the smaller the company, the more you have to worry about suspension and debarment. With large companies, the government will sometimes avoid suspension or debarment, since it needs the goods/services provided by the contractor. After all, the government can’t afford to debar General Electric, since no one else makes nuclear submarines these days. With small companies, however, the government will usually be able to procure the products you offer from someone else, and will thus often pursue suspensions as a matter of principal.

A suspension is a declaration of war that requires an immediate, forceful response. Don’t think you can handle this yourself by schmoozing with the contracting officer. Remember, you would not have been suspended unless the contracting officer thought it justified.

Instead, call your lawyer the same day you receive the suspension notice. He or she will meet with you to investigate the allegations supporting the suspension, talk with potential witnesses, and gather the documentation necessary to prove why the suspension is mistaken. If the agency does not quickly back down, your lawyer may be able to obtain an injunction from a federal judge blocking the suspension, although that’s not an easy task.

Suspensions and debarments are not every day affairs. The overwhelming majority of federal contractors are never suspended or debarred while contracting with the government. Nevertheless, you should be aware of the possibilities of suspension and debarment, especially if your federal business is a significant portion of your sales.

Suspensions and debarments are costly: lost business, lost reputation, lawyers fees, and endless meetings. To avoid this mess to the extent possible, stay on good terms with your contracting officers, perform on time, and abide by the terms of the certifications and representations of your contract.