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FCPA Compliance Report

Tom Fox has practiced law in Houston for 30 years and now brings you the FCPA Compliance and Ethics Report. Learn the latest in anti-corruption and anti-bribery compliance and international transaction issues, as well as business solutions to compliance problems.
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Jun 4, 2018

I continue  a five-part series on Suspension and Debarment, with Rodney A. Grandon, Managing Director at Affiliated Monitors, Inc., (AMI) the sponsor of this series. During a 27-year career with the US military and government, Grandon served as the Air Force’s Suspending and Debarring Official as well as a wide variety of other functions which gives him subject matter expertise into issues surrounding this topic. During the series I will be exploring several topics with Grandon including:

Part 1-Introduction to Suspension and Debarment;

Part 2-What is the difference between Suspension and Debarment?

Part 3-What is the convergence between Suspension & Debarment and the FCPA?

Part 4-What is a present responsibility determination?

Part 5-Remedies and Compliance in Suspension and Debarment.

In this episode, we discuss some of the key differences between a suspension and a debarment.

Recalling that on the GSA website, it states, “The Suspension and Debarment process protects the federal government from fraud, waste and abuse by using a number of tools to avoid doing business with non-responsible contractors. Suspensions, Proposals for Debarment, and Debarments are the most widely known tools as these actions are visible to the public”; A suspension is used when there is an immediate need. It is a temporary measure; there is a twelve-month limit, which can be extended for another six months. A debarment is for a specific term but is generally not longer than three years.  

Grandon noted a “suspension is to essentially take steps to protect the government’s interest from a contractor that is believed to be unsuitable as a business partner, until more of the facts can be assembled. Generally, the investigation is underway and there is a need to take protective steps before all the information has been fully gathered.” Grandon emphasized the temporary nature of a suspension while debarment is seen as more permanent, even with the limit of the term.  

Procedurally, a suspension requires notes at the time that a party is entered into the exclusive parties list on the System of Acquisition Management (SAM). A notice letter is issued to the contractor advising that the government has initiated the suspension, the factual basis for the suspension and the rights and procedures available to the respondent as it relates to the suspension. The notice usually indicates the exclusion is effective immediately.

A suspension is effective throughout the Executive Branch of the Federal government and applies to procurement and non-procurement programs. A suspended party cannot present offers or be awarded new contracts or contract renewals. Further, offers will not be solicited from, contracts will not be awarded to and existing contracts will not be renewed or otherwise extended, further subcontracts requiring Government approval will not be approved for a suspended company by any agency in the Executive Branch of the Federal government, unless the head of the agency taking the contracting action or a designee states, in writing, the compelling reason for continued business dealings between you and the agency.

A suspension prevents a company from conducting business with the federal government as an agent or representative of other contractors or of participants in Federal assistance programs, nor can they act as an individual surety to other Government contractors. It also prevents any such companies from being subcontractors to approved or at least non-suspended contractors. Finally, all affiliations of a suspended entity with a company doing business will be examined.

A debarment begins with notice of a proposed debarment and again the party is put into SAM on the exclusion list. A notice is sent out at the same time advising the party that they have been excluded from federal contracting under the procurement role. Once again, a debarment is temporary, is usually three years in length and is based upon a preponderance of the evidence, usually a conviction.

Another commentator has noted that suspension and debarment “essentially eliminate a company’s access to future government revenue, the consequences can be devastating. A company is not only excluded from future government contracts and subcontracts, it is also rendered ineligible for, among other things, federal grants, loans, and subsidies. In addition, the collateral consequences that stem from S&D can be equally, if not more, destructive. A suspended or debarred company may be precluded from contracting with state and local governments, foreign governments, or international organizations (such as the World Bank). A company may also lose its government security clearances and licenses. The reputational damage caused by the suspension or debarment may harm a company’s commercial interests as well.” Indeed, Grandon noted, “It can be very devastating in many cases and it has been referred to as a potential death sentence for companies that are dependent on federal dollars for their revenues.”

Some of the reasons for a suspension or debarment can include commission of fraud, embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violating Federal criminal laws, receiving stolen property or an unfair trade practice. A basis can also be if a company fails to perform the contract and, most interestingly, if a contractor knowingly fails “to disclose violation of criminal law”. The bottom line is suspension and debarment can strike fear into the heart of any federal government contractor.

Tomorrow we take up the convergent between the Foreign Corrupt Practices Act (FCPA) and suspension and debarment.

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