[Federal Register Volume 64, Number 25 (Monday, February 8, 1999)]
[Proposed Rules]
[Pages 6013-6020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2861]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Part 1309

RIN 0970--AB54


Head Start Program

AGENCY: Administration on Children, Youth and Families (ACYF), 
Administration for Children and Families (ACF), HHS.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Administration on Children, Youth and Families is issuing 
this Notice of Proposed Rulemaking to implement a statutory provision 
that authorizes Head Start grantees to use grant funds to finance the 
construction and major renovation of Head Start facilities.

DATES: In order to be considered, comments on this proposed rule must 
be received on or before April 9, 1999.

ADDRESSES: Please address comments to the Associate Commissioner, Head 
Start Bureau, Administration for Children, Youth and Families, P.O. Box 
1182, Washington, DC 20013. Beginning 14 days after close of the 
comment period, comments will be available for public inspection in 
Room 2219, 330 C Street, SW., Washington, DC 20201, Monday through 
Friday, between the hours of 9 a.m. and 4 p.m.

FOR FURTHER INFORMATION CONTACT: Douglas Klafehn, Deputy Associate 
Commissioner, Head Start Bureau, Administration for Children, Youth and 
Families, P.O. Box 1182, Washington, DC 20013; (202) 205-8572.

SUPPLEMENTARY INFORMATION:

I. Program Purpose

    Head Start is authorized under the Head Start Act (42 U.S.C. 9801 
et seq.). It is a national program providing comprehensive 
developmental services to low-income preschool children, primarily age 
three to the age of compulsory school attendance, and their families. 
To help enrolled children achieve their full potential, Head Start 
programs provide comprehensive

[[Page 6014]]

health, nutritional, educational, social and other services. In 
addition, Section 645A of the Head Start Act provides authority to fund 
programs serving infants and toddlers. Programs receiving funds under 
the authority of this section are referred to as Early Head Start 
programs.
    Head Start programs are required to provide for the direct 
participation of the parents of enrolled children in the development, 
conduct, and direction of local programs. Parents also receive training 
and education to foster their understanding of and involvement in the 
development of their children. In fiscal year 1997, Head Start served 
794,000 children through a network of over 2,000 grantees and delegate 
agencies.
    While Head Start is intended to serve primarily children whose 
families have incomes at or below the poverty line, or who receive 
public assistance, Head Start policy permits up to 10 percent of the 
children in local programs to be from families who do not meet these 
low-income criteria. Tribal grantees can exceed this limit under 
certain conditions. The Act also requires that a minimum of 10 percent 
of the enrollment opportunities in each program be made available to 
children with disabilities. Such children are expected to participate 
in the full range of Head Start services and activities with their non-
disabled peers and to receive needed special education and related 
services.

II. Summary of the Proposed Regulation

    The authority for this Notice of Proposed Rulemaking (NPRM) is 
section 644(g) of the Head Start Act (42 U.S.C. 9839). Paragraph (g) 
was added by Public Law 103-252, Title I of the Human Services 
Amendments of 1994. Section 644(g) states that the Secretary may 
authorize the use of federal financial assistance to make payments for 
capital expenditures, such as expenditures for the construction and 
major renovation of facilities. Authorization for the use of grant 
funds in this manner requires a determination by the Secretary that 
suitable facilities are not otherwise available to Indian tribes, rural 
communities, and other low-income communities to carry out Head Start 
programs, that the lack of suitable facilities (including public school 
facilities) will inhibit the operation of such programs, and that 
construction of such facilities is more cost effective than the 
purchase or renovation of available facilities. The Act also provides 
that grant funds may be used to pay the cost of amortizing the 
principal and paying interest on loans. It directs the Secretary to 
establish uniform procedures for Head Start agencies to request 
approval to use grant funds to construct new facilities or make major 
renovations to existing facilities.
    A Notice of Proposed Rulemaking (NPRM) on Purchase of Head Start 
Facilities was published in the Federal Register on December 1, 1994 
(59 FR 61575). The Final Rule on Purchase of Head Start Facilities, 
published elsewhere in this issue of the Federal Register, does not 
address construction or major renovation since the statutory change 
concerning construction and major renovation occurred too close to 
publication of that NPRM to permit the inclusion of procedures covering 
construction and major renovation. We recognize, however, that 
procedures covering the purchase, construction and major renovation of 
facilities using Head Start grant funds should be consistent and should 
be brought together in one place. Therefore, the procedures on 
construction and major renovation when made final will amend the final 
rule on purchase of Head Start facilities so that 45 CFR part 1309 will 
cover, in one single rule, the use of grant funds to purchase, 
construct and make minor renovations to Head Start facilities.
    The proposed rule:
     Defines major renovation to mean structural changes to the 
foundation, roof, floor, or exterior or load-bearing walls of a 
facility, or the extension of a facility to increase its floor area. 
Major renovation also means extensive alteration of a facility such as 
to significantly change its function and purpose, even if such 
renovation does not include any structural change to the facility.
     Specifies what information the grantee must provide to 
establish eligibility to be awarded grant funds to construct or make a 
major renovation to a Head Start facility.
     Requires that a grantee receive approval from HHS of the 
final working drawings and specifications for construction or major 
renovation before it advertises for bids.
     Requires that all construction and major renovation 
contracts be on a lump sum fixed-price basis.

III. Section by Section Discussion of the NPRM

    We propose to revise the heading of Part 1309 to reflect the 
addition of major renovation and construction requirements in this 
part. The revised heading is ``Head Start Facilities Purchase, Major 
Renovation and Construction.''

Section 1309.1--Purpose and application

    We propose to revise Sec. 1309.1 to include reference to the 
applicability of part 1309 to the construction or major renovation of 
Head Start facilities in addition to the purchase of such facilities.

Section 1309.3--Definitions

    We propose to revise Sec. 1309.3 by adding five definitions. The 
definition for ``construction,'' a new definition, is based on the 
statutory language found in section 644(g)(2)(A) of the Head Start Act, 
which states that grant funds may be used to pay for ``construction of 
facilities that are not in existence on the date'' the Secretary 
determines the grantee meets the statutory criteria for eligibility. In 
addition, we revised the definition of ``acquire'' to encompass 
construction in whole or part.
    The second definition we propose is ``incidental alterations and 
renovations.'' This definition is added to distinguish such alterations 
and renovations from major renovations which are defined also in this 
proposed rule. Alterations and renovations are considered 
``incidental'' if they readily modify a facility to meet program 
requirements, if the cost of the alterations and renovations do not 
exceed the lesser of $150,000 or 25 percent of total direct costs 
expected to be approved for the grantee's budget period, and the 
renovations or alterations do not meet the definition for major 
renovations described below. A third new definition is for ``major 
renovation,'' which has two parts. Major renovation means structural 
changes to the foundation, roof, floor, or exterior or load-bearing 
walls of a facility, or the extension of an existing facility to 
increase its floor area, or extensive alteration of a facility such as 
to significantly change its function and purpose, even if such 
renovation does not include any structural change to the facility.
    Classification as a major renovation will have two consequences: 
the grantee will be able to pay the principal and interest on a loan to 
finance the work, and the grantee will be required to meet the 
preliminary eligibility and other criteria found in this regulation.
    The fourth and fifth new definitions we propose are for the terms 
``suitable facility'' and ``useable facility.'' The terms are necessary 
because section 644(g) of the Head Start Act requires that a 
determination be made that no ``suitable'' facility is available within 
a community before a grantee can be permitted to use grant funds for 
the

[[Page 6015]]

construction or renovation of a facility. The term ``suitable'' means a 
facility in the grantee's service area that is owned by the grantee or 
is available for lease or purchase, is useable as a Head Start 
facility, and is not more expensive to purchase, own or lease than 
other comparable facilities. The term ``useable'' is included and 
intended to describe a facility not in need of renovation to increase 
its size or to bring it into compliance with local licensing and code 
requirements and the access requirements of the Americans with 
Disabilities Act (ADA), if applicable, and section 504 of the 
Rehabilitation Act of 1973.

Section 1309.10--Application

    We propose to revise the heading of Sec. 1309.10 to read 
``Applications for the purchase, construction and major renovation of 
facilities.'' We also propose to revise Sec. 1309.10, which appears in 
the final rule on purchase of Head Start facilities which is published 
today, to include requirements for application for the construction and 
major renovation of facilities with Head Start funds. The proposed 
provision will establish requirements for applications from Head Start 
grantees who wish to obtain funds to: (1) Purchase existing facilities; 
(2) continue to pay costs of purchases begun during the period from 
December 21, 1986 to October 7, 1992; (3) construct new facilities; (4) 
renovate facilities which they own or lease; or (5) purchase facilities 
for the purpose of renovating them to make them usable for their Head 
Start programs. With the exception of existing paragraphs (f) and (r) 
which we have redesignated (e) and (q), we propose modifications in all 
of the existing provisions of Sec. 1309.10 to apply to applications for 
construction and major renovation as well as for purchase of existing 
facilities. We propose to incorporate the existing paragraph (d) into a 
new paragraph (b). In addition, a proposed amendment to the newly 
redesignated paragraph (l) requires that a grantee proposing to 
undertake a major renovation of a leased facility must have a lease 
with a duration of at least five years from the date the renovation is 
completed. We propose to add to the newly redesignated paragraph (m) a 
requirement for an assessment of the impact of proposed construction or 
major renovation under the National Environmental Policy Act of 1969 
(42 U.S.C. 4332(2)(C)). We propose further that before submitting an 
application under proposed section 1309.10, grantees seeking funds for 
construction or for major renovations must establish their eligibility 
under one of two new provisions proposed as Secs. 1309.49 and 1309.50.

Section 1309.11--Cost comparisons for purchase, construction and major 
renovation of facilities

    We are proposing to amend Sec. 1309.11, which appears as a final 
rule published today, to apply to cost comparisons for construction and 
major renovation of facilities. We are proposing to amend the heading 
of this section to read ``Cost comparisons for purchase, construction 
and major renovation of facilities'' to apply the proposed provisions 
of Sec. 1309.11 to cost comparisons for construction and major 
renovation of facilities. Paragraph (a) of the proposed rule requires 
that a cost comparison be conducted subject to the proposed paragraph 
(c) which is expanded to include not only purchase of facilities but 
also comparisons required for construction and major renovations of 
facilities. In conformance with section 644(g)(1) of the Head Start 
Act, paragraph (c)(2) of the proposed rule will require Head Start 
grantees requesting funding for the construction of a new facility to 
compare the cost of constructing to the cost of owning, purchasing or 
leasing an alternative facility which may be made useable as a Head 
Start facility by means of renovation of the facility. Paragraph (c)(3) 
proposes that grantees applying for funding to undertake a major 
renovation of a facility must compare the cost of the proposed 
renovation, including the cost of purchasing the facility to be 
renovated (if the grantee is proposing to purchase the facility) to the 
cost of constructing a facility of similar size. ACF proposes to 
request grantees to furnish this information in order that it may 
properly exercise discretion in selecting grantees to receive funding 
under section 644(g) of the Head Start Act. We are proposing that 
paragraph (e) include clarification that the period of comparison for 
renovations of leased facilities is the period of the lease remaining 
after the major renovation is completed. Paragraph (f) is identical to 
the final rule.

Section 1309.21 Recording of Federal interest and other protection of 
federal interest

    We propose to apply the same provisions for the subordination of 
Federal interest for construction and major renovation of Head Start 
facilities as are found in the final rule for the purchase of 
facilities. We propose to revise paragraph (a) of this section to read 
``The Federal government has an interest in all real property and 
equipment acquired or upon which major renovations have been undertaken 
with grant funds for use as a Head Start facility. The responsible HHS 
official may subordinate the federal interest in such property to that 
of a lender which finances the acquisition or major renovation costs 
subject to the conditions set forth in paragraph (f) of this section.'' 
We are proposing some technical changes in paragraph (d) of this 
section by inserting the words ``or at the commencement of major 
renovation or construction of a facility'' after the word purchasing, 
and in (d)(1) we propose to substitute the words ``acquisition or major 
renovation'' for the word ``purchase'' and finally we propose to revise 
paragraph (f) by substituting the word ``purchased'' with the words 
``acquired or upon which major renovations have been undertaken.''

Section 1309.23 Insurance, bonding and maintenance

    In this section we propose to add a sentence clarifying that for 
facilities which have been constructed or renovated, insurance coverage 
must begin at the commencement of the expenditure of costs in 
fulfillment of construction or renovation work.

Sections 1309.40 through 1309.43

    The proposed revisions to Secs. 1309.40, 1309.41, 1309.42, and 
1309.43 replace the word ``purchase'' with ``acquisition or major 
renovation.'' Sections 1309.41, 1309.42 and 1309.43 contain technical 
edits also.
    A new subpart F has been added to cover very specific requirements 
on construction and major renovation of Head Start Facilities.

Section 1309.49--Eligibility--construction

Section 1309.50--Eligibility--major renovation

    These two sections conform to section 644 (g)(1) in requiring 
applicants to demonstrate that the Head Start program serves an Indian 
Tribe or is available in a low-income or rural community and that the 
lack of a suitable facility in the grantee's service area will inhibit 
the operation of the program.
    Applicants requesting funding for construction of facilities must 
demonstrate that there are no facilities available for lease or 
purchase or facilities that are available are not suitable for use by a 
Head Start program.
    Grantees requesting funds for major renovations must demonstrate 
that there are no facilities available for lease or purchase or that 
facilities available are not suitable for use without major

[[Page 6016]]

renovations. Applicants for funding for major renovations and who are 
leasing the facilities must have a lease guaranteeing the use of the 
facility for a minimum period of five years from the time the 
renovations are completed.
    We are proposing further in this rule that all applicants support, 
whenever possible, the determination that there are no suitable 
facilities with a written statement by a licensed real estate 
professional in the grantee's service area.

Section 1309.51--Approval of drawings and specifications

    In this section we propose to require that grantees receive 
approval from the responsible HHS official of the final drawings and 
specifications for the proposed construction or major renovation before 
soliciting bids or awarding a contract for the work. The architect or 
engineer shall make a certification to the responsible HHS official of 
whether in his or her professional opinion the plans and specifications 
conform to Head Start programmatic requirements and are appropriate 
from a cost and technical point of view.

Section 1309.52--Procurement procedures

    Paragraph (a) of this section refers to the Department's 
procurement policy, found in 45 CFR parts 74 and 92, and reiterates the 
basic rule that all facility transactions be conducted in a manner to 
provide, to the maximum extent practicable, open and free competition. 
Paragraph (b) provides that all construction and major renovation 
contracts shall be on a lump sum fixed-price basis, and prohibits the 
grantee from entering into a contract without prior written approval of 
the responsible HHS official. Paragraph (c) requires prior written 
approval of the responsible HHS official for unsolicited modifications 
that would change the scope or objective of the project. In paragraph 
(d) we propose that all contracts for HHS-funded construction or major 
renovation of Head Start facilities contain a clause stating that the 
responsible HHS official or his or her designee shall have access at 
all reasonable times to the work being performed pursuant to the 
contract, at any stage of preparation or progress, and requiring the 
contractor to facilitate such access and inspection.
    The intent of these provisions is to protect the grantee and the 
Department against substandard work and cost overruns.

Section 1309.53--Inspection of work

    This section proposes that the grantee shall provide competent and 
adequate architectural or engineering inspection at the work site to 
insure that the completed work conforms to the approved plans and 
specifications. Also, a final architectural or engineering inspection 
report of the facility must be submitted to the responsible HHS 
official within 30 calendar days of substantial completion of the 
construction or major renovation. This is intended to insure that the 
project is being properly managed and that any problems or unusual 
circumstances are identified and dealt with as early as possible.

Section 1309.54--Davis-Bacon Act

    Construction and major renovation contracts and subcontracts are 
subject to the Davis-Bacon Act (40 U.S.C. 276a et seq.). In this 
section we propose that the grantee must provide an assurance that all 
laborers and mechanics employed by contractors or subcontractors in the 
construction or renovation of Head Start facilities shall be paid wages 
at not less than those prevailing on similar construction in the 
locality, as determined by the Secretary of Labor. Grantees are 
required to comply with the requirements found in the Davis-Bacon Act 
and the regulations of the Department of Labor which implement that 
Act. Those regulations are found in Title 29 of the Code of Federal 
Regulations.

IV. Impact Analysis

Executive Order 12866

    Executive Order 12866 requires that regulations be drafted to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that this 
rule is consistent with these priorities and principles. This Notice of 
Proposed Rulemaking implements the statutory authority for Head Start 
grantees to apply to use grant funds to construct or make major 
renovations to facilities. Congress made no additional appropriation to 
fund this new authority, however, and so any money spent toward the 
construction or renovation of Head Start facilities is money that would 
have been spent otherwise by the program or other programs from the 
same appropriation amount.

Regulatory Flexibility Act of 1980

    The Regulatory Flexibility Act (5 U.S.C. CH. 6) requires the 
Federal government to anticipate and reduce the impact of rules and 
paperwork requirements on small businesses. For each rule with a 
``significant economic impact on a substantial number of small 
entities'' an analysis must be prepared describing the rule's impact on 
small entities. Small entities are defined by the Act to include small 
businesses, small non-profit organizations and small governmental 
entities. While these regulations would affect small entities, they 
would not affect a substantial number. Furthermore, the cost of the 
application process and other activities undertaken as a result of 
these regulations will not have a significant economic impact because 
the Head Start program covers 80% of the allowable costs of grantees 
under the program. The remaining costs associated with compliance are 
part of the share of costs grantees agree to meet from their own 
resources when they enter the Head Start program. For these reasons, 
the Secretary certifies that this rule will not have a significant 
impact on substantial numbers of small entities.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995, Pub. L. 104-13, all 
Departments are required to submit to the Office of Management and 
Budget (OMB) for review and approval any reporting or recordkeeping 
requirement inherent in a proposed or final rule. This NPRM contains 
information collection and record-keeping requirements in Sec. 1309.10 
(application), 1309.49 (eligibility construction), and 1309.50 (major 
renovation) which will be submitted to OMB for review and approval in 
accordance with the Paperwork Reduction Act.
    The respondents to the information collection requirements in the 
rule are Head Start grantees who may be State or local non-profit 
agencies or organizations. The Department needs to require this 
collection of information in order to assure that grantees who apply 
for approval to construct or make major renovations to a facility with 
Head Start funds have followed certain necessary legal and 
administrative procedures. Also, these collection of information 
requirements are necessary for monitoring purposes.
    The grantees who will be affected by these requirements will be 
those who request approval and are approved to construct or make major 
renovations to a facility for the purpose of operating a Head Start 
program. Based on the average number of grantees who requested approval 
from the Department since the statutory authority became effective, the 
estimated annual number of grantees that will be affected is 200.

[[Page 6017]]

    The actual submittal of an application under Sec. 1309.10 from a 
grantee to construct or make a major renovation to a facility is a one 
time activity which is preceded by a number of preparatory activities. 
We estimate the time it will take to prepare the application in 
accordance with the requirements of this rule is 40 hours per grantee, 
calculated over a period of time. On an annual basis, the total hours 
estimated for submittal of applications from grantees are 8,000.
    The Administration for Children and Families (ACF) will consider 
comments by the public on these proposed collection of information in:
     Evaluating whether the proposed collections are necessary 
for the proper performance of the functions of ACF, including whether 
the information will have practical utility;
     Evaluating the accuracy of ACF's estimate of the burden of 
the proposed collections of information;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     Minimizing the burden of the collection of information on 
those who are to respond.
    OMB is required to make a decision concerning the collections of 
information contained in this final rule between 30 and 60 days after 
publication of this document in the Federal Register. Therefore, a 
comment is best assured of having its full effect if OMB receives it 
within 30 days of publication. Written comments to OMB for the proposed 
information collection should be sent directly to the following: Office 
of Management and Budget, Paperwork Reduction Project, 725 17th Street, 
NW, Washington, DC 20503, Attn: Wendy Taylor.

List of Subjects in 45 CFR Part 1309

    Acquisition, Construction, Facilities, Head Start, Real property, 
Renovation

    (Catalog of Federal Domestic Assistance Program Number 93.600, 
Project Head Start)

    Dated: August 3, 1998.
Olivia A. Golden,
Assistant Secretary for Children and Families.
    Approved: September 15, 1998.
Donna E. Shalala,
Secretary.

    For the reasons set forth in the Preamble, 45 CFR part 1309 is 
proposed to be amended as follows:
    1. The authority citation for part 1309 continues to read as 
follows:

    Authority: 42 U.S.C. 9801 et seq.

    2. The heading of part 1309 is revised to read as follows:

PART 1309--HEAD START FACILITIES PURCHASE, MAJOR RENOVATION AND 
CONSTRUCTION

    3. Section 1309.1 is revised to read as follows:


Sec. 1309.1  Purpose and application.

    This part prescribes regulations implementing sections 644(c), (f) 
and (g) of the Head Start Act, 42 U.S.C. 9801 et seq., as they apply to 
grantees operating Head Start programs under the Act. It prescribes the 
procedures for applying for Head Start grant funds to purchase, 
construct, or make major renovations to facilities in which to operate 
Head Start programs. It also details the measures which must be taken 
to protect the Federal interest in facilities purchased, constructed or 
renovated with Head Start grant funds.
    4. Section 1309.3 is amended by revising the definition ``acquire'' 
and adding five new definitions to read as follows:


Sec. 1309.3  Definitions.

* * * * *
    Acquire means purchased or constructed in whole or in part with 
Head Start grant funds through payments made in satisfaction of a 
mortgage agreement (both principal and interest), as a down payment, 
for professional fees, closing costs and any other costs associated 
with the purchase or construction of the property that are usual and 
customary for the locality.
* * * * *
    Construction means new building, and excludes renovations, 
alterations, additions, or work of any kind to existing buildings.
* * * * *
    Incidental alterations and renovations means improvements to a 
facility which can be readily made, which are not considered major or 
structural renovations as defined in this section and the total costs 
of which do not exceed the lesser of $150,000 or 25 percent of total 
direct costs approved for a budget period.
    Major renovation means structural changes to the foundation, roof, 
floor, or exterior or load-bearing walls of a facility, or the 
extension of an existing facility to increase its floor area. Major 
renovation also means extensive alteration of an existing facility such 
as to significantly change its function and purpose, even if such 
renovation does not include any structural change to the facility.
* * * * *
    Suitable Facility means a facility that is owned by the grantee or 
is available for lease or purchase, is useable as a Head Start facility 
and is not more expensive to purchase, own or lease than other 
comparable facilities in the grantee's service area.
    Useable facility means a facility which is large enough to meet the 
foreseeable needs of the Head Start program and which complies with 
local licensing and code requirements and the access requirements of 
the Americans with Disabilities Act (ADA), if applicable, and section 
504 of the Rehabilitation Act of 1973.
    5. Section 1309.10 is revised to read as follows:


Sec. 1309.10  Applications for the purchase, construction and major 
renovation of facilities.

    A grantee which proposes to use grant funds to purchase a facility, 
or a grantee found eligible under section Sec. 1309.49 to apply for 
funds to construct a facility, or section Sec. 1309.50 to undertake 
major renovation of a facility, including facilities purchased for that 
purpose, must submit a written application to the responsible HHS 
official. The application must include the following information:
    (a) A legal description of the site of the facility, and an 
explanation of the appropriateness of the location to the grantee's 
service area, including a statement of the effect that acquisition or 
major renovation of the facility has had or will have on the 
transportation of children to the program, on the grantee's ability to 
collaborate with other child care, social services and health 
providers, and on all other program activities and services.
    (b) Plans and specifications of the facility to be purchased, 
including information on the size and type of structure, the number and 
a description of the rooms, and the lot on which the building is 
located (including the space available for a playground and for 
parking). If incidental alterations and renovations or major 
renovations are being proposed to make a facility useable to carry out 
the Head Start program, a description of the renovations, and the plans 
and specifications submitted must also describe the facility as it will 
be after renovations are complete. In the case of a proposed major 
renovation, a certification by a licensed engineer or architect as to 
the cost and technical appropriateness of the proposed renovation must 
be included.
    (c) The cost comparison described in Sec. 1309.11 of this part.
    (d) The intended uses of the facility proposed for acquisition or 
major renovation, including information demonstrating that the facility 
will be

[[Page 6018]]

used principally as a Head Start center or a direct support facility 
for a Head Start program. If the facility is to be used for purposes in 
addition to the operation of the Head Start program, the grantee must 
state what portion of the facility is to be used for such other 
purposes.
    (e) An assurance that the facility complies (or will comply when 
constructed or after completion of the renovations described in 
paragraph (b) of this section) with local licensing and code 
requirements, the access requirements of the Americans with 
Disabilities Act (ADA), if applicable, and section 504 of the 
Rehabilitation Act of 1973. The grantee also will assure that it has 
met the requirements of the Flood Disaster Protection Act of 1973, if 
applicable.
    (f) If the grantee proposing to purchase a facility without 
undertaking major renovations is claiming that the lack of alternative 
facilities will prevent or would have prevented operation of the 
program, a statement of how it was determined that there is or was a 
lack of alternative facilities. This statement must be supported, 
whenever possible, by a written statement from a licensed real estate 
professional in the grantee's service area. If a grantee requesting 
approval of the previous purchase of a facility is unable to provide 
such statements based on circumstances which existed at the time of the 
purchase, the grantee and the licensed real estate professional may use 
present conditions as a basis for making the determination.
    (g) The terms of any proposed or existing loan(s) related to 
acquisition or major renovation of the facility and the repayment plans 
(detailing balloon payments or other unconventional terms, if any), and 
information on all other sources of funding of the acquisition or major 
renovation, including any restrictions or conditions imposed by other 
funding sources.
    (h) A statement of the effect that the acquisition or major 
renovation of the facility would have on the grantee's meeting of the 
non-Federal share requirement of section 640(b) of the Head Start Act, 
including whether the grantee is seeking a waiver of its non-Federal 
share obligation under that section of the Act.
    (i) Certification by a licensed engineer or architect that the 
building proposed to be purchased or previously purchase is 
structurally sound and safe for use as a Head Start facility. The 
applicant must certify that upon the completion of major renovation to 
a facility or construction of a facility that inspection by a licensed 
engineer or architect will be conducted to determine that the facility 
is structurally sound and safe for use as a Head Start facility.
    (j) A statement of the effect that the acquisition or major 
renovation of a facility would have on the grantee's ability to meet 
the limitation on development and administrative costs in section 
644(b) of the Head Start Act. One-time fees and expenses necessary to 
the acquisition or major renovation, such as the down payment, the cost 
of necessary renovation, loan fees and related expenses, and fees paid 
to attorneys, engineers, and appraisers, are not considered to be 
administrative costs.
    (k) A proposed schedule for acquisition, renovation and occupancy 
of the facility.
    (l) Reasonable assurances that the applicant will obtain a fee 
simple or such other estate or interest in the site of the facility to 
be acquired sufficient to assure undisturbed use and possession for the 
purpose of operating the Head Start program. If the grantee proposes to 
acquire a facility without also purchasing the land on which the 
facility is situated, the application must describe the easement, right 
of way or land rental it will obtain or has obtained to allow it 
sufficient access to the facility. If the grantee proposes to undertake 
a major renovation of a leased facility, the grantee must have a lease 
of at least five years duration from the date the renovation is 
completed.
    (m) An assessment of the impact of the proposed purchase on the 
human environment if it involves more than a simple incidental 
alteration and renovation or any significant change in land use, 
including substantial increases in traffic in the surrounding area due 
to the provision of Head Start transportation services and an 
assessment of all proposed construction and major renovation pursuant 
to section 102(2)(C) of the National Environmental Policy Act of 1969 
(42 U.S.C. 4332(2)(C) and its implementing regulations (40 CFR parts 
1500-1508), as well as a report showing the results of tests for 
environmental hazards present in the facility, ground water, and soil 
(or justification why such testing is not necessary). In addition, such 
information as may be necessary to comply with the National Historic 
Preservation Act of 1966 (16 U.S.C. 470f) must be included.
    (n) Assurance that the grantee will comply with the requirements of 
the Uniform Relocation Assistance and Real Property Acquisition 
Policies Act of 1970, as amended (42 U.S.C. 4601 et seq. and 49 CFR 
Part 24), and information about the costs that may be incurred due to 
compliance with this Act.
    (o) A statement of the share of the cost of acquisition or major 
renovation that will be paid with grant funds.
    (p) For a grantee seeking approval of a previous purchase, a 
statement of the extent to which it has attempted to comply and will be 
able to comply with the provisions of Sec. 1309.22 of this part.
    (q) Such additional information as the responsible HHS official may 
require.
    6. Section 1309.11 is revised to read as follows:


Sec. 1309.11  Cost comparisons for purchase, construction and major 
renovation of facilities.

    (a) A grantee proposing to acquire or undertake a major renovation 
of a facility must submit a detailed estimate of the costs of the 
proposed activity and compare the cost of the proposed activity as 
provided under paragraph (c) of this section.
    (b) All costs of acquisition, renovation and ownership must be 
identified, including, but not limited to, professional fees, purchase 
of the facility to be renovated, renovation costs, moving expenses, 
additional transportation costs, maintenance, taxes, insurance, and 
easements, rights of way or land rentals. An independent appraisal of 
the current value of the facility proposed to be purchased, previously 
purchased or renovated, made by a professional appraiser, must be 
included.
    (c)(1) Grantees proposing to purchase a facility, without 
requesting funds for major renovations to the facility, must compare 
the cost of the proposed facility to the cost of the facility currently 
used by the grantee, unless the grantee has no current facility, will 
lose the use of its current facility, intends to continue to use its 
current facility after it purchases the new facility, or has shown to 
the satisfaction of the responsible HHS official that its existing 
facility is inadequate. Where the grantee's current facility is not 
used as the alternate facility, the grantee must use for comparison a 
facility (or facilities) available for lease in the grantee's service 
area and useable as a Head Start facility or which can be made useable 
through incidental alteration or renovation, the cost of which shall be 
included in the cost comparison. In the case of an application for 
approval of the previous purchase of a facility, the cost of the 
present facility must be compared to the cost of the facility used by 
the grantee before purchase of its current facility. If the facility 
used by the grantee before the purchase of its present facility was

[[Page 6019]]

deemed inadequate by the responsible HHS official, the grantee had no 
previous facility, or if the grantee continued to use its previous 
facility after it purchased the current facility, the alternative 
facility shall be an available, appropriate facility (or facilities) of 
comparable size that was available for rent in the grantee's service 
area at the time of its purchase of the current facility.
    (2) Grantees proposing to construct a facility must compare the 
costs of constructing the proposed facility to the costs of owning, 
purchasing or leasing an alternative facility which can be made useable 
through incidental alterations and renovations or major renovations. 
The alternative facility is one now owned by the grantee or available 
for lease or purchase in the grantee's service area. If no such 
facility is available, this statement must explain how this fact was 
determined and the claim must be supported, whenever possible, by a 
written statement from a licensed real estate professional in the 
grantee's service area.
    (3) A grantee proposing to undertake a major renovation of a 
facility must compare the cost of the proposed renovation (including 
the cost of purchasing the facility to be renovated, if the grantee is 
proposing to purchase the facility) to the cost of constructing a 
facility of comparable size.
    (d) The grantee must separately delineate the following expenses in 
the application:
    (1) One-time costs, including, but not limited to, cost of 
purchasing the facility to be renovated, the down payment, professional 
fees, moving expenses, the cost of site preparation; and
    (2) Ongoing costs, including, but not limited to, mortgage 
payments, insurance premiums, maintenance costs, and property taxes. If 
the grantee is exempt from the payment of property taxes, this fact 
must be stated.
    (e) The period of comparison for purchase, construction or 
renovation of a facility is twenty years, except that for the purchase 
of a modular unit the period of comparison is ten years and the period 
of comparison for major renovation of a leased facility is the period 
of the lease remaining after the renovations are completed. For 
approvals of previous purchases the period of comparison begins on the 
date the purchase took place.
    (f) If the facility is to be used for purposes in addition to the 
operation of the Head Start program, the cost of use of that part of 
the facility used for such other purposes must be allocated in 
accordance with applicable Office of Management and Budget cost 
principles.
    7. Section 1309.21 is amended by revising paragraphs (a), (d), 
introductory text, (d)(1), and (f), introductory text to read as 
follows:


Sec. 1309.21  Recording of Federal interest and other protection of 
Federal interest.

    (a) The Federal government has an interest in all real property and 
equipment acquired or upon which major renovations have been undertaken 
with grant funds for use as a Head Start facility. The responsible HHS 
official may subordinate the federal interest in such property to that 
of a lender which finances the acquisition or major renovation costs 
subject to the conditions set forth in paragraph (f) of this section.
* * * * *
    (d) Immediately upon purchasing or at the commencement of major 
renovation or construction of a facility, or receiving permission to 
use funds for a previously purchased facility the grantee shall record 
the Notice of Federal Interest in the appropriate official records for 
the jurisdiction is located. The Notice shall include the following 
information:
    (1) The date of the award of grant funds for the acquisition or 
major renovation of the property to be used as a Head Start facility, 
and the address and legal description of the property to be acquired or 
renovated;
* * * * *
    (f) In subordinating its interest in a facility acquired or upon 
which major renovations have been undertaken with grant funds, the 
responsible HHS official does not waive application of paragraph (d) of 
this section and Sec. 1309.22. A written agreement by the responsible 
HHS official to subordinate the Federal interest must provide:
* * * * *
    8. Section 1309.23 is amended by revising paragraph (a) to read as 
follows:


Sec. 1309.23  Insurance, bonding and maintenance.

    (a) At the time of acquiring or undertaking a major renovation of a 
facility or receiving approval for the previous purchase of a facility 
the grantee shall obtain insurance coverage for the facility which is 
not lower in value than coverage it has obtained for other real 
property it owns, and which at least meets the requirements of the 
coverage specified in paragraphs (a)(1) and (2) of this section. For 
facilities which have been constructed or renovated, insurance coverage 
must begin at the commencement of the expenditure of costs in 
fulfillment of construction or renovation work.
* * * * *
    9. Section 1309.40 is revised to read as follows:


Sec. 1309.40  Copies of documents.

    Certified copies of the deed, lease, loan instrument, mortgage, and 
any other legal documents related to the acquisition or major 
renovation of the facility or to the discharge of any debt secured by 
the facility must be submitted to the responsible HHS official within 
ten days of their execution.
    10. Section 1309.41 is revised to read as follows:


Sec. 1309.41  Record retention.

    All records pertinent to the acquisition or major renovation of a 
facility must be retained by the grantee for a period equal to the 
period of the grantee's ownership (or occupancy, in the case of leased 
facilities) of the facility plus three years.
    11. Section 1309.42 is revised to read as follows:


Sec. 1309.42  Audit of mortgage.

    Any audit of a grantee which has acquired or made major renovations 
to a facility with grant funds shall include an audit of any mortgage 
or encumbrance on the facility. Reasonable and necessary fees for this 
audit are payable with grant funds.
    12. Section 1309.43 is revised to read as follows:


Sec. 1309.43  Use of grant funds to pay fees.

    Consistent with the cost principles referred to in 45 CFR part 74 
and 45 CFR part 92, reasonable fees and costs associated with and 
necessary to the acquisition or major renovation of a facility 
(including reasonable and necessary fees and costs incurred to 
establish preliminary eligibility under Sec. 1309.50 of this part, or 
otherwise prior to the submission of an application under Sec. 1309.10 
of this Part or acquisition of the facility) are payable with grant 
funds, but require prior, written approval of the responsible HHS 
official.
    13. A new subpart F is added to read as follows:

Subpart F--Construction and Major Renovation

Sec.
1309.49  Eligibility--Construction.
1309.50  Eligibility--Major renovation.
1309.51  Approval of drawings and specifications.
1309.52  Procurement procedures.
1309.53  Inspection of work.
1309.54  Davis-Bacon Act.

[[Page 6020]]

Subpart F--Construction and Major Renovation


Sec. 1309.49  Eligibility--Construction.

    Before submitting an application under section 1309.10 for 
construction of a facility, the grantee must establish that:
    (a) The Head Start program serves an Indian Tribe; or is located in 
a rural or other low-income community; and
    (b) There is a lack of suitable facilities (including public school 
facilities) in the grantee's service area which will inhibit the 
operation of the program, as demonstrated by a statement that neither 
the grantee's current facility nor any facility available for lease or 
purchase in the service area is suitable for use by a Head Start 
program. This statement must explain the factors considered, how it was 
determined that there is a lack of suitable facilities and be supported 
whenever possible by a written statement from a licensed real estate 
professional in the grantee's service area.


Sec. 1309.50  Eligibility--Major renovation.

    (a) Before submitting an application under Sec. 1309.10, the 
grantee must establish that:
    (1) The Head Start program serves an Indian Tribe, or is available 
in a rural or other low-income community; and
    (2) There is a lack of suitable facilities (including public school 
facilities) in the grantee's service area which will inhibit the 
operation of the program, as demonstrated by a statement that neither 
the grantee's current facility nor any facility available for lease or 
purchase in the service area is suitable or could be made suitable 
without major renovation. This statement must explain the factors 
considered, how it was determined that there is a lack of suitable 
facilities and be supported, whenever possible, by a written statement 
from a licensed real estate professional in the grantee's service area.
    (b) In order to receive funding for major renovation of a leased 
facility, the grantee must have a lease that provides the Head Start 
program with a term of occupancy of at least five years from the time 
the renovation will be complete.


Sec. 1309.51  Approval of drawings and specifications.

    (a) The grantee may not advertise for bids or award a contract for 
any part of construction or major renovation funded by grant funds 
until final working drawings and specifications have been approved by 
the responsible HHS official.
    (b) Approval by the responsible HHS official shall be based on the 
certification by a licensed engineer or architect as to the cost and 
technical appropriateness of the proposed construction or renovation, 
and on a determination that the drawings and specifications conform to 
Head Start programmatic requirements.


Sec. 1309.52  Procurement procedures.

    (a) All facility construction and major renovation transactions 
must comply with the procurement procedures in 45 CFR parts 74 and 92, 
and must be conducted in a manner to provide, to the maximum extent 
practicable, open and free competition.
    (b) All construction and major renovation contracts for facilities 
acquired with grant funds require the prior, written approval of the 
responsible HHS official, and shall be on a lump sum fixed-price basis.
    (c) Prior written approval of the responsible HHS official is 
required for unsolicited modifications that would change the scope or 
objective of the project, including proposed modifications that would 
materially alter the costs of the project or increase the amount of 
grant funds needed to complete the project.
    (d) All construction and major renovation contracts for facilities 
acquired with grant funds shall contain a clause stating that the 
responsible HHS official or his or her designee shall have access at 
all reasonable times to the work being performed pursuant to the 
contract, at any stage of preparation or progress, and requiring that 
the contractor shall facilitate such access and inspection.


Sec. 1309.53  Inspection of work.

    (a) The grantee must provide and maintain competent and adequate 
architectural or engineering inspection at the work site to insure that 
the completed work conforms to the approved plans and specifications.
    (b) The grantee must submit a final architectural or engineering 
inspection report of the facility to the responsible HHS official 
within 30 calendar days of substantial completion of the construction 
or renovation.


Sec. 1309.54  Davis-Bacon Act.

    Construction and renovation projects and subcontracts financed with 
funds awarded under the Head Start program are subject to the Davis-
Bacon Act (40 U.S.C. 276a et seq.) and the regulations of the 
Department of Labor, 29 CFR part 5. The grantee must provide an 
assurance that all laborers and mechanics employed by contractors or 
subcontractors in the construction or renovation of affected Head Start 
facilities shall be paid wages at not less than those prevailing on 
similar construction in the locality, as determined by the Secretary of 
Labor.

[FR Doc. 99-2861 Filed 2-5-99; 8:45 am]
BILLING CODE 4184-01-U