[Federal Register Volume 63, Number 31 (Tuesday, February 17, 1998)]
[Proposed Rules]
[Pages 7734-7738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3720]


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DEPARTMENT OF AGRICULTURE

7 CFR Parts 3015, 3016 and 3019

RIN 0503-AA16


Uniform Administrative Requirements for Grants and Cooperative 
Agreements to State and Local Governments and Uniform Administrative 
Requirements for Grants and Agreements With Institutions of Higher 
Education, Hospitals, and Other Non-Profit Organizations

AGENCY: Department of Agriculture, USDA.

ACTION: Notice of proposed rulemaking.

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SUMMARY: USDA is proposing to revise its grants management regulations 
in order to bring the entitlement programs it administers under the 
same regulations that already apply to nonentitlement programs; and to 
identify exceptions to these general rules that apply only to 
entitlement programs. The effect of the first change would be that only 
one set of Federal administrative requirements would apply to awards 
that a grantee or subgrantee organization receives under USDA programs. 
That would be consistent with how most other Federal awarding agencies 
handle their codifications of governmentwide rules for grantees and 
subgrantees. In making the second change, this proposed rule would 
establish the following exceptions for entitlement programs: States and 
their governmental subgrantees would be required to conduct 
procurements under USDA entitlement programs in accordance with the 
specific procurement rules stated in the USDA regulations; the option 
to use State rules that differed from these Federal rules would not be 
available, as it is for procurements under nonentitlement programs; 
States and their governmental subgrantees would be required to exclude 
from consideration for a contract award any contractor that had 
developed draft product specifications, requirements, statements of 
work, invitations for bid, and/or requests for proposals for use by the 
grantee or subgrantee in conducting procurements under USDA entitlement 
programs; Financial reporting requirements under USDA entitlement 
programs would continue to be provided in the program-specific 
regulations rather than in the departmental regulations. This would not 
affect the reporting requirements themselves.

DATES: Written comments must be submitted on or before May 19, 1998.

ADDRESSES: Comments must be mailed or faxed to Gerald Miske, 
Supervisory Management Analyst, Fiscal Policy Division, Office of the 
Chief Financial Officer, USDA, Room 3022 South Building, 1400 
Independence Avenue, S.W., Washington, D.C. 20250; FAX (202) 690-1529. 
Written comments may be inspected at the above address from 8:00 a.m. 
to 5:00 p.m. A copy of the Regulatory Cost/Benefit Assessment 
referenced in the Regulatory Impact Analysis section of this preamble 
can be obtained from Gerald Miske, Supervisory Management Analyst, 
Fiscal Policy Division, Office of the Chief Financial Officer, USDA, 
Room 3022 South Building, 1400 Independence Avenue, S.W., Washington, 
D.C. 20250. This assessment may be examined at the same address.

FOR FURTHER INFORMATION CONTACT: Gerald Miske, Supervisory Management 
Analyst, Fiscal Policy Division, Office of the Chief Financial Officer, 
USDA, at the above address; telephone (202) 720-1553.

SUPPLEMENTARY INFORMATION:

Background

    The administrative requirements for awards and subawards under all 
USDA entitlement programs are currently in 7 CFR Part 3015, ``Uniform 
Federal Assistance Regulations.'' The corresponding requirements for 
awards and subawards to State and local governmental organizations 
under USDA nonentitlement programs are in Subparts A through D of 7 CFR 
Part 3016, ``Uniform Administrative Requirements for Grants and 
Cooperative Agreements to State and Local Governments;'' and the 
administrative requirements for awards and subawards to 
nongovernmental, nonprofit organizations are in 7 CFR Part 3019, 
``Uniform Administrative Requirements for Grants and Agreements With 
Institutions of Higher Education, Hospitals, and Other Nonprofit 
Organizations.'' This proposed rule would expand the scope of Parts 
3016 and 3019 to include entitlement programs, and delete 
administrative requirements for awards and subawards under such 
programs from the scope of Part 3015. It would also establish, in 
Subpart E to Part 3016, certain exceptions to the general 
administrative requirements that would apply only to the entitlement 
programs. The following text outlines the evolution of these proposed 
changes.
    On March 11, 1988, USDA joined other Federal agencies in publishing 
a final grants management common rule applicable to assistance 
relationships established by grants and cooperative agreements, and by 
subawards thereunder, to State and local governments. Prior to that 
date, administrative requirements for awards and subawards under all 
USDA programs were codified at 7 CFR Part 3015. USDA implemented the 
common rule at 7 CFR Part 3016. At that time, the common rule did not 
apply to entitlement programs such as the Food Stamp and Child 
Nutrition Programs administered by the Food and Nutrition Service, 
USDA, and the public assistance programs administered by the Department 
of Health and Human Services (DHHS). However, Subpart E was reserved in 
the rule to subsequently address provisions specific to entitlement 
programs. Pending the publication of Subpart E to Part 3016, the USDA 
entitlement programs have remained under Part 3015. These programs 
included:
    (1) Entitlement grants under the following programs authorized by 
the National School Lunch Act, as amended: (a) National School Lunch 
Program, General and Special Meal Assistance (sections 4 and 11 of the 
Act, respectively), (b) Commodity Assistance (section 6 of the Act), 
(c) Summer Food Service Program for Children (section 13 of the Act), 
and (d) Child and Adult Care Food Program (section 17 of the Act); (2) 
Entitlement grants under the following programs authorized by the Child 
Nutrition Act of 1966, as amended: (a) Special Milk Program for 
Children (section 3 of the Act), (b) School Breakfast Program (section 
4 of the Act), and (c) State Administrative Expense Funds (section 7 of 
the Act); and (3) Entitlement grants for State Administrative Expenses 
under the Food Stamp Act of 1977, as amended (section 16 of the Act).
    The exclusion of these programs from the scope of Part 3016 made 
that regulation apply only to USDA's nonentitlement programs. The 
principal nonentitlement programs administered by the Food and 
Nutrition Service include the Special Supplemental

[[Page 7735]]

Nutrition Program for Women, Infants and Children (WIC), the Commodity 
Supplemental Food Program (CSFP), the WIC Farmers' Market Nutrition 
Program (FMNP), the Nutrition Education and Training Program (NET), and 
the Emergency Food Assistance Program (TEFAP).
    On August 24, 1995 (60 FR 44122), USDA published an interim rule at 
7 CFR Part 3019 in order to implement the revised OMB Circular A-110, 
Uniform Administrative Requirements for Grants and Agreements with 
Institutions of Higher Education, Hospitals, and Other Nonprofit 
Organizations. As with Part 3016, USDA did not include entitlement 
programs in the scope of Part 3019. Accordingly, a nonprofit private 
school operating the National School Lunch Program and the NET under 
subgrants from a State educational agency must currently apply Part 
3015 to the former and Part 3019 to the latter. In excluding 
entitlements from the scope of Part 3019 at the time of its initial 
publication, USDA anticipated issuing a document that would provide a 
single set of grant and subgrant administrative rules for all types of 
organizations operating USDA entitlement programs.
    This Notice of Proposed Rulemaking is USDA's first step in 
developing such a document. In publishing this proposed rule, USDA 
solicits comments on: (1) applying the provisions of Part 3016 to USDA 
entitlement program awards and subawards to State and local 
governmental organizations; (2) adopting proposed exceptions to be 
included in Subpart E of Part 3016; and (3) applying the provisions of 
Part 3019 to USDA entitlement program awards and subawards to 
nongovernmental, nonprofit organizations.
    USDA is also making an editorial change in Part 3015 to correct the 
name of the USDA office responsible for Federal assistance policy.
    Finally, USDA is making a technical change to recognize the recent 
reclassification of the Food Distribution Program on Indian 
Reservations (FDPIR) from nonentitlement to entitlement. This 
reclassification is based on the FDPIR's close relationship with the 
Food Stamp Program. The FDPIR is authorized by section 4(b) of the Food 
Stamp Act of 1977, as amended and, beginning in Fiscal Year 1997, 
awards made to States and Indian Tribal Organizations (ITOs) under this 
program have been funded from USDA's Food Stamp Program account. The 
program's characteristics place it in the same class with the 
entitlement programs, particularly the Food Stamp Program. The 
President's Budget for Fiscal year 1998 represents it as such.
    This proposed rule would not affect USDA nonentitlement programs. 
As noted above, Part 3016 has covered grants and subgrants to State and 
local governments under these programs since its publication. Likewise, 
Part 3019 covers nonprofit organizations that operate nonentitlement 
programs.
    In this proposed rule, USDA proposes those exceptions deemed most 
essential to establishing appropriate administrative requirements for 
grants and agreements under entitlement programs while bringing these 
programs under Parts 3016 and 3019. The promulgation of such rules 
would not, however, preclude the subsequent identification of 
additional exceptions for these programs.
    In that regard, USDA has met with DHHS and the OMB to plan for the 
synchronization of administrative requirements for all entitlement 
programs. It was agreed that USDA would proceed with this limited scope 
rule because of its responsiveness to specific needs of program 
operators. The three agencies also agreed, however, that USDA and DHHS 
would collaborate in further refining administrative policies for 
entitlements programs. Such deliberations may lead to proposals for 
additional exceptions in Subpart E to Part 3016 and DHHS's parallel 
regulation.
    At this time, USDA proposes the following specific exceptions for 
entitlement programs:
    1. Adoption of Standards for State and Subgrantee Procurements. 
With certain qualifications discussed below, USDA proposes to adopt the 
rules found in section 3016.36(b) through (i) for procurements by 
States, and by local governments and ITOs operating as subgrantees of 
States, under USDA entitlement programs. This would differ from the 
general rules on State and subgrantee procurements under Federal 
awards. The general rule for States is stated in section 3016.36(a), 
which authorizes States to conduct procurements under Federal grants 
using the same procedures they apply to their procurements from 
nonfederal funds. Section 3016.37(a) extends this principle to States' 
administration of subgrants. This section instructs a State to ``follow 
State law and procedures when awarding and administering subgrants of 
financial assistance (whether on a cost reimbursement or fixed amount 
basis) to local and Indian tribal governments.'' A State may therefore 
require its governmental subgrantees to conduct procurements under 
their subgrants in accordance with sections 3016.36(b) through (i), 
with State procurement rules, or with any combination of the two.
    These general rules were included in the common rule codified at 7 
CFR Part 3016 in keeping with Executive Order 12612, Federalism, dated 
October 30, 1987. Under the Federalism principle, a Federal awarding 
agency should rely to the maximum extent possible on State processes 
rather than prescribe Federal ones. The preamble to the common rule 
expressed this principle as follows: ``Federal agencies should refrain 
from establishing uniform, national standards, and, where possible, 
defer to the States to establish them.'' (53 FR 8035) With respect to 
subgrantees, the preamble clarified that ``local governments and Indian 
tribal governments will administer direct Federal grants according to 
the standards in the common rule and Federal pass-through funds 
subgranted from the State according to State laws and procedures.'' (53 
FR 8036)(Emphasis in original.)
    In publishing this proposed rule, USDA proposes to depart from this 
principle by requiring both States and their governmental subgrantees 
to use sections 3016.36(b) through (i) in conducting procurements under 
USDA entitlement programs. The Federalism principle has never been 
applied to grants under these programs because of their budget impact. 
State and local governmental procurements under such programs are 
currently subject to a modicum of Federal regulation; governmental 
grantees and subgrantees follow their own procurement rules to the 
extent they do not contravene those procurement requirements stated in 
applicable Federal regulations. USDA believes the nature of the 
entitlement programs warrants continuing this policy.
    Federal liabilities to make payments to States under these programs 
are created in a manner that gives USDA less control than is the case 
with discretionary awards and other nonentitlement programs. The 
following cases illustrate this concern:
    Food Stamp Program. Under a Food Stamp Program administrative cost 
grant, the Federal Government pays a statutorily prescribed share 
(generally 50 percent) of the State's allowable costs. The program's 
authorizing statute does not set a ceiling on the State administrative 
costs for which USDA is required to fund its prescribed share. 
Accordingly, USDA has sought supplemental appropriations whenever there 
has been a possibility that existing appropriations would prove 
insufficient to support cumulative grant levels.

[[Page 7736]]

    National School Lunch Program. A State's grant award under the 
National School Lunch Program is determined by applying a formula 
consisting of the number of lunches of each authorized type served to 
eligible children, multiplied by the applicable payment rate prescribed 
by law. Once a State and its subgrantees have incurred the cost of 
serving school lunches to eligible children, there is an obligation for 
USDA to make the payments generated by this formula. If more eligible 
meals are served than the Federal budget provided for, a funding 
shortfall may result. Where information has indicated the possibility 
that this may occur, USDA has sought supplemental appropriations or 
taken other measures to ensure that the formula-generated amount would 
be available.
    Program size is another feature of most USDA entitlement programs 
that necessitates more stringent Federal regulation of procurements 
involving funds made available for them. In Fiscal Year 1996, USDA 
disbursed approximately $1.9 billion for Food Stamp Program State 
administrative costs and $5.4 billion in cash and commodity assistance 
under the National School Lunch Program. Approximately 25,000 schools 
and school districts operate the National School Lunch Program, most of 
them as subgrantees of States. Moreover, many program operators are not 
only purchasing goods and services for use in the program, but are also 
engaging food service management companies to assume much of the 
responsibility for program operations. If procurement rules are to 
control how large numbers of program operators specify to contractors 
their operational responsibilities for Federal programs, the rules 
applicable to such actions must contain a core of minimum, uniform 
requirements crafted to protect the public funds.
    As discussed above, State and local governments administering 
USDA's entitlement programs must currently follow the Federal 
procurement rules stated in Part 3015, which had applied to all Federal 
grants and subgrants to State and local governments before the 
publication of Part 3016. (See 7 CFR Part 3015, Subpart S.) The 
procurement requirements of section 3016.36(b) through (i), in effect, 
comprise an updated version of these older rules. Accordingly, USDA 
believes this proposal represents continuity in the administration of 
entitlement programs. In any event, USDA's experience administering 
grants to States under entitlement and nonentitlement programs suggests 
that the procurement rules found at section 3016.36(b) through (i) 
closely resemble the rules used by most States for their nonfederal 
procurements.
    USDA believes the principal effect of adopting the procurement 
rules in section 3016.36(b) through (i) for procurements under USDA 
entitlement programs would be the strengthening of competition in such 
procurements. Existing rules at 7 CFR 3015.182 require States and other 
governmental organizations to conduct procurements under entitlement 
grants and subgrants in ways that maximize open and free competition.
    However, some State and local procurement rules provide for 
preference in source selection for bidders located within the State or 
political subdivision, in order to promote the political entity's 
economic development. For example, State or local procurement rules may 
require that an outside bidder's bid be surcharged a prescribed 
percentage for price comparison purposes. Such geographical preferences 
are inherently noncompetitive because they can enable a local bidder to 
receive a contract without having submitted the lowest responsive bid. 
The old rules codified at 7 CFR Part 3015 proscribe certain practices 
as anti-competitive, but are silent on geographical preferences. By 
contrast, section 3016.36(c)(2) expressly prohibits them (except in 
certain cases that involve contracting for architectural and 
engineering services).
    USDA is concerned that geographical preferences may have resulted 
in State agencies and local program operators obtaining goods and 
services for program purposes at more than the lowest available price. 
This represents an inefficient use of scarce program funds.
    The Comptroller General has found such practices' restraining 
effects on competition acceptable only to the extent that their 
operation presents no more than a negligible obstacle to outside 
bidders' efforts to obtain contracts. Such determinations must be made 
on a case-by-case basis. For example, the Comptroller General found 
that a State rule requiring a two percent surcharge on outside bidders' 
bids satisfied this standard. (Matter of the Eagle Construction 
Company, B-191498, dated March 5, 1979) On the other hand, USDA has 
been asked to determine whether geographical preferences ranging from 
seven to 15 percent were consistent with the open and free competition 
requirements of section 3015.182. Such cases have placed USDA in the 
position of determining, on a case-by-case basis, ``how much preference 
is too much.'' One State even asked USDA to disclose in advance the 
preference level USDA would accept.
    USDA believes that maximum open and free competition promotes the 
most effective use of public funds made available for entitlement 
programs. Accordingly, USDA's proposal to apply section 3016.36(b) 
through (i) to States and their subgrantees includes the express 
prohibition in section 3016.36(c)(2) against the use of in-State or 
local geographical preferences in procurements conducted under USDA 
entitlement programs. Commenters are requested to respond to this 
proposal, whether they support or oppose it.
    In addition to adopting the procurement rules of section 3016.36(b) 
through (i), with their prohibition of geographical preferences, for 
procurements under entitlement programs, USDA proposes to expressly 
prohibit another practice that it believes restricts full and open 
competition. A governmental grantee or subgrantee making a procurement 
under a USDA entitlement program would be precluded from accepting an 
offer from, or awarding the contract to, a contractor that had 
developed or drafted specifications, requirements, statements of work, 
invitations for bids or requests for proposals related to the 
procurement. USDA believes that allowing contractors to participate in 
procurements for which they had developed some or all of the 
procurement documents would afford them an unfair competitive 
advantage, to the detriment of full and open competition. This proposed 
change would not prohibit governmental grantees and subgrantees from 
using contractors to prepare any or all elements of a procurement. It 
would only eliminate such contractors from consideration for the actual 
award.
    USDA believes this proposed prohibition is already implicit in the 
text of section 3016.36(c)(1)(v), which identifies organizational 
conflicts of interest as a situation considered to be restrictive of 
competition. USDA has also considered the possibility that expressly 
stating the prohibition with respect to entitlement programs may be 
misconstrued to restrict its applicability to this class of program. On 
the other hand, past experience in administering entitlement programs 
suggests that stating the prohibition more explicitly would 
significantly strengthen USDA's efforts to enforce it. In addition, 
this proposal follows the language of a parallel requirement at section 
3019.43. Part 3019 and its underlying circular, A-110, apply only to 
nongovernmental,

[[Page 7737]]

nonprofit organizations, but they do represent the OMB's ``state of the 
art'' pronouncement on grant and subgrant administrative requirements. 
The fact that the OMB saw fit to express in A-110 both the broad 
prohibition of organizational conflicts of interest, and the specific 
case thereunder that USDA now proposes to include in Subpart E, 
suggests that the need for clarification of this issue extends beyond 
USDA.
    Given the foregoing, USDA requests commenters to address the issues 
of whether the proposed prohibition is necessary, and to recommend ways 
to state it in Subpart E while avoiding misconstruction of its intent.
    2. Financial Reporting Requirements. USDA also proposes to clarify 
that the Food Stamp and Child Nutrition Programs are exempt from the 
financial reporting requirements found in section 3016.41, but are 
subject to financial reporting requirements stated in program-specific 
regulations. This would not entail any change in existing financial 
reporting requirements under these programs. Both programs use program-
specific financial reports approved by the OMB under the Paperwork 
Reduction Act of 1995. The existing OMB clearances on these reports 
would not require renewal before their stated expiration dates.

Regulatory Impact Analysis

Executive Order 12866

    The Office of Management and Budget has reviewed this rule and has 
determined the rule to be significant under Executive Order 12866. In 
accordance with the provisions of Executive Order 12866, USDA has 
prepared a cost benefit assessment which analyzes the economic impact 
of this proposed rule on States, other grantees, and subgrantees 
operating USDA entitlement programs. The economic impact has two 
discrete dimensions: bringing these programs under the umbrella of 
Parts 3016 and 3019, and establishing the deviations and exceptions 
stated in Subpart E to Part 3016.
    USDA believes that both dimensions would have a negligible economic 
impact. The new administrative requirements would generally continue 
the old rules that grantees and subgrantees have been using for USDA 
entitlement programs since Part 3015 was first published in 1981. 
Differences between the old and new rules are generally attributable to 
the evolution of Federal grants policy since 1981, including the 
``closing of loopholes.''
    USDA's belief that adopting the rules stated in sections 3016.36(b) 
through (i) for procurements by State and local governments under USDA 
entitlement programs would entail negligible economic impact or 
administrative burden is founded not only on the overall similarity 
between the new and old grants administrative rules, but also on the 
generic nature of procurement requirements themselves. USDA believes 
the requirements stated in sections 3016.36(b) through (i) comprise the 
minimum components of a sound procurement system. USDA's research on 
this issue suggests that most of these provisions are already 
universally applicable to grantee and subgrantee procurement systems.
    Given the available evidence that State procurement rules generally 
follow those procurement rules stated in section 3016.36(b) through 
(i), USDA considered relying on State rules in accordance with section 
3016.36(a). However, USDA decided to proceed with this aspect of the 
proposed rule for several reasons. First, State rules often allow 
geographical preference in source selection; the problems associated 
with that practice have already been explained. Second, Part 3016 
expresses a standard for the kind of procurement systems USDA considers 
sufficient to protect the programs' interests. Without it, geographical 
preference and other anti-competitive practices by grantees and 
subgrantees would be more difficult to combat. Finally, Part 3016 
contains a number of passages authorizing various aspects of awarding 
agency oversight. USDA believes the magnitude and nature of the 
entitlement programs necessitate retaining such explicit statements of 
oversight authority.
    USDA does not have the database needed to quantify the foregoing 
generalizations about the costs and savings associated with this 
proposed rule. For example, USDA does not know how many procurements 
grantees and subgrantees currently make by the small purchase method 
and by formal advertising, how their mix of procurement methods might 
change under this proposed rule, how much they would save per 
transaction, how many businesses would be affected, whether insular 
territories and outlying areas would be disproportionately affected, 
etc. Accordingly, USDA requests commenters to provide feedback on the 
economic impact of this proposed rule.
    As noted above, under this proposed rule financial reporting 
requirements would continue to be contained in the program-specific 
regulations rather than in Part 3016. Since the reporting requirements 
themselves would remain unchanged, this provision of the proposed rule 
would have no economic impact on grantees and subgrantees.

Civil Rights Impact Analysis

    USDA does not believe that this rule will have a significant civil 
rights impact and invites comments on this.

Paperwork Reduction Act of 1995

    The information collection requirements of this rule have been 
previously approved under # 0505-0008 for entitlement and 
nonentitlement programs. USDA believes that adopting this proposed rule 
would not impose additional information collection requirements on 
grantees and subgrantees.

Regulatory Flexibility Act

    In accordance with the requirements of the Regulatory Flexibility 
Act (5 U.S.C. 605(b)), the USDA Acting Chief Financial Officer has 
reviewed this rule and certifies that it does not have a significant 
economic impact on a substantial number of small entities. The 
potential economic impact is discussed above in connection with 
Executive Order 12866.

List of Subjects

7 CFR Part 3015

    Grant programs, Intergovernmental relations.

7 CFR Part 3016

    Grant programs.

7 CFR Part 3019

    Grant programs.

    Issued at Washington, D.C.
Irwin T. David,
Acting Chief Financial Officer.
    Approved:
Dan Glickman,
Secretary of Agriculture.
    Accordingly, USDA is proposing to amend 7 CFR chapter XXX as set 
forth below.

PART 3015--UNIFORM FEDERAL ASSISTANCE REGULATIONS

    1. The authority citation for Part 3015 continues to read as 
follows:

    Authority: 5 U.S.C. 301, Subpart I; 31 U.S.C. 7505, unless 
otherwise noted.

    2. In Sec. 3015.1 revise paragraphs (a)(1), (a)(3), (a)(4) and (d) 
to read as follows:


Sec. 3015.1  Purpose and scope of this part.

    (a)(1) This part specifies the set of principles for determining 
allowable costs under USDA grants and cooperative agreements to State 
and local governments, universities, non-profit and for-profit 
organizations as set

[[Page 7738]]

forth in OMB Circulars A-87, A-21, A-122, and 48 CFR 31.2, 
respectively; and the general provisions that apply to all grants and 
cooperative agreements made by USDA.
* * * * *
    (3) Rules for grants and cooperative agreements to State and local 
governments are found in Part 3016.
    (4) Rules for grants and cooperative agreements to institutions of 
higher education, hospitals, and other non-profit organizations are 
found in part 3019.
* * * * *
    (d) Responsibility for developing and interpreting the material for 
this part and in keeping it up-to-date is assigned to the Office of the 
Chief Financial Officer.
    3. In Sec. 3015.2 revise paragraphs (d)(3), (d)(4), (d)(5), and 
(d)(6) to read as follows:


Sec. 3015.2  Applicability.

* * * * *
    (d) * * *
    (3) Agencies or instrumentalities of the Federal government,
    (4) Individuals,
    (5) State and local governments, and
    (6) Institutions of higher education, hospitals and other non-
profit organizations.
* * * * *

PART 3016--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 
COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS

    4. The authority citation for Part 3016 continues to read as 
follows:

    Authority: 5 U.S.C. 301.

     5. In Sec. 3016.4 remove paragraphs (a) (4) through (6), 
redesignate paragraphs (a) (7) through (10) as (a) (4) through (7) and 
revise paragraph (b) to read as follows:


Sec. 3016.4  Applicability.

* * * * *
    (b) Entitlement programs. In USDA, the entitlement programs 
enumerated below are subject to subparts A-D and the modifications in 
subpart E.
    (1) Entitlement grants under the following programs authorized by 
The National School Lunch Act:
    (i) National School Lunch Program, General Assistance (section 4 of 
the Act),
    (ii) Commodity Assistance (section 6 of the Act),
    (iii) National School Lunch Program, Special Meal Assistance 
(section 11 of the Act),
    (iv) Summer Food Service Program for Children (section 13 of the 
Act), and
    (v) Child and Adult Care Food Program (section 17 of the Act);
    (2) Entitlement grants under the following programs authorized by 
The Child Nutrition Act of 1966:
    (i) Special Milk Program for Children (section 3 of the Act),
    (ii) School Breakfast Program (section 4 of the Act), and
    (iii) Entitlement grants for State Administrative Expense Funds 
(section 7 of the Act); and
    (3) Entitlement grants under the following programs authorized by 
the Food Stamp Act of 1977:
    (i) Food Distribution Program on Indian Reservations (section 4(b) 
of the Act), and
    (ii) State Administrative Expense Funds (section 16 of the Act).
    6. Subpart E is added to read as follows:

Subpart E--Entitlement


Sec. 3016.60  Special procurement provisions.

    (a) Notwithstanding Secs. 3016.36(a) and 3016.37(a) of this part, 
States and subgrantees of States shall conduct procurements under the 
USDA entitlement program grants or subgrants specified in 
Sec. 3016.4(b) in accordance with Sec. 3016.36(b) through (i) of this 
part.
    (b) 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 for use by a grantee or subgrantee 
in conducting procurements under the USDA entitlement program grants or 
subgrants specified in Sec. 3016.4(b) shall be excluded from competing 
for such procurements.


Sec. 3016.61  Financial reporting.

    The financial reporting provisions found in Sec. 3016.41 do not 
apply to any of the USDA entitlement programs listed in Sec. 3016.4(b) 
except the Food Distribution Program on Indian Reservations. The 
financial reporting requirements for these entitlement programs are 
found in the following program regulations:
    (a) For the National School Lunch Program, 7 CFR 210.20(a);
    (b) For the Special Milk Program for Children, 7 CFR 215.11(c);
    (c) For the School Breakfast Program, 7 CFR 220.13(b);
    (d) For the Summer Food Service Program for Children, 7 CFR 225.8;
    (e) For the Child and Adult Care Food Program, 7 CFR 226.7(d);
    (f) For State Administrative Expense Funds under section 7 of the 
Child Nutrition Act of 1966, 7 CFR 235.7(b); and
    (g) For State Administrative Expenses under section 16 of the Food 
Stamp Act of 1977, 7 CFR 277.11.

PART 3019--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 
AGREEMENTS WITH INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, AND 
OTHER NON-PROFIT ORGANIZATIONS

    7. The authority citation for Part 3019 continues to read as 
follows:

    Authority: 5 U.S.C. 301.
    8. In Sec. 3019.1 designate the existing text as paragraph (a) and 
add paragraph (b) to read as follows:

Subpart A--General


Sec. 3019.1  Purpose.

    (b) In USDA, this part also applies specifically to the grants, 
agreements and subawards to institutions of higher education, 
hospitals, and other non-profit organizations that are awarded to carry 
out the entitlement programs identified below:
    (1) Entitlement grants under the following programs authorized by 
The National School Lunch Act:
    (i) National School Lunch Program, General Assistance (section 4 of 
the Act),
    (ii) Commodity Assistance (section 6 of the Act),
    (iii) National School Lunch Program, Special Meal Assistance 
(section 11 of the Act),
    (iv) Summer Food Service Program for Children (section 13 of the 
Act), and
    (v) Child and Adult Care Food Program (section 17 of the Act).
    (2) Entitlement grants under the following programs authorized by 
The Child Nutrition Act of 1966:
    (i) Special Milk Program for Children (section 3 of the Act), and
    (ii) School Breakfast Program (section 4 of the Act).
    (3) Entitlement grants for State Administrative expenses under The 
Food Stamp Act of 1977 (section 16 of the Act).

[FR Doc. 98-3720 Filed 2-13-98; 8:45 am]
BILLING CODE 3410-90-P