Office of the Secretary, DoD.
The Department of Defense (DoD) proposes to add a new part to the DoD Grant and Agreement Regulations (DoDGARs) to incorporate policies and procedures for the award and administration of technology investment agreements (TIAs). TIAs are a relatively new class of assistance instruments. DoD Components use TIAs to support or stimulate defense research projects involving for-profit firms, especially commercial firms that do business primarily in the commercial marketplace. The new part therefore gives DoD agreements officers greater flexibility to negotiate award provisions in areas that can present barriers to those commercial firms (e.g., intellectual property, audits, and cost principles). This notice of proposed rulemaking also proposes revisions to several additional parts of the DoDGARs, to conform the rest of the DoDGARs with the proposed new part.
Comments are due on or before July 1, 2002.
Forward comments to ODDR&E(R), ATTN: Mark Herbst, 3080 Defense Pentagon, Washington, DC 20301-3080.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Mark Herbst, (703) 696-0372.End Further Info End Preamble Start Supplemental Information
The Congress and the DoD have a civil-military integration policy that envisions a national technology and industrial base capable of meeting national security objectives, including the performance of research and development to ensure that our armed forces have systems with superior technology. The policy calls for DoD reliance, to the maximum extent practicable, on the commercial sector of that technology and industrial base.
To help achieve civil-military integration, the Congress in 1989 enacted 10 U.S.C. 2371, “Research projects: transactions other than contracts and grants” to authorize DoD use of cooperative agreements and other transactions. Using this authority, DoD Components through the mid-1990s developed types of cooperative agreements and other transactions to support research (called “dual-use” research) with good potential for both commercial and defense applications. The DoD in 1997 issued interim guidance that merged various cooperative agreements and other transactions that were similar to each other into a single class of assistance instruments called technology investment agreements (TIAs). This proposed rule is the first step toward putting in place rules of a more permanent nature, based on the experience with these new instruments.
B. Discussion of Proposed Part 37
Coverage, In Relation To Rules For Other Assistance Instruments
The subjects covered for TIAs in the proposed part 37 parallel those covered for grants and most cooperative agreements in parts 22, 32, 33, and 34 of the DoD Grant and Agreement Regulations (DoDGARs). This creates a comprehensive and stand-alone part for TIAs, which we judge to be the best way to have clear policy and procedural guidance that properly maintains distinctions between TIAs and other assistance instruments.
The subparts of the proposed part 37 address chronologically DoD agreements officers' pre-award through post-award responsibilities for TIAs. The coverage in most of the subparts largely parallels what is covered for other assistance instruments in part 22 of the DoDGARs. Two subparts of the proposed part 37, subparts F and G, address award terms related to administrative requirements for TIAs. The coverage in those two subparts most closely parallels what is covered for other assistance instruments in parts 32 and 33 of the DoDGARs, for various types of nonprofit recipients, and in part 34 for for-profit recipients.
Plain Language Format
Executive Order 12866 requires each agency to write regulations that are simple and easy to understand. A Presidential memorandum of June 2, 1998, requires agencies to write new regulations in plain language. We used a question and answer format for this rule to make it more readable. We invite your comments on how to make the proposed rule easier to understand.
Effect of Rule on Recipients
The proposed part 37 speaks to the DoD agreements officer who awards or administers TIAs, rather than to the TIA recipient. However, the part also affects TIA recipients because it tells the agreements officer how to craft award terms and conditions that legally bind the recipient, as well as the Federal Government. We therefore would appreciate any comments that you may have on the requirements in this proposed rule that would apply to you as a potential TIA recipient. The following paragraphs describe the subparts of the proposed part and highlight some requirements affecting recipients.
Agreement Types and Authorities (Subpart A)
Subpart A of the proposed part 37 contains general information about TIAs for DoD Components and agreements officers. It has little potential effect on recipients.
Situations for Use of TIAs (Subpart B)
Subpart B of the proposed part 37 tells the agreements officer when he or she appropriately may use a TIA. Three sections of this subpart may affect TIA recipients.
First, section 37.210 encourages awards to consortia, as a way to increase recipient self-governance. It suggests that agreements officers consider other ways to increase self-governance before making awards to single firms or multiple firms in prime award-subaward relationships.
Second, section 37.215 states that recipients are to provide, to the maximum extent practicable, at least half of the costs of research projects supported by TIAs. This is a statutory condition for any TIA using the authority of 10 U.S.C. 2371 and a matter of policy for other TIAs. The reason that cost sharing is appropriate is that TIAs are used to support dual-use research that is of mutual benefit to the DoD and recipients because it has good potential for both defense and commercial applications. The purpose of the cost share is to ensure that recipients have a vested interest in the projects' success.
Third, section 37.230 clarifies that agreements officers are not to use TIAs in cases where a recipient is to receive fee or profit, in accordance with DoD policy stated in part 22 of the DoDGARs (32 CFR part 22). The basis for the policy is that fee or profit, while appropriate for a procurement contract used in a buyer-seller relationship, is not appropriate for an assistance instrument used to stimulate or support a project of mutual interest to the recipient and the Government.
Types of TIAs (Subpart C)
Subpart C of the proposed part 37 describes a new type of assistance instrument called a fixed-support TIA that agreements officers may use under certain conditions. With a fixed-support Start Printed Page 21487TIA, the Government agrees to award a set amount of money to support a portion of the costs of a research project that has well-defined and verifiable outcomes. The advantage to a recipient is that this type of TIA lessens Government-unique requirements in areas, such as audits and cost accounting, that present barriers to some commercial firms. We invite comments on the concept of fixed-support TIAs because there is little practical experience with them—almost all TIAs to date have been expenditure-based.
Competition (Subpart D)
Subpart D of the proposed part 37 states the policy for agreements officers to use merit-based competitive procedures to award TIAs and discusses the content of the program announcement or solicitation.
Pre-Award Business Evaluation (Subpart E)
Subpart E of the proposed part 37 addresses agreements officers' responsibilities, prior to awarding TIAs, for determining that potential recipients are qualified and evaluating business aspects of the proposed transactions.
Award Terms Based on Administrative Requirements (Subparts F and G)
The portions of the proposed part 37 with the greatest potential for affecting recipients are subparts F and G, which specify administrative requirements for TIAs. Subpart F addresses organization-wide system requirements for financial management, property management, and purchasing. To reduce administrative burdens, the general policy in Subpart F is to have each type of organization that participates in a TIA continue to use its present systems. Subpart G addresses award-specific administrative requirements, such as payment methods. The general policy in subpart G is to simplify administration by making these award-specific requirements uniform for different organizations participating in a given award, since the requirements do not compel changes in organizations' systems.
Overall, subparts F and G give agreements officers considerable latitude to negotiate award provisions in areas that sometimes are sources of concern for commercial firms. We appreciate that commercial firms often are not familiar with usual Government-unique requirements and may not always agree with them.
One portion of subpart F that should be of particular interest to potential recipients is the portion in §§ 37.640 through 37.680 that addresses audit requirements for expenditure-based TIAs. Under § 37.650, agreements officers may authorize use of Independent Public Accountants (IPAs) for audits of for-profit firms under certain conditions. When IPAs are used, paragraph (c) of § 37.660 requires the audits to be performed in accordance with the Generally Accepted Government Auditing Standards (GAGAS) issued by the General Accounting Office. Much of the GAGAS parallel the Generally Accepted Auditing Standards (GAAS) used in the commercial sector, and we ask that any comments raising issues with the use of the GAGAS rather than the GAAS identify the specific GAGAS provisions that are at issue.
The portion of subpart F addressing property requirements also may be of particular interest to some for-profit firms. Section 37.685 establishes the general policy for capital assets, including equipment, that for-profit firms may need to perform research under TIAs. The policy calls for including only depreciation or use charges for capital assets as costs under a TIA in most cases. Under § 37.685, an agreements officer may grant an exception and permit a firm to charge the full acquisition cost of a capital asset to the research project. However, the DoD does not have statutory authority to give a for-profit recipient unconditional title to a capital asset purchased in whole or in part with Federal funds, unless the property is consumed in the project. Therefore, when the full acquisition cost of a capital asset is charged to the project, subpart F provides that the recipient will take title to the property and that the Government will have an interest in the property until the end of the project. At that time, the recipient will reimburse the Federal Government for its share of the residual value of the asset, if the fair market value of the property at that time is $5,000 or more.
Executing the Award (Subpart H)
Subpart H of the proposed part 37 details agreements officers' responsibilities at the time of award. The section that likely is of most interest to potential TIA recipients is § 37.1010, which lists substantive issues that the award document must address.
Post-Award Administration and Definitions (Subparts I and J)
Subpart I, on post-award administration, largely addresses internal agency procedures and has little potential effect on recipients. Definitions of terms used in the proposed part 37 are in subpart J.
C. Discussion of Proposed Conforming Changes to Other Parts
In addition to proposing to adopt the new part 37, the DoD is proposing to make conforming changes to other DoDGARs parts. The most significant changes are to part 21, which is the part of the DoDGARs that sets out DoD Components' general responsibilities for managing assistance functions. We are proposing to amend part 21 to apply to TIAs, as well as to other types of assistance instruments. We also are proposing to recast Part 21 in a plain language format like that of the new part 37. Given this significant revision, we are publishing part 21 in its entirety in this notice of proposed rulemaking. We also are proposing very minor changes to other DoDGARs parts, to conform those parts to the revised part 21.
Executive Order 12866
This proposed regulatory action is not a significant regulatory action, as defined by Executive Order 12866.
Regulatory Flexibility Act of 1980 (5 U.S.C. 605(b))
This proposed regulatory action will not have a significant adverse impact on a substantial number of small entities.
Unfunded Mandates Act of 1995 (Sec. 202, Pub. L. 104-4)
This proposed regulatory action does not contain a Federal mandate that will result in the expenditure by State, local, and tribal governments, in aggregate, or by the private sector of $100 million or more in any one year.
Paperwork Reduction Act of 1995 (44 U.S.C., Chapter 35)
This proposed regulatory action will not impose any additional reporting or recordkeeping requirements under the Paperwork Reduction Act.
Federalism (Executive Order 13132)
This proposed regulatory action does not have Federalism implications, as set forth in Executive Order 13132. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.Start List of Subjects
List of Subjects
- Grant programs
- Grants administration
- Grant programs
- Grants administration
- Reporting and recordkeeping requirements
- Colleges and universities
- Grant programs
- Grants administration
- Nonprofit organizations
- Reporting and recordkeeping requirements
- Business and industry
- Grant programs
- Grants administration
- Reporting and recordkeeping requirements
- Accounting, administrative practice and procedure
- Grant programs
- Grants administration
- Reporting and recordkeeping requirements
Patricia L. Toppings,
Alternate OSD Federal Register, Liaison Officer, Department of Defense.
Accordingly, Title 32 of the Code of Federal Regulations, Chapter I, Subchapter B is proposed to be amended as follows.
1. Part 21 is revised to read as follows:Start Part
PART 21—DoD GRANTS AND AGREEMENTS—GENERAL MATTERS
- What are the purposes of this part?
- What is the Defense Grant and Agreement Regulatory System (DGARS)?
- What types of instruments are covered by the DGARS?
- What are the purposes of the DGARS?
- Who is responsible for the DGARS?
- What publications are in the DGARS?
- What instruments are subject to the DoD Grant and Agreement Regulations (DoDGARs)?
- What is the purpose of the DoDGARs?
- Who ensures DoD Component compliance with the DoDGARs?
- May DoD Components issue supplemental policies and procedures to implement the DoDGARs?
- Are there areas in which DoD Components must establish policies and procedures to implement the DoDGARs?
- Do acquisition regulations also apply to DoD grants and agreements?
- How are the DoDGARs published and maintained?
- Who can authorize deviations from the DoDGARs?
- What are the procedures for requesting and documenting deviations?
- To what instruments does this subpart apply?
- What is the purpose of this subpart?
- Must a DoD Component have statutory authority to make an assistance award?
- Must the statutory authority specifically mention the use of grants or other assistance instruments?
- Under what types of statutory authorities do DoD Components award assistance instruments?
- How does a DoD Component's authority flow to awarding and administering activities?
- What are the responsibilities of the head of the awarding or administering activity?
- Must DoD Components formally select and appoint grants officers and agreements officers?
- What are the standards for selecting and appointing grants officers and agreements officers?
- What are the requirements for a grants officer's or agreements officer's statement of appointment?
- What are the requirements for a termination of a grants officer's or agreements officer's appointment?
- Who can sign, administer, or terminate assistance instruments?
- What is the extent of grants officers' and agreements officers' authority?
- What are grants officers' and agreements officers' responsibilities?
- What is the purpose of this subpart?
- What is the Catalog of Federal Domestic Assistance (CFDA)?
- Why does the DoD report information to the CFDA?
- Who reports the information for the CFDA?
- What are the purposes of the Defense Assistance Awards Data System (DAADS)?
- Who issues policy guidance for the DAADS?
- Who operates the DAADS?
- Do DoD Components have central points for collecting DAADS data?
- What are the duties of the DoD Components' central points for the DAADS?
- Must DoD Components report every obligation to the DAADS?
- Must DoD Components relate reported actions to listings in the CFDA?
- When and how must DoD Components report to the DAADS?
- Must DoD Components assign numbers uniformly to awards?
- Agreements officer.
- Contracting activity.
- Contracting officer.
- Cooperative agreement.
- DoD Components.
- Grants officer.
- Nonprocurement instrument.
- Procurement contract.
- Technology investment agreements.
Appendix A to Part 21—Instruments to Which DoDGARs Portions Apply
Subpart A— Introduction
This part of the DoD Grant and Agreement Regulations:
(a) Provides general information about the Defense Grant and Agreement Regulatory System (DGARS).
(b) Sets forth general policies and procedures related to DoD Components' overall management of functions related to assistance and certain other nonprocurement instruments subject to the DGARS (see § 21.205(b)).
Subpart B—Defense Grant and Agreement Regulatory System
The Defense Grant and Agreement Regulatory System (DGARS) is the system of regulatory policies and procedures for the award and administration of DoD Components' assistance and other nonprocurement awards. DoD Directive 3210.6 established the DGARS.
The Defense Grant and Agreement Regulatory System (DGARS) applies to the following types of funding instruments awarded by DoD Components:
(a) All grants, cooperative agreements, and technology investment agreements.
(b) Other nonprocurement instruments, as needed to implement statutes, Executive orders, or other Federal Governmentwide rules that apply to those other nonprocurement instruments, as well as to grants and cooperative agreements.
The purposes of the DGARS are to provide uniform policies and procedures for DoD Components' awards, in order to meet DoD needs for:
(a) Efficient program execution, effective program oversight, and proper stewardship of Federal funds.
(b) Compliance with relevant statutes; Executive orders; and applicable guidance, such as Office of Management and Budget (OMB) circulars.
(c) Collection from DoD Components, retention, and dissemination of management and fiscal data related to awards.
The Director of Defense Research and Engineering, or his or her designee, develops and implements DGARS policies and procedures. He or she does so by issuing and maintaining the DoD publications that comprise the DGARS.
A DoD publication (DoD 3210.6-R ) entitled “The DoD Grant and Agreement Regulations” is the principal element of the DGARS. The Director of Defense Research and Engineering also may publish
DGARS policies and procedures in DoD instructions and other DoD publications, as appropriate.
Subpart C—The DoD Grant and Agreement Regulations
(a) The types of instruments that are subject to the DoDGARs vary from one portion of the DoDGARs to another. The types of instruments include grants, cooperative agreements, and technology investment agreements. Some portions of the DoDGARs apply to other types of assistance or nonprocurement instruments. The term “awards,” as defined in subpart D of this part, is used in this part to refer collectively to all of the types of instruments that are subject to one or more portions of the DoDGARs.
(b) Note that each portion of the DoDGARs identifies the types of instruments to which it applies. However, grants officers and agreements officers must exercise caution when determining the applicability of some Governmentwide rules that are included within the DoDGARs, because a term may be defined differently in a Governmentwide rule than it is defined elsewhere in the DoDGARs. One example is part 33 of the DoDGARs (32 CFR part 33), which contains administrative requirements for awards to State and local governments. That DoDGARs part is the DoD's codification of the Governmentwide rule implementing OMB Circular A-102. Part 33 states that it applies to grants, but defines the term “grant” to include cooperative agreements and other forms of financial assistance.
(c) For convenience, the table in appendix A to this part provides an overview of the applicability of the various portions of the DoDGARs.
The DoD Grant and Agreement Regulations provide uniform policies and procedures for the award and administration of DoD Components' awards. The DoDGARs are the primary DoD regulations for achieving the DGARS purposes described in § 21.210.
The Head of each DoD Component that makes or administers awards, or his or her designee, is responsible for ensuring compliance with the DoDGARs within that DoD Component.
Yes, Heads of DoD Components or their designees may issue regulations, procedures, or instructions to implement the DGARS or supplement the DoDGARs to satisfy needs that are specific to the DoD Component, as long as the regulations, procedures, or instructions do not impose additional costs or administrative burdens on recipients or potential recipients.
Yes, Heads of DoD Components or their designees must establish policies and procedures in areas where uniform policies and procedures throughout the DoD Component are required, such as for:
(a) Requesting class deviations from the DoDGARs (see §§ 21.335(b) and 21.340(a)) or exemptions from the provisions of 31 U.S.C. 6301 et seq., that govern the appropriate use of contracts, grants, and cooperative agreements (see 32 CFR 22.220).
(b) Designating one or more Grant Appeal Authorities to resolve claims, disputes, and appeals (see 32 CFR 22.815).
(c) Reporting data on assistance awards and programs, as required by 31 U.S.C. chapter 61 (see subpart C of this part).
(d) Prescribing requirements for use and disposition of real property acquired under awards, if the DoD Component makes any awards to institutions of higher education or to other nonprofit organizations under which real property is acquired in whole or in part with Federal funds (see 32 CFR 32.32).
Unless the DoDGARs specify that they apply, policies and procedures in the following acquisition regulations that apply to procurement contracts do not apply to grants, cooperative agreements, technology investment agreements, or to other assistance or nonprocurement awards:
(a) The Federal Acquisition Regulation (FAR) (48 CFR parts 1-53).
(b) The Defense Federal Acquisition Regulation Supplement (DFARS) (48 CFR parts 201-270).
(c) DoD Component supplements to the FAR and DFARS.
(a) The DoD publishes the DoDGARs in Chapter I, Subchapter B, Title 32 of the Code of Federal Regulations (CFR) and in a separate internal DoD document (DoD 3210.6-R). The DoD document is divided into parts, subparts, and sections, to parallel the CFR publication. Cross-references within the DoDGARs are stated as CFR citations (e.g., a reference to section 21.215 in part 21 would be to 32 CFR 21.215).
(b) The DoD publishes updates to the DoDGARs in the Federal Register. When finalized, the DoD also posts the updates to the internal DoD document on the World Wide Web at http://www.dtic.mil/whs/directives.
(c) A standing working group recommends revisions to the DoDGARs to the Director of Defense Research and Engineering (DDR&E). The DDR&E, Director of Defense Procurement, and each Military Department must be represented on the working group. Other DoD Components that make or administer awards may also nominate representatives. The working group meets when necessary.
(a) The Head of the DoD Component or his or her designee may authorize individual deviations from the DoDGARs, which are deviations that affect only one award, if the deviations are not prohibited by statute, executive order or regulation.
(b) The Director of Defense Research and Engineering (DDR&E) or his or her designee must approve in advance any class deviation that affects more than one award. Note that OMB concurrence also is required for class deviations from two parts of the DoDGARs, 32 CFR parts 32 and 33, in accordance with 32 CFR 32.4 and 33.6, respectively.
(a) DoD Components must submit copies of justifications and agency approvals for individual deviations and written requests for class deviations to: Deputy Director of Defense Research and Engineering, ATTN: Basic Research, 3080 Defense Pentagon, Washington DC 20301-3080.
(b) Grants officers and agreements officers must maintain copies of requests and approvals for individual and class deviations in award files.
Subpart D—Authorities and Responsibilities for Making and Administering Assistance Awards
This subpart applies to grants, cooperative agreements, and technology investment agreements, which are legal instruments used to reflect assistance relationships between the United States Government and recipients.
This subpart describes the sources and flow of authority to make or administer assistance awards, and assigns the broad responsibilities associated with DoD Components' use of those instruments.
Yes, the use of an assistance instrument to carry out a program requires authorizing legislation. That is unlike the use of a procurement contract, for which Federal agencies have inherent, Constitutional authority.
No, the statutory authority described in § 21.410 need not specifically say that the purpose of the program is assistance or mention the use of any type of assistance instrument. However, the intent of the statute must support a judgment that the use of an assistance instrument is appropriate. For example, a DoD Component may judge that the principal purpose of a program for which it has authorizing legislation is assistance, rather than acquisition. The DoD Component would properly use an assistance instrument to carry out that program, in accordance with 31 U.S.C. chapter 63.
DoD Components may use assistance instruments under a number of statutory authorities that fall into three categories:
(a) Authorities that statutes provide to the Secretary of Defense. These authorities generally are delegated by the Secretary of Defense to Heads of DoD Components, usually through DoD directives, instructions, or policy memoranda that are not part of the Defense Grant and Agreement Regulatory System. Examples of statutory authorities in this category are:
(1) Authority under 10 U.S.C. 2391 to award grants or cooperative agreements to help State and local governments alleviate serious economic impacts of defense program changes (e.g., base openings and closings, contract changes, and personnel reductions and increases).
(2) Authority under 10 U.S.C. 2413 to enter into cooperative agreements with entities that furnish procurement technical assistance to businesses.
(b) Authorities that statutes may provide directly to Heads of DoD Components. When a statute authorizes the Head of a DoD Component to use a funding instrument to carry out a program with a principal purpose of assistance, use of that authority requires no delegation by the Secretary of Defense. For example, 10 U.S.C. 2358 authorizes the Secretaries of the Military Departments, in addition to the Secretary of Defense, to perform research and development projects through grants and cooperative agreements. Similarly, 10 U.S.C. 2371 provides authority for the Secretaries of the Military Departments and Secretary of Defense to carry out basic, applied, or advanced research projects using assistance instruments other than grants and cooperative agreements. A Military Department's use of the authority of 10 U.S.C. 2358 or 10 U.S.C. 2371 therefore requires no delegation by the Secretary of Defense.
(c) Authorities that arise indirectly as the result of statute. For example, authority to use an assistance instrument may result from:
(1) A federal statute authorizing a program that is consistent with an assistance relationship (i.e., the support or stimulation of a public purpose, rather than the acquisition of a good or service for the direct benefit of the Department of Defense). In accordance with 31 U.S.C. chapter 63, such a program would appropriately be carried out through the use of grants or cooperative agreements. Depending upon the nature of the program (e.g., research) and whether the program statute includes authority for any specific types of instruments, there also may be authority to use other assistance instruments.
The Head of a DoD Component, or his or her designee, may delegate to the heads of contracting activities (HCAs) within the Component, that Component's authority to make and administer awards, to appoint grants officers and agreements officers (see §§ 21.435 through 21.450), and to broadly manage the DoD Component's functions related to assistance instruments. The HCA is the same official (or officials) designated as the head of the contracting activity for procurement contracts, as defined at 48 CFR 2.101. The intent is that overall management responsibilities for a DoD Component's functions related to nonprocurement instruments be assigned only to officials that have similar responsibilities for procurement contracts.
When designated by the Head of the DoD Component or his or her designee (see 32 CFR 21.425), the head of the awarding or administering activity (i.e., the HCA) is responsible for the awards made by or assigned to that activity. He or she must supervise and establish internal policies and procedures for that activity's awards.
Yes, each DoD Component that awards grants or enters into cooperative Start Printed Page 21491agreements must have a formal process (see § 21.425) for selecting and appointing grants officers and for terminating their appointments. Similarly, each DoD Component that awards or administers technology investment agreements must have a process for selecting and appointing agreements officers and for terminating their appointments.
In selecting grants officers and agreements officers, DoD Components must use the following minimum standards:
(a) In selecting a grants officer, the appointing official must judge whether the candidate has the necessary experience, training, education, business acumen, judgment, and knowledge of assistance instruments and contracts to function effectively as a grants officer. The appointing official also must take those attributes of the candidate into account when deciding the complexity and dollar value of the grants and cooperative agreements to be assigned.
(b) In selecting an agreements officer, the appointing official must consider all of the same factors as in paragraph (a) of this section. In addition, the appointing official must consider the candidate's ability to function in the less structured environment of technology investment agreements, where the rules provide more latitude and the individual must have a greater capacity for exercising judgment. Agreements officers therefore should be individuals who have demonstrated expertise in executing complex assistance and acquisition instruments.
A statement of a grants officer's or agreements officer's appointment:
(a) Must be in writing.
(b) Must clearly state the limits of the individual's authority, other than limits contained in applicable laws or regulations. Information on those limits of a grants officer's or agreements officer's authority must be readily available to the public and agency personnel.
(c) May, if the individual is a contracting officer, be incorporated into the his or her statement of appointment as a contracting officer (i.e., there does not need to be a separate written statement of appointment for assistance instruments).
A termination of a grants officer's or agreements officer's authority:
(a) Must be in writing, unless the written statement of appointment provides for automatic termination.
(b) May not be retroactive.
(c) May be integrated into a written termination of the individual's appointment as a contracting officer, as appropriate.
Only grants officers are authorized to sign, administer, or terminate grants or cooperative agreements (other than technology investment agreements) on behalf of the Department of Defense. Similarly, only agreements officers may sign, administer, or terminate technology investment agreements.
Grants officers and agreements officers may bind the Government only to the extent of the authority delegated to them in their written statements of appointment (see § 21.445).
Grants officers and agreements officers should be allowed wide latitude to exercise judgment in performing their responsibilities, which are to ensure that:
(a) Individual awards are used effectively in the execution of DoD programs, and are made and administered in accordance with applicable laws, Executive orders, regulations, and DoD policies.
(b) Sufficient funds are available for obligation.
(c) Recipients of awards receive impartial, fair, and equitable treatment.
Subpart E—Information Reporting on Awards Subject to 31 U.S.C. Chapter 61
This subpart prescribes policies and procedures for compiling and reporting data related to DoD awards and programs that are subject to information reporting requirements of 31 U.S.C. chapter 61. That chapter of the U.S. Code requires the Office of Management and Budget to maintain a Governmentwide information system to collect data on Federal agencies' domestic assistance awards and programs.
The Catalog of Federal Domestic Assistance (CFDA) is a Governmentwide compilation of information about domestic assistance programs. It covers all domestic assistance programs and activities, regardless of the number of awards made under the program, the total dollar value of assistance provided, or the duration. In addition to programs using grants and agreements, covered programs include those providing assistance in other forms, such as payments in lieu of taxes or indirect assistance resulting from Federal operations.
The Federal Program Information Act (31 U.S.C. 6101 et seq.), as implemented through OMB Circular A-89, requires the Department of Defense and other Federal agencies to provide certain information about their domestic assistance programs to the OMB and the General Services Administration (GSA). The GSA makes this information available to the public by publishing it in the Catalog of Federal Domestic Assistance (CFDA) and maintaining the Federal Assistance Programs Retrieval System, a computerized data base of the information.
(a) Each DoD Component that provides domestic financial assistance must:
(1) Report to the Director of Information, Operations and Reports, Washington Headquarters Services (DIOR, WHS) all new programs and changes as they occur or as the DoD Component submits its annual updates to existing CFDA information.
(2) Identify to the DIOR, WHS a point-of-contact who will be responsible for reporting the program information and for responding to inquiries related to it.
(b) The DIOR, WHS is the Department of Defense's single office for collecting, compiling and reporting such program information to the OMB and GSA.
Data from the Defense Assistance Awards Data System (DAADS) are used to provide:
(a) DoD inputs to meet statutory requirements for Federal Governmentwide reporting of data related to obligations of funds by assistance instrument. Start Printed Page 21492
(b) A basis for meeting Governmentwide requirements to report to the Federal Assistance Awards Data System (FAADS) maintained by the Department of Commerce and for preparing other recurring and special reports to the President, the Congress, the General Accounting Office, and the public. DoD Components' reporting of DAADS data, as used by the DoD to meet the Governmentwide requirements to report to the FAADS, is assigned Interagency Report Control Number 0252-DOC-QU.
(c) Information to support policy formulation and implementation and to meet management oversight requirements related to the use of awards.
The Deputy Director, Defense Research and Engineering (DDDR&E), or his or her designee, issues necessary policy guidance for the Defense Assistance Awards Data System.
The Director of Information Operations and Reports, Washington Headquarters Services (DIOR, WHS), consistent with guidance issued by the DDDR&E:
(a) Processes DAADS information on a quarterly basis and prepares recurring and special reports using such information.
(b) Prepares, updates, and disseminates instructions for reporting information to the DAADS. The instructions are to specify procedures, formats, and editing processes to be used by DoD Components, including record layout, submission deadlines, media, methods of submission, and error correction schedules.
Each DoD Component must have a central point for collecting DAADS information from contracting activities within that DoD Component. The central points are as follows:
(a) For the Army: As directed by the U.S. Army Contracting Support Agency.
(b) For the Navy: As directed by the Office of Naval Research.
(c) For the Air Force: As directed by the Office of the Secretary of the Air Force, Acquisition Contracting Policy and Implementation Division (SAF/AQCP).
(d) For the Office of the Secretary of Defense, Defense Agencies, and DoD Field Activities: Each Defense Agency must identify a central point for collecting and reporting DAADS information to the DIOR, WHS, at the address given in § 21.555(a). DIOR, WHS serves as the central point for offices and activities within the Office of the Secretary of Defense and for DoD Field Activities.
The office that serves, in accordance with § 21.535, as the central point for collecting DAADS information from contracting activities within each DoD Component must:
(a) Establish internal procedures to ensure reporting by contracting activities that make awards subject to 31 U.S.C. chapter 61.
(b) Collect information required by DD Form 2566  , “DoD Assistance Award Action Report,” from those contracting activities, and report it to DIOR, WHS, in accordance with §§ 21.545 through 21.555.
(c) Submit to the DIOR, WHS, any recommended changes to the DAADS.
Yes, DoD Components' central points must collect and report the data required by the DD Form 2566 for each individual action that involves the obligation or deobligation of Federal funds for an award that is subject to 31 U.S.C. chapter 61.
Yes, DoD Components' central points must report each action as an obligation or deobligation under a specific programmatic listing in the Catalog of Federal Domestic Assistance (CFDA, see § 21.505). The programmatic listing to be shown is the one that provided the funds being obligated or deobligated. For example, if a grants officer or agreements officer in one DoD Component obligates appropriations of a second DoD Component's programmatic listing, the grants officer or agreements officer must show the CFDA programmatic listing of the second DoD Component on the DD Form 2566.
DoD Components' central points must report:
(a) On a quarterly basis to DIOR, WHS. For the first three quarters of the Federal fiscal year, the data are due by close-of-business (COB) on the 15th day after the end of the quarter (i.e., first-quarter data are due by COB on January 15th, second-quarter data by COB April 15th, and third-quarter data by COB July 15th). Fourth-quarter data are due by COB October 25th, the 25th day after the end of the quarter. If any due date falls on a weekend or holiday, the data are due on the next regular workday. The mailing address for DIOR, WHS is 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302.
(b) On a floppy diskette or by other means permitted either by the instructions described in § 21.530(b) or by agreement with the DIOR, WHS. The data must be reported in the format specified in the instructions.
Yes, DoD Components must assign identifying numbers to all awards subject to this subpart, including grants, cooperative agreements, and technology investment agreements. The uniform numbering system parallels the procurement instrument identification (PII) numbering system specified in 48 CFR 204.70 (in the “Defense Federal Acquisition Regulation Supplement”), as follows:
(a) The first six alphanumeric characters of the assigned number must be identical to those specified by 48 CFR 204.7003(a)(1) to identify the DoD Component and contracting activity.
(b) The seventh and eighth positions must be the last two digits of the fiscal year in which the number is assigned to the grant, cooperative agreement, or other nonprocurement instrument.
(c) The 9th position must be a number:
(1) “1” for grants.
(2) “2” for cooperative agreements, including technology investment agreements that are cooperative agreements (see Appendix C to 32 CFR part 37).
(3) “3” for other nonprocurement instruments, including technology investment agreements that are not cooperative agreements.
(d) The 10th through 13th positions must be the serial number of the instrument. DoD Components and contracting activities need not follow any specific pattern in assigning these numbers and may create multiple series of letters and numbers to meet internal needs for distinguishing between various sets of awards.
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 Start Printed Page 21493definition 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.
An official with the authority to enter into, administer, and/or terminate technology investment agreements.
The transfer of a thing of value to a recipient to carry out a public purpose of support or stimulation authorized by a law of the United States (see 31 U.S.C. 6101(3)). Grants, cooperative agreements, and technology investment agreements are examples of legal instruments used to provide assistance.
A grant, cooperative agreement, technology investment agreement, or other nonprocurement instrument subject to one or more parts of the DoD Grant and Agreement Regulations (see Appendix A to this part).
See the definition for procurement contract in this section.
An activity to which the Head of a DoD Component has delegated broad authority regarding acquisition functions, pursuant to 48 CFR 1.601.
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.
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.
The issuance or use of a policy or procedure that is inconsistent with the DoDGARs.
The Office of the Secretary of Defense, the Military Departments, the Defense Agencies, and DoD Field Activities.
A legal instrument which, consistent with 31 U.S.C. 6304, is used to enter into a relationship:
(a) Of which the principal purpose is to transfer a thing of value to the recipient to carry out a public purpose of support or stimulation authorized by a law of the United States, rather than to acquire property or services for the Department of Defense's direct benefit or use.
(b) In which substantial involvement is not expected between the Department of Defense and the recipient when carrying out the activity contemplated by the grant.
An official with the authority to enter into, administer, and/or terminate grants or cooperative agreements.
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.
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.
An organization or other entity receiving an award from a DoD Component.
A special class of assistance instruments used to increase involvement of commercial firms in defense research programs and for other purposes related to integrating the commercial and defense sectors of the nation's technology and industrial base. Technology investment agreements include one kind of cooperative agreement with provisions tailored for involving commercial firms, as well as one kind of other assistance transaction. Technology investment agreements are described more fully in 32 CFR part 37.
Appendix A to Part 21 — Instruments to Which DoDGARs Portions Apply
|DoDGARs * * *||which addresses * * *||applies to * * *|
|(32 CFR part 21), Subpart D and E||The Defense Grant and Agreement Regulatory System and the DoD Grant and Agreement Regulations||“awards,” which are grants, cooperative agreements, technology investment agreements (TIAs), and other nonprocurement instruments subject to one more parts of the DoDGARs.|
|(32 CFR part 21), Subpart D||Authorities and responsiblities for assistance award and administration||grants, cooperative agreements, and TIAa.|
|(32 CFR part 21), Subpart E||DoD Components' information reporting requirements||grants, cooperative agreements, TIAs, and other nonprocurement instruments subject to reporting requirements in 31 U.S.C. chapter 61.|
|(32 CFR part 22)||DoD grants officers' responsibilities for award and administration of grants and cooperative agreements||grants and cooperative agreements other than TIAs.|
|(32 CFR part 25), Suparts A through E||Governmentwide debarment and suspension requirements||Nonprocurement generally, which is grants, cooperative agreements, TIAs, and other instruments included in the definition of “primary covered transaction” at 32 CFR 25.110(a)(1)(i), with the exceptions identified at 32 CFR 25.110(a)(2).|
|Start Printed Page 21494|
|(32 CFR part 25), Subpart F||Governmentwide drug-free workplace requirements||financial assistance generally, including cooperative agreements and TIAs, as included in the definition of “grant” at 32 CFR 25.605(b)(7).|
|(32 CFR part 28)||Governmentwide restrictions on lobbying||grants, cooperative agreements and other financial assistance instruments, including TIAs, that are included in the definitions of “Federal grant” and “Federal cooperative agreement” at 32 CFR 28.105.|
|(32 CFR part 32)||Administrative requirements for grants and agreements with institutions of higher education, hospitals, and other non-profit organizations||grants, cooperative agreements other than TIAs, and other assistance included in “award,” as defined in 32 CFR 32.2. Portions of this part apply to TIAs, but only as 32 CFR part 37 refers to them and makes them apply.|
|(32 CFR part 33)||Administrative requirements for grants and agreements with State and local governments||grants, cooperative agreements other than TIAs, and other assistance included in “grant,” as defined in 32 CFR 33.3. Portions of this part apply to TIAs, but only as 32 CFR part 37 refers to them and makes them apply.|
|(32 CFR part 34)||Administrative requirements for grants and agreements with for-profit organizations||grants and cooperative agreements other than TIAs (“awards,” as defined in 32 CFR 34.2). Portions of this part apply to TIAs, but only as 32 CFR part 37 refers to them and makes them apply.|
|(32 CFR part 37)||Agreements officers' responsibilities for award and administration of TIAs||TIAs. Note that this part refers to portions of DoDGARs parts 32, 33, and 34 that apply to TIAs.|
2. The authority citation for part 22 continues to read as follows:
7. The authority citation for part 32 continues to read as follows:
8. Section 32.4 is amended by:
9. Section 32.11 is amended by removing “32 CFR 21.205(a) and” in paragraph (a)(2).
10. The authority citation for part 34 continues to read as follows:
11. The definition of “award” in § 34.2 is amended to read as follows:
Award. A grant or a cooperative agreement other than a technology investment agreement (TIA). TIAs are covered by part 37 of the DoDGARs (32 CFR part 37). Portions of this part may apply to a TIA, but only to the extent that 32 CFR part 37 makes them apply.
12. Section 34.3 is amended by:
13. Part 37 is added to read as follows:
PART 37—TECHNOLOGY INVESTMENT AGREEMENTS
- What does this part do?
- Does this part cover all types of instruments that 10 U.S.C. 2371 authorizes?
- What type of instruments are technology investment agreements (TIAs)?
- For what purposes are TIAs used?
- Can my organization award or administer TIAs?
- May I award or administer TIAs if I am authorized to award or administer other assistance instruments?
- Which other parts of the DoD Grant and Agreement Regulations apply to TIAs?
- What are my responsibilities as an agreements officer for ensuring the appropriate use of TIAs?
- What judgments must I make about the nature of the project?
- To what types of recipients may I award a TIA?
- What must I conclude about the recipient's commitment and cost sharing?
- How involved should the Government program official be in the project?
- What judgment must I make about the benefits of using a TIA?
- May I use a TIA if a participant is to receive fee or profit? Start Printed Page 21495
- What is the difference between an expenditure-based and fixed-support TIA?
- When may I use a fixed-support TIA?
- When would I use an expenditure-based TIA?
- What are the advantages of using a fixed-support TIA?
- Must I use competitive procedures to award TIAs?
- What must my announcement or solicitation include?
- Should my announcement or solicitation state that TIAs may be awarded?
- Should I address cost sharing in the announcement or solicitation?
- Should I tell proposers that we will not disclose information that they submit?
- What must my pre-award business evaluation address?
- What resources are available to assist me during the pre-award business evaluation?
- What are my responsibilities for determining that a recipient is qualified?
- Must I do anything additional to determine the qualification of a consortium?
- What is my responsibility for determining that the total project funding is reasonable?
- What is my responsibility for determining the value and reasonableness of the recipient's cost sharing contribution?
- What criteria do I use in deciding whether to accept a recipient's cost sharing?
- How do I value cost sharing related to real property or equipment?
- May I accept fully depreciated real property or equipment as cost sharing?
- May I accept costs of prior research as cost sharing?
- May I accept intellectual property as cost sharing?
- How do I value a recipient's other contributions?
- Must I be able to estimate project expenditures precisely in order to justify use of a fixed-support TIA?
- May I use a hybrid instrument that provides fixed support for only a portion of a project?
- What must I do if a CAS-covered participant accounts differently for its own and the Federal Government shares of project costs?
- What are my responsibilities for determining milestone payment amounts?
- What is recovery of funds and when should I consider including it in my TIA?
- Which administrative matters are covered in this subpart?
- What is the general policy on participants' financial, property, and purchasing systems?
- Must I tell participants what requirements they are to flow down for subawardees' systems?
- What standards do I include for financial systems of for-profit firms?
- What financial management standards do I include for nonprofit participants?
- What cost principles or standards do I require for for-profit participants?
- Must I require a for-profit firm to use Federally approved indirect cost rates?
- What cost principles do I require a nonprofit participant to use?
- Must I include a provision for audits of for-profit participants?
- Must I require periodic system audits, as well as award-specific audits, of for-profit participants?
- Who must I identify as the auditor for a for-profit participant?
- Must I specify the frequency of IPAs' periodic audits of for-profit participants?
- What else must I specify concerning audits of for-profit participants by IPAs?
- Must I require nonprofit participants to have periodic systems audits?
- Must I require participants to flow down audit requirements to subrecipients?
- Must I report when I enter into a TIA allowing a for-profit firm to use an IPA?
- Must I require a participant to report when it enters into a subaward allowing a for-profit firm to use an IPA?
- May I allow for-profit firms to purchase real property and equipment with project funds?
- How are nonprofit participants to manage real property and equipment?
- What are the requirements for Federally owned property?
- What are the requirements for supplies?
- What standards do I include for purchasing systems of for-profit firms?
- What standards do I include for purchasing systems of nonprofit organizations?
- Which administrative matters are covered in this subpart?
- If I am awarding a TIA, what payment methods may I specify?
- What should my TIA's provisions specify for the method and frequency of recipients' payment requests?
- May the Government withhold payments?
- Must I require a recipient to return interest on advance payments?
- Must I require the recipient to obtain prior approval from the Government for changes in plans?
- May I let a recipient charge pre-award costs to the agreement?
- What requirements do I include for program income?
- What general approach should I take in negotiating data and patent rights?
- What data rights should I obtain?
- Should I require recipients to mark data?
- How should I handle protected data?
- What rights should I obtain for inventions?
- Should my patent provision include march-in rights?
- Should I require recipients to mark documents related to inventions?
- Should my TIA include a provision concerning foreign access to technology?
- What requirements must I include for periodic reports on program and business status?
- May I require updated program plans?
- Must I require a final performance report?
- How is the final performance report to be sent to the Defense Technical Information Center?
- May I tell a participant that information in financial and programmatic reports will not be publicly disclosed?
- Must I make receipt of the final performance report a condition for final payment?
- How long must I require participants to keep records related to the TIA?
- What requirement for access to a for-profit participant's records do I include in a TIA?
- What requirement for access to a nonprofit participant's records do I include in a TIA?
- What requirements do I include for termination and enforcement? Start Printed Page 21496
- What are my responsibilities at the time of award?
- What are my general responsibilities concerning the award document?
- What substantive issues should my award document address?
- How do I decide who must sign the TIA if the recipient is an unincorporated consortium?
- What must I document in my award file?
- Must I report information to the Defense Assistance Awards Data System?
- What information must I report to the Defense Technical Information Center?
- How do I know if my TIA uses the 10 U.S.C. 2371 authority and I must report additional data under § 37.1030(b)?
- § 37.1040
- When and how do I report information required by § 37.1035?
- To whom must I send copies of the award document?
- What are my responsibilities generally as an administrative agreements officer for a TIA?
- What additional duties do I have as the administrator of a TIA with advance payments or payable milestones?
- What other responsibilities related to payments do I have?
- What are my responsibilities related to participants' single audits?
- When and how may I request an award-specific audit?
- Advanced research.
- Agreements officer.
- Applied research.
- Articles of collaboration.
- Award-specific audit.
- Basic research.
- Cash contributions.
- Commercial firm.
- Cooperative agreement.
- Cost sharing.
- DoD Component.
- Expenditure-based award.
- Expenditures or outlays.
- In-kind contributions.
- Institution of higher education.
- Intellectual property.
- Nonprofit organization.
- Periodic audit.
- Procurement contract.
- Program income.
- Program official.
- Real property.
- Technology investment agreements.
Appendix A to Part 37—What is the Civil-Military Integration Policy that is the Basis for Technology Investment Agreements?
Appendix B to Part 37—What Type of Instrument is a TIA and What Statutory Authorities Does it Use?
Appendix C to Part 37What is the Desired Coverage for Periodic Audits of For-Profit Participants to be Audited by IPAs?
Appendix D to Part 37—What Common National Policy Requirements May Apply and Need to Be Included in TIAs?
Appendix E to Part 37—What Provisions May a Participant Need to Include when Purchasing Goods or Services Under a TIA?
This part establishes uniform policies and procedures for the DoD Components' award and administration of technology investment agreements (TIAs).
No, this part covers only TIAs, some of which use the authority of 10 U.S.C. 2371 (see appendix B to this part). This part does not cover assistance instruments other than TIAs that use the authority of 10 U.S.C. 2371. It also does not cover acquisition agreements for prototype projects that use 10 U.S.C. 2371 authority augmented by the authority in section 845 of Public Law 103-160, as amended.
TIAs are assistance instruments used to stimulate or support research. As discussed in appendix B to this part, a TIA may be either a kind of cooperative agreement or a type of assistance transaction other than a grant or cooperative agreement.
The ultimate goal for using TIAs, like other assistance instruments used in defense research programs, is to foster the best technologies for future defense needs. TIAs differ from and complement other assistance instruments available to agreements officers, in that TIAs address the goal by fostering civil-military integration (see appendix A to this part). TIAs therefore are designed to:
(a) Reduce barriers to commercial firms' participation in defense research, to give the Department of Defense (DoD) access to the broadest possible technology and industrial base.
(b) Promote new relationships among performers in both the defense and commercial sectors of that technology and industrial base.
(c) Stimulate performers to develop, use, and disseminate improved practices.
Your office may award or administer TIAs if it has a delegation of the authorities in 10 U.S.C. 2371, as well as 10 U.S.C. 2358. If your office is in a Military Department, it must have a delegation of the authority of the Secretary of that Military Department under those statutes. If your office is in a Defense Agency, it must have a delegation of the authority of the Secretary of Defense under 10 U.S.C. 2358 and 2371. Your office needs those authorities to be able to:
(a) Enter into cooperative agreements to stimulate or support research, using the authority of 10 U.S.C. 2358, as well as assistance transactions other than grants or cooperative agreements, using the authority of 10 U.S.C. 2371. The reason that both authorities are needed is that a TIA, depending upon its patent rights provision (see appendix B to this part), may be either a cooperative agreement or a type of assistance transaction other than a grant or cooperative agreement.
(b) Recover funds from a recipient and reuse the funds for program purposes, as authorized by 10 U.S.C. 2371 and described in § 37.580.
(c) Exempt certain information received from proposers from disclosure under the Freedom of Information Act, as authorized by 10 U.S.C. 2371 and described in § 37.420.
(a) You must have specific authorization to award or administer TIAs. Being authorized to award or administer grants and cooperative agreements is not sufficient; a grants officer is an agreements officer only if the statement of appointment also authorizes the award or administration of TIAs.
(b) You receive that authorization in the same way that you receive authority to award other assistance instruments, as described in 32 CFR 21.215, 21.225, and 21.230.
(a) TIAs are explicitly covered in this part and part 21 of the DoD Grant and Agreement Regulations (DoDGARs). Part 21 (32 CFR part 21) addresses deviation procedures and other general matters that relate to the DoDGARs, to DoD Components' authorities and responsibilities for assistance instruments, and to requirements for reporting information about assistance awards.
(b) Two additional parts of the DoDGARs apply to TIAs, although they do not mention TIAs explicitly. They are:
(1) Part 25 (32 CFR part 25), on debarment, suspension, and drug-free workplace requirements, which applies because it covers nonprocurement instruments in general; and
(c) Portions of four other DoDGARs parts apply to TIAs only as cited by reference in this part. Those parts of the DoDGARs are parts 22, 32, 33, and 34 (32 CFR parts 22, 32, 33, and 34).
Subpart B—Appropriate Use of Technology Investment Agreements
You must ensure that you use TIAs only in appropriate situations. To do so, you must conclude that the use of a TIA is justified based on:
(a) The nature of the project, as discussed in § 37.205;
(b) The type of recipient, addressed in § 37.210;
(c) The recipient's commitment and cost sharing, as described in § 37.215;
(d) The degree of involvement of the Government program official, as discussed in § 37.220; and
(e) Your judgment that the use of a TIA could benefit defense research objectives in ways that likely would not happen if another type of assistance instrument were used. Your answers to the four questions in § 37.225 should be the basis for your judgment.
(a) Conclude that the principal purpose of the project is stimulation or support of research (i.e., assistance), rather than acquiring goods or services for the benefit of the Government (i.e., acquisition);
(b) Decide that the basic, applied, or advanced research project is relevant to the policy objective of civil-military integration (see appendix A of this part); and
(c) Ensure that, to the maximum extent practicable, any TIA that uses the authority of 10 U.S.C. 2371 (see appendix B of this part) does not support research that duplicates other research being conducted under existing programs carried out by the Department of Defense. This is a statutory requirement of 10 U.S.C. 2371.
(d) When your TIA is a type of assistance transaction other than a grant or cooperative agreement, satisfy the condition in 10 U.S.C. 2371 to judge that the use of a standard grant or cooperative agreement for the research project is not feasible or appropriate. As discussed in appendix B to this part:
(1) This situation arises if your TIA includes a patent provision that is less restrictive than is possible under the Bayh-Dole statute (because the patent provision is what distinguishes a TIA that is a cooperative agreement from a TIA that is an assistance transaction other than a grant or cooperative agreement).
(2) You satisfy the requirement to judge that a standard cooperative agreement is not feasible or appropriate when you judge that execution of the research project warrants a less restrictive patent provision than is possible under Bayh-Dole.
(a) As a matter of DoD policy, you may award a TIA only when one or more for-profit firms are to be involved either in the:
(1) Performance of the research project; or
(2) The commercial application of the research results. In that case, you must determine that the nonprofit performer has at least a tentative agreement with specific for-profit partners who plan on being involved when there are results to transition. You should review the agreement between the nonprofit and for-profit partners, because the for-profit partners' involvement is the basis for using a TIA rather than another type of assistance instrument.
(b) Consistent with the goals of civil-military integration, TIAs are most appropriate when one or more commercial firms (as defined at § 37.1250) are to be involved in the project.
(c) You are encouraged to make awards to consortia (a consortium may include one or more for-profit firms, as well as State or local government agencies, institutions of higher education, or other nonprofit organizations). The reasons are that:
(1) When multiple performers are participating as a consortium, they are more equal partners in the research performance than usually is the case with a prime recipient and subawards. All of them therefore are more likely to be directly involved in developing and revising plans for the research effort, reviewing technical progress, and overseeing financial and other business matters. That feature makes consortia well suited to building new relationships among performers in the defense and commercial sectors of the technology and industrial base, a principal objective for the use of TIAs.
(2) In addition, interactions among the participants within a consortium potentially provide a self-governance mechanism. The potential for additional self-governance is particularly good when a consortium includes multiple for-profit participants that normally are competitors within an industry.
(d) TIAs also may be used for carrying out research performed by single firms or multiple performers in prime award-subaward relationships. In awarding TIAs in those cases, however, you should consider providing for greater involvement of the program official or a way to increase self-governance (e.g., a prime award with multiple subawards arranged so as to give the subrecipients more insight into and authority and responsibility for programmatic and business aspects of the overall project than they usually have).
(a) You should judge that the recipient has a strong commitment to and self-interest in the success of the project. You should find evidence of that commitment and interest in the proposal, in the recipient's management plan, or through other means. A recipient's self-interest might be driven, for example, by a research project's potential for fostering technology to be incorporated into products and processes for the commercial marketplace.
(b) You must seek cost sharing. The purpose of cost share is to ensure that the recipient incurs real risk that gives it a vested interest in the project's success; the willingness to commit to meaningful cost sharing therefore is one good indicator of a recipient's self-interest. The requirements are that:
(1) To the maximum extent practicable, the non-Federal parties carrying out a research project under a TIA are to provide at least half of the Start Printed Page 21498costs of the project. Obtaining this cost sharing, to the maximum extent practicable, is a statutory condition for any TIA under the authority of 10 U.S.C. 2371, and is a matter of DoD policy for all other TIAs.
(2) The parties must provide the cost sharing from non-Federal resources that are available to them unless there is specific authority to use other Federal resources for that purpose (see § 37.530(f)).
(c) You may consider whether cost sharing is impracticable in a given case, unless there is a non-waivable, statutory requirement for cost sharing that applies to the particular program under which the award is to be made. Before deciding that cost sharing is impracticable, you should carefully consider whether there are other factors that demonstrate the recipient's self-interest in the success of the current project.
(a) TIAs are used to carry out cooperative relationships between the Federal Government and the recipient, which requires a greater level of involvement of the Government program official in the execution of the research than the usual oversight of a research grant or procurement contract. For example, program officials will participate in recipients' periodic reviews of research progress and will be substantially involved with the recipients in the resulting revisions of plans for future effort. That increased programmatic involvement before and during program execution with a TIA can reduce the need for some Federal financial requirements that are problematic for commercial firms.
(b) Some aspects of their involvement require program officials to have greater knowledge about and participation in business matters that traditionally would be your exclusive responsibility as the agreements officer. TIAs therefore also require closer cooperation between program officials and you, as the one who decides business matters.
Before deciding that a TIA is appropriate, you also must judge that using a TIA could benefit defense research objectives in ways that likely would not happen if another type of assistance instrument were used (e.g., a cooperative agreement subject to all of the requirements of 32 CFR part 34). You, in conjunction with Government program officials, must consider the questions in paragraphs (a) through (d) of this section, to help identify the benefits that may justify using a TIA and reducing some of the usual requirements. In accordance with § 37.1030, you will report your answers to these questions to help the DoD measure the Department-wide benefits of using TIAs and meet requirements to report to the Congress. Note that you must give full concise answers only to questions that relate to the benefits that you perceive for using the TIA, rather than another type of funding instrument, for the particular research project. A simple “no” or “not applicable” is a sufficient response for other questions. The questions are:
(a) Will the use of a TIA permit the involvement in the research of any commercial firms or business units of firms that would not otherwise participate in the project? If so:
(1) What are the expected benefits of those firms' or divisions' participation (e.g., is there a specific technology that could be better, more readily available, or less expensive)?
(2) Why would they not participate if an instrument other than a TIA were used? You should identify specific provisions of the TIA or features of the TIA award process that enable their participation.
(b) Will the use of a TIA allow the creation of new relationships among participants at the prime or subtier levels, among business units of the same firm, or between non-Federal participants and the Federal Government that will help the DoD get better technology in the future? If so:
(1) Why do these new relationships have the potential for helping the DoD get technology in the future that is better, more affordable, or more readily available?
(2) Are there provisions of the TIA or features of the TIA award process that enable these relationships to form? If so, you should be able to identify specifically what they are. If not, you should be able to explain specifically why you think that the relationships could not be created if an assistance instrument other than a TIA were used.
(c) Will the use of a TIA allow firms or business units of firms that traditionally accept Government awards to use new business practices in the execution of the research that will help us get better technology, help us get new technology more quickly or less expensively, or facilitate partnering with commercial firms? If so:
(1) What specific benefits will the DoD potentially get from the use of these new practices? You should be able to explain specifically why you foresee a potential for those benefits.
(2) Are there provisions of the TIA or features of the TIA award process that enable the use of the new practices? If so, you should be able to identify those provisions or features and explain why you think that the practices could not be used if the award were made using an assistance instrument other than a TIA.
(d) Are there any other benefits of the use of a TIA that could help the Department of Defense better meet its objectives in carrying out the research project? If so, you should be able to identify specifically what they are, how they can help meet defense objectives, what features of the TIA or award process enable the DoD to realize them, and why the benefits likely would not be realized if an assistance instrument other than a TIA were used.
In accordance with 32 CFR 22.205(b), you may not use a TIA if any participant is to receive fee or profit. Note that this policy extends to all performers of the research project carried out under the TIA, including any subawards for substantive program performance, but it does not preclude participants' or subrecipients' payment of reasonable fee or profit when making purchases from suppliers of goods (e.g., supplies and equipment) or services needed to carry out the research.
Subpart C—Expenditure-Based and Fixed-Support Technology Investment Agreements
The fundamental difference between an expenditure-based and fixed-support TIA is that:
(a) For an expenditure-based TIA, the amounts of interim payments or the total amount ultimately paid to the recipient are based on the amounts the recipient expends on project costs. If a recipient completes the project specified at the time of award before it expends all of the agreed-upon Federal funding and recipient cost sharing, the Federal Government may recover its share of the unexpended balance of funds or, by mutual agreement with the recipient, amend the agreement to expand the scope of the research project. An expenditure-based TIA therefore is analogous to a cost-type procurement contract or grant.
(b) For a fixed-support TIA, the amount of assistance established at the time of award is not meant to be adjusted later if the research project is carried out to completion. In that sense, a fixed-support TIA is somewhat Start Printed Page 21499analogous to a fixed-price procurement contract (although “price,” a concept appropriate to a procurement contract for buying a good or service, is not appropriate for a TIA or other assistance instrument for stimulation or support of a project).
You may use a fixed-support TIA if:
(a) The agreement is to support or stimulate research with outcomes that are well defined, observable, and verifiable;
(b) You can reasonably estimate the resources required to achieve those outcomes well enough to ensure the desired level of cost sharing (see example in § 37.560(b)); and
(c) Your TIA does not require a specific amount or percentage of recipient cost sharing. In cases where the agreement does require a specific amount or percentage of cost sharing, a fixed-support TIA is not practicable because the agreement has to specify cost principles or standards for costs that may be charged to the project; require the recipient to track the costs of the project; and provide access for audit to allow verification of the recipient's compliance with the mandatory cost sharing. You therefore must use an expenditure-based TIA if you:
(1) Have a non-waivable requirement (e.g., in statute) for a specific amount or percentage of recipient cost sharing; or
(2) Have otherwise elected to include in the TIA a requirement for a specific amount or percentage of cost sharing.
In general, you must use an expenditure-based TIA under conditions other than those described in § 37.305. Reasons for any exceptions to this general rule must be documented in the award file and must be consistent with the policy in § 37.230 that precludes payment of fee or profit to participants.
In situations where the use of fixed-support TIAs is permissible (see §§ 37.305 and 37.310), their use may encourage some commercial firms' participation in the research. With a fixed-support TIA, you can eliminate or reduce some post-award requirements that sometimes are cited as disincentives for those firms to participate. For example, a fixed-support TIA need not:
(a) Specify minimum standards for the recipient's financial management system.
(b) Specify cost principles or standards stating the types of costs the recipient may charge to the project.
(c) Provide for financial audits by Federal auditors or independent public accountants of the recipient's books and records.
(d) Set minimum standards for the recipient's purchasing system.
(e) Require the recipient to prepare financial reports for submission to the Federal Government.
Subpart D—Competition Phase
DoD policy is to award TIAs using merit-based, competitive procedures, as described in 32 CFR 22.315:
(a) In every case where required by statute; and
(b) To the maximum extent practicable in all other cases.
Your announcement, to be considered as part of a competitive procedure, must include the basic information described in 32 CFR 22.315(a). Additional elements for you to consider in the case of a program that may use TIAs are described in §§ 37.410 through 37.420.
Yes, once you consider the factors described in subpart B of this part and decide that TIAs are among the types of instruments that you may award pursuant to a solicitation, it is important for you to state that fact in the solicitation. You also should state that TIAs are more flexible than traditional Government funding instruments and that provisions are negotiable in areas such as audits and intellectual property rights that may cause concern for commercial firms. Doing so should increase the likelihood that commercial firms will be willing to submit proposals.
To help ensure a competitive process that is fair and equitable to all potential proposers, you should state clearly in the solicitation:
(a) The types of cost sharing that are acceptable;
(b) How any in-kind contributions will be valued, in accordance with §§ 37.530 through 37.555; and
(c) Whether you will give any consideration to alternative approaches a proposer may offer to demonstrate its strong commitment to and self-interest in the project's success, in accordance with § 37.215.
Your solicitation should tell potential proposers that:
(a) For all TIAs, information described in paragraph (b) of this section is exempt from disclosure requirements of the Freedom of Information Act (FOIA)(codified at 5 U.S.C. 552) for a period of five years after the date on which the DoD Component receives the information from them.
(b) As provided in 10 U.S.C. 2371, disclosure is not required, and may not be compelled, under FOIA during that period if:
(1) A proposer submits the information in a competitive or noncompetitive process that could result in their receiving a cooperative agreement for basic, applied, or advanced research under the authority of 10 U.S.C. 2358 or any other type of transaction authorized by 10 U.S.C. 2371 (as explained in appendix B to this part, that includes all TIAs); and
(2) The type of information is among the following types that are exempt:
(i) Proposals, proposal abstracts, and supporting documents; and
(ii) Business plans and technical information submitted on a confidential basis.
(c) If proposers desire to protect business plans and technical information for five years from FOIA disclosure requirements, they must mark them with a legend identifying them as documents submitted on a confidential basis.
Subpart E—Pre-Award Business Evaluation
(a) You must determine the qualification of the recipient, as described in §§ 37.510 and 37.515.
(b) As the business expert working with the program official, you also must address the financial aspects of the proposed agreement. You must:
(1) Determine that the total amount of funding for the proposed effort is reasonable, as addressed in § 37.520.
(2) Assess the value and determine the reasonableness of the recipient's proposed cost sharing contribution, as discussed in §§ 37.525 through 37.555.
(3) If you are contemplating the use of a fixed-support rather than expenditure-based TIA, ensure that its use is Start Printed Page 21500justified, as explained in §§ 37.560 and 37.565.
(4) Address issues of inconsistent cost accounting by traditional Government contractors, should they arise, as noted in § 37.570.
(5) Determine amounts for milestone payments, if you use them, as discussed in § 37.575.
Administrative agreements officers of the Defense Contract Management Agency and the Office of Naval Research can share lessons learned from administering other TIAs. Program officials can be a source of information when you are determining the reasonableness of proposed funding (e.g., on labor rates, as discussed in § 37.520) or establishing observable and verifiable technical milestones for payments (see § 37.575). Auditors at the Defense Contract Audit Agency can act in an advisory capacity to help you determine the reasonableness of proposed amounts, including values of in-kind contributions toward cost sharing.
Prior to award of a TIA, your responsibilities for determining that the recipient is qualified are the same as those of a grants officer who is awarding a grant or cooperative agreement. Those responsibilities are described in subpart D of 32 CFR part 22. When the recipient is a consortium that is not formally incorporated, you have the additional responsibility described in § 37.515.
(a) When the prospective recipient of a TIA is a consortium that is not formally incorporated, your determination that the recipient meets the standard at 32 CFR 22.415(a) requires that you, in consultation with legal counsel, review the management plan in the consortium's collaboration agreement. The purpose of your review is to ensure that the management plan is sound and that it adequately addresses the elements necessary for an effective working relationship among the consortium members. An effective working relationship is essential to increase the research project's chances of success.
(b) The collaboration agreement, commonly referred to as the articles of collaboration, is the document that sets out the rights and responsibilities of each consortium member. It binds the individual consortium members together, whereas the TIA binds the Government and the consortium as a group (or the Government and a consortium member on behalf of the consortium, as explained in § 37.1015). The document should discuss, among other things, the consortium's:
(1) Management structure.
(2) Method of making payments to consortium members.
(3) Means of ensuring and overseeing members' efforts on the project.
(4) Provisions for members' cost sharing contributions.
(5) Provisions for ownership and rights in intellectual property developed previously or under the agreement.
In cooperation with the program official, you must assess the reasonableness of the total estimated budget to perform the research that will be supported by the agreement. Additional guidance follows for:
(a) Labor. Much of the budget likely will involve direct labor and associated indirect costs, which may be represented together as a “loaded” labor rate. The program official is an essential advisor on reasonableness of the overall level of effort and its composition by labor category. You also may rely on your experience with other awards as the basis for determining reasonableness. If you have any unresolved questions, two of the ways that you might find helpful in establishing reasonableness are to:
(1) Consult the administrative agreements officers or auditors identified in § 37.505.
(2) Compare loaded labor rates of for-profit firms that do not have expenditure-based Federal procurement contracts or assistance awards with a standard or average for the particular industry. Note that the program official may have knowledge about customary levels of direct labor charges in the particular industry that is involved. You may be able to compare associated indirect charges with Government-approved indirect cost rates that exist for many nonprofit and for-profit organizations that have Federal procurement contracts or assistance awards (note the requirement in § 37.630 for a for-profit participant to use Federally approved provisional indirect cost rates, if it has them).
(b) Real property and equipment. In almost all cases, the project costs may include only depreciation or use charges for real property and equipment of for-profit participants, in accordance with § 37.685. Remember that the budget for an expenditure-based TIA may not include depreciation of a participant's property as a direct cost of the project if that participant's practice is to charge the depreciation of that type of property as an indirect cost, as many organizations do.
(a) Determine that the recipient's cost sharing contributions meet the criteria for cost sharing and determine values for them, in accordance with §§ 37.530 through 37.555. In doing so, you must:
(1) Ensure that there are affirmative statements from any third parties identified as sources of cash contributions.
(2) Include in the award file an evaluation that documents how you determined the values of the recipient's contributions to the funding of the project.
(b) Judge that the recipient's cost sharing contribution, as a percentage of the total budget, is reasonable. To the maximum extent practicable, the recipient must provide at least half of the costs of the project, in accordance with § 37.215.
You may accept any cash or in-kind contributions that meet all of the following criteria:
(a) In your judgment, they represent meaningful cost sharing that demonstrates the recipient's commitment to the success of the research project. Cash contributions clearly demonstrate commitment and they are strongly preferred over in-kind contributions.
(b) They are necessary and reasonable for accomplishment of the research project's objectives.
(c) They are costs that may be charged to the project under § 37.625 and § 37.635, as applicable to the participant making the contribution.
(d) They are verifiable from the recipient's records.
(e) They are not included as cost sharing contributions for any other Federal award.
(f) They are not paid by the Federal Government under another award, except: Start Printed Page 21501
(1) Costs that are authorized by Federal statute to be used for cost sharing; or
(2) Independent research and development (IR&D) costs, as described at 32 CFR 34.13(a)(5)(ii), that meet all of the criteria in paragraphs (a) through (e) of this section. IR&D is acceptable as cost sharing, even though it may be reimbursed by the Government through other awards. It is standard business practice for all for-profit firms, including commercial firms, to recover their research and development (R&D) costs (which for Federal procurement contracts is recovered as IR&D) through prices charged to their customers. Thus, the cost principles at 48 CFR part 31 allow a for-profit firm that has expenditure-based, Federal procurement contracts to recover through those procurement contracts the allocable portion of its R&D costs associated with a technology investment agreement.
You rarely should accept values for cost sharing contributions of real property or equipment that are in excess of depreciation or reasonable use charges, as discussed in § 37.685 for for-profit participants. You may accept the full value of a donated capital asset if the real property or equipment is to be dedicated to the project and you expect that it will have a fair market value that is less than $5,000 at the project's end. In those cases, you should value the donation at the lesser of:
(a) The value of the property as shown in the recipient's accounting records (i.e., purchase price less accumulated depreciation); or
(b) The current fair market value. You may accept the use of any reasonable basis for determining the fair market value of the property. If there is a justification to do so, you may accept the current fair market value even if it exceeds the value in the recipient's records.
You should limit the value of any contribution of a fully depreciated asset to a reasonable use charge. In determining what is reasonable, you must consider:
(a) The original cost of the asset;
(b) Its estimated remaining useful life at the time of your negotiations;
(c) The effect of any increased maintenance charges or decreased performance due to age; and
(d) The amount of depreciation that the participant previously charged to Federal awards.
No, you may not count any participant's costs of prior research as a cost sharing contribution. Only the additional resources that the recipient will provide to carry out the current project (which may include pre-award costs for the current project, as described in § 37.830) are to be counted.
(a) In most instances, you should not count costs of patents and other intellectual property (e.g., copyrighted material, including software) as cost sharing, because:
(1) It is difficult to assign values to these intangible contributions;
(2) Their value usually is a manifestation of prior research costs, which are not allowed as cost share under § 37.545; and
(3) Contributions of intellectual property rights generally do not represent the same cost of lost opportunity to a recipient as contributions of cash or tangible assets. The purpose of cost share is to ensure that the recipient incurs real risk that gives it a vested interest in the project's success.
(b) You may include costs associated with intellectual property if the costs are based on sound estimates of market value of the contribution. For example, a for-profit firm may offer the use of commercially available software for which there is an established license fee for use of the product. The costs of the development of the software would not be a reasonable basis for valuing its use.
For types of participant contributions other than those addressed in §§ 37.535 through 37.550, the general rule is that you are to value each contribution consistently with the cost principles or standards in § 37.625 and § 37.635 that apply to the participant making the contribution. When valuing services and property donated by parties other than the participants, you may use as guidance the provisions of 32 CFR 34.13(b)(2) through (5).
Fixed-Support or Expenditure-Based Approach
(a) To use a fixed-support TIA, rather than an expenditure-based TIA, you must have confidence in your estimate of the expenditures required to achieve well-defined outcomes. Therefore, you must work carefully with program officials to select outcomes that, when the recipient achieves them, are reliable indicators of the amount of effort the recipient expended. However, your estimate of the required expenditures need not be a precise dollar amount, as illustrated by the example in paragraph (b) of this section, if:
(1) The recipient is contributing a substantial share of the costs of achieving the outcomes, which must meet the criteria in § 37.305(a); and
(2) You are confident that the costs of achieving the outcomes will be at least a minimum amount that you can specify and the recipient is willing to accept the possibility that its cost sharing percentage ultimately will be higher if the costs exceed that minimum amount.
(b) To illustrate the approach, consider a project for which you are confident that the recipient will have to expend at least $800,000 to achieve the specified outcomes. You must determine, in conjunction with program officials, the minimum level of recipient cost sharing that you want to negotiate, based on the circumstances, to demonstrate the recipient's commitment to the success of the project. For purposes of this illustration, let that minimum recipient cost sharing be 40% of the total project costs. In that case, the Federal share should be no more than 60% and you could set a fixed level of Federal support at $480,000 (60% of $800,000). With that fixed level of Federal support, the recipient would be responsible for the balance of the costs needed to complete the project.
Yes, for a research project that is to be carried out by a number of participants, you may award a TIA that provides for some participants to perform under fixed-support arrangements and others to perform under expenditure-based arrangements. This approach may be useful, for example, if a commercial firm that is a participant will not accept an agreement with all of the post-award requirements of an expenditure-based award. Before using a fixed-support arrangement for that firm's portion of the project, you must judge that it meets the criteria in § 37.305.
Accounting, Payments, and Recovery of Funds
(a) If a participant has Federal procurement contracts that are subject Start Printed Page 21502to the Cost Accounting Standards (CAS) in part 30 of the Federal Acquisition Regulation (FAR) and the associated FAR Appendix (48 CFR part 30 and 48 CFR 9903.201-1, respectively), you must alert the cognizant administrative contracting officer (ACO) for the participant's procurement contracts if you learn that the participant plans to account for:
(1) Its own share of project costs under the TIA as direct costs and the Federal Government's share as indirect costs; or
(2) Its own share as indirect costs and the Federal Government's share as direct costs. This may arise, for example, if a for-profit firm (or a nonprofit organization that is identified in OMB Circular A-122 as being subject to the FAR cost principles in 48 CFR parts 31 and 231) proposes to charge its share of project costs as independent research and development costs, which are indirect costs under the FAR cost principles.
(b) The reason for alerting the ACO is that the inconsistent (direct versus indirect) charging of the two shares could cause a noncompliance with Cost Accounting Standard (CAS) 402. Noncompliance with CAS 402 is a potential issue only for a participant that has CAS-covered Federal procurement contracts (note that CAS requirements do not apply to a for-profit participant's TIAs).
(c) For for-profit participants with CAS-covered procurement contracts, the cognizant ACO in most cases will be an individual within the Defense Contract Management Agency (DCMA). You can identify a cognizant ACO at the DCMA by querying the contract administration team locator that matches contractors with their ACOs (currently on the World Wide Web at http://alerts.dcmdw.dcma.mil/support, a site that also can be accessed through the DCMA home page at http://www.dcma.mil).
(a) If you select the milestone payment method (see § 37.805), you must assess the reasonableness of the estimated budget for reaching each milestone. This assessment enables you to set the amount of each milestone payment to approximate the Federal share of the anticipated resource needs for carrying out that phase of the research effort.
(b) The Federal share at each milestone need not be the same as the Federal share of the total project. For example, you might deliberately set payment amounts with a larger Federal share for early milestones if a project involves a start-up company with limited resources.
(c) For an expenditure-based TIA, if you have minimum percentages that you want the recipient's cost sharing to be at the milestones, you should indicate those percentages in the agreement or in separate instructions to the post-award administrative agreements officer. That will help the administrative agreements officer decide when a project's expenditures have fallen too far below the original projections, requiring adjustments of future milestone payment amounts (see § 37.1105(c)).
(d) For fixed-support TIAs, the milestone payments should be associated with the well-defined, observable and verifiable technical outcomes (e.g., demonstrations, tests, or data analysis) that you establish for the project in accordance with §§ 37.305(a) and 37.560(a).
(a) Recovery of funds refers to the use of the authority in 10 U.S.C. 2371 to include a provision in certain types of agreements, including TIAs, that require a recipient to make payments to the Department of Defense or another Federal agency as a condition of the agreement. Recovery of funds is a good tool in the right circumstances, at the discretion of the agreements officer and the awarding organization, but its purpose is not to augment program budgets. It may be used to recover funds provided to a recipient through a TIA or another Federal procurement or assistance instrument, and the recovery should not exceed the amounts provided. Recovery of funds is distinct from program income, as described in § 37.835.
(b) In accordance with 10 U.S.C. 2371, as implemented by policy guidance from the Office of the Under Secretary of Defense (Comptroller), the payment amounts may be credited to an existing account of the Department of Defense and used for the same program purposes as other funds in that account.
(c) Before you use the authority to include a provision for recovery of funds, note that 10 U.S.C. 2371 requires you to judge that it would not be feasible or appropriate to use for the research project a standard grant or cooperative agreement (in this instance, a “standard cooperative agreement” means a cooperative agreement without a provision for recovery of funds). You satisfy that 10 U.S.C. 2371 requirement when you judge that execution of the research project warrants inclusion of a provision for recovery of funds.
Subpart F—Award Terms Affecting Participants' Financial, Property, and Purchasing Systems
This subpart addresses “systemic” administrative matters that place requirements on the operation of a participant's financial management, property management, or purchasing system. Each participant's systems are organization-wide and do not vary with each agreement. Therefore, all TIAs should address systemic requirements in a uniform way for each type of participant organization.
The general policy for expenditure-based TIAs is to avoid requirements that would force participants to use different financial management, property management, and purchasing systems than they currently use for:
(a) Expenditure-based Federal procurement contracts and assistance awards in general, if they receive them; or
(b) Commercial business, if they have no expenditure-based Federal procurement contracts and assistance awards.
If it is an expenditure-based award, your TIA must require participants to flow down the same financial management, property management, and purchasing systems requirements to a subrecipient that would apply if the subrecipient were a participant. For example, a for-profit participant would flow down to a university subrecipient the requirements that apply to a university participant. Note that this policy applies to subawards for substantive performance of portions of the research project supported by the TIA, and not to participants' purchases of goods or services needed to carry out the research.
(a) To avoid causing needless changes in participants' financial management Start Printed Page 21503systems, your expenditure-based TIAs will make for-profit participants that currently perform under other expenditure-based Federal procurement contracts or assistance awards subject to the same standards for financial management systems that apply to those other awards. Therefore, if a for-profit participant has expenditure-based DoD assistance awards other than TIAs, your TIAs are to apply the standards in 32 CFR 34.11. You may grant an exception and allow a for-profit participant that has other expenditure-based Federal Government awards to use an alternative set of standards that meets the minimum criteria in paragraph (b) of this section, if there is a compelling programmatic or business reason to do so. For each case in which you grant an exception, you must document the reason in the award file.
(b) For an expenditure-based TIA, you are to allow and encourage each for-profit participant that does not currently perform under expenditure-based Federal procurement contracts or assistance awards (other than TIAs) to use its existing financial management system as long as the system, as a minimum:
(1) Complies with Generally Accepted Accounting Principles.
(2) Effectively controls all project funds, including Federal funds and any required cost share. The system must have complete, accurate, and current records that document the sources of funds and the purposes for which they are disbursed. It also must have procedures for ensuring that project funds are used only for purposes permitted by the agreement (see § 37.625).
(3) Includes, if advance payments are authorized under § 37.805, procedures to minimize the time elapsing between the payment of funds by the Government and the firm's disbursement of the funds for program purposes.
So as not to force system changes for any State, local government, institution of higher education, or other nonprofit organization, your expenditure-based TIA's requirements for the financial management system of any nonprofit participant are the same as those that apply to the participant's other Federal assistance awards. Specifically, the requirements are those in:
(a) 32 CFR 33.20 for State and local governments; and
(b) 32 CFR 32.21(b) for other nonprofit organizations, with the exception of Government-owned, contractor-operated (GOCO) facilities and Federally Funded Research and Development Centers (FFRDCs) that are excepted from the definition of “recipient” in 32 CFR part 32. Although it should occur infrequently, if a nonprofit GOCO or FFRDC is a participant, you must specify appropriate standards that conform as much as practicable with requirements in that participant's other Federal awards.
(a) So as not to require any firm to needlessly change its cost-accounting system, your expenditure-based TIAs are to apply the Government cost principles in 48 CFR parts 31 and 231 to for-profit participants that currently perform under expenditure-based Federal procurement contracts or assistance awards (other than TIAs) and therefore have existing systems for identifying allowable costs under those principles. If there are programmatic or business reasons to do otherwise, you may grant an exception from this requirement, in which case you must document the reasons in your award file.
(b) For other for-profit participants, you may establish alternative standards in the agreement as long as that alternative provides, as a minimum, that Federal funds and funds counted as recipients' cost sharing will be used only for costs that:
(1) A reasonable and prudent person would incur in carrying out the research project contemplated by the agreement. Generally, elements of cost that appropriately are charged are those identified with research and development activities under the Generally Accepted Accounting Principles (see Statement of Financial Accounting Standards Number 2, “Accounting for Research and Development Costs,” October 1974 ). Moreover, costs must be allocated to DoD and other projects in accordance with the relative benefits the projects receive. Costs charged to DoD projects must be given consistent treatment with costs allocated to the participants' other research and development activities (e.g., activities supported by the participants themselves or by non-Federal sponsors).
(2) Are consistent with the purposes stated in the governing Congressional authorizations and appropriations. You are responsible for ensuring that provisions in the award document address any requirements that result from authorizations and appropriations.
In accordance with the general policy in § 37.605, you must require a for-profit participant that has Federally approved indirect cost rates for its Federal procurement contracts to use those rates to accumulate and report costs under an expenditure-based TIA. This includes both provisional and final rates that are approved up until the time that the TIA is closed out. You may grant an exception from this requirement if there are programmatic or business reasons to do otherwise (e.g., the participant offers you a lower rate). If you grant an exception, the participant must accumulate and report the costs using an accounting system and practices that it uses for other customers (e.g., its commercial customers). Also, you must document the reason for the exception in your award file.
So as not to force financial system changes for any nonprofit participant, your expenditure-based TIA will provide that costs to be charged to the research project by any nonprofit participant must be determined to be allowable in accordance with:
(a) OMB Circular A-87, if the participant is a State or local governmental organization.
(b) OMB Circular A-21, if the participant is an institution of higher education.
(c) 45 CFR part 74, appendix E, if the participant is a hospital.
(d) OMB Circular A-122, if the participant is any other type of nonprofit organization (the cost principles in 48 CFR parts 31 and 231 are to be used by any nonprofit organization that is identified in Circular A-122 as being subject to those cost principles).
If your TIA is an expenditure-based award, you must include in it an audit provision that addresses, for each for-profit participant:
(a) Whether the for-profit participant must have periodic audits, in addition to any award-specific audits, as described in § 37.645. Note that the DCAA or the Office of the Inspector Start Printed Page 21504General, DoD (OIG, DoD), can provide advice on the types and scope of audits that may be needed in various circumstances.
(b) Whether the DCAA or an independent public accountant (IPA) will perform required audits, as discussed in § 37.650.
(c) How frequently any periodic audits are to be performed, addressed in § 37.655.
(d) Other matters described in § 37.660, such as audit coverage, allowability of audit costs, auditing standards, and remedies for noncompliance.
You need to consider requirements for both periodic audits and award-specific audits (as defined in § 37.1325 and § 37.1235, respectively). The way that your expenditure-based TIA addresses the two types of audits will vary, depending upon the type of for-profit participant.
(a) For for-profit participants that are audited by the DCAA or other Federal auditors, as described in §§ 37.650(b) and 37.655, you need not add specific requirements for periodic audits because the Federal audits should be sufficient to address whatever may be needed. Your inclusion in the TIA of the standard access-to-records provision for those for-profit participants, as discussed in § 37.915(a), gives the necessary access in the event that you or administrative agreements officers later need to request audits to address award-specific issues that arise.
(b) For each other for-profit participant, you:
(1) Should require that the participant have an independent auditor (i.e., the DCAA or an independent public accountant) conduct periodic audits of its systems if it expends $300,000 or more per year in TIAs and other Federal assistance awards. A prime reason for including this requirement is that the Federal Government, for an expenditure-based award, necessarily relies on amounts reported by the participant's systems when it sets payment amounts or adjusts performance outcomes. The periodic audit provides some assurance that the reported amounts are reliable.
(2) Must ensure that the award provides an independent auditor the access needed for award-specific audits, to be performed at the request of the cognizant administrative agreements officer if issues arise that require audit support. However, the expectation is that periodic audits will be all that is needed in most cases, and you should rely on them to the maximum extent possible to resolve any award-specific issues.
The auditor that you will identify in the expenditure-based TIA to perform periodic and award-specific audits of a for-profit participant depends on the circumstances, as follows:
(a) You may provide that an IPA will be the auditor for a for-profit participant that does not meet the criteria in paragraph (b) of this section, but only if the participant will not agree to give the DCAA access to the necessary books and records for audit purposes. Note that the allocable portion of the costs of the IPA's audit may be reimbursable under the TIA, as described in § 37.660(b). The IPA should be the one that the participant uses to perform other audits (e.g., of its financial statement), to minimize added burdens and costs. You must document in the award file the participant's unwillingness to give the DCAA access. The DCAA is to be the auditor if the participant grants the necessary access.
(b) Except as provided in paragraph (c) of this section, you must identify the DCAA as the auditor for any for-profit participant that is subject to DCAA audits because it is currently performing under a Federal award that is subject to the:
(c) If there are programmatic or business reasons that justify the use of an auditor other than the DCAA for a for-profit participant that meets the criteria in paragraph (b) of this section, you may provide that an IPA will be the auditor for that participant if you obtain prior approval from the Office of the Inspector General, DoD. You must submit requests for prior approval to the Assistant Inspector General (Auditing), 400 Army-Navy Drive, Arlington, VA 22202. Your request must include the name and address of the business unit(s) for which IPAs will be used. It also must explain why you judge that the participant will not give the DCAA the necessary access to records for audit purposes (e.g., you may submit a statement to that effect from the participant). The OIG, DoD, will respond within five working days of receiving the request for prior approval, either by notifying you of the decision (approval or disapproval) or giving you a date by which they will notify you of the decision.
If your expenditure-based TIA provides for periodic audits of a for-profit participant by an IPA, you must specify the frequency for those audits. You should consider having an audit performed during the first year of the award, when the participant has its IPA do its next financial statement audit, unless the participant already had a systems audit due to other Federal awards within the past two years. The frequency thereafter may vary depending upon the dollars the participant is expending annually under the award, but it is not unreasonable to require an updated audit every two to three years to reverify that the participant's systems are reliable (the audit then would cover the two or three-year period between audits). The DCAA is a source of advice on audit frequencies if your TIA provides for audits by IPAs.
If your expenditure-based TIA provides for audits of a for-profit participant by an IPA, you also must specify:
(a) What periodic audits are to cover. It is important that you specify audit coverage that is only as broad as needed to provide reasonable assurance of the participant's compliance with award terms that have a direct and material effect on the research project. Appendix C to this part provides guidance to for-profit participants and their IPAs that you may use for this purpose. The DCAA and the OIG, DoD, also can provide advice to help you set appropriate limits on audit objectives and scope.
(b) Who will pay for periodic and award-specific audits. The allocable portion of the costs of any audits by IPAs may be reimbursable under the TIA. The costs may be direct charges or allocated indirect costs, consistent with the participant's accounting system and practices.
(c) The auditing standards that the IPA will use. Unless you receive prior approval from the OIG, DoD, to do otherwise, you must provide that the IPA will perform the audits in Start Printed Page 21505accordance with the Generally Accepted Government Auditing Standards.
(d) The available remedies for noncompliance. The agreement must provide that the participant may not charge costs to the award for any audit that the agreements officer, with the advice of the OIG, DoD, determines was not performed in accordance with the Generally Accepted Government Auditing Standards or other terms of the agreement. It also must provide that the Government has the right to require the participant to have the IPA take corrective action and, if corrective action is not taken, that the agreements officer has recourse to any of the remedies for noncompliance identified in 32 CFR 34.52(a).
(e) The remedy if it later is found that the participant, at the time it entered into the TIA, was performing on a procurement contract or other Federal award subject to the Cost Accounting Standards at 48 CFR part 30 and the cost principles at 48 CFR part 31. Unless the OIG, DoD, approves an exception (see § 37.650(c)), the TIA's terms must provide that the DCAA will perform the audits for the agreement if it later is found that the participant, at the time the TIA was awarded, was performing under awards described in § 37.650(b) that gave the DCAA audit access to the participant's books and records.
(f) Where the IPA is to send audit reports. The agreement must provide that the IPA is to submit audit reports to the administrative agreements officer and the OIG, DoD. It also must require that the IPA report instances of fraud directly to the OIG, DoD.
(g) The retention period for the IPA's working papers. You must specify that the IPA is to retain working papers for a period of at least three years after the final payment, unless the working papers relate to an audit whose findings are not fully resolved within that period or to an unresolved claim or dispute (in which case, the IPA must keep the working papers until the matter is resolved and final action taken).
(h) Who will have access to the IPA's working papers. The agreement must provide for Government access to working papers.
Yes, expenditure-based TIAs are assistance instruments subject to the Single Audit Act (31 U.S.C. 7501-7507), so nonprofit participants are subject to their usual requirements under that Act and OMB Circular A-133. Specifically, the requirements are those in:
(a) 32 CFR 33.26 for State and local governments; and
(b) 32 CFR 32.26 for other nonprofit organizations. Note that those requirements also are appropriate for Government-owned, contractor-operated (GOCO) facilities and Federally Funded Research and Development Centers (FFRDCs) that are excluded from the definition of “recipient” in 32 CFR part 32, because nonprofit GOCOs and FFRDCs are subject to the Single Audit Act.
(a) Yes, in accordance with § 37.610, your expenditure-based TIA must require participants to flow down the same audit requirements to a subrecipient that would apply if the subrecipient were a participant.
(b) For example, a for-profit participant that is audited by the DCAA:
(1) Would flow down to a university subrecipient the Single Audit Act requirements that apply to a university participant.
(2) Could enter into a subaward allowing a for-profit participant, under the circumstances described in § 37.650(a), to use an IPA to do its audits.
(c) This policy applies to subawards for substantive performance of portions of the research project supported by the TIA, and not to participants' purchases of goods or services needed to carry out the research.
Yes, you must include that information with the data you provide for your DoD Component's annual submission to the Defense Technical Information Center (DTIC), as provided in § 37.1030(c).
Yes, your expenditure-based TIA must require participants to report to you when they enter into any subaward allowing a for-profit participant to use an IPA, as described in § 37.670(b)(2). You must provide that information about the new subaward under the TIA for your DoD Component's annual submission to the DTIC, even though the TIA may have been reported in a prior year and does not itself have to be reported again.
(a) With the two exceptions described in paragraph (b) of this section, you must require a for-profit firm to purchase real property or equipment with its own funds that are separate from the research project. You should allow the firm to charge to an expenditure-based TIA only depreciation or use charges for real property or equipment (and your cost estimate for a fixed-support TIA only would include those costs). Note that the firm must charge depreciation consistently with its usual accounting practice. Many firms treat depreciation as an indirect cost. Any firm that usually charges depreciation indirectly for a particular type of property must not charge depreciation for that property as a direct cost to the TIA.
(b) In two situations, you may grant an exception and allow a for-profit firm to use project funds, which includes both the Federal Government and recipient shares, to purchase real property or equipment (i.e., to charge to the project the full acquisition cost of the property). The two circumstances, which should be infrequent for equipment and extremely rare for real property, are those in which you either:
(1) Judge that the real property or equipment will be dedicated to the project and have a current fair market value that is less than $5,000 by the time the project ends; or
(2) Give prior approval for the firm to include the full acquisition cost of the real property or equipment as part of the cost of the project (see § 37.535).
(c) If you grant an exception in either of the circumstances described in paragraphs (b)(1) and (2) of this section, you must make the real property or equipment subject to the property management standards in 32 CFR 34.21(b) through (d). As provided in those standards, the title to the real property or equipment will vest conditionally in the for-profit firm upon acquisition. Your TIA, whether it is a fixed-support or expenditure-based award, must specify that any item of equipment that has a fair market value of $5,000 or more at the conclusion of the project also will be subject to the disposition process in 32 CFR 34.21(e), whereby the Federal Government will recover its interest in the property at that time.
For nonprofit participants, your TIA's requirements for vesting of title, use, Start Printed Page 21506management, and disposition of real property or equipment acquired under the award are the same as those that apply to the participant's other Federal assistance awards. Specifically, the requirements are those in:
(a) 32 CFR 33.31 and 33.32, for participants that are States and local governmental organizations.
(b) 32 CFR 32.32 and 32.33, for other nonprofit participants, with the exception of nonprofit GOCOs and FFRDCs that are exempted from the definition of “recipient” in 32 CFR part 32. Although it should occur infrequently, if a nonprofit GOCO or FFRDC is a participant, you must specify appropriate standards that conform as much as practicable with requirements in that participant's other Federal awards. Note also that:
(1) If the TIA is a cooperative agreement (see appendix B to this part), 31 U.S.C. 6306 provides authority to vest title to tangible personal property in a nonprofit institution of higher education or in a nonprofit organization whose primary purpose is conducting scientific research, without further obligation to the Federal Government; and
(2) Your TIA therefore must specify any conditions on the vesting of title to real property or equipment acquired by any such nonprofit participant, or the title will vest in the participant without further obligation to the Federal Government, as specified in 32 CFR 32.33(b)(3).
If you provide Federally owned property to any participant for the performance of research under a TIA, you must require that participant to account for, use, and dispose of the property in accordance with:
(a) 32 CFR 34.22, if the participant is a for-profit firm.
(b) 32 CFR 33.32(f), if the participant is a State or local governmental organization. Note that 32 CFR 33.32(f) requires you to provide additional information to the participant on the procedures for managing the property.
(c) 32 CFR 32.33(a) and 32.34(f), if the participant is a nonprofit organization other than a GOCO or FFRDC (requirements for nonprofit GOCOs and FFRDCs should conform with the property standards that apply to their Federal procurement contracts).
Your expenditure-based TIA's provisions should permit participants to use their existing procedures to account for and manage supplies. A fixed-support TIA should not include requirements to account for or manage supplies.
(a) If your TIA is an expenditure-based award, it should require for-profit participants that currently perform under DoD assistance instruments subject to the purchasing standards in 32 CFR 34.31 to use the same requirements for TIAs, unless there are programmatic or business reasons to do otherwise (in which case you must document the reasons in the award file).
(b) You should allow other for-profit participants under expenditure-based TIAs to use their existing purchasing systems, as long as they flow down the applicable requirements in Federal statutes, Executive orders or Governmentwide regulations (see appendix E to this part for a list of those requirements).
(c) If your TIA is a fixed-support award, you need only require for-profit participants to flow down the requirements listed in appendix F to this part.
(a) So as not to force system changes for any nonprofit participant, your expenditure-based TIA will provide that each nonprofit participant's purchasing system comply with:
(1) 32 CFR 33.36, if the participant is a State or local governmental organization.
(2) 32 CFR 32.40 through 32.49 if the participant is a nonprofit organization other than a GOCO or FFRDC that is excepted from the definition of “recipient” in 32 CFR part 32. Although it should occur infrequently, if a nonprofit GOCO or FFRDC is a participant, you must specify appropriate standards that conform as much as practicable with requirements in that participant's other Federal awards.
(b) If your TIA is a fixed-support award, you need only require nonprofit participants to flow down the requirements listed in appendix E to this part.
Subpart G—Award Terms Related to Other Administrative Matters
This subpart addresses “non-systemic” administrative matters that do not impose organization-wide requirements on a participant's financial management, property management, or purchasing system. Because an organization does not have to redesign its systems to accommodate award-to-award variations in these requirements, a TIA that you award may differ from other TIAs in the non-systemic requirements that it specifies for a given participant, based on the circumstances of the particular research project. To eliminate needless administrative complexity, you should handle some non-systemic requirements, such as the payment method, in a uniform way for the agreement as a whole.
Your TIA may provide for:
(a) Reimbursement, as described in 32 CFR 34.12(a)(1), if it is an expenditure-based award.
(c) Payments based on payable milestones. These are payments made according to a schedule that is based on predetermined measures of technical progress or other payable milestones. This approach relies upon the fact that, as research progresses throughout the term of the agreement, observable activity will be taking place. The recipient is paid upon the accomplishment of the predetermined measure of progress. Fixed-support TIAs must use this payment method and each measure of progress appropriately would be one of the well-defined outcomes that you identify in the agreement (this does not preclude use of an initial advance payment, if there is no alternative to meeting immediate cash needs). There are cash management considerations when this payment method is used as a means of financing for an expenditure-based TIA (see § 37.575 and § 37.1105).
The procedure and frequency for payment requests depend upon the payment method, as follows:
(a) For either reimbursements or advance payments, your TIA must allow recipients to submit requests for payment at least monthly. You may authorize the recipients to use the forms or formats described in 32 CFR 34.12(d).
(b) If the payments are based on payable milestones, the recipient will submit a report or other evidence of Start Printed Page 21507accomplishment to the program official at the completion of each predetermined activity. The agreement administrator may approve payment to the recipient after receiving validation from the program manager that the milestone was successfully reached.
Your TIA must provide that the administrative agreements officer may withhold payments in the circumstances described in 32 CFR 34.12(g), but not otherwise.
If your expenditure-based TIA provides for either advance payments or payable milestones, the agreement must require the recipient to:
(a) Maintain in an interest-bearing account any advance payments or milestone payment amounts received in advance of needs to disburse the funds for program purposes unless:
(1) The recipient receives less than $120,000 in Federal grants, cooperative agreements, and TIAs per year;
(2) The best reasonably available interest-bearing account would not be expected to earn interest in excess of $1,000 per year on the advance or milestone payments; or
(3) The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources for the project.
(b) Remit annually the interest earned to the administrative agreements officer.
Revision of Budget and Program Plans
If it is an expenditure-based award, your agreement must require the recipient to obtain the agreement administrator's prior approval if there is to be a change in plans that results in a need for additional Federal funding (this is unnecessary for a fixed-support TIA because the recipient is responsible for additional costs of achieving the outcomes). Other than that, the program official's substantial involvement in the project should ensure that the Government has advance notice of changes in plans.
Pre-award costs, as long as they are otherwise allowable costs of the project, may be charged to an expenditure-based TIA only with the specific approval of the agreements officer. All pre-award costs are incurred at the recipient's risk (i.e., no DoD Component is obligated to reimburse the costs if for any reason the recipient does not receive an award or if the award is less than anticipated and inadequate to cover the costs).
Your TIA should apply the standards of 32 CFR 34.14 for program income that may be generated. Note the need to specify whether the recipient is to have any obligation to the Federal Government with respect to program income generated after the end of the project period (the period, as established in the award document, during which Federal support is provided). Doing so is especially important if the TIA includes a provision for the recipient to return any amounts to the Federal Government (see § 37.580).
(a) You should confer with program officials and legal counsel to develop an overall strategy for intellectual property that takes into account inventions and data that may result from the project and future needs the Government may have for rights in them. The strategy should take into account any intellectual property the Government is furnishing and any pre-existing proprietary information that the recipient is furnishing, as well as data and inventions that may be generated under the award (recognizing that new data and inventions may be less valuable without pre-existing information). All pre-existing intellectual property, both the Government's and the recipient's, should be marked to give notice of its status.
(b) Because TIAs entail substantial cost sharing by recipients, you must use discretion in negotiating Government rights to data and patentable inventions resulting from research under the agreements. The considerations in §§ 37.845 through 37.875 are intended to serve as guidelines, within which you necessarily have considerable latitude to negotiate provisions appropriate to a wide variety of circumstances that may arise. Your goal should be a good balance between DoD interests in:
(1) Gaining access to the best technologies for defense needs, including technologies available in the commercial marketplace, and promoting commercialization of technologies resulting from the research. Either of these interests may be impeded if you negotiate excessive rights for the Government. One objective of TIAs is to help incorporate defense requirements into the development of what ultimately will be commercially available technologies, an objective that is best served by reducing barriers to commercial firms' participation in the research. In that way, the commercial technology and industrial base can be a source of readily available, reliable, and affordable components, subsystems, computer software, and other technological products and manufacturing processes for military systems.
(2) Providing adequate protection of the Government's investment, which may be weakened if the Government's rights are inadequate. You should consider whether the Government may require access to data or inventions for Governmental purposes, such as a need to develop defense-unique products or processes that the commercial marketplace likely will not address.
(a) You should seek to obtain what you, with the advice of legal counsel, judge is needed to ensure future Government use of technology that emerges from the research, as long as doing so is consistent with the balance between DoD interests described in § 37.840(b). You should consider data in which you wish to obtain license rights and data that you may wish to be delivered; since TIAs are assistance instruments rather than acquisition instruments, however, it is not expected that data would be delivered in most cases. What generally is needed is an irrevocable, world-wide license for the Government to use, modify, reproduce, release, or disclose for Governmental purposes the data that are generated under TIAs (including any data, such as computer software, in which a recipient may obtain a copyright). A Governmental purpose is any activity in which the United States Government participates, but a license for Governmental purposes does not include the right to use, or have or permit others to use, modify, reproduce, release, or disclose data for commercial purposes.
(b) You may negotiate licenses of different scope than described in paragraph (a) of this section when necessary to accomplish program objectives or to protect the Government's interests. Consult with legal counsel before negotiating a license of different scope. Start Printed Page 21508
(c) In negotiating data rights, you should consider the rights in background data that are necessary to fully utilize technology that is expected to result from the TIA, in the event the recipient does not commercialize the technology or chooses to protect any invention as a trade secret rather than by a patent. If a recipient intends to protect any invention as a trade secret, you should consult with your intellectual property counsel before deciding what information related to the invention the award should require the recipient to report.
To protect the recipient's interests in data, your TIA should require the recipient to mark any particular data that it wishes to protect from disclosure with a legend identifying the data as licensed data subject to use, release, or disclosure restrictions.
Prior to releasing or disclosing data marked with a restrictive legend (as described in § 37.850) to third parties, you should require those parties to agree in writing that they will:
(a) Use the data only for governmental purposes; and
(b) Not release or disclose the data without the permission of the licensor (i.e., the recipient).
(a) You should negotiate rights in inventions that represent a good balance between the Government's interests (see § 37.840(b)) and the recipient's interests. As explained in appendix B to this part:
(1) You have the flexibility to negotiate patent rights provisions that vary from what the Bayh-Dole statute (Chapter 18 of Title 35, U.S.C.) requires in many situations. You have that flexibility because TIAs include not only cooperative agreements, but also assistance transactions other than grants or cooperative agreements.
(2) Your TIA becomes an assistance instrument other than a grant or cooperative agreement if its patent rights provision varies from what Bayh-Dole requires in your situation. However, you need not consider that difference in the type of transaction until the agreement is finalized, and it should not affect the provision you negotiate.
(b) As long as it is consistent with the balance between DoD interests described in § 37.840(b) and the recipient's interests, you should seek to obtain for the Government, when an invention is conceived or first actually reduced to practice under a TIA, a nonexclusive, nontransferrable, irrevocable, paid-up license to practice the invention, or to have it practiced, for or on behalf of the United States throughout the world. The license is for Governmental purposes, and does not include the right to practice the invention for commercial purposes.
(c) To provide for the license described in paragraph (b) of this section, your TIA generally would include the patent-rights clause that 37 CFR 401.14 specifies to implement the Bayh-Dole statute's requirements. Note that:
(1) The clause is designed specifically for grants, contracts, and cooperative agreements awarded to small businesses and nonprofit organizations, the types of funding instruments and recipients to which the entire Bayh-Dole statute applies. As explained in appendix B to this part, only two Bayh-Dole requirements (in 35 U.S.C. sections 202(c)(4) and 203) apply to cooperative agreements with other performers, by virtue of an amendment to Bayh-Dole at 35 U.S.C. 210(c).
(2) You may use the same clause, suitably modified, in cooperative agreements with performers other than small businesses and nonprofit organizations. Doing so is consistent with a 1983 Presidential memorandum that calls for giving other performers rights in inventions from Federally supported research that are at least as great as the rights that Bayh-Dole gives to small businesses and nonprofit organizations (see Appendix B to this part for details). That Presidential memorandum is incorporated by reference in Executive Order 12591 (52 FR 13414, 3 CFR, 1987 Comp., p. 220), as amended by Executive Order 12618 (52 FR 48661, 3 CFR, 1987 Comp., p. 262).
(3) The clause provides for flow-down of Bayh-Dole patent-rights provisions to subawards with small businesses and nonprofit organizations.
(d) You may negotiate Government rights of a different scope than the standard patent-rights provision described in paragraph (c) of this section when necessary to accomplish program objectives and foster the Government's interests. If you do so:
(1) With the help of the program manager and legal counsel, you must decide what best represents a reasonable arrangement considering the circumstances, including past investments, contributions under the current TIA, and potential commercial markets. Taking past investments as an example, you should consider whether the Government or the recipient has contributed more substantially to the prior research and development that provides the foundation for the planned effort. If the predominant past contributor to the particular technology has been:
(i) The Government, then the TIA's patent-rights provision should be at or close to the standard Bayh-Dole provision.
(ii) The recipient, then a less restrictive patent provision may be appropriate, to allow the recipient to benefit more directly from its investments.
(2) You should keep in mind that obtaining a nonexclusive license at the time of award, as described in paragraph (b) of this section, is valuable if the Government later requires access to inventions to enable development of defense-unique products or processes that the commercial marketplace is not addressing. If you do not obtain a license at the time of award, you should consider alternative approaches to ensure access, such as negotiating a priced option for obtaining nonexclusive licenses in the future to inventions that are conceived or reduced to practice under the TIA.
(3) You also may consider whether you want to provide additional flexibility by giving the recipient more time than the standard patent-rights provision does to:
(i) Notify the Government of an invention, from the time the inventor discloses it within the for-profit firm.
(ii) Inform the Government whether it intends to take title to the invention.
(iii) Commercialize the invention, before the Government license rights in the invention become effective.
Your TIA's patent rights provision should include the Bayh-Dole march-in rights clause at paragraph (j)(1) of 37 CFR 401.14, or an equivalent clause, concerning actions that the Government may take to obtain the right to use subject inventions, if the recipient fails to take effective steps to achieve practical application of the subject inventions within a reasonable time. The march-in provision may be modified to best meet the needs of the program. However, only infrequently should the march-in provision be entirely removed (e.g., you may wish to do so if a recipient is providing most of Start Printed Page 21509the funding for a research project, with the Government providing a much smaller share).
To protect the recipient's interest in inventions, your TIA should require the recipient to mark documents disclosing inventions it desires to protect by obtaining a patent. The recipient should mark the documents with a legend identifying them as intellectual property subject to public release or public disclosure restrictions, as provided in 35 U.S.C. 205.
(a) Consistent with the objective of enhancing the national security by increasing DoD reliance on the U.S. commercial technology and industrial bases, you must include a provision in the TIA that addresses foreign access to technology developed under the TIA.
(b) The provision must provide, as a minimum, that any transfer of the:
(1) Technology must be consistent with the U.S. export laws, regulations and policies (e.g., the International Traffic in Arms Regulation at 22 CFR part 121, et seq., the DoD Industrial Security Regulation in DoD 5220.22-R, and the Department of Commerce Export Regulation at 15 CFR part 770, et seq.), as applicable.
(2) Exclusive right to use or sell the technology in the United States must, unless the Government grants a waiver, require that products embodying the technology or produced through the use of the technology will be manufactured substantially in the United States. The provision may further provide that:
(i) In individual cases, the Government may waive the requirement of substantial manufacture in the United States upon a showing by the recipient that reasonable but unsuccessful efforts have been made to transfer the technology under similar terms to those likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible.
(ii) In those cases, the DoD Component may require a refund to the Government of some or all the funds paid under the TIA for the development of the transferred technology.
(c) You may, but are not required to, seek to negotiate a domestic manufacture condition for transfers of nonexclusive rights to use or sell the technology in the United States, to parallel the one described for exclusive licenses in paragraph (b)(2) of this section, if you judge that nonexclusive licenses for foreign manufacture could effectively preclude the establishment of domestic sources of the technology for defense purposes.
Financial and Programmatic Reporting
Your TIA must include either:
(a) The requirements in 32 CFR 32.51 and 32.52 for status reports on programmatic performance and, if it is an expenditure-based award, on financial performance; or
(b) Alternative requirements that, as a minimum, include periodic reports addressing program and, if it is an expenditure-based award, business status. You must require submission of the reports at least annually, and you may require submission as frequently as quarterly (this does not preclude a recipient from electing to submit more frequently than quarterly the financial information that is required to process payment requests if the award is an expenditure-based TIA that uses reimbursement or advance payments under § 37.810(a)). The requirements for the content of the reports are as follows:
(1) The program portions of the reports must address progress toward achieving program performance goals, including current issues, problems, or developments.
(2) The business portions of the reports, applicable only to expenditure-based awards, must provide summarized details on the status of resources (federal funds and non-federal cost sharing), including an accounting of expenditures for the period covered by the report. The report should compare the resource status with any payment and expenditure schedules or plans provided in the original award; explain any major deviations from those schedules; and discuss actions that will be taken to address the deviations. You may require a recipient to separately identify in these reports the expenditures for each participant in a consortium and for each programmatic milestone or task, if you, after consulting with the program official, judge that those additional details are needed for good stewardship.
In addition to reports on progress to date, your TIA may include a provision requiring the recipient to annually prepare updated technical plans for the future conduct of the research effort. If your TIA does include a requirement for annual program plans, you also must require the recipient to submit the annual program plans to the agreements officer responsible for administering the TIA.
You need not require a final performance report that addresses all major accomplishments under the TIA. If you do not do so, however, there must be an alternative that satisfies the requirement in DoD Instruction 3200.14  to document all DoD Science and Technology efforts and disseminate the results through the Defense Technical Information Center (DTIC). An example of an alternative would be periodic reports throughout the performance of the research that collectively cover the entire project.
(a) Whether your TIA requires a final performance report or uses an alternative means under § 37.890, you may include an award term or condition or otherwise instruct the recipient to submit the documentation either:
(1) Directly to the DTIC; or
(2) To the office that is administering the award (for subsequent transmission to the DTIC).
(b) If you specify that the recipient is to submit the report directly to the DTIC, you also:
(1) Must instruct the recipient to include a fully completed DD Form 298 with each document, so that the DTIC can recognize the document as being related to the particular award and properly record its receipt; and
(2) Should advise the recipient to provide a copy of the completed DD Form 298 to the agreements officer responsible for administering the TIA.
You may tell a participant that:
(a) We may exempt from disclosure under the Freedom of Information Act (FOIA) a trade secret or commercial and financial information that a participant provides after the award, if the information is privileged or confidential Start Printed Page 21510information. The DoD Component that receives the FOIA request will review the information in accordance with DoD procedures at 32 CFR 286.23(h) (and any DoD Component supplementary procedures) to determine whether it is privileged or confidential information under the FOIA exemption at 5 U.S.C. 552(b)(4), as implemented by the DoD at 32 CFR 286.12(d).
(b) If the participant also provides information in the course of a competition prior to award, there is a statutory exemption for five years from FOIA disclosure requirements for certain types of information submitted at that time (see § 37.420).
If a final report is required, your TIA should make receipt of the report a condition for final payment. If the payments are based on payable milestones, the submission and acceptance of the final report by the Government representative will be incorporated as an event that is a prerequisite for one of the payable milestones.
Records Retention and Access Requirements
Your TIA must require participants to keep records related to the TIA (for which the agreement provides Government access under § 37.915) for a period of three years after submission of the final financial status report for an expenditure-based TIA or final programmatic status report for a fixed-support TIA, with the following exceptions:
(a) The participant must keep records longer than three years after submission of the final financial status report if the records relate to an audit, claim, or dispute that begins but does not reach its conclusion within the 3-year period. In that case, the participant must keep the records until the matter is resolved and final action taken.
(b) Records for any real property or equipment acquired with project funds under the TIA must be kept for three years after final disposition.
(a) If a for-profit participant currently grants access to its records to the DCAA or other Federal Government auditors, your TIA must include for that participant the standard access-to-records requirements at 32 CFR 34.42(e). If the agreement is a fixed-support TIA, the language in 32 CFR 34.42(e) may be modified to provide access to records concerning the recipient's technical performance, without requiring access to the recipient's financial or other records. Note that any need to address access to technical records in this way is in addition to, not in lieu of, the need to address rights in data (see § 37.845).
(b) For other for-profit participants that do not currently give the Federal Government direct access to their records and are not willing to grant full access to records pertinent to the award, there is no set requirement to include a provision in your TIA for Government access to records. If the audit provision of an expenditure-based TIA gives an IPA access to the recipient's financial records for audit purposes, the Federal Government must have access to the IPA's reports and working papers and you need not include a provision requiring direct Government access to the recipient's financial records. For both fixed-support and expenditure-based TIAs, you may wish to negotiate Government access to recipient records concerning technical performance. Should you negotiate a provision giving access only to specific Government officials (e.g., the agreements officer), rather than a provision giving Government access generally, it is important to let participants know that the OIG, DoD, has a statutory right of access to records and other materials to which other DoD Component officials have access.
Your TIA must include for any nonprofit participant the standard access-to-records requirement at:
(a) 32 CFR 33.42(e), for a participant that is a State or local governmental organization.
(b) 32 CFR 32.53(e), for a participant that is a nonprofit organization. The same requirement applies to any nonprofit GOCO or FFRDC, even though nonprofit GOCOs and FFRDCs are exempted from the definition of “recipient” in 32 CFR part 32.
Termination and Enforcement
Subpart H—Executing the Award
At the time of the award, you must:
(a) Ensure that the award document contains the appropriate terms and conditions and is signed by the appropriate parties, in accordance with §§ 37.1005 through 37.1015.
(b) Document your analysis of the agreement in the award file, as discussed in § 37.1020.
(c) Provide information about the award to offices responsible for reporting, as described in §§ 37.1025 through 37.1035.
(d) Distribute copies of the award document, as required by § 37.1045.
The Award Document
You are responsible for ensuring that the award document is complete and accurate. Your objective is to create a document that:
(a) Addresses all issues;
(b) States requirements directly. It is not helpful to readers to incorporate statutes or rules by reference, without sufficient explanation of the requirements. You generally should not incorporate clauses from the Federal Acquisition Regulation (48 CFR parts 1-53) or Defense Federal Acquisition Regulation Supplement (48 CFR parts 201-253), because those provisions are designed for procurement contracts that are used to acquire goods and services, rather than for TIAs or other assistance instruments.
(c) Is written in clear and concise language, to minimize potential ambiguity.
You necessarily will design and negotiate a TIA individually to meet the specific requirements of the particular project, so the complete list of substantive issues that you will address in the award document may vary. Every award document must address:
(a) Project scope. The scope is an overall vision statement for the project, including a discussion of the project's purpose, objectives, and detailed military and commercial goals. It is a critical provision because it provides a context for resolving issues that may arise during post-award administration. In a fixed-support TIA, you also must clearly specify the well-defined outcomes that reliably indicate the amount of effort expended and serve as the basis for the level of the fixed support (see §§ 37.305 and 37.560(a)). Start Printed Page 21511
(b) Project management. You should describe the nature of the relationship between the Federal Government and the recipient; the relationship among the participants, if the recipient is an unincorporated consortium; and the overall technical and administrative management of the project. TIAs are used to carry out collaborative relationships between the Federal Government and the recipient. Consequently, there must be substantial involvement of the DoD program official (see § 37.220) and usually the administrative agreements officer. The program official provides technical insight, which differs from the usual technical oversight of a project. The management provision also should discuss how you and the recipient will make any modifications to the TIA.
(c) Termination, enforcement, and disputes. Your TIA must provide for termination, enforcement remedies, and disputes and appeals procedures, in accordance with § 37.925.
(d) Funding. You must:
(1) Show the total amount of the agreement and the total period of performance.
(2) If the TIA is an expenditure-based award, state the Government's and recipient's agreed-upon cost shares. The award document should identify values for any in-kind contributions, determined in accordance with §§ 37.530 through 37.555, to preclude later disagreements about them.
(3) Specify the amount of Federal funds obligated and the performance period for those obligated funds.
(4) State, if the agreement is to be incrementally funded, that the Government's obligation for additional funding is contingent upon the availability of funds and that no legal obligation on the part of the Government exists until additional funds are made available and the agreement is amended. You also must include a prior approval requirement for changes in plans requiring additional Government funding, in accordance with § 37.825.
(e) Payment. You must choose the payment method and tell the recipient how, when, and where to submit payment requests, as discussed in §§ 37.805 through 37.815. Your payment method must take into account sound cash management practices by avoiding unwarranted cash advances. For an expenditure-based TIA, your payment provision must require the return of interest should excess cash balances occur, in accordance with § 37.820.
(f) Records retention and access to records. You must include the records retention requirement at § 37.910. You also must provide for access to for-profit and nonprofit participants' records, in accordance with § 37.915 and § 37.920.
(g) Patents and data rights. In designing the patents and data rights provision, you must set forth the minimum required Federal Government rights in intellectual property generated under the award and address related matters, as provided in §§ 37.840 through 37.875. It is important to define all essential terms in the patent rights provision.
(h) Foreign access to technology. You must include a provision, in accordance with § 37.875, concerning foreign access and domestic manufacture of products using technology generated under the award.
(i) Title to, management of, and disposition of tangible property. Your property provisions for for-profit and nonprofit participants must be in accordance with §§ 37.685 through 37.700.
(j) Financial management systems. For an expenditure-based award, you must specify the minimum standards for financial management systems of both for-profit and nonprofit participants, in accordance with §§ 37.615 and 37.620.
(k) Allowable costs. If the TIA is an expenditure-based award, you must specify the standards that both for-profit and nonprofit participants are to use to determine which costs may be charged to the project, in accordance with §§ 37.625 through 37.635, as well as § 37.830.
(l) Audits. If your TIA is an expenditure-based award, you must include an audit provision for both for-profit and nonprofit participants and subrecipients, in accordance with §§ 37.640 through 37.670 and § 37.680.
(m) Purchasing system standards. You should include a provision specifying the standards in §§ 37.705 and 37.710 for purchasing systems of for-profit and nonprofit participants, respectively.
(n) Program income. You should specify requirements for program income, in accordance with § 37.835.
(o) Financial and programmatic reporting. You must specify the reports that the recipient is required to submit and tell the recipient when and where to submit them, in accordance with §§ 37.880 through 37.905.
(p) Assurances for applicable national policy requirements. You must incorporate assurances of compliance with applicable requirements in Federal statutes, Executive orders, or regulations (except for national policies that require certifications). Appendix D to this part contains a list of commonly applicable requirements that you need to augment with any specific requirements that apply in your particular circumstances (e.g., general provisions in the appropriations act for the specific funds that you are obligating).
(q) Other routine matters. The agreement should address any other issues that need clarification, including who in the Government will be responsible for post-award administration and the statutory authority or authorities for entering into the TIA (see appendix B to this part for a discussion of statutory authorities). In addition, the agreement must specify that it takes precedence over any inconsistent terms and conditions in collateral documents such as attachments to the TIA or the recipient's articles of collaboration.
(a) If the recipient is a consortium that is not formally incorporated and the consortium members prefer to have the agreement signed by all of them individually, you may execute the agreement in that manner.
(b) If they wish to designate one consortium member to sign the agreement on behalf of the consortium as a whole, you should not decide whether to execute the agreement in that way until you review the consortium's articles of collaboration with legal counsel.
(1) The purposes of the review are to:
(i) Determine whether the articles properly authorize one participant to sign on behalf of the other participants and are binding on all consortium members with respect to the research project; and
(ii) Assess the risk that otherwise could exist when entering into an agreement signed by a single member on behalf of a consortium that is not a legal entity. For example, you should assess whether the articles of collaboration adequately address consortium members' future liabilities related to the research project (i.e., whether they will have joint and severable liability).
(2) After the review, in consultation with legal counsel, you should determine whether it is better to have all of the consortium members sign the agreement individually or to allow them to designate one member to sign on all members' behalf.
Reporting Information About the Award
You should include in your award file an agreements analysis in which you: Start Printed Page 21512
(a) Briefly describe the program and detail the specific military and commercial benefits that should result from the project supported by the TIA. If the recipient is a consortium that is not formally incorporated, you should attach a copy of the signed articles of collaboration.
(b) Describe the process that led to the award of the TIA, including how you and program officials solicited and evaluated proposals and selected the one supported through the TIA.
(c) Explain how you decided that a TIA was the most appropriate instrument, in accordance with the factors in subpart B of this part. Your explanation must include your answers to the relevant questions in § 37.225(a) through (d).
(d) Explain how you valued the recipient's cost sharing contributions, in accordance with §§ 37.530 through 37.555.
(e) Document the results of your negotiation, addressing all significant issues in the TIA's provisions. For example, this includes specific explanations if you:
(1) Specify requirements for a participant's systems that vary from the standard requirements in §§ 37.615(a), 37.625(a), 37.630, or 37.705(a) of subpart G of this part, in cases where those sections provide flexibility for you to do so.
(2) Provide that any audits are to be performed by an IPA, rather than the DCAA, where permitted under § 37.650. Your documentation must include:
(i) The names and addresses of business units for which IPAs will be the auditors;
(ii) Estimated amounts of Federal funds expected under the award for those business units; and
(iii) The basis (e.g., a written statement from the recipient) for your judging that the business units do not currently perform under types of awards described in § 37.650(b)(1) and (2) and are not willing to grant the DCAA audit access.
(3) Include an intellectual property provision that varies from Bayh-Dole requirements.
(4) Determine that cost sharing is impracticable.
Yes, you must give the necessary information about the award to the office in your organization that is responsible for preparing DD Form 2566 reports for the Defense Assistance Award Data System, to ensure timely and accurate reporting of data required by 31 U.S.C. 6101-6106 (see 32 CFR part 21, subpart C).
(a) For any TIA, you must give your answers to the questions in § 37.225(a) through (d) to the office in your DoD Component that is responsible for providing data on TIAs to the DTIC. Contact DTIC-OCP, 8725 John J. Kingman Rd., Suite 0928, Fort Belvoir, VA 22060-6218, if you are unsure about the responsible office in your DoD Component. The DTIC compiles the information to help the Department of Defense measure the Department-wide benefits of using TIAs and assess the instruments' value in helping to meet the policy objectives described in § 37.205(b) and Appendix A to this part.
(b) If the TIA uses the authority of 10 U.S.C. 2371, as described in § 37.1035, your information submission for the DTIC under paragraph (a) of this section must include the additional data required for the DoD's annual report to Congress.
(c) If, as permitted under § 37.650, the TIA includes a provision allowing a for-profit participant to have audits performed by an IPA, rather than the DCAA, you must report that fact with the other information you submit about the TIA. Note that you also must include information about any use of IPAs permitted by subawards that participants make to for-profit firms, as provided in § 37.670. Information about a subaward under the TIA must be reported even if you receive the information in a subsequent year, when information about the TIA itself does not need to be reported.
(d) The requirements in this section to report information to the DTIC should not be confused with the post-award requirement to forward copies of technical reports to the DTIC, as described at §§ 37.890 and 37.895. The reporting requirements in this section are assigned the Report Control Symbol DD-A&T(A)1936.
As explained in appendix B to this part, a TIA uses the authority of 10 U.S.C. 2371 and therefore must be included in the DoD's annual report to Congress on the use of 10 U.S.C. 2371 authorities if it:
(a) Is an assistance transaction other than a grant or cooperative agreement, by virtue of its patent rights provision; or
(b) Includes a provision to recover funds from a recipient, as described at § 37.580.
Information that you report, in accordance with § 37.1030, to the office that your DoD Component designates as the central point for reporting to the DTIC must be:
(a) Submitted quarterly, by the date that your central point establishes.
(b) In the format that your central point provides (which is consistent with the format that the DTIC specifies to DoD Components).
Distributing Copies of the Award Document
You must send a copy of the award document to the:
(a) Recipient. You must include on the first page of the recipient's copy a prominent notice about the current DoD requirements for payment by electronic funds transfer (EFT).
(b) Office you designate to administer the TIA. You are strongly encouraged to delegate post-award administration to the regional office of the Defense Contract Management Agency or Office of Naval Research that administers awards to the recipient. When delegating, you should clearly indicate on the cover sheet or first page of the award document that the award is a TIA, to help the post-award administrator distinguish it from other types of assistance instruments.
(c) Finance and accounting office designated to make the payments to the recipient.
Subpart I—Post-Award Administration
As the administrative agreements officer for a TIA, you have the responsibilities that your office agreed to accept in the delegation from the office that made the award. Generally, you will have the same responsibilities as a post-award administrator of a grant or cooperative agreement, as described in 32 CFR 22.715. Responsibilities for TIAs include:
(a) Advising agreements officers before they award TIAs on how to establish award terms and conditions that better meet research programmatic needs, facilitate effective post-award administration, and ensure good stewardship of Federal funds.
(b) Participating as the business partner to the DoD program official to ensure the Government's substantial involvement in the research project. This may involve attendance with Start Printed Page 21513program officials at kickoff meetings or post-award conferences with recipients. It also may involve attendance at the consortium management's periodic meetings to review technical progress, financial status, and future program plans.
(c) Tracking and processing of reports required by the award terms and conditions, including periodic business status reports, programmatic progress reports, and patent reports.
(d) Handling payment requests and related matters. For a TIA using advance payments, that includes reviews of progress to verify that there is continued justification for advancing funds, as discussed in § 37.1105(b). For a TIA using milestone payments, it includes making any needed adjustments in future milestone payment amounts, as discussed in § 37.1105(c).
(e) Coordinating audit requests and reviewing audit reports for both single audits of participants' systems and any award-specific audits that may be needed, as discussed in §§ 37.1115 and 37.1120.
(f) Responding, after coordination with program officials, to recipient requests for permission to sell or exclusively license intellectual property to entities that do not agree to manufacture substantially in the United States, as described in § 37.875(b). Before you grant approval for any technology, you must secure assurance that the Government will be able to use the technology (e.g., a reasonable license for Government use, if the recipient is selling the technology) or seek reimbursement of the Government's investments.
(g) Notifying the agreements officer who made the award if a participant informs you about a subaward allowing a for-profit subrecipient to have audits performed by an IPA, rather than the DCAA. You should alert the awarding official that he or she must report the information, as required by § 37.1030(c).
Your additional post-award responsibilities as an administrative agreements officer for an expenditure-based TIA with advance payments or payable milestones are to ensure good cash management. To do so, you must:
(a) For any expenditure-based TIA with advance payments or payable milestones, forward to the responsible payment office any interest that the recipient remits in accordance with § 37.820(b). The payment office will return the amounts to the Department of the Treasury's miscellaneous receipts account.
(b) For any expenditure-based TIA with advance payments, consult with the program official and consider whether program progress reported in periodic reports, in relation to reported expenditures, is sufficient to justify your continued authorization of advance payments under § 37.805(b).
(c) For any expenditure-based TIA using milestone payments, work with the program official at the completion of each payable milestone or upon receipt of the next business status report to:
(1) Compare the total amount of project expenditures, as recorded in the payable milestone report or business status report, with the projected budget for completing the milestone; and
(2) Adjust future payable milestones, as needed, if expenditures lag substantially behind what was originally projected and you judge that the recipient is receiving Federal funds sooner than necessary for program purposes. Before making adjustments, you should consider how large a deviation is acceptable at the time of the milestone. For example, suppose that the first milestone payment for a TIA you are administering is $50,000, and that the awarding official set the amount based on a projection that the recipient would have to expend $100,000 to reach the milestone (i.e., the original plan was for the recipient's share at that milestone to be 50% of project expenditures). If the milestone payment report shows $90,000 in expenditures, the recipient's share at this point is 44% ($40,000 out of the total $90,000 expended, with the balance provided by the $50,000 milestone payment of Federal funds). For this example, you should adjust future milestones if you judge that a 6% difference in the recipient's share at the first milestone is too large, but not otherwise. Remember that milestone payment amounts are not meant to track expenditures precisely at each milestone and that a recipient's share will increase as it continues to perform research and expend funds, until it completes another milestone to trigger the next Federal payment.
If you are the administrative agreements officer, you have the responsibilities described in 32 CFR 22.810(c), regardless of the payment method. You also must ensure that you do not withhold payments, except in one of the circumstances described in 32 CFR 34.12(g).
For audits of for-profit participant's systems, under §§ 37.640 through 37.660, you are the focal point within the Department of Defense for ensuring that participants submit audit reports and for resolving any findings in those reports. Nonprofit participants send their single audit reports to a Governmentwide clearinghouse. For those participants, the Office of the Assistant Inspector General (Auditing) should receive any DoD-specific findings from the clearinghouse and refer them to you for resolution, if you are the appropriate official to do so.
Guidance on when and how you should request additional audits for expenditure-based TIAs is identical to the guidance for grants officers in 32 CFR 34.16(d). If you require an award-specific examination or audit of a for-profit participant's records related to a TIA, you must use the auditor specified in the award terms and conditions, which should be the same auditor who performs periodic audits of the participant. The DCAA and the OIG, DoD, are possible sources of advice on audit-related issues, such as appropriate audit objectives and scope.
Subpart J—Definitions of Terms Used in this Part
A payment made to a recipient before the recipient disburses the funds for program purposes. Advance payments may be based upon recipients' requests or predetermined payment schedules.
Research that creates new technology or demonstrates the viability of applying existing technology to new products and processes in a general way. Advanced research is most closely analogous to precompetitive technology development in the commercial sector (i.e., early phases of research and development on which commercial competitors are willing to collaborate, because the work is not so coupled to specific products and processes that the results of the work must be proprietary). It does not include development of military systems and hardware where specific requirements have been defined. It is typically funded in Research, Development, Test and Evaluation programs within Budget Activity 3, Advanced Technology Development.
An official with the authority to enter into, administer, and/or terminate TIAs (see § 37.125).
Efforts that attempt to determine and exploit the potential of scientific discoveries or improvements in technology such as new materials, devices, methods and processes. It typically is funded in Research, Development, Test and Evaluation programs within Budget Activity 2, Applied Research (also known informally as research category 6.2) programs. Applied research normally follows basic research but may not be fully distinguishable from the related basic research. The term does not include efforts whose principal aim is the design, development, or testing of specific products, systems or processes to be considered for sale or acquisition; these efforts are within the definition of “development.”
An agreement among the participants in a consortium that is not formally incorporated as a legal entity, by which they establish their relative rights and responsibilities (see § 37.515).
The transfer of a thing of value to a recipient to carry out a public purpose of support or stimulation authorized by a law of the United States (see 31 U.S.C. 6101(3)). Grants, cooperative agreements, and technology investment agreements are examples of legal instruments used to provide assistance.
An audit of a single TIA, usually done at the cognizant agreements officer's request, to help resolve issues that arise during or after the performance of the research project. An award-specific audit of an individual award differs from a periodic audit of a participant (as defined in § 37.1325).
Efforts directed toward increasing knowledge and understanding in science and engineering, rather than the practical application of that knowledge and understanding. It typically is funded within Research, Development, Test and Evaluation programs in Budget Activity 1, Basic Research (also known informally as research category 6.1).
A recipient's cash expenditures made as contributions toward cost sharing, including expenditures of money that third parties contributed to the recipient.
A for-profit firm or segment of a for-profit firm (e.g., a division or other business unit) that does a substantial portion of its business in the commercial marketplace.
A group of research-performing organizations that either is formally incorporated or that otherwise agrees to jointly carry out a research project (see definition of “articles of collaboration,” in § 37.1225).
A legal instrument which, consistent with 31 U.S.C. 6305, is used to enter into the same kind of relationship as a grant (see definition of “grant,” in § 37.1295), except that substantial involvement is expected between the Department of Defense and the recipient when carrying out the activity contemplated by the cooperative agreement. The term does not include “cooperative research and development agreements” as defined in 15 U.S.C. 3710a.
A portion of project costs that are borne by the recipient or non-Federal third parties on behalf of the recipient, rather than by the Federal Government.
Recorded information, regardless of form or method of recording. The term includes technical data, which are data of a scientific or technical nature, and computer software. It does not include financial, cost, or other administrative information related to the administration of a TIA.
The Office of the Secretary of Defense, a Military Department, a Defense Agency, or a DoD Field Activity.
Tangible property, other than real property, that has a useful life of more than one year and an acquisition cost of $5,000 or more per unit.
A Federal Government contract or assistance award for which the amounts of interim payments or the total amount ultimately paid (i.e., the sum of interim payments and final payment) are subject to redetermination or adjustment, based on the amounts expended by the recipient in carrying out the purposes for which the award was made. Most Federal Government grants and cooperative agreements are expenditure-based awards.
Charges made to the project or program. They may be reported either on a cash or accrual basis, as shown in the following table:
|If reports are prepared on a . . .||Expenditures are the sum of . . .|
|(a) Cash basis||(1) Cash disbursements for direct charges for goods and services;|
|(2) The amount of indirect expense charged;|
|(3) The value of third party in-kind contributions applied; and|
|(4) The amount of cash advances and payments made to any other organizations for the performance of a part of the research effort.|
|(b) Accrual basis||(1) Cash disbursements for direct charges for goods and services;|
|(2) The amount of indirect expense incurred;|
|(3) The value of in-kind contributions applied; and|
|(4) The net increase (or decrease) in the amounts owed by the recipient for goods and other property received, for services performed by employees, contractors, and other payees and other amounts becoming owed under programs for which no current services or performance are required.|
A legal instrument which, consistent with 31 U.S.C. 6304, is used to enter into a relationship:
(a) The principal purpose of which is to transfer a thing of value to the recipient to carry out a public purpose of support or stimulation authorized by a law of the United States, rather than to acquire property or services for the Department of Defense's direct benefit or use. Start Printed Page 21515
(b) In which substantial involvement is not expected between the Department of Defense and the recipient when carrying out the activity contemplated by the grant.
The value of non-cash contributions made by a recipient or non-Federal third parties toward cost sharing.
An educational institution that:
(a) Meets the criteria in section 1201(a) of the Higher Education Act of 1965 (20 U.S.C. 1141(a)); and
(b) Is subject to the provisions of OMB Circular A-110, “Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations,” as implemented by the Department of Defense at 32 CFR part 32.
Inventions, data, works of authorship, and other intangible products of intellectual effort that can be owned by a person, whether or not they are patentable or may be copyrighted. The term also includes mask works, such as those used in microfabrication, whether or not they are tangible.
(a) Any corporation, trust, association, cooperative or other organization that:
(1) Is operated primarily for scientific, educational, service, or similar purposes in the public interest.
(2) Is not organized primarily for profit; and
(3) Uses its net proceeds to maintain, improve, or expand the operations of the organization.
(b) The term includes any nonprofit institution of higher education or nonprofit hospital.
A consortium member or, in the case of an agreement with a single for-profit entity, the recipient. Note that a for-profit participant may be a firm or a segment of a firm (e.g., a division or other business unit).
An audit of a participant, performed at an agreed-upon time (usually a regular time interval), to determine whether the participant as a whole is managing its Federal awards in compliance with the terms of those awards. Appendix C to this part describes what such an audit may cover. A periodic audit of a participant differs from an award-specific audit of an individual award (as defined in § 37.1235).
A Federal Government procurement contract. It is a legal instrument which, consistent with 31 U.S.C. 6303, reflects a relationship between the Federal Government and a State, a local government, or other recipient when the principal purpose of the instrument is to acquire property or services for the direct benefit or use of the Federal Government. See the more detailed definition of the term “contract” at 48 CFR 2.101.
Gross income earned by the recipient or a participant that is generated by a supported activity or earned as a direct result of a TIA. Program income includes but is not limited to: income from fees for performing services; the use or rental of real property, equipment, or supplies acquired under a TIA; the sale of commodities or items fabricated under a TIA; and license fees and royalties on patents and copyrights. Interest earned on advances of Federal funds is not program income.
A Federal Government program manager, scientific officer, or other individual who is responsible for managing the technical program being carried out through the use of a TIA.
Real property, equipment, supplies, and intellectual property, unless stated otherwise.
Land, including land improvements, structures and appurtenances thereto, but excluding movable machinery and equipment.
An organization or other entity that receives a TIA from a DoD Component. Note that a for-profit recipient may be a firm or a segment of a firm (e.g., a division or other business unit).
Basic, applied, and advanced research, as defined in this subpart.
Tangible property other than real property and equipment. Supplies have a useful life of less than one year or an acquisition cost of less than $5,000 per unit.
The cancellation of a TIA, in whole or in part, at any time prior to either:
(a) The date on which all work under the TIA is completed; or
(b) The date on which Federal sponsorship ends, as given in the award document or any supplement or amendment thereto.
A special class of assistance instruments used to increase involvement of commercial firms in defense research programs and for other purposes (described in appendix A to this part) related to integrating the commercial and defense sectors of the nation's technology and industrial base. A technology investment agreement may be a cooperative agreement with provisions tailored for involving commercial firms (as distinct from a cooperative agreement subject to all of the requirements in 32 CFR part 34), or another kind of assistance transaction (see appendix B to this part).
Appendix A to Part 37—What is the Civil-Military Integration Policy that is the Basis for Technology Investment Agreements?
A. TIAs complement other funding instruments that are available to agreements officers in that they are designed to foster civil-military integration in DoD Science and Technology (S&T) programs. Civil-military integration creates a single, national technology and industrial base upon which the DoD can draw to meet its needs. Achieving civil-military integration is a national policy objective, as stated in 10 U.S.C. 2501.
B. Civil-military integration includes:
1. Removing barriers to participation in DoD programs by commercial firms, firms that deal primarily in the commercial marketplace. In recent years, some commercial firms judged that it would be overly burdensome and costly for them to comply with Government-unique requirements. That belief caused some firms to decline to do cost-type business with the Federal Government. It caused other firms to create divisions for Government business that are separate and isolated from their divisions for commercial business. TIAs give agreements officers flexibility to tailor Government requirements and lower or remove barriers to firms' participation, where the tailoring of requirements can be done consistently with good stewardship of Federal Government funds.
2. Creating new business relationships among the performers in the technology and industrial base. Collaborations among commercial firms, firms that regularly perform defense programs, and nonprofit organizations can create wholes that are greater than the sums of the parts. The collaborations can enhance overall quality and productivity.
3. Promoting the development and use of new business practices and disseminating current best practices throughout the technology and industrial base. Start Printed Page 21516
C. The use of TIAs to promote civil-military integration will help defense S&T programs achieve their primary mission. That mission is to develop superior technology and help transition the technology to applications that enable affordable, decisive military capability. The use of TIAs to increase access to commercial firms, to create new relationships, and to promote better business practices will help:
1. Increase technological sophistication. The DoD and firms that currently perform defense programs will benefit from technology in the commercial marketplace that often is more advanced than what is available in the defense-specific sector.
2. Reduce DoD's life-cycle costs for buying, operating, and maintaining weapon and support systems. The intent is that the DoD and firms that currently perform defense programs will be able to take advantage of the economies of scale of the commercial marketplace, which has a much larger volume of business for many high-technology products and processes than the Federal Government's share alone.
Appendix B to Part 37—What Type of Instrument Is a TIA and What Statutory Authorities Does It Use?
A. A TIA may be either a type of cooperative agreement or a type of “assistance transaction other than a grant or cooperative agreement,” depending on its patent-rights provision. It is awarded under the statutory authority of 10 U.S.C. 2358, 10 U.S.C. 2371, or both, as explained in paragraphs B through E of this Appendix and illustrated in the table below.
|The TIA's provision complies with Bayh-Dole||The TIA's patent provision varies from what patent is possible under Bayh-Dole|
|1. The TIA does not include recovery of funds provision||The TIA is a type of cooperative agreement, under 10 U.S.C. 2358(b)(1)||The TIA is a type of assistance transaction other than a grant or cooperative agreement, under 10 U.S.C. 2371.|
|2. The TIA includes recovery of funds provision||The TIA is a type of cooperative agreement, under 10 U.S.C. 2358(b)(1). It uses recovery of funds authority of 10 U.S.C. 2371||The TIA is a type of assistance transaction other than a grant or cooperative agreement, under 10 U.S.C. 2371. It also uses the recovery of authority of funds 10 U.S.C. 2371.|
B. A TIA is a type of cooperative agreement whenever its patent-rights provision complies with the Bayh-Dole statute (Chapter 18 of Title 35, U.S.C.), as shown in the preceding table. The authority to award the TIA is 10 U.S.C. 2358, in addition to any program-specific statute that may provide authority to award cooperative agreements. The TIA also may use the authority of 10 U.S.C. 2371 to include a recovery of funds provision that requires the recipient, as a condition for receiving support under the agreement, to make payments to the Department of Defense or other Federal agency.
C. A TIA becomes a type of assistance transaction other than a grant or cooperative agreement when its patent-rights provision is less restrictive than is possible under Bayh-Dole. The authority to award the instrument is 10 U.S.C. 2371, as well as any program-specific authority to provide assistance. Note that the agreements officer's judgment that the execution of the research project warrants a less restrictive patent provision than is possible under Bayh-Dole is sufficient to satisfy the statutory condition in 10 U.S.C. 2371 for use of an assistance transaction other than a cooperative agreement or grant (i.e., that it is not feasible or appropriate to use a standard grant or cooperative agreement to carry out the project). The TIA also may include a recovery of funds provision, as authorized by 10 U.S.C. 2371.
D. From a practical point of view, an agreements officer need not decide while he or she is negotiating the terms and conditions with the recipient whether a TIA is a cooperative agreement or an assistance transaction other than a grant or cooperative agreement. The agreements officer must make that decision when the agreement is finalized, based upon a comparison of the patent provision with what is required by Bayh-Dole.
E. In making that comparison, the agreements officer should consult with legal counsel and remember that most Bayh-Dole requirements apply only to small business firms and nonprofit organizations (note that a consortium that is not formally incorporated is neither a small business firm nor a nonprofit organization). There are only two requirements of Bayh-Dole, in 35 U.S.C. 202(c)(4) and 203 that directly apply to cooperative agreements with other than small business firms and nonprofit organizations. A 1984 amendment to Bayh-Dole, at 35 U.S.C. 210(c), makes those two portions apply. The 1984 amendment otherwise states that Bayh-Dole does not preclude agencies from complying with a 1983 Presidential Statement of Government Patent Policy (incorporated by reference in Executive Order 12591). The President in that statement authorized Federal agencies to tailor cooperative agreements with for-profit firms other than small businesses, in ways that would waive rights of the Government or obligations of the performer under Bayh-Dole, if they determined that:
1. “The interests of the United States and the general public will be better served thereby as, for example, where this is necessary to obtain a uniquely or highly qualified performer; or''
2. “The award involves co-sponsored, cost sharing, or joint venture research and development, and the performer, co-sponsor or joint venturer is making substantial contribution of funds, facilities or equipment to the work performed under the award.”
Appendix C to Part 37—What is the Desired Coverage for Periodic Audits of For-Profit Participants to be Audited by IPAs?
You may provide the following guidance to a for-profit participant and its IPA on the desired coverage of periodic audits.
Coverage of Independent Audits of For-Profit Firms
Table of Contents
Part 1. General Information
What is the purpose of this document?
Why does the Federal Government need an audit?
Can the audit be integrated with the regular audit of a firm's financial statements?
What are the objectives of the audit?
What is the source of the requirement for the audit?
What should the IPA do if he or she finds that the Defense Contract Audit Agency is performing audits of the firm?
Part 2. Audit Objectives and Compliance Requirements
A. Allowable Costs
What is the objective of this portion of the audit?
What standards or cost principles determine the costs that are allowable as charges to the award?
What compliance requirements for the allowability of costs should the audit address?
B. Cost Sharing
What is the objective of this portion of the audit?
What are the compliance requirements for cost sharing?
C. Financial Reporting
What are the objectives of this portion of the audit?
What are the compliance requirements for financial reporting?
D. Equipment and Real Property Management
Is a review of a firm's property management system usually required?
What are the objectives of the review?
What are the compliance requirements for Federally owned property and for equipment or real property purchased under DoD awards?
E. Program Income
Is an audit of program income usually required?
What is program income?
What is the objective of this portion of the audit?
What are the applicable standards for program income? Start Printed Page 21517
Part 1. General Information
What Is the Purpose of This Document?
This document provides guidance for an independent public accountant (IPA) who is asked by a for-profit firm to conduct an audit of its systems, due to the firm's having received a technology investment agreement from the Department of Defense (DoD).
Why Does the Federal Government Need an Audit?
Federal officials are accountable to the public for the resources provided to carry out Government programs. Financial auditing contributes to accountability by providing an independent assessment to assure that recipients are handling Government funds properly.
Can the Audit Be Integrated With the Regular Audit of a Firm's Financial Statements?
Yes, the intent is to cause the minimum possible disruption to the firm's activities, so the IPA is encouraged to do the needed transaction sampling for DoD awards as part of the regularly scheduled audit of the firm's financial statements. In some cases, it may be even more efficient and economical to separately audit the individual DoD awards, and the firm may elect to have the IPA do so.
What are the Objectives of the Audit?
The auditor is to determine and report on whether:
1. The firm has an internal control structure that provides reasonable assurance that it is managing DoD awards in compliance with the award terms and conditions, including applicable Federal laws and regulations.
2. Based on a sampling of DoD award expenditures, the firm has complied with award terms and conditions, including applicable Federal laws and regulations, that may have a direct and material effect on DoD awards.
What Is the Source of the Requirement for the Audit?
The source of the requirement stated in the award document stems from sections 37.640 through 37.660 of 32 CFR part 37, which is part 37 of the DoD Grant and Agreement Regulations (DoDGARs).
What Should the IPA Do If He or She Finds That the Defense Contract Audit Agency is Performing Audits of the Firm?
The IPA should consult with officials of the firm to ensure that:
1. DoD agreements officers were aware of the DCAA audit presence at the time they made awards; and
2. The DoD agreements authorize the IPA to perform the audit, rather than requiring that the DCAA do so. If the IPA is authorized to perform the audit, he or she must consider the nature, timing, and extent of his or her own auditing procedures, to avoid unnecessary duplication of the DCAA effort.
Part 2. Audit Objectives and Compliance Requirements
A. Allowable Costs
What Is the Objective of This Portion of the Audit?
The objective is to determine, by testing a sample of transactions, whether the firm complied with the requirements concerning allowability of costs charged to DoD awards.
What Standards or Cost Principles Determine the Costs That Are Allowable as Charges to the Award?
Each technology investment agreement should specify the standards or cost principles that the for-profit firm is to use to determine the costs that it is allowed to charge to that award. While the TIA may specify use of the for-profit cost principles in the Federal Acquisition Regulation (FAR, at 48 CFR part 31) and Defense FAR Supplement (DFARS, at 48 CFR part 231), it more likely will specify an alternative standard. The minimum standard in the latter case is that Federal funds and the firm's cost sharing contributions will be used only for costs that a reasonable and prudent person would incur in carrying out the research project contemplated by the agreement.
What Compliance Requirements For Allowability of Costs Should the Audit Address?
For a firm that is subject to the cost principles in the FAR and DFARS, the IPA should determine and report on whether costs charged to DoD awards are in compliance with those cost principles and indirect cost rates are applied in accordance with approved rate agreements.
For a firm that is subject to alternative standards that may be used for a TIA, the IPA should determine and report on whether costs charged to the DoD awards are:
1. Necessary and reasonable for the performance of the research projects supported by the awards, or for related administration. Generally, elements of cost that appropriately are charged are those identified with research and development activities under the Generally Accepted Accounting Principles (see Statement of Financial Accounting Standards Number 2, “Accounting for Research and Development Costs,” October 1974).
2. Allocable to the research projects (i.e., costs are charged to DoD projects in a manner that is in accordance with the benefits the projects received).
3. Given consistent treatment with costs allocated to the firm's other research and development activities (e.g., activities supported by the firm itself or by non-Federal sponsors), through application of Generally Accepted Accounting Principles appropriate to the circumstances.
4. In conformance with any limitations in the award documents or regulations that they cite (e.g., any restrictions on types or amounts of costs, or requirements for prior approval of DoD agreements officers).
5. Supported by appropriate documentation in the firm's records. The documentation may be in electronic form.
B. Cost Sharing
What Is the Objective of This Portion of the Audit?
The objective is to determine, by testing a sample of cost sharing contributions, whether the firm made the contributions that the agreements required.
What Are the Compliance Requirements for Cost Sharing?
The provisions of the award documents will specify requirements for the firm's cost sharing, which may be contributions of a specified amount or a percentage of total project costs. The cost sharing may be in the form of allowable costs incurred or in-kind contributions (including third-party in-kind contributions).
The values of the firm's contributions are determined in accordance with sections 37.530 through 37.555 of 32 CFR part 37, which is part 37 of the DoDGARs.
C. Financial Reporting
What Are the Objectives of This Portion of the Audit?
The primary objective is to determine whether the firm's financial reports for DoD awards:
1. Fairly and completely represent the expenditures and status of resources for projects supported by those awards; and
2. Are supported by applicable accounting records and the accounting basis used (e.g., cash or accrual).
What Are the Compliance Requirements for Financial Reporting?
The agreements will specify the frequency and content of the financial reports. They may specify the use of standard forms (e.g., the Standard Form 269 or 269A, “Financial Status Report,” or Standard Form 272, “Report of Federal Cash Transactions). Alternatively, the agreements may specify an equivalent approach of periodic reports, and the reports may include information on both programmatic and business status. The requirements are in section 37.880 of 32 CFR part 37, which is part 37 of the DoDGARs.
Each financial report (and the business portion of any report that also has programmatic information) will contain at least summarized details on the status of resources (Federal funds and any non-Federal cost sharing that the agreements require), including an accounting of expenditures for the period covered by the report. The report should compare the resource status with any payment and expenditure schedules or plans provided in the original award; explain any major deviations from these schedules; and discuss actions that will be taken to address the deviations.
D. Equipment and Real Property Management
Is a Review of a Firm's Property Management System Usually Required?
No, the IPA needs to review the property management system only if:
1. There is Federally owned property associated with the award; or
2. The firm charged the full purchase price of any equipment or real property as project Start Printed Page 21518costs (i.e., to Federal funds or the firm's funds that are counted toward required cost sharing); and
3. The award under which the property was purchased provides for a continuing Federal interest in the property.
Note that the IPA generally will not need to review the property management system because most DoD awards will not have Federally owned property associated with them and will allow the firm to charge to the project only depreciation or use charges for real property or equipment.
What Are the Objectives of the Review?
The objectives are to determine whether the firm:
1. Obtained the necessary prior approval for the equipment or real property purchase from the grants officer or agreements officer.
2. Keeps proper records for equipment and adequately safeguards and maintains equipment.
3. Handles disposition or encumbrance of equipment or real property acquired under DoD awards in accordance with the applicable requirements.
What Are the Compliance Requirements for Federally Owned Property and for Equipment or Real Property Purchased Under DoD Awards?
To protect the Federal interest in property, the DoD Grant and Agreement Regulations include standards for the firm's property management, use, and disposition, as shown in this table:
|If the property is * * *||Then the property management standards for the for-profit firm are in * * *|
|Real property or equipment purchased under a TIA,||Section 37.685 of 32 CFR part 37|
|Federally owned property||Section 37.695 of 32 CFR part 37.|
Note that a for-profit firm may include the full acquisition cost of real property or equipment as a charge to the project only with the prior approval of the grants officer or the agreements officer. The title to the real property or equipment vests conditionally in the for-profit firm upon acquisition, and there is a continuing Federal interest in the property unless an awarding office has statutory authority to do otherwise and elects to use that authority for a particular award. The Federal Government recovers its interest in the property through the disposition process at the project's end.
E. Program Income
Is An Audit of Program Income Usually Required?
No, most awards will not involve any program income.
What Is Program Income?
Program income is gross income earned by the recipient that is generated by a supported activity or earned as a result of the award. For example, if the purpose of an award is to support the firm's delivery of services and the firm collects fees for doing so, those fees are program income. As another example, if samples of materials or biological specimens are generated as a result of a supported research effort, and the firm sells samples to other research organizations, the proceeds of those sales would be program income. If authorized by the terms and conditions of the award costs incident to the generation of program income may be deducted from gross income to determine program income, provided these costs have not been charged to the award.
What Is the Objective of This Portion of the Audit?
The objective is to determine whether program income is correctly recorded and used in accordance with the award terms and applicable standards.
What Are the Applicable Standards for Program Income?
The standards for program income are in section 37.835 of 32 CFR part 37, which is part 37 of the DoDGARs.
Appendix D to Part 37—What Common National Policy Requirements May Apply and Need to Be Included in TIAs?
Whether your TIA is a cooperative agreement or another type of assistance transaction, as discussed in appendix B to this part, the terms and conditions of the agreement must provide for recipients' compliance with applicable Federal statutes and regulations. This appendix lists some of the more common requirements to aid you in identifying ones that apply to your TIA. The list is not intended to be all-inclusive, however, and you may need to consult legal counsel to verify whether there are others that apply in your situation (e.g., due to a provision in the appropriations act for the specific funds that you are using or due to a statute or rule that applies to a particular program or type of activity).
Three requirements that apply to all TIAs currently require you to obtain a certification at the time of proposal. They are:
1. Requirements concerning debarment and suspension in a Governmentwide common rule that the DoD has codified at subparts A through E of 32 CFR part 25. They apply to all nonprocurement transactions.
2. Requirements concerning drug-free workplace in a Governmentwide common rule that the DoD has codified at subpart F of 32 CFR part 25. They apply to all financial assistance.
3. Prohibitions concerning lobbying in a Governmentwide common rule that the DoD has codified at 32 CFR part 28. They apply to all financial assistance.
Appendix A to 32 CFR part 22 includes sample provisions that you may use, to have proposers incorporate the certifications by reference into their proposals. That appendix also has information on the sources of the requirements.
B. Assurances That Apply to all TIAs
DoD policy is to use certifications, as described in the preceding paragraphs, only for national policy requirements that specifically require them. The usual approach to communicating other national policy requirements to recipients is to incorporate them as award terms or conditions, or assurances. Appendix B to 32 CFR part 22 lists national policy requirements that commonly apply to grants and cooperative agreements. It also has suggested language for assurances to incorporate the requirements in award documents. Of those requirements, the following four apply to all TIAs:
1. Prohibitions on discrimination on the basis of race, color, or national origin in Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d, et seq.). These apply to all financial assistance. They require recipients to flow down the prohibitions to any subrecipients performing a part of the substantive research program (as opposed to suppliers from whom recipients purchase goods or services). For further information, see item a. under the heading “Nondiscrimination” in appendix B to 32 CFR part 22.
2. Prohibitions on discrimination on the basis of age, in the Age Discrimination Act of 1975 (42 U.S.C. 6101, et seq.). They apply to all financial assistance and require flow down to subrecipients. For further information, see item d. under the heading “Nondiscrimination” in appendix B to 32 CFR part 22.
3. Prohibitions on discrimination on the basis of handicap, in section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794). They apply to all financial assistance and require flow down to subrecipients. For further information, see item e.1. under the heading “Nondiscrimination” in appendix B to 32 CFR part 22.
4. Preferences for use of U.S.-flag air carriers in the International Air Transportation Fair Competitive Practices Act of 1974 (49 U.S.C. 40118), which apply to uses of U.S. Government funds.
C. Other Assurances
Additional requirements listed in appendix B to 32 CFR part 22 may apply in certain circumstances, as follows:
1. If construction work is to be done under a TIA or its subawards, it is subject to the prohibitions in Executive Order 11246 on discrimination on the basis of race, color, religion, sex, or national origin. For further information, see item b. under the heading “Nondiscrimination” in appendix B to 32 CFR part 22.
2. If the research involves human subjects or animals, it is subject to the requirements in item a. or b., respectively, under the heading “Live organisms” in appendix B to 32 CFR part 22.
3. If the research involves actions that may affect the environment, it is subject to the National Environmental Policy Act, which is item b.1. under the heading “Environmental Standards” in appendix B to 32 CFR part 22. It also may be subject to one or more of the other requirements in items b.2 through b.6. under that heading, which concern flood-prone areas, coastal zones, coastal barriers, wild and scenic rivers, and underground sources of drinking water.
4. If the project may impact a historic property, it is subject to the National Historic Start Printed Page 21519Preservation Act of 1966 (16 U.S.C. 470, et seq.), as described under the heading “National Historic Preservation” in appendix B to 32 CFR part 22.
Appendix E to Part 37—What Provisions May a Participant Need To Include When Purchasing Goods or Services Under a TIA?
A. As discussed in § 37.705, you must inform recipients of any national policy requirements that flow down to their purchases of goods or services (e.g., supplies or equipment) under their TIAs. Note that purchases of goods or services differ from subawards, which are for substantive research program performance.
B. Appendix A to 32 CFR part 34 lists seven national policy requirements that commonly apply to firms' purchases under grants or cooperative agreements. Of those seven, two that apply to all recipients' purchases under TIAs are:
1. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352). A contractor submitting a bid to the recipient for a contract award of $100,000 or more must file a certification with the recipient that it has not and will not use Federal appropriations for certain lobbying purposes. The contractor also must disclose any lobbying with non-Federal funds that takes place in connection with obtaining any Federal award. For further details, see 32 CFR part 28, the DoD's codification of the Governmentwide common rule implementing this amendment.
2. Debarment and suspension. Recipients may not make contract awards that exceed the simplified acquisition threshold (currently $100,000) and certain other contract awards may not be made to parties listed on the General Services Administration (GSA) “List of Parties Excluded from Federal Procurement and Nonprocurement Programs. The GSA list contains the names of parties debarred, suspended, or otherwise excluded by agencies, and parties declared ineligible under statutory or regulatory authority other than Executive Orders 12549 (3 CFR, 1986 Comp., p. 189) and 12689 (3 CFR, 1989 Comp., p. 235). For further details, see subparts A through E of 32 CFR part 25, which is the DoD's codification of the Governmentwide common rule implementing Executive Orders 12549 and 12689.
C. One other requirement applies only in cases where construction work is to be performed under the TIA with Federal funds or recipient funds counted toward required cost sharing:
1. Equal Employment Opportunity. Although construction work should happen rarely under a TIA, the agreements officer in that case should inform the recipient that Department of Labor regulations at 41 CFR 60-1.4(b) prescribe a clause that must be incorporated into construction awards and subawards. Further details are provided in appendix B to part 22 of the DoDGARs (32 CFR part 22), in section b. under the heading “Nondiscrimination.”
1. Electronic copies may be obtained at the Internet site http://www.dtic.mil/whs/directives. Paper copies may be obtained, at cost, from the National Technical Information Service, 5285 Port Royal Road, Springfield, VA 22161. Authorized users may obtain copies from the Defense Technical Information Center, 8725 John J. Kingman Rd., Suite 0944, Fort Belvoir, VA 22060-6218.Back to Citation
2. See footnote 1 to § 21.200.Back to Citation
3. Electronic copies may be obtained at the Internet site http://www.whitehouse.gov/OMB. For paper copies, contact the Office of Management and Budget, EOP Publications, 725 17th St. NW., New Executive Office Building, Washington, DC 20503.Back to Citation
4. See footnote 3 to § 21.300(b).Back to Citation
1. Electronic copies may be obtained at the Internet site http://www.whitehouse.gov/OMB. For paper copies, contact the Office of Management and Budget, EOP Publications, 725 17th St. NW., New Executive Office Building, Washington, DC 20503.Back to Citation
2. Copies may be obtained from the Financial Accounting Standards Board (FASB), 401 Merritt 7, P.O. Box 5116, Norwalk, CT 06856-5116. Information about ordering also may be found at the Internet site http://www.fasb.org or by telephoning the FASB at (800)748-0659.Back to Citation
3. See footnote 1 to § 37.570(a)(2).Back to Citation
4. See footnote 1 to § 37.570(a)(2).Back to Citation
5. The electronic document may be accessed at www.gao.gov. Printed copies may be purchased from the U.S. Government Printing Office; for ordering information, call (202)512-1800 or access the Internet site at www.gpo.gov.Back to Citation
6. See footnote 1 to § 37.570(a)(2).Back to Citation
7. Electronic copies may be obtained at the Internet site http://www.dtic.mil/whs/directives. Paper copies may be obtained, at cost, from the National Technical Information Service, 5285 Port Royal Road, Springfield, VA 22161. Authorized users may obtain copies from the Defense Technical Information Center, 8725 John J. Kingman Rd., Suite 0944, Fort Belvoir, VA 22060-6218.Back to Citation
8. See footnote 7 to § 37.875(b)(1).Back to Citation
[FR Doc. 02-10280 Filed 4-29-02; 8:45 am]
BILLING CODE 5001-08-P