Dispute over ‘delayed action’ in vendor suspension/debarments

SBA OIG says 15 cases pending for an average 620 days

      The Small Business Administration appears to be delaying action on suspensions and debarments, allowing possibly fraudulent contractors to receive $80.3 million in federal contracts in recent months, according to a recent audit by the SBA Office of Inspector General (OIG).

     As of March 2019, the SBA had 15 cases of pending suspension or debarment that had been pending for an average of 620 days each--nearly two years.

      However, the SBA is pushing back on the OIG’s claim that those delays are problematic.

      “It was not any ‘delayed action’ that caused harm, and SBA disagrees that the referrals ‘demonstrated causes for debarment,’ John W. Klein, SBA’s Suspension and Debarment Official for All Other Programs and an SBA associate general counsel, along with two other SBA officials, wrote in a response to the inspector general.

      SBA also has gained some support for its position from industry.

      Isaias "Cy" Alba IV, partner at PilieroMazza PLLC, recently defended the SBA’s position in a blog. He suggested that great care must be taken to thoroughly investigate the facts when considering suspension or debarment of a small business because the firms are very vulnerable.

      “Luckily, the 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.”

OIG report

      The inspector general outlined several cases in which the SBA appeared to be delaying action on pending suspensions or debarments. These included:

• A vendor was referred to the SBA in July 2017 for allegedly soliciting an improper 8(a) pass-through. As of March 2019, the firm had received $1.8 million in contracts from other federal agencies;
• A firm was referred to SBA in September 2017 for allegedly making false certifications to gain access to 8(a) contracts. The company received $40.8 million in contracts. After the case was turned over to the Army, the Army suspended the firm in May 2019;
• An 8(a) firm allegedly made misrepresentations to remain in the 8(a) program, but was allowed to remain in the program for 396 days while the case was pending. During that time, it received $37.7 million in contracts.
• Although a state court found misrepresentation in four cases of improper 8(a) pass-throughs, the SBA did not suspend or debar, and did not document its reasons;
• In February, OIG referred a case to SBA’s suspension and debarment office in which a vendor had agreed to pay the government $100,000 to settle allegations. The U.S. Attorney closed the case in May due to SBA inaction.

      SBA officials told the OIG that they prioritized cases based on the potential harm to SBA. But the OIG said that potential harm to other federal agencies also should be considered.

More Information:
OIG report: https://bit.ly/2Defx9vhttps://bit.ly/35zsYNu

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