Federal Assistance Manual Chapter 1-10

CHAPTER 1-10 DISTINGUISHING AND PROVIDING SPECIFIC GUIDELINES FOR CONTRACTS, GRANTS AND COOPERATIVE AGREEMENTS

• 1-10-00 General
• 1-10-10 Distinguishing Procurement and Assistance Relationships
• 1-10-20 Guidelines for Contracts
• 1-10-30 Guidelines for Grants and Cooperative Agreements
• 1-10-40 Deviations

1-10-00 GENERAL

1. The Federal Grant and Cooperative Agreement Act of 1978 was repealed in 1982 and replaced by Public Law 97-258, Using Procurement Contracts and Grant and Cooperative Agreements, 31 U.S.C. §§6301-6308. P.L. 97-258 provides guidance on distinguishing Federal assistance relationships from Federal procurement relationships.

2. Relationships not included within the coverage of this chapter include instruments such as intra-agency and interagency agreements, international agreements, memoranda of understanding, and, when not for the purpose of public support or stimulation, licenses, sale documents, leases and special use permits.

1-10-10 DISTINGUISHING PROCUREMENT AND ASSISTANCE RELATIONSHIPS

1. A procurement contract is to be used as the legal instrument reflecting a relationship between the Federal Government and a recipient whenever the principal purpose is the acquisition, by purchase, lease or barter of property or services for the direct benefit or use of the Federal Government.

2. An assistance agreement is to be used as the legal instrument when the relationship between the Federal Government and a recipient has as its principal purpose the transfer of money, property, services or anything of value to the recipient in order to accomplish a public purpose of support or stimulation authorized by Federal statute.
   1. A grant agreement is the preferred assistance instrument if no substantial involvement is anticipated between the Federal Government and the recipient during the performance of the contemplated assistance activities.

   2. A cooperative agreement is the preferred assistance instrument if substantial involvement is anticipated between the Federal Government and the recipient during the performance of the contemplated assistance activities.

3. Any program announcement, public notice, solicitation, or request for applications or proposals should indicate whether the intended relationship will be procurement or assistance and which type of instruments(s) will be used: contract, grant or cooperative agreement.

4. Federal assistance units should make every effort to ensure their relationships conform with those specified in the statute. If, however, major individual transactions or programs should contain elements of both procurement and assistance in such a way that they cannot be characterized as having a principal purpose of one or the other, initial guidance should be sought from the AD-PS, which will coordinate with the Assistant Director, Finance and Administration (AD-FA) and the Solicitor, if necessary.

1-10-20 GUIDELINES FOR CONTRACTS

1. The statute requires the use of a procurement contract when the principal purpose of a transaction is acquisition, by purchase, lease, or barter of property or services for the direct benefit or use of the Federal Government. The statute also allows the use of contracts "whenever an executive agency determines in a specific instance that the use of a type of emergency project procurement contract is appropriate." This provision accommodates situations in which an agency determines that specific public needs can be satisfied best by using the procurement process. However, because the provision does not allow agencies to circumvent the criteria for use of procurement or assistance instruments, use of this authority is restricted to extraordinary circumstances, and only with the prior approval of the AD-PS, in coordination with the AD-FA.

2. Procurement contracts would normally be used for the following purposes:
   1. Assessment of the performance of Federal Government programs or projects or recipient activity desired by the Federal Government. It does not include research of an evaluative character unless the request for its performance is initiated by the Federal Government.

   2. Professional or technical support services provided by or on behalf of the Federal Government or any third party. Third party does not include services rendered by a State or local government, Indian tribe, or professional group to its own constituency or membership.

   3. Surveys, studies, and research which provide specific information desired by the Federal Government for its direct activities or for dissemination to the public.

   4. Training projects where the Federal Government selects the individual or specific groups whose members are to be trained or specifies the content of the curriculum (not applicable to fellowship awards).

   5. Planning for Federal Government use.

   6. Production of publications or audio-visual materials other than the results of research projects or the proceedings of scientific conferences which are not being procured for use by the Federal Government.

   7. Design or development of items for Federal Government use or pursuant to agency definition of specifications.

   8. Conferences conducted on behalf of the Federal Government.

   9. The development of management information or other data for Federal Government use.

1-10-30 GUIDELINES FOR GRANTS AND COOPERATIVE AGREEMENTS

1. Grants or cooperative agreements will normally be used for the following purposes:
   1. General financial assistance (stimulation or support) to eligible recipients under specific legislation authorizing such assistance.

   2. Financial assistance (stimulation or support) to a specific program activity eligible for such assistance under specific legislation authorizing such assistance.

2. In all cases, the determination of when to use cooperative agreements will be based on the need for substantial Federal programmatic involvement in the assisted activity. Some programs (e.g., the Federal Lands Program) require the use of cooperative agreements exclusively. This determination will always be based on statutory requirements or policy level determinations of substantial Federal programmatic involvement in the performance of the assisted project. Other programs may use a mix of grant and cooperative agreements, depending on the nature of the project or the abilities of recipients. For example, some projects may start out as cooperative agreements in the first year and may be converted to grants after recipient capabilities have been established.

3. The criteria for distinguishing between grants and cooperative agreements is that substantial involvement is anticipated between the agency and the recipient during performance of the contemplated activity. As a guide to making this determination, anticipated involvement during performance would exist and, depending on the circumstances, could be substantial, where the relationship includes, for example:
   1. A Federal Government option to immediately halt an activity (e.g., construction specifications are not met).

   2. Federal Government review and approval of one stage before work can begin on a subsequent stage during the period covered by the assistance instrument. (This principle is not intended to suggest the use of cooperative agreement merely because the Federal Government had reserved the right to approve or disapprove an operational grant following a planning grant--provided each grant is a separate instrument.)

   3. Federal Government participation or approval in the selection or award of subgrants or contracts let under the assistance instrument, if such involvement is clearly indicated by statute or authorized by waiver.

   4. Federal Government involvement in the selection of key recipient personnel. (Provision in the award for the participation of a named principal investigator for research projects would not, by itself, warrant use of a cooperative agreement).

   5. Federal Government and recipient collaboration or joint participation in the performance of the assisted activities.

   6. Direct Federal Government operational involvement or participation to ensure compliance with such general statutory requirements as civil rights, environmental protection, and provisions for the handicapped. Such provisions go beyond the normal enforcement described in D.4. below.

   7. Federal Government monitoring to permit specified kinds of direction or redirection of the work.

   8. Federal Government requirements prior to award limiting the recipient's discretion with respect to scope of services offered, organizational structure, staffing, mode of operation, and other management processes, coupled with close Federal Government monitoring or operational involvement during performance over and above the normal exercise of Federal stewardship responsibilities to ensure compliance with these requirements.

4. Conversely, anticipated substantial involvement during performance does not include:
   1. Federal Government approval of recipient's plans prior to award.

   2. Exercise of normal Federal stewardship responsibilities during performance to ensure that the objectives, terms and conditions of the award are accomplished. This could include site visits, and review and response to performance, financial, and audit reports.

   3. Unanticipated Federal Government involvement to correct deficiencies in programmatic or financial performance by the recipient.

   4. Enforcement of public policy and socioeconomic statutory requirements such as civil rights, environmental protection, and provision for the handicapped.

   5. Federal Government review of performance after completion.

   6. Enforcement of general fiscal and administrative requirements such as those included in OMB circulars or Federal Government regulations.

5. Providing technical assistance, advice, or guidance to recipients, of financial assistance does not constitute substantial involvement during performance, if:
   1. It is provided at the request of the recipient; or

   2. The recipient is not required to follow it; or

   3. The recipient is required to follow it, but it is provided prior to the start of the assisted activity and the recipient understood this prior to the financial assistance award.

6. A project funded under the Joint Funding Simplification Act that includes more than one type of assistance relationship, e.g., some components funded by grants and others by cooperative agreements, is entirely permissible. P.L.97-258 provides the opportunity and authority to participate in jointly funded projects in any number of funding relationships to serve the best interests of the participating agencies' programs.

1-10-40 DEVIATIONS

1. There shall be no deviations from the policy without prior approval from the Director, OSM. Where severe disruption to a program or serious consequences to recipient would result, Federal assistance units should request initial advice from the AD-PS.

2. In isolated instances, it may be necessary for the AD-PS to seek an "exception" from OMB. OMB grants exceptions only on the basis of agency requests that include strong justification and an indication of the harm that will result if an exception is not granted.

3. Request from RDs/FODs for an exception should be sent to the AD-PS. The request should include:
   1. Whether the exception is requested for a complete program, a class of actions or an individual transaction;

   2. An explanation of why an exception is requested, including statutory, program policy or other reasons;

   3. A statement of what OSM will do if an exception is not granted and what the implications would be if this action were taken; and

   4. An indication of how OSM will handle the situation if the OMB exception expires before there are any changes to either the Public Law as amended or OSM statutes.

FEDERAL ASSISTANCE MANUAL
January 2, 1998