On March 28, 2015, the Department of State (“State”) issued a proposed rule to update various procedural aspects of the agency’s suspension and debarment actions.  The proposed rule appears intended to streamline the suspension and debarment process and reinforce the independence of the agency’s suspension and debarment official (“SDO”).  Yet despite these laudable aims, the proposed rule raises substantial questions about the scope and implementation of the contemplated changes.

The proposed rule would amend the debarment-related portion of the Department of State Acquisition Regulation (“DOSAR”), State’s agency-specific procurement regulations.  While many of the proposed changes are technical or administrative in nature, two are worthy of particular mention.

A.  Replacing Fact-Finding Panel with Individual Fact-Finder

First, under the proposed rule, fact-finding in suspension or debarment cases would be conducted by an individual “fact-finding official,” rather than by the three-person panel required under existing rules.  According to State, this change would have the benefit of “simplifying the fact-finding process” but would not impact the nature or amount of process afforded to parties subject to suspension and debarment proceedings.

Standing alone, the proposal to replace a panel with a designated fact-finding official seems reasonable, especially if doing so would increase the efficiency of fact-finding efforts.  Yet the proposed rule offers no criteria or standards for the selection of the fact-finding official, instead stating only that the fact-finding official would be “the individual designated by the debarring official to conduct additional proceedings as necessary concerning disputed material facts.”  This absence of  any guidelines is particularly striking when compared to the existing rule, which specifically provides that the fact-finding panel is to be comprised of “one representative each from the Office of the Legal Adviser, the contracting activity, and the requirements office,” with the representative from the Office of the Legal Adviser serving as the panel chairperson.  At bottom, even though State’s decision to concentrate fact-finding authority in the hands of a single individual may be defensible, the absence of any standards or guidelines for the selection of that individual is potentially troubling.

B.  Ensuring Independence of SDO Decisionmaking

A second proposed change to the DOSAR is the elimination of certain requirements to consult with State’s Office of the Inspector General (“OIG”) during the course of investigating and referring matters for potential debarment action.  State’s existing rules provide that if a matter involving fraud or criminal activity is referred to OIG, then:

The Office of the Inspector General shall investigate the matter, as appropriate, and provide a copy of its investigation report to the Procurement Executive for consideration of debarment action, if and when appropriate.  The contracting officer shall provide to the Procurement Executive and the Office of the Inspector General a copy of his or her intended actions in response to the office of the Inspector General report.

In recent years, such close involvement of the OIG in debarment matters has led to concerns about a lack of independence between SDOs and agency officials responsible for acquisition and investigative functions.  In the 2013 National Defense Authorization Act (“NDAA”), Congress enacted legislation that specifically provided that the SDOs for certain agencies, including State, “may not report to or be subject to the supervision of [that agency’s] acquisition office or Inspector General.”  And several recent court cases challenging suspension and debarments have argued—in some cases with great success—about the inappropriateness of exclusion actions that revealed the involvement of acquisition or investigative officials.

State may have taken note of this trend, as the proposed rule eliminates the requirement to consult with the OIG when investigating and referring matters for possible debarment action.  Although the OIG may provide valuable investigative support, this rule change appears intended to ensure the independence of the SDO when making actual exclusion decisions, and is likely to be welcomed by those in the contracting community.

Curiously, however, this change fixes only one-half of the problem, as State continues to designate its Procurement Executive as the agency’s SDO even though the 2013 NDAA specifically forbade the State SDO from reporting or being subject to the agency’s acquisition office.  Other agencies subject to this same provision have taken steps to ensure that their SDOs are not also responsible for procurement activities.  For example, USAID formerly designated the director of its Office of Acquisition and Assistance to serve as SDO, but after this arrangement was challenged in federal court, the agency moved the SDO to a different office—and terminated a suspension in order “[t]o ensure compliance with the National Defense Authorization Act of 2013.”  This recent precedent makes State’s decision to continue to have its Procurement Executive serve as the SDO all the more remarkable.

In sum, although State’s proposed rule appears well-intentioned, it leaves unaddressed important questions about the scope and implementation of its procedural changes.  Contractors doing business with the Department of State would be wise to continue to monitor these changes, especially given the increasingly complex regulatory environment and the growing reliance on suspension and debarment actions.  Obviously, no contractor plans to find itself in the midst of a responsibility inquiry, but it is crucial to ensure that contractor rights are adequately protected in the event that this does occur.

Tags: debarment, NDAA, State Department, suspension
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Photo of Frederic Levy Frederic Levy

Fred Levy is senior counsel in the firm’s Government Contracts and White Collar Defense and Investigations Practice Groups. He is a leading suspension and debarment lawyer, focusing his practice on the resolution of complex compliance and ethics issues. He has successfully represented numerous…

Fred Levy is senior counsel in the firm’s Government Contracts and White Collar Defense and Investigations Practice Groups. He is a leading suspension and debarment lawyer, focusing his practice on the resolution of complex compliance and ethics issues. He has successfully represented numerous high-profile corporations and individuals under investigation by the government in civil and criminal matters, including False Claims Act cases, and in suspension and debarment proceedings to ensure their continued eligibility to participate in federal programs. He has also conducted numerous internal investigations on behalf of corporate clients and advises corporations on voluntary or mandatory disclosures to federal agencies. Fred regularly counsels clients on government contract performance issues, claims and terminations, and litigates matters before the boards of contract appeals and in the Federal Circuit.

Related to his work involving program fraud, Fred counsels clients in the area of contractor “responsibility.” He is involved in the development and implementation of contractor ethics and compliance programs that meet the standards of the Federal Acquisition Regulation, Federal Sentencing Guidelines, and Sarbanes-Oxley, and he regularly conducts ethics and compliance training.

Fred is a principal editor of Guide to the Mandatory Disclosure Rule, and of The Practitioner’s Guide to Suspension and Debarment, 4th Edition. He is a vice-chair of the Debarment and Suspension Committee of the ABA Public Contract Law Section, and a former co-chair of that committee and of the Procurement Fraud Committee. He is a graduate of Columbia College and Columbia Law School.

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Photo of Michael Wagner Michael Wagner

Mike Wagner represents companies and individuals in complex compliance and enforcement matters arising in the public procurement context. Combining deep regulatory expertise and extensive investigations experience, Mike helps government contractors navigate detailed procurement rules and achieve the efficient resolution of government investigations and…

Mike Wagner represents companies and individuals in complex compliance and enforcement matters arising in the public procurement context. Combining deep regulatory expertise and extensive investigations experience, Mike helps government contractors navigate detailed procurement rules and achieve the efficient resolution of government investigations and enforcement actions.

Mike regularly represents contractors in federal and state compliance and enforcement matters relating to a range of procurement laws and regulations. He has particular experience handling investigations and litigation brought under the civil False Claims Act, and he routinely counsels government contractors on mandatory and voluntary disclosure considerations under the FAR, DFARS, and related regulatory regimes. He also represents contractors in high-stakes suspension and debarment matters at the federal and state levels, and he has served as Co-Chair of the ABA Suspension & Debarment Committee and is principal editor of the American Bar Association’s Practitioner’s Guide to Suspension & Debarment (4th ed.) (2018).

Mike also has extensive experience representing companies pursuing and negotiating grants, cooperative agreements, and Other Transaction Authority agreements (OTAs). In this regard, he has particular familiarity with the semiconductor and clean energy industries, and he has devoted substantial time in recent years to advising clients on strategic considerations for pursuing opportunities under the CHIPS Act, Inflation Reduction Act, and Bipartisan Infrastructure Law.

In his counseling practice, Mike regularly advises government contractors and suppliers on best practices for managing the rapidly-evolving array of cybersecurity and supply chain security rules and requirements. In particular, he helps companies assess and navigate domestic preference and country-of-origin requirements under the Buy American Act (BAA), Trade Agreements Act (TAA), Berry Amendment, and DOD Specialty Metals regulation. He also assists clients in managing product and information security considerations related to overseas manufacture and development of Information and Communication Technologies & Services (ICTS).

Mike serves on Covington’s Hiring Committee and is Co-Chair of the firm’s Summer Associate Program. He is a frequent writer and speaker on issues relating to procurement fraud and contractor responsibility, and he has served as an adjunct professor at the George Washington University Law School.

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