National Association of Government Contractors

Court Vacates 15-Year Contractor Debarment

Finding shortcomings in the administrative record, a recent federal court decision vacated a 15-year long debarment, and offered hope to other contractors that might find themselves facing exclusion from federal contracts and programs.

The court's decision and reinforces the importance that a final debarment decision has, when "fact-based" debarments are made when material facts are in dispute.

For contractors facing an exclusion -- it is essential to ensure that the administrative record on which a debarment decision is based -- reflects all information showing why an exclusion is unwarranted, or unnecessary, to protect the Government.

The court reaches their decision in this case, (Int'l Exps., Inc. v. Mattis, US District Court for D.C.) by examining allegations that a food exporter to the Middle East engaged in a range of misconduct tied to federal contracts supporting U.S. troops.

While the owner of the contracting business, ultimately pled guilty to conspiracy charges. A companion qui tam False Claims Act suit against the owner and his wife, focusing on a claim of altered expiration dates, and was settled for $15 million.

These issues led the Defense Logistics Agency ("DLA") to debar both the owner and the business, as well as his wife, brother, and a new business started by the wife in the same industry.

The wife had argued that because neither she, the brother, nor the new business had anything to do with the underlying misconduct, there was no basis for DLA's exclusion. DLA nonetheless found debarment appropriate on affiliation principles in FAR Part 9. DLA also concluded that aggravating facts raised in the qui tam suit warranted a 15-year debarment period -- far beyond the 3-year standard set out in FAR Part 9.406-4.

Though the Court upheld the affiliation exclusion based on a broad reading of the FAR's debarment regulations, it held the 15-year exclusion was improperly based on allegations the debarring official should have found were in dispute.

The plaintiffs argued that, in the qui tam settlement agreement, they expressly disclaimed responsibility for mislabeling food products. Not only that, but the record showed that DLA did not have before it the exhibits attached to the qui tam Complaint, and thus, apparently accepted the allegations in that Complaint at face value, even though they were "untested" and "unproven."

The Court found that this was improper, particularly because of conflicting evidence suggesting that alterations to food labels were done for legitimate purposes (such as converting dates to the standard format used in the Middle East and ensuring that the shelf lives were limited due to more stringent requirements at the receiving locations). Given these issues, the Court found that there was a genuine issue of material fact regarding the qui tam materials that required the agency to make written findings of fact. Because DLA did not do so, the Court vacated the 15-year debarment period.

Successful judicial challenges of debarment decisions are uncommon, so contractors facing suspension and debarment proceedings should take note of this decision -- and in particular the importance of a well-developed administrative record.

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