Government Contracting Database
Responsibility Opinion – Criminal Conduct of Employees
Responsibility Opinion – Criminal Conduct of Employees
The Federal Acquisition Regulations (“FAR”), at 9.104-1, provide that to be determined responsible, a prospective contractor must:
- Have adequate financial resources to perform the contract, or the ability to obtain them;
- Be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments;
- Have a satisfactory performance record;
- Have a satisfactory record of integrity and business ethics;
- Have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them;
- Have the necessary production, construction, and technical equipment and facilities, or the ability to obtain them;
- Be otherwise qualified and eligible to receive an award under applicable laws and regulations.
It is apparent that most of the factors the government addresses in determining a contractor’s responsibility to perform federal projects have not been brought into question by the (NAME) project. The fact that two ex-employees of CONTRACTOR have been convicted of criminal conduct on the (NAME) project will undoubtedly cause procurement officials to inquire about what involvement, if any, the corporation had in the misconduct of its ex-employees. Any such inquiry will disclose that the corporation’s integrity and business ethics were not undermined by these employees, however. To the contrary, the corporation responded in an ethical and appropriate manner when it first learned of the alleged misconduct, promptly investigated the matter, and immediately discharged the employees (before they were indicted). They have not been employed by CONTRACTOR since (DATE).
It is significant that these ex-employees were field level personnel who were not part of CONTRACTOR’s corporate management. CONTRACTOR, Inc. has not been charged, or implicated, in the alleged wrongdoing of these individuals. Although the criminal conduct of employees may, under certain circumstances, be imputed to a corporation, no such imputation of criminal conduct has been asserted against CONTRACTOR. It would be manifestly unfair and inappropriate for a contracting officer to impugn the integrity of the corporation when law enforcement officials (the U.S. Department of Justice), reviewing the same facts, have not imputed the criminal conduct of these ex-employees to the corporation.
It should also be noted that a finding of non-responsibility based upon the conduct of these ex-employees would amount to an impermissible de facto debarment of the corporation. (The Presidential Blue Ribbon Commission on Defense Management (Packard Commission) concluded that a contractor should not be suspended or debarred solely because of a conviction based on some prior non-ongoing conduct). In our opinion, the overwhelming evidence of ethical business practices by CONTRACTOR should overcome any attempt to stigmatize the corporation as a result of the isolated, non-ongoing, conduct of its ex-employees. In fact, the corporation has done everything possible to assure that it maintains the highest ethical standards and has engaged our firm to initiate an “Ethics in Government Contracting” program for its employees.
Another issue raised as a result of the (NAME) project concerns the contracting officer’s unsatisfactory performance rating. The notice of a proposed unsatisfactory rating was responded to, and contested, by CONTRACTOR in a letter to the Contracting Officer dated October 25, 1991. In its response, CONTRACTOR contended, and still contends, that the Baltimore District issued the self-serving unsatisfactory evaluation as a pretext to defend the Corps against the substantial contract claims which had been submitted by CONTRACTOR.
FAR 9.104-3(b), Satisfactory Performance Record, provides that:
A prospective contractor that is or recently has been seriously deficient in contract performance shall be presumed to be non-responsible, unless the contracting officer determines that the circumstances were properly beyond the contractor’s control, or that the contractor has taken appropriate corrective action…The contracting officer shall consider the number of contracts involved and the extent of deficient performance in each contract when making this determination… (Emphasis added)
The import, if any, of the unsatisfactory rating on the (NAME) project must be offset by a recognition of the self-serving basis for the evaluation, by a recognition of the numerous federal projects performed by the CONTRACTOR for which it was rated satisfactory, and by the organizational changes made by the corporation since the completion of the (NAME) project. Significantly, at the same time that the (NAME) project was allegedly being performed unsatisfactorily, CONTRACTOR was also performing the remediation of the (PROJECT) for the (AGENCY). The (PROJECT) involved many of the same management personnel of CONTRACTOR who had been used on the (NAME) project, was completed ahead of schedule, and resulted in a satisfactory performance evaluation. Unlike (NAME), there were no significant contract claims on the (PROJECT).
The unsatisfactory performance appraisal on the (NAME) project could lead an uninformed reader to conclude that CONTRACTOR failed in almost every area of management on the project. Given the pervasive nature of the allegations, which struck at the core of CONTRACTOR’s basic integrity and competency, particularly when coupled with the attempted imputation to the corporation of the criminal conduct of its ex-employees, one might wonder why CONTRACTOR was permitted to continue its performance of the (NAME) project. The answer is simple – no one really believed that CONTRACTOR was non-responsible. CONTRACTOR was not terminated for default and completed the project. Its unsatisfactory performance rating was directly related to the fact that substantial claims were submitted. Certainly, a corporation’s management could not be so fundamentally non-responsible as alleged by the contracting officer and, at the same time, be capable of performing in a satisfactory, if not exemplary, fashion in another project for the same (AGENCY).
CONTRACTOR is, without any doubt, a corporation with considerable prestige and experience in the (TYPE)field. The corporation participated in (NUMBER) federal projects during the period from 1988 to the present, either as a prime or significant subcontractor. Of these, twelve were (AGENCY) projects, and on five of those projects, CONTRACTOR served as a prime contractor. In the past four years, CONTRACTOR has been responsible for performing over X million dollars of federal contract work, over eleven million dollars of which was performed as a prime contractor. With the sole exception of the (NAME) project, the corporation received satisfactory performance ratings. In addition, although (TYPE) is still in its infancy, CONTRACTOR participated in (NUMBER) federal (TYPE) projects and was included in (OMITTED TO PRESERVE CONFIDENTIALITY).
It is our considered opinion, therefore, that CONTRACTOR, Inc. is presently responsible and that the negative implications of the (NAME) project are insufficient to legally support a finding of non-responsibility to perform federal projects and, in any event, have been overcome by management changes accomplished by CONTRACTOR after completion of the (NAME) project. We are prepared to provide further legal argument in support of our position should it be necessary.
Updated: July 5, 2018