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Limit on Suspension of Affiliates Clarified

 

Two contractors' suspension from government contracting was lifted by a district court because no contractor may be suspended for more than 18 months unless legal proceedings are initiated against it. The contractors were fourth- and fifth-tier subsidiaries of a contractor that was suspended following an indictment for defrauding the government with regard to contracts to supply food to military personnel in the Middle East. The sole basis for the contractors' suspension was their status as affiliates. In cross-motions for summary judgment on the contractors' action to terminate their 31-month suspension, the parties disputed the proper interpretation of FAR 9.407-4 (b), which provides in part "[i]n no event may a suspension extend beyond 18 months, unless legal proceedings have been initiated within that period." The government argued proceedings against the suspended principal contractor allowed continued suspension of its affiliates.

Sounder Interpretation

The court sided with the contractors' "sounder" interpretation that FAR 9.407-4 (b) did not distinguish between suspensions based on an enumerated cause and suspensions based on affiliation. Therefore, suspected wrongdoers and suspended affiliates must be treated equally, and an affiliate's suspension may not exceed 18 months unless legal proceedings have been initiated against the affiliate itself. Here, the contractors' continued suspension was contrary to law and violated the Administrative Procedure Act. ( Agility Defense & Government Services, Inc., et al. v. Dept. of Defense, et al., DC ND Ala, 56 CCF 79,842)

 


































































































































































































 






 

 

(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )

     
  
 

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