[Federal Register Volume 85, Number 161 (Wednesday, August 19, 2020)]
[Unknown Section]
[Pages 51158-51161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16416]



[[Page 51157]]

Vol. 85

Wednesday,

No. 161

August 19, 2020

Part II





Department of Defense





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Office of the Secretary





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2 CFR Parts 1103, 1104, et al.

32 CFR Parts 21, 22, et al.





Implementation of Governmentwide Guidance for Grants and Cooperative 
Agreements, Award Format for DoD Grants and Cooperative Agreements, 
Administrative Requirements Terms and Conditions for Cost-Type Grants 
and Cooperative Agreements to Nonprofit and Governmental Entities, 
National Policy Requirements: General Award Terms and Conditions, 
Definitions for DoD Grant and Agreement Regulations, and DoD Grant and 
Agreement Regulations; Final Rules

  Federal Register / Vol. 85, No. 161 / Wednesday, August 19, 2020 / 
Final Rule  

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DEPARTMENT OF DEFENSE

Office of the Secretary

2 CFR Parts 1103, 1104, and 1125

[DOD-2016-OS-0048]
RIN 0790-AJ45


Implementation of Governmentwide Guidance for Grants and 
Cooperative Agreements

AGENCY: Office of the Secretary, Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: This final rule is the first of a sequence of six rules in 
this issue of the Federal Register, which were published as Notices of 
Proposed Rulemaking (NPRMs) on November 7, 2016. The six rules 
collectively establish for DoD grants and cooperative agreements an 
updated interim implementation of Governmentwide guidance on 
administrative requirements, cost principles, and audit requirements 
for Federal awards. This final rule removes outdated portions of the 
DoD Grant and Agreement Regulations (DoDGARs) and replaces it with a 
new DoDGARs part containing revised implementation of the guidance, and 
establishes seven subchapters within DoD's chapter of the Grants and 
Agreements title of the Code of Federal Regulations.

DATES: This rule is effective October 19, 2020.

FOR FURTHER INFORMATION CONTACT: Barbara Orlando, Basic Research 
Office, telephone 571-372-6413.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

A. Purpose of the Final Rule

    The Department of Defense Grant and Agreement Regulations (DoDGARs) 
are being updated to, among other things, implement Office of 
Management and Budget (OMB) guidance to Federal agencies on 
administrative requirements, cost principles, and audit requirements 
applicable to Federal grants, cooperative agreements, and other 
assistance instruments (2 CFR part 200). DoD established an interim 
implementation of that guidance at 2 CFR part 1103 in December 2014 (79 
FR 76047), pending comprehensive updates to the DoDGARs.
    This final rule and the five additional rules immediately following 
it in this issue of the Federal Register implement the OMB guidance as 
it applies to general terms and conditions of DoD grants and 
cooperative agreements. The six final rules establish eleven new 
DoDGARs parts and make conforming changes to existing DoDGARs parts. 
They represent a major step toward completion of the needed updating of 
the DoDGARs. Additional updates to complete the overall revision of the 
DoDGARs will be published for public comment in subsequent notices of 
proposed rulemaking. Those proposals will focus on portions of the 
DoDGARs that specify pre-award, time-of-award requirements, and post-
award requirements. All portions of the DoDGARs remaining in chapter I, 
subchapter C of title 32 of the CFR ultimately will be relocated to 
chapter XI of title 2 of the CFR, with any updating that may be needed.

B. Revisions Implemented by This Rule

    This final rule establishes 2 CFR part 1104 to serve as the central 
part of the DoDGARs that specifies for DoD Components which portions of 
the DoDGARs apply to DoD grants and cooperative agreements for various 
pre-award, time-of-award, and post-award purposes, pending completion 
of the remaining updates to the DoDGARs that are needed to fully 
implement the OMB guidance. It also removes the interim implementation 
of the guidance published in December 2014 at 2 CFR part 1103, as that 
implementation is superseded by this 2 CFR part 1104.
    2 CFR part 1104 serves as the central hub to direct DoD Components' 
use of the other ten new parts issued as final rules in the Federal 
Register in chapter XI of 2 CFR, as well as parts of the DoDGARs that 
will remain for the time being in subchapter C, chapter I of title 32 
of the CFR.

C. Legal Authorities for the Regulatory Action

    There are two statutory authorities for this final rule:
     10 U.S.C. 113, which establishes the Secretary of Defense 
as the head of the Department of Defense; and
     5 U.S.C. 301, which authorizes the head of an Executive 
department to prescribe regulations for the governance of that 
department and the performance of its business.

II. Regulatory History

    In December 2014 (79 FR 76047), DoD established an interim 
implementation of the final guidance, ``Uniform Administrative 
Requirements, Cost Principles, and Audit Requirements for Federal 
Awards,'' published by the Office of Management and Budget (OMB) on 
December 26, 2013, in 2 CFR part 200 (Uniform Guidance--available at 78 
FR 78589). DoD then published a Notice of Proposed Rulemaking (November 
7, 2016 (81 FR 78356)) that proposed changes to 2 CFR parts 1103, 1104, 
and 1125 in order to provide an organizing framework for the DoDGARs to 
make it easier for users of the regulations to locate the content that 
they need. This action responds to comments received on the proposed 
rule and finalizes the proposed changes.

III. Comments and Responses

    DoD received one public comment on the November 7, 2016 NPRM that 
proposed to (1) remove 2 CFR part 1103, the part of the DoDGARs that 
DoD adopted on December 19, 2014, as its interim implementation of the 
OMB guidance at 2 CFR part 200; and (2) replace that part with a new 
DoDGARs part-2 CFR part 1104--containing a revised implementation of 
the guidance. That comment from an anonymous individual pertains to 
this rulemaking and the other five related rulemakings in today's 
Federal Register, thus it is addressed here.
    Comment: The commenter indicated that consistent public concerns 
arise with the bureaucracy or even government at-large centered on 
perceived accountability and efficiency and this proposed rule provides 
an opportunity for accessibility and increases overall agency 
efficiency. The commenter noted that (1) the changes impact a wide 
range of institutions and will allow for improvements in communication 
between government and the institutions it interacts with at each 
level, and (2) this regulatory action has the potential to provide much 
needed uniformity to the grant process. The commenter further indicated 
that this regulatory action will increase the efficiency for 
individuals attempting to access grant and agreement information by 
allocating a central hub of information. It will allow affected parties 
to identify and utilize information at a faster rate and will eliminate 
the complications of sorting through multiple sources. The commenter 
also recognized that, while some may argue that the time required to 
centralize this process and communicate changes could increase problems 
in the short-term, it is his or her belief that standardizing the 
overall process will result in positive long-term benefits.
    The commenter also specified that the additional NPRMs regarding 
the DoDGARs create an increase in the ability of the process to be 
understandable by all agencies and institutions that interact with the 
DoD. Differences in definitions or how guidelines are worded would be

[[Page 51159]]

reduced through these regulatory actions, and it would promote 
necessary standardization for the awards process. The commenter's 
belief is that adoption of the proposed rules will assist the intended 
groups listed such as hospitals, higher education institutions, and 
alternate levels of government by increasing accessibility across the 
board. The intention to create a central hub, providing standard 
definitions and wording and utilizing plain language, will allow for an 
increase in governmental accountability and efficiency that can heavily 
influence overall public trust.
    Response: We appreciate the commenter's insights concerning the 
intent and expected outcomes of this rulemaking.
    Title 2 CFR part 1104 incorporates, with limited changes as 
indicated below, ten other new DoDGARs parts, which are in four of the 
five final rules following this one, by referencing their 
applicability. Those final rules (1) provide standard wording of 
general terms and conditions governing administrative requirements for 
DoD grants and cooperative agreements awarded to institutions of higher 
education, nonprofit organizations, States, local governments, and 
Indian tribes; (2) provide standard wording for general terms and 
conditions addressing national policy requirements for DoD grants and 
cooperative agreements awarded to all types of entities; (3) establish 
a standard award format for DoD grants and cooperative agreements, and 
(4) establish a central DoDGARs part with definitions of terms used in 
those regulations. The fifth final rule provides conforming changes in 
existing parts of the DoDGARs.
    The changes in 2 CFR part 1104 are as follows:
     In 2 CFR 1104.105(a)(2) and 1104.110(b), we removed the 
word ``new'' as a modifier since 32 CFR part 34 has been continuously 
in effect and the administrative requirements contained therein (except 
as modified by the technical amendments to that part being made today) 
are to be used in all applicable awards until superseded.
     In 2 CFR 1104.115, we added at the end of the paragraph 
the words ``. . .and other applicable Defense Grant and Agreement 
Regulatory System (DGARS) policies'' to recognize that pending overall 
completion of the DoDGARs some policies that apply to DoD Components 
reside in the DGARS.
     Throughout, changed usage from ``grant and cooperative 
agreements awards'' to ``grants and cooperative agreements'' or 
``grants and cooperative agreements awarded to . . . '' depending on 
the context to eliminate the redundancy of using the defined term 
``award(s)'' to modify ``grants and cooperative agreements.''

IV. Regulatory Analyses

    We developed this rule after considering numerous statutes and 
Executive Orders (E.O.s) related to rulemaking. Below we summarize our 
analyses based on these statutes or E.O.s.

A. Regulatory Planning and Review

    Executive Orders 12866 (Regulatory Planning and Review) and 13563 
(Improving Regulation and Regulatory Review) direct agencies to assess 
the costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated as a ``not significant'' 
regulatory action, and not economically significant, under section 3(f) 
of Executive Order 12866. Accordingly, the rule has not been reviewed 
by the Office of Management and Budget (OMB) under the requirements of 
these Executive Orders.
    Executive Order 13771 (Reducing Regulation and Controlling 
Regulatory Costs) directs agencies to reduce regulation and control 
regulatory costs and provides that ``for every one new regulation 
issued, at least two prior regulations be identified for elimination, 
and that the cost of planned regulations be prudently managed and 
controlled through a budgeting process.'' This rule is not subject to 
the requirements of this Executive Order because it is not significant 
under Executive Order 12866.
Cost
    DOD has found that this rule will not impose costs to the public 
because this consolidation standardizes multiple approaches to the 
award and administration of DoD grants and cooperative agreements.
Benefits
    DoD determined that issuing a revision of the implementation of OMB 
guidance in 2 CFR part 200 and creating a central hub in the DoD Grant 
and Agreement Regulations will help maximize long-term benefits to the 
public by standardizing multiple approaches to the award and 
administration of DoD grants and cooperative agreements previously used 
by DoD Components.
Alternatives
    1. No Action--If no action was taken, DoD would not be in 
compliance with OMB requirements to move all financial assistance 
regulations to 2 CFR.
    2. Next Best alternative--The next best alternative is to subject 
all awards, regardless of where they are in their current life cycle, 
to the requirements of this final rule. Since awards are performed over 
a 1-5-year life cycle, it would not be beneficial to the public to 
impose the requirements of this final rule on an award that is near the 
end of its life cycle. Therefore, this is not an acceptable 
alternative, as it would impose additional requirements on award 
recipients without offering an added benefit.

B. Congressional Review Act (5 U.S.C. 801, et seq.)

    Under the Congressional Review Act, a major rule may not take 
effect until at least 60 days after submission to Congress of a report 
regarding the rule. A major rule is one that would have an annual 
effect on the economy of $100 million or more or have certain other 
impacts. This rule is not a major rule under the Congressional Review 
Act.

C. Impact on Small Entities

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as 
amended, requires Federal agencies to consider the potential impact of 
regulations on small entities during rulemaking. The term ``small 
entities'' comprises small businesses, not-for-profit organizations 
that are independently owned and operated and are not dominant in their 
fields, and governmental jurisdictions with populations of less than 
50,000. This rule will not impose any impacts on any entities. This 
means that there will be no economic impacts on any entities. 
Therefore, the Department of Defense under the Regulatory Flexibility 
Act \1\ certifies that this rule will not have a significant economic 
impact on a substantial number of small entities.
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    \1\ 5 U.S.C. 601 et seq (1980).
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D. Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996, Public Law 104-121, we want to assist small 
entities in understanding this rule so that they can better evaluate 
its effects on them and participate in the rulemaking. If the rule

[[Page 51160]]

would affect your small business, organization, or governmental 
jurisdiction and you have questions concerning its provisions or 
options for compliance, please contact the person in the FOR FURTHER 
INFORMATION CONTACT section of this rule.
    Small businesses may send comments on the actions of Federal 
employees who enforce, or otherwise determine compliance with, Federal 
regulations to the Small Business and Agriculture Regulatory 
Enforcement Ombudsman and the Regional Small Business Regulatory 
Fairness Boards. The Ombudsman evaluates these actions annually and 
rates each agency's responsiveness to small business.

E. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-1538, 
requires Federal agencies to assess the effects of their discretionary 
regulatory actions. In particular, the Act addresses actions that may 
result in the expenditure by a State, local, or tribal government, in 
the aggregate, or by the private sector of $100,000,000 (adjusted for 
inflation) or more in any 1 year. Although this rule will not result in 
such an expenditure, we do discuss the effects of this rule elsewhere 
in this preamble.

F. Collection of Information

    The Paperwork Reduction Act (PRA) (44 U.S.C. 3501-3520) applies to 
collections of information using identical questions posed to, or 
reporting or recordkeeping requirements imposed on, ten or more members 
of the public. This rule does not call for a new collection of 
information under the PRA.

G. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This proposed rule does not have federalism implications 
that warrant the preparation of a federalism assessment in accordance 
with Executive Order 13132.

List of Subjects in 2 CFR Parts 1103, 1104, and 1125

    Business and Industry, Colleges and universities, Cooperative 
agreements, Grants administration, Hospitals, Indians, Nonprofit 
organizations, Small business, State and local governments.

    Accordingly, under the authority of 5 U.S.C. 301 and 10 U.S.C. 113, 
2 CFR chapter XI is amended as follows:

PART 1103--[REMOVED]

0
1. Part 1103 is removed.

0
2. Subchapter A to chapter XI, consisting of parts 1100 through 1109, 
is added to read as follows:

Subchapter A --General Matters and Definitions

PARTS 1100-1103--[RESERVED]

PART 1104--IMPLEMENTATION OF GOVERNMENTWIDE GUIDANCE FOR GRANTS AND 
COOPERATIVE AGREEMENTS

Sec.
1104.1 Purpose of this part.
1104.100 Award format for DoD Components' grants and cooperative 
agreements.
1104.105 Regulations governing DoD Components' general terms and 
conditions.
1104.110 Regulations governing DoD Components' award-specific terms 
and conditions.
1104.115 Regulations governing DoD Components' internal procedures.
1104.120 Definitions.

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


Sec.  1104.1   Purpose of this part.

    This part provides an update to the DoD interim implementation of 
Office of Management and Budget (OMB) guidance in 2 CFR part 200. It 
supersedes the initial interim implementation of that guidance that DoD 
adopted in 2 CFR part 1103 on December 19, 2014.


Sec.  1104.100  Award format for DoD Components' grants and cooperative 
agreements.

    DoD Components must conform the format of new grants and 
cooperative agreements to the standard award format specified in part 
1120 of the DoD Grant and Agreement Regulations (DoDGARS) (2 CFR part 
1120). The standard format provides locations within the award for:
    (a) General terms and conditions, including the administrative and 
national policy requirements discussed in Sec.  1104.105(a) and (b), 
respectively.
    (b) Any award-specific terms and conditions discussed in Sec.  
1104.110.


Sec.  1104.105  Regulations governing DoD Components' general terms and 
conditions.

    (a) Administrative requirements. On an interim basis pending 
completion of the update of the DoDGARs to implement OMB guidance 
published in 2 CFR part 200, the following regulatory provisions govern 
the administrative requirements to be included in general terms and 
conditions of DoD Components' new grants and cooperative agreements:
    (1) The provisions of parts 1126 through 1138 of the DoDGARs (2 CFR 
parts 1126 through 1138, which comprise subchapter D of this chapter) 
govern the administrative requirements to be included in the general 
terms and conditions of DoD Components' new grants and cooperative 
agreements awarded to institutions of higher education, nonprofit 
organizations, States, local governments, and Indian tribes.
    (2) Part 34 of the DoDGARs (32 CFR part 34) governs the 
administrative requirements to be included in general terms and 
conditions of DoD Components' grants and cooperative agreements awarded 
to for-profit entities.
    (b) National policy requirements. Part 1122 of the DoDGARs (2 CFR 
part 1122) governs the national policy requirements to be included in 
DoD Components' new grants and cooperative agreements awarded to all 
types of entities.


Sec.  1104.110  Regulations governing DoD Components' award-specific 
terms and conditions.

    On an interim basis pending completion of the update of the DoDGARs 
to implement OMB guidance published in 2 CFR part 200:
    (a) The guidance in 2 CFR part 200 governs administrative 
requirements to be included in any award-specific terms and conditions 
used to supplement the general terms and conditions of a new grant or 
cooperative agreement awarded to an institution of higher education, 
nonprofit organization, State, local government, or Indian tribe.
    (b) Part 34 of the DoDGARs (32 CFR part 34) governs the 
administrative requirements to be included in any award-specific terms 
and conditions of DoD Components' grants and cooperative agreements 
awarded to for-profit entities.


Sec.  1104.115  Regulations governing DoD Components' internal 
procedures.

    On an interim basis pending completion of the update of the DoDGARs 
to implement OMB guidance published in 2 CFR part 200, DoD Components' 
internal pre-award, time-of-award, and post-award procedures will 
continue to comply with requirements in parts 21 and 22 of the DoDGARs 
(32 CFR parts 21 and 22) and other applicable Defense Grant and 
Agreement Regulatory System (DGARS) policies.

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Sec.  1104.120  Definitions.

    (a) DoD Grant and Agreement Regulations or DoDGARs means the 
regulations in chapter I, subchapter C of title 32, Code of Federal 
Regulations, and chapter XI of title 2, Code of Federal Regulations.
    (b) Other terms. See part 1108 of the DoDGARs for definitions of 
other terms used in this part.

PARTS 1105-1109--[RESERVED]

0
3. Subchapter B to chapter XI, consisting of parts 1110 through 1119, 
is added and reserved to read as follows:

Subchapter B--[RESERVED]

PARTS 1110-1119--[RESERVED]

0
4. Subchapter C to chapter XI, consisting of parts 1120 through 1125, 
is added to read as follows:

Subchapter C--Award Format and National Policy Terms and Conditions for 
All Grants and Cooperative Agreements

PARTS 1120--1124--[RESERVED]

PART 1125--[TRANSFERRED TO SUBCHAPTER C]

0
5. Part 1125 is transferred to subchapter C.

0
6. Subchapter D to chapter XI, consisting of parts 1126 through 1140, 
is added to read as follows:

Subchapter D--Administrative Requirements Terms and Conditions for 
Cost-Type Grants and Cooperative Agreements to Nonprofit and 
Governmental Entities

PART 1126-1140--[RESERVED]

0
7. Subchapter E to chapter XI, consisting of parts 1141 through 1155, 
is added and reserved to read as follows:

Subchapter E--[Reserved]

PARTS 1141-1155--[RESERVED]

0
8. Subchapter F to chapter XI, consisting of parts 1156 through 1170, 
is added and reserved to read as follows:

Subchapter F--[RESERVED]

PART 1156-1170--[RESERVED]

0
9. Subchapter G to chapter XI, consisting of parts 1171 through 1199, 
is added and reserved to read as follows:

Subchapter G--[RESERVED]

PART 1171-1199--[RESERVED]

    Dated: July 24, 2020.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2020-16416 Filed 8-18-20; 8:45 am]
BILLING CODE 5001-06-P