Fewer Contractors Barred as Government Targets Penalties

August 8, 2018 Sam Skolnik
  • Number of excluded contractors fell 14 percent in one year
  • Feds going after individuals more than entire companies

The number of contractors excluded from government work decreased for the third year in a row, with experts citing increased federal experience in targeting bad players.

In fiscal 2017, federal agencies issued 3,640 suspensions, debarments, and proposals for debarment—14 percent fewer than the 4,249 actions taken in 2016, the reportreleased Aug. 7 from the Interagency Suspension and Debarment Committee found. The report was sent to Congress July 31.

The drop from four years ago is even starker. In 2014, agencies suspended contractors, debarred them, and proposed them for debarment a total of 5,179 times—42 percent more than in 2017.

The reduction may be a result of a changing federal approach to potentially troublesome companies with officials giving them advanced notice to fix problems and singling out individual executives rather than entire firms for punishment, according to an attorney who specializes in federal contracting.

Agencies suspend, debar or propose to debar federal contractors to stop those companies from doing business with the government for a temporary period. The actions are designed to protect the government from companies “whose conduct indicates either a lack of business honesty or integrity or serious, poor performance,” according to the annual report.

Contractors often view suspensions and debarments as punishments that can be tantamount to death sentences, causing them to potentially lose millions of dollars of business.

Nuanced Situations

One reason for the drop in exclusions may be a multiyear trend in which the federal government suspended and debarred individual corporate officials and workers, as opposed to contracting companies.

As individuals have been targeted more frequently, contractors are learning how to present mitigating factors more effectively that might prevent exclusions, Paul Khoury, a partner with Wiley Rein and co-chair of the firm’s government contracts practice group, told Bloomberg Government. Federal agencies are likewise becoming better at figuring out when an individual’s actions might not rise to the level of an exclusion, he said.

“There seems to be more willingness to look at more nuanced situations,” he said.

Early Warning

The decrease in contractor exclusions over the last year coincided with a rise in the number of agency “pre-notice” letters, which are used to inform potential exclusion targets that agency suspension and debarment officials are reviewing their cases – and gives them a chance to respond.

Agencies sent 193 letters in 2017, 21 percent more than the 160 sent the year before. By contrast, in 2009, just 90 such letters were sent by agencies.

“Use of these letters helps the agency better assess the risk to Government programs and determine what measures are necessary to protect the Government’s interest without immediately imposing an exclusion action,” according to the report.

It’s possible that the rise in pre-notice letters could help explain the drop in exclusion actions, Khoury said. “If you have a concern, write a letter” and work with that company before taking an action that, for the contractor, can be drastic, he said.

To contact the reporter on this story: Sam Skolnik in Washington at sskolnik@bgov.com

To contact the editors responsible for this story: Bennett Roth at broth@bgov.com; Jodie Morris at jmorris@bgov.com

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