Debunking “Too Big to Debar” (Again)
Sometimes I feel like combatting debarment misinformation is a part-time job. Anytime misconduct involving a government contractor becomes public, criticism from the media, watchdog groups, and Congress often negatively influences a public that is largely uninformed about the debarment process, creating public pressure to rid the government of “bad” contractors.
Many of these calls for “more debarment” not only lack a basic understanding of U.S. debarment laws, they fail to acknowledge the extreme negative consequences of overly rigid or punitive debarment systems. I have spent the past 15 years publishing countless articles and essays in an attempt to counter the loud and, frankly, ignorant voices spreading misinformation about this critical risk management tool. Given recent attention to this issue, I have provided a brief explainer of U.S. debarment law and policy below.
.1. Is discretionary debarment in the United States used to punish “bad” contractors?
No. Federal Acquisition Regulation (FAR) 9.4 provides the framework for discretionary suspension and debarment in the U.S. procurement system and is grounded in the concept of “protection” rather than “punishment.” As noted in FAR 9.402: “The serious nature of debarment and suspension requires that these sanctions be imposed only in the public interest for the Government’s protection and not for the purposes of punishment.”
The punishment/protection distinction is one of the most frequently misunderstood aspects of the U.S. debarment regime – often leading to confusion and misunderstanding about how or why certain exclusion decisions are made when a contractor’s misconduct is discovered. The confusion likely stems from the mistaken belief that debarment is an extension of the government’s criminal justice system, designed to punish bad actors. Although this is certainly the case in some countries, in the United States, debarment is a “business decision,” designed to protect taxpayer dollars, not punish misconduct.
Even if there is cause to consider a contractor’s debarment, agency suspension & debarment officials (SDOs) must also assess whether exclusion is still necessary to protect the government’s interest by considering “mitigating factors” such as cooperation, disciplinary action against responsible employees, and compliance enhancements.
Because the United States attempts to balance its interest in promoting competition with its need to maintain the integrity of the system, it reserves debarment only for those contractors who continue to pose a threat to the government’s interests. The United States views the exclusion of contractors that, despite past misconduct, are otherwise responsible due to their significant mitigation efforts, as undermining its goal of competition by unnecessarily excluding contractors that are responsible enough to continue receiving taxpayer dollars.
2. But Contractor X did something bad. And fines and penalties don’t do enough to punish wrongdoers. Shouldn’t we use debarment as a form of punishment to more effectively deter misconduct?
No. Debarment is not an effective “sanction.” Systems that wield debarment as a form of punishment disincentivize disclosures and cooperation, deter compliance enhancements, and undermine government procurement competition. Don’t believe me? Just look at Canada.
3. Are some contractors too big to debar?
No. Although large contractors are less likely to be debarred than their small to mid-sized counterparts, the reason is not because of a “too big to debar” problem. As I explained in my article, A House of Cards Falls: Why Too Big to Debar is All Slogan and Little Substance:
[W]hen misconduct occurs in huge multinational corporations, the improper activity often involves a specific division or subset of employees, rather than the entire company. Thus, in responding to the misconduct, large companies are better positioned to sever the diseased sector, remediate, implement robust compliance programs, and move forward. In other words, these companies are often far better equipped to demonstrate their present responsibility. Small companies, however, often lack the resources to respond to and remediate harm and install new and sophisticated compliance programs. More importantly, because misconduct often permeates the entire firm, small companies are often unable to terminate the employees responsible for the misconduct, making full remediation impossible.
In addition, most of the largest U.S. contractors have the most sophisticated and well-resourced ethics and compliance programs in the world. With organizations such as DII and IFBEC continuing to support these efforts, many large contractors have become leaders in the ethics and compliance space. Consequently, when large contractors have compliance failures, they have the resources to remediate the problem, enhance their pre-existing compliance programs, and demonstrate that they are still responsible enough to receive government contracts.
4. But contractor misconduct makes me mad. Punishing them by taking away their government contracts would make me feel a lot better.
First, as a general rule, it’s not a great idea to allow “feelings” to drive the development of administrative policies. To the individuals calling for “more debarment,” I ask: Do you like paying more for things than you should? Do you prefer to buy lower quality goods and services? Do you want your taxpayer dollars to be wasted? No? Then STOP advocating for policies that undermine competition. I am not suggesting that we continue working with companies that are irredeemable or pose ongoing threats to the government. But if a company can demonstrate that they have fully addressed misconduct, engaged in remediation, enhanced their compliance programs, and no longer pose a threat to taxpayer dollars, they shouldn’t be debarred.
Second, this is a friendly reminder that bad stuff happens. No entity is immune from employee misconduct and compliance failures. The best any company can do is prevent as much misconduct as possible, detect misconduct that has already occurred, and mitigate the wrongdoing. Promoting policies that incentivize compliance investments rather than those driven by a visceral desire for retribution is the best way to protect government procurement systems.
Associate Dean, Government Procurement Law at The George Washington University Law School