On January 9, 2024, the Federal Acquisition Regulation (FAR) Council proposed a rule that would amend the FAR in an effort to improve consistency between the procurement and nonprocurement procedures on suspension and debarment. The proposed changes are based on recommendations made by the Interagency Suspension and Debarment Committee.
The government has always used suspension and debarment procedures as a mechanism to protect its business interests, both in procurement and nonprocurement matters. Since 1989, a suspension or debarment under either system has had a reciprocal effect of excluding parties from both new procurement or nonprocurement transactions. Over time, separate suspension and debarment regulatory systems have emerged for procurement and nonprocurement matters. The FAR system applies to traditional procurement contracts, while the Nonprocurement Common Rule (NCR) covers nonprocurement funding vehicles such as grants, loans, and cooperative agreements. The proposed rule aims to change the FAR system to be more closely aligned with the NCR, including implementing some of the existing NCR suspension and debarment practices not currently found in the FAR.
Both systems are designed to protect the interests of the government. They both follow the same general principles and use essentially the same basic process. But although the two systems are similar, they are not identical. One key difference that will remain is the immediate effect that a notice of proposed debarment carries under the FAR, where a party is immediately excluded from procurement matters, in contrast to the NCR, where any such notice does not have an immediate effect. The rationale for this difference is that contracts are more likely to require immediate exclusion when something goes awry than would nonprocurement transactions.
Many of the differences between the FAR and NCR suspension and debarment systems are definitional. The definitional changes in the proposed rule were made by the FAR Council in an effort to streamline and make clear the meaning of certain words. For example, the definition of “suspending and debarring official” (SDO) is added to the FAR and standardized throughout to denote the title of the government official who is authorized to impose suspension and debarment actions on behalf of the federal government. A definition of “administrative agreement” would also be added under the proposed rule. SDOs have come to recognize the value of administrative agreements as a tool that offers the government an alternative other than exclusion to implement protective measures. By providing a definition, the proposed rule will clarify what constitutes an administrative agreement. The proposed rule also offers several substantive procedural changes.
Notably, the proposed rule seeks to add seven new aggravating factors that an SDO should consider, in addition to the ten existing mitigation factors, before arriving at a debarment decision. These factors include, among other things, the contractor’s history, level of involvement, and handling of prior wrongdoing. Incorporating these aggravating factors into the FAR will provide consistency between the two rules as well as additional guidance and options for SDOs to consider when making contractor responsibility determinations.
The proposed rule would also provide additional flexibility for both the government and contractors by expanding the allowable modes of communicating notices of suspension and proposed debarment, as well as making contractor submissions. Additionally, the proposed rule would increase the time frame for a debarment decision from 30 working days after receipt of any information and argument submitted by the contractor, to 45 days, subject to further extension by the SDO for good cause.
The proposed rule adds a requirement for the SDO to enter an administrative agreement into the Federal Awardee Performance and Integrity Information System (FAPIIS), whether the agreement resolves a suspension or debarment action or whether it was a potential suspension or debarment action. The proposed rule also adds a requirement for the SDO to enter voluntary exclusions into the excluded parties section of the System for Award Management (SAM) as is currently required under the NCR. This change will allow agency officials to review these types of exclusions before contract awards are made. There is also new language that allows an indictment – or any other official findings by federal, state, or local bodies – to serve as adequate evidence for purposes of suspension actions. This language would mirror that found in the NCR.
Comments on the proposed rule are due by March 11, 2024, to be considered in formulation of the final rule. Federal suspension and debarment rules warrant close attention by companies doing business with the U.S. government. These rules underscore the importance of establishing strong business ethics and compliance programs to prevent incidents that could not only lead to suspension and debarment but also mitigate the risk of exclusion. Contractors should seek legal counsel to assess and address any potential suspension and debarment exposure before problems arise.
Client Alert 2024-019
