BLOG: A Thank You to the Small Business Administration: SBA Takes a Stand on OIG's Approach to Suspension and Debarment

October 16, 2019

By Isaias "Cy" Alba IV
Practice Areas: Government Contracts Law and Small Business Programs & Advisory Services

The ability to suspend and debar contractors is a tool the federal government can deploy when necessary to protect it from unscrupulous contractors. Critically, it is not intended to be used punitively. The reason for this is clear, especially when dealing with small businesses: if you debar or suspend a company without evidence that it is not a responsible contractor, you risk destroying part of the United States’ industrial base and numerous jobs that Americans rely on without good cause. Too often the Inspector Generals look to “shoot first and ask questions later” when it comes to suspension and debarment, taking a “guilty until proven innocent” approach. This approach can have catastrophic effects for small businesses. Luckily, the Small Business Administration’s (“SBA”) suspension and debarment officials understand this risk and have taken to heart the underlying principles, enshrined in law, that all government contractors are innocent until proven guilty.

On September 18, 2019, the SBA’s Office of Inspector General (“OIG”) released a report examining whether or not SBA sufficiently exercises its suspension and debarment authority.  According to the OIG, the SBA delayed suspending and debarring actions and such delays do not control the “risk presented by potentially irresponsible entities.” Notice the OIG’s admonishment of SBA officials for failing to penalize companies “demonstrating” “potential” causes for suspension and debarment, and for, instead, thoughtfully and thoroughly investigating the facts to determine whether the company actually presented a risk to the federal government. The OIG would seemingly like SBA to suspend or debar small businesses for the slightest suspicion of a misunderstanding of the opaque and confusing regulations surrounding the federal small business programs instead of actually waiting for the facts and performing an investigation.

Fortunately, SBA rejected the most concerning aspects of the OIG’s report, noting that OIG’s depiction of the facts was patently inaccurate. Specifically, SBA noted that it purposefully holds cases open to ensure that it has time to gather “additional facts that might warrant a suspension or debarment action.” And that, in many cases, SBA did its job, performed a fulsome investigation, and then “promptly concluded that the referrals did not substantiate the imposition of an exclusionary action.” This is exactly how the process should work, especially for small businesses.

Again, suspension and debarment are not punitive actions; they are only to be taken if a contractor is not presently responsible—if there is such a large risk of ongoing violations that the only way the government can protect itself is by issuing a prohibition on the entity bidding or continuing to perform on federal contracts. That fact pattern is exceedingly rare. Most small businesses that take missteps do so accidentally—and without malicious intent. More importantly, once it is brought to their attention, they immediately seek advice on how to come into compliance and rectify the mistakes they didn’t even realize they had made. That is not the sign of an irresponsible contractor but instead a sign of human fallibility, something to which we can, and should, all relate.

SBA’s suspension and debarment officials have shown in their actions and their response to the OIG’s report that they are truly champions of small businesses and realize the trials and tribulations that many small business federal contractors go through while navigating a tangled web of laws, rules, and regulations. So I think it is a time to say “Thank You” to SBA for its response here.

If you have questions regarding this blog or other matters relating to government contracts and small businesses, please contact a member of PilieroMazza’s Government Contracts Law and Small Business Programs & Advisory Services practice groups.

Isaias “Cy” Alba, IV, the author of this blog, is a Partner in PilieroMazza’s Government Contracts Law and Small Business Programs & Advisory Services practice groups.

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