United States Department of Agriculture
Food and Nutrition Service
Southeast Region
Policy Memorandum 250.20-03: Debarment and Suspension Questions and Answers
This information was previously issued as National School Lunch Program Policy Memoranda 94-8, dated June 22, 1994, 95-16, dated July 27, 1995, 95-11, dated May 18, 1995, 96-11, dated April 30, 1996, 96-14, dated May 2, 1996 and 96-17, dated June 24, 1996.
This memorandum is a compilation of a wide range of questions and answers regarding debarment and suspension activities. In some cases, we reference other resources for more complete information.
1. What is the difference between Federal nonprocurement and Federal procurement programs?
A Federal nonprocurement program is one involving Federal financial assistance provided to recipients and, if applicable, subrecipients. Any procurement under such a program is done by a recipient or subrecipient of the Federal assistance, not directly by the Federal government. U.S. Department of Agriculture's (USDA's) regulation on debarment and suspension (7 CFR Part 3017) addresses Federal nonprocurement programs administered by the Food and Nutrition Service. This would include the National School Lunch (NSLP), School Breakfast (SBP), Special Milk (SMP), Summer Food Service (SFSP), and Child and Adult Care Food (CACFP) Programs.
Federal procurement programs involve purchases directly by the government (e.g. Department of Defense, Veterans Administration, U.S. Department of Agriculture, etc.).
2. Define person and principal as it relates to debarment and suspension. (7 CFR 3017)
Person - any individual, corporation, partnership, association, unit of government or legal entity, however organized.
Principal - officer, director, owner, partner, key employee or other person with primary management or supervisory responsibilities within a company. Also includes persons who have critical influence on or substantive control over a covered transaction whether or not employed by the company.
3. What is reciprocity?
A June 1995 amendment to 7 CFR 3017 caused exclusionary action under both the Federal non-procurement and Federal Procurement programs. If a company is under Debarment, suspension, proposed debarment or voluntary exclusion by a Federal agency such as USDA, the company is also excluded by programs such as NSLP, SFSP and CACFP, and by local agencies like schools and care centers. This is also true in reverse - local to national.
4. If a company is debarred from Federal procurement programs by a Federal agency such as the Department of Defense or the Veterans Administration, does this prevent this debarred company from bidding on local school districts' bids under Federal nonprocurement programs?
Yes. 7 CFR 3017 and 48 CFR Federal Acquisition Regulations were amended creating reciprocity. This amendment causes as exclusionary action under the government-wide non-procurement suspension and debarment rules to cause the same exclusion. Therefore, debarment from Federal procurement programs (e.g. by the Department of Defense of Veterans Administration) does apply to Federal non-procurement program transactions (e.g. procurement transactions at the grantee [State agency] and sub-grantee or school food authority/sponsor levels). A company debarred from Federal procurement programs such as the Department of Defense would not be able to enter into contracts with local school districts.
5. How can a State agency (SA) or school food authority (SFA)/sponsor ensure that they do not enter into a contract with a company which has been debarred or suspended from Federal nonprocurement programs?
Each SA or SFA/sponsor must require each responsive bidder to include a certification statement with each bid on each contract of $100,000 or more or any contracts for audit services regardless of the amount. By signing the certification statement, the bidder certifies that neither it nor any of its principals (e.g. key employees) have been proposed for debarment, debarred, or suspended from Federal nonprocurement programs by a Federal agency. It is the responsibility of each SFA/sponsor to require the certification as part of a responsive bid.
If an agency obtains the signed certification from an organization, and that organization is later found to have been debarred, the State/local agency is not liable. An agency is only liable if it knowingly contracts with an organization which is suspended or debarred. A SFA/sponsor may rely upon the certification statement submitted by a bidder unless SFA/sponsor personnel know that the certification is erroneous. In such cases, the SFA/sponsor should contact the SA for confirmation of the bidder's status relative to debarment and suspension.
6. To what level/tier is a debarment taken? - contractor, sub-contractor, sub-sub-contractor, etc.?
The January 4, 1996 amendment to 7 CFR Part 3017 limited coverage of lower tier procurement contracts in the domestic food assistance programs to the initial procurement contract and the first tier of sub-contracts. For example, in a local agency contract with a food distributor for pizza: the initial contractor would be the distributor, and the first tier contractor would be the pizza manufacturer. It would not be necessary to obtain a debarment certification from the company producing tomato sauce for the pizza.
7. In contracting with a delivery company to deliver milk, what kind of certification is needed?
Both the delivery company and the milk company should provide proper debarment certification. AD-1048 is required for all contracts over $100,000. Instruction 5 of AD-1048 states that the lower tier participant shall not knowingly enter into any transaction with a person who is debarred or suspended. Therefore, the delivery company must get a debarment certification from anyone they contract with.
8. If a company is proposed for debarment from Federal nonprocurement programs, does this automatically exclude them from being awarded the contract for school districts or sponsors of child care centers?
No. Under proposed debarment, the company or individual may enter into new contracts involving Federal nonprocurement programs and continue to extend or renew existing contracts. Additionally, proposed debarment does not excuse the company or individual from fulfilling existing contracts involving Federal non-procurement programs; however, should a company or individual subsequently become debarred, it or he/she would be prohibited from entering into new contracts or extending or renewing existing contracts, but the company or individual would still be required to fulfill existing contracts.
9. If a company or individual is proposed for debarment from Federal nonprocurement programs, how should the AD-1048 be completed?
As stated above, signing the AD-1048 certifies that neither the prospective bidder nor its principals are presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation in Federal nonprocurement programs by any Federal department or agency. In the event the bidder is unable to certify to any of the statements, they can attach an explanation to the proposal clarifying their current status. Only if the company or individual indicates that it or he/she has been proposed for debarment, the SA/SFA/sponsor may accept this clarification in lieu of the signed AD-1048 and may consider the company/individual as being responsive. However, if the company or individual indicates that there is another reason why it or he/she is unable to sign the certification, the SA/SFA/sponsor should first contact the Regional Office/SA, as applicable, to confirm the status of the company or individual before the clarification is accepted and the company or individual is considered responsive.
10. Must a bidder return Form AD-1048 with their bid when they are unable to sign the form and are submitting an attached explanation clarifying their status in lieu of the certification statement?
No. An unsigned AD-1048 Form does not have to be returned by the bidder. The attached statement must include an explanation that the company or individual has been proposed for debarment. If the bidder does not sign the AD-1048 or submit an attached statement, the bidder should be considered non-responsive.
11. Several SA’s have prototype bid documents that include the certification statement but have omitted the sentence that allows prospective participants to attach an explanation. Should SA’s modify their prototype?
If this sentence was omitted, the SA should modify their prototype bid documents to incorporate the complete certification provisions and instructions set forth in 7 CFR Part 3017, Appendix B. This can be accomplished by using the AD-1048 Form with instructions.
12. Some States have statutes or laws regarding suspension, debarment or convictions that are more stringent than Federal requirements. What rules should be followed?
Check with your State procurement officer to determine which rules apply in your State. These rules would be in effect in addition to Federal standards.
13. If the only bidder is ineligible due to debarment or suspension activities, or the ineligible bidder’s price is significantly lower than the eligible bidders, what can be done to obtain supplies or services?
If every effort has been made by the local agency to find a company eligible to contract for services or supplies, they may consider requesting an exception from FNS through the State agency.