Procurement Debarment and Suspension of Government Contractors: Legal Overview

Congressional research reportMay 27, 2015

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Procurement Debarment and Suspension of

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RL34753

Procurement Debarment and Suspension of Government Contractors: Legal Overview

Summary

Debarment and suspension (collectively known as “exclusion”) are of perennial interest to

Congress because exclusion is one of the primary techniques that federal agencies use to avoid

dealings with vendors who have failed, or are deemed likely to fail, to meet their obligations

under federal law or government contracts. Debarred contractors are generally ineligible for new

federal contracts for a fixed period of time, while suspended contractors are generally ineligible

for the duration of any investigation or litigation involving their conduct. Federal law specifies

various grounds for exclusion, only some of which expressly relate to procurement. The grounds

and procedures for nonprocurement exclusions are outside the scope of this report. However, all

persons excluded on procurement or other grounds are listed in the System for Award

Management (SAM), which contracting officers must check prior to awarding a contract.

Procurement-related exclusions can be broadly characterized as being either statutory or

administrative. Statutory exclusions are required or authorized by congressional enactments that

bar persons who have engaged in conduct prohibited under the statute from at least certain

government contracts. Such exclusions are often mandatory, or at least beyond the discretion of

the heads of procuring agencies, and are intended as punishments. The statute often prescribes the

duration of the exclusion, and procuring agencies generally cannot waive the exclusion.

Administrative exclusions, in contrast, are authorized by the Federal Acquisition Regulation

(FAR). The FAR authorizes the debarment of contractors who are convicted of, found civilly

liable for, or found by agency officials to have committed specified offenses, or when other

causes affect contractor responsibility. It similarly authorizes suspension when contractors are

suspected of or indicted for specified offenses, or when there are other causes that affect

contractor responsibility. The FAR does not require the exclusion of a contractor, even when

grounds for exclusion are present. Instead, agency officials retain discretion as to whether to

exclude particular contractors, and they may enter into administrative agreements circumscribing

the conduct of contractors in lieu of exclusion. Exclusion under the FAR is also intended to

protect the government’s interests, not for purposes of punishment. The length of the exclusion

can vary depending upon the seriousness of the conduct in question and the duration of any

investigation, among other things. However, agency heads could waive administrative exclusions.

Excluded parties are generally ineligible for new government contracts and, in the case of

administrative exclusions, are also expressly said to be ineligible to (1) receive new work or an

option under an existing contract; (2) serve as a subcontractor on certain contracts; or (3) serve as

an individual surety. However, existing contracts of the excluded contractor generally remain in

effect unless they are terminated for default or convenience by the government.

Because they are dealing with the federal government, contractors are entitled to due process

before being excluded from government contracts, although the nature of the process due to them

varies for debarments and suspensions. Agencies are generally prohibited from using means other

than debarment or suspension proceedings to effectively exclude contractors. Such conduct is

sometimes described as “de facto debarment.” Conduct that results in de facto debarment could

also result in contractors being deprived of constitutionally protected liberty interests in

prospective government contracts. Additionally, agencies could be found to have violated the

Administrative Procedure Act (APA) by acting arbitrarily and capriciously if they exclude a

contractor based upon circumstances that the agency was aware of when it previously found the

contractor sufficiently “responsible” to be awarded a federal contract.

Congressional Research Service

Procurement Debarment and Suspension of Government Contractors: Legal Overview

Contents

Authorities Requiring or Allowing Exclusion ................................................................................. 1

Statutes Requiring or Allowing Exclusion ................................................................................ 2

Exclusion Under the FAR .......................................................................................................... 7

Debarment ........................................................................................................................... 7

Suspension........................................................................................................................... 9

Exclusion for Conduct Imputed to the Contractor ............................................................ 10

Agency Discretion, Administrative Agreements, Continuation of Current

Contracts, and Waivers ................................................................................................... 11

Contractors’ Rights in Exclusion Proceedings ............................................................................... 15

Tables

Table 1. Procurement-Related Statutory Exclusions........................................................................ 3

Table 2. Comparison of Statutory and Administrative Debarments .............................................. 14

Contacts

Author Contact Information........................................................................................................... 18

Congressional Research Service

Procurement Debarment and Suspension of Government Contractors: Legal Overview

ebarment and suspension (collectively known as “exclusion”) are of perennial interest to

Congress because exclusion is one of the primary techniques that federal agencies use to

avoid dealings with vendors who have failed, or are deemed likely to fail, to meet their

obligations under federal law or government contracts.1 Debarred contractors are generally

ineligible for new federal contracts for a fixed period of time, while suspended contractors are

generally ineligible for the duration of any investigation or litigation involving their conduct.

Federal law specifies various grounds for exclusion, only some of which expressly relate to

procurement. The grounds and procedures for nonprocurement exclusions are outside the scope

of this report. However, all persons excluded on procurement or other grounds are listed in the

System for Award Management (SAM) (previously the Excluded Parties List System (EPLS)).

Contracting officers are generally barred from soliciting offers from, awarding contracts to, or

consenting to subcontracts with contractors who are listed as excluded in SAM.2

This report discusses grounds and procedures for procurement-related exclusions.3 In particular, it

surveys the authorities requiring or allowing federal agencies to debar or suspend contractors, as

well as the due process and other protections for contractors in exclusion proceedings.

Authorities Requiring or Allowing Exclusion

Contractors can currently be debarred or suspended under federal statutes or under the Federal

Acquisition Regulation (FAR), an administrative rule governing contracting by executive branch

agencies.4 There are only two explicit overlaps between the causes of debarment and suspension

under statute and those under the FAR, involving debarments and suspensions for violations of

(1) the Drug-Free Workplace Act of 19885 and (2) various statutes proscribing intentionally

affixing a “Made in America” label to an ineligible product sold in or shipped to the United

States.6 However, the FAR includes certain “catch-all” provisions that could potentially make the

Agencies also use responsibility determinations for this purpose. Prior to awarding a federal contract, the contracting

officer must determine that the contractor is sufficiently “responsible” to perform that contract. See generally 48 C.F.R.

§§9.100-9.108-5; CRS Report R40633, Responsibility Determinations Under the Federal Acquisition Regulation:

Legal Standards and Procedures, by (name redacted). Statutory prohibitions upon contracting with specific entities can

similarly be used for this purpose, although they could potentially be found to constitute unconstitutional bills of

attainder in some cases. See, e.g., CRS Report R40826, Bills of Attainder: The Constitutional Implications of Congress

Legislating Narrowly, by (name redacted).

See generally 48 C.F.R. §9.404(c)(7).

Nonprocurement debarments are discussed in a separate report, archived CRS Report R40993, Debarment and

Suspension Provisions Applicable to Federal Grant Programs, by (name redacted). Questions about this report may be

referred to CRS Legislative Attorney (name redacted).

The FAR is promulgated by the General Services Administration (GSA), the Department of Defense (DOD), and the

National Aeronautics and Space Administration (NASA) under the authority of the Office of Federal Procurement

Policy Act of 1974. See Office of Federal Procurement Policy Act of 1974, P.L. 93-400, 88 Stat. 796 (August 30, 1974)

DOD, GSA & NASA, Establishing the Federal Acquisition Regulation: Final Rule, 48 Federal Register 42,102, 42,142

(September 19, 1983). For more on the FAR, see generally CRS Report R42826, The Federal Acquisition Regulation

(FAR): Answers to Frequently Asked Questions, by (name redacted) et al.

The Drug-Free Workplace Act of 1988, P.L. 100-690, §§5151-5160, 102 Stat. 4181 (codified at 41 U.S.C. §§81018106), is mentioned in FAR 9.406-2(b)(1)(ii) and 9.407-2(a)(4), which corresponds to 48 C.F.R. §9.406-2(b)(1)(ii) and

9.407-2(a)(4).

Compare 48 C.F.R. §9.406-2(a)(4) (grounds for debarment) and 48 C.F.R. §9.407-2(a)(5) (grounds for suspension)

with, e.g., 33 U.S.C. §569f (conviction of intentionally affixing a “Made in America” label to an ineligible product sold

in or shipped to the United States that was used in an Army Corps of Engineers civil works project).

Congressional Research Service

Procurement Debarment and Suspension of Government Contractors: Legal Overview

same conduct grounds for debarment or suspension under statute and under the FAR. One of

these provisions authorizes debarment for “any ... offense indicating a lack of business integrity

or business honesty.”7 The other authorizes debarment or suspension for “any other cause of [a]

serious or compelling nature.”8

Statutes Requiring or Allowing Exclusion

Some federal statutes include provisions specifying that contractors who engage in certain

conduct prohibited under the statute shall or may be debarred or suspended from future contracts

with the federal government.9 Such debarments or suspensions are often referred to as “statutory

debarments” or “statutory suspensions” because they are expressly provided for in statute. They

are sometimes also described as “inducement debarments” or “inducement suspensions” because

they are designed to provide additional inducement for contractors’ compliance with the

statutes.10

Statutes providing for debarment and suspension often require that the excluded party be

convicted of wrongdoing under the statute, but at other times, findings of wrongdoing by agency

heads suffice for exclusion.11 Sometimes the exclusion applies only to certain types of

contractors, or dealings with specified agencies (e.g., institutions of higher education who

contract with the government, contracts with the Department of Defense).12 Most of the time,

however, the exclusion applies more broadly to all types of contractors dealing with all federal

agencies.13 Persons identified by statute—often the head of the agency administering the statute

requiring or allowing exclusion—make the determination to debar or suspend contractors.14

Debarments last for a fixed period specified by statute, while suspensions last until a designated

official finds that the contractor has ceased the conduct that constituted its violation of the

statute.15 Generally, statutory exclusions can only be waived by a few officials under narrow

circumstances.16 Heads of procuring agencies generally cannot waive exclusions to allow

debarred or suspended contractors to contract with their agency. Table 1 surveys the

48 C.F.R. §9.406-2(a)(5)

48 C.F.R. §9.406-2(c); 48 C.F.R. §9.407-2(c).

See, e.g., 21 U.S.C. §862 (authorizing debarment for violations of federal or state controlled substance laws).

Exclusions required or authorized by executive orders are often listed with statutory debarments because they are

similarly intended as inducements to particular behavior. See, e.g., Executive Order 11246, as amended (authorizing the

Secretary of Labor to debar contractors who fail to comply with equal employment opportunity and affirmative action

requirements until such time as they comply); Executive Order 12989, as amended by Executive Order 13286,

authorizing the heads of contracting agencies to debar contractors (or organizational units thereof) that the Secretary of

Homeland Security has determined are not incompliance with the employment provisions of the Immigration and

Nationality Act).

Compare 42 U.S.C. §7606 (debarment based on conviction) with 41 U.S.C. §8303(c) (debarment based on agency

head’s findings).

See, e.g., 10 U.S.C. §983 (debarment for institutions of higher education only); 48 C.F.R. §§209.470-1-209.470-4

(same); 10 U.S.C. §2408 (debarment from Department of Defense contracts only).

See, e.g., 40 U.S.C. §3144 (government-wide debarment for failure to pay wages under the Davis-Bacon Act).

See, e.g., 42 U.S.C. §7606 (Administrator of the Environmental Protection Agency to debar contractors for certain

violations of the Clean Air Act).

Compare 41 U.S.C. §8102(b)(3) (providing for debarment for up to five years) with 33 U.S.C. §1368 (suspensions

for certain violations of the Clean Water Act end with the violation).

Compare 33 U.S.C. §1368 (allowing the President to waive a debarment “in the paramount interests of the United

States” with notice to Congress) with 40 U.S.C. §3144 (making no provisions for waiver).

Congressional Research Service

Procurement Debarment and Suspension of Government Contractors: Legal Overview

procurement-related statutory exclusions presently in effect. It attempts to be comprehensive,

listing all such exclusions codified in the United States Code (including as notes). It does not list

any un-codified provisions that may exist.

Table 1. Procurement-Related Statutory Exclusions

Statute

Cause of

Debarment

Mandatory or

Discretionarya

Decisionmaker

Duration &

Scope

Waiver of

Debarment

American

Technology

Preeminence

Act of 1991 (15

U.S.C. §1536)

Determination by

a court or federal

agency that a

person has

intentionally

affixed a “Made in

America" or

similar label to an

ineligible product

sold in or shipped

to the United

States

Mandatory

Secretary of

Commerce

No time

period

prescribed;

exclusion only

applies to

Department of

Commerce

contracts and

subcontracts

Not provided

for in statute;

but exclusion

effectuated

pursuant to

FAR

procedures

Buy American

Act (41 U.S.C.

§8303(c))

Violations of the

Buy American

Act in

constructing,

altering, or

repairing any

public building or

work in the

United States

using

appropriated

funds

Mandatory

Head of the

agency that

awarded the

contract under

which the

violation

occurred

Three years;

governmentwide

Not provided

for in statute

Clean Air Act

(42 U.S.C.

§7606)

Conviction for

violating 42

U.S.C. §7413(c)

Mandatory

EPA

Administrator

Lasts until EPA

Administrator

certifies the

condition is

corrected;

governmentwide but

limited to the

facility giving

rise to the

conviction

Waiver by

President

when he or

she

determines it

is in the

paramount

interests of

the United

States and

notifies

Congress

Clean Water

Act (33 U.S.C.

§1368)

Conviction for

violating 33

U.S.C. §1319(c)

Mandatory

EPA

Administrator

Lasts until EPA

Administrator

certifies the

condition is

corrected;

governmentwide but

limited to the

facility giving

rise to the

conviction

Waiver by

President

when he or

she

determines it

is in the

paramount

interests of

the United

States and

notifies

Congress

Congressional Research Service

Procurement Debarment and Suspension of Government Contractors: Legal Overview

Statute

Cause of

Debarment

Mandatory or

Discretionarya

Decisionmaker

Duration &

Scope

Waiver of

Debarment

Davis-Bacon

Act (40 U.S.C.

§3144)b

Failure to pay

prescribed wages

for laborers and

mechanics

Mandatory

Secretary of

Laborc

Three years;

governmentwide

Not provided

for in statute

Disaster

Mitigation Act

(42 U.S.C.

§5206)

Conviction of

intentionally

affixing a “Made

in America” label

to an ineligible

product sold in

or shipped to the

United States

Discretionary

(determination

must be made

within 90 days

of determining

that a person

was convicted)

Administrator of

the Federal

Emergency

Management

Agency

No time

period

prescribed;

exclusion

applies only to

contracts

under the

Stafford Act

Not provided

for in statute

Drug-Free

Workplace Act

of 1988 (41

U.S.C.

§8102(b))

Specified

violations of the

act (e.g., failure to

publish a

statement

notifying

employees that

the unlawful use

of controlled

substances in the

workplace is

prohibited); or

having so many

employees

convicted of

criminal drug

violations

occurring in the

workplace as to

indicate that the

contractor has

failed to make a

good faith effort

to provide a

drug-free

workplace

Discretionary

Head of the

contracting

agency

Up to five

years;

governmentwide

Not provided

for in statute

Foreign

Relations

Authorization

Act (22 U.S.C.

§2679b)

Final

determination by

a court or federal

agency that a

person

intentionally

affixed a “Made in

America" or

similar label to an

ineligible product

sold in or shipped

to the United

States

Mandatory

Secretary of

State

No time

period

prescribed;

exclusion only

applies to

Department of

State

contracts and

subcontracts

Not provided

for in statute,

but exclusion

effectuated

pursuant to

FAR

procedures

John Warner

National

Defense

Authorization

Knowing or

willful

noncompliance

with general

Discretionary

Secretary of

Defense

Exclusion lasts

until the

vendor has

effectively

Not provided

for in statute

Congressional Research Service

Procurement Debarment and Suspension of Government Contractors: Legal Overview

Statute

Cause of

Debarment

Mandatory or

Discretionarya

Decisionmaker

Duration &

Scope

Waiver of

Debarment

Act for FY2007

(10 U.S.C.

§2533b)

prohibition upon

the use of

specialty metals

not melted or

produced in the

United States in

certain defense

products

Military

Recruiting on

Campus (10

U.S.C. §983; 48

C.F.R. §209.470

et seq.)

Policy or practice

prohibiting

Reserve Officers’

Training Corps

(ROTC) access

or military

recruiting on

campus

Mandatory

Secretary of

Defense

Lasts so long

as the policy

or practice

triggering the

suspension;

limited to

Department of

Defense

Contracts

Not provided

for in statute

National

Defense

Authorization

Act for FY1993

(10 U.S.C.

§2410f)

Conviction of

intentionally

affixing a “Made

in America" or

similar label to

any ineligible

product sold in

or shipped to the

United States

Discretionary

(determination

must be made

within 90 days

of determining

that a person

was convicted)

Secretary of

Defense

Not

prescribed by

statute;

exclusion only

applies to

Department of

Defense

contracts

Not provided

for in statute

Service

Contract Act

(41 U.S.C.

§6706)

Failure to pay

compensation

due to employees

under the act

Mandatory

Secretary of

Labor

Three years;

governmentwide

Waiver by the

Secretary of

Labor because

of “unusual

circumstances”

Small Business

Act (15 U.S.C.

§645)

Misrepresentation

of size or status

(e.g., womanowned) in order

to obtain certain

small business

contracting

preferences

Mandatory

Administrator of

Small Business

Not

prescribed by

statute;

governmentwide

Not provided

for in statute,

but exclusion

effectuated

pursuant to

FAR

procedures

Sudan

Accountability

and Divestment

Act (50 U.S.C.

§1701 note)

Falsely certifying

that the

contractor does

not “conduct

business

operations” in the

Sudan

Discretionary

Any executivebranch agency

head

Three years;

governmentwide

Not provided

for in statute

Veterans

Benefits Act (38

U.S.C. §8127)

Willful and

intentional

misrepresentation

of status as a

small business

owned and

controlled by

veterans or

Mandatory

Secretary of

Veterans Affairs

(VA)

Not less than

5 years;

exclusion from

VA contracts

only

Not provided

for in statute

Congressional Research Service

addressed the

issues that

lead to

noncompliance

Procurement Debarment and Suspension of Government Contractors: Legal Overview

Statute

Cause of

Debarment

Mandatory or

Discretionarya

Decisionmaker

Duration &

Scope

Waiver of

Debarment

service-disabled

veterans for

purposes of the

Veterans First

Contracting

program

Walsh-Healey

Act (41 U.S.C.

§6504)

Failure to pay the

minimum wage,

requiring

mandatory and

uncompensated

overtime, use of

child labor, or

maintenance of

hazardous

working

conditions

Mandatory

Secretary of

Labor

Three years;

governmentwide

Waiver by the

Secretary of

Labor; no

criteria for

waiver

specified

Water

Resources

Development

Act (33 U.S.C.

§569f)

Conviction of

intentionally

affixing a “Made

in America" label

to an ineligible

product sold in

or shipped to the

United States that

was used in an

Army Corps of

Engineers civil

works project

Mandatory

Secretary of the

Army

Not less than

three years

and not more

than five years;

governmentwide

Not provided

for in statute

Source: Congressional Research Service, based on various sources cited in Table 1.

Notes: There are two other statutory provisions discussing debarment that are not included in this table

because they are specific to individual persons and would not apply to corporations. Section 862 of Title 21 of

the United States Code allows the court sentencing an individual for violating federal or state laws on the

distribution of controlled substances to debar that individual for up to one year, in the case of first-time

offenders, or for up to five years, in the case of repeat offenders. Section 2408 of Title 10 of the United States

Code similarly prohibits persons who have been convicted of fraud or any other felony arising out of a contract

with the Department of Defense (DOD) from working in management or supervisory capacities on any DOD

contract, or engaging in similar activities. Contractors who knowingly employ such “prohibited persons” are

themselves subject to criminal penalties.

An exclusion is said to be “mandatory” for purposes of Table 1 if the statute governing the exclusion uses

the word “shall.” Under general principles of statutory interpretation, the term “shall” is construed as

imperative or mandatory. See 1A Sutherland Statutes and Statutory Construction §25:4 (Norman J. Singer ed.,

2002) (“Unless the context otherwise indicates the use of the word ‘shall’ ... indicates a mandatory intent.”).

However, because these exclusions are punitive, an argument could potentially be made that the

determination as to whether to exclude a particular person is within the agency’s prosecutorial discretion.

See, e.g., United States v. Nixon, 418 U.S. 683, 693 (1974) (citing the Confiscation Cases, 7 Wall. 454 (1869)

(“[T]he Executive Branch has exclusive authority and absolute discretion to decide whether to prosecute a

case…”)); Heckler v. Cheney, 470 U.S. 821, 832 (1985) (noting that an agency decision to initiate an

enforcement action in the administrative context “shares to some extent the characteristics of the decision

of a prosecutor in the executive branch”).

The statutory debarment provided for in the Davis-Bacon Act is better known under its former location

within the United States Code, 40 U.S.C. §276a-2(a).

Congressional Research Service

Procurement Debarment and Suspension of Government Contractors: Legal Overview

Section 3144(b)(1) of Title 40 of the United States Code expressly provides that the “Comptroller General

shall distribute to all departments of the Federal Government a list of the names of persons whom the

Comptroller General has found to have disregarded their obligations to employees and subcontractors”

(emphasis added). However, federal regulations provide for the Department of Labor to “transmit ... the

names of ... contractors and subcontractors and their responsible officers” found to have violated the DavisBacon Act to the Comptroller General for listing. See 29 C.F.R. §5.12(a)(2).

Exclusion Under the FAR

As a matter of policy, the federal government seeks to “prevent improper dissipation of public

funds”17 in its contracting activities by dealing only with responsible contractors.18 Debarment

and suspension promote this policy by precluding agencies from entering into new contracts with

contractors whose prior violations of federal or state law, or failure to perform under contract,

suggest they are nonresponsible.19 However, because exclusions under the FAR are designed to

protect the government’s interests, they may not be imposed solely to punish prior contractor

misconduct.20 Federal courts could overrule challenged agency decisions to debar contractors

when agency officials seek to punish the contractor—rather than protect the government—in

making their exclusion determinations.21

Where grounds for debarment or suspension exist, as discussed below, any agency may act to

exclude the contractor, potentially including one that does not currently have a contract with the

contractor or is not the contractor’s “primary” business partner.22 In practice, though, exclusions

are most commonly initiated by the agency under or in regard to whose contract or proposed

contract the alleged misconduct occurred.

Debarment

The FAR authorizes agency officials to debar contractors from future contracts under three

circumstances. First, debarment may be imposed when a contractor is convicted of or found

civilly liable for any so-called “integrity offense.” Integrity offenses include

•

fraud or criminal offenses in connection with obtaining, attempting to obtain, or

performing a government contract or subcontract;

United States v. Bizzell, 921 F.2d 263, 267 (10th Cir. 1990) (“It is the clear intent of debarment to purge government

programs of corrupt influences and to prevent improper dissipation of public funds. Removal of persons whose

participation in those programs is detrimental to public purposes is remedial by definition.”) (internal citations

omitted).

48 C.F.R. §9.402(a) (directing agency contracting officers to “solicit offers from, award contracts to, and consent to

subcontracts with responsible contractors only”).

See id. (“Debarment and suspension are discretionary actions that ... are appropriate means to effectuate [the] policy

[of dealing only with responsible contractors].”).

48 C.F.R. §9.402(b) (“The serious nature of debarment and suspension requires that these sanctions be imposed only

in the public interest for the Government’s protection and not for purposes of punishment.”).

See, e.g., IMCO, Inc. v. United States, 97 F.3d 1422, 1427 (Fed. Cir. 1996) (upholding an agency’s debarment

determination but noting that the outcome could have been different had the debarment been imposed for purposes of

punishment).

See, e.g., Deborah Billings, EPA Lifts Temporary Suspension of IBM for Misconduct on Agency Contract Bid, 89

Fed. Cont. Rep. 371 (April 4, 2008). In this case, the EPA suspended IBM because of IBM’s alleged misconduct when

bidding on an EPA contract. At the time, IBM had contracts with numerous other federal agencies, most notably the

General Services Administration (GSA).

Congressional Research Service

Procurement Debarment and Suspension of Government Contractors: Legal Overview

•

violations of federal or state antitrust laws relating to the submission of offers;

•

embezzlement, theft, forgery, bribery, falsification or destruction of records,

making false statements, tax evasion, violating federal criminal tax laws, or

receipt of stolen property;

•

intentionally affixing a “Made in America” label, or similar inscription, on

ineligible products; and

•

other offenses indicating a lack of business integrity or honesty that seriously and

directly affect the present responsibility of a contractor or subcontractor.23

Second, in the absence of convictions or civil judgments, debarment may be imposed when

government officials find, by a preponderance of the evidence, that the contractor committed

certain offenses. These offenses include

•

serious violations of the terms of a government contract or subcontract;24

•

violations of the Drug-Free Workplace Act of 1988;25

•

intentionally affixing a “Made in America” label, or similar inscription, on

ineligible products;

•

commission of an unfair trade practice as defined in Section 20126 of the Defense

Production Act;

•

delinquent federal taxes in an amount exceeding $3,000;27 and

•

knowing failure by a principal to timely disclose to the government credible

evidence of (1) violations of federal criminal laws involving fraud, conflict of

interest, bribery, or gratuity offenses covered by Title 18 of the United States

Code; (2) violations of the civil False Claims Act; or (3) significant

overpayments on the contract28 that occurred in connection with the award,

48 C.F.R. §9.406-2(a)(1)-(5).

For purposes of the FAR, serious violations of the terms of a government contract or subcontract include (1) willful

failure to perform in accordance with a term of the contract or (2) a history of failure to perform or unsatisfactory

performance under contract. 48 C.F.R. §9.406-2(b)(1)(i)(A)-(B).

Such violations include (1) failure to comply with the requirements in Section 52.223-6 of the FAR or (2)

employment of so many persons who have been convicted of violating criminal drug statutes in the workplace as to

indicate that the contractor failed to make good faith efforts to provide a drug-free workplace. 48 C.F.R. §9.4062(b)(1)(ii)(A)-(B). FAR 52.223-6 requires that contractors (1) publish a statement notifying employees that the

manufacture, distribution, possession, or use of controlled substances in the workplace is prohibited and specifying

actions to be taken in response to employee violations; (2) establish drug-free awareness programs to inform employees

of the policy; (3) provide employees with a written copy of the policy; (4) notify employees that their continued

employment is contingent upon their compliance with the policy; (5) notify agency contracting officials of employee

convictions for violations of controlled substance laws; and (6) take steps to terminate or ensure treatment of

employees convicted of violating controlled substance laws.

Section 201 covers (1) violations of Section 337 of the Tariff Act of 1930; (2) violations of agreements under the

Export Administration Act of 1979 or similar bilateral or multilateral export control agreements; or (3) knowingly false

statements regarding material elements of certifications concerning the content of an item.

Federal taxes are considered delinquent, for purposes of this provision, when (1) tax liability is finally determined

and (2) the taxpayer is delinquent in making payment. See 48 C.F.R. §9.406-2(b)(v)(A)(1)-(2).

Overpayments resulting from contract financing payments, as defined under 48 C.F.R. §32.001, are excluded here.

See 48 C.F.R. §9.406-2(b)(vi)(C).

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performance or closeout of a federal contract or subcontract and were discovered

within three years of final payment.29

Debarment can also result, under this provision of the FAR, when the Secretary of Homeland

Security or the Attorney General finds, by a preponderance of the evidence, that a contractor has

not complied with the employment provisions of the Immigration and Nationality Act.30

Third, and finally, debarment may be imposed whenever there exists “any other cause of so

serious or compelling a nature that it affects the present responsibility of a contractor.”31

Debarments last for a “period commensurate with the seriousness of the cause(s),” generally not

exceeding three years.32 As discussed below, due process generally requires that contractors

receive written notice of and the opportunity for a hearing regarding any debarment.33

Debarment-worthy conduct by a contractor’s officers, directors, shareholders, partners,

employees, or other associates can be imputed to the contractor, and vice versa.34

Suspension

The FAR also allows agency officials to suspend government contractors when they suspect,

upon adequate evidence, any of the following offenses, or when contractors are indicted for these

offenses:

•

fraud or criminal offenses in connection with obtaining, attempting to obtain, or

performing a public contract;

•

violation of federal or state antitrust laws relating to the submission of offers;

•

embezzlement, theft, forgery, bribery, falsification or destruction of records,

making false statements, tax evasion, violations of federal criminal tax laws, or

receipt of stolen property;

48 C.F.R. §9.406-2(b)(1)(i)-(vi). The final ground for debarment (i.e., failure to timely disclose specified offenses)

was added to the FAR by the Close the Contractor Fraud Loophole Act, §§6101-6103 of the Supplemental

Appropriations Act of 2008 (P.L. 110-252), which also amended the FAR to require that contractors timely notify

agency officials of overpayments or federal crimes connected with the award of a “covered contract or subcontract.”

See 48 C.F.R. §§3.1000-3.1004. Covered contracts and subcontracts are those that are greater than $5 million in

amount and more than 120 days in duration, regardless of whether they are performed outside the United States or

include commercial items. P.L. 110-252, §§6101-03, 122 Stat. 2323 (June 30, 2008). Previously, under FAR §§9.405

and 52.209-5(a) (2006), contractors with awards worth more than $30,000 had to disclose the existence of indictments,

charges, convictions, or civil judgments against them. However, disclosure of the existence of legal proceedings is

different from disclosure of grounds on which future legal proceedings could potentially be initiated.

48 C.F.R. §9.406-2(b)(2).

48 C.F.R. §9.406-2(c).

48 C.F.R. §9.406-4(a)(1). Debarments are generally limited to one year for violations of the Immigration and

Nationality Act, but can last up to five years for violations of the Drug-Free Workplace Act. 48 C.F.R. §9.4064(a)(1)(i)-(ii). The FAR allows debarring officials to extend the debarment for an additional period if they determine

that an extension is necessary to protect the government’s interests. 48 C.F.R. §9.406-4(b). Extension cannot be based

solely upon the facts and circumstances upon which the initial debarment was based, however. Id.

48 C.F.R. §9.406-3. When debarment is based on a conviction, the hearing that the contractor received prior to the

conviction suffices for due process in the debarment proceeding.

48 C.F.R. §9.406-5(a)-(b).

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•

violations of the Drug-Free Workplace Act of 1988;35

•

intentional misuse of the “Made in America” designation;

•

unfair trade practices, as defined in Section 201 of the Defense Production Act;36

•

delinquent federal taxes in an amount exceeding $3,000;37

•

knowing failure by a principal to timely disclose to the government credible

evidence of (1) violations of federal criminal laws involving fraud, conflict of

interest, bribery, or gratuity offenses covered by Title 18 of the United States

Code; (2) violations of the civil False Claims Act; or (3) significant

overpayments on the contract38 that occurred in connection with the award,

performance or closeout of a federal contract or subcontract and were discovered

within three years of final payment;39 and

•

other offenses indicating a lack of business integrity or honesty that seriously

affect the present responsibility of a contractor.40

Agency officials may also suspend a contractor when they suspect, upon adequate evidence, that

there exists “any other cause of so serious or compelling a nature that it affects the present

responsibility of a ... contractor or subcontractor.”41

A suspension generally lasts only as long as an agency’s investigation of the conduct for which

the contractor was suspended, or any ensuing legal proceedings.42 It generally may not exceed 1218 months unless legal proceedings have been initiated within that period.43 As discussed below,

certain due process protections apply with suspensions, as with debarment.44 Suspension-worthy

conduct can be imputed, as can debarment-worthy conduct.45

Exclusion for Conduct Imputed to the Contractor

The FAR expressly authorizes agencies to extend debarment or suspension decisions to

“affiliates” of the contractor if the affiliates are specifically named, and are given written notice

See supra note 25 for a description of what conduct violates the Drug-Free Workplace Act.

See supra note 26 for a listing of unfair trade practices under Section 201 of the Defense Production Act.

See supra note 27 for a discussion of what makes federal taxes delinquent for purposes of this provision of the FAR.

See supra note 28 for more on qualifying overpayments.

See supra note 29 for more on the history of this provision.

48 C.F.R. §9.407-2(a)(1)-(9) (suspicion on adequate evidence) & 48 C.F.R. §9.407-2(b) (indictment).

48 C.F.R. §9.407-2(c).

However, an affiliate of a suspended contractor could potentially be suspended for the duration of the investigation

of the principal contractor, or litigation involving the principal, without themselves being the subjects of independent

investigations or litigation. See generally Agility Defense & Gov’t Servs., Inc. v. U.S. Dep’t of Defense, 739 F.3d 586

(11th Cir. 2013), rev’g, 2012 U.S. Dist. LEXIS 91236 (June 26, 2012). For further discussion of the Agility decision, see

generally CRS Legal Sidebar WSLG826, Update: 11th Circuit Finds That Agencies Have Broad Discretion to Suspend

Affiliates of Federal Contractors, But Additional Challenges Are Pending in Other Jurisdictions, by (name redacted).

48 C.F.R. §9.407-4(a).

48 C.F.R. §9.407-3(a)-(d). The due process protections with suspension are not as extensive as those with debarment

because suspension is seen as “less serious” than debarment because of its shorter duration. See infra notes 87-91 and

accompanying text.

48 C.F.R. §9.407-5.

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of the exclusion and an opportunity to respond.46 The FAR also provides that the “fraudulent,

criminal, or other seriously improper conduct” of an officer, director, shareholder, partner,

employee, or other individual associated with a contractor may be imputed to the contractor in

certain circumstances,47 and vice versa.48 In addition, the conduct of one contractor participating

in a joint venture or similar arrangement may be imputed to other contractors if “the conduct

occurred for or on behalf of the joint venture or similar arrangement, or with the knowledge,

approval, or acquiescence of these contractors.”49 However, while these regulations have been

described by one court as “administrative devices to protect the public welfare and to impose on

government contractors a higher standard of care,”50 they do not necessarily allow agencies to

exclude persons simply based on their job titles or other nominal indicia of control.51 Similarly,

agency exclusion determinations could potentially be vulnerable to challenge on the grounds that

they are unreasonable if the agency makes “inconsistent” decisions when determining whether to

exclude particular affiliates of a contractor.52

Agency Discretion, Administrative Agreements, Continuation of Current

Contracts, and Waivers

Not all contractors who engage in conduct that constitutes potential grounds for debarment or

suspension under the FAR are excluded from contracting with executive branch agencies. Nor

does the debarment or suspension of a contractor guarantee that agencies do not presently have

contracts with that contractor, or will not contract with that contractor before the exclusion period

ends. Several aspects of the exclusion process under the FAR explain why this is so.

48 C.F.R. §9.406-1(b) (debarment); 48 C.F.R. §9.407-1(c) (suspension). For purposes of Subpart 9.4 of the FAR,

“[b]usiness concerns, organizations, or individuals are affiliates of each other if, directly or indirectly, (1) either one

controls or has the power to control the other, or (2) a third party controls or has the power to control both. Indicia of

control include, but are not limited to, interlocking management or ownership, identity of interests among family

members, shared facilities and equipment, common use of employees, or a business entity organized following the

debarment, suspension, or proposed debarment of a contractor which has the same or similar management, ownership,

or principal employees as the contract or that was debarred, suspended, or proposed for debarment.” 48 C.F.R. §9.403.

48 C.F.R. §9.406-5(a). Such conduct may be imputed to the contractor when “the conduct occurred in connection

with the individual’s performance of duties for or on behalf of the contractor, or with the contractor’s knowledge,

approval, or acquiescence,” and the contractor’s acceptance of benefits derived from the conduct constitutes evidence

of knowledge, approval, or acquiescence. Id.

48 C.F.R. §9.406-5(b). For the contractor’s conduct to be imputed to an officer, director, shareholder, partner,

employee or other individual, that individual must have participated in and known of, or had reason to know of, the

contractor’s conduct. Id.

48 C.F.R. §9.406-5(c).

Caiola v. Carroll, 851 F.2d 395, 399 (1988).

Id. at 401 (“Although it may be proper to presume or infer control from one’s title as an officer or director of a

closely held corporation, the presumption or inference of control must yield to the evidence of the particular case. On

the record presented in this case, a presumption or inference of control would be unwarranted as to [the plaintiffs].

Therefore, it was unreasonable to extend or impute [the company’s] criminal conduct to [them].”).

Id. at 400 (finding that the exclusion of the president and secretary of an excluded company was unreasonable given

that its treasurer was not excluded, and “[i]f a strict liability standard was to be applied, fairness and equal treatment

required that it be applied to all officers”). But see Kisser v. Cisneros, 14 F.3d 615, 619 (D.C. Cir. 1994) (construing

Caiola to mean only that an agency, having made an affirmative decision to debar several corporate officers, may not

make inconsistent decisions regarding their culpability). The plaintiff in Kisser had suggested that Caiola instead be

construed to mean that an agency must establish a “reasoned explanation” for why it excludes some, but not all,

members of a corporation who are potentially subject to debarment under the FAR.

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Procurement Debarment and Suspension of Government Contractors: Legal Overview

First, under the FAR, debarment or suspension of contractors is discretionary.53 The FAR says that

agencies “may debar” or “may suspend” a contractor when grounds for exclusion exist,54 but it

does not require them to do so.55 Rather, the FAR advises agency officials to focus upon the

public interest when making debarment determinations.56 Because the public interest can be seen

to encompass both safeguarding public funds by excluding contractors who may be

nonresponsible and not excluding contractors who are fundamentally responsible and could

otherwise compete for government contracts,57 agency officials could find that contractors who

engaged in exclusion-worthy conduct should not be excluded, particularly if they appear unlikely

to engage in similar conduct in the future.58 Any circumstance suggesting that a contractor is

unlikely to repeat past misconduct—such as changes in personnel or procedures, restitution, or

cooperation in a government investigation—can potentially incline an agency’s decision against

debarment.59 Moreover, exclusion can be limited to particular “divisions, organizational elements,

or commodities” of a company if agency officials find that only segments of a business engaged

in wrongdoing.60 Other contractors generally cannot challenge agency decisions not to debar a

contractor who is alleged or could be said to have engaged in debarment-worthy conduct.61 They

generally can only contest an agency’s determination of a contractor’s present responsibility,62

which is required prior to a contract award.63

Second, agencies can use administrative agreements as alternatives to debarment.64 In these

agreements, the contractor generally admits its wrongful conduct and agrees to restitution;

separation of employees from management or programs; implementation or extension of

compliance programs; employee training; outside auditing; agency access to contractor records;

48 C.F.R. §9.402(a) (“Debarment and suspension are discretionary actions.... ”).

48 C.F.R. §§9.406-2(a), 9.407-1(a).

See, e.g., 48 C.F.R. §9.406-1(a) (“The existence of a cause for debarment ... does not necessarily require that the

contractor be debarred.... ”).

Id. Suspensions under the FAR are based on the standard of the “government’s interests.” 48 C.F.R. §9.407-1(b)(1).

This is broadly similar, but not identical, to the “public interest,” which is why the focus of this paragraph is limited to

debarments.

See, e.g., Commercial Drapery Contractors, Inc. v. United States, 133 F.3d 1, 14-15 (D.C. Cir. 1998) (“Suspending a

contractor is a serious matter. Disqualification from contracting ‘directs the power and prestige of government’ at a

single entity and may cause economic injury.”).

See, e.g., 48 C.F.R. §9.406-1(a); Roemer v. Hoffman, 419 F. Supp. 130, 132 (D.D.C. 1976) (stating that the proper

focus, in debarment determinations, is upon whether the contractor is presently responsible notwithstanding the past

misconduct).

48 C.F.R. §9.406-1(a)(1)-(10).

Id. at (b). For example, in 2003, the Air Force suspended three units of Boeing Integrated Defense System in

response to allegations that several former Boeing employees conspired to steal trade secrets from rival Lockheed

Martin Corp. during a competition for the 1998 Evolved Expendable Launch Vehicle contract. See, e.g., Air Force Lifts

Suspension of Boeing from Eligibility for Federal Contracts, 83 Fed. Cont. Rep. 226 (March 8, 2005).

See, e.g., Heckler v. Chaney, 470 U.S. 821, 832 (1985) (holding that agency refusal to act is generally not judicially

reviewable).

See, e.g., Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1334-39 (Fed. Cir. 2001)

(upholding a challenged agency responsibility determination).

48 C.F.R. §9.103(b) (“No purchase or award shall be made unless the contracting officer makes an affirmative

determination of responsibility.”).

See, e.g., Office of Management and Budget, Suspension and Debarment, Administrative Agreements, and

Compelling Reason Determinations, August 31, 2006 (copy on file with the author) (“Agencies can sometimes enter

into administrative agreements ... as an alternative to suspension or debarment.”).

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Procurement Debarment and Suspension of Government Contractors: Legal Overview

or other remedial measures.65 The agency, for its part, reserves the right to impose additional

sanctions, including debarment, if the contractor fails to abide by the agreement or engages in

further misconduct.66 The FAR notes such agreements as a possible alternative to debarment,67

and their formation has historically been seen to be within agencies’ general authority to

determine with whom and on what terms they contract.68 Only the agency signing the agreement

is a party to it, and other agencies would not necessarily have been aware of the agreement’s

existence prior to enactment of the Duncan Hunter National Defense Authorization Act for

FY2009. Commonly known as the Clean Contracting Act, Sections 871-873 of this act required

the General Services Administration to establish a database that includes information related to

contractor misconduct beyond that contained in the former Excluded Party List System (EPLS),

subsequently incorporated within the System for Award Management (SAM). Called the Federal

Awardee Performance Integrity Information System (FAPIIS), the database established by the

Clean Contracting Act is required to contain brief descriptions of administrative agreements

relating to federal contracts within the past five years (along with terminations for default and

nonresponsibility determinations and civil, criminal, and administrative proceedings involving

federal contracts that resulted in a conviction or finding of fault) for persons holding a federal

contract or grant worth $500,000 or more.69

Third, even when a contractor is debarred, suspended, or proposed for debarment under the FAR,

an agency may generally allow the contractor to continue performance under any current

contracts or subcontracts unless the agency head directs otherwise.70 The debarment or

suspension generally serves only to preclude an excluded contractor from (1) receiving new

contracts or orders from executive branch agencies;71 (2) receiving new work or an option under

an existing contract; (3) serving as a subcontractor on certain contracts with executive branch

agencies;72 or (4) serving as an individual surety for the duration of the debarment or

Alan M. Grayson, Suspension and Debarment 37-38 (1991).

See, e.g., United States Department of State, Bureau of Political Military Affairs, In the Matter of General Motors

Corporation & General Dynamics Corporation, October 22, 2004, available at http://www.contractormisconduct.org/

ass/contractors/26/cases/108/528/general-dynamics-4_ca.pdf.

48 C.F.R. §9.406-3(f)(1) (requiring agency officials to take certain steps “[i]f the contractor enters into an

administrative agreement with the Government in order to resolve a debarment proceeding”).

See, e.g., Van Brocklin v. Tennessee, 117 U.S. 151, 154 (1886) (government has the inherent authority to enter into

binding contracts in the execution of its duties).

P.L. 110-417, §§871-73, 122 Stat. 4555-558 (October 14, 2008). The act also calls for Interagency Committee on

Debarment and Suspension to resolve which of multiple agencies wishing to exclude a contractor should be the lead

agency in bringing exclusion proceedings and coordinate exclusion actions among agencies. Id. at §873(a)(1)-(2). The

involvement of the Interagency Committee is potentially significant, because although the FAR previously encouraged

agencies to coordinate their exclusion efforts, it provided no requirement or mechanism for them to do so. See 48

C.F.R. §9.402(c) (2008) (“When more than one agency has an interest in the debarment or suspension of a contractor,

consideration shall be given to designating one agency as the lead agency for making the decision. Agencies are

encouraged to establish methods or procedures for coordinating their actions.”).

48 C.F.R. §9.405-1(a). However, when the existing contracts or subcontracts are “indefinite quantity” contracts, an

agency may not place orders exceeding the guaranteed minimum. 48 C.F.R. §9.405-1(b)(1). Similarly, an agency may

not (1) place orders under optional use Federal Supply Schedule contracts, blanket purchase agreements, or basic

ordering agreements with excluded contractors or (2) add new work, exercise options, or otherwise extend the duration

of current contracts or orders. 48 C.F.R. §9.405-1(b)(2)-(3).

48 C.F.R. §9.405(a). Contractors under indefinite-quantity contracts may, however, generally receive additional

orders so long as the total orders placed with the contractor does not exceed the minimum order under the contract. See

48 C.F.R. §9.405-1(b)(1).

With subcontracts that are subject to agency consent, there can be no consent unless the agency head states in writing

the “compelling reasons” for the subcontract. 48 C.F.R. §9.405-2(a). The rules as to subcontracts that are not subject to

(continued...)

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suspension.73 Any contracts that the excluded contractor presently has remain in effect unless they

are terminated for default or for convenience under separate provisions of the FAR.74

Finally, the FAR authorizes agencies to waive a contractor’s exclusion and enter into new

contracts with a debarred or suspended contractor.75 For an exclusion to be waived, an agency

head must “determine[] that there is a compelling reason for such action.”76 Some agencies have

regulations defining what constitutes a “compelling reason,” while others do not.77 Waivers are

agency-specific and are not regularly communicated to other agencies, a situation which a 2005

Government Accountability Office (GAO) report suggested remedying.78 Agency determinations

about the existence of compelling reasons are not, per se, reviewable by the courts; however,

other contractors can challenge awards to formerly excluded contractors through customary bid

protest processes.79 Moreover, even when an agency does not waive a contractor’s exclusion, it

can reduce the period or extent of debarment if the contractor shows (1) newly discovered

material evidence; (2) reversal of the conviction or civil judgment on which the debarment was

based; (3) bona fide changes in ownership or management; (4) elimination of other causes for

which the debarment was imposed; or (5) other appropriate reasons.80

Table 2. Comparison of Statutory and Administrative Debarments

Characteristic

Statutory Debarments

Administrative Debarments

Authority for

debarments

Various statutes

FAR (Part 9); Office of Federal Procurement

Policy Act

Basis for debarments

Specified violations of statutes (e.g.,

violations of federal or state controlled

substance laws; certain violations of the Buy

American Act, Clean Air Act, Clean Water

Act; etc.)

(1) Contractors convicted of or found civilly

liable for specified offenses; (2) agency

officials find contractors engaged in specified

conduct; or (3) other causes affect present

responsibility

Debarring official

Generally head of the agency administering

the statute

Head of the contracting agency or a

designee

Purpose

Often mandatory, occasionally discretionary

Always discretionary

Scope

Punitive

Preventive; cannot be punitive

(...continued)

agency consent are somewhat different. See 48 C.F.R. §9.405-2(b).

48 C.F.R. §9.405(a)-(c); §9.405-2(a)-(b).

See generally 48 C.F.R. §§49.000-49.607.

48 C.F.R. §9.405(a).

Id.

For purposes of the Department of Defense, for example, compelling reasons exist when (1) only the debarred or

suspended contractor can provide the supplies or services; (2) “urgency requires” contracting with the debarred or

suspended contractor; (3) the contractor and the agency have an agreement covering the same events that resulted in the

debarment or suspension, and the agreement includes the agency decision not to debar or suspend the contractor; or (4)

national defense requires continued business dealings with the debarred or suspended contractor. 48 C.F.R.

§209.405(a)(i)-(iv).

Gov’t Accountability Office, Federal Procurement: Additional Data Reporting Could Improve the Suspension and

Debarment Process 14 (2005), available at http://www.gao.gov/highlights/d05479high.pdf.

48 C.F.R. §§33.103-33.105. See CRS Report R40228, GAO Bid Protests: An Overview of Time Frames and

Procedures, by (name redacted) and (name redacted) for more information on bid protests generally.

48 C.F.R. §9.406-4(c)(1)-(5).

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Characteristic

Statutory Debarments

Administrative Debarments

Duration

Prescribed by statute

Commensurate with the offense, generally

not over 3 years

Waiving official

Generally the head of the agency

administering the statute

Head of the contracting agency

Source: Congressional Research Service.

Contractors’ Rights in Exclusion Proceedings

Although agencies generally have broad discretion in determining whether contractors should be

excluded for particular conduct, contractors enjoy several protections in the exclusion process.

Perhaps the foremost among these is an entitlement to due process of the law under the Fifth

Amendment to the U.S. Constitution. Early government contractors were generally held to lack

due process protections because contracting with the government was viewed as a privilege, not a

right,81 and courts held that persons were entitled to due process only when deprived of rights.82

However, this changed in 1964, with the decision by the U.S. Court of Appeals for the D.C.

Circuit in Gonzalez v. Freeman.83 Written by future Chief Justice Warren Burger, who was then a

judge for the D.C. Circuit, Gonzalez held that while contractors may not have a right to

government contracts, “that cannot mean that the government can act arbitrarily, either

substantively or procedurally, against a person or that such a person is not entitled to challenge

the processes and the evidence before he is officially declared ineligible for government

contracts.”84 For this reason, the court found that the Commodity Credit Corporation (CCC) had

improperly debarred the Thos. P. Gonzalez Corporation, in part, because the CCC failed to

provide written notice of the charges against the contractor85 and did not give the contractor “the

opportunity to present evidence and to cross-examine adverse witnesses, all culminating in

administrative findings and conclusions based upon the record.”86 A subsequent decision by the

D.C. Circuit in Horne Brothers, Inc. v. Laird held that contractors are also entitled to due process

in suspension determinations,87 although the court distinguished between suspensions of shorter

and longer duration in finding that a contractor is entitled to pre-exclusion notice and an

See, e.g., Perkins v. Lukens Steel Co., 310 U.S. 113, 129 (1940) (finding that “prospective bidders for contracts

derive no enforceable rights against the agent [Secretary] for an erroneous interpretation of the principal’s [Congress’s]

authorization.”). See also id. at 127 (“Like private individuals and businesses, the Government enjoys the unrestricted

power to produce its own supplies, to determine those with whom it will deal, and to fix the terms and conditions upon

which it will make needed purchases.”).

See, e.g., Ideal Uniform Cap Co., B-125183 (March 1, 1956) (rejecting a challenge to a debarment based, in part, on

the contractor’s reliance on the Fifth Amendment in refusing to produce business records subpoenaed by a Senate

subcommittee). The debarring agency had failed to comply with its own regulations, which called for notice and an

opportunity to respond prior to debarment, but the Government Accountability Office nonetheless denied the

contractor’s protest on the grounds that “contracting with the Government is a privilege, not a legal right.” Id.

334 F.2d 570 (D.C. Cir. 1964).

Id. at 574 (emphasis added).

Id.

Id. at 578. The court further found that the agency had violated the Administrative Procedure Act by debarring the

contractor in the absence of regulations (1) authorizing debarment for the offenses in question and (2) establishing

standards and procedures for the debarment process. Id. at 574-77.

463 F.2d 1268, 1271 (D.C. Cir. 1972) (“[A]n action that ‘suspends’ a contractor and contemplates that he may dangle

in suspension for a period of one year or more, is such as to require the Government to insure fundamental fairness to

the contractor whose economic life may depend on his ability to bid on government contracts.”).

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opportunity to be heard in suspensions of five months but not of three weeks.88 Because of these

and subsequent decisions,89 the FAR currently provides that contractors must generally receive

notice and an opportunity for a hearing before being debarred,90 but can be suspended without

prior notice or an opportunity to be heard so long as they are “immediately advised” of the

suspension and allowed to offer information in opposition to the suspension within 30 days.91

The judicially developed doctrine of de facto debarment can also serve to protect contractors from

improper exclusion in certain circumstances.92 While the possibility of de facto debarment often

arises in connection with agency conduct that also deprives the contractor of a protected liberty

interest without due process,93 the de facto debarment analysis focuses primarily upon conduct

outside the debarment and suspension process that effectively excludes contractors.94 For

example, in its 1980 decision in Old Dominion Dairy Products, Inc. v. Secretary of Defense, the

U.S. Court of Appeals for the D.C. Circuit found that the Air Force had improperly de facto

debarred a contractor through repeated nonresponsibility determinations based on the same

information. The Air Force had determined the contractor to be nonresponsible for the award of

Id. at 1272-73.

See, e.g., ATL, Inc. v. United States, 736 F.2d 677, 685 (Fed. Cir. 1984) (“[W]here the Navy is taking a flat-out

position denying fact-finding,” the suspended contractor is due a “prompt give-and-take, step-by-step cooperative

process.”); Transco Security, Inc. of Ohio v. Freeman, 639 F.3d 318, 323 (6th Cir. 1981) (finding that the General

Services Administration failed to provide adequate notice when it indicated that a company was suspended for alleged

billing irregularities, but did not “specify the contracts allegedly affected by, or the approximate date of, the

‘misbillings.’”).

48 C.F.R. §9.406-3(b)-(c). These procedures do not apply where the debarment is based upon convictions or civil

judgments. In such cases, the process that the contractors received in their criminal or civil trial is deemed to constitute

due process for purposes of debarment.

48 C.F.R. §9.407-3(b)-(c). Specifically, the notice of the suspension must state that the contractor may “submit, in

person, in writing, or through a representative, information and argument in opposition to the suspension.” Id. at

§9.407-3(b)(1). Some commentators have, however, objected that the FAR’s current provisions regarding suspension

are inconsistent with the Horne Brothers decision and deprive the contractor of due process, in part, because they do

not obligate the government to hold a hearing within 30 days of the suspension. See, e.g., Todd J. Canni, Shoot First,

Ask Questions Later: An Examination and Critique of Suspension and Debarment under the FAR, Including a

Discussion of the Mandatory Disclosure Rule, the IBM Suspension, and Other Noteworthy Developments 38 Pub.

Cont. L.J. 547, 603-605 (2008/2009).

See, e.g., Peter Kiewit Sons’ Co. v. U.S. Army Corps of Eng’rs, 534 F. Supp. 1139 (D.D.C. 1982), rev'd on other

grounds, 714 F.2d 163 (D.C. Cir. 1983) (finding that a government directive to hold all awards to contractor “in

abeyance” due to concerns about the contractor’s integrity, without providing notice or an opportunity to be heard,

constituted de facto debarment and deprived the contractor of due process).

Nathanael Causey, Past Performance Information, De facto Debarments, and Due Process: Debunking the Myth of

Pandora’s Box, 29 Pub. Cont. LJ. 637, 676 (2000) (noting that de facto debarment and due process issues often arise in

the same case). A court could, however, find an improper de facto debarment without finding a denial of due process.

See, e.g., Shermco Indus. v. Secretary of the Air Force, 584 F. Supp. 76 (N.D. Tex. 1984). In addition, one court

recently found that de facto debarment need not be based on charges of lack of integrity to give rise to Fifth

Amendment due process protections. See Phillips v. Mabus, 894 F. Supp. 2d 71 (D.D.C. 2012).

See Causey, supra note 93, at 681 (“The key distinction between de facto debarment and denial of due process is the

element of stigma.”). De facto debarment cases generally focus upon the contractor’s liberty interests in being able to

challenge allegations about their integrity that could deprive them of their livelihood. See Old Dominion Dairy Prods.,

Inc. v. Sec’y of Def., 631 F.2d 953, 955-56 (D.C. Cir. 1980) (“[W]hen a determination is made that a contractor lacks

integrity and the Government has not acted to invoke formal suspension and debarment procedures, notice of the

charges must be given to the contractor as soon as possible so that the contractor may utilize whatever opportunities are

available to present its side of the story before adverse action is taken.”). Courts have recognized that contractors have

such liberty interests, despite lacking property rights in prospective government contracts. See, e.g., Transco Sec., 639

F.2d at 321 (“[D]eprivation of the right to bid on government contracts is not a property interest.”).

Congressional Research Service

Procurement Debarment and Suspension of Government Contractors: Legal Overview

one contract because of an audit report showing three irregularities in billing statements.95 The

Air Force never informed the contractor of these allegations, in part, because contractors do not

routinely receive notice of nonresponsibility determinations concerning them.96 However, the

contractor was later determined to be nonresponsible for the award of a second contract by

another contracting officer, who had received news of the earlier determination and relied upon it

to conclude that the contractor lacked integrity.97 The court found that the second

nonresponsibility determination constituted an improper de facto debarment because the

contractor was excluded from government contracts without any notice of or opportunity to

challenge the allegations against it.98 Later judicial and administrative tribunals have similarly

found that an agency improperly de facto debars a contractor based upon repeated

nonresponsibility determinations based on the same information,99 as well as through words or

conduct evidencing an intent to exclude the contractor from government contracts.100

Additionally, in certain circumstances, agencies’ determinations to debar or suspend a contractor

could potentially be found to violate the Administrative Procedure Act (APA), particularly if the

agency excludes the contractor based upon circumstances that the agency was aware of when it

previously found that contractor sufficiently responsible to be awarded a federal contract. Such a

situation arose in the 2001 case of Lion Raisins, Inc. v. United States, where the U.S. Court of

Federal Claims found that the U.S. Department of Agriculture’s (USDA’s) suspension of a

contractor for falsifying raisin certifications violated the APA, given that the USDA knew of the

contractor’s conduct when making five prior determinations that the contractor was

“responsible.”101 According to the court,

[e]ven assuming plaintiff’s alleged conduct evidences “a lack of integrity or business

honesty” so as to justify suspension, the court holds that [the suspending official] abused his

discretion when he determined that the evidence of plaintiff’s lack of integrity in April 1998,

which was known to the agency as of May 1999, “seriously and directly” affected plaintiff’s

Old Dominion, 631 F.3d at 960.

See CRS Report R40633, Responsibility Determinations Under the Federal Acquisition Regulation: Legal Standards

and Procedures, supra note 1, at 12.

Old Dominion, 631 F.3d at 966 n.24 (noting that “the determination that Old Dominion lacked integrity had already

been communicated through Government channels and undoubtedly would have been recommunicated every time [it]

bid on a subsequent contract”).

Id. at 968.

See, e.g., Shermco Indus., 584 F. Supp. at 93-94 (“[A] procuring agency cannot make successive determinations of

nonresponsibility on the same basis; rather it must initiate suspension or debarment procedures at the earliest

practicable moment following the first determination of nonresponsibility.”); 43 Comp. Gen. 140 (August 8, 1963)

(finding that multiple determinations of nonresponsibility can be tantamount to debarment). However, multiple

contemporaneous nonresponsibility determinations made on the same basis do not necessarily constitute de facto

debarment, especially when the determinations are based on the most current information available. See, e.g., Mexican

Intermodal Equip., S.A. de C.V., Comp. Gen. B-270144 (January 31, 1996) (two responsibility determinations were not

“part of a long-term disqualification,” but were “merely a reflection of the fact that the determinations were based on

the same current information.”); Sermor Inc., Comp. Gen. B-219132.2 (October 23, 1985) (finding five consecutive

nonresponsibility determinations did not constitute de facto debarment).

100

See, e.g., Peter Kiewit Sons’ Co., 534 F. Supp. at 1139 et seq. (internal government directive to hold awards to the

contractor “in abeyance” for an indefinite period); Conset Corp. v. Cmty. Servs. Admin., 655 F.2d 1291 (D.C. Cir.

1981) (circulation of a memorandum alleging that a grant recipient had a conflict of interest, coupled with a subsequent

refusal to approve the firm for a grant); Related Indus., Inc. v. United States, 2 Cl. Ct. 517 (1983) (contracting officer

stated that “under no circumstances will he award any contract” to the contractor); Leslie & Elliott Co. v. Garrett, 732

F. Supp. 191 (D.D.C. 1990) (statement that the contractor was an “administrative burden” that lacked integrity).

101

51 Fed. Cl. 238 (2001).

Congressional Research Service

Procurement Debarment and Suspension of Government Contractors: Legal Overview

“present responsibility” as a Government contractor in February of 2001. The USDA

awarded plaintiff five contracts between the completion of its investigation in May 1999 and

its decision to suspend plaintiff in January 2001. The USDA statutorily was obligated to

make an affirmative finding of plaintiff’s responsibility before awarding each of those

contracts. In other words, five times between May 26, 1999, and February 1, 2001, the

USDA itself affirmed that plaintiff’s business practices met the standards for present

responsibility. Significantly, by the USDA’s own representations, it did so despite the

possession of all the evidence that it would later use to suspend plaintiff. The court finds

these facts dispositive of the issue of plaintiff’s present responsibility. That [the suspending

official] knew of the five interim contracts is demonstrated by their incorporation into the

administrative record and by his reference to them in his final report and decision. That he

nevertheless concluded that suspension was immediately necessary to protect government

interests, without pointing to any event as to the issue of immediacy, was arbitrary and

capricious.102

While the decision in Lion Raisins has been strongly criticized by some commentators103 and

distinguished by some courts,104 it has been followed or cited approvingly by others105 and could

potentially be construed as precluding agencies from debarring or suspending contractors under

the FAR based on “stale” allegations of wrongdoing.106

Author Contact Information

(name redacted)

Legislative Attorney

[redacted]@crs.loc.gov, 7-....

102

Id. at 247-48 (internal citations omitted).

See, e.g., Michael J. Davidson, Protest Challenges to Integrity-based Responsibility Determinations, 14 Fed. Cir.

Bar J. 473, 499-500 (2004/2005) (“Contrary to the court’s opinion, the contracting officer’s affirmative responsibility

determination is a decision by a single contracting officer, not that of the entire agency. The responsibility

determination is limited to that specific contract and does not bind the agency on any responsibility determination

beyond it. Moreover, while the lack of present responsibility determination by [a suspending or debarring official]

binds the contracting officer and preempts the normal contracting officer responsibility determination, the converse is

not true. To the extent the court decided otherwise, the case was wrongly decided.”).

104

See Kirkpatrick v. White, 351 F. Supp. 2d 1261 (N.D. Ala. 2004) (noting that the investigation underlying the

suspension in the instant case was not completed until eight months after the suspension was imposed, unlike in Lion

Raisins); Gulf Group, Inc. v. United States, 61 Fed. Cl. 338 (2004) (noting that the testimony of the decisionmaker in

the instant case was not inconsistent with the documentation of his decision, unlike in Lion Raisins).

105

See, e.g., Todd Constr., L.P. v. United States, 88 Fed. Cl. 235 (2009); Arch Chems., Inc. v. United States, 64 Fed.

Cl. 380 (2005); S.K.J. & Assocs. v. United States, 67 Fed. Cl. 218 (2005).

106

See Davidson, supra note 103, at 503 (suggesting that Lion Raisins gave agencies “greater incentive to act quicker”

when determining whether to exclude a contractor).

103

Congressional Research Service

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