[Federal Register Volume 65, Number 120 (Wednesday, June 21, 2000)]
[Rules and Regulations]
[Pages 38706-38708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15684]



[[Page 38705]]

-----------------------------------------------------------------------

Part IV





Department of Housing and Urban Development





-----------------------------------------------------------------------



24 CFR Part 24



Debarment, Suspension, and Limited Denial of Participation; 
Clarification of Procedures; Final Rule

  Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / 
Rules and Regulations  

[[Page 38706]]


-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 24

[Docket No. FR-4505-F-01]
RIN 2501-AC61


Debarment, Suspension, and Limited Denial of Participation; 
Clarification of Procedures

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule clarifies two aspects of HUD's debarment, 
suspension, and limited denial of participation procedures. First, the 
rule clarifies that a debarring or suspending official may refer either 
disputed material facts or issues of law, or both to a hearing officer. 
Second, the rule clarifies the jurisdictional and procedural posture of 
a Limited Denial of Participation (LDP) when HUD subsequently issues a 
proposed debarment or suspension based on the same transaction(s) or 
conduct.

DATES: Effective Date: July 21, 2000.

FOR FURTHER INFORMATION CONTACT: Dane M. Narode, Deputy Chief Counsel 
for Administrative Proceedings, Departmental Enforcement Center, U.S. 
Department of Housing and Urban Development, 1250 Maryland Avenue, 
Suite 200, Washington, DC 20024; telephone (202) 708-2350 (this is not 
a toll-free number). Hearing- or speech-impaired persons may access 
this number via TTY by calling the toll-free Federal Information Relay 
Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background Information

    HUD's current regulations at 24 CFR part 24, subparts C, D, and G, 
cover the administration of the debarment, suspension, and limited 
denial of participation (LDP) administrative remedies, respectively. 
Recent administrative decisions interpreting aspects of these 
regulations have indicated a need for additional clarification as to 
their intent and operation.

a. Scope of Referral

    24 CFR 314(b)(2)(i) provides that a debarring official may refer 
``disputed material facts and issues of law to a hearing officer for 
findings of fact and conclusions of law.'' Section 413(b)(3) provides 
similar authority to a suspending official. This rule clarifies that 
under Sec. 24.314(b)(2)(i) and Sec. 24.413(b)(3), the debarring or 
suspending official, or a designee, has complete discretion to: (1) 
refer only disputed material facts to a hearing officer for resolution; 
(2) provide facts to a hearing officer and request that the hearing 
officer only make conclusions of law based on those facts; or (3) 
request a hearing officer to make findings of fact and conclusions of 
law. The hearing officer's findings of fact or conclusions of law must 
then conform to the scope of the debarring or suspending official's 
referral.

b. Transfer of Jurisdiction

    HUD's current regulation at 24 CFR 24.713(c) (entitled ``Effect of 
suspension or debarment on limited denial of participation'') covers 
the situation where HUD issues an LDP and then subsequently issues a 
proposed debarment or suspension based on the same transaction(s) or 
conduct. If a respondent contests the proposed debarment or suspension, 
Sec. 24.713(c)(2) requires the consolidation of the LDP proceeding with 
the proposed debarment or suspension proceeding and requires the 
debarring or suspending official to issue a final decision for both 
causes. If the respondent does not contest the proposed debarment or 
suspension, Sec. 24.713(c)(1) makes the final imposition of a debarment 
or suspension a final decision with respect to the LDP as well.
    The intent of Sec. 24.713(c) is to avoid separate LDP and debarment 
or suspension hearings, based on the same transaction(s) or conduct, 
coexisting for any period of time and to ensure that the consolidated 
proceeding is heard and decided under the debarment/suspension 
procedures. HUD revised its regulations governing debarments and 
suspensions in 1995 (60 FR 33049, June 26, 1995) to conform its 
procedures with other Federal agencies implementing the governmentwide 
common rule on debarments and suspensions. The intent of the 1995 
revisions was to reduce the regulatory burden on HUD and participants 
in its programs by applying the revised procedures to all debarments 
and suspensions. Continuing to apply LDP procedures to a debarment or 
suspension into which an LDP had been consolidated under 
Sec. 24.712(c)(2) would be inconsistent with that intent.
    This final rule clarifies that if HUD issues an LDP and then 
subsequently issues a proposed debarment or suspension, which the 
debarring or suspending official determines is based on the same 
transaction(s) or conduct, and the respondent contests the proposed 
debarment or suspension, then the hearing officer responsible for 
hearing the LDP must immediately divest jurisdiction over the LDP and 
transfer the administrative record of the case to the debarring or 
suspending official. The debarring or suspending official will then 
issue a final decision for both the LDP and the proposed debarment or 
suspension, pursuant to the hearing procedures governing debarments and 
suspensions.
    This rule also clarifies that, when a proposed debarment or 
suspension is issued following an LDP, during the 30 day period that a 
respondent is given under the regulations to contest the proposed 
debarment or suspension, all administrative proceedings on the LDP, 
including discovery, are automatically stayed. This again clarifies the 
intent of the regulations that at no time should there be two 
proceedings occurring on separate procedural tracks--one for an LDP and 
another for a debarment or suspension--based on the same transaction(s) 
or conduct.

II. Small Entities and HUD Enforcement Actions

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121, 110 Stat. 847, approved March 29, 1996) (``SBREFA'') 
provides, among other things, for agencies to establish specific 
policies or programs to assist small entities. Small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. On May 31, 1998 (63 FR 28214), HUD published a Federal 
Register notice describing HUD's actions on implementation of SBREFA.
    Section 223 of SBREFA requires agencies that regulate the 
activities of small entities to establish a policy or program to reduce 
or, under appropriate circumstances, waive civil penalties when a small 
entity violates a statute or regulation. Where penalties are determined 
appropriate, HUD's policy is to consider: (1) The nature of the 
violation (the violation must not be one that is repeated or multiple, 
willful, criminal or poses health or safety risks); (2) whether the 
entity has shown a good faith effort to comply with the regulations; 
and (3) the resources of the regulated entity. Depending upon the 
circumstances surrounding the violation, it is not HUD's intent to put 
any individual or entity out of business by the penalties or settlement 
amounts paid to the Federal Government.
    With respect to the issuance of an LDP, debarment, or suspension, 
HUD is cognizant that section 222 of the SBREFA requires the Small 
Business and Agriculture Regulatory Enforcement Ombudsman to ``work 
with each agency with regulatory authority over small businesses to 
ensure that small business

[[Page 38707]]

concerns that receive or are subject to an audit, on-site inspection, 
compliance assistance effort or other enforcement related communication 
or contact by agency personnel are provided with a means to comment on 
the enforcement activity conducted by this personnel.'' To implement 
this statutory provision, the Small Business Administration has 
requested that agencies include the following language on agency 
publications and notices which are provided to small businesses 
concerns at the time the enforcement action is undertaken. The language 
is as follows:

Your Comments Are Important

    The Small Business and Agriculture Regulatory Enforcement 
Ombudsman and 10 Regional Fairness Boards were established to 
receive comments from small businesses about federal agency 
enforcement actions. The Ombudsman will annually evaluate the 
enforcement activities and rate each agency's responsiveness to 
small business. If you wish to comment on the enforcement actions of 
[insert agency name], call 1-888-REG-FAIR (1-888-734-3247).

    As HUD stated in its May 21, 1998 notice, HUD intends to work with 
the Small Business Administration to provide small entities with 
information on the Fairness Boards and National Ombudsman program, at 
the time enforcement actions are taken, to ensure that small entities 
have the full means to comment on the enforcement activity conducted by 
HUD.

III. Justification for Final Rulemaking

    In general, HUD publishes a rule for public comment before issuing 
the rule for effect, in accordance with our regulations on rulemaking 
at 24 CFR part 10. Part 10, however, provides for an exception to this 
general rule when HUD finds good cause to omit advance notice and 
public participation. The good cause requirement is satisfied when 
prior public procedure is ``impracticable, unnecessary, or contrary to 
the public interest'' (24 CFR 10.1). HUD finds that good cause exists 
to publish this final rule for effect without first soliciting public 
comment because prior public procedure is unnecessary. This final rule 
only clarifies two aspects of HUD's debarment, suspension, and limited 
denial of participation procedures. This rule does not implement any 
substantive changes to these procedures.

IV. Findings and Certifications

Environmental Impact

    The clarifying revisions contained in this final rule do not 
direct, provide for assistance or loan and mortgage insurance for, or 
otherwise govern or regulate, real property acquisition, disposition, 
leasing, rehabilitation, alteration, demolition, or new construction, 
or establish, revise, or provide for standards for construction or 
construction materials, manufactured housing, or occupancy. Therefore, 
this rule is categorically excluded from the requirements of the 
National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Regulatory Flexibility Act

    The Secretary has reviewed this final rule before publication and 
by approving it certifies, in accordance with the Regulatory 
Flexibility Act (5 U.S.C. 605(b)), that this final rule would not have 
a significant economic impact on a substantial number of small 
entities. This final rule only clarifies two aspects of HUD's 
debarment, suspension, and limited denial of participation procedures. 
This rule does not implement any substantive changes to these 
procedures.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) requires Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and on 
the private sector. This final rule does not impose, within the meaning 
of the UMRA, any Federal mandates on any State, local, or tribal 
governments or on the private sector.

Federalism Impact

    This final rule does not have federalism implications and does not 
impose substantial direct compliance costs on State and local 
governments or preempt State law within the meaning of Executive Order 
13132 (entitled ``Federalism'').

List of Subjects in 24 CFR Part 24

    Administrative practice and procedure, Drug abuse, Government 
contracts, Government procurement, Grant programs, Loan programs, 
Reporting and recordkeeping requirements.

    For the reasons discussed in the preamble, HUD amends 24 CFR part 
24 as follows:

PART 24--GOVERNMENT DEBARMENT AND SUSPENSION AND GOVERNMENTWIDE 
REQUIREMENTS FOR DRUG-FREE WORK-PLACE (GRANTS)

    1. The authority citation for part 24 continues to read as follows:

    Authority: 41 U.S.C. 701 et seq.; 42 U.S.C. 3535(d); E.O. 12549, 
51 FR 6370, 3 CFR, 1986 Comp., p. 189; E.O. 12689, 54 FR 34131, 3 
CFR, 1989 Comp., p. 235.


    2. Revise paragraph (b)(2)(i) of Sec. 24.314 to read as follows:


Sec. 24.314  Debarring official's decision.

* * * * *
    (b) * * *
    (2) * * *
    (i) The debarring official may refer either disputed material facts 
or issues of law, or both to a hearing officer for either findings of 
fact or conclusions of law, or both.

    3. Revise paragraph (b)(3) of Sec. 24.413 to read as follows:


Sec. 24.413  Suspending official's decision.

* * * * *
    (b) * * *
    (3) The suspending official may refer either disputed material 
facts or issues of law, or both to a hearing officer for either 
findings of fact or conclusions of law, or both.

    4. Revise paragraph (c) of Sec. 24.713 to read as follows:


Sec. 24.713  Opportunity to contest the limited denial of 
participation.

* * * * *
    (c) Effect of suspension or debarment on limited denial of 
participation. If a respondent has submitted a request for a hearing 
pursuant to paragraph (a) of this section, and if the respondent has 
also received, pursuant to subpart C or D of this part, a notice of 
proposed debarment or suspension based on the same transaction(s) or 
conduct as the limited denial of participation, as determined by the 
debarring or suspending official, the following rules apply:
    (1) During the 30 day period after the respondent receives a 
proposed debarment or suspension during which the respondent may elect 
to contest the debarment under Sec. 24.314(a), or the suspension under 
Sec. 24.412(a), all proceedings in the limited denial or participation, 
including discovery, are automatically stayed.
    (2) If the respondent does not contest the proposed debarment 
pursuant to Sec. 24.313(a), or the suspension pursuant to 
Sec. 24.412(a), the final imposition of the debarment or suspension 
shall also constitute a final decision with respect to those parts of 
the limited denial of participation based on the same transaction(s) or 
conduct as the debarment or suspension, as determined by the debarring 
or suspending official.
    (3) If the respondent does contest the proposed debarment pursuant 
to Sec. 24.313(a), or the suspension pursuant to Sec. 24.412(a), then:
    (i) Those parts of the limited denial of participation based on the 
same

[[Page 38708]]

transaction(s) or conduct as the debarment or suspension, as determined 
by the debarring or suspending official, and the debarment or 
suspension shall be immediately consolidated before the debarring or 
suspending official;
    (ii) Jurisdiction of the hearing officer under 24 CFR part 24, 
subpart G, to hear those parts of the limited denial of participation 
based on the same transaction(s) or conduct as the debarment or 
suspension, as determined by the debarring or suspending official, 
shall be divested, and the hearing officer responsible for hearing the 
limited denial of participation shall transfer the administrative 
record to the debarring or suspending official; and
    (iii) The debarring or suspending official shall hear the entire 
consolidated case under the procedures governing debarments and 
suspensions, and shall issue a final decision as to both the limited 
denial of participation and the debarment or suspension.

    Dated: June 14, 2000.
Andrew Cuomo,
Secretary.
[FR Doc. 00-15684 Filed 6-20-00; 8:45 am]
BILLING CODE 4210-32-P