Steven Shaw says he takes a carrot or stick approach to debarment.
As the U.S. Air Force’s deputy general counsel for contractor responsibility for the past 15 years, this has given him the ability to work with companies to change behavior instead of immediately blocking them from new government contracts.
Making suspensions mandatory would leave him with just the stick, he said, and companies would have more incentive to hide things and stonewall the process.
“If you don’t have discretion, then you’re really talking punishment,” Shaw told Just Anti-Corruption. “You’re not talking present responsibility and whether the company has fixed the problem.”
The point of debarment is to protect the government, not to penalize, as he told the Senate Committee on Homeland Security and Government Affairs last November. Yet some lawmakers have recently pushed efforts to take discretion from agencies by making contract bans automatic after corporations face felony convictions or companies or companies are charged with fraud connected to a government contract.
Recently, Rep. Betty McCollum (D-Minn.) amended the 2012 Consolidated Appropriations Act to require agencies to consider a debarment for corporations convicted of felonies in the last two years. New contracts with the corporation would be illegal until each agency decides it is okay to work with.
Just Anti-Corruption previously explored the amendment, which McCollum said she hopes will be made permanent to keep “crooks” away from federal dollars.
A bill introduced by Sen. Claire McCaskill (D-Mo.) in February could have upped the stakes considerably by automatically suspending any company from government contracting if an employee or any business controlled by the contractor is charged with fraud connected to a government contract.
No conviction would be required.
“What this legislation is trying to do is move a boulder, that there has been cultural reluctance on suspension and debarment,” McCaskill said at an April 17 hearing of the contracting oversight Subcommittee of the Senate Homeland Security and Governmental Affairs Committee.
At the hearing, she acknowledged the arguments against mandatory debarment and suspension but said there have been examples of bad actors in some cases though there’s “not even been a ripple” toward debarment.
McCaskill, however, has backed off.
While she still wants to require that suspension or debarment are considered after fraud charges, she has removed the language that would trigger such action automatically.
A revision of the bill, known as the Comprehensive Contingency Contracting Reform Act of 2012, was introduced in June with new language saying that debarment officers must automatically consider debarment or suspension for contractors charged with fraud related to contracts with the State and Defense Departments or the U.S. Agency for International Development.
A representative from McCaskill’s office did not respond to a request to comment on changes to the bill.
Shaw has repeatedly said that automatic triggers would make things worse.
Right now, he can go to a company before any debarment and work with it to be sure the problem is fixed. If the company can show actions taken against those involved in past conduct and steps that ensure it is a reliable contractor, the company won’t face debarment.
The Federal Acquisition Regulation calls this present responsibility, and an agency’s debarment officer has the authority to judge if a company has taken proper action.
If a company doesn’t cooperate or fails to show present responsibility, Shaw said he then uses the stick — something he did with 111 debarments in 2010. That year, 83 companies were suspended by the Air Force and 159 companies were proposed for debarment. Numerous agencies, including the State Department and U.S. AID had debarments in the single digits.
The Interagency Suspension and Debarment Committee issues numbers yearly.
Even with the Air Force’s high numbers, Shaw said, racking up debarments isn’t really the point.
“If you really want the numbers,” he said, “you’re not going to be serious about that present responsibility.”
Instead of punishing, the idea is to get the company to change its behavior, something that won’t show up if you just count debarments.
While the effect can be difficult to quantify, Shaw has one high profile example – BAE Systems.
The company had reached a level of infamy domestically and in the United Kingdom for paying bribes to a Saudi Arabian official starting in the 1980s related to fighter aircraft sales and for making payments to other foreign officials through shell companies.
BAE, which reportedly did not cooperate with investigators, had been the focus of a Justice Department investigation for Foreign Corrupt Practices Act, violations of U.S. export laws and for lying about FCPA compliance.
The Justice Department gave Shaw information on BAE’s conduct that raised his concern. He didn’t have useable evidence to debar the company – but he could send BAE a “show cause letter” which lays out the Air Force’s concerns and can serve as an advance notice of formal measures to ban contracts.
About a week later, Shaw said BAE’s CEO was in his office.
Soon after, the company changed its tone with the Justice Department, pleaded guilty to a felony charges and agreed to a $400 million fine.
Shaw points to the timeline but doesn’t say that his letter led to the guilty plea.
Still, cooperation with the government is a key part of “present responsibility.”
A company that doesn’t cooperate could be banned from contracts government wide, something potentially more damaging than a fine that comes with a guilty plea.
Under McCaskill’s original bill, BAE would have been debarred if any fraud charges were filed related to a federal contract. In this case, the charges were related to foreign corruption. McCollum’s amendment would have banned new contracts after the guilty plea until Shaw decided debarment wasn’t necessary.
BAE worked with the Air Force over the next year, Shaw said, and implemented ethical changes outlined by the Air Force across the company.
To Shaw, debarment officers already have the tools they need to protect the government. The key though is independence.
The Air Force deals with more contracts and more money than many other agencies, and its debarment office is also more independent because the Air Force has made a point to make it that way since the early 1990s.
Decisions on debarment at other agencies might be more closely tied to the offices trying to get contracts through, perhaps putting outside influence on the officer that decides on debarments.
In the Air Force, Shaw has the call.
Without influence from above, he can suspend parts of Boeing, a huge government contractor, as he did in 2003 for nearly two years. He can suspend part of L-3, as he did in June 2010, even though it had a vital contract with the Air Force’s Special Operations Command.
The companies were reinstated after signing administrative agreements that commit all parts of the company to ethics standards detailed by the Air Force.
Because Shaw’s office is separate from the procurement system and from officials who waive a debarment he decides on, he said he has the freedom to do what he thinks is right.
“I’ve never gotten any kind of pressure from anybody, and that’s why I’ve done this for 15 years,” said Shaw, who had previously been in private practice and served as a federal prosecutor. “I thought I’d come over for maybe a couple years.”
Through those years, Shaw said he’s accomplished more with the carrot than the stick.
At the same time, his debarments have outpaced numerous other agencies, something McCaskill noted at the April 17 hearing.
“I don’t know what they’re drinking at the Air Force,” she said, “but I like it that they’re aggressive about suspension and debarment.”