Australian Defense Department Criticized for Awarding $25,000 Contract to Debarred U.S. Contractor

On July 15, The Guardian reported that the Australian Department of Defence had awarded a $25,000 contract in 2018 to a U.S. ladder manufacturing company, LockNClimb, that had been debarred by the U.S. Government from receiving U.S. federal contracts.  For this contract, the Defence Department reportedly had determined that no Australian company could provide the required products — specialty ladders for aircraft maintenance — within the required timeframe.

In 2016, however, LockNClimb’s President and Chief Executive Officer, Jeffrey A. Green, had pleaded guilty in 2016 to offering a bribe to a U.S. Air Force official.  Even though the bribe in question was for only $280 in cash, Green’s felony plea resulted in a sentence that included a mere 12 days’ confinement but 36 months of supervised release.  That led, according to the Guardian, to LockNClimb’s debarment until August 2019.

After the Guardian’s initial article, a Defence Department spokesperson stated that the award “was conducted in accordance with the commonwealth procurement rules. As the procurement was for a low risk, commercial off the shelf product, it was determined that a limited tender represented the appropriate procurement method.”  At the same time, the Department acknowledged that it was not aware of LockNClimb’s debarment at the time of the award.

Note: The Guardian commented that the Defence Department’s “lack of knowledge of the US debarment is likely to raise more questions about [its] procurement processes.”  The first question, though, is what those questions should be.  Certainly information about Green and LockNClimb was readily available online at the time of the award – not only through the U.S. Department of Justice’s website, as the Guardian noted, but on the U.S. Department of Defense Inspector General’s website and the U.S. Defense Procurement Fraud Debarment (DPFD) Clearinghouse, which allows contractors to check online “to promptly confirm whether potential employees have been convicted of fraud or any other felony arising out of a contract with the Department of Defense.”

At the same time, it is fair to ask what the Defence Department’s due diligence obligation was on a contract that, in the world of defense contracting, could be characterized as miniscule.  If the Defence Department is to review its procurement procedures, it should consider whether to establish a risk-based due diligence process in which it consults certain predesignated public sources, such as the U.S. online resources mentioned above, for any contract, regardless of amount, and establishes enhanced due diligence for higher-value contracts.

It is also fair to ask whether, when one country has chosen to debar a particular contractor, other countries are obligated thereby to debar that same contractor without further consideration.  As Professor Christopher Yukins of George Washington University Law School has stated,

cross-debarment between governments and other institutions is not yet common.  Although one government may take note, and make informal inquiries, when another government or institution takes action against a contractor, generally governments are not bound by other governments’ or institutions’ debarment decisions.  Assessing cross-debarment therefore requires careful consideration of potential costs and benefits. [Emphasis in original; footnotes omitted]

Australian defense officials should take those factors into account – along with the need to maintain a consistent risk-based approach in their procurement process – in deciding what lessons to draw from their experience with the LockNClimb contract.

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