he ability—and, to a certain extent, the legal right—to compete for new Governmentbusiness is critical to a company’s short-term success and its long-term survival, yet it is
often taken for granted. The reality is that this ability, as well as the legal right, to compete forGovernment work can be extinguished for a number of reasons, some of which are totallyunrelated to the company’s performance of, or conduct under, a Government contract.
For over half a century the Government has had the right to suspend or debar contractorsfrom obtaining new business. This right obtains from numerous statutes (some of which governconduct outside the procurement realm) and has been incorporated into the Federal Acquisi-tion Regulation.
Previous BRIEFING PAPERS on this issue have discussed the policies, practices, and procedures relatedto suspension and debarment. To a certain extent, much of what they covered remains current and
PRACTICAL TIGHT-KNIT BRIEFINGS INCLUDING ACTION GUIDELINES ON GOVERNMENT CONTRACT TOPICS
IN BRIEF
BRIEFINGPAPERS SECOND SERIES
®
T
Background
Purposes
Grounds■ Debarment■ Suspension
Procedural Requirements■ Suspension & Debarment■ De Facto Suspension &
Debarment
Mitigating Factors &Administrative Agreements
Parallel Proceedings &Coordinated Settlements
Effects■ Duration■ Existing Contracts
■ Agencies & The ExcludedParties List
■ Subcontracts■ Certification■ Imputed Liability & Related
Entities
Judicial Review
State Considerations■ General■ Reciprocal Suspension Or
Debarment■ Affiliates & Imputed Liability■ Duration■ Parallel Proceedings■ Due Process■ Certifications■ State Debarred & Suspended
Lists
Joseph D. West and Timothy J. Hatch are partners in Gibson Dunn &Crutcher LLP. Mr. West is co-chair of the firm’s Government and Commer-cial Contracts Practice, resident in the firm’s Washington, DC office, andMr. Hatch is a member of the firm’s Government and Commercial Con-tracts and Business Crimes & Investigations practices, resident in thefirm’s Los Angeles office. Ms. Brennan and Mr. VanDyke are members ofthe Government and Commercial Contract practice, resident in the Wash-ington, DC office.
SUSPENSION & DEBARMENT
By Joseph D. West, Timothy J. Hatch, Christyne K. Brennan, and Lawrence J.C. VanDyke
valid. However, over the 17 years that have passedsince the last BRIEFING PAPER on this topic,1 therehave been a number of developments (e.g., the“Nonprocurement Common Rule” and the ef-fects of Enron-like corporate scandals) that re-quire a fresh look at suspension and debarment.
This BRIEFING PAPER builds on those earlierefforts and provides a current, basic overviewof the suspension and debarment process. Itcompares and contrasts the rights, obligations,
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This publication was created to provide you with accurate and authoritativeinformation concerning the subject matter covered; however, this publicationwas not necessarily prepared by persons licensed to practice law in a particularjurisdiction. The publisher is not engaged in rendering legal or otherprofessional advice, and this publication is not a substitute for the advice ofan attorney. If you require legal or other expert advice, you should seek theservices of a competent attorney or other professional.
and procedures in the Federal AcquisitionRegulation with those under the Nonprocure-ment Common Rule and addresses the impli-cations of business conduct outside the pro-curement area on a contractor’s ability to dobusiness with the Federal Government. Finally,it reviews certain state-related statutes andregulations that affect a contractor’s eligibil-ity for Government work.
Background
The policies behind current suspension anddebarment practices have a time-honored pedi-gree. As early as 1884, Congress required thatmilitary supply contracts be awarded to the“lowest responsible bidder.”2 In 1928, the U.S.Comptroller General recognized in an opin-ion letter that “the interests of the UnitedStates” may necessitate debarment in someinstances.3 And with the passage of the BuyAmerican Act of 1933, Congress first expresslyauthorized statutory debarment.4
In the late 1940s, Congress passed two actsthat greatly increased the Government’s useof suspension and debarment—the ArmedServices Procurement Act of 19475 and theFederal Property and Administrative ServicesAct of 1949.6 These acts formed the basis forthe Armed Services Procurement Regulations7
and the Federal Procurement Regulations,8
respectively. These regulations established similardebarment procedures for both military andcivilian agencies.
In the decades that followed, concerns wereexpressed that the existing regulations pro-vided insufficient procedural safeguards, and
that there was a lack of uniformity in the ap-plication of the regulations.9 Moreover, sev-eral key court decisions found suspended ordebarred contractors’ due process liberty in-terest violated by insufficient proceedings.10
These and other concerns eventually led tothe release in 1982 by the Office of FederalProcurement Policy of Policy Letter 82-1, whichestablished uniform guidelines for suspensionand debarment.11 A little more than a yearlater, these guidelines were adopted essen-tially wholesale into Subpart 9.4 of the FAR,which has governed federal agency procure-ment—both military and civilian—since 1983.
While suspension and debarment associatedwith Government procurement is regulated bythe FAR, “nonprocurement” spending—suchas grants, loans, and other forms of Govern-ment assistance—accounts for a considerableportion of the Federal Government’s budget.The same considerations that gave rise to sus-pension and debarment in the procurementsetting have more recently militated for ex-clusion of unsuitable participants fromnonprocurement Government programs. Ac-cordingly, in 1986 President Reagan issued anExecutive Order requiring all executive de-partments and agencies to “participate in asystem for debarment and suspension from pro-grams and activities involving Federal finan-cial and nonfinancial assistance and benefits.”12
In 1988, 28 agencies published a “Non-procurement Common Rule” (NCR) that pro-vides for “governmentwide nonprocurementsuspension and debarment.”13 The NCR, whichhas recently been recodified in the Codeof Federal Regulations at 2 C.F.R. Part 180, re-quires that procurement and nonprocurement
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suspensions and debarments be treated re-ciprocally and be effective Government-wide.14
The NCR has been widely adopted by federalagencies,15 including agencies such as the De-partment of Health and Human Services, De-partment of Education, and Department of Ag-riculture that each manage extensive nonprocure-ment programs such as Medicare/Medicaid,student financial aid programs, and the FoodStamp program. By its terms, the NCR appliesto “any” nonprocurement transaction within thecovered agency, including, but not limited togrants, cooperative agreements, scholarships,fellowships, contracts of assistance, loans, loanguarantees, subsidies, insurances, payments forspecified uses, and donation agreements.16 Inaddition to FAR Subpart 9.4 and the NCR, nu-merous statutes expressly provide for suspen-sion and debarment.17
The previous BRIEFING PAPER on this topicreported a rapid growth in the number ofsuspension and debarments from 1982 to 1988but a fairly stable plateau thereafter.18 Thisleveling-off trend has generally continued insuspensions and debarments related to De-partment of Defense contracts. For example,in 2004 the four largest agencies in the DODtook 1,198 suspension and debarment actions,only slightly more than the 1,033 such actionstaken in 1988.19 Overall, however, the num-ber of suspensions and debarments have fluc-tuated in the last several years. There were9,918 suspensions and debarments in FiscalYear 2005, 5,045 in FY 2004, 7,607 in FY 2003,7,684 in FY 2002, and 8,828 in FY 2001.20 Butthese numbers do not tell the whole story;there have been significant shifts in theGovernment’s approach to suspension anddebarment in the supervening 17 years. Forexample, as will be discussed later in this PA-PER, in recent years agencies have shown anincreased willingness to suspend and debarbased on corporate malfeasance unrelated toGovernment contracts.
In discussing suspension and debarment, thisPAPER will focus predominately on the FARand NCR and will avoid detailed discussion ofthe various statutory bases for suspension anddebarment. In the majority of instances, the
provisions of the NCR track the FAR; signifi-cant differences will be noted. Finally, it isimportant to note that most agencies have de-veloped agency-specific supplements to theFAR,21 and therefore the specific grounds andprocedures for suspension and debarment mayvary somewhat by agency. This is but one im-portant reason to retain experienced advisorsearly in the process when facing a potentialsuspension or debarment situation.
Purposes
Administrative suspension and debarmentis provided for by the FAR (procurement-related) and the NCR (nonprocurement-related), with supplementation by individualagencies. As expressly stated in both the FARand the NCR, suspension and debarment arenot to be employed by the Government “forpurposes of punishment.”22 Rather, suspen-sion and debarment are to be used “only inthe public interest for the Government’s pro-tection” to ensure that the Government onlyenters into financial relationships with “respon-sible” entities.23 Suspension and debarmentare intended to protect Government programsfrom persons who engage in dishonest or ille-gal conduct or are otherwise unable to satis-factorily perform Government contracts.
In addition, many statutes provide for sus-pension and debarment as tools to promotecompliance. The first such statute was the BuyAmerican Act of 1933, which promotes theuse of American-produced materials by pro-viding for debarment of any contractor thatviolates its provisions.24 Similarly, labor laws suchas the Davis-Bacon Act and Walsh-Healey Act,25
drug-enforcement laws such as the Drug-FreeWorkplace Act and Anti-Drug Abuse Act,26 andenvironmental laws such as the Clean Air Actand Clean Water Act,27 promote their variousgoals by barring noncompliant Governmentcontractors. The Government in recent yearshas also shown an increased willingness to useexclusion as a means to promote statutory goalsoutside of the Government contracts area. Forexample, the Social Security Act requires ex-clusion of providers found guilty of health care
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fraud or abuse from Medicare and Medicaidprograms.28 Likewise, the Generic Drug En-forcement Act provides for debarment of personswho have committed certain drug-related vio-lations from submitting or assisting in the sub-mission of a drug application.29
Grounds
Provided that proper grounds exist, the FARand the NCR permit—but do not require—suspension and debarment. This is an impor-tant distinction. The purpose of suspensionand debarment is not punitive but rather toprotect the Government and the public. There-fore, even if grounds exist for suspension ordebarment, an agency is not required to—and indeed should not—debar or suspend apresently responsible contractor.30 In determiningwhether a contractor is presently responsible,an agency looks to the seriousness of thecontractor’s acts or omissions and any reme-dial measures or mitigating factors counsel-ing against exclusion.31
■■■■■ Debarment
Debarment disqualifies a firm from contract-ing with the Government or participating inGovernment nonprocurement transactions fora specific period of time (usually limited to amaximum of three years).32 As already noted,the grounds for debarment may be either statu-tory or administrative. In the former instance,the specific provisions of the statute govern.Unlike the provisions for administrative de-barments, which make debarment discretion-ary, some statutes mandate debarment for vio-lation of the statute.33 Courts have also heldthat, even where a statute does not explicitlyallow for debarment, the power to debar isimplicitly granted.34 Finally, courts have broadlyinterpreted statutory debarment authority toinclude debarment for failure to cooperatein an agency compliance review.35
The FAR enumerates several grounds for ad-ministrative debarment. Generally, a contrac-tor or participant in a Government programmay be debarred for (1) a conviction or civiljudgment for fraud or the commission of a
criminal offense, (2) a serious violation of theterms of a Government contract, subcontract,or transaction (established by a preponderanceof the evidence), or (3) any other cause soserious or compelling in nature that it affectsan entity’s “present responsibility.”36
Specifically, procurement debarment underthe FAR can occur for criminal convictions orcivil judgment for (a) fraud or a criminal of-fense in connection with a public contract orsubcontract, (b) violation of federal or stateantitrust laws, (c) embezzlement, theft, forg-ery, bribery, falsification or destruction of records,making false statements, tax evasion, or receiv-ing stolen property, (d) intentionally affixinga “Made in America” label to foreign goods, or(e) any other offense indicating a lack of busi-ness integrity or business honesty.37 Debarmentunder the FAR may also be based on the seri-ous violation of the terms of a Governmentcontract or subcontract, including willful fail-ure to perform or a history of failure to per-form one or more contracts.38 Further groundsfor debarment include violations of the Drug-Free Workplace Act, unfair trade practices, non-compliance with the Immigration and Nation-ality Act’s employment provisions, or “any othercause of so serious or compelling a nature thatit affects the present responsibility of the con-tractor or subcontractor.”39
The grounds for nonprocurement debar-ment under the NCR are similar in most re-spects to the FAR. Unlike the FAR, the NCRdoes not specifically provide for debarmentfor falsely affixing a “Made in America” labelto foreign-made products or noncompliancewith the employment provisions of the Immi-gration and Nationality Act.40 The NCR does,however, provide four additional, unique groundsfor nonprocurement debarment. First, in whatis a significant expansion over the FAR, theNCR provides for debarment of an entity for“[k]nowingly doing business with an ineligibleperson.”41 Second, a participant may be de-barred for failing to pay debts to “any Federalagency or instrumentality” (except for debtsarising under the Internal Revenue Code).42
Third, in addition to two examples given inthe FAR of violations of public agreements
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serious enough to merit debarment, the NCRadds a “willful violation of a statutory or regu-latory provision…applicable to a public agree-ment.”43 Finally, the NCR expressly providesfor debarment upon violation of a materialprovision of a voluntary exclusion agreementor any suspension or debarment settlementagreement.44
Where one or more of the above groundsfor debarment exists, debarment will be im-posed where it is “in the Government’s inter-est.”45 It is extremely important to recognizethat debarment is often a likely collateral con-sequence of a criminal conviction or civil judg-ment. Moreover, it is important to bear inmind that a grant of immunity from prosecu-tion is no guarantee against suspension or de-barment.46
■■■■■ Suspension
Suspension is the temporary disqualificationof a firm from contracting with the Govern-ment or from participating in Governmentprograms.47 The grounds for suspension anddebarment are substantially similar. Practicallyspeaking, suspension is a temporary debarmentthat lasts until an investigation, litigation, oragency determination has settled the facts rel-evant to the grounds for debarment.48 Accord-ingly, although a suspension is “temporary,”in instances where an investigation or litiga-tion lasts more than three years, the term ofa suspension may actually exceed the typicalmaximum term of a debarment.49
Both the FAR and the NCR recognize thatsuspension is a “serious action” that shouldonly be imposed on the basis of an indict-ment or “adequate evidence” of the existenceof grounds for debarment, and where “im-mediate action” is necessary to protect theGovernment’s and public’s interests.50 “Adequateevidence” is “information sufficient to supportthe reasonable belief that a particular act oromission has occurred.”51 In assessing whetheradequate evidence for suspension exists, theFAR states that a suspending official “should”examine basic documents such as contracts,inspection reports, and correspondence.52 Theofficial also “should” consider the seriousness
of the contractor’s acts or omissions and “may,but is not required to,” consider remedial mea-sures or mitigating factors.53 The NCR, in con-trast, states only that the official “may” exam-ine basic documents and does not expresslyprovide for consideration of the seriousnessof a participant’s actions or mitigating factors.54
Under both the FAR and the NCR, however,the adequate evidence requirement is an easierstandard for a debarring official to meet thanthe preponderance of the evidence standardrequired for debarment.
Another difference between the FAR andNCR regards a serious violation of the termsof a Government contract or agreement. Un-der the FAR, a serious violation supported bythe preponderance of the evidence is groundsfor debarment, but, unlike the other groundsfor debarment, there is no corresponding pro-vision in the FAR for suspension based on ad-equate evidence of such a violation.55 In con-trast, because the NCR provides for suspen-sion upon adequate evidence of the existenceof any cause of debarment, the NCR does spe-cifically provide for suspension based on ad-equate evidence of a serious violation of apublic agreement or transaction.56
Recently, responding to the headline-grab-bing scandals at companies like Enron, agen-cies have shown increased willingness to sus-pend or debar companies that have engagedin corporate malfeasance unrelated to anyGovernment contract activity. For example,in 2003, the General Services Administration,relying on the FAR’s “catch-all” provision al-lowing debarment for any other cause so se-rious or compelling in nature that it affectsan entity’s “present responsibility,”57 proposedfor debarment MCI WorldCom after it wasrevealed that MCI had “committed the mostmassive fraud in U.S. history when it over-stated its earnings to the [Securities and Ex-change Commission].”58 Similarly, the GSAsuspended both Arthur Anderson and Enronin the wake of their well-publicized scandals.59
In none of these instances was the underly-ing conduct directly related to contracts withthe Government. This means that today’s Gov-ernment contractor or program participant
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must give serious consideration to potentialsuspension and debarment implications of anyadverse conduct by its officers or employees,as well as to the resolution of any civil orcriminal charges resulting from that conduct.
Procedural Requirements
The procedures required to debar or sus-pend an individual or organization vary de-pending upon whether the basis is statutoryor administrative. For statutory suspensions ordebarments, the statute itself provides the ap-plicable procedural requirements, subject onlyto the constitutional limits of due process asdefined by the courts.60 A discussion of thevarious statutory requirements is beyond thescope of this PAPER. The procedures applicableto administrative suspensions or debarments,which are the focus of this PAPER, are explainedby the FAR (for procurement) and the NCR(for nonprocurement). As in most respects,here also the FAR and the NCR are very simi-lar; this PAPER will note the instances wherethey diverge.
■■■■■ Suspension & Debarment
To initiate a suspension or debarment, anagency must first become aware of the exist-ence of possible grounds for such action. TheFAR accomplishes this by requiring agenciesto establish procedures for prompt reporting,investigation, and referral to the applicabledebarring official of any “matters appropriatefor that official’s consideration.”61 Indictments,convictions, and civil judgments are the typesof “matters” most commonly referred to de-barring officials. However, an indictment orsimilar official action is not necessary to ini-tiate a suspension action; while less common,a suspension may be initiated by an agencythat has developed the facts independent ofor even in the absence of a parallel judicialproceeding.62
Once an agency has made the decision toformally consider an entity for debarment orsuspension, the agency is required by the FARand NCR to issue either a notice of suspen-sion63 or notice of proposed debarment.64 While
the regulations require that notice be givenbefore debarment (hence the notice of proposeddebarment),65 a notice of suspension can be(and usually is) provided with the suspensioneffective immediately.66 The agency must providecertain information in the notice, includingthat the entity has either been suspended oris being considered for debarment, the basisfor the agency’s action, and the Government-wide effect of the suspension or proposal todebar.67 In the case of a suspension, the no-tice also notes that the suspension is for atemporary period pending completion of aninvestigation or resulting proceedings.68 Althoughthe agency must state the basis for the sus-pension or proposed debarment “in terms suf-ficient to put you on notice,” in the case of asuspension, which generally occurs concurrentwith some Government investigation or pros-ecution, the agency is permitted to limit thenotice so as not to disclose the Government’sevidence.69
One crucial difference between the FARand the NCR is that, while a notice of pro-posed debarment under the FAR immediatelyexcludes a contractor from procuring addi-tional Government contracts, a notice of pro-posed debarment under the NCR does not.70
Only once a participant is actually debarreddoes exclusion begin under the NCR. How-ever, an entity that is proposed for debarmentunder the FAR is immediately excluded fromparticipation in nonprocurement programs gov-erned by the NCR.71 It is also important tonote that a notice that an agency is consider-ing or proposing to suspend an entity wouldnot immediately exclude that entity, becauseit would not comply with the requirement underboth the FAR and the NCR that a notice ofsuspension must notify an entity that “you havebeen suspended.”72
For an entity for whom Government contractsor programs are vital, receipt of a notice of sus-pension under either the FAR or the NCR or anotice of proposal to debar under the FARis grave indeed; such a notice immediately ex-cludes the entity from any further contractsor Government programs. In part because ofthis draconian effect, agencies sometimes issue
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“show cause” letters, which inform an entity thatit is being considered for suspension or pro-posed debarment, but do not have the effectof immediate exclusion. Typically, such lettersoffer an opportunity to respond within a settime period to allegations of misconduct thathave been brought to the attention of the de-barring official. Neither the FAR nor the NCRrequire an agency to issue a show cause letteror to provide any notice before the notice ofsuspension or proposed debarment, and a re-cent attempt failed to amend the regulationsto require the issuance of a show cause letter“except in those cases where the governmentwould be harmed by waiting any period of time”to suspend or propose debarment.73 Therefore,the issuance of a show cause letter continues tobe completely at the discretion of individualagencies. Whether, however, an entity receivesa show cause letter, or simply knows by othermeans that an agency is considering suspensionor proposed debarment, that entity is well ad-vised to begin a dialogue with the agency earlyin the process so as to avoid, if possible, theissuance of an immediately effective exclusion-ary notice. Agency debarring officials are nor-mally receptive to such approaches. The im-portance of advice from experienced counselas early as possible in this process cannot beoverstated.
A suspended entity has 30 days after re-ceipt of the notice to submit information andargument in opposition to the suspension, in-cluding specific facts that contradict statementscontained in the notice.74 Similarly, an entityhas 30 days to contest a proposed debarmentby providing specific facts contradicting thebasis for the debarment.75 The NCR requiresthat, in addition to providing specific infor-mation contradicting the basis for the suspensionor proposed debarment, an entity contestingsuspension or debarment must also inform theagency of all prior exclusions imposed by fed-eral, state, or local agencies, any additionalrelevant criminal or civil proceedings not in-cluded in the notice, and all of the entity’saffiliates.76
The contesting entity will only be entitledto a hearing where (1) material facts are in
dispute, (2) the action was not based on anindictment, conviction, or civil judgment, and(3) substantial interests of the Governmentin pending or contemplated legal proceed-ings will not be prejudiced by a hearing.77 Ifthe debarring official determines that the aboveconditions are met, the issue is referred to afact-finder who conducts an independent pro-ceeding.78 At the conclusion of the proceed-ing, the fact-finder submits written findingsof fact to the debarring official, which arebinding unless determined by the official tobe arbitrary and capricious or clearly errone-ous.79
If an entity has been proposed for debar-ment and there is no suspension in effect,once all issues of disputed material fact havebeen resolved, the agency must make a de-barment decision within 30 days under theFAR and 45 days under the NCR, subject toextension for good cause.80 Notice of the de-cision must be promptly provided to any de-barred entity and involved affiliates, and ifdebarment is imposed, the notice must statethe reasons for debarment, the period of de-barment, and explain that the debarment iseffective Government-wide.81
■■■■■ De Facto Suspension & Debarment
As already noted in this PAPER, the Govern-ment will only enter into contracts or transac-tional relationships with “responsible sources.”82
Accordingly, an agency, without going throughthe procedures required to expressly suspendor debar, could nonetheless “de facto” debaran entity simply by repeatedly finding itnonresponsible and refusing to contract or trans-act with the entity. Such a de facto debar-ment is improper because it circumvents theprocedural safeguards required to debar orsuspend an entity.83 Generally, repeated find-ings of nonresponsibility are necessary to makeout a claim of de facto debarment.84
Late in the Clinton administration, the Of-fice of Management and Budget promulgatedFAR amendments requiring a more search-ing assessment of contractors’ compliance withlabor, employment, tax, environmental, anti-trust, and consumer protection laws in making
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preaward determinations of responsibility.85
Critics of the amendments argued that theyeffectively opened wide the door for contrac-tor “blacklisting” without offering the proce-dural protections required to actually suspendor debar a contractor. However, the issue wasmooted when the Bush administration revokedthe amendments only a year later.86
An agency may also de facto debar a con-tractor by downgrading its past performancerating in a negotiated procurement. Past per-formance is a significant nonprice evaluationfactor in such Government contract awards,thereby considerably influencing the awarddecision.87 The contractor’s ability to challengethe agency’s decision related to the past per-formance rating is exceptionally limited, however,since the Government Accountability Officeand courts provide broad discretion to agencyofficials in evaluating an offeror’s past per-formance.88
Mitigating Factors & AdministrativeAgreements
Because the suspension and debarment in-quiry is focused on present responsibility, themere existence of grounds does not alone man-date suspension or debarment.89 Rather, in con-sidering suspension or debarment under theFAR, agency officials “should” consider reme-dial or mitigating factors such as (1) the pres-ence of effective standards of conduct and in-ternal control systems in place when the mis-conduct occurred or adopted before any Gov-ernment investigation; (2) whether the con-tractor timely brought the misconduct to theagency’s attention; (3) whether the contrac-tor fully investigated the misconduct andprovided the results of the investigation tothe agency; (4) the contractor’s cooperation;(5) payment of fines, restitution, and reim-bursement of the Government’s investigationcosts by the contractor; (6) whether the con-tractor has taken appropriate disciplinary ac-tion against the responsible individuals; (7) imple-mentation of remedial measures; (8) institu-tion of a new or revised review and controlprocess and ethics training programs; (9) whether
adequate time has passed to eliminate the causeof the misconduct; and (10) management’srecognition of the seriousness of the miscon-duct and role in implementing programs toprevent recurrence.90
The NCR provides a more extensive list ofmitigating and aggravating factors that a de-barring official “may” consider. In addition tothose listed in the FAR, the NCR providesthe following factors that focus more on theunderlying misconduct and a history or pat-tern of behavior: (a) the actual or potentialharm or impact that results or may result fromthe wrongdoing; (b) the frequency of inci-dents and/or duration of the wrongdoing;(c) whether there is a pattern or prior his-tory of wrongdoing; (d) whether the entityhas been excluded or disqualified previouslyby a federal, state, or local agency on a basisof similar conduct; (e) whether the entity hadalready entered into an administrative agree-ment based on similar conduct; (f) whetherand to what extent the entity planned, initi-ated, or carried out the wrongdoing; (g) whetherthe wrongdoing was pervasive within the or-ganization; (h) the kind of positions held bythe individuals involved in the wrongdoing;and (i) other factors that are appropriate tothe circumstances of a particular case.91
Once a cause for suspension or debarmenthas been established—whether under the FARor the NCR—the burden is on the contractoror program participant to demonstrate, to thesatisfaction of the debarring official, that it ispresently responsible.92 While failure by thedebarring official to consider mitigating fac-tors in making this determination may providea basis to challenge the decision as arbitrary,93
because of the strong deference generally ac-corded to agency determinations of non-responsibility, an organization’s best opportu-nity to demonstrate present responsibility is be-fore the suspension or debarment decision. Rec-ognizing this, some agencies have taken a pro-active approach, creating voluntary disclosureprograms. Examples of such programs includethe DOD Voluntary Disclosure Program,94 ini-tiated in 1986, and the Environmental Protec-tion Agency Voluntary Disclosure Program,95
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initiated in 1995. Such programs offer incen-tives for entities to voluntarily discover, promptlydisclose, expeditiously correct, and prevent re-currence of wrongdoing. While the programsdo not guarantee that compliance with theprogram’s conditions will prevent suspensionor debarment, in practice compliant organiza-tions have generally not been suspended ordebarred. It is worth noting, however, that thenumber of voluntary disclosures under the DOD’sprogram has been diminishing for the past fewyears.96
Typically, if grounds for suspension or de-barment have been established but the de-barring official has been assured that the en-tity is nonetheless presently responsible, thesuspension or proposed debarment process issettled with an administrative agreement.Whether to consider settlement and how tostructure it are left to the discretion of theindividual agencies; the FAR does not evenmention settlement and the NCR states onlythat settlement is permissible and may includea voluntary exclusion.97
Administrative agreements vary from agencyto agency and settlement to settlement. Of-ten, however, the agreements will incorpo-rate at least some of the remedial and miti-gating factors in the FAR and NCR listed above.Moreover, the agreement will be for a term(often three years), and will require the en-tity to take certain actions such as implementingor maintaining various compliance, monitor-ing, and ethics programs, excluding certainindividuals from the business or at least in-volvement with the agency, and notifying theagency on a regular basis regarding compli-ance. The agreement may also provide for astated term of voluntary exclusion, which un-der the NCR has Government-wide effect.98
Finally, the agreement also often provides forimmediate exclusion in the event of materialbreach thereof.
Parallel Proceedings & CoordinatedSettlements
Often, the actions that form the basis forthe debarring official’s consideration of sus-
pension or debarment are also the same ac-tions underlying a parallel criminal or civilproceeding. This raises particularly thorny is-sues, because settlement of the criminal orcivil proceeding is no guarantee against sus-pension or debarment,99 and often there islittle that can be done to turn parallel intosequential proceedings.100
In attempt to bring finality to as many ofthe proceedings as possible, it is often wise toattempt to reach a “coordinated settlement.”While some agencies may entertain interimsettlements, most agencies will not considersettlement of a suspension or debarment matteruntil finality of the underlying civil or crimi-nal case. Since the Department of Justice, andnot the relevant agency, primarily controls theunderlying civil or criminal case, the contractor’sdirect coordination with agency debarring of-ficials before, during, and after resolution ofthe underlying case is imperative. Such coor-dination may facilitate an expeditious resolu-tion of any proposed debarment or suspen-sion, thereby allowing the contractor to main-tain its eligibility and present responsibility.
Even if an agency is unwilling to partici-pate in comprehensive settlement discussions,it may be possible when settling civil or crimi-nal proceedings to influence the likelihoodof future suspension or debarment by obtain-ing as part of the settlement a statement fromthe prosecutor or adverse party that bears posi-tively on the entity’s present responsibility. Forexample, an affirmative statement by the De-partment of Justice that “our investigation hasuncovered no evidence that suggests a cur-rent lack of integrity or business honesty onthe part of the company or its current man-agement or employees” (or words to that ef-fect) will be extremely favorable to the con-tractor in any future suspension or debarmentsettlement negotiations with the agency.
Effects
For a Government contractor or programparticipant, suspension or debarment can bethe equivalent of an organizational death penalty.In addition to the direct effects of suspension
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or debarment discussed below, there are of-ten serious indirect effects, including the po-tential of reciprocal debarment by state gov-ernments (discussed later in this PAPER), andthe possibility that obligations under publicdisclosure laws may be implicated. It is impor-tant that an entity facing a potential suspen-sion or debarment consider all of these ef-fects as it works through the process.
■■■■■ Duration
Regardless whether an entity is suspendedor debarred under the FAR or under the NCR,that entity is immediately excluded from anynew procurement and nonprocurement ac-tivity Government-wide.101 Exclusions under theFAR and NCR have reciprocal affect; exclu-sion under either regulation precludes bothprocurement and nonprocurement eligibility.102
Moreover, a notice of proposed debarmentunder the FAR also immediately excludes anentity from pursuing new procurement andnonprocurement awards.103 In contrast, how-ever, a notice of proposed debarment underthe NCR does not exclude an entity in eitherthe procurement or nonprocurement arena.104
Because a suspension is considered a “tem-porary” exclusion, the Government must ini-tiate legal proceedings within 12 months ofthe suspension notice, or 18 months if theAssistant Attorney General requests an exten-sion.105 Once legal proceedings are initiated,however, an entity may be suspended untilthe termination of the proceedings.106 Thus,a suspension may in fact last longer than adebarment.
A debarment, on the other hand, is for afixed length of time—generally not to ex-ceed three years.107 As with a suspension, adebarment (as well as a proposed debarmentunder the FAR) is effective Government-wide.108 Where a suspension precedes a de-barment, the period of the suspension mustbe considered by the debarring official whensetting the length of the debarment.109 Oncean entity has been debarred, it may requestthe debarring official to reconsider the de-barment decision or reduce the period orextent of debarment.110 The request must
be in writing and supported by documenta-tion of the reasons for reconsideration suchas (1) newly discovered evidence, (2) rever-sal of a conviction or judgment that formedthe basis for the debarment, or (3) a bonafide change in control of the debarred orga-nization.111 Conversely, if a debarring officialwishes to extend the period of an existingdebarment, the official may do so if neces-sary to protect the public interest, but notsolely on the basis of the same facts and cir-cumstances underlying the original debar-ment.112 Moreover, to extend a debarmentan agency must use essentially the same pro-cedures as required for a new debarment.113
■■■■■ Existing Contracts
Suspensions or debarments are prospec-tive; agencies may continue contracts or sub-contracts in existence at the time the con-tractor was debarred, suspended, or proposedfor debarment, unless the agency’s head di-rects otherwise.114 However, unless the agencyhead makes a written determination of thecompelling reasons for doing so, agenciesare proscribed from (1) placing orders ex-ceeding the guaranteed minimum under in-definite quantity contracts, (2) placing or-ders under optional use contracts, blanketpurchase agreements, or basic ordering agree-ments, or (3) adding new work, exercisingoptions, or otherwise extending the dura-tion of current contracts or orders.115 Agen-cies also have the discretion to terminatecontracts of excluded contractors, but onlyafter review by the agency to “ensure thepropriety of the proposed action.”116
■■■■■ Agencies & The Excluded Parties List
When an entity is suspended or debarred—or proposed for debarment under the FAR—that entity is placed on the Excluded PartiesList System (EPLS) operated by the GSA.117
The EPLS is the central mechanism by whichthe Government gives Government-wide effectto agency exclusions, whether procurement ornonprocurement. Within five working days oftaking exclusionary action towards an entity,an agency must provide the name and address
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of the excluded entity, the name and contactinformation of the agency taking the action,the cause for the action, the effect of the ac-tion, the termination date, and a DUNS Num-ber, Social Security Number, Employer Identi-fication Number, or other Taxpayer Identifi-cation Number where available.118 Even volun-tary exclusions entered into as part of a settle-ment agreement are entered into the EPLSand thus given Government-wide effect.119
Once an entity’s name is on the EPLS, thatentity is excluded from receiving Governmentcontracts or subcontracts and participating innonprocurement transactions with the Gov-ernment. The FAR prohibits agencies fromsoliciting offers from, awarding contracts to,or consenting to subcontracts with entities listedon the EPLS.120 EPLS-listed contractors arealso barred under the FAR from acting as agentsor representatives for other contractors in theirGovernment contracts.121 Contracting Officersmust review the EPLS after the opening ofbids or receipt of proposals and immediatelybefore award.122 The NCR similarly bars fed-eral agencies from entering into a coveredtransaction with anyone listed on the EPLS.123
Federal agencies may only contract or trans-act with an entity listed on the EPLS if theagency’s head grants an exception, stating inwriting the “compelling reasons” for the ex-ception.124 Such exceptions are rare, gener-ally limited to very large Government contractorswhere the Government either does not havereadily available alternative sources or cannotquickly change suppliers.125
Where the Government inadvertently entersinto a contract with an excluded contractor,the contract is voidable at the option of theGovernment, and the contractor will not be per-mitted to recover for any expenses incurred inpartially performing the contract.126 Moreover,as will be explained below, the FAR imposes acertification requirement for most contracts,127
and a false certification could subject an entityto criminal and civil false claims liability.
■■■■■ Subcontracts
The FAR restricts Government contractors fromentering into any subcontract in excess of $25,000
with an entity that has been excluded, unlessthere is a compelling reason to do so.128 A con-tractor that intends to subcontract with an ex-cluded party must notify the CO, in writing,before entering into the subcontract. The no-tice must provide (1) the name of the pro-posed subcontractor, (2) acknowledgement thatthe subcontractor is listed on the EPLS, (3) thecompelling reasons for subcontracting with thelisted entity, and (4) how the contractor in-tends to protect the Government’s interests.129
Whereas the FAR only restricts subcontractingwith excluded parties at the first tier, theNCR contains a pass-down provision that re-stricts transactions with excluded parties atall tiers of a covered transaction.130 Thus, aprogram participant may not use the servicesof an excluded entity or person, no matterhow many tiers removed, except where thefederal agency explicitly grants an exceptionof the same type that would be required forthe agency to transact directly with an ex-cluded entity.131 If a participant knowinglydoes business with an excluded entity, theagency may disallow costs, annul or termi-nate the transaction, issue a stop work or-der, debar or suspend the participant, or takeother appropriate remedies.132
■■■■■ Certification
To ensure that the Government does notcontract or subcontract with excluded enti-ties, the FAR requires that the contractor mustprovide a certification for all contracts at orabove the simplified acquisition threshold (cur-rently at $100,000).133 In the certification, thecontractor states whether (a) it is currentlydebarred, suspended, proposed for debarment,or otherwise ineligible for federal contracts,(b) it has received a criminal conviction orcivil judgment for fraud or a similar offensein connection with a public contract or sub-contract or for a violation of federal or stateantitrust statutes relating to offers, (c) it iscurrently criminally indicted or civilly chargedfor any of the above offenses, or (d) it hashad any Government contracts terminated fordefault in the past three years.134 The certifi-cation applies not only to the contractor, but
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also to any “principals” of the contractor.135
The FAR also requires that for any first-tiersubcontract over $25,000, the contractor mustrequire a similar certification.136
The NCR similarly imposes an affirmative dutyon a direct program participant to notify theagency if it or its principals (1) are presentlyexcluded or disqualified, (2) have in the pastthree years been convicted or had a civil judg-ment rendered against them of the type thatcould form the basis for suspension or debar-ment, (3) are presently indicted or civilly chargedwith such an offense, or (4) have had anyGovernment (federal, state, or local) transac-tions terminated for default within the pastthree years.137 And while the NCR does notrequire a certification from the direct par-ticipant regarding lower-tier transactions, itdoes place an affirmative duty on the partici-pant to verify that a lower-tier entity is notexcluded.138
■■■■■ Imputed Liability & Related Entities
The scope of suspension and debarment isextended considerably by the fact that boththe FAR and NCR allow for vertical and hori-zontal imputation. The FAR and NCR per-mit fraudulent, criminal, or other improperconduct of any officer, director, shareholder,partner, employee, or any other individualassociated with an organization to be imputedto the organization where (a) the conductoccurred in connection with work for theorganization, (b) the organization acquiescedin or knew or approved of the conduct, or(c) the organization accepted benefits fromthe conduct.139 It is important to note thatthe regulations essentially impose strict liabilitywhere conduct occurs “in connection withthe individual’s performance of duties foror on behalf of” the organization, and agen-cies are generally not receptive to argumentsthat an individual’s willful misconduct shouldnot be imputed to the organization becauseit was not authorized.140
Fraudulent, criminal, or other improper con-duct can also be imputed in the other direc-tion—from an organization to an individual—
if the individual either participated in, hadknowledge of, or had reason to know of theorganization’s conduct.141 Finally, fraudulent,criminal, or other improper conduct can alsobe imputed horizontally from one organiza-tion to another where (1) the conduct oc-curs in connection with a partnership, jointventure, joint application, association, or othersimilar arrangement, (2) where an organiza-tion directs, manages, controls, or influencesthe offending organization, or (3) where anorganization accepts benefits derived from theother organization’s impermissible conduct.142
When an organization is suspended or de-barred, the exclusion by default includes alldivisions or other organizational elements un-less the debarring official expressly limits theexclusion to specific divisions of the organiza-tion.143 Courts and agencies have on some oc-casions, however, been willing to recognizethat, for larger companies, company-wide ex-clusion may not be appropriate when the mis-conduct was limited to one or a few divisions.144
Suspension or debarment may also be extendedto “affiliates” of an organization at the discre-tion of the debarring official, but only if af-filiates are specifically named and given anopportunity to contest the action.145 Organi-zations are affiliated if (a) one controls or hasthe power to control the other, or (b) a thirdparty controls or has the power to control bothorganizations.146 The power to exclude affili-ates enables agencies to stop excluded orga-nizations from circumventing suspension ordebarment by simply changing names or re-incorporating without any change in effectivecontrol.147
Organizations must also be very careful whenconsidering hiring individuals who have beensuspended or debarred. The NCR expresslyprohibits an excluded individual from actingas a “principal” of an organization participat-ing in a covered program.148 Moreover, the NCRdefines “principal” broadly, as (1) any person“with management or supervisory responsibili-ties,” (2) any person who handles or is other-wise in a position to influence the use of fed-eral funds, or (3) any person in a technical orprofessional position “capable of substantially
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influencing” the organization’s participation ina covered program.149 And while the FAR doesnot contain a similarly harsh provision, if thepotential employee would be considered a “prin-cipal” within the meaning of the FAR certifi-cation provision discussed above, the hiring com-pany would be required to make an affirma-tive certification of the suspension or debar-ment for every prospective Government con-tract above the simplified acquisition thresh-old.150 This, in turn, could influence a CO’sdetermination regarding the present respon-sibility of the company.151 Therefore, organiza-tions are well advised to carefully consider therisks when hiring debarred or suspended indi-viduals.
Judicial Review
An agency suspension or debarment deci-sion is reviewable in federal district court un-der the Administrative Procedure Act.152 Thescope of review, however, is deferential to theagency;153 a court will not set aside an agencydecision unless it finds that decision “arbitrary,capricious, an abuse of discretion, or other-wise not in accordance with law.”154 In reviewingagency action under the APA, a court willinquire whether the agency “examine[d] therelevant data and articulate[d] a satisfactoryexplanation for the action including a ratio-nal connection between the facts found andthe choice made.”155 Moreover, because of sov-ereign immunity, the only remedy availableto an excluded entity is an injunction againstthe suspension or debarment.156
Before judicial review is available, an ex-cluded entity must have exhausted all avail-able administrative remedies.157 Thus, for ex-ample, an organization that fails to submit anopposition to a suspension within 30 days ofreceiving notice would fail to exhaust its ad-ministrative remedies under the NCR.158 Theexhaustion requirement may be waived in “onlythe most exceptional circumstances.”159 Gen-erally only where the claimant can demon-strate that further agency process would clearlybe futile—for example, prolonged agency in-action—will the claimant be permitted to by-
pass the exhaustion requirement.160 A claim-ant is not, however, required to exhaust anagency appeal process unless the governing stat-ute or regulations explicitly requires such ex-haustion.161
A claimant usually desires to have the ex-clusion lifted pending resolution of the suit.To obtain such preliminary injunctive relief,a claimant will be required to meet a fairlystringent test, which varies slightly depend-ing on the circuit in which the suit is brought.Generally, however, four factors will be con-sidered by the court: (1) whether the claim-ant has a substantial likelihood of success onthe merits, (2) whether the claimant wouldsuffer irreparable harm without the injunc-tion, (3) whether the claimant’s need for aninjunction outweighs any harm that would re-sult, and (4) whether the preliminary reliefwould serve the public interest.162
To the extent that an agency follows theprocedural requirements of the FAR or NCRin making a suspension or debarment deci-sion, it is unlikely that an excluded entity canmake out a claim for violation of constitutionaldue process. The procedures required by theFAR and NCR were developed in response toearly court decisions finding deprivations ofdue process relating to suspension and de-barment.163 The law is fairly settled, there-fore, that these procedures adequately rep-resent the process that is due under the Con-stitution.
State Considerations
■■■■■ General
The suspension or debarment of a contrac-tor by a state agency or authority is regulatedby state specific statutes and agency regula-tions. As a result, the effect of a federal sus-pension or debarment on a contractor’s abil-ity to conduct state public work or the stateconsequences of an admission by a contractorof a federal violation may have different out-comes as determined by each relevant state.Notwithstanding, there are a number of statesthat include similar bases in their statutes for
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imposing suspension or debarment on a con-tractor, as well as provide for some due pro-cess rights in such debarment determinations.In addition, while states have recognized thatthe determination of affiliation is a fact-intensive inquiry, many states analyze similarindicia for making a determination of affilia-tion or imputation of liability from a debarredemployee to its company.
■■■■■ Reciprocal Suspension Or Debarment
(1) Federal Suspension or Debarment—Certainstates, including Massachusetts, Maryland, NewJersey, and Pennsylvania, may debar a con-tractor simply because the contractor was de-barred by the Federal Government pursuantto Subpart 9.4 of the FAR as discussed above.164
Some state statutes are permissive when pro-viding for a state debarment of a federallydebarred contractor,165 while other states man-date a simultaneous debarment.166 Massachu-setts, for example, requires that a contractorbe simultaneously debarred or suspended bythe state if the contractor has been debarredor suspended by the Federal Government, un-less “special circumstances exist.”167
Other states will not automatically debar acontractor that is federally debarred but willconsider such federal debarment in determiningthe contractor’s responsibility when awardinga state contract.168 New York, for example, inits vendor responsibility determinations for stateprocurements, considers whether the vendor,any principal, owner, officer, major stockholder,affiliate, or any person involved the bidding,contracting, or leasing process has been thesubject of a federal, state, or local govern-ment suspension or debarment.169
(2) State Suspension or Debarment—States maydebar a contractor if it was debarred by an-other state.170 Most states provide that the statemay debar a contractor if it has been debarredby another state for any reason.171 Indeed, statesgive themselves broad authority to debar a con-tractor based on a variety of causes. There-fore, if a state does not expressly provide forthe debarment of a contractor if it has beendebarred by another state, it may allow forsuch a debarment where the contractor has
been debarred in another state based on ageneral cause of “unsatisfactory performance.”Some states may also include a “catch-all” causefor suspension or debarment in their statutes,such as Pennsylvania’s, which provides that acontractor may be debarred or suspended for“[a]ny other act or omission indicating a lackof skill, ability, capacity, quality control, busi-ness integrity or business honesty that seri-ously and directly affects the present respon-sibility of a person as determined by the pur-chasing agency.”172 States may use these broadcauses for debarment as a basis for debarringa contractor that has been debarred in an-other state.
(3) Suspension or Debarment for Violation ofFederal Law—Some states provide that suspensionor debarment may be imposed on a contrac-tor for violation of certain federal laws.173 Whilesuch violation of federal law may not lead to adebarment of the contractor by the FederalGovernment, a contractor should beware ofpotential debarment by states. Massachusetts,for example, may impose debarment for theviolation of federal antitrust laws, federal lawsregulating campaign contributions, federal lawsregulating hours of labor, prevailing wages,minimum wages, overtime pay, equal pay, childlabor, or worker’s compensation, federal lawsprohibiting discrimination in employment, fed-eral laws regulating labor relations or occupa-tional health or safety, or federal laws pro-tecting the environment.174 While most statesrequire that a violation of such federal lawresult in a conviction or final adjudication bya court or agency,175 some states, such as NewJersey and Pennsylvania, only require a viola-tion of certain federal laws with no require-ment of a final adjudication to debar an en-tity.176 Thus, if a state only requires violationof a federal law to impose debarment, acontractor’s admission of a violation of fed-eral law in a settlement agreement with theFederal Government that did not lead to afederal debarment may result in a state de-barment. Therefore, individuals and compa-nies should be advised that even though theymay not be debarred by the Federal Govern-ment, they may be debarred by a state if theyviolate a federal law.
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(4) Suspension or Debarment for Violation ofSpecific State Statutes or Requirements—Some stateshave “stand alone” statutes mandating that con-tractors will be subject to suspension or de-barment for violation of specific state statutes.Such “stand alone” statutes may be employedby states that do not have general suspensionand debarment statutes, or they may simplybe another statute that a state may use to de-bar a contractor. For example, “drug-free work-place” statutes177 and state “Buy American Act”requirements178 provide for debarment if anentity violates these statutes. Some states de-bar contractors for violating prevailing wagelaws,179 violating state bid-rigging laws,180 ordiscriminating in the “solicitation, selection,hiring, or commercial treatment of vendors,suppliers, subcontractors, or commercial cus-tomers.”181 Other states provide for debarmentwhere a contractor has been classified as asmall, minority, or woman-owned business basedon false information.182 A review of state stat-utes to determine the bases for a suspensionor debarment should not be limited to a gen-eral debarment statute. Many states have spe-cific statutes such as those discussed above thatprovide a basis for debarment if the entityviolates those statutes.
(5) Suspension or Debarment for Violation of StatePublic Contract Provisions—Some states may im-pose debarment where the contractor fails toperform or unsatisfactorily performs under statecontracts over a number of years.183 Other statesmay also impose suspension or debarment wherethe contractor simply fails to timely performits work under one state contract.184 In addi-tion, some states may provide for suspensionor debarment of a contractor where the con-tractor has been declared in default, fails tocomply with contract specifications or deliveryterms, or fails to submit documents requiredby a contract.185 A company should considersuch state statutes when it is performing a statecontract and recognize the risk of debarmentif it does not satisfactorily perform or is de-faulted. The risk of losing future state workon the basis of a state debarment may warranta company investing the time and money toaffirmatively prevent and cure any unsatisfac-tory performance or defaults.
(6) Suspension or Debarment for Negligent Vio-lation of a Statute—Although most states re-quire that a violation of a statute be inten-tional for a contractor to be debarred,186 atleast one state has determined that the negli-gent violation of a statute is sufficient to war-rant debarment of a contractor. The SupremeCourt of Connecticut determined that a vio-lation was not required to be intentional orwillful to place the contractor on the debar-ment list. Instead, the court held that a neg-ligent violation was sufficient.187 The relevantdebarment statute stated that companies wouldbe placed on the debarment list if “found tohave disregarded their obligations under saidsection.”188 The court analyzed the term “dis-regard” and determined that it included neg-ligent conduct.189 Although the plaintiff ar-gued that if the court “conditioned[ed] de-barment on conduct that is neither intentionalor willful, [it] would leave employers open tothe drastic sanction of debarment for a mi-nor error of a few dollars,”190 the court heldthat “if the legislature had wished to condi-tion debarment on intentional or willful con-duct, then it could have said so.”191 Other statesmay follow this line of reasoning where theyhave a broad “catch-all” basis for suspensionor debarment as discussed above.
■■■■■ Affiliates & Imputed Liability
Similar to the relevant FAR provisions andfederal case law concerning affiliates and re-lated entities discussed above, states also willdebar a company where an affiliated entityhas been debarred or impute liability wherean individual has been debarred.
States recognize that a determination of af-filiation is a fact-intensive inquiry. As a Massa-chusetts statute states: “The decision to in-clude a known affiliate within the scope of asuspension or debarment shall be made on acase-by-case basis, after giving due regard toall relevant facts and circumstances.”192 Statesconsider certain indicia of control in deter-mining affiliation similar to the indicia listedin the FAR.193 For example, the District ofColumbia defines an affiliate as “any businessin which a suspended or debarred person is
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an officer or has a substantial financial inter-est (as defined by regulations), and any busi-ness that has a substantial direct or indirectownership interest (as defined by regulations)in the suspended or debarred business, or inwhich the suspended or debarred business hasa substantial direct or indirect ownership in-terest.”194 And a Chicago Public Schools policymanual on debarment lists the indicia of con-trol for determining an affiliate almost verba-tim to the federally recognized indicia, stat-ing that indicia of control include, but arenot limited to “interlocking management orownership, identity of interests among familymembers, shared facilities and equipment, com-mon use of employees or a business entityorganized or following the suspension, debar-ment, bankruptcy, dissolution, or reorganiza-tion of a person which has the same or simi-lar management, ownership or principal em-ployee as the debarred, excluded or volun-tarily excluded person.”195
New York also considers several indicia ofcontrol when determining affiliation. A NewYork court held that a contractor was a “sub-stantially owned-affiliated entity” where therewas a close familial relationship between theowners of the affiliated entity and the de-barred contractor, the companies were locatedin the same building, the companies sharedoffice equipment and a secretary, the affili-ated entity hired a former employee of thedebarred contractor, the companies were namedinsureds on insurance policies, and after thecontractor was debarred, insurance policiesformerly issued to the debarred contractor werereissued to the affiliated entity.196 Furthermore,the court held that it was significant that be-fore the contractor’s debarment, the affiliatedentity’s public contracts were limited to con-struction materials, but after the debarment,the affiliated entity began bidding for con-tracts related to the work of the debarredcontractor.197
States may also consider whether the affili-ated and debarred contractors have participatedin joint ventures, thus “creat[ing] the publicperception that the two firms are a single en-tity.”198 And Virginia has expressly stated that
a successor company “formed with the sameresources, owners or stockholders” as the de-barred contractor will also be debarred.199
Moreover, similar to federal debarment policy,states recognize that if an individual is de-barred, the company that employs the indi-vidual may also be debarred.200 Some statesrequire the debarred employee to be an of-ficer or in controlling capacity of the com-pany to which liability is imputed, while otherstates do not require the debarred individualto be a high-level employee. Virginia has rec-ognized that “[t]he illegal or improper con-duct of an individual may be fully imputed tothe firm with which they are, or were, em-ployed when the conduct in question oc-curred.”201 Maryland requires that a entity bedebarred where the state has debarred “anofficer, director, controlling shareholder, orpartner” or “an employee directly involved inthe process of obtaining contracts with publicbodies.”202 And New Jersey provides for im-putation of liability to a company where theconduct was “accomplished within the courseof the person’s official duty or was affectedby the person with the knowledge or approvalof the affiliate.”203
Likewise, states may impute the liability ofa debarred company to the individuals whocontrol the company. A Virginia policy manualstates that “the illegal or improper conductof a firm may be fully imputed to an indi-vidual or individuals having control over theaffairs of the firm.” 204 Therefore, whether thean individual’s debarment may impute liabil-ity to a company or a company’s debarmentmay be imputed to an individual will be de-termined by the individual’s role in the com-pany and the state’s regulations regarding suchimputation of liability.
■■■■■ Duration
States generally debar contractors from oneto five years205 and suspend contractors as longas ten years.206 However, a California courthas upheld the permanent debarment of acontractor where the court concluded thatthe contractor’s “corrupt practices involvedthe ‘administration’ of City contracts so as to
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warrant permanent debarment.” 207 While statesmay determine the duration of debarment ona case-by-case basis,208 most states require thatthe duration of suspension or debarment bedefinite.209
■■■■■ Parallel Proceedings
Individuals and corporations may be de-barred or suspended where they refuse towaive immunity or answer questions in paral-lel or previous proceedings. New York dis-qualifies contractors from submitting awardsor receiving bids from the state for five yearsif the contractor “refuses to sign a waiver ofimmunity against subsequent criminal pros-ecution or to answer any relevant question”concerning contracts or transactions with thestate of New York, when called to testify be-fore a grand jury or to testify in an investiga-tion.210 An almost identical New York statuteapplicable to municipal contracts, however,was held unconstitutional because it violatedthe Fifth Amendment to the U.S. Constitu-tion.211 It is yet to be determined whetherthe state statute will also be challenged asunconstitutional.
Maryland’s debarment statute also contem-plates that a contractor that testifies in a grandjury proceeding and admits to an act that con-stitutes “grounds for conviction or liability underany law or statute” set forth in the state de-barment statute may be debarred.212 There-fore, a contractor should carefully considerthe effect of its actions and statements in paralleland previous proceedings on its potential forsuspension or debarment by states.
■■■■■ Due Process
Similar to the clear federal recognition ofdue process for contractors in suspension ordebarment matters,213 state courts have alsoincreasingly held that a contractor has dueprocess rights to a hearing when the state seeksto debar that contractor.214 Some states haveprovided for such a hearing or at least con-templated a hearing in their suspension anddebarment statutes and procedures.215 For ex-ample, Pennsylvania’s debarment statute pro-vides that “[a]fter reasonable notice to the
person involved and reasonable opportunityfor that person to be heard, the head of apurchasing agency, after consultation with thehead of the using agency, shall have authorityto debar a person from consideration for theaward of contracts.”216 And Georgia proceduresfor suspension and debarment state that“[p]reliminary hearings shall be as informalas may be reasonable and appropriate underthe circumstances and in accordance with ap-plicable due process requirements.”217
Such due process rights, however, do notnecessarily include a constitutional right to a“full panoply of judicial trial procedures.”218
A California court has held that a contractorwas provided due process in a debarment pro-ceeding where the contractor had an “effec-tive opportunity to defend, including the abilityto conduct discovery, present unlimited docu-mentary evidence, cross-examine adverse wit-nesses at their depositions, present witness state-ments and testimony, submit written argumentand make an oral presentation before the de-cision-maker.”219 However, cross-examinationof witnesses during a debarment hearing isnot necessarily required for a contractor toreceive due process.220 Moreover, where onestate agency debars a contractor, another stateagency may also impose a similar debarmentwithout providing the contractor an opportu-nity for a hearing.221 New Jersey provides that“where another Department or agency hasimposed debarment upon a party, the Depart-ment may also impose a similar debarmentwithout affording an opportunity for a hear-ing, provided that the Department furnishesnotice of the proposed similar debarment tothat party, and affords that party an opportu-nity to present information to explain why theproposed similar debarment should not beimposed in whole or in part.”222 Other statesprovide that hearing should be held, but itmay be held after debarment is imposed.223
■■■■■ Certifications
In addition to reviewing the federal ExcludedParties List,224 states may determine whethera contractor has been debarred or suspendedby a federal or state entity or been convicted
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of or violated a federal or state law by requir-ing a certification similar to the certificationrequired by the FAR (discussed above).225 Cali-fornia, for example, provides that a “state agencymay determine the eligibility of any person toenter into a contract…by requiring the per-son to submit a statement under penalty ofperjury declaring that neither the person norany subcontractor to be engaged by the per-son has been convicted of [“fraud, bribery,collusion, conspiracy, or any other act in vio-lation of any state or federal antitrust law inconnection with the bidding upon, award of,or performance of, any public works contract”]within the preceding three years.”226 New Yorkrequires a certification by the contractor thatits bid submitted to the state has been “ar-rived at independently without collusion, con-sultation, communication, or agreement, for
the purpose of restricting competition, as toany matter relating to such prices with anyother bidder or with any competitor.227 There-fore, before being awarded a state contract,contractors may be required to certify thatthey have not been federally debarred or sus-pended, as well as that they have not beenconvicted of or violated federal laws.
■■■■■ State Debarred & Suspended Lists
Most states maintain a list of debarred andsuspended companies similar to the federalExcluded Parties List.228 Such lists are publishedon state government websites, in state procure-ment bulletins, and in state central registersand may include information such as the basisfor suspension or debarment, the extent ofthe restrictions imposed on the contractor, andthe termination and/or hearing date.229
These Guidelines are designed to assist you inavoiding suspension and debarment. They arenot, however, a substitute for professionalrepresentation in any specific situation.
1. Make certain that you understand thedifferences between the FAR and the NCR,especially if you are a Government contractorinvolved in “nonprocurement” spending suchas grants, loans, and other forms of Governmentassistance. Note that the NCR provides fouradditional grounds for debarment: (1) for“knowingly doing business with an ineligibleperson,” (2) for failing to pay debts to “anyFederal agency or instrumentality” (except fordebts arising under the Internal Revenue Code),(3) for “willful violation of a statutory or regulatoryprovision…applicable to a public agreement,”and (4) upon violation of a material provisionof a voluntary exclusion agreement or anysuspension or debarment settlement agreement.
2. When entering into a joint venture orother affiliated relationship, be cautious ofjoint venture partners or affiliates that havebeen debarred or suspended at the federal orstate level. Such suspension or debarment maybe imputed to the Government contractor.
GUIDELINES
3. Carefully consider the risks when hiringdebarred or suspended individuals. A Govern-ment contractor may be required to make anaffirmative certification as to the suspension ordebarment of such individual when seekingGovernment contract awards.
4. Before entering into a subcontract, confirmthat the subcontractor is not currently debarredor suspended. The FAR restricts a Governmentcontractor from entering into a first-tiersubcontract in excess of $25,000 with an entitythat has been excluded, unless there is acompelling reason to do so. The NCR restrictssubcontracting with an excluded entity at anytier.
5. Before settling an alleged violation ofany federal law with the Government, be waryof settlement language that causes you to expresslyadmit to the violation. In addition to causingproblems at the federal level, such an admissionalone may be cause for suspension or debarmentat the state level. Remember that settlement ofa criminal or civil proceeding is no guaranteeagainst suspension or debarment, particularlywhen the settlement is made with the Departmentof Justice and not the contracting agency.
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6. Be aware that a Government contractor’stestimony in a grand jury or other investigationmay be used as a basis for its suspension ordebarment.
7. Give serious consideration to potentialsuspension and debarment implications of anyadverse conduct of your officers or employees,whether such conduct is related to an ongoingGovernment contract you are performing ornot. Such adverse conduct may be a basis forsuspension or debarment of a Governmentcontractor under the “catch-all” provisions ofdebarment and suspension regulations at boththe federal and state levels.
8. If you have reason to believe that youmight be considered for suspension or debarment(e.g., as a result of settling an alleged violationof the antitrust laws), you should “get out infront” of the problem and approach theappropriate debarring official to open a dialoguewith that official.
9. Recognize that state suspension anddebarment laws, regulations, and processes canbe more severe than their federal counterparts.If you are a Government contractor with a
substantial state business base, you need to payclose attention to these state procedures.
10. If you are unable to convince the debarringofficial that you unequivocally satisfy the “presentlyresponsible” standard, you should seek to enterinto an administrative agreement that wouldallow you to continue acquiring new work,albeit with significant risks if you fail to adhereto the terms of the agreement.
11. Although the same rules (whether theFAR or the NCR) apply to all agencies alike,bear in mind that the debarring official ineach agency has significant discretion as tohow the rules are applied and whether anyparticular action or inaction constitutes sufficientgrounds to make a determination of presentresponsibility. There is no scorecard thatobjectively rates an entity’s performance; rather,the decision to suspend or debar is highlysubjective. Some officials have been known touse that subjectivity to essentially imposepunishment, while others have maintainedthe focus on present responsibility. It isimportant to know the track record of anagency’s debarring official before initiatingcontact with that official.
★★★★★ REFERENCES ★★★★★
1/ Toomey, Fisher & Shapiro, “Debarment& Suspension/Edition III,” Briefing PapersNo. 89-4 (Mar. 1989). In part becauseof the long period since the previousBriefing Paper, this Paper is written asa stand-alone resource, not as asubsequent edition. This Paper has,however, generally retained theorganizational structure of Edition III.Accordingly, it contains material that ofnecessity overlaps with that edition,the authors of which are gratefullyacknowledged. See also Johnson &DeVecchio, “Debarment & Suspension/Edition II,” Briefing Papers No. 83-9(Sept. 1983); Dembling, “Debarment &Suspension,” Briefing Papers No. 78-6(Dec. 1978). See generally McCullough& Pafford, “Feature Comment: GovernmentContract Suspension and Debarment—What Every Contractor Needs To Know,”45 GC ¶ 465 (Nov. 19, 2003).
2/ Act of July 5, 1884, ch. 217, 23 Stat.107, 109 (emphasis added).
8/ See 24 Fed. Reg. 1933 (Mar. 17, 1959)(codified at 41 C.F.R. pt. 1-1 et seq.).
9/ See, e.g., Senate Subcomm. on Admin.Practice and Procedure, Selected Reportsof the Administrative Conference of theUnited States, S. Doc. No. 24, at 265(1st Sess. 1963) (relating problems withthe suspension and debarment process).
10/ See Gonzalez v. Freeman, 334 F.2d570 (D.C. Cir. 1964) (holding thatdebarment must, at a minimum, bepreceded by notice of the grounds fordebarment, an opportunity to rebut thosegrounds, and an administrative recordconsisting of the agency’s findings andconclusions); Horne Bros., Inc. v. Laird,463 F.2d 1268 (D.C. Cir. 1972) (holding
that a suspension should not “exceedone month” without providing thesuspended party an opportunity to rebutthe basis for the suspension); OldDominion Dairy Prods., Inc. v. Secretaryof Def., 631 F.2d 953, 955–56 (D.C.Cir. 1980) (holding that, if the Governmenthas not gone through the proceduresnecessary to overtly debar or suspenda contractor, but nonetheless “effectivelybars a contractor from virtually allGovernment work due to charges thatthe contractor lacks honesty or integrity,”then “due process requires that thecontractor be given notice of thosecharges as soon as possible and someopportunity to respond to the chargesbefore adverse action is taken”).
15/ For a list of adopting agencies, seehttp://www.epa.gov/isdc/reg.htm.
16/ See 2 C.F.R. §§ 180.210, 180.970. Directforeign aid, personal entitlements suchas Social Security benefits, federalemployment, disaster-related transactions,permits, licenses, or certificates issuedto regulate health, safety, or theenvironment, and incidental benefitsresulting from ordinary governmentaloperations are exempted from coverageby the NCR. 2 C.F.R. § 180.215.
17/ For a list of various statutes expresslyproviding for debarment and suspension,see GAO, Federal Procurement: AdditionalData Reporting Could Improve theSuspension and Debarment Process 23tbl.4 (GAO-05-479, July 29, 2005).
18/ See Toomey, supra note 1, at 2.
19/ Compare id. with GAO, supra note 17,at 12 tbl.2.
20/ President’s Council on Integrity andEfficiency, Executive Council on Integrityand Efficiency, A Progress Report tothe President Fiscal Year 2005, at 12(2006).
25/ 40 U.S.C.A. § 3144; 41 U.S.C.A. § 37.See generally Greenberg, Abrahams &Katz, “Complying With the Davis-BaconAct,” Briefing Papers No. 03-11 (Oct.2003).
26/ 41 U.S.C.A. § 701; 21 U.S.C.A. § 862.
27/ 42 U.S.C.A. § 7606; 33 U.S.C.A. § 1368.
28/ 42 U.S.C.A. § 1320a-7.
29/ 21 U.S.C.A. § 335a.
30/ 2 C.F.R. § 180.125; FAR 9.406-1(a),9.407-1(b).
31/ FAR 9.406-1(a), 9.407-1(b).
32/ FAR 2.101, 9.406-4; 2 C.F.R. §§ 180.865,180.925.
33/ See, e.g., Generic Drug EnforcementAct, 21 U.S.C.A. § 335a.
34/ See, e.g., Janik Paving & Constr., Inc.v. Brock, 828 F.2d 84 (2d Cir. 1987)(permitting debarment for failure to complywith the overtime requirements of theContract Work Hours and SafetyStandards Act, even in the absence ofan express debarment provision in theAct); Copper Plumbing & Heating Co. v.Campbell, 290 F.2d 368 (D.C. Cir. 1961)(noting that the “power to enter intocontracts” includes the authority to debar).
35/ See, e.g., First Ala. Bank of Montgomeryv. Donovan, 692 F.2d 714 (11th Cir.1982) (permitting debarment for refusalto cooperate with compliance reviewassociated with an Executive Orderprohibiting discrimination by Governmentcontractors).
36/ FAR 9.406-2; see 2 C.F.R. § 180.800.
37/ FAR 9.406-2(a).
38/ FAR 9.406-2(b)(1)(i).
39/ FAR 9.406-2(b), (c).
40/ See 2 C.F.R. § 180.800.
41/ 2 C.F.R. § 180.800(c)(2).
42/ 2 C.F.R. § 180.800(c)(3).
43/ 2 C.F.R. § 180.800(b)(3).
44/ 2 C.F.R. § 180.800(c)(4).
45/ FAR 9.406-1(a); cf. 2 C.F.R. 180.845.
46/ American Floor Consultants &Installations, Inc. v. United States, 70Fed. Cl. 235 (2006) (permitting debarmentnotwithstanding an agreement immunizingthe contractor from criminal prosecution).
47/ FAR 2.101; 2 C.F.R. § 180.1015.
48/ FAR 9.407-1(b)(1), 9.407-4(a); 2 C.F.R.§§ 180.700, 180.760.
49/ See, e.g., Frequency Elecs., Inc. v.U.S. Dep’t of the Air Force, 151 F.3d1029 (4th Cir. 1998) (upholding a“temporary” suspension of almost fiveyears).
50/ FAR 9.407-1(b)(1); 2 C.F.R. § 180.700.
51/ 2 C.F.R. § 180.900; FAR 2.101. Boththe FAR and the NCR state that anindictment constitutes adequate evidencefor suspension actions. FAR 9.407-2(b);2 C.F.R. § 180.705(b).
52/ FAR 9.407-1(b)(1).
53/ FAR 9.407-1(b)(2).
54/ 2 C.F.R. § 180.705.
55/ Compare FAR 9.406-2(b)(1) with FAR9.407-2.
56/ 2 C.F.R. § 180.700(b).
57/ FAR 9.406-2(c).
58/ Letter from Joseph A. Neurauter,Suspension and Debarment Official, GSA,to Michael D. Capellas, Chairman andCEO, WorldCom, Inc. (July 31, 2003).
59/ See News Release, GSA, GSA SuspendsEnron and Arthur Andersen and FormerOfficials (Mar. 15, 2002) (GSA # 9930).
60/ See Gonzalez v. Freeman, 334 F.2d570 (D.C. Cir. 1964) (holding thatdebarment must, at a minimum, bepreceded by notice of the grounds fordebarment, an opportunity to rebut thosegrounds, and an administrative recordconsisting of the agency’s findings andconclusions); Horne Bros., Inc. v. Laird,463 F.2d 1268 (D.C. Cir. 1972) (holdingthat a suspension should not “exceedone month” without providing thesuspended party an opportunity to rebutthe basis for the suspension); OldDominion Dairy Prods., Inc. v. Secretaryof Def., 631 F.2d 953, 955–56 (D.C.Cir. 1980) (holding that, if the Governmenthas not gone through the proceduresnecessary to overtly debar or suspenda contractor, but nonetheless “effectivelybars a contractor from virtually allGovernment work due to charges thatthe contractor lacks honesty or integrity,”then “due process requires that thecontractor be given notice of thosecharges as soon as possible and someopportunity to respond to the chargesbefore adverse action is taken”).
61/ FAR 9.406-3(a); see also FAR 9.407-3(a); 2 C.F.R. § 180.600. A list of federalagency suspension/debarment contactsis available in American Bar Ass’n, ThePractitioner’s Guide to Suspension andDebarment app. A (3d ed. 2002).
62/ See, e.g., Electro-Methods, Inc. v. UnitedStates, 728 F.2d 1471 (Fed. Cir. 1984)(upholding a suspension based on theAir Force’s independent finding of“adequate evidence” of wrongdoing afterthe issuance of search warrants butbefore indictment).
63/ FAR 9.407-3(c); 2 C.F.R. § 180.715.
64/ FAR 9.406-3(c); 2 C.F.R. § 180.805.
65/ FAR 9.406-3(c)(1); 2 C.F.R. § 180.805(a).
66/ FAR 9.407-3(c)(1); 2 C.F.R. § 180.715(a).
67/ FAR 9.406-3(c), 9.407-3(c); 2 C.F.R.§§ 180.715, 180.805.
68/ FAR 9.407-3(c)(2); 2 C.F.R. § 180.715(e).
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69/ 2 C.F.R. § 180.805(b); 2 C.F.R.§ 180.715(c); FAR 9.406-3(c)(2), 9.407-3(c)(1)(ii); see also Electro-Methods,Inc. v. United States, 728 F.2d 1471(Fed. Cir. 1984).
70/ Compare FAR 9.405(a) with 2 C.F.R.§ 180.810.
71/ 2 C.F.R. § 180.940(a).
72/ See 2 C.F.R. § 180.715(a) (emphasisadded); FAR 9.407-3(c)(1).
73/ 69 Fed. Reg. 34,248 (June 18, 2004);see 46 GC ¶ 252(n); see also FDIC v.Mallen, 486 U.S. 230 (1988) (finding nodue process violation for suspensionwithout a hearing).
74/ FAR 9.407-3(c)(5); 2 C.F.R. §§ 180.725,180.730.
75/ FAR 9.406-3(c)(4); 2 C.F.R. §§ 180.820,180.825.
76/ 2 C.F.R. §§ 180.825, 180.730.
77/ FAR 9.407-3(b)(2), 9.406-3(b)(2); 2 C.F.R.§§ 180.735, 180.830.
78/ FAR 9.407-3(d)(2)(ii), 9.406-3(d)(2)(ii);2 C.F.R. §§ 180.750, 180.845.
79/ FAR 9.407-3(d)(2)(ii), 9.406-3(d)(2)(ii);2 C.F.R. §§ 180.750, 180.845.
80/ FAR 9.406-3(d); 2 C.F.R. § 180.870(a).
81/ FAR 9.406-3(e); 2 C.F.R. § 180.870(b).
82/ FAR 9.402; 2 C.F.R. § 180.125. For amore detailed discussion of contractorresponsibility, see generally Bodenheimer,“Responsibility of Prospective Contractors,”Briefing Papers No. 97-9 (Aug. 1997).
83/ See Old Dominion Dairy v. Secretary ofDef., 631 F.2d 953 (D.C. Cir. 1980)(finding that a contractor has a dueprocess right to notice of the chargesof a lack of integrity and of at least aminimal opportunity to respond to thosecharges before being denied Governmentcontracts); Leslie & Elliott Co. v. Garrett,732 F. Supp. 191 (D.D.C. 1990) (findingde facto debarment where therepresentatives of the Navy found alow bidder nonresponsible on two contractsand made statements evidencing thatthe Navy did not want to do businesswith the contractor); Shermco Indus.,Inc. v. Secretary of the Air Force, 584F. Supp. 76 (N.D. Tex. 1984) (findingde facto suspension where the agencymade repeated determinations ofnonresponsibility on the same basis).See generally Everhart, “‘Graylisting’of Federal Contractors: Transco Security,Inc. of Ohio v. Freeman and ProceduralDue Process Under SuspensionProcedures,” 31 Cath. Univ. L. Rev.731 (1982).
84/ See, e.g., Geo-Con, Inc. v. United States,783 F. Supp. 1 (D.D.C. 1992) (notingthat “in contrast to de facto debarmentcases in which contractors have lostseveral government contracts, thedisqualification in this case is limited toone award”).
85/ See 65 Fed. Reg. 80,256 (Dec. 20,2000); see 42 GC ¶ 505.
86/ See 66 Fed. Reg. 66,983 (Dec. 27,2001); see 44 GC ¶ 5.
87/ FAR 15.304(c)(3), 15.305(a)(2).
88/ For additional information on pastperformance issues, see generally West& Wagman, “Past PerformanceInformation,” Briefing Papers No. 99-10(Sept. 1999).
89/ FAR 9.406-1(a), 9.407-1(b)(2); 2 C.F.R.§ 180.845(a).
90/ FAR 9.406-1(a).
91/ 2 C.F.R. § 180.860.
92/ FAR 9.406-1(a); 2 C.F.R. § 180.855.For a more extensive discussion of therole of remedial measures and mitigatingfactors in avoiding suspension anddebarment, see American Bar Ass’n,supra note 61, ch. IV.
93/ Compare Silverman v. U.S. Dep’t ofDef., 817 F. Supp. 846, 849–50 (S.D.Cal. 1993), 35 GC ¶ 385 (finding anagency debarment decision arbitrary,capricious, and an abuse of discretionbecause it did not focus on mitigatingfactors surrounding the plaintiff’s guiltyplea) with Kirkpatrick v. White, 351 F.Supp. 2d 1261, 1285 (N.D. Ala. 2004)(noting that a key factor in the Silvermandecision was the six-year period betweenthe misconduct and debarment).
94/ See DOD, The Department of DefenseVoluntary Disclosure Program—ADescription of the Process (May 24,2000). In 1986—the same year that theDOD’s voluntary disclosure programbegan—24 defense contractors joinedtogether to establish the Defense IndustryInitiative (DII), an organization dedicatedto ethics-based corporate self-governanceand voluntary disclosure of violationsof federal procurement laws. There arenow almost 70 DII signatories. SeeDefense Industry Initiative on BusinessEthics and Conduct, 2005 Annual Reportto the Public (Feb. 22, 2006) [hereinafter2005 DII Report].
95/ See 65 Fed. Reg. 19,618 (Apr. 11,2000).
96/ See 2005 DII Report, supra note 94, at45.
97/ 2 C.F.R. §§ 180.635, 180.640.
98/ 2 C.F.R. § 180.640.
99/ See, e.g., American Floor Consultants& Installations, Inc. v. United States,70 Fed. Cl. 235 (2006) (dismissing acontractor’s challenge to a debarmentwhere the contractor had entered into ano-prosecution agreement).
100/ See, e.g., United States v. Kordel, 397U.S. 1, 11 (1970) (“It would stultifyenforcement of federal law to require agovernmental agency…invariably tochoose either to forgo recommendationof a criminal prosecution once it seekscivil relief, or to defer civil proceedingspending the ultimate outcome of a criminaltrial.”); Securities & Exch. Comm’n v.Dresser Indus., Inc., 628 F.2d 1368,1374 (D.C. Cir. 1980) (“The civil andregulatory laws of the United Statesfrequently overlap with the criminal laws,creating the possibility of parallel civiland criminal proceedings, eithersuccessive or simultaneous. In theabsence of substantial prejudice to therights of the parties involved, suchparallel proceedings are unobjectionableunder our jurisprudence.”); Arthurs v.Stern, 560 F.2d 477 (1st Cir. 1977)(refusing to stay civil proceedings untilthe termination of concurrent criminalproceedings).
101/ FAR 9.405(a); 2 C.F.R. §§ 180.710,180.810.
102/ 2 C.F.R. §§ 180.140, 180.145.
103/ FAR 9.405(a); 2 C.F.R. § 180.940(a).
104/ 2 C.F.R. § 180.810.
105/ FAR 9.407-4(b); 2 C.F.R. § 180.760.
106/ FAR 9.407-4(a); 2 C.F.R. § 180.760.
107/ FAR 9.406-4(a); 2 C.F.R. § 180.865.
108/ FAR 9.406-1(c); 2 C.F.R. § 180.155.
109/ FAR 9.406-4(a)(2); 2 C.F.R. § 180.865(b).
110/ FAR 9.406-4(c); 2 C.F.R. §§ 180.875,180.880.
111/ FAR 9.406-4(c); 2 C.F.R. §§ 180.875,180.880.
112/ FAR 9.406-4(b); 2 C.F.R. § 180.885.
113/ FAR 9.406-4(b); 2 C.F.R. § 180.885.
114/ FAR 9.405-1; 2 C.F.R. § 180.415.
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115/ FAR 9.405-1(b); 2 C.F.R. § 180.415(b).
116/ FAR 9.405-1(a); 2 C.F.R. § 180.415(a).
117/ FAR 9.404; 2 C.F.R. § 180.155. Theweb-based EPLS is available at http://epls.gov.
118/ FAR 9.404(b); 2 C.F.R. §§ 180.515,180.520.
119/ 2 C.F.R. § 180.645(a).
120/ FAR 9.405(a).
121/ FAR 9.405(a).
122/ FAR 9.405(d).
123/ 2 C.F.R. §§ 180.400(a), 180.430(a).
124/ FAR 9.405(a); 2 C.F.R. § 180.135.
125/ See Kramer, “Awarding Contracts toSuspended and Debarred Firms: AreStricter Rules Necessary?,” 34 Pub.Cont. L.J. 539 (2005) (noting that Boeingand MCI WorldCom continued to receivesignificant Government business evenafter being excluded).
126/ See American Heritage Bancorp v. UnitedStates, 61 Fed. Cl. 376, 387 (2004)(collecting cases).
127/ See FAR 9.409(a); 41 U.S.C.A. § 403(11).
128/ FAR 9.405-2(b).
129/ FAR 9.405-2(b).
130/ 2 C.F.R. §§ 180.330, 180.355.
131/ 2 C.F.R. §§ 180.305, 180.135.
132/ 2 C.F.R. § 180.325.
133/ FAR 9.409(a); 41 U.S.C.A. § 403(11).
134/ FAR 52.209-5, para. (a)(1).
135/ See FAR 52.209-5, para. (a)(2) (defining“principals” as “officers; directors;owners; partners; and, persons havingprimary management or supervisoryresponsibilities within a business entity(e.g., general manager; plant manager;head of a subsidiary, division, or businesssegment, and similar positions)”).
136/ FAR 9.409(b), 52.209-6.
137/ 2 C.F.R. § 180.335.
138/ 2 C.F.R. § 180.300.
139/ FAR 9.406-5(a), 9.407-5; 2 C.F.R.§ 180.630(a).
143/ FAR 9.406-1(b), 9.407-1(c); 2 C.F.R.§ 180.625(a).
144/ See, e.g., Peter Kiewit Sons’ Co. v.U.S. Army Corps of Engineers, 534 F.Supp. 1139, 1148 (D.D.C. 1982), rev’don other grounds, 714 F.2d 163 (D.C.Cir. 1983) (noting that misconduct withina few divisions of the company did “notestablish that the entire Kiewitorganization, with its 11,000 employees,lack[ed] responsibility”); Dowling Groupv. Williams, No. 82-1775, slip op. at12–13 (D.D.C. Oct. 29, 1982)(distinguishing Peter Kiewit Son’s Co.on the basis that “[a]lthough Dowling isrelatively small, the Kiewit Co. is alarge corporation with over 11,000employees”); Press Release, U.S. AirForce, AF Announces Boeing InquiryResults (July 25, 2003) (noting that theAir Force suspended three of Boeing’sbusiness units for “serious violationsof federal law”).
145/ FAR 9.406-1(b), 9.407-1(c); 2 C.F.R.§ 180.625(b).
146/ FAR 9.403; 2 C.F.R. § 180.905.
147/ See, e.g., Herb Richards Constr. Co.,Comp. Gen. Dec. B-262177, 95-2 CPD¶ 231 (noting that “in the absence ofany evidence to the contrary, an agencymay reasonably assume that familymembers generally have an identity ofinterest”); Howema Bau-GmbH, Comp.Gen. Dec. B-245356 et al., 91-2 CPD¶ 214 (transferring ownership to asuspended individual’s three sons didnot prevent extension of the suspensionto the company as an affiliate).
148/ 2 C.F.R. §§ 180.130(b), 180.405.
149/ 2 C.F.R. § 180.995.
150/ See FAR 52.209-5.
151/ See Bodenheimer, supra note 82.
152/ 5 U.S.C.A. § 706.
153/ See, e.g., WEDJ/Three C’s, Inc. v.Department of Def., No. 4:CV-05-2427,2006 WL 2077021, *5 (M.D. Pa. July24, 2006), 48 GC ¶ 290 (noting that it“is not our role under the [APA]…to sitin the shoes of the [debarring official]and judge the facts differently”).
161/ Darby v. Cisneros, 509 U.S. 137 (1993),35 GC ¶ 426; Gleichman v. U.S. Dep’tof Agric., 896 F. Supp. 42, 44 (D. Me.1995).
162/ See, e.g., Washington Metro. Area TransitComm’n v. Holiday Tours, Inc., 559F.2d 841, 843 (D.C. Cir. 1977).
163/ See Gonzalez v. Freeman, 334 F.2d570 (D.C. Cir. 1964) (holding thatdebarment must, at a minimum, bepreceded by notice of the grounds fordebarment, an opportunity to rebut thosegrounds, and an administrative recordconsisting of the agency’s findings andconclusions); Horne Bros., Inc. v. Laird,463 F.2d 1268 (D.C. Cir. 1972) (holdingthat a suspension should not “exceedone month” without providing thesuspended party an opportunity to rebutthe basis for the suspension); OldDominion Dairy Prods., Inc. v. Secretaryof Def., 631 F.2d 953, 955–56 (D.C.Cir. 1980) (holding that, if the Governmenthas not gone through the proceduresnecessary to overtly debar or suspenda contractor, but nonetheless “effectivelybars a contractor from virtually allGovernment work due to charges thatthe contractor lacks honesty or integrity,”then “due process requires that thecontractor be given notice of thosecharges as soon as possible and someopportunity to respond to the chargesbefore adverse action is taken”). Seegenerally Everhart, supra note 83.
164/ Mass. Gen. Laws Ann. ch. 29, § 29F(c)(2)(“Notwithstanding any other provision ofthis section, any contractor debarred orsuspended by any agency of the UnitedStates shall by reason of such debarmentor suspension be simultaneously debarredor suspended under this section, withrespect to non-federally aided contracts;the secretary or the commissioner maydetermine in writing that specialcircumstances exist which justifycontracting with the affected contractor.”);Md. Code Ann., State Fin. & Proc. § 16-
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203(c) (“A person may be debarred fromentering into a contract with the State ifthe person, an officer, partner, controllingstockholder or principal of that person,or any other person substantially involvedin that person’s contracting activitieshas been debarred from federal contractsunder the Federal Acquisition Regulations,as provided in 48 C.F.R. Chapter 1.”);62 Pa. Cons. Stat. Ann. § 531(b)(9)(“Debarment by any agency or departmentof the Federal Government or by anyother state.”); N.J. Admin. Code § 17:19-3.1(a)(13) (“Debarment or disqualificationby any other agency of government”).
165/ Md. Code Ann., State Fin. & Proc. § 16-203.
166/ Mass. Gen. Laws Ann. ch. 29, § 29F(c)(2).
167/ Mass. Gen. Laws Ann. ch. 29, § 29F(c)(2).
168/ State of Maryland Bd. of Public WorksAdvisory, Suspension & Debarment (Aug.31, 2005 (“A bidder who appears on thefederal list is not automatically barredfrom State contracts but that federal(or other jurisdiction) debarment mustbe factored into the contractorresponsibility determination.”).
169/ New York State Procurement Bulletin,Best Practices Determining VendorResponsibility (Oct. 2005).
170/ Ohio Rev. Code Ann. § 153.02(A)(9)(“Been debarred from bidding on orparticipating in a contract with any stateor federal agency.”); Commonwealth ofVirginia Dep’t of Transp., Debarmentand/or Suspension Policy (1995)(“Debarment by some other state orfederal agency for any reason”).
171/ Ohio Rev. Code Ann. § 153.02(A)(9)(“Been debarred from bidding on orparticipating in a contract with any stateor federal agency.”); Commonwealth ofVirginia Dep’t of Transp., supra note170 (“Debarment by some other stateor federal agency for any reason”).
172/ 62 Pa. Cons. Stat. Ann. § 531(b)(12);see also N.J. Admin. Code § 17:19-3.1(a)(12).
173/ Mass. Gen. Laws Ann. ch. 29, § 29F(c)(1);62 Pa. Cons. Stat. Ann. § 531(b); N.J.Admin. Code § 17:19-3.1.
174/ Mass. Gen. Laws Ann. ch. 29, § 29F(c)(1).
175/ Mass. Gen. Laws Ann. ch. 29, § 29F(c)(1);Md. Code Ann., State Fin. & Proc. § 16-203.
177/ 30 Ill. Comp. Stat. Ann. 580/6; Ga.Code Ann. § 50-24-5; Cal. Gov’t Code§ 8356.
178/ N.J. Stat. Ann. § 52:33-4.
179/ Ohio Rev. Code Ann. § 4115.133; N.J.Stat. Ann. § 34:11-56.38.
180/ 62 Pa. Cons. Stat. Ann. § 4505.
181/ Md. Code Ann., State Fin. & Proc. § 19-101; Md. Code Ann., State Fin. & Proc.§ 16-203 (as approved May 2, 2006).
182/ N.J. Stat. Ann. § 52:32-30.
183/ Md. Code Ann., State Fin. & Proc. § 16-203(d)(3)(ii) (“A person may be debarredfrom entering into a contract with theState…for one of the following violationsof a contract provision if the Board believesit to be serious enough to justifydebarment…within the preceding 5 years,the failure to perform or of unsatisfactoryperformance in accordance with the termsof one or more contracts, unless thefailure to perform or unsatisfactoryperformance was caused by acts beyondthe control of the person”); 62 Pa. Cons.Stat. Ann. § 531(b)(11); State of Georgia,Dep’t of Admin. Servs., State PurchasingDiv., Georgia Vendor Manual § 7.21 (June2006); N.J. Admin. Code § 17:19-3.1.
184/ 62 Pa. Cons. State. Ann. § 531(b)(11)(iii);D.C. Code § 2-308.04(b)(4)(A) (“Willfulfailure without good cause to perform inaccordance with the specifications orwithin the time limit provided in thecontract”).
185/ 30 Ill. Comp. Stat. Ann. 500/50-65 (“Anycontractor may be suspended for violationof this Code or for failure to conform tospecifications or terms of delivery.”);Georgia Vendor Manual, supra note 183;N.J. Admin. Code § 17:19-3.1, 3.4; D.C.Code § 2-308.04(b)(4)(A); 62 Pa. Cons.Stat. Ann. § 531(b)(11).
186/ Duffy v. Department of Labor & Indus.,Prevailing Wage Div. 160 Pa. Commw.140, 634 A.2d 734, 737 (1993); 43 Pa.Stat. § 165-11(e) (“In the event thatthe secretary shall determine…that anyperson or firm has failed to pay theprevailing wages and that such failurewas intentional, he shall thereupon notifyall public bodies of the name or namesof such persons or firms and no contractshall be awarded to such persons orfirms or to any firm, corporation orpartnership in which such persons orfirms have an interest until three yearshave elapsed from the date of the noticeto the public bodies aforesaid.”).
187/ Electrical Contractors, Inc. v. Tianti,223 Conn. 573, 583, 613 A.2d 281, 286(1992).
192/ Mass. Gen. Laws Ann. ch. 29, § 29F(f);see also N.J. Admin. Code § 16:44-8.3(d) (“A debarment may include allknown affiliates of a person, providedthat each decision to include an affiliateis made on a case-by-case basis aftergiving due regard to all relevant factsand circumstances.”).
193/ Chicago Public Schools Policy Manual,Debarment Policy on Non-ResponsiblePersons in Procurement Transactions(Mar. 22, 2000); D.C. Code § 2-308.04(f);see FAR 9.403.
194/ D.C. Code § 2-308.04(f).
195/ Chicago Public Schools Policy Manual,supra note 193; see FAR 9.403.
196/ Bistrian Materials, Inc. v. Angello, 296A.D.2d 495, 747 N.Y.S.2d 97 (2d Dep’t2002).
197/ Id. at 497.
198/ Commonwealth of Virginia Dep’t ofTransp., supra note 170.
199/ Id.
200/ Md. Code Ann., State Fin. & Proc. § 16-307(a); Commonwealth of Virginia Dep’tof Transp., supra note 170; N.J. Admin.Code § 16:44-8.3(d).
201/ Commonwealth of Virginia Dep’t ofTransp., supra note 170.
202/ Md. Code Ann., State Fin. & Proc. § 16-307(a).
203/ N.J. Admin. Code § 16:44-8.3(d).
204/ Commonwealth of Virginia Dep’t ofTransp., supra note 170.
★ AUGUST BRIEFING PAPERS 2006 ★
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205/ 30 Ill. Comp. Stat. Ann. 580/8 (“Uponissuance of any final decision underthis Act requiring debarment of acontractor, grantee or individual, suchcontractor, grantee or individual shallbe ineligible for award of any contractor grant by the State for at least oneyear but not more than 5 years, asspecified in the decision.”); 62 Pa. Cons.Stat. Ann. § 531(a) (“A debarment maybe for a period of not more than threeyears.”); Georgia Vendor Manual, supranote 183 (debarment may not exceedfive years); Colo. Rev. Stat. § 24-109-105(1)(a) (“The debarment shall not befor a period of more than three years.”);N.J. Admin. Code § 16:44-8.3(b)(“Debarment shall be for a reasonable,definitely stated period of time, whichas a general rule shall not exceed fiveyears.”).
206/ 30 Ill. Comp. Stat. Ann. 500/50-65(“Suspension shall be for cause andmay be for a period of up to 10 years atthe discretion of the applicable chiefprocurement officer.”); 4 Pa. Code § 60.7(“Suspensions will be for a temporaryperiod pending the completion of aninvestigation and legal proceedings asmay ensue.”); 62 Pa. Cons. Stat. Ann.§ 531(a) (“The head of the purchasingagency may suspend a person fromconsideration for an award of contractsfor a period of up to three months ifthere is probable cause for debarment.”);Georgia Vendor Manual, supra note 183(“The suspension is for the period ittakes to complete an investigation intopossible debarment including any appealof a debarment decision but not for aperiod in excess of one hundred twenty(120) days.”).
207/ Southern Cal. Underground Contractors,Inc. v. City of San Diego, 108 Cal. App.4th 533, 538, 133 Cal. Rptr. 2d 527,531 (4th Dist. 2003) (reversing lowercourt judgment insofar as it imposed athree-year rather than a permanentdebarment).
208/ Commonwealth of Virginia Dep’t ofTransp., supra note 170 (“The debarmentmay be imposed for any length of time.”).
209/ N.J. Admin. Code § 16:44-8.3(b)(“Debarment shall be for a reasonable,definitely stated period of time….”).
210/ N.Y. State Fin. Law § 139-b.
211/ Lefkowitz v. Turley, 414 U.S. 70, 83,94 S.Ct. 316, 325 (1973) (where thecourt agreed with the district court,which held that “the plaintiffs’disqualification from public contractingfor five years as a penalty for assertinga constitutional privilege is violative of
their Fifth Amendment rights”); Peoplev. Avant, 33 N.Y.2d 265, 352 N.Y.S.2d161 (1973) (where the court held thatthe municipal law, which provided thata contractor would be disqualified fromsubmitting bids or receiving awards if itrefused to sign a waiver of immunityagainst subsequent criminal prosecutionwhen it testified in an investigationconcerning any transaction or contractwith the state, was unconstitutional).
212/ Md. Code Ann., State Fin. & Proc. § 16-203(b) (“A person may be debarred fromentering into a contract with the Stateif, during the course of an officialinvestigation or other proceedings, theperson, an officer, partner, controllingstockholder or principal of that person,or any other person substantially involvedin that person’s contracting activitieshas admitted, in writing or under oath,an act or omission that constitutesgrounds for conviction or liability underany law or statute described in subsection(a) of this section.”).
213/ Transco Sec., Inc. of Ohio v. Freeman,639 F.2d 318, 321 (6th Cir. 1981) (“Onewho has been dealing with the governmenton an ongoing basis may not be blacklisted,whether by suspension or debarment,without being afforded proceduralsafeguards including notice of thecharges, an opportunity to rebut thosecharges, and, under most circumstances,a hearing.”).
214/ Boyle v. Maryland-National Capital Park& Planning Comm’n, 385 Md. 142, 867A.2d 1050 (2005); Golden Day Schools,Inc. v. State Dept. of Educ., 83 Cal.App. 4th 695, 99 Cal. Rptr. 2d 917 (2dDist. 2000).
215/ Md. Code Ann., State Fin. & Proc. § 16-304; 62 Pa. Cons. Stat. Ann. § 531(a);Georgia State Financing and InvestmentComm’n, Procedures for Suspension andDebarment (July 2001).
216/ 62 Pa. Cons. Stat. Ann. § 531(a).
217/ Georgia State Financing & InvestmentComm’n, supra note 215.
218/ Southern Cal. Underground Contractors,Inc. v. City of San Diego, 108 Cal.App. 4th 533, 542–543, 133 Cal. Rptr.2d 527, 534 (4th Dist. 2003).
219/ Id. at 550.
220/ Stacy & Witbeck, Inc. v. City & Countyof San Francisco, 36 Cal. App. 4th1074, 1088, 44 Cal. Rptr. 2d 472, 480(1st Dist. 1995).
221/ N.J. Admin. Code § 16:44-8.3(a).
222/ N.J. Admin. Code § 16:44-8.3(a).
223/ Commonwealth of Virginia Dep’t ofTransp., supra note 170.
224/ New York State Procurement Bulletin,Best Practices Determining VendorResponsibility (Oct. 2005) (“Agenciesmay also use a variety of resources toobtain or verify vendor information….Information regarding vendor debarmentswith the federal government may befound at the Excluded Parties listSystem.”); see FAR 9.404; http://epls.gov.
225/ Illinois State Bd. of Educ., CertificationRegarding Debarment, Suspension,Ineligibility, and Voluntary Exclusion LowerTier Covered Transactions; see FAR52.209-5
226/ Cal. Pub. Cont. Code § 10285.1.
227/ N.Y. State Fin. Law § 139-d.
228/ Mass. Gen. Laws Ann. ch. 29, § 29F(b);Ohio Rev. Code Ann. § 153.02(D) (“Thedirector, through the office of the statearchitect, shall maintain a list of allcontractors currently debarred underthis section. Any governmental entityawarding a contract for construction ofa public improvement may use acontractor’s presence on the debarmentlist to determine whether a contractoris responsible or best under section9.312 or any other section of the RevisedCode in the award of a contract.”); seeFAR 9.404; http://epls.gov.
229/ State of Illinois, Department of LaborList of Contractors Prohibited From anAward of a Contract or a Subcontractfor Public Works Projects, http://www.state.il.us/agency/idol/l istings/debar.htm; Maryland Bd. of Public Works,Businesses & Persons Suspended orDebarred, http://www.bpw.state.md.us/bpw_db.asp; State of New JerseyConsolidated Debarment Report, http://www.state.nj.us/treasury/debarred/; Stateof New York, Department of Labor Listof Employers Ineligible To Bid On or BeAwarded Any Public Work Contract, http://www.labor.state.ny.us/workerprotection/publicwork/PDFs/debarred.pdf#page=1;State of North Carolina Debarred VendorList, http://www.doa.state.nc.us/PandC/actions.htm; Ohio Dep’t of Transp.,Division of Contract AdministrationDebarments List, http://www.dot.state.oh.us/CONTRACT/Notice/Debarments.pdf.
