In this era of outsourced government, nothing strikes fear in the hearts of government contractors like the words “suspension” and “debarment.” Given recent legislative initiatives designed to increase the prominence and use of this tool, a company’s familiarity with the U.S. suspension and debarment (S&D) regime is extraordinarily important.
For a company that does business with U.S. and foreign governments, this knowledge is critical. Although the FCPA does not typically involve U.S. government contracts or the company divisions that do business with the U.S. government, a company may be excluded for conduct unrelated to U.S. government contracts.
This is the first post in a series that will provide a broad overview of the U.S. administrative S&D regime, a discussion of recent legislative activity, and information about comparable debarment regimes that may also be triggered by the bribery of foreign government officials.
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Federal Acquisition Regulation (FAR) 9.4 authorizes the administrative S&D of government contractors to ensure that the federal government does business only with “responsible” partners. S&D reinforce this policy by precluding the award of new contracts to companies whose misconduct indicates they are no longer responsible enough to do business with the U.S. government. This is a discretionary regime that may be used only to protect the government from imminent harm.
As I have discussed in previous posts on the FCPA Blog (here and here), an important but frequently misunderstood aspect of the S&D regime is that both tools are to be used only for the purpose of protecting the government, not to punish past misconduct (more on that topic in my next post).
Because S&D essentially eliminate a company’s access to future government revenue, the consequences can be devastating. A company is not only excluded from future government contracts and subcontracts, it is also rendered ineligible for, among other things, federal grants, loans, and subsidies. In addition, the collateral consequences that stem from S&D can be equally, if not more, destructive. A suspended or debarred company may be precluded from contracting with state and local governments, foreign governments, or international organizations (such as the World Bank). A company may also lose its government security clearances and licenses. The reputational damage caused by the suspension or debarment may harm a company’s commercial interests as well.
When all of these consequences are considered, it is not surprising that the regime is often referred to as the “corporate death penalty.”
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Up Next—Suspension & Debarment Part II: 'Seriously, Suspension and Debarment May Not Be Used to Punish Contractors…'
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.