This section of the FEDERAL REGISTER

contains documents other than rules or

proposed rules that are applicable to the

public. Notices of hearings and investigations,

committee meetings, agency decisions and

rulings, delegations of authority, filing of

petitions and applications and agency

statements of organization and functions are

examples of documents appearing in this

section.

Notices Federal Register

13692

Vol. 60, No. 49

Tuesday, March 14, 1995

1The use of the term ‘‘bank’’ herein is intended

to refer to all financial institutions whose

information is subject to Exemption 8. Likewise, the

term ‘‘bank regulatory agency’’ refers to any agency

responsible for the regulation or supervision of

financial institutions.

ADMINISTRATIVE CONFERENCE OF

THE UNITED STATES

Adoption of Recommendations

AGENCY: Administrative Conference of

the United States.

ACTION: Notice.

SUMMARY: The Administrative

Conference of the United States (ACUS)

adopted two recommendations at its

Fifty-First Plenary Session. The

recommendations concern the

application and modification of

Exemption 8 of the Freedom of

Information Act, and procedures

governing debarment and suspension

from federal programs.

FOR FURTHER INFORMATION CONTACT:

Nancy G. Miller, 202–254–7020.

SUPPLEMENTARY INFORMATION: The

Administrative Conference of the

United States was established by the

Administrative Conference Act, 5 U.S.C.

591–596. The Conference studies the

efficiency, adequacy, and fairness of the

administrative procedures used by

federal agencies in carrying out

administrative programs, and makes

recommendations for improvements to

the agencies, collectively or

individually, and to the President,

Congress, and the Judicial Conference of

the United States (5 U.S.C. 594(1)). At

its Fifty-First Plenary Session, held

January 19, 1995, the Assembly of the

Administrative Conference of the

United States adopted two

recommendations.

Recommendation 95–1, ‘‘Application

and Modification of Exemption 8 of the

Freedom of Information Act,’’ suggests

some changes in the scope of coverage

of that exemption. Exemption 8 protects

from disclosure certain documents

relating to examination and supervision

of banks by federal agencies. The

Recommendation proposes that

Exemption 8 be retained for

examination reports of open banks, and

modified for examination reports for

closed banks that have failed. Operating

and condition reports should be

disclosed insofar as they contain or are

based on publicly available information.

The Conference also makes several

suggestions to bank regulatory agencies

on their administration of Exemption 8.

Recommendation 95–2, ‘‘Debarment

and Suspension from Federal

Programs,’’ addresses issues relating to

debarments and suspensions from

federal procurement and

nonprocurement programs. It

recommends that debarment from

procurement programs have the effect of

debarment from nonprocurement

programs, and vice versa. It

recommends that independent

factfinders preside over hearings on

disputed material facts. It makes

suggestions on improvements in the

procedures governing debarments and

suspensions, and it recommends that

Congress refrain from legislating

mandatory debarments.

The full texts of the recommendation

are set out in the Appendix below. The

recommendations will be transmitted to

the affected agencies and to appropriate

committees of the United States

Congress. The Administrative

Conference has advisory powers only,

and the decision on whether to

implement the recommendations must

be made by the affected agencies or by

Congress.

Recommendations and statements of

the Administrative Conference are

published in full text in the Federal

Register. In past years Conference

recommendations and statements of

continuing interest were also published

in full text in the Code of Federal

Regulations (1 CFR Parts 305 and 310).

Budget constraints have required a

suspension of this practice in 1994.

However, a complete listing of past

recommendations and statements is

published in the Code of Federal

Regulations. Copies of all past

Conference recommendations and

statements, and the research reports on

which they are based, may be obtained

from the Office of the Chairman of the

Administrative Conference. Requests for

single copies of such documents will be

filled without charge to the extent that

supplies on hand permit (see 1 CFR

304.2).

The transcript of the Plenary Session

is available for public inspection at the

Conference’s offices at Suite 500, 2120

L Street, NW, Washington, DC.

Dated: March 7, 1995.

Jeffrey S. Lubbers,

Research Director.

Appendix—Recommendations of the

Administrative Conference of the United

States

The following recommendations were

adopted by the Assembly of the

Administrative Conference on

Thursday, January 19, 1995.

Recommendation 95–1, Application and

Modification of Exemption 8 of The Freedom

of Information Act

Background

The Freedom of Information Act (FOIA), 5

U.S.C. § 552, generally mandates public

access to records in the possession or control

of federal agencies, whether the records are

generated by the agency or obtained by it

from other sources. The Act contains nine

exemptions, each of which authorizes but

does not require the agency to protect from

disclosure certain types of information.

Exemption 8 permits agencies responsible for

the regulation or supervision of financial

institutions to protect from disclosure

matters contained in or related to

examination, operating, or condition reports

prepared by, on behalf of, or for the use of

the agency.

Exemption 8 provides an unusual level of

protection to banks and bank regulatory

agencies.1 Except for Exemption 9, dealing

with geological and geophysical information,

no other FOIA exemption is industry- or

agency-specific. In light of the change in the

regulatory environment of financial

institutions since the passage of the FOIA in

1966, the Conference has reviewed whether

this broad exemption continues to be

justified. The upheaval faced by financial

institutions in the last decade and the

number of such institutions that have failed

makes availability of information relating to

the regulation of that segment of the economy

of particular interest. A substantial amount of

taxpayer money has been spent to alleviate

problems relating to financial institutions.

Exemption 8 covers a wide range of

documents, primarily operating reports,

condition reports, and examination reports of

financial institutions. Operating and

condition reports are largely public financial

statements submitted by the bank to the

agency, although they also may include some

nonpublic information. Examination reports

are the written statements prepared by the
Federal Register / Vol. 60, No. 49 / Tuesday, March 14, 1995 / Notices 13693

2See ACUS Recommendation 71–2, ‘‘Principles

and Guidelines for Implementation of the Freedom

of Information Act.’’ See also Presidential

Memorandum for Heads of Departments and

Agencies, The Freedom of Information Act (Oct. 4,

1993) (Policy statement on the use of the FOIA

encouraging agencies to disclose agency records in

the absence of any clear harm); Attorney General’s

Memorandum for Heads of Departments and

Agencies, The Freedom of Information Act (Oct. 4,

1993).

3See ACUS Recommendation 82–1, ‘‘Exemption

(b)(4) of the Freedom of Information Act,’’

Recommendation 83–4, ‘‘The Use of the Freedom of

Information Act for Discovery Purposes.’’

4Protection of a customer’s privacy interest may

require redaction of more than a customer’s name;

other characteristics of the loan might reveal

customer identifications.

5The Conference does not seek to define when a

closed bank would be deemed to have failed. As

discussed below, among the bases for

recommending that information about closed failed

banks be available under FOIA are the role of

government oversight and impacts on taxpayers.

6While Congress has mandated reports by the

agency’s Inspector General for certain bank failures

after July 1, 1993 (see Federal Deposit Insurance

Corporation Improvement Act of 1991, 12

U.S.C.§ 1831o(k)), disclosure of the underlying data,

if requested, may provide a useful validation or

check on such reports.

7 Despite recent history, the vast majority of all

financial institutions do not fail. This

recommendation, therefore, addresses only the

disclosure on request of examination reports of a

narrow group of banks where the justification for

release of the data is especially compelling.

8Among the potentially relevant exemptions are

Exemptions 4 (confidential commercial or financial

information), 5 (agency predecisional documents), 6

(personal privacy), and 7 (investigative reports).

agency’s examiners evaluating the bank’s

operations and practices, but they are not

audit reports. Examination reports include,

among other things, information about an

institution’s portfolio of loans, the strength of

its management, and areas that may need

corrective action to improve its safety,

soundness, and compliance with law. While

bank regulatory agencies encourage

examiners to make their reports candid,

careful, and complete, the reports often

include preliminary analysis and

commentary. The examination report (known

in some agencies as the ‘‘open’’ portion) is

made available to the bank, on the condition

that it not be disclosed outside the bank. The

agencies retain the supporting information

for the report (which in some agencies is

known as the ‘‘closed’’ portion). Most

agencies also include in the examination

report and disclose to the bank what is

known as a CAMEL rating: a composite

summary in numerical form of key

components of the examination—Capital,

Asset quality, Management, Earnings, and

Liquidity. There are also ratings for each

factor in the closed portion.

Justification for Scope of Exemption 8

The Administrative Conference has always

endorsed the FOIA concept of disclosure of

government records 2 while recognizing the

need to balance competing concerns.3 Thus,

it concludes that, while the basic protection

of confidential and sensitive data relating to

open banks should continue, where

documents or information in agencies’

possession are already public or relate to an

institution no longer operating, the public

interest in disclosure outweighs the potential

harm from such disclosure.

Exemption 8’s protection of operating,

condition and examination reports is

generally seen as serving three primary

purposes: (1) It protects banks—including

both the examined bank and those that have

relationships with it—from substantial harm

that might be caused by disclosure of

information and opinion about their

condition; (2) It facilitates the free exchange

of information between bank personnel and

examiners and encourages bank examiners to

be candid, and as necessary, immediately

responsive, in their assessments of a bank’s

financial position and operation; and (3) It

protects the privacy of bank customers (e.g.,

depositors and borrowers).

Bank regulators and the institutions they

regulate and/or supervise have generally

asserted the need to protect both the candor

of examination reports and the

nonadversarial nature of the relationship

between examiners and financial institution

officials. In particular, they have expressed

concern that disclosure of sensitive adverse

information—especially preliminary data,

information, and conclusions—could reduce

the candor of the examiners’ comments and

analysis, and inhibit bank officials from

offering open access to their records and from

being frank and open in their discussions

with the examiners. Examination reports,

they point out, are intended to draw the

attention of bank management to actual and

potential problems as quickly as possible.

The exemption is also aimed at protecting

the stability of financial institutions by

preventing the inappropriate disclosure of

information relating to the soundness of the

institution, as reflected in examination

reports and in operating and condition

reports. The expressed concern is to avoid

‘‘runs on the bank,’’ as well as other adverse

impacts—e.g., short-term liquidity problems,

volatility in cost of funds, reduced access to

credit or to depositors. Nondisclosure is

further justified on grounds that harmful

overreactions based on incomplete data are

likely to outweigh any public benefits.

Financial institutions are also by their nature

interrelated, in the sense that an adverse

impact on one may have broad and possibly

severe adverse implications for others.

Moreover, the need for disclosure is

diminished insofar as the public already

receives, as a result of various banking and

securities law requirements, a substantial

amount of detailed, comparable information

about banks.

Finally, there is a critical interest in

protecting the privacy of those doing

business with a financial institution.

Examiners evaluate samples of loans.

Information that might permit identification

of the borrowers and other customers, as well

as information about their financial situation

and soundness, may appear in examination

reports. There seems little doubt that

information that might identify customers

generally should be exempt from disclosure.4

Proper Scope of Exemption 8

Because of these considerations, the

Conference believes that Exemption 8’s

provisions should be retained for ‘‘matters

that are contained in or related to

examination * * * reports’’ pertaining to

open banks. The continued protection of

examination reports of open institutions

seems appropriate under the current

regulatory regime.

Congress should, however, limit the

exemption’s coverage with respect to

information in operating and condition

reports that is publicly available. Almost all

of the information contained in operating and

condition reports (i.e., quarterly statements of

income and expenses, assets and liabilities)

is currently in the public domain. As a result,

bank regulatory agencies generally do release

such information even though it may literally

fit within Exemption 8. There is, therefore,

no reason to retain this portion of the

exemption insofar as it permits

nondisclosure of publicly available data.

The more difficult question is whether the

protection of other information covered by

Exemption 8 continues to be warranted.

Although the Conference concludes that

examination reports with respect to open

institutions should remain protected, it

believes that examination reports (including

all CAMEL ratings) of closed institutions that

have failed should not be exempt from

disclosure. (Closed institutions that did not

fail would be treated like open institutions

for this purpose.5)

The deposit insurance program gives the

public (and the taxpayers) a particular

interest in knowing what caused a bank to

fail and whether regulatory oversight was

adequate or effective.6 Release of

examination report information is unlikely to

cause any harm to the institution itself once

it is closed; nor is there any ongoing

relationship between the examiner and the

bank officials that would be jeopardized by

disclosure. The examiners’ concern about

protecting candor is sharply reduced for

banks that are closed.7 Further, the disclosure

of such information pertaining to closed

banks would, of course, continue to be

subject to other FOIA exemptions.8

Nonetheless, to further ensure that

disclosure will not cause undue harm, the

Conference recommends that certain

limitations be placed on disclosure of

examination reports of closed banks that

have failed. Disclosure concerning a failed

bank that could reasonably be expected to

impair the solvency of an open bank or

efforts to sell the failed institution or its

assets should be delayed. Similarly,

disclosure should be delayed where it could

reasonably be expected to interfere with an

ongoing civil or criminal investigation.

Information relating to specific loans or other

information that would identify customers

could be redacted. Moreover, in cases where

either the Federal Deposit Insurance

Corporation or the Resolution Trust

Corporation is involved in responding to the

bank’s failure, other bank regulatory agencies

should consult with them before releasing

examination reports.

Separately, the Conference also proposes

that Congress consider whether Exemption 8
13694 Federal Register / Vol. 60, No. 49 / Tuesday, March 14, 1995 / Notices

9See, e.g., Public Citizen v. Farm Credit

Administration, 938 F.2d 290 (D.C. Cir. 1991)

(Reports of FCA regarding the National Consumer

Co-op Bank covered by Exemption 8).

10The Community Reinvestment Act, 12 U.S.C.

§ 2906, requires reports concerning credit made

available by banks in low and moderate income

areas. See also the Federal Deposit Insurance

Corporation Improvement Act of 1991, which

requires reports by the agency’s Inspector General

for each bank failure after July 1, 1993.

11The Office of the Comptroller of the Currency

has an ombudsman, whose current responsibilities

include involvement in banks’ challenges to their

CAMEL ratings. Recently enacted Pub. L. No. 103–

325 requires each federal banking agency to appoint

an ombudsman to deal with complaints from the

public about regulatory activities.

12Administrative Conference Statement 12, 1 CFR

310.12 (1993). It has also recommended the use of

ombudsmen more generally in federal agencies.

Administrative Conference Recommendation 90–2,

‘‘The Ombudsman in Federal Agencies,’’ 1 CFR

305.90–2 (1993).

13The use of the term ‘‘bank’’ herein is intended

to refer to all financial institutions whose

information is subject to Exemption 8. Likewise, the

term ‘‘bank regulatory agency’’ refers to any agency

responsible for the regulation or supervision of

financial institutions.

14This recommendation does not seek to alter the

applicability of other FOIA exemptions or of notice

requirements such as those set out in Executive

Order 12600 (relating to predisclosure notification

for confidential commercial information).

15For an illustration of such a report, see the

Community Reinvestment Act, 12 U.S.C. § 2906

(reporting on supply of credit by banks in low and

moderate income areas).

should continue to apply to situations where

examination or other reports of financial

institutions are prepared by agencies having

no authority to regulate or otherwise

supervise those institutions.9 Especially

where the financial institutions do not accept

deposits from the public and there is no

applicable deposit insurance, Congress

should review whether the policies

underlying the Exemption apply.

If Congress believes that additional

information relating to financial institutions

would improve accountability and oversight

or provide for a better-informed marketplace,

the Conference recommends that Congress

consider using the approach taken in the

Community Reinvestment Act, where

specific, focused, published reports have

been required.10

Administration of Exemption 8

There are a number of actions bank

regulatory agencies can take under their

current authority to improve implementation

of Exemption 8. Several bank regulatory

agencies have already implemented many of

them, and the Conference recommends their

consideration by all. As a first step, agencies

that regulate or supervise financial

institutions should ensure that information

that is otherwise publicly available is not

treated as exempt under the FOIA. For

example, as noted, operating and condition

reports contain information that appears

largely to be publicly available from other

sources. To the extent that this and other

information currently withheld under

Exemption 8 is otherwise available and can

be separated from sensitive data, agencies

should release such information. Agencies

should also continue to review their data

collection forms and information-gathering

documents and design them so that

confidential information is collected

separately and can be easily segregated from

information that could be disclosed.

Several bank regulatory agencies now

participate in an interagency FOIA group.

The Conference lauds this effort, and

encourages all bank regulatory agencies to

coordinate their application of the exemption

and its scope, in order to ensure that similar

documents are treated similarly. In doing so,

agencies should keep in mind the FOIA’s

intent to allow the public to know what

agencies are doing to the greatest extent

possible. Agencies generally should presume,

for example, that if one agency releases a

particular type of document, such documents

should be released by all other agencies if

requested. Agencies also should avoid

routinely exempting documents that are

‘‘related to’’ examination reports without

carefully evaluating whether the information

could be disclosed. Even though an

examination report itself may be

nondisclosable, not all portions of all

documents related to it are necessarily also

nondisclosable.

Bank regulatory agencies should also

consider using the ombudsmen recently

mandated by statute 11 to inquire into citizen

concerns about handling FOIA requests and

to recommend solutions or possible systemic

improvements. The Conference has

previously stated that use of alternative

means of dispute resolution should be

explored in resolving FOIA disputes 12

Agencies generally have the discretion to

release requested information even if it is

otherwise exempt under the FOIA. Pending

Congressional action on the

recommendations to modify Exemption 8,

the bank regulatory agencies should

implement the recommendations

independently and, in any case, they should

experiment with the release of examination

reports for large failed banks. This would

provide information to the public about the

banks for which the largest amounts of

money (and potentially, public funds) are at

stake, and would provide an opportunity for

determining whether such release has any

significant untoward effects.

Recommendation

I. As applied to open financial institutions

and closed financial institutions that have

not failed, the provisions of Exemption 8 of

the Freedom of Information Act should be

retained for ‘‘matters that are contained in or

related to examination * * * reports.’’ The

Conference concludes that bank regulatory

agencies should continue to have discretion

to withhold such examination reports,

because, among other reasons, (a) disclosure

of material relating to supervision and

regulation of open financial institutions

might have an adverse impact on the

supervisory and regulatory process and on

the banks themselves,13 (b) such disclosure

also might have an adverse economic impact

on other banks, due to the unique

interrelationship of such institutions, and (c)

a substantial amount of related information is

already otherwise available.

II. A. In order to ensure that information

about banks is not unreasonably withheld,

Congress should limit the exception to

disclosure in Exemption 8 as follows:

1. As applied to closed institutions that

have failed, examination reports and CAMEL

ratings should not be exempt from

disclosure, except that disclosure should be

delayed where it could reasonably be

expected to (a) impair the solvency of an

open bank or an agency’s efforts to sell the

closed bank or its assets, or (b) interfere with

an ongoing civil or criminal investigation.

Records identifying specific loans or

customers could be redacted,14 and prior

consultation with other agencies with

jurisdiction over such a closed bank should

be required.

2. As applied to all financial institutions,

operating and condition reports should not

be exempt from disclosure insofar as they

contain or are based on publicly-available

information.

B. Congress should also consider whether

Exemption 8 should continue to apply to

examination or other reports of financial

institutions prepared by agencies having no

authority to regulate or otherwise supervise

those institutions, especially where the

financial institutions do not accept deposits

from the public.

III. To the extent that Congress determines

that additional information relating to the

regulation or examination of financial

institutions should be publicly available to

enhance accountability and oversight, it

should provide for preparation of special

public reports and analyses, or for other

mechanisms specifically designed to provide

the necessary information to the public on a

systematic basis.15

IV. Agencies with supervisory or regulatory

responsibilities relating to financial

institutions should continue to review ways

to improve their administration of the

Freedom of Information Act.

A. Bank regulatory agencies should

implement the following practices:

1. Information subject to Exemption 8

should be withheld only insofar as necessary

to protect the efficacy of the examination

process and the privacy of sensitive data and

to avoid adverse economic impacts on other

banks. Agencies should not withhold

information on the basis that it is ‘‘related to’’

operating, condition or examination reports

unless they determine that nondisclosure is

properly justified.

2. Information that is already publicly

available should not be treated as exempt

from disclosure. For example, agencies

should continue, in response to FOIA

requests, to release operating and condition

information submitted by financial

institutions that is publicly available.

3. To facilitate the disclosure of releasable

information, agencies should, to the extent

feasible, design data-collection forms or other

information-gathering mechanisms in order

to separate disclosable and nondisclosable

information.

4. Agencies authorized to rely on

Exemption 8 should continue to develop a

coordinated approach for releasing
Federal Register / Vol. 60, No. 49 / Tuesday, March 14, 1995 / Notices 13695

16See Pub. L. No. 103–325, which requires each

federal banking agency to appoint an ombudsman.

See Administrative Conference Recommendation

90–2, ‘‘The Ombudsman in Federal Agencies,’’ 1

CFR 305.90–2 (1993).

1The FAR Council includes representatives of the

Office of Federal Procurement Policy in OMB, the

General Services Administration, NASA, and the

Department of Defense.

2 48 CFR § 9.400 et seq.

3 53 Fed. Reg. 19,204 (1988).

4For example, 96 percent of the Air Force’s

debarments and suspensions are based on

indictments and convictions. Neither the Army, Air

Force, Defense Logistics Agency, nor the Navy has

had fact-based hearings in any debarment or

suspension cases in the last 5 years.

5The Federal Acquisition Streamlining Act, Pub.

L. No. 103–355 (1994).

6Executive Order 12689, issued in 1989.

7Waiver and exception procedures are currently

found in the FAR at 48 CFR 9.406–1(c), 9.407–1(d),

and in the Common Rule at X.215.

information, so that the public receives

uniform treatment for similar data or types of

documents.

5. Agencies should consider using their

ombudsmen to inquire into citizen concerns

about handling of FOIA requests and to

recommend solutions or possible systemic

improvements.16

B. In light of their discretion to release

even otherwise exempt information in

response to requests under the FOIA, bank

regulatory agencies should implement the

recommendations set forth in Part II(A). In

any case, agencies should, on an

experimental basis, immediately make the

disclosures recommended therein with

respect to large failed financial institutions.

Recommendation 95–2, Debarment and

Suspension from Federal Programs

Introduction

The federal government is very big

business in its purchases of products and

services and in its provision of grants, loans,

subsidies, and other types of economic

assistance. Many private companies—small,

medium, and large—rely to a significant

degree on their business with the government

for economic survival. In this

recommendation, the Administrative

Conference of the United States addresses

several significant issues that arise when

federal agencies act to protect the public fisc

by suspending or debarring individuals and

companies who allegedly are not responsible

enough to continue to do business with the

government.

The Administrative Conference of the

United States has considered the topic of

debarment and suspension from federal

programs several times in the last 35 years.

The 1961–62 temporary Administrative

Conference issued a series of influential

recommendations on the procedural

structure of debarment and suspension of

federal contractors. A 1975 study done for

the Conference found that those

recommendations remained sound. Since

then, there has been substantial activity in

the debarment and suspension area, as the

Federal Acquisition Regulation (FAR) and

other regulatory programs have been

promulgated to authorize such actions both

in the procurement and nonprocurement

arenas, and Congress has authorized

debarment and suspensions in a variety of

contexts.

The Conference’s recent study focused on

the regulatory programs involving

procurement debarment coordinated by the

Federal Acquisition Regulation Council (FAR

Council) 1 and promulgated in the FAR,2 and

a comparable (but not identical) effort

involving nonprocurement debarment

coordinated separately by OMB (known as

the ‘‘Common Rule’’).3 The two debarment

and suspension programs have similar

structures, but they are not identical, and not

completely complementary.

Debarment refers to an action to preclude

individuals and entities from receiving future

contracts or other benefits such as loans or

grants for a designated period of time. A

suspension is a similar action on a temporary

basis. They are intended to ensure that

government ‘‘does business,’’ in both its

contracts and its nonprocurement assistance

programs, only with individuals and entities

that are ‘‘presently responsible.’’

The Department of Defense alone debarred

or suspended 1,157 persons and businesses

in 1994. Across the federal government,

almost 6,000 entities were debarred or

suspended the same year.

A. Procurement

The regulations set forth in the FAR

provide that each agency should promulgate

its own regulations consistent with the FAR

provisions. The FAR provides that an agency

may suspend a contractor on an immediate,

temporary basis prior to a hearing, based on

‘‘adequate evidence’’ of a variety of actions

relating to a lack of contractor integrity. A

proposed debarment, for which there is no

minimum evidentiary threshold set out in the

FAR, also has the effect of immediately

precluding the award of additional federal

contracts. Contractors have the opportunity

to present information and argument in

opposition to a suspension or proposed

debarment. In cases where there is a disputed

issue of material fact, a contractor is entitled

to an informal factfinding hearing where the

contractor may appear with counsel, submit

documentary evidence, and present and

confront witnesses. The regulations do not

specify the type of hearing officer. The

regulations do contain a list of mitigating

factors the debarring official (who is usually

also the suspending official) should consider

in deciding whether to debar or suspend.

Most debarments involve contractors that

have been indicted or convicted; relatively

few involve disputed issues of material fact

that would warrant a hearing.4

Contractor suspensions and debarments

have government-wide effect; i.e., no

executive branch agency may enter into a

contract with a debarred or suspended

contractor. The General Services

Administration administers a list of debarred

and suspended contractors.

B. Nonprocurement

The nonprocurement debarment and

suspension process is based on Executive

Order 12549, issued in 1986. OMB led an

effort for uniform regulations (the Common

Rule), and at least 36 agencies have issued

such a rule. The regulatory framework differs

slightly from the procurement debarment

system. The procedures are basically similar,

with suspended persons entitled to appear in

person or submit written argument and

information after the suspension is effective,

and a further informal hearing available in

cases with disputed issues of material fact.

Unlike in the procurement context, however,

a proposed debarment does not have

immediate effect. Nor do the

nonprocurement regulations contain a list of

factors the debarring official should consider

in connection with the decision whether to

debar or suspend.

As in the procurement context,

nonprocurement debarments and

suspensions have executive branch-wide

effect and the GSA publishes a list of those

debarred or suspended. However, those

debarred or suspended under one (e.g., the

nonprocurement) system are not now

debarred from the other; i.e., there is no

reciprocal effect.

* * * * *

Debarments and suspensions under both

regulatory programs generally may not

exceed 3 years. They may be terminated on

a showing that, among other things, there has

been a bona fide change in ownership or

management, or that the causes on which the

debarment was based have been eliminated.

Discussion

Although the nonprocurement and

procurement debarment programs appear

generally to be functioning fairly well, the

Conference does recommend some changes

to make the process more efficient and more

fair.

A. Reciprocal Effect

As noted, the procurement and

nonprocurement systems, while each having

government-wide effect, do not have

reciprocal effect. Legislation 5 and an

executive order 6 have mandated that this

problem be resolved, and the Conference

underscores the importance of making the

appropriate regulatory modifications

promptly to ensure that debarment or

suspension under one system leads to

debarment or suspension under both. The

Conference also believes that the existing

provisions allowing agency heads to waive

the applicability of a government-wide

debarment or suspension for their agency

should be retained.7

B. Debarring Officials and Hearing Officers

Neither regulatory framework specifies

criteria for appointing the debarring official.

Some agencies have written specifications

identifying the type of official who is to

perform this function, as well as the official

who is to serve as a hearing officer in the

relatively few cases where informal hearings

on disputed issues of fact are held. However,

there is no uniformity among the agencies

that have established these criteria. For

example, at the Department of Housing and

Urban Development, where hearings are

relatively frequent, administrative law judges
13696 Federal Register / Vol. 60, No. 49 / Tuesday, March 14, 1995 / Notices

8 In Girard v. Klopfenstein, 930 F.2d 738 (9th Cir.

1991), the court suggested the need for a separation

of the prosecutorial and decisionmaking functions

in a debarment case, but did not explicitly decide

the issue.

9See Recommendation 92–7, ‘‘The Federal

Administrative Judiciary,’’ at ¶ A(1)(c).

10See 42 U.S.C. § 1320a-7(exclusion of health care

providers from Medicare program participation).

11See 5 U.S.C. § 554(d)(2).

12Regarding the need to clearly set forth the

appeals procedure, see Darby v. Cisneros, 113 S.Ct.

2539 (1993)(in absence of agency regulations

governing agency appeal, respondents could

proceed directly to court).

13The procurement debarment rule indicates that

the debarring official ‘‘should consider’’ the

mitigating factors in determining whether to debar.

The suspension rule provides that the suspending

official ‘‘may, but is not required to consider’’

mitigating factors in determining whether to

suspend. The Conference recommends that the

‘‘should consider’’ language be used in both

debarment and suspension cases.

14The Administrative Conference has

recommended standards for mitigating statutory

money penalty amounts imposed administratively.

See Recommendation 79–3, ‘‘Agency Assessment

and Mitigation of Civil Money Penalties.’’

(ALJs) or board of contract appeals (BCA)

judges serve in effect as debarring officials,

while also presiding over the hearings. At the

Department of the Air Force, the debarring

official is the Assistant General Counsel for

Contractor Responsibility, and a military trial

judge presides over any factfinding

proceedings. The Environmental Protection

Agency’s debarring official is the director of

its Office of Grants and Debarment, but the

agency uses hearing officers who do not have

the institutional independence of an ALJ,

BCA judge, or military judge. Few agencies

expressly require either the debarring official

or the hearing officer to have any specific

level of institutional independence.

The informal nature of the adjudication, as

well as the process for a prehearing

suspension, have been consistently upheld

by the courts as providing due process.

Courts have occasionally discussed the need

to ensure some measure of independence on

the part of adjudicators.8 Neither the FAR nor

the Common Rule explicitly addresses the

issue. Given the informal character of

debarment and suspension determinations,

as well as the ‘‘business’’ protection basis for

such decisions, the strict separation of

functions and total avoidance of ex parte

contacts that would apply in more formal

contexts may not be needed. However, it is

important that the debarring official be

sufficiently independent to protect due

process. It is, for example, good practice that

the debarring official not be supervised by

nor directly supervise the investigators or

advocates who are developing the cases. It is

also good practice for debarring officials

generally to ensure that all information that

serves as the basis for decision appears in the

administrative record, and that it is made

available to the respondent in contested

cases.

When there is a hearing to resolve disputed

issues of material fact in a suspension or

debarment case, a greater degree of

independence ought to be required on the

part of the hearing officer. The

Administrative Conference has recently taken

the position that cases involving ‘‘imposition

of sanctions with substantial economic

effect’’ should be heard by administrative law

judges.9 Debarments and suspensions clearly

can have substantial economic effect.

Depending on the type of entity and the

nature of its business, a debarment from

federal contracts or other benefits may

bankrupt a company. Therefore, while a full

APA formal hearing is not constitutionally

required in debarment and suspension cases,

even where there are disputed issues of fact,

use of a truly independent hearing officer is

consistent with notions, and appearances, of

fairness. In some statutory debarment

programs, Congress has required that postdebarment hearings be presided over by

ALJs.10 ALJs clearly have the requisite

independence. Administrative judges from

boards of contract appeals and military

judges have similar independence. They are

experienced in providing hearings that

ensure that the respondent has the proper

opportunity to present a case. Using only

such independent judges for factfinding

hearings would also ensure uniformity

among agencies; since a debarment has

government-wide effect, the nature of a factfinding hearing should not depend on the

particular agency taking the action. The

Conference therefore recommends that,

where there are disputed issues of material

fact in debarment or suspension cases, the

agency assign an ALJ, BCA judge, or military

judge to preside over the hearing. If an

agency wishes to use some other hearing

officer, it should ensure that such officer is

guaranteed independence comparable to that

of an ALJ.11 Agencies should also provide in

their rules whether the judge would issue (a)

findings of fact that would be certified to the

debarring official; (b) a recommended

decision to the debarring official; or (c) an

initial decision, subject to any appropriate

further appeal within the agency.12

C. The FAR and Common Rule

As discussed above, the two sets of

procedures, for procurement and for

nonprocurement debarment and suspension,

are not identical. Some of the variations

relate to the differing natures of the programs

they address. On other issues, uniformity

might serve to eliminate confusion,

especially in light of the government-wide

effect and (hopefully soon-to-be) reciprocal

impact. At a minimum, there are several

issues that the Conference recommends be

addressed in each set of rules.

Both nonprocurement and procurement

debarments and suspensions are

discretionary. The procurement regulations

include a list of mitigating factors the

debarring official should consider in

determining whether to debar or suspend.13

No such list exists in the nonprocurement

context, and neither program has a list of

aggravating factors. The Conference

recommends that a list of mitigating and

aggravating factors be included in the

regulations for both programs. These lists

should be considered by debarring officials

both in determining whether to impose a

debarment or suspension, and in determining

the period of debarment.14 The Conference

takes no position on whether any such list

should represent an exclusive list of factors

to be considered, but does recommend that

each agency make clear its intention with

respect to exclusivity. The Conference also

notes that both aggravating and mitigating

circumstances should focus on issues relating

to the respondent’s ‘‘present responsibility’’

to avoid any appearance that the debarment

is intended as punishment.

As noted, each type of debarment is

effective across the executive branch. There

will thus be cases where a particular entity

does business with multiple agencies. The

Conference recommends that a procedure be

developed by which agencies can efficiently

and routinely coordinate with each other and

determine which agency will serve as the

lead agency on behalf of the government in

taking debarment and/or suspension action.

This would avoid multiple actions with

inconsistent results. It may also ensure that

the agency with the greatest interest will

handle the case. The Conference is aware that

agencies considering actions relating to the

same respondent do confer informally in

many cases, but believes that a more uniform,

regularized process for agencies to determine

a lead agency in particular cases would be

preferable.

As also noted, suspensions become

effective immediately. The suspended

respondent may, after the fact, submit written

comment and information to the debarring

official opposing the continuation of the

suspension. In some cases, the lack of

advance notice is necessary to allow an

agency to protect the integrity of its

contracting or nonprocurement program. In

other cases, however, it may be appropriate

to provide advance notice to the potential

respondent that a suspension or proposed

debarment may be forthcoming. In fact, some

agencies do send what are in essence ‘‘show

cause’’ letters in certain situations. In cases

where the interests of the government would

not be substantially adversely affected by

providing advance notice of a suspension of

proposed debarment, the Conference

encourages agencies to provide such notice.

Given that debarments and suspensions

have a government-wide effect and may soon

also apply to both procurement and

nonprocurement programs, it is especially

important that respondents be given notice at

the earliest opportunity of these potential

impacts.

Suspensions require a finding of ‘‘adequate

evidence’’ as a threshold for their issuance.

Proposed debarments, which in the

procurement context have a similar

preclusive effect, have no such threshold.

(An ultimate decision to debar must be based

on the preponderance of evidence, however.)

Given their immediate effect, a minimum

evidentiary threshold for procurement

proposals to debar would also be appropriate.

The Conference recommends that proposals

to debar in the procurement context require

‘‘adequate evidence of cause to debar.’’

The Administrative Conference also

recommends that all agencies within the

‘‘executive branch’’ (broadly construed to

include ‘‘independent’’ agencies) should

implement the ‘‘Common Rule’’ and those

portions of the FAR that address suspension

and debarment.
Federal Register / Vol. 60, No. 49 / Tuesday, March 14, 1995 / Notices 13697

15For example, DHHS is required to —exclude—

from participation in the Medicare and Medicaid

programs for 5 years any health care provider who

is convicted of a crime related to the provision of

services under those programs, or of patient abuse.

42 U.S.C. § 1320a-7(a).

16This recommendation should not be read to

discourage Congress from providing guidelines for

agencies to consider in exercising their discretion.

17Waiver and exception procedures are currently

found in the FAR at 48 CFR 9.406–1(c), 9.407–1(d),

and in the Common Rule at X.215. 18See 5 U.S.C. § 554(d)(2).

D. Statutory Debarments

The procurement and nonprocurement

debarment and suspension programs are

based in regulation and/or executive order.

There are also many statutorily-based

debarment schemes, some of which also

involve procurement and nonprocurement

programs. In many of these statutory

programs, Congress has restricted agencies’

discretion whether to debar, or to determine

the length of a debarment.15 Congress has

increasingly opted to require agencies to

debar or suspend in particular situations.

Debarment and suspension are not intended

to be punitive remedies, but rather are

premised on the need to protect the integrity

of government programs. The Conference

believes that Congress should ordinarily

allow agencies to retain the discretion to

determine (1) whether debarments or

suspensions are appropriate in individual

cases, and (2) the appropriate length of such

debarments. Moreover, Congress should

review existing statutory schemes that

mandate debarment and/or particular terms

of debarment, and determine whether they

should be continued. The primary basis for

recommending that agency discretion not be

limited with respect to most debarment and

suspension determinations is the need to

retain flexibility to meet the needs of the

government and the public. The Conference

believes that agency officials generally would

be in a better position than Congress to

determine appropriate remedial sanctions in

individual cases that serve both to protect the

fisc and meet program needs.16

The co-existence of the regulatory

debarment programs that are the focus of this

recommendation with a broad variety of

statutory debarment programs creates a

number of issues that relate to the

interactions between them. The Conference

may in the future study these issues, which

include conflicts that arise from inconsistent

procedural requirements and questions about

whether all statutory programs are intended

to have government-wide effect.

Recommendation

I. Entities coordinating the Federal

Acquisition Regulation (FAR) and the

Common Rule for nonprocurement

debarment, and individual agencies in their

procurement and nonprocurement debarment

and suspension regulations, should promptly

ensure that the applicable regulations

provide that suspensions or debarments from

either federal procurement activities or

federal nonprocurement activities have the

effect of suspension or debarment from both,

subject to waiver and exception procedures.17

II. Entities coordinating the FAR and the

Common Rule, and individual agencies in

their regulations, should ensure that:

A. cases involving disputed issues of

material fact are referred to administrative

law judges, military judges, administrative

judges of boards of contract appeals, or other

hearing officers who are guaranteed similar

levels of independence 18 for hearing and for

preparation of (1) findings of fact certified to

the debarring official; (2) a recommended

decision to the debarring official; or (3) an

initial decision, subject to any appropriate

appeal within the agency.

B. debarring officials in each agency

should:

1. Be senior agency officials;

2. Be guaranteed sufficient independence

to provide due process; and

3. In cases where the agency action is

disputed, ensure that any information on

which a decision to debar or suspend is

based appears in the record of the decision.

III. Entities coordinating the FAR and the

Common Rule, and individual agencies in

their regulations, should provide that each

regulatory scheme for suspension and

debarment includes:

A. A list of mitigating and aggravating

factors that an agency should consider in

determining (1) whether to debar or suspend

and (2) the term for any debarment;

B. A process for determining a single

agency to act as the lead agency on behalf of

the government in pursuing and handling a

case against a person or entity that has

transactions with multiple agencies;

C. (With respect to procurement debarment

only) a minimum evidentiary threshold of at

least ‘‘adequate evidence of a cause to debar’’

to issue a notice of proposed debarment;

D. A requirement that all respondents be

given notice of the potential governmentwide impact of a suspension or debarment,

as well as the applicability of any such action

to both procurement and nonprocurement

programs; and

E. Encouragement for the use of ‘‘show

cause’’ letters in appropriate cases.

IV. All federal agencies in the executive

branch (broadly construed to include

‘‘independent’’ agencies) should implement

the ‘‘Common rule’’ and FAR rules on

suspension and debarment.

V. Congress should ordinarily refrain from

limiting agencies— discretion by mandating

suspensions, debarments, or fixed periods of

suspension or debarment. Congress should

also review existing laws that mandate

suspensions, debarments, and fixed periods,

to determine whether to amend the

provisions to permit agency discretion to

make such determinations.

[FR Doc. 95–6183 Filed 3–13–95; 8:45 am]

BILLING CODE 6110–01–P

DEPARTMENT OF AGRICULTURE

Forest Service

Inland Native Fish Strategy

ACTION: Proposal to Prepare Interim

Direction for Native Inland Fish Habitat

Management.

SUMMARY: The notice is hereby given

that the Forest Service, in cooperation

with the Bureau of Land Management

and U.S. Fish and Wildlife Service, is

gathering information in order to

prepare an Environmental Assessment

(EA) for a proposal to protect habitat

and populations of native inland fish.

The Forest Service is proposing to

amend Regional Guides and Forest

Plans to include interim direction in the

form of riparian management objectives,

standards and guidelines, and

monitoring requirements. The interim

direction will apply to the geographic

area covered by the Eastside Ecosystem

Management Strategy Environmental

Impact Statement (EIS) and Upper

Columbia River Basin EIS, except for

anadromous fish habitat (which is now

being managed under the interim

PACFISH strategy, approved February

24, 1995).

The purpose and need for the

proposed action is to preserve

management options for inland aquatic

resources by reducing the risk of loss of

populations and reducing potential

negative impacts to aquatic habitat of

resident fishes until the signing of

Records of Decision for both EISs. As a

companion to the protection provided

for anadromous fish by PACFISH, this

Environmental Assessment is intended

to provide the basis for establishing

appropriate interim direction to protect

habitat and populations of resident

native fishes outside of anadromous fish

habitat, including bull trout which has

recently been determined to be

warranted by the U.S. Fish and Wildlife

Service (Federal Register Vol. 59, No.

111, June 10, 1994, pp. 30254–30255).

Specifically this EA will address

National Forest System lands on the

Bitterroot, Boise, Caribou, Challis,

Clearwater, Colville, Deerlodge,

Deschutes, Flathead, Fremont, Helena,

Humboldt, Kootenai, Lolo, Malheur,

Ochoco, Panhandle, Payette, Salmon,

Sawtooth, Wallowa-Whitman, and

Winema National Forests in the

Northern, Intermountain, and Pacific

Northwest Regions.

The Forest Service also serves notice

that the agency is seeking information

and comments from Federal, State, and

local agencies and other individuals or

organizations who may be interested in

or affected by the proposed action. This

input will be used in preparing the

Environmental Assessment.

Written comments should be sent to

the agency within 30 days from the date

of publication in the Federal Register.

ADDRESSES: Send written comments to

USDA Forest Service, Idaho Panhandle