[Federal Register Volume 69, Number 83 (Thursday, April 29, 2004)]
[Rules and Regulations]
[Pages 23418-23436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9671]


-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

Rural Housing Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1951 and 4284

RIN 0570-AA40


General Requirements for Cooperative Services Grant Programs, 
Value-Added Producer Grants, Agriculture Innovation Centers and Rural 
Cooperative Development Grants

AGENCY: Rural Business-Cooperative Service, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule implements new regulations for Value-Added 
producer grants (Value-Added Producer Grants) and a new demonstration 
program whereby agriculture innovation centers provide technical and 
other assistance to agricultural producers to help them establish 
businesses that produce and sell Value-Added agricultural commodities 
or products (Agriculture Innovation Centers). The Agricultural 
Innovation Center program is authorized under the Farm Security and 
Rural Investment Act of 2002 (Pub. L. 107-171) (2002 Farm Bill). The 
2002 Farm Bill also modified and extended the authority of the 
Secretary of the U.S. Department of Agriculture (Secretary) (USDA) to 
make Value-Added Producer Grants.
    This rule implements regulations in one central location to 
consolidate requirements that are common to all grant programs 
administered by Cooperative Services within the Rural Business-
Cooperative Service (RBS), thereby avoiding the necessity of repeating 
elements shared in common in each of the subparts dedicated to specific 
programs.
    This rule amends regulations to reduce the matching requirement 
required of certain institutions of higher education with respect to 
Rural Cooperative Development Grants from 25 percent to 5 percent and 
to adjust the scoring criteria to reflect this change.
    Finally, this rule amends regulations to add Value-Added Producer 
Grants and Agriculture Innovation Center Grants to the list of RBS 
programs covered by the servicing regulation in that part.

DATES: Effective Date: June 1, 2004.

FOR FURTHER INFORMATION CONTACT: Jim Haskell, Assistant Deputy 
Administrator, Rural Business-Cooperative Service, USDA, Stop 3250, 
Room 4016, 1400 Independence Ave., SW., Washington, DC 20250-3250, 
telephone (202) 720-8460, or internet e-mail [email protected].

SUPPLEMENTARY INFORMATION:

Classification

    This rule has been reviewed under Executive Order 12866 and has 
been determined to be a significant regulatory action by the Office of 
Management and Budget.

Programs Affected

    The Catalog of Federal Domestic Assistance Program numbers assigned 
to these programs are 10.352 (Value-Added Grants), 10.771 (Rural 
Cooperative Development Grants) and 10.776 (Agriculture Innovation 
Centers).

Program Administration

    These programs are administered through the Cooperative Services 
Program of the Rural Business-Cooperative Service Agency within the 
Rural Development mission area of USDA and delivered via the USDA Rural 
Development state directors.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act, USDA may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless the collection displays a currently 
valid OMB control number
    The Agency published a notice requesting comments on the collection 
requirements (approved under OMB control number 0570-0045) contained in 
this rule for the Agriculture Innovation Center Grant program 
concurrent with the publication of the proposed rule on June 13, 2003 
(68 FR 35321). No comments were received on the paperwork burden.
    The information collection requirements associated with Value-Added 
Producer Grants and Rural Development Cooperative Grants were approved 
under OMB control numbers 0570-0039 and 0570-0006, respectively.

[[Page 23419]]

Government Paperwork Elimination Act

    RBS is committed to compliance with the Government Paperwork 
Elimination Act, which requires Government agencies, in general, to 
provide the public the option of submitting information or transacting 
business electronically to the maximum extent possible.

Environmental Impact Statement

    It is the determination of the Secretary that this action is not a 
major Federal action significantly affecting the environment. 
Therefore, in accordance with the National Environmental Policy Act of 
1969, an Environmental Impact Statement is not required.

Executive Order 12988

    This rule has been reviewed in accordance with E.O. 12988, Civil 
Justice Reform. In accordance with this rule: (1) All state and local 
laws and regulations that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule; and 
(3) administrative proceedings in accordance with 7 CFR part 11 must be 
exhausted before bringing suit in court challenging action taken under 
this rule unless those regulations specifically allow bringing suit at 
an earlier time.

The Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on state, local, and tribal governments and 
the private sector. Under section 202 of the UMRA, USDA must prepare a 
written statement, including a cost benefit analysis, for proposed and 
final rules with ``Federal mandates'' that may result in expenditures 
to state, local or tribal governments, in the aggregate, or to the 
private sector, of $100 million or more in any one year. When such a 
statement is needed for a rule, section 205 of UMRA generally requires 
USDA to identify and consider a reasonable number of regulatory 
alternatives and adopt the least costly, more cost effective or least 
burdensome alternative that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of title II of the UMRA) for state, local, and tribal 
governments or the private sector. Therefore this rule is not subject 
to the requirements of sections 202 and 205 of UMRA.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), the undersigned has determined and certified by signature of this 
document that this rule will not have a significant economic impact on 
a substantial number of small entities. The Regulatory Flexibility Act 
is intended to encourage Federal agencies to utilize innovative 
administrative procedures in dealing with individuals, small 
businesses, small organizations, and small governmental bodies that 
would otherwise be unnecessarily adversely affected by Federal 
regulations. The provisions included in this rule will not impact a 
substantial number of small entities to a greater extent than large 
entities. Therefore, no regulatory flexibility analysis under the 
Regulatory Flexibility Act is necessary.

Executive Order 13132, Federalism

    The policies contained in this rule do not have any substantial 
direct effect on 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. Nor does this 
rule impose substantial direct compliance costs on state and local 
governments. This rule is intended to foster cooperation between the 
Federal Government and the states and local governments, and reduces, 
where possible, any regulatory burden imposed by the Federal Government 
that impedes the ability of states and local governments to solve 
pressing economic, social and physical problems in their state.

I. Background

    Section 6402 of the Farm Security and Rural Investment Act of 2002 
(Pub. L. 107-171) (2002 Farm Bill) authorized a new grant initiative to 
establish up to 15 agriculture innovation demonstration centers 
(Agriculture Innovation Centers or AICs) with the intent of fostering 
the ability of agricultural producers to reap the benefits of producing 
and marketing value-added products. Section 6401 of the 2002 Farm Bill 
expanded a value-added producer grant program initially established by 
section 231 of the Agricultural Risk Protection Act of 2000 (Pub. L. 
106-224). These two provisions of the 2002 Farm Bill are the primary 
subjects of this rulemaking.
    The Value-Added Producer Grant program was authorized in 2000. Over 
$57,000,000 in value-added producer grants have been awarded since this 
program was first authorized. This rule incorporates the broader 
standards for eligibility for future producer grants and reflects some 
of the lessons learned from the experiences of the U.S. Department of 
Agriculture in implementing this program over the past two years. For 
example, we have clarified that two separate types of grants are 
available, i.e., planning and working capital grants, with slight 
differences in the respective application requirements and evaluation 
criteria.
    The purposes for Value-Added Producer grants are primarily to 
support the development and implementation of business plans and 
marketing strategies for value-added products. These grants will be 
made directly to independent agricultural producers, eligible 
agricultural producer groups, farmer or rancher cooperatives, or 
majority-controlled producer-based business ventures. The 2002 Farm 
Bill added a new dimension to value-added efforts with the 
authorization of grants for a third value-added program, namely a 
demonstration program whereby the grant recipients are to be centers 
that provide technical assistance and marketing and development 
assistance to producers. The rule contemplates that the centers in 
question are not new buildings, per se, but may be research and 
resource centers operating under the umbrella of an established entity.
    The eligibility requirements for the Agriculture Innovation Centers 
authorized in section 6402 of the 2002 Farm Bill place an emphasis on 
the recipients' capabilities and a plan and board management that 
reflect the needs of the agricultural community in their state. Their 
mandate is to provide technical assistance for marketing and business 
development assistance to enable agricultural producers to produce 
value-added agricultural products.
    The Rural Business-Cooperative Service (RBS) published a notice in 
the Federal Register on June 13, 2003 of proposed program regulations 
for the Value-Added Producer Grant and Agricultural Innovation Center 
programs and notice of proposed changes to the existing program 
regulations for the Rural Cooperative Development Grant program (68 FR 
35321). We received comments from 153 entities. We considered all 
comments in developing this final rule. The comments and the Agency's 
responses are summarized below.

II. Program Descriptions

A. Value-Added Producer Grants

Value-Added Agricultural Product
    The term value-added agricultural product means any agricultural

[[Page 23420]]

commodity or product that has been changed, produced, or segregated 
such that the market for the product has expanded and where the greater 
portion of the revenue derived from the value-added activity accrues to 
the producer of the commodity or product.
Use of Grant Funds
    The purpose of this program is to enable producers of agricultural 
commodities to participate in the economic returns to be found in the 
value-added market. Grants are to be used to develop business plans and 
develop strategies for creating marketing opportunities. Grants may 
also be used for feasibility studies and to provide capital to 
establish alliances or business ventures that allow the producers of 
the value-added agricultural product to better compete in domestic and 
international markets.
    Grant funds may not be used for planning, repair, rehabilitation, 
acquisition, or construction of a building or a facility (including a 
processing facility), or for the purchase, rental, or installation of 
fixed equipment.
Eligibility
    Grants will be awarded only to independent producers, eligible 
agricultural producer groups, farmer or rancher cooperatives or 
majority-controlled producer-based business ventures. Independent 
producers include agricultural producers, steering committees of 
producers and producer-owned corporations and associations who have an 
ownership interest in the agricultural product to which incremental 
value will accrue as a result of the proposed project.
Matching Funds
    Grant recipients will provide matching non-Federal funds equal to 
the amount of the grant received. These matching funds must be expended 
in advance of grant funding, such that for every dollar of grant that 
is advanced, an equal amount of match funds shall have been funded 
prior to submitting the request for reimbursement.

B. Agriculture Innovation Centers

Use of Grant Funds
    Grant funds are to be used for a demonstration program whereby 
centers are established to provide agricultural producers with 
technical and business development assistance for establishing 
businesses producing and selling value-added agricultural products, 
assistance in marketing, market development, business planning, 
outreach and organizational and development assistance to increase the 
viability, growth and sustainability of value-added businesses.
    Grants may be used for the following purposes: applied research, 
consulting services, hiring of employees, the making of matching 
grants, legal services and other related costs of conducting the above 
activities. Funds for these purposes may not be used to plan, repair, 
rehabilitate, acquire, or construct a building or a facility (including 
a processing facility) or to purchase, rent, or install fixed 
equipment.
Eligibility
    A grant may be made to an entity that demonstrates the capacity and 
technical expertise to conduct the activities described above. In 
addition to the capacity factor, the entity must provide a plan with 
specific goals to be met, its technical or other expertise and support 
for the entity in the agricultural community. Also, the entity must 
demonstrate that adequate resources (in cash or in kind) are available, 
or have been committed for this purpose which will allow the grant 
recipient to achieve the goals established. Finally, the entity must 
have a board of directors such that there are representatives of each 
of the following groups on the board: (a) The two general agricultural 
organizations with the greatest number of members in the State in which 
the entity is located, (b) the applicable State department of 
agriculture and (c) entities representing the four highest grossing 
commodities produced in the State, determined on the basis of annual 
gross cash sales. Trade associations are eligible to apply.

III. Rural Cooperative Development Grants and Conforming Amendments

    Section 6015 of the 2002 Farm Bill reduced the match funding 
requirements for rural cooperative development grants imposed on 
certain institutions of higher learning from 25 percent to 5 percent. 
These institutions are defined as ``1994 Institutions'' and are listed 
by name in the Equity in Educational Land-Grant Status Act of 1994 (7 
U.S.C. 301 note). This rulemaking amends the regulation applicable to 
this grant program to provide for this targeted reduced match funding 
requirement.
    The amendments implemented for subpart F within 7 CFR part 4284 
conform the regulations for the rural cooperative development grant 
program with the newly implemented subpart A that consolidates 
provisions common to all grant programs administered by Cooperative 
Services within RBS.

IV. Comments on the Proposed Rule and Responses

    The following paragraphs summarize the major comments and Agency 
responses. The comments are grouped by the program to which they 
relate.

A. Comments on the General Requirements for Cooperative Services Grant 
Programs.

    Comment: Two persons requested clarification on the definition of a 
producer, including what level of ownership is required and threshold 
of production required.
    Response: Agree in part. We added the definition of an 
``Agricultural Producer'' in Sec.  4284.3. The definition states that 
farmers, ranchers, loggers, and fishermen are producers. Producers do 
not have to own the land, but they must be producing the product that 
has value added to it and they must have ownership of that product. 
That is, a logger, a fisherman, a wild herb gatherer, or a beef feeder 
may be considered a producer of logs, fish, wild herbs, or beef without 
owning all of the production assets. This definition will not include a 
threshold on the amount that has to be produced because production 
units and amounts vary widely among commodities.
    Comment: One commenter requested that the definition for 
``Agriculture Producer Group'' be modified to allow non-profit 
organizations without a producer majority of the board or membership to 
compete for the Value-Added Producer Grants and the Agriculture 
Innovation Center Grants.
    Response: No change. While we agree that there are some non-profit 
organizations with expertise in value-added business and cooperative 
development that work on behalf of independent producers, many other 
organizations with similar expertise actually work on behalf of their 
own organization or in some cases the benefit of non-agriculture 
producer businesses. To assure that the grant funds actually benefit 
producers, it is our opinion that the independent producers must have 
majority control of any entity receiving the money.
    Comment: One commenter asked that the definition of economic 
development be broadened to include social, economic, and environmental 
considerations.
    Response: No change. The three programs under this regulation--
Value-Added Producer Grants, Agriculture Innovation Centers, and Rural 
Cooperative Development Grants--are all rural business development 
programs. The authorizing legislation

[[Page 23421]]

does not include social or environmental considerations. Thus, the 
definition of economic development should only address the development 
of the economic base in rural areas.
    Comment: One commenter suggested that in Sec.  4284.3, the 
definition of ``Rural and rural area'' appears to prevent potential 
applicants who reside in rural areas from locating facilities in more 
heavily populated communities. The commenter suggested that grant 
applicants be allowed to locate rural-owned value-added facilities 
outside of rural areas when necessary due to sound business principles 
and infrastructure constraints without endangering their grant 
eligibility.
    Response: No change. The legislation authorizing the Rural 
Cooperative Development Grant program specifies that the grants are to 
be used to facilitate the creation or retention of jobs in rural areas. 
The Value-Added Producer Grant and the Agricultural Innovation Center 
Grant programs do not have the restriction of facilitating the creation 
or retention of jobs in rural areas. Therefore Rural Cooperative 
Development Grant facilities must be located in a rural area, but 
Value-Added Producer Grant and Agriculture Innovation Centers do not.
    Comment: Three commenters expressed confusion about whether using 
wind to produce energy is considered an agricultural product.
    Response: Agree. We have added language to Sec.  4284.3 to include 
using wind and hydro resources to produce energy on land that is farmed 
as a value-added activity.
    Comment: One commenter expressed confusion over matching fund 
requirements for the different programs and the fact that those match 
requirements are unreasonable.
    Response: No change. The matching funds requirements are specified 
in the authorizing legislation for each program. We have no authority 
to change those requirements. For all programs, the matching funds 
provided by the recipient must be expended for approved project costs 
in advance of federal funds.
    Comment: One commenter requested that we specify whether producer 
labor can be considered matching funds.
    Response: No change. Producer labor can be used as matching funds 
in certain cases. (See relevant sections of 7 CFR parts 3015 and 3019.)
    Comment: One commenter indicated that the distinction between Rural 
Cooperative Development Grants and Agricultural Innovation Centers was 
unclear.
    Response: No change. Section 4284.502 outlines how Rural 
Cooperative Development Grants will be used with further explanation of 
the use of the funds for the program explained in 4284.508. Section 
4284.1001 outlines the purpose of the Agriculture Innovation 
Demonstration Centers with further explanation of the use of the funds 
for the program explained in Sec.  4284.1008. It is our opinion that no 
further explanation is necessary.

B. Comments on the Value-Added Producer Grant (VAPG) Program

    Comment: One commenter recommended that the entire VAPG Program be 
discontinued.
    Response: No change. Under the Constitution, only Congress has the 
authority to end a legislated program.
    Comment: One commenter believed the definition of a producer 
excluded forest-based businesses that rely on public lands and those 
that do contract logging on private lands.
    Response: Agree in part. The authorizing legislation for the VAPG 
Program directs funds toward assisting agricultural producers, not 
manufacturers of agricultural products. We have expanded the definition 
of producer to include those who may not own the land, but do own the 
product that has value added to it. Thus, we believe ``log producers'' 
are eligible applicants under the revised definition.
    Comment: One commenter noted that the definition of Independent 
Producers regarding contract production and joint ownership appears 
contradictory to the Majority-Controlled Producer-Based Business 
Venture definition as proposed.
    Response: Agree in part. The definition is confusing. However, we 
do not consider producers who do not own the product produced to be 
independent. Therefore, we have modified the definition of 
``Independent Producers'' in Sec.  4284.3 to exclude producers who 
produce the agricultural product under contract for another entity, but 
do not own the product produced.
    Comment: One commenter questioned whether the proposed definition 
of ``Independent Producers'' included steering committees.
    Response: No change. We believe the definition of ``Independent 
Producers'' includes steering committees as defined in Sec.  4284.3, 
``'An independent producer can also be a steering committee composed of 
independent agricultural producers in the process of organizing an 
association to operate a value-added venture that will be owned and 
controlled by the independent producers supplying agricultural product 
to the market.''
    Comment: Two commenters noted that preventing applicants from using 
funds (including matching funds) for planning, repair, rehabilitation, 
acquisition, or construction of a building or facility, or for the 
purchase, rental, or installation of fixed equipment will created a 
significant barrier to promoting innovative partnerships, business-to-
business ventures or public-private initiatives.
    Response: No change. The authorizing legislation for the VAPG 
Program specifically prohibits the use of funds for planning, repair, 
rehabilitation, acquisition, or construction of a building or facility, 
or for the purchase, rental, or installation of fixed equipment.
    Comment: One commenter was concerned that the structure of the VAPG 
Program, the criteria for evaluation, the match requirements, and the 
prohibition on the purchase of equipment and building of new facilities 
make the program of little use to forest-based businesses in rural 
communities despite the fact that the definition of ``Agricultural 
Product'' includes forestry products.
    Response: No change. The match requirements and the prohibition on 
the purchase of equipment and the building of new facilities are 
contained in the authorizing legislation. We believe that the structure 
of the program and the evaluation criteria do not discriminate against 
forest-based business, but hold all types of businesses to the same 
standards.
    Comment: Two commenters suggested that grant applicants applying 
for working capital funds certify that they have a financial record 
keeping system in place that meets minimum accounting standards.
    Response: No change. Relevant sections of 7 CFR parts 3015 and 3019 
already address this issue.
    Comment: Two commenters noted that the proposed regulation did not 
include language limiting Majority-Controlled, Producer-Based Business 
Ventures to ten percent of the total funding for the program.
    Response: Agree. Section 6401 of the 2002 Farm Bill amends section 
231 of the Agricultural Risk Protection Act of 2000 to state in part, 
``The amount of grants provided majority-controlled producer-based 
business ventures under paragraph (1)(B) for a fiscal year may not 
exceed 10 percent of the amount of funds that are used to make grants 
for the fiscal year under this subsection.'' This limitation has been 
added to the language of the final regulation.

[[Page 23422]]

    Comments: Three commenters expressed confusion over how many grants 
an entity may apply for and receive.
    Response: Agree. These comments are partially addressed by Sec.  
4284.907(d) which states, ``No project may be the subject of more than 
one Planning Grant or more than one Working Capital Grant. The same 
project may, however, be awarded one Planning Grant and subsequently 
apply for and receive a Working Capital Grant.'' However, the Agency 
believes the same project should not receive more than one planning 
grant or more than one working capital grant. Projects receiving Value-
Added Producer Grants should be viable and sustainable. These grants 
are to assist the start of new ventures, not to sustain them. If a 
venture simultaneously needs more than one grant (either planning or 
working capital), it is not considered sustainable for purposes of this 
program. The Agency seeks to fund a broad diversity of projects and in 
so doing has determined that only one award per applicant per funding 
cycle is appropriate. The Agency believes a previously awarded 
applicant can apply for and receive another grant for a totally 
different project in a different funding cycle. A change to the final 
rule is included to reflect a project restriction of $500,000. This 
limitation applies to a project rather than a grantee and clarifying 
language has been added. See Sec.  4284.909.
    Comment: One commenter suggested that the restriction limiting 
funding to one project per applicant in proposed Sec.  4284.907(e) be 
deleted or modified to accommodate applicants with diverse membership 
subgroups and a strong capability of managing federal funds.
    Response: No change. We recognize that there are numerous potential 
applicants who could effectively manage several different projects. 
However, it is our policy to award grants to as many different 
recipients as possible to ensure that the maximum number of groups 
receive the opportunity to benefit from this program.
    Comment: One commenter asked that we specify a maximum number of 
days between the deadline for the grant application and the time of 
grantee notification.
    Response: No change. It is not possible for us to specify the 
number of days between the deadline for the grant application and the 
time of grantee notification because the volume and quality of 
applications is unknown for each funding cycle. It is our policy to 
conduct the review of the applications received and to notify grantees 
as quickly as possible.
    Comment: One commenter asked if the ``description of the task in 
detail'' is required to be duplicated because Sec.  4284.910 notes that 
``each of the proposal evaluation criteria referenced in the RFP must 
be addressed, specifically and individually in narrative form,'' while 
Sec.  4284.913 states that one must provide ``specific and detailed 
planning task descriptions.''
    Response: No change. We are asking for a narrative as part of the 
application and have detailed what items need to be in that narrative. 
At the same time the final rule provides information as to how that 
narrative will be evaluated. No duplication is required nor implied 
thus we feel no clarification is needed.
    Comment: One commenter expressed concern that entities applying for 
planning grants may not be fully formed or financed until after the 
feasibility of the business and marketing plans are demonstrated.
    Response: No change. The regulation provides for steering 
committees to be eligible applicants in order to accommodate 
organizations that are not fully formed.
    Comment: One commenter pointed out that being able to apply for 
grants more than once per year would be helpful because projects may be 
idle for months as applicants wait for the next application period.
    Response: No change. While we agree that multiple application 
periods per year would be helpful for applicants, we do not have the 
resources to properly administer the program more than once a year.
    Comment: One commenter suggested having small planning grants 
available year-round to cover the costs of preliminary feasibility work 
to screen out non-viable projects before spending any more time or 
money.
    Response: No change. The legislation that established this program 
does not allow for a set aside for small planning grants.
    Comment: One commenter suggested allowing reimbursement of project 
expenses incurred prior to the award of the grant or allowing the 
payment by the recipient of those expenses to be used as matching funds 
for the grant.
    Response: No change. Applicants may request reimbursement of pre-
award costs in accordance with applicable sections of 7 CFR parts 3015 
and 3019.
    Comment: One commenter suggested that ``substantial ranking points 
be given to projects that focus on solving marketing and distribution 
obstacles.''
    Response: No change. The authorizing legislation states what are 
considered eligible value-added activities in broad terms, but does not 
provide for preferences among those eligible activities. It is our 
policy to consider all eligible activities equally.
    Comment: One commenter expressed confusion about the eligibility of 
agricultural production.
    Response: Agree. We agree that the proposed regulation was 
confusing. Therefore, we have modified Sec.  4284.907(a) to drop the 
reference to agricultural products and to refer back to the specific 
definition in this rule. Agricultural production expenses may be an 
eligible use of funds if they are a part of the differentiated 
production or marketing as demonstrated in a business plan.
    Comment: One commenter requested that farmer and rancher 
cooperatives be able to utilize grants for existing as well as emerging 
markets.
    Response: No change. The authorizing legislation specifies that 
farmer and rancher cooperatives use grant funds for emerging markets 
only.
    Comment: Six commenters suggested that priority in the scoring of 
grant applications be given to the development of all biobased 
products, not just bioenergy.
    Response: No change. We have awarded points for proposals with 
substantive bioenergy components in the past because bioenergy was a 
Presidential initiative. In this regulation, however, the evaluation 
criteria in Sec.  4284.913 do not include any criteria for bioenergy. 
Rather, criterion number 8 indicates that we may award points in the 
future for proposals that focus on Presidential initiatives. Because 
Presidential initiatives can change over time, we will announce 
descriptions of the initiative(s) and the points to be awarded with the 
applicable NOFA. Thus, it is possible that the program could award 
extra points for all biobased products in the future. The VAPG program 
also allows up to five additional points to be awarded to a proposal by 
the Agency's Administrator to help accomplish Agency objectives such as 
implementing Presidential initiatives.
    Comment: 116 commenters recommended awarding additional points to 
proposals that focus on small- and medium-sized farms.
    Response: No change. The authorizing legislation for the VAPG 
program (the Agricultural Risk Protection Act of 2000 as amended by the 
2002 Farm Bill) does not give special consideration to any size, type, 
or class of producer and rancher, except in one area. Should the 
sustainability of small- and medium-sized farms and ranches become a

[[Page 23423]]

Presidential initiative, criterion number 8 can be changed to reflect 
this new emphasis. Also, the VAPG program allows up to five additional 
points to be awarded to a proposal by the Agency's Administrator to 
help accomplish Agency objectives, including the implementation of 
Presidential initiatives. Thus, if the promotion of small- and medium-
sized farms becomes a Presidential initiative, Administrator points 
could be awarded to proposals that focus on these farms and ranches. 
Also, of the four types of eligible applicants defined in the 
authorizing legislation, only independent producers are exempt from the 
``emerging markets'' requirement. Many small and medium-sized farms and 
ranchers are eligible as ``Independent Producers,'' and, thus, have one 
less condition to satisfy. Plus, evaluation criterion 6 (Amount 
Requested) awards greater points for the smaller grant dollar requests. 
Small- and medium-sized enterprises often have smaller grant requests 
and may take advantage of this criterion.
    Comment: Two commenters suggested we add language to the regulation 
concerning the eligibility of research for grant funds. One commenter 
suggested that we add language indicating grant funds may be used for 
research into the development of products while another commenter 
suggested we clearly note that research and development costs are not 
eligible uses of funds.
    Response: Agree. We have added language to Sec.  4284.10 clearly 
expressing that grant funds may not be used for research and 
development. There are many other grant programs that do support 
research and development, and we believe the primary focus of this 
program is marketing developed products.
    Comment: One commenter suggested we add points to proposals that 
bring value-added business opportunities to economically distressed 
rural areas and Indian reservations.
    Response: No change. The authorizing legislation does not target 
either of these two areas. However, should increasing business 
opportunities to economically distressed rural areas and Indian 
reservations become a Presidential initiative, criterion number 8 can 
be changed to reflect this new emphasis. Also, the VAPG program allows 
up to five additional points to be awarded to a proposal by the 
Agency's Administrator to help accomplish Agency objectives, including 
the implementation of Presidential initiatives. Thus, if increasing 
business opportunities to economically distressed rural areas and 
Indian reservations becomes a Presidential initiative, Administrator 
points could be awarded to proposals that focus on these activities.
    Comment: 116 commenters suggested adding language to the evaluation 
criteria to give more weight to those proposals that contribute to 
environmental health and sustainability.
    Response: No change. The authorizing legislation does not target 
this area, and we believe that a standard evaluation of environmental 
health and sustainability is not possible. Should environmental health 
and sustainability become a Presidential initiative, criterion number 8 
can be changed to reflect this new emphasis. Plus, the VAPG program 
allows up to five additional points to be awarded to a proposal by the 
Agency's Administrator to help accomplish Agency objectives such as 
implementing Presidential initiatives. Thus, if the promotion of 
environmental health and sustainability becomes a Presidential 
initiative, Administrator points could be awarded to proposals that 
focus on this activity.
    Comment: One commenter suggested limiting eligibility to 
cooperatives.
    Response: No change. The authorizing legislation specifically 
identifies the eligible entities for this program. We do not have the 
authority to restrict eligibility beyond what is authorized by 
Congress.
    Comment: One commenter noted that in Sec.  4284.3, there are 
definitions for both ``cooperatives'' and ``farmer cooperatives'' that 
could be mutually inconsistent.
    Response: Agree. We have removed the term ``Cooperative'' and 
revised the definition for ``Farmer or Rancher Cooperative'' to be 
specific to farmer or rancher-owned and controlled businesses from 
which benefits are derived and distributed equitably on the basis of 
use by each of the farmer or rancher owners. We have observed a trend 
in state cooperative incorporation law to allow more and more outside 
(non-farmer or non-rancher) investment in agricultural cooperatives. In 
one state, up to 85 percent of the members of agricultural cooperatives 
can be non-producers. The purpose of the value-added programs is to 
help agricultural producers, however, and we are of the view that 
program funding should be strictly targeted to recipients that meet the 
definition in this final rule.
    Comment: One commenter noted in Sec.  4284.3 that there is no 
definition for a feasibility study. The commenter expressed confusion 
about the difference between a feasibility study and feasibility 
analysis and suggested that definitions be provided.
    Response: No change. We do not believe there is a difference 
between feasibility analysis and conducting a feasibility study. Both 
terms describe the same activity, that that activity is an eligible use 
of grant funds.

C. Comments on the Agricultural Innovation Center (AIC) Program

    Comment: Six commenters suggested that the composition of the Board 
of Directors specified in Sec.  4284.1004 be modified to include 
additional or alternative members. Two additional commenters 
recommended that existing centers not be required to change their Board 
of Directors composition in order to be eligible for the grant.
    Response: No change. The authorizing legislation specifies the 
composition of the Board of Directors and does not provide for that 
composition to be modified or for any entity to be exempt from that 
requirement.
    Comment: Four commenters expressed confusion about the definition 
of a ``Center'' provided in Sec.  4284.1004 as well as the eligibility 
of existing centers.
    Response: No change. The definition of a ``Center'' provided in the 
regulation does not imply that existing entities that consider 
themselves to be agriculture innovation centers are ineligible to apply 
for this grant. Any entity that meets the eligibility criteria listed 
in Sec.  4284.1007 is eligible to apply for this grant.
    Comment: Two commenters noted that it was unclear whether scale 
production is an eligible use of grant funds.
    Response: Agree. We have made express provision for Scale 
Production Assessment studies as an eligible use of funds, where these 
studies look at a variety of plant sizes to determine which size is 
most efficient for the proposed value-added activity. Note that the 
eligible use does not refer to building new facilities--an activity 
explicitly prohibited by the authorizing legislation. We have added a 
definition of scale production assessments to Sec.  4284.1004.
    Comment: One commenter noted that he could not find any reference 
in the proposed rule to the maximum grant amount, the matching 
requirements, and the length of the grant period.
    Response: Agree. The authorizing legislation clearly states the 
maximum grant amount and Sec.  4284.1009 has been added to the final 
rule to reflect that maximum amount. The grant period will be addressed 
in the applicable grant agreement.
    Comment: One commenter suggested that trade associations, marketing

[[Page 23424]]

associations, and flexible manufacturing networks should be eligible 
for the grant.
    Response: No change. Section 4284.1007 defines the eligibility 
requirements for this grant. Any trade or marketing association 
controlled by producers is eligible if it defines a specific group of 
producers to be helped.
    Comment: Two commenters suggested modifying Sec.  4284.1008(d) to 
include education and training as eligible uses of grant funds.
    Response: No change. The authorizing legislation specifies that the 
agricultural producers to be provided are ``technical assistance, 
consisting of engineering services, applied research, scale production, 
and similar services, to enable the agricultural producers to establish 
businesses * * *,'' but does not allow for the more indirect help of 
education and training. Also, because education and training are funded 
by other sources, there is no need to include them as eligible uses in 
this program.
    Comment: One commenter expressed confusion about the statement in 
proposed Sec.  4284.1009(c)(5)(ix) that says, ``If the Center is not to 
be an independent legal entity, provide copies of the corporate 
governance documents that describe how members of the Board of 
Directors for the Center are to be determined.'' The commenter believed 
that we had failed to address the documentation needed by non-legal 
entities.
    Response: No change. An applicant must be a legal entity to apply 
for the grant. The statement in question is meant to distinguish 
between the documentation needed by Centers that are stand-alone 
entities (i.e., independent legal entities) and the documentation 
needed by Centers that are subsidiaries of another legal entity.
    Comment: Four commenters, in reference to proposed Sec.  4284.1012, 
suggested that preference should be given to organizations that can 
demonstrate expertise and ability to provide assistance as well as a 
proven track record of success in providing technical assistance.
    Response: No change. We believe the selection criteria ``ability to 
deliver,'' ``successful track record,'' and ``qualifications of 
personnel'' adequately address an organization's ability and experience 
in providing technical assistance and other producer services as well 
as its track record in providing those services.
    Comment: One commenter suggested that the following language be 
added to Sec.  4284.1012(b): ``and in reaching and serving the full 
range and diversity of agriculture within the State, including small 
and medium-sized farms and ranches, young and beginning farmers, and 
socially disadvantaged producers.'' Similarly, the commenter asked that 
the local support activity reflect special consideration for the same 
group of producers as well as a broad diversity of others.
    Response: No change. Because the authorizing legislation does not 
give special consideration to any size, type, or class of producer and 
rancher, it is our opinion that neither the applicant's track record, 
nor the local support record, can be based on any of these special 
considerations.
    Comment: Three commenters expressed concern that the evaluation 
criterion in Sec.  4284.1012(d) placed too much emphasis on in-house 
expertise.
    Response: No change. We recognize that no Center will be able to 
have 100 percent of the necessary expertise in-house. The Agency 
recognizes the value of contractors and the contribution they can make 
to rural development. Applicants will be rewarded if they can show they 
have qualified consultants on retainer. However, we believe it is 
important to have enough in-house expertise in technical assistance 
activities and administrative activities to ensure that all services 
are delivered effectively and efficiently, including those of 
contractors. By providing a greater reward to applicants who have a 
higher level of in-house expertise, we believe this will help increase 
the effective and efficient delivery of services.
    Comment: One commenter suggested that experience in forming farmer-
owned cooperatives and helping cooperatives develop business plans 
should be emphasized in the evaluation criteria.
    Response: No change. The focus of this program is not cooperative 
development, but rather assisting producers with producing and 
marketing value-added products. It is our position that the Centers 
should be able to provide assistance with whatever business model they 
and producers find to be most effective for each individual situation 
rather than encouraging one business model over another in all 
situations.
    Comment: Three commenters suggested that Centers be mandated to 
support the development of biobased products.
    Response: No change. It is our position that the Centers and the 
producers they assist should choose the products that they believe will 
be sustainable and profitable rather than have us dictate what products 
should be produced and marketed.

D. Comments on the Rural Cooperative Development Grant (RCDG) Program

    Comment: One commenter expressed concern about a perceived change 
in focus from a broad vision of cooperative development to a more 
limited technical scope. The commenter also suggested a decrease in 
focus on low income and minority people living in distressed rural 
areas.
    Response: No change. We believe there has been no change in the 
scope of the program. This program has always sought to support a 
variety of technical assistance activities in those centers that 
received funding. These include conducting feasibility analyses, 
developing business plans, conducting marketing studies, providing 
organizational advice, and conducting educational activities. We will 
continue to encourage centers funded under the revised regulation to 
offer a full array of technical assistance services. Also, the focus on 
low income and minorities in distressed areas has not changed. One of 
the selection criteria continues to be the level of commitment the 
applicant has to providing technical assistance to underserved and 
economically distressed areas.
    Comment: One commenter notes that a set aside for minority-owned 
and controlled centers is not mentioned in the proposed regulation.
    Response: The set aside for minority centers is not part of the 
authorizing legislation (the Consolidated Farm and Rural Development 
Act as amended by the 2002 Farm Bill). This set aside has been 
authorized by various annual appropriations legislation in the past. 
Because the set aside is not part of the program's authorizing 
legislation, it is not included in the regulation.
    Comment: One commenter noted an inconsistency between Sec.  
4284.502 and Sec.  4284.508. The policy section includes development of 
rural cooperatives, value-added processing businesses, and rural 
businesses. The section addressing use of grant funds includes only the 
development of rural cooperatives.
    Response: Agree. The focus of the RCDG Program is cooperative 
development, not general business development. We have added language 
to Sec.  4284.502 to clarify this focus.
    Comment: One commenter suggested that cooperative development 
centers should be required to have stakeholder representation on their 
governing boards. The commenter also suggested an independent survey of 
stakeholders to evaluate outcomes of Center activities and 
qualifications of the Centers.

[[Page 23425]]

    Response: Agree in part. The authorizing legislation has no 
requirement that Centers have boards and so we did not dictate the 
composition of the boards. We agree that a survey of stakeholders is a 
good idea and we will seriously consider conducting a survey. However, 
conducting the survey would be an Agency activity rather than a center 
activity, so it will not be addressed in the regulation.
    Comment: One commenter expressed concern that the limitation in 
Sec.  4284.509 restricting grants to one-year or less time periods does 
not support ongoing technical assistance. The commenter suggested that 
ongoing funding should be tied to evaluation of results by 
stakeholders.
    Response: No change. The program appropriations are made on an 
annual basis and future funding levels are unknown. Thus, it is our 
policy to fund one-year grant periods. Previous recipients must 
successfully demonstrate a proven track record and evidence of project 
completion through competition with other applicants in order to 
receive funding.
    Comment: Eleven commenters had concerns regarding the evaluation 
criteria of ``Future Support'' listed in Sec.  4284.513. The focus of 
these comments was that centers should not be rewarded for having plans 
for non-RCDG funding.
    Comment: Disagree. The RCDG Program is a competitive grant program, 
not an entitlement. Cooperative development centers compete with each 
other on an annual basis for these grant funds. Currently funded 
cooperative development centers are not assured funding in the 
following year. There have been a number of centers funded for one or 
two years and not funded the next year. Farmers and other rural 
residents, including underserved and minority groups, have been 
adversely affected in these situations. We believe that those centers 
who find other funding sources should be rewarded because they are 
better able to serve their customers in the event they do not receive 
RCDG funding. We have revised the Future Support criterion to better 
reflect our position on this issue.
    Comment: Twelve commenters suggested that the ``Amount Requested'' 
evaluation criterion listed in Sec.  4284.513 be removed.
    Response: Agree. The evaluation criterion has been eliminated.
    Comment: One commenter expressed concern that the RCDG Program does 
not provide incentives and support for cooperatives and centers who 
work together.
    Response: No change. The regulations do provide incentives for 
cooperatives to work together and for centers to help cooperatives do 
this. An applicant for an RCDG will receive more points in the Linkages 
evaluation criteria listed in Sec.  4284.513 if it demonstrates the 
ability to create horizontal and vertical linkages among businesses. 
The regulation does not discuss linkages among centers because they 
currently exist and are highly developed.
    Comment: One commenter requested that funds from other grant 
programs be allowed as matching funds.
    Response: No change. 7 CFR 3019.23(a)(5) states that matching funds 
shall not be ``paid by the Federal Government under another award 
except where authorized by Federal statute to be used for cost sharing 
or matching.''

List of Subjects

7 CFR Part 1951

    Grant programs--Housing and community development, Reporting 
requirements, Rural development.

7 CFR Part 4284

    Agricultural commodities, Agriculture innovation centers, 
Agricultural marketing research, Business and Industry, Grant 
programs--Housing and community development, Rural areas, Rural 
development, Value-added.

0
Accordingly, chapters XVIII and XLII, title 7, of the Code of Federal 
Regulations are amended as follows:

PART 1951--SERVICING AND COLLECTIONS

0
1. The authority citation for part 1951 continues to read as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1932 Note; 7 U.S.C. 1989; 31 
U.S.C. 3716; 42 U.S.C. 1480.

0
2. Revise Sec.  1951.201 to read as follows:

Subpart E--Servicing of Community and Direct Business Programs 
Loans and Grants


Sec.  1951.201  Purposes.

    This subpart prescribes the Rural Development mission area 
policies, authorizations and procedures for servicing the following 
programs: Water and Waste Disposal System loans and grants, Community 
Facility loans and grants, Rural Business Enterprise/Television 
Demonstration grants; loans for Grazing and other shift-in-land-use 
projects; Association Recreation loans; Association Irrigation and 
Drainage loans; Watershed loans and advances; Resource Conservation and 
Development loans; Direct Business loans; Economic Opportunity 
Cooperative loans; Rural Renewal loans; Energy Impacted Area 
Development Assistance Program grants; National Nonprofit Corporation 
grants; Water and Waste Disposal Technical Assistance and Training 
grants; Emergency Community Water Assistance grants; System for 
Delivery of Certain Rural Development Programs panel grants; section 
306C WWD loans and grants; and, in part 4284 of this title, Rural and 
Cooperative Development Grants, Value-Added Producer Grants and 
Agriculture Innovation Center Grants. Rural Development State Offices 
act on behalf of the Rural Utilities Service, the Rural Business-
Cooperative Service and the Farm Service Agency as to loan and grant 
programs formerly administered by the Farmers Home Administration and 
the Rural Development Administration. Loans sold without insurance to 
the private sector will be serviced in the private sector and will not 
be serviced under this subpart. The provisions of this subpart are not 
applicable to such loans. Future changes to this Subpart will not be 
made applicable to such loans.

PART 4284--GRANTS

0
3. The authority citation for part 4284 is revised to read as follows:

    Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.

    Subpart F also issued under 7 U.S.C 1932(e).
    Subpart G also issued under 7 U.S.C 1926(a)(11).
    Subpart J also issued under 7 U.S.C 1621 note.
    Subpart K also issued under 7 U.S.C. 1621 note.


0
4. Subpart A of part 4284, consisting of Sec. Sec.  4284.1 through 
4284.100 is added to read as follows:

Subpart A--General Requirements for Cooperative Services Grant 
Programs

Sec.
4284.1 Purpose.
4284.2 Policy.
4284.3 Definitions.
4284.4 Appeals.
4284.5 [Reserved]
4284.6 Applicant eligibility.
4284.7 Electronic submission.
4284.8 Grant approval and obligation of funds.
4284.9 Grant disbursement.
4284.10 Ineligible grant purposes.
4284.11 Award requirements.
4284.12 Reporting requirements.
4284.13 Confidentiality of reports.
4284.14 Grant servicing.
4284.15 Performance reviews.
4284.16 Other considerations.
4284.17 Member delegate clause.
4284.18 Audit requirements.

[[Page 23426]]

4284.19 Programmatic changes.
4284.20-4284.99 [Reserved]
4284.100 OMB control number.


Sec.  4284.1  Purpose.

    The purpose of this subpart is to set forth definitions and 
requirements which are common to all grant programs set forth in this 
part administered by Cooperative Services within the Rural Business-
Cooperative Service (RBS). Programs administered by the Business 
Programs within RBS are not affected by this subpart.


Sec.  4284.2  Policy.

    It is the policy of Cooperative Services to administer grant 
programs as uniformly as possible to minimize unnecessary 
inconsistencies in the administration of the grant programs provided 
for in this part. The specific provisions or definitions provided in 
the subparts that are specific to Cooperative Services are supplemental 
to these general provisions. Where a specific program provision is 
expressly different from what is provided in this subpart, the program 
specific subpart shall prevail.


Sec.  4284.3  Definitions.

    Agency--Rural Business-Cooperative Service (RBS), an agency of the 
United States Department of Agriculture (USDA), or a successor agency.
    Agricultural Producer--Persons or entities, including farmers, 
ranchers, loggers, agricultural harvesters and fishermen, that engage 
in the production or harvesting of an agricultural product. Producers 
may or may not own the land or other production resources, but must 
have majority ownership interest in the agricultural product to which 
Value-Added is to accrue as a result of the project. Examples of 
agricultural producers include: a logger who has a majority interest in 
the logs harvested that are then converted to boards, a fisherman that 
has a majority interest in the fish caught that are then smoked, a wild 
herb gatherer that has a majority interest in the gathered herbs that 
are then converted into essential oils, a cattle feeder that has a 
majority interest in the cattle that are fed, slaughtered and sold as 
boxed beef, and a corn grower that has a majority interest in the corn 
produced that is then converted into corn meal.
    Agriculture Producer Group--An organization that represents 
Independent Producers, whose mission includes working on behalf of 
Independent Producers and the majority of whose membership and board of 
directors is comprised of Independent Producers.
    Agricultural Product--Plant and animal products and their by-
products to include forestry products, fish and seafood products.
    Cooperative Services--The office within RBS, and its successor 
organization, that administers programs authorized by the Cooperative 
Marketing Act of 1926 (7 U.S.C. 451 et seq.) and such other programs so 
identified in USDA regulations.
    Economic development--The economic growth of an area as evidenced 
by increase in total income, employment opportunities, decreased out-
migration of population, value of production, increased diversification 
of industry, higher labor force participation rates, increased duration 
of employment, higher wage levels, or gains in other measurements of 
economic activity, such as land values.
    Emerging Market--A new or developing market for the applicant, 
which the applicant has not traditionally supplied.
    Farmer or Rancher Cooperative--A farmer or rancher-owned and 
controlled business from which benefits are derived and distributed 
equitably on the basis of use by each of the farmer or rancher owners.
    Fixed equipment--Tangible personal property used in trade or 
business that would ordinarily be subject to depreciation under the 
Internal Revenue Code, including processing equipment, but not 
including property for equipping and furnishing offices such as 
computers, office equipment, desks or file cabinets.
    Independent Producers--Agricultural producers, individuals or 
entities (including for profit and not for profit corporations, LLCs, 
partnerships or LLPs), where the entities are solely owned or 
controlled by Agricultural Producers who own a majority ownership 
interest in the agricultural product that is produced. An independent 
producer can also be a steering committee composed of independent 
producers in the process of organizing an association to operate a 
Value-Added venture that will be owned and controlled by the 
independent producers supplying the agricultural product to the market. 
Independent Producers must produce and own the agricultural product to 
which value is being added. Producers who produce the agricultural 
product under contract for another entity but do not own the product 
produced are not independent producers.
    Majority-Controlled Producer-Based Business Venture--A venture 
where more than 50% of the ownership and control is held by Independent 
Producers, or, partnerships, LLCs, LLPs, corporations or cooperatives 
that are themselves 100 percent owned and controlled by Independent 
Producers.
    Matching Funds--Cash or confirmed funding commitments from non-
Federal sources unless otherwise provided by law. Unless otherwise 
provided, matching funds must be at least equal to the grant amount. 
Unless otherwise provided, in-kind contributions that conform to the 
provisions of 7 CFR 3015.50 and 7 CFR 3019.23, as applicable, can be 
used as matching funds. Examples of in-kind contributions include 
volunteer services furnished by professional and technical personnel, 
donated supplies and equipment, and donated office space. Matching 
funds must be provided in advance of grant funding, such that for every 
dollar of grant that is advanced, not less than an equal amount of 
match funds shall have been funded prior to submitting the request for 
reimbursement. Matching funds are subject to the same use restrictions 
as grant funds. Funds used for an ineligible purpose will not be 
considered matching funds.
    National Office--USDA RBS headquarters in Washington, DC.
    Nonprofit institution--Any organization or institution, including 
an accredited institution of higher education, no part of the net 
earnings of which may inure, to the benefit of any private shareholder 
or individual.
    Product segregation--Physical separation of a product or commodity 
from similar products. Physical separation requires a barrier to 
prevent mixing with the similar product.
    Public body--Any state, county, city, township, incorporated town 
or village, borough, authority, district, economic development 
authority, or Indian tribe on federal or state reservations or other 
federally recognized Indian tribe in rural areas.
    RFP--Request for Proposals.
    Rural and rural area--includes all the territory of a state that is 
not within the outer boundary of any city or town having a population 
of 50,000 or more and the urbanized area contiguous and adjacent to 
such city or town, as defined by the U.S. Bureau of the Census using 
the latest decennial census of the United States.
    Rural Development--A mission area within the USDA consisting of the 
Office of Under Secretary for Rural Development, Office of Community 
Development, Rural Business-Cooperative Service, Rural Housing Service 
and Rural Utilities Service and their successors.

[[Page 23427]]

    State--includes each of the several States, the Commonwealth of 
Puerto Rico, the Virgin Islands of the United States, Guam, American 
Samoa, the Commonwealth of the Northern Mariana Islands, and, as may be 
determined by the Secretary to be feasible, appropriate and lawful, the 
Freely Associated States and the Federated States of Micronesia.
    State Office--USDA Rural Development offices located in each state.
    Value-Added--The incremental value that is realized by the producer 
from an agricultural commodity or product as the result of a change in 
its physical state, differentiated production or marketing, as 
demonstrated in a business plan, or Product segregation. Also, the 
economic benefit realized from the production of farm or ranch-based 
renewable energy. Incremental value may be realized by the producer as 
a result of either an increase in value to buyers or the expansion of 
the overall market for the product. Examples include milling wheat into 
flour, slaughtering livestock or poultry, making strawberries into jam, 
the marketing of organic products, an identity-preserved marketing 
system, wind or hydro power produced on land that is farmed and 
collecting and converting methane from animal waste to generate energy. 
Identity-preserved marketing systems include labeling that identifies 
how the product was produced and by whom.


Sec.  4284.4  Appeals.

    Any appealable adverse decision made by the Agency may be appealed 
in accordance with USDA appeal regulations found at 7 CFR part 11 and 
subpart B of part 1900. If the Agency makes a determination that a 
decision is not appealable, a participant may request that it be 
reviewed by the Director of the National Appeals Division.


Sec.  4284.5  [Reserved]


Sec.  4284.6  Applicant eligibility.

    An outstanding judgment obtained against an applicant by the United 
States in a Federal Court (other than in the United States Tax Court), 
which has been recorded, shall cause the applicant to be ineligible to 
receive any assistance until the judgment is paid in full or otherwise 
satisfied. RBS grant funds may not be used to satisfy the judgment.


Sec.  4284.7  Electronic submission.

    Applicants and grant awardees are encouraged, but not required, to 
submit applications and reports in electronic form as prescribed in 
requests for proposals issued by USDA and in the applicable grant 
agreements.


Sec.  4284.8  Grant approval and obligation of funds.

    The following statement will be entered in the comment section of 
the Request for Obligation of Funds, which must be signed by the 
grantee:

    The grantee certifies that it is in compliance with and will 
continue to comply with all applicable laws, regulations, Executive 
Orders and other generally applicable requirements, including those 
contained in 7 CFR part 4284 and 7 CFR parts 3015, 3016, 3017, 3018, 
3019 and 3052 in effect on the date of grant approval, and the 
approved Letter of Conditions.

Sec.  4284.9  Grant disbursement.

    The Agency will determine, based on 7 CFR parts 3015, 3016 and 
3019, as applicable, whether disbursement of a grant will be by advance 
or reimbursement. The Agency may limit the frequency in which a Request 
for Advance or Reimbursement may be submitted.


Sec.  4284.10  Ineligible grant purposes.

    Grant funds may not be used to:
    (a) Duplicate current services or replace or substitute support 
previously provided. If the current service is inadequate, however, 
grant funds may be used to expand the level of effort or services 
beyond what is currently being provided;
    (b) Pay costs of preparing the application package for funding 
under this program;
    (c) Pay costs of the project incurred prior to the date of grant 
approval;
    (d) Fund political activities;
    (e) Pay for assistance to any private business enterprise which 
does not have a least 51 percent ownership by those who are either 
citizens of the United States or reside in the United States after 
being legally admitted for permanent residence;
    (f) Pay any judgment or debt owed to the United States;
    (g) Plan, repair, rehabilitate, acquire, or construct a building or 
facility (including a processing facility);
    (h) Purchase, rent or install Fixed Equipment;
    (i) Pay for the repair of privately owned vehicles; or
    (j) Fund research and development.


Sec.  4284.11  Award requirements.

    In addition to specific grant requirements, all approved applicants 
will be required to do the following:
    (a) Enter into a grant agreement with USDA in form and substance 
similar to the form of agreement as may be published within or as an 
appendix to the applicable RFP;
    (b) Submit a feasibility study and business plan showing the 
viability of the venture, if any Federal grant and matching funds are 
to be used as working capital;
    (c) Use ``Request for Advance or Reimbursement'' to request 
advances or reimbursements, as applicable, but not more frequently than 
once a month;
    (d) Maintain a financial management system that is acceptable to 
the Agency; and
    (e) Collect and maintain data on race, sex and national origin of 
the beneficiaries of the project.


Sec.  4284.12  Reporting requirements.

    Grantees must submit the following to USDA:
    (a) A ``Financial Status Report'' listing expenditures according to 
agreed upon budget categories, on a semi-annual basis. Reporting 
periods end each March 31 and September 30. Reports are due 30 days 
after the reporting period ends.
    (b) Semi-annual performance reports that compare accomplishments to 
the objectives stated in the proposal. Identify all tasks completed to 
date and provide documentation supporting the reported results. If the 
original schedule provided in the work plan is not being met, the 
report should discuss the problems or delays that may affect completion 
of the project. Objectives for the next reporting period should be 
listed. Compliance with any special condition on the use of award funds 
should be discussed. Reports are due as provided in paragraph (a) of 
this section. The supporting documentation for completed tasks include, 
but are not limited to, feasibility studies, marketing plans, business 
plans, articles of incorporation and bylaws and an accounting of how 
working capital funds were spent.
    (c) Final project performance reports, inclusive of supporting 
documentation. The final performance report is due within 30 days of 
the completion of the project.


Sec.  4284.13  Confidentiality of reports.

    All reports submitted to the Agency will be held in confidence to 
the extent permitted by law.


Sec.  4284.14  Grant servicing.

    Grants will be serviced in accordance with 7 CFR part 1951, 
subparts E and O. Grantees will permit periodic inspection of the 
program operations by a representative of the Agency. All non-
confidential information resulting from the Grantee's activities shall 
be made available to the general public on an equal basis.

[[Page 23428]]

Sec.  4284.15  Performance reviews.

    (a) USDA will incorporate performance criteria in grant award 
documentation and will regularly evaluate the progress and performance 
of grant awardees.
    (b) USDA may elect to suspend or terminate a grant in all or part, 
or funding of a particular workplan activity, but nevertheless fund the 
remainder of a request for an advance or reimbursement, as applicable, 
where USDA has determined:
    (1) That the grantee or subrecipient of grant funds has 
demonstrated insufficient progress in complying with the terms of the 
grant agreement;
    (2) There is reason to believe that other sources of joint funding 
have not been or will not be forthcoming on a timely basis; or
    (3) Such other cause as USDA identifies in writing to the grantee 
(including but not limited to the use of Federal grant funds for 
ineligible purposes).


Sec.  4284.16  Other considerations.

    (a) Environmental review. All grants made under this subpart are 
subject to the requirements of 7 CFR part 1940, subpart G. Applications 
for technical assistance or planning projects are generally excluded 
from the environmental review process by Sec.  1940.333, provided the 
assistance is not related to the development of a specific site. 
Applicants for grant funds must consider and document within their 
plans the important environmental factors within the planning area and 
the potential environmental impacts of the plan on the planning area, 
as well as the alternative planning strategies that were reviewed.
    (b) Civil rights. All grants made under this subpart are subject to 
the requirements of title VI of the Civil Rights Act of 1964, which 
prohibits discrimination on the basis of race, color and national 
origin as outlined in 7 CFR part 1901, subpart E. In addition, the 
grants made under this subpart are subject to the requirements of 
section 504 of the Rehabilitation Act of 1973, as amended, which 
prohibits discrimination on the basis of disability; the requirements 
of the Age Discrimination Act of 1975, which prohibits discrimination 
on the basis of age; and title III of the Americans with Disabilities 
Act, which prohibits discrimination on the basis of disability by 
private entities in places of public accommodations. This program will 
also be administered in accordance with all other applicable civil 
rights law.
    (c) Other USDA regulations. The grant programs under this part are 
subject to the provisions of the following regulations, as applicable:
    (1) 7 CFR part 3015, Uniform Federal Assistance Regulations;
    (2) 7 CFR part 3016, Uniform Administrative Requirements for Grants 
and Cooperative Agreements to State and Local Governments;
    (3) 7 CFR part 3017, Governmentwide Debarment and Suspension 
(nonprocurement) and Governmentwide Requirements for Drug-Free 
Workplace (Grants);
    (4) 7 CFR part 3018, New Restrictions on Lobbying;
    (5) 7 CFR part 3019, Uniform Administrative Requirements for Grants 
and Agreements with Institutions of Higher Education, Hospitals and 
Other Non-profit Organizations; and
    (6) 7 CFR part 3052, Audits of States, Local Governments and Non-
profit Organizations.


Sec.  4284.17  Member delegate clause.

    No Member of Congress shall be admitted to any share or part of a 
grant program or any benefit that may arise there from, but this 
provision shall not be construed to bar as a contractor under a grant a 
publicly held corporation whose ownership might include a Member of 
Congress.


Sec.  4284.18  Audit requirements.

    Grantees must comply with the audit requirements of 7 CFR part 
3052. The audit requirements apply to the years in which grant funds 
are received and years in which work is accomplished using grant funds.


Sec.  4284.19  Programmatic changes.

    The Grantee shall obtain prior approval for any change to the scope 
or objectives of the approved project. Failure to obtain prior approval 
of changes to the scope of work or budget may result in suspension, 
termination and recovery of grant funds.


Sec. Sec.  4284.20--4284.99  [Reserved]


Sec.  4284.100  OMB control number.

    The information collection requirements contained in this 
regulation have been approved by the Office of Management and Budget 
(OMB) and have been assigned OMB control number 0570-0045.

0
5. Subpart F of part 4284, consisting of Sec. Sec.  4284.501 through 
4284.600 is revised to read as follows:

Subpart F--Rural Cooperative Development Grants

Sec.
4284.501 Purpose.
4284.502 Policy.
4284.503 Program administration
4284.504 Definitions.
4284.505-4284.506 [Reserved]
4284.507 Eligibility for grant assistance.
4284.508 Use of grant funds.
4284.509 Limitations on grants.
4284.510 Application processing.
4284.511 Evaluation screening.
4284.512 Evaluation process.
4284.513 Evaluation criteria and weights.
4284.514 Grant closing.
4284.515-4284.599 [Reserved]
4284.600 OMB control number.


Sec.  4284.501  Purpose.

    This subpart outlines the Agency's polices and procedures for 
making grants for cooperative development in rural areas.


Sec.  4284.502  Policy.

    Rural cooperative development grants will be used to facilitate the 
creation or retention of jobs in rural areas through the development of 
new rural cooperatives, Value-Added processing and rural businesses.


Sec.  4284.503  Program administration.

    The rural cooperative development grant program is administered by 
Cooperative Services within the Agency.


Sec.  4284.504  Definitions.

    Center--The entity established or operated by the grantee for rural 
cooperative development. It may or may not be an independent legal 
entity separate from the grantee.
    Cooperative development--The startup, expansion or operational 
improvement of a cooperative to promote development in rural areas of 
services and products, processes that can be used in the marketing of 
products, or enterprises that create Value-Added to farm products 
through processing or marketing activities. Development activities may 
include, but are not limited to, technical assistance, research 
services, educational services and advisory services. Operational 
improvement includes making the cooperative more efficient or better 
managed.
    1994 Institution--means a college identified as such for purposes 
of the Equity in Educational Land-Grant Status Act of 1994 (7 U.S.C. 
301 note). Contact the Agency for a list of currently eligible 
colleges.
    Project--A planned undertaking by a Center that utilizes the funds 
provided to it to promote economic development in rural areas through 
the creation and enhancement of cooperatives.


Sec.  4284.505-4284.506  [Reserved]


Sec.  4284.507  Eligibility for grant assistance.

    Grants may be made to Nonprofit corporations and institutions of 
higher

[[Page 23429]]

education. Grants may not be made to Public bodies.


Sec.  4284.508  Use of grant funds.

    Grant funds may be used to pay up to 75 percent (95 percent where 
the grantee is a 1994 Institution) of the cost of establishing and 
operating centers for rural cooperative development. Matching funds 
contributed by the applicant may include a loan from another federal 
source. Grant funds may be used for, but are not limited to, providing 
the following to individuals, cooperatives, small businesses and other 
similar entities in rural areas served by the Center:
    (a) Applied research, feasibility, environmental and other studies 
that may be useful for the purpose of cooperative development.
    (b) Collection, interpretation and dissemination of principles, 
facts, technical knowledge, or other information for the purpose of 
cooperative development.
    (c) Providing training and instruction for the purpose of 
cooperative development.
    (d) Providing loans and grants for the purpose of cooperative 
development in accordance with the subpart.
    (e) Providing technical assistance, research services and advisory 
services for the purpose of cooperative development.


Sec.  4284.509  Limitations on grants.

    Grants made pursuant to this subpart shall be for one year or less.


Sec.  4284.510  Application processing.

    (a) Applications. USDA will solicit applications on a competitive 
basis by publication of one or more Requests for Proposals (RFPs). 
Unless otherwise specified in the applicable RFP, applicants must file 
an original and one hard copy of the required forms and a proposal.
    (b) Required forms. The following forms must be completed, signed 
and submitted as part of the application package. Other forms may be 
required. This will be published in the applicable RFP.
    (1) ``Application for Federal Assistance''
    (2) ``Budget Information--Non-Construction Programs''
    (3) ``Assurances--Non-Construction Programs''
    (c) Proposal. Each proposal must contain the following elements. 
Additional elements may be published in the applicable RFP.
    (1) Title Page.
    (2) Table of Contents.
    (3) Executive Summary. A summary of the proposal should briefly 
describe the Center, including goals and tasks to be accomplished, the 
amount requested, how the work will be performed and whether 
organizational staff, consultants or contractors will be used.
    (4) Eligibility. A detailed discussion describing how the applicant 
meets the eligibility requirements.
    (5) Proposal Narrative. The narrative portion of the proposal must 
include, but is not limited to, the following:
    (i) Project Title. The title of the proposed project must be brief, 
not to exceed 75 characters, yet describe the essentials of the 
project.
    (ii) Information Sheet. A separate one-page information sheet 
listing each of the evaluation criteria referenced in the RFP, followed 
by the page numbers of all relevant material and documentation 
contained in the proposal that address or support the criteria.
    (iii) Goals of the Project. This section must include the 
following:
    (A) A provision that substantiates that the Center will effectively 
serve rural areas in the United States;
    (B) A provision that the primary objective of the Center will be to 
improve the economic condition of rural areas through cooperative 
development;
    (C) A description of the contributions that the proposed activities 
are likely to make to the improvement of the economic conditions of the 
rural areas for which the Center will provide services.
    (D) Provisions that the Center, in carrying out the activities, 
will seek, where appropriate, the advice, participation, expertise, and 
assistance of representatives of business, industry, educational 
institutions, the Federal Government, and State and local governments.
    (iv) Work Plan. Applicants must discuss the specific tasks to be 
completed using grant and matching funds. The work plan should show how 
customers will be identified, key personnel to be involved, and the 
evaluation methods to be used to determine the success of specific 
tasks and overall objectives of Center operations. The budget must 
present a breakdown of the estimated costs associated with cooperative 
development activities as well as the operation of the Center and 
allocate these costs to each of the tasks to be undertaken. Matching 
funds as well as grant funds must be accounted for in the budget.
    (v) Performance Evaluation Criteria. Performance criteria suggested 
by the applicant for incorporation in the grant award in the event the 
proposal receives grant funding under this subpart. These suggested 
criteria are not binding on USDA.
    (vi) Undertakings. The applicant must expressly undertake to do the 
following:
    (A) Take all practicable steps to develop continuing sources of 
financial support for the Center, particularly from sources in the 
private sector;
    (B) Make arrangements for the activities by the nonprofit 
institution operating the Center to be monitored and evaluated; and
    (C) Provide an accounting for the money received by the grantee 
under this subpart.
    (vii) Delivery of Cooperative development assistance. The applicant 
must describe its previous accomplishments and outcomes in Cooperative 
development activities and/or its potential for effective delivery of 
Cooperative development services to rural areas. The applicant should 
also describe the type(s) of assistance to be provided, the expected 
impacts of that assistance, the sustainability of cooperative 
organizations receiving the assistance, and the transferability of its 
Cooperative development strategy and focus to other areas of the U.S.
    (viii) Qualifications of Personnel. Applicants must describe the 
qualifications of personnel expected to perform key center tasks, and 
whether these personnel are to be full/part-time Center employees or 
contract personnel. Those personnel having a track record of positive 
solutions for complex cooperative development or marketing problems, or 
those with a record of conducting feasibility studies that later proved 
to be accurate, business planning, marketing analysis, or other 
activities relevant to the Center's success should be highlighted.
    (ix) Support and commitments. Applicants must describe the level of 
support and commitment in the community for the proposed Center and the 
services it would provide. Plans for coordinating with other 
developmental organizations in the proposed service area, or with state 
and local government institutions should be included. Letters 
supporting cooperation and coordination from potential local customers 
should be provided.
    (x) Future support. Applicants should describe their vision for 
Center operations beyond the first year, including issues such as 
sources and uses of alternative funding; reliance on Federal, state, 
and local grants; and the use of in-house personnel for providing 
services versus contracting out for that expertise. To the extent 
possible, applicants should document future funding sources that will 
help achieve long-term sustainability of the Center.

[[Page 23430]]

    (xi) Evaluation criteria. Each of the evaluation criteria 
referenced in the RFP must be specifically and individually addressed 
in narrative form.
    (6) Verification of Matching Funds. Applicants must provide a 
budget to support the work plan showing all sources and uses of funds 
during the project period. Applicants will be required to verify 
matching funds, both cash and in-kind. Sufficient information should be 
included such that USDA can verify all representations.
    (7) Certification. Applicants must certify that matching funds will 
be available at the same time grant funds are anticipated to be spent 
and that matching funds will be spent in advance of grant funding, such 
that for every dollar of grant that is advanced, not less than an equal 
amount of match funds will have been funded prior to submitting the 
request for advance.


Sec.  4284.511  Evaluation screening.

    The Agency will conduct an initial screening of all proposals to 
determine whether the applicant is eligible and whether the application 
is complete and sufficiently responsive to the requirements set forth 
in the applicable RFP so as to allow for an informed review. Incomplete 
or non-responsive applications will not be evaluated further. 
Applicants may revise their applications and re-submit them prior to 
the published deadline if there is sufficient time to do so.


Sec.  4284.512  Evaluation process.

    (a) Applications will be evaluated by qualified reviewers appointed 
by the Agency.
    (b) After all proposals have been evaluated using the evaluation 
criteria and scored in accordance with the point allocation specified 
in the applicable RFP, the Agency will present to the Administrator of 
RBS a list of all applications in rank order, together with funding 
level recommendations.


Sec.  4284.513  Evaluation criteria and weights.

    Unless supplemented in a RFP, the criteria listed in this section 
will be used to evaluate grants under this subpart. Preference will be 
given to items in paragraphs (a) through (f) of this section. The 
distribution of points to be awarded per criterion will be identified 
in the applicable RFP.
    (a) Administrative capabilities. The application will be evaluated 
to determine whether the subject Center has a track record of 
administering a nationally coordinated, regional or state-wide operated 
project. Centers that have capable financial systems and audit 
controls, personnel and program administration performance measures and 
clear rules of governance will receive more points than those not 
evidencing this capacity.
    (b) Technical assistance and other services. The Agency will 
evaluate the applicant's demonstrated expertise in providing technical 
assistance in Rural areas.
    (c) Economic development. The Agency will evaluate the applicant's 
demonstrated ability to assist in the retention of businesses, 
facilitate the establishment of cooperatives and new cooperative 
approaches and generate employment opportunities that will improve the 
economic conditions of rural areas.
    (d) Linkages. The Agency will evaluate the applicant's demonstrated 
ability to create horizontal linkages among businesses within and among 
various sectors in rural areas of the United States and vertical 
linkages to domestic and international markets.
    (e) Commitment. The Agency will evaluate the applicant's commitment 
to providing technical assistance and other services to underserved and 
economically distressed areas in rural areas of the United States.
    (f) Matching Funds. All applicants must demonstrate Matching Funds 
equal to at least 25 percent (5 percent for 1994 Institutions) of the 
grant amount requested. Applications exceeding these minimum commitment 
levels will receive more points.
    (g) Delivery. The Agency will evaluate whether the Center has a 
track record in providing technical assistance in rural areas and 
accomplishing effective outcomes in cooperative development. The 
Center's potential for delivering effective cooperative development 
assistance, the expected effects of that assistance, the sustainability 
of cooperative organizations receiving the assistance, and the 
transferability of the Center's cooperative development strategy and 
focus to other States will also be assessed.
    (h) Work Plan/Budget. The work plan will be reviewed for detailed 
actions and an accompanying timetable for implementing the proposal. 
Clear, logical, realistic and efficient plans will result in a higher 
score. Budgets will be reviewed for completeness and the quality of non 
Federal funding commitments.
    (i) Qualifications of those Performing the Tasks. The application 
will be evaluated to determine if the personnel expected to perform key 
center tasks have a track record of positive solutions for complex 
Cooperative development or marketing problems, or a successful record 
of conducting accurate feasibility studies, business plans, marketing 
analysis, or other activities relevant to Cooperative development 
center success.
    (j) Local support. Applications will be reviewed for previous and 
expected local support for the Center, plans for coordinating with 
other developmental organizations in the proposed service area and 
coordination with state and local institutions. Support documentation 
should include recognition of rural values that balance employment 
opportunities with environmental stewardship and other positive rural 
amenities. Centers that demonstrate strong support from potential 
beneficiaries and formal evidence of the Center's intent to coordinate 
with other developmental organizations will receive more points than 
those not evidencing such support and formal intent.
    (k) Future support. Applications that demonstrate their vision for 
funding center operations for future years, including diversification 
of funding sources and building in-house technical assistance capacity, 
will receive more points for this criterion.


Sec.  4284.514  Grant closing.

    (a) Letter of Conditions. The Agency will notify an approved 
applicant in writing, setting out the conditions under which the grant 
will be made.
    (b) Applicant's intent to meet conditions. Upon reviewing the 
conditions and requirements in the letter of conditions, the applicant 
must complete, sign and return the Agency's ``Letter of Intent to Meet 
Conditions,'' or, if certain conditions cannot be met, the applicant 
may propose alternate conditions to the Agency. The Agency must concur 
with any changes proposed to the letter of conditions by the applicant 
before the application will be further processed.
    (c) Grant agreement. The Agency and the grantee must enter into the 
Agency's ``Agriculture Innovation Center Grant Agreement'' prior to the 
advance of funds.


Sec. Sec.  4284.515-4284.599  [Reserved]


Sec.  4284.600  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget 
and have been assigned OMB control number 0570-0006 in accordance with 
the Paperwork Reduction Act of 1995.

0
6. Subpart J of part 4284, consisting of Sec. Sec.  4284.901 through 
4284.1000 is added to read as follows:

[[Page 23431]]

Subpart J--Value-Added Producer Grants

Sec.
4284.901 Purpose.
4284.902 Policy.
4284.903 Program administration.
4284.904 Definitions.
4284.905-906 [Reserved]
4284.907 Eligibility for grant assistance.
4284.908 Use of grant and matching funds.
4284.909 Limitations on use of funds and awards.
4284.910 Application processing.
4284.911 Evaluation screening.
4284.912 Evaluation process.
4284.913 Evaluation criteria and weights.
4284.914 Grant closing.
4284.915-4284.999 [Reserved]
4284.1000 OMB control number.


Sec.  4284.901  Purpose.

    This subpart implements the Value-Added agricultural product market 
development grant program (Value-Added Producer Grants) administered by 
the Rural Business-Cooperative Service whereby grants are made to 
enable producers to develop businesses that produce and market Value-
Added agricultural products.


Sec.  4284.902  Policy.

    It is the policy of the Secretary of Agriculture to fund a broad 
diversity of projects that help increase the agricultural producers' 
customer base and share of the food and agricultural system profit.


Sec.  4284.903  Program Administration.

    The Value-Added Producer Grant program is administered by 
Cooperative Services within the Agency.


Sec.  4284.904  Definitions.

    Planning Grants--Grants to facilitate the development of a defined 
program of economic activities to determine the viability of a 
potential Value-Added venture, including feasibility studies, marketing 
strategies, business plans and legal evaluations.
    Working Capital Grants--Grants to provide funds to operate ventures 
and pay the normal expenses of the venture that are eligible uses of 
grant funds.


Sec. Sec.  4284.905-4284.906  [Reserved]


Sec.  4284.907  Eligibility for grant assistance.

    (a) The proposed project must evidence a high likelihood of 
creating Value-Added for an Agricultural Product.
    (b) Independent Producers, Agricultural producer groups, Farmer or 
Rancher cooperatives and Majority-Controlled Producer-Based Business 
Ventures, are eligible for grants under this subpart.
    (c) An applicant that is a Farmer or Rancher cooperative, an 
Agriculture producer group or a Majority-Controlled Producer-Based 
Business Venture must be entering into an Emerging Market as a result 
of the proposed project. An applicant that is an Independent Producer 
does not have to be entering into an Emerging Market.
    (d) No project may be the subject of more than one Planning Grant 
or more than one Working Capital Grant under this subpart. The same 
project may, however, be awarded one Planning Grant and subsequently 
apply for and receive a Working Capital Grant.
    (e) Not more than one project per funding cycle per applicant may 
receive grant funding under this subpart.


Sec.  4284.908  Use of grant and matching funds.

    (a) An application may be for either a Planning Grant or a Working 
Capital Grant, but not both.
    (b) Grant funds may be used to pay up to 50 percent of the costs 
for carrying out relevant projects. Matching funds must be provided for 
the balance of costs.
    (c) Matching funds may only be used for the same purposes allowed 
for grant funds.
    (d) Planning Grant funds may be used to develop a business plan or 
perform a feasibility study to establish a viable marketing opportunity 
for a Value-Added producer. These uses include, but are not limited to, 
the following:
    (1) Conduct, or hire a qualified consultant to conduct, a 
feasibility analysis of the proposed value added project to help 
determine the potential success of the project;
    (2) Develop, or hire a qualified consultant to develop, a business 
operations plan that provides comprehensive detail on the management, 
planning and other operational aspects of the proposed project; and
    (3) Develop, or hire a qualified consultant to develop, a marketing 
plan for the proposed Value-Added product(s) including the 
identification of a market window, potential buyers, a description of 
the distribution system and possible promotional campaigns;
    (e) Working Capital Grant funds may be used to provide capital to 
establish alliances or business ventures that allow the producer of the 
Value-Added agricultural product to better compete in domestic or 
international markets. These uses include, but are not limited to, the 
following:
    (1) Establish a working capital account to fund operations prior to 
obtaining sufficient cash flow from operations;
    (2) Hire counsel to provide legal advice and to draft 
organizational and other legal documents related to the proposed 
venture;
    (3) Hire a Certified Public Accountant or other qualified 
individual to design an accounting system for the proposed venture; and
    (4) Pay salaries, utilities and other operating costs such as 
inventory financing, the purchase of office equipment, computers and 
supplies and finance other related activities.


Sec.  4284.909  Limitations on use of funds and awards.

    (a) In addition to the limitations provided in 7 CFR subpart A, 
neither grant nor matching funds may be used to fund architectural or 
engineering design work, or other planning work, for a physical 
facility;
    (b) The total amount provided to any Value-Added project shall not 
exceed $500,000;
    (c) The aggregate amount of awards to majority controlled producer-
based business ventures may not exceed ten percent of the total funds 
obligated under this subpart during any fiscal year.


Sec.  4284.910  Application processing.

    (a) Applications. USDA will solicit applications on a competitive 
basis by publication of one or more RFPs. Unless otherwise specified in 
the applicable RFP, applicants must file an original and one copy of 
the required forms and a proposal.
    (b) Required forms. The following forms must be completed, signed 
and submitted as part of the application package. Other forms may be 
required. This will be published in the applicable RFP.
    (1) ``Application for Federal Assistance.''
    (2) ``Budget Information--Non-Construction Programs.''
    (3) ``Assurances--Non-Construction Programs.''
    (c) Proposal. Each proposal must contain the following elements. 
Additional elements may be published in the applicable RFP.
    (1) Title Page.
    (2) Table of Contents.
    (3) Executive Summary. A summary of the proposal should briefly 
describe the project including goals, tasks to be completed and other 
relevant information that provides a general overview of the project. 
In this section the applicant must clearly state whether the 
application is for a Planning Grant or a Working Capital Grant and the 
amount requested.

[[Page 23432]]

    (4) Eligibility. The narrative must include a detailed discussion 
of how the applicant meets the eligibility requirements.
    (5) Proposal Narrative. The narrative portion of the proposal must 
include, but is not limited to, the following:
    (i) Project Title. The title of the proposed project must be brief, 
not to exceed 75 characters, yet describe the essentials of the 
project.
    (ii) Information Sheet. A separate one page information sheet 
listing each of the evaluation criteria referenced in the RFP followed 
by the page numbers of all relevant material and documentation 
contained in the proposal that address or support the criteria.
    (iii) Goals of the Project. A clear statement of the ultimate goals 
of the project. There must be an explanation of how a market will be 
expanded and the degree to which incremental revenue will accrue to the 
benefit of the agricultural producer(s).
    (iv) Work Plan. The narrative must contain a description of the 
project and set forth the tasks involved in reasonable detail.
    (v) Performance Evaluation Criteria. Performance criteria suggested 
by the applicant for incorporation in the grant award in the event the 
proposal receives grant funding under this subpart. These suggested 
criteria are not binding on USDA.
    (vi) Proposal Evaluation Criteria. Each of the proposal evaluation 
criteria referenced in the RFP must be addressed, specifically and 
individually, in narrative form.
    (6) Verification of Matching Funds. Applicants must provide a 
budget to support the work plan showing all sources and uses of funds 
during the project period. Applicants will be required to verify 
matching funds, both cash and in-kind. Sufficient information should be 
included such that USDA can verify all representations.
    (7) Certification. Applicants must certify that matching funds will 
be available at the same time grant funds are anticipated to be spent 
and that matching funds will be spent in advance of grant funding, such 
that for every dollar of grant that is advanced, not less than an equal 
amount of match funds will have been funded prior to submitting the 
request for reimbursement.


Sec.  4284.911  Evaluation screening.

    The Agency will conduct an initial screening of all proposals to 
determine whether the applicant is eligible and whether the application 
is complete and sufficiently responsive to the requirements set forth 
in the RFP to allow for an informed review. Failure to address any of 
the required evaluation criteria will disqualify the proposal. 
Submissions which do not pass the initial screening may be returned to 
the Applicant. If the submission deadline has not expired and time 
permits, returned applications may be revised and re-submitted.


Sec.  4284.912  Evaluation process.

    (a) Applications will be evaluated by agricultural economists or 
other technical experts appointed by the Agency.
    (b) After all proposals have been evaluated and scored in 
accordance with the point allocation specified in the applicable RFP, 
Agency officials will present to the Administrator of RBS a list of all 
applications in rank order, together with funding level 
recommendations.
    (c) The Administrator reserves the right to award additional 
points, as specified in the applicable RFP, to accomplish agency 
objectives (e.g., to ensure geographic distribution, distribution of a 
commodity or accomplish presidential initiatives.) The maximum number 
of points that can be added to an application cannot exceed ten percent 
of the total points of the original score.
    (d) After giving effect to the Administrator's point awards, 
applications will be funded in rank order until all available funds 
have been obligated.
    (e) In the event an insufficient number of eligible applications 
are received in response to a given RFP, time permitting, subsequent 
rounds of competition will be initiated by publishing subsequent RFPs.
    (f) Unless a proposal is withdrawn, eligible but unfunded proposals 
from preceding competitions in a given fiscal year will be considered 
for funding in subsequent competitions in the same fiscal year.


Sec.  4284.913  Evaluation criteria and weights.

    Unless supplemented in a RFP, the criteria listed in this section 
will be used to evaluate proposals submitted under this subpart. The 
distribution of points to be awarded per criterion will be identified 
in the applicable RFP.
    (a) Planning Grants. (1) Nature of the proposed venture. Projects 
will be evaluated for technological feasibility, operational 
efficiency, profitability, sustainability and the likely improvement to 
the local rural economy. Points will be awarded based on the greatest 
expansion of markets and increased returns to producers. Evaluators may 
rely on their own knowledge and examples of similar ventures described 
in the proposal to form conclusions regarding this criterion.
    (2) Qualifications of those doing work. Proposals will be reviewed 
for whether the personnel who are responsible for doing proposed tasks, 
including those hired to do studies, have the necessary qualifications. 
If a consultant or others are to be hired, more points may be awarded 
if the proposal includes evidence of their availability and commitment 
as well.
    (3) Project leadership. The leadership abilities of individuals who 
are proposing the venture will be evaluated as to whether they are 
sufficient to support a conclusion of likely project success. Credit 
may be given for leadership evidenced in community or volunteer 
efforts.
    (4) Commitments and support. Producer commitments will be evaluated 
on the basis of the number of Independent Producers currently involved 
as well as how many may potentially be involved, and the nature, level 
and quality of their contributions. End user commitments will be 
evaluated on the basis of potential markets and the potential amount of 
output to be purchased. Proposals will be reviewed for evidence that 
the project enjoys third party support and endorsement, with emphasis 
placed on financial and in kind support as well as technical 
assistance.
    (5) Work plan/Budget. The work plan will be reviewed to determine 
whether it provides specific and detailed planning task descriptions 
that will accomplish the project's goals. The budget will be reviewed 
for a detailed breakdown of estimated costs associated with the 
planning activities. The budget must present a detailed breakdown of 
all estimated costs associated with the planning activities and 
allocate these costs among the listed tasks. Points may not be awarded 
unless sufficient detail is provided to determine whether or not funds 
are being used for qualified purposes. Matching funds as well as grant 
funds must be accounted for in the budget to receive points.
    (6) Amount requested. Points will be awarded based on the size of 
the grant request. Generally, requests for lower amounts will receive a 
higher score for this criterion than higher requests. The points to be 
awarded and request ranges will be established in the applicable RFP.
    (7) Project cost per owner-producer. This is calculated by dividing 
the amount of Federal funds requested by the total number of producers 
that are owners of the venture. Points to be

[[Page 23433]]

awarded will be established in the applicable RFP.
    (8) Presidential initiatives. Points may be awarded for proposals 
that focus on Presidential initiatives. Descriptions of these 
initiatives and the points to be awarded will be established in the 
applicable RFP.
    (b) Working Capital Grants. (1) Business viability. Proposals will 
be evaluated on the basis of the technical and economic feasibility and 
sustainability of the venture and the efficiency of operations.
    (2) Customer base/increased returns. Proposals that demonstrate 
strong growth in a market or customer base and greater Value-Added 
revenue accruing to producer-owners will receive more points than those 
that demonstrate less growth in markets and realized Value-Added 
returns.
    (3) Commitments and support. Producer commitments will be evaluated 
on the basis of the number of Independent Producers currently involved 
as well as how many may potentially be involved, and the nature, level 
and quality of their contributions. End user commitments will be 
evaluated on the basis of identified markets, letters of intent or 
contracts from potential buyers and the amount of output to be 
purchased. Proposals will be reviewed for evidence that the project 
enjoys third party support and endorsement, with emphasis placed on 
financial and in kind support as well as technical assistance.
    (4) Management team/work force. The education and capabilities of 
project managers and those who will operate the venture must reflect 
the skills and experience necessary to effect project success. The 
availability and quality of the labor force needed to operate the 
venture will also be evaluated. Proposals that reflect successful track 
records managing similar projects will receive higher points for this 
criterion than those that do not reflect successful track records.
    (5) Work plan/Budget. The work plan will be reviewed for whether it 
provides specific and detailed planning task descriptions that will 
accomplish the project's goals and the budget will be reviewed for a 
detailed breakdown of estimated costs associated with the planning 
activities. The budget must present a detailed breakdown of all 
estimated costs associated with the venture's operations and allocate 
these costs among the listed tasks. Points may not be awarded unless 
sufficient detail is provided to determine whether or not funds are 
being used for qualified purposes. Matching funds as well as grant 
funds must be accounted for in the budget to receive points.
    (6) Amount requested. Points will be awarded based on the size of 
the grant request. Requests for lower amounts will receive a higher 
score for this criterion than higher requests. The points to be awarded 
and request ranges will be established in the applicable RFP.
    (7) Project cost per owner-producer. This is calculated by dividing 
the amount of Federal funds requested by the total number of producers 
that are owners of the venture. Points to be awarded will be 
established in the applicable RFP.
    (8) Presidential initiatives. Points may be awarded for proposals 
that focus on Presidential initiatives. Descriptions of these 
initiatives and the points to be awarded will be established in the 
applicable RFP.


Sec.  4284.914  Grant closing.

    (a) Letter of Conditions. The Agency will notify an approved 
applicant in writing, setting out the conditions under which the grant 
will be made.
    (b) Applicant's intent to meet conditions. Upon reviewing the 
conditions and requirements in the letter of conditions, the applicant 
must complete, sign and return the Agency's ``Letter of Intent to Meet 
Conditions,'' or, if certain conditions cannot be met, the applicant 
may propose alternate conditions to the Agency. The Agency must concur 
with any changes proposed to the letter of conditions by the applicant 
before the application will be further processed.
    (c) Grant agreement. The Agency and the grantee must sign the 
Agency's ``Value-Added Producer Grant Agreement'' prior to the advance 
of funds.


Sec. Sec.  4284.915-999  [Reserved]


Sec.  4284.1000  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget 
(OMB) and have been assigned OMB control number 0570-0039 in accordance 
with the Paperwork Reduction Act of 1995.

0
7. Subpart K of part 4284, consisting of Sec. Sec.  4284.1001 through 
4284.1100 is added to read as follows:

Subpart K--Agriculture Innovation Demonstration Centers

Sec.
4284.1001 Purpose.
4284.1002 Policy.
4284.1003 Program administration.
4284.1004 Definitions.
4284.1005-4284.1006 [Reserved]
4284.1007 Eligibility for grant assistance.
4284.1008 Use of grant funds.
4284.1009 Limitations on awards.
4284.1010 Application processing.
4284.1011 Evaluation screening.
4284.1012 Evaluation process.
4284.1013 Evaluation criteria and weights.
4284.1014 Grant closing.
4284.1015-4284.1099 [Reserved]
4284.1100 OMB control number.


Sec.  4284.1001  Purpose.

    This subpart implements a demonstration program administered by the 
Rural Business-Cooperative Service whereby grants are made to 
innovation centers responsible for providing technical and business 
development assistance to agricultural producers seeking to engage in 
the marketing or the production of Value-Added products.


Sec.  4284.1002  Policy.

    It is the policy of the Secretary of Agriculture to fund Centers 
which evidence broad support from the agricultural community in the 
state or region, significant coordination with end users (processing 
and distribution companies and regional grocers), strategic alliances 
with entities having technical research capabilities and a focused 
delivery plan for reaching out to the producer community. It is also 
the policy of the Secretary, using the research and technical services 
of the U.S. Department of Agriculture, to assist the grantees in 
establishing Centers. This program is not intended to fund scientific 
research.


Sec.  4284.1003  Program administration.

    The Agriculture Innovation Demonstration Center program is 
administered by Cooperative Services within the Agency.


Sec.  4284.1004  Definitions.

    Board of Directors--The group of individuals that govern the 
Center.
    Center--The Agriculture Innovation Center to be established and 
operated by the grantees. It may or may not be an independent legal 
entity, but it must be independently governed in accordance with the 
requirements of this subpart.
    Producer Services--Services to be provided by the Centers to 
agricultural producers. Producer Services consist of the following 
types of services:
    (1) Technical assistance, consisting of engineering services, 
applied research, Scale Production Assessments, and similar services, 
to enable the agricultural producers to establish businesses to produce 
Value-Added agricultural commodities or products;

[[Page 23434]]

    (2) Assistance in marketing, market development and business 
planning, including advisory services with respect to leveraging 
capital assets; and
    (3) Organizational, outreach and development assistance to increase 
the viability, growth and sustainability of businesses that produce 
Value-Added agricultural commodities or products.
    Qualified Board of Directors--A Board of Directors that includes 
representatives from each of the following groups:
    (1) The two general agricultural organizations with the greatest 
number of members in the State in which the Center is located;
    (2) The State department of agriculture, or equivalent, of the 
State in which the Center is located; and
    (3) Entities representing the four highest grossing commodities 
produced in the State in which the Center is located, as determined on 
the basis of annual gross cash sales.
    Scale Production Assessments--Studies that analyze facilities, 
including processing facilities, for potential Value-added activities 
in order to determine the size that optimizes construction and other 
cost efficiencies.


Sec.  4284.1005-4284.1006  [Reserved]


Sec.  4284.1007  Eligibility for grant assistance.

    Non-profit and for-profit corporations, institutions of higher 
learning and other entities, including a consortium where a lead entity 
has been designated and agrees to act as funding agent, that meet the 
following requirements are eligible for grant assistance:
    (a) The entity--
    (1) Has provided services similar to those listed for Producer 
Services; or
    (2) Demonstrates the capability of providing Producer Services;
    (b) The application includes a plan that meets the requirements of 
Sec.  4284.1010(c)(5)(iv) that also outlines--
    (1) The support for the entity in the agricultural community;
    (2) The technical and other expertise of the entity; and
    (3) The goals of the entity for increasing and improving the 
ability of local agricultural producers to develop markets and 
processes for Value-Added agricultural commodities or products;
    (c) The entity demonstrates that adequate resources (in cash or in 
kind) are available, or have been committed to be made available to the 
entity, to increase and improve the ability of local agricultural 
producers to develop markets and processes for Value-Added agricultural 
commodities or products; and
    (d) The proposed Center has a Qualified Board of Directors.


Sec.  4284.1008  Use of grant funds.

    Grant funds may be used to assist eligible recipients in 
establishing Centers that provide Producer Services and may only be 
used to support operations of the Center that directly relate to 
providing Producer Services. Grant funds may be used for the following 
purposes, subject to the limitations set forth in Sec.  4284.10:
    (a) Consulting services for legal, accounting and technical 
services to be used by the grantee in establishing and operating a 
Center;
    (b) Hiring of employees, at the discretion of the Qualified Board 
of Directors;
    (c) The making of matching grants to agricultural producers, 
individually not to exceed $5,000, where the aggregate amount of all 
such matching grants made by the grantee does not exceed $50,000;
    (d) Applied research;
    (e) Legal services; and
    (f) Such other related purposes as the Agency may announce in the 
RFP.


Sec.  4284.1009  Limitations on awards.

    The maximum grant award for an agriculture innovation center shall 
be in an amount that does not exceed the lesser of $1,000,000 or twice 
the dollar amount of the resources (in cash or in kind) that the 
eligible entity demonstrates are available, or have been committed to 
be made available, to the eligible entity.


Sec.  4284.1010  Application processing.

    (a) Applications. USDA will solicit applications on a competitive 
basis by publication of one or more Requests for Proposals (RFPs). 
Unless otherwise specified in the applicable RFP, applicants must file 
an original and one copy of the required forms and a proposal.
    (b) Required forms. The following forms must be completed, signed 
and submitted as part of the application package. Other OMB approved 
forms may be required. This will be published in the applicable RFP.
    (1) ``Application for Federal Assistance.''
    (2) ``Budget Information--Non-Construction Programs.''
    (3) ``Assurances--Non-Construction Programs.''
    (c) Proposal. Each proposal must contain the following elements. 
Additional elements may be published in the applicable RFP.
    (1) Title Page.
    (2) Table of Contents.
    (3) Executive Summary. A summary of the proposal should briefly 
describe the project including goals, tasks to be completed and other 
relevant information that provides a general overview of the project 
and the amount requested.
    (4) Eligibility. A detailed discussion describing how the applicant 
meets the eligibility requirements.
    (5) Proposal Narrative. The narrative portion of the proposal must 
include, but is not limited to, the following:
    (i) Project Title. The title of the proposed project must be brief, 
not to exceed 75 characters, yet describe the essentials of the 
project.
    (ii) Information Sheet. A separate one page information sheet 
listing each of the evaluation criteria referenced in the RFP followed 
by the page numbers of all relevant material and documentation 
contained in the proposal that address or support the criteria.
    (iii) Goals of the Project. The first part of this section should 
list each Producer Service to be offered by the Center. The second part 
of this section should list one or more specific goals relating to 
increasing and improving the ability of identified local agricultural 
producers to develop a market or process for Value-Added agricultural 
commodities or products.
    (iv) Work Plan. Actions that must be taken in order for the 
Producer Services to be available from the Center. Each action listed 
should include a target date by which it will be completed. General 
start up tasks should be listed, followed by specific tasks listed for 
each Producer Service to be offered, as well as tasks associated with 
the start of operations. The tasks associated with the start of 
operations should include a focused marketing and delivery plan 
directed to the local agricultural producers that were identified in 
paragraph (c)(5)(iii) of this section. The actions to be taken should 
include steps for identifying customers, acquiring personnel and 
contracting for services to the Center, including arrangements for 
strategic alliances.
    (v) Performance Evaluation Criteria. Performance criteria suggested 
by the applicant for incorporation in the grant award in the event the 
proposal receives grant funding under this subpart. These suggested 
criteria are not binding on USDA.
    (vi) Agricultural Community Support. Evidence of support from the 
local agricultural community should be included in this section. 
Letters in support should reflect that the writer is familiar with the 
provisions of the Plan for the Center, including the stated goals.
    Evidence of support can take the form of making employees available 
to the

[[Page 23435]]

Center, service as a board member and other in-kind contributions.
    (vii) Strategic Coordination and Alliances. Describe arrangements 
in place or planned with end users (processing and distribution 
companies and regional grocers) as well as arrangements with entities 
having technical research capabilities, broad support from the 
agricultural community in the state or region, significant coordination 
with end users (processing and distribution companies and regional 
grocers), strategic alliances with entities having technical research 
capabilities and a focused delivery plan for reaching out to the 
producer community.
    (viii) Capacity. Evidence of the ability of the grantee(s) to 
successfully establish and operate a Center. A description of the 
grantee's track record in providing services similar to those listed 
for Producer Services or evidence that the entity has the capability to 
provide Producer Services. Resumes of key personnel should be included 
in this section. Past successes should be described in detail, with a 
focus on lessons learned, best practices, familiarity with producer 
problems in Value-Added ventures, and how these barriers are best 
overcome should be elaborated on in this section. For every challenge 
identified, the applicant should demonstrate how they are addressed in 
the Work Plan (see paragraph (c)(5)(iv) of this section). All successes 
should include a monetary estimate of the Value-Added achieved.
    (ix) Legal structure. Provide a description of the legal 
relationship between the grantee(s) and the proposed Center. If the 
Center is to be an independent corporate entity, provide copies of the 
corporate charter, bylaws and other relevant organizational documents. 
Describe how funds for the Center will be handled and include copies of 
the agreements documenting the legal relationships between the Center 
and related parties. If the Center is not to be an independent legal 
entity, provide copies of the corporate governance documents that 
describe how members of the Board of Directors for the Center are to be 
determined.
    (x) Evaluation Criteria. Each of the evaluation criteria referenced 
in the RFP must be specifically and individually addressed in narrative 
form. Supporting documentation, as applicable, should be included in 
this section, or a cross reference to other sections in the application 
should be provided, as applicable.
    (xi) Verification of Adequate Resources. Present a budget to 
support the work plan showing sources and uses of funds during the 
start up period prior to the start of operations and for the first year 
of full operations. Present a copy of a bank statement evidencing 
sources of funds equal to amounts required in excess of the grant 
requested, or, in the alternative, a copy of confirmed funding 
commitments from credible sources such that USDA is satisfied that the 
Center has adequate resources to complete a full year of operation. 
Include information sufficient to facilitate verification by USDA of 
all representations.
    (xii) Certification of Adequate Resources Applicants must certify 
that non-Federal funds identified in the budget pursuant to paragraph 
(c)(5)(xi) of this section will be available and funded commensurately 
with grant funds.


Sec.  4284.1011  Evaluation screening.

    The Agency will conduct an initial screening of all proposals to 
determine whether the applicant is eligible and whether the application 
is complete and sufficiently responsive to the requirements set forth 
in the applicable RFP so as to allow for an informed review. Incomplete 
or non-responsive applications will not be evaluated further, and may 
be returned to the applicant. Applicants may revise their applications 
and re-submit them prior to the published deadline if there is 
sufficient time to do so.


Sec.  4284.1012  Evaluation process.

    (a) Applications will be evaluated by qualified reviewers appointed 
by the Agency.
    (b) After all proposals have been evaluated using the evaluation 
criteria and scored in accordance with the point allocation specified 
in the applicable RFP, Agency officials will present to the 
Administrator of RBS a list of all applications in rank order, together 
with funding level recommendations.
    (c) The Administrator reserves the right to award additional 
points, as specified in the applicable RFP, to accomplish agency 
objectives (e.g., to ensure geographic distribution, put emphasis on a 
specific commodity, or to accomplish presidential initiatives.) The 
maximum number of points that can be added to an application under this 
paragraph cannot exceed ten percent of the total points the application 
originally scored.
    (d) After giving effect to the Administrator's point awards, 
applications will be funded in rank order until all available funds 
have been obligated.


Sec.  4284.1013  Evaluation criteria and weights.

    Unless supplemented in a RFP, the criteria listed in this section 
will be used to evaluate grants under this subpart. The distribution of 
points to be awarded per criterion will be identified in the applicable 
RFP.
    (a) Ability to Deliver. The application will be evaluated as to 
whether it evidences unique abilities to deliver Producer Services so 
as to create sustainable Value-Added ventures. Abilities that are 
transferable to a wide range of agricultural Value-Added commodities 
are preferred over highly specialized skills. Strong skills must be 
accompanied by a credible and thoughtful plan.
    (b) Successful Track Record. The applicant's track record in 
achieving Value-Added successes.
    (c) Work Plan/Budget. The work plan will be reviewed for detailed 
actions and an accompanying timetable for implementing the proposal. 
Clear, logical, realistic and efficient plans will result in a higher 
score. Budgets will be reviewed for completeness and the strength of 
non-Federal funding commitments.
    (d) Qualifications of personnel. Proposals will be reviewed for 
whether the key personnel who are to be responsible for performing the 
proposed tasks have the necessary qualifications and whether they have 
a track record of performing activities similar to those being 
proposed. If a consultant or others are to be hired, points may be 
awarded for consultants only if the proposal includes evidence of their 
availability and commitment as well. Proposals using in-house employees 
with strong track records in innovative activities will receive higher 
points relative to proposals that out-source expertise.
    (e) Local support. Proposed Centers must show local support and 
coordination with other developmental organizations in the proposed 
service area and with state and local institutions. Support 
documentation should include recognition of rural values that balance 
employment opportunities with environmental stewardship and other rural 
amenities. Proposed Centers that show strong support from potential 
beneficiaries and coordination with other developmental organizations 
will receive more points than those not evidencing such support.
    (f) Future support. Applicants that can demonstrate their vision 
for funding center operations for future years, including 
diversification of funding sources and building in-house technical 
assistance capacity, will receive more points for this criterion.

[[Page 23436]]

Sec.  4284.1014  Grant closing.

    (a) Letter of Conditions. The Agency will notify an approved 
applicant in writing, setting out the conditions under which the grant 
will be made.
    (b) Applicant's intent to meet conditions. Upon reviewing the 
conditions and requirements in the letter of conditions, the applicant 
must complete, sign and return the Agency's ``Letter of Intent to Meet 
Conditions,'' or, if certain conditions cannot be met, the applicant 
may propose alternate conditions to the Agency. The Agency must concur 
with any changes proposed to the letter of conditions by the applicant 
before the application will be further processed.
    (c) Grant agreement. The Agency and the grantee must enter into an 
``Agriculture Innovation Center Grant Agreement'' prior to the advance 
of funds.


Sec. Sec.  4284.1015-4284.1099  [Reserved]


Sec.  4284.1100  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget 
and have been assigned OMB control number 0570-0045.

    Dated: April 21, 2004.
Gilbert Gonzalez,
Acting Under Secretary, Rural Development.
[FR Doc. 04-9671 Filed 4-28-04; 8:45 am]
BILLING CODE 3410-XY-P