A project manager discovers that a subcontractor has been disposing of chemical waste improperly, violating environmental regulations. The project is 85% complete and on the critical path. Replacing the subcontractor will cause a 2-month delay and a 20% budget overrun.<br/><br/>What is the BEST course of action for the project manager?

Allow the subcontractor to finish the remaining 15% of work under strict supervision to avoid project failure.

Report the violation to the project sponsor and ask for guidance on whether to suspend the subcontractor.

Suspend the subcontractor's work immediately and initiate a root cause analysis and remediation plan.

Issue a formal warning to the subcontractor and deduct the cost of potential fines from their final payment.