The Federal Acquisition Regulation (FAR) Council has issued a final rule, effective January 17, 2025, to improve the consistency between the procurement and nonprocurement procedures for suspension and debarment. The changes, which were proposed a year ago, are largely positive and help iron out the differences between the procedures used to suspend or debar contractors (including individuals) with respect to FAR-based procurements, and the procedures of the Nonprocurement Common Rule (NCR), which applies to grants, cooperative agreements, contracts of assistance, loans, and loan guarantees.
One notable inconsistency that the final rule unfortunately maintains is the immediate exclusionary effect of a notice of proposed debarment under the FAR. Under the NCR, a notice of proposed debarment is just that: a notice to which one has the opportunity to respond before adverse effects begin. See 2 C.F.R. § 180.810 (“Unlike a suspension, a debarment is not effective until the debarring official issues a decision. The debarring official does not issue a decision until the respondent has had an opportunity to contest the proposed debarment.”). Under the FAR, by contrast, being proposed for debarment has the same effect as a suspension: the contractor is immediately excluded from further contract awards before it has an opportunity to present its case. See FAR 9.405(a) (“Contractors debarred, suspended, or proposed for debarment are excluded from receiving contracts, and agencies shall not solicit offers from, award contracts to, or consent to subcontracts with these contractors, unless the agency head determines that there is a compelling reason for such action . . . .”); see also FAR 9.405-1(a)(2) (generally prohibiting agencies from placing new orders or exercising options under, adding work to, or extending the duration of contracts where the contractor is proposed for debarment).
Some had hoped that the FAR Council would bring the FAR into line with the NCR and reserve immediate exclusions for suspensions, where “immediate action is necessary to protect the Government’s interest.” See FAR 9.407-1. In cases where it is unnecessary to shoot first and ask questions later, many thought a pre-exclusion opportunity to respond would be more in keeping with the principles of fairness, transparency, and informed judgment that underlie the suspension and debarment system. That might be through a non-exclusionary “proposed for debarment” response period, as currently happens under the NCR without the collapse of the Republic. Or it might occur through mandatory show-cause or other pre-notice letters, which suspension and debarment officials have successfully used on a discretionary basis for many years now. Immediate exclusion through suspension would always remain available when immediate action is required.
Many were disappointed when last year’s proposed rule opted to maintain the exclusionary effect of a proposed debarment and keep pre-notice letters discretionary in all cases. Alas, the new final rule hews to the line established in the proposed rule, apparently over the objections of most of the public who submitted comments on the issue. This continues to leave a contractor with little recourse against immediate exclusion if an agency proposes the contractor for debarment without a prior opportunity to be heard, regardless of whether there is a need for immediate action to protect the Government’s interest. Even if the contractor subsequently can get the exclusion rescinded by showing the agency that the proposed debarment is unsupported or based on bad information, the damage (such as lost contract awards and a public reputational taint) may already be done.
At least in some jurisdictions, a contractor may be able to seek a temporary restraining order or preliminary injunction to halt exclusion from an unwarranted notice of a proposed debarment. Although courts have ruled both ways on this issue, there is a sound basis for arguing that a notice of proposed debarment constitutes final agency action (which is an essential jurisdictional requirement for seeking review under the Administrative Procedure Act) given its immediate exclusionary effect. Such suits, though, are few and far between.
In the absence of a procedural change, the sound discretion and careful analysis of most suspension and debarment officials, as well as the widespread use of discretionary pre-notice letters, remain the most important checks against potential abuse of the automatic exclusions triggered by proposed debarments. The FAR Council missed its chance to follow the NCR by making a check part of the governing regulations.
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