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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: April 17, 2002

SUBJECT: Office of Federal Procurement Policy (OFPP); Contractor Responsibility Determinations and Indefinite-Delivery Contracts

SOURCE: OFPP Memorandum, April 16, 2002

AGENCIES: Office of Management and Budget (OMB), OFPP

ACTION: Notice

SYNOPSIS: OFPP Administrator Angela Styles has issued a memorandum to the heads of departments and agencies reminding them that the authority in paragraph (b) of Federal Acquisition Regulation (FAR) 9.405-1, Continuation of Current Contracts, to continue to award orders against existing contracts to contractors that have been debarred or suspended is discretionary, not mandatory. This memorandum was issued in direct response to the March 15, 2002, suspension of Enron and Arthur Andersen from further contract awards.

SUPPLEMENTAL INFORMATION: FAR Subpart 9.1, Responsible Prospective Contractors, contains policies, standards, and procedures for determining whether prospective contractors and subcontractors are responsible. FAR 9.103, Policy, states, "Purchases shall be made from, and contracts shall be awarded to, responsible contractors only. No purchase or award shall be made unless the contracting officer makes an affirmative determination of responsibility."

A contractor that is debarred, suspended, or proposed for debarment under FAR Subpart 9.4, Debarment, Suspension, and Ineligibility, is nonresponsible, and is excluded from receiving government contracts. However, contracts with the debarred or suspended contractor that are already in existence are not required to be terminated. In addition, FAR 9.405-1(b) states that an ordering activity "may continue to place orders against existing contracts, including indefinite-delivery contracts, in the absence of a termination." Ms. Styles believes "this provision creates a significant risk that the government will not be adequately protected. Accordingly, I am asking the FAR Council to consider revising FAR 9.405-1(b) to address this risk." She cites Defense FAR Supplement (DFARS) 209.405-1 as possible model for a FAR revision. DFARS 209.405-1 prohibits Defense contracting activities from placing orders exceeding the guaranteed minimum under indefinite-quantity contracts with debarred or suspended contractors, or from placing orders against Federal Supply Schedule contracts with debarred or suspended contractors when the agency is an optional user (the agency head may waive this prohibition if he or she makes a written determination that there is a compelling reason to do so).

Ms. Styles goes on to remind agencies that FAR 9.405-1(b) is discretionary, and that FAR 9.405-1(b) does not require the placement of orders with nonresponsible contractors. "If a contracting officer places an order under an existing contract with a contractor that is debarred, suspended, or proposed for debarment, the contract action should be justified in writing by the cognizant contracting officer."

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2002 by Panoptic Enterprises. All Rights Reserved.

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