LEGAL GUIDANCE/OCTOBER 1994 ISSUE

DEBARMENTS AND SUSPENSIONS

Within the past 2 years, two major healthcare product manufacturers,
Baxter Healthcare Corporation (Baxter) and C. R. Bard, Inc. (Bard)
have faced debarment and suspension actions. These sanctions adversely
affected the Navy's ability to equip its military treatment facilities
(MTF's) with required pharmaceuticals and other medical items. What
exactly are suspensions and debarments? How are they imposed? For your
reference, a summary of the policies and procedures governing the
debarment and suspension of contractors by Federal contracting
agencies is discussed below. A more detailed description may also be
found in Part 9, Debarment, Suspension, and Ineligibility of the
Federal Acquisition Regulation (FAR).

What is a debarment? Debarment is described as the exclusion of
contractors from Government contracting and Government-approved
subcontracting for "a reasonable" specified period. Who has authority
to debar contractors? This is assigned to the agency head or designee
authorized by the agency head. Debarment encompasses all divisions or
other organizational elements of the contractor, unless the debarment
decision is limited by its terms to specific divisions, organizational
elements, or commodities. However, a debarment may be extended by the
debarring official to include any affiliates of the contractor if they
are, (1) specifically named, and (2) given written notice of the
proposed debarment with an opportunity to respond to this notice. A
contractor's debarment, or proposed debarment, is effective throughout
the Executive Branch of the Government, unless an acquiring agency's
head or designee states in writing the compelling reasons justifying
continued business dealings between that agency and the contractor.
Hence, as explained below, the suspensions and proposed debarments of
both Baxter and Bard, which were processed by the VA, were binding, at
least initially, on the Navy as well.

Contractors may be debarred for a conviction of or civil judgment
for-- (1) Commission of fraud, (2) Violation of antitrust statutes,

(3) Other criminal statutes/offenses. A contractor may also be
debarred if it seriously violates any contract terms or violates the
Drug-Free Workplace Act. How long are debarments effective? Debarments
continue for a period commensurate with the seriousness of the cause
mentioned above. Generally, debarments do not exceed 3 years, although
violations of the provisions of the Drug-Free Workplace Act may result
in debarments of up to 5 years.

What is a suspension? Suspension is defined as an immediate temporary
exclusion of a contractor "pending completion of investigation or
legal proceeding when it has been determined necessary to protect the
Government's interest." Contractors may be disqualified temporarily
from Government contracting and Government~approved subcontracting by
a suspending official. Who has authority to suspend contractors?
Again, the contracting agency's head or the agency's designee is
authorized to impose suspension. Normally suspensions are terminated
if legal proceedings have not taken place within 12 months after the


date of the suspension notice. Suspensions may be extended by the
Assistant Attorney General for no more than an additional 6 months. In
no event may a suspension extend beyond 18 months, unless legal
proceedings have been initiated within that period. Similar to
debarments, suspensions are effective throughout the Executive Branch
of the Government, unless an acquiring agency's head or designee
states in writing the compelling reasons justifying continued business
dealings between that agency and the contractor.

Last year, the Department of Veterans Affairs (VA) suspended Baxter
based on the findings from an investigation conducted by the VA's
Inspector General. This put the Navy's medical activities at risk in
providing quality patient care. However, based on compelling
circumstances, the Assistant Secretary of the Navy granted specific
temporary authority to continue contracting actions with Baxter until
the end of October 1993 or upon termination of the suspension which
ever occurred first. In December Baxter's suspension was terminated
and Federal agencies resumed business with Baxter.

Contractors may be suspended, upon adequate evidence, of--(1)
Indications of fraud, (2) Indications of antitrust violations, and (3)
Indications of lack of business integrity. Indictment is considered
adequate evidence for suspension purposes. Suspension encompasses all
divisions or other organizational elements of the contractor, unless
the suspension decision is limited by its terms to specific divisions,
organizational elements, or commodities.

Due to the seriousness of debarment and suspension actions against
contractors, contracting officers may only impose these sanctions in
the public interest for the Government's protection and not for
purposes of punishment.

Following the opening of bids or receipt for proposals, the
contracting officer reviews the "Consolidated List of Debarred,
Suspended, and Ineligible Contractors," which identifies parties
excluded from procurement programs. This list is compiled, maintained,
and distributed throughout the executive agencies by the General
Services Administration. Agencies may solicit offers from, award
contracts to, and consent to subcontracts with responsible contractors
only. Proposals, quotations, or offers received from any contractor
listed shall not be evaluated for award or included in the competitive
range, nor shall discussions be conducted with a listed offeror during
a period of ineligibility, unless the acquiring agency's head or
designee determines, in writing, that there is a compelling reason to
do _so. A contractor is considered ineligible when it is excluded from
Government contracting pursuant to statutory, Executive order, or
regulatory authority. If the period of ineligibility expires or is
terminated prior to award, the contracting officer may, but is not
required to, consider such proposals, quotations, or offers.
Immediately prior to award, the contracting officer shall again review
the list to ensure that no award is made to a listed contractor.

Contracts that are in existence before a suspension or debarment is
imposed remain in effect. However, these contracts may not be renewed


or extended unless a "compelling reason" exists. Also, no Government
contractor may award a subcontract equal to or in excess of $25,000 to
a debarred/suspended contractor unless there is a compelling reason to
do so and the contractor first notifies the contracting officer and
further complies with the provisions of the FAR.

NMLC point of contact is Mr. John R. Osing, Jr., Office of the
Counsel, who may be reached at (301) 619-2157 or by DSN at 343-2157.