TR Daily Parties Urge FCC to Ensure Due Process in Suspension, Debarment Rules
Friday, February 14, 2020

Parties Urge FCC to Ensure Due Process in Suspension, Debarment Rules

Service providers and stakeholders in the FCC’s universal service programs are urging the Commission to exercise caution in changing its suspension and debarment rules, saying that it should ensure due process, look for alternatives, and protect subscribers that may have no other options for broadband service.

Parties were responding to the FCC’s GN docket 19-309 notice of proposed rulemaking (NPRM) on expanding the application of the agency’s suspension and debarment rules, which currently apply only to participants in its Universal Service Fund programs, to participants in the telecommunications relay service (TRS) reimbursement program and National Deaf-Blind Equipment Distribution Program (NDBEDP). The NPRM also proposed that the FCC participate in a government-wide program that puts entities disbarred from government program on a government-wide exclusion list (TR Daily, Nov. 22, 2019).

In a joint filing, the Schools, Health & Libraries Broadband (SHLB) Coalition and the State E-Rate Coordinators’ Alliance said they are “concerned that the proposed rules are overbroad and fail to consider the unique aspects of the USF programs.”

They said, “Formal suspension and debarment procedures should be limited to fraud, repeated or willful violations, and other intentional and serious misconduct. It should not serve as a remedy for mere negligence or good faith mistakes.”

SHLB and SECA urged the adoption of “procedural safeguards to ensure that individuals or organizations subject to suspension and debarment are treated fairly. Because USAC currently employs a de facto suspension process which lacks any due process protections, SHLB-SECA urges the Commission to eliminate the practice and to clarify the Administrator’s role under the new rules.”

They added that “the rules must balance threats to the integrity of the USF programs on the one hand and an ominous, damaging suspension or debarment to participants on the other. The rules should offer flexibility and authorize the Commission to use alternative remedies where appropriate, for example, precluding a transaction in lieu of or prior to suspending a participant, granting exceptions to allow an excluded party to participate in a transaction, and authorizing debarring officials to tailor debarments or propose alternative remedies. SHLB-SECA firmly supports the use of a ‘limited denial of participation’ as a parallel, more flexible alternative to suspension and debarment. We also endorse giving debarred participants an opportunity to reduce the period and scope of debarment.”

In addition, they said, “USF beneficiaries should be permitted to continue receiving services from a suspended or debarred provider for the duration of the contract, whether the services are delivered under a contract or month-to-month basis.”

SHLB and SECA said that “the criteria in the Guidelines for imputing conduct from an individual to an organization should be more carefully crafted. The rules should also provide that incorrect advice given in connection with USF program rules may not, without more, be grounds for suspension and debarment.”

Also, “it is imperative that new rules offer sufficient clarity and specificity to participants subject to the rules. The Commission should more clearly define which conduct it believes is sufficient to warrant suspension or debarment and specify which information may be deemed so unfavorable that rejection of a transaction is warranted,” they said.

In a joint filing, Incompas, NTCA, and ACA said, “[G]iven the detrimental impacts suspension and debarment have on participants as well as intended beneficiaries of the affected programs, the Joint Association Commenters urge the FCC to draw upon the experience of other agencies and adopt balanced rules that not only allow for an appropriate response to incidents of noncompliance or misconduct, but also incorporate strong due process protections for service providers.

“First,” they continued, “the FCC should recognize that initiating a suspension or debarment proceeding is a drastic action and should not be used as a tool for punishment or as a response to political pressure against disfavored service providers. The suspension and debarment process is meant to assess a service provider’s ‘present responsibility’ to participate in an affected funding program, not to punish past violations. It should be used sparingly.

“Second,” they added, “the FCC should not expand the grounds for suspension and debarment to include considerations of service provider compliance or regulatory fee payment history that do not rise to the level of an inability to conform conduct to FCC rules. Consideration of such conduct ignores existing FCC mechanisms to recoup improper payments or impose forfeitures and risks conflating the agency’s enforcement functions with the forward looking purpose of the suspension and debarment rules.”

“Third,” the three trade associations said, “the FCC must ensure that the agency official issuing suspension and debarment determinations operates as a neutral, objective decision maker. To achieve this, the responsibility is best placed in the agency’s Office of Managing Director,” as opposed to within the bureaus.

The joint commenters also urged the FCC to take into consideration mitigating factors before initiating suspension or debarment proceedings, to set “clear timeframes” making determinations, to address continuity of service concerns, and to “adopt targeted safe harbors for suspension and debarment to provide affected program participants with predictability, encourage voluntary compliance, and protect the public from unnecessary service terminations.”

Also in a joint filing, CTIA and USTelecom said that, “as proposed in the NPRM, the new suspension and debarment rules lack clear standards and sufficient due process procedures, set too low a threshold for suspension and debarment, and impose onerous compliance obligations on USF and other support program participants. The proposed rules reach a far broader range of conduct than contemplated by the OMB Guidelines, potentially punishing many good actors for the sake of expediting penalties against a few bad ones. The proposed rules would also impose burdensome reporting obligations, diverting scarce resources from USF and other support program participants, many of which are resource-constrained to begin with.”

They added, “The Commission should balance the need to reserve critical support program resources for qualified participants with the need to adopt fair, reasonable, clear rules and procedures that promote participants’ ability to leverage those resources to expand broadband access, as other federal agency support programs have done. By protecting providers’ due process rights, focusing suspension and debarment procedures on egregious conduct, and minimizing burdens on providers, the Commission can update its rules to combat misconduct and ensure that these scarce resources go to those who need them, while promoting participation in the USF and other support programs to help bridge the digital divide.”

They urged the FCC to adopt a “preponderance of the evidence” standard, adopt “meaningful standards for the imputation of conduct” from an individual to an organization, and consider mitigating factors before imposing suspension or debarment. Suspension and debarment should be imposed only for “egregious” conduct, they said, and not for “unsatisfactory” performance.

CTIA and USTelecom urged the FCC to apply the rules to primary tier participants (e.g., carriers, schools, health care providers) only. “A variety of federal agencies have concluded that extending the enhanced disclosure obligations to suppliers and subcontractors is not necessary to protect the public interest. Moreover, the Commission has not explained why departure from its current rules, which do not extend to suppliers or subcontractors, is necessary to protect the public interest. Because communications networks are capital-intensive and include a wide array of subcontractor inputs, the number of lower tier participants is significant, so extending the requirements to them would impose unduly burdensome investigation obligations on primary tier participants. The proposed rules may also result in suspending or debarring a primary tier participant because of a good-faith mistake or failure to identify, out of the large number of subcontractors it works with, a single subcontractor who is in some way disqualified. Time and effort spent on such investigations would be better invested in network upgrades and other efforts to close the digital divide. Moreover, including subcontractors could also limit choice and competitive options for primary tier contractors,” they said.

NCTA said that “the substantial agency discretion provided under the rules proposed in the Notice raises due process and other concerns that should be addressed before the Commission moves forward with this proposal.”

NCTA added that, “in deciding whether to move beyond the current ‘clear-cut, mandatory, and virtually self-executing’ rules, the Commission must take care not to sweep too broadly. In particular, any new rules should ensure that: (1) robust due process protections are in place; (2) the discretion provided to the agency under the Guidelines is not abused; (3) parties do not face suspension and debarment for actions beyond their control; and (4) parties do not face suspension and debarment for conduct that predates the new rules.” For example, NCTA said that parties should not face suspension and debarment for the actions of contractors and sub-contractors.

The proposal to no longer require a prior criminal conviction or finding of civil liability poses “a risk that parties will face suspension and debarment without adequate notice of the allegations against them or insufficient opportunity to challenge the allegations and introduce exculpatory or mitigating evidence,” NCTA said.

“The necessary due process protections should include procedures that occur before the Commission acts to suspend or debar a participant in one of its programs, evidentiary standards during the process, and procedures for challenging such decisions after they are made and addressing such challenges in a timely manner,” it urged.

NCTA called for the creation of “a process by which parties are informed of the potential for suspension or debarment proceedings before the formal initiation of such proceedings. The use of ‘pre-notice’ or ‘show cause’ letters could serve to inform the affected provider of the alleged basis for the suspension or debarment and the facts upon which such allegations are based. Such a notice also could be the trigger for discussions about resolution through less extreme alternatives than suspension and debarment,” such as a consent decree.

Pursuing alternatives to suspension and debarment would help avoid leaving area, schools, and health facilities without universal service support if the only provider serving them is suspended or debarred, NCTA said.

It also called for providing parties with “a meaningful opportunity to introduce evidence of exculpatory or mitigating factors.” It opposed the proposal for using an “adequate evidence” standard. It urged the FCC to “establish a set of clear timeframes for action by the agency officials responsible for making decisions regarding suspension and debarment, as well as review of those decisions by the full Commission.”

NCTA called for the FCC to “take steps to ensure that the discretion under the [Office of Management and Budget Guidelines to Agencies on Government Debarment and Suspension (Nonprocurement)] is not abused,” by, for example, “making clear that it will weigh the severity of the alleged misconduct against the provider’s overall track record” and by “mak[ing] clear that it will only consider using suspension and debarment where it finds that a party has willfully violated the Commission’s rules or been grossly negligent in its compliance efforts, and not in instances of administrative error or inadvertent oversights.”

NCTA also said it is “is concerned about language in the Guidelines that would potentially trigger disqualification for having a state or local “transaction” terminated within the preceding three years. Given that many participants in the federal universal service fund programs have extensive dealings with state and local governments this provision would create a significant risk of suspension or debarment from federal programs based on state or local actions that are not the result of any serious wrongdoing or that may be completely unfounded. Accordingly, the Commission should make clear that it will only pursue suspension and debarment when there is evidence that a party has acted willfully or been grossly negligent in its failure to comply with the rules.”

The Wireless Internet Service Providers Association warned that “certain of the proposed rules could lead to consequences that are far-reaching and disproportionate to the potential harm.” It recommended that “a finding of inappropriate use of Federal funding should not warrant automatic suspension of the ability to obtain FCC licenses for provision of service to the public.

WISPA also said that the FCC “should not expand the OMB Guidelines’ definition of ‘principal’ so as to create the presumption that the enumerated professionals must generally be considered ‘principals’ without having any identified capability to substantially influence activity that is part of a covered transaction.”

WISPA recommended that “to expedite staff review for eligibility purposes, an applicants [sic] should disclose in initial short-form applications only whether the applicant or its principals are presently excluded or disqualified, with more detailed disclosures required during the long-form application review process that is limited to successful bidders.”

WISPA opposed the notice’s proposal “to apply any revised rules to conduct occurring before such rules are effective.”

E-Rate Central said, “As a practical matter, the E-rate program has for too long been run with its own form of a shadow suspension and debarment process whereby funding for program participants is deferred and/or denied for extended periods for undisclosed reasons and with no procedural protections. Applications have essentially disappeared into ‘black holes’ thus depriving schools and libraries of millions of dollars in much needed technology funding for their students and patrons for years on end. This is not a new problem.”

It cited a 2011 white paper by the State E-Rate Coordinators’ Alliance, of which E-Rate Central is a member, showing that 169 applicants still had applications pending from 2009, and 8 applicants still had applications pending from 1999. “The situation since 2011 has not improved,” it said. “In addition to ‘black hole’ applicants, we have witnessed examples of ‘black hole’ consultants dragging large groups of applicants into the hole with them.”

In one case involving 300 parochial schools in New York working with the same consultant, “USAC was unwilling — or perhaps unable — to answer applicant or State E-rate Coordinator questions as to the delays in application reviews for this consultant. Only later in 2018, following the arrest of seven individuals including the consultant’s founder in connection with E-rate fraud, did the probable reason for USAC’s delays become apparent. What is still not known is to what extent all 300-odd schools were complicit in the alleged fraud or how many were simply penalized by using a suspect consultant,” E-Rate Central said.

“The critical E-rate question to be addressed in this NPRM is whether or not the proposed suspension and debarment rules (or some variation thereof) can shed light on ‘black hole’ situations by giving USAC and/or the FCC tools to more flexibly address areas of concern while at the same time providing due process relief to applicants, service providers, and consultants,” E-Rate Central said, suggesting “the use of a ‘limited denial of participation’ mechanism,” which would “[p]ut all participants, regardless of tier, on notice that an investigation is underway,” as well as set timeframes for resolution, allow for alternative compliance measures, and not automatically trigger inter-agency reciprocity.

Other parties expressing concerns about the FCC’s proposals included Cellular South, Inc., and immixGroup, Inc. —Lynn Stanton, [email protected]

MainStory: FederalNews FCC DisabilityAccess

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