[Federal Register Volume 61, Number 63 (Monday, April 1, 1996)]
[Rules and Regulations]
[Pages 14252-14261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7824]



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LEGAL SERVICES CORPORATION
45 CFR Part 1634


Competitive Bidding for Grants and Contracts

AGENCY: Legal Services Corporation.

ACTION: Final rule.

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SUMMARY: Congress has adopted legislation requiring the Legal Services 
Corporation (``LSC'' or ``Corporation'') to utilize a system of 
competitive bidding for the award of grants and contracts. Pursuant to 
that law, this rule is intended to implement a system of competitive 
bidding for the award of grants and contracts for the delivery of legal 
services to eligible clients. The competitive bidding system has been 
structured so as to meet the primary purposes of the LSC Act as 
amended, that is, to ensure the economical and effective delivery of 
high quality civil legal services to eligible clients and improve 
opportunities for low-income persons. Competitive bidding is also 
intended to encourage recipients to improve their performance in 
delivering legal services.

EFFECTIVE DATE: May 1, 1996.

FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel, 
Legal Services Corporation, 750 First Street NE., 11th Floor, 
Washington, DC 20002-4250, (202) 336-8800.

SUPPLEMENTARY INFORMATION: On June 25, 1995, the Corporation's Board of 
Directors (``Board'') adopted a resolution requiring Corporation staff 
to prepare a regulation on competition in the delivery of legal 
services. On September 8 and 9, 1995, the Board's Operations and 
Regulations Committee and the Provisions for the Delivery of Legal 
Services Committee (``Committees'') held public hearings on a draft 
proposed rule, 45 CFR Part 1634. After adopting several changes to the 
draft proposed rule, the Committees voted to publish a proposed rule in 
the Federal Register for notice and comment. The proposed rule was 
published on September 21, 1995 (60 FR 48951), and eleven comments were 
received and reviewed by the Corporation. Seven comments came from LSC 
recipients; the rest were submitted by the State Bar of California, the 
Maryland Task Force on Statewide Planning for Essential Legal Services 
for the Indigent (``SPELSI''), the National Organization of Legal 
Services Workers (``NOLSW'') and the Center for Law and Social Policy 
(``CLASP''). On February 23, 1996, the Committees met to consider 
written and oral comments to the proposed rule. Based on those 
comments, the Committees made several revisions. On February 24, 1996, 
the Board voted to adopt the rule as recommended by the Committees for 
publication as a final rule in the Federal Register.
    Generally, this rule is intended to set out the framework for a 
system of competitive bidding that is structured to meet the primary 
purposes of the LSC Act, that is, to ensure the effective and 
economical delivery of high quality legal services to eligible clients. 
Through the competitive bidding system, qualified attorneys and 
entities are to be provided an opportunity to compete for grants and 
contracts to participate in the delivery of a full range of high 
quality legal services in service areas determined by the Corporation. 
Competitive bidding is also intended to encourage recipients to improve 
their performance in delivering legal services.
    The competitive system envisioned in this regulation is intended to 
encourage realistic and responsible bids aimed toward the provision of 
quality legal services. Proposals should favor cost-effectiveness, 
rather than simply cost, and favor delivery systems that provide a full 
range of legal assistance, rather than only some kinds of services in 
only some types of cases. Competitive bidding is also intended to 
ensure that recipients are those best able to provide high quality 
legal assistance to the poor.
    Finally, the rule provides authority for the Corporation to modify 
the timetables and other provisions of the system to conform to 
requirements imposed by law.
    A section-by-section discussion of the rule is provided below.

Sec. 1634.1  Purpose

    This section sets out the purpose of the rule, which is to 
encourage the economical and effective delivery of high quality legal 
services to eligible clients through an integrated system of

[[Page 14253]]
legal services providers by providing opportunities for qualified 
attorneys and entities to compete for grants and contracts and by 
encouraging recipients to improve their performance in delivering legal 
assistance. The section also states that the competitive system is 
intended to preserve local control over resource allocation and program 
priorities, and minimize disruptions when there is a change in 
providers in the delivery of legal services to eligible clients within 
a service area.
    Comments on this section generally disagreed on the advisability of 
using a competitive process in the context of a delivery system for the 
provision of legal assistance. Concern was expressed that a competitive 
process would cause instability, discourage and reduce pro bono efforts 
by the private bar, fragment the delivery of legal services, and 
undermine the goal of an economical and effective system of legal 
assistance to the poor. It was also pointed out that competitive 
bidding has not worked in criminal defense or in civil legal aid where 
it has been tried. The Board made no changes to the rule in response to 
these comments. In addition to the fact that the Corporation 
anticipates the passage of legislation in the near future that will 
require the Corporation to implement a competitive process, the Board 
determined that the rule sets out a process that addresses many of 
these concerns and yet retains flexibility for the Corporation to shape 
the delivery system in a way that will make it more effective and 
economical.
    The comment from the State Bar of California agreed with the 
statement in paragraph (a) that a purpose of the rule is to encourage a 
system for the delivery of legal services that is consistent with the 
American Bar Association's Standards for Providers of Civil Legal 
Services to the Poor, but suggested that some provision should be made 
for any congressional directive that would be inconsistent with the 
Standards. The Board decided that no revision to the rule was 
necessary. First, the purpose section merely sets out the reason for 
the rule and is not an express requirement. Second, the rule's section 
on selection criteria requires consideration of an applicant's 
compliance with both the Standards and any applicable law. See 
Sec. 1634.9 (c) and (e). Because the law would always take precedence 
over the Standards, an applicant would not be penalized for 
noncompliance with a Standard when such noncompliance is required by 
law.
    The meaning of an ``integrated system of legal services providers'' 
was also questioned in a comment that stated that the phrase lends 
itself to several possible interpretations. Section 1634.1(a) of the 
proposed rule provided that:

    The purpose of such a competitive system is to: (a) Encourage 
the effective and economical delivery of high quality legal services 
to eligible clients that is consistent with the Corporation's 
Performance Criteria and the American Bar Association's Standards 
for Providers of Civil Legal Services to the Poor through an 
integrated system of legal services providers[.] [emphasis added].

Although the rule does not define an integrated system, the meaning of 
the phrase is made clear in Sec. 1634.9(a)(6), which sets out a 
selection criterion that would require an applicant to demonstrate an 
ability to be part of an integrated system. According to this 
criterion, an integrated system is one where the various recipients in 
a State work in conjunction with the various components of the State's 
legal services delivery system in order to assure a full range of legal 
services. In addition, an integrated system facilitates the ability of 
recipients to develop and increase non-Corporation resources, enhances 
the efficient involvement of private attorneys in the delivery of legal 
assistance to eligible clients and improves a recipient's ability to 
serve their client's needs. Recipients should be better able to serve 
their clients if they know of and cooperate with other legal services 
providers, community groups and human services providers.

Section 1634.2  Definitions

    This section defines key terms used in the regulation.
    The definition of ``qualified applicants'' includes recipients and 
other entities or lawyers qualified to compete. The only comment on 
this definition disagreed with the inclusion of state and local 
governments or substate regional planning and coordination agencies due 
to the potential for conflicts of interest. However, these entities 
have been designated as qualified applicants by all versions of the 
competition provision included in Fiscal Year (``FY'') 1996 legislation 
considered by Congress. Although such legislation has not yet been 
enacted as law, the Corporation anticipates that such legislation will 
be enacted in the near future that will include this type of entity. 
Therefore, the Board included the provision in this final rule.
    The proposed rule defined ``review panel'' as including, at a 
minimum, lawyers experienced in and knowledgeable about the delivery of 
legal assistance to low-income persons and eligible clients or 
representatives of low-income community groups. Comments pointed out 
that the provision did not go far enough because the provision's 
requirements would be met as long as there was one attorney 
knowledgeable about legal services and one eligible client or low-
income representative. No requirements existed for other members of a 
review panel. Comments suggested that the criteria for membership on a 
review panel should be similar to that of a recipient's board of 
directors, because review panels, like governing bodies, are charged 
with important decision-making power in implementing the purposes of 
the LSC Act. Absent appropriate knowledge and qualifications, review 
panel members would be ill-equipped to make effective decisions 
regarding the use of Federal funds. Accordingly, the Board decided to 
amend the proposed definition to require that a majority of review 
panel members shall be eligible clients or representatives of low-
income community groups and lawyers who are supportive of the purposes 
of the LSC Act and who are experienced in and knowledgeable about the 
delivery of legal assistance to low-income persons. In addition, the 
definition now requires that the remaining members of review panels be 
persons who are supportive of the purposes of the LSC Act and have an 
interest in and knowledge of the delivery of legal assistance to the 
poor.
    The definition of a review panel also prohibits membership by any 
person with a financial interest or ethical conflict. Situations where 
there could be a conflict of interest would be where the person has 
been an adverse party in any case litigated by any applicant whose 
proposal the review panel member is to review, or has issued a 
complaint against any such applicant, or is disgruntled because any 
such applicant has denied the person's request for legal assistance. A 
financial conflict would arise if the person would benefit financially 
if an applicant is either awarded or denied a grant or contract.
    The definition also excludes from membership anyone who, within the 
past five years, has been employed by or has been a board member of any 
applicant being reviewed. Comments approved of this requirement in 
general, but stated that it needed elaboration and clarification, 
either in the supplementary information or the rule itself. The Board 
decided to revise the rule to clarify that no person may be on a review 
panel for any applicant if, within the last five years, the person has 
been employed by any such applicant or has served on any such 
applicant's governing body. A person is not disqualified from serving 
as a review

[[Page 14254]]
panel member if he or she has been employed by or served on the 
governing body of another applicant. However, if any applicant being 
reviewed by the person consists of entities formed from mergers of 
prior recipients, and the reviewer has been associated with at least 
one of the former recipients, the person would be disqualified from 
sitting on that applicant's review panel.
    Finally, it is intended that Corporation staff should not be part 
of review panels; however, they may facilitate the work of the panels 
by providing planning and administrative services.
    ``Service area'' is defined as an area over which there is to be 
competition and could include all or part of a current recipient's 
service area or be larger than an area served by a current recipient. 
The rule provides that the particular service areas for any particular 
competitive process are to be determined by the Corporation. Concern 
was expressed in comments that giving the Corporation unlimited 
discretion in determining service areas, in conjunction with the 
discretion given in Sec. 1634.3(d) to award more than one grant or 
contract within a service area, could result in the funding of a 
multitude of small, fragmented providers. The Corporation's discretion 
to determine service areas is not intended to result in fragmented 
delivery of legal services. Rather, it is intended to allow the 
Corporation to respond to a reduced budget and to make grants to 
applicants who submit creative solutions to such fiscal realities. 
However, it is also intended that all decisions on competitive grants 
and contracts will be made with the goal of ensuring, by establishing a 
strong preference for, full-service providers, so that clients will 
have access to a full range of permissible legal services. The 
definition should thus be interpreted in conjunction with 
Sec. 1634.3(d), which has been revised from the proposed rule to state 
such a preference more clearly. See discussion of Sec. 1634.3 below.
    Finally, ``subpopulation of eligible clients'' is defined as 
population groups, such as Native Americans and migrant farm workers, 
who have historically been recognized as requiring a separate system of 
delivery in order to be provided legal assistance effectively.

Section 1634.3  Competition for Grants and Contracts

    This section sets out the framework for competition for grants and 
contracts awarded under section 1006(a)(1)(A) of the LSC Act and is 
partly based on provisions in unenacted legislation for FY 1996 (H.R. 
2076) that was passed by Congress but was vetoed by the President. 
Provisions from H.R. 2076 have been included because the Corporation 
anticipates passage of legislation containing substantially similar 
language in the near future and H.R. 2076 is the best indication of 
Congressional intent regarding how the Corporation should conduct 
competition.
    Paragraph (a) provides that, as of 30 days after the effective date 
of this part, all grants and contracts for the direct provision of 
legal assistance will be awarded by competition. Paragraph (b) provides 
that the Corporation will determine the service areas or the 
subpopulations of clients within service areas. Paragraph (c) states 
that the use of a competitive process for the awarding of a grant or 
contract for a particular service area will not constitute a 
termination or denial of refunding pursuant to parts 1606 and 1625 of 
the Corporation's regulations.
    Paragraph (d) authorizes the Corporation to award more than one 
grant or contract for all or part of a service area. As discussed 
above, comments expressed concern that giving the Corporation 
discretion to award more than one grant or contract within a service 
area could result in the funding of a multitude of small, fragmented 
providers. That is not the intent of this provision. Rather, it is 
merely intended to give the Corporation the ability to deal with fiscal 
realities and changes that will result from a competitive process and 
yet still preserve an integrated full service system of legal 
assistance. The rule has been revised to allow the Corporation to make 
more than one grant or contract for a particular service area only when 
the Corporation determines such action is necessary to ensure that 
eligible clients within the service area will have access to a full 
range of high quality legal services.
    Another comment on Sec. 1634.3(d) stated that the words ``high 
quality'' should be included in paragraph (d) so that the last phrase 
would read: ``so as to ensure that all eligible clients within the 
service area will have access to a full range of high quality legal 
services in accordance with the LSC Act.'' The Board agreed and the 
words ``high quality'' are included in this final rule.
    Paragraph (e) states that no grant or contract may be awarded for a 
term of more than five years. It also clarifies that, if the amount of 
funding during the period of the grant or contract is reduced as a 
result of changes in congressional appropriations, as opposed to a 
reduction of funding for a particular recipient for cause, such a 
reduction will not be considered to be a termination or denial of 
refunding under Corporation regulations.

Section 1634.4  Announcement of Competition

    Paragraph (a) of this section requires the Corporation to give 
public notice of a competition within a particular service area to 
current recipients, appropriate bar associations and other interested 
groups. The Corporation is also required to publish an announcement in 
periodicals of State and local bar associations and at least one daily 
newspaper of general circulation in the area to be served. The rule 
recognizes that LSC has no control over the scheduling and policies of 
bar journals, so the rule requires that LSC ``take appropriate steps to 
announce'' the competition in bar journals. The timing of the 
announcements may be affected by Congressional directions. Paragraph 
(b) sets out the minimal contents for the request for proposals 
(``RFP''), but leaves to the Corporation discretion to include the 
details of what the RFP will include. The Corporation is required by 
paragraph (c) to make a copy of the RFP available to any person or 
entity requesting one.

Section 1634.5  Identification of Qualified Applicants for Grants and 
Contracts

    This section lists types of applicants that would qualify to 
compete for a grant or contract under this part. These include current 
recipients, other non-profit organizations that have as a purpose the 
furnishing of legal assistance to eligible clients, private attorneys, 
groups of private attorneys or law firms, State or local governments, 
and substate regional planning and coordination agencies which are 
composed of substate areas and whose governing boards are controlled by 
locally elected officials.
    The rule proposes that in order to receive an award of a grant or 
contract, all of the above entities would be required to have, 
depending on the type of applicant, a governing or policy body that is 
consistent with the provisions of 45 CFR part 1607, the Corporation's 
regulations on governing bodies. Part 1607 requires all current LSC 
recipients to have governing bodies, unless a recipient is granted a 
waiver pursuant to Sec. 1607.6. Recipients granted a waiver, however, 
are still required to have a policy body. Under part 1607, a governing 
body is defined as a recipient's governing board or body that has 
authority to govern the activities of the LSC recipient. A policy body, 
on the other hand, is a body formed pursuant

[[Page 14255]]
to the waiver provision of part 1607 that would formulate and enforce 
policy with respect to the services provided under a grant or contract 
made under the LSC Act. Policy bodies would be allowed only under 
unusual situations, such as when the recipient is not principally a 
legal assistance organization but gets an LSC grant for legal 
assistance activities. Because a governing board or policy body is not 
necessarily mandated under the LSC Act or the Corporation's 
appropriations act for entities or individuals listed in Sec. 1634.5(a) 
(3), (4) and (5), the Corporation requested comments in the proposed 
rule on whether, as a matter of policy, some governing or policy body 
should be required for all types of grantees so that all grantees are 
accountable to and guided by the policy decisions of such bodies. All 
comments on this provision agreed on the advisability of having 
governing boards or bodies for all types of recipients. One current LSC 
recipient stated that its ability to enjoy significant community 
support and to receive State and local funding was largely due to the 
ties that the program's boards of directors have had with the 
community. Another stated that having some type of governing body helps 
ensure adequate input from the client community. Finally, one comment 
suggested that governing or policy bodies should be independent of any 
State or local government influence.
    The Board agreed that it is advisable for every recipient to be 
accountable to a governing board or policy body for its activities 
under the LSC grant as long as the requirement is not inconsistent with 
other applicable law. When the Corporation was first created in 1974, 
Congress included a governing body requirement in the LSC Act and, 
starting in the early 1980's, has included additional requirements in 
the Corporation's annual appropriations acts in a proviso commonly 
called the McCollum Amendment. The McCollum Amendment mandates that 
attorney governing body members be appointed by appropriate local bar 
associations. The intent of this provision is to ``increase local 
accountability of programs and to improve enforcement of the act and 
regulations.'' 127 Cong. Rec. 12550 (June 16, 1981). In accord with the 
consistent congressional view favoring governing bodies for LSC 
recipients, the Corporation believes that some sort of oversight body 
for each recipient is critical to the preservation of an accountable 
and high quality legal services system. In addition, the Corporation's 
experience with governing bodies has been that they provide critical 
community connections and policy and oversight functions necessary for 
a recipient to operate a successful legal services program. 
Furthermore, to require such accountability by some recipients and not 
others would create an unlevel playing field in the competitive process 
and would risk the misuse of LSC funds by those recipients without 
local oversight bodies.
    Section 1634.5(a)(3) identifies law firms as qualified applicants 
but parenthetically excludes from eligibility any ``private law firm 
that expends 50 percent or more of its resources and time litigating 
issues in the broad interests of a majority of the public.'' The 
parenthetical language, which is found in Section 1007(b)(5) of the LSC 
Act, prohibits the Corporation from making grants or contracts with law 
firms that expend more than 50 percent or more of their resources and 
time litigating issues in the broad interests of a majority of the 
public, rather than the poor as a class of beneficiaries. Congress has 
chosen not to permit LSC to fund the activities of such law firms. 
Rather, under the LSC Act, Congress has indicated that LSC should fund 
programs focused primarily on the provision of legal assistance to the 
poor.
    The proposed paragraph (c) authorized applicants to submit joint 
applications. The Board revised this section from the proposed rule to 
allow a joint application only when the application delineates the 
respective roles and responsibilities of each qualified applicant.

Section 1634.6  Notice of Intent to Compete

    This section contemplates that all applicants, including current 
recipients, who intend to compete for a grant or contract for a 
particular service area will file a notice of intent to compete which 
shall include the information delineated in paragraph (b). Filing 
deadlines for the notices shall be specified in the RFP. The 
information requested will give the Corporation notice of the level of 
competition and some indication as to whether applicants may need 
assistance in order to complete a full application.
    One comment suggested that the Corporation should not require 
current recipients to provide all the information listed in paragraph 
(b) unless there has been a change because it is not cost efficient for 
the Corporation to request information it already has. The Board noted 
that the proposed rule already stated that applicants who had provided 
the required information prior to filing a notice of intent to compete 
would not need to resubmit such information. However, the Board revised 
the rule to require all applicants to submit the required information 
at the time of filing an intent to compete. The Board adopted the 
revision because all applicants should be treated equally and because 
it is administratively more efficient for the Corporation to receive 
all information relevant to the competitive grant process in the notice 
of intent to compete.
    Another comment advised including a requirement that the 
Corporation inform all applicants of all notices of intent to compete 
that had been filed, so that applicants would be informed of the extent 
of competition for any particular service area. Another stated that 
applicants should be given the names, addresses and telephone numbers 
of potential competitors who had filed notices to compete and the state 
bar numbers of the potential applicant's executive, managing or senior 
attorneys. Finally, one comment suggested that a new provision be added 
to Sec. 1634.7 to address the issue of whether applications are subject 
to disclosure under the Freedom of Information Act (``FOIA''). The 
Board did not revise the rule in response to these comments because any 
applicants interested in competition information may submit requests 
for such information pursuant to the Corporation's FOIA rule, 45 CFR 
part 1602, and the Board decided that it is better to deal with the 
release of competition information pursuant to the policies and 
safeguards in the FOIA rule.
    Under FOIA, ``agency records'' must be released upon request unless 
the information is protected by one or more of nine FOIA exemptions. 
Within the context of federal grants, Exemptions 4 and 5 provide 
protection for certain grant or grant making documents. 5 U.S.C. 
Secs. 552(b)(4) and 552(b)(5).
    Exemption 4 protects trade secrets and commercial or financial 
information obtained from a person that is privileged or confidential. 
Information that a person is required to provide in order to compete 
for a federal grant is considered to be confidential if disclosure 
would either impair the agency's ability to obtain necessary 
information in the future or cause substantial harm to the competitive 
position of the provider of the information. See Critical Mass Energy 
Project v. Nuclear Regulatory Commission, 975 F.2d 871 (D.C. Cir. 
1992)(en banc); National Parks and Conservation Association v. Morton, 
498 F.2d 765 (D.C. Cir. 1974).
    Exemption 5 protects ``inter-agency or intra-agency memoranda or 
letters which would not be available by law to

[[Page 14256]]
a party * * * in litigation with the agency.'' This exemption protects 
materials reflecting an agency's predecisional deliberative or policy-
making processes but does not protect purely factual information, NLRB 
v. Sears, Roebuck & Company, 421 U.S. 132, 151 (1975); Russell v. 
Department of the Air Force, 682 F.2d 1045, 1048 (D.C. Cir. 1982), 
unless it is so intertwined with protected information that its release 
would reveal the agency's deliberative process. Wolfe v. HHS, 839 F.2d 
768, 774 (D.C. Cir. 1988)(en banc).
    Pursuant to these exemptions, the Corporation intends to treat 
competition records in the following manner. Prior to making awards, 
the Corporation will not release any competitive grant applications and 
any other related documents that would cause competitive harm to 
applicants. Once grants are awarded, however, the Corporation intends 
to release any successful applications requested under FOIA except for 
any proprietary information contained therein. Proprietary information 
generally means information that is the product of a proprietor, to 
which the proprietor has an exclusive right in the competitive market, 
and the release of which would harm the competitive advantage of the 
proprietor. Prior to releasing successful applications, the Corporation 
will inform applicants of any FOIA requests for their applications. 
Applicants may then submit requests to the Corporation that their 
applications or other relevant documents not be disclosed. Such 
requests shall state all grounds upon which the disclosure is opposed. 
However, the Corporation will make the final decision as to whether 
information is protected from disclosure under FOIA and will inform the 
applicant if the material is to be released. The applicant will be 
given the opportunity to appeal that decision to the Corporation's 
President.
    The Corporation will also protect from disclosure any competitive 
grant documents that are determined to be predecisional and 
deliberative, the release of which would reveal the Corporation's 
deliberative or policy-making processes. Finally, the Corporation will 
protect any other information protected under FOIA.

Section 1634.7  Application Process

    This section sets out the application process and the basic 
requirements that applicants will have to meet in order to be entitled 
to compete for a grant or contract to deliver services in a particular 
service area. The Corporation is given broad discretion to determine 
what information is needed to complete a particular application.
    Paragraph (e) of the proposed rule provided that the Corporation 
may require each applicant to agree in writing that, if the applicant 
is not selected for the award of a grant or contract, the applicant 
would not institute a court action regarding the denial of an award 
until the applicant has participated in a mediation with the 
Corporation on the matter. The proposed rule also provided that 
mediation procedures would be designed by the Corporation and would 
provide for the convenience of the parties and encourage an expeditious 
resolution of issues. The provision was intended to avoid costly 
litigation by providing a relatively friendly forum for the parties to 
meet and resolve issues. The California State Bar expressed support for 
the provision with no explanation, but the CLASP disagreed and urged 
deletion of the provision. According to CLASP, regardless of the fact 
that the proposed rule stated that the provision was not intended to 
suggest that applicants have any property or hearing rights,1 the 
very fact that the provision is in the rule is an invitation for 
applicants to use mediation as a forum to raise issues over the results 
of the competition process that otherwise would not have been raised. 
CLASP believes that this provision could embroil the Corporation in 
expensive, drawn-out mediation procedures and will actually precipitate 
litigation rather than head it off.

    \1\ It is well established that, absent express statutory 
language to the contrary or a showing that the applicant's statutory 
or constitutional rights have been violated, pre-award applicants 
for discretionary grants have no protected property interests in 
receiving a grant and thus have no standing to appeal the funding 
decision by the grantor. See Cappalli, Federal Grants and 
Cooperative Agreements, Sec. 3.28 and Legal Services Corporation v. 
Ehrlich, 457 F. Supp. 1058, 1062-64 (D. Md. 1978).
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    In determining whether to retain the proposed mediation provision, 
the Board considered comments made during its public hearings on the 
rule as well as the written public comments. One concern raised at the 
public hearings was whether the mediation provision is intended to 
delay making a grant to a successful applicant until the complaining 
applicant's issues are decided through mediation. It was pointed out 
that, if the grant award is not delayed, there would be no remedy for 
the complaining applicant and thus nothing of substance to mediate. 
Another issue raised was whether a standard should be established to 
determine whether a complaint had sufficient merit to warrant a 
mediation procedure and who would decide whether the standard is met. 
One comment suggested that a way to avoid frivolous complaints would be 
to require that the applicant agree to pay half of the cost of 
mediation in order to discourage frivolous complaints.
    The Board agreed to delete the mediation provision from the rule. 
In addition to the concerns raised in comments, the Board also noted 
that the provision is unnecessary. The Corporation already has 
authority to respond to complaints about its activities and to decide 
the appropriate type of forum to address and resolve such complaints.

Section 1634.8  Selection Process

    This section sets out the selection process to be used by the 
Corporation when deciding what grants or contracts are to be made to 
service areas. The proposed rule required the Corporation to review all 
relevant information about each applicant that is no more than five 
years old, request any necessary additional information, conduct on-
site visits if appropriate to fully evaluate an application, and 
summarize in writing any information not contained in an applicant's 
application. One comment suggested that there may be some instances 
where information about an applicant that is older than five years may 
have relevance to the competitive process and that the Corporation 
should not make a hard and fast rule against reviewing older documents.
    The Board agreed that the cutoff time should be changed to six 
years. Because competitive grants may not be made for longer than a 5-
year term, the extra year would allow the Corporation, for example, to 
review information about applicants during the last year of a prior 5-
year competitive grant term. Information from a prior grant term would 
inform the Corporation of the status of grantees prior to a new 
competitive process and could, for example, provide information on any 
unresolved problems that arose during the immediately proceeding grant 
period.
    The proposed rule required the Corporation to convene a review 
panel if there is more than one applicant for a particular service 
area, although it could choose to convene a panel when there is only 
one applicant. Comments disagreed with the provision that would allow 
the Corporation to forego a review panel if there is only one applicant 
for a service area. They argued that an independent review panel is 
necessary for all applicants to ensure a fair and impartial process 
free of the vagaries of politics. Not having a review panel for

[[Page 14257]]
a single applicant, according to the comments, risks a situation where 
a single applicant is given less scrutiny or is selected for a grant 
award simply because there are no competing applications. Although 
recognizing that the comments have merit, the Board decided to retain 
the Corporation's discretion to forego a review panel for single 
applicants. The Board is concerned that reductions in the Corporation's 
appropriations could make it difficult, if not impossible in any 
particular grant year, to fund review panels for single applicants.
    The rule provides that the Corporation staff shall conduct one or 
more on-site visits to an applicant if necessary and appropriate to 
evaluate the application fully. One comment stated that review panels 
should also have the option for a site visit. The Board opted against 
this proposal, both because of the financial and administrative burden 
and because site visits are intended to allow Corporation staff to 
compile all pertinent information regarding a particular grantee for 
the use of the review panels.
    The process set out in this section provides that review panels 
would review the applications and any summaries prepared by the 
Corporation and would make recommendations to the Corporation regarding 
awards for particular service areas. The Corporation staff would then 
consider the review panel's recommendation and forward a staff 
recommendation to the Corporation President for a final decision. The 
staff's written recommendation must include the recommendations of the 
review panel and, if the staff recommendation differs from that of the 
review panel, the staff recommendation shall include an explanation of 
why the recommendations differ. The requirement that the review panel's 
recommendation be included in all staff recommendations to the 
President was made in response to comments suggesting such a 
requirement. The Board decided that the President would be better able 
to make grant decisions if provided with review panel recommendations.
    One comment suggested that the rule specify a time frame for review 
panels to either meet or render recommendations. The Board determined 
that establishing a time frame should be an internal administrative 
decision based on the Corporation's needs in any given year and that no 
time frame should be included in the rule.
    Under the proposed rule, the Corporation staff could recommend that 
the President make an award up to five years or, if there is no 
applicant for a service area or no applicant meets the criteria to 
receive a grant, paragraph (c) made it clear that the Corporation had 
discretion to determine how to provide for legal assistance in the 
service area. Among other choices, the Corporation could put a current 
grantee on month-to-month funding in order to conduct a new competition 
or enlarge the service area of a neighboring grantee.
    One comment suggested that paragraph (c) should state more 
affirmatively that LSC must make some provision to ensure that service 
is continued in an area where there were no acceptable applicants. The 
Board revised the rule to require the Corporation to take all practical 
steps to ensure the continued provision of legal assistance in a 
particular service area.
    Finally, paragraph (b) provides that the President is to make final 
decisions regarding the awarding of grants and contracts. It also 
requires the Corporation to notify all applicants in writing of the 
President's decisions.

Section 1634.9  Selection Criteria

    This section sets out the selection criteria that the Corporation 
will use in selecting recipients for the service areas subject to 
competition. The criteria include those specified in unenacted FY 1996 
legislation (H.R. 2076) that was passed by Congress but vetoed by the 
President, as well as additional criteria taken from the provisions of 
the LSC Act and regulations and from the Performance Measures which the 
Corporation has developed to measure the performance of recipients. 
Criteria from H.R. 2076 have been included because it is the best 
indication of congressional intent on the Corporation's competitive 
process and the Corporation anticipates that legislation that is 
substantially similar to H.R. 2076 will be enacted in the near future.
    This section received the most comments. Paragraph (a)(1) requires 
each applicant to demonstrate an understanding of the basic legal needs 
of the eligible clients in the area served. There were no comments and 
no changes made to this subsection.
    Two comments on paragraph (a)(2) stated that the focus should be on 
the quality of an applicant's actual services as well as on the quality 
of the applicant's approach to the provision of legal services as 
provided in the proposed subsection (b). The Board agreed and revised 
paragraph (a)(2) to require applicants to demonstrate the quality of 
their legal services as well as their delivery approach.
    Paragraph (a)(2) also requires each applicant to demonstrate the 
quality, feasibility and cost-effectiveness of its delivery approach in 
relation to the Corporation's Performance Criteria and the American Bar 
Association's Standards for Providers of Civil Legal Services to the 
Poor. Among other things, an applicant's ability to meet this criterion 
could be demonstrated by information regarding the applicant's 
experience with the delivery of the type of legal assistance 
contemplated under the grants or contracts. For applicants who are not 
current recipients, such experience could include, for example, 
experience in a legal clinic for the poor, the provision of legal 
assistance on a pre-paid basis to low-income clients, experience on a 
pro bono or judicare panel, the provision of legal assistance as a 
private attorney in a low-income neighborhood, experience as a public 
defender, or other experience in the public sector.
    Paragraph (a)(3) requires that the applicant's governing board or 
policy body meets or will meet all applicable statutory, regulatory or 
other legal requirements in accordance with the time schedules set out 
by the Corporation. This requirement would not apply to an entity if it 
is inconsistent with applicable law.
    Paragraph (a)(4) requires that the applicant demonstrate how it 
will comply with applicable provisions of the law and LSC regulations. 
Among other things, the applicant's past experience of compliance with 
the Corporation or other funding sources or regulatory agencies would 
be evidence of the applicant's ability to comply with this criterion.
    Paragraph (a)(5), which reflects congressional desire expressed in 
unenacted FY 1996 legislation that was passed by Congress but vetoed by 
the President, requires the Corporation to consider the reputations of 
the applicant's principals and key staff.
    Paragraph (a)(6) requires applicants to demonstrate their capacity 
to provide high quality, economical and efficient legal services 
through an integrated delivery system, such as a capacity of the 
applicant to engage in collaborative efforts with other organizations 
involved in serving or assisting eligible clients. One comment stated 
that it is not clear in this provision whether an applicant should 
coordinate with State and local legal services programs in order to 
ensure a full range of legal assistance within the applicant's service 
area or in other service areas of the state. The intent of this 
provision is that the applicant seek to develop a legal assistance 
delivery approach that will

[[Page 14258]]
help ensure that a full range of legal assistance will be provided 
within the applicant's service area, even if the applicant does not 
itself provide a full range of legal assistance. It is expected that 
coordination with other legal services systems throughout the State 
will enable the recipient to provide a higher quality of legal 
assistance in the applicant's area.
    Paragraph (a)(7) requires applicants to demonstrate a capacity to 
develop and increase non-Corporation resources. This requirement was 
part of paragraph (f) in the proposed rule, but the Board decided that 
it should be stated in a separate provision.
    Paragraph (a)(8) requires that applicants who are not current 
recipients demonstrate a capacity to take over pending cases from 
current recipients and to provide for service to such clients.
    Paragraph (a)(9) focuses on institutional conflicts of interest of 
the applicant with the client community. Institutional conflicts could 
prevent applicants from being able to deliver the full range of legal 
services necessary to address the basic legal needs of clients. 
Applicants must show that they do not have any conflicts that would 
require them to refuse to provide representation on particular cases 
that are of high priority to the client community because the applicant 
is not permitted by a funding source independent of LSC to provide such 
assistance.
    Paragraph (b) provides that the Corporation shall not give any 
preference to current or previous recipients of funds when awarding 
grants and contracts under the competitive bidding system. One comment 
stated that, absent legislation to the contrary, ``no rational basis 
exists not to grant a preference to current or previous grantees,'' and 
any such preference would be overcome by less than favorable monitoring 
and compliance reports. The Board did not agree. Rather, the Board 
believes that grant decisions pursuant to a fair competitive process 
should be determined on the selection criteria and not on a prior 
status of an applicant as an LSC recipient. The Board also noted that 
all versions of unenacted FY 1996 legislation dealing with competition 
expressly provided that no preference be given to current or previous 
recipients.

Section 1634.10  Transition Provisions

    This section provides for transition steps that the Corporation may 
take when a current recipient is replaced by another applicant. Under 
paragraph (a) (1), funding can be provided to enable a current 
recipient to complete cases, or withdraw or transfer such cases to the 
new recipient or other appropriate legal services provider. Paragraph 
(a)(2) requires the Corporation to ensure the appropriate disposition 
of real and personal property of the current recipient which was 
purchased in whole or in part with Corporation funds in accordance with 
Corporation policies. The proposed rule did not require the Corporation 
to ensure the appropriate disposition of property but merely authorized 
the Corporation to do so. One comment suggested that this activity 
should be mandatory and the Board agreed.
    Another comment suggested that the rule should state that continued 
funding for a recipient should be for ``a reasonable period of time'' 
and at a ``reasonable'' level to be determined by the Corporation. The 
Board decided against adding the ``reasonable'' language. It is already 
implicit in the rule because the Corporation should always act in a 
reasonable manner, as opposed to an arbitrary or capricious manner. In 
addition, the term ``reasonable,'' standing alone, is too vague to be 
helpful.
    Paragraph (b) provides that the Corporation can fund new recipients 
at less than their full grant initially with incremental increases to 
the full amount of their grant award, if necessary, to ensure effective 
and economical use of Corporation funds during the early months of a 
grant to a new recipient. Such funding was used effectively in past 
years when new grantees were funded and helped prevent the accumulation 
of excessive fund balances. Other transition issues may arise that are 
not expressly addressed in this rule. The Corporation intends to 
address such issues as they arise in a consistent and fair manner and 
will clearly communicate any transition policies or procedures to 
affected recipients in a timely manner.

Section 1634.11  Replacement of Recipient That Does Not Complete Grant 
Term

    This section was not in the proposed rule but was addressed by the 
Board in its consideration of Sec. 1634.8(c), which deals with the 
Corporation's discretion to deal with a situation where, pursuant to a 
competition, there are no applicants for a service area or no applicant 
meets the grant criteria. This section addresses a different situation 
where a recipient, during the term of a grant, is unable or unwilling 
to continue to perform the duties required under the terms of its 
grant. According to this section, under such circumstances, the 
Corporation shall take all practical steps to ensure continued legal 
assistance in the service area and shall have discretion to determine 
the appropriate means to do so. Alternatives would include enlarging 
the service area of a neighboring recipient, putting a current 
recipient on month-to-month funding or entering into a short term grant 
with another qualified provider until the Corporation is able to 
complete another competition.

Section 1634.12  Emergency Procedures and Waivers

    This section, which was designated as Sec. 1634.11 in the proposed 
rule, provides that the President may waive or amend certain parts of 
the regulations, including the timetables established thereunder when 
necessary to comply with requirements imposed by law. This is 
necessary, for example, because Congress has not yet enacted 
legislation providing the Corporation with specific timetables or full 
fiscal year funding. Because of the uncertainty of when such 
legislation will be enacted or what the exact terms of such legislation 
will be, the Corporation may need flexibility in order to issue its 
competitive grants in a manner consistent with such law when finally 
enacted. Only one comment was received on this section and it stated 
that no other provisions of this rule should be waiveable except for 
those cited in the section and that the rule should expressly say so. 
The Board determined that the waiver provision already applies only to 
those provisions cited and that no clarification was necessary.

List of Subjects in 45 CFR Part 1634

    Contracts, grants, legal services.

    For the reasons set out in the preamble, LSC proposes to amend 45 
CFR chapter XVI by adding part 1634.

PART 1634--COMPETITIVE BIDDING FOR GRANTS AND CONTRACTS

Sec.
1634.1  Purpose.
1634.2  Definitions.
1634.3  Competition for grants and contracts.
1634.4  Announcement of competition.
1634.5  Identification of qualified applicants for grants and 
contracts.
1634.6  Notice of intent to compete.
1634.7  Application process.
1634.8  Selection process.
1634.9  Selection criteria.
1634.10  Transition provisions.
1634.11  Replacement of recipient that does not complete grant term.
1634.12   Emergency procedures and waivers.

    Authority: 42 U.S.C. 2996e(a)(1)(A); 2996f(a)(3).


[[Page 14259]]



Sec. 1634.1  Purpose.

    This part is designed to improve the delivery of legal assistance 
to eligible clients through the use of a competitive system to award 
grants and contracts for the delivery of legal services. The purposes 
of such a competitive system are to:
    (a) Encourage the effective and economical delivery of high quality 
legal services to eligible clients that is consistent with the 
Corporation's Performance Criteria and the American Bar Association's 
Standards for Providers of Civil Legal Services to the Poor through an 
integrated system of legal services providers;
    (b) Provide opportunities for qualified attorneys and entities to 
compete for grants and contracts to deliver high quality legal services 
to eligible clients;
    (c) Encourage ongoing improvement of performance by recipients in 
providing high quality legal services to eligible clients;
    (d) Preserve local control over resource allocation and program 
priorities; and
    (e) Minimize disruptions in the delivery of legal services to 
eligible clients within a service area during a transition to a new 
provider.


Sec. 1634.2  Definitions.

    (a) Qualified applicants are those persons, groups or entities 
described in section 1634.5(a) of this part who are eligible to submit 
notices of intent to compete and applications to participate in a 
competitive bidding process as described in this part.
    (b) Review panel means a group of individuals who are not 
Corporation staff but who are engaged by the Corporation to review 
applications and make recommendations regarding awards of grants or 
contracts for the delivery of legal assistance to eligible clients. A 
majority of review panel members shall be lawyers who are supportive of 
the purposes of the LSC Act and experienced in and knowledgeable about 
the delivery of legal assistance to low-income persons, and eligible 
clients or representatives of low-income community groups. The 
remaining members of the review panel shall be persons who are 
supportive of the purposes of the LSC Act and have an interest in and 
knowledge of the delivery of quality legal services to the poor. No 
person may serve on a review panel for an applicant with whom the 
person has a financial interest or ethical conflict; nor may the person 
have been a board member of or employed by that applicant in the past 
five years.
    (c) Service area is the area defined by the Corporation to be 
served by grants or contracts to be awarded on the basis of a 
competitive bidding process. A service area is defined geographically 
and may consist of all or part of the area served by a current 
recipient, or it may include an area larger than the area served by a 
current recipient.
    (d) Subpopulation of eligible clients includes Native Americans and 
migrant farm workers and may include other groups of eligible clients 
that, because they have special legal problems or face special 
difficulties of access to legal services, might better be addressed by 
a separate delivery system to serve that client group effectively.


Sec. 1634.3  Competition for grants and contracts.

    (a) After the effective date of this part, all grants and contracts 
for legal assistance awarded by the Corporation under Section 
1006(a)(1)(A) of the LSC Act shall be subject to the competitive 
bidding process described in this part. No grant or contract for the 
delivery of legal assistance shall be awarded by the Corporation for 
any period after the effective date of this part, unless the recipient 
of that grant has been selected on the basis of the competitive bidding 
process described in this part.
    (b) The Corporation shall determine the service areas to be covered 
by grants or contracts and shall determine whether the population to be 
served will consist of all eligible clients within the service area or 
a specific subpopulation of eligible clients within one or more service 
areas.
    (c) The use of the competitive bidding process to award grant(s) or 
contract(s) shall not constitute a termination or denial of refunding 
of financial assistance to a current recipient pursuant to parts 1606 
and 1625 of this chapter.
    (d) Wherever possible, the Corporation shall award no more than one 
grant or contract to provide legal assistance to eligible clients or a 
subpopulation of eligible clients within a service area. The 
Corporation may award more than one grant or contract to provide legal 
assistance to eligible clients or a subpopulation of eligible clients 
within a service area only when the Corporation determines that it is 
necessary to award more than one such grant or contract in order to 
ensure that all eligible clients within the service area will have 
access to a full range of high quality legal services in accordance 
with the LSC Act or other applicable law.
    (e) In no event may the Corporation award a grant or contract for a 
term longer than five years. The amount of funding provided annually 
under each such grant or contract is subject to changes in 
congressional appropriations or restrictions on the use of those funds 
by the Corporation. A reduction in a recipient's annual funding 
required as a result of a change in the law or a reduction in funding 
appropriated to the Corporation shall not be considered a termination 
or denial of refunding under parts 1606 or 1625 of this chapter.


Sec. 1634.4  Announcement of competition.

    (a) The Corporation shall give public notice that it intends to 
award a grant or contract for a service area on the basis of a 
competitive bidding process, shall take appropriate steps to announce 
the availability of such a grant or contract in the periodicals of 
State and local bar associations, and shall publish a notice of the 
Request For Proposals (RFP) in at least one daily newspaper of general 
circulation in the area to be served under the grant or contract. In 
addition, the Corporation shall notify current recipients, other bar 
associations, and other interested groups within the service area of 
the availability of the grant or contract and shall conduct such other 
outreach as the Corporation determines to be appropriate to ensure that 
interested parties are given an opportunity to participate in the 
competitive bidding process.
    (b) The Corporation shall issue an RFP which shall include 
information regarding: who may apply, application procedures, the 
selection process, selection criteria, the service areas that will be 
the subject of the competitive bidding process, the amount of funding 
available for the service area, if known, applicable timetables and 
deadlines, and the LSC Act, regulations, guidelines and instructions 
and any other applicable federal law. The RFP may also include any 
other information that the Corporation determines to be appropriate.
    (c) The Corporation shall make a copy of the RFP available to any 
person, group or entity that requests a copy in accordance with 
procedures established by the Corporation.


Sec. 1634.5  Identification of qualified applicants for grants and 
contracts.

    (a) The following persons, groups and entities are qualified 
applicants who may submit a notice of intent to compete and an 
application to participate in the competitive bidding process:
    (1) Current recipients;
    (2) Other non-profit organizations that have as a purpose the 
furnishing of legal assistance to eligible clients;
    (3) Private attorneys, groups of attorneys or law firms (except 
that no

[[Page 14260]]
private law firm that expends 50 percent or more of its resources and 
time litigating issues in the broad interests of a majority of the 
public may be awarded a grant or contract under the LSC Act);
    (4) State or local governments;
    (5) Substate regional planning and coordination agencies which are 
composed of substate areas and whose governing boards are controlled by 
locally elected officials.
    (b) All persons, groups and entities listed in paragraph (a) of 
this section must have a governing or policy body consistent with the 
requirements of part 1607 of this chapter or other law that sets out 
requirements for recipients' governing bodies, unless such governing 
body requirements are inconsistent with applicable law.
    (c) Applications may be submitted jointly by more than one 
qualified applicant so long as the application delineates the 
respective roles and responsibilities of each qualified applicant.


Sec. 1634.6  Notice of intent to compete.

    (a) In order to participate in the competitive bidding process, an 
applicant must submit a notice of intent to compete on or before the 
date designated by the Corporation in the RFP. The Corporation may 
extend the date if necessary to take account of special circumstances 
or to permit the Corporation to solicit additional notices of intent to 
compete.
    (b) At the time of the filing of the notice of intent to compete, 
each applicant must provide the Corporation with the following 
information as well as any additional information that the Corporation 
determines is appropriate:
    (1) Names and resumes of principals and key staff;
    (2) Names and resumes of current and proposed governing board or 
policy body members and their appointing organizations;
    (3) Initial description of area proposed to be served by the 
applicant and the services to be provided.


Sec. 1634.7  Application process.

    (a) The Corporation shall set a date for receipt of applications 
and shall announce the date in the RFP. The date shall afford 
applicants adequate opportunity, after filing the notice of intent to 
compete, to complete the application process. The Corporation may 
extend the application date if necessary to take account of special 
circumstances.
    (b) The application shall be submitted in a form to be determined 
by the Corporation.
    (c) A completed application shall include all of the information 
requested by the RFP. It may also include any additional information 
needed to fully address the selection criteria, and any other 
information requested by the Corporation. Incomplete applications will 
not be considered for awards by the Corporation.
    (d) The Corporation shall establish a procedure to provide 
notification to applicants of receipt of the application.


Sec. 1634.8  Selection process.

    (a) After receipt of all applications for a particular service 
area, Corporation staff shall:
    (1) Review each application and any additional information that the 
Corporation has regarding each applicant, including for any applicant 
that is or includes a current or former recipient, past monitoring and 
compliance reports, performance evaluations and other pertinent records 
for the past six years;
    (2) Request from an applicant and review any additional information 
that the Corporation determines is appropriate to evaluate the 
application fully;
    (3) Conduct one or more on-site visits to an applicant if the 
Corporation determines that such visits are appropriate to evaluate the 
application fully;
    (4) Summarize in writing information regarding the applicant that 
is not contained in the application if appropriate for the review 
process; and
    (5) Convene a review panel unless there is only one applicant for a 
particular service area and the Corporation determines that use of a 
review panel is not appropriate. The review panel shall:
    (i) Review the applications and the summaries prepared by the 
Corporation staff. The review panel may request other information 
identified by the Corporation as necessary to evaluate the applications 
fully; and
    (ii) Make a written recommendation to the Corporation regarding the 
award of grants or contracts from the Corporation for a particular 
service area.
    (6) After considering the recommendation made by the review panel, 
if a review panel was convened, make a staff recommendation to the 
President. The staff recommendation shall include the recommendation of 
the review panel and, if the staff recommendation differs from that of 
the review panel, an explanation of the basis for the difference in the 
recommendations.
    (b) After reviewing the written recommendations, the President 
shall select the applicants to be awarded grants or contracts from the 
Corporation and the Corporation shall notify each applicant in writing 
of the President's decision regarding each applicant's application.
    (c) In the event that there are no applicants for a service area or 
that the Corporation determines that no applicant meets the criteria 
and therefore determines not to award a grant or contract for a 
particular service area, the Corporation shall take all practical steps 
to ensure the continued provision of legal assistance in that service 
area. The Corporation shall have discretion to determine how legal 
assistance is to be provided to the service area, including, but not 
limited to, enlarging the service area of a neighboring recipient, 
putting a current recipient on month-to-month funding or entering into 
a short term, interim grant or contract with another qualified provider 
for the provision of legal assistance in the service area until the 
completion of a competitive bidding process within a reasonable period 
of time.


Sec. 1634.9  Selection criteria.

    (a) The criteria to be used to select among qualified applicants 
shall include the following:
    (1) Whether the applicant has a full understanding of the basic 
legal needs of the eligible clients in the area to be served;
    (2) The quality, feasibility and cost-effectiveness of the 
applicant's legal services delivery and delivery approach in relation 
to the Corporation's Performance Criteria and the American Bar 
Association's Standards for Providers of Civil Legal Services to the 
Poor, as evidenced by, among other things, the applicant's experience 
with the delivery of the type of legal assistance contemplated under 
the proposal;
    (3) Whether the applicant's governing or policy body meets or will 
meet all applicable requirements of the LSC Act, regulations, 
guidelines, instructions and any other requirements of law in 
accordance with a time schedule set out by the Corporation;
    (4) The applicant's capacity to comply with all other applicable 
provisions of the LSC Act, rules, regulations, guidelines and 
instructions, as well as with ethical requirements and any other 
requirements imposed by law. Evidence of the applicant's capacity to 
comply with this criterion may include, among other things, the 
applicant's compliance experience with the Corporation or other funding 
sources or regulatory agencies, including but not limited to Federal or 
State agencies, bar associations or foundations, courts,

[[Page 14261]]
IOLTA programs, and private foundations;
    (5) The reputations of the applicant's principals and key staff;
    (6) The applicant's knowledge of the various components of the 
legal services delivery system in the State and its willingness to 
coordinate with the various components as appropriate to assure the 
availability of a full range of legal assistance, including:
    (i) its capacity to cooperate with State and local bar 
associations, private attorneys and pro bono programs to increase the 
involvement of private attorneys in the delivery of legal assistance 
and the availability of pro bono legal services to eligible clients; 
and
    (ii) its knowledge of and willingness to cooperate with other legal 
services providers, community groups, public interest organizations and 
human services providers in the service area;
    (7) The applicant's capacity to develop and increase non-
Corporation resources;
    (8) The applicant's capacity to ensure continuity in client 
services and representation of eligible clients with pending matters; 
and
    (9) The applicant does not have known or potential conflicts of 
interest, institutional or otherwise, with the client community and 
demonstrates a capacity to protect against such conflicts.
    (b) In selecting recipients of awards for grants or contracts under 
this part, the Corporation shall not grant any preference to current or 
previous recipients of funds from the Corporation.


Sec. 1634.10  Transition provisions.

    (a) When the competitive bidding process results in the award of a 
grant or contract to an applicant, other than the current recipient, to 
serve the area currently served by that recipient, the Corporation--
    (1) may provide, if the law permits, continued funding to the 
current recipient, for a period of time and at a level to be determined 
by the Corporation after consultation with the recipient, to ensure the 
prompt and orderly completion of or withdrawal from pending cases or 
matters or the transfer of such cases or matters to the new recipient 
or to other appropriate legal service providers in a manner consistent 
with the rules of ethics or professional responsibility for the 
jurisdiction in which those services are being provided; and
    (2) shall ensure, after consultation with the recipient, the 
appropriate disposition of real and personal property purchased by the 
current recipient in whole or in part with Corporation funds consistent 
with the Corporation's policies.
    (b) Awards of grants or contracts for legal assistance to any 
applicant that is not a current recipient may, in the Corporation's 
discretion, provide for incremental increases in funding up to the 
annualized level of the grant or contract award in order to ensure that 
the applicant has the capacity to utilize Corporation funds in an 
effective and economical manner.


Sec. 1634.11  Replacement of recipient that does not complete grant 
term.

    In the event that a recipient is unable or unwilling to continue to 
perform the duties required under the terms of its grant or contract, 
the Corporation shall take all practical steps to ensure the continued 
provision of legal assistance in that service area. The Corporation 
shall have discretion to determine how legal assistance is to be 
provided to the service area, including, but not limited to, enlarging 
the service area of a neighboring recipient, putting a current 
recipient on month-to-month funding or entering into a short term, 
interim grant or contract with another qualified provider for the 
provision of legal assistance in the service area until the completion 
of a competitive bidding process within a reasonable period of time.


Sec. 1634.12  Emergency procedures and waivers.

    The President of the Corporation may waive the requirements of 
Secs. 1634.6 and 1634.8(a) (3) and (5) when necessary to comply with 
requirements imposed by law on the awards of grants and contracts for a 
particular fiscal year.

    Dated: March 26, 1996.
Victor M. Fortuno,
General Counsel.
[FR Doc. 96-7824 Filed 3-29-96; 8:45 am]
BILLING CODE 7050-01-P