By: Ben Barlow  [9/7/22]

There are few words that strike fear in the hearts of those who make their living via security clearances and government contracts as much as ‘debarment.’ Those outside the contracting world have likely never heard the word – but in a business culture where contracts might be a future option, all should be familiar with not only the word but how it can negatively impact individuals and businesses.

In the normal business and employment world, penalties for wrongdoing and improper activity can range from a reprimand to termination to criminal charges. In the government contracting world, all those possible consequences exist; however, there is the additional penalty set forth in the Federal Acquisition Regulations (“FAR”) and the Defense corollary (not surprisingly known as the “DFAR”) – of debarment, making a business or individual ineligible to work on government contracts for a period of time (generally up to three years).

If three years seems like a relatively short period of time, you are likely not a government contractor. For contractors and subcontractors relying on contracts for income, three years is an eternity and jeopardizes not only the opportunity to work on other contracts immediately but, for individuals, the potential of ever being hired by another contractor. That potential consequence is in addition to the potential impact on an individual’s ‘golden ticket’ – the security clearance that was likely long-sought and which puts individuals into a relatively small hiring pool.

First, the good. Debarment is a good thing for taxpayers and agencies – at least good in theory. It is intended to be a safeguard to ensure that companies and individuals engaging in improper activity are stopped and not only terminated from the contracts but prevented from simply jumping on another contract and engaging in similar activity until caught.

Once again, those not well-versed in the contracting world might wonder how someone could do something wrong on one contract, get fired, and then simply jump on another contract. Well, easily.

There are an incredible number of contracts. Everything the government does, from purchasing straws at a commissary on a Navy base to obtaining the specialized circuit boards that control power to mobile generators abroad has a corresponding contract specifying everything from the size and shape of the straws to the packaging for the circuit boards. Other contracts are for services ranging from operating the cash register at that Navy base (with the straws) to providing intelligence analysis in a tent powered by that mobile generator. That is an incredible number of contracts representing an incredible number of products, people, and dollars. To guard against bad actors simply jumping from contract to contract or companies jumping from supplying one product on one side of the planet to another product on the other side, the government has a master list of those who have been ‘debarred.’ That list of excluded businesses and individuals is what ensures that everyone knows who is ‘on the outs’ for contract awards and hiring.

So, the good of debarment is that it and the master list of excluded businesses and individuals safeguard government agencies and taxpayers from bad actors.

The bad is that bad actors are not the only businesses and individuals who get caught up in the effort to safeguard agencies and taxpayers – sometimes in the rush to protect the contracting world from wrongdoing, misunderstandings, or normal contract disputes get improperly labeled misconduct – and a dispute which should be resolved through discussions and policy and procedure correction instead gets referred to a debarring official and a business or individual receives a ‘Notice of Proposed Debarment’ (“Notice”) instead.

A Notice informs an entity or individual that the agency has determined that some conduct has occurred warranting punishment. That Notice starts a clock ticking (30 days) for the entity or individual to respond to the Notice, to provide additional information, and to request an opportunity to present evidence opposing the proposed debarment.

That Notice will also reference an administrative record (“AR”). The AR is the ‘file’ upon which the proposal is based – it is the set of documents that the debarring official has reviewed in determining that specific conduct warrants debarment. Attached to the Notice will be a memo providing the facts (as understood by the agency and culled from the AR) and argument as to why the facts, in light of the FAR, warrant debarment.

If there were no response from the entity or individual being proposed for debarment, the debarring official would look at the AR and determine whether the facts, AR, and their own argument supports the proposed punishment. In other words, without a response from the business or individual, the debarring official will take the information they have just used to propose debarment and decide whether it supports debarment – so the outcome for non-responding businesses or individuals is fairly clear.

So, failing to respond to the proposal is not a good idea. First, the AR just contains the government’s side of the story and there are countless situations where hearing one side of a story can make activity seem like misconduct, and only upon hearing both sides of the story does the true story become clear. Letting the government’s AR be the only record is much like being the defendant in a lawsuit but allowing only the other side’s evidence to be put in front of the judge. Second, officials can misinterpret and misapply the FAR. There might have been some misconduct on the part of an employee or entity, but that misconduct might have been isolated and might not support the extreme punishment of debarment. Again, debarment is supposed to be the answer where misconduct falls into specific categories or is so compelling so as to justify an extreme punishment. Often errors or mistakes occur where individuals and businesses are operating in the fast-paced world of contracting, but those individuals and businesses have long records of service or other mitigating factors that show debarment is not in the public interest and would merely deprive the agency and taxpayers of a reliable contractor – albeit one that had to correct some processes or procedures. Supplementing the AR with other material setting out the ‘other side of the story’ and questioning the official’s application of the FAR to the facts is crucial.

Attorneys, not surprisingly and unfortunately, often advise that the best course of action is for you to retain an attorney – even when, in reality, you might not need an attorney. Consultations with attorneys should not always end with retaining the attorney being your only option because there are times when there is not the risk exposure you imagine or it makes business sense for you to handle a matter in other ways. The receipt of a debarment notice and proposal is not one of those times where you are fine on your own – debarment is far too serious a matter to take on yourself and quality representation will often make a real difference as to whether proposals are denied or debarment terms are drastically shortened. In addition, where individuals still have potential issues with their security clearances even if the proposal is denied or debarment period shortened, representation by attorneys experienced in dealing with security clearance issues is essential. If you have specific questions about your situation and whether representation is needed, our debarment and security clearance team at Dunlap Bennett & Ludwig would be happy to assist.

To learn about how Dunlap Bennett & Ludwig can assist you with your legal needs, contact us by calling 800-747-9354 or by emailing clientservices@dbllawyers.com.


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Posted in: Business Law, Government Contracts

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