The Air Force is showing increased interest in using its Contractor Responsibility Watch List (CRWL). This is for companies that, in the agency’s view, should be blocked from further space projects. The CRWL skips over the debarment process for contracts and grants based on an apparent congressional notion that the Space Systems Command, and now the Assistant Secretary (Space Acquisition and Integration) covering all space programs, should have special authority to blacklist companies.
Although an earlier version of CRWL was little used, the Fiscal Year (FY) 2025 National Defense Authorization Act (NDAA) (10 U.S.C. § 2271a) emphasizes that the Air Force will not approve contracts, subcontracts, grants, cooperative agreements, or other transactions for a company (or specific division thereof) listed on the CRWL. The FY 2025 NDAA CRWL raises many questions:
- Why not rely on the already well-established and judicially-approved federal Suspension and Debarment Official (SDO) process?
- What effect will a CRWL listing have on current proposals, contracts, grants, or other agreements?
- Is CRWL now a public list?
- Does the System for Award Management (SAM) include CRWL?
- Will a CRWL listing have the stigma and reciprocal effect that can lead to government-wide debarment?
- Who is responsible for CRWL vetting of potential subcontractors?
The FY 2025 NDAA requires the Air Force to issue new CRWL guidance, which might answer some of these questions. Maintaining high standards of business ethics and compliance is always a requirement for contractors, but reasonable disputes do arise during a project. A fundamental concern remains that an Air Force CRWL listing could be imposed without further review. Absent an independent SDO, performance disputes could lead to punitive “de facto debarment” via CRWL.
What is debarment v. “de facto debarment”?
In the U.S. federal procurement system, a contracting officer (CO) determines whether a contractor is qualified (“responsible”) before awarding a contract. This decision takes into account the contractor’s financial resources, current and past performance history, ethics and integrity, operations, and facilities. A responsibility decision only affects the contractor for a specific contract.
By contrast, debarment (sometimes preceded by suspension) is an automatic exclusion from bidding for all federal agency procurements, which can carry over to state and local procurements and often commercial contracting. The same issues that give rise to suspension and debarment from contracting can also occur with grants and other agreements, which are covered by similar rules for “nonprocurement” transactions.
- Courts have recognized that Constitutional fairness prohibits the government from debarring companies without affording them Fifth Amendment due process. This includes giving notice of the grounds for debarment and an opportunity to oppose it.
- The contracting and grant rules establish formal procedures to provide due process and give each agency’s SDO the sole authority to debar companies or individuals.
- The SDO’s role is not to determine punishment for alleged misconduct but rather to assess overall present responsibility. Most companies will take prompt corrective action to address any causes for potential debarment. After providing notice and an opportunity to respond, and based on a review of the record, the SDO can determine whether debarment is really necessary to protect the public interest. If the SDO’s debarment decision is unreasonable, it can be reversed by judicial review.
- A recent update brings more uniformity between the contracting and grant rules for suspension and debarment and adds best practices for providing notice, developing the record, and considering mitigating (or aggravating) factors.
When the government ignores these procedures but yet seeks to avoid making contracts or grant awards to a company, an illegal de facto debarment occurs. Courts have said that a de facto debarment is shown by an agency’s statements or conduct that it will not award the company future work. One specific instance might not be enough, but clear evidence of a systematic disqualification from government contracts or grants is an illegal de facto debarment.
The Contractor Responsibly Watch List (CRWL)
The National Reconnaissance Office (NRO) spy satellites program originated the CRWL concept, calling it an internal performance-based watch list. The FY 2018 NDAA created the “Air Force Space Contractor Responsibility Watch List,” which was implemented by Space Systems Command, Instruction 64-101, Space Contractor Responsibility Watch List (CRWL) (Oct. 2, 2018, rev. Mar. 8, 2022). From the start, the Air Force envisioned a CRWL listing would take a problem encountered on even one project and use it to halt award actions on other contracts or grants.
An SSCI 64-101 CRWL listing requires Space Systems Command approval before proceeding with a space company whose ability to successfully carry out a project is uncertain due to poor performance or award fee scores below 50 percent, financial concerns, felony convictions or civil judgments, or security or foreign ownership and control issues.
The FY 2025 NDAA restates and expands the possibilities for CRWL listing to include alleged “inadequate management, operational or financial controls, or resources” or the catch-all of “[a]ny other failure of controls or performance of a nature so serious or compelling as to warrant placement of the contractor on the watch list.” The CRWL, thus can target performance under a single contract for almost any reason, which would then block future contracts or options. The current CRWL guidance does not speak to issues that could arise during performance, such as contract interpretation or the possibility that the government might be partly responsible for cost or schedule impacts. Rather, the company is presumed at fault until proven otherwise.
Why did the Air Force and Congress want this heavy-handed measure? The State Department has been allowed to use a form of de facto debarment for counterterrorism vetting, but this would not be called for in Air Force space programs. Government contracting and grant officials already have considerable leverage over contractors and grantees under standard terms and conditions. COs also have the Contractor Performance Assessment Ratings System (CPARS), where they can record detailed performance evaluations and ratings in a government-wide database. If contract or grant administration is not effective, can the government still get a company’s attention? And the perception persists that there is a limited possibility of SDO debarment, where the focus is on overall corporate responsibility. The CRWL thus side-steps the contract or grant processes and enables a quick sanction.
Current CRWL Procedures
There is a modicum of process and procedure in SSCI 64-101, including notification of the reasons for a proposed CRWL listing, although there are exceptions for immediate listing. The company has 30 days to respond to a notification. However, there are no provisions to:
- Require a full administrative record supporting the alleged cause(s) for a listing;
- Resolve how a listing will be handled by the Interagency Suspension and Debarment Committee, which monitors implementation of Executive Order 12549 (Debarment and Suspension) for all agencies; or
- Ensure that the administrative record will not be releasable under the Freedom of Information Act.
Fact-Finding
SSCI 64-101 raises the possibility of fact-finding if the Air Force determines there is a genuine dispute over material facts. This is left to the discretion of the SSC Commander, who could decide whether written arguments are sufficient or allow an in-person hearing. The procedure does not require that the matter be assigned to an independent fact-finder.
By contrast, since at least 1992, the Department of Defense FAR Supplement (DFARS) has included uniform procedures for SDOs. In addition, the FAR/DFARS process calls for a neutral designated fact-finder to resolve factual disputes. The current CRWL process stops short of this and limits the ability to challenge documents, statements, witnesses, or other information used to support a proposed CRWL action.
What to Do?
Given the state-of-the-art technical challenges the Air Force is seeking to overcome inherent in space contracting, all project participants would be best served by concentrating on contractual remedies rather than draconian measures. In any event, companies need to avoid the CRWL penalty box, which means recognizing that this tool exists behind Air Force demands to carry out program objectives. Accordingly, it will be important to:
- Become familiar with the updated CRWL policies and procedures once they are issued;
- Maintain effective compliance programs, with analytical metrics as part of risk management;
- Proactively identify, communicate, and resolve potential performance issues;
- Channel bona fide disputes into contractual remedies, even if by formal claims;
- Consider bringing in an SDO at an early point if serious compliance issues arise, including enforcement actions – CRWL allows for a case-by-case delegation to the Air Force SDO.
- If there is a potential CRWL listing, demand a complete administrative record, followed by an adequate hearing to ensure that disputed material facts are thoroughly documented and any issues are addressed.
The best way to prepare for judicial intervention, if necessary, is to provide the Air Force with exhaustive, documented responses as early as possible. After that, even though the FY25 NDAA recites that “[CRWL] shall not be construed as a punitive measure or de facto suspension or debarment of a contractor,” the CRWL is a systematic effort to bar a company from future work, which a court could decide amounts to an impermissible de facto debarment.
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