Justin A. Chiarodo and Stephanie M. Harden
A recent federal court decision vacating a staggering 15-year debarment based on shortcomings in the administrative record offers a glimmer of hope to contractors facing exclusion from federal programs, and reinforces the importance that any final debarment decision be based on a fulsome record—particularly in “fact-based” debarments where there are disputed material facts. The big takeaway for contractors facing an exclusion is 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 underlying exclusions in this case arose from allegations that a food exporter to the Middle East engaged in a range of misconduct tied to federal contracts supporting U.S. troops (including allegations of inflated trucking charges, altered expiration dates, and falsified halal and USDA certificates). The owner ultimately pled guilty to conspiracy charges. A companion qui tam False Claims Act suit against the owner and his wife, focusing on the altered expiration dates, 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 countervailing 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.
The case is Int’l Exps., Inc. v. Mattis, No. 14-2064, United States District Court for the District of Columbia.