Tuesday, September 11, 2012

Risks of Not Checking for Federal Debarment and Suspension

Federal funding comes with strings.  One of the most commonly overlooked federal requirements is that state and local agencies must check that a contractor, consultant, or vendor is not debarred or suspended by the federal government - before entering into a contract.  The requirement applies for any contract of $25,000 or more.

Risks of not checking status:  There are three primary risks associated with contracting with a firm that is debarred or suspended from working on federally funded projects:
  • Audit findings:  State, local, or federal funding sources may issue an audit finding for failure to check whether firms an agency contracts with have been debarred or suspended.  The City of Olympia (WA) and the Spokane (WA) Regional Health District were recently the subjects of audit findings  issued by the Washington State Auditor's Office for failure to check the debarment status of vendors, contractors, and subrecipients. Click here to read the Olympia audit finding.  Click here to read the Spokane audit finding.
  • Loss of funding:  Failure to check for debarment or suspension status may result in the federal funding agency either not reimbursing an agency or requiring the agency pay back grant funds for having violated the requirements.
  • Performance issues:  Firms get on the debarment or suspension list for having violated federal requirements.  There is a higher risk, depending on what provisions the firm violated, of performance related problems on the contract.
Have internal controls in place:  Public agencies should have processes in place to:
  • Identify what procurements are funded in whole or in part with federal funds
  • Ensure that the federal online database is checked prior to award
  • Maintain documentation in the file that the debarment status has been checked
How to check status:  The federal government is in transition now between two online systems.  For many years, the online checks could be performed at www.epls.gov.  Recently, they launched www.sam.gov, which has experienced some operational problems, and sometimes www.epls.gov is still operational.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC 

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