[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. ----------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- (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): - --------------------------------------------------------------------------- \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\). --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- (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. --------------------------------------------------------------------------- \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.'' --------------------------------------------------------------------------- \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