Another Perspective On Too Big tTo Debar:BP, the Environmental Protection Agency, and the World Bank.

*Nolan A. Kulbiski1301 Vermont Avenue, NW #211

Washington, DC 20005

*Nolan A. Kulbiski (kulbiski@gmail.com) is a J.D. candidate at2012 graduate of 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.

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Table of Contents

INTRODUCTION ....................................................2I. Crises of Size: “Too Big to Fail” and “Too Big to Debar” .....2II.EPA Suspension and Debarment: The Toothless Tiger ...........8A. Procurement Debarment and Suspension: Strong in Theory,

Weak in Practice ...........................................9B. The Terrible Trifecta: Three Weaknesses Plague Federal

Suspension and Debarment ..................................121. Death by a Thousand Cuts: How the Overuse of Waiver Is

Eroding the Legitimacy of the Suspension and Debarment System ....................................................12

2. What Is True by Lamplight Is Not Always True by Sunlight: Lack of Transparency and Accountability in the Federal Suspension and Debarment System ...........................15

3. A Little Knowledge Is a Dangerous Thing: Ignorance and Misconceptions Wreak Havoc on Federal Suspension and Debarment .................................................19

C. Muddying Already Murky Waters: EPA’s Statutory Debarment Authority under the Clean Air and Clean Water Acts ........20

ANALYSIS .......................................................23III. The World Bank Sanctions Model ............................23A. Transparency and the Department of Institutional Integrity . 25B. Flexibility and the Evaluation and Suspension Officer ......28C. Independence and the Sanctions Board .......................32CONCLUSION .....................................................35IV. “Too Big To Debar” Is Not the Problem: Moving Forward in

the Era of Large Contractors ..............................35INTRODUCTION ....................................................2I. Crises of Size: “Too Big tTo Fail” and “Too Big tTo Debar” ...2II.EPA Suspension and Debarment: The Toothless Tiger ...........8A. Procurement Debarment and Suspension: Strong in Theory,

Weak in Practice ...........................................9B. The Terrible Trifecta: Three Weaknesses Plague Federal

Suspension and Debarment ..................................121. Death by a Thousand Cuts: How the Overuse of Waiver Is

Eroding the Legitimacy of the Suspension and Debarment System ..................................................1312

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2. What Is True by Lamplight Is Not Always True by Sunlight: Lack of Transparency and Accountability in the Federal Suspension and Debarment System .........................1615

3. A Little Knowledge Is a Dangerous Thing: Ignorance and Misconceptions Wreak Havoc on Federal Suspension and Debarment ...............................................1918

C. Muddying Already Murky Waters: EPA’s Statutory Debarment Authority uUnder the Clean Air and Clean Water Acts .....2120

ORIGINAL ANALYSIS ............................................2422III. The World Bank Sanctions Model ..........................2422A. Transparency and tThe Department of Institutional Integrity

........................................................2624B. Flexibility and tThe Evaluation and Suspension Officer . . .2927C. Independence and tThe Sanctions Board ....................3331CONCLUSION ...................................................3633IV. “Too Big tTo Debar” Is Not the Problem; Moving Forward in

the Era of Large Contractors ............................3633

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INTRODUCTION

I. Crises of Size: “Too Big t T o Fail” and “Too Big t T o 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.”

Between 1997 and 2006, the value of the average American

home increased in value by 124%, fueled by questionable lending

practices.1 At the same time, BP was committingcommitted various

environmental crimes across the United States. For example, in

1999, a subsidiary of BP pleadpleaded guilty to illegally

injecting “wastes include[ing] paint thinner and toxic solvents”

into the ground in Alaska.2 In 2005, an explosion at BP’s Texas

City refinery killed 15 people and injured 170 more “in America’s

1 CSI: Ccredit Ccrunch: Central Banks Have Played a Starring Role, THE ECONOMIST, Oct.ober 18, 2007, available at http://www.economist.com/node/9972489.2 Press Release, Envtironmental. Protection Agency, BP Exploration [Alaska] Pleads Guilty To Hazardous Substance Crime Will Pay $22 Million, Establish Nationwide Environmental Management System (Sept.ember 23, 1999)[hereinafter EPA Press Release][, available at yosemite.epa.gov/opa/admpress.nsf/016bcfb1deb9fecd85256aca005d74df/5d61856989631e20852567f6004bbbff.yosemite.epa.gov.

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worst industrial accident in a generation.”3 The Ggovernment

found over 300 safety violations and levied various fines against

BP, some of which it hashave been paid and others of which it

continues to dispute.4 Finally, iIn 2007, BP pleadpleaded 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.5

In 2008, home values decreased sharply and the “housing

bubble” burst.6 Large financial institutions that invested in

home loans were at risk offaced possible failure because their

loans that had suddenly become worthless were at risk of

failure.7 Some warned that the failure of these key financial

institutions might could create a domino effect, destroying of

3 Sarah Lyall, In BP’s Record, Aa 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, BBC NEWS British BROADCASTING CORPORATION , (Aug.ust, 12, 2010), available at 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. Dep’artment of Justice, British Petroleum to Pay More Tthan $370 Million in Environmental Crimes, Fraud Cases (Oct.ober 25, 2007), (available at http://www.justice.gov/opa/pr/2007/October/07_ag_850.html).6 Roger C. Altman, The Great Crash, 2008: A Geopolitical Setback for the West, FOREIGN AFFAIRS, Jan.uary/Feb.ruary 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”) http://www.foreignaffairs.com/articles/63714/roger-c-altman/the-great-crash-2008 (“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.

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much of the modern American financial system.8 To avert this

disaster, the Government declared certain institutions “too big

to fail”9 and stepped in withoffered bailouts for to firms like

the American International Group (“AIG”) and General Motors (“

GM”) even while foreclosures rates on homes skyrocketed.10

ManySome Americans may fear that large corporations are

holding the United States hostage. Large corporations reap

rewards when times are flush and , but, when investments fail (or

when laws are broken,) the American people must pay. The events

ofnf 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.”

On April 20, 2010, the oil drilling rig, Deepwater Horizon,

caught fireexploded.11 Over the following months, the flow of

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 Apr.il 25, 2012).9 Paul Krugman, Op-Ed., Financial Reform 101, N.Y. TIMES, Apr.il 21, 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.ember 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.11 Press Release, BP Press Office, BP Confirms that Transocean Ltd Issued the Following Statement Today: “Transocean Ltd.

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oil flow created one of the biggest man-made environmental

disasters in U.S.United States history.12 Even as the oil

spilled into the Gulf of Mexico, there were calls toEPA was

considering whether to de “bar BP from receiving gGovernment

contracts.”13 These calls had begunbegan “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.”14 In fact, since 2000, BP has been convicted

three times under the Clean Air Act (“CAA”) and the Clean Water

Act (“CWA”)CWA.15 (in 1999, for illegal dumping in Alaska in

Reports Fire on Semisubmersible Drilling Rig Deepwater Horizon”, (Apr.il 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), available at 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)), available athttp://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 BP was cited in 2009 for illegally disposing of hazardous waste in Alaska. dumping in Texas. See Environmental Protection AgencyEPA Press Release, supra note 2. It was also cited in 2005 for an explosion that occurred at a refinery in Texas. Steven Greenhouse, BP to Pay Record Fine for Refinery, N.Y. TIMES, August 23, 2010, at B1. the Texas City explosion. Richard Mauer

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2005, for the Texas City explosion and, in 2006, for a burst oil

pipeline in Alaska. At the time of the 2010 spill, two units of

BP were debarred “because of environmental and safety violations

that resulted in the death of several workers.”16 Nonetheless,

Tthese debarments did not prevent BP from being the largest

supplier of fuel to the military in 2009.17

However, BP has not been suspended or debarred in the wake

of the Deepwater Horizon spill and continues to receive

government contracts.18 This has led to allegations that large

government contractors, such aslike BP, have, in effect, become

“too big to debar.”19 It has also led to calls for reform from

&and Anna M. Tinsley, Gulf Oil Spill: BP Hhas Llong Rrecord of Llegal, Eethical Vviolations, MCCLATCHY NEWSPAPER S , (May 8, 2010), available at http ://www.mcclatchydc.com/2010/05/08/93779/bp-has- a-long-record-of-legal.html#ixzz0nZaTzd q N . Finally, BP was cited iin 2006 for a ruptured burst oil pipe in Alaska. Mark Tran, BP Sshuts Lleaking Alaskan Wwells, THE GUARDIAN (LONDO N) , (July 19, 2006), available at http://www.guardian.co.uk/business/2006/jul/19/oilandpetrol.bp.16 Nixon, supra note 14, at A12.17 Justin M. Davidson, Comment, Pulling Without Consequence: How BP and Other Large Government Contractors Evade Suspension and Debarment for Environmental Crime and Misconduct, 29 PACE ENVTL. L. REV. 257, 274 (2011) ( citing R. Jeffrey Smith, BP Has Steady Sales at Defense Department Despite U.S. Scrutiny, WASH. POST. , July 5, 2010, http://www.washingtonpost.com/wp-dyn/content/article/2010/07/04/AR2010070403632.html). Ben Rooney, BP Still a Top Supplier to U.S. Military, CNNMONEY.COM , (July 15, 2010), available at, http://www.money.cnn.com/2010/07/15/news/companies/BP_government_contracts/index.htm.18 See id. at 274-75. , e.g., iId.19 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).

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officials, including 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.”20 It has also led toresulted in a proposed

amendment to the Mmilitary Aauthorization Bbill, requiring the

Secretary of Defense to determine “whether BP or its subsidiaries

should be debarred from contracting with the Department of

Defense.”21

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.22 A large entity, such as

BP, could thenan shift work to a non-violating facility and

maintain its eligibility for government contracts.23 BP is not

the only large contractor to receive government contracts after

20 Nixon, supra note 14, at A12..21 H.R. 5136, 111th Cong. § 849 (2010). The proposed bill provides in relevant part “(“Sec. 849. Debarment of BP and Its Subsidiaries. (a) Contracts With BP and Its Subsidiaries. [i]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.” Id).22 2 C.F.R. § 1532.1110 (2011).23 See generally Nixon, supra note 14, at A12 ([E]ven when there are suspensions or debarments they usually affect individuals or a business unit within the company, not the whole company.”)..

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debarment.24 Suspensions have beenwere revoked after contractors

used their enormous resources to put pressure on federal

agencies.25 BP is just one beneficiary of a debarment and

suspension system that allows large contractors to play by their

own rules.

This Note examines the structure of the EPA’s suspension and

debarment scheme under traditional procurement authority and

under its unique statutory authority. It then explores how these

systems have proven to be inadequate in handling the unique

challenge presented by large, influential contractors. Finally,

it this Note advocates an alternative procurement integrity

system modeled after the three-part procurement sanctions system

of the World Bank.26

24 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?, in 14 THE ARMY LAWYER 15 n.4 (2004),2004 ARMY LAW . , Apr.il 2004, at 14, 15 n. 14 (2004), citing Rena Merle, Boeing Gets Waiver from Air Force, WASH. POST,, Aug.ust 30, 2003, at E1 and Rena Merle, Boeing Wins Contract Despite Suspension, WASH. POST, Oct.ober 1, 2003, at E3.25 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) (noting that 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”).26 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.

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II. EPA Suspension and Debarment: The Toothless Tiger

To understand how BP continues to receive billions of

dollars in government contracts, it is important to one should

must look at the EPA’s suspension and debarment scheme. The

mission of theThe EPA’s mission is to protect human health and

the environment.27 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.28

Like many federal agencies, the EPA’s exercises procurement

debarment and suspension authority arises 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 CWA29 and the CAA.30 These statutes

prohibit agencies from awarding contracts to be performed at

facilities that violate the debarment and suspensionse

provisions.31 This Nnote will first addresscover the weaknesses

of procurement suspension and debarment and then consider some of

27 Environmental Protection Agency, Our Mission and What We Do, EPA.GOV , http://www.epa.gov/aboutepa/whatwedo.html, (last visited January 23, 2011Apr.il 11, 2012).28 See 33 U.S.C. § 1368(a) (200610) (instructing federal agencies to not contract with any person convicted under §section 1319(c)); 42 U.S.C. § 7606(a) (200610) (instructing agencies to not contract with any person convicted under § section 7413(c)).29 33 U.S.C.33 U.S.C. § 1368 (2010).30 42 U.S.C.42 U.S.C. § 7606 (2010).31 See 33 U.S.C. § 1368(a); 42 U.S.C. § 7606(a).

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the uniquespecial problems that arise when the EPA exercises its

statutory debarment authority under the CWA and CAA.

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.32 Procurement suspension and debarment ensures that

agencies “solicit offers from, award contracts to, and consent to

subcontracts with responsible contractors only.”33 Procurement

32 Much has been written on procurement debarment and suspension under FAR Subpart 9.4., Tthis Nnote will only addresscover those provisions and practices that have been exploited by large contractors, like such as BP, to avoid facing debarment and suspension. See, e.g., generally , Christopher Yukins, Suspension and Debarment: Re-examining the Process, 13 PUB. PROC. LAW REV. 255 (2004), (generally appraisingal of the nature and purpose of procurement suspension and debarment in wake of several high profile suspensions and debarments); Canni, supra note 2427, (conducting a critically examination ingation 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), (detailings 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 A DVOC . (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), (detailings the 2008 amendments to the FAR aeffecting 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), (providing a historically accounting offorof the development of federal suspension and debarment through the mid- 1990s).33 FAR 9.402(a).

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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 . . . .”34 Consequences for Ddebarred

contractors can may facebe severe consequences.35

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,36 various contract- related

offenses,37 and “any other cause of so serious or compelling a

34 FAR 9.402(a)-(b).35 See 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. . . .”).36 FAR 9.406-2(a). Under this provision (allowing debarment of The debarring official may debar a contractor may be debarred 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.”).37 FAR 9.406-2(b). This provision provides for debarment when (The debarring official may debarallowing 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

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nature that it affects the present responsibility of the

contractor or subcontractor.”38 The debarring official (“DO”)

exercises discretion and must “determine whether debarment is in

the Government’s interest” considering a variety of factors.39

The FAR regulations allows agencies to develop their own rules

product was not made in the United States or its outlying areas . . . . (iv) Commission of an unfair trade practice as defined in 9.403. . .3….(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 employment . . . .”)38 FAR 9.406-2(c).39 FAR 9.406-1(a). The FAR provides a number of factors to consider including: “(“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.””).

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for suspension and debarment40 but requires all DOs to issue a

“notice of proposal to debar”41 to the contractor before theprior

to making a final decisions is made and a “notice of debarring

official’s decision” afterwards. 42

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 that. The followingse

weaknesses render procurement suspension and debarment useless

against BP and other large contractors. : They are the overuse of

waiver, a lack of transparency, and a lack of governmentwide

education about suspension and debarment.

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

The first weakness, overuse of the “waiver” provision, comes

into playarises after a DO has debarred a contractor, the

“waiver” provision. Using waiver anThe waiver provision allows

an agency can to 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.43 For example, Boeing

received two large contracts from the U.S. United States Air

40 FAR 9.406-3(a)-(b).41 FAR 9.406-3(c).42 FAR 9.406-3(e).43 FAR 9.405(a).

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Force after two of its debarred units had been debarred after

receiveding such waivers, from the Air Force.44 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 discourage DOs

from seriously investigating the debarment of large contractors

at all.45

Other agencies can waive debarments made by the EPA under

the EPA’s procurement and statutory authority.46 Thus, even if

the EPA debarred a large contractor, the head of any another

agency can may override the suspension or debarment simply by

stating “in writing the compelling reasons justifying continued

business dealings between that agency and the contractor.”47

This provision is put to frequent usefrequently used by the

Department of Defense for a variety of reasons listed in DFARS

44 Zucker, supra note 2326, 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. . .”).45 See Nixon, supra note 1314, at A12.46 For more detail on statutory debarmentt. sSee, infra Section Part II.C. Muddying Already Murky Waters: EPA’s Statutory Debarment Authority under the Clean Air and Clean Water Acts.47 FAR 9.406-1(c) (debarment);, FAR 9.407-1(d) (suspension).

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209.405.48 This policy is designed to assist enable 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.49

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

Governmenta government agency to be nonresponsible, it runs

counter to the policy announced in FAR 9.402(a).50 Moreover,

when a large contractor is debarred, the effect of the debarment

on the contractor is neutralized by generous invocation of

waiver.51 For example, in 2003, three of Boeing's units were

48 These reasons include: “(i) OOnly 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.”49 Canni, supra note 2427, 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”).).50 See FAR 9.402(a) (“Agencies shall solicit offers from, award contracts to, and consent to subcontracts with responsible contractors only.”).51 See, e.g., Griff Witte, Federal Ban Doesn’t Hurt Worldcom Much, WASH. INGTON POST, October 24, 2003, at E1 (“In the nearly three months since federal authorities suspended WorldCom Inc.

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debarred for procurement violations.52 However, these

debarments, through limited to three units, were effectively

nullified when the Air Force twice waived Boeing's suspension.53

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.54

2. “What Is True by Lamp-light Is Not Always True by Sun-light”55: Lack of Transparency and Accountability in the Federal Suspension and Debarment System

Transparency is one of the pillars of a good public

procurement system.56 In order to maintain transparency,

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.”).52 Zucker, supra note 26, at 14.53 Zucker, supra note 23,See iId. at 22.54 Zucker, supra note 23,See iId. 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.”) (emphasis in original).55 JOSEPH JOUBERT, JOUBERT: A SELECTION FROM HIS THOUGHTS, (Katharine Lyttelton trans., Dodd, Mead & Co. eds., 1899).56 See Steven L. Schooner, Desiderata: Objectives for a System of Government Contract Law, 11 PUB. PROC. UREMENT L. REV. 103, 104 (2002) (noting that the ““At a macro level, the author prefers to begin with three ‘“‘pillars’” that . . . , in my opinion, underlie the United States procurement system [are]: system transparency; procurement integrity; and competition”).

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accountability mechanisms run exist throughout federal

procurement law.57 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.”58 The EPA began intense negotiations

with IBM and the suspension was lifted within eight days,59 after

the EPA had negotiated a favorable interim agreement.60 The EPA

justifiably claimed this outcome a success.61 However, the

57 See id.Schooner, supra note 50, at 106 n. 19 (quoting See 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.”).58 Canni, supra note 2427, at 592.59 Canni, supra note 24, at 595Id. at 594.60 IBM withdrew from the competition, placed five individuals on administrative leave, agreed to monitoring, and paid the costs of the investigation. Interim Agreement between Envtironmental. Prot.ection Agency & IBM Corp. (Apr. 3, 2008)[hereinafter Interim Agreement], available at, Interim Agreement, DOWNLOAD 101 , Text of the agreement is available at http://download.101com.com/pub/fcw/media/htdocs/ui/st_images/April%203%202008%20IBM%20Interim%20Agreement.pdf (last visited Apr.il 30, 2012) (text of the agreement).61 See Matthew Weigeit, IBM Case: A Question of Due Process, FEDE. RAL COMPUTER WEE K. , (Apr.il 11, 2008), available at 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.

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contracting community was not reassured that justice had been

done and was frightened by thea series of apparently arbitrary,

opaque, and unaccountable decisions.62 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.

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.63 A busy DCO may have a greater incentives to make

sure anensure that an agency’s vital needs are met or that small

contractors are debarred , rather than picking a fight

withpursuing sanctions against a large contractor.64 Even if

debarring officialsDOs do not feel particularly intimidated by

Shrugging off calls for reform of the system from some quarters, Meunier said no changes are necessary.”).62 See Christopher J. Dorobek, Editorial: EPA/IBM Case: We Still Have Questions, FEDE . RAL COMPUTER WEE K. , (AprilApr. 18, 2008), available at 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).63 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.”).64 For a discussion of the difficulty involved in incentivizing governmental behavior . Ssee generally Steven L. Schooner, Fear of Oversight: The Fundamental Failure of Businesslike Government, 50 AM. U. L. REV. 627 (February, 2001).

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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.65

As a result of these shortages the workforce shortage, debarring

officials may not have enough time to address suspension and

thesedebarment issues.

DOs need options in crafting sanctions to compel errant

contractors and do while doing minimalwhile minimizing damage to

gGovernment interests. Currently, suspension and debarment are

the primary sanctions available to DOs.66 DOs have discretion

over the length of debarment67 and some discretion over the scope

of debarment,.68 hHowever, debarment in any form is often a

harsh remedy.69 Of course, DOs also have the option to negotiate

65 U.S. GOV’T ACCOUNTABILITY OFFICE, GAO- 03-443, FEDERAL PROCUREMENT: SPENDING AND WORKFORCE TRENDS 4 (“[A]ll agencies face the prospect of losing many of their skilled acquisition personnel over the next 5 years—with --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 U.S. GOV’T ACCOUNTABILITY OFFICE GEN. ACCT. OFFICE , FEDERAL PROCUREMENT: SPENDING AND WORKFORCE TRENDS (2003)).66 See FAR 9.402(b) (noting the “serious nature of debarment and suspension”). 00.67 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.”).68 See FAR 9.406-5.69 See FAR 9.402(b) (noting the “serious nature of debarment and suspension”).

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administrative agreements,70, as the EPA did after suspending

IBM.71

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.72.

When debarment of a large contractor seems is 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.

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

The current 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 regardingunderstanding of 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,

70 See , e.g., FAR 9.406-3(f)(1).71 Interim Agreement, supra note 60. Canni, supra note 27, at 5942.72 The IBM case is a perfect example of the inadequacy of this remedy. See supra notes 60-62 and accompanying text.

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Office of Inspector General report found that suspension and

debarment were significantly underused in the agency.73 This was

attributed directly to procurement officials’ antipathy to the

suspension and debarment process.74

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.” DEP’ T. OF HOMELAND SEC. URITY , OFFICE OF INSPECTOR GEN. ERAL , OIG-10-50, DHS’ UM SE 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 See id. “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.

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DHS is not the only agency to confront this issue.75

Willard D. Blalock, Chair of the Interagency Suspension and

Debarment Committee, acknowledged the underutilization of

suspension and debarment.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.”77 Federal agencies will have

to look forneed creative ways strategies to increase the

willingness and ability of agency officials’ willingness and

ability to use the suspension and debarment tools at their

disposal.

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

75 Ensuring Contractor Accountability: Past Performance and Suspension & Debarment: Hearing Before the S. Comm’n 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 (“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.”). Government Contractor Accountability MeasuresEnsuring Contractor Accountability: Past Performance and Suspension & Debarment: Hearing Before the Senate Commission on Wartime Contracting in Iraq and Afghanistan, 112th Cong. 4 (2011) (Sstatement of Willard D. Blalock, Chair, Interagency Suspension Aand Debarment Committee), February 28, 2011, available at http://www.wartimecontracting.gov/docs/hearing2011-02-28_testimony-Blalock.pdf.76 See id. at 4-5.77 Id. at 5.

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All executive agencies are granted authority to engage in

procurement debarment, as discussed above=.78 Congress

occasionally grants unique debarment authority to specific

agencies in order to advance various public policies.79 The EPA

has been granted such a statutory debarment authority under the

CAA and CWA.80 The regulations promulgated pursuant to these

actsthe CAA and CWA provide for the debarment of companies that

violate these acts.81 An EPA “listing official” is put in charge

oftasked with listing facilities found to be in violation of

these statutes. All federal agencies are preclulded from awarding

and listing precludes all federal agencies from making an award

of a contract to bfor worke performed at a listed facility.82

This statutory debarment scheme has come to increasingly mirrors

procurement debarment and, therefore, suffers from all of the

78 See discussion supra infra Part II.A.79 See, e.g., 33 U.S.C. § 1368(a) (200610); 42 U.S.C. § 7606(a) (200610).80 Id.81 2 C.F.R. § 1532.1100 (2011).82 See 2 C.F.R. § 1532.1130.

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same weaknesses.83 These weaknesses include: (overuse of

waiver,84 lack of independent debarring officials,85 and lack of

flexible sanctions86).

EPA’sThis statutory debarment scheme suffers from an

additional weakness.: iIts sanction is limited to violating

83 See generally 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), The American Law Institute (2004) (“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 See generally DFARS 209.405 (stating that waiver should only occur for “compelling” reasons). (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 website, About the Office of Administration and Resource ManagementSuspension and Debarment Program, EPA.GOV , http://www.epa.gov/aboutepa/oarm.html (last visited AprilMay 30,Apr. 30, 2012) (noting that both www.epa.gov/ogd/sdd/debarment.htm (Last visited April 14, 2012) (Both the FAR 9.4 and the regulatory and statutory debarment programs are administered by the Office of Administration and Resources Management).86 See 2 C.F.R. § 1532.1110 (2011) (“If you are convicted of any offense described in § 1532.1105, you are automatically disqualified from eligibility to receive any contract, . . .

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facilities, as opposed to violating contractors.87 For example,

at the time of the Gulf Oil Spill in 2010, two of BP’s facilities

had beenwere already debarred under the EPA’s statutory debarment

authority.88 However, Tthis existing debarment did little to

keep a large firm like prevent BP from being the Department of

Defense’s largest supplier of fuel.89 Large contractors in

possession of debarred facilities, like BP, fulfill government

contracts with using products and services originating at other

facilities, likeas BP has continued to do.90

The federal suspension and debarment system is not broken.

Most of the time, the rightGenerally 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 thhampere effectiveness of thisa

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.

ORIGINAL ANALYSIS

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.”).87 See Iid.88 Nixon, supra note 1314, at A12.89 DavidsonRooney, supra note 1819, at 274.90 See Nixon, supra note 14, at A12.

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III. The World Bank Sanctions Model

Organizations such as the World Bank have encountered

similar debarment and suspension challenges and have already

developed some innovative means to secure their procurement

systems against unscrupulous contractors of all sizes.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.”92 The World Bank

has “disbursed over $568 billion as development finance”93 and

“procures spends over a$1 billion dollars annually forin goods

and services for its own internal businessrequirements.”94 In

order to effectively use its funds, the World Bank developed a

sophisticated sanctions program designed to take account

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 J. 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), available at http://www.foxnews.com/story/0,2933,470964,00.html).92 Canni, supra note 76 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 98 (2005)). 94 See CORPORATE PROCUREMENT UNIT, THE WORLD BANK GROU P. , CORPORATE PROCUREMENT VENDOR GUIDE 2 , available at siteresources.worldbank.org/EXTCORPPROCUREMENT/Resources/VendorGuide.pdf?& resourceurlname=VendorGuide.pdf.

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ofaccount for: (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.”95

There are three relevant values embedded in the World Bank’s

sanctions program: transparency, flexibility, and independence.

These values are each important to the roles of the three

separate parts of the World Bank sanctions system: the Department

of Institutional Integrity, the Evaluation and Suspension

Officer, and the Sanctions Board.

A. Transparency and tThe Department of Institutional Integrity

The World Bank recognizes the importance of transparency to

the effective fulfillment of its mission.96 The World Bank’s

95 WORLD BANK BORROWERS , GUIDELINES: PROCUREMENT OF GOODS, WORKS AND NON- CONSULTING SERVICES UNDER IBRD LOANS AND IDA CREDITS 2 8 ( , January 2011), available at go.worldbank.org/1KKD1KNT40.96 “The World Bank recognizes that transparency and accountability are of fundamental importance to the development

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Integrity Vice Presidency (“INT”) has reaffirmsed this commitment

to transparency.97 The INT performs investigatory and

prosecutorial functions in the procurement integrity process.98

Some federal agencies already have units similar to the World

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 (July 1, 2010), available at go.worldbank.org/L3HF51WOX0.97 See WORLD BANK INTEGRITY VICE PRESIDENCY, POLICY ON DISCLOSURE OF INFORMATION 3-4 (2011), available at go.worldbank.org/VVY6KYS720. “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.” Id. WORLD BANK INTEGRITY VICE PRESIDENCY , THE POLICY ON DISCLOSURE OF INFORMATION POLICY OF THE INTEGRITY VICE PRESIDENCY , 3-4 ( February 3, 2011), available at go.worldbank.org/VVY6KYS720.98 See WORLD BANK, WORLD BANK SANCTIONS PROCEDURES, 10Section 3.01, (January 1, 2011) [hereinafter WORLD BANK SANCTIONS PROCEDURES ], 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

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Bank’s INT.99 BecauseThe INT Tthis is an effective means to

increase transparency and the appearance of impartiality, it and,

therefore, should be used adopted by more government agencies.100

This The World Bank’s commitment to transparency in the

suspension and debarment process stands in sharp contrasct to

federal practice. For example, tThe lack of information released

after the suspension of IBM by the EPAthe EPA suspended IBM,

discussed above, turned anconverted the enforcement coup into a

cause for alarm in within the contracting community.101 More

recently, the Government has given no account forfailed to

explain why it continues to spend billions of dollars with on BP

after despite it has been foundfinding BP legally responsible for

repeated environmental disasters.102 Even if the Government has

evidence to support a finding of one or more Sanctionable Practices in connection with a Bank Project; or (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 See DHS REPORT , supra note 73, at 5 (“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 See id. (“An Air Force official also noted that this organizational placement eliminates any perceived conflict of interest.”)..“ DHS Report Id.101 See discussion suprainfra Part II.B.2.102 See discussion suprainfra Part I.

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good reason to continue to do business with BP, it would beis in

the Government’s best interest to articulate theose reasons

publicly rather than allow the public contracting community to

assume the worst.

In order to facilitate this kind of exchange, the Government

should adopt a policy similar to that of the INT. The Government

should adoptSuch a policy that should includes proactive

disclosure, a consistent redaction process, information on

request, and a requester appeals process.103 These This type of

systems are is not completely foreign to the Federal Government

because. C certain agencies have begun already initiated

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.”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.105

103 See, WORLD BANK INTEGRITY VICE PRESIDENCY , THE DISCLOSURE OF INFORMATION POLICY OF THE INTEGRITY VICE PRESIDENCY supra note 8297, at 3 (discussing World Bank’s transparency process).104 DHS REPORT , supra note 73, at 20.105 Id. (noting that the website provides ““The Department of Transportation’s website provides extensive details on the suspension and debarment program and supplements the Federal Acquisition Regulation.”). Additionally, it 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.

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The spread ofExtending these policies to more federal agencies

would go a long way toward increasing contractor trust in the

suspension and debarment system.

B. Flexibility and tThe Evaluation and Suspension Officer

After the INT has conducted its investigation, it presents a

Statement of Accusations and Evidence to the Evaluation and

Suspension Officer (“EO”).106 The World Bank has four EOs.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 . . . .”108 TIn the Notice of Sanctions

Proceedings the EO “shall recommend . . . an appropriate sanction

to be imposed on each Respondent, selected [by the EO] from the

range of possible sanctions . . . .”109

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.”110 However, the EO has a good

deal of discretion in making his or her selection of possible

Id.DHS Report.106 See WORLD BANK SANCTIONS PROCEDURES , supra note 98, at Section 3.01(b).10.107 World Bank, Sanctions Evaluation and Suspension Officers, SANCTIONS SYSTEM , http://go.worldbank.org/OQBQTFFFI0 web.worldbank.org (last visited AprilApr. 1, 2011).108 WORLD BANK SANCTIONS PROCEDURES, supra note 98, at 11.Section 4.01(a). 109 World Bank Sanctions Procedures, Id. at Section 4.01(c).12.110 See id. at 11.Section 4.01(a).

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sanctions., the EO has a good deal of discretion. The base

sanction is a three-year debarment sentence with conditional

release.111 Thisat sanction can be adjusted significantly.112 The

least severe option is “a formal ‘Letter of Reprimand’ of the

Respondent’s conduct.”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 . . . .”114 If these options are determined to

be too lenient, then the EO may seek debarment which “shall

extend across the operations of the World Bank Group.”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.”116 Finally, the EO can

111 WORLD BANK, WORLD BANK SANCTIONING GUIDELINES, (January 1, 2011), available at http://go.worldbank.org/CVUUIS7HZ0.112 See WORLD BANK SANCTIONS PROCEDURES , supra note 98, at 23-25.Section 9.01. 113 World Bank Sanctions Procedures, Id. at Section 9.01(a).23. 114 World Bank Sanctions Procedures, Id. at Section 9.01(b)23-24 (“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 World Bank Sanctions Procedures, Id. at Section 9.01(c).24.116 World Bank Sanctions Procedures Id.,Id at Section 9.01(d) at 24-25.(“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

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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.”117

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.”118 The World Bank

negotiated an innovative agreement whereby Lotti agreed to a

debarment with conditional release.119 Lotti is has been 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.”120 In addition, Lotti agreed

“to pay an estimated [$350,000] US$350,000 in restitution to

Indonesia” and has been cross-debarred by other multilateral

development banks.121 This is the kind of creative sanctions that

disciplinary action against or reassignment of employees.”).117 World Bank Sanctions Procedures, Id. at Section 9.01(e).25.118 Press Release, World Bank, Enforcing Accountability: Italian Company Lotti to Ppay US $350,000 in Rrestitution to Indonesia Aafter Aacknowledging Ffraudulent Mmisconduct in a World Bank-Ffinanced Pproject, No:2011/279/INT, (Dec.ember 22, 2010), available at go.worldbank.org/FX15OX4LX0.119 Id.120 Id. 121 Id.

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fFederal agencies should use the types of creative sanctions to

deal with contractors that are seem too big to debar.

As with the INT, several U.S. agencies, such as (tThe U.S.

Environmental Protection AgencyEPA, the U.S. United States Navy,

and the U.S. United States Air Force,) already have officials

analogousequivalent to the World Bank’s EO.122 This is an

effective model to for increasinge both the appearance of

fairness and the reality ofactual consistent treatment in

government contracting.123 An unbiased debarment official should

be a requirementrequired for any agency actively engaged in

suspension and debarment.

Federal agencies have the authority to craft similar

flexible sanctions in the form of administrative agreements.124

Agencies should be encouraged to use administrative agreements

proactively as an alternative substitute forto suspension and

debarment rather than reactively as a means of resolving already

imposed suspensions and debarments. The Government should adopt

a guidance similarakin to the World Bank Group Sanctioning

122 See 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.DHS Report.124 See, e.g., FAR 9.406-3(f)(1).

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Guidelines125 that would outline a variety of different

sanctions126 and provide further guidancedirection on when and how

to apply different sanctions.127 Such a reform would transform

debarring officials into sanctioning officials with who would

have at their disposal a wide variety of procurement-related

sanctions at their disposal.

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 allowing it to . The EPA could make

specific demands of BP and enforce those demands with the threat

of a debarment should those conditions not be metfor non-

compliance. Adopting a government-wide policy regarding flexible

sanctions would encourage a more proactive use of these sanctions

at the agency levelby agencies.

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

125 WORLD BANK SANCTIONING GUIDELINES, supra note 9198.126 For example, I.e., debarment with conditional release, debarment, conditional non-debarment, letter of reprimand, permanent debarment, and restitution and other remedies. See WORLD BANK SANCTIONING PROCEDURES, supra note 98, at 23-36. .127 For example, 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. See WORLD BANK SANCTIONING GUIDELINES, supra note 111.

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the most important means for maintaining that independence.128

The Sanctions Board consists of seven members, four of whom are

external to the World Bank.129 The Chair of the Board is also an

external member, in order to enhance the perceived independence

of the Board.130 The Sanctions Board has the final responsibility

to of “determin[ing]e, based on the record, whether or not it is

more likely than not that the Respondent engaged in one or more

[s]Sanctionable [p]Practices.”131 The BoardIt must also “impose

128 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). Pascale Hélène Dubois, a World Bank Evaluation and Suspension Officer writes “[t]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 (World Bank Evaluation and Suspension Officer) & 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, World Bank Sanctions Regime: An Overview, October 8, 2010, available at http://go.worldbank.org/EB6JXKU4Z0 (last visited Apr.il 14, 2012).130 See WORLD BANK GRP. , WORLD BANK GROUP SANCTIONS REGIME: AN OVERVIEW 5 (2010). See World Bank, Sanctions Board Members, SANCTIONS SYSTEM, October 8, 2010, available at http://go.worldbank.org/ZL06WOFFD0 (last visited Apr.il 14, 2012).131 WORLD BANK SANCTIONS PROCEDURES, supra note 98, at Section 8.0121.

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an appropriate sanction or sanctions on the Respondent” and is

“not [to] be bound by the recommendation of the Evaluation

Officer.”132

Both the EO and the Sanctions Board are instructed to take a

wide variety of factors into consideration when making sanctions

determinations.133 However, Tthe Sanctions Board does not take

into consideration business concerns.134 andFurthermore,

“[t]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.135

This level of independence from political and business

concerns grants gives the World Bank Sanctions Program a high

level of perceived legitimacy. No contractor is ever too big to

be debarred byat the World Bank because the Sanctions Board is

132 World Bank Sanctions Procedures, Id. at Section 8.01(b).22.133 World Bank Sanctions Procedures, See iId. at 25-26. 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 (hi) 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 [s]Sanctionable [p]Practice.”).134 See id. (business concerns are not listed as a factor to consider).135 World Bank Sanctions Procedures, Id. at Section 8.03(a).23.

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insulated from such considerations. On the other handIn

contrast,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 the 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.

CONCLUSION

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

The Federal Government needs depends on 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 also requires

hardware, software, and technology that only the biggest and best

firms can currentlyare able to provide. Finally, tThe Federal

Government needs lots ofdepends on large amounts of fuel to be

delivered where it needs it, when it needs it. But, just because

theDespite the Federal Government’s needs dependence on large

firms, likesuch as BP, does not mean that the Federal Government

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is not powerless to take effective action against BP and other

large contractors when theyit breaks the law.

In order to recognize the potential importance of these

proposed reforms, one can think aboutshould consider what would

have occurred if they reforms proposed above were in place

beforeimplemented prior to the 2010 oil spill. First, an

independent investigation would have been conducted by an office

likereminiscent of 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.

In contract, under the 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

tragedy from happening again. By Iimplementing some of thethese

reforms, already in place at the World Bank (transparency,

flexibility, and independence), would empower federal agencies,

like the EPA, could be empowered to take action to rein in the

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abuses of by 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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