Modernizing Suspension and Debarment Rules

FEDERAL COMMUNICATIONS COMMISSION

2 CFR Part 6001

47 CFR Parts 54 and 64

[GN Docket No. 19-309; FCC 26-18; FR ID 339008]

Modernizing Suspension and Debarment Rules

AGENCY:

Federal Communications Commission.

ACTION:

Final rule.

SUMMARY:

In this document, the Federal Communications Commission (Commission) adopts the Office of Management and Budget's Guidance for Nonprocurement Debarment and Suspension, along with agency-specific regulations to allow the agency to further combat waste, fraud, and abuse, and remove bad actors from participation in its support programs. The Commission finds further notice and comment “unnecessary” under the Administrative Procedure Act (APA) for the Commission to adopt the Guidelines (including updates made after the Notice of Proposed Rulemaking in this proceeding), but elect to provide an opportunity for input on that assessment as to three of the Guidelines. A Proposed Rule relating to the Commission's adoption of updated suspension and debarment rules is published elsewhere in this issue of the

Federal Register

.

DATES:

Effective dates:

Amendatory instruction 3 is effective May 11, 2026. Amendatory instructions 1, 4 through 9, and 11 through 13 are delayed indefinitely. The Commission will publish a document in the

Federal Register

announcing the effective date for the delayed actions.

Comment due date:

As explained in the preamble below, comments in response to the adoption of §§ 180.630, 180.705, and 180.730 of the OMB Guidelines will be accepted until May 11, 2026. If significant adverse comment is received, the Federal Communications Commission will publish a timely notification in the

Federal Register

informing the public of additional procedures that must be followed.

ADDRESSES:

Pursuant to §§  1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments on or before the dates provided in the

DATES

section of this document. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS). See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998). You may submit comments, identified by GN Docket No. 19-309, by any of the following methods:

•

Electronic Filers:

Comments may be filed electronically using the internet by accessing the ECFS:

https://www.fcc.gov/ecfs

.

•

Paper Filers:

Parties who choose to file by paper must file an original and one copy of each filing.

• Filings can be sent by hand or messenger delivery, by commercial courier, or by the U.S. Postal Service. All filings must be addressed to the Secretary, Federal Communications Commission.

• Hand-delivered or messenger-delivered paper filings for the Commission's Secretary are accepted between 8:00 a.m. and 4:00 p.m. by the FCC's mailing contractor at 9050 Junction Drive, Annapolis Junction, MD 20701. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of before entering the building.

• Commercial courier deliveries (any deliveries not by the U.S. Postal Service) must be sent to 9050 Junction Drive, Annapolis Junction, MD 20701. Filings sent by U.S. Postal Service First-Class Mail, Priority Mail, and Priority Mail Express must be sent to 45 L Street NE, Washington, DC 20554.

•

People With Disabilities:

To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an email to

fcc504@fcc.gov

or call the Consumer & Governmental Affairs Bureau at 202-418-0530.

FOR FURTHER INFORMATION CONTACT:

Paula Silberthau, Attorney Advisor, Office of General Counsel, 202-418-1874,

paula.silberthau@fcc.gov.

SUPPLEMENTARY INFORMATION:

This is a summary of the Commission's

Report and Order

in GN Docket No. 19-309, FCC 26-18, adopted on March 26, 2026, and released on March 27, 2026. The complete text of this document is available for download at

https://docs.fcc.gov/public/attachments/FCC-26-18A1.pdf.

Alternative formats are available for people with disabilities (Braille, large print, electronic files, audio format) by sending an email to

fcc504@fcc.gov

or calling the Commission's Consumer and Government Affairs Bureau at (202) 418-0503.

Regulatory Flexibility Act.

The Regulatory Flexibility Act of 1980, as amended (RFA) requires that an agency prepare a regulatory flexibility analysis for notice and comment rulemakings, unless the agency certifies that “the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.” Accordingly, the Commission has prepared a Final Regulatory Flexibility Analysis (FRFA) concerning the possible impact of the rule changes contained in the

Report and Order

on small entities. The FRFA is set forth below and in Appendix B appended to the Commission's Report and Order,

https://docs.fcc.gov/public/attachments/FCC-26-18A1.pdf.

Paperwork Reduction Act.

This document contains new information collection requirements. The Commission, as part of its continuing effort to reduce paperwork burdens, will invite the general public to comment on the information collection requirements contained in this

Report and Order

as required by the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, the Commission notes that pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198,

see

44 U.S.C. 3506(c)(4), we previously sought specific comment on how the Commission might further reduce the information collection burden for small business concerns with fewer than 25 employees.

Congressional Review Act.

The Commission has determined, and the Administrator of the Office of Information and Regulatory Affairs, Office of Management and Budget, concurs, that this rule is “non-major” under the Congressional Review Act, 5 U.S.C. 804(2). The Commission will send a copy of the

Report and Order

to Congress and the Government Accountability Office pursuant to 5 U.S.C. 801(a)(1)(A).

Introduction

The Federal Communications Commission (FCC or Commission) administers several congressionally-mandated programs, such as the Universal Service Fund (USF) and the Telecommunications Relay Services (TRS) program, that provide significant funding to close the digital divide and ensure that all Americans have access to communications services. In administering these important programs, it is incumbent upon the Commission to be a good steward of these funds, which are ultimately paid for by the American people. We must ensure that these limited dollars serve their intended purposes. Waste, fraud, and abuse frustrate the Commission's goals and undermines public trust in these programs. Bad actors who would seek to enrich themselves by siphoning

these critical resources away from connecting rural households and businesses, schools and libraries, rural healthcare providers, low-income households, and people with disabilities have no place in these programs. As such, in this Report and Order we adopt additional, critical tools which will allow us to promptly and efficiently take action to exclude or otherwise limit bad actors' participation in these programs. These changes, which received widespread support in the record, will align our processes with other agencies, incorporate current fraud prevention best practices, and, ultimately, distribute funds more responsibly.

Background

OMB Guidelines.

The Commission's 2019 Notice of Proposed Rulemaking (NPRM) (85 FR 2078) proposed to adopt the OMB Guidelines on Governmentwide Debarment and Suspension (Nonprocurement) (Guidelines) (71 FR 66431, amended 89 FR 30046). The Guidelines establish a common framework for a governmentwide debarment and suspension system for nonprocurement programs. The Guidelines define “non-procurement transaction” as “any transaction, regardless of type (except procurement contracts),” including but not limited to grants, cooperative agreements, scholarships, fellowships, contracts of assistance, loans, loan guarantees, subsidies, insurances, payments for specified uses, and donation agreements. Suspension and debarment rules for federal procurement contracts are contained in the Federal Acquisition Regulation (FAR), 48 CFR pt. 9. The Guidelines generally provide for suspension or debarment based on a range of misconduct. This range includes not only convictions of or civil judgments for fraud or certain criminal offenses, but also violations of the requirements of public transactions “so serious as to affect the integrity of a Federal agency program” (including willful or repeated violations). In addition, the Guidelines provide that suspension or debarment could be warranted for “[f]ailure to pay a single substantial debt, or a number of outstanding debts . . . owed to any Federal agency . . . .” Finally, the Guidelines provide the discretion to suspend or debar for “[a]ny other cause that is so serious or compelling in nature that it affects [the party's] present responsibility.” However, in the case of suspensions, but not debarments, the suspending official must find that “[i]mmediate action is necessary to protect the public interest.”

Suspensions under the Guidelines have prospective but immediate effect, and debarments are effective following a 30-day opportunity for a party to respond to a debarment notice and the issuance of a final debarment order. Once effective, an action to suspend or debar serves to automatically exclude the suspended or debarred party from new covered transactions governmentwide, whether in procurement or nonprocurement programs or activities. For ongoing activities, “a participant may . . . continue to use the services of an excluded person as a principal” if the participant was “using that person's services in the transaction before the person was excluded.” The participant also has the option of discontinuing the excluded person's services and finding an alternative provider. Likewise, under the Guidelines, a participant “may continue covered transactions with an excluded person if the transactions were in existence when the Federal agency excluded the person,” but the participant is not required to do so.

Under the Guidelines, suspension and debarment (referred jointly herein as exclusions) are not punitive actions, and are separate from civil enforcement actions (including those undertaken under the Communications Act) and criminal prosecutions. They are also separate from any administrative procedures that may be used to recover debt. Thus, this Report and Order does not limit or otherwise impact any preexisting statutory, regulatory or common law tools available to the Commission or to the Government generally, other than any suspension and debarment rules that may be expressly replaced or superseded by this Report and Order. Instead, exclusion is an administrative action taken to protect the Government's business interests on a prospective basis. Federal agencies, through their Suspending and Debarring Officials (SDO), must use balance and judgment in determining whether suspension or debarment is appropriate in a particular matter, including when an exclusion proceeding occurs as a result of, or at the same time as, other criminal, civil, or administrative proceedings. In this respect, the approach in the Guidelines can enhance the remedies or tools that a federal agency such as the Commission might use to address misconduct, while providing the federal agency with flexibility to adopt supplemental rules tailored to its specific programs.

Notice of Proposed Rulemaking

The Notice of Proposed Rulemaking (NPRM) proposed to adopt the Guidelines for several critical support programs: the USF programs, the TRS program, and the NDBEDP. The NPRM also proposed supplemental rules that would implement the Guidelines and clarify their application to the Commission's programs. The NPRM explained that the proposed supplemental rules were consistent with the Guidelines—which broadly afford each agency flexibility to implement the Guidelines in a manner that addresses its specific needs—and were based on the Commission's experience in administering these programs over many years.

The comments received by the Commission demonstrate that there is widespread support for us to adopt new rules that are substantially similar to those proposed in the NPRM. Indeed, there was near consensus support for adopting updated, more flexible suspension and debarment rules based on the Guidelines to facilitate the exclusion of bad actors who pose a threat to the integrity of our programs. Additionally, many commenters proposed concrete, thoughtful modifications or alternatives to our proposed supplemental rules to improve their clarity, transparency, and process protections without compromising their efficacy. And in many cases, we find that adopting commenters' proposed changes or clarifications will advance the public interest.

Since the release of the NPRM, high-profile investigations involving fraud in Commission programs, including USF and other programs, have served to emphasize the importance of having more robust suspension and debarment rules in order to safeguard public funds.

Report and Order

We hereby adopt the Guidelines and supplemental rules, as tailored below to the Commission's programs, to best address and prevent waste, fraud, and abuse with respect to those programs. Specifically, we adopt a broader and expanded range of misconduct (beyond merely criminal convictions and civil judgments) that can trigger Commission exclusion proceedings, and apply these remedies to the Covered Programs. We adopt the Guidelines' approach, again tailored to the Commission's programs and needs, in applying the exclusions to any participant or principal, which can include individuals, units of government, or legal entities, engaging in a covered transaction, and we adopt supplemental rules that explain how these regulations will apply for different tiers of transactions between an agency and a participant, as well as between a participant in one of the covered

transactions and other parties. We establish the position of SDO at the Commission and will subsequently appoint an SDO whose proceedings, unless otherwise designated, will be exempt proceedings governed by section 1.1204(b) of the Commission's ex parte rules, which provides that ex parte presentations to or from Commission decisionmaking personnel are permissible and need not be disclosed. We anticipate that this approach will encourage the free flow of information in communications involving the SDO, permit the SDO to consider relevant evidence, and facilitate expedient yet comprehensive resolution of these proceedings. Accordingly, we find it is in the public interest to designate such proceedings as exempt proceedings under our

ex parte

rules. The SDO will review the misconduct, adduce additional evidence if necessary, and determine whether an exclusion remedy is warranted.

We follow the Guidelines' approach, which excludes a suspended or debarred entity or individual from all new governmentwide nonprocurement and procurement programs, but we adopt supplemental rules and a presumption that the SDO will exclude a suspended or debarred party from existing transactions subject to a reasonable period for customers or end-users to transition to a new provider. For certain situations, such as where alternate service providers are not available, the supplemental rules will permit the SDO to consider whether it is in the public interest to grant limited exceptions. To the extent that another government agency has excluded an entity or individual from participating in its programs, the revised rules will generally provide for reciprocity and exclude such entities or individuals from Commission programs. We adopt the Guidelines' approach of imposing a suspension period of up to twelve months and a three year debarment period with a supplemental rule offering the SDO the option, in appropriate cases, to require the excluded entity or individual to file a petition for readmission rather than being automatically permitted to resume participation after the conclusion of the exclusionary period. Although we do not expect the SDO to regularly rely on this option, we permit the SDO to have discretion to require this filing if warranted.

We also adopt an alternative remedy to suspension and debarment, a Limited Denial of Participation, to address misconduct that may not warrant an exclusion. The SDO may limit the entity or individual from participating in some or all of the programs that the revised rules cover or may limit participation in other ways that we discuss in greater detail below.

Such entities or individuals generally may not participate in the relevant programs, must disclose to others involved in transactions receiving Federal funds that they are excluded from participation, and may not serve, or continue to serve, on Commission advisory committees and comparable Commission groups or task forces.

As a procedural matter, we acknowledge that in the NPRM we proposed to codify most proposed supplemental suspension and debarment rules at Title 47, chapter 1, subchapter A, part 16. As detailed below, we instead codify most of the supplemental rules at Title 2, subtitle B, chapter LX, part 6001, subject to coordination with other agencies regarding the placement in the Code of Federal Regulations. This change comports with the placement practice of many other agencies that have adopted the governmentwide suspension and debarment rules with any relevant supplemental rules or modifications.

Suspension and Debarment

The default procedural requirements applicable to suspension and debarment actions are set forth in subparts F, G, and H of the Guidelines. In the NPRM, the Commission requested comment on Commission-specific modifications to those procedures as well as proposed supplemental rules specific to our programs. The NPRM also more broadly invited comment on any other changes that parties proposed to the Guidelines' default rules and procedures.

Definition of, and Relationship Between, Suspension and Debarment

We adopt the Guidelines' definitions of suspension and debarment given their broader range of covered misconduct and the governmentwide reach of their remedies as compared with the scope of our existing rules. The Guidelines define a “suspension” as “an action taken by a suspending official . . . that immediately prohibits a person from participating in covered transactions and transactions covered under the Federal Acquisition Regulations . . . for a temporary period, pending completion of a Federal agency investigation and any judicial or administrative proceedings that may ensue,” and note that a “person so excluded is suspended.” The Guidelines define a “debarment” as “an action taken by a debarring official . . . to exclude a person from participating in covered transactions and transactions covered under the Federal Acquisition Regulations,” noting that “[a] person so excluded is debarred.”

Suspension differs from debarment in several ways. First, a suspension is “a temporary status of ineligibility for procurement and nonprocurement transactions, pending completion of an investigation or legal or debarment proceeding” whereas debarment is a remedy that is “impose[d] . . . for a specified period as a final determination that a person is not presently responsible.” Second, an SDO only needs to find that there is “adequate evidence” to support a suspension but must base a debarment on a “preponderance of the evidence.” Third, because a suspension usually precedes notice and a chance to be heard, an SDO may only impose a suspension when it finds that “immediate action is necessary to protect the public interest.” In contrast, a debarment is imposed after a notice is issued and the respondent has had a chance to contest the proposed debarment. Finally, the period for suspension is typically capped at twelve months, though the SDO may also extend the suspension for an additional six months. If legal or debarment proceedings are initiated, the suspension may continue until the conclusion of those proceedings, but if such proceedings are not initiated a suspension may not exceed 18 months. Additionally, the period of debarment is based on the seriousness of the cause(s) prompting debarment and typically should not exceed three years. If circumstances warrant, the SDO may extend the debarment period or issue additional requirements under the supplemental rules adopted by this

Report and Order.

Applicability

We apply the new suspension and debarment rules to nonprocurement transactions only under the Covered Programs. The rules shall not extend at this time to transactions carried out under the Commission's other currently existing programs, nor shall they extend to transactions to or from licensees and those with spectrum usage rights (with the exception of transactions under the Covered Programs where such an entity is a participant). These decisions find ample support in the record.

Under the Guidelines that we adopt, together with supplemental rules, the suspension and debarment provisions apply to those persons or entities that the rules designate as “participants.” We describe the participants for each of the programs to which the new rules apply in more detail below. But as a

general matter, participants subject to these rules are: (1) the beneficiaries and service providers that participate in the Commission's programs (typically designated as “Primary Tier” participants); and (2) other entities or persons—including contractors, subcontractors, suppliers, consultants, marketing organizations, or agents or representatives of such entities or persons—involved with the implementation of these programs (“Lower Tier” participants). Persons at the lower tiers will not be considered participants unless they also satisfy additional criteria. Specifically, they must either: (i) have a material role relating to or significantly affecting claims for disbursements related to the program; (ii) be considered a “principal” in the transaction; or (iii) be involved in a transaction in the program anticipated to be at least $25,000. Given our experience administering the Covered Programs, we are inclined to construe broadly the term “involved in” to include the submission of an application for support. For example, E-Rate consultants are ”involved in” a transaction when assisting schools and libraries in preparing their application. Likewise, marketing representatives are “involved in” transactions every time they assist in signing up a low-income consumer in the Lifeline program.

In addition, consistent with section 180.200 of the Guidelines, our rules also treat the E-Rate and Rural Health Care program beneficiaries, including schools, libraries, and rural health care facilities, that deal directly with the Commission or its agent, Universal Service Administrative Company (USAC), as “participants” subject to the rules. On the other hand, we do not treat Lifeline (or former ACP) subscribers or end-users of TRS and NDBEDP services as “participants” subject to the disclosure and other requirements of our new rules.

Causes and Factors

We generally adopt the NPRM's proposals regarding what causes and factors may lead to suspension and debarments, but for the reasons explained below, we adjust and clarify our approach in light of the record. The Guidelines expressly identify several “causes” for suspension or debarment, which include: (1) convictions of, or civil judgments for, fraud or certain offenses—including any offense “indicating a lack of business integrity or business honesty that seriously and directly affects your present responsibility;” or (2) violations of the terms of “a public agreement or transaction so serious as to affect the integrity of a Federal agency program,” which may include willful or repeated violations. The Guidelines indicate that, beyond the specific, enumerated causes, an agency may exclude a person for “[a]ny other cause that is so serious or compelling in nature that it affects your present responsibility.” Further, the Guidelines provide each agency flexibility to identify additional causes for suspensions and debarments. The NPRM proposed to adopt the causes in the Guidelines, proposed several additional causes, and requested comment generally on whether to adopt an FCC-specific supplemental rule with the additional causes. Further, as explained in the NPRM, in the case of the TRS program and NDBEDP, causes for suspension and revocation under existing procedures overlap with, but are not the same as, the new suspension and debarment rules. Therefore, the procedures adopted herein are intended to supplement, not replace, the existing program procedures authorizing suspension or revocation of certifications to provide TRS or to participate in the NDBEDP.

We find that adoption of the causes for exclusion articulated in the Guidelines will provide the Commission with flexibility while affording program participants notice of the types of misconduct that may trigger suspension or debarment. Most commenters did not object to our adoption of the Guidelines' causes for suspension and debarment or aggravating and mitigating factors that an SDO may consider. We address other commenters' views below.

Consistent with the Guidelines, we also adopt the examples of “causes” and factors proposed in the NPRM. Our Supplemental Rule 6001.450(a) is consistent with the “causes,” and subsections (b) and (c) of Supplemental Rule 6001.450 are consistent with the “factors” that may be considered. In this regard, we build on the longstanding history of the Guidelines and their widespread adoption. We also find that expressly identifying the types of FCC-specific activity that may result in exclusion serves the dual purposes of providing further guidance to the SDO and notice to program participants. We find that our supplemental rule is consistent with the Guidelines.

Our “causes” rule includes potential causes for suspension or debarment that fall into two categories: (i) violations of program-specific rules that affect program integrity; and (ii) violations of other applicable Commission rules that affect present responsibility. The first group includes “violation[s] of the terms of a public agreement or transaction,” specific to FCC programs, that could “be so serious as to affect the integrity of” those programs. The causes that fall into this category include, but are not limited to: the willful or grossly negligent submission of false or misleading FCC forms or statements or other documentation to the Commission or to the administrators of the Covered Programs that result in or could result in overpayments of federal funds to the recipients; the willful or grossly negligent violation of a statutory or regulatory provision applicable to the Covered Programs; and the willful, grossly negligent, or habitual failure to respond to requests made by the Commission or the administrators of the Covered Programs for additional information to justify payment or continued operation under their certifications. We anticipate that in evaluating a person's failure to respond, the SDO will also consider the person's compliance with any applicable document retention regulations, as well as the quality and credibility of evidence presented. We also note that not all such violations will be serious enough to affect program integrity; rather, this supplemental rule simply provides notice of the type of violations that, in light of the relevant facts and circumstances, may be sufficiently serious.

The second group of “causes” include: (1) a single serious violation of Commission rules or repeated violations of Commission rules; or (2) a single substantial or habitual non-payment or under-payment of Commission regulatory fees. A single serious violation would be a violation that materially and negatively affects the participant's present responsibility. Similar to the causes listed in section 180.800(c) of the Guidelines, these additional causes bear upon the present responsibility of a program participant in doing business with the federal government—specifically, the Commission.

Many of the commenters opposing our proposed supplemental causes rule misapprehended or mischaracterized the proposal. The NPRM did not propose automatic triggers that would always require exclusion or that would be dispositive in suspension and debarment proceedings; instead, the NPRM proposed to identify FCC-specific activity to supplement the causes that can trigger suspension and debarment processes. Under the Guidelines and our supplemental rule, before initiating a proceeding, an SDO should look to not only the causes identified in section 180.800, but also, consistent with the Guidelines, the FCC-specific activities identified in

Supplemental Rule 6001.450, and then evaluate that conduct based on the aggravating and mitigating factors set forth in section 180.860. Consistent with the Guidelines, an SDO would then consider the unique circumstances of the particular case including whether a cause for debarment is “so serious or compelling in nature that it affects [a participant's] present responsibility,” since the purpose of the suspension and debarment system is to “ensure[] the integrity of Federal programs by conducting business only with responsible persons.” In this regard, we also observe that the extent of noncompliance often bears on Commission determinations relating to what actions it will take to address misconduct; the case-by-case determination we adopt here mirrors that approach in other contexts such as licensing. We thus reject suggestions to the contrary.

We also disagree with the Joint Association Commenters who claim that a supplemental rule is unnecessary because the Commission has “existing . . . mechanisms to protect affected funding programs,” or that the proposed rule somehow “duplicate[s]” or “conflate[s] the FCC's enforcement function to prosecute past violations with the forward-looking purpose of the suspension and debarment rules.” To the contrary, the rules we adopt are necessary precisely because they are not duplicative, but instead provide the Commission with needed additional tools to protect the integrity of its programs, including ensuring that federal funds are not disbursed to irresponsible actors. Rule violations generally will continue to be handled through enforcement proceedings in the first instance, though investigation of such violations could result in referral for an exclusion proceeding in appropriate cases. For example, in situations in which a single substantial rule violation or repeated rule violations (

e.g.,

month after month violation of the same rule, notwithstanding FCC clarifications, guidance, or enforcement actions) demonstrate an entity's lack of responsibility, an exclusion proceeding would be appropriate and our revised supplemental rule accounts for this. Further, in light of the robust process protections in our supplemental rules and the clarifications we offer in this

Report and Order,

we also reject the suggestion of CTIA and USTelecom that “[p]ermitting suspension or debarment for minor or single rule violations could reduce participation in the Commission's support programs.”

In turn, administration of funding holds and recovery of improper payments will continue to be handled through existing administrative and debt collection tools. Additionally, the rules adopted in this Report and Order will not preclude the agency or the program administrators from undertaking other reviews and actions, such as USAC's ability to lock a registered Representative Accountability Database (RAD) user's account, to address Commission rule violations or recover improperly disbursed funds. (RAD is a registration system that USAC uses to validate the identities of service provider representatives and track a representative's transactions in the National Lifeline Accountability Database (NLAD) and the National Verifier. Service providers' representatives are required to register for a unique Representative ID (Rep ID) that is linked to the service provider's Application Programming Interface (API) account. This allows USAC to track and monitor the activity of individual service provider representatives. If USAC suspects that a representative is engaging in potentially fraudulent activity, it may lock the representative's account.) Likewise, nothing in this Report and Order or any order of the SDO shall interfere with the Commitment Adjustment Process (COMAD) through which USAC recovers funds that have been committed or disbursed in error, or otherwise wrongly, by rescinding those commitments and recovering improperly disbursed funding. An exclusion is a distinct remedy that will remove wrongdoers both from participation in agency procurement and nonprocurement programs governmentwide. We intend to enhance the tools available to ensure program integrity and not undermine them.

We also disagree with INCOMPAS, NCTA—The Rural Broadband Association, and ACA Connects—America's Communications Association (collectively, the Joint Association Commenters) that the

NPRM

“does not provide parties with fair notice as to when they could face suspension or debarment for the proposed additional factors, such as compliance history.” We acknowledge that the

NPRM

used the term “factors” in connection with the OMB Guidelines' “causes” for suspension and debarment, but the Commission cited the OMB cause rule at the outset of that discussion, 2 CFR 180.800, and separately stated that OMB rules “also” list “mitigating and aggravating factors,” citing 2 CFR 180.860, which permits a consideration of compliance history. The Joint Association Commenters had ample notice that the Commission might examine compliance history as an additional cause and/or as an aggravating or mitigating factor. Our Supplemental Rule § 6001.450(a) is consistent with the “causes,” and subsections (b) and (c) of Supplemental Rule § 6001.450 supplement the “factors” that may be considered under the Guidelines (and consequently our rules).

The NPRM also proposed that our supplemental “cause” rule identify that suspension or debarment may be appropriate for certain “willful or grossly negligent” or “willful or habitual” conduct. Some commenters urge the Commission to exclude from the “cause” rule inadvertent violations, good faith mistakes, and violations resulting from negligence not rising to the level of gross negligence, noting that in the enforcement context a “willfulness” standard encompasses situations where a participant intended to engage in conduct but not necessarily to violate Commission rules. We recognize that in certain other contexts, there is Commission precedent holding that even inadvertent errors can be “willful.” Of course, the Guidelines do not define the term “willful,” but one federal court has, in the context of the Guidelines, suggested that the word generally applies to knowing or reckless violations, rather than conduct that is merely negligent.

See, e.g., Pillar of Fire,

Memorandum Opinion and Order, 32 FCC Rcd 9633, 9635 n.17 (2017);

Donald W. Bishop,

Forfeiture Order, 8 FCC Rcd 2847, 2847 (1993) (noting that the Commission has interpreted 47 U.S.C. 312(f)(1)'s use of “willful . . . [to] mea[n] the conscious and deliberate commission or omission of such act, irrespective of any intent to violate the Act or Commission rules.” (citing authorities)). While this definition of “willfulness” may be narrower than the one in these Commission cases, that does not significantly change the SDO's ability to suspend or debar participants because the Guidelines also provide a general catchall basis for debarment for “[a]ny other cause that is so serious or compelling in nature that it affects [a participant's] present responsibility.”

Moreover, a finding that a “cause” exists does not automatically result in a suspension or debarment. The Commission's implementation of the statutory enforcement requirements relating to the Do-Not-Call registry for telephone numbers used by Public Safety Answering Points (PSAPs) is instructive. As detailed in the 2012 PSAP Report and Order, the Commission was required to set forfeiture amounts within a statutory

range based on “whether the conduct leading to the violation was negligent, grossly negligent, reckless, or willful, and depending on whether the violation was a first or subsequent offence.” The statute did not define the relevant terms. In the 2012 PSAP Report and Order, the Commission concluded that in setting forfeitures for PSAP Do-Not-Call registry violations it is reasonable, to the extent that terms such as “willfulness” and “gross negligence” have been defined in the enforcement context, to rely on those definitions and that the Communications Act and Commission requirements to take into account the “nature, circumstances, extent and gravity of the violation and, with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and such other matters as justice may require,” “encompass the factors necessary to distinguish between negligent, grossly negligent, reckless or willful conduct, as used in the Tax Relief Act, without the need for further clarification on this point in our rules.” We similarly conclude that it is reasonable and consistent with the Guidelines to take the same “case-by-case” approach here.

Further, the Guidelines' list of causes that we adopt in this Report and Order speaks about certain “willful failures” and “willful violations” as sufficient to support debarment, while having long afforded agencies the flexibility to implement this rule using their discretion in evaluating both what constitutes a willful act and the seriousness of the conduct. While the Guidelines provide no express exception for inadvertent errors, the drafters of the Guidelines intended to provide “assurance that performance matters which are minor or highly parochial in nature would not be used as a basis for debarment actions.” (52 FR 20361). Consistent with this approach, we agree that in some cases, instances of inadvertent error, especially if set against a demonstrated history of compliance with program requirements, may be so minor and isolated that they do not provide an adequate basis for suspension or debarment.

For purposes of both section 180.800 and our supplemental cause rule, the term “willful” will not in the ordinary case include minor, isolated, and inadvertent noncompliance. On the other hand, the Guidelines clearly permit debarment for a “history of failure to perform or unsatisfactory performance” of a public transaction if “so serious as to affect the integrity of a Federal agency program.” A history of violations of program requirements over one or multiple projects may rise to a level that affects the integrity of an agency program and forms a basis for debarment, even if these violations individually may each have been considered minor. Similarly, a single violation may be so significant that it affects the integrity of an agency program—for example, a violation affecting substantial expenditures of public funds. The SDO thus has flexibility to evaluate the appropriateness of exclusion given the complexity of the rule(s) at issue as well as the facts of a particular case.

We therefore reject CTIA and USTelecom's argument that gross negligence should not be sufficient to support suspension or debarment and that our supplemental rule should require, at a minimum, a finding of recklessness. We note that consistent with our Rule 1.17 precedent, the exercise of reasonable due diligence—a standard that should not be difficult for program participants to meet—is generally sufficient to avoid a finding of simple negligence (and a fortiori of either gross negligence or recklessness). Thus, for example—as NCTA correctly surmised—a company that submits forms that “ `could result in overpayments' notwithstanding [its] good faith effort to comply with all applicable rules,” generally would not satisfy the “grossly negligent” requirement to trigger suspension or debarment proceedings.

We are also not persuaded by C Spire's arguments that every potential cause in our supplemental rule should “make reference to statutory or regulatory violations, not merely a type of conduct,” or that words like “repeat” and “habitual” are overly vague.” First, the Guidelines include among their causes a “history of failure to perform or of unsatisfactory performance,” without specifying the length of that “history.” The Guidelines also permit suspension or debarment based on a participant's lack of “business integrity or business honesty” that affects “present responsibility,” which are not linked to specific statutory or regulatory violations. Second, if an exclusion proceeding is commenced, a participant can present evidence to the SDO that its conduct falls short of “repeated” or “habitual”—or does not qualify as a regulatory or statutory violation—and raise other mitigation arguments. We also decline to identify the “number of . . . violations” that can give rise to suspension or debarment as requested by C Spire, as this would be inconsistent with the kind of flexibility the Guidelines contemplate and give agencies to consider the facts and circumstances of each case. For these reasons, we are also not persuaded by SHLB-SECA's arguments that suspension or debarment should be invoked only for “fraud or repeated willful violations” because some rules, in their view, “use a strict liability standard” while other rules may be considered vague. As we have stated repeatedly, suspension and debarment decisions will be determined on a case-by-case basis by which an SDO may consider mitigating circumstances even for such rules as SHLB-SECA may characterize as rules imposing strict liability.

The Joint Association Commenters also objected that our proposed supplemental rule—insofar as it permits suspension or debarment for “habitual non-payment or under-payment of Commission regulatory fees or of required contributions”—is “in tension” with the Guidelines, which permit suspension or debarment for “[f]ailure to pay a single substantial debt, or a number of outstanding debts” only if the “debt is uncontested” or the debtor's “legal and administrative remedies have been exhausted.” But habitual nonpayment or underpayment of fees generally could also qualify as “repeated violations of Commission rules,” permitting exclusion on that separate and independent basis. And in any event, the Guidelines permit an agency to identify what activity is “so serious or compelling” that it implicates a participant's “present responsibility.” Further, as already discussed extensively, suspension and debarment decisions will be determined on a case-by-case basis in which an SDO may consider both aggravating and mitigating circumstances. A substantial single or habitual non-payment or under-payment of fees or contributions could be so egregious, in the context of a particular case, as to merit suspension and debarment, notwithstanding the fact that the participant has not exhausted its legal or administrative remedies.

Aggravating and Mitigating Factors

Under the Guidelines, the SDO should consider aggravating and mitigating factors in debarment proceedings, including specific factors set forth in the Guidelines. We also conclude that the SDO may consider aggravating and mitigating factors in suspension proceedings. Although the Guidelines do not explicitly provide for such considerations, the Guidelines do require a suspending official to consider “[a]ny further information and argument presented in support of, or [in] opposition to, the suspension.” The Guidelines also give the suspending official “wide discretion,” stating that

the official may, for example, “infer the necessity for immediate action to protect the public interest either from the nature of the circumstances giving rise to a cause for suspension or from potential business relationships or involvement with a program of the Federal Government.” Accordingly, we determine that the SDO should consider aggravating or mitigating factors during suspension and debarment proceedings, pursuant to 2 CFR 180.860 as well as the additional factors we adopt here.

We adopt the aggravating and mitigating factors provided in the Guidelines. In addition, we adopt a supplemental rule under which the SDO may consider additional mitigating factors. Among such mitigating factors would be remedies that took effect after the misconduct occurred that the SDO considers likely to prevent misconduct going forward, as well as whether proceedings to address alleged misconduct (such as non-payment of regulatory fees) may be pending before the Commission. We decline, however, the request by the Joint Association Commenters and CTIA and USTelecom to create any safe harbors for specific program violations because of the discretion already afforded to the SDO to evaluate each situation on its own merits. Further, we note that a party can often mitigate risk from inadvertent violations, and we recommend that parties do so wherever possible. We also decline to adopt the Joint Association Commenter's request for a specific procedure to protect a self-reporting service provider from suspension action for a period of time after the provider notifies the Commission of a potential issue or following adoption of codes of business ethics and conduct as suggested in the record. While taking such self-corrective actions is critical and could qualify as a mitigating factor, the Commission should retain flexibility to proceed to exclusion, where appropriate, notwithstanding a participant's efforts at self-governance.

The NPRM also specifically asked whether, during a debarment proceeding, the Commission should consider the impact that debarment would have on the provision of services to customers and end-users. We agree that impact on customers and end-users should be considered during suspension and debarment proceedings, and there is support for doing so in the record, but we conclude that we should not treat the potential impact on customers and end-users (including sole source considerations) as a rationale for allowing a person whose misconduct otherwise warrants an exclusion to avoid the imposition of a suspension or debarment. Rather, we conclude that the better approach is to address an exclusion's potential impact on customers and end-users in the context of whether or to what extent to permit an excluded party to continue to provide services for a limited duration, and under what terms and conditions. The SDO shall make determinations about transitions and continuation periods in the manner described in more detail below.

Evidentiary Standards

The Guidelines require “adequate evidence”—defined as “information sufficient to support the reasonable belief that a particular act or omission has occurred”—for suspension and a “preponderance of the evidence” for debarment. The NPRM requested comment on whether the Commission should adopt these evidentiary standards, as well as whether the Commission should adopt any supplemental evidentiary standard rules.

We received limited comment on the proposal, which we address below, and we now adopt the Guidelines' evidentiary standards. Other federal agencies across the government employ these standards, and we find that adopting a similar framework will facilitate governmentwide reciprocity and promote ease of application.

Contrary to CTIA and USTelecom and NCTA's claims, we are not persuaded that any harm will result from allowing suspension based on “adequate evidence,” as opposed to a “preponderance of the evidence.” To initiate a suspension under the “adequate evidence” standard in the Guidelines, an SDO still must independently consider whether there is “information sufficient to support the reasonable belief” that a “cause” for suspension has occurred—which also requires the SDO to consider whether the participant's alleged conduct implicates whether that participant is “presently responsible.” While we do not adopt a rigid definition of “adequate evidence,” the SDO may find analogies in caselaw on how to apply the “adequate evidence” standard to be instructive.

See, e.g., Horne Bros.

v.

Laird,

463 F.2d 1268, 1271 (D.C. Cir. 1972). Unsubstantiated assertions made by a third party (

e.g.,

an unsuccessful E-Rate competing bidder) would likely not satisfy this standard. Moreover, the Guidelines and our rules also provide procedural protections (including a notice of the reasons for suspension upon initiation and a timely opportunity to respond and present evidence), ensuring that, even if an initial suspension decision was erroneously based on materially incomplete or incorrect information, it could be quickly corrected. Specifically, we expect that the SDO will provide a suspension notice containing sufficient information for the suspended person to respond to the notice and identify any relevant facts or circumstances. In this regard, such notices should not be based on “mere suspicion, unfounded allegation, or error.”

Transco Sec., Inc. of Ohio

v.

Freeman,

639 F.2d 318, 322-23 (6th Cir. 1981). We find that it would be reasonable to apply an “adequate evidence” standard under these circumstances, particularly given that suspensions are temporary.

In response to comments, we further clarify the types of findings on which the SDO may rely. As the Joint Association Commenters, CTIA and USTelecom, and NCTA noted, section 504(c) of the Communications Act would preclude an FCC SDO from issuing a suspension or proposing a debarment based solely on the issuance of a Notice of Apparent Liability (NAL). However, section 504(c) does not preclude the SDO's reliance on any facts underpinning an NAL. Section 504(c) provides that “[i]n any case where the Commission issues a notice of apparent liability . . . that fact shall not be used, in any other proceeding before the Commission . . . to the prejudice of the person to whom such notice was issued . . . .” To be clear, section 504(c)'s prohibition on using NALs is limited to the Commission's use of “that fact”—

i.e.,

the issuance of the NAL. The Commission has previously addressed this issue in the 1999

Commission's Forfeiture Policy Statement

and explained that “[t]he statute says that the issuance of an NAL shall not be used against a person unless the forfeiture has been paid or the person is subject to a final court order to pay. It does not say that the facts underlying prior NALs shall not be used against a person.” This is supported by the legislative history. Thus, section 504(c) does not prohibit the Commission, and by extension the SDO, from considering the facts underlying the NAL in another proceeding. An SDO may therefore make determinations in an exclusion proceeding—

i.e.,

impose a suspension or propose a debarment—based on the facts underlying an NAL if those satisfy the Guidelines' evidentiary standards. In proceedings before the SDO, however, parties may submit evidence disputing the facts underlying the NAL, should they choose to do so. We clarify this point in response to the Joint Association Commenters' concerns

about the use of an NAL in proceedings before the SDO. Similarly, because an exclusion decision must satisfy these evidentiary standards based on the SDO's rigorous review of the record, we reject the recommendation of the Joint Association Commenters that the Commission “expressly exclude USAC decisions from serving as causes for suspension or debarment.” An SDO may consider findings by a program administrator in an audit report or commitment adjustment if those findings satisfy the Guidelines' evidentiary standards. That is so even if an appeal of the administrator's decision is pending. But if the participant contests the exclusion, including contesting certain facts in the record of the proceeding, the SDO must render a final decision based on his/her independent evaluation of the record. As a corollary to this principle, in the event a response to an NAL has been filed or a USAC decision is subject to a request for FCC review, or the record otherwise has developed in direct response to the document or decision being referenced, we direct the SDO to consider that additional evidence independent of a participant contesting an exclusion. We emphasize that the SDO must exercise independent judgment. The SDO may not, consistent with section 504(c), presume based on the issuance of the NAL that the Guidelines' standards have been satisfied. We agree with CTIA that the same logic would apply equally to the use of factual allegations set forth in complaints before the Commission in pending proceedings because, like NALs, allegations made in pending Commission proceedings are not final.

In contrast, we note that in suspension proceedings, pursuant to section 180.735(a)(1) of the Guidelines, respondents may not challenge the facts if the “suspension is based upon an indictment, conviction, civil judgment, or other findings by a Federal, State, or local body for which an opportunity to contest the facts was provided.” Under this rule, which we adopt, facts contained in Commission orders for which an opportunity to contest the facts was provided, including those issued by bureaus and offices on delegated authority, may not be challenged if relied upon by the SDO in issuing the suspension. We recognize, however, that orders may be affected by judicial decisions or modified by the issuing body itself. Therefore, we adopt section 180.735(a)(1) with a modification to allow respondents to bring to the SDO's attention information showing that the findings in the original Federal, State or local orders are no longer accurate where (i) an order has been reconsidered or modified by the issuing body (or by its staff acting on delegated authority), or (ii) an order has been remanded, reversed, or vacated on judicial review. For debarment proceedings, we adopt a new rule providing that the SDO, in consultation with the Office of General Counsel (OGC), shall apply the principles of collateral estoppel to determine whether a respondent may challenge findings set forth in (i) Commission orders (including orders of bureaus or offices issued on delegated authority) for which the opportunity to contest the facts was provided or (ii) orders of any other Federal, state, or local body for which the opportunity to contest the facts was provided. We also recognize that Commission-level decisions can be subject to petitions for reconsideration and actions on delegated authority can be subject to applications seeking full Commission review. In those cases, it either typically (in the case of reconsideration) or necessarily (in the case of an application for review) is the full Commission that resolves those requests. Consequently, where the facts material to an exclusion decision issued by the SDO are contested in a pending petition for reconsideration of a Commission-level decision or an application for review of an action on delegated authority, the SDO's exclusion decision shall take effect but shall be referred to the full Commission for review. In this scenario, the required written decision by the SDO for purposes of 2 CFR 6001.135(a) would be the referral of the matter to the full Commission. Consistent with the policy reflected in 2 CFR 6001.135(b), the full Commission will attempt in good faith to issue a written decision within 180 days of receiving the referral.

Exceptions to Exclusion

The Guidelines permit an agency head to “grant an exception permitting an excluded person to participate in a particular covered transaction.” The NPRM asked whether we should adopt this rule and whether we should identify factors for granting such an “exception” or whether that determination should be left solely to the discretion of the full Commission or the Chair. The NPRM tentatively proposed that if any factors are enumerated, one consideration should be the extent to which the exclusion would substantially impair delivery of services to customers and end-users. The NPRM asked whether there are additional factors that should be considered. In addition, the NPRM asked whether the Commission should delegate authority to the bureaus overseeing the programs to grant such exceptions. We adopt an approach by which the SDO in the first instance will determine whether good cause exists to grant an “exception” to the exclusion remedy in a particular case.

We agree that in appropriate cases, exceptions to both Commission exclusions and to those issued by another federal agency should be permitted. We thus adopt sections 180.135 of the Guidelines with the modifications set forth in Supplemental Rule 6001.125. This supplemental rule delegates authority to the SDO in the first instance to decide whether to “grant an exception permitting an excluded person to participate in a particular covered transaction.” An excluded party, however, may seek reconsideration, or file an application for review (AFR) with the Commission, as provided for in Supplemental Rule 6001.125(f). Commenters expressed support for this approach. We intend for this delegation to apply for purposes of other rule sections in the OMB Guidelines that refer to section 180.135 of the Guidelines. We thus decline to adopt other possible approaches under the Guidelines, which would allow the Chairperson or perhaps even the full Commission to act on exceptions in the first instance. The SDO's decisions will remain subject to the AFR procedures available for decisions of a Commission component, as we describe herein, thereby providing for appropriate oversight.

Under the supplemental rules that we adopt herein, the SDO is responsible for determining appropriate transition and continuation periods before issuing any suspension or debarment order, and in that process must consider whether, subject to the limitations described herein, an exception to permit extended continuation periods to ensure delivery of services to customers and end-users would be appropriate. Because the SDO will be responsible for conducting these proceedings in which these transitional issues (including sole source services) are closely evaluated, the SDO is in a suitable position to assess the facts of each case and determine whether to grant exceptions for covered transactions and to address the relevant scope of any applicable limitations that might apply. The proponent of an exception bears the burden of proving, by a preponderance of the evidence, any facts asserted.

Consistent with our discussion of transitions and continuations below and to better protect program integrity, we find that any exceptions shall be subject

to appropriate conditions such as mandatory audits, additional reporting requirements, compliance agreements (with approval of OGC), monitoring, or any other forms of effective oversight supplemental to those already provided under FCC programs. We also adopt the NPRM's proposal, strongly supported by commenters, that the availability of alternate service providers to serve customers and end-users in a given area is one relevant factor for the Commission to consider in deciding whether to grant an exception to Commission exclusions or to those issued by another agency. If a participant contends that it is the sole provider of services, the SDO shall afford the bureau that administers the program involved an opportunity to address this matter and rebut those assertions if necessary.

We note that for purposes of the Lifeline, E-Rate, or RHC programs, where exclusions involve resellers, there will almost always be alternate sources of service providers for customers and end-users. That is because resellers by definition purchase their services or equipment from underlying carriers or from a manufacturer or other manufacturer partner and then resell the services and equipment to their own customers and end-users. Our experience with debarments and other enforcement actions in the Lifeline, E-Rate, and RHC programs has demonstrated that Lifeline subscribers, schools, libraries, and health care providers are able to transition from the reseller to the underlying carrier or to another provider. We recognize, however, that some participants in the E-Rate or RHC programs may need to seek new bids for services and/or equipment, and the SDO should provide a sufficient transition period for this to occur.

Transitions and Continuations

Under the Guidelines, a program participant may choose to continue with an excluded entity “if the transactions were in existence when the Federal agency excluded the person.” The NPRM requested comment on that approach as well as on whether continuation should be permitted under those programs in which beneficiaries are receiving services on a month-to-month (or similarly short term) basis. We explained in the NPRM that section 180.310 of the Guidelines, if adopted, would constitute a significant change from policies currently in effect for the E-Rate program that preclude the distribution of any USF funds to debarred entities or entities that have violated program rules. For the reasons explained below, we conclude that the continuation policies set forth in section 180.310 of the Guidelines, and the related provisions contained in sections 180.315(a) and 180.415, should not be applied to the programs subject to this Report and Order. We instead adopt a presumption that the SDO require beneficiaries receiving services from an excluded provider to transition to new providers, subject to limited exceptions described below. To ensure consistency in eliminating bad actors from program participation, whether as participants or principals, we conclude that the related continuation policies set forth in section 180.315 of the Guidelines should not be applied to the programs subject to this Report and Order and that participants should promptly secure the services of other principals (if needed) for their covered transactions in order to maintain the integrity of Commission programs.

The rules we adopt on transitions and continuations reflect our experience with current rules in the E-Rate or RHC programs that require beneficiaries to change providers after an exclusion or findings of rule violations. Further, in most of our programs there are alternative providers to whom beneficiaries can transition, whether for telecommunications or other services from participants or ancillary services from principals. For example, for participants (

e.g.,

beneficiaries, consultants, and service providers) who are resellers, we expect that there will be an underlying carrier that may be able to continue providing services to customers and end-users. We note that some principals, such as consultants or management companies, may be providers of services for whom, in our experience, substitute providers should be readily available. Other principals such as officers, directors, or program managers, may be internal to organizations. In such cases, an exclusion would require that the organization remove those excluded persons from any role and duties in covered transactions (including oversight responsibilities) and transfer their duties for such transactions to other individuals as may be needed.

Additionally, many of the Lifeline consumers receive service on a month-to-month basis. If we were to treat such relationships as long-term contracts under sections 180.310 and 180.315 of the Guidelines, in practice any exclusion would become meaningless because excluded providers could continue to provide service indefinitely. That is not an acceptable outcome. Further, in most service areas there are multiple providers of these services such that consumers can readily find alternative providers.

Therefore, for both suspensions and debarments, we will continue and extend to all programs subject to this Report and Order the practice of requiring alternative providers and other mitigation measures to help transition customers and end-users from an existing, excluded provider to alternative providers. We recognize, however, that for some programs, the availability of alternative providers may be limited or longer transition periods may be necessary. We therefore grant authority to the SDO to both fashion reasonable transition periods that protect beneficiaries from loss of services and also to grant exceptions pursuant to Supplemental Rule 6001.125 for that purpose subject to administrative agreements (such as compliance agreements) and agency oversight as appropriate. The SDO's determinations on transitions and continuations should reflect the overarching goal of the OMB Guidelines to protect program integrity by limiting or eliminating program participation by bad actors, while also ensuring continuation of services to beneficiaries. Funds for Learning has advanced the premise that, “[w]here at all possible, suspension and debarment should not interfere with the continued receipt of services to [the] . . . institutions and the communities they serve.” Although this is an important consideration—and perhaps even a critical one in certain circumstances—we must balance it with the need to protect the public, including individual consumers, from waste, fraud, and abuse that could result in deleterious effects for a specific Commission program or group of programs.

In reaching these conclusions, we have carefully considered the comments of SHLB-SECA, which recommended that beneficiaries such as schools, libraries, and health care providers should have the option to receive uninterrupted support from a suspended or debarred entity for the duration of the contract, rather than being required to substitute a new service provider through a service provider or Service Provider Identification Number (SPIN) change, if allowable under state and local procurement rules, or rebidding the contract or service. Funds for Learning similarly encouraged us to “allow participants to receive service from a suspended or debarred entity for the duration of the USF-supported contract or to substitute a new provider, whether the services are on a fixed or on a month-to-month basis.” Our experience

with service provider substitutions under our current rules, however, persuades us that we can protect against service disruptions to beneficiaries, including under the E-Rate and RHC programs, without allowing excluded service providers to indefinitely continue to provide services and receive support under these programs. The SDO shall be responsible for determining the terms and conditions of any transitional periods or, in rare cases, permit exceptions to allow for continuations of a limited duration where, for example, no alternative providers are presently available or transitioning to another service provider will require additional steps (perhaps under state agency requirements). We further direct the SDO to work closely with the bureaus and offices responsible for the programs, as well as OGC, to develop transition or continuation plans. Where appropriate, the SDO's transitional terms might include compliance agreements, enhanced agency oversight, and other safeguards designed to eliminate the potential for further misconduct. The review of how exclusions will apply as to agency procurement transactions in this regard shall be made by the SDO, in consultation with the affected bureaus or offices, and with OGC, on a case-by-case basis. Any compliance agreements will require the approval of OGC.

To achieve these goals, the SDO first will need to closely evaluate the particular services provided by the party and the availability of alternate providers in the geographic areas served, the typical terms of any contracts that may exist between the provider and its beneficiaries, and any federal or state certification requirements applicable in programs such as the NDBEDP or TRS program. If the SDO determines that a continuation is necessary, the SDO shall fashion an order (or provide for an administrative agreement) that ensures an expedited transition to alternative providers; we emphasize that transitions from excluded entities should be accomplished with all deliberate speed in order to protect program integrity and remove bad actors from our programs. The SDO shall require that during any transitional period, the excluded providers continue providing services to their beneficiaries consistent with our rules and with their contractual obligations. In those cases where obtaining an alternative provider may require new competitive bidding or provider certifications, the SDO shall ensure that the transition period is sufficient to allow for that process.

The equities as applied to marketing organizations, enrollment representatives, or consultants who have been suspended or debarred counsel that we adopt a different rule in that context. The SDO shall require that those entities or persons immediately cease their operations related to covered transactions. No exceptions or transitional periods shall be permitted. Program participants shall not have the option to continue doing business with such entities or persons during the period of their suspension or debarment. In our experience, there are many persons and organizations seeking to perform such marketing and consulting services, such that service providers should have ample options for securing replacement vendors. Further, immediate discontinuation of such marketing and consulting services will not have adverse effects on current customers or end-users of the service providers and will help to avoid an excluded actor continuing to benefit under our programs.

Additionally, we acknowledge that the NDBEDP and TRS programs present unique circumstances for the SDO to consider in our transition and continuation framework. We note that the Commission certifies a state TRS program for each state, and each state program manages TTY-to-voice TRS, Speech-to-Speech Relay Service, and analog Captioned Telephone Service within the state. Generally, each state program contracts with one provider to offer service within the state, although states have the option to contract with different providers for the different forms of TRS, and states also have the option to contract with multiple providers of the same service or services. Because state programs are subject to the Commission's mandatory minimum standards, and the Interstate TRS Fund, which is overseen by the Commission, is responsible for payment of the interstate minutes originating in any given state, suspension or debarment of a provider that is contracted by a state program would effectively debar that provider from serving the state. If the contract provider in a state is debarred from providing service, the state program would need to contract with a new provider to maintain the state program's eligibility under the Commission's mandatory minimum standards. Thus, for example, because only a single NDBEDP provider is certified to serve each geographic area, suspended or debarred NDBEDP service providers may need to continue to provide services to program participants, with appropriate safeguards as directed by the SDO, until another entity is certified to operate within the respective jurisdiction. To facilitate the transition to another provider, the Consumer and Governmental Affairs Bureau (CGB) should request an NDBEDP certified entity that has been suspended or debarred to voluntarily relinquish its certification within a deadline and explain that if the entity does not voluntarily relinquish its certification, then a revocation proceeding pursuant to 47 CFR 64.6207(h) will be initiated. Similarly, if a TRS provider is suspended or debarred and is the only entity offering a particular form of TRS in a jurisdiction, an alternative provider will need to be certified by the Commission or contracted by a state TRS program to provide those services.

Under those circumstances, we anticipate that the SDO will allow a suspended or debarred TRS provider to continue to provide services to program participants until another entity is certified by the Commission or contracted by the relevant state TRS program to provide the form of TRS involved. The Commission will expedite its certification review to the maximum extent possible to facilitate a rapid transition to an alternative provider and will encourage the state authorities to act similarly. Further, the Commission will follow its current notice and hearing process for suspending or revoking a TRS provider certification or a state TRS program certification. These procedures will ensure that any exclusion action is implemented consistent with applicable Commission rules to safeguard Commission programs and program beneficiaries' needs.

We anticipate that transitional periods to alternative providers will vary from program to program, and the SDO will need to take individual circumstances into account. In extraordinary situations where alternative providers cannot be identified as quickly as initially anticipated, the SDO may permit a continuation beyond the initial transition period, but any extended transition should be limited and as short as feasible. After the SDO determines the length of the initial and any subsequently extended transition period, the SDO shall require excluded providers to send timely notices to affected customers and end-users of the need to transition to alternative providers.

Notices to affected customers or end-users should include: (1) a statement that the participating provider has been suspended or debarred; (2) a statement that the provider will continue to

provide services until the date certain as specified in the suspension or debarment order; (3) a statement that users should obtain service from another provider; and (4) a listing of the names and contact information for other providers authorized to supply that service in the jurisdiction. In evaluating transition periods and notice requirements, especially for the Lifeline program, the SDO should also consider any transition and notice provisions that the Commission has previously adopted.

The SDO, in consultation with the bureaus, should also take appropriate steps to ensure that a suspension or debarment is implemented in a manner consistent with existing Commission requirements and the needs of program beneficiaries.

Interagency Reciprocity

Under the Guidelines, an agency's determination to exclude an entity from its program is afforded governmentwide reciprocity; that is, an entity that is suspended or disbarred by another federal agency is automatically suspended or disbarred from the Commission's nonprocurement and procurement programs. However, the Guidelines also permit an excluded entity to petition the agency for an exception to the governmentwide exclusion. The NPRM explained that adoption of the Guidelines could trigger the suspension or debarment of persons or entities that currently participate in the Commission's programs through governmentwide reciprocity. The NPRM requested comment on whether there were any program participants currently excluded by another agency, and, if so, whether they proposed any modifications or supplemental rules to allow them to continue to participate in Commission programs.

The NPRM also requested comment on how a person excluded by another agency should advise the Commission of the exclusion and request an exception to reciprocity. The NPRM further asked if the Commission should be required to act within a certain period after receiving such a request and whether the agency should issue exceptions, if appropriate, through a negotiated agreement that would include mandatory independent audits, additional reporting requirements, or similar forms of oversight. The NPRM requested comment on how the Commission will provide information regarding entities suspended or debarred by the Commission to the governmentwide Systems of Awards Management Exclusions (

SAM.gov

Exclusions). We received no comment on these requests.

We generally adopt the Guidelines' reciprocity rule; entities excluded by the Commission SDO will be excluded from nonprocurement programs governmentwide, and entities excluded by other federal agencies' SDOs will be excluded from the Commission's nonprocurement programs subject to this Report and Order. Additionally, we adopt with modifications our proposed supplemental rules on exceptions to reciprocity and explain the procedures necessary to ensure that the SDO can appropriately evaluate whether and to what extent to grant exceptions to exclusions issued by other agencies. Under Supplemental Rules 6001.120(d) and 6001.125, we delegate authority to the SDO to entertain petitions for exceptions from interagency reciprocity.

The procedure we adopt is a two-step process, consisting of a preliminary review by the SDO and the SDO's subsequent exception determination, if warranted. First, we require in Supplemental Rule 6001.120, as proposed in the NPRM, that FCC program participants or principals excluded by another agency promptly notify the Commission within ten business days after the participant has received notice of the exclusion so that the Commission may consider this information in connection with participation in the programs that the Commission administers. We also require that any participant or principal who is currently included in the

SAM.gov

Exclusion, based on conduct occurring before the effective date of this rule, provide notice of such exclusion to the Commission within 30 days after these rules become effective. Such notifications shall be made by email and by letter to the head of the bureau or office responsible for the program(s) in which the excluded entity participates, the administrators of any affected program, the Commission's General Counsel, and the Commission's Managing Director. We delegate authority to OGC, in consultation with these bureaus and offices, to revise these methods where appropriate. Participants or principals excluded by other agencies may temporarily continue with existing covered transactions under FCC programs but may not enter into new transactions unless an exception is granted. Such participants and principals must also comply with any orders for transitions or limited continuations that the SDO may issue.

When advised of an exclusion issued by another agency, the SDO shall conduct a preliminary evaluation, upon the request of a participant or an excluded person or an FCC bureau or office responsible for administering the affected programs, to determine whether to grant an exception based on factors such as when the underlying misconduct occurred, when the other agency issued the exclusion, whether the excluded person is a sole source provider of services under an FCC program, and how much longer the exclusion will remain in effect. The SDO shall consult with OGC and the bureaus and offices responsible for administration of any affected programs or covered transactions in making this determination. If no exception is granted after the preliminary evaluation, the entity remains excluded from Commission programs. The SDO will promptly notify the excluded party and initiate informal proceedings on transitions to alternate providers or limited continuations, if necessary. The notice shall further state that the excluded party is immediately barred from enrolling new customers or end-users in any Commission programs subject to our suspension and debarment rules, may not enter into any new covered transactions or provide services for a covered transaction, and has 30 days to file a response in which the excluded person may seek an exception from Commission reciprocity.

Requests for an exception from an exclusion issued by another agency following a preliminary determination that no exception is warranted must state the reasons for the requested exception and provide any supporting evidence. After the informal proceedings are concluded, the SDO will issue a decision that rules on any exception request filed by the excluded person and may grant the exclusion only if doing so is supported by a preponderance of the evidence. In any event, exceptions should be granted only infrequently, particularly in the context of the criteria that the SDO shall consider in evaluating whether to permit an exception. If the exception request is not granted, the decision will also set forth the appropriate transition or continuation requirements applicable to the exclusion (including customer notice requirements) consistent with Supplemental Rule 6001.310. The SDO will consult with OGC and the bureaus or offices responsible for administration of any affected programs before issuing these rulings. Any exceptions granted by the SDO may be subject to appropriate conditions such as mandatory audits, additional reporting requirements, compliance agreements (with approval of OGC), monitoring, or

any other forms of effective oversight supplemental to that already provided under FCC programs.

We believe that the procedure we have created for the SDO to consider how to implement reciprocity creates sufficient opportunity for the party excluded by another agency to participate in this process, and we modify our proposed supplemental rule. We also require a participant that is not already registered with

SAM.gov

to do so within 10 days of the date that its suspension or debarment becomes effective. We note that the timing of this registration requirement will differ in cases of suspension, which generally becomes effective when first imposed, and debarment, which becomes effective only when the SDO issues a final decision at the close of the proceedings.

Alternative Remedies or Settlements

We also adopt potential alternative remedies within the suspension and debarment framework to resolve these proceedings without resorting to an exclusion, if appropriate. The Guidelines allow agencies to settle exclusion actions when it is in the best interest of the government and specifically authorize the use of administrative agreements as the settlement framework. The NPRM invited comment on whether the SDO should have authority to tailor exclusions for particular circumstances or propose remedies in lieu of exclusion. The NPRM asked commenters to address whether the SDO should impose alternative remedies after consulting with appropriate bureau and office staff with knowledge of how entities are certified (in the case of TRS or NDBEDP) or how alternative remedies might impact delivery of services to beneficiaries. The NPRM also asked what types of alternative remedies should be considered, how such remedies should be fashioned, and when alternative resolutions might be appropriate.

There was consensus in the record that the SDO should have authority to fashion settlements (often referred to as administrative agreements in the suspension and debarment context) short of imposing exclusions. Moreover, the Interagency Suspension and Debarment Committee (ISDC) encourages agencies to use administrative agreements, which are increasingly being imposed as alternatives to exclusion.

We agree and adopt a modified supplemental rule on alternative remedies to suspension and debarment that will include administrative agreements, as contemplated by sections 180.635 and 180.650 of the Guidelines. The modified rule we adopt, however, recognizes that OGC possesses substantial expertise in designing administrative agreements (including compliance agreements under our programs). We require that the SDO consult and coordinate with OGC in structuring any administrative agreements and require the approval of OGC before they may be adopted. In addition, under the rules we adopt, administrative agreements may not: (i) impede or impair the Commission's authority to seek full recovery under its debt collection authority of any improper payments made to the settling party; or (ii) purport to resolve any claims the Government may have against the settling party, such as pending NALs issued by the Enforcement Bureau or causes of action under the False Claims Act or other similar laws or common law claims. Similarly, should a party propose a “global” settlement with the Government on matters before the SDO and pending in other forums, then such a settlement would require the participation and approval of all relevant decisionmakers at the Commission, the Department of Justice, and any other agencies or entities involved, as appropriate.

We also agree with WISPA and SHLB-SECA that the SDO should determine whether an administrative agreement is the appropriate remedy on a case-by-case basis. We note, as described by the Joint Association Commenters, that one factor that could weigh in favor of resolution through administrative agreement is a participant's “self-report[ing] an issue to the FCC,” depending on the circumstances (

e.g.,

the severity of the violation or misconduct, and whether it was reported promptly and remediated when discovered). Based on the record, we also find that administrative agreements are most effective if, in addition to training and compliance obligations, they require reporting, auditing, and/or independent monitoring.

Period of Debarment

The typical debarment period under the Guidelines is not more than three years, but may be adjusted based on the “seriousness of the causes” for debarment and evaluation of the factors listed in the Guidelines. Further, a debarred person may ask the SDO to reconsider the debarment decision or to reduce the time period of the debarment. The NPRM asked whether we should adopt the standard debarment period and whether there are additional mitigating factors beyond those set forth in the Guidelines that may warrant a reduction in the debarment period, including the absence of an alternative service provider or the participant's post-debarment adoption of compliance agreements. Based on the record, we adopt the standard three-year debarment period under section 180.865 of the Guidelines, which provides the SDO with flexibility to consider adjustments. We also find that a debarred participant may submit a petition under sections 180.875 and 180.880 of the Guidelines for a reduction of the debarment period based on, among other things, the absence of other service providers or the participant's post-debarment adoption and satisfactory implementation of appropriate compliance agreements.

The NPRM additionally asked whether schools, libraries, and health care providers should be treated differently from other USF participants with respect to the period of debarment. SHLB-SECA stated that it is “absolutely necessary” to do so because such institutions are not “commercial enterprise[s]; these are the non-profit organizations that the FCC's programs were designed to benefit.” As we have already made clear, the SDO will consider the totality of the circumstances, such as the effect of debarment on the broader public interest, including on the beneficiaries of FCC programs. All of the FCC programs that will be subject to these suspension and debarment rules are intended, ultimately, to benefit unserved or underserved populations—regardless of the type of entity or individual obtaining program services, but all participants must also conduct their business in a manner designed to prevent waste, fraud, or abuse.

The NPRM also requested comment on a proposed rule that would permit the SDO to determine that a participant's conduct was so egregious as to require it to petition for readmission to Commission programs. We received no comments on this proposal and now adopt the proposed readmission rule. Although we expect that the SDO will not regularly rely on this option, we find that, in the appropriate situation, it will protect the public interest by adding an additional opportunity for review before permitting the worst actors from returning to FCC programs. Where a petition for readmission is required, the debarred party as petitioner must demonstrate that it has implemented sufficient remedial actions to avoid future program violations. These requirements

shall apply regardless of any change of ownership of an excluded entity. If the entity fails to file a required petition or if the request is denied, the SDO may extend the debarment for an additional period under section 180.885 of the Guidelines in order to protect the public interest.

Additional Process Considerations

We resolve several additional procedural questions that the Commission raised in the NPRM to ensure that implementation of any new rules would be efficient and fair. In their comments, parties also offered proposals for other improvements or modifications which we address in this section.

Appointment and Designation of the SDO.

Under our legacy rules, the Enforcement Bureau has authority to resolve universal service suspension and debarment proceedings. The NPRM requested comment on whether we should revisit that delegation given our proposal to significantly expand the scope of the Commission's suspension and debarment rules. Specifically, the NPRM asked whether the Chief, Enforcement Bureau (or designee) should serve as SDO, and, if so, whether it would be appropriate for that person to conduct proceedings in which the individual was involved in any capacity. The NPRM also asked whether persons other than Enforcement Bureau personnel should be considered for appointment as SDOs, and, if so, to specify their qualifications, identifying the Managing Director as one possible alternative. Additionally, the NPRM asked if the SDOs should be subject to appointment for a specific term, or whether they should be subject to removal by the Commission at will—and whether the Supreme Court's decision in

Lucia

v.

SEC,

138 S. Ct. 2044 (2018), limited the appointment of SDOs. Ultimately, the NPRM explained that our primary goal is for the official to be neutral, but explained that suspension and debarment proceedings are not adjudications subject to the Administrative Procedure Act's (APA) formal hearing provisions that prohibit agency staff from performing both prosecutorial and decisional activities. We adopt an approach under which a Commission-appointed official, the SDO, will preside over suspension and debarment proceedings under delegated authority.

Commenters generally supported our proposal that the official should be neutral. The Joint Association Commenters and SHLB-SECA argued that, to ensure such neutrality, the Commission should house the SDO within the Office of the Managing Director (OMD) or OGC and/or should establish clear demarcations between the suspension and debarment function, on the one hand, and the enforcement and program administration functions, on the other. Mr. Meunier agreed that such separation is “desirable,” although not required as a matter of due process. Mr. Meunier and SHLB-SECA also urged that the SDO must have sufficient background, knowledge, and expertise with the highly complex rules underlying USF, TRS, and other federal programs to avoid lengthy delays and erroneous findings and conclusions. And finally, one commenter, E-Rate Central, opined that appointment of the appropriate SDO might “depend upon the remedial action contemplated.”

As the foregoing makes clear, while commenters generally agreed on the principle that the SDO should be “neutral” and have relevant expertise, they did not coalesce around any specific proposal. We agree that the SDO's decisions should be informed by the relevant subject matter experts within the Commission, and we permit the SDO to draw upon and apply expertise from the pertinent bureaus and offices.

The Commission will designate an individual to serve as the SDO. It is not yet clear what demands the Commission will face in terms of staffing, resources, and time on an annual basis in connection with suspension and debarment proceedings. Therefore, we decline to adopt any of the other specific proposals regarding an SDO's appointment at this time. Rather, to enhance administrative economy and preserve flexibility to better serve the public interest in light of future staffing resources and enforcement demands, we anticipate that the Commission will address the agency's organizational needs and practices when making the SDO appointment.

To the extent that commenters question a bureau or office's objectivity to handle exclusion or LDP proceedings, we disagree. It is our experience that bureaus and offices routinely work together to administer the Commission's existing suspension and debarment rules in an objective manner, and we anticipate and expect that such efforts would continue. We delegate authority to the Office of General Counsel, in consultation with the Office of the Managing Director, the Enforcement Bureau, the Wireline Competition Bureau, and the Consumer and Governmental Affairs Bureau to revise existing delegated authority rules to accommodate this planned shift in responsibilities.

Pre-Notice Letters.

We permit the use of pre-notice letters, as numerous commenters urged. According to the ISDC, these letters “include show cause letters, requests for information, and similar types of letters” and “are used to inform an individual or entity that the agency suspension and debarment program is reviewing matters for potential SDO action, to identify the assertion of misconduct or the history of poor performance, and to give the recipient an opportunity to respond prior to formal SDO action.” CTIA and USTelecom suggested that such letters should be required. The Joint Association Commenters, in contrast, noted that pre-notice letters are generally beneficial and should be used “whenever possible,” while NCTA acknowledged they may not be appropriate in response to “egregious conduct.” We agree that pre-notice letters may be a useful tool in appropriate circumstances, for example, if it is clear that the misconduct at issue should be resolved through an administrative agreement. We decline, however, to require their issuance in all cases. CTIA and USTelecom did not identify any agency that has made pre-notice letters mandatory, and we find that doing so could harm the public interest by preventing the Commission from moving quickly when necessary to protect our programs and their beneficiaries.

Imputation of Conduct.

The Guidelines' imputation rule allows the agency to impute conduct from an individual to an organization, from an organization to an individual, among individuals, or among organizations in appropriate circumstances. The NPRM noted that the rule allows us to “plug a gap in the Commission's current suspension and debarment mechanism.” We now adopt the Guidelines' imputation rule as proposed, which will afford us greater flexibility in responding to misconduct.

Some commenters expressed concern about the imputation of conduct under the Guidelines and recommended possible limitations or modifications. One commenter, E-mpa, also objected to any imputation, arguing that suspension or debarment of an entire company as a result of bad conduct by only a few individuals could cause undue hardship to all those at the company whose conduct was not improper. Such an argument, however, misses the critical point that where bad conduct exists, our obligation is to protect our programs and program beneficiaries, and in many cases any potential harm to the company or its “good actors” will be greatly outweighed by the harm that

such firms can cause to our programs and beneficiaries. Further, E-mpa fails to recognize that the Guidelines' imputation rule is permissive, not mandatory—it sets forth when an agency “may” impute conduct—and permits the SDO to take individual facts into account on a case-by-case basis. We also find commenters' other concerns with the Guidelines' imputation rule unpersuasive. Specifically, SHLB-SECA urged that imputation from an individual to an organization should require the organization's knowledge, approval, or acquiescence. While we generally agree that imputation from an individual to an organization will be most appropriate based on the latter's knowledge, approval, or acquiescence, there may be other scenarios where imputation is appropriate due to an organization's inadequate supervision or oversight. We also reject the recommendation of CTIA and USTelecom to limit imputation to an organization only where an individual acts within the scope of his/her employment; such a limitation would emphasize form over substance and fail to capture scenarios where an organization has knowledge of, and benefits from, an individual's misconduct that is outside of his/her scope of employment.

We also note that neither of the EPA decisions cited by CTIA and USTelecom suggests that imputation is appropriate only when an individual acts within the scope of his/her employment. In the

All Out Sewer and Drain Service

decision, the debarring official made passing reference to the fact that the individual “was acting within the scope of his agency” and “duties” for the company, but the debarring official did not state or suggest that this fact was necessary to his analysis. So too in

Michael J. Conrad,

the debarring official quoted a representation from a plea agreement that the individual was “acting within the scope of employment for the benefit of the corporation.” But this fact is not referenced or cited as relevant to the debarring official's imputation from the organization to the individual.

Finally, NCTA's concern—that the imputation rule could trigger strict liability for a provider based on actions by a third party not within the provider's control and that the provider made good-faith efforts to identify—is misplaced. Section 180.630 permits (without requiring) imputation in such scenarios, and the provider may demonstrate why the SDO should not impute liability.

Presentation of Evidence.

The NPRM requested comment on several evidentiary procedures, including who should provide information supporting suspension or debarment to the SDO in an exclusion proceeding. The NPRM proposed that where the Office of Inspector General (OIG) has conducted the underlying investigation supporting the suspension and debarment, it should have primary responsibility for providing the information, because it would be the entity most familiar with the underlying facts. In other situations, the NPRM proposed, it might be appropriate for the presentation to be made by the other units within the Commission that may have conducted the investigation, such as the Enforcement Bureau, with input from the bureau most responsible for the implementation of the relevant program, who may inform how to implement suspension or debarment without adversely impacting the persons or entities the programs are designed to assist. We received minimal comment on this issue. SHLB-SECA agreed that an exclusion proceeding generally should involve the participation of the bureau responsible for the relevant FCC program to leverage its institutional memory and expertise. Consistent with the Guidelines' direction that suspension and debarment proceedings should be “informal,” and with the analysis of Mr. Meunier that the SDO exercises “managerial decision functions,” we authorize in Supplemental Rule 6001.445 that the SDO in each proceeding designate a Commission unit primarily responsible for sharing relevant materials with the SDO to inform the SDO's decisionmaking and, where necessary, establish coordination procedures for other bureaus or offices to participate.

Reconsideration, Review, and Appeal.

The Guidelines are generally silent on procedures for review of the SDO's decisions. The NPRM proposed that a determination by the SDO should be subject to reconsideration under section 405 of the Communications Act or an AFR filed under section 155(c)(4) of the Act, and requested comment on whether it would be appropriate or necessary to adopt any supplemental rules regarding appeals and review. The NPRM also requested comment on whether there should be specific timeframes for appeals and requests for review, and which standard and timeframe should apply to related stay requests.

Commenters generally agreed that we should provide certainty with respect to the mechanisms, standards, and timeframes for reconsideration, review, and appeal of suspension and debarment decisions. For instance, CTIA and USTelecom requested that we specify both the process and timelines for review and that we authorize direct judicial review of SDO decisions, subject to a shot-clock. The Joint Association Commenters recommended that we establish clear timeframes and due process protections for suspension and debarment proceedings, also urging that once the SDO issues a decision, a provider should be allowed to seek direct judicial review. NCTA agreed that the Commission should establish a set of clear timeframes for action by the SDO, as well as review of those decisions by the full Commission. Mr. Meunier stated that with respect to appeals, the Guidelines have no requirements “but agencies that wish to do so may include an avenue of internal agency appeal,” noting that EPA provides a “restricted option” for an appeal officer to reverse a suspension or debarment only where the SDO “based the decision on an error of fact or law, or abused his or her discretion.”

To provide for additional opportunities for review consistent with the Communications Act and our rules, we adopt procedures for review of SDO decisions and permit reconsideration, review, and appeal as follows. First, we reject proposals to allow direct judicial review of SDO decisions. Indeed, the Communications Act itself precludes such review. Moreover, we separately find that an aggrieved party will have an adequate opportunity to seek judicial review of a suspension or debarment decision after exhausting our procedures, which afford significant due process protections.

Second, we clarify that a suspended party may seek reconsideration and/or Commission review only after the SDO has issued a final suspension decision under section 180.755 of the Guidelines. (Such filings remain subject to the Commission's other, more general legal requirements.) Although a suspension is effective on the date the SDO first signs a suspension order (the initial suspension decision), under our supplemental rules, that initial decision shall only prevent the suspended party from enrolling new customers or otherwise entering into new covered transactions. After receiving notice of the initial suspension decision, a provider has an opportunity to respond and participate in an informal proceeding, after which, the SDO issues a suspension decision with written findings of fact (the final suspension decision). We find that, consistent with our rules and precedent, a party may not file a petition for reconsideration (PFR) or an AFR of the initial suspension decision. These decisions are not amenable to PFR because they are interlocutory. They do not mark the

consummation of the suspension decisionmaking process. The Joint Association Commenters seek to justify a PFR of the initial decision by asserting that “the decision of the SDO regarding a proposed suspension or debarment should contain specific findings of fact and law as well as the SDO's reasoning for such findings to provide a clear record in the event of an appeal.” But unlike the requirements for final decisions, the Guidelines and supplemental rules that we adopt in this Report and Order do not require the SDO to include such findings in an initial suspension decision or proposed debarment. As a result, reconsideration of the initial suspension would not be appropriate at this early stage of the process. Initial suspension decisions are likewise not conducive to AFR, because any issues presented to the Commission in an AFR must be first raised with the entity acting on delegated authority—which cannot have occurred at this point in the suspension process.

In contrast, a party may seek reconsideration (if necessary) or Commission review (when otherwise permitted) of a final suspension decision only where the party has responded to the initial suspension decision. If a party does not oppose the initial suspension, however, the party waives the right to challenge the final suspension decision. As we proposed in the NPRM, and consistent with section 405 of the Act, a final suspension decision is not interlocutory, because it marks the consummation of the suspension process. Because the Guidelines do not expressly provide for reconsideration of suspension decisions, and to eliminate any ambiguity, we hereby adopt a supplemental rule expressly permitting reconsideration of final suspension decisions in accordance with section 1.106 of our rules. We note further that like other decisions on delegated authority, a participant may seek Commission review of a final suspension decision when otherwise permissible under the Act and our existing rules.

Third, we agree with commenters that reconsideration and Commission review of suspension decisions should be subject to reasonable timelines. Indeed, the Guidelines already establish timelines for an SDO to complete the exclusion process and issue a final, written decision. To those ends, we also reject the request of INCOMPAS to implement a 90-day constructive denial rule as inconsistent with the Guidelines. And we agree with commenters that absent a clear timeline for reconsideration, review, and appeal, there is a possibility that suspension and debarment proceedings, including appeals, will be lengthy. We thus adopt rules directing the SDO to resolve any PFR of a final suspension decision within 45 days, which the SDO may extend for good cause, and the Commission to endeavor to resolve any AFR of a final suspension decision within 180 days. We note several commenters raised concerns regarding practices by USAC related to the timing of administrative processing. We conclude that these comments address issues that are outside of the scope of this rulemaking and reject them. We note, of course, that commenters may raise these concerns in an appropriate open proceeding or may propose changes to our rules through a petition for rulemaking.

Fourth, we conclude that a final suspension decision is a non-hearing order that resolves an informal proceeding. As such, the decision is subject to a permissive stay contemplated by § 1.102(b) of our rules. We remind participants that a permissive stay is an extraordinary remedy. Consistent with Commission policy for evaluating stay requests, the decisionmaker (whether the SDO or the Commission) will consider the four criteria set forth in

Virginia Petroleum Jobbers Association:

(1) whether the requesting party is likely to succeed on the merits; (2) whether the requesting party will be irreparably injured without a stay; (3) the degree of injury to other parties if relief is granted; and (4) whether a stay is in the public interest. We decline to adopt an automatic stay when the decisionmaker fails to issue a decision on the stay request within a prescribed timeframe. We likewise do not agree that the filing of an AFR should trigger an automatic stay. We find that such procedural steps are unnecessary given the timelines we adopt for reconsideration and review.

Fifth, we generally adopt the same rules and standards for reconsideration, review, and appeal of debarment decisions. Unlike suspensions, debarments become effective after the SDO issues a final debarment order. Accordingly, we adopt the Guidelines' reconsideration rule for debarments and also clarify that any debarment decision may be subject to an AFR under § 1.115 of our rules. And, as with suspension decisions, we clarify that a debarment is a non-hearing order subject to a permissive stay under § 1.102(b) of our rules.

Limited Denial of Participation

We adopt an additional remedy to supplement the suspension and debarment framework adopted herein. In the NPRM, the Commission asked whether we should adopt a mechanism similar to a process utilized by the U.S. Department of Housing and Urban Development (HUD), which provides for a “limited denial of participation” as an alternative to suspension and debarment. (72 FR 73484, 73487 (Dec. 27, 2007)). Many of the procedures governing this mechanism resemble those under the Guidelines for suspensions or debarments, but HUD's LDP does not trigger inter-agency reciprocity because the LDP is not part of the governmentwide suspension and debarment system. Therefore, under HUD's regulations, imposing an LDP prevents a bad actor from continuing to participate in the particular program(s) and/or geographic region(s) that prompted the limited exclusion, but does not result in the party's placement on the SAM.gov Exclusions triggering governmentwide reciprocal exclusions. HUD's rules also offer flexibility by permitting the agency to initiate a suspension or debarment while an LDP is ongoing if the SDO thereafter determines an exclusion is more appropriate. The NPRM requested comment on whether the Commission should adopt the LDP mechanism and, if so, what standards might be appropriate for its use.

We find that an LDP will increase the agency's flexibility to protect its programs from actors whose conduct is concerning, but which does not warrant suspension and debarment. Additionally, the LDP mechanism we adopt will provide additional due process protections beyond those proposed in the NPRM by requiring that before an LDP may be issued, the alleged wrongdoer must first be provided with notice and an opportunity to be heard. Similar to HUD's LDP, a Commission-issued LDP will not have governmentwide effect, but will apply only to FCC activities.

Applicability

LDPs shall be available as a remedy for misconduct arising from any agency programs subject to our suspension or debarment rules. Commenters did not recommend a more expansive scope, and we have concluded that there is no need to broaden the scope of LDPs. Further, as proposed in the NPRM, we conclude that a denial of participation need not be limited to the program where the misconduct occurred, but may be extended by the SDO to any other Commission programs subject to LDPs, depending on the facts and circumstances of the case. For example, if the misconduct involves a violation of competitive bidding requirements in the

E-Rate program, the action may warrant a denial of participation from another program involving competitive bidding, such as the Rural Health Care program. The SDO should make these determinations based on the unique circumstances of each case, and in coordination with all relevant bureaus and offices.

Commenters generally supported our adoption of an LDP. For example, SHLB-SECA “firmly support[ed]” our use of an LDP “as a parallel, more flexible alternative to suspension and debarment.” According to SHLB-SECA, an LDP “could be put to good use to counteract the one-off bad conduct of participants with no history of the same, similar, or other misconduct . . . .” SHLB-SECA further explained that an LDP would not be the appropriate remedy “where there is evidence of substantial wrongdoing” but could be an effective tool to incentivize participants “to respond to information requests and other directives,” provided that appropriate procedural protections are maintained. E-Rate Central agreed that an LDP could provide the Commission “with a useful investigative tool while at the same time providing greater transparency and due process for targets of an investigation.” We largely agree with these views regarding the benefits of an LDP, but we emphasize that the Commission remains free to rely on other investigative tools to ensure compliance with the Commission's information requests and other directives.

Some commenters also requested that we adopt additional limitations on the imposition of this remedy. The Joint Association Commenters noted that the Commission can avoid “continuity of service concerns” by restricting the imposition of LDPs to new awards in affected programs, and by not covering existing contracts or customers. SHLB-SECA agreed and also urged that the LDP rules should incorporate due process protections. The Joint Association Commenters and SHLB-SECA also both recommended that an LDP should be imposed for a shorter period than a suspension and should not affect existing customers or awards. Finally, CTIA and USTelecom generally did not oppose adoption of an LDP, but suggested that it should not be imposed based solely on an assessment that a program applicant's participation in the program poses an “unsatisfactory” risk, as proposed in the NPRM.

The LDP mechanism we adopt in this Report and Order affords the SDO the flexibility to fashion the appropriate remedy based on the facts and circumstances of each case. We therefore decline to limit LDPs to cover only new awards in the program(s) in which the misconduct occurred as some commenters suggested. This remedy is similar to one adopted by HUD, which does not limit LDPs in this fashion, and there may be instances where it is in the public interest for an LDP to impact a provider's existing contracts or customers or participation in other FCC programs. We note, however, that the SDO should consider service disruptions and other customer-facing effects when determining the scope of an LDP, as it bears on the best interests of the federal government. Likewise, to the extent that an LDP could impact existing contracts or customers, the SDO should provide for transitions or continuations of services in a manner similar to what we have adopted in this Report and Order for suspensions or debarments to ensure that any service disruptions are mitigated. Given the limited scope and duration of the LDP, as well as the possibility that the SDO will adopt remedies designed to bring the subject of the LDP into compliance with the Commission's rules, we anticipate that it will be less likely that existing customers will need a different service provider.

Causes and Factors

We adopt, with several modifications, the proposed rule on LDP causes set forth in the NPRM. In evaluating whether to issue an LDP, we conclude that the SDO should consider the totality of the circumstances, the factors set forth in section 180.860 of the Guidelines, and such additional factors as whether the misconduct was an isolated occurrence, how egregious the misconduct was, and whether the violator promptly and fully self-reported or otherwise took concrete steps to come into compliance. This analysis is somewhat similar to what the Commission undertakes in the context of forfeitures.

We conclude, and commenters agree, that it is in the public interest to provide the agency with discretion to implement a remedy most appropriate for the misconduct at hand. We clarify in Supplemental Rule 6001.1103(a), however, that if the alleged misconduct involves any of the causes set forth in section 180.800(a) of the Guidelines, or the filing of a criminal indictment or information or a conviction or evidence of fraud, the presumption shall be that a suspension will be the more appropriate remedy. In addition, we adopt Supplemental Rule 6001.1105(a), but clarify therein that only misconduct in those FCC programs subject to the LDP remedy may trigger the LDP remedy. Limiting those causes to conduct in programs subject to the LDP remedy is a conforming change reflecting our decision that LDPs shall be available as a remedy only for those agency programs for which a suspension or debarment could be sought.

Finally, we do not agree with CTIA and USTelecom that one of the enumerated LDP causes—permitting LDPs on the basis of a provider's “unsatisfactory risk”—is impermissibly vague or overbroad. To the contrary, our approach is consistent with the Guidelines, which permit suspension and debarment based on, among other things, an entity's “unsatisfactory performance of one or more public agreements or transactions.” Furthermore, the Commission is required by governmentwide guidance to manage risks in its programs.

Evidentiary Standard

We adopt an “adequate evidence” standard for an LDP consistent with the evidentiary standard for a suspension under the Guidelines. We also adopt two proposed rules that explicitly define circumstances that constitute “adequate evidence.” First, an existing LDP related to any Commission program shall constitute adequate evidence to enter a concurrent LDP for any other Commission program(s). Second, filing of a criminal indictment or information, regardless of whether it is based on offenses against, or related to, the Commission, shall constitute adequate evidence for the purpose of limited denial of participation actions. While we adopt two per se rules, these are not the only circumstances that may constitute adequate evidence.

Initiating a Proceeding

To preserve the flexibility of this remedy, an LDP proceeding may be initiated in several ways. As with exclusions, the head of any bureau or office that determines that an LDP would be appropriate based on the causes and factors in Supplemental Rule 6001.1105 may refer the matter to the SDO along with documentation supporting this remedy. Following the referral, the SDO, after consultation with the relevant bureau or office, shall determine whether an exclusion, an LDP, other action, or no action is most appropriate. If the SDO determines an LDP is appropriate, the SDO shall promptly provide any person subject to the proceeding with notice that the LDP has been proposed. Such notice shall specify the causes for the proposed limited denial of participation, the potential effect of the remedy, including its possible length and the FCC

program(s) and geographic areas (if relevant) impacted. The notice shall explain the recipient's right to contest the proposed limited denial of participation as provided under Supplemental Rule 6001.1113 by seeking a conference or providing documents in opposition, or both, and state that the person has 15 days to respond.

An LDP may also be initiated if an SDO determines during a suspension or debarment proceeding, after consultation with the relevant bureau or office, that an LDP would be a more appropriate remedy. The SDO shall provide notice to the respondent that the suspension or debarment proceeding shall be suspended, and the record for the suspension and debarment proceeding transferred to and incorporated into the LDP proceeding. The imposition of an LDP, however, does not alter the right of the Commission to suspend or debar any person under this part if the SDO later determines that an exclusion is warranted.

Administrative Agreements

We conclude that administrative agreements, including compliance agreements, may be issued either to supplement an LDP or as an alternative to an LDP to ensure that the SDO has maximum flexibility to fashion the appropriate remedy. As in suspension or debarment proceedings, administrative remedies may be implemented only after consultation with the bureaus and offices responsible for the programs in which the misconduct occurred, and compliance agreements shall require consultation with and approval by OGC.

Period of Limited Denial of Participation

We also adopt our proposal that the SDO may impose an LDP for any term up to twelve months, but we also permit the SDO to grant an extension of an additional six months (not to exceed eighteen months in total). Such an extension should be imposed if review of conduct during the initial suspension period: (i) fails to demonstrate full compliance with the terms of the LDP or any supplemental administrative agreements; or (ii) shows other misconduct in any Commission program subject to this remedy or additional new causes sufficient to support extension of the LDP period. In addition, the SDO imposing the LDP may also initiate a suspension or debarment proceeding (after consultation with applicable bureaus) if review of conduct during the initial or extended LDP period demonstrates conduct that may warrant a suspension or debarment.

Additional LDP Process Considerations

In the NPRM, the Commission requested comment on several additional process proposals and questions related to the proposed LDP mechanism. In their comments, parties also offered proposals for other improvements or modifications which we address in this section.

SDO Authority to Conduct LDP Proceedings.

The NPRM proposed that the authority to conduct LDP proceedings would reside with the bureaus administering the relevant programs. However, after review of the record, we agree with the Joint Association Commenters and conclude that consolidating this authority under the SDO will provide a more streamlined administrative mechanism and will promote consistency in the application of this remedy. Consolidated authority will also allow the SDO to more easily convert an LDP to an exclusion proceeding, or vice versa, based on the alleged bad actor's conduct and the evidence that the SDO reviews during the proceeding.

Converting an LDP Proceeding to a Suspension and Debarment Proceeding.

Just as an SDO may determine that a suspension and debarment proceeding may be paused pending consideration of an LDP on the same facts, if after an LDP has been initiated the SDO either learns of new facts evidencing more serious misconduct than initially suggested or learns of new misconduct, the SDO shall have authority to initiate an exclusion proceeding if appropriate after consulting with the relevant bureau or office.

We also adopt Supplemental Rule 6001.1121, as proposed in the NPRM, to establish procedures to handle parallel proceedings in cases where a subsequent suspension and debarment is proposed based on the same transactions or conduct underlying the LDP. Under this rule, LDP proceedings are stayed for 30 days so that respondents may contest the proposed suspension or debarment. If the respondent contests the proposed exclusion, the proceedings will be consolidated and the LDP record incorporated into the exclusion proceeding.

We further emphasize that if the person or entity subject to an LDP fails to comply with its terms (including those in any administrative agreements), the SDO, after consultation with the bureaus or offices, may initiate an exclusion proceeding. If the suspension and debarment proceeding is initiated when an LDP is already in effect, the LDP shall remain operative while the exclusion is contested. Where both suspension or debarment and LDP proceedings are pending, the procedures described in section 6001.1121 of the Supplemental Rules, as proposed in the NPRM, shall be applicable.

Imputation of Conduct.

We also adopt our proposed rule by which the Commission may impute conduct in LDP proceedings in the same manner as provided under section 180.630 of the Guidelines for exclusion proceedings, which we have adopted in this Report and Order.

Covered Programs, Participant Tiers, and Disclosures

Scope of Covered Transactions

The Guidelines generally define “non-procurement transactions” as “any transaction, regardless of type (except procurement contracts),” including but not limited to grants, cooperative agreements, scholarships, fellowships, contracts of assistance, loans, loan guarantees, subsidies, insurances, payments for specified uses, and donation agreements. Thus, procurement contracts awarded directly by a federal agency would not be considered “covered transactions” under the nonprocurement governmentwide guidance for suspension and debarment. However, where non-federal participants in nonprocurement transactions award contracts for goods or services, such contracts would be deemed to be covered transactions if the amount of the contract equals or exceeds $25,000. Notwithstanding this definition, the Guidelines provide agencies with flexibility to determine which nonprocurement transactions should be covered by their suspension and debarment rules.

The Commission's primary nonprocurement programs have been the Covered Programs. For example, in 2024, disbursements totaled $8.59 billion for USF programs, and $1.48 billion (projected) for the 2025-26 TRS Fund Year. Based in part on audits and reports by the Commission's Inspector General, the NPRM proposed that all transactions under the USF programs, TRS programs, and the NDBEDP be considered covered transactions under any new rules, and that all other Commission transactions be exempt from such rules. The NPRM, tentatively concluding that application of the suspension and debarment rules to these programs would improve the sustainability of their funding for the benefit of those whom the programs

serve, requested comment on the benefits of applying the suspension and debarment rules to the USF programs, TRS programs, and the NDBEDP. We now adopt the tentative conclusions in the NPRM, for which there is substantial support in the record.

The NPRM also requested comment on whether all transactions covered by the Guidelines' definition should be included within the Commission's suspension and debarment regime or whether some Commission nonprocurement programs should be exempted because alternative remedies (

e.g.,

license revocation) may be more appropriate. The NPRM noted that the Guidelines primarily, but not exclusively, focus on transactions that involve a transfer of Federal funds to a non-Federal entity. The Guidelines exclude from the definition of “covered transaction” any “permit, license, certificate or similar instrument issued as a means to regulate public health, safety or the environment,” unless a federal agency specifically designates it as a covered transaction. Consistent with that framework, the NPRM proposed to exclude all other transactions, such as applications for section 214 authorizations, equipment authorizations, and broadcast and spectrum licenses issued by the Commission. Similarly, the NPRM proposed to exclude all transactions to or from licensees and those with spectrum usage rights (except for those USF, TRS, and NDBEDP transactions where such an entity is a participant), such as incentive auction payments or repacking payments.

Commenters overwhelmingly supported the NPRM's proposal to apply the Guidelines to the USF programs. Funds For Learning, the Joint Association Commenters, and SHLB-SECA noted that the current suspension and debarment rules for USF programs are too narrow or inflexible and can impede the Commission's ability to safeguard its programs against bad actors. E-Rate Central also generally favored “the adoption of more formal suspension and debarment rules” for E-Rate transactions. Commenters also expressed support for coverage of the TRS program and the NDBEDP. We adopt our proposal to apply the modified Guidelines and our supplemental rules to nonprocurement transactions under these programs.

Commenters also generally supported excluding programs other than the USF and TRS programs and the NDBEDP from coverage under any new rules. For example, CTIA and USTelecom “agree[d] with the Commission's finding that the Communications Act and the Commission's rules regarding [other] applications and transactions provide more appropriate remedies.” WISPA also agreed with the Commission's approach, “particularly because” excluded transactions are “governed by separate Commission rules,” and warned against expanding the set of covered programs. And Mr. Meunier noted that while most agencies do not adopt supplemental rules identifying an “elaborate list of inclusions,” that fact “does not preclude an agency from issuing such a list if it chooses to do so.” The rules, therefore, shall not extend at this time to transactions carried out under the Commission's other currently existing programs, nor shall they extend to transactions to or from licensees and those with spectrum usage rights (with the exception of transactions under the Covered Programs where such an entity is a participant). These decisions find ample support in the record.

Participant Categories

Tiers.

All participants (primary tier and lower tier) are potentially subject to suspension and debarment. The Guidelines use “tiers” to categorize program participants, and a participant's placement in a particular tier can affect the scope of that participant's required disclosures. Primary tier participants are those who deal directly with the agency or program administrators by submitting proposals for, or entering into, covered transactions. Lower tier participants are typically those who enter into covered transactions with a person at the next higher tier. Agencies, however, have some discretion to designate participants as belonging to the primary tier, the lower tier, or neither. The NPRM proposed to define USF, TRS, and NDBEDP program participants as primary tier participants and other individuals who contract with program participants as lower tier participants. The NPRM also proposed, consistent with the Guidelines, to designate certain parties who do not directly contract with the primary tier participant (for example, subcontractors) as lower tier participants if they meet certain criteria. While the tier designations varied by program, the NPRM generally proposed two prongs for the lower tier participant definition. First, the participant must belong to one of several specified categories, including contractors, subcontractors, suppliers, consultants, or their agents or representatives for supported transactions. Second, the participant must also satisfy at least one of the following three criteria: (1) the participant must have a material role relating to, or significantly affecting, claims for disbursements related to the program; (2) the participant must be a “principal,” or (3) the amount of the transaction involving the participant is expected to be at least $25,000.

We now adopt the framework of primary tier and lower tier participants proposed in the NPRM and summarized in the chart below. The program-specific rationales for our designations are discussed in detail below, but, overall, we find that expanding the definition of lower tier participant for each program will provide the Commission with the flexibility necessary for more comprehensive program oversight, without imposing onerous requirements on participants. Subcontractors and suppliers play essential roles in carrying out covered transactions, and they are entrusted with large sums of Federal funds. By classifying them as lower tier participants, rather than excluding them from designation as participants, our rules will establish more extensive oversight and control of program spending. Further, these parties who may play a significant role in covered transactions will be subject to exclusion from our programs, when justified by the facts. Therefore, the expanded list of lower tier participants as described in the summary chart and codified in our Supplemental Rules affords the Commission authority to take an exclusion action, if justified by the record, with respect to these parties who are often key players in transactions under our programs. We thus find that this broad definition of lower tier participants, including subcontractors and suppliers, is in the public interest.

Our adopted designations for the Covered Programs by tier are summarized in the chart below.

Primary tier participants

Lower tier participants

High-Cost

Service Providers

Contractors, subcontractors, suppliers, consultants or their agents or representatives for High-Cost-supported transactions, if:

(1) such person has a material role relating to, or significantly affecting, claims for disbursements related to the program;

(2) such person is considered a “principal;” or

(3) the amount of the transaction is expected to be at least $25,000.

Lifeline

Service Providers

Any participant in the Lifeline program (except for the primary tier carrier), regardless of tier or dollar value, including but not limited to those that are reimbursed based on the number of Lifeline subscribers enrolled

(Contractors, subcontractors, suppliers, consultants, or their agents or representatives and Lifeline marketing organizations for Lifeline-supported transactions, or their agents or representatives, if

(1) such person has a material role relating to, or significantly affecting, claims for disbursements related to the program;

(2) such person is considered a “principal;” or

(3) the amount of the transaction is expected to be at least $25,000.

E-Rate

Schools and Libraries

FCC Form 471 Service Providers

Contractors, subcontractors, suppliers, consultants, or their agents or representatives for E-Rate-supported transactions, if

(1) such person has a material role relating to, or significantly affecting, claims for disbursements related to the program;

(2) such person is considered a “principal;” or

(3) the amount of the transaction is expected to be at least $25,000.

RHC

Health Care Providers

FCC Form 462/466 Service Providers

Contractors, subcontractors, suppliers, consultants, or their agents or representatives for RHC-supported transactions, if

(1) such person has a material role relating to, or significantly affecting, claims for disbursements related to the program;

(2) if such person is considered a “principal;” or

(3) the amount of the transaction is expected to be at least $25,000.

TRS

NDBEDP

Service Providers

Certified Programs

Contractors, subcontractors, suppliers with whom the certified programs have a contractual relationship, consultants, or their agents or representatives for TRS- or NDBEDP-supported transactions, if:

(1) such person has a material role relating to, or significantly affecting, claims for disbursements related to the program;

(2) such person is considered a “principal;” or

(3) the amount of the transaction is expected to be at least $25,000.

ACP

Service Providers

Any participant in the ACP (except for the primary tier service provider), regardless of tier or dollar value, including but not limited to those reimbursed based on the number of ACP subscribers enrolled.

(Contractors, subcontractors, suppliers, consultants, or their agents or representatives and any ACP Marketing Organizations for ACP-supported transactions, or their agents or representatives, if

(1) such person has a material role relating to, or significantly affecting, claims for disbursements related to the program;

(2) such person is considered a “principal;” or

(3) the amount of the transaction is expected to be at least $25,000.

ACP Outreach Grant Program

Recipients of ACP Outreach grants

Subrecipients, contractors or subcontractors of the grant recipients, or their agents or representatives, if

(1) such person has a material role relating to, or significantly affecting, claims for disbursements related to the program;

(2) such person is considered a “principal;” or

(3) the amount of the transaction is expected to be at least $25,000.

General Lower Tier Considerations.

Several commenters, including CTIA, USTelecom, and NCTA, suggested that the Commission either exclude lower tier participants from the rules' coverage altogether or adopt a purported safe harbor described in the Guidelines that provides participants with three options for verifying other participants' status. Specifically, CTIA and USTelecom suggested that the NPRM did not adequately explain why extending the rules to subcontractors and suppliers was necessary to promote the public interest, and they further stated that such an extension would “impose unduly burdensome investigation obligations on primary tier participants.” The breadth and scope of the Guidelines offers a governmentwide default for including subcontractors and suppliers. CTIA and USTelecom do not offer any indication of why this scope is unnecessary for failing to guard against waste, fraud, and abuse, and indeed, the Commission's experience suggests otherwise. That is, subcontractors and suppliers may originate or amplify the extent of fraud, further supporting the need for this scope.

CTIA and USTelecom also raised the possibility that subcontractor exclusions could significantly limit “competitive options” for primary tier contractors, particularly in rural areas. Similarly, NCTA urged the Commission not to “impos[e] a strict liability standard on providers that would hold them accountable for actions by a third party that are not within their control and that they made a good faith effort to identify.” Because subcontractors and suppliers play essential roles in carrying out covered transactions and are entrusted with large sums of Federal funds, they are also in a position to plan, initiate, or carry out wrongdoing, both with or without the awareness of the primary tier participant. Applying the rules to all participants, including subcontractors and suppliers, establishes the most comprehensive level of program oversight to ensure the actions of all bad actors can be addressed so program funds go to applicants who need it and comply with program rules. Applicants and participants in programs that the Commission administers should carefully consider the scope of the Commission's requirements directed at safeguarding waste, fraud, and abuse,

when receiving and spending these funds and deciding with whom to engage in business.

We find NCTA's concerns misguided. First, nothing in the Guidelines imposes a strict liability standard, as NCTA has suggested. To the contrary, the Guidelines explicitly list a number of mitigating factors that the SDO may consider in evaluating exclusions, including “[w]hether and to what extent [the participant] planned, initiated, or carried out the wrongdoing,” “[w]hether there is a pattern or prior history of wrongdoing,” and “[o]ther factors that are appropriate to the circumstances of a particular case.” These mitigating factors give the Commission flexibility to address each case on its own merits and ensure that providers will not be held to a “strict liability standard.” Second, as discussed above, the Guidelines give the Commission flexibility to determine whether the actions of a lower tier participant should result in any action against a primary tier participant. Finally, as discussed above, the Guidelines also furnish several methods for primary tier participants to collect information about their lower tier business partners. Primary tier participants who follow these methods, which we largely adopt with minor modifications consistent with our augmented disclosure requirements, can further mitigate any liability.

We are similarly unpersuaded by CTIA and USTelecom's argument that suspension or debarment of subcontractors and other lower tier participants could limit the ability of primary tier participants to bid on work. If a service provider concludes there is a bona fide shortage of competent contractors, subcontractors, or suppliers to enable it to bid on a covered transaction, it can support an excluded party's request for an “exception” under the Guidelines, allowing the excluded person to participate in future transactions. As discussed above, one basis for granting such an exception is the unavailability of any other qualified entities to perform the necessary services.

Finally, the commenters ask that if disclosure requirements are nevertheless extended to lower tier participants, then primary tier participants should be permitted to use any one of three options to satisfy disclosure obligations provided in section 180.300 of the Guidelines. As nothing in the NPRM proposed to limit the disclosure options for lower tier participants, we agree that the disclosure obligation options described in section 180.300 should be applicable to all participants.

Lower Tier Transaction Thresholds.

As described above, one of the three criteria in the NPRM's proposed definition of lower tier participant is “the amount of the transaction is expected to be at least $25,000.” Some commenters expressed concern that this threshold was too low. CTIA and USTelecom argued that a $25,000 threshold would sweep in nearly all contractors for some projects and would not adequately account for inflation. They suggested that the threshold be increased to $100,000. E-Rate Central in turn sought clarification on whether the $25,000 threshold applies to “an individual FRN, application, invoice, or some combination thereof.”

We find that the $25,000 threshold is reasonable and decline to raise the transaction value threshold to an amount greater than $25,000. That threshold is consistent with and is derived from the Guidelines' definition of “covered transactions.” Moreover, under the Guidelines, the Commission can consider the “actual or potential harm or impact” arising from any wrongdoing as a mitigating factor in an exclusion proceeding, allowing it to take the size of a transaction into account without creating an unnecessarily rigid higher dollar threshold. We are also concerned that adopting a higher threshold for our programs could interfere with governmentwide reciprocity. While CTIA and USTelecom noted that agencies tasked with regulating other capital-intensive industries have increased their thresholds and urge that inflation should be considered, the breadth and diversity of outlays made through our covered programs, as well as the myriad threats to the integrity of our programs, weigh against adjusting the threshold. Even a small lower tier participant (

e.g.,

a marketing organization) can drive significant amounts of waste, fraud, and abuse.

We also find a “transaction” can be cumulative and encompass more than a one-off funding request number (FRN), application, or monthly disbursement. Bad actors should not be able to avoid the obligations that attach to lower tier participants by dividing larger projects into smaller reimbursement requests that fall below a transaction threshold. Instead, the SDO must have the discretion to aggregate smaller related FRNs, applications, or disbursements to meet the threshold. For example, an “act or pattern of behavior” could fall within a single contract that multiple E-Rate or Rural Health Care applications rely on, or within a particular enrollment or claims process or policy that a Lifeline service provider applied to multiple Lifeline subscribers.

An “act or pattern of behavior” can also include, for example, a billing practice that does not account for changes in the service start or end dates, or a subscriber's non-usage of a USF-supported service that results in the Rural Health Care (RHC) program or the Lifeline program being over-invoiced for services that were not actually provided. Although missing one change in a service date or the non-usage of a single Lifeline subscriber may be a small amount that is over-charged, these acts or patterns of behavior have resulted in significant amounts of over-billing in the USF programs.

Primary and Lower Tier Classifications for High-Cost Programs.

For the High-Cost programs, we adopt the NPRM's proposal that the primary tier participant will be the carrier receiving support. We likewise adopt the NPRM's proposal that lower tier participants are contractors, subcontractors, suppliers, consultants, or their agents or representatives for High-Cost-supported transactions if: (1) such person has a material role relating to, or significantly affecting, claims for disbursements related to the High-Cost program; (2) such person is a “principal;” or (3) the amount of the transaction involving the participant is expected to be at least $25,000. We received no comment on these proposals.

Primary and Lower Tier Classifications for the Lifeline Program, Affordable Connectivity Program, and ACP Outreach Grant Program.

In the Lifeline program and former ACP, we adopt the proposals that the primary tier participant will be the service provider receiving support, while for the former ACP Outreach Grant Program, the primary tier participants were those parties obtaining grants (consistent with sections 180.970 and 180.200 of the Guidelines). Although the appropriation for the ACP has been exhausted, we include misconduct in the ACP as a basis for suspension and debarment because many service providers that participated in ACP also participate in the Lifeline program and it can also take time to investigate and assess the misconduct. Additionally, we adopt the proposals that beneficiaries under these programs generally are not considered primary or lower tier participants. For the ACP Outreach Grant Program, however, beneficiaries are primary tier participants. Under both the Lifeline program and the former ACP, the service providers can submit consumer Lifeline and/or ACP applications to the

National Verifier and enroll subscribers through the National Lifeline Accountability Database, and therefore service providers are in the best position to have up-to-date information on customer eligibility, activation, and use of their Lifeline and/or ACP services. In addition, the service provider submits requests for payment to the USF Administrator and is best situated to carry out the obligations of primary tier participants under the Guidelines. In contrast, interactions between low-income consumers and the Commission or the USF Administrator are incidental. We received no comment on these proposals.

The NPRM proposed three categories of lower tier participants in the Lifeline program. We received no comment on these categories and therefore adopt the proposal without modification. We also adopt the same categories for the former ACP because of the similarities between the two programs. First, lower tier participants include parties (except for the primary tier Lifeline carrier or ACP service provider) to any contract or award in which a person is reimbursed, including but not limited to contracts or awards based on the number of Lifeline or ACP subscribers enrolled or providing commissions, or any combination thereof, regardless of dollar value. Second, lower tier participants include contractors, subcontractors, suppliers, consultants, or their agents or representatives, and third-party marketing organizations for Lifeline or ACP-supported transactions, or their agents or representatives, including enrollment representatives, if: (1) such person has a material role relating to, or significantly affecting, claims for disbursements related to the Lifeline program or the ACP; (2) such person is considered a “principal;” or (3) the amount of the transaction involving the participant is expected to be at least $25,000.

We adopt similar categories for lower tier participants in the former ACP Outreach Grant Program, recognizing that some grantees may do business with third parties in conducting their covered transaction. In the ACP Outreach Grant Program, lower tier participants include subrecipients, contractors or subcontractors of the grant recipients, or their agents or representatives, if: (1) such person has a material role relating to, or significantly affecting, claims for disbursements related to the ACP Outreach Grant Program; (2) such person is considered a “principal;” or (3) the amount of the transaction involving the participant is expected to be at least $25,000.

Primary and Lower Tier Classifications for the E-Rate Program.

In the E-Rate program, we adopt the proposal that both the program applicant (the school, library, or consortium) and the service provider(s) selected by the applicant (as indicated on FCC Form 471) be designated as primary tier participants. We received no comment on this proposal. We find that extending the primary tier designation to all applicants will allow us to obtain more extensive primary tier disclosures from the applicants themselves before approving transactions, while also ensuring that applicants will obtain disclosures from service providers during their bid selection process under the modified disclosure rules we adopt.

The NPRM also proposed that the service providers selected by the applicant schools, libraries, and consortia also be considered primary tier participants, regardless of whether they submit invoices directly to USAC for reimbursement. Here too, we received no comment and adopt the proposal without modification. In our experience, service providers, like applicants, may be responsible for waste, fraud, and abuse, and therefore imposing the more substantial primary tier obligations and disclosure requirements on these entities also promotes the Commission's goal of protecting federal funds.

Under the E-Rate program, schools and libraries may create “consortia” that can seek competitive bids and/or apply for E-Rate funding on behalf of all their members. When schools and libraries participate as a consortia, the NPRM proposed that the consortium itself, acting through its lead member, would be a primary tier participant, along with the member schools or libraries. In considering any suspension or debarment action, however, we proposed that the SDO should evaluate which particular school or library consortium member was responsible for the misconduct and direct the suspension and debarment orders to those responsible for the bad acts, rather than to all consortium members. We adopt that proposal.

E-Rate Central supported this tailored approach to consortia, but further proposed that “multiple schools and libraries being serviced by a single E-Rate consultant or service provider be treated in an equivalent manner.” If E-Rate Central is proposing that when a lower tier participant is excluded each school or library serviced by that lower tier participant should be evaluated on its own merits in exclusion proceedings, the Guidelines already provide for such case-by-case review. Among other things, an SDO must consider the facts and circumstances of each particular case, including any arguments that a respondent raises, and must make a final determination about that respondent's present responsibility. Alternatively, if E-Rate Central is requesting that a lower tier participant's misconduct in connection with one school or library not affect transactions involving another school or library with whom that lower tier participant works, that may be unavoidable. As explained above, where a participant in an E-Rate transaction is excluded, we require that other parties to the transaction promptly complete a service provider or SPIN change and, for the integrity of the program, terminate their dealings with the excluded party (unless an exception is granted under section 180.135 of the Guidelines or under section 6001.125 of our supplemental rules). Finally, if E-Rate Central is requesting some broader form of relief that would undermine the exclusions, we find that it would frustrate the purposes of the Guidelines, one of which is to facilitate a broad exclusion when it is in the public interest.

Finally, the NPRM proposed three categories of lower tier participants for the E-Rate program. Lower tier participants include contractors, subcontractors, suppliers, consultants, or their agents or representatives for E-Rate transactions if: (1) they have a material role relating to, or significantly affecting, claims for disbursements related to the E-Rate program; (2) they are considered a “principal;” or (3) the amount of the transaction involving the participant is expected to be at least $25,000. All these individuals or entities play important roles in our E-Rate transactions, and we find it is important to our oversight and to the integrity of the E-Rate program that they be included as lower tier participants.

We also note that given the similarities between the program rules (such as forms and processes) and overlap in participants, for the purposes of this

Report and Order,

E-Rate specific rules and requirements adopted in this

Order

will also be applicable to the Cybersecurity Pilot Program.

Primary and Lower Tier Classifications for the Rural Health Care Program.

In the Rural Health Care program, we adopt the NPRM proposal that both the program applicant and the service provider(s) selected by the applicant (as indicated on FCC Form 462 or 466) be designated as primary tier participants. We received no comment on these proposals, and for the same reasoning discussed in connection

with the E-Rate program, now adopt them.

Similarly, the NPRM proposed that a consortium applicant in the RHC Health Care Connect Fund program, acting through its lead entity, would be the primary tier participant, along with its member health care providers, but that in exclusion proceedings, the SDO should evaluate which particular consortium member is responsible for the underlying misconduct and direct the suspension and debarment orders to those entities, rather than to all consortium members. For the same reasoning articulated in the E-Rate program, we now adopt this proposal.

Finally, the NPRM proposed three categories of lower tier participants for the RHC program. We received no comment on these proposals, and for the same reasoning discussed in connection with the E-Rate program, now adopt them. Lower tier participants include contractors, subcontractors, suppliers, consultants, or their agents or representatives for RHC program transactions, if: (1) they have a material role relating to, or significantly affecting, claims for disbursements related to the RHC program; (2) they are considered a “principal;” or (3) the amount of the transaction involving the participant is expected to be at least $25,000.

Primary and Lower Tier Classifications for the TRS Program and NDBEDP.

In the TRS program and the NDBEDP, we adopt the proposal that the service providers and certified programs receiving payments should be deemed the primary tier participants. We received no comment on this proposal, and for the reasons set forth in the NPRM now adopt it. In these programs, the service providers for TRS and certified programs for NDBEDP evaluate the qualifications of customers to participate in the programs. In addition, the service providers and certified programs submit requests for payment to the program administrators and are in the best position to carry out the obligations of primary tier participants under the Guidelines. Specifically, for the TRS program (other than TRS that is provided through state programs) and the NDBEDP, the primary tier participants will be the certified entities that are reimbursed by the Commission and the TRS Fund administrator for providing services under the covered transactions. Additionally, for TRS that is provided through a state TRS program, the primary tier participants will be the TRS providers that are authorized by each state to provide intrastate TRS under the state program and that, accordingly, are compensated by the TRS Fund for the provision of interstate TRS. We received no comment on the question of whether the rules should treat certain types of TRS and NDBEDP participants differently, noting that, for the NDBEDP, some participants are state or local governments, and others are non-profits. In the absence of a clear record, we decline to distinguish in our rules between participants based on their governmental or non-governmental status.

The NPRM observed that, in contrast to the service providers, direct interaction between TRS and NDBEDP beneficiaries (

i.e.,

individuals with hearing or speech disabilities) and the Commission or the program administrators is incidental. Because beneficiaries in the TRS program and NDBEDP do not directly submit applications to the program administrators, the NPRM proposed that, similar to Lifeline, these beneficiaries should not be considered either primary or lower tier participants, and not be subject to the exclusion rules. We received no comment on this proposal and now adopt it.

The NPRM proposed three categories of lower tier participants for the TRS program and the NDBEDP. We received no comment on these proposals and now adopt them. Lower tier participants include contractors, subcontractors, suppliers with whom the certified programs have a contractual relationship, consultants, or their agents or representatives for TRS- or NDBEDP-supported transactions if: (1) they have a material role relating to, or significantly affecting, claims for disbursements related to the TRS or NDBEDP programs; (2) they are considered a “principal;” or (3) the amount of the transaction involving the participant is expected to be at least $25,000. In the case of suppliers, however, to ensure more effective enforcement, we have clarified that only those suppliers with whom the certified programs have a contractual relationship shall be automatically deemed lower tier participants.

Transactions with the USF, TRS Fund, and NDBEDP Administrators.

The Commission also proposed a clarification to section 180.200 of the Guidelines explaining that covered transactions include not only transactions between a person and the Commission, but also any transactions between a person and the administrators of relevant programs, when those administrators are acting on behalf, or as agents, of the Commission. As noted above, the Wireline Competition Bureau (WCB) subsequently sought comment on application of this proposal to the former ACP. We received no specific comment on this proposal, and we now adopt it. This clarification will ensure that all transactions overseen by the Commission under these programs are covered, whether the Commission is acting directly or through its agents.

Principals

The definition of “principal” plays an important role under the Guidelines not only in establishing the scope of disclosure requirements, but also in ensuring that parties who may play a significant role in covered transactions are subject to our suspension and debarment rules when justified by the facts. The modified definition of “principal” ensures that the Commission may take an exclusion action, if justified for cause, with respect to all parties that fall into this modified definition.

The Guidelines define “principal” as: (a) an “officer, director, owner, partner, principal investigator, or another person . . . with management or supervisory responsibilities;” or (b) a “consultant or other person, whether or not employed by the participant or paid with Federal funds, who (1) [i]s in a position to handle Federal funds; (2) [i]s in a position to influence or control the use of those funds; or (3) [o]ccupies a

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