How Will Debarment Officials Weigh the “Public Interest” Consideration During the Covid-19 Pandemic in the Context of Debarment Actions Given the Vital Government Benefits at Stake?

 

Ellis BennettBy Ellis Bennett

Bennett is a partner practicing out of Dunlap Bennett & Ludwig’s Leesburg, VA office.

Government agencies may exclude contractors from doing business with the entire government as a result of various types of misconduct.  Federal Acquisition Regulation (“FAR”) 9.4 sets forth the various policies and procedures applicable to the debarment of government contractors.  If debarred, most contractors, are subject to a complete prohibition from doing any business at all with the federal government for three (3) years.  In most cases, any such prohibition is more than enough to put a government contractor out of business.  Moreover, any individual subject to debarment is not only prohibited from bidding on or receiving any federally funded contracts, he or she is also ineligible to receive any federal grants, scholarships, fellowships, contracts of assistance, loans, loan guarantees, subsidies, or insurance.  This may impact many individuals otherwise eligible for government loans, such as Small Business Administration (“SBA”) loans, Veteran’s Administration (“VA”) loans or health insurance coverage through Medicare or Medicaid.

The purpose of debarment is not punitive.  Instead, debarment is designed to protect the integrity of government programs by ensuring that only honest, ethical, and otherwise responsible persons and companies participate.  The basis for a debarment can be for either a conviction or a civil judgment. Criminal convictions that lead to a debarment may include fraud, antitrust violations, forgery, bribery, falsification of records, making false statements, making false claims, conspiracy, failure to comply with applicable environmental requirements, failure to pay the predetermined minimum wage, and other offenses indicating a lack of business integrity or business honesty that seriously and directly affects a person’s or company’s “present responsibility.” Civil judgments that lead to a debarment typically include qui tam actions for making false claims under the False Claims Act, 31 U.S.C. 3729 et seq. In addition to a civil judgment or conviction, a person or company may be debarred whenever an agency can show by a preponderance of the evidence that some other serious cause that may affect a person’s or company’s present responsibility has occurred.

Debarments are initiated when the government sends written notice to the person or company that is proposed for debarment.  A contractor may respond to a debarment notice either in person or in writing or both.  After receiving the notice, the respondent has thirty (30) days to submit information and argument in opposition to the suspension or proposed debarment.  The response typically includes specific facts that contradict the factual statements in the notice.

Before arriving at any debarment decision, the debarring official is not only required to consider the seriousness of the contractor’s acts or omissions as a factual matter, the debarring official is also required to consider any relevant remedial measures or mitigating factors that exist.  While the existence or nonexistence of mitigating factors or remedial measures is not necessarily determinative of a contractor’s present responsibility, the FAR references various factors that may influence the debarring official’s decision.  These mitigating or aggravating factors include such items as the actual or potential harm, the frequency or duration of the incidents, pattern or history of wrongdoing, any previous exclusion, paid fines, cooperation in an investigation, and corrective action.  In addition to the list of mitigating factors included in the FAR, the debarring official is to consider the “public interest” in making a debarment determination.  The public interest consideration gives debarring officials great latitude.

The debarment of contractors is absolutely discretionary.  Even when a cause for debarment exists, an agency is not required to debar a contractor.  Given the focus on the public interest in making debarment determinations, a new unique issue may well be raised in the coming weeks and months in the context of debarment proceedings given the Covid-19 (or “Coronavirus”) pandemic.

Given the current pandemic, debarment officials should carefully consider whether debarment is appropriate and in the public interest because if imposed it may well deprive contractors and their principals and employees access to vital loans and insurance benefits that may be an absolute must for survival not just in a financial sense, but in a literal sense.  It will be incredibly interesting to see how debarment officials approach this new and unique consideration as things continue to evolve as our country confronts the numerous challenges presented by the Covid-19 pandemic.

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Posted in: Government Contracts