On April 18, 2022, the government released its annual report on federal suspension and debarment activities for FY 2020.  The report is published by the Interagency Suspension and Debarment Committee (“ISDC”) to fulfill its obligation annually to update Congress on the status of the government’s suspension and debarment program across all executive agencies.  While the facts and figures are somewhat dated, the FY 2020 Report nevertheless provides useful insights into federal suspension debarment trends that are relevant to the government contracting community.  Below we highlight the three biggest takeaways from this year’s ISDC report.

1. Combined Suspensions and Debarments Hit a Ten Year Low

Combined suspensions and debarments in FY 2020 hit the their lowest totals since FY 2010.  FY 2020 saw 1,671 combined suspensions and debarments, down from 1,921 in FY 2019.  In its report, the government attributes that decline in part to challenges associated with the COVID-19 pandemic, including the government’s remote or socially distanced workforce, delays in mail service, travel restrictions, and postponements in court proceedings.  However, it is worth noting that combined suspensions and debarments have declined in five of the last six years, and are down 56% from the FY 2014 peak of 2,938.

On an individual agency level, traditionally active agencies once again have reported the highest total number of actions in FY 2020.  The Department of Defense (including all of its component departments) continues to generate a large share of the federal debarment activity, with 621 suspensions and debarments in FY 2020 (roughly 37% of FY 2020 totals).  Other customarily active agencies again account for a significant share of the suspension and debarment action in FY 2020, including the Department of Homeland Security (217 or ~13%), the Environmental Protection Agency (164 or ~10%), the General Services Administration (75 or ~4%), and the Department of Transportation (44 or ~3%).[1]

There is no way to determine from the report the extent to which contractor self-policing and disclosures, mandatory or otherwise, account for the suspension and debarment activity.[2] While the ISDC reports the number of “referrals” it received, it does not identify the sources of those referrals or the number of referrals attributed to a particular referral source.

2. Increased Emphasis on Alternative Remedies, But Trends Mostly Flat

 The ISDC also attributes the decline in suspension and debarment actions to increased agency use of “alternative remedies,” which require significant additional time and resources compared to immediate exclusions effected under the FAR or NCR.  Agencies should be commended for striving to use alternative remedies, such as pre-notice letters and administrative agreements, which allow SDOs to investigate potential present responsibility concerns and protect the government’s interest without immediately triggering the often-devastating consequences of a suspension or debarment.  Although it is encouraging that the ISDC continues to emphasize alternative remedies, FY 2020 data suggests use of alternative remedies generally has remained consistent with (and in some cases down from) historical norms.

The most commonly used form of “alternative remedy” are pre-notice letters, including show-cause letters, requests for information, and similar communications providing recipients with an opportunity to respond to SDO concerns prior to formal SDO actions.  The appropriate use of pre-notice letters long has been encouraged both by industry and the ISDC as a valuable first-step alternative to issuing a notice of proposed debarment.  Heeding this guidance, certain agencies have distinguished themselves in their use of pre-notice letters, including the Navy (28 pre-notice letters in FY 20), the Environmental Protection Agency (16), and the Department of Homeland Security (12).  However, pre-notice letters declined from 139 in FY 2019 to 103 in FY 2020 — a 26% drop, indicating that there remains ample room for other agencies to adapt their practices to better align with ISDC recommendations.

Administrative agreements are another “alternative remedy” tracked in the ISDC report.  In FY 2020, federal agencies entered into 58 administrative agreements, a slight increase from the 54 administrative agreements entered in FY 2019.  The ISDC report specifically notes that eight agencies reported entering into administrative agreements with individual respondents in FY 2020.  This is notable given that agencies historically have struggled to identify an effective form of administrative agreement that would allow individuals to demonstrate present responsibility and avoid an exclusionary action.

3. Significant Steps Toward a Unified Rule

Finally, this year’s report suggests that a unified suspension and debarment scheme for procurement and nonprocurement transactions may finally be on its way to becoming a reality.  The parallel and not-entirely-consistent regulatory regimes that govern suspension and debarment in the procurement and nonprocurement contexts have confused contractors – and government personnel – for years, and the ISDC has long aspired to address the disparity between the two bodies of law.

This year’s ISDC report indicates that the ISDC has created a subcommittee to provide recommendations and technical assistance to the FAR Council as it strives to align the FAR with the NCR.  The input is part of FAR Case 2019-15, which will support the issuance of a new proposed rule.  Although it remains to be seen whether and how any proposed rule will address historical inconsistencies between the FAR and NCR, the creation of the ISDC subcommittee and FAR Case 2019-15 represent substantial steps toward realizing this long held ISDC objective.

Conclusion

Although dated, the FY 2020 ISDC Report illustrates some important trends in the federal debarment space.  Although the report depicts that a decline in suspension and debarment actions in relative terms, the overall number of actions (more than 1,600 suspensions and debarments) shows that this remedy nonetheless remains an important tool in the government’s arsenal.  Further, the report also serves as a reminder to industry that a present responsibility review is becoming an increasingly variable process with many potential outcomes.  Now more than ever contractors facing the possibility of a suspension or debarment should be aware of and consider all of the potential paths for resolution.

 

[1] As in the past, the counting convention used by the ISDC to generate its statistics tends to overstate the level of suspension and debarment activity, as suspensions, proposed debarments and debarments involving the same respondent and underlying circumstances are counted as separate exclusion actions.  In addition, companies with multiple names or DBAs were counted as separate business entities for purposes of the data.

[2] The ISDC report indicates that 10 agencies reported 36 instances of “proactive engagements” by companies and individuals in FY 2020.  However, it is not clear whether any of these engagements involved reports of wrongdoing simultaneously made to an Office of Inspector General under the Mandatory Disclosure Rule applicable to federal contractors or similar disclosures.  Proactive engagements often occur prior to resolution of a matter already pending with an enforcement agency.