9.407-2 Causes for suspension
Source: FAR 9.407-2 on acquisition.gov
Contractors can be suspended from government contracting for a wide range of offenses—including fraud, tax delinquency, and failure to disclose violations—making robust compliance and timely disclosure essential.
Overview
FAR 9.407-2 outlines the specific causes that may lead to the suspension of a contractor from government contracting. Suspension is a serious administrative action taken when there is adequate evidence of misconduct or lack of business integrity, pending the outcome of an investigation or legal proceedings. The regulation lists various offenses, including fraud, antitrust violations, embezzlement, drug-free workplace violations, false "Made in America" labeling, unfair trade practices, significant tax delinquency, failure to disclose certain violations or overpayments, false certifications, and any other offense affecting a contractor's present responsibility. Indictment for any listed cause is considered adequate evidence for suspension. The regulation also allows for suspension based on other serious or compelling causes affecting a contractor's responsibility.
Key Rules
- Enumerated Causes for Suspension
- Contractors may be suspended for a range of offenses, including fraud, criminal offenses, antitrust violations, embezzlement, bribery, drug-free workplace violations, false labeling, unfair trade practices, significant tax delinquency, failure to disclose violations or overpayments, false certifications, and other offenses affecting business integrity.
- Indictment as Adequate Evidence
- An indictment for any of the listed causes is sufficient evidence to justify suspension.
- Other Serious or Compelling Causes
- Suspension may also be imposed for other causes that seriously affect a contractor's present responsibility, even if not specifically listed.
Responsibilities
- Contracting Officers: Must be aware of the causes for suspension and report suspected violations to the suspending and debarring official.
- Contractors: Must avoid the listed offenses, maintain compliance with all relevant laws and regulations, and timely disclose credible evidence of violations or overpayments.
- Agencies: Responsible for oversight, investigation, and taking appropriate suspension actions when warranted.
Practical Implications
- This section exists to protect the government from doing business with contractors lacking integrity or responsibility.
- Contractors must maintain robust compliance programs to avoid suspension triggers.
- Failure to disclose violations or overpayments can itself be a cause for suspension.
- Common pitfalls include inadequate internal controls, lack of timely disclosure, and failure to comply with drug-free workplace or tax requirements.
(a) The suspending and debarring official may suspend a contractor suspected, upon adequate evidence, of-
(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) Violations of http://uscode.house.gov/view.xhtml?req=granuleid%3AUSC-prelim-title41-chapter81&saved=%7CZ3JhbnVsZWlkOlVTQy1wcmVsaW0tdGl0bGU0MC1jaGFwdGVyMzctZnJvbnQ%3D%7C%7C%7C0%7Cfalse%7Cprelim&edition=prelim" target="_blank">41 U.S.C. chapter 81, Drug-Free Workplace, as indicated by-
(i) Failure to comply with the requirements of the clause at 52.226-7, Drug-Free Workplace; or
(ii) Such a number of contractor employees convicted of violations of criminal drug statutes occurring in the workplace as to indicate that the contractor has failed to make a good faith effort to provide a drug-free workplace (see 26.504);
(5) Intentionally affixing a label bearing a "Made in America" inscription (or any inscription having the same meaning) to a product sold in or shipped to the United States or its outlying areas, when the product was not made in the United States or its outlying areas (see Section 202 of the Defense Production Act (Public Law102-558));
(6) Commission of an unfair trade practice as defined in 9.403 (see section 201 of the Defense Production Act (Pub.L.102-558));
(7) Delinquent Federal taxes in an amount that exceeds $10;000. See the criteria at 9.406-2(b)(1)(v) for determination of when taxes are delinquent;
(8) Knowing failure by a principal, until 3 years after final payment on any Government contract awarded to the contractor, to timely disclose to the Government, in connection with the award, performance, or closeout of the contract or a subcontract thereunder, credible evidence of-
(i) Violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code;
(ii) Violation of the civil False Claims Act (http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title31-section3729&num=0&edition=prelim" target="_blank">31 U.S.C. 3729-http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title31-section3733&num=0&edition=prelim" target="_blank">3733); or
(iii) Significant overpayment(s) on the contract, other than overpayments resulting from contract financing payments as defined in 32.001; or
(9) Determination of a false certification under 52.209-13, Violation of Arms Control Treaties or Agreements-Certification.
(10) 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.
(b) Indictment for any of the causes in paragraph (a) of this section constitutes adequate evidence for suspension.
(c) The suspending and debarring official may upon adequate evidence also suspend a contractor for any other cause of so serious or compelling a nature that it affects the present responsibility of a Government contractor or subcontractor.