Suspensions, Proposed Debarments and Debarments are used by agencies to protect themselves from irresponsible contractors.
Federal Acquisition Regulation (FAR) Part 9.4 directs agencies to solicit offers, award contracts and consent to subcontracts only with responsible contractors. The process for suspension and debarment is left to agency discretion. The rule results from the efforts of the Office of Management and Budget to combat waste, fraud and abuse in the 1980s. Suspension and debarment used to be referred to as “blacklisting.” The rule follows court decisions laying a constitutional foundation for a debarment process and contains procedural and substantive requirements for initiating action and issuing decisions.
As agencies have differing regulations and processes, in 2014 the GAO was tasked by the House Committee on Oversight and Government Reform to examine suspension and debarment programs (see GAO-14-513). The GAO found that the number of actions more than doubled from 1,836 in fiscal year 2009 to 4,812 in fiscal year 2013.
Results of Suspension and Disbarment. The grounds for suspension and debarment are similar. Debarment disqualifies firms from contracting for a specific time, usually three years. Suspension is a temporary disqualification, but practically, suspension lasts throughout the period of an investigation, litigation, or agency determination regarding debarment. The term of a suspension may exceed the term of a debarment.
Suspended and debarred entities are listed as “excluded” in the System for Award Management (SAM). SAM lists different “Exclusion Types:” 1. Preliminarily Ineligible (Proceedings Pending), 2. Ineligible (Proceedings Complete), 3. Prohibition/Restriction, and 4) Voluntary Exclusion. Exclusion records contain the cause and effect of the exclusion.
Causes of Suspension and Debarment. FAR Part 9.406-2 lists the causes for debarment: a civil judgment or criminal conviction “indicating a lack of business integrity or business honesty...;” a violation of the terms of a contract; a failure to maintain a drug-free workplace; affixing a “Made in America” label to a product not made in the U.S.; the commission of an unfair trade practice; delinquent Federal taxes exceeding $3,500; a failure to comply with immigration laws; or, “…Any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor.”
Agency Rules. Given discretion, agencies have different rules. Some agencies issue “show cause” letters, other agencies “propose debarment” immediately. A proposed debarment excludes entities from contracts or government programs. A show cause letter informs entities they are being considered for suspension or debarment but do not have the effect of an exclusion.
Agencies differ in whether they conduct independent fact-finding. Rules permit suspension and debarment, but agencies are not required to debar or suspend contractors. To determine if a contractor is responsible, agencies examine the seriousness of the contractor's acts or omissions and any remedial measures or mitigating factors. The failure to cooperate or respond to a notice may be grounds for debarment.
An entity suspended or proposed for debarment has 30 days to submit information and arguments in opposition. Agencies only need “adequate evidence” to support a suspension or debarment. This evidence standard is an easier for agencies to meet than the preponderance of the evidence standard applicable in most administrative proceedings. A response should include specific facts contradicting the basis of the debarment. The response should include documents like contracts, invoices, bank records, inspection reports, and correspondence. A response should include remedial measures that have been taken and mitigating factors.
A hearing may be held when 1. material facts are in dispute, 2. the action was not based on an indictment, conviction, or civil judgment, and 3. substantial interests of the Government in pending or contemplated legal proceedings will not be prejudiced by a hearing.
If an entity has been proposed for debarment and no suspension is in effect once all disputed issues have been resolved the agency must make a debarment decision within 30 days. Notice of the decision must be provided to the debarred entity and affiliates, and if debarment is imposed, the notice must state the reasons for debarment, the debarment period, and explain the debarment is effective Government-wide.
Judicial Review. Agency rules withstand judicial scrutiny because suspension and debarment are not “punitive” procedures. There is no right to a contract award. The grounds for debarment may be statutory or administrative and even where a statute does not explicitly allow for debarment, the power to debar is implicitly granted to agencies. Agencies impose debarment or suspension to protect their own interests. However, a suspension or debarment decision is reviewable in federal district court under the Administrative Procedure Act. The scope of review is deferential to the agency and courts will not set aside an agency decision unless it finds that decision “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Before judicial review is available an excluded entity must have exhausted all available administrative remedies. Thus, for example, if an entity that fails to reply to a notice it would have failed to exhaust its administrative remedies.Conclusion. As soon as entity knows it is being considered for suspension or debarment it should begin a dialogue with the agency to avoid the issuance of an exclusionary notice. An entity should also seek the advice of experienced counsel to begin preparing a reply.