Government Contracts Update

A recent district court decision affirmed a critical element of the suspension and debarment process—notice and an opportunity to respond to all allegations forming the basis for such an action. On September 21, 2017, the U.S. District Court for the District of Columbia (D.D.C.) issued a decision granting Symplicity founder Ariel Friedler's motion for summary judgment, finding that Friedler's debarment was arbitrary and capricious and violated the Administrative Procedure Act (APA) because he was not given notice of all bases for debarment. See generally Friedler v. Gen. Servs. Admin., Civ. Action No. 15-2267 (KBJ) (D.D.C. filed Sept. 21, 2017).

Friedler, the founder and sole shareholder of contractor Symplicity, was initially suspended based on his indictment under 18 U.S.C. §§ 371 and 1030 for conspiracy to access a protected computer without authorization, to which he later pleaded guilty. Id. at 9. Prior to his conviction, Friedler engaged in negotiations with members of the General Services Administration's (GSA) suspension and debarment team. Id. at 8-12. Friedler and GSA contemplated an agreement to avoid Friedler's suspension, though no terms were agreed upon at that point. Id. However, following Friedler's conviction, GSA issued a Notice of Proposed Debarment based on the conviction and underlying actions and provided Friedler with an opportunity to respond to the allegation within 30 calendar days. Id. at 12.

Following the Notice of Proposed Debarment, Friedler and GSA resumed negotiations and executed several agreements, including a Voting Trust Agreement, though a larger agreement that would formally terminate Friedler's suspension and avoid the debarment remained on the table. Id. at 12-15. During this time, GSA learned that Friedler had returned to Symplicity premises and engaged in business with the federal government, both in violation of the prior agreements. Id. at 15. Rather than terminate the actions against Friedler, GSA issued a Final Debarment Notice, which rested not only on his criminal conviction, but on the two later discovered violations as well. Id. at 16. The Final Debarment Notice stated that these additional grounds also indicated Friedler's "lack of present responsibility," as did the initial conviction. Id. at 26.

Friedler challenged the debarment at the D.D.C., alleging a violation of the APA for failure to provide him with notice and an opportunity to respond to the additional grounds for debarment. Id. at 17-18. The Court agreed with Friedler and rejected GSA's arguments that the additional grounds identified were mere findings of fact relating to Friedler's present responsibility and were used only to support an extended debarment period, which GSA claimed was proper. Id. at 18-19; 23-32.

Under the Federal Acquisition Regulation (FAR), causes for debarment are plenary, and include in relevant part "a conviction of or civil judgment for…[an] offense indicating a lack of business integrity or business honesty that seriously and directly affects…[a contractor's] present responsibility," or "any other cause of so serious or compelling a nature that it affects the [contractor's] present responsibility." 48 C.F.R. §§ 9.406-2(a)(5), (c). For such enumerated offenses, a notice of proposed debarment must contain, inter alia, "the cause(s) relied upon under 9.406-2 for proposing debarment" and a statement "[t]hat, within 30 days after receipt of the notice, the contractor may submit, in person, in writing, or through a representative, information and argument in opposition to the proposed debarment, including any additional specific information that raises a genuine dispute over the material facts." Id. §§ 9.406-3(c)(3)-(4). In reaching a final determination, a debarring official is to "make a decision on the basis of all the information in the administrative record, including any submission made by the contractor." Id. at § 9.406-3(d)(1).

The Friedler court found that GSA ran afoul of these concepts by debarring Friedler based on two new factual grounds not included in the Notice of Proposed Debarment. The D.D.C. noted that not only were the grounds themselves labeled as "new causes" under the Notice, but that even without that language, such conduct necessarily constituted a new cause because it had not yet occurred at the time the Notice of Proposed Debarment was issued. Friedler, supra, at 25-28. Furthermore, even if these bases were used only as an aggravating factor to extend the proposed debarment period, notice and an opportunity to respond would still be required under 48 C.F.R. § 9.406-4(b), which states that "the procedures of 9.406-3 shall be followed" to extend the period of a debarment. Id. at 32-37..

Notably, the D.D.C.'s opinion made clear that even in light of the considerable deference afforded to agency determinations, Judge Brown was unconvinced that Friedler's criminal conviction alone provided a basis for Friedler's debarment; had Friedler been afforded the opportunity to respond to the two other identified causes, it is possible no debarment would have resulted. Id. at 21-22, 40. Accordingly, the error was not harmless under the APA. Id. at 40-42.

The complex facts of this case reinforce the fundamental concepts of notice and an opportunity to respond in proposed debarments and indicate that even in spite of deference to agency determinations, courts are willing to hold suspending and debarring officials to a scrutinizing standard in the contractors' best interest. Thus, contractors proposed for debarment should not only meaningfully respond to the agency's allegations but also, if debarment occurs, conduct a detailed comparison of the grounds identified in the proposed debarment versus the final debarment to ensure no new grounds were added. If the final debarment rests on additional bases of which the contractor previously did not have notice, contractors should be quick to object and avoid the imposition or prolonging of a debarment on such legally unacceptable grounds.