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Law360 (November 6, 2020, 5:17 PM EST) --
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| David Robbins |
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| Sati Harutyunyan |
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| Eric Herendeen |
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| Umer Chaudhry |
As in prior years, this review is focused on the agencies most actively suspending and debarring government contractors. The analysis does not include a number of agencies that have active statutory and discretionary programs but do not take frequent action against government contractors.
The benefit of analyzing SAM data shortly after the Sept. 30 fiscal year-end is that it provides a near real-time understanding of the state of suspension and debarment without needing to wait months — and sometimes over a year — for the Interagency Suspension and Debarment Committee, or ISDC, report.
Additionally, by examining the publicly available data in real time we are able to glean more insights about the risks government contractors face than would be available solely from the ISDC report. And, as has been the case in years past, by tracking this data year over year, trends emerge that are worth watching.
It goes without saying that this year was unique in nearly every respect. COVID-19 caused tremendous disruption in the contractor workforce, the government community, and the nation as a whole. We expected that the suspension and debarment numbers would be different this year as a result. But that does not necessarily appear to be the case.
Once again, overall numbers of suspensions and debarments continued to decline — by nearly 14% — from the prior year. This is a continuation of a multi-year trend. The overall decline from when we started writing these articles after fiscal year 2016 through fiscal year 2020 is a staggering 44.87%.
SAM Data Versus ISDC Report Data
The data discussed in this article differ significantly from the information the ISDC publishes in its report to Congress. The ISDC report lists total numbers of suspensions, debarments and proposed debarments by agency. As such the ISDC report measures the number of times an agency issued any action at all during a fiscal year.
For example, if the agency suspended, proposed for debarment and debarred a single contractor in a year, that counts as three actions in the ISDC report. But that information does not help us understand the number of companies or individuals that were subjected to exclusions. Nor does it tell us anything about the types of entities against which the government directed its exclusionary authority.
Therefore, we continue to need to dive deeply into SAM data in order to understand how the suspension and debarment system really functions. While the ISDC report is prepared for Congress, this deep dive into SAM data presents information that helps contractors assess risks and adjust their conduct.
As always, there are caveats and assumptions that accompany this data. This information is exported directly from SAM. It relies on the accuracy of the information input into SAM by the government, and the functionality of the SAM system itself. The analysis continues to require searching the exclusions tab on SAM using a date restriction for fiscal year 2020, exporting the data to excel and analyzing the output.
And once again, agencies that have not been historically active with discretionary suspensions and debarments are omitted from this analysis. For example, while we included the U.S. Department of Homeland Security in our analysis last year because it entered a single exclusion action after years of no actions at the headquarters level, DHS has again fallen back to zero. DHS is therefore omitted again this year.
Agencies whose suspension and debarment efforts are focused on entities other than government contractors — e.g., U.S. Immigration and Customs Enforcement, U.S. Department of Health and Human Services, Office of Foreign Assets Control and U.S. Department of Housing and Urban Development — are also excluded from this chart.
To be clear, each of these excluded agencies have active programs. But because they have different missions than the contractor-focused agencies, their data would skew the analysis of how the government contractor-facing suspension and debarment system is actually working.
SAM no longer marks firms or special entities in exported data. In years past, we have used that information to analyze how many actual government contractors were being excluded. The companies with normal indicia of participation in government contracting, such as Data Universal Numbering System, or DUNS, numbers and Commercial and Government Entity codes, were considered firms, and those without were special entities.
In order to attempt to continue the analysis, we have treated companies with DUNS numbers in their SAM exclusion record as firms and those without as special entities. While this is an imperfect comparison, we believe it is important to consider how many actual government contractors — not those who may hypothetically someday contract with the government — are being excluded.
Moving on to individuals, agencies are still listing multiple common names in SAM. But that practice appears to be less frequently used this year than in years past. Last year, we noted that the U.S. Department of the Interior used the practice to list 14 common names, with 13 seemingly related to just one individual:
1. Helen Brings
2. Helen Brings Back
3. Helen Brings Him Back
4. Helen Bringshim Back
5. Helen Bringhimbac
6. Helen Bringshimback
7. Helen F Bringshimback
8. Helen F Hernandez
9. Helen Frances Bringshim-Back
10. Helen Frances Hernandez
11. Helen Hernandez
12. Helen S Hernandez
13. Helen S. Hernandes
And we noted that this use of common names raised a number of questions. What interest is possibly served by listing this many names? Is there sufficient evidence that this one person is really conducting U.S. government contracting under all of these names? Would any reasonable acquisition official really think "Helen Bringshimback" is a unique individual, and does the government need protection from her and all of her various aliases? Also, one cannot help but question who Helen is trying to bring back, and why.
We filed a Freedom of Information Act request to try to answer these questions. After the department first denied it had any records, we asked the department to check again — after all, the regulations require written decisions. Ultimately, we received our response.
Helen Hernandez pled guilty to embezzlement and theft from an Indian tribal organization, in violation of Title 18 of the U.S. Code, Section 1163. Specifically, Hernandez was the secretary for the chief financial officer of a specific tribe's credit and finance office. The referral for debarment consideration articulated Hernandez's connection with government funds in this way:
Further review of the materials released through the FOIA process revealed that Hernandez held clerical responsibilities in an office that approved small loans — not exceeding $1,000 — and abused that position to help issue $47,000 in fraudulent loans.Ms. Hernandez has experience working with funds that are awarded by the Federal Government. As such, Ms. Hernandez may reasonably be expected to seek work funded under Federal assistance program or to otherwise participate in Federal discretionary assistance, loans, leases and benefit programs. Therefore, it is reasonably likely that M. Hernandez may be a "principal" as defined at 2 C.F.R. 180.995. As such, Ms. Hernandez poses a business risk to the Federal Government.
Hernandez did not respond to her proposed debarment and was therefore debarred for three years. According to a U.S. Department of Justice press release, Hernandez was sentenced to five years of probation and ordered to pay $42,100 in restitution.[2]
While we might question whether a temporary employee serving as an administrative assistant has experience working with funds awarded by the federal government sufficient to debar her, the regulations leave that decision to the Department of the Interior. Interestingly, however, there is no indication in the documents released through the FOIA process or in the press release about the basis for Hernandez's multiple names in SAM.
Traditionally, this is the point in our article where we cross-reference SAM exclusion data with available business size information to determine how many small businesses each agency excluded. As with years past, the government overwhelmingly excluded small businesses with revenues less than $5 million annually according to publicly available business intelligence websites.
However, we question whether this information has value this year because of COVID-19 impacts. Excluding large businesses takes time and energy from government debarment staff. There are more filings, more lawyers and more meetings.
In a year where most government suspension and debarment practitioners had to work remotely, deal with online school and care for family members, navigate information technology systems that may not have been set up for mass telework, and avoid getting the virus at the same time, it would be rational to decide that 2020 was not the right year to take on a large company. There was just way too much else going on.
Accordingly, we will skip the table showing business size this year and pick up with the numbers again in fiscal year 2021, which, while perhaps not virus-free, hopefully will be closer to a normal year than fiscal year 2020 was. And we wish all readers continued good health and safety through these challenging months.
Instead, we will attempt to provide some government-practitioner perspective in this space. Admittedly, it has been several years since author David Robbins served as a government debarment practitioner, and acting U.S. Air Force deputy general counsel and suspending and debarring official, so these views may be a bit dated. But the perspective may still be helpful.
It is common for government practitioners to feel like the private bar and industry do not understand their motivations or fully understand their drive to protect the government's business interests. Similarly, it is common for government practitioners to feel like the SAM data does not accurately reflect their efforts, or may be wrongly interpreted by nongovernment actors. After all, the government practitioner has access to far more information than any other debarment stakeholder.
This perspective is important, and has not commonly been expressed in print in recent years — the effort to write and then obtain approval to publish while working for the government can be substantial. But the flipside is that industry may feel like its interactions with government debarment practitioners are filled with friction, that the government practitioner does not necessarily understand business and that the unrelenting focus on a single aspect of a multi-faceted organization — especially when that single facet can be addressed with policies, procedures, training, resources and, if necessary, monitoring — misses the forest for the trees.
In our view, the more that can be done to analyze and explain the nuance of suspension and debarment practice, the better, especially when the effects of exclusion are as severe as they are.
We now turn back to the traditional tabular and graphical analysis of multi-year suspension and debarment data from SAM.
The year-over-year decline in federal suspension and debarment activity continues. We continue to wonder when the numbers will hit bottom and begin to rise again.
Last year we noted that the number of firms excluded increased significantly, from 258 to a four-year high of 330. We noted that was significant because the government was increasing its focus on companies actively engaged in government contracting.
The number of excluded firms declined in fiscal year 2020, down to 316. But it is too soon to say whether the decline was due to COVID-19 or reflects an ebb in focus on active government contractors.
Looking into the future, it is easy to predict that the decline in actions will continue. But COVID-19 remains an unknown. The massive stimulus program enacted in fiscal year 2020 will likely spin off enforcement actions for the next decade. Suspension and debarment are likely to feature prominently in the government's set of remedies for stimulus-related misconduct.
Whether that increase will begin in fiscal year 2021 or later is anyone's guess. But it will happen soon enough and these numbers should again begin to rise.
David Robbins is a partner, and Sati Harutyunyan, Eric Herendeen and Umer M. Chaudhry are associates, at Jenner & Block LLP.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] http://www.sam.gov/.
[2] https://www.justice.gov/usao-sd/pr/former-secretary-tribal-office-sentenced-embezzlement.
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