Suspend BP From Federal Contracts? Don't Bet On It

By Robert Bodsky

Will BP be suspended or debarred from government contracting for its role in the massive oil spill in the Gulf? The Wall Street Journal offers some thought-provoking speculation this morning, noting that Obama administration attorneys are looking at whether BP's actions leading up to the environmental disaster warrant being banned from future federal contracts.

Assistant Attorney General Ronald Weich wrote to eight senators on Wednesday, explaining that Justice Department attorneys are "examining a full range of affirmative legal options that may be available to the United States."

Let's put this all into a broader context. Could BP be subject to a massive fine? Count on it. Will they face additional scrutiny from federal regulators and watchdogs? Certainly. But suspension or debarment from future government contracts? Highly unlikely.

In fiscal 2009 the energy giant won a whopping $2.9 billion in contracts, the overwhelming majority from the Pentagon, where BP is the largest supplier of fuel. In other words, Defense needs BP, arguably as a matter of national security--a likely argument they will use not to suspend or debar the firm.

Some will argue that with the BP spill in the Gulf, we're in unchartered waters (so to speak). Maybe, but history says otherwise. For example, it's tough to find two more demonized contractors in history than KBR and Blackwater; however both have survived massive scandals and have kept winning billion-dollar contracts. In addition, companies like Siemens AG, BAE Systems and Chevron have paid nine-figure penalties to the government in recent years to settle foreign bribery cases. And, as I reported last month, none have faced suspension.

In other words, get used to BP as a government contractor. The administration may be wagging its finger at them now. But, sooner or later, they'll be partnering again.