[Federal Register Volume 67, Number 83 (Tuesday, April 30, 2002)]
[Proposed Rules]
[Pages 21486-21519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-10280]



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Part IV





Department of Defense





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Office of the Secretary



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32 CFR Parts 21, 22, et al.



DoD Grant and Agreement Regulations; Proposed Rule

  Federal Register / Vol. 67 , No. 83 / Tuesday, April 30, 2002 / 
Proposed Rules  

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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Parts 21, 22, 32, 34, and 37

RIN 0790-AG87


DoD Grant and Agreement Regulations

AGENCY: Office of the Secretary, DoD.

ACTION: Proposed rule.

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SUMMARY: The Department of Defense (DoD) proposes to add a new part to 
the DoD Grant and Agreement Regulations (DoDGARs) to incorporate 
policies and procedures for the award and administration of technology 
investment agreements (TIAs). TIAs are a relatively new class of 
assistance instruments. DoD Components use TIAs to support or stimulate 
defense research projects involving for-profit firms, especially 
commercial firms that do business primarily in the commercial 
marketplace. The new part therefore gives DoD agreements officers 
greater flexibility to negotiate award provisions in areas that can 
present barriers to those commercial firms (e.g., intellectual 
property, audits, and cost principles). This notice of proposed 
rulemaking also proposes revisions to several additional parts of the 
DoDGARs, to conform the rest of the DoDGARs with the proposed new part.

DATES: Comments are due on or before July 1, 2002.

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

FOR FURTHER INFORMATION CONTACT: Mark Herbst, (703) 696-0372.

SUPPLEMENTARY INFORMATION:

A. Background

    The Congress and the DoD have a civil-military integration policy 
that envisions a national technology and industrial base capable of 
meeting national security objectives, including the performance of 
research and development to ensure that our armed forces have systems 
with superior technology. The policy calls for DoD reliance, to the 
maximum extent practicable, on the commercial sector of that technology 
and industrial base.
    To help achieve civil-military integration, the Congress in 1989 
enacted 10 U.S.C. 2371, ``Research projects: transactions other than 
contracts and grants'' to authorize DoD use of cooperative agreements 
and other transactions. Using this authority, DoD Components through 
the mid-1990s developed types of cooperative agreements and other 
transactions to support research (called ``dual-use'' research) with 
good potential for both commercial and defense applications. The DoD in 
1997 issued interim guidance that merged various cooperative agreements 
and other transactions that were similar to each other into a single 
class of assistance instruments called technology investment agreements 
(TIAs). This proposed rule is the first step toward putting in place 
rules of a more permanent nature, based on the experience with these 
new instruments.

B. Discussion of Proposed Part 37

Coverage, In Relation To Rules For Other Assistance Instruments

    The subjects covered for TIAs in the proposed part 37 parallel 
those covered for grants and most cooperative agreements in parts 22, 
32, 33, and 34 of the DoD Grant and Agreement Regulations (DoDGARs). 
This creates a comprehensive and stand-alone part for TIAs, which we 
judge to be the best way to have clear policy and procedural guidance 
that properly maintains distinctions between TIAs and other assistance 
instruments.
    The subparts of the proposed part 37 address chronologically DoD 
agreements officers' pre-award through post-award responsibilities for 
TIAs. The coverage in most of the subparts largely parallels what is 
covered for other assistance instruments in part 22 of the DoDGARs. Two 
subparts of the proposed part 37, subparts F and G, address award terms 
related to administrative requirements for TIAs. The coverage in those 
two subparts most closely parallels what is covered for other 
assistance instruments in parts 32 and 33 of the DoDGARs, for various 
types of nonprofit recipients, and in part 34 for for-profit 
recipients.

Plain Language Format

    Executive Order 12866 requires each agency to write regulations 
that are simple and easy to understand. A Presidential memorandum of 
June 2, 1998, requires agencies to write new regulations in plain 
language. We used a question and answer format for this rule to make it 
more readable. We invite your comments on how to make the proposed rule 
easier to understand.

Effect of Rule on Recipients

    The proposed part 37 speaks to the DoD agreements officer who 
awards or administers TIAs, rather than to the TIA recipient. However, 
the part also affects TIA recipients because it tells the agreements 
officer how to craft award terms and conditions that legally bind the 
recipient, as well as the Federal Government. We therefore would 
appreciate any comments that you may have on the requirements in this 
proposed rule that would apply to you as a potential TIA recipient. The 
following paragraphs describe the subparts of the proposed part and 
highlight some requirements affecting recipients.

Agreement Types and Authorities (Subpart A)

    Subpart A of the proposed part 37 contains general information 
about TIAs for DoD Components and agreements officers. It has little 
potential effect on recipients.

Situations for Use of TIAs (Subpart B)

    Subpart B of the proposed part 37 tells the agreements officer when 
he or she appropriately may use a TIA. Three sections of this subpart 
may affect TIA recipients.
    First, section 37.210 encourages awards to consortia, as a way to 
increase recipient self-governance. It suggests that agreements 
officers consider other ways to increase self-governance before making 
awards to single firms or multiple firms in prime award-subaward 
relationships.
    Second, section 37.215 states that recipients are to provide, to 
the maximum extent practicable, at least half of the costs of research 
projects supported by TIAs. This is a statutory condition for any TIA 
using the authority of 10 U.S.C. 2371 and a matter of policy for other 
TIAs. The reason that cost sharing is appropriate is that TIAs are used 
to support dual-use research that is of mutual benefit to the DoD and 
recipients because it has good potential for both defense and 
commercial applications. The purpose of the cost share is to ensure 
that recipients have a vested interest in the projects' success.
    Third, section 37.230 clarifies that agreements officers are not to 
use TIAs in cases where a recipient is to receive fee or profit, in 
accordance with DoD policy stated in part 22 of the DoDGARs (32 CFR 
part 22). The basis for the policy is that fee or profit, while 
appropriate for a procurement contract used in a buyer-seller 
relationship, is not appropriate for an assistance instrument used to 
stimulate or support a project of mutual interest to the recipient and 
the Government.

Types of TIAs (Subpart C)

    Subpart C of the proposed part 37 describes a new type of 
assistance instrument called a fixed-support TIA that agreements 
officers may use under certain conditions. With a fixed-support

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TIA, the Government agrees to award a set amount of money to support a 
portion of the costs of a research project that has well-defined and 
verifiable outcomes. The advantage to a recipient is that this type of 
TIA lessens Government-unique requirements in areas, such as audits and 
cost accounting, that present barriers to some commercial firms. We 
invite comments on the concept of fixed-support TIAs because there is 
little practical experience with them--almost all TIAs to date have 
been expenditure-based.

Competition (Subpart D)

    Subpart D of the proposed part 37 states the policy for agreements 
officers to use merit-based competitive procedures to award TIAs and 
discusses the content of the program announcement or solicitation.

Pre-Award Business Evaluation (Subpart E)

    Subpart E of the proposed part 37 addresses agreements officers' 
responsibilities, prior to awarding TIAs, for determining that 
potential recipients are qualified and evaluating business aspects of 
the proposed transactions.

Award Terms Based on Administrative Requirements (Subparts F and G)

    The portions of the proposed part 37 with the greatest potential 
for affecting recipients are subparts F and G, which specify 
administrative requirements for TIAs. Subpart F addresses organization-
wide system requirements for financial management, property management, 
and purchasing. To reduce administrative burdens, the general policy in 
Subpart F is to have each type of organization that participates in a 
TIA continue to use its present systems. Subpart G addresses award-
specific administrative requirements, such as payment methods. The 
general policy in subpart G is to simplify administration by making 
these award-specific requirements uniform for different organizations 
participating in a given award, since the requirements do not compel 
changes in organizations' systems.
    Overall, subparts F and G give agreements officers considerable 
latitude to negotiate award provisions in areas that sometimes are 
sources of concern for commercial firms. We appreciate that commercial 
firms often are not familiar with usual Government-unique requirements 
and may not always agree with them.
    One portion of subpart F that should be of particular interest to 
potential recipients is the portion in Secs. 37.640 through 37.680 that 
addresses audit requirements for expenditure-based TIAs. Under 
Sec. 37.650, agreements officers may authorize use of Independent 
Public Accountants (IPAs) for audits of for-profit firms under certain 
conditions. When IPAs are used, paragraph (c) of Sec. 37.660 requires 
the audits to be performed in accordance with the Generally Accepted 
Government Auditing Standards (GAGAS) issued by the General Accounting 
Office. Much of the GAGAS parallel the Generally Accepted Auditing 
Standards (GAAS) used in the commercial sector, and we ask that any 
comments raising issues with the use of the GAGAS rather than the GAAS 
identify the specific GAGAS provisions that are at issue.
    The portion of subpart F addressing property requirements also may 
be of particular interest to some for-profit firms. Section 37.685 
establishes the general policy for capital assets, including equipment, 
that for-profit firms may need to perform research under TIAs. The 
policy calls for including only depreciation or use charges for capital 
assets as costs under a TIA in most cases. Under Sec. 37.685, an 
agreements officer may grant an exception and permit a firm to charge 
the full acquisition cost of a capital asset to the research project. 
However, the DoD does not have statutory authority to give a for-profit 
recipient unconditional title to a capital asset purchased in whole or 
in part with Federal funds, unless the property is consumed in the 
project. Therefore, when the full acquisition cost of a capital asset 
is charged to the project, subpart F provides that the recipient will 
take title to the property and that the Government will have an 
interest in the property until the end of the project. At that time, 
the recipient will reimburse the Federal Government for its share of 
the residual value of the asset, if the fair market value of the 
property at that time is $5,000 or more.

Executing the Award (Subpart H)

    Subpart H of the proposed part 37 details agreements officers' 
responsibilities at the time of award. The section that likely is of 
most interest to potential TIA recipients is Sec. 37.1010, which lists 
substantive issues that the award document must address.

Post-Award Administration and Definitions (Subparts I and J)

    Subpart I, on post-award administration, largely addresses internal 
agency procedures and has little potential effect on recipients. 
Definitions of terms used in the proposed part 37 are in subpart J.

C. Discussion of Proposed Conforming Changes to Other Parts

    In addition to proposing to adopt the new part 37, the DoD is 
proposing to make conforming changes to other DoDGARs parts. The most 
significant changes are to part 21, which is the part of the DoDGARs 
that sets out DoD Components' general responsibilities for managing 
assistance functions. We are proposing to amend part 21 to apply to 
TIAs, as well as to other types of assistance instruments. We also are 
proposing to recast Part 21 in a plain language format like that of the 
new part 37. Given this significant revision, we are publishing part 21 
in its entirety in this notice of proposed rulemaking. We also are 
proposing very minor changes to other DoDGARs parts, to conform those 
parts to the revised part 21.

Executive Order 12866

    This proposed regulatory action is not a significant regulatory 
action, as defined by Executive Order 12866.

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

    This proposed regulatory action will not have a significant adverse 
impact on a substantial number of small entities.

Unfunded Mandates Act of 1995 (Sec. 202, Pub. L. 104-4)

    This proposed regulatory action does not contain a Federal mandate 
that will 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.

Paperwork Reduction Act of 1995 (44 U.S.C., Chapter 35)

    This proposed regulatory action will not impose any additional 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act.

Federalism (Executive Order 13132)

    This proposed regulatory action does not have Federalism 
implications, as set forth in Executive Order 13132. It will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.

List of Subjects

32 CFR Part 21

    Grant programs, Grants administration.

32 CFR Part 22

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

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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.

32 CFR Part 37

    Accounting, administrative practice and procedure, Grant programs, 
Grants administration, Reporting and recordkeeping requirements.

    Approved: April 19, 2002.
Patricia L. Toppings,
Alternate OSD Federal Register, Liaison Officer, Department of Defense.
    Accordingly, Title 32 of the Code of Federal Regulations, Chapter 
I, Subchapter B is proposed to be amended as follows.

    1. Part 21 is revised to read as follows:

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

Subpart A--Introduction
21.100   What are the purposes of this part?
Subpart B--Defense Grant and Agreement Regulatory System
21.200   What is the Defense Grant and Agreement Regulatory System 
(DGARS)?
21.205   What types of instruments are covered by the DGARS?
21.210   What are the purposes of the DGARS?
21.215   Who is responsible for the DGARS?
21.220   What publications are in the DGARS?
Subpart C--The DoD Grant and Agreement Regulations
21.300   What instruments are subject to the DoD Grant and Agreement 
Regulations (DoDGARs)?
21.305   What is the purpose of the DoDGARs?
21.310   Who ensures DoD Component compliance with the DoDGARs?
21.315   May DoD Components issue supplemental policies and 
procedures to implement the DoDGARs?
21.320   Are there areas in which DoD Components must establish 
policies and procedures to implement the DoDGARs?
21.325   Do acquisition regulations also apply to DoD grants and 
agreements?
21.330   How are the DoDGARs published and maintained?
21.335   Who can authorize deviations from the DoDGARs?
21.340   What are the procedures for requesting and documenting 
deviations?
Subpart D--Authorities and Responsibilities for Making and 
Administering Assistance Awards
21.400   To what instruments does this subpart apply?
21.405   What is the purpose of this subpart?
21.410   Must a DoD Component have statutory authority to make an 
assistance award?
21.415   Must the statutory authority specifically mention the use 
of grants or other assistance instruments?
21.420   Under what types of statutory authorities do DoD Components 
award assistance instruments?
21.425   How does a DoD Component's authority flow to awarding and 
administering activities?
21.430   What are the responsibilities of the head of the awarding 
or administering activity?
21.435   Must DoD Components formally select and appoint grants 
officers and agreements officers?
21.440   What are the standards for selecting and appointing grants 
officers and agreements officers?
21.445   What are the requirements for a grants officer's or 
agreements officer's statement of appointment?
21.450   What are the requirements for a termination of a grants 
officer's or agreements officer's appointment?
21.455   Who can sign, administer, or terminate assistance 
instruments?
21.460   What is the extent of grants officers' and agreements 
officers' authority?
21.465   What are grants officers' and agreements officers' 
responsibilities?
Subpart E--Information Reporting on Awards Subject to 31 U.S.C. Chapter 
61
21.500   What is the purpose of this subpart?
21.505   What is the Catalog of Federal Domestic Assistance (CFDA)?
21.510   Why does the DoD report information to the CFDA?
21.515   Who reports the information for the CFDA?
21.520   What are the purposes of the Defense Assistance Awards Data 
System (DAADS)?
21.525   Who issues policy guidance for the DAADS?
21.530   Who operates the DAADS?
21.535   Do DoD Components have central points for collecting DAADS 
data?
21.540   What are the duties of the DoD Components' central points 
for the DAADS?
21.545   Must DoD Components report every obligation to the DAADS?
21.550   Must DoD Components relate reported actions to listings in 
the CFDA?
21.555   When and how must DoD Components report to the DAADS?
21.560   Must DoD Components assign numbers uniformly to awards?
Subpart F--Definitions
21.605   Acquisition.
21.610   Agreements officer.
21.615   Assistance.
21.620   Award.
21.625   Contract.
21.630   Contracting activity.
21.635   Contracting officer.
21.640   Cooperative agreement.
21.645   Deviation.
21.650   DoD Components.
21.655   Grant.
21.660   Grants officer.
21.665   Nonprocurement instrument.
21.670   Procurement contract.
21.675   Recipient.
21.680   Technology investment agreements.
Appendix A to Part 21--Instruments to Which DoDGARs Portions Apply

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

Subpart A-- Introduction


Sec. 21.100  What are the purposes of this part?

    This part of the DoD Grant and Agreement Regulations:
    (a) Provides general information about the Defense Grant and 
Agreement Regulatory System (DGARS).
    (b) Sets forth general policies and procedures related to DoD 
Components' overall management of functions related to assistance and 
certain other nonprocurement instruments subject to the DGARS (see 
Sec. 21.205(b)).

Subpart B--Defense Grant and Agreement Regulatory System


Sec. 21.200  What is the Defense Grant and Agreement Regulatory System 
(DGARS)?

    The Defense Grant and Agreement Regulatory System (DGARS) is the 
system of regulatory policies and procedures for the award and 
administration of DoD Components' assistance and other nonprocurement 
awards. DoD Directive 3210.6\1\ established the DGARS.
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    \1\ Electronic copies may be obtained at the Internet site 
http://www.dtic.mil/whs/directives. Paper copies may be obtained, at 
cost, from the National Technical Information Service, 5285 Port 
Royal Road, Springfield, VA 22161. Authorized users may obtain 
copies from the Defense Technical Information Center, 8725 John J. 
Kingman Rd., Suite 0944, Fort Belvoir, VA 22060-6218.
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Sec. 21.205  What types of instruments are covered by the DGARS?

    The Defense Grant and Agreement Regulatory System (DGARS) applies 
to the following types of funding instruments awarded by DoD 
Components:
    (a) All grants, cooperative agreements, and technology investment 
agreements.
    (b) Other nonprocurement instruments, as needed to implement 
statutes, Executive orders, or other Federal Governmentwide rules that 
apply to those other nonprocurement instruments, as well as to grants 
and cooperative agreements.

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Sec. 21.210  What are the purposes of the DGARS?

    The purposes of the DGARS are to provide uniform policies and 
procedures for DoD Components' awards, in order to meet DoD needs for:
    (a) Efficient program execution, effective program oversight, and 
proper stewardship of Federal funds.
    (b) Compliance with relevant statutes; Executive orders; and 
applicable guidance, such as Office of Management and Budget (OMB) 
circulars.
    (c) Collection from DoD Components, retention, and dissemination of 
management and fiscal data related to awards.


Sec. 21.215  Who is responsible for the DGARS?

    The Director of Defense Research and Engineering, or his or her 
designee, develops and implements DGARS policies and procedures. He or 
she does so by issuing and maintaining the DoD publications that 
comprise the DGARS.


Sec. 21.220  What publications are in the DGARS?

    A DoD publication (DoD 3210.6-R\2\) entitled ``The DoD Grant and 
Agreement Regulations'' is the principal element of the DGARS. The 
Director of Defense Research and Engineering also may publish
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    \2\ See footnote 1 to Sec. 21.200.
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    DGARS policies and procedures in DoD instructions and other DoD 
publications, as appropriate.

Subpart C--The DoD Grant and Agreement Regulations


Sec. 21.300  What instruments are subject to the DoD Grant and 
Agreement Regulations (DoDGARs)?

    (a) The types of instruments that are subject to the DoDGARs vary 
from one portion of the DoDGARs to another. The types of instruments 
include grants, cooperative agreements, and technology investment 
agreements. Some portions of the DoDGARs apply to other types of 
assistance or nonprocurement instruments. The term ``awards,'' as 
defined in subpart D of this part, is used in this part to refer 
collectively to all of the types of instruments that are subject to one 
or more portions of the DoDGARs.
    (b) Note that each portion of the DoDGARs identifies the types of 
instruments to which it applies. However, grants officers and 
agreements officers must exercise caution when determining the 
applicability of some Governmentwide rules that are included within the 
DoDGARs, because a term may be defined differently in a Governmentwide 
rule than it is defined elsewhere in the DoDGARs. One example is part 
33 of the DoDGARs (32 CFR part 33), which contains administrative 
requirements for awards to State and local governments. That DoDGARs 
part is the DoD's codification of the Governmentwide rule implementing 
OMB Circular A-102.\3\ Part 33 states that it applies to grants, but 
defines the term ``grant'' to include cooperative agreements and other 
forms of financial assistance.
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    \3\ Electronic copies may be obtained at the Internet site 
http://www.whitehouse.gov/OMB. For paper copies, contact the Office 
of Management and Budget, EOP Publications, 725 17th St. NW., New 
Executive Office Building, Washington, DC 20503.
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    (c) For convenience, the table in appendix A to this part provides 
an overview of the applicability of the various portions of the 
DoDGARs.


Sec. 21.305  What is the purpose of the DoDGARs?

    The DoD Grant and Agreement Regulations provide uniform policies 
and procedures for the award and administration of DoD Components' 
awards. The DoDGARs are the primary DoD regulations for achieving the 
DGARS purposes described in Sec. 21.210.


Sec. 21.310  Who ensures DoD Component compliance with the DoDGARs?

    The Head of each DoD Component that makes or administers awards, or 
his or her designee, is responsible for ensuring compliance with the 
DoDGARs within that DoD Component.


Sec. 21.315  May DoD Components issue supplemental policies and 
procedures to implement the DoDGARs?

    Yes, Heads of DoD Components or their designees may issue 
regulations, procedures, or instructions to implement the DGARS or 
supplement the DoDGARs to satisfy needs that are specific to the DoD 
Component, as long as the regulations, procedures, or instructions do 
not impose additional costs or administrative burdens on recipients or 
potential recipients.


Sec. 21.320  Are there areas in which DoD Components must establish 
policies and procedures to implement the DoDGARs?

    Yes, Heads of DoD Components or their designees must establish 
policies and procedures in areas where uniform policies and procedures 
throughout the DoD Component are required, such as for:
    (a) Requesting class deviations from the DoDGARs (see 
Secs. 21.335(b) and 21.340(a)) 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).
    (b) Designating one or more Grant Appeal Authorities to resolve 
claims, disputes, and appeals (see 32 CFR 22.815).
    (c) Reporting data on assistance awards and programs, as required 
by 31 U.S.C. chapter 61 (see subpart C of this part).
    (d) 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. 21.325  Do acquisition regulations also apply to DoD grants and 
agreements?

    Unless the DoDGARs specify that they apply, policies and procedures 
in the following acquisition regulations that apply to procurement 
contracts do not apply to grants, cooperative agreements, technology 
investment agreements, or to other assistance or nonprocurement awards:
    (a) The Federal Acquisition Regulation (FAR) (48 CFR parts 1-53).
    (b) The Defense Federal Acquisition Regulation Supplement (DFARS) 
(48 CFR parts 201-270).
    (c) DoD Component supplements to the FAR and DFARS.


Sec. 21.330  How are the DoDGARs published and maintained?

    (a) The DoD publishes the DoDGARs in Chapter I, Subchapter B, Title 
32 of the Code of Federal Regulations (CFR) and in a separate internal 
DoD document (DoD 3210.6-R). The DoD document is divided into parts, 
subparts, and sections, to parallel the CFR publication. Cross-
references within the DoDGARs are stated as CFR citations (e.g., a 
reference to section 21.215 in part 21 would be to 32 CFR 21.215).
    (b) The DoD publishes updates to the DoDGARs in the Federal 
Register. When finalized, the DoD also posts the updates to the 
internal DoD document on the World Wide Web at http://www.dtic.mil/whs/directives.
    (c) A standing working group recommends revisions to the DoDGARs to 
the Director of Defense Research and Engineering (DDR&E). The DDR&E, 
Director of Defense Procurement, and each Military Department must be 
represented on the working group. Other DoD Components that make or 
administer awards may also nominate representatives. The working group 
meets when necessary.

[[Page 21490]]

Sec. 21.335  Who can authorize deviations from the DoDGARs?

    (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 award, if the deviations are not prohibited by 
statute, executive order or regulation.
    (b) The Director of Defense Research and Engineering (DDR&E) or his 
or her designee must approve in advance any class deviation that 
affects more than one award. Note that OMB concurrence also is required 
for class deviations from two parts of the DoDGARs, 32 CFR parts 32 and 
33, in accordance with 32 CFR 32.4 and 33.6, respectively.


Sec. 21.340  What are the procedures for requesting and documenting 
deviations?

    (a) DoD Components must submit copies of justifications and agency 
approvals for individual deviations and written requests for class 
deviations to: Deputy Director of Defense Research and Engineering, 
ATTN: Basic Research, 3080 Defense Pentagon, Washington DC 20301-3080.
    (b) Grants officers and agreements officers must maintain copies of 
requests and approvals for individual and class deviations in award 
files.

Subpart D--Authorities and Responsibilities for Making and 
Administering Assistance Awards


Sec. 21.400  To what instruments does this subpart apply?

    This subpart applies to grants, cooperative agreements, and 
technology investment agreements, which are legal instruments used to 
reflect assistance relationships between the United States Government 
and recipients.


Sec. 21.405  What is the purpose of this subpart?

    This subpart describes the sources and flow of authority to make or 
administer assistance awards, and assigns the broad responsibilities 
associated with DoD Components' use of those instruments.


Sec. 21.410  Must a DoD Component have statutory authority to make an 
assistance award?

    Yes, the use of an assistance instrument to carry out a program 
requires authorizing legislation. That is unlike the use of a 
procurement contract, for which Federal agencies have inherent, 
Constitutional authority.


Sec. 21.415  Must the statutory authority specifically mention the use 
of grants or other assistance instruments?

    No, the statutory authority described in Sec. 21.410 need not 
specifically say that the purpose of the program is assistance or 
mention the use of any type of assistance instrument. However, the 
intent of the statute must support a judgment that the use of an 
assistance instrument is appropriate. For example, a DoD Component may 
judge that the principal purpose of a program for which it has 
authorizing legislation is assistance, rather than acquisition. The DoD 
Component would properly use an assistance instrument to carry out that 
program, in accordance with 31 U.S.C. chapter 63.


Sec. 21.420  Under what types of statutory authorities do DoD 
Components award assistance instruments?

    DoD Components may use assistance instruments under a number of 
statutory authorities that fall into three categories:
    (a) 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:
    (1) Authority under 10 U.S.C. 2391 to award grants or cooperative 
agreements to help State and local governments alleviate serious 
economic impacts of defense program changes (e.g., base openings and 
closings, contract changes, and personnel reductions and increases).
    (2) Authority under 10 U.S.C. 2413 to enter into cooperative 
agreements with entities that furnish procurement technical assistance 
to businesses.
    (b) Authorities that statutes may provide directly to Heads of DoD 
Components. When a statute authorizes the Head of a DoD Component to 
use a funding instrument 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. Similarly, 10 U.S.C. 2371 provides 
authority for the Secretaries of the Military Departments and Secretary 
of Defense to carry out basic, applied, or advanced research projects 
using assistance instruments other than grants and cooperative 
agreements. A Military Department's use of the authority of 10 U.S.C. 
2358 or 10 U.S.C. 2371 therefore requires no delegation by the 
Secretary of Defense.
    (c) Authorities that arise indirectly as the result of statute. For 
example, authority to use an assistance instrument may result from:
    (1) 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. Depending upon the 
nature of the program (e.g., research) and whether the program statute 
includes authority for any specific types of instruments, there also 
may be authority to use other assistance instruments.
    (2) Exemptions requested by the Department of Defense and granted 
by the Office of Management and Budget under 31 U.S.C. 6307, as 
described in 32 CFR 22.220.


Sec. 21.425  How does a DoD Component's authority flow to awarding and 
administering activities?

    The Head of a DoD Component, or his or her designee, may delegate 
to the heads of contracting activities (HCAs) within the Component, 
that Component's authority to make and administer awards, to appoint 
grants officers and agreements officers (see Secs. 21.435 through 
21.450), and to broadly manage the DoD Component's functions related to 
assistance instruments. The 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. 21.430  What are the responsibilities of the head of the awarding 
or administering activity?

    When designated by the Head of the DoD Component or his or her 
designee (see 32 CFR 21.425), the head of the awarding or administering 
activity (i.e., the HCA) is responsible for the awards made by or 
assigned to that activity. He or she must supervise and establish 
internal policies and procedures for that activity's awards.


Sec. 21.435  Must DoD Components formally select and appoint grants 
officers and agreements officers?

    Yes, each DoD Component that awards grants or enters into 
cooperative

[[Page 21491]]

agreements must have a formal process (see Sec. 21.425) for selecting 
and appointing grants officers and for terminating their appointments. 
Similarly, each DoD Component that awards or administers technology 
investment agreements must have a process for selecting and appointing 
agreements officers and for terminating their appointments.


Sec. 21.440  What are the standards for selecting and appointing grants 
officers and agreements officers?

    In selecting grants officers and agreements officers, DoD 
Components must use the following minimum standards:
    (a) In selecting a grants officer, the appointing official must 
judge whether the candidate has the necessary experience, training, 
education, business acumen, judgment, and knowledge of assistance 
instruments and contracts to function effectively as a grants officer. 
The appointing official also must take those attributes of the 
candidate into account when deciding the complexity and dollar value of 
the grants and cooperative agreements to be assigned.
    (b) In selecting an agreements officer, the appointing official 
must consider all of the same factors as in paragraph (a) of this 
section. In addition, the appointing official must consider the 
candidate's ability to function in the less structured environment of 
technology investment agreements, where the rules provide more latitude 
and the individual must have a greater capacity for exercising 
judgment. Agreements officers therefore should be individuals who have 
demonstrated expertise in executing complex assistance and acquisition 
instruments.


Sec. 21.445  What are the requirements for a grants officer's or 
agreements officer's statement of appointment?

    A statement of a grants officer's or agreements officer's 
appointment:
    (a) Must be in writing.
    (b) Must clearly state the limits of the individual's authority, 
other than limits contained in applicable laws or regulations. 
Information on those limits of a grants officer's or agreements 
officer's authority must be readily available to the public and agency 
personnel.
    (c) May, if the individual is a contracting officer, be 
incorporated into the his or her statement of appointment as a 
contracting officer (i.e., there does not need to be a separate written 
statement of appointment for assistance instruments).


Sec. 21.450  What are the requirements for a termination of a grants 
officer's or agreements officer's appointment?

    A termination of a grants officer's or agreements officer's 
authority:
    (a) Must be in writing, unless the written statement of appointment 
provides for automatic termination.
    (b) May not be retroactive.
    (c) May be integrated into a written termination of the 
individual's appointment as a contracting officer, as appropriate.


Sec. 21.455  Who can sign, administer, or terminate assistance 
instruments?

    Only grants officers are authorized to sign, administer, or 
terminate grants or cooperative agreements (other than technology 
investment agreements) on behalf of the Department of Defense. 
Similarly, only agreements officers may sign, administer, or terminate 
technology investment agreements.


Sec. 21.460  What is the extent of grants officers' and agreements 
officers' authority?

    Grants officers and agreements officers may bind the Government 
only to the extent of the authority delegated to them in their written 
statements of appointment (see Sec. 21.445).


Sec. 21.465  What are grants officers' and agreements officers' 
responsibilities?

    Grants officers and agreements officers should be allowed wide 
latitude to exercise judgment in performing their responsibilities, 
which are to ensure that:
    (a) Individual awards are used effectively in the execution of DoD 
programs, and are made and administered in accordance with applicable 
laws, Executive orders, regulations, and DoD policies.
    (b) Sufficient funds are available for obligation.
    (c) Recipients of awards receive impartial, fair, and equitable 
treatment.

Subpart E--Information Reporting on Awards Subject to 31 U.S.C. 
Chapter 61


Sec. 21.500  What is the purpose of this subpart?

    This subpart prescribes policies and procedures for compiling and 
reporting data related to DoD awards and programs that are subject to 
information reporting requirements of 31 U.S.C. chapter 61. That 
chapter of the U.S. Code requires the Office of Management and Budget 
to maintain a Governmentwide information system to collect data on 
Federal agencies' domestic assistance awards and programs.


Sec. 21.505  What is the Catalog of Federal Domestic Assistance (CFDA)?

    The Catalog of Federal Domestic Assistance (CFDA) is a 
Governmentwide compilation of information about domestic assistance 
programs. It 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 agreements, covered programs include those 
providing assistance in other forms, such as payments in lieu of taxes 
or indirect assistance resulting from Federal operations.


Sec. 21.510  Why does the DoD report information to the CFDA?

    The Federal Program Information Act (31 U.S.C. 6101 et seq.), as 
implemented through OMB Circular A-89,\4\ requires the Department of 
Defense and other Federal agencies to provide certain information about 
their domestic assistance programs to the OMB and the General Services 
Administration (GSA). The 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.
---------------------------------------------------------------------------

    \4\ See footnote 3 to Sec. 21.300(b).
---------------------------------------------------------------------------


Sec. 21.515  Who reports the information for the CFDA?

    (a) Each DoD Component that provides domestic financial assistance 
must:
    (1) Report to the Director of Information, Operations and Reports, 
Washington Headquarters Services (DIOR, WHS) all new programs and 
changes as they occur or as the DoD Component submits its annual 
updates to existing CFDA information.
    (2) Identify to the DIOR, WHS a point-of-contact who will be 
responsible for reporting the program information and for responding to 
inquiries related to it.
    (b) The DIOR, WHS is the Department of Defense's single office for 
collecting, compiling and reporting such program information to the OMB 
and GSA.


Sec. 21.520  What are the purposes of the Defense Assistance Awards 
Data System (DAADS)?

    Data from the Defense Assistance Awards Data System (DAADS) are 
used to provide:
    (a) DoD inputs to meet statutory requirements for Federal 
Governmentwide reporting of data related to obligations of funds by 
assistance instrument.

[[Page 21492]]

    (b) A basis for meeting Governmentwide requirements to report to 
the Federal Assistance Awards Data System (FAADS) 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. DoD Components' reporting of DAADS data, as used by the 
DoD to meet the Governmentwide requirements to report to the FAADS, is 
assigned Interagency Report Control Number 0252-DOC-QU.
    (c) Information to support policy formulation and implementation 
and to meet management oversight requirements related to the use of 
awards.


Sec. 21.525  Who issues policy guidance for the DAADS?

    The Deputy Director, Defense Research and Engineering (DDDR&E), or 
his or her designee, issues necessary policy guidance for the Defense 
Assistance Awards Data System.


Sec. 21.530  Who operates the DAADS?

    The Director of Information Operations and Reports, Washington 
Headquarters Services (DIOR, WHS), consistent with guidance issued by 
the DDDR&E:
    (a) Processes DAADS information on a quarterly basis and prepares 
recurring and special reports using such information.
    (b) Prepares, updates, and disseminates instructions for reporting 
information to the DAADS. The instructions are to specify procedures, 
formats, and editing processes to be used by DoD Components, including 
record layout, submission deadlines, media, methods of submission, and 
error correction schedules.


Sec. 21.535  Do DoD Components have central points for collecting DAADS 
data?

    Each DoD Component must have a central point for collecting DAADS 
information from contracting activities within that DoD Component. The 
central points are as follows:
    (a) For the Army: As directed by the U.S. Army Contracting Support 
Agency.
    (b) For the Navy: As directed by the Office of Naval Research.
    (c) For the Air Force: As directed by the Office of the Secretary 
of the Air Force, Acquisition Contracting Policy and Implementation 
Division (SAF/AQCP).
    (d) For the Office of the Secretary of Defense, Defense Agencies, 
and DoD Field Activities: Each Defense Agency must identify a central 
point for collecting and reporting DAADS information to the DIOR, WHS, 
at the address given in Sec. 21.555(a). DIOR, WHS serves as the central 
point for offices and activities within the Office of the Secretary of 
Defense and for DoD Field Activities.


Sec. 21.540  What are the duties of the DoD Components' central points 
for the DAADS?

    The office that serves, in accordance with Sec. 21.535, as the 
central point for collecting DAADS information from contracting 
activities within each DoD Component must:
    (a) Establish internal procedures to ensure reporting by 
contracting activities that make awards subject to 31 U.S.C. chapter 
61.
    (b) Collect information required by DD Form 2566 \5\, ``DoD 
Assistance Award Action Report,'' from those contracting activities, 
and report it to DIOR, WHS, in accordance with Secs. 21.545 through 
21.555.
---------------------------------------------------------------------------

    \5\ DD Forms are available at http://www.dior.whs.mil/ICDHOME/FORMTAB.HTM
---------------------------------------------------------------------------

    (c) Submit to the DIOR, WHS, any recommended changes to the DAADS.


Sec. 21.545  Must DoD Components report every obligation to the DAADS?

    Yes, DoD Components' central points must collect and report the 
data required by the DD Form 2566 for each individual action that 
involves the obligation or deobligation of Federal funds for an award 
that is subject to 31 U.S.C. chapter 61.


Sec. 21.550  Must DoD Components relate reported actions to listings in 
the CFDA?

    Yes, DoD Components' central points must report each action as an 
obligation or deobligation under a specific programmatic listing in the 
Catalog of Federal Domestic Assistance (CFDA, see Sec. 21.505). The 
programmatic listing to be shown is the one that provided the funds 
being obligated or deobligated. For example, if a grants officer or 
agreements officer in one DoD Component obligates appropriations of a 
second DoD Component's programmatic listing, the grants officer or 
agreements officer must show the CFDA programmatic listing of the 
second DoD Component on the DD Form 2566.


Sec. 21.555  When and how must DoD Components report to the DAADS?

    DoD Components' central points must report:
    (a) On a quarterly basis to DIOR, WHS. 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.
    (b) On a floppy diskette or by other means permitted either by the 
instructions described in Sec. 21.530(b) or by agreement with the DIOR, 
WHS. The data must be reported in the format specified in the 
instructions.


Sec. 21.560  Must DoD Components assign numbers uniformly to awards?

    Yes, DoD Components must assign identifying numbers to all awards 
subject to this subpart, including grants, cooperative agreements, and 
technology investment agreements. The uniform 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 
must 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 must 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 must be a number:
    (1) ``1'' for grants.
    (2) ``2'' for cooperative agreements, including technology 
investment agreements that are cooperative agreements (see Appendix C 
to 32 CFR part 37).
    (3) ``3'' for other nonprocurement instruments, including 
technology investment agreements that are not cooperative agreements.
    (d) The 10th through 13th positions must 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.

Subpart F--Definitions


Sec. 21.605  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

[[Page 21493]]

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.


Sec. 21.610  Agreements officer.

    An official with the authority to enter into, administer, and/or 
terminate technology investment agreements.


Sec. 21.615  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, cooperative agreements, 
and technology investment agreements are examples of legal instruments 
used to provide assistance.


Sec. 21.620  Award.

    A grant, cooperative agreement, technology investment agreement, or 
other nonprocurement instrument subject to one or more parts of the DoD 
Grant and Agreement Regulations (see Appendix A to this part).


Sec. 21.625  Contract.

    See the definition for procurement contract in this section.


Sec. 21.630  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.


Sec. 21.635  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.


Sec. 21.640  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.


Sec. 21.645  Deviation.

    The issuance or use of a policy or procedure that is inconsistent 
with the DoDGARs.


Sec. 21.650  DoD Components.

    The Office of the Secretary of Defense, the Military Departments, 
the Defense Agencies, and DoD Field Activities.


Sec. 21.655  Grant.

    A legal instrument which, consistent with 31 U.S.C. 6304, is used 
to enter into a relationship:
    (a) Of which the principal purpose 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.
    (b) In which substantial involvement is not expected between the 
Department of Defense and the recipient when carrying out the activity 
contemplated by the grant.


Sec. 21.660  Grants officer.

    An official with the authority to enter into, administer, and/or 
terminate grants or cooperative agreements.


Sec. 21.665  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.


Sec. 21.670  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.


Sec. 21.675  Recipient.

    An organization or other entity receiving an award from a DoD 
Component.


Sec. 21.680  Technology investment agreements.

    A special class of assistance instruments used to increase 
involvement of commercial firms in defense research programs and for 
other purposes related to integrating the commercial and defense 
sectors of the nation's technology and industrial base. Technology 
investment agreements include one kind of cooperative agreement with 
provisions tailored for involving commercial firms, as well as one kind 
of other assistance transaction. Technology investment agreements are 
described more fully in 32 CFR part 37.

Appendix A to Part 21 -- Instruments to Which DoDGARs Portions 
Apply

----------------------------------------------------------------------------------------------------------------
           DoDGARs * * *                     which addresses * * *                    applies to * * *
----------------------------------------------------------------------------------------------------------------
Part 21:
  (32 CFR part 21), Subpart D and E  The Defense Grant and Agreement        ``awards,'' which are grants,
                                      Regulatory System and the DoD Grant    cooperative agreements, technology
                                      and Agreement Regulations.             investment agreements (TIAs), and
                                                                             other nonprocurement instruments
                                                                             subject to one more parts of the
                                                                             DoDGARs.
Part 21:
  (32 CFR part 21), Subpart D......  Authorities and responsiblities for    grants, cooperative agreements, and
                                      assistance award and administration.   TIAa.
Part 21:
  (32 CFR part 21), Subpart E......  DoD Components' information reporting  grants, cooperative agreements,
                                      requirements.                          TIAs, and other nonprocurement
                                                                             instruments subject to reporting
                                                                             requirements in 31 U.S.C. chapter
                                                                             61.
Part 22:
  (32 CFR part 22).................  DoD grants officers' responsibilities  grants and cooperative agreements
                                      for award and administration of        other than TIAs.
                                      grants and cooperative agreements.
Part 25:
  (32 CFR part 25), Suparts A        Governmentwide debarment and           Nonprocurement generally, which is
   through E.                         suspension requirements.               grants, cooperative agreements,
                                                                             TIAs, and other instruments
                                                                             included in the definition of
                                                                             ``primary covered transaction'' at
                                                                             32 CFR 25.110(a)(1)(i), with the
                                                                             exceptions identified at 32 CFR
                                                                             25.110(a)(2).

[[Page 21494]]

 
Part 25:
  (32 CFR part 25), Subpart F......  Governmentwide drug-free workplace     financial assistance generally,
                                      requirements.                          including cooperative agreements
                                                                             and TIAs, as included in the
                                                                             definition of ``grant'' at 32 CFR
                                                                             25.605(b)(7).
Part 28:
  (32 CFR part 28).................  Governmentwide restrictions on         grants, cooperative agreements and
                                      lobbying.                              other financial assistance
                                                                             instruments, including TIAs, that
                                                                             are included in the definitions of
                                                                             ``Federal grant'' and ``Federal
                                                                             cooperative agreement'' at 32 CFR
                                                                             28.105.
Part 32:
  (32 CFR part 32).................  Administrative requirements for        grants, cooperative agreements other
                                      grants and agreements with             than TIAs, and other assistance
                                      institutions of higher education,      included in ``award,'' as defined
                                      hospitals, and other non-profit        in 32 CFR 32.2. Portions of this
                                      organizations.                         part apply to TIAs, but only as 32
                                                                             CFR part 37 refers to them and
                                                                             makes them apply.
Part 33:
  (32 CFR part 33).................  Administrative requirements for        grants, cooperative agreements other
                                      grants and agreements with State and   than TIAs, and other assistance
                                      local governments.                     included in ``grant,'' as defined
                                                                             in 32 CFR 33.3. Portions of this
                                                                             part apply to TIAs, but only as 32
                                                                             CFR part 37 refers to them and
                                                                             makes them apply.
Part 34:
  (32 CFR part 34).................  Administrative requirements for        grants and cooperative agreements
                                      grants and agreements with for-        other than TIAs (``awards,'' as
                                      profit organizations.                  defined in 32 CFR 34.2). Portions
                                                                             of this part apply to TIAs, but
                                                                             only as 32 CFR part 37 refers to
                                                                             them and makes them apply.
Part 37:
  (32 CFR part 37).................  Agreements officers' responsibilities  TIAs. Note that this part refers to
                                      for award and administration of TIAs.  portions of DoDGARs parts 32, 33,
                                                                             and 34 that apply to TIAs.
----------------------------------------------------------------------------------------------------------------

PART 22--[AMENDED]

    2. The authority citation for part 22 continues to read as follows:

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


Sec. 22.105  [Amended]

    3. Section 22.105 is amended by removing ``32 CFR 21.130'' in the 
first sentence and adding ``32 CFR part 21, subpart F'' in its place.


Sec. 22.210  [Amended]

    4. Section 22.210 is amended by removing ``32 CFR 21.205(b)'' in 
paragraph (a)(1) and adding ``32 CFR 21.410 through 21.420'' in its 
place.


Sec. 22.220  [Amended]

    5. Section 22.220 is amended by removing ``32 CFR 21.115(b)(1)'' in 
paragraph (a)(1) and adding ``32 CFR 21.320(a)'' in its place.


Sec. 22.605  [Amended]

    6. Section 22.605 is amended by removing ``32 CFR part 21, subpart 
C'' in paragraph (b) and adding ``32 CFR part 21, subpart E'' in its 
place.

PART 32--[AMENDED]

    7. The authority citation for part 32 continues to read as follows:

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


Sec. 32.4  [Amended]

    8. Section 32.4 is amended by:
    a. Removing ``32 CFR 21.125(a) and (c)'' in paragraph (a) and 
adding ``32 CFR 21.335(a) and 21.340'' in its place; and
    b. Removing ``32 CFR 21.125(b) and (c)'' in paragraph (c)(2) and 
adding ``32 CFR 21.335(b) and 21.340'' in its place.


Sec. 32.11  [Amended]

    9. Section 32.11 is amended by removing ``32 CFR 21.205(a) and'' in 
paragraph (a)(2).

PART 34--[AMENDED]

    10. The authority citation for part 34 continues to read as 
follows:

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

    11. The definition of ``award'' in Sec. 34.2 is amended to read as 
follows:


Sec. 34.2  Definitions.

* * * * *
    Award. A grant or a cooperative agreement other than a technology 
investment agreement (TIA). TIAs are covered by part 37 of the DoDGARs 
(32 CFR part 37). Portions of this part may apply to a TIA, but only to 
the extent that 32 CFR part 37 makes them apply.
* * * * *


Sec. 34.3  [Amended]

    12. Section 34.3 is amended by:
    a. Removing ``32 CFR 21.125(a)'' in paragraph (a) and adding ``32 
CFR 21.335(a) and 21.340'' in its place; and
    b. Removing ``32 CFR 21.125(b) and(c)'' in paragraph (c) and adding 
``32 CFR 21.335(b) and 21.340'' in its place.
    13. Part 37 is added to read as follows:

PART 37--TECHNOLOGY INVESTMENT AGREEMENTS

Subpart A--General
Sec.
37.100  What does this part do?
37.105  Does this part cover all types of instruments that 10 U.S.C. 
2371 authorizes?
37.110  What type of instruments are technology investment 
agreements (TIAs)?
37.115  For what purposes are TIAs used?
37.120  Can my organization award or administer TIAs?
37.125  May I award or administer TIAs if I am authorized to award 
or administer other assistance instruments?
37.130  Which other parts of the DoD Grant and Agreement Regulations 
apply to TIAs?
Subpart B--Appropriate Use of Technology Investment Agreements
37.200  What are my responsibilities as an agreements officer for 
ensuring the appropriate use of TIAs?
37.205  What judgments must I make about the nature of the project?
37.210  To what types of recipients may I award a TIA?
37.215  What must I conclude about the recipient's commitment and 
cost sharing?
37.220  How involved should the Government program official be in 
the project?
37.225  What judgment must I make about the benefits of using a TIA?
37.230  May I use a TIA if a participant is to receive fee or 
profit?

[[Page 21495]]

Subpart C--Expenditure-Based and Fixed-Support Technology Investment 
Agreements
37.300  What is the difference between an expenditure-based and 
fixed-support TIA?
37.305  When may I use a fixed-support TIA?
37.310  When would I use an expenditure-based TIA?
37.315  What are the advantages of using a fixed-support TIA?
Subpart D--Competition Phase
37.400  Must I use competitive procedures to award TIAs?
37.405  What must my announcement or solicitation include?
37.410  Should my announcement or solicitation state that TIAs may 
be awarded?
37.415  Should I address cost sharing in the announcement or 
solicitation?
37.420  Should I tell proposers that we will not disclose 
information that they submit?
Subpart E--Pre-Award Business Evaluation
37.500  What must my pre-award business evaluation address?
37.505  What resources are available to assist me during the pre-
award business evaluation?

Recipient Qualification

37.510  What are my responsibilities for determining that a 
recipient is qualified?
37.515  Must I do anything additional to determine the qualification 
of a consortium?

Total Funding

37.520  What is my responsibility for determining that the total 
project funding is reasonable?

Cost Sharing

37.525  What is my responsibility for determining the value and 
reasonableness of the recipient's cost sharing contribution?
37.530  What criteria do I use in deciding whether to accept a 
recipient's cost sharing?
37.535  How do I value cost sharing related to real property or 
equipment?
37.540  May I accept fully depreciated real property or equipment as 
cost sharing?
37.545  May I accept costs of prior research as cost sharing?
37.550  May I accept intellectual property as cost sharing?
37.555  How do I value a recipient's other contributions?

Fixed-Support or Expenditure-Based Approach

37.560  Must I be able to estimate project expenditures precisely in 
order to justify use of a fixed-support TIA?
37.565  May I use a hybrid instrument that provides fixed support 
for only a portion of a project?

Accounting, Payments, and Recovery of Funds

37.570  What must I do if a CAS-covered participant accounts 
differently for its own and the Federal Government shares of project 
costs?
37.575  What are my responsibilities for determining milestone 
payment amounts?
37.580  What is recovery of funds and when should I consider 
including it in my TIA?
Subpart F--Award Terms Affecting Participants' Financial, Property, and 
Purchasing Systems
37.600  Which administrative matters are covered in this subpart?
37.605  What is the general policy on participants' financial, 
property, and purchasing systems?
37.610  Must I tell participants what requirements they are to flow 
down for subawardees' systems?

Financial Matters

37.615  What standards do I include for financial systems of for-
profit firms?
37.620  What financial management standards do I include for 
nonprofit participants?
37.625  What cost principles or standards do I require for for-
profit participants?
37.630  Must I require a for-profit firm to use Federally approved 
indirect cost rates?
37.635  What cost principles do I require a nonprofit participant to 
use?
37.640  Must I include a provision for audits of for-profit 
participants?
37.645  Must I require periodic system audits, as well as award-
specific audits, of for-profit participants?
37.650  Who must I identify as the auditor for a for-profit 
participant?
37.655  Must I specify the frequency of IPAs' periodic audits of 
for-profit participants?
37.660  What else must I specify concerning audits of for-profit 
participants by IPAs?
37.665  Must I require nonprofit participants to have periodic 
systems audits?
37.670  Must I require participants to flow down audit requirements 
to subrecipients?
37.675  Must I report when I enter into a TIA allowing a for-profit 
firm to use an IPA?
37.680  Must I require a participant to report when it enters into a 
subaward allowing a for-profit firm to use an IPA?

Property

37.685  May I allow for-profit firms to purchase real property and 
equipment with project funds?
37.690  How are nonprofit participants to manage real property and 
equipment?
37.695  What are the requirements for Federally owned property?
37.700  What are the requirements for supplies?

Purchasing

37.705  What standards do I include for purchasing systems of for-
profit firms?
37.710  What standards do I include for purchasing systems of 
nonprofit organizations?
Subpart G--Award Terms Related to Other Administrative Matters
37.800  Which administrative matters are covered in this subpart?

Payments

37.805  If I am awarding a TIA, what payment methods may I specify?
37.810  What should my TIA's provisions specify for the method and 
frequency of recipients' payment requests?
37.815  May the Government withhold payments?
37.820  Must I require a recipient to return interest on advance 
payments?

Revision of Budget and Program Plans

37.825  Must I require the recipient to obtain prior approval from 
the Government for changes in plans?
37.830  May I let a recipient charge pre-award costs to the 
agreement?

Program Income

37.835  What requirements do I include for program income?

Intellectual Property

37.840  What general approach should I take in negotiating data and 
patent rights?
37.845  What data rights should I obtain?
37.850  Should I require recipients to mark data?
37.855  How should I handle protected data?
37.860  What rights should I obtain for inventions?
37.865  Should my patent provision include march-in rights?
37.870  Should I require recipients to mark documents related to 
inventions?
37.875  Should my TIA include a provision concerning foreign access 
to technology?

Financial and Programmatic Reporting

37.880  What requirements must I include for periodic reports on 
program and business status?
37.885  May I require updated program plans?
37.890  Must I require a final performance report?
37.895  How is the final performance report to be sent to the 
Defense Technical Information Center?
37.900  May I tell a participant that information in financial and 
programmatic reports will not be publicly disclosed?
37.905  Must I make receipt of the final performance report a 
condition for final payment?

Records Retention and Access Requirements

37.910  How long must I require participants to keep records related 
to the TIA?
37.915   What requirement for access to a for-profit participant's 
records do I include in a TIA?
37.920   What requirement for access to a nonprofit participant's 
records do I include in a TIA?

Termination and Enforcement

37.925   What requirements do I include for termination and 
enforcement?

[[Page 21496]]

Subpart H--Executing the Award
37.1000   What are my responsibilities at the time of award?

The Award Document

37.1005   What are my general responsibilities concerning the award 
document?
37.1010   What substantive issues should my award document address?
37.1015   How do I decide who must sign the TIA if the recipient is 
an unincorporated consortium?

Reporting Information About the Award

37.1020   What must I document in my award file?
37.1025   Must I report information to the Defense Assistance Awards 
Data System?
37.1030   What information must I report to the Defense Technical 
Information Center?
37.1035   How do I know if my TIA uses the 10 U.S.C. 2371 authority 
and I must report additional data under Sec. 37.1030(b)?
Sec. 37.1040   When and how do I report information required by 
Sec. 37.1035?

Distributing Copies of the Award Document

37.1045   To whom must I send copies of the award document?
Subpart I--Post-Award Administration
37.1100   What are my responsibilities generally as an 
administrative agreements officer for a TIA?
37.1105   What additional duties do I have as the administrator of a 
TIA with advance payments or payable milestones?
37.1110   What other responsibilities related to payments do I have?
37.1115   What are my responsibilities related to participants' 
single audits?
37.1120   When and how may I request an award-specific audit?
Subpart J--Definitions of Terms Used in This Part
37.1205   Advance.
37.1210   Advanced research.
37.1215   Agreements officer.
37.1220   Applied research.
37.1225   Articles of collaboration.
37.1230   Assistance.
37.1235   Award-specific audit.
37.1240   Basic research.
37.1245   Cash contributions.
37.1250   Commercial firm.
37.1255   Consortium.
37.1260   Cooperative agreement.
37.1265   Cost sharing.
37.1270   Data.
37.1275   DoD Component.
37.1280   Equipment.
37.1285   Expenditure-based award.
37.1290   Expenditures or outlays.
37.1295   Grant.
37.1300   In-kind contributions.
37.1305   Institution of higher education.
37.1310   Intellectual property.
37.1315   Nonprofit organization.
37.1320   Participant.
37.1325   Periodic audit.
37.1330   Procurement contract.
37.1335   Program income.
37.1340   Program official.
37.1345   Property.
37.1350   Real property.
37.1355   Recipient.
37.1360   Research.
37.1365   Supplies.
37.1370   Termination.
37.1375   Technology investment agreements.
Appendix A to Part 37--What is the Civil-Military Integration Policy 
that is the Basis for Technology Investment Agreements?
Appendix B to Part 37--What Type of Instrument is a TIA and What 
Statutory Authorities Does it Use?
Appendix C to Part 37What is the Desired Coverage for Periodic 
Audits of For-Profit Participants to be Audited by IPAs?
Appendix D to Part 37--What Common National Policy Requirements May 
Apply and Need to Be Included in TIAs?
Appendix E to Part 37--What Provisions May a Participant Need to 
Include when Purchasing Goods or Services Under a TIA?

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

Subpart A-General


Sec. 37.100  What does this part do?

    This part establishes uniform policies and procedures for the DoD 
Components' award and administration of technology investment 
agreements (TIAs).


Sec. 37.105  Does this part cover all types of instruments that 10 
U.S.C. 2371 authorizes?

    No, this part covers only TIAs, some of which use the authority of 
10 U.S.C. 2371 (see appendix B to this part). This part does not cover 
assistance instruments other than TIAs that use the authority of 10 
U.S.C. 2371. It also does not cover acquisition agreements for 
prototype projects that use 10 U.S.C. 2371 authority augmented by the 
authority in section 845 of Public Law 103-160, as amended.


Sec. 37.110  What type of instruments are technology investment 
agreements (TIAs)?

    TIAs are assistance instruments used to stimulate or support 
research. As discussed in appendix B to this part, a TIA may be either 
a kind of cooperative agreement or a type of assistance transaction 
other than a grant or cooperative agreement.


Sec. 37.115  For what purposes are TIAs used?

    The ultimate goal for using TIAs, like other assistance instruments 
used in defense research programs, is to foster the best technologies 
for future defense needs. TIAs differ from and complement other 
assistance instruments available to agreements officers, in that TIAs 
address the goal by fostering civil-military integration (see appendix 
A to this part). TIAs therefore are designed to:
    (a) Reduce barriers to commercial firms' participation in defense 
research, to give the Department of Defense (DoD) access to the 
broadest possible technology and industrial base.
    (b) Promote new relationships among performers in both the defense 
and commercial sectors of that technology and industrial base.
    (c) Stimulate performers to develop, use, and disseminate improved 
practices.


Sec. 37.120  Can my organization award or administer TIAs?

    Your office may award or administer TIAs if it has a delegation of 
the authorities in 10 U.S.C. 2371, as well as 10 U.S.C. 2358. If your 
office is in a Military Department, it must have a delegation of the 
authority of the Secretary of that Military Department under those 
statutes. If your office is in a Defense Agency, it must have a 
delegation of the authority of the Secretary of Defense under 10 U.S.C. 
2358 and 2371. Your office needs those authorities to be able to:
    (a) Enter into cooperative agreements to stimulate or support 
research, using the authority of 10 U.S.C. 2358, as well as assistance 
transactions other than grants or cooperative agreements, using the 
authority of 10 U.S.C. 2371. The reason that both authorities are 
needed is that a TIA, depending upon its patent rights provision (see 
appendix B to this part), may be either a cooperative agreement or a 
type of assistance transaction other than a grant or cooperative 
agreement.
    (b) Recover funds from a recipient and reuse the funds for program 
purposes, as authorized by 10 U.S.C. 2371 and described in Sec. 37.580.
    (c) Exempt certain information received from proposers from 
disclosure under the Freedom of Information Act, as authorized by 10 
U.S.C. 2371 and described in Sec. 37.420.


Sec. 37.125  May I award or administer TIAs if I am authorized to award 
or administer other assistance instruments?

    (a) You must have specific authorization to award or administer 
TIAs. Being authorized to award or administer grants and cooperative 
agreements is not sufficient; a grants officer is an agreements officer 
only if the statement of appointment also authorizes the award or 
administration of TIAs.
    (b) You receive that authorization in the same way that you receive 
authority to award other assistance instruments, as described in 32 CFR 
21.215, 21.225, and 21.230.

[[Page 21497]]

Sec. 37.130  Which other parts of the DoD Grant and Agreement 
Regulations apply to TIAs?

    (a) TIAs are explicitly covered in this part and part 21 of the DoD 
Grant and Agreement Regulations (DoDGARs). Part 21 (32 CFR part 21) 
addresses deviation procedures and other general matters that relate to 
the DoDGARs, to DoD Components' authorities and responsibilities for 
assistance instruments, and to requirements for reporting information 
about assistance awards.
    (b) Two additional parts of the DoDGARs apply to TIAs, although 
they do not mention TIAs explicitly. They are:
    (1) Part 25 (32 CFR part 25), on debarment, suspension, and drug-
free workplace requirements, which applies because it covers 
nonprocurement instruments in general; and
    (2) Part 28 (32 CFR part 28), on lobbying restrictions, which 
applies by law (31 U.S.C. 1352) to TIAs that are cooperative agreements 
and as a matter of DoD policy to all other TIAs.
    (c) Portions of four other DoDGARs parts apply to TIAs only as 
cited by reference in this part. Those parts of the DoDGARs are parts 
22, 32, 33, and 34 (32 CFR parts 22, 32, 33, and 34).

Subpart B--Appropriate Use of Technology Investment Agreements


Sec. 37.200  What are my responsibilities as an agreements officer for 
ensuring the appropriate use of TIAs?

    You must ensure that you use TIAs only in appropriate situations. 
To do so, you must conclude that the use of a TIA is justified based 
on:
    (a) The nature of the project, as discussed in Sec. 37.205;
    (b) The type of recipient, addressed in Sec. 37.210;
    (c) The recipient's commitment and cost sharing, as described in 
Sec. 37.215;
    (d) The degree of involvement of the Government program official, 
as discussed in Sec. 37.220; and
    (e) Your judgment that the use of a TIA could benefit defense 
research objectives in ways that likely would not happen if another 
type of assistance instrument were used. Your answers to the four 
questions in Sec. 37.225 should be the basis for your judgment.


Sec. 37.205  What judgments must I make about the nature of the 
project?

    You must:
    (a) Conclude that the principal purpose of the project is 
stimulation or support of research (i.e., assistance), rather than 
acquiring goods or services for the benefit of the Government (i.e., 
acquisition);
    (b) Decide that the basic, applied, or advanced research project is 
relevant to the policy objective of civil-military integration (see 
appendix A of this part); and
    (c) Ensure that, to the maximum extent practicable, any TIA that 
uses the authority of 10 U.S.C. 2371 (see appendix B of this part) does 
not support research that duplicates other research being conducted 
under existing programs carried out by the Department of Defense. This 
is a statutory requirement of 10 U.S.C. 2371.
    (d) When your TIA is a type of assistance transaction other than a 
grant or cooperative agreement, satisfy the condition in 10 U.S.C. 2371 
to judge that the use of a standard grant or cooperative agreement for 
the research project is not feasible or appropriate. As discussed in 
appendix B to this part:
    (1) This situation arises if your TIA includes a patent provision 
that is less restrictive than is possible under the Bayh-Dole statute 
(because the patent provision is what distinguishes a TIA that is a 
cooperative agreement from a TIA that is an assistance transaction 
other than a grant or cooperative agreement).
    (2) You satisfy the requirement to judge that a standard 
cooperative agreement is not feasible or appropriate when you judge 
that execution of the research project warrants a less restrictive 
patent provision than is possible under Bayh-Dole.


Sec. 37.210  To what types of recipients may I award a TIA?

    (a) As a matter of DoD policy, you may award a TIA only when one or 
more for-profit firms are to be involved either in the:
    (1) Performance of the research project; or
    (2) The commercial application of the research results. In that 
case, you must determine that the nonprofit performer has at least a 
tentative agreement with specific for-profit partners who plan on being 
involved when there are results to transition. You should review the 
agreement between the nonprofit and for-profit partners, because the 
for-profit partners' involvement is the basis for using a TIA rather 
than another type of assistance instrument.
    (b) Consistent with the goals of civil-military integration, TIAs 
are most appropriate when one or more commercial firms (as defined at 
Sec. 37.1250) are to be involved in the project.
    (c) You are encouraged to make awards to consortia (a consortium 
may include one or more for-profit firms, as well as State or local 
government agencies, institutions of higher education, or other 
nonprofit organizations). The reasons are that:
    (1) When multiple performers are participating as a consortium, 
they are more equal partners in the research performance than usually 
is the case with a prime recipient and subawards. All of them therefore 
are more likely to be directly involved in developing and revising 
plans for the research effort, reviewing technical progress, and 
overseeing financial and other business matters. That feature makes 
consortia well suited to building new relationships among performers in 
the defense and commercial sectors of the technology and industrial 
base, a principal objective for the use of TIAs.
    (2) In addition, interactions among the participants within a 
consortium potentially provide a self-governance mechanism. The 
potential for additional self-governance is particularly good when a 
consortium includes multiple for-profit participants that normally are 
competitors within an industry.
    (d) TIAs also may be used for carrying out research performed by 
single firms or multiple performers in prime award-subaward 
relationships. In awarding TIAs in those cases, however, you should 
consider providing for greater involvement of the program official or a 
way to increase self-governance (e.g., a prime award with multiple 
subawards arranged so as to give the subrecipients more insight into 
and authority and responsibility for programmatic and business aspects 
of the overall project than they usually have).


Sec. 37.215  What must I conclude about the recipient's commitment and 
cost sharing?

    (a) You should judge that the recipient has a strong commitment to 
and self-interest in the success of the project. You should find 
evidence of that commitment and interest in the proposal, in the 
recipient's management plan, or through other means. A recipient's 
self-interest might be driven, for example, by a research project's 
potential for fostering technology to be incorporated into products and 
processes for the commercial marketplace.
    (b) You must seek cost sharing. The purpose of cost share is to 
ensure that the recipient incurs real risk that gives it a vested 
interest in the project's success; the willingness to commit to 
meaningful cost sharing therefore is one good indicator of a 
recipient's self-interest. The requirements are that:
    (1) To the maximum extent practicable, the non-Federal parties 
carrying out a research project under a TIA are to provide at least 
half of the

[[Page 21498]]

costs of the project. Obtaining this cost sharing, to the maximum 
extent practicable, is a statutory condition for any TIA under the 
authority of 10 U.S.C. 2371, and is a matter of DoD policy for all 
other TIAs.
    (2) The parties must provide the cost sharing from non-Federal 
resources that are available to them unless there is specific authority 
to use other Federal resources for that purpose (see Sec. 37.530(f)).
    (c) You may consider whether cost sharing is impracticable in a 
given case, unless there is a non-waivable, statutory requirement for 
cost sharing that applies to the particular program under which the 
award is to be made. Before deciding that cost sharing is 
impracticable, you should carefully consider whether there are other 
factors that demonstrate the recipient's self-interest in the success 
of the current project.


Sec. 37.220  How involved should the Government program official be in 
the project?

    (a) TIAs are used to carry out cooperative relationships between 
the Federal Government and the recipient, which requires a greater 
level of involvement of the Government program official in the 
execution of the research than the usual oversight of a research grant 
or procurement contract. For example, program officials will 
participate in recipients' periodic reviews of research progress and 
will be substantially involved with the recipients in the resulting 
revisions of plans for future effort. That increased programmatic 
involvement before and during program execution with a TIA can reduce 
the need for some Federal financial requirements that are problematic 
for commercial firms.
    (b) Some aspects of their involvement require program officials to 
have greater knowledge about and participation in business matters that 
traditionally would be your exclusive responsibility as the agreements 
officer. TIAs therefore also require closer cooperation between program 
officials and you, as the one who decides business matters.


Sec. 37.225  What judgment must I make about the benefits of using a 
TIA?

    Before deciding that a TIA is appropriate, you also must judge that 
using a TIA could benefit defense research objectives in ways that 
likely would not happen if another type of assistance instrument were 
used (e.g., a cooperative agreement subject to all of the requirements 
of 32 CFR part 34). You, in conjunction with Government program 
officials, must consider the questions in paragraphs (a) through (d) of 
this section, to help identify the benefits that may justify using a 
TIA and reducing some of the usual requirements. In accordance with 
Sec. 37.1030, you will report your answers to these questions to help 
the DoD measure the Department-wide benefits of using TIAs and meet 
requirements to report to the Congress. Note that you must give full 
concise answers only to questions that relate to the benefits that you 
perceive for using the TIA, rather than another type of funding 
instrument, for the particular research project. A simple ``no'' or 
``not applicable'' is a sufficient response for other questions. The 
questions are:
    (a) Will the use of a TIA permit the involvement in the research of 
any commercial firms or business units of firms that would not 
otherwise participate in the project? If so:
    (1) What are the expected benefits of those firms' or divisions' 
participation (e.g., is there a specific technology that could be 
better, more readily available, or less expensive)?
    (2) Why would they not participate if an instrument other than a 
TIA were used? You should identify specific provisions of the TIA or 
features of the TIA award process that enable their participation.
    (b) Will the use of a TIA allow the creation of new relationships 
among participants at the prime or subtier levels, among business units 
of the same firm, or between non-Federal participants and the Federal 
Government that will help the DoD get better technology in the future? 
If so:
    (1) Why do these new relationships have the potential for helping 
the DoD get technology in the future that is better, more affordable, 
or more readily available?
    (2) Are there provisions of the TIA or features of the TIA award 
process that enable these relationships to form? If so, you should be 
able to identify specifically what they are. If not, you should be able 
to explain specifically why you think that the relationships could not 
be created if an assistance instrument other than a TIA were used.
    (c) Will the use of a TIA allow firms or business units of firms 
that traditionally accept Government awards to use new business 
practices in the execution of the research that will help us get better 
technology, help us get new technology more quickly or less 
expensively, or facilitate partnering with commercial firms? If so:
    (1) What specific benefits will the DoD potentially get from the 
use of these new practices? You should be able to explain specifically 
why you foresee a potential for those benefits.
    (2) Are there provisions of the TIA or features of the TIA award 
process that enable the use of the new practices? If so, you should be 
able to identify those provisions or features and explain why you think 
that the practices could not be used if the award were made using an 
assistance instrument other than a TIA.
    (d) Are there any other benefits of the use of a TIA that could 
help the Department of Defense better meet its objectives in carrying 
out the research project? If so, you should be able to identify 
specifically what they are, how they can help meet defense objectives, 
what features of the TIA or award process enable the DoD to realize 
them, and why the benefits likely would not be realized if an 
assistance instrument other than a TIA were used.


Sec. 37.230  May I use a TIA if a participant is to receive fee or 
profit?

    In accordance with 32 CFR 22.205(b), you may not use a TIA if any 
participant is to receive fee or profit. Note that this policy extends 
to all performers of the research project carried out under the TIA, 
including any subawards for substantive program performance, but it 
does not preclude participants' or subrecipients' payment of reasonable 
fee or profit when making purchases from suppliers of goods (e.g., 
supplies and equipment) or services needed to carry out the research.

Subpart C--Expenditure-Based and Fixed-Support Technology 
Investment Agreements


Sec. 37.300  What is the difference between an expenditure-based and 
fixed-support TIA?

    The fundamental difference between an expenditure-based and fixed-
support TIA is that:
    (a) For an expenditure-based TIA, the amounts of interim payments 
or the total amount ultimately paid to the recipient are based on the 
amounts the recipient expends on project costs. If a recipient 
completes the project specified at the time of award before it expends 
all of the agreed-upon Federal funding and recipient cost sharing, the 
Federal Government may recover its share of the unexpended balance of 
funds or, by mutual agreement with the recipient, amend the agreement 
to expand the scope of the research project. An expenditure-based TIA 
therefore is analogous to a cost-type procurement contract or grant.
    (b) For a fixed-support TIA, the amount of assistance established 
at the time of award is not meant to be adjusted later if the research 
project is carried out to completion. In that sense, a fixed-support 
TIA is somewhat

[[Page 21499]]

analogous to a fixed-price procurement contract (although ``price,'' a 
concept appropriate to a procurement contract for buying a good or 
service, is not appropriate for a TIA or other assistance instrument 
for stimulation or support of a project).


Sec. 37.305  When may I use a fixed-support TIA?

    You may use a fixed-support TIA if:
    (a) The agreement is to support or stimulate research with outcomes 
that are well defined, observable, and verifiable;
    (b) You can reasonably estimate the resources required to achieve 
those outcomes well enough to ensure the desired level of cost sharing 
(see example in Sec. 37.560(b)); and
    (c) Your TIA does not require a specific amount or percentage of 
recipient cost sharing. In cases where the agreement does require a 
specific amount or percentage of cost sharing, a fixed-support TIA is 
not practicable because the agreement has to specify cost principles or 
standards for costs that may be charged to the project; require the 
recipient to track the costs of the project; and provide access for 
audit to allow verification of the recipient's compliance with the 
mandatory cost sharing. You therefore must use an expenditure-based TIA 
if you:
    (1) Have a non-waivable requirement (e.g., in statute) for a 
specific amount or percentage of recipient cost sharing; or
    (2) Have otherwise elected to include in the TIA a requirement for 
a specific amount or percentage of cost sharing.


Sec. 37.310  When would I use an expenditure-based TIA?

    In general, you must use an expenditure-based TIA under conditions 
other than those described in Sec. 37.305. Reasons for any exceptions 
to this general rule must be documented in the award file and must be 
consistent with the policy in Sec. 37.230 that precludes payment of fee 
or profit to participants.


Sec. 37.315  What are the advantages of using a fixed-support TIA?

    In situations where the use of fixed-support TIAs is permissible 
(see Secs. 37.305 and 37.310), their use may encourage some commercial 
firms' participation in the research. With a fixed-support TIA, you can 
eliminate or reduce some post-award requirements that sometimes are 
cited as disincentives for those firms to participate. For example, a 
fixed-support TIA need not:
    (a) Specify minimum standards for the recipient's financial 
management system.
    (b) Specify cost principles or standards stating the types of costs 
the recipient may charge to the project.
    (c) Provide for financial audits by Federal auditors or independent 
public accountants of the recipient's books and records.
    (d) Set minimum standards for the recipient's purchasing system.
    (e) Require the recipient to prepare financial reports for 
submission to the Federal Government.

Subpart D--Competition Phase


Sec. 37.400  Must I use competitive procedures to award TIAs?

    DoD policy is to award TIAs using merit-based, competitive 
procedures, as described in 32 CFR 22.315:
    (a) In every case where required by statute; and
    (b) To the maximum extent practicable in all other cases.


Sec. 37.405  What must my announcement or solicitation include?

    Your announcement, to be considered as part of a competitive 
procedure, must include the basic information described in 32 CFR 
22.315(a). Additional elements for you to consider in the case of a 
program that may use TIAs are described in Secs. 37.410 through 37.420.


Sec. 37.410  Should my announcement or solicitation state that TIAs may 
be awarded?

    Yes, once you consider the factors described in subpart B of this 
part and decide that TIAs are among the types of instruments that you 
may award pursuant to a solicitation, it is important for you to state 
that fact in the solicitation. You also should state that TIAs are more 
flexible than traditional Government funding instruments and that 
provisions are negotiable in areas such as audits and intellectual 
property rights that may cause concern for commercial firms. Doing so 
should increase the likelihood that commercial firms will be willing to 
submit proposals.


Sec. 37.415  Should I address cost sharing in the announcement or 
solicitation?

    To help ensure a competitive process that is fair and equitable to 
all potential proposers, you should state clearly in the solicitation:
    (a) The types of cost sharing that are acceptable;
    (b) How any in-kind contributions will be valued, in accordance 
with Secs. 37.530 through 37.555; and
    (c) Whether you will give any consideration to alternative 
approaches a proposer may offer to demonstrate its strong commitment to 
and self-interest in the project's success, in accordance with 
Sec. 37.215.


Sec. 37.420  Should I tell proposers that we will not disclose 
information that they submit?

    Your solicitation should tell potential proposers that:
    (a) For all TIAs, information described in paragraph (b) of this 
section is exempt from disclosure requirements of the Freedom of 
Information Act (FOIA)(codified at 5 U.S.C. 552) for a period of five 
years after the date on which the DoD Component receives the 
information from them.
    (b) As provided in 10 U.S.C. 2371, disclosure is not required, and 
may not be compelled, under FOIA during that period if:
    (1) A proposer submits the information in a competitive or 
noncompetitive process that could result in their receiving a 
cooperative agreement for basic, applied, or advanced research under 
the authority of 10 U.S.C. 2358 or any other type of transaction 
authorized by 10 U.S.C. 2371 (as explained in appendix B to this part, 
that includes all TIAs); and
    (2) The type of information is among the following types that are 
exempt:
    (i) Proposals, proposal abstracts, and supporting documents; and
    (ii) Business plans and technical information submitted on a 
confidential basis.
    (c) If proposers desire to protect business plans and technical 
information for five years from FOIA disclosure requirements, they must 
mark them with a legend identifying them as documents submitted on a 
confidential basis.

Subpart E--Pre-Award Business Evaluation


Sec. 37.500  What must my pre-award business evaluation address?

    (a) You must determine the qualification of the recipient, as 
described in Secs. 37.510 and 37.515.
    (b) As the business expert working with the program official, you 
also must address the financial aspects of the proposed agreement. You 
must:
    (1) Determine that the total amount of funding for the proposed 
effort is reasonable, as addressed in Sec. 37.520.
    (2) Assess the value and determine the reasonableness of the 
recipient's proposed cost sharing contribution, as discussed in 
Secs. 37.525 through 37.555.
    (3) If you are contemplating the use of a fixed-support rather than 
expenditure-based TIA, ensure that its use is

[[Page 21500]]

justified, as explained in Secs. 37.560 and 37.565.
    (4) Address issues of inconsistent cost accounting by traditional 
Government contractors, should they arise, as noted in Sec. 37.570.
    (5) Determine amounts for milestone payments, if you use them, as 
discussed in Sec. 37.575.


Sec. 37.505  What resources are available to assist me during the pre-
award business evaluation?

    Administrative agreements officers of the Defense Contract 
Management Agency and the Office of Naval Research can share lessons 
learned from administering other TIAs. Program officials can be a 
source of information when you are determining the reasonableness of 
proposed funding (e.g., on labor rates, as discussed in Sec. 37.520) or 
establishing observable and verifiable technical milestones for 
payments (see Sec. 37.575). Auditors at the Defense Contract Audit 
Agency can act in an advisory capacity to help you determine the 
reasonableness of proposed amounts, including values of in-kind 
contributions toward cost sharing.

Recipient Qualification


Sec. 37.510  What are my responsibilities for determining that a 
recipient is qualified?

    Prior to award of a TIA, your responsibilities for determining that 
the recipient is qualified are the same as those of a grants officer 
who is awarding a grant or cooperative agreement. Those 
responsibilities are described in subpart D of 32 CFR part 22. When the 
recipient is a consortium that is not formally incorporated, you have 
the additional responsibility described in Sec. 37.515.


Sec. 37.515  Must I do anything additional to determine the 
qualification of a consortium?

    (a) When the prospective recipient of a TIA is a consortium that is 
not formally incorporated, your determination that the recipient meets 
the standard at 32 CFR 22.415(a) requires that you, in consultation 
with legal counsel, review the management plan in the consortium's 
collaboration agreement. The purpose of your review is to ensure that 
the management plan is sound and that it adequately addresses the 
elements necessary for an effective working relationship among the 
consortium members. An effective working relationship is essential to 
increase the research project's chances of success.
    (b) The collaboration agreement, commonly referred to as the 
articles of collaboration, is the document that sets out the rights and 
responsibilities of each consortium member. It binds the individual 
consortium members together, whereas the TIA binds the Government and 
the consortium as a group (or the Government and a consortium member on 
behalf of the consortium, as explained in Sec. 37.1015). The document 
should discuss, among other things, the consortium's:
    (1) Management structure.
    (2) Method of making payments to consortium members.
    (3) Means of ensuring and overseeing members' efforts on the 
project.
    (4) Provisions for members' cost sharing contributions.
    (5) Provisions for ownership and rights in intellectual property 
developed previously or under the agreement.

Total Funding


Sec. 37.520  What is my responsibility for determining that the total 
project funding is reasonable?

    In cooperation with the program official, you must assess the 
reasonableness of the total estimated budget to perform the research 
that will be supported by the agreement. Additional guidance follows 
for:
    (a) Labor. Much of the budget likely will involve direct labor and 
associated indirect costs, which may be represented together as a 
``loaded'' labor rate. The program official is an essential advisor on 
reasonableness of the overall level of effort and its composition by 
labor category. You also may rely on your experience with other awards 
as the basis for determining reasonableness. If you have any unresolved 
questions, two of the ways that you might find helpful in establishing 
reasonableness are to:
    (1) Consult the administrative agreements officers or auditors 
identified in Sec. 37.505.
    (2) Compare loaded labor rates of for-profit firms that do not have 
expenditure-based Federal procurement contracts or assistance awards 
with a standard or average for the particular industry. Note that the 
program official may have knowledge about customary levels of direct 
labor charges in the particular industry that is involved. You may be 
able to compare associated indirect charges with Government-approved 
indirect cost rates that exist for many nonprofit and for-profit 
organizations that have Federal procurement contracts or assistance 
awards (note the requirement in Sec. 37.630 for a for-profit 
participant to use Federally approved provisional indirect cost rates, 
if it has them).
    (b) Real property and equipment. In almost all cases, the project 
costs may include only depreciation or use charges for real property 
and equipment of for-profit participants, in accordance with 
Sec. 37.685. Remember that the budget for an expenditure-based TIA may 
not include depreciation of a participant's property as a direct cost 
of the project if that participant's practice is to charge the 
depreciation of that type of property as an indirect cost, as many 
organizations do.

Cost Sharing


Sec. 37.525  What is my responsibility for determining the value and 
reasonableness of the recipient's cost sharing contribution?

    You must:
    (a) Determine that the recipient's cost sharing contributions meet 
the criteria for cost sharing and determine values for them, in 
accordance with Secs. 37.530 through 37.555. In doing so, you must:
    (1) Ensure that there are affirmative statements from any third 
parties identified as sources of cash contributions.
    (2) Include in the award file an evaluation that documents how you 
determined the values of the recipient's contributions to the funding 
of the project.
    (b) Judge that the recipient's cost sharing contribution, as a 
percentage of the total budget, is reasonable. To the maximum extent 
practicable, the recipient must provide at least half of the costs of 
the project, in accordance with Sec. 37.215.


Sec. 37.530  What criteria do I use in deciding whether to accept a 
recipient's cost sharing?

    You may accept any cash or in-kind contributions that meet all of 
the following criteria:
    (a) In your judgment, they represent meaningful cost sharing that 
demonstrates the recipient's commitment to the success of the research 
project. Cash contributions clearly demonstrate commitment and they are 
strongly preferred over in-kind contributions.
    (b) They are necessary and reasonable for accomplishment of the 
research project's objectives.
    (c) They are costs that may be charged to the project under 
Sec. 37.625 and Sec. 37.635, as applicable to the participant making 
the contribution.
    (d) They are verifiable from the recipient's records.
    (e) They are not included as cost sharing contributions for any 
other Federal award.
    (f) They are not paid by the Federal Government under another 
award, except:

[[Page 21501]]

    (1) Costs that are authorized by Federal statute to be used for 
cost sharing; or
    (2) Independent research and development (IR&D) costs, as described 
at 32 CFR 34.13(a)(5)(ii), that meet all of the criteria in paragraphs 
(a) through (e) of this section. IR&D is acceptable as cost sharing, 
even though it may be reimbursed by the Government through other 
awards. It is standard business practice for all for-profit firms, 
including commercial firms, to recover their research and development 
(R&D) costs (which for Federal procurement contracts is recovered as 
IR&D) through prices charged to their customers. Thus, the cost 
principles at 48 CFR part 31 allow a for-profit firm that has 
expenditure-based, Federal procurement contracts to recover through 
those procurement contracts the allocable portion of its R&D costs 
associated with a technology investment agreement.


Sec. 37.535  How do I value cost sharing related to real property or 
equipment?

    You rarely should accept values for cost sharing contributions of 
real property or equipment that are in excess of depreciation or 
reasonable use charges, as discussed in Sec. 37.685 for for-profit 
participants. You may accept the full value of a donated capital asset 
if the real property or equipment is to be dedicated to the project and 
you expect that it will have a fair market value that is less than 
$5,000 at the project's end. In those cases, you should value the 
donation at the lesser of:
    (a) The value of the property as shown in the recipient's 
accounting records (i.e., purchase price less accumulated 
depreciation); or
    (b) The current fair market value. You may accept the use of any 
reasonable basis for determining the fair market value of the property. 
If there is a justification to do so, you may accept the current fair 
market value even if it exceeds the value in the recipient's records.


Sec. 37.540  May I accept fully depreciated real property or equipment 
as cost sharing?

    You should limit the value of any contribution of a fully 
depreciated asset to a reasonable use charge. In determining what is 
reasonable, you must consider:
    (a) The original cost of the asset;
    (b) Its estimated remaining useful life at the time of your 
negotiations;
    (c) The effect of any increased maintenance charges or decreased 
performance due to age; and
    (d) The amount of depreciation that the participant previously 
charged to Federal awards.


Sec. 37.545  May I accept costs of prior research as cost sharing?

    No, you may not count any participant's costs of prior research as 
a cost sharing contribution. Only the additional resources that the 
recipient will provide to carry out the current project (which may 
include pre-award costs for the current project, as described in 
Sec. 37.830) are to be counted.


Sec. 37.550  May I accept intellectual property as cost sharing?

    (a) In most instances, you should not count costs of patents and 
other intellectual property (e.g., copyrighted material, including 
software) as cost sharing, because:
    (1) It is difficult to assign values to these intangible 
contributions;
    (2) Their value usually is a manifestation of prior research costs, 
which are not allowed as cost share under Sec. 37.545; and
    (3) Contributions of intellectual property rights generally do not 
represent the same cost of lost opportunity to a recipient as 
contributions of cash or tangible assets. The purpose of cost share is 
to ensure that the recipient incurs real risk that gives it a vested 
interest in the project's success.
    (b) You may include costs associated with intellectual property if 
the costs are based on sound estimates of market value of the 
contribution. For example, a for-profit firm may offer the use of 
commercially available software for which there is an established 
license fee for use of the product. The costs of the development of the 
software would not be a reasonable basis for valuing its use.


Sec. 37.555  How do I value a recipient's other contributions?

    For types of participant contributions other than those addressed 
in Secs. 37.535 through 37.550, the general rule is that you are to 
value each contribution consistently with the cost principles or 
standards in Sec. 37.625 and Sec. 37.635 that apply to the participant 
making the contribution. When valuing services and property donated by 
parties other than the participants, you may use as guidance the 
provisions of 32 CFR 34.13(b)(2) through (5).

Fixed-Support or Expenditure-Based Approach


Sec. 37.560  Must I be able to estimate project expenditures precisely 
in order to justify use of a fixed-support TIA?

    (a) To use a fixed-support TIA, rather than an expenditure-based 
TIA, you must have confidence in your estimate of the expenditures 
required to achieve well-defined outcomes. Therefore, you must work 
carefully with program officials to select outcomes that, when the 
recipient achieves them, are reliable indicators of the amount of 
effort the recipient expended. However, your estimate of the required 
expenditures need not be a precise dollar amount, as illustrated by the 
example in paragraph (b) of this section, if:
    (1) The recipient is contributing a substantial share of the costs 
of achieving the outcomes, which must meet the criteria in 
Sec. 37.305(a); and
    (2) You are confident that the costs of achieving the outcomes will 
be at least a minimum amount that you can specify and the recipient is 
willing to accept the possibility that its cost sharing percentage 
ultimately will be higher if the costs exceed that minimum amount.
    (b) To illustrate the approach, consider a project for which you 
are confident that the recipient will have to expend at least $800,000 
to achieve the specified outcomes. You must determine, in conjunction 
with program officials, the minimum level of recipient cost sharing 
that you want to negotiate, based on the circumstances, to demonstrate 
the recipient's commitment to the success of the project. For purposes 
of this illustration, let that minimum recipient cost sharing be 40% of 
the total project costs. In that case, the Federal share should be no 
more than 60% and you could set a fixed level of Federal support at 
$480,000 (60% of $800,000). With that fixed level of Federal support, 
the recipient would be responsible for the balance of the costs needed 
to complete the project.


Sec. 37.565  May I use a hybrid instrument that provides fixed support 
for only a portion of a project?

    Yes, for a research project that is to be carried out by a number 
of participants, you may award a TIA that provides for some 
participants to perform under fixed-support arrangements and others to 
perform under expenditure-based arrangements. This approach may be 
useful, for example, if a commercial firm that is a participant will 
not accept an agreement with all of the post-award requirements of an 
expenditure-based award. Before using a fixed-support arrangement for 
that firm's portion of the project, you must judge that it meets the 
criteria in Sec. 37.305.

Accounting, Payments, and Recovery of Funds


Sec. 37.570  What must I do if a CAS-covered participant accounts 
differently for its own and the Federal Government shares of project 
costs?

    (a) If a participant has Federal procurement contracts that are 
subject

[[Page 21502]]

to the Cost Accounting Standards (CAS) in part 30 of the Federal 
Acquisition Regulation (FAR) and the associated FAR Appendix (48 CFR 
part 30 and 48 CFR 9903.201-1, respectively), you must alert the 
cognizant administrative contracting officer (ACO) for the 
participant's procurement contracts if you learn that the participant 
plans to account for:
    (1) Its own share of project costs under the TIA as direct costs 
and the Federal Government's share as indirect costs; or
    (2) Its own share as indirect costs and the Federal Government's 
share as direct costs. This may arise, for example, if a for-profit 
firm (or a nonprofit organization that is identified in OMB Circular A-
122\1\ as being subject to the FAR cost principles in 48 CFR parts 31 
and 231) proposes to charge its share of project costs as independent 
research and development costs, which are indirect costs under the FAR 
cost principles.
    (b) The reason for alerting the ACO is that the inconsistent 
(direct versus indirect) charging of the two shares could cause a 
noncompliance with Cost Accounting Standard (CAS) 402. Noncompliance 
with CAS 402 is a potential issue only for a participant that has CAS-
covered Federal procurement contracts (note that CAS requirements do 
not apply to a for-profit participant's TIAs).
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    \1\ Electronic copies may be obtained at the Internet site 
http://www.whitehouse.gov/OMB. For paper copies, contact the Office 
of Management and Budget, EOP Publications, 725 17th St. NW., New 
Executive Office Building, Washington, DC 20503.
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    (c) For for-profit participants with CAS-covered procurement 
contracts, the cognizant ACO in most cases will be an individual within 
the Defense Contract Management Agency (DCMA). You can identify a 
cognizant ACO at the DCMA by querying the contract administration team 
locator that matches contractors with their ACOs (currently on the 
World Wide Web at http://alerts.dcmdw.dcma.mil/support, a site that 
also can be accessed through the DCMA home page at http://www.dcma.mil).


Sec. 37.575  What are my responsibilities for determining milestone 
payment amounts?

    (a) If you select the milestone payment method (see Sec. 37.805), 
you must assess the reasonableness of the estimated budget for reaching 
each milestone. This assessment enables you to set the amount of each 
milestone payment to approximate the Federal share of the anticipated 
resource needs for carrying out that phase of the research effort.
    (b) The Federal share at each milestone need not be the same as the 
Federal share of the total project. For example, you might deliberately 
set payment amounts with a larger Federal share for early milestones if 
a project involves a start-up company with limited resources.
    (c) For an expenditure-based TIA, if you have minimum percentages 
that you want the recipient's cost sharing to be at the milestones, you 
should indicate those percentages in the agreement or in separate 
instructions to the post-award administrative agreements officer. That 
will help the administrative agreements officer decide when a project's 
expenditures have fallen too far below the original projections, 
requiring adjustments of future milestone payment amounts (see 
Sec. 37.1105(c)).
    (d) For fixed-support TIAs, the milestone payments should be 
associated with the well-defined, observable and verifiable technical 
outcomes (e.g., demonstrations, tests, or data analysis) that you 
establish for the project in accordance with Secs. 37.305(a) and 
37.560(a).


Sec. 37.580  What is recovery of funds and when should I consider 
including it in my TIA?

    (a) Recovery of funds refers to the use of the authority in 10 
U.S.C. 2371 to include a provision in certain types of agreements, 
including TIAs, that require a recipient to make payments to the 
Department of Defense or another Federal agency as a condition of the 
agreement. Recovery of funds is a good tool in the right circumstances, 
at the discretion of the agreements officer and the awarding 
organization, but its purpose is not to augment program budgets. It may 
be used to recover funds provided to a recipient through a TIA or 
another Federal procurement or assistance instrument, and the recovery 
should not exceed the amounts provided. Recovery of funds is distinct 
from program income, as described in Sec. 37.835.
    (b) In accordance with 10 U.S.C. 2371, as implemented by policy 
guidance from the Office of the Under Secretary of Defense 
(Comptroller), the payment amounts may be credited to an existing 
account of the Department of Defense and used for the same program 
purposes as other funds in that account.
    (c) Before you use the authority to include a provision for 
recovery of funds, note that 10 U.S.C. 2371 requires you to judge that 
it would not be feasible or appropriate to use for the research project 
a standard grant or cooperative agreement (in this instance, a 
``standard cooperative agreement'' means a cooperative agreement 
without a provision for recovery of funds). You satisfy that 10 U.S.C. 
2371 requirement when you judge that execution of the research project 
warrants inclusion of a provision for recovery of funds.

Subpart F--Award Terms Affecting Participants' Financial, Property, 
and Purchasing Systems


Sec. 37.600  Which administrative matters are covered in this subpart?

    This subpart addresses ``systemic'' administrative matters that 
place requirements on the operation of a participant's financial 
management, property management, or purchasing system. Each 
participant's systems are organization-wide and do not vary with each 
agreement. Therefore, all TIAs should address systemic requirements in 
a uniform way for each type of participant organization.


Sec. 37.605  What is the general policy on participants' financial, 
property, and purchasing systems?

    The general policy for expenditure-based TIAs is to avoid 
requirements that would force participants to use different financial 
management, property management, and purchasing systems than they 
currently use for:
    (a) Expenditure-based Federal procurement contracts and assistance 
awards in general, if they receive them; or
    (b) Commercial business, if they have no expenditure-based Federal 
procurement contracts and assistance awards.


Sec. 37.610  Must I tell participants what requirements they are to 
flow down for subrecipients' systems?

    If it is an expenditure-based award, your TIA must require 
participants to flow down the same financial management, property 
management, and purchasing systems requirements to a subrecipient that 
would apply if the subrecipient were a participant. For example, a for-
profit participant would flow down to a university subrecipient the 
requirements that apply to a university participant. Note that this 
policy applies to subawards for substantive performance of portions of 
the research project supported by the TIA, and not to participants' 
purchases of goods or services needed to carry out the research.

Financial Matters


Sec. 37.615  What standards do I include for financial systems of for-
profit firms?

    (a) To avoid causing needless changes in participants' financial 
management

[[Page 21503]]

systems, your expenditure-based TIAs will make for-profit participants 
that currently perform under other expenditure-based Federal 
procurement contracts or assistance awards subject to the same 
standards for financial management systems that apply to those other 
awards. Therefore, if a for-profit participant has expenditure-based 
DoD assistance awards other than TIAs, your TIAs are to apply the 
standards in 32 CFR 34.11. You may grant an exception and allow a for-
profit participant that has other expenditure-based Federal Government 
awards to use an alternative set of standards that meets the minimum 
criteria in paragraph (b) of this section, if there is a compelling 
programmatic or business reason to do so. For each case in which you 
grant an exception, you must document the reason in the award file.
    (b) For an expenditure-based TIA, you are to allow and encourage 
each for-profit participant that does not currently perform under 
expenditure-based Federal procurement contracts or assistance awards 
(other than TIAs) to use its existing financial management system as 
long as the system, as a minimum:
    (1) Complies with Generally Accepted Accounting Principles.
    (2) Effectively controls all project funds, including Federal funds 
and any required cost share. The system must have complete, accurate, 
and current records that document the sources of funds and the purposes 
for which they are disbursed. It also must have procedures for ensuring 
that project funds are used only for purposes permitted by the 
agreement (see Sec. 37.625).
    (3) Includes, if advance payments are authorized under Sec. 37.805, 
procedures to minimize the time elapsing between the payment of funds 
by the Government and the firm's disbursement of the funds for program 
purposes.


Sec. 37.620  What financial management standards do I include for 
nonprofit participants?

    So as not to force system changes for any State, local government, 
institution of higher education, or other nonprofit organization, your 
expenditure-based TIA's requirements for the financial management 
system of any nonprofit participant are the same as those that apply to 
the participant's other Federal assistance awards. Specifically, the 
requirements are those in:
    (a) 32 CFR 33.20 for State and local governments; and
    (b) 32 CFR 32.21(b) for other nonprofit organizations, with the 
exception of Government-owned, contractor-operated (GOCO) facilities 
and Federally Funded Research and Development Centers (FFRDCs) that are 
excepted from the definition of ``recipient'' in 32 CFR part 32. 
Although it should occur infrequently, if a nonprofit GOCO or FFRDC is 
a participant, you must specify appropriate standards that conform as 
much as practicable with requirements in that participant's other 
Federal awards.


Sec. 37.625  What cost principles or standards do I require for for-
profit participants?

    (a) So as not to require any firm to needlessly change its cost-
accounting system, your expenditure-based TIAs are to apply the 
Government cost principles in 48 CFR parts 31 and 231 to for-profit 
participants that currently perform under expenditure-based Federal 
procurement contracts or assistance awards (other than TIAs) and 
therefore have existing systems for identifying allowable costs under 
those principles. If there are programmatic or business reasons to do 
otherwise, you may grant an exception from this requirement, in which 
case you must document the reasons in your award file.
    (b) For other for-profit participants, you may establish 
alternative standards in the agreement as long as that alternative 
provides, as a minimum, that Federal funds and funds counted as 
recipients' cost sharing will be used only for costs that:
    (1) A reasonable and prudent person would incur in carrying out the 
research project contemplated by the agreement. Generally, elements of 
cost that appropriately are charged are those identified with research 
and development activities under the Generally Accepted Accounting 
Principles (see Statement of Financial Accounting Standards Number 2, 
``Accounting for Research and Development Costs,'' October 1974\2\). 
Moreover, costs must be allocated to DoD and other projects in 
accordance with the relative benefits the projects receive. Costs 
charged to DoD projects must be given consistent treatment with costs 
allocated to the participants' other research and development 
activities (e.g., activities supported by the participants themselves 
or by non-Federal sponsors).
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    \2\ Copies may be obtained from the Financial Accounting 
Standards Board (FASB), 401 Merritt 7, P.O. Box 5116, Norwalk, CT 
06856-5116. Information about ordering also may be found at the 
Internet site http://www.fasb.org or by telephoning the FASB at 
(800)748-0659.
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    (2) Are consistent with the purposes stated in the governing 
Congressional authorizations and appropriations. You are responsible 
for ensuring that provisions in the award document address any 
requirements that result from authorizations and appropriations.


Sec. 37.630  Must I require a for-profit firm to use Federally approved 
indirect cost rates?

    In accordance with the general policy in Sec. 37.605, you must 
require a for-profit participant that has Federally approved indirect 
cost rates for its Federal procurement contracts to use those rates to 
accumulate and report costs under an expenditure-based TIA. This 
includes both provisional and final rates that are approved up until 
the time that the TIA is closed out. You may grant an exception from 
this requirement if there are programmatic or business reasons to do 
otherwise (e.g., the participant offers you a lower rate). If you grant 
an exception, the participant must accumulate and report the costs 
using an accounting system and practices that it uses for other 
customers (e.g., its commercial customers). Also, you must document the 
reason for the exception in your award file.


Sec. 37.635  What cost principles do I require a nonprofit participant 
to use?

    So as not to force financial system changes for any nonprofit 
participant, your expenditure-based TIA will provide that costs to be 
charged to the research project by any nonprofit participant must be 
determined to be allowable in accordance with:
    (a) OMB Circular A-87,\3\ if the participant is a State or local 
governmental organization.
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    \3\ See footnote 1 to Sec. 37.570(a)(2).
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    (b) OMB Circular A-21,\4\ if the participant is an institution of 
higher education.
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    \4\ See footnote 1 to Sec. 37.570(a)(2).
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    (c) 45 CFR part 74, appendix E, if the participant is a hospital.
    (d) OMB Circular A-122, if the participant is any other type of 
nonprofit organization (the cost principles in 48 CFR parts 31 and 231 
are to be used by any nonprofit organization that is identified in 
Circular A-122 as being subject to those cost principles).


Sec. 37.640  Must I include a provision for audits of for-profit 
participants?

    If your TIA is an expenditure-based award, you must include in it 
an audit provision that addresses, for each for-profit participant:
    (a) Whether the for-profit participant must have periodic audits, 
in addition to any award-specific audits, as described in Sec. 37.645. 
Note that the DCAA or the Office of the Inspector

[[Page 21504]]

General, DoD (OIG, DoD), can provide advice on the types and scope of 
audits that may be needed in various circumstances.
    (b) Whether the DCAA or an independent public accountant (IPA) will 
perform required audits, as discussed in Sec. 37.650.
    (c) How frequently any periodic audits are to be performed, 
addressed in Sec. 37.655.
    (d) Other matters described in Sec. 37.660, such as audit coverage, 
allowability of audit costs, auditing standards, and remedies for 
noncompliance.


Sec. 37.645  Must I require periodic audits, as well as award-specific 
audits, of for-profit participants?

    You need to consider requirements for both periodic audits and 
award-specific audits (as defined in Sec. 37.1325 and Sec. 37.1235, 
respectively). The way that your expenditure-based TIA addresses the 
two types of audits will vary, depending upon the type of for-profit 
participant.
    (a) For for-profit participants that are audited by the DCAA or 
other Federal auditors, as described in Secs. 37.650(b) and 37.655, you 
need not add specific requirements for periodic audits because the 
Federal audits should be sufficient to address whatever may be needed. 
Your inclusion in the TIA of the standard access-to-records provision 
for those for-profit participants, as discussed in Sec. 37.915(a), 
gives the necessary access in the event that you or administrative 
agreements officers later need to request audits to address award-
specific issues that arise.
    (b) For each other for-profit participant, you:
    (1) Should require that the participant have an independent auditor 
(i.e., the DCAA or an independent public accountant) conduct periodic 
audits of its systems if it expends $300,000 or more per year in TIAs 
and other Federal assistance awards. A prime reason for including this 
requirement is that the Federal Government, for an expenditure-based 
award, necessarily relies on amounts reported by the participant's 
systems when it sets payment amounts or adjusts performance outcomes. 
The periodic audit provides some assurance that the reported amounts 
are reliable.
    (2) Must ensure that the award provides an independent auditor the 
access needed for award-specific audits, to be performed at the request 
of the cognizant administrative agreements officer if issues arise that 
require audit support. However, the expectation is that periodic audits 
will be all that is needed in most cases, and you should rely on them 
to the maximum extent possible to resolve any award-specific issues.


Sec. 37.650  Who must I identify as the auditor for a for-profit 
participant?

    The auditor that you will identify in the expenditure-based TIA to 
perform periodic and award-specific audits of a for-profit participant 
depends on the circumstances, as follows:
    (a) You may provide that an IPA will be the auditor for a for-
profit participant that does not meet the criteria in paragraph (b) of 
this section, but only if the participant will not agree to give the 
DCAA access to the necessary books and records for audit purposes. Note 
that the allocable portion of the costs of the IPA's audit may be 
reimbursable under the TIA, as described in Sec. 37.660(b). The IPA 
should be the one that the participant uses to perform other audits 
(e.g., of its financial statement), to minimize added burdens and 
costs. You must document in the award file the participant's 
unwillingness to give the DCAA access. The DCAA is to be the auditor if 
the participant grants the necessary access.
    (b) Except as provided in paragraph (c) of this section, you must 
identify the DCAA as the auditor for any for-profit participant that is 
subject to DCAA audits because it is currently performing under a 
Federal award that is subject to the:
    (1) Cost principles in 48 CFR part 31 of the Federal Acquisition 
Regulation (FAR) and 48 CFR part 231 of the Defense FAR Supplement; or
    (2) Cost Accounting Standards in part 30 of the FAR (48 CFR part 
30) and the associated Appendix (48 CFR 9903.201-1).
    (c) If there are programmatic or business reasons that justify the 
use of an auditor other than the DCAA for a for-profit participant that 
meets the criteria in paragraph (b) of this section, you may provide 
that an IPA will be the auditor for that participant if you obtain 
prior approval from the Office of the Inspector General, DoD. You must 
submit requests for prior approval to the Assistant Inspector General 
(Auditing), 400 Army-Navy Drive, Arlington, VA 22202. Your request must 
include the name and address of the business unit(s) for which IPAs 
will be used. It also must explain why you judge that the participant 
will not give the DCAA the necessary access to records for audit 
purposes (e.g., you may submit a statement to that effect from the 
participant). The OIG, DoD, will respond within five working days of 
receiving the request for prior approval, either by notifying you of 
the decision (approval or disapproval) or giving you a date by which 
they will notify you of the decision.


Sec. 37.655  Must I specify the frequency of IPAs' periodic audits of 
for-profit participants?

    If your expenditure-based TIA provides for periodic audits of a 
for-profit participant by an IPA, you must specify the frequency for 
those audits. You should consider having an audit performed during the 
first year of the award, when the participant has its IPA do its next 
financial statement audit, unless the participant already had a systems 
audit due to other Federal awards within the past two years. The 
frequency thereafter may vary depending upon the dollars the 
participant is expending annually under the award, but it is not 
unreasonable to require an updated audit every two to three years to 
reverify that the participant's systems are reliable (the audit then 
would cover the two or three-year period between audits). The DCAA is a 
source of advice on audit frequencies if your TIA provides for audits 
by IPAs.


Sec. 37.660  What else must I specify concerning audits of for-profit 
participants by IPAs?

    If your expenditure-based TIA provides for audits of a for-profit 
participant by an IPA, you also must specify:
    (a) What periodic audits are to cover. It is important that you 
specify audit coverage that is only as broad as needed to provide 
reasonable assurance of the participant's compliance with award terms 
that have a direct and material effect on the research project. 
Appendix C to this part provides guidance to for-profit participants 
and their IPAs that you may use for this purpose. The DCAA and the OIG, 
DoD, also can provide advice to help you set appropriate limits on 
audit objectives and scope.
    (b) Who will pay for periodic and award-specific audits. The 
allocable portion of the costs of any audits by IPAs may be 
reimbursable under the TIA. The costs may be direct charges or 
allocated indirect costs, consistent with the participant's accounting 
system and practices.
    (c) The auditing standards that the IPA will use. Unless you 
receive prior approval from the OIG, DoD, to do otherwise, you must 
provide that the IPA will perform the audits in

[[Page 21505]]

accordance with the Generally Accepted Government Auditing 
Standards.\5\
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    \5\ The electronic document may be accessed at www.gao.gov. 
Printed copies may be purchased from the U.S. Government Printing 
Office; for ordering information, call (202)512-1800 or access the 
Internet site at www.gpo.gov.
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    (d) The available remedies for noncompliance. The agreement must 
provide that the participant may not charge costs to the award for any 
audit that the agreements officer, with the advice of the OIG, DoD, 
determines was not performed in accordance with the Generally Accepted 
Government Auditing Standards or other terms of the agreement. It also 
must provide that the Government has the right to require the 
participant to have the IPA take corrective action and, if corrective 
action is not taken, that the agreements officer has recourse to any of 
the remedies for noncompliance identified in 32 CFR 34.52(a).
    (e) The remedy if it later is found that the participant, at the 
time it entered into the TIA, was performing on a procurement contract 
or other Federal award subject to the Cost Accounting Standards at 48 
CFR part 30 and the cost principles at 48 CFR part 31. Unless the OIG, 
DoD, approves an exception (see Sec. 37.650(c)), the TIA's terms must 
provide that the DCAA will perform the audits for the agreement if it 
later is found that the participant, at the time the TIA was awarded, 
was performing under awards described in Sec. 37.650(b) that gave the 
DCAA audit access to the participant's books and records.
    (f) Where the IPA is to send audit reports. The agreement must 
provide that the IPA is to submit audit reports to the administrative 
agreements officer and the OIG, DoD. It also must require that the IPA 
report instances of fraud directly to the OIG, DoD.
    (g) The retention period for the IPA's working papers. You must 
specify that the IPA is to retain working papers for a period of at 
least three years after the final payment, unless the working papers 
relate to an audit whose findings are not fully resolved within that 
period or to an unresolved claim or dispute (in which case, the IPA 
must keep the working papers until the matter is resolved and final 
action taken).
    (h) Who will have access to the IPA's working papers. The agreement 
must provide for Government access to working papers.


Sec. 37.665  Must I require nonprofit participants to have periodic 
audits?

    Yes, expenditure-based TIAs are assistance instruments subject to 
the Single Audit Act (31 U.S.C. 7501-7507), so nonprofit participants 
are subject to their usual requirements under that Act and OMB Circular 
A-133.\6\ Specifically, the requirements are those in:
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    \6\ See footnote 1 to Sec. 37.570(a)(2).
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    (a) 32 CFR 33.26 for State and local governments; and
    (b) 32 CFR 32.26 for other nonprofit organizations. Note that those 
requirements also are appropriate for Government-owned, contractor-
operated (GOCO) facilities and Federally Funded Research and 
Development Centers (FFRDCs) that are excluded from the definition of 
``recipient'' in 32 CFR part 32, because nonprofit GOCOs and FFRDCs are 
subject to the Single Audit Act.


Sec. 37.670  Must I require participants to flow down audit 
requirements to subrecipients?

    (a) Yes, in accordance with Sec. 37.610, your expenditure-based TIA 
must require participants to flow down the same audit requirements to a 
subrecipient that would apply if the subrecipient were a participant.
    (b) For example, a for-profit participant that is audited by the 
DCAA:
    (1) Would flow down to a university subrecipient the Single Audit 
Act requirements that apply to a university participant.
    (2) Could enter into a subaward allowing a for-profit participant, 
under the circumstances described in Sec. 37.650(a), to use an IPA to 
do its audits.
    (c) This policy applies to subawards for substantive performance of 
portions of the research project supported by the TIA, and not to 
participants' purchases of goods or services needed to carry out the 
research.


Sec. 37.675  Must I report when I enter into a TIA allowing a for-
profit firm to use an IPA?

    Yes, you must include that information with the data you provide 
for your DoD Component's annual submission to the Defense Technical 
Information Center (DTIC), as provided in Sec. 37.1030(c).


Sec. 37.680  Must I require a participant to report when it enters into 
a subaward allowing a for-profit firm to use an IPA?

    Yes, your expenditure-based TIA must require participants to report 
to you when they enter into any subaward allowing a for-profit 
participant to use an IPA, as described in Sec. 37.670(b)(2). You must 
provide that information about the new subaward under the TIA for your 
DoD Component's annual submission to the DTIC, even though the TIA may 
have been reported in a prior year and does not itself have to be 
reported again.

Property


Sec. 37.685  May I allow for-profit firms to purchase real property and 
equipment with project funds?

    (a) With the two exceptions described in paragraph (b) of this 
section, you must require a for-profit firm to purchase real property 
or equipment with its own funds that are separate from the research 
project. You should allow the firm to charge to an expenditure-based 
TIA only depreciation or use charges for real property or equipment 
(and your cost estimate for a fixed-support TIA only would include 
those costs). Note that the firm must charge depreciation consistently 
with its usual accounting practice. Many firms treat depreciation as an 
indirect cost. Any firm that usually charges depreciation indirectly 
for a particular type of property must not charge depreciation for that 
property as a direct cost to the TIA.
    (b) In two situations, you may grant an exception and allow a for-
profit firm to use project funds, which includes both the Federal 
Government and recipient shares, to purchase real property or equipment 
(i.e., to charge to the project the full acquisition cost of the 
property). The two circumstances, which should be infrequent for 
equipment and extremely rare for real property, are those in which you 
either:
    (1) Judge that the real property or equipment will be dedicated to 
the project and have a current fair market value that is less than 
$5,000 by the time the project ends; or
    (2) Give prior approval for the firm to include the full 
acquisition cost of the real property or equipment as part of the cost 
of the project (see Sec. 37.535).
    (c) If you grant an exception in either of the circumstances 
described in paragraphs (b)(1) and (2) of this section, you must make 
the real property or equipment subject to the property management 
standards in 32 CFR 34.21(b) through (d). As provided in those 
standards, the title to the real property or equipment will vest 
conditionally in the for-profit firm upon acquisition. Your TIA, 
whether it is a fixed-support or expenditure-based award, must specify 
that any item of equipment that has a fair market value of $5,000 or 
more at the conclusion of the project also will be subject to the 
disposition process in 32 CFR 34.21(e), whereby the Federal Government 
will recover its interest in the property at that time.


Sec. 37.690  How are nonprofit participants to manage real property and 
equipment?

    For nonprofit participants, your TIA's requirements for vesting of 
title, use,

[[Page 21506]]

management, and disposition of real property or equipment acquired 
under the award are the same as those that apply to the participant's 
other Federal assistance awards. Specifically, the requirements are 
those in:
    (a) 32 CFR 33.31 and 33.32, for participants that are States and 
local governmental organizations.
    (b) 32 CFR 32.32 and 32.33, for other nonprofit participants, with 
the exception of nonprofit GOCOs and FFRDCs that are exempted from the 
definition of ``recipient'' in 32 CFR part 32. Although it should occur 
infrequently, if a nonprofit GOCO or FFRDC is a participant, you must 
specify appropriate standards that conform as much as practicable with 
requirements in that participant's other Federal awards. Note also 
that:
    (1) If the TIA is a cooperative agreement (see appendix B to this 
part), 31 U.S.C. 6306 provides authority to vest title to tangible 
personal property in a nonprofit institution of higher education or in 
a nonprofit organization whose primary purpose is conducting scientific 
research, without further obligation to the Federal Government; and
    (2) Your TIA therefore must specify any conditions on the vesting 
of title to real property or equipment acquired by any such nonprofit 
participant, or the title will vest in the participant without further 
obligation to the Federal Government, as specified in 32 CFR 
32.33(b)(3).


Sec. 37.695  What are the requirements for Federally owned property?

    If you provide Federally owned property to any participant for the 
performance of research under a TIA, you must require that participant 
to account for, use, and dispose of the property in accordance with:
    (a) 32 CFR 34.22, if the participant is a for-profit firm.
    (b) 32 CFR 33.32(f), if the participant is a State or local 
governmental organization. Note that 32 CFR 33.32(f) requires you to 
provide additional information to the participant on the procedures for 
managing the property.
    (c) 32 CFR 32.33(a) and 32.34(f), if the participant is a nonprofit 
organization other than a GOCO or FFRDC (requirements for nonprofit 
GOCOs and FFRDCs should conform with the property standards that apply 
to their Federal procurement contracts).


Sec. 37.700  What are the requirements for supplies?

    Your expenditure-based TIA's provisions should permit participants 
to use their existing procedures to account for and manage supplies. A 
fixed-support TIA should not include requirements to account for or 
manage supplies.

Purchasing


Sec. 37.705  What standards do I include for purchasing systems of for-
profit firms?

    (a) If your TIA is an expenditure-based award, it should require 
for-profit participants that currently perform under DoD assistance 
instruments subject to the purchasing standards in 32 CFR 34.31 to use 
the same requirements for TIAs, unless there are programmatic or 
business reasons to do otherwise (in which case you must document the 
reasons in the award file).
    (b) You should allow other for-profit participants under 
expenditure-based TIAs to use their existing purchasing systems, as 
long as they flow down the applicable requirements in Federal statutes, 
Executive orders or Governmentwide regulations (see appendix E to this 
part for a list of those requirements).
    (c) If your TIA is a fixed-support award, you need only require 
for-profit participants to flow down the requirements listed in 
appendix F to this part.


Sec. 37.710  What standards do I include for purchasing systems of 
nonprofit organizations?

    (a) So as not to force system changes for any nonprofit 
participant, your expenditure-based TIA will provide that each 
nonprofit participant's purchasing system comply with:
    (1) 32 CFR 33.36, if the participant is a State or local 
governmental organization.
    (2) 32 CFR 32.40 through 32.49 if the participant is a nonprofit 
organization other than a GOCO or FFRDC that is excepted from the 
definition of ``recipient'' in 32 CFR part 32. Although it should occur 
infrequently, if a nonprofit GOCO or FFRDC is a participant, you must 
specify appropriate standards that conform as much as practicable with 
requirements in that participant's other Federal awards.
    (b) If your TIA is a fixed-support award, you need only require 
nonprofit participants to flow down the requirements listed in appendix 
E to this part.

Subpart G--Award Terms Related to Other Administrative Matters


Sec. 37.800  Which administrative matters are covered in this subpart?

    This subpart addresses ``non-systemic'' administrative matters that 
do not impose organization-wide requirements on a participant's 
financial management, property management, or purchasing system. 
Because an organization does not have to redesign its systems to 
accommodate award-to-award variations in these requirements, a TIA that 
you award may differ from other TIAs in the non-systemic requirements 
that it specifies for a given participant, based on the circumstances 
of the particular research project. To eliminate needless 
administrative complexity, you should handle some non-systemic 
requirements, such as the payment method, in a uniform way for the 
agreement as a whole.

Payments


Sec. 37.805  If I am awarding a TIA, what payment methods may I 
specify?

    Your TIA may provide for:
    (a) Reimbursement, as described in 32 CFR 34.12(a)(1), if it is an 
expenditure-based award.
    (b) Advance payments, as described in 32 CFR 34.12(a)(2), subject 
to the conditions in 32 CFR 34.12(b)(2)(i) through (iii).
    (c) Payments based on payable milestones. These are payments made 
according to a schedule that is based on predetermined measures of 
technical progress or other payable milestones. This approach relies 
upon the fact that, as research progresses throughout the term of the 
agreement, observable activity will be taking place. The recipient is 
paid upon the accomplishment of the predetermined measure of progress. 
Fixed-support TIAs must use this payment method and each measure of 
progress appropriately would be one of the well-defined outcomes that 
you identify in the agreement (this does not preclude use of an initial 
advance payment, if there is no alternative to meeting immediate cash 
needs). There are cash management considerations when this payment 
method is used as a means of financing for an expenditure-based TIA 
(see Sec. 37.575 and Sec. 37.1105).


Sec. 37.810  What should my TIA's provisions specify for the method and 
frequency of recipients' payment requests?

    The procedure and frequency for payment requests depend upon the 
payment method, as follows:
    (a) For either reimbursements or advance payments, your TIA must 
allow recipients to submit requests for payment at least monthly. You 
may authorize the recipients to use the forms or formats described in 
32 CFR 34.12(d).
    (b) If the payments are based on payable milestones, the recipient 
will submit a report or other evidence of

[[Page 21507]]

accomplishment to the program official at the completion of each 
predetermined activity. The agreement administrator may approve payment 
to the recipient after receiving validation from the program manager 
that the milestone was successfully reached.


Sec. 37.815  May the Government withhold payments?

    Your TIA must provide that the administrative agreements officer 
may withhold payments in the circumstances described in 32 CFR 
34.12(g), but not otherwise.


Sec. 37.820  Must I require a recipient to return interest on advance 
payments?

    If your expenditure-based TIA provides for either advance payments 
or payable milestones, the agreement must require the recipient to:
    (a) Maintain in an interest-bearing account any advance payments or 
milestone payment amounts received in advance of needs to disburse the 
funds for program purposes unless:
    (1) The recipient receives less than $120,000 in Federal grants, 
cooperative agreements, and TIAs per year;
    (2) The best reasonably available interest-bearing account would 
not be expected to earn interest in excess of $1,000 per year on the 
advance or milestone payments; 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 for the project.
    (b) Remit annually the interest earned to the administrative 
agreements officer.

Revision of Budget and Program Plans


Sec. 37.825  Must I require the recipient to obtain prior approval from 
the Government for changes in plans?

    If it is an expenditure-based award, your agreement must require 
the recipient to obtain the agreement administrator's prior approval if 
there is to be a change in plans that results in a need for additional 
Federal funding (this is unnecessary for a fixed-support TIA because 
the recipient is responsible for additional costs of achieving the 
outcomes). Other than that, the program official's substantial 
involvement in the project should ensure that the Government has 
advance notice of changes in plans.


Sec. 37.830  May I let a recipient charge pre-award costs to the 
agreement?

    Pre-award costs, as long as they are otherwise allowable costs of 
the project, may be charged to an expenditure-based TIA only with the 
specific approval of the agreements officer. All pre-award costs are 
incurred at the recipient's risk (i.e., no DoD Component is obligated 
to reimburse the costs if for any reason the recipient does not receive 
an award or if the award is less than anticipated and inadequate to 
cover the costs).

Program Income


Sec. 37.835  What requirements do I include for program income?

    Your TIA should apply the standards of 32 CFR 34.14 for program 
income that may be generated. Note the need to specify whether the 
recipient is to have any obligation to the Federal Government with 
respect to program income generated after the end of the project period 
(the period, as established in the award document, during which Federal 
support is provided). Doing so is especially important if the TIA 
includes a provision for the recipient to return any amounts to the 
Federal Government (see Sec. 37.580).

Intellectual Property


Sec. 37.840  What general approach should I take in negotiating data 
and patent rights?

    (a) You should confer with program officials and legal counsel to 
develop an overall strategy for intellectual property that takes into 
account inventions and data that may result from the project and future 
needs the Government may have for rights in them. The strategy should 
take into account any intellectual property the Government is 
furnishing and any pre-existing proprietary information that the 
recipient is furnishing, as well as data and inventions that may be 
generated under the award (recognizing that new data and inventions may 
be less valuable without pre-existing information). All pre-existing 
intellectual property, both the Government's and the recipient's, 
should be marked to give notice of its status.
    (b) Because TIAs entail substantial cost sharing by recipients, you 
must use discretion in negotiating Government rights to data and 
patentable inventions resulting from research under the agreements. The 
considerations in Secs. 37.845 through 37.875 are intended to serve as 
guidelines, within which you necessarily have considerable latitude to 
negotiate provisions appropriate to a wide variety of circumstances 
that may arise. Your goal should be a good balance between DoD 
interests in:
    (1) Gaining access to the best technologies for defense needs, 
including technologies available in the commercial marketplace, and 
promoting commercialization of technologies resulting from the 
research. Either of these interests may be impeded if you negotiate 
excessive rights for the Government. One objective of TIAs is to help 
incorporate defense requirements into the development of what 
ultimately will be commercially available technologies, an objective 
that is best served by reducing barriers to commercial firms' 
participation in the research. In that way, the commercial technology 
and industrial base can be a source of readily available, reliable, and 
affordable components, subsystems, computer software, and other 
technological products and manufacturing processes for military 
systems.
    (2) Providing adequate protection of the Government's investment, 
which may be weakened if the Government's rights are inadequate. You 
should consider whether the Government may require access to data or 
inventions for Governmental purposes, such as a need to develop 
defense-unique products or processes that the commercial marketplace 
likely will not address.


Sec. 37.845  What data rights should I obtain?

    (a) You should seek to obtain what you, with the advice of legal 
counsel, judge is needed to ensure future Government use of technology 
that emerges from the research, as long as doing so is consistent with 
the balance between DoD interests described in Sec. 37.840(b). You 
should consider data in which you wish to obtain license rights and 
data that you may wish to be delivered; since TIAs are assistance 
instruments rather than acquisition instruments, however, it is not 
expected that data would be delivered in most cases. What generally is 
needed is an irrevocable, world-wide license for the Government to use, 
modify, reproduce, release, or disclose for Governmental purposes the 
data that are generated under TIAs (including any data, such as 
computer software, in which a recipient may obtain a copyright). A 
Governmental purpose is any activity in which the United States 
Government participates, but a license for Governmental purposes does 
not include the right to use, or have or permit others to use, modify, 
reproduce, release, or disclose data for commercial purposes.
    (b) You may negotiate licenses of different scope than described in 
paragraph (a) of this section when necessary to accomplish program 
objectives or to protect the Government's interests. Consult with legal 
counsel before negotiating a license of different scope.

[[Page 21508]]

    (c) In negotiating data rights, you should consider the rights in 
background data that are necessary to fully utilize technology that is 
expected to result from the TIA, in the event the recipient does not 
commercialize the technology or chooses to protect any invention as a 
trade secret rather than by a patent. If a recipient intends to protect 
any invention as a trade secret, you should consult with your 
intellectual property counsel before deciding what information related 
to the invention the award should require the recipient to report.


Sec. 37.850  Should I require recipients to mark data?

    To protect the recipient's interests in data, your TIA should 
require the recipient to mark any particular data that it wishes to 
protect from disclosure with a legend identifying the data as licensed 
data subject to use, release, or disclosure restrictions.


Sec. 37.855  How should I handle protected data?

    Prior to releasing or disclosing data marked with a restrictive 
legend (as described in Sec. 37.850) to third parties, you should 
require those parties to agree in writing that they will:
    (a) Use the data only for governmental purposes; and
    (b) Not release or disclose the data without the permission of the 
licensor (i.e., the recipient).


Sec. 37.860  What rights should I obtain for inventions?

    (a) You should negotiate rights in inventions that represent a good 
balance between the Government's interests (see Sec. 37.840(b)) and the 
recipient's interests. As explained in appendix B to this part:
    (1) You have the flexibility to negotiate patent rights provisions 
that vary from what the Bayh-Dole statute (Chapter 18 of Title 35, 
U.S.C.) requires in many situations. You have that flexibility because 
TIAs include not only cooperative agreements, but also assistance 
transactions other than grants or cooperative agreements.
    (2) Your TIA becomes an assistance instrument other than a grant or 
cooperative agreement if its patent rights provision varies from what 
Bayh-Dole requires in your situation. However, you need not consider 
that difference in the type of transaction until the agreement is 
finalized, and it should not affect the provision you negotiate.
    (b) As long as it is consistent with the balance between DoD 
interests described in Sec. 37.840(b) and the recipient's interests, 
you should seek to obtain for the Government, when an invention is 
conceived or first actually reduced to practice under a TIA, a 
nonexclusive, nontransferrable, irrevocable, paid-up license to 
practice the invention, or to have it practiced, for or on behalf of 
the United States throughout the world. The license is for Governmental 
purposes, and does not include the right to practice the invention for 
commercial purposes.
    (c) To provide for the license described in paragraph (b) of this 
section, your TIA generally would include the patent-rights clause that 
37 CFR 401.14 specifies to implement the Bayh-Dole statute's 
requirements. Note that:
    (1) The clause is designed specifically for grants, contracts, and 
cooperative agreements awarded to small businesses and nonprofit 
organizations, the types of funding instruments and recipients to which 
the entire Bayh-Dole statute applies. As explained in appendix B to 
this part, only two Bayh-Dole requirements (in 35 U.S.C. sections 
202(c)(4) and 203) apply to cooperative agreements with other 
performers, by virtue of an amendment to Bayh-Dole at 35 U.S.C. 210(c).
    (2) You may use the same clause, suitably modified, in cooperative 
agreements with performers other than small businesses and nonprofit 
organizations. Doing so is consistent with a 1983 Presidential 
memorandum that calls for giving other performers rights in inventions 
from Federally supported research that are at least as great as the 
rights that Bayh-Dole gives to small businesses and nonprofit 
organizations (see Appendix B to this part for details). That 
Presidential memorandum is incorporated by reference in Executive Order 
12591 (52 FR 13414, 3 CFR, 1987 Comp., p. 220), as amended by Executive 
Order 12618 (52 FR 48661, 3 CFR, 1987 Comp., p. 262).
    (3) The clause provides for flow-down of Bayh-Dole patent-rights 
provisions to subawards with small businesses and nonprofit 
organizations.
    (4) There are provisions in 37 CFR part 401 stating when you must 
include the clause (37 CFR 401.3) and, in cases when it is required, 
how you may modify and tailor it (37 CFR 401.5).
    (d) You may negotiate Government rights of a different scope than 
the standard patent-rights provision described in paragraph (c) of this 
section when necessary to accomplish program objectives and foster the 
Government's interests. If you do so:
    (1) With the help of the program manager and legal counsel, you 
must decide what best represents a reasonable arrangement considering 
the circumstances, including past investments, contributions under the 
current TIA, and potential commercial markets. Taking past investments 
as an example, you should consider whether the Government or the 
recipient has contributed more substantially to the prior research and 
development that provides the foundation for the planned effort. If the 
predominant past contributor to the particular technology has been:
    (i) The Government, then the TIA's patent-rights provision should 
be at or close to the standard Bayh-Dole provision.
    (ii) The recipient, then a less restrictive patent provision may be 
appropriate, to allow the recipient to benefit more directly from its 
investments.
    (2) You should keep in mind that obtaining a nonexclusive license 
at the time of award, as described in paragraph (b) of this section, is 
valuable if the Government later requires access to inventions to 
enable development of defense-unique products or processes that the 
commercial marketplace is not addressing. If you do not obtain a 
license at the time of award, you should consider alternative 
approaches to ensure access, such as negotiating a priced option for 
obtaining nonexclusive licenses in the future to inventions that are 
conceived or reduced to practice under the TIA.
    (3) You also may consider whether you want to provide additional 
flexibility by giving the recipient more time than the standard patent-
rights provision does to:
    (i) Notify the Government of an invention, from the time the 
inventor discloses it within the for-profit firm.
    (ii) Inform the Government whether it intends to take title to the 
invention.
    (iii) Commercialize the invention, before the Government license 
rights in the invention become effective.


Sec. 37.865  Should my patent provision include march-in rights?

    Your TIA's patent rights provision should include the Bayh-Dole 
march-in rights clause at paragraph (j)(1) of 37 CFR 401.14, or an 
equivalent clause, concerning actions that the Government may take to 
obtain the right to use subject inventions, if the recipient fails to 
take effective steps to achieve practical application of the subject 
inventions within a reasonable time. The march-in provision may be 
modified to best meet the needs of the program. However, only 
infrequently should the march-in provision be entirely removed (e.g., 
you may wish to do so if a recipient is providing most of

[[Page 21509]]

the funding for a research project, with the Government providing a 
much smaller share).


Sec. 37.870  Should I require recipients to mark documents related to 
inventions?

    To protect the recipient's interest in inventions, your TIA should 
require the recipient to mark documents disclosing inventions it 
desires to protect by obtaining a patent. The recipient should mark the 
documents with a legend identifying them as intellectual property 
subject to public release or public disclosure restrictions, as 
provided in 35 U.S.C. 205.


Sec. 37.875  Should my TIA include a provision concerning foreign 
access to technology?

    (a) Consistent with the objective of enhancing the national 
security by increasing DoD reliance on the U.S. commercial technology 
and industrial bases, you must include a provision in the TIA that 
addresses foreign access to technology developed under the TIA.
    (b) The provision must provide, as a minimum, that any transfer of 
the:
    (1) Technology must be consistent with the U.S. export laws, 
regulations and policies (e.g., the International Traffic in Arms 
Regulation at 22 CFR part 121, et seq., the DoD Industrial Security 
Regulation in DoD 5220.22-R,\7\ and the Department of Commerce Export 
Regulation at 15 CFR part 770, et seq.), as applicable.
---------------------------------------------------------------------------

    \7\ Electronic copies may be obtained at the Internet site 
http://www.dtic.mil/whs/directives. Paper copies may be obtained, at 
cost, from the National Technical Information Service, 5285 Port 
Royal Road, Springfield, VA 22161. Authorized users may obtain 
copies from the Defense Technical Information Center, 8725 John J. 
Kingman Rd., Suite 0944, Fort Belvoir, VA 22060-6218.
---------------------------------------------------------------------------

    (2) Exclusive right to use or sell the technology in the United 
States must, unless the Government grants a waiver, require that 
products embodying the technology or produced through the use of the 
technology will be manufactured substantially in the United States. The 
provision may further provide that:
    (i) In individual cases, the Government may waive the requirement 
of substantial manufacture in the United States upon a showing by the 
recipient that reasonable but unsuccessful efforts have been made to 
transfer the technology under similar terms to those likely to 
manufacture substantially in the United States or that under the 
circumstances domestic manufacture is not commercially feasible.
    (ii) In those cases, the DoD Component may require a refund to the 
Government of some or all the funds paid under the TIA for the 
development of the transferred technology.
    (c) You may, but are not required to, seek to negotiate a domestic 
manufacture condition for transfers of nonexclusive rights to use or 
sell the technology in the United States, to parallel the one described 
for exclusive licenses in paragraph (b)(2) of this section, if you 
judge that nonexclusive licenses for foreign manufacture could 
effectively preclude the establishment of domestic sources of the 
technology for defense purposes.

Financial and Programmatic Reporting


Sec. 37.880  What requirements must I include for periodic reports on 
program and business status?

    Your TIA must include either:
    (a) The requirements in 32 CFR 32.51 and 32.52 for status reports 
on programmatic performance and, if it is an expenditure-based award, 
on financial performance; or
    (b) Alternative requirements that, as a minimum, include periodic 
reports addressing program and, if it is an expenditure-based award, 
business status. You must require submission of the reports at least 
annually, and you may require submission as frequently as quarterly 
(this does not preclude a recipient from electing to submit more 
frequently than quarterly the financial information that is required to 
process payment requests if the award is an expenditure-based TIA that 
uses reimbursement or advance payments under Sec. 37.810(a)). The 
requirements for the content of the reports are 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, applicable only to 
expenditure-based awards, must provide summarized details on the status 
of resources (federal funds and non-federal cost sharing), 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. You may require a recipient to 
separately identify in these reports the expenditures for each 
participant in a consortium and for each programmatic milestone or 
task, if you, after consulting with the program official, judge that 
those additional details are needed for good stewardship.


Sec. 37.885  May I require updated program plans?

    In addition to reports on progress to date, your TIA may include a 
provision requiring the recipient to annually prepare updated technical 
plans for the future conduct of the research effort. If your TIA does 
include a requirement for annual program plans, you also must require 
the recipient to submit the annual program plans to the agreements 
officer responsible for administering the TIA.


Sec. 37.890  Must I require a final performance report?

    You need not require a final performance report that addresses all 
major accomplishments under the TIA. If you do not do so, however, 
there must be an alternative that satisfies the requirement in DoD 
Instruction 3200.14 \8\ to document all DoD Science and Technology 
efforts and disseminate the results through the Defense Technical 
Information Center (DTIC). An example of an alternative would be 
periodic reports throughout the performance of the research that 
collectively cover the entire project.
---------------------------------------------------------------------------

    \8\ See footnote 7 to Sec. 37.875(b)(1).
---------------------------------------------------------------------------


Sec. 37.895  How is the final performance report to be sent to the 
Defense Technical Information Center?

    (a) Whether your TIA requires a final performance report or uses an 
alternative means under Sec. 37.890, you may include an award term or 
condition or otherwise instruct the recipient to submit the 
documentation either:
    (1) Directly to the DTIC; or
    (2) To the office that is administering the award (for subsequent 
transmission to the DTIC).
    (b) If you specify that the recipient is to submit the report 
directly to the DTIC, you also:
    (1) Must instruct the recipient to include a fully completed DD 
Form 298 with each document, so that the DTIC can recognize the 
document as being related to the particular award and properly record 
its receipt; and
    (2) Should advise the recipient to provide a copy of the completed 
DD Form 298 to the agreements officer responsible for administering the 
TIA.


Sec. 37.900  May I tell a participant that information in financial and 
programmatic reports will not be publicly disclosed?

    You may tell a participant that:
    (a) We may exempt from disclosure under the Freedom of Information 
Act (FOIA) a trade secret or commercial and financial information that 
a participant provides after the award, if the information is 
privileged or confidential

[[Page 21510]]

information. The DoD Component that receives the FOIA request will 
review the information in accordance with DoD procedures at 32 CFR 
286.23(h) (and any DoD Component supplementary procedures) to determine 
whether it is privileged or confidential information under the FOIA 
exemption at 5 U.S.C. 552(b)(4), as implemented by the DoD at 32 CFR 
286.12(d).
    (b) If the participant also provides information in the course of a 
competition prior to award, there is a statutory exemption for five 
years from FOIA disclosure requirements for certain types of 
information submitted at that time (see Sec. 37.420).


Sec. 37.905  Must I make receipt of the final performance report a 
condition for final payment?

    If a final report is required, your TIA should make receipt of the 
report a condition for final payment. If the payments are based on 
payable milestones, the submission and acceptance of the final report 
by the Government representative will be incorporated as an event that 
is a prerequisite for one of the payable milestones.

Records Retention and Access Requirements


Sec. 37.910  How long must I require participants to keep records 
related to the TIA?

    Your TIA must require participants to keep records related to the 
TIA (for which the agreement provides Government access under 
Sec. 37.915) for a period of three years after submission of the final 
financial status report for an expenditure-based TIA or final 
programmatic status report for a fixed-support TIA, with the following 
exceptions:
    (a) The participant must keep records longer than three years after 
submission of the final financial status report if the records relate 
to an audit, claim, or dispute that begins but does not reach its 
conclusion within the 3-year period. In that case, the participant must 
keep the records until the matter is resolved and final action taken.
    (b) Records for any real property or equipment acquired with 
project funds under the TIA must be kept for three years after final 
disposition.


Sec. 37.915  What requirement for access to a for-profit participant's 
records do I include in a TIA?

    (a) If a for-profit participant currently grants access to its 
records to the DCAA or other Federal Government auditors, your TIA must 
include for that participant the standard access-to-records 
requirements at 32 CFR 34.42(e). If the agreement is a fixed-support 
TIA, the language in 32 CFR 34.42(e) may be modified to provide access 
to records concerning the recipient's technical performance, without 
requiring access to the recipient's financial or other records. Note 
that any need to address access to technical records in this way is in 
addition to, not in lieu of, the need to address rights in data (see 
Sec. 37.845).
    (b) For other for-profit participants that do not currently give 
the Federal Government direct access to their records and are not 
willing to grant full access to records pertinent to the award, there 
is no set requirement to include a provision in your TIA for Government 
access to records. If the audit provision of an expenditure-based TIA 
gives an IPA access to the recipient's financial records for audit 
purposes, the Federal Government must have access to the IPA's reports 
and working papers and you need not include a provision requiring 
direct Government access to the recipient's financial records. For both 
fixed-support and expenditure-based TIAs, you may wish to negotiate 
Government access to recipient records concerning technical 
performance. Should you negotiate a provision giving access only to 
specific Government officials (e.g., the agreements officer), rather 
than a provision giving Government access generally, it is important to 
let participants know that the OIG, DoD, has a statutory right of 
access to records and other materials to which other DoD Component 
officials have access.


Sec. 37.920  What requirement for access to a nonprofit participant's 
records do I include in a TIA?

    Your TIA must include for any nonprofit participant the standard 
access-to-records requirement at:
    (a) 32 CFR 33.42(e), for a participant that is a State or local 
governmental organization.
    (b) 32 CFR 32.53(e), for a participant that is a nonprofit 
organization. The same requirement applies to any nonprofit GOCO or 
FFRDC, even though nonprofit GOCOs and FFRDCs are exempted from the 
definition of ``recipient'' in 32 CFR part 32.

Termination and Enforcement


Sec. 37.925  What requirements do I include for termination and 
enforcement?

    Your TIA must apply the standards of 32 CFR 34.51 for termination, 
32 CFR 34.52 for enforcement, and your organization's procedures 
implementing 32 CFR 22.815 for disputes and appeals.

Subpart H--Executing the Award


Sec. 37.1000  What are my responsibilities at the time of award?

    At the time of the award, you must:
    (a) Ensure that the award document contains the appropriate terms 
and conditions and is signed by the appropriate parties, in accordance 
with Secs. 37.1005 through 37.1015.
    (b) Document your analysis of the agreement in the award file, as 
discussed in Sec. 37.1020.
    (c) Provide information about the award to offices responsible for 
reporting, as described in Secs. 37.1025 through 37.1035.
    (d) Distribute copies of the award document, as required by 
Sec. 37.1045.

The Award Document


Sec. 37.1005  What are my general responsibilities concerning the award 
document?

    You are responsible for ensuring that the award document is 
complete and accurate. Your objective is to create a document that:
    (a) Addresses all issues;
    (b) States requirements directly. It is not helpful to readers to 
incorporate statutes or rules by reference, without sufficient 
explanation of the requirements. You generally should not incorporate 
clauses from the Federal Acquisition Regulation (48 CFR parts 1-53) or 
Defense Federal Acquisition Regulation Supplement (48 CFR parts 201-
253), because those provisions are designed for procurement contracts 
that are used to acquire goods and services, rather than for TIAs or 
other assistance instruments.
    (c) Is written in clear and concise language, to minimize potential 
ambiguity.


Sec. 37.1010  What substantive issues should my award document address?

    You necessarily will design and negotiate a TIA individually to 
meet the specific requirements of the particular project, so the 
complete list of substantive issues that you will address in the award 
document may vary. Every award document must address:
    (a) Project scope. The scope is an overall vision statement for the 
project, including a discussion of the project's purpose, objectives, 
and detailed military and commercial goals. It is a critical provision 
because it provides a context for resolving issues that may arise 
during post-award administration. In a fixed-support TIA, you also must 
clearly specify the well-defined outcomes that reliably indicate the 
amount of effort expended and serve as the basis for the level of the 
fixed support (see Secs. 37.305 and 37.560(a)).

[[Page 21511]]

    (b) Project management. You should describe the nature of the 
relationship between the Federal Government and the recipient; the 
relationship among the participants, if the recipient is an 
unincorporated consortium; and the overall technical and administrative 
management of the project. TIAs are used to carry out collaborative 
relationships between the Federal Government and the recipient. 
Consequently, there must be substantial involvement of the DoD program 
official (see Sec. 37.220) and usually the administrative agreements 
officer. The program official provides technical insight, which differs 
from the usual technical oversight of a project. The management 
provision also should discuss how you and the recipient will make any 
modifications to the TIA.
    (c) Termination, enforcement, and disputes. Your TIA must provide 
for termination, enforcement remedies, and disputes and appeals 
procedures, in accordance with Sec. 37.925.
    (d) Funding. You must:
    (1) Show the total amount of the agreement and the total period of 
performance.
    (2) If the TIA is an expenditure-based award, state the 
Government's and recipient's agreed-upon cost shares. The award 
document should identify values for any in-kind contributions, 
determined in accordance with Secs. 37.530 through 37.555, to preclude 
later disagreements about them.
    (3) Specify the amount of Federal funds obligated and the 
performance period for those obligated funds.
    (4) State, if the agreement is to be incrementally funded, that the 
Government's obligation for additional funding is contingent upon the 
availability of funds and that no legal obligation on the part of the 
Government exists until additional funds are made available and the 
agreement is amended. You also must include a prior approval 
requirement for changes in plans requiring additional Government 
funding, in accordance with Sec. 37.825.
    (e) Payment. You must choose the payment method and tell the 
recipient how, when, and where to submit payment requests, as discussed 
in Secs. 37.805 through 37.815. Your payment method must take into 
account sound cash management practices by avoiding unwarranted cash 
advances. For an expenditure-based TIA, your payment provision must 
require the return of interest should excess cash balances occur, in 
accordance with Sec. 37.820.
    (f) Records retention and access to records. You must include the 
records retention requirement at Sec. 37.910. You also must provide for 
access to for-profit and nonprofit participants' records, in accordance 
with Sec. 37.915 and Sec. 37.920.
    (g) Patents and data rights. In designing the patents and data 
rights provision, you must set forth the minimum required Federal 
Government rights in intellectual property generated under the award 
and address related matters, as provided in Secs. 37.840 through 
37.875. It is important to define all essential terms in the patent 
rights provision.
    (h) Foreign access to technology. You must include a provision, in 
accordance with Sec. 37.875, concerning foreign access and domestic 
manufacture of products using technology generated under the award.
    (i) Title to, management of, and disposition of tangible property. 
Your property provisions for for-profit and nonprofit participants must 
be in accordance with Secs. 37.685 through 37.700.
    (j) Financial management systems. For an expenditure-based award, 
you must specify the minimum standards for financial management systems 
of both for-profit and nonprofit participants, in accordance with 
Secs. 37.615 and 37.620.
    (k) Allowable costs. If the TIA is an expenditure-based award, you 
must specify the standards that both for-profit and nonprofit 
participants are to use to determine which costs may be charged to the 
project, in accordance with Secs. 37.625 through 37.635, as well as 
Sec. 37.830.
    (l) Audits. If your TIA is an expenditure-based award, you must 
include an audit provision for both for-profit and nonprofit 
participants and subrecipients, in accordance with Secs. 37.640 through 
37.670 and Sec. 37.680.
    (m) Purchasing system standards. You should include a provision 
specifying the standards in Secs. 37.705 and 37.710 for purchasing 
systems of for-profit and nonprofit participants, respectively.
    (n) Program income. You should specify requirements for program 
income, in accordance with Sec. 37.835.
    (o) Financial and programmatic reporting. You must specify the 
reports that the recipient is required to submit and tell the recipient 
when and where to submit them, in accordance with Secs. 37.880 through 
37.905.
    (p) Assurances for applicable national policy requirements. You 
must incorporate assurances of compliance with applicable requirements 
in Federal statutes, Executive orders, or regulations (except for 
national policies that require certifications). Appendix D to this part 
contains a list of commonly applicable requirements that you need to 
augment with any specific requirements that apply in your particular 
circumstances (e.g., general provisions in the appropriations act for 
the specific funds that you are obligating).
    (q) Other routine matters. The agreement should address any other 
issues that need clarification, including who in the Government will be 
responsible for post-award administration and the statutory authority 
or authorities for entering into the TIA (see appendix B to this part 
for a discussion of statutory authorities). In addition, the agreement 
must specify that it takes precedence over any inconsistent terms and 
conditions in collateral documents such as attachments to the TIA or 
the recipient's articles of collaboration.


Sec. 37.1015  How do I decide who must sign the TIA if the recipient is 
an unincorporated consortium?

    (a) If the recipient is a consortium that is not formally 
incorporated and the consortium members prefer to have the agreement 
signed by all of them individually, you may execute the agreement in 
that manner.
    (b) If they wish to designate one consortium member to sign the 
agreement on behalf of the consortium as a whole, you should not decide 
whether to execute the agreement in that way until you review the 
consortium's articles of collaboration with legal counsel.
    (1) The purposes of the review are to:
    (i) Determine whether the articles properly authorize one 
participant to sign on behalf of the other participants and are binding 
on all consortium members with respect to the research project; and
    (ii) Assess the risk that otherwise could exist when entering into 
an agreement signed by a single member on behalf of a consortium that 
is not a legal entity. For example, you should assess whether the 
articles of collaboration adequately address consortium members' future 
liabilities related to the research project (i.e., whether they will 
have joint and severable liability).
    (2) After the review, in consultation with legal counsel, you 
should determine whether it is better to have all of the consortium 
members sign the agreement individually or to allow them to designate 
one member to sign on all members' behalf.

Reporting Information About the Award


Sec. 37.1020  What must I document in my award file?

    You should include in your award file an agreements analysis in 
which you:

[[Page 21512]]

    (a) Briefly describe the program and detail the specific military 
and commercial benefits that should result from the project supported 
by the TIA. If the recipient is a consortium that is not formally 
incorporated, you should attach a copy of the signed articles of 
collaboration.
    (b) Describe the process that led to the award of the TIA, 
including how you and program officials solicited and evaluated 
proposals and selected the one supported through the TIA.
    (c) Explain how you decided that a TIA was the most appropriate 
instrument, in accordance with the factors in subpart B of this part. 
Your explanation must include your answers to the relevant questions in 
Sec. 37.225(a) through (d).
    (d) Explain how you valued the recipient's cost sharing 
contributions, in accordance with Secs. 37.530 through 37.555.
    (e) Document the results of your negotiation, addressing all 
significant issues in the TIA's provisions. For example, this includes 
specific explanations if you:
    (1) Specify requirements for a participant's systems that vary from 
the standard requirements in Secs. 37.615(a), 37.625(a), 37.630, or 
37.705(a) of subpart G of this part, in cases where those sections 
provide flexibility for you to do so.
    (2) Provide that any audits are to be performed by an IPA, rather 
than the DCAA, where permitted under Sec. 37.650. Your documentation 
must include:
    (i) The names and addresses of business units for which IPAs will 
be the auditors;
    (ii) Estimated amounts of Federal funds expected under the award 
for those business units; and
    (iii) The basis (e.g., a written statement from the recipient) for 
your judging that the business units do not currently perform under 
types of awards described in Sec. 37.650(b)(1) and (2) and are not 
willing to grant the DCAA audit access.
    (3) Include an intellectual property provision that varies from 
Bayh-Dole requirements.
    (4) Determine that cost sharing is impracticable.


Sec. 37.1025  Must I report information to the Defense Assistance 
Awards Data System?

    Yes, you must give the necessary information about the award to the 
office in your organization that is responsible for preparing DD Form 
2566 reports for the Defense Assistance Award Data System, to ensure 
timely and accurate reporting of data required by 31 U.S.C. 6101-6106 
(see 32 CFR part 21, subpart C).


Sec. 37.1030  What information must I report to the Defense Technical 
Information Center?

    (a) For any TIA, you must give your answers to the questions in 
Sec. 37.225(a) through (d) to the office in your DoD Component that is 
responsible for providing data on TIAs to the DTIC. Contact DTIC-OCP, 
8725 John J. Kingman Rd., Suite 0928, Fort Belvoir, VA 22060-6218, if 
you are unsure about the responsible office in your DoD Component. The 
DTIC compiles the information to help the Department of Defense measure 
the Department-wide benefits of using TIAs and assess the instruments' 
value in helping to meet the policy objectives described in 
Sec. 37.205(b) and Appendix A to this part.
    (b) If the TIA uses the authority of 10 U.S.C. 2371, as described 
in Sec. 37.1035, your information submission for the DTIC under 
paragraph (a) of this section must include the additional data required 
for the DoD's annual report to Congress.
    (c) If, as permitted under Sec. 37.650, the TIA includes a 
provision allowing a for-profit participant to have audits performed by 
an IPA, rather than the DCAA, you must report that fact with the other 
information you submit about the TIA. Note that you also must include 
information about any use of IPAs permitted by subawards that 
participants make to for-profit firms, as provided in Sec. 37.670. 
Information about a subaward under the TIA must be reported even if you 
receive the information in a subsequent year, when information about 
the TIA itself does not need to be reported.
    (d) The requirements in this section to report information to the 
DTIC should not be confused with the post-award requirement to forward 
copies of technical reports to the DTIC, as described at Secs. 37.890 
and 37.895. The reporting requirements in this section are assigned the 
Report Control Symbol DD-A&T(A)1936.


Sec. 37.1035  How do I know if my TIA uses the 10 U.S.C. 2371 authority 
and I must report additional data under Sec. 37.1030(b)?

    As explained in appendix B to this part, a TIA uses the authority 
of 10 U.S.C. 2371 and therefore must be included in the DoD's annual 
report to Congress on the use of 10 U.S.C. 2371 authorities if it:
    (a) Is an assistance transaction other than a grant or cooperative 
agreement, by virtue of its patent rights provision; or
    (b) Includes a provision to recover funds from a recipient, as 
described at Sec. 37.580.


Sec. 37.1040  When and how do I report information required by 
Sec. 37.1035?

    Information that you report, in accordance with Sec. 37.1030, to 
the office that your DoD Component designates as the central point for 
reporting to the DTIC must be:
    (a) Submitted quarterly, by the date that your central point 
establishes.
    (b) In the format that your central point provides (which is 
consistent with the format that the DTIC specifies to DoD Components).

Distributing Copies of the Award Document


Sec. 37.1045  To whom must I send copies of the award document?

    You must send a copy of the award document to the:
    (a) Recipient. You must include on the first page of the 
recipient's copy a prominent notice about the current DoD requirements 
for payment by electronic funds transfer (EFT).
    (b) Office you designate to administer the TIA. You are strongly 
encouraged to delegate post-award administration to the regional office 
of the Defense Contract Management Agency or Office of Naval Research 
that administers awards to the recipient. When delegating, you should 
clearly indicate on the cover sheet or first page of the award document 
that the award is a TIA, to help the post-award administrator 
distinguish it from other types of assistance instruments.
    (c) Finance and accounting office designated to make the payments 
to the recipient.

Subpart I--Post-Award Administration


Sec. 37.1100  What are my responsibilities generally as an 
administrative agreements officer for a TIA?

    As the administrative agreements officer for a TIA, you have the 
responsibilities that your office agreed to accept in the delegation 
from the office that made the award. Generally, you will have the same 
responsibilities as a post-award administrator of a grant or 
cooperative agreement, as described in 32 CFR 22.715. Responsibilities 
for TIAs include:
    (a) Advising agreements officers before they award TIAs on how to 
establish award terms and conditions that better meet research 
programmatic needs, facilitate effective post-award administration, and 
ensure good stewardship of Federal funds.
    (b) Participating as the business partner to the DoD program 
official to ensure the Government's substantial involvement in the 
research project. This may involve attendance with

[[Page 21513]]

program officials at kickoff meetings or post-award conferences with 
recipients. It also may involve attendance at the consortium 
management's periodic meetings to review technical progress, financial 
status, and future program plans.
    (c) Tracking and processing of reports required by the award terms 
and conditions, including periodic business status reports, 
programmatic progress reports, and patent reports.
    (d) Handling payment requests and related matters. For a TIA using 
advance payments, that includes reviews of progress to verify that 
there is continued justification for advancing funds, as discussed in 
Sec. 37.1105(b). For a TIA using milestone payments, it includes making 
any needed adjustments in future milestone payment amounts, as 
discussed in Sec. 37.1105(c).
    (e) Coordinating audit requests and reviewing audit reports for 
both single audits of participants' systems and any award-specific 
audits that may be needed, as discussed in Secs. 37.1115 and 37.1120.
    (f) Responding, after coordination with program officials, to 
recipient requests for permission to sell or exclusively license 
intellectual property to entities that do not agree to manufacture 
substantially in the United States, as described in Sec. 37.875(b). 
Before you grant approval for any technology, you must secure assurance 
that the Government will be able to use the technology (e.g., a 
reasonable license for Government use, if the recipient is selling the 
technology) or seek reimbursement of the Government's investments.
    (g) Notifying the agreements officer who made the award if a 
participant informs you about a subaward allowing a for-profit 
subrecipient to have audits performed by an IPA, rather than the DCAA. 
You should alert the awarding official that he or she must report the 
information, as required by Sec. 37.1030(c).


Sec. 37.1105  What additional duties do I have as the administrator of 
a TIA with advance payments or payable milestones?

    Your additional post-award responsibilities as an administrative 
agreements officer for an expenditure-based TIA with advance payments 
or payable milestones are to ensure good cash management. To do so, you 
must:
    (a) For any expenditure-based TIA with advance payments or payable 
milestones, forward to the responsible payment office any interest that 
the recipient remits in accordance with Sec. 37.820(b). The payment 
office will return the amounts to the Department of the Treasury's 
miscellaneous receipts account.
    (b) For any expenditure-based TIA with advance payments, consult 
with the program official and consider whether program progress 
reported in periodic reports, in relation to reported expenditures, is 
sufficient to justify your continued authorization of advance payments 
under Sec. 37.805(b).
    (c) For any expenditure-based TIA using milestone payments, work 
with the program official at the completion of each payable milestone 
or upon receipt of the next business status report to:
    (1) Compare the total amount of project expenditures, as recorded 
in the payable milestone report or business status report, with the 
projected budget for completing the milestone; and
    (2) Adjust future payable milestones, as needed, if expenditures 
lag substantially behind what was originally projected and you judge 
that the recipient is receiving Federal funds sooner than necessary for 
program purposes. Before making adjustments, you should consider how 
large a deviation is acceptable at the time of the milestone. For 
example, suppose that the first milestone payment for a TIA you are 
administering is $50,000, and that the awarding official set the amount 
based on a projection that the recipient would have to expend $100,000 
to reach the milestone (i.e., the original plan was for the recipient's 
share at that milestone to be 50% of project expenditures). If the 
milestone payment report shows $90,000 in expenditures, the recipient's 
share at this point is 44% ($40,000 out of the total $90,000 expended, 
with the balance provided by the $50,000 milestone payment of Federal 
funds). For this example, you should adjust future milestones if you 
judge that a 6% difference in the recipient's share at the first 
milestone is too large, but not otherwise. Remember that milestone 
payment amounts are not meant to track expenditures precisely at each 
milestone and that a recipient's share will increase as it continues to 
perform research and expend funds, until it completes another milestone 
to trigger the next Federal payment.


Sec. 37.1110  What other responsibilities related to payments do I 
have?

    If you are the administrative agreements officer, you have the 
responsibilities described in 32 CFR 22.810(c), regardless of the 
payment method. You also must ensure that you do not withhold payments, 
except in one of the circumstances described in 32 CFR 34.12(g).


Sec. 37.1115  What are my responsibilities related to participants' 
single audits?

    For audits of for-profit participant's systems, under Secs. 37.640 
through 37.660, you are the focal point within the Department of 
Defense for ensuring that participants submit audit reports and for 
resolving any findings in those reports. Nonprofit participants send 
their single audit reports to a Governmentwide clearinghouse. For those 
participants, the Office of the Assistant Inspector General (Auditing) 
should receive any DoD-specific findings from the clearinghouse and 
refer them to you for resolution, if you are the appropriate official 
to do so.


Sec. 37.1120  When and how may I request an award-specific audit?

    Guidance on when and how you should request additional audits for 
expenditure-based TIAs is identical to the guidance for grants officers 
in 32 CFR 34.16(d). If you require an award-specific examination or 
audit of a for-profit participant's records related to a TIA, you must 
use the auditor specified in the award terms and conditions, which 
should be the same auditor who performs periodic audits of the 
participant. The DCAA and the OIG, DoD, are possible sources of advice 
on audit-related issues, such as appropriate audit objectives and 
scope.

Subpart J--Definitions of Terms Used in this Part


Sec. 37.1205  Advance.

    A payment made to a recipient before the recipient disburses the 
funds for program purposes. Advance payments may be based upon 
recipients' requests or predetermined payment schedules.


Sec. 37.1210  Advanced research.

    Research 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 Research, Development, Test and Evaluation 
programs within Budget Activity 3, Advanced Technology Development.

[[Page 21514]]

Sec. 37.1215  Agreements officer.

    An official with the authority to enter into, administer, and/or 
terminate TIAs (see Sec. 37.125).


Sec. 37.1220  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 
Research, Development, Test and Evaluation programs within Budget 
Activity 2, Applied Research (also known informally as research 
category 6.2) programs. 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.''


Sec. 37.1225  Articles of collaboration.

    An agreement among the participants in a consortium that is not 
formally incorporated as a legal entity, by which they establish their 
relative rights and responsibilities (see Sec. 37.515).


Sec. 37.1230  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, cooperative agreements, 
and technology investment agreements are examples of legal instruments 
used to provide assistance.


Sec. 37.1235  Award-specific audit.

    An audit of a single TIA, usually done at the cognizant agreements 
officer's request, to help resolve issues that arise during or after 
the performance of the research project. An award-specific audit of an 
individual award differs from a periodic audit of a participant (as 
defined in Sec. 37.1325).


Sec. 37.1240  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 Research, 
Development, Test and Evaluation programs in Budget Activity 1, Basic 
Research (also known informally as research category 6.1).


Sec. 37.1245  Cash contributions.

    A recipient's cash expenditures made as contributions toward cost 
sharing, including expenditures of money that third parties contributed 
to the recipient.


Sec. 37.1250  Commercial firm.

    A for-profit firm or segment of a for-profit firm (e.g., a division 
or other business unit) that does a substantial portion of its business 
in the commercial marketplace.


Sec. 37.1255  Consortium.

    A group of research-performing organizations that either is 
formally incorporated or that otherwise agrees to jointly carry out a 
research project (see definition of ``articles of collaboration,'' in 
Sec. 37.1225).


Sec. 37.1260  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 
of ``grant,'' in Sec. 37.1295), 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.


Sec. 37.1265  Cost sharing.

    A portion of project costs that are borne by the recipient or non-
Federal third parties on behalf of the recipient, rather than by the 
Federal Government.


Sec. 37.1270  Data.

    Recorded information, regardless of form or method of recording. 
The term includes technical data, which are data of a scientific or 
technical nature, and computer software. It does not include financial, 
cost, or other administrative information related to the administration 
of a TIA.


Sec. 37.1275  DoD Component.

    The Office of the Secretary of Defense, a Military Department, a 
Defense Agency, or a DoD Field Activity.


Sec. 37.1280  Equipment.

    Tangible property, other than real property, that has a useful life 
of more than one year and an acquisition cost of $5,000 or more per 
unit.


Sec. 37.1285  Expenditure-based award.

    A Federal Government contract or assistance award for which the 
amounts of interim payments or the total amount ultimately paid (i.e., 
the sum of interim payments and final payment) are subject to 
redetermination or adjustment, based on the amounts expended by the 
recipient in carrying out the purposes for which the award was made. 
Most Federal Government grants and cooperative agreements are 
expenditure-based awards.


Sec. 37.1290  Expenditures or outlays.

    Charges made to the project or program. They may be reported either 
on a cash or accrual basis, as shown in the following table:

------------------------------------------------------------------------
If reports are prepared on a . . .    Expenditures are the sum of . . .
------------------------------------------------------------------------
(a) Cash basis....................  (1) Cash disbursements for direct
                                     charges for goods and services;
                                    (2) The amount of indirect expense
                                     charged;
                                    (3) The value of third party in-kind
                                     contributions applied; and
                                    (4) The amount of cash advances and
                                     payments made to any other
                                     organizations for the performance
                                     of a part of the research effort.
(b) Accrual basis.................  (1) Cash disbursements for direct
                                     charges for goods and services;
                                    (2) The amount of indirect expense
                                     incurred;
                                    (3) The value of in-kind
                                     contributions applied; and
                                    (4) The net increase (or decrease)
                                     in the amounts owed by the
                                     recipient for goods and other
                                     property received, for services
                                     performed by employees,
                                     contractors, and other payees and
                                     other amounts becoming owed under
                                     programs for which no current
                                     services or performance are
                                     required.
------------------------------------------------------------------------

Sec. 37.1295  Grant.

    A legal instrument which, consistent with 31 U.S.C. 6304, is used 
to enter into a relationship:
    (a) 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.

[[Page 21515]]

    (b) In which substantial involvement is not expected between the 
Department of Defense and the recipient when carrying out the activity 
contemplated by the grant.


Sec. 37.1300  In-kind contributions.

    The value of non-cash contributions made by a recipient or non-
Federal third parties toward cost sharing.


Sec. 37.1305  Institution of higher education.

    An educational institution that:
    (a) Meets the criteria in section 1201(a) of the Higher Education 
Act of 1965 (20 U.S.C. 1141(a)); and
    (b) Is subject to the provisions of OMB Circular A-110, 
``Administrative Requirements for Grants and Agreements with 
Institutions of Higher Education, Hospitals, and Other Non-Profit 
Organizations,'' as implemented by the Department of Defense at 32 CFR 
part 32.


Sec. 37.1310  Intellectual property.

    Inventions, data, works of authorship, and other intangible 
products of intellectual effort that can be owned by a person, whether 
or not they are patentable or may be copyrighted. The term also 
includes mask works, such as those used in microfabrication, whether or 
not they are tangible.


Sec. 37.1315  Nonprofit organization.

    (a) Any corporation, trust, association, cooperative or other 
organization that:
    (1) Is operated primarily for scientific, educational, service, or 
similar purposes in the public interest.
    (2) Is not organized primarily for profit; and
    (3) Uses its net proceeds to maintain, improve, or expand the 
operations of the organization.
    (b) The term includes any nonprofit institution of higher education 
or nonprofit hospital.


Sec. 37.1320  Participant.

    A consortium member or, in the case of an agreement with a single 
for-profit entity, the recipient. Note that a for-profit participant 
may be a firm or a segment of a firm (e.g., a division or other 
business unit).


Sec. 37.1325  Periodic audit.

    An audit of a participant, performed at an agreed-upon time 
(usually a regular time interval), to determine whether the participant 
as a whole is managing its Federal awards in compliance with the terms 
of those awards. Appendix C to this part describes what such an audit 
may cover. A periodic audit of a participant differs from an award-
specific audit of an individual award (as defined in Sec. 37.1235).


Sec. 37.1330  Procurement contract.

    A Federal Government procurement contract. It is 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 of the term ``contract'' 
at 48 CFR 2.101.


Sec. 37.1335  Program income.

    Gross income earned by the recipient or a participant that is 
generated by a supported activity or earned as a direct result of a 
TIA. Program income includes but is not limited to: income from fees 
for performing services; the use or rental of real property, equipment, 
or supplies acquired under a TIA; the sale of commodities or items 
fabricated under a TIA; and license fees and royalties on patents and 
copyrights. Interest earned on advances of Federal funds is not program 
income.


Sec. 37.1340  Program official.

    A Federal Government program manager, scientific officer, or other 
individual who is responsible for managing the technical program being 
carried out through the use of a TIA.


Sec. 37.1345  Property.

    Real property, equipment, supplies, and intellectual property, 
unless stated otherwise.


Sec. 37.1350  Real property.

    Land, including land improvements, structures and appurtenances 
thereto, but excluding movable machinery and equipment.


Sec. 37.1355  Recipient.

    An organization or other entity that receives a TIA from a DoD 
Component. Note that a for-profit recipient may be a firm or a segment 
of a firm (e.g., a division or other business unit).


Sec. 37.1360  Research.

    Basic, applied, and advanced research, as defined in this subpart.


Sec. 37.1365  Supplies.

    Tangible property other than real property and equipment. Supplies 
have a useful life of less than one year or an acquisition cost of less 
than $5,000 per unit.


Sec. 37.1370  Termination.

    The cancellation of a TIA, in whole or in part, at any time prior 
to either:
    (a) The date on which all work under the TIA is completed; or
    (b) The date on which Federal sponsorship ends, as given in the 
award document or any supplement or amendment thereto.


Sec. 37.1375  Technology investment agreements.

    A special class of assistance instruments used to increase 
involvement of commercial firms in defense research programs and for 
other purposes (described in appendix A to this part) related to 
integrating the commercial and defense sectors of the nation's 
technology and industrial base. A technology investment agreement may 
be a cooperative agreement with provisions tailored for involving 
commercial firms (as distinct from a cooperative agreement subject to 
all of the requirements in 32 CFR part 34), or another kind of 
assistance transaction (see appendix B to this part).

Appendix A to Part 37--What is the Civil-Military Integration 
Policy that is the Basis for Technology Investment Agreements?

    A. TIAs complement other funding instruments that are available 
to agreements officers in that they are designed to foster civil-
military integration in DoD Science and Technology (S&T) programs. 
Civil-military integration creates a single, national technology and 
industrial base upon which the DoD can draw to meet its needs. 
Achieving civil-military integration is a national policy objective, 
as stated in 10 U.S.C. 2501.
    B. Civil-military integration includes:
    1. Removing barriers to participation in DoD programs by 
commercial firms, firms that deal primarily in the commercial 
marketplace. In recent years, some commercial firms judged that it 
would be overly burdensome and costly for them to comply with 
Government-unique requirements. That belief caused some firms to 
decline to do cost-type business with the Federal Government. It 
caused other firms to create divisions for Government business that 
are separate and isolated from their divisions for commercial 
business. TIAs give agreements officers flexibility to tailor 
Government requirements and lower or remove barriers to firms' 
participation, where the tailoring of requirements can be done 
consistently with good stewardship of Federal Government funds.
    2. Creating new business relationships among the performers in 
the technology and industrial base. Collaborations among commercial 
firms, firms that regularly perform defense programs, and nonprofit 
organizations can create wholes that are greater than the sums of 
the parts. The collaborations can enhance overall quality and 
productivity.
    3. Promoting the development and use of new business practices 
and disseminating current best practices throughout the technology 
and industrial base.

[[Page 21516]]

    C. The use of TIAs to promote civil-military integration will 
help defense S&T programs achieve their primary mission. That 
mission is to develop superior technology and help transition the 
technology to applications that enable affordable, decisive military 
capability. The use of TIAs to increase access to commercial firms, 
to create new relationships, and to promote better business 
practices will help:
    1. Increase technological sophistication. The DoD and firms that 
currently perform defense programs will benefit from technology in 
the commercial marketplace that often is more advanced than what is 
available in the defense-specific sector.
    2. Reduce DoD's life-cycle costs for buying, operating, and 
maintaining weapon and support systems. The intent is that the DoD 
and firms that currently perform defense programs will be able to 
take advantage of the economies of scale of the commercial 
marketplace, which has a much larger volume of business for many 
high-technology products and processes than the Federal Government's 
share alone.

Appendix B to Part 37--What Type of Instrument Is a TIA and What 
Statutory Authorities Does It Use?

    A. A TIA may be either a type of cooperative agreement or a type 
of ``assistance transaction other than a grant or cooperative 
agreement,'' depending on its patent-rights provision. It is awarded 
under the statutory authority of 10 U.S.C. 2358, 10 U.S.C. 2371, or 
both, as explained in paragraphs B through E of this Appendix and 
illustrated in the table below.

------------------------------------------------------------------------
                                                      The TIA's patent
                               The TIA's provision    provision varies
                               complies with Bayh-   from what patent is
                                      Dole          possible under Bayh-
                                                            Dole
------------------------------------------------------------------------
1. The TIA does not include   The TIA is a type of  The TIA is a type of
 recovery of funds provision.  cooperative           assistance
                               agreement, under 10   transaction other
                               U.S.C. 2358(b)(1).    than a grant or
                                                     cooperative
                                                     agreement, under 10
                                                     U.S.C. 2371.
2. The TIA includes recovery  The TIA is a type of  The TIA is a type of
 of funds provision.           cooperative           assistance
                               agreement, under 10   transaction other
                               U.S.C. 2358(b)(1).    than a grant or
                               It uses recovery of   cooperative
                               funds authority of    agreement, under 10
                               10 U.S.C. 2371.       U.S.C. 2371. It
                                                     also uses the
                                                     recovery of
                                                     authority of funds
                                                     10 U.S.C. 2371.
------------------------------------------------------------------------

    B. A TIA is a type of cooperative agreement whenever its patent-
rights provision complies with the Bayh-Dole statute (Chapter 18 of 
Title 35, U.S.C.), as shown in the preceding table. The authority to 
award the TIA is 10 U.S.C. 2358, in addition to any program-specific 
statute that may provide authority to award cooperative agreements. 
The TIA also may use the authority of 10 U.S.C. 2371 to include a 
recovery of funds provision that requires the recipient, as a 
condition for receiving support under the agreement, to make 
payments to the Department of Defense or other Federal agency.
    C. A TIA becomes a type of assistance transaction other than a 
grant or cooperative agreement when its patent-rights provision is 
less restrictive than is possible under Bayh-Dole. The authority to 
award the instrument is 10 U.S.C. 2371, as well as any program-
specific authority to provide assistance. Note that the agreements 
officer's judgment that the execution of the research project 
warrants a less restrictive patent provision than is possible under 
Bayh-Dole is sufficient to satisfy the statutory condition in 10 
U.S.C. 2371 for use of an assistance transaction other than a 
cooperative agreement or grant (i.e., that it is not feasible or 
appropriate to use a standard grant or cooperative agreement to 
carry out the project). The TIA also may include a recovery of funds 
provision, as authorized by 10 U.S.C. 2371.
    D. From a practical point of view, an agreements officer need 
not decide while he or she is negotiating the terms and conditions 
with the recipient whether a TIA is a cooperative agreement or an 
assistance transaction other than a grant or cooperative agreement. 
The agreements officer must make that decision when the agreement is 
finalized, based upon a comparison of the patent provision with what 
is required by Bayh-Dole.
    E. In making that comparison, the agreements officer should 
consult with legal counsel and remember that most Bayh-Dole 
requirements apply only to small business firms and nonprofit 
organizations (note that a consortium that is not formally 
incorporated is neither a small business firm nor a nonprofit 
organization). There are only two requirements of Bayh-Dole, in 35 
U.S.C. 202(c)(4) and 203 that directly apply to cooperative 
agreements with other than small business firms and nonprofit 
organizations. A 1984 amendment to Bayh-Dole, at 35 U.S.C. 210(c), 
makes those two portions apply. The 1984 amendment otherwise states 
that Bayh-Dole does not preclude agencies from complying with a 1983 
Presidential Statement of Government Patent Policy (incorporated by 
reference in Executive Order 12591). The President in that statement 
authorized Federal agencies to tailor cooperative agreements with 
for-profit firms other than small businesses, in ways that would 
waive rights of the Government or obligations of the performer under 
Bayh-Dole, if they determined that:
    1. ``The interests of the United States and the general public 
will be better served thereby as, for example, where this is 
necessary to obtain a uniquely or highly qualified performer; or''
    2. ``The award involves co-sponsored, cost sharing, or joint 
venture research and development, and the performer, co-sponsor or 
joint venturer is making substantial contribution of funds, 
facilities or equipment to the work performed under the award.''

Appendix C to Part 37--What is the Desired Coverage for Periodic Audits 
of For-Profit Participants to be Audited by IPAs?

    You may provide the following guidance to a for-profit 
participant and its IPA on the desired coverage of periodic audits.

Coverage of Independent Audits of For-Profit Firms

Table of Contents

Part 1. General Information
    What is the purpose of this document?
    Why does the Federal Government need an audit?
    Can the audit be integrated with the regular audit of a firm's 
financial statements?
    What are the objectives of the audit?
    What is the source of the requirement for the audit?
    What should the IPA do if he or she finds that the Defense 
Contract Audit Agency is performing audits of the firm?
Part 2. Audit Objectives and Compliance Requirements
A. Allowable Costs
    What is the objective of this portion of the audit?
    What standards or cost principles determine the costs that are 
allowable as charges to the award?
    What compliance requirements for the allowability of costs 
should the audit address?
B. Cost Sharing
    What is the objective of this portion of the audit?
    What are the compliance requirements for cost sharing?
C. Financial Reporting
    What are the objectives of this portion of the audit?
    What are the compliance requirements for financial reporting?
D. Equipment and Real Property Management
    Is a review of a firm's property management system usually 
required?
    What are the objectives of the review?
    What are the compliance requirements for Federally owned 
property and for equipment or real property purchased under DoD 
awards?
E. Program Income
    Is an audit of program income usually required?
    What is program income?
    What is the objective of this portion of the audit?
    What are the applicable standards for program income?

[[Page 21517]]

Part 1. General Information

What Is the Purpose of This Document?

    This document provides guidance for an independent public 
accountant (IPA) who is asked by a for-profit firm to conduct an 
audit of its systems, due to the firm's having received a technology 
investment agreement from the Department of Defense (DoD).

Why Does the Federal Government Need an Audit?

    Federal officials are accountable to the public for the 
resources provided to carry out Government programs. Financial 
auditing contributes to accountability by providing an independent 
assessment to assure that recipients are handling Government funds 
properly.

Can the Audit Be Integrated With the Regular Audit of a Firm's 
Financial Statements?

    Yes, the intent is to cause the minimum possible disruption to 
the firm's activities, so the IPA is encouraged to do the needed 
transaction sampling for DoD awards as part of the regularly 
scheduled audit of the firm's financial statements. In some cases, 
it may be even more efficient and economical to separately audit the 
individual DoD awards, and the firm may elect to have the IPA do so.

What are the Objectives of the Audit?

    The auditor is to determine and report on whether:
    1. The firm has an internal control structure that provides 
reasonable assurance that it is managing DoD awards in compliance 
with the award terms and conditions, including applicable Federal 
laws and regulations.
    2. Based on a sampling of DoD award expenditures, the firm has 
complied with award terms and conditions, including applicable 
Federal laws and regulations, that may have a direct and material 
effect on DoD awards.

What Is the Source of the Requirement for the Audit?

    The source of the requirement stated in the award document stems 
from sections 37.640 through 37.660 of 32 CFR part 37, which is part 
37 of the DoD Grant and Agreement Regulations (DoDGARs).

What Should the IPA Do If He or She Finds That the Defense Contract 
Audit Agency is Performing Audits of the Firm?

    The IPA should consult with officials of the firm to ensure 
that:
    1. DoD agreements officers were aware of the DCAA audit presence 
at the time they made awards; and
    2. The DoD agreements authorize the IPA to perform the audit, 
rather than requiring that the DCAA do so. If the IPA is authorized 
to perform the audit, he or she must consider the nature, timing, 
and extent of his or her own auditing procedures, to avoid 
unnecessary duplication of the DCAA effort.

Part 2. Audit Objectives and Compliance Requirements

    A. Allowable Costs

What Is the Objective of This Portion of the Audit?

    The objective is to determine, by testing a sample of 
transactions, whether the firm complied with the requirements 
concerning allowability of costs charged to DoD awards.

What Standards or Cost Principles Determine the Costs That Are 
Allowable as Charges to the Award?

    Each technology investment agreement should specify the 
standards or cost principles that the for-profit firm is to use to 
determine the costs that it is allowed to charge to that award. 
While the TIA may specify use of the for-profit cost principles in 
the Federal Acquisition Regulation (FAR, at 48 CFR part 31) and 
Defense FAR Supplement (DFARS, at 48 CFR part 231), it more likely 
will specify an alternative standard. The minimum standard in the 
latter case is that Federal funds and the firm's cost sharing 
contributions will be used only for costs that a reasonable and 
prudent person would incur in carrying out the research project 
contemplated by the agreement.

What Compliance Requirements For Allowability of Costs Should the Audit 
Address?

    For a firm that is subject to the cost principles in the FAR and 
DFARS, the IPA should determine and report on whether costs charged 
to DoD awards are in compliance with those cost principles and 
indirect cost rates are applied in accordance with approved rate 
agreements.
    For a firm that is subject to alternative standards that may be 
used for a TIA, the IPA should determine and report on whether costs 
charged to the DoD awards are:
    1. Necessary and reasonable for the performance of the research 
projects supported by the awards, or for related administration. 
Generally, elements of cost that appropriately are charged are those 
identified with research and development activities under the 
Generally Accepted Accounting Principles (see Statement of Financial 
Accounting Standards Number 2, ``Accounting for Research and 
Development Costs,'' October 1974).
    2. Allocable to the research projects (i.e., costs are charged 
to DoD projects in a manner that is in accordance with the benefits 
the projects received).
    3. Given consistent treatment with costs allocated to the firm's 
other research and development activities (e.g., activities 
supported by the firm itself or by non-Federal sponsors), through 
application of Generally Accepted Accounting Principles appropriate 
to the circumstances.
    4. In conformance with any limitations in the award documents or 
regulations that they cite (e.g., any restrictions on types or 
amounts of costs, or requirements for prior approval of DoD 
agreements officers).
    5. Supported by appropriate documentation in the firm's records. 
The documentation may be in electronic form.

B. Cost Sharing

What Is the Objective of This Portion of the Audit?

    The objective is to determine, by testing a sample of cost 
sharing contributions, whether the firm made the contributions that 
the agreements required.

What Are the Compliance Requirements for Cost Sharing?

    The provisions of the award documents will specify requirements 
for the firm's cost sharing, which may be contributions of a 
specified amount or a percentage of total project costs. The cost 
sharing may be in the form of allowable costs incurred or in-kind 
contributions (including third-party in-kind contributions).
    The values of the firm's contributions are determined in 
accordance with sections 37.530 through 37.555 of 32 CFR part 37, 
which is part 37 of the DoDGARs.

C. Financial Reporting

What Are the Objectives of This Portion of the Audit?

    The primary objective is to determine whether the firm's 
financial reports for DoD awards:
    1. Fairly and completely represent the expenditures and status 
of resources for projects supported by those awards; and
    2. Are supported by applicable accounting records and the 
accounting basis used (e.g., cash or accrual).

What Are the Compliance Requirements for Financial Reporting?

    The agreements will specify the frequency and content of the 
financial reports. They may specify the use of standard forms (e.g., 
the Standard Form 269 or 269A, ``Financial Status Report,'' or 
Standard Form 272, ``Report of Federal Cash Transactions). 
Alternatively, the agreements may specify an equivalent approach of 
periodic reports, and the reports may include information on both 
programmatic and business status. The requirements are in section 
37.880 of 32 CFR part 37, which is part 37 of the DoDGARs.
    Each financial report (and the business portion of any report 
that also has programmatic information) will contain at least 
summarized details on the status of resources (Federal funds and any 
non-Federal cost sharing that the agreements require), 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 these schedules; and discuss 
actions that will be taken to address the deviations.

D. Equipment and Real Property Management

Is a Review of a Firm's Property Management System Usually Required?

    No, the IPA needs to review the property management system only 
if:
    1. There is Federally owned property associated with the award; 
or
    2. The firm charged the full purchase price of any equipment or 
real property as project

[[Page 21518]]

costs (i.e., to Federal funds or the firm's funds that are counted 
toward required cost sharing); and
    3. The award under which the property was purchased provides for 
a continuing Federal interest in the property.
    Note that the IPA generally will not need to review the property 
management system because most DoD awards will not have Federally 
owned property associated with them and will allow the firm to 
charge to the project only depreciation or use charges for real 
property or equipment.

What Are the Objectives of the Review?

    The objectives are to determine whether the firm:
    1. Obtained the necessary prior approval for the equipment or 
real property purchase from the grants officer or agreements 
officer.
    2. Keeps proper records for equipment and adequately safeguards 
and maintains equipment.
    3. Handles disposition or encumbrance of equipment or real 
property acquired under DoD awards in accordance with the applicable 
requirements.

What Are the Compliance Requirements for Federally Owned Property and 
for Equipment or Real Property Purchased Under DoD Awards?

    To protect the Federal interest in property, the DoD Grant and 
Agreement Regulations include standards for the firm's property 
management, use, and disposition, as shown in this table:

------------------------------------------------------------------------
                                            Then the property management
         If the property is * * *           standards for the for-profit
                                                  firm are in * * *
------------------------------------------------------------------------
Real property or equipment purchased under  Section 37.685 of 32 CFR
 a TIA,                                      part 37
Federally owned property..................  Section 37.695 of 32 CFR
                                             part 37.
------------------------------------------------------------------------

    Note that a for-profit firm may include the full acquisition 
cost of real property or equipment as a charge to the project only 
with the prior approval of the grants officer or the agreements 
officer. The title to the real property or equipment vests 
conditionally in the for-profit firm upon acquisition, and there is 
a continuing Federal interest in the property unless an awarding 
office has statutory authority to do otherwise and elects to use 
that authority for a particular award. The Federal Government 
recovers its interest in the property through the disposition 
process at the project's end.

E. Program Income

Is An Audit of Program Income Usually Required?

    No, most awards will not involve any program income.

What Is Program Income?

    Program income is gross income earned by the recipient that is 
generated by a supported activity or earned as a result of the 
award. For example, if the purpose of an award is to support the 
firm's delivery of services and the firm collects fees for doing so, 
those fees are program income. As another example, if samples of 
materials or biological specimens are generated as a result of a 
supported research effort, and the firm sells samples to other 
research organizations, the proceeds of those sales would be program 
income. 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.

What Is the Objective of This Portion of the Audit?

    The objective is to determine whether program income is 
correctly recorded and used in accordance with the award terms and 
applicable standards.

What Are the Applicable Standards for Program Income?

    The standards for program income are in section 37.835 of 32 CFR 
part 37, which is part 37 of the DoDGARs.

Appendix D to Part 37--What Common National Policy Requirements May 
Apply and Need to Be Included in TIAs?

    Whether your TIA is a cooperative agreement or another type of 
assistance transaction, as discussed in appendix B to this part, the 
terms and conditions of the agreement must provide for recipients' 
compliance with applicable Federal statutes and regulations. This 
appendix lists some of the more common requirements to aid you in 
identifying ones that apply to your TIA. The list is not intended to 
be all-inclusive, however, and you may need to consult legal counsel 
to verify whether there are others that apply in your situation 
(e.g., due to a provision in the appropriations act for the specific 
funds that you are using or due to a statute or rule that applies to 
a particular program or type of activity).

A. Certifications

    Three requirements that apply to all TIAs currently require you 
to obtain a certification at the time of proposal. They are:
    1. Requirements concerning debarment and suspension in a 
Governmentwide common rule that the DoD has codified at subparts A 
through E of 32 CFR part 25. They apply to all nonprocurement 
transactions.
    2. Requirements concerning drug-free workplace in a 
Governmentwide common rule that the DoD has codified at subpart F of 
32 CFR part 25. They apply to all financial assistance.
    3. Prohibitions concerning lobbying in a Governmentwide common 
rule that the DoD has codified at 32 CFR part 28. They apply to all 
financial assistance.
    Appendix A to 32 CFR part 22 includes sample provisions that you 
may use, to have proposers incorporate the certifications by 
reference into their proposals. That appendix also has information 
on the sources of the requirements.

B. Assurances That Apply to all TIAs

    DoD policy is to use certifications, as described in the 
preceding paragraphs, only for national policy requirements that 
specifically require them. The usual approach to communicating other 
national policy requirements to recipients is to incorporate them as 
award terms or conditions, or assurances. Appendix B to 32 CFR part 
22 lists national policy requirements that commonly apply to grants 
and cooperative agreements. It also has suggested language for 
assurances to incorporate the requirements in award documents. Of 
those requirements, the following four apply to all TIAs:
    1. Prohibitions on discrimination on the basis of race, color, 
or national origin in Title VI of the Civil Rights Act of 1964 (42 
U.S.C. 2000d, et seq.). These apply to all financial assistance. 
They require recipients to flow down the prohibitions to any 
subrecipients performing a part of the substantive research program 
(as opposed to suppliers from whom recipients purchase goods or 
services). For further information, see item a. under the heading 
``Nondiscrimination'' in appendix B to 32 CFR part 22.
    2. Prohibitions on discrimination on the basis of age, in the 
Age Discrimination Act of 1975 (42 U.S.C. 6101, et seq.). They apply 
to all financial assistance and require flow down to subrecipients. 
For further information, see item d. under the heading 
``Nondiscrimination'' in appendix B to 32 CFR part 22.
    3. Prohibitions on discrimination on the basis of handicap, in 
section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794). They 
apply to all financial assistance and require flow down to 
subrecipients. For further information, see item e.1. under the 
heading ``Nondiscrimination'' in appendix B to 32 CFR part 22.
    4. Preferences for use of U.S.-flag air carriers in the 
International Air Transportation Fair Competitive Practices Act of 
1974 (49 U.S.C. 40118), which apply to uses of U.S. Government 
funds.

C. Other Assurances

    Additional requirements listed in appendix B to 32 CFR part 22 
may apply in certain circumstances, as follows:
    1. If construction work is to be done under a TIA or its 
subawards, it is subject to the prohibitions in Executive Order 
11246 on discrimination on the basis of race, color, religion, sex, 
or national origin. For further information, see item b. under the 
heading ``Nondiscrimination'' in appendix B to 32 CFR part 22.
    2. If the research involves human subjects or animals, it is 
subject to the requirements in item a. or b., respectively, under 
the heading ``Live organisms'' in appendix B to 32 CFR part 22.
    3. If the research involves actions that may affect the 
environment, it is subject to the National Environmental Policy Act, 
which is item b.1. under the heading ``Environmental Standards'' in 
appendix B to 32 CFR part 22. It also may be subject to one or more 
of the other requirements in items b.2 through b.6. under that 
heading, which concern flood-prone areas, coastal zones, coastal 
barriers, wild and scenic rivers, and underground sources of 
drinking water.
    4. If the project may impact a historic property, it is subject 
to the National Historic

[[Page 21519]]

Preservation Act of 1966 (16 U.S.C. 470, et seq.), as described 
under the heading ``National Historic Preservation'' in appendix B 
to 32 CFR part 22.

Appendix E to Part 37--What Provisions May a Participant Need To 
Include When Purchasing Goods or Services Under a TIA?

    A. As discussed in Sec. 37.705, you must inform recipients of 
any national policy requirements that flow down to their purchases 
of goods or services (e.g., supplies or equipment) under their TIAs. 
Note that purchases of goods or services differ from subawards, 
which are for substantive research program performance.
    B. Appendix A to 32 CFR part 34 lists seven national policy 
requirements that commonly apply to firms' purchases under grants or 
cooperative agreements. Of those seven, two that apply to all 
recipients' purchases under TIAs are:
    1. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352). A contractor 
submitting a bid to the recipient for a contract award of $100,000 
or more must file a certification with the recipient that it has not 
and will not use Federal appropriations for certain lobbying 
purposes. The contractor also must disclose any lobbying with non-
Federal funds that takes place in connection with obtaining any 
Federal award. For further details, see 32 CFR part 28, the DoD's 
codification of the Governmentwide common rule implementing this 
amendment.
    2. Debarment and suspension. Recipients may not make contract 
awards that exceed the simplified acquisition threshold (currently 
$100,000) and certain other contract awards may not be made to 
parties listed on the General Services Administration (GSA) ``List 
of Parties Excluded from Federal Procurement and Nonprocurement 
Programs. The GSA list contains the names of parties debarred, 
suspended, or otherwise excluded by agencies, and parties declared 
ineligible under statutory or regulatory authority other than 
Executive Orders 12549 (3 CFR, 1986 Comp., p. 189) and 12689 (3 CFR, 
1989 Comp., p. 235). For further details, see subparts A through E 
of 32 CFR part 25, which is the DoD's codification of the 
Governmentwide common rule implementing Executive Orders 12549 and 
12689.
    C. One other requirement applies only in cases where 
construction work is to be performed under the TIA with Federal 
funds or recipient funds counted toward required cost sharing:
    1. Equal Employment Opportunity. Although construction work 
should happen rarely under a TIA, the agreements officer in that 
case should inform the recipient that Department of Labor 
regulations at 41 CFR 60-1.4(b) prescribe a clause that must be 
incorporated into construction awards and subawards. Further details 
are provided in appendix B to part 22 of the DoDGARs (32 CFR part 
22), in section b. under the heading ``Nondiscrimination.''

[FR Doc. 02-10280 Filed 4-29-02; 8:45 am]
BILLING CODE 5001-08-P