Understanding Procurement-Based Suspension and Debarment in Federal Contracting

Federal contractors face few threats more serious than suspension or debarment. This exclusionary action has become more prevalent during the Trump Administration. For example, at the end of 2025, the U.S. Small Business Administration (SBA) suspended nearly 7,000 Minnesota borrowers for "suspected fraudulent activity." A few weeks later, the U.S. Department of War (DOW) announced a review of small business set-aside contractors of more than $20 million. And just last week, the SBA suspended more than 1,000 firms from the 8(a) Business Development Program – about 25 percent of all firms registered in the program – for failing to meet the agency's January 19, 2026, deadline to submit three years' worth of financial documents.

The suspension of Minnesota borrowers was issued under the non-procurement suspension process detailed in 2 C.F.R Part 180, and the 8(a) suspensions were issued under that program's regulations in 13 C.F.R. Part 124. These were not Federal Acquisition Regulation (FAR)-based procurement suspensions. In this environment of heightened enforcement efforts, however, contractors and subcontractors need to understand the procurement suspension and debarment regime in order to protect their continued eligibility for federal contracts and avoid exclusion that can have immediate and cascading business consequences.

This Holland & Knight blog posts addresses the purpose, scope and practical implications of debarment under FAR Subpart 9.4, which governs exclusion from federal procurement and shapes how agencies assess the risk, responsibility and eligibility of contractors for continued business dealings with the government. Specifically, this article provides a primer on:

• the purpose and scope of procurement-based suspension and debarment
• causes for suspension and debarment
• procedures and due process protections
• the effects of exclusion
• practical considerations for contractors

Purpose and Scope of Suspension and Debarment

Suspension and debarment are tools designed to protect the government's interests by making sure it only does business with presently "responsible" contractors. Although often thought of as punitive measures, suspension and debarment are expressly administrative. As such, the FAR makes clear that suspension and debarment should only be used when necessary to protect the government's interests. In other words, they are not intended or permitted to be used as punishment for procurement violations.

Debarment is the more serious remedy. It results in an exclusion from federal contracting for a period of time, typically three years. Suspension, by contrast, is intended to be only a temporary measure used when immediate action is necessary to protect the government's interests pending the results of an investigation or proceeding. In the procurement context, suspensions may be followed by a proposal for debarment. Their effects are government-wide, and prime contractors, subcontractors, and their respective principals and employees may be suspended or debarred.

Causes for Suspension and Debarment¹

FAR 9.406-2 and 9.407-2 list the reasons for which a contractor may be debarred or suspended, respectively. The most serious causes for debarment include:

• conviction of civil judgment for fraud or a criminal offense in connection with obtaining or performing a public contract
• violation of federal or state antitrust statutes
• various crimes reflecting a lack of business ethics such as embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion and receiving stolen property
• willful nonperformance or breach of a government contract
• knowing failure to report certain criminal offenses and material overpayments under a public contract
• more generally, any other cause that is deemed to adversely affect a contractor or subcontractor's present responsibility and business integrity

The causes for suspension largely mirror those for debarment. The key distinction is that a contractor may be suspended merely on "adequate evidence" of one of the aforementioned causes, whereas debarment requires an agency suspension and debarment official to find cause by a "preponderance of the evidence."

Procedures and Due Process Protections

The FAR provides for a detailed process to protect a contractor's rights while an agency considers suspension or debarment. For debarment, FAR 9.406-3 requires that the contractor receive written notice of the proposed action, including the reasons for the proposed debarment and the specific facts upon which the action is based. The contractor must be afforded an opportunity to submit information and argument in opposition to the proposed debarment within 30 days of receipt of the notice. Key here, the debarring official must consider all relevant information, including any remedial measures taken by the contractor and any mitigating factors that may color the contractor's present responsibility. The contractor may request a fact-finding proceeding if material facts are in dispute, and the debarring official must issue a written decision on the matter.

Suspension procedures under FAR 9.407-3 are similar to those for debarment. A suspension becomes effective immediately upon issuance, though the contractor must receive prompt written notice explaining the basis for the action. The contractor then has 30 days to submit information and argument challenging the suspension. Suspensions must be based on adequate evidence, and if legal proceedings are not initiated within 12 months, the suspension generally must be terminated unless the Assistant Attorney General requests an extension.

In addition to notices of suspension or proposed debarment, federal agencies have discretion to issue a "show cause notice," affording a contractor or subcontractor an opportunity to address any matters that may amount to cause for suspension or debarment. Unlike suspensions or proposals for debarment, a show cause notice does not result in an automatic exclusion from eligible for federal contracts or eligibility for other federal programs.

Effects of Exclusion

Contractors who are suspended or debarred are immediately listed in the System for Award Management (SAM) as excluded from federal contracting. The effect of this listing is potentially ruinous because contracting officers are required to review SAM for any present exclusions before making an award. An excluded contractor – suspended or debarred – faces the prospect of losing out on all federal contracting opportunities during the term of the exclusion. Additionally, an exclusion renders the contractor and any excluded individuals ineligible for federal loan guarantees and other benefits.

The effects, however, do not stop at exclusion. Beyond a single exclusion, the FAR specifically provides for the imputation of an entity's misconduct to related entities. It also provides that the conduct of an individual may be imputed to the individual's organization and that an organization's misdeeds may be imputed to individuals associated with the organization. This can then serve as the basis for potential further suspension or debarment action against the entity or individual to which or whom the conduct is imputed.

In addition, prime and higher-tier subcontractors are required to confirm and certify that no subcontractors are excluded.

Stated simply, suspension or debarment can have far-reaching consequences, including numerous second- and third-order effects that can destroy a concern's continued viability.

Practical Considerations for Contractors

Appreciating the seriousness of suspension and debarment and their potentially disastrous effects, contractors must be proactive in their compliance efforts and studiously protect their present responsibility to do business with the government.

For contractors notified of potential suspension or debarment action, best practices may include the following (elaborated on further below):

• early engagement with experienced government contracts counsel
• developing a detailed and comprehensive administrative record
• voluntary disclosure of procurement irregularities
• internal remedial measures to establish (or re-establish) present responsibility
• administrative agreements to resolve a potential or ongoing proceeding

As noted, upon receiving a Notice of Suspension, an entity has an opportunity to contest the action, typically within 30 days after receipt of the Notice. Although a response is not mandated by regulation, preparing a strategic and well-organized submission can significantly influence the outcome of the process, particularly given that the ramifications of a suspension can be devastating and wide-reaching. Further, failure to respond may be treated as acquiescence to the suspension and the underlying allegations, with potentially severe and far-reaching consequences.

In the event of responding to a Notice, at the very least, an entity must provide the information required by FAR 9.407-3(c)(7). The FAR does not expressly articulate a formal burden of proof for suspension determinations. Once a Notice of Suspension is issued, the practical burden shifts to the contractor to demonstrate present responsibility, a core concept that governs both suspension and debarment decisions under FAR 9.407-3 procedures. Specifically, FAR 9.407-3(c)(5) permits a contractor submission of "any specific information that raises a genuine dispute over the material facts" related to the allegations. Moreover, both suspension and debarment procedures require that the government agency provide the administrative record upon which a suspension or proposed debarment is based.

Accordingly, an effective response should focus not only on rebutting allegations but also on affirmatively demonstrating that the contractor is presently responsible and capable of performing federal work with integrity and reliability. Contractors that receive a Notice of Suspension (or debarment) should consider the following actions and strategic considerations.

1. Engage Experienced Government Contract Counsel: Contractors should first consult with experienced government contracts counsel who can navigate the procedural requirements and develop an effective response strategy. The process of contesting a suspension or debarment action involves complex regulatory and strategic planning and considerations. If a contractor is reliant on receiving funds from federal contracts, retaining qualified counsel is a must. Attorneys who practice in the area of federal grants and contracts bring relevant experience with these matters, including familiarity with the process and standards for demonstrating present responsibility, as well as established relationships with agency counsel.
2. Immediate Internal Assessment and Investigation: A critical early step is to conduct an internal assessment to understand the basis of the allegations outlined in the Notice. Counsel can assist in reviewing the notice, identifying the specific grounds cited by the agency and advising on the best approach to demonstrate present responsibility. Upon receiving a Notice, a contractor should preserve relevant documents, implement a litigation hold, conduct a privileged internal review and assess the accuracy of the allegations. The internal review should evaluate not only whether the alleged conduct occurred, but also whether it reflects a systemic compliance failure or an isolated incident, as that distinction is often central to a present responsibility determination. Oftentimes, it is helpful to engage outside counsel to conduct an internal investigation into the allegations contained in the Notice. The findings and conclusions of such an investigation are privileged since the investigation is conducted by outside counsel but can be shared with the agency (at the entity's discretion) if they prove favorable. In addition to being privileged, investigations by outside counsel are far more likely to be viewed as credible and trustworthy by an agency than an entity's own internal investigation. Though the findings of such an investigation need not be disclosed, favorable results may be shared with the suspending official at the entity's discretion to support a showing of the contractor's present responsibility.
3. Request Access to the Administrative Record and Manage Response Timing: To prepare a meaningful and well-supported response, contractors often request through counsel a copy of the administrative record or supporting materials relied upon by the agency in issuing the Notice of Suspension. Access to this information allows the contractor to understand the factual basis for the suspension, assess the sufficiency of the government's evidence and tailor its response to the specific concerns identified by the suspending official. In appropriate circumstances, an entity may also request additional time to submit its response. Although agencies are not required to grant extensions, such requests are commonly made when additional time is needed to review the administrative record, conduct an internal investigation, or develop and document remedial measures. When coordinated through experienced counsel, these requests can help ensure the response process is orderly, focused and aligned with the FAR's emphasis on present responsibility and protection of the government's interests.
4. Develop a Strong Written Response: The written submission is typically the central and most critical vehicle for contesting a suspension. A well-structured and persuasive response should systematically address each allegation set forth in the Notice, provide clear factual rebuttals supported by documentation and affirmatively demonstrate the entity's present responsibility. In addition, the submission should clearly articulate the entity's compliance framework, including internal controls, policies, training programs and oversight mechanisms. It should also highlight concrete corrective and remedial actions already implemented or underway. The response should be organized, professional and forward-looking, and must fully satisfy all applicable regulatory requirements governing suspension proceedings.
5. Implement and Document Remediation: Remediation is a central consideration for the agency's decision. Contractors should document any steps taken to address the underlying issues, such as revising internal controls, conducting independent audits or implementing new training initiatives. These actions not only serve as mitigating factors but also reinforce the contractor's ongoing eligibility to participate in federal contracting. By approaching the process proactively and transparently, contractors can maximize their chances of a favorable outcome and minimize the long-term impact of suspension or debarment proceedings.

Suspension and debarment actions pose immediate and far-reaching risks for entities that depend on federal assistance or federal contracting opportunities. A suspension immediately halts participation in federal procurement programs and can quickly escalate to a debarment if not addressed strategically. While contractors are afforded an opportunity to respond, the timeline is compressed and the consequences are significant.

Understanding of the applicable regulatory framework combined with early, strategic engagement of experienced counsel can be outcome determinative for these proceedings. Proactive, well-supported responses may mean the difference between a temporary interruption and a long-term loss of eligibility across procurement programs. In practice, FAR Subpart 9.4 places a premium on present contractor responsibility, and entities that move quickly to assess risk, implement remediation and clearly demonstrate responsibility are best positioned to protect their continued participation in federal procurement programs.

If you are facing suspension or debarment, or if you have questions, please contact the authors, and register to attend Holland & Knight's free upcoming webinar, "Suspension and Debarment: What Contractors Need to Know," on February 10, 2026, at 10 a.m. EST.

Notes

¹ As noted above, this article focuses on suspension and debarment in the context of federal procurements. Other bases for debarment, not addressed here, include non-procurement exclusions of federal grant-holders, debarments certain environmental violations, intentional labor standards violations and healthcare provider exclusions from eligibility for participation in the Medicare and Medicaid programs.