In a recent Final Rule (Rule) made effective January 17, 2025, the Federal Acquisition Regulation’s (FAR) suspension and debarment procedures were revised to be more consistent with the procedures in 2 CFR part 180 applicable to nonprocurement transactions such as grants, cooperative agreements, and loans. Below is background on the FAR’s suspension and debarment procedures and key takeaways from the Rule.
Background
Federal contracts may only be awarded to “responsible prospective contractors.” In other words, contractors must be presently responsible to do business with the government. If a contractor is determined not to be presently responsible due to, for example, a conviction or civil judgment for fraud, bribery, falsification or destruction of records, or making false statements, the government may suspend or debar that contractor in order to protect the government’s interests.
Suspensions and debarments are administrative actions taken by the government that either disqualify a contractor temporarily from government contracting or exclude a contractor from government contracting for a reasonable, specified period. Suspensions and debarments are serious matters imposed for the government’s protection and not for punitive purposes. The existence of a cause for suspension or debarment does not require that a contractor be suspended or debarred. Rather, the debarring official must consider the seriousness of the contractor’s actions or omissions, any remedial measures or mitigating factors, and any favorable evidence of responsibility. This ensures that any responsibility finding is based on whether there is a realistic and clear threat of harm to the government’s proprietary interests.
The suspension and debarment procedures for procurement contracts are generally found in FAR Subpart 9.4 and agency-specific procedures may be found in their respective FAR supplements (e.g., for Department of Defense contracts, these provisions are generally located in Defense Federal Acquisition Regulation Supplement Subpart 209.4). Separate, similar suspension and debarment rules apply to nonprocurement transactions (e.g., grants, cooperative agreements, contracts of assistance, loans, and loan guarantees); these are located at Title 2, Part 180 of the CFR. The Rule’s primary purpose is to improve the consistency between the two sets of procedures by revising the FAR.
Key Takeaways from the Rule
- Immediate Exclusionary Effect: The most notable aspect of the Rule is what it does not change. Under the FAR, when a contractor receives a notice of proposed debarment, the contractor is immediately excluded from receiving contracts, despite no formal determination yet as to whether the contractor will be debarred. Agencies cannot solicit offers from, award contracts to, or consent to subcontracts with the contractor. This immediate exclusionary effect is a thorn in the side of many contractors who are oftentimes blind-sided by notices of proposed debarment. In contrast, the suspension and debarment procedures for nonprocurement transactions do not provide for any immediate exclusionary effect for a proposed debarment. Given the Rule’s purpose is to improve consistency between the two sets of procedures, and the perceived lack of due process in the FAR procedures, respondents to the proposed version of the Rule recommended that the immediate exclusionary effect of proposed debarment be removed from the FAR. These commenters noted that the government can issue a notice of suspension if the risk to the government in a specific case requires immediate exclusion to protect the government’s interests. They also explained that “[w]here immediate exclusion is not necessary and the Government would not choose to suspend the contractor, the proposal for debarment should not have an exclusionary effect. Immediate exclusion is particularly unwarranted in cases where the proposed debarment is not based on a conviction or civil judgment, and fact-finding proceedings are necessary.”
Ultimately, the Federal Acquisition Regulatory Council (FAR Council) chose not to revise the FAR to remove this requirement, pointing to the proposed rule’s preamble which asserted that: (1) immediate exclusion is necessary to protect the Government’s interests and taxpayer’s money by minimizing business risk, (2) unlike nonprocurement transactions which require businesses to meet overall program goals as opposed to exact contractual requirements, contracts are more likely to require immediate exclusion when something goes wrong, and (3) the distinction is consistent with statutory intent (as reflected in recurring Appropriations Act language since 2012). The FAR Council further explained that neither the Interagency Suspension and Debarment Committee nor the FAR Council “think that the application of a proposed debarment . . . leads to inappropriate use or overuse of immediate exclusions[,]” and that the Rule permits agencies to utilize a pre-notice letter as an alternative to an immediate exclusion. Therefore, the immediate exclusionary effect of a proposed debarment remains in the FAR and will continue to prejudice contractors proposed for debarment.
- Deadline to Issue Decision: Regarding proposals for debarment, the FAR previously and generally provided that suspending and debarring officials had 30 business days to issue a debarment decision following “receipt of any information and argument submitted by the contractor . . . .” This timeline, however, could be blurred when the suspending and debarring official requests additional information or the contractor plans to provide a supplemental submission. The Rule revises the FAR to provide more clarity, stating that a suspending and debarring official will have 45 days to issue a decision “from the date that the official administrative record is closed . . . .” The record closes “upon the expiration of the contractor’s time to submit information and argument in opposition, including any extensions.” When in doubt, contractors should seek clarity from the suspending and debarring official on when the record officially closes.
- Responding as an Individual Versus as a Company: A contractor or an individual associated with the contractor (e.g., owner, employee, etc.) can be suspended or debarred. Suspending and debarring officials are instructed to consult and consider a list of mitigating factors before arriving at a decision to suspend or debar a contractor or individual. Previously, however, several of these factors only applied to entities. Many of the factors were either irrelevant or did not directly apply to individuals, making it more difficult for them to present a case as to why they should be considered responsible. The Rule now clarifies which factors in FAR 9.406-1 apply to an individual’s proposed suspension or debarment. Also, several factors that a suspending and debarring official should consider were added to the Rule, including (a) whether the contractor has a pattern or prior history of wrongdoing, (b) whether the wrongdoing was pervasive throughout the contractor’s organization, and (c) whether the contractor is already a party to an administrative agreement with an agency.
In sum, while the FAR Council made several notable revisions and helpful clarifications to the FAR, the FAR still inequitably precludes a contractor from obtaining new federal contracts immediately upon receiving a notice of proposed debarment. The effects on any business are drastic with each week that passes awaiting a decision. For a contractor, there are competing interests at play. On the one hand, a contractor (or individual) may want to quickly respond to any notice of suspension or proposed debarment in the hopes of having the exclusion lifted sooner rather than later. Yet on the other hand, the contractor (or individual) may want to provide a fulsome, robust response with sufficient factual and legal evidence as to why it is presently responsible to ensure a positive determination in its favor. Preparing the response is generally not a small task and oftentimes requires more time to respond than the initial 30 days given. Until the FAR’s suspension and debarment procedures are further refined, contractors (and individuals) who receive notices of proposed debarment will continue to be presumed guilty until proven innocent and thus face immediate exclusion to protect the government’s interests.
If you have questions about the Rule, please contact Jackie Unger, Daniel Figuenick, or another member of PilieroMazza’s Government Contracts Group.
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