Government Contracts Monitor

House Passes Legislation Requiring FCPA Violators to be Proposed for Debarment

September 22, 2010

Legislation approved by the House last week would require federal agencies to propose for debarment federal contractors found to have violated the Foreign Corrupt Practice Act (FCPA).  The FCPA prohibits giving or offering to give anything of value to a foreign official for the purpose of obtaining or retaining business for or with any foreign government.

The new legislation – the 2010 Overseas Contractor Reform Act (H.R. 5366) – creates potential new risks for contractors and contractor employees doing business abroad.  On September 15, 2010, the legislation unanimously passed the U.S. House of Representatives and now moves to the Senate.  However, there is currently no companion measure in the Senate and the legislation may be perceived as merely an election-year attempt to combat “fraud, waste and abuse” in federal contracting.  

Under existing rules, debarring officials may debar contractors for any “offense indicating a lack of business integrity or business honesty.”  Federal Acquisition Regulation (FAR) 9.406-2(a)(5).  However, the House legislation mandates that debarring officials propose for debarment all contractors found to be in violation of the FCPA.  Issuance of a notice of proposed debarment has the same legal effect as a debarment.  FAR 9.405(a).  Although the contractor would be permitted to present information and argument in opposition to any proposed debarment, the new legislation creates a government-wide policy that no contracts should be awarded to individuals or companies that violate the FCPA.  H.R. 5366, §3. 

But, the practical implications of HR 5366 for the contracting community are unclear.  Already debarring officials are able to debar contractors for FCPA violations.  In addition, under the new legislation debarring officials would only be required to propose a contractor for debarment within 30 days after entry of a final adverse finding in an FCPA action.  “Finding” is not defined in the new legislation – leaving open the question of whether a deferred prosecution or a non-prosecution agreement involving an FCPA violation would trigger debarment.  

However, with Department of Justice enforcement of the FCPA on the rise, the new rules could create a significant new risk for contractors with overseas operations.  A strict reading of the House legislation could lead to debarment for minor FCPA violations.  Jackson Kelly will be monitoring this legislation as it moves to the Senate.

Written By: Sam Jack