Debarment is not just for ethics violations anymore. Suspending and Debarring Officials are looking to a new source for referrals – Contracting Officers. FAR 9.406-2(b)(1)(i)(A) and FAR 9.406-2(b)(1)(i)(B) allow Suspending and Debarring Officials to debar companies for a history of performance issues or a willful failure to perform in accordance with the terms of one or more contracts. Debarment is intended to be a business risk decision designed to protect the Government from contractors that present risks, including performance risks. Termination for default is one of the premier ways to demonstrate that a contractor is a performance risk to the Government.
Over the past year, the Air Force has debarred 5 contractors for failing to perform resulting in a termination for default. In each of these cases, the contractor was responsible for performing in accordance with the contract, failed to do so, and eventually was terminated for default. In one particular case, a prime contractor failed to repair deficient work or even respond to the Air Force’s Cure Notice. The prime contractor had a previous contract with the Air Force, which it had also subcontracted to the same contractor that had done the rejected work. The work was satisfactory for this contract, and the prime contractor was paid in full. However, the prime contractor failed to pay its subcontractor. Supporting its debarment decision on both of these bases, the Air Force debarred the prime contractor for three years.
Termination for default does not need to lead to debarment, however. The Suspending and Debarring Official has discretion to implement this tool. A contractor can use the mitigating factors and remedial measures in FAR 9.4 to demonstrate that it is presently responsible. A contractor will need to show that it understands the seriousness of the termination for default as well as changes it has made in the company to prevent the termination from happening again. Ultimately, the contractor must prove to the Suspending and Debarring Official that the contractor can be trusted to do further business with the Government.
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