The USPS Office of Inspector General (OIG) recently announced that it will be auditing the Postal Service’s Suspension and Debarment program. Debarments most frequently result from a criminal conviction of a company, or its employees. But a contractor can be debarred for any type of improper conduct that negatively reflects on its honesty, ethics, or competence. Resulting debarments have government-wide impact. The thrust of the audit appears to be whether USPS is debarring enough contractors. Read on for more details about OIG’s upcoming audit.

In its audit notice, the OIG referenced a 2009 statement by the Chairman of the House Committee on Oversight and Government Reform that “too often federal government agencies were not taking suspension and debarment actions.” The OIG further noted that “[a]ppropriate use of suspension and debarment can help limit future losses to the Postal Service.” For this project, the OIG plans to obtain background information and evaluate the Postal Service’s current suspension and debarment practices.

Debarment and suspension of bad contractors sounds like a “no brainer,” but in real life, it’s more complicated than that. Businesses that have committed fraud or otherwise demonstrated their lack of integrity and trustworthiness should be debarred. But if a business has fixed the problem — typically by getting rid of a rogue employee and instituting compliance measures — it should not be proposed for suspension or debarment, and any debarment already imposed should be lifted. Because debarring a company that is currently responsible only hurts the Postal Service by reducing the number of competitors for USPS requirements.

The problem with debarment actions is that procurement and law enforcement officials sometimes see them as fair punishment for past bad conduct, regardless of the contractor’s current responsibility. But debarment is not designed or permitted to be used as punishment. That’s what criminal law is for.

Separately, this author has been involved in situations where the Postal Service offered to refrain from debarring a contractor if the contractor paid a certain amount of money to the Postal Service. This is nothing short of seeking ransom money and has no place in debarment and suspension practice. Either the contractor is bad and unreformed and should be debarred, or it is now responsible and should not be debarred. Payment of money to the Postal Service doesn’t figure in that determination.

Any OIG study in this area should recognize that debarment should not be imposed as additional punishment for contractors who may have committed past bad acts but are currently responsible.