Contract appeals division: administrative compliance agreements: an effective tool in the suspension and debarment process

Army Lawyer, Feb, 2005 by Jennifer S. Zucker, Joseph Fratarcangeli

Introduction

Many in the government contracting community question the effectiveness of administrative remedies such as suspension and debarment for ensuring a competitive and nondiscriminatory contracting environment. Such criticism may be well-founded, but the primary intent of these provisions is to protect the government and the taxpayer. One problem in ensuring effectiveness has been the lack of a mechanism for periodic review of contractor responsibility following an adverse administrative decision. Suspension and debarment, frequently viewed as an all or nothing remedy, generally function to disqualify the non-responsible contractor from receiving new government contracts for a specified period of time. In many cases, this is unobjectionable. In some cases, however, the government may have an interest in rehabilitating the contractor through the use of corrective and remedial administrative measures.

To this end, the Army has expanded the use of administrative compliance agreements. (1) Compliance agreements provide continuing assurance that the interests of the government will be sufficiently protected without resorting to a suspension or debarment. (2) Moreover, administrative compliance agreements provide redress for the apparent inequities of the suspension and debarment process with respect to small and large businesses. Every case, however, does not warrant the application of an agreement, as it requires considerable time and expense. (3) Factors for the government to consider before entering into an administrative compliance agreement include: the contractor's otherwise satisfactory performance; its response to the wrongdoing; its willingness to cooperate; its willing to make restitution; and its willingness to implement or strengthen an ethics program. (4)

This article briefly outlines suspension and debarment procedures and then discusses administrative compliance agreements as an effective option. The discussion also includes the application of an administrative compliance agreement to large and small businesses, as well as the measures taken by Boeing following the Air Force's recent suspension.

Background

Federal Acquisition Regulation (FAR) Part 9 encompasses procedures pertaining to contractor responsibility, as well as suspension and debarment. (5) A contracting officer shall make an affirmative determination of responsibility preceding all government contract awards. (6) In making that determination, the contracting officer must assess such factors as the adequacy of the contractor's financial resources, its ability to satisfy the contract requirements, and whether the contractor has "a satisfactory record of integrity and business ethics." (7) This analysis ensures that federal agencies only contract with responsible contractors. Furthermore, the analysis only applies on a contract-by-contract basis.

On the other hand, suspension and debarments render contractors ineligible from receiving any new federal government contracts. (8) Suspension is action taken by the suspension official under FAR 9.407 to temporarily disqualify a contractor. (9) Debarment is action taken by the debarring official under FAR 9.406 to exclude a contractor for a reasonable, specified period. (10) FAR 9.407-2 and FAR 9.406-2 lists causes for suspension and debarment. (11)

Are Administrative Compliance Agreements a Viable Alternative to Suspension and Debarment?

Administrative compliance agreements offer an option to agencies considering suspension and debarment. Although waivers permit the federal government to conduct business with a contractor that is suspended or debarred, such action is criticized because the contractor continues to receive business without addressing the misconduct. Administrative compliance agreements ensure that the government (and more importantly, the suspension and debarment official (SDO)), through internal and external audits, has confidence that the contractor will act responsibly. Although no industry template for administrative compliance agreements exists, the following elements draw from and expand upon those listed in Defense Federal Acquisition Regulation Supplement 203.7001: (12)

1. Recognition of Malfeasance: Contractor recognition of malfeasance and adequate assurance that it will not repeat the misconduct.

2. Removal: Removal of the wrongdoers within the firm, as appropriate. This may be difficult depending on the size of the company and/or the position held by the offender.

3. Satisfactory Performance: Overall contractor performance shall be otherwise satisfactory. The contractor's performance must be in strict compliance with the terms of current contracts.

4. Appointment of an Ombudsman: The Ombudsman's function is to assess the corporate ethical climate and act as the eyes and ears of the agency. This position is critical to any successful compliance agreement and generally refers to an independent attorney, certified public accountant, or other expert knowledgeable in the area of government contracts. While employed by the contractor, the Ombudsman will not be under its direct control. The Ombudsman will certify on an annual basis that he or she has no financial conflicts of interest. Responsibilities include: assisting in the implementation of the Agreement; serving as the first point of contact for all questions regarding the Agreement, conducting internal audits; and, investigating instances of alleged improprieties.