Debarment and Contractor Responsibility
The Government requires the contractors it does business with to conduct themselves in a manner it deems to be the highest degree of integrity and honesty. These Standards of Conduct1 are pervasive and obligate contractors to avoid fraudulent and unethical conduct, and even the appearance of impropriety in the federal procurement process. If a contractor violates one or more standards of conduct the Government may impose civil and administrative, and even criminal sanctions. One such administrative sanction is suspension and debarment2 from contracting with the Government. Debarment prohibits contractors from doing business with any Executive Agency. A period of debarment may run for three (3) years, but could be extended for a longer period.
One result of the debarment of a contractor is that the contractor is deemed non-responsible for award of a contract. Suspension may precede debarment, but the impact of either action is to preclude the contractor from doing business with federal agencies on a Government wide-basis. When a contractor is debarred, it will be considered non-responsible.3 The acquisition regulations state that a contractor that is suspended or debarred is guilty of a grave violation of Government approved “ethics” and must be denied the award of a contract.4 In order to preserve the integrity of the procurement system, the Government will not award a contract to a contractor that is suspended or debarred.
Does this policy apply solely to the contractor competing for a contract, or does it also include a contractor’s affiliates, such as a parent company?
This question was decided in the United States Court of Federal Claims, (“COFC” or the “Court”) in the appeal of OSG Product Transfers, LLC. (“OSG”) v United States of America, No. 07-561C issued on June 30, 2008. The Military Sealift Command solicited bids for the long-term charter of two (2) T-5 petroleum tankers for Defense Energy Support Center. The Government received six bids, three of which were technically acceptable. The OSG bid was the lowest price acceptable bid. However, the ultimate parent of OSG five...
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