Excluded parties: Overview, definition, and example
What are excluded parties?
Excluded parties are individuals or entities that are specifically disqualified, restricted, or barred from participating in a contract, transaction, or program, often due to legal, regulatory, or compliance reasons. These parties may appear on government exclusion lists—such as those maintained by the U.S. Office of Inspector General (OIG) or the System for Award Management (SAM)—because of past violations, debarments, or sanctions.
Why are excluded parties important?
Identifying excluded parties is important because working with them can expose a business to legal, financial, or reputational risk, and in some industries, may lead to automatic violations of law or funding rules. For example, federal contracts or healthcare programs prohibit participation by individuals or organizations that have been excluded for fraud or misconduct. Contracts often include representations or warranties stating that neither party is an excluded party and will not engage with any.
Understanding excluded parties through an example
A healthcare provider enters into an agreement with a billing contractor. The agreement includes a clause requiring both parties to confirm that they are not excluded from participation in federal healthcare programs. If the contractor later appears on the OIG exclusion list, the provider may be required to terminate the agreement to remain in compliance with Medicare and Medicaid rules.
Example of how an excluded parties clause may appear in a contract
Here’s how an excluded parties clause may appear in a services or government contracting agreement:
"Each party represents and warrants that it is not presently debarred, suspended, proposed for debarment, declared ineligible, or otherwise identified as an excluded party on any federal or state exclusion list, including the System for Award Management (SAM) or the OIG List of Excluded Individuals/Entities (LEIE)."
Conclusion
Excluded parties clauses help ensure compliance with laws and funding requirements by screening out individuals or entities that are legally barred from participating. Including this provision protects the integrity of the transaction and minimizes regulatory exposure, especially in government contracting, healthcare, and grant-funded environments.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.