To mandate or not to mandate the use of suspension and debarment – that is the current question up for debate among federal agencies and government officials. As criticism of agencies for failure to utilize or enforce suspension and debarment procedures continues, the idea of mandating the use of these procedures as punishment for indictments and convictions related to federal contracts is gaining momentum. Interest in this idea reached a high point in recent weeks with issuance of a memorandum from the Office of Management and Budget (“OMB”) and agency testimony before the Senate on the matter.

The OMB memorandum identifies the use of suspension and debarment a “powerful tool” for protecting taxpayer resources and the integrity of federal government processes from government contractors who “lack business integrity because they have engaged in dishonest or illegal conduct or are otherwise unable to satisfactorily perform their responsibilities.” The memorandum, which was issued in response to an August 2011 Government Accountability Office (“GAO”) report, found that more than half of the ten agencies it reviewed lacked characteristics common among active and effective suspension and debarment programs. In particular, the GAO discovered that the agencies investigated did not have: (i) sufficient dedicated staff resources, (ii) well developed internal guidance, and (iii) processes for referring cases to officials.

To remedy the issues addressed in the GAO report, the OMB set forth a new set of directives that apply to agencies and departments subject to the Chief Financial Officers Act. These directives include the following: (1) appointing senior accountable officials to assess agency suspension and debarment programs; (2) reviewing internal policies and procedures to ensure effective use of suspension and debarment tools; and (3) checking federal databases to guarantee that only responsible contractors receive federal awards. The OMB tasked the Interagency Suspension and Debarment Committee (“ISDC”) to serve as support structure by helping agencies develop trainings and share best practices related to suspension and debarment tools.

The OMB issued its memorandum one day before the Senate Committee on Homeland Security and Government Affairs (“Committee”) held a hearing on the matter. The Committee obtained testimonies from agency heads and officials, including Daniel Gordon, outgoing OMB procurement chief, and Steven Shaw, deputy general counsel of the U.S. Air Force. While committee members, including Senators Susan Collins and Joseph Lieberman, support implementing mandatory suspension and debarment, agency officials advocated against mandating such procedures. Mr. Gordon stated that the current regulations provide the necessary authority and discretion to combat dishonest or incompetent federal contractors. Mr. Shaw argued against taking away agency discretion and stated that automatic suspensions and debarments would remove contractor incentive to work in creative ways to benefit the government.

Although the question concerning mandatory suspensions and debarments is still up for debate, contractors should use this time to ensure that they and their businesses would not fall prey to the proposed automatic measures if they became law. Accordingly, contractors need to take an internal look at their compliance policies and procedures to make certain they meet all federal contract requirements. By taking advantage of the opportunity to “clean house” concerning contract provisions and ethical regulations, contractors can obtain a clear conscience about their compliance and prevent any violations that could potentially lead to suspensions and debarments.