When assessing whether a contractor is eligible for award, contracting officers are required to conduct a meaningful present responsibility determination using the factors contained in FAR 9.1. However, a final rule issued by the FAR Council on September 30, 2016 has inserted a wild card into the process—the agency suspension and debarment official (SDO).
The final rule adopts an interim rule without change, which amends the FAR to establish the following representation and certification requirements:
- Representation (FAR 52.209-11): Any corporation responding to a federal solicitation must represent whether it: (1) has any unpaid federal tax liability that has been assessed and is not being appealed or paid in a timely manner; or (2) has a felony conviction for a violation under any federal law within the preceding 24 months. There is no de minimus amount for reporting tax delinquencies. Consistent with the Consolidated and Further Continuing Appropriation Acts, an affirmative response to either prong would create an automatic exclusion that precludes the award of federal contracts in a “shoot first, ask questions later” fashion.
- Certification (FAR 52.209-12): Corporate offerors must certify to tax matters contained in FAR 52.209-12(b) when responding to certain solicitations where the resultant contract (including options) may have a value greater than $5 million. If applicable, contractors must ensure that their certifications are accurate; otherwise additional liability could arise for the submission of false statements.
The definition of “corporation” is broadly interpreted, and the rule may apply to joint ventures and other teaming arrangements. Under the rule’s representation requirements, while delinquent federal taxes need not be disclosed while administrative or judicial remedies are being exhausted, corporate offerors must report any federal felony conviction, regardless of whether it is on appeal. This could affect a significant number of corporate contractors, as the United States Sentencing Commission estimated that in fiscal year 2015, the number of corporations and other organizational defendants sentenced for at least one federal criminal offense increased 10.5 percent from fiscal year 2014. The rule’s representation requirement also applies to acquisitions for commercial items (including commercially available off-the-shelf items) as well as acquisitions in amounts below the simplified acquisition threshold.
There is only one way in which a corporation may regain eligibility for award after disclosing a federal tax delinquency or recent federal felony conviction—the agency SDO must review the matter and determine that further action is not necessary to protect the Government’s interests. While bright-line rules have now been established for a corporate offeror’s disclosure and certification requirements, the rest is not so clear.
Once an SDO receives notification of a corporation’s tax delinquency or felony conviction, there is neither a set timeframe during which the SDO must make a suspension or debarment decision nor is there any set guidance for SDOs to follow, which could significantly delay the timeline for award. It is also unclear whether this rule would leverage the usual lead agency process for suspension and debarment matters, or whether it requires consideration of suspension and debarment on an agency -by-agency basis. If the latter, each SDO may apply their own factors to the process, which creates the risk of inconsistent determinations. The timeframe of such SDO determinations could halt contract awards and impact various aspects of acquisition.
Now that agency suspension and debarment officials have been affirmatively injected into the pre-award responsibility determination process, corporations with a tax delinquency or recent federal felony conviction can no longer escape the suspension and debarment system if it seeks to obtain a federal contract. As a practical matter, contractors should—prior to negotiating any settlement or plea agreement regarding tax liability or felony convictions—consider meeting with their agency SDOs to affirmatively demonstrate their present responsibility. This meeting should not only include lead agency SDOs, but likely all key agency customers. Potential corporate contractors that do not have the benefit of a previously-established SDO relationship should similarly consider the implications of this final rule in negotiating any settlement or plea agreement when facing a federal felony criminal charge.
Note that this set of certifications is different from Certifications Regarding Responsibility Matters dealing with notifications of corporate tax delinquencies contained at FAR 52.209-5(a)(1)(i)(D). That rule calls upon the offeror and/or its principals to notify the government when the offeror itself is delinquent in its taxes. For those interested in the interplay between the two disclosures, the Final Rule implementing FAR 52.209-5(a)(1)(i)(D) is available here.