Food Stamp Program: Automated Data Processing Equipment and Services; Reduction in Reporting Requirements

SUMMARY: This rule proposes to increase the cost thresholds above which

prior written Federal approval of State automated data processing (ADP)

equipment and services acquisitions is required for Federal financial

participation. The effect of the proposed changes would be a reduction

in State reporting requirements.

Additionally, State request would be deemed to have provisionally

met the prior approval requirement if FCS does not approve, disapprove,

or request additional information about the request within 60 days of

the agency's letter to the State acknowledging its receipt. Finally,

this rule proposes to eliminate the requirement that State agencies

submit written information pertaining to the State biennial system

security reviews. States would be required to maintain copies of the

report and pertinent supporting documentation for FCS review.

DATES: Comments must be received on or before September 29, 1995 in

order to be assured of consideration.

ADDRESSES: Comments should be addressed to John H. Knaus, Chief,

Quality Control Branch, Program Accountability Division, Food Stamp

Program, 3101 Park Center Drive, Room 904, Alexandria, Virginia 22302.

All written comments will be open to public inspection during regular

business hours (8:30 a.m. to 5 p.m., Monday through Friday) at that

address.

FOR FURTHER INFORMATION CONTACT: Questions concerning this proposed

rulemaking should be addressed to Mr. Knaus at the above address or by

telephone at (703) 305-2474.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rulemaking has been determined to be significant and was

reviewed by the Office of Management and Budget under Executive Order

12866.

Executive Order 12372

The Food Stamp Program (FSP) is listed in the Catalog of Federal

Domestic Assistance under 10.551 and information on State agency

administrative matching grants for the FSP is listed under 10.561. For

the reasons set forth in the final rule and related notice to 7 CFR

3015, subpart v (48 FR 29115), the FSP is excluded from the scope of

Executive Order 12372 which requires intergovernmental consultation

with State and local officials.

Executive Order 12778

This rulemaking has been reviewed under Executive Order 12778,

Civil Justice Reform. This rule is intended to have preemptive effect

with respect to any State or local laws, regulations or policies which

conflict with its provisions or which would otherwise impede its full

implementation. This rule is not intended to have retroactive effect

unless so specified in the ``Effective Date'' section of this preamble.

Prior to any judicial challenge to the provisions of this rule or the

application of its provisions, all applicable administrative procedures

must be exhausted. In the FSP the administrative procedures are as

follows: (1) For program benefit recipients--State administrative

procedures issued pursuant to 7 U.S.C. 2020(e)(10) and 7 CFR 273.15;

(2) for State agencies--administrative procedures issued pursuant to 7

U.S.C. 2023 set out at 7 CFR 276.7 (for rules related to non-QC

liabilities) or Part 283 (for rules related to QC Liabilities); (3) for

program retailers and wholesalers--administrative procedures issued

pursuant to 7 U.S.C. 2023 set out at 7 CFR 278.8.

Regulatory Flexibility Act

This rulemaking has been reviewed with regard to the requirements

of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 94 Stat.

1164, September 19, 1980, 5 U.S.C. 601-612). Ellen Haas, Under

Secretary for Food, Nutrition, and Consumer Services, has certified

that this rule does not have a significant economic impact on a

substantial number of small entities. This rule will affect State

agencies by reducing the reporting requirements applicable to them.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.

3507), information collection requirements relating to automated data

processing and information retrieval systems have been approved by OMB

Approval No. 0584-0083. The provisions of this rule do not contain any

additional reporting and/or recordkeeping requirements subject to OMB

approval.

Background

State agencies acquire ADP equipment and services for computer

operations which support the FSP. For Federal financial participation,

States are required to obtain prior written Federal approval when ADP

acquisitions for total State and Federal costs exceed the thresholds

established in 7 CFR 277.18. Currently, prior approval is required for

competitively bid ADP acquisitions of $500,000 or more; sole source

acquisitions costing more than $100,000; project increases of $300,000

or more; most procurement documents (requests of proposals (RFPs) and

contracts) of $500,000 or more; and contract amendments that cost

$100,000 or more.

ADP equipment and services acquisitions under $5 million account

for a small percentage of the total cost of State systems development.

In the interest of improved efficiency and effectiveness of the ADP

process, the Department proposes to increase thresholds above which

prior approval is required. This change would reduce the reporting

burden on States and provide for better use of Federal resources.

The higher thresholds proposed in this rule would require prior

approval from the U.S. Department of Agriculture (USDA) Food and

Consumer Service

[[Page 38973]]

(FCS) for: (1) advance planning documents (APDs) for ADP equipment and

services acquisitions of $5 million or more in total Federal and State

costs; (2) justifications for noncompetitive ADP acquisitions from

nongovernment sources of more than $1 million but no more than $5

million in total Federal and State costs; (3) requests for proposals

and contracts of more than $5 million in total Federal and State costs

for competitive procurements and more than $1 million for

noncompetitive acquisitions from nongovernmental sources, unless

specifically exempted by FCS; (4) contract amendments for cost

increases exceeding $1 million or time extensions of more than 120

days; (5) annual APD updates for projects with total acquisition costs

of more than $5 million; and (6) as-needed APD updates for cost

increases of $1 million or more (the percentage of cost benchmark is

removed).

Additionally, this rule proposes to add a provision to regulations

which will promote efficient operation of the prior approval

requirement. The prior approval requirement would be deemed to have

been provisionally met if FCS has not approved, denied or requested

additional information on the request within 60 days of the Agency's

written acknowledgement of its receipt. With this change, States would

have a firmer basis upon which to establish project timeframes,

including the need for FCS approvals. The possibility of increased

costs attributable to a delay in FCS action on State funding requests

would also be reduced.

This change would allow States which are confident that their

requests are in compliance of Federal requirements to proceed after the

60-day period has expired without awaiting final FCS approval. However,

the provisional approval would not exempt a State from having to meet

all other Federal requirements which pertain to the acquisition of ADP

equipment and services. Such acquisitions remain subject to Federal

audit and review, and the final determinations of these audits and

reviews.

Currently, State agencies are required to submit to FCS information

pertaining to the biennial security review. As proposed, State agencies

would no longer be required to submit this information; but security

review reports and pertinent supporting documentation would have to be

maintained for Federal onsite review.

This rulemaking reflects concerned efforts on the part of USDA and

DHHS to promote inter-Departmental consistency and standardization. The

Departments are publishing similar regulations in coordination with

each other.

Regulation Changes

Regulations now require prior written approval for acquisition of

ADP equipment and services if total costs are $500,000 or more in

Federal and State funds. If the State plans to acquire the equipment

and services non-competitively from a non-government source, prior

approval is required when the total acquisition costs are greater than

$100,000.

This rulemaking proposes to revise 7 CFR 277.18(c)(1) by raising

the thresholds for approval of competitive acquisitions to those that

will cost $5 million or more in total Federal and State funds. As

proposed, noncompetitive acquisitions of $5 million or more would also

require prior approval. In addition, noncompetitive acquisitions from a

non-governmental source that have total State and Federal acquisition

costs of more than $1 million but no more than $5 million would need

prior approval of the justification for the sole source purchase. No

changes are proposed for the requirements in this paragraph that apply

to Electronic Benefit Transfer (EBT) systems.

Paragraphs (c)(2)(ii) (A) and (B) currently provide that, unless

specifically exempted by FCS, prior written approval must be received

before the release of a Request for Proposal (RFP) or execution of a

contract where costs are anticipated to equal or exceed $500,000. This

rule proposes to increase the threshold for prior approval of

competitive procurements to those costing more than $5 million and, for

noncompetitive procurements from non-government sources, to those

costing more than $1 million. States could be required to submit RFPs

and contracts under the threshold amounts on an exception basis or if

the procurement strategy is not adequately described in the APD.

Changes to thresholds for contract amendments, specified in

paragraph (c)(2)(ii)(C), are also proposed. Regulations now require

that, unless specifically exempted by FCS, prior approval is required

before the State's signing of a contract amendment unless it involves

cost increases of less than $100,000 or time extensions of less than 60

days, and is an integral part of the APD. This rule proposes to change

that requirement to provide that, unless specifically exempted by FCS,

prior Federal approval would be required for contract amendments

involving cost increases greater than $1 million or contract time

extensions of more than 120 days. States would also be required to

submit contract amendments under these thresholds on an exception basis

or if the contract amendment is not adequately justified in the APD.

Proposed changes to paragraphs (c)(2)(ii) (A), (B) and (C), as

discussed above, would retain FCS' right to review and approve all

RFPs, contracts, and contract amendments, regardless of dollar amount

on an exception basis. The exception basis could include instances

where new program requirements or technology are involved, or when

adequate justification in the APD has not been provided. EBT system

requirements in these paragraphs would be unchanged.

States are currently required to submit for approval an annual APD

Update for approved planning and implementation APDs when the total

acquisition costs exceed $1 million. This rule proposes to increase the

threshold for submission of these documents to those costing more than

$5 million.

Paragraph (e)(3)(i) now recommends submission of ``as-needed'' APD

updates whenever there is a significant increase ($300,000 or 10

percent, whichever is less) in total costs for a commitment of Federal

financial participation for the increase. As proposed, the amount of a

significant increase in total project costs would be raised to $1

million or more. There would no longer be a percentage of cost

benchmark.

This rule proposes to add a new paragraph after paragraph (c)(4).

To promote operation of the prior approval requirement, this new

paragraph, (c)(5), would provide for provisional approval of the prior

approval requirement if FCS has not provided written approval,

disapproval, or a request for additional information within 60 days of

issuing an acknowledge of receipt of a State's request.

Finally, this rule proposes to amend paragraph (p)(3), which

requires States agencies to submit information related to the biennial

security review. As proposed, State agencies would be required to

maintain reports of their biennial ADP system reviews and pertinent

supporting documentation for Federal on-site review.

List of Subjects in 7 CFR Part 277

Claims, Computer technology, Grant programs, Social programs.

Accordingly, 7 CFR part 277 is proposed to be amended as follows:

[[Page 38974]]

PART 277--PAYMENTS OF CERTAIN ADMINISTRATIVE COSTS OF STATE

AGENCIES

1. The authority citation for Part 277 continues to read as

follows:

Authority: 7 U.S.C. 2011-2032.

2. In Sec. 277.18,

a. paragraph (c)(1) is revised;

b. the second sentence in paragraph (c)(2)(ii)(A) is removed and

two sentences are added in its place;

c. the second sentence in paragraph (c)(2)(ii)(B) is removed and

two sentences are added in its place;

d. the second sentence in paragraph (c)(2)(ii)(C) is removed and

two sentences are added in its place;

e. paragraph (c)(5) is added;

f. paragraph (e)(1) is amended by removing to words ``$1 million''

and adding in their place the words ``$5 million'';

g. paragraph (e)(3)(i) is amended by removing the words ``($300,000

or 10 percent, whichever is less)'' and adding in their place the words

``($1 million or more)'';

h. the third and fourth sentences of paragraph (p)(3) are removed

and one sentence is added in their place.

The revisions and additions read as follows:

Sec. 277.18 Establishment of an Automated Data Processing (ADP) and

Information Retrieval System.

* * * * *

(c) General acquisition requirements.--(1) Requirement for prior

FCS approval. A State agency shall obtain prior written approval from

FCS as specified in paragraph (c)(2) of this section when it plans to

acquire ADP equipment or services with proposed FFP that it anticipates

will have total acquisition costs of $5 million or more in Federal and

State funds. This applies to both competitively bid and sole source

acquisitions. A State agency shall also obtain prior written approval

from FCS of its justification for a sole source acquisition when it

plans to acquire ADP equipment or services non-competitively from a

non-governmental source which has a total State and Federal acquisition

cost of more than $1 million but no more than $5 million. However, a

State agency shall obtain prior written approval from FCS for the

acquisition of ADP equipment or services to be utilized in and EBT

system regardless of the cost of the acquisition. The State agency

shall request prior FCS approval by submitting the planning APD, the

Implementation APD or the justification for the sole source acquisition

signed by the appropriate State official to the FCS regional office.

(2) Specific prior approval requirements. * * *

(ii) * * *

(A) * * * However, RFPs costing up to $5 million for competitive

procurement and up to $1 million for noncompetitive acquisitions from

non-governmental sources and which are an integral part of the approval

APD need not be submitted to FCS. Stated will be required to submit

RFPs under this threshold amount on an exception basis or if the

procurement strategy is not adequately described in an APD. * * *

(B) * * * However, contracts costing up to $5 million for

competitive procurements and up to $1 million for noncompetitive

acquisitions from nongovernmental sources, and which are an integral

part of the approved APD need not be submitted to FCS. States will be

required to submit contracts under this threshold amount on an

exception basis or if the procurement strategy is not adequately

described in an APD. * * *

(C) * * * However, contract amendments involving cost increases of

up to $1 million or time extensions of up to 120 days, and which are an

integral part of the approved ADP need not be submitted to FCS. States

will be required to submit contract amendments under these threshold

amounts on an exception basis or if the contract amendment is not

adequately justified in an APD. * * *

* * * * *

(5) Prompt action on requests for prior approval. FCS will reply

promptly to State requests for prior approval. If FCS has not provided

written approval, disapproval or a request for additional information

within 60 days of FCS' letter acknowledging receipt of the State's

request, the request will be deemed to have provisionally met the prior

approval requirement in 277.18(c). However, provisional approval will

not exempt a State from having to meet all other Federal requirements

which pertain to the acquisition of ADP equipment and services. Such

requirements remain subject to Federal audit and review.

* * * * *

(p) * * *

(3) * * * State agencies shall maintain reports of their biennial

ADP system security reviews, together with pertinent supporting

documentation, for Federal on-site review.

* * * * *

Dated: July 26, 1995.

Ellen Haas,

Under Secretary, Food, Nutrition, and Consumer Services.

[FR Doc. 95-18789 Filed 7-28-95; 8:45 am]

BILLING CODE 3410-30-M