Debarment and suspension (collectively known as "exclusion") are of perennial interest to Congress because exclusion is one of the primary techniques that federal agencies use to avoid dealings with vendors who have failed, or are deemed likely to fail, to meet their obligations under federal law or government contracts. Debarred contractors are generally ineligible for new federal contracts for a fixed period of time, while suspended contractors are generally ineligible for the duration of any investigation or litigation involving their conduct. Federal law specifies various grounds for exclusion, only some of which expressly relate to procurement. The grounds and procedures for nonprocurement exclusions are outside the scope of this report. However, all persons excluded on procurement or other grounds are listed in the System for Award Management (SAM) (previously the Excluded Parties List System (EPLS)). This report discusses grounds and procedures for procurement-related exclusions. Authorities Requiring or Allowing Exclusion

Contractors can currently be debarred or suspended under federal statutes or under the Federal Acquisition Regulation (FAR), an administrative rule governing contracting by executive branch agencies. Heads of procuring agencies generally cannot waive exclusions to allow debarred or suspended contractors to contract with their agency. However, because exclusions under the FAR are designed to protect the government's interests, they may not be imposed solely to punish prior contractor misconduct. First, debarment may be imposed when a contractor is convicted of or found civilly liable for any so-called "integrity offense." Suspension

The FAR also allows agency officials to suspend government contractors when they suspect, upon adequate evidence, any of the following offenses, or when contractors are indicted for these offenses:
fraud or criminal offenses in connection with obtaining, attempting to obtain, or performing a public contract; violation of federal or state antitrust laws relating to the submission of offers; embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violations of federal criminal tax laws, or receipt of stolen property; violations of the Drug-Free Workplace Act of 1988; intentional misuse of the "Made in America" designation; unfair trade practices, as defined in Section 201 of the Defense Production Act; delinquent federal taxes in an amount exceeding $3,000; knowing failure by a principal to timely disclose to the government credible evidence of (1) violations of federal criminal laws involving fraud, conflict of interest, bribery, or gratuity offenses covered by Title 18 of the United States Code; (2) violations of the civil False Claims Act; or (3) significant overpayments on the contract that occurred in connection with the award, performance or closeout of a federal contract or subcontract and were discovered within three years of final payment; and other offenses indicating a lack of business integrity or honesty that seriously affect the present responsibility of a contractor. Because the public interest can be seen to encompass both safeguarding public funds by excluding contractors who may be nonresponsible and not excluding contractors who are fundamentally responsible and could otherwise compete for government contracts, agency officials could find that contractors who engaged in exclusion-worthy conduct should not be excluded, particularly if they appear unlikely to engage in similar conduct in the future. The debarment or suspension generally serves only to preclude an excluded contractor from (1) receiving new contracts or orders from executive branch agencies; (2) receiving new work or an option under an existing contract; (3) serving as a subcontractor on certain contracts with executive branch agencies; or (4) serving as an individual surety for the duration of the debarment or suspension. Any contracts that the excluded contractor presently has remain in effect unless they are terminated for default or for convenience under separate provisions of the FAR. While the possibility of de facto debarment often arises in connection with agency conduct that also deprives the contractor of a protected liberty interest without due process, the de facto debarment analysis focuses primarily upon conduct outside the debarment and suspension process that effectively excludes contractors. Additionally, in certain circumstances, agencies' determinations to debar or suspend a contractor could potentially be found to violate the Administrative Procedure Act (APA), particularly if the agency excludes the contractor based upon circumstances that the agency was aware of when it previously found that contractor sufficiently responsible to be awarded a federal contract.
Debarment and suspension (collectively known as "exclusion") are of perennial interest to Congress because exclusion is one of the primary techniques that federal agencies use to avoid dealings with vendors who have failed, or are deemed likely to fail, to meet their obligations under federal law or government contracts. Debarred contractors are generally ineligible for new federal contracts for a fixed period of time, while suspended contractors are generally ineligible for the duration of any investigation or litigation involving their conduct. Federal law specifies various grounds for exclusion, only some of which expressly relate to procurement. The grounds and procedures for nonprocurement exclusions are outside the scope of this report. However, all persons excluded on procurement or other grounds are listed in the System for Award Management (SAM), which contracting officers must check prior to awarding a contract.
Procurement-related exclusions can be broadly characterized as being either statutory or administrative. Statutory exclusions are required or authorized by congressional enactments that bar persons who have engaged in conduct prohibited under the statute from at least certain government contracts. Such exclusions are often mandatory, or at least beyond the discretion of the heads of procuring agencies, and are intended as punishments. The statute often prescribes the duration of the exclusion, and procuring agencies generally cannot waive the exclusion.
Administrative exclusions, in contrast, are authorized by the Federal Acquisition Regulation (FAR). The FAR authorizes the debarment of contractors who are convicted of, found civilly liable for, or found by agency officials to have committed specified offenses, or when other causes affect contractor responsibility. It similarly authorizes suspension when contractors are suspected of or indicted for specified offenses, or when there are other causes that affect contractor responsibility. The FAR does not require the exclusion of a contractor, even when grounds for exclusion are present. Instead, agency officials retain discretion as to whether to exclude particular contractors, and they may enter into administrative agreements circumscribing the conduct of contractors in lieu of exclusion. Exclusion under the FAR is also intended to protect the government's interests, not for purposes of punishment. The length of the exclusion can vary depending upon the seriousness of the conduct in question and the duration of any investigation, among other things. However, agency heads could waive administrative exclusions.
Excluded parties are generally ineligible for new government contracts and, in the case of administrative exclusions, are also expressly said to be ineligible to (1) receive new work or an option under an existing contract; (2) serve as a subcontractor on certain contracts; or (3) serve as an individual surety. However, existing contracts of the excluded contractor generally remain in effect unless they are terminated for default or convenience by the government.
Because they are dealing with the federal government, contractors are entitled to due process before being excluded from government contracts, although the nature of the process due to them varies for debarments and suspensions. Agencies are generally prohibited from using means other than debarment or suspension proceedings to effectively exclude contractors. Such conduct is sometimes described as "de facto debarment." Conduct that results in de facto debarment could also result in contractors being deprived of constitutionally protected liberty interests in prospective government contracts. Additionally, agencies could be found to have violated the Administrative Procedure Act (APA) by acting arbitrarily and capriciously if they exclude a contractor based upon circumstances that the agency was aware of when it previously found the contractor sufficiently "responsible" to be awarded a federal contract.