Case Affirms Rights of Contractors Facing Debarment.

• Author: Levy, Frederic
• Position: GOVERNMENT CONTRACTING INSIGHTS

Experienced defense companies understand that suspension or debarment from U.S. government contracts can be a death knell.

The ultimate decision on these actions typically lies with the procuring agency's suspension and debarment official, and those officials generally enjoy substantial discretion. However, a recent federal court case shows that contractors can obtain judicial relief when an agency fails to follow required processes.

On July 8, part supplier Precision Metals Corp. was granted a temporary restraining order vacating and setting aside a Defense Logistics Agency debarment and enjoining debarment while court proceedings are pending. The decision, which emphasized two procedural violations, serves as a reminder that an agency's authority to debar contractors is not unlimited and that it must strictly adhere to the rights granted contractors before taking action.

Federal procurement regulations set forth the procedures for suspension and debarment proceedings and provide that contractors "may submit, in person, in writing, or through a representative, information and argument in opposition to the proposed debarment." The language generally has been understood to entitle contractors to an in-person meeting if requested.

In Precision's case, the contractor's rights were augmented by the language in the agency's notice of proposed debarment, stating that Precision could submit a response "either in person or in writing, or both."

Precision asserted that it had requested an in-person meeting with the DLA on numerous occasions. However, the agency issued its decision without such a meeting. In response, Precision filed a federal lawsuit before the Eastern District of New York under the Administrative Procedures Act, asserting that the DLA's decision was arbitrary and capricious.

The federal court agreed and ruled that Precision had "shown a likelihood of success on their claims against defendants," stating that the agency had violated the procedures act when it issued a debarment without granting an in-person meeting. The court further held that in addition to likely violating the procedures act, the failure to provide the meeting also likely violated Precision's Fifth Amendment due process rights.

In its decision, the court acknowledged the potentially catastrophic and irreparable impact of a federal debarment, particularly for a company like Precision operating on thin margins. The court reaffirmed its ruling by extending the...