An Overview of Debarment In Federal Contracting
Agencies can exclude contractors from doing business with the entire government through debarment. Federal Acquisition Regulation 9.4 (FAR) sets forth the policies and procedures governing the debarment of contractors, provides for a listing of debarred contractors, and sets out the consequences of a debarment. With the duration of most debarments being three years, it is enough to put a government contractor out of business and is therefore one of the strongest tools the government has to protect the public interest.
What Is Debarment
Debarment is a mechanism the government can use to protect itself from fraud, waste, and abuse by excluding non-responsible contractors from opportunities. If an agency believes a cause for debarment exists, it will refer the matter to the debarring official, who may debar a contractor for any of the causes in FAR 9.406-2 using the procedures in FAR 9.406-3.
The existence of a cause for debarment, however, does not necessarily require that the contractor be debarred; the seriousness of the contractor’s acts or omissions and any remedial measures or mitigating factors will be considered in making any debarment decision. Before arriving at a decision, the debarring official will consider any of the mitigating factors outlined in FAR 9.406-1 offered by the contractor.
A contractor may present matters in opposition to the debarment official to demonstrate present responsibility and request a hearing. The evidentiary standard for debarments is preponderance of the evidence. Once debarred, the contractor will be listed on the System For Award Management as excluded from contracting. It may continue performance of any current contracts, but will no longer be eligible to receive prime contracts or work as a subcontractor.
Who May Be Debarred
Generally, any person or company doing business with the government may be debarred. Furthermore, the improper conduct of any officer, director, shareholder, partner, employee, or other individual associated with a contractor may be imputed to the contractor when the conduct occurred in connection with the individual’s performance of duties for or on behalf of the contractor, or with the contractor’s knowledge, approval, or acquiescence. And, any improper conduct of a contractor may be imputed to any officer, director, shareholder, partner, employee, or other individual associated with the contractor who participated in, knew of, or had reason to know of the contractor’s conduct. Finally, contractors in a joint venture or similar arrangement may be debarred for the conduct of a participating entity if the improper conduct occurred for or on behalf of the joint venture or with the knowledge, approval, or acquiescence of these contractors.
Causes For Debarment
FAR 9.406-2 enumerates the following as causes for debarment.
- For a conviction of or civil judgment for (1) commission of fraud or a criminal offense in connection with (i) obtaining, (ii) attempting to obtain; or (iii) performing a public contract or subcontract; (2) violation of federal or state antitrust statutes relating to the submission of offers; (3) commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violating federal criminal tax laws, or receiving stolen property; (4) intentionally affixing a label bearing a “Made in America” inscription (or any inscription having the same meaning) to a product sold in or shipped to the United States; or (5) commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a government contractor or subcontractor.
- Violation of the terms of a government contract or subcontract so serious as to justify debarment.
- Violation of the Drug-Free Workplace Act.
- Commission of an unfair trade practice.
- Delinquent Federal taxes in an amount that exceeds $3,500.
- Knowing failure to disclose violations of criminal law.
- Any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor.
Importantly, the last bullet point on this list is known as a catch-all, meaning that debarring officials have significant latitude in determining what constitutes cause for debarment.
As stated above, debarment is perhaps the most serious remedy employed by agencies, as it effectively destroys a contractor’s ability to do business with the government. Debarment appears in state and local acquisition activities as well, with each state and local entity having its own rules of procedure and cause. Whether at the federal, state, or local level, contractors should always take a debarment notice seriously and act with great care to respond timely and effectively.