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Is the Federal Suspension and Debarment System Broken?

Is the federal suspension and debarment system broken? The Senate Homeland Security and Governmental Affairs Committee (HSGAC) attempted to answer that question yesterday. That hearing follows a hearing on suspension and debarment held last month by a House Oversight and Government Reform subcommittee. Both hearings featured almost the same witnesses, but hopefully the House and Senate will independently tackle the long-standing problems in the system and enhance protections against non-responsible contractors.

One concern is whether the definition of “presently responsible” in the Federal Acquisition Regulation allows the government to take action against contractors (suspension and debarment isn’t punishment for past misconduct—it’s based on a contractor’s current ability to be responsible). At the first sign of action by the Department of Justice (DOJ) or an agency, contractors (at least those that are not small businesses) fire a few employees, beef up training and compliance measures, and make all kinds of promises to the government in order to avoid the possibility of losing future contract awards. But is that system working in the interest of the government and taxpayers?

In recent months, the government has issued several reports highlighting problems in the federal government’s suspension and debarment system. Despite a decade of concerns, little has changed to protect the public from risky contractors.

Possibly because of the hearings on the Hill, it appears that the Obama administration has finally bought into the fact that the system needs improvement. According to an Office of Management and Budget (OMB) memo released on Tuesday:

Some agencies have long-standing and robust suspension and debarment programs. However, for too long, too many Federal agencies have failed to adequately use the suspension and debarment tools that are placed at their disposal or have failed even to maintain the most basic program capabilities required to suspend or debar non-responsible parties.

The memo directs agencies to appoint a “senior accountable official” to maintain a suspension and debarment program and improve policies and practices in this area.

In fiscal year 2010, there were 5,114 suspensions or debarments, but only one—the 18-day suspension of GTSI Corporation— involved a top federal contractor, which raises concerns about contractors being too big too fail. A recent survey by the Council of the Inspectors General on Integrity and Efficiency illustrated that agencies are not effectively utilizing suspension and debarment to protect the billions of dollars in Recovery Act spending.

Additionally, according to the DOJ Inspector General (IG), from 2005 to 2010, the DOJ awarded 77 contracts to suspended or debarred contractors, only made 17 referrals for suspension and debarment, and did not have a formal system to track the status of suspension and debarment referrals. The DOJ IG noted that there were “deficiencies in DOJ’s suspension and debarment process and … officials are not uniformly checking the EPLS [Excluded Parties List System] immediately prior to making awards.”

The problem with suspended or debarred contractors receiving new contract awards isn’t new. The Government Accountability Office (GAO) revealed in 2009 that it had identified a number of contractors who had received new contracts despite being in the EPLS—the list of suspended or debarred companies and individuals. Also, a July 2011 Department of Defense IG report found “incentive requests totaling $4.17 million from prime contractors who were inappropriately subcontracting to a related party and prime contractors” listed on the EPLS.

Another DoD IG report from July concluded that improvements to the suspension and debarment system are needed, including a better process for referring poorly performing contractors for potential suspensions or debarments, improved training regarding referring poorly performing contractors, and improvements in checking the EPLS before awarding contracts. What made this report particularly interesting was the fact that “[t]he DoD IG has not performed an audit on S&D since 1993, and that audit only focused on S&D reporting procedures for subcontractors.”

Then, there is the recently sunsetted Commission on Wartime Contracting (CWC), which warned in its final report that “agencies sometimes do not pursue suspensions or debarments in a contingency environment” (see Recommendation 11, p. 156). Although the CWC looked at the unique situation of contractor responsibility in contingency operations, POGO believes its conclusions apply throughout the government.

GAO recently reviewed the suspension and debarment process and testified before Congress, recommending that certain agencies “take steps to improve their suspension and debarment programs ensuring that they incorporate the characteristics we identified as common among agencies with more active programs, including assigning dedicated staff resources, developing detailed implementing guidance, and promoting the use of a case referral process.” (Although not required to follow the Federal Acquisition Regulation (FAR), the GAO recently proposed a policy stating that it will follow the FAR’s prohibition on awarding contracts to entities in the EPLS. Let’s hope that the GAO uses this important tool to protect the public.)

So, despite past and present claims by the Interagency Suspension and Debarment Committee (ISDC) that the suspension and debarment system is working, other government watchdogs obviously have a difference of opinion. In fact, the ISDC is part of the problem. It took two years to put together its report on the suspension and debarment system, and it has been deficient in providing leadership in promoting enhancements to the system.

We have recently witnessed some contractor accountability and transparency improvements with regard to EPLS and FAPIIS (the government’s new contractor and grantee responsibility database), but when large companies with questionable track records continue to receive contracts, we have to ask if the system is working as intended.