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Monday, July 28, 2014

Non-responsibility, suspension and debarment

This post is inspired by a well written article describing debarment by the Canadian government I happened to read. Since I am neither licensed nor competent to comment at all on Canadian law I will only comment on what may be a contrast between common US practice.  I will set out the author's counsel without the cut, paste, paraphrasing that I usually apply, though I will be selective, so better to read the whole article for context as well as accuracy, as you should with every article cited on this blawg. 

Besides which, there are in this article and those in other posts, many points of information and issues raised that I do not focus on; even more reason to read the original piece at the link provided.

A practical approach to navigating debarment by the Canadian government
Federal debarment of contractors that violate federal contracting rules is sharply on the rise. The recent Integrity Framework[1] issued by Public Works and Government Services Canada is fuelled by a desire for government accountability in an age of unprecedented government spending. The consequences of debarment are significant and include the right of the government to terminate the contract for default and to demand the immediate return of any advance payments made.

The federal government uses debarment to ensure that contracts are awarded only to “reliable and dependable” contractors. In simple terms, debarment amounts to a government-wide ban. Federal departments are prohibited from doing business for a period of 10 years with an individual contractor that has engaged in improper conduct. Unlike in other jurisdictions, Canada’s debarment regime is not codified under any particular statute or regulation but rather is a policy[2] administered through a series of certifications and standard terms and conditions given by the bidder or contractor in its proposal or contract with the government.

A contractor may be debarred from participating in government procurements for 10 years from the date when the contractor or its affiliate has been convicted of an “integrity offence.” Integrity offences include bribery of Canadian and foreign public officials, extortion, tax evasion, bid-rigging, forgery, fraudulent manipulation of stock exchange transactions, insider trading, falsification of books, money laundering and acceptance of secret commissions.

Canada’s debarment regime is implemented by way of a series of certifications provided by the bidder in federal government solicitation documents and resulting contracts. The bidder or contractor, as the case may be, must certify in its bid (or contract) that neither it, nor any member of its board of directors or any of its affiliates has a conviction or been discharged of any of the following integrity offences during the previous 10 years....

A bidder that is unable to provide the certifications will be “debarred” or disqualified from the bidding process. The government has retained for itself the right to enter into a contract with an otherwise non-compliant bidder when it is in the “public interest” to do so, which includes when no one else is capable of performing the contract or for reasons related to emergency, national security, health and safety or economic harm.
I was interested in how much this subject matter is so similar to Guam law and its American Bar Association Model Code inspiration. But also a tad perplexed.

One the one hand, it appears that failure to certify integrity by way of certain affirmative certifications disqualifies a bidder from the bidding process.   But at the same time, it suggests that such failure is an automatic debarment. Consider these statements from the article:
The federal government uses debarment to ensure that contracts are awarded only to “reliable and dependable” contractors.

A bidder that is unable to provide the certifications will be “debarred” or disqualified from the bidding process.

In simple terms, debarment amounts to a government-wide ban.

A contractor may be debarred from participating in government procurements for 10 years from the date when the contractor or its affiliate has been convicted of an “integrity offence.

In our regime, the legislation and policy have the same goals: "to ensure that contracts are awarded only to “reliable and dependable” contractors". Unless I missed the intent of the article, however, our regime differentiates from eliminating a bidder "from the bidding process", and invoking "a government-wide ban" on the contractor.

Under our regime, no bidder or offeror (or contractor tendering a proposal) is eligible to receive an award if found to be "nonresponsible". Responsibility is a judgment made by the contracting officer considering a variety of "Standards of Responsibility", which are not restricted to self-certification. (See Guam Procurement Regulation 2 GAR § 3116(b)(2), and ABA Model Procurement Regulation R-3.401.02.) 

Responsibility is defined in terms of capability to perform, as well as integrity and reliability. (See Guam law 5 GCA § 5201(f); ABA Model Code 3-101(6).)

Thus, a bidder lacking in integrity may be found nonresponsible even if capable, and a bidder lacking in capability may be found nonresponsible even if of high integrity.  Responsibility does not necessarily hinge on improper behaviour alone.

Since capability is a factor even when there is no question of integrity, in our regime, we do not automatically suspend or debar a contractor which is found to be nonresponsible; it may be have capabilities to perform adequately in another contracting context.

There is, though, a separate process by which bidders or offerors may be suspended or debared "from consideration for award of contracts" (suspension being instant but lasting only 3 months, and debarment allows for hearing and lasts for 3 years; see, Guam law 5 GCA § 5426 and ABA Model Code 9-102). 

Among reasons substantiating a suspension or debarment are findings of convictions of certain crimes evidencing lack of commercially moral turpitude, deliberate failure without good cause to perform, a recent record of failure to perform or of unsatisfactory performance caused by acts beyond the control of the contractor, violation of procurement ethics, and filing a frivolous or fraudulent petition, protest or appeal under the procurement law.

Although contracts may contain provisions allowing for termination of the contract by the government, the suspension or debarment does not automatically apply to continued performance of a contract, since is specifically applies to "consideration for award of contracts".

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