Administrative: Government contractors are debarred

Where plaintiffs challenged the debarment decision, but some of their arguments were not raised at the administrative level and were thus waived, and they failed to show the government’s decision was arbitrary and capricious, an abuse of discretion or otherwise not in accordance with the law, it was affirmed.

Background

Paragon Defense Solutions Inc., Weiwei Jian, SupplySync LLC and Natallia Patashka challenge their debarment from federal contracting by the United States Defense Logistics Agency, or DLA. Before the court are cross-motions for summary judgment.

Waiver

With respect to their objection based on the DLA’s and the suspending and debarring official’s lack of authority to debar them, plaintiffs contend that they did not need to raise or press these issues before the agency because “[i]t doesn’t matter what was argued below, when the argument is that the agency had no legal authority in the first place.” But decision from both the Supreme Court and Fourth Circuit establish that even where a litigant argues that the agency’s decision is void due to either the agency’s or the decisionmaker’s lacking the authority to impose the decision in the first instance, these issues must be pressed at the agency level or else they are unreviewable by the district court.

Merits

Even if plaintiffs had not waived the above arguments, they nevertheless fail on their merits and do not establish that defendants acted contrary to law. First, both the DLA and the official had the authority to debar plaintiffs. Plaintiffs nevertheless argue that the Small Business Administration, or SBA, is the only agency that can debar plaintiffs because Paragon and SupplySync are small businesses, and only the SBA can determine contractor responsibility under the Small Business Act. The court disagrees.

Although the SBA issues certificates of competency “for the purpose of receiving and performing a specific Government contract,” that certification does not preclude other federal agencies from making subsequent responsibility determinations for the purposes of debarment based on a small business contractor’s contract performance. Accordingly, even if these authority issues were preserved for review, the DLA did not act without authority or contrary to law when it debarred plaintiffs.

Plaintiffs argue that because the system permits a contractor to cancel an unlimited number of contracts and the government may terminate contracts at its convenience, government contractors may not be debarred for cancelling already-awarded contracts, and for this reason, debarring plaintiffs based on the number of contract termination was improper. The court again disagrees.

Debarment may be pursued where there is a cause for it in the regulations and the official determines that it is in the government’s interest to do so and weighs the relevant mitigating factors pursuant to statute. In any event, whatever rights plaintiffs may have had with respect to the cancellation of contracts, the court cannot identify any basis from which to conclude that the DLA was limited to recording what it regarded as performance issues in a contractor’s file and not pursue debarment when it deemed performance issues reflected in cancellations sufficiently serious to warrant debarment. Nor was recording any performance issues in the plaintiffs’ file a prerequisite to instituting debarment proceedings.

Similarly, plaintiffs contend that because the government has warranty rights, the government could have exercised in lieu of pursuing debarment, it was improper for them to debar plaintiffs rather than enforce their warranty rights. But the relied upon regulations do not require the government to pursue these warranty rights in lieu of, or before, seeking debarment. Likewise without merit is plaintiffs’ contention that debarment was not permissible given the government’s asserted failure failed to inspect goods within a reasonable time after they were delivered, and thereby arguably accepted plaintiffs’ nonconforming parts.

Debarment

In making the decision to debar Jian and Paragon, DLA relied primarily on the (i) 43 percent contract cancellation rate and (ii) 71 percent nonconforming parts sampling. Paragon and Jian did not dispute the accuracy of these statistics or contest these findings; instead, they merely promised to implement remedial measures to improve its quality control processes. Based on the entire administrative record, the court cannot find that the agency committed a clear error of judgment in debarring Jian and Paragon based on the undisputed facts before it.

With respect to Patashka and SupplySync’s debarments, and Jian and Paragon’s three-year debarment extension, DLA also “articulate[s] a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.’” Accordingly, based on the entirety of the administrative record, the court does not find that these decisions were arbitrary and capricious, an abuse of discretion or otherwise not in accordance with the law.

Plaintiffs’ motion for summary judgment denied. Defendants’ motion for summary judgment granted.

Paragon Defense Solutions Inc. v. Hegseth, Case No. 1:24-cv-01241, Aug. 20, 2025. EDVA at Alexandria (Trenga). VLW 025-3-341. 18 pp.