Introduction

On January 3, 2025, the Federal Acquisition Regulatory Council (“FAR Council”) published a long-awaited final rule to update suspension and debarment procedures. 90 Fed. Reg. 507. The final rule takes effect January 17, 2025.

As a refresher, suspension and debarment are non-punitive administrative actions by which the federal government excludes non-responsible contractors from eligibility to receive new government contracts and other federal awards. Suspension is a temporary measure, often imposed pending the outcome of an investigation or legal proceedings, when immediate exclusion is necessary to protect the government’s interests. Debarment is a longer-term exclusion, typically lasting up to three years, imposed when, after due process, the Suspending and Debarring Official (“SDO”) finds the contractor non-responsible. Both actions aim to ensure that the government only engages with responsible and reliable contractors.

Suspension and debarment procedures are codified in two distinct regulatory regimes: the Federal Acquisition Regulation (“FAR”), codified in 48 CFR, applies to procurement transactions, which involve the federal government’s acquisition of goods and services; and the Nonprocurement Common Rule (“NCR”), found in 2 CFR part 180, which applies to transactions such as grants, cooperative agreements, and other forms of federal assistance. While both regulatory frameworks aim to protect the government’s interests by excluding unreliable contractors, they differ in their specific procedures and immediate effects.

Key Changes and Additions

The FAR Council updated FAR 9.406 in several ways, such as by adding several new definitions and concepts, to better reflect actual practice and improve transparency.

1. Retention of Proposed Debarment as Exclusionary

The final rule resolves what was perhaps the most anticipated issue with the new rulemaking: whether the FAR Council would remove the exclusionary effect of a FAR-based notice of proposed debarment to align with the NCR, under which a notice of proposed debarment is not exclusionary.

Despite extensive comments from industry stakeholders advocating that a notice of proposed debarment issued under the FAR should not be exclusionary, the FAR Council decided to retain this feature of FAR practice, and not align with the NCR. The Council justified this decision by (a) emphasizing the perceived differences in the purposes and risks associated with procurement contracts versus grants; (b) citing the need to protect the government’s business interests promptly when there is a significant risk posed by a contractor; (c) stating that the existing exclusionary effect of a notice of proposed debarment under the FAR has not resulted in inappropriate use or overuse of immediate exclusions and that the current framework provides sufficient safeguards to ensure that immediate exclusions are applied judiciously and only when necessary to protect the government’s interests; and (d) noting that the final rule formally recognizes the use of pre-notice letters, which can serve as an alternative to immediate exclusion, thereby providing contractors with an opportunity to address potential issues before formal suspension or debarment proceedings are initiated.

Because the FAR Council retained the exclusionary effect of notices of proposed debarment, it will continue to matter hugely if an entity that has both procurement contracts and grants receives a notice of proposed debarment under the FAR versus the NCR.

2. Clarification of Mitigating and Aggravating Factors for Individuals

The prior regulation contained a list of 10 mitigating factors for an SDO to consider when determining whether to debar a contractor. In response to feedback stating that the existing mitigating factors did not readily apply themselves to individual respondents even though most suspensions and debarments are aimed at individuals, the FAR Council has modified the factors in FAR 9.406-1 to better address how they apply to individuals. There are now 12 mitigating factors that expressly apply to individuals, including, for instance, whether an individual has cooperated with investigations or attended relevant remediation training. 

3. New Definitions, with One Notable Omission

The prior regulation did not define several key concepts that are relevant to understanding suspension and debarment practice. The final rule addresses this by introducing several new definitions. Notably, however, the FAR Council expressly declined to define “present responsibility,” because it found that the existing regulatory framework is sufficient to convey what it means to be “presently responsible.” This approach allows the concept of “present responsibility” to remain flexible and adaptable to the specific circumstances of each case, rather than being constrained by a rigid definition. This flexibility will ultimately be beneficial in assessing the unique factors and context of each suspension and debarment proceeding.

The new definitions in the final rule include: Suspending and Debarring Official; Administrative Agreement; Pre-Notice Letter; Voluntary Exclusion; Conviction; Civil Judgment; and Nonprocurement Common Rule.

These new definitions aim to provide greater clarity and consistency in the application of suspension and debarment procedures by providing a common and clear understanding of the terms and processes involved in this area of the law.

Conclusion

The final rule on suspension and debarment is a significant and long-awaited update to FAR 9.406 and 9.407. The final rule enhances consistency between the FAR and the NCR to a certain degree and provides a clear explanation by the FAR Council for the distinctions that remain between the two regulations. The final rule’s new definitions permit contractors and individuals to better understand this area of the law, although obtaining the assistance of experienced counsel is still a must for those facing questions about their present responsibility.