[Federal Register Volume 61, Number 166 (Monday, August 26, 1996)]
[Proposed Rules]
[Pages 43867-43916]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20777]



  Federal Register / Vol. 61, No. 166, Monday, August 26, 1996 / 
Proposed Rules  

[[Page 43867]]



DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Parts 21, 22, 28, 32, 33, and 34

RIN 0790-AG28


DoD Grant and Agreement Regulations

AGENCY: Office of the Secretary, DoD.

ACTION: Proposed rule.

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SUMMARY: The Department of Defense is taking the next step toward 
establishing the DoD Grant and Agreement Regulations. They are being 
established to satisfy a need for uniform policies and procedures for 
DoD Components' award and administration of grants and cooperative 
agreements.
    The Department of Defense proposes to add four new parts and to 
make minor amendments that update two of the four existing parts of the 
DoD Grant and Agreement Regulations. The four proposed new parts: 
address DoD Components' overall management of grant and agreement 
functions; set forth DoD Components' and grants officers' 
responsibilities related to the award and administration of grants and 
agreements; implement administrative requirements in OMB Circular A-110 
for grants and agreements awarded to institutions of higher education 
and other nonprofit organizations; and establish administrative 
requirements for awards to commercial organizations. The proposed minor 
amendments to two existing parts: provide DoD-specific procedures 
related to Governmentwide restrictions on lobbying; and update 
administrative requirements for awards to State and local governments, 
to conform with recent changes in statutes and statutory 
implementation.

DATES: Comments are due on or before October 25, 1996.

ADDRESSES: Forward comments to ODDR&E(R), ATTN: Mark Herbst, 3080 
Defense Pentagon, Washington, DC 20301-3080.

FOR FURTHER INFORMATION CONTACT: Mark Herbst, (703) 614-0205.

SUPPLEMENTARY INFORMATION:

Steps Taken to Date To Establish the DoD Grant and Agreement 
Regulations

    In 1992, the Department of Defense (DoD) took the first step toward 
establishing the DoD Grant and Agreement Regulations. At that time (see 
57 FR 6199, February 21, 1992), DoD redesignated into Subchapter B of 
Chapter I of Title 32 of the Code of Federal Regulations three 
Governmentwide rules: debarment, suspension, and drug-free workplace 
requirements, now at 32 CFR Part 25; lobbying restrictions, now at 32 
CFR Part 28; and administrative requirements for grants and cooperative 
agreements to State and local governments, now at 32 CFR Part 33.
    The Department of Defense now takes the second step toward 
establishing the regulations. In this second step, the Department 
proposes to make minor amendments to update the existing parts 28 and 
33 in Subchapter B of Chapter I, and to adopt the new parts 21, 22, 32, 
and 34.

Additional Information About Proposed Amendments to Parts 28 and 33

    The proposed amendments to part 28, ``New Restrictions on 
Lobbying,'' would implement the DoD-specific statutory authority to 
waive certain restrictions. The proposed amendments to part 33, 
``Uniform Administrative Requirements for Grants and Cooperative 
Agreements to State and Local Governments,'' are needed to implement 
the Resource Conservation and Recovery Act (42 U.S.C. 6962) and 
statutory changes made by the Federal Acquisition Streamlining Act of 
1994.

Additional Information About Proposed Parts 21 and 22

    Parts 21 and 22 primarily establish internal DoD policies and 
procedures. Part 21 addresses DoD Components' overall management of 
grant and cooperative agreement functions. Part 22 outlines grants 
officers' and DoD Components' responsibilities related to the award and 
administration of grants and cooperative agreements.
    In addition to establishing internal policies and procedures, the 
proposed parts 21 and 22 implement several statutes that apply to DoD 
grants and agreements, including: requirements in 31 U.S.C. 6101, et 
seq., to report data on assistance awards and programs (implemented in 
subpart C, part 21); provisions of 31 U.S.C. 6301, et seq., concerning 
the appropriate use of grants and cooperative agreements (implemented 
in subpart B, part 22); and statutes concerning the use of competitive 
procedures, such as 10 U.S.C. 2374 (implemented in subpart C, part 22), 
which was enacted by the Federal Acquisition Streamlining Act of 1994.
    To reduce burdens on recipients, section 22.510 of the proposed 
part 22 allows a streamlined certification method that reduces the 
paperwork associated with obtaining required certifications. This is 
consistent with the National Performance Review's recommendation that 
the Government explore methods for eliminating needless paperwork by 
simplifying the compliance certification process, a recommendation that 
the Department of Defense heartily supports. The Department expects 
that initiatives to increase the use of electronic commerce in agency 
announcements of programs, recipients' submission of proposals, and 
transmission of award documents, ultimately will enable even less 
burdensome means for obtaining required certifications than the method 
proposed in part 22.
    One section within subpart E of the proposed part 22 is reserved, 
because DoD intends to redesignate an existing rule into that section 
when part 22 is finalized. That rule, currently codified at 32 CFR Part 
23, implements a law concerning military recruiters' access to 
university campuses.

Additional Information About Proposed Part 32

    The proposed part 32 specifies administrative requirements for 
grants and cooperative agreements with universities and other non-
profit organizations. It thereby implements the Governmentwide guidance 
in the updated, OMB Circular A-110, ``Uniform Administrative 
Requirements for Grants and Agreements With Institutions of Higher 
Education, Hospitals, and Other Non-Profit Organizations.''
    During the comment period on the proposed part 32, and until DoD 
adopts a final version as its implementation of the November, 1993, 
version of OMB Circular A-110 [58 FR 62992], DoD Components will 
incorporate terms and conditions in grants and cooperative agreements 
to universities and other nonprofit entities that provide for 
recipients' administration of those awards in accordance with that 
updated version of the Circular. Most DoD Components' awards already do 
so, an interim practice that was authorized in February, 1994. By 
standardizing this interim practice within the remaining DoD 
Components, DoD will provide uniform requirements that parallel those 
of other Federal agencies, thereby alleviating unnecessary burdens on 
recipients. Award terms and conditions will provide for compliance with 
part 32 when it is finalized, superseding the interim practice.
    The proposed part 32 adopts the language of the updated OMB 
Circular, except for clarifying changes and a few changes to reduce 
paperwork requirements and conform the rule to recent changes in 
regulation and statute. None of the clarifying changes are intended to 
deviate from the substance

[[Page 43868]]

in the Circular. The few other changes are as follows:
     In keeping with the spirit of the National Performance 
Review and the Circular, the proposed section 32.44 would reduce 
reporting and record keeping burdens on small entities. It provides 
that recipients that receive less than $10 million annually in contract 
and grant funding will not be required to have written procurement 
procedures. With this change, the requirements of part 32 will be more 
comparable to those applicable to contractors under the Federal 
Acquisition Regulations.
     The proposed part 32 deletes provisions of the Circular 
concerning the Cash Management Improvement Act (CMIA). The Circular 
language was based on the Department of Treasury's original 
implementation of CMIA, which applied the Act's provisions to some 
state universities. Subsequent to OMB's issuance of the Circular, 
however, the Department of Treasury amended its regulations 
implementing CMIA, to exclude state universities from the coverage.
     The proposed part 32 updates references to the small 
purchase threshold (previously $25,000) fixed at 41 U.S.C. 403(11), to 
reflect the simplified acquisition threshold (currently $100,000) 
established at 41 U.S.C. 403(11) by the Federal Acquisition 
Streamlining Act of 1994.
     The proposed section 32.25 deletes Circular language that 
authorizes a Federal agency to waive the requirement for recipients to 
obtain the agency's approval before initiating a one-time, no-cost 
extension of an award for a 12-month period. The language is deleted 
because DoD incremental funding policies are to use a given fiscal 
year's appropriations to support programmatic effort for specified 
periods (e.g., research funds usually are for effort only through the 
first three months of the next fiscal year). DoD Components therefore 
must scrutinize requests for no-cost extensions, when those extensions 
could lengthen by a year the period during which a given fiscal year's 
appropriations would be used.

Additional Information About Proposed Part 34

    The proposed part 34 specifies administrative requirements for 
grants and for most cooperative agreements with commercial 
organizations. Consistent with the updated OMB Circular A-110, which 
states that ``Federal agencies may apply the provisions of this 
Circular to commercial organizations . . . ,'' the proposed part 34 
uses the Circular as its basis. It necessarily differs from Circular A-
110 in areas (e.g., exempt property) where the Circular's provisions 
are specifically written for educational and nonprofit organizations. 
In some other areas, such as procurement standards, the proposed part 
34 lessens requirements and reduces administrative burdens that 
otherwise would be applied to commercial organizations.

Remaining Step To Establish the DoD Grant and Agreement Regulations

    The final major step in establishing the DoD Grant and Agreement 
Regulations will be to adopt one additional part on selected research 
agreements with commercial organizations. That part, which currently is 
being prepared, is intended to provide more flexible administrative 
requirements than those in the proposed part 34. The greater 
flexibility would be available for a certain class of research 
agreements that is designed to help integrate the defense and non-
defense portions of the U.S. technology and industrial bases.

Executive Order 12866

    The proposed part 32 was determined to be a ``significant 
regulatory action,'' as defined by Executive Order 12866, by the 
Administrator of OMB's Office of Information and Regulatory Affairs. 
The Department of Defense believes that none of the proposed rules 
will: (1) have an annual effect on the economy of $100 million or more 
or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities; (2) create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in Executive Order 
12866.

Regulatory Flexibility Act of 1980 [5 U.S.C. 605(b)]

    These regulatory actions will not have a significant adverse impact 
on a substantial number of small entities.

Paperwork Reduction Act of 1995 (44 U.S.C. 3500 et seq.)

    These regulatory actions will not impose any new reporting or 
recordkeeping requirements under the Paperwork Reduction Act. Reporting 
and recordkeeping requirements in the proposed parts 32 and 34 are 
those promulgated by the updated OMB Circular A-110, which the Office 
of Mangement and Budget proposed in August, 1992 [57 FR 39018], asking 
for public comments, and finalized in November, 1993 [58 FR 62992].

List of Subjects

32 CFR Part 21

    Grant programs, Grants administration.

32 CFR Part 22 -

    Accounting, Grant programs, Grants administration, 
Intergovernmental relations, Reporting and recordkeeping requirements.

32 CFR Part 28 -

    Grant programs, Loan programs, Lobbying, Penalties, Reporting and 
recordkeeping requirements.

32 CFR Part 32 -

    Accounting, Colleges and universities, Grant programs, Grants 
administration, Hospitals, Nonprofit organizations, Reporting and 
recordkeeping requirements.

32 CFR Part 33 -

    Accounting, Grant programs, Grants administration, Indians, 
Intergovernmental relations, Reporting and recordkeeping requirements.

32 CFR Part 34 -

    Accounting, Business and industry, Grant programs, Grants 
administration, Reporting and recordkeeping requirements.

    Accordingly, Title 32 of the Code of Federal Regulations, Chapter 
I, Subchapter B, is proposed to be amended as follows.
    1. The heading of Subchapter B is proposed to be revised to read as 
follows:

SUBCHAPTER B--DoD GRANT AND AGREEMENT REGULATIONS

    2. Part 21 is proposed to be added to read as follows:

PART 21--DoD GRANTS AND AGREEMENTS--GENERAL MATTERS

Subpart A--Defense Grant and Agreement Regulatory System

Sec.
21.100  Scope.
21.105  Authority, purpose, and issuance.
21.110  Applicability and relationship to acquisition regulations.
21.115  Compliance and implementation.
21.120  Publication and maintenance.
21.125  Deviations.
21.130  Definitions.

[[Page 43869]]

Subpart B--Authorities and Responsibilities

21.200  Purpose.
21.205  DoD Components' authorities.
21.210  Vesting and delegation of authority.
21.215  Contracting activities.
21.220  Grants officers.

Subpart C--Grants Information

21.300  Purpose.
21.305  Defense Assistance Awards Data System.
21.310  Catalog of Federal Domestic Assistance.
21.315  Uniform grants and agreements numbering system.

    Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Subpart A--Defense Grant and Agreement Regulatory System


Sec. 21.100  Scope.

    The purposes of this part, which is one portion of the DoD Grant 
and Agreement Regulations (DoDGARs), are to: -
    (a) Provide general information about the DoDGARs. -
    (b) Set forth general policies and procedures related to DoD 
Components' overall management of functions related to grants and 
cooperative agreements.


Sec. 21.105  Authority, purpose, and issuance.

    (a) DoD Directive 3210.6 \1\ established the Defense Grant and 
Agreement Regulatory System (DGARS). The directive authorized 
publication of policies and procedures comprising the DGARS in the DoD 
Grant and Agreement Regulations (DoDGARs), in DoD instructions, and in 
other DoD publications, as appropriate. Thus, the DoDGARs are one 
element of the DGARS.
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    \1\ Copies may be obtained, at cost, from the National Technical 
Information Service, 5285 Port Royal Road, Springfield, VA 22161. 
Authorized users may also obtain copies from the Defense Technical 
Information Center, 8725 John J. Kingman Rd., Suite 0944, Fort 
Belvoir, VA 22060-6218.
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    (b) The purposes of the DoDGARs, in conjunction with other elements 
of the DGARS, are to provide uniform policies and procedures for grants 
and cooperative agreements awarded by DoD Components, in order to meet 
DoD needs for:
    (1) Efficient program execution, effective program oversight, and 
proper stewardship of Federal funds.
    (2) Compliance with relevant statutes; Executive orders; and 
applicable guidance, such as Office of Management and Budget (OMB) 
circulars.
    (3) Collection from DoD Components, retention, and dissemination of 
management and fiscal data related to grants and agreements.
    (c) The Director of Defense Research and Engineering, or his or her 
designee:
    (1) Develops and implements DGARS policies and procedures.
    (2) Issues and maintains the DoD Grant and Agreement Regulations 
and other DoD publications that comprise the DGARS.


Sec. 21.110  Applicability and relationship to acquisition regulations.

    (a) Applicability to grants and cooperative agreements. The DoD 
Grant and Agreement Regulations (DoDGARs) apply to all DoD grants and 
cooperative agreements.-
    (b) Applicability to other nonprocurement instruments. (1) In 
accordance with DoD Directive 3210.6, the DoDGARs may include rules 
that apply to other nonprocurement instruments, when specifically 
required in order to implement a statute, Executive order, or 
Governmentwide rule that applies to other nonprocurement instruments, 
as well as to grants and cooperative agreements. For example, the rule 
on nonprocurement debarment and suspension in 32 CFR part 25, subparts 
A through E, applies to all nonprocurement transactions, including 
grants, cooperative agreements, contracts of assistance, loans and loan 
guarantees (see definition of ``primary covered transaction'' at 32 CFR 
25.110(a)(1)(i)). -
    (2) The following is a list of DoDGARs rules that apply not only to 
grants and cooperative agreements, but also to other types of 
nonprocurement instruments: -
    (i) Requirements for reporting to the Defense Assistance Award Data 
System, in subpart C of this part. -
    (ii) The rule on nonprocurement debarment and suspension in 32 CFR 
part 25, subparts A through E. -
    (iii) Drug-free workplace requirements in 32 CFR part 25, subpart 
F. -
    (iv) Restrictions on lobbying in 32 CFR part 28. -
    (v) Administrative requirements for grants, cooperative agreements, 
and other financial assistance to: -
    (A) Universities and other nonprofit organizations, in 32 CFR part 
32. -
    (B) State and local governments, in 32 CFR part 33. -
    (3) Grants officers should be aware that each rule that applies to 
other types of nonprocurement instruments (i.e., other than grants and 
cooperative agreements) states its applicability to such instruments. 
However, grants officers must exercise caution when determining the 
applicability of some Governmentwide rules that are included in the 
DoDGARs, because a term may be defined differently in a Governmentwide 
rule than it is defined elsewhere in the DoDGARs. For example, the 
Governmentwide implementation of the Drug-Free Workplace Act of 1988 
(32 CFR part 25, subpart F) states that it applies to grants, but 
defines ``grants'' to include cooperative agreements and other forms of 
financial assistance. -
    (c) Relationship to acquisition regulations. The Federal 
Acquisition Regulation (FAR) (48 CFR parts 1-53), the Defense Federal 
Acquisition Regulation Supplement (DFARS) (48 CFR parts 201-270), and 
DoD Component supplements to the FAR and DFARS apply to DoD Components' 
procurement contracts used to acquire goods and services for the direct 
benefit or use of the Federal Government. Policies and procedures in 
the FAR and DFARS do not apply to grants, cooperative agreements, or 
other nonprocurement transactions unless the DoDGARs specify that they 
apply.


Sec. 21.115  Compliance and implementation. -

    The Head of each DoD Component that awards or administers grants 
and cooperative agreements, or his or her designee: -
    (a) Is responsible for ensuring compliance with the DoDGARs within 
that DoD Component. -
    (b) May authorize the issuance of regulations, procedures, or 
instructions that are necessary to implement DGARS policies and 
procedures within the DoD Component, or to supplement the DoDGARs to 
satisfy needs that are specific to the DoD Component, as long as such 
regulations, procedures, or instructions do not impose additional costs 
or administrative burdens on recipients or potential recipients. Heads 
of DoD Components or their designees shall establish policies and 
procedures in areas where uniform policies and procedures throughout 
the DoD Component are required, such as for: -
    (1) Requesting class deviations from the DoDGARs (see Sec. 21.125) 
or exemptions from the provisions of 31 U.S.C. 6301 et seq., that 
govern the appropriate use of contracts, grants, and cooperative 
agreements (see 32 CFR 22.220). -
    (2) Designating one or more Grant Appeal Authorities to resolve 
claims, disputes, and appeals (see 32 CFR 22.815). -
    (3) Reporting data on assistance awards and programs, as required 
by 31 U.S.C. chapter 61 (see subpart C of this part). -
    (4) Prescribing requirements for use and disposition of real 
property acquired under awards, if the DoD

[[Page 43870]]

Component makes any awards to institutions of higher education or to 
other nonprofit organizations under which real property is acquired in 
whole or in part with Federal funds (see 32 CFR 32.32).


Sec. 21.120  Publication and maintenance. -

    (a) The DoDGARs are published as Chapter I, Subchapter B, Title 32 
of the Code of Federal Regulations (CFR) and in a separate loose-leaf 
edition. The loose-leaf edition is divided into parts, subparts, and 
sections, to parallel the CFR publication. Cross-references within the 
DoDGARs are stated as CFR citations (e.g., a reference to section 
21.115 in part 21 would be to 32 CFR 21.115). -
    (b) Updates to the DoDGARs are published in the Federal Register. 
When finalized, updates also are published as Defense Grant and 
Agreement Circulars, with revised pages for the separate, loose-leaf 
edition. -
    (c) Revisions to the DoDGARs are recommended to the Director of 
Defense Research and Engineering (DDR&E) by a standing working group. 
The DDR&E, Director of Defense Procurement, and each Military 
Department shall be represented on the working group. Other DoD 
Components that use grants or cooperative agreements may also nominate 
representatives. The working group meets when necessary.


Sec. 21.125  Deviations.

    (a) The Head of the DoD Component or his or her designee may 
authorize individual deviations from the DoDGARs, which are deviations 
that affect only one grant or agreement, if such deviations are not 
prohibited by statute, executive order or regulation.
    (b) Class deviations that affect more than one grant or agreement 
must be approved in advance by the Director, Defense Research and 
Engineering (DDR&E) or his or her designee. Note that OMB concurrence 
also is required for deviations from two parts of the DoDGARs, 32 CFR 
parts 32 and 33, in accordance with 32 CFR 32.4 and 33.6, respectively.
    (c) Copies of justifications and agency approvals for individual 
deviations and written requests for class deviations shall be submitted 
to:--Deputy Director, Defense Research and Engineering, ATTN: Research, 
3080 Defense Pentagon, Washington D.C. 20301-3080.
    (d) Copies of requests and approvals for individual and class 
deviations shall be maintained in award files.


Sec. 21.130  Definitions.

    Acquisition. The acquiring (by purchase, lease, or barter) of 
property or services for the direct benefit or use of the United States 
Government (see more detailed definition at 48 CFR 2.101). In 
accordance with 31 U.S.C. 6303, procurement contracts are the 
appropriate legal instruments for acquiring such property or services.
    Assistance. The transfer of a thing of value to a recipient to 
carry out a public purpose of support or stimulation authorized by a 
law of the United States (see 31 U.S.C. 6101(3)). Grants and 
cooperative agreements are examples of legal instruments used to 
provide assistance.
    Contract. See the definition for procurement contract in this 
section.
    Contracting activity. An activity to which the Head of a DoD 
Component has delegated broad authority regarding acquisition 
functions, pursuant to 48 CFR 1.601.
    Contracting officer. A person with the authority to enter into, 
administer, and/or terminate contracts and make related determinations 
and findings. A more detailed definition of the term appears at 48 CFR 
2.101.
    Cooperative agreement. A legal instrument which, consistent with 31 
U.S.C. 6305, is used to enter into the same kind of relationship as a 
grant (see definition ``grant''), except that substantial involvement 
is expected between the Department of Defense and the recipient when 
carrying out the activity contemplated by the cooperative agreement. 
The term does not include ``cooperative research and development 
agreements'' as defined in 15 U.S.C. 3710a.
    Deviation. The issuance or use of a policy or procedure that is 
inconsistent with the DoDGARs.
    DoD Components. The Office of the Secretary of Defense, the 
Military Departments, the Defense Agencies, and DoD Field Activities.
    Grant. A legal instrument which, consistent with 31 U.S.C. 6304, is 
used to enter into a relationship:
    (1) The principal purpose of which is to transfer a thing of value 
to the recipient to carry out a public purpose of support or 
stimulation authorized by a law of the United States, rather than to 
acquire property or services for the Department of Defense's direct 
benefit or use.
    (2) In which substantial involvement is not expected between the 
Department of Defense and the recipient when carrying out the activity 
contemplated by the grant.
    Grants officer. An official with the authority to enter into, 
administer, and/or terminate grants or cooperative agreements.
    Nonprocurement instrument. A legal instrument other than a 
procurement contract. Examples include instruments of financial 
assistance, such as grants or cooperative agreements, and those of 
technical assistance, which provide services in lieu of money.
    Procurement contract. A legal instrument which, consistent with 31 
U.S.C. 6303, reflects a relationship between the Federal Government and 
a State, a local government, or other person when the principal purpose 
of the instrument is to acquire property or services for the direct 
benefit or use of the Federal Government. See the more detailed 
definition for contract at 48 CFR 2.101.
    Recipient. An organization or other entity receiving a grant or 
cooperative agreement from a DoD Component.

Subpart B--Authorities and Responsibilities


Sec. 21.200  Purpose.

    This subpart describes the sources and flow of authority to use 
grants and cooperative agreements, and assigns the broad 
responsibilities associated with DoD Components' use of such 
instruments.


Sec. 21.205  DoD Components' authorities.

    (a) In accordance with 31 U.S.C. 6301 et seq., DoD Components shall 
use grants and cooperative agreements as legal instruments reflecting 
assistance relationships between the United States Government and 
recipients.
    (b) Unlike the use of procurement contracts (for which Federal 
agencies have inherent, Constitutional authority), use of grants or 
cooperative agreements requires specific statutory authority. DoD 
Components may award grants and cooperative agreements under a number 
of statutory authorities that fall into three categories:
    (1) Authorities that statutes provide to the Secretary of Defense. 
These authorities generally are delegated by the Secretary of Defense 
to Heads of DoD Components, usually through DoD directives, 
instructions, or policy memoranda that are not part of the Defense 
Grant and Agreement Regulatory System. Examples of statutory 
authorities in this category are:
    (i) Authority under 10 U.S.C. 2391 to make grants or conclude 
cooperative agreements to assist State and local governments in 
planning and carrying out community adjustments and economic 
diversification required by changes in military installations or in DoD 
contracts or spending that may have a direct and significant adverse

[[Page 43871]]

consequence on the affected community.
    (ii) Authority under 10 U.S.C. 2413 to enter into cooperative 
agreements with entities that furnish procurement technical assistance 
to businesses.
    (2) Authorities that statutes may provide directly to Heads of DoD 
Components. For example, 10 U.S.C. 2358 authorizes the Secretaries of 
the Military Departments, in addition to the Secretary of Defense, to 
perform research and development projects through grants and 
cooperative agreements. A Military Department's use of the authority of 
10 U.S.C. 2358 therefore requires no delegation by the Secretary of 
Defense.
    (3) Authorities that arise indirectly as the result of statute. For 
example, authority to use a grant or cooperative agreement may result 
from:
    (i) A federal statute authorizing a program that is consistent with 
an assistance relationship (i.e., the support or stimulation of a 
public purpose, rather than the acquisition of a good or service for 
the direct benefit of the Department of Defense). In accordance with 31 
U.S.C. chapter 63, such a program would appropriately be carried out 
through the use of grants or cooperative agreements.
    (ii) Exemptions requested by the Department of Defense and granted 
by the Office of Management and Budget under 31 U.S.C. 6307, as 
described in 32 CFR 22.220.


Sec. 21.210  Vesting and delegation of authority.

    (a) The authority and responsibility for awarding grants and 
cooperative agreements is vested in the Head of each DoD Component that 
has such authority.
    (b) The Head of each such DoD Component, or his or her designee, 
may delegate to the heads of contracting activities (HCAs) within that 
Component, authority to award grants or cooperative agreements, to 
appoint grants officers (see Sec. 21.220(c)), and to broadly manage the 
DoD Component's functions related to grants and agreements. An HCA is 
the same official (or officials) designated as the head of the 
contracting activity for procurement contracts, as defined at 48 CFR 
2.101--the intent is that overall management responsibilities for a DoD 
Component's functions related to nonprocurement instruments be assigned 
only to officials that have similar responsibilities for procurement 
contracts.


Sec. 21.215  Contracting activities.

    When designated by the Head of the DoD Component or his or her 
designee (see 32 CFR 22.210(b)), the HCA is responsible for the grants 
and cooperative agreements made by or assigned to that activity. He or 
she shall supervise and establish internal policies and procedures for 
that activity's assistance awards.


Sec. 21.220  Grants officers. -

    (a) Authority. Only grants officers are authorized to sign grants 
or cooperative agreements, or to administer or terminate such legal 
instruments on behalf of the Department of Defense. Grants officers may 
bind the Government only to the extent of the authority delegated to 
them. -
    (b) Responsibilities. Grants officers should be allowed wide 
latitude to exercise judgment in performing their responsibilities. 
Grants officers are responsible for ensuring that: --
    (1) Individual grants and cooperative agreements are used 
effectively in the execution of DoD programs, and are awarded and 
administered in accordance with applicable laws, Executive orders, 
regulations, and DoD policies. --
    (2) Sufficient funds are available for obligation. --
    (3) Recipients of grants and cooperative agreements receive 
impartial, fair, and equitable treatment. -
    (c) Selection, appointment and termination of appointment of grants 
officers. Each DoD Component that awards grants or enters into 
cooperative agreements shall have a formal process (see Sec. 21.210(b)) 
to select and appoint grants officers and terminate their appointments. 
DoD Components are not required to maintain a selection process for 
grants officers separate from the selection process for contracting 
officers, and written statements of appointment or termination for 
grants officers may be integrated into the necessary documentation for 
contracting officers, as appropriate. --
    (1) Selection. In selecting grants officers, appointing officials 
shall consider the complexity and dollar value of the grants and 
agreements to be assigned and judge whether candidates possess the 
necessary experience, training, education, business acumen, judgment, 
and knowledge of contracts and assistance instruments to function 
effectively as grants officers. --
    (2) Appointment. Statements of appointment shall be in writing and 
shall clearly state the limits of grants officers' authority, other 
than limits contained in applicable laws or regulations. Information on 
the limits of a grants officer's authority shall be readily available 
to the public and agency personnel. --
    (3) Termination. Written statements of termination are required, 
unless the written statement of appointment provides for automatic 
termination. No termination shall be retroactive.

Subpart C--Grants Information


Sec. 21.300  Purpose. -

    This subpart prescribes policies and procedures for compiling and 
reporting data related to grants, cooperative agreements, and other 
nonprocurement instruments subject to information reporting 
requirements of 31 U.S.C. chapter 61.


Sec. 21.305  Defense Assistance Awards Data System. -

    (a) Purposes of the system. Data from the Defense Assistance Awards 
Data System (DAADS) are used to provide: --
    (1) DoD inputs to meet statutory requirements for Federal 
Governmentwide reporting of data related to obligations of funds by 
grant, cooperative agreement, or other nonprocurement instrument. --
    (2) A basis for meeting Governmentwide requirements to report to 
the Federal Assistance Awards Data System maintained by the Department 
of Commerce and for preparing other recurring and special reports to 
the President, the Congress, the General Accounting Office, and the 
public. --
    (3) Information to support policy formulation and implementation 
and to meet management oversight requirements related to the use of 
grants, cooperative agreements, and other nonprocurement instruments. -
    (b) Responsibilities. (1) The Deputy Director, Defense Research and 
Engineering (DDDR&E), or his or her designee, shall issue the manual 
described in paragraph (b)(2)(ii) of this section. --
    (2) The Director for Information Operations and Reports, Washington 
Headquarters Services (DIOR, WHS) shall, consistent with guidance 
issued by the DDDR&E:----
    (i) Process DAADS information on a quarterly basis and prepare 
recurring and special reports using such information. ----
    (ii) Prepare, update, and disseminate ``Department of Defense 
Assistance Awards Data System,'' an instruction manual for reporting 
information to DAADS. The manual, which shall be issued by the office 
of the DDR&E, shall specify procedures, formats, and editing processes 
to be used by DoD Components, including magnetic tape layout and error 
correction schedules. --
    (3) The following offices shall serve as central points for 
collecting DAADS

[[Page 43872]]

information from contracting activities within the DoD Components: ----
    (i) For the Army: As directed by the U.S. Army Contracting Support 
Agency. ----
    (ii) For the Navy: As directed by the Office of Naval Research. ---
-
    (iii) For the Air Force: As directed by SAF/AQCP. ----
    (iv) For the Office of the Secretary of Defense, Defense Agencies, 
and DoD Field Activities: Each Defense Agency shall identify a central 
point for collecting and reporting DAADS information to the DIOR, WHS, 
at the address given in paragraph (c)(2) of this section. DIOR, WHS 
shall serve as the central point for offices and activities within the 
Office of the Secretary of Defense and for DoD Field Activities. --
    (4) The office that serves, in accordance with paragraph (b)(3) of 
this section, as the central point for collecting DAADS information 
from contracting activities within each DoD Component shall: ----
    (i) Establish internal procedures to ensure reporting by 
contracting activities that use grants, cooperative agreements or other 
nonprocurement instruments subject to 31 U.S.C. chapter 61. ----
    (ii Collect information required by DD Form 2566, ``DoD Assistance 
Award Action Report,'' from those contracting activities, and report it 
to DIOR, WHS, in accordance with paragraph (d) of this section. ----
    (iii) Submit to the DDDR&E, at the address given in Sec. 21.125(c), 
any recommended changes to the DAADS or to the instruction manual 
described in paragraph (b)(2)(ii) of this section. -
    (c) Reporting procedures. The data required by the DD Form 2566 
shall be: --
    (1) Collected for each individual grant, cooperative agreement, or 
other nonprocurement action that is subject to 31 U.S.C. chapter 61 and 
involves the obligation or deobligation of Federal funds. Each action 
is reported as an obligation under a specific program listed in the 
Catalog of Federal Domestic Assistance (CFDA, see Sec. 21.310). The 
program to be shown is the one that provided the funds being obligated 
(i.e., if a grants officer in one DoD Component obligates 
appropriations of another DoD Component's program, the grants officer 
would show the CFDA program of the second DoD Component on the DD Form 
2566). --
    (2) Reported on a quarterly basis to DIOR, WHS by the offices that 
are designated pursuant to paragraph (b)(3) of this section. For the 
first three quarters of the Federal fiscal year, the data are due by 
close-of-business (COB) on the 15th day after the end of the quarter 
(i.e., first-quarter data are due by COB on January 15th, second-
quarter data by COB April 15th, and third-quarter data by COB July 
15th). Fourth-quarter data are due by COB October 25th, the 25th day 
after the end of the quarter. If any due date falls on a weekend or 
holiday, the data are due on the next regular workday. The mailing 
address for DIOR, WHS is 1215 Jefferson Davis Highway, Suite 1204, 
Arlington, VA 22202-4302. --
    (3) Reported on a computer tape, floppy diskette or by other means 
permitted by the instruction manual described in paragraph (b)(2)(ii) 
of this section. The data shall be reported in the format specified in 
the instruction manual. -
    (d) Report control symbol. DoD Components' reporting of DAADS data 
is used by DoD to satisfy Governmentwide requirements to report to the 
Federal Assistance Awards Data System, which is assigned Interagency 
Report Control Number 0252-DOC-QU.


Sec. 21.310  Catalog of Federal Domestic Assistance.

    (a) Purpose and scope of the reporting requirement. (1) Under the 
Federal Program Information Act (31 U.S.C. 6101 et seq.), as 
implemented through OMB Circular A-89,\2\ the Department of Defense is 
required to provide certain information about its domestic assistance 
programs to OMB and the General Services Administration (GSA). GSA 
makes this information available to the public by publishing it in the 
Catalog of Federal Domestic Assistance (CFDA) and maintaining the 
Federal Assistance Programs Retrieval System, a computerized data base 
of the information.
---------------------------------------------------------------------------

    \2\ Contact the Office of Management and Budget, EOP 
Publications, 725 17th St. N.W., New Executive Office Building, 
Washington, D.C. 20503.
---------------------------------------------------------------------------

    (2) The CFDA covers all domestic assistance programs and 
activities, regardless of the number of awards made under the program, 
the total dollar value of assistance provided, or the duration. In 
addition to programs using grants and cooperative agreements, covered 
programs include those providing assistance in other forms, such as 
payments in lieu of taxes or indirect assistance resulting from Federal 
operations.
    (b) Responsibilities. (1) Each DoD Component that provides domestic 
financial assistance shall:
    (i) Report to the Director for Information Operations and Reports, 
Washington Headquarters Services (DIOR, WHS) all new programs and 
changes as they occur, or as DIOR, WHS requests annual updates to 
existing CFDA information.
    (ii) Identify to the DIOR, WHS a point-of-contact who will be 
responsible for reporting such program information and for responding 
to inquiries related to it.
    (2) The DIOR, WHS shall act as the Department of Defense's single 
office for collecting, compiling and reporting such program information 
to OMB and GSA.


Sec. 21.315  Uniform grants and agreements numbering system.

    DoD Components shall assign identifying numbers to all 
nonprocurement instruments subject to this subpart, including grants 
and cooperative agreements. The numbering system parallels the 
procurement instrument identification (PII) numbering system specified 
in 48 CFR 204.70 (in the ``Defense Federal Acquisition Regulation 
Supplement''), as follows:
    (a) The first six alphanumeric characters of the assigned number 
shall be identical to those specified by 48 CFR 204.7003(a)(1) to 
identify the DoD Component and contracting activity.
    (b) The seventh and eighth positions shall be the last two digits 
of the fiscal year in which the number is assigned to the grant, 
cooperative agreement, or other nonprocurement instrument.
    (c) The 9th position shall be a number: ``1'' for grants; ``2'' for 
cooperative agreements; and ``3'' for other nonprocurement instruments.
    (d) The 10th through 13th positions shall be the serial number of 
the instrument. DoD Components and contracting activities need not 
follow any specific pattern in assigning these numbers and may create 
multiple series of letters and numbers to meet internal needs for 
distinguishing between various sets of awards.
    3. Part 22 is proposed to be added to read as follows:

PART 22--DoD GRANTS AND AGREEMENTS--AWARD AND ADMINISTRATION

Subpart A--General

Sec.
22.100  Purpose, relation to other parts, and organization.
22.105  Definitions.

Subpart B--Selecting the Appropriate Instrument

22.200  Purpose.
22.205  Distinguishing assistance from procurement.
22.210  Authority for providing assistance.
22.215  Distinguishing grants and cooperative agreements.
22.220  Exemptions.

Subpart C--Competition

22.300  Purpose.
22.305  General policy and requirement for competition.

[[Page 43873]]

22.310  Statutes concerning certain research, development, and 
facilities construction grants.
22.315  Merit-based, competitive procedures.
22.320  Special competitions.
Subpart D--Recipient Qualification Matters--General Policies and 
Procedures
22.400  Purpose.
22.405  Policy.
22.410  Grants officers' responsibilities.
22.415  Standards.
22.420  Pre-award procedures.

Subpart E--National Policy Matters

22.505  Purpose.
22.510  Certifications, representations, and assurances.
22.515  Provisions of annual appropriations acts.
22.520  Military recruiting on campus. [Reserved]
22.525  Paperwork Reduction Act.
22.530  Metric system of measurement.

Subpart F--Award

22.600  Purpose.
22.605  Grants officers' responsibilities.
22.610  Award instruments.

Subpart G--Field Administration

22.700  Purpose.
22.705  Policy.
22.710  Assignment of grants administration offices.
22.715  Grants administration office functions.

Subpart H--Post-Award Administration

22.800  Purpose and relation to other parts.
22.805  Post-award requirements in other parts.
22.810  Payments.
22.815  Claims, disputes, and appeals.
22.820  Debt collection.
22.825  Closeout audits.

Appendix A to Part 22--Suggested Proposal Provision for Required 
Certifications

Appendix B to Part 22--Suggested Award Provisions for National Policy 
Requirements That Often Apply

Appendix C to Part 22--Administrative Requirements and Issues To Be 
Addressed in Award Terms and Conditions

    Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Subpart A--General


Sec. 22.100  Purpose, relation to other parts, and organization.

    (a) This part outlines grants officers' and DoD Components' 
responsibilities related to the award and administration of grants and 
cooperative agreements.
    (b) In doing so, it also supplements other parts of the DoD Grant 
and Agreement Regulations (DoDGARs) that are either Governmentwide 
rules or DoD implementation of Governmentwide guidance in Office of 
Management and Budget (OMB) Circulars. Those other parts of the 
DoDGARs, which are referenced as appropriate in this part, are:
    (1) Governmentwide rules on debarment, suspension and drug-free 
workplace requirements, in 32 CFR part 25.
    (2) The Governmentwide rule on lobbying restrictions, in 32 CFR 
part 28.
    (3) Administrative requirements for grants and agreements awarded 
to specific types of recipients:
    (i) For State and local governmental organizations, in the 
Governmentwide rule at 32 CFR part 33.
    (ii) For institutions of higher education and other nonprofit 
organizations, at 32 CFR part 32.
    (iii) For commercial organizations, at 32 CFR part 34.
    (c)-The organization of this part parallels the award and 
administration process, from pre-award through post-award matters. It 
therefore is organized in the same manner as the parts of the DoDGARs 
(32 CFR parts 32, 33, and 34) that prescribe administrative 
requirements for specific types of recipients.


Sec. 22.105  Definitions.

    Other than the terms defined in this section, terms used in this 
part are defined in 32 CFR 21.130.
    Administrative offset. An action whereby money payable by the 
United States Government to, or held by the Government for, a recipient 
is withheld to satisfy a delinquent debt the recipient owes the 
Government.
    Advanced research. Advanced technology development that creates new 
technology or demonstrates the viability of applying existing 
technology to new products and processes in a general way. Advanced 
research is most closely analogous to precompetitive technology 
development in the commercial sector (i.e., early phases of research 
and development on which commercial competitors are willing to 
collaborate, because the work is not so coupled to specific products 
and processes that the results of the work must be proprietary). It 
does not include development of military systems and hardware where 
specific requirements have been defined. It is typically funded in 
Budget Activity 3 (6.3, Advanced Development, which formerly was 
category ``6.3A,'' Advanced Technology Development), within Research, 
Development, Test and Evaluation (RDT&E).
    Applied research. Efforts that attempt to determine and exploit the 
potential of scientific discoveries or improvements in technology such 
as new materials, devices, methods and processes. It typically is 
funded within Budget Activity 2 (6.2, Exploratory Development) within 
Research, Development, Test and Evaluation (RDT&E). Applied research 
normally follows basic research but may not be fully distinguishable 
from the related basic research. The term does not include efforts 
whose principal aim is the design, development, or testing of specific 
products, systems or processes to be considered for sale or 
acquisition; these efforts are within the definition of 
``development.''
    Basic research. Efforts directed toward increasing knowledge and 
understanding in science and engineering, rather than the practical 
application of that knowledge and understanding. It typically is funded 
within Budget Activity 1 (6.1, Basic Research) within Research, 
Development, Test and Evaluation (RDT&E). For the purposes of this 
part, basic research includes:
    (1) Research-related, science and engineering education, including 
graduate fellowships and research traineeships.
    (2) Research instrumentation and other activities designed to 
enhance the infrastructure for science and engineering research.
    Claim. A written demand or written assertion by one of the parties 
to a grant or cooperative agreement seeking as a matter of right, the 
payment of money in a sum certain, the adjustment or interpretation of 
award terms, or other relief arising under or relating to a grant or 
cooperative agreement. A routine request for payment that is not in 
dispute when submitted is not a claim. The submission may be converted 
to a claim by written notice to the grants officer if it is disputed 
either as to liability or amount, or is not acted upon in a reasonable 
time.
    Debt. Any amount of money or any property owed to a Federal Agency 
by any person, organization, or entity except another United States 
Federal agency. Debts include any amounts due from insured or 
guaranteed loans, fees, leases, rents, royalties, services, sales of 
real or personal property, or overpayments, penalties, damages, 
interest, fines and forfeitures, and all other claims and similar 
sources. Amounts due a nonappropriated fund instrumentality are not 
debts owed the United States, for the purposes of this subchapter.
    Delinquent debt. A debt:
    (1) That the debtor fails to pay by the date specified in the 
initial written notice from the agency owed the debt, normally within 
30 days, unless the debtor makes satisfactory payment

[[Page 43874]]

arrangements with the agency by that date; and
    (2) With respect to which the debtor has elected not to exercise 
any available appeals or has exhausted all agency appeal processes.
    Development. The systematic use of scientific and technical 
knowledge in the design, development, testing, or evaluation of 
potential new products, processes, or services to meet specific 
performance requirements or objectives. It includes the functions of 
design engineering, prototyping, and engineering testing.
    Electronic commerce. A wide range of functions related to grants 
and cooperative agreements which are performed using data 
communications techniques.
    Electronic data interchange. The exchange of standardized 
information communicated electronically between business partners, 
typically between computers. It is DoD policy that DoD Component EDI 
applications conform to the American National Standards Institute 
(ANSI), Accredited Standards Committee (ASC) X-12 standard.\1\
---------------------------------------------------------------------------

    \1\ Available from Accredited Standards Committee, X-12 
Secretariat, Data Interchange Standards Association, 1800 Diagonal 
Road, Suite 355, Alexandria, VA 22314-2852; Attention: Manager 
Maintenance and Publications.
---------------------------------------------------------------------------

    Electronic funds transfer. A system that provides the authority to 
debit or credit accounts in financial institutions by electronic means 
rather than source documents (e.g., paper checks). Processing typically 
occurs through the Federal Reserve System and/or the Automated Clearing 
House (ACH) computer network. It is DoD policy that DoD Component EFT 
transmissions conform to the American National Standards Institute 
(ANSI), Accredited Standards Committee (ASC) X-12 standard.
    Historically Black colleges and universities. Institutions of 
higher education determined by the Secretary of Education to meet the 
requirements of 34 CFR 608.2. Each DoD Component's contracting 
activities and grants officers may obtain a list of historically Black 
colleges and universities from that DoD Component's Small and 
Disadvantaged Business Utilization office.
    Institution of higher education. An educational institution that 
meets the criteria in section 1201(a) of the Higher Education Act of 
1965 (20 U.S.C. 1141(a)).
    Minority institutions. Institutions of higher education that meet 
the criteria for minority institutions specified in 10 U.S.C. 2323. 
Each DoD Component's contracting activities and grants officers may 
obtain copies of a current list of institutions that qualify as 
minority institutions under 10 U.S.C. 2323 from that DoD Component's 
Small and Disadvantaged Business Utilization office (the list of 
minority institutions changes periodically, based on Department of 
Education data on institutions' enrollments of minority students).
    Research. Basic, applied, and advanced research, as defined in this 
section.
    Subaward. An award of financial assistance in the form of money, or 
property in lieu of money, made under a DoD grant or cooperative 
agreement by a recipient to an eligible subrecipient. The term includes 
financial assistance for substantive program performance by the 
subrecipient of a portion of the program for which the DoD grant or 
cooperative agreement was made. It does not include the recipient's 
procurement of goods and services needed to carry out the program.

Subpart B--Selecting the Appropriate Instrument


Sec. 22.200  Purpose.

    This subpart provides the bases for determining the appropriate 
type of instrument in a given situation.


Sec. 22.205  Distinguishing assistance from procurement.

    Before using a grant or cooperative agreement, the grants officer 
shall make a positive judgment that an assistance instrument, rather 
than a procurement contract, is the appropriate instrument, based on 
the following:
    (a) Purpose. (1) The grants officer must judge that the principal 
purpose of the activity to be carried out under the instrument is to 
stimulate or support a public purpose (i.e., to provide assistance), 
rather than acquisition (i.e., to acquire goods and services for the 
direct benefit of the United States Government). If the principal 
purpose is acquisition, then the grants officer shall judge that a 
procurement contract is the appropriate instrument, in accordance with 
31 U.S.C. chapter 63 (``Using Procurement Contracts and Grant and 
Cooperative Agreements''). Assistance instruments shall not be used in 
such situations, except:
    (i) When a statute specifically provides otherwise; or
    (ii) When an exemption is granted, in accordance with Sec. 22.220.
    (2) For research and development, the appropriate use of grants and 
cooperative agreements therefore is almost exclusively limited to the 
performance of selected basic, applied, and advanced research projects. 
Development projects nearly always shall be performed by contract 
because their principal purpose is the acquisition of specific 
deliverable items (e.g., prototypes or other hardware) for the benefit 
of the Department of Defense.
    (b) Fee or profit. Payment of fee or profit is consistent with an 
activity whose principal purpose is the acquisition of goods and 
services for the direct benefit or use of the United States Government, 
rather than an activity whose principal purpose is assistance. 
Therefore, the grants officer shall use a procurement contract, rather 
than an assistance instrument, in all cases where:
    (1) Fee or profit is to be paid to the recipient of the instrument; 
or
    (2) The instrument is to be used to carry out a program where fee 
or profit is necessary to achieving program objectives.


Sec. 22.210  Authority for providing assistance.

    (a) Before a grant or cooperative agreement may be used, the grants 
officer must:
    (1) Identify the program statute, the statute that authorizes the 
DoD Component to carry out the activity the principal purpose of which 
is assistance (see 32 CFR 21.205(b)).
    (2) Review the program statute to determine if it contains 
requirements that affect the:
    (i) Solicitation, selection, and award processes. For example, 
program statutes may authorize assistance to be provided only to 
certain types of recipients; may require that recipients meet certain 
other criteria to be eligible to receive assistance; or require that a 
specific process shall be used to review recipients' proposals.
    (ii) Terms and conditions of the award. For example, some program 
statutes require a specific level of cost sharing or matching.
    (b) The grants officer shall ensure that the award of any grant or 
cooperative agreement for a research project complies with the 
requirements of 10 U.S.C. 2358, DoD's broad authority to carry out 
research, even if the research project is authorized under a statutory 
authority other than 10 U.S.C. 2358. This broadening of the 
applicability of 10 U.S.C. 2358 to all research awards is a matter of 
DoD policy. The requirements of 10 U.S.C. 2358 are that, in the opinion 
of the Head of the DoD Component or his or her designee, the projects 
must be:
    (1) Necessary to the responsibilities of the DoD Component.

[[Page 43875]]

    (2) Related to weapons systems and other military needs or of 
potential interest to the DoD Component.


Sec. 22.215  Distinguishing grants and cooperative agreements.

    (a) Once a grants officer judges, in accordance with Secs. 22.205 
and 22.210, that either a grant or cooperative agreement is the 
appropriate instrument, the grants officer shall distinguish between 
the two instruments as follows:
    (1) Grants shall be used when the grants officer judges that 
substantial involvement is not expected between the Department of 
Defense and the recipient when carrying out the activity contemplated 
in the agreement.
    (2) Cooperative agreements shall be used when the grants officer 
judges that substantial involvement is expected. Under no circumstances 
are cooperative agreements to be used solely to obtain the stricter 
controls typical of a contract. The grants officer should document the 
nature of the substantial involvement that led to selection of a 
cooperative agreement.
    (b) In judging whether substantial involvement is expected, grants 
officers should recognize that ``substantial involvement'' is a 
relative, rather than an absolute, concept, and that it is primarily 
based on programmatic factors, rather than requirements for grant or 
agreement award or administration. For example, substantial involvement 
may include collaboration, participation, or intervention in the 
program or activity to be performed under the award.


Sec. 22.220  Exemptions.

    Under 31 U.S.C. 6307, the Director of the OMB is authorized to 
exempt an agency transaction or program from the requirements of 31 
U.S.C. chapter 63. Grants officers shall request such exemptions only 
in exceptional circumstances. Each request shall specify for which 
individual transaction or program the exemption is sought; the reasons 
for requesting an exemption; the anticipated consequences if the 
exemption is not granted; and the implications for other transactions 
and programs if the exemption is granted. The procedures for requesting 
exemptions shall be:
    (a) In cases where 31 U.S.C. chapter 63 would require use of a 
contract and an exemption from that requirement is desired:
    (1) The grants officer shall submit a request for exemption, 
through appropriate channels established by his or her DoD Component 
(see 32 CFR 21.115(b)(1)), to the Director of Defense Procurement 
(DDP).
    (2) The DDP, after coordination with the Director of Defense 
Research and Engineering (DDR&E), shall transmit the request to OMB or 
notify the DoD Component that the request has been disapproved.
    (b) In other cases, the DoD Component shall submit a request for 
the exemption through appropriate channels to the DDR&E. The DDR&E 
shall transmit the request to OMB or notify the DoD Component that the 
request has been disapproved.
    (c) Where an exemption is granted, documentation of the approval 
shall be maintained in the award file.

Subpart C--Competition


Sec. 22.300  Purpose.

    This subpart establishes DoD policy and implements statutes related 
to the use of competitive procedures in the award of grants and 
cooperative agreements.


Sec. 22.305  General policy and requirement for competition.

    (a) It is DoD policy to maximize use of competition in the award of 
grants and cooperative agreements. This also conforms with:
    (1) 31 U.S.C. 6301(3), which encourages the use of competition in 
awarding all grants and cooperative agreements.
    (2) 10 U.S.C. 2374(a), which sets out Congressional policy that any 
new grant for research, development, test, or evaluation be awarded 
through merit-based selection procedures.
    (b) Grants officers shall use merit-based, competitive procedures 
(as defined by Sec. 22.315) to award grants and cooperative agreements:
    (1) In every case where required by statute (e.g., 10 U.S.C. 2361, 
as implemented in Sec. 22.310, for certain grants to institutions of 
higher education).
    (2) To the maximum extent practicable in all cases where not 
required by statute.


Sec. 22.310  Statutes concerning certain research, development, and 
facilities construction grants.

    (a) Definitions specific to this section. For the purposes of 
implementing the requirements of 10 U.S.C. 2374 in this section, the 
following terms are defined:
    (1) Follow-on grant. A grant that provides for continuation of 
research and development performed by a recipient under a preceding 
grant. Note that follow-on grants are distinct from incremental funding 
actions during the period of execution of a multi-year award.
    (2) New grant. A grant that is not a follow-on grant.
    (b) Statutory requirement to use competitive procedures. (1) A 
grants officer shall not award a grant by other than merit-based, 
competitive procedures (as defined by Sec. 22.315) to an institution of 
higher education for the performance of research and development or for 
the construction of research or other facilities, unless:
    (i) In the case of a new grant for research and development, there 
is a statute meeting the criteria in paragraph (c)(1) of this section;
    (ii) In the case of a follow-on grant for research and development, 
or of a grant for the construction of research or other facilities, 
there is a statute meeting the criteria in paragraph (c)(2) of this 
section; and
    (iii) The Secretary of Defense submits to Congress a written notice 
of intent to make the grant. The grant may not be awarded until 180 
days have elapsed after the date on which Congress received the notice 
of intent. Contracting activities must submit a draft notice of intent 
with supporting documentation through channels to the Deputy Director, 
Defense Research and Engineering.
    (2) Because subsequently enacted statutes may, by their terms, 
impose different requirements than set out in paragraph (b)(1) of this 
section, grants officers shall consult legal counsel on a case-by-case 
basis, when grants for the performance of research and development or 
for the construction of research or other facilities are to be awarded 
to institutions of higher education by other than merit-based 
competitive procedures.
    (c) Subsequent statutes. In accordance with 10 U.S.C. 2361 and 10 
U.S.C. 2374, a provision of law may not be construed as requiring the 
award of a grant through other than the merit-based, competitive 
procedures described in Sec. 22.315, unless:
    (1) Institutions of higher education--new grants for research and 
development. In the case of a new grant for research and development to 
an institution of higher education, such provision of law specifically:
    (i) Identifies the particular institution of higher education 
involved;
    (ii) States that such provision of law modifies or supersedes the 
provisions of 10 U.S.C. 2361 (a requirement that applies only if the 
statute authorizing or requiring award by other than competitive 
procedures was enacted after September 30, 1989); and

[[Page 43876]]

    (iii) States that the award to the institution of higher education 
involved is required by such provision of law to be made in 
contravention of the policy set forth in 10 U.S.C. 2374(a).
    (2) Institutions of higher education--follow-on grants for research 
and development and grants for the construction of any research or 
other facility. In the case of any such grant to an institution of 
higher education, such provision of law specifically:
    (i) Identifies the particular institution of higher education 
involved; and
    (ii) States that such provision of law modifies or supersedes the 
provisions of 10 U.S.C. 2361 (a requirement that applies only if the 
statute authorizing or requiring award by other than competitive 
procedures was enacted after September 30, 1989).
    (3) Other entities--new grants for research and development--(i) 
General. In the case of a new grant for research and development to an 
entity other than an institution of higher education, such provision of 
law specifically:
    (A) Identifies the particular entity involved;
    (B) States that the award to that entity is required by such 
provision of law to be made in contravention of the policy set forth in 
10 U.S.C. 2374(a).
    (ii) Exception. The requirement of paragraph (c)(3)(i) of this 
section does not apply to any grant that calls upon the National 
Academy of Sciences to:
    (A) Investigate, examine, or experiment upon any subject of science 
or art of significance to the Department of Defense or any Military 
Department; and
    (B) Report on such matters to the Congress or any agency of the 
Federal Government.


Sec. 22.315  Merit-based, competitive procedures.

    Competitive procedures are methods that encourage participation in 
DoD programs by a broad base of the most highly qualified performers. 
These procedures are characterized by competition among as many 
eligible proposers as possible, with a published or widely disseminated 
notice. Competitive procedures include, as a minimum:
    (a) Notice to prospective proposers. The notice may be a notice of 
funding availability or Broad Agency Announcement published in the 
Federal Register or Commerce Business Daily, respectively, or a notice 
that is made available broadly by electronic means. Alternatively, it 
may take the form of a specific notice that is distributed to eligible 
proposers (a specific notice must be distributed to at least two 
eligible proposers to be considered as part of a competitive 
procedure). Notices must include, as a minimum, the following 
information:
    (1) Programmatic area(s) of interest, in which proposals or 
applications are sought.
    (2) Eligibility criteria for potential recipients (see subpart D of 
this part).
    (3) Criteria that will be used to select the applications or 
proposals that will be funded, and the method for conducting the 
evaluation.
    (4) The type(s) of funding instruments (e.g., grants, cooperative 
agreements, other assistance instruments, or procurement contracts) 
that are anticipated to be awarded pursuant to the announcement.
    (5) Instructions for preparation and submission of a proposal or 
application, including the time by which it must be submitted.
    (b) At least two eligible, prospective proposers.
    (c) Impartial review of the merits of applications or proposals 
received in response to the notice, using the evaluation method and 
selection criteria described in the notice. For research and 
development awards, in order to be considered as part of a competitive 
procedure, the two principal selection criteria, unless statute 
provides otherwise, must be the:
    (1) Technical merits of the proposed research and development; and
    (2) Potential relationship of the proposed research and development 
to Department of Defense missions.


Sec. 22.320  Special competitions.

    (a) General. Some programs may be competed for programmatic or 
policy reasons among specific classes of potential recipients. An 
example would be a program to enhance U.S. capabilities for academic 
research and research-coupled graduate education in defense-critical, 
science and engineering disciplines, a program that would be competed 
specifically among institutions of higher education. All such special 
competitions shall be consistent with program representations in the 
President's budget submission to Congress and with subsequent 
Congressional authorizations and appropriations for the programs.
    (b) Historically Black colleges and universities (HBCUs) and other 
minority institutions (MIs). Increasing the ability of HBCUs and MIs to 
participate in federally funded, university programs is an objective of 
Executive Order 12876 (3 CFR, 1993 Comp., p. 671) and 10 U.S.C. 2323. 
Whenever practicable, grants officers shall reserve appropriate 
programmatic areas for exclusive competition among HBCUs and MIs when 
preparing Broad Agency Announcements or other announcements as notices 
for programs in which grants or cooperative agreements are to be 
awarded to institutions of higher education.

Subpart D--Recipient Qualification Matters--General Policies and 
Procedures


Sec. 22.400  Purpose.

    The purpose of this subpart is to specify policies and procedures 
for grants officers' determination of recipient qualifications prior to 
award.


Sec. 22.405  Policy.

    (a) General. Grants officers normally shall award grants or 
cooperative agreements only to qualified recipients that meet the 
standards in Sec. 22.415. This practice conforms with the 
Governmentwide policy, stated at 32 CFR 25.115(a), to do business only 
with responsible persons.
    (b) Exception. In exceptional circumstances, grants officers may 
make awards to recipients that do not fully meet the standards in 
Sec. 22.415 and include special award conditions that are appropriate 
to the particular situation, in accordance with 32 CFR 32.14, 33.12, or 
34.4.


Sec. 22.410  Grants officers' responsibilities.

    The grants officer is responsible for determining a recipient's 
qualification prior to award. The grants officer's signature on the 
award document shall signify his or her determination that either:
    (a) The potential recipient meets the standards in Sec. 22.415 and 
is qualified to receive the grant or cooperative agreement; or
    (b) An award is justified to a recipient that does not fully meet 
the standards, pursuant to Sec. 22.405(b). In such cases, grants 
officers shall document in the award file the rationale for making an 
award to a recipient that does not fully meet the standards.


Sec. 22.415  Standards.

    To be qualified, a potential recipient must:
    (a) Have the management capability and adequate financial and 
technical resources, given those that would be made available through 
the grant or cooperative agreement, to execute the program of 
activities envisioned under the grant or cooperative agreement.
    (b) Have a satisfactory record of executing such programs or 
activities.
    (c) Have a satisfactory record of integrity and business ethics.

[[Page 43877]]

    (d) Be otherwise qualified and eligible to receive a grant or 
cooperative agreement under applicable laws and regulations (see 
Sec. 22.420(c)).


Sec. 22.420  Pre-award procedures.

    (a) The appropriate method to be used and amount of effort to be 
expended in deciding the qualification of a potential recipient will 
vary. In deciding on the method and level of effort, the grants officer 
should consider factors such as:
    (1) DoD's past experience with the recipient;
    (2) Whether the recipient has previously received cost-type 
contracts, grants, or cooperative agreements from the Federal 
Government; and
    (3) The amount of the prospective award and complexity of the 
project to be carried out under the award.
    (b) There is no DoD-wide requirement to obtain a pre-award credit 
report, audit, or any other specific piece of information. On a case-
by-case basis, the grants officer will decide whether there is a need 
to obtain any such information to assist in deciding whether the 
recipient meets the standards in Sec. 22.415(a), (b), and (c).
    (1) Should the grants officer in a particular case decide that a 
pre-award credit report, audit, or survey is needed, he or she should 
consult first with the appropriate grants administration office 
(identified in Sec. 22.710), and decide whether pre-existing surveys or 
audits of the recipient, such as those of the recipient's internal 
control systems under OMB Circular A-133 \2\ or A-128 \3\ will satisfy 
the need (see Sec. 22.715(a)(1)).
---------------------------------------------------------------------------

    \2\ Contact the Office of Management and Budget, EOP 
Publications, 725 17th St. N.W., New Executive Office Building, 
Washington, D.C. 20503.
    \3\ See footnote 2 to paragraph (b)(1) of this section.
---------------------------------------------------------------------------

    (2) If, after consulting with the grants administration office, the 
grants officer decides to obtain a credit report, audit, or other 
information, and the report or other information discloses that a 
potential recipient is delinquent on a debt to an agency of the United 
States Government, then:
    (i) The grants officer shall take such information into account 
when determining whether the potential recipient is qualified with 
respect to the grant or cooperative agreement; and
    (ii) If the grants officer decides to make the award to the 
recipient, unless there are compelling reasons to do otherwise, the 
grants officer shall delay the award of the grant or cooperative 
agreement until payment is made or satisfactory arrangements are made 
to repay the debt.
    (c) In deciding whether a recipient is otherwise qualified and 
eligible in accordance with the standard in Sec. 22.415(d), the grants 
officer shall ensure that the potential recipient: --
    (1) Is not identified on the Governmentwide ``List of Parties 
Excluded from Federal Procurement and Nonprocurement Programs'' as 
being debarred, suspended, or otherwise ineligible to receive the 
award. The grants officer shall check the list of such parties for: ---
-
    (i) Potential recipients of prime awards, as described at 32 CFR 
25.505(d); ----
    (ii) A recipient's principals (e.g., officers, directors, or other 
key employees, as defined at 32 CFR 25.105); and ----
    (iii) Potential recipients of subawards, where DoD Component 
approval of such principals or lower-tier recipients is required under 
the terms of the award (see 32 CFR 25.505(e)). --
    (2) Has provided all certifications and assurances required by 
Federal statute, Executive order, or codified regulation, unless they 
are to be addressed in award terms and conditions at the time of award 
(see Sec. 22.510). --
    (3) Meets any eligibility criteria that may be specified in the 
statute authorizing the specific program under which the award is being 
made (see Sec. 22.210(a)(2)). -
    (d) Grants officers shall obtain recipients' Taxpayer 
Identification Numbers (these may be Social Security Numbers for 
individuals and Employer Identification Numbers for businesses or non-
profit entities) to facilitate later collection of delinquent debts, if 
necessary.

Subpart E--National Policy Matters


Sec. 22.505  Purpose. -

    The purpose of this subpart is to supplement other regulations that 
implement national policy requirements, to the extent that it is 
necessary to provide additional guidance to DoD grants officers. The 
other regulations that implement national policy requirements include: 
-
    (a) The other parts of the DoDGARs (32 CFR parts 32, 33, and 34) 
that implement the Governmentwide guidance in OMB Circulars A-102 \4\ 
and A-110 \5\ on administrative requirements for grants and cooperative 
agreements. Those parts address some national policy matters that 
appear in the OMB Circulars.
---------------------------------------------------------------------------

    \4\ See footnote 2 to Sec. 22.420(b)(1).
    \5\ See footnote 2 to Sec. 22.420(b)(1).-
---------------------------------------------------------------------------

    (b) DoD regulations other than the DoDGARs. -
    (c) Other Federal agencies' regulations.


Sec. 22.510  Certifications, representations, and assurances. -

    (a) Certifications--(1) Policy. Certifications of compliance with 
national policy requirements are to be obtained from recipients only 
for those national policies where a statute, Executive order, or 
codified regulation specifically states that a certification is 
required. Other national policy requirements may be addressed by 
obtaining representations or assurances (see paragraph (b) of this 
section). Grants officers should utilize methods for obtaining 
certifications, in accordance with Executive Order 12866 (3 CFR, 1993 
Comp., p. 638), that minimize administration and paperwork.
    (2) Procedures. (i) When necessary, grants officers may obtain 
individual, written certifications.
    (ii) Whenever possible, however, grants officers should identify 
the certifications that are required for the particular type of 
recipient and program, and consolidate them into a single certification 
provision that cites them by reference.
    (A) Appendix A to this part lists the common certifications and 
cites their applicability. Because some certifications (e.g., the 
certification on lobbying in Appendix A to this part) are required by 
law to be submitted at the time of proposal, rather than at the time of 
award, Appendix A to this part includes suggested language for 
incorporating common certifications by reference into a proposal.
    (B) If a grants officer elects to have proposers incorporate 
certifications by reference into their proposals, the solicitation 
either must include the full text of the certifications that proposers 
are to provide by reference, or must inform the proposers where the 
full text may be found (e.g., in documents or computer network sites 
that are readily available to the public) and offer to provide it to 
proposers upon request.
    (C) Grants officers may incorporate certifications by reference in 
award documents when doing so is consistent with statute and codified 
regulation. Note that a statute requires submission of the lobbying 
certification in Appendix A to this part at the time of proposal. 
Grants officers may incorporate the other certifications listed in 
Appendix A to this part in award documents, notwithstanding the 
regulatory requirement stated in 32 CFR 25.510(a) for obtaining 
certifications regarding debarment and suspension at the time of 
proposal submission. The provision that a grants officer would use to 
incorporate certifications in award documents would be similar to the

[[Page 43878]]

suggested provision in Appendix A to this part, except that it would be 
modified to state that the recipient is providing the required 
certifications by signing the award document or by accepting funds 
under the award.
    (b) Representations and assurances. Many national policies, either 
in statute or in regulation, require recipients of grants and 
cooperative agreements to make representations or provide assurances 
(rather than certifications) that they are in compliance with the 
policies. As discussed in Sec. 22.610(b), Appendix B to this part 
suggests award terms and conditions that may be used to address several 
of the more commonly applicable national policy requirements. These 
terms and conditions may be used to obtain required assurances and 
representations, if the grants officer wishes to do so at the time of 
award, rather than through the use of the standard application form 
(SF-424) or other means at the time of proposal.


Sec. 22.515  Provisions of annual appropriations acts. -

    An annual appropriations act can include general provisions stating 
national policy requirements that apply to the use of funds (e.g., 
obligation through a grant or cooperative agreement) appropriated by 
the act. Because these requirements are of limited duration (the period 
during which a given year's appropriations are available for 
obligation), and because they can vary from year to year and from one 
agency's appropriations act to another agency's, the grants officer 
must know the agency(ies) and fiscal year(s) of the appropriations 
being obligated by a given grant or cooperative agreement, and may need 
to consult legal counsel if he or she does not know the requirements 
applicable to those appropriations.


Sec. 22.520  Military recruiting on campus. [Reserved]


Sec. 22.525  Paperwork Reduction Act. -

    Grants officers shall include appropriate award terms or 
conditions, if a recipient's activities under an award will be subject 
to the Paperwork Reduction Act of 1995 (44 U.S.C. 3500, et seq.):-
    (a) Generally, the Act only applies to Federal agencies--it 
requires agencies to obtain clearance from the Office of Management and 
Budget before collecting information using forms, schedules, 
questionnaires, or other methods calling either for answers to: ---
    (1) Identical questions from ten or more persons other than 
agencies, instrumentalities, or employees of the United States. ---
    (2) Questions from agencies, instrumentalities, or employees of the 
United States which are to be used for statistical compilations of 
general public interest. --
    (b) The Act applies to similar collections of information by 
recipients of grants or cooperative agreements only when: ---
    (1) A recipient collects information at the specific request of the 
awarding Federal agency; or ---
    (2) The terms and conditions of the award require specific approval 
by the agency of the information collection or the collection 
procedures.


Sec. 22.530  Metric system of measurement. --

    (a) Statutory requirement. The Metric Conversion Act of 1975, as 
amended by the Omnibus Trade and Competitiveness Act of 1988 (15 U.S.C. 
205) and implemented by Executive Order 12770 (3 CFR, 1991 Comp., p. 
343), states that: ---
    (1) The metric system is the preferred measurement system for U.S. 
trade and commerce. ---
    (2) The metric system of measurement will be used, to the extent 
economically feasible, in federal agencies' procurements, grants, and 
other business-related activities. ---
    (3) Metric implementation shall not be required to the extent that 
such use is likely to cause significant inefficiencies or loss of 
markets to United States firms. --
    (b) Responsibilities. DoD Components shall ensure that the metric 
system is used, to the maximum extent practicable, in measurement-
sensitive activities supported by programs that use grants and 
cooperative agreements, and in measurement-sensitive outputs of such 
programs.

Subpart F--Award


Sec. 22.600  Purpose. --

    This subpart sets forth grants officers' responsibilities relating 
to the award document and other actions at the time of award.


Sec. 22.605  Grants officers' responsibilities. --

    At the time of award, the grants officer is responsible for 
ensuring that: --
    (a) The award instrument contains the appropriate terms and 
conditions, in accordance with Sec. 22.610. --
    (b) Information about the award is provided to the office 
responsible for preparing reports for the Defense Assistance Award Data 
System (DAADS), to ensure timely and accurate reporting of data 
required by 31 U.S.C. 6101-6106 (see 32 CFR part 21, subpart C). --
    (c) In addition to the copy of the award document provided to the 
recipient, a copy is forwarded to the office designated to administer 
the grant or cooperative agreement, and another copy is forwarded to 
the finance and accounting office designated to make the payments to 
the recipient.


Sec. 22.610  Award instruments. --

    (a) Each award document shall include terms and conditions that: --
-
    (1) Address programmatic requirements (e.g., a statement of work or 
other appropriate terms or conditions that describe the specific goals 
and objectives of the project). The grants officer shall develop such 
terms and conditions in coordination with program officials. ---
    (2) Provide for the recipient's compliance with: -----
    (i) Pertinent Federal statutes or Executive orders that apply 
broadly to Federal or DoD assistance awards. -----
    (ii) Any program-specific requirements that are prescribed in the 
program statute (see Sec. 22.210(a)(2)), or appropriation-specific 
requirements that are stated in the pertinent Congressional 
appropriations (see Sec. 22.515). -----
    (iii) Pertinent portions of the DoDGARs or other Federal 
regulations, including those that implement the Federal statutes or 
Executive orders described in paragraphs (a)(2) (i) and (ii) of this 
section. ---
    (3) Specify the grants officer's instructions for post-award 
administration, for any matter where the post-award administration 
provisions in 32 CFR part 32, 33, or 34 give the grants officer options 
for handling the matter. For example, under 32 CFR 32.24(b), the grants 
officers must choose among possible methods for the recipient's 
disposition of program income. It is essential that the grants officer 
identify the option selected in each case, to provide clear 
instructions to the recipient and the grants officer responsible for 
post-award administration of the grant or cooperative agreement. --
    (b) To assist grants officers: ---
    (1) Appendix B to this part provides model clauses to implement 
certain Federal statutes, Executive orders, and regulations (see 
paragraph (a)(2)(i) of this section) that frequently apply to DoD 
grants and cooperative agreements. Grants officers may incorporate the 
model clauses into award terms and conditions, as appropriate. It 
should be noted that Appendix B to this part is an aid, and not an 
exhaustive list of all requirements that apply in all cases.

[[Page 43879]]

Depending on the circumstances of a given award, other statutes, 
Executive orders, or codified regulations also may apply (e.g., 
Appendix B to this part does not list program-specific requirements 
described in paragraph (a)(2)(ii) of this section).
    (2) Appendix C to this part is a list of administrative 
requirements that apply to awards to different types of recipients. It 
also identifies post-award administration issues that the grants 
officer must address in the award terms and conditions.

Subpart G--Field Administration


Sec. 22.700  Purpose. ---

    This subpart prescribes policies and procedures for administering 
grants and cooperative agreements. It does so in conjunction with 32 
CFR parts 32, 33, and 34, which prescribe administrative requirements 
for particular types of recipients.


Sec. 22.705  Policy. ---

    (a) DoD policy is to have each recipient deal with a single office, 
to the maximum extent practicable, for post-award administration of its 
grants and agreements. This reduces burdens on recipients that can 
result when multiple DoD offices separately administer grants and 
agreements they award to a given recipient. It also minimizes 
unnecessary duplication of field administration services. ---
    (b) To further reduce burdens on recipients, the office responsible 
for performing field administration services for grants and agreements 
to a particular recipient shall be the same office that is assigned 
responsibility for performing field administration services for 
contracts awarded to that recipient. --
    (c) Contracting activities and grants officers therefore shall use 
cross-servicing arrangements whenever practicable and, to the maximum 
extent possible, delegate responsibility for post-award administration 
to the cognizant grants administration offices identified in 
Sec. 22.710.


Sec. 22.710  Assignment of grants administration offices.

    In accordance with the policy stated in Sec. 22.705(b), the DoD 
offices (referred to in this part as ``grants administration offices'') 
that are assigned responsibility for performing field administration 
services for grants and agreements are (see the ``DoD Directory of 
Contract Administration Services Components,'' DLAH 4105.4,\6\ for 
specific addresses of administration offices): -
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    \6\ Copies may be obtained from the Defense Logistics Agency, 
Publications Distribution Division (DASC-WDM), 8725 John J. Kingman 
Rd., Suite 0119, Fort Belvoir, VA 22060-6220.
---------------------------------------------------------------------------

    (a) Regional offices of the Office of Naval Research, for grants 
and agreements with: ----
    (1) Institutions of higher education and laboratories affiliated 
with such institutions, to the extent that such organizations are 
subject to the university cost principles in OMB Circular A-21.\7\
---------------------------------------------------------------------------

    \7\ See footnote 2 to Sec. 22.420(b)(1).
---------------------------------------------------------------------------

    (2) Nonprofit organizations that are subject to the cost principles 
in OMB Circular A-122,\8\ if their principal business with the 
Department of Defense is research and development.
---------------------------------------------------------------------------

    \8\ See footnote 2 to Sec. 22.420(b)(1). -
---------------------------------------------------------------------------

    (b) Field offices of the Defense Contract Management Command, for 
grants and agreements with all other entities, including: --
    (1) Commercial organizations. --
    (2) Nonprofit organizations identified in Attachment C of OMB 
Circular A-122 that are subject to commercial cost principles in 48 CFR 
part 31. --
    (3) Nonprofit organizations subject to the cost principles in OMB 
Circular A-122, if their principal business with the Department of 
Defense is other than research and development.
    (4) State and local governments.


Sec. 22.715  Grants administration office functions.

    The primary responsibility of cognizant grants administration 
offices shall be to advise and assist grants officers and recipients 
prior to and after award, and to help ensure that recipients fulfill 
all requirements in law, regulation, and award terms and conditions. 
Specific functions include:
    (a) Conducting reviews and coordinating reviews, audits, and audit 
requests. This includes:
    (1) Advising grants officers on the extent to which audits by 
independent auditors (i.e., public accountants or Federal auditors) 
have provided the information needed to carry out their 
responsibilities. If a recipient has had an independent audit in 
accordance with OMB Circular A-128 or OMB Circular A-133, and the audit 
report disclosed no material weaknesses in the recipient's financial 
management and other management and control systems, additional 
preaward or closeout audits usually will not be needed (see 
Secs. 22.420(b) and 22.825(b)).
    (2) Performing pre-award surveys, when requested by a grants 
officer, after providing advice described in paragraph (a)(1) of this 
section.
    (3) Reviewing recipients' systems and compliance with Federal 
requirements, in coordination with any reviews and compliance audits 
performed by independent auditors under OMB Circular A-128 or A-133. 
This includes:
    (i) Reviewing recipients' financial management, property 
management, and purchasing systems, to determine the adequacy of such 
systems.
    (ii) Determining that recipients have drug-free workplace programs, 
as required under 32 CFR part 25.
    (4) Notifying the Office of the Assistant Inspector General for 
Audit Policy and Oversight (OAIG(APO)), 400 Army-Navy Drive, Arlington, 
VA 22202, if either of the following is not available within a 
reasonable period of time (e.g., six months) after the date on which a 
recipient of DoD grants and agreements was to have submitted its audit 
report under OMB Circular A-128 or A-133 to the OAIG(APO):
    (i) The recipient's audit report under OMB Circular A-128 or A-133.
    (ii) The OAIG(APO)'s desk review of the recipient's audit report, 
or a letter stating that the OAIG(APO) has decided not to conduct a 
desk review.
    (b) Performing property administration services for Government-
owned property, and for any property acquired by a recipient, with 
respect to which the recipient has further obligations to the 
Government.
    (c) Ensuring timely submission of required reports.
    (d) Executing administrative closeout procedures.
    (e) Establishing recipients' indirect cost rates, where the 
Department of Defense is the cognizant or oversight Federal agency with 
the responsibility for doing so.
    (f) Performing other administration functions (e.g., receiving 
recipients' payment requests and transmitting approved payment 
authorizations to payment offices) as delegated by applicable cross-
servicing agreements or letters of delegation.

Subpart H--Post-Award Administration


Sec. 22.800  Purpose and relation to other parts.

    This subpart sets forth grants officers' and DoD Components' 
responsibilities for post-award administration, by providing DoD-
specific requirements on payments; debt collection; claims, disputes 
and appeals; and closeout audits.


Sec. 22.805  Post-award requirements in other parts.

    Grants officers responsible for post-award administration of grants 
and cooperative agreements shall administer such awards in accordance 
with the

[[Page 43880]]

following parts of the DoDGARs, as supplemented by this subpart:
    (a) Awards to domestic recipients. Standard administrative 
requirements for grants and cooperative agreements with domestic 
recipients are specified in other parts of the DoDGARs, as follows:
    (1) For awards to domestic institutions of higher education and 
other nonprofit organizations, requirements are specified in 32 CFR 
part 32, which is the DoD implementation of OMB Circular A-110.
    (2) For awards to State and local governments, specifies 
requirements are specified in 32 CFR part 33, which is the DoD 
codification of the Governmentwide common rule to implement OMB 
Circular A-102.
    (3) For awards to domestic commercial organizations, requirements 
are specified in 32 CFR part 34, which is modeled on the requirements 
in OMB Circular A-110.
    (b) Awards to foreign recipients. DoD Components shall use the 
administrative requirements specified in paragraph (a) of this section, 
to the maximum extent practicable, for grants and cooperative 
agreements to foreign recipients.


Sec. 22.810  Payments.

    (a) Purpose. This section prescribes policies and grants officers' 
post-award responsibilities, with respect to payments to recipients of 
grants and cooperative agreements.
    (b) Policy. It is Governmentwide policy to minimize the time 
elapsing between any payment of funds to a recipient and the 
recipient's disbursement of the funds for program purposes (see 32 CFR 
32.22(a) and 33.21(b), and the implementation of the Cash Management 
Improvement Act at 31 CFR part 205). Expanding on the Governmentwide 
policy, DoD policy is to:
    (1) Use electronic commerce, to the maximum extent practicable, in 
the payment process for grants and cooperative agreements, to improve 
timeliness and accuracy of payments.
    (2) Make authorized payments expeditiously.
    (i) When grants or agreements provide for payments, either advances 
or reimbursements, to be made in response to recipients' requests, 
authorized payments shall be made as soon as possible after receipt of 
the requests. Authorized payments normally shall not be made more than:
    (A) Seven days after receipt of recipients' requests, whenever 
grants officers, payment offices, and recipients are able to use 
electronic commerce (i.e., electronic data interchange (EDI) to request 
and authorize payments and electronic funds transfer (EFT) to make 
payments).
    (B) Thirty days after receipt of recipients' requests, when it is 
not possible to use electronic commerce and offices must process paper 
to receive recipients' requests, or to authorize and make payments 
(note, however, that Governmentwide guidance implemented at 32 CFR 
32.22(e)(1) makes payment within 30 days a firm requirement, not just 
the norm, for payments to institutions of higher education and other 
nonprofit organizations, when the reimbursement method of payment is 
used). Payments shall be made as expeditiously as processing of paper 
transactions allows--this policy is intended neither to delay payments 
nor to make them as close as possible to the 30th day.
    (ii) When payments are authorized in advance, based on a 
predetermined schedule, the payment office should make each payment 
within 7 days of the date specified, if the schedule was provided to 
the payment office at least 30 days in advance of the date of the 
scheduled payment.
    (c) Post-award responsibilities. The administrative grants officer 
designated to handle payments for a grant or cooperative agreement is 
responsible for:
    (1) Maintaining a close working relationship with the personnel in 
the finance and accounting office responsible for making the payments. 
A good working relationship is necessary, to ensure timely and accurate 
handling of financial transactions for grants and agreements. 
Administrative grants officers should be generally familiar with 
policies and procedures for disbursing officers that are contained in 
Chapter 19 of Volume 10 of the DoD Financial Management Regulation (DoD 
7000.14-R \9\).
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    \9\ Copies may be obtained, at cost, from the National Technical 
Information Service, 5285 Port Royal Road, Springfield, VA 22161. 
Authorized users may also obtain copies from the Defense Technical 
Information Center, 8725 John J. Kingman Rd., Suite 0944, Fort 
Belvoir, VA 22060-6218.
---------------------------------------------------------------------------

    (2) Handling recipients' requests for payments in accordance with 
DoD implementation of Governmentwide guidance (see 32 CFR 32.22, 33.21, 
or 34.12, as applicable).
    (3) Reviewing each payment request to ensure that:
    (i) The request complies with the award terms.
    (ii) Available funds are adequate to pay the request.
    (iii) The recipient will not have excess cash on hand, based on 
expenditure patterns.
    (4) Forwarding authorizations to the designated payment office 
expeditiously, so that payments may be made in accordance with the 
timely payment goals in paragraph (b)(2) of this section. 
Authorizations generally should be forwarded to the payment office at 
least 3 working days before the end of the period specified in 
paragraph (b)(2)(i) (A) or (B) of this section.


Sec. 22.815  Claims, disputes, and appeals.

    (a) Award terms. Grants officers shall include in grants and 
cooperative agreements a term or condition that incorporates the 
procedures of this section for:
    (1) Processing recipient claims and disputes.
    (2) Deciding appeals of grants officers' decisions.
    (b) Submission of claims--(1) Recipient claims. Recipients shall 
submit claims arising out of or relating to a grant or cooperative 
agreement to the grants officer for decision. Claims shall be in 
writing, shall specify the nature and basis for the relief requested, 
and shall include all data that supports the claim.
    (2) DoD Component claims. Claims by a DoD Component shall be the 
subject of a written decision by a grants officer.
    (c) Alternative Dispute Resolution (ADR)--(1) Policy. DoD policy is 
to try to resolve all issues concerning grants and cooperative 
agreements by mutual agreement at the grants officer's level. DoD 
Components therefore are encouraged to use ADR procedures to the 
maximum extent practicable. ADR procedures are any voluntary means 
(e.g., mini-trials or mediation) used to resolve issues in controversy 
without resorting to formal administrative appeals (see paragraph (e) 
of this section) or to litigation.
    (2) Procedures. (i) The ADR procedures or techniques to be used may 
either be agreed upon by the Government and the recipient in advance 
(e.g., when agreeing on the terms and conditions of the grant or 
cooperative agreement), or may be agreed upon at the time the parties 
determine to use ADR procedures.
    (ii) If a grants officer and a recipient are not able to resolve an 
issue through unassisted negotiations, the grants officer shall 
encourage the recipient to enter into ADR procedures. ADR procedures 
may be used prior to submission of a recipient's claim or at any time 
prior to the Grant Appeal Authority's decision on a recipient's

[[Page 43881]]

appeal (see paragraph (e)(3)(iii) of this section).
    (d) Grants officer decisions. (1) Within 60 days of receipt of a 
written claim, the grants officer shall either:
    (i) Prepare a written decision, which shall include the reasons for 
the decision; shall identify all relevant data on which the decision is 
based; shall identify the cognizant Grant Appeal Authority and give his 
or her mailing address; and shall be included in the award file; or
    (ii) Notify the recipient of a specific date when he or she will 
render a written decision, if more time is required to do so. The 
notice shall inform the recipient of the reason for delaying the 
decision (e.g., the complexity of the claim, a need for more time to 
complete ADR procedures, or a need for the recipient to provide 
additional information to support the claim).
    (2) The decision of the grants officer shall be final. If a 
recipient decides to appeal a grants officer's decision, the grants 
officer shall encourage the recipient to enter into ADR procedures, as 
described in paragraph (c) of this section.
    (e) Formal administrative appeals--(1) Grant Appeal Authorities. 
Each DoD Component that awards grants or cooperative agreements shall 
establish one or more Grant Appeal Authorities to decide formal, 
administrative appeals in accordance with paragraph (e)(3) of this 
section. Each Grant Appeal Authority shall be either:
    (i) An individual at a grade level in the Senior Executive Service, 
if civilian, or at the rank of Flag or General Officer, if military; or
    (ii) A board chaired by such an individual.
    (2) Right of appeal. A recipient has the right to appeal a grants 
officer's decision to the Grant Appeal Authority (but note that ADR 
procedures, as described in paragraph (c) of this section, are the 
preferred means for resolving any appeal).
    (3) Appeal procedures--(i) Notice of appeal. A recipient may appeal 
a decision of the grants officer within 90 days of receiving that 
decision, by filing a written notice of appeal to the Grant Appeal 
Authority and to the grants officer. If a recipient elects to use an 
ADR procedure, the recipient is permitted an additional 60 days to file 
the written notice of appeal to the Grant Appeal Authority and grants 
officer.
    (ii) Appeal file. Within 30 days of receiving the notice of appeal, 
the grants officer shall forward to the Grant Appeal Authority and the 
recipient the appeal file, which shall include copies of all documents 
relevant to the appeal. The recipient may supplement the file with 
additional documents it deems relevant. Either the grants officer or 
the recipient may supplement the file with a memorandum in support of 
its position. The Grant Appeal Authority may request additional 
information from either the grants officer or the recipient.
    (iii) Decision. The appeal shall be decided solely on the basis of 
the written record, unless the Grant Appeal Authority decides to 
conduct fact-finding procedures or an oral hearing on the appeal. Any 
fact-finding or hearing shall be conducted using procedures that the 
Grant Appeal Authority deems appropriate.
    (f) Representation. A recipient may be represented by counsel or 
any other designated representative in any claim, appeal, or ADR 
proceeding brought pursuant to this section, as long as the 
representative is not otherwise prohibited by law or regulation from 
appearing before the DoD Component concerned.
    (g) Non-exclusivity of remedies. Nothing in this section is 
intended to limit a recipient's right to any remedy under the law.


Sec. 22.820  Debt collection.

    (a) Purpose. This section prescribes procedures for establishing 
debts owed by recipients of grants and cooperative agreements, and 
transferring them to payment offices for collection.
    (b) Resolution of indebtedness. The grants officer shall attempt to 
resolve by mutual agreement any claim of a recipient's indebtedness to 
the United States arising out of a grant or cooperative agreement 
(e.g., by a finding that a recipient was paid funds in excess of the 
amount to which the recipient was entitled under the terms and 
conditions of the award).
    (c) Grants officer's decision. In the absence of such mutual 
agreement, any claim of a recipient's indebtedness shall be the subject 
of a grants officer decision, in accordance with Sec. 22.815(b)(2). The 
grants officer shall prepare and transmit to the recipient a written 
notice that:
    (1) Describes the debt, including the amount, the name and address 
of the official who determined the debt (e.g., the grants officer under 
Sec. 22.815(d), and a copy of that determination.
    (2) Informs the recipient that:
    (i) Within 30 days of the grants officer's decision, the recipient 
shall either pay the amount owed or inform the grants officer of the 
recipient's intention to appeal the decision.
    (ii) If the recipient elects not to appeal, any amounts not paid 
within 30 days of the grants officer's decision will be a delinquent 
debt.
    (iii) If the recipient elects to appeal the grants officer's 
decision the recipient has 90 days, or 150 days if ADR procedures are 
used, after receipt of the grants officer's decision to file the 
appeal, in accordance with Sec. 22.815(e)(3)(i).
    (iv) The debt will bear interest, and may include penalties and 
other administrative costs. No interest will be charged if the 
recipient pays the amount owed within 30 days of the grants officer's 
decision. Interest will be charged for the entire period from the date 
the decision was mailed, if the recipient pays the amount owed after 30 
days.
    (d) Follow-up. Depending upon the response from the recipient, the 
grants officer shall proceed as follows:
    (1) If the recipient pays the amount owed within 30 days to the 
grants officer, the grants officer shall forward the payment to the 
responsible payment office.
    (2) If within 30 days the recipient has neither paid the amount due 
nor provided notice of intent to file an appeal of the grants officer's 
decision, the grants officer shall send a demand letter to the 
recipient, with a copy to the payment office that will be responsible 
for collecting the delinquent debt. The payment office will be 
responsible for any further debt collection activity, including 
issuance of additional demand letters (see Chapter 19 of volume 10 of 
the DoD Financial Management Regulation, DoD 7000.14-R. The grants 
officer's demand letter shall:
    (i) Describe the debt, including the amount, the name and address 
of the official that determined the debt (e.g., the grants officer 
under Sec. 22.815(d)), and a copy of that determination.
    (ii) Notify the recipient that the debt is a delinquent debt that 
bears interest from the date of the grants officer's decision, and that 
penalties and other administrative costs may be assessed.
    (iii) Identify the payment office that is responsible for the 
collection of the debt, and notify the recipient that it may submit a 
proposal to that payment office to defer collection, if immediate 
payment is not practicable.
    (3) If the recipient elects to appeal the grants officer's 
decision, further action to collect the debt is deferred, pending the 
outcome of the appeal. If the final result of the appeal is a 
determination that the recipient owes a debt to the Federal Government, 
the grants officer shall send a demand letter to the recipient and 
transfer responsibility for further debt collection to a payment

[[Page 43882]]

office, as described in paragraph (d)(2) of this section.
    (e) Administrative offset. In carrying out the responsibility for 
collecting delinquent debts, a disbursing officer may need to consult 
grants officers, to determine whether administrative offset against 
payments to a recipient owing a delinquent debt would interfere with 
execution of projects being carried out under grants or cooperative 
agreements. Disbursing officers may also ask grants officers whether it 
is feasible to convert payment methods under grants or agreements from 
advance payments to reimbursements, to facilitate use of administrative 
offset. Grants officers therefore should be familiar with guidelines 
for disbursing officers, in Chapter 19 of Volume 10 of the Financial 
Management Regulation (DoD 7000.14-R), concerning withholding and 
administrative offset to recover delinquent debts.


Sec. 22.825  Closeout audits.

    (a) Purpose. This section establishes DoD policy for obtaining 
audits at closeout of individual grants and cooperative agreements. It 
thereby supplements the closeout procedures specified in:
    (1) 32 CFR 32.71 and 32.72, for awards to institutions of higher 
education and other nonprofit organizations.
    (2) 32 CFR 33.50 and 33.51, for awards to State and local 
governments.
    (3) 32 CFR 34.61 and 34.62, for awards to commercial entities.
    (b) Policy. Grants officers shall use their judgment on a case-by-
case basis, in deciding whether to obtain an audit prior to closing out 
a grant or cooperative agreement (i.e., there is no specific DoD 
requirement to obtain an audit prior to doing so). Factors to be 
considered include:
    (1) The amount of the award.
    (2) DoD's past experience with the recipient, including the 
presence or lack of findings of material deficiencies in recent:
    (i) Audits of individual awards; or
    (ii) Systems-wide financial audits and audits of the compliance of 
the recipient's systems with Federal requirements, under OMB Circular 
A-128 or A-133, where those Circulars are applicable. (See 
Sec. 22.715(a)(1)).

                Appendix A to Part 22.--Suggested Proposal Provision for Required Certifications                
----------------------------------------------------------------------------------------------------------------
                                                         Used for                                               
Suggested provision in proposal ---------------------------------------------------------                       
   (or, suitably modified, in                                               Specific       Source of requirement
             award)                Type of award    Type of recipient      situation                            
----------------------------------------------------------------------------------------------------------------
By signing and submitting this                                                                                  
 proposal, the recipient is                                                                                     
 providing the:                                                                                                 
    (1) Certification at         Any                All but foreign    Any..............  Subparts A through E  
     Appendix A to 32 CFR Part    nonprocurement     governments,                          of 32 CFR 25, which  
     25 regarding debarment,      transaction [see   foreign                               implement E.O. 12549 
     suspension, and other        ``primary          governmental                          [3 CFR, 1986 Comp.,  
     responsibility matters.      covered            entities, and                         p. 189]; E.O. 12689  
                                  transaction,''     others excluded                       [3 CFR, 1989 Comp.,  
                                  defined at 32      from ``person,''                      p. 235]; and Sec.    
                                  CFR                as defined at 32                      2455 of Federal      
                                  25.110(a)(1)(i)].  CFR 25.105.                           Acquisition and      
                                                                                           Streamlining Act of  
                                                                                           1994 (Pub. L. 103-   
                                                                                           355).                
    (2) Certification at         Any financial      Any..............  Any, except where  Subpart F of 32 CFR   
     Appendix C to 32 CFR Part    assistance,                           inconsistent       25, which implements 
     25 regarding drug-free       including any                         with               sec. 5151-5160 of the
     workplace requirements.      grant or                              international      Drug-Free Workplace  
                                  cooperative                           obligations of     Act of 1988 (Pub. L. 
                                  agreement [see                        the U.S. or the    100-690, Title V,    
                                  ``grant,'' as                         laws or            Subtitle D; 41 U.S.C.
                                  broadly defined                       regulations of a   701, et seq.).       
                                  at 32 CFR                             foreign                                 
                                  25.605(b)(7)].                        government [see                         
                                                                        32 CFR                                  
                                                                        25.610(b)].                             
    (3) Certification at         Any financial      All but Indian     Any..............  32 CFR 28, which      
     Appendix A to 32 CFR Part    assistance [see    tribe or tribal                       implements 31 U.S.C. 
     28 regarding lobbying.       32 CFR 28.105(b)   organization                          1352.                
                                  and definitions    with respect to                                            
                                  of ``Federal       expenditures                                               
                                  grant,''           specifically                                               
                                  ``Federal          permitted by                                               
                                  cooperative        other Federal                                              
                                  agreement,'' and   law [see 32 CFR                                            
                                  ``Federal loan''   28.105(l)].                                                
                                  in 32 CFR 28.105                                                              
                                  (c), (d), and                                                                 
                                  (e)].                                                                         
----------------------------------------------------------------------------------------------------------------


      Appendix B to Part 22.--Suggested Award Provisions for National Policy Requirements That Often Apply      
----------------------------------------------------------------------------------------------------------------
                                                         Used for                                               
                                ---------------------------------------------------------   Some requirement(s) 
   Suggested award provision                                                Specific        the grants  officer 
                                   Type of award    Type of recipient      situation            should note     
----------------------------------------------------------------------------------------------------------------
       Nondiscrimination                                                                                        
                                                                                                                
By signing this agreement or                                                                                    
 accepting funds under this                                                                                     
 agreement, the recipient                                                                                       
 assures that it will comply                                                                                    
 with applicable provisions of                                                                                  
 the following national                                                                                         
 policies prohibiting                                                                                           
 discrimination:                                                                                                

[[Page 43883]]

                                                                                                                
    a. On the basis of race,     Grants,            Any..............  Any..............  32 CFR part 195.6     
     color, or national origin,   cooperative                                              requires grants      
     in Title VI of the Civil     agreements, and                                          officer to obtain    
     Rights Act of 1964 (42       other financial                                          recipient's assurance
     U.S.C. 2000d, et seq.), as   assistance                                               of compliance. It    
     implemented by DoD           included at 32                                           also requires        
     regulations at 32 CFR part   CFR 195.2(d).                                            recipient to flow    
     195.                                                                                  down requirements to 
                                                                                           subrecipients.       
    b. On the basis of race,     Grants,            Any..............  Awards under       Recipients must       
     color, religion, sex, or     cooperative                           which              include clause       
     national origin, in          agreements, and                       construction       prescribed by 41 CFR 
     Executive Order 11246 [3     other prime                           work is to be      60-1.4(b) in         
     CFR, 1964-1965 Comp., p.     awards included                       done.              federally assisted   
     339], as implemented by      by ``Federally                                           construction awards  
     Department of Labor          assisted                                                 and subawards [41 CFR
     regulations at 41 CFR part   construction                                             60-1.4(d) allows     
     60.                          contract''                                               incorporation by     
                                  definition at 40                                         reference]. This     
                                  CFR 60-1.3.                                              requirement also is  
                                                                                           at 32 CFR 33.36(l)(3)
                                                                                           and at paragraphs 1. 
                                                                                           of Appendices A to 32
                                                                                           CFR part 32 and 32   
                                                                                           CFR part 34.         
    c. On the basis of sex or    Grants,            Educational        Any educational    ......................
     blindness, in Title IX of    cooperative        institution [for   program or                              
     the Education Amendments     agreements, and    sex                activity                                
     of 1972 (20 U.S.C. 1681,     other financial    discrimination,    receiving                               
     et seq.).                    assistance         excepts any        Federal                                 
                                  included at 16     institution        financial                               
                                  U.S.C. 1682.       controlled by      assistance.                             
                                                     religious                                                  
                                                     organization,                                              
                                                     when                                                       
                                                     inconsistent                                               
                                                     with the                                                   
                                                     organization's                                             
                                                     religious                                                  
                                                     tenets].                                                   
    d. On the basis of age, in   Grants,            Any..............  Any..............  45 CFR 90.4 requires  
     the Age Discrimination Act   cooperative                                              that recipient flow  
     of 1975 (42 U.S.C. 6101,     agreements, and                                          down requirements to 
     et seq.), as implemented     other awards                                             subrecipients        
     by Department of Health      included in                                              [definition of       
     and Human Services           ``Federal                                                ``recipient'' at 45  
     regulations at 45 CFR part   financial                                                CFR 90.4 includes    
     90.                          assistance''                                             entities to which    
                                  definition at 45                                         assistance is        
                                  CFR 90.4.                                                extended indirectly, 
                                                                                           through another      
                                                                                           recipient].          
    e. On the basis of                                                                                          
     handicap, in:                                                                                              
        1. Section 504 of the    Grants,            Any..............  Any..............  32 CFR 56.9(b)        
         Rehabilitation Act of    cooperative                                              requires grants      
         1973 (29 U.S.C. 794),    agreements, and                                          officer to obtain    
         as implemented by        other awards                                             recipient's written  
         Department of Justice    included in                                              assurance of         
         regulations at 28 CFR    ``Federal                                                compliance and       
         part 41 and DoD          financial                                                specifies what the   
         regulations at 32 CFR    assistance''                                             assurance includes.  
         part 56.                 definition at 32                                         Note that            
                                  CFR 56.3(b).                                             requirements flow    
                                                                                           down to subawards    
                                                                                           [``recipient,''      
                                                                                           defined at 32 CFR    
                                                                                           56.3(g), includes    
                                                                                           entities receiving   
                                                                                           assistance indirectly
                                                                                           through other        
                                                                                           recipients].         
        2. The Architectural     Grant or loan....  Any..............  Construction or    ......................
         Barriers Act of 1968                                           alteration of                           
         (42 U.S.C. 4151, et                                            buildings or                            
         seq.).                                                         facilities which                        
                                                                        will require                            
                                                                        public                                  
                                                                        accessibility.                          
    Officials Not to Benefit                                                                                    
                                                                                                                
No member of or delegate to      Grants,            Any..............  Any.               ......................
 Congress, or resident            cooperative                                                                   
 commissioner, shall be           agreements, and                                                               
 admitted to any share or part    other                                                                         
 of this agreement, or to any     ``agreements''.                                                               
 benefit arising from it, in                                                                                    
 accordance with 41 U.S.C. 22.                                                                                  
                                                                                                                
         Live Organisms                                                                                         
                                                                                                                
By signing this agreement or                                                                                    
 accepting funds under this                                                                                     
 agreement, the recipient                                                                                       
 assures that it will comply                                                                                    
 with applicable provisions of                                                                                  
 the following national                                                                                         
 policies concerning live                                                                                       
 organisms:                                                                                                     

[[Page 43884]]

                                                                                                                
    a. For human subjects, the   Any..............  Any..............  Research,          32 CFR 219.103        
     Common Federal Policy for                                          development,       requires each        
     the Protection of Human                                            test, or           recipient to have a  
     Subjects, codified by the                                          evaluation         Federally approved,  
     Department of Health and                                           involving live,    written assurance of 
     Human Services at 45 CFR                                           human subjects,    compliance [it may be
     part 46 and implemented by                                         with some          HHS-approved, on file
     the Department of Defense                                          exceptions [see    with HHS; DoD-       
     at 32 CFR part 219.                                                32 CFR part 219].  approved, on file    
                                                                                           with a DoD Component;
                                                                                           or may need to be    
                                                                                           obtained by the      
                                                                                           grants officer for   
                                                                                           the specific award]. 
    b. For animals:                                                                                             
        1. Rules concerning      Any..............  Any..............  Research,          Prior to making an    
         animal acquisition,                                            experimentation,   award under which    
         transport, care,                                               or testing         animal-based         
         handling, and use in:                                          involving the      research, testing, or
         (i) 9 CFR parts 1-4,                                           use of animals.    training is to be    
         Department of                                                                     performed, DoD       
         Agriculture                                                                       Directive 3216.1 \1\ 
         regulations that                                                                  requires             
         implement the                                                                     administrative review
         Laboratory Animal                                                                 of the proposal by a 
         Welfare Act of 1966 (7                                                            DoD veterinarian     
         U.S.C. 2131-2156); and                                                            trained or           
         (ii) the ``Guide for                                                              experienced in       
         the Care and Use of                                                               laboratory animal    
         Laboratory Animals,''                                                             science and medicine,
         National Institutes of                                                            as well as a review  
         Health Publication No.                                                            by the recipient's   
         86-23.                                                                            Institutional Animal 
                                                                                           Care and Use         
                                                                                           Committee.           
        2. Prohibitions on the   Any..............  Any..............  Use of DoD         ......................
         purchase or use of                                             appropriations                          
         dogs or cats for                                               for training on                         
         certain medical                                                treatment of                            
         training purposes, in                                          wounds.                                 
         Section 8019 (10                                                                                       
         U.S.C. 2241 note) of                                                                                   
         the Department of                                                                                      
         Defense Appropriations                                                                                 
         Act, 1991 (Pub. Law                                                                                    
         101-511).                                                                                              
        3. Regulations of the    Any..............  Any..............  Activities which   ......................
         Departments of the                                             may involve or                          
         Interior (50 CFR parts                                         impact wildlife                         
         10-24) and Commerce                                            and plants.                             
         (50 CFR parts 217-227)                                                                                 
         that implement                                                                                         
         statutes and                                                                                           
         conventions on the                                                                                     
         taking, possession,                                                                                    
         transport, sale,                                                                                       
         purchase, export, or                                                                                   
         import of wildlife and                                                                                 
         plants, including the:                                                                                 
         Endangered Species Act                                                                                 
         of 1973 (16 U.S.C.                                                                                     
         1531-1543); Marine                                                                                     
         Mammal Protection Act                                                                                  
         (16 U.S.C. 1361-1384);                                                                                 
         Lacey Act (18 U.S.C.                                                                                   
         42); and Convention on                                                                                 
         International Trade in                                                                                 
         Endangered Species of                                                                                  
         Wild Fauna and Flora.                                                                                  
                                                                                                                
      Military Recruiters                                                                                       
                                                                                                                
[Grants Officers shall include   Grants and         Domestic           Any.               ......................
 the exact award provision        cooperative        institution of                                             
 specified at 32 CFR part 23.].   agreements.        higher education                                           
                                                     (see 32 CFR part                                           
                                                     23).                                                       
                                                                                                                

[[Page 43885]]

                                                                                                                
        Cargo Preference                                                                                        
                                                                                                                
The recipient agrees that it     Grants,            Any..............  Any award where    46 CFR 381.7 requires 
 will comply with the Cargo       cooperative                           possibility        grants officers to   
 Preference Act of 1954 (46       agreements, and                       exists for ocean   include appropriate  
 U.S.C. 1241), as implemented     other awards                          transport of       clauses in award     
 by Department of                 included in 46                        items procured     documents. It also   
 Transportation regulations at    CFR 381.7.                            or obtained by     requires recipients  
 46 CFR 381.7, which require                                            or on behalf of    to include           
 that at least 50 percent of                                            the recipient,     appropriate clauses  
 equipment, materials or                                                or any of the      in contracts using   
 commodities procured or                                                recipient's        U.S. Government funds
 otherwise obtained with U.S.                                           contractors or     under agreements,    
 Government funds under this                                            subcontractors.    where ocean transport
 agreement, and which may be                                                               of procured goods is 
 transported by ocean vessel,                                                              possible [e.g., see  
 shall be transported on                                                                   clause at 46 CFR     
 privately owned U.S.-flag                                                                 381.7(b)].           
 commercial vessels, if                                                                                         
 available.                                                                                                     
                                                                                                                
    Preference for U.S.-Flag                                                                                    
            Carriers                                                                                            
                                                                                                                
Travel supported by U.S.         Any..............  Any..............  Any agreement      ......................
 Government funds under this                                            under which                             
 agreement shall use U.S.-flag                                          international                           
 air carriers (air carriers                                             air travel may                          
 holding certificates under 49                                          be supported by                         
 U.S.C. 41102) for                                                      U.S. Government                         
 international air                                                      funds.                                  
 transportation of people and                                                                                   
 property to the extent that                                                                                    
 such service is available, in                                                                                  
 accordance with the                                                                                            
 International Air                                                                                              
 Transportation Fair                                                                                            
 Competitive Practices Act of                                                                                   
 1974 (49 U.S.C. 40118) and the                                                                                 
 interpretative guidelines                                                                                      
 issued by the Comptroller                                                                                      
 General of the United States                                                                                   
 in the March 31, 1981,                                                                                         
 amendment to Comptroller                                                                                       
 General Decision B138942.                                                                                      
                                                                                                                
  Relocation and Real Property                                                                                  
          Acquisition                                                                                           
                                                                                                                
The recipient assures that it    Grants,            ``State agency''   Any project that   42 U.S.C. 4630 and 49 
 will comply with 49 CFR part     cooperative        as defined in 49   may result in      CFR 24.4, as         
 24, which implements the         agreements, and    CFR part 24 to     real property      implemented by DoD at
 Uniform Relocation Assistance    other ``Federal    include persons    acquisition or     32 CFR part 259,     
 and Real Property Acquisition    financial          with authority     displacement       requires grants      
 Policies Act of 1970 (42         assistance''       to acquire         where State        officers to obtain   
 U.S.C. 4601, et seq.) and        [see 49 CFR        property by        agency hasn't      recipients' assurance
 provides for fair and            24.2(j)].          eminent domain     opted to certify   of compliance.       
 equitable treatment of persons                      under State law.   to Dept. of                             
 displaced by Federally                                                 Transportation                          
 assisted programs or persons                                           in lieu of                              
 whose property is acquired as                                          providing                               
 a result of such programs.                                             assurance.                              
                                                                                                                
           Hatch Act                                                                                            
                                                                                                                
The recipient agrees to comply   Grants or loans..  State and local    All but employees  ......................
 with the Hatch Act (5 U.S.C.                        governments.       of educational                          
 1501-1508 and 7324-7328), as                                           or research                             
 implemented by the Office of                                           institutions                            
 Personnel Management at 5 CFR                                          supported by                            
 part 151, which limits                                                 State; political                        
 political activity of                                                  subdivision                             
 employees or officers of State                                         thereof; or                             
 or local governments whose                                             religious,                              
 employment is connected to an                                          philanthropic,                          
 activity financed in whole or                                          or cultural                             
 part with Federal funds.                                               organization.                           
                                                                                                                
    Environmental Standards                                                                                     
                                                                                                                
By signing this agreement or                                                                                    
 accepting funds under this                                                                                     
 agreement, the recipient                                                                                       
 assures that it will:                                                                                          

[[Page 43886]]

                                                                                                                
    a. Comply with applicable    Grants,            Any..............  Any, for Clean     40 CFR 15.31 requires 
     provisions of the Clean      cooperative                           Air Act, Clean     the assurances in the
     Air Act (42 U.S.C. 7401,     agreements, and                       Water Act, and     suggested award      
     et seq.) and Clean Water     other awards                          Executive Order    provision. It also   
     Act (33 U.S.C. 1251, et      included in                           11738.             requires that        
     seq.), as implemented by     definitions of                       40 CFR 15.5 makes   recipients flow down 
     Executive Order 11738 [3     ``grant'' and                         awards of less     requirements to      
     CFR, 1971-1975 Comp., p.     ``loan'' in 40                        than $100,000,     subawards (``grant'' 
     799] and Environmental       CFR part 15.                          and certain        as defined at 40 CFR 
     Protection Agency (EPA)                                            other awards,      15.4 includes        
     regulations at 40 CFR part                                         exempt from the    subagreements).      
     15. In accordance with the                                         EPA regulations.  Executive Order 11738 
     EPA regulations, the                                                                  establishes          
     recipient further agrees                                                              additional           
     that it will:                                                                         responsibilities for 
                                                                                           grants officers.     
        Not use any facility on                                                                                 
         the EPA's List of                                                                                      
         Violating Facilities                                                                                   
         in performing any                                                                                      
         award that is                                                                                          
         nonexempt under 40 CFR                                                                                 
         15.5, as long as the                                                                                   
         facility remains on                                                                                    
         the list                                                                                               
        Notify the awarding                                                                                     
         agency if it intends                                                                                   
         to use a facility in                                                                                   
         performing this award                                                                                  
         that is on the List of                                                                                 
         Violating Facilities                                                                                   
         or that the recipient                                                                                  
         knows has been                                                                                         
         recommended to be                                                                                      
         placed on the List of                                                                                  
         Violating Facilities                                                                                   
    b. Identify to the awarding                                                                                 
     agency any impact this                                                                                     
     award may have on:                                                                                         
        1. The quality of the    Any..............  Any..............  Any actions that   The Council on        
         human environment, and                                         may affect the     Environmental        
         provide help the                                               environment.       Quality's regulations
         agency may need to                                                                for implementing NEPA
         comply with the                                                                   are at 40 CFR parts  
         National Environmental                                                            1500-1508. Executive 
         Policy Act (NEPA, at                                                              Order 11514 [3 CFR,  
         42 U.S.C. 4321, et                                                                1966-1970 Comp., p.  
         seq.) and to prepare                                                              902], as amended by  
         Environmental Impact                                                              Executive Order      
         Statements or other                                                               11991, sets policies 
         required environmental                                                            and procedures for   
         documentation. The                                                                considering actions  
         recipient agrees, in                                                              in the U.S. Executive
         such cases, to take no                                                            Orders 11988 [3 CFR, 
         action that will have                                                             1977 Comp., p. 117]  
         an adverse                                                                        and 11990 [3 CFR,    
         environmental impact                                                              1977 Comp., p. 121]  
         (e.g., any physical                                                               specify additional   
         disturbance of a site                                                             considerations, when 
         such as breaking of                                                               actions involve      
         ground) until the                                                                 floodplains or       
         grants officer                                                                    wetlands,            
         provides written                                                                  respectively.        
         notification of                                                                                        
         compliance with the                                                                                    
         environmental impact                                                                                   
         analysis process.                                                                                      
        2. Flood-prone areas,    Grants,            Any..............  Awards involving   42 U.S.C. 4012a       
         and provide help the     cooperative                           construction,      prohibits awards for 
         agency may need to       agreements, and                       land acquisition   acquisition or       
         comply with the          other                                 or development,    construction in flood-
         National Flood           ``financial                           with some          prone areas (Federal 
         Insurance Act of 1968    assistance''                          exceptions [see    Emergency Management 
         and Flood Disaster       (see 42 U.S.C.                        42 U.S.C. 4001,    Agency publishes     
         Protection Act of 1973   4003).                                et seq.].          lists of such areas  
         (42 U.S.C. 4001, et                                                               in the Federal       
         seq.), which require                                                              Register), unless    
         flood insurance, when                                                             recipient has        
         available, for                                                                    required insurance.  
         Federally assisted                                                                If action is in a    
         construction or                                                                   floodplain, Executive
         acquisition in flood-                                                             Order 11988 [3 CFR,  
         prone areas.                                                                      1977 Comp., p. 117]  
                                                                                           specifies additional 
                                                                                           pre-award procedures 
                                                                                           for Federal agencies.
                                                                                           Recipients are to    
                                                                                           apply requirements to
                                                                                           subawards            
                                                                                           (``financial         
                                                                                           assistance,'' defined
                                                                                           at 42 U.S.C. 4003,   
                                                                                           includes indirect    
                                                                                           Federal assistance.  

[[Page 43887]]

                                                                                                                
        3. Coastal zones, and    Grants,            State and local    Awards that may    16 U.S.C. 1456(d)     
         provide help the         cooperative        governments,       affect the         prohibits approval of
         agency may need to       agreements, and    interstate and     coastal zone.      projects inconsistent
         comply with the          other ``Federal    other regional                        with a coastal       
         Coastal Zone             assistance''       agencies.                             State's approved     
         Management Act of 1972   [see 16 U.S.C.                                           management program   
         (16 U.S.C. 1451, et      1456(d)].                                                for the coastal zone.
         seq.), concerning                                                                                      
         protection of U.S.                                                                                     
         coastal resources.                                                                                     
        4. Coastal barriers,     Grants,            Any..............  Awards that may    16 U.S.C. 3504-3505   
         and provide help the     cooperative                           affect barriers    prohibit new awards  
         agency may need to       agreements, and                       along the          for actions within   
         comply with the          other                                 Atlantic and       Coastal Barrier      
         Coastal Barriers         ``financial                           Gulf coasts and    System, except for   
         Resource Act (16         assistance''                          Great Lakes'       certain purposes.    
         U.S.C. 3501, et seq.),   (see 16 U.S.C.                        shores.            Requirements flow to 
         concerning               3502).                                                   subawards (16 U.S.C. 
         preservation of                                                                   3502 includes        
         barrier resources.                                                                indirect assistance  
                                                                                           as ``financial       
                                                                                           assistance'').       
        5. Any existing or       Any..............  Any..............  Awards that may    ......................
         proposed component of                                          affect existing                         
         the National Wild and                                          or proposed                             
         Scenic Rivers system,                                          element of                              
         and provide help the                                           National Wild                           
         agency may need to                                             and Scenic                              
         comply with the Wild                                           Rivers system.                          
         and Scenic Rivers Act                                                                                  
         of 1968 (16 U.S.C.                                                                                     
         1271, et seq.).                                                                                        
        6. Underground sources   Any..............  Any..............  Construction in    42 U.S.C. 300h-3(e)   
         of drinking water in                                           any area with      precludes awards of  
         areas that have an                                             aquifer that the   Federal financial    
         aquifer that is the                                            EPA finds would    assistance for any   
         sole or principal                                              create public      project that the EPA 
         drinking water source,                                         health hazard,     administrator        
         and provide help the                                           if contaminated.   determines may       
         agency may need to                                                                contaminate a sole-  
         comply with the Safe                                                              source aquifer so as 
         Drinking Water Act (42                                                            to threaten public   
         U.S.C. 300h-3).                                                                   health.              
                                                                                                                
 National Historic Preservation                                                                                 
                                                                                                                
The recipient agrees to          Any..............  Any..............  Any construction,  36 CFR part 800       
 identify to the awarding                                               acquisition,       requires grants      
 agency any property listed or                                          modernization,     officers to get      
 eligible for listing on the                                            or other           comments from the    
 National Register of Historic                                          activity that      Advisory Council on  
 Places that will be affected                                           may impact a       Historic Preservation
 by this award, and to provide                                          historic           before proceeding    
 any help the awarding agency                                           property.          with Federally       
 may need, with respect to this                                                            assisted projects    
 award, to comply with Section                                                             that may affect      
 106 of the National Historic                                                              properties listed on 
 Preservation Act of 1966 (16                                                              or eligible for      
 U.S.C. 470, et seq.), as                                                                  listing on the       
 implemented by the Advisory                                                               National Register of 
 Council on Historic                                                                       Historic Places.     
 Preservation regulations at 36                                                                                 
 CFR part 800 and Executive                                                                                     
 Order 11593 [3 CFR, 1971-1975                                                                                  
 Comp., p. 559].                                                                                                
----------------------------------------------------------------------------------------------------------------
\1\ Copies may be obtained, at cost, from the National Technical Information Service, 5285 Port Royal Road,     
  Springfield, VA 22161. Authorized users may also obtain copies from the Defense Technical Information Center, 
  8725 John J. Kingman Rd., Suite 0944, Fort Belvoir, VA 22060-6218.                                            



                      Appendix C to Part 22.--Administrative Requirements and Issues To Be Addressed in Award Terms and Conditions                      
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     Source of requirement for each type of recipient (where details may                                                
                                                                  be found)                                                                             
       Requirement, in brief        --------------------------------------------------------------------- Issues to be address in award terms/conditions
                                      University or other                                                                                               
                                           nonprofit         Governmental entity     Commercial entity                                                  
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standards for Financial Management   32 CFR 32.21.........  32 CFR 33.20.........  32 CFR 34.11.........  For university, nonprofit, or commercial      
 Systems. Recipients' systems to                                                                           entity, specify if want:                     
 comply with.                                                                                              Bonding and insurance [32 CFR        
                                                                                                           32.21(c) or 32 CFR 34.11(b)].                
                                                                                                           Fidelity bond [32 CFR 32.21(d) or 32 
                                                                                                           CFR 34.11(c)].                               

[[Page 43888]]

                                                                                                                                                        
Payment. Recipients request          32 CFR 32.22.........  32 CFR 33.21, 33.41    32 CFR 34.12.........  Specify:                                      
 payments and handle advances and                            (d) and (e).                                  Payment method (e.g., advance,       
 interest in compliance with.                                                                              reimbursement, working capital advance).     
                                                                                                           Note: if predetermined payment schedule is   
                                                                                                           used, must specify means to ensure that      
                                                                                                           recipients don't develop large cash balances 
                                                                                                           well in advance of needs for such funds      
                                                                                                           (e.g., recipient submits SF-269 or SF-270    
                                                                                                           forms at regular intervals, for grants       
                                                                                                           officer to review recipients' cash on hand). 
                                                                                                           SF-270, SF-271, or other form to     
                                                                                                           request payment.                             
                                                                                                           Name/address of office to which      
                                                                                                           recipient sends payment requests and office  
                                                                                                           that will make payments.                     
                                                                                                           How frequently recipient may submit  
                                                                                                           payment requests.                            
Allowable costs. Allowability of     32 CFR 32.37 and       32 CFR 33.22 and       32 CFR 34.17.........                                                
 costs to be in accordance with.      32.28.                 33.23.                                                                                     
Fee/profit. None allowed...........  .....................  .....................  32 CFR 34.18.........                                                
Cost share or match. If cost share   32 CFR 32.23.........  32 CFR 33.24.........  32 CFR 34.13.........  Specify if want to allow inclusion of certain 
 or match is required, allowability                                                                        types of items as cost share or allow them to
 and valuation are governed by.                                                                            be valued in certain ways [32 CFR 32.23 (b), 
                                                                                                           (c), and (g); 32 CFR 33.24 (b)(4), (b)(5),   
                                                                                                           and (e)(2); 32 CFR 34.13 (a)(7), (b)(1), and 
                                                                                                           (b)(4)(ii)].                                 
Program income. Recipients account   32 CFR 32.24.........  32 CFR 33.25.........  32 CFR 34.14.........  Specify:                                      
 for program income in accordance                                                                          Method for disposition [32 CFR 32.24 
 with.                                                                                                     (b), (c), and (d); 32 CFR 33.25(g); 32 CFR   
                                                                                                           34.14 (d), (e), and (f)].                    
                                                                                                           If want recipient to have obligation 
                                                                                                           to Government for certain types of income or 
                                                                                                           for income earned after end of project period
                                                                                                           [32 CFR 32.24 (e) and (h), 32 CFR 33.25 (a), 
                                                                                                           (d), (e), and (h); 32 CFR 34.14(b)].         
                                                                                                           If want to allow recipient to deduct 
                                                                                                           costs of generating income [32 CFR 32.24(f); 
                                                                                                           32 CFR 33.25(c); 32 CFR 34.14(c)].           
Revision of budget/program plans.    32 CFR 32.25.........  32 CFR 33.30.........  32 CFR 34.15.........  Specify:                                      
 Recipients request prior approval                                                                         If wish to waive some prior approvals
 for plan changes, in accordance                                                                           that are optional, but are in effect unless  
 with.                                                                                                     specifically waived [32 CFR 33.30 (b),       
                                                                                                           (c)(1), (d)(3); 32 CFR 34.15(c)(2)].         
                                                                                                           If wish to require some prior        
                                                                                                           approvals that are optional, but are only in 
                                                                                                           effect if specifically stated [32 CFR 32.25  
                                                                                                           (d), (e), (h); 32 CFR 34.15(c)(3)].          
Audit. Recipients periodically to    32 CFR 32.26.........  32 CFR 33.26.........  32 CFR 34.16.........  Require all but commercial entities to submit 
 have independent, financial and                                                                           copy of OMB Circular A-133 or A-128 audit    
 compliance audit and report to                                                                            reports to IG, DoD. Require commercial       
 DoD, subject to provisions of.                                                                            entities to submit audit reports to whichever
                                                                                                           office(s) the DoD Component wishes audit     
                                                                                                           reports to be sent.                          
Property. Recipients manage in       32 CFR 32.30 through   32 CFR 33.31 through   32 CFR 34.20 through   Specify if want:                              
 accordance with.                     32.37.                 33.34.                 34.25.                 To allow commercial entities to      
                                                                                                           acquire real property under awards [32 CFR   
                                                                                                           34.21(a)].                                   
                                                                                                           University or other nonprofit to have
                                                                                                           any further obligation to Government for     
                                                                                                           exempt property [32 CFR 32.33(b)].           
                                                                                                           To retain right to transfer title [32
                                                                                                           CFR 32.34(h); 32 CFR 33.32(g)].              
                                                                                                           To allow recipients to use equipment 
                                                                                                           for certain purposes [32 CFR 32.34 (d) and   
                                                                                                           (e); 32 CFR 33.32(c)(4); 32 CFR 34.21(d)].   
                                                                                                           To waive data rights [32 CFR         
                                                                                                           32.36(c); 32 CFR 34.24(b)(1)(ii)].           
                                                                                                           To require recipients to record liens
                                                                                                           [32 CFR 32.37].                              
                                                                                                          For research awards to certain recipients,    
                                                                                                           include patents clause required by 37 CFR 401
                                                                                                           [32 CFR 32.36(b); 32 CFR 34.24(a)].          
Procurement. Recipients systems for  32 CFR 32.40 through   32 CFR 33.36.........  32 CFR 34.30 through   Specify if want to require recipient to make  
 acquiring goods and services under   32.49.                                        34.31.                 certain preaward documents available for DoD 
 awards are to comply with.                                                                                Component's review [32 CFR 32.44(e); 32 CFR  
                                                                                                           33.36(g); 32 CFR 34.31(b)].                  
Subawards. Recipients flow down                                                                                                                         
 requirements to subawards in                                                                                                                           
 accordance with.                                                                                                                                       
(2)32 CFR 32.5, 32 CFR 33.37, and                                                                                                                       
 32 CFR 34.1(b)(2)                                                                                                                                      

[[Page 43889]]

                                                                                                                                                        
Reports. Requirements are specified  32 CFR 32.51 and       32 CFR 33.40 and       32 CFR 34.41.........  Specify:                                      
 in.                                  32.52.                 33.41.                                        When recipients are to submit        
                                                                                                           periodic and final performance reports [32   
                                                                                                           CFR 32.51 (b) and (c); 32 CFR 33.40 (b), (c),
                                                                                                           and (f); 32 CFR 34.41].                      
                                                                                                           Frequency of financial status and    
                                                                                                           cash transactions reports [32 CFR 32.52      
                                                                                                           (a)(1)(iii) and (a)(2)(iv); 32 CFR 33.41     
                                                                                                           (b)(3) and (c); 32 CFR 34.41], or if wish to 
                                                                                                           exercise right to waive them under certain   
                                                                                                           conditions [32 CFR 32.52 (a)(1)(i) and       
                                                                                                           (a)(2)(v); 32 CFR 33.41(a)(6); 32 CFR 34.41].
                                                                                                           Whether want reports on cash or      
                                                                                                           accrual basis [32 CFR 32.52(a)(1)(ii); 32 CFR
                                                                                                           33.41(b)(2); 32 CFR 34.41].                  
Records. Retention and access        32 CFR 32.53.........  32 CFR 33.42.........  32 CFR 34.42.........                                                
 requirements specified in.                                                                                                                             
Termination and enforcement. Award   32 CFR 32.61 and       32 CFR 33.43 and       32 CFR 34.51 and                                                     
 is subject for.                      32.62.                 33.44.                 34.52.                                                              
Disputes, claims, and appeals.                                                                                                                          
 Procedures are specified in.                                                                                                                           
(2)32 CFR 22.815                                                                                                                                        
After-the-award requirements.        32 CFR 32.71 through   32 CFR 33.50 through   32 CFR 34.61 through                                                 
 Closeout, subsequent adjustments,    32.73.                 33.52.                 34.63.                                                              
 continuing responsibilities, and                                                                                                                       
 collection of amounts due are                                                                                                                          
 subject to requirements in.                                                                                                                            
--------------------------------------------------------------------------------------------------------------------------------------------------------



PART 28--[AMENDED]

    4. Part 28 is proposed to be amended as follows: -
    a. The authority citation for part 28 continues to read as follows:

     -Authority: Section 319, Public Law 102-121 (31 U.S.C. 1352); 5 
U.S.C. section 301; 10 U.S.C. 113.

     -b. Section 28.500 is proposed to be revised to read as follows:


Sec. 28.500  Secretary of Defense. -

    (a) Exemption authority. The Secretary of Defense may exempt, on a 
case-by-case basis, a covered Federal action from the prohibition 
whenever the Secretary determines, in writing, that such an exemption 
is in the national interest. The Secretary shall transmit a copy of 
each such written exemption to Congress immediately after making such a 
determination. -
    (b) Policy. It is the policy of the Department of Defense that 
exemptions under paragraph (a) of this section shall be requested only 
rarely and in exceptional circumstances. -
    (c) Procedures. Each DoD Component that awards or administers 
Federal grants, Federal cooperative agreements, or Federal loans 
subject to this part shall establish procedures whereby: -
    (1) A grants officer wishing to request an exemption for a grant, 
cooperative agreement, or loan shall transmit such request through 
appropriate channels to: Director for Research, ODDR&E(R), 3080 Defense 
Pentagon, Washington, D.C. 20301-3080. -
    (2) Each such request shall explain why an exemption is in the 
national interest, a justification that must be transmitted to Congress 
for each exemption that is approved.
    5. Part 32 is proposed to be added to read as follows:

PART 32--ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH 
INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, AND OTHER NON-PROFIT 
ORGANIZATIONS

Subpart A--General

Sec.
32.1  Purpose.
32.2  Definitions.
32.3  Effect on other issuances.
32.4  Deviations.
32.5  Subawards.

Subpart B--Pre-Award Requirements

32.10  Purpose.
32.11  Pre-award policies.
32.12  Forms for applying for Federal assistance.
32.13  Debarment and suspension.
32.14  Special award conditions.
32.15  Metric system of measurement.
32.16  Resource Conservation and Recovery Act (RCRA).
32.17  Certifications and representations.

Subpart C--Post-Award Requirements

Financial and Program Management

32.20  Purpose of financial and program management.
32.21  Standards for financial management systems.
32.22  Payment.
32.23  Cost sharing or matching.
32.24  Program income.
32.25  Revision of budget and program plans.
32.26  Non-Federal audits.
32.27  Allowable costs.
32.28  Period of availability of funds.

Property Standards

32.30  Purpose of property standards.
32.31  Insurance coverage.
32.32  Real property.
32.33  Federally-owned and exempt property.
32.34  Equipment.
32.35  Supplies.
32.36  Intangible property.
32.37  Property trust relationship.

Procurement Standards

32.40  Purpose of procurement standards.
32.41  Recipient responsibilities.
32.42  Codes of conduct.
32.43  Competition.
32.44  Procurement procedures.
32.45  Cost and price analysis.
32.46  Procurement records.
32.47  Contract administration.
32.48  Contract provisions.
32.49  Resource Conservation and Recovery Act.

[[Page 43890]]

Reports and Records

32.50  Purpose of reports and records.
32.51  Monitoring and reporting program performance.
32.52  Financial reporting.
32.53  Retention and access requirements for records.

Termination and Enforcement

32.60  Purpose of termination and enforcement.
32.61  Termination.
32.62  Enforcement.

Subpart D--After-the-Award Requirements

32.70  Purpose.
32.71  Closeout procedures.
32.72  Subsequent adjustments and continuing responsibilities.
32.73  Collection of amounts due.

Appendix A to Part 32--Contract Provisions

    Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Subpart A--General


Sec. 32.1  Purpose.

    (a) General. This part implements OMB Circular A-110 \1\ and 
establishes uniform administrative requirements for grants, agreements, 
and subawards awarded to institutions of higher education, hospitals, 
and other non-governmental, non-profit organizations.
---------------------------------------------------------------------------

    \1\ For copies of the Circular, contact the Office of Management 
and Budget, EOP Publications, 725 17th St. N.W., New Executive 
Office Building, Washington, D.C. 20503.
---------------------------------------------------------------------------

    (b) Prime awards. DoD Components shall apply the provisions of this 
part to grants and agreements with recipients that are institutions of 
higher education, hospitals, and other non-profit organizations. DoD 
Components shall not impose additional or inconsistent requirements, 
except as provided in Secs. 32.4 and 32.14, or unless specifically 
required by Federal statute or executive order.
    (c) Subawards. Any legal entity that receives a grant or agreement 
from a DoD Component shall apply the provisions of this part to 
subawards with institutions of higher education, hospitals, and other 
non-profit organizations. Thus, a governmental or commercial 
organization, whose prime award from a DoD Component is subject to 32 
CFR part 33 or part 34, respectively, applies this part to subawards 
with institutions of higher education, hospitals, or other non-profit 
organizations. It should be noted that subawards are for the 
performance of substantive work under grants and agreements, and are 
distinct from contracts for procuring goods and services. It should be 
further noted that non-profit organizations that implement Federal 
programs for the States are also subject to State requirements.


Sec. 32.2  Definitions.

    The following are definitions of terms used in this part. Grants 
officers are cautioned that terms may be defined differently in this 
part than they are in other parts of the DoD Grant and Agreement 
Regulations, because this part implements OMB Circular A-110 and uses 
definitions as stated in that Circular. In such cases, the definition 
given in this section applies to the term as it is used in this part, 
and the definition given in other parts applies to the term as it is 
used in those parts. For example, ``recipient'' is defined in this 
section to be specific types of organizations that are subject to this 
part, but is defined at 32 CFR 21.130 to be any type of organization 
that receives a grant or cooperative agreement (since that part applies 
to awards to any type of organization).
    Accrued expenditures. The charges incurred by the recipient during 
a given period requiring the provision of funds for:
    (1) Goods and other tangible property received;
    (2) Services performed by employees, contractors, subrecipients, 
and other payees; and
    (3) Other amounts becoming owed under programs for which no current 
services or performance is required.
    Accrued income. The sum of:
    (1) Earnings during a given period from:
    (i) Services performed by the recipient; and
    (ii) Goods and other tangible property delivered to purchasers.
    (2) Amounts becoming owed to the recipient for which no current 
services or performance is required by the recipient.
    Acquisition cost of equipment. The net invoice price of the 
equipment, including the cost of modifications, attachments, 
accessories, or auxiliary apparatus necessary to make the property 
usable for the purpose for which it was acquired. Other charges, such 
as the cost of installation, transportation, taxes, duty or protective 
in-transit insurance, shall be included or excluded from the unit 
acquisition cost in accordance with the recipient's regular accounting 
practices.
    Advance. A payment made by Treasury check or other appropriate 
payment mechanism to a recipient upon its request either before outlays 
are made by the recipient or through the use of predetermined payment 
schedules.
    Award. Financial assistance that provides support or stimulation to 
accomplish a public purpose. Awards include grants and other agreements 
in the form of money or property in lieu of money, by the Federal 
Government to an eligible recipient. The term does not include: 
technical assistance, which provides services instead of money; other 
assistance in the form of loans, loan guarantees, interest subsidies, 
or insurance; direct payments of any kind to individuals; and, 
contracts which are required to be entered into and administered under 
procurement laws and regulations.
    Cash contributions. The recipient's cash outlay, including the 
outlay of money contributed to the recipient by third parties.
    Closeout. The process by which the grants officer administering an 
award made by a DoD Component determines that all applicable 
administrative actions and all required work of the award have been 
completed by the recipient and DoD Component.
    Contract. A procurement contract under an award or subaward, and a 
procurement subcontract under a recipient's or subrecipient's contract.
    Cost sharing or matching. That portion of project or program costs 
not borne by the Federal Government.
    Date of completion. The date on which all work under an award is 
completed or the date on the award document, or any supplement or 
amendment thereto, on which Federal sponsorship ends.
    Disallowed costs. Those charges to an award that the grants officer 
administering an award made by a DoD Component determines to be 
unallowable, in accordance with the applicable Federal cost principles 
or other terms and conditions contained in the award.
    DoD Component. A Military Department, Defense Agency, DoD field 
activity, or organization within the Office of the Secretary of Defense 
that provides or administers an award to a recipient.
    Equipment. Tangible nonexpendable personal property including 
exempt property charged directly to the award having a useful life of 
more than one year and an acquisition cost of $5000 or more per unit. 
However, consistent with recipient policy, lower limits may be 
established.
    Excess property. Property under the control of any DoD Component 
that, as determined by the head thereof, is no longer required for its 
needs or the discharge of its responsibilities.
    Exempt property. Tangible personal property acquired in whole or in 
part with Federal funds, where the DoD Component has statutory 
authority to vest title in the recipient without further obligation to 
the Federal Government. An example of exempt property

[[Page 43891]]

authority is contained in the Federal Grant and Cooperative Agreement 
Act (31 U.S.C. 6306), for property acquired under an award to conduct 
basic or applied research by a non-profit institution of higher 
education or non-profit organization whose principal purpose is 
conducting scientific research.
    Federal funds authorized. The total amount of Federal funds 
obligated by a DoD Component for use by the recipient. This amount may 
include any authorized carryover of unobligated funds from prior 
funding periods when permitted by agency regulations or agency 
implementing instructions.
    Federal share (of real property, equipment, or supplies). That 
percentage of the property's acquisition costs and any improvement 
expenditures paid with Federal funds.
    Funding period. The period of time when Federal funding is 
available for obligation by the recipient.
    Intangible property and debt instruments. Property that includes, 
but is not limited to, trademarks, copyrights, patents and patent 
applications and such property as loans, notes and other debt 
instruments, lease agreements, stock and other instruments of property 
ownership, whether considered tangible or intangible.
    Obligations. The amounts of orders placed, contracts and grants 
awarded, services received and similar transactions during a given 
period that require payment by the recipient during the same or a 
future period.
    Outlays or expenditures. Charges made to the project or program. 
They may be reported on a cash or accrual basis. For reports prepared 
on a cash basis, outlays are the sum of cash disbursements for direct 
charges for goods and services, the amount of indirect expense charged, 
the value of third party in-kind contributions applied and the amount 
of cash advances and payments made to subrecipients. For reports 
prepared on an accrual basis, outlays are the sum of cash disbursements 
for direct charges for goods and services, the amount of indirect 
expense incurred, the value of in-kind contributions applied, and the 
net increase (or decrease) in the amounts owed by the recipient for 
goods and other property received, for services performed by employees, 
contractors, subrecipients and other payees and other amounts becoming 
owed under programs for which no current services or performance are 
required.
    Personal property. Property of any kind except real property. It 
may be tangible, having physical existence, or intangible, having no 
physical existence, such as copyrights, patents, or securities.
    Prior approval. Written approval by an authorized official 
evidencing prior consent.
    Program income. Gross income earned by the recipient that is 
directly generated by a supported activity or earned as a result of the 
award (see exclusions in Sec. 32.24(e) and (h)). Program income 
includes, but is not limited to, income from fees for services 
performed, the use or rental of real or personal property acquired 
under federally-funded projects, the sale of commodities or items 
fabricated under an award, license fees and royalties on patents and 
copyrights, and interest on loans made with award funds. Interest 
earned on advances of Federal funds is not program income. Except as 
otherwise provided in program regulations or the terms and conditions 
of the award, program income does not include the receipt of principal 
on loans, rebates, credits, discounts, etc., or interest earned on any 
of them.
    Project costs. All allowable costs, as set forth in the applicable 
Federal cost principles, incurred by a recipient and the value of the 
contributions made by third parties in accomplishing the objectives of 
the award during the project period.
    Project period. The period established in the award document during 
which Federal sponsorship begins and ends.
    Property. Real property and personal property (equipment, supplies, 
intangible property and debt instruments), unless stated otherwise.
    Real property. Land, including land improvements, structures and 
appurtenances thereto, but excluding movable machinery and equipment.
    Recipient. An organization receiving financial assistance directly 
from DoD Components to carry out a project or program. The term 
includes public and private institutions of higher education, public 
and private hospitals, and other quasi-public and private non-profit 
organizations such as, but not limited to, community action agencies, 
research institutes, educational associations, and health centers. The 
term also includes consortia comprised of any combination of 
universities, other nonprofit organizations, governmental 
organizations, commercial organizations, and other entities, to the 
extent that the consortia are legally incorporated as nonprofit 
organizations. The term does not include Government-owned contractor-
operated facilities or research centers providing continued support for 
mission-oriented, large-scale programs that are Government-owned or 
controlled, or are designated as federally-funded research and 
development centers.
    Research and development. All research activities, both basic and 
applied, and all development activities that are supported at 
universities, colleges, and other non-profit institutions. ``Research'' 
is defined as a systematic study directed toward fuller scientific 
knowledge or understanding of the subject studied. ``Development'' is 
the systematic use of knowledge and understanding gained from research 
directed toward the production of useful materials, devices, systems, 
or methods, including design and development of prototypes and 
processes. The term research also includes activities involving the 
training of individuals in research techniques where such activities 
utilize the same facilities as other research and development 
activities and where such activities are not included in the 
instruction function.
    Small award. A grant or agreement not exceeding the simplified 
acquisition threshold fixed at 41 U.S.C. 403(11) (currently $100,000).
    Subaward. An award of financial assistance in the form of money, or 
property in lieu of money, made under an award by a recipient to an 
eligible subrecipient or by a subrecipient to a lower tier 
subrecipient. The term includes financial assistance when provided by 
any legal agreement, even if the agreement is called a contract, but 
does not include procurement of goods and services nor does it include 
any form of assistance which is excluded from the definition of 
``award'' in this section.
    Subrecipient. The legal entity to which a subaward is made and 
which is accountable to the recipient for the use of the funds 
provided.
    Supplies. All personal property excluding equipment, intangible 
property, and debt instruments as defined in this section, and 
inventions of a contractor conceived or first actually reduced to 
practice in the performance of work under a funding agreement 
(``subject inventions''), as defined in 37 CFR part 401, ``Rights to 
Inventions Made by Nonprofit Organizations and Small Business Firms 
Under Government Grants, Contracts, and Cooperative Agreements.''
    Suspension. An action by a DoD Component that temporarily withdraws 
Federal sponsorship under an award, pending corrective action by the 
recipient or pending a decision to terminate the award by the DoD 
Component. Suspension of an award is a separate action from suspension 
of a recipient under 32 CFR part 25.

[[Page 43892]]

    Termination. The cancellation of an award, in whole or in part, at 
any time prior to the date of completion.
    Third party in-kind contributions. The value of non-cash 
contributions provided by non-Federal third parties. Third party in-
kind contributions may be in the form of real property, equipment, 
supplies, and the value of goods and services directly benefiting and 
specifically identifiable to the project or program.
    Unliquidated obligations. The amount of obligations incurred by the 
recipient:
    (1) That have not been paid, if financial reports are prepared on a 
cash basis.
    (2) For which an outlay has not been recorded, if reports are 
prepared on an accrued expenditure basis.
    Unobligated balance. The portion of the funds authorized by a DoD 
Component that has not been obligated by the recipient and is 
determined by deducting the cumulative obligations from the cumulative 
funds authorized.
    Unrecovered indirect cost. The difference between the amount 
awarded and the amount which could have been awarded under the 
recipient's approved negotiated indirect cost rate.
    Working capital advance. A procedure where by funds are advanced to 
the recipient to cover its estimated disbursement needs for a given 
initial period.


Sec. 32.3  Effect on other issuances.

    For awards subject to this part, all administrative requirements of 
codified program regulations, program manuals, handbooks and other 
nonregulatory materials which are inconsistent with the requirements of 
this part shall be superseded, except to the extent they are required 
by statute, or authorized in accordance with the deviations provision 
in Sec. 32.4.


Sec. 32.4  Deviations.

    (a) Individual deviations. Individual deviations affecting only one 
award may be approved by DoD Components in accordance with procedures 
stated in 32 CFR 21.125(a) and (c).
    (b) Small awards. DoD Components may apply less restrictive 
requirements than the provisions of this part when awarding small 
awards, except for those requirements which are statutory.
    (c) Other class deviations. For classes of awards other than small 
awards, the Director of Defense Research and Engineering, or his or her 
designee, with the concurrence of the Office of Management and Budget 
(OMB), may grant exceptions from the requirements of this part when 
exceptions are not prohibited by statute. DoD Components shall request 
approval for such deviations in accordance with 32 CFR 21.125 (b) 
and(c). However, in the interest of maximum uniformity, exceptions from 
the requirements of this part shall be permitted only in unusual 
circumstances.


Sec. 32.5  Subawards.

    Unless sections of this part specifically exclude subrecipients 
from coverage, the provisions of this part shall be applied to 
subrecipients performing work under awards if such subrecipients are 
institutions of higher education, hospitals or other non-profit 
organizations. State and local government subrecipients are subject to 
the provisions of 32 CFR part 33. Subrecipients that are commercial 
organizations are subject to 32 CFR part 34.

Subpart B--Pre-Award Requirements


Sec. 32.10  Purpose.

    Sections 32.11 through 32.17 prescribe application forms and 
instructions and other pre-award matters.


Sec. 32.11  Pre-award policies.

    (a) Use of grants, cooperative agreements, and contracts. (1) OMB 
Circular A-110 states that:
    (i) In each instance, the Federal awarding agency shall decide on 
the appropriate award instrument (i.e., grant, cooperative agreement, 
or contract).
    (ii) The Federal Grant and Cooperative Agreement Act (31 U.S.C. 
6301-6308) governs the use of grants, cooperative agreements, and 
contracts. Under that Act:
    (A) A grant or cooperative agreement shall be used only when the 
principal purpose of a transaction is to accomplish a public purpose of 
support or stimulation authorized by Federal statute.
    (B) Contracts shall be used when the principal purpose is 
acquisition of property or services for the direct benefit or use of 
the Federal Government.
    (C) The statutory criterion for choosing between grants and 
cooperative agreements is that for the latter, ``substantial 
involvement is expected between the executive agency and the State, 
local government, or other recipient when carrying out the activity 
contemplated in the agreement.''
    (2) In selecting the appropriate award instruments, DoD Components' 
grants officers shall comply with the DoD implementation of the Federal 
Grant and Cooperative Agreement Act at 32 CFR 21.205(a) and 32 CFR part 
22, subpart B.
    (b) Public notice and priority setting. As a matter of 
Governmentwide policy, Federal awarding agencies shall notify the 
public of intended funding priorities for programs that use 
discretionary grants or agreements, unless funding priorities are 
established by Federal statute. For DoD Components, compliance with 
competition policies and statutory requirements implemented in 32 CFR 
part 22, subpart C, shall constitute compliance with this 
Governmentwide policy.


Sec. 32.12  Forms for applying for Federal assistance.

    (a) DoD Components shall comply with the applicable report 
clearance requirements of 5 CFR part 1320, ``Controlling Paperwork 
Burdens on the Public,'' with regard to all forms used in place of or 
as a supplement to the Standard Form 424\2\ (SF-424) series.
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    \2\ For copies of Standard Forms listed in this part, contact 
regional grants administration offices of the Office of Naval 
Research. Addresses for the offices are listed in the ``DoD 
Directory of Contract Administration Services Components,'' DLAH 
4105.4, which can be obtained from: Defense Logistics Agency, 
Publications Distribution Division (DASC-WDM), 8725 John J. Kingman 
Rd., Suite 0119, Fort Belvoir, VA 22060-6220.
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    (b) Applicants shall use the SF-424 series or those forms and 
instructions prescribed by DoD Components.
    (c) For Federal programs covered by E.O. 12372 (3 CFR, 1982 Comp., 
p. 197), ``Intergovernmental Review of Federal Programs,'' the 
applicant shall complete the appropriate sections of the SF-424 
(Application for Federal Assistance) indicating whether the application 
was subject to review by the State Single Point of Contact (SPOC). The 
name and address of the SPOC for a particular State can be obtained 
from the DoD Component or the Catalog of Federal Domestic Assistance. 
The SPOC shall advise the applicant whether the program for which 
application is made has been selected by that State for review.
    (d) DoD Components that do not use the SF-424 form should indicate 
whether the application is subject to review by the State under E.O. 
12372.


Sec. 32.13  Debarment and suspension.

    DoD Components and recipients shall comply with the nonprocurement 
debarment and suspension common rule at 32 CFR part 25. This common 
rule restricts subawards and contracts with certain parties that are 
debarred, suspended or otherwise excluded from or ineligible for 
participation in Federal assistance programs or activities.

[[Page 43893]]

Sec. 32.14  Special award conditions.

    (a) DoD Components may impose additional requirements as needed, 
over and above those provided in this part, if an applicant or 
recipient:
    (1) Has a history of poor performance;
    (2) Is not financially stable;
    (3) Has a management system that does not meet the standards 
prescribed in this part;
    (4) Has not conformed to the terms and conditions of a previous 
award; or
    (5) Is not otherwise responsible.
    (b) Before imposing additional requirements, DoD Components shall 
notify the applicant or recipient in writing as to:
    (1) The nature of the additional requirements;
    (2) The reason why the additional requirements are being imposed;
    (3) The nature of the corrective action needed;
    (4) The time allowed for completing the corrective actions; and
    (5) The method for requesting reconsideration of the additional 
requirements imposed.
    (c) Any special conditions shall be promptly removed once the 
conditions that prompted them have been corrected.
    (d) Grants officers:
    (1) Should coordinate the imposition and removal of special award 
conditions with the cognizant grants administration office identified 
in 32 CFR 22.710.
    (2) Shall include in the award file the written notification to the 
recipient, described in paragraph (b) of this section, and the 
documentation required by 32 CFR 22.410(b).


Sec. 32.15  Metric system of measurement.

    The Metric Conversion Act, as amended by the Omnibus Trade and 
Competitiveness Act (15 U.S.C. 205) declares that the metric system is 
the preferred measurement system for U.S. trade and commerce, and for 
Federal agencies' procurements, grants, and other business-related 
activities. DoD grants officers shall comply with requirements 
concerning the use of the metric system at 32 CFR 22.530.


Sec. 32.16  Resource Conservation and Recovery Act.

    Recipients' procurements shall comply with applicable requirements 
of the Resource Conservation and Recovery Act (RCRA), as described at 
Sec. 32.49.


Sec. 32.17  Certifications and representations.

    (a) OMB Circular A-110 authorizes and encourages each Federal 
agency, unless prohibited by statute or codified regulation, to allow 
recipients to submit certifications and representations required by 
statute, executive order, or regulation on an annual basis, if the 
recipients have ongoing and continuing relationships with the agency.
    (b) DoD grants officers shall comply with the provisions concerning 
certifications and representations at 32 CFR 22.510. Those provisions 
ease burdens on recipients to the extent possible, given current 
statutory impediments to obtaining all certifications on an annual 
basis. The provisions thereby also comply with the intent of OMB 
Circular A-110, to use less burdensome methods for obtaining 
certifications and representations, as such methods become feasible.

Subpart C--Post-Award Requirements

Financial and Program Management


Sec. 32.20  Purpose of financial and program management.

    Sections 32.21 through 32.28 prescribe standards for financial 
management systems, methods for making payments and rules for: 
satisfying cost sharing and matching requirements, accounting for 
program income, budget revision approvals, making audits, determining 
allowability of cost, and establishing fund availability.


Sec. 32.21  Standards for financial management systems.

    (a) DoD Components shall require recipients to relate financial 
data to performance data and develop unit cost information whenever 
practical. For awards that support research, it should be noted that it 
is generally not appropriate to develop unit cost information.
    (b) Recipients' financial management systems shall provide for the 
following.
    (1) Accurate, current and complete disclosure of the financial 
results of each federally-sponsored project or program in accordance 
with the reporting requirements set forth in Sec. 32.52. If a DoD 
Component requires reporting on an accrual basis from a recipient that 
maintains its records on other than an accrual basis, the recipient 
shall not be required to establish an accrual accounting system. These 
recipients may develop such accrual data for its reports on the basis 
of an analysis of the documentation on hand.
    (2) Records that identify adequately the source and application of 
funds for federally-sponsored activities. These records shall contain 
information pertaining to Federal awards, authorizations, obligations, 
unobligated balances, assets, outlays, income and interest.
    (3) Effective control over and accountability for all funds, 
property and other assets. Recipients shall adequately safeguard all 
such assets and assure they are used solely for authorized purposes.
    (4) Comparison of outlays with budget amounts for each award. 
Whenever appropriate, financial information should be related to 
performance and unit cost data. As discussed in paragraph (a) of this 
section, unit cost data is generally not appropriate for awards that 
support research.
    (5) Written procedures to minimize the time elapsing between the 
transfer of funds to the recipient from the U.S. Treasury and the 
issuance or redemption of checks, warrants or payments by other means 
for program purposes by the recipient.
    (6) Written procedures for determining the reasonableness, 
allocability and allowability of costs in accordance with the 
provisions of the applicable Federal cost principles (see Sec. 32.27) 
and the terms and conditions of the award.
    (7) Accounting records including cost accounting records that are 
supported by source documentation.
    (c) Where the Federal Government guarantees or insures the 
repayment of money borrowed by the recipient, the DoD Component, at its 
discretion, may require adequate bonding and insurance if the bonding 
and insurance requirements of the recipient are not deemed adequate to 
protect the interest of the Federal Government.
    (d) The DoD Component may require adequate fidelity bond coverage 
where the recipient lacks sufficient coverage to protect the Federal 
Government's interest.
    (e) Where bonds are required in the situations described above, the 
bonds shall be obtained from companies holding certificates of 
authority as acceptable sureties, as prescribed in 31 CFR part 223, 
``Surety Companies Doing Business with the United States.''


Sec. 32.22  Payment.

    (a) Payment methods shall minimize the time elapsing between the 
transfer of funds from the United States Treasury and the issuance or 
redemption of checks, warrants, or payment by other means by the 
recipients. Payment methods of State agencies or instrumentalities 
shall be consistent with Treasury-State agreements under the Cash 
Management Improvement Act (CMIA) (31 U.S.C. 3335 and 6503) or default 
procedures in 31 CFR part 205.
    (b) Recipients are to be paid in advance, provided they maintain or

[[Page 43894]]

demonstrate the willingness to maintain:
    (1) Written procedures that minimize the time elapsing between the 
transfer of funds and disbursement by the recipient; and
    (2) Financial management systems that meet the standards for fund 
control and accountability as established in Sec. 32.21. Cash advances 
to a recipient organization shall be limited to the minimum amounts 
needed and be timed to be in accordance with the actual, immediate cash 
requirements of the recipient organization in carrying out the purpose 
of the approved program or project. The timing and amount of cash 
advances shall be as close as is administratively feasible to the 
actual disbursements by the recipient organization for direct program 
or project costs and the proportionate share of any allowable indirect 
costs.
    (c) Whenever possible, advances shall be consolidated to cover 
anticipated cash needs for all awards made by the DoD Component to the 
recipient.
    (1) Advance payment mechanisms include, but are not limited to, 
Treasury check and electronic funds transfer.
    (2) Advance payment mechanisms are subject to 31 CFR part 205.
    (3) Recipients shall be authorized to submit requests for advances 
and reimbursements at least monthly when electronic fund transfers are 
not used.
    (d) Requests for Treasury check advance payment shall be submitted 
on SF-270,\3\ ``Request for Advance or Reimbursement,'' or other forms 
as may be authorized by OMB. This form is not to be used when Treasury 
check advance payments are made to the recipient automatically through 
the use of a predetermined payment schedule or if inconsistent with DoD 
procedures for electronic funds transfer.
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    \3\ See footnote 2 to Sec. 32.12(a).
---------------------------------------------------------------------------

    (e) Reimbursement is the preferred method when the requirements in 
paragraph (b) of this section cannot be met. DoD Components may also 
use this method on any construction agreement, or if the major portion 
of the construction project is accomplished through private market 
financing or Federal loans, and the Federal assistance constitutes a 
minor portion of the project.
    (1) When the reimbursement method is used, the responsible DoD 
payment office shall make payment within 30 days after receipt of the 
billing, unless the billing is improper (see also 32 CFR 22.810(b)(2)).
    (2) Recipients shall be authorized to submit requests for 
reimbursement at least monthly when electronic funds transfers are not 
used.
    (f) If a recipient cannot meet the criteria for advance payments 
and the grants officer, in consultation with the program manager, has 
determined that reimbursement is not feasible because the recipient 
lacks sufficient working capital, the award may provide for cash on a 
working capital advance basis. Under this procedure, the award shall 
provide for advancing cash to the recipient to cover its estimated 
disbursement needs for an initial period generally geared to the 
awardee's disbursing cycle. Thereafter, the award shall provide for 
reimbursing the recipient for its actual cash disbursements. The 
working capital advance method of payment shall not be used for 
recipients unwilling or unable to provide timely advances to their 
subrecipient to meet the subrecipient's actual cash disbursements.
    (g) To the extent available, recipients shall disburse funds 
available from repayments to and interest earned on a revolving fund, 
program income, rebates, refunds, contract settlements, audit 
recoveries and interest earned on such funds before requesting 
additional cash payments.
    (h) Unless otherwise required by statute, grants officers shall not 
withhold payments for proper charges made by recipients at any time 
during the project period unless:
    (1) A recipient has failed to comply with the project objectives, 
the terms and conditions of the award, or Federal reporting 
requirements; or
    (2) The recipient or subrecipient is delinquent in a debt to the 
United States (see definitions of ``debt'' and ``delinquent debt,'' at 
32 CFR 22.105). Under such conditions, the grants officer may, upon 
reasonable notice, inform the recipient that payments shall not be made 
for obligations incurred after a specified date until the conditions 
are corrected or the indebtedness to the Federal Government is 
liquidated (also see 32 CFR 22.420(b)(2) and 22.820).
    (i) Standards governing the use of banks and other institutions as 
depositories of funds advanced under awards are as follows:
    (1) Except for situations described in paragraph (i)(2) of this 
section, DoD Components shall not require separate depository accounts 
for funds provided to a recipient or establish any eligibility 
requirements for depositories for funds provided to a recipient. 
However, recipients must be able to account for the receipt, obligation 
and expenditure of funds.
    (2) Advances of Federal funds shall be deposited and maintained in 
insured accounts whenever possible.
    (j) Consistent with the national goal of expanding the 
opportunities for women-owned and minority-owned business enterprises, 
recipients shall be encouraged to use women-owned and minority-owned 
banks (a bank which is owned at least 50 percent by women or minority 
group members).
    (k) Recipients shall maintain advances of Federal funds in interest 
bearing accounts, unless:
    (1) The recipient receives less than $120,000 in Federal awards per 
year;
    (2) The best reasonably available interest bearing account would 
not be expected to earn interest in excess of $250 per year on Federal 
cash balances; or
    (3) The depository would require an average or minimum balance so 
high that it would not be feasible within the expected Federal and non-
Federal cash resources.
    (l) Interest earned on Federal advances deposited in interest 
bearing accounts shall be remitted annually to Department of Health and 
Human Services, Payment Management System, P.O. Box 6021, Rockville, MD 
20852. In keeping with Electronic Funds Transfer rules (31 CFR part 
206), interest should be remitted to the HHS Payment Management System 
through an electronic medium such as the FEDWIR Deposit System. 
Recipients that do not have this capability should use a check. 
Interest amounts up to $250 per year may be retained by the recipient 
for administrative expense.
    (m) Except as noted elsewhere in this part, only the following 
forms shall be authorized for the recipients in requesting advances and 
reimbursements. DoD Components shall not require more than an original 
and two copies of these forms.
    (1) SF-270, Request for Advance or Reimbursement. Each DoD 
Component shall adopt the SF-270 as a standard form for all 
nonconstruction programs when electronic funds transfer or 
predetermined advance methods are not used. DoD Components, however, 
have the option of using this form for construction programs in lieu of 
the SF-271,\4\ ``Outlay Report and Request for Reimbursement for 
Construction Programs.''
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    \4\ See footnote 2 to Sec. 32.12(a).
---------------------------------------------------------------------------

    (2) SF-271, Outlay Report and Request for Reimbursement for 
Construction Programs. Each DoD Component shall adopt the SF-271 as the 
standard form to be used for requesting reimbursement for

[[Page 43895]]

construction programs. However, a DoD Component may substitute the SF-
270 when the DoD Component determines that it provides adequate 
information to meet Federal needs.


Sec. 32.23  Cost sharing or matching.

    (a) All contributions, including cash and third party in-kind, 
shall be accepted as part of the recipient's cost sharing or matching 
when such contributions meet all of the following criteria:
    (1) Are verifiable from the recipient's records.
    (2) Are not included as contributions for any other federally-
assisted project or program.
    (3) Are necessary and reasonable for proper and efficient 
accomplishment of project or program objectives.
    (4) Are allowable under the applicable cost principles.
    (5) Are not paid by the Federal Government under another award, 
except where authorized by Federal statute to be used for cost sharing 
or matching.
    (6) Are provided for in the approved budget when required by the 
DoD Component.
    (7) Conform to other provisions of this part, as applicable.
    (b) Unrecovered indirect costs (see definition in Sec. 32.2) may be 
included as part of cost sharing or matching only with the prior 
approval of the grants officer.
    (c) Values for recipient contributions of services and property 
shall be established in accordance with the applicable cost principles. 
If a DoD Component authorizes recipients to donate buildings or land 
for construction/facilities acquisition projects or long-term use, the 
value of the donated property for cost sharing or matching shall be the 
lesser of:
    (1) The certified value of the remaining life of the property 
recorded in the recipient's accounting records at the time of donation; 
or
    (2) The current fair market value. However, when there is 
sufficient justification, the DoD Component may approve the use of the 
current fair market value of the donated property, even if it exceeds 
the certified value at the time of donation to the project.
    (d) Volunteer services furnished by professional and technical 
personnel, consultants, and other skilled and unskilled labor may be 
counted as cost sharing or matching if the service is an integral and 
necessary part of an approved project or program. Rates for volunteer 
services shall be consistent with those paid for similar work in the 
recipient's organization. In those instances in which the required 
skills are not found in the recipient organization, rates shall be 
consistent with those paid for similar work in the labor market in 
which the recipient competes for the kind of services involved. In 
either case, paid fringe benefits that are reasonable, allowable, and 
allocable may be included in the valuation.
    (e) When an employer other than the recipient furnishes the 
services of an employee, these services shall be valued at the 
employee's regular rate of pay (plus an amount of fringe benefits that 
are reasonable, allowable, and allocable, but exclusive of overhead 
costs), provided these services are in the same skill for which the 
employee is normally paid.
    (f) Donated supplies may include such items as office supplies, 
laboratory supplies or workshop and classroom supplies. Value assessed 
to donated supplies included in the cost sharing or matching share 
shall be reasonable and shall not exceed the fair market value of the 
property at the time of the donation.
    (g) The method used for determining cost sharing or matching for 
donated equipment, buildings and land for which title passes to the 
recipient may differ according to the purpose of the award, if the 
purpose of the award is to:
    (1) Assist the recipient in the acquisition of equipment, buildings 
or land, the total value of the donated property may be claimed as cost 
sharing or matching; or
    (2) Support activities that require the use of equipment, buildings 
or land, normally only depreciation or use charges for equipment and 
buildings may be made. However, the full value of equipment or other 
capital assets and fair rental charges for land may be allowed, 
provided that the DoD Component has approved the charges.
    (h) The value of donated property shall be determined in accordance 
with the usual accounting policies of the recipient, with the following 
qualifications.
    (1) The value of donated land and buildings shall not exceed its 
fair market value at the time of donation to the recipient as 
established by an independent appraiser (e.g., certified real property 
appraiser or General Services Administration representative) and 
certified by a responsible official of the recipient.
    (2) The value of donated equipment shall not exceed the fair market 
value of equipment of the same age and condition at the time of 
donation.
    (3) The value of donated space shall not exceed the fair rental 
value of comparable space as established by an independent appraisal of 
comparable space and facilities in a privately-owned building in the 
same locality.
    (4) The value of loaned equipment shall not exceed its fair rental 
value.
    (i) The following requirements pertain to the recipient's 
supporting records for in-kind contributions from third parties:
    (1) Volunteer services shall be documented and, to the extent 
feasible, supported by the same methods used by the recipient for its 
own employees.
    (2) The basis for determining the valuation for personal service 
and property shall be documented.


Sec. 32.24  Program income.

    (a) DoD Components shall apply the standards set forth in this 
section in requiring recipient organizations to account for program 
income related to projects financed in whole or in part with Federal 
funds.
    (b) Except as provided in paragraph (h) of this section, program 
income earned during the project period shall be retained by the 
recipient and, in accordance with the terms and conditions of the 
award, shall be used in one or more of the following ways:
    (1) Added to funds committed to the project by the DoD Component 
and recipient and used to further eligible project or program 
objectives.
    (2) Used to finance the non-Federal share of the project or 
program.
    (3) Deducted from the total project or program allowable cost in 
determining the net allowable costs on which the Federal share of costs 
is based.
    (c) When a program regulation or award authorizes the disposition 
of program income as described in paragraphs (b)(1) or (b)(2) of this 
section, program income in excess of any limits stipulated shall be 
used in accordance with paragraph (b)(3) of this section.
    (d) In the event that program regulations or the terms and 
conditions of the award do not specify how program income is to be 
used, paragraph (b)(3) of this section shall apply automatically to all 
projects or programs except research. For awards that support research, 
paragraph (b)(1) of this section shall apply automatically unless the 
terms and conditions specify another alternative or the recipient is 
subject to special award conditions, as indicated in Sec. 32.14.
    (e) Unless program regulations or the terms and conditions of the 
award provide otherwise, recipients shall have no obligation to the 
Federal Government regarding program income earned after the end of the 
project period.
    (f) If authorized by program regulations or the terms and 
conditions

[[Page 43896]]

of the award, costs incident to the generation of program income may be 
deducted from gross income to determine program income, provided these 
costs have not been charged to the award.
    (g) Proceeds from the sale of property shall be handled in 
accordance with the requirements of the Property Standards (see 
Secs. 32.30 through 32.37).
    (h) Unless program regulations or the terms and condition of the 
award provide otherwise, recipients shall have no obligation to the 
Federal Government with respect to program income earned from license 
fees and royalties for copyrighted material, patents, patent 
applications, trademarks, and inventions produced under an award. Note 
that the Patent and Trademark Amendments (35 U.S.C. chapter 18) apply 
to inventions made under an experimental, developmental, or research 
award.


Sec. 32.25  Revision of budget and program plans.

    (a) The budget plan is the financial expression of the project or 
program as approved during the award process. It may include either the 
sum of the Federal and non-Federal shares, or only the Federal share, 
depending upon DoD Component requirements. It shall be related to 
performance for program evaluation purposes whenever appropriate.
    (b) Recipients are required to report deviations from budget and 
program plans, and request prior approvals for budget and program plan 
revisions, in accordance with this section.
    (c) For nonconstruction awards, recipients shall request prior 
approvals from the cognizant grants officer for one or more of the 
following program or budget related reasons.
    (1) Change in the scope or the objective of the project or program 
(even if there is no associated budget revision requiring prior written 
approval).
    (2) Change in a key person specified in the application or award 
document.
    (3) The absence for more than three months, or a 25 percent 
reduction in time devoted to the project, by the approved project 
director or principal investigator.
    (4) The need for additional Federal funding.
    (5) The inclusion, unless waived by the DoD Component, of costs 
that require prior approval in accordance with OMB Circular A-21,\5\ 
``Cost Principles for Institutions of Higher Education,'' OMB Circular 
A-122,\6\ ``Cost Principles for Non-Profit Organizations,'' or Appendix 
E to 45 CFR part 74, ``Principles for Determining Costs Applicable to 
Research and Development under Grants and Contracts with Hospitals,'' 
or 48 CFR part 31, ``Contract Cost Principles and Procedures,'' as 
applicable. However, it should be noted that many of the prior 
approvals in these cost principles are appropriately waived only after 
consultation with the cognizant federal agency responsible for 
negotiating the recipient's indirect costs.
---------------------------------------------------------------------------

    \5\ See footnote 1 to Sec. 32.1(a).
    \6\ See footnote 1 to Sec. 32.1(a).
---------------------------------------------------------------------------

    (6) The transfer of funds allotted for training allowances (direct 
payment to trainees) to other categories of expense.
    (7) Unless described in the application and funded in the approved 
awards, the subaward, transfer or contracting out of any work under an 
award. This provision does not apply to the purchase of supplies, 
material, equipment or general support services.
    (d) (1) Except for requirements listed in paragraphs (c)(1) and 
(c)(4) of this section, OMB Circular A-110 authorizes DoD Components, 
at their option, to waive cost-related and administrative prior written 
approvals required by this part and OMB Circulars A-21 and A-122 (but 
see cautionary note at end of paragraph (c)(5) of this section).
    (2) The two prior approvals listed in paragraphs (d)(2) (i) and 
(ii) of this section are automatically waived unless the award document 
states otherwise. DoD Components should not override this automatic 
waiver and require the prior approvals, especially for research awards, 
unless there are compelling reasons for doing so in a given 
circumstance. Absent an override in the award terms and conditions, 
recipients need not obtain prior approvals before:
    (i) Incurring pre-award costs 90 calendar days prior to award 
(incurring pre-award costs more than 90 calendar days prior to award 
would still require the prior approval of the DoD Component). All pre-
award costs are incurred at the recipient's risk (i.e., the DoD 
Component is under no obligation to reimburse such costs if for any 
reason the recipient does not receive an award or if the award is less 
than anticipated and inadequate to cover such costs).
    (ii) Carrying forward unobligated balances to subsequent funding 
periods.
    (e) The DoD Component may, at its option, restrict the transfer of 
funds among direct cost categories, functions and activities for awards 
in which the Federal share of the project exceeds $100,000 and the 
cumulative amount of such transfers exceeds or is expected to exceed 10 
percent of the total budget as last approved by the DoD Component. No 
DoD Component shall permit a transfer that would cause any Federal 
appropriation or part thereof to be used for purposes other than those 
consistent with the original intent of the appropriation.
    (f) For construction awards, recipients shall request prior written 
approval promptly from grants officers for budget revisions whenever:
    (1) The revision results from changes in the scope or the objective 
of the project or program;
    (2) The need arises for additional Federal funds to complete the 
project; or
    (3) A revision is desired which involves specific costs for which 
prior written approval requirements may be imposed consistent with 
applicable OMB cost principles listed in Sec. 32.27.
    (g) When a DoD Component makes an award that provides support for 
both construction and nonconstruction work, the DoD Component may 
require the recipient to request prior approval from the grants officer 
before making any fund or budget transfers between the two types of 
work supported.
    (h) No other prior approval requirements for specific items may be 
imposed unless a deviation has been approved, in accordance with the 
deviation procedures in Sec. 32.4(c).
    (i) For both construction and nonconstruction awards, DoD 
Components shall require recipients to notify the grants officer in 
writing promptly whenever the amount of Federal authorized funds is 
expected to exceed the needs of the recipient for the project period by 
more than $5000 or five percent of the Federal award, whichever is 
greater. This notification shall not be required if an application for 
additional funding is submitted for a continuation award.
    (j) When requesting approval for budget revisions, recipients shall 
use the budget forms that were used in the application unless the 
grants officer indicates a letter of request suffices.
    (k) Within 30 calendar days from the date of receipt of the request 
for budget revisions, the grants officer shall review the request and 
notify the recipient whether the budget revisions have been approved. 
If the revision is still under consideration at the end of 30 calendar 
days, the grants officer shall inform the recipient in writing of the 
date when the recipient may expect the decision.


Sec. 32.26  Non-Federal audits.

    (a) Recipients and subrecipients that are institutions of higher 
education or other non-profit organizations shall be subject to the 
audit requirements contained in OMB Circular A-133,\7\

[[Page 43897]]

``Audits of Institutions of Higher Education and Other Non-Profit 
Institutions.''
---------------------------------------------------------------------------

    \7\ See footnote 1 to Sec. 32.1(a).
---------------------------------------------------------------------------

    (b) State and local governments that are subrecipients shall be 
subject to the audit requirements contained in the Single Audit Act (31 
U.S.C. 7501-7) and regulations at 32 CFR part 266 implementing OMB 
Circular A-128,\8\ ``Audits of State and Local Governments.''-
---------------------------------------------------------------------------

    \8\ See footnote 1 to Sec. 32.1(a).
---------------------------------------------------------------------------

    (c) Hospitals that are subrecipients and are not covered by the 
audit provisions of OMB Circular A-133 shall be subject to the audit 
requirements specified in award terms and conditions.
    (d) Commercial organizations that are subrecipients shall be 
subject to the audit requirements specified in 32 CFR 34.16.


Sec. 32.27  Allowable costs.

    (a) General. For each kind of recipient or subrecipient of a cost-
type assistance award, or each contractor receiving a. cost-type 
contract under an assistance award, there is a set of Federal 
principles for determining allowable costs. Allowability of costs shall 
be determined in accordance with the cost principles applicable to the 
entity incurring the costs.
    (b) Governmental organizations. Allowability of costs incurred by 
State, local or federally-recognized Indian tribal governments that may 
be subrecipients or contractors under awards subject to this part is 
determined in accordance with the provisions of OMB Circular A-87,\9\ 
``Cost Principles for State and Local Governments.''
---------------------------------------------------------------------------

    \9\ See footnote 1 to Sec. 32.1(a).
---------------------------------------------------------------------------

    (c) Non-profit organizations. The allowability of costs incurred by 
non-profit organizations that may be recipients or subrecipients of 
awards subject to this part, or contractors under such awards, is 
determined in accordance with the provisions of OMB Circular A-122, 
``Cost Principles for Non-Profit Organizations.''
    (d) Higher educational institutions. The allowability of costs 
incurred by institutions of higher education that may be recipients, 
subrecipients, or contractors is determined in accordance with the 
provisions of OMB Circular A-21, ``Cost Principles for Educational 
Institutions.''
    (e) Hospitals. The allowability of costs incurred by hospitals that 
are recipients, subrecipients, or contractors is determined in 
accordance with the provisions of Appendix E to 45 CFR part 74, 
``Principles for Determining Costs Applicable to Research and 
Development Under Grants and Contracts with Hospitals.''
    (f) Commercial organizations. The allowability of costs incurred by 
subrecipients or contractors that are either commercial organizations 
or non-profit organizations listed in Attachment C to Circular A-122 is 
determined in accordance with the provisions of the Federal Acquisition 
Regulation (FAR) at 48 CFR part 31.


Sec. 32.28  Period of availability of funds.

    Where a funding period is specified, a recipient may charge to the 
award only allowable costs resulting from obligations incurred during 
the funding period and any pre-award costs (see Sec. 32.25(d)(2)(i)) 
authorized by the DoD Component.

Property Standards


Sec. 32.30  Purpose of property standards.

    Sections 32.31 through 32.37 set forth uniform standards governing 
management and disposition of property furnished by the Federal 
Government and property whose cost was charged to a project supported 
by a Federal award. DoD Components shall require recipients to observe 
these standards under awards and shall not impose additional 
requirements, unless specifically required by Federal statute. The 
recipient may use its own property management standards and procedures 
provided it observes the provisions of Secs. 32.31 through 32.37.


Sec. 32.31  Insurance coverage.

    Recipients shall, at a minimum, provide the equivalent insurance 
coverage for real property and equipment acquired with Federal funds as 
provided to property owned by the recipient. Federally-owned property 
need not be insured unless required by the terms and conditions of the 
award.


Sec. 32.32  Real property.

    Each DoD Component that makes awards under which real property is 
acquired in whole or in part with Federal funds shall prescribe 
requirements for recipients concerning the use and disposition of such 
property. Unless otherwise provided by statute, such requirements, at a 
minimum, shall contain the following:
    (a) Title to real property shall vest in the recipient subject to 
the condition that the recipient shall use the real property for the 
authorized purpose of the project as long as it is needed and shall not 
encumber the property without approval of the DoD Component.
    (b) The recipient shall obtain written approval by the grants 
officer for the use of real property in other federally sponsored 
projects when the recipient determines that the property is no longer 
needed for the purpose of the original project. Use in other projects 
shall be limited to those under federally sponsored projects (i.e., 
awards) or programs that have purposes consistent with those authorized 
for support by the DoD Component.
    (c) When the real property is no longer needed as provided in 
paragraphs (a) and (b) of this section, the recipient shall request 
disposition instructions from the DoD Component or its successor 
Federal agency. The responsible Federal agency shall observe one or 
more of the following disposition instructions:
    (1) The recipient may be permitted to retain title without further 
obligation to the Federal Government after it compensates the Federal 
Government for that percentage of the current fair market value of the 
property attributable to the Federal participation in the project.
    (2) The recipient may be directed to sell the property under 
guidelines provided by the DoD Component and pay the Federal Government 
for that percentage of the current fair market value of the property 
attributable to the Federal participation in the project (after 
deducting actual and reasonable selling and fix-up expenses, if any, 
from the sales proceeds). When the recipient is authorized or required 
to sell the property, proper sales procedures shall be established that 
provide for competition to the extent practicable and result in the 
highest possible return.
    (3) The recipient may be directed to transfer title to the property 
to the Federal Government or to an eligible third party provided that, 
in such cases, the recipient shall be entitled to compensation for its 
attributable percentage of the current fair market value of the 
property.


Sec. 32.33  Federally-owned and exempt property.

    (a) Federally-owned property. (1) Title to federally-owned property 
remains vested in the Federal Government. Recipients shall submit 
annually an inventory listing of federally-owned property in their 
custody to the DoD Component that made the award. Upon completion of 
the award or when the property is no longer needed, the recipient shall 
report the property to the DoD Component for further Federal agency 
utilization.
    (2) If the DoD Component that made the award has no further need 
for the property, it shall be declared excess and either:

[[Page 43898]]

    (i) Reported to the General Services Administration, in accordance 
with the Federal Property and Administrative Services Act of 1949 (40 
U.S.C. 483(b)(2)), as implemented by General Services Administration 
regulations at 41 CFR 101-47.202; or
    (ii) Disposed of by alternative methods pursuant to other specific 
statutory authority (e.g., DoD Components are authorized by the Federal 
Technology Transfer Act (15 U.S.C. 3710(i)), to donate research 
equipment to educational and non-profit organizations for the conduct 
of technical and scientific education and research activities. 
Donations under this Act shall be in accordance with the DoD 
implementation of E.O. 12821 (3 CFR, 1993 Comp., p. 323), ``Improving 
Mathematics and Science Education in Support of the National Education 
Goals''. Appropriate instructions shall be issued to the recipient by 
the DoD Component.
    (b) Exempt property. (1) When statutory authority exists, a DoD 
Component may vest title to property acquired with Federal funds in the 
recipient without further obligation to the Federal Government and 
under conditions the DoD Component considers appropriate. For example, 
under 31 U.S.C. 6306, DoD Components may so vest title to tangible 
personal property under a grant or cooperative agreement for basic or 
applied research in a nonprofit institution of higher education or a 
nonprofit organization whose primary purpose is conducting scientific 
research. Such property is ``exempt property.''
    (2) As a matter of policy, DoD Components shall make maximum use of 
the authority of 31 U.S.C. 6306 to vest title to exempt property in 
institutions of higher education, without further obligation to the 
Government, to enhance the university infrastructure for future 
performance of defense research and related science and engineering 
education.
    (3) DoD Components may establish conditions, in regulation or in 
award terms and conditions, for vesting title to exempt property. 
Should a DoD Component not establish conditions, title to exempt 
property upon acquisition shall vest in the recipient without further 
obligation to the Federal Government.


Sec. 32.34  Equipment.

    (a) Title to equipment acquired by a recipient with Federal funds 
shall vest in the recipient, subject to conditions of this section.
    (b) The recipient shall not use equipment acquired with Federal 
funds to provide services to non-Federal outside organizations for a 
fee that is less than private companies charge for equivalent services, 
unless specifically authorized by Federal statute, for as long as the 
Federal Government retains an interest in the equipment.
    (c) The recipient shall use the equipment in the project or program 
for which it was acquired as long as needed, whether or not the project 
or program continues to be supported by Federal funds and shall not 
encumber the property without approval of the DoD Component that made 
the award. When no longer needed for the original project or program, 
the recipient shall use the equipment in connection with its other 
federally-sponsored activities, in the following order of priority:
    (1) First, activities sponsored by the DoD Component that funded 
the original project.
    (2) Second, activities sponsored by other DoD Components.
    (3) Then, activities sponsored by other Federal agencies.
    (d) During the time that equipment is used on the project or 
program for which it was acquired, the recipient shall make it 
available for use on other projects or programs if such other use will 
not interfere with the work on the project or program for which the 
equipment was originally acquired. First preference for such other use 
shall be given to other projects or programs sponsored by the DoD 
Component that financed the equipment; second preference shall be given 
to projects or programs sponsored by other DoD Components; and third 
preference shall be given to projects or programs sponsored by other 
Federal agencies. If the property is owned by the Federal Government, 
use on other activities not sponsored by the Federal Government shall 
be permissible if authorized by the DoD Component that financed the 
property. User charges shall be treated as program income.
    (e) When acquiring replacement equipment, the recipient may use the 
equipment to be replaced as trade-in or sell the equipment and use the 
proceeds to offset the costs of the replacement equipment subject to 
the approval of the DoD Component that financed the equipment.
    (f) The recipient's property management standards for equipment 
acquired with Federal funds and federally-owned property shall include 
all of the following:
    (1) Records for equipment and federally-owned property shall be 
maintained accurately and shall include the following information:
    (i) A description of the equipment or federally-owned property.
    (ii) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or other identification number.
    (iii) Source of the equipment or federally-owned property, 
including the award number.
    (iv) Whether title vests in the recipient or the Federal 
Government.
    (v) Acquisition date (or date received, if the property was 
furnished by the Federal Government) and cost.
    (vi) Information from which one can calculate the percentage of 
Federal participation in the cost of the equipment (not applicable to 
property furnished by the Federal Government).
    (vii) Location and condition of the equipment or federally-owned 
property and the date the information was reported.
    (viii) Unit acquisition cost.
    (ix) Ultimate disposition data, including date of disposal and 
sales price or the method used to determine current fair market value 
where a recipient compensates the DoD Component that made the award for 
its share.
    (2) Property owned by the Federal Government shall be identified to 
indicate Federal ownership.
    (3) A physical inventory of equipment and federally-owned property 
shall be taken and the results reconciled with the equipment records at 
least once every two years. Any differences between quantities 
determined by the physical inspection and those shown in the accounting 
records shall be investigated to determine the causes of the 
difference. The recipient shall, in connection with the inventory, 
verify the existence, current utilization, and continued need for the 
equipment or federally-owned property.
    (4) A control system shall be in effect to insure adequate 
safeguards to prevent loss, damage, or theft of the equipment or 
federally-owned property. Any loss, damage, or theft of equipment or 
federally-owned property shall be investigated and fully documented; if 
the property was owned by the Federal Government, the recipient shall 
promptly notify the DoD Component.
    (5) Adequate maintenance procedures shall be implemented to keep 
the equipment or federally-owned property in good condition.
    (6) Where the recipient is authorized or required to sell the 
equipment, proper sales procedures shall be established which provide 
for competition to the extent practicable and result in the highest 
possible return.

[[Page 43899]]

    (g) When the recipient no longer needs the equipment, the equipment 
may be used for other activities in accordance with the following 
standards.
    (1) For equipment with a current per unit fair market value of 
$5,000 or more, the recipient may retain the equipment for other uses 
provided that compensation is made to the DoD Component that originally 
made the award or its successor. The amount of compensation shall be 
computed by applying the percentage of Federal participation in the 
cost of the original project or program to the current fair market 
value of the equipment.
    (2) If the recipient has no need for the equipment, the recipient 
shall request disposition instructions from the DoD Component. The DoD 
Component shall issue instructions to the recipient no later than 120 
calendar days after the recipient's request and the following 
procedures shall govern:
    (i) The grants officer, in consultation with the program manager, 
shall judge whether the age and nature of the equipment warrant a 
screening procedure to determine whether the equipment is useful to a 
DoD Component or other Federal agency. If a screening procedure is 
warranted:
    (A) The DoD Component shall determine whether the equipment can be 
used to meet DoD requirements.
    (B) If no DoD requirement exists, the availability of the equipment 
shall be reported to the General Services Administration by the DoD 
Component to determine whether a requirement for the equipment exists 
in other Federal agencies.
    (ii) If so instructed or if disposition instructions are not issued 
within 120 calendar days after the recipient's request, the recipient 
shall sell the equipment and reimburse the DoD Component that made the 
award an amount computed by applying to the sales proceeds the 
percentage of Federal participation in the cost of the original project 
or program. However, the recipient shall be permitted to deduct and 
retain from the Federal share $500 or ten percent of the proceeds, 
whichever is less, for the recipient's selling and handling expenses.
    (iii) If the recipient is instructed to ship the equipment 
elsewhere, the recipient shall be reimbursed by the Federal Government 
by an amount which is computed by applying the percentage of the 
recipient's participation in the cost of the original project or 
program to the current fair market value of the equipment, plus any 
reasonable shipping or interim storage costs incurred.
    (iv) If the recipient is instructed to otherwise dispose of the 
equipment, the recipient shall be reimbursed by the DoD Component that 
made the award for such costs incurred in its disposition.
    (h) The DoD Component may reserve the right to transfer the title 
to the Federal Government or to a third party named by the Federal 
Government when such third party is otherwise eligible under existing 
statutes. Such transfer shall be subject to the following standards.
    (1) The equipment shall be appropriately identified in the award or 
otherwise made known to the recipient in writing. For exempt property, 
in accordance with Sec. 32.33(b)(3), note that this identification must 
occur by the time of award, or title to the property vests in the 
recipient without further obligation to the Government.
    (2) The DoD Component shall issue disposition instructions within 
120 calendar days after receipt of a final inventory. The final 
inventory shall list all equipment acquired with award funds and 
federally-owned property. If the DoD Component fails to issue 
disposition instructions for equipment within the 120 calendar day 
period, the recipient shall apply the standards of paragraph (g)(1) of 
this section.
    (3) When the DoD Component exercises its right to take title, the 
equipment shall be subject to the provisions for federally-owned 
property.


Sec. 32.35   Supplies.

    (a) Title to supplies shall vest in the recipient upon acquisition. 
If there is a residual inventory of unused supplies exceeding $5,000 in 
total aggregate value upon termination or completion of the project or 
program and the supplies are not needed for any other federally-
sponsored project or program, the recipient shall retain the supplies 
for use on non-Federal sponsored activities or sell them, but shall, in 
either case, compensate the Federal Government for its share. The 
amount of compensation shall be computed in the same manner as for 
equipment.
    (b) The recipient shall not use supplies acquired with Federal 
funds to provide services to non-Federal outside organizations for a 
fee that is less than private companies charge for equivalent services, 
unless specifically authorized by Federal statute as long as the 
Federal Government retains an interest in the supplies.


Sec. 32.36   Intangible property.

    (a) The recipient may copyright any work that is subject to 
copyright and was developed, or for which ownership was purchased, 
under an award. DoD Components reserve a royalty-free, nonexclusive and 
irrevocable right to reproduce, publish, or otherwise use the work for 
Federal purposes, and to authorize others to do so.
    (b) Recipients are subject to applicable regulations governing 
patents and inventions, including Governmentwide regulations issued by 
the Department of Commerce at 37 CFR part 401, ``Rights to Inventions 
Made by Nonprofit Organizations and Small Business Firms Under 
Government Grants, Contracts and Cooperative Agreements.''
    (c) Unless waived by the DoD Component making the award, the 
Federal Government has the right to:
    (1) Obtain, reproduce, publish or otherwise use the data first 
produced under an award.
    (2) Authorize others to receive, reproduce, publish, or otherwise 
use such data for Federal purposes.
    (d) Title to intangible property and debt instruments acquired 
under an award or subaward (rather than developed or produced under the 
award or subaward) vests upon acquisition in the recipient. The 
recipient shall use that property for the originally-authorized 
purpose, and the recipient shall not encumber the property without 
approval of the DoD Component that made the award. When no longer 
needed for the originally authorized purpose, disposition of the 
intangible property shall occur in accordance with the provisions of 
Sec. 32.34(g).


Sec. 32.37   Property trust relationship.

    Real property, equipment, intangible property and debt instruments 
that are acquired or improved with Federal funds shall be held in trust 
by the recipient as trustee for the beneficiaries of the project or 
program under which the property was acquired or improved. DoD 
Components may require recipients to record liens or other appropriate 
notices of record to indicate that personal or real property has been 
acquired or improved with Federal funds and that use and disposition 
conditions apply to the property.

Procurement Standards


Sec. 32.40   Purpose of procurement standards.

    Sections 32.41 through 32.48 set forth standards for use by 
recipients in establishing procedures for the procurement of supplies 
and other expendable property, equipment, real property and other 
services with Federal funds. These standards are furnished to ensure 
that such materials and services are obtained in an effective manner 
and

[[Page 43900]]

in compliance with the provisions of applicable Federal statutes and 
executive orders.


Sec. 32.41   Recipient responsibilities.

    The standards contained in this section do not relieve the 
recipient of the contractual responsibilities arising under its 
contract(s). The recipient is the responsible authority, without 
recourse to the DoD Component that made the award, regarding the 
settlement and satisfaction of all contractual and administrative 
issues arising out of procurements entered into in support of an award 
or other agreement. This includes disputes, claims, protests of award, 
source evaluation or other matters of a contractual nature. Matters 
concerning violation of statute are to be referred to such Federal, 
State or local authority as may have proper jurisdiction.


Sec. 32.42   Codes of conduct.

    The recipient shall maintain written standards of conduct governing 
the performance of its employees engaged in the award and 
administration of contracts. No employee, officer, or agent shall 
participate in the selection, award, or administration of a contract 
supported by Federal funds if a real or apparent conflict of interest 
would be involved. Such a conflict would arise when the employee, 
officer, or agent, any member of his or her immediate family, his or 
her partner, or an organization which employs or is about to employ any 
of the parties indicated herein, has a financial or other interest in 
the firm selected for an award. The officers, employees, and agents of 
the recipient shall neither solicit nor accept gratuities, favors, or 
anything of monetary value from contractors, or parties to 
subagreements. However, recipients may set standards for situations in 
which the financial interest is not substantial or the gift is an 
unsolicited item of nominal value. The standards of conduct shall 
provide for disciplinary actions to be applied for violations of such 
standards by officers, employees, or agents of the recipient.


Sec. 32.43   Competition.

    All procurement transactions shall be conducted in a manner to 
provide, to the maximum extent practical, open and free competition. 
The recipient shall be alert to organizational conflicts of interest as 
well as noncompetitive practices among contractors that may restrict or 
eliminate competition or otherwise restrain trade. In order to ensure 
objective contractor performance and eliminate unfair competitive 
advantage, contractors that develop or draft specifications, 
requirements, statements of work, invitations for bids and/or requests 
for proposals shall be excluded from competing for such procurements. 
Awards shall be made to the bidder or offeror whose bid or offer is 
responsive to the solicitation and is most advantageous to the 
recipient, price, quality and other factors considered. Solicitations 
shall clearly set forth all requirements that the bidder or offeror 
shall fulfill in order for the bid or offer to be evaluated by the 
recipient. Any and all bids or offers may be rejected when it is in the 
recipient's interest to do so.


Sec. 32.44   Procurement procedures.

    (a) To comply with this part, which is DoD's implementation of OMB 
Circular A-110, all recipients that received at least $10 million in 
Federal funding in the previous fiscal year (through contracts and 
subcontracts, as well as assistance awards and subawards) shall have 
written procurement procedures. Note, however, that a recipient that 
received awards from other Federal agencies, in addition to awards from 
DoD Components, must also comply with the other agencies' 
implementation of OMB Circular A-110 (which may require written 
procurement procedures, even if the recipient received less than $10 
million in Federal funding). All recipients, whether or not their 
procurement procedures must be maintained in writing, shall have 
procedures that provide, at a minimum, that:
    (1) Recipients avoid purchasing unnecessary items;
    (2) Where appropriate, an analysis is made of lease and purchase 
alternatives to determine which would be the most economical and 
practical procurement; and
    (3) Solicitations for goods and services provide for all of the 
following:
    (i) A clear and accurate description of the technical requirements 
for the material, product or service to be procured. In competitive 
procurements, such a description shall not contain features which 
unduly restrict competition.
    (ii) Requirements which the bidder/offeror must fulfill and all 
other factors to be used in evaluating bids or proposals.
    (iii) A description, whenever practicable, of technical 
requirements in terms of functions to be performed or performance 
required, including the range of acceptable characteristics or minimum 
acceptable standards.
    (iv) The specific features of ``brand name or equal'' descriptions 
that bidders are required to meet when such items are included in the 
solicitation.
    (v) The acceptance, to the extent practicable and economically 
feasible, of products and services dimensioned in the metric system of 
measurement.
    (vi) Preference, to the extent practicable and economically 
feasible, for products and services that conserve natural resources and 
protect the environment and are energy efficient.
    (b) Positive efforts shall be made by recipients to utilize small 
businesses, minority-owned firms, and women's business enterprises, 
whenever possible. Recipients of Federal awards shall take all of the 
following steps to further this goal:
    (1) Ensure that small businesses, minority-owned firms, and women's 
business enterprises are used to the fullest extent practicable.
    (2) Make information on forthcoming opportunities available and 
arrange time frames for purchases and contracts to encourage and 
facilitate participation by small businesses, minority-owned firms, and 
women's business enterprises.
    (3) Consider in the contract process whether firms competing for 
larger contracts intend to subcontract with small businesses, minority-
owned firms, and women's business enterprises.
    (4) Encourage contracting with consortiums of small businesses, 
minority-owned firms and women's business enterprises when a contract 
is too large for one of these firms to handle individually.
    (5) Use the services and assistance, as appropriate, of such 
organizations as the Small Business Administration and the Department 
of Commerce's Minority Business Development Agency in the solicitation 
and utilization of small businesses, minority-owned firms and women's 
business enterprises.
    (c) The type of procuring instruments used (e.g., fixed price 
contracts, cost reimbursable contracts, purchase orders, and incentive 
contracts) shall be determined by the recipient but shall be 
appropriate for the particular procurement and for promoting the best 
interest of the program or project involved. The ``cost-plus-a-
percentage-of-cost'' or ``percentage of construction cost'' methods of 
contracting shall not be used.
    (d) Contracts shall be made only with responsible contractors who 
possess the potential ability to perform successfully under the terms 
and conditions of the proposed procurement. Consideration shall be 
given to such matters as contractor integrity, record of past 
performance, financial and technical resources or accessibility to 
other necessary resources. In certain

[[Page 43901]]

circumstances, contracts with certain parties are restricted by the DoD 
implementation, in 32 CFR part 25, of E.O.s 12549 (3 CFR, 1986 Comp., 
p. 189) and 12689 (3 CFR, 1989 Comp., p. 235), ``Debarment and 
Suspension.''
    (e) Recipients shall, on request, make available for the DoD 
Component's pre-award review, procurement documents such as request for 
proposals or invitations for bids, independent cost estimates, etc., 
when any of the following conditions apply:
    (1) A recipient's procurement procedures or operation fails to 
comply with the procurement standards in this part.
    (2) The procurement is expected to exceed the simplified 
acquisition threshold fixed at 41 U.S.C. 403 (11) (currently $100,000) 
and is to be awarded without competition or only one bid or offer is 
received in response to a solicitation.
    (3) The procurement, which is expected to exceed the simplified 
acquisition threshold, specifies a ``brand name'' product.
    (4) The proposed award over the simplified acquisition threshold is 
to be awarded to other than the apparent low bidder under a sealed bid 
procurement.
    (5) A proposed contract modification changes the scope of a 
contract or increases the contract amount by more than the amount of 
the simplified acquisition threshold.


Sec. 32.45  Cost and price analysis.

    Some form of cost or price analysis shall be made and documented in 
the procurement files in connection with every procurement action. 
Price analysis may be accomplished in various ways, including the 
comparison of price quotations submitted, market prices and similar 
indicia, together with discounts. Cost analysis is the review and 
evaluation of each element of cost to determine reasonableness, 
allocability and allowability.


Sec. 32.46  Procurement records.

    Procurement records and files for purchases in excess of the 
simplified acquisition threshold shall include the following at a 
minimum:
    (a) Basis for contractor selection;
    (b) Justification for lack of competition when competitive bids or 
offers are not obtained; and
    (c) Basis for award cost or price.


Sec. 32.47  Contract administration.

    A system for contract administration shall be maintained to ensure 
contractor conformance with the terms, conditions and specifications of 
the contract and to ensure adequate and timely follow up of all 
purchases. Recipients shall evaluate contractor performance and 
document, as appropriate, whether contractors have met the terms, 
conditions and specifications of the contract.


Sec. 32.48  Contract provisions.

    The recipient shall include, in addition to provisions to define a 
sound and complete agreement, the following provisions in all 
contracts. The following provisions shall also be applied to 
subcontracts:
    (a) Contracts in excess of the simplified acquisition threshold 
shall contain contractual provisions or conditions that allow for 
administrative, contractual, or legal remedies in instances in which a 
contractor violates or breaches the contract terms, and provide for 
such remedial actions as may be appropriate.
    (b) All contracts in excess of the simplified acquisition threshold 
shall contain suitable provisions for termination by the recipient, 
including the manner by which termination shall be effected and the 
basis for settlement. In addition, such contracts shall describe 
conditions under which the contract may be terminated for default as 
well as conditions where the contract may be terminated because of 
circumstances beyond the control of the contractor.
    (c) Except as otherwise required by statute, an award that requires 
the contracting (or subcontracting) for construction or facility 
improvements shall provide for the recipient to follow its own 
requirements relating to bid guarantees, performance bonds, and payment 
bonds unless the construction contract or subcontract exceeds $100,000. 
For those contracts or subcontracts exceeding $100,000, the DoD 
Component may accept the bonding policy and requirements of the 
recipient, provided the grants officer has made a determination that 
the Federal Government's interest is adequately protected. If such a 
determination has not been made, the minimum requirements shall be as 
follows:
    (1) A bid guarantee from each bidder equivalent to five percent of 
the bid price. The ``bid guarantee'' shall consist of a firm commitment 
such as a bid bond, certified check, or other negotiable instrument 
accompanying a bid as assurance that the bidder shall, upon acceptance 
of his bid, execute such contractual documents as may be required 
within the time specified.
    (2) A performance bond on the part of the contractor for 100 
percent of the contract price. A ``performance bond'' is one executed 
in connection with a contract to secure fulfillment of all the 
contractor's obligations under such contract.
    (3) A payment bond on the part of the contractor for 100 percent of 
the contract price. A ``payment bond'' is one executed in connection 
with a contract to assure payment as required by statute of all persons 
supplying labor and material in the execution of the work provided for 
in the contract.
    (4) Where bonds are required in the situations described in 
Secs. 32.40 through 32.49, the bonds shall be obtained from companies 
holding certificates of authority as acceptable sureties pursuant to 31 
CFR part 223, ``Surety Companies Doing Business with the United 
States.''
    (d) All negotiated contracts (except those for less than the 
simplified acquisition threshold) awarded by recipients shall include a 
provision to the effect that the recipient, the Department of Defense, 
the Comptroller General of the United States, or any of their duly 
authorized representatives, shall have access to any books, documents, 
papers and records of the contractor which are directly pertinent to a 
specific program for the purpose of making audits, examinations, 
excerpts and transcriptions.
    (e) All contracts, including those for amounts less than the 
simplified acquisition threshold, by recipients and their contractors 
shall contain the procurement provisions of Appendix A to this part, as 
applicable.


Sec. 32.49  Resource Conservation and Recovery Act. -

    Under the Resource Conservation and Recovery Act (RCRA) (section 
6002, Public Law 94-580, 42 U.S.C. 6962), any State agency or agency of 
a political subdivision of a State which is using appropriated Federal 
funds must comply with section 6002. Section 6002 requires that 
preference be given in procurement programs to the purchase of specific 
products containing recycled materials identified in guidelines 
developed by the Environmental Protection Agency (EPA) (40 CFR parts 
247-254). Accordingly, State and local institutions of higher 
education, hospitals, and non-profit organizations that receive direct 
Federal awards or other Federal funds shall give preference in their 
procurement programs funded with Federal funds to the purchase of 
recycled products pursuant to the EPA guidelines.

Reports and Records


Sec. 32.50  Purpose of reports and records. -

    Sections 32.51 through 32.53 set forth the procedures for 
monitoring and reporting on the recipient's financial

[[Page 43902]]

and program performance and the necessary standard reporting forms. 
They also set forth record retention requirements.


Sec. 32.51  Monitoring and reporting program performance. -

    (a) Recipients are responsible for managing and monitoring each 
project, program, subaward, function or activity supported by the 
award. Recipients shall monitor subawards to ensure subrecipients have 
met the audit requirements as delineated in Sec. 32.26. -
    (b) The award terms and conditions shall prescribe the frequency 
with which the performance reports shall be submitted. Except as 
provided in paragraph (f) of this section, performance reports shall 
not be required more frequently than quarterly or less frequently than 
annually. Annual reports shall be due 90 calendar days after the award 
year; quarterly or semi-annual reports shall be due 30 days after the 
reporting period. DoD Components may require annual reports before the 
anniversary dates of multiple year awards in lieu of these 
requirements. The final performance reports are due 90 calendar days 
after the expiration or termination of the award. -
    (c) If inappropriate, a final technical or performance report shall 
not be required after completion of the project. -
    (d) When required, performance reports shall generally contain, for 
each award, brief information on each of the following: --
    (1) A comparison of actual accomplishments with the goals and 
objectives established for the period, the findings of the 
investigator, or both. Whenever appropriate and the output of programs 
or projects can be readily quantified, such quantitative data should be 
related to cost data for computation of unit costs. However, unit costs 
are generally inappropriate for research (see Secs. 32.21 (a) and 
(b)(4)). --
    (2) Reasons why established goals were not met, if appropriate. --
    (3) Other pertinent information including, when appropriate, 
analysis and explanation of cost overruns or high unit costs. -
    (e) Recipients shall not be required to submit more than the 
original and two copies of performance reports. -
    (f) Recipients shall immediately notify the grants officer of 
developments that have a significant impact on the award-supported 
activities. Also, notification shall be given in the case of problems, 
delays, or adverse conditions which materially impair the ability to 
meet the objectives of the award. This notification shall include a 
statement of the action taken or contemplated, and any assistance 
needed to resolve the situation. -
    (g)- DoD Components' representatives may make site visits, as 
needed. -
    (h)- DoD Components shall comply with applicable clearance 
requirements of 5 CFR part 1320 when requesting performance data from 
recipients.


Sec. 32.52  Financial reporting. -

    (a) The following forms or such other forms as may be approved by 
OMB are authorized for obtaining financial information from recipients:
    (1) SF-269 \10\ or SF-269A,\11\ Financial Status Report. (i) DoD 
Components shall require recipients to use the SF-269 or SF-269A to 
report the status of funds for all nonconstruction projects or 
programs. A DoD Component may, however, have the option of not 
requiring the SF-269 or SF-269A when the SF-270, Request for Advance or 
Reimbursement, or SF-272,\12\ Report of Federal Cash Transactions, is 
determined to provide adequate information to meet agency needs, except 
that a final SF-269 or SF-269A shall be required at the completion of 
the project when the SF-270 is used only for advances.
---------------------------------------------------------------------------

    \10\ See footnote 2 to Sec. 32.12(a).
    \11\ See footnote 2 to Sec. 32.12(a).
    \12\ See footnote 2 to Sec. 32.12(a). ----
---------------------------------------------------------------------------

    (ii) The DoD Component shall prescribe whether the report shall be 
on a cash or accrual basis. If the award requires accrual information 
and the recipient's accounting records are not normally kept on the 
accrual basis, the recipient shall not be required to convert its 
accounting system, but shall develop such accrual information through 
best estimates based on an analysis of the documentation on hand. ----
    (iii) The DoD Component shall determine the frequency of the 
Financial Status Report for each project or program, considering the 
size and complexity of the particular project or program. However, the 
report shall not be required more frequently than quarterly or less 
frequently than annually. A final report shall be required at the 
completion of the agreement. ----
    (iv) The DoD Component shall require recipients to submit the SF-
269 or SF-269A (an original and no more than two copies) no later than 
30 days after the end of each specified reporting period for quarterly 
and semi-annual reports, and 90 calendar days for annual and final 
reports. Extensions of reporting due dates may be approved by the 
grants officer upon request of the recipient. --
    (2) SF-272, Report of Federal Cash Transactions. (i) When funds are 
advanced to recipients the DoD Component shall require each recipient 
to submit the SF-272 and, when necessary, its continuation sheet, SF-
272a.\13\ The grants officer shall use this report to monitor cash 
advanced to recipients and to obtain disbursement information for each 
agreement with the recipients. ----
---------------------------------------------------------------------------

    \13\ See footnote 2 to Sec. 32.12(a). -
---------------------------------------------------------------------------

    (ii) DoD Components may require forecasts of Federal cash 
requirements in the ``Remarks'' section of the report. ----
    (iii) When practical and deemed necessary, DoD Components may 
require recipients to report in the ``Remarks'' section the amount of 
cash advances received in excess of three days. Recipients shall 
provide short narrative explanations of actions taken to reduce the 
excess balances.
    (iv) Recipients shall be required to submit not more than the 
original and two copies of the SF-272 15 calendar days following the 
end of each quarter. DoD Components may require a monthly report from 
those recipients receiving advances totaling $1 million or more per 
year. -
    (v) DoD Components may waive the requirement for submission of the 
SF-272 for any one of the following reasons:
    (A) When monthly advances do not exceed $25,000 per recipient, 
provided that such advances are monitored through other forms contained 
in this section;
    (B) If, in the grants officer's opinion, the recipient's accounting 
controls are adequate to minimize excessive Federal advances; or
    (C) When electronic payment mechanisms or SF-270 forms provide 
adequate data.
    (b) When the DoD Component needs additional information or more 
frequent reports, the following shall be observed:
    (1) When additional information is needed to comply with 
legislative requirements, grants officers shall issue instructions to 
require recipients to submit such information under the ``Remarks'' 
section of the reports.
    (2) When a grants officer, after consultation with the Federal 
agency assigned cognizance for a recipient's audit and audit 
resolution, determines that the recipient's accounting system does not 
meet the standards in Sec. 32.21, additional pertinent information to 
further monitor awards may be obtained upon written notice to the 
recipient until such time as the system is brought up to standard. The 
grants officer, in obtaining this information, shall comply with 
applicable report clearance requirements of 5 CFR part 1320.

[[Page 43903]]

    (3) Grants officers are encouraged to shade out any line item on 
any report if not necessary.
    (4) DoD Components are encouraged to accept the identical 
information from the recipients in machine readable format or computer 
printouts or electronic outputs in lieu of prescribed formats.
    (5) DoD Components may provide computer or electronic outputs to 
recipients when it expedites or contributes to the accuracy of 
reporting.


Sec. 32.53  Retention and access requirements for records. -

    (a) This section sets forth requirements for record retention and 
access to records for awards to recipients. DoD Components shall not 
impose any other record retention or access requirements upon 
recipients. -
    (b) Financial records, supporting documents, statistical records, 
and all other records pertinent to an award shall be retained for a 
period of three years from the date of submission of the final 
expenditure report. The only exceptions are the following:
    (1) If any litigation, claim, or audit is started before the 
expiration of the 3-year period, the records shall be retained until 
all litigation, claims or audit findings involving the records have 
been resolved and final action taken.
    (2) Records for real property and equipment acquired with Federal 
funds shall be retained for 3 years after final disposition.
    (3) When records are transferred to or maintained by the DoD 
Component that made the award, the 3-year retention requirement is not 
applicable to the recipient.
    (4) Indirect cost rate proposals, cost allocations plans, and 
related records, for which retention requirements are specified in 
paragraph (g) of this section.
    (c) Copies of original records may be substituted for the original 
records if authorized by the grants officer.
    (d) The grants officer shall request that recipients transfer 
certain records to DoD Component custody when he or she determines that 
the records possess long term retention value. However, in order to 
avoid duplicate recordkeeping, a grants officer may make arrangements 
for recipients to retain any records that are continuously needed for 
joint use.
    (e) DoD Components, the Inspector General, Comptroller General of 
the United States, or any of their duly authorized representatives, 
have the right of timely and unrestricted access to any books, 
documents, papers, or other records of recipients that are pertinent to 
the awards, in order to make audits, examinations, excerpts, 
transcripts and copies of such documents. This right also includes 
timely and reasonable access to a recipient's personnel for the purpose 
of interview and discussion related to such documents. The rights of 
access in this paragraph are not limited to the required retention 
period, but shall last as long as records are retained.
    (f) Unless required by statute, no DoD Component shall place 
restrictions on recipients that limit public access to the records of 
recipients that are pertinent to an award, except when the DoD 
Component can demonstrate that such records shall be kept confidential 
and would have been exempted from disclosure pursuant to the Freedom of 
Information Act (5 U.S.C. 552) if the records had belonged to the DoD 
Component making the award.
    (g) Indirect cost rate proposals, cost allocations plans, etc. 
Paragraphs (g)(1) and (g)(2) of this section apply to the following 
types of documents, and their supporting records: indirect cost rate 
computations or proposals, cost allocation plans, and any similar 
accounting computations of the rate at which a particular group of 
costs is chargeable (such as computer usage chargeback rates or 
composite fringe benefit rates).
    (1) If submitted for negotiation. If the recipient submits an 
indirect-cost proposal, plan, or other computation to the Federal 
agency responsible for negotiating the recipient's indirect cost rate, 
as the basis for negotiation of the rate, or the subrecipient submits 
such a proposal, plan, or computation to the recipient, then the 3-year 
retention period for its supporting records starts on the date of such 
submission.
    (2) If not submitted for negotiation. If the recipient is not 
required to submit to the cognizant Federal agency or the subrecipient 
is not required to submit to the recipient the proposal, plan, or other 
computation for negotiation purposes, then the 3-year retention period 
for the proposal, plan, or other computation and its supporting records 
starts at the end of the fiscal year (or other accounting period) 
covered by the proposal, plan, or other computation.

Termination and Enforcement


Sec. 32.60  Purpose of termination and enforcement.

    Sections 32.61 and 32.62 set forth uniform suspension, termination 
and enforcement procedures.


Sec. 32.61  Termination.

    (a) Awards may be terminated in whole or in part only as follows:
    (1) By the grants officer, if a recipient materially fails to 
comply with the terms and conditions of an award;
    (2) By the grants officer with the consent of the recipient, in 
which case the two parties shall agree upon the termination conditions, 
including the effective date and, in the case of partial termination, 
the portion to be terminated; or
    (3) By the recipient upon sending to the grants officer written 
notification setting forth the reasons for such termination, the 
effective date, and, in the case of partial termination, the portion to 
be terminated. The recipient must provide such notice at least 30 days 
prior to the effective date of the termination. However, if the grants 
officer determines in the case of partial termination that the reduced 
or modified portion of the award will not accomplish the purposes for 
which the award was made, he or she may terminate the award in its 
entirety.
    (b) If costs are allowed under an award, the responsibilities of 
the recipient referred to in Sec. 32.71, including those for property 
management as applicable, shall be considered in the termination of the 
award, and provision shall be made for continuing responsibilities of 
the recipient after termination, as appropriate.


Sec. 32.62  Enforcement.

    (a) Remedies for noncompliance. If a recipient materially fails to 
comply with the terms and conditions of an award, whether stated in a 
Federal statute, regulation, assurance, application, or notice of 
award, the grants officer may, in addition to imposing any of the 
special conditions outlined in Sec. 32.14, take one or more of the 
following actions, as appropriate in the circumstances:
    (1) Temporarily withhold cash payments pending correction of the 
deficiency by the recipient or more severe enforcement action by the 
grants officer and DoD Component.
    (2) Disallow (that is, deny both use of funds and any applicable 
matching credit for) all or part of the cost of the activity or action 
not in compliance.
    (3) Wholly or partly suspend or terminate the current award.
    (4) Withhold further awards for the project or program.
    (5) Take other remedies that may be legally available.
    (b) Hearings and appeals. In taking an enforcement action, the DoD 
Component shall provide the recipient an opportunity for hearing, 
appeal, or other administrative proceeding to which the recipient is 
entitled under

[[Page 43904]]

any statute or regulation applicable to the action involved (see 32 CFR 
22.815).
    (c) Effects of suspension and termination. Costs of a recipient 
resulting from obligations incurred by the recipient during a 
suspension or after termination of an award are not allowable unless 
the grants officer expressly authorizes them in the notice of 
suspension or termination or subsequently. Other recipient costs during 
suspension or after termination which are necessary and not reasonably 
avoidable are allowable if the costs:
    (1) Result from obligations which were properly incurred by the 
recipient before the effective date of suspension or termination, are 
not in anticipation of it, and in the case of a termination, are 
noncancellable; and
    (2) Would be allowable if the award were not suspended or expired 
normally at the end of the funding period in which the termination 
takes effect.
    (d) Relationship to debarment and suspension. The enforcement 
remedies identified in this section, including suspension and 
termination, do not preclude a recipient from being subject to 
debarment and suspension under 32 CFR part 25.

Subpart D--After-the-Award Requirements


Sec. 32.70  Purpose.

    Sections 32.71 through 32.73 contain closeout procedures and other 
procedures for subsequent disallowances and adjustments.


Sec. 32.71  Closeout procedures.

    (a) Recipients shall submit, within 90 calendar days after the date 
of completion of the award, all financial, performance, and other 
reports required by the terms and conditions of the award. The grants 
officer may approve extensions when requested by the recipient.
    (b) Unless the grants officer authorizes an extension, a recipient 
shall liquidate all obligations incurred under the award not later than 
90 calendar days after the funding period or the date of completion as 
specified in the terms and conditions of the award or in agency 
implementing instructions.
    (c) The responsible grants officer and payment office shall 
expedite completion of steps needed to close out awards and make 
prompt, final payments to a recipient for allowable reimbursable costs 
under the award being closed out.
    (d) The recipient shall promptly refund any balances of unobligated 
cash that the DoD Component has advanced or paid and that is not 
authorized to be retained by the recipient for use in other projects. 
OMB Circular A-129 \14\ governs unreturned amounts that become 
delinquent debts (see 32 CFR 22.820).
---------------------------------------------------------------------------

    \14\ See footnote 1 to Sec. 32.1(a).
---------------------------------------------------------------------------

    (e) When authorized by the terms and conditions of the award, the 
grants officer shall make a settlement for any upward or downward 
adjustments to the Federal share of costs after closeout reports are 
received.
    (f) The recipient shall account for any real and personal property 
acquired with Federal funds or received from the Federal Government in 
accordance with Secs. 32.31 through 32.37.
    (g) In the event a final audit has not been performed prior to the 
closeout of an award, the DoD Component shall retain the right to 
recover an appropriate amount after fully considering the 
recommendations on disallowed costs resulting from the final audit.


Sec. 32.72  Subsequent adjustments and continuing responsibilities.

    (a) The closeout of an award does not affect any of the following:
    (1) The right of the Department of Defense to disallow costs and 
recover funds on the basis of a later audit or other review.
    (2) The obligation of the recipient to return any funds due as a 
result of later refunds, corrections, or other transactions.
    (3) Audit requirements in Sec. 32.26.
    (4) Property management requirements in Secs. 32.31 through 32.37.
    (5) Records retention as required in Sec. 32.53.
    (b) After closeout of an award, a relationship created under an 
award may be modified or ended in whole or in part with the consent of 
the grants officer and the recipient, provided the responsibilities of 
the recipient referred to in Sec. 32.73(a), including those for 
property management as applicable, are considered and provisions made 
for continuing responsibilities of the recipient, as appropriate.


Sec. 32.73  Collection of amounts due.

    (a) Any funds paid to a recipient in excess of the amount to which 
the recipient is finally determined to be entitled under the terms and 
conditions of the award constitute a debt to the Federal Government.
    (b) OMB Circular A-110 informs each Federal agency that:
    (1) If a debt is not paid within a reasonable period after the 
demand for payment, the Federal agency may reduce the debt by:
    (i) Making administrative offset against other requests for 
reimbursement.
    (ii) Withholding advance payments otherwise due to the recipient.
    (iii) Taking other action permitted by statute.
    (2) Except as otherwise provided by law, the Federal awarding 
agency shall charge interest on an overdue debt in accordance with 4 
CFR Chapter II, ``Federal Claims Collection Standards.''
    (c) DoD grants officers shall follow the procedures in 32 CFR 
22.820 for issuing demands for payment and transferring debts to DoD 
payment offices for collection.

Appendix A to Part 32--Contract Provisions

    All contracts awarded by a recipient, including those for 
amounts less than the simplified acquisition threshold, shall 
contain the following provisions as applicable:
    1. Equal Employment Opportunity--All contracts shall contain a 
provision requiring compliance with E.O. 11246 (3 CFR, 1964-1965 
Comp., p. 339), ``Equal Employment Opportunity,'' as amended by E.O. 
11375 (3 CFR, 1966-1970 Comp., p. 684), ``Amending Executive Order 
11246 Relating to Equal Employment Opportunity,'' and as 
supplemented by regulations at 41 CFR chapter 60, ``Office of 
Federal Contract Compliance Programs, Equal Employment Opportunity, 
Department of Labor.''
    2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C. 
276c)--All contracts and subawards in excess of $2000 for 
construction or repair awarded by recipients and subrecipients shall 
include a provision for compliance with the Copeland ``Anti-
Kickback'' Act (18 U.S.C. 874), as supplemented by Department of 
Labor regulations (29 CFR part 3, ``Contractors and Subcontractors 
on Public Building or Public Work Financed in Whole or in Part by 
Loans or Grants from the United States''). The Act provides that 
each contractor or subrecipient shall be prohibited from inducing, 
by any means, any person employed in the construction, completion, 
or repair of public work, to give up any part of the compensation to 
which he is otherwise entitled. The recipient shall report all 
suspected or reported violations to the responsible DoD Component.
    3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--This Act 
applies to procurements under awards only when the Federal program 
legislation specifically makes it apply (i.e., Davis-Bacon does not 
by itself apply to procurements under awards). In cases where 
another statute does make the Davis-Bacon Act apply, all 
construction contracts awarded by the recipients and subrecipients 
of more than $2,000 shall include a provision for compliance with 
the Davis-Bacon Act (40 U.S.C. 276a to a-7) and as supplemented by 
Department of Labor regulations (29 CFR part 5, ``Labor Standards 
Provisions Applicable to Contracts Governing Federally Financed and 
Assisted

[[Page 43905]]

Construction''). Under this Act, contractors shall be required to 
pay wages to laborers and mechanics at a rate not less than the 
minimum wages specified in a wage determination made by the 
Secretary of Labor. In addition, contractors shall be required to 
pay wages not less than once a week. The recipient shall place a 
copy of the current prevailing wage determination issued by the 
Department of Labor in each solicitation and the award of a contract 
shall be conditioned upon the acceptance of the wage determination. 
The recipient shall report all suspected or reported violations to 
the Federal awarding agency.
    4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333)--Where applicable, all contracts awarded by recipients in 
excess of $100,000 for construction or other purposes that involve 
the employment of mechanics or laborers shall include a provision 
for compliance with Sections 102 and 107 of the Contract Work Hours 
and Safety Standards Act (40 U.S.C. 327-333), as supplemented by 
Department of Labor regulations (29 CFR part 5). Under Section 102 
of the Act, each contractor shall be required to compute the wages 
of every mechanic and laborer on the basis of a standard work week 
of 40 hours. Work in excess of the standard work week is permissible 
provided that the worker is compensated at a rate of not less than 
1\1/2\ times the basic rate of pay for all hours worked in excess of 
40 hours in the work week. Section 107 of the Act is applicable to 
construction work and provides that no laborer or mechanic shall be 
required to work in surroundings or under working conditions which 
are unsanitary, hazardous or dangerous. These requirements do not 
apply to the purchases of supplies or materials or articles 
ordinarily available on the open market, or contracts for 
transportation or transmission of intelligence.
    5. Rights to Inventions Made Under a Contract or Agreement--
Contracts or agreements for the performance of experimental, 
developmental, or research work shall provide for the rights of the 
Federal Government and the recipient in any resulting invention in 
accordance with 37 CFR part 401, ``Rights to Inventions Made by 
Nonprofit Organizations and Small Business Firms Under Government 
Grants, Contracts and Cooperative Agreements.''
    6. Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
Pollution Control Act (33 U.S.C. 1251 et seq.), as amended--
Contracts and subawards of amounts in excess of $100,000 shall 
contain a provision that requires the recipient to agree to comply 
with all applicable standards, orders or regulations issued pursuant 
to the Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
Pollution Control Act as amended (33 U.S.C. 1251 et seq.). 
Violations shall be reported to the responsible DoD Component and 
the Regional Office of the Environmental Protection Agency (EPA).
    7. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors 
who apply or bid for an award of $100,000 or more shall file the 
required certification. Each tier certifies to the tier above that 
it will not and has not used Federal appropriated funds to pay any 
person or organization for influencing or attempting to influence an 
officer or employee of any agency, a member of Congress, officer or 
employee of Congress, or an employee of a member of Congress in 
connection with obtaining any Federal contract, grant or any other 
award covered by 31 U.S.C. 1352. Each tier shall also disclose any 
lobbying with non-Federal funds that takes place in connection with 
obtaining any Federal award. Such disclosures are forwarded from 
tier to tier up to the recipient.
    8. Debarment and Suspension (E.O.s 12549 and 12689)--Contract 
awards that exceed the simplified acquisition threshold and certain 
other contract awards shall not be made to parties listed on the 
General Services Administration's Lists of Parties Excluded from 
Federal Procurement and Nonprocurement Programs in accordance with 
E.O.s 12549 (3 CFR, 1986 Comp., p. 189) and 12689 (3 CFR, 1989 
Comp., p. 235), ``Debarment and Suspension.'' This list contains the 
names of parties debarred, suspended, or otherwise excluded by 
agencies, and contractors declared ineligible under statutory or 
regulatory authority other than E.O. 12549. Contractors with awards 
that exceed the simplified acquisition threshold shall provide the 
required certification regarding its exclusion status and that of 
its principals.

PART 33--[AMENDED]

    6. Part 33 is proposed to be amended as follows:
    a. The authority citation for part 33 continues to read as follows:

    Authority: 5 U.S.C. 301; 10 U.S.C. 113.

    b. Section 33.36 is proposed to be amended by revising paragraph 
(i)(6) and by adding paragraph (j) to read as follows:


Sec. 33.36  Procurement.

* * * * *
    (i) * * *
    (6) Compliance with sections 103 and 107 of the Contract Work Hours 
and Safety Standards Act (40 U.S.C. 327-330, as amended), as 
supplemented by Department of Labor regulations (29 CFR Part 5). 
(Contracts awarded by grantees and subgrantees in excess of $100,000 
for construction or other purposes that involve the employment of 
mechanics or laborers).
* * * * *
    (j) Resource Conservation and Recovery Act (RCRA). Any State agency 
or agency of a political subdivision of a State must comply with RCRA 
(Public Law 94-580), with respect to its procurements using 
appropriated Federal funds. Section 6002 of RCRA (42 U.S.C. 6962) 
requires that entities qualifying as ``procuring agencies'' give 
preference in procurement programs to the purchase of specific products 
containing recycled materials identified in guidelines (40 CFR parts 
247-254) developed by the Environmental Protection Agency (EPA).
    7. Part 34 is proposed to be added to read as follows:

PART 34--ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH 
COMMERCIAL ORGANIZATIONS

Subpart A--General

Sec.
34.1  Purpose.
34.2  Definitions.
34.3  Deviations.
34.4  Special award conditions.

Subpart B--Post-Award Requirements

Financial and Program Management

34.10  Purpose of financial and program management.
34.11  Standards for financial management systems.
34.12  Payment.
34.13  Cost sharing or matching.
34.14  Program income.
34.15  Revision of budget and program plans.
34.16  Audits.
34.17  Allowable costs.
34.18  Fee and profit.

Property Standards

34.20  Purpose of property standards.
34.21  Real property and equipment.
34.22  Federally owned property.
34.23  Property management system.
34.24  Supplies.
34.25  Intellectual property developed or produced under awards.

Procurement Standards

34.30  Purpose of procurement standards.
34.31  Requirements.

Reports and Records

34.40  Purpose of reports and records.
34.41  Monitoring and reporting program and financial performance.
34.42  Retention and access requirements for records.

Termination and Enforcement

34.50  Purpose of termination and enforcement.
34.51  Termination.
34.52  Enforcement.
34.53  Disputes and appeals.

Subpart C--After-the-Award Requirements

34.60  Purpose.
34.61  Closeout procedures.
34.62  Subsequent adjustments and continuing responsibilities.
34.63  Collection of amounts due.

Appendix A to Part 34--Contract Provisions

    Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Subpart A--General


Sec. 34.1  Purpose.

    (a) This part prescribes administrative requirements for grants and 
cooperative

[[Page 43906]]

agreements to commercial organizations. -
    (b) Applicability to prime awards and subawards is as follows:
    (1) Prime awards. DoD Components shall apply the provisions of this 
part to awards to commercial organizations. DoD Components shall not 
impose requirements that are in addition to, or inconsistent with, the 
requirements provided in this part, except:
    (i) In accordance with the deviation procedures or special award 
conditions in Sec. 34.3 or Sec. 34.4, respectively; or
    (ii) As required by Federal statute, Executive order, or Federal 
regulation implementing a statute or Executive order.
    (2) Subawards. (i) Any legal entity (including any State, local 
government, university or other nonprofit organization, as well as any 
commercial entity) that receives an award from a DoD Component shall 
apply the provisions of this part to subawards with commercial 
organizations. It should be noted that subawards (see definition in 
Sec. 34.2) are financial assistance for substantive programmatic 
performance and do not include recipients' procurement of goods and 
services.
    (ii) Commercial organizations that receive prime awards covered by 
this part shall apply to each subaward the administrative requirements 
that are applicable to the particular type of subrecipient (e.g., 32 
CFR part 33 specifies requirements for subrecipients that are States or 
local governments, and 32 CFR part 32 contains requirements for 
universities or other nonprofit organizations).


Sec. 34.2  Definitions.

    The following are definitions of terms as used in this part. Grants 
officers are cautioned that terms may be defined differently in this 
part than they are in other parts of the DoD Grant and Agreement 
Regulations (DoD GARS).
    Advance. A payment made by Treasury check or other appropriate 
payment mechanism to a recipient upon its request either before outlays 
are made by the recipient or through the use of predetermined payment 
schedules.
    Award. A grant or cooperative agreement.
    Cash contributions. The recipient's cash outlay, including the 
outlay of money contributed to the recipient by third parties.
    Closeout. The process by which the grants officer administering an 
award made by a DoD Component determines that all applicable 
administrative actions and all required work of the award have been 
completed by the recipient and DoD Component.
    Contract. A procurement contract under an award or subaward, and a 
procurement subcontract under a recipient's or subrecipient's contract.
    Cost sharing or matching. That portion of project or program costs 
not borne by the Federal Government.
    Disallowed costs. Those charges to an award that the grants officer 
administering an award made by a DoD Component determines to be 
unallowable, in accordance with the applicable Federal cost principles 
or other terms and conditions contained in the award.
    DoD Component. A Military Department, Defense Agency, DoD Field 
Activity, or organization within the Office of the Secretary of Defense 
that provides or administers an award to a recipient.
    Equipment. Tangible nonexpendable personal property charged 
directly to the award having a useful life of more than one year and an 
acquisition cost of $5,000 or more per unit. That definition applies 
for the purposes of the Federal administrative requirements in this 
part. However, the recipient's policy may be to use a lower dollar 
value for defining ``equipment,'' and nothing in this part should be 
construed as requiring the recipient to establish a higher limit for 
purposes other than the administrative requirements in this part.
    Excess property. Property under the control of any DoD Component 
that, as determined by the head thereof, is no longer required for its 
needs or the discharge of its responsibilities.
    Expenditures. See the definition for outlays in this section.
    Federally owned property. Property in the possession of, or 
directly acquired by, the Government and subsequently made available to 
the recipient.
    Funding period. The period of time when Federal funding is 
available for obligation by the recipient.
    Intellectual property. Intangible personal property such as patents 
and patent applications, trademarks, copyrights, technical data, and 
software rights.
    Obligations. The amounts of orders placed, contracts and grants 
awarded, services received and similar transactions during a given 
period that require payment by the recipient during the same or a 
future period.
    Outlays or expenditures. Charges made to the project or program. 
They may be reported on a cash or accrual basis. For reports prepared 
on a cash basis, outlays are the sum of cash disbursements for direct 
charges for goods and services, the amount of indirect expense charged, 
the value of third party in-kind contributions applied and the amount 
of cash advances and payments made to subrecipients. For reports 
prepared on an accrual basis, outlays are the sum of cash disbursements 
for direct charges for goods and services, the amount of indirect 
expense incurred, the value of in-kind contributions applied, and the 
net increase (or decrease) in the amounts owed by the recipient for 
goods and other property received, for services performed by employees, 
contractors, subrecipients and other payees and other amounts becoming 
owed under programs for which no current services or performance are 
required.
    Personal property. Property of any kind except real property. It 
may be:
    (1) Tangible, having physical existence (i.e., equipment and 
supplies); or
    (2) Intangible, having no physical existence, such as patents, 
copyrights, data and software.
    Prior approval. Written or electronic approval by an authorized 
official evidencing prior consent.
    Program income. Gross income earned by the recipient that is 
directly generated by a supported activity or earned as a result of the 
award. Program income includes, but is not limited to, income from fees 
for services performed, the use or rental of real or personal property 
acquired under federally-funded projects, the sale of commodities or 
items fabricated under an award, license fees and royalties on patents 
and copyrights, and interest on loans made with award funds. Interest 
earned on advances of Federal funds is not program income. Except as 
otherwise provided in program regulations or the terms and conditions 
of the award, program income does not include the receipt of principal 
on loans, rebates, credits, discounts, etc., or interest earned on any 
of them.
    Project costs. All allowable costs, as set forth in the applicable 
Federal cost principles, incurred by a recipient and the value of the 
contributions made by third parties in accomplishing the objectives of 
the award during the project period.
    Project period. The period established in the award document during 
which Federal sponsorship begins and ends.
    Property. Real property and personal property (equipment, supplies, 
and intellectual property), unless stated otherwise.
    Real property. Land, including land improvements, structures and 
appurtenances thereto, but excludes movable machinery and equipment.

[[Page 43907]]

    Recipient. A commercial organization receiving an award directly 
from a DoD Component to carry out a project or program.
    Research. Basic, applied, and advanced research activities. ``Basic 
research'' is defined as efforts directed toward increasing knowledge 
or understanding in science and engineering. ``Applied research'' is 
defined as efforts that attempt to determine and exploit the potential 
of scientific discoveries or improvements in technology, such as new 
materials, devices, methods, and processes. ``Advanced research,'' 
advanced technology development that creates new technology or 
demonstrates the viability of applying existing technology to new 
products and processes in a general way, is most closely analogous to 
precommercialization or precompetitive technology development in the 
commercial sector (it does not include development of military systems 
and hardware where specific requirements have been defined).
    Small award. An award not exceeding the simplified acquisition 
threshold fixed at 41 U.S.C. 403(11) (currently $100,000).
    Small business concern. A concern, including its affiliates, that 
is independently owned and operated, not dominant in the field of 
operation in which it has applied for an award, and qualified as a 
small business under the criteria and size standards in 13 CFR part 
121. For more details, grants officers should see 48 CFR part 19 in the 
``Federal Acquisition Regulation.''
    Subaward. Financial assistance in the form of money, or property in 
lieu of money, provided under an award by a recipient to an eligible 
subrecipient or by a subrecipient to a lower tier subrecipient. The 
term includes financial assistance when provided by any legal 
agreement, even if the agreement is called a contract, but the term 
includes neither procurement of goods and services nor any form of 
assistance which is excluded from the definition of ``award'' in this 
section.
    Subrecipient. The legal entity to which a subaward is made and 
which is accountable to the recipient for the use of the funds 
provided.
    Supplies. Tangible expendable personal property that is charged 
directly to the award and that has a useful life of less than one year 
or an acquisition cost of less than $5000 per unit.
    Suspension. An action by a DoD Component that temporarily withdraws 
Federal sponsorship under an award, pending corrective action by the 
recipient or pending a decision to terminate the award by the DoD 
Component. Suspension of an award is a separate action from suspension 
of a recipient under 32 CFR part 25.
    Termination. The cancellation of an award, in whole or in part, 
under an agreement at any time prior to either:
    (1) The date on which all work under an award is completed; or
    (2) The date on which Federal sponsorship ends, as given on the 
award document or any supplement or amendment thereto.
    Third party in-kind contributions. The value of non-cash 
contributions provided by non-Federal third parties. Third party in-
kind contributions may be in the form of real property, equipment, 
supplies and other expendable property, and the value of goods and 
services directly benefiting and specifically identifiable to the 
project or program.
    Unobligated balance. The portion of the funds authorized by a DoD 
Component that has not been obligated by the recipient and is 
determined by deducting the cumulative obligations from the cumulative 
funds authorized.


Sec. 34.3  Deviations.

    (a) Individual deviations. Individual deviations affecting only one 
award may be approved by DoD Components in accordance with procedures 
stated in 32 CFR 21.125(a).
    (b) Small awards. DoD Components may apply less restrictive 
requirements than the provisions of this part when awarding small 
awards, except for those requirements which are statutory.
    (c) Other class deviations. For classes of awards other than small 
awards, the Director, Defense Research and Engineering, or his or her 
designee, may grant exceptions from the requirements of this part when 
exceptions are not prohibited by statute. DoD Components shall request 
approval for such deviations in accordance with 32 CFR 21.125 (b) and 
(c).


Sec. 34.4  Special award conditions.

    (a) Grants officers may impose additional requirements as needed, 
over and above those provided in this part, if an applicant or 
recipient:
    (1) Has a history of poor performance;
    (2) Is not financially stable;
    (3) Has a management system that does not meet the standards 
prescribed in this part;
    (4) Has not conformed to the terms and conditions of a previous 
award; or--
    (5) Is not otherwise responsible. -
    (b) Before imposing additional requirements, DoD Components shall 
notify the applicant or recipient in writing as to: --
    (1) The nature of the additional requirements; --
    (2) The reason why the additional requirements are being imposed; -
-
    (3) The nature of the corrective action needed; --
    (4) The time allowed for completing the corrective actions; and --
    (5) The method for requesting reconsideration of the additional 
requirements imposed. -
    (c) Any special conditions shall be promptly removed once the 
conditions that prompted them have been corrected. -
    (d) Grants officers: --
    (1) Should coordinate the imposition and removal of special award 
conditions with the cognizant grants administration office identified 
in 32 CFR 22.710. --
    (2) Shall include in the award file the written notification to the 
recipient, described in paragraph (b) of this section, and the 
documentation required by 32 CFR 22.410(b).

Subpart B--Post-award Requirements

Financial and Program Management


Sec. 34.10  Purpose of financial and program management. -

    Sections 34.11 through 34.17 prescribe standards for financial 
management systems; methods for making payments; and rules for cost 
sharing and matching, program income, revisions to budgets and program 
plans, audits, allowable costs, and fee and profit.


Sec. 34.11  Standards for financial management systems. -

    (a) Recipients shall be allowed and encouraged to use existing 
financial management systems established for doing business in the 
commercial marketplace, to the extent that the systems comply with 
Generally Accepted Accounting Principles (GAAP) and the minimum 
standards in this section. As a minimum, a recipient's financial 
management system shall provide: --
    (1) Effective control of all funds. Control systems must be 
adequate to ensure that costs charged to Federal funds and those 
counted as the recipient's cost share or match are consistent with 
requirements for cost reasonableness, allowability, and allocability in 
the applicable cost principles (see Sec. 34.17) and in the terms and 
conditions of the award. --
    (2) Accurate, current and complete records that document for each 
project funded wholly or in part with Federal funds the source and 
application of the Federal funds and the recipient's

[[Page 43908]]

required cost share or match. These records shall: ----
    (i) Contain information about receipts, authorizations, assets, 
expenditures, program income, and interest. ----
    (ii) Be adequate to make comparisons of outlays with budgeted 
amounts for each award (as required for programmatic and financial 
reporting under Sec. 34.41. Where appropriate, financial information 
should be related to performance and unit cost data. Note that unit 
cost data are generally not appropriate for awards that support 
research. --
    (3) To the extent that advance payments are authorized under 
Sec. 34.12, procedures that minimize the time elapsing between the 
transfer of funds to the recipient from the Government and the 
recipient's disbursement of the funds for program purposes. --
    (4) The recipient shall have a system to support charges to Federal 
awards for salaries and wages, whether treated as direct or indirect 
costs. Where employees work on multiple activities or cost objectives, 
a distribution of their salaries and wages will be supported by 
personnel activity reports which must: ----
    (i) Reflect an after the fact distribution of the actual activity 
of each employee. ----
    (ii) Account for the total activity for which each employee is 
compensated. ----
    (iii) Be prepared at least monthly, and coincide with one or more 
pay periods. -
    (b) Where the Federal Government guarantees or insures the 
repayment of money borrowed by the recipient, the DoD Component, at its 
discretion, may require adequate bonding and insurance if the bonding 
and insurance requirements of the recipient are not deemed adequate to 
protect the interest of the Federal Government. -
    (c) The DoD Component may require adequate fidelity bond coverage 
where the recipient lacks sufficient coverage to protect the Federal 
Government's interest. -
    (d) Where bonds are required in the situations described above, the 
bonds shall be obtained from companies holding certificates of 
authority as acceptable sureties, as prescribed in 31 CFR part 223, 
``Surety Companies Doing Business with the United States.''


Sec. 34.12  Payment. -

    (a) Methods available. Payment methods for agreements with 
commercial organizations are: --
    (1) Reimbursement. Under this method, the recipient requests 
reimbursement for costs incurred during a time period. After approval 
of the request by the grants officer designated to do so, the DoD 
payment office reimburses the recipient by electronic funds transfer or 
check. --
    (2) Advance payments. Under this method, a DoD Component makes a 
payment to a recipient before the recipient disburses cash. The payment 
generally is made upon the recipient's request, although predetermined 
payment schedules may be used when the timing of the recipient's needs 
to disburse funds can be predicted in advance with sufficient accuracy 
to ensure compliance with paragraph (b)(2)(iii) of this section.-
    (b) Selecting a method. (1) The preferred payment method is the 
reimbursement method, as described in paragraph (a)(1) of this 
section.--
    (2) Advance payments, as described in paragraph (a)(2) of this 
section, may be used in exceptional circumstances, subject to the 
following conditions: ----
    (i) The grants officer, in consultation with the program official, 
must judge that advance payments are necessary or will materially 
contribute to the probability of success of the project contemplated 
under the agreement (e.g., as startup funds for a project performed by 
a newly formed company). The rationale for the judgment shall be 
documented in the award file. ----
    (ii) Cash advances shall be limited to the minimum amounts needed 
to carry out the program. ---
    (iii) Recipients and the DoD Component shall maintain procedures to 
ensure that the timing of cash advances is as close as is 
administratively feasible to the recipients' disbursements of the funds 
for program purposes, including direct program or project costs and the 
proportionate share of any allowable indirect costs. ----
    (iv) Recipients shall maintain advance payments of Federal funds in 
interest-bearing accounts, and remit annually the interest earned to 
the DoD Component (for return to the Department of Treasury's 
miscellaneous receipts account), unless one of the following applies: -
----
    (A) The recipient receives less than $120,000 in Federal awards per 
year. -----
    (B) The best reasonably available interest bearing account would 
not be expected to earn interest in excess of $250 per year on Federal 
cash balances. -----
    (C) The depository would require an average or minimum balance so 
high that it would not be feasible within the expected Federal and non-
Federal cash resources. -
    (c) Frequency of payments. For either reimbursements or advance 
payments, recipients shall be authorized to submit requests for payment 
at least monthly.
    (d) Forms for requesting payment. DoD Components may authorize 
recipients to use the SF-270,\1\ ``Request for Advance or 
Reimbursement;'' the SF-271,\2\ ``Outlay Report and Request for 
Reimbursement for Construction Programs;'' or prescribe other forms or 
formats as necessary.
---------------------------------------------------------------------------

    \1\ For copies of Standard Forms listed in this part, contact 
regional grants administration offices of the Office of Naval 
Research. Addresses for the offices are listed in the ``DoD 
Directory of Contract Administration Services Components,'' DLAH 
4105.4, which can be obtained from: Defense Logistics Agency, 
Publications Distribution Division (DASC-WDM), 8725 John J. Kingman 
Rd., Suite 0119, Fort Belvoir, VA 22060-6220.
    \2\ See footnote 1 to this paragraph (d).
---------------------------------------------------------------------------

    (e) Timeliness of payments. Payments normally will be made within 
30 days of a recipient's request for reimbursement or advance, in 
accordance with 32 CFR 22.810. -
    (f) Precedence of other available funds. Recipients shall disburse 
funds available from program income, rebates, refunds, contract 
settlements, audit recoveries, and interest earned on such funds before 
requesting additional cash payments. -
    (g) Withholding of payments. Unless otherwise required by statute, 
grants officers shall not withhold payments for proper charges made by 
recipients during the project period for reasons other than the 
following: --
    (1) A recipient has failed to comply with project objectives, the 
terms and conditions of the award, or Federal reporting requirements, 
in which case the grants officer may suspend payments in accordance 
with Sec. 34.52. --
    (2) The recipient is delinquent on a debt to the United States (see 
definitions of ``debt'' and ``delinquent debt'' in 32 CFR 22.105). In 
that case, the grants officer may, upon reasonable notice, withhold 
payments for obligations incurred after a specified date, until the 
debt is resolved.


Sec. 34.13  Cost sharing or matching. -

    (a) Acceptable contributions. All contributions, including cash 
contributions and third party in-kind contributions, shall be accepted 
as part of the recipient's cost sharing or matching when such 
contributions meet all of the following criteria: --
    (1) They are verifiable from the recipient's records. --
    (2) They are not included as contributions for any other federally-
assisted project or program. --
    (3) They are necessary and reasonable for proper and efficient 
accomplishment of project or program objectives. --
    (4) They are allowable under Sec. 34.17. --
    (5) They are not paid by the Federal Government under another 
award, except where authorized by Federal

[[Page 43909]]

statute to be used for cost sharing or matching. --
    (6) They are provided for in the approved budget, when approval of 
the budget is required by the DoD Component. --
    (7) If they are real property or equipment, whether purchased with 
recipient's funds or donated by third parties, they must have the 
grants officer's prior approval if the contributions' value is to 
exceed depreciation or use charges during the project period 
(paragraphs (b)(1) and (b)(4)(ii) of this section discuss the limited 
circumstances under which a grants officer may approve higher values). 
If a DoD Component requires approval of a recipient's budget (see 
paragraph (a)(6) of this section), the grants officer's approval of the 
budget satisfies this prior approval requirement, for real property or 
equipment items listed in the budget. --
    (8) They conform to other provisions of this part, as applicable. -
    (b) Valuing and documenting contributions--(1) Valuing recipient's 
property or services of recipient's employees. Values shall be 
established in accordance with the applicable cost principles in 
Sec. 34.17, which means that amounts chargeable to the project are 
determined on the basis of costs incurred. For real property or 
equipment used on the project, the cost principles authorize 
depreciation or use charges. The full value of the item may be applied 
when the item will be consumed in the performance of the agreement or 
fully depreciated by the end of the agreement. In cases where the full 
value of a donated capital asset is to be applied as cost sharing or 
matching, that full value shall be the lesser of the following: ----
    (i) The certified value of the remaining life of the property 
recorded in the recipient's accounting records at the time of donation; 
or ----
    (ii) The current fair market value. However, when there is 
sufficient justification, the grants officer may approve the use of the 
current fair market value of the donated property, even if it exceeds 
the certified value at the time of donation to the project.
    (2) Valuing services of others' employees. When an employer other 
than the recipient furnishes the services of an employee, those 
services shall be valued at the employee's regular rate of pay plus an 
amount of fringe benefits and overhead (at an overhead rate appropriate 
for the location where the services are performed) provided these 
services are in the same skill for which the employee is normally paid.
    (3) Valuing volunteer services. Volunteer services furnished by 
professional and technical personnel, consultants, and other skilled 
and unskilled labor may be counted as cost sharing or matching if the 
service is an integral and necessary part of an approved project or 
program. Rates for volunteer services shall be consistent with those 
paid for similar work in the recipient's organization. In those 
instances in which the required skills are not found in the recipient 
organization, rates shall be consistent with those paid for similar 
work in the labor market in which the recipient competes for the kind 
of services involved. In either case, paid fringe benefits that are 
reasonable, allowable, and allocable may be included in the valuation.
    (4) Valuing property donated by third parties. (i) Donated supplies 
may include such items as office supplies or laboratory supplies. Value 
assessed to donated supplies included in the cost sharing or matching 
share shall be reasonable and shall not exceed the fair market value of 
the property at the time of the donation.
    (ii) Normally only depreciation or use charges for equipment and 
buildings may be applied. However, the fair rental charges for land and 
the full value of equipment or other capital assets may be allowed, 
when they will be consumed in the performance of the agreement or fully 
depreciated by the end of the agreement, provided that the grants 
officer has approved the charges. When use charges are applied, values 
shall be determined in accordance with the usual accounting policies of 
the recipient, with the following qualifications:
    (A) The value of donated space shall not exceed the fair rental 
value of comparable space as established by an independent appraisal of 
comparable space and facilities in a privately-owned building in the 
same locality.
    (B) The value of loaned equipment shall not exceed its fair rental 
value.
    (5) Documentation. The following requirements pertain to the 
recipient's supporting records for in-kind contributions from third 
parties:
    (i) Volunteer services shall be documented and, to the extent 
feasible, supported by the same methods used by the recipient for its 
own employees.
    (ii) The basis for determining the valuation for personal services 
and property shall be documented.


Sec. 34.14  Program income.

    (a) DoD Components shall apply the standards in this section to the 
disposition of program income from projects financed in whole or in 
part with Federal funds.
    (b) Recipients shall have no obligation to the Government, unless 
the terms and conditions of the award provide otherwise, for program 
income earned:
    (1) From license fees and royalties for copyrighted material, 
patents, patent applications, trademarks, and inventions produced under 
an award. Note, however, that the Patent and Trademark Amendments (35 
U.S.C. Chapter 18), as implemented in Sec. 34.24, apply to inventions 
made under a research award.
    (2) After the end of the project period. If a grants officer 
anticipates that an award is likely to generate program income after 
the end of the project period, the grants officer should indicate in 
the award document whether the recipient will have any obligation to 
the Federal Government with respect to such income.
    (c) If authorized by the terms and conditions of the award, costs 
incident to the generation of program income may be deducted from gross 
income to determine program income, provided these costs have not been 
charged to the award.
    (d) Other than any program income excluded pursuant to paragraphs 
(b) and (c) of this section, program income earned during the project 
period shall be retained by the recipient and used in one or more of 
the following ways, as specified in program regulations or the terms 
and conditions of the award:
    (1) Added to funds committed to the project by the DoD Component 
and recipient and used to further eligible project or program 
objectives.
    (2) Used to finance the non-Federal share of the project or 
program.
    (3) Deducted from the total project or program allowable cost in 
determining the net allowable costs on which the Federal share of costs 
is based.
    (e) If the terms and conditions of an award authorize the 
disposition of program income as described in paragraph (d)(1) or 
(d)(2) of this section, and stipulate a limit on the amounts that may 
be used in those ways, program income in excess of the stipulated 
limits shall be used in accordance with paragraph (d)(3) of this 
section.
    (f) In the event that the terms and conditions of the award do not 
specify how program income is to be used, paragraph (d)(3) of this 
section shall apply automatically to all projects or programs except 
research. For awards that support research, paragraph (d)(1) of this 
section shall apply automatically unless the terms and conditions 
specify another alternative or the recipient is

[[Page 43910]]

subject to special award conditions, as indicated in Sec. 34.4.
    (g) Proceeds from the sale of property that is acquired, rather 
than fabricated, under an award are not program income and shall be 
handled in accordance with the requirements of the Property Standards 
(see Secs. 34.20 through 34.25).


Sec. 34.15  Revision of budget and program plans.

    (a) The budget plan is the financial expression of the project or 
program as approved during the award process. It may include either the 
sum of the Federal and non-Federal shares, or only the Federal share, 
depending upon DoD Component requirements. It shall be related to 
performance for program evaluation purposes whenever appropriate.
    (b) Recipients are required to report deviations from budget and 
program plans, and request prior approvals for budget and program plan 
revisions, in accordance with this section.
    (c) Recipients shall immediately request, in writing, prior 
approval from the cognizant grants officer when there is reason to 
believe that within the next seven days a programmatic or budgetary 
revision will be necessary for certain reasons, as follows:
    (1) The recipient always must obtain the grants officer's prior 
approval when a revision is necessary for either of the following two 
reasons (i.e., these two requirements for prior approval may never be 
waived):
    (i) A change in the scope or the objective of the project or 
program (even if there is no associated budget revision requiring prior 
written approval).
    (ii) A need for additional Federal funding.
    (2) The recipient must obtain the grants officer's prior approval 
when a revision is necessary for any of the following six reasons, 
unless the requirement for prior approval is waived in the terms and 
conditions of the award (i.e., if the award document is silent, these 
prior approvals are required):
    (i) A change in a key person specified in the application or award 
document.
    (ii) The absence for more than three months, or a 25 percent 
reduction in time devoted to the project, by the approved project 
director or principal investigator.
    (iii) The inclusion of any additional costs that require prior 
approval in accordance with applicable cost principles for Federal 
funds and recipients' cost share or match, in Sec. 34.17 and 
Sec. 34.13, respectively.
    (iv) The inclusion of pre-award costs. All such costs are incurred 
at the recipient's risk (i.e., the DoD Component is under no obligation 
to reimburse such costs if for any reason the recipient does not 
receive an award, or if the award is less than anticipated and 
inadequate to cover such costs).
    (v) A ``no-cost'' extension of the project period that does not 
require additional Federal funds and does not change the approved 
objectives or scope of the project.
    (vi) Any subaward, transfer or contracting out of substantive 
program performance under an award, unless described in the application 
and funded in the approved awards. This provision does not apply to the 
purchase of supplies, material, or general support services, except 
that procurement of equipment or other capital items of property always 
is subject to the grants officer's prior approval under Sec. 34.21(a), 
if it is to be purchased with Federal funds, or Sec. 34.13(a)(7), if it 
is to be used as cost sharing or matching.
    (3) The recipient also must obtain the grants officer's prior 
approval when a revision is necessary for either of the following 
reasons, if specifically required in the terms and conditions of the 
award document (i.e., if the award document is silent, these prior 
approvals are not required):
    (i) The transfer of funds among direct cost categories, functions 
and activities for awards in which the Federal share of the project 
exceeds $100,000 and the cumulative amount of such transfers exceeds or 
is expected to exceed 10 percent of the total budget as last approved 
by the DoD Component. No DoD Component shall permit a transfer that 
would cause any Federal appropriation or part thereof to be used for 
purposes other than those consistent with the original intent of the 
appropriation.
    (ii) For awards that provide support for both construction and 
nonconstruction work, any fund or budget transfers between the two 
types of work supported.
    (d) Within 30 calendar days from the date of receipt of the 
recipient's request for budget revisions, the grants officer shall 
review the request and notify the recipient whether the budget 
revisions have been approved. If the revision is still under 
consideration at the end of 30 calendar days, the grants officer shall 
inform the recipient in writing of the date when the recipient may 
expect the decision.


Sec. 34.16  Audits.

    (a) Any recipient that expends $300,000 or more in a year under 
Federal awards shall have an audit made for that year by an independent 
auditor, in accordance with paragraph (b) of this section. The audit 
generally should be made a part of the regularly scheduled, annual 
audit of the recipient's financial statements. However, it may be more 
economical in some cases to have the Federal awards separately audited, 
and a recipient may elect to do so, unless that option is precluded by 
award terms and conditions, or by Federal laws or regulations 
applicable to the program(s) under which the awards were made.
    (b) The auditor shall determine and report on whether:
    (1) The recipient has an internal control structure that provides 
reasonable assurance that it is managing Federal awards in compliance 
with Federal laws and regulations, and with the terms and conditions of 
the awards.
    (2) Based on a sampling of Federal award expenditures, the 
recipient has complied with laws, regulations, and award terms that may 
have a direct and material effect on Federal awards.
    (c) The recipient shall make the auditor's report available to DoD 
Components whose awards are affected.
    (d) The requirement for an annual independent audit is intended to 
ascertain the adequacy of the recipient's internal financial management 
systems and to curtail the unnecessary duplication and overlap that 
usually results when Federal agencies request audits of individual 
awards on a routine basis. Therefore, a grants officer:
    (1) Shall consider whether the independent audit satisfies his or 
her requirements, before requesting any additional audits; and
    (2) When requesting an additional audit, shall:
    (i) Limit the scope of such additional audit to areas not 
adequately addressed by the independent audit.
    (ii) Coordinate the audit request with the Federal agency with the 
predominant fiscal interest in the recipient, as the agency responsible 
for the scheduling and distribution of audits. If DoD has the 
predominant fiscal interest in the recipient, the Defense Contract 
Management Command (DCMC) is responsible for monitoring audits, 
ensuring resolution of audit findings, and distributing audit reports. 
When an additional audit is requested and DoD has the predominant 
fiscal interest in the recipient, DCMC shall, to the extent 
practicable, ensure that the additional audit builds upon the 
independent audit or other audits performed in accordance with this 
section.
    (e) There may be instances in which Federal auditors have recently 
performed audits, are performing audits,

[[Page 43911]]

or are planning to perform audits, of a recipient. In these cases, the 
recipient and its Federal cognizant agency should seek to have the non-
Federal, independent auditors work with the Federal auditors to develop 
a coordinated audit approach, to minimize duplication of audit work.


Sec. 34.17  Allowable costs.

    Allowability of costs shall be determined in accordance with the 
cost principles applicable to the type of entity incurring the costs, 
as follows:
    (a) Commercial organizations. Allowability of costs incurred by 
commercial organizations that are recipients of prime awards from DoD 
Components, and those that are subrecipients under prime awards to 
other organizations, is to be determined in accordance with 48 CFR 
parts 31 and 231 (in the Federal Acquisition Regulation, or FAR, and 
the Defense Federal Acquisition Regulation Supplement, or DFARS, 
respectively).
    (b) Other types of organizations. Allowability of costs incurred by 
other types of organizations that may be subrecipients under a prime 
award to a commercial organization is determined as follows:
    (1) Institutions of higher education. Allowability is determined in 
accordance with OMB Circular A-21,\3\ ``Cost Principles for Educational 
Institutions.''
---------------------------------------------------------------------------

    \3\ For copies of the Circular, contact the Office of Management 
and Budget, EOP Publications, 725 17th St. N.W., New Executive 
Office Building, Washington, D.C. 20503.
---------------------------------------------------------------------------

    (2) Other nonprofit organizations. Allowability is determined in 
accordance with OMB Circular A-122,\4\ ``Cost Principles for Non-Profit 
Organizations.'' Note that Attachment C of the Circular identifies 
selected nonprofit organizations for whom cost allowability is 
determined in accordance with the FAR cost principles for commercial 
organizations.
---------------------------------------------------------------------------

    \4\ See footnote 3 to paragraph (b)(1) of this section.
---------------------------------------------------------------------------

    (3) Hospitals. Allowability is determined in accordance with the 
provisions of 45 CFR part 74, Appendix E, ``Principles for Determining 
Costs Applicable to Research and Development Under Grants and Contracts 
with Hospitals.''
    (4) Governmental organizations. Allowability for State, local, or 
federally recognized Indian tribal governments is determined in 
accordance with OMB Circular A-87,\5\ ``Cost Principles for State and 
Local Governments.''
---------------------------------------------------------------------------

    \5\ See footnote 3 to paragraph (b)(1) of this section.
---------------------------------------------------------------------------


Sec. 34.18  Fee and profit.

    In accordance with 32 CFR 22.205(b), grants and cooperative 
agreements shall not:
    (a) Provide for the payment of fee or profit to the recipient.
    (b) Be used to carry out programs where fee or profit is necessary 
to achieving program objectives.

Property Standards


Sec. 34.20  Purpose of property standards.

    Sections 34.21 through 34.25 set forth uniform standards for 
management, use, and disposition of property. DoD Components shall 
encourage recipients to use existing property-management systems, to 
the extent that the systems meet these minimum requirements.


Sec. 34.21  Real property and equipment.

    (a) Prior approval for acquisition with Federal funds. Recipients 
may purchase real property or equipment in whole or in part with 
Federal funds under a grant or cooperative agreement only with the 
prior approval of the grants officer.
    (b) Title. Title to such real property or equipment shall vest in 
the recipient upon acquisition. Unless a statute specifically 
authorizes a DoD Component to vest title in the recipient without 
further obligation to the Government, and the DoD Component elects to 
do so, the title shall be a conditional title. Title shall vest in the 
recipient subject to the conditions that the recipient:
    (1) Use the real property or equipment for the authorized purposes 
of the project until funding for the project ceases, or until the 
property is no longer needed for the purposes of the project.
    (2) Not encumber the property without approval of the grants 
officer.
    (3) Use and dispose of the property in accordance with paragraphs 
(d) and (e) of this section.
    (c) Federal interest in real property or equipment offered as cost-
share. A recipient may offer real property or equipment that is 
purchased with recipient's funds or that is donated by a third party to 
meet a portion of any required cost sharing or matching, subject to the 
prior approval requirement in Sec. 34.13(a)(7). If a recipient does so, 
the Government has a financial interest in the property, a share of the 
property value attributable to the Federal participation in the 
project. The property therefore shall be considered as if it had been 
acquired in part with Federal funds, and shall be subject to the 
provisions of paragraphs (b)(1), (b)(2) and (b)(3) of this section, and 
to the provisions of Sec. 34.23.
    (d) Use. If real property or equipment is acquired in whole or in 
part with Federal funds under an award, and the award provides that 
title vests conditionally in the recipient, the real property or 
equipment is subject to the following:
    (1) During the time that the real property or equipment is used on 
the project or program for which it was acquired, the recipient shall 
make it available for use on other projects or programs, if such other 
use will not interfere with the work on the project or program for 
which the real property or equipment was originally acquired. Use of 
the real property or equipment on other projects will be in the 
following order of priority:
    (i) Activities sponsored by DoD Components' grants, cooperative 
agreements, or other assistance awards;
    (ii) Activities sponsored by other Federal agencies' grants, 
cooperative agreements, or other assistance awards;
    (iii) Activities under Federal procurement contracts, or activities 
not sponsored by any Federal agency. If so used, use charges shall be 
assessed to those activities. For real property or equipment, the use 
charges shall be at rates equivalent to those for which comparable real 
property or equipment may be leased. The use charges shall be treated 
as program income.
    (2) After Federal funding for the project ceases, or when the real 
property or equipment is no longer needed for the purposes of the 
project, the recipient may use the real property or equipment for other 
projects, insofar as:
    (i) There are Federally sponsored projects for which the real 
property or equipment may be used. If the only use for the real 
property or equipment is for projects that have no Federal sponsorship, 
the recipient shall proceed with disposition of the real property or 
equipment, in accordance with paragraph (e) of this section.
    (ii) The recipient obtains written approval from the grants officer 
to do so. The grants officer shall ensure that there is a formal change 
of accountability for the real property or equipment to a currently 
funded, Federal award.
    (iii) The recipient's use of the real property or equipment for 
other projects is in the same order of priority as described in 
paragraph (d)(1) of this section.
    (e) Disposition. (1) When an item of real property or equipment is 
no longer needed for Federally sponsored projects, the recipient shall 
proceed as follows:
    (i) If the property that is no longer needed is equipment (rather 
than real property), the recipient may wish to replace it with an item 
that is needed currently for the project. In that case, the recipient 
may use the original

[[Page 43912]]

equipment as trade-in or sell it and use the proceeds to offset the 
costs of the replacement equipment, subject to the approval of the 
responsible agency (i.e., the DoD Component or the Federal agency to 
which the DoD Component delegated responsibility for administering the 
equipment).
    (ii) The recipient may elect to retain title, without further 
obligation to the Federal Government, by compensating the Federal 
Government for that percentage of the current fair market value of the 
real property or equipment that is attributable to the Federal 
participation in the project.
    (iii) If the recipient does not elect to retain title to real 
property or equipment (see paragraph (e)(1)(ii) of this section), or 
request approval to use equipment as trade-in or offset for replacement 
equipment (see paragraph (e)(1)(i) of this section), the recipient 
shall request disposition instructions from the responsible agency.
    (2) If a recipient requests disposition instructions, in accordance 
with paragraph (e)(1)(iii) of this section, the responsible grants 
officer shall:
    (i) For equipment (but not real property), consult with the Federal 
program manager and judge whether the age and nature of the equipment 
warrant a screening procedure, to determine whether the equipment is 
useful to a DoD Component or other Federal agency. If a screening 
procedure is warranted, the responsible agency shall determine whether 
the equipment can be used to meet a DoD Component's requirement. If no 
DoD requirement is found, the responsible agency shall report the 
availability of the equipment to the General Services Administration, 
to determine whether a requirement for the equipment exists in other 
Federal agencies.
    (ii) For either real property or equipment, issue instructions to 
the recipient for disposition of the property no later than 120 
calendar days after the recipient's request. The grants officer's 
options for disposition are to direct the recipient to:
    (A) Transfer title to the real property or equipment to the Federal 
Government or to an eligible third party provided that, in such cases, 
the recipient shall be entitled to compensation for its attributable 
percentage of the current fair market value of the real property or 
equipment, plus any reasonable shipping or interim storage costs 
incurred. If title is transferred to the Federal Government, it shall 
be subject thereafter to provisions for Federally owned property in 
Sec. 34.22.
    (B) Sell the real property or equipment and pay the Federal 
Government for that percentage of the current fair market value of the 
property that is attributable to the Federal participation in the 
project (after deducting actual and reasonable selling and fix-up 
expenses, if any, from the sale proceeds). When the recipient is 
authorized or required to sell the real property or equipment, proper 
sales procedures shall be established that provide for competition to 
the extent practicable and result in the highest possible return.
    (3) If the responsible agency fails to issue disposition 
instructions within 120 days of the recipient's request, as described 
in paragraph (e)(2)(ii) of this section, the recipient shall dispose of 
the real property or equipment through the option described in 
paragraph (e)(2)(ii)(B) of this section.


Sec. 34.22  Federally owned property.

    (a) Annual inventory. Recipients shall submit annually an inventory 
listing of all Federally owned property in their custody (property 
furnished by the Federal Government, rather than acquired by the 
recipient with Federal funds under the award), to the DoD Component or 
other Federal agency responsible for administering the property under 
the award.
    (b) Use on other activities. (1) Use of federally owned property on 
other activities is permissible, if authorized by the DoD Component 
responsible for administering the award to which the property currently 
is charged.
    (2) Use on other activities will be in the following order of 
priority:
    (i) Activities sponsored by DoD Components' grants, cooperative 
agreements, or other assistance awards;
    (ii) Activities sponsored by other Federal agencies' grants, 
cooperative agreements, or other assistance awards;
    (iii) Activities under Federal procurement contracts, or activities 
not sponsored by any Federal agency. If so used, use charges shall be 
assessed to those activities. For real property or equipment, the use 
charges shall be at rates equivalent to those for which comparable real 
property or equipment may be leased. The use charges shall be treated 
as program income.
    (c) Disposition of property. Upon completion of the award, the 
recipient shall report the property to the responsible agency. The 
agency may:
    (1) Use the property to meet another Federal Government need (e.g, 
by transferring accountability for the property to another Federal 
award to the same recipient, or by directing the recipient to transfer 
the property to a Federal agency that needs the property, or to another 
recipient with a currently funded award).
    (2) Declare the property to be excess property and either:
    (i) Report the property to the General Services Administration, in 
accordance with the Federal Property and Administrative Services Act of 
1949 (40 U.S.C. 483(b)(2)), as implemented by General Services 
Administration regulations at 41 CFR 101-47.202; or
    (ii) Dispose of the property by alternative methods, if there is 
statutory authority to do so (e.g., DoD Components are authorized by 15 
U.S.C. 3710(i), the Federal Technology Transfer Act, to donate research 
equipment to educational and nonprofit organizations for the conduct of 
technical and scientific education and research activities. Such 
donations shall be in accordance with the DoD implementation of 
Executive Order 12821 (3 CFR, 1993 Comp., p. 323), ``Improving 
Mathematics and Science Education in Support of the National Education 
Goals.'') Appropriate instructions shall be issued to the recipient by 
the responsible agency.


Sec. 34.23  Property management system.

    The recipient's property management system shall include the 
following, for property that is Federally owned, and for equipment that 
is acquired in whole or in part with Federal funds, or that is used as 
matching share:
    (a) Property records shall be maintained, to include the following 
information:
    (1) A description of the property.
    (2) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or any other identification number.
    (3) Source of the property, including the award number.
    (4) Whether title vests in the recipient or the Federal Government.
    (5) Acquisition date (or date received, if the property was 
furnished by the Federal Government) and cost.
    (6) Information from which one can calculate the percentage of 
Federal participation in the cost of the property (not applicable to 
property furnished by the Federal Government).
    (7) The location and condition of the property and the date the 
information was reported.
    (8) Ultimate disposition data, including date of disposal and sales 
price or the method used to determine current fair market value where a 
recipient compensates the Federal Government for its share.
    (b) Federally owned equipment shall be marked, to indicate Federal 
ownership.

[[Page 43913]]

    (c) A physical inventory shall be taken and the results reconciled 
with the property records at least once every two years. Any 
differences between quantities determined by the physical inspection 
and those shown in the accounting records shall be investigated to 
determine the causes of the difference. The recipient shall, in 
connection with the inventory, verify the existence, current 
utilization, and continued need for the property.
    (d) A control system shall be in effect to insure adequate 
safeguards to prevent loss, damage, or theft of the property. Any loss, 
damage, or theft of property shall be investigated and fully 
documented; if the property was owned by the Federal Government, the 
recipient shall promptly notify the Federal agency responsible for 
administering the property.
    (e) Adequate maintenance procedures shall be implemented to keep 
the property in good condition.


Sec. 34.24  Supplies.

    (a) Title shall vest in the recipient upon acquisition for supplies 
acquired with Federal funds under an award.
    (b) Upon termination or completion of the project or program, the 
recipient shall retain any unused supplies. If the inventory of unused 
supplies exceeds $5,000 in total aggregate value and the items are not 
needed for any other Federally sponsored project or program, the 
recipient shall retain the items for use on non-Federal sponsored 
activities or sell them, but shall, in either case, compensate the 
Federal Government for its share.


Sec. 34.25  Intellectual property developed or produced under awards.

    (a) Patents. Grants and cooperative agreements with:
    (1) Small business concerns shall comply with 35 U.S.C. Chapter 18, 
as implemented by 37 CFR part 401, which applies to inventions made 
under grants and cooperative agreements with small business concerns 
for research and development. 37 CFR 401.14 provides a standard clause 
that is required in such cooperative agreements in most cases, 37 CFR 
401.3 specifies when the clause shall be included, and 37 CFR 401.5 
specifies how the clause may be modified and tailored.
    (2) Commercial organizations other than small business concerns 
shall comply with 35 U.S.C. 210(c) and Executive Order 12591 (3 CFR, 
1987 Comp., p. 220) (which codifies a Presidential Memorandum on 
Government Patent Policy, dated February 18, 1983).
    (i) The Executive order states that, as a matter of policy, grants 
and cooperative agreements should grant to all commercial 
organizations, regardless of size, title to patents made in whole or in 
part with Federal funds, in exchange for royalty-free use by or on 
behalf of the Government (i.e., it extends the applicability of 35 
U.S.C. Chapter 18, to the extent permitted by law, to commercial 
organizations other than small business concerns).
    (ii) 35 U.S.C. 210(c) states that 35 U.S.C. Chapter 18 is not 
intended to limit agencies' authority to agree to the disposition of 
rights in inventions in accordance with the Presidential memorandum 
codified by the Executive order. It also states that such grants and 
agreements shall provide for Government license rights required by 35 
U.S.C. 202(c)(4) and march-in rights required by 35 U.S.C. 203.
    (b) Copyright, data and software rights. Requirements concerning 
data and software rights are as follows:
    (1) The recipient may copyright any work that is subject to 
copyright and was developed under an award. DoD Components reserve a 
royalty-free, nonexclusive and irrevocable right to reproduce, publish, 
or otherwise use the work for Federal purposes, and to authorize others 
to do so.
    (2) Unless waived by the DoD Component making the award, the 
Federal Government has the right to:
    (i) Obtain, reproduce, publish or otherwise use the data first 
produced under an award.
    (ii) Authorize others to receive, reproduce, publish, or otherwise 
use such data for Federal purposes.

Procurement Standards


Sec. 34.30  Purpose of procurement standards.

    Section 34.31 sets forth requirements necessary to ensure:
    (a) Compliance of recipients' procurements that use Federal funds 
with applicable Federal statutes and executive orders.
    (b) Proper stewardship of Federal funds used in recipients' 
procurements.


Sec. 34.31  Requirements.

    The following requirements pertain to recipients' procurements 
funded in whole or in part with Federal funds or with recipients' cost-
share or match:
    (a) Reasonable cost. Recipients procurement procedures shall make 
maximum practicable use of competition, or shall use other means that 
ensure reasonable cost for procured goods and services.
    (b) Pre-award review of certain procurements. Prior to awarding a 
procurement contract under a grant or cooperative agreement, a 
recipient may be required to provide the grants officer administering 
the grant or cooperative agreement with pre-award documents (e.g., 
requests for proposals, invitations for bids, or independent cost 
estimates) related to the procurement. Recipients will only be required 
to provide such documents for the grants officer's pre-award review in 
cases where the grants officer judges that there is a compelling need 
to do so. In such cases, the grants officer must include a provision in 
the grant or cooperative agreement that states the requirement.
    (c) Contract provisions. (1) Contracts in excess of the simplified 
acquisition threshold shall contain contractual provisions or 
conditions that allow for administrative, contractual, or legal 
remedies in instances in which a contractor violates or breaches the 
contract terms, and provide for such remedial actions as may be 
appropriate.
    (2) All contracts in excess of the simplified acquisition threshold 
shall contain suitable provisions for termination for default by the 
recipient or for termination due to circumstances beyond the control of 
the contractor.
    (3) All negotiated contracts in excess of the simplified 
acquisition threshold shall include a provision permitting access of 
the Department of Defense, the Comptroller General of the United 
States, or any of their duly authorized representatives, to any books, 
documents, papers, and records of the contractor that are directly 
pertinent to a specific program, for the purpose of making audits, 
examinations, excerpts, and transcriptions.
    (4) All contracts, including those for amounts less than the 
simplified acquisition threshold, awarded by recipients and their 
contractors shall contain the procurement provisions of Appendix A to 
this part, as applicable.

Reports and Records


Sec. 34.40  Purpose of reports and records.

    Sections 34.41 and 34.42 prescribe requirements for monitoring and 
reporting financial and program performance and for records retention.


Sec. 34.41  Monitoring and reporting program and financial performance.

    Grants officers may use the provisions of 32 CFR 32.51 and 32.52 
for awards to commercial organizations, or may include equivalent 
technical and financial reporting requirements that ensure reasonable 
oversight of the expenditure of appropriated funds. As a minimum, 
equivalent requirements must include:

[[Page 43914]]

    (a) Periodic reports (at least annually, and no more frequently 
than quarterly) addressing both program status and business status, as 
follows:
    (1) The program portions of the reports must address progress 
toward achieving program performance goals, including current issues, 
problems, or developments.
    (2) The business portions of the reports shall provide summarized 
details on the status of resources (federal funds and non-federal cost 
sharing or matching), including an accounting of expenditures for the 
period covered by the report. The report should compare the resource 
status with any payment and expenditure schedules or plans provided in 
the original grant or agreement; explain any major deviations from 
those schedules; and discuss actions that will be taken to address the 
deviations.
    (3) When grants officers previously authorized advance payments, 
pursuant to Sec. 34.12(a)(2), they should consult with the program 
official and consider whether program progress reported in the periodic 
report, in relation to reported expenditures, is sufficient to justify 
continued authorization of advance payments.
    (b) Unless inappropriate, a final performance report that addresses 
all major accomplishments under the agreement.


Sec. 34.42  Retention and access requirements for records.

    (a) This section sets forth requirements for records retention and 
access to records for awards to recipients.
    (b) Financial records, supporting documents, statistical records, 
and all other records pertinent to an award shall be retained for a 
period of three years from the date of submission of the final 
expenditure report. The only exceptions are the following:
    (1) If any litigation, claim, or audit is started before the 
expiration of the 3-year period, the records shall be retained until 
all litigation, claims or audit findings involving the records have 
been resolved and final action taken.
    (2) Records for real property and equipment acquired with Federal 
funds shall be retained for 3 years after final disposition.
    (3) When records are transferred to or maintained by the DoD 
Component that made the award, the 3-year retention requirement is not 
applicable to the recipient.
    (4) Indirect cost rate proposals, cost allocations plans, and 
related records, for which retention requirements are specified in 
Sec. 34.42(g).
    (c) Copies of original records may be substituted for the original 
records if authorized by the grants officer.
    (d) The grants officer shall request that recipients transfer 
certain records to DoD Component custody when he or she determines that 
the records possess long term retention value. However, in order to 
avoid duplicate recordkeeping, a grants officer may make arrangements 
for recipients to retain any records that are continuously needed for 
joint use.
    (e) DoD Components, the Inspector General, Comptroller General of 
the United States, or any of their duly authorized representatives, 
have the right of timely and unrestricted access to any books, 
documents, papers, or other records of recipients that are pertinent to 
the awards, in order to make audits, examinations, excerpts, 
transcripts and copies of such documents. This right also includes 
timely and reasonable access to a recipient's personnel for the purpose 
of interview and discussion related to such documents. The rights of 
access in this paragraph are not limited to the required retention 
period, but shall last as long as records are retained.
    (f) Unless required by statute, no DoD Component shall place 
restrictions on recipients that limit public access to the records of 
recipients that are pertinent to an award, except when the DoD 
Component can demonstrate that such records shall be kept confidential 
and would have been exempted from disclosure pursuant to the Freedom of 
Information Act (5 U.S.C. 552) if the records had belonged to the DoD 
Component making the award.
    (g) Indirect cost proposals, cost allocation plans, and other cost 
accounting documents (such as documents related to computer usage 
chargeback rates), along with their supporting records, shall be 
retained for a 3-year period, as follows:
    (1) If a recipient is required to submit an indirect-cost proposal, 
cost allocation plan, or other computation to the cognizant Federal 
agency, for purposes of negotiating an indirect cost rate or other 
rates, the 3-year retention period starts on the date of the 
submission. This retention requirement also applies to subrecipients 
submitting similar documents for negotiation to the recipient.
    (2) If the recipient or the subrecipient is not required to submit 
the documents or supporting records for negotiating an indirect cost 
rate or other rates, the 3-year retention period for the documents and 
records starts at the end of the fiscal year (or other accounting 
period) covered by the proposal, plan, or other computation.

Termination and Enforcement


Sec. 34.50  Purpose of termination and enforcement.

    Sections 34.51 through 34.53 set forth uniform procedures for 
suspension, termination, enforcement, and disputes.


Sec. 34.51  Termination.

    (a) Awards may be terminated in whole or in part only in accordance 
with one of the following:
    (1) By the grants officer, if a recipient materially fails to 
comply with the terms and conditions of an award.
    (2) By the grants officer with the consent of the recipient, in 
which case the two parties shall agree upon the termination conditions, 
including the effective date and, in the case of partial termination, 
the portion to be terminated.
    (3) By the recipient upon sending to the grants officer written 
notification setting forth the reasons for such termination, the 
effective date, and, in the case of partial termination, the portion to 
be terminated. The recipient must provide such notice at least 30 days 
prior to the effective date of the termination. However, if the grants 
officer determines in the case of partial termination that the reduced 
or modified portion of the award will not accomplish the purposes for 
which the award was made, he or she may terminate the award in its 
entirety.
    (b) If costs are allowed under an award, the responsibilities of 
the recipient referred to in Sec. 34.61(b), including those for 
property management as applicable, shall be considered in the 
termination of the award, and provision shall be made for continuing 
responsibilities of the recipient after termination, as appropriate.


Sec. 34.52  Enforcement.

    (a) Remedies for noncompliance. If a recipient materially fails to 
comply with the terms and conditions of an award, whether stated in a 
Federal statute, regulation, assurance, application, or notice of 
award, the grants officer may, in addition to imposing any of the 
special conditions outlined in Sec. 34.4, take one or more of the 
following actions, as appropriate in the circumstances:
    (1) Temporarily withhold cash payments pending correction of the 
deficiency by the recipient or more severe enforcement action by the 
grants officer and DoD Component.
    (2) Disallow (that is, deny both use of funds and any applicable 
matching

[[Page 43915]]

credit for) all or part of the cost of the activity or action not in 
compliance.
    (3) Wholly or partly suspend or terminate the current award.
    (4) Withhold further awards for the project or program.
    (5) Take other remedies that may be legally available.
    (b) Hearings and appeals. In taking an enforcement action, the 
grants officer and DoD Component shall provide the recipient an 
opportunity for hearing, appeal, or other administrative proceeding to 
which the recipient is entitled under any statute or regulation 
applicable to the action involved (see Sec. 34.53 and 32 CFR 22.815).
    (c) Effects of suspension and termination. Costs of a recipient 
resulting from obligations incurred by the recipient during a 
suspension or after termination of an award are not allowable unless 
the grants officer expressly authorizes them in the notice of 
suspension or termination or subsequently. Other recipient costs during 
suspension or after termination which are necessary and not reasonably 
avoidable are allowable if the costs:
    (1) Result from obligations which were properly incurred by the 
recipient before the effective date of suspension or termination, are 
not in anticipation of it, and in the case of a termination, are 
noncancellable; and
    (2) Would be allowable if the award were not suspended or expired 
normally at the end of the funding period in which the termination 
takes effect.
    (d) Relationship to debarment and suspension. The enforcement 
remedies identified in this section, including suspension and 
termination, do not preclude a recipient from being subject to 
debarment and suspension under 32 CFR part 25.


Sec. 34.53  Disputes and appeals.

    Recipients have the right to appeal certain decisions by grants 
officers. In resolving such issues, DoD policy is to use Alternative 
Dispute Resolution (ADR) techniques, to the maximum practicable extent. 
See 32 CFR 22.815 for standards for DoD Components' dispute resolution 
and formal, administrative appeal procedures.

Subpart C--After-the-Award Requirements


Sec. 34.60  Purpose.

    Sections 34.61 through 34.63 contain procedures for closeout and 
for subsequent disallowances and adjustments.


Sec. 34.61  Closeout procedures.

    (a) The cognizant grants officer shall, at least six months prior 
to the expiration date of the award, contact the recipient to 
establish:
    (1) All steps needed to close out the award, including submission 
of financial and performance reports, liquidation of obligations, and 
decisions on property disposition.
    (2) A schedule for completing those steps.
    (b) The following provisions shall apply to the closeout:
    (1) The responsible grants officer and payment office shall 
expedite completion of steps needed to close out awards and make 
prompt, final payments to a recipient for allowable reimbursable costs 
under the award being closed out.
    (2) The recipient shall promptly refund any unobligated balances of 
cash that the DoD Component has advanced or paid and that is not 
authorized to be retained by the recipient for use in other projects. 
For unreturned amounts that become delinquent debts, see 32 CFR 22.820.
    (3) When authorized by the terms and conditions of the award, the 
grants officer shall make a settlement for any upward or downward 
adjustments to the Federal share of costs after closeout reports are 
received.
    (4) The recipient shall account for any real property and personal 
property acquired with Federal funds or received from the Federal 
Government in accordance with Secs. 34.21 through 34.25.
    (5) In the event a final audit has not been performed prior to the 
closeout of an award, the DoD Component shall retain the right to 
recover an appropriate amount after fully considering the 
recommendations on disallowed costs resulting from the final audit.


Sec. 34.62  Subsequent adjustments and continuing responsibilities.

    (a) The closeout of an award does not affect any of the following:
    (1) The right of the Department of Defense to disallow costs and 
recover funds on the basis of a later audit or other review.
    (2) The obligation of the recipient to return any funds due as a 
result of later refunds, corrections, or other transactions.
    (3) Audit requirements in Sec. 34.16.
    (4) Property management requirements in Secs. 34.21 through 34.25.
    (5) Records retention as required in Sec. 34.42.
    (b) After closeout of an award, a relationship created under an 
award may be modified or ended in whole or in part with the consent of 
the grants officer and the recipient, provided the responsibilities of 
the recipient referred to in Sec. 34.61(a), including those for 
property management as applicable, are considered and provisions made 
for continuing responsibilities of the recipient, as appropriate.


Sec. 34.63  Collection of amounts due. -

    Any funds paid to a recipient in excess of the amount to which the 
recipient is finally determined to be entitled under the terms and 
conditions of the award constitute a debt to the Federal Government. 
Procedures for issuing the demand for payment and pursuing 
administrative offset and other remedies are described in 32 CFR 
22.820.

Appendix A to Part 34--Contract Provisions -

    All contracts awarded by a recipient, including those for 
amounts less than the simplified acquisition threshold, shall 
contain the following provisions as applicable:
    1. Equal Employment Opportunity--All contracts shall contain a 
provision requiring compliance with E.O. 11246 (3 CFR, 1964-1965 
Comp., p. 339), ``Equal Employment Opportunity,'' as amended by E.O. 
11375 (3 CFR, 1966-1970 Comp., p. 684), ``Amending Executive Order 
11246 Relating to Equal Employment Opportunity,'' and as 
supplemented by regulations at 41 CFR chapter 60, ``Office of 
Federal Contract Compliance Programs, Equal Employment Opportunity, 
Department of Labor.''
    2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C. 
276c)--All contracts and subawards in excess of $2000 for 
construction or repair awarded by recipients and subrecipients shall 
include a provision for compliance with the Copeland ``Anti-
Kickback'' Act (18 U.S.C. 874), as supplemented by Department of 
Labor regulations (29 CFR part 3, ``Contractors and Subcontractors 
on Public Building or Public Work Financed in Whole or in Part by 
Loans or Grants from the United States''). The Act provides that 
each contractor or subrecipient shall be prohibited from inducing, 
by any means, any person employed in the construction, completion, 
or repair of public work, to give up any part of the compensation to 
which he is otherwise entitled. The recipient shall report all 
suspected or reported violations to the responsible DoD Component.
    3. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333)--Where applicable, all contracts awarded by recipients in 
excess of $100,000 for construction and other purposes that involve 
the employment of mechanics or laborers shall include a provision 
for compliance with Sections 102 and 107 of the Contract Work Hours 
and Safety Standards Act (40 U.S.C. 327-333), as supplemented by 
Department of Labor regulations (29 CFR part 5). Under Section 102 
of the Act, each contractor shall be required to compute the wages 
of every mechanic and laborer on the basis of a standard work week 
of 40 hours. Work in excess of the standard work week is permissible 
provided that the worker is

[[Page 43916]]

compensated at a rate of not less than 1\1/2\ times the basic rate 
of pay for all hours worked in excess of 40 hours in the work week. 
Section 107 of the Act is applicable to construction work and 
provides that no laborer or mechanic shall be required to work in 
surroundings or under working conditions which are unsanitary, 
hazardous or dangerous. These requirements do not apply to the 
purchases of supplies or materials or articles ordinarily available 
on the open market, or contracts for transportation or transmission 
of intelligence.
    4. Rights to Inventions Made Under a Contract or Agreement--
Contracts or agreements for the performance of experimental, 
developmental, or research work shall provide for the rights of the 
Federal Government and the recipient in any resulting invention in 
accordance with 37 CFR part 401, ``Rights to Inventions Made by 
Nonprofit Organizations and Small Business Firms Under Government 
Grants, Contracts and Cooperative Agreements.''
    5. Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
Pollution Control Act (33 U.S.C. 1251 et seq.), as amended--
Contracts and subawards of amounts in excess of $100,000 shall 
contain a provision that requires the recipient to agree to comply 
with all applicable standards, orders or regulations issued pursuant 
to the Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
Pollution Control Act as amended (33 U.S.C. 1251 et seq.). 
Violations shall be reported to the responsible DoD Component and 
the Regional Office of the Environmental Protection Agency (EPA).
    6. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors 
who apply or bid for an award of $100,000 or more shall file the 
required certification. Each tier certifies to the tier above that 
it will not and has not used Federal appropriated funds to pay any 
person or organization for influencing or attempting to influence an 
officer or employee of any agency, a member of Congress, officer or 
employee of Congress, or an employee of a member of Congress in 
connection with obtaining any Federal contract, grant or any other 
award covered by 31 U.S.C. 1352. Each tier shall also disclose any 
lobbying with non-Federal funds that takes place in connection with 
obtaining any Federal award. Such disclosures are forwarded from 
tier to tier up to the recipient.
    7. Debarment and Suspension (E.O.s 12549 and 12689)--Contract 
awards that exceed the simplified acquisition threshold and certain 
other contract awards shall not be made to parties listed on 
nonprocurement portion of the General Services Administration's 
Lists of Parties Excluded from Federal Procurement and 
Nonprocurement Programs in accordance with E.O.s 12549 (3 CFR, 1986 
Comp., p. 189) and 12689 (3 CFR, 1989 Comp., p. 235), ``Debarment 
and Suspension.'' This list contains the names of parties debarred, 
suspended, or otherwise excluded by agencies, and contractors 
declared ineligible under statutory or regulatory authority other 
than E.O. 12549. Contractors with awards that exceed the small 
purchase threshold shall provide the required certification 
regarding its exclusion status and that of its principals.

    Dated: August 9, 1996.
Linda M. Bynum,
Alternate OSD Federal Register Liaison Officer Department of Defense.
[FR Doc. 96-20777 Filed 8-23-96; 8:45 am]
BILLING CODE 5000-04-P