# DoD Grant and Agreement Regulations

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A98-5888

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** March 12, 1998
- **Citation:** 63 FR 12152

## Text

SUMMARY: The Department of Defense (DoD) is completing the
establishment of most of the DoD Grant and Agreement Regulations
(DoDGARs). The DoDGARs provide uniform policies and procedures for DoD
Components' award and administration of grants and cooperative
agreements.

DATES: These final rules are effective on April 13, 1998.

FOR FURTHER INFORMATION CONTACT: Mark Herbst; ODDR&E(R); 3080 Defense
Pentagon; Washington, DC 20301-3080.

SUPPLEMENTARY INFORMATION: The specific regulatory actions that are
being taken are to: (1) adopt four new parts of the DoDGARs (32 CFR
parts 21, 22, 32, and 34); (2) make minor amendments to update one of
the four existing parts of the DoDGARs (32 CFR part 28); and (3)
eliminate another of the existing parts (32 CFR part 23), by
incorporating its contents into one of the four new parts (32 CFR part
22).
The four new parts: address DoD Components' overall management of
grant and agreement functions; set forth DoD Components' and grants
officers' responsibilities related to the award and administration of
grants and agreements; implement administrative requirements in OMB
Circular A-110 for grants and agreements awarded to institutions of
higher education and other nonprofit organizations; and establish
administrative requirements for awards to for-profit organizations.
The minor amendments to the existing part provide DoD-specific
procedures related to Governmentwide restrictions on lobbying.
The part that is being removed, with its contents incorporated into
another part, is the rule implementing a law that prohibits the
Department of Defense from providing funds by grant to institutions of
higher education that have policies of denying, or that effectively
prevent, the Secretary of Defense from obtaining for military
recruiting purposes: entry to campuses; access to students on campuses;
or access to directory information pertaining to students.

A. Background

DoD published a notice in the Federal Register on August 26, 1996
(61 FR 43867) requesting comments on four new DoDGARs parts and updates
to two other parts. DoD received comments from: three universities; an
association of academic institutions; an industry association; an
attorneys' association; the Office of Management and Budget (OMB) and
one other non-DoD Federal agency; and several DoD Components. All
comments were considered in developing the final rule.
Some comments concerned a future DoDGARs part that was mentioned in
the Federal Register preamble to the proposed rules. That future part,
which is not included in this rulemaking, is being developed for a
class of research agreements with for-profit firms that is meant to
help integrate the defense and non-defense portions of the U.S.
technology and industrial bases. The future part therefore will provide
more flexible administrative requirements than those contained in part
34 of this rulemaking. Comments pertaining to that future part are
addressed herein only to the extent that they also relate to parts that
are included in this rulemaking.
The following sections present a summary of the major comments
grouped by subject, and the responses to the comments. Changes in the
rules are discussed in the responses to the comments. Other changes
were made to increase readability.

B. Comments and Responses

Comments on General Matters

Comment: The DoDGARs should be included as a supplement to the
rules for award and administration of procurement contracts, in the
Defense Federal Acquisition Regulation Supplement. That would give DoD
contracting officers a single source for rules on contracts, grants,
and cooperative agreements.
Response: No change. It would be inappropriate to merge regulations
for assistance instruments with the regulations for contracts, which
are used for the very different purpose of acquisition.
Comment: The DoDGARs should include a structured format for grants
and cooperative agreements, which could be similar to the uniform
contract format that is currently in 48 CFR part 15, in the Federal
Acquisition Regulations. The format could be an outline of major
topical headings and specific clauses and provisions that are either
mandatory or optional.
Response: No change. There are efforts currently among DoD
activities, some in coordination with other Federal agencies, to
maintain uniform formats for assistance instruments that are used for
similar purposes (e.g., research). Codifying a single standard format
in the DoDGARs at this time likely would hinder these efforts and also
could impede ongoing initiatives to streamline agency business
practices and eliminate unnecessary burdens on recipients.

Comments on Instrument Types, Authorities, and Applicability

Comment: The definition of the term ``contract'' in Sec. 21.130
should be expanded to include cooperative agreements, which also are
contracts. In some cases, even a grant is a contract.
Response: No change. Federal cooperative agreements and grants
often are viewed as ``contractual instruments'' because they are
binding agreements between two parties. However, under the Federal
Grant and Cooperative Agreement Act (31 U.S.C., Chapter 63), Federal
grants and cooperative agreements are assistance instruments that are
quite distinct from Federal procurement contracts, and the term
``contract'' is used widely to mean procurement contracts in Federal
statutes and rules for procurement instruments. If the DoD Grant and
Agreement Regulations were to define the term ``contract''
inconsistently with the predominant Federal usage, it would create
confusion for DoD Components, other Federal agencies, and Government
contractors.
Comment: The term ``assistance'' should be defined in Sec. 21.130
to exclude ``other transactions.'' ``Other transactions'' can be
written to be in the nature of assistance, but such legal instruments
should not be considered to be ``assistance'' for purposes of
applicable laws and regulations and should not be covered by the
DoDGARs.
Response: No change. ``Other transactions,'' as authorized by 10
U.S.C. 2371, are any transactions other than contracts, grants, and
cooperative agreements. DoD recognizes that there could be different
types of ``other transactions,'' including some for providing
assistance. Therefore, the rule can not state categorically that no
``other transactions'' are subject to the laws and regulations that
apply when a Federal agency provides assistance.
Comment: Paragraph (b) of Sec. 21.110 states that the DoDGARs in
certain situations may include rules that apply to other nonprocurement
instruments, in addition to grants and cooperative agreements. It
should expressly state

[[Page 12153]]

that the DoDGARs do not apply to ``other transactions.''
Response: No change. Depending on the type of instrument it is, a
particular ``other transaction'' may be subject to some DoDGARs rules--
such as the rule at 32 CFR part 25 on nonprocurement debarment and
suspension--that apply to more types of instruments than just
cooperative agreements and grants.
Comment: The title of subpart C, part 21, currently is ``Grants
Information,'' but it should be changed to recognize the applicability
of the subpart to cooperative agreements and other nonprocurement
instruments, as well as grants.
Response: Agree. Changed the title to ``Information Reporting on
Grants, Cooperative Agreements, and Other Nonprocurement Instruments.''
Comment: The use of the term ``transaction'' in Sec. 22.220,
``Exemptions,'' a section that otherwise addresses only grants and
cooperative agreements, may lead to confusion with the term ``other
transaction.''
Response: Revised the first sentence of Sec. 22.220 to make it
clear that the use of the term ``transaction'' in this case directly
follows from the section of the Federal Grant and Cooperative Agreement
Act (31 U.S.C. 6307) that authorizes the Director of the Office of
Management and Budget to exempt an agency transaction.
Comment: The wording of paragraph (b) of Sec. 21.205, on the need
for specific statutory authority to use a grant or cooperative
agreement, may cause confusion. It may cause a grants officer to
believe that an authorizing statute must specifically state that a
grant or cooperative agreement may be used. What is required is that
the intent of the authorizing statute must support the use of an
assistance instrument.
Response: Agree. Revised the paragraph to say that the intent of
the authorizing statute must support the use of an assistance
instrument.
Comment: The last sentence in paragraph (b)(2) of Sec. 21.205
should provide a more general statement about authorizing statutes that
do not require delegation by the Secretary of Defense, consistent with
the paragraph's heading, ``Authorities that rise indirectly as a result
of statute.'' The last sentence merely provides one example.
Response: Added a general statement to the paragraph.
Comment: Paragraph (a)(2) of Sec. 22.205 should be revised to
reflect the intent of 10 U.S.C. 2358, which allows the use of
cooperative agreements for some development projects.
Response: No change. Paragraph (a)(2) of Sec. 22.205 does permit
the use of a cooperative agreement for a development project, in
accordance with the Federal Grant and Cooperative Agreement Act (31
U.S.C., Chapter 63), if the principal purpose of that development
project is assistance. The paragraph correctly notes that the principal
purpose of almost all DoD development projects is acquisition, and that
it therefore is not appropriate to use assistance instruments for
carrying out those projects.
Comment: The last sentence of paragraph (a)(2) of Sec. 22.205
should be revised to recognize that there is statutory authority to use
``other transactions,'' as well as contracts, to carry out prototype
projects relevant to weapons or weapons systems.
Response: Agree. Revised the sentence to recognize the use of
acquisition transactions other than contracts.
Comment: Paragraph (b) of Sec. 22.210 broadens the applicability of
10 U.S.C. 2358. It requires that any research project carried out
through a grant or cooperative agreement must be relevant to defense
missions or interests, even if the grant or cooperative agreement is
awarded under a statutory authority other than 10 U.S.C. 2358. The
paragraph should be modified, to limit this requirement to grants and
cooperative agreements used to carry out research projects under the
authority of 10 U.S.C. 2358.
Response: The requirement for defense relevance in 10 U.S.C. 2358
applies to research projects carried out under other authorities.
Specifically, under paragraph (c) of 10 U.S.C. 2358, any research
project carried out with funds appropriated to a DoD Component must
comply with that requirement. Revised paragraph (b) of Sec. 22.210 to
clarify the broader applicability of the statute.
Comment: The DoD should clarify the relationship of part 32, which
implements OMB Circular A-110, to parts 21 and 22. Doing so will let
university and nonprofit recipients know the extent to which they must
be familiar with those parts.
Response: Agree. Added a new paragraph (b) to Sec. 32.1 to clarify
that parts 21 and 22 provide guidance to DoD Components and grants
officers and do not directly impose any requirements on recipients.
Because that guidance indirectly affects recipients, the information in
those parts concerning internal policies and procedures should be
helpful to recipients of DoD awards.
Comment: Part 34 imposes administrative requirements for awards to
commercial organizations that are burdensome, costly, and different
from normal commercial practice. Commercial firms that cannot meet the
requirements of part 34 should be made subject to the future DoDGARs
part on agreements with more flexible administrative requirements.
Response: Replaced the term ``commercial organization'' throughout
the rule with ``for-profit organization.'' A number of comments
revealed that the rule's use of the term ``commercial organizations''
to include all for-profit organizations confused the many people who
use the term ``commercial firms'' to mean the subset of for-profit
firms that have not traditionally performed under cost-type contracts
or assistance instruments from the Federal Government.
The future DoDGARs part, as described earlier in this preamble,
concerns a class of agreements for use in carrying out research
programs to help integrate the defense and non-defense portions of the
U.S. technology and industrial bases. A prime consideration in
preparing that part is removing obstructions to participation in
defense research by commercial firms that have not traditionally been
Government contractors, where consistent with proper stewardship of
Federal funds. That distinguishes the future DoDGARs part from part 34,
which is intended to apply to the more general case of awards for any
type of program performed by a for-profit firm.

Comments on Payments and Interest

Comment: Paragraph (b)(2) of Sec. 22.810, paragraph (e)(1) of
Sec. 32.22, and paragraph (e) of Sec. 34.12 address the
responsibilities of DoD disbursing officers, as well as grants
officers. The DoD Financial Management Regulation (the FMR, which is
DoD 7000.14-R) addresses DoD disbursing officers' responsibilities.
Therefore, these paragraphs of the DoDGARs should be revised to refer
to the pertinent portions of the FMR, rather than create a duplicative
set of rules.
Response: Agree. Reorganized and revised section 22.810 to specify
requirements only in areas that are grants officers' responsibilities
and refer to DoD 7000.14-R for requirements that are disbursing
officers' responsibilities. Similarly, revised paragraph (e)(1) of
Sec. 32.22 and paragraph (e) of Sec. 34.12 to refer to Sec. 22.810, and
thereby to DoD 7000.14-R.
Comment: Sections 32.21(b)(5) and 32.22(l) should be revised to
include references to the Cash Management Improvement Act (CMIA) that
are contained in the corresponding paragraphs of OMB Circular A-110.

[[Page 12154]]

Response: Agree in part. The final rule restores the Circular A-110
language in Sec. 32.21(b)(5), because some provisions of the CMIA may
apply in rare instances to universities or nonprofit organizations. The
reference to the CMIA in Sec. 32.22(l), however, is not restored; the
Circular should be amended to delete that reference, to conform to
updated Department of the Treasury regulations implementing the CMIA.
Comment: Paragraph (l) of Sec. 32.22 should be revised to provide
details about the data and format requirements for electronically
remitting interest earned on advance payments, to facilitate direct
deposit in the Department of the Treasury account for the Division of
Payment Management of the Department of Health and Human Services'
(DHHS/DPM).
Response: Revised this section to advise recipients that current
information on the format for electronic submissions of interest
payments should be obtained from the administrative grants officer.
This will help to ensure that recipients have up-to-date information.
If the information were codified in the DoDGARs, recipients would
experience delays due to the regulatory process each time that changes
were made in formats or data elements for electronic remittances.

Note: University and nonprofit recipients that are subject to
the DoDGARs part 32 are advised of the following details about the
current format for electronic submissions, to help ensure direct
deposit of electronic remittances to the account of the DHHS/DPM:
the preferred funds transfer format is CCD+; the American Banking
Association routing number 05103670 should appear in the third
field; the check digit in the fourth field is a six (6); and the
account number for the DHHS/DPM, which is 303000, should appear in
the fifth field.

Comment: The rules need to be revised to implement requirements in
the Debt Collection Improvement Act of 1996 (Title 31, Pub. L. 104-134)
to: obtain each recipient's Taxpayer Identification Number (TIN);
include the TIN with each payment authorization forwarded to the
disbursing office; and pay recipients by electronic funds transfer
(EFT).
Response: Paragraph (d) of Sec. 22.420, which contains the
requirement to obtain each recipient's TIN, is revised to conform to
the new law and refer to it. Revisions to Sec. 22.810 implement the
requirements for forwarding TINs with payment authorizations and for
payment by EFT. Section 22.605 and Appendix C to part 22 also are
revised, to ensure that award documents alert recipients and disbursing
officers to the requirement for payment by EFT.
Comment: Section 34.12, ``Payment,'' states that reimbursement is
the preferred method of payment and makes no provision for payments of
fixed amounts for accomplishment of technical milestones. Perhaps the
technical-milestone method of payment is intended to be covered in the
new DoDGARs part, still in draft, on flexible research agreements. Many
commercial companies are unable or unwilling to contract with DoD when
payments will be made on a cost reimbursement basis.
Response: No change. The milestone payment method is associated
with the new type of research agreement that will be covered by a
future DoDGARs part.
Comment: Under Sec. 34.12, for-profit recipients must remit any
interest earned to the DoD Component that made the award. It would be
better to have the recipient remit the interest to the Defense
Contracting Management Command (DCMC) office that has the
responsibility for administering the agreement, by delegation from the
DoD Component that awarded the agreement.
Response: Revised Sec. 34.12 to provide for remittance of interest
to the administrative grants officer that is responsible for post-award
administration of the agreement.

Comments on Debt Collection

Comment: Paragraph (c)(2)(iv) of section 22.820 does not state how
the interest rate will be determined, when a recipient owes the
Government interest on a debt. The paragraph should provide for simple
interest at the rate fixed by the Secretary of the Treasury under Pub.
L. 92-41.
Response: Added a reference in this section to the DoD Financial
Management Regulations (FMR) for rules covering interest costs. The FMR
explains how the interest rate is determined.
Comment: Section 22.820, ``Debt Collection,'' says that the
recipient still may elect to appeal after the grants officer turns over
a debt to the Defense Finance and Accounting Service (DFAS) for
collection. Once a debt is turned over to DFAS, the debt collection
rules in the Financial Management Regulation will apply, and DFAS may
not decide to defer the debt to allow an appeal.
Response: Revised this section to clarify that further action to
collect the debt is deferred, to allow time for an appeal, only when
the recipient notifies the grants officer within the 30-day prescribed
time period of its intent to appeal. If the recipient does not so
notify the grants officer within that period, the debt is transferred
to DFAS for collection.

Comments on Claims, Disputes, and Appeals

Comment: Section 22.815, ``Claims, disputes, and appeals,'' says
that a recipient's appeal of a grants officer's final decision is to be
based solely on the basis of the written record, unless the Grant
Appeal Authority decides to conduct fact-finding procedures or an oral
hearing on the appeal. It would be desirable to give the recipient the
right to a hearing before the Grant Appeal Authority, if requested.
Response: No change. The rules permit the Grant Appeal Authority to
conduct an oral hearing, and a reasonable request from a recipient
would be a basis for doing so. However, creating the right to a hearing
is a step toward instituting a more formal appeals process, and there
is no current problem that justifies the increased Government
administration, with attendant burdens and costs, that is associated
with a more formal process. Instituting a more formal process also runs
counter to the direction taken in the rule, to strongly encourage
Alternative Dispute Resolution and other less cumbersome means of
resolving disputes.
Comment: Under Sec. 22.820, ``Debt collection,'' a debt owed by a
recipient, based on a DoD Component's claim, bears interest and may
include penalties and other administrative costs. Recommend adding a
provision that recipient claims also bear interest.
Response: No change. A Federal agency may pay interest on claims
only when it has statutory authority to do so.
Comment: Paragraph (d)(2) of Sec. 22.815, ``Claims, disputes, and
appeals,'' states that a grants officer's decision is final, but then
goes on to say that it can be appealed. A decision that can be appealed
isn't final.
Response: Revised the paragraph to clarify that the decision is
final, unless the recipient decides to appeal.

Comments on Cost Sharing, Budget Revisions, and Other Cost-Related
Matters

Comment: Paragraph (b) of section 32.23, ``Cost sharing and
matching,'' requires the grants officer's prior approval for a
university's or nonprofit organization's use of unrecovered indirect
costs as cost sharing or matching. Recipients should be authorized, as
a matter of DoD policy, to so use unrecovered indirect costs.
Response: Revised this paragraph to remove the prior approval
requirement.

[[Page 12155]]

Comment: Paragraph (c)(2) of Sec. 32.23, ``Cost sharing and
matching,'' specifies ``current fair market value'' as one metric for
valuing buildings or land donated by a recipient as cost sharing or
matching. The paragraph should include a statement that the DoD
Component may use any reasonable basis for determining the fair market
value.
Response: Revised the paragraph to add the suggested statement.
Comment: Paragraph (d)(1) of Sec. 32.25, ``Revision of budget and
program plans,'' gives DoD Components the option to waive certain cost-
related and administrative prior approvals required by OMB Circulars A-
110, A-21, and A-122. It would be preferable for these waivers to be
made the standard practice, rather than optional.
Response: No change. DoD awards grants and agreements to university
and nonprofit recipients for various types of programs. Some recipients
and programs need more oversight than others. DoD Components therefore
need the flexibility provided by the OMB circulars to judge on a case-
by-case basis whether they can waive these prior approvals.
Furthermore, some of the prior approvals in the cost principles (OMB
Circulars A-21 and A-122) relate to system-wide methods for handling
indirect costs that should not be waived without first consulting with
the cognizant agency responsible for negotiating the recipient's
indirect cost rate.
Comment: Paragraph (d) of Sec. 32.25, ``Revision of budget and
program plans,'' does not include the language from the corresponding
section of OMB Circular A-110 that permits a university or nonprofit
recipient to initiate a one-time extension of the expiration date of an
award, without the Federal agency's prior approval, if the extension
requires no additional Federal funds (i.e., it is a ``no-cost
extension''). Recommend that DoD include language authorizing
recipients to initiate no-cost extensions, with the requirement that
the recipients notify DoD of the actions. Regardless of the final
resolution of the matter, Sec. 32.25 should clearly state whether DoD
requires prior approvals for no-cost extensions, rather than remaining
silent and leaving university and nonprofit recipients in doubt about
the policy.
Response: Revised the section to state that DoD Components may
waive the prior approval requirement on a case-by-case basis, when the
Components judge that doing so would not cause them to fail to comply
with DoD incremental programming and budgeting policies. Those policies
specify the period during which a given fiscal year's appropriations
are to be used (e.g., that one fiscal year's research funds usually are
to support effort only through the first three months of the next
fiscal year).
Comment: It is unnecessary to give DoD Components the option to
require university or nonprofit recipients to obtain the agency's prior
approval for rebudgeting between direct cost categories on awards in
excess of $100,000, as provided in paragraph (e) of Sec. 32.25,
``Revision of budget and program plans.'' Paragraph (e) even appears to
contradict paragraphs (c) (1) through (5) of Sec. 32.25, which specify
prior approval requirements for other budget revisions related to
nonconstruction awards.
Response: DoD Components need the flexibility provided by OMB
Circular A-110 to require prior approvals for such budget changes,
because some types of programs for which DoD Components use grants and
agreements require more oversight than others. Nonetheless, this prior
approval requirement generally is not appropriate for grants to support
research, the likely object of the comment. Paragraph (e) of Sec. 32.25
is revised to include a statement to that effect. While there are no
apparent contradictions between paragraphs (c) and (e) of Sec. 32.25,
also revised paragraph (c) to refer to paragraph (e), to help prevent
confusion about prior approval requirements for rebudgeting actions
related to nonconstruction awards.
Comment: The DoD should restore to paragraph (c) of Sec. 32.25 the
requirement in the corresponding paragraph of OMB Circular A-110 for
recipients to obtain prior approval before revising the budget in a way
that transfers amounts budgeted for indirect costs to absorb increases
in direct costs, or vice versa, if the awarding office wishes to
approve such transfers.
Response: Agree in part. The language is restored in that paragraph
of the final rule, but with a caveat that requiring prior approval for
such budget revisions should be required only in exceptional
circumstances. That change addresses the rare cases in which an
assistance program may require more Government oversight.
Comment: Section 34.13, ``Cost sharing or matching,'' should be
revised to address for-profit recipients' use of Independent Research
and Development (IR&D) costs to meet cost sharing or matching
requirements. The section should conform with Federal Acquisition
Regulation (FAR) coverage for procurement contracts, at 48 CFR 31.205-
18(e), which says that contributions of IR&D costs under certain types
of cooperative arrangements may be treated as allowable indirect costs,
if the work performed would have been allowed as IR&D had there been no
cooperative arrangement.
Response: Revised this section to provide coverage for assistance
instruments that conforms with the FAR coverage for procurement
contracts.
Comment: Section 34.16, ``Audits,'' should state that a for-profit
recipient's audit costs are allowable as direct charges to the
agreement. Also, the section should state whether audit costs are
subject to cost sharing requirements.
Response: Added language to clarify that audit costs are allowable
as direct or indirect costs, as appropriate. Cost sharing requirements
apply to total project costs, of which audit costs are an element;
there is no need to include language in the rule to specifically
address the applicability of cost sharing requirements to audit costs
or the many other specific types of direct or indirect cost that
comprise the total project costs.
Comment: Section 34.11, ``Standards for financial management
systems,'' seems to not require for-profit recipients to do employee
time reporting more frequently than monthly and permits reports to
coincide with one or more pay periods. Many firms keep daily records
for their DoD contract business--is the difference intended?
Response: The intent of the standards is to have records that
accurately reflect the distribution of the actual activity of each
employee that has salary or wages charged to DoD awards, and to keep
paperwork burdens to the minimum that is necessary for that purpose.
The rule provides flexibility for the recipient because the reporting
frequency needed to ensure accurate records may vary, depending upon
the circumstances. For example, if an employee works on just one
project, there probably is no need to record time spent on various
tasks more frequently than monthly. However, if an employee works on
many projects, it is likely that more frequent recording of time spent
on specific tasks is necessary.
Comment: Section 34.17, ``Allowable costs,'' provides that for-
profit recipients of prime awards, as well as for-profit subrecipients
under prime awards, determine the allowability of costs in accordance
with the Federal Acquisition Regulation (FAR). Section 32.27 similarly
requires university and nonprofit recipients to flow down the FAR cost
principles to for-profit subrecipients under their prime awards. Most
commercial firms are unable to comply with these requirements--

[[Page 12156]]

Generally Accepted Accounting Principles (GAAP) should be applied,
instead.
Response: DoD recognizes that alternatives to the FAR cost
principles may be appropriate for use with certain types of research
investment agreements that involve for-profit firms, due to cost
matching and other characteristics of the agreements--such agreements
will be covered by a future part of the DoDGARs. One change is made at
this time in Sec. 32.27 of the final rule. The provisions of part 34
will be revised, as needed, when that future part is adopted. At this
time, those provisions are appropriate because part 34 applies to any
type of program, not just research, that is performed by for-profit
firms, not just commercial firms that have not traditionally done
business with the Government.
Comment: Requirements for the allowability of costs for for-profit
firms appear in paragraph (f) of Sec. 32.27 in part 32, but part 32
applies to awards to universities and other nonprofit organizations,
rather than to awards to for-profit firms. This is confusing.
Response: For-profit firms are mentioned in part 32 because they
may be subawardees under prime awards to universities and nonprofit
organizations, and the prime awardees need to know which requirements
apply to those subawards.
Comment: The definition of ``third-party in-kind contributions'' in
Sec. 34.2, ``Definitions,'' is confusing to commercial firms. The rule
should clarify how third parties would contribute to the project and
what their rights and responsibilities are.
Response: No change. The definition relates to Sec. 34.13, ``Cost
sharing or matching,'' which specifies how one values third-party
contributions, which include services of others' employees, volunteer
services, and property donated by third parties. The definition and
rules in part 34 on valuing third-party in-kind contributions parallel
the Governmentwide guidance in OMB Circular A-110, as implemented in
part 32 of the DoDGARs, for university and nonprofit recipients. While
third-party contributions are not expected to be encountered as often
by for-profit recipients as they are by university and nonprofit
recipients, they can occur and it therefore is useful to include rules
on how to value the contributions. It would be inappropriate for DoD
rules to specify rights or responsibilities of third parties making
such contributions--those properly would be worked out by the
recipients and third parties.

Comments on Program Income and Revisions of Program Plans

Comment: The definition of ``program income'' in section 34.2 is
too broad because it includes gross income that is ``earned as a result
of the award,'' and not just income earned by a for-profit recipient
that is ``directly generated by a supported activity.'' This is
especially problematic when coupled with the requirement in paragraph
(b)(2) of Sec. 34.14 for the grants officer to consider whether the
recipient has any obligation for program income generated after the
project period is over. The purpose of many agreements is to stimulate
development of technology that will generate income into the U.S.
economy long after the project's end, thereby benefiting the
Government.
Response: No change. This section applies mainly to program income
earned during the project period. Any Federal interest in program
income earned after that period must be provided for in the award,
based on an understanding between the recipient and the Government at
the time the award is negotiated. These rules apply to various
programs, not just research; even for research, one can not rule out in
all cases the appropriateness of a recipient's obligation to the
Government with respect to program income that is generated after the
project period. In cases where it is appropriate, the grants officer
must have the same flexibility as a firm's representatives to negotiate
agreement terms that are fair and equitable to both the firm and the
Government.
Comment: The requirement in paragraph (c) of Sec. 34.15 to
immediately request and gain prior approval when making decisions
regarding key personnel exceeds the provisions of most procurement
contracts. The recipient should only have a requirement to promptly
notify the Government when a change in key personnel is made.
Response: No change. The prior approval requirement applies only to
key personnel specified in the application or award document. Usually,
the experience and qualifications of such key personnel are prime
considerations in making an assistance award, and the Government should
be consulted before the recipient makes changes in those personnel.
This is a standard requirement in Federal agency rules governing
assistance awards, providing one illustration of the ways in which
assistance relationships differ from acquisition relationships that are
consummated through procurement contracts.

Comments on Property

Comment: It is not clear why some of the terms related to property
in part 32, which implements OMB Circular A-110, are used or defined
differently than in the Circular.
Response: Part 32 of the proposed rule included some nonsubstantive
technical improvements to the language of the Circular. For example,
the proposed rule replaced the term ``supplies and other expendable
property'' with the term ``supplies'' in two places (in Sec. 32.35 and
in the definition in Sec. 32.2 of ``third party in-kind
contributions'') because the term ``supplies'' includes all expendable
property. Similarly, the proposed rule deleted the term ``expendable
equipment'' in Sec. 32.23(f) because the term is self-contradictory
(given that ``equipment,'' as defined, is nonexpendable property).
Comment: Paragraph (b) of Sec. 32.35, ``Supplies,'' states that
university and nonprofit recipients shall not use supplies acquired
with Federal funds to provide services to non-Federal outside
organizations for a fee that is less than private companies charge for
equivalent services. Suggest adding another provision to address
recipients providing commercially acquired services.
Response: No change. DoD is not aware of any instance in which a
university or nonprofit recipient has provided to outside organizations
commercially acquired services that were obtained under a Federal
award. If a problem arises in this area, it should be addressed through
a revision to the Governmentwide guidance in OMB Circular A-110, so
that it will be implemented by all Federal agencies.
Comment: Paragraph (b) of Sec. 34.21 provides that for-profit
recipients receive only a conditional title to equipment purchased in
whole or in part with Federal funds. Among the conditions, which are
specified in Secs. 34.21 and 34.23, are that the recipient: Keep track
of real property or equipment for a project; make the property
available for use on other projects on a non-interfering basis and in a
certain order of priority; assess charges for the property's use to
Federal contracts or projects not supported by any Federal agency,
treating those use charges as program income; and handle the
disposition of the property at project's end, compensating the
Government for its share of the current fair market value. These are
burdensome requirements; the provisions of Sec. 34.23, for example,
will require commercial firms to establish costly property management
systems. Recommend

[[Page 12157]]

instead that recipients be given unconditional title to any equipment
purchased in part with recipient funds and in part with Federal funds.
Response: No change. A Federal agency needs specific authority to
vest title to equipment unconditionally. Therefore, the section
correctly states that the title shall be a conditional title unless a
statute specifically authorizes a DoD Component to vest title in the
recipient without further obligation to the Government, and the DoD
Component elects to do so. The conditions of the title are reasonable,
because they apply specifically to property in which the Federal
Government has a continuing financial interest. The provisions of
Sec. 34.23, for example, which are based on OMB Circular A-110's
Governmentwide guidance for assistance awards, maintain accountability
for Federally owned property and for equipment that is acquired with
Federal funds under an award.
Comment: Under paragraph (c) of Sec. 34.21, a for-profit recipient
may offer real property or equipment that is purchased with recipient
funds or donated by a third party to meet a portion of any required
cost share or match. However, the Government then has a financial
interest in the property, a share of the value attributable to the
Federal participation in the project. The property then is subject to
provisions of the rule concerning the property's encumbrance, disposal,
tracking, and use for projects other than the one for which it is being
used to meet cost sharing requirements. This policy is inequitable,
unnecessary, and will discourage commercial firms from entering into
cooperative arrangements with the Department of Defense. We are not
aware of any Federal agency taking this position for real property or
equipment purchased by recipients or donated by third parties.
Response: Revised the section to clarify that these provisions
apply to property acquired with recipient funds or donated by a third
party only when the full value of the property is accepted as the value
of the contribution toward cost sharing or matching. With that
clarification, the provisions of this section are based on
Governmentwide policies established by OMB Circulars A-110 and A-102
for assistance awards to universities and nonprofit organizations and
certain awards to State and local governments--Circular A-110 also
states that its provisions may be used for awards to for-profit
organizations, and DoD understands that other Federal agencies do so.
It is important to note that accepting the full value of property
as the value to be counted for purposes of cost sharing or matching is
the exception rather than the rule. Usually, one only would count the
depreciation of the property during the project period or the cost of
using the property, either of which normally is a fraction of the full
value. There is no issue with title in those cases, because the
recipient owns unconditionally any property purchased with its own
funds or donated to it by a third party.
In the exceptional cases where the full value is used for cost
sharing or matching purposes, the recipient is effectively donating the
property to a project that it and the Government are jointly
supporting. It would defeat the purpose of cost sharing in such cases
if the recipient kept the asset, free and clear, after contributing the
asset's full value toward its share of the support for the project. The
provisions of the rule to which the property is subject in those
exceptional cases (e.g., that the recipient keep track of the property
and not encumber it without the grants officer's approval) are
reasonable.
Comment: Upon completion of a project, if there is an inventory of
leftover unused supplies that are not needed for other Federal projects
and the inventory's value exceeds $5,000, Sec. 34.24 states that a for-
profit recipient is to reimburse the Federal Government for its share
of the value. This means that supplies will be subject to controls that
are very costly and administratively burdensome, such as the
requirements in Sec. 34.23 for the recipient's property management
system.
Response: No change. Normally, recipients should be buying supplies
as needed for the project and expensing them when used. Therefore,
large inventories of unused supplies should not be left over at the end
of the project. If the value of unused supplies equals that of an item
of equipment, it should reimburse the Government for its share of the
cost of those supplies. With respect to the applicability of the
specific requirements in Sec. 34.23 for the recipient's property
management system, that section applies to equipment acquired under the
award, but not supplies; the rule only states the requirement
concerning large inventories of unused supplies charged to the project,
and the recipient determines what system it will use to comply with the
requirement.
Comment: Section 34.25 states that the Government has the right,
unless it is waived by the DoD Component, to obtain, reproduce, publish
or otherwise use the data first produced under an award. This section
should be revised to state that the data may be used only for Federal
Government purposes.
Response: Revised this section to clarify that the data may be used
only for Federal Government purposes.
Comment: The intellectual property rights accorded the Government
under assistance awards to for-profit firms, in Sec. 34.25, are a
disincentive to industry to participate in cooperative agreements. The
regulations should not set a rigid minimum set of rights which the
Government must obtain in every case. Instead, the regulation should
state that the grants officer may negotiate an allocation of rights
that is fair and equitable depending upon the circumstances of the
particular agreement.
Response: No change other than the clarification on data rights
described in the response to the preceding comment. For patents, the
rule provides the grants officer with all of the flexibility in current
statute and executive order applicable to grants and cooperative
agreements. For copyrights, data, and software, the rule's provisions
are appropriate for intellectual property generated with Federal
support under most assistance awards, and grants officers can handle
the exceptional cases through the usual deviation procedure. One class
of instruments that DoD plans to handle differently is the class of
research investment agreements, with cost matching and other
distinguishing features, that will be the subject of a future DoDGARs
part.
Comment: Section 34.25 states that awards are to include the patent
clause specified by Department of Commerce (DoC) regulations at 37 CFR
401.14. The section should be modified to allow for-profit firms to
obtain rights in subject inventions of subawardees that are small
businesses or nonprofit organizations. Otherwise, the patent clause in
the DoC regulations will preclude a firm from doing so, even if the
for-profit awardee has paid in part for the subawardees' effort as part
of its cost share.
Response: No change. The comment relates primarily to the new class
of research investment agreements that will be the subject of a future
DoDGARs part. For cooperative agreements covered by part 34, grants
officers already can handle any individual cases where alternative
provisions are justified, by making determinations of exceptional
circumstances under 37 CFR 401.3(a)(2) in the DoC regulations.
Comment: Section 34.25 should be revised to provide an
``authorization and consent'' clause to be included in cooperative
agreements with for-profit

[[Page 12158]]

recipients. The clause would say that the Government authorizes and
consents to all use and manufacture by the recipient, in the
performance of the cooperative agreement or any subaward, of any
invention described in and covered by a United States patent.
Response: No change. It would not be appropriate to include a
clause in cooperative agreements authorizing a recipient's or
subrecipient's infringement of U.S. patents held by other parties.

Comments on Procurement

Comment: Section 34.31, which specifies requirements for
procurements made by for-profit recipients of DoD assistance awards,
contains requirements that often differ significantly from standard
commercial practices. For example, the section provides that preaward
documents may be subject to preaward review by the grants officer.
Also, this section requires certain Government flowdown and audit
provisions. The requirements will require commercial firms to draft
Government terms and conditions for subcontracts, and to establish
Government-unique purchasing requirements. Recommend these requirements
be eliminated.
Response: In response to the general comment, the few requirements
in this section were carefully selected from the much larger set of
requirements specified by OMB Circular A-110 for university and other
nonprofit recipients of Federal assistance. They are judged to be the
minimal set of requirements that are needed to ensure proper
stewardship of Federal assistance.
In response to the first specific comment on preaward review of a
recipient's procurement documents, the word ``exceptional'' was added
to the sentence that advises the grants officer that preaward review is
the exception rather than the rule. The sentence now states that
recipients will only be required to provide such documents for the
grants officer's pre-award review in exceptional cases where the grants
officer judges that there is a compelling need to do so. For those
projects where there is substantial involvement by the Government and a
procurement is central to the success of the project (e.g., the
purchase of a large computer to be used jointly by a recipient and
Government researchers), DoD believes that the Government's right to a
preaward review of the procurement documents can be essential.
With respect to the second specific comment on flowdown of
Government-unique requirements to contracts under assistance awards,
many of the requirements are required by law, regulation, or executive
order--DoD therefore cannot waive them and they must be included when
they are applicable, as the rule states. The few other requirements are
those carefully selected as the minimal set for proper stewardship for
most financial assistance, such as the standard access to records by
DoD, the Comptroller General, and their duly authorized
representatives. As it prepares the future DoDGARs part for a specific
class of research investment agreements, DoD will consider which
requirements might be waived in light of the substantial cost sharing
and other special features of that class of instruments.
Comment: The Office of Management and Budget expressed concern that
Sec. 32.44 included a $10 million threshold, below which a recipient
would not have to maintain its procurement procedures in writing. The
concern is that the threshold would create substantive differences
between requirements of the DoD and those in other Federal agencies'
implementation of OMB Circular A-110.
Response: The provision was revised, as requested. The Office of
Management and Budget has agreed to explore the possibility of amending
OMB Circular A-110 to establish for all Federal agencies' awards a
dollar threshold below which recipients would be relieved of the
requirement to maintain procurement procedures in writing.
Comment: The definition of ``contract'' in Sec. 21.130 refers to it
as an instrument reflecting a certain type of relationship between the
Federal Government and a State, a local government, or other person.
Suggest adding the words ``or entity'' after the word ``person.''
Response: Replaced the word ``person'' with ``recipient,'' which is
the term used at 31 U.S.C. 6303 in the Federal Grant and Cooperative
Agreement Act, the defining statute that specifies when it is
appropriate for Federal agencies to use contracts. The term
``recipient'' covers persons and other entities.
Comment: Change the wording of the definition of ``contract'' in
Sec. 34.2 to clarify that there can be subcontracts under a grant or
cooperative agreement.
Response: Revised the wording to clarify that the term ``contract''
includes: Recipients' procurement contracts under DoD assistance
awards; subrecipients' procurement contracts under assistance
subawards; and procurement subcontracts under contracts awarded by
recipients or subrecipients.

Comments on Records Retention

Comment: The first and second sentences in paragraph (e) of
Sec. 34.42 provide that: (1) DoD Components, the Inspector General,
Comptroller General of the United States, or any of their duly
authorized representatives, have the right of timely and unrestricted
access to certain records of for-profit recipients that are pertinent
to awards; and (2) this right includes timely and reasonable access to
a recipient's personnel for the purpose of interview and discussion
related to such documents. In the first sentence, recommend replacing
the words ``duly authorized representatives'' and the words
``unrestricted access'' with ``duly authorized Government
representatives'' and ``access during normal working hours,''
respectively. Recommend deleting the second sentence, which goes beyond
what is authorized in existing law.
Response: No change. The wording of this section mirrors that of
the Governmentwide guidance in OMB Circular A-110 for assistance awards
to nonprofit organizations, guidance issued after legal review by all
major Federal agencies and with the benefit of public review and
comment. It is not necessary to add the words ``during normal working
hours'' to clarify what is meant by ``reasonable access to a
recipient's personnel,'' because it rarely would be reasonable to
insist upon access at other times. Adding the word ``Government'' to
``duly authorized representatives'' could be contrary to the increased
reliance upon non-Federal auditors that accompanies the Governmentwide
emphasis on the single-audit concept, which is broadened to for-profit
recipients by the rule's Sec. 34.16. Finally, there is no intent to
have the word ``interview'' interpreted in an extreme way that would
appear to give the Government access that exceeds its statutory
authority.
Comment: In light of the increasing transfer of records from hard
copy to electronic media, recommend including language similar to that
in the Federal Acquisition Regulation at 48 CFR 4.703(d), which
implemented Pub. L. 103-335's requirements concerning such transfers
for procurement contracts.
Response: Added new paragraphs to both Sec. 32.53, for awards to
university and other nonprofit recipients, and Sec. 34.42, for awards
to for-profit firms.

[[Page 12159]]

Comments on Termination and Enforcement

Comment: Paragraph (a)(1) of Sec. 34.51 provides that the grants
officer may terminate awards to a for-profit firm if the recipient
``fails to comply with the terms and conditions of an award.'' It
should be amended to say ``fails to comply with the material terms and
conditions.''
Response: No change. The provision already says ``materially fails
to comply with the terms and conditions.''
Comment: Section 34.51 should be revised to provide the Government
the same flexibility it has with procurement contracts to unilaterally
terminate awards to for-profit firms for reasons other than non-
performance or non-compliance.
Response: No change. This is an example of a basic difference
between procurement and assistance relationships. Other than
terminations for cause, the Government should be able to terminate
assistance awards only by mutual agreement with the recipient, as the
rule provides.
Comment: It should be expressly specified in paragraph (a) of
Sec. 34.52 that a for-profit recipient is to be paid all of the
allowable costs that it incurred prior to termination if the award is
terminated for failure to comply with a material provision of the
award.
Response: Revised paragraph (a)(3) of Sec. 34.52 to state that, in
the case of termination, the recipient will be reimbursed for allowable
costs it incurred prior to termination, with the possible exception of
costs for activities or actions not in compliance.

Comments on National Policy Requirements

Comment: Appendix B to part 22 contains a requirement for the
grants officer to include an award clause implementing the ``officials
not to benefit'' statute. That statute (41 U.S.C. 22) was amended by
section 6004 of the Federal Acquisition Streamlining Act (FASA), to
eliminate the requirement to include a clause. This is an unnecessary
clause and should be deleted.
Response: No change. Due to FASA's amendment of 41 U.S.C. 22, the
statute itself no longer requires an ``officials not to benefit''
clause in Federal awards. However, recipients of Federal awards still
must comply with the ``officials not to benefit'' requirement in 41
U.S.C. 22, just as they must comply with all other applicable U.S.
statutes and Federal regulations. Compliance with those requirements is
inherently a condition of the award; while a general award clause could
require compliance with all applicable Federal statutes and
regulations, without identifying any of them, fairness dictates that
recipients be informed about specific requirements whenever possible.
For that reason, Appendix B to part 22 offers clauses that the grants
officer may use to communicate the requirements to recipients.
Comment: Appendix B to part 22 flows down to subrecipients a number
of requirements for which that flowdown apparently is not required by
law. They include nondiscrimination items a., b., d., and e., as well
as the Cargo Preference and Clean Air and Water Acts.
Response: No change. Each of these requirements does flow down to
subrecipients, as stated in the appendix, due to the implementation of
the statute in Federal regulation. By helping to clarify the
applicability to awards and subawards of the most common national
policy requirements, the appendix should be useful to both grants
officers and recipients.
Comment: Appendix B to part 22 states that the Architectural
Barriers Act applies to awards for the construction or alteration of
buildings or facilities which will require public accessibility. There
is no basis in law or regulation for limiting the applicability of the
Act to buildings that require public accessibility (employees, for
example, may be disabled and usually are not considered members of the
public). The only statutory exemption is for certain types of
facilities that are restricted to use only by able-bodied military
personnel.
Response: Corrected the statement in the appendix on the
applicability of the Act.
Comment: Section 22.510(a)(2)(ii) states that grants officers may
allow recipients to incorporate certifications into a provision that
cites them by reference, rather than providing the full text of the
certification with each proposal or award document. In accordance with
statute or codified regulations, certain certifications cannot be
incorporated by reference.
Response: No substantive change. For the three certifications
(debarment and suspension, drug-free workplace, and lobbying) that
currently are required, the Department has concluded that the pertinent
statutes, Executive order, and DoD regulations (32 CFR parts 25 and 28)
do not presently preclude incorporation of the certifications by
reference. For clarity, the final rule includes additional statements
that certifications may be incorporated by reference to the extent
consistent with statute and codified regulation.
Comment: Section 22.510 states that Appendix A to part 22 includes
``suggested'' language for incorporating certifications by reference.
However, this is not permitted because the certification language is
required, not suggested.
Response: The language in Appendix A incorporates by reference the
exact certification language that is required to comply with statute
and codified regulation. To alleviate the confusion, the term
``suggested'' is removed from Sec. 22.510 and Appendix A. Section
22.510 now states that Appendix A ``includes language that may be used
for incorporating certifications by reference.''
Comment: Section 22.510(a)(2)(ii)(C) states that grants officers
may obtain the certification concerning debarment and suspension at the
time of award, notwithstanding the regulatory requirement at 32 CFR
25.510(a) to obtain that certification at the time of proposal
submission. The Office of Management and Budget is concerned that
adoption of this provision would grant the DoD a deviation from the
Governmentwide common rule on debarment and suspension, creating a
nonuniformity with other Federal agencies.
Response: The provision is revised, as suggested.

C. Other Changes

Changes for Audit Requirements and Conditional Exemptions

On August 29, 1997 (62 FR 45934 ff.), subsequent to the DoD's
proposal of these rules for comment, the Office of Management and
Budget made two changes to OMB Circular A-110. The first change was to
delete references to OMB Circular A-128, ``Audits of State and Local
Governments,'' which recently was rescinded, and to refer instead to
the revised OMB Circular A-133, ``Audits of States, Local Governments,
and Non-Profit Organizations.'' Part 32 in these final rules, which is
the DoD's implementation of OMB Circular A-110, includes this change.
Conforming changes also were made in part 22 of these final rules.
The second change made by the Office of Management and Budget to
OMB Circular A-110 was to add a new section that addresses conditional
exemptions. The applicability of that new section to the DoD is under
review and will be addressed in a future rulemaking action.

[[Page 12160]]

Deferral of Final Action on Proposed Changes to 32 CFR Part 33

As requested by the Office of Management and Budget, the DoD agreed
to defer final action on the two proposed amendments to part 33,
``Uniform Administrative Requirements for Grants and Cooperative
Agreements to State and Local Governments,'' which is the DoD's
implementation of a Governmentwide rule. Those two proposed changes
were to implement: (1) The Resource Conservation and Recovery Act (42
U.S.C. 6962); and (2) changes made by the Federal Acquisition
Streamlining Act of 1994 to the Contract Work Hours and Safety
Standards Act (40 U.S.C. 327-330, as amended). The deferral enables the
Office of Management and Budget to coordinate these amendments with
other Federal agencies and request that the agencies amend the
Governmentwide rule.

Changes for Military Recruiting

As stated in the DoD's preamble when these rules were proposed, the
rule previously codified at 32 CFR part 23, ``Grants and Agreements--
Military Recruiting on Campus,'' is moved by this final rulemaking to
section 22.520 in part 22. A few, nonsubstantive technical corrections
are made to the language that previously appeared in part 23, to allow
its incorporation into part 22.

Executive Order 12866

Part 32 was determined to be a ``significant regulatory action,''
as defined by Executive Order 12866, by the Administrator of the Office
of Management and Budget's Office of Information and Regulatory
Affairs. The Department of Defense believes that none of the rules
will: (1) Have an annual effect on the economy of $100 million or more
or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities; (2) create a serious inconsistency or otherwise interfere
with an action taken or planned by another agency; (3) materially alter
the budgetary impact of entitlements, grants, user fees, or loan
programs or the rights and obligations of recipients thereof; or (4)
raise novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in Executive Order
12866.

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

These regulatory actions do not contain a Federal mandate that may
result in the expenditure by State, local and tribal governments, in
aggregate, or by the private sector, of $100 million or more in any one
year.

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

These regulatory actions will not have a significant adverse impact
on a substantial number of small entities.

Paperwork Reduction Act of 1995 (44 U.S.C. 3500 et seq.)

These regulatory actions will not impose any new reporting or
recordkeeping requirements under the Paperwork Reduction Act. Reporting
and recordkeeping requirements in parts 32 and 34 are those promulgated
by the updated OMB Circular A-110, which the Office of Management and
Budget proposed in August 1992 (57 FR 39018), asking for public
comments, and finalized in November 1993 (58 FR 62992).

List of Subjects

32 CFR Part 21

Grant programs, Grants administration.

32 CFR Part 22

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

32 CFR Part 23

Colleges and universities, Grant programs, Grants administration,
Penalties.

32 CFR Part 28

Grant programs, Loan programs, Lobbying, Penalties, Reporting and
recordkeeping requirements.

32 CFR Part 32

Accounting, Colleges and universities, Grant programs, Grants
administration, Hospitals, Nonprofit organizations, Reporting and
recordkeeping requirements.

32 CFR Part 34

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

Accordingly, title 32 of the Code of Federal Regulations, chapter
I, subchapter B, is revised as follows.
1. The heading of subchapter B is revised to read as follows:

SUBCHAPTER B--DoD GRANT AND AGREEMENT REGULATIONS

2. Part 21 is added to read as follows:

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

Subpart A--Defense Grant and Agreement Regulatory System

Sec.
21.100 Scope.
21.105 Authority, purpose, and issuance.
21.110 Applicability and relationship to acquisition regulations.
21.115 Compliance and implementation.
21.120 Publication and maintenance.
21.125 Deviations.
21.130 Definitions.

Subpart B--Authorities and Responsibilities

21.200 Purpose.
21.205 DoD Components' authorities.
21.210 Vesting and delegation of authority.
21.215 Contracting activities.
21.220 Grants officers.
Subpart C--Information Reporting on Grants, Cooperative Agreements, and
Other Nonprocurement Instruments
21.300 Purpose.
21.305 Defense Assistance Awards Data System.
21.310 Catalog of Federal Domestic Assistance.
21.315 Uniform grants and agreements numbering system.

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

Subpart A--Defense Grant and Agreement Regulatory System

Sec. 21.100 Scope.

The purposes of this part, which is one portion of the DoD Grant
and Agreement Regulations (DoDGARs), are to:
(a) Provide general information about the DoDGARs.
(b) Set forth general policies and procedures related to DoD
Components' overall management of functions related to grants and
cooperative agreements.

Sec. 21.105 Authority, purpose, and issuance.

(a) DoD Directive 3210.6\1\ established the Defense Grant and
Agreement Regulatory System (DGARS). The directive authorized
publication of policies and procedures comprising the DGARS in the DoD
Grant and Agreement Regulations (DoDGARs), in DoD instructions, and in
other DoD publications, as appropriate. Thus, the

[[Page 12161]]

DoDGARs are one element of the DGARS.
---------------------------------------------------------------------------

\1\ Copies may be obtained, at cost, from the National Technical
Information Service, 5285 Port Royal Road, Springfield, VA 22161.
Authorized users may also obtain copies from the Defense Technical
Information Center, 8725 John J. Kingman Rd., Suite 0944, Fort
Belvoir, VA 22060-6218.
---------------------------------------------------------------------------

(b) The purposes of the DoDGARs, in conjunction with other elements
of the DGARS, are to provide uniform policies and procedures for grants
and cooperative agreements awarded by DoD Components, in order to meet
DoD needs for:
(1) Efficient program execution, effective program oversight, and
proper stewardship of Federal funds.
(2) Compliance with relevant statutes; Executive orders; and
applicable guidance, such as Office of Management and Budget (OMB)
circulars.
(3) Collection from DoD Components, retention, and dissemination of
management and fiscal data related to grants and agreements.
(c) The Director of Defense Research and Engineering, or his or her
designee:
(1) Develops and implements DGARS policies and procedures.
(2) Issues and maintains the DoD Grant and Agreement Regulations
and other DoD publications that comprise the DGARS.

Sec. 21.110 Applicability and relationship to acquisition regulations.

(a) Applicability to grants and cooperative agreements. The DoD
Grant and Agreement Regulations (DoDGARs) apply to all DoD grants and
cooperative agreements.
(b) Applicability to other nonprocurement instruments. (1) In
accordance with DoD Directive 3210.6, the DoDGARs may include rules
that apply to other nonprocurement instruments, when specifically
required in order to implement a statute, Executive order, or
Governmentwide rule that applies to other nonprocurement instruments,
as well as to grants and cooperative agreements. For example, the rule
on nonprocurement debarment and suspension in 32 CFR part 25, subparts
A through E, applies to all nonprocurement transactions, including
grants, cooperative agreements, contracts of assistance, loans and loan
guarantees (see definition of ``primary covered transaction'' at 32 CFR
25.110(a)(1)(i)).
(2) The following is a list of DoDGARs rules that apply not only to
grants and cooperative agreements, but also to other types of
nonprocurement instruments:
(i) Requirements for reporting to the Defense Assistance Award Data
System, in subpart C of this part.
(ii) The rule on nonprocurement debarment and suspension in 32 CFR
part 25, subparts A through E.
(iii) Drug-free workplace requirements in 32 CFR part 25, subpart
F.
(iv) Restrictions on lobbying in 32 CFR part 28.
(v) Administrative requirements for grants, cooperative agreements,
and other financial assistance to:
(A) Universities and other nonprofit organizations, in 32 CFR part
32.
(B) State and local governments, in 32 CFR part 33.
(3) Grants officers should be aware that each rule that applies to
other types of nonprocurement instruments (i.e., other than grants and
cooperative agreements) states its applicability to such instruments.
However, grants officers must exercise caution when determining the
applicability of some Governmentwide rules that are included in the
DoDGARs, because a term may be defined differently in a Governmentwide
rule than it is defined elsewhere in the DoDGARs. For example, the
Governmentwide implementation of the Drug-Free Workplace Act of 1988
(32 CFR part 25, subpart F) states that it applies to grants, but
defines ``grants'' to include cooperative agreements and other forms of
financial assistance.
(c) Relationship to acquisition regulations. The Federal
Acquisition Regulation (FAR) (48 CFR parts 1-53), the Defense Federal
Acquisition Regulation Supplement (DFARS) (48 CFR parts 201-270), and
DoD Component supplements to the FAR and DFARS apply to DoD Components'
procurement contracts used to acquire goods and services for the direct
benefit or use of the Federal Government. Policies and procedures in
the FAR and DFARS do not apply to grants, cooperative agreements, or
other nonprocurement transactions unless the DoDGARs specify that they
apply.

Sec. 21.115 Compliance and implementation.

The Head of each DoD Component that awards or administers grants
and cooperative agreements, or his or her designee:
(a) Is responsible for ensuring compliance with the DoDGARs within
that DoD Component.
(b) May authorize the issuance of regulations, procedures, or
instructions that are necessary to implement DGARS policies and
procedures within the DoD Component, or to supplement the DoDGARs to
satisfy needs that are specific to the DoD Component, as long as such
regulations, procedures, or instructions do not impose additional costs
or administrative burdens on recipients or potential recipients. Heads
of DoD Components or their designees shall establish policies and
procedures in areas where uniform policies and procedures throughout
the DoD Component are required, such as for:
(1) Requesting class deviations from the DoDGARs (see Sec. 21.125)
or exemptions from the provisions of 31 U.S.C. 6301 et seq., that
govern the appropriate use of contracts, grants, and cooperative
agreements (see 32 CFR 22.220).
(2) Designating one or more Grant Appeal Authorities to resolve
claims, disputes, and appeals (see 32 CFR 22.815).
(3) Reporting data on assistance awards and programs, as required
by 31 U.S.C. chapter 61 (see subpart C of this part).
(4) Prescribing requirements for use and disposition of real
property acquired under awards, if the DoD Component makes any awards
to institutions of higher education or to other nonprofit organizations
under which real property is acquired in whole or in part with Federal
funds (see 32 CFR 32.32).

Sec. 21.120 Publication and maintenance.

(a) The DoDGARs are published as chapter I, subchapter B, title 32
of the Code of Federal Regulations (CFR) and in a separate loose-leaf
edition. The loose-leaf edition is divided into parts, subparts, and
sections, to parallel the CFR publication. Cross-references within the
DoDGARs are stated as CFR citations (e.g., a reference to Sec. 21.115
in part 21 would be to 32 CFR 21.115).
(b) Updates to the DoDGARs are published in the Federal Register.
When finalized, updates also are published as Defense Grant and
Agreement Circulars, with revised pages for the separate, loose-leaf
edition.
(c) Revisions to the DoDGARs are recommended to the Director of
Defense Research and Engineering (DDR&E) by a standing working group.
The DDR&E, Director of Defense Procurement, and each Military
Department shall be represented on the working group. Other DoD
Components that use grants or cooperative agreements may also nominate
representatives. The working group meets when necessary.

Sec. 21.125 Deviations.

(a) The Head of the DoD Component or his or her designee may
authorize individual deviations from the DoDGARs, which are deviations
that affect only one grant or cooperative agreement, if such deviations
are not prohibited by statute, executive order or regulation.
(b) Class deviations that affect more than one grant or cooperative
agreement must be approved in advance by the Director, Defense Research
and

[[Page 12162]]

Engineering (DDR&E) or his or her designee. Note that OMB concurrence
also is required for deviations from two parts of the DoDGARs, 32 CFR
parts 32 and 33, in accordance with 32 CFR 32.4 and 33.6, respectively.
(c) Copies of justifications and agency approvals for individual
deviations and written requests for class deviations shall be submitted
to: Deputy Director, Defense Research and Engineering, ATTN: Research,
3080 Defense Pentagon, Washington DC 20301-3080.
(d) Copies of requests and approvals for individual and class
deviations shall be maintained in award files.

Sec. 21.130 Definitions.

Acquisition. The acquiring (by purchase, lease, or barter) of
property or services for the direct benefit or use of the United States
Government (see more detailed definition at 48 CFR 2.101). In
accordance with 31 U.S.C. 6303, procurement contracts are the
appropriate legal instruments for acquiring such property or services.
Assistance. The transfer of a thing of value to a recipient to
carry out a public purpose of support or stimulation authorized by a
law of the United States (see 31 U.S.C. 6101(3)). Grants and
cooperative agreements are examples of legal instruments used to
provide assistance.
Contract. See the definition for procurement contract in this
section.
Contracting activity. An activity to which the Head of a DoD
Component has delegated broad authority regarding acquisition
functions, pursuant to 48 CFR 1.601.
Contracting officer. A person with the authority to enter into,
administer, and/or terminate contracts and make related determinations
and findings. A more detailed definition of the term appears at 48 CFR
2.101.
Cooperative agreement. A legal instrument which, consistent with 31
U.S.C. 6305, is used to enter into the same kind of relationship as a
grant (see definition ``grant''), except that substantial involvement
is expected between the Department of Defense and the recipient when
carrying out the activity contemplated by the cooperative agreement.
The term does not include ``cooperative research and development
agreements'' as defined in 15 U.S.C. 3710a.
Deviation. The issuance or use of a policy or procedure that is
inconsistent with the DoDGARs.
DoD Components. The Office of the Secretary of Defense, the
Military Departments, the Defense Agencies, and DoD Field Activities.
Grant. A legal instrument which, consistent with 31 U.S.C. 6304, is
used to enter into a relationship:
(1) The principal purpose of which is to transfer a thing of value
to the recipient to carry out a public purpose of support or
stimulation authorized by a law of the United States, rather than to
acquire property or services for the Department of Defense's direct
benefit or use.
(2) In which substantial involvement is not expected between the
Department of Defense and the recipient when carrying out the activity
contemplated by the grant.
Grants officer. An official with the authority to enter into,
administer, and/or terminate grants or cooperative agreements.
Nonprocurement instrument. A legal instrument other than a
procurement contract. Examples include instruments of financial
assistance, such as grants or cooperative agreements, and those of
technical assistance, which provide services in lieu of money.
Procurement contract. A legal instrument which, consistent with 31
U.S.C. 6303, reflects a relationship between the Federal Government and
a State, a local government, or other recipient when the principal
purpose of the instrument is to acquire property or services for the
direct benefit or use of the Federal Government. See the more detailed
definition for contract at 48 CFR 2.101.
Recipient. An organization or other entity receiving a grant or
cooperative agreement from a DoD Component.

Subpart B--Authorities and Responsibilities

Sec. 21.200 Purpose.

This subpart describes the sources and flow of authority to use
grants and cooperative agreements, and assigns the broad
responsibilities associated with DoD Components' use of such
instruments.

Sec. 21.205 DoD Components' authorities.

(a) In accordance with 31 U.S.C. 6301 et seq., DoD Components shall
use grants and cooperative agreements as legal instruments reflecting
assistance relationships between the United States Government and
recipients.
(b) Unlike the use of a procurement contract (for which Federal
agencies have inherent, Constitutional authority), use of a grant or
cooperative agreement to carry out a program requires authorizing
legislation, the intent of which supports the use of an assistance
instrument (e.g., the intent of the legislation authorizing a program
supports a judgment that the principal purpose of the program is
assistance, rather than acquisition). DoD Components may award grants
and cooperative agreements under a number of statutory authorities that
fall into three categories:
(1) Authorities that statutes provide to the Secretary of Defense.
These authorities generally are delegated by the Secretary of Defense
to Heads of DoD Components, usually through DoD directives,
instructions, or policy memoranda that are not part of the Defense
Grant and Agreement Regulatory System. Examples of statutory
authorities in this category are:
(i) Authority under 10 U.S.C. 2391 to make grants or conclude
cooperative agreements to assist State and local governments in
planning and carrying out community adjustments and economic
diversification required by changes in military installations or in DoD
contracts or spending that may have a direct and significant adverse
consequence on the affected community.
(ii) Authority under 10 U.S.C. 2413 to enter into cooperative
agreements with entities that furnish procurement technical assistance
to businesses.
(2) Authorities that statutes may provide directly to Heads of DoD
Components. When a statute authorizes the head of a DoD Component to
use a grant or cooperative agreement or to carry out a program with a
principal purpose of assistance, use of that authority requires no
delegation by the Secretary of Defense. For example, 10 U.S.C. 2358
authorizes the Secretaries of the Military Departments, in addition to
the Secretary of Defense, to perform research and development projects
through grants and cooperative agreements. A Military Department's use
of the authority of 10 U.S.C. 2358 therefore requires no delegation by
the Secretary of Defense.
(3) Authorities that arise indirectly as the result of statute. For
example, authority to use a grant or cooperative agreement may result
from:
(i) A federal statute authorizing a program that is consistent with
an assistance relationship (i.e., the support or stimulation of a
public purpose, rather than the acquisition of a good or service for
the direct benefit of the Department of Defense). In accordance with 31
U.S.C. chapter 63, such a program would appropriately be carried out
through the use of grants or cooperative agreements.
(ii) Exemptions requested by the Department of Defense and granted
by the Office of Management and Budget

[[Page 12163]]

under 31 U.S.C. 6307, as described in 32 CFR 22.220.

Sec. 21.210 Vesting and delegation of authority.

(a) The authority and responsibility for awarding grants and
cooperative agreements is vested in the Head of each DoD Component that
has such authority.
(b) The Head of each such DoD Component, or his or her designee,
may delegate to the heads of contracting activities (HCAs) within that
Component, authority to award grants or cooperative agreements, to
appoint grants officers (see Sec. 21.220(c)), and to broadly manage the
DoD Component's functions related to grants and cooperative agreements.
An HCA is the same official (or officials) designated as the head of
the contracting activity for procurement contracts, as defined at 48
CFR 2.101--the intent is that overall management responsibilities for a
DoD Component's functions related to nonprocurement instruments be
assigned only to officials that have similar responsibilities for
procurement contracts.

Sec. 21.215 Contracting activities.

When designated by the Head of the DoD Component or his or her
designee (see 32 CFR 21.210(b)), the HCA is responsible for the grants
and cooperative agreements made by or assigned to that activity. He or
she shall supervise and establish internal policies and procedures for
that activity's assistance awards.

Sec. 21.220 Grants officers.

(a) Authority. Only grants officers are authorized to sign grants
or cooperative agreements, or to administer or terminate such legal
instruments on behalf of the Department of Defense. Grants officers may
bind the Government only to the extent of the authority delegated to
them.
(b) Responsibilities. Grants officers should be allowed wide
latitude to exercise judgment in performing their responsibilities.
Grants officers are responsible for ensuring that:
(1) Individual grants and cooperative agreements are used
effectively in the execution of DoD programs, and are awarded and
administered in accordance with applicable laws, Executive orders,
regulations, and DoD policies.
(2) Sufficient funds are available for obligation.
(3) Recipients of grants and cooperative agreements receive
impartial, fair, and equitable treatment.
(c) Selection, appointment and termination of appointment of grants
officers. Each DoD Component that awards grants or enters into
cooperative agreements shall have a formal process (see Sec. 21.210(b))
to select and appoint grants officers and terminate their appointments.
DoD Components are not required to maintain a selection process for
grants officers separate from the selection process for contracting
officers, and written statements of appointment or termination for
grants officers may be integrated into the necessary documentation for
contracting officers, as appropriate.
(1) Selection. In selecting grants officers, appointing officials
shall consider the complexity and dollar value of the grants and
cooperative agreements to be assigned and judge whether candidates
possess the necessary experience, training, education, business acumen,
judgment, and knowledge of contracts and assistance instruments to
function effectively as grants officers.
(2) Appointment. Statements of appointment shall be in writing and
shall clearly state the limits of grants officers' authority, other
than limits contained in applicable laws or regulations. Information on
the limits of a grants officer's authority shall be readily available
to the public and agency personnel.
(3) Termination. Written statements of termination are required,
unless the written statement of appointment provides for automatic
termination. No termination shall be retroactive.

Subpart C--Information Reporting on Grants, Cooperative Agreements,
and Other Nonprocurement Instruments

Sec. 21.300 Purpose.

This subpart prescribes policies and procedures for compiling and
reporting data related to grants, cooperative agreements, and other
nonprocurement instruments subject to information reporting
requirements of 31 U.S.C. chapter 61.

Sec. 21.305 Defense Assistance Awards Data System.

(a) Purposes of the system. Data from the Defense Assistance Awards
Data System (DAADS) are used to provide:
(1) DoD inputs to meet statutory requirements for Federal
Governmentwide reporting of data related to obligations of funds by
grant, cooperative agreement, or other nonprocurement instrument.
(2) A basis for meeting Governmentwide requirements to report to
the Federal Assistance Awards Data System maintained by the Department
of Commerce and for preparing other recurring and special reports to
the President, the Congress, the General Accounting Office, and the
public.
(3) Information to support policy formulation and implementation
and to meet management oversight requirements related to the use of
grants, cooperative agreements, and other nonprocurement instruments.
(b) Responsibilities. (1) The Deputy Director, Defense Research and
Engineering (DDDR&E), or his or her designee, shall issue the manual
described in paragraph (b)(2)(ii) of this section.
(2) The Director for Information Operations and Reports, Washington
Headquarters Services (DIOR, WHS) shall, consistent with guidance
issued by the DDDR&E:
(i) Process DAADS information on a quarterly basis and prepare
recurring and special reports using such information.
(ii) Prepare, update, and disseminate ``Department of Defense
Assistance Awards Data System,'' an instruction manual for reporting
information to DAADS. The manual, which shall be issued by the office
of the DDR&E, shall specify procedures, formats, and editing processes
to be used by DoD Components, including magnetic tape layout and error
correction schedules.
(3) The following offices shall serve as central points for
collecting DAADS information from contracting activities within the DoD
Components:
(i) For the Army: As directed by the U.S. Army Contracting Support
Agency.
(ii) For the Navy: As directed by the Office of Naval Research.
(iii) For the Air Force: As directed by SAF/AQCP.
(iv) For the Office of the Secretary of Defense, Defense Agencies,
and DoD Field Activities: Each Defense Agency shall identify a central
point for collecting and reporting DAADS information to the DIOR, WHS,
at the address given in paragraph (c)(2) of this section. DIOR, WHS
shall serve as the central point for offices and activities within the
Office of the Secretary of Defense and for DoD Field Activities.
(4) The office that serves, in accordance with paragraph (b)(3) of
this section, as the central point for collecting DAADS information
from contracting activities within each DoD Component shall:
(i) Establish internal procedures to ensure reporting by
contracting activities that use grants, cooperative agreements or other
nonprocurement instruments subject to 31 U.S.C. chapter 61.
(ii) Collect information required by DD Form 2566, ``DoD Assistance
Award

[[Page 12164]]

Action Report,'' from those contracting activities, and report it to
DIOR, WHS, in accordance with paragraph (d) of this section.
(iii) Submit to the DDDR&E, at the address given in Sec. 21.125(c),
any recommended changes to the DAADS or to the instruction manual
described in paragraph (b)(2)(ii) of this section.
(c) Reporting procedures. The data required by the DD Form 2566
shall be:
(1) Collected for each individual grant, cooperative agreement, or
other nonprocurement action that is subject to 31 U.S.C. chapter 61 and
involves the obligation or deobligation of Federal funds. Each action
is reported as an obligation under a specific program listed in the
Catalog of Federal Domestic Assistance (CFDA, see Sec. 21.310). The
program to be shown is the one that provided the funds being obligated
(i.e., if a grants officer in one DoD Component obligates
appropriations of a second DoD Component's program, the grants officer
would show the CFDA program of the second DoD Component on the DD Form
2566).
(2) Reported on a quarterly basis to DIOR, WHS by the offices that
are designated pursuant to paragraph (b)(3) of this section. For the
first three quarters of the Federal fiscal year, the data are due by
close-of-business (COB) on the 15th day after the end of the quarter
(i.e., first-quarter data are due by COB on January 15th, second-
quarter data by COB April 15th, and third-quarter data by COB July
15th). Fourth-quarter data are due by COB October 25th, the 25th day
after the end of the quarter. If any due date falls on a weekend or
holiday, the data are due on the next regular workday. The mailing
address for DIOR, WHS is 1215 Jefferson Davis Highway, Suite 1204,
Arlington, VA 22202-4302.
(3) Reported on a computer tape, floppy diskette or by other means
permitted by the instruction manual described in paragraph (b)(2)(ii)
of this section. The data shall be reported in the format specified in
the instruction manual.
(d) Report control symbol. DoD Components' reporting of DAADS data
is used by DoD to satisfy Governmentwide requirements to report to the
Federal Assistance Awards Data System, which is assigned Interagency
Report Control Number 0252-DOC-QU.

Sec. 21.310 Catalog of Federal Domestic Assistance.

(a) Purpose and scope of the reporting requirement. (1) Under the
Federal Program Information Act (31 U.S.C. 6101 et seq.), as
implemented through OMB Circular A-89,\2\ the Department of Defense is
required to provide certain information about its domestic assistance
programs to OMB and the General Services Administration (GSA). GSA
makes this information available to the public by publishing it in the
Catalog of Federal Domestic Assistance (CFDA) and maintaining the
Federal Assistance Programs Retrieval System, a computerized data base
of the information.
---------------------------------------------------------------------------

\2\ Contact the Office of Management and Budget, EOP
Publications, 725 17th St. N.W., New Executive Office Building,
Washington, D.C. 20503.
---------------------------------------------------------------------------

(2) The CFDA covers all domestic assistance programs and
activities, regardless of the number of awards made under the program,
the total dollar value of assistance provided, or the duration. In
addition to programs using grants and cooperative agreements, covered
programs include those providing assistance in other forms, such as
payments in lieu of taxes or indirect assistance resulting from Federal
operations.
(b) Responsibilities. (1) Each DoD Component that provides domestic
financial assistance shall:
(i) Report to the Director for Information Operations and Reports,
Washington Headquarters Services (DIOR, WHS) all new programs and
changes as they occur, or as DIOR, WHS requests annual updates to
existing CFDA information.
(ii) Identify to the DIOR, WHS a point-of-contact who will be
responsible for reporting such program information and for responding
to inquiries related to it.
(2) The DIOR, WHS shall act as the Department of Defense's single
office for collecting, compiling and reporting such program information
to OMB and GSA.

Sec. 21.315 Uniform grants and agreements numbering system.

DoD Components shall assign identifying numbers to all
nonprocurement instruments subject to this subpart, including grants
and cooperative agreements. The numbering system parallels the
procurement instrument identification (PII) numbering system specified
in 48 CFR 204.70 (in the ``Defense Federal Acquisition Regulation
Supplement''), as follows:
(a) The first six alphanumeric characters of the assigned number
shall be identical to those specified by 48 CFR 204.7003(a)(1) to
identify the DoD Component and contracting activity.
(b) The seventh and eighth positions shall be the last two digits
of the fiscal year in which the number is assigned to the grant,
cooperative agreement, or other nonprocurement instrument.
(c) The 9th position shall be a number: ``1'' for grants; ``2'' for
cooperative agreements; and ``3'' for other nonprocurement instruments.
(d) The 10th through 13th positions shall be the serial number of
the instrument. DoD Components and contracting activities need not
follow any specific pattern in assigning these numbers and may create
multiple series of letters and numbers to meet internal needs for
distinguishing between various sets of awards.
3. Part 22 is added to read as follows:

PART 22--DoD GRANTS AND AGREEMENTS--AWARD AND ADMINISTRATION

Subpart A--General

Sec.
22.100 Purpose, relation to other parts, and organization.
22.105 Definitions.

Subpart B--Selecting the Appropriate Instrument

22.200 Purpose.
22.205 Distinguishing assistance from procurement.
22.210 Authority for providing assistance.
22.215 Distinguishing grants and cooperative agreements.
22.220 Exemptions.

Subpart C--Competition

22.300 Purpose.
22.305 General policy and requirement for competition.
22.310 Statutes concerning certain research, development, and
facilities construction grants.
22.315 Merit-based, competitive procedures.
22.320 Special competitions.
22.325 Historically Black colleges and universities (HBCUs) and
other minority institutions (MIs).

Subpart D--Recipient Qualification Matters--General Policies and
Procedures

22.400 Purpose.
22.405 Policy.
22.410 Grants officers' responsibilities.
22.415 Standards.
22.420 Pre-award procedures.

Subpart E--National Policy Matters

22.505 Purpose.
22.510 Certifications, representations, and assurances.
22.515 Provisions of annual appropriations acts.
22.520 Military recruiting on campus.
22.525 Paperwork Reduction Act.
22.530 Metric system of measurement.

Subpart F--Award

22.600 Purpose.
22.605 Grants officers' responsibilities.
22.610 Award instruments.

Subpart G--Field Administration

22.700 Purpose.
22.705 Policy.

[[Page 12165]]

22.710 Assignment of grants administration offices.
22.715 Grants administration office functions.

Subpart H--Post-Award Administration

22.800 Purpose and relation to other parts.
22.805 Post-award requirements in other parts.
22.810 Payments.
22.815 Claims, disputes, and appeals.
22.820 Debt collection.
22.825 Closeout audits.
Appendix A to Part 22--Proposal Provision for Required
Certifications.
Appendix B to Part 22--Suggested Award Provisions for National
Policy Requirements That Often Apply.
Appendix C to Part 22--Administrative Requirements and Issues To Be
Addressed in Award Terms and Conditions.

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

Subpart A--General

Sec. 22.100 Purpose, relation to other parts, and organization.

(a) This part outlines grants officers' and DoD Components'
responsibilities related to the award and administration of grants and
cooperative agreements.
(b) In doing so, it also supplements other parts of the DoD Grant
and Agreement Regulations (DoDGARs) that are either Governmentwide
rules or DoD implementation of Governmentwide guidance in Office of
Management and Budget (OMB) Circulars. Those other parts of the
DoDGARs, which are referenced as appropriate in this part, are:
(1) Governmentwide rules on debarment, suspension and drug-free
workplace requirements, in 32 CFR part 25.
(2) The Governmentwide rule on lobbying restrictions, in 32 CFR
part 28.
(3) Administrative requirements for grants and agreements awarded
to specific types of recipients:
(i) For State and local governmental organizations, in the
Governmentwide rule at 32 CFR part 33.
(ii) For institutions of higher education and other nonprofit
organizations, at 32 CFR part 32.
(iii) For for-profit organizations, at 32 CFR part 34.
(c) The organization of this part parallels the award and
administration process, from pre-award through post-award matters. It
therefore is organized in the same manner as the parts of the DoDGARs
(32 CFR parts 32, 33, and 34) that prescribe administrative
requirements for specific types of recipients.

Sec. 22.105 Definitions.

Other than the terms defined in this section, terms used in this
part are defined in 32 CFR 21.130.
Administrative offset. An action whereby money payable by the
United States Government to, or held by the Government for, a recipient
is withheld to satisfy a delinquent debt the recipient owes the
Government.
Advanced research. Advanced technology development that creates new
technology or demonstrates the viability of applying existing
technology to new products and processes in a general way. Advanced
research is most closely analogous to precompetitive technology
development in the commercial sector (i.e., early phases of research
and development on which commercial competitors are willing to
collaborate, because the work is not so coupled to specific products
and processes that the results of the work must be proprietary). It
does not include development of military systems and hardware where
specific requirements have been defined. It is typically funded in
Advanced Technology Development (Budget Activity 3 and Research
Category 6.3A) programs within Research, Development, Test and
Evaluation (RDT&E).
Applied research. Efforts that attempt to determine and exploit the
potential of scientific discoveries or improvements in technology such
as new materials, devices, methods and processes. It typically is
funded in Applied Research (Budget Activity 2 and Research Category
6.2) programs within Research, Development, Test and Evaluation
(RDT&E). Applied research normally follows basic research but may not
be fully distinguishable from the related basic research. The term does
not include efforts whose principal aim is the design, development, or
testing of specific products, systems or processes to be considered for
sale or acquisition; these efforts are within the definition of
``development.''
Basic research. Efforts directed toward increasing knowledge and
understanding in science and engineering, rather than the practical
application of that knowledge and understanding. It typically is funded
within Basic Research (Budget Activity 1 and Research Category 6.1)
programs within Research, Development, Test and Evaluation (RDT&E). For
the purposes of this part, basic research includes:
(1) Research-related, science and engineering education, including
graduate fellowships and research traineeships.
(2) Research instrumentation and other activities designed to
enhance the infrastructure for science and engineering research.
Claim. A written demand or written assertion by one of the parties
to a grant or cooperative agreement seeking as a matter of right, the
payment of money in a sum certain, the adjustment or interpretation of
award terms, or other relief arising under or relating to a grant or
cooperative agreement. A routine request for payment that is not in
dispute when submitted is not a claim. The submission may be converted
to a claim by written notice to the grants officer if it is disputed
either as to liability or amount, or is not acted upon in a reasonable
time.
Debt. Any amount of money or any property owed to a Federal Agency
by any person, organization, or entity except another United States
Federal Agency. Debts include any amounts due from insured or
guaranteed loans, fees, leases, rents, royalties, services, sales of
real or personal property, or overpayments, penalties, damages,
interest, fines and forfeitures, and all other claims and similar
sources. Amounts due a nonappropriated fund instrumentality are not
debts owed the United States, for the purposes of this subchapter.
Delinquent debt. A debt:
(1) That the debtor fails to pay by the date specified in the
initial written notice from the agency owed the debt, normally within
30 calendar days, unless the debtor makes satisfactory payment
arrangements with the agency by that date; and
(2) With respect to which the debtor has elected not to exercise
any available appeals or has exhausted all agency appeal processes.
Development. The systematic use of scientific and technical
knowledge in the design, development, testing, or evaluation of
potential new products, processes, or services to meet specific
performance requirements or objectives. It includes the functions of
design engineering, prototyping, and engineering testing.
Electronic commerce. The conduct of business through the use of
automation and electronic media, in lieu of paper transactions, direct
personal contact, telephone, or other means. For grants and cooperative
agreements, electronic commerce can include the use of electronic data
interchange, electronic mail, electronic bulletin board systems, and
electronic funds transfer for: program announcements or solicitations;
applications or proposals; award documents; recipients' requests for
payment; payment authorizations; and payments.

[[Page 12166]]

Electronic data interchange. The exchange of standardized
information communicated electronically between business partners,
typically between computers. It is DoD policy that DoD Component EDI
applications conform to the American National Standards Institute
(ANSI), Accredited Standards Committee (ASC) X-12 standard.\1\
---------------------------------------------------------------------------

\1\ Available from Accredited Standards Committee, X-12
Secretariat, Data Interchange Standards Association, 1800 Diagonal
Road, Suite 355, Alexandria, VA 22314-2852; Attention: Manager
Maintenance and Publications.
---------------------------------------------------------------------------

Electronic funds transfer. A system that provides the authority to
debit or credit accounts in financial institutions by electronic means
rather than source documents (e.g., paper checks). Processing typically
occurs through the Federal Reserve System and/or the Automated Clearing
House (ACH) computer network. It is DoD policy that DoD Component EFT
transmissions conform to the American National Standards Institute
(ANSI), Accredited Standards Committee (ASC) X-12 standard.
Historically Black colleges and universities. Institutions of
higher education determined by the Secretary of Education to meet the
requirements of 34 CFR 608.2. Each DoD Component's contracting
activities and grants officers may obtain a list of historically Black
colleges and universities from that DoD Component's Small and
Disadvantaged Business Utilization office.
Institution of higher education. An educational institution that
meets the criteria in section 1201(a) of the Higher Education Act of
1965 (20 U.S.C. 1141(a)). Note, however, that institution of higher
education has a different meaning in Sec. 22.520, as given at
Sec. 22.520(b)(2).
Minority institutions. Institutions of higher education that meet
the criteria for minority institutions specified in 10 U.S.C. 2323.
Each DoD Component's contracting activities and grants officers may
obtain copies of a current list of institutions that qualify as
minority institutions under 10 U.S.C. 2323 from that DoD Component's
Small and Disadvantaged Business Utilization office (the list of
minority institutions changes periodically, based on Department of
Education data on institutions' enrollments of minority students).
Research. Basic, applied, and advanced research, as defined in this
section.
Subaward. An award of financial assistance in the form of money, or
property in lieu of money, made under a DoD grant or cooperative
agreement by a recipient to an eligible subrecipient. The term includes
financial assistance for substantive program performance by the
subrecipient of a portion of the program for which the DoD grant or
cooperative agreement was made. It does not include the recipient's
procurement of goods and services needed to carry out the program.

Subpart B--Selecting the Appropriate Instrument

Sec. 22.200 Purpose.

This subpart provides the bases for determining the appropriate
type of instrument in a given situation.

Sec. 22.205 Distinguishing assistance from procurement.

Before using a grant or cooperative agreement, the grants officer
shall make a positive judgment that an assistance instrument, rather
than a procurement contract, is the appropriate instrument, based on
the following:
(a) Purpose. (1) The grants officer must judge that the principal
purpose of the activity to be carried out under the instrument is to
stimulate or support a public purpose (i.e., to provide assistance),
rather than acquisition (i.e., to acquire goods and services for the
direct benefit of the United States Government). If the principal
purpose is acquisition, then the grants officer shall judge that a
procurement contract is the appropriate instrument, in accordance with
31 U.S.C. chapter 63 (``Using Procurement Contracts and Grant and
Cooperative Agreements''). Assistance instruments shall not be used in
such situations, except:
(i) When a statute specifically provides otherwise; or
(ii) When an exemption is granted, in accordance with Sec. 22.220.
(2) For research and development, the appropriate use of grants and
cooperative agreements therefore is almost exclusively limited to the
performance of selected basic, applied, and advanced research projects.
Development projects nearly always shall be performed by contract or
other acquisition transaction because their principal purpose is the
acquisition of specific deliverable items (e.g., prototypes or other
hardware) for the benefit of the Department of Defense.
(b) Fee or profit. Payment of fee or profit is consistent with an
activity whose principal purpose is the acquisition of goods and
services for the direct benefit or use of the United States Government,
rather than an activity whose principal purpose is assistance.
Therefore, the grants officer shall use a procurement contract, rather
than an assistance instrument, in all cases where:
(1) Fee or profit is to be paid to the recipient of the instrument;
or
(2) The instrument is to be used to carry out a program where fee
or profit is necessary to achieving program objectives.

Sec. 22.210 Authority for providing assistance.

(a) Before a grant or cooperative agreement may be used, the grants
officer must:
(1) Identify the program statute, the statute that authorizes the
DoD Component to carry out the activity the principal purpose of which
is assistance (see 32 CFR 21.205(b)).
(2) Review the program statute to determine if it contains
requirements that affect the:
(i) Solicitation, selection, and award processes. For example,
program statutes may authorize assistance to be provided only to
certain types of recipients; may require that recipients meet certain
other criteria to be eligible to receive assistance; or require that a
specific process shall be used to review recipients' proposals.
(ii) Terms and conditions of the award. For example, some program
statutes require a specific level of cost sharing or matching.
(b) The grants officer shall ensure that the award of DoD
appropriations through a grant or cooperative agreement for a research
project meets the standards of 10 U.S.C. 2358, DoD's broad authority to
carry out research, even if the research project is authorized under a
statutory authority other than 10 U.S.C. 2358. The standards of 10
U.S.C. 2358 are that, in the opinion of the Head of the DoD Component
or his or her designee, the projects must be:
(1) Necessary to the responsibilities of the DoD Component.
(2) Related to weapons systems and other military needs or of
potential interest to the DoD Component.

Sec. 22.215 Distinguishing grants and cooperative agreements.

(a) Once a grants officer judges, in accordance with Secs. 22.205
and 22.210, that either a grant or cooperative agreement is the
appropriate instrument, the grants officer shall distinguish between
the two instruments as follows:
(1) Grants shall be used when the grants officer judges that
substantial involvement is not expected between the Department of
Defense and the recipient when carrying out the activity contemplated
in the agreement.
(2) Cooperative agreements shall be used when the grants officer
judges that substantial involvement is expected.

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The grants officer should document the nature of the substantial
involvement that led to selection of a cooperative agreement. Under no
circumstances are cooperative agreements to be used solely to obtain
the stricter controls typical of a contract.
(b) In judging whether substantial involvement is expected, grants
officers should recognize that ``substantial involvement'' is a
relative, rather than an absolute, concept, and that it is primarily
based on programmatic factors, rather than requirements for grant or
cooperative agreement award or administration. For example, substantial
involvement may include collaboration, participation, or intervention
in the program or activity to be performed under the award.

Sec. 22.220 Exemptions.

Under 31 U.S.C. 6307, ``the Director of the Office of Management
and Budget may exempt an agency transaction or program'' from the
requirements of 31 U.S.C. chapter 63. Grants officers shall request
such exemptions only in exceptional circumstances. Each request shall
specify for which individual transaction or program the exemption is
sought; the reasons for requesting an exemption; the anticipated
consequences if the exemption is not granted; and the implications for
other agency transactions and programs if the exemption is granted. The
procedures for requesting exemptions shall be:
(a) In cases where 31 U.S.C. chapter 63 would require use of a
contract and an exemption from that requirement is desired:
(1) The grants officer shall submit a request for exemption,
through appropriate channels established by his or her DoD Component
(see 32 CFR 21.115(b)(1)), to the Director of Defense Procurement
(DDP).
(2) The DDP, after coordination with the Director of Defense
Research and Engineering (DDR&E), shall transmit the request to OMB or
notify the DoD Component that the request has been disapproved.
(b) In other cases, the DoD Component shall submit a request for
the exemption through appropriate channels to the DDR&E. The DDR&E
shall transmit the request to OMB or notify the DoD Component that the
request has been disapproved.
(c) Where an exemption is granted, documentation of the approval
shall be maintained in the award file.

Subpart C--Competition

Sec. 22.300 Purpose.

This subpart establishes DoD policy and implements statutes related
to the use of competitive procedures in the award of grants and
cooperative agreements.

Sec. 22.305 General policy and requirement for competition.

(a) It is DoD policy to maximize use of competition in the award of
grants and cooperative agreements. This also conforms with:
(1) 31 U.S.C. 6301(3), which encourages the use of competition in
awarding all grants and cooperative agreements.
(2) 10 U.S.C. 2374(a), which sets out Congressional policy that any
new grant for research, development, test, or evaluation be awarded
through merit-based selection procedures.
(b) Grants officers shall use merit-based, competitive procedures
(as defined by Sec. 22.315) to award grants and cooperative agreements:
(1) In every case where required by statute (e.g., 10 U.S.C. 2361,
as implemented in Sec. 22.310, for certain grants to institutions of
higher education).
(2) To the maximum extent practicable in all cases where not
required by statute.

Sec. 22.310 Statutes concerning certain research, development, and
facilities construction grants.

(a) Definitions specific to this section. For the purposes of
implementing the requirements of 10 U.S.C. 2374 in this section, the
following terms are defined:
(1) Follow-on grant. A grant that provides for continuation of
research and development performed by a recipient under a preceding
grant. Note that follow-on grants are distinct from incremental funding
actions during the period of execution of a multi-year award.
(2) New grant. A grant that is not a follow-on grant.
(b) Statutory requirement to use competitive procedures. (1) A
grants officer shall not award a grant by other than merit-based,
competitive procedures (as defined by Sec. 22.315) to an institution of
higher education for the performance of research and development or for
the construction of research or other facilities, unless:
(i) In the case of a new grant for research and development, there
is a statute meeting the criteria in paragraph (c)(1) of this section;
(ii) In the case of a follow-on grant for research and development,
or of a grant for the construction of research or other facilities,
there is a statute meeting the criteria in paragraph (c)(2) of this
section; and
(iii) The Secretary of Defense submits to Congress a written notice
of intent to make the grant. The grant may not be awarded until 180
calendar days have elapsed after the date on which Congress received
the notice of intent. Contracting activities must submit a draft notice
of intent with supporting documentation through channels to the Deputy
Director, Defense Research and Engineering.
(2) Because subsequently enacted statutes may, by their terms,
impose different requirements than set out in paragraph (b)(1) of this
section, grants officers shall consult legal counsel on a case-by-case
basis, when grants for the performance of research and development or
for the construction of research or other facilities are to be awarded
to institutions of higher education by other than merit-based
competitive procedures.
(c) Subsequent statutes. In accordance with 10 U.S.C. 2361 and 10
U.S.C. 2374, a provision of law may not be construed as requiring the
award of a grant through other than the merit-based, competitive
procedures described in Sec. 22.315, unless:
(1) Institutions of higher education--new grants for research and
development. In the case of a new grant for research and development to
an institution of higher education, such provision of law specifically:
(i) Identifies the particular institution of higher education
involved;
(ii) States that such provision of law modifies or supersedes the
provisions of 10 U.S.C. 2361 (a requirement that applies only if the
statute authorizing or requiring award by other than competitive
procedures was enacted after September 30, 1989); and
(iii) States that the award to the institution of higher education
involved is required by such provision of law to be made in
contravention of the policy set forth in 10 U.S.C. 2374(a).
(2) Institutions of higher education--follow-on grants for research
and development and grants for the construction of any research or
other facility. In the case of any such grant to an institution of
higher education, such provision of law specifically:
(i) Identifies the particular institution of higher education
involved; and
(ii) States that such provision of law modifies or supersedes the
provisions of 10 U.S.C. 2361 (a requirement that applies only if the
statute authorizing or requiring award by other than competitive
procedures was enacted after September 30, 1989).
(3) Other entities--new grants for research and development--(i)
General. In the case of a new grant for research and development to an
entity other than

[[Page 12168]]

an institution of higher education, such provision of law specifically:
(A) Identifies the particular entity involved;
(B) States that the award to that entity is required by such
provision of law to be made in contravention of the policy set forth in
10 U.S.C. 2374(a).
(ii) Exception. The requirement of paragraph (c)(3)(i) of this
section does not apply to any grant that calls upon the National
Academy of Sciences to:
(A) Investigate, examine, or experiment upon any subject of science
or art of significance to the Department of Defense or any Military
Department; and
(B) Report on such matters to the Congress or any agency of the
Federal Government.

Sec. 22.315 Merit-based, competitive procedures.

Competitive procedures are methods that encourage participation in
DoD programs by a broad base of the most highly qualified performers.
These procedures are characterized by competition among as many
eligible proposers as possible, with a published or widely disseminated
notice. Competitive procedures include, as a minimum:
(a) Notice to prospective proposers. The notice may be a notice of
funding availability or Broad Agency Announcement published in the
Federal Register or Commerce Business Daily, respectively, or a notice
that is made available broadly by electronic means. Alternatively, it
may take the form of a specific notice that is distributed to eligible
proposers (a specific notice must be distributed to at least two
eligible proposers to be considered as part of a competitive
procedure). Notices must include, as a minimum, the following
information:
(1) Programmatic area(s) of interest, in which proposals or
applications are sought.
(2) Eligibility criteria for potential recipients (see subpart D of
this part).
(3) Criteria that will be used to select the applications or
proposals that will be funded, and the method for conducting the
evaluation.
(4) The type(s) of funding instruments (e.g., grants, cooperative
agreements, other assistance instruments, or procurement contracts)
that are anticipated to be awarded pursuant to the announcement.
(5) Instructions for preparation and submission of a proposal or
application, including the time by which it must be submitted.
(b) At least two eligible, prospective proposers.
(c) Impartial review of the merits of applications or proposals
received in response to the notice, using the evaluation method and
selection criteria described in the notice. For research and
development awards, in order to be considered as part of a competitive
procedure, the two principal selection criteria, unless statute
provides otherwise, must be the:
(1) Technical merits of the proposed research and development; and
(2) Potential relationship of the proposed research and development
to Department of Defense missions.

Sec. 22.320 Special competitions.

Some programs may be competed for programmatic or policy reasons
among specific classes of potential recipients. An example would be a
program to enhance U.S. capabilities for academic research and
research-coupled graduate education in defense-critical, science and
engineering disciplines, a program that would be competed specifically
among institutions of higher education. All such special competitions
shall be consistent with program representations in the President's
budget submission to Congress and with subsequent Congressional
authorizations and appropriations for the programs.

Sec. 22.325 Historically Black colleges and universities (HBCUs) and
other minority institutions (MIs).

Increasing the ability of HBCUs and MIs to participate in federally
funded, university programs is an objective of Executive Order 12876 (3
CFR, 1993 Comp., p. 671) and 10 U.S.C. 2323. Grants officers shall
include appropriate provisions in Broad Agency Announcements (BAAs) or
other announcements for programs in which awards to institutions of
higher education are anticipated, in order to promote participation of
HBCUs and MIs in such programs. Also, whenever practicable, grants
officers shall reserve appropriate programmatic areas for exclusive
competition among HBCUs and MIs when preparing announcements for such
programs.

Subpart D--Recipient Qualification Matters--General Policies and
Procedures

Sec. 22.400 Purpose.

The purpose of this subpart is to specify policies and procedures
for grants officers' determination of recipient qualifications prior to
award.

Sec. 22.405 Policy.

(a) General. Grants officers normally shall award grants or
cooperative agreements only to qualified recipients that meet the
standards in Sec. 22.415. This practice conforms with the
Governmentwide policy, stated at 32 CFR 25.115(a), to do business only
with responsible persons.
(b) Exception. In exceptional circumstances, grants officers may
make awards to recipients that do not fully meet the standards in
Sec. 22.415 and include special award conditions that are appropriate
to the particular situation, in accordance with 32 CFR 32.14, 33.12, or
34.4.

Sec. 22.410 Grants officers' responsibilities.

The grants officer is responsible for determining a recipient's
qualification prior to award. The grants officer's signature on the
award document shall signify his or her determination that either:
(a) The potential recipient meets the standards in Sec. 22.415 and
is qualified to receive the grant or cooperative agreement; or
(b) An award is justified to a recipient that does not fully meet
the standards, pursuant to Sec. 22.405(b). In such cases, grants
officers shall document in the award file the rationale for making an
award to a recipient that does not fully meet the standards.

Sec. 22.415 Standards.

To be qualified, a potential recipient must:
(a) Have the management capability and adequate financial and
technical resources, given those that would be made available through
the grant or cooperative agreement, to execute the program of
activities envisioned under the grant or cooperative agreement.
(b) Have a satisfactory record of executing such programs or
activities (if a prior recipient of an award).
(c) Have a satisfactory record of integrity and business ethics.
(d) Be otherwise qualified and eligible to receive a grant or
cooperative agreement under applicable laws and regulations (see
Sec. 22.420(c)).

Sec. 22.420 Pre-award procedures.

(a) The appropriate method to be used and amount of effort to be
expended in deciding the qualification of a potential recipient will
vary. In deciding on the method and level of effort, the grants officer
should consider factors such as:
(1) DoD's past experience with the recipient;
(2) Whether the recipient has previously received cost-type
contracts, grants, or cooperative agreements from the Federal
Government; and
(3) The amount of the prospective award and complexity of the
project to be carried out under the award.

[[Page 12169]]

(b) There is no DoD-wide requirement to obtain a pre-award credit
report, audit, or any other specific piece of information. On a case-
by-case basis, the grants officer will decide whether there is a need
to obtain any su

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A98-5888. Public record. Not legal advice.