Kulbiski

Another Perspective On Too Big tTo Debar:

BP, the Environmental Protection Agency, and the World Bank.

*Nolan A. Kulbiski

1301 Vermont Avenue, NW #211

Washington, DC 20005

*Nolan A. Kulbiski (kulbiski@gmail.com) is a J.D. candidate at The George Washington University Law School and the Projects Editor of the Public Contract Law Journal. He wishes to thank Professors Karen Thornton, Steven Schooner, Jessica Tillipman, and Christopher Yukins for their guidance and support in the study of government contracts.

Table of ContentsINTRODUCTION2I.Crises of Size: “Too Big tTo Fail” and “Too Big tTo Debar”2II.EPA Suspension and Debarment: The Toothless Tiger8A.Procurement Debarment and Suspension: Strong in Theory, Weak in Practice9B.The Terrible Trifecta: Three Weaknesses Plague Federal Suspension and Debarment121.Death by a Thousand Cuts: How the Overuse of Waiver Is Eroding the Legitimacy of the Suspension and Debarment System13122.What Is True by Lamplight Is Not Always True by Sunlight: Lack of Transparency and Accountability in the Federal Suspension and Debarment System16153.A Little Knowledge Is a Dangerous Thing: Ignorance and Misconceptions Wreak Havoc on Federal Suspension and Debarment1918C.Muddying Already Murky Waters: EPA’s Statutory Debarment Authority uUnder the Clean Air and Clean Water Acts2120ORIGINAL ANALYSIS2422III.The World Bank Sanctions Model2422A.Transparency and tThe Department of Institutional Integrity2624B.Flexibility and tThe Evaluation and Suspension Officer2927C.Independence and tThe Sanctions Board3331CONCLUSION3633IV.“Too Big tTo Debar” Is Not the Problem; Moving Forward in the Era of Large Contractors3633

INTRODUCTION

I.Crises of Size: “Too Big tTo Fail” and “Too Big tTo Debar”

During the first decade of this century, the United States, barreled toward dual crises that were, in hindsight, both preventable. The first was a financial crisis that has caused many to question the wisdom of allowing financial firms to grow so large that they become “too big to fail.” The second was an environmental disaster that suggests that large corporations like BP have become “too big to debar.”Comment by Nicole Bazik: No FNs in this paragraph because it is all introductory material.

Between 1997 and 2006, the average American home increased in value by 124% fueled by questionable lending practices.[footnoteRef:1] At the same time, BP was committingcommitted various environmental crimes across the United States. For example, in 1999, a subsidiary of BP plead guilty to illegally injecting “wastes include[ing] paint thinner and toxic solvents” into the ground in Alaska.[footnoteRef:2] In 2005, an explosion at BP’s Texas City refinery killed 15 people and injured 170 more “in America’s worst industrial accident in a generation.”[footnoteRef:3] The Ggovernment found over 300 safety violations and levied various fines against BP, some of which it has paid and others of which it continues to dispute.[footnoteRef:4] In 2007, BP plead guilty to a criminal violation of the Clean Water Act (“CWA”) and agreed to pay $20 million in penalties after crude oil leaked from its pipeline leaks of crude oil in Alaska.[footnoteRef:5]Comment by Nicole Bazik: Internet Newspaper – R16.6(f)Comment by Nicole Bazik: No FN because this is an introductory sentence (see next few sentences for the details).Comment by Nicole Bazik: Press Release – R17.2.3 and parallel internet citation – R18.2.3(a) FYI – The actual link to this source is yosemite.epa.gov/opa/admpress.nsf/016bcfb1deb9fecd85256aca005d74df/5d61856989631e20852567f6004bbbff. I did not include this entire link because it is so long - R18.2.2(d)Comment by Nicole Bazik: Newspaper Article R16.6Comment by Nicole Bazik: Direct Internet Source – R18.2.2Comment by Nicole Bazik: Press Release – R17.2.3 and parallel internet citation – R18.2.3(a) [1: CSI: credit crunch, The Economist, October 18, 2007, http://www.economist.com/node/9972489.] [2: Press Release, Environmental Protection Agency, BP Exploration [Alaska] Pleads Guilty To Hazardous Substance Crime Will Pay $22 Million, Establish Nationwide Environmental Management System (September 23, 1999), available at yosemite.epa.gov.] [3: Sarah Lyall, In BP’s Record, a History of Boldness and Costly Blunders, N.Y. Times, July 12, 2010, at A1.] [4: BP Agrees to Pay Record $50.6 Million Fine for Texas Explosion, British Broadcasting Corporation (Aug. 12, 2010), http://www.bbc.co.uk/news/business-10960486 (BP continues to contest $30 million in fines for 439 "new willful violations").] [5: Press Release, U.S. Department of Justice, British Petroleum to Pay More Than $370 Million in Environmental Crimes, Fraud Cases (October 25, 2007), available at http://www.justice.gov/opa/pr/2007/October/07_ag_850.html.]

In 2008, home values decreased sharply and the “housing bubble” burst.[footnoteRef:6] Large financial institutions that invested in home loans were at risk of failure because their loans that had suddenly become worthless were at risk of failure.[footnoteRef:7] Some warned that the failure of key financial institutions might create a domino effect destroying of much of the modern American financial system.[footnoteRef:8] To avert this disaster the Government declared certain institutions “too big to fail”[footnoteRef:9] and stepped in with bailouts for firms like the American International Group (“AIG”) and General Motors (“ GM”) even while foreclosures rates on homes skyrocketed.[footnoteRef:10] Comment by Nicole Bazik: Entire Magazine Article – R16Comment by Nicole Bazik: Direct Internet Source – R18.2.2Comment by Nicole Bazik: Newspaper Article – R16.6Comment by Nicole Bazik: Newspaper Article – R16.6 and Direct Internet Source R18.2.2 [6: Roger C. Altman, The Great Crash, 2008: A Geopolitical Setback for the West, Foreign Affairs, Jan./Feb. 2009, (“Total home equity in the United States, which was valued at $13 trillion at its peak in 2006, had dropped to $8.8 trillion by mid-2008 and was still falling in late 2008”).] [7: Id.] [8: See The Federal Reserve Bank of San Francisco, What Did the Fed Do to Combat the Financial Crisis?, The Economy: Crisis & Response, http://www.frbsf.org/econanswers/response_q1more.htm (last visited April 25, 2012).] [9: Paul Krugman, Op-Ed., Financial Reform 101, N.Y. Times, April 1, 2010, at A23 (“"It’s easy to see where concerns about banks that are ‘too big to fail’ come from. In the face of financial crisis, the U.S. government provided cash and guarantees to financial institutions whose failure, it feared, might bring down the whole system . . . . And it also established a dangerous precedent: big financial institutions, we now know, will be bailed out in times of crisis.”)] [10: See Diya Gullapalli, Bailout of Money Funds Seems to Stanch Outflow, Wall St. J., Sept. 20, 2008, at A2; Chris Isidore, Still Fighting Over GM’s Bailout, CNN Money (Feb. 16, 2012), http://www.money.cnn.com/2012/02/16/news/companies/gm_bailout/index.htm.]

Many Americans fear that large corporations are holding the United States hostage. Large corporations reap rewards when times are flush, but, when investments fail (or when laws are broken,) the American people must pay. The events onf April 20, 2010, and its aftermath did nothing to quell those fears and reinforced the conclusion that large corporations have become “too big to debar.”Comment by Nicole Bazik: No FNs in this paragraph because this is author commentary/opinion.

On April 20, 2010, the oil drilling rig, Deepwater Horizon, exploded.[footnoteRef:11] Over the following months, the flow of oil created one of the biggest man-made environmental disasters in U.S.United States history.[footnoteRef:12] Even as the oil spilled into the Gulf of Mexico, there were calls to de “bar BP from receiving gGovernment contracts.”[footnoteRef:13] These calls had begun “before the spill in the Gulf of Mexico [when] officials at the Environmental Protection Agency (“EPA”) wanted to stop BP from getting government contracts until it addressed various environmental and safety violations.”[footnoteRef:14] In fact, since 2000, BP has been convicted three times under the Clean Air Act (“CAA”) and the Clean Water Act (“CWA”)CWA (in 1999, for illegal dumping in Alaska[footnoteRef:15], in 2005, for the Texas City explosion[footnoteRef:16], and, in 2006, for a burst oil pipeline in Alaska[footnoteRef:17]). At the time of the spill, two units of BP were debarred “because of environmental and safety violations that resulted in the death of several workers.”[footnoteRef:18] Nonetheless, Tthese debarments did not prevent BP from being the largest supplier of fuel to the military in 2009.[footnoteRef:19] Comment by Nicole Bazik: Press Release – R17.2.3 and parallel internet citation – R18.2.3(a)Comment by Nicole Bazik: Direct internet source – R18.2.2 (does not seem like National Geographic actually has a print version of their Daily News – if they do then apply R16.6(f) instead.Comment by Nicole Bazik: Direct internet source – R18.2.2Comment by Nicole Bazik: Newspaper Article R16.6Comment by Nicole Bazik: Supra R4.2Comment by Nicole Bazik: Direct internet source – R18.2.2Comment by Nicole Bazik: Direct internet source – R18.2.2Comment by Nicole Bazik: Direct internet source R18.2.2 [11: Press Release, BP Press Office, BP Confirms that Transocean Ltd Issued the Following Statement Today: Transocean Ltd. Reports Fire on Semisubmersible Drilling Rig Deepwater Horizon(April 21, 2010), available at http://www.bp.com/genericarticle.do?categoryId=2012968&contentId=7061443.] [12: Marianne Lavelle, Gulf Oil Spill Worst in U.S. History; Drilling Postponed, Nat’l Geographic (May 27, 2010), http://www.news.nationalgeographic.com/news/2010/05/100527-energy-nation-gulf-oil-spill-top-kill-obama/ (“Hours after the U.S. Geological Survey (USGS) released estimates that affirm the Deepwater Horizon spill in the Gulf of Mexico is the worst in U.S. history, President Obama announced new limits on U.S. offshore drilling to allow for ‘further study and deeper reform.’”).] [13: Abram Lustgarten, EPA Officials Weigh Sanctions Against BP’s U.S. Operations, Propublica.org (May 21, 2010), http://www.propublica.org/article/epa-officials-weighing-sanctions-against-bps-us-operations.] [14: Ron Nixon, Size Protects Government Contractors That Stray, N.Y. Times, Dec. 17, 2010, at A12.] [15: Environmental Protection Agency, supra note 2.] [16: Richard Mauer & Anna M. Tinsley, Gulf Oil Spill: BP Has Long Record of Legal, Ethical Violations, McClatchy Newspapers (May 8, 2010), http://www.mcclatchydc.com/2010/05/08/93779/bp-has-a-long-record-of-legal.html#ixzz0nZaTzdqN.] [17: Mark Tran, BP Shuts Leaking Alaskan Wells, The Guardian (London) (July 19, 2006), http://www.guardian.co.uk/business/2006/jul/19/oilandpetrol.bp.] [18: Nixon, supra note 14.] [19: Ben Rooney, BP Still a Top Supplier to U.S. Military, CNNMoney.com (July 15, 2010), http://www.money.cnn.com/2010/07/15/news/companies/BP_government_contracts/index.htm.]

However, BP has not been suspended or debarred in the wake of the Deepwater Horizon spill and continues to receive government contracts.[footnoteRef:20] This has led to allegations that large government contractors, such aslike BP, have in effect become “too big to debar.”[footnoteRef:21] It has also led to calls for reform from officials like Senator Russ Feingold who “do[es] not think that large corporations should be given a free pass for behavior that would typically result in the debarment of a smaller corporation.”[footnoteRef:22] It has also led to a proposed amendment to the military authorization bill requiring the Secretary of Defense to determine “whether BP or its subsidiaries should be debarred from contracting with the Department of Defense.”[footnoteRef:23]Comment by Nicole Bazik: Consecutively paginated journal – R16.4Comment by Nicole Bazik: Federal bill (unenacted) – R13.2 [20: See, e.g., id.] [21: Rena Steinzor & Anne Havemann, Too Big to Obey: Why BP Should Be Debarred, 36 Wm. & Mary Envtl. L. & Pol’y Rev. 81, 111-13 (2011).] [22: Nixon, supra note 14.] [23: H.R. 5136, 111th Cong. (2010) (“Sec. 849. Debarment of BP and Its Subsidiaries. (a) Contracts With BP and Its Subsidiaries. If the Secretary of Defense determines that BP or any of its subsidiaries performing any contract with the Department of Defense is no longer a responsible source (as defined in section 2302 of title 10, United States Code), the Secretary shall determine, not later than 90 days after making such determination, whether BP or its subsidiaries should be debarred from contracting with the Department of Defense.”).]

BP was not seriously affected by prior debarments because it was debarred under the EPA’s statutory debarment authority. These debarments, (under the CAA and CWA,) are effective against violating facilities, not enterprises.[footnoteRef:24] A large entity can shift work to a non-violating facility and maintain its eligibility for government contracts.[footnoteRef:25] BP is not the only large contractor to receive government contracts after debarment.[footnoteRef:26] Suspensions have beenwere revoked after contractors used their enormous resources to put pressure on federal agencies.[footnoteRef:27] BP is just one beneficiary of a debarment and suspension system that allows large contractors to play by their own rules.Comment by Nicole Bazik: No FN because this is author opinion/introductory sentence.Comment by Nicole Bazik: Federal Regulation – R14.2Comment by Nicole Bazik: Wasn’t entirely sure how to cite this – looked at the original of the source – found and it said to cite as I did.“Issues may be cited as ARMY LAW., [date], at [page number].”Comment by Nicole Bazik: No FN because this is author opinion/concluding sentence. [24: 2 C.F.R. § 1532.1110 (2011).] [25: See Nixon, supra note 14.] [26: Boeing was suspended in 2003 for ethical violations. The Air Force later waived the suspension, twice. Jennifer S. Zucker, The Boeing Suspension: Has Increased Consolidation Tied the Department of Defense's Hands?, Army Law., April 2004, at 15 n. 14 (2004), citing Rena Merle, Boeing Gets Waiver from Air Force, Wash. Post, Aug. 30, 2003, at E1 and Rena Merle, Boeing Wins Contract Despite Suspension, Wash. Post, Oct. 1, 2003, at E3.] [27: Todd J. Canni, Shoot First, Ask Questions Later: An Examination and Critique of Suspension and Debarment Practice Under the FAR, Including a Discussion of the Mandatory Disclosure Rule, the IBM Suspension, and Other Noteworthy Developments, 38 Pub. Cont. L.J. 547, 594 (2009) (IBM got a suspension lifted after eight days because “the Government presumably was willing to work with IBM to reach an expedient resolution of the matter because of IBM's vast resources, stature in the government contracting community, and the leverage it possesses due to the Government's need for IBM's products and services”).]

This Note examines the structure of the EPA’s suspension and debarment scheme under traditional procurement authority and under its unique statutory authority. It explores how these systems have proven inadequate in handling the unique challenge presented by large, influential contractors. Finally, it advocates an alternative procurement integrity system modeled after the three-part procurement sanctions system of the World Bank.[footnoteRef:28] Comment by Nicole Bazik: No FNs to sources in this paragraph because this is just a roadmap. [28: The three parts are (1) the investigatory and prosecutorial Integrity Vice Presidency, (2) the judicial Evaluation and Suspension Officer, and (3) the independent Sanctions Board.]

II.EPA Suspension and Debarment: The Toothless Tiger

To understand how BP continues to receive billions of dollars in government contracts, one should look at the EPA suspension and debarment scheme. The mission of the EPA is to protect human health and the environment.[footnoteRef:29] One of the tools available to the EPA to accomplish this mission is the power to suspend or debar contractors from receiving government contracts if the contractor harms human health or the environment.[footnoteRef:30]Comment by Nicole Bazik: No FN – introductory sentence.Comment by Nicole Bazik: Direct Internet Source – R18.2.2Comment by Nicole Bazik: Current official code – R12.3 [29: Environmental Protection Agency, Our Mission and What We Do, epa.gov, http://www.epa.gov/aboutepa/whatwedo.html, (last visited April 11, 2012).] [30: See 33 U.S.C. § 1368(a) (2010) (instructing federal agencies to not contract with any person convicted under section 1319(c)); 42 U.S.C. § 7606(a) (2010) (instructing agencies to not contract with any person convicted under section 7413(c)).]

Like many federal agencies, the EPA exercises procurement debarment and suspension authority under 2 C.F.R. § 180, 2 C.F.R. § 1532, and FAR 9.4. The EPA also has unique statutory debarment authority under the CWA[footnoteRef:31] and the CAA.[footnoteRef:32] These statutes prohibit agencies from awarding contracts to be performed at facilities that violate these provisions.[footnoteRef:33] This Nnote will first addresscover the weaknesses of procurement suspension and debarment and then consider some of the uniquespecial problems that arise when the EPA exercises its statutory debarment authority under the CWA and CAA.Comment by Nicole Bazik: No FN because full citation information is given in the text.Comment by Nicole Bazik: Short cite of U.S.C. – R 12.10Comment by Nicole Bazik: No FN - roadmap [31: § 1368.] [32: § 7606.] [33: See § 1368(a); § 7606(a).]

A.Procurement Debarment and Suspension: Strong in Theory, Weak in Practice

Agencies across the Federal Government may protect the public fisc through the suspension and debarment of errant contractors.[footnoteRef:34] Procurement suspension and debarment ensures that agencies “solicit offers from, award contracts to, and consent to subcontracts with responsible contractors only.”[footnoteRef:35] Procurement suspension and debarment are “imposed only in the public interest for the Government’s protection and not for purposes of punishment” and, as such, “[d]ebarment and suspension are discretionary actions . . . .”[footnoteRef:36] Consequences for debarred contractors can be severe.[footnoteRef:37] Comment by Nicole Bazik: Consecutively paginated journals and periodicals – 16.4Comment by Nicole Bazik: PCLJ Style Guide for FAR regulations [34: Much has been written on procurement debarment and suspension under FAR Subpart 9.4. This Note will only address those provisions and practices that have been exploited by large contractors, such as BP, to avoid facing debarment and suspension. See generally Christopher Yukins, Suspension and Debarment: Re-examining the Process, 13 Pub. Proc. Law Rev. 255 (2004), (generally appraising the nature and purpose of procurement suspension and debarment in wake of several high profile suspensions and debarments); Canni, supra note NOTEREF _Ref195622131 \h \* MERGEFORMAT 27, (critically examining of due process and fairness to contractors under FAR 9.4); Michael J. Davidson & Jennifer L. Longmeyer-Wood, The ICE Suspension and Debarment Program Heats Up, 46 Procurement Law. 1 (2010), (detailing the increased use of FAR 9.4 by the Department of Homeland Security, Immigration and Customs Enforcement to debar “contractors that have knowingly hired or harbored illegal aliens”); Robert J. Wagman, Jr., The Risks of Doing Business with the Government Are Getting Riskier, 47 The Advoc. (Tex.) 62 (2009), (summarizing the development of antifraud enforcement under the False Claims Act as enacted in the FAR); Sandeep Kathuria, Best Practices for Compliance with the New Government Contractor Compliance and Ethics Rules Under the Federal Acquisition Regulation, 38 Pub. Cont. L.J. 803 (2009), (detailing the 2008 amendments to the FAR affecting initial compliance program requirements and mandatory disclosure provisions); Brian D. Shannon, Debarment and Suspension Revisited: Fewer Eggs in the Basket?, 44 Cath. U. L. Rev. 363 (1995), (historically accounting for the development of federal suspension and debarment through the mid-1990s).] [35: FAR 9.402(a).] [36: FAR 9.402(a)-(b).] [37: FAR 9.405(a) (“Contractors debarred, suspended, or proposed for debarment are excluded from receiving contracts, and agencies shall not solicit offers from, award contracts to, or consent to subcontracts with these contractors”).]

Under FAR 9.4, a contractor can be debarred for a wide variety of offenses that fall under three broad categories: convictions and civil judgments,[footnoteRef:38] various contract- related offenses,[footnoteRef:39] and “any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor.”[footnoteRef:40] The debarring official (“DO”) exercises discretion and must “determine whether debarment is in the Government’s interest” considering a variety of factors.[footnoteRef:41] The FAR regulations allows agencies to develop their own rules for suspension and debarment[footnoteRef:42] but requires all DOs to issue a “notice of proposal to debar”[footnoteRef:43] to the contractor before the decisions is made and a “notice of debarring official’s decision”[footnoteRef:44] afterwards. [38: FAR 9.406-2(a) (allowing debarment of a contractor for “(1) Commission of fraud or a criminal offense in connection with—(i) Obtaining; (ii) Attempting to obtain; or (iii) Performing a public contract or subcontract. (2) Violation of Federal or State antitrust statutes relating to the submission of offers; (3) Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violating Federal criminal tax laws, or receiving stolen property; (4) Intentionally affixing a label bearing a “Made in America” inscription . . . to a product . . . when the product was not made in the United States or its outlying areas . . . ; or (5) Commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a Government contractor or subcontractor.”).] [39: FAR 9.406-2(b) (allowing debarment of “(1) A contractor, based upon a preponderance of the evidence, for any of the following—(i) Violation of the terms of a Government contract or subcontract so serious as to justify debarment . . . . (ii) Violations of the Drug-Free Workplace Act of 1988 . . . . (iii) Intentionally affixing a label bearing a “Made in America” inscription . . . to a product . . . when the product was not made in the United States or its outlying areas . . . . (iv) Commission of an unfair trade practice as defined in 9.403….(v) Delinquent Federal taxes . . . . (vi) Knowing failure by a principal . . . to timely disclose to the Government, in connection with the award, performance, or closeout of the contract or a subcontract thereunder, credible evidence of—(A) Violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations . . . ; (B) Violation of the civil False Claims Act . . . ; or (C) Significant overpayment(s) on the contract . . . . (2) A contractor, based on a determination by the Secretary of Homeland Security or the Attorney General of the United States, that the contractor is not in compliance with Immigration and Nationality Act . . . .”)] [40: FAR 9.406-2(c).] [41: FAR 9.406-1(a) (“Before arriving at any debarment decision, the debarring official should consider factors such as the following: (1) Whether the contractor had effective standards of conduct and internal control systems in place . . . . (2) Whether the contractor brought the activity cited . . . to the attention of the . . . Government . . . . (3) Whether the contractor has fully investigated the circumstances surrounding the cause for debarment . . . . (4) Whether the contractor cooperated fully with Government agencies . . . . (5) Whether the contractor has paid [for] . . . all . . . liability . . . . (6) Whether the contractor has taken appropriate disciplinary action against the individuals responsible . . . . (7) Whether the contractor has implemented . . . remedial measures . . . . (8) Whether the contractor has instituted . . . new or revised review and control procedures and ethics training programs. (9) Whether the contractor has had adequate time to eliminate the circumstances . . . that led to the cause for debarment. (10) Whether . . . management recognizes and understands the seriousness of the misconduct . . . and has implemented programs to prevent recurrence.”).] [42: FAR 9.406-3(a)-(b).] [43: FAR 9.406-3(c).] [44: FAR 9.406-3(e).]

B.The Terrible Trifecta: Three Weaknesses Plague Federal Suspension and Debarment

There are three weaknesses in the FAR regulations and in itstheir application by agencies. The followingse weaknesses render procurement suspension and debarment useless against BP and other large contractors: the overuse of waiver, a lack of transparency, and a lack of governmentwide education about suspension and debarment.Comment by Nicole Bazik: No FNs because this is author opinion and an introductory paragraph.

1.Death by a Thousand Cuts: How the Overuse of Waiver Is Eroding the Legitimacy of the Suspension and Debarment System

The first weakness, the “waiver” provision, comes into playarises after a DO has debarred a contractor, the “waiver” provision. Using waiver an agency can ignore a debarment if the “the agency head determines that there is a compelling reason,” freeing that agency to “solicit offers from, award contracts to, or consent to subcontracts with” debarred contractors.[footnoteRef:45] For example, Boeing received two large contracts from the U.S. United States Air Force after two of its debarred units had been debarred after receiveding such waivers, from the Air Force.[footnoteRef:46] There is a danger that the use of waivers to spare large contractors the consequences of suspension and debarment may erode the public’s confidence in the efficacy of suspension and debarment. Even worse, the threatened use of waiver may prevent DOs from seriously investigating the debarment of large contractors at all.[footnoteRef:47]Comment by Nicole Bazik: No FN because introductory sentence/author opinion.Comment by Nicole Bazik: PCLJ Style Guide for FAR regulationsComment by Nicole Bazik: Supra R4.2Comment by Nicole Bazik: No FN because this is author opinion.Comment by Nicole Bazik: Supra R4.2 [45: FAR 9.405(a).] [46: Zucker, supra note NOTEREF _Ref195621809 \h \* MERGEFORMAT 26, at 22 (“Accordingly, on 29 August 2003, the AF waived its suspension and awarded Boeing a $ 56.7 million cost-plus-award-fee contract to deploy a Delta II rocket carrying the Global Positioning Satellite (GPS) system . . . . On 30 September 2003, the AF again waived its suspension of Boeing's space units. This time it justified the waiver on national defense requirements and awarded a single Buy II EELV launch to Boeing for the launch of a NRO satellite”).] [47: See Nixon, supra note NOTEREF _Ref195621562 \h \* MERGEFORMAT 14.]

Other agencies can waive debarments made by the EPA under the EPA’s procurement and statutory authority.[footnoteRef:48] Thus, even if the EPA debarred a large contractor, the head of any agency can override the suspension or debarment simply by stating “in writing the compelling reasons justifying continued business dealings between that agency and the contractor.”[footnoteRef:49] This provision is put to frequent use by the Department of Defense for a variety of reasons listed in DFARS 209.405.[footnoteRef:50] This policy is designed to assist an agency that would otherwise be unable to procure mission critical goods or services from a debarred contractor where no other source is reasonably available.[footnoteRef:51]Comment by Nicole Bazik: Internal Cross-Reference – R3.5Comment by Nicole Bazik: PCLJ Style Guide for FAR regulations.Comment by Nicole Bazik: PCLJ Style Guide for corresponding agency supplements to the FARComment by Nicole Bazik: Supra R4.2 [48: For more detail on statutory debarment. See infra Part II.C.Muddying Already Murky Waters: EPA’s Statutory Debarment Authority under the Clean Air and Clean Water Acts.] [49: FAR 9.406-1(c) (debarment); FAR 9.407-1(d) (suspension).] [50: “(i) Only a debarred or suspended contractor can provide the supplies or services; (ii) Urgency requires contracting with a debarred or suspended contractor; (iii) The contractor and a department or agency have an agreement covering the same events that resulted in the debarment or suspension and the agreement includes the department or agency decision not to debar or suspend the contractor; or (iv) The national defense requires continued business dealings with the debarred or suspended contractor.”] [51: Canni, supra note NOTEREF _Ref195622131 \h \* MERGEFORMAT 27, at 606 (Waiver is designed to prevent agencies from finding “themselves in a precarious position where they might be unable to procure critical items including military weapons, parts, and equipment . . . [by allowing] agencies to continue their mission, even if that requires continued business dealings with a contractor deemed nonresponsible”).]

In spite of the necessity of waiver in certain contexts, the overuse of waiver has negative effects on the integrity of the entire procurement system. First, when the Government continues to contract with an entity that has been declared by the Government to be nonresponsible it runs counter to the policy announced in FAR 9.402(a).[footnoteRef:52] Moreover, when a large contractor is debarred, the effect of the debarment on the contractor is neutralized by generous invocation of waiver.[footnoteRef:53] For example, in 2003, three of Boeing's units were debarred for procurement violations.[footnoteRef:54] However, these debarments, through limited to three units, were effectively nullified when the Air Force twice waived Boeing's suspension.[footnoteRef:55] In fact, the use of waivers for large contractors is one symptom, and one means of accommodating a government -contractor marketplace that has become increasingly dominated by a few large firms.[footnoteRef:56] Comment by Nicole Bazik: No FN because introductory sentence/author opinionComment by Nicole Bazik: PCLJ Style Guide - FARComment by Nicole Bazik: Newspaper Article R16.6Comment by Nicole Bazik: Supra – R4.2 [52: “Agencies shall solicit offers from, award contracts to, and consent to subcontracts with responsible contractors only.”] [53: Griff Witte, Federal Ban Doesn’t Hurt Worldcom Much, Washington Post, October 24, 2003 (“In the nearly three months since federal authorities suspended WorldCom Inc. from receiving new and renewed contracts because of its ongoing accounting troubles, U.S. agencies have granted the telecommunications giant more than $100 million worth of government work through a little-known waiver process”).] [54: Zucker, supra note 26, at 14.] [55: NOTEREF _Ref195621809 \h \* MERGEFORMAT Id. at 22.] [56: Id. at 24-26 (“The military currently needs mega-defense contractors just as much as these contractors need the military . . . . In other words, the top five companies received the following percentage of the DOD's prime contract awards: 49.8% of Research, Development, Test, and Evaluation, 40.6% of Supplies and Equipment, and 15.5% of Other Services and Construction. Even the temporary suspension of one of these giants would leave one, at best two, prime contractors capable of providing critical products and services to the DOD”).]

2.What Is True by Lamplight Is Not Always True by Sunlight[footnoteRef:57]: Lack of Transparency and Accountability in the Federal Suspension and Debarment SystemComment by Nicole Bazik: Book – R15 [57: Joseph Joubert, Joubert: A Selection from His Thoughts (Katharine Lyttelton trans., Dodd, Mead & Co. eds., 1899).]

Transparency is one of the pillars of a good public procurement system.[footnoteRef:58] In order to maintain transparency, accountability mechanisms run throughout federal procurement law.[footnoteRef:59] When large contractors appear to have special influence over the suspension and debarment process, the perceived legitimacy of the process is threatened. For example, in March 2008, the EPA suspended IBM over “allegations that IBM improperly obtained sensitive source selection and contractor bid or proposal information.”[footnoteRef:60] The EPA began intense negotiations with IBM and the suspension was lifted within eight days,[footnoteRef:61] after the EPA had negotiated a favorable interim agreement.[footnoteRef:62] The EPA justifiably claimed this outcome a success.[footnoteRef:63] However, the contracting community was not reassured that justice had been done and was frightened by thea series of apparently arbitrary, opaque, and unaccountable decisions.[footnoteRef:64] The lack of transparency transformed an otherwise good outcome into a public-relations issue that undermined contractor confidence in the fairness of the procurement system.Comment by Nicole Bazik: Consecutively paginated journal R16.4Comment by Nicole Bazik: Applying R10.6.2 (quoting parentheticals in case citations) to a consecutively paginated journal citations.Comment by Nicole Bazik: No FN because this is author opinion. Comment by Nicole Bazik: Supra R4.2Comment by Nicole Bazik: Direct internet source 18.2.2 (next two FNs as well)Comment by Nicole Bazik: No FN because author opinion. [58: See Steven L. Schooner, Desiderata: Objectives for a System of Government Contract Law, 11 Pub. Proc. L. Rev. 103, 104 (2002) (“At a macro level, the author prefers to begin with three ‘pillars’ that, in my opinion, underlie the United States procurement system: system transparency; procurement integrity; and competition”).] [59: See id. NOTEREF _Ref195622243 \h \* MERGEFORMAT at 106 n. 19 (quoting Jody Freeman, The Private Role in Public Governance, 75 N.Y.U. L. Rev. 543, 586-87 (2000)) (“Numerous laws designed to ensure transparency, rationality, and accountability in decision making, including the Administrative Procedure Act (APA) and the Freedom of Information Act, apply to agencies, and not to private actors.”).] [60: Canni, supra note NOTEREF _Ref195622131 \h \* MERGEFORMAT 27, at 592.] [61: NOTEREF _Ref195622131 \h \* MERGEFORMAT Id. at 594.] [62: IBM withdrew from the competition, placed five individuals on administrative leave, agreed to monitoring, and paid the costs of the investigation. Environmental Protection Agency & IBM Corp., Interim Agreement, Download 101, http://download.101com.com/pub/fcw/media/htdocs/ui/st_images/April%203%202008%20IBM%20Interim%20Agreement.pdf (last visited April 30, 2012) (text of the agreement).] [63: See Matthew Weigeit, IBM Case: A Question of Due Process, Federal Computer Week (April 11, 2008), http://www.fcw.com/articles/2008/04/11/ibm-case-a-question-of-due-process.aspx. (“EPA lifted the suspension eight days later, but the question of how it came to pass in the first place lingered. Now, EPA’s debarment official has an answer: It happened because the system worked as intended. ‘Nothing is broken,’ said Robert Meunier, EPA’s debarring official and chairman of the Interagency Suspension and Debarment Committee. Shrugging off calls for reform of the system from some quarters, Meunier said no changes are necessary.”).] [64: See Christopher J. Dorobek, Editorial: EPA/IBM Case: We Still Have Questions, Federal Computer Week (April 18, 2008), http://www.fcw.com/articles/2008/04/18/editorial-epaibm-case-we-still-have-questions.aspx (accompanied by an editorial cartoon featuring a vendor standing at a gallows about to be hanged by a vaguely disinterested agency bureaucrat).]

DCOs tend to be conservative in exercising their discretion, including the discretion to suspend and debar large contractors, especially when exercising that discretion could lead to intense scrutiny.[footnoteRef:65] A busy DCO may have greater incentives to make sure an agency’s vital needs are met or that small contractors are debarred, rather than picking a fight with a large contractor.[footnoteRef:66] Even if debarring officials do not feel particularly intimidated by large contractors, they may simply have other priorities. For example, iIt is well known that the Federal Government is, or soon will be, facing a severe procurement workforce shortage.[footnoteRef:67] As a result of the workforce shortage, debarring officials may not enough time to address these issues.Comment by Nicole Bazik: Book R15Comment by Nicole Bazik: Consecutively paginated journal R16,4Comment by Nicole Bazik: No FN – author opinion.Comment by Nicole Bazik: Consecutively paginated journal R16.4 and quoting R10.6.2 [65: Steven Kelman, Procurement and Public Management—The Fear of Discretion and the Quality of Government Performance 26 (1990) (“Because exercise of discretion generates the congressional investigations and media stories, contracting officers tend to be safe rather than sorry. Given their lack of program responsibility for what is procured, they have little to compensate them for taking risks.”).] [66: For a discussion of the difficulty involved in incentivizing governmental behavior. See generally Steven L. Schooner, Fear of Oversight: The Fundamental Failure of Businesslike Government, 50 Am. U. L. Rev. 627 (2001).] [67: “[A]ll agencies face the prospect of losing many of their skilled acquisition personnel over the next 5 years --with a significant portion of the government's acquisition workforce becoming eligible to retire by fiscal year 2008.” Steven Schooner, Contractor Atrocities at Abu Ghraib: Compromised Accountability in a Streamlined, Outsourced Government, 16 Stan. L. & Pol’y Rev. 549, 559 n. 32 (2005) (quoting Gen. Acct. Office, Federal Procurement: Spending and Workforce Trends (2003)).]

DOs need options in crafting sanctions to compel errant contractors and do while doing minimal damage to Government interests. Currently, suspension and debarment are the primary sanctions available to DOs.[footnoteRef:68] DOs have discretion over the length of debarment[footnoteRef:69] and some discretion over the scope of debarment.[footnoteRef:70] However, debarment in any form is often a harsh remedy. Of course, DOs also have the option to negotiate administrative agreements[footnoteRef:71], as the EPA did after suspending IBM.[footnoteRef:72] Comment by Nicole Bazik: No FN – author opinion.Comment by Nicole Bazik: PCLJ Style Guide on FAR Comment by Nicole Bazik: No FN – author opinion.Comment by Nicole Bazik: Supra R.42 [68: See FAR 9.4.] [69: FAR 9.406-4 (“Debarment shall be for a period commensurate with the seriousness of the cause(s). Generally, debarment should not exceed 3 years”).] [70: FAR 9.406-5.] [71: See, e.g., FAR 9.406-3(f)(1).] [72: Canni, supra note 27, at 592.]

The use of administrative agreements should be encouraged, not just as a means of resolving suspensions and debarments, but as an alternative sanction in its own right. Debarment is a blunt tool, often ill- suited to the complicated realities of the relationship between the Government and large contractors. When debarment of a large contractor seems inimical to the Ggovernment’s interests, DOs should be encouraged, and required, to craft more nuanced agreements designed to maintain the fairness and transparency of the procurement system while also protecting the Ggovernment’s business interests.Comment by Nicole Bazik: No FNs in this paragraph because all author opinion.

3.A Little Knowledge Is a Dangerous Thing: Ignorance and Misconceptions Wreak Havoc on Federal Suspension and Debarment

The lack of transparency in the suspension and debarment system makes the process mysterious and confusing for the contracting community. Likewise, Tthe lack of communication and awareness regarding suspension and debarment within many agencies makes the process mysterious and frightening for many agency employees and officials. For example, ina February 2010, the Department of Homeland Security (DHS)’s, Office of Inspector General report found that suspension and debarment were significantly underused in the agency.[footnoteRef:73] This was attributed directly to procurement officials’ antipathy to the suspension and debarment process.[footnoteRef:74] Comment by Nicole Bazik: No FN – author opinion (next sentence too)Comment by Nicole Bazik: Report available online – R15.9 [73: The Office of Inspector General found “23 instances where contracts were terminated for default or cause but were not reviewed to determine whether a suspension and debarment referral was warranted” and “21 instances where contracts were terminated for default, the reasons for which were not recorded in government-wide databases.” Dept. of Homeland Security, Office of Inspector General, DHS’ Use of Suspension and Debarment Actions for Poorly Performing Contractors 1 (2010), available at www.dhs.gov/xoig/assets/mgmtrpts/OIG_10-50_Feb10.pdf. [hereinafter DHS Report].] [74: “The Department of Homeland Security has suspension and debarment policies and procedures in place. However, the department is reluctant to apply the policies and procedures against poorly-performing contractors. Department procurement officials characterized the suspension and debarment process as being too resource intensive, punitive, and as negatively impacting the size of the contractor pool.” Id.]

DHS is not the only agency to confront this issue.[footnoteRef:75] Willard D. Blalock, Chair of the Interagency Suspension and Debarment Committee, acknowledged the underutilization of suspension and debarment.[footnoteRef:76] He and stated that “[t]he current suspension and debarment system is appropriate,” but that “[w]hat is required is the will to use it.”[footnoteRef:77] Federal agencies will have to look for creative ways to increase the willingness and ability of agency officials’ willingness and ability to use the suspension and debarment tools at their disposal.Comment by Nicole Bazik: Legislative hearing R13.3Comment by Nicole Bazik: No FN – author opinion. [75: “Recent audits by agency Inspector Generals have prompted some member agencies to re-examine their suspension and debarment programs to determine what can be done to make them more effective in ensuring that the agency conducts business only with responsible contractors and grantees.” Ensuring Contractor Accountability: Past Performance and Suspension & Debarment: Hearing Before the Senate Commission on Wartime Contracting in Iraq and Afghanistan, 112th Cong. 4 (2011) (statement of Willard D. Blalock, Chair, Interagency Suspension and Debarment Committee), available at http://www.wartimecontracting.gov/docs/hearing2011-02-28_testimony-Blalock.pdf.] [76: See id. at 5.] [77: Id.]

C.Muddying Already Murky Waters: EPA’s Statutory Debarment Authority uUnder the Clean Air and Clean Water Acts

All executive agencies are granted authority to engage in procurement debarment as discussed above.[footnoteRef:78] Congress occasionally grants unique debarment authority to specific agencies in order to advance various public policies.[footnoteRef:79] The EPA has been granted such a statutory debarment authority under the CAA and CWA.[footnoteRef:80] The regulations promulgated pursuant to these acts provide for the debarment of companies that violate these acts.[footnoteRef:81] An EPA “listing official” is put in charge of listing facilities found to be in violation of these statutes and listing precludes all federal agencies from making an award of a contract to be performed at a listed facility.[footnoteRef:82] This statutory debarment scheme has come to increasingly mirror procurement debarment and therefore suffers from all of the same weaknesses.[footnoteRef:83] These weaknesses include: (overuse of waiver,[footnoteRef:84] lack of independent debarring officials,[footnoteRef:85] and lack of flexible sanctions[footnoteRef:86]).Comment by Nicole Bazik: NOTE – I’m sorry but I can’t figure out how to correctly link this to the section cited. When I try to insert a cross reference, it replaces Part II.A with either the title of that section or the number zero. Comment by Nicole Bazik: Statute U.S.C. - R12.3Comment by Nicole Bazik: Federal regulations – R14.2Comment by Nicole Bazik: Memoranda R17.2.3Comment by Nicole Bazik: PCLJ Style Guide for FAR addendum regulationsComment by Nicole Bazik: Direct internet source – R18.2.2Comment by Nicole Bazik: Short cite of federal regulation – 5 FN rule [78: See discussion infra Part II.A.] [79: See, e.g., 33 U.S.C. § 1368(a) (2010); 42 U.S.C. § 7606(a) (2010).] [80: Id.] [81: 2 C.F.R. § 1532.1100 (2011).] [82: See § 1532.1130.] [83: Memorandum from Robert F. Meunier, EPA Debarring Official, to EPA Suspension and Debarment Program Officials, EPA Final Policy Guidance: Listing of Persons Ineligible for Award under Section 306 of the Clean Air Act and Section 508 of the Clean Water Act (Jan. 22, 1999)(“Since 1995, the responsibility for implementing the mandatory contract and assistance ineligibility provisions under Section 306 of the Clean Air Act (CAA) and Section 508 of the Clean Water Act (CWA) has been delegated to the EPA Debarring Official pursuant to Agency reorganization plans. The integration of EPA's statutory and discretionary debarment programs was envisioned, in part, to enhance consistency in the development of policy and achieve operational efficiency amongst EPA's debarment functions.”)] [84: DFARS 209.405 (The Department of Defense offers the following compelling reasons for waiver: “(1) only a debarred or suspended contractor can provide the supplies or services; (2) Urgency requires contracting with a debarred or suspended contractor; (3) The contractor and a department or agency have an agreement covering the same events which resulted in the debarment or suspension and the agreement includes the department or agency decision not to debar or suspend the contractor; or (4) The national defense requires continued business dealings with the debarred or suspended contractor.”).] [85: See U.S. Environmental Protection Agency, About the Office of Administration and Resource Management, EPA.Gov, http://www.epa.gov/aboutepa/oarm.html (last visited April 30, 2012) (Both the FAR 9.4 and the statutory debarment programs are administered by the Office of Administration and Resources Management).] [86: § 1532.1110 (2011) (“If you are convicted of any offense described in § 1532.1105, you are automatically disqualified from eligibility to receive any contract, subcontract, assistance, sub-assistance, loan or other nonprocurement benefit or transaction that is prohibited by a Federal department or agency under the Governmentwide debarment and suspension system . . . if you: (a) Will perform any part of the transaction or award at the facility giving rise to your conviction (called the violating facility); and (b) You own, lease or supervise the violating facility.”).]

EPA’sThis statutory debarment scheme suffers from an additional weakness.: iIts sanction is limited to violating facilities, as opposed to violating contractors.[footnoteRef:87] For example, at the time of the Gulf Oil Spill in 2010, two of BP’s facilities had been debarred under the EPA’s statutory debarment authority.[footnoteRef:88] However, Tthis did little to keep a large firm like BP from being the Department of Defense’s largest supplier of fuel.[footnoteRef:89] Large contractors in possession of debarred facilities fulfill government contracts with products and services originating at other facilities, likeas BP has continued to do.[footnoteRef:90] Comment by Nicole Bazik: Supra R.4.2 [87: See id.] [88: Nixon, supra note NOTEREF _Ref195621562 \h \* MERGEFORMAT 14.] [89: Rooney, supra note NOTEREF _Ref195621581 \h \* MERGEFORMAT 19.] [90: See Nixon, supra note 14.]

The federal suspension and debarment system is not broken. Most of the time, the right contractors are suspended or debarred for the right reasons and the public interest is served. However, overuse of waiver, a lack of transparency, and a dearth of education have hampered the effectiveness of a basically good system. With a few simple reforms the Government could hold large contractors accountable, increase the integrity of the public procurement system, and reassure the public.Comment by Nicole Bazik: No FNs because author opinion in this paragraph.

ORIGINAL ANALYSIS

III.The World Bank Sanctions Model

Organizations such as the World Bank have encountered similar challenges and have already developed some innovative means to secure their procurement systems against unscrupulous contractors of all sizes.[footnoteRef:91] While the World Bank is not a governmental actor, it “is the largest development bank in the world with a core mission of providing financial assistance to developing countries.”[footnoteRef:92] The World Bank has “disbursed over $568 billion as development finance”[footnoteRef:93] and “procures spends over a$1 billion annually forin goods and services for its own internal businessrequirements.”[footnoteRef:94] In order to effectively use its funds, the World Bank developed a sophisticated sanctions program designed to take account of: (a) “the need for economy and efficiency in the implementation of [projects]”; (b) its “interest in giving all eligible bidders . . . …the same information and equal opportunity to compete in providing goods, works, and non-consulting services financed by the Bank”; (c) its “interest in encouraging the development of domestic contracting and manufacturing industries in the Bborrowing country”; and (d) “the importance of transparency in the procurement process.”[footnoteRef:95]Comment by Nicole Bazik: Consecutively paginated journal R16.4, citing parenthetical R10.6.2, direct internet source R18.2.2Comment by Nicole Bazik: R15.9 – report that is available in both print and online. All subsequent FNs that refer to a World Bank report were cited according to this rule. [91: The World Bank has developed a reputation for going up against large corporations like “Satyam Computer Services, Ltd. . . . a corporate behemoth with $2 billion in annual sales, [that was debarred] from receiving contracts from the Bank's internal corporate procurement group.” Todd Canni, Debarment Is No Longer Private World Bank Business: An Examination of the Bank's Distinct Debarment Procedures Used for Corporate Procurements and Financed Projects, 40 Pub. Cont. L.J. 147, 147-48 (2010), (citing Richard Behar, World Bank Admits Top Tech Vendor Debarred for 8 Years, Fox News (Dec. 24, 2008), http://www.foxnews.com/story/0,2933,470964,00.html).] [92: NOTEREF _Ref195622411 \h \* MERGEFORMAT Id. at 149.] [93: Sope Williams, The Debarment of Corrupt Contractors from World Bank-Financed Contracts, 36 Pub. Cont. L.J. 277, 281 (citing World Bank, The World Bank Annual Report 2005: Year in Review 8 (2005)). ] [94: See Corporate Procurement Unit, World Bank Group, Corporate Procurement Vendor Guide 2, available at siteresources.worldbank.org/EXTCORPPROCUREMENT/Resources/VendorGuide.pdf?& resourceurlname=VendorGuide.pdf.] [95: World Bank Borrowers, Guidelines: Procurement of Goods, Works and Non-Consulting Services under IBRD Loans and IDA Credits 8 (2011), available at go.worldbank.org/1KKD1KNT40.]

There are three relevant values embedded in the World Bank’s sanctions program: transparency, flexibility, and independence. These values are each important to the role of the three separate parts of the sanctions system: the Department of Institutional Integrity, the Evaluation and Suspension Officer, and the Sanctions Board.Comment by Nicole Bazik: No FN – author opinion and road map for next section.

A.Transparency and tThe Department of Institutional Integrity

The World Bank recognizes the importance of transparency to the effective fulfillment of its mission.[footnoteRef:96] The World Bank’s Integrity Vice Presidency (“INT”) has reaffirmed this commitment to transparency.[footnoteRef:97] INT performs investigatory and prosecutorial functions in the procurement integrity process.[footnoteRef:98] Some federal agencies have units similar to the World Bank’s INT.[footnoteRef:99] Because Tthis is an effective means to increase transparency and the appearance of impartiality, it should be used by more government agencies.[footnoteRef:100]Comment by Nicole Bazik: Not entirely sure how to cite this set of regulations by the World Bank. I used R15.9 (report that is available online), but maintained the section rather than page number.Comment by Nicole Bazik: Hereinafter R4.2 [96: “The World Bank recognizes that transparency and accountability are of fundamental importance to the development process and to achieving its mission to alleviate poverty. Transparency is essential to building and maintaining public dialogue and increasing public awareness about the Bank’s development role and mission. It is also critical for enhancing good governance, accountability, and development effectiveness. Openness promotes engagement with stakeholders, which, in turn, improves the design and implementation of projects and policies, and strengthens development outcomes. It facilitates public oversight of Bank-supported operations during their preparation and implementation, which not only assists in exposing potential wrongdoing and corruption, but also enhances the possibility that problems will be identified and addressed early on.” World Bank, The World Bank Policy on Access to Information 1 (2010), available at go.worldbank.org/L3HF51WOX0.] [97: “This policy is based on the principles, underlying the WB’s Access to Information Policy, adapted to reflect the unique mandate and functioning of INT, which rely on its ability to safeguard the integrity of the investigative and sanctions processes, and the confidentiality of protected information in its possession: (i) Maximizing access to information. (ii) Safeguarding the deliberative process, and the integrity of INT’s investigations. (iii) Providing clear procedures for making information available, including a consistent process for redacting protected information. (iv) Recognizing requesters’ right to an appeals process.” World Bank Integrity Vice Presidency, Policy on Disclosure of Information 3-4 (2011), available at go.worldbank.org/VVY6KYS720.] [98: World Bank, World Bank Sanctions Procedures Section 3.01, (2011), available at go.worldbank.org/CVUUIS7HZ0 [hereinafter World Bank Sanctions Procedures] (“(a) INT may seek to initiate sanctions proceedings, if: (i) as a result of investigation by INT, the Integrity Vice President believes that there is sufficient evidence to support a finding of one or more Sanctionable Practices in connection with a Bank Project; (ii) after a determination by the Director, GSD of non-responsibility based on a Sanctionable Practice in connection with the Bank’s corporate procurement, the Integrity Vice President believe that sanctions proceedings are appropriate; or (iii) the Integrity Vice President makes a preliminary determination that a Material Term of the VDP Terms & Conditions has been violated by a VDP participant.”).] [99: “The United States Air Force, the United States Army, and the Department of Housing and Urban Development placed their suspension and debarment functions within their Offices of General Counsel, which have dedicated staffs with the legal expertise and training necessary to pursue, investigate, and defend suspension and debarment actions.” DHS Report, supra note 73, at 5.] [100: “An Air Force official also noted that this organizational placement eliminates any perceived conflict of interest.” Id.]

This The World Bank’s commitment to transparency in the suspension and debarment process stands in sharp contrasct to federal practice. The lack of information released after the suspension of IBM by the EPA, discussed above, turned an enforcement coup into a cause for alarm in the contracting community.[footnoteRef:101] More recently, the Government has given no account for why it continues to spend billions of dollars with BP after it has been found legally responsible for repeated environmental disasters.[footnoteRef:102] Even if the Government has good reason to continue to do business with BP, it would be in the Government’s best interest to articulate those reasons publicly rather than allow the public to assume the worst. Comment by Nicole Bazik: No FN – author opinionComment by Nicole Bazik: Again, I’m sorry I was not able to figure out how to cross-reference the infra cite without deleting the Part reference in this and the next footnoteComment by Nicole Bazik: No FN – author opinion. [101: See discussion infra Part II.B.2.] [102: See discussion infra Part I.]

In order to facilitate this kind of exchange the Government should adopt a policy similar to that of the INT. The Government should adopt a policy that includes proactive disclosure, a consistent redaction process, information on request, and a requester appeals process.[footnoteRef:103] These systems are not completely foreign to the Federal Government because. C certain agencies have begun meaningful reform. For example, Tthe Air Force promotes internal transparency and education through “[i]nitial awareness training” on suspension and debarment that “is administered/documented for all new employees.”[footnoteRef:104] and Tthe Department of Transportation maintains a website designed to inform its own employees and the public on the agency’s suspension and debarment activities.[footnoteRef:105] The spread of these policies would go a long way toward increasing contractor trust in the suspension and debarment system.Comment by Nicole Bazik: No FN – author opinion.Comment by Nicole Bazik: Supra R4.2Comment by Nicole Bazik: No FN – introductory sentence.Comment by Nicole Bazik: No FN – author opinion. [103: See World Bank Integrity Vice Presidency, supra note NOTEREF _Ref196036581 \h \* MERGEFORMAT 97 at 3.] [104: DHS Report, supra note 73, at 20.] [105: “The Department of Transportation’s website provides extensive details on the suspension and debarment program and supplements the Federal Acquisition Regulation. The website provides extensive information on the Department of Transportation’s suspension and debarment program. The site contains a “Frequently Asked Questions” section where it provides guidance to agency personnel as well as to individuals who have been referred for suspension and/or debarment.” Id.]

B.Flexibility and tThe Evaluation and Suspension Officer

After INT has conducted its investigation, it presents a Statement of Accusations and Evidence to the Evaluation and Suspension Officer (“EO”).[footnoteRef:106] The World Bank has four EOs.[footnoteRef:107] The EO’s primary responsibility is to determine whether the “INT’s accusations in the Statement of Accusations and Evidence are supported by sufficient evidence” and, if so, to ”issue a Notice of Sanctions Proceedings . . . .”[footnoteRef:108] In the Notice of Sanctions Proceedings the EO “shall recommend . . . an appropriate sanction to be imposed on each Respondent, selected from the range of possible sanctions . . . .”[footnoteRef:109]Comment by Nicole Bazik: Again – I am not 100% sure on how to cite these World Bank Procedures. I’ve decided to follow the hereinafter formulation from R4.2, while also maintaining the section numbering rather than using the page.However, you may rather follow what the student author has used – just short citing as if the WB procedures were a federal regulation/statute.Also, should the sections be turned into section symbols? I am not sure.Comment by Nicole Bazik: Direct internet source R18.2.2 [106: See World Bank Sanctions Procedures, supra note 98, at Section 3.01(b).] [107: World Bank, Sanctions Evaluation and Suspension Officers, Sanctions System, http://go.worldbank.org/OQBQTFFFI0 (last visited April 1, 2011).] [108: World Bank Sanctions Procedures, supra note 98, at Section 4.01(a). ] [109: Id. at Section 4.01(c).]

The EO has no discretion in deciding whether to issue a Notice of Sanctions Proceedings if the INT’s accusations are “supported by sufficient evidence.”[footnoteRef:110] However, in making his or her selection of possible sanctions, the EO has a good deal of discretion. The base sanction is a three-year debarment with conditional release.[footnoteRef:111] That sanction can be adjusted significantly.[footnoteRef:112] The least severe is “a formal ‘Letter of Reprimand’ of the Respondent’s conduct.”[footnoteRef:113] The next option is a “Conditional Non-Debarment,” wherein “[r]espondent is required to comply with certain remedial, preventative or other conditions as a condition to avoid debarment . . . .”[footnoteRef:114] If these options are too lenient, then the EO may seek debarment which “shall extend across the operations of the World Bank Group.”[footnoteRef:115] The EOs are given further flexibility to recommend a “Debarment with Conditional Release,” wherein the Respondent is “released from debarment only if the Respondent demonstrates compliance with certain remedial, preventative or other conditions for release, after a minimum period of debarment.”[footnoteRef:116] Finally, the EO can require the Respondent “to make restitution to the Borrower or to any other party or take actions to remedy the harm done by its misconduct.”[footnoteRef:117] Comment by Nicole Bazik: No FN – introductory sentence. See later sentences for examples.Comment by Nicole Bazik: Again using R15.9 for report type document available online. Again not entirely sure if this is the correct rule to follow seeing as these are guidelines (more like regulations or a statute?). [110: See id. at Section 4.01(a).] [111: World Bank, World Bank Sanctioning Guidelines (2011), available at http://go.worldbank.org/CVUUIS7HZ0.] [112: See World Bank Sanctions Procedures, supra note 98, at Section 9.01. ] [113: Id. at Section 9.01(a). ] [114: Id. at Section 9.01(b) (“Conditions may include (but are not limited to) verifiable actions taken to improve business governance, including the introduction, improvement and/or implementation of corporate compliance or ethics programs, restitution or disciplinary action against or reassignment of employees.”).] [115: Id. at Section 9.01(c).] [116: Id at Section 9.01(d) (“Conditions may include (but are not limited to) verifiable actions taken to improve business governance, including the introduction, improvement and/or implementation of corporate compliance or ethics programs, restitution or disciplinary action against or reassignment of employees.”).] [117: Id. at Section 9.01(e).]

The World Bank recently put these flexible sanctions to use against C. Lotti and Associati Societa’ di Ingegneria S.p.A. (“Lotti”), an Italian company that “acknowledged misconduct in a World Bank investigation relating to a Bank-financed public works project in the water sector in Indonesia.”[footnoteRef:118] The World Bank negotiated an innovative agreement whereby Lotti agreed to a debarment with conditional release.[footnoteRef:119] Lotti is debarred for 27 months “but can be released from debarment if it demonstrates compliance with certain remedial, corrective and preventive measures such as implementation of an acceptable corporate compliance program and cooperation with the World Bank’s [INT] investigations.”[footnoteRef:120] In addition, Lotti agreed “to pay an estimated US$350,000 in restitution to Indonesia” and has been cross-debarred by other multilateral development banks.[footnoteRef:121] This is the kind of creative sanctions that federal agencies should use to deal with contractors that are seem too big to debar.Comment by Nicole Bazik: Press release available online – R17.2.3 and Rule 18.2.3Comment by Nicole Bazik: No FN – author opinion. [118: Press Release, World Bank, Enforcing Accountability: Italian Company Lotti to Pay US$350,000 in Restitution to Indonesia After Acknowledging Fraudulent Misconduct in a World Bank-Financed Project (Dec. 22, 2010), available at go.worldbank.org/FX15OX4LX0.] [119: Id.] [120: Id. ] [121: Id.]

As with the INT, several agencies, such as (tThe U.S. Environmental Protection Agency, the U.S. United States Navy, and the U.S. United States Air Force,) already have officials analogous to the World Bank’s EO.[footnoteRef:122] This is an effective model to increase both the appearance of fairness and the reality of consistent treatment in government contracting.[footnoteRef:123] An unbiased debarment official should be a requirement for any agency actively engaged in suspension and debarment.Comment by Nicole Bazik: Supra R4.2Comment by Nicole Bazik: No FN- author opinion. [122: DHS Report, supra note 73, at 6.] [123: “According to officials we interviewed, having a single suspension and debarment official who is not affiliated with the acquisition community provides a fair and unbiased platform to evaluate referrals and maintain program continuity” Id.]

Federal agencies have the authority to craft similar flexible sanctions in the form of administrative agreements.[footnoteRef:124] Agencies should be encouraged to use administrative agreements proactively as a substitute for suspension and debarment rather than reactively as a means of resolving already imposed suspensions and debarments. The Government should adopt guidance similar to the World Bank Group Sanctioning Guidelines[footnoteRef:125] that would outline a variety of different sanctions[footnoteRef:126] and provide further guidance on when and how to apply different sanctions.[footnoteRef:127] Such a reform would transform debarring officials into sanctioning officials who would have at their disposal a wide variety of procurement-related sanctions.Comment by Nicole Bazik: PCLJ Style Guide - FARComment by Nicole Bazik: No FN- author opinion.Comment by Nicole Bazik: No FN – author opinion [124: See, e.g., FAR 9.406-3(f)(1).] [125: World Bank Sanctioning Guidelines, supra note NOTEREF _Ref196040399 \h \* MERGEFORMAT 98.] [126: I.e., debarment with condition release, debarment, conditional non-debarment, letter of reprimand, permanent debarment, and restitution and other remedies.] [127: I.e., aggravating factors related to the severity of the misconduct, harm caused by the misconduct, interference with investigation, and past history of adjudicated misconduct; and mitigating factors like minor role in misconduct, voluntary corrective action taken, and cooperation with investigation.]

The EPA could use flexible sanctions to craft procurement related responses to environmental bad actors. If the EPA believes that it cannot effectively debar BP it could issue a conditional non-debarment. The EPA could make specific demands of BP and enforce those demands with the threat of a debarment should those conditions not be met. Adopting a governmentwide policy regarding flexible sanctions would encourage a more proactive use of these sanctions at the agency level.Comment by Nicole Bazik: No FNs – author opinion.

C.Independence and tThe Sanctions Board

The World Bank emphasizes the importance of independence to the legitimacy of its sanctions system and the Sanctions Board is the most important means for maintaining that independence.[footnoteRef:128] The Sanctions Board consists of seven members, four of whom are external to the World Bank.[footnoteRef:129] The Chair is also an external member, in order to enhance the perceived independence of the Board.[footnoteRef:130] The Sanctions Board has the final responsibility to “determine, based on the record, whether or not it is more likely than not that the Respondent engaged in one or more Sanctionable Practices.”[footnoteRef:131] It must also “impose an appropriate sanction or sanctions on the Respondent” and is “not [to] be bound by the recommendation of the Evaluation Officer.”[footnoteRef:132] Comment by Nicole Bazik: Consecutively paginated journal R16.4Comment by Nicole Bazik: Direct internet source – R18.2.2 (And next sentence)Comment by Nicole Bazik: Again not entirely sure how to short cite this – was consistent with way I cited it earlier in the Note. [128: “The Sanctions Board makes a de novo decision based on the written submissions and the hearing. The two-tiered sanctions system, divided between the EOs and the Sanctions Board, gives the Respondent notice of the allegations and two opportunities to respond. It also allows decisionmakers who are independent of the investigators to temporarily suspend and debar Respondents in order to protect the integrity of the World Bank. Notice, an opportunity to respond, and a decision by an independent decisionmaker are considered to be the basics of procedural justice, and the World Bank’s sanctions system operates to provide these protections.” Pascale Hélène Dubois & Aileen Elizabeth Nowlan, Global Administrative Law and the Legitimacy of Sanctions Regimes in International Law, 36 Yale J. Int’l L. Online 15, 19 (2010).] [129: World Bank, The World Bank’s Sanctions System: Tackling Corruption Through a Two-Tier Administrative Sanctions Process, Sanctions System, http://go.worldbank.org/EB6JXKU4Z0 (last visited April 14, 2012).] [130: See World Bank, Sanctions Board Members, Sanctions System, http://go.worldbank.org/ZL06WOFFD0 (last visited April 14, 2012).] [131: World Bank Sanctions Procedures, supra note 98, at Section 8.01.] [132: Id. at Section 8.01(b).]

Both the EO and the Sanctions Board are instructed to take a wide variety of factors into consideration when making sanctions determinations.[footnoteRef:133] However, Tthe Sanctions Board does not take into consideration business concerns.[footnoteRef:134] and “T[t]he decision of the Sanctions Board [is] final,” and is not subject to reversal by any World Bank official either for policy or business reasons.[footnoteRef:135] [133: Id. at Section 9.02 (“(a) the severity of the misconduct; (b) the magnitude of the harm caused by the misconduct; (c) interference by the sanctioned party in the Bank’s investigation; (d) the sanctioned party’s past history of misconduct . . . ; (e) mitigating circumstances . . . ; (f) breach of the confidentiality of the sanctions proceedings . . . ; (g) in cases brought under Section 1.01(c)(ii) following a determination of non-responsibility, the period of ineligibility decided by the Director, GSD; (h) the period of temporary suspension already served by the sanctioned party; and (i) any other factor that the Evaluation Officer or Sanctions Board, as the case may be, reasonably deems relevant to the sanctioned party’s culpability or responsibility in relation to the Sanctionable Practice.”).] [134: See id. (business concerns not listed as a factor to consider).] [135: Id. at Section 8.03(a).]

This level of independence from political and business concerns grants the World Bank Sanctions Program a high level of perceived legitimacy. No contractor is ever too big to debar at the World Bank because the Sanctions Board is insulated from such considerations. On the other hand,Whereas, in the federal system, closed doors and insiderism have bred a high level of suspicion on the part of contractors. It is a tall order to ask any agency to cede authority to an independent body, controlled by outsiders. However, agencies need to weigh the potential loss of control against potential gains in legitimacy and effectiveness that would accrue from conducting the process in the light of an open board as opposed to the shadows of a bureaucrat’s office.Comment by Nicole Bazik: No FNs – author opinion

CONCLUSION

IV.“Too Big To Debar” Is Not the Problem; Moving Forward in the Era of Large Contractors

The Federal Government needs large contractors. The Federal Ggovernment needs state of the art aircraft, watercraft, and other military equipment that only large firms can provide. The Federal Government needs hardware, software, and technology that only the biggest and best firms can currently provide. The Federal Government needs lots of fuel delivered where it needs it, when it needs it. But, just because the Federal Government needs large firms, likesuch as BP, does not mean that the Federal Government is powerless to take effective action against BP when it breaks the law.Comment by Nicole Bazik: No FNs in this section – conclusion and author opinion.

In order to recognize the potential importance of these reforms, one can think about what would have occurred if the reforms proposed above were in place before the oil spill. First, an independent investigation would have been conducted by an office like the World Bank’s INT. The results of this investigation would have been open to public scrutiny. Next, an independent sanctions officer would have crafted a tailored administrative agreement with BP. This agreement would have been designed to ensure meaningful future compliance by BP while maintaining important governmental interests. Finally, this agreement would have been subject to approval by an independent board with members from various constituencies. This board would be charged with protecting the public interest in the sanctioning process.

Compare that outcome with the status quo, where BP has not been held accountable, where the public remains in the dark, and where nothing prevents the same thing from happening again. By implementing some of the reforms already in place at the World Bank (transparency, flexibility, and independence), federal agencies, like the EPA, could be empowered to take action to rein in the abuses of large contractors. BP may or may not be “too big to debar,” but it is not too big to be held accountable for its actions.

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