A federal agency’s action for suspension or debarment is government-wide; it applies to all federal financial and nonfinancial assistance and benefits. The Interagency Suspension and Debarment Committee (ISDC) facilities lead agency coordination. Two regulations govern suspension and debarment actions: the Non-procurement Common Rule (NCR) and Federal Acquisition Regulation (FAR). The NCR, governed by 2 C.F.R. Parts 180 and 1532, guides suspension or debarment involving federal financial and nonfinancial assistance. The FAR, governed by 48 C.F.R. Subpart 9.4, provides guidelines when a respondent is a federal contractor. Additionally, EPA conducts statutory debarments that automatically disqualify companies and individuals convicted of certain offenses under section 306 of the Clean Air Act (CAA) (42 U.S.C. § 7606) and section 508 of the Clean Water Act (CWA) (33 U.S.C. § 1368) from participation in procurement and non-procurement transactions. 2 C.F.R. § 1532.1100.
Suspension and debarment actions do not intend to punish—they are imposed to protect public interest by ensuring the federal government provides federal funds to presently responsible business partners. 2 C.F.R. § 180.125; 48 C.F.R. § 9.402. Suspension and debarment are tools to protect the government from business operations with recipients who pose a business risk.
Suspension and Debarment as a Tool to Influence Environmental Compliance
For offenses under federal environmental statutes, EPA, as a federal agency, has the original burden to prove a suspension or debarment cause exists. Specific ways to establish cause per the NCR are listed in 2 CFR §§ 180.700 and 800 respectively, while specific ways to establish cause per the FAR are listed in 48 CFR §§ 9.407-2 and 9.406-2 respectively.
Respondents then have the burden to prove suspension or debarment is unnecessary by demonstrating they are “presently responsible” to the Debarring Official—an agency official authorized to impose suspensions or debarments. 2 C.F.R. § 180.855; 48 C.F.R. § 9.406-1(a). Present responsibility is demonstrated by satisfying various mitigating factors including remedial or ethics training measures, ensuring environmental regulation compliance, and maintaining environmental compliance programs. For reinstatements regarding a statutory debarment, ineligibility for federal funding persists until the debarring official certifies that the conditions that led to the conviction have been resolved. The suspended or debarred company or individual must resolve their own environmental misconduct or noncompliance. 2 C.F.R. § 180.860; 48 C.F.R. § 9.406-1(a).
Suspension and Debarment in Practice
Suspension actions assist in promoting environmental compliance by not allowing respondents to receive federal funding if their actions may cause consequences to human health or the environment. For example, Craven Laboratories, a chemical testing laboratory, and its president and three employees were indicted for alleged violations of the Federal Food, Drug, and Cosmetic Act and the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) for concealing and falsifying information concerning pesticide residue tests by manipulating data to falsely classify pesticide residues on grocery store products as being safe. EPA 92-R-246. The indictment alleged the laboratory and individuals fabricated research to EPA for pesticide tolerances (allowable residue levels) in food and feed to defraud manufacturers from safely conducting pesticide testing, and caused submission of false information to EPA in registering pesticides under FIFRA. EPA identified 17 pesticides involved in the possible fraudulent data, including pesticides EPA was in the process of banning due to carcinogenic risks. Due to an indictment of its alleged violation of the aforementioned federal statutes (rather than a conviction to constitute debarment) and potential impacts on human health and the environment, the laboratory’s actions were deemed a cause so serious and compelling a nature it affected its present responsibility; the laboratory was immediately suspended from all federal procurement contracts and non-procurement grants, loans, and assistance programs. EPA 92-R-246, 1992 WL 12145479.
One example of this is the case NH Environmental Group, Inc. d/b/a/ Tierra Environmental and Industrial Services, Inc. and A&C Environmental, and Ronald L. Holmes, wherein a wastewater transporter and treatment facility were debarred under the FAR pursuant to 48 C.F.R. § 9.406-2(a)(5) and disqualified from certain non-procurement and procurement transactions due to a criminal conviction under the CWA. EPA Case Nos. 12-0061-00, 12-0061-00A, 12-0061-01, 12-0061-01A, 2016 WL 3360882. The facility was convicted of negligently introducing pollutants into a publicly owned treatment work (POTW) because it routinely hauled wastewater to a sanitary sewer that discharged to the POTW on at least 59 known dates between January and June 2008. The facility received its notice of proposed debarment on July 6, 2015, and filed its reinstatement petition on September 20, 2015. The facility explained reasons for its restatement were warranted due to cooperating with government agencies, implementing remedial measures, taking disciplinary action against the individuals responsible, paying requested fines, and not receiving violation notices since its conduct occurred. The debarring official determined the facility was not presently responsible due to a lack of business integrity or honesty and debarred the facility until October 21, 2017, to protect governmental interests. Although the facility paid fines and restitution for its CWA conviction, the debarring official denied its reinstatement petition under the CWA because future business activities and operations were unlikely to be conducted in compliance with the CWA nor did it satisfy mitigating factors to comply with the CWA to demonstrate it a presently responsible business partner. Specifically, it did not have enough time to initiate remedial efforts, implement its new Environmental Business Code of Conduct and Ethics, and engage an environmental consultant.
Debarments may extend from one company or individual to another if a nexus exists amongst misconduct or relations. Respondents may receive a shortened debarment by contesting it and demonstrating environmental compliance. An example of this is Omega Protein, Inc., Omega Protein Corporation, Omega Shipyard, Inc. (EPA Case Nos. 17-0873-00A, 17-0873-01, 17-0873-02), 2017 WL 5951474. In that case, a subsidiary that operated a plant where fish were processed into oils to produce supplements was convicted of knowingly discharging a pollutant into U.S. water violating the CWA; and was debarred under the NCR pursuant to 2 C.F.R. § 180.980 as a “participant” because it received a $10 million loan from the Department of Commerce’s National Oceanic and Atmospheric Administration Fisheries Finance Program. The subsidiary’s misconduct was also imputed to the parent company (and its other subsidiary) because the parent company has the power to direct, manage, control, or influence the subsidiary’s activities, and in July 2017, EPA issued a notice of proposed debarment to the parent company, and both of its subsidiaries for a period of five years. Respondents did not contest the debarment but instead requested debarment be limited to three years instead of five. The debarring official determined cause for debarment existed, therefore the burden shifted to respondents to demonstrate it was presently responsible and that debarment should be reduced. Some mitigating factors were considered including the actual or potential harm or impact from misconduct, frequency and duration of misconduct, and whether appropriate remedial measures occurred. Respondents were ultimately debarred for three years as requested because, although respondents were deemed not fully presently responsible, respondents pursued sufficient remedial measures like agreeing to pay all fines and assessments, creating new internal compliance policies, conducting personnel changes to improve environmental and regulatory compliance, and spending millions to improve environmental compliance. Respondents were debarred until November 12, 2020.
Suspension and debarment protect governmental interests by preventing those deemed not presently responsible business partners from receiving federal funds, among other assistance. These actions influence environmental compliance with laws and regulations in a holistic manner rather than risk loss of eligibility to participate in federal procurement and non-procurement activities. Following indictment or conviction, suspension and debarment may even motivate previously recalcitrant respondents to remediate the causes that led to misconduct to demonstrate present responsibility. Since respondents have the burden to prove suspension or debarment is unnecessary by being presently responsible, efforts to resolve these actions rests solely upon respondents. Implementation of remedial measures benefit respondents and furthers EPA’s mission to protect human health and the environment by encouraging responsible actions.