[Federal Register: November 26, 2003 (Volume 68, Number 228)]
[Rule and Regulations]
[Page 66533-66646]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26no03-12]


[[Page 66533]]

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Part II

Governmentwide Debarment and Suspension (Nonprocurement), and
Requirements for Drug-Free Workplace (Grants); Rules (Final and Interim
Final)
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Office of Personnel Management
Department of Agriculture
Department of Energy
Export-Import Bank
Small Business Administration
National Aeronautics and Space Administration
Department of Commerce
Social Security Administration
Office of National Drug Control Policy
Department of State
Agency for International Development
Peace Corps
Inter-American Foundation
African Development Foundation
Department of Housing and Urban Development
Department of Justice
Department of Labor
Federal Mediation and Conciliation Service
Department of the Treasury
Department of Defense
Department of Education
National Archives and Records Administration
Department of Veterans Affairs
Environmental Protection Agency
General Services Administration
Department of the Interior
Department of Health and Human Services
National Science Foundation
National Foundation on the Arts and the Humanities
 National Endowment for the Arts
 National Endowment for the Humanities
 Institute of Museum and Library Services
Corporation for National and Community Service
Department of Transportation


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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 970

DEPARTMENT OF AGRICULTURE

7 CFR Parts 3017 and 3021

DEPARTMENT OF ENERGY

10 CFR Parts 606, 607, and 1036

THE EXPORT-IMPORT BANK OF THE UNITED STATES

12 CFR Part 413

SMALL BUSINESS ADMINISTRATION

13 CFR Parts 145 and 147

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

14 CFR Parts 1265 and 1267

DEPARTMENT OF COMMERCE

15 CFR Parts 26 and 29

SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 436 and 439

OFFICE OF NATIONAL DRUG CONTROL POLICY

21 CFR Parts 1404 and 1405

DEPARTMENT OF STATE

22 CFR Parts 133 and 137

AGENCY FOR INTERNATIONAL DEVELOPMENT

22 CFR Parts 208 and 210

PEACE CORPS

22 CFR Parts 310 and 312

INTER-AMERICAN FOUNDATION

22 CFR Parts 1006 and 1008

AFRICAN DEVELOPMENT FOUNDATION

22 CFR Parts 1508 and 1509

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 21 and 24

DEPARTMENT OF JUSTICE

28 CFR Parts 67 and 83

DEPARTMENT OF LABOR

29 CFR Parts 94 and 98

FEDERAL MEDIATION AND CONCILIATION SERVICE

29 CFR Parts 1471 and 1472

DEPARTMENT OF THE TREASURY

31 CFR Parts 19 and 20

DEPARTMENT OF DEFENSE

32 CFR Parts 25 and 26

DEPARTMENT OF EDUCATION

34 CFR Parts 84, 85, 668 and 682

NATIONAL ARCHIVES AND RECORDS ADMINISTRATION

36 CFR Parts 1209 and 1212

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Parts 44 and 48

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 32 and 36

GENERAL SERVICES ADMINISTRATION

41 CFR Parts 105-68 and 105-74

DEPARTMENT OF THE INTERIOR

43 CFR Parts 12, 42 and 43

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 76 and 82

NATIONAL SCIENCE FOUNDATION

45 CFR Parts 620 and 630

NATIONAL FOUNDATION ON THE ARTS AND THE HUMANITIES

National Endowment for the Arts

45 CFR Parts 1154 and 1155

National Endowment for the Humanities

45 CFR Parts 1169 and 1173

Institute of Museum and Library Services

45 CFR Parts 1185 and 1186

CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

45 CFR Parts 2542 and 2545

DEPARTMENT OF TRANSPORTATION

49 CFR Parts 29 and 32


Governmentwide Debarment and Suspension (Nonprocurement) and
Governmentwide Requirements for Drug-Free Workplace (Grants)

AGENCIES: Office of Personnel Management; Department of Agriculture;
Department of Energy; The Export-Import Bank of the United States;
Small Business Administration; National Aeronautics and Space
Administration; Department of Commerce; Social Security Administration;
Office of National Drug Control Policy; Department of State; Agency for
International Development; Peace Corps; Inter-American Foundation;
African Development Foundation; Department of Housing and Urban
Development; Department of Justice; Department of Labor; Federal
Mediation and Conciliation Service; Department of the Treasury;
Department of Defense; Department of Education; National Archives and
Records Administration; Department of Veterans Affairs; Environmental
Protection Agency; General Services Administration; Department of the
Interior; Department of Health and Human Services; National Science
Foundation; National Foundation on the Arts and the Humanities,
National Endowment for the Arts, National Endowment for the Humanities,
Institute of Museum and Library Services; Corporation for National and
Community Service, and Department of Transportation.

ACTION: Final rules and interim final rules.

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SUMMARY: These rules implement changes to the governmentwide
nonprocurement debarment and suspension common rule (NCR) and the
associated rule on drug-free workplace requirements. The final and
interim final rules reflect changes made to the proposed rules in
response to the comments received during the comment period. The NCR
sets forth the common policies and procedures that Federal Executive
branch agencies must use in taking suspension or debarment actions. It
also establishes procedures for participants and Federal agencies in
entering covered transactions. While these procedures are mandatory for
all agencies of the Executive branch under Executive Order 12549, any
Federal agency with procurement or nonprocurement responsibilities may
elect to join the governmentwide system by adopting these procedures
through the rulemaking process. Certain small Executive branch agencies
that are exempt from having to issue separate regulations with the
approval of the Office of Management and Budget, may initiate
suspension and debarment actions in their inherent authority. Following
the procedures set forth in the NCR will help ensure that the agencies'
actions comply with due process standards and provide the public with
uniform procedures. As an alternative, smaller Executive branch
agencies may refer matters of contractor and participant responsibility
to another Executive branch agency for action. For a detailed
explanation of the changes to these rules, see the comments section
under Supplementary Information below.

DATES: The effective date for this rule is November 26, 2003. The
comment date for those agencies issuing this rule as an interim rule
(i.e., the Department of Agriculture, the Export-Import Bank, the
Department of Justice, and the Department of Treasury) is January 26,
2004.

ADDRESSES: Comments on the interim rules should be submitted to the
individual agency contacts.

FOR FURTHER INFORMATION CONTACT: Robert F. Meunier, Chair of the
Interagency Suspension and Debarment Committee, Office of Grants and
Debarment (3901-R), Environmental Protection Agency, 1200 Pennsylvania
Avenue NW., Washington, DC 20460, by phone at (202) 564-5399 or by e-mail (meunier.robert@epa.gov). A chart showing where each agency has
codified the common rule may be obtained by accessing the Office of
Management and Budget's home page (http://www.whitehouse.gov/omb),
under the heading ``Grants Management.''

SUPPLEMENTARY INFORMATION:

A. Background

    On February 18, 1986, President Reagan issued Executive Order 12549
(3 CFR 1986 Comp., p. 189), ``Debarment and Suspension,'' to establish
a governmentwide debarment and suspension system covering the full
range of Federal procurement and nonprocurement activities, and to
establish procedures for debarment and suspension from participation in
Federal nonprocurement programs. Section 4 of that Order established
the Interagency Suspension and Debarment Committee (ISDC) to monitor
implementation of that system, coordinate actions among the Federal
agencies, and make recommendations to the Office of Management and
Budget (OMB) concerning regulatory and other changes needed to address
the needs of both the procurement and nonprocurement suspension and
debarment programs under a comprehensive debarment and suspension
system encompassing the full range of Federal activities.
    The OMB published initial guidelines for nonprocurement debarment
and suspension to all Executive branch agencies on May 29, 1987 (52 FR
20360), followed by final guidelines along with the NCR on May 26, 1988
(53 FR 19160). The OMB guidelines and NCR provide uniform requirements
for debarment and suspension by Executive branch agencies to protect
assistance, loans, benefits and other nonprocurement activities from
waste, fraud, abuse, poor performance or noncompliance similar to the
system used for Federal procurement activities under Subpart 9.4 of the
Federal Acquisition Regulation (FAR) and its supplements.
    On January 31, 1989, the agencies amended the NCR by adding a new
subpart F to implement the Drug-Free Workplace Act of 1988 (54 FR
4946).
    On August 16, 1989, President George H. W. Bush issued Executive
Order 12689, ``Debarment and Suspension,'' (3 CFR 1989 Comp., p. 235),
directing agencies to reconcile technical differences existing between
the procurement and nonprocurement debarment programs, and to give
exclusions under either program reciprocal effect across procurement
and nonprocurement activities. In 1994, Congress passed the Federal
Acquisition Streamlining Act of 1994 (Pub. L. 103-355, 108 Stat. 3327),
mandating reciprocity for exclusions issued under the procurement and
nonprocurement debarment programs.
    On April 12, 1999, OMB asked the ISDC to review the common rule and
propose amendments that would: (a) Resolve remaining unnecessary
technical differences between the procurement and nonprocurement
systems; (b) revise the current rule in a plain language style and
format; and (c) make other improvements to the common rule consistent
with the purpose of the suspension and debarment system. On October 29,
1999, the ISDC issued a final report to OMB with recommended changes to
the NCR.
    On January 23, 2002, thirty agencies jointly proposed amendments to
the NCR and for the removal and relocation of the governmentwide
provisions implementing the Drug-Free Workplace Act of 1988 (67 FR
3265). One additional agency, Department of Housing and Urban
Development, proposed its amendments to those rules on July 22, 2002
(67 FR 48006).
    Since publication of the above proposed rules, the Federal
Emergency Management Agency (FEMA), along with parts of many other
Federal agencies, has been transferred into the new Department of
Homeland Security (DHS). Therefore, this final rulemaking does not
include a final rule for FEMA or DHS. Three agencies, Department of
Treasury, Department of Justice and The Export-Import Bank of the
United States, did not propose changes along with other agencies on
January 23, 2002, but are adopting these rules on an interim final
basis. The Department of Agriculture, although it proposed rules on
January 23, has decided to issue an interim final rule for the reasons
cited in its agency-specific preamble. Persons wishing to submit
comments to the Department of Agriculture, Department of Treasury,
Department of Justice or The Export-Import Bank of the United States
may do so within sixty (60) days of the date of this publication by
sending comments as described in the preambles to those rules. The
remaining twenty-nine agencies are jointly issuing this rule as a final
rule.
    Furthermore, since publication of the proposed rule, the General
Services Administration (GSA) has changed the name of the List of
Parties Excluded from Federal Procurement and Nonprocurement Programs
(List). It is now called the Excluded Parties List System (EPLS).
Corresponding changes have been made throughout this rule.

Comments on the Proposed Rules

    We received comments on the proposed amendments to the NCR from
sixteen commenters. Of those, eight are

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from employees of Federal agencies; two are from state employees; and
six are from professional or public organizations. We received no
comments addressing the provisions related to the drug-free workplace
requirements.

General Comments

    Plain language format. Generally, most comments were supportive of
the plain language style and format of the proposed rule, including the
American Bar Association's Section on Public Contracts Law (ABA-PCL),
which found the format of the proposed rule to be in a ``* * * user
friendly style that is well suited for non-lawyers. * * * without
losing any of the precision in the standard regulation format.''
    However, one commenter expressed concern that the question and
answer format will make it more difficult for Government officials
familiar with standard rules to find information quickly by scanning
the table of contents for short titles.
    While we acknowledge that the longer sentences associated with the
question and answer format will make scanning the table of contents
more difficult, we believe that the benefits to the regulated community
far exceed any small burden that might be placed on Government
officials when using the rule. We prepared the proposed rule so that
information pertaining to Government officials with various
responsibilities under the rule, and information pertaining to
individuals and businesses subject to the rule, are grouped together
under separate subparts. We believe that this will enhance everyone's
ability to locate information of particular interest to them.
    One commenter noted that in some places within the proposed rule
the sentences are still complex. In preparing the proposed rule, there
were several provisions, such as those reciting the causes for
debarment and provisions related to affiliation and imputed conduct,
which we did not revise or did so insubstantially. As a result, in a
few places the style of the language was not fully in line with the
style used in other parts of the proposed rule. Accordingly, we revised
the final rule so that those provisions are less complex and more in
keeping with the plain language format used elsewhere in the rule.
Section 630 of the final rule, regarding imputation of conduct, is
reorganized entirely in response to this and other comments regarding
its lack of clarity.
    Native American Tribes. One commenter noted that neither the
existing NCR, nor the proposed rule specifically addresses the
treatment of Native American Tribes. Issues related to the status of
recognized Native American Tribes can be complex. However, tribes, like
states, are expected to be responsible recipients of, and participants
in, Federal nonprocurement transactions. Under this rule, Native
American Tribes are accorded the same treatment as state governments
with regard to the coverage and applicability. Therefore, no special
distinction with respect to Native American Tribes is required.
    Debarring Official Responsibilities. One commenter requested that
the final rule specifically state that suspending and debarring
officials may use the services of other officials in carrying out their
duties. The numerous references to the suspending or debarring official
within this rule do not imply that the suspending or debarring official
must perform all those duties without the assistance of staff or
others. The drafting committee acknowledges that it is common practice
for suspending and debarring officials to use the services of
assistants in carrying out their duties. Such administrative matters
are more appropriately addressed through agency-specific internal
guidance rather than in this rule.
Subpart A
    ``Participant'' and ``participate''. Two commenters raised concerns
that the definition of ``participant'' in section 980 may be confused
with the term ``participant'' as used in section 105(a) and
``participate'' as used in section 135. These terms in sections 105(a)
and 135 are, in fact, broader in scope than the definition in section
980. We agree that section 105(a) should be clarified to identify the
entire universe of potential participants, rather than only those who
may presently have the status of a current ``participant'' as defined
in section 980. Accordingly, section 105 in the final rule is amended
to state that portions of the rule apply to you if you are `` * * * a
person who has been, is, or may be expected to be, a * * * ''
participant or principal in a covered transaction. Similarly, section
135 of the proposed rule has been amended by substituting the concept
of involvement for participation to make it clear that Federal agencies
may take suspension or debarment actions against any persons who may be
involved in covered transactions regardless of whether they are
currently a ``participant'' as defined under section 980. We also made
changes to the imputed conduct provisions by substituting the word
``person'' for ``participant'' in section 630 for the same reason.
Subpart B
    Covered transactions. One commenter suggested that Subpart B of the
final rule include specific language currently contained in the
existing NCR in section 110(a)(1), which notes that a nonprocurement
transaction need not involve the transfer of Federal funds. We included
that language in the proposed rule in the definition of nonprocurement
transaction in section 970(b). Accordingly, no further amendment to
Subpart B for that purpose is necessary.
    Commodity Debarment. One agency raised concern about the
regulation's lack of guidance with regard to ``commodity'' suspension
and debarment referenced in sections 110(c) and 945. The ISDC notes
that any resolution of the issues surrounding debarment of commodities
requires thorough agency-wide consultation and possible changes to
Parts 8, 9, 13, 47, 51 and 52 of the FAR. Because the comment was
received after the comment period had closed and just prior to
publication of this final rule, there was insufficient opportunity for
the ISDC to address this issue before this rulemaking. Therefore the
issues surrounding commodity suspension and debarment will be addressed
at a later time. However, any agency considering a commodity debarment
should fully coordinate the action in accordance with section 620.
    Optional lower tier coverage. We received two comments about the
language in section 220 of the proposed rule that mandates coverage of
subcontracts of $25,000 or more at the first tier below a covered
nonprocurement transaction. The language gives agencies an option to
extend coverage to subcontracts at lower tiers.
    The two comments recommended diametrically opposed changes to the
proposed rule. One commenter suggested revising the rule to require
agencies to cover subcontracts at all tiers and said that making lower
tier coverage optional would be inconsistent with the rule's purpose as
stated in section 110. The other suggested revising the rule to either:
(1) Eliminate coverage of subcontracts entirely, relying on reciprocity
with Federal procurement debarment and suspension actions; or (2)
establish a common approach for all Federal agencies by limiting
coverage to first tier subcontracts of $25,000 or more (the proposed
rule's mandatory coverage).
    The two comments reflect the widely varying nature of Federal
programs subject to this rule. Some programs,

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especially programs with awards to states as pass-through entities,
have substantial program performance by subcontractors at lower tiers
below covered nonprocurement transactions. Other programs, including
many research programs, are performed by participants in the covered
nonprocurement transactions. At least some programs of the first type
may be particularly vulnerable to subcontractor malfeasance; agencies
in those cases need the flexibility to extend coverage to lower tier
subcontracts to adequately protect the Federal Government's interest.
Many programs of the second type, however, do not share that
vulnerability. Revising the rule to mandate extended coverage in all
cases would increase administrative burdens and costs for those
programs without commensurate benefits to the taxpayer. For this
reason, the final rule includes the optional lower tier coverage in
section 220 as the best way to afford adequate protection for the wide
universe of Federal agency programs without imposing undue
administrative burdens on agencies or participants.
Subpart C
    Scope of action. One commenter recommended that proposed sections
300, 400, 420 and 445 be clarified to state that persons checking the
Excluded Parties List System (EPLS), formerly known as the List of
Parties Excluded or Disqualified from Federal Procurement and
Nonprocurement Programs, should look at the cause and treatment code to
see if the listed person is ineligible under a statute or executive
order as opposed to suspended or debarred under this rule. The cause
and treatment code will reveal a scope of disqualification which may
differ from a discretionary suspension or debarment. The EPLS includes
cause and treatment codes with each listing, as well as instructions
for their use, so that the user will know the nature and scope of a
person's ineligibility. This is the same system as that currently in
place and has worked without problems. We believe that sections 75(b),
145(b)(1) and 515 of the proposed rule already adequately address this
matter. Therefore, no additional language in this regard is added to
the final rule.
    Participant verification of eligibility of lower tier participant.
One commenter recommended that we clarify that a participant planning
to enter into a covered transaction with another entity at the next
lower tier must verify that the entity is not excluded or disqualified.
We agree. We included a new section 300 in the final rule to more
clearly state that obligation. We renumbered the remaining sections
within that series to maintain the sequence of the final rule.
    Participant termination of suspended or debarred principal in
existing covered transactions. One agency commenter noted that the
cautionary language contained in the final sentence of section 305(a)
of the proposed rule (now section 310(a) of the final rule), be
modified appropriately and included at the end of proposed section
310(a) (now section 315(a) of the final rule). The language under
proposed rule section 305(a) emphasized that a participant exercise
caution in deciding whether to terminate covered transactions, such as
subcontracts or subgrants, with persons that were already in existence
at the time the person was excluded. The commenting agency noted that a
participant may face the same issue with regard to one of its own
employees who may be subject to an exclusion while already acting as a
principal under another covered transaction. Since an agency exclusion
imposed under this rule does not apply to existing awards, termination
options in such situations can be legally and practically complex.
Before such an action is taken, the option must be carefully analyzed
and weighed. We believe the same or similar concerns apply to decisions
about employees who serve as principals. Accordingly, section 315(a) of
this final rule has been amended to include similar cautionary
language.
    Participant verification of its principals' eligibility. One
commenter suggested that proposed section 315 be clarified so that the
reader understands that a participant need only verify that its own
principals, and not those of lower tier participants, are eligible to
participate in the covered transaction. Since a participant may have a
transaction both above it and below it, it is possible to misconstrue
this section to obligate the participant to verify the principals of
those participants above and below its own organization. The language
in proposed sections 315 and 325 (now sections 320 and 330 in the final
rule), was intended to require participants only to verify eligibility
of its own principals in its own transactions. Participants at lower
tiers will verify the principals' eligibility in their transactions.
Accordingly, we amended proposed section 315 (now section 320 in the
final rule), to replace the phrase ``any principal'' in the first
sentence, with the phrase ``any of your principals.''
    Doing business with an excluded person. The same commenter
suggested that proposed section 320 (now section 325 in the final
rule), be modified by replacing the phrase ``If as a participant you
knowingly do business with an excluded person'' with ``If you as a
participant do business with a person when you knew or had reason to
know that the person was excluded. * * * .'' The commenter believes it
would make the standard consistent with that found elsewhere in the
rule. However, the only place in the rule that the ``reason to know''
standard applies is when an agency is imputing conduct from an entity
to an individual for the purpose of suspension or debarment. That
standard is different from the ``should have known'' standard, but less
than the actual knowledge standard required under proposed section 320
(now section 325). When the NCR was published as a final rule in 1988,
the standard of actual knowledge was adopted to support a cause for
debarment under section 305(c)(2). That final rule changed the language
from what had been proposed as a ``known or reasonably should have
known'' standard. That was done to conform the nonprocurement rule to a
FAR certification proposed amendments at 52 FR 28642-46 (July 31,
1987). See also discussion at 53 FR 19167 (May 26, 1988). It was
determined then, and we agree now, that actual knowledge of
ineligibility should be required before an agency debars a person for
doing business with an excluded or disqualified person. Therefore, the
standard under this section in the final rule remains unchanged.
    Certification. Three of the six comments we received on this
subject, including one from the ABA-PCL, supported the proposed rule's
elimination of a current requirement for certifications. The ABA-PCL
also noted that the problems caused by certifications could be
aggravated, rather than solved, if some agencies elected to continue
using certifications, and instructions were not issued to preclude each
agency from separately crafting certification language that differed
from the language used by the others. We agree and note that this
comment should be addressed by the joint efforts of 26 Federal grant-
making agencies to implement the streamlining and simplification
requirements of the Federal Financial Assistance Management Improvement
Act of 1999 (Pub. Law 106-107). A stated goal of those interagency
efforts is to eliminate certifications or assurances that are found to
be unnecessary and establish common language for others.
    One of the three commenters supporting continued use of

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certifications said that certifications provide the best means of
obtaining accurate and updated information about a person's
eligibility. That commenter noted that the Office of Federal
Procurement Policy retained the suspension/debarment certification when
the Clinger-Cohen amendments were implemented for Federal procurement
contracts.\1\ Another comment in support of retaining certifications
suggested that a certification is the best way for a participant to
provide information about itself and its principals, as required by
proposed rule section 330 (now section 335 in the final rule), to the
Federal agency with which it is about to engage in a covered
transaction.
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    \1\ Section 4301(b)(2)(iii) of the Federal Acquisition Reform
Act of 1996 (Pub. L. 104-106), prohibits Federal agencies from
imposing non-statutory certifications on contractors or offerors
unless the Federal Acquisition Regulatory Council provides written
justification to the Administrator for Federal Procurement Policy,
and the Administrator approves the certification requirement in
writing. This justification must include a determination that there
is no less burdensome means for administering and enforcing the
agency regulation.
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    We understand and appreciate these views. However, Federal award
officials can now rely on the electronic EPLS which is available
worldwide on the Internet, as opposed to the printed version that could
be six weeks out of date by the time some awarding officials receive
them. New technology has eliminated any need to require Federal
agencies to obtain suspension/debarment certifications, although the
rule still makes certifications available as an option for any agency
with circumstances that justify their continued use. In their agency-
specific preambles accompanying the Federal Register notice of proposed
rulemaking, only a few agencies proposed to use certifications in their
covered transactions. This suggests that many agencies see alternative
methods as an opportunity to reduce burdens on participants without
reducing compliance with the rule's requirements. Therefore, the final
rule does not require Federal agencies to obtain certifications.
Subpart E
    Identity confirmation by date of birth. The Federation of American
Hospitals suggested that section 515 of the rule include a field for
birth date entries on the GSA List (now called the EPLS). The
Federation observed that birth dates are currently available in company
employee databases and are used in other Federal programs to assist in
matching identities. The ISDC has been studying the use of birth dates
as a potential data entry into the EPLS to confirm the identity of
individuals. The collection, use, and dissemination of personal
identifier information, such as social security numbers and birth
dates, is widely practiced in private and commercial settings. However,
when Federal agencies desire to do so, the issue is more complex.
Certain statutes designed to protect privacy must be considered. We
believe that this suggestion has merit and should be considered as an
enhancement to the current system at a later date.
Subpart F
    Confirmation of receipt of notice by e-mail. The ABA-PCL expressed
general support for expanding the options for delivery of action
notices under sections 615, 725, 820 and 975. It noted that e-mail
notification, unlike notification by facsimile, is still in an
evolutionary stage and may lack the level of certainty that the notice
reaches the intended recipient in a timely manner. It suggested that
the regulation should require that e-mails be followed up by notice via
regular mail, or that the respondent provide the sender with a
confirmation of e-mail receipt.
    While still an evolving technology, e-mail is not inferior to
traditional mail or facsimile as a means to deliver notice. Even
current mail with return receipt options does not guarantee that the
mail reaches the intended recipient. Many return receipts are returned
to the sender as undeliverable or unclaimed. Some are signed by a
person whose signature is not legible. The legal system accepts, as
legally sufficient, constructive notice to bring a matter to
conclusion--knowing that actual receipt by the intended recipient is
not guaranteed. This has been equally true in the world of suspension
and debarment. Agencies are occasionally faced with claims by
respondents who have been debarred that they did not see the notice or
decision, or that the facsimile notice was mis-delivered. The current
NCR and FAR debarment rules assume receipt if the notice is sent to the
last known address. Because the rules allow any debarred person to
petition for reinstatement at any time, a person who makes a case for
non receipt of notice is not deprived of an opportunity to contest an
action or have its status changed. Requiring duplicate mailings or
other cumbersome procedures will not significantly increase the chance
of actual receipt. It would only lengthen the notification process and
deprive the agencies of the ability to take prompt protective action
and to conduct business efficiently. Therefore, we did not change this
in the final rule.
    Scope of action with regard to subsidiaries. The ABA-PCL requested
that proposed section 625 be amended to address uncertainty about
whether an organization's suspension or debarment automatically covers
wholly owned subsidiaries. The 1988 preamble to the NCR contained a
detailed explanation of the treatment to be accorded all subsidiaries
of a corporation with regard to the scope of a debarment or suspension.
See 53 FR 19169 (May 26, 1988). The 1988 NCR, when proposed, would have
included subsidiaries automatically within the scope of a suspension or
debarment action taken against the parent company. As a result of
comments received in 1988, the final NCR removed the term
``subsidiaries'' from the automatic scope of a suspension or debarment
against a parent company. This was, in part, because separately
incorporated entities may have different shareholder interests involved
that may not be notified of the action. Also, a subsidiary corporation
may receive an award in its own name. Procurement and nonprocurement
award officials must rely on the EPLS to determine the eligibility
status of a potential contractor or participant. There is nothing in
the award process that will inform the award official that any
potential contractor or participant is, or may be, a subsidiary of
another excluded entity--even if all the subsidiary's stock is owned by
the excluded entity. Apart from cases where a subsidiary's name may
include part of the parent's name, there may be nothing in the EPLS
that will cause an award official to associate the potential subsidiary
contractor or participant with an excluded parent. For these reasons,
the original nonprocurement suspension and debarment final rule elected
to treat all subsidiaries as ``affiliates.'' This means that all
entities with a distinct legal identity, including wholly-owned
subsidiaries, must be provided with a notice of action, an opportunity
to contest, and written determinations. The subsidiary will appear with
its own listing to assure that the Government may effectively enforce
the EPLS. Parts of a business entity that do not enjoy a separate legal
standing, such as unincorporated divisions and branches, are included
within the scope of the action against the entity.
    Imputing conduct. One commenter observed that a technical reading
of section 630 of the proposed rule does not adequately describe
imputing conduct from a subsidiary to its parent company or between
separate corporate or other business entities other than

[[Page 66539]]

those engaged in joint ventures. Paragraph (a) of that section refers
to imputing conduct from individuals to organizations. Paragraph (b)
addresses imputing conduct from organizations to individuals. Paragraph
(c) addresses imputing conduct between businesses linked by some form
of limited joint venture or agreement.
    Many agencies have operated with the understanding that the phrase
``or similar arrangement'' contained in section 325(b)(3) of the
current NCR allows agencies to impute conduct between a subsidiary and
its parent company. The proposed rule did not alter the current
language of the NCR. However, after reviewing the proposed language,
and comments requesting that we redraft this section using plain
language (see General comments on plain language format above), we
revised section 630 of this final rule to make clear that, for the
purpose of suspension or debarment, Federal agencies may impute
misconduct from individuals to organizations, from organizations to
individuals, from individuals to other individuals, and from
organizations to organizations, where appropriate. Section 630(c) of
the final rule covers imputing misconduct from any linked
organizations, including those linked by a parent-subsidiary
relationship. This revised format and style of section 630 will help
eliminate ambiguity existing under the current NCR language and make it
more understandable to the general public.
    We also note that this rule retains the reason to know standard as
the appropriate standard for imputing misconduct to individuals under
section 630(b). The Circuit Court of Appeals for the DC Circuit, in
Novicki v. Cook, 946 F.2d 938 (D.C. Cir. 1991), noted that the reason
to know standard was not defined in the FAR. Using an analysis of that
standard at common law, the Court reasoned that this standard is not
one of strict liability or a should have known standard that can be met
merely because of an individual's position as president of a
corporation. We agree with that interpretation. We also note, as did
the Court, that the debarring official in that case had other
information in the record, the nature of which could have reasonably
supported imputation under the reason to know standard under the right
circumstances. Under this rule, if a person in a position of control,
influence or authority over a business activity acquires information
that suggests misconduct and fails to take action to prevent the
misconduct from occurring, or to mitigate the injurious consequences of
the misconduct once it has occurred, imputation under the reason to
know standard of section 630(b) is appropriate. If a person in
authority over a business activity can be shown to have deliberately
avoided acquiring information about misconduct that would otherwise
reasonably be expected to come to their attention in the ordinary
course of performing their duties, they may be deemed to have reason to
know of the misconduct under section 630(b).
    The reason to know standard of section 630(b) applies to all
situations where conduct is to be imputed to an individual. It applies
the same standard for imputing conduct between spouses or relatives as
it does between an organization and an individual or between unrelated
individuals. This section does not authorize imputing conduct from one
individual to another in a business activity solely upon the existence
of a family or marital relationship between two individuals. Other
factors, such as age, experience in the business, education, financial
capacity, and organizational or operational independence should be
considered along with the relationship before determining that one
individual had reason to know of the misconduct of the other. Where no
other factors are present to support imputing conduct to a related
individual, that individual may still be subject to action as an
affiliate, if the appropriate degree of control can be established.
    Another commenter suggested that we delete from section 630 the
word ``scope'' to describe application of the imputed conduct
provisions and we use the term only with regard to the subject matter
addressed in section 625. We agree with that clarification and have
revised the initial sentence in section 630 accordingly.
    That commenter also suggested that the final rule substitute the
words ``may be'' for the word ``is'' in the final sentence of
paragraphs (a) and (c) of section 630 of the proposed rule. The
commenter believed such a change would clarify that acceptance of
benefits derived from the conduct in question alone does not create a
conclusive presumption upon which to impute conduct. We agree that the
mere acceptance of benefits alone would be an insufficient basis upon
which to conclude that a person had knowledge of, approved of, or
acquiesced in the conduct where evidence suggests otherwise. However,
agencies under the Governmentwide debarment and suspension system have
always used acceptance of benefits as one indicator of knowledge,
approval or acquiescence. A suspending or debarring official, or an
official conducting fact-finding in a suspension or debarment action,
may weigh the fact of receipt of benefits derived from the conduct
against other information available in the record to determine whether
a person knew or approved of, or acquiesced in, the conduct in
question. Therefore, the language in the proposed rule is accurate and
remains in the final rule.
Subparts G and H
    One Federal debarring official noted that the language of section
700(a) of the proposed rule generally requires adequate evidence to
suspect that a cause for debarment exists as the first part of a two-
part test to support a suspension. He observed that the adequate
evidence test makes sense so long as the reader applies it to any
ground under section 800 other than section 800(a). A cause for
debarment under section 800(a) requires the matter to have already
progressed to a conviction or judgment. While the language in the
proposed rule has existed under the NCR for years without apparent
confusion, we agree that either section 800(a) should be stated more
generally such as ``commission of criminal offense or liability for a
civil matter'' or section 700 should distinguish between suspensions
based on causes under section 800(a) and those based on causes under
sections 800(b) through (d). To keep the causes for debarment under the
FAR and this rule consistent, we elected not to alter the language of
section 800(a) in this final rule. But to improve the clarity with
respect to suspensions for actions that have not yet progressed to a
judgment or conviction, we divided proposed section 700(a) into two
paragraphs (a) and (b). Section 700(a) of the final rule relates to
suspensions based upon indictment, complaint or other adequate evidence
to support criminal or civil matters that may ultimately fall under
section 800(a). Section 700(b) of the final rule relates to adequate
evidence of any other cause for debarment. Proposed section 700(b)
becomes section 700(c) in this final rule.
    Fact-finding proceedings versus presenting matters in opposition. A
few commenters found proposed rule sections 740 and 835 confusing
because while these sections address meetings held with the suspending
or debarring official to present matters in opposition, the final
sentence of each section relates to taking witness testimony and
conducting cross-examination. These matters apply to fact-finding
proceedings, not presentation of matters in opposition. Fact-finding
proceedings are addressed in sections 745 and 840.

[[Page 66540]]

Therefore, we moved the language relating to witness testimony and
cross-examination from sections 740 and 835 of the proposed rule to
sections 745 and 840, respectively, in this final rule. In addition, in
response to another agency comment, we clarified the provisions under
those sections so that it is clear that fact-finding privileges of
presenting witnesses, evidence and other information, or cross-
examination of any witnesses, or confrontation of evidence and
information presented, is equally available to respondents and the
government representatives at those proceedings.
    One commenter requested that we revise sections 740(b) and 845(c)
to permit the suspending or debarring official to refer both disputed
facts and issues of law to another official for resolution. The
Governmentwide suspension and debarment provisions under the FAR and
the NCR provide only for submitting material facts genuinely in dispute
to another official for resolution. In some agencies, the debarring
official is in the Office of General Counsel, in other cases, the
General Counsel's Office may review the decision before issuance or may
advise the debarring official on legal matters while the matter is
pending. Each agency has the discretion to decide, and must determine
for itself, how it will handle legal issues in the context of debarment
or suspension actions. We believe it is in the best interest of the
Government to continue that practice. Furthermore, changing the
proposed language in accordance with this request would place the NCR
at odds with the requirements for suspension and debarment under the
FAR. Accordingly, we made no change.
    One commenter suggested that the final rule clarify whether
disputes over mitigating or aggravating factors would entitle a
respondent to a fact-finding proceeding. The current interpretation and
practice of the agencies in suspension and debarment actions under both
the FAR and NCR is that a respondent is entitled to a fact-finding
proceeding on material facts in genuine dispute only with regard to
establishing a cause for debarment or suspension. As a practical
matter, the regulation does not preclude a suspending or debarring
official from using a fact-finding proceeding to address aggravating or
mitigating factors in dispute if he or she finds it helpful in reaching
a final decision. We left the final rule unchanged to avoid creating an
appearance of differing standards for fact-finding between the NCR and
the FAR.
    Time limits for decision. One commenter suggested that we amend
sections 755 and 870 to require that the suspending or debarring
official make a final decision within 45 days of closing the official
record, even in cases where fact-finding is conducted. Currently under
the NCR, the 45-day time limit for the suspending or debarring
official's decision only applies to cases in which no fact-finding is
required. The proposed rule did not alter that requirement. However,
since the suspending or debarring official does not close the record in
any case until after he or she receives the needed information,
including the fact-finder's findings, there is no reason for the
suspending or debarring official to treat these cases differently.
Accordingly, sections 755 and 870(a) have been revised to set a 45-day
period for final decision in all cases, subject to extension for good
cause.
    Petitions for reconsideration. One commenter recommended that
either section 875 or 880 incorporate a minimum six month waiting
period before a debarred person may petition the debarring official for
reconsideration of its period or scope of debarment. We believe there
are many reasons that may justify an adjustment of the period or scope
of a debarment within six months of issuance of the initial decision.
For example, the debarring official may have overlooked important
information in the record, or the debarred person may be able to
establish present responsibility shortly after a debarment is issued.
Unlike the 45-day time limit imposed upon the debarring official in
rendering the initial determination, no such time limit is imposed in
handling requests for reconsideration under these sections. The
debarring official has significant discretion in, and control over,
handling requests for reconsideration. Debarring officials can use that
discretion in dealing with reconsideration requests, including
frivolous requests, without minimum waiting periods. In a close case, a
minimum waiting period could discourage a debarring official from
imposing a debarment if a company has made an incomplete demonstration
of present responsibility. In addition, it can have a harsh result on
the company that addresses Government concerns promptly. Most agencies
do not appear to have experienced significant problems handling
reconsideration requests. Accordingly, the final rule does not include
a mandatory minimum waiting period for reconsideration.
Subpart I
    Define ``procurement''. One commenter recommended adding a
definition of the term ``procurement'' in Subpart I to clarify which
lower tier transactions are covered transactions. The commenter
suggested defining ``procurement'' as the acquisition of supplies and
services by contract with a commercial entity, to help distinguish
lower tier procurement transactions from subawards made by research
institutions to collaborating research organizations.
    We understand the importance of distinguishing procurement
transactions, which are covered transactions at lower tiers only if
they meet the criteria under section 220 of the rule, from
nonprocurement transactions that are more broadly covered under section
210. Adding a definition of the term ``procurement'' to this rule would
be warranted if confusion was prevalent among Federal agencies or
participant communities about the distinction between procurement and
nonprocurement. However, we do not believe this is the case. The
definition of ``subgrant'' and ``subaward'' in Federal agencies'
implementation of OMB Circulars A-102 and A-110, respectively, provide
an adequate basis for most agencies and participant communities to make
the distinction. Specifically, a lower tier transaction is a
nonprocurement transaction subject to section 210 if the transaction's
purpose is to have the lower tier participant perform any part of the
substantive program from the Federal agency's primary tier transaction.
If it meets this criterion, the lower tier transaction is a
nonprocurement transaction even if the higher tier participant calls
the transaction a ``contract.'' In contrast, the lower tier transaction
is procurement subject to section 220 if its purpose is the acquisition
of goods or services needed by a performer, at any tier, of the
substantive program. While we do not believe that adding a definition
of ``procurement'' is necessary in this Governmentwide rule, any
Federal agency may add clarifying language in its own rule if it judges
that doing so is warranted for its programs. Also, a participant may
seek guidance from the awarding Federal agency if necessary.
    Conviction. One commenter requested clarification of the term
``entry'' of judgment as it relates to the definition of ``conviction''
in section 925. Under Rule 32 of the Federal Rules of Criminal
Procedure, a conviction is not final until the entry of a final order.
Therefore, a criminal conviction does not exist to

[[Page 66541]]

support a cause for debarment under section 800(a) until the court
signs the Judgment, Commitment or Probation Order (or its equivalent).
The proposed rule sought to address this definition so that agencies
would be free to conclude debarment proceedings where a defendant
enters a guilty plea or a guilty verdict is returned but judgment is
withheld, delayed, or diverted pursuant to an alternative sentence or
disposition. Accordingly, the proposed rule expanded the definition to
focus on the practical reality of the criminal proceeding's conclusion,
rather than the technical requirement that a judgment be ``entered.''
    While acknowledging the legitimacy of the Government's desire to
finalize debarment proceedings in criminal matters concluded under
special terms without the benefit of a formal entry of judgment, the
ABA-PCL expressed concern that the proposed definition, as written, is
so broad that it would capture dispositions that are not the functional
equivalent of a finding or pronouncement of guilt. It observed that the
contexts for such alternate dispositions vary from case to case, and
from jurisdiction to jurisdiction, and that failure to add some
boundaries to the expanded definition might discourage resolution of
some cases in a way that is beneficial to the Government and the
affected person. The ABA-PCL suggested that the phrase ``or any other
resolution'' in the proposed definition be subject to some limitation
reflective of an admission or finding of guilt before being treated as
a ground for debarment. We believe the ABA-PCL's concern is
appropriate. Accordingly, the definition of ``conviction'' in the final
rule is revised to provide that an alternative disposition to a
criminal entry of a judgment will be treated as the functional
equivalent of a judgment if it occurs with the participation of the
court; or in a case that involves only an agreement with the
prosecutor, if it occurs in the context of an admission of guilt. In
making this assessment, the debarring official should consider the
entire context of the disposition or resolution, including the nature
of the obligations imposed on or accepted by the person, and any
official statements made regarding the alternate disposition. Where a
person is suspended upon commencement of criminal proceedings which are
later held in abeyance to satisfy the terms of an alternative
disposition, and the alternative disposition does not qualify as the
functional equivalent of a conviction, the suspension may continue
until the criminal matter is concluded under NCR section 760(a).
    Person. The ABA-PCL also questioned whether it is practical to
continue including a ``unit of government'' within the definition of
person for the purpose of taking suspension or debarment actions. The
commenter notes that units of government often have a unique status in
Federal agency programs that make their suspension or debarment
impractical. We acknowledge that there is often a unique relationship
between the governmental organizations that might dissuade a Federal
agency from choosing to debar a governmental body from Federal
nonprocurement transactions. However, that is not true for all Federal
transactions, or for all units of government. Federal suspending and
debarring officials have sufficient discretion and options available
when dealing with units of government or their employees that allow the
official to consider all relevant factors. We do not believe that the
Federal Government's interest in protecting its nonprocurement programs
would be enhanced by eliminating all units of government from the
definition of ``person.'' Such an approach would, in effect, create an
exemption from coverage and create a void of oversight and
accountability for many special bodies of government that receive
Federal funds and benefits. Therefore, the definition of ``person''
remains unchanged in the final rule.
    Principal. The ABA-PCL also expressed concern that the definition
of the term ``principal'' in proposed section 995(b)(3) is so broad as
to potentially result in making it impossible for an individual to find
employment in their given field. Proposed section 995(b)(3) includes
any person who ``occupies a technical or professional position capable
of influencing the development or outcome of an activity that affects a
covered transaction.'' The ABA-PCL suggests that this should be
narrowed to cover an employee who ``occupies a technical or
professional position capable of directly and substantially influencing
the development or outcome of an activity required under a covered
transaction.'' We agree that the definition of ``principal'' in
proposed section 995(b)(3) should be narrowed in an effort to cover
critical non-supervisory/managerial positions. However, use of the term
``directly'' may confuse the reader to believe that the exclusion will
apply only to positions that are charged as a direct cost to the
covered transaction. As noted in the 1988 preamble to the NCR, the
Government rejects the direct/indirect cost analysis as being a valid
basis upon which to apply the exclusion. In addition, the ABA-PCL's
suggested phrase ``required under a covered transaction'' could be read
to require that the product or service must be specifically mentioned
in the award, agreement or transaction. It is the intent of this rule
to cover any important service or product that is required to perform
the award, whether or not it is directly specified in it. Accordingly,
we altered the definition of ``principal'' in section 995(b)(3) of the
final rule to apply to any person who ``* * * Occupies a technical or
professional position capable of substantially influencing the
development or outcome of an activity required to perform the covered
transaction.'' (Emphasis added.)
    Fundamental concepts that still apply under this rule. In addition
to addressing the comments raised during the comment period in this
rulemaking, we identified important concepts that were addressed in the
preamble to the original NCR, or that evolved since its publication,
that still apply under this final rule. They are being restated here to
preserve them and to provide useful guidance on the interpretation and
application of this rule.
    Protection not punishment. Suspension and debarment are
administrative actions taken to protect the Government's business
interests. It should not be used to punish persons for past misconduct
or to coerce a respondent to resolve other criminal, civil or
administrative matters. While suspension and debarment will frequently
occur as a result of, or at the same time as other proceedings, and may
even be highly dependent upon the resolution of those other
proceedings, suspension and debarment are not alternatives for using
traditional means of resolving matters in the appropriate forum.
Notwithstanding this precaution, the suspending and debarring official
may resolve any matter otherwise appropriate for suspension or
debarment under the terms of a comprehensive or global agreement that
addresses criminal, civil, enforcement, audit, contract dispute, or
other proceeding collateral to it when in the best interest of the
Government to do so.
    It is important for suspending and debarring officials to use
balance and sound business judgment in ascertaining whether to use
suspension and debarment to address a matter. Where other
administrative remedies are available, such as disallowing costs or
recovery of sums by set-off, filing of civil claims, or various
contractual or

[[Page 66542]]

audit options exist, the suspending or debarring official should
consider whether those remedies may be more appropriate under the
circumstances, or whether to await the outcome of those procedures
before using the suspension or debarment option.
    Covered transactions and principals. While much of the NCR is
drafted in terms of an ``award'' being made by the Government or a
participant, it is important to note that the concept of covered
transactions is much broader than relationships or benefits that are
conferred through traditional vehicles such as grants, cooperative
agreements, direct loans, or contracts and subcontracts under them.
Loan guarantees, technical assistance, approvals, some licenses and
other privileges or events, not necessarily involving an award of
money, are covered transactions. Where money is part of the equation,
the direct or indirect nature of a participant's cost does not govern
whether the transaction is a ``covered transaction.'' This is because
many critical services, such as professional fees for legal,
accounting, engineering and other services may be charged as an
indirect cost to the nonprocurement transaction, but the services of
that individual or entity are still critical to performance. For
example, an accountant or accounting firm that is debarred for
misconduct may be ineligible to perform audit services for a grantee
under a covered transaction even though the accounting services are to
be charged by the participant as an indirect cost to its grant.
    Even where a participant provides services under a covered
transaction that is being serviced by a volunteer who has been
suspended or debarred, the prohibition on the participant's use of that
volunteer in the capacity of a principal will apply to the covered
transaction.
    Where the NCR is otherwise silent, each agency may describe in its
own rule those special transactions it regards as ``covered
transactions,'' and the services that when performed on behalf of a
participant are those of a ``principal.'' Failure to do so may limit
the agency's ability to apply the person's exclusion to or within the
transaction.
    Jurisdiction to debar versus the effect of debarment. It is
important to separate the questions: ``Who may an agency suspend or
debar?'' and ``What is the excluded person suspended or debarred
from?'' The definition of ``person'' in section 985 and the authority
stated under section 135 of this rule answer the first question. An
agency may suspend or debar any individual or entity that may
reasonably be expected to be involved in a covered transaction. The
authority to take action against any person that may be `` * * *
reasonably expected to be involved in a covered transaction,'' is not
intended to operate as a limitation on an agency's ability to protect
itself. On the contrary, this rule gives agencies broad authority to
take action to protect public programs against any individual or entity
that presents a rational business risk to the Government's
nonprocurement programs. The answer to the second question is that the
suspended or debarred person is excluded from being a principal or
participant in any nonprocurement covered transaction that is not
exempt from coverage under the NCR (see section 215). Federal agencies
can freely enter into exempt transactions without checking the EPLS,
collecting certifications or assurances, or conditioning the award upon
non-debarment or suspension. Transactions that are exempt from coverage
include entitlements such as certain social security, disability, or
welfare benefits, etc. Exempt transactions also include benefits a
person receives that are incidental in nature, such as benefits flowing
to sellers of a primary residence when the sale is financed by an FHA
loan, or benefits that occur as a result of normal government
operations, such as insurance on deposits in Federal banks, use of the
postal services, and public use of national parks and recreation areas.
It is important for agencies to distinguish when a beneficiary of a
transaction is an intended beneficiary (not necessarily the principal
or primary beneficiary) and when a person is an incidental beneficiary.
    An agency is not precluded from suspending or debarring any person
just because that person happens to be a participant in one of these
non-covered transactions. Indeed, an agency may even suspend or debar
that person for misconduct that occurs during performance of one of
those exempt or non-covered transactions, e.g., engaging in mail fraud,
or violating an environmental permit.
    Serious violations of health, safety and environmental laws and
regulations. Although the causes for debarment do not specifically
identify by name various violations that threaten the health and safety
of workers or threaten the environment, serious violations of these
laws and regulations have always been subject to suspension or
debarment under several provisions, including section 305(a)(4) and/or
(d) of the NCR (now section 800(a)(4) and/or (d)). Any violation of
law, regulation or agreement; or any conduct, failure to perform or
other event that seriously threatens a Federal nonprocurement or
procurement activity, is subject to potential suspension and debarment
under this rule. On December 27, 2001, the Federal Acquisition
Regulatory Council issued a final rule (see 66 FR 66986-66990),
revoking the December 20, 2000 amendments to the FAR that included,
among other things, a contractor's health, safety and environmental
record in the contract officer's pre-award responsibility review. In so
doing, the FAR Council acknowledged that the Governmentwide suspension
and debarment system is the most effective and appropriate forum to
address serious concerns about a contractor's or participant's
responsibility for violations of this nature.
    Transactions in foreign countries. The prohibitions against using
suspended or debarred persons in covered transactions applies equally
to transactions entered into by Federal agencies or participants in
foreign countries. So long as the transaction is one involving U.S.
Executive branch resources or benefits, the protection afforded by the
exclusion applies no matter where the covered transaction occurs. The
state or country of incorporation, registration, or principal place of
business of an excluded entity is irrelevant to its coverage. The
prohibition would not apply, however, if the transaction is exempt
because it is an award to a foreign government entity as described in
section 215(a).
    Lead agency. Lead agency is not a jurisdictional concept. It is an
administrative procedure employed by the Federal agencies to bring
efficiency, focus and coordination of resources to bear on any matter
which may touch the interests and expertise of several agencies. A
respondent has no right to have any particular agency act as lead
agency in a suspension or debarment action. While section 620 of this
rule allows for agencies to coordinate their interests and select a
lead agency, failure to do so does not invalidate the actions of the
agency that handles the matter. The ISDC, under its authority in
sections 4 and 5 of E.O. 12549, uses flexible and informal procedures
to coordinate actions and assist in selecting a lead agency.
    Submission of applications, bids and proposals versus award.
Questions often arise as to an excluded person's eligibility to submit
a bid, application or proposal for or under a covered transaction where
the bidder, applicant or offeror expects its suspension or

[[Page 66543]]

debarment to end prior to the award date. The NCR, like the FAR,
precludes awards to excluded persons. Since eligibility for award is
determined at that time, in most procurement and nonprocurement
transactions, agencies often accept bids, applications or proposals
subject to an eligibility determination on the date of award. However,
this rule does not require that agencies do so. Each agency must
determine for itself whether to accept or consider bids, applications
or offers submitted by an excluded person when there is a possibility
that an exclusion may end or be removed before the date of award. There
may be little danger in considering these submissions where it is clear
from the EPLS that a debarment will end on a date certain. However,
where a suspension is in place, or the debarred person is anticipating
a favorable ruling on a petition for early reinstatement prior to
award, caution is advised. In any event, it is the prerogative of the
awarding agency to decide whether and under what conditions it will
accept or consider bids, applications or proposals under these
circumstances.
    What constitutes a new ``award?'' Once a person is excluded under
this rule, it is important to note that the exclusion applies to awards
or transactions entered into on or after the date of the exclusion.
Because of the varying types of agreements and contracts that may
exist, it is not always easy to determine whether a transaction is part
of an existing award or if it is a new award subject to the exclusion.
As a rule of thumb, if the transaction in question requires the
approval of the party awarding the transaction or conferring the
benefit, the transaction is a new award, and subject to the prohibition
on using excluded persons. If the transaction is part of a larger
agreement and the legal obligation and authority to provide goods or
services are already in place, the transaction may be regarded as a
preexisting transaction. No-cost time extensions under existing awards
can be treated as part of the existing award at the option of the
agency granting it.
    Evidence of misconduct versus mere suspicion. Suspension or
debarment may not be imposed upon mere suspicion of misconduct. While
the procedures under this rule do not require suspending or debarring
officials to follow formal rules of evidence in making decisions, they
require that certain standards of proof of misconduct be met in order
to suspend or debar a person. These standards (adequate evidence for
suspension and preponderance of the evidence for debarment) require
that the suspending or debarring official base his or her decision on
an appropriate quality of information, according to the circumstances
at hand, so as to preclude suspending or debarring a person on the
basis of empty speculation or on mere suspicion of wrongdoing.
    Suspension, adequate evidence and immediate need. The standard for
suspension is a two part test. First, the suspending official must have
adequate evidence that a cause for debarment exists. Second, the
suspending official must conclude that immediate action is necessary to
protect Federal interests. In a criminal case, the adequate evidence
test is met by the presence of an indictment or information.
Suspensions based upon evidence other than an indictment are common
during the course of an investigation when the information available to
the suspending official is sufficient to support a reasonable belief
that an act or omission has occurred. In some cases, evidence may be
made available to the suspending official that is sensitive to an
ongoing investigation. The suspending official may have to review the
evidence in camera and be unable to disclose the evidence to a
suspended respondent. In such cases, it is important that the
suspension notice contain enough information so that the respondent can
make a meaningful presentation of matters in opposition, since a fact-
finding proceeding is likely to be denied to resolve material facts in
dispute. In any event, the record must contain the evidence that was
considered in issuing the suspension.
    Even in cases where an indictment is present, the suspending
official must determine that immediate action is necessary to protect
Federal interests before imposing a suspension. As noted in the
preamble to the proposed changes to this rule, the determination of
``immediate need'' does not require that the suspending official issue
a separate finding. As stated by the court in Coleman American Moving
Services, Inc. v. Weinberger, 716 F. Supp. 1405 (M.D. Ala. 1989),
immediate need is a conclusion that a suspending official may draw from
inferences made from the facts and circumstances present. In cases of
serious crimes such as fraud against the Government, or criminal
activity that threatens the health and safety of individuals, immediate
need may be obvious. In other cases, however, a suspending official's
determination of immediate need may not be as clear. It is, therefore,
important that the suspending official's record be sufficient for a
reviewing court to ascertain why immediate action was deemed prudent.
In this regard the term ``immediate'' does not connote that future
misconduct, loss, or injury is probable. A suspending official may
conclude that immediate action is needed based on what a reasonably
prudent business person would be expected to do given the risk
potential under the circumstances.
    It is also important to note that the standard of evidence for
issuing a suspension does not change merely because the respondent
contests the action and is able to marshal some information that
conflicts with information the Government has provided to the
suspending official. In cases where an investigation is still underway,
particularly when fact-finding is not to be conducted at the request of
the prosecuting officials, the suspending official must be careful not
to apply the debarment standard of preponderance of the evidence when
deciding whether to continue the suspension. To do so would place the
Government at a disadvantage and bring the suspension decision out of
context with its goal of temporary protection pending the outcome of an
investigation or legal proceedings. Unless the respondent is able to
nullify the evidentiary basis for the suspension without regard to
resolving disputed material facts, the Government's evidence may remain
adequate to support the action. However, a respondent may still attempt
to have a suspension removed by addressing the Government's immediate
interests that are at risk. If the respondent can demonstrate that the
respondent has taken protective action to eliminate, or reduce to an
acceptable level, the Government's risk pending completion of the
investigation or legal proceedings, the suspending official may
terminate a suspension even though there is adequate evidence to
support a suspension.

Impact Analysis--Executive Order 12866

    The participating agencies have examined the economic implications
of this final rule as required by Executive Order 12866, ``Regulatory
Planning and Review.'' Executive Order 12866 directs agencies to assess
all costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety, and other advantages; distributive impacts; and
equity). Executive Order 12866 classifies a rule as significant if it
meets any one of a number of specified conditions,

[[Page 66544]]

including: Having an annual effect on the economy of $100 million,
adversely affecting a sector of the economy in a material way,
adversely affecting competition, or adversely affecting jobs. A
regulation is also considered a significant regulatory action if it
raises novel legal or policy issues.
    Although the participating agencies have determined that this final
rule does not meet the economic significance threshold of $100 million
effect on the economy in any one year under Section 3(f)(1), the Office
of Management and Budget has reviewed this final rule as a significant
regulatory action under the Executive Order.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 605(b)) requires that, for
each rule with a ``significant economic impact on a substantial number
of small entities,'' an analysis must be prepared describing the rule's
impact on small entities and identifying any significant alternatives
to the rule that would minimize the economic impact on small entities.
    The participating agencies certify that this rule will not have a
significant impact on a substantial number of small entities. This rule
addresses Federal agency procedures for suspension and debarment. It
clarifies current requirements under the Nonprocurement Common Rule for
Debarment and Suspension by reorganizing information and presenting
that information in a plain language, question-and-answer format.

C. Unfunded Mandates Act of 1995

    The Unfunded Mandates Act of 1995 (Pub. L. 104-4) requires agencies
to prepare several analytic statements before proposing any rule that
may result in annual expenditures of $100 million by State, local,
Indian Tribal governments or the private sector. Since this rule does
not result in expenditures of this magnitude, the participating
agencies certify that such statements are not necessary.

D. Paperwork Reduction Act

    The participating agencies certify that this rule does not impose
additional reporting or recordkeeping requirements under the Paperwork
Reduction Act of 1995 (44 U.S.C. chapter 35).

E. Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by section 251 of the
Small Business Regulatory Enforcement Fairness Act of 1996, (5 U.S.C.
804). This rule will not: Result in an annual effect on the economy of
$100 million or more; result in an increase in cost or prices; or have
significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of United States-based
companies to compete with foreign-based companies in domestic and
export markets.

F. Executive Order 13132: Federalism

    This rule will not have substantial direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. Therefore, in accordance with section 6 of
Executive Order 13132, the participating agencies have determined that
this rule does not have sufficient federalism implications to warrant
the preparation of a federalism summary impact statement.

Text of the Final Common Rules

    The text of the final common rules appear below:
    1. [Part/Subpart]--is revised to read as follows:

[PART/SUBPART]--GOVERNMENTWIDE DEBARMENT AND SUSPENSION
(NONPROCUREMENT)

Sec.
--.25 How is this part organized?
--.50 How is this part written?
--.75 Do terms in this part have special meanings?
Subpart A--General
--.100 What does this part do?
--.105 Does this part apply to me?
--.110 What is the purpose of the nonprocurement debarment and
suspension system?
--.115 How does an exclusion restrict a person's involvement in
covered transactions?
--.120 May we grant an exception to let an excluded person
participate in a covered transaction?
--.125 Does an exclusion under the nonprocurement system affect a
person's eligibility for Federal procurement contracts?
--.130 Does exclusion under the Federal procurement system affect a
person's eligibility to participate in nonprocurement transactions?
--.135 May the [Agency noun] exclude a person who is not currently
participating in a nonprocurement transaction?
--.140 How do I know if a person is excluded?
--.145 Does this part address persons who are disqualified, as well
as those who are excluded from nonprocurement transactions?
Subpart B--Covered Transactions
--.200 What is a covered transaction?
--.205 Why is it important to know if a particular transaction is a
covered transaction?
--.210 Which nonprocurement transactions are covered transactions?
--.215 Which nonprocurement transactions are not covered
transactions?
--.220 Are any procurement contracts included as covered
transactions?
--.225 How do I know if a transaction in which I may participate is
a covered transaction?
Subpart C--Responsibilities of Participants Regarding Transactions

Doing Business With Other Persons

--.300 What must I do before I enter into a covered transaction with
another person at the next lower tier?
--.305 May I enter into a covered transaction with an excluded or
disqualified person?
--.310 What must I do if a Federal agency excludes a person with
whom I am already doing business in a covered transaction?
--.315 May I use the services of an excluded person as a principal
under a covered transaction?
--.320 Must I verify that principals of my covered transactions are
eligible to participate?
--.325 What happens if I do business with an excluded person in a
covered transaction?
--.330 What requirements must I pass down to persons at lower tiers
with whom I intend to do business?

Disclosing Information--Primary Tier Participants

--.335 What information must I provide before entering into a
covered transaction with the [Agency noun]?
--.340 If I disclose unfavorable information required under Sec.
--.335, will I be prevented from participating in the transaction?
--.345 What happens if I fail to disclose the information required
under Sec.  --.335?
--.350 What must I do if I learn of the information required under
Sec.  --.335 after entering into a covered transaction with the
[Agency noun]?

Disclosing Information--Lower Tier Participants

--.355 What information must I provide to a higher tier participant
before entering into a covered transaction with that participant?
--.360 What happens if I fail to disclose the information required
under Sec.  --.355?
--.365 What must I do if I learn of information required under Sec.
--.355 after entering into a covered transaction with a higher tier
participant?
Subpart D--Responsibilities of [Agency adjective] Officials Regarding
Transactions
--.400 May I enter into a transaction with an excluded or
disqualified person?
--.405 May I enter into a covered transaction with a participant if
a principal of the transaction is excluded?
--.410 May I approve a participant's use of the services of an
excluded person?

[[Page 66545]]

--.415 What must I do if a Federal agency excludes the participant
or a principal after I enter into a covered transaction?
--.420 May I approve a transaction with an excluded or disqualified
person at a lower tier?
--.425 When do I check to see if a person is excluded or
disqualified?
--.430 How do I check to see if a person is excluded or
disqualified?
--.435 What must I require of a primary tier participant?
--.440 [Reserved]
--.445 What action may I take if a primary tier participant
knowingly does business with an excluded or disqualified person?
--.450 What action may I take if a primary tier participant fails to
disclose the information required under Sec.  --.335?
--.455 What may I do if a lower tier participant fails to disclose
the information required under Sec.  --.355 to the next higher tier?
Subpart E--Excluded Parties List System
--.500 What is the purpose of the Excluded Parties List System
(EPLS)?
--.505 Who uses the EPLS?
--.510 Who maintains the EPLS?
--.515 What specific information is in the EPLS?
--.520 Who places the information into the EPLS?
--.525 Whom do I ask if I have questions about a person in the EPLS?
--.530 Where can I find the EPLS?
Subpart F--General Principles Relating to Suspension and Debarment
Actions
--.600 How do suspension and debarment actions start?
--.605 How does suspension differ from debarment?
--.610 What procedures does the [Agency noun] use in suspension and
debarment actions?
--.615 How does the [Agency noun] notify a person of a suspension or
debarment action?
--.620 Do Federal agencies coordinate suspension and debarment
actions?
--.625 What is the scope of a suspension or debarment?
--.630 May the [Agency noun] impute conduct of one person to
another?
--.635 May the [Agency noun] settle a debarment or suspension
action?
--.640 May a settlement include a voluntary exclusion?
--.645 Do other Federal agencies know if the [Agency noun] agrees to
a voluntary exclusion?
Subpart G--Suspension
--.700 When may the suspending official issue a suspension?
--.705 What does the suspending official consider in issuing a
suspension?
--.710 When does a suspension take effect?
--.715 What notice does the suspending official give me if I am
suspended?
--.720 How may I contest a suspension?
--.725 How much time do I have to contest a suspension?
--.730 What information must I provide to the suspending official if
I contest a suspension?
--.735 Under what conditions do I get an additional opportunity to
challenge the facts on which the suspension is based?
--.740 Are suspension proceedings formal?
--.745 How is fact-finding conducted?
--.750 What does the suspending official consider in deciding
whether to continue or terminate my suspension?
--.755 When will I know whether the suspension is continued or
terminated?
--.760 How long may my suspension last?
Subpart H--Debarment
--.800 What are the causes for debarment?
--.805 What notice does the debarring official give me if I am
proposed for debarment?
--.810 When does a debarment take effect?
--.815 How may I contest a proposed debarment?
--.820 How much time do I have to contest a proposed debarment?
--.825 What information must I provide to the debarring official if
I contest a proposed debarment?
--.830 Under what conditions do I get an additional opportunity to
challenge the facts on which a proposed debarment is based?
--.835 Are debarment proceedings formal?
--.840 How is fact-finding conducted?
--.845 What does the debarring official consider in deciding whether
to debar me?
--.850 What is the standard of proof in a debarment action?
--.855 Who has the burden of proof in a debarment action?
--.860 What factors may influence the debarring official's decision?
--.865 How long may my debarment last?
--.870 When do I know if the debarring official debars me?
--.875 May I ask the debarring official to reconsider a decision to
debar me?
--.880 What factors may influence the debarring official during
reconsideration?
--.885 May the debarring official extend a debarment?
Subpart I--Definitions
--.900 Adequate evidence.
--.905 Affiliate.
--.910 Agency.
--.915 Agent or representative.
--.920 Civil judgment.
--.925 Conviction.
--.930 Debarment.
--.935 Debarring official.
--.940 Disqualified.
--.945 Excluded or exclusion.
--.950 Excluded Parties List System.
--.955 Indictment.
--.960 Ineligible or ineligibility.
--.965 Legal proceedings.
--.970 Nonprocurement transaction.
--.975 Notice.
--.980 Participant.
--.985 Person.
--.990 Preponderance of the evidence.
--.995 Principal.
--.1000 Respondent.
--.1005 State.
--.1010 Suspending official.
--.1015 Suspension.
--.1020 Voluntary exclusion or voluntarily excluded.
Subpart J--[Reserved]

Appendix to Part--Covered Transactions

    Authority: Sec. 2455, Pub. L. 103-355, 108 Stat. 3327; E.O.
12549, 3 CFR, 1986 Comp., p.189; E.O. 12689, 3 CFR, 1989 Comp., p
.235.


Sec.  --.25  How is this part organized?

    (a) This part is subdivided into ten subparts. Each subpart
contains information related to a broad topic or specific audience with
special responsibilities, as shown in the following table:

------------------------------------------------------------------------
       In subpart . . .        You will find provisions related to . . .
------------------------------------------------------------------------
A............................  general information about this rule.
B............................  the types of [Agency adjective]
                                transactions that are covered by the
                                Governmentwide nonprocurement suspension
                                and debarment system.
C............................  the responsibilities of persons who
                                participate in covered transactions.
D............................  the responsibilities of [Agency
                                adjective] officials who are authorized
                                to enter into covered transactions.
E............................  the responsibilities of Federal agencies
                                for the Excluded Parties List System
                                (Disseminated by the General Services
                                Administration).
F............................  the general principles governing
                                suspension, debarment, voluntary
                                exclusion and settlement.
G............................  suspension actions.
H............................  debarment actions.
I............................  definitions of terms used in this part.
J............................  [Reserved]
------------------------------------------------------------------------


[[Page 66546]]

    (b) The following table shows which subparts may be of special
interest to you, depending on who you are:

------------------------------------------------------------------------
             If you are . . .                   See subpart(s) . . .
------------------------------------------------------------------------
(1) a participant or principal in a         A, B, C, and I.
 nonprocurement transaction.
(2) a respondent in a suspension action...  A, B, F, G and I.
(3) a respondent in a debarment action....  A, B, F, H and I.
(4) a suspending official.................  A, B, D, E, F, G and I.
(5) a debarring official..................  A, B, D, E, F, H and I.
(6) a (n) [Agency adjective] official       A, B, D, E and I.
 authorized to enter into a covered
 transaction.
(7) Reserved..............................  J.
------------------------------------------------------------------------

Sec.  --.50  How is this part written?

    (a) This part uses a ``plain language'' format to make it easier
for the general public and business community to use. The section
headings and text, often in the form of questions and answers, must be
read together.
    (b) Pronouns used within this part, such as ``I'' and ``you,''
change from subpart to subpart depending on the audience being
addressed. The pronoun ``we'' always is the [Agency noun].
    (c) The ``Covered Transactions'' diagram in the appendix to this
part shows the levels or ``tiers'' at which the [Agency noun] enforces
an exclusion under this part.


Sec.  --.75  Do terms in this part have special meanings?

    This part uses terms throughout the text that have special meaning.
Those terms are defined in Subpart I of this part. For example, three
important terms are--
    (a) Exclusion or excluded, which refers only to discretionary
actions taken by a suspending or debarring official under this part or
the Federal Acquisition Regulation (48 CFR part 9, subpart 9.4);
    (b) Disqualification or disqualified, which refers to prohibitions
under specific statutes, executive orders (other than Executive Order
12549 and Executive Order 12689), or other authorities.
Disqualifications frequently are not subject to the discretion of an
agency official, may have a different scope than exclusions, or have
special conditions that apply to the disqualification; and
    (c) Ineligibility or ineligible, which generally refers to a person
who is either excluded or disqualified.

Subpart A--General


Sec.  --.100  What does this part do?

    This part adopts a governmentwide system of debarment and
suspension for [Agency adjective] nonprocurement activities. It also
provides for reciprocal exclusion of persons who have been excluded
under the Federal Acquisition Regulation, and provides for the
consolidated listing of all persons who are excluded, or disqualified
by statute, executive order, or other legal authority. This part
satisfies the requirements in section 3 of Executive Order 12549,
``Debarment and Suspension'' (3 CFR 1986 Comp., p. 189), Executive
Order 12689, ``Debarment and Suspension'' (3 CFR 1989 Comp., p. 235)
and 31 U.S.C. 6101 note (Section 2455, Public Law 103-355, 108 Stat.
3327).


Sec.  --.105  Does this part apply to me?

    Portions of this part (see table at Sec.  --.25(b)) apply to you if
you are a(n)--
    (a) Person who has been, is, or may reasonably be expected to be, a
participant or principal in a covered transaction;
    (b) Respondent (a person against whom the [Agency noun] has
initiated a debarment or suspension action);
    (c) [Agency adjective] debarring or suspending official; or
    (d) [Agency adjective] official who is authorized to enter into
covered transactions with non-Federal parties.


Sec.  --.110  What is the purpose of the nonprocurement debarment and
suspension system?

    (a) To protect the public interest, the Federal Government ensures
the integrity of Federal programs by conducting business only with
responsible persons.
    (b) A Federal agency uses the nonprocurement debarment and
suspension system to exclude from Federal programs persons who are not
presently responsible.
    (c) An exclusion is a serious action that a Federal agency may take
only to protect the public interest. A Federal agency may not exclude a
person or commodity for the purposes of punishment.


Sec.  --.115  How does an exclusion restrict a person's involvement in
covered transactions?

    With the exceptions stated in Sec. Sec.  --.120, --.315, and
--.420, a person who is excluded by the [Agency noun] or any other
Federal agency may not:
    (a) Be a participant in a(n) [Agency adjective] transaction that is
a covered transaction under subpart B of this part;
    (b) Be a participant in a transaction of any other Federal agency
that is a covered transaction under that agency's regulation for
debarment and suspension; or
    (c) Act as a principal of a person participating in one of those
covered transactions.


Sec.  --.120  May we grant an exception to let an excluded person
participate in a covered transaction?

    (a) The [Agency head or designee] may grant an exception permitting
an excluded person to participate in a particular covered transaction.
If the [Agency head or designee] grants an exception, the exception
must be in writing and state the reason(s) for deviating from the
governmentwide policy in Executive Order 12549.
    (b) An exception granted by one agency for an excluded person does
not extend to the covered transactions of another agency.


Sec.  --.125  Does an exclusion under the nonprocurement system affect
a person's eligibility for Federal procurement contracts?

    If any Federal agency excludes a person under its nonprocurement
common rule on or after August 25, 1995, the excluded person is also
ineligible to participate in Federal procurement transactions under the
FAR. Therefore, an exclusion under this part has reciprocal effect in
Federal procurement transactions.


Sec.  --.130  Does exclusion under the Federal procurement system
affect a person's eligibility to participate in nonprocurement
transactions?

    If any Federal agency excludes a person under the FAR on or after
August 25, 1995, the excluded person is also ineligible to participate
in nonprocurement covered transactions under this part. Therefore, an
exclusion under the FAR has reciprocal effect in Federal nonprocurement
transactions.


Sec.  --.135  May the [Agency noun] exclude a person who is not
currently participating in a nonprocurement transaction?

    Given a cause that justifies an exclusion under this part, we may
exclude any person who has been involved, is currently involved, or may
reasonably be expected to be involved in a covered transaction.


Sec.  --.140  How do I know if a person is excluded?

    Check the Excluded Parties List System (EPLS) to determine whether
a person is excluded. The General Services Administration (GSA)
maintains the EPLS and makes it available, as detailed in subpart E of
this part. When a Federal agency takes an action to exclude a person
under the

[[Page 66547]]

nonprocurement or procurement debarment and suspension system, the
agency enters the information about the excluded person into the EPLS.


Sec.  --.145  Does this part address persons who are disqualified, as
well as those who are excluded from nonprocurement transactions?

    Except if provided for in Subpart J of this part, this part--
    (a) Addresses disqualified persons only to--
    (1) Provide for their inclusion in the EPLS; and
    (2) State responsibilities of Federal agencies and participants to
check for disqualified persons before entering into covered
transactions.
    (b) Does not specify the--
    (1) [Agency adjective] transactions for which a disqualified person
is ineligible. Those transactions vary on a case-by-case basis, because
they depend on the language of the specific statute, Executive order,
or regulation that caused the disqualification;
    (2) Entities to which the disqualification applies; or
    (3) Process that the agency uses to disqualify a person. Unlike
exclusion, disqualification is frequently not a discretionary action
that a Federal agency takes.

Subpart B--Covered Transactions


Sec.  --.200  What is a covered transaction?

    A covered transaction is a nonprocurement or procurement
transaction that is subject to the prohibitions of this part. It may be
a transaction at--
    (a) The primary tier, between a Federal agency and a person (see
appendix to this part); or
    (b) A lower tier, between a participant in a covered transaction
and another person.


Sec.  --.205  Why is it important if a particular transaction is a
covered transaction?

    The importance of a covered transaction depends upon who you are.
    (a) As a participant in the transaction, you have the
responsibilities laid out in Subpart C of this part. Those include
responsibilities to the person or Federal agency at the next higher
tier from whom you received the transaction, if any. They also include
responsibilities if you subsequently enter into other covered
transactions with persons at the next lower tier.
    (b) As a Federal official who enters into a primary tier
transaction, you have the responsibilities laid out in subpart D of
this part.
    (c) As an excluded person, you may not be a participant or
principal in the transaction unless--
    (1) The person who entered into the transaction with you allows you
to continue your involvement in a transaction that predates your
exclusion, as permitted under Sec.  --.310 or Sec.  --.415; or
    (2) A(n) [Agency adjective] official obtains an exception from the
[Agency head or designee] to allow you to be involved in the
transaction, as permitted under Sec.  --.120.


Sec.  --.210  Which nonprocurement transactions are covered
transactions?

    All nonprocurement transactions, as defined in Sec.  --.970, are
covered transactions unless listed in Sec.  --.215. (See appendix to
this part.)


Sec.  --.215  Which nonprocurement transactions are not covered
transactions?

    The following types of nonprocurement transactions are not covered
transactions:
    (a) A direct award to--
    (1) A foreign government or foreign governmental entity;
    (2) A public international organization;
    (3) An entity owned (in whole or in part) or controlled by a
foreign government; or
    (4) Any other entity consisting wholly or partially of one or more
foreign governments or foreign governmental entities.
    (b) A benefit to an individual as a personal entitlement without
regard to the individual's present responsibility (but benefits
received in an individual's business capacity are not excepted). For
example, if a person receives social security benefits under the
Supplemental Security Income provisions of the Social Security Act, 42
U.S.C. 1301 et seq., those benefits are not covered transactions and,
therefore, are not affected if the person is excluded.
    (c) Federal employment.
    (d) A transaction that the [Agency noun] needs to respond to a
national or agency-recognized emergency or disaster.
    (e) A permit, license, certificate, or similar instrument issued as
a means to regulate public health, safety, or the environment, unless
the [Agency noun] specifically designates it to be a covered
transaction.
    (f) An incidental benefit that results from ordinary governmental
operations.
    (g) Any other transaction if the application of an exclusion to the
transaction is prohibited by law.


Sec.  --.220  Are any procurement contracts included as covered
transactions?

    (a) Covered transactions under this part--
    (1) Do not include any procurement contracts awarded directly by a
Federal agency; but
    (2) Do include some procurement contracts awarded by non-Federal
participants in nonprocurement covered transactions (see appendix to
this part).
    (b) Specifically, a contract for goods or services is a covered
transaction if any of the following applies:
    (1) The contract is awarded by a participant in a nonprocurement
transaction that is covered under Sec.  --.210, and the amount of the
contract is expected to equal or exceed $25,000.
    (2) The contract requires the consent of a(n) [Agency adjective]
official. In that case, the contract, regardless of the amount, always
is a covered transaction, and it does not matter who awarded it. For
example, it could be a subcontract awarded by a contractor at a tier
below a nonprocurement transaction, as shown in the appendix to this
part.
    (3) The contract is for federally-required audit services.


Sec.  --.225  How do I know if a transaction in which I may participate
is a covered transaction?

    As a participant in a transaction, you will know that it is a
covered transaction because the agency regulations governing the
transaction, the appropriate agency official, or participant at the
next higher tier who enters into the transaction with you, will tell
you that you must comply with applicable portions of this part.

Subpart C--Responsibilities of Participants Regarding Transactions

Doing Business With Other Persons


Sec.  --.300  What must I do before I enter into a covered transaction
with another person at the next lower tier?

    When you enter into a covered transaction with another person at
the next lower tier, you must verify that the person with whom you
intend to do business is not excluded or disqualified. You do this by:
    (a) Checking the EPLS; or
    (b) Collecting a certification from that person if allowed by this
rule; or
    (c) Adding a clause or condition to the covered transaction with
that person.


Sec.  --.305  May I enter into a covered transaction with an excluded
or disqualified person?

    (a) You as a participant may not enter into a covered transaction
with an excluded person, unless the [Agency noun] grants an exception
under Sec.  --.120.
    (b) You may not enter into any transaction with a person who is
disqualified from that transaction,

[[Page 66548]]

unless you have obtained an exception under the disqualifying statute,
Executive order, or regulation.


Sec.  --.310  What must I do if a Federal agency excludes a person with
whom I am already doing business in a covered transaction?

    (a) You as a participant may continue covered transactions with an
excluded person if the transactions were in existence when the agency
excluded the person. However, you are not required to continue the
transactions, and you may consider termination. You should make a
decision about whether to terminate and the type of termination action,
if any, only after a thorough review to ensure that the action is
proper and appropriate.
    (b) You may not renew or extend covered transactions (other than
no-cost time extensions) with any excluded person, unless the [Agency
noun] grants an exception under Sec.  --.120.


Sec.  --.315  May I use the services of an excluded person as a
principal under a covered transaction?

    (a) You as a participant may continue to use the services of an
excluded person as a principal under a covered transaction if you were
using the services of that person in the transaction before the person
was excluded. However, you are not required to continue using that
person's services as a principal. You should make a decision about
whether to discontinue that person's services only after a thorough
review to ensure that the action is proper and appropriate.
    (b) You may not begin to use the services of an excluded person as
a principal under a covered transaction unless the [Agency noun] grants
an exception under Sec.  --.120.


Sec.  --.320  Must I verify that principals of my covered transactions
are eligible to participate?

    Yes, you as a participant are responsible for determining whether
any of your principals of your covered transactions is excluded or
disqualified from participating in the transaction. You may decide the
method and frequency by which you do so. You may, but you are not
required to, check the EPLS.


Sec.  --.325  What happens if I do business with an excluded person in
a covered transaction?

    If as a participant you knowingly do business with an excluded
person, we may disallow costs, annul or terminate the transaction,
issue a stop work order, debar or suspend you, or take other remedies
as appropriate.


Sec.  --.330  What requirements must I pass down to persons at lower
tiers with whom I intend to do business?

    Before entering into a covered transaction with a participant at
the next lower tier, you must require that participant to--
    (a) Comply with this subpart as a condition of participation in the
transaction. You may do so using any method(s), unless Sec.  --.440
requires you to use specific methods.
    (b) Pass the requirement to comply with this subpart to each person
with whom the participant enters into a covered transaction at the next
lower tier.

Disclosing Information--Primary Tier Participants


Sec.  --.335  What information must I provide before entering into a
covered transaction with the [Agency noun]?

    Before you enter into a covered transaction at the primary tier,
you as the participant must notify the [Agency adjective] office that
is entering into the transaction with you, if you know that you or any
of the principals for that covered transaction:
    (a) Are presently excluded or disqualified;
    (b) Have been convicted within the preceding three years of any of
the offenses listed in Sec.  --.800(a) or had a civil judgment rendered
against you for one of those offenses within that time period;
    (c) Are presently indicted for or otherwise criminally or civilly
charged by a governmental entity (Federal, State or local) with
commission of any of the offenses listed in Sec.  --.800(a); or
    (d) Have had one or more public transactions (Federal, State, or
local) terminated within the preceding three years for cause or
default.


Sec.  --.340  If I disclose unfavorable information required under
Sec.  --.335, will I be prevented from participating in the
transaction?

    As a primary tier participant, your disclosure of unfavorable
information about yourself or a principal under Sec.  --.335 will not
necessarily cause us to deny your participation in the covered
transaction. We will consider the information when we determine whether
to enter into the covered transaction. We also will consider any
additional information or explanation that you elect to submit with the
disclosed information.


Sec.  --.345  What happens if I fail to disclose information required
under Sec.  --.335?

    If we later determine that you failed to disclose information under
Sec.  --.335 that you knew at the time you entered into the covered
transaction, we may--
    (a) Terminate the transaction for material failure to comply with
the terms and conditions of the transaction; or
    (b) Pursue any other available remedies, including suspension and
debarment.


Sec.  --.350  What must I do if I learn of information required under
Sec.  --.335 after entering into a covered transaction with the [Agency
noun]?

    At any time after you enter into a covered transaction, you must
give immediate written notice to the [Agency adjective] office with
which you entered into the transaction if you learn either that--
    (a) You failed to disclose information earlier, as required by
Sec.  --.335; or
    (b) Due to changed circumstances, you or any of the principals for
the transaction now meet any of the criteria in Sec.  --.335.

Disclosing Information--Lower Tier Participants


Sec.  --.355  What information must I provide to a higher tier
participant before entering into a covered transaction with that
participant?

    Before you enter into a covered transaction with a person at the
next higher tier, you as a lower tier participant must notify that
person if you know that you or any of the principals are presently
excluded or disqualified.


Sec.  --.360  What happens if I fail to disclose the information
required under Sec.  --.355?

    If we later determine that you failed to tell the person at the
higher tier that you were excluded or disqualified at the time you
entered into the covered transaction with that person, we may pursue
any available remedies, including suspension and debarment.


Sec.  --.365  What must I do if I learn of information required under
Sec.  --.355 after entering into a covered transaction with a higher
tier participant?

    At any time after you enter into a lower tier covered transaction
with a person at a higher tier, you must provide immediate written
notice to that person if you learn either that--
    (a) You failed to disclose information earlier, as required by
Sec.  --.355; or
    (b) Due to changed circumstances, you or any of the principals for
the transaction now meet any of the criteria in Sec.  --.355.

[[Page 66549]]

Subpart D--Responsibilities of [Agency adjective] Officials
Regarding Transactions


Sec.  --.400  May I enter into a transaction with an excluded or
disqualified person?

    (a) You as an agency official may not enter into a covered
transaction with an excluded person unless you obtain an exception
under Sec.  --.120.
    (b) You may not enter into any transaction with a person who is
disqualified from that transaction, unless you obtain a waiver or
exception under the statute, Executive order, or regulation that is the
basis for the person's disqualification.


Sec.  --.405  May I enter into a covered transaction with a participant
if a principal of the transaction is excluded?

    As an agency official, you may not enter into a covered transaction
with a participant if you know that a principal of the transaction is
excluded, unless you obtain an exception under Sec.  --.120.


Sec.  --.410  May I approve a participant's use of the services of an
excluded person?

    After entering into a covered transaction with a participant, you
as an agency official may not approve a participant's use of an
excluded person as a principal under that transaction, unless you
obtain an exception under Sec.  --.120.


Sec.  --.415  What must I do if a Federal agency excludes the
participant or a principal after I enter into a covered transaction?

    (a) You as an agency official may continue covered transactions
with an excluded person, or under which an excluded person is a
principal, if the transactions were in existence when the person was
excluded. You are not required to continue the transactions, however,
and you may consider termination. You should make a decision about
whether to terminate and the type of termination action, if any, only
after a thorough review to ensure that the action is proper.
    (b) You may not renew or extend covered transactions (other than
no-cost time extensions) with any excluded person, or under which an
excluded person is a principal, unless you obtain an exception under
Sec.  --.120.


Sec.  --.420  May I approve a transaction with an excluded or
disqualified person at a lower tier?

    If a transaction at a lower tier is subject to your approval, you
as an agency official may not approve--
    (a) A covered transaction with a person who is currently excluded,
unless you obtain an exception under Sec.  --.120; or
    (b) A transaction with a person who is disqualified from that
transaction, unless you obtain a waiver or exception under the statute,
Executive order, or regulation that is the basis for the person's
disqualification.


Sec.  --.425  When do I check to see if a person is excluded or
disqualified?

    As an agency official, you must check to see if a person is
excluded or disqualified before you--
    (a) Enter into a primary tier covered transaction;
    (b) Approve a principal in a primary tier covered transaction;
    (c) Approve a lower tier participant if agency approval of the
lower tier participant is required; or
    (d) Approve a principal in connection with a lower tier transaction
if agency approval of the principal is required.


Sec.  --.430  How do I check to see if a person is excluded or
disqualified?

    You check to see if a person is excluded or disqualified in two
ways:
    (a) You as an agency official must check the EPLS when you take any
action listed in Sec.  --.425.
    (b) You must review information that a participant gives you, as
required by Sec.  --.335, about its status or the status of the
principals of a transaction.


Sec.  --.435  What must I require of a primary tier participant?

    You as an agency official must require each participant in a
primary tier covered transaction to--
    (a) Comply with subpart C of this part as a condition of
participation in the transaction; and
    (b) Communicate the requirement to comply with Subpart C of this
part to persons at the next lower tier with whom the primary tier
participant enters into covered transactions.


Sec.  --.440  [Reserved]


Sec.  --.445  What action may I take if a primary tier participant
knowingly does business with an excluded or disqualified person?

    If a participant knowingly does business with an excluded or
disqualified person, you as an agency official may refer the matter for
suspension and debarment consideration. You may also disallow costs,
annul or terminate the transaction, issue a stop work order, or take
any other appropriate remedy.


Sec.  --.450  What action may I take if a primary tier participant
fails to disclose the information required under Sec.  --.335?

    If you as an agency official determine that a participant failed to
disclose information, as required by Sec.  --.335, at the time it
entered into a covered transaction with you, you may--
    (a) Terminate the transaction for material failure to comply with
the terms and conditions of the transaction; or
    (b) Pursue any other available remedies, including suspension and
debarment.


Sec.  --.455  What may I do if a lower tier participant fails to
disclose the information required under Sec.  --.355 to the next higher
tier?

    If you as an agency official determine that a lower tier
participant failed to disclose information, as required by Sec.
--.355, at the time it entered into a covered transaction with a
participant at the next higher tier, you may pursue any remedies
available to you, including the initiation of a suspension or debarment
action.

Subpart E--Excluded Parties List System


Sec.  --.500  What is the purpose of the Excluded Parties List System
(EPLS)?

    The EPLS is a widely available source of the most current
information about persons who are excluded or disqualified from covered
transactions.


Sec.  --.505  Who uses the EPLS?

    (a) Federal agency officials use the EPLS to determine whether to
enter into a transaction with a person, as required under Sec.  --.430.
    (b) Participants also may, but are not required to, use the EPLS to
determine if--
    (1) Principals of their transactions are excluded or disqualified,
as required under Sec.  --.320; or
    (2) Persons with whom they are entering into covered transactions
at the next lower tier are excluded or disqualified.
    (c) The EPLS is available to the general public.


Sec.  --.510  Who maintains the EPLS?

    In accordance with the OMB guidelines, the General Services
Administration (GSA) maintains the EPLS. When a Federal agency takes an
action to exclude a person under the nonprocurement or procurement
debarment and suspension system, the agency enters the information
about the excluded person into the EPLS.


Sec.  --.515  What specific information is in the EPLS?

    (a) At a minimum, the EPLS indicates--
    (1) The full name (where available) and address of each excluded or
disqualified person, in alphabetical

[[Page 66550]]

order, with cross references if more than one name is involved in a
single action;
    (2) The type of action;
    (3) The cause for the action;
    (4) The scope of the action;
    (5) Any termination date for the action;
    (6) The agency and name and telephone number of the agency point of
contact for the action; and
    (7) The Dun and Bradstreet Number (DUNS), or other similar code
approved by the GSA, of the excluded or disqualified person, if
available.
    (b)(1) The database for the EPLS includes a field for the Taxpayer
Identification Number (TIN) (the social security number (SSN) for an
individual) of an excluded or disqualified person.
    (2) Agencies disclose the SSN of an individual to verify the
identity of an individual, only if permitted under the Privacy Act of
1974 and, if appropriate, the Computer Matching and Privacy Protection
Act of 1988, as codified in 5 U.S.C. 552(a).


Sec.  --.520  Who places the information into the EPLS?

    Federal officials who take actions to exclude persons under this
part or officials who are responsible for identifying disqualified
persons must enter the following information about those persons into
the EPLS:
    (a) Information required by Sec.  --.515(a);
    (b) The Taxpayer Identification Number (TIN) of the excluded or
disqualified person, including the social security number (SSN) for an
individual, if the number is available and may be disclosed under law;
    (c) Information about an excluded or disqualified person, generally
within five working days, after--
    (1) Taking an exclusion action;
    (2) Modifying or rescinding an exclusion action;
    (3) Finding that a person is disqualified; or
    (4) Finding that there has been a change in the status of a person
who is listed as disqualified.


Sec.  --.525  Whom do I ask if I have questions about a person in the
EPLS?

    If you have questions about a person in the EPLS, ask the point of
contact for the Federal agency that placed the person's name into the
EPLS. You may find the agency point of contact from the EPLS.


Sec.  --.530  Where can I find the EPLS?

    (a) You may access the EPLS through the Internet, currently at
http://epls.arnet.gov.
    (b) As of November 26, 2003, you may also subscribe to a printed
version. However, we anticipate discontinuing the printed version.
Until it is discontinued, you may obtain the printed version by
purchasing a yearly subscription from the Superintendent of Documents,
U.S. Government Printing Office, Washington, DC 20402, or by calling
the Government Printing Office Inquiry and Order Desk at (202) 783-
3238.

Subpart F--General Principles Relating to Suspension and Debarment
Actions


Sec.  --.600  How do suspension and debarment actions start?

    When we receive information from any source concerning a cause for
suspension or debarment, we will promptly report and investigate it. We
refer the question of whether to suspend or debar you to our suspending
or debarring official for consideration, if appropriate.


Sec.  --.605  How does suspension differ from debarment?

    Suspension differs from debarment in that--

------------------------------------------------------------------------
      A suspending official . . .           A debarring official . . .
------------------------------------------------------------------------
(a) Imposes suspension as a temporary    Imposes debarment for a
 status of ineligibility for              specified period as a final
 procurement and nonprocurement           determination that a person is
 transactions, pending completion of an   not presently responsible.
 investigation or legal proceedings.
(b) Must--.............................  Must conclude, based on a
(1) Have adequate evidence that there     preponderance of the evidence,
 may be a cause for debarment of a        that the person has engaged in
 person; and.                             conduct that warrants
(2) Conclude that immediate action is     debarment.
 necessary to protect the Federal
 interest.
(c) Usually imposes the suspension       Imposes debarment after giving
 first, and then promptly notifies the    the respondent notice of the
 suspended person, giving the person an   action and an opportunity to
 opportunity to contest the suspension    contest the proposed
 and have it lifted.                      debarment.
------------------------------------------------------------------------

Sec.  --.610  What procedures does the [Agency noun] use in suspension
and debarment actions?

    In deciding whether to suspend or debar you, we handle the actions
as informally as practicable, consistent with principles of fundamental
fairness.
    (a) For suspension actions, we use the procedures in this subpart
and subpart G of this part.
    (b) For debarment actions, we use the procedures in this subpart
and subpart H of this part.


Sec.  --.615  How does the [Agency noun] notify a person of a
suspension or debarment action?

    (a) The suspending or debarring official sends a written notice to
the last known street address, facsimile number, or e-mail address of--
    (1) You or your identified counsel; or
    (2) Your agent for service of process, or any of your partners,
officers, directors, owners, or joint venturers.
    (b) The notice is effective if sent to any of these persons.


Sec.  --.620  Do Federal agencies coordinate suspension and debarment
actions?

    Yes, when more than one Federal agency has an interest in a
suspension or debarment, the agencies may consider designating one
agency as the lead agency for making the decision. Agencies are
encouraged to establish methods and procedures for coordinating their
suspension and debarment actions.


Sec.  --.625  What is the scope of a suspension or debarment?

    If you are suspended or debarred, the suspension or debarment is
effective as follows:
    (a) Your suspension or debarment constitutes suspension or
debarment of all of your divisions and other organizational elements
from all covered transactions, unless the suspension or debarment
decision is limited--
    (1) By its terms to one or more specifically identified
individuals, divisions, or other organizational elements; or
    (2) To specific types of transactions.
    (b) Any affiliate of a participant may be included in a suspension
or

[[Page 66551]]

debarment action if the suspending or debarring official--
    (1) Officially names the affiliate in the notice; and
    (2) Gives the affiliate an opportunity to contest the action.


Sec.  --.630  May the [Agency noun] impute conduct of one person to
another?

    For purposes of actions taken under this rule, we may impute
conduct as follows:
    (a) Conduct imputed from an individual to an organization. We may
impute the fraudulent, criminal, or other improper conduct of any
officer, director, shareholder, partner, employee, or other individual
associated with an organization, to that organization when the improper
conduct occurred in connection with the individual's performance of
duties for or on behalf of that organization, or with the
organization's knowledge, approval or acquiescence. The organization's
acceptance of the benefits derived from the conduct is evidence of
knowledge, approval or acquiescence.
    (b) Conduct imputed from an organization to an individual, or
between individuals. We may impute the fraudulent, criminal, or other
improper conduct of any organization to an individual, or from one
individual to another individual, if the individual to whom the
improper conduct is imputed either participated in, had knowledge of,
or reason to know of the improper conduct.
    (c) Conduct imputed from one organization to another organization.
We may impute the fraudulent, criminal, or other improper conduct of
one organization to another organization when the improper conduct
occurred in connection with a partnership, joint venture, joint
application, association or similar arrangement, or when the
organization to whom the improper conduct is imputed has the power to
direct, manage, control or influence the activities of the organization
responsible for the improper conduct. Acceptance of the benefits
derived from the conduct is evidence of knowledge, approval or
acquiescence.


Sec.  --.635  May the [Agency noun] settle a debarment or suspension
action?

    Yes, we may settle a debarment or suspension action at any time if
it is in the best interest of the Federal Government.


Sec.  --.640  May a settlement include a voluntary exclusion?

    Yes, if we enter into a settlement with you in which you agree to
be excluded, it is called a voluntary exclusion and has governmentwide
effect.


Sec.  --.645  Do other Federal agencies know if the [Agency noun]
agrees to a voluntary exclusion?

    (a) Yes, we enter information regarding a voluntary exclusion into
the EPLS.
    (b) Also, any agency or person may contact us to find out the
details of a voluntary exclusion.

Subpart G--Suspension


Sec.  --.700  When may the suspending official issue a suspension?

    Suspension is a serious action. Using the procedures of this
subpart and subpart F of this part, the suspending official may impose
suspension only when that official determines that--
    (a) There exists an indictment for, or other adequate evidence to
suspect, an offense listed under Sec.  --.800(a), or
    (b) There exists adequate evidence to suspect any other cause for
debarment listed under Sec.  --.800(b) through (d); and
    (c) Immediate action is necessary to protect the public interest.


Sec.  --.705  What does the suspending official consider in issuing a
suspension?

    (a) In determining the adequacy of the evidence to support the
suspension, the suspending official considers how much information is
available, how credible it is given the circumstances, whether or not
important allegations are corroborated, and what inferences can
reasonably be drawn as a result. During this assessment, the suspending
official may examine the basic documents, including grants, cooperative
agreements, loan authorizations, contracts, and other relevant
documents.
    (b) An indictment, conviction, civil judgment, or other official
findings by Federal, State, or local bodies that determine factual and/
or legal matters, constitutes adequate evidence for purposes of
suspension actions.
    (c) In deciding whether immediate action is needed to protect the
public interest, the suspending official has wide discretion. For
example, the suspending official may infer the necessity for immediate
action to protect the public interest either from the nature of the
circumstances giving rise to a cause for suspension or from potential
business relationships or involvement with a program of the Federal
Government.


Sec.  --.710  When does a suspension take effect?

    A suspension is effective when the suspending official signs the
decision to suspend.


Sec.  --.715  What notice does the suspending official give me if I am
suspended?

    After deciding to suspend you, the suspending official promptly
sends you a Notice of Suspension advising you--
    (a) That you have been suspended;
    (b) That your suspension is based on--
    (1) An indictment;
    (2) A conviction;
    (3) Other adequate evidence that you have committed irregularities
which seriously reflect on the propriety of further Federal Government
dealings with you; or
    (4) Conduct of another person that has been imputed to you, or your
affiliation with a suspended or debarred person;
    (c) Of any other irregularities in terms sufficient to put you on
notice without disclosing the Federal Government's evidence;
    (d) Of the cause(s) upon which we relied under Sec.  --.700 for
imposing suspension;
    (e) That your suspension is for a temporary period pending the
completion of an investigation or resulting legal or debarment
proceedings;
    (f) Of the applicable provisions of this subpart, Subpart F of this
part, and any other [Agency adjective] procedures governing suspension
decision making; and
    (g) Of the governmentwide effect of your suspension from
procurement and nonprocurement programs and activities.


Sec.  --.720  How may I contest a suspension?

    If you as a respondent wish to contest a suspension, you or your
representative must provide the suspending official with information in
opposition to the suspension. You may do this orally or in writing, but
any information provided orally that you consider important must also
be submitted in writing for the official record.


Sec.  --.725  How much time do I have to contest a suspension?

    (a) As a respondent you or your representative must either send, or
make rrangements to appear and present, the information and argument to
the suspending official within 30 days after you receive the Notice of
Suspension.
    (b) We consider the notice to be received by you--
    (1) When delivered, if we mail the notice to the last known street
address, or five days after we send it if the letter is undeliverable;
    (2) When sent, if we send the notice by facsimile or five days
after we send it if the facsimile is undeliverable; or

[[Page 66552]]

    (3) When delivered, if we send the notice by e-mail or five days
after we send it if the e-mail is undeliverable.


Sec.  --.730  What information must I provide to the suspending
official if I contest a suspension?

    (a) In addition to any information and argu