One of the most fundamentally (and frequently) misunderstood aspects of the FAR 9.4 suspension & debarment (S&D) regime is that S&D are only to be used for the purpose of protecting the Government, not to punish contractors for their past misconduct. This “punishment vs. protection” distinction is crucial to understanding why certain S&D determinations are made.
In recent years, as contractors like BAE and Siemens have settled large (FCPA-related) enforcement actions with the U.S. Government, there has been an epidemic of misleading and erroneous statements made about the role of S&D in the FCPA context. Specifically, it has been argued that contractors should be “punished” if they violate the FCPA by being debarred from the procurement system. Statements like this are legally incorrect and demonstrate a glaring unfamiliarity with the plain language of the FAR.
S&D are not tools of punishment and are wholly independent of the criminal justice system. They are administrative remedies that enable agencies to exclude contractors from the federal procurement system only to protect the Government from the imminent harm that may result from doing business with a non-responsible contractor. Indeed, as FAR 9.4 makes clear: “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 purposes of punishment.”
The individuals pushing for greater use of S&D to “punish” contractors lack a basic understanding of the how the regime actually works. When a company violates a law like the FCPA, prosecutors have various tools at their disposal that they may use to punish the organization. Remember the huge fines and penalties that both Siemens ($800 million) and BAE ($400 million) paid when they settled with the Government? That was their punishment.
While it is always reasonable to expect ethical conduct from companies that receive taxpayer dollars, the S&D regime must be used appropriately—not as some arbitrary hammer designed to severely cripple or destroy companies that may have run afoul of the FCPA.
Up Next—Suspension & Debarment Part III: Mechanics and Mitigating Factors
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Suspension and Debarment Part I: An Introduction, can be found here.
Jessica Tillipman is a contributing editor of the FCPA Blog. She's the Assistant Dean for Outside Placement and a Professorial Lecturer in Law at The George Washington University Law School. She also teaches an Anti-Corruption seminar that focuses on corruption control issues in government procurement.