[Federal Register Volume 63, Number 48 (Thursday, March 12, 1998)]
[Rules and Regulations]
[Pages 12152-12215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5888]



[[Page 12151]]

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Part II





Department of Defense





_______________________________________________________________________



32 CFR Parts 21, 22, 23, 28, 32, and 34



DoD Grant and Agreement Regulations; Final Rule

  Federal Register / Vol. 63, No. 48 / Thursday, March 12, 1998 / Rules 
and Regulations  

[[Page 12152]]



DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Parts 21, 22, 23, 28, 32, and 34

RIN 0790-AG28


DoD Grant and Agreement Regulations

AGENCY: Office of the Secretary, DoD.

ACTION: Final rule.

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SUMMARY: The Department of Defense (DoD) is completing the 
establishment of most of the DoD Grant and Agreement Regulations 
(DoDGARs). The DoDGARs provide uniform policies and procedures for DoD 
Components' award and administration of grants and cooperative 
agreements.

DATES: These final rules are effective on April 13, 1998.

FOR FURTHER INFORMATION CONTACT: Mark Herbst; ODDR&E(R); 3080 Defense 
Pentagon; Washington, DC 20301-3080.

SUPPLEMENTARY INFORMATION: The specific regulatory actions that are 
being taken are to: (1) adopt four new parts of the DoDGARs (32 CFR 
parts 21, 22, 32, and 34); (2) make minor amendments to update one of 
the four existing parts of the DoDGARs (32 CFR part 28); and (3) 
eliminate another of the existing parts (32 CFR part 23), by 
incorporating its contents into one of the four new parts (32 CFR part 
22).
    The four 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 for-profit organizations.
    The minor amendments to the existing part provide DoD-specific 
procedures related to Governmentwide restrictions on lobbying.
    The part that is being removed, with its contents incorporated into 
another part, is the rule implementing a law that prohibits the 
Department of Defense from providing funds by grant to institutions of 
higher education that have policies of denying, or that effectively 
prevent, the Secretary of Defense from obtaining for military 
recruiting purposes: entry to campuses; access to students on campuses; 
or access to directory information pertaining to students.

A. Background

    DoD published a notice in the Federal Register on August 26, 1996 
(61 FR 43867) requesting comments on four new DoDGARs parts and updates 
to two other parts. DoD received comments from: three universities; an 
association of academic institutions; an industry association; an 
attorneys' association; the Office of Management and Budget (OMB) and 
one other non-DoD Federal agency; and several DoD Components. All 
comments were considered in developing the final rule.
    Some comments concerned a future DoDGARs part that was mentioned in 
the Federal Register preamble to the proposed rules. That future part, 
which is not included in this rulemaking, is being developed for a 
class of research agreements with for-profit firms that is meant to 
help integrate the defense and non-defense portions of the U.S. 
technology and industrial bases. The future part therefore will provide 
more flexible administrative requirements than those contained in part 
34 of this rulemaking. Comments pertaining to that future part are 
addressed herein only to the extent that they also relate to parts that 
are included in this rulemaking.
    The following sections present a summary of the major comments 
grouped by subject, and the responses to the comments. Changes in the 
rules are discussed in the responses to the comments. Other changes 
were made to increase readability.

B. Comments and Responses

Comments on General Matters

    Comment: The DoDGARs should be included as a supplement to the 
rules for award and administration of procurement contracts, in the 
Defense Federal Acquisition Regulation Supplement. That would give DoD 
contracting officers a single source for rules on contracts, grants, 
and cooperative agreements.
    Response: No change. It would be inappropriate to merge regulations 
for assistance instruments with the regulations for contracts, which 
are used for the very different purpose of acquisition.
    Comment: The DoDGARs should include a structured format for grants 
and cooperative agreements, which could be similar to the uniform 
contract format that is currently in 48 CFR part 15, in the Federal 
Acquisition Regulations. The format could be an outline of major 
topical headings and specific clauses and provisions that are either 
mandatory or optional.
    Response: No change. There are efforts currently among DoD 
activities, some in coordination with other Federal agencies, to 
maintain uniform formats for assistance instruments that are used for 
similar purposes (e.g., research). Codifying a single standard format 
in the DoDGARs at this time likely would hinder these efforts and also 
could impede ongoing initiatives to streamline agency business 
practices and eliminate unnecessary burdens on recipients.

Comments on Instrument Types, Authorities, and Applicability

    Comment: The definition of the term ``contract'' in Sec. 21.130 
should be expanded to include cooperative agreements, which also are 
contracts. In some cases, even a grant is a contract.
    Response: No change. Federal cooperative agreements and grants 
often are viewed as ``contractual instruments'' because they are 
binding agreements between two parties. However, under the Federal 
Grant and Cooperative Agreement Act (31 U.S.C., Chapter 63), Federal 
grants and cooperative agreements are assistance instruments that are 
quite distinct from Federal procurement contracts, and the term 
``contract'' is used widely to mean procurement contracts in Federal 
statutes and rules for procurement instruments. If the DoD Grant and 
Agreement Regulations were to define the term ``contract'' 
inconsistently with the predominant Federal usage, it would create 
confusion for DoD Components, other Federal agencies, and Government 
contractors.
    Comment: The term ``assistance'' should be defined in Sec. 21.130 
to exclude ``other transactions.'' ``Other transactions'' can be 
written to be in the nature of assistance, but such legal instruments 
should not be considered to be ``assistance'' for purposes of 
applicable laws and regulations and should not be covered by the 
DoDGARs.
    Response: No change. ``Other transactions,'' as authorized by 10 
U.S.C. 2371, are any transactions other than contracts, grants, and 
cooperative agreements. DoD recognizes that there could be different 
types of ``other transactions,'' including some for providing 
assistance. Therefore, the rule can not state categorically that no 
``other transactions'' are subject to the laws and regulations that 
apply when a Federal agency provides assistance.
    Comment: Paragraph (b) of Sec. 21.110 states that the DoDGARs in 
certain situations may include rules that apply to other nonprocurement 
instruments, in addition to grants and cooperative agreements. It 
should expressly state

[[Page 12153]]

that the DoDGARs do not apply to ``other transactions.''
    Response: No change. Depending on the type of instrument it is, a 
particular ``other transaction'' may be subject to some DoDGARs rules--
such as the rule at 32 CFR part 25 on nonprocurement debarment and 
suspension--that apply to more types of instruments than just 
cooperative agreements and grants.
    Comment: The title of subpart C, part 21, currently is ``Grants 
Information,'' but it should be changed to recognize the applicability 
of the subpart to cooperative agreements and other nonprocurement 
instruments, as well as grants.
    Response: Agree. Changed the title to ``Information Reporting on 
Grants, Cooperative Agreements, and Other Nonprocurement Instruments.''
    Comment: The use of the term ``transaction'' in Sec. 22.220, 
``Exemptions,'' a section that otherwise addresses only grants and 
cooperative agreements, may lead to confusion with the term ``other 
transaction.''
    Response: Revised the first sentence of Sec. 22.220 to make it 
clear that the use of the term ``transaction'' in this case directly 
follows from the section of the Federal Grant and Cooperative Agreement 
Act (31 U.S.C. 6307) that authorizes the Director of the Office of 
Management and Budget to exempt an agency transaction.
    Comment: The wording of paragraph (b) of Sec. 21.205, on the need 
for specific statutory authority to use a grant or cooperative 
agreement, may cause confusion. It may cause a grants officer to 
believe that an authorizing statute must specifically state that a 
grant or cooperative agreement may be used. What is required is that 
the intent of the authorizing statute must support the use of an 
assistance instrument.
    Response: Agree. Revised the paragraph to say that the intent of 
the authorizing statute must support the use of an assistance 
instrument.
    Comment: The last sentence in paragraph (b)(2) of Sec. 21.205 
should provide a more general statement about authorizing statutes that 
do not require delegation by the Secretary of Defense, consistent with 
the paragraph's heading, ``Authorities that rise indirectly as a result 
of statute.'' The last sentence merely provides one example.
    Response: Added a general statement to the paragraph.
    Comment: Paragraph (a)(2) of Sec. 22.205 should be revised to 
reflect the intent of 10 U.S.C. 2358, which allows the use of 
cooperative agreements for some development projects.
    Response: No change. Paragraph (a)(2) of Sec. 22.205 does permit 
the use of a cooperative agreement for a development project, in 
accordance with the Federal Grant and Cooperative Agreement Act (31 
U.S.C., Chapter 63), if the principal purpose of that development 
project is assistance. The paragraph correctly notes that the principal 
purpose of almost all DoD development projects is acquisition, and that 
it therefore is not appropriate to use assistance instruments for 
carrying out those projects.
    Comment: The last sentence of paragraph (a)(2) of Sec. 22.205 
should be revised to recognize that there is statutory authority to use 
``other transactions,'' as well as contracts, to carry out prototype 
projects relevant to weapons or weapons systems.
    Response: Agree. Revised the sentence to recognize the use of 
acquisition transactions other than contracts.
    Comment: Paragraph (b) of Sec. 22.210 broadens the applicability of 
10 U.S.C. 2358. It requires that any research project carried out 
through a grant or cooperative agreement must be relevant to defense 
missions or interests, even if the grant or cooperative agreement is 
awarded under a statutory authority other than 10 U.S.C. 2358. The 
paragraph should be modified, to limit this requirement to grants and 
cooperative agreements used to carry out research projects under the 
authority of 10 U.S.C. 2358.
    Response: The requirement for defense relevance in 10 U.S.C. 2358 
applies to research projects carried out under other authorities. 
Specifically, under paragraph (c) of 10 U.S.C. 2358, any research 
project carried out with funds appropriated to a DoD Component must 
comply with that requirement. Revised paragraph (b) of Sec. 22.210 to 
clarify the broader applicability of the statute.
    Comment: The DoD should clarify the relationship of part 32, which 
implements OMB Circular A-110, to parts 21 and 22. Doing so will let 
university and nonprofit recipients know the extent to which they must 
be familiar with those parts.
    Response: Agree. Added a new paragraph (b) to Sec. 32.1 to clarify 
that parts 21 and 22 provide guidance to DoD Components and grants 
officers and do not directly impose any requirements on recipients. 
Because that guidance indirectly affects recipients, the information in 
those parts concerning internal policies and procedures should be 
helpful to recipients of DoD awards.
    Comment: Part 34 imposes administrative requirements for awards to 
commercial organizations that are burdensome, costly, and different 
from normal commercial practice. Commercial firms that cannot meet the 
requirements of part 34 should be made subject to the future DoDGARs 
part on agreements with more flexible administrative requirements.
    Response: Replaced the term ``commercial organization'' throughout 
the rule with ``for-profit organization.'' A number of comments 
revealed that the rule's use of the term ``commercial organizations'' 
to include all for-profit organizations confused the many people who 
use the term ``commercial firms'' to mean the subset of for-profit 
firms that have not traditionally performed under cost-type contracts 
or assistance instruments from the Federal Government.
    The future DoDGARs part, as described earlier in this preamble, 
concerns a class of agreements for use in carrying out research 
programs to help integrate the defense and non-defense portions of the 
U.S. technology and industrial bases. A prime consideration in 
preparing that part is removing obstructions to participation in 
defense research by commercial firms that have not traditionally been 
Government contractors, where consistent with proper stewardship of 
Federal funds. That distinguishes the future DoDGARs part from part 34, 
which is intended to apply to the more general case of awards for any 
type of program performed by a for-profit firm.

Comments on Payments and Interest

    Comment: Paragraph (b)(2) of Sec. 22.810, paragraph (e)(1) of 
Sec. 32.22, and paragraph (e) of Sec. 34.12 address the 
responsibilities of DoD disbursing officers, as well as grants 
officers. The DoD Financial Management Regulation (the FMR, which is 
DoD 7000.14-R) addresses DoD disbursing officers' responsibilities. 
Therefore, these paragraphs of the DoDGARs should be revised to refer 
to the pertinent portions of the FMR, rather than create a duplicative 
set of rules.
    Response: Agree. Reorganized and revised section 22.810 to specify 
requirements only in areas that are grants officers' responsibilities 
and refer to DoD 7000.14-R for requirements that are disbursing 
officers' responsibilities. Similarly, revised paragraph (e)(1) of 
Sec. 32.22 and paragraph (e) of Sec. 34.12 to refer to Sec. 22.810, and 
thereby to DoD 7000.14-R.
    Comment: Sections 32.21(b)(5) and 32.22(l) should be revised to 
include references to the Cash Management Improvement Act (CMIA) that 
are contained in the corresponding paragraphs of OMB Circular A-110.

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    Response: Agree in part. The final rule restores the Circular A-110 
language in Sec. 32.21(b)(5), because some provisions of the CMIA may 
apply in rare instances to universities or nonprofit organizations. The 
reference to the CMIA in Sec. 32.22(l), however, is not restored; the 
Circular should be amended to delete that reference, to conform to 
updated Department of the Treasury regulations implementing the CMIA.
    Comment: Paragraph (l) of Sec. 32.22 should be revised to provide 
details about the data and format requirements for electronically 
remitting interest earned on advance payments, to facilitate direct 
deposit in the Department of the Treasury account for the Division of 
Payment Management of the Department of Health and Human Services' 
(DHHS/DPM).
    Response: Revised this section to advise recipients that current 
information on the format for electronic submissions of interest 
payments should be obtained from the administrative grants officer. 
This will help to ensure that recipients have up-to-date information. 
If the information were codified in the DoDGARs, recipients would 
experience delays due to the regulatory process each time that changes 
were made in formats or data elements for electronic remittances.

    Note: University and nonprofit recipients that are subject to 
the DoDGARs part 32 are advised of the following details about the 
current format for electronic submissions, to help ensure direct 
deposit of electronic remittances to the account of the DHHS/DPM: 
the preferred funds transfer format is CCD+; the American Banking 
Association routing number 05103670 should appear in the third 
field; the check digit in the fourth field is a six (6); and the 
account number for the DHHS/DPM, which is 303000, should appear in 
the fifth field.

    Comment: The rules need to be revised to implement requirements in 
the Debt Collection Improvement Act of 1996 (Title 31, Pub. L. 104-134) 
to: obtain each recipient's Taxpayer Identification Number (TIN); 
include the TIN with each payment authorization forwarded to the 
disbursing office; and pay recipients by electronic funds transfer 
(EFT).
    Response: Paragraph (d) of Sec. 22.420, which contains the 
requirement to obtain each recipient's TIN, is revised to conform to 
the new law and refer to it. Revisions to Sec. 22.810 implement the 
requirements for forwarding TINs with payment authorizations and for 
payment by EFT. Section 22.605 and Appendix C to part 22 also are 
revised, to ensure that award documents alert recipients and disbursing 
officers to the requirement for payment by EFT.
    Comment: Section 34.12, ``Payment,'' states that reimbursement is 
the preferred method of payment and makes no provision for payments of 
fixed amounts for accomplishment of technical milestones. Perhaps the 
technical-milestone method of payment is intended to be covered in the 
new DoDGARs part, still in draft, on flexible research agreements. Many 
commercial companies are unable or unwilling to contract with DoD when 
payments will be made on a cost reimbursement basis.
    Response: No change. The milestone payment method is associated 
with the new type of research agreement that will be covered by a 
future DoDGARs part.
    Comment: Under Sec. 34.12, for-profit recipients must remit any 
interest earned to the DoD Component that made the award. It would be 
better to have the recipient remit the interest to the Defense 
Contracting Management Command (DCMC) office that has the 
responsibility for administering the agreement, by delegation from the 
DoD Component that awarded the agreement.
    Response: Revised Sec. 34.12 to provide for remittance of interest 
to the administrative grants officer that is responsible for post-award 
administration of the agreement.

Comments on Debt Collection

    Comment: Paragraph (c)(2)(iv) of section 22.820 does not state how 
the interest rate will be determined, when a recipient owes the 
Government interest on a debt. The paragraph should provide for simple 
interest at the rate fixed by the Secretary of the Treasury under Pub. 
L. 92-41.
    Response: Added a reference in this section to the DoD Financial 
Management Regulations (FMR) for rules covering interest costs. The FMR 
explains how the interest rate is determined.
    Comment: Section 22.820, ``Debt Collection,'' says that the 
recipient still may elect to appeal after the grants officer turns over 
a debt to the Defense Finance and Accounting Service (DFAS) for 
collection. Once a debt is turned over to DFAS, the debt collection 
rules in the Financial Management Regulation will apply, and DFAS may 
not decide to defer the debt to allow an appeal.
    Response: Revised this section to clarify that further action to 
collect the debt is deferred, to allow time for an appeal, only when 
the recipient notifies the grants officer within the 30-day prescribed 
time period of its intent to appeal. If the recipient does not so 
notify the grants officer within that period, the debt is transferred 
to DFAS for collection.

Comments on Claims, Disputes, and Appeals

    Comment: Section 22.815, ``Claims, disputes, and appeals,'' says 
that a recipient's appeal of a grants officer's final decision is to be 
based 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. It would be desirable to give the recipient the 
right to a hearing before the Grant Appeal Authority, if requested.
    Response: No change. The rules permit the Grant Appeal Authority to 
conduct an oral hearing, and a reasonable request from a recipient 
would be a basis for doing so. However, creating the right to a hearing 
is a step toward instituting a more formal appeals process, and there 
is no current problem that justifies the increased Government 
administration, with attendant burdens and costs, that is associated 
with a more formal process. Instituting a more formal process also runs 
counter to the direction taken in the rule, to strongly encourage 
Alternative Dispute Resolution and other less cumbersome means of 
resolving disputes.
    Comment: Under Sec. 22.820, ``Debt collection,'' a debt owed by a 
recipient, based on a DoD Component's claim, bears interest and may 
include penalties and other administrative costs. Recommend adding a 
provision that recipient claims also bear interest.
    Response: No change. A Federal agency may pay interest on claims 
only when it has statutory authority to do so.
    Comment: Paragraph (d)(2) of Sec. 22.815, ``Claims, disputes, and 
appeals,'' states that a grants officer's decision is final, but then 
goes on to say that it can be appealed. A decision that can be appealed 
isn't final.
    Response: Revised the paragraph to clarify that the decision is 
final, unless the recipient decides to appeal.

Comments on Cost Sharing, Budget Revisions, and Other Cost-Related 
Matters

    Comment: Paragraph (b) of section 32.23, ``Cost sharing and 
matching,'' requires the grants officer's prior approval for a 
university's or nonprofit organization's use of unrecovered indirect 
costs as cost sharing or matching. Recipients should be authorized, as 
a matter of DoD policy, to so use unrecovered indirect costs.
    Response: Revised this paragraph to remove the prior approval 
requirement.

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    Comment: Paragraph (c)(2) of Sec. 32.23, ``Cost sharing and 
matching,'' specifies ``current fair market value'' as one metric for 
valuing buildings or land donated by a recipient as cost sharing or 
matching. The paragraph should include a statement that the DoD 
Component may use any reasonable basis for determining the fair market 
value.
    Response: Revised the paragraph to add the suggested statement.
    Comment: Paragraph (d)(1) of Sec. 32.25, ``Revision of budget and 
program plans,'' gives DoD Components the option to waive certain cost-
related and administrative prior approvals required by OMB Circulars A-
110, A-21, and A-122. It would be preferable for these waivers to be 
made the standard practice, rather than optional.
    Response: No change. DoD awards grants and agreements to university 
and nonprofit recipients for various types of programs. Some recipients 
and programs need more oversight than others. DoD Components therefore 
need the flexibility provided by the OMB circulars to judge on a case-
by-case basis whether they can waive these prior approvals. 
Furthermore, some of the prior approvals in the cost principles (OMB 
Circulars A-21 and A-122) relate to system-wide methods for handling 
indirect costs that should not be waived without first consulting with 
the cognizant agency responsible for negotiating the recipient's 
indirect cost rate.
    Comment: Paragraph (d) of Sec. 32.25, ``Revision of budget and 
program plans,'' does not include the language from the corresponding 
section of OMB Circular A-110 that permits a university or nonprofit 
recipient to initiate a one-time extension of the expiration date of an 
award, without the Federal agency's prior approval, if the extension 
requires no additional Federal funds (i.e., it is a ``no-cost 
extension''). Recommend that DoD include language authorizing 
recipients to initiate no-cost extensions, with the requirement that 
the recipients notify DoD of the actions. Regardless of the final 
resolution of the matter, Sec. 32.25 should clearly state whether DoD 
requires prior approvals for no-cost extensions, rather than remaining 
silent and leaving university and nonprofit recipients in doubt about 
the policy.
    Response: Revised the section to state that DoD Components may 
waive the prior approval requirement on a case-by-case basis, when the 
Components judge that doing so would not cause them to fail to comply 
with DoD incremental programming and budgeting policies. Those policies 
specify the period during which a given fiscal year's appropriations 
are to be used (e.g., that one fiscal year's research funds usually are 
to support effort only through the first three months of the next 
fiscal year).
    Comment: It is unnecessary to give DoD Components the option to 
require university or nonprofit recipients to obtain the agency's prior 
approval for rebudgeting between direct cost categories on awards in 
excess of $100,000, as provided in paragraph (e) of Sec. 32.25, 
``Revision of budget and program plans.'' Paragraph (e) even appears to 
contradict paragraphs (c) (1) through (5) of Sec. 32.25, which specify 
prior approval requirements for other budget revisions related to 
nonconstruction awards.
    Response: DoD Components need the flexibility provided by OMB 
Circular A-110 to require prior approvals for such budget changes, 
because some types of programs for which DoD Components use grants and 
agreements require more oversight than others. Nonetheless, this prior 
approval requirement generally is not appropriate for grants to support 
research, the likely object of the comment. Paragraph (e) of Sec. 32.25 
is revised to include a statement to that effect. While there are no 
apparent contradictions between paragraphs (c) and (e) of Sec. 32.25, 
also revised paragraph (c) to refer to paragraph (e), to help prevent 
confusion about prior approval requirements for rebudgeting actions 
related to nonconstruction awards.
    Comment: The DoD should restore to paragraph (c) of Sec. 32.25 the 
requirement in the corresponding paragraph of OMB Circular A-110 for 
recipients to obtain prior approval before revising the budget in a way 
that transfers amounts budgeted for indirect costs to absorb increases 
in direct costs, or vice versa, if the awarding office wishes to 
approve such transfers.
    Response: Agree in part. The language is restored in that paragraph 
of the final rule, but with a caveat that requiring prior approval for 
such budget revisions should be required only in exceptional 
circumstances. That change addresses the rare cases in which an 
assistance program may require more Government oversight.
    Comment: Section 34.13, ``Cost sharing or matching,'' should be 
revised to address for-profit recipients' use of Independent Research 
and Development (IR&D) costs to meet cost sharing or matching 
requirements. The section should conform with Federal Acquisition 
Regulation (FAR) coverage for procurement contracts, at 48 CFR 31.205-
18(e), which says that contributions of IR&D costs under certain types 
of cooperative arrangements may be treated as allowable indirect costs, 
if the work performed would have been allowed as IR&D had there been no 
cooperative arrangement.
    Response: Revised this section to provide coverage for assistance 
instruments that conforms with the FAR coverage for procurement 
contracts.
    Comment: Section 34.16, ``Audits,'' should state that a for-profit 
recipient's audit costs are allowable as direct charges to the 
agreement. Also, the section should state whether audit costs are 
subject to cost sharing requirements.
    Response: Added language to clarify that audit costs are allowable 
as direct or indirect costs, as appropriate. Cost sharing requirements 
apply to total project costs, of which audit costs are an element; 
there is no need to include language in the rule to specifically 
address the applicability of cost sharing requirements to audit costs 
or the many other specific types of direct or indirect cost that 
comprise the total project costs.
    Comment: Section 34.11, ``Standards for financial management 
systems,'' seems to not require for-profit recipients to do employee 
time reporting more frequently than monthly and permits reports to 
coincide with one or more pay periods. Many firms keep daily records 
for their DoD contract business--is the difference intended?
    Response: The intent of the standards is to have records that 
accurately reflect the distribution of the actual activity of each 
employee that has salary or wages charged to DoD awards, and to keep 
paperwork burdens to the minimum that is necessary for that purpose. 
The rule provides flexibility for the recipient because the reporting 
frequency needed to ensure accurate records may vary, depending upon 
the circumstances. For example, if an employee works on just one 
project, there probably is no need to record time spent on various 
tasks more frequently than monthly. However, if an employee works on 
many projects, it is likely that more frequent recording of time spent 
on specific tasks is necessary.
    Comment: Section 34.17, ``Allowable costs,'' provides that for-
profit recipients of prime awards, as well as for-profit subrecipients 
under prime awards, determine the allowability of costs in accordance 
with the Federal Acquisition Regulation (FAR). Section 32.27 similarly 
requires university and nonprofit recipients to flow down the FAR cost 
principles to for-profit subrecipients under their prime awards. Most 
commercial firms are unable to comply with these requirements--

[[Page 12156]]

Generally Accepted Accounting Principles (GAAP) should be applied, 
instead.
    Response: DoD recognizes that alternatives to the FAR cost 
principles may be appropriate for use with certain types of research 
investment agreements that involve for-profit firms, due to cost 
matching and other characteristics of the agreements--such agreements 
will be covered by a future part of the DoDGARs. One change is made at 
this time in Sec. 32.27 of the final rule. The provisions of part 34 
will be revised, as needed, when that future part is adopted. At this 
time, those provisions are appropriate because part 34 applies to any 
type of program, not just research, that is performed by for-profit 
firms, not just commercial firms that have not traditionally done 
business with the Government.
    Comment: Requirements for the allowability of costs for for-profit 
firms appear in paragraph (f) of Sec. 32.27 in part 32, but part 32 
applies to awards to universities and other nonprofit organizations, 
rather than to awards to for-profit firms. This is confusing.
    Response: For-profit firms are mentioned in part 32 because they 
may be subawardees under prime awards to universities and nonprofit 
organizations, and the prime awardees need to know which requirements 
apply to those subawards.
    Comment: The definition of ``third-party in-kind contributions'' in 
Sec. 34.2, ``Definitions,'' is confusing to commercial firms. The rule 
should clarify how third parties would contribute to the project and 
what their rights and responsibilities are.
    Response: No change. The definition relates to Sec. 34.13, ``Cost 
sharing or matching,'' which specifies how one values third-party 
contributions, which include services of others' employees, volunteer 
services, and property donated by third parties. The definition and 
rules in part 34 on valuing third-party in-kind contributions parallel 
the Governmentwide guidance in OMB Circular A-110, as implemented in 
part 32 of the DoDGARs, for university and nonprofit recipients. While 
third-party contributions are not expected to be encountered as often 
by for-profit recipients as they are by university and nonprofit 
recipients, they can occur and it therefore is useful to include rules 
on how to value the contributions. It would be inappropriate for DoD 
rules to specify rights or responsibilities of third parties making 
such contributions--those properly would be worked out by the 
recipients and third parties.

Comments on Program Income and Revisions of Program Plans

    Comment: The definition of ``program income'' in section 34.2 is 
too broad because it includes gross income that is ``earned as a result 
of the award,'' and not just income earned by a for-profit recipient 
that is ``directly generated by a supported activity.'' This is 
especially problematic when coupled with the requirement in paragraph 
(b)(2) of Sec. 34.14 for the grants officer to consider whether the 
recipient has any obligation for program income generated after the 
project period is over. The purpose of many agreements is to stimulate 
development of technology that will generate income into the U.S. 
economy long after the project's end, thereby benefiting the 
Government.
    Response: No change. This section applies mainly to program income 
earned during the project period. Any Federal interest in program 
income earned after that period must be provided for in the award, 
based on an understanding between the recipient and the Government at 
the time the award is negotiated. These rules apply to various 
programs, not just research; even for research, one can not rule out in 
all cases the appropriateness of a recipient's obligation to the 
Government with respect to program income that is generated after the 
project period. In cases where it is appropriate, the grants officer 
must have the same flexibility as a firm's representatives to negotiate 
agreement terms that are fair and equitable to both the firm and the 
Government.
    Comment: The requirement in paragraph (c) of Sec. 34.15 to 
immediately request and gain prior approval when making decisions 
regarding key personnel exceeds the provisions of most procurement 
contracts. The recipient should only have a requirement to promptly 
notify the Government when a change in key personnel is made.
    Response: No change. The prior approval requirement applies only to 
key personnel specified in the application or award document. Usually, 
the experience and qualifications of such key personnel are prime 
considerations in making an assistance award, and the Government should 
be consulted before the recipient makes changes in those personnel. 
This is a standard requirement in Federal agency rules governing 
assistance awards, providing one illustration of the ways in which 
assistance relationships differ from acquisition relationships that are 
consummated through procurement contracts.

Comments on Property

    Comment: It is not clear why some of the terms related to property 
in part 32, which implements OMB Circular A-110, are used or defined 
differently than in the Circular.
    Response: Part 32 of the proposed rule included some nonsubstantive 
technical improvements to the language of the Circular. For example, 
the proposed rule replaced the term ``supplies and other expendable 
property'' with the term ``supplies'' in two places (in Sec. 32.35 and 
in the definition in Sec. 32.2 of ``third party in-kind 
contributions'') because the term ``supplies'' includes all expendable 
property. Similarly, the proposed rule deleted the term ``expendable 
equipment'' in Sec. 32.23(f) because the term is self-contradictory 
(given that ``equipment,'' as defined, is nonexpendable property).
    Comment: Paragraph (b) of Sec. 32.35, ``Supplies,'' states that 
university and nonprofit recipients 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. Suggest adding another provision to address 
recipients providing commercially acquired services.
    Response: No change. DoD is not aware of any instance in which a 
university or nonprofit recipient has provided to outside organizations 
commercially acquired services that were obtained under a Federal 
award. If a problem arises in this area, it should be addressed through 
a revision to the Governmentwide guidance in OMB Circular A-110, so 
that it will be implemented by all Federal agencies.
    Comment: Paragraph (b) of Sec. 34.21 provides that for-profit 
recipients receive only a conditional title to equipment purchased in 
whole or in part with Federal funds. Among the conditions, which are 
specified in Secs. 34.21 and 34.23, are that the recipient: Keep track 
of real property or equipment for a project; make the property 
available for use on other projects on a non-interfering basis and in a 
certain order of priority; assess charges for the property's use to 
Federal contracts or projects not supported by any Federal agency, 
treating those use charges as program income; and handle the 
disposition of the property at project's end, compensating the 
Government for its share of the current fair market value. These are 
burdensome requirements; the provisions of Sec. 34.23, for example, 
will require commercial firms to establish costly property management 
systems. Recommend

[[Page 12157]]

instead that recipients be given unconditional title to any equipment 
purchased in part with recipient funds and in part with Federal funds.
    Response: No change. A Federal agency needs specific authority to 
vest title to equipment unconditionally. Therefore, the section 
correctly states that the title shall be a conditional title 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 conditions of the title are reasonable, 
because they apply specifically to property in which the Federal 
Government has a continuing financial interest. The provisions of 
Sec. 34.23, for example, which are based on OMB Circular A-110's 
Governmentwide guidance for assistance awards, maintain accountability 
for Federally owned property and for equipment that is acquired with 
Federal funds under an award.
    Comment: Under paragraph (c) of Sec. 34.21, a for-profit recipient 
may offer real property or equipment that is purchased with recipient 
funds or donated by a third party to meet a portion of any required 
cost share or match. However, the Government then has a financial 
interest in the property, a share of the value attributable to the 
Federal participation in the project. The property then is subject to 
provisions of the rule concerning the property's encumbrance, disposal, 
tracking, and use for projects other than the one for which it is being 
used to meet cost sharing requirements. This policy is inequitable, 
unnecessary, and will discourage commercial firms from entering into 
cooperative arrangements with the Department of Defense. We are not 
aware of any Federal agency taking this position for real property or 
equipment purchased by recipients or donated by third parties.
    Response: Revised the section to clarify that these provisions 
apply to property acquired with recipient funds or donated by a third 
party only when the full value of the property is accepted as the value 
of the contribution toward cost sharing or matching. With that 
clarification, the provisions of this section are based on 
Governmentwide policies established by OMB Circulars A-110 and A-102 
for assistance awards to universities and nonprofit organizations and 
certain awards to State and local governments--Circular A-110 also 
states that its provisions may be used for awards to for-profit 
organizations, and DoD understands that other Federal agencies do so.
    It is important to note that accepting the full value of property 
as the value to be counted for purposes of cost sharing or matching is 
the exception rather than the rule. Usually, one only would count the 
depreciation of the property during the project period or the cost of 
using the property, either of which normally is a fraction of the full 
value. There is no issue with title in those cases, because the 
recipient owns unconditionally any property purchased with its own 
funds or donated to it by a third party.
    In the exceptional cases where the full value is used for cost 
sharing or matching purposes, the recipient is effectively donating the 
property to a project that it and the Government are jointly 
supporting. It would defeat the purpose of cost sharing in such cases 
if the recipient kept the asset, free and clear, after contributing the 
asset's full value toward its share of the support for the project. The 
provisions of the rule to which the property is subject in those 
exceptional cases (e.g., that the recipient keep track of the property 
and not encumber it without the grants officer's approval) are 
reasonable.
    Comment: Upon completion of a project, if there is an inventory of 
leftover unused supplies that are not needed for other Federal projects 
and the inventory's value exceeds $5,000, Sec. 34.24 states that a for-
profit recipient is to reimburse the Federal Government for its share 
of the value. This means that supplies will be subject to controls that 
are very costly and administratively burdensome, such as the 
requirements in Sec. 34.23 for the recipient's property management 
system.
    Response: No change. Normally, recipients should be buying supplies 
as needed for the project and expensing them when used. Therefore, 
large inventories of unused supplies should not be left over at the end 
of the project. If the value of unused supplies equals that of an item 
of equipment, it should reimburse the Government for its share of the 
cost of those supplies. With respect to the applicability of the 
specific requirements in Sec. 34.23 for the recipient's property 
management system, that section applies to equipment acquired under the 
award, but not supplies; the rule only states the requirement 
concerning large inventories of unused supplies charged to the project, 
and the recipient determines what system it will use to comply with the 
requirement.
    Comment: Section 34.25 states that the Government has the right, 
unless it is waived by the DoD Component, to obtain, reproduce, publish 
or otherwise use the data first produced under an award. This section 
should be revised to state that the data may be used only for Federal 
Government purposes.
    Response: Revised this section to clarify that the data may be used 
only for Federal Government purposes.
    Comment: The intellectual property rights accorded the Government 
under assistance awards to for-profit firms, in Sec. 34.25, are a 
disincentive to industry to participate in cooperative agreements. The 
regulations should not set a rigid minimum set of rights which the 
Government must obtain in every case. Instead, the regulation should 
state that the grants officer may negotiate an allocation of rights 
that is fair and equitable depending upon the circumstances of the 
particular agreement.
    Response: No change other than the clarification on data rights 
described in the response to the preceding comment. For patents, the 
rule provides the grants officer with all of the flexibility in current 
statute and executive order applicable to grants and cooperative 
agreements. For copyrights, data, and software, the rule's provisions 
are appropriate for intellectual property generated with Federal 
support under most assistance awards, and grants officers can handle 
the exceptional cases through the usual deviation procedure. One class 
of instruments that DoD plans to handle differently is the class of 
research investment agreements, with cost matching and other 
distinguishing features, that will be the subject of a future DoDGARs 
part.
    Comment: Section 34.25 states that awards are to include the patent 
clause specified by Department of Commerce (DoC) regulations at 37 CFR 
401.14. The section should be modified to allow for-profit firms to 
obtain rights in subject inventions of subawardees that are small 
businesses or nonprofit organizations. Otherwise, the patent clause in 
the DoC regulations will preclude a firm from doing so, even if the 
for-profit awardee has paid in part for the subawardees' effort as part 
of its cost share.
    Response: No change. The comment relates primarily to the new class 
of research investment agreements that will be the subject of a future 
DoDGARs part. For cooperative agreements covered by part 34, grants 
officers already can handle any individual cases where alternative 
provisions are justified, by making determinations of exceptional 
circumstances under 37 CFR 401.3(a)(2) in the DoC regulations.
    Comment: Section 34.25 should be revised to provide an 
``authorization and consent'' clause to be included in cooperative 
agreements with for-profit

[[Page 12158]]

recipients. The clause would say that the Government authorizes and 
consents to all use and manufacture by the recipient, in the 
performance of the cooperative agreement or any subaward, of any 
invention described in and covered by a United States patent.
    Response: No change. It would not be appropriate to include a 
clause in cooperative agreements authorizing a recipient's or 
subrecipient's infringement of U.S. patents held by other parties.

Comments on Procurement

    Comment: Section 34.31, which specifies requirements for 
procurements made by for-profit recipients of DoD assistance awards, 
contains requirements that often differ significantly from standard 
commercial practices. For example, the section provides that preaward 
documents may be subject to preaward review by the grants officer. 
Also, this section requires certain Government flowdown and audit 
provisions. The requirements will require commercial firms to draft 
Government terms and conditions for subcontracts, and to establish 
Government-unique purchasing requirements. Recommend these requirements 
be eliminated.
    Response: In response to the general comment, the few requirements 
in this section were carefully selected from the much larger set of 
requirements specified by OMB Circular A-110 for university and other 
nonprofit recipients of Federal assistance. They are judged to be the 
minimal set of requirements that are needed to ensure proper 
stewardship of Federal assistance.
    In response to the first specific comment on preaward review of a 
recipient's procurement documents, the word ``exceptional'' was added 
to the sentence that advises the grants officer that preaward review is 
the exception rather than the rule. The sentence now states that 
recipients will only be required to provide such documents for the 
grants officer's pre-award review in exceptional cases where the grants 
officer judges that there is a compelling need to do so. For those 
projects where there is substantial involvement by the Government and a 
procurement is central to the success of the project (e.g., the 
purchase of a large computer to be used jointly by a recipient and 
Government researchers), DoD believes that the Government's right to a 
preaward review of the procurement documents can be essential.
    With respect to the second specific comment on flowdown of 
Government-unique requirements to contracts under assistance awards, 
many of the requirements are required by law, regulation, or executive 
order--DoD therefore cannot waive them and they must be included when 
they are applicable, as the rule states. The few other requirements are 
those carefully selected as the minimal set for proper stewardship for 
most financial assistance, such as the standard access to records by 
DoD, the Comptroller General, and their duly authorized 
representatives. As it prepares the future DoDGARs part for a specific 
class of research investment agreements, DoD will consider which 
requirements might be waived in light of the substantial cost sharing 
and other special features of that class of instruments.
    Comment: The Office of Management and Budget expressed concern that 
Sec. 32.44 included a $10 million threshold, below which a recipient 
would not have to maintain its procurement procedures in writing. The 
concern is that the threshold would create substantive differences 
between requirements of the DoD and those in other Federal agencies' 
implementation of OMB Circular A-110.
    Response: The provision was revised, as requested. The Office of 
Management and Budget has agreed to explore the possibility of amending 
OMB Circular A-110 to establish for all Federal agencies' awards a 
dollar threshold below which recipients would be relieved of the 
requirement to maintain procurement procedures in writing.
    Comment: The definition of ``contract'' in Sec. 21.130 refers to it 
as an instrument reflecting a certain type of relationship between the 
Federal Government and a State, a local government, or other person. 
Suggest adding the words ``or entity'' after the word ``person.''
    Response: Replaced the word ``person'' with ``recipient,'' which is 
the term used at 31 U.S.C. 6303 in the Federal Grant and Cooperative 
Agreement Act, the defining statute that specifies when it is 
appropriate for Federal agencies to use contracts. The term 
``recipient'' covers persons and other entities.
    Comment: Change the wording of the definition of ``contract'' in 
Sec. 34.2 to clarify that there can be subcontracts under a grant or 
cooperative agreement.
    Response: Revised the wording to clarify that the term ``contract'' 
includes: Recipients' procurement contracts under DoD assistance 
awards; subrecipients' procurement contracts under assistance 
subawards; and procurement subcontracts under contracts awarded by 
recipients or subrecipients.

Comments on Records Retention

    Comment: The first and second sentences in paragraph (e) of 
Sec. 34.42 provide that: (1) 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 certain records of for-profit recipients that are pertinent 
to awards; and (2) this right includes timely and reasonable access to 
a recipient's personnel for the purpose of interview and discussion 
related to such documents. In the first sentence, recommend replacing 
the words ``duly authorized representatives'' and the words 
``unrestricted access'' with ``duly authorized Government 
representatives'' and ``access during normal working hours,'' 
respectively. Recommend deleting the second sentence, which goes beyond 
what is authorized in existing law.
    Response: No change. The wording of this section mirrors that of 
the Governmentwide guidance in OMB Circular A-110 for assistance awards 
to nonprofit organizations, guidance issued after legal review by all 
major Federal agencies and with the benefit of public review and 
comment. It is not necessary to add the words ``during normal working 
hours'' to clarify what is meant by ``reasonable access to a 
recipient's personnel,'' because it rarely would be reasonable to 
insist upon access at other times. Adding the word ``Government'' to 
``duly authorized representatives'' could be contrary to the increased 
reliance upon non-Federal auditors that accompanies the Governmentwide 
emphasis on the single-audit concept, which is broadened to for-profit 
recipients by the rule's Sec. 34.16. Finally, there is no intent to 
have the word ``interview'' interpreted in an extreme way that would 
appear to give the Government access that exceeds its statutory 
authority.
    Comment: In light of the increasing transfer of records from hard 
copy to electronic media, recommend including language similar to that 
in the Federal Acquisition Regulation at 48 CFR 4.703(d), which 
implemented Pub. L. 103-335's requirements concerning such transfers 
for procurement contracts.
    Response: Added new paragraphs to both Sec. 32.53, for awards to 
university and other nonprofit recipients, and Sec. 34.42, for awards 
to for-profit firms.

[[Page 12159]]

Comments on Termination and Enforcement

    Comment: Paragraph (a)(1) of Sec. 34.51 provides that the grants 
officer may terminate awards to a for-profit firm if the recipient 
``fails to comply with the terms and conditions of an award.'' It 
should be amended to say ``fails to comply with the material terms and 
conditions.''
    Response: No change. The provision already says ``materially fails 
to comply with the terms and conditions.''
    Comment: Section 34.51 should be revised to provide the Government 
the same flexibility it has with procurement contracts to unilaterally 
terminate awards to for-profit firms for reasons other than non-
performance or non-compliance.
    Response: No change. This is an example of a basic difference 
between procurement and assistance relationships. Other than 
terminations for cause, the Government should be able to terminate 
assistance awards only by mutual agreement with the recipient, as the 
rule provides.
    Comment: It should be expressly specified in paragraph (a) of 
Sec. 34.52 that a for-profit recipient is to be paid all of the 
allowable costs that it incurred prior to termination if the award is 
terminated for failure to comply with a material provision of the 
award.
    Response: Revised paragraph (a)(3) of Sec. 34.52 to state that, in 
the case of termination, the recipient will be reimbursed for allowable 
costs it incurred prior to termination, with the possible exception of 
costs for activities or actions not in compliance.

Comments on National Policy Requirements

    Comment: Appendix B to part 22 contains a requirement for the 
grants officer to include an award clause implementing the ``officials 
not to benefit'' statute. That statute (41 U.S.C. 22) was amended by 
section 6004 of the Federal Acquisition Streamlining Act (FASA), to 
eliminate the requirement to include a clause. This is an unnecessary 
clause and should be deleted.
    Response: No change. Due to FASA's amendment of 41 U.S.C. 22, the 
statute itself no longer requires an ``officials not to benefit'' 
clause in Federal awards. However, recipients of Federal awards still 
must comply with the ``officials not to benefit'' requirement in 41 
U.S.C. 22, just as they must comply with all other applicable U.S. 
statutes and Federal regulations. Compliance with those requirements is 
inherently a condition of the award; while a general award clause could 
require compliance with all applicable Federal statutes and 
regulations, without identifying any of them, fairness dictates that 
recipients be informed about specific requirements whenever possible. 
For that reason, Appendix B to part 22 offers clauses that the grants 
officer may use to communicate the requirements to recipients.
    Comment: Appendix B to part 22 flows down to subrecipients a number 
of requirements for which that flowdown apparently is not required by 
law. They include nondiscrimination items a., b., d., and e., as well 
as the Cargo Preference and Clean Air and Water Acts.
    Response: No change. Each of these requirements does flow down to 
subrecipients, as stated in the appendix, due to the implementation of 
the statute in Federal regulation. By helping to clarify the 
applicability to awards and subawards of the most common national 
policy requirements, the appendix should be useful to both grants 
officers and recipients.
    Comment: Appendix B to part 22 states that the Architectural 
Barriers Act applies to awards for the construction or alteration of 
buildings or facilities which will require public accessibility. There 
is no basis in law or regulation for limiting the applicability of the 
Act to buildings that require public accessibility (employees, for 
example, may be disabled and usually are not considered members of the 
public). The only statutory exemption is for certain types of 
facilities that are restricted to use only by able-bodied military 
personnel.
    Response: Corrected the statement in the appendix on the 
applicability of the Act.
    Comment: Section 22.510(a)(2)(ii) states that grants officers may 
allow recipients to incorporate certifications into a provision that 
cites them by reference, rather than providing the full text of the 
certification with each proposal or award document. In accordance with 
statute or codified regulations, certain certifications cannot be 
incorporated by reference.
    Response: No substantive change. For the three certifications 
(debarment and suspension, drug-free workplace, and lobbying) that 
currently are required, the Department has concluded that the pertinent 
statutes, Executive order, and DoD regulations (32 CFR parts 25 and 28) 
do not presently preclude incorporation of the certifications by 
reference. For clarity, the final rule includes additional statements 
that certifications may be incorporated by reference to the extent 
consistent with statute and codified regulation.
    Comment: Section 22.510 states that Appendix A to part 22 includes 
``suggested'' language for incorporating certifications by reference. 
However, this is not permitted because the certification language is 
required, not suggested.
    Response: The language in Appendix A incorporates by reference the 
exact certification language that is required to comply with statute 
and codified regulation. To alleviate the confusion, the term 
``suggested'' is removed from Sec. 22.510 and Appendix A. Section 
22.510 now states that Appendix A ``includes language that may be used 
for incorporating certifications by reference.''
    Comment: Section 22.510(a)(2)(ii)(C) states that grants officers 
may obtain the certification concerning debarment and suspension at the 
time of award, notwithstanding the regulatory requirement at 32 CFR 
25.510(a) to obtain that certification at the time of proposal 
submission. The Office of Management and Budget is concerned that 
adoption of this provision would grant the DoD a deviation from the 
Governmentwide common rule on debarment and suspension, creating a 
nonuniformity with other Federal agencies.
    Response: The provision is revised, as suggested.

C. Other Changes

Changes for Audit Requirements and Conditional Exemptions

    On August 29, 1997 (62 FR 45934 ff.), subsequent to the DoD's 
proposal of these rules for comment, the Office of Management and 
Budget made two changes to OMB Circular A-110. The first change was to 
delete references to OMB Circular A-128, ``Audits of State and Local 
Governments,'' which recently was rescinded, and to refer instead to 
the revised OMB Circular A-133, ``Audits of States, Local Governments, 
and Non-Profit Organizations.'' Part 32 in these final rules, which is 
the DoD's implementation of OMB Circular A-110, includes this change. 
Conforming changes also were made in part 22 of these final rules.
    The second change made by the Office of Management and Budget to 
OMB Circular A-110 was to add a new section that addresses conditional 
exemptions. The applicability of that new section to the DoD is under 
review and will be addressed in a future rulemaking action.

[[Page 12160]]

Deferral of Final Action on Proposed Changes to 32 CFR Part 33

    As requested by the Office of Management and Budget, the DoD agreed 
to defer final action on the two proposed amendments to part 33, 
``Uniform Administrative Requirements for Grants and Cooperative 
Agreements to State and Local Governments,'' which is the DoD's 
implementation of a Governmentwide rule. Those two proposed changes 
were to implement: (1) The Resource Conservation and Recovery Act (42 
U.S.C. 6962); and (2) changes made by the Federal Acquisition 
Streamlining Act of 1994 to the Contract Work Hours and Safety 
Standards Act (40 U.S.C. 327-330, as amended). The deferral enables the 
Office of Management and Budget to coordinate these amendments with 
other Federal agencies and request that the agencies amend the 
Governmentwide rule.

Changes for Military Recruiting

    As stated in the DoD's preamble when these rules were proposed, the 
rule previously codified at 32 CFR part 23, ``Grants and Agreements--
Military Recruiting on Campus,'' is moved by this final rulemaking to 
section 22.520 in part 22. A few, nonsubstantive technical corrections 
are made to the language that previously appeared in part 23, to allow 
its incorporation into part 22.

Executive Order 12866

    Part 32 was determined to be a ``significant regulatory action,'' 
as defined by Executive Order 12866, by the Administrator of the Office 
of Management and Budget's Office of Information and Regulatory 
Affairs. The Department of Defense believes that none of the 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.

Unfunded Mandates Reform Act (Sec. 202, Pub. L. 104-4)

    These regulatory actions do not contain a Federal mandate that may 
result in the expenditure by State, local and tribal governments, in 
aggregate, or by the private sector, of $100 million or more in any one 
year.

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 parts 32 and 34 are those promulgated 
by the updated OMB Circular A-110, which the Office of Management 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 23

    Colleges and universities, Grant programs, Grants administration, 
Penalties.

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 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 revised as follows.
    1. The heading of subchapter B is revised to read as follows:

SUBCHAPTER B--DoD GRANT AND AGREEMENT REGULATIONS

    2. Part 21 is 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.

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--Information Reporting on Grants, Cooperative Agreements, and 
Other Nonprocurement Instruments
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

[[Page 12161]]

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 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 Sec. 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 cooperative agreement, if such deviations 
are not prohibited by statute, executive order or regulation.
    (b) Class deviations that affect more than one grant or cooperative 
agreement must be approved in advance by the Director, Defense Research 
and

[[Page 12162]]

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 DC 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 recipient 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 a procurement contract (for which Federal 
agencies have inherent, Constitutional authority), use of a grant or 
cooperative agreement to carry out a program requires authorizing 
legislation, the intent of which supports the use of an assistance 
instrument (e.g., the intent of the legislation authorizing a program 
supports a judgment that the principal purpose of the program is 
assistance, rather than acquisition). 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 
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. When a statute authorizes the head of a DoD Component to 
use a grant or cooperative agreement or to carry out a program with a 
principal purpose of assistance, use of that authority requires no 
delegation by the Secretary of Defense. 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

[[Page 12163]]

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 cooperative 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 21.210(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 
cooperative 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--Information Reporting on Grants, Cooperative Agreements, 
and Other Nonprocurement Instruments


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 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

[[Page 12164]]

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 a second 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 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.
22.310  Statutes concerning certain research, development, and 
facilities construction grants.
22.315  Merit-based, competitive procedures.
22.320  Special competitions.
22.325  Historically Black colleges and universities (HBCUs) and 
other minority institutions (MIs).

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.
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.

[[Page 12165]]

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--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 for-profit 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 
Advanced Technology Development (Budget Activity 3 and Research 
Category 6.3A) programs 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 in Applied Research (Budget Activity 2 and Research Category 
6.2) programs 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 Basic Research (Budget Activity 1 and Research Category 6.1) 
programs 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 calendar days, unless the debtor makes satisfactory payment 
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. The conduct of business through the use of 
automation and electronic media, in lieu of paper transactions, direct 
personal contact, telephone, or other means. For grants and cooperative 
agreements, electronic commerce can include the use of electronic data 
interchange, electronic mail, electronic bulletin board systems, and 
electronic funds transfer for: program announcements or solicitations; 
applications or proposals; award documents; recipients' requests for 
payment; payment authorizations; and payments.

[[Page 12166]]

    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)). Note, however, that institution of higher 
education has a different meaning in Sec. 22.520, as given at 
Sec. 22.520(b)(2).
    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 or 
other acquisition transaction 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 DoD 
appropriations through a grant or cooperative agreement for a research 
project meets the standards 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. The standards 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.
    (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.

[[Page 12167]]

The grants officer should document the nature of the substantial 
involvement that led to selection of a cooperative agreement. Under no 
circumstances are cooperative agreements to be used solely to obtain 
the stricter controls typical of a contract.
    (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 
cooperative 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 Office of Management 
and Budget may 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 agency 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 
calendar 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
    (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

[[Page 12168]]

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.

    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.


Sec. 22.325  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. Grants officers shall 
include appropriate provisions in Broad Agency Announcements (BAAs) or 
other announcements for programs in which awards to institutions of 
higher education are anticipated, in order to promote participation of 
HBCUs and MIs in such programs. Also, whenever practicable, grants 
officers shall reserve appropriate programmatic areas for exclusive 
competition among HBCUs and MIs when preparing announcements for such 
programs.

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 (if a prior recipient of an award).
    (c) Have a satisfactory record of integrity and business ethics.
    (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.

[[Page 12169]]

    (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\ will satisfy the need (see 
Sec. 22.715(a)(1)).
---------------------------------------------------------------------------

    \2\ Contact the Office of Management and Budget, EOP 
Publications, 725 17th St. NW, New Executive Office Building, 
Washington, DC 20503.
---------------------------------------------------------------------------

    (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 each recipient's Taxpayer 
Identification Number (TIN, which may be the Social Security Number for 
an individual and Employer Identification Number for a business or non-
profit entity) and notify the recipient that the TIN is being obtained 
for purposes of collecting and reporting on any delinquent amounts that 
may arise out of the recipient's relationship with the Government. 
Obtaining the TIN and so notifying the recipient is a statutory 
requirement of 31 U.S.C. 7701, as amended by the Debt Collection 
Improvement Act of 1996 (section 31001(i)(1), Pub. L. 104-134).

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 \3\ 
and A-110 \4\ on administrative requirements for grants and cooperative 
agreements. Those parts address some national policy matters that 
appear in the OMB Circulars.
---------------------------------------------------------------------------

    \3\ See footnote 2 to Sec. 22.420(b)(1).
    \4\ 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, and to the extent consistent with statute 
and codified regulation, 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 language that may be used 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, he or she must do so 
in one of the two following ways. When required by statute or codified 
regulation, the solicitation must include the full text of the 
certifications that proposers are to provide by reference. In other 
cases, the grants officer may include language in the solicitation that 
informs 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 offers 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, and 
that 32 CFR 25.510(a) requires submission of certifications regarding 
debarment and suspension at the time of proposal. The provision that a 
grants officer would use to incorporate certifications in award 
documents, when consistent with statute and codified regulation, would 
be similar to the 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

[[Page 12170]]

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 \5\) or other means at the time of proposal.
---------------------------------------------------------------------------

    \5\ 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 either from: Defense Logistics Agency, 
Publications Distribution Division (DASC-WDM), 8725 John J. Kingman 
Rd., Suite 0119, Fort Belvoir, VA 22060-6220; or from the Defense 
Contract Management Command home page at http://
www.dcmc.dcrb.dla.mil.''
---------------------------------------------------------------------------


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.

    (a) Purpose. The purpose of this section is to implement section 
558 of the National Defense Authorization Act for Fiscal Year 1995 
(Pub. L. 103-337), as it specifically affects grants and cooperative 
agreements (note that section 558 appears as a note to 10 U.S.C. 503). 
This section thereby supplements DoD's primary implementation of 
section 558, in 32 CFR part 216, ``Military Recruiting and Reserve 
Officer Training Corps Program Access to Institutions of Higher 
Education.''
    (b) Definitions specific to this section. In this section:
    (1) Directory information has the following meaning, given in 
section 558(c) of Pub. L. 103-337. It means, with respect to a student, 
the student's name, address, telephone listing, date and place of 
birth, level of education, degrees received, and the most recent 
previous educational institution enrolled in by the student.
    (2) Institution of higher education has a different meaning in this 
section than it does in the rest of this part. The meaning of the term 
in other sections of this part is given at Sec. 22.105. In this 
section, ``institution of higher education'' (IHE) has the following 
meaning, given at 32 CFR 216.3. The term means a domestic college, 
university, or subelement thereof providing postsecondary school 
courses of study, including foreign campuses of such domestic 
institutions. The term includes junior colleges, community colleges, 
and institutions providing courses leading to undergraduate and post-
graduate degrees. The term does not include entities that operate 
exclusively outside the United States, its territories, and 
possessions. A subelement of an IHE is a discrete (although not 
necessarily autonomous) organizational entity that may establish policy 
or practices affecting military recruiting and related actions (e.g., 
an undergraduate school, law school, medical school, or other graduate 
school).
    (c) Statutory requirement. No funds available to the Department of 
Defense may be provided by grant to any institution of higher education 
that either has a policy of denying or that effectively prevents the 
Secretary of Defense from obtaining, for military recruiting purposes, 
entry to campuses or access to students on campuses or access to 
directory information pertaining to students.
    (d) Policy.--(1) Applicability to subordinate elements of 
institutions of higher education. 32 CFR part 216, DoD's primary 
implementation of section 558, establishes procedures by which the 
Department of Defense identifies institutions of higher education that 
have a policy or practice described in paragraph (c) of this section. 
In cases where those procedures lead to a determination that specific 
subordinate elements of an institution of higher education have such a 
policy or practice, rather than the institution as a whole, 32 CFR part 
216 provides that the prohibition on use of DoD funds applies only to 
those subordinate elements.
    (2) Applicability to cooperative agreements. As a matter of DoD 
policy, the restrictions of section 558, as implemented by 32 CFR part 
216, apply to cooperative agreements, as well as grants.
    (3) Deviations. Grants officers may not deviate from any provision 
of this section without obtaining the prior approval of the Director of 
Defense Research and Engineering. Requests for deviations shall be 
submitted, through appropriate channels, to: Director for Research, 
ODDR&E(R), 3080 Defense Pentagon, Washington, DC 20301-3080.
    (e) Grants officers' responsibilities. A grants officer shall:
    (1) Not award any grant or cooperative agreement to an institution 
of higher education that has been identified pursuant to the procedures 
of 32 CFR part 216. Such institutions are identified on the 
Governmentwide ``List of Parties Excluded from Federal Procurement and 
Nonprocurement Programs,'' as being ineligible to receive awards of DoD 
funds (note that 32 CFR 25.505(d) requires the grants officer to check 
the list prior to determining that a recipient is qualified to receive 
an award).
    (2) [Reserved].
    (3) Not consent to any subaward of DoD funds to such an 
organization, under a grant or cooperative agreement to any recipient, 
if such subaward requires the grants officer's consent.
    (4) Include the clause in paragraph (f) of this section in each 
grant or cooperative agreement with an institution of higher education. 
Note that this requirement does not flow down (i.e., recipients are not 
required to include the clause in subawards).
    (5) If an institution of higher education refuses to accept the 
clause in paragraph (f) of this section:
    (i) Determine that the institution is not qualified with respect to 
the award. The grants officer may award to an alternative recipient.
    (ii) Transmit the name of the institution, through appropriate 
channels, to the Director for Accession Policy, Office of the Assistant 
Secretary of Defense for Force Management Policy, OASD(FMP), 4000 
Defense Pentagon, Washington, DC 20301-4000. This will allow OASD(FMP) 
to decide whether to initiate an evaluation of the institution under 32 
CFR part 216, to determine whether it is an institution that has a 
policy or practice described in paragraph (c) of this section.
    (f) Clause for award documents. The following clause is to be 
included in grants and cooperative agreements with institutions of 
higher education:

``As a condition for receipt of funds available to the Department of 
Defense (DoD) under this award, the recipient agrees that it is not 
an institution of higher education (as defined in 32 CFR part 216) 
that has a policy of denying, and that it is not an institution of 
higher education that effectively prevents, the Secretary of Defense 
from obtaining for

[[Page 12171]]

military recruiting purposes: (A) Entry to campuses or access to 
students on campuses; or (B) access to directory information 
pertaining to students. If the recipient is determined, using the 
procedures in 32 CFR part 216, to be such an institution of higher 
education during the period of performance of this agreement, and 
therefore to be in breach of this clause, the Government will cease 
all payments of DoD funds under this agreement and all other DoD 
grants and cooperative agreements to the recipient, and it may 
suspend or terminate such grants and agreements unilaterally for 
material failure to comply with the terms and conditions of award.''


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)(1) 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.
    (2) For any award subject to the electronic funds transfer (EFT) 
requirement described in Sec. 22.810(b)(2), the grants officer shall 
include a prominent notification of that fact on the first page of the 
copies forwarded to the recipient, the administrative grants officer, 
and the finance and accounting office. On the first page of the copy 
forwarded to the recipient, the grants officer also shall include a 
prominent notification that the recipient, to be paid, must submit a 
Payment Information Form (Standard Form SF-3881\6\) to the responsible 
DoD payment office, if that payment office does not currently have the 
information (e.g., bank name and account number) needed to pay the 
recipient by EFT.
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    \6\ See footnote 5 to Sec. 22.510(b).
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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. 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.

[[Page 12172]]

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 cooperative agreements. This reduces burdens on recipients 
that can result when multiple DoD offices separately administer grants 
and cooperative 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 cooperative 
agreements to a particular recipient shall be, to the maximum extent 
practicable, 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 cooperative agreements are (see the ``DoD 
Directory of Contract Administration Services Components,'' DLAH 
4105.4,\7\ for specific addresses of administration offices):
---------------------------------------------------------------------------

    \7\ Copies may be obtained either from the Defense Logistics 
Agency, Publications Distribution Division (DASC-WDM), 8725 John J. 
Kingman Rd., Suite 0119, Fort Belvoir, VA 22060-6220, or from the 
Defense Contract Management Command home page at http://
www.dcmc.dcrb.dla.mil.
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    (a) Regional offices of the Office of Naval Research, for grants 
and cooperative 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.\8\
---------------------------------------------------------------------------

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

    (2) Nonprofit organizations that are subject to the cost principles 
in OMB Circular A-122,\9\ if their principal business with the 
Department of Defense is research and development.
---------------------------------------------------------------------------

    \9\ See footnote 2 to Sec. 22.420(b)(1).
---------------------------------------------------------------------------

    (b) Field offices of the Defense Contract Management Command, for 
grants and cooperative agreements with all other entities, including:
    (1) For-profit organizations.
    (2) Nonprofit organizations identified in Attachment C of OMB 
Circular A-122 that are subject to for-profit 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-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-133, or in 
accordance with the terms and conditions of the award. 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 
Policy and Oversight (OAIG(P&O)), 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-133 to the OAIG(P&O):
    (i) The recipient's audit report under OMB Circular A-133.
    (ii) The OAIG(P&O)'s desk review of the recipient's audit report, 
or a letter stating that the OAIG(P&O) 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 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:

[[Page 12173]]

    (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, 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 for-profit 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. (1) 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).
    (2) It also is a Governmentwide requirement to use electronic funds 
transfer (EFT) in the payment of any grant for which an application or 
proposal was submitted or renewed on or after July 26, 1996, unless the 
recipient has obtained a waiver by submitting to the head of the 
pertinent Federal agency a certification that it has neither an account 
with a financial institution nor an authorized payment agent. This 
requirement is in 31 U.S.C. 3332, as amended by the Debt Collection 
Improvement Act of 1996 (section 31001(x)(1)(A), Pub. L. 104-134), and 
as implemented by Department of Treasury regulations at 31 CFR part 
208. As a matter of DoD policy, this requirement applies to cooperative 
agreements, as well as grants. Within the Department of Defense, the 
Defense Finance and Accounting Service implements this EFT requirement, 
and grants officers have collateral responsibilities at the time of 
award, as described in Sec. 22.605(c), and in postaward administration, 
as described in Sec. 22.810(c)(3)(iv).
    (3) Expanding on these Governmentwide policies, DoD policy is for 
DoD Components to use electronic commerce, to the maximum extent 
practicable, in the portions of the payment process for grants and 
cooperative agreements for which grants officers are responsible. In 
cases where recipients submit each payment request to the grants 
officer, this includes using electronic methods to receive recipients' 
requests for payment and to transmit authorizations for payment to the 
DoD payment office. Using electronic methods will improve timeliness 
and accuracy of payments and reduce administrative burdens associated 
with paper-based payments.
    (c) Post-award responsibilities. In cases where the recipient 
submits each payment request to the grants officer, the administrative 
grants officer designated to handle payments for a grant or cooperative 
agreement is responsible for:
    (1) Handling the recipient's requests for payments in accordance 
with DoD implementation of Governmentwide guidance (see 32 CFR 32.22, 
33.21, or 34.12, as applicable).
    (2) 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.
    (3) 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 cooperative 
agreements. Administrative grants officers:
    (i) Should be generally familiar with policies and procedures for 
disbursing offices that are contained in Chapter 19 of Volume 10 of the 
DoD Financial Management Regulation (the FMR, DoD 7000.14-R\10\).
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    \10\ 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.
---------------------------------------------------------------------------

    (ii) Shall forward authorizations to the designated payment office 
expeditiously, so that payments may be made in accordance with the 
timely payment guidelines in Chapter 19 of Volume 10 of the FMR. Unless 
alternative arrangements are made with the payment office, 
authorizations should be forwarded to the payment office at least 3 
working days before the end of the period specified in the FMR. The 
period specified in the FMR is:
    (A) No more than seven calendar days after receipt of the 
recipient's request by the administrative grants officer, whenever 
electronic commerce is used (i.e., EDI to request and authorize 
payments and electronic funds transfer (EFT) to make payments).
    (B) No more than thirty calendar days after receipt of the 
recipient's request by the administrative grants officer, when it is 
not possible to use electronic commerce and paper transactions are 
used.
    (C) No more than seven calendar days after each date specified, 
when payments are authorized in advance based on a predetermined 
payment schedule, provided that the payment schedule was received in 
the disbursing office at least 30 calendar days in advance of the date 
of the scheduled payment.
    (iii) Shall ensure that the recipients' Taxpayer Identification 
Number (TIN) is included with each payment authorization forwarded to 
the payment office. This is a statutory requirement of 31 U.S.C. 3325, 
as amended by the Debt Collection Improvement Act of 1996 (section 
31001(y), Pub. L. 104-134).
    (iv) For each award that is required to be paid by EFT (see 
Sec. 22.605(c) and (Sec. 22.810(b)(2)), shall prominently indicate that 
fact in the payment authorization.


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. If a recipient 
wishes to submit a claim arising out of or relating to a grant or 
cooperative agreement, the grants officer shall inform the recipient 
that the claim must:
    (i) Be submitted in writing to the grants officer for decision;
    (ii) Specify the nature and basis for the relief requested; and
    (iii) 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

[[Page 12174]]

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 appeal 
(see paragraph (e)(3)(iii) of this section).
    (d) Grants officer decisions. (1) Within 60 calendar 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, unless the 
recipient decides to appeal. 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 calendar 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 calendar 
days to file the written notice of appeal to the Grant Appeal Authority 
and grants officer.
    (ii) Appeal file. Within 30 calendar 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 calendar days of the grants officer's decision, the 
recipient shall either pay the amount owed to the grants officer (at 
the address that was provided pursuant to paragraph (c)(1) of this 
section) 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 calendar 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 calendar days, or 150 calendar 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, in accordance with the debt collection 
provisions in Chapters 29, 31, and 32 of Volume 5 and Chapters 18 and 
19 of Volume 10 of the DoD Financial Management Regulation (DoD 
7000.14-R). No interest will be charged if the recipient pays the 
amount owed within 30 calendar 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 
calendar 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 calendar days 
to the grants officer, the grants officer shall forward the payment to 
the responsible payment office.

[[Page 12175]]

    (2) If within 30 calendar days 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 office, as described in paragraph (d)(3) of this section.
    (3) If within 30 calendar 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.
    (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 cooperative 
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 for-profit 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-133, where that Circular is applicable. (See Sec. 22.715(a)(1)).

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PART 23--[REMOVED]

    4. Under the authority of 5 U.S.C. 301, Part 23 is removed.

PART 28--[AMENDED]

    5. Part 28 is amended as follows:
    a. The authority citation for part 28 continues to read as follows:

    Authority: Sect. 319, Pub. L. 102-121 (31 U.S.C. 1352); 5 U.S.C. 
301; 10 U.S.C. 113.

    b. Section 28.500 is 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, DC. 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.
    6. Part 32 is 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.
62.1  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.

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 awards and 
subawards 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. NW, New Executive Office 
Building, Washington, DC 20503.
---------------------------------------------------------------------------

    (b) Relationship to other parts. This part is an integral part of 
the DoD Grant and Agreement Regulations (DoDGARs), which comprise this 
subchapter of the Code of Federal Regulations. This part includes 
references to other parts of the DoDGARs that implement Governmentwide 
guidance and provide uniform internal policies and procedures for DoD 
Components that make or administer awards. Although parts 21 and 22 of 
this subchapter do not impose any direct requirements on recipients, 
and recipients therefore are not required to be familiar with those 
parts, the information in those parts concerning internal policies and 
procedures should be helpful to recipients of DoD awards.
    (c) Prime awards. DoD Components shall apply the provisions of this 
part to awards to 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.
    (d) Subawards. Any legal entity that receives an award 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 for-profit 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 awards, 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

[[Page 12189]]

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, suspension is defined in this section to mean temporary 
withdrawal of Federal sponsorship under an award, but is defined at 32 
CFR 25.105 to be an action taken to exclude a person from participating 
in a grant, cooperative agreement, or other covered transaction.
    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 $5,000 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 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

[[Page 12190]]

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, for-profit 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. An award 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 participant under 32 CFR part 25.
    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 whereby 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. (1) For classes of awards other than 
small awards, the Director of Defense Research and Engineering (DDR&E), 
or his or her designee, may grant exceptions from the requirements of 
this part:
    (i) With the written concurrence of the Office of the Management 
and Budget (OMB). The DDR&E, or his or her designee, shall provide 
written notification to OMB of the Department of Defense's intention to 
grant a class deviation; and
    (ii) When exceptions are not prohibited by statute.
    (2) DoD Components shall request approval for such deviations in

[[Page 12191]]

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 for-profit 
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 awards, 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.


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 (RCRA).

    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

[[Page 12192]]

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. The Circular further 
states that annual certifications and representations, when used, shall 
be signed by responsible officials with the authority to ensure 
recipients' compliance with the pertinent requirements.
    (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 and regulatory 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. To the extent that the 
provisions of the Cash Management Improvement Act (CMIA) (Pub. L. 101-
453) govern, payment methods of State agencies, instrumentalities, and 
fiscal agents should be consistent with CMIA Treasury-State Agreements 
or the CMIA default procedures codified at 31 CFR part 205, 
``Withdrawal of Cash from the Treasury for Advances under Federal Grant 
and Other Programs.''
    (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 
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,

[[Page 12193]]

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 generally makes payment within 30 calendar days after 
receipt of the billing by the office designated to receive the billing, 
unless the billing is improper (for further information about 
timeframes for payments, see 32 CFR 22.810(c)(3)(ii)).
    (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 under OMB Circular A-129, ``Managing Federal Credit 
Programs'' (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)(1) Interest earned on Federal advances deposited in interest 
bearing accounts shall be remitted annually to Department of Health and 
Human Services, Payment Management System, PO Box 6021, Rockville, MD 
20852.
    (2) 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. 
Electronic remittances should be in the format and should include any 
data that are specified by the grants officer as being necessary to 
facilitate direct deposit in HHS' account at the Department of the 
Treasury.
    (3) Recipients that do not have electronic remittance capability 
should use a check.
    (4) 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 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.
    (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

[[Page 12194]]

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. The DoD 
Component may accept the use of any reasonable basis for determining 
the fair market value of the property.
    (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 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.

[[Page 12195]]

    (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 transfer of amounts budgeted for indirect costs to absorb 
increases in direct costs, or vice versa, if approval is required by 
the DoD Component. DoD Components should require this prior approval 
only in exceptional circumstances. The requirement in each such case 
must be stated in the award document.
    (6) 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).
---------------------------------------------------------------------------

    (7) The transfer of funds allotted for training allowances (direct 
payment to trainees) to other categories of expense.
    (8) 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.
    (9) If required by the DoD Component, the transfer of funds among 
direct cost categories that is described in paragraph (e) of this 
section.
    (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 override this automatic waiver 
and require the prior approvals, especially for research awards, only 
in exceptional circumstances. 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.
    (3) Under certain conditions, a DoD Component may authorize a 
recipient to initiate, without prior approval, a one-time, no-cost 
extension (i.e., an extension in the expiration date of an award that 
does not require additional Federal funds) for a period of up to twelve 
months, as long as the no-cost extension does not involve a change in 
the approved objectives or scope of the project. The conditions for 
waiving this prior approval requirement are that the DoD Component 
must:
    (i) Judge that the recipient's subsequently initiating a one-time, 
no-cost extension would not cause the DoD Component to fail to comply 
with DoD funding policies (for further information on the location of 
DoD funding policies, grants officers may refer to Appendix C to 32 CFR 
part 22).
    (ii) Require a recipient that wishes to initiate a one-time, no-
cost extension to so notify the office that made the award at least 10 
calendar days before the original expiration date of the award.
    (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. As a 
matter of DoD policy, requiring prior approvals for such transfers 
generally is not appropriate for grants to support research. 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 (including hospitals) shall 
be subject to the audit requirements contained in the Single Audit Act 
Amendments of 1996 (31 U.S.C. 7501-7507) and revised OMB

[[Page 12196]]

Circular A-133,\7\ ``Audits of States, Local Governments, and Non-
Profit Organizations.''
---------------------------------------------------------------------------

    \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 
Amendments of 1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-
133, ``Audits of States, Local Governments, and Non-Profit 
Organizations.''
    (c) Hospitals that are subrecipients and are not covered by the 
audit provisions of revised OMB Circular A-133 shall be subject to the 
audit requirements specified in award terms and conditions.
    (d) For-profit 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,\8\ 
``Cost Principles for State and Local Governments.''
---------------------------------------------------------------------------

    \8\ 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) For-profit organizations. The allowability of costs incurred by 
subrecipients or contractors that are either for-profit 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; however, the grants officer or the 
award terms and conditions may in rare cases authorize a determination 
of allowable costs that are in accordance with uniform cost accounting 
standards and comply with cost principles acceptable to the Department 
of Defense.


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

[[Page 12197]]

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:
    (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. For example, 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. 12999 (3 CFR, 1996 Comp., p. 180), ``Educational 
Technology: Ensuring Opportunity for All Children in the Next 
Century,'' as applicable. 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.

[[Page 12198]]

    (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.
    (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) 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

[[Page 12199]]

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 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) All recipients shall establish written procurement procedures. 
These procedures shall 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 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

[[Page 12200]]

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, Pub. L. 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 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

[[Page 12201]]

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 calendar 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 Sec. 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 \9\ or SF-269A,\10\ 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,\11\ 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.
---------------------------------------------------------------------------

    \9\ See footnote 2 to Sec. 32.12(a).
    \10\ See footnote 2 to Sec. 32.12(a).
    \11\ 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 award.
    (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 calendar 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.\12\ The grants officer shall use this report to monitor cash 
advanced to recipients and to obtain disbursement information for each 
award to the recipients.
---------------------------------------------------------------------------

    \12\ 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 working 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.
    (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.

[[Page 12202]]

    (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.
    (h) If the information described in this section is maintained on a 
computer, recipients shall retain the computer data on a reliable 
medium for the time periods prescribed. Recipients may transfer 
computer data in machine readable form from one reliable computer 
medium to another. Recipients' computer data retention and transfer 
procedures shall maintain the integrity, reliability, and security of 
the original computer data. Recipients shall also maintain an audit 
trail describing the data transfer. For the record retention time 
periods prescribed in this section, recipients shall not destroy, 
discard, delete, or write over such computer data.

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 
calendar 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.

[[Page 12203]]

    (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 any statute or regulation applicable to the action 
involved. Award terms or conditions will incorporate the procedures of 
32 CFR 22.815 for processing recipient claims and disputes and for 
deciding appeals of grants officers' decisions.
    (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\13\ governs unreturned amounts that become 
delinquent debts (see 32 CFR 22.820).
---------------------------------------------------------------------------

    \13\ 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. Recipients will be informed about 
pertinent procedures and timeframes through the written notices of 
grants officers' decisions and demands for payment.

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 ch. 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

[[Page 12204]]

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 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, Grant or 
Cooperative Agreement--Contracts, grants, or cooperative 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.

    7. Part 34 is added to read as follows:

PART 34--ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH 
FOR-PROFIT 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 awards to 
for-profit 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 for-profit 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 
for-profit entity) that receives an award from a DoD Component shall 
apply the provisions of this part to subawards with for-profit 
organizations. It should be noted that subawards (see definition in 
Sec. 34.2) are financial assistance for substantive programmatic 
performance

[[Page 12205]]

and do not include recipients' procurement of goods and services.
    (ii) For-profit 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 (DoDGARs).
    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. Either:
    (1) A procurement contract made by a recipient under a DoD 
Component's award or by a subrecipient under a subaward; or
    (2) A procurement subcontract under a contract awarded by a 
recipient or subrecipient.
    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.
    Recipient. A for-profit 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).

[[Page 12206]]

    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 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

[[Page 12207]]

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 awards with for-profit 
organizations are:
    (1) Reimbursement. Under this method, the recipient requests 
reimbursement for costs incurred during a time period. In cases where 
the recipient submits each request for payment to the grants officer, 
the DoD payment office reimburses the recipient by electronic funds 
transfer or check after approval of the request by the grants officer 
designated to do so.
    (2) Advance payments. Under this method, a DoD Component makes a 
payment to a recipient based upon projections of the recipient's cash 
needs. 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 award (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 administrative grants officer responsible for post-award 
administration (the grants officer shall forward the payment to the 
responsible payment office, 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 either: Defense Logistics Agency, 
Publications Distribution Division (DASC-WDM), 8725 John J. Kingman 
Rd., Suite 0119, Fort Belvoir, VA 22060-6220; or the Defense 
Contract Management Command home page at http://
www.dcmc.dcrb.dla.mil.
    \2\ See footnote 1 to this paragraph (d).
---------------------------------------------------------------------------

    (e) Timeliness of payments. Payments normally will be made within 
30 calendar days of the receipt of a recipient's request for 
reimbursement or advance by the office designated to receive the 
request (for further information about timeframes for payments, see 32 
CFR 22.810(c)(3)(ii)).
    (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:
    (i) Costs that are authorized by Federal statute to be used for 
cost sharing or matching; or
    (ii) Independent research and development (IR&D) costs. In 
accordance with the for-profit cost principle in 48 CFR 31.205-18(e), 
use of IR&D as cost sharing is permitted, whether or not the Government 
decides at a later date to reimburse any of the IR&D as allowable 
indirect costs. In such cases, the IR&D must meet all of the criteria 
in paragraphs (a) (1) through (4) and (a) (6) through (8) of this 
section.
    (6) They are provided for in the approved budget, when approval of 
the budget is required by the DoD Component.

[[Page 12208]]

    (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 award or fully 
depreciated by the end of the award. 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. The grants 
officer may accept the use of any reasonable basis for determining the 
fair market value of the property.
    (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 award or fully 
depreciated by the end of the award, 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. 34.25, 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 subject to special 
award conditions, as indicated in Sec. 34.4.
    (g) Proceeds from the sale of property that is acquired, rather 
than fabricated,

[[Page 12209]]

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 calendar 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, 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,

[[Page 12210]]

independent auditors work with the Federal auditors to develop a 
coordinated audit approach, to minimize duplication of audit work.
    (f) Audit costs (including a reasonable allocation of the costs of 
the audit of the recipient's financial statement, based on the relative 
benefit to the Government and the recipient) are allowable costs of DoD 
awards.


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) For-profit organizations. Allowability of costs incurred by 
for-profit 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:
    (1) The for-profit cost principles in 48 CFR parts 31 and 231 (in 
the Federal Acquisition Regulation, or FAR, and the Defense Federal 
Acquisition Regulation Supplement, or DFARS, respectively).
    (2) The supplemental information on allowability of audit costs, in 
Sec. 34.16(f).
    (b) Other types of organizations. Allowability of costs incurred by 
other types of organizations that may be subrecipients under a prime 
award to a for-profit 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 for-profit 
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 an award 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 the full value of 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:

[[Page 12211]]

    (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 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 calendar 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 E.O. 
12999 (3 CFR, 1996 Comp., p. 180), ``Educational Technology: Ensuring 
Opportunity for All Children in the Next Century,'' as applicable.) 
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

[[Page 12212]]

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.
    (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 grants and 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) For-profit 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 for-profit 
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 for-profit 
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 
cooperative 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 for Federal 
Government purposes 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 an award, a recipient may be required to 
provide the grants officer administering the award 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 exceptional 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 award 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 for-profit organizations, or may include equivalent 
technical and financial reporting requirements that

[[Page 12213]]

ensure reasonable oversight of the expenditure of appropriated funds. 
As a minimum, equivalent requirements must include:
    (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 award; 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 award.


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.
    (h) If the information described in this section is maintained on a 
computer, recipients shall retain the computer data on a reliable 
medium for the time periods prescribed. Recipients may transfer 
computer data in machine readable form from one reliable computer 
medium to another. Recipients' computer data retention and transfer 
procedures shall maintain the integrity, reliability, and security of 
the original computer data. Recipients shall also maintain an audit 
trail describing the data transfer. For the record retention time 
periods prescribed in this section, recipients shall not destroy, 
discard, delete, or write over such computer data.

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 
calendar 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.

[[Page 12214]]

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 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. In the 
case of termination, the recipient will be reimbursed for allowable 
costs incurred prior to termination, with the possible exception of 
those for activities and actions described in paragraph (a)(2) of this 
section.
    (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) If a final audit is required and 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

[[Page 12215]]

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 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, Grant or 
Cooperative Agreement--Contracts, grants, or cooperative 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: March 3, 1998.
Patricia L. Toppings,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 98-5888 Filed 3-11-98; 8:45 am]
BILLING CODE 5000-04-P