Federal Procurement: Additional Data Reporting Could Improve the 
Suspension and Debarment Process (29-JUL-05, GAO-05-479).	 
                                                                 
Federal government purchases of contracted goods and services	 
have grown to more than $300 billion annually. To protect the	 
government's interests, the Federal Acquisition Regulation (FAR) 
provides that agencies can suspend or debar contractors for	 
causes affecting present responsibility--such as serious failure 
to perform to the terms of a contract. The FAR provides 	 
flexibility to agencies in developing a suspension or debarment  
process. GAO was asked to (1) describe the general guidance on	 
the suspension and debarment process and how selected agencies	 
have implemented the process, and (2) identify any needed	 
improvements in the suspension and debarment process. We examined
the FAR and the regulations of 24 agencies that have FAR	 
supplements governing suspension and debarment procedures. We	 
selected 6 defense and civilian agencies representing about 67	 
percent of fiscal year 2003 federal contract spending for	 
in-depth review.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-479 					        
    ACCNO:   A31541						        
  TITLE:     Federal Procurement: Additional Data Reporting Could     
Improve the Suspension and Debarment Process			 
     DATE:   07/29/2005 
  SUBJECT:   Contract administration				 
	     Contract oversight 				 
	     Contract performance				 
	     Contractor debarment				 
	     Federal procurement				 
	     Federal procurement policy 			 
	     Procurement evaluation				 
	     Procurement law					 
	     Federal regulations				 
	     Accountability					 
	     Policy evaluation					 
	     Transparency					 
	     Excluded Parties List System			 
	     GSA Federal Procurement Data System		 

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GAO-05-479

     

     * Results in Brief
     * Background
     * FAR Provides Governmentwide Policies, and Agencies Make Specific
       Exclusion Decisions
     * Additional Reporting and Sharing of Information Could Improve the
       Effectiveness of the Process
          * Incomplete or Unreliable EPLS Data Make It Difficult to Identify
            Excluded Parties
          * ISDC Provides an Opportunity to Facilitate Sharing of Information
            on Administrative Agreements and Exclusion Waivers
     * Conclusions
     * Recommendations
     * Agency Comments and Our Evaluation
     * Appendix I: Scope and Methodology
     * Appendix II: Statutory Debarments
     * Appendix III: Trends in Exclusions in EPLS for Selected Agencies
     * Appendix IV: Selected Agencies' Suspension and De
     * Appendix V: Comments from the Department of Defense
          * 
               * Order by Mail or Phone

                 United States Government Accountability Office

Report to Congressional Committees

GAO

July 2005

FEDERAL PROCUREMENT

  Additional Data Reporting Could Improve the Suspension and Debarment Process

GAO-05-479

FEDERAL PROCUREMENT

Additional Data Reporting Could Improve the Suspension and Debarment
Process

  What GAO Found

The FAR prescribes policies governing the circumstances under which
contractors may be suspended or debarred, the standards of evidence that
apply to exclusions, and the usual length of these exclusions. To
implement these policies, 24 agencies developed FAR supplementation. In
fiscal year 2004, the 6 agencies we reviewed in depth suspended a total of
262 parties and debarred a total of 590 parties. Five agencies entered
into a total of 38 administrative agreements, which permit contractors
that meet certain agency-imposed requirements to remain eligible for new
contracts. Agency officials said that such agreements can help improve
contractor responsibility, ensure compliance through monitoring, and
maintain competition. In certain circumstances, agencies can continue to
do business with excluded contractors, such as when there is a compelling
need for an excluded contractor's service or product. In fiscal year 2004,
two of the agencies we reviewed in depth-the Air Force and the Army-issued
compelling reason waivers to continue doing business with excluded
parties.

To help ensure excluded contractors do not unintentionally receive new
contracts during the period of exclusion, the FAR requires contracting
officers to consult the Excluded Parties List System (EPLS)-a
governmentwide database on exclusions-and identify any competing
contractors that have been suspended or debarred. However, the data in
EPLS may be insufficient for this purpose. For example, as of November
2004, about 99 percent of records in EPLS for the 6 agencies we reviewed
in depth did not have contractor identification numbers-a unique
identifier that enables agencies to conclude confidently whether a
contractor has been excluded. In the absence of these numbers, agencies
use the company's name to search EPLS, which may not identify an excluded
contractor if the contractor's name has changed. Further, information on
administrative agreements and compelling reason determinations is not
routinely shared among agencies. Such information could help agencies in
their exclusion decisions and promote greater transparency and
accountability.

           Actions Taken by Six Selected Agencies in Fiscal Year 2004

                                        Proposed               Administrative 
Agency             Suspensions    debarments   Debarments       agreements 
Air Force                     94          246           233              2 
Army                          68          113            90              9 
Navy                           2           27            33              0 
Defense Logistics                                           
Agency                        12          147           133              1 
GSA                           70           53            33              4 
EPA                           16           65            68             22 
Total                        262          651           590             38 

United States Government Accountability Office

Contents

  Letter 1

Results in Brief 2 Background 4 FAR Provides Governmentwide Policies, and
Agencies Make

Specific Exclusion Decisions 7 Additional Reporting and Sharing of
Information Could Improve

the Effectiveness of the Process 14 Conclusions 18 Recommendations 18
Agency Comments and Our Evaluation 19

Appendix I Scope and Methodology

Appendix II Statutory Debarments

       Appendix III Trends in Exclusions in EPLS for Selected Agencies 26

Appendix IV Selected Agencies' Suspension and Debarment Organizations

Appendix V Comments from the Department of Defense

  Tables

Table 1: Agencies That Developed Supplements to the FAR,

Adopted NCR, or Developed Additional Guidance 10 Table 2: Actions Taken by
Six Selected Agencies in Fiscal Year

2004 12 Table 3: Key Characteristics of Administrative Agreements 13 Table
4: Statutory Debarments 23 Table 5: Agencies' Suspension and Debarment
Organizations 28

Figures 
             Figure 1: Exclusions in EPLS Governmentwide from 1995 to 2004  5 
               Figure 2: Current Exclusions in EPLS among Six Selected     
                            Agencies, as of November 2004                   6 
           Figure 3: Typical Elements of Selected Agencies' Suspension and 
                                  Debarment Process                         9 
              Figure 4: Trends in Exclusions in EPLS for Selected Agencies 
                                                                      from 
           1995 to 2004                                                    26 

Abbreviations

CAGE             Contractor and Government Entity                          
DFARS                    Defense Federal Acquisition Regulation Supplement 
DLA              Defense Logistics Agency                                  
DOD              Department of Defense                                     
EPA              Environmental Protection Agency                           
EPLS             Excluded Parties List System                              
FAR              Federal Acquisition Regulation                            
FPDS             Federal Procurement Data System                           
GSA              General Services Administration                           
ISDC                        Interagency Suspension and Debarment Committee 
NCR              Nonprocurement Common Rule                                
OMB              Office of Management and Budget                           

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

United States Government Accountability Office Washington, DC 20548

July 29, 2005

The Honorable Susan M. Collins Chairman The Honorable Joseph I. Lieberman
Ranking Minority Member Committee on Homeland Security and Governmental
Affairs United States Senate

The Honorable Tom Davis Chairman The Honorable Henry A. Waxman Ranking
Minority Member Committee on Government Reform House of Representatives

Federal government purchases of contracted goods and services have grown
to more than $300 billion annually. 1 Federal agencies are required to
award contracts only to "responsible sources"-those that are determined to
be reliable, dependable, and capable of performing required work. To
protect the government's interests, the Federal Acquisition Regulation
(FAR) provides that agencies can suspend or debar contractors from future
contracts for various reasons, such as conviction of or indictment for
certain offenses, or a serious failure to perform to the terms of a
contract. 2 The FAR provides flexibility to agencies in developing a
suspension and debarment process. While this flexibility enables agencies
to meet their individual needs, it also highlights the importance of
transparency into their processes to help determine whether suspension and
debarment actions are protecting the government's interests.

Given the significant amount of federal dollars spent by agencies to
acquire goods and services, and the need to ensure that the government

1

The total dollar value of contracting actions reported in the Federal
Procurement Data System (FPDS) exceeded $300 billion in fiscal years 2003
and 2004.

2

A suspension is a temporary exclusion of a contractor pending the
completion of an investigation and any ensuing legal proceedings. A
debarment is a fixed-term exclusion. Generally, the period of debarment
shall not exceed 3 years. Suspensions and debarments are frequently
referred to collectively as exclusions.

    Page 1 GAO-05-479 Suspension and Debarment

                                Results in Brief

only does business with responsible contractors, you asked us to (1)
describe the general guidance on the suspension and debarment process and
how selected agencies have implemented the process, and (2) identify any
needed improvements in the suspension and debarment process.

To conduct our work, we examined the FAR and the regulations of the 24
agencies that have issued supplements to the FAR governing suspension and
debarment procedures. From these 24 agencies, we selected 6 defense and
civilian agencies for in-depth review of policies and practices: the Air
Force, Army, Navy, and Defense Logistics Agency (DLA) within the
Department of Defense (DOD); the General Services Administration (GSA);
and the Environmental Protection Agency (EPA). Together, these 6 agencies
accounted for about 67 percent of fiscal year 2003 federal contract
spending, as reported in the Federal Procurement Data System (FPDS). 3 We
also analyzed data from the Excluded Parties List System (EPLS)-a
Web-based database on governmentwide exclusions maintained by GSA-and from
the selected agencies' internal data management systems. We conducted our
work from August 2004 through June 2005 in accordance with generally
accepted government auditing standards. For more information on our scope
and methodology, see appendix I.

The FAR prescribes policies governing such matters as the circumstances
under which contractors may be excluded from federal contracting, the
standards of evidence that apply to suspensions and debarments, and the
usual length of these exclusions. The FAR requires agencies to establish a
process for determining exclusions, and allows agencies to supplement the
FAR to implement the process. The supplements to the FAR or additional
guidance developed by 24 agencies generally designate internal
responsibilities for suspension and debarment procedures and intra-agency
coordination. The 6 agencies we reviewed in depth suspended a total of 262
parties and debarred a total of 590 parties in fiscal year 2004. Five of
the 6 agencies entered into a total of 38 administrative agreements-an
alternative to suspension and debarment where contractors that meet
certain requirements imposed by the agency may remain eligible for new
contracts. Agency officials said that such agreements can serve the
government's interest by improving contractor

3

At the time we were planning our review, fiscal year 2003 was the latest
year with complete available data.

    Page 2 GAO-05-479 Suspension and Debarment

responsibility, ensuring compliance through monitoring, and maintaining
competition. In fiscal year 2004, the Army and EPA used these agreements
the most. In certain circumstances, agencies can continue to do business
with excluded contractors, such as when there is a compelling need for an
excluded contractor's service or product. In fiscal year 2004, two of the
agencies we reviewed, the Air Force and the Army, issued compelling reason
determinations, known as waivers, to continue doing business with a total
of five excluded parties.

To help ensure that excluded contractors do not unintentionally receive
new contracts during a period of exclusion, the FAR requires contracting
officers to consult EPLS to identify any competing contractors that have
been suspended or debarred. We found, however, that the data in EPLS may
be insufficient for this purpose. Specifically, although the FAR requires
that agencies enter contractors' unique identification numbers in EPLS,
there is no required field in the EPLS database for these numbers. As a
result, contractor identification numbers have not been routinely entered
in EPLS. For the 6 agencies we reviewed in depth, about 99 percent of
records in the EPLS database as of November 2004 did not have contractor
identification numbers. In the absence of a unique identifier in EPLS,
agencies use name matching to identify excluded contractors, a technique
that may not always be reliable. Consequently, contracting officials
cannot always be fully confident that a prospective contractor is not on
the list of excluded parties. The Interagency Suspension and Debarment
Committee (ISDC) provides a forum for sharing information among suspension
and debarment officials. However, neither ISDC nor any other entity
collects or reports data on administrative agreements or compelling reason
waivers. Increased sharing of information on the terms and effectiveness
of past and current administrative agreements would be helpful to
officials in considering new agreements. Similarly, reporting information
on compelling reason determinations would allow suspension and debarment
officials to assess the use of these waivers and would promote greater
transparency and accountability.

We are making two recommendations aimed at improving the quality and
availability of data used in the suspension and debarment process: to make
contractor identification numbers a required field in the EPLS database
and to increase sharing of data on administrative agreements and
compelling reason determinations. In comments on a draft of this report,
DOD, GSA, and OMB generally agreed with these recommendations. EPA
submitted technical comments on the draft, and we have incorporated these
comments into the report as appropriate. Written comments from DOD are
reproduced in their entirety in appendix V.

  Background

Suspensions and debarments apply governmentwide-one agency's suspension or
debarment decision precludes all other agencies from doing business with
an excluded party. Suspensions and debarments may be either statutory or
administrative. Statutory debarments, also referred to as declarations of
ineligibility, are based on violation of law, such as statutory
requirements to pay minimum wages. 4 Administrative debarments are based
on the causes specified in the FAR, including commission of offenses such
as fraud, theft, bribery, or tax evasion. In 1988, the Nonprocurement
Common Rule (NCR) was implemented to provide a parallel process to the FAR
for suspending and debarring parties from receiving federal grants, loans,
and other nonprocurement transactions. 5 The FAR and NCR provide for
reciprocity with each other- that is, any exclusion under the FAR shall be
recognized under NCR, and any exclusion under NCR shall be recognized
under the FAR. 6

Exclusions of companies or individuals from federal contracts
(procurements) or other federal funding such as grants (nonprocurements),
as well as declarations of ineligibility, are listed in EPLS, a Web-based
system maintained by GSA. 7 EPLS also includes an archive of expired
exclusions. Agencies are required to report all excluded parties by
entering data directly into the database within 5 working days after the
exclusion becomes effective. The FAR includes a list of the information to
be included in EPLS, such as the contractor's name and

4

Minimum wage statutes include, for example, the Davis-Bacon Act and the
Service Contract Act. Other statutes that might be the basis for a
statutory debarment include the Buy American Act and various environmental
protection acts. Statutory debarments are further described in appendix
II. Declarations of ineligibility also may be based on executive orders or
non-FAR regulations.

5

NCR was adopted under the rulemaking authority of the respective agencies
after the Office of Management and Budget issued guidelines, as provided
for in Executive Order No. 12549 (1986) and is described in FAR 9.403. The
policies and procedures are common to executive branch agencies and
federal agencies that elected to join the governmentwide NCR system, but
an agency can modify the common rule for specific suspension and debarment
issues unique to the agency. NCR was amended on November 26, 2003, in 68
Fed. Reg. 66535 to resolve technical differences between the procurement
and nonprocurment systems.

6

While this report focuses mainly on the FAR suspension and debarment
provisions, the same provisions are generally included in the NCR.

7

EPLS is the single repository for suspensions, proposed and actual
debarments, as well as other exclusions related to federal procurement and
nonprocurement activities. The database can be accessed at www.epls.gov.

address, contractor identification number, the cause of the action, the
period of the exclusion, and the name of the agency taking the action. 8

From January 1995 to November 2004, the number of exclusion actions taken
each year by all agencies governmentwide has ranged from about 3,400 in
1995 to almost 7,000 in 2002, with an average of 5,700 actions taken
annually (see fig.1).

Figure 1: Exclusions in EPLS Governmentwide from 1995 to 2004 Exclusions
11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 1995
1996 1997 1998 1999 2000 2001 2002 2003 2004

In 1997, 3,940 exclusions that had been recorded without action dates were
assigned dates of February 3, 1997, as part of an electronic conversion
that took place on that date. Source: GAO analysis of EPLS data as of
November 2004.

In November 2004, the number of current exclusions governmentwide totaled
about 32,500, about 3,500 of which were the result of statutory
debarments. Of this governmentwide total, EPLS showed that the 6 agencies
we reviewed had excluded about 2,400 parties, 617 of which were the result
of statutory debarments by EPA, based on violations of the Clean Water and
Clean Air Acts (see fig. 2). For exclusion actions taken each year by the
six selected agencies from 1995 to 2004, see appendix III.

8FAR 9.404.

Figure 2: Current Exclusions in EPLS among Six Selected Agencies, as of
November 2004

    Exclusions

708

                                    DLA SA A

ce

                                       y

                                       y

                                       rm

                                      EPav

ir For

                                       G

                                       N

                                       A

A

    Agency

Procurement/nonprocurement suspensions and debarments Statutory debarments

Source: GAO analysis of EPLS data.

Note: Procurement/nonprocurement actions include suspensions, and proposed
and actual debarments, as well as other exclusions related to procurement
and nonprocurement activities. Generally, statutory debarments are based
on violations of law such as those requiring payment of minimum wages. Of
the agencies we reviewed in depth, only EPA had administered statutory
debarments as of November 2004.

In 1987, we reported that the suspension and debarment regulations and
procedures generally provided an effective tool for protecting the
government against doing business with fraudulent, unethical, or
nonperforming contractors. 9 We noted, however, that there was a need for
timely access to a governmentwide list of excluded parties. We also
identified areas for improvement in the process and recommended amendments
to the FAR. The following recommendations have been

9GAO , Procurement: Suspension and Debarment Procedures, GAO/NSIAD-87-37BR
(Washington, D.C.: Feb. 13, 1987).

Page 6 GAO-05-479 Suspension and Debarment

  FAR Provides Governmentwide Policies, and Agencies Make Specific Exclusion
  Decisions

implemented: (1) that governmentwide exclusions be extended to contractors
proposed for debarment; (2) that the definition of affiliate, i.e.,
related firms or those under common control, include a description of
indicators of control, such as common management or ownership; (3) that
suspended and debarred contractors also be excluded from subcontracting
under government contracts; and (4) that the extent to which orders placed
under certain contractual arrangements-such as multiple awards schedules,
basic ordering agreements, and indefinite quantity contracts-are covered
by exclusions be clarified.

The FAR prescribes general policies governing the circumstances under
which contractors may be excluded from federal contracting, requires
agencies to establish a process for determining exclusions, and allows
agencies the flexibility to supplement the FAR to implement the process.
The supplements to the FAR and additional guidance developed by 24
agencies generally designate internal responsibilities for suspension and
debarment procedures and intra-agency coordination. As an alternative to
exclusion, agencies sometimes enter into administrative agreements with
contractors with whom they believe there is a continuing need to do
business. These agreements can encourage changes in business practices
designed to promote contractor responsibility. In limited circumstances,
an agency may continue to do business with excluded contractors.

The FAR requires federal agencies to conduct business only with
responsible contractors and prescribes overall suspension and debarment
policies. A suspension may be imposed only when an agency determines that
immediate action is necessary to protect the government's interests. To
initiate a suspension, an agency must have adequate evidence that the
party has committed certain civil or criminal offenses or that there is
another compelling cause affecting the contractor's present
responsibility. 10 Generally, legal proceedings must begin within 12
months or the suspension terminates. To initiate a debarment, an agency
must have evidence of conviction or civil judgment for certain offenses, a
preponderance of evidence that the party has committed certain offenses,
such as serious failure to perform to the terms of a contract, or any
other cause of so serious or compelling a nature that it affects the
contractor's

10

Adequate evidence means information sufficient to support the reasonable
belief that a particular act or omission has occurred. Indictment
constitutes adequate evidence for suspension. FAR 2.101; FAR 9.407-2.

Page 7 GAO-05-479 Suspension and Debarment

present responsibility. 11 The agency debarring official is responsible
for determining whether debarment is in the government's interest, and the
FAR states that the seriousness of the contractor's actions and any
remedial measures or mitigating factors should be considered. Generally,
the period of debarment should not exceed 3 years.

Figure 3 provides a general overview of the suspension and debarment
process.

A preponderance of the evidence means proof by information that, compared
with that opposing it, leads to the conclusion that the fact at issue is
more probably true than not. FAR 2.101.

Page 8 GAO-05-479 Suspension and Debarment

Figure 3: Typical Elements of Selected Agencies' Suspension and Debarment
                                    Process

Source: GAO analysis of data from Interagency Committee on Suspension and
Debarment and selected agencies.

Note: There are some variations in the process among agencies, and this
figure does not include every possible scenario for a case. For example, a
case initiated as a possible suspension could result in a determination
that there is no immediate need for suspension and could later result in a
proposal for debarment.

The FAR allows agencies flexibility to supplement FAR provisions and
develop guidance based on agency needs. The 24 agencies we reviewed had
included suspension and debarment policies in FAR supplements; 21 had also
adopted NCR; and 12 had developed additional guidance, such as directives
and policy memos to implement their suspension and debarment processes
(see table 1). The additional guidance generally designates
responsibilities for suspension and debarment procedures and addresses
intra-agency coordination.

    Table 1: Agencies That Developed Supplements to the FAR, Adopted NCR, or
                         Developed Additional Guidance

                         Agency Supplement NCR Guidance

                    Agency for International Development zz

                          Department of Agriculture zz

                       Broadcasting Board of Governors zz

                           Department of Commerce zz

                               DOD Air Force z zz

                                 DOD Army z zz

                                  DOD DLA z zz

                                 DOD Navy z zz

                          Department of Education z zz

                            Department of Energy zz

                      Environmental Protection Agency z zz

                      General Services Administration z zz

                     Federal Emergency Management Agency z

                   Department of Health and Human Services zz

                           Department of Justice z zz

                             Department of Labor zz

                National Aeronautics and Space Administration zz

                        National Science Foundation z zz

                        Nuclear Regulatory Commission z

                       Office of Personnel Management zz

                             Department of State zz

                       Department of Transportation z zz

                          Department of Treasury z zz

                       Department of Veterans Affairs zz

                                Totals 24 21 12

Source: GAO analysis of supplements to FAR and guidance.

Each of the six agencies we reviewed in depth-the Air Force, Army, Navy,
Defense Logistics Agency, EPA, and GSA-has included suspension and
debarment policies in FAR supplements, adopted NCR, and developed guidance
for implementing suspension and debarment procedures:

     o The Defense Federal Acquisition Regulation Supplement (DFARS)
       designates suspension and debarment officials in the various DOD
       organizations-including the Air Force, Army, Navy, and Defense
       Logistics Agency-and a process for waiving contractor exclusions for
       compelling reasons. In addition, in September 1992, the Under
       Secretary of Defense for Acquisition issued guidance stating that (1)
       when appropriate, before action is taken on suspension, a contractor
       should be informed that DOD has extremely serious concerns with the
       contractor's conduct, and the contractor should be allowed to provide
       information on its behalf, and (2) DOD debarring officials should
       coordinate fully within DOD, and in certain cases among civilian
       agencies, to determine the possible effects of the suspensions and
       debarments on other organizations as well as to receive additional
       information that may affect the exclusion decision.
     o EPA's Acquisition Regulation, a FAR supplement, designates the roles
       of various officials and clarifies EPA's suspension and debarment
       procedures. An August 1993 memorandum of understanding provides
       specific responsibilities for EPA's Office of Acquisition Management
       and Office of Grants and Debarment in the processing of suspension and
       debarment actions. In addition, EPA has established guidance on
       initiating a suspension or debarment action. EPA also included a
       specific section in NCR addressing EPA's statutory disqualifications
       under the Clean Air and Clean Water Acts.
     o GSA also supplemented the FAR with a regulation that designates the
       roles of various officials and clarifies suspension and debarment
       procedures. The GSA Acquisition Manual contains similar language to
       the FAR supplement. In addition, GSA's Office of Inspector General
       Operations Manual outlines responsibilities for investigating cases,
       coordinating with law enforcement agencies, and making referrals to
       GSA's suspension and debarment officials. In November 2002, GSA issued
       an internal order concerning the requirement for legal review of
       suspension and debarment decisions.

Each of the agencies we reviewed established an organizational structure
that identifies the lead office, responsibilities, and staffing to manage
their suspension and debarment activities. (See app. IV for a summary of
each agency's suspension and debarment organizational structure.) Table 2
shows specific actions reported by the six agencies we reviewed during
fiscal year 2004.

      Table 2: Actions Taken by Six Selected Agencies in Fiscal Year 2004

Proposed Administrative Agency Suspensions debarments Debarments
agreements

Air Force 94 246 233

Army 68 113 90

Navy 2 27 33

DLA 12 147 133

a

GSA 70 53 33

EPA 16b 65b 68

    Total 262 651 590

Source: Agency-reported data.

a

GSA has only recently begun to use administrative agreements and entered
into four during fiscal year 2004. 12

bThese data include eight cases in which a suspension and proposed
debarment were issued simultaneously under the NCR.

Administrative agreements, also referred to as compliance agreements,
provide an alternative to exclusion when contractors that are being
considered for suspension or debarment have addressed the cause of the
problem through actions such as disciplining individuals, revising
internal controls, and disclosing problems to the appropriate government
agency in a timely manner. 13 Under administrative agreements, contractors
agree to meet certain requirements and may continue to enter into
contracts with the government. Agency officials said that reaching
administrative agreements with contractors can serve the government's
interest by improving contractor responsibility, ensuring compliance
through monitoring the requirements of the agreement, and maintaining
competition among contractors. Administrative agreements can be

12

One of these administrative agreements was reached with WorldCom. See GAO,
GSA Actions Leading to Proposed Debarment of WorldCom, GAO-04-741R
(Washington, D.C.: May 26, 2004) for more information on the proposed
debarment of WorldCom, Inc.

13

Voluntary exclusions are another form of alternative remedy provided for
by the NCR. These exclusions are referred to as governmentwide exclusion
agreements, which are based on the terms of settlement between an entity
and one or more federal agencies.

Page 12 GAO-05-479 Suspension and Debarment

negotiated at any point in the suspension and debarment process, such as
when a contractor independently acknowledges a problem, but the agencies
we reviewed in depth said these agreements are most commonly negotiated as
an alternative to debarment. These agreements generally follow a
consistent format, emphasize corporate ethics programs, and are in effect
for a period of 3 years. Table 3 summarizes the key contractor
requirements included in the agreements we reviewed. 14

Table 3: Key Characteristics of Administrative Agreements
Key Characteristics                        GSA EPA Air Force Army DLA Navy 
Written ethics policy or code                z   z     z      z     z    z 
Employee ethics training                     z   z     z      z     z    z 
Compliance hotline                           z   z     z      z     z    z 
Ethics officer or advisor                    z   z     z      z     z    z 
Independent auditor or ombudsman to          z   z     z      z       
monitor compliance                                                    
Scheduled reporting to agency                z   z     z      z     z    z 
Contractor payment for portion of agency's                                 
administrative costs                             z     z      z          z

Source: Agency reported data.

Note: GAO analysis of 8 administrative agreements.

While administrative agreements provide an alternative to exclusion,
agencies can continue to do business with excluded contractors in limited
circumstances through the use of waivers by making a determination that
there is a compelling reason to award a contract to an excluded party. 15
This determination requires a written explanation of the reason for doing
business with an excluded contractor, such as an urgent need for the
contractor's supplies or services, or that the contractor is the only
known source. 16 Of the six agencies we reviewed, only the Air Force and
the Army reported that compelling reason waivers had been issued over the
past 2 years. The Air Force reported that three waivers had been
granted-in August and September 2003 and in August 2004-to continue
contracting

14

For DOD agencies, a number of these elements are required. See, for
example, DFARS subpart 203.70.

15

FAR 9.405; DFARS 209.405.

16

Additionally, FAR precludes contractors from entering into subcontracts in
excess of $25,000 with a contractor that is debarred, suspended, or
proposed for debarment unless there is a compelling reason to do so, and
so notifies the contracting officer before entering into such a
subcontract. FAR 52.209-6.

with the Boeing Company for launch services for military space equipment
based on national security concerns and to mitigate program schedule and
cost risks. In fiscal year 2004, the Air Force issued one waiver for
sole-source reasons, and the Army issued four waivers based on urgent
need.

Suspension and debarment constitutes exclusion of all divisions or other
organizational elements of the contractor, unless the exclusion decision
is otherwise limited. 17 Exclusions may extend to affiliates, if named in
the suspension or debarment notice and decision. 18 Organizational
entities of excluded contractors that can demonstrate independence may be
allowed to receive government contracts.

The information in EPLS may be insufficient to enable contracting officers
to determine with confidence that a prospective contractor is not
currently suspended, debarred, or proposed for debarment. Further,
information on administrative agreements and compelling reason waivers is
not routinely shared among agencies or captured centrally in a database
such as EPLS. The Interagency Suspension and Debarment Committee (ISDC),
which monitors the suspension and debarment system, provides a useful
forum for sharing information among suspension and debarment officials.

  Additional Reporting and Sharing of Information Could Improve the
  Effectiveness of the Process

    Incomplete or Unreliable EPLS Data Make It Difficult to Identify Excluded
    Parties

The FAR requires agencies to enter various information on contractors into
EPLS, including contractors' and grantees' Data Universal Numbering System
(DUNS) number19-a unique nine-digit identification number assigned by Dun
& Bradstreet, Inc. to identify unique business entities. 20 We found,
however, that while the EPLS database has a field for entering
contractors' DUNS numbers, it is not a required field in the database, and
the data appear to be routinely omitted from the database. For the 6
agencies we reviewed in depth, about 99 percent of records in the EPLS

17

FAR 9.407-1(c) and 9.406-1(b).

18

Affiliates are business concerns, organizations, or individuals where,
directly or indirectly, one controls the other or a third party controls
both. FAR 9.403.

19

FAR 9.404(c).

20

Unique identifiers also include an individual's Social Security number,
Employer Identification Number, or other Taxpayer Identification Number.

Page 14 GAO-05-479 Suspension and Debarment

database as of November 2004 did not have DUNS contractor identification
numbers.

To ensure that excluded contractors do not unintentionally receive new
contracts during the period of exclusion, the FAR and NCR require
contracting officers and awarding officials to consult EPLS and identify
any competing contractors that have been suspended or debarred. 21 Because
EPLS lacks unique identifiers for most of the cases for the six agencies
we reviewed in depth, contracting officers use the competing contractor's
name to search the system to determine whether a prospective contractor
has been excluded from doing business with the federal government.
However, a contractor's name as it appears in a bid or proposal may not be
the same as in EPLS. For example, the XYZ Company may submit bids or
proposals using "XYZ Company" but appear as "XYZ" in EPLS. Therefore, if
the contracting officer searched for an exact match, EPLS would not
identify the company. 22 Searching for partial matches would fail to
identify companies that have changed their names. According to agency
suspension and debarment officials, contracting officers have overlooked
excluded contractors when using EPLS, due in part to not being able to
match contractor names. Though agency officials could not recall specific
cases, they said that this difficulty in matching names is more likely to
occur in cases in which contractors have changed their names.

We too had difficulty matching names using EPLS. For example, because of
the various ways a contractor's name might be entered in the database and
because contractor names sometimes change over time, we could not be
assured that we identified all contractors that have been excluded more
than once. We also attempted to match contractors' names in EPLS and
FPDS-the database containing government contracting actions-to determine
whether excluded contractors had received new contracts

21

Contracting officers are required to consult EPLS (1) after opening bids
or receipt of proposals, and (2) immediately prior to contract award. FAR
9.405(d)(1) and (4). Additionally, for acquisitions where the contract
value is expected to exceed the simplified acquisition threshold, which is
generally $100,000, FAR requires offerors to certify that they are not
presently debarred, suspended, proposed for debarment, or declared
ineligible for the award of contracts by any federal agency. FAR 52.209-5
and FAR 52.212-3(h).

22

EPLS allows either exact or partial name searches.

during a period of exclusion. 23 Although this effort did not produce any
matches, we cannot conclude with confidence that excluded contractors are
not receiving new contracts because of the lack of consistency regarding
contractor names both between and within the databases. This problem has
been longstanding. In our 1987 report, we noted similar difficulties in
matching data from the list of excluded parties with FPDS data. Despite
our findings, the problem continues, increasing the risk that suspended or
debarred contractors will be awarded new contracts during a period of
exclusion.

The overall reliability of reported data is also a concern. According to
GSA officials, responsibility for ensuring data reliability rests with the
agencies entering data into EPLS. GSA does not know, however, whether
agencies have tested the reliability of their EPLS data. The absence of
information on data reliability makes using the system for oversight or
analysis problematic. For example, when we attempted to use EPLS to
determine the average length of time of exclusions, we found many records
with an indefinite termination date. In some cases, parties are listed as
excluded for an indefinite period of time pending the outcome of a case.
In nonprocurement cases, parties also may be excluded for an indefinite
period of time. 24 However, when a record is entered in EPLS without a
termination date, the system defaults to record the termination date as
indefinite. In the absence of information on data reliability, there is no
way to estimate the extent to which the entries with indefinite
termination dates reflect parties that had been excluded for an indefinite
period of time or parties for which no termination date had been entered.

23

To determine whether suspended or debarred contractors were receiving new
contracts during a period of exclusion, we compared 44,634 records for
excluded parties in EPLS with 1,006,919 contracting actions listed in FPDS
for fiscal year 2003-the latest year for which complete data were
available at the time of our review.

24

Most of these exclusions are for individual service providers, such as
physicians, who have engaged in fraud and have been excluded from
participation in federal health care programs.

    ISDC Provides an Opportunity to Facilitate Sharing of Information on
    Administrative Agreements and Exclusion Waivers

The Interagency Suspension and Debarment Committee (ISDC) is responsible
for coordinating policy, practices, and information sharing on various
suspension and debarment issues. 25 The ISDC serves as an interagency
forum and conducts monthly meetings for federal agencies' suspension and
debarment officials. While ISDC is not a decision-making body, it develops
recommendations for the Office of Management and Budget (OMB) on
interagency issues, such as determining which agency should take the lead
on a case when more than one agency does business with a particular
contractor. The ISDC reports to OMB's Office of Federal Financial
Management and has been chaired by EPA's suspension and debarment officer
since 1988.

In its March 2002 report on interagency coordination, the ISDC emphasized
the importance of identifying a lead agency to coordinate with other
federal agencies that do business with a contractor before entering into
an administrative agreement. In our discussions with several suspension
and debarment officials they said that, in addition, sharing information
on past and current administrative agreements within the broader community
of suspension and debarment officials would also be useful. They said that
when an agency official is considering taking action with respect to a
particular contractor, it would be helpful to know whether another agency
had ever used an administrative agreement with that contractor, what the
terms of the agreement were, and whether the contractor had complied with
the agreement. That information is not currently collected centrally nor
routinely made available to all suspension and debarment officials. Of the
agencies we reviewed, only the Army has taken initiative to share
information on administrative agreements. In February 2005, the Army
launched the "Army Fraud Fighter's Web Site," which includes a list of
contractors with which they have entered into administrative agreements.
26

Similarly, greater sharing of information on compelling reason waivers
also would be helpful. We found that information on compelling reason
waivers was not readily available from most agencies we reviewed. To
obtain information on compelling reason waivers, we had to reconcile the
information we collected from the DOD agencies with information we
collected from GSA for those agencies. The FAR supplement for DOD requires
DOD to provide written notice of any compelling reason waiver

25

The ISDC was created by Executive Order 12549 in February 1986.

26

www.jagcnet.army.mil/ARMYFRAUD.

                                  Conclusions

determination to GSA, 27 but we had to make repeated requests from DOD
agencies and GSA in order to obtain complete information. In our view,
accountability and transparency of the process would be enhanced were this
information routinely collected and reported by all agencies. For example,
more information on the use of waivers would allow suspension and
debarment officials to evaluate patterns in the use of waivers to
determine whether they were used more commonly in some industries than
others. They could also assess the rationales cited by agencies in
granting waivers to determine whether agencies are applying standards
consistently or whether the governmentwide standards are in need of
revision.

Federal agencies faced with the challenge of ensuring that they only do
business with responsible contractors may not be identifying excluded
contractors when awarding new contracts. Improving the EPLS database by
requiring agencies to enter contractor identification numbers into the
system could provide the data needed to enhance agency confidence that
excluded contractors can be readily identified. Sharing information among
agencies on administrative agreements and compelling reason waivers could
also improve the transparency and effectiveness of the suspension and
debarment process and thereby help to ensure the government's interests
are protected.

To improve the effectiveness of the suspension and debarment process,

  Recommendations

we are making two recommendations that

     o the Administrator of General Services modify the EPLS database to
       require contractor identification numbers for all actions entered into
       the system and
     o the Director of the Office of Management and Budget require agencies
       to collect and report data on administrative agreements and compelling
       reason determinations to the Interagency Suspension and Debarment
       Committee and ensure that these data are available to all suspension
       and debarment officials.

27DFARS S: 209.405.

  Agency Comments and Our Evaluation

We provided a draft of this report to DOD, EPA, GSA, and OMB for review
and comment. DOD provided written comments which are included in appendix
V. EPA provided technical comments on the draft, and we have incorporated
these comments into the report as appropriate. GSA and OMB provided oral
comments.

DOD generally concurred with our recommendations. In addition to requiring
the contractor identification numbers for all actions entered into the
system, DOD believes that the EPLS database should include a field for the
Contractor and Government Entity (CAGE) code, if available. DOD stated
that given the automated procurement system used by many DOD offices, it
is important to enable these offices to check for the CAGE code of a
prospective contractor in the EPLS database. DOD also provided technical
comments on the draft report, and we have revised the draft accordingly.

GSA concurred with our recommendation that GSA modify the EPLS database to
require contractor identification numbers for all actions entered into the
system. GSA stated that it is in the process of competing the EPLS
application, and the identification number will be a required field when
the updated system becomes operational in fiscal year 2006. In addition,
the updated system will be required to interface with the Central
Contractor Registration System, which should improve the quality of
contractor data in EPLS. The new system also should have greater
capability to allow agencies to report information such as the reasons why
a party has been excluded.

OMB concurred with our recommendation that OMB require agencies to collect
and report data on administrative agreements and compelling reason
determinations to the Interagency Suspension and Debarment Committee and
make this information available to all suspension and debarment officials.

As agreed with your offices, unless you release this report earlier, we
will not distribute it until 30 days from the date of this letter. At that
time, we will send copies of this report to the Secretary of Defense, the
Administrator of General Services, the Administrator of the Environmental
Protection Agency, the Director of the Office of Management and Budget,
and interested congressional committees. We will also make copies
available to others upon request. In addition, this report will be
available at no charge on GAO's Web site at http://www.gao.gov.

If you have any questions about this report, please contact me at (202)
5124841 or [email protected]. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this report.
Major contributors to this report were Amelia Shachoy, Assistant Director,
Marie Ahearn, Ken Graffam, Mehrunisa Qayyum, Emma Quach, Jeffrey Rose,
Karen Sloan, and Cordell Smith.

William T. Woods, Director Acquisition and Sourcing Management

                       Appendix I: Scope and Methodology

We conducted our work at six agencies-General Services Administration
(GSA), Environmental Protection Agency (EPA), and four DOD agencies- Air
Force, Army, Defense Logistics Agency (DLA), and Navy. The DOD agencies
were selected on the basis of the dollar value of contracting actions
reported in the Federal Procurement Data System (FPDS) for fiscal year
2003--the year for which the most recent and complete data were available
at the time of our review. We selected GSA because of its central role in
federal procurement and in maintaining the Excluded Parties List System
(EPLS). We selected EPA because of its active role in suspension and
debarment, including its role in chairing the Interagency Suspension and
Debarment Committee (ISDC) and in implementing systematic procedures for
tracking the status of suspension and debarment cases. Together, these
agencies accounted for about 67 percent of fiscal year 2003 federal
contract spending, as reported in the FPDS. We also reviewed literature
and interviewed government and nongovernment officials, academics, and
private sector organizations with relevant experience.

To describe the general guidance on the suspension and debarment process
and how selected agencies have implemented the process, we examined the
Federal Acquisition Regulation (FAR), Nonprocurement Common Rule (NCR),
and the regulations and guidance of the 24 agencies that have issued
supplements to the FAR governing suspension and debarment procedures. We
analyzed documents and testimonial evidence at the 6 selected agencies to
determine how each agency (a) used administrative agreements; (b)
coordinated and shared suspension and debarment information; and (c)
collected data to monitor the suspension and debarment process.

To identify any needed improvements in the suspension and debarment
process, we analyzed data from GSA's EPLS as of November 18, 2004. This
analysis included comparing the EPLS and FPDS databases to identify any
suspended or debarred contractors that received a new contract during a
period of suspension or debarment. We compared 44,634 records for excluded
parties in EPLS with 1,006,919 contractors listed in FPDS at the end of
fiscal year 2003, the latest year for which complete data were available
at the time of our review. Because EPLS records do not require contractor
identification numbers, we compared other identifiers, such as name and
address, to determine whether a contract action in FPDS was for the
issuance of a new contract during the period of exclusion. We also
analyzed the data for the length of time parties are excluded and to
determine the extent to which parties are excluded more than once. To
assess the reliability of EPLS data we (1) performed electronic testing of

Appendix I: Scope and Methodology

the required data elements for obvious errors in accuracy and
completeness, (2) reviewed related documentation, and (3) interviewed
knowledgeable agency officials. We found the data to be insufficiently
reliable for determining whether excluded contractors receive new
contracts, for determining the termination dates of exclusions, or for
performing simple analyses such as the average length of exclusions or the
percentage of parties excluded more than one time. We also reviewed other
areas for improvements, such as agencies' internal data reporting and the
role of the ISDC.

We conducted our work from August 2004 through June 2005 in accordance
with generally accepted government auditing standards.

                       Appendix II: Statutory Debarments

Statutory debarments, or exclusions, are based on statutory, executive
order, or regulatory authority other than the FAR. The grounds and
procedures for statutory debarments may be set forth in regulations issued
by agencies, such as the Department of Labor and EPA, which have
enforcement responsibilities but may not be the procuring agencies. The
authorities for these statutory debarments use various terminology for
exclusion, such as "ineligible," "prohibited," or "listing;" however, the
terms all encompass sanctions precluding contract awards or involvement in
a contract for a specific period of time. Table 4 lists the authorities
identified in GSA's EPLS as reasons for debarring individuals and
contractors from receiving federal contracts.

Table 4: Statutory Debarments
Statute                      Description                                   
Anti-Drug Abuse Act of 1988  Ineligible for federal benefits, including    
                                contracts, at discretion of sentencing judge  
                                following conviction(s) for a federal or      
                                state offense relating to the distribution or 
                                possession of controlled substances.          
                                (Permanently ineligible upon conviction of    
                                third                                         
                                offense for distribution.) 21 U.S.C. S: 862.  
Buy American Act             Debarred by an agency for violation of the    
                                Act concerning nonuse of American-produced    
                                materials. 41 U.S.C. S: 10(b).                
Clean Air Act and            Prohibited from receiving federal contracts   
                                following conviction under either Act if      
                                intended performance is to be at facility     
                                which gave rise to the conviction and         
Clean Water Act              violating facility is owned, leased or        
                                supervised by convicted person at the time of 
                                award. 42                                     
                                U.S.C. S: 7606; 33 U.S.C. S: 1368.            
Davis-Bacon Act              Debarred by Comptroller General for violation 
                                of the minimum or prevailing wage rate        
                                requirements of the Act for construction or   
                                repair of public buildings and works.         
                                40 U.S.C. S: 276a-2(a).                       
Service Contract Act         Debarred by Secretary of Labor for violation  
                                of the minimum wage requirements of the       
                                Act, for service employees. 41 U.S.C. S: 354. 
Walsh-Healy Act              Debarred by the Secretary of Labor for        
                                violation of the minimum wages, 40-hour work  
                                week and non-use of child labor requirements  
                                of the Act. 41 U.S.C. S:35.                   
Prohibition on Persons       Prohibited from serving in management or      
Convicted of                 supervisory capacity on DOD contracts or      
Defense Contract Related     serving on board of directors or as a         
Felonies                     consultant to defense contractors awarded DOD 
                                contracts following conviction of fraud or    
                                any other felony, arising out of a contract   
                                with                                          
                                DOD, 10 U.S.C. 2408.                          

Reorganization Plan No. 14 of 1950, 5 USC Declared ineligible to receive
federal contracts by the Secretary of Labor under the

Appendix Plan's authority and based on violations of one or more labor
standards in certain numerous federal statutes, such as the Contract Work
Hours and Safety Standards Act, 40 U.S.C. 327.

Prohibition on Entering into Contracts Prohibited from receiving DOD
contracts over $110,000 based on a finding by the

Against Interest of U.S. Secretary of State that a foreign government
supporting international terrorism owns or controls a significant interest
in the contracting firm. 10 USC S: 2327(b); DFARS S: 209.104-1(g).

                       Appendix II: Statutory Debarments

                              Statute Description

Military Recruiting on Campus Institutions of higher education declared
ineligible to receive contracts based on DOD finding that the institution
denied military recruitment on campus. Pub. L. 103-337, as amended by Pub.
L. 104-324. This provision was repealed by Pub. L. 106-65, Oct. 5, 1999.
Currently, 10 USC 983 and DFARS 209.470-2 prohibit DOD from contracting
with an institution of higher education if DOD determines that the
institution prevents military recruitment or Senior Reserve Officer
Training Corps (ROTC) on campus.

Drug-Free Workplace Act of 1988 Suspension or debarment from receiving
federal contracts for violations of the Drug-Free Workplace Act of 1988,
41 U.S.C. 701.

Executive Order 11246, as amended Declared ineligible for award of federal
contracts by Secretary of Labor based on failure to satisfy obligations
under equal opportunity or affirmative action clauses of a federal
contract.

Source: GAO analysis of EPLS codes indicating the reason for statutory
debarment.

Note: There is no statutory requirement to suspend or debar contractors
who have unpaid federal tax debt. 1

1

GAO has recently reported on contractors who have unpaid federal tax debt.
See GAO, Financial Management: Thousands of Civilian Agency Contractors
Abuse the Federal Tax System with Little Consequence, GAO-05-637,
(Washington, D.C.: June 16, 2005).

Page 24 GAO-05-479 Suspension and Debarment

                       Appendix II: Statutory Debarments

Appendix III: Trends in Exclusions in EPLS for Selected Agencies

: Trends in Exclusions in EPLS for Selected Agencies from 1995 to 2004

Calendar year

Air Force

1995
1996
1997
1998
1999
Army 1995
1996
1997
1998
1999
Navy 1995
1996
1997
1998
1999
DLA 1995
1996
1997
1998
1999
GSA 1995
1996
1997
1998
1999
EPA 1995
1996
1997
1998
1999
100 200 300 400 500 600 700 800 900
Exclusions

Source: GAO analysis of EPLS data as of November 2004.

Calendar year

Air Force

2000

2001 2002 2003 2004

Army

2000 2001 2002 2003 2004

Navy

2000

2001 2002 2003 2004

DLA

2000 2001 2002 2003 2004

GSA

2000 2001 2002 2003 2004

EPA

2000 2001 2002 2003

2004

0 100 200 300 400 500 600 700 800 900 Exclusions

Appendix IV: Selected Agencies' Suspension and Debarment Organizations

The FAR and NCR require agencies to establish a process for suspension and
debarment. The organizational structure established to manage the process
at the six agencies we reviewed is summarized in table 5.

           Table 5: Agencies' Suspension and Debarment Organizations

                  Agency Lead office Responsibilities Staffing

EPA Office of Grants and Debarment Division dedicated to investigations
and case 1 Suspension and Debarment development refers cases to suspension
and Officer debarment official. 12 Professional Staff

GSA Office of Chief Acquisition Officer, Office of Inspector General
handles suspension 1 Suspension and Debarment

Office of Acquisition Integrity and debarment as one aspect of its
investigative Officer work and refers cases to the Office of Acquisition 2
Professional Staff Integrity. Suspension and debarment is one aspect 1
Support Staff of the acquisition integrity function.

DLA Office of General Counsel, Defense Criminal Investigative Service
performs 1 Suspension and Debarment

Contracting Integrity Office law enforcement function and makes referrals
to Officer DLA. DLA also receives referrals from other 1 Professional
Staff military services' Defense Criminal Investigative Organizations.

Air Force Office of Deputy General Counsel, Division within General
Counsel's office dedicated 1 Suspension and Debarment

Contractor Responsibility Division to suspension and debarment actions.
Defense Officer Criminal Investigative Organizations also refer 3
Professional Staff cases. This Division is also responsible for the Co-op
students provide procurement fraud program. support

Army Office of Judge Advocate General, Suspension and debarment is one
aspect of the 3 Suspension and Debarment Contract Appeals Division,
procurement fraud function. Additional support Officers (US, Europe,
Korea) Procurement Fraud Branch from the Contract Appeals Division is
available. 6 Professional Staff

Defense Criminal Investigative Organizations also 1 Support Staff refer
cases.

Navy Office of General Counsel, Suspension and debarment is one aspect of
the 1 Suspension and Debarment Procurement Integrity Office Procurement
Integrity function. Defense Criminal Officer Investigative Organizations
also refer cases. 3 Professional Staff 1 Support Staff

                 Source: GAO analysis of agency-reported data.

Appendix V: Comments from the Department of Defense

Appendix V: Comments from the Department of Defense

Appendix V: Comments from the Department of Defense

(120438)

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