March 24, 2010
A final rule issued on March 23, 2010, amends the Federal Acquisition Regulation ("FAR") to implement the Federal Awardee Performance and Integrity Information System ("FAPIIS"). FAPIIS was created to fulfill the requirements imposed by Section 872 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Pub. L. 110-417). This final rule followed a proposed rule issued on September 3, 2009, and a period of public comment. The final rule becomes effective on April 22, 2010.
As stated by the FAR Councils in the preamble to the final rule, "FAPIIS is intended to significantly enhance the scope of information available to contracting officers as they evaluate the integrity and performance of prospective contractors." In theory, FAPIIS is intended to be a "one-stop shop" for Contracting Officers to obtain information regarding a prospective contractor’s integrity and performance history. Contracting Officers are required to check FAPIIS prior to the award of a contract over the simplified acquisition threshold. Moreover, contractors with contracts exceeding $500,000, and including FAR clause 52.209-8, "Updates of Information Regarding Responsibility Matters," are required to enter data into FAPIIS semi-annually during the life of their covered contracts. The final rule also amends the FAR to require offerors with greater than $10 million in active Federal contracts and grants to certify that their FAPIIS entry is accurate and complete when responding to solicitations where the value of the resulting contract is expected to exceed $500,000.
FAPIIS will include all of the information contained in the Past Performance Information Retrieval System ("PPIRS"), the Excluded Parties List System ("EPLS"), the Contractor Performance Assessment Reporting System ("CPARS"), and the Central Contractor Registration ("CCR") system. Information will be retained in FAPIIS for five years. Thus FAPIIS will include data regarding a contractor’s past performance history, active suspensions or debarments, any suspensions or debarments that have expired less than five years ago, nonresponsibility determinations, and terminations for default or cause. The final rule also requires suspension and debarment officials to submit administrative agreements with contractors resolving a suspension or debarment to FAPIIS within three working days of entering into the agreement.
Most notably, contractors with FAPIIS covered contracts must submit to FAPIIS (through CCR) information regarding whether the offeror or its principals have, within the last five years, in connection with the award or performance by the offeror of a Federal contract or grant, been the subject of a proceeding at the Federal or State level that resulted in: (1) a conviction in a criminal proceeding; (2) a finding of fault or liability in a civil proceeding resulting in fines or damages of greater than $5,000; (3) a finding of fault or liability in an administrative proceeding that results in a fine of greater than $5,000, or reimbursement, restitution, or damages greater than $100,000; and, (4) a settlement in a criminal, civil, or administrative proceeding resulting in an admission of fault by the contractor where a decision on the merits could have led to any of the results above. The final rule imposes this requirement on both contractors and their principals. A principal is defined as an officer, director, owner, partner, or person having primary management or supervisory responsibilities within a business entity.
FAPIIS is intended to be used primarily as a tool for Contracting Officers in making responsibility determinations under FAR subpart 9.1. Although the final rule does incorporate FAPIIS into the procedures for agency evaluations of contractor past performance, it explicitly directs Contracting Officers to FAR part 15 for issues relating to past performance evaluations in the context of source selection activity. Thus, at least as it is written, the final rule envisions the use of FAPIIS primarily for responsibility determinations.
The extent of FAPIIS’ role in responsibility determinations and the source selection process remains to be seen. However, there are several concerns about this new comprehensive responsibility approach. First, there is a cause for concern regarding the potential misuse of FAPIIS data. Contracting Officers are directed to "consider all the information in FAPIIS" when making a responsibility determination, but are also cautioned that some of the information in FAPIIS may not be relevant to their responsibility determination. The final rule leaves this relevancy determination to each individual Contracting Officer’s "sound judgment," although it does require Contracting Officers to document the basis for their responsibility determination. This may lead to the lack of uniform use of FAPIIS information among Contracting Officers. The FAR Councils opted to stress "training, rather than more specific standards" as the means by which to ensure Contracting Officers utilize FAPIIS on a uniform and fair basis.
Second, there is cause for concern regarding the privacy of FAPIIS information. Access to FAPIIS is restricted in most cases to procurement officials and, in the case of their own entries, contractors. However, the final rule does not provide an explicit exemption for Freedom of Information Act ("FOIA") requests seeking FAPIIS information. Each agency must make a case-by-case determination regarding the release of FAPIIS data in response to FOIA requests. This could lead disclosure of a contractor’s FAPIIS entry to both competitors and the public at large.
Third, and perhaps most important, there is cause for concern that the improper use of FAPIIS could trigger the practice of de facto debarment, discussed in more detail in our previous Briefing Paper, in which agency officials essentially debar a contractor by continuously finding it to be nonresponsible. This is all the more likely due to the fact that FAPIIS will include settlement agreements regarding prior suspensions and debarments. While the final rule requires Contracting Officers to notify the relevant suspension and debarment official if they find anything in their review of the contractor’s FAPIIS entry that "appears appropriate for the official’s consideration," this requirement will not necessarily placate concerns regarding de facto debarment, although it may result in an increase in legitimate debarment and suspension proceedings.
Despite these concerns, the FAR Councils are actively considering a phased expansion of FAPIIS’ scope to include state and local-level contract performance information, and a reduction of the relevant threshold from $500,000 to the simplified acquisition threshold. A proposed rule would be issued prior to implementing these expansions.
It remains to be seen what effect FAPIIS will have on responsibility determinations, and whether its use will lend credence to any of the concerns expressed above. At the very least, contractors should update their compliance infrastructure to reflect the final rule’s requirements, and continually monitor their FAPIIS entries to ensure that they are accurate. Contractors should also work with their Contracting Officers to ensure that they understand how the Contracting Officer is utilizing their FAPIIS data. We will continue to monitor the implementation of FAPIIS and keep you up to date on any new developments in this area.
Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding this issue. Please contact the Gibson Dunn attorney with whom you work, or any of the following government contracts partners in the firm’s Washington, D.C. office:
Joseph D. West (202-955-8658, firstname.lastname@example.org)
Karen L. Manos (202-955-8536, email@example.com)
Diana G. Richard (202-877-3572, firstname.lastname@example.org)
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