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On January 3, 2025, the Defense Department, GSA, and NASA (together, the "FAR Council") published its final rule amending the suspension and debarment procedures under the Federal Acquisition Regulation ("FAR"). The rule, which is also based on recommendations from the Interagency Suspension and Debarment Committee, adds language to improve consistency between the procurement and non-procurement procedures on suspension and debarment.

The final rule takes effect on January 17, 2025.

By way of background, there are two different regulatory systems for suspension and debarment depending on the type of activity involved. FAR Subpart 9.4 governs FAR-based contracting activities, whereas 2 C.F.R. Part 180, the Nonprocurement Common Rule ("NCR"), governs nonprocurement activities – like grants, cooperative agreements, and assistance contracts. Although these two regimes are similar, they have some differences in substance and in defined terms.

Acknowledging that these two systems are different but "are designed toward the same end, follow the same general principles, and use essentially the same basic action notice and decision-making process," the FAR Council proposed to make them "in closer alignment where appropriate." With the final rule, the FAR Council retained the bulk of its proposed amendments, making only minor changes and clarifications (i.e., it did not make any changes that have a "significant negative effect on contractors").

Below is a high-level overview on some of the updates to the suspension and debarment rules:

Definitions

Recognizing the gap between the defined terms under the FAR and NCR, the FAR Council amended the FAR to provide a host of new and expanded definitions.

• Administrative agreement means an agreement between an agency suspending and debarring official and the contractor used to resolve a suspension or debarment proceeding, or a potential suspension or debarment proceeding.

• Civil judgment means the disposition of a civil action by any court of competent jurisdiction, whether by verdict, decision, settlement, stipulation, other disposition that creates a civil liability for the complained of wrongful acts, or a final determination of liability under the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 3801– 3812).

• Conviction means— (1) A judgment or any other determination of guilt of a criminal offense by any court of competent jurisdiction, whether entered upon a verdict or plea, including a plea of nolo contendere; or (2) Any other resolution that is the functional equivalent of a judgment establishing a criminal offense by a court of competent jurisdiction, including probation before judgment and deferred prosecution. A disposition without the participation of the court is the functional equivalent of a judgment only if it includes an admission of guilt.

• Non procurement Common Rule * See 2 CFR part 180 and agency enacting regulations in 2 CFR subtitle B.

• Pre-notice letter means a written correspondence issued to a contractor in a suspension or debarment matter, which does not immediately result in an exclusion or ineligibility. The letter is issued at the discretion of the suspending and debarring official. The letter is not a mandatory step in the suspension or debarment process.

• Voluntary exclusion means a contractor’s written agreement to be excluded for a period under the terms of settlement between the contractor and the suspending and debarring official of one or more agencies. A voluntary exclusion must have Governmentwide effect.

Factors for Debarment and Suspension

To promote consistency, the final rule also adds factors that suspending and debarring officials should consider prior to making a decision. Prior to the change, the NCR had more factors plus a catch-all for the officials to consider. The final rule closes the gap and adds seven additional mitigating or aggravating factors (17 in total) under FAR 9.406-1(a), which is consistent with 2 C.F.R. §§ 180.860(a)–(f), (j), (k), (m), and (s). The final rule now includes:

• Whether the contractor (including an individual) has a pattern or prior history of wrongdoing, the frequency of incidents and/or duration of the wrongdoing, and the actual or potential harm or impact that results, or may result, from the wrongdoing.

• Whether and to what extent the contractor (including an individual) planned, initiated, or carried out the wrongdoing, and the kind of positions within the contractor’s organization held by the individual involved in the wrongdoing.

• Whether the wrongdoing was pervasive within the contractor’s organization.

• Whether the individual or the contractor’s principals tolerated the offense.

• Whether the contractor (including an individual) is or has been excluded or disqualified by an agency of the Federal Government or has not been allowed to participate in State or local contracts or assistance agreements on a basis of conduct similar to one or more of the causes for debarment specified in this subpart.

• Whether the contractor (including an individual) has entered into an administrative agreement with a Federal agency or a similar agreement with a State or local government that is not Governmentwide but is based on conduct similar to one or more of the causes for debarment specified in this subpart.

• Whether there are any other factors to consider for the contractor (including an individual) appropriate to the circumstances of a particular case.

Moreover, and in an effort to provide additional clarity and transparency, the final rule also amends FAR 9.406-1(a) to make it clear which factors apply to individuals, as opposed to contractors. The final rule also adds related clarifying language for suspensions under FAR 9.407-1(b)(2).

In sum, the refreshed factors are welcome news for contractors. Besides harmonizing the two suspension and debarment regimes, the revised factors provide a great roadmap for contractors both proactively as part of their compliance programs and reactively in responding to government inquiries involving suspension and debarment.

Other Items of Interest

Aggravating Factors

Previously, the FAR only referenced remedial measures and mitigating factors with respect to suspension and debarment decisions. Consistent with the NCR, the final rule clarifies that the suspending and debarring official also should consider "aggravating factors" before arriving at a decision. The aggravating factors not only promote consistency between the regimes but also provide "more guidance and increased options for the suspending and debarring official to consider when making present responsibility determinations." The final rule now says "the seriousness of the contractor’s acts or omissions and any remedial measures, mitigating factors, or aggravating factors should be considered in making any debarment decision."

Pre-Notice Letter

As noted in the revised defined terms above, the FAR council added a definition for "pre-notice letter." Consistent with that newly defined term, and recognizing that agencies typically like to assess issues early in the suspension and debarment process (as well as to find early resolutions), the final rule makes clear under both FAR 9.406-3(h) (debarment) and 9.407-3(g) (suspension) that "[p]rior to initiating a [debarment/suspension], a pre-notice letter may be issued at the discretion of the agency suspending and debarring official. A pre-notice letter is not required to initiate [debarment/suspension] under this subpart."

Proposed Debarment Remains Exclusionary

Notably, in light of the fact that the FAR Council included "pre-notice letters" to the text of the final rule, the FAR Council declined to walk back the immediate exclusionary effect of a proposed debarment. Thus, while a notice of proposed debarment under the NCR remains nonexclusionary, the FAR Council believes that there are important policy reasons – e.g., protecting the government's interest when something goes wrong – for retaining the immediate exclusionary effect of a notice of proposed debarment for procurements under the FAR.

Communications and Flexibility

The FAR Council added language to FAR 9.406-3(c)(1) and 9.407-3(c) that provides suspending and debarring officials the flexibility to issue a notice of proposed debarment or notice of suspension by mail, email, or certified mail with return receipt requested. Further, FAR 9.406-3(b)(1) and 9.407-3(b)(1) includes new language so that agencies may establish informal procedures governing the suspension and debarment decision-making process, including flexible procedures to allow a contractor "to present matters in opposition in person or remotely through appropriate technology."

Decision Timeline

Prior to the rule change, the suspending and debarring official was required to make a debarment decision on actions based upon conviction or civil judgment, or in which there is no genuine dispute over material facts (if no suspension is in effect) within 30 working days after receipt of any information/argument submitted by the contractor. The final rule changes the timeframe under FAR 9.406-3(d)(1) to 45 calendar days "from the date that the official administrative record is closed, unless the suspending and debarring official extends this period for good cause."

Conclusion

As shown above, the final rule is welcome news for contractors and government alike because it provides a streamlined approach to the suspension and debarment processes by aligning the procedures under the FAR with the NCR. These harmonizing changes, among other things, not only provide much needed clarity and flexibility in the suspension and debarment process but also promote transparency and fairness as well. Lastly, with the expanded mitigating and aggravating factors, contractors may want to take this opportunity to jumpstart the new year by refreshing your ethics and compliance programs.