Rule2026-06864
Modernizing Suspension and Debarment Rules
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 9, 2026
Effective
May 11, 2026
Issuing agencies
Federal Communications Commission
Abstract
In this document, the Federal Communications Commission (Commission) adopts the Office of Management and Budget's Guidance for Nonprocurement Debarment and Suspension, along with agency-specific regulations to allow the agency to further combat waste, fraud, and abuse, and remove bad actors from participation in its support programs. The Commission finds further notice and comment "unnecessary" under the Administrative Procedure Act (APA) for the Commission to adopt the Guidelines (including updates made after the Notice of Proposed Rulemaking in this proceeding), but elect to provide an opportunity for input on that assessment as to three of the Guidelines. A Proposed Rule relating to the Commission's adoption of updated suspension and debarment rules is published elsewhere in this issue of the Federal Register.
Full Text
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[Federal Register Volume 91, Number 68 (Thursday, April 9, 2026)]
[Rules and Regulations]
[Pages 18134-18180]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-06864]
[[Page 18133]]
Vol. 91
Thursday,
No. 68
April 9, 2026
Part IV
Federal Communications Commission
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2 CFR Part 6001
47 CFR Parts 54 and 64
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Modernizing Suspension and Debarment Rules; Final Rule
Federal Register / Vol. 91, No. 68 / Thursday, April 9, 2026 / Rules
and Regulations
[[Page 18134]]
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FEDERAL COMMUNICATIONS COMMISSION
2 CFR Part 6001
47 CFR Parts 54 and 64
[GN Docket No. 19-309; FCC 26-18; FR ID 339008]
Modernizing Suspension and Debarment Rules
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this document, the Federal Communications Commission
(Commission) adopts the Office of Management and Budget's Guidance for
Nonprocurement Debarment and Suspension, along with agency-specific
regulations to allow the agency to further combat waste, fraud, and
abuse, and remove bad actors from participation in its support
programs. The Commission finds further notice and comment
``unnecessary'' under the Administrative Procedure Act (APA) for the
Commission to adopt the Guidelines (including updates made after the
Notice of Proposed Rulemaking in this proceeding), but elect to provide
an opportunity for input on that assessment as to three of the
Guidelines. A Proposed Rule relating to the Commission's adoption of
updated suspension and debarment rules is published elsewhere in this
issue of the Federal Register.
DATES:
Effective dates: Amendatory instruction 3 is effective May 11,
2026. Amendatory instructions 1, 4 through 9, and 11 through 13 are
delayed indefinitely. The Commission will publish a document in the
Federal Register announcing the effective date for the delayed actions.
Comment due date: As explained in the preamble below, comments in
response to the adoption of Sec. Sec. 180.630, 180.705, and 180.730 of
the OMB Guidelines will be accepted until May 11, 2026. If significant
adverse comment is received, the Federal Communications Commission will
publish a timely notification in the Federal Register informing the
public of additional procedures that must be followed.
ADDRESSES: Pursuant to Sec. Sec. 1.415 and 1.419 of the Commission's
rules, 47 CFR 1.415, 1.419, interested parties may file comments on or
before the dates provided in the DATES section of this document.
Comments may be filed using the Commission's Electronic Comment Filing
System (ECFS). See Electronic Filing of Documents in Rulemaking
Proceedings, 63 FR 24121 (1998). You may submit comments, identified by
GN Docket No. 19-309, by any of the following methods:
<bullet> Electronic Filers: Comments may be filed electronically
using the internet by accessing the ECFS: <a href="https://www.fcc.gov/ecfs">https://www.fcc.gov/ecfs</a>.
<bullet> Paper Filers: Parties who choose to file by paper must
file an original and one copy of each filing.
<bullet> Filings can be sent by hand or messenger delivery, by
commercial courier, or by the U.S. Postal Service. All filings must be
addressed to the Secretary, Federal Communications Commission.
<bullet> Hand-delivered or messenger-delivered paper filings for
the Commission's Secretary are accepted between 8:00 a.m. and 4:00 p.m.
by the FCC's mailing contractor at 9050 Junction Drive, Annapolis
Junction, MD 20701. All hand deliveries must be held together with
rubber bands or fasteners. Any envelopes and boxes must be disposed of
before entering the building.
<bullet> Commercial courier deliveries (any deliveries not by the
U.S. Postal Service) must be sent to 9050 Junction Drive, Annapolis
Junction, MD 20701. Filings sent by U.S. Postal Service First-Class
Mail, Priority Mail, and Priority Mail Express must be sent to 45 L
Street NE, Washington, DC 20554.
<bullet> People With Disabilities: To request materials in
accessible formats for people with disabilities (braille, large print,
electronic files, audio format), send an email to <a href="/cdn-cgi/l/email-protection#30565353050004705653531e575f46"><span class="__cf_email__" data-cfemail="accacfcf999c98eccacfcf82cbc3da">[email protected]</span></a> or
call the Consumer & Governmental Affairs Bureau at 202-418-0530.
FOR FURTHER INFORMATION CONTACT: Paula Silberthau, Attorney Advisor,
Office of General Counsel, 202-418-1874, <a href="/cdn-cgi/l/email-protection#9cecfde9f0fdb2eff5f0fef9eee8f4fde9dcfaffffb2fbf3ea"><span class="__cf_email__" data-cfemail="7a0a1b0f161b54091316181f080e121b0f3a1c1919541d150c">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order in GN Docket No. 19-309, FCC 26-18, adopted on March 26,
2026, and released on March 27, 2026. The complete text of this
document is available for download at <a href="https://docs.fcc.gov/public/attachments/FCC-26-18A1.pdf">https://docs.fcc.gov/public/attachments/FCC-26-18A1.pdf</a>. Alternative formats are available for
people with disabilities (Braille, large print, electronic files, audio
format) by sending an email to <a href="/cdn-cgi/l/email-protection#abcdc8c89e9b9febcdc8c885ccc4dd"><span class="__cf_email__" data-cfemail="4e282d2d7b7e7a0e282d2d60292138">[email protected]</span></a> or calling the
Commission's Consumer and Government Affairs Bureau at (202) 418-0503.
Regulatory Flexibility Act. The Regulatory Flexibility Act of 1980,
as amended (RFA) requires that an agency prepare a regulatory
flexibility analysis for notice and comment rulemakings, unless the
agency certifies that ``the rule will not, if promulgated, have a
significant economic impact on a substantial number of small
entities.'' Accordingly, the Commission has prepared a Final Regulatory
Flexibility Analysis (FRFA) concerning the possible impact of the rule
changes contained in the Report and Order on small entities. The FRFA
is set forth below and in Appendix B appended to the Commission's
Report and Order, <a href="https://docs.fcc.gov/public/attachments/FCC-26-18A1.pdf">https://docs.fcc.gov/public/attachments/FCC-26-18A1.pdf</a>.
Paperwork Reduction Act. This document contains new information
collection requirements. The Commission, as part of its continuing
effort to reduce paperwork burdens, will invite the general public to
comment on the information collection requirements contained in this
Report and Order as required by the Paperwork Reduction Act of 1995,
Public Law 104-13. In addition, the Commission notes that pursuant to
the Small Business Paperwork Relief Act of 2002, Public Law 107-198,
see 44 U.S.C. 3506(c)(4), we previously sought specific comment on how
the Commission might further reduce the information collection burden
for small business concerns with fewer than 25 employees.
Congressional Review Act. The Commission has determined, and the
Administrator of the Office of Information and Regulatory Affairs,
Office of Management and Budget, concurs, that this rule is ``non-
major'' under the Congressional Review Act, 5 U.S.C. 804(2). The
Commission will send a copy of the Report and Order to Congress and the
Government Accountability Office pursuant to 5 U.S.C. 801(a)(1)(A).
Introduction
The Federal Communications Commission (FCC or Commission)
administers several congressionally-mandated programs, such as the
Universal Service Fund (USF) and the Telecommunications Relay Services
(TRS) program, that provide significant funding to close the digital
divide and ensure that all Americans have access to communications
services. In administering these important programs, it is incumbent
upon the Commission to be a good steward of these funds, which are
ultimately paid for by the American people. We must ensure that these
limited dollars serve their intended purposes. Waste, fraud, and abuse
frustrate the Commission's goals and undermines public trust in these
programs. Bad actors who would seek to enrich themselves by siphoning
[[Page 18135]]
these critical resources away from connecting rural households and
businesses, schools and libraries, rural healthcare providers, low-
income households, and people with disabilities have no place in these
programs. As such, in this Report and Order we adopt additional,
critical tools which will allow us to promptly and efficiently take
action to exclude or otherwise limit bad actors' participation in these
programs. These changes, which received widespread support in the
record, will align our processes with other agencies, incorporate
current fraud prevention best practices, and, ultimately, distribute
funds more responsibly.
Background
OMB Guidelines. The Commission's 2019 Notice of Proposed Rulemaking
(NPRM) (85 FR 2078) proposed to adopt the OMB Guidelines on
Governmentwide Debarment and Suspension (Nonprocurement) (Guidelines)
(71 FR 66431, amended 89 FR 30046). The Guidelines establish a common
framework for a governmentwide debarment and suspension system for
nonprocurement programs. The Guidelines define ``non-procurement
transaction'' as ``any transaction, regardless of type (except
procurement contracts),'' including but not limited to grants,
cooperative agreements, scholarships, fellowships, contracts of
assistance, loans, loan guarantees, subsidies, insurances, payments for
specified uses, and donation agreements. Suspension and debarment rules
for federal procurement contracts are contained in the Federal
Acquisition Regulation (FAR), 48 CFR pt. 9. The Guidelines generally
provide for suspension or debarment based on a range of misconduct.
This range includes not only convictions of or civil judgments for
fraud or certain criminal offenses, but also violations of the
requirements of public transactions ``so serious as to affect the
integrity of a Federal agency program'' (including willful or repeated
violations). In addition, the Guidelines provide that suspension or
debarment could be warranted for ``[f]ailure to pay a single
substantial debt, or a number of outstanding debts . . . owed to any
Federal agency . . . .'' Finally, the Guidelines provide the discretion
to suspend or debar for ``[a]ny other cause that is so serious or
compelling in nature that it affects [the party's] present
responsibility.'' However, in the case of suspensions, but not
debarments, the suspending official must find that ``[i]mmediate action
is necessary to protect the public interest.''
Suspensions under the Guidelines have prospective but immediate
effect, and debarments are effective following a 30-day opportunity for
a party to respond to a debarment notice and the issuance of a final
debarment order. Once effective, an action to suspend or debar serves
to automatically exclude the suspended or debarred party from new
covered transactions governmentwide, whether in procurement or
nonprocurement programs or activities. For ongoing activities, ``a
participant may . . . continue to use the services of an excluded
person as a principal'' if the participant was ``using that person's
services in the transaction before the person was excluded.'' The
participant also has the option of discontinuing the excluded person's
services and finding an alternative provider. Likewise, under the
Guidelines, a participant ``may continue covered transactions with an
excluded person if the transactions were in existence when the Federal
agency excluded the person,'' but the participant is not required to do
so.
Under the Guidelines, suspension and debarment (referred jointly
herein as exclusions) are not punitive actions, and are separate from
civil enforcement actions (including those undertaken under the
Communications Act) and criminal prosecutions. They are also separate
from any administrative procedures that may be used to recover debt.
Thus, this Report and Order does not limit or otherwise impact any
preexisting statutory, regulatory or common law tools available to the
Commission or to the Government generally, other than any suspension
and debarment rules that may be expressly replaced or superseded by
this Report and Order. Instead, exclusion is an administrative action
taken to protect the Government's business interests on a prospective
basis. Federal agencies, through their Suspending and Debarring
Officials (SDO), must use balance and judgment in determining whether
suspension or debarment is appropriate in a particular matter,
including when an exclusion proceeding occurs as a result of, or at the
same time as, other criminal, civil, or administrative proceedings. In
this respect, the approach in the Guidelines can enhance the remedies
or tools that a federal agency such as the Commission might use to
address misconduct, while providing the federal agency with flexibility
to adopt supplemental rules tailored to its specific programs.
Notice of Proposed Rulemaking
The Notice of Proposed Rulemaking (NPRM) proposed to adopt the
Guidelines for several critical support programs: the USF programs, the
TRS program, and the NDBEDP. The NPRM also proposed supplemental rules
that would implement the Guidelines and clarify their application to
the Commission's programs. The NPRM explained that the proposed
supplemental rules were consistent with the Guidelines--which broadly
afford each agency flexibility to implement the Guidelines in a manner
that addresses its specific needs--and were based on the Commission's
experience in administering these programs over many years.
The comments received by the Commission demonstrate that there is
widespread support for us to adopt new rules that are substantially
similar to those proposed in the NPRM. Indeed, there was near consensus
support for adopting updated, more flexible suspension and debarment
rules based on the Guidelines to facilitate the exclusion of bad actors
who pose a threat to the integrity of our programs. Additionally, many
commenters proposed concrete, thoughtful modifications or alternatives
to our proposed supplemental rules to improve their clarity,
transparency, and process protections without compromising their
efficacy. And in many cases, we find that adopting commenters' proposed
changes or clarifications will advance the public interest.
Since the release of the NPRM, high-profile investigations
involving fraud in Commission programs, including USF and other
programs, have served to emphasize the importance of having more robust
suspension and debarment rules in order to safeguard public funds.
Report and Order
We hereby adopt the Guidelines and supplemental rules, as tailored
below to the Commission's programs, to best address and prevent waste,
fraud, and abuse with respect to those programs. Specifically, we adopt
a broader and expanded range of misconduct (beyond merely criminal
convictions and civil judgments) that can trigger Commission exclusion
proceedings, and apply these remedies to the Covered Programs. We adopt
the Guidelines' approach, again tailored to the Commission's programs
and needs, in applying the exclusions to any participant or principal,
which can include individuals, units of government, or legal entities,
engaging in a covered transaction, and we adopt supplemental rules that
explain how these regulations will apply for different tiers of
transactions between an agency and a participant, as well as between a
participant in one of the covered
[[Page 18136]]
transactions and other parties. We establish the position of SDO at the
Commission and will subsequently appoint an SDO whose proceedings,
unless otherwise designated, will be exempt proceedings governed by
section 1.1204(b) of the Commission's ex parte rules, which provides
that ex parte presentations to or from Commission decisionmaking
personnel are permissible and need not be disclosed. We anticipate that
this approach will encourage the free flow of information in
communications involving the SDO, permit the SDO to consider relevant
evidence, and facilitate expedient yet comprehensive resolution of
these proceedings. Accordingly, we find it is in the public interest to
designate such proceedings as exempt proceedings under our ex parte
rules. The SDO will review the misconduct, adduce additional evidence
if necessary, and determine whether an exclusion remedy is warranted.
We follow the Guidelines' approach, which excludes a suspended or
debarred entity or individual from all new governmentwide
nonprocurement and procurement programs, but we adopt supplemental
rules and a presumption that the SDO will exclude a suspended or
debarred party from existing transactions subject to a reasonable
period for customers or end-users to transition to a new provider. For
certain situations, such as where alternate service providers are not
available, the supplemental rules will permit the SDO to consider
whether it is in the public interest to grant limited exceptions. To
the extent that another government agency has excluded an entity or
individual from participating in its programs, the revised rules will
generally provide for reciprocity and exclude such entities or
individuals from Commission programs. We adopt the Guidelines' approach
of imposing a suspension period of up to twelve months and a three year
debarment period with a supplemental rule offering the SDO the option,
in appropriate cases, to require the excluded entity or individual to
file a petition for readmission rather than being automatically
permitted to resume participation after the conclusion of the
exclusionary period. Although we do not expect the SDO to regularly
rely on this option, we permit the SDO to have discretion to require
this filing if warranted.
We also adopt an alternative remedy to suspension and debarment, a
Limited Denial of Participation, to address misconduct that may not
warrant an exclusion. The SDO may limit the entity or individual from
participating in some or all of the programs that the revised rules
cover or may limit participation in other ways that we discuss in
greater detail below.
Such entities or individuals generally may not participate in the
relevant programs, must disclose to others involved in transactions
receiving Federal funds that they are excluded from participation, and
may not serve, or continue to serve, on Commission advisory committees
and comparable Commission groups or task forces.
As a procedural matter, we acknowledge that in the NPRM we proposed
to codify most proposed supplemental suspension and debarment rules at
Title 47, chapter 1, subchapter A, part 16. As detailed below, we
instead codify most of the supplemental rules at Title 2, subtitle B,
chapter LX, part 6001, subject to coordination with other agencies
regarding the placement in the Code of Federal Regulations. This change
comports with the placement practice of many other agencies that have
adopted the governmentwide suspension and debarment rules with any
relevant supplemental rules or modifications.
Suspension and Debarment
The default procedural requirements applicable to suspension and
debarment actions are set forth in subparts F, G, and H of the
Guidelines. In the NPRM, the Commission requested comment on
Commission-specific modifications to those procedures as well as
proposed supplemental rules specific to our programs. The NPRM also
more broadly invited comment on any other changes that parties proposed
to the Guidelines' default rules and procedures.
Definition of, and Relationship Between, Suspension and Debarment
We adopt the Guidelines' definitions of suspension and debarment
given their broader range of covered misconduct and the governmentwide
reach of their remedies as compared with the scope of our existing
rules. The Guidelines define a ``suspension'' as ``an action taken by a
suspending official . . . that immediately prohibits a person from
participating in covered transactions and transactions covered under
the Federal Acquisition Regulations . . . for a temporary period,
pending completion of a Federal agency investigation and any judicial
or administrative proceedings that may ensue,'' and note that a
``person so excluded is suspended.'' The Guidelines define a
``debarment'' as ``an action taken by a debarring official . . . to
exclude a person from participating in covered transactions and
transactions covered under the Federal Acquisition Regulations,''
noting that ``[a] person so excluded is debarred.''
Suspension differs from debarment in several ways. First, a
suspension is ``a temporary status of ineligibility for procurement and
nonprocurement transactions, pending completion of an investigation or
legal or debarment proceeding'' whereas debarment is a remedy that is
``impose[d] . . . for a specified period as a final determination that
a person is not presently responsible.'' Second, an SDO only needs to
find that there is ``adequate evidence'' to support a suspension but
must base a debarment on a ``preponderance of the evidence.'' Third,
because a suspension usually precedes notice and a chance to be heard,
an SDO may only impose a suspension when it finds that ``immediate
action is necessary to protect the public interest.'' In contrast, a
debarment is imposed after a notice is issued and the respondent has
had a chance to contest the proposed debarment. Finally, the period for
suspension is typically capped at twelve months, though the SDO may
also extend the suspension for an additional six months. If legal or
debarment proceedings are initiated, the suspension may continue until
the conclusion of those proceedings, but if such proceedings are not
initiated a suspension may not exceed 18 months. Additionally, the
period of debarment is based on the seriousness of the cause(s)
prompting debarment and typically should not exceed three years. If
circumstances warrant, the SDO may extend the debarment period or issue
additional requirements under the supplemental rules adopted by this
Report and Order.
Applicability
We apply the new suspension and debarment rules to nonprocurement
transactions only under the Covered Programs. The rules shall not
extend at this time to transactions carried out under the Commission's
other currently existing programs, nor shall they extend to
transactions to or from licensees and those with spectrum usage rights
(with the exception of transactions under the Covered Programs where
such an entity is a participant). These decisions find ample support in
the record.
Under the Guidelines that we adopt, together with supplemental
rules, the suspension and debarment provisions apply to those persons
or entities that the rules designate as ``participants.'' We describe
the participants for each of the programs to which the new rules apply
in more detail below. But as a
[[Page 18137]]
general matter, participants subject to these rules are: (1) the
beneficiaries and service providers that participate in the
Commission's programs (typically designated as ``Primary Tier''
participants); and (2) other entities or persons--including
contractors, subcontractors, suppliers, consultants, marketing
organizations, or agents or representatives of such entities or
persons--involved with the implementation of these programs (``Lower
Tier'' participants). Persons at the lower tiers will not be considered
participants unless they also satisfy additional criteria.
Specifically, they must either: (i) have a material role relating to or
significantly affecting claims for disbursements related to the
program; (ii) be considered a ``principal'' in the transaction; or
(iii) be involved in a transaction in the program anticipated to be at
least $25,000. Given our experience administering the Covered Programs,
we are inclined to construe broadly the term ``involved in'' to include
the submission of an application for support. For example, E-Rate
consultants are ''involved in'' a transaction when assisting schools
and libraries in preparing their application. Likewise, marketing
representatives are ``involved in'' transactions every time they assist
in signing up a low-income consumer in the Lifeline program.
In addition, consistent with section 180.200 of the Guidelines, our
rules also treat the E-Rate and Rural Health Care program
beneficiaries, including schools, libraries, and rural health care
facilities, that deal directly with the Commission or its agent,
Universal Service Administrative Company (USAC), as ``participants''
subject to the rules. On the other hand, we do not treat Lifeline (or
former ACP) subscribers or end-users of TRS and NDBEDP services as
``participants'' subject to the disclosure and other requirements of
our new rules.
Causes and Factors
We generally adopt the NPRM's proposals regarding what causes and
factors may lead to suspension and debarments, but for the reasons
explained below, we adjust and clarify our approach in light of the
record. The Guidelines expressly identify several ``causes'' for
suspension or debarment, which include: (1) convictions of, or civil
judgments for, fraud or certain offenses--including any offense
``indicating a lack of business integrity or business honesty that
seriously and directly affects your present responsibility;'' or (2)
violations of the terms of ``a public agreement or transaction so
serious as to affect the integrity of a Federal agency program,'' which
may include willful or repeated violations. The Guidelines indicate
that, beyond the specific, enumerated causes, an agency may exclude a
person for ``[a]ny other cause that is so serious or compelling in
nature that it affects your present responsibility.'' Further, the
Guidelines provide each agency flexibility to identify additional
causes for suspensions and debarments. The NPRM proposed to adopt the
causes in the Guidelines, proposed several additional causes, and
requested comment generally on whether to adopt an FCC-specific
supplemental rule with the additional causes. Further, as explained in
the NPRM, in the case of the TRS program and NDBEDP, causes for
suspension and revocation under existing procedures overlap with, but
are not the same as, the new suspension and debarment rules. Therefore,
the procedures adopted herein are intended to supplement, not replace,
the existing program procedures authorizing suspension or revocation of
certifications to provide TRS or to participate in the NDBEDP.
We find that adoption of the causes for exclusion articulated in
the Guidelines will provide the Commission with flexibility while
affording program participants notice of the types of misconduct that
may trigger suspension or debarment. Most commenters did not object to
our adoption of the Guidelines' causes for suspension and debarment or
aggravating and mitigating factors that an SDO may consider. We address
other commenters' views below.
Consistent with the Guidelines, we also adopt the examples of
``causes'' and factors proposed in the NPRM. Our Supplemental Rule
6001.450(a) is consistent with the ``causes,'' and subsections (b) and
(c) of Supplemental Rule 6001.450 are consistent with the ``factors''
that may be considered. In this regard, we build on the longstanding
history of the Guidelines and their widespread adoption. We also find
that expressly identifying the types of FCC-specific activity that may
result in exclusion serves the dual purposes of providing further
guidance to the SDO and notice to program participants. We find that
our supplemental rule is consistent with the Guidelines.
Our ``causes'' rule includes potential causes for suspension or
debarment that fall into two categories: (i) violations of program-
specific rules that affect program integrity; and (ii) violations of
other applicable Commission rules that affect present responsibility.
The first group includes ``violation[s] of the terms of a public
agreement or transaction,'' specific to FCC programs, that could ``be
so serious as to affect the integrity of'' those programs. The causes
that fall into this category include, but are not limited to: the
willful or grossly negligent submission of false or misleading FCC
forms or statements or other documentation to the Commission or to the
administrators of the Covered Programs that result in or could result
in overpayments of federal funds to the recipients; the willful or
grossly negligent violation of a statutory or regulatory provision
applicable to the Covered Programs; and the willful, grossly negligent,
or habitual failure to respond to requests made by the Commission or
the administrators of the Covered Programs for additional information
to justify payment or continued operation under their certifications.
We anticipate that in evaluating a person's failure to respond, the SDO
will also consider the person's compliance with any applicable document
retention regulations, as well as the quality and credibility of
evidence presented. We also note that not all such violations will be
serious enough to affect program integrity; rather, this supplemental
rule simply provides notice of the type of violations that, in light of
the relevant facts and circumstances, may be sufficiently serious.
The second group of ``causes'' include: (1) a single serious
violation of Commission rules or repeated violations of Commission
rules; or (2) a single substantial or habitual non-payment or under-
payment of Commission regulatory fees. A single serious violation would
be a violation that materially and negatively affects the participant's
present responsibility. Similar to the causes listed in section
180.800(c) of the Guidelines, these additional causes bear upon the
present responsibility of a program participant in doing business with
the federal government--specifically, the Commission.
Many of the commenters opposing our proposed supplemental causes
rule misapprehended or mischaracterized the proposal. The NPRM did not
propose automatic triggers that would always require exclusion or that
would be dispositive in suspension and debarment proceedings; instead,
the NPRM proposed to identify FCC-specific activity to supplement the
causes that can trigger suspension and debarment processes. Under the
Guidelines and our supplemental rule, before initiating a proceeding,
an SDO should look to not only the causes identified in section
180.800, but also, consistent with the Guidelines, the FCC-specific
activities identified in
[[Page 18138]]
Supplemental Rule 6001.450, and then evaluate that conduct based on the
aggravating and mitigating factors set forth in section 180.860.
Consistent with the Guidelines, an SDO would then consider the unique
circumstances of the particular case including whether a cause for
debarment is ``so serious or compelling in nature that it affects [a
participant's] present responsibility,'' since the purpose of the
suspension and debarment system is to ``ensure[] the integrity of
Federal programs by conducting business only with responsible
persons.'' In this regard, we also observe that the extent of
noncompliance often bears on Commission determinations relating to what
actions it will take to address misconduct; the case-by-case
determination we adopt here mirrors that approach in other contexts
such as licensing. We thus reject suggestions to the contrary.
We also disagree with the Joint Association Commenters who claim
that a supplemental rule is unnecessary because the Commission has
``existing . . . mechanisms to protect affected funding programs,'' or
that the proposed rule somehow ``duplicate[s]'' or ``conflate[s] the
FCC's enforcement function to prosecute past violations with the
forward-looking purpose of the suspension and debarment rules.'' To the
contrary, the rules we adopt are necessary precisely because they are
not duplicative, but instead provide the Commission with needed
additional tools to protect the integrity of its programs, including
ensuring that federal funds are not disbursed to irresponsible actors.
Rule violations generally will continue to be handled through
enforcement proceedings in the first instance, though investigation of
such violations could result in referral for an exclusion proceeding in
appropriate cases. For example, in situations in which a single
substantial rule violation or repeated rule violations (e.g., month
after month violation of the same rule, notwithstanding FCC
clarifications, guidance, or enforcement actions) demonstrate an
entity's lack of responsibility, an exclusion proceeding would be
appropriate and our revised supplemental rule accounts for this.
Further, in light of the robust process protections in our supplemental
rules and the clarifications we offer in this Report and Order, we also
reject the suggestion of CTIA and USTelecom that ``[p]ermitting
suspension or debarment for minor or single rule violations could
reduce participation in the Commission's support programs.''
In turn, administration of funding holds and recovery of improper
payments will continue to be handled through existing administrative
and debt collection tools. Additionally, the rules adopted in this
Report and Order will not preclude the agency or the program
administrators from undertaking other reviews and actions, such as
USAC's ability to lock a registered Representative Accountability
Database (RAD) user's account, to address Commission rule violations or
recover improperly disbursed funds. (RAD is a registration system that
USAC uses to validate the identities of service provider
representatives and track a representative's transactions in the
National Lifeline Accountability Database (NLAD) and the National
Verifier. Service providers' representatives are required to register
for a unique Representative ID (Rep ID) that is linked to the service
provider's Application Programming Interface (API) account. This allows
USAC to track and monitor the activity of individual service provider
representatives. If USAC suspects that a representative is engaging in
potentially fraudulent activity, it may lock the representative's
account.) Likewise, nothing in this Report and Order or any order of
the SDO shall interfere with the Commitment Adjustment Process (COMAD)
through which USAC recovers funds that have been committed or disbursed
in error, or otherwise wrongly, by rescinding those commitments and
recovering improperly disbursed funding. An exclusion is a distinct
remedy that will remove wrongdoers both from participation in agency
procurement and nonprocurement programs governmentwide. We intend to
enhance the tools available to ensure program integrity and not
undermine them.
We also disagree with INCOMPAS, NCTA--The Rural Broadband
Association, and ACA Connects--America's Communications Association
(collectively, the Joint Association Commenters) that the NPRM ``does
not provide parties with fair notice as to when they could face
suspension or debarment for the proposed additional factors, such as
compliance history.'' We acknowledge that the NPRM used the term
``factors'' in connection with the OMB Guidelines' ``causes'' for
suspension and debarment, but the Commission cited the OMB cause rule
at the outset of that discussion, 2 CFR 180.800, and separately stated
that OMB rules ``also'' list ``mitigating and aggravating factors,''
citing 2 CFR 180.860, which permits a consideration of compliance
history. The Joint Association Commenters had ample notice that the
Commission might examine compliance history as an additional cause and/
or as an aggravating or mitigating factor. Our Supplemental Rule Sec.
6001.450(a) is consistent with the ``causes,'' and subsections (b) and
(c) of Supplemental Rule Sec. 6001.450 supplement the ``factors'' that
may be considered under the Guidelines (and consequently our rules).
The NPRM also proposed that our supplemental ``cause'' rule
identify that suspension or debarment may be appropriate for certain
``willful or grossly negligent'' or ``willful or habitual'' conduct.
Some commenters urge the Commission to exclude from the ``cause'' rule
inadvertent violations, good faith mistakes, and violations resulting
from negligence not rising to the level of gross negligence, noting
that in the enforcement context a ``willfulness'' standard encompasses
situations where a participant intended to engage in conduct but not
necessarily to violate Commission rules. We recognize that in certain
other contexts, there is Commission precedent holding that even
inadvertent errors can be ``willful.'' Of course, the Guidelines do not
define the term ``willful,'' but one federal court has, in the context
of the Guidelines, suggested that the word generally applies to knowing
or reckless violations, rather than conduct that is merely negligent.
See, e.g., Pillar of Fire, Memorandum Opinion and Order, 32 FCC Rcd
9633, 9635 n.17 (2017); Donald W. Bishop, Forfeiture Order, 8 FCC Rcd
2847, 2847 (1993) (noting that the Commission has interpreted 47 U.S.C.
312(f)(1)'s use of ``willful . . . [to] mea[n] the conscious and
deliberate commission or omission of such act, irrespective of any
intent to violate the Act or Commission rules.'' (citing authorities)).
While this definition of ``willfulness'' may be narrower than the one
in these Commission cases, that does not significantly change the SDO's
ability to suspend or debar participants because the Guidelines also
provide a general catchall basis for debarment for ``[a]ny other cause
that is so serious or compelling in nature that it affects [a
participant's] present responsibility.''
Moreover, a finding that a ``cause'' exists does not automatically
result in a suspension or debarment. The Commission's implementation of
the statutory enforcement requirements relating to the Do-Not-Call
registry for telephone numbers used by Public Safety Answering Points
(PSAPs) is instructive. As detailed in the 2012 PSAP Report and Order,
the Commission was required to set forfeiture amounts within a
statutory
[[Page 18139]]
range based on ``whether the conduct leading to the violation was
negligent, grossly negligent, reckless, or willful, and depending on
whether the violation was a first or subsequent offence.'' The statute
did not define the relevant terms. In the 2012 PSAP Report and Order,
the Commission concluded that in setting forfeitures for PSAP Do-Not-
Call registry violations it is reasonable, to the extent that terms
such as ``willfulness'' and ``gross negligence'' have been defined in
the enforcement context, to rely on those definitions and that the
Communications Act and Commission requirements to take into account the
``nature, circumstances, extent and gravity of the violation and, with
respect to the violator, the degree of culpability, any history of
prior offenses, ability to pay, and such other matters as justice may
require,'' ``encompass the factors necessary to distinguish between
negligent, grossly negligent, reckless or willful conduct, as used in
the Tax Relief Act, without the need for further clarification on this
point in our rules.'' We similarly conclude that it is reasonable and
consistent with the Guidelines to take the same ``case-by-case''
approach here.
Further, the Guidelines' list of causes that we adopt in this
Report and Order speaks about certain ``willful failures'' and
``willful violations'' as sufficient to support debarment, while having
long afforded agencies the flexibility to implement this rule using
their discretion in evaluating both what constitutes a willful act and
the seriousness of the conduct. While the Guidelines provide no express
exception for inadvertent errors, the drafters of the Guidelines
intended to provide ``assurance that performance matters which are
minor or highly parochial in nature would not be used as a basis for
debarment actions.'' (52 FR 20361). Consistent with this approach, we
agree that in some cases, instances of inadvertent error, especially if
set against a demonstrated history of compliance with program
requirements, may be so minor and isolated that they do not provide an
adequate basis for suspension or debarment.
For purposes of both section 180.800 and our supplemental cause
rule, the term ``willful'' will not in the ordinary case include minor,
isolated, and inadvertent noncompliance. On the other hand, the
Guidelines clearly permit debarment for a ``history of failure to
perform or unsatisfactory performance'' of a public transaction if ``so
serious as to affect the integrity of a Federal agency program.'' A
history of violations of program requirements over one or multiple
projects may rise to a level that affects the integrity of an agency
program and forms a basis for debarment, even if these violations
individually may each have been considered minor. Similarly, a single
violation may be so significant that it affects the integrity of an
agency program--for example, a violation affecting substantial
expenditures of public funds. The SDO thus has flexibility to evaluate
the appropriateness of exclusion given the complexity of the rule(s) at
issue as well as the facts of a particular case.
We therefore reject CTIA and USTelecom's argument that gross
negligence should not be sufficient to support suspension or debarment
and that our supplemental rule should require, at a minimum, a finding
of recklessness. We note that consistent with our Rule 1.17 precedent,
the exercise of reasonable due diligence--a standard that should not be
difficult for program participants to meet--is generally sufficient to
avoid a finding of simple negligence (and a fortiori of either gross
negligence or recklessness). Thus, for example--as NCTA correctly
surmised--a company that submits forms that `` `could result in
overpayments' notwithstanding [its] good faith effort to comply with
all applicable rules,'' generally would not satisfy the ``grossly
negligent'' requirement to trigger suspension or debarment proceedings.
We are also not persuaded by C Spire's arguments that every
potential cause in our supplemental rule should ``make reference to
statutory or regulatory violations, not merely a type of conduct,'' or
that words like ``repeat'' and ``habitual'' are overly vague.'' First,
the Guidelines include among their causes a ``history of failure to
perform or of unsatisfactory performance,'' without specifying the
length of that ``history.'' The Guidelines also permit suspension or
debarment based on a participant's lack of ``business integrity or
business honesty'' that affects ``present responsibility,'' which are
not linked to specific statutory or regulatory violations. Second, if
an exclusion proceeding is commenced, a participant can present
evidence to the SDO that its conduct falls short of ``repeated'' or
``habitual''--or does not qualify as a regulatory or statutory
violation--and raise other mitigation arguments. We also decline to
identify the ``number of . . . violations'' that can give rise to
suspension or debarment as requested by C Spire, as this would be
inconsistent with the kind of flexibility the Guidelines contemplate
and give agencies to consider the facts and circumstances of each case.
For these reasons, we are also not persuaded by SHLB-SECA's arguments
that suspension or debarment should be invoked only for ``fraud or
repeated willful violations'' because some rules, in their view, ``use
a strict liability standard'' while other rules may be considered
vague. As we have stated repeatedly, suspension and debarment decisions
will be determined on a case-by-case basis by which an SDO may consider
mitigating circumstances even for such rules as SHLB-SECA may
characterize as rules imposing strict liability.
The Joint Association Commenters also objected that our proposed
supplemental rule--insofar as it permits suspension or debarment for
``habitual non-payment or under-payment of Commission regulatory fees
or of required contributions''--is ``in tension'' with the Guidelines,
which permit suspension or debarment for ``[f]ailure to pay a single
substantial debt, or a number of outstanding debts'' only if the ``debt
is uncontested'' or the debtor's ``legal and administrative remedies
have been exhausted.'' But habitual nonpayment or underpayment of fees
generally could also qualify as ``repeated violations of Commission
rules,'' permitting exclusion on that separate and independent basis.
And in any event, the Guidelines permit an agency to identify what
activity is ``so serious or compelling'' that it implicates a
participant's ``present responsibility.'' Further, as already discussed
extensively, suspension and debarment decisions will be determined on a
case-by-case basis in which an SDO may consider both aggravating and
mitigating circumstances. A substantial single or habitual non-payment
or under-payment of fees or contributions could be so egregious, in the
context of a particular case, as to merit suspension and debarment,
notwithstanding the fact that the participant has not exhausted its
legal or administrative remedies.
Aggravating and Mitigating Factors
Under the Guidelines, the SDO should consider aggravating and
mitigating factors in debarment proceedings, including specific factors
set forth in the Guidelines. We also conclude that the SDO may consider
aggravating and mitigating factors in suspension proceedings. Although
the Guidelines do not explicitly provide for such considerations, the
Guidelines do require a suspending official to consider ``[a]ny further
information and argument presented in support of, or [in] opposition
to, the suspension.'' The Guidelines also give the suspending official
``wide discretion,'' stating that
[[Page 18140]]
the official may, for example, ``infer the necessity for immediate
action to protect the public interest either from the nature of the
circumstances giving rise to a cause for suspension or from potential
business relationships or involvement with a program of the Federal
Government.'' Accordingly, we determine that the SDO should consider
aggravating or mitigating factors during suspension and debarment
proceedings, pursuant to 2 CFR 180.860 as well as the additional
factors we adopt here.
We adopt the aggravating and mitigating factors provided in the
Guidelines. In addition, we adopt a supplemental rule under which the
SDO may consider additional mitigating factors. Among such mitigating
factors would be remedies that took effect after the misconduct
occurred that the SDO considers likely to prevent misconduct going
forward, as well as whether proceedings to address alleged misconduct
(such as non-payment of regulatory fees) may be pending before the
Commission. We decline, however, the request by the Joint Association
Commenters and CTIA and USTelecom to create any safe harbors for
specific program violations because of the discretion already afforded
to the SDO to evaluate each situation on its own merits. Further, we
note that a party can often mitigate risk from inadvertent violations,
and we recommend that parties do so wherever possible. We also decline
to adopt the Joint Association Commenter's request for a specific
procedure to protect a self-reporting service provider from suspension
action for a period of time after the provider notifies the Commission
of a potential issue or following adoption of codes of business ethics
and conduct as suggested in the record. While taking such self-
corrective actions is critical and could qualify as a mitigating
factor, the Commission should retain flexibility to proceed to
exclusion, where appropriate, notwithstanding a participant's efforts
at self-governance.
The NPRM also specifically asked whether, during a debarment
proceeding, the Commission should consider the impact that debarment
would have on the provision of services to customers and end-users. We
agree that impact on customers and end-users should be considered
during suspension and debarment proceedings, and there is support for
doing so in the record, but we conclude that we should not treat the
potential impact on customers and end-users (including sole source
considerations) as a rationale for allowing a person whose misconduct
otherwise warrants an exclusion to avoid the imposition of a suspension
or debarment. Rather, we conclude that the better approach is to
address an exclusion's potential impact on customers and end-users in
the context of whether or to what extent to permit an excluded party to
continue to provide services for a limited duration, and under what
terms and conditions. The SDO shall make determinations about
transitions and continuation periods in the manner described in more
detail below.
Evidentiary Standards
The Guidelines require ``adequate evidence''--defined as
``information sufficient to support the reasonable belief that a
particular act or omission has occurred''--for suspension and a
``preponderance of the evidence'' for debarment. The NPRM requested
comment on whether the Commission should adopt these evidentiary
standards, as well as whether the Commission should adopt any
supplemental evidentiary standard rules.
We received limited comment on the proposal, which we address
below, and we now adopt the Guidelines' evidentiary standards. Other
federal agencies across the government employ these standards, and we
find that adopting a similar framework will facilitate governmentwide
reciprocity and promote ease of application.
Contrary to CTIA and USTelecom and NCTA's claims, we are not
persuaded that any harm will result from allowing suspension based on
``adequate evidence,'' as opposed to a ``preponderance of the
evidence.'' To initiate a suspension under the ``adequate evidence''
standard in the Guidelines, an SDO still must independently consider
whether there is ``information sufficient to support the reasonable
belief'' that a ``cause'' for suspension has occurred--which also
requires the SDO to consider whether the participant's alleged conduct
implicates whether that participant is ``presently responsible.'' While
we do not adopt a rigid definition of ``adequate evidence,'' the SDO
may find analogies in caselaw on how to apply the ``adequate evidence''
standard to be instructive. See, e.g., Horne Bros. v. Laird, 463 F.2d
1268, 1271 (D.C. Cir. 1972). Unsubstantiated assertions made by a third
party (e.g., an unsuccessful E-Rate competing bidder) would likely not
satisfy this standard. Moreover, the Guidelines and our rules also
provide procedural protections (including a notice of the reasons for
suspension upon initiation and a timely opportunity to respond and
present evidence), ensuring that, even if an initial suspension
decision was erroneously based on materially incomplete or incorrect
information, it could be quickly corrected. Specifically, we expect
that the SDO will provide a suspension notice containing sufficient
information for the suspended person to respond to the notice and
identify any relevant facts or circumstances. In this regard, such
notices should not be based on ``mere suspicion, unfounded allegation,
or error.'' Transco Sec., Inc. of Ohio v. Freeman, 639 F.2d 318, 322-23
(6th Cir. 1981). We find that it would be reasonable to apply an
``adequate evidence'' standard under these circumstances, particularly
given that suspensions are temporary.
In response to comments, we further clarify the types of findings
on which the SDO may rely. As the Joint Association Commenters, CTIA
and USTelecom, and NCTA noted, section 504(c) of the Communications Act
would preclude an FCC SDO from issuing a suspension or proposing a
debarment based solely on the issuance of a Notice of Apparent
Liability (NAL). However, section 504(c) does not preclude the SDO's
reliance on any facts underpinning an NAL. Section 504(c) provides that
``[i]n any case where the Commission issues a notice of apparent
liability . . . that fact shall not be used, in any other proceeding
before the Commission . . . to the prejudice of the person to whom such
notice was issued . . . .'' To be clear, section 504(c)'s prohibition
on using NALs is limited to the Commission's use of ``that fact''--
i.e., the issuance of the NAL. The Commission has previously addressed
this issue in the 1999 Commission's Forfeiture Policy Statement and
explained that ``[t]he statute says that the issuance of an NAL shall
not be used against a person unless the forfeiture has been paid or the
person is subject to a final court order to pay. It does not say that
the facts underlying prior NALs shall not be used against a person.''
This is supported by the legislative history. Thus, section 504(c) does
not prohibit the Commission, and by extension the SDO, from considering
the facts underlying the NAL in another proceeding. An SDO may
therefore make determinations in an exclusion proceeding--i.e., impose
a suspension or propose a debarment--based on the facts underlying an
NAL if those satisfy the Guidelines' evidentiary standards. In
proceedings before the SDO, however, parties may submit evidence
disputing the facts underlying the NAL, should they choose to do so. We
clarify this point in response to the Joint Association Commenters'
concerns
[[Page 18141]]
about the use of an NAL in proceedings before the SDO. Similarly,
because an exclusion decision must satisfy these evidentiary standards
based on the SDO's rigorous review of the record, we reject the
recommendation of the Joint Association Commenters that the Commission
``expressly exclude USAC decisions from serving as causes for
suspension or debarment.'' An SDO may consider findings by a program
administrator in an audit report or commitment adjustment if those
findings satisfy the Guidelines' evidentiary standards. That is so even
if an appeal of the administrator's decision is pending. But if the
participant contests the exclusion, including contesting certain facts
in the record of the proceeding, the SDO must render a final decision
based on his/her independent evaluation of the record. As a corollary
to this principle, in the event a response to an NAL has been filed or
a USAC decision is subject to a request for FCC review, or the record
otherwise has developed in direct response to the document or decision
being referenced, we direct the SDO to consider that additional
evidence independent of a participant contesting an exclusion. We
emphasize that the SDO must exercise independent judgment. The SDO may
not, consistent with section 504(c), presume based on the issuance of
the NAL that the Guidelines' standards have been satisfied. We agree
with CTIA that the same logic would apply equally to the use of factual
allegations set forth in complaints before the Commission in pending
proceedings because, like NALs, allegations made in pending Commission
proceedings are not final.
In contrast, we note that in suspension proceedings, pursuant to
section 180.735(a)(1) of the Guidelines, respondents may not challenge
the facts if the ``suspension is based upon an indictment, conviction,
civil judgment, or other findings by a Federal, State, or local body
for which an opportunity to contest the facts was provided.'' Under
this rule, which we adopt, facts contained in Commission orders for
which an opportunity to contest the facts was provided, including those
issued by bureaus and offices on delegated authority, may not be
challenged if relied upon by the SDO in issuing the suspension. We
recognize, however, that orders may be affected by judicial decisions
or modified by the issuing body itself. Therefore, we adopt section
180.735(a)(1) with a modification to allow respondents to bring to the
SDO's attention information showing that the findings in the original
Federal, State or local orders are no longer accurate where (i) an
order has been reconsidered or modified by the issuing body (or by its
staff acting on delegated authority), or (ii) an order has been
remanded, reversed, or vacated on judicial review. For debarment
proceedings, we adopt a new rule providing that the SDO, in
consultation with the Office of General Counsel (OGC), shall apply the
principles of collateral estoppel to determine whether a respondent may
challenge findings set forth in (i) Commission orders (including orders
of bureaus or offices issued on delegated authority) for which the
opportunity to contest the facts was provided or (ii) orders of any
other Federal, state, or local body for which the opportunity to
contest the facts was provided. We also recognize that Commission-level
decisions can be subject to petitions for reconsideration and actions
on delegated authority can be subject to applications seeking full
Commission review. In those cases, it either typically (in the case of
reconsideration) or necessarily (in the case of an application for
review) is the full Commission that resolves those requests.
Consequently, where the facts material to an exclusion decision issued
by the SDO are contested in a pending petition for reconsideration of a
Commission-level decision or an application for review of an action on
delegated authority, the SDO's exclusion decision shall take effect but
shall be referred to the full Commission for review. In this scenario,
the required written decision by the SDO for purposes of 2 CFR
6001.135(a) would be the referral of the matter to the full Commission.
Consistent with the policy reflected in 2 CFR 6001.135(b), the full
Commission will attempt in good faith to issue a written decision
within 180 days of receiving the referral.
Exceptions to Exclusion
The Guidelines permit an agency head to ``grant an exception
permitting an excluded person to participate in a particular covered
transaction.'' The NPRM asked whether we should adopt this rule and
whether we should identify factors for granting such an ``exception''
or whether that determination should be left solely to the discretion
of the full Commission or the Chair. The NPRM tentatively proposed that
if any factors are enumerated, one consideration should be the extent
to which the exclusion would substantially impair delivery of services
to customers and end-users. The NPRM asked whether there are additional
factors that should be considered. In addition, the NPRM asked whether
the Commission should delegate authority to the bureaus overseeing the
programs to grant such exceptions. We adopt an approach by which the
SDO in the first instance will determine whether good cause exists to
grant an ``exception'' to the exclusion remedy in a particular case.
We agree that in appropriate cases, exceptions to both Commission
exclusions and to those issued by another federal agency should be
permitted. We thus adopt sections 180.135 of the Guidelines with the
modifications set forth in Supplemental Rule 6001.125. This
supplemental rule delegates authority to the SDO in the first instance
to decide whether to ``grant an exception permitting an excluded person
to participate in a particular covered transaction.'' An excluded
party, however, may seek reconsideration, or file an application for
review (AFR) with the Commission, as provided for in Supplemental Rule
6001.125(f). Commenters expressed support for this approach. We intend
for this delegation to apply for purposes of other rule sections in the
OMB Guidelines that refer to section 180.135 of the Guidelines. We thus
decline to adopt other possible approaches under the Guidelines, which
would allow the Chairperson or perhaps even the full Commission to act
on exceptions in the first instance. The SDO's decisions will remain
subject to the AFR procedures available for decisions of a Commission
component, as we describe herein, thereby providing for appropriate
oversight.
Under the supplemental rules that we adopt herein, the SDO is
responsible for determining appropriate transition and continuation
periods before issuing any suspension or debarment order, and in that
process must consider whether, subject to the limitations described
herein, an exception to permit extended continuation periods to ensure
delivery of services to customers and end-users would be appropriate.
Because the SDO will be responsible for conducting these proceedings in
which these transitional issues (including sole source services) are
closely evaluated, the SDO is in a suitable position to assess the
facts of each case and determine whether to grant exceptions for
covered transactions and to address the relevant scope of any
applicable limitations that might apply. The proponent of an exception
bears the burden of proving, by a preponderance of the evidence, any
facts asserted.
Consistent with our discussion of transitions and continuations
below and to better protect program integrity, we find that any
exceptions shall be subject
[[Page 18142]]
to appropriate conditions such as mandatory audits, additional
reporting requirements, compliance agreements (with approval of OGC),
monitoring, or any other forms of effective oversight supplemental to
those already provided under FCC programs. We also adopt the NPRM's
proposal, strongly supported by commenters, that the availability of
alternate service providers to serve customers and end-users in a given
area is one relevant factor for the Commission to consider in deciding
whether to grant an exception to Commission exclusions or to those
issued by another agency. If a participant contends that it is the sole
provider of services, the SDO shall afford the bureau that administers
the program involved an opportunity to address this matter and rebut
those assertions if necessary.
We note that for purposes of the Lifeline, E-Rate, or RHC programs,
where exclusions involve resellers, there will almost always be
alternate sources of service providers for customers and end-users.
That is because resellers by definition purchase their services or
equipment from underlying carriers or from a manufacturer or other
manufacturer partner and then resell the services and equipment to
their own customers and end-users. Our experience with debarments and
other enforcement actions in the Lifeline, E-Rate, and RHC programs has
demonstrated that Lifeline subscribers, schools, libraries, and health
care providers are able to transition from the reseller to the
underlying carrier or to another provider. We recognize, however, that
some participants in the E-Rate or RHC programs may need to seek new
bids for services and/or equipment, and the SDO should provide a
sufficient transition period for this to occur.
Transitions and Continuations
Under the Guidelines, a program participant may choose to continue
with an excluded entity ``if the transactions were in existence when
the Federal agency excluded the person.'' The NPRM requested comment on
that approach as well as on whether continuation should be permitted
under those programs in which beneficiaries are receiving services on a
month-to-month (or similarly short term) basis. We explained in the
NPRM that section 180.310 of the Guidelines, if adopted, would
constitute a significant change from policies currently in effect for
the E-Rate program that preclude the distribution of any USF funds to
debarred entities or entities that have violated program rules. For the
reasons explained below, we conclude that the continuation policies set
forth in section 180.310 of the Guidelines, and the related provisions
contained in sections 180.315(a) and 180.415, should not be applied to
the programs subject to this Report and Order. We instead adopt a
presumption that the SDO require beneficiaries receiving services from
an excluded provider to transition to new providers, subject to limited
exceptions described below. To ensure consistency in eliminating bad
actors from program participation, whether as participants or
principals, we conclude that the related continuation policies set
forth in section 180.315 of the Guidelines should not be applied to the
programs subject to this Report and Order and that participants should
promptly secure the services of other principals (if needed) for their
covered transactions in order to maintain the integrity of Commission
programs.
The rules we adopt on transitions and continuations reflect our
experience with current rules in the E-Rate or RHC programs that
require beneficiaries to change providers after an exclusion or
findings of rule violations. Further, in most of our programs there are
alternative providers to whom beneficiaries can transition, whether for
telecommunications or other services from participants or ancillary
services from principals. For example, for participants (e.g.,
beneficiaries, consultants, and service providers) who are resellers,
we expect that there will be an underlying carrier that may be able to
continue providing services to customers and end-users. We note that
some principals, such as consultants or management companies, may be
providers of services for whom, in our experience, substitute providers
should be readily available. Other principals such as officers,
directors, or program managers, may be internal to organizations. In
such cases, an exclusion would require that the organization remove
those excluded persons from any role and duties in covered transactions
(including oversight responsibilities) and transfer their duties for
such transactions to other individuals as may be needed.
Additionally, many of the Lifeline consumers receive service on a
month-to-month basis. If we were to treat such relationships as long-
term contracts under sections 180.310 and 180.315 of the Guidelines, in
practice any exclusion would become meaningless because excluded
providers could continue to provide service indefinitely. That is not
an acceptable outcome. Further, in most service areas there are
multiple providers of these services such that consumers can readily
find alternative providers.
Therefore, for both suspensions and debarments, we will continue
and extend to all programs subject to this Report and Order the
practice of requiring alternative providers and other mitigation
measures to help transition customers and end-users from an existing,
excluded provider to alternative providers. We recognize, however, that
for some programs, the availability of alternative providers may be
limited or longer transition periods may be necessary. We therefore
grant authority to the SDO to both fashion reasonable transition
periods that protect beneficiaries from loss of services and also to
grant exceptions pursuant to Supplemental Rule 6001.125 for that
purpose subject to administrative agreements (such as compliance
agreements) and agency oversight as appropriate. The SDO's
determinations on transitions and continuations should reflect the
overarching goal of the OMB Guidelines to protect program integrity by
limiting or eliminating program participation by bad actors, while also
ensuring continuation of services to beneficiaries. Funds for Learning
has advanced the premise that, ``[w]here at all possible, suspension
and debarment should not interfere with the continued receipt of
services to [the] . . . institutions and the communities they serve.''
Although this is an important consideration--and perhaps even a
critical one in certain circumstances--we must balance it with the need
to protect the public, including individual consumers, from waste,
fraud, and abuse that could result in deleterious effects for a
specific Commission program or group of programs.
In reaching these conclusions, we have carefully considered the
comments of SHLB-SECA, which recommended that beneficiaries such as
schools, libraries, and health care providers should have the option to
receive uninterrupted support from a suspended or debarred entity for
the duration of the contract, rather than being required to substitute
a new service provider through a service provider or Service Provider
Identification Number (SPIN) change, if allowable under state and local
procurement rules, or rebidding the contract or service. Funds for
Learning similarly encouraged us to ``allow participants to receive
service from a suspended or debarred entity for the duration of the
USF-supported contract or to substitute a new provider, whether the
services are on a fixed or on a month-to-month basis.'' Our experience
[[Page 18143]]
with service provider substitutions under our current rules, however,
persuades us that we can protect against service disruptions to
beneficiaries, including under the E-Rate and RHC programs, without
allowing excluded service providers to indefinitely continue to provide
services and receive support under these programs. The SDO shall be
responsible for determining the terms and conditions of any
transitional periods or, in rare cases, permit exceptions to allow for
continuations of a limited duration where, for example, no alternative
providers are presently available or transitioning to another service
provider will require additional steps (perhaps under state agency
requirements). We further direct the SDO to work closely with the
bureaus and offices responsible for the programs, as well as OGC, to
develop transition or continuation plans. Where appropriate, the SDO's
transitional terms might include compliance agreements, enhanced agency
oversight, and other safeguards designed to eliminate the potential for
further misconduct. The review of how exclusions will apply as to
agency procurement transactions in this regard shall be made by the
SDO, in consultation with the affected bureaus or offices, and with
OGC, on a case-by-case basis. Any compliance agreements will require
the approval of OGC.
To achieve these goals, the SDO first will need to closely evaluate
the particular services provided by the party and the availability of
alternate providers in the geographic areas served, the typical terms
of any contracts that may exist between the provider and its
beneficiaries, and any federal or state certification requirements
applicable in programs such as the NDBEDP or TRS program. If the SDO
determines that a continuation is necessary, the SDO shall fashion an
order (or provide for an administrative agreement) that ensures an
expedited transition to alternative providers; we emphasize that
transitions from excluded entities should be accomplished with all
deliberate speed in order to protect program integrity and remove bad
actors from our programs. The SDO shall require that during any
transitional period, the excluded providers continue providing services
to their beneficiaries consistent with our rules and with their
contractual obligations. In those cases where obtaining an alternative
provider may require new competitive bidding or provider
certifications, the SDO shall ensure that the transition period is
sufficient to allow for that process.
The equities as applied to marketing organizations, enrollment
representatives, or consultants who have been suspended or debarred
counsel that we adopt a different rule in that context. The SDO shall
require that those entities or persons immediately cease their
operations related to covered transactions. No exceptions or
transitional periods shall be permitted. Program participants shall not
have the option to continue doing business with such entities or
persons during the period of their suspension or debarment. In our
experience, there are many persons and organizations seeking to perform
such marketing and consulting services, such that service providers
should have ample options for securing replacement vendors. Further,
immediate discontinuation of such marketing and consulting services
will not have adverse effects on current customers or end-users of the
service providers and will help to avoid an excluded actor continuing
to benefit under our programs.
Additionally, we acknowledge that the NDBEDP and TRS programs
present unique circumstances for the SDO to consider in our transition
and continuation framework. We note that the Commission certifies a
state TRS program for each state, and each state program manages TTY-
to-voice TRS, Speech-to-Speech Relay Service, and analog Captioned
Telephone Service within the state. Generally, each state program
contracts with one provider to offer service within the state, although
states have the option to contract with different providers for the
different forms of TRS, and states also have the option to contract
with multiple providers of the same service or services. Because state
programs are subject to the Commission's mandatory minimum standards,
and the Interstate TRS Fund, which is overseen by the Commission, is
responsible for payment of the interstate minutes originating in any
given state, suspension or debarment of a provider that is contracted
by a state program would effectively debar that provider from serving
the state. If the contract provider in a state is debarred from
providing service, the state program would need to contract with a new
provider to maintain the state program's eligibility under the
Commission's mandatory minimum standards. Thus, for example, because
only a single NDBEDP provider is certified to serve each geographic
area, suspended or debarred NDBEDP service providers may need to
continue to provide services to program participants, with appropriate
safeguards as directed by the SDO, until another entity is certified to
operate within the respective jurisdiction. To facilitate the
transition to another provider, the Consumer and Governmental Affairs
Bureau (CGB) should request an NDBEDP certified entity that has been
suspended or debarred to voluntarily relinquish its certification
within a deadline and explain that if the entity does not voluntarily
relinquish its certification, then a revocation proceeding pursuant to
47 CFR 64.6207(h) will be initiated. Similarly, if a TRS provider is
suspended or debarred and is the only entity offering a particular form
of TRS in a jurisdiction, an alternative provider will need to be
certified by the Commission or contracted by a state TRS program to
provide those services.
Under those circumstances, we anticipate that the SDO will allow a
suspended or debarred TRS provider to continue to provide services to
program participants until another entity is certified by the
Commission or contracted by the relevant state TRS program to provide
the form of TRS involved. The Commission will expedite its
certification review to the maximum extent possible to facilitate a
rapid transition to an alternative provider and will encourage the
state authorities to act similarly. Further, the Commission will follow
its current notice and hearing process for suspending or revoking a TRS
provider certification or a state TRS program certification. These
procedures will ensure that any exclusion action is implemented
consistent with applicable Commission rules to safeguard Commission
programs and program beneficiaries' needs.
We anticipate that transitional periods to alternative providers
will vary from program to program, and the SDO will need to take
individual circumstances into account. In extraordinary situations
where alternative providers cannot be identified as quickly as
initially anticipated, the SDO may permit a continuation beyond the
initial transition period, but any extended transition should be
limited and as short as feasible. After the SDO determines the length
of the initial and any subsequently extended transition period, the SDO
shall require excluded providers to send timely notices to affected
customers and end-users of the need to transition to alternative
providers.
Notices to affected customers or end-users should include: (1) a
statement that the participating provider has been suspended or
debarred; (2) a statement that the provider will continue to
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provide services until the date certain as specified in the suspension
or debarment order; (3) a statement that users should obtain service
from another provider; and (4) a listing of the names and contact
information for other providers authorized to supply that service in
the jurisdiction. In evaluating transition periods and notice
requirements, especially for the Lifeline program, the SDO should also
consider any transition and notice provisions that the Commission has
previously adopted.
The SDO, in consultation with the bureaus, should also take
appropriate steps to ensure that a suspension or debarment is
implemented in a manner consistent with existing Commission
requirements and the needs of program beneficiaries.
Interagency Reciprocity
Under the Guidelines, an agency's determination to exclude an
entity from its program is afforded governmentwide reciprocity; that
is, an entity that is suspended or disbarred by another federal agency
is automatically suspended or disbarred from the Commission's
nonprocurement and procurement programs. However, the Guidelines also
permit an excluded entity to petition the agency for an exception to
the governmentwide exclusion. The NPRM explained that adoption of the
Guidelines could trigger the suspension or debarment of persons or
entities that currently participate in the Commission's programs
through governmentwide reciprocity. The NPRM requested comment on
whether there were any program participants currently excluded by
another agency, and, if so, whether they proposed any modifications or
supplemental rules to allow them to continue to participate in
Commission programs.
The NPRM also requested comment on how a person excluded by another
agency should advise the Commission of the exclusion and request an
exception to reciprocity. The NPRM further asked if the Commission
should be required to act within a certain period after receiving such
a request and whether the agency should issue exceptions, if
appropriate, through a negotiated agreement that would include
mandatory independent audits, additional reporting requirements, or
similar forms of oversight. The NPRM requested comment on how the
Commission will provide information regarding entities suspended or
debarred by the Commission to the governmentwide Systems of Awards
Management Exclusions (<a href="http://SAM.gov">SAM.gov</a> Exclusions). We received no comment on
these requests.
We generally adopt the Guidelines' reciprocity rule; entities
excluded by the Commission SDO will be excluded from nonprocurement
programs governmentwide, and entities excluded by other federal
agencies' SDOs will be excluded from the Commission's nonprocurement
programs subject to this Report and Order. Additionally, we adopt with
modifications our proposed supplemental rules on exceptions to
reciprocity and explain the procedures necessary to ensure that the SDO
can appropriately evaluate whether and to what extent to grant
exceptions to exclusions issued by other agencies. Under Supplemental
Rules 6001.120(d) and 6001.125, we delegate authority to the SDO to
entertain petitions for exceptions from interagency reciprocity.
The procedure we adopt is a two-step process, consisting of a
preliminary review by the SDO and the SDO's subsequent exception
determination, if warranted. First, we require in Supplemental Rule
6001.120, as proposed in the NPRM, that FCC program participants or
principals excluded by another agency promptly notify the Commission
within ten business days after the participant has received notice of
the exclusion so that the Commission may consider this information in
connection with participation in the programs that the Commission
administers. We also require that any participant or principal who is
currently included in the <a href="http://SAM.gov">SAM.gov</a> Exclusion, based on conduct occurring
before the effective date of this rule, provide notice of such
exclusion to the Commission within 30 days after these rules become
effective. Such notifications shall be made by email and by letter to
the head of the bureau or office responsible for the program(s) in
which the excluded entity participates, the administrators of any
affected program, the Commission's General Counsel, and the
Commission's Managing Director. We delegate authority to OGC, in
consultation with these bureaus and offices, to revise these methods
where appropriate. Participants or principals excluded by other
agencies may temporarily continue with existing covered transactions
under FCC programs but may not enter into new transactions unless an
exception is granted. Such participants and principals must also comply
with any orders for transitions or limited continuations that the SDO
may issue.
When advised of an exclusion issued by another agency, the SDO
shall conduct a preliminary evaluation, upon the request of a
participant or an excluded person or an FCC bureau or office
responsible for administering the affected programs, to determine
whether to grant an exception based on factors such as when the
underlying misconduct occurred, when the other agency issued the
exclusion, whether the excluded person is a sole source provider of
services under an FCC program, and how much longer the exclusion will
remain in effect. The SDO shall consult with OGC and the bureaus and
offices responsible for administration of any affected programs or
covered transactions in making this determination. If no exception is
granted after the preliminary evaluation, the entity remains excluded
from Commission programs. The SDO will promptly notify the excluded
party and initiate informal proceedings on transitions to alternate
providers or limited continuations, if necessary. The notice shall
further state that the excluded party is immediately barred from
enrolling new customers or end-users in any Commission programs subject
to our suspension and debarment rules, may not enter into any new
covered transactions or provide services for a covered transaction, and
has 30 days to file a response in which the excluded person may seek an
exception from Commission reciprocity.
Requests for an exception from an exclusion issued by another
agency following a preliminary determination that no exception is
warranted must state the reasons for the requested exception and
provide any supporting evidence. After the informal proceedings are
concluded, the SDO will issue a decision that rules on any exception
request filed by the excluded person and may grant the exclusion only
if doing so is supported by a preponderance of the evidence. In any
event, exceptions should be granted only infrequently, particularly in
the context of the criteria that the SDO shall consider in evaluating
whether to permit an exception. If the exception request is not
granted, the decision will also set forth the appropriate transition or
continuation requirements applicable to the exclusion (including
customer notice requirements) consistent with Supplemental Rule
6001.310. The SDO will consult with OGC and the bureaus or offices
responsible for administration of any affected programs before issuing
these rulings. Any exceptions granted by the SDO may be subject to
appropriate conditions such as mandatory audits, additional reporting
requirements, compliance agreements (with approval of OGC), monitoring,
or
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any other forms of effective oversight supplemental to that already
provided under FCC programs.
We believe that the procedure we have created for the SDO to
consider how to implement reciprocity creates sufficient opportunity
for the party excluded by another agency to participate in this
process, and we modify our proposed supplemental rule. We also require
a participant that is not already registered with <a href="http://SAM.gov">SAM.gov</a> to do so
within 10 days of the date that its suspension or debarment becomes
effective. We note that the timing of this registration requirement
will differ in cases of suspension, which generally becomes effective
when first imposed, and debarment, which becomes effective only when
the SDO issues a final decision at the close of the proceedings.
Alternative Remedies or Settlements
We also adopt potential alternative remedies within the suspension
and debarment framework to resolve these proceedings without resorting
to an exclusion, if appropriate. The Guidelines allow agencies to
settle exclusion actions when it is in the best interest of the
government and specifically authorize the use of administrative
agreements as the settlement framework. The NPRM invited comment on
whether the SDO should have authority to tailor exclusions for
particular circumstances or propose remedies in lieu of exclusion. The
NPRM asked commenters to address whether the SDO should impose
alternative remedies after consulting with appropriate bureau and
office staff with knowledge of how entities are certified (in the case
of TRS or NDBEDP) or how alternative remedies might impact delivery of
services to beneficiaries. The NPRM also asked what types of
alternative remedies should be considered, how such remedies should be
fashioned, and when alternative resolutions might be appropriate.
There was consensus in the record that the SDO should have
authority to fashion settlements (often referred to as administrative
agreements in the suspension and debarment context) short of imposing
exclusions. Moreover, the Interagency Suspension and Debarment
Committee (ISDC) encourages agencies to use administrative agreements,
which are increasingly being imposed as alternatives to exclusion.
We agree and adopt a modified supplemental rule on alternative
remedies to suspension and debarment that will include administrative
agreements, as contemplated by sections 180.635 and 180.650 of the
Guidelines. The modified rule we adopt, however, recognizes that OGC
possesses substantial expertise in designing administrative agreements
(including compliance agreements under our programs). We require that
the SDO consult and coordinate with OGC in structuring any
administrative agreements and require the approval of OGC before they
may be adopted. In addition, under the rules we adopt, administrative
agreements may not: (i) impede or impair the Commission's authority to
seek full recovery under its debt collection authority of any improper
payments made to the settling party; or (ii) purport to resolve any
claims the Government may have against the settling party, such as
pending NALs issued by the Enforcement Bureau or causes of action under
the False Claims Act or other similar laws or common law claims.
Similarly, should a party propose a ``global'' settlement with the
Government on matters before the SDO and pending in other forums, then
such a settlement would require the participation and approval of all
relevant decisionmakers at the Commission, the Department of Justice,
and any other agencies or entities involved, as appropriate.
We also agree with WISPA and SHLB-SECA that the SDO should
determine whether an administrative agreement is the appropriate remedy
on a case-by-case basis. We note, as described by the Joint Association
Commenters, that one factor that could weigh in favor of resolution
through administrative agreement is a participant's ``self-report[ing]
an issue to the FCC,'' depending on the circumstances (e.g., the
severity of the violation or misconduct, and whether it was reported
promptly and remediated when discovered). Based on the record, we also
find that administrative agreements are most effective if, in addition
to training and compliance obligations, they require reporting,
auditing, and/or independent monitoring.
Period of Debarment
The typical debarment period under the Guidelines is not more than
three years, but may be adjusted based on the ``seriousness of the
causes'' for debarment and evaluation of the factors listed in the
Guidelines. Further, a debarred person may ask the SDO to reconsider
the debarment decision or to reduce the time period of the debarment.
The NPRM asked whether we should adopt the standard debarment period
and whether there are additional mitigating factors beyond those set
forth in the Guidelines that may warrant a reduction in the debarment
period, including the absence of an alternative service provider or the
participant's post-debarment adoption of compliance agreements. Based
on the record, we adopt the standard three-year debarment period under
section 180.865 of the Guidelines, which provides the SDO with
flexibility to consider adjustments. We also find that a debarred
participant may submit a petition under sections 180.875 and 180.880 of
the Guidelines for a reduction of the debarment period based on, among
other things, the absence of other service providers or the
participant's post-debarment adoption and satisfactory implementation
of appropriate compliance agreements.
The NPRM additionally asked whether schools, libraries, and health
care providers should be treated differently from other USF
participants with respect to the period of debarment. SHLB-SECA stated
that it is ``absolutely necessary'' to do so because such institutions
are not ``commercial enterprise[s]; these are the non-profit
organizations that the FCC's programs were designed to benefit.'' As we
have already made clear, the SDO will consider the totality of the
circumstances, such as the effect of debarment on the broader public
interest, including on the beneficiaries of FCC programs. All of the
FCC programs that will be subject to these suspension and debarment
rules are intended, ultimately, to benefit unserved or underserved
populations--regardless of the type of entity or individual obtaining
program services, but all participants must also conduct their business
in a manner designed to prevent waste, fraud, or abuse.
The NPRM also requested comment on a proposed rule that would
permit the SDO to determine that a participant's conduct was so
egregious as to require it to petition for readmission to Commission
programs. We received no comments on this proposal and now adopt the
proposed readmission rule. Although we expect that the SDO will not
regularly rely on this option, we find that, in the appropriate
situation, it will protect the public interest by adding an additional
opportunity for review before permitting the worst actors from
returning to FCC programs. Where a petition for readmission is
required, the debarred party as petitioner must demonstrate that it has
implemented sufficient remedial actions to avoid future program
violations. These requirements
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shall apply regardless of any change of ownership of an excluded
entity. If the entity fails to file a required petition or if the
request is denied, the SDO may extend the debarment for an additional
period under section 180.885 of the Guidelines in order to protect the
public interest.
Additional Process Considerations
We resolve several additional procedural questions that the
Commission raised in the NPRM to ensure that implementation of any new
rules would be efficient and fair. In their comments, parties also
offered proposals for other improvements or modifications which we
address in this section.
Appointment and Designation of the SDO. Under our legacy rules, the
Enforcement Bureau has authority to resolve universal service
suspension and debarment proceedings. The NPRM requested comment on
whether we should revisit that delegation given our proposal to
significantly expand the scope of the Commission's suspension and
debarment rules. Specifically, the NPRM asked whether the Chief,
Enforcement Bureau (or designee) should serve as SDO, and, if so,
whether it would be appropriate for that person to conduct proceedings
in which the individual was involved in any capacity. The NPRM also
asked whether persons other than Enforcement Bureau personnel should be
considered for appointment as SDOs, and, if so, to specify their
qualifications, identifying the Managing Director as one possible
alternative. Additionally, the NPRM asked if the SDOs should be subject
to appointment for a specific term, or whether they should be subject
to removal by the Commission at will--and whether the Supreme Court's
decision in Lucia v. SEC, 138 S. Ct. 2044 (2018), limited the
appointment of SDOs. Ultimately, the NPRM explained that our primary
goal is for the official to be neutral, but explained that suspension
and debarment proceedings are not adjudications subject to the
Administrative Procedure Act's (APA) formal hearing provisions that
prohibit agency staff from performing both prosecutorial and decisional
activities. We adopt an approach under which a Commission-appointed
official, the SDO, will preside over suspension and debarment
proceedings under delegated authority.
Commenters generally supported our proposal that the official
should be neutral. The Joint Association Commenters and SHLB-SECA
argued that, to ensure such neutrality, the Commission should house the
SDO within the Office of the Managing Director (OMD) or OGC and/or
should establish clear demarcations between the suspension and
debarment function, on the one hand, and the enforcement and program
administration functions, on the other. Mr. Meunier agreed that such
separation is ``desirable,'' although not required as a matter of due
process. Mr. Meunier and SHLB-SECA also urged that the SDO must have
sufficient background, knowledge, and expertise with the highly complex
rules underlying USF, TRS, and other federal programs to avoid lengthy
delays and erroneous findings and conclusions. And finally, one
commenter, E-Rate Central, opined that appointment of the appropriate
SDO might ``depend upon the remedial action contemplated.''
As the foregoing makes clear, while commenters generally agreed on
the principle that the SDO should be ``neutral'' and have relevant
expertise, they did not coalesce around any specific proposal. We agree
that the SDO's decisions should be informed by the relevant subject
matter experts within the Commission, and we permit the SDO to draw
upon and apply expertise from the pertinent bureaus and offices.
The Commission will designate an individual to serve as the SDO. It
is not yet clear what demands the Commission will face in terms of
staffing, resources, and time on an annual basis in connection with
suspension and debarment proceedings. Therefore, we decline to adopt
any of the other specific proposals regarding an SDO's appointment at
this time. Rather, to enhance administrative economy and preserve
flexibility to better serve the public interest in light of future
staffing resources and enforcement demands, we anticipate that the
Commission will address the agency's organizational needs and practices
when making the SDO appointment.
To the extent that commenters question a bureau or office's
objectivity to handle exclusion or LDP proceedings, we disagree. It is
our experience that bureaus and offices routinely work together to
administer the Commission's existing suspension and debarment rules in
an objective manner, and we anticipate and expect that such efforts
would continue. We delegate authority to the Office of General Counsel,
in consultation with the Office of the Managing Director, the
Enforcement Bureau, the Wireline Competition Bureau, and the Consumer
and Governmental Affairs Bureau to revise existing delegated authority
rules to accommodate this planned shift in responsibilities.
Pre-Notice Letters. We permit the use of pre-notice letters, as
numerous commenters urged. According to the ISDC, these letters
``include show cause letters, requests for information, and similar
types of letters'' and ``are used to inform an individual or entity
that the agency suspension and debarment program is reviewing matters
for potential SDO action, to identify the assertion of misconduct or
the history of poor performance, and to give the recipient an
opportunity to respond prior to formal SDO action.'' CTIA and USTelecom
suggested that such letters should be required. The Joint Association
Commenters, in contrast, noted that pre-notice letters are generally
beneficial and should be used ``whenever possible,'' while NCTA
acknowledged they may not be appropriate in response to ``egregious
conduct.'' We agree that pre-notice letters may be a useful tool in
appropriate circumstances, for example, if it is clear that the
misconduct at issue should be resolved through an administrative
agreement. We decline, however, to require their issuance in all cases.
CTIA and USTelecom did not identify any agency that has made pre-notice
letters mandatory, and we find that doing so could harm the public
interest by preventing the Commission from moving quickly when
necessary to protect our programs and their beneficiaries.
Imputation of Conduct. The Guidelines' imputation rule allows the
agency to impute conduct from an individual to an organization, from an
organization to an individual, among individuals, or among
organizations in appropriate circumstances. The NPRM noted that the
rule allows us to ``plug a gap in the Commission's current suspension
and debarment mechanism.'' We now adopt the Guidelines' imputation rule
as proposed, which will afford us greater flexibility in responding to
misconduct.
Some commenters expressed concern about the imputation of conduct
under the Guidelines and recommended possible limitations or
modifications. One commenter, E-mpa, also objected to any imputation,
arguing that suspension or debarment of an entire company as a result
of bad conduct by only a few individuals could cause undue hardship to
all those at the company whose conduct was not improper. Such an
argument, however, misses the critical point that where bad conduct
exists, our obligation is to protect our programs and program
beneficiaries, and in many cases any potential harm to the company or
its ``good actors'' will be greatly outweighed by the harm that
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such firms can cause to our programs and beneficiaries. Further, E-mpa
fails to recognize that the Guidelines' imputation rule is permissive,
not mandatory--it sets forth when an agency ``may'' impute conduct--and
permits the SDO to take individual facts into account on a case-by-case
basis. We also find commenters' other concerns with the Guidelines'
imputation rule unpersuasive. Specifically, SHLB-SECA urged that
imputation from an individual to an organization should require the
organization's knowledge, approval, or acquiescence. While we generally
agree that imputation from an individual to an organization will be
most appropriate based on the latter's knowledge, approval, or
acquiescence, there may be other scenarios where imputation is
appropriate due to an organization's inadequate supervision or
oversight. We also reject the recommendation of CTIA and USTelecom to
limit imputation to an organization only where an individual acts
within the scope of his/her employment; such a limitation would
emphasize form over substance and fail to capture scenarios where an
organization has knowledge of, and benefits from, an individual's
misconduct that is outside of his/her scope of employment.
We also note that neither of the EPA decisions cited by CTIA and
USTelecom suggests that imputation is appropriate only when an
individual acts within the scope of his/her employment. In the All Out
Sewer and Drain Service decision, the debarring official made passing
reference to the fact that the individual ``was acting within the scope
of his agency'' and ``duties'' for the company, but the debarring
official did not state or suggest that this fact was necessary to his
analysis. So too in Michael J. Conrad, the debarring official quoted a
representation from a plea agreement that the individual was ``acting
within the scope of employment for the benefit of the corporation.''
But this fact is not referenced or cited as relevant to the debarring
official's imputation from the organization to the individual.
Finally, NCTA's concern--that the imputation rule could trigger
strict liability for a provider based on actions by a third party not
within the provider's control and that the provider made good-faith
efforts to identify--is misplaced. Section 180.630 permits (without
requiring) imputation in such scenarios, and the provider may
demonstrate why the SDO should not impute liability.
Presentation of Evidence. The NPRM requested comment on several
evidentiary procedures, including who should provide information
supporting suspension or debarment to the SDO in an exclusion
proceeding. The NPRM proposed that where the Office of Inspector
General (OIG) has conducted the underlying investigation supporting the
suspension and debarment, it should have primary responsibility for
providing the information, because it would be the entity most familiar
with the underlying facts. In other situations, the NPRM proposed, it
might be appropriate for the presentation to be made by the other units
within the Commission that may have conducted the investigation, such
as the Enforcement Bureau, with input from the bureau most responsible
for the implementation of the relevant program, who may inform how to
implement suspension or debarment without adversely impacting the
persons or entities the programs are designed to assist. We received
minimal comment on this issue. SHLB-SECA agreed that an exclusion
proceeding generally should involve the participation of the bureau
responsible for the relevant FCC program to leverage its institutional
memory and expertise. Consistent with the Guidelines' direction that
suspension and debarment proceedings should be ``informal,'' and with
the analysis of Mr. Meunier that the SDO exercises ``managerial
decision functions,'' we authorize in Supplemental Rule 6001.445 that
the SDO in each proceeding designate a Commission unit primarily
responsible for sharing relevant materials with the SDO to inform the
SDO's decisionmaking and, where necessary, establish coordination
procedures for other bureaus or offices to participate.
Reconsideration, Review, and Appeal. The Guidelines are generally
silent on procedures for review of the SDO's decisions. The NPRM
proposed that a determination by the SDO should be subject to
reconsideration under section 405 of the Communications Act or an AFR
filed under section 155(c)(4) of the Act, and requested comment on
whether it would be appropriate or necessary to adopt any supplemental
rules regarding appeals and review. The NPRM also requested comment on
whether there should be specific timeframes for appeals and requests
for review, and which standard and timeframe should apply to related
stay requests.
Commenters generally agreed that we should provide certainty with
respect to the mechanisms, standards, and timeframes for
reconsideration, review, and appeal of suspension and debarment
decisions. For instance, CTIA and USTelecom requested that we specify
both the process and timelines for review and that we authorize direct
judicial review of SDO decisions, subject to a shot-clock. The Joint
Association Commenters recommended that we establish clear timeframes
and due process protections for suspension and debarment proceedings,
also urging that once the SDO issues a decision, a provider should be
allowed to seek direct judicial review. NCTA agreed that the Commission
should establish a set of clear timeframes for action by the SDO, as
well as review of those decisions by the full Commission. Mr. Meunier
stated that with respect to appeals, the Guidelines have no
requirements ``but agencies that wish to do so may include an avenue of
internal agency appeal,'' noting that EPA provides a ``restricted
option'' for an appeal officer to reverse a suspension or debarment
only where the SDO ``based the decision on an error of fact or law, or
abused his or her discretion.''
To provide for additional opportunities for review consistent with
the Communications Act and our rules, we adopt procedures for review of
SDO decisions and permit reconsideration, review, and appeal as
follows. First, we reject proposals to allow direct judicial review of
SDO decisions. Indeed, the Communications Act itself precludes such
review. Moreover, we separately find that an aggrieved party will have
an adequate opportunity to seek judicial review of a suspension or
debarment decision after exhausting our procedures, which afford
significant due process protections.
Second, we clarify that a suspended party may seek reconsideration
and/or Commission review only after the SDO has issued a final
suspension decision under section 180.755 of the Guidelines. (Such
filings remain subject to the Commission's other, more general legal
requirements.) Although a suspension is effective on the date the SDO
first signs a suspension order (the initial suspension decision), under
our supplemental rules, that initial decision shall only prevent the
suspended party from enrolling new customers or otherwise entering into
new covered transactions. After receiving notice of the initial
suspension decision, a provider has an opportunity to respond and
participate in an informal proceeding, after which, the SDO issues a
suspension decision with written findings of fact (the final suspension
decision). We find that, consistent with our rules and precedent, a
party may not file a petition for reconsideration (PFR) or an AFR of
the initial suspension decision. These decisions are not amenable to
PFR because they are interlocutory. They do not mark the
[[Page 18148]]
consummation of the suspension decisionmaking process. The Joint
Association Commenters seek to justify a PFR of the initial decision by
asserting that ``the decision of the SDO regarding a proposed
suspension or debarment should contain specific findings of fact and
law as well as the SDO's reasoning for such findings to provide a clear
record in the event of an appeal.'' But unlike the requirements for
final decisions, the Guidelines and supplemental rules that we adopt in
this Report and Order do not require the SDO to include such findings
in an initial suspension decision or proposed debarment. As a result,
reconsideration of the initial suspension would not be appropriate at
this early stage of the process. Initial suspension decisions are
likewise not conducive to AFR, because any issues presented to the
Commission in an AFR must be first raised with the entity acting on
delegated authority--which cannot have occurred at this point in the
suspension process.
In contrast, a party may seek reconsideration (if necessary) or
Commission review (when otherwise permitted) of a final suspension
decision only where the party has responded to the initial suspension
decision. If a party does not oppose the initial suspension, however,
the party waives the right to challenge the final suspension decision.
As we proposed in the NPRM, and consistent with section 405 of the Act,
a final suspension decision is not interlocutory, because it marks the
consummation of the suspension process. Because the Guidelines do not
expressly provide for reconsideration of suspension decisions, and to
eliminate any ambiguity, we hereby adopt a supplemental rule expressly
permitting reconsideration of final suspension decisions in accordance
with section 1.106 of our rules. We note further that like other
decisions on delegated authority, a participant may seek Commission
review of a final suspension decision when otherwise permissible under
the Act and our existing rules.
Third, we agree with commenters that reconsideration and Commission
review of suspension decisions should be subject to reasonable
timelines. Indeed, the Guidelines already establish timelines for an
SDO to complete the exclusion process and issue a final, written
decision. To those ends, we also reject the request of INCOMPAS to
implement a 90-day constructive denial rule as inconsistent with the
Guidelines. And we agree with commenters that absent a clear timeline
for reconsideration, review, and appeal, there is a possibility that
suspension and debarment proceedings, including appeals, will be
lengthy. We thus adopt rules directing the SDO to resolve any PFR of a
final suspension decision within 45 days, which the SDO may extend for
good cause, and the Commission to endeavor to resolve any AFR of a
final suspension decision within 180 days. We note several commenters
raised concerns regarding practices by USAC related to the timing of
administrative processing. We conclude that these comments address
issues that are outside of the scope of this rulemaking and reject
them. We note, of course, that commenters may raise these concerns in
an appropriate open proceeding or may propose changes to our rules
through a petition for rulemaking.
Fourth, we conclude that a final suspension decision is a non-
hearing order that resolves an informal proceeding. As such, the
decision is subject to a permissive stay contemplated by Sec. 1.102(b)
of our rules. We remind participants that a permissive stay is an
extraordinary remedy. Consistent with Commission policy for evaluating
stay requests, the decisionmaker (whether the SDO or the Commission)
will consider the four criteria set forth in Virginia Petroleum Jobbers
Association: (1) whether the requesting party is likely to succeed on
the merits; (2) whether the requesting party will be irreparably
injured without a stay; (3) the degree of injury to other parties if
relief is granted; and (4) whether a stay is in the public interest. We
decline to adopt an automatic stay when the decisionmaker fails to
issue a decision on the stay request within a prescribed timeframe. We
likewise do not agree that the filing of an AFR should trigger an
automatic stay. We find that such procedural steps are unnecessary
given the timelines we adopt for reconsideration and review.
Fifth, we generally adopt the same rules and standards for
reconsideration, review, and appeal of debarment decisions. Unlike
suspensions, debarments become effective after the SDO issues a final
debarment order. Accordingly, we adopt the Guidelines' reconsideration
rule for debarments and also clarify that any debarment decision may be
subject to an AFR under Sec. 1.115 of our rules. And, as with
suspension decisions, we clarify that a debarment is a non-hearing
order subject to a permissive stay under Sec. 1.102(b) of our rules.
Limited Denial of Participation
We adopt an additional remedy to supplement the suspension and
debarment framework adopted herein. In the NPRM, the Commission asked
whether we should adopt a mechanism similar to a process utilized by
the U.S. Department of Housing and Urban Development (HUD), which
provides for a ``limited denial of participation'' as an alternative to
suspension and debarment. (72 FR 73484, 73487 (Dec. 27, 2007)). Many of
the procedures governing this mechanism resemble those under the
Guidelines for suspensions or debarments, but HUD's LDP does not
trigger inter-agency reciprocity because the LDP is not part of the
governmentwide suspension and debarment system. Therefore, under HUD's
regulations, imposing an LDP prevents a bad actor from continuing to
participate in the particular program(s) and/or geographic region(s)
that prompted the limited exclusion, but does not result in the party's
placement on the <a href="http://SAM.gov">SAM.gov</a> Exclusions triggering governmentwide
reciprocal exclusions. HUD's rules also offer flexibility by permitting
the agency to initiate a suspension or debarment while an LDP is
ongoing if the SDO thereafter determines an exclusion is more
appropriate. The NPRM requested comment on whether the Commission
should adopt the LDP mechanism and, if so, what standards might be
appropriate for its use.
We find that an LDP will increase the agency's flexibility to
protect its programs from actors whose conduct is concerning, but which
does not warrant suspension and debarment. Additionally, the LDP
mechanism we adopt will provide additional due process protections
beyond those proposed in the NPRM by requiring that before an LDP may
be issued, the alleged wrongdoer must first be provided with notice and
an opportunity to be heard. Similar to HUD's LDP, a Commission-issued
LDP will not have governmentwide effect, but will apply only to FCC
activities.
Applicability
LDPs shall be available as a remedy for misconduct arising from any
agency programs subject to our suspension or debarment rules.
Commenters did not recommend a more expansive scope, and we have
concluded that there is no need to broaden the scope of LDPs. Further,
as proposed in the NPRM, we conclude that a denial of participation
need not be limited to the program where the misconduct occurred, but
may be extended by the SDO to any other Commission programs subject to
LDPs, depending on the facts and circumstances of the case. For
example, if the misconduct involves a violation of competitive bidding
requirements in the
[[Page 18149]]
E-Rate program, the action may warrant a denial of participation from
another program involving competitive bidding, such as the Rural Health
Care program. The SDO should make these determinations based on the
unique circumstances of each case, and in coordination with all
relevant bureaus and offices.
Commenters generally supported our adoption of an LDP. For example,
SHLB-SECA ``firmly support[ed]'' our use of an LDP ``as a parallel,
more flexible alternative to suspension and debarment.'' According to
SHLB-SECA, an LDP ``could be put to good use to counteract the one-off
bad conduct of participants with no history of the same, similar, or
other misconduct . . . .'' SHLB-SECA further explained that an LDP
would not be the appropriate remedy ``where there is evidence of
substantial wrongdoing'' but could be an effective tool to incentivize
participants ``to respond to information requests and other
directives,'' provided that appropriate procedural protections are
maintained. E-Rate Central agreed that an LDP could provide the
Commission ``with a useful investigative tool while at the same time
providing greater transparency and due process for targets of an
investigation.'' We largely agree with these views regarding the
benefits of an LDP, but we emphasize that the Commission remains free
to rely on other investigative tools to ensure compliance with the
Commission's information requests and other directives.
Some commenters also requested that we adopt additional limitations
on the imposition of this remedy. The Joint Association Commenters
noted that the Commission can avoid ``continuity of service concerns''
by restricting the imposition of LDPs to new awards in affected
programs, and by not covering existing contracts or customers. SHLB-
SECA agreed and also urged that the LDP rules should incorporate due
process protections. The Joint Association Commenters and SHLB-SECA
also both recommended that an LDP should be imposed for a shorter
period than a suspension and should not affect existing customers or
awards. Finally, CTIA and USTelecom generally did not oppose adoption
of an LDP, but suggested that it should not be imposed based solely on
an assessment that a program applicant's participation in the program
poses an ``unsatisfactory'' risk, as proposed in the NPRM.
The LDP mechanism we adopt in this Report and Order affords the SDO
the flexibility to fashion the appropriate remedy based on the facts
and circumstances of each case. We therefore decline to limit LDPs to
cover only new awards in the program(s) in which the misconduct
occurred as some commenters suggested. This remedy is similar to one
adopted by HUD, which does not limit LDPs in this fashion, and there
may be instances where it is in the public interest for an LDP to
impact a provider's existing contracts or customers or participation in
other FCC programs. We note, however, that the SDO should consider
service disruptions and other customer-facing effects when determining
the scope of an LDP, as it bears on the best interests of the federal
government. Likewise, to the extent that an LDP could impact existing
contracts or customers, the SDO should provide for transitions or
continuations of services in a manner similar to what we have adopted
in this Report and Order for suspensions or debarments to ensure that
any service disruptions are mitigated. Given the limited scope and
duration of the LDP, as well as the possibility that the SDO will adopt
remedies designed to bring the subject of the LDP into compliance with
the Commission's rules, we anticipate that it will be less likely that
existing customers will need a different service provider.
Causes and Factors
We adopt, with several modifications, the proposed rule on LDP
causes set forth in the NPRM. In evaluating whether to issue an LDP, we
conclude that the SDO should consider the totality of the
circumstances, the factors set forth in section 180.860 of the
Guidelines, and such additional factors as whether the misconduct was
an isolated occurrence, how egregious the misconduct was, and whether
the violator promptly and fully self-reported or otherwise took
concrete steps to come into compliance. This analysis is somewhat
similar to what the Commission undertakes in the context of
forfeitures.
We conclude, and commenters agree, that it is in the public
interest to provide the agency with discretion to implement a remedy
most appropriate for the misconduct at hand. We clarify in Supplemental
Rule 6001.1103(a), however, that if the alleged misconduct involves any
of the causes set forth in section 180.800(a) of the Guidelines, or the
filing of a criminal indictment or information or a conviction or
evidence of fraud, the presumption shall be that a suspension will be
the more appropriate remedy. In addition, we adopt Supplemental Rule
6001.1105(a), but clarify therein that only misconduct in those FCC
programs subject to the LDP remedy may trigger the LDP remedy. Limiting
those causes to conduct in programs subject to the LDP remedy is a
conforming change reflecting our decision that LDPs shall be available
as a remedy only for those agency programs for which a suspension or
debarment could be sought.
Finally, we do not agree with CTIA and USTelecom that one of the
enumerated LDP causes--permitting LDPs on the basis of a provider's
``unsatisfactory risk''--is impermissibly vague or overbroad. To the
contrary, our approach is consistent with the Guidelines, which permit
suspension and debarment based on, among other things, an entity's
``unsatisfactory performance of one or more public agreements or
transactions.'' Furthermore, the Commission is required by
governmentwide guidance to manage risks in its programs.
Evidentiary Standard
We adopt an ``adequate evidence'' standard for an LDP consistent
with the evidentiary standard for a suspension under the Guidelines. We
also adopt two proposed rules that explicitly define circumstances that
constitute ``adequate evidence.'' First, an existing LDP related to any
Commission program shall constitute adequate evidence to enter a
concurrent LDP for any other Commission program(s). Second, filing of a
criminal indictment or information, regardless of whether it is based
on offenses against, or related to, the Commission, shall constitute
adequate evidence for the purpose of limited denial of participation
actions. While we adopt two per se rules, these are not the only
circumstances that may constitute adequate evidence.
Initiating a Proceeding
To preserve the flexibility of this remedy, an LDP proceeding may
be initiated in several ways. As with exclusions, the head of any
bureau or office that determines that an LDP would be appropriate based
on the causes and factors in Supplemental Rule 6001.1105 may refer the
matter to the SDO along with documentation supporting this remedy.
Following the referral, the SDO, after consultation with the relevant
bureau or office, shall determine whether an exclusion, an LDP, other
action, or no action is most appropriate. If the SDO determines an LDP
is appropriate, the SDO shall promptly provide any person subject to
the proceeding with notice that the LDP has been proposed. Such notice
shall specify the causes for the proposed limited denial of
participation, the potential effect of the remedy, including its
possible length and the FCC
[[Page 18150]]
program(s) and geographic areas (if relevant) impacted. The notice
shall explain the recipient's right to contest the proposed limited
denial of participation as provided under Supplemental Rule 6001.1113
by seeking a conference or providing documents in opposition, or both,
and state that the person has 15 days to respond.
An LDP may also be initiated if an SDO determines during a
suspension or debarment proceeding, after consultation with the
relevant bureau or office, that an LDP would be a more appropriate
remedy. The SDO shall provide notice to the respondent that the
suspension or debarment proceeding shall be suspended, and the record
for the suspension and debarment proceeding transferred to and
incorporated into the LDP proceeding. The imposition of an LDP,
however, does not alter the right of the Commission to suspend or debar
any person under this part if the SDO later determines that an
exclusion is warranted.
Administrative Agreements
We conclude that administrative agreements, including compliance
agreements, may be issued either to supplement an LDP or as an
alternative to an LDP to ensure that the SDO has maximum flexibility to
fashion the appropriate remedy. As in suspension or debarment
proceedings, administrative remedies may be implemented only after
consultation with the bureaus and offices responsible for the programs
in which the misconduct occurred, and compliance agreements shall
require consultation with and approval by OGC.
Period of Limited Denial of Participation
We also adopt our proposal that the SDO may impose an LDP for any
term up to twelve months, but we also permit the SDO to grant an
extension of an additional six months (not to exceed eighteen months in
total). Such an extension should be imposed if review of conduct during
the initial suspension period: (i) fails to demonstrate full compliance
with the terms of the LDP or any supplemental administrative
agreements; or (ii) shows other misconduct in any Commission program
subject to this remedy or additional new causes sufficient to support
extension of the LDP period. In addition, the SDO imposing the LDP may
also initiate a suspension or debarment proceeding (after consultation
with applicable bureaus) if review of conduct during the initial or
extended LDP period demonstrates conduct that may warrant a suspension
or debarment.
Additional LDP Process Considerations
In the NPRM, the Commission requested comment on several additional
process proposals and questions related to the proposed LDP mechanism.
In their comments, parties also offered proposals for other
improvements or modifications which we address in this section.
SDO Authority to Conduct LDP Proceedings. The NPRM proposed that
the authority to conduct LDP proceedings would reside with the bureaus
administering the relevant programs. However, after review of the
record, we agree with the Joint Association Commenters and conclude
that consolidating this authority under the SDO will provide a more
streamlined administrative mechanism and will promote consistency in
the application of this remedy. Consolidated authority will also allow
the SDO to more easily convert an LDP to an exclusion proceeding, or
vice versa, based on the alleged bad actor's conduct and the evidence
that the SDO reviews during the proceeding.
Converting an LDP Proceeding to a Suspension and Debarment
Proceeding. Just as an SDO may determine that a suspension and
debarment proceeding may be paused pending consideration of an LDP on
the same facts, if after an LDP has been initiated the SDO either
learns of new facts evidencing more serious misconduct than initially
suggested or learns of new misconduct, the SDO shall have authority to
initiate an exclusion proceeding if appropriate after consulting with
the relevant bureau or office.
We also adopt Supplemental Rule 6001.1121, as proposed in the NPRM,
to establish procedures to handle parallel proceedings in cases where a
subsequent suspension and debarment is proposed based on the same
transactions or conduct underlying the LDP. Under this rule, LDP
proceedings are stayed for 30 days so that respondents may contest the
proposed suspension or debarment. If the respondent contests the
proposed exclusion, the proceedings will be consolidated and the LDP
record incorporated into the exclusion proceeding.
We further emphasize that if the person or entity subject to an LDP
fails to comply with its terms (including those in any administrative
agreements), the SDO, after consultation with the bureaus or offices,
may initiate an exclusion proceeding. If the suspension and debarment
proceeding is initiated when an LDP is already in effect, the LDP shall
remain operative while the exclusion is contested. Where both
suspension or debarment and LDP proceedings are pending, the procedures
described in section 6001.1121 of the Supplemental Rules, as proposed
in the NPRM, shall be applicable.
Imputation of Conduct. We also adopt our proposed rule by which the
Commission may impute conduct in LDP proceedings in the same manner as
provided under section 180.630 of the Guidelines for exclusion
proceedings, which we have adopted in this Report and Order.
Covered Programs, Participant Tiers, and Disclosures
Scope of Covered Transactions
The Guidelines generally define ``non-procurement transactions'' as
``any transaction, regardless of type (except procurement contracts),''
including but not limited to grants, cooperative agreements,
scholarships, fellowships, contracts of assistance, loans, loan
guarantees, subsidies, insurances, payments for specified uses, and
donation agreements. Thus, procurement contracts awarded directly by a
federal agency would not be considered ``covered transactions'' under
the nonprocurement governmentwide guidance for suspension and
debarment. However, where non-federal participants in nonprocurement
transactions award contracts for goods or services, such contracts
would be deemed to be covered transactions if the amount of the
contract equals or exceeds $25,000. Notwithstanding this definition,
the Guidelines provide agencies with flexibility to determine which
nonprocurement transactions should be covered by their suspension and
debarment rules.
The Commission's primary nonprocurement programs have been the
Covered Programs. For example, in 2024, disbursements totaled $8.59
billion for USF programs, and $1.48 billion (projected) for the 2025-26
TRS Fund Year. Based in part on audits and reports by the Commission's
Inspector General, the NPRM proposed that all transactions under the
USF programs, TRS programs, and the NDBEDP be considered covered
transactions under any new rules, and that all other Commission
transactions be exempt from such rules. The NPRM, tentatively
concluding that application of the suspension and debarment rules to
these programs would improve the sustainability of their funding for
the benefit of those whom the programs
[[Page 18151]]
serve, requested comment on the benefits of applying the suspension and
debarment rules to the USF programs, TRS programs, and the NDBEDP. We
now adopt the tentative conclusions in the NPRM, for which there is
substantial support in the record.
The NPRM also requested comment on whether all transactions covered
by the Guidelines' definition should be included within the
Commission's suspension and debarment regime or whether some Commission
nonprocurement programs should be exempted because alternative remedies
(e.g., license revocation) may be more appropriate. The NPRM noted that
the Guidelines primarily, but not exclusively, focus on transactions
that involve a transfer of Federal funds to a non-Federal entity. The
Guidelines exclude from the definition of ``covered transaction'' any
``permit, license, certificate or similar instrument issued as a means
to regulate public health, safety or the environment,'' unless a
federal agency specifically designates it as a covered transaction.
Consistent with that framework, the NPRM proposed to exclude all other
transactions, such as applications for section 214 authorizations,
equipment authorizations, and broadcast and spectrum licenses issued by
the Commission. Similarly, the NPRM proposed to exclude all
transactions to or from licensees and those with spectrum usage rights
(except for those USF, TRS, and NDBEDP transactions where such an
entity is a participant), such as incentive auction payments or
repacking payments.
Commenters overwhelmingly supported the NPRM's proposal to apply
the Guidelines to the USF programs. Funds For Learning, the Joint
Association Commenters, and SHLB-SECA noted that the current suspension
and debarment rules for USF programs are too narrow or inflexible and
can impede the Commission's ability to safeguard its programs against
bad actors. E-Rate Central also generally favored ``the adoption of
more formal suspension and debarment rules'' for E-Rate transactions.
Commenters also expressed support for coverage of the TRS program and
the NDBEDP. We adopt our proposal to apply the modified Guidelines and
our supplemental rules to nonprocurement transactions under these
programs.
Commenters also generally supported excluding programs other than
the USF and TRS programs and the NDBEDP from coverage under any new
rules. For example, CTIA and USTelecom ``agree[d] with the Commission's
finding that the Communications Act and the Commission's rules
regarding [other] applications and transactions provide more
appropriate remedies.'' WISPA also agreed with the Commission's
approach, ``particularly because'' excluded transactions are ``governed
by separate Commission rules,'' and warned against expanding the set of
covered programs. And Mr. Meunier noted that while most agencies do not
adopt supplemental rules identifying an ``elaborate list of
inclusions,'' that fact ``does not preclude an agency from issuing such
a list if it chooses to do so.'' The rules, therefore, shall not extend
at this time to transactions carried out under the Commission's other
currently existing programs, nor shall they extend to transactions to
or from licensees and those with spectrum usage rights (with the
exception of transactions under the Covered Programs where such an
entity is a participant). These decisions find ample support in the
record.
Participant Categories
Tiers. All participants (primary tier and lower tier) are
potentially subject to suspension and debarment. The Guidelines use
``tiers'' to categorize program participants, and a participant's
placement in a particular tier can affect the scope of that
participant's required disclosures. Primary tier participants are those
who deal directly with the agency or program administrators by
submitting proposals for, or entering into, covered transactions. Lower
tier participants are typically those who enter into covered
transactions with a person at the next higher tier. Agencies, however,
have some discretion to designate participants as belonging to the
primary tier, the lower tier, or neither. The NPRM proposed to define
USF, TRS, and NDBEDP program participants as primary tier participants
and other individuals who contract with program participants as lower
tier participants. The NPRM also proposed, consistent with the
Guidelines, to designate certain parties who do not directly contract
with the primary tier participant (for example, subcontractors) as
lower tier participants if they meet certain criteria. While the tier
designations varied by program, the NPRM generally proposed two prongs
for the lower tier participant definition. First, the participant must
belong to one of several specified categories, including contractors,
subcontractors, suppliers, consultants, or their agents or
representatives for supported transactions. Second, the participant
must also satisfy at least one of the following three criteria: (1) the
participant must have a material role relating to, or significantly
affecting, claims for disbursements related to the program; (2) the
participant must be a ``principal,'' or (3) the amount of the
transaction involving the participant is expected to be at least
$25,000.
We now adopt the framework of primary tier and lower tier
participants proposed in the NPRM and summarized in the chart below.
The program-specific rationales for our designations are discussed in
detail below, but, overall, we find that expanding the definition of
lower tier participant for each program will provide the Commission
with the flexibility necessary for more comprehensive program
oversight, without imposing onerous requirements on participants.
Subcontractors and suppliers play essential roles in carrying out
covered transactions, and they are entrusted with large sums of Federal
funds. By classifying them as lower tier participants, rather than
excluding them from designation as participants, our rules will
establish more extensive oversight and control of program spending.
Further, these parties who may play a significant role in covered
transactions will be subject to exclusion from our programs, when
justified by the facts. Therefore, the expanded list of lower tier
participants as described in the summary chart and codified in our
Supplemental Rules affords the Commission authority to take an
exclusion action, if justified by the record, with respect to these
parties who are often key players in transactions under our programs.
We thus find that this broad definition of lower tier participants,
including subcontractors and suppliers, is in the public interest.
Our adopted designations for the Covered Programs by tier are
summarized in the chart below.
----------------------------------------------------------------------------------------------------------------
Primary tier participants Lower tier participants
----------------------------------------------------------------------------------------------------------------
High-Cost............................... Service Providers.......... Contractors, subcontractors, suppliers,
consultants or their agents or
representatives for High-Cost-supported
transactions, if:
(1) such person has a material role
relating to, or significantly affecting,
claims for disbursements related to the
program;
[[Page 18152]]
(2) such person is considered a
``principal;'' or
(3) the amount of the transaction is
expected to be at least $25,000.
Lifeline................................ Service Providers.......... Any participant in the Lifeline program
(except for the primary tier carrier),
regardless of tier or dollar value,
including but not limited to those that
are reimbursed based on the number of
Lifeline subscribers enrolled
(Contractors, subcontractors, suppliers,
consultants, or their agents or
representatives and Lifeline marketing
organizations for Lifeline-supported
transactions, or their agents or
representatives, if
(1) such person has a material role
relating to, or significantly affecting,
claims for disbursements related to the
program;
(2) such person is considered a
``principal;'' or
(3) the amount of the transaction is
expected to be at least $25,000.
E-Rate.................................. Schools and Libraries...... Contractors, subcontractors, suppliers,
FCC Form 471 Service consultants, or their agents or
Providers. representatives for E-Rate-supported
transactions, if
(1) such person has a material role
relating to, or significantly affecting,
claims for disbursements related to the
program;
(2) such person is considered a
``principal;'' or
(3) the amount of the transaction is
expected to be at least $25,000.
RHC..................................... Health Care Providers...... Contractors, subcontractors, suppliers,
FCC Form 462/466 Service consultants, or their agents or
Providers. representatives for RHC-supported
transactions, if
(1) such person has a material role
relating to, or significantly affecting,
claims for disbursements related to the
program;
(2) if such person is considered a
``principal;'' or
(3) the amount of the transaction is
expected to be at least $25,000.
TRS..................................... Service Providers.......... Contractors, subcontractors, suppliers
NDBEDP.................................. Certified Programs......... with whom the certified programs have a
contractual relationship, consultants,
or their agents or representatives for
TRS- or NDBEDP-supported transactions,
if:
(1) such person has a material role
relating to, or significantly affecting,
claims for disbursements related to the
program;
(2) such person is considered a
``principal;'' or
(3) the amount of the transaction is
expected to be at least $25,000.
ACP..................................... Service Providers.......... Any participant in the ACP (except for
the primary tier service provider),
regardless of tier or dollar value,
including but not limited to those
reimbursed based on the number of ACP
subscribers enrolled.
(Contractors, subcontractors, suppliers,
consultants, or their agents or
representatives and any ACP Marketing
Organizations for ACP-supported
transactions, or their agents or
representatives, if
(1) such person has a material role
relating to, or significantly affecting,
claims for disbursements related to the
program;
(2) such person is considered a
``principal;'' or
(3) the amount of the transaction is
expected to be at least $25,000.
ACP Outreach Grant Program.............. Recipients of ACP Outreach Subrecipients, contractors or
grants. subcontractors of the grant recipients,
or their agents or representatives, if
(1) such person has a material role
relating to, or significantly affecting,
claims for disbursements related to the
program;
(2) such person is considered a
``principal;'' or
(3) the amount of the transaction is
expected to be at least $25,000.
----------------------------------------------------------------------------------------------------------------
General Lower Tier Considerations. Several commenters, including
CTIA, USTelecom, and NCTA, suggested that the Commission either exclude
lower tier participants from the rules' coverage altogether or adopt a
purported safe harbor described in the Guidelines that provides
participants with three options for verifying other participants'
status. Specifically, CTIA and USTelecom suggested that the NPRM did
not adequately explain why extending the rules to subcontractors and
suppliers was necessary to promote the public interest, and they
further stated that such an extension would ``impose unduly burdensome
investigation obligations on primary tier participants.'' The breadth
and scope of the Guidelines offers a governmentwide default for
including subcontractors and suppliers. CTIA and USTelecom do not offer
any indication of why this scope is unnecessary for failing to guard
against waste, fraud, and abuse, and indeed, the Commission's
experience suggests otherwise. That is, subcontractors and suppliers
may originate or amplify the extent of fraud, further supporting the
need for this scope.
CTIA and USTelecom also raised the possibility that subcontractor
exclusions could significantly limit ``competitive options'' for
primary tier contractors, particularly in rural areas. Similarly, NCTA
urged the Commission not to ``impos[e] a strict liability standard on
providers that would hold them accountable for actions by a third party
that are not within their control and that they made a good faith
effort to identify.'' Because subcontractors and suppliers play
essential roles in carrying out covered transactions and are entrusted
with large sums of Federal funds, they are also in a position to plan,
initiate, or carry out wrongdoing, both with or without the awareness
of the primary tier participant. Applying the rules to all
participants, including subcontractors and suppliers, establishes the
most comprehensive level of program oversight to ensure the actions of
all bad actors can be addressed so program funds go to applicants who
need it and comply with program rules. Applicants and participants in
programs that the Commission administers should carefully consider the
scope of the Commission's requirements directed at safeguarding waste,
fraud, and abuse,
[[Page 18153]]
when receiving and spending these funds and deciding with whom to
engage in business.
We find NCTA's concerns misguided. First, nothing in the Guidelines
imposes a strict liability standard, as NCTA has suggested. To the
contrary, the Guidelines explicitly list a number of mitigating factors
that the SDO may consider in evaluating exclusions, including
``[w]hether and to what extent [the participant] planned, initiated, or
carried out the wrongdoing,'' ``[w]hether there is a pattern or prior
history of wrongdoing,'' and ``[o]ther factors that are appropriate to
the circumstances of a particular case.'' These mitigating factors give
the Commission flexibility to address each case on its own merits and
ensure that providers will not be held to a ``strict liability
standard.'' Second, as discussed above, the Guidelines give the
Commission flexibility to determine whether the actions of a lower tier
participant should result in any action against a primary tier
participant. Finally, as discussed above, the Guidelines also furnish
several methods for primary tier participants to collect information
about their lower tier business partners. Primary tier participants who
follow these methods, which we largely adopt with minor modifications
consistent with our augmented disclosure requirements, can further
mitigate any liability.
We are similarly unpersuaded by CTIA and USTelecom's argument that
suspension or debarment of subcontractors and other lower tier
participants could limit the ability of primary tier participants to
bid on work. If a service provider concludes there is a bona fide
shortage of competent contractors, subcontractors, or suppliers to
enable it to bid on a covered transaction, it can support an excluded
party's request for an ``exception'' under the Guidelines, allowing the
excluded person to participate in future transactions. As discussed
above, one basis for granting such an exception is the unavailability
of any other qualified entities to perform the necessary services.
Finally, the commenters ask that if disclosure requirements are
nevertheless extended to lower tier participants, then primary tier
participants should be permitted to use any one of three options to
satisfy disclosure obligations provided in section 180.300 of the
Guidelines. As nothing in the NPRM proposed to limit the disclosure
options for lower tier participants, we agree that the disclosure
obligation options described in section 180.300 should be applicable to
all participants.
Lower Tier Transaction Thresholds. As described above, one of the
three criteria in the NPRM's proposed definition of lower tier
participant is ``the amount of the transaction is expected to be at
least $25,000.'' Some commenters expressed concern that this threshold
was too low. CTIA and USTelecom argued that a $25,000 threshold would
sweep in nearly all contractors for some projects and would not
adequately account for inflation. They suggested that the threshold be
increased to $100,000. E-Rate Central in turn sought clarification on
whether the $25,000 threshold applies to ``an individual FRN,
application, invoice, or some combination thereof.''
We find that the $25,000 threshold is reasonable and decline to
raise the transaction value threshold to an amount greater than
$25,000. That threshold is consistent with and is derived from the
Guidelines' definition of ``covered transactions.'' Moreover, under the
Guidelines, the Commission can consider the ``actual or potential harm
or impact'' arising from any wrongdoing as a mitigating factor in an
exclusion proceeding, allowing it to take the size of a transaction
into account without creating an unnecessarily rigid higher dollar
threshold. We are also concerned that adopting a higher threshold for
our programs could interfere with governmentwide reciprocity. While
CTIA and USTelecom noted that agencies tasked with regulating other
capital-intensive industries have increased their thresholds and urge
that inflation should be considered, the breadth and diversity of
outlays made through our covered programs, as well as the myriad
threats to the integrity of our programs, weigh against adjusting the
threshold. Even a small lower tier participant (e.g., a marketing
organization) can drive significant amounts of waste, fraud, and abuse.
We also find a ``transaction'' can be cumulative and encompass more
than a one-off funding request number (FRN), application, or monthly
disbursement. Bad actors should not be able to avoid the obligations
that attach to lower tier participants by dividing larger projects into
smaller reimbursement requests that fall below a transaction threshold.
Instead, the SDO must have the discretion to aggregate smaller related
FRNs, applications, or disbursements to meet the threshold. For
example, an ``act or pattern of behavior'' could fall within a single
contract that multiple E-Rate or Rural Health Care applications rely
on, or within a particular enrollment or claims process or policy that
a Lifeline service provider applied to multiple Lifeline subscribers.
An ``act or pattern of behavior'' can also include, for example, a
billing practice that does not account for changes in the service start
or end dates, or a subscriber's non-usage of a USF-supported service
that results in the Rural Health Care (RHC) program or the Lifeline
program being over-invoiced for services that were not actually
provided. Although missing one change in a service date or the non-
usage of a single Lifeline subscriber may be a small amount that is
over-charged, these acts or patterns of behavior have resulted in
significant amounts of over-billing in the USF programs.
Primary and Lower Tier Classifications for High-Cost Programs. For
the High-Cost programs, we adopt the NPRM's proposal that the primary
tier participant will be the carrier receiving support. We likewise
adopt the NPRM's proposal that lower tier participants are contractors,
subcontractors, suppliers, consultants, or their agents or
representatives for High-Cost-supported transactions if: (1) such
person has a material role relating to, or significantly affecting,
claims for disbursements related to the High-Cost program; (2) such
person is a ``principal;'' or (3) the amount of the transaction
involving the participant is expected to be at least $25,000. We
received no comment on these proposals.
Primary and Lower Tier Classifications for the Lifeline Program,
Affordable Connectivity Program, and ACP Outreach Grant Program. In the
Lifeline program and former ACP, we adopt the proposals that the
primary tier participant will be the service provider receiving
support, while for the former ACP Outreach Grant Program, the primary
tier participants were those parties obtaining grants (consistent with
sections 180.970 and 180.200 of the Guidelines). Although the
appropriation for the ACP has been exhausted, we include misconduct in
the ACP as a basis for suspension and debarment because many service
providers that participated in ACP also participate in the Lifeline
program and it can also take time to investigate and assess the
misconduct. Additionally, we adopt the proposals that beneficiaries
under these programs generally are not considered primary or lower tier
participants. For the ACP Outreach Grant Program, however,
beneficiaries are primary tier participants. Under both the Lifeline
program and the former ACP, the service providers can submit consumer
Lifeline and/or ACP applications to the
[[Page 18154]]
National Verifier and enroll subscribers through the National Lifeline
Accountability Database, and therefore service providers are in the
best position to have up-to-date information on customer eligibility,
activation, and use of their Lifeline and/or ACP services. In addition,
the service provider submits requests for payment to the USF
Administrator and is best situated to carry out the obligations of
primary tier participants under the Guidelines. In contrast,
interactions between low-income consumers and the Commission or the USF
Administrator are incidental. We received no comment on these
proposals.
The NPRM proposed three categories of lower tier participants in
the Lifeline program. We received no comment on these categories and
therefore adopt the proposal without modification. We also adopt the
same categories for the former ACP because of the similarities between
the two programs. First, lower tier participants include parties
(except for the primary tier Lifeline carrier or ACP service provider)
to any contract or award in which a person is reimbursed, including but
not limited to contracts or awards based on the number of Lifeline or
ACP subscribers enrolled or providing commissions, or any combination
thereof, regardless of dollar value. Second, lower tier participants
include contractors, subcontractors, suppliers, consultants, or their
agents or representatives, and third-party marketing organizations for
Lifeline or ACP-supported transactions, or their agents or
representatives, including enrollment representatives, if: (1) such
person has a material role relating to, or significantly affecting,
claims for disbursements related to the Lifeline program or the ACP;
(2) such person is considered a ``principal;'' or (3) the amount of the
transaction involving the participant is expected to be at least
$25,000.
We adopt similar categories for lower tier participants in the
former ACP Outreach Grant Program, recognizing that some grantees may
do business with third parties in conducting their covered transaction.
In the ACP Outreach Grant Program, lower tier participants include
subrecipients, contractors or subcontractors of the grant recipients,
or their agents or representatives, if: (1) such person has a material
role relating to, or significantly affecting, claims for disbursements
related to the ACP Outreach Grant Program; (2) such person is
considered a ``principal;'' or (3) the amount of the transaction
involving the participant is expected to be at least $25,000.
Primary and Lower Tier Classifications for the E-Rate Program. In
the E-Rate program, we adopt the proposal that both the program
applicant (the school, library, or consortium) and the service
provider(s) selected by the applicant (as indicated on FCC Form 471) be
designated as primary tier participants. We received no comment on this
proposal. We find that extending the primary tier designation to all
applicants will allow us to obtain more extensive primary tier
disclosures from the applicants themselves before approving
transactions, while also ensuring that applicants will obtain
disclosures from service providers during their bid selection process
under the modified disclosure rules we adopt.
The NPRM also proposed that the service providers selected by the
applicant schools, libraries, and consortia also be considered primary
tier participants, regardless of whether they submit invoices directly
to USAC for reimbursement. Here too, we received no comment and adopt
the proposal without modification. In our experience, service
providers, like applicants, may be responsible for waste, fraud, and
abuse, and therefore imposing the more substantial primary tier
obligations and disclosure requirements on these entities also promotes
the Commission's goal of protecting federal funds.
Under the E-Rate program, schools and libraries may create
``consortia'' that can seek competitive bids and/or apply for E-Rate
funding on behalf of all their members. When schools and libraries
participate as a consortia, the NPRM proposed that the consortium
itself, acting through its lead member, would be a primary tier
participant, along with the member schools or libraries. In considering
any suspension or debarment action, however, we proposed that the SDO
should evaluate which particular school or library consortium member
was responsible for the misconduct and direct the suspension and
debarment orders to those responsible for the bad acts, rather than to
all consortium members. We adopt that proposal.
E-Rate Central supported this tailored approach to consortia, but
further proposed that ``multiple schools and libraries being serviced
by a single E-Rate consultant or service provider be treated in an
equivalent manner.'' If E-Rate Central is proposing that when a lower
tier participant is excluded each school or library serviced by that
lower tier participant should be evaluated on its own merits in
exclusion proceedings, the Guidelines already provide for such case-by-
case review. Among other things, an SDO must consider the facts and
circumstances of each particular case, including any arguments that a
respondent raises, and must make a final determination about that
respondent's present responsibility. Alternatively, if E-Rate Central
is requesting that a lower tier participant's misconduct in connection
with one school or library not affect transactions involving another
school or library with whom that lower tier participant works, that may
be unavoidable. As explained above, where a participant in an E-Rate
transaction is excluded, we require that other parties to the
transaction promptly complete a service provider or SPIN change and,
for the integrity of the program, terminate their dealings with the
excluded party (unless an exception is granted under section 180.135 of
the Guidelines or under section 6001.125 of our supplemental rules).
Finally, if E-Rate Central is requesting some broader form of relief
that would undermine the exclusions, we find that it would frustrate
the purposes of the Guidelines, one of which is to facilitate a broad
exclusion when it is in the public interest.
Finally, the NPRM proposed three categories of lower tier
participants for the E-Rate program. Lower tier participants include
contractors, subcontractors, suppliers, consultants, or their agents or
representatives for E-Rate transactions if: (1) they have a material
role relating to, or significantly affecting, claims for disbursements
related to the E-Rate program; (2) they are considered a ``principal;''
or (3) the amount of the transaction involving the participant is
expected to be at least $25,000. All these individuals or entities play
important roles in our E-Rate transactions, and we find it is important
to our oversight and to the integrity of the E-Rate program that they
be included as lower tier participants.
We also note that given the similarities between the program rules
(such as forms and processes) and overlap in participants, for the
purposes of this Report and Order, E-Rate specific rules and
requirements adopted in this Order will also be applicable to the
Cybersecurity Pilot Program.
Primary and Lower Tier Classifications for the Rural Health Care
Program. In the Rural Health Care program, we adopt the NPRM proposal
that both the program applicant and the service provider(s) selected by
the applicant (as indicated on FCC Form 462 or 466) be designated as
primary tier participants. We received no comment on these proposals,
and for the same reasoning discussed in connection
[[Page 18155]]
with the E-Rate program, now adopt them.
Similarly, the NPRM proposed that a consortium applicant in the RHC
Health Care Connect Fund program, acting through its lead entity, would
be the primary tier participant, along with its member health care
providers, but that in exclusion proceedings, the SDO should evaluate
which particular consortium member is responsible for the underlying
misconduct and direct the suspension and debarment orders to those
entities, rather than to all consortium members. For the same reasoning
articulated in the E-Rate program, we now adopt this proposal.
Finally, the NPRM proposed three categories of lower tier
participants for the RHC program. We received no comment on these
proposals, and for the same reasoning discussed in connection with the
E-Rate program, now adopt them. Lower tier participants include
contractors, subcontractors, suppliers, consultants, or their agents or
representatives for RHC program transactions, if: (1) they have a
material role relating to, or significantly affecting, claims for
disbursements related to the RHC program; (2) they are considered a
``principal;'' or (3) the amount of the transaction involving the
participant is expected to be at least $25,000.
Primary and Lower Tier Classifications for the TRS Program and
NDBEDP. In the TRS program and the NDBEDP, we adopt the proposal that
the service providers and certified programs receiving payments should
be deemed the primary tier participants. We received no comment on this
proposal, and for the reasons set forth in the NPRM now adopt it. In
these programs, the service providers for TRS and certified programs
for NDBEDP evaluate the qualifications of customers to participate in
the programs. In addition, the service providers and certified programs
submit requests for payment to the program administrators and are in
the best position to carry out the obligations of primary tier
participants under the Guidelines. Specifically, for the TRS program
(other than TRS that is provided through state programs) and the
NDBEDP, the primary tier participants will be the certified entities
that are reimbursed by the Commission and the TRS Fund administrator
for providing services under the covered transactions. Additionally,
for TRS that is provided through a state TRS program, the primary tier
participants will be the TRS providers that are authorized by each
state to provide intrastate TRS under the state program and that,
accordingly, are compensated by the TRS Fund for the provision of
interstate TRS. We received no comment on the question of whether the
rules should treat certain types of TRS and NDBEDP participants
differently, noting that, for the NDBEDP, some participants are state
or local governments, and others are non-profits. In the absence of a
clear record, we decline to distinguish in our rules between
participants based on their governmental or non-governmental status.
The NPRM observed that, in contrast to the service providers,
direct interaction between TRS and NDBEDP beneficiaries (i.e.,
individuals with hearing or speech disabilities) and the Commission or
the program administrators is incidental. Because beneficiaries in the
TRS program and NDBEDP do not directly submit applications to the
program administrators, the NPRM proposed that, similar to Lifeline,
these beneficiaries should not be considered either primary or lower
tier participants, and not be subject to the exclusion rules. We
received no comment on this proposal and now adopt it.
The NPRM proposed three categories of lower tier participants for
the TRS program and the NDBEDP. We received no comment on these
proposals and now adopt them. Lower tier participants include
contractors, subcontractors, suppliers with whom the certified programs
have a contractual relationship, consultants, or their agents or
representatives for TRS- or NDBEDP-supported transactions if: (1) they
have a material role relating to, or significantly affecting, claims
for disbursements related to the TRS or NDBEDP programs; (2) they are
considered a ``principal;'' or (3) the amount of the transaction
involving the participant is expected to be at least $25,000. In the
case of suppliers, however, to ensure more effective enforcement, we
have clarified that only those suppliers with whom the certified
programs have a contractual relationship shall be automatically deemed
lower tier participants.
Transactions with the USF, TRS Fund, and NDBEDP Administrators. The
Commission also proposed a clarification to section 180.200 of the
Guidelines explaining that covered transactions include not only
transactions between a person and the Commission, but also any
transactions between a person and the administrators of relevant
programs, when those administrators are acting on behalf, or as agents,
of the Commission. As noted above, the Wireline Competition Bureau
(WCB) subsequently sought comment on application of this proposal to
the former ACP. We received no specific comment on this proposal, and
we now adopt it. This clarification will ensure that all transactions
overseen by the Commission under these programs are covered, whether
the Commission is acting directly or through its agents.
Principals
The definition of ``principal'' plays an important role under the
Guidelines not only in establishing the scope of disclosure
requirements, but also in ensuring that parties who may play a
significant role in covered transactions are subject to our suspension
and debarment rules when justified by the facts. The modified
definition of ``principal'' ensures that the Commission may take an
exclusion action, if justified for cause, with respect to all parties
that fall into this modified definition.
The Guidelines define ``principal'' as: (a) an ``officer, director,
owner, partner, principal investigator, or another person . . . with
management or supervisory responsibilities;'' or (b) a ``consultant or
other person, whether or not employed by the participant or paid with
Federal funds, who (1) [i]s in a position to handle Federal funds; (2)
[i]s in a position to influence or control the use of those funds; or
(3) [o]ccupies a technical or professional position capable of
substantially influencing the development or outcome of an activity [in
a transaction].'' The Guidelines further state that an agency may
``[i]dentify specific examples of types of individuals who would be
`principals' under [its] nonprocurement programs and transactions, in
addition to the types of individuals'' specifically identified above.
The NPRM proposed that in addition to those persons defined as
principals under the Guidelines, the term ``principal'' should also
mean ``any person who has a critical influence on, or substantive
control over, a covered transaction, whether or not employed by the
participant.'' The NPRM then identified classes of persons who may fit
this supplemental definition of ``principal,'' including management and
marketing agents, accountants, consultants, investment bankers,
engineers, attorneys, and other professionals who are in a business
relationship with participants in connection with a covered transaction
under a Commission program. (This expanded definition of the term
``principal'' draws upon a supplement to the governmentwide definition
adopted by HUD.) Most commenters did not address the NPRM's proposed
[[Page 18156]]
definition of ``principal.'' WISPA, however, recommended that the
Commission adopt OMB's definition of ``principal'' without
modification, while raising some concerns about the clarity and scope
of our proposed supplemental rule. And SHLB-SECA, while not expressly
objecting to our supplemental definition of ``principal,'' suggested
that the breadth of the definition extends to those that merely provide
advice and do not necessarily have substantial influence or control
over a covered transaction.
We now adopt a modified version of the NPRM's proposed supplemental
definition of ``principal'' that expands the Guideline's definition,
but is narrower than originally proposed. As noted, the existing
definition in the OMB Guidelines includes an ``officer, director,
owner, partner, principal investigator, or another person . . . with
management or supervisory responsibilities'' and we adopt that
definition as part of our overall adoption of the OMB Guidelines'
definitions. This decision therefore adequately captures a person, such
as a corporate executive or board member with management or supervisory
responsibilities, that the Commission may wish to exclude, particularly
given our decision regarding the scope of imputation. The supplemental
definition of ``principal'' we adopt has two components: first, in
addition to the persons deemed principals under section 180.995(a) of
the Guidelines, a principal will also include any consultants that have
a business relationship with participants in connection with a covered
transaction, as well as Lifeline or ACP marketing organizations; and
second, in addition to any person deemed a principal under section
180.995(b) of the Guidelines, a principal will also include any person
having a critical influence on, or substantive control over, a covered
transaction even if not in one of the enumerated categories. In this
regard, we find that an individual's status as a principal does not
depend on whether that individual is employed by the participant, the
specific title the individual holds, or whether the person is paid with
federal funds. Rather, we focus on the function that the person
performs and how adequately the person performs it with respect to
``principal'' level responsibilities. The modified definition of
``principal'' ensures that the Commission may take an exclusion action,
if justified for cause, with respect to all parties that fall into this
modified definition.
We also decline to designate management agents, accountants, or
attorneys as persons who will automatically be deemed principals as we
had proposed in the NPRM. We conclude that the term ``management
agent'' which was drawn from a HUD definition is inapposite in our
context. As to accountants or attorneys, we note that these
professionals could be principals under the ``influence or control''
prongs of the supplemental definition, but decline to categorically
deem them as principals. We received no specific comment on the
categories of persons that the NPRM proposed as ``principals,'' but we
remove ``investment bankers'' and ``engineers'' from the definition (as
proposed) because, on further review, we find that these professionals
have not been drivers of waste, fraud, and abuse in our programs.
To implement our supplemental definition of principal, we also
define ``Lifeline marketing organization'' or ``ACP marketing
organization'' as an entity that: (i) has a contractual relationship
with the entity providing the Lifeline or ACP services to consumers for
the purpose of securing Lifeline or ACP enrollments; or (ii) has any
contract to provide for such Lifeline or ACP enrollment services.
The first component of our supplemental definition is a per se rule
that consultants who have or had a business relationship with the
participant in connection with a covered transaction and Lifeline or
ACP marketing organizations shall be considered a principal. Our
decision to treat certain enumerated professionals as principals
without requiring an explicit fact-finding process for each person in
these categories reflects both a special concern for the roles played
by those professionals in Commission transactions and the need for
clarity and administrability in our rules. Were we to adopt a
supplemental definition requiring a finding of fact to clarify the
disclosure requirements applicable to each participant in a
transaction, as WISPA has suggested, participants would face increased
uncertainty with respect to their disclosure responsibilities, while
the Commission would need to continually provide guidance in numerous
transactions as to what constitutes ``critical influence'' or
``substantive control.''
Moreover, based on our experience with our programs, we find that
in most cases consultants and Lifeline or ACP marketing organizations
would likely be designated as principals under the ``influence'' or
``control'' component of our definition, even if they were not
categorically included in the definition. Marketing organizations, for
instance, have had an outsized impact on activity in the Lifeline
program and the former ACP, frequently submitting apparently fraudulent
Lifeline or ACP enrollments to increase reimbursements for service
providers and, prior to its prohibition by the Lifeline and ACP rules,
potential commissions for the agents themselves. Likewise, consultants
play a significant role in the E-Rate and Rural Health Care programs
when retained by program participants to manage projects that receive
USF support. In several cases, such consultants have committed serious
program violations. The expanded definition of ``principal'' will
enable us to bar those who participate in the schemes as well as those
who orchestrate them.
We further clarify, however, that enrollment representatives of
marketing organizations will be classified as lower tier participants
because of their ``material role relating to, or significantly
affecting, claims for disbursements related to the programs in which
they participate'' as described in the Tier Chart of this Report and
Order, but such persons will not be deemed ``principals'' except in
extraordinary circumstances as determined on a case-by-case basis. The
term ``enrollment representatives'' shall have the same meaning as set
forth in the Commission programs that may be implicated in any
transaction (to the extent such definitions exist). Moreover, the
disclosure obligations of marketing representatives, who are lower tier
participants, will be limited to those under section 180.355 of the
Guidelines.
There was muted objection to designating various persons providing
advice to program participants as ``principals.'' SHLB-SECA did not
object directly, but ``encourage[d] the Commission to clarify that
[providing] incorrect or allegedly incorrect advice . . . may not be
grounds for suspension or debarment,'' explaining that ``[a]dvice alone
does not constitute substantial influence or control over a covered
transaction.'' Similarly, SHLB-SECA and E-mpa argued that consultants
and other third parties can never cause violations or misconduct by
providing ``incorrect or allegedly incorrect advice'' because
``participants are free to accept or reject advice, whether it be good,
bad or somewhere in between.'' We reject these assertions. As a result
of our experience administering our programs and addressing cases
involving waste, fraud, and abuse, we find that consultants and other
third parties can easily contribute to rule violations by negligently
or intentionally providing erroneous or misleading advice,
notwithstanding the fact that ``USF
[[Page 18157]]
participants are free to accept or reject advice.''
We note in any given case, a consultant may make the factual
argument that it did not cause the misconduct by the primary tier
participant, which, if true, would preclude the consultant's suspension
or debarment. But if the evidence demonstrates that a consultant's
``act of giving advice'' was the cause of rule violations or misconduct
by a program participant, then an exclusion might be appropriate,
depending on the aggravating and mitigating factors. Thus, for example,
a consultant also could argue in any given case that, to the extent
that its advice was incorrect, it was merely negligently so, which, if
true, would weigh against exclusion as we have made clear in this
analysis.
As to the second prong of our supplemental rule, we adopt the
``critical influence on or substantive control over'' component to
ensure that certain forms of misconduct in our programs may be
addressed even if the bad actor may not otherwise be captured by the
Guidelines' definition of principal. For example, a person that
violates our competitive bidding rules might not be ``influencing the
development or outcome of an activity required to perform the covered
transaction,'' yet that person's misconduct could merit a debarment.
For example, in the course of an investigation into the TRS entity, it
might be determined that a particular hearing health professional or
entity had a significant adverse effect on the transaction that could
warrant a debarment of that person. Individual hearing health
professionals are not directly subject to Commission rules, but such
conduct could critically influence ineligible individuals to register
for and use TRS, despite the determination of eligibility ultimately
lying with TRS providers and users. Our expanded definition of
``principal'' affords the Commission the flexibility to consider such
conduct in protecting program integrity.
We reject WISPA's recommendation that the Commission adopt the OMB
definition of a ``principal'' without any modification as the
definition of ``principal'' adopted here advances the purpose of the
Guidelines. Certain individuals that facilitate program abuse
(including rule violations) may not fall within the Guidelines' more
narrow definition of ``principal.'' Standing alone, the Guidelines
could unduly restrict the Commission's ability to address the actions
of individuals it has identified as posing a risk to the integrity of
its programs.
Likewise, we find that adopting these program-specific supplemental
definitions will provide greater certainty and notice to program
participants and improve administrative efficiency and program
integrity. Under the Guidelines, both primary and lower tier
participants must promptly make disclosures about all ``principals'' to
the transactions before a transaction is consummated. We therefore
disagree with WISPA's concern that the SDO first must make
individualized findings about whether a person in the supplemental
categories is a ``principal'' before disclosures are required. Such a
cumbersome process would delay consummation of transactions and the
timely delivery of services. In contrast, by affording participants
further clarity at this stage, our supplemental rule will ensure more
timely disclosures that will facilitate program integrity and
efficiency. We would also urge participants to err on the side of
disclosure in close cases. Finally, we conclude the benefit of our
enhanced ability to combat forms of waste, fraud, and abuse, greatly
outweigh any incidental burdens created by the modified disclosure
requirements.
Participant Disclosures by Tier
The Guidelines require both primary and lower tier participants to
disclose certain information before they enter into a covered
transaction. We adopt the Guidelines' disclosure requirements, with
program-specific modifications, as detailed below. In addition to the
discussion in this section, we refer parties to the Guidelines in 2 CFR
part 180, subpart C (Responsibilities of Participants Regarding
Transactions Doing Business with Other Persons), and note that entities
who participate in federal grant programs (e.g., schools, libraries, or
rural health care providers) or seek federal contracts (e.g., service
providers) should already be familiar with similar requirements.
Primary Tier Participants. Under the Guidelines, primary tier
participants must advise the agency if they are presently excluded or
disqualified, and also must state (a) whether the participant or any
principals for the transaction ``[h]ave been convicted within the
preceding three years of any of the offenses listed in Sec. 180.800(a)
or had a civil judgment rendered against [them] for one of those
offenses within that time period;'' (b) ``[a]re presently indicted for
or otherwise criminally or civilly charged by a governmental entity
(Federal, State or local) with the commission of any of the offenses
listed in Sec. 180.800(a);'' or (c) ``[h]ave had one or more public
transactions . . . terminated within the preceding three years for
cause or default.''
The NPRM proposed that these disclosure requirements could be
communicated and implemented by amending existing program forms, form
instructions and certification rules and sought comment on how to
administer such requirements in a manner that minimizes burdens on
primary tier participants. The NPRM and subsequent Public Notice also
proposed to clarify that such disclosures by primary tier participants
be made not only to the Commission and the applicable bureaus, but also
to the relevant program administrators.
We adopt the full disclosure requirements set forth in the
Guidelines for primary tier participants. Commenters generally focused
their opposition on the breadth and clarity of the disclosure
requirement--especially as it relates to the disclosure of having ``one
or more public transactions . . . terminated within the preceding three
years for cause or default.'' For example, immixGroup, NCTA, E-Rate
Central, and E-mpa sought clarification on what kinds of
``termination'' would merit disclosure. (immixGroup, however, supported
the requirement that parties report convictions for offenses listed
under section 180.800(a) and stated that it might be reasonable for
parties to have to report charges or indictments for those same
offenses.) Several commenters also specifically requested that we
clarify that a mere denial of a USAC funding request would not qualify
as a reportable ``termination.'' Commenter immixGroup also suggested
that we adopt ``exceptions to both the reporting of funding denials
requirement during the pendency of an administrative appeal and,
specifically, until a final non-appealable decision is issued by the
appropriate body of last resort.'' CTIA and USTelecom suggested that
the disclosure requirement for terminations be limited to transactions
with the Federal government, not state and local governments.
First, we adopt a supplemental rule clarifying that a mere denial
of a funding request does not, without more, constitute a ``termination
. . . for cause or default'' of a public transaction as that phrase is
used by the Guidelines. Program administrators deny funding requests
for a wide variety of reasons, some of which may arise from minor
technical and procedural errors. On the other hand, participants are
required to report termination of a previously approved funding request
based on serious errors or misconduct (such as violations of
competitive bidding requirements) by a participant in the
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covered transaction that was terminated. Although this requirement does
mean that, for example, a service provider must disclose a denial
caused by a violation by an applicant, we note again both that a party
making a disclosure may provide additional information (e.g., that it
was not responsible for the violation), and that unfavorable
disclosures do not automatically trigger denial of a transaction or the
initiation of exclusion proceedings.
Second, we decline to establish an exception for otherwise
reportable terminations that are pending appeal. The mere disclosure of
a termination--pending appeal or otherwise--does not automatically
trigger the denial of a new transaction or initiate an exclusion
proceeding. Rather, the Commission has flexibility under the Guidelines
to consider both the disclosed information and ``any additional
information or explanation [a transaction participant] elect[s] to
submit with the disclosed information'' in deciding whether to approve
the transaction. Additionally, the Commission or program administrators
might allow a transaction to proceed, despite an unfavorable
disclosure, but employ additional safeguards, including heightened
scrutiny or audits, to ensure compliance. Establishing an exception
covering all terminations pending appeal would unnecessarily deprive
the Commission and program administrators of potentially relevant
information about transaction partners. We will not, however, require
the reporting of terminations that have been reversed or vacated.
Third, we decline to limit the termination reporting requirement to
Federal transactions. Subject to the clarifications herein, primary
tier participants must report terminations of transactions with state
and local governments. Like Commission programs, programs run by state
and local governments often require participants to handle and direct
public funds in an appropriate manner. A participant's propriety in
these dealings can offer valuable insight as to its fitness to
participate in Commission programs, particularly when a participant's
prior contact with the Federal government is limited or nonexistent. We
are unconvinced by CTIA and USTelecom's argument that ``identifying
every state and local `transaction' terminated for cause or default . .
. would be highly burdensome.'' The reporting requirement stretches
back only three years and would likely require significant review of
only a small subset of transactions.
We also adopt a supplemental rule requiring that such disclosures
be made not only to the Commission, but to the relevant program
administrators as well. We find that the requirements are essential to
ensuring that the program administrators and the Commission have access
to the information needed to make informed decisions around approval
and denial of transactions.
In addition, recognizing that primary tier participants in the E-
Rate and RHC programs typically enter into contractual arrangements
with each other, we create a supplemental rule requiring service
providers in the E-Rate and RHC programs to make the necessary
disclosures not only to the Commission and USAC, but also to the
schools, libraries, or health care providers during the competitive
bidding process. Because service providers will now be primary tier
participants, section 180.300 of the Guidelines, which requires pre-
transaction verification by a primary tier participant that a lower
tier participant is not excluded, would not apply on its face to
transactions between E-Rate schools and libraries and their service
providers or rural health care beneficiaries and their service
providers because all these entities will now be considered primary
tier participants. Therefore, we adopt a supplemental rule modifying
section 180.300 to require that the verifications required by that rule
will be applicable not only to transactions with ``another person at
the next lower tier'' but to transactions among participants at the
same tier as well.
We note that disclosures among primary tier participants other than
the agency involved is not envisioned under the Guidelines because for
typical transactions covered by the Guidelines, non-federal primary
tier participants may not be entering into transactions with each
other. However, the E-Rate and RHC programs follow a different model,
and service providers in the first instance are chosen by the program
beneficiaries, not by the Commission. Therefore, to facilitate program
integrity and ensure the efficacy of disclosures, primary tier
disclosures as required by Supplemental Rule 6001.300(a) should be made
to the beneficiaries prior to consummation of any covered transactions,
preferably at an early stage in the bid selection process and before
the service provider is selected and the FCC Form 471, 462 or 466 is
submitted in cases where there are no bids or a competitive bidding
exemption may apply.
We encourage schools, libraries, and health care providers to
require such disclosures as early as possible in the bid selection
process so that they may consider such disclosures before entering into
any covered transactions.
We further direct WCB and CGB to modify, as appropriate, any
applicable program forms (such as FCC Forms 470, 461, or 465) to
require the relevant primary tier disclosures. In those cases in which
no bids are submitted, or in which a competitive bidding exemption is
applicable (such as 47 CFR 54.622(i)), the program beneficiaries shall
obtain such disclosures from service providers before they may enter
into any new covered transactions for program services.
These requirements will ensure that all primary tier participants
receive valuable background information about the parties with whom
they are considering doing business. Importantly, most disclosures
(other than that the disclosing party has been excluded or
disqualified) are not dispositive or outcome determinative. Rather,
disclosures enable program beneficiaries, program administrators, and
the Commission to evaluate the level of risk associated with any given
transaction and consider appropriate remedial measures short of
disqualification (e.g., compliance conditions, audits, heightened
scrutiny).
We recognize that the Guidelines' disclosure requirements
necessarily involve some administrative costs for the Commission and
program administrators, as well as program participants. But we reject
CTIA and USTelecom's argument that these requirements will have the net
effect of diverting ``resources better invested in providing service
and equipment to unserved communities and consumers'' into ``satisfying
onerous compliance obligations.'' To the contrary, we anticipate that
these disclosure requirements will ensure that scarce federal support
dollars fulfill their intended purposes by allowing the Commission and
primary tier participants to avoid entering into business with bad
actors who may commit waste, fraud, or abuse. The disclosures will also
allow the Commission and program administrators to address perceived
risks ex ante through monitoring and audits rather than through ex post
remedies, which also will enhance the efficiency of the Commission's
operations.
Lower Tier Participants. The Guidelines' disclosure requirements
for lower tier participants are less extensive: lower tier participants
need disclose only whether they are excluded or disqualified from
participating in
[[Page 18159]]
covered transactions. The NPRM asked whether the Commission should
adopt a supplemental rule requiring that lower tier participants also
disclose the information required of primary tier participants to both
the Commission and program administrators, and to the higher tier
participant with which they seek to conduct business. The NPRM noted
that, under the Guidelines, an unfavorable disclosure by a primary tier
participant would not necessarily cause the federal agency to deny
participation (except for instances of exclusion or disqualification),
and the NPRM proposed to extend this protection to disclosures by lower
tier participants. The NPRM explained that extending primary tier
disclosure requirements to lower tier participants would allow the
Commission and its administrators, as well as higher tier participants,
the opportunity to consider additional information to better determine
whether the participation of lower tier participants is appropriate.
The NPRM proposed requiring that primary and lower tier participants
include a term or condition in their transactions with the next lower
tier participants mandating compliance with the disclosure rules.
We adopt with the modifications and exceptions described below our
proposed rule extending the Guidelines' primary tier disclosure
requirements to lower tier participants in all Commission programs
subject to this Report and Order. We find that this extension will
advance the public interest and is appropriate given our experience
combatting waste, fraud, and abuse in our programs. Specifically, lower
tier participants, such as consultants and marketing organizations,
have been significant drivers of malfeasance in the universal service
programs. We do not believe that requiring lower tier participants to
disclose only whether they are excluded or disqualified from
participating in covered transactions will fully accomplish the
Guidelines' objective of enabling government agencies or the parties
with whom these participants may be conducting transactions to make
better-informed decisions about prospective business partners.
We further modify the Guidelines to require disclosures among and
between lower tier participants that enter into covered transactions
with each other. In those transactions, the lower tier participant who
is performing work for another participant shall provide the
disclosures to any participant who is paying for the work or otherwise
hiring the person under the covered transaction. Thus, for example, an
E-Rate subcontractor who wants to enter into a covered transaction with
a contractor--both of whom are lower tier participants--must provide
any applicable disclosures to that contractor before consummating the
covered transaction. Similarly, a marketing organization that wants to
perform a portion of Lifeline marketing work for another marketing
entity must provide that entity with the applicable disclosures. This
requirement will again ensure that all parties, regardless of tier, who
enter into covered transactions can make an informed decision about
their potential partners.
However, we tailor the disclosure obligations for enrollment
representatives of marketing organizations, which we classify as lower
tier participants. Enrollment representatives need only disclose
whether that individual representative is excluded or not and need only
make the disclosures to the marketing organization with whom the
representative is employed or seeks employment. We limit the disclosure
obligations for enrollment representatives because we conclude that a
marketing organization will not require the full panoply of disclosures
in order to make reasonable hiring decisions of enrollment
representatives. Additionally, we recognize the substantial
administrative burden that would be imposed on lower tier employ
[…truncated; see source link]Indexed from Federal Register on April 9, 2026.
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