

Debarment. The word alone sounds like some sort of medieval method of dispatching enemies favored by Vlad the Debarer. In reality, it’s not that bad, but if you’re a federal contractor, it should still strike fear in your heart.
Avoiding Uncle Sam’s blacklist starts with understanding the grounds for debarment and its processes. Debarment is the formal exclusion of a business or individual from participation in federal contracting. The exclusion is designed to protect the government from dealing with contractors that lack business integrity. This blog discusses some of the key features of debarment so you may avoid Uncle Sam’s ire.
Debarment is inherently tied to the concept of responsibility. As a policy matter, the federal government will only contract with responsible companies. Responsibility encompasses several considerations, including business integrity.
Debarred contractors have committed actions that demonstrate a lack of business integrity. Consequently, these contractors are excluded from further participation in federal procurements for a specified period.
Essentially, debarment is a defense mechanism. It’s a way for the government to protect itself from contractual dealings with firms that lack business integrity.
Notably, debarment is not to be used as punishment. According to the FAR, “[t]he serious nature of debarment and suspension requires that these sanctions be imposed only in the public interest for the Government’s protection and not for purposes of punishment.” Punishment or not, the consequences of debarment can be harsh.
As a matter of business integrity, there are several types of conduct that can lead to debarment.
For example, a contractor may be debarred for a conviction or civil judgement involving business integrity. Criminal actions that may result in debarment include, “[c]ommission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violating Federal criminal tax laws, or receiving stolen property[.]”
Commission of fraud while performing a federal contract, violation of antitrust laws, or falsifying “Made in America” inscriptions may also lead to debarment.
Profound contract performance failures can also provide grounds for debarment. Such failures include “[w]illful failure to perform in accordance with the terms of one or more contracts[,]” or “[a] history of failure to perform, or of unsatisfactory performance of, one or more contracts.” Violations of the drug free workplace may also serve as a basis for debarment.
Delinquent taxes may also be a basis for suspension or debarment; however, any tax deficiency must exceed $10,000 to justify debarment.
Importantly, fraudulent or criminal actions of a contractor may be imputed to its management and ownership for debarment purposes. The opposite is also true. Fraudulent or criminal acts of management or ownership may be imputed to the contractor.
Each agency is charged with developing its own procedures for handling debarment and suspension procedures. While specific agency procedures will vary, all will include methods for reporting, investigation, and referral of the conduct.
Formal debarment proceedings begin with a notice of proposed debarment sent from the debarring agency to the contractor. This notice will identify the basis for the debarment, as well as provide an opportunity for the contractor to respond to the proposed allegations. The deadline for this response is 30 days.
After allowing time for a response, the agency will issue its decision. If the agency decides to debar the contractor, the decision will specify the basis for the debarment. It will also provide effective dates for the debarment period. Typically, debarment lasts no longer than three years, but there are exceptions.
Before making a final decision regarding debarment, the government will take into consideration several factors.
Relevant debarment circumstances include whether the contractor investigated the conduct that gave rise to debarment and made the government award of that conduct. Consideration will also be given for whether the contractor implemented changes to address the conduct and prevent recurrence. Disciplinary action taken against individuals that engaged in conduct giving rise to debarment, as well as management recognition of the seriousness of the issues will also be considered.
Many of these questions are inherently forward looking. This is because the goal of debarment is to prevent future harm to the government. Debarment is not meant to be a tool to punish prior conduct.
Debarment directly impacts a contractor’s ability to obtain work. Debarred contractors are listed in System for Award Management (“SAM”) as excluded parties. This exclusion directly impacts a contractor’s ability to receive new contracts.
Debarment effectively precludes a contractor from receiving new contract awards. According to the FAR, “[c]ontractors 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[.]” Proposals submitted by debarred contractors will not be evaluated by the government.
For current contracts, there is greater flexibility. An agency may continue existing contracts with a debarred federal contractor. That being said, future task orders will not be issued, and option periods will not be exercised.
Debarment will also impact subcontracting opportunities. Contracting officers are instructed not to consent to proposed subcontractors that are debarred. Even when contracting office consent is not required, federal contractors are generally prohibited from executing a subcontract with a debarred contractor in excess of $35,000, unless the subcontract is for commercial off-the-shelf items.
For federal contractors, debarment is a worst-case scenario. It forecloses future contract opportunities and may prematurely terminate current awards. The pause on federal work may last years.
Given the stakes, it’s always advisable for contractors facing debarment to obtain legal counsel to navigate the debarment process. Attorneys at Schoonover and Moriarty have experience counseling contractors through debarment and are available to assist with debarment issues.