[Title 40 CFR B]
[Code of Federal Regulations (annual edition) - July 1, 2002 Edition]
[Title 40 - PROTECTION OF ENVIRONMENT]
[Chapter I - ENVIRONMENTAL PROTECTION AGENCY]
[Subchapter B - GRANTS AND OTHER FEDERAL ASSISTANCE]
[From the U.S. Government Printing Office]


40PROTECTION OF ENVIRONMENT12002-07-012002-07-01falseGRANTS AND OTHER FEDERAL ASSISTANCEBSUBCHAPTER BPROTECTION OF ENVIRONMENTENVIRONMENTAL PROTECTION AGENCY
            SUBCHAPTER B--GRANTS AND OTHER FEDERAL ASSISTANCE


PART 30--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, AND OTHER NON-PROFIT ORGANIZATIONS--Table of Contents




                           Subpart A--General

Sec.
30.1  Purpose.
30.2  Definitions.
30.3  Effect on other issuances.
30.4  Deviations.
30.5  Subawards.
30.6  Availability of OMB circulars.

                    Subpart B--Pre-Award Requirements

30.10  Purpose.
30.11  Pre-award policies.
30.12  Forms for applying for Federal assistance.
30.13  Debarment and suspension.
30.14  Special award conditions.
30.15  Metric system of measurement.
30.16  Resource Conservation and Recovery Act (RCRA).
30.17  Certifications and representations.
30.18  Hotel and motel fire safety.

                   Subpart C--Post-Award Requirements

                    Financial and Program Management

30.20  Purpose of financial and program management.
30.21  Standards for financial management systems.
30.22  Payment.
30.23  Cost sharing or matching.
30.24  Program income.
30.25  Revision of budget and program plans.
30.26  Non-Federal audits.
30.27  Allowable costs.
30.28  Period of availability of funds.

                           Property Standards

30.30  Purpose of property standards.
30.31  Insurance coverage.
30.32  Real property.
30.33  Federally-owned and exempt property.
30.34  Equipment.
30.35  Supplies and other expendable property.
30.36  Intangible property.
30.37  Property trust relationship.

                          Procurement Standards

30.40  Purpose of procurement standards.
30.41  Recipient responsibilities.
30.42  Codes of conduct.
30.43  Competition.
30.44  Procurement procedures.
30.45  Cost and price analysis.
30.46  Procurement records.
30.47  Contract administration.
30.48  Contract provisions.

                           Reports and Records

30.50  Purpose of reports and records.
30.51  Monitoring and reporting program performance.
30.52  Financial reporting.
30.53  Retention and access requirements for records.
30.54  Quality assurance.

                       Termination and Enforcement

30.60  Purpose of termination and enforcement.
30.61  Termination.
30.62  Enforcement.
30.63  Disputes.

                 Subpart D--After-the-Award Requirements

30.70  Purpose.
30.71  Closeout procedures.

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30.72  Subsequent adjustments and continuing responsibilities.
30.73  Collection of amounts due.

Appendix to Part 30--Contract Provisions

    Authority: 7 U.S.C. 135 et seq.; 15 U.S.C. 2601 et seq.; 33 U.S.C. 
1251 et seq.; 42 U.S.C. 241, 242b, 243, 246, 300f, 300j-1, 300j-2, 300j-
3, 1857 et seq., 6901 et seq., 7401 et seq., 9601 et seq.; OMB Circular 
A-110 (64 FR 54926, October 8, 1999).

    Source: 61 FR 6067, Feb. 15, 1996, unless otherwise noted.



                           Subpart A--General



Sec. 30.1  Purpose.

    This subpart establishes uniform administrative requirements for 
Federal grants and agreements awarded to institutions of higher 
education, hospitals, and other non-profit organizations. The 
Environmental Protection Agency (EPA) may not impose additional or 
inconsistent requirements, except as provided in Secs. 30.4, and 30.14 
or unless specifically required by Federal statute or Executive Order. 
Non-profit organizations that implement Federal programs for the States 
are also subject to State requirements.



Sec. 30.2  Definitions.

    (a) Accrued expenditures means the charges incurred by the recipient 
during a given period requiring the provision of funds for:
    (1) Goods and other tangible property received;
    (2) Services performed by employees, contractors, subrecipients, and 
other payees; and
    (3) Other amounts becoming owed under programs for which no current 
services or performance is required.
    (b) Accrued income means the sum of:
    (1) Earnings during a given period from;
    (i) Services performed by the recipient; and
    (ii) Goods and other tangible property delivered to purchasers; and
    (2) Amounts becoming owed to the recipient for which no current 
services or performance is required by the recipient.
    (c) Acquisition cost of equipment means the net invoice price of the 
equipment, including the cost of modifications, attachments, 
accessories, or auxiliary apparatus necessary to make the property 
usable for the purpose for which it was acquired. Other charges, such as 
the cost of installation, transportation, taxes, duty or protective in-
transit insurance, shall be included or excluded from the unit 
acquisition cost in accordance with the recipient's regular accounting 
practices.
    (d) Advance means a payment made by Treasury check or other 
appropriate payment mechanism to a recipient upon its request either 
before outlays are made by the recipient or through the use of 
predetermined payment schedules.
    (e) Award means financial assistance that provides support or 
stimulation to accomplish a public purpose. Awards include grants and 
other agreements in the form of money or property in lieu of money, by 
the Federal Government to an eligible recipient. The term does not 
include: technical assistance, which provides services instead of money; 
other assistance in the form of loans, loan guarantees, interest 
subsidies, or insurance; direct payments of any kind to individuals; 
and, contracts which are required to be entered into and administered 
under procurement laws and regulations.
    (f) Cash contributions means the recipient's cash outlay, including 
the outlay of money contributed to the recipient by third parties.
    (g) Closeout means the process by which a Federal awarding agency 
determines that all applicable administrative actions and all required 
work of the award have been completed by the recipient and Federal 
awarding agency.
    (h) Contract means a procurement contract under an award or 
subaward, and a procurement subcontract under a recipient's or 
subrecipient's contract.
    (i) Cost sharing or matching means that portion of project or 
program costs not borne by the Federal Government.
    (j) Date of completion means the date on which all work under an 
award is completed or the date on the award document, or any supplement 
or amendment thereto, on which Federal sponsorship ends.
    (k) Disallowed costs means those charges to an award that the 
Federal

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awarding agency determines to be unallowable, in accordance with the 
applicable Federal cost principles or other terms and conditions 
contained in the award.
    (l) Equipment means tangible nonexpendable personal property 
including exempt property charged directly to the award having a useful 
life of more than one year and an acquisition cost of $5000 or more per 
unit. However, consistent with recipient policy, lower limits may be 
established.
    (m) Excess property means property under the control of any Federal 
awarding agency that, as determined by the head thereof, is no longer 
required for its needs or the discharge of its responsibilities.
    (n) Exempt property means tangible personal property acquired in 
whole or in part with Federal funds, where the Federal awarding agency 
has statutory authority to vest title in the recipient without further 
obligation to the Federal Government. An example of exempt property 
authority is contained in the Federal Grant and Cooperative Agreement 
Act (31 U.S.C. 6306), for property acquired under an award to conduct 
basic or applied research by a non-profit institution of higher 
education or non-profit organization whose principal purpose is 
conducting scientific research.
    (o) Federal awarding agency means the Federal agency that provides 
an award to the recipient.
    (p) Federal funds authorized means the total amount of Federal funds 
obligated by the Federal Government for use by the recipient. This 
amount may include any authorized carryover of unobligated funds from 
prior funding periods when permitted by agency regulations or agency 
implementing instructions.
    (q) Federal share of real property, equipment, or supplies means 
that percentage of the property's acquisition costs and any improvement 
expenditures paid with Federal funds.
    (r) Funding period means the period of time when Federal funding is 
available for obligation by the recipient.
    (s) Intangible property and debt instruments means, but is not 
limited to, trademarks, copyrights, patents and patent applications and 
such property as loans, notes and other debt instruments, lease 
agreements, stock and other instruments of property ownership, whether 
considered tangible or intangible.
    (t) Obligations means the amounts of orders placed, contracts and 
grants awarded, services received and similar transactions during a 
given period that require payment by the recipient during the same or a 
future period.
    (u) Outlays or expenditures means charges made to the project or 
program. They may be reported on a cash or accrual basis. For reports 
prepared on a cash basis, outlays are the sum of cash disbursements for 
direct charges for goods and services, the amount of indirect expense 
charged, the value of third party in-kind contributions applied and the 
amount of cash advances and payments made to subrecipients. For reports 
prepared on an accrual basis, outlays are the sum of cash disbursements 
for direct charges for goods and services, the amount of indirect 
expense incurred, the value of in-kind contributions applied, and the 
net increase (or decrease) in the amounts owed by the recipient for 
goods and other property received, for services performed by employees, 
contractors, subrecipients and other payees and other amounts becoming 
owed under programs for which no current services or performance are 
required.
    (v) Personal property means property of any kind except real 
property. It may be tangible, having physical existence, or intangible, 
having no physical existence, such as copyrights, patents, or 
securities.
    (w) Prior approval means written approval by an authorized official 
evidencing prior consent.
    (x) Program income means gross income earned by the recipient that 
is directly generated by a supported activity or earned as a result of 
the award (see exclusions in Sec. 30.24 (e) and (h)). Program income 
includes, but is not limited to, income from fees for services 
performed, the use or rental of real or personal property acquired under 
federally-funded projects, the sale of commodities or items fabricated 
under an award, license fees and royalties on patents and copyrights, 
and interest on loans made with award funds. Interest

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earned on advances of Federal funds is not program income. Except as 
otherwise provided in Federal awarding agency regulations or the terms 
and conditions of the award, program income does not include the receipt 
of principal on loans, rebates, credits, discounts, etc., or interest 
earned on any of them.
    (y) Project costs means all allowable costs, as set forth in the 
applicable Federal cost principles, incurred by a recipient and the 
value of the contributions made by third parties in accomplishing the 
objectives of the award during the project period.
    (z) Project period means the period established in the award 
document during which Federal sponsorship begins and ends.
    (aa) Property means, unless otherwise stated, real property, 
equipment, intangible property and debt instruments.
    (bb) Real property means land, including land improvements, 
structures and appurtenances thereto, but excludes movable machinery and 
equipment.
    (cc) Recipient means an organization receiving financial assistance 
directly from Federal awarding agencies to carry out a project or 
program. The term includes public and private institutions of higher 
education, public and private hospitals, and other quasi-public and 
private non-profit organizations such as, but not limited to, community 
action agencies, research institutes, educational associations, and 
health centers. The term may include commercial organizations, foreign 
or international organizations (such as agencies of the United Nations) 
which are recipients, subrecipients, or contractors or subcontractors of 
recipients or subrecipients at the discretion of the Federal awarding 
agency. The term does not include government-owned contractor-operated 
facilities or research centers providing continued support for mission-
oriented, large-scale programs that are government-owned or controlled, 
or are designated as federally-funded research and development centers.
    (dd) Research and development means all research activities, both 
basic and applied, and all development activities that are supported at 
universities, colleges, and other non-profit institutions. ``Research'' 
is defined as a systematic study directed toward fuller scientific 
knowledge or understanding of the subject studied. ``Development'' is 
the systematic use of knowledge and understanding gained from research 
directed toward the production of useful materials, devices, systems, or 
methods, including design and development of prototypes and processes. 
The term research also includes activities involving the training of 
individuals in research techniques where such activities utilize the 
same facilities as other research and development activities and where 
such activities are not included in the instruction function.
    (ee) Small award means a grant or cooperative agreement not 
exceeding the small purchase threshold fixed at 41 U.S.C. 403(11) 
(currently $100,000).
    (ff) Subaward means an award of financial assistance in the form of 
money, or property in lieu of money, made under an award by a recipient 
to an eligible subrecipient or by a subrecipient to a lower tier 
subrecipient. The term includes financial assistance when provided by 
any legal agreement, even if the agreement is called a contract, but 
does not include procurement of goods and services nor does it include 
any form of assistance which is excluded from the definition of 
``award'' in paragraph (e) of this section.
    (gg) Subrecipient means the legal entity to which a subaward is made 
and which is accountable to the recipient for the use of the funds 
provided. The term may include foreign or international organizations 
(such as agencies of the United Nations) at the discretion of the 
Federal awarding agency.
    (hh) Supplies means all personal property excluding equipment, 
intangible property, and debt instruments as defined in this section, 
and inventions of a contractor conceived or first actually reduced to 
practice in the performance of work under a funding agreement (``subject 
inventions''), as defined in 37 CFR part 401, ``Rights to Inventions 
Made by Nonprofit Organizations

[[Page 322]]

and Small Business Firms Under Government Grants, Contracts, and 
Cooperative Agreements.''
    (ii) Suspension means an action by a Federal awarding agency that 
temporarily withdraws Federal sponsorship under an award, pending 
corrective action by the recipient or pending a decision to terminate 
the award by the Federal awarding agency. Suspension of an award is a 
separate action from suspension under Federal agency regulations 
implementing Executive Orders 12549 and 12689, ``Debarment and 
Suspension.''
    (jj) Termination means the cancellation of Federal sponsorship, in 
whole or in part, under an agreement at any time prior to the date of 
completion.
    (kk) Third party in-kind contributions means the value of non-cash 
contributions provided by non-Federal third parties. Third party in-kind 
contributions may be in the form of real property, equipment, supplies 
and other expendable property, and the value of goods and services 
directly benefiting and specifically identifiable to the project or 
program.
    (ll) Unliquidated obligations, for financial reports prepared on a 
cash basis, means the amount of obligations incurred by the recipient 
that have not been paid. For reports prepared on an accrued expenditure 
basis, they represent the amount of obligations incurred by the 
recipient for which an outlay has not been recorded.
    (mm) Unobligated balance means the portion of the funds authorized 
by the Federal awarding agency that has not been obligated by the 
recipient and is determined by deducting the cumulative obligations from 
the cumulative funds authorized.
    (nn) Unrecovered indirect cost means the difference between the 
amount awarded and the amount which could have been awarded under the 
recipient's approved negotiated indirect cost rate.
    (oo) Working capital advance means a procedure where by funds are 
advanced to the recipient to cover its estimated disbursement needs for 
a given initial period.



Sec. 30.3  Effect on other issuances.

    For awards subject to Circular A-110, all administrative 
requirements of codified program regulations, program manuals, handbooks 
and other nonregulatory materials which are inconsistent with the 
requirements of Circular A-110 shall be superseded, except to the extent 
they are required by statute, or authorized in accordance with the 
deviations provision in Sec. 30.4.



Sec. 30.4  Deviations.

    The Office of Management and Budget (OMB) may grant exceptions for 
classes of grants or recipients subject to the requirements of Circular 
A-110 when exceptions are not prohibited by statute. However, in the 
interest of maximum uniformity, exceptions from the requirements of 
Circular A-110 shall be permitted only in unusual circumstances. EPA may 
apply more restrictive requirements to a class of recipients when 
approved by OMB. EPA may apply less restrictive requirements when 
awarding small awards, except for those requirements which are 
statutory. Exceptions on a case-by-case basis may also be made by EPA.



Sec. 30.5  Subawards.

    Unless sections of Circular A-110 specifically exclude subrecipients 
from coverage, the provisions of Circular A-110 shall be applied to 
subrecipients performing work under awards if such subrecipients are 
institutions of higher education, hospitals or other non-profit 
organizations. State and local government subrecipients are subject to 
the provisions of regulations in 40 CFR part 31 implementing the grants 
management common rule, ``Uniform Administrative Requirements for Grants 
and Cooperative Agreements to State and Local Governments,''.



Sec. 30.6  Availability of OMB circulars.

    OMB circulars cited in this part are available from the Office of 
Management and Budget (OMB) by writing to the Executive Office of the 
President, Publications Service, 725 17th Street, NW., Suite 200, 
Washington, DC 20503.

[[Page 323]]



                    Subpart B--Pre-Award Requirements



Sec. 30.10  Purpose.

    Sections 30.11 through 30.18 prescribe forms and instructions and 
other pre-award matters to be used in applying for Federal awards.



Sec. 30.11  Pre-award policies.

    (a) Use of grants and cooperative agreements, and contracts. In each 
instance, EPA shall decide on the appropriate award instrument (i.e., 
grant, cooperative agreement, or contract). The Federal Grant and 
Cooperative Agreement Act (31 U.S.C. 6301-08) governs the use of grants, 
cooperative agreements and contracts. A grant or cooperative agreement 
shall be used only when the principal purpose of a transaction is to 
accomplish a public purpose of support or stimulation authorized by 
Federal statute. The statutory criterion for choosing between grants and 
cooperative agreements is that for the latter, ``substantial involvement 
is expected between the executive agency and the State, local 
government, or other recipient when carrying out the activity 
contemplated in the agreement.'' Contracts shall be used when the 
principal purpose is acquisition of property or services for the direct 
benefit or use of the Federal Government.
    (b) Public notice and priority setting. EPA shall notify the public 
of its intended funding priorities for discretionary grant programs, 
unless funding priorities are established by Federal statute.
    (c) By submitting an application to EPA, the applicant grants EPA 
permission to share the application with technical reviewers both within 
and outside the Agency.



Sec. 30.12  Forms for applying for Federal assistance.

    (a) EPA shall comply with the applicable report clearance 
requirements of 5 CFR part 1320, ``Controlling Paperwork Burdens on the 
Public,'' with regard to all forms used by EPA in place of or as a 
supplement to the Standard Form 424 (SF-424) series.
    (b) Applicants shall use the SF-424 series or those forms and 
instructions prescribed by EPA.
    (c) For Federal programs covered by Executive Order 12372, 
``Intergovernmental Review of Federal Programs,'' the applicant shall 
complete the appropriate sections of the SF-424 (Application for Federal 
Assistance) indicating whether the application was subject to review by 
the State Single Point of Contact (SPOC). The name and address of the 
SPOC for a particular State can be obtained from EPA or the Catalog of 
Federal Domestic Assistance. The SPOC shall advise the applicant whether 
the program for which application is made has been selected by that 
State for review.
    (d) If the SF-424 form is not used EPA should indicate whether the 
application is subject to review by the State under Executive Order 
12372.



Sec. 30.13  Debarment and suspension.

    EPA and recipients shall comply with the nonprocurement debarment 
and suspension regulations in 40 CFR part 32 implementing Executive 
Orders 12549 and 12689, ``Debarment and Suspension.'' 40 CFR part 32 
restricts subawards and contracts with certain parties that are 
debarred, suspended or otherwise excluded from or ineligible for 
participation in Federal assistance programs or activities.



Sec. 30.14  Special award conditions.

    If an applicant or recipient: has a history of poor performance, is 
not financially stable; has a management system that does not meet the 
standards prescribed in Circular A-110; has not conformed to the terms 
and conditions of a previous award; or is not otherwise responsible, EPA 
may impose additional requirements as needed, provided that such 
applicant or recipient is notified in writing as to: the nature of the 
additional requirements, the reason why the additional requirements are 
being imposed, the nature of the corrective action needed, the time 
allowed for completing the corrective actions, and the method for 
requesting reconsideration of the additional requirements imposed. Any 
special conditions shall be promptly removed once the conditions that 
prompted them have been corrected.

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Sec. 30.15  Metric system of measurement.

    The Metric Conversion Act, as amended by the Omnibus Trade and 
Competitiveness Act (15 U.S.C. 205), declares that the metric system is 
the preferred measurement system for U.S. trade and commerce. The Act 
requires each Federal agency to establish a date or dates in 
consultation with the Secretary of Commerce, when the metric system of 
measurement will be used in the agency's procurements, grants, and other 
business-related activities. Metric implementation may take longer where 
the use of the system is initially impractical or likely to cause 
significant inefficiencies in the accomplishment of federally-funded 
activities. EPA shall follow the provisions of Executive Order 12770, 
``Metric Usage in Federal Government Programs.''



Sec. 30.16  Resource Conservation and Recovery Act (RCRA).

    Resource Conservation and Recovery Act (RCRA) (Public Law 94-580 
codified at 42 U.S.C. 6962). Under the Act, any State agency or agency 
of a political subdivision of a State which is using appropriated 
Federal funds must comply with Section 6002. Section 6002 requires that 
preference be given in procurement programs to the purchase of specific 
products containing recycled materials identified in guidelines 
developed by EPA (40 CFR parts 247 through 254). Accordingly, State and 
local institutions of higher education, hospitals, and non-profit 
organizations that receive direct Federal awards or other Federal funds 
shall give preference in their procurement programs funded with Federal 
funds to the purchase of recycled products pursuant to EPA's guidelines. 
Further, pursuant to Executive Order 12873 (dated October 20, 1993) 
recipients are to print documents/reports prepared under an EPA award of 
assistance double sided on recycled paper. This requirement does not 
apply to Standard Forms. These forms are printed on recycled paper as 
available through the General Services Administration.



Sec. 30.17  Certifications and representations.

    Unless prohibited by statute or codified regulation, EPA will allow 
recipients to submit certifications and representations required by 
statute, Executive Order, or regulation on an annual basis, if the 
recipients have ongoing and continuing relationships with the agency. 
Annual certifications and representations shall be signed by responsible 
officials with the authority to ensure recipients' compliance with the 
pertinent requirements.



Sec. 30.18  Hotel and motel fire safety.

    The Hotel and Motel Fire Safety Act of 1990 (Public Law 101-391) 
establishes a number of fire safety standards which must be met for 
hotels and motels. The law provides further that Federal funds may not 
be used to sponsor a conference, meeting, or training seminar held in a 
hotel or motel which does not meet the law's fire protection and control 
guidelines. If necessary, the head of the Federal agency may waive this 
prohibition in the public interest.



                   Subpart C--Post-Award Requirements

                    Financial and Program Management



Sec. 30.20  Purpose of financial and program management.

    Sections 30.21 through 30.28 prescribe standards for financial 
management systems, methods for making payments and rules for: 
satisfying cost sharing and matching requirements, accounting for 
program income, budget revision approvals, making audits, determining 
allowability of cost, and establishing fund availability.



Sec. 30.21  Standards for financial management systems.

    (a) EPA shall require recipients to relate financial data to 
performance data and develop unit cost information whenever practical.
    (b) Recipients' financial management systems shall provide for the 
following.
    (1) Accurate, current and complete disclosure of the financial 
results of each federally-sponsored project or program in accordance 
with the reporting requirements set forth in Sec. 30.52. If EPA requires 
reporting on an accrual basis from a recipient that maintains its 
records on other than an accrual

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basis, the recipient shall not be required to establish an accrual 
accounting system. These recipients may develop such accrual data for 
its reports on the basis of an analysis of the documentation on hand.
    (2) Records that identify adequately the source and application of 
funds for federally-sponsored activities. These records shall contain 
information pertaining to Federal awards, authorizations, obligations, 
unobligated balances, assets, outlays, income and interest.
    (3) Effective control over and accountability for all funds, 
property and other assets. Recipients shall adequately safeguard all 
such assets and assure they are used solely for authorized purposes.
    (4) Comparison of outlays with budget amounts for each award. 
Whenever appropriate, financial information should be related to 
performance and unit cost data.
    (5) Written procedures to minimize the time elapsing between the 
transfer of funds to the recipient from the U.S. Treasury and the 
issuance or redemption of checks, warrants or payments by other means 
for program purposes by the recipient. To the extent that the provisions 
of the Cash Management Improvement Act (CMIA) (Pub. L. 101-453) govern, 
payment methods of State agencies, instrumentalities, and fiscal agents 
shall be consistent with CMIA Treasury-State Agreements or the CMIA 
default procedures codified at 31 CFR part 205, ``Withdrawal of Cash 
from the Treasury for Advances under Federal Grant and Other Programs.''
    (6) Written procedures for determining the reasonableness, 
allocability and allowability of costs in accordance with the provisions 
of the applicable Federal cost principles and the terms and conditions 
of the award.
    (7) Accounting records including cost accounting records that are 
supported by source documentation.
    (c) Where the EPA guarantees or insures the repayment of money 
borrowed by the recipient, the recipient shall provide adequate bonding 
and insurance if the bonding and insurance requirements of the recipient 
are not deemed adequate to protect the interest of the Federal 
Government.
    (d) Recipients shall obtain adequate fidelity bond coverage where 
coverage to protect the Federal Government's interest is insufficient.
    (e) Where bonds are required in the situations described above, the 
bonds shall be obtained from companies holding certificates of authority 
as acceptable sureties, as prescribed in 31 CFR part 223, ``Surety 
Companies Doing Business with the United States.''



Sec. 30.22  Payment.

    (a) Payment methods shall minimize the time elapsing between the 
transfer of funds from the United States Treasury and the issuance or 
redemption of checks, warrants, or payment by other means by the 
recipients. Payment methods of State agencies or instrumentalities shall 
be consistent with Treasury-State CMIA agreements or default procedures 
codified at 31 CFR part 205.
    (b) Recipients are to be paid in advance, provided they maintain or 
demonstrate the willingness to maintain: written procedures that 
minimize the time elapsing between the transfer of funds and 
disbursement by the recipient; and financial management systems that 
meet the standards for fund control and accountability as established in 
Sec. 30.21. Cash advances to a recipient organization shall be limited 
to the minimum amounts needed and be timed to be in accordance with the 
actual, immediate cash requirements of the recipient organization in 
carrying out the purpose of the approved program or project. The timing 
and amount of cash advances shall be as close as is administratively 
feasible to the actual disbursements by the recipient organization for 
direct program or project costs and the proportionate share of any 
allowable indirect costs.
    (c) Whenever possible, advances shall be consolidated to cover 
anticipated cash needs for all awards made by the EPA to the recipient.
    (1) Advance payment mechanisms include, but are not limited to, 
Treasury check and electronic funds transfer.
    (2) Advance payment mechanisms are subject to 31 CFR part 205.

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    (3) Recipients shall be authorized to submit requests for advances 
and reimbursements at least monthly when electronic fund transfers are 
not used.
    (d) Requests for Treasury check advance payment shall be submitted 
on SF-270, ``Request for Advance or Reimbursement,'' or other forms as 
may be authorized by OMB. This form is not to be used when Treasury 
check advance payments are made to the recipient automatically through 
the use of a predetermined payment schedule or if precluded by special 
instructions for electronic funds transfer.
    (e) Reimbursement is the preferred method when the requirements in 
paragraph (b) of this section cannot be met. EPA may also use this 
method on any construction agreement, or if the major portion of the 
construction project is accomplished through private market financing or 
Federal loans, and the Federal assistance constitutes a minor portion of 
the project.
    (1) When the reimbursement method is used, EPA shall make payment 
within 30 days after receipt of the billing, unless the billing is 
improper.
    (2) Recipients shall be authorized to submit request for 
reimbursement at least monthly when electronic funds transfers are not 
used.
    (f) If a recipient cannot meet the criteria for advance payments and 
EPA has determined that reimbursement is not feasible because the 
recipient lacks sufficient working capital, EPA may provide cash on a 
working capital advance basis. Under this procedure, EPA shall advance 
cash to the recipient to cover its estimated disbursement needs for an 
initial period generally geared to the awardee's disbursing cycle. 
Thereafter, EPA shall reimburse the recipient for its actual cash 
disbursements. The working capital advance method of payment shall not 
be used for recipients unwilling or unable to provide timely advances to 
their subrecipient to meet the subrecipient's actual cash disbursements.
    (g) To the extent available, recipients shall disburse funds 
available from repayments to and interest earned on a revolving fund, 
program income, rebates, refunds, contract settlements, audit recoveries 
and interest earned on such funds before requesting additional cash 
payments.
    (h) Unless otherwise required by statute, EPA shall not withhold 
payments for proper charges made by recipients at any time during the 
project period unless paragraph (h) (1) or (2) of this section applies.
    (1) A recipient has failed to comply with the project objectives, 
the terms and conditions of the award, or Federal reporting 
requirements.
    (2) The recipient or subrecipient is delinquent in a debt to the 
United States as defined in OMB Circular A-129, ``Managing Federal 
Credit Programs.'' Under such conditions, EPA may, upon reasonable 
notice, inform the recipient that payments shall not be made for 
obligations incurred after a specified date until the conditions are 
corrected or the indebtedness to the Federal Government is liquidated.
    (i) Standards governing the use of banks and other institutions as 
depositories of funds advanced under awards are as follows.
    (1) Except for situations described in paragraph (i)(2) of this 
section, EPA shall not require separate depository accounts for funds 
provided to a recipient or establish any eligibility requirements for 
depositories for funds provided to a recipient. However, recipients must 
be able to account for the receipt, obligation and expenditure of funds.
    (2) Advances of Federal funds shall be deposited and maintained in 
insured accounts whenever possible.
    (j) Consistent with the national goal of expanding the opportunities 
for women-owned and minority-owned business enterprises, recipients 
shall be encouraged to use women-owned and minority-owned banks (a bank 
which is owned at least 50 percent by women or minority group members).
    (k) Recipients shall maintain advances of Federal funds in interest 
bearing accounts, unless paragraph (k) (1), (2) or (3) of this section 
applies.
    (1) The recipient receives less than $120,000 in Federal awards per 
year.
    (2) The best reasonably available interest bearing account would not 
be expected to earn interest in excess of $250 per year on Federal cash 
balances.

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    (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.
    (l) For those entities where CMIA and its implementing regulations 
do not apply, interest earned on Federal advances deposited in interest 
bearing accounts shall be remitted annually to Department of Health and 
Human Services, Payment Management System, P.O. Box 6021, Rockville, MD 
20852. Interest amounts up to $250 per year may be retained by the 
recipient for administrative expense. State universities and hospitals 
shall comply with CMIA, as it pertains to interest. If an entity subject 
to CMIA uses its own funds to pay pre-award costs for discretionary 
awards without prior written approval from EPA, it waives its right to 
recover the interest under CMIA. In keeping with Electronic Funds 
Transfer rules, (31 CFR part 206), interest should be remitted to the 
HHS Payment Management System through an electronic medium such as the 
FEDWIRE Deposit system. Recipients which do not have this capability 
should use a check.
    (m) Except as noted elsewhere in Circular A-110, only the following 
forms shall be authorized for the recipients in requesting advances and 
reimbursements. EPA shall not require more than an original and two 
copies of these forms.
    (1) SF-270, Request for Advance or Reimbursement. EPA shall adopt 
the SF-270 as a standard form for all nonconstruction programs when 
electronic funds transfer or predetermined advance methods are not used. 
However, EPA has the option of using this form for construction programs 
in lieu of the SF-271, ``Outlay Report and Request for Reimbursement for 
Construction Programs.''
    (2) SF-271, Outlay Report and Request for Reimbursement for 
Construction Programs. EPA shall adopt the SF-271 as the standard form 
to be used for requesting reimbursement for construction programs. 
However, the SF-270 may be substituted when EPA determines that it 
provides adequate information to meet its needs.



Sec. 30.23  Cost sharing or matching.

    EPA shall not require cost sharing or matching unless required by 
statute, regulation, Executive Order, or official Agency policy.
    (a) All contributions, including cash and third party in-kind, shall 
be accepted as part of the recipient's cost sharing or matching when 
such contributions meet all of the following criteria.
    (1) Are verifiable from the recipient's records.
    (2) Are not included as contributions for any other federally-
assisted project or program.
    (3) Are necessary and reasonable for proper and efficient 
accomplishment of project or program objectives.
    (4) Are allowable under the applicable cost principles.
    (5) Are not paid by the Federal Government under another award, 
except where authorized by Federal statute to be used for cost sharing 
or matching.
    (6) Are identified in the approved budget.
    (7) Conform to other provisions of Circular A-110, as applicable.
    (b) Unrecovered indirect costs may be included as part of cost 
sharing or matching only with the prior approval of the EPA Award 
Official.
    (c) Values for recipient contributions of services and property 
shall be established in accordance with the applicable cost principles. 
If, after consultation with Agency property management personnel, the 
EPA Award Official authorizes recipients to donate buildings or land for 
construction or facilities acquisition projects or long-term use, the 
value of the donated property for cost sharing or matching shall be the 
lesser of paragraph (c) (1) or (2) of this section.
    (1) The certified value of the remaining life of the property 
recorded in the recipient's accounting records at the time of donation.
    (2) The current fair market value. However, when there is sufficient 
justification, the EPA Award Official may approve the use of the current 
fair market value of the donated property, even if it exceeds the 
certified value at the time of donation to the project.
    (d) Volunteer services furnished by professional and technical 
personnel,

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consultants, and other skilled and unskilled labor may be counted as 
cost sharing or matching if the service is an integral and necessary 
part of an approved project or program. Rates for volunteer services 
shall be consistent with those paid for similar work in the recipient's 
organization. In those instances in which the required skills are not 
found in the recipient organization, rates shall be consistent with 
those paid for similar work in the labor market in which the recipient 
competes for the kind of services involved. In either case, paid fringe 
benefits that are reasonable, allowable, and allocable may be included 
in the valuation.
    (e) When an employer other than the recipient furnishes the services 
of an employee, these services shall be valued at the employee's regular 
rate of pay (plus an amount of fringe benefits that are reasonable, 
allowable, and allocable, but exclusive of overhead costs), provided 
these services are in the same skill for which the employee is normally 
paid.
    (f) Donated supplies may include such items as expendable equipment, 
office supplies, laboratory supplies or workshop and classroom supplies. 
Value assessed to donated supplies included in the cost sharing or 
matching share shall be reasonable and shall not exceed the fair market 
value of the property at the time of the donation.
    (g) The method used for determining cost sharing or matching for 
donated equipment, buildings and land for which title passes to the 
recipient may differ according to the purpose of the award, if paragraph 
(g) (1) or (2) of this section applies.
    (1) If the purpose of the award is to assist the recipient in the 
acquisition of equipment, buildings or land, the total value of the 
donated property may be claimed as cost sharing or matching.
    (2) If the purpose of the award is to support activities that 
require the use of equipment, buildings or land, normally only 
depreciation or use charges for equipment and buildings may be made. 
However, the full value of equipment or other capital assets and fair 
rental charges for land may be allowed, provided that the EPA technical 
program office, after consultation with EPA property management 
personnel, has approved the charges.
    (h) The value of donated property shall be determined in accordance 
with the usual accounting policies of the recipient, with the following 
qualifications.
    (1) The value of donated land and buildings shall not exceed its 
fair market value at the time of donation to the recipient as 
established by an independent appraiser (e.g., certified real property 
appraiser or General Services Administration representative) and 
certified by a responsible official of the recipient.
    (2) The value of donated equipment shall not exceed the fair market 
value of equipment of the same age and condition at the time of 
donation.
    (3) The value of donated space shall not exceed the fair rental 
value of comparable space as established by an independent appraisal of 
comparable space and facilities in a privately-owned building in the 
same locality.
    (4) The value of loaned equipment shall not exceed its fair rental 
value.
    (5) The following requirements pertain to the recipient's supporting 
records for in-kind contributions from third parties.
    (i) Volunteer services shall be documented and, to the extent 
feasible, supported by the same methods used by the recipient for its 
own employees.
    (ii) The basis for determining the valuation for personal service, 
material, equipment, buildings and land shall be documented.



Sec. 30.24  Program income.

    (a) EPA shall apply the standards set forth in this section in 
requiring recipient organizations to account for program income related 
to projects financed in whole or in part with Federal funds.
    (b) Except as provided in paragraph (h) of this section, program 
income earned during the project period shall be retained by the 
recipient and, in accordance with EPA regulations or the terms and 
conditions of the award, shall be used in one or more of the ways listed 
in the following.
    (1) Added to funds committed to the project by EPA and recipient and 
used

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to further eligible project or program objectives.
    (2) Used to finance the non-Federal share of the project or program.
    (3) Deducted from the total project or program allowable cost in 
determining the net allowable costs on which the Federal share of costs 
is based.
    (c) When EPA authorizes the disposition of program income as 
described in paragraphs (b)(1) or (2) of this section, program income in 
excess of any limits stipulated shall be used in accordance with 
paragraph (b)(3) of this section.
    (d) In the event that the EPA does not specify in its regulations or 
the terms and conditions of the award how program income is to be used, 
paragraph (b)(3) of this section shall apply automatically to all 
projects or programs except research. For awards that support research, 
paragraph (b)(1) of this section shall apply automatically unless EPA 
indicates in the terms and conditions another alternative on the award 
or the recipient is subject to special award conditions, as indicated in 
Sec. 30.14.
    (e) Unless EPA regulations or the terms and conditions of the award 
provide otherwise, recipients shall have no obligation to the Federal 
Government regarding program income earned after the end of the project 
period.
    (f) If authorized by EPA regulations or 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.
    (g) Proceeds from the sale of property shall be handled in 
accordance with the requirements of the Property Standards (See 
Secs. 30.30 through 30.37).
    (h) Unless EPA regulations or the terms and condition of the award 
provide otherwise, recipients shall have no obligation to the Federal 
Government with respect to program income earned from license fees and 
royalties for copyrighted material, patents, patent applications, 
trademarks, and inventions produced under an award. However, Patent and 
Trademark Amendments (35 U.S.C. 18) apply to inventions made under an 
experimental, developmental, or research award.



Sec. 30.25  Revision of budget and program plans.

    (a) The budget plan is the financial expression of the project or 
program as approved during the award process. The budget shall include 
both the Federal and non-Federal share. It shall be related to 
performance for program evaluation purposes whenever appropriate.
    (b) Recipients are required to report deviations from budget and 
program plans, and request prior approvals for budget and program plan 
revisions, in accordance with this section.
    (c) For nonconstruction awards, unless EPA regulations provide 
otherwise, recipients shall request prior written approvals from:
    (1) The EPA Award Official for the following:
    (i) Change in the scope or the objective of the project or program 
(even if there is no associated budget revision requiring prior written 
approval).
    (ii) The need for additional Federal funding.
    (iii) The inclusion of costs that require prior approval in 
accordance with OMB Circular A-21, ``Cost Principles for Institutions of 
Higher Education,'' OMB Circular A-122, ``Cost Principles for Non-Profit 
Organizations,'' or 45 CFR part 74 appendix E, ``Principles for 
Determining Costs Applicable to Research and Development under Grants 
and Contracts with Hospitals,'' or 48 CFR part 31, ``Contract Cost 
Principles and Procedures,'' as applicable.
    (2) The technical program office for the following:
    (i) Change in a key person specified in the application or award 
document.
    (ii) The absence for more than three months, or a 25 percent 
reduction in time devoted to the project, by the approved project 
director or principal investigator.
    (iii) The transfer of amounts budgeted for indirect costs to absorb 
increases in direct costs, or vice versa.
    (iv) The transfer of funds allotted for training allowances (direct 
payment to trainees) to other categories of expense.
    (v) Unless described in the application and funded in the approved 
award, the subaward, transfer or contracting out of any work under an 
award. This

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provision does not apply to the purchase of supplies, material, 
equipment or general support services.
    (d) No other prior approval requirements for specific items may be 
imposed unless a deviation has been approved by OMB.
    (e) Except for requirements listed in paragraphs (c)(1)(i) and (ii) 
of this section, the EPA Award Official may waive cost-related and 
administrative prior written approvals required by this part and OMB 
cost principles. For awards that support research, these prior approval 
requirements are automatically waived unless:
    (1) EPA provides otherwise in the award or agency regulation or
    (2) One of the conditions in paragraph (f)(2)(i) of this section 
applies.
    (f) Recipients are authorized without prior approval or a waiver to:
    (1) Incur pre-award costs 90 calendar days prior to award.
    (i) Pre-award costs incurred more than 90 calendar days prior to 
award require the prior approval of the EPA Award Official.
    (ii) The applicant must include all pre-award costs in its 
application.
    (iii) The applicant incurs such costs at its own risk (i.e., EPA is 
under no obligation to reimburse such costs if for any reason the 
recipient does not receive an award or if the award is less than 
anticipated and inadequate to cover such costs).
    (iv) EPA will only allow pre-award costs without approval if there 
are sufficient programmatic reasons for incurring the expenditures prior 
to the award (e.g., time constraints, weather factors, etc.), they are 
in conformance with the appropriate cost principles, and any procurement 
complies with the requirements of this rule.
    (2) Extend the expiration date of the award one time for up to 12 
months.
    (i) A one-time extension may not be initiated if:
    (A) The terms and conditions of the award prohibit the extension;
    (B) The extension requires additional Federal funds; or
    (C) The extension involves any change in the approved objectives or 
scope of the project.
    (ii) For one-time extensions, the recipient must notify the EPA 
Award Official in writing with the supporting reasons and revised 
expiration date at least 10 days before the expiration date specified in 
the award.
    (iii) This one-time extension may not be exercised merely for the 
purpose of using unobligated balances.
    (3) Carry forward unobligated balances to subsequent funding periods 
providing the recipient notifies the EPA Award Official by means of the 
Financial Status Report.
    (g) The EPA technical program office may, at its option, restrict 
the transfer of funds among direct cost categories or programs, 
functions and activities for awards in which the Federal share of the 
project exceeds $100,000 and the cumulative amount of such transfers 
exceeds or is expected to exceed 10 percent of the total budget as last 
approved by EPA. Except as provided for at paragraph (c) of this 
section, for awards in which the Federal share is less than $100,000 
there are no restrictions on transfers of funds among direct cost 
categories. EPA shall not permit a transfer that would cause any Federal 
appropriation or part thereof to be used for purposes other than those 
consistent with the original intent of the appropriation.
    (h) All other changes to nonconstruction budgets, except for the 
changes described in paragraph (j) of this section, do not require prior 
approval.
    (i) For construction awards, recipients shall request prior written 
approval promptly from EPA for budget revisions whenever paragraph 
(h)(1), (2) or (3) of this section applies.
    (1) The revision results from changes in the scope or the objective 
of the project or program.
    (2) The need arises for additional Federal funds to complete the 
project.
    (3) A revision is desired which involves specific costs for which 
prior written approval requirements may be imposed consistent with 
applicable OMB cost principles listed in Sec. 30.27.
    (j) No other prior approval requirements for specific items may be 
imposed unless a deviation has been approved by OMB.
    (k) When EPA makes an award that provides support for both 
construction and nonconstruction work, EPA may require the recipient to 
request prior

[[Page 331]]

approval before making any fund or budget transfers between the two 
types of work supported.
    (l) For both construction and nonconstruction awards, EPA shall 
require recipients to notify the agency in writing promptly whenever the 
amount of Federal authorized funds is expected to exceed the needs of 
the recipient for the project period by more than $5000 or five percent 
of the Federal award, whichever is greater. This notification shall not 
be required if an application for additional funding is submitted for a 
continuation award.
    (m) When requesting approval for budget revisions, recipients shall 
use the budget forms that were used in the application unless the EPA 
indicates that a letter clearly describing the details of the request 
will suffice.
    (n) Within 30 calendar days from the date of receipt of the request 
for budget revisions, EPA shall review the request and notify the 
recipient whether the budget revisions have been approved. If the 
revision is still under consideration at the end of 30 calendar days, 
EPA shall inform the recipient in writing of the date when the recipient 
may expect the decision.



Sec. 30.26  Non-Federal audits.

    (a) Recipients and subrecipients that are institutions of higher 
education or other non-profit organizations (including hospitals) shall 
be subject to the audit requirements contained in the Single Audit Act 
Amendments of 1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-133, 
``Audits of States, Local Governments, and Non-Profit Organizations.''
    (b) State and local governments shall be subject to the audit 
requirements contained in the Single Audit Act Amendments of 1996 (31 
U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of States, 
Local Governments, and Non-Profit Organizations.''
    (c) For-profit hospitals not covered by the audit provisions of 
revised OMB Circular A-133 shall be subject to the audit requirements of 
the Federal awarding agencies.
    (d) Commercial organizations shall be subject to the audit 
requirements of EPA or the prime recipient as incorporated into the 
award document.

[61 FR 6067, Feb. 15, 1996, as amended at 62 FR 45939, 45944, Aug. 29, 
1997]



Sec. 30.27  Allowable costs.

    (a) For each kind of recipient, there is a set of Federal principles 
for determining allowable costs. Allowability of costs shall be 
determined in accordance with the cost principles applicable to the 
entity incurring the costs. Thus, allowability of costs incurred by 
State, local or federally-recognized Indian tribal governments is 
determined in accordance with the provisions of OMB Circular A-87, 
``Cost Principles for State and Local Governments.'' The allowability of 
costs incurred by non-profit organizations is determined in accordance 
with the provisions of OMB Circular A-122, ``Cost Principles for Non-
Profit Organizations.'' The allowability of costs incurred by 
institutions of higher education is determined in accordance with the 
provisions of OMB Circular A-21, ``Cost Principles for Educational 
Institutions.'' The allowability of costs incurred by hospitals is 
determined in accordance with the provisions of appendix E of 45 CFR 
part 74, ``Principles for Determining Costs Applicable to Research and 
Development Under Grants and Contracts with Hospitals.'' The 
allowability of costs incurred by commercial organizations and those 
non-profit organizations listed in Attachment C to Circular A-122 is 
determined in accordance with the provisions of the Federal Acquisition 
Regulation (FAR) at 48 CFR part 31. In addition, EPA's annual 
Appropriations Acts may contain restrictions on the use of assistance 
funds. For example, the Acts may prohibit the use of funds to support 
intervention in Federal regulatory or adjudicatory proceedings.
    (b) EPA will limit its participation in the salary rate (excluding 
overhead) paid to individual consultants retained by recipients or by a 
recipient's contractors or subcontractors to the maximum daily rate for 
level 4 of the Executive Schedule unless a greater amount is authorized 
by law. (Recipient's may, however, pay consultants more than this 
amount.) This limitation applies to consultation services of designated 
individuals with specialized skills who

[[Page 332]]

are paid at a daily or hourly rate. This rate does not include 
transportation and subsistence costs for travel performed; recipients 
will pay these in accordance with their normal travel reimbursement 
practices. Contracts with firms for services which are awarded using the 
procurement requirements in this part are not affected by this 
limitation.



Sec. 30.28  Period of availability of funds.

    Where a funding period is specified, a recipient may charge to the 
grant only allowable costs resulting from obligations incurred during 
the funding period and any pre-award costs authorized by EPA.

                           Property Standards



Sec. 30.30  Purpose of property standards.

    Sections 30.31 through 30.37 set forth uniform standards governing 
management and disposition of property furnished by the Federal 
Government whose cost was charged to a project supported by a Federal 
award. EPA shall require recipients to observe these standards under 
awards and shall not impose additional requirements, unless specifically 
required by Federal statute. The recipient may use its own property 
management standards and procedures provided it observes the provisions 
of Secs. 30.31 through 30.37.



Sec. 30.31  Insurance coverage.

    Recipients shall, at a minimum, provide the equivalent insurance 
coverage for real property and equipment acquired with Federal funds as 
provided to property owned by the recipient. Federally-owned property 
need not be insured unless required by the terms and conditions of the 
award.



Sec. 30.32  Real property.

    EPA shall prescribe requirements for recipients concerning the use 
and disposition of real property acquired in whole or in part under 
awards. Unless otherwise provided by statute, such requirements, at a 
minimum, shall contain the following.
    (a) Title to real property shall vest in the recipient subject to 
the condition that the recipient shall use the real property for the 
authorized purpose of the project as long as it is needed and shall not 
encumber the property without approval of EPA.
    (b) The recipient shall obtain written approval by EPA for the use 
of real property in other federally-sponsored projects when the 
recipient determines that the property is no longer needed for the 
purpose of the original project. Use in other projects shall be limited 
to those under federally-sponsored projects (i.e., awards) or programs 
that have purposes consistent with those authorized for support by EPA.
    (c) When the real property is no longer needed as provided in 
paragraphs (a) and (b) of this section, the recipient shall request 
disposition instructions from EPA or its successor Federal awarding 
agency. EPA shall observe one or more of the following disposition 
instructions.
    (1) The recipient may be permitted to retain title without further 
obligation to the Federal Government after it compensates the Federal 
Government for that percentage of the current fair market value of the 
property attributable to the Federal participation in the project.
    (2) The recipient may be directed to sell the property under 
guidelines provided by EPA and pay the Federal Government for that 
percentage of the current fair market value of the property attributable 
to the Federal participation in the project (after deducting actual and 
reasonable selling and fix-up expenses, if any, from the sales 
proceeds). When the recipient is authorized or required to sell the 
property, proper sales procedures shall be established that provide for 
competition to the extent practicable and result in the highest possible 
return.
    (3) The recipient may be directed to transfer title to the property 
to the Federal Government or to an eligible third party provided that, 
in such cases, the recipient shall be entitled to compensation for its 
attributable percentage of the current fair market value of the 
property.



Sec. 30.33  Federally-owned and exempt property.

    (a) Federally-owned property. (1) Title to federally-owned property 
remains

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vested in the Federal Government. Recipients shall submit annually an 
inventory listing of federally-owned property in their custody to EPA's 
property management staff. Upon completion of the award or when the 
property is no longer needed, the recipient shall report the property to 
EPA's property management staff for further utilization.
    (2) If EPA has no further need for the property, it shall be 
declared excess and reported to the General Services Administration, 
unless EPA has statutory authority to dispose of the property by 
alternative methods (e.g., the authority provided by the Federal 
Technology Transfer Act (15 U.S.C. 3710 (I)) to donate research 
equipment to educational and non-profit organizations in accordance with 
Executive Order 12821, ``Improving Mathematics and Science Education in 
Support of the National Education Goals.'') Appropriate instructions 
shall be issued to the recipient by EPA's property management staff.
    (b) Exempt property. When statutory authority exists, EPA has the 
option to vest title to property acquired with Federal funds in the 
recipient without further obligation to the Federal Government and under 
conditions EPA considers appropriate. Such property is ``exempt 
property.'' Should EPA not establish conditions, title to exempt 
property upon acquisition shall vest in the recipient without further 
obligation to the Federal Government.



Sec. 30.34  Equipment.

    (a) Title to equipment acquired by a recipient with Federal funds 
shall vest in the recipient, subject to conditions of this section.
    (b) The recipient shall not use equipment acquired with Federal 
funds to provide services to non-Federal outside organizations for a fee 
that is less than private companies charge for equivalent services, 
unless specifically authorized by Federal statute, for as long as the 
Federal Government retains an interest in the equipment.
    (c) The recipient shall use the equipment in the project or program 
for which it was acquired as long as needed, whether or not the project 
or program continues to be supported by Federal funds and shall not 
encumber the property without approval of EPA. When no longer needed for 
the original project or program, the recipient shall use the equipment 
in connection with its other federally-sponsored activities, in the 
following order of priority: Activities sponsored by EPA, then 
activities sponsored by other Federal awarding agencies.
    (d) During the time that equipment is used on the project or program 
for which it was acquired, the recipient shall make it available for use 
on other projects or programs if such other use will not interfere with 
the work on the project or program for which the equipment was 
originally acquired. First preference for such other use shall be given 
to other projects or programs sponsored by EPA; second preference shall 
be given to projects or programs sponsored by other Federal awarding 
agencies. If the equipment is owned by the Federal Government, use on 
other activities not sponsored by the Federal Government shall be 
permissible if authorized by EPA. User charges shall be treated as 
program income.
    (e) When acquiring replacement equipment, the recipient may use the 
equipment to be replaced as trade-in or sell the equipment and use the 
proceeds to offset the costs of the replacement equipment subject to the 
approval of EPA.
    (f) The recipient's property management standards for equipment 
acquired with Federal funds and federally-owned equipment shall include 
all of the following.
    (1) Equipment records shall be maintained accurately and shall 
include the following information.
    (i) A description of the equipment.
    (ii) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or other identification number.
    (iii) Source of the equipment, including the award number.
    (iv) Whether title vests in the recipient or the Federal Government.
    (v) Acquisition date (or date received, if the equipment was 
furnished by the Federal Government) and cost.
    (vi) Information from which one can calculate the percentage of 
Federal

[[Page 334]]

participation in the cost of the equipment (not applicable to equipment 
furnished by the Federal Government).
    (vii) Location and condition of the equipment and the date the 
information was reported.
    (viii) Unit acquisition cost.
    (ix) Ultimate disposition data, including date of disposal and sales 
price or the method used to determine current fair market value where a 
recipient compensates EPA for its share.
    (2) Equipment owned by the Federal Government shall be identified to 
indicate Federal ownership.
    (3) A physical inventory of equipment shall be taken and the results 
reconciled with the equipment records at least once every two years. Any 
differences between quantities determined by the physical inspection and 
those shown in the accounting records shall be investigated to determine 
the causes of the difference. The recipient shall, in connection with 
the inventory, verify the existence, current utilization, and continued 
need for the equipment.
    (4) A control system shall be in effect to insure adequate 
safeguards to prevent loss, damage, or theft of the equipment. Any loss, 
damage, or theft of equipment shall be investigated and fully 
documented; if the equipment was owned by the Federal Government, the 
recipient shall promptly notify EPA.
    (5) Adequate maintenance procedures shall be implemented to keep the 
equipment in good condition.
    (6) Where the recipient is authorized or required to sell the 
equipment, proper sales procedures shall be established which provide 
for competition to the extent practicable and result in the highest 
possible return.
    (g) When the recipient no longer needs the equipment, the equipment 
may be used for other activities in accordance with the following 
standards. For equipment with a current per unit fair market value of 
$5000 or more, the recipient may retain the equipment for other uses 
provided that compensation is made to the original Federal awarding 
agency or its successor. The amount of compensation shall be computed by 
applying the percentage of Federal participation in the cost of the 
original project or program to the current fair market value of the 
equipment. If the recipient has no need for the equipment, the recipient 
shall request disposition instructions from EPA. EPA shall determine 
whether the equipment can be used to meet the agency's requirements. If 
no requirement exists within that agency, the availability of the 
equipment shall be reported to the General Services Administration by 
EPA to determine whether a requirement for the equipment exists in other 
Federal agencies. EPA shall issue instructions to the recipient no later 
than 120 calendar days after the recipient's request and the following 
procedures shall govern.
    (1) If so instructed or if disposition instructions are not issued 
within 120 calendar days after the recipient's request, the recipient 
shall sell the equipment and reimburse EPA an amount computed by 
applying to the sales proceeds the percentage of Federal participation 
in the cost of the original project or program. However, the recipient 
shall be permitted to deduct and retain from the Federal share $500 or 
ten percent of the proceeds, whichever is less, for the recipient's 
selling and handling expenses.
    (2) If the recipient is instructed to ship the equipment elsewhere, 
the recipient shall be reimbursed by the Federal Government by an amount 
which is computed by applying the percentage of the recipient's 
participation in the cost of the original project or program to the 
current fair market value of the equipment, plus any reasonable shipping 
or interim storage costs incurred.
    (3) If the recipient is instructed to otherwise dispose of the 
equipment, the recipient shall be reimbursed by EPA for such costs 
incurred in its disposition.
    (4) EPA may reserve the right to transfer the title to the Federal 
Government or to a third party named by the Federal Government when such 
third party is otherwise eligible under existing statutes. Such transfer 
shall be subject to the following standards.
    (i) The equipment shall be appropriately identified in the award or 
otherwise made known to the recipient in writing.

[[Page 335]]

    (ii) EPA shall issue disposition instructions within 120 calendar 
days after receipt of a final inventory. The final inventory shall list 
all equipment acquired with grant funds and federally-owned equipment. 
If EPA fails to issue disposition instructions within the 120 calendar 
day period, the recipient shall apply the standards of this section, as 
appropriate.
    (iii) When EPA exercises its right to take title, the equipment 
shall be subject to the provisions for federally-owned equipment.



Sec. 30.35  Supplies and other expendable property.

    (a) Title to supplies and other expendable property shall vest in 
the recipient upon acquisition. If there is a residual inventory of 
unused supplies exceeding $5000 in total aggregate value upon 
termination or completion of the project or program and the supplies are 
not needed for any other federally-sponsored project or program, the 
recipient shall retain the supplies for use on non-Federal sponsored 
activities or sell them, but shall, in either case, compensate the 
Federal Government for its share. The amount of compensation shall be 
computed in the same manner as for equipment.
    (b) The recipient shall not use supplies acquired with Federal funds 
to provide services to non-Federal outside organizations for a fee that 
is less than private companies charge for equivalent services, unless 
specifically authorized by Federal statute as long as the Federal 
Government retains an interest in the supplies.



Sec. 30.36  Intangible property.

    (a) The recipient may copyright any work that is subject to 
copyright and was developed, or for which ownership was purchased, under 
an award. EPA reserves a royalty-free, nonexclusive and irrevocable 
right to reproduce, publish, or otherwise use the work for Federal 
purposes, and to authorize others to do so.
    (b) Recipients are subject to applicable regulations governing 
patents and inventions, including government-wide regulations issued by 
the Department of Commerce at 37 CFR part 401, ``Rights to Inventions 
Made by Nonprofit Organizations and Small Business Firms Under 
Government Grants, Contracts and Cooperative Agreements.''
    (c) The Federal Government has the right to:
    (1) Obtain, reproduce, publish or otherwise use the data first 
produced under an award; and
    (2) Authorize others to receive, reproduce, publish, or otherwise 
use such data for Federal purposes.
    (d)(1) In addition, in response to a Freedom of Information Act 
(FOIA) request for research data relating to published research findings 
produced under an award that were used by the Federal Government in 
developing an agency action that has the force and effect of law, the 
EPA shall request, and the recipient shall provide, within a reasonable 
time, the research data so that they can be made available to the public 
through the procedures established under the FOIA. If the EPA obtains 
the research data solely in response to a FOIA request, the agency may 
charge the requester a reasonable fee equaling the full incremental cost 
of obtaining the research data. This fee should reflect costs incurred 
by the agency, the recipient, and applicable subrecipients. This fee is 
in addition to any fees the agency may assess under the FOIA (5 U.S.C. 
552(a)(4)(A)).
    (2) The following definitions apply for purposes of this paragraph 
(d):
    (i) Research data is defined as the recorded factual material 
commonly accepted in the scientific community as necessary to validate 
research findings, but not any of the following: preliminary analyses, 
drafts of scientific papers, plans for future research, peer reviews, or 
communications with colleagues. This ``recorded'' material excludes 
physical objects (e.g., laboratory samples). Research data also do not 
include:
    (A) Trade secrets, commercial information, materials necessary to be 
held confidential by a researcher until they are published, or similar 
information which is protected under law; and
    (B) Personnel and medical information and similar information the 
disclosure of which would constitute a clearly unwarranted invasion of 
personal privacy, such as information that

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could be used to identify a particular person in a research study.
    (ii) Published is defined as either when:
    (A) Research findings are published in a peer-reviewed scientific or 
technical journal; or
    (B) A Federal agency publicly and officially cites the research 
findings in support of an agency action that has the force and effect of 
law.
    (iii) Used by the Federal Government in developing an agency action 
that has the force and effect of law is defined as when an agency 
publicly and officially cites the research findings in support of an 
agency action that has the force and effect of law.
    (e) Title to intangible property and debt instruments acquired under 
an award or subaward vests upon acquisition in the recipient. The 
recipient shall use that property for the originally-authorized purpose, 
and the recipient shall not encumber the property without approval of 
EPA. When no longer needed for the originally authorized purpose, 
disposition of the intangible property shall occur in accordance with 
the provisions of Sec. 30.34(g).

[61 FR 6067, Feb. 15, 1996, as amended at 65 FR 14407, 14417, Mar. 16, 
2000]



Sec. 30.37  Property trust relationship.

    Real property, equipment, intangible property and debt instruments 
that are acquired or improved with Federal funds shall be held in trust 
by the recipient as trustee for the beneficiaries of the project or 
program under which the property was acquired or improved. Agencies may 
require recipients to record liens or other appropriate notices of 
record to indicate that personal or real property has been acquired or 
improved with Federal funds and that use and disposition conditions 
apply to the property.

                          Procurement Standards



Sec. 30.40  Purpose of procurement standards.

    Sections 30.41 through 30.48 set forth standards for use by 
recipients in establishing procedures for the procurement of supplies 
and other expendable property, equipment, real property and other 
services with Federal funds. These standards are furnished to ensure 
that such materials and services are obtained in an effective manner and 
in compliance with the provisions of applicable Federal statutes and 
Executive Orders. No additional procurement standards or requirements 
shall be imposed by EPA upon recipients, unless specifically required by 
Federal statute or Executive Order or approved by OMB.



Sec. 30.41  Recipient responsibilities.

    The standards contained in this part do not relieve the recipient of 
the contractual responsibilities arising under its contract(s). The 
recipient is the responsible authority, without recourse to EPA, 
regarding the settlement and satisfaction of all contractual and 
administrative issues arising out of procurements entered into in 
support of an award or other agreement. This includes disputes, claims, 
protests of award, source evaluation or other matters of a contractual 
nature. Matters concerning violation of statute are to be referred to 
such Federal, State or local authority as may have proper jurisdiction.



Sec. 30.42  Codes of conduct.

    The recipient shall maintain written standards of conduct governing 
the performance of its employees engaged in the award and administration 
of contracts. No employee, officer, or agent shall participate in the 
selection, award, or administration of a contract supported by Federal 
funds if a real or apparent conflict of interest would be involved. Such 
a conflict would arise when the employee, officer, or agent, any member 
of his or her immediate family, his or her partner, or an organization 
which employs or is about to employ any of the parties indicated herein, 
has a financial or other interest in the firm selected for an award. The 
officers, employees, and agents of the recipient shall neither solicit 
nor accept gratuities, favors, or anything of monetary value from 
contractors, or parties to subagreements. However, recipients may set 
standards for situations in which the financial interest is not 
substantial or the gift is an unsolicited item of nominal value. The 
standards of conduct shall provide for

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disciplinary actions to be applied for violations of such standards by 
officers, employees, or agents of the recipient.



Sec. 30.43  Competition.

    All procurement transactions shall be conducted in a manner to 
provide, to the maximum extent practical, open and free competition. The 
recipient shall be alert to organizational conflicts of interest as well 
as noncompetitive practices among contractors that may restrict or 
eliminate competition or otherwise restrain trade. In order to ensure 
objective contractor performance and eliminate unfair competitive 
advantage, contractors that develop or draft specifications, 
requirements, statements of work, invitations for bids and/or requests 
for proposals shall be excluded from competing for such procurements. 
Awards shall be made to the bidder or offeror whose bid or offer is 
responsive to the solicitation and is most advantageous to the 
recipient, price, quality and other factors considered. Solicitations 
shall clearly set forth all requirements that the bidder or offeror 
shall fulfill in order for the bid or offer to be evaluated by the 
recipient. Any and all bids or offers may be rejected when it is in the 
recipient's interest to do so.



Sec. 30.44  Procurement procedures.

    (a) All recipients shall establish written procurement procedures. 
These procedures shall provide for, at a minimum, that paragraphs (a) 
(1), (2) and (3) of this section apply.
    (1) Recipients avoid purchasing unnecessary items.
    (2) Where appropriate, an analysis is made of lease and purchase 
alternatives to determine which would be the most economical and 
practical procurement for the Federal Government.
    (3) Solicitations for goods and services provide for all of the 
following.
    (i) A clear and accurate description of the technical requirements 
for the material, product or service to be procured. In competitive 
procurements, such a description shall not contain features which unduly 
restrict competition.
    (ii) Requirements which the bidder/offeror must fulfill and all 
other factors to be used in evaluating bids or proposals.
    (iii) A description, whenever practicable, of technical requirements 
in terms of functions to be performed or performance required, including 
the range of acceptable characteristics or minimum acceptable standards.
    (iv) The specific features of ``brand name or equal'' descriptions 
that bidders are required to meet when such items are included in the 
solicitation.
    (v) The acceptance, to the extent practicable and economically 
feasible, of products and services dimensioned in the metric system of 
measurement.
    (vi) Preference, to the extent practicable and economically 
feasible, for products and services that conserve natural resources and 
protect the environment and are energy efficient.
    (b) Positive efforts shall be made by recipients to utilize small 
businesses, minority-owned firms, and women's business enterprises, 
whenever possible. Recipients of Federal awards shall take all of the 
following steps to further this goal.
    (1) Ensure that small businesses, minority-owned firms, and women's 
business enterprises are used to the fullest extent practicable.
    (2) Make information on forthcoming opportunities available and 
arrange time frames for purchases and contracts to encourage and 
facilitate participation by small businesses, minority-owned firms, and 
women's business enterprises.
    (3) Consider in the contract process whether firms competing for 
larger contracts intend to subcontract with small businesses, minority-
owned firms, and women's business enterprises.
    (4) Encourage contracting with consortiums of small businesses, 
minority-owned firms and women's business enterprises when a contract is 
too large for one of these firms to handle individually.
    (5) Use the services and assistance, as appropriate, of such 
organizations as the Small Business Administration and the Department of 
Commerce's Minority Business Development Agency in the solicitation and 
utilization of small businesses, minority-owned firms and women's 
business enterprises.

[[Page 338]]

    (6) If the prime contractor awards subcontracts, requiring the 
contractor to take steps in paragraphs (b)(1) through (5) of this 
section.
    (c) The type of procuring instruments used (e.g., fixed price 
contracts, cost reimbursable contracts, purchase orders, and incentive 
contracts) shall be determined by the recipient but shall be appropriate 
for the particular procurement and for promoting the best interest of 
the program or project involved. The ``cost-plus-a-percentage-of-cost'' 
or ``percentage of construction cost'' methods of contracting shall not 
be used.
    (d) Contracts shall be made only with responsible contractors who 
possess the potential ability to perform successfully under the terms 
and conditions of the proposed procurement. Consideration shall be given 
to such matters as contractor integrity, record of past performance, 
financial and technical resources or accessibility to other necessary 
resources. In certain circumstances, contracts with certain parties are 
restricted by agencies' implementation of Executive Orders 12549 and 
12689, ``Debarment and Suspension.''
    (e) Recipients shall, on request, make available for EPA, pre-award 
review and procurement documents, such as request for proposals or 
invitations for bids, independent cost estimates, etc., when any of the 
following conditions apply.
    (1) A recipient's procurement procedures or operation fails to 
comply with the procurement standards in EPA's implementation of 
Circular A-110.
    (2) The procurement is expected to exceed the small purchase 
threshold fixed at 41 U.S.C. 403 (11) (currently $100,000) and is to be 
awarded without competition or only one bid or offer is received in 
response to a solicitation.
    (3) The procurement, which is expected to exceed the small purchase 
threshold, specifies a ``brand name'' product.
    (4) The proposed award over the small purchase threshold is to be 
awarded to other than the apparent low bidder under a sealed bid 
procurement.
    (5) A proposed contract modification changes the scope of a contract 
or increases the contract amount by more than the amount of the small 
purchase threshold.



Sec. 30.45  Cost and price analysis.

    Some form of cost or price analysis shall be made and documented in 
the procurement files in connection with every procurement action. Price 
analysis may be accomplished in various ways, including the comparison 
of price quotations submitted, market prices and similar indicia, 
together with discounts. Cost analysis is the review and evaluation of 
each element of cost to determine reasonableness, allocability and 
allowability.



Sec. 30.46  Procurement records.

    Procurement records and files for purchases in excess of the small 
purchase threshold shall include the following at a minimum: Basis for 
contractor selection; justification for lack of competition when 
competitive bids or offers are not obtained; and basis for award cost or 
price.



Sec. 30.47  Contract administration.

    A system for contract administration shall be maintained to ensure 
contractor conformance with the terms, conditions and specifications of 
the contract and to ensure adequate and timely follow up of all 
purchases. Recipients shall evaluate contractor performance and 
document, as appropriate, whether contractors have met the terms, 
conditions and specifications of the contract.



Sec. 30.48  Contract provisions.

    The recipient shall include, in addition to provisions to define a 
sound and complete agreement, the following provisions in all contracts. 
The following provisions shall also be applied to subcontracts.
    (a) Contracts in excess of the small purchase threshold shall 
contain contractual provisions or conditions that allow for 
administrative, contractual, or legal remedies in instances in which a 
contractor violates or breaches the contract terms, and provide for such 
remedial actions as may be appropriate.
    (b) All contracts in excess of the small purchase threshold shall 
contain

[[Page 339]]

suitable provisions for termination by the recipient, including the 
manner by which termination shall be effected and the basis for 
settlement. In addition, such contracts shall describe conditions under 
which the contract may be terminated for default as well as conditions 
where the contract may be terminated because of circumstances beyond the 
control of the contractor.
    (c) Except as otherwise required by statute, an award that requires 
the contracting (or subcontracting) for construction or facility 
improvements shall provide for the recipient to follow its own 
requirements relating to bid guarantees, performance bonds, and payment 
bonds unless the construction contract or subcontract exceeds $100,000. 
For those contracts or subcontracts exceeding $100,000, EPA may accept 
the bonding policy and requirements of the recipient, provided EPA has 
made a determination that the Federal Government's interest is 
adequately protected. If such a determination has not been made, the 
minimum requirements shall be as follows.
    (1) A bid guarantee from each bidder equivalent to five percent of 
the bid price. The ``bid guarantee'' shall consist of a firm commitment 
such as a bid bond, certified check, or other negotiable instrument 
accompanying a bid as assurance that the bidder shall, upon acceptance 
of his bid, execute such contractual documents as may be required within 
the time specified.
    (2) A performance bond on the part of the contractor for 100 percent 
of the contract price. A ``performance bond'' is one executed in 
connection with a contract to secure fulfillment of all the contractor's 
obligations under such contract.
    (3) A payment bond on the part of the contractor for 100 percent of 
the contract price. A ``payment bond'' is one executed in connection 
with a contract to assure payment as required by statute of all persons 
supplying labor and material in the execution of the work provided for 
in the contract.
    (4) Where bonds are required in the situations described herein, the 
bonds shall be obtained from companies holding certificates of authority 
as acceptable sureties pursuant to 31 CFR part 223, ``Surety Companies 
Doing Business with the United States.''
    (d) All negotiated contracts (except those for less than the small 
purchase threshold) awarded by recipients shall include a provision to 
the effect that the recipient, EPA, the Comptroller General of the 
United States, or any of their duly authorized representatives, shall 
have access to any books, documents, papers and records of the 
contractor which are directly pertinent to a specific program for the 
purpose of making audits, examinations, excerpts and transcriptions.
    (e) All contracts, including small purchases, awarded by recipients 
and their contractors shall contain the procurement provisions of the 
appendix to Circular A-110, as applicable.

                           Reports and Records



Sec. 30.50  Purpose of reports and records.

    Sections 30.51 through 30.53 set forth the procedures for monitoring 
and reporting on the recipient's financial and program performance and 
the necessary standard reporting forms. They also set forth record 
retention requirements.



Sec. 30.51  Monitoring and reporting program performance.

    (a) Recipients are responsible for managing and monitoring each 
project, program, subaward, function or activity supported by the award. 
Recipients shall monitor subawards to ensure subrecipients have met the 
audit requirements as delineated in Sec. 30.26.
    (b) EPA shall prescribe the frequency with which the performance 
reports shall be submitted. Except as provided in paragraph (f) of this 
section, performance reports shall not be required more frequently than 
quarterly or, less frequently than annually. Annual reports shall be due 
90 calendar days after the grant year; quarterly or semi-annual reports 
shall be due 30 days after the reporting period. EPA may require annual 
reports before the anniversary dates of multiple year awards in lieu of 
these requirements. The final performance reports are due 90 calendar 
days after the expiration or termination of the award.

[[Page 340]]

    (c) If inappropriate, a final technical or performance report shall 
not be required after completion of the project.
    (d) When required, performance reports shall generally contain, for 
each award, brief information on each of the following.
    (1) A comparison of actual accomplishments with the goals and 
objectives established for the period, the findings of the investigator, 
or both. Whenever appropriate and the output of programs or projects can 
be readily quantified, such quantitative data should be related to cost 
data for computation of unit costs.
    (2) Reasons why established goals were not met, if appropriate.
    (3) Other pertinent information including, when appropriate, 
analysis and explanation of cost overruns or high unit costs.
    (e) Recipients shall not be required to submit more than the 
original and two copies of performance reports.
    (f) Recipients shall immediately notify EPA of developments that 
have a significant impact on the award-supported activities. Also, 
notification shall be given in the case of problems, delays, or adverse 
conditions which materially impair the ability to meet the objectives of 
the award. This notification shall include a statement of the action 
taken or contemplated, and any assistance needed to resolve the 
situation.
    (g) EPA may make site visits, as needed.
    (h) EPA shall comply with clearance requirements of 5 CFR part 1320 
when requesting performance data from recipients.



Sec. 30.52  Financial reporting.

    (a) The following forms or such other forms as may be approved by 
OMB are authorized for obtaining financial information from recipients.
    (1) SF-269 or SF-269A, Financial Status Report. (i) EPA shall 
require recipients to use the SF-269 or SF-269A to report the status of 
funds for all nonconstruction projects or programs. However, EPA has the 
option of not requiring the SF-269 or SF-269A when the SF-270, Request 
for Advance or Reimbursement, or SF-272, Report of Federal Cash 
Transactions, is determined to provide adequate information to meet its 
needs, except that a final SF-269 or SF-269A shall be required at the 
completion of the project when the SF-270 is used only for advances.
    (ii) EPA shall prescribe whether the report shall be on a cash or 
accrual basis. If EPA requires accrual information and the recipient's 
accounting records are not normally kept on the accrual basis, the 
recipient shall not be required to convert its accounting system, but 
shall develop such accrual information through best estimates based on 
an analysis of the documentation on hand.
    (iii) EPA shall determine the frequency of the Financial Status 
Report for each project or program, considering the size and complexity 
of the particular project or program. However, the report shall not be 
required more frequently than quarterly or less frequently than 
annually. A final report shall be required at the completion of the 
agreement.
    (iv) EPA shall require recipients to submit the SF-269 or SF-269A 
(an original and no more than two copies) no later than 30 days after 
the end of each specified reporting period for quarterly and semi-annual 
reports, and 90 calendar days for annual and final reports. Extensions 
of reporting due dates may be approved by EPA upon request of the 
recipient.
    (2) SF-272, Report of Federal Cash Transactions. (i) When funds are 
advanced to recipients EPA shall require each recipient to submit the 
SF-272 and, when necessary, its continuation sheet, SF-272A. EPA shall 
use this report to monitor cash advanced to recipients and to obtain 
disbursement information for each agreement with the recipients.
    (ii) EPA may require forecasts of Federal cash requirements in the 
``Remarks'' section of the report.
    (iii) When practical and deemed necessary, EPA may require 
recipients to report in the ``Remarks'' section the amount of cash 
advances received in excess of three days. Recipients shall provide 
short narrative explanations of actions taken to reduce the excess 
balances.
    (iv) Recipients shall be required to submit not more than the 
original and

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two copies of the SF-272 15 calendar days following the end of each 
quarter. EPA may require a monthly report from those recipients 
receiving advances totaling $1 million or more per year.
    (v) EPA may waive the requirement for submission of the SF-272 for 
any one of the following reasons:
    (A) When monthly advances do not exceed $25,000 per recipient, 
provided that such advances are monitored through other forms contained 
in this section;
    (B) If, in EPA's opinion, the recipient's accounting controls are 
adequate to minimize excessive Federal advances; or
    (C) When the electronic payment mechanisms provide adequate data.
    (b) When EPA needs additional information or more frequent reports, 
the following shall be observed.
    (1) When additional information is needed to comply with legislative 
requirements, EPA shall issue instructions to require recipients to 
submit such information under the ``Remarks'' section of the reports.
    (2) When EPA determines that a recipient's accounting system does 
not meet the standards in Sec. 30.21, additional pertinent information 
to further monitor awards may be obtained upon written notice to the 
recipient until such time as the system is brought up to standard. EPA, 
in obtaining this information, shall comply with report clearance 
requirements of 5 CFR part 1320.
    (3) EPA may shade out any line item on any report if not necessary.
    (4) EPA may accept the identical information from the recipients in 
machine readable format or computer printouts or electronic outputs in 
lieu of prescribed formats.
    (5) EPA may provide computer or electronic outputs to recipients 
when such expedites or contributes to the accuracy of reporting.



Sec. 30.53  Retention and access requirements for records.

    (a) This section sets forth requirements for record retention and 
access to records for awards to recipients. EPA shall not impose any 
other record retention or access requirements upon recipients.
    (b) Financial records, supporting documents, statistical records, 
and all other records pertinent to an award shall be retained for a 
period of three years from the date of submission of the final 
expenditure report or, for awards that are renewed quarterly or 
annually, from the date of the submission of the quarterly or annual 
financial report, as authorized by EPA. The only exceptions are the 
following.
    (1) If any litigation, claim, or audit is started before the 
expiration of the 3-year period, the records shall be retained until all 
litigation, claims or audit findings involving the records have been 
resolved and final action taken.
    (2) Records for real property and equipment acquired with Federal 
funds shall be retained for 3 years after final disposition.
    (3) When records are transferred to or maintained by EPA, the 3-year 
retention requirement is not applicable to the recipient.
    (4) Indirect cost rate proposals, cost allocations plans, etc. as 
specified in paragraph (g) of this section.
    (c) Copies of original records may be substituted for the original 
records if authorized by EPA.
    (d) EPA shall request transfer of certain records to its custody 
from recipients when it determines that the records possess long term 
retention value. However, in order to avoid duplicate recordkeeping, EPA 
may make arrangements for recipients to retain any records that are 
continuously needed for joint use.
    (e) EPA, the Inspector General, Comptroller General of the United 
States, or any of their duly authorized representatives, have the right 
of timely and unrestricted access to any books, documents, papers, or 
other records of recipients that are pertinent to the awards, in order 
to make audits, examinations, excerpts, transcripts and copies of such 
documents. This right also includes timely and reasonable access to a 
recipient's personnel for the purpose of interview and discussion 
related to such documents. The rights of access in this paragraph are 
not limited to the required retention period, but shall last as long as 
records are retained.

[[Page 342]]

    (f) Unless required by statute, EPA shall not place restrictions on 
recipients that limit public access to the records of recipients that 
are pertinent to an award, except when it can be demonstrated that such 
records shall be kept confidential and would have been exempted from 
disclosure pursuant to the Freedom of Information Act (5 U.S.C. 552) if 
the records had belonged to EPA.
    (g) Indirect cost rate proposals, cost allocations plans, etc. 
Paragraphs (g)(1) and (g)(2) of this section apply to the following 
types of documents, and their supporting records: indirect cost rate 
computations or proposals, cost allocation plans, and any similar 
accounting computations of the rate at which a particular group of costs 
is chargeable (such as computer usage chargeback rates or composite 
fringe benefit rates).
    (1) If submitted for negotiation. If the recipient submits to EPA or 
the subrecipient submits to the recipient the proposal, plan, or other 
computation to form the basis for negotiation of the rate, then the 3-
year retention period for its supporting records starts on the date of 
such submission.
    (2) If not submitted for negotiation. If the recipient is not 
required to submit to EPA or the subrecipient is not required to submit 
to the recipient the proposal, plan, or other computation for 
negotiation purposes, then the 3-year retention period for the proposal, 
plan, or other computation and its supporting records starts at the end 
of the fiscal year (or other accounting period) covered by the proposal, 
plan, or other computation.



Sec. 30.54  Quality assurance.

    If the project officer determines that the grantee's project 
involves environmentally related measurements or data generation, the 
grantee shall develop and implement quality assurance practices 
consisting of policies, procedures, specifications, standards, and 
documentation sufficient to produce data of quality adequate to meet 
project objectives and to minimize loss of data due to out-of-control 
conditions or malfunctions. The quality system must comply with the 
requirements of ANSI/ASQC E4, ``Specifications and Guidelines for 
Quality Systems for Environmental Data Collection and Environmental 
Technology Programs'', which may be obtained from the National Technical 
Information Service (NTIS), 5885 Port Royal Road, Springfield, VA 22161.

                       Termination and Enforcement



Sec. 30.60  Purpose of termination and enforcement.

    Sections 30.61 and 30.62 set forth uniform suspension, termination 
and enforcement procedures.



Sec. 30.61  Termination.

    (a) Awards may be terminated in whole or in part only if paragraph 
(a) (1), (2) or (3) of this section applies.
    (1) By EPA, if a recipient materially fails to comply with the terms 
and conditions of an award.
    (2) By EPA with the consent of the recipient, in which case the two 
parties shall agree upon the termination conditions, including the 
effective date and, in the case of partial termination, the portion to 
be terminated.
    (3) By the recipient upon sending to EPA written notification 
setting forth the reasons for such termination, the effective date, and, 
in the case of partial termination, the portion to be terminated. 
However, if EPA determines in the case of partial termination that the 
reduced or modified portion of the grant will not accomplish the 
purposes for which the grant was made, it may terminate the grant in its 
entirety under either paragraph (a) (1) or (2) of this section.
    (b) If costs are allowed under an award, the responsibilities of the 
recipient referred to in Sec. 30.71(a), including those for property 
management as applicable, shall be considered in the termination of the 
award, and provision shall be made for continuing responsibilities of 
the recipient after termination, as appropriate.



Sec. 30.62  Enforcement.

    (a) Remedies for noncompliance. If a recipient materially fails to 
comply with the terms and conditions of an award, whether stated in a 
Federal statute, regulation, assurance, application, or notice of award, 
EPA may, in addition

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to imposing any of the special conditions outlined in Sec. 30.14, take 
one or more of the following actions, as appropriate in the 
circumstances.
    (1) Temporarily withhold cash payments pending correction of the 
deficiency by the recipient or more severe enforcement action by EPA.
    (2) Disallow (that is, deny both use of funds and any applicable 
matching credit for) all or part of the cost of the activity or action 
not in compliance.
    (3) Wholly or partly suspend or terminate the current award.
    (4) Withhold further awards for the project or program.
    (5) Take other remedies that may be legally available.
    (b) Hearings and appeals. In taking an enforcement action, EPA shall 
provide the recipient an opportunity for hearing, appeal, or other 
administrative proceeding to which the recipient is entitled under any 
statute or regulation applicable to the action involved. EPA's Dispute 
Provisions found at 40 CFR part 31, subpart F, Disputes, are applicable 
to assistance awarded under the provisions of this part.
    (c) Effects of suspension and termination. Costs of a recipient 
resulting from obligations incurred by the recipient during a suspension 
or after termination of an award are not allowable unless EPA expressly 
authorizes them in the notice of suspension or termination or 
subsequently. Other recipient costs during suspension or after 
termination which are necessary and not reasonably avoidable are 
allowable if paragraphs (c)(1) and (2) of this section apply.
    (1) The costs result from obligations which were properly incurred 
by the recipient before the effective date of suspension or termination, 
are not in anticipation of it, and in the case of a termination, are 
noncancellable.
    (2) The costs would be allowable if the award were not suspended or 
expired normally at the end of the funding period in which the 
termination takes effect.
    (d) Relationship to debarment and suspension. The enforcement 
remedies identified in this section, including suspension and 
termination, do not preclude a recipient from being subject to debarment 
and suspension under Executive Orders 12549 and 12689 and EPA's 
implementing regulations (see Sec. 30.13).



Sec. 30.63  Disputes.

    (a) Disagreements should be resolved at the lowest possible level.
    (b) If an agreement cannot be reached, the EPA disputes decision 
official will provide a written final decision. The EPA disputes 
decision official is the individual designated by the award official to 
resolve disputes concerning assistance agreements. If the dispute cannot 
be resolved the procedures outlined at 40 CFR part 31, subpart F, should 
be followed.



                 Subpart D--After-the-Award Requirements



Sec. 30.70  Purpose.

    Sections 30.71 through 30.73 contain closeout procedures and other 
procedures for subsequent disallowances and adjustments.



Sec. 30.71  Closeout procedures.

    (a) Recipients shall submit, within 90 calendar days after the date 
of completion of the award, all financial, performance, and other 
reports as required by the terms and conditions of the award. EPA may 
approve extensions when requested by the recipient.
    (b) Unless EPA authorizes an extension, a recipient shall liquidate 
all obligations incurred under the award not later than 90 calendar days 
after the funding period or the date of completion as specified in the 
terms and conditions of the award or in agency implementing 
instructions.
    (c) EPA shall make prompt payments to a recipient for allowable 
reimbursable costs under the award being closed out.
    (d) The recipient shall promptly refund any balances of unobligated 
cash that EPA has advanced or paid and that is not authorized to be 
retained by the recipient for use in other projects. OMB Circular A-129 
governs unreturned amounts that become delinquent debts.
    (e) When authorized by the terms and conditions of the award, EPA 
shall make a settlement for any upward or downward adjustments to the 
Federal

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share of costs after closeout reports are received.
    (f) The recipient shall account for any real and personal property 
acquired with Federal funds or received from the Federal Government in 
accordance with Secs. 30.31 through 30.37.
    (g) In the event a final audit has not been performed prior to the 
closeout of an award, EPA shall retain the right to recover an 
appropriate amount after fully considering the recommendations on 
disallowed costs resulting from the final audit.



Sec. 30.72  Subsequent adjustments and continuing responsibilities.

    (a) The closeout of an award does not affect any of the following.
    (1) The right of EPA to disallow costs and recover funds on the 
basis of a later audit or other review.
    (2) The obligation of the recipient to return any funds due as a 
result of later refunds, corrections, or other transactions.
    (3) Audit requirements in Sec. 30.26.
    (4) Property management requirements in Secs. 30.31 through 30.37.
    (5) Records retention as required in Sec. 30.53.
    (b) After closeout of an award, a relationship created under an 
award may be modified or ended in whole or in part with the consent of 
EPA and the recipient, provided the responsibilities of the recipient 
referred to in Sec. 30.73(a), including those for property management as 
applicable, are considered and provisions made for continuing 
responsibilities of the recipient, as appropriate.



Sec. 30.73  Collection of amounts due.

    (a) Any funds paid to a recipient in excess of the amount to which 
the recipient is finally determined to be entitled under the terms and 
conditions of the award constitute a debt to the Federal Government. If 
not paid within a reasonable period after the demand for payment, EPA 
may reduce the debt by paragraph (a) (1), (2) or (3) of this section.
    (1) Making an administrative offset against other requests for 
reimbursements.
    (2) Withholding advance payments otherwise due to the recipient.
    (3) Taking other action permitted by statute.
    (b) Except as otherwise provided by law, EPA shall charge interest 
on an overdue debt in accordance with 4 CFR chapter II, ``Federal Claims 
Collection Standards.''

                Appendix to Part 30--Contract Provisions

    All contracts awarded by a recipient, including small purchases, 
shall contain the following provisions as applicable:
    1. Equal Employment Opportunity--All contracts shall contain a 
provision requiring compliance with Executive Order 11246, ``Equal 
Employment Opportunity,'' as amended by Executive Order 11375, 
``Amending Executive Order 11246 Relating to Equal Employment 
Opportunity,'' and as supplemented by regulations at 41 CFR part 60, 
``Office of Federal Contract Compliance Programs, Equal Employment 
Opportunity, Department of Labor.''
    2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C. 
276c)--All contracts and subgrants in excess of $100,000 for 
construction or repair awarded by recipients and subrecipients shall 
include a provision for compliance with the Copeland ``Anti-Kickback'' 
Act (18 U.S.C. 874), as supplemented by Department of Labor regulations 
(29 CFR part 3, ``Contractors and Subcontractors on Public Building or 
Public Work Financed in Whole or in Part by Loans or Grants from the 
United States''). The Act provides that each contractor or subrecipient 
shall be prohibited from inducing, by any means, any person employed in 
the construction, completion, or repair of public work, to give up any 
part of the compensation to which he is otherwise entitled. The 
recipient shall report all suspected or reported violations to EPA.
    3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--When 
required by Federal program legislation, all construction contracts 
awarded by the recipients and subrecipients of more than $2000 shall 
include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 
276a to a-7) and as supplemented by Department of Labor regulations (29 
CFR part 5, ``Labor Standards Provisions Applicable to Contracts 
Governing Federally Financed and Assisted Construction''). Under this 
Act, contractors shall be required to pay wages to laborers and 
mechanics at a rate not less than the minimum wages specified in a wage 
determination made by the Secretary of Labor. In addition, contractors 
shall be required to pay wages not less than once a week. The recipient 
shall place a copy of the current prevailing wage determination issued 
by the Department of Labor in each solicitation and the award of a 
contract shall be conditioned upon the acceptance of the

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wage determination. The recipient shall report all suspected or reported 
violations to EPA.
    4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333)-
-Where applicable, all contracts awarded by recipients in excess of 
$100,000 for construction contracts and in excess of $2500 for other 
contracts that involve the employment of mechanics or laborers shall 
include a provision for compliance with sections 102 and 107 of the 
Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333), as 
supplemented by Department of Labor regulations (29 CFR part 5). Under 
section 102 of the Act, each contractor shall be required to compute the 
wages of every mechanic and laborer on the basis of a standard work week 
of 40 hours. Work in excess of the standard work week is permissible 
provided that the worker is compensated at a rate of not less than 1/2 
times the basic rate of pay for all hours worked in excess of 40 hours 
in the work week. Section 107 of the Act is applicable to construction 
work and provides that no laborer or mechanic shall be required to work 
in surroundings or under working conditions which are unsanitary, 
hazardous or dangerous. These requirements do not apply to the purchases 
of supplies or materials or articles ordinarily available on the open 
market, or contracts for transportation or transmission of intelligence.
    5. Rights to Inventions Made Under a Contract or Agreement--
Contracts or agreements for the performance of experimental, 
developmental, or research work shall provide for the rights of the 
Federal Government and the recipient in any resulting invention in 
accordance with 37 CFR part 401, ``Rights to Inventions Made by 
Nonprofit Organizations and Small Business Firms Under Government 
Grants, Contracts and Cooperative Agreements,'' and any implementing 
regulations issued by EPA.
    6. Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
Pollution Control Act (33 U.S.C. 1251 et seq.), as amended--Contracts 
and subgrants of amounts in excess of $100,000 shall contain a provision 
that requires the recipient to agree to comply with all applicable 
standards, orders or regulations issued pursuant to the Clean Air Act 
(42 U.S.C. 7401 et seq.) and the Federal Water Pollution Control Act as 
amended (33 U.S.C. 1251 et seq.). Violations shall be reported to the 
Regional Office of the Environmental Protection Agency (EPA).
    7. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors who 
apply or bid for an award of more than $100,000 shall file the required 
certification. Each tier certifies to the tier above that it will not 
and has not used Federal appropriated funds to pay any person or 
organization for influencing or attempting to influence an officer or 
employee of any agency, a member of Congress, officer or employee of 
Congress, or an employee of a member of Congress in connection with 
obtaining any Federal contract, grant or any other award covered by 31 
U.S.C. 1352. Each tier shall also disclose any lobbying with non-Federal 
funds that takes place in connection with obtaining any Federal award. 
Such disclosures are forwarded from tier to tier up to the recipient.
    8. Debarment and Suspension (Executive Orders 12549 and 12689)--No 
contract shall be made to parties listed on the General Services 
Administration's List of Parties Excluded from Federal Procurement or 
Nonprocurement Programs in accordance with Executive Orders 12549 and 
12689, ``Debarment and Suspension.'' This list contains the names of 
parties debarred, suspended, or otherwise excluded by agencies, and 
contractors declared ineligible under statutory or regulatory authority 
other than Executive Order 12549. Contractors with awards that exceed 
the small purchase threshold shall provide the required certification 
regarding its exclusion status and that of its principal employees.



PART 31--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS--Table of Contents




                           Subpart A--General

Sec.
31.1  Purpose and scope of this part.
31.2  Scope of subpart.
31.3  Definitions.
31.4  Applicability.
31.5  Effect on other issuances.
31.6  Additions and exceptions.

                    Subpart B--Pre-Award Requirements

31.10  Forms for applying for grants.
31.11  State plans.
31.12  Special grant or subgrant conditions for ``high-risk'' grantees.
31.13  Principal environmental statutory provisions applicable to EPA 
          assistance awards.

                   Subpart C--Post-Award Requirements

                        Financial Administration

31.20  Standards for financial management systems.
31.21  Payment.
31.22  Allowable costs.
31.23  Period of availability of funds.
31.24  Matching or cost sharing.
31.25  Program income.
31.26  Non-Federal audit.

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                    Changes, Property, and Subawards

31.30  Changes.
31.31  Real property.
31.32  Equipment.
31.33  Supplies.
31.34  Copyrights.
31.35  Subawards to debarred and suspended parties.
31.36  Procurement.
31.37  Subgrants.
31.38  Indian Self Determination Act.

              Reports, Records, Retention, and Enforcement

31.40  Monitoring and reporting program performance.
31.41  Financial reporting.
31.42  Retention and access requirements for records.
31.43  Enforcement.
31.44  Termination for convenience.
31.45  Quality assurance.

                 Subpart D--After-the-Grant Requirements

31.50  Closeout.
31.51  Later disallowances and adjustments.
31.52  Collection of amounts due.

Subpart E--Entitlement [Reserved]

                           Subpart F--Disputes

31.70  Disputes.

Appendix A to Part 31--Audit Requirements for State and Local Government 
          Recipients

    Authority: 33 U.S.C. 1251 et seq.; 42 U.S.C. 7401 et seq.; 42 U.S.C. 
6901 et seq.; 42 U.S.C. 300f et seq.; 7 U.S.C. 136 et seq.; 15 U.S.C. 
2601 et seq.; 42 U.S.C. 9601 et seq.; 20 U.S.C. 4011 et seq.; 33 U.S.C. 
1401 et seq.

    Source: 53 FR 8075 and 8087, Mar. 11, 1988, unless otherwise noted.



                           Subpart A--General



Sec. 31.1  Purpose and scope of this part.

    This part establishes uniform administrative rules for Federal 
grants and cooperative agreements and subawards to State, local and 
Indian tribal governments.



Sec. 31.2  Scope of subpart.

    This subpart contains general rules pertaining to this part and 
procedures for control of exceptions from this part.



Sec. 31.3  Definitions.

    As used in this part:
    Accrued expenditures mean the charges incurred by the grantee during 
a given period requiring the provision of funds for:
    (1) Goods and other tangible property received;
    (2) Services performed by employees, contractors, subgrantees, 
subcontractors, and other payees; and
    (3) Other amounts becoming owed under programs for which no current 
services or performance is required, such as annuities, insurance 
claims, and other benefit payments.
    Accrued income means the sum of:
    (1) Earnings during a given period from services performed by the 
grantee and goods and other tangible property delivered to purchasers, 
and
    (2) Amounts becoming owed to the grantee for which no current 
services or performance is required by the grantee.
    Acquisition cost of an item of purchased equipment means the net 
invoice unit price of the property including the cost of modifications, 
attachments, accessories, or auxiliary apparatus necessary to make the 
property usable for the purpose for which it was acquired. Other charges 
such as the cost of installation, transportation, taxes, duty or 
protective in-transit insurance, shall be included or excluded from the 
unit acquisition cost in accordance with the grantee's regular 
accounting practices.
    Administrative requirements mean those matters common to grants in 
general, such as financial management, kinds and frequency of reports, 
and retention of records. These are distinguished from programmatic 
requirements, which concern matters that can be treated only on a 
program-by-program or grant-by-grant basis, such as kinds of activities 
that can be supported by grants under a particular program.
    Awarding agency means (1) with respect to a grant, the Federal 
agency, and (2) with respect to a subgrant, the party that awarded the 
subgrant.
    Cash contributions means the grantee's cash outlay, including the 
outlay of money contributed to the grantee or subgrantee by other public 
agencies and institutions, and private organizations and individuals. 
When authorized

[[Page 347]]

by Federal legislation, Federal funds received from other assistance 
agreements may be considered as grantee or subgrantee cash 
contributions.
    Contract means (except as used in the definitions for grant and 
subgrant in this section and except where qualified by Federal) a 
procurement contract under a grant or subgrant, and means a procurement 
subcontract under a contract.
    Cost sharing or matching means the value of the third party in-kind 
contributions and the portion of the costs of a federally assisted 
project or program not borne by the Federal Government.
    Cost-type contract means a contract or subcontract under a grant in 
which the contractor or subcontractor is paid on the basis of the costs 
it incurs, with or without a fee.
    Equipment means tangible, nonexpendable, personal property having a 
useful life of more than one year and an acquisition cost of $5,000 or 
more per unit. A grantee may use its own definition of equipment 
provided that such definition would at least include all equipment 
defined above.
    Expenditure report means: (1) For nonconstruction grants, the SF-269 
``Financial Status Report'' (or other equivalent report); (2) for 
construction grants, the SF-271 ``Outlay Report and Request for 
Reimbursement'' (or other equivalent report).
    Federally recognized Indian tribal government means the governing 
body or a governmental agency of any Indian tribe, band, nation, or 
other organized group or community (including any Native village as 
defined in section 3 of the Alaska Native Claims Settlement Act, 85 Stat 
688) certified by the Secretary of the Interior as eligible for the 
special programs and services provided by him through the Bureau of 
Indian Affairs.
    Government means a State or local government or a federally 
recognized Indian tribal government.
    Grant means an award of financial assistance, including cooperative 
agreements, in the form of money, or property in lieu of money, by the 
Federal Government to an eligible grantee. The term does not include 
technical assistance which provides services instead of money, or other 
assistance in the form of revenue sharing, loans, loan guarantees, 
interest subsidies, insurance, or direct appropriations. Also, the term 
does not include assistance, such as a fellowship or other lump sum 
award, which the grantee is not required to account for.
    Grantee means the government to which a grant is awarded and which 
is accountable for the use of the funds provided. The grantee is the 
entire legal entity even if only a particular component of the entity is 
designated in the grant award document.
    Local government means a county, municipality, city, town, township, 
local public authority (including any public and Indian housing agency 
under the United States Housing Act of 1937) school district, special 
district, intrastate district, council of governments (whether or not 
incorporated as a nonprofit corporation under State law), any other 
regional or interstate government entity, or any agency or 
instrumentality of a local government.
    Obligations means the amounts of orders placed, contracts and 
subgrants awarded, goods and services received, and similar transactions 
during a given period that will require payment by the grantee during 
the same or a future period.
    OMB means the U.S. Office of Management and Budget.
    Outlays (expenditures) mean charges made to the project or program. 
They may be reported on a cash or accrual basis. For reports prepared on 
a cash basis, outlays are the sum of actual cash disbursement for direct 
charges for goods and services, the amount of indirect expense incurred, 
the value of in-kind contributions applied, and the amount of cash 
advances and payments made to contractors and subgrantees. For reports 
prepared on an accrued expenditure basis, outlays are the sum of actual 
cash disbursements, the amount of indirect expense incurred, the value 
of inkind contributions applied, and the new increase (or decrease) in 
the amounts owed by the grantee for goods and other property received, 
for services performed by employees, contractors, subgrantees, 
subcontractors, and other payees, and other amounts becoming owed under 
programs for which

[[Page 348]]

no current services or performance are required, such as annuities, 
insurance claims, and other benefit payments.
    Percentage of completion method refers to a system under which 
payments are made for construction work according to the percentage of 
completion of the work, rather than to the grantee's cost incurred.
    Prior approval means documentation evidencing consent prior to 
incurring specific cost.
    Real property means land, including land improvements, structures 
and appurtenances thereto, excluding movable machinery and equipment.
    Share, when referring to the awarding agency's portion of real 
property, equipment or supplies, means the same percentage as the 
awarding agency's portion of the acquiring party's total costs under the 
grant to which the acquisition costs under the grant to which the 
acquisition cost of the property was charged. Only costs are to be 
counted--not the value of third-party in-kind contributions.
    State means any of the several States of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, any territory or 
possession of the United States, or any agency or instrumentality of a 
State exclusive of local governments. The term does not include any 
public and Indian housing agency under United States Housing Act of 
1937.
    Subgrant means an award of financial assistance in the form of 
money, or property in lieu of money, made under a grant by a grantee to 
an eligible subgrantee. The term includes financial assistance when 
provided by contractual legal agreement, but does not include 
procurement purchases, nor does it include any form of assistance which 
is excluded from the definition of grant in this part.
    Subgrantee means the government or other legal entity to which a 
subgrant is awarded and which is accountable to the grantee for the use 
of the funds provided.
    Supplies means all tangible personal property other than equipment 
as defined in this part.
    Suspension means depending on the context, either (1) temporary 
withdrawal of the authority to obligate grant funds pending corrective 
action by the grantee or subgrantee or a decision to terminate the 
grant, or (2) an action taken by a suspending official in accordance 
with agency regulations implementing E.O. 12549 to immediately exclude a 
person from participating in grant transactions for a period, pending 
completion of an investigation and such legal or debarment proceedings 
as may ensue.
    Termination means permanent withdrawal of the authority to obligate 
previously-awarded grant funds before that authority would otherwise 
expire. It also means the voluntary relinquishment of that authority by 
the grantee or subgrantee. Termination does not include:
    (1) Withdrawal of funds awarded on the basis of the grantee's 
underestimate of the unobligated balance in a prior period;
    (2) Withdrawal of the unobligated balance as of the expiration of a 
grant;
    (3) Refusal to extend a grant or award additional funds, to make a 
competing or noncompeting continuation, renewal, extension, or 
supplemental award; or
    (4) Voiding of a grant upon determination that the award was 
obtained fraudulently, or was otherwise illegal or invalid from 
inception.
    Terms of a grant or subgrant mean all requirements of the grant or 
subgrant, whether in statute, regulations, or the award document.
    Third party in-kind contributions mean property or services which 
benefit a federally assisted project or program and which are 
contributed by non-Federal third parties without charge to the grantee, 
or a cost-type contractor under the grant agreement.
    Unliquidated obligations for reports prepared on a cash basis mean 
the amount of obligations incurred by the grantee that has not been 
paid. For reports prepared on an accrued expenditure basis, they 
represent the amount of obligations incurred by the grantee for which an 
outlay has not been recorded.
    Unobligated balance means the portion of the funds authorized by the 
Federal agency that has not been obligated by the grantee and is 
determined

[[Page 349]]

by deducting the cumulative obligations from the cumulative funds 
authorized.



Sec. 31.4  Applicability.

    (a) General. Subparts A-D of this part apply to all grants and 
subgrants to governments, except where inconsistent with Federal 
statutes or with regulations authorized in accordance with the exception 
provision of Sec. 31.6, or:
    (1) Grants and subgrants to State and local institutions of higher 
education or State and local hospitals.
    (2) The block grants authorized by the Omnibus Budget Reconciliation 
Act of 1981 (Community Services; Preventive Health and Health Services; 
Alcohol, Drug Abuse, and Mental Health Services; Maternal and Child 
Health Services; Social Services; Low-Income Home Energy Assistance; 
States' Program of Community Development Block Grants for Small Cities; 
and Elementary and Secondary Education other than programs administered 
by the Secretary of Education under Title V, Subtitle D, Chapter 2, 
Section 583--the Secretary's discretionary grant program) and Titles I-
III of the Job Training Partnership Act of 1982 and under the Public 
Health Services Act (Section 1921), Alcohol and Drug Abuse Treatment and 
Rehabilitation Block Grant and Part C of Title V, Mental Health Service 
for the Homeless Block Grant).
    (3) Entitlement grants to carry out the following programs of the 
Social Security Act:
    (i) Aid to Needy Families with Dependent Children (Title IV-A of the 
Act, not including the Work Incentive Program (WIN) authorized by 
section 402(a)19(G); HHS grants for WIN are subject to this part);
    (ii) Child Support Enforcement and Establishment of Paternity (Title 
IV-D of the Act);
    (iii) Foster Care and Adoption Assistance (Title IV-E of the Act);
    (iv) Aid to the Aged, Blind, and Disabled (Titles I, X, XIV, and 
XVI-AABD of the Act); and
    (v) Medical Assistance (Medicaid) (Title XIX of the Act) not 
including the State Medicaid Fraud Control program authorized by section 
1903(a)(6)(B).
    (4) Entitlement grants under the following programs of The National 
School Lunch Act:
    (i) School Lunch (section 4 of the Act),
    (ii) Commodity Assistance (section 6 of the Act),
    (iii) Special Meal Assistance (section 11 of the Act),
    (iv) Summer Food Service for Children (section 13 of the Act), and
    (v) Child Care Food Program (section 17 of the Act).
    (5) Entitlement grants under the following programs of The Child 
Nutrition Act of 1966:
    (i) Special Milk (section 3 of the Act), and
    (ii) School Breakfast (section 4 of the Act).
    (6) Entitlement grants for State Administrative expenses under The 
Food Stamp Act of 1977 (section 16 of the Act).
    (7) A grant for an experimental, pilot, or demonstration project 
that is also supported by a grant listed in paragraph (a)(3) of this 
section;
    (8) Grant funds awarded under subsection 412(e) of the Immigration 
and Nationality Act (8 U.S.C. 1522(e)) and subsection 501(a) of the 
Refugee Education Assistance Act of 1980 (Pub. L. 96-422, 94 Stat. 
1809), for cash assistance, medical assistance, and supplemental 
security income benefits to refugees and entrants and the administrative 
costs of providing the assistance and benefits;
    (9) Grants to local education agencies under 20 U.S.C. 236 through 
241-1(a), and 242 through 244 (portions of the Impact Aid program), 
except for 20 U.S.C. 238(d)(2)(c) and 240(f) (Entitlement Increase for 
Handicapped Children); and
    (10) Payments under the Veterans Administration's State Home Per 
Diem Program (38 U.S.C. 641(a)).
    (b) Entitlement programs. Entitlement programs enumerated above in 
Sec. 31.4(a) (3) through (8) are subject to subpart E.



Sec. 31.5  Effect on other issuances.

    All other grants administration provisions of codified program 
regulations, program manuals, handbooks and other nonregulatory 
materials which are inconsistent with this part are superseded, except 
to the extent

[[Page 350]]

they are required by statute, or authorized in accordance with the 
exception provision in Sec. 31.6.



Sec. 31.6  Additions and exceptions.

    (a) For classes of grants and grantees subject to this part, Federal 
agencies may not impose additional administrative requirements except in 
codified regulations published in the Federal Register.
    (b) Exceptions for classes of grants or grantees may be authorized 
only by OMB.
    (c) Exceptions on a case-by-case basis and for subgrantees may be 
authorized by the affected Federal agencies.
    (1) In the Environmental Protection Agency, the Director, Grants 
Administration Division, is authorized to grant the exceptions.
    (2) [Reserved]
    (d) The EPA Director is also authorized to approve exceptions, on a 
class or an individual case basis, to EPA program--specific assistance 
regulations other than those which implement statutory and executive 
order requirements.

[53 FR 8068 and 8087, Mar. 11, 1988, and amended at 53 FR 8075, Mar. 11, 
1988]



                    Subpart B--Pre-Award Requirements



Sec. 31.10  Forms for applying for grants.

    (a) Scope. (1) This section prescribes forms and instructions to be 
used by governmental organizations (except hospitals and institutions of 
higher education operated by a government) in applying for grants. This 
section is not applicable, however, to formula grant programs which do 
not require applicants to apply for funds on a project basis.
    (2) This section applies only to applications to Federal agencies 
for grants, and is not required to be applied by grantees in dealing 
with applicants for subgrants. However, grantees are encouraged to avoid 
more detailed or burdensome application requirements for subgrants.
    (b) Authorized forms and instructions for governmental 
organizations. (1) In applying for grants, applicants shall only use 
standard application forms or those prescribed by the granting agency 
with the approval of OMB under the Paperwork Reduction Act of 1980.
    (2) Applicants are not required to submit more than the original and 
two copies of preapplications or applications.
    (3) Applicants must follow all applicable instructions that bear OMB 
clearance numbers. Federal agencies may specify and describe the 
programs, functions, or activities that will be used to plan, budget, 
and evaluate the work under a grant. Other supplementary instructions 
may be issued only with the approval of OMB to the extent required under 
the Paperwork Reduction Act of 1980. For any standard form, except the 
SF-424 facesheet, Federal agencies may shade out or instruct the 
applicant to disregard any line item that is not needed.
    (4) When a grantee applies for additional funding (such as a 
continuation or supplemental award) or amends a previously submitted 
application, only the affected pages need be submitted. Previously 
submitted pages with information that is still current need not be 
resubmitted.



Sec. 31.11  State plans.

    (a) Scope. The statutes for some programs require States to submit 
plans before receiving grants. Under regulations implementing Executive 
Order 12372, ``Intergovernmental Review of Federal Programs,'' States 
are allowed to simplify, consolidate and substitute plans. This section 
contains additional provisions for plans that are subject to regulations 
implementing the Executive Order.
    (b) Requirements. A State need meet only Federal administrative or 
programmatic requirements for a plan that are in statutes or codified 
regulations.
    (c) Assurances. In each plan the State will include an assurance 
that the State shall comply with all applicable Federal statutes and 
regulations in effect with respect to the periods for which it receives 
grant funding. For this assurance and other assurances required in the 
plan, the State may:
    (1) Cite by number the statutory or regulatory provisions requiring 
the assurances and affirm that it gives the

[[Page 351]]

assurances required by those provisions,
    (2) Repeat the assurance language in the statutes or regulations, or
    (3) Develop its own language to the extent permitted by law.
    (d) Amendments. A State will amend a plan whenever necessary to 
reflect: (1) New or revised Federal statutes or regulations or (2) a 
material change in any State law, organization, policy, or State agency 
operation. The State will obtain approval for the amendment and its 
effective date but need submit for approval only the amended portions of 
the plan.



Sec. 31.12  Special grant or subgrant conditions for ``high-risk'' grantees.

    (a) A grantee or subgrantee may be considered ``high risk'' if an 
awarding agency determines that a grantee or subgrantee:
    (1) Has a history of unsatisfactory performance, or
    (2) Is not financially stable, or
    (3) Has a management system which does not meet the management 
standards set forth in this part, or
    (4) Has not conformed to terms and conditions of previous awards, or
    (5) Is otherwise not responsible; and if the awarding agency 
determines that an award will be made, special conditions and/or 
restrictions shall correspond to the high risk condition and shall be 
included in the award.
    (b) Special conditions or restrictions may include:
    (1) Payment on a reimbursement basis;
    (2) Withholding authority to proceed to the next phase until receipt 
of evidence of acceptable performance within a given funding period;
    (3) Requiring additional, more detailed financial reports;
    (4) Additional project monitoring;
    (5) Requiring the grantee or subgrantee to obtain technical or 
management assistance; or
    (6) Establishing additional prior approvals.
    (c) If an awarding agency decides to impose such conditions, the 
awarding official will notify the grantee or subgrantee as early as 
possible, in writing, of:
    (1) The nature of the special conditions/restrictions;
    (2) The reason(s) for imposing them;
    (3) The corrective actions which must be taken before they will be 
removed and the time allowed for completing the corrective actions and
    (4) The method of requesting reconsideration of the conditions/
restrictions imposed.



Sec. 31.13  Principal environmental statutory provisions applicable to EPA assistance awards.

    Grantees shall comply with all applicable Federal laws including:
    (a) Section 306 of the Clean Air Act, (42 U.S.C. 7606).
    (b) Section 508 of the Federal Water Pollution Control Act, as 
amended, (33 U.S.C. 1368).
    (c) Section 1424(e) of the Safe Drinking Water Act, (42 U.S.C. 300h-
3(e)).

[53 FR 8075, Mar. 11, 1988]



                   Subpart C--Post-Award Requirements

                        Financial Administration



Sec. 31.20  Standards for financial management systems.

    (a) A State must expand and account for grant funds in accordance 
with State laws and procedures for expending and accounting for its own 
funds. Fiscal control and accounting procedures of the State, as well as 
its subgrantees and cost-type contractors, must be sufficient to--
    (1) Permit preparation of reports required by this part and the 
statutes authorizing the grant, and
    (2) Permit the tracing of funds to a level of expenditures adequate 
to establish that such funds have not been used in violation of the 
restrictions and prohibitions of applicable statutes.
    (b) The financial management systems of other grantees and 
subgrantees must meet the following standards:
    (1) Financial reporting. Accurate, current, and complete disclosure 
of the financial results of financially assisted activities must be made 
in accordance with the financial reporting requirements of the grant or 
subgrant.
    (2) Accounting records. Grantees and subgrantees must maintain 
records

[[Page 352]]

which adequately identify the source and application of funds provided 
for financially-assisted activities. These records must contain 
information pertaining to grant or subgrant awards and authorizations, 
obligations, unobligated balances, assets, liabilities, outlays or 
expenditures, and income.
    (3) Internal control. Effective control and accountability must be 
maintained for all grant and subgrant cash, real and personal property, 
and other assets. Grantees and subgrantees must adequately safeguard all 
such property and must assure that it is used solely for authorized 
purposes.
    (4) Budget control. Actual expenditures or outlays must be compared 
with budgeted amounts for each grant or subgrant. Financial information 
must be related to performance or productivity data, including the 
development of unit cost information whenever appropriate or 
specifically required in the grant or subgrant agreement. If unit cost 
data are required, estimates based on available documentation will be 
accepted whenever possible.
    (5) Allowable cost. Applicable OMB cost principles, agency program 
regulations, and the terms of grant and subgrant agreements will be 
followed in determining the reasonableness, allowability, and 
allocability of costs.
    (6) Source documentation. Accounting records must be supported by 
such source documentation as cancelled checks, paid bills, payrolls, 
time and attendance records, contract and subgrant award documents, etc.
    (7) Cash management. Procedures for minimizing the time elapsing 
between the transfer of funds from the U.S. Treasury and disbursement by 
grantees and subgrantees must be followed whenever advance payment 
procedures are used. Grantees must establish reasonable procedures to 
ensure the receipt of reports on subgrantees' cash balances and cash 
disbursements in sufficient time to enable them to prepare complete and 
accurate cash transactions reports to the awarding agency. When advances 
are made by letter-of-credit or electronic transfer of funds methods, 
the grantee must make drawdowns as close as possible to the time of 
making disbursements. Grantees must monitor cash drawdowns by their 
subgrantees to assure that they conform substantially to the same 
standards of timing and amount as apply to advances to the grantees.
    (c) An awarding agency may review the adequacy of the financial 
management system of any applicant for financial assistance as part of a 
preaward review or at any time subsequent to award.



Sec. 31.21  Payment.

    (a) Scope. This section prescribes the basic standard and the 
methods under which a Federal agency will make payments to grantees, and 
grantees will make payments to subgrantees and contractors.
    (b) Basic standard. Methods and procedures for payment shall 
minimize the time elapsing between the transfer of funds and 
disbursement by the grantee or subgrantee, in accordance with Treasury 
regulations at 31 CFR part 205.
    (c) Advances. Grantees and subgrantees shall be paid in advance, 
provided they maintain or demonstrate the willingness and ability to 
maintain procedures to minimize the time elapsing between the transfer 
of the funds and their disbursement by the grantee or subgrantee.
    (d) Reimbursement. Reimbursement shall be the preferred method when 
the requirements in paragraph (c) of this section are not met. Grantees 
and subgrantees may also be paid by reimbursement for any construction 
grant. Except as otherwise specified in regulation, Federal agencies 
shall not use the percentage of completion method to pay construction 
grants. The grantee or subgrantee may use that method to pay its 
construction contractor, and if it does, the awarding agency's payments 
to the grantee or subgrantee will be based on the grantee's or 
subgrantee's actual rate of disbursement.
    (e) Working capital advances. If a grantee cannot meet the criteria 
for advance payments described in paragraph (c) of this section, and the 
Federal agency has determined that reimbursement is not feasible because 
the grantee lacks sufficient working capital, the awarding agency may 
provide cash or a working capital advance

[[Page 353]]

basis. Under this procedure the awarding agency shall advance cash to 
the grantee to cover its estimated disbursement needs for an initial 
period generally geared to the grantee's disbursing cycle. Thereafter, 
the awarding agency shall reimburse the grantee for its actual cash 
disbursements. The working capital advance method of payment shall not 
be used by grantees or subgrantees if the reason for using such method 
is the unwillingness or inability of the grantee to provide timely 
advances to the subgrantee to meet the subgrantee's actual cash 
disbursements.
    (f) Effect of program income, refunds, and audit recoveries on 
payment. (1) Grantees and subgrantees shall disburse repayments to and 
interest earned on a revolving fund before requesting additional cash 
payments for the same activity.
    (2) Except as provided in paragraph (f)(1) of this section, grantees 
and subgrantees shall disburse program income, rebates, refunds, 
contract settlements, audit recoveries and interest earned on such funds 
before requesting additional cash payments.
    (g) Withholding payments. (1) Unless otherwise required by Federal 
statute, awarding agencies shall not withhold payments for proper 
charges incurred by grantees or subgrantees unless--
    (i) The grantee or subgrantee has failed to comply with grant award 
conditions or
    (ii) The grantee or subgrantee is indebted to the United States.
    (2) Cash withheld for failure to comply with grant award condition, 
but without suspension of the grant, shall be released to the grantee 
upon subsequent compliance. When a grant is suspended, payment 
adjustments will be made in accordance with Sec. 31.43(c).
    (3) A Federal agency shall not make payment to grantees for amounts 
that are withheld by grantees or subgrantees from payment to contractors 
to assure satisfactory completion of work. Payments shall be made by the 
Federal agency when the grantees or subgrantees actually disburse the 
withheld funds to the contractors or to escrow accounts established to 
assure satisfactory completion of work.
    (h) Cash depositories. (1) Consistent with the national goal of 
expanding the opportunities for minority business enterprises, grantees 
and subgrantees are encouraged to use minority banks (a bank which is 
owned at least 50 percent by minority group members). A list of minority 
owned banks can be obtained from the Minority Business Development 
Agency, Department of Commerce, Washington, DC 20230.
    (2) A grantee or subgrantee shall maintain a separate bank account 
only when required by Federal-State agreement.
    (i) Interest earned on advances. Except for interest earned on 
advances of funds exempt under the Intergovernmental Cooperation Act (31 
U.S.C. 6501 et seq.) and the Indian Self-Determination Act (23 U.S.C. 
450), grantees and subgrantees shall promptly, but at least quarterly, 
remit interest earned on advances to the Federal agency. The grantee or 
subgrantee may keep interest amounts up to $100 per year for 
administrative expenses.



Sec. 31.22  Allowable costs.

    (a) Limitation on use of funds. Grant funds may be used only for:
    (1) The allowable costs of the grantees, subgrantees and cost-type 
contractors, including allowable costs in the form of payments to fixed-
price contractors; and
    (2) Reasonable fees or profit to cost-type contractors but not any 
fee or profit (or other increment above allowable costs) to the grantee 
or subgrantee.
    (b) Applicable cost principles. For each kind of organization, there 
is a set of Federal principles for determining allowable costs. 
Allowable costs will be determined in accordance with the cost 
principles applicable to the organization incurring the costs. The 
following chart lists the kinds of organizations and the applicable cost 
principles.

------------------------------------------------------------------------
           For the costs of a--                Use the principles in--
------------------------------------------------------------------------
State, local or Indian tribal government..  OMB Circular A-87.
Private nonprofit organization other than   OBM Circular A-122.
 an (1) institution of higher education,
 (2) hospital, or (3) organization named
 in OMB Circular A-122 as not subject to
 that circular.

[[Page 354]]

 
Educational institutions..................  OMB Circular A-21.
For-profit organization other than a        48 CFR part 31, Contract
 hospital and an organization named in OBM   Cost Principles and
 Circular A-122 as not subject to that       Procedures, or uniform cost
 circular.                                   accounting standards that
                                             comply with cost principles
                                             acceptable to the Federal
                                             agency.
------------------------------------------------------------------------



Sec. 31.23  Period of availability of funds.

    (a) General. Where a funding period is specified, a grantee may 
charge to the award only costs resulting from obligations of the funding 
period unless carryover of unobligated balances is permitted, in which 
case the carryover balances may be charged for costs resulting from 
obligations of the subsequent funding period.
    (b) Liquidation of obligations. A grantee must liquidate all 
obligations incurred under the award not later than 90 days after the 
end of the funding period (or as specified in a program regulation) to 
coincide with the submission of the annual Financial Status Report (SF-
269). The Federal agency may extend this deadline at the request of the 
grantee.



Sec. 31.24  Matching or cost sharing.

    (a) Basic rule: Costs and contributions acceptable. With the 
qualifications and exceptions listed in paragraph (b) of this section, a 
matching or cost sharing requirement may be satisfied by either or both 
of the following:
    (1) Allowable costs incurred by the grantee, subgrantee or a cost-
type contractor under the assistance agreement. This includes allowable 
costs borne by non-Federal grants or by other cash donations from non-
Federal third parties.
    (2) The value of third party in-kind contributions applicable to the 
period to which the cost sharing or matching requirements applies.
    (b) Qualifications and exceptions--(1) Costs borne by other Federal 
grant agreements. Except as provided by Federal statute, a cost sharing 
or matching requirement may not be met by costs borne by another Federal 
grant. This prohibition does not apply to income earned by a grantee or 
subgrantee from a contract awarded under another Federal grant.
    (2) General revenue sharing. For the purpose of this section, 
general revenue sharing funds distributed under 31 U.S.C. 6702 are not 
considered Federal grant funds.
    (3) Cost or contributions counted towards other Federal costs-
sharing requirements. Neither costs nor the values of third party in-
kind contributions may count towards satisfying a cost sharing or 
matching requirement of a grant agreement if they have been or will be 
counted towards satisfying a cost sharing or matching requirement of 
another Federal grant agreement, a Federal procurement contract, or any 
other award of Federal funds.
    (4) Costs financed by program income. Costs financed by program 
income, as defined in Sec. 31.25, shall not count towards satisfying a 
cost sharing or matching requirement unless they are expressly permitted 
in the terms of the assistance agreement. (This use of general program 
income is described in Sec. 31.25(g).)
    (5) Services or property financed by income earned by contractors. 
Contractors under a grant may earn income from the activities carried 
out under the contract in addition to the amounts earned from the party 
awarding the contract. No costs of services or property supported by 
this income may count toward satisfying a cost sharing or matching 
requirement unless other provisions of the grant agreement expressly 
permit this kind of income to be used to meet the requirement.
    (6) Records. Costs and third party in-kind contributions counting 
towards satisfying a cost sharing or matching requirement must be 
verifiable from the records of grantees and subgrantee or cost-type 
contractors. These records must show how the value placed on third party 
in-kind contributions was derived. To the extent feasible, volunteer 
services will be supported by the same methods that the organization 
uses to support the allocability of regular personnel costs.
    (7) Special standards for third party in-kind contributions. (i) 
Third party in-kind contributions count towards satisfying a cost 
sharing or matching requirement only where, if the party receiving the 
contributions were to pay

[[Page 355]]

for them, the payments would be allowable costs.
    (ii) Some third party in-kind contributions are goods and services 
that, if the grantee, subgrantee, or contractor receiving the 
contribution had to pay for them, the payments would have been an 
indirect costs. Costs sharing or matching credit for such contributions 
shall be given only if the grantee, subgrantee, or contractor has 
established, along with its regular indirect cost rate, a special rate 
for allocating to individual projects or programs the value of the 
contributions.
    (iii) A third party in-kind contribution to a fixed-price contract 
may count towards satisfying a cost sharing or matching requirement only 
if it results in:
    (A) An increase in the services or property provided under the 
contract (without additional cost to the grantee or subgrantee) or
    (B) A cost savings to the grantee or subgrantee.
    (iv) The values placed on third party in-kind contributions for cost 
sharing or matching purposes will conform to the rules in the succeeding 
sections of this part. If a third party in-kind contribution is a type 
not treated in those sections, the value placed upon it shall be fair 
and reasonable.
    (c) Valuation of donated services--(1) Volunteer services. Unpaid 
services provided to a grantee or subgrantee by individuals will be 
valued at rates consistent with those ordinarily paid for similar work 
in the grantee's or subgrantee's organization. If the grantee or 
subgrantee does not have employees performing similar work, the rates 
will be consistent with those ordinarily paid by other employers for 
similar work in the same labor market. In either case, a reasonable 
amount for fringe benefits may be included in the valuation.
    (2) Employees of other organizations. When an employer other than a 
grantee, subgrantee, or cost-type contractor furnishes free of charge 
the services of an employee in the employee's normal line of work, the 
services will be valued at the employee's regular rate of pay exclusive 
of the employee's fringe benefits and overhead costs. If the services 
are in a different line of work, paragraph (c)(1) of this section 
applies.
    (d) Valuation of third party donated supplies and loaned equipment 
or space. (1) If a third party donates supplies, the contribution will 
be valued at the market value of the supplies at the time of donation.
    (2) If a third party donates the use of equipment or space in a 
building but retains title, the contribution will be valued at the fair 
rental rate of the equipment or space.
    (e) Valuation of third party donated equipment, buildings, and land. 
If a third party donates equipment, buildings, or land, and title passes 
to a grantee or subgrantee, the treatment of the donated property will 
depend upon the purpose of the grant or subgrant, as follows:
    (1) Awards for capital expenditures. If the purpose of the grant or 
subgrant is to assist the grantee or subgrantee in the acquisition of 
property, the market value of that property at the time of donation may 
be counted as cost sharing or matching,
    (2) Other awards. If assisting in the acquisition of property is not 
the purpose of the grant or subgrant, paragraphs (e)(2) (i) and (ii) of 
this section apply:
    (i) If approval is obtained from the awarding agency, the market 
value at the time of donation of the donated equipment or buildings and 
the fair rental rate of the donated land may be counted as cost sharing 
or matching. In the case of a subgrant, the terms of the grant agreement 
may require that the approval be obtained from the Federal agency as 
well as the grantee. In all cases, the approval may be given only if a 
purchase of the equipment or rental of the land would be approved as an 
allowable direct cost. If any part of the donated property was acquired 
with Federal funds, only the non-federal share of the property may be 
counted as cost-sharing or matching.
    (ii) If approval is not obtained under paragraph (e)(2)(i) of this 
section, no amount may be counted for donated land, and only 
depreciation or use allowances may be counted for donated equipment and 
buildings. The depreciation or use allowances for this property are not 
treated as third party in-kind

[[Page 356]]

contributions. Instead, they are treated as costs incurred by the 
grantee or subgrantee. They are computed and allocated (usually as 
indirect costs) in accordance with the cost principles specified in 
Sec. 31.22, in the same way as depreciation or use allowances for 
purchased equipment and buildings. The amount of depreciation or use 
allowances for donated equipment and buildings is based on the 
property's market value at the time it was donated.
    (f) Valuation of grantee or subgrantee donated real property for 
construction/acquisition. If a grantee or subgrantee donates real 
property for a construction or facilities acquisition project, the 
current market value of that property may be counted as cost sharing or 
matching. If any part of the donated property was acquired with Federal 
funds, only the non-federal share of the property may be counted as cost 
sharing or matching.
    (g) Appraisal of real property. In some cases under paragraphs (d), 
(e) and (f) of this section, it will be necessary to establish the 
market value of land or a building or the fair rental rate of land or of 
space in a building. In these cases, the Federal agency may require the 
market value or fair rental value be set by an independent appraiser, 
and that the value or rate be certified by the grantee. This requirement 
will also be imposed by the grantee on subgrantees.



Sec. 31.25  Program income.

    (a) General. Grantees are encouraged to earn income to defray 
program costs. Program income includes income from fees for services 
performed, from the use or rental of real or personal property acquired 
with grant funds, from the sale of commodities or items fabricated under 
a grant agreement, and from payments of principal and interest on loans 
made with grant funds. Except as otherwise provided in regulations of 
the Federal agency, program income does not include interest on grant 
funds, rebates, credits, discounts, refunds, etc. and interest earned on 
any of them.
    (b) Definition of program income. Program income means gross income 
received by the grantee or subgrantee directly generated by a grant 
supported activity, or earned only as a result of the grant agreement 
during the grant period. ``During the grant period'' is the time between 
the effective date of the award and the ending date of the award 
reflected in the final financial report.
    (c) Cost of generating program income. If authorized by Federal 
regulations or the grant agreement, costs incident to the generation of 
program income may be deducted from gross income to determine program 
income.
    (d) Governmental revenues. Taxes, special assessments, levies, 
fines, and other such revenues raised by a grantee or subgrantee are not 
program income unless the revenues are specifically identified in the 
grant agreement or Federal agency regulations as program income.
    (e) Royalties. Income from royalties and license fees for 
copyrighted material, patents, and inventions developed by a grantee or 
subgrantee is program income only if the revenues are specifically 
identified in the grant agreement or Federal agency regulations as 
program income. (See Sec. 31.34.)
    (f) Property. Proceeds from the sale of real property or equipment 
will be handled in accordance with the requirements of Secs. 31.31 and 
31.32.
    (g) Use of program income. Program income shall be deducted from 
outlays which may be both Federal and non-Federal as described below, 
unless the Federal agency regulations or the grant agreement specify 
another alternative (or a combination of the alternatives). In 
specifying alternatives, the Federal agency may distinguish between 
income earned by the grantee and income earned by subgrantees and 
between the sources, kinds, or amounts of income. When Federal agencies 
authorize the alternatives in paragraphs (g) (2) and (3) of this 
section, program income in excess of any limits stipulated shall also be 
deducted from outlays.
    (1) Deduction. Ordinarily program income shall be deducted from 
total allowable costs to determine the net allowable costs. Program 
income shall be used for current costs unless the Federal agency 
authorizes otherwise. Program income which the grantee did not 
anticipate at the time of the award shall be used to reduce the Federal

[[Page 357]]

agency and grantee contributions rather than to increase the funds 
committed to the project.
    (2) Addition. When authorized, program income may be added to the 
funds committed to the grant agreement by the Federal agency and the 
grantee. The program income shall be used for the purposes and under the 
conditions of the grant agreement.
    (3) Cost sharing or matching. When authorized, program income may be 
used to meet the cost sharing or matching requirement of the grant 
agreement. The amount of the Federal grant award remains the same.
    (h) Income after the award period. There are no Federal requirements 
governing the disposition of program income earned after the end of the 
award period (i.e., until the ending date of the final financial report, 
see paragraph (a) of this section), unless the terms of the agreement or 
the Federal agency regulations provide otherwise.



Sec. 31.26  Non-Federal audit.

    (a) Basic rule. Grantees and subgrantees are responsible for 
obtaining audits in accordance with the Single Audit Act Amendments of 
1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of 
States, Local Governments, and Non-Profit Organizations.'' The audits 
shall be made by an independent auditor in accordance with generally 
accepted government auditing standards covering financial audits.
    (b) Subgrantees. State or local governments, as those terms are 
defined for purposes of the Single Audit Act Amendments of 1996, that 
provide Federal awards to a subgrantee, which expends $300,000 or more 
(or other amount as specified by OMB) in Federal awards in a fiscal 
year, shall:
    (1) Determine whether State or local subgrantees have met the audit 
requirements of the Act and whether subgrantees covered by OMB Circular 
A-110, ``Uniform Administrative Requirements for Grants and Agreements 
with Institutions of Higher Education, Hospitals, and Other Non-Profit 
Organizations,'' have met the audit requirements of the Act. Commercial 
contractors (private for-profit and private and governmental 
organizations) providing goods and services to State and local 
governments are not required to have a single audit performed. State and 
local governments should use their own procedures to ensure that the 
contractor has complied with laws and regulations affecting the 
expenditure of Federal funds;
    (2) Determine whether the subgrantee spent Federal assistance funds 
provided in accordance with applicable laws and regulations. This may be 
accomplished by reviewing an audit of the subgrantee made in accordance 
with the Act, Circular A-110, or through other means (e.g., program 
reviews) if the subgrantee has not had such an audit;
    (3) Ensure that appropriate corrective action is taken within six 
months after receipt of the audit report in instance of noncompliance 
with Federal laws and regulations;
    (4) Consider whether subgrantee audits necessitate adjustment of the 
grantee's own records; and
    (5) Require each subgrantee to permit independent auditors to have 
access to the records and financial statements.
    (c) Auditor selection. In arranging for audit services, Sec. 31.36 
shall be followed.

[53 FR 8075, 8087, Mar. 11, 1988, as amended at 62 FR 45939, 45944, Aug. 
29, 1997]

                    Changes, Property, and Subawards



Sec. 31.30  Changes.

    (a) General. Grantees and subgrantees are permitted to rebudget 
within the approved direct cost budget to meet unanticipated 
requirements and may make limited program changes to the approved 
project. However, unless waived by the awarding agency, certain types of 
post-award changes in budgets and projects shall require the prior 
written approval of the awarding agency.
    (b) Relation to cost principles. The applicable cost principles (see 
Sec. 31.22) contain requirements for prior approval of certain types of 
costs. Except where waived, those requirements apply to all grants and 
subgrants even if paragraphs (c) through (f) of this section do not.
    (c) Budget changes. (1) Nonconstruction projects. Except as stated 
in other regulations or an award document, grantees

[[Page 358]]

or subgrantees shall obtain the prior approval of the awarding agency 
whenever any of the following changes is anticipated under a 
nonconstruction award:
    (i) Any revision which would result in the need for additional 
funding.
    (ii) Unless waived by the awarding agency, cumulative transfers 
among direct cost categories, or, if applicable, among separately 
budgeted programs, projects, functions, or activities which exceed or 
are expected to exceed ten percent of the current total approved budget, 
whenever the awarding agency's share exceeds $100,000.
    (iii) Transfer of funds allotted for training allowances (i.e., from 
direct payments to trainees to other expense categories).
    (2) Construction projects. Grantees and subgrantees shall obtain 
prior written approval for any budget revision which would result in the 
need for additional funds.
    (3) Combined construction and nonconstruction projects. When a grant 
or subgrant provides funding for both construction and nonconstruction 
activities, the grantee or subgrantee must obtain prior written approval 
from the awarding agency before making any fund or budget transfer from 
nonconstruction to construction or vice versa.
    (d) Programmatic changes. Grantees or subgrantees must obtain the 
prior approval of the awarding agency whenever any of the following 
actions is anticipated:
    (1) Any revision of the scope or objectives of the project 
(regardless of whether there is an associated budget revision requiring 
prior approval).
    (2) Need to extend the period of availability of funds.
    (3) Changes in key persons in cases where specified in an 
application or a grant award. In research projects, a change in the 
project director or principal investigator shall always require approval 
unless waived by the awarding agency.
    (4) Under nonconstruction projects, contracting out, subgranting (if 
authorized by law) or otherwise obtaining the services of a third party 
to perform activities which are central to the purposes of the award. 
This approval requirement is in addition to the approval requirements of 
Sec. 31.36 but does not apply to the procurement of equipment, supplies, 
and general support services.
    (e) Additional prior approval requirements. The awarding agency may 
not require prior approval for any budget revision which is not 
described in paragraph (c) of this section.
    (f) Requesting prior approval. (1) A request for prior approval of 
any budget revision will be in the same budget formal the grantee used 
in its application and shall be accompanied by a narrative justification 
for the proposed revision.
    (2) A request for a prior approval under the applicable Federal cost 
principles (see Sec. 31.22) may be made by letter.
    (3) A request by a subgrantee for prior approval will be addressed 
in writing to the grantee. The grantee will promptly review such request 
and shall approve or disapprove the request in writing. A grantee will 
not approve any budget or project revision which is inconsistent with 
the purpose or terms and conditions of the Federal grant to the grantee. 
If the revision, requested by the subgrantee would result in a change to 
the grantee's approved project which requires Federal prior approval, 
the grantee will obtain the Federal agency's approval before approving 
the subgrantee's request.



Sec. 31.31  Real property.

    (a) Title. Subject to the obligations and conditions set forth in 
this section, title to real property acquired under a grant or subgrant 
will vest upon acquisition in the grantee or subgrantee respectively.
    (b) Use. Except as otherwise provided by Federal statutes, real 
property will be used for the originally authorized purposes as long as 
needed for that purposes, and the grantee or subgrantee shall not 
dispose of or encumber its title or other interests.
    (c) Disposition. When real property is no longer needed for the 
originally authorized purpose, the grantee or subgrantee will request 
disposition instructions from the awarding agency. The instructions will 
provide for one of the following alternatives:

[[Page 359]]

    (1) Retention of title. Retain title after compensating the awarding 
agency. The amount paid to the awarding agency will be computed by 
applying the awarding agency's percentage of participation in the cost 
of the original purchase to the fair market value of the property. 
However, in those situations where a grantee or subgrantee is disposing 
of real property acquired with grant funds and acquiring replacement 
real property under the same program, the net proceeds from the 
disposition may be used as an offset to the cost of the replacement 
property.
    (2) Sale of property. Sell the property and compensate the awarding 
agency. The amount due to the awarding agency will be calculated by 
applying the awarding agency's percentage of participation in the cost 
of the original purchase to the proceeds of the sale after deduction of 
any actual and reasonable selling and fixing-up expenses. If the grant 
is still active, the net proceeds from sale may be offset against the 
original cost of the property. When a grantee or subgrantee is directed 
to sell property, sales procedures shall be followed that provide for 
competition to the extent practicable and result in the highest possible 
return.
    (3) Transfer of title. Transfer title to the awarding agency or to a 
third-party designated/approved by the awarding agency. The grantee or 
subgrantee shall be paid an amount calculated by applying the grantee or 
subgrantee's percentage of participation in the purchase of the real 
property to the current fair market value of the property.



Sec. 31.32  Equipment.

    (a) Title. Subject to the obligations and conditions set forth in 
this section, title to equipment acquired under a grant or subgrant will 
vest upon acquisition in the grantee or subgrantee respectively.
    (b) States. A State will use, manage, and dispose of equipment 
acquired under a grant by the State in accordance with State laws and 
procedures. Other grantees and subgrantees will follow paragraphs (c) 
through (e) of this section.
    (c) Use. (1) Equipment shall be used by the grantee or subgrantee in 
the program or project for which it was acquired as long as needed, 
whether or not the project or program continues to be supported by 
Federal funds. When no longer needed for the original program or 
project, the equipment may be used in other activities currently or 
previously supported by a Federal agency.
    (2) The grantee or subgrantee shall also make equipment available 
for use on other projects or programs currently or previously supported 
by the Federal Government, providing such use will not interfere with 
the work on the projects or program for which it was originally 
acquired. First preference for other use shall be given to other 
programs or projects supported by the awarding agency. User fees should 
be considered if appropriate.
    (3) Notwithstanding the encouragement in Sec. 31.25(a) to earn 
program income, the grantee or subgrantee must not use equipment 
acquired with grant funds to provide services for a fee to compete 
unfairly with private companies that provide equivalent services, unless 
specifically permitted or contemplated by Federal statute.
    (4) When acquiring replacement equipment, the grantee or subgrantee 
may use the equipment to be replaced as a trade-in or sell the property 
and use the proceeds to offset the cost of the replacement property, 
subject to the approval of the awarding agency.
    (d) Management requirements. Procedures for managing equipment 
(including replacement equipment), whether acquired in whole or in part 
with grant funds, until disposition takes place will, as a minimum, meet 
the following requirements:
    (1) Property records must be maintained that include a description 
of the property, a serial number or other identification number, the 
source of property, who holds title, the acquisition date, and cost of 
the property, percentage of Federal participation in the cost of the 
property, the location, use and condition of the property, and any 
ultimate disposition data including the date of disposal and sale price 
of the property.

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    (2) A physical inventory of the property must be taken and the 
results reconciled with the property records at least once every two 
years.
    (3) A control system must be developed to ensure adequate safeguards 
to prevent loss, damage, or theft of the property. Any loss, damage, or 
theft shall be investigated.
    (4) Adequate maintenance procedures must be developed to keep the 
property in good condition.
    (5) If the grantee or subgrantee is authorized or required to sell 
the property, proper sales procedures must be established to ensure the 
highest possible return.
    (e) Disposition. When original or replacement equipment acquired 
under a grant or subgrant is no longer needed for the original project 
or program or for other activities currently or previously supported by 
a Federal agency, disposition of the equipment will be made as follows:
    (1) Items of equipment with a current per-unit fair market value of 
less than $5,000 may be retained, sold or otherwise disposed of with no 
further obligation to the awarding agency.
    (2) Items of equipment with a current per unit fair market value in 
excess of $5,000 may be retained or sold and the awarding agency shall 
have a right to an amount calculated by multiplying the current market 
value or proceeds from sale by the awarding agency's share of the 
equipment.
    (3) In cases where a grantee or subgrantee fails to take appropriate 
disposition actions, the awarding agency may direct the grantee or 
subgrantee to take excess and disposition actions.
    (f) Federal equipment. In the event a grantee or subgrantee is 
provided federally-owned equipment:
    (1) Title will remain vested in the Federal Government.
    (2) Grantees or subgrantees will manage the equipment in accordance 
with Federal agency rules and procedures, and submit an annual inventory 
listing.
    (3) When the equipment is no longer needed, the grantee or 
subgrantee will request disposition instructions from the Federal 
agency.
    (g) Right to transfer title. The Federal awarding agency may reserve 
the right to transfer title to the Federal Government or a third party 
named by the awarding agency when such a third party is otherwise 
eligible under existing statutes. Such transfers shall be subject to the 
following standards:
    (1) The property shall be identified in the grant or otherwise made 
known to the grantee in writing.
    (2) The Federal awarding agency shall issue disposition instruction 
within 120 calendar days after the end of the Federal support of the 
project for which it was acquired. If the Federal awarding agency fails 
to issue disposition instructions within the 120 calendar-day period the 
grantee shall follow 31.32(e).
    (3) When title to equipment is transferred, the grantee shall be 
paid an amount calculated by applying the percentage of participation in 
the purchase to the current fair market value of the property.



Sec. 31.33  Supplies.

    (a) Title. Title to supplies acquired under a grant or subgrant will 
vest, upon acquisition, in the grantee or subgrantee respectively.
    (b) Disposition. If there is a residual inventory of unused supplies 
exceeding $5,000 in total aggregate fair market value upon termination 
or completion of the award, and if the supplies are not needed for any 
other federally sponsored programs or projects, the grantee or 
subgrantee shall compensate the awarding agency for its share.



Sec. 31.34  Copyrights.

    The Federal awarding agency reserves a royalty-free, nonexclusive, 
and irrevocable license to reproduce, publish or otherwise use, and to 
authorize others to use, for Federal Government purposes:
    (a) The copyright in any work developed under a grant, subgrant, or 
contract under a grant or subgrant; and
    (b) Any rights of copyright to which a grantee, subgrantee or a 
contractor purchases ownership with grant support.

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Sec. 31.35  Subawards to debarred and suspended parties.

    Grantees and subgrantees must not make any award or permit any award 
(subgrant or contract) at any tier to any party which is debarred or 
suspended or is otherwise excluded from or ineligible for participation 
in Federal assistance programs under Executive Order 12549, ``Debarment 
and Suspension.''



Sec. 31.36  Procurement.

    (a) States. When procuring property and services under a grant, a 
State will follow the same policies and procedures it uses for 
procurements from its non-Federal funds. The State will ensure that 
every purchase order or other contract includes any clauses required by 
Federal statutes and executive orders and their implementing 
regulations. Other grantees and subgrantees will follow paragraphs (b) 
through (i) in this section.
    (b) Procurement standards. (1) Grantees and subgrantees will use 
their own procurement procedures which reflect applicable State and 
local laws and regulations, provided that the procurements conform to 
applicable federal law, the standards identified in this section, and if 
applicable, Sec. 31.38.
    (2) Grantees and subgrantees will maintain a contract administration 
system which ensures that contractors perform in accordance with the 
terms, conditions, and specifications of their contracts or purchase 
orders.
    (3) Grantees and subgrantees will maintain a written code of 
standards of conduct governing the performance of their employees 
engaged in the award and administration of contracts. No employee, 
officer or agent of the grantee or subgrantee shall participate in 
selection, or in the award or administration of a contract supported by 
Federal funds if a conflict of interest, real or apparent, would be 
involved. Such a conflict would arise when:
    (i) The employee, officer or agent,
    (ii) Any member of his immediate family,
    (iii) His or her partner, or
    (iv) An organization which employs, or is about to employ, any of 
the above, has a financial or other interest in the firm selected for 
award. The grantee's or subgrantee's officers, employees or agents will 
neither solicit nor accept gratuities, favors or anything of monetary 
value from contractors, potential contractors, or parties to 
subagreements. Grantee and subgrantees may set minimum rules where the 
financial interest is not substantial or the gift is an unsolicited item 
of nominal intrinsic value. To the extent permitted by State or local 
law or regulations, such standards or conduct will provide for 
penalties, sanctions, or other disciplinary actions for violations of 
such standards by the grantee's and subgrantee's officers, employees, or 
agents, or by contractors or their agents. The awarding agency may in 
regulation provide additional prohibitions relative to real, apparent, 
or potential conflicts of interest.
    (4) Grantee and subgrantee procedures will provide for a review of 
proposed procurements to avoid purchase of unnecessary or duplicative 
items. Consideration should be given to consolidating or breaking out 
procurements to obtain a more economical purchase. Where appropriate, an 
analysis will be made of lease versus purchase alternatives, and any 
other appropriate analysis to determine the most economical approach.
    (5) To foster greater economy and efficiency, grantees and 
subgrantees are encouraged to enter into State and local 
intergovernmental agreements for procurement or use of common goods and 
services.
    (6) Grantees and subgrantees are encouraged to use Federal excess 
and surplus property in lieu of purchasing new equipment and property 
whenever such use is feasible and reduces project costs.
    (7) Grantees and subgrantees are encouraged to use value engineering 
clauses in contracts for construction projects of sufficient size to 
offer reasonable opportunities for cost reductions. Value engineering is 
a systematic and creative anaylsis of each contract item or task to 
ensure that its essential function is provided at the overall lower 
cost.
    (8) Grantees and subgrantees will make awards only to responsible 
contractors possessing the ability to perform successfully under the 
terms and

[[Page 362]]

conditions of a proposed procurement. Consideration will be given to 
such matters as contractor integrity, compliance with public policy, 
record of past performance, and financial and technical resources.
    (9) Grantees and subgrantees will maintain records sufficient to 
detail the significant history of a procurement. These records will 
include, but are not necessarily limited to the following: rationale for 
the method of procurement, selection of contract type, contractor 
selection or rejection, and the basis for the contract price.
    (10) Grantees and subgrantees will use time and material type 
contracts only--
    (i) After a determination that no other contract is suitable, and
    (ii) If the contract includes a ceiling price that the contractor 
exceeds at its own risk.
    (11) Grantees and subgrantees alone will be responsible, in 
accordance with good administrative practice and sound business 
judgment, for the settlement of all contractual and administrative 
issues arising out of procurements. These issues include, but are not 
limited to source evaluation, protests, disputes, and claims. These 
standards do not relieve the grantee or subgrantee of any contractual 
responsibilities under its contracts. Federal agencies will not 
substitute their judgment for that of the grantee or subgrantee unless 
the matter is primarily a Federal concern. Violations of law will be 
referred to the local, State, or Federal authority having proper 
jurisdiction.
    (12) Grantees and subgrantees will have protest procedures to handle 
and resolve disputes relating to their procurements and shall in all 
instances disclose information regarding the protest to the awarding 
agency. A protestor must exhaust all administrative remedies with the 
grantee and subgrantee before pursuing a protest with the Federal 
agency. Reviews of protests by the Federal agency will be limited to:
    (i) Violations of Federal law or regulations and the standards of 
this section (violations of State or local law will be under the 
jurisdiction of State or local authorities) and
    (ii) Violations of the grantee's or subgrantee's protest procedures 
for failure to review a complaint or protest. Protests received by the 
Federal agency other than those specified above will be referred to the 
grantee or subgrantee.
    (c) Competition. (1) All procurement transactions will be conducted 
in a manner providing full and open competition consistent with the 
standards of Sec. 31.36. Some of the situations considered to be 
restrictive of competition include but are not limited to:
    (i) Placing unreasonable requirements on firms in order for them to 
qualify to do business,
    (ii) Requiring unnecessary experience and excessive bonding,
    (iii) Noncompetitive pricing practices between firms or between 
affiliated companies,
    (iv) Noncompetitive awards to consultants that are on retainer 
contracts,
    (v) Organizational conflicts of interest,
    (vi) Specifying only a ``brand name'' product instead of allowing 
``an equal'' product to be offered and describing the performance of 
other relevant requirements of the procurement, and
    (vii) Any arbitrary action in the procurement process.
    (2) Grantees and subgrantees will conduct procurements in a manner 
that prohibits the use of statutorily or administratively imposed in-
State or local geographical preferences in the evaluation of bids or 
proposals, except in those cases where applicable Federal statutes 
expressly mandate or encourage geographic preference. Nothing in this 
section preempts State licensing laws. When contracting for 
architectural and engineering (A/E) services, geographic location may be 
a selection criteria provided its application leaves an appropriate 
number of qualified firms, given the nature and size of the project, to 
compete for the contract.
    (3) Grantees will have written selection procedures for procurement 
transactions. These procedures will ensure that all solicitations:
    (i) Incorporate a clear and accurate description of the technical 
requirements for the material, product, or service to be procured. Such 
description shall not, in competitive procurements, contain features 
which unduly

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restrict competition. The description may include a statement of the 
qualitative nature of the material, product or service to be procured, 
and when necessary, shall set forth those minimum essential 
characteristics and standards to which it must conform if it is to 
satisfy its intended use. Detailed product specifications should be 
avoided if at all possible. When it is impractical or uneconomical to 
make a clear and accurate description of the technical requirements, a 
``brand name or equal'' description may be used as a means to define the 
performance or other salient requirements of a procurement. The specific 
features of the named brand which must be met by offerors shall be 
clearly stated; and
    (ii) Identify all requirements which the offerors must fulfill and 
all other factors to be used in evaluating bids or proposals.
    (4) Grantees and subgrantees will ensure that all prequalified lists 
of persons, firms, or products which are used in acquiring goods and 
services are current and include enough qualified sources to ensure 
maximum open and free competition. Also, grantees and subgrantees will 
not preclude potential bidders from qualifying during the solicitation 
period.
    (5) Construction grants awarded under Title II of the Clean Water 
Act are subject to the following ``Buy American'' requirements in 
paragraphs (c)(5) (i)-(iii) of this section. Section 215 of the Clean 
Water Act requires that contractors give preference to the use of 
domestic material in the construction of EPA-funded treatment works.
    (i) Contractors must use domestic construction materials in 
preference to nondomestic material if it is priced no more than 6 
percent higher than the bid or offered price of the nondomestic 
material, including all costs of delivery to the construction site and 
any applicable duty, whether or not assessed. The grantee will normally 
base the computations on prices and costs in effect on the date of 
opening bids or proposals.
    (ii) The award official may waive the Buy American provision based 
on factors the award official considers relevant, including:
    (A) Such use is not in the public interest;
    (B) The cost is unreasonable;
    (C) The Agency's available resources are not sufficient to implement 
the provision, subject to the Deputy Administrator's concurrence;
    (D) The articles, materials or supplies of the class or kind to be 
used or the articles, materials or supplies from which they are 
manufactured are not mined, produced or manufactured in the United 
States in sufficient and reasonably available commerical quantities or 
satisfactory quality for the particular project; or
    (E) Application of this provision is contrary to multilateral 
government procurement agreements, subject to the Deputy Administrator's 
concurrence.
    (iii) All bidding documents, subagreements, and, if appropriate, 
requests for proposals must contain the following ``Buy American'' 
provision: In accordance with section 215 of the Clean Water Act (33 
U.S.C. 1251 et seq.) and implementing EPA regulations, the contractor 
agrees that preference will be given to domestic construction materials 
by the contractor, subcontractors, materialmen and suppliers in the 
performance of this subagreement.
    (d) Methods of procurement to be followed--(1) Procurement by small 
purchase procedures. Small purchase procedures are those relatively 
simple and informal procurement methods for securing services, supplies, 
or other property that do not cost more than the simplified acquisition 
threshold fixed at 41 U.S.C. 403(11) (currently set at $100,000). If 
small purchase procedures are used, price or rate quotations shall be 
obtained from an adequate number of qualified sources.
    (2) Procurement by sealed bids (formal advertising). Bids are 
publicly solicited and a firm-fixed-price contract (lump sum or unit 
price) is awarded to the responsible bidder whose bid, conforming with 
all the material terms and conditions of the invitation for bids, is the 
lowest in price. The sealed bid method is the preferred method for 
procuring construction, if the conditions in 31.36(d)(2)(i) apply.

[[Page 364]]

    (i) In order for sealed bidding to be feasible, the following 
conditions should be present:
    (A) A complete, adequate, and realistic specification or purchase 
description is available;
    (B) Two or more responsible bidders are willing and able to compete 
effectively and for the business; and
    (C) The procurement lends itself to a firm fixed price contract and 
the selection of the successful bidder can be made principally on the 
basis of price.
    (ii) If sealed bids are used, the following requirements apply:
    (A) The invitation for bids will be publicly advertised and bids 
shall be solicited from an adequate number of known suppliers, providing 
them sufficient time prior to the date set for opening the bids;
    (B) The invitation for bids, which will include any specifications 
and pertinent attachments, shall define the items or services in order 
for the bidder to properly respond;
    (C) All bids will be publicly opened at the time and place 
prescribed in the invitation for bids;
    (D) A firm fixed-price contract award will be made in writing to the 
lowest responsive and responsible bidder. Where specified in bidding 
documents, factors such as discounts, transportation cost, and life 
cycle costs shall be considered in determining which bid is lowest. 
Payment discounts will only be used to determine the low bid when prior 
experience indicates that such discounts are usually taken advantage of; 
and
    (E) Any or all bids may be rejected if there is a sound documented 
reason.
    (3) Procurement by competitive proposals. The technique of 
competitive proposals is normally conducted with more than one source 
submitting an offer, and either a fixed-price or cost-reimbursement type 
contract is awarded. It is generally used when conditions are not 
appropriate for the use of sealed bids. If this method is used, the 
following requirements apply:
    (i) Requests for proposals will be publicized and identify all 
evaluation factors and their relative importance. Any response to 
publicized requests for proposals shall be honored to the maximum extent 
practical;
    (ii) Proposals will be solicited from an adequate number of 
qualified sources;
    (iii) Grantees and subgrantees will have a method for conducting 
technical evaluations of the proposals received and for selecting 
awardees;
    (iv) Awards will be made to the responsible firm whose proposal is 
most advantageous to the program, with price and other factors 
considered; and
    (v) Grantees and subgrantees may use competitive proposal procedures 
for qualifications-based procurement of architectural/engineering (A/E) 
professional services whereby competitors' qualifications are evaluated 
and the most qualified competitor is selected, subject to negotiation of 
fair and reasonable compensation. The method, where price is not used as 
a selection factor, can only be used in procurement of A/E professional 
services. It cannot be used to purchase other types of services though 
A/E firms are a potential source to perform the proposed effort.
    (4) Procurement by noncompetitive proposals is procurement through 
solicitation of a proposal from only one source, or after solicitation 
of a number of sources, competition is determined inadequate.
    (i) Procurement by noncompetitive proposals may be used only when 
the award of a contract is infeasible under small purchase procedures, 
sealed bids or competitive proposals and one of the following 
circumstances applies:
    (A) The item is available only from a single source;
    (B) The public exigency or emergency for the requirement will not 
permit a delay resulting from competitive solicitation;
    (C) The awarding agency authorizes noncompetitive proposals; or
    (D) After solicitation of a number of sources, competition is 
determined inadequate.
    (ii) Cost analysis, i.e., verifying the proposed cost data, the 
projections of the data, and the evaluation of the specific elements of 
costs and profits, is required.
    (iii) Grantees and subgrantees may be required to submit the 
proposed procurement to the awarding agency for

[[Page 365]]

pre-award review in accordance with paragraph (g) of this section.
    (e) Contracting with small and minority firms, women's business 
enterprise and labor surplus area firms. (1) The grantee and subgrantee 
will take all necessary affirmative steps to assure that minority firms, 
women's business enterprises, and labor surplus area firms are used when 
possible.
    (2) Affirmative steps shall include:
    (i) Placing qualified small and minority businesses and women's 
business enterprises on solicitation lists;
    (ii) Assuring that small and minority businesses, and women's 
business enterprises are solicited whenever they are potential sources;
    (iii) Dividing total requirements, when economically feasible, into 
smaller tasks or quantities to permit maximum participation by small and 
minority business, and women's business enterprises;
    (iv) Establishing delivery schedules, where the requirement permits, 
which encourage participation by small and minority business, and 
women's business enterprises;
    (v) Using the services and assistance of the Small Business 
Administration, and the Minority Business Development Agency of the 
Department of Commerce; and
    (vi) Requiring the prime contractor, if subcontracts are to be let, 
to take the affirmative steps listed in paragraphs (e)(2) (i) through 
(v) of this section.
    (f) Contract cost and price. (1) Grantees and subgrantees must 
perform a cost or price analysis in connection with every procurement 
action including contract modifications. The method and degree of 
analysis is dependent on the facts surrounding the particular 
procurement situation, but as a starting point, grantees must make 
independent estimates before receiving bids or proposals. A cost 
analysis must be performed when the offeror is required to submit the 
elements of his estimated cost, e.g., under professional, consulting, 
and architectural engineering services contracts. A cost analysis will 
be necessary when adequate price competition is lacking, and for sole 
source procurements, including contract modifications or change orders, 
unless price resonableness can be established on the basis of a catalog 
or market price of a commercial product sold in substantial quantities 
to the general public or based on prices set by law or regulation. A 
price analysis will be used in all other instances to determine the 
reasonableness of the proposed contract price.
    (2) Grantees and subgrantees will negotiate profit as a separate 
element of the price for each contract in which there is no price 
competition and in all cases where cost analysis is performed. To 
establish a fair and reasonable profit, consideration will be given to 
the complexity of the work to be performed, the risk borne by the 
contractor, the contractor's investment, the amount of subcontracting, 
the quality of its record of past performance, and industry profit rates 
in the surrounding geographical area for similar work.
    (3) Costs or prices based on estimated costs for contracts under 
grants will be allowable only to the extent that costs incurred or cost 
estimates included in negotiated prices are consistent with Federal cost 
principles (see Sec. 31.22). Grantees may reference their own cost 
principles that comply with the applicable Federal cost principles.
    (4) The cost plus a percentage of cost and percentage of 
construction cost methods of contracting shall not be used.
    (g) Awarding agency review. (1) Grantees and subgrantees must make 
available, upon request of the awarding agency, technical specifications 
on proposed procurements where the awarding agency believes such review 
is needed to ensure that the item and/or service specified is the one 
being proposed for purchase. This review generally will take place prior 
to the time the specification is incorporated into a solicitation 
document. However, if the grantee or subgrantee desires to have the 
review accomplished after a solicitation has been developed, the 
awarding agency may still review the specifications, with such review 
usually limited to the technical aspects of the proposed purchase.
    (2) Grantees and subgrantees must on request make available for 
awarding agency pre-award review procurement

[[Page 366]]

documents, such as requests for proposals or invitations for bids, 
independent cost estimates, etc. when:
    (i) A grantee's or subgrantee's procurement procedures or operation 
fails to comply with the procurement standards in this section; or
    (ii) The procurement is expected to exceed the simplified 
acquisition threshold and is to be awarded without competition or only 
one bid or offer is received in response to a solicitation; or
    (iii) The procurement, which is expected to exceed the simplified 
acquisition threshold, specifies a ``brand name'' product; or
    (iv) The proposed award is more than the simplified acquisition 
threshold and is to be awarded to other than the apparent low bidder 
under a sealed bid procurement; or
    (v) A proposed contract modification changes the scope of a contract 
or increases the contract amount by more than the simplified acquisition 
threshold.
    (3) A grantee or subgrantee will be exempt from the pre-award review 
in paragraph (g)(2) of this section if the awarding agency determines 
that its procurement systems comply with the standards of this section.
    (i) A grantee or subgrantee may request that its procurement system 
be reviewed by the awarding agency to determine whether its system meets 
these standards in order for its system to be certified. Generally, 
these reviews shall occur where there is a continuous high-dollar 
funding, and third-party contracts are awarded on a regular basis.
    (ii) A grantee or subgrantee may self-certify its procurement 
system. Such self-certification shall not limit the awarding agency's 
right to survey the system. Under a self-certification procedure, 
awarding agencies may wish to rely on written assurances from the 
grantee or subgrantee that it is complying with these standards. A 
grantee or subgrantee will cite specific procedures, regulations, 
standards, etc., as being in compliance with these requirements and have 
its system available for review.
    (h) Bonding requirements. For construction or facility improvement 
contracts or subcontracts exceeding the simplified acquisition 
threshold, the awarding agency may accept the bonding policy and 
requirements of the grantee or subgrantee provided the awarding agency 
has made a determination that the awarding agency's interest is 
adequately protected. If such a determination has not been made, the 
minimum requirements shall be as follows:
    (1) A bid guarantee from each bidder equivalent to five percent of 
the bid price. The ``bid guarantee'' shall consist of a firm commitment 
such as a bid bond, certified check, or other negotiable instrument 
accompanying a bid as assurance that the bidder will, upon acceptance of 
his bid, execute such contractual documents as may be required within 
the time specified.
    (2) A performance bond on the part of the contractor for 100 percent 
of the contract price. A ``performance bond'' is one executed in 
connection with a contract to secure fulfillment of all the contractor's 
obligations under such contract.
    (3) A payment bond on the part of the contractor for 100 percent of 
the contract price. A ``payment bond'' is one executed in connection 
with a contract to assure payment as required by law of all persons 
supplying labor and material in the execution of the work provided for 
in the contract.
    (i) Contract provisions. A grantee's and subgrantee's contracts must 
contain provisions in paragraph (i) of this section. Federal agencies 
are permitted to require changes, remedies, changed conditions, access 
and records retention, suspension of work, and other clauses approved by 
the Office of Federal Procurement Policy.
    (1) Administrative, contractual, or legal remedies in instances 
where contractors violate or breach contract terms, and provide for such 
sanctions and penalties as may be appropriate. (Contracts more than the 
simplified acquisition threshold)
    (2) Termination for cause and for convenience by the grantee or 
subgrantee including the manner by which it will be effected and the 
basis for settlement. (All contracts in excess of $10,000)

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    (3) Compliance with Executive Order 11246 of September 24, 1965, 
entitled ``Equal Employment Opportunity,'' as amended by Executive Order 
11375 of October 13, 1967, and as supplemented in Department of Labor 
regulations (41 CFR chapter 60). (All construction contracts awarded in 
excess of $10,000 by grantees and their contractors or subgrantees)
    (4) Compliance with the Copeland ``Anti-Kickback'' Act (18 U.S.C. 
874) as supplemented in Department of Labor regulations (29 CFR part 3). 
(All contracts and subgrants for construction or repair)
    (5) Compliance with the Davis-Bacon Act (40 U.S.C. 276a to 276a-7) 
as supplemented by Department of Labor regulations (29 CFR part 5). 
(Construction contracts in excess of $2000 awarded by grantees and 
subgrantees when required by Federal grant program legislation)
    (6) Compliance with Sections 103 and 107 of the Contract Work Hours 
and Safety Standards Act (40 U.S.C. 327-330) as supplemented by 
Department of Labor regulations (29 CFR part 5). (Construction contracts 
awarded by grantees and subgrantees in excess of $2000, and in excess of 
$2500 for other contracts which involve the employment of mechanics or 
laborers)
    (7) Notice of awarding agency requirements and regulations 
pertaining to reporting.
    (8) Notice of awarding agency requirements and regulations 
pertaining to patent rights with respect to any discovery or invention 
which arises or is developed in the course of or under such contract.
    (9) Awarding agency requirements and regulations pertaining to 
copyrights and rights in data.
    (10) Access by the grantee, the subgrantee, the Federal grantor 
agency, the Comptroller General of the United States, or any of their 
duly authorized representatives to any books, documents, papers, and 
records of the contractor which are directly pertinent to that specific 
contract for the purpose of making audit, examination, excerpts, and 
transcriptions.
    (11) Retention of all required records for three years after 
grantees or subgrantees make final payments and all other pending 
matters are closed.
    (12) Compliance with all applicable standards, orders, or 
requirements issued under section 306 of the Clean Air Act (42 U.S.C. 
1857(h)), section 508 of the Clean Water Act (33 U.S.C. 1368), Executive 
Order 11738, and Environmental Protection Agency regulations (40 CFR 
part 15). (Contracts, subcontracts, and subgrants of amounts in excess 
of $100,000)
    (13) Mandatory standards and policies relating to energy efficiency 
which are contained in the State energy conservation plan issued in 
compliance with the Energy Policy and Conservation Act (Pub. L. 94-163, 
89 Stat. 871).
    (j) Payment to consultants. (1) EPA will limit its participation in 
the salary rate (excluding overhead) paid to individual consultants 
retained by grantees or by a grantee's contractors or subcontractors to 
the maximum daily rate for a GS-18. (Grantees may, however, pay 
consultants more than this amount). This limitation applies to 
consultation services of designated individuals with specialized skills 
who are paid at a daily or hourly rate. This rate does not include 
transportation and subsistence costs for travel performed; grantees will 
pay these in accordance with their normal travel reimbursement 
practices. (Pub. L. 99-591).
    (2) Subagreements with firms for services which are awarded using 
the procurement requirements in this part are not affected by this 
limitation.
    (k) Use of the same architect or engineer during construction. (1) 
If the grantee is satisfied with the qualifications and performance of 
the architect or engineer who provided any or all of the facilities 
planning or design services for a waste-water treatment works project 
and wishes to retain that firm or individual during construction of the 
project, it may do so without further public notice and evaluation of 
qualifications, provided:
    (i) The grantee received a facilities planning (Step 1) or design 
grant (Step 2), and selected the architect or engineer in accordance 
with EPA's procurement regulations in effect when EPA awarded the grant; 
or

[[Page 368]]

    (ii) The award official approves noncompetitive procurement under 
Sec. 31.36(d)(4) for reasons other than simply using the same individual 
or firm that provided facilities planning or design services for the 
project; or
    (iii) The grantee attests that:
    (A) The initial request for proposals clearly stated the possibility 
that the firm or individual selected could be awarded a subagreement for 
services during construction; and
    (B) The firm or individual was selected for facilities planning or 
design services in accordance with procedures specified in this section.
    (C) No employee, officer or agent of the grantee, any member of 
their immediate families, or their partners have financial or other 
interest in the firm selected for award; and
    (D) None of the grantee's officers, employees or agents solicited or 
accepted gratuities, favors or anything of monetary value from 
contractors or other parties to subagreements.
    (2) However, if the grantee uses the procedures in paragraph (k)(1) 
of this section to retain an architect or engineer, any Step 3 
subagreements between the architect or engineer and the grantee must 
meet all of the other procurement provisions in Sec. 31.36.

[53 FR 8068 and 8087, Mar. 11, 1988, and amended at 53 FR 8075, Mar. 11, 
1988; 60 FR 19639, 19644, Apr. 19, 1995; 66 FR 3794, Jan. 16, 2001]



Sec. 31.37  Subgrants.

    (a) States. States shall follow State law and procedures when 
awarding and administering subgrants (whether on a cost reimbursement or 
fixed amount basis) of financial assistance to local and Indian tribal 
governments. States shall:
    (1) Ensure that every subgrant includes any clauses required by 
Federal statute and executive orders and their implementing regulations;
    (2) Ensure that subgrantees are aware of requirements imposed upon 
them by Federal statute and regulation;
    (3) Ensure that a provision for compliance with Sec. 31.42 is placed 
in every cost reimbursement subgrant; and
    (4) Conform any advances of grant funds to subgrantees substantially 
to the same standards of timing and amount that apply to cash advances 
by Federal agencies.
    (b) All other grantees. All other grantees shall follow the 
provisions of this part which are applicable to awarding agencies when 
awarding and administering subgrants (whether on a cost reimbursement or 
fixed amount basis) of financial assistance to local and Indian tribal 
governments. Grantees shall:
    (1) Ensure that every subgrant includes a provision for compliance 
with this part;
    (2) Ensure that every subgrant includes any clauses required by 
Federal statute and executive orders and their implementing regulations; 
and
    (3) Ensure that subgrantees are aware of requirements imposed upon 
them by Federal statutes and regulations.
    (c) Exceptions. By their own terms, certain provisions of this part 
do not apply to the award and administration of subgrants:
    (1) Section 31.10;
    (2) Section 31.11;
    (3) The letter-of-credit procedures specified in Treasury 
Regulations at 31 CFR part 205, cited in Sec. 31.21; and
    (4) Section 31.50.



Sec. 31.38  Indian Self Determination Act.

    Any contract, subcontract, or subgrant awarded under an EPA grant by 
an Indian Tribe or Indian Intertribal Consortium shall require to the 
extent feasible:
    (a) Preferences and opportunities for training and employment in 
connection with the administration of such contracts or grants shall be 
given to Indians as defined in the Indian Self Determination Act (25 
U.S.C. 450b); and
    (b) Preference in the award of subcontracts and subgrants in 
connection with the administration of such contracts or grants shall be 
given to Indian organizations and to Indian-owned economic enterprises 
as defined in section 3 of the Indian Financing Act of 1974 (88 Stat. 
77) [25 U.S.C. 1452].

[66 FR 3794, Jan. 19, 2001]

[[Page 369]]

              Reports, Records, Retention, and Enforcement



Sec. 31.40  Monitoring and reporting program performance.

    (a) Monitoring by grantees. Grantees are responsible for managing 
the day-to-day operations of grant and subgrant supported activities. 
Grantees must monitor grant and subgrant supported activities to assure 
compliance with applicable Federal requirements and that performance 
goals are being achieved. Grantee monitoring must cover each program, 
function or activity.
    (b) Nonconstruction performance reports. The Federal agency may, if 
it decides that performance information available from subsequent 
applications contains sufficient information to meet its programmatic 
needs, require the grantee to submit a performance report only upon 
expiration or termination of grant support. Unless waived by the Federal 
agency this report will be due on the same date as the final Financial 
Status Report.
    (1) Grantees shall submit annual performance reports unless the 
awarding agency requires quarterly or semi-annual reports. However, 
performance reports will not be required more frequently than quarterly. 
Annual reports shall be due 90 days after the grant year, quarterly or 
semi-annual reports shall be due 30 days after the reporting period. The 
final performance report will be due 90 days after the expiration or 
termination of grant support. If a justified request is submitted by a 
grantee, the Federal agency may extend the due date for any performance 
report. Additionally, requirements for unnecessary performance reports 
may be waived by the Federal agency.
    (2) Performance reports will contain, for each grant, brief 
information on the following:
    (i) A comparison of actual accomplishments to the objectives 
established for the period. Where the output of the project can be 
quantified, a computation of the cost per unit of output may be required 
if that information will be useful.
    (ii) The reasons for slippage if established objectives were not 
met.
    (iii) Additional pertinent information including, when appropriate, 
analysis and explanation of cost overruns or high unit costs.
    (3) Grantees will not be required to submit more than the original 
and two copies of performance reports.
    (4) Grantees will adhere to the standards in this section in 
prescribing performance reporting requirements for subgrantees.
    (c) Construction performance reports. For the most part, on-site 
technical inspections and certified percentage-of-completion data are 
relied on heavily by Federal agencies to monitor progress under 
construction grants and subgrants. The Federal agency will require 
additional formal performance reports only when considered necessary, 
and never more frequently than quarterly.
    (d) Significant developments. Events may occur between the scheduled 
performance reporting dates which have significant impact upon the grant 
or subgrant supported activity. In such cases, the grantee must inform 
the Federal agency as soon as the following types of conditions become 
known:
    (1) Problems, delays, or adverse conditions which will materially 
impair the ability to meet the objective of the award. This disclosure 
must include a statement of the action taken, or contemplated, and any 
assistance needed to resolve the situation.
    (2) Favorable developments which enable meeting time schedules and 
objectives sooner or at less cost than anticipated or producing more 
beneficial results than originally planned.
    (e) Federal agencies may make site visits as warranted by program 
needs.
    (f) Waivers, extensions. (1) Federal agencies may waive any 
performance report required by this part if not needed.
    (2) The grantee may waive any performance report from a subgrantee 
when not needed. The grantee may extend the due date for any performance 
report from a subgrantee if the grantee will still be able to meet its 
performance reporting obligations to the Federal agency.

[[Page 370]]



Sec. 31.41  Financial reporting.

    (a) General. (1) Except as provided in paragraphs (a) (2) and (5) of 
this section, grantees will use only the forms specified in paragraphs 
(a) through (e) of this section, and such supplementary or other forms 
as may from time to time be authorized by OMB, for:
    (i) Submitting financial reports to Federal agencies, or
    (ii) Requesting advances or reimbursements when letters of credit 
are not used.
    (2) Grantees need not apply the forms prescribed in this section in 
dealing with their subgrantees. However, grantees shall not impose more 
burdensome requirements on subgrantees.
    (3) Grantees shall follow all applicable standard and supplemental 
Federal agency instructions approved by OMB to the extent required under 
the Paperwork Reduction Act of 1980 for use in connection with forms 
specified in paragraphs (b) through (e) of this section. Federal 
agencies may issue substantive supplementary instructions only with the 
approval of OMB. Federal agencies may shade out or instruct the grantee 
to disregard any line item that the Federal agency finds unnecessary for 
its decisionmaking purposes.
    (4) Grantees will not be required to submit more than the original 
and two copies of forms required under this part.
    (5) Federal agencies may provide computer outputs to grantees to 
expedite or contribute to the accuracy of reporting. Federal agencies 
may accept the required information from grantees in machine usable 
format or computer printouts instead of prescribed forms.
    (6) Federal agencies may waive any report required by this section 
if not needed.
    (7) Federal agencies may extend the due date of any financial report 
upon receiving a justified request from a grantee.
    (b) Financial Status Report--(1) Form. Grantees will use Standard 
Form 269 or 269A, Financial Status Report, to report the status of funds 
for all nonconstruction grants and for construction grants when required 
in accordance with Sec. 31.41(e)(2)(iii).
    (2) Accounting basis. Each grantee will report program outlays and 
program income on a cash or accrual basis as prescribed by the awarding 
agency. If the Federal agency requires accrual information and the 
grantee's accounting records are not normally kept on the accrual basis, 
the grantee shall not be required to convert its accounting system but 
shall develop such accrual information through and analysis of the 
documentation on hand.
    (3) Frequency. The Federal agency may prescribe the frequency of the 
report for each project or program. However, the report will not be 
required more frequently than quarterly. If the Federal agency does not 
specify the frequency of the report, it will be submitted annually. A 
final report will be required upon expiration or termination of grant 
support.
    (4) Due date. When reports are required on a quarterly or semiannual 
basis, they will be due 30 days after the reporting period. When 
required on an annual basis, they will be due 90 days after the grant 
year. Final reports will be due 90 days after the expiration or 
termination of grant support.
    (c) Federal Cash Transactions Report--(1) Form. (i) For grants paid 
by letter or credit, Treasury check advances or electronic transfer of 
funds, the grantee will submit the Standard Form 272, Federal Cash 
Transactions Report, and when necessary, its continuation sheet, 
Standard Form 272a, unless the terms of the award exempt the grantee 
from this requirement.
    (ii) These reports will be used by the Federal agency to monitor 
cash advanced to grantees and to obtain disbursement or outlay 
information for each grant from grantees. The format of the report may 
be adapted as appropriate when reporting is to be accomplished with the 
assistance of automatic data processing equipment provided that the 
information to be submitted is not changed in substance.
    (2) Forecasts of Federal cash requirements. Forecasts of Federal 
cash requirements may be required in the ``Remarks'' section of the 
report.
    (3) Cash in hands of subgrantees. When considered necessary and 
feasible by the Federal agency, grantees may be required to report the 
amount of cash

[[Page 371]]

advances in excess of three days' needs in the hands of their 
subgrantees or contractors and to provide short narrative explanations 
of actions taken by the grantee to reduce the excess balances.
    (4) Frequency and due date. Grantees must submit the report no later 
than 15 working days following the end of each quarter. However, where 
an advance either by letter of credit or electronic transfer of funds is 
authorized at an annualized rate of one million dollars or more, the 
Federal agency may require the report to be submitted within 15 working 
days following the end of each month.
    (d) Request for advance or reimbursement--(1) Advance payments. 
Requests for Treasury check advance payments will be submitted on 
Standard Form 270, Request for Advance or Reimbursement. (This form will 
not be used for drawdowns under a letter of credit, electronic funds 
transfer or when Treasury check advance payments are made to the grantee 
automatically on a predetermined basis.)
    (2) Reimbursements. Requests for reimbursement under nonconstruction 
grants will also be submitted on Standard Form 270. (For reimbursement 
requests under construction grants, see paragraph (e)(1) of this 
section.)
    (3) The frequency for submitting payment requests is treated in 
Sec. 31.41(b)(3).
    (e) Outlay report and request for reimbursement for construction 
programs. (1) Grants that support construction activities paid by 
reimbursement method.
    (i) Requests for reimbursement under construction grants will be 
submitted on Standard Form 271, Outlay Report and Request for 
Reimbursement for Construction Programs. Federal agencies may, however, 
prescribe the Request for Advance or Reimbursement form, specified in 
Sec. 31.41(d), instead of this form.
    (ii) The frequency for submitting reimbursement requests is treated 
in Sec. 31.41(b)(3).
    (2) Grants that support construction activities paid by letter of 
credit, electronic funds transfer or Treasury check advance. (i) When a 
construction grant is paid by letter of credit, electronic funds 
transfer or Treasury check advances, the grantee will report its outlays 
to the Federal agency using Standard Form 271, Outlay Report and Request 
for Reimbursement for Construction Programs. The Federal agency will 
provide any necessary special instruction. However, frequency and due 
date shall be governed by Sec. 31.41(b) (3) and (4).
    (ii) When a construction grant is paid by Treasury check advances 
based on periodic requests from the grantee, the advances will be 
requested on the form specified in Sec. 31.41(d).
    (iii) The Federal agency may substitute the Financial Status Report 
specified in Sec. 31.41(b) for the Outlay Report and Request for 
Reimbursement for Construction Programs.
    (3) Accounting basis. The accounting basis for the Outlay Report and 
Request for Reimbursement for Construction Programs shall be governed by 
Sec. 31.41(b)(2).



Sec. 31.42  Retention and access requirements for records.

    (a) Applicability. (1) This section applies to all financial and 
programmatic records, supporting documents, statistical records, and 
other records of grantees or subgrantees which are:
    (i) Required to be maintained by the terms of this part, program 
regulations or the grant agreement, or
    (ii) Otherwise reasonably considered as pertinent to program 
regulations or the grant agreement.
    (2) This section does not apply to records maintained by contractors 
or subcontractors. For a requirement to place a provision concerning 
records in certain kinds of contracts, see Sec. 31.36(i)(10).
    (b) Length of retention period. (1) Except as otherwise provided, 
records must be retained for three years from the starting date 
specified in paragraph (c) of this section.
    (2) If any litigation, claim, negotiation, audit or other action 
involving the records has been started before the expiration of the 3-
year period, the records must be retained until completion of the action 
and resolution of all issues which arise from it, or until the end of 
the regular 3-year period, whichever is later.

[[Page 372]]

    (3) To avoid duplicate recordkeeping, awarding agencies may make 
special arrangements with grantees and subgrantees to retain any records 
which are continuously needed for joint use. The awarding agency will 
request transfer of records to its custody when it determines that the 
records possess long-term retention value. When the records are 
transferred to or maintained by the Federal agency, the 3-year retention 
requirement is not applicable to the grantee or subgrantee.
    (c) Starting date of retention period--(1) General. When grant 
support is continued or renewed at annual or other intervals, the 
retention period for the records of each funding period starts on the 
day the grantee or subgrantee submits to the awarding agency its single 
or last expenditure report for that period. However, if grant support is 
continued or renewed quarterly, the retention period for each year's 
records starts on the day the grantee submits its expenditure report for 
the last quarter of the Federal fiscal year. In all other cases, the 
retention period starts on the day the grantee submits its final 
expenditure report. If an expenditure report has been waived, the 
retention period starts on the day the report would have been due.
    (2) Real property and equipment records. The retention period for 
real property and equipment records starts from the date of the 
disposition or replacement or transfer at the direction of the awarding 
agency.
    (3) Records for income transactions after grant or subgrant support. 
In some cases grantees must report income after the period of grant 
support. Where there is such a requirement, the retention period for the 
records pertaining to the earning of the income starts from the end of 
the grantee's fiscal year in which the income is earned.
    (4) Indirect cost rate proposals, cost allocations plans, etc. This 
paragraph applies to the following types of documents, and their 
supporting records: indirect cost rate computations or proposals, cost 
allocation plans, and any similar accounting computations of the rate at 
which a particular group of costs is chargeable (such as computer usage 
chargeback rates or composite fringe benefit rates).
    (i) If submitted for negotiation. If the proposal, plan, or other 
computation is required to be submitted to the Federal Government (or to 
the grantee) to form the basis for negotiation of the rate, then the 3-
year retention period for its supporting records starts from the date of 
such submission.
    (ii) If not submitted for negotiation. If the proposal, plan, or 
other computation is not required to be submitted to the Federal 
Government (or to the grantee) for negotiation purposes, then the 3-year 
retention period for the proposal plan, or computation and its 
supporting records starts from end of the fiscal year (or other 
accounting period) covered by the proposal, plan, or other computation.
    (d) Substitution of microfilm. Copies made by microfilming, 
photocopying, or similar methods may be substituted for the original 
records.
    (e) Access to records--(1) Records of grantees and subgrantees. The 
awarding agency and the Comptroller General of the United States, or any 
of their authorized representatives, shall have the right of access to 
any pertinent books, documents, papers, or other records of grantees and 
subgrantees which are pertinent to the grant, in order to make audits, 
examinations, excerpts, and transcripts.
    (2) Expiration of right of access. The rights of access in this 
section must not be limited to the required retention period but shall 
last as long as the records are retained.
    (f) Restrictions on public access. The Federal Freedom of 
Information Act (5 U.S.C. 552) does not apply to records Unless required 
by Federal, State, or local law, grantees and subgrantees are not 
required to permit public access to their records.



Sec. 31.43  Enforcement.

    (a) Remedies for noncompliance. If a grantee or subgrantee 
materially fails to comply with any term of an award, whether stated in 
a Federal statute or regulation, an assurance, in a State plan or 
application, a notice of award, or elsewhere, the awarding agency may 
take one or more of the following actions, as appropriate in the 
circumstances:

[[Page 373]]

    (1) Temporarily withhold cash payments pending correction of the 
deficiency by the grantee or subgrantee or more severe enforcement 
action by the awarding agency,
    (2) Disallow (that is, deny both use of funds and matching credit 
for) all or part of the cost of the activity or action not in 
compliance,
    (3) Wholly or partly suspend or terminate the current award for the 
grantee's or subgrantee's program,
    (i) EPA can also wholly or partly annul the current award for the 
grantee's or subgrantee's program,
    (ii) [Reserved]
    (4) Withhold further awards for the program, or
    (5) Take other remedies that may be legally available.
    (b) Hearings, appeals. In taking an enforcement action, the awarding 
agency will provide the grantee or subgrantee an opportunity for such 
hearing, appeal, or other administrative proceeding to which the grantee 
or subgrantee is entitled under any statute or regulation applicable to 
the action involved.
    (c) Effects of suspension and termination. Costs of grantee or 
subgrantee resulting from obligations incurred by the grantee or 
subgrantee during a suspension or after termination of an award are not 
allowable unless the awarding agency expressly authorizes them in the 
notice of suspension or termination or subsequently. Other grantee or 
subgrantee costs during suspension or after termination which are 
necessary and not reasonably avoidable are allowable if:
    (1) The costs result from obligations which were properly incurred 
by the grantee or subgrantee before the effective date of suspension or 
termination, are not in anticipation of it, and, in the case of a 
termination, are noncancellable, and,
    (2) The costs would be allowable if the award were not suspended or 
expired normally at the end of the funding period in which the 
termination takes effect.
    (d) Relationship to Debarment and Suspension. The enforcement 
remedies identified in this section, including suspension and 
termination, do not preclude grantee or subgrantee from being subject to 
``Debarment and Suspension'' under E.O. 12549 (see Sec. 31.35).

[53 FR 8068 and 8087, Mar. 11, 1988, as amended at 53 FR 8076, Mar. 11, 
1988]



Sec. 31.44  Termination for convenience.

    Except as provided in Sec. 31.43 awards may be terminated in whole 
or in part only as follows:
    (a) By the awarding agency with the consent of the grantee or 
subgrantee in which case the two parties shall agree upon the 
termination conditions, including the effective date and in the case of 
partial termination, the portion to be terminated, or
    (b) By the grantee or subgrantee upon written notification to the 
awarding agency, setting forth the reasons for such termination, the 
effective date, and in the case of partial termination, the portion to 
be terminated. However, if, in the case of a partial termination, the 
awarding agency determines that the remaining portion of the award will 
not accomplish the purposes for which the award was made, the awarding 
agency may terminate the award in its entirety under either Sec. 31.43 
or paragraph (a) of this section.



Sec. 31.45  Quality assurance.

    If the grantee's project involves environmentally related 
measurements or data generation, the grantee shall develop and implement 
quality assurance practices consisting of policies, procedures, 
specifications, standards, and documentation sufficient to produce data 
of quality adequate to meet project objectives and to minimize loss of 
data due to out-of-control conditions or malfunctions.

[53 FR 8076, Mar. 11, 1988]



                 Subpart D--After-the-Grant Requirements



Sec. 31.50  Closeout.

    (a) General. The Federal agency will close out the award when it 
determines that all applicable administrative actions and all required 
work of the grant has been completed.
    (b) Reports. Within 90 days after the expiration or termination of 
the grant, the grantee must submit all financial,

[[Page 374]]

performance, and other reports required as a condition of the grant. 
Upon request by the grantee, Federal agencies may extend this timeframe. 
These may include but are not limited to:
    (1) Final performance or progress report.
    (2) Financial Status Report (SF 269) or Outlay Report and Request 
for Reimbursement for Construction Programs (SF-271) (as applicable.)
    (3) Final request for payment (SF-270) (if applicable).
    (4) Invention disclosure (if applicable).
    (5) Federally-owned property report: In accordance with 
Sec. 31.32(f), a grantee must submit an inventory of all federally owned 
property (as distinct from property acquired with grant funds) for which 
it is accountable and request disposition instructions from the Federal 
agency of property no longer needed.
    (c) Cost adjustment. The Federal agency will, within 90 days after 
receipt of reports in paragraph (b) of this section, make upward or 
downward adjustments to the allowable costs.
    (d) Cash adjustments. (1) The Federal agency will make prompt 
payment to the grantee for allowable reimbursable costs.
    (2) The grantee must immediately refund to the Federal agency any 
balance of unobligated (unencumbered) cash advanced that is not 
authorized to be retained for use on other grants.



Sec. 31.51  Later disallowances and adjustments.

    The closeout of a grant does not affect:
    (a) The Federal agency's right to disallow costs and recover funds 
on the basis of a later audit or other review;
    (b) The grantee's obligation to return any funds due as a result of 
later refunds, corrections, or other transactions;
    (c) Records retention as required in Sec. 31.42;
    (d) Property management requirements in Secs. 31.31 and 31.32; and
    (e) Audit requirements in Sec. 31.26.



Sec. 31.52  Collection of amounts due.

    (a) Any funds paid to a grantee in excess of the amount to which the 
grantee is finally determined to be entitled under the terms of the 
award constitute a debt to the Federal Government. If not paid within a 
reasonable period after demand, the Federal agency may reduce the debt 
by:
    (1) Making an adminstrative offset against other requests for 
reimbursements,
    (2) Withholding advance payments otherwise due to the grantee, or
    (3) Other action permitted by law.
    (b) Except where otherwise provided by statutes or regulations, the 
Federal agency will charge interest on an overdue debt in accordance 
with the Federal Claims Collection Standards (4 CFR Ch. II). The date 
from which interest is computed is not extended by litigation or the 
filing of any form of appeal.

Subpart E--Entitlement [Reserved]



                           Subpart F--Disputes



Sec. 31.70  Disputes.

    (a) Disagreements should be resolved at the lowest level possible.
    (b) If an agreement cannot be reached, the EPA disputes decision 
official will provide a written final decision. The EPA disputes 
decision official is the individual designated by the award official to 
resolve disputes concerning assistance agreements.
    (c) The disputes decision official's decision will constitute final 
agency action unless a request for review is filed by registered mail, 
return receipt requested, within 30 calendar days of the date of the 
decision.
    (1) For final decisions issued by an EPA disputes decision official 
at Headquarters, the request for review shall be filed with the 
Assistant Administrator responsible for the assistance program.
    (2) For final decisions issued by a Regional disputes decision 
official, the request for review shall be filed with the Regional 
Administrator. If the Regional Administrator issued the final decision, 
the request for reconsideration shall be filed with the Regional 
Administrator.
    (d) The request shall include:
    (1) A copy of the EPA disputes decision official's final decision;

[[Page 375]]

    (2) A statement of the amount in dispute;
    (3) A description of the issues involved; and
    (4) A concise statement of the objections to the final decision.
    (e) The disputant(s) may be represented by counsel and may submit 
documentary evidence and briefs for inclusion in a written record.
    (f) Disputants are entitled to an informal conference with EPA 
officials.
    (g) Disputants are entitled to a written decision from the 
appropriate Regional or Assistant Administrator.
    (h) A decision by the Assistant Administrator to confirm the final 
decision of a Headquarters disputes decision official will constitute 
the final Agency action.
    (i) A decision by the Regional Administrator to confirm the Regional 
disputes decision official's decision will constitute the final Agency 
action. However, a petition for discretionary review by the Assistant 
Administrator responsible for the assistance program may be filed within 
30 calendar days of the Regional Administrator's decision. The petition 
shall be sent to the Assistant Administrator by registered mail, return 
receipt requested, and shall include:
    (1) A copy of the Regional Administrator's decision; and
    (2) A concise statement of the objections to the decision.
    (j) If the Assistant Administrator decides not to review the 
Regional Administrator's decision, the Assistant Administrator will 
advise the disputant(s) in writing that the Regional Administrator's 
decision remains the final Agency action.
    (k) If the Assistant Administrator decides to review the Regional 
Administrator's decision, the review will generally be limited to the 
written record on which the Regional Administrator's decision was based. 
The Assistant Administrator may allow the disputant(s) to submit briefs 
in support of the petition for review and may provide an opportunity for 
an informal conference in order to clarify technical or legal issues. 
After reviewing the Regional Administrator's decision, the Assistant 
Administrator will issue a written decision which will then become the 
final Agency action.
    (l) Reviews may not be requested of:
    (1) Decisions on requests for exceptions under Sec. 31.6;
    (2) Bid protest decisions under Sec. 31.36(b)(12);
    (3) National Environmental Policy Act decisions under part 6;
    (4) Advanced wastewater treatment decisions of the Administrator; 
and
    (5) Policy decisions of the EPA Audit Resolution Board.

[53 FR 8076, Mar. 11, 1988]

Appendix A to Part 31--Audit Requirements for State and Local Government 
                               Recipients

                    EXECUTIVE OFFICE OF THE PRESIDENT

                     Office of Management and Budget

                           Circular No. A-128

April 12, 1985

To the Heads of Executive Departments and Establishments.
Subject: Audits of State and Local Governments.
    1. Purpose. This Circular is issued pursuant to the Single Audit Act 
of 1984, Public Law 98-502. It establishes audit requirements for State 
and local governments that receive Federal aid, and defines Federal 
responsibilities for implementing and monitoring those requirements.
    2. Supersession. The Circular supersedes Attachment P, ``Audit 
Requirements,'' of Circular A-102, ``Uniform requirements for grants to 
State and local governments.''
    3. Background. The Single Audit Act builds upon earlier efforts to 
improve audits of Federal aid programs. The Act requires State or local 
governments that receive $100,000 or more a year in Federal funds to 
have an audit made for that year. Section 7505 of the Act requires the 
Director of the Office of Management and Budget to prescribe policies, 
procedures and guidelines to implement the Act. It specifies that the 
Director shall designate ``cognizant'' Federal agencies, determine 
criteria for making appropriate charges to Federal programs for the cost 
of audits, and provide procedures to assure that small firms or firms 
owned and controlled by disadvantaged individuals have the opportunity 
to participate in contracts for single audits.
    4. Policy. The Single Audit Act requires the following:
    a. State or local governments that receive $100,000 or more a year 
in Federal financial assistance shall have an audit made in accordance 
with this Circular.

[[Page 376]]

    b. State or local governments that receive between $25,000 and 
$100,000 a year shall have an audit made in accordance with this 
Circular, or in accordance with Federal laws and regulations governing 
the programs they participate in.
    c. State or local governments that receive less than $25,000 a year 
shall be exempt from compliance with the Act and other Federal audit 
requirements. These State and local governments shall be governed by 
audit requirements prescribed by State or local law or regulation.
    d. Nothing in this paragraph exempts State or local governments from 
maintaining records of Federal financial assistance or from providing 
access to such records to Federal agencies, as provided for in Federal 
law or in Circular A-102, ``Uniform requirements for grants to State or 
local governments.''
    5. Definitions. For the purposes of this Circular the following 
definitions from the Single Audit Act apply:
    a. Cognizant agency means the Federal agency assigned by the Office 
of Management and Budget to carry out the responsibilities described in 
paragraph 11 of this Circular.
    b. Federal financial assistance means assistance provided by a 
Federal agency in the form of grants, contracts, cooperative agreements, 
loans, loan guarantees, property, interest subsidies, insurance, or 
direct appropriations, but does not include direct Federal cash 
assistance to individuals. It includes awards received directly from 
Federal agencies, or indirectly through other units of State and local 
governments.
    c. Federal agency has the same meaning as the term agency in section 
551(1) of Title 5, United States Code.
    d. Generally accepted accounting principles has the meaning 
specified in the generally accepted government auditing standards.
    e. Generally accepted government auditing standards means the 
Standards for Audit of Government Organizations, Programs, Activities, 
and Functions, developed by the Comptroller General, dated February 27, 
1981.
    f. Independent auditor means:
    (1) A State or local government auditor who meets the independence 
standards specified in generally accepted government auditing standards; 
or
    (2) A public accountant who meets such independence standards.
    g. Internal controls means the plan of organization and methods and 
procedures adopted by management to ensure that:
    (1) Resource use is consistent with laws, regulations, and policies;
    (2) Resources are safeguarded against waste, loss, and misuse; and
    (3) Reliable data are obtained, maintained, and fairly disclosed in 
reports.
    h. Indian tribe means any Indian tribe, band, nations, or other 
organized group or community, including any Alaskan Native village or 
regional or village corporations (as defined in, or established under, 
the Alaskan Native Claims Settlement Act) that is recognized by the 
United States as eligible for the special programs and services provided 
by the United States to Indians because of their status as Indians.
    i. Local government means any unit of local government within a 
State, including a county, a borough, municipality, city, town, 
township, parish, local public authority, special district, school 
district, intrastate district, council of governments, and any other 
instrumentality of local government.
    j. Major Federal Assistance Program, as defined by Pub. L. 98-502, 
is described in the Attachment to this Circular.
    k. Public accountants means those individuals who meet the 
qualification standards included in generally accepted government 
auditing standards for personnel performing government audits.
    l. State means any State of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, 
American Samoa, the Commonwealth of the Northern Mariana Islands, and 
the Trust Territory of the Pacific Islands, any instrumentality thereof, 
and any multi-State, regional, or interstate entity that has 
governmental functions and any Indian tribe.
    m. Subrecipient means any person or government department, agency, 
or establishment that receives Federal financial assistance to carry out 
a program through a State or local government, but does not include an 
individual that is a beneficiary of such a program. A subrecipient may 
also be a direct recipient of Federal financial assistance.
    6. Scope of audit. The Single Audit Act provides that:
    a. The audit shall be made by an independent auditor in accordance 
with generally accepted government auditing standards covering financial 
and compliance audits.
    b. The audit shall cover the entire operations of a State or local 
government or, at the option of that government, it may cover 
departments, agencies or establishments that received, expended, or 
otherwise administered Federal financial assistance during the year. 
However, if a State or local government receives $25,000 or more in 
General Revenue Sharing Funds in a fiscal year, it shall have an audit 
of its entire operations. A series of audits of individual departments, 
agencies, and establishments for the same fiscal year may be considered 
a single audit.
    c. Public hospitals and public colleges and universities may be 
excluded from State and local audits and the requirements of this 
Circular. However, if such entities are excluded, audits of these 
entities shall be made in accordance with statutory requirements and

[[Page 377]]

the provisions of Circular A-110. ``Uniform requirements for grants to 
universities, hospitals, and other nonprofit organizations.''
    d. The auditor shall determine whether:
    (1) The financial statements of the government, department, agency 
or establishment present fairly its financial position and the results 
of its financial operations in accordance with generally accepted 
accounting principles:
    (2) The organization has internal accounting and other control 
systems to provide reasonable assurance that it is managing Federal 
financial assistance programs in compliance with applicable laws and 
regulations; and
    (3) The organization has complied with laws and regulations that may 
have material effect on its financial statements and on each major 
Federal assistance program.
    7. Frequency of audit. Audits shall be made annually unless the 
State or local government has, by January 1, 1987, a constitutional or 
statutory requirement for less frequent audits. For those governments, 
the cognizant agency shall permit biennial audits, covering both years, 
if the government so requests. It shall also honor requests for biennial 
audits by governments that have an administrative policy calling for 
audits less frequent than annual, but only for fiscal years beginning 
before January 1, 1987.
    8. Internal control and compliance reviews. The Single Audit Act 
requires that the independent auditor determine and report on whether 
the organization has internal control systems to provide reasonable 
assurance that it is managing Federal assistance programs in compliance 
with applicable laws and regulations.
    a. Internal control review. In order to provide this assurance the 
auditor must make a study and evaluation of internal control systems 
used in administering Federal assistance programs. The study and 
evaluation must be made whether or not the auditor intends to place 
reliance on such systems. As part of this review, the auditor shall:
    (1) Test whether these internal control systems are functioning in 
accordance with prescribed procedures.
    (2) Examine the recipient's system for monitoring subrecipients and 
obtaining and acting on subrecipient audit reports.
    b. Compliance review. The law also requires the auditor to determine 
whether the organization has complied with laws and regulations that may 
have a material effect on each major Federal assistance program.
    (1) In order to determine which major programs are to be tested for 
compliance, State and local governments shall identify in their accounts 
all Federal funds received and expended and the programs under which 
they were received. This shall include funds received directly from 
Federal agencies and through other State and local governments.
    (2) The review must include the selection and testing of a 
representative number of charges from each major Federal assistance 
program. The selection and testing of transactions shall be based on the 
auditor's professional judgment considering such factors as the amount 
of expenditures for the program and the individual awards; the newness 
of the program or changes in its conditions; prior experience with the 
program, particularly as revealed in audits and other evaluations (e.g., 
inspections program reviews); the extent to which the program is carried 
out through subrecipients; the extent to which the program contracts for 
goods or services; the level to which the program is already subject to 
program reviews or other forms of independent oversight; the adequacy of 
the controls for ensuring compliance; the expectation of adherence or 
lack of adherence to the applicable laws and regulations; and the 
potential impact of adverse findings.
    (a) In making the test of transactions, the auditor shall determine 
whether.

--The amounts reported as expenditures were for allowable services, and
--The records show that those who received services or benefits were 
eligible to receive them.

    (b) In addition to transaction testing, the auditor shall determine 
whether:
--Matching requirements, levels of effort and earmarking limitations 
were met,
--Federal financial reports and claims for advances and reimbursements 
contain information that is supported by the books and records from 
which the basic financial statements have been prepared, and
--Amounts claimed or used for matching were determined in accordance 
with OMB Circular A-87, ``Cost principles for State and local 
governments,'' and Attachment F of Circular A-102, ``Uniform 
requirements for grants to State and local governments.''

    (c) The principal compliance requirements of the largest Federal aid 
programs may be ascertained by referring to the Compliance Supplement 
for Single Audits of State and Local Governments, issued by OMB and 
available from the Government Printing Office. For those programs not 
covered in the Compliance Supplement, the auditor may ascertain 
compliance requirements by researching the statutes, regulations, and 
agreements governing individual programs.
    (3) Transactions related to other Federal assistance programs that 
are selected in connection with examinations of financial statements and 
evaluations of internal controls shall be tested for compliance with 
Federal laws and regulations that apply to such transactions.
    9. Subrecipients. State or local governments that receive Federal 
financial assistance and

[[Page 378]]

provide $25,000 or more of it in a fiscal year to a subrecipient shall:
    a. Determine whether State or local subrecipients have met the audit 
requirements of this Circular and whether subrecipients covered by 
Circular A-110. ``Uniform requirements for grants to universities, 
hospitals, and other nonprofit organizations,'' have met that 
requirement;
    b. Determine whether the subrecipient spent Federal assistance funds 
provided in accordance with applicable laws and regulations. This may be 
accomplished by reviewing an audit of the subrecipient made in 
accordance with this Circular, Circular A-110, or through other means 
(e.g., program reviews) if the subrecipient has not yet had such an 
audit;
    c. Ensure that appropriate corrective action is taken within six 
months after receipt of the audit report in instances of noncompliance 
with Federal laws and regulations;
    d. Consider whether subrecipient audits necessitate adjustment of 
the recipient's own records; and
    e. Require each subrecipient to permit independent auditors to have 
access to the records and financial statements as necessary to comply 
with this Circular.
    10. Relation to other audit requirements. The Single Audit Act 
provides that an audit made in accordance with this Circular shall be in 
lieu of any financial or financial compliance audit required under 
individual Federal assistance programs. To the extent that a single 
audit provides Federal agencies with information and assurance they need 
to carry out their overall responsibilities, they shall rely upon and 
use such information. However, a Federal agency shall make any 
additional audits which are necessary to carry out its responsibilities 
under Federal law and regulation. Any additional Federal audit effort 
shall be planned and carried out in such a way as to avoid duplication.
    a. The provisions of this Circular do not limit the authority of 
Federal agencies to make, or contract for audits and evaluations of 
Federal financial assistance programs, nor do they limit the authority 
of any Federal agency Inspector General or other Federal audit official.
    b. The provisions of this Circular do not authorize any State or 
local government or subrecipient thereof to constrain Federal agencies, 
in any manner, from carrying out additional audits.
    c. A Federal agency that makes or contracts for audits in additon to 
the audits made by recipients pursuant to this Circular shall, 
consistent with other applicable laws and regulations, arrange for 
funding the cost of such additional audits. Such additional audits 
include economy and efficiency audits, program results audits, and 
program evaluations.
    11. Cognizant agency responsibilities. The Single Audit Act provides 
for congnizant Federal agencies to oversee the implementation of this 
Circular.
    a. The Office of Management and Budget will assign cognizant 
agencies for States and their subdivisions and larger local governments 
and their subdivisions. Other Federal agencies may participate with an 
assigned cognizant agency, in order to fulfill the cognizant 
responsibilities. Smaller governments not assigned a cognizant agency 
will be under the general oversight of the Federal agency that provides 
them the most funds whether directly or indirectly.
    b. A cognizant agency shall have the following responsibilities:
    (1) Ensure that audits are made and reports are received in a timely 
manner and in accordance with the requirements of this Circular.
    (2) Provide technical advice and liaison to State and local 
governments and independent auditors.
    (3) Obtain or make quality control reviews of selected audits made 
by non-Federal audit organizations, and provide the results, when 
appropriate, to other interested organizations.
    (4) Promptly inform other affected Federal agencies and appropriate 
Federal law enforcement officials of any reported illegal acts or 
irregularities. They should also inform State or local law enforcement 
and prosecuting authorities, if not advised by the recipient, of any 
violation of law within their jurisdiction.
    (5) Advise the recipient of audits that have been found not to have 
met the requirements set forth in this Circular. In such instances, the 
recipient will be expected to work with the auditor to take corrective 
action. If corrective action is not taken, the cognizant agency shall 
notify the recipient and Federal awarding agencies of the facts and make 
recommendations for followup action. Major inadequacies or repetitive 
substandard performance of independent auditors shall be referred to 
appropriate professional bodies for disciplinary action.
    (6) Coordinate, to the extent practicable, audits made by or for 
Federal agencies that are in addition to the audits made pursuant to 
this Circular, so that the additional audits build up such audits.
    (7) Oversee the resolution of audit findings that affect the 
programs of more than one agency.
    12. Illegal acts or irregularities. If the auditor becomes aware of 
illegal acts or other irregularities, prompt notice shall be given to 
recipient management officials above the level of involvement. (See also 
program 13(a)(3) below for the auditor's reporting responsibilities.) 
The recipient, in turn, shall promptly notify the cognizant agency of 
the illegal

[[Page 379]]

acts or irregularities and of proposed and actual actions, if any. 
Illegal acts and irregularities include such matters as conflicts of 
interest, falsification of records or reports, and misappropriations of 
funds or other assets.
    13. Audit Reports. Audit reports must be prepared at the completion 
of the audit. Reports serve many needs of State and local governments as 
well as meeting the requirements of the Single Audit Act.
    a. The audit report shall state that the audit was made in 
accordance with the provisions of this Circular. The report shall be 
made up of at least:
    (1) The auditor's report on financial statements and on a schedule 
of Federal assistance; the financial statements; and a schedule of 
Federal assistance, showing the total expenditures for each Federal 
assitance program as identified in the Catalog of Federal Domestic 
Assistance. Federal programs or grants that have not been assigned a 
catalog number shall be identified under the caption ``other Federal 
assistance.''
    (2) The author's report on the study and evaluation of internal 
control systems must identify the organization's significant internal 
accounting controls, and those controls designed to provide reasonable 
assurance that Federal programs are being managed in compliance with 
laws and regulations. It must also identify the controls that were 
evaluated, the controls that were not evaluated, and the material 
weaknesses identified as a result of the evaluation.
    (3) The auditor's report on compliance containing:

--A statement of positive assurance with respect to those items tested 
for compliance, including compliance with law and regulations pertaining 
to financial reports and claims for advances and reimbursements;
--Negative assurance on those items not tested;
--A summary of all instances of noncompliance; and
--An identification of total amounts questioned, if any, for each 
Federal assistance award, as a result of noncompliance.

    b. The three parts of the audit report may be bound into a single 
report, or presented at the same time as separate documents.
    c. All fraud abuse, or illegal acts or indications of such acts, 
including all questioned costs found as the result of these acts that 
auditors become aware of, should normally be covered in a separate 
written report submitted in accordance with paragraph 13f.
    d. In addition to the audit report, the recipient shall provide 
comments on the findings and recommendations in the report, including a 
plan for corrective action taken or planned and comments on the status 
of corrective action taken on prior findings. If corrective action is 
not necessary, a statement describing the reason it is not should 
accompany the audit report.
    e. The reports shall be made available by the State or local 
government for public inspection within 30 days after the completion of 
the audit.
    f. In accordance with generally accepted government audit standards, 
reports shall be submitted by the auditor to the organization audited 
and to those requiring or arranging for the audit. In addition, the 
recipient shall submit copies of the reports to each Federal department 
or agency that provided Federal assistance funds to the recipient. 
Subrecipients shall submit copies to recipients that provided them 
Federal assistance funds. The reports shall be sent within 30 days after 
the completion of the audit, but no later than one year after the end of 
the audit period unless a longer period is agreed to with the cognizant 
agency.
    g. Recipients of more than $100,000 in Federal funds shall submit 
one copy of the audit report within 30 days after issuance to a central 
clearinghouse to be designated by the Office of Management and Budget. 
The clearinghouse will keep completed audits on file and follow up with 
State and local governments that have not submitted required audit 
reports.
    h. Recipients shall keep audit reports on file for three years from 
their issuance.
    14. Audit Resolution. As provided in paragraph 11, the cognizant 
agency shall be responsible for monitoring the resolution of audit 
findings that affect the programs of more than one Federal agency. 
Resolution of findings that relate to the programs of a single Federal 
agency will be the responsibility of the recipient and that agency. 
Alternate arrangements may be made on a case-by-case basis by agreement 
among the agencies concerned.
    Resolution shall be made within six months after receipt of the 
report by the Federal departments and agencies. Corrective action should 
proceed as rapidly as possible.
    15. Audit workpapers and reports. Workpapers and reports shall be 
retained for a minimum of three years from the date of the audit report, 
unless the auditor is notified in writing by the cognizant agency to 
extend the retention period. Audit workpapers shall be made available 
upon request to the cognizant agency or its designee or the General 
Accounting Office, at the completion of the audit.
    16. Audit Costs. The cost of audits made in accordance with the 
provisions of this Circular are allowable charges to Federal assistance 
programs.
    a. The charges may be considered a direct cost or an allocated 
indirect cost, determined in accordance with the provision of Circular 
A-87, ``Cost principles for State and local governments.''

[[Page 380]]

    b. Generally, the percentage of costs charged to Federal assistance 
programs for a single audit shall not exceed the percentage that Federal 
funds expended represent of total funds expended by the recipient during 
the fiscal year. The percentage may be exceeded, however, if appropriate 
documentation demonstrates higher actual cost.
    17. Sanctions. The Single Audit Act provides that no cost may be 
charged to Federal assistance programs for audits required by the Act 
that are not made in accordance with this Circular. In cases of 
continued inability or unwillingness to have a proper audit, Federal 
agencies must consider other appropriate sanctions including:

--Withholding a percentage of assistance payments until the audit its 
completed satisfactorily,
--Withholding or disallowing overhead costs, and
--Suspending the Federal assistance agreement until the audit is made.

    18. Auditor Selection. In arranging for audit services State and 
local governments shall follow the procurement standards prescribed by 
Attachment O of Circular A-102, ``Uniform requirements for grants to 
State and local governments.'' The standards provide that while 
recipients are encouraged to enter into intergovernmental agreements for 
audit and other services, analysis should be made to determine whether 
it would be more economical to purchase the services from private firms. 
In instances where use of such intergovernmental agreements are required 
by State statutes (e.g., audit services) these statutes will take 
precedence.
    19. Small and Minority Audit Firms. Small audit firms and audit 
firms owned and controlled by socially and economically disadvantaged 
individuals shall have the maximum practicable opportunity to 
participate in contracts awarded to fulfill the requirements of this 
Circular. Recipients of Federal assistance shall take the following 
steps to further this goal:
    a. Assure that small audit firms and audit firms owned and 
controlled by socially and economically disadvantaged individuals are 
used to the fullest extent practicable.
    b. Make information on forthcoming opportunities available and 
arrange timeframes for the audit so as to encourage and facilitate 
participation by small audit firms and audit firms owned and controlled 
by socially and economically disadvantaged individuals.
    c. Consider in the contract process whether firms competing for 
larger audits intend to subcontract with small audit firms and audit 
firms owned and controlled by socially and economically disadvantaged 
individuals.
    d. Encourage contracting with small audit firms or audit firms owned 
and controlled by socially and economically disadvantaged individuals 
which have traditionally audited government programs and, in such cases 
where this is not possible, assure that these firms are given 
consideration for audit subcontracting opportunities.
    e. Encourage contracting with consortiums of small audit firms as 
described in paragraph (a) above when a contract is too large for an 
individual small audit firm or audit firm owned and controlled by 
socially and economically disadvantaged individuals.
    f. Use the services and assistance, as appropriate, of such 
organizations as the Small Business Administration in the solicitation 
and utilization of small audit firms or audit firms owned and controlled 
by socially and economically disadvantaged individuals.
    20. Reporting. Each Federal agency will report to the Director of 
OMB on or before March 1, 1987, and annually thereafter on the 
effectiveness of State and local governments in carrying out the 
provisions of this Circular. The report must identify each State or 
local government or Indian tribe that, in the opinion of the agency, is 
failing to comply with the Circular.
    21. Regulations. Each Federal agency shall include the provisions of 
this Circular in its regulations implementing the Single Audit Act.
    22. Effective date. This Circular is effective upon publication and 
shall apply to fiscal years of State and local governments that begin 
after December 31, 1984. Earlier implementation is encouraged. However, 
until it is implemented, the audit provisions of Attachment P to 
Circular A-102 shall continue to be observed.
    23. Inquiries, All questions or inquiries should be addressed to 
Financial Management Division, Office of Management and Budget, 
telephone number 202/395-3993.
    24. Sunset review date. This Circular shall have an independent 
policy review to ascertain its effectiveness three years from the date 
of issuance.
                                                      David A. Stockman,
                                                               Director.

                       Attachment--Circular A-128

        Definition of Major Program as Provided in Pub. L. 96-502

    Major Federal Assistance Program, for State and local governments 
having Federal assistance expenditures between $100,000 and 
$100,000,000, means any program for which Federal expenditures during 
the applicable year exceed the larger of $308,000, or 3 percent of such 
total expenditures.
    Where total expenditures of Federal assistance exceed $100,000,000, 
the following criteria apply:

[[Page 381]]



------------------------------------------------------------------------
 Total expenditures of Federal financial assistance      Major Federal
                  for all programs                    assistance program
-----------------------------------------------------  means any program
            More than                But less than       that exceeds
------------------------------------------------------------------------
$100 million....................  $1 billion........  $3 million.
$1 billion......................  $2 billion........  $4 million.
$2 billion......................  $3 billion........  $7 million.
$3 billion......................  $4 billion........  $10 million.
$4 billion......................  $5 billion........  $13 million.
$5 billion......................  $6 billion........  $16 million.
$6 billion......................  $7 billion........  $19 million.
Over $7 billion.................  ..................  $20 million.
------------------------------------------------------------------------


[51 FR 6353, Feb. 21, 1986. Redesignated at 53 FR 8076, Mar. 11, 1988]




  PART 32--GOVERNMENTWIDE DEBARMENT AND SUSPENSION (NONPROCUREMENT) AND GOVERNMENTWIDE REQUIREMENTS FOR DRUG-FREE WORKPLACE (GRANTS); CLEAN AIR ACT 

AND CLEAN 
WATER ACT INELIGIBILITY OF FACILITIES IN PERFORMANCE OF FEDERAL CONTRACTS, GRANTS AND LOANS--Table of Contents




                           Subpart A--General

Sec.
32.100  Purpose.
32.105  Definitions.
32.110  Coverage.
32.115  Policy.

                       Subpart B--Effect of Action

32.200  Debarment or suspension.
32.205  Ineligible persons.
32.210  Voluntary exclusion.
32.215  Exception provision.
32.220  Continuation of covered transactions.
32.225  Failure to adhere to restrictions.

                          Subpart C--Debarment

32.300  General.
32.305  Causes for debarment.
32.310  Procedures.
32.311  Investigation and referral.
32.312  Notice of proposed debarment.
32.313  Opportunity to contest proposed debarment.
32.314  Debarring official's decision.
32.315  Settlement and voluntary exclusion.
32.320  Period of debarment.
32.321  Reinstatement of facility eligibility.
32.325  Scope of debarment.
32.335  Appeal.

                          Subpart D--Suspension

32.400  General.
32.405  Causes for suspension.
32.410  Procedures.
32.411  Notice of suspension.
32.412  Opportunity to contest suspension.
32.413  Suspending official's decision.
32.415  Period of suspension.
32.420  Scope of suspension.
32.430  Appeal.

       Subpart E--Responsibilities of GSA, Agency and Participants

32.500  GSA responsibilities.
32.505  EPA responsibilities.
32.510  Participants' responsibilities.

          Subpart F--Drug-Free Workplace Requirements (Grants)

32.600  Purpose.
32.605  Definitions.
32.610  Coverage.
32.615  Grounds for suspension of payments, suspension or termination of 
          grants, or suspension or debarment.
32.620  Effect of violation.
32.625  Exception provision.
32.630  Certification requirements and procedures.
32.635  Reporting of and employee sanctions for convictions of criminal 
          drug offenses.

Appendix A to Part 32--Certification Regarding Debarment, Suspension, 
          and Other Responsibility Matters--Primary Covered Transactions
Appendix B to Part 32--Certification Regarding Debarment, Suspension, 
          Ineligibility and Voluntary Exclusion--Lower Tier Covered 
          Transactions
Appendix C to Part 32--Certification Regarding Drug-Free Workplace 
          Requirements

    Authority: E.O. 12549; 41 U.S.C. 701 et seq.; 7 U.S.C. 136 et seq.; 
15 U.S.C. 2601 et seq.; 20 U.S.C. 4011 et seq.; 33 U.S.C. 1251 et seq.; 
42 U.S.C. 300f, 4901, 6901, 7401, 9801 et seq.; E.O. 12689; E.O. 11738; 
Pub. L. 103-355 Sec. 2455.

    Source: 53 FR 19196, 19204, May 26, 1988, unless otherwise noted.

    Cross Reference: See also Office of Management and Budget notice 
published at 55 FR 21679, May 25, 1990, and at 60 FR 33036, June 26, 
1995.



                           Subpart A--General



Sec. 32.100  Purpose.

    (a) Executive Order (E.O.) 12549 provides that, to the extent 
permitted by law, Executive departments and agencies shall participate 
in a governmentwide system for nonprocurement debarment and suspension. 
A person who is debarred or suspended shall be excluded

[[Page 382]]

from Federal financial and nonfinancial assistance and benefits under 
Federal programs and activities. Debarment or suspension of a 
participant in a program by one agency shall have governmentwide effect.
    (b) These regulations implement section 3 of E.O. 12549 and the 
guidelines promulgated by the Office of Management and Budget under 
section 6 of the E.O. by:
    (1) Prescribing the programs and activities that are covered by the 
governmentwide system;
    (2) Prescribing the governmentwide criteria and governmentwide 
minimum due process procedures that each agency shall use;
    (3) Providing for the listing of debarred and suspended 
participants, participants declared ineligible (see definition of 
``ineligible'' in Sec. 32.105), and participants who have voluntarily 
excluded themselves from participation in covered transactions;
    (4) Setting forth the consequences of a debarment, suspension, 
determination of ineligibility, or voluntary exclusion; and
    (5) Offering such other guidance as necessary for the effective 
implementation and administration of the governmentwide system.
    (c) These regulations also implement Executive Order 12689 (3 CFR, 
1989 Comp., p. 235) and 31 U.S.C. 6101 note (Public Law 103-355, sec. 
2455, 108 Stat. 3327) by--
    (1) Providing for the inclusion in the List of Parties Excluded from 
Federal Procurement and Nonprocurement Programs all persons proposed for 
debarment, debarred or suspended under the Federal Acquisition 
Regulation, 48 CFR part 9, subpart 9.4; persons against which 
governmentwide exclusions have been entered under this part; and persons 
determined to be ineligible; and
    (2) Setting forth the consequences of a debarment, suspension, 
determination of ineligibility, or voluntary exclusion.
    (d) Although these regulations cover the listing of ineligible 
participants and the effect of such listing, they do not prescribe 
policies and procedures governing declarations of ineligibility.
    (e) Facilities ineligible to provide goods, materials, or services 
under Federal contracts, loans or assistance, pursuant to Section 306 of 
the Clean Air Act (CAA) or Section 508 of the Clean Water Act (CWA) are 
excluded in accordance with the terms of those statutes. Reinstatement 
of a CAA or CWA ineligible facility may be requested in accordance with 
the procedures at Sec. 32.321.

[60 FR 33040, 33059, June 26, 1995, as amended at 61 FR 28756, June 6, 
1996]



Sec. 32.105  Definitions.

    The following definitions apply to this part:
    Adequate evidence. Information sufficient to support the reasonable 
belief that a particular act or omission has occurred.
    Affiliate. Persons are affiliates of each other if, directly or 
indirectly, either one controls or has the power to control the other, 
or, a third person controls or has the power to control both. Indicia of 
control include, but are not limited to: interlocking management or 
ownership, identity of interests among family members, shared facilities 
and equipment, common use of employees, or a business entity organized 
following the suspension or debarment of a person which has the same or 
similar management, ownership, or principal employees as the suspended, 
debarred, ineligible, or voluntarily excluded person.
    Agency. Any executive department, military department or defense 
agency or other agency of the executive branch, excluding the 
independent regulatory agencies.
    Agency head. Administrator of the Environmental Protection Agency.
    CAA or CWA ineligibility. The status of a facility which, as 
provided in section 306 of the Clean Air Act (CAA) and section 508 of 
the Clean Water Act (CWA), is ineligible to be used in the performance 
of a Federal contract, subcontract, loan, assistance award or covered 
transaction. Such ineligibility commences upon conviction of a facility 
owner, lessee, or supervisor for a violation of section 113 of the CAA 
or section 309(c) of the CWA, which violation occurred at the facility. 
The ineligibility of the facility continues until such time as the EPA 
Debarring Official certifies that the condition giving

[[Page 383]]

rise to the CAA or CWA criminal conviction has been corrected.
    Civil judgment. The disposition of a civil action by any court of 
competent jurisdiction, whether entered by verdict, decision, 
settlement, stipulation, or otherwise creating a civil liability for the 
wrongful acts complained of; or a final determination of liability under 
the Program Fraud Civil Remedies Act of 1988 (31 U.S.C. 3801-12).
    Conviction. A judgment of conviction of a criminal offense by any 
court of competent jurisdiction, whether entered upon a verdict or a 
plea, including a plea of nolo contendere.
    Debarment. An action taken by a debarring official in accordance 
with these regulations to exclude a person from participating in covered 
transactions. A person so excluded is ``debarred.''
    Debarring official. An official authorized to impose debarment. The 
debarring official is either:
    (1) The agency head, or
    (2) An official designated by the agency head.
    EPA. Environmental Protection Agency.
    Facility. Any building, plant, installation, structure, mine, 
vessel, floating craft, location or site of operations at which, or from 
which, a Federal contract, subcontract, loan, assistance award or 
covered transaction is to be performed. Where a location or site of 
operations contains or includes more than one building, plant, 
installation or structure, the entire location or site shall be deemed 
the facility unless otherwise limited by EPA.
    Indictment. Indictment for a criminal offense. An information or 
other filing by competent authority charging a criminal offense shall be 
given the same effect as an indictment.
    Ineligible. Excluded from participation in Federal nonprocurement 
programs pursuant to a determination of ineligibility under statutory, 
executive order, or regulatory authority, other than Executive Order 
12549 and its agency implementing regulations; for exemple, excluded 
pursuant to the Davis-Bacon Act and its implementing regulations, the 
equal employment opportunity acts and executive orders, or the 
environmental protection acts and executive orders. A person is 
ineligible where the determination of ineligibility affects such 
person's eligibility to participate in more than one covered 
transaction.
    Legal proceedings. Any criminal proceeding or any civil judicial 
proceeding to which the Federal Government or a State or local 
government or quasi-governmental authority is a party. The term includes 
appeals from such proceedings.
    List of Parties Excluded from Federal Procurement and Nonprocurement 
Programs. A list compiled, maintained and distributed by the General 
Services Administration (GSA) containing the names and other information 
about persons who have been debarred, suspended, or voluntarily excluded 
under Executive Orders 12549 and 12689 and these regulations or 48 CFR 
part 9, subpart 9.4, persons who have been proposed for debarment under 
48 CFR part 9, subpart 9.4, and those persons who have been determined 
to be ineligible.
    Notice. A written communication served in person or sent by 
certified mail, return receipt requested, or its equivalent, to the last 
known address of a party, its identified counsel, its agent for service 
of process, or any partner, officer, director, owner, or joint venturer 
of the party. Notice, if undeliverable, shall be considered to have been 
received by the addressee five days after being properly sent to the 
last address known by the agency.
    Participant. Any person who submits a proposal for, enters into, or 
reasonably may be expected to enter into a covered transaction. This 
term also includes any person who acts on behalf of or is authorized to 
commit a participant in a covered transaction as an agent or 
representative of another participant.
    Person. Any individual, corporation, partnership, association, unit 
of government or legal entity, however organized, except: foreign 
governments or foreign governmental entities, public international 
organizations, foreign government owned (in whole or in part) or 
controlled entities, and entities consisting wholly or partially of 
foreign governments or foreign governmental entities.

[[Page 384]]

    Preponderance of the evidence. Proof by information that, compared 
with that opposing it, leads to the conclusion that the fact at issue is 
more probably true than not.
    Principal. Officer, director, owner, partner, key employee, or other 
person within a participant with primary management or supervisory 
responsibilities; or a person who has a critical influence on or 
substantive control over a covered transaction, whether or not employed 
by the participant. Persons who have a critical influence on or 
substantive control over a covered transaction are:
    (1) Principal investigators.
    (2) Bid and proposal estimators and preparers.
    Proposal. A solicited or unsolicited bid, application, request, 
invitation to consider or similar communication by or on behalf of a 
person seeking to participate or to receive a benefit, directly or 
indirectly, in or under a covered transaction.
    Respondent. A person against whom a debarment or suspension action 
has been initiated.
    State. Any of the States of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, any territory or possession 
of the United States, or any agency of a State, exclusive of 
institutions of higher education, hospitals, and units of local 
government. A State instrumentality will be considered part of the State 
government if it has a written determination from a State government 
that such State considers that instrumentality to be an agency of the 
State government.
    Suspending official. An official authorized to impose suspension. 
The suspending official is either:
    (1) The agency head, or
    (2) An official designated by the agency head.
    Suspension. An action taken by a suspending official in accordance 
with these regulations that immediately excludes a person from 
participating in covered transactions for a temporary period, pending 
completion of an investigation and such legal, debarment, or Program 
Fraud Civil Remedies Act proceedings as may ensue. A person so excluded 
is ``suspended.''
    Voluntary exclusion or voluntarily excluded. A status of 
nonparticipation or limited participation in covered transactions 
assumed by a person pursuant to the terms of a settlement.

[53 FR 19196, 19204, May 26, 1988, as amended at 53 FR 19196, May 26, 
1988; 59 FR 50692, Oct. 5, 1994; 60 FR 33040, 33059, June 26, 1995; 61 
FR 28756, June 6, 1996; 62 FR 47149, Sept. 8, 1997]



Sec. 32.110  Coverage.

    (a) These regulations apply to all persons who have participated, 
are currently participating or may reasonably be expected to participate 
in transactions under Federal nonprocurement programs. For purposes of 
these regulations such transactions will be referred to as ``covered 
transactions.''
    (1) Covered transaction. For purposes of these regulations, a 
covered transaction is a primary covered transaction or a lower tier 
covered transaction. Covered transactions at any tier need not involve 
the transfer of Federal funds.
    (i) Primary covered transaction. Except as noted in paragraph (a)(2) 
of this section, a primary covered transaction is any nonprocurement 
transaction between an agency and a person, regardless of type, 
including: grants, cooperative agreements, scholarships, fellowships, 
contracts of assistance, loans, loan guarantees, subsidies, insurance, 
payments for specified use, donation agreements and any other 
nonprocurement transactions between a Federal agency and a person. 
Primary covered transactions also include those transactions specially 
designated by the U.S. Department of Housing and Urban Development in 
such agency's regulations governing debarment and suspension.
    (ii) Lower tier covered transaction. A lower tier covered 
transaction is:
    (A) Any transaction between a participant and a person other than a 
procurement contract for goods or services, regardless of type, under a 
primary covered transaction.
    (B) Any procurement contract for goods or services between a 
participant and a person, regardless of type, expected to equal or 
exceed the Federal procurement small purchase threshold fixed at 10 
U.S.C. 2304(g) and 41 U.S.C.

[[Page 385]]

253(g) (currently $25,000) under a primary covered transaction.
    (C) Any procurement contract for goods or services between a 
participant and a person under a covered transaction, regardless of 
amount, under which that person will have a critical influence on or 
substantive control over that covered transaction. Such persons are:
    (1) Principal investigators.
    (2) Providers of federally-required audit services.
    (2) Exceptions. The following transactions are not covered:
    (i) Statutory entitlements or mandatory awards (but not subtier 
awards thereunder which are not themselves mandatory), including 
deposited funds insured by the Federal Government;
    (ii) Direct awards to foreign governments or public international 
organizations, or transactions with foreign governments or foreign 
governmental entities, public international organizations, foreign 
government owned (in whole or in part) or controlled entities, entities 
consisting wholly or partially of foreign governments or foreign 
governmental entities;
    (iii) Benefits to an individual as a personal entitlement without 
regard to the individual's present responsibility (but benefits received 
in an individual's business capacity are not excepted);
    (iv) Federal employment;
    (A) For the purpose of this paragraph, no transactions under EPA 
assistance programs are deemed to be pursuant to agency-recognized 
emergencies or disasters.
    (B) [Reserved]
    (v) Transactions pursuant to national or agency-recognized 
emergencies or disasters;
    (vi) Incidental benefits derived from ordinary governmental 
operations; and
    (vii) Other transactions where the application of these regulations 
would be prohibited by law.
    (b) Relationship to other sections. This section describes the types 
of transactions to which a debarment or suspension under the regulations 
will apply. Subpart B, ``Effect of Action,'' Sec. 32.200, ``Debarment or 
suspension,'' sets forth the consequences of a debarment or suspension. 
Those consequences would obtain only with respect to participants and 
principals in the covered transactions and activities described in 
Sec. 32.110(a). Sections 32.325, ``Scope of debarment,'' and 32.420, 
``Scope of suspension,'' govern the extent to which a specific 
participant or organizational elements of a participant would be 
automatically included within a debarment or suspension action, and the 
conditions under which affiliates or persons associated with a 
participant may also be brought within the scope of the action.
    (c) Relationship to Federal procurement activities. In accordance 
with E.O. 12689 and section 2455 of Public Law 103-355, any debarment, 
suspension, proposed debarment or other governmentwide exclusion 
initiated under the Federal Acquisition Regulation (FAR) on or after 
August 25, 1995 shall be recognized by and effective for Executive 
Branch agencies and participants as an exclusion under this regulation. 
Similarly, any debarment, suspension or other governmentwide exclusion 
initiated under this regulation on or after August 25, 1995 shall be 
recognized by and effective for those agencies as a debarment or 
suspension under the FAR.
    (d) Except as provided in Sec. 32.215 of this part, Federal agencies 
shall not use a CAA or CWA ineligible facility in the performance of any 
Federal contract, subcontract, loan, assistance award or covered 
transaction.

[53 FR 19196, 19204, May 26, 1988, as amended at 53 FR 19197, May 26, 
1988; 60 FR 33041, 33059, June 26, 1995; 61 FR 28757, June 6, 1996]



Sec. 32.115  Policy.

    (a) In order to protect the public interest, it is the policy of the 
Federal Government to conduct business only with responsible persons. 
Debarment and suspension are discretionary actions that, taken in 
accordance with Executive Order 12549 and these regulations, are 
appropriate means to implement this policy.
    (b) Debarment and suspension are serious actions which shall be used 
only in the public interest and for the Federal Government's protection 
and not for purposes of punishment. Agencies may impose debarment or 
suspension for the causes and in accordance with the procedures set 
forth in these regulations.

[[Page 386]]

    (c) When more than one agency has an interest in the proposed 
debarment or suspension of a person, consideration shall be given to 
designating one agency as the lead agency for making the decision. 
Agencies are encouraged to establish methods and procedures for 
coordinating their debarment or suspension actions.
    (d) It is EPA policy to exercise its authority to reinstate CAA or 
CWA ineligible facilities in a manner which is consistent with the 
policies in paragraphs (a) and (b) of this section.

[53 FR 19196, 19204, May 26, 1988, as amended at 53 FR 19197, May 26, 
1988; 61 FR 28757, June 6, 1996]



                       Subpart B--Effect of Action



Sec. 32.200  Debarment or suspension.

    (a) Primary covered transactions. Except to the extent prohibited by 
law, persons who are debarred or suspended shall be excluded from 
primary covered transactions as either participants or principals 
throughout the Executive Branch of the Federal Government for the period 
of their debarment, suspension, or the period they are proposed for 
debarment under 48 CFR part 9, subpart 9.4. Accordingly, no agency shall 
enter into primary covered transactions with such excluded persons 
during such period, except as permitted pursuant to Sec. 32.215.
    (b) Lower tier covered transactions. Except to the extent prohibited 
by law, persons who have been proposed for debarment under 48 CFR part 
9, subpart 9.4, debarred or suspended shall be excluded from 
participating as either participants or principals in all lower tier 
covered transactions (see Sec. 32.110(a)(1)(ii)) for the period of their 
exclusion.
    (c) Exceptions. Debarment or suspension does not affect a person's 
eligibility for--
    (1) Statutory entitlements or mandatory awards (but not subtier 
awards thereunder which are not themselves mandatory), including 
deposited funds insured by the Federal Government;
    (2) Direct awards to foreign governments or public international 
organizations, or transactions with foreign governments or foreign 
governmental entities, public international organizations, foreign 
government owned (in whole or in part) or controlled entities, and 
entities consisting wholly or partially of foreign governments or 
foreign governmental entities;
    (3) Benefits to an individual as a personal entitlement without 
regard to the individual's present responsibility (but benefits received 
in an individual's business capacity are not excepted);
    (4) Federal employment;
    (5) Transactions pursuant to national or agency-recognized 
emergencies or disasters;
    (6) Incidental benefits derived from ordinary governmental 
operations; and
    (7) Other transactions where the application of these regulations 
would be prohibited by law.

[60 FR 33041, 33059, June 26, 1995]



Sec. 32.205  Ineligible persons.

    Persons who are ineligible, as defined in Sec. 32.105(i), are 
excluded in accordance with the applicable statutory, executive order, 
or regulatory authority.



Sec. 32.210  Voluntary exclusion.

    Persons who accept voluntary exclusions under Sec. 32.315 are 
excluded in accordance with the terms of their settlements. EPA shall, 
and participants may, contact the original action agency to ascertain 
the extent of the exclusion.



Sec. 32.215  Exception provision.

    (a) EPA may grant an exception permitting a debarred, suspended, or 
voluntarily excluded person, or a person proposed for debarment under 48 
CFR part 9, subpart 9.4, to participate in a particular covered 
transaction upon a written determination by the agency head or an 
authorized designee stating the reason(s) for deviating from the 
Presidential policy established by Executive Order 12549 and 
Sec. 32.200. However, in accordance with the President's stated 
intention in the Executive Order, exceptions shall be granted only 
infrequently. Exceptions shall be reported in accordance with 
Sec. 32.505(a).
    (b) Any agency head, or authorized designee, may except any Federal 
contract, subcontract, loan, assistance award or covered transaction, 
individually or as a class, in whole or in part,

[[Page 387]]

from the prohibitions otherwise applicable by reason of a CAA or CWA 
ineligibility. The agency head granting the exception shall notify the 
EPA Debarring Official of the exception as soon, before or after 
granting the exception, as may be practicable. The justification for 
such an exception, or any renewal thereof, shall fully describe the 
purpose of the contract or covered transaction, and show why the 
paramount interest of the United States requires the exception.
    (c) The EPA Debarring Official is the official authorized to grant 
exceptions under this section for EPA.

[61 FR 28757, June 6, 1996]



Sec. 32.220  Continuation of covered transactions.

    (a) Notwithstanding the debarment, suspension, proposed debarment 
under 48 CFR part 9, subpart 9.4, determination of ineligibility, or 
voluntary exclusion of any person by an agency, agencies and 
participants may continue covered transactions in existence at the time 
the person was debarred, suspended, proposed for debarment under 48 CFR 
part 9, subpart 9.4, declared ineligible, or voluntarily excluded. A 
decision as to the type of termination action, if any, to be taken 
should be made only after thorough review to ensure the propriety of the 
proposed action.
    (b) Agencies and participants shall not renew or extend covered 
transactions (other than no-cost time extensions) with any person who is 
debarred, suspended, proposed for debarment under 48 CFR part 9, subpart 
9.4, ineligible or voluntary excluded, except as provided in 
Sec. 32.215.

[60 FR 33041, 33059, June 26, 1995]



Sec. 32.225  Failure to adhere to restrictions.

    (a) Except as permitted under Sec. 32.215 or Sec. 32.220, a 
participant shall not knowingly do business under a covered transaction 
with a person who is--
    (1) Debarred or suspended;
    (2) Proposed for debarment under 48 CFR part 9, subpart 9.4; or
    (3) Ineligible for or voluntarily excluded from the covered 
transaction.
    (b) Violation of the restriction under paragraph (a) of this section 
may result in disallowance of costs, annulment or termination of award, 
issuance of a stop work order, debarment or suspension, or other 
remedies as appropriate.
    (c) A participant may rely upon the certification of a prospective 
participant in a lower tier covered transaction that it and its 
principals are not debarred, suspended, proposed for debarment under 48 
CFR part 9, subpart 9.4, ineligible, or voluntarily excluded from the 
covered transaction (See appendix B of these regulations), unless it 
knows that the certification is erroneous. An agency has the burden of 
proof that a participant did knowingly do business with a person that 
filed an erroneous certification.

[60 FR 33041, 33059, June 26, 1995]



                          Subpart C--Debarment



Sec. 32.300  General.

    The debarring official may debar a person for any of the causes in 
Sec. 32.305, using procedures established in Secs. 32.310 through 
32.314. The existence of a cause for debarment, however, does not 
necessarily require that the person be debarred; the seriousness of the 
person's acts or omissions and any mitigating factors shall be 
considered in making any debarment decision.



Sec. 32.305  Causes for debarment.

    Debarment may be imposed in accordance with the provisions of 
Secs. 32.300 through 32.314 for:
    (a) Conviction of or civil judgment for:
    (1) Commission of fraud or a criminal offense in connection with 
obtaining, attempting to obtain, or performing a public or private 
agreement or transaction;
    (2) Violation of Federal or State antitrust statutes, including 
those proscribing price fixing between competitors, allocation of 
customers between competitors, and bid rigging;
    (3) Commission of embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, 
receiving stolen property,

[[Page 388]]

making false claims, or obstruction of justice; or
    (4) Commission of any other offense indicating a lack of business 
integrity or business honesty that seriously and directly affects the 
present responsibility of a person.
    (b) Violation of the terms of a public agreement or transaction so 
serious as to affect the integrity of an agency program, such as:
    (1) A willful failure to perform in accordance with the terms of one 
or more public agreements or transactions;
    (2) A history of failure to perform or of unsatisfactory performance 
of one or more public agreements or transactions; or
    (3) A willful violation of a statutory or regulatory provision or 
requirement applicable to a public agreement or transaction.
    (c) Any of the following causes:
    (1) A nonprocurement debarment by any Federal agency taken before 
October 1, 1988, the effective date of these regulations, or a 
procurement debarment by any Federal agency taken pursuant to 48 CFR 
subpart 9.4;
    (2) Knowingly doing business with a debarred, suspended, ineligible, 
or voluntarily excluded person, in connection with a covered 
transaction, except as permitted in Secs. 32.215 or 32.220;
    (3) Failure to pay a single substantial debt, or a number of 
outstanding debts (including disallowed costs and overpayments, but not 
including sums owed the Federal Government under the Internal Revenue 
Code) owed to any Federal agency or instrumentality, provided the debt 
is uncontested by the debtor or, if contested, provided that the 
debtor's legal and administrative remedies have been exhausted;
    (4) Violation of a material provision of a voluntary exclusion 
agreement entered into under Sec. 32.315 or of any settlement of a 
debarment or suspension action; or
    (5) Violation of any requirement of subpart F of this part, relating 
to providing a drug-free workplace, as set forth in Sec. 32.615 of this 
part.
    (d) Any other cause of so serious or compelling a nature that it 
affects the present responsibility of a person.

[53 FR 19196, 19204, May 26, 1988, as amended at 54 FR 4962, Jan. 31, 
1989]



Sec. 32.310  Procedures.

    EPA shall process debarment actions as informally as practicable, 
consistent with the principles of fundamental fairness, using the 
procedures in Secs. 32.311 through 32.314.



Sec. 32.311  Investigation and referral.

    Information concerning the existence of a cause for debarment from 
any source shall be promptly reported, investigated, and referred, when 
appropriate, to the debarring official for consideration. After 
consideration, the debarring official may issue a notice of proposed 
debarment.



Sec. 32.312  Notice of proposed debarment.

    A debarment proceeding shall be initiated by notice to the 
respondent advising:
    (a) That debarment is being considered;
    (b) Of the reasons for the proposed debarment in terms sufficient to 
put the respondent on notice of the conduct or transaction(s) upon which 
it is based;
    (c) Of the cause(s) relied upon under Sec. 32.305 for proposing 
debarment;
    (d) Of the provisions of Sec. 32.311 through Sec. 32.314, and any 
other EPA procedures, if applicable, governing debarment decisionmaking; 
and
    (e) Of the potential effect of a debarment.



Sec. 32.313  Opportunity to contest proposed debarment.

    (a) Submission in opposition. Within 30 days after receipt of the 
notice of proposed debarment, the respondent may submit, in person, in 
writing, or through a representative, information and argument in 
opposition to the proposed debarment.
    (1) If the respondent desires a hearing, it shall submit a written 
request to the debarring official within the 30-day period following 
receipt of the notice of proposed debarment.
    (2) [Reserved]
    (b) Additional proceedings as to disputed material facts. (1) In 
actions not based upon a conviction or civil judgment, if the debarring 
official finds that the respondent's submission in opposition raises a 
genuine dispute over

[[Page 389]]

facts material to the proposed debarment, respondent(s) shall be 
afforded an opportunity to appear with a representative, submit 
documentary evidence, present witnesses, and confront any witness the 
agency presents.
    (2) A transcribed record of any additional proceedings shall be made 
available at cost to the respondent, upon request, unless the respondent 
and the agency, by mutual agreement, waive the requirement for a 
transcript.

[53 FR 19196, 19204, May 26, 1988, as amended at 53 FR 19197, May 26, 
1988]



Sec. 32.314  Debarring official's decision.

    (a) No additional proceedings necessary. In actions based upon a 
conviction or civil judgment, or in which there is no genuine dispute 
over material facts, the debarring official shall make a decision on the 
basis of all the information in the administrative record, including any 
submission made by the respondent. The decision shall be made within 45 
days after receipt of any information and argument submitted by the 
respondent, unless the debarring official extends this period for good 
cause.
    (b) Additional proceedings necessary. (1) In actions in which 
additional proceedings are necessary to determine disputed material 
facts, written findings of fact shall be prepared. The debarring 
official shall base the decision on the facts as found, together with 
any information and argument submitted by the respondent and any other 
information in the administrative record.
    (2) The debarring official may refer disputed material facts to 
another official for findings of fact. The debarring official may reject 
any such findings, in whole or in part, only after specifically 
determining them to be arbitrary and capricious or clearly erroneous.
    (3) The debarring official's decision shall be made after the 
conclusion of the proceedings with respect to disputed facts.
    (c)(1) Standard of proof. In any debarment action, the cause for 
debarment must be established by a preponderance of the evidence. Where 
the proposed debarment is based upon a conviction or civil judgment, the 
standard shall be deemed to have been met.
    (2) Burden of proof. The burden of proof is on the agency proposing 
debarment.
    (d) Notice of debarring official's decision. (1) If the debarring 
official decides to impose debarment, the respondent shall be given 
prompt notice:
    (i) Referring to the notice of proposed debarment;
    (ii) Specifying the reasons for debarment;
    (iii) Stating the period of debarment, including effective dates; 
and
    (iv) Advising that the debarment is effective for covered 
transactions throughout the executive branch of the Federal Government 
unless an agency head or an authorized designee makes the determination 
referred to in Sec. 32.215.
    (2) If the debarring official decides not to impose debarment, the 
respondent shall be given prompt notice of that decision. A decision not 
to impose debarment shall be without prejudice to a subsequent 
imposition of debarment by any other agency.



Sec. 32.315  Settlement and voluntary exclusion.

    (a) When in the best interest of the Government, EPA may, at any 
time, settle a debarment or suspension action.
    (1) The debarring and suspending official is the official authorized 
to settle debarment or suspension actions.
    (2) [Reserved]
    (b) If a participant and the agency agree to a voluntary exclusion 
of the participant, such voluntary exclusion shall be entered on the 
Nonpro-curement List (see subpart E).
    (c) The EPA Debarring Official may consider matters regarding 
present responsibility, as well as any other matter regarding the 
conditions giving rise to alleged CAA or CWA violations in anticipation 
of entry of a plea, judgment or conviction. If, at any time, it is in 
the interest of the United States to conclude such matters pursuant to a 
comprehensive settlement agreement, the EPA Debarring Official may 
conclude the debarment and ineligibility matters as part of any such 
settlement, so long as he or she certifies that the

[[Page 390]]

condition giving rise to the CAA or CWA violation has been corrected.

[53 FR 19196, 19204, May 26, 1988, as amended at 53 FR 19197, May 26, 
1988; 61 FR 28757, June 6, 1996]



Sec. 32.320  Period of debarment.

    (a) Debarment shall be for a period commensurate with the 
seriousness of the cause(s). If a suspension precedes a debarment, the 
suspension period shall be considered in determining the debarment 
period.
    (1) Debarment for causes other than those related to a violation of 
the requirements of subpart F of this part generally should not exceed 
three years. Where circumstances warrant, a longer period of debarment 
may be imposed.
    (2) In the case of a debarment for a violation of the requirements 
of subpart F of this part (see Sec. 32.305(c)(5)), the period of 
debarment shall not exceed five years.
    (b) The debarring official may extend an existing debarment for an 
additional period, if that official determines that an extension is 
necessary to protect the public interest. However, a debarment may not 
be extended solely on the basis of the facts and circumstances upon 
which the initial debarment action was based. If debarment for an 
additional period is determined to be necessary, the procedures of 
Secs. 32.311 through 32.314 shall be followed to extend the debarment.
    (c) The respondent may request the debarring official to reverse the 
debarment decision or to reduce the period or scope of debarment. Such a 
request shall be in writing and supported by documentation. The 
debarring official may grant such a request for reasons including, but 
not limited to:
    (1) Newly discovered material evidence;
    (2) Reversal of the conviction or civil judgment upon which the 
debarment was based;
    (3) Bona fide change in ownership or management;
    (4) Elimination of other causes for which the debarment was imposed; 
or
    (5) Other reasons the debarring official deems appropriate.

[53 FR 19196, 19204, May 26, 1988, as amended at 54 FR 4962, Jan. 31, 
1989]



Sec. 32.321  Reinstatement of facility eligibility.

    (a) A written petition to reinstate the eligibility of a CAA or CWA 
ineligible facility may be submitted to the EPA Debarring Official. The 
petitioner bears the burden of providing sufficient information and 
documentation to establish, by a preponderance of the evidence, that the 
condition giving rise to the CAA or CWA conviction has been corrected. 
If the material facts set forth in the petition are disputed, and the 
Debarring Official denies the petition, the petitioner shall be afforded 
the opportunity to have additional proceedings as provided in 
Sec. 32.314(b).
    (b) A decision by the EPA Debarring Official denying a petition for 
reinstatement may be appealed under Sec. 32.335.

[61 FR 28757, June 6, 1996]



Sec. 32.325  Scope of debarment.

    (a) Scope in general. (1) Debarment of a person under these 
regulations constitutes debarment of all its divisions and other 
organizational elements from all covered transactions, unless the 
debarment decision is limited by its terms to one or more specifically 
identified individuals, divisions or other organizational elements or to 
specific types of transactions.
    (2) The debarment action may include any affiliate of the 
participant that is specifically named and given notice of the proposed 
debarment and an opportunity to respond (see Secs. 32.311 through 
32.314).
    (b) Imputing conduct. For purposes of determining the scope of 
debarment, conduct may be imputed as follows:
    (1) Conduct imputed to participant. The fraudulent, criminal or 
other seriously improper conduct of any officer, director, shareholder, 
partner, employee, or other individual associated with a participant may 
be imputed to the participant when the conduct occurred in connection 
with the individual's performance of duties for or on behalf of the 
participant, or with the participant's knowledge, approval, or 
acquiescence. The participant's acceptance of the benefits derived from 
the conduct shall be evidence of such knowledge, approval, or 
acquiescence.

[[Page 391]]

    (2) Conduct imputed to individuals associated with participant. The 
fraudulent, criminal, or other seriously improper conduct of a 
participant may be imputed to any officer, director, shareholder, 
partner, employee, or other individual associated with the participant 
who participated in, knew of, or had reason to know of the participant's 
conduct.
    (3) Conduct of one participant imputed to other participants in a 
joint venture. The fraudulent, criminal, or other seriously improper 
conduct of one participant in a joint venture, grant pursuant to a joint 
application, or similar arrangement may be imputed to other participants 
if the conduct occurred for or on behalf of the joint venture, grant 
pursuant to a joint application, or similar arrangement may be imputed 
to other participants if the conduct occurred for or on behalf of the 
joint venture, grant pursuant to a joint application, or similar 
arrangement or with the knowledge, approval, or acquiescence of these 
participants. Acceptance of the benefits derived from the conduct shall 
be evidence of such knowledge, approval, or acquiescence.



Sec. 32.335  Appeal.

    (a) The debarment determination under Sec. 32.314 shall be final. 
However, any party to the action may request the Director, Office of 
Grants and Debarment (OGD Director), to review the findings of the 
Debarring Official by filing a request with the OGD Director within 30 
calendar days of the party's receipt of the debarment determination, or 
its reconsideration. The request must be in writing and set forth the 
specific reasons why relief should be granted.
    (b) A review under this section shall be at the discretion of the 
OGD Director. If a review is granted, the debarring official may stay 
the effective date of a debarment order pending resolution of the 
appeal. If a debarment is stayed, the stay shall be automatically lifted 
if the OGD Director affirms the debarment.
    (c) The review shall be based solely upon the record. The OGD 
Director may set aside a determination only if it is found to be 
arbitrary, capricious, and abuse of discretion, or based upon a clear 
error of law.
    (d) The OGD Director's subsequent determination shall be in writing 
and mailed to all parties.
    (e) A determination under Sec. 32.314 or a review under this section 
shall not be subject to a dispute or a bid protest under parts 30, 31 or 
33 of this subchapter.

[53 FR 19197, May 26, 1988, as amended at 59 FR 50693, Oct. 5, 1994; 62 
FR 47149, Sept. 8, 1997]



                          Subpart D--Suspension



Sec. 32.400  General.

    (a) The suspending official may suspend a person for any of the 
causes in Sec. 32.405 using procedures established in Secs. 32.410 
through 32.413.
    (b) Suspension is a serious action to be imposed only when:
    (1) There exists adequate evidence of one or more of the causes set 
out in Sec. 32.405, and
    (2) Immediate action is necessary to protect the public interest.
    (c) In assessing the adequacy of the evidence, the agency should 
consider how much information is available, how credible it is given the 
circumstances, whether or not important allegations are corroborated, 
and what inferences can reasonably be drawn as a result. This assessment 
should include an examination of basic documents such as grants, 
cooperative agreements, loan authorizations, and contracts.



Sec. 32.405  Causes for suspension.

    (a) Suspension may be imposed in accordance with the provisions of 
Secs. 32.400 through 32.413 upon adequate evidence:
    (1) To suspect the commission of an offense listed in 
Sec. 32.305(a); or
    (2) That a cause for debarment under Sec. 32.305 may exist.
    (b) Indictment shall constitute adequate evidence for purposes of 
suspension actions.



Sec. 32.410  Procedures.

    (a) Investigation and referral. Information concerning the existence 
of a cause for suspension from any source

[[Page 392]]

shall be promptly reported, investigated, and referred, when 
appropriate, to the suspending official for consideration. After 
consideration, the suspending official may issue a notice of suspension.
    (b) Decisionmaking process. EPA shall process suspension actions as 
informally as practicable, consistent with principles of fundamental 
fairness, using the procedures in Sec. 32.411 through Sec. 32.413.



Sec. 32.411  Notice of suspension.

    When a respondent is suspended, notice shall immediately be given:
    (a) That suspension has been imposed;
    (b) That the suspension is based on an indictment, conviction, or 
other adequate evidence that the respondent has committed irregularities 
seriously reflecting on the propriety of further Federal Government 
dealings with the respondent;
    (c) Describing any such irregularities in terms sufficient to put 
the respondent on notice without disclosing the Federal Government's 
evidence;
    (d) Of the cause(s) relied upon under Sec. 32.405 for imposing 
suspension;
    (e) That the suspension is for a temporary period pending the 
completion of an investigation or ensuing legal, debarment, or Program 
Fraud Civil Remedies Act proceedings;
    (f) Of the provisions of Sec. 32.411 through Sec. 32.413 and any 
other EPA procedures, if applicable, governing suspension 
decisionmaking; and
    (g) Of the effect of the suspension.



Sec. 32.412  Opportunity to contest suspension.

    (a) Submission in opposition. Within 30 days after receipt of the 
notice of suspension, the respondent may submit, in person, in writing, 
or through a representative, information and argument in opposition to 
the suspension.
    (1) If the respondent desires a hearing, it shall submit a written 
request to the suspending official within the 30-day period following 
receipt of the notice of suspension.
    (2) [Reserved]
    (b) Additional proceedings as to disputed material facts. (1) If the 
suspending official finds that the respondent's submission in opposition 
raises a genuine dispute over facts material to the suspension, 
respondent(s) shall be afforded an opportunity to appear with a 
representative, submit documentary evidence, present witnesses, and 
confront any witness the agency presents, unless:
    (i) The action is based on an indictment, conviction or civil 
judgment, or
    (ii) A determination is made, on the basis of Department of Justice 
advice, that the substantial interests of the Federal Government in 
pending or contemplated legal proceedings based on the same facts as the 
suspension would be prejudiced.
    (2) A transcribed record of any additional proceedings shall be 
prepared and made available at cost to the respondent, upon request, 
unless the respondent and the agency, by mutual agreement, waive the 
requirement for a transcript.

[53 FR 19196, 19204, May 26, 1988, as amended at 53 FR 19197, May 26, 
1988]



Sec. 32.413  Suspending official's decision.

    The suspending official may modify or terminate the suspension (for 
example, see Sec. 32.320(c) for reasons for reducing the period or scope 
of debarment) or may leave it in force. However, a decision to modify or 
terminate the suspension shall be without prejudice to the subsequent 
imposition of suspension by any other agency or debarment by any agency. 
The decision shall be rendered in accordance with the following 
provisions:
    (a) No additional proceedings necessary. In actions: based on an 
indictment, conviction, or civil judgment; in which there is no genuine 
dispute over material facts; or in which additional proceedings to 
determine disputed material facts have been denied on the basis of 
Department of Justice advice, the suspending official shall make a 
decision on the basis of all the information in the administrative 
record, including any submission made by the respondent. The decision 
shall be made within 45 days after receipt of any information and 
argument submitted by the respondent, unless the suspending official 
extends this period for good cause.

[[Page 393]]

    (b) Additional proceedings necessary. (1) In actions in which 
additional proceedings are necessary to determine disputed material 
facts, written findings of fact shall be prepared. The suspending 
official shall base the decision on the facts as found, together with 
any information and argument submitted by the respondent and any other 
information in the administrative record.
    (2) The suspending official may refer matters involving disputed 
material facts to another official for findings of fact. The suspending 
official may reject any such findings, in whole or in part, only after 
specifically determining them to be arbitrary or capricious or clearly 
erroneous.
    (c) Notice of suspending official's decision. Prompt written notice 
of the suspending official's decision shall be sent to the respondent.



Sec. 32.415  Period of suspension.

    (a) Suspension shall be for a temporary period pending the 
completion of an investigation or ensuing legal, debarment, or Program 
Fraud Civil Remedies Act proceedings, unless terminated sooner by the 
suspending official or as provided in paragraph (b) of this section.
    (b) If legal or administrative proceedings are not initiated within 
12 months after the date of the suspension notice, the suspension shall 
be terminated unless an Assistant Attorney General or United States 
Attorney requests its extension in writing, in which case it may be 
extended for an additional six months. In no event may a suspension 
extend beyond 18 months, unless such proceedings have been initiated 
within that period.
    (c) The suspending official shall notify the Department of Justice 
of an impending termination of a suspension, at least 30 days before the 
12-month period expires, to give that Department an opportunity to 
request an extension.



Sec. 32.420  Scope of suspension.

    The scope of a suspension is the same as the scope of a debarment 
(see Sec. 32.325), except that the procedures of Secs. 32.410 through 
32.413 shall be used in imposing a suspension.



Sec. 32.430  Appeal.

    (a) The suspension determination under Sec. 32.413 shall be final. 
However, any party to the action may request the Director, Office of 
Grants and Debarment (OGD Director), to review the findings of the 
suspending official by filing a request with the OGD Director within 30 
calendar days of the party's receipt of the suspension determination, or 
its reconsideration. The request must be in writing and set forth the 
specific reasons why relief should be granted.
    (b) A review under this section shall be at the discretion of the 
OGD Director. If a review is granted, the suspending official may stay 
the effective date of a suspension order pending resolution of appeal. 
If a suspension is stayed, the stay shall be automatically lifted if the 
OGD Director affirms the suspension.
    (c) The review shall be based solely upon the record. The OGD 
Director may set aside a determination only if it is found to be 
arbitrary, capricious, an abuse of discretion, or based upon a clear 
error of law.
    (d) The OGD Director's subsequent determination shall be in writing 
and mailed to all parties.
    (e) A determination under Sec. 32.413 or a review under this section 
shall not be subject to a dispute or a bid protest under parts 30, 31, 
or 33 of this subchapter.

[53 FR 19197, May 26, 1988, as amended at 59 FR 50693, Oct. 5, 1994; 62 
FR 47149, Sept. 8, 1997]



       Subpart E--Responsibilities of GSA, Agency and Participants



Sec. 32.500  GSA responsibilities.

    (a) In accordance with the OMB guidelines, GSA shall compile, 
maintain, and distribute a list of all persons who have been debarred, 
suspended, or voluntarily excluded by agencies under Executive Order 
12549 and these regulations, and those who have been determined to be 
ineligible.
    (b) At a minimum, this list shall indicate:
    (1) The names and addresses of all debarred, suspended, ineligible, 
and

[[Page 394]]

voluntarily excluded persons, in alphabetical order, with cross-
references when more than one name is involved in a single action;
    (2) The type of action;
    (3) The cause for the action;
    (4) The scope of the action;
    (5) Any termination date for each listing; and
    (6) The agency and name and telephone number of the agency point of 
contact for the action.



Sec. 32.505  EPA responsibilities.

    (a) The agency shall provide GSA with current information concerning 
debarments, suspension, determinations of ineligibility, and voluntary 
exclusions it has taken. Until February 18, 1989, the agency shall also 
provide GSA and OMB with information concerning all transactions in 
which EPA has granted exceptions under Sec. 32.215 permitting 
participation by debarred, suspended, or voluntarily excluded persons.
    (b) Unless an alternative schedule is agreed to by GSA, the agency 
shall advise GSA of the information set forth in Sec. 32.500(b) and of 
the exceptions granted under Sec. 32.215 within five working days after 
taking such actions.
    (c) The agency shall direct inquiries concerning listed persons to 
the agency that took the action.
    (d) Agency officials shall check the Nonprocurement List before 
entering covered transactions to determine whether a participant in a 
primary transaction is debarred, suspended, ineligible, or voluntarily 
excluded (Tel. ).
    (e) Agency officials shall check the Nonprocurement List before 
approving principals or lower tier participants where agency approval of 
the principal or lower tier participant is required under the terms of 
the transaction, to determine whether such principals or participants 
are debarred, suspended, ineligible, or voluntarily excluded.



Sec. 32.510  Participants' responsibilities.

    (a) Certification by participants in primary covered transactions. 
Each participant shall submit the certification in appendix A to this 
part for it and its principals at the time the participant submits its 
proposal in connection with a primary covered transaction, except that 
States need only complete such certification as to their principals. 
Participants may decide the method and frequency by which they determine 
the eligibility of their principals. In addition, each participant may, 
but is not required to, check the Nonprocurement List for its principals 
(Tel. ). Adverse information on the certification will not 
necessarily result in denial of participation. However, the 
certification, and any additional information pertaining to the 
certification submitted by the participant, shall be considered in the 
administration of covered transactions.
    (b) Certification by participants in lower tier covered 
transactions. (1) Each participant shall require participants in lower 
tier covered transactions to include the certification in appendix B to 
this part for it and its principals in any proposal submitted in 
connection with such lower tier covered transactions.
    (2) A participant may rely upon the certification of a prospective 
participant in a lower tier covered transaction that it and its 
principals are not debarred, suspended, ineligible, or voluntarily 
excluded from the covered transaction by any Federal agency, unless it 
knows that the certification is erroneous. Participants may decide the 
method and frequency by which they determine the eligiblity of their 
principals. In addition, a participant may, but is not required to, 
check the Nonprocurement List for its principals and for participants 
(Tel. ).
    (c) Changed circumstances regarding certification. A participant 
shall provide immediate written notice to EPA if at any time the 
participant learns that its certification was erroneous when submitted 
or has become erroneous by reason of changed circumstances. Participants 
in lower tier covered transactions shall provide the same updated notice 
to the participant to which it submitted its proposals.



          Subpart F--Drug-Free Workplace Requirements (Grants)

    Source: 55 FR 21688, 21701, May 25, 1990, unless otherwise noted.

[[Page 395]]



Sec. 32.600  Purpose.

    (a) The purpose of this subpart is to carry out the Drug-Free 
Workplace Act of 1988 by requiring that--
    (1) A grantee, other than an individual, shall certify to the agency 
that it will provide a drug-free workplace;
    (2) A grantee who is an individual shall certify to the agency that, 
as a condition of the grant, he or she will not engage in the unlawful 
manufacture, distribution, dispensing, possession or use of a controlled 
substance in conducting any activity with the grant.
    (b) Requirements implementing the Drug-Free Workplace Act of 1988 
for contractors with the agency are found at 48 CFR subparts 9.4, 23.5, 
and 52.2.



Sec. 32.605  Definitions.

    (a) Except as amended in this section, the definitions of 
Sec. 32.105 apply to this subpart.
    (b) For purposes of this subpart--
    (1) Controlled substance means a controlled substance in schedules I 
through V of the Controlled Substances Act (21 U.S.C. 812), and as 
further defined by regulation at 21 CFR 1308.11 through 1308.15;
    (2) Conviction means a finding of guilt (including a plea of nolo 
contendere) or imposition of sentence, or both, by any judicial body 
charged with the responsibility to determine violations of the Federal 
or State criminal drug statutes;
    (3) Criminal drug statute means a Federal or non-Federal criminal 
statute involving the manufacture, distribution, dispensing, use, or 
possession of any controlled substance;
    (4) Drug-free workplace means a site for the performance of work 
done in connection with a specific grant at which employees of the 
grantee are prohibited from engaging in the unlawful manufacture, 
distribution, dispensing, possession, or use of a controlled substance;
    (5) Employee means the employee of a grantee directly engaged in the 
performance of work under the grant, including:
    (i) All direct charge employees;
    (ii) All indirect charge employees, unless their impact or 
involvement is insignificant to the performance of the grant; and,
    (iii) Temporary personnel and consultants who are directly engaged 
in the performance of work under the grant and who are on the grantee's 
payroll.

This definition does not include workers not on the payroll of the 
grantee (e.g., volunteers, even if used to meet a matching requirement; 
consultants or independent contractors not on the payroll; or employees 
of subrecipients or subcontractors in covered workplaces);
    (6) Federal agency or agency means any United States executive 
department, military department, government corporation, government 
controlled corporation, any other establishment in the executive branch 
(including the Executive Office of the President), or any independent 
regulatory agency;
    (7) Grant means an award of financial assistance, including a 
cooperative agreement, in the form of money, or property in lieu of 
money, by a Federal agency directly to a grantee. The term grant 
includes block grant and entitlement grant programs, whether or not 
exempted from coverage under the grants management government-wide 
common rule on uniform administrative requirements for grants and 
cooperative agreements. The term does not include technical assistance 
that provides services instead of money, or other assistance in the form 
of loans, loan guarantees, interest subsidies, insurance, or direct 
appropriations; or any veterans' benefits to individuals, i.e., any 
benefit to veterans, their families, or survivors by virtue of the 
service of a veteran in the Armed Forces of the United States;
    (8) Grantee means a person who applies for or receives a grant 
directly from a Federal agency (except another Federal agency);
    (9) Individual means a natural person;
    (10) State means any of the States of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, any territory or 
possession of the United States, or any agency of a State, exclusive of 
institutions of higher education, hospitals, and units of

[[Page 396]]

local government. A State instrumentality will be considered part of the 
State government if it has a written determination from a State 
government that such State considers the instrumentality to be an agency 
of the State government.



Sec. 32.610  Coverage.

    (a) This subpart applies to any grantee of the agency.
    (b) This subpart applies to any grant, except where application of 
this subpart would be inconsistent with the international obligations of 
the United States or the laws or regulations of a foreign government. A 
determination of such inconsistency may be made only by the agency head 
or his/her designee.
    (c) The provisions of subparts A, B, C, D and E of this part apply 
to matters covered by this subpart, except where specifically modified 
by this subpart. In the event of any conflict between provisions of this 
subpart and other provisions of this part, the provisions of this 
subpart are deemed to control with respect to the implementation of 
drug-free workplace requirements concerning grants.



Sec. 32.615  Grounds for suspension of payments, suspension or termination of grants, or suspension or debarment.

    A grantee shall be deemed in violation of the requirements of this 
subpart if the agency head or his or her official designee determines, 
in writing, that--
    (a) The grantee has made a false certification under Sec. 32.630;
    (b) With respect to a grantee other than an individual--
    (1) The grantee has violated the certification by failing to carry 
out the requirements of paragraphs (A) (a)-(g) and/or (B) of the 
certification (Alternate I to appendix C) or
    (2) Such a number of employees of the grantee have been convicted of 
violations of criminal drug statutes for violations occurring in the 
workplace as to indicate that the grantee has failed to make a good 
faith effort to provide a drug-free workplace.
    (c) With respect to a grantee who is an individual--
    (1) The grantee has violated the certification by failing to carry 
out its requirements (Alternate II to appendix C); or
    (2) The grantee is convicted of a criminal drug offense resulting 
from a violation occurring during the conduct of any grant activity.



Sec. 32.620  Effect of violation.

    (a) In the event of a violation of this subpart as provided in 
Sec. 32.615, and in accordance with applicable law, the grantee shall be 
subject to one or more of the following actions:
    (1) Suspension of payments under the grant;
    (2) Suspension or termination of the grant; and
    (3) Suspension or debarment of the grantee under the provisions of 
this part.
    (b) Upon issuance of any final decision under this part requiring 
debarment of a grantee, the debarred grantee shall be ineligible for 
award of any grant from any Federal agency for a period specified in the 
decision, not to exceed five years (see Sec. 32.320(a)(2) of this part).



Sec. 32.625  Exception provision.

    The agency head may waive with respect to a particular grant, in 
writing, a suspension of payments under a grant, suspension or 
termination of a grant, or suspension or debarment of a grantee if the 
agency head determines that such a waiver would be in the public 
interest. This exception authority cannot be delegated to any other 
official.



Sec. 32.630  Certification requirements and procedures.

    (a)(1) As a prior condition of being awarded a grant, each grantee 
shall make the appropriate certification to the Federal agency providing 
the grant, as provided in appendix C to this part.
    (2) Grantees are not required to make a certification in order to 
continue receiving funds under a grant awarded before March 18, 1989, or 
under a no-cost time extension of such a grant. However, the grantee 
shall make a one-time drug-free workplace certification for a non-
automatic continuation of

[[Page 397]]

such a grant made on or after March 18, 1989.
    (b) Except as provided in this section, all grantees shall make the 
required certification for each grant. For mandatory formula grants and 
entitlements that have no application process, grantees shall submit a 
one-time certification in order to continue receiving awards.
    (c) A grantee that is a State may elect to make one certification in 
each Federal fiscal year. States that previously submitted an annual 
certification are not required to make a certification for Fiscal Year 
1990 until June 30, 1990. Except as provided in paragraph (d) of this 
section, this certification shall cover all grants to all State agencies 
from any Federal agency. The State shall retain the original of this 
statewide certification in its Governor's office and, prior to grant 
award, shall ensure that a copy is submitted individually with respect 
to each grant, unless the Federal agency has designated a central 
location for submission.
    (d)(1) The Governor of a State may exclude certain State agencies 
from the statewide certification and authorize these agencies to submit 
their own certifications to Federal agencies. The statewide 
certification shall name any State agencies so excluded.
    (2) A State agency to which the statewide certification does not 
apply, or a State agency in a State that does not have a statewide 
certification, may elect to make one certification in each Federal 
fiscal year. State agencies that previously submitted a State agency 
certification are not required to make a certification for Fiscal Year 
1990 until June 30, 1990. The State agency shall retain the original of 
this State agency-wide certification in its central office and, prior to 
grant award, shall ensure that a copy is submitted individually with 
respect to each grant, unless the Federal agency designates a central 
location for submission.
    (3) When the work of a grant is done by more than one State agency, 
the certification of the State agency directly receiving the grant shall 
be deemed to certify compliance for all workplaces, including those 
located in other State agencies.
    (e)(1) For a grant of less than 30 days performance duration, 
grantees shall have this policy statement and program in place as soon 
as possible, but in any case by a date prior to the date on which 
performance is expected to be completed.
    (2) For a grant of 30 days or more performance duration, grantees 
shall have this policy statement and program in place within 30 days 
after award.
    (3) Where extraordinary circum-stances warrant for a specific grant, 
the grant officer may determine a different date on which the policy 
statement and program shall be in place.



Sec. 32.635  Reporting of and employee sanctions for convictions of criminal drug offenses.

    (a) When a grantee other than an individual is notified that an 
employee has been convicted for a violation of a criminal drug statute 
occurring in the workplace, it shall take the following actions:
    (1) Within 10 calendar days of receiving notice of the conviction, 
the grantee shall provide written notice, including the convicted 
employee's position title, to every grant officer, or other designee on 
whose grant activity the convicted employee was working, unless a 
Federal agency has designated a central point for the receipt of such 
notifications. Notification shall include the identification number(s) 
for each of the Federal agency's affected grants.
    (2) Within 30 calendar days of receiving notice of the conviction, 
the grantee shall do the following with respect to the employee who was 
convicted.
    (i) Take appropriate personnel action against the employee, up to 
and including termination, consistent with requirements of the 
Rehabilitation Act of 1973, as amended; or
    (ii) Require the employee to participate satisfactorily in a drug 
abuse assistance or rehabilitation program approved for such purposes by 
a Federal, State, or local health, law enforcement, or other appropriate 
agency.
    (b) A grantee who is an individual who is convicted for a violation 
of a criminal drug statute occurring during the conduct of any grant 
activity shall

[[Page 398]]

report the conviction, in writing, within 10 calendar days, to his or 
her Federal agency grant officer, or other designee, unless the Federal 
agency has designated a central point for the receipt of such notices. 
Notification shall include the identification number(s) for each of the 
Federal agency's affected grants.

(Approved by the Office of Management and Budget under control number 
0991-0002)

 Appendix A to Part 32--Certification Regarding Debarment, Suspension, 
     and Other Responsibility Matters--Primary Covered Transactions

                     Instructions for Certification

    1. By signing and submitting this proposal, the prospective primary 
participant is providing the certification set out below.
    2. The inability of a person to provide the certification required 
below will not necessarily result in denial of participation in this 
covered transaction. The prospective participant shall submit an 
explanation of why it cannot provide the certification set out below. 
The certification or explanation will be considered in connection with 
the department or agency's determination whether to enter into this 
transaction. However, failure of the prospective primary participant to 
furnish a certification or an explanation shall disqualify such person 
from participation in this transaction.
    3. The certification in this clause is a material representation of 
fact upon which reliance was placed when the department or agency 
determined to enter into this transaction. If it is later determined 
that the prospective primary participant knowingly rendered an erroneous 
certification, in addition to other remedies available to the Federal 
Government, the department or agency may terminate this transaction for 
cause or default.
    4. The prospective primary participant shall provide immediate 
written notice to the department or agency to which this proposal is 
submitted if at any time the prospective primary participant learns that 
its certification was erroneous when submitted or has become erroneous 
by reason of changed circumstances.
    5. The terms covered transaction, debarred, suspended, ineligible, 
lower tier covered transaction, participant, person, primary covered 
transaction, principal, proposal, and voluntarily excluded, as used in 
this clause, have the meanings set out in the Definitions and Coverage 
sections of the rules implementing Executive Order 12549. You may 
contact the department or agency to which this proposal is being 
submitted for assistance in obtaining a copy of those regulations.
    6. The prospective primary participant agrees by submitting this 
proposal that, should the proposed covered transaction be entered into, 
it shall not knowingly enter into any lower tier covered transaction 
with a person who is proposed for debarment under 48 CFR part 9, subpart 
9.4, debarred, suspended, declared ineligible, or voluntarily excluded 
from participation in this covered transaction, unless authorized by the 
department or agency entering into this transaction.
    7. The prospective primary participant further agrees by submitting 
this proposal that it will include the clause titled ``Certification 
Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion-
Lower Tier Covered Transaction,'' provided by the department or agency 
entering into this covered transaction, without modification, in all 
lower tier covered transactions and in all solicitations for lower tier 
covered transactions.
    8. A participant in a covered transaction may rely upon a 
certification of a prospective participant in a lower tier covered 
transaction that it is not proposed for debarment under 48 CFR part 9, 
subpart 9.4, debarred, suspended, ineligible, or voluntarily excluded 
from the covered transaction, unless it knows that the certification is 
erroneous. A participant may decide the method and frequency by which it 
determines the eligibility of its principals. Each participant may, but 
is not required to, check the List of Parties Excluded from Federal 
Procurement and Nonprocurement Programs.
    9. Nothing contained in the foregoing shall be construed to require 
establishment of a system of records in order to render in good faith 
the certification required by this clause. The knowledge and information 
of a participant is not required to exceed that which is normally 
possessed by a prudent person in the ordinary course of business 
dealings.
    10. Except for transactions authorized under paragraph 6 of these 
instructions, if a participant in a covered transaction knowingly enters 
into a lower tier covered transaction with a person who is proposed for 
debarment under 48 CFR part 9, subpart 9.4, suspended, debarred, 
ineligible, or voluntarily excluded from participation in this 
transaction, in addition to other remedies available to the Federal 
Government, the department or agency may terminate this transaction for 
cause or default.

[[Page 399]]

Certification Regarding Debarment, Suspension, and Other Responsibility 
                  Matters--Primary Covered Transactions

    (1) The prospective primary participant certifies to the best of its 
knowledge and belief, that it and its principals:
    (a) Are not presently debarred, suspended, proposed for debarment, 
declared ineligible, or voluntarily excluded by any Federal department 
or agency;
    (b) Have not within a three-year period preceding this proposal been 
convicted of or had a civil judgment rendered against them for 
commission of fraud or a criminal offense in connection with obtaining, 
attempting to obtain, or performing a public (Federal, State or local) 
transaction or contract under a public transaction; violation of Federal 
or State antitrust statutes or commission of embezzlement, theft, 
forgery, bribery, falsification or destruction of records, making false 
statements, or receiving stolen property;
    (c) Are not presently indicted for or otherwise criminally or 
civilly charged by a governmental entity (Federal, State or local) with 
commission of any of the offenses enumerated in paragraph (1)(b) of this 
certification; and
    (d) Have not within a three-year period preceding this application/
proposal had one or more public transactions (Federal, State or local) 
terminated for cause or default.
    (2) Where the prospective primary participant is unable to certify 
to any of the statements in this certification, such prospective 
participant shall attach an explanation to this proposal.

[60 FR 33042, 33059, June 26, 1995]

 Appendix B to Part 32--Certification Regarding Debarment, Suspension, 
 Ineligibility and Voluntary Exclusion--Lower Tier Covered Transactions

                     Instructions for Certification

    1. By signing and submitting this proposal, the prospective lower 
tier participant is providing the certification set out below.
    2. The certification in this clause is a material representation of 
fact upon which reliance was placed when this transaction was entered 
into. If it is later determined that the prospective lower tier 
participant knowingly rendered an erroneous certification, in addition 
to other remedies available to the Federal Government the department or 
agency with which this transaction originated may pursue available 
remedies, including suspension and/or debarment.
    3. The prospective lower tier participant shall provide immediate 
written notice to the person to which this proposal is submitted if at 
any time the prospective lower tier participant learns that its 
certification was erroneous when submitted or had become erroneous by 
reason of changed circumstances.
    4. The terms covered transaction, debarred, suspended, ineligible, 
lower tier covered transaction, participant, person, primary covered 
transaction, principal, proposal, and voluntarily excluded, as used in 
this clause, have the meaning set out in the Definitions and Coverage 
sections of rules implementing Executive Order 12549. You may contact 
the person to which this proposal is submitted for assistance in 
obtaining a copy of those regulations.
    5. The prospective lower tier participant agrees by submitting this 
proposal that, should the proposed covered transaction be entered into, 
it shall not knowingly enter into any lower tier covered transaction 
with a person who is proposed for debarment under 48 CFR part 9, subpart 
9.4, debarred, suspended, declared ineligible, or voluntarily excluded 
from participation in this covered transaction, unless authorized by the 
department or agency with which this transaction originated.
    6. The prospective lower tier participant further agrees by 
submitting this proposal that it will include this clause titled 
``Certification Regarding Debarment, Suspension, Ineligibility and 
Voluntary Exclusion-Lower Tier Covered Transaction,'' without 
modification, in all lower tier covered transactions and in all 
solicitations for lower tier covered transactions.
    7. A participant in a covered transaction may rely upon a 
certification of a prospective participant in a lower tier covered 
transaction that it is not proposed for debarment under 48 CFR part 9, 
subpart 9.4, debarred, suspended, ineligible, or voluntarily excluded 
from covered transactions, unless it knows that the certification is 
erroneous. A participant may decide the method and frequency by which it 
determines the eligibility of its principals. Each participant may, but 
is not required to, check the List of Parties Excluded from Federal 
Procurement and Nonprocurement Programs.
    8. Nothing contained in the foregoing shall be construed to require 
establishment of a system of records in order to render in good faith 
the certification required by this clause. The knowledge and information 
of a participant is not required to exceed that which is normally 
possessed by a prudent person in the ordinary course of business 
dealings.
    9. Except for transactions authorized under paragraph 5 of these 
instructions, if a participant in a covered transaction knowingly enters 
into a lower tier covered transaction with a person who is proposed for 
debarment under 48 CFR part 9, subpart 9.4, suspended, debarred, 
ineligible, or voluntarily excluded

[[Page 400]]

from participation in this transaction, in addition to other remedies 
available to the Federal Government, the department or agency with which 
this transaction originated may pursue available remedies, including 
suspension and/or debarment.

    Certification Regarding Debarment, Suspension, Ineligibility an 
          Voluntary Exclusion--Lower Tier Covered Transactions

    (1) The prospective lower tier participant certifies, by submission 
of this proposal, that neither it nor its principals is presently 
debarred, suspended, proposed for debarment, declared ineligible, or 
voluntarily excluded from participation in this transaction by any 
Federal department or agency.
    (2) Where the prospective lower tier participant is unable to 
certify to any of the statements in this certification, such prospective 
participant shall attach an explanation to this proposal.

[60 FR 33042, 33059, June 26, 1995]

   Appendix C to Part 32--Certification Regarding Drug-Free Workplace 
                              Requirements

                     Instructions for Certification

    1. By signing and/or submitting this application or grant agreement, 
the grantee is providing the certification set out below.
    2. The certification set out below is a material representation of 
fact upon which reliance is placed when the agency awards the grant. If 
it is later determined that the grantee knowingly rendered a false 
certification, or otherwise violates the requirements of the Drug-Free 
Workplace Act, the agency, in addition to any other remedies available 
to the Federal Government, may take action authorized under the Drug-
Free Workplace Act.
    3. For grantees other than individuals, Alternate I applies.
    4. For grantees who are individuals, Alternate II applies.
    5. Workplaces under grants, for grantees other than individuals, 
need not be identified on the certification. If known, they may be 
identified in the grant application. If the grantee does not identify 
the workplaces at the time of application, or upon award, if there is no 
application, the grantee must keep the identity of the workplace(s) on 
file in its office and make the information available for Federal 
inspection. Failure to identify all known workplaces constitutes a 
violation of the grantee's drug-free workplace requirements.
    6. Workplace identifications must include the actual address of 
buildings (or parts of buildings) or other sites where work under the 
grant takes place. Categorical descriptions may be used (e.g., all 
vehicles of a mass transit authority or State highway department while 
in operation, State employees in each local unemployment office, 
performers in concert halls or radio studios).
    7. If the workplace identified to the agency changes during the 
performance of the grant, the grantee shall inform the agency of the 
change(s), if it previously identified the workplaces in question (see 
paragraph five).
    8. Definitions of terms in the Nonprocurement Suspension and 
Debarment common rule and Drug-Free Workplace common rule apply to this 
certification. Grantees' attention is called, in particular, to the 
following definitions from these rules:
    Controlled substance means a controlled substance in Schedules I 
through V of the Controlled Substances Act (21 U.S.C. 812) and as 
further defined by regulation (21 CFR 1308.11 through 1308.15);
    Conviction means a finding of guilt (including a plea of nolo 
contendere) or imposition of sentence, or both, by any judicial body 
charged with the responsibility to determine violations of the Federal 
or State criminal drug statutes;
    Criminal drug statute means a Federal or non-Federal criminal 
statute involving the manufacture, distribution, dispensing, use, or 
possession of any controlled substance;
    Employee means the employee of a grantee directly engaged in the 
performance of work under a grant, including: (i) All direct charge 
employees; (ii) All indirect charge employees unless their impact or 
involvement is insignificant to the performance of the grant; and, (iii) 
Temporary personnel and consultants who are directly engaged in the 
performance of work under the grant and who are on the grantee's 
payroll. This definition does not include workers not on the payroll of 
the grantee (e.g., volunteers, even if used to meet a matching 
requirement; consultants or independent contractors not on the grantee's 
payroll; or employees of subrecipients or subcontractors in covered 
workplaces).

        Certification Regarding Drug-Free Workplace Requirements

             Alternate I. (Grantees Other Than Individuals)

    A. The grantee certifies that it will or will continue to provide a 
drug-free workplace by:
    (a) Publishing a statement notifying employees that the unlawful 
manufacture, distribution, dispensing, possession, or use of a 
controlled substance is prohibited in the grantee's workplace and 
specifying the actions that will be taken against employees for 
violation of such prohibition;
    (b) Establishing an ongoing drug-free awareness program to inform 
employees about--
    (1) The dangers of drug abuse in the workplace;

[[Page 401]]

    (2) The grantee's policy of maintaining a drug-free workplace;
    (3) Any available drug counseling, rehabilitation, and employee 
assistance programs; and
    (4) The penalties that may be imposed upon employees for drug abuse 
violations occurring in the workplace;
    (c) Making it a requirement that each employee to be engaged in the 
performance of the grant be given a copy of the statement required by 
paragraph (a);
    (d) Notifying the employee in the statement required by paragraph 
(a) that, as a condition of employment under the grant, the employee 
will--
    (1) Abide by the terms of the statement; and
    (2) Notify the employer in writing of his or her conviction for a 
violation of a criminal drug statute occurring in the workplace no later 
than five calendar days after such conviction;
    (e) Notifying the agency in writing, within ten calendar days after 
receiving notice under paragraph (d)(2) from an employee or otherwise 
receiving actual notice of such conviction. Employers of convicted 
employees must provide notice, including position title, to every grant 
officer or other designee on whose grant activity the convicted employee 
was working, unless the Federal agency has designated a central point 
for the receipt of such notices. Notice shall include the identification 
number(s) of each affected grant;
    (f) Taking one of the following actions, within 30 calendar days of 
receiving notice under paragraph (d)(2), with respect to any employee 
who is so convicted--
    (1) Taking appropriate personnel action against such an employee, up 
to and including termination, consistent with the requirements of the 
Rehabilitation Act of 1973, as amended; or
    (2) Requiring such employee to participate satisfactorily in a drug 
abuse assistance or rehabilitation program approved for such purposes by 
a Federal, State, or local health, law enforcement, or other appropriate 
agency;
    (g) Making a good faith effort to continue to maintain a drug-free 
workplace through implementation of paragraphs (a), (b), (c), (d), (e) 
and (f).
    B. The grantee may insert in the space provided below the site(s) 
for the performance of work done in connection with the specific grant:

Place of Performance (Street address, city, county, State, zip code)
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

Check {time}  if there are workplaces on file that are not identified 
here.

              Alternate II. (Grantees Who Are Individuals)

    (a) The grantee certifies that, as a condition of the grant, he or 
she will not engage in the unlawful manufacture, distribution, 
dispensing, possession, or use of a controlled substance in conducting 
any activity with the grant;
    (b) If convicted of a criminal drug offense resulting from a 
violation occurring during the conduct of any grant activity, he or she 
will report the conviction, in writing, within 10 calendar days of the 
conviction, to every grant officer or other designee, unless the Federal 
agency designates a central point for the receipt of such notices. When 
notice is made to such a central point, it shall include the 
identification number(s) of each affected grant.

[55 FR 21690, 21701, May 25, 1990]



PART 34--NEW RESTRICTIONS ON LOBBYING--Table of Contents




                           Subpart A--General

Sec.
34.100  Conditions on use of funds.
34.105  Definitions.
34.110  Certification and disclosure.

                 Subpart B--Activities by Own Employees

34.200  Agency and legislative liaison.
34.205  Professional and technical services.
34.210  Reporting.

            Subpart C--Activities by Other Than Own Employees

34.300  Professional and technical services.

                  Subpart D--Penalties and Enforcement

34.400  Penalties.
34.405  Penalty procedures.
34.410  Enforcement.

                          Subpart E--Exemptions

34.500  Secretary of Defense.

                        Subpart F--Agency Reports

34.600  Semi-annual compilation.
34.605  Inspector General report.

Appendix A to Part 34--Certification Regarding Lobbying
Appendix B to Part 34--Disclosure Form to Report Lobbying

    Authority: Section 319; Pub. L. 101-121 (31 U.S.C. 1352); 33 U.S.C. 
1251 et seq.; 42 U.S.C. 7401 et seq.; 42 U.S.C. 6901 et seq.; 42 U.S.C. 
300f et seq.; 7 U.S.C. 136 et seq.; 15 U.S.C. 2601 et

[[Page 402]]

seq.; 42 U.S.C. 9601 et seq.; 20 U.S.C. 4011 et seq.; 33 U.S.C. 1401 et 
seq.

    Source: 55 FR 6737 and 6753, Feb. 26, 1990 (interim), unless 
otherwise noted.

    Cross-Reference: See also Office of Management and Budget notice 
published at 54 FR 52306, December 20, 1989.



                           Subpart A--General



Sec. 34.100  Conditions on use of funds.

    (a) No appropriated funds may be expended by the recipient of a 
Federal contract, grant, loan, or cooperative agreement to pay any 
person for influencing or attempting to influence an officer or employee 
of any agency, a Member of Congress, an officer or employee of Congress, 
or an employee of a Member of Congress in connection with any of the 
following covered Federal actions: the awarding of any Federal contract, 
the making of any Federal grant, the making of any Federal loan, the 
entering into of any cooperative agreement, and the extension, 
continuation, renewal, amendment, or modification of any Federal 
contract, grant, loan, or cooperative agreement.
    (b) Each person who requests or receives from an agency a Federal 
contract, grant, loan, or cooperative agreement shall file with that 
agency a certification, set forth in appendix A, that the person has not 
made, and will not make, any payment prohibited by paragraph (a) of this 
section.
    (c) Each person who requests or receives from an agency a Federal 
contract, grant, loan, or a cooperative agreement shall file with that 
agency a disclosure form, set forth in appendix B, if such person has 
made or has agreed to make any payment using nonappropriated funds (to 
include profits from any covered Federal action), which would be 
prohibited under paragraph (a) of this section if paid for with 
appropriated funds.
    (d) Each person who requests or receives from an agency a commitment 
providing for the United States to insure or guarantee a loan shall file 
with that agency a statement, set forth in appendix A, whether that 
person has made or has agreed to make any payment to influence or 
attempt to influence an officer or employee of any agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with that loan insurance or guarantee.
    (e) Each person who requests or receives from an agency a commitment 
providing for the United States to insure or guarantee a loan shall file 
with that agency a disclosure form, set forth in appendix B, if that 
person has made or has agreed to make any payment to influence or 
attempt to influence an officer or employee of any agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with that loan insurance or guarantee.



Sec. 34.105  Definitions.

    For purposes of this part:
    (a) Agency, as defined in 5 U.S.C. 552(f), includes Federal 
executive departments and agencies as well as independent regulatory 
commissions and Government corporations, as defined in 31 U.S.C. 
9101(1).
    (b) Covered Federal action means any of the following Federal 
actions:
    (1) The awarding of any Federal contract;
    (2) The making of any Federal grant;
    (3) The making of any Federal loan;
    (4) The entering into of any cooperative agreement; and,
    (5) The extension, continuation, renewal, amendment, or modification 
of any Federal contract, grant, loan, or cooperative agreement.

Covered Federal action does not include receiving from an agency a 
commitment providing for the United States to insure or guarantee a 
loan. Loan guarantees and loan insurance are addressed independently 
within this part.
    (c) Federal contract means an acquisition contract awarded by an 
agency, including those subject to the Federal Acquisition Regulation 
(FAR), and any other acquisition contract for real or personal property 
or services not subject to the FAR.
    (d) Federal cooperative agreement means a cooperative agreement 
entered into by an agency.
    (e) Federal grant means an award of financial assistance in the form 
of money, or property in lieu of money, by the Federal Government or a 
direct

[[Page 403]]

appropriation made by law to any person. The term does not include 
technical assistance which provides services instead of money, or other 
assistance in the form of revenue sharing, loans, loan guarantees, loan 
insurance, interest subsidies, insurance, or direct United States cash 
assistance to an individual.
    (f) Federal loan means a loan made by an agency. The term does not 
include loan guarantee or loan insurance.
    (g) Indian tribe and tribal organization have the meaning provided 
in section 4 of the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 450B). Alaskan Natives are included under the definitions 
of Indian tribes in that Act.
    (h) Influencing or attempting to influence means making, with the 
intent to influence, any communication to or appearance before an 
officer or employee or any agency, a Member of Congress, an officer or 
employee of Congress, or an employee of a Member of Congress in 
connection with any covered Federal action.
    (i) Loan guarantee and loan insurance means an agency's guarantee or 
insurance of a loan made by a person.
    (j) Local government means a unit of government in a State and, if 
chartered, established, or otherwise recognized by a State for the 
performance of a governmental duty, including a local public authority, 
a special district, an intrastate district, a council of governments, a 
sponsor group representative organization, and any other instrumentality 
of a local government.
    (k) Officer or employee of an agency includes the following 
individuals who are employed by an agency:
    (1) An individual who is appointed to a position in the Government 
under title 5, U.S. Code, including a position under a temporary 
appointment;
    (2) A member of the uniformed services as defined in section 101(3), 
title 37, U.S. Code;
    (3) A special Government employee as defined in section 202, title 
18, U.S. Code; and,
    (4) An individual who is a member of a Federal advisory committee, 
as defined by the Federal Advisory Committee Act, title 5, U.S. Code 
appendix 2.
    (l) Person means an individual, corporation, company, association, 
authority, firm, partnership, society, State, and local government, 
regardless of whether such entity is operated for profit or not for 
profit. This term excludes an Indian tribe, tribal organization, or any 
other Indian organization with respect to expenditures specifically 
permitted by other Federal law.
    (m) Reasonable compensation means, with respect to a regularly 
employed officer or employee of any person, compensation that is 
consistent with the normal compensation for such officer or employee for 
work that is not furnished to, not funded by, or not furnished in 
cooperation with the Federal Government.
    (n) Reasonable payment means, with respect to professional and other 
technical services, a payment in an amount that is consistent with the 
amount normally paid for such services in the private sector.
    (o) Recipient includes all contractors, subcontractors at any tier, 
and subgrantees at any tier of the recipient of funds received in 
connection with a Federal contract, grant, loan, or cooperative 
agreement. The term excludes an Indian tribe, tribal organization, or 
any other Indian organization with respect to expenditures specifically 
permitted by other Federal law.
    (p) Regularly employed means, with respect to an officer or employee 
of a person requesting or receiving a Federal contract, grant, loan, or 
cooperative agreement or a commitment providing for the United States to 
insure or guarantee a loan, an officer or employee who is employed by 
such person for at least 130 working days within one year immediately 
preceding the date of the submission that initiates agency consideration 
of such person for receipt of such contract, grant, loan, cooperative 
agreement, loan insurance commitment, or loan guarantee commitment. An 
officer or employee who is employed by such person for less than 130 
working days within one year immediately preceding the date of the 
submission that initiates agency consideration of such person shall be 
considered to be regularly employed as

[[Page 404]]

soon as he or she is employed by such person for 130 working days.
    (q) State means a State of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, a territory or possession of 
the United States, an agency or instrumentality of a State, and a multi-
State, regional, or interstate entity having governmental duties and 
powers.



Sec. 34.110  Certification and disclosure.

    (a) Each person shall file a certification, and a disclosure form, 
if required, with each submission that initiates agency consideration of 
such person for:
    (1) Award of a Federal contract, grant, or cooperative agreement 
exceeding $100,000; or
    (2) An award of a Federal loan or a commitment providing for the 
United States to insure or guarantee a loan exceeding $150,000.
    (b) Each person shall file a certification, and a disclosure form, 
if required, upon receipt by such person of:
    (1) A Federal contract, grant, or cooperative agreement exceeding 
$100,000; or
    (2) A Federal loan or a commitment providing for the United States 
to insure or guarantee a loan exceeding $150,000,

Unless such person previously filed a certification, and a disclosure 
form, if required, under paragraph (a) of this section.
    (c) Each person shall file a disclosure form at the end of each 
calendar quarter in which there occurs any event that requires 
disclosure or that materially affects the accuracy of the information 
contained in any disclosure form previously filed by such person under 
paragraphs (a) or (b) of this section. An event that materially affects 
the accuracy of the information reported includes:
    (1) A cumulative increase of $25,000 or more in the amount paid or 
expected to be paid for influencing or attempting to influence a covered 
Federal action; or
    (2) A change in the person(s) or individual(s) influencing or 
attempting to influence a covered Federal action; or,
    (3) A change in the officer(s), employee(s), or Member(s) contacted 
to influence or attempt to influence a covered Federal action.
    (d) Any person who requests or receives from a person referred to in 
paragraphs (a) or (b) of this section:
    (1) A subcontract exceeding $100,000 at any tier under a Federal 
contract;
    (2) A subgrant, contract, or subcontract exceeding $100,000 at any 
tier under a Federal grant;
    (3) A contract or subcontract exceeding $100,000 at any tier under a 
Federal loan exceeding $150,000; or,
    (4) A contract or subcontract exceeding $100,000 at any tier under a 
Federal cooperative agreement,

Shall file a certification, and a disclosure form, if required, to the 
next tier above.
    (e) All disclosure forms, but not certifications, shall be forwarded 
from tier to tier until received by the person referred to in paragraphs 
(a) or (b) of this section. That person shall forward all disclosure 
forms to the agency.
    (f) Any certification or disclosure form filed under paragraph (e) 
of this section shall be treated as a material representation of fact 
upon which all receiving tiers shall rely. All liability arising from an 
erroneous representation shall be borne solely by the tier filing that 
representation and shall not be shared by any tier to which the 
erroneous representation is forwarded. Submitting an erroneous 
certification or disclosure constitutes a failure to file the required 
certification or disclosure, respectively. If a person fails to file a 
required certification or disclosure, the United States may pursue all 
available remedies, including those authorized by section 1352, title 
31, U.S. Code.
    (g) For awards and commitments in process prior to December 23, 
1989, but not made before that date, certifications shall be required at 
award or commitment, covering activities occurring between December 23, 
1989, and the date of award or commitment. However, for awards and 
commitments in process prior to the December 23, 1989 effective date of 
these provisions, but not made before December 23, 1989, disclosure 
forms shall not be required at time of award or commitment but shall be 
filed within 30 days.

[[Page 405]]

    (h) No reporting is required for an activity paid for with 
appropriated funds if that activity is allowable under either subpart B 
or C.



                 Subpart B--Activities by Own Employees



Sec. 34.200  Agency and legislative liaison.

    (a) The prohibition on the use of appropriated funds, in Sec. 34.100 
(a), does not apply in the case of a payment of reasonable compensation 
made to an officer or employee of a person requesting or receiving a 
Federal contract, grant, loan, or cooperative agreement if the payment 
is for agency and legislative liaison activities not directly related to 
a covered Federal action.
    (b) For purposes of paragraph (a) of this section, providing any 
information specifically requested by an agency or Congress is allowable 
at any time.
    (c) For purposes of paragraph (a) of this section, the following 
agency and legislative liaison activities are allowable at any time only 
where they are not related to a specific solicitation for any covered 
Federal action:
    (1) Discussing with an agency (including individual demonstrations) 
the qualities and characteristics of the person's products or services, 
conditions or terms of sale, and service capabilities; and,
    (2) Technical discussions and other activities regarding the 
application or adaptation of the person's products or services for an 
agency's use.
    (d) For purposes of paragraph (a) of this section, the following 
agencies and legislative liaison activities are allowable only where 
they are prior to formal solicitation of any covered Federal action:
    (1) Providing any information not specifically requested but 
necessary for an agency to make an informed decision about initiation of 
a covered Federal action;
    (2) Technical discussions regarding the preparation of an 
unsolicited proposal prior to its official submission; and,
    (3) Capability presentations by persons seeking awards from an 
agency pursuant to the provisions of the Small Business Act, as amended 
by Public Law 95-507 and other subsequent amendments.
    (e) Only those activities expressly authorized by this section are 
allowable under this section.



Sec. 34.205  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in Sec. 34.100 
(a), does not apply in the case of a payment of reasonable compensation 
made to an officer or employee of a person requesting or receiving a 
Federal contract, grant, loan, or cooperative agreement or an extension, 
continuation, renewal, amendment, or modification of a Federal contract, 
grant, loan, or cooperative agreement if payment is for professional or 
technical services rendered directly in the preparation, submission, or 
negotiation of any bid, proposal, or application for that Federal 
contract, grant, loan, or cooperative agreement or for meeting 
requirements imposed by or pursuant to law as a condition for receiving 
that Federal contract, grant, loan, or cooperative agreement.
    (b) For purposes of paragraph (a) of this section, ``professional 
and technical services'' shall be limited to advice and analysis 
directly applying any professional or technical discipline. For example, 
drafting of a legal document accompanying a bid or proposal by a lawyer 
is allowable. Similarly, technical advice provided by an engineer on the 
performance or operational capability of a piece of equipment rendered 
directly in the negotiation of a contract is allowable. However, 
communications with the intent to influence made by a professional (such 
as a licensed lawyer) or a technical person (such as a licensed 
accountant) are not allowable under this section unless they provide 
advice and analysis directly applying their professional or technical 
expertise and unless the advice or analysis is rendered directly and 
solely in the preparation, submission or negotiation of a covered 
Federal action. Thus, for example, communications with the intent to 
influence made by a lawyer that do not provide legal advice or analysis 
directly and solely related to the legal aspects of

[[Page 406]]

his or her client's proposal, but generally advocate one proposal over 
another are not allowable under this section because the lawyer is not 
providing professional legal services. Similarly, communications with 
the intent to influence made by an engineer providing an engineering 
analysis prior to the preparation or submission of a bid or proposal are 
not allowable under this section since the engineer is providing 
technical services but not directly in the preparation, submission or 
negotiation of a covered Federal action.
    (c) Requirements imposed by or pursuant to law as a condition for 
receiving a covered Federal award include those required by law or 
regulation, or reasonably expected to be required by law or regulation, 
and any other requirements in the actual award documents.
    (d) Only those services expressly authorized by this section are 
allowable under this section.



Sec. 34.210  Reporting.

    No reporting is required with respect to payments of reasonable 
compensation made to regularly employed officers or employees of a 
person.



            Subpart C--Activities by Other Than Own Employees



Sec. 34.300  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in Sec. 34.100 
(a), does not apply in the case of any reasonable payment to a person, 
other than an officer or employee of a person requesting or receiving a 
covered Federal action, if the payment is for professional or technical 
services rendered directly in the preparation, submission, or 
negotiation of any bid, proposal, or application for that Federal 
contract, grant, loan, or cooperative agreement or for meeting 
requirements imposed by or pursuant to law as a condition for receiving 
that Federal contract, grant, loan, or cooperative agreement.
    (b) The reporting requirements in Sec. 34.110 (a) and (b) regarding 
filing a disclosure form by each person, if required, shall not apply 
with respect to professional or technical services rendered directly in 
the preparation, submission, or negotiation of any commitment providing 
for the United States to insure or guarantee a loan.
    (c) For purposes of paragraph (a) of this section, ``professional 
and technical services'' shall be limited to advice and analysis 
directly applying any professional or technical discipline. For example, 
drafting or a legal document accompanying a bid or proposal by a lawyer 
is allowable. Similarly, technical advice provided by an engineer on the 
performance or operational capability of a piece of equipment rendered 
directly in the negotiation of a contract is allowable. However, 
communications with the intent to influence made by a professional (such 
as a licensed lawyer) or a technical person (such as a licensed 
accountant) are not allowable under this section unless they provide 
advice and analysis directly applying their professional or technical 
expertise and unless the advice or analysis is rendered directly and 
solely in the preparation, submission or negotiation of a covered 
Federal action. Thus, for example, communications with the intent to 
influence made by a lawyer that do not provide legal advice or analysis 
directly and solely related to the legal aspects of his or her client's 
proposal, but generally advocate one proposal over another are not 
allowable under this section because the lawyer is not providing 
professional legal services. Similarly, communications with the intent 
to influence made by an engineer providing an engineering analysis prior 
to the preparation or submission of a bid or proposal are not allowable 
under this section since the engineer is providing technical services 
but not directly in the preparation, submission or negotiation of a 
covered Federal action.
    (d) Requirements imposed by or pursuant to law as a condition for 
receiving a covered Federal award include those required by law or 
regulation, or reasonably expected to be required by law or regulation, 
and any other requirements in the actual award documents.

[[Page 407]]

    (e) Persons other than officers or employees of a person requesting 
or receiving a covered Federal action include consultants and trade 
associations.
    (f) Only those services expressly authorized by this section are 
allowable under this section.



                  Subpart D--Penalties and Enforcement



Sec. 34.400  Penalties.

    (a) Any person who makes an expenditure prohibited herein shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such expenditure.
    (b) Any person who fails to file or amend the disclosure form (see 
appendix B) to be filed or amended if required herein, shall be subject 
to a civil penalty of not less than $10,000 and not more than $100,000 
for each such failure.
    (c) A filing or amended filing on or after the date on which an 
administrative action for the imposition of a civil penalty is commenced 
does not prevent the imposition of such civil penalty for a failure 
occurring before that date. An administrative action is commenced with 
respect to a failure when an investigating official determines in 
writing to commence an investigation of an allegation of such failure.
    (d) In determining whether to impose a civil penalty, and the amount 
of any such penalty, by reason of a violation by any person, the agency 
shall consider the nature, circumstances, extent, and gravity of the 
violation, the effect on the ability of such person to continue in 
business, any prior violations by such person, the degree of culpability 
of such person, the ability of the person to pay the penalty, and such 
other matters as may be appropriate.
    (e) First offenders under paragraphs (a) or (b) of this section 
shall be subject to a civil penalty of $10,000, absent aggravating 
circumstances. Second and subsequent offenses by persons shall be 
subject to an appropriate civil penalty between $10,000 and $100,000, as 
determined by the agency head or his or her designee.
    (f) An imposition of a civil penalty under this section does not 
prevent the United States from seeking any other remedy that may apply 
to the same conduct that is the basis for the imposition of such civil 
penalty.



Sec. 34.405  Penalty procedures.

    Agencies shall impose and collect civil penalties pursuant to the 
provisions of the Program Fraud and Civil Remedies Act, 31 U.S.C. 3803 
(except subsection (c)), 3804, 3805, 3806, 3807, 3808, and 3812, insofar 
as these provisions are not inconsistent with the requirements herein.



Sec. 34.410  Enforcement.

    The head of each agency shall take such actions as are necessary to 
ensure that the provisions herein are vigorously implemented and 
enforced in that agency.



                          Subpart E--Exemptions



Sec. 34.500  Secretary of Defense.

    (a) The Secretary of Defense may exempt, on a case-by-case basis, a 
covered Federal action from the prohibition whenever the Secretary 
determines, in writing, that such an exemption is in the national 
interest. The Secretary shall transmit a copy of each such written 
exemption to Congress immediately after making such a determination.
    (b) The Department of Defense may issue supplemental regulations to 
implement paragraph (a) of this section.



                        Subpart F--Agency Reports



Sec. 34.600  Semi-annual compilation.

    (a) The head of each agency shall collect and compile the disclosure 
reports (see appendix B) and, on May 31 and November 30 of each year, 
submit to the Secretary of the Senate and the Clerk of the House of 
Representatives a report containing a compilation of the information 
contained in the disclosure reports received during the six-month period 
ending on March 31 or September 30, respectively, of that year.
    (b) The report, including the compilation, shall be available for 
public inspection 30 days after receipt of the report by the Secretary 
and the Clerk.

[[Page 408]]

    (c) Information that involves intelligence matters shall be reported 
only to the Select Committee on Intelligence of the Senate, the 
Permanent Select Committee on Intelligence of the House of 
Representatives, and the Committees on Appropriations of the Senate and 
the House of Representatives in accordance with procedures agreed to by 
such committees. Such information shall not be available for public 
inspection.
    (d) Information that is classified under Executive Order 12356 or 
any successor order shall be reported only to the Committee on Foreign 
Relations of the Senate and the Committee on Foreign Affairs of the 
House of Representatives or the Committees on Armed Services of the 
Senate and the House of Representatives (whichever such committees have 
jurisdiction of matters involving such information) and to the 
Committees on Appropriations of the Senate and the House of 
Representatives in accordance with procedures agreed to by such 
committees. Such information shall not be available for public 
inspection.
    (e) The first semi-annual compilation shall be submitted on May 31, 
1990, and shall contain a compilation of the disclosure reports received 
from December 23, 1989 to March 31, 1990.
    (f) Major agencies, designated by the Office of Management and 
Budget (OMB), are required to provide machine-readable compilations to 
the Secretary of the Senate and the Clerk of the House of 
Representatives no later than with the compilations due on May 31, 1991. 
OMB shall provide detailed specifications in a memorandum to these 
agencies.
    (g) Non-major agencies are requested to provide machine-readable 
compilations to the Secretary of the Senate and the Clerk of the House 
of Representatives.
    (h) Agencies shall keep the originals of all disclosure reports in 
the official files of the agency.



Sec. 34.605  Inspector General report.

    (a) The Inspector General, or other official as specified in 
paragraph (b) of this section, of each agency shall prepare and submit 
to Congress each year, commencing with submission of the President's 
Budget in 1991, an evaluation of the compliance of that agency with, and 
the effectiveness of, the requirements herein. The evaluation may 
include any recommended changes that may be necessary to strengthen or 
improve the requirements.
    (b) In the case of an agency that does not have an Inspector 
General, the agency official comparable to an Inspector General shall 
prepare and submit the annual report, or, if there is no such comparable 
official, the head of the agency shall prepare and submit the annual 
report.
    (c) The annual report shall be submitted at the same time the agency 
submits its annual budget justifications to Congress.
    (d) The annual report shall include the following: All alleged 
violations relating to the agency's covered Federal actions during the 
year covered by the report, the actions taken by the head of the agency 
in the year covered by the report with respect to those alleged 
violations and alleged violations in previous years, and the amounts of 
civil penalties imposed by the agency in the year covered by the report.

         Appendix A to Part 34--Certification Regarding Lobbying

 Certification for Contracts, Grants, Loans, and Cooperative Agreements

    The undersigned certifies, to the best of his or her knowledge and 
belief, that:
    (1) No Federal appropriated funds have been paid or will be paid, by 
or on behalf of the undersigned, to any person for influencing or 
attempting to influence an officer or employee of an agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with the awarding of any Federal contract, the 
making of any Federal grant, the making of any Federal loan, the 
entering into of any cooperative agreement, and the extension, 
continuation, renewal, amendment, or modification of any Federal 
contract, grant, loan, or cooperative agreement.
    (2) If any funds other than Federal appropriated funds have been 
paid or will be paid to any person for influencing or attempting to 
influence an officer or employee of any agency, a Member of Congress, an 
officer or employee of Congress, or an employee of a Member of Congress 
in connection with this Federal contract, grant, loan, or cooperative 
agreement, the undersigned shall complete

[[Page 409]]

and submit Standard Form-LLL, ``Disclosure Form to Report Lobbying,'' in 
accordance with its instructions.
    (3) The undersigned shall require that the language of this 
certification be included in the award documents for all subawards at 
all tiers (including subcontracts, subgrants, and contracts under 
grants, loans, and cooperative agreements) and that all subrecipients 
shall certify and disclose accordingly.
    This certification is a material representation of fact upon which 
reliance was placed when this transaction was made or entered into. 
Submission of this certification is a prerequisite for making or 
entering into this transaction imposed by section 1352, title 31, U.S. 
Code. Any person who fails to file the required certification shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such failure.

            Statement for Loan Guarantees and Loan Insurance

    The undersigned states, to the best of his or her knowledge and 
belief, that:
    If any funds have been paid or will be paid to any person for 
influencing or attempting to influence an officer or employee of any 
agency, a Member of Congress, an officer or employee of Congress, or an 
employee of a Member of Congress in connection with this commitment 
providing for the United States to insure or guarantee a loan, the 
undersigned shall complete and submit Standard Form-LLL, ``Disclosure 
Form to Report Lobbying,'' in accordance with its instructions.
    Submission of this statement is a prerequisite for making or 
entering into this transaction imposed by section 1352, title 31, U.S. 
Code. Any person who fails to file the required statement shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such failure.

[[Page 410]]

        Appendix B to Part 34--Disclosure Form to Report Lobbying
      
      

[[Page 411]]





[[Page 412]]





[[Page 413]]





PART 35--STATE AND LOCAL ASSISTANCE--Table of Contents




Sec.
35.001  Applicability.

                 Subpart A--Environmental Program Grants

                                 General

35.100  Purpose of the subpart.
35.101  Environmental programs covered by the subpart.
35.102  Definitions of terms.

                        Preparing an Application

35.104  Components of a complete application.
35.105  Time frame for submitting an application.
35.107  Work plans.
35.108  Funding period.
35.109  Consolidated grants.

                        EPA Action on Application

35.110  Time frame for EPA action.
35.111  Criteria for approving an application.
35.112  Factors considered in determining award amount.
35.113  Reimbursement for pre-award costs.

                         Post-Award Requirements

35.114  Amendments and other changes.
35.115  Evaluation of performance.
35.116  Direct implementation.
35.117  Unused funds.
35.118  Unexpended balances.

                     Performance Partnership Grants

35.130  Purpose of Performance Partnership Grants.
35.132  Requirements summary.
35.133  Programs eligible for inclusion.
35.134  Eligible recipients.
35.135  Activities eligible for funding.
35.136  Cost share requirements.
35.137  Application requirements.
35.138  Competitive grants.

                   Air Pollution Control (Section 105)

35.140  Purpose.
35.141  Definitions.
35.143  Allotment.
35.145  Maximum federal share.
35.146  Maintenance of effort.
35.147  Minimum cost share for a Performance Partnership Grant.
35.148  Award limitations.

                  Water Pollution Control (Section 106)

35.160  Purpose.
35.161  Definition.
35.162  Basis for allotment.
35.165  Maintenance of effort.
35.168  Award limitations.

            Public Water System Supervision (Section 1443(a))

35.170  Purpose.
35.172  Allotment.
35.175  Maximum federal share.
35.178  Award limitations.

          Underground Water Source Protection (Section 1443(b))

35.190  Purpose.
35.192  Basis for allotment.
35.195  Maximum federal share.
35.198  Award limitation.

              Hazardous Waste Management (Section 3011(a))

35.210  Purpose.
35.212  Basis for allotment.
35.215  Maximum federal share.
35.218  Award limitation.

          Pesticide Cooperative Enforcement (Section 23(a)(1))

35.230  Purpose.
35.232  Basis for allotment.
35.235  Maximum federal share.

   Pesticide Applicator Certification and Training (Section 23(a)(2))

35.240  Purpose.
35.242  Basis for allotment.
35.245  Maximum federal share.

           Pesticide Program Implementation (Section 23(a)(1))

35.250  Purpose.
35.251  Basis for allotment.
35.252  Maximum federal share.

               Nonpoint Source Management (Section 319(h))

35.260  Purpose.
35.265  Maximum federal share.
35.266  Maintenance of effort.
35.268  Award limitations.

                Lead-Based Paint Program (Section 404(g))

35.270  Purpose.
35.272  Funding coordination.

                 State Indoor Radon Grants (Section 306)

35.290  Purpose.
35.292  Basis for allotment.
35.295  Maximum federal share.
35.298  Award limitations.

          Toxic Substances Compliance Monitoring (Section 28 )

35.310  Purpose.
35.312  Competitive process.
35.315  Maximum federal share.
35.318  Award limitation.

[[Page 414]]

          State Underground Storage Tanks (Section 2007(f)(2))

35.330  Purpose.
35.332  Basis for allotment.
35.335  Maximum federal share.

            Pollution Prevention State Grants (Section 6605)

35.340  Purpose.
35.342  Competitive process.
35.343  Definitions.
35.345  Eligible applicants.
35.348  Award limitation.
35.349  Maximum federal share.

        Water Quality Cooperative Agreements (Section 104(b)(3))

35.360  Purpose.
35.362  Competitive process.
35.364  Maximum federal share.

          State Wetlands Development Grants (Section 104(b)(3))

35.380  Purpose.
35.382  Competitive process.
35.385  Maximum federal share.

                  State Administration (Section 205(g))

35.400  Purpose.
35.402  Allotment.
35.405  Maintenance of effort.
35.408  Award limitations.

      Water Quality Management Planning Grants (Section 205(j)(2))

35.410  Purpose.
35.412  Allotment.
35.415  Maximum federal share.
35.418  Award limitations.

           Subpart B--Environmental Program Grants for Tribes

                           General--All Grants

35.500  Purpose of the subpart.
35.501  Environmental programs covered by the subpart.
35.502  Definitions of terms.
35.503  Deviation from this subpart.
35.504  Eligibility of an Intertribal Consortium.

                        Preparing an Application

35.505  Components of a complete application.
35.506  Time frame for submitting an application.
35.507  Work plans.
35.508  Funding period.
35.509  Consolidated grants.

                        EPA Action on Application

35.510  Time frame for EPA action.
35.511  Criteria for approving an application.
35.512  Factors considered in determining award amount.
35.513  Reimbursement for pre-award costs.

                         Post-award Requirements

35.514  Amendments and other changes.
35.515  Evaluation of performance.
35.516  Direct implementation.
35.517  Unused funds.
35.518  Unexpended balances.

                     Performance Partnership Grants

35.530  Purpose of Performance Partnership Grants.
35.532  Requirements summary.
35.533  Programs eligible for inclusion.
35.534  Eligible recipients.
35.535  Activities eligible for funding.
35.536  Cost share requirements.
35.537  Application requirements.
35.538  Project period.

          Indian Environmental General Assistance Program (GAP)

35.540  Purpose.
35.542  Definitions. [Reserved]
35.543  Eligible recipients.
35.545  Eligible activities.
35.548  Award limitation.

                   Air Pollution Control (Section 105)

35.570  Purpose.
35.572  Definitions.
35.573  Eligible Tribe.
35.575  Maximum federal share.
35.576  Maintenance of effort.
35.578  Award limitation.

             Water Pollution Control (Sections 106 and 518)

35.580  Purpose.
35.582  Definitions.
35.583  Eligible recipients.
35.585  Maximum federal share.
35.588  Award limitations.

        Water Quality Cooperative Agreements (Section 104(b)(3))

35.600  Purpose.
35.603  Competitive process.
35.604  Maximum federal share.

         Wetlands Development Grant Program (Section 104(b)(3))

35.610  Purpose.
35.613  Competitive process.
35.615  Maximum federal share.

     Nonpoint Source Management Grants (Sections 319(h) and 518(f))

35.630  Purpose.
35.632  Definition.
35.633  Eligibility requirements.
35.635  Maximum federal share.
35.636  Maintenance of effort.

[[Page 415]]

35.638  Award limitations.

          Pesticide Cooperative Enforcement (Section 23 (a)(1))

35.640  Purpose.
35.641  Eligible recipients.
35.642  Maximum federal share.
35.645  Basis for allotment.

   Pesticide Applicator Certification and Training (Section 23(a)(2))

35.646  Purpose.
35.649  Maximum federal share.

           Pesticide Program Implementation (Section 23(a)(1))

35.650  Purpose.
35.653  Eligible recipients.
35.655  Basis for allotment.
35.659  Maximum federal share.

               Pollution Prevention Grants (Section 6605)

35.660  Purpose.
35.661  Competitive process.
35.662  Definitions.
35.663  Eligible recipients.
35.668  Award limitations.
35.669  Maximum federal share.

       Public Water System Supervision (Sections 1443(a) and 1451)

35.670  Purpose.
35.672  Definition.
35.673  Annual amount reserved by EPA.
35.675  Maximum federal share.
35.676  Eligible recipients.
35.678  Award limitations.

          Underground Water Source Protection (Section 1443(b))

35.680  Purpose.
35.682  Definition.
35.683  Annual amount reserved by EPA.
35.685  Maximum federal share.
35.686  Eligible recipients
35.688  Award limitations.

                Lead-Based Paint Program (Section 404(g))

35.690  Purpose.
35.691  Funding coordination.
35.693  Eligible recipients.

                    Indoor Radon Grants (Section 306)

35.700  Purpose.
35.702  Basis for allotment.
35.703  Eligible recipients.
35.705  Maximum federal share.
35.708  Award limitations.

           Toxic Substances Compliance Monitoring (Section 28)

35.710  Purpose.
35.712  Competitive process.
35.713  Eligible recipients.
35.715  Maximum federal share.
35.718  Award limitation.

        Hazardous Waste Management Program Grants (P.L. 105-276)

35.720  Purpose.
35.723  Competitive process.
35.725  Maximum federal share.

         Underground Storage Tanks Program Grants (P.L. 105-276)

35.730  Purpose.
35.731  Eligible recipients.
35.732  Basis for allotment.
35.735  Maximum federal share.

Subparts C-D [Reserved]

 Subpart E--Grants for Construction of Treatment Works--Clean Water Act

35.900  Purpose.
35.901  Program policy.
35.903  Summary of construction grant program.
35.905  Definitions.
35.907  Municipal pretreatment program.
35.908  Innovative and alternative technologies.
35.909  Step 2 = 3 grants.
35.910  Allocation of funds.
35.910-1  Allotments.
35.910-2  Period of availability; reallotment.
35.910-3--35.910-4  [Reserved]
35.910-5  Additional allotments of previously withheld sums.
35.910-6  Fiscal Year 1977 public works allotments.
35.910-7  Fiscal Year 1977 Supplemental Appropriations Act allotments.
35.910-8  Allotments for Fiscal Years 1978-1981.
35.910-9  Allotment of Fiscal Year 1978 appropriation.
35.910-10  Allotment of Fiscal Year 1979 appropriation.
35.910-11  Allotment of Fiscal Year 1980 appropriation.
35.910-12  Reallotment of deobligated funds of Fiscal Year 1978.
35.912  Delegation to State agencies.
35.915  State priority system and project priority list.
35.915-1  Reserves related to the project priority list.
35.917  Facilities planning (step 1).
35.917-1  Content of facilities plan.
35.917-2  State responsibilities.
35.917-3  Federal assistance.
35.917-4  Planning scope and detail.
35.917-5  Public participation.
35.917-6  Acceptance by implementing governmental units.
35.917-7  State review and certification of facilities plan.
35.917-8  Submission and approval of facilities plan.

[[Page 416]]

35.917-9  Revision or amendment of facilities plan.
35.918  Individual systems.
35.918-1  Additional limitations on awards for individual systems.
35.918-2  Eligible and ineligible costs.
35.918-3  Requirements for discharge of effluents.
35.920  Grant application.
35.920-1  Eligibility.
35.920-2  Procedure.
35.920-3  Contents of application.
35.925  Limitations on award.
35.925-1  Facilities planning.
35.925-2  Water quality management plans and agencies.
35.925-3  Priority determination.
35.925-4  State allocation.
35.925-5  Funding and other capabilities.
35.925-6  Permits.
35.925-7  Design.
35.925-8  Environmental review.
35.925-9  Civil rights.
35.925-10  Operation and maintenance program.
35.925-11  User charges and industrial cost recovery.
35.925-12  Property.
35.925-13  Sewage collection system.
35.925-14  Compliance with environmental laws.
35.925-15  Treatment of industrial wastes.
35.925-16  Federal activities.
35.925-17  Retained amounts for reconstruction and expansion.
35.925-18  Limitation upon project costs incurred prior to award.
35.925-19  [Reserved]
35.925-20  Procurement.
35.925-21  Storm sewers.
35.926  Value engineering (VE).
35.927  Sewer system evaluation and rehabilitation.
35.927-1  Infiltration/inflow analysis.
35.927-2  Sewer system evaluation survey.
35.927-3  Rehabilitation.
35.927-4  Sewer use ordinance.
35.927-5  Project procedures.
35.928  Requirements for an industrial cost recovery system.
35.928-1  Approval of the industrial cost recovery system.
35.928-2  Use of industrial cost recovery payments.
35.928-3  Implementation of the industrial cost recovery system.
35.928-4  Moratorium on industrial cost recovery payments.
35.929  Requirements for user charge system.
35.929-1  Approval of the user charge system.
35.929-2  General requirements for all user charge systems.
35.929-3  Implementation of the user charge system.
35.930  Award of grant assistance.
35.930-1  Types of projects.
35.930-2  Grant amount.
35.930-3  Grant term.
35.930-4  Project scope.
35.930-5  Federal share.
35.930-6  Limitation on Federal share.
35.935  Grant conditions.
35.935-1  Grantee responsibilities.
35.935-2  Procurement.
35.935-3  Property.
35.935-4  Step 2 = 3 projects.
35.935-5  Davis-Bacon and related statutes.
35.935-6  Equal employment opportunity.
35.935-7  Access.
35.935-8  Supervision.
35.935-9  Project initiation and completion.
35.935-10  Copies of contract documents.
35.935-11  Project changes.
35.935-12  Operation and maintenance.
35.935-13  Submission and approval of user charge systems.
35.935-14  Final inspection.
35.935-15  Submission and approval of industrial cost recovery system.
35.935-16  Sewer use ordinance and evaluation/rehabilitation program.
35.935-17  Training facility.
35.935-18  Value engineering.
35.935-19  Municipal pretreatment program.
35.935-20  Innovative processes and techniques.
35.936  Procurement.
35.936-1  Definitions.
35.936-2  Grantee procurement systems; State or local law.
35.936-3  Competition.
35.936-4  Profits.
35.936-5  Grantee responsibility.
35.936-6  EPA responsibility.
35.936-7  Small and minority business.
35.936-8  Privity of contract.
35.936-9  Disputes.
35.936-10  Federal procurement regulations.
35.936-11  General requirements for subagreements.
35.936-12  Documentation.
35.936-13  Specifications.
35.936-14  Force account work.
35.936-15  Limitations on subagreement award.
35.936-16  Code or standards of conduct.
35.936-17  Fraud and other unlawful or corrupt practices.
35.936-18  Negotiation of subagreements.
35.936-19  Small purchases.
35.936-20  Allowable costs.
35.936-21  Delegation to State agencies; certification of procurement 
          systems.
35.936-22  Bonding and insurance.
35.937  Subagreements for architectural or engineering services.
35.937-1  Type of contract (subagreement).
35.937-2  Public notice.
35.937-3  Evaluation of qualifications.
35.937-4  Solicitation and evaluation of proposals.
35.937-5  Negotiation.
35.937-6  Cost and price considerations.
35.937-7  Profit.

[[Page 417]]

35.937-8  Award of subagreement.
35.937-9  Required solicitation and subagreement provisions.
35.937-10  Subagreement payments--architectural or engineering services.
35.937-11  Applicability to existing contracts.
35.937-12  Subcontracts under subagreements for architectural or 
          engineering services.
35.938  Construction contracts (subagreements) of grantees.
35.938-1  Applicability.
35.938-2  Performance by contract.
35.938-3  Type of contract.
35.938-4  Formal advertising.
35.938-5  Negotiation of contract amendments (change orders).
35.938-6  Progress payments to contractors.
35.938-7  Retention from progress payments.
35.938-8  Required construction contract provisions.
35.938-9  Subcontracts under construction contracts.
35.939  Protests.
35.940  Determination of allowable costs.
35.940-1  Allowable project costs.
35.940-2  Unallowable costs.
35.940-3  Costs allowable, if approved.
35.940-4  Indirect costs.
35.940-5  Disputes concerning allowable costs.
35.945  Grant payments.
35.950  Suspension, termination or annulment of grants.
35.955  Grant amendments to increase grant amounts.
35.960  Disputes.
35.965  Enforcement.
35.970  Contract enforcement.

Appendix A to Subpart E--Cost-Effectiveness Analysis Guidelines
Appendix B to Subpart E--Federal Guidelines--User Charges For Operation 
          and Maintenance of Publicly Owned Treatment Works
Appendix C-1 to Subpart E--Required Provisions--Consulting Engineering 
          Agreements
Appendix C-2 to Subpart E--Required Provisions--Construction Contracts
Appendix D to Subpart E--EPA Transition Policy--Existing Consulting 
          Engineering Agreements
Appendix E to Subpart E--Innovative and Alternative Technology 
          Guidelines

Subparts F-G [Reserved]

Subpart H--Cooperative Agreements for Protecting and Restoring Publicly 
                         Owned Freshwater Lakes

35.1600  Purpose.
35.1603  Summary of clean lakes assistance program.
35.1605  Definitions.
35.1605-1  The Act.
35.1605-2  Freshwater lake.
35.1605-3  Publicly owned freshwater lake.
35.1605-4  Nonpoint source.
35.1605-5  Eutrophic lake.
35.1605-6  Trophic condition.
35.1605-7  Desalinization.
35.1605-8  Diagnostic-feasibility study.
35.1605-9  Indian Tribe set forth at 40 CFR 130.6(d).
35.1610  Eligibility.
35.1613  Distribution of funds.
35.1615  Substate agreements.
35.1620  Application requirements.
35.1620-1  Types of assistance.
35.1620-2  Contents of applications.
35.1620-3  Environmental evaluation.
35.1620-4  Public participation.
35.1620-5  State work programs and lake priority lists.
35.1620-6  Intergovernmental review.
35.1630  State lake classification surveys.
35.1640  Application review and evaluation.
35.1640-1  Application review criteria.
35.1650  Award.
35.1650-1  Project period.
35.1650-2  Limitations on awards.
35.1650-3  Conditions on award.
35.1650-4  Payment.
35.1650-5  Allowable costs.
35.1650-6  Reports.

Appendix A to Subpart H--Requirements for Diagnostic-Feasibility Studies 
          and Environmental Evaluations

          Subpart I--Grants for Construction of Treatment Works

35.2000  Purpose and policy.
35.2005  Definitions.
35.2010  Allotment; reallotment.
35.2012  Capitalization grants.
35.2015  State priority system and project priority list.
35.2020  Reserves.
35.2021  Reallotment of reserves.
35.2023  Water quality management planning.
35.2024  Combined sewer overflows.
35.2025  Allowance and advance of allowance.
35.2030  Facilities planning.
35.2032  Innovative and alternative technologies.
35.2034  Privately owned individual systems.
35.2035  Rotating biological contractor (RBC) replacement grants.
35.2036  Design/build project grants.
35.2040  Grant application.
35.2042  Review of grant applications.
35.2050  Effect of approval or certification of documents.
35.2100  Limitations on award.
35.2101  Advanced treatment.
35.2102  Water quality management planning.
35.2103  Priority determination.
35.2104  Funding and other considerations.
35.2105  Debarment and suspension.

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35.2106  Plan of operation.
35.2107  Intermunicipal service agreements.
35.2108  Phased or segmented treatment works.
35.2109  Step 2=3.
35.2110  Access to individual systems.
35.2111  Revised water quality standards.
35.2112  Marine discharge waiver applicants.
35.2113  Environmental review.
35.2114  Value engineering.
35.2116  Collection system.
35.2118  Preaward costs.
35.2120  Infiltration/Inflow.
35.2122  Approval of user charge system and proposed sewer use 
          ordinance.
35.2123  Reserve capacity.
35.2125  Treatment of wastewater from industrial users.
35.2127  Federal facilities.
35.2130  Sewer use ordinance.
35.2140  User charge system.
35.2152  Federal share.
35.2200  Grant conditions.
35.2202  Step 2=3 projects.
35.2203  Step 7 projects.
35.2204  Project changes.
35.2205  Maximum allowable project cost.
35.2206  Operation and maintenance.
35.2208  Adoption of sewer use ordinance and user charge system.
35.2210  Land acquisition.
35.2211  Field testing for Innovative and Alternative Technology Report.
35.2212  Project initiation.
35.2214  Grantee responsibilities.
35.2216  Notice of building completion and final inspection.
35.2218  Project performance.
35.2250  Determination of allowable costs.
35.2260  Advance purchase of eligible land.
35.2262  Funding of field testing.
35.2300  Grant payments.
35.2350  Subagreement enforcement.

Appendix A to Subpart I--Determination of Allowable Costs
Appendix B to Subpart I--Allowance for Facilities Planning and Design

       Subpart J--Construction Grants Program Delegation to States

35.3000  Purpose.
35.3005  Policy.
35.3010  Delegation agreement.
35.3015  Extent of State responsibilities.
35.3020  Certification procedures.
35.3025  Overview of State performance under delegation.
35.3030  Right of review of State decision.
35.3035  Public participation.

        Subpart K--State Water Pollution Control Revolving Funds

35.3100  Policy and purpose.
35.3105  Definitions.
35.3110  Fund establishment.
35.3115  Eligible activities of the SRF.
35.3120  Authorized types of assistance.
35.3125  Limitations on SRF assistance.
35.3130  The capitalization grant agreement.
35.3135  Specific capitalization grant agreement requirements.
35.3140  Environmental review requirements.
35.3145  Application of other Federal authorities.
35.3150  Intended Use Plan (IUP).
35.3155  Payments.
35.3160  Cash draw rules.
35.3165  Reports and audits.
35.3170  Corrective action.

Appendix A to Subpart K--Criteria for Evaluating a State's Proposed 
          NEPA-Like Process

             Subpart L--Drinking Water State Revolving Funds

35.3500  Purpose, policy, and applicability.
35.3505  Definitions.
35.3510  Establishment of the DWSRF program.
35.3515  Allotment and withholdings of funds.
35.3520  Systems, projects, and project-related costs eligible for 
          assistance from the Fund.
35.3525  Authorized types of assistance from the Fund.
35.3530  Limitations on uses of the Fund.
35.3535  Authorized set-aside activities.
35.3540  Requirements for funding set-aside activities.
35.3545  Capitalization grant agreement.
35.3550  Specific capitalization grant agreement requirements.
35.3555  Intended Use Plan (IUP).
35.3560  General payment and cash draw rules.
35.3565  Specific cash draw rules for authorized types of assistance 
          from the Fund.
35.3570  Reports and audits.
35.3575  Application of Federal cross-cutting authorities (cross-
          cutters).
35.3580  Environmental review requirements.
35.3585  Compliance assurance procedures.

Appendix A to Subpart L--Criteria for Evaluating a State's Proposed 
          NEPA-Like Process.

               Subpart M--Grants for Technical Assistance

                                 General

35.4000  Authority.
35.4005  What is a Technical Assistance Grant?
35.4010  What does this subpart do?
35.4011  Do the general grant regulations for nonprofit organizations 
          apply to TAGs?
35.4012  If there appears to be a difference between the requirements in 
          40 CFR part 30

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          and this subpart, which regulations should my group follow?
35.4015  Do certain words in this subpart have specific meaning?

                            Who Is Eligible?

35.4020  Is my community group eligible for a TAG?
35.4025  Is there any way my group can get a TAG if it is currently 
          ineligible?
35.4030  Can I be a part of a TAG group if I belong to an ineligible 
          group?
35.4035  Does EPA use the same eligibility criteria for TAGs at 
          ``Federal facility'' sites?
35.4040  How many groups can receive a TAG at one Superfund site?

                Your Responsibilities as a TAG Recipient

35.4045  What requirements must my group meet as a TAG recipient?
35.4050  Must my group contribute toward the cost of a TAG?
35.4055  What if my group can't come up with the ``matching funds?''

                       How Much Money TAGs Provide

35.4060  How much money can my group receive through a TAG?
35.4065  How can my group get more than $50,000?

                          What TAGs Can Pay for

35.4070  How can my group spend TAG money?
35.4075  Are there things my group can't spend TAG money for?

                          How You Get the Money

35.4080  Does my group get a lump sum up front, or does EPA reimburse us 
          for costs we incur?
35.4085  Can my group get an ``advance payment'' to help us get started?
35.4090  If my group is eligible for an advance payment, how do we get 
          our funds?
35.4095  What can my group pay for with an advance payment?
35.4100  Can my group incur any costs prior to the award of our grant?

                         How to Apply for a TAG

35.4105  What is the first step for getting a TAG?
35.4106  What information should an LOI include?
35.4110  What does EPA do once it receives the first LOI from a group?
35.4115  After the public notice that EPA has received an LOI, how much 
          time does my group have to form a coalition or submit a 
          separate LOI?
35.4120  What does my group do next?
35.4125  What else does my group need to do?
35.4130  What must be included in my group's budget?
35.4135  What period of time should my group's budget cover?
35.4140  What must be included in my group's work plan?
35.4145  How much time do my group or other interested groups have to 
          submit a TAG application to EPA?
35.4150  What happens after my group submits its application to EPA?
35.4155  How does EPA decide whether to award a TAG to our group?
35.4160  What does EPA do if more than one group applies for a TAG at 
          the same site?
35.4161  Does the TAG application process affect the schedule for work 
          at my site?
35.4165  When does EPA award a TAG?

                            Managing Your TAG

35.4170  What kinds of reporting does EPA require?
35.4175  What other reporting and record keeping requirements are there?
35.4180  Must my group keep financial records after we finish our TAG?
35.4185  What does my group do with reports our technical advisor 
          prepares for us?

    Procuring a Technical Advisor or Other Contractor With TAG Funds

35.4190  How does my group identify a qualified technical advisor?
35.4195  Are there certain people my group cannot select to be our 
          technical advisor, grant administrator, or other contractor 
          under the grant?
35.4200  What restrictions apply to contractors my group procures for 
          our TAG?
35.4205  How does my group procure a technical advisor or any other 
          contractor?
35.4210  Must my group solicit and document bids for our procurements?
35.4215  What if my group can't find an adequate number of potential 
          sources for a technical advisor or other contractor?
35.4220  How does my group ensure a prospective contractor does not have 
          a conflict of interest?
35.4225  What if my group decides a prospective contractor has a 
          conflict of interest?
35.4230  What are my group's contractual responsibilities once we 
          procure a contractor?
35.4235  Are there specific provisions my group's contract(s) must 
          contain?

                    Requirements for TAG Contractors

35.4240  What provisions must my group's TAG contractor comply with if 
          it subcontracts?

              Grant Disputes, Termination, and Enforcement

35.4245  How does my group resolve a disagreement with EPA regarding our 
          TAG?
35.4250  Under what circumstances would EPA terminate my group's TAG?

[[Page 420]]

35.4255  Can my group terminate our TAG?
35.4260  What other steps might EPA take if my group fails to comply 
          with the terms and conditions of our award?

                            Closing Out a TAG

35.4265  How does my group close out our TAG?

                      Other Things You Need to Know

35.4270  Definitions.
35.4275  Where can my group get the documents this subpart references 
          (for example, OMB circulars, other subparts, forms)?

Subpart N [Reserved]

  Subpart O--Cooperative Agreements and Superfund State Contracts for 
                       Superfund Response Actions

                                 General

35.6000  Authority.
35.6005  Purpose and scope.
35.6010  Eligibility.
35.6015  Definitions.
35.6020  Other statutory provisions.
35.6025  Deviation from this subpart.

              Pre-Remedial Response Cooperative Agreements

35.6050  Eligibility for pre-remedial Cooperative Agreements.
35.6055  State-lead pre-remedial Cooperative Agreements.
35.6060  Political subdivision-lead pre-remedial Cooperative Agreements.
35.6070  Indian Tribe-lead pre-remedial Cooperative Agreements.

                Remedial Response Cooperative Agreements

35.6100  Eligibility for remedial Cooperative Agreements.
35.6105  State-lead remedial Cooperative Agreements.
35.6110  Indian Tribe-lead remedial Cooperative Agreements.
35.6115  Political subdivision-lead remedial Cooperative Agreements.
35.6120  Notification of the out-of-State or out-of-Indian Tribal 
          jurisdiction transfer of CERCLA waste.

                   Enforcement Cooperative Agreements

35.6145  Eligibility for enforcement Cooperative Agreements.
35.6150  Activities eligible for funding under enforcement Cooperative 
          Agreements.
35.6155  State, political subdivision or Indian Tribe-lead enforcement 
          Cooperative Agreements.

                 Removal Response Cooperative Agreements

35.6200  Eligibility for removal Cooperative Agreements.
35.6205  Removal Cooperative Agreements.

                   Core Program Cooperative Agreements

35.6215  Eligibility for Core Program Cooperative Agreements.
35.6220  General.
35.6225  Activities eligible for funding under Core Program Cooperative 
          Agreements.
35.6230  Application requirements.
35.6235  Cost sharing.

                  Support Agency Cooperative Agreements

35.6240  Eligibility for support agency Cooperative Agreements.
35.6245  Allowable activities.
35.6250  Support agency Cooperative Agreement requirements.
35.6255  Cost sharing.

   Financial Administration Requirements Under a Cooperative Agreement

35.6270  Standards for financial management systems.
35.6275  Period of availability of funds.
35.6280  Payments.
35.6285  Recipient payment of response costs.
35.6290  Program income.

      Personal Property Requirements Under a Cooperative Agreement

35.6300  General personal property acquisition and use requirements.
35.6305  Obtaining supplies.
35.6310  Obtaining equipment.
35.6315  Alternative methods for obtaining property.
35.6320  Usage rate.
35.6325  Title and EPA interest in CERCLA-funded property.
35.6330  Title to federally owned property.
35.6335  Property management standards.
35.6340  Disposal of CERCLA-funded property.
35.6345  Equipment disposal options.
35.6350  Disposal of federally owned property.

        Real Property Requirements Under a Cooperative Agreement

35.6400  Acquisition and transfer of interest.
35.6405  Use.

          Copyright Requirements Under a Cooperative Agreement

35.6450  General requirements.

   Use of Recipient Employees (``Force Account'') Under a Cooperative 
                                Agreement

35.6500  General requirements.

[[Page 421]]

         Procurement Requirements Under a Cooperative Agreement

35.6550  Procurement system standards.
35.6555  Competition.
35.6560  Master list of debarred, suspended, and voluntarily excluded 
          persons.
35.6565  Procurement methods.
35.6570  Use of the same engineer during subsequent phases of response.
35.6575  Restrictions on types of contracts.
35.6580  Contracting with minority and women's business enterprises 
          (MBE/WBE), small businesses, and labor surplus area firms.
35.6585  Cost and price analysis.
35.6590  Bonding and insurance.
35.6595  Contract provisions.
35.6600  Contractor claims.
35.6605  Privity of contract.
35.6610  Contracts awarded by a contractor.

             Reports Required Under a Cooperative Agreement

35.6650  Quarterly progress reports.
35.6655  Notification of significant developments.
35.6660  Property inventory reports.
35.6665  Procurement reports.
35.6670  Financial reports.

           Records Requirements Under a Cooperative Agreement

35.6700  Project records.
35.6705  Records retention.
35.6710  Records access.

      Other Administrative Requirements for Cooperative Agreements

35.6750  Modifications.
35.6755  Monitoring program performance.
35.6760  Enforcement and termination for convenience.
35.6765  Non-Federal audit.
35.6770  Disputes.
35.6775  Exclusion of third-party benefits.
35.6780  Closeout.
35.6785  Collection of amounts due.
35.6790  High risk recipients.

     Requirements for Administering a Superfund State Contract (SSC)

35.6800  General.
35.6805  Contents of an SSC.
35.6815  Administrative requirements.
35.6820  Conclusion of the SSC.

    Subpart P--Financial Assistance for the National Estuary Program

35.9000  Applicability.
35.9005  Purpose.
35.9010  Definitions.
35.9015  Summary of annual process.
35.9020  Planning targets.
35.9030  Work program.
35.9035  Budget period.
35.9040  Application for assistance.
35.9045  EPA action on application.
35.9050  Assistance amount.
35.9055  Evaluation of recipient performance.
35.9060  Maximum Federal share.
35.9065  Limitations.
35.9070  National program assistance agreements.

    Authority: 42 U.S.C. 4368b, unless otherwise noted.



Sec. 35.001  Applicability.

    This part codifies policies and procedures for financial assistance 
awarded by the Environmental Protection Agency (EPA) to State, 
interstate, and local agencies, Indian Tribes and Intertribal Consortia 
for pollution abatement and control programs. These provisions 
supplement the EPA general assistance regulations in 40 CFR part 31.

[66 FR 1734, Jan. 9, 2001]



                 Subpart A--Environmental Program Grants

    Authority: 42 U.S.C. 7401 et seq.; 33 U.S.C. 1251 et seq.; 42 U.S.C. 
300f et seq.; 42 U.S.C. 6901 et seq.; 7 U.S.C. 136 et seq.; 15 U.S.C. 
2601 et seq.; 42 U.S.C. 13101 et seq.; Pub. L. 104-134, 110 Stat. 1321, 
1321-299 (1996); Pub. L. 105-65, 111 Stat. 1344, 1373 (1997).

    Source: 66 FR 1734, Jan. 9, 2001, unless otherwise noted.

                                 General



Sec. 35.100  Purpose of the subpart.

    This subpart establishes administrative requirements for all grants 
awarded to State, interstate, and local agencies and other entities for 
the environmental programs listed in Sec. 35.101. This subpart 
supplements requirements in EPA's general grant regulations found at 40 
CFR parts 30 and 31. Sections 35.100--35.118 contain administrative 
requirements that apply to all environmental program grants included in 
this subpart. Sections 35.130-35.418 contain requirements that apply to 
specified environmental program grants. Many of these environmental 
programs also have programmatic and technical requirements that are 
published elsewhere in the Code of Federal Regulations.

[[Page 422]]



Sec. 35.101  Environmental programs covered by the subpart.

    (a) The requirements in this subpart apply to all grants awarded for 
the following programs:
    (1) Performance partnership grants (Omnibus Consolidated Rescissions 
and Appropriations Act of 1996, Pub. Law 104-134, 110 Stat. 1321, 1321-
299 (1996) and Departments of Veterans Affairs and Housing and Urban 
Development, and Independent Agencies Appropriations Act, 1998, Pub. Law 
105-65, 111 Stat. 1344, 1373 (1997)).
    (2) Air pollution control (section 105 of the Clean Air Act).
    (3) Water pollution control (section 106 of the Clean Water Act).
    (4) Public water system supervision (section 1443(a) of the Safe 
Drinking Water Act).
    (5) Underground water source protection (section 1443(b) of the Safe 
Drinking Water Act).
    (6) Hazardous waste management (section 3011(a) of the Solid Waste 
Disposal Act).
    (7) Pesticide cooperative enforcement (section 23(a)(1) of the 
Federal Insecticide, Fungicide, and Rodenticide Act).
    (8) Pesticide applicator certification and training (section 
23(a)(2) of the Federal Insecticide, Fungicide, and Rodenticide Act).
    (9) Pesticide program implementation (section 23(a)(1) of the 
Federal Insecticide, Fungicide, and Rodenticide Act).
    (10) Nonpoint source management (sections 205(j)(5) and 319(h) of 
the Clean Water Act).
    (11) Lead-based paint program (section 404(g) of the Toxic 
Substances Control Act).
    (12) State indoor radon grants (section 306 of the Toxic Substances 
Control Act).
    (13) Toxic substances compliance monitoring (section 28 of the Toxic 
Substances Control Act).
    (14) State underground storage tanks (section 2007(f)(2) of the 
Solid Waste Disposal Act).
    (15) Pollution prevention state grants (section 6605 of the 
Pollution Prevention Act of 1990).
    (16) Water quality cooperative agreements (section 104(b)(3) of the 
Clean Water Act).
    (17) Wetlands development grants program (section 104(b)(3) of the 
Clean Water Act).
    (18) State administration of construction grant, permit, and 
planning programs (section 205(g) of the Clean Water Act).
    (19) Water quality management planning (section 205(j)(2) of the 
Clean Water Act).
    (b) Unless otherwise prohibited by statute or regulation, the 
requirements in Sec. 35.100 through Sec. 35.118 of this subpart also 
apply to grants under environmental programs established after this 
subpart becomes effective if specified in Agency guidance for such 
programs.
    (c) In the event a grant is awarded from EPA headquarters for one of 
the programs listed in paragraph (a) of this section, this subpart shall 
apply and the term ``Regional Administrator'' shall mean ``Assistant 
Administrator'.



Sec. 35.102  Definitions of terms.

    Terms are defined as follows when they are used in this subpart.
    Allotment. EPA's calculation of the funds that may be available to 
an eligible recipient for an environmental program grant. An allotment 
is not an entitlement.
    Consolidated grant. A single grant made to a recipient consolidating 
funds from more than one environmental grant program. After the award is 
made, recipients must account for grant funds in accordance with the 
funds' original environmental program sources. Consolidated grants are 
not Performance Partnership Grants.
    Environmental program. A program for which EPA awards grants under 
the authorities listed in Sec. 35.101. The grants are subject to the 
requirements of this subpart.
    Funding period. The period of time specified in the grant agreement 
during which the recipient may expend or obligate funds for the purposes 
set forth in the agreement.
    National program guidance. Guidance issued by EPA's National Program 
Managers for establishing and maintaining effective environmental 
programs. This guidance establishes national goals, objectives, and 
priorities

[[Page 423]]

as well as the core performance measures and other information to be 
used in monitoring progress. The guidance may also set out specific 
environmental strategies, criteria for evaluating programs, and other 
elements of program implementation.
    Outcome. The environmental result, effect, or consequence that will 
occur from carrying out an environmental program or activity that is 
related to an environmental or programmatic goal or objective. Outcomes 
must be quantitative, and they may not necessarily be achievable during 
a grant funding period. See ``output.''
    Output. An environmental activity or effort and associated work 
products related to an environmental goal or objective that will be 
produced or provided over a period of time or by a specified date. 
Outputs may be quantitative or qualitative but must be measurable during 
a grant funding period. See ``outcome.''
    Performance Partnership Agreement. A negotiated agreement signed by 
the EPA Regional Administrator and an appropriate official of a State 
agency and designated as a Performance Partnership Agreement. Such 
agreements typically set out jointly developed goals, objectives, and 
priorities; the strategies to be used in meeting them; the roles and 
responsibilities of the State and EPA; and the measures to be used in 
assessing progress. A Performance Partnership Agreement may be used as 
all or part of a work plan for a grant if it meets the requirements for 
a work plan set out in Sec. 35.107.
    Performance Partnership Grant. A single grant combining funds from 
more than one environmental program. A Performance Partnership Grant may 
provide for administrative savings or programmatic flexibility to direct 
grant resources where they are most needed to address public health and 
environmental priorities (see also Sec. 35.130). Each Performance 
Partnership Grant has a single, integrated budget and recipients do not 
need to account for grant funds in accordance with the funds' original 
environmental program sources.
    Planning target. The amount of funds that the Regional Administrator 
suggests a grant applicant consider in developing its application, 
including the work plan, for an environmental program.
    Regional supplemental guidance. Guidance to environmental program 
applicants prepared by the Regional Administrator, based on the national 
program guidance and specific regional and applicant circumstances, for 
use in preparing a grant application.
    Work plan commitments. The outputs and outcomes associated with each 
work plan component, as established in the grant agreement.
    Work plan component. A negotiated set or group of work plan 
commitments established in the grant agreement. A work plan may have one 
or more work plan components.

                        Preparing an Application



Sec. 35.104  Components of a complete application.

    A complete application for an environmental program must:
    (a) Meet the requirements in 40 CFR part 31, subpart B;
    (b) Include a proposed work plan (Sec. 35.107); and
    (c) Specify the environmental program and the amount of funds 
requested.



Sec. 35.105  Time frame for submitting an application.

    An applicant should submit a complete application to EPA at least 60 
days before the beginning of the proposed funding period.



Sec. 35.107  Work plans.

    (a) Bases for negotiating work plans. The work plan is negotiated 
between the applicant and the Regional Administrator and reflects 
consideration of national, regional, and State environmental and 
programmatic needs and priorities.
    (1) Negotiation considerations. In negotiating the work plan, the 
Regional Administrator and applicant will consider such factors as 
national program guidance; any regional supplemental guidance; goals, 
objectives, and priorities proposed by the applicant; other jointly 
identified needs or priorities; and the planning target.

[[Page 424]]

    (2) National program guidance. If an applicant proposes a work plan 
that differs significantly from the goals and objectives, priorities, or 
core performance measures in the national program guidance associated 
with the proposed activities, the Regional Administrator must consult 
with the appropriate National Program Manager before agreeing to the 
work plan.
    (3) Use of existing guidance. An applicant should base the grant 
application on the national program guidance in place at the time the 
application is being prepared.
    (b) Work plan requirements. (1) The work plan is the basis for the 
management and evaluation of performance under the grant agreement.
    (2) An approvable work plan must specify:
    (i) The work plan components to be funded under the grant;
    (ii) The estimated work years and the estimated funding amounts for 
each work plan component;
    (iii) The work plan commitments for each work plan component and a 
time frame for their accomplishment;
    (iv) A performance evaluation process and reporting schedule in 
accordance with Sec. 35.115 of this subpart; and
    (v) The roles and responsibilities of the recipient and EPA in 
carrying out the work plan commitments.
    (3) The work plan must be consistent with applicable federal 
statutes; regulations; circulars; executive orders; and EPA delegations, 
approvals, or authorizations.
    (c) Performance Partnership Agreement as work plan. An applicant may 
use a Performance Partnership Agreement or a portion of a Performance 
Partnership Agreement as the work plan for an environmental program 
grant if the portions of the Performance Partnership Agreement that 
serve as all or part of the grant work plan:
    (1) Are clearly identified and distinguished from other portions of 
the Performance Partnership Agreement; and
    (2) Meet the requirements in Sec. 35.107(b).



Sec. 35.108  Funding period.

    The Regional Administrator and applicant may negotiate the length of 
the funding period for environmental program grants, subject to 
limitations in appropriations acts.



Sec. 35.109  Consolidated grants.

    (a) Any applicant eligible to receive funds from more than one 
environmental program may submit an application for a consolidated 
grant. For consolidated grants, an applicant prepares a single budget 
and work plan covering all of the environmental programs included in the 
application. The consolidated budget must identify each environmental 
program to be included, the amount of each program's funds, and the 
extent to which each program's funds support each work plan component. 
Recipients of consolidated grants must account for grant funds in 
accordance with the funds' environmental program sources; funds included 
in a consolidated grant from a particular environmental program may be 
used only for that program.
    (b) Insular areas that choose to consolidate environmental program 
grants may be exempted by the Regional Administrator from requirements 
of this subpart in accordance with 48 U.S.C. 1469a.

                        EPA Action on Application



Sec. 35.110  Time frame for EPA action.

    The Regional Administrator will review a complete application and 
either approve, conditionally approve, or disapprove it within 60 days 
of receipt. This period may be extended by mutual agreement between EPA 
and the applicant. The Regional Administrator will award the funds for 
approved or conditionally approved applications when the funds are 
available.



Sec. 35.111  Criteria for approving an application.

    (a) The Regional Administrator may approve an application upon 
determining that:
    (1) The application meets the requirements of this subpart and 40 
CFR part 31;
    (2) The application meets the requirements of all applicable federal 
statutes; regulations; circulars; executive orders; and delegations, 
approvals, or authorizations;

[[Page 425]]

    (3) The proposed work plan complies with the requirements of 
Sec. 35.107; and
    (4) The achievement of the proposed work plan is feasible, 
considering such factors as the applicant's existing circumstances, past 
performance, program authority, organization, resources, and procedures.
    (b) If the Regional Administrator finds the application does not 
satisfy the criteria in paragraph (a) of this section, the Regional 
Administrator may either:
    (1) Conditionally approve the application if only minor changes are 
required, with grant conditions necessary to ensure compliance with the 
criteria, or
    (2) Disapprove the application in writing.



Sec. 35.112  Factors considered in determining award amount.

    (a) After approving an application under Sec. 35.111, the Regional 
Administrator will consider such factors as the applicant's allotment, 
the extent to which the proposed work plan is consistent with EPA 
guidance and mutually agreed upon priorities, and the anticipated cost 
of the work plan relative to the proposed work plan components, to 
determine the amount of funds to be awarded.
    (b) If the Regional Administrator finds the requested level of 
funding is not justified or the work plan does not comply with the 
requirements of Sec. 35.107, the Regional Administrator will attempt to 
negotiate a resolution of the issues with the applicant before 
determining the award amount. The Regional Administrator may determine 
that the award amount will be less than the amount allotted or 
requested.



Sec. 35.113  Reimbursement for pre-award costs.

    (a) Notwithstanding the requirements of 40 CFR 31.23(a) and OMB cost 
principles, EPA may reimburse recipients for pre-award costs incurred 
from the beginning of the funding period established in the grant 
agreement if such costs would have been allowable if incurred after the 
award and the recipients submitted complete grant applications before 
the beginning of the budget period. Such costs must be identified in the 
grant application EPA approves.
    (b) The applicant incurs pre-award costs at its own risk. EPA is 
under no obligation to reimburse such costs unless they are included in 
an approved grant award.

                         Post-Award Requirements



Sec. 35.114  Amendments and other changes.

    The provisions of 40 CFR 31.30 do not apply to environmental program 
grants awarded under this subpart. The following provisions govern 
amendments and other changes to grant work plans and budgets after the 
work plan is negotiated and a grant awarded.
    (a) Changes requiring prior approval. Recipients may make 
significant changes in work plan commitments only after obtaining the 
Regional Administrator's prior written approval. EPA, in consultation 
with the recipient, will document these revisions including budgeted 
amounts associated with the revisions.
    (b) Changes requiring approval. Recipients must request, in writing, 
grant amendments for changes requiring increases in environmental 
program grant amounts and extensions of the funding period. Recipients 
may begin implementing a change before the amendment has been approved 
by EPA, but do so at their own risk. If EPA approves the change, EPA 
will issue a grant amendment. EPA will notify the recipient in writing 
if the change is disapproved.
    (c) Changes not requiring approval. Other than those situations 
described in paragraphs (a) and (b) of this section, recipients do not 
need to obtain approval for changes, including changes in grant work 
plans, budgets, or other components of grant agreements, unless the 
Regional Administrator determines approval requirements should be 
imposed on a specific recipient for a specified period of time.
    (d) OMB cost principles. The Regional Administrator may waive in 
writing approval requirements for specific recipients and costs 
contained in OMB cost principles.
    (e) Changes in consolidated grants. Recipients of consolidated 
grants under

[[Page 426]]

Sec. 35.109 may not transfer funds among environmental programs.
    (f) Subgrants. Subgrantees must request required approvals in 
writing from the recipient and the recipient shall approve or disapprove 
the request in writing. A recipient will not approve any work plan or 
budget revision which is inconsistent with the purpose or terms and 
conditions of the federal grant to the recipient. If the revision 
requested by the subgrantee would result in a significant change to the 
recipient's approved grant which requires EPA approval, the recipient 
will obtain EPA's approval before approving the subgrantee's request.



Sec. 35.115  Evaluation of performance.

    (a) Joint evaluation process. The applicant and the Regional 
Administrator will develop a process for jointly evaluating and 
reporting progress and accomplishments under the work plan. A 
description of the evaluation process and a reporting schedule must be 
included in the work plan (see Sec. 35.107(b)(2)(iv)). The schedule must 
require the recipient to report at least annually and must satisfy the 
requirements for progress reporting under 40 CFR 31.40(b).
    (b) Elements of the evaluation process. The evaluation process must 
provide for:
    (1) A discussion of accomplishments as measured against work plan 
commitments;
    (2) A discussion of the cumulative effectiveness of the work 
performed under all work plan components;
    (3) A discussion of existing and potential problem areas; and
    (4) Suggestions for improvement, including, where feasible, 
schedules for making improvements.
    (c) Resolution of issues. If the joint evaluation reveals that the 
recipient has not made sufficient progress under the work plan, the 
Regional Administrator and the recipient will negotiate a resolution 
that addresses the issues. If the issues cannot be resolved through 
negotiation, the Regional Administrator may take appropriate measures 
under 40 CFR 31.43. The recipient may request review of the Regional 
Administrator's decision under the dispute processes in 40 CFR 31.70.
    (d) Evaluation reports. The Regional Administrator will ensure that 
the required evaluations are performed according to the negotiated 
schedule and that copies of evaluation reports are placed in the 
official files and provided to the recipient.



Sec. 35.116  Direct implementation.

    If funds remain in a State's allotment for an environmental program 
grant either after grants for that environmental program have been made 
or because no grant was made, the Regional Administrator may, subject to 
any limitations contained in appropriation acts, use all or part of the 
funds to support a federal program required by law in the State in the 
absence of an acceptable State program.



Sec. 35.117  Unused funds.

    If funds for an environmental program grant remain in a State's 
allotment either after an initial environmental program grant has been 
made or because no grant was made, and the Regional Administrator does 
not use the funds under Sec. 35.116 of this subpart, the Regional 
Administrator may award the funds to any eligible recipient in the 
region, including the same State or an Indian Tribe or Tribal 
consortium, for the same environmental program or for a Performance 
Partnership Grant, subject to any limitations in appropriation acts.



Sec. 35.118  Unexpended balances.

    Subject to any relevant provisions of law, if a recipient's 
Financial Status Report shows unexpended balances, the Regional 
Administrator will deobligate the unexpended balances and make them 
available, to either the same recipient in the same region or other 
eligible recipients, including Indian Tribes and Tribal Consortia, for 
environmental program grants.

                     Performance Partnership Grants



Sec. 35.130  Purpose of Performance Partnership Grants.

    (a) Purpose of section. Sections 35.130 through 35.138 govern 
Performance Partnership Grants to States and interstate agencies 
authorized in the Omnibus Consolidated Rescissions and

[[Page 427]]

Appropriations Act of 1996, (Pub. L. 104-134; 110 Stat. 1321, 1321-299 
(1996)) and the Departments of Veterans Affairs and Housing and Urban 
Development, and Independent Agencies Appropriations Act, 1998, (Pub. L. 
105-65; 111 Stat. 1344, 1373 (1997)).
    (b) Purpose of program. Performance Partnership Grants enable States 
and interstate agencies to combine funds from more than one 
environmental program grant into a single grant with a single budget. 
Recipients do not need to account for Performance Partnership Grant 
funds in accordance with the funds' original environmental program 
sources; they need only account for total Performance Partnership Grant 
expenditures subject to the requirements of this subpart. The 
Performance Partnership Grant program is designed to:
    (1) Strengthen partnerships between EPA and State and interstate 
agencies through joint planning and priority-setting and better 
deployment of resources;
    (2) Provide State and interstate agencies with flexibility to direct 
resources where they are most needed to address environmental and public 
health priorities;
    (3) Link program activities more effectively with environmental and 
public health goals and program outcomes;
    (4) Foster development and implementation of innovative approaches 
such as pollution prevention, ecosystem management, and community-based 
environmental protection strategies; and
    (5) Provide savings by streamlining administrative requirements.



Sec. 35.132  Requirements summary.

    Applicants and recipients of Performance Partnership Grants must 
meet:
    (a) The requirements in Secs. 35.100 to 35.118, which apply to all 
environmental program grants, including Performance Partnership Grants; 
and
    (b) The requirements in Secs. 35.130 to 35.138, which apply only to 
Performance Partnership Grants.



Sec. 35.133  Programs eligible for inclusion.

    (a) Eligible programs. Except as provided in paragraph (b) of this 
section, the environmental programs eligible, in accordance with 
appropriation acts, for inclusion in a Performance Partnership Grant are 
listed in Sec. 35.101(a)(2) through (17). (Funds available from the 
section 205(g) State Administration Grants program (Sec. 35.100(b)(18)) 
and the Water Quality Management Planning Grant program 
(Sec. 35.100(b)(19)) may not be included in Performance Partnership 
Grants.)
    (b) Changes in eligible programs. The Administrator may, in guidance 
or regulation, describe subsequent additions, deletions, or changes to 
the list of environmental programs eligible for inclusion in Performance 
Partnership Grants.



Sec. 35.134  Eligible recipients.

    (a) Eligible agencies. All State agencies (including environmental, 
health, agriculture, and other agencies) and interstate agencies 
eligible to receive funds from more than one environmental program may 
receive Performance Partnership Grants
    (b) Designated agency. A State agency must be designated by a 
Governor, State legislature, or other authorized State process to 
receive grants under each of the environmental programs to be combined 
in the Performance Partnership Grant. If it is not the designated agency 
for a particular grant program to be included in the Performance 
Partnership Grant, the State agency must have an agreement with the 
State agency that does have the designation regarding how the funds will 
be shared between the agencies.
    (c) Programmatic requirements. In order to include funds from an 
environmental program grant listed in Sec. 35.101 of this subpart in a 
Performance Partnership Grant, applicants must meet the requirements for 
award of each of the environmental programs from which funds are 
combined in the agency's Performance Partnership Grant, except the 
requirements at Secs. 35.268(b) and (c), 35.272, and 35.298 (c), (d), 
(e), and (g). These requirements can be found in this regulation 
beginning at Sec. 35.140.



Sec. 35.135  Activities eligible for funding.

    (a) A recipient may use a Performance Partnership Grant, subject to 
the

[[Page 428]]

requirements of paragraph (c) of this section, to fund any activity that 
is eligible for funding under at least one of the environmental programs 
from which funds are combined into the grant.
    (b) A recipient may also use a Performance Partnership Grant to fund 
multi-media activities that are eligible in accordance with paragraph 
(a) of this section and have been agreed to by the Regional 
Administrator. Such activities may include multi-media permitting and 
enforcement and pollution prevention, ecosystem management, community-
based environmental protection, and other innovative approaches.
    (c) A recipient may not use a Performance Partnership Grant to fund 
activities eligible only under a specific environmental program grant 
unless some or all of the recipient's allotted funds for that program 
have been included in the Performance Partnership Grant.



Sec. 35.136  Cost share requirements.

    (a) An applicant for a Performance Partnership Grant must provide a 
non-federal cost share that is not less than the sum of the minimum non-
federal cost share required under each of the environmental programs 
that are combined in the Performance Partnership Grant. Cost share 
requirements for the individual environmental programs are described in 
Secs. 35.140 to 35.418.
    (b) When an environmental program included in the Performance 
Partnership Grant has both a matching and maintenance of effort 
requirement, the greater of the two amounts will be used to calculate 
the minimum cost share attributed to that environmental program.



Sec. 35.137  Application requirements.

    (a) An application for a Performance Partnership Grant must contain:
    (1) A list of the environmental programs and the amount of funds 
from each program to be combined in the Performance Partnership Grant;
    (2) A consolidated budget;
    (3) A consolidated work plan that addresses each program being 
combined in the grant and that meets the requirements of Sec. 35.107; 
and,
    (4) A rationale, commensurate with the extent of any programmatic 
flexibility (i.e., increased effort in some programs and decreased 
effort in others) indicated in the work plan, that explains the basis 
for the applicant's priorities, the expected environmental or other 
benefits to be achieved, and the anticipated impact on any environmental 
programs or program areas proposed for reduced effort.
    (b) The applicant and the Regional Administrator will negotiate 
regarding the information necessary to support the rationale for 
programmatic flexibility required in paragraph (a)(4) of this section. 
The rationale may be supported by information from a variety of sources, 
including a Performance Partnership Agreement or comparable negotiated 
document, the evaluation report required in Sec. 35.125, and other 
environmental and programmatic data sources.
    (c) A State agency seeking programmatic flexibility is encouraged to 
include a description of efforts to involve the public in developing the 
State agency's priorities.



Sec. 35.138  Competitive grants.

    (a) Some environmental program grants are awarded through a 
competitive process. An applicant and the Regional Administrator may 
agree to add funds available for a competitive grant to a Performance 
Partnership Grant. If this is done, the work plan commitments that would 
have been included in the competitive grant must be included in the 
Performance Partnership Grant work plan. After the funds have been added 
to the Performance Partnership Grant, the recipient does not need to 
account for these funds in accordance with the funds' original 
environmental program source.
    (b) If the projected completion date for competitive grant work plan 
commitments added to a Performance Partnership Grant is after the end of 
the Performance Partnership Grant funding period, the Regional 
Administrator and the applicant will agree in writing as to how the work 
plan commitments will be carried over into future work plans.

[[Page 429]]

                   Air Pollution Control (Section 105)



Sec. 35.140  Purpose.

    (a) Purpose of section. Sections 35.140 through 35.148 govern Air 
Pollution Control Grants to State, local, interstate, or intermunicipal 
air pollution control agencies (as defined in section 302(b) of the 
Clean Air Act) authorized under section 105 of the Act.
    (b) Purpose of program. Air Pollution Control Grants are awarded to 
administer programs that prevent and control air pollution or implement 
national ambient air quality standards.
    (c) Program regulations. Refer to 40 CFR parts 49, 50, 51, 52, 58, 
60, 61, 62, and 81 for associated program regulations.



Sec. 35.141  Definitions.

    In addition to the definitions in Sec. 35.102, the following 
definitions apply to the Clean Air Act's section 105 grant program:
    Implementing means any activity related to planning, developing, 
establishing, carrying-out, improving, or maintaining programs for the 
prevention and control of air pollution or implementation of national 
primary and secondary ambient air quality standards.
    Nonrecurrent expenditures are those expenditures which are shown by 
the recipient to be of a nonrepetitive, unusual, or singular nature that 
would not reasonably be expected to recur in the foreseeable future. 
Costs categorized as nonrecurrent must be approved in the grant 
agreement or an amendment thereto.
    Recurrent expenditures are those expenses associated with the 
activities of a continuing environmental program. All expenditures are 
considered recurrent unless justified by the applicant as nonrecurrent 
and approved as such in the grant award or an amendment thereto.



Sec. 35.143  Allotment.

    (a) The Administrator allots air pollution control funds under 
section 105 of the Clean Air Act based on a number of factors, 
including:
    (1) Population;
    (2) The extent of actual or potential air pollution problems; and
    (3) The financial need of each agency.
    (b) The Regional Administrator shall allot to a State not less than 
one-half of one percent nor more than 10 percent of the annual section 
105 grant appropriation.
    (c) The Administrator may award funds on a competitive basis.



Sec. 35.145  Maximum federal share.

    (a) The Regional Administrator may provide air pollution control 
agencies, as defined in section 302(b) of the Clean Air Act, up to 
three-fifths of the approved costs of implementing programs for the 
prevention and control of air pollution or implementing national primary 
and secondary ambient air quality standards.
    (b) Revenue collected pursuant to a State's Title V operating permit 
program may not be used to meet the cost share requirements of section 
105.



Sec. 35.146  Maintenance of effort.

    (a) To receive funds under section 105, an agency must expend 
annually, for recurrent section 105 program expenditures, an amount of 
non-federal funds at least equal to such expenditures during the 
preceding fiscal year.
    (b) In order to award grants in a timely manner each fiscal year, 
the Regional Administrator shall compare an agency's proposed 
expenditure level, as detailed in the agency's grant application, to 
that agency's expenditure level in the second preceding fiscal year. 
When expenditure data for the preceding fiscal year is complete, the 
Regional Administrator shall use this information to determine the 
agency's compliance with its maintenance of effort requirement.
    (c) If the expenditure data for the preceding fiscal year shows that 
an agency did not meet the requirements of Sec. 35.146, the Regional 
Administrator will take action to recover the grant funds for the year 
in which the agency did not maintain its level of effort.
    (d) The Regional Administrator may grant an exception to 
Sec. 35.146(a) if, after notice and opportunity for a public hearing, 
the Regional Administrator determines that a reduction in expenditure is 
attributable to a non-selective reduction of the programs of all 
executive branch agencies of the applicable unit of government.

[[Page 430]]

    (e) The Regional Administrator will not award section 105 funds 
unless the applicant provides assurance that the grant will not supplant 
non-federal funds that would otherwise be available for maintaining the 
section 105 program.



Sec. 35.147  Minimum cost share for a Performance Partnership Grant.

    (a) To calculate the cost share for a Performance Partnership Grant 
(see Secs. 35.130 through 35.138) in the initial and subsequent years 
that it includes section 105 funds, the minimum cost share contribution 
for the section 105 program will be the match requirement set forth in 
Sec. 35.145, or the maintenance of effort established under Sec. 35.146 
in the first year that the section 105 grant is included in a 
Performance Partnership Grant, whichever is greater.
    (b) If an air pollution control agency includes its section 105 air 
program funding in a Performance Partnership Grant and subsequently 
withdraws that program from the grant:
    (1) The required maintenance of effort amount for the section 105 
program for the first year after the program is withdrawn will be equal 
to the maintenance of effort amount required in the year the agency 
included the section 105 program in the Performance Partnership Grant.
    (2) The maximum federal share for the section 105 program in the 
first and subsequent years after the grant is withdrawn may not be more 
than three-fifths of the approved cost of the program.
    (c) The Regional Administrator may approve an exception from 
paragraph (b) of this section upon determining that exceptional 
circumstances justify a reduction in the maintenance of effort, 
including when an air pollution control agency reduces section 105 
funding as part of a non-selective reduction of the programs of all 
executive branch agencies of the applicable unit of government.



Sec. 35.148  Award limitations.

    (a) The Regional Administrator will not award section 105 funds to 
an interstate or intermunicipal agency:
    (1) That does not provide assurance that it can develop a 
comprehensive plan for the air quality control region which includes 
representation of appropriate State, interstate, local, Tribal, and 
international interests; and
    (2) Without consulting with the appropriate official designated by 
the Governor or Governors of the State or States affected or the 
appropriate official of any affected Indian Tribe or Tribes.
    (b) The Regional Administrator will not disapprove an application 
for or terminate or annul a section 105 grant without prior notice and 
opportunity for a public hearing in the affected State or States.

                  Water Pollution Control (Section 106)



Sec. 35.160  Purpose.

    (a) Purpose of section. Sections 35.160 through 35.168 govern Water 
Pollution Control Grants to State and interstate agencies (as defined in 
section 502 of the Clean Water Act) authorized under section 106 of the 
Clean Water Act.
    (b) Purpose of program. Water Pollution Control Grants are awarded 
to assist in administering programs for the prevention, reduction, and 
elimination of water pollution, including programs for the development 
and implementation of ground-water protection strategies. Some of these 
activities may also be eligible for funding under sections 104(b)(3) 
(Water Quality Cooperative Agreements and Wetlands Development Grants), 
205(j)(2) (Water Quality Management Planning), and section 205(g) (State 
Administration Grants) of the Clean Water Act. (See Secs. 35.160, 
35.360, 35.380, 35.400, and 35.410.)
    (c) Associated program requirements. Program requirements for water 
quality planning and management activities are provided in 40 CFR part 
130.



Sec. 35.161  Definition.

    Recurrent expenditures are those expenditures associated with the 
activities of a continuing Water Pollution Control program. All 
expenditures, except those for equipment purchases of $5,000 or more, 
are considered recurrent unless justified by the applicant as 
nonrecurrent and approved as such in the grant award or an amendment 
thereto.

[[Page 431]]



Sec. 35.162  Basis for allotment.

    (a) Allotments. Each fiscal year funds appropriated for Water 
Pollution Control grants to State and interstate agencies will be 
allotted to States and interstate agencies on the basis of the extent of 
the pollution problems in the respective States. A portion of the funds 
appropriated for States under the Water Pollution Control grant program 
will be set aside for allotment to eligible interstate agencies. The 
interstate allotment will be 2.6 percent of the funds available under 
this paragraph.
    (b) State allotment formula. The Water Pollution Control State grant 
allotment formula establishes an allotment ratio for each State based on 
six components selected to reflect the extent of the water pollution 
problem in the respective States. The formula provides a funding floor 
for each State with provisions for periodic adjustments for inflation 
and a maximum funding level (150 percent of its previous fiscal year 
allotment).
    (1) Components and component weights--(i) Components. The six 
components used in the Water Pollution Control State grant allotment 
formula are: Surface Water Area; Ground Water Use; Water Quality 
Impairment; Point Sources; Nonpoint Sources; and Population of Urbanized 
Area. The components for the formula are presented in Table 1 of this 
section, with their associated elements, sub-elements, and supporting 
data sources.

[[Page 432]]

[GRAPHIC] [TIFF OMITTED] TR09JA01.019

    (ii) Component weights. To account for the fact that not all of the 
selected formula components contribute equally to the extent of the 
pollution problem within the States, each formula component is weighted 
individually. Final component weights will be phased-in by Fiscal Year 
(FY) 2004, according to the schedule presented in Table 2 of this 
section:

[[Page 433]]



  Table 2--Component Weights in the Water Pollution Control State Grant
                            Allotment Formula
------------------------------------------------------------------------
                                                     FY2001-
               Component                  FY 2000     FY2003    FY2004+
                                         (percent)  (percent)  (percent)
------------------------------------------------------------------------
Surface Water Area.....................         13         13         12
Ground Water Use.......................         11         12         12
Water Quality Impairment...............         13         25         35
Point Sources..........................         25         17         13
Nonpoint Sources.......................         18         15         13
Population of Urbanized Area...........         20         18         15
                                        --------------------------------
    Total..............................        100        100        100
------------------------------------------------------------------------

    (2) Funding floor. A funding floor is established for each State. 
Each State's funding floor will be at least equal to its FY 2000 
allotment in all future years unless the funds appropriated for States 
under the Water Pollution Control grant program decrease from the FY 
2000 amount.
    (3) Funding decrease. If the appropriation for Water Pollution 
Control State grants decreases in future years, the funding floor will 
be disregarded and all State allotments will be reduced by an equal 
percentage.
    (4) Inflation adjustment. Funding floors for each State will be 
adjusted for inflation when the funds appropriated for Water Pollution 
Control State grants increase from the preceding fiscal year. These 
adjustments will be made on the basis of the cumulative change in the 
Consumer Price Index (CPI), published by the U.S. Department of Labor, 
since the most recent year in which Water Pollution Control State grant 
funding last increased. Inflation adjustments to State funding floors 
will be capped at the lesser of the percentage change in appropriated 
funds or the cumulative percentage change in the inflation rate.
    (5) Cap on annual funding increases. The maximum allotment to any 
State will be 150 percent of that State's allotment for the previous 
fiscal year.
    (6) Cap on component ratio. A component ratio is equal to each 
State's share of the national total of a single component. The cap on 
each of the six State formula components ratios is 10 percent. If a 
State's calculated component ratio for a particular component exceeds 
the 10 percent cap, the State will instead be assigned 10 percent for 
that component. The component ratios for all other States will be 
adjusted accordingly.
    (7) Update cycle. The data used in the State formula will be 
periodically updated. The first update will impact allotments for FY 
2001, and will consist of updating the data used to support the Water 
Quality Impairment component of the formula. These data will be updated 
using the currently available Clean Water Act section 305(b) reports. 
After this initial update, the data used to support all six components 
of the Water Pollution Control State grant allotment formula will be 
updated in FY 2003 (for use in the determination of FY 2004 allotments). 
Thereafter, all data will be updated every five years (e.g., in FY 2008 
for FY 2009 allotments and in FY 2013 for FY 2014 allotments.) There 
will be an annual adjustment to the funding floor for all States, based 
on the appropriation for Water Pollution Control State grants and 
changes in the CPI.
    (c) Interstate allotment formula. EPA will set-aside 2.6 percent of 
the funds appropriated for the Water Pollution Control State grant 
program for interstate agencies. The interstate agency Water Pollution 
Control grant allotment formula consists of two parts: a base allotment 
and a variable allotment.
    (1) Base allotment. Each eligible interstate agency shall be 
provided a base allotment of $125,000 to help fund coordination 
activities among its member States. However, no more than 50 percent of 
the total available interstate set-aside may be allotted as part of the 
base allotment. If, given the 50 percent limitation placed on the base 
allotment, the amount of interstate

[[Page 434]]

set-aside funds is insufficient to provide each interstate agency with 
$125,000, then each interstate agency will receive a base allotment 
equal to 50 percent of the total interstate set-aside divided by the 
total number of eligible interstate agencies.
    (2) Variable allotment. The variable allotment provides for funds to 
be distributed to interstate agencies on the basis of the extent of the 
pollution problems in the respective States. Funds not allotted under 
the base allotment will be allotted to eligible interstate agencies 
based on each interstate agency's share of their member States' Water 
Pollution Control grant formula allotment ratios. Updates of the data 
for the six components of the Water Pollution Control State grant 
allocation formula will automatically result in corresponding updates to 
the variable allotment portion of the interstate allotments. The 
allotment ratios for those States involved in compacts with more than 
one interstate agency will be allocated among such interstate agencies 
based on the percentage of each State's territory that is situated 
within the drainage basin or watershed area covered by each compact.



Sec. 35.165  Maintenance of effort.

    To receive a Water Pollution Control grant, a State or interstate 
agency must expend annually for recurrent section 106 program 
expenditures an amount of non-federal funds at least equal to 
expenditures during the fiscal year ending June 30, 1971.



Sec. 35.168  Award limitations.

    (a) The Regional Administrator may award section 106 funds to a 
State only if:
    (1) The State monitors and compiles, analyzes, and reports water 
quality data as described in section 106(e)(1) of the Clean Water Act;
    (2) The State has authority comparable to that in section 504 of the 
Clean Water Act and adequate contingency plans to implement such 
authority;
    (3) There is no federally-assumed enforcement as defined in section 
309(a)(2) of the Clean Water Act in effect with respect to the State 
agency;
    (4) The State's work plan shows that the activities to be funded are 
coordinated, as appropriate, with activities proposed for funding under 
sections 205(g) and (j) of the Clean Water Act; and
    (5) The State filed with the Administrator within 120 days after 
October 18, 1972, a summary report of the current status of the State 
pollution control program, including the criteria used by the State in 
determining priority of treatment works.
    (b) The Regional Administrator may award section 106 funds to an 
interstate agency only if:
    (1) The interstate agency filed with the Administrator within 120 
days after October 18, 1972, a summary report of the current status of 
the State pollution control program, including the criteria used by the 
State in determining priority of treatment works.
    (2) There is no federally-assumed enforcement as defined in section 
309(a)(2) of the Clean Water Act in effect with respect to the 
interstate agency.

            Public Water System Supervision (Section 1443(a))



Sec. 35.170  Purpose.

    (a) Purpose of section. Sections 35.170 through 35.178 govern Public 
Water System Supervision Grants to States (as defined in section 1401 
(13)(A) of the Safe Drinking Water Act) authorized under section 1443(a) 
of the Act.
    (b) Purpose of program. Public Water System Supervision Grants are 
awarded to carry out public water system supervision programs including 
implementation and enforcement of the requirements of the Act that apply 
to public water systems.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR parts 141, 142, and 143.



Sec. 35.172  Allotment.

    (a) Basis for allotment. The Administrator allots funds for grants 
to support States' Public Water System Supervision programs based on 
each State's population, geographic area, numbers of community and non-
community water systems, and other relevant factors.

[[Page 435]]

    (b) Allotment limitation. No State, except American Samoa, Guam, the 
Virgin Islands, and the Commonwealth of the Northern Mariana Islands, 
shall be allotted less than $334,500 (which is one percent of the FY 
1989 appropriation).



Sec. 35.175  Maximum federal share.

    The Regional Administrator may provide a maximum of 75 percent of 
the State's approved work plan costs.



Sec. 35.178  Award limitations.

    (a) Initial grants. The Regional Administrator will not make an 
initial award unless the applicant has an approved Public Water System 
Supervision program or agrees to establish an approvable program within 
one year of the initial award.
    (b) Subsequent grants. The Regional Administrator will not award a 
grant to a State after the initial award unless the applicant has 
assumed and maintained primary enforcement responsibility for the 
State's Public Water System Supervision program.

          Underground Water Source Protection (Section 1443(b))



Sec. 35.190  Purpose.

    (a) Purpose of section. Sections 35.190 through 35.198 govern 
Underground Water Source Protection Grants to States (as defined in 
section 1401(13)(A) of the Safe Drinking Water Act) authorized under 
section 1443(b) of the Act.
    (b) Purpose of program. The Underground Water Source Protection 
Grants are awarded to carry out underground water source protection 
programs.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR 124, 144, 145, 146, and 147.



Sec. 35.192  Basis for allotment.

    The Administrator allots funds for grants to support State's 
underground water source protection programs based on such factors as 
population, geographic area, extent of underground injection practices, 
and other relevant factors.



Sec. 35.195  Maximum federal share.

    The Regional Administrator may provide a maximum of 75 percent of a 
State's approved work plant costs.



Sec. 35.198  Award limitation.

    The Regional Administrator will only award section 1443(b) funds to 
States that have primary enforcement responsibility for the underground 
water source protection program.

              Hazardous Waste Management (Section 3011(a))



Sec. 35.210  Purpose.

    (a) Purpose of section. Sections 35.210 through 35.218 govern 
Hazardous Waste Management Grants to States (as defined in section 1004 
of the Solid Waste Disposal Act) under section 3011(a) of the Act.
    (b) Purpose of program. Hazardous Waste Management Grants are 
awarded to assist States in the development and implementation of 
authorized State hazardous waste management programs.
    (c) Associated program regulations. Associated program regulations 
are at 40 CFR part 124, subparts B, E, and F; 40 CFR parts 260 through 
266; 40 CFR parts 268 through 273; and 40 CFR part 279.



Sec. 35.212  Basis for allotment.

    The Administrator allots funds for Hazardous Waste Management Grants 
in accordance with section 3011(b) of the Solid Waste Disposal Act based 
on factors including:
    (a) The extent to which hazardous waste is generated, transported, 
treated, stored, and disposed of in the State;
    (b) The extent to which human beings and the environment in the 
State are exposed to such waste, and;
    (c) Other factors the Administrator deems appropriate.



Sec. 35.215  Maximum federal share.

    The Regional Administrator may provide up to 75 percent of the 
approved work plant costs.



Sec. 35.218  Award limitation.

    The Regional Administrator will not award Hazardous Waste Management

[[Page 436]]

Grants to a State with interim or final hazardous waste authorization 
unless the applicant is the lead agency designated in the authorization 
agreement.

          Pesticide Cooperative Enforcement (Section 23(a)(1))



Sec. 35.230  Purpose.

    (a) Purpose of section. Sections 35.230 through 35.235 govern 
Pesticide Enforcement Cooperative Agreements to States (as defined in 
section 2 of Federal Insecticide, Fungicide, and Rodenticide Act) under 
section 23(a)(1) of the Act.
    (b) Purpose of program. Pesticides Enforcement Cooperative 
Agreements are awarded to assist States to implement pesticide 
enforcement programs.
    (c) Program regulations. Associated program regulations are at 40 
CFR parts 150 through 189 and 19 CFR part 12.



Sec. 35.232  Basis for allotment.

    (a) Factors for FIFRA enforcement program funding. The factors 
considered in allotment of funds for enforcement of FIFRA are:
    (1) The State's population,
    (2) The number of pesticide-producing establishments,
    (3) The numbers of certified private and commercial pesticide 
applicators,
    (4) The number of farms and their acreage, and
    (5) As appropriate, the State's potential farm worker protection 
concerns.
    (b) Final allotments. Final allotments are negotiated between each 
State and the appropriate Regional Administrator.



Sec. 35.235  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of the 
approved work plan costs.

   Pesticide Applicator Certification and Training (Section 23(a)(2))



Sec. 35.240  Purpose.

    (a) Purpose of section. Sections 35.240 through 35.245 govern 
Pesticide Applicator Certification and Training Grants to States (as 
defined in section 2 of Federal Insecticide, Fungicide, and Rodenticide 
Act) under section 23(a)(2) of the Act.
    (b) Purpose of program. Pesticide Applicator Certification and 
Training Grants are awarded to train and certify restricted use 
pesticide applicators.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR parts 162, 170, and 171.



Sec. 35.242  Basis for allotment.

    The Regional Administrator considers two factors in allotting 
pesticides applicator certification and training funds:
    (a) The number of farms in each State; and
    (b) The numbers of private and commercial applicators requiring 
certification and recertification in each State.



Sec. 35.245  Maximum federal share.

    The Regional Administrator may provide up to 50 percent of the 
approved work plan costs.

           Pesticide Program Implementation (Section 23(a)(1))



Sec. 35.250  Purpose.

    (a) Purpose of section. Sections 35.250 through 35.259 govern 
Pesticide Program Implementation Cooperative Agreements to States (as 
defined in section 2 of Federal Insecticide, Fungicide, and Rodenticide 
Act) under section 23(a)(1) of the Act.
    (b) Purpose of program. Pesticide Program Implementation Cooperative 
Agreements are awarded to assist States to develop and implement 
pesticide programs, including programs that protect workers, 
groundwater, and endangered species from pesticide risks and for other 
pesticide management programs designated by the Administrator.
    (c) Program regulations. Associated program regulations are at 40 
CFR parts 150 through 189 and 19 CFR part 12.



Sec. 35.251  Basis for allotment.

    (a) Factors for pesticide program implementation funding. The 
factors considered in allotment of funds for pesticide program 
implementation are based

[[Page 437]]

upon potential ground water, endangered species, and worker protection 
concerns in each State relative to other States and on other factors the 
Administrator deems appropriate for these or other pesticide program 
implementation activities.
    (b) Final allotments. Final allotments are negotiated between each 
State and the appropriate Regional Administrator.



Sec. 35.252  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of the 
approved work plan costs.

               Nonpoint Source-Management (Section 319(h))



Sec. 35.260  Purpose.

    (a) Purpose of section. Sections 35.260 through 35.268 govern 
Nonpoint Source Management Grants to States (as defined in section 502 
of the Clean Water Act) authorized under section 319 of the Act.
    (b) Purpose of program. Nonpoint Source Management Grants may be 
awarded for the implementation of EPA-approved nonpoint source 
management programs, including ground-water quality protection 
activities, that will advance the implementation of a comprehensive 
approved nonpoint source management program.



Sec. 35.265  Maximum federal share.

    The Regional Administrator may provide up to 60 percent of the 
approved work plan costs in any fiscal year. The non-federal share of 
costs must be provided from non-federal sources.



Sec. 35.266  Maintenance of effort.

    To receive section 319 funds in any fiscal year, a State must agree 
to maintain its aggregate expenditures from all other sources for 
programs for controlling nonpoint pollution and improving the quality of 
the State's waters at or above the average level of such expenditures in 
Fiscal Years 1985 and 1986.



Sec. 35.268  Award limitations.

    The following limitations apply to funds appropriated and awarded 
under section 319(h) of the Act in any fiscal year.
    (a) Award amount. The Regional Administrator will award no more than 
15 percent of the amount appropriated to carry out section 319(h) of the 
Act to any one State. This amount includes any grants to any local 
public agency or organization with authority to control pollution from 
nonpoint sources in any area of the State.
    (b) Financial assistance to persons. States may use funds for 
financial assistance to persons only to the extent that such assistance 
is related to the cost of demonstration projects.
    (c) Administrative costs. Administrative costs in the form of 
salaries, overhead, or indirect costs for services provided and charged 
against activities and programs carried out with these funds shall not 
exceed 10 percent of the funds the State receives in any fiscal year. 
The cost of implementing enforcement and regulatory activities, 
education, training, technical assistance, demonstration projects, and 
technology transfer programs are not subject to this limitation.
    (d) Requirements. The Regional Administrator will not award section 
319(h) funds to a State unless:
    (1) Approved assessment report. EPA has approved the State's 
assessment report on nonpoint sources, prepared in accordance with 
section 319(a) of the Act;
    (2) Approved State management program. EPA has approved the State's 
management program for nonpoint sources, prepared in accordance with 
section 319(b) of the Act;
    (3) Progress on reducing pollutant loadings. The Regional 
Administrator determines that the State made satisfactory progress in 
the preceding fiscal year in meeting its schedule for achieving 
implementation of best management practices to reduce pollutant loadings 
from categories of nonpoint sources, or particular nonpoint sources, 
designated in the State's management program. The State must have 
developed this schedule in accordance with section 319(b)(2)(c) of the 
Act;
    (4) Activity and output descriptions. The work plan briefly 
describes each significant category of nonpoint source

[[Page 438]]

activity and the work plan commitments to be produced for each category; 
and
    (5) Significant watershed projects. For watershed projects whose 
costs exceed $50,000, the work plan also contains:
    (i) A brief synopsis of the watershed implementation plan outlining 
the problem(s) to be addressed;
    (ii) The project's goals and objectives; and
    (iii) The performance measures or environmental indicators that will 
be used to evaluate the results of the project.

                Lead-Based Paint Program (Section 404(g))



Sec. 35.270  Purpose.

    (a) Purpose of section. Sections 35.270 through 35.278 govern Lead-
Based Paint Program Grants to States (as defined in section 3 of the 
Toxic Substances Control Act), under section 404(g) of the Act.
    (b) Purpose of program. Lead-Based Paint Program Grants are awarded 
to develop and carry out authorized programs to ensure that individuals 
employed in lead-based paint activities are properly trained; that 
training programs are accredited; and that contractors employed in such 
activities are certified.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR part 745.



Sec. 35.272  Funding coordination.

    Recipients must use the lead-based paint program funding in a way 
that complements any related assistance they receive from other federal 
sources for lead-based paint activities.

                 State Indoor Radon Grants (Section 306)



Sec. 35.290  Purpose.

    (a) Purpose of section. Sections 35.290 through 35.298 govern Indoor 
Radon Grants to States (as defined in section 3 of the Toxic Substances 
Control Act, which include territories and the District of Columbia) 
under section 306 of the Toxic Substances Control Act.
    (b) Purpose of program. (1) State Indoor Radon Grants are awarded to 
assist States with the development and implementation of programs that 
assess and mitigate radon and that aim at reducing radon health risks. 
State Indoor Radon Grant funds may be used for the following eligible 
activities:
    (i) Survey of radon levels, including special surveys of geographic 
areas or classes of buildings (such as public buildings, school 
buildings, high-risk residential construction types);
    (ii) Development of public information and education materials 
concerning radon assessment, mitigation, and control programs;
    (iii) Implementation of programs to control radon on existing and 
new structures;
    (iv) Purchase by the State of radon measurement equipment and 
devices;
    (v) Purchase and maintenance of analytical equipment connected to 
radon measurement and analysis, including costs of calibration of such 
equipment;
    (vi) Payment of costs of EPA-approved training programs related to 
radon for permanent State or local employees;
    (vii) Payment of general overhead and program administration costs 
in accordance with Sec. 35.298(d);
    (viii) Development of a data storage and management system for 
information concerning radon occurrence, levels, and programs;
    (ix) Payment of costs of demonstration of radon mitigation methods 
and technologies as approved by EPA, including State participation in 
the EPA Home Evaluation Program; and
    (x) A toll-free radon hotline to provide information and technical 
assistance.
    (2) States may use grant funds to assist local governments in 
implementation of activities eligible for assistance under paragraphs 
(b)(1)(ii), (iii), and (vi) of this section.
    (3) In implementing paragraphs (b)(1)(iv) and (ix) of this section, 
a State should make every effort, consistent with the goals and 
successful operation of the State radon program, to give preference to 
low-income persons.
    (4) Funds appropriated for section 306 may not be used to cover the 
costs of federal proficiency rating programs under section 305(a)(2) of 
the Act.

[[Page 439]]

Funds appropriated for section 306 and grants awarded under section 306 
may be used to cover the costs of State proficiency rating programs.



Sec. 35.292  Basis for allotment.

    (a) The Regional Administrator will allot State Indoor Radon Grant 
funds based on the criteria in EPA Guidance in accordance with sections 
306(d) and (e) of the Toxic Substances Control Act.
    (b) No State may receive a State Indoor Radon Grant in excess of 10 
percent of the total appropriated amount made available each fiscal 
year.



Sec. 35.295  Maximum federal share.

    The Regional Administrator may provide State agencies up to 50 
percent of the approved costs for the development and implementation of 
radon program activities.



Sec. 35.298  Award limitations.

    (a) The Regional Administrator shall not include State Indoor Radon 
funds in a Performance Partnership Grant awarded to another State Agency 
without consulting with the State Agency which has the primary 
responsibility for radon programs as designated by the Governor of the 
affected State.
    (b) No grant may be made in any fiscal year to a State which in the 
preceding fiscal year did not satisfactorily implement the activities 
funded by the grant in the preceding fiscal year.
    (c) The costs of radon measurement equipment or devices (see 
Sec. 35.290(b)(1)(iv)) and demonstration of radon mitigation, methods, 
and technologies (see Sec. 35.290(b)(1)(ix)) shall not, in the 
aggregate, exceed 50 percent of a State's radon grant award in a fiscal 
year.
    (d) The costs of general overhead and program administration (see 
Sec. 35.290(b)(1)(vii)) of a State Indoor Radon grant shall not exceed 
25 percent of the amount of a State's Indoor Radon Grant in a fiscal 
year.
    (e) A State may use funds for financial assistance to persons only 
to the extent such assistance is related to demonstration projects or 
the purchase and analysis of radon measurement devices.
    (f) Recipients must provide the Regional Administrator all radon-
related information generated in its grant supported activities, 
including the results of radon surveys, mitigation demonstration 
projects, and risk communication studies.
    (g) Recipients must maintain and make available to the public, a 
list of firms and individuals in the State that have received a passing 
rating under the EPA proficiency rating program under section 305(a)(2) 
of the Act.

           Toxic Substances Compliance Monitoring (Section 28)



Sec. 35.310  Purpose.

    (a) Purpose of section. Sections 35.310 through 35.315 govern Toxic 
Substances Compliance Monitoring Grants to States (as defined in section 
3(13) of the Toxic Substances Control Act) under section 28(a) of the 
Act.
    (b) Purpose of program. Toxic Substances Compliance Monitoring 
Grants are awarded to establish and operate compliance monitoring 
programs to prevent or eliminate unreasonable risks to health or the 
environment associated with chemical substances or mixtures within the 
States with respect to which the Administrator is unable or not likely 
to take action for their prevention or elimination.
    (c) Associated program regulations. Associated program regulations 
are at 40 CFR parts 700 through 799.



Sec. 35.312  Competitive process.

    EPA will award Toxic Substances Control Act Compliance Monitoring 
grant funds to States through a competitive process in accordance with 
national program guidance.



Sec. 35.315  Maximum federal share.

    The Regional Administrator may provide up to 75 percent of the 
approved work plan costs.



Sec. 35.318  Award limitation.

    If the toxic substances compliance monitoring grant funds are 
included in a Performance Partnership Grant, the toxic substances 
compliance monitoring work plan commitments must be included in the 
Performance Partnership Grant work plan.

[[Page 440]]

          State Underground Storage Tanks (Section 2007(f)(2))



Sec. 35.330  Purpose.

    (a) Purpose of section. Sections 35.330 through 35.335 govern 
Underground Storage Tank Grants to States (as defined in section 1004 of 
the Solid Waste Disposal Act) under section 2007(f)(2) of the Act.
    (b) Purpose of program. State Underground Storage Tank Grants are 
awarded to States to develop and implement a State underground storage 
tank release detection, prevention, and corrective action program under 
Subtitle I of the Resource Conservation and Recovery Act.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR parts 280 through 282.



Sec. 35.332  Basis for allotment.

    The Administrator allots State Underground Storage Tank Grant funds 
to each EPA regional office. Regional Administrators award funds to 
States based on their programmatic needs and applicable EPA guidance.



Sec. 35.335  Maximum federal share.

    The Regional Administrator may provide up to 75 percent of the 
approved work plan costs.

            Pollution Prevention State Grants (Section 6605)



Sec. 35.340  Purpose.

    (a) Purpose of section. Sections 35.340 through 35.349 govern 
Pollution Prevention State Grants under section 6605 of the Pollution 
Prevention Act.
    (b) Purpose of program. Pollution Prevention State Grants are 
awarded to promote the use of source reduction techniques by businesses.



Sec. 35.342  Competitive process.

    EPA Regions award Pollution Prevention State Grants to State 
programs through a competitive process in accordance with EPA guidance. 
When evaluating State applications, EPA must consider, among other 
criteria, whether the proposed State program would:
    (a) Make specific technical assistance available to businesses 
seeking information about source reduction opportunities, including 
funding for experts to provide onsite technical advice to businesses 
seeking assistance in the development of source reduction plans;
    (b) Target assistance to businesses for whom lack of information is 
an impediment to source reduction; and
    (c) Provide training in source reduction techniques. Such training 
may be provided through local engineering schools or other appropriate 
means.



Sec. 35.343  Definitions.

    In addition to the definitions in Sec. 35.102, the following 
definitions apply to the Pollution Prevention State Grants program and 
to Secs. 35.340 through 35.349:
    (a) Pollution prevention/source reduction is any practice that:
    (1) Reduces the amount of any hazardous substance, pollutant, or 
contaminant entering any waste stream or otherwise released into the 
environment (including fugitive emissions) prior to recycling, 
treatment, or disposal;
    (2) Reduces the hazards to public health and the environment 
associated with the release of such substances, pollutants, or 
contaminants; or
    (3) Reduces or eliminates the creation of pollutants through:
    (i) Increased efficiency in the use of raw materials, energy, water, 
or other resources; or
    (ii) Protection of natural resources by conservation.
    (b) Pollution prevention/source reduction does not include any 
practice which alters the physical, chemical, or biological 
characteristics or the volume of a hazardous substance, pollutant, or 
contaminant through a process or activity which itself is not integral 
to and necessary for the production of a product or the providing of a 
service.



Sec. 35.345  Eligible applicants.

    Applicants eligible for funding under the Pollution Prevention 
program include any agency or instrumentality, including State 
universities, of the 50 States, the District of Columbia, the U.S. 
Virgin Islands, the Commonwealth of Puerto Rico, and any territory or 
possession of the United States.

[[Page 441]]



Sec. 35.348  Award limitation.

    If a State includes a Pollution Prevention State Grant in a 
Performance Partnership Grant, the work plan commitments must be 
included in the Performance Partnership Grant work plan (see 
Sec. 35.138).



Sec. 35.349  Maximum federal share.

    The federal share for Pollution Prevention State Grants will not 
exceed 50 percent of the allowable pollution prevention State grant 
project cost.

        Water Quality Cooperative Agreements (Section 104(b)(3))



Sec. 35.360  Purpose.

    (a) Purpose of section. Sections 35.360 through 35.364 govern Water 
Quality Cooperative Agreements to State water pollution control agencies 
and interstate agencies (as defined in section 502 of the Clean Water 
Act) and local government agencies under section 104(b)(3) of the Act. 
These sections do not govern Water Quality Cooperative Agreements to 
other entities eligible under sections 104(b)(3) which are generally 
subject to the uniform administrative requirements of 40 CFR part 30.
    (b) Purpose of program. EPA awards Water Quality Cooperative 
Agreements for investigations, experiments, training, demonstrations, 
surveys, and studies relating to the causes, effects, extent, 
prevention, reduction, and elimination of water pollution. EPA issues 
guidance each year advising EPA regions and headquarters regarding 
appropriate priorities for funding for this program. This guidance may 
include such focus areas as National Pollutant Discharge Elimination 
System watershed permitting, urban wet weather programs, or innovative 
pretreatment program or biosolids projects.



Sec. 35.362  Competitive process.

    EPA will award Water Quality Cooperative Agreement funds through a 
competitive process in accordance with national program guidance.



Sec. 35.364  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of approved 
work plan costs.

          State Wetlands Development Grants (Section 104(b)(3))



Sec. 35.380  Purpose.

    (a) Purpose of section. Sections 35.380 through 35.385 govern State 
Wetlands Development Grants for State and interstate agencies (as 
defined in section 502 of the Clean Water Act) and local government 
agencies under section 104(b)(3) of the Act. These sections do not 
govern wetlands development grants to other entities eligible under 
section 104(b)(3) which are generally subject to the uniform 
administrative requirements of 40 CFR part 30.
    (b) Purpose of program. EPA awards State Wetlands Development Grants 
to assist in the development of new, or refinement of existing, wetlands 
protection and management programs.



Sec. 35.382  Competitive process.

    State Wetlands Development Grants are awarded on a competitive 
basis. EPA annually establishes a deadline for receipt of proposed grant 
project applications. EPA reviews applications and decides which grant 
projects to fund in a given year based on criteria established by EPA. 
After the competitive process is complete, the recipient can, at its 
discretion, accept the award as a State Wetlands Development Grant or 
add the funds to a Performance Partnership Grant. If the recipient 
chooses to add the funds to a Performance Partnership Grant, the 
wetlands development program work plan commitments must be included in 
the Performance Partnership Grant work plan.



Sec. 35.385  Maximum federal share.

    EPA may provide up to 75 percent of the approved work plan costs for 
the development or refinement of a wetlands protection and management 
program.

                  State Administration (Section 205(g))



Sec. 35.400  Purpose.

    (a) Purpose of section. Sections 35.400 through 35.408 govern State 
Administration Grants to States (as defined in section 502 of the Clean 
Water Act) authorized under section 205(g) of the Act.

[[Page 442]]

    (b) Purpose of program. EPA awards these grants for the following 
two purposes:
    (1) Construction management grants. A State may use section 205(g) 
funds for administering elements of the construction grant program under 
sections 201, 203, 204, and 212 of the Clean Water Act and for managing 
waste treatment construction grants for small communities. A State may 
also use construction management assistance funds for administering 
elements of a State's construction grant program which are implemented 
without federal grants, if the Regional Administrator determines that 
those elements are consistent with 40 CFR part 35, subpart I.
    (2) Permit and planning grants. A State may use section 205(g) funds 
for administering permit programs under sections 402 and 404, including 
Municipal Wastewater Pollution Prevention activities under an approved 
section 402 program and State operator training programs, and for 
administering statewide waste treatment management planning programs, 
including the development of State biosolids management programs, under 
section 208(b)(4). Some of these activities may also be eligible for 
funding under sections 106 (Water Pollution Control), 205(j)(2) (Water 
Quality Management Planning), and 104(b)(3) (Water Quality Cooperative 
Agreements and Wetlands Development Grants) of the Clean Water Act. (See 
Secs. 35.160, 35.410, 35.360, and 35.380.)
    (c) Associated program requirements. Program requirements for State 
construction management activities under delegation are provided in 40 
CFR part 35, subparts I and J. Program requirements for water quality 
management activities are provided in 40 CFR part 130.



Sec. 35.402  Allotment.

    Each State may reserve up to four percent of the State's authorized 
construction grant allotment as determined by Congress or $400,000, 
whichever is greater, for section 205 (g) grants.



Sec. 35.405  Maintenance of effort.

    To receive funds under section 205(g), a State agency must expend 
annually for recurrent section 106 program expenditures an amount of 
non-federal funds at least equal to such expenditures during fiscal year 
1977, unless the Regional Administrator determines that the reduction is 
attributable to a non-selective reduction of expenditures in State 
executive branch agencies (see Sec. 35.165).



Sec. 35.408  Award limitations.

    The Regional Administrator will not award section 205(g) funds:
    (a) For construction management grants unless there is a signed 
agreement delegating responsibility for administration of those 
activities to the State.
    (b) For permit and planning grants before awarding funds providing 
for the management of a substantial portion of the State's construction 
grants program. The maximum amount of permit and planning grants a State 
may receive is limited to the amount remaining in its reserve after the 
Regional Administrator allows for full funding of the management of the 
construction grant program under full delegation.
    (c) For permit and planning grants unless the work plan submitted 
with the application shows that the activities to be funded are 
coordinated, as appropriate, with activities proposed for funding under 
sections 106 (Water Pollution Control) and 205(j) (Water Quality 
Management Planning) of the Clean Water Act.

      Water Quality Management Planning Grants (Section 205(j)(2))



Sec. 35.410  Purpose.

    (a) Purpose of section. Sections 35.410 through 35.418 govern Water 
Quality Management Planning Grants to States (as defined in section 502 
of the Clean Water Act) authorized under section 205(j)(2) of the Act.
    (b) Purpose of program. EPA awards Water Quality Management Planning 
Grants to carry out water quality management planning activities. Some 
of these activities may also be eligible for funding under sections 106 
(Water Pollution Control), 104(b)(3) (Water Quality Cooperative 
Agreements and Wetlands Development Grants) and section 205(g) (State 
Administration Grants) of

[[Page 443]]

the Clean Water Act. (See Secs. 35.160, 35.360, 35.380, and 35.400.) EPA 
awards these grants for purposes such as:
    (1) Identification of the most cost-effective and locally acceptable 
facility and nonpoint measures to meet and maintain water quality 
standards.
    (2) Development of an implementation plan to obtain State and local 
financial and regulatory commitments to implement measures developed 
under paragraph (b)(1) of this section.
    (3) Determination of the nature, extent, and causes of water quality 
problems in various areas of the State and interstate region.
    (4) Determination of those publicly owned treatment works which 
should be constructed with State Revolving Fund assistance. This 
determination should take into account the relative degree of effluent 
reduction attained, the relative contributions to water quality of other 
point or nonpoint sources, and the consideration of alternatives to such 
construction.
    (5) Implementation of section 303(e) of the Clean Water Act.
    (c) Program requirements for water quality management planning 
activities are provided in 40 CFR part 130.



Sec. 35.412  Allotment.

    States must reserve, each fiscal year, not less than $100,000 nor 
more than one percent of the State's construction grant allotment as 
determined by Congress for Water Quality Management Planning Grants 
under section 205(j)(2). However, Guam, the Virgin Islands, American 
Samoa and the Commonwealth of the Northern Mariana Islands must reserve 
a reasonable amount for this purpose. (See 40 CFR 35.3110(g)(4) 
regarding reserves from State allotments under Title VI of the Clean 
Water Act for section 205(j) grants.)



Sec. 35.415  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of the 
approved work plan costs.



Sec. 35.418  Award limitations.

    The following limitations apply to funds awarded under section 
205(j)(2) of the Clean Water Act. The Regional Administrator will not 
award these grants to a State agency:
    (a) Unless the agency develops its work plan jointly with local, 
regional and interstate agencies and gives funding priority to such 
agencies and designated or undesignated public comprehensive planning 
organizations to carry out portions of that work plan.
    (b) Unless the agency reports annually on the nature, extent, and 
causes of water quality problems in various areas of the State and 
interstate region.
    (c) Unless the work plan submitted with the application shows that 
the activities to be funded are coordinated, as appropriate, with 
activities proposed for funding under section 106 (Water Pollution 
Control) of the Clean Water Act.



           Subpart B--Environmental Program Grants for Tribes

    Authority: 42 U.S.C. 7401 et seq.; 33 U.S.C. 1251 et seq.; 42 U.S.C. 
300f et seq.; 42 U.S.C. 6901 et seq.; 7 U.S.C. 136 et seq.; 15 U.S.C. 
2601 et seq.; 42 U.S.C. 13101 et seq.; Pub. L. 104-134, 110 Stat. 1321, 
1321-299 (1996); Pub. L. 105-65, 111 Stat. 1344, 1373 (1997); Pub. L. 
105-276, 112 Stat. 2461, 2499 (1988).

    Source: 66 FR 3795, Jan. 16, 2001, unless otherwise noted.

                           General--All Grants



Sec. 35.500  Purpose of the subpart.

    This subpart establishes administrative requirements for all grants 
awarded to Indian Tribes and Intertribal Consortia for the environmental 
programs listed in Sec. 35.501. This subpart supplements requirements in 
EPA's general grant regulations found at 40 CFR part 31. Sections 
35.500-518 contain administrative requirements that apply to all 
environmental program grants included in this subpart. Sections 35.530 
through 35.718 contain requirements that apply to specified 
environmental program grants. Many of these environmental programs also 
have programmatic and technical requirements that are published 
elsewhere in the Code of Federal Regulations.

[[Page 444]]



Sec. 35.501  Environmental programs covered by the subpart.

    (a) The requirements in this subpart apply to all grants awarded for 
the following programs:
    (1) Performance Partnership Grants (1996 Omnibus Consolidated 
Rescissions and Appropriations Act of 1996, Pub. L. 104-134; 110 Stat. 
1321, 1321-299 (1996) and Departments of Veterans Affairs, Housing and 
Urban Development, and Independent Agencies Appropriations Act of 1998, 
Pub. L. 105-65; 111 Stat. 1344, 1373 (1997)).
    (2) The Indian Environmental General Assistance Program Act of 1992, 
42 U.S.C. 4368b.
    (3) Clean Air Act. Air pollution control (section 105).
    (4) Clean Water Act.
    (i) Water pollution control (section 106 and 518).
    (ii) Water quality cooperative agreements (section 104(b)(3)).
    (iii) Wetlands development grant program (section 104(b)(3)).
    (iv) Nonpoint source management (section 319(h)).
    (5) Federal Insecticide, Fungicide, and Rodenticide Act.
    (i) Pesticide cooperative enforcement (section 23(a)(1)).
    (ii) Pesticide applicator certification and training (section 
23(a)(2)).
    (iii) Pesticide program implementation (section 23(a)(1)).
    (6) Pollution Prevention Act of 1990. Pollution prevention grants 
for Tribes (section 6605).
    (7) Safe Drinking Water Act.
    (i) Public water system supervision (section 1443(a)).
    (ii) Underground water source protection (section 1443(b)).
    (8) Toxic Substances Control Act.
    (i) Lead-based paint program (section 404(g)).
    (ii) Indoor radon grants (section 306).
    (iii) Toxic substances compliance monitoring (section 28).
    (9) Department of Veterans Affairs and Housing and Urban 
Development, and Independent Agencies Appropriations Act, 1999 (Pub. L. 
105-276; 112 Stat. 2461, 2499; 42 U.S.C. 6908a).
    (i) Hazardous Waste Management Program Grants (Pub. L. 105-276; 112 
Stat. 2461, 2499; 42 U.S.C. 6908a).
    (ii) Underground Storage Tanks Program Grants (Pub. L. 105-276; 112 
Stat. 2461, 2499; 42 U.S.C. 6908a).
    (b) Unless otherwise prohibited by statute or regulation, the 
requirements in Sec. 35.500 through Sec. 35.518 of this subpart also 
apply to grants to Indian Tribes and Intertribal Consortia under 
environmental programs established after this subpart becomes effective, 
if specified in Agency guidance for such programs.
    (c) In the event a grant is awarded from EPA headquarters for one of 
the programs listed in paragraph (a) of this section, this subpart shall 
apply and the term ``Regional Administrator'' shall mean ``Assistant 
Administrator'.



Sec. 35.502  Definitions of terms.

    Terms are defined as follows when they are used in this regulation:
    Consolidated grant. A single grant made to a recipient consolidating 
funds from more than one environmental grant program. After the award is 
made, recipients must account for grant funds in accordance with the 
funds' original environmental program sources. Consolidated grants are 
not Performance Partnership Grants.
    Environmental program. A program for which EPA awards grants under 
the authorities listed in Sec. 35.501. The grants are subject to the 
requirements of this subpart.
    Federal Indian reservation. All land within the limits of any Indian 
reservation under the jurisdiction of the United States Government, 
notwithstanding the issuance of any patent, and, including rights-of-way 
running through the reservation.
    Funding period. The period of time specified in the grant agreement 
during which the recipient may expend or obligate funds for the purposes 
set forth in the agreement.
    Intertribal Consortium or Consortia. A partnership between two or 
more Tribes that is authorized by the governing bodies of those Tribes 
to apply for and receive assistance under one or more of the programs 
listed in Sec. 35.501.
    National program guidance. Guidance issued by EPA's National Program

[[Page 445]]

Managers for establishing and maintaining effective environmental 
programs. This guidance establishes national goals, objectives, and 
priorities as well as other information to be used in monitoring 
progress. The guidance may also set out specific environmental 
strategies, core performance measures, criteria for evaluating programs, 
and other elements of program implementation.
    Outcome. The environmental result, effect, or consequence that will 
occur from carrying out an environmental program or activity that is 
related to an environmental or programmatic goal or objective. Outcomes 
must be quantitative, and they may not necessarily be achievable during 
a grant funding period. See ``output.''
    Output. An environmental activity or effort and associated work 
products related to an environmental goal or objective that will be 
produced or provided over a period of time or by a specified date. 
Outputs may be quantitative or qualitative but must be measurable during 
a grant funding period. See ``outcome.''
    Performance Partnership Grant. A single grant combining funds from 
more than one environmental program. A Performance Partnership Grant may 
provide for administrative savings or programmatic flexibility to direct 
grant resources where they are most needed to address public health and 
environmental priorities (see also Sec. 35.530). Each Performance 
Partnership Grant has a single, integrated budget and recipients do not 
need to account for grant funds in accordance with the funds' original 
environmental program sources.
    Planning target. The amount of funds that the Regional Administrator 
suggests a grant applicant consider in developing its application, 
including the work plan, for an environmental program.
    Regional supplemental guidance. Guidance to environmental program 
grant applicants prepared by the Regional Administrator, based on the 
national program guidance and specific regional and applicant 
circumstances, for use in preparing a grant application.
    Tribal Environmental Agreement (TEA). A dynamic, strategic planning 
document negotiated by the Regional Administrator and an appropriate 
Tribal official. A Tribal Environmental Agreement may include: Long-term 
and short-term environmental goals, objectives, and desired outcomes 
based on Tribal priorities and available funding. A Tribal Environmental 
Agreement can be a very general or specific document that contains 
budgets, performance measures, outputs and outcomes that could be used 
as part or all of a Performance Partnership Grant work plan, if it meets 
the requirements of section 35.507(b).
    Tribe. Except as otherwise defined in statute or this subpart, 
Indian Tribal Government (Tribe) means: Any Indian Tribe, band, nation, 
or other organized group or community, including any Alaska Native 
village, which is recognized as eligible by the United States Department 
of the Interior for the special services provided by the United States 
to Indians because of their status as Indians.
    Work plan. The document which identifies how and when the applicant 
will use funds from environmental program grants and is the basis for 
management and evaluation of performance under the grant agreement to 
produce specific outputs and outcomes (see 35.507). The work plan must 
be consistent with applicable federal statutes; regulations; circulars; 
executive orders; and EPA delegations, approvals, or authorizations.
    Work plan commitments. The outputs and outcomes associated with each 
work plan component, as established in the grant agreement.
    Work plan component. A negotiated set or group of work plan 
commitments established in the grant agreement. A work plan may have one 
or more work plan components.



Sec. 35.503  Deviation from this subpart.

    EPA will consider and may approve requests for an official deviation 
from non-statutory provisions of this regulation in accordance with 40 
CFR 31.6.



Sec. 35.504  Eligibility of an Intertribal Consortium.

    (a) An Intertribal Consortium is eligible to receive grants under 
the authorities listed in Sec. 35.501 only if the

[[Page 446]]

Consortium demonstrates that all members of the Consortium meet the 
eligibility requirements for the grant and authorize the Consortium to 
apply for and receive assistance in accordance with paragraph (c) of 
this section, except as provided in paragraph (b) of this section.
    (b) An Intertribal Consortium is eligible to receive a grant under 
the Indian Environmental General Assistance Program Act, in accordance 
with Sec. 35.540, if the Consortium demonstrates that:
    (1) A majority of its members meets the eligibility requirements for 
the grant;
    (2) All members that meet the eligibility requirements authorize the 
Consortium to apply for and receive assistance; and
    (3) It has adequate accounting controls to ensure that only members 
that meet the eligibility requirements will benefit directly from the 
grant project and will receive and manage grant funds, and the 
Consortium agrees to a grant condition to that effect.
    (c) An Intertribal Consortium must submit to EPA adequate 
documentation of:
    (1) The existence of the partnership between Indian Tribal 
governments, and
    (2) Authorization of the Consortium by all its members (or in the 
case of the General Assistance Program, all members that meet the 
eligibility requirements for a General Assistance Program grant) to 
apply for and receive the grant(s) for which the Consortium has applied.

                        Preparing an Application



Sec. 35.505  Components of a complete application.

    A complete application for an environmental program grant must:
    (a) Meet the requirements in 40 CFR part 31, subpart B;
    (b) Include a proposed work plan (Sec. 35.507 of this subpart); and
    (c) Specify the environmental program and the amount of funds 
requested.



Sec. 35.506  Time frame for submitting an application.

    An applicant should submit a complete application to EPA at least 60 
days before the beginning of the proposed funding period.



Sec. 35.507  Work plans.

    (a) Bases for negotiating work plans. The work plan is negotiated 
between the applicant and the Regional Administrator and reflects 
consideration of national, regional, and Tribal environmental and 
programmatic needs and priorities.
    (1) Negotiation considerations. In negotiating the work plan, the 
Regional Administrator and applicant will consider such factors as 
national program guidance; any regional supplemental guidance; goals, 
objectives, and priorities proposed by the applicant; other jointly 
identified needs or priorities; and the planning target.
    (2) National program guidance. If an applicant proposes a work plan 
that differs significantly from the goals and objectives, priorities, or 
performance measures in the national program guidance associated with 
the proposed work plan activities, the Regional Administrator must 
consult with the appropriate National Program Manager before agreeing to 
the work plan.
    (3) Use of existing guidance. An applicant should base the grant 
application on the national program guidance in place at the time the 
application is being prepared.
    (b) Work plan requirements. (1) The work plan is the basis for the 
management and evaluation of performance under the grant agreement.
    (2) An approvable work plan must specify:
    (i) The work plan components to be funded under the grant;
    (ii) The estimated work years and estimated funding amounts for each 
work plan component;
    (iii) The work plan commitments for each work plan component, and a 
time frame for their accomplishment;
    (iv) A performance evaluation process and reporting schedule in 
accordance with Sec. 35.515 of this subpart; and
    (v) The roles and responsibilities of the recipient and EPA in 
carrying out the work plan commitments.

[[Page 447]]

    (3) The work plan must be consistent with applicable federal 
statutes; regulations; circulars; executive orders; and delegations, 
approvals, or authorizations.
    (c) Tribal Environmental Agreement as work plan. An applicant may 
use a Tribal Environmental Agreement or a portion of the Tribal 
Environmental Agreement as the work plan or part of the work plan for an 
environmental program grant if the portion of the Tribal Environmental 
Agreement that is to serve as the grant work plan:
    (1) Is clearly identified as the grant work plan and distinguished 
from other portions of the Tribal Environmental Agreement; and
    (2) Meets the requirements in Sec. 35.507(b).



Sec. 35.508  Funding period.

    The Regional Administrator and applicant may negotiate the length of 
the funding period for environmental program grants, subject to 
limitations in appropriations and authorizing statutes.



Sec. 35.509   Consolidated grants.

    Any applicant eligible to receive funds from more than one 
environmental program may submit an application for a consolidated 
grant. For consolidated grants, an applicant prepares a single budget 
and work plan covering all of the environmental programs included in the 
application. The consolidated budget must identify each environmental 
program to be included, the amount of each program's funds, and the 
extent to which each program's funds support each work plan component. 
Recipients of consolidated grants must account for grant funds in 
accordance with the funds' environmental program sources; funds included 
in a consolidated grant from a particular environmental program may be 
used only for that program.

                        EPA Action on Application



Sec. 35.510  Time frame for EPA action.

    The Regional Administrator will review a complete application and 
either approve, conditionally approve, or disapprove it within 60 days 
of receipt. The Regional Administrator will award grants for approved or 
conditionally approved applications if funds are available.



Sec. 35.511  Criteria for approving an application.

    (a) After evaluating other applications as appropriate, the Regional 
Administrator may approve an application upon determining that:
    (1) The application meets the requirements of this subpart and 40 
CFR part 31;
    (2) The application meets the requirements of all applicable federal 
statutes; regulations; circulars; executive orders; and EPA delegations, 
approvals, or authorizations;
    (3) The proposed work plan complies with the requirements of 
Sec. 35.507 of this subpart; and
    (4) The achievement of the proposed work plan is feasible, 
considering such factors as the applicant's existing circumstances, past 
performance, program authority, organization, resources, and procedures.
    (b) If the Regional Administrator finds the application does not 
satisfy the criteria in paragraph (a) of this section, the Regional 
Administrator may either:
    (1) Conditionally approve the application if only minor changes are 
required, with grant conditions necessary to ensure compliance with the 
criteria, or
    (2) Disapprove the application in writing.



Sec. 35.512  Factors considered in determining award amount.

    (a) After approving an application under Sec. 35.511, the Regional 
Administrator will consider such factors as the amount of funds 
available for award to Indian Tribes and Intertribal Consortia, the 
extent to which the proposed work plan is consistent with EPA guidance 
and mutually agreed upon priorities, and the anticipated cost of the 
work plan relative to the proposed work plan components to determine the 
amount of funds to be awarded.
    (b) If the Regional Administrator finds that the requested level of 
funding is not justified, the Regional Administrator will attempt to 
negotiate a

[[Page 448]]

resolution of the issues with the applicant before determining the award 
amount.



Sec. 35.513  Reimbursement for pre-award costs.

    (a) Notwithstanding the requirements of 40 CFR 31.23(a) (Period of 
availability of funds ), and OMB cost principles, EPA may reimburse 
recipients for pre-award costs incurred from the beginning of the 
funding period established in the grant agreement if such costs would 
have been allowable if incurred after the award. Such costs must be 
specifically identified in the grant application EPA approves.
    (b) The applicant incurs pre-award costs at its own risk. EPA is 
under no obligation to reimburse such costs unless they are included in 
an approved grant application.

                         Post-Award Requirements



Sec. 35.514  Amendments and other changes.

    The provisions of 40 CFR 31.30 do not apply to environmental program 
grants awarded under this subpart. The following provisions govern 
amendments and other changes to grant work plans and budgets after the 
work plan is negotiated and a grant awarded.
    (a) Changes requiring prior approval. The recipient needs the 
Regional Administrator's prior written approval to make significant 
post-award changes to work plan commitments. EPA, in consultation with 
the recipient, will document approval of these changes including 
budgeted amounts associated with the revisions.
    (b) Changes requiring approval. Recipients must request, in writing, 
grant amendments for changes requiring increases in environmental 
program grant amounts and extensions of the funding period. Recipients 
may begin implementing a change before the amendment has been approved 
by EPA, but do so at their own risk. If EPA approves the change, EPA 
will issue a grant amendment. EPA will notify the recipient in writing 
if the change is disapproved.
    (c) Changes not requiring approval. Other than those situations 
described in paragraphs (a) and (b) of this section, recipients do not 
need to obtain approval for changes, including changes in grant work 
plans, budgets, or other parts of grant agreements, unless the Regional 
Administrator determines approval requirements should be imposed on a 
specific recipient for a specified period of time.
    (d) Office of Management and Budget (OMB) cost principles. The 
Regional Administrator may waive, in writing, approval requirements for 
specific recipients and costs contained in OMB cost principles.
    (e) Changes in consolidated grants. Recipients of consolidated 
grants under Sec. 35.509 may not transfer funds among environmental 
programs.
    (f) Subgrants. Subgrantees must request required approvals in 
writing from the recipient and the recipient shall approve or disapprove 
the request in writing. A recipient will not approve any work plan or 
budget revision which is inconsistent with the purpose or terms and 
conditions of the federal grant to the recipient. If the revision 
requested by the subgrantee would result in a significant change to the 
recipient's approved grant which requires EPA approval, the recipient 
will obtain EPA's approval before approving the subgrantee's request.



Sec. 35.515  Evaluation of performance.

    (a) Joint evaluation process. The applicant and the Regional 
Administrator will develop a process for jointly evaluating and 
reporting progress and accomplishments under the work plan (see section 
35.507(b)(2)(iv)). A description of the evaluation process and reporting 
schedule must be included in the work plan. The schedule must require 
the recipient to report at least annually and must satisfy the 
requirements for progress reporting under 40 CFR 31.40(b).
    (b) Elements of the evaluation process. The evaluation process must 
provide for:
    (1) A discussion of accomplishments as measured against work plan 
commitments;
    (2) A discussion of the cumulative effectiveness of the work 
performed under all work plan components;
    (3) A discussion of existing and potential problem areas; and

[[Page 449]]

    (4) Suggestions for improvement, including, where feasible, 
schedules for making improvements.
    (c) Resolution of issues. If the joint evaluation reveals that the 
recipient has not made sufficient progress under the work plan, the 
Regional Administrator and the recipient will negotiate a resolution 
that addresses the issues. If the issues cannot be resolved through 
negotiation, the Regional Administrator may take appropriate measures 
under 40 CFR 31.43. The recipient may request review of the Regional 
Administrator's decision under the dispute processes in 40 CFR 31.70.
    (d) Evaluation reports. The Regional Administrator will ensure that 
the required evaluations are performed according to the negotiated 
schedule and that copies of evaluation reports are placed in the 
official files and provided to the recipient.



Sec. 35.516  Direct implementation.

    If funds for an environmental program remain after Tribal and 
Intertribal Consortia environmental program grants for that program have 
been awarded or because no grants were awarded, the Regional 
Administrator may, subject to any limitations contained in appropriation 
acts, use all or part of the funds to support a federal program required 
by law in the absence of an acceptable Tribal program.



Sec. 35.517  Unused funds.

    If funds for an environmental program remain after Tribal and 
Intertribal Consortia grants for that program have been awarded or 
because no grants were awarded, and the Regional Administrator does not 
use the funds under Sec. 35.516 of this subpart, the Regional 
Administrator may award the funds to any eligible Indian Tribe or 
Intertribal Consortium in the region (including a Tribe or Intertribal 
Consortium that has already received funds) for the same environmental 
program or for a Performance Partnership Grant, subject to any 
limitations in appropriation acts.



Sec. 35.518  Unexpended balances.

    Subject to any relevant provisions of law, if a recipient's final 
Financial Status Report shows unexpended balances, the Regional 
Administrator will deobligate the unexpended balances and make them 
available, either to the same recipient or other Tribes or Intertribal 
Consortia in the region, for environmental program grants.

                     Performance Partnership Grants



Sec. 35.530  Purpose of Performance Partnership Grants.

    (a) Purpose of section. Sections 35.530 through 35.538 govern 
Performance Partnership Grants to Tribes and Intertribal Consortia 
authorized in the Omnibus Consolidated Rescissions and Appropriations 
Act of 1996 (Pub. L. 104-134; 110 Stat. 1321, 1321-299 (1996)) and 
Departments of Veterans Affairs and Housing and Urban Development, and 
Independent Agencies Appropriations Act, 1998 (Pub. L. 105-65; 111 Stat. 
1344, 1373 (1997)).
    (b) Purpose of program. Performance Partnership Grants enable Tribes 
and Intertribal Consortia to combine funds from more than one 
environmental program grant into a single grant with a single budget. 
Recipients do not need to account for Performance Partnership Grant 
funds in accordance with the funds' original environmental program 
sources; they need only account for total Performance Partnership Grant 
expenditures. Subject to the requirements of this subpart, the 
Performance Partnership Grant program is designed to:
    (1) Strengthen partnerships between EPA and Tribes and Intertribal 
Consortia through joint planning and priority setting and better 
deployment of resources;
    (2) Provide Tribes and Intertribal Consortia with flexibility to 
direct resources where they are most needed to address environmental and 
public health priorities;
    (3) Link program activities more effectively with environmental and 
public health goals and program outcomes;
    (4) Foster development and implementation of innovative approaches, 
such as pollution prevention, ecosystem management, and community-based 
environmental protection strategies; and
    (5) Provide savings by streamlining administrative requirements.

[[Page 450]]



Sec. 35.532  Requirements summary.

    (a) Applicants and recipients of Performance Partnership Grants must 
meet:
    (1) The requirements in Secs. 35.500 to 35.518 of this subpart which 
apply to all environmental program grants, including Performance 
Partnership Grants; and
    (2) The requirements in Secs. 35.530 to 35.538 of this subpart which 
apply only to Performance Partnership Grants.
    (b) In order to include funds from an environmental program grant 
listed in Sec. 35.501(a) of this subpart in a Performance Partnership 
Grant, applicants must meet the requirements for award of each 
environmental program from which funds are included in the Performance 
Partnership Grant, except the requirements at Secs. 35.548(c), 35.638(b) 
and (c), 35.691, and 35.708 (c), (d), (e), and (g). These requirements 
can be found in this regulation beginning at Sec. 35.540. If the 
applicant is an Intertribal Consortium, each Tribe that is a member of 
the Consortium must meet the requirements.
    (3) Apply for the environmental program grant.
    (4) Obtain the Regional Administrator's approval of the application 
for that grant.
    (c) If funds from an environmental program are not included in a 
Performance Partnership Grant, an applicant is not required to meet the 
eligibility requirements for that environmental program grant in order 
to carry out activities eligible under that program as provided in 
Sec. 35.535.



Sec. 35.533  Programs eligible for inclusion.

    (a) Eligible programs. Except as provided in paragraph (b) of this 
section, the environmental program grants eligible for inclusion in a 
Performance Partnership Grant are listed in Sec. 35.501(a)(2) through 
(9) of this subpart.
    (b) Changes in eligible programs. The Administrator may, in guidance 
or regulation, describe subsequent additions, deletions, or changes to 
the list of environmental programs eligible for inclusion in Performance 
Partnership Grants.



Sec. 35.534  Eligible recipients.

    (a) A Tribe or Intertribal Consortium is eligible for a Performance 
Partnership Grant if the Tribe or each member of the Intertribal 
Consortium is eligible for, and the Tribe or Intertribal Consortium 
receives funding from, more than one of the environmental program grants 
listed in Sec. 35.501(a) in accordance with the requirements for those 
environmental programs.
    (b) For grants to Tribes, a Tribal agency must be designated by a 
Tribal government or other authorized Tribal process to receive grants 
under each of the environmental programs to be combined in the 
Performance Partnership Grant.



Sec. 35.535  Activities eligible for funding.

    (a) Delegated, approved, or authorized activities. A Tribe or 
Intertribal Consortium may use Performance Partnership Grant funds to 
carry out EPA-delegated, EPA-approved, or EPA-authorized activities, 
such as permitting and primary enforcement responsibility only if the 
Tribe or each member of the Intertribal Consortium receives from the 
Regional Administrator the delegations, approvals, or authorizations to 
conduct such activities.
    (b) Other program activities. Except for the limitation in paragraph 
(a) of this section, a Tribe or Intertribal Consortium may use 
Performance Partnership Grant funds for any activity that is eligible 
under the environmental programs listed in Sec. 35.501(a) of this 
subpart, as determined by the Regional Administrator. If an applicant 
proposes a Performance Partnership Grant work plan that differs 
significantly from any of the proposed work plans approved for funding 
that the applicant now proposes to move into a Performance Partnership 
Grant, the Regional Administrator must consult with the appropriate 
National Program Managers before agreeing to the Performance Partnership 
Grant work plan. National Program Managers may expressly waive or modify 
this requirement for consultation in national program guidance. National 
Program Managers also may define in national program guidance 
``significant'' differences from a work plan submitted with a Tribe's or 
a Consortium's application for funds.

[[Page 451]]



Sec. 35.536  Cost share requirements.

    (a) The Performance Partnership Grant cost share shall be the sum of 
the amounts required for each environmental program grant included in 
the Performance Partnership Grant, as determined in accordance with 
paragraphs (b) and (c) of this section, unless waived under paragraph 
(d) of this section.
    (b) For each environmental program grant included in the Performance 
Partnership Grant that has a cost share of five percent or less under 
the provisions of Secs. 35.540 through 35.718, the required cost share 
shall be that identified in Secs. 35.540 through 35.718 of this subpart.
    (c) For each environmental program grant included in the Performance 
Partnership Grant that has a cost share of greater than five percent 
under the provisions of Secs. 35.540 through 35.718 of this subpart, the 
required cost share shall be five percent of the allowable cost of the 
work plan budget for that program. However, after the first two years in 
which a Tribe or Intertribal Consortium receives a Performance 
Partnership Grant, the Regional Administrator must determine through 
objective assessment whether the Tribe or the members of an Intertribal 
Consortium meet socio-economic indicators that demonstrate the ability 
of the Tribe or the Intertribal Consortium to provide a cost share 
greater than five percent. If the Regional Administrator determines that 
the Tribe or the members of Intertribal Consortium meets such 
indicators, then the Regional Administrator shall increase the required 
cost share up to a maximum of 10 percent of the allowable cost of the 
work plan budget for each program with a cost share greater than five 
percent.
    (d) The Regional Administrator may waive the cost share required 
under this section upon request of the Tribe or Intertribal Consortium, 
if, based on an objective assessment of socio-economic indicators, the 
Regional Administrator determines that meeting the cost share would 
impose undue hardship.



Sec. 35.537  Application requirements.

    An application for a Performance Partnership Grant must contain:
    (a) A list of the environmental programs and the amount of funds 
from each program to be combined in the Performance Partnership Grant;
    (b) A consolidated budget;
    (c) A consolidated work plan that addresses each program being 
combined in the grant and which meets the requirements of Sec. 35.507.



Sec. 35.538  Project period.

    If the projected completion date for a work plan commitment funded 
under an environmental program grant that is added to a Performance 
Partnership Grant extends beyond the end of the project period for the 
Performance Partnership Grant, the Regional Administrator and the 
recipient will agree in writing as to how and when the work plan 
commitment will be completed.

          Indian Environmental General Assistance Program (GAP)



Sec. 35.540  Purpose.

    (a) Purpose of section. Sections 35.540 through 35.547 govern grants 
to Tribes and Intertribal Consortia under the Indian Environmental 
General Assistance Program Act of 1992 (42 U.S.C. 4368b.)
    (b) Purpose of program. Indian Environmental General Assistance 
Program grants are awarded to build capacity to administer environmental 
programs for Tribes by providing general assistance to plan, develop, 
and establish environmental protection programs for Tribes.



Sec. 35.542  Definitions. [Reserved]



Sec. 35.543  Eligible recipients.

    The following entities are eligible to receive grants under this 
program:
    (a) Tribes and
    (b) Intertribal Consortia as provided in Sec. 35.504.



Sec. 35.545  Eligible activities.

    Tribes and Intertribal Consortia may use General Assistance Program 
funds

[[Page 452]]

for planning, developing, and establishing environmental protection 
programs and to develop and implement solid and hazardous waste programs 
for Tribes.



Sec. 35.548  Award limitations.

    (a) Each grant awarded under the General Assistance Program shall be 
not less than $75,000. This limitation does not apply to additional 
funds that may become available for award to the same Tribe or 
Intertribal Consortium.
    (b) The Regional Administrator shall not award a grant to a single 
Tribe or Intertribal Consortium of more than 10 percent of the total 
annual funds appropriated under the Act.
    (c) The project period of a General Assistance Program award may not 
exceed four years.
    (d) No award under this program shall result in reduction of total 
EPA grants for environmental programs to the recipient.

                   Air Pollution Control (Section 105)



Sec. 35.570  Purpose.

    (a) Purpose of section. Sections 35.570 through 35.578 govern air 
pollution control grants to Tribes (as defined in section 302(r) of the 
Clean Air Act (CAA)) authorized under sections 105 and 301(d) of the Act 
and Intertribal Consortia.
    (b) Purpose of program. Air pollution control grants are awarded to 
develop and administer programs that prevent and control air pollution 
or implement national air quality standards for air resources within the 
exterior boundaries of the reservation or other areas within the Tribe's 
jurisdiction.
    (c) Associated program regulations. Refer to 40 CFR parts 49, 50, 
51, 52, 58, 60, 61, 62, and 81 for associated program regulations.



Sec. 35.572  Definitions.

    In addition to the definitions in Sec. 35.502, the following 
definitions apply to the Clean Air Act's section 105 grant program:
    Nonrecurrent expenditures are those expenditures which are shown by 
the recipient to be of a nonrepetitive, unusual, or singular nature such 
as would not reasonably be expected to recur in the foreseeable future. 
Costs categorized as nonrecurrent must be approved in the grant 
agreement or an amendment thereto.
    Recurrent expenditures are those expenses associated with the 
activities of a continuing environmental program. All expenditures are 
considered recurrent unless justified by the applicant as nonrecurrent 
and approved as such in the grant award or an amendment thereto.



Sec. 35.573  Eligible Tribe.

    (a) A Tribe is eligible to receive section 105 financial assistance 
under Secs. 35.570 through 35.578 if it has demonstrated eligibility to 
be treated as a State under 40 CFR 49.6. An Intertribal Consortium 
consisting of Tribes that have demonstrated eligibility to be treated as 
States under 40 CFR 49.6 is also eligible for financial assistance.
    (b) Tribes that have not made a demonstration under 40 CFR 49.6 and 
Intertribal Consortia consisting of Tribes that have not demonstrated 
eligibility to be treated as States under 40 CFR 49.6 are eligible for 
financial assistance under sections 105 and 302(b)(5) of the Clean Air 
Act.



Sec. 35.575  Maximum federal share.

    (a) For Tribes and Intertribal Consortia eligible under 
Sec. 35.573(a), the Regional Administrator may provide financial 
assistance in an amount up to 95 percent of the approved costs of 
planning, developing, establishing, or improving an air pollution 
control program, and up to 95 percent of the approved costs of 
maintaining that program. After two years from the date of each Tribe's 
or Intertribal Consortium's initial grant award, the Regional 
Administrator will reduce the maximum federal share to 90 percent if the 
Regional Administrator determines that the Tribe or each member of the 
Intertribal Consortium meets certain economic indicators that would 
provide an objective assessment of the Tribe's or each of the 
Intertribal Consortiums member's ability to increase its share. For a 
Tribe or Intertribal Consortium eligible under Sec. 35.573(a), the 
Regional Administrator may increase the maximum federal share if the 
Tribe or Intertribal Consortium can demonstrate in writing to the 
satisfaction

[[Page 453]]

of the Regional Administrator that fiscal circumstances within the Tribe 
or within the member Tribes of the Intertribal Consortium are 
constrained to such an extent that fulfilling the match requirement 
would impose undue hardship.
    (b) For Tribes and Intertribal Consortia eligible under 
Sec. 35.573(b), the Regional Administrator may provide financial 
assistance in an amount up to 60 percent of the approved costs of 
planning, developing, establishing, or improving an air pollution 
control program, and up to 60 percent of the approved costs of 
maintaining that program.
    (c) Revenue collected under a Tribal Title V operating permit 
program may not be used to meet the cost share requirements of this 
section.



Sec. 35.576  Maintenance of effort.

    (a) For Tribes and Intertribal Consortia that are eligible for 
financial assistance under Sec. 35.573(b) of this subpart, the Tribe or 
each of the Intertribal Consortium's members must expend annually, for 
recurrent Section 105 program expenditures, an amount of non-federal 
funds at least equal to such expenditures during the preceding fiscal 
year.
    (1) In order to award grants in a timely manner each fiscal year, 
the Regional Administrator shall compare a Tribe's or each of the 
Intertribal Consortium's member's proposed expenditure level, as 
detailed in the grant application, to its expenditure level in the 
second preceding fiscal year. When expenditure data for the preceding 
fiscal year is complete, the Regional Administrator shall use this 
information to determine the Tribe's or Intertribal Consortium's 
compliance with its maintenance of effort requirement.
    (2) If expenditure data for the preceding fiscal year shows that a 
Tribe or Intertribal Consortium did not meet the requirements of 
paragraph (a) of this section, the Regional Administrator will take 
action to recover the grant funds for that year.
    (3) The Regional Administrator may grant an exception to 
Sec. 35.576(a) if, after notice and opportunity for a public hearing, 
the Regional Administrator determines that a reduction in expenditures 
is attributable to a non-selective reduction of all the Tribe's or each 
of the Intertribal Consortium's member's programs.
    (b) For Tribes and Intertribal Consortia that are eligible under 
Sec. 35.573(b), the Regional Administrator will not award Section 105 
funds unless the applicant provides assurance that the grant will not 
supplant non-federal funds that would otherwise be available for 
maintaining the Section 105 program.



Sec. 35.578  Award limitation.

    The Regional Administrator will not disapprove an application for, 
or terminate or annul an award of, financial assistance under 
Sec. 35.573 without prior notice and opportunity for a public hearing 
within the appropriate jurisdiction or, where more than one area is 
affected, within one of the affected areas within the jurisdiction

             Water Pollution Control (Sections 106 and 518)



Sec. 35.580  Purpose.

    (a) Purpose of section. Sections 35.580 through 35.588 govern water 
pollution control grants to eligible Tribes and Intertribal Consortia 
(as defined in Sec. 35.502) authorized under sections 106 and 518 of the 
Clean Water Act.
    (b) Purpose of program. Water pollution control grants are awarded 
to assist Tribes and Intertribal Consortia in administering programs for 
the prevention, reduction, and elimination of water pollution, including 
programs for the development and implementation of ground-water 
protection strategies.
    (c) Associated program requirements. Program requirements for water 
quality planning and management activities are provided in 40 CFR part 
130.



Sec. 35.582  Definitions.

    Federal Indian reservation. All land within the limits of any Indian 
reservation under the jurisdiction of the United States Government, 
notwithstanding the issuance of any patent, and, including rights-of-way 
running through the reservation.

[[Page 454]]

    Tribe. Any Indian Tribe, band, group, or community recognized by the 
Secretary of the Interior, exercising governmental authority over a 
federal Indian reservation.



Sec. 35.583  Eligible recipients.

    A Tribe, including an Intertribal Consortium, is eligible to receive 
a section 106 grant if EPA determines that the Indian Tribe or each 
member of the Intertribal Consortium meets the requirements for 
treatment in a manner similar to a State under section 518(e) of the 
Clean Water Act (see 40 CFR 130.6(d)).



Sec. 35.585  Maximum federal share.

    (a) The Regional Administrator may provide up to 95 percent of the 
approved work plan costs for Tribes or Intertribal Consortia 
establishing a section 106 program. Work plan costs include costs of 
planning, developing, establishing, improving or maintaining a water 
pollution control program.
    (b) The Regional Administrator may increase the maximum federal 
share if the Tribe or Intertribal Consortium can demonstrate in writing 
to the satisfaction of the Regional Administrator that fiscal 
circumstances within the Tribe or within each Tribe that is a member of 
an Intertribal Consortium are constrained to such an extent that 
fulfilling the match requirement would impose undue hardship.



Sec. 35.588  Award limitations.

    (a) The Regional Administrator will only award section 106 funds to 
a Tribe or Intertribal Consortium if:
    (1) All monitoring and analysis activities performed by the Tribe or 
Intertribal Consortium meets the applicable quality assurance and 
quality control requirements in 40 CFR 31.45.
    (2) The Tribe or each member of the Intertribal Consortium has 
emergency power authority comparable to that in section 504 of the Clean 
Water Act and adequate contingency plans to implement such authority.
    (3) EPA has not assumed enforcement as defined in section 309(a)(2) 
of the Clean Water Act in the Tribe's or any Intertribal Consortium 
member's jurisdiction.
    (4) The Tribe or Intertribal Consortium agrees to include a 
discussion of how the work performed under section 106 addressed water 
quality problems on Tribal lands in the annual report required under 
Sec. 35.515(d).
    (5) After an initial award of section 106 funds, the Tribe or 
Intertribal Consortium shows satisfactory progress in meeting its 
negotiated work plan commitments.
    (b) A Tribe or Intertribal Consortium is eligible to receive a 
section 106 grant or section 106 grant funds even if the Tribe or each 
of the members of an Intertribal Consortium does not meet the 
requirements of section 106(e)(1) and 106(f)(1) of the Clean Water Act.

        Water Quality Cooperative Agreements (Section 104(b)(3))



Sec. 35.600  Purpose.

    (a) Purpose of section. Sections 35.600 through 35.604 govern Water 
Quality Cooperative Agreements to Tribes and Intertribal Consortia 
authorized under section 104(b)(3) of the Clean Water Act. These 
sections do not govern Water Quality Cooperative Agreements under 
section 104(b)(3) to organizations that do not meet the definitions of 
Tribe or Intertribal Consortium in Sec. 35.502; such cooperative 
agreements generally are subject to the uniform administrative 
requirements for grants at 40 CFR part 30.
    (b) Purpose of program. EPA awards Water Quality Cooperative 
Agreements for investigations, experiments, training, demonstrations, 
surveys, and studies relating to the causes, effects, extent, 
prevention, reduction, and elimination of water pollution. EPA issues 
guidance each year advising EPA regions and headquarters regarding 
appropriate priorities for funding for this program. This guidance may 
include such focus areas as National Pollutant Discharge Elimination 
System watershed permitting, urban wet weather programs, or innovative 
pretreatment programs and biosolids projects.



Sec. 35.603  Competitive process.

    EPA will award water quality cooperative agreement funds through a 
competitive process in accordance with national program guidance. After 
the

[[Page 455]]

competitive process is complete, the recipient can, at its discretion, 
accept the award as a separate cooperative agreement or add the funds to 
a Performance Partnership Grant. If the recipient chooses to add the 
funds to a Performance Partnership Grant, the water quality work plan 
commitments must be included in the Performance Partnership Grant work 
plan.



Sec. 35.604  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of approved 
work plan costs.

         Wetlands Development Grant Program (Section 104(b)(3))



Sec. 35.610  Purpose.

    (a) Purpose of section. Sections 35.610 through 35.615 govern 
wetlands development grants to Tribes and Intertribal Consortia under 
section 104(b)(3) of the Clean Water Act. These sections do not govern 
wetlands development grants under section 104(b)(3) to organizations 
that do not meet the definitions of Tribe or Intertribal Consortium in 
Sec. 35.502; such grants generally are subject to the uniform 
administrative requirements for grants at 40 CFR part 30.
    (b) Purpose of program. EPA awards wetlands development grants to 
assist in the development of new, or the refinement of existing, 
wetlands protection and management programs.



Sec. 35.613  Competitive process.

    Wetlands development grants are awarded on a competitive basis. EPA 
annually establishes a deadline for receipt of grant applications. EPA 
reviews applications and decides which grant projects to fund based on 
criteria established by EPA. After the competitive process is complete, 
the recipient can, at its discretion, accept the award as a wetlands 
development program grant or add the funds to a Performance Partnership 
Grant. If the recipient chooses to add the funds to a Performance 
Partnership Grant, the wetlands development program work plan 
commitments must be included in the Performance Partnership Grant work 
plan.



Sec. 35.615  Maximum federal share.

    EPA may provide up to 75 percent of the approved work plan costs for 
the development or refinement of a wetlands protection and management 
program.

     Nonpoint Source Management Grants (Sections 319(h) and 518(f))



Sec. 35.630  Purpose.

    (a) Purpose of section. Sections 35.630 through 35.638 govern 
nonpoint source management grants to eligible Tribes and Intertribal 
Consortia under sections 319(h) and 518(f) of the Clean Water Act.
    (b) Purpose of program. Nonpoint source management grants may be 
awarded for the implementation of EPA-approved nonpoint source 
management programs, including ground-water quality protection 
activities that will advance the approved nonpoint source management 
program.



Sec. 35.632  Definition.

    Tribe. Any Indian Tribe, band, group, or community recognized by the 
Secretary of the Interior and exercising governmental authority over a 
federal Indian reservation.



Sec. 35.633  Eligibility requirements.

    A Tribe or Intertribal Consortium is eligible to receive a Nonpoint 
Source Management grant if EPA has determined that the Tribe or each 
member of the Intertribal Consortium meets the requirements for 
treatment in a manner similar to a State under section 518(e) of the 
Clean Water Act (see 40 CFR 130.6(d)).



Sec. 35.635  Maximum federal share.

    (a) The Regional Administrator may provide up to 60 percent of the 
approved work plan costs in any fiscal year. The non-federal share of 
costs must be provided from non-federal sources.
    (b) The Regional Administrator may increase the maximum federal 
share if the Tribe or Intertribal Consortium can demonstrate in writing 
to the satisfaction of the Regional Administrator that fiscal 
circumstances within the Tribe or within each Tribe that is

[[Page 456]]

a member of the Intertribal Consortium are constrained to such an extent 
that fulfilling the match requirement would impose undue hardship. In no 
case shall the federal share be greater than 90 percent.



Sec. 35.636  Maintenance of effort.

    To receive funds under section 319 in any fiscal year, a Tribe or 
each member of an Intertribal Consortium must agree that the Tribe or 
each member of the Intertribal Consortium will maintain its aggregate 
expenditures from all other sources for programs for controlling 
nonpoint source pollution and improving the quality of the Tribe's or 
the Intertribal Consortium's members' waters at or above the average 
level of such expenditures in Fiscal Years 1985 and 1986.



Sec. 35.638  Award limitations.

    (a) Available funds. EPA may use no more than the amount authorized 
under the Clean Water Act section 319 and 518(f) for making grants to 
Tribes or Intertribal Consortia.
    (b) Financial assistance to persons. Tribes or Intertribal Consortia 
may use funds for financial assistance to persons only to the extent 
that such assistance is related to the cost of demonstration projects.
    (c) Administrative costs. Administrative costs in the form of 
salaries, overhead, or indirect costs for services provided and charged 
against activities and programs carried out with these funds shall not 
exceed 10 percent of the funds the Tribe or Intertribal Consortium 
receives in any fiscal year. The cost of implementing enforcement and 
regulatory activities, education, training, technical assistance, 
demonstration projects, and technology transfer programs are not subject 
to this limitation.
    (d) The Regional Administrator will not award section 319(h) funds 
to any Tribe or Intertribal Consortium unless:
    (1) Approved assessment report. EPA has approved the Tribe's or each 
member of the Intertribal Consortium's Assessment Report on nonpoint 
sources, prepared in accordance with section 319(a) of the Act;
    (2) Approved Tribe or Intertribal Consortium management program. EPA 
has approved the Tribes's or each member of the Intertribal Consortium's 
management program for nonpoint sources, prepared in accordance with 
section 319(b) of the Act;
    (3) Progress on reducing pollutant loadings. The Regional 
Administrator determines, for a Tribe or Intertribal Consortium that 
received a section 319 funds in the preceding fiscal year, that the 
Tribe or each member of the Intertribal Consortium made satisfactory 
progress in meeting its schedule for achieving implementation of best 
management practices to reduce pollutant loadings from categories of 
nonpoint sources, or particular nonpoint sources, designated in the 
Tribe's or each Consortium member's management program. The Tribe or 
each member of the Intertribal Consortium must develop this schedule in 
accordance with section 319(b)(2) of the Act;
    (4) Activity and output descriptions. The work plan briefly 
describes each significant category of nonpoint source activity and the 
work plan commitments to be produced for each category; and
    (5) Significant watershed projects. For watershed projects whose 
costs exceed $50,000, the work plan contains:
    (i) A brief synopsis of the watershed implementation plan outlining 
the problems to be addressed;
    (ii) The project's goals and objectives; and
    (iii) The performance measures and environmental indicators that 
will be used to evaluate the results of the project.

          Pesticide Cooperative Enforcement (Section 23(a)(1))



Sec. 35.640  Purpose.

    (a) Purpose of section. Sections 35.640 through 35.645 govern 
cooperative agreements to Tribes and Intertribal Consortia authorized 
under section 23(a)(1) of the Federal Insecticide, Fungicide, and 
Rodenticide Act for pesticide enforcement.
    (b) Purpose of program. Cooperative agreements are awarded to assist 
Tribes and Intertribal Consortia in implementing pesticide enforcement 
programs.

[[Page 457]]

    (c) Associated program regulations. Refer to 19 CFR part 12 and 40 
CFR parts 150 through 189 for associated regulations.



Sec. 35.641  Eligible recipients.

    Eligible recipients of pesticide enforcement cooperative agreements 
are Tribes and Intertribal Consortia.



Sec. 35.642  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of the 
approved work plan costs.



Sec. 35.645  Basis for allotment.

    The Administrator allots pesticide enforcement cooperative agreement 
funds to each regional office. Regional offices award funds to Tribes 
and Intertribal Consortia based on their programmatic needs and 
applicable EPA guidance.

   Pesticide Applicator Certification and Training (Section 23(a)(2))



Sec. 35.646  Purpose.

    (a) Purpose of section. Sections 35.646 through 35.649 govern 
pesticide applicator certification and training grants to Tribes and 
Intertribal Consortia under section 23(a)(2) of the Federal Insecticide, 
Fungicide, and Rodenticide Act.
    (b) Purpose of program. Pesticide applicator certification and 
training grants are awarded to train and certify restricted use 
pesticide applicators.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR parts 162, 170, and 171.



Sec. 35.649  Maximum federal share.

    The Regional Administrator may provide up to 50 percent of the 
approved work plan costs.

           Pesticide Program Implementation (Section 23(a)(1))



Sec. 35.650  Purpose.

    (a) Purpose of section. Sections 35.650 through 35.659 govern 
Pesticide Program Implementation cooperative agreements to Tribes and 
Intertribal Consortia under section 23(a)(1) of the Federal Insecticide, 
Fungicide, and Rodenticide Act.
    (b) Purpose of program. Cooperative agreements are awarded to assist 
Tribes and Intertribal Consortia to develop and implement pesticide 
programs, including programs that protect workers, ground water, and 
endangered species from pesticide risks and other pesticide management 
programs designated by the Administrator.
    (c) Program regulations. Refer to 40 CFR parts 150 through 189 and 
19 CFR part 12 for associated regulations.



Sec. 35.653  Eligible recipients.

    Eligible recipients of pesticide program implementation cooperative 
agreements are Tribes and Intertribal Consortia.



Sec. 35.655  Basis for allotment.

    The Administrator allots pesticide program implementation 
cooperative agreement funds to each Regional Office. Regional Offices 
award funds to Tribes and Intertribal Consortia based on their 
programmatic needs and applicable EPA guidance.



Sec. 35.659  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of the 
approved work plan costs.

               Pollution Prevention Grants (Section 6605)



Sec. 35.660  Purpose.

    (a) Purpose of section. Sections 35.660 through 35.669 govern grants 
to Tribes and Intertribal Consortia under section 6605 of the Pollution 
Prevention Act.
    (b) Purpose of program. Pollution Prevention Grants are awarded to 
promote the use of source reduction techniques by businesses.



Sec. 35.661   Competitive process.

    EPA Regions award Pollution Prevention Grant funds to Tribes and 
Intertribal Consortia through a competitive process in accordance with 
EPA guidance. When evaluating a Tribe's or Intertribal Consortium's 
application, EPA must consider, among other criteria, whether the 
proposed program would:

[[Page 458]]

    (a) Make specific technical assistance available to businesses 
seeking information about source reduction opportunities, including 
funding for experts to provide onsite technical advice to businesses 
seeking assistance in the development of source reduction plans;
    (b) Target assistance to businesses for whom lack of information is 
an impediment to source reduction; and
    (c) Provide training in source reduction techniques. Such training 
may be provided through local engineering schools or other appropriate 
means.



Sec. 35.662  Definitions.

    The following definition applies to the Pollution Prevention Grant 
program and to Secs. 35.660 through 35.669:
    (a) Pollution prevention/source reduction is any practice that:
    (1) Reduces the amount of any hazardous substance, pollutant, or 
contaminant entering any waste stream or otherwise released into the 
environment (including fugitive emissions) prior to recycling, 
treatment, or disposal;
    (2) Reduces the hazards to public health and the environment 
associated with the release of such substances, pollutants, or 
contaminants; or
    (3) Reduces or eliminates the creation of pollutants through:
    (i) Increased efficiency in the use of raw materials, energy, water, 
or other resources; or
    (ii) Protection of national resources by conservation.
    (b) Pollution prevention/source reduction does not include any 
practice which alters the physical, chemical, or biological 
characteristics or the volume of a hazardous substance, pollutant, or 
contaminant through a process or activity which itself is not integral 
to and necessary for the production of a product or the providing of a 
service.



Sec. 35.663  Eligible recipients.

    (a) The Regional Administrator will treat a Tribe or Intertribal 
Consortium as eligible to apply for a Pollution Prevention Grant if the 
Tribe or each member of the Intertribal Consortium:
    (1) Is recognized by the Secretary of the Interior;
    (2) Has an existing government exercising substantial governmental 
duties and powers;
    (3) Has adequate authority to carry out the grant activities; and
    (4) Is reasonably expected to be capable, in the Regional 
Administrator's judgment, of administering the grant program.
    (b) If the Administrator has previously determined that an Indian 
Tribe has met the prerequisites in paragraphs (a)(1) and (2) of this 
section for another EPA program, the Tribe need provide only that 
information unique to the Pollution Prevention Grants program required 
by paragraphs (b)(3) and (4) of this section.



Sec. 35.668  Award limitation.

    If the Pollution Prevention Grant funds are included in a 
Performance Partnership Grant, the Pollution Prevention work plan 
commitments must be included in the Performance Partnership Grant work 
plan.



Sec. 35.669  Maximum federal share.

    The federal share for Pollution Prevention Grants will not exceed 50 
percent of the allowable Tribe and Intertribal Consortium Pollution 
Prevention project cost.

   Public Water System Supervision (Section 1443(a) and Section 1451)



Sec. 35.670  Purpose.

    (a) Purpose of section. Sections 35. 670 through 35.678 govern 
public water system supervision grants to Tribes and Intertribal 
Consortia authorized under sections 1443(a) and 1451 of the Safe 
Drinking Water Act.
    (b) Purpose of program. Public water system supervision grants are 
awarded to carry out public water system supervision programs including 
implementation and enforcement of the requirements of the Act that apply 
to public water systems.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR parts 141, 142, and 143.

[[Page 459]]



Sec. 35.672  Definition.

    Tribe. Any Indian Tribe having a federally recognized governing body 
carrying out substantial governmental duties and powers over any area.



Sec. 35.673  Annual amount reserved by EPA.

    Each year, EPA shall reserve up to seven percent of the public water 
system supervision funds for grants to Tribes and Intertribal Consortia 
under section 1443(a).



Sec. 35.675  Maximum federal share.

    (a) The Regional Administrator may provide up to 75 percent of the 
approved work plan costs.
    (b) The Regional Administrator may increase the maximum federal 
share if the Tribe or Intertribal Consortium can demonstrate in writing 
to the satisfaction of the Regional Administrator that fiscal 
circumstances within the Tribe or Consortium are constrained to such an 
extent that fulfilling the match requirement would impose undue 
hardship, except that the federal share shall not be greater than 90 
percent.



Sec. 35.676  Eligible recipients.

    A Tribe or Intertribal Consortium is eligible to apply for a public 
water system supervision grant if the Tribe or each member of the 
Intertribal Consortium meets the following criteria:
    (a) The Tribe or each member of the Intertribal Consortium is 
recognized by the Secretary of the Interior;
    (b) The Tribe or each member of the Intertribal Consortium has a 
governing body carrying out substantial governmental duties and powers 
over any area;
    (c) The functions to be exercised under the grant are within the 
area of the Tribal government's jurisdiction; and
    (d) The Tribe or each member of the Intertribal Consortium is 
reasonably expected to be capable, in the Regional Administrator's 
judgment, of carrying out the functions to be exercised under the grant.



Sec. 35.678  Award limitations.

    (a) Initial grant. The Regional Administrator will not make an 
initial award unless the Tribe or each member of the Intertribal 
Consortium has:
    (1) Met the requirements of Sec. 35.676 (Eligible recipients);
    (2) Established an approved public water system supervision program 
or agrees to establish an approvable program within three years of the 
initial award and assumed primary enforcement responsibility within this 
period; and
    (3) Agreed to use at least one year of the grant funding to 
demonstrate program capability to implement the requirements found in 40 
CFR 142.10.
    (b) Subsequent grants. The Regional Administrator will not make a 
subsequent grant, after the initial award, unless the Tribe or each 
member of the Intertribal Consortia can demonstrate reasonable progress 
towards assuming primary enforcement responsibility within the three-
year period after initial award. After the three-year period expires, 
the Regional Administrator will not award section 1443(a) funds to an 
Indian Tribe or Intertribal Consortium unless the Tribe or each member 
of the Intertribal Consortia has assumed primary enforcement 
responsibility for the public water system supervision program.

          Underground Water Source Protection (Section 1443(b))



Sec. 35.680  Purpose.

    (a) Purpose of section. Sections 35.680 through 35.688 govern 
underground water source protection grants to Tribes and Intertribal 
Consortia under section 1443(b) of the Safe Drinking Water Act.
    (b) Purpose of program. The Underground Water Source Protection 
grants are awarded to carry out underground water source protection 
programs.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR parts 124, 144, 145, 146, and 147.

[[Page 460]]



Sec. 35.682  Definition.

    Tribe. Any Indian Tribe having a federally recognized governing body 
carrying out substantial governmental duties and powers over any area.



Sec. 35.683  Annual amount reserved by EPA.

    EPA shall reserve up to five percent of the underground water source 
protection funds each year for underground water source protection 
grants to Tribes under section 1443(b) of the Safe Drinking Water Act.



Sec. 35.685  Maximum federal share.

    (a) The Regional Administrator may provide up to 75 percent of the 
approved work plan costs.
    (b) The Regional Administrator may increase the maximum federal 
share if the Tribe or Intertribal Consortium can demonstrate in writing 
to the satisfaction of the Regional Administrator that fiscal 
circumstances within the Tribe or Consortium are constrained to such an 
extent that fulfilling the match requirement would impose undue 
hardship, except that the federal share shall not be greater than 90 
percent.



Sec. 35.686  Eligible recipients.

    A Tribe or Intertribal Consortium is eligible to apply for an 
underground water source protection grant if the Tribe or each member of 
the Intertribal Consortium meets the following criteria:
    (a) The Tribe or each member of the Intertribal Consortium is 
recognized by the Secretary of the Interior;
    (b) The Tribe or each member of the Intertribal Consortium has a 
governing body carrying out substantial governmental duties and powers 
over any area;
    (c) The functions to be exercised under the grant are within the 
area of the Tribal government's jurisdiction; and
    (d) The Tribe or each member of the Intertribal Consortium is 
reasonably expected to be capable, in the Regional Administrator's 
judgment, of carrying out the functions to be exercised under the grant.



Sec. 35.688  Award limitations.

    (a) Initial grants. The Regional Administrator will not make an 
initial award unless the Tribe or each member of the Intertribal 
Consortium has:
    (1) Met the requirements of Sec. 35.676 (Eligible recipients); and
    (2) Established an approved underground water source protection 
program or agrees to establish an approvable program within four years 
of the initial award.
    (b) Subsequent grants. The Regional Administrator will not make a 
subsequent grant, after the initial award, unless the Tribe can 
demonstrate reasonable progress towards assuming primary enforcement 
responsibility within the four-year period after initial award. After 
the four-year period expires, the Regional Administrator shall not award 
section 1443(b) funds to an Indian Tribe unless the Tribe has assumed 
primary enforcement responsibility for the underground water source 
protection program.

                Lead-Based Paint Program (Section 404(g))



Sec. 35.690  Purpose.

    (a) Purpose of section. Sections 35.690 through 35.693 govern grants 
to Tribes and Intertribal Consortia under section 404(g) for the Toxic 
Substances Control Act .
    (b) Purpose of program. Lead-Based Paint Program grants are awarded 
to develop and carry out authorized programs to ensure that individuals 
employed in lead-based paint activities are properly trained; that 
training programs are accredited; and that contractors employed in such 
activities are certified.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR part 745.



Sec. 35.691  Funding coordination.

    Recipients must use the Lead-Based Paint program funding in a way 
that complements any related assistance they receive from other federal 
sources for lead-based paint activities.



Sec. 35.693  Eligible recipients.

    (a) The Regional Administrator will treat a Tribe or Intertribal 
Consortium

[[Page 461]]

as eligible to apply for a Lead-Based Paint Program grant if the Tribe 
or each member of the Intertribal Consortium:
    (1) Is recognized by the Secretary of the Interior;
    (2) Has an existing government exercising substantial governmental 
duties and powers;
    (3) Has adequate authority to carry out the grant activities; and
    (4) Is reasonably expected to be capable, in the Regional 
Administrator's judgment, of administering the grant program.
    (b) If the Administrator has previously determined that an Indian 
Tribe has met the prerequisites in paragraphs (a)(1) and (2) of this 
section for another EPA program, the Tribe need provide only that 
information unique to the Lead-Based Paint Program required by 
paragraphs (b)(3) and (4) of this section.

                    Indoor Radon Grants (Section 306)



Sec. 35.700  Purpose.

    (a) Purpose of section. Sections 35.700 through 35.708 govern Indoor 
Radon Grants to Tribes and Intertribal Consortia under section 306 of 
the Toxic Substances Control Act.
    (b) Purpose of program. (1) Indoor Radon Grants are awarded to 
assist Tribes and Intertribal Consortia with the development and 
implementation of programs that assess and mitigate radon and that aim 
at reducing radon health risks. Indoor Radon Grant funds may be used for 
the following eligible activities.
    (i) Survey of radon levels, including special surveys of geographic 
areas or classes of buildings (such as public buildings, school 
buildings, high-risk residential construction types);
    (ii) Development of public information and education materials 
concerning radon assessment, mitigation, and control programs;
    (iii) Implementation of programs to control radon on existing and 
new structures;
    (iv) Purchase, by the Tribe or Intertribal Consortium of radon 
measurement equipment and devices;
    (v) Purchase and maintenance of analytical equipment connected to 
radon measurement and analysis, including costs of calibration of such 
equipment;
    (vi) Payment of costs of Environmental Protection Agency-approved 
training programs related to radon for permanent Tribal employees;
    (vii) Payment of general overhead and program administration costs;
    (viii) Development of a data storage and management system for 
information concerning radon occurrence, levels, and programs;
    (ix) Payment of costs of demonstration of radon mitigation methods 
and technologies as approved by EPA, including Tribal and Intertribal 
Consortia participation in the Environmental Protection Agency Home 
Evaluation Program; and
    (x) A toll-free radon hotline to provide information and technical 
assistance.
    (2) In implementing paragraphs (b)(1)(iv) and (ix) of this section, 
a Tribe or Intertribal Consortia should make every effort, consistent 
with the goals and successful operation of the Tribal Indoor Radon 
program, to give preference to low-income persons.



Sec. 35.702  Basis for allotment.

    (a) The Regional Administrator will allot Indoor Radon Grant funds 
based on the criteria in EPA guidance in accordance with section 306(d) 
and (e) of the Toxic Substances Control Act.
    (b) No Tribe or Intertribal Consortium may receive an Indoor Radon 
Grant in excess of 10 percent of the total appropriated amount made 
available each fiscal year.



Sec. 35.703  Eligible recipients.

    (a) The Regional Administrator will treat a Tribe or Intertribal 
Consortium as eligible to apply for an Indoor Radon Grant if the Tribe 
or each member of the Intertribal Consortium:
    (1) Is recognized by the Secretary of the Interior;
    (2) Has an existing government exercising substantial governmental 
duties and powers;
    (3) Has adequate authority to carry out the grant activities; and,
    (4) Is reasonably expected to be capable, in the Regional 
Administrator's judgment, of administering the grant program.

[[Page 462]]

    (b) If the Administrator has previously determined that a Tribe has 
met the prerequisites in paragraphs (a)(1) and (2) of this section for 
another EPA program, the Tribe need provide only that information unique 
to the radon grant program required by paragraphs (a)(3) and (4) of this 
section.



Sec. 35.705  Maximum federal share.

    The Regional Administrator may provide Tribes and Intertribal 
Consortia up to 75 percent of the approved costs for the development and 
implementation of radon program activities incurred by the Tribe in the 
first year of a grant to the Tribe or Consortium; 60 percent in the 
second year; and 50 percent in the third and each year thereafter.



Sec. 35.708  Award limitations.

    (a) The Regional Administrator shall consult with the Tribal agency 
which has the primary responsibility for radon programs as designated by 
the affected Tribe before including Indoor Radon Grant funds in a 
Performance Partnership Grant with another Tribal agency.
    (b) No grant may be made in any fiscal year to a Tribe or 
Intertribal Consortium which did not satisfactorily implement the 
activities funded by the most recent grant awarded to the Tribe or 
Intertribal Consortium for an Indoor Radon program.
    (c) The costs of radon measurement equipment or devices (see 
Sec. 35.820(b)(1)(iv)) and demonstration of radon mitigation, methods, 
and technologies (see Sec. 35.820(b)(1)(ix)) shall not, in aggregate, 
exceed 50 percent of a Tribe's or Intertribal Consortium's radon grant 
award in a fiscal year.
    (d) The costs of general overhead and program administration (see 
Sec. 35.820(b)(1)(vii)) of an indoor radon grant shall not exceed 25 
percent of the amount of a Tribe's or Intertribal Consortium's Indoor 
Radon Grant in a fiscal year.
    (e) A Tribe or Intertribal Consortium may use funds for financial 
assistance to persons only to the extent such assistance is related to 
demonstration projects or the purchase and analysis of radon measurement 
devices.
    (f) Recipients must provide the Regional Administrator all radon-
related information generated in its grant supported activities, 
including the results of radon surveys, mitigation demonstration 
projects, and risk communication studies.
    (g) Recipients must maintain and make available to the public, a 
list of firms and individuals that have received a passing rating under 
the EPA proficiency rating program under section 305(a)(2) of the Act.
    (h) Funds appropriated for section 306 may not be used to cover the 
costs of federal proficiency rating programs under section 305(a)(2) of 
the Act. Funds appropriated for section 306 and grants awarded under 
section 306 may be used to cover the costs of the Tribal proficiency 
rating programs.

           Toxic Substances Compliance Monitoring (Section 28)



Sec. 35.710  Purpose.

    (a) Purpose of section. Sections 35.710 through 35.715 govern Toxic 
Substances Compliance Monitoring grants to Tribes and Intertribal 
Consortia under section 28 of the Toxic Substances Control Act.
    (b) Purpose of program. Toxic Substances Compliance Monitoring 
grants are awarded to establish and operate compliance monitoring 
programs to prevent or eliminate unreasonable risks to health or the 
environment associated with chemical substances or mixtures on Tribal 
lands with respect to which the Administrator is unable or not likely to 
take action for their prevention or elimination.
    (c) Associated program regulations. Refer to 40 CFR parts 700 
through 799 for associated program regulations.



Sec. 35.712  Competitive process.

    EPA will award Toxic Substances Control Act Compliance Monitoring 
grants to Tribes or Intertribal Consortia through a competitive process 
in accordance with national program guidance.



Sec. 35.713  Eligible recipients.

    (a) The Regional Administrator will treat a Tribe or Intertribal 
Consortium

[[Page 463]]

as eligible to apply for a Toxic Substances Compliance Monitoring grant 
if the Tribe or each member of the Intertribal Consortium:
    (1) Is recognized by the Secretary of the Interior;
    (2) Has an existing government exercising substantial governmental 
duties and powers;
    (3) Has adequate authority to carry out the grant activities; and,
    (4) Is reasonably expected to be capable, in the Regional 
Administrator's judgment, of administering the grant program.
    (b) If the Administrator has previously determined that an Indian 
Tribe has met the prerequisites in paragraphs (a)(1) and (2) of this 
section for another EPA program, the Tribe need provide only that 
information unique to the Toxic Substances Compliance Monitoring grant 
program required by paragraphs (a)(3) and (4) of this section.



Sec. 35.715  Maximum federal share.

    The Regional Administrator may provide up to 75 percent of the 
approved work plan costs.



Sec. 35.718  Award limitation.

    If the Toxic Substances Compliance Monitoring grant funds are 
included in a Performance Partnership Grant, the toxic substances 
compliance monitoring work plan commitments must be included in the 
Performance Partnership Grant work plan.

        Hazardous Waste Management Program Grants (P.L. 105-276)



Sec. 35.720  Purpose.

    (a) Purpose of section. Sections 35.720 through 35.725 govern 
hazardous waste program grants to eligible Tribes and Intertribal 
Consortia under the Departments of Veterans Affairs and Housing and 
Urban Development, and Independent Agencies Appropriations Act, 1999, 
P.L. 105-276, 112 Stat. 2461, 2499; 42 U.S.C. 6908a (1998).
    (b) Purpose of program. Tribal hazardous waste program grants are 
awarded to assist Tribes and Intertribal Consortia in developing and 
implementing programs to manage hazardous waste.



Sec. 35.723  Competitive process.

    EPA will award Tribal hazardous waste program grants to Tribes or 
Intertribal Consortia on a competitive basis in accordance with national 
program guidance. After the competitive process is complete, the 
recipient can, at its discretion, accept the award as a Tribal hazardous 
waste program grant or add the funds to a Performance Partnership Grant. 
If the recipient chooses to add the funds to a Performance Partnership 
Grant, the Tribal hazardous waste program work plan commitments must be 
included in the Performance Partnership Grant work plan.



Sec. 35.725  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of the 
approved work plan costs.

         Underground Storage Tanks Program Grants (P.L. 105-276)



Sec. 35.730  Purpose.

    (a) Purpose of section. Section 35.730 through 35.733 govern 
underground storage tank program grants to eligible Tribes and 
Intertribal Consortia under P.L. 105-276.
    (b) Purpose of program. Tribal underground storage tank program 
grants are awarded to assist Tribes and Intertribal Consortia in 
developing and implementing programs to manage underground storage 
tanks.



Sec. 35.731  Eligible recipients.

    Eligible recipients of underground storage tank program grants are 
Tribes and Intertribal Consortia.



Sec. 35.732  Basis for allotment.

    The Administrator allots underground storage tank program grant 
funds to each regional office based on applicable EPA guidance. Regional 
offices award funds to Tribes and Intertribal Consortia based on their 
programmatic needs and applicable EPA guidance.



Sec. 35.735  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of the 
approved work plan costs.

[[Page 464]]

Subparts C-D [Reserved]



 Subpart E--Grants for Construction of Treatment Works--Clean Water Act

    Authority: Secs. 109(b), 201 through 205, 207, 208(d), 210 through 
212, 215 through 217, 304(d)(3), 313, 501, 502, 511, and 516(b) of the 
Clean Water Act, as amended, 33 U.S.C. 1251 et seq.

    Source: 43 FR 44049, Sept. 27, 1978, unless otherwise noted.



Sec. 35.900  Purpose.

    (a) This subpart supplements the EPA general grant regulations and 
procedures (part 30 of this chapter) and establishes policies and 
procedures for grants to assist in the construction of waste treatment 
works in compliance with the Clean Water Act.
    (b) A number of provisions of this subpart which contained 
transition dates preceding October 1, 1978, have been modified to delete 
those dates. However, the earlier requirements remain applicable to 
grants awarded when those provisions were in effect. The transition 
provisions in former Secs. 35.905-4, 35.917, and 35.925-18 remain 
applicable to certain grants awarded through March 31, 1981.
    (c) Technical and guidance publications (MCD series) concerning this 
program which are issued by EPA may be ordered from: General Services 
Administration (8FFS), Centralized Mailing List Services, Building 41, 
Denver Federal Center, Denver, Colo. 80225. In order to expedite 
processing of requests, persons desiring to obtain these publications 
should request a copy of EPA form 7500-21 (the order form listing all 
available publications), from EPA Headquarters, Municipal Construction 
Division (WH-547) or from any regional office of EPA.



Sec. 35.901  Program policy.

    The primary purpose of Federal grant assistance available under this 
subpart is to assist municipalities in meeting enforceable requirements 
of the Act, particularly, applicable national pollution discharge 
elimination system (NPDES) permit requirements. The Regional 
Administrator and States are authorized and encouraged to administer 
this grant program in a manner which will most effectively achieve the 
enforceable requirements of the Act.



Sec. 35.903  Summary of construction grant program.

    (a) The construction of federally financed waste treatment works is 
generally accomplished in three steps: Step 1, facilities plans and 
related elements; step 2, preparation of construction drawings and 
specifications; and step 3, building of a treatment works.
    (b) The Regional Administrator may award grant assistance for a step 
1, step 2, or step 3 project, or, as authorized by Sec. 35.909, for a 
project involving a combination of step 2 and step 3 (step 2=3 grant). 
For a step 1, step 2, or step 3 grant award, a ``project'' may consist 
of an entire step or any ``treatment works segment'' (see Sec. 35.905) 
of construction within a step. In the case of step 2=3 grant awards, a 
project must consist of all associated step 2 and step 3 work; 
segmenting is not permitted.
    (c) Grants are awarded from State allocations (see Sec. 35.910 et 
seq.) under the Act. No grant assistance may be awarded unless priority 
for a project has been determined in accordance with an approved State 
priority system under Sec. 35.915. The State is responsible for 
determining the amount and timing of Federal assistance to each 
municipality for which treatment works funding is needed.
    (d) An applicant will initially define the scope of a project. The 
State may revise this initial project scope when priority for the 
project is established. The Regional Administrator will make the final 
determination of project scope when grant assistance is awarded (see 
Sec. 35.930-4).
    (e) For each proposed grant, an applicant must first submit his 
application to the State agency. The basic grant application must meet 
the requirements for the project in Sec. 35.920-3. If grant assistance 
for subsequent related projects is necessary, the grantee shall make 
submissions in the form of amendments to the basic application. The 
State agency will forward to the appropriate EPA Regional Administrator 
complete project applications or amendments to them for which the

[[Page 465]]

State agency has determined priority. The grant will consist of the 
grant agreement resulting from the basic application and grant 
amendments awarded for subsequent related projects.
    (f) Generally, grant assistance for projects involving step 2 or 3 
will not be awarded unless the Regional Administrator first determines 
that the facilities planning requirements of Secs. 35.917 to 35.917-9 of 
this subpart have been met. Facilities planning may not be initiated 
prior to approval of a step 1 grant or written approval of a ``plan of 
study'' accompanied by a reservation of funds (see Sec. 35.925-18 and 
definition of ``construction'' in Sec. 35.905).
    (g) If initiation of step 1, 2, or 3 construction (see definition of 
``construction'' in Sec. 35.905) occurs before grant award, costs 
incurred before the approved date of initiation of construction will not 
be paid and award will not be made except under the circumstances in 
Sec. 35.925-18.
    (h) The Regional Administrator may not award grant assistance unless 
the application meets the requirements of Sec. 35.920-3 and he has made 
the determinations required by Sec. 35.925 et seq.
    (i) A grant or grant amendment awarded for a project under this 
subpart shall constitute a contractual obligation of the United States 
to pay the Federal share of allowable project costs up to the amount 
approved in the grant agreement (including amendments) in accordance 
with Sec. 35.930-6. However, this obligation is subject to the grantee's 
compliance with the conditions of the grant (see Sec. 35.935 et seq.) 
and other applicable requirements of this subpart.
    (j) Sections 35.937-10, 35.938-6 and 35.945 authorize prompt payment 
for project costs which have been incurred. The initial request for 
payment may cover the Federal share of allowable costs incurred before 
the award except as otherwise provided in Sec. 35.925-18. Before the 
award of such assistance, the applicant must claim in the application 
for grant assistance for that project all allowable costs incurred 
before initiation of project construction. An applicant may make no 
subsequent claim for payment for such costs. The estimated amount of any 
grant or grant amendment, including any prior costs, must be established 
in conjunction with determination of priority for the project. The 
Regional Administrator must determine that the project costs are 
allowable under Sec. 35.940 et seq.
    (k) Under section 204(b) of the Act, the grantee must comply with 
applicable user charge and industrial cost recovery requirements; see 
Secs. 35.925-11, 35.928 et seq., 35.929 et seq., 35.935-13, 35.935-15, 
and appendix B to this subpart.
    (l) The costs of sewage collection systems for new communities, new 
subdivisions, or newly developed urban areas should be included as part 
of the development costs of the new construction in these areas. Under 
section 211 of the Act, such costs will not be allowed under the 
construction grant program; see Sec. 35.925-13.
    (m) The approval of a plan of study for step 1, a facilities plan, 
or award of grant assistance for step 1, step 2, or step 3, or any 
segment thereof, will not constitute a Federal commitment for grant 
assistance for any subequent project.
    (n) Where justified, a deviation from any substatutory requirement 
of this subpart may be granted under Sec. 30.1000 of this chapter.
    (o) The Act requires EPA and the States to provide for, encourage 
and assist public participation in the Construction Grants Program. This 
requirement for public participation applies to the development of the 
State water pollution control strategy, the State project priority 
system, and the State project priority list, under Sec. 35.915; to the 
development of user charge and industrial cost recovery systems, under 
Secs. 35.925.11, 35.928, and 35.929; and to the delegation of 
administrative responsibilities for the Construction Grants Program 
under subpart F of this chapter.
    (p) Requirements regarding the award and administration of 
subagreements are set forth in Secs. 35.935 through 35.939.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 10302, Feb. 16, 1979]



Sec. 35.905  Definitions.

    As used in this subpart, the following words and terms mean:

[[Page 466]]

    Act. The Clean Water Act (33 U.S.C. 1251 et seq., as amended).
    Ad valorem tax. A tax based upon the value of real property.
    Combined sewer. A sewer intended to serve as a sanitary sewer and a 
storm sewer, or as an industrial sewer and a storm sewer.
    Complete waste treatment system. A complete waste treatment system 
consists of all the treatment works necessary to meet the requirements 
of title III of the Act, involved in: (a) The transport of waste waters 
from individual homes or buildings to a plant or facility where 
treatment of the waste water is accomplished; (b) the treatment of the 
waste waters to remove pollutants; and (c) the ultimate disposal, 
including recycling or reuse, of the treated waste waters and residues 
which result from the treatment process. One complete waste treatment 
system would, normally, include one treatment plant or facility, but 
also includes two or more connected or integrated treatment plants or 
facilities.
    Construction. Any one or more of the following: Preliminary planning 
to determine the feasibility of treatment works, engineering, 
architectural, legal, fiscal, or economic investigations or studies, 
surveys, designs, plans, working drawings, specifications, procedures, 
or other necessary actions, erection, building, acquisition, alteration, 
remodeling, improvement, or extension of treatment works, or the 
inspection or supervision of any of the foregoing items. The phrase 
initiation of construction, as used in this subpart means with reference 
to a project for:
    (a) Step 1: The approval of a plan of study (see Secs. 35.920-
3(a)(1) and 35.925-18(a));
    (b) Step 2: The award of a step 2 grant;
    (c) Step 3: Issuance of a notice to proceed under a construction 
contract for any segment of step 3 project work or, if notice to proceed 
is not required, execution of the construction contract.
    Enforceable requirements of the Act. Those conditions or limitations 
of section 402 or 404 permits which, if violated, could result in the 
issuance of a compliance order or initiation of a civil or criminal 
action under section 309 of the Act. If a permit has not been issued, 
the term shall include any requirement which, in the Regional 
Administrator's judgment, would be included in the permit when issued. 
Where no permit applies, the term shall include any requirement which 
the Regional Administrator determines is necessary to meet applicable 
criteria for best practicable waste treatment technology (BPWTT).
    Excessive infiltration/inflow. The quantities of infiltration/inflow 
which can be economically eliminated from a sewerage system by 
rehabilitation, as determined in a cost-effectiveness analysis that 
compares the costs for correcting the infiltration/inflow conditions to 
the total costs for transportation and treatment of the infiltration/
inflow, subject to the provisions in Sec. 35.927.
    Industrial cost recovery. (a) The grantee's recovery from the 
industrial users of a treatment works of the grant amount allocable to 
the treatment of waste from such users under section 204(b) of the Act 
and this subpart.
    (b) The grantee's recovery from the commercial users of an 
individual system of the grant amount allocable to the treatment of 
waste from such users under section 201(h) of the Act and this subpart.
    Industrial cost recovery period. That period during which the grant 
amount allocable to the treatment of wastes from industrial users is 
recovered from the industrial users of such works.
    Industrial user. (a) Any nongovernmental, nonresidential user of a 
publicly owned treatment works which discharges more than the equivalent 
of 25,000 gallons per day (gpd) of sanitary wastes and which is 
identified in the Standard Industrial Classification Manual, 1972, 
Office of Management and Budget, as amended and supplemented under one 
of the following divisions:

    Division A. Agriculture, Forestry, and Fishing.
Division B. Mining.
Division D. Manufacturing.
Division E. Transportation, Communications, Electric, Gas, and Sanitary 
Services.
Division I. Services.

    (1) In determining the amount of a user's discharge for purposes of 
industrial cost recovery, the grantee may

[[Page 467]]

exclude domestic wastes or discharges from sanitary conveniences.
    (2) After applying the sanitary waste exclusion in paragraph (b)(1) 
of this section (if the grantee chooses to do so), dischargers in the 
above divisions that have a volume exceeding 25,000 gpd or the weight of 
biochemical oxygen demand (BOD) or suspended solids (SS) equivalent to 
that weight found in 25,000 gpd of sanitary waste are considered 
industrial users. Sanitary wastes, for purposes of this calculation of 
equivalency, are the wastes discharged from residential users. The 
grantee, with the Regional Administrator's approval, shall define the 
strength of the residential discharges in terms of parameters including, 
as a minimum, BOD and SS per volume of flow.
    (b) Any nongovernmental user of a publicly owned treatment works 
which discharges waste water to the treatment works which contains toxic 
pollutants or poisonous solids, liquids, or gases in sufficient quantity 
either singly or by interaction with other wastes, to contaminate the 
sludge of any municipal systems, or to injure or to interfere with any 
sewage treatment process, or which constitutes a hazard to humans or 
animals, creates a public nuisance, or creates any hazard in or has an 
adverse effect on the waters receiving any discharge from the treatment 
works.
    (c) All commercial users of an individual system constructed with 
grant assistance under section 201(h) of the Act and this subpart. (See 
Sec. 35.918(a)(3).)
    Infiltration. Water other than waste water that enters a sewerage 
system (including sewer service connections) from the ground through 
such means as defective pipes, pipe joints, connections, or manholes. 
Infiltration does not include, and is distinguished from, inflow.
    Infiltration/inflow. The total quantity of water from both 
infiltration and inflow without distinguishing the source.
    Inflow. Water other than waste water that enters a sewerage system 
(including sewer service connections) from sources such as roof leaders, 
cellar drains, yard drains, area drains, foundation drains, drains from 
springs and swampy areas, manhole covers, cross connections between 
storm sewers and sanitary sewers, catch basins, cooling towers, storm 
waters, surface runoff, street wash waters, or drainage. Inflow does not 
include, and is distinguished from, infiltration.
    Interceptor sewer. A sewer whose primary purpose is to transport 
waste waters from collector sewers to a treatment facility.
    Interstate agency. An agency of two or more States established under 
an agreement or compact approved by the Congress, or any other agency of 
two or more States, having substantial powers or duties pertaining to 
the control of water pollution.
    Municipality. A city, town, borough, county, parish, district, 
association, or other public body (including an intermunicipal agency of 
two or more of the foregoing entities) created under State law, or an 
Indian tribe or an authorized Indian tribal organization, having 
jurisdiction over disposal of sewage, industrial wastes, or other waste, 
or a designated and approved management agency under section 208 of the 
Act.
    (a) This definition includes a special district created under State 
law such as a water district, sewer district, sanitary district, utility 
district, drainage district, or similar entity or an integrated waste 
management facility, as defined in section 201(e) of the Act, which has 
as one of its principal responsibilities the treatment, transport, or 
disposal of liquid wastes of the general public in a particular 
geographic area.
    (b) This definition excludes the following:
    (1) Any revenue producing entity which has as its principal 
responsibility an activity other than providing waste water treatment 
services to the general public, such as an airport, turnpike, port 
facility, or other municipal utility.
    (2) Any special district (such as school district or a park 
district) which has the responsibility to provide waste water treatment 
services in support of its principal activity at specific facilities, 
unless the special district has the responsibility under State law to 
provide waste water treatment services to the community surrounding the 
special district's facility and no other municipality, with concurrent 
jurisdiction to

[[Page 468]]

serve the community, serves or intends to serve the special district's 
facility or the surrounding community.
    Operable treatment works. An operable treatment works is a treatment 
works that:
    (a) Upon completion of construction will treat waste water, 
transport waste water to or from treatment, or transport and dispose of 
waste water in a manner which will significantly improve an 
objectionable water quality situation or health hazard, and
    (b) Is a component part of a complete waste treatment system which, 
upon completion of construction for the complete waste treatment system 
(or completion of construction of other treatment works in the system in 
accordance with a schedule approved by the Regional Administrator) will 
comply with all applicable statutory and regulatory requirements.
    Project. The scope of work for which a grant or grant amendment is 
awarded under this subpart. The scope of work is defined as step 1, step 
2, or step 3 of treatment works construction or segments (see definition 
of treatment works segment and Sec. 35.930-4).
    Replacement. Expenditures for obtaining and installing equipment, 
accessories, or appurtenances which are necessary during the useful life 
of the treatment works to maintain the capacity and performance for 
which such works were designed and constructed. The term operation and 
maintenance includes replacement.
    Sanitary sewer. A sewer intended to carry only sanitary or sanitary 
and industrial waste waters from residences, commercial buildings, 
industrial plants, and institutions.
    Sewage collection system. For the purpose of Sec. 35.925-13, each, 
and all, of the common lateral sewers, within a publicly owned treatment 
system, which are primarily installed to receive waste waters directly 
from facilities which convey waste water from individual structures or 
from private property, and which include service connection ``Y'' 
fittings designed for connection with those facilities. The facilities 
which convey waste water from individual structures, from private 
property to the public lateral sewer, or its equivalent, are 
specifically excluded from the definition, with the exception of pumping 
units, and pressurized lines, for individual structures or groups of 
structures when such units are cost effective and are owned and 
maintained by the grantee.
    State. A State, the District of Columbia, the Commonwealth of Puerto 
Rico, the Virgin Islands, Guam, American Samoa, the Trust Territory of 
the Pacific Islands, and the Commonwealth of the Northern Marianas.
    State agency. The State water pollution control agency designated by 
the Governor having responsibility for enforcing State laws relating to 
the abatement of pollution.
    Storm sewer. A sewer intended to carry only storm waters, surface 
runoff, street wash waters, and drainage.
    Treatment works. Any devices and systems for the storage, treatment, 
recycling, and reclamation of municipal sewage, domestic sewage, or 
liquid industrial wastes used to implement section 201 of the Act, or 
necessary to recycle or reuse water at the most economical cost over the 
useful life of the works. These include intercepting sewers, outfall 
sewers, sewage collection systems, individual systems, pumping, power, 
and other equipment and their appurtenances; extensions, improvement, 
remodeling, additions, and alterations thereof; elements essential to 
provide a reliable recycled supply such as standby treatment units and 
clear well facilities; and any works, including site acquisition of the 
land that will be an integral part of the treatment process or is used 
for ultimate disposal of residues resulting from such treatment 
(including land for composting sludge, temporary storage of such 
compost, and land used for the storage of treated waste water in land 
treatment systems before land application); or any other method or 
system for preventing, abating, reducing, storing, treating, separating, 
or disposing of municipal waste or industrial waste, including waste in 
combined storm water and sanitary sewer systems.
    Treatment works segment. A treatment works segment may be any 
portion of an operable treatment works described in an approved 
facilities plan, under Sec. 35.917, which can be identified as a

[[Page 469]]

contract or discrete subitem or subcontract for step 1, 2, or 3 work. 
Completion of construction of a treatment works segment may, but need 
not, result in an operable treatment works.
    Useful life. Estimated period during which a treatment works will be 
operated.
    User charge. A charge levied on users of a treatment works, or that 
portion of the ad valorem taxes paid by a user, for the user's 
proportionate share of the cost of operation and maintenance (including 
replacement) of such works under sections 204(b)(1)(A) and 201(h)(2) of 
the Act and this subpart.
    Value engineering (VE). A specialized cost control technique which 
uses a systematic and creative approach to identify and to focus on 
unnecessarily high cost in a project in order to arrive at a cost saving 
without sacrificing the reliability or efficiency of the project.



Sec. 35.907  Municipal pretreatment program.

    (a) The Regional Administrator is authorized to provide grant 
assistance for the development of an approvable municipal pretreatment 
program as required by part 403 of this chapter in conjunction with a 
step 1, step 2, or step 3 project.
    (b) The grantee is required to develop a pretreatment program if the 
Regional Administrator determines that:
    (1) The municipal treatment works:
    (i) Serves industries subject to proposed or promulgated 
pretreatment standards under section 307(b) of the Act, or
    (ii) Expects to serve industries connecting into the works in 
accordance with section 301(i)(2), where these industries are subject to 
the section 307 (b) or (c) standards: and
    (2) A work plan under a section 208 planning grant has not provided 
for the development of a program approvable under part 403 of this 
chapter.
    (c) A pretreatment program may be required for municipal treatment 
works which receive other nondomestic wastes covered by guidance issued 
under section 304(g) of the Act.
    (d) Development of an approvable municipal pretreatment program 
under part 403 of this chapter shall include:
    (1) An industrial survey as required by Sec. 403.8 of this chapter 
including identification of system users, the character and volume of 
pollutants discharged, type of industry, location (see paragraph (f) of 
this section);
    (2) An evaluation of legal authority, including adequacy of enabling 
legislation, and selection of mechanisms to be used for control and 
enforcement (e.g., ordinance, joint powers agreement, contract);
    (3) An evaluation of financial programs and revenue sources to 
insure adequate funding to carry out the pretreatment program;
    (4) A determination of technical information necessary to support 
development of an industrial waste ordinance or other means of enforcing 
pretreatment standards;
    (5) Design of a monitoring enforcement program;
    (6) A determination of pollutant removals in existing treatment 
works;
    (7) A determination of the treatment works tolerance to pollutants 
which interfere with its operation, sludge use, or disposal;
    (8) A determination of required monitoring equipment for the 
municipal treatment works;
    (9) A determination of municipal facilities to be constructed for 
monitoring or analysis of industrial waste.
    (e) Items (d) (6) and (7) of this section are grant eligible if 
necessary for the proper design or operation of the municipal treatment 
works but are not grant eligible when performed solely for the purpose 
of seeking an allowance for removal of pollutants under Sec. 403.7 of 
this chapter.
    (f) Information concerning the character and volume of pollutants 
discharged by industry to a municipal treatment works is to be provided 
to the municipality by the industrial discharger under paragraph (d)(1) 
of this section. However, the costs of a limited amount of end-of-pipe 
sampling and associated analysis of industrial discharges to a municipal 
treatment works properly allocable to the municipality are allowable if 
the grantee obtains the prior written approval of the Regional 
Administrator; see Sec. 35.940-3(f).

[[Page 470]]

    (g) The pretreatment program developed under paragraph (b) of this 
section is subject to the Regional Administrator's approval under 
Sec. 35.935-19 and must be implemented in accordance with part 403 of 
this chapter.



Sec. 35.908  Innovative and alternative technologies.

    (a) Policy. EPA's policy is to encourage and, where possible, to 
assist in the development of innovative and alternative technologies for 
the construction of waste water treatment works. Such technologies may 
be used in the construction of waste water treatment works under this 
subpart as Sec. 35.915-1, Sec. 35.930-5, appendix E, and this section 
provide. New technology or processes may also be developed or 
demonstrated with the assistance of EPA research or demonstration grants 
awarded under Title I of the Act (see part 40 of this subchapter).
    (b) Funding for innovative and alterative technologies. (1) Projects 
or portions of projects which the Regional Administrator determines meet 
criteria for innovative or alternative technologies in appendix E may 
receive 85-percent grants (see Sec. 35.930-5).
    (i) Only funds from the reserve in Sec. 35.915-1(b) shall be used to 
increase these grants from 75 to 85 percent.
    (ii) Funds for the grant increase shall be distributed according to 
the chronological approval of grants, unless the State and the Regional 
Administrator agree otherwise.
    (iii) The project must be on the fundable portion of the State 
project priority list.
    (iv) If the project is an alternative to conventional treatment 
works for a small community (a municipality with a population of 3,500 
or less or a highly dispersed section of a larger municipality, as 
defined by the Regional Administrator), funds from the reserve in 
Sec. 35.915(e) may be used for the 75 percent portion of the Federal 
grant.
    (v) Only if sewer related costs qualify as alternatives to 
conventional treatment works for small communities are they entitled to 
the grant increase from 75 to 85 percent, either as part of the entire 
treatment works or as components.
    (2) A project or portions of a project may be designated innovative 
or alternative on the basis of a facilities plan or on the basis of 
plans and specifications. A project that has been designated innovative 
on the basis of the facilities plan may lose that designation if plans 
and specifications indicate that it does not meet the appropriate 
criteria stated in section 6 of appendix E.
    (3) Projects or portions of projects that receive step 2, step 3, or 
step 2=3 grant awards after December 27, 1977, from funds allotted or 
reallotted in fiscal year 1978 may also receive the grant increase from 
funds allotted for fiscal year 1979 for eligible portions that meet the 
criteria for alternative technologies in appendix E, if funds are 
available for such purposes under Sec. 35.915-1(b).
    (c) Modification or replacement of innovative and alternative 
projects. The Regional Administrator may award grant assistance to fund 
100 percent of the eligible costs of the modification or replacement of 
any treatment works constructed with 85-percent grant assistance if:
    (1) He determines that:
    (i) The facilities have not met design performance specifications 
(unless such failure is due to any person's negligence);
    (ii) Correction of the failure requires significantly increased 
capital or operating and maintenance expenditures; and
    (iii) Such failure has occurred within the 2-year period following 
final inspection; and
    (2) The replacement or modification project is on the fundable 
portion of the State's priority list.
    (d) Sole source procurement. A determination by the Regional 
Administrator under this section that innovative criteria have been met 
will serve as the basis for sole source procurement (see Sec. 35.936-
13(b)) for step 3, if appropriate, to achieve the objective of 
demonstrating innovative technology.



Sec. 35.909  Step 2=3 grants.

    (a) Authority. The Regional Administrator may award grant assistance 
for a step 2=3 project for the combination of design (step 2) and 
construction

[[Page 471]]

(step 3) of a waste water treatment works.
    (b) Limitations. The Regional Administrator may award step 2=3 grant 
assistance only if he determines that:
    (1) The population is 25,000 or less for the applicant municipality 
(according to most recent U.S. Census information or disaggregations 
thereof);
    (2) The treatment works has an estimated total step 3 construction 
cost of $2 million or less, as determined by the Regional Administrator. 
For any State that the Assistant Administrator for Water and Waste 
Management finds to have unusually high costs of construction, the 
Regional Administrator may make step 2=3 awards where the estimated 
total step 3 construction costs of such treatment works does not exceed 
$3 million. The project must consist of all associated step 2 and step 3 
work; segmenting is not permitted; and
    (3) The fundable range of the approved project priority list 
includes the step 2 and step 3 work.
    (c) Application requirements. Step 2=3 projects are subject to all 
requirements of this subpart that apply to separate step 2 and step 3 
projects except compliance with Sec. 35.920-3(c) is not required before 
grant award. An applicant should only submit a single application.
    (d) Cross references. See Secs. 35.920-3(d) (contents of 
application), 35.930-1(a)(4) (types of projects) and 35.935-4 (grant 
conditions).



Sec. 35.910  Allocation of funds.



Sec. 35.910-1  Allotments.

    Allotments are made on a formula or other basis which Congress 
specifies for each fiscal year. Except where Congress indicates the 
exact amount of funds which each State should receive, computation of a 
State's ratio will be carried out to the nearest ten-thousandth percent 
(0.0001 percent). Unless regulations for allotments for a specific 
fiscal year otherwise specify, alloted amounts will be rounded to the 
nearest thousand dollars.



Sec. 35.910-2  Period of availability; reallotment.

    (a) All sums allotted under Sec. 35.910-5 shall remain available for 
obligation within that State until September 30, 1978. Such funds which 
remain unobligated on October 1, 1978, will be immediately reallotted in 
the same manner as sums under paragraph (b) of this section.
    (b) All other sums allotted to a State under section 207 of the Act 
shall remain available for obligation until the end of 1 year after the 
close of the fiscal year for which the sums were authorized. Sums not 
obligated at the end of that period shall be immediately reallotted on 
the basis of the same ratio as applicable to sums allotted for the then-
current fiscal year, but none of the funds reallotted shall be made 
available to any State which failed to obligate any of the funds being 
reallotted. Any sum made available to a State by reallotment under this 
section shall be in addition to any funds otherwise allotted to such 
State for grants under this subpart during any fiscal year.
    (c) Sums which are deobligated after the reallotment date for those 
funds shall be treated in the same manner as the most recent allotment 
before the deobligation.



Secs. 35.910-3--35.910-4  [Reserved]



Sec. 35.910-5  Additional allotments of previously withheld sums.

    (a) A total sum of $9 billion is allotted from sums authorized, but 
initially unallotted, for fiscal years 1973, 1974, and 1975. This 
additional allotment shall be available for obligation through September 
30, 1977, before reallotment of unobligated sums under Sec. 35.910-2.
    (b) Two-thirds of the sum hereby allotted ($6 billion) represents 
the initially unallotted portion of the amounts authorized for fiscal 
years 1973 and 1974. Therefore, the portion of the additional allotments 
derived from this sum were computed by applying the percentages formerly 
set forth in Sec. 35.910-3(b) to the total sums authorized for fiscal 
years 1973 and 1974 ($11 billion) and subtracting the previously 
allotted sums, formerly set forth in Sec. 35.910-3(c).
    (c) One-third of the sum hereby allotted ($3 billion) represents the 
initially unallotted portion of the amounts authorized for fiscal year 
1975. Therefore,

[[Page 472]]

the portion of the additional allotments derived from this sum were 
computed in a three-step process: First, by applying the percentages set 
forth in Sec. 35.910-4(b) to the total sums authorized for fiscal year 
1975 ($7 billion); then, by making adjustments necessary to assure that 
no State's allotment of such sums fell below its fiscal year 1972 
allotment, under Pub. L. 93-243; and, finally, by subtracting the 
previously allotted sums set forth in Sec. 35.910-4(c).
    (d) Based upon the computations set forth in paragraphs (b) and (c) 
of this section, the total additional sums hereby allotted to the States 
are as follows:

------------------------------------------------------------------------
                         State                              Allotment
------------------------------------------------------------------------
Alabama................................................      $43,975,950
Alaska.................................................       25,250,500
Arizona................................................       18,833,450
Arkansas...............................................       39,822,700
California.............................................      945,776,800
Colorado...............................................       43,113,300
Connecticut............................................      155,091,800
Delaware...............................................       56,394,900
District of Columbia...................................       72,492,000
Florida................................................      345,870,100
Georgia................................................      117,772,800
Hawaii.................................................       51,903,300
Idaho..................................................       19,219,100
Illinois...............................................      571,698,400
Indiana................................................      251,631,800
Iowa...................................................      100,044,900
Kansas.................................................       53,794,200
Kentucky...............................................       90,430,800
Louisiana..............................................       71,712,250
Maine..................................................       78,495,200
Maryland...............................................      297,705,300
Massachusetts..........................................      295,809,100
Michigan...............................................      625,991,900
Minnesota..............................................      172,024,500
Mississippi............................................       38,735,200
Missouri...............................................      157,471,200
Montana................................................       12,378,200
Nebraska...............................................       38,539,500
Nevada.................................................       31,839,800
New Hampshire..........................................       77,199,350
New Jersey.............................................      660,830,500
New Mexico.............................................       15,054,900
New York...............................................    1,046,103,500
North Carolina.........................................      110,345,000
North Dakota...........................................        2,802,000
Ohio...................................................      497,227,400
Oklahoma...............................................       64,298,700
Oregon.................................................       77,582,900
Pennsylvania...........................................      498,984,900
Rhode Island...........................................       45,599,600
South Carolina.........................................       82,341,900
South Dakota...........................................        5,688,000
Tennessee..............................................      107,351,400
Texas..................................................      174,969,850
Utah...................................................       21,376,500
Vermont................................................       22,506,600
Virginia...............................................      251,809,000
Washington.............................................      103,915,600
West Virginia..........................................       59,419,900
Wisconsin..............................................      145,327,400
Wyoming................................................        2,930,650
Guam...................................................        6,399,200
Puerto Rico............................................       84,910,500
Virgin Islands.........................................        7,794,800
American Samoa.........................................          738,200
Trust Territory of Pacific.............................        2,672,800
                                                        ----------------
      Total............................................    9,000,000,000
------------------------------------------------------------------------



Sec. 35.910-6  Fiscal Year 1977 public works allotments.

    (a) The $480 million appropriated by Public Law 94-447, 90 Stat. 
1498, is available for obligation under the authority of title III of 
the Public Works Employment Act of 1976 (Pub. L. 94-369, 90 Stat. 999), 
as provided by section 301 of Public Law 94-369, to carry out title II 
of the Clean Water Act (other than sections 206, 208, and 209). 
Allotments of these funds shall remain available until expended. Amounts 
allotted are in addition to the State's last allotment under the Clean 
Water Act and are to be used for the same purpose.
    (b) The sum of $480 million has been allotted to States identified 
in column 1 of the Table IV of the House Public Works and Transportation 
Committee print numbered 94-25 based on percentages shown in column 5 of 
that table.
    (c) The percentages referred to in paragraph (b) of this section and 
used in computing the State allotments set forth in paragraph (d) of 
this section are as follows:

------------------------------------------------------------------------
                            State                               Percent
------------------------------------------------------------------------
Alabama.....................................................        4.90
Alaska......................................................         .91
Arizona.....................................................        4.69
Arkansas....................................................        3.74
California..................................................           0
Colorado....................................................        3.04
Connecticut.................................................           0
Delaware....................................................           0
District of Columbia........................................           0
Florida.....................................................        2.97
Georgia.....................................................        5.70
Hawaii......................................................         .60
Idaho.......................................................        1.06
Illinois....................................................           0
Indiana.....................................................           0
Iowa........................................................         .37
Kansas......................................................        2.90
Kentucky....................................................        2.70
Louisiana...................................................        3.51
Maine.......................................................           0
Maryland....................................................        1.51
Massachusetts...............................................           0
Michigan....................................................           0
Minnesota...................................................           0
Mississippi.................................................        2.65
Missouri....................................................        1.47
Montana.....................................................         .63
Nebraska....................................................         .77
Nevada......................................................         .13

[[Page 473]]

 
New Hampshire...............................................           0
New Jersey..................................................           0
New Mexico..................................................        1.13
New York....................................................           0
North Carolina..............................................        6.65
North Dakota................................................        1.06
Ohio........................................................           0
Oklahoma....................................................        3.64
Oregon......................................................         .28
Pennsylvania................................................           0
Rhode Island................................................           0
South Carolina..............................................        2.92
South Dakota................................................         .89
Tennessee...................................................        3.01
Texas.......................................................       18.46
Utah........................................................        1.86
Vermont.....................................................           0
Virginia....................................................           0
Washington..................................................        2.49
West Virginia...............................................        7.14
Wisconsin...................................................        2.65
Wyoming.....................................................         .91
Guam........................................................         .30
Puerto Rico.................................................        1.22
Virgin Islands..............................................           0
American Samoa..............................................         .16
Trust Territory of Pacific..................................         .98
                                                             -----------
      Total.................................................      100.00
------------------------------------------------------------------------

    (d) Based on these percentages, the total additional sums hereby 
allotted to the States are as follows:

------------------------------------------------------------------------
                                                            Allotments
                                                            from funds
                          State                            appropriated
                                                           under Public
                                                            Law 94-447
------------------------------------------------------------------------
Alabama.................................................     $23,520.000
Alaska..................................................       4,368,000
Arizona.................................................      22,512,000
Arkansas................................................      17,952,000
California..............................................               0
Colorado................................................      14,592,000
Connecticut.............................................               0
Delaware................................................               0
District of Columbia....................................               0
Florida.................................................      14,256,000
Georgia.................................................      27,360,000
Hawaii..................................................       2,880,000
Idaho...................................................       5,088,000
Illinois................................................               0
Indiana.................................................               0
Iowa....................................................       1,776,000
Kansas..................................................      13,920,000
Kentucky................................................      12,960,000
Louisiana...............................................      16,848,000
Maine...................................................               0
Maryland................................................       7,248,000
Massachusetts...........................................               0
Michigan................................................               0
Minnesota...............................................               0
Mississippi.............................................      12,720,000
Missouri................................................       7,056,000
Montana.................................................       3,024,000
Nebraska................................................       3,696,000
Nevada..................................................         624,000
New Hampshire...........................................               0
New Jersey..............................................               0
New Mexico..............................................       5,424,000
New York................................................               0
North Carolina..........................................      31,920,000
North Dakota............................................       5,088,000
Ohio....................................................               0
Oklahoma................................................      17,472,000
Oregon..................................................       1,344,000
Pennsylvania............................................               0
Rhode Island............................................               0
South Carolina..........................................      14,016,000
South Dakota............................................       4,272,000
Tennessee...............................................      14,448,000
Texas...................................................      88,608,000
Utah....................................................       8,928,000
Vermont.................................................               0
Virginia................................................               0
Washington..............................................      11,952,000
West Virginia...........................................      34,272,000
Wisconsin...............................................      12,720,000
Wyoming.................................................       4,368,000
Guam....................................................       1,440,000
Puerto Rico.............................................       5,856,000
Virgin Islands..........................................               0
American Samoa..........................................         768,000
Trust Territory of Pacific..............................       4,704,000
                                                         ---------------
      Total.............................................     480,000,000
------------------------------------------------------------------------



Sec. 35.910-7  Fiscal Year 1977 Supplemental Appropriations Act allotments.

    (a) Under title I, chapter V of Public Law 95-26, $1 billion is 
available for obligation. The allotments are to be used to carry out 
title II of the Act, excluding sections 206, 208, and 209. These 
allotments are available until expended but must be obligated by May 3, 
1980. After that date, unobligated balances will be subject to 
reallotment under section 205 (b) of the Act (see Sec. 35.910-2 (b)).
    (b) The allotments, computed by proportionally adjusting the table 
on page 16 of Senate Report No. 95-38, are based on the following four 
factors:
    (1) 25 percent on the States estimated 1975 census population;
    (2) 50 percent on each State's partial needs, i.e., on the cost of 
needed facilities in categories I, II, and IVB (secondary treatment, 
more stringent treatment required to meet water quality standards, and 
interceptor sewers and pumping stations), as shown in table IV of the 
May 6, 1975, EPA report, ``cost Estimates for Construction of Publicly 
Owned Waste Water Treatment Facilities--1974 Needs Survey'';
    (3) 25 percent on each State's full needs, i.e., on the cost of 
needed facilities in categories I, II, IIIA, IIIB, IVA, IVB, and V 
(secondary treatment, more

[[Page 474]]

stringent treatment required to meet water quality standards, 
infiltration and inflow correction, major sewer system rehabilitation, 
collector sewers, interceptor sewers, and pumping stations, and 
treatment of combined sewer overflows), as shown in table V of the EPA 
report noted in paragraph (b) (2) of this section; and
    (4) An allotment adjustment to insure that no State receives less 
than the one-third of 1 percent of the total amount allocated.
    (c) Based on paragraph (b) of this section, the total additional 
sums hereby allotted to the States are as follows:

------------------------------------------------------------------------
                          State                              Allotment
------------------------------------------------------------------------
Alabama.................................................     $10,906,000
Alaska..................................................       4,759,000
Arizona.................................................       6,345,000
Arkansas................................................      10,807,000
California..............................................      82,391,000
Colorado................................................       8,031,000
Connecticut.............................................      12,195,000
Delaware................................................       3,966,000
District of Columbia....................................       3,966,000
Florida.................................................      35,792,000
Georgia.................................................      19,929,000
Hawaii..................................................       6,940,000
Idaho...................................................       4,065,000
Illinois................................................      52,151,000
Indiana.................................................      21,713,000
Iowa....................................................      11,005,000
Kansas..................................................      12,195,000
Kentucky................................................      14,971,000
Louisiana...............................................      12,493,000
Maine...................................................       5,453,000
Maryland................................................      37,874,000
Massachusetts...........................................      27,662,000
Michigan................................................      46,897,000
Minnesota...............................................      15,070,000
Mississippi.............................................       7,535,000
Missouri................................................      19,830,000
Montana.................................................       3,272,000
Nebraska................................................       6,147,000
Nevada..................................................       3,272,000
New Hampshire...........................................       6,742,000
New Jersey..............................................      47,591,000
New Mexico..............................................       3,272,000
New York................................................     105,294,000
North Carolina..........................................      20,722,000
North Dakota............................................       3,272,000
Ohio....................................................      55,522,000
Oklahoma................................................      13,484,000
Oregon..................................................       8,328,000
Pennsylvania............................................      46,698,000
Rhode Island............................................       3,966,000
South Carolina..........................................      13,088,000
South Dakota............................................       3,272,000
Tennessee...............................................      14,872,000
Texas...................................................      43,030,000
Utah....................................................       5,057,000
Vermont.................................................       3,272,000
Virginia................................................      22,011,000
Washington..............................................      15,368,000
West Virginia...........................................      21,614,000
Wisconsin...............................................      19,929,000
Wyoming.................................................       3,272,000
Guam....................................................         992,000
Puerto Rico.............................................       8,923,000
Virgin Islands..........................................         496,000
American Samoa..........................................         298,000
Trust Territory of Pacific..............................       1,983,000
                                                         ---------------
      Total.............................................   1,000,000,000
------------------------------------------------------------------------



Sec. 35.910-8  Allotments for fiscal years 1978-1981.

    (a) Unless later legislation requires otherwise, for each of the 
fiscal years 1978-1981, all funds appropriated under authorizations in 
section 207 of the Act will be distributed among the States based on the 
following percentages drawn from table 3 of Committee print numbered 95-
30 of the Committee on Public Works and Transportation of the House of 
Representatives:

------------------------------------------------------------------------
                            State                             Percentage
------------------------------------------------------------------------
Alabama.....................................................      1.2842
Alaska......................................................       .4235
Arizona.....................................................       .7757
Arkansas....................................................       .7513
California..................................................      7.9512
Colorado....................................................       .9187
Connecticut.................................................      1.1072
Delaware....................................................       .3996
District of Columbia........................................       .3193
Florida.....................................................      3.8366
Georgia.....................................................      1.9418
Hawaii......................................................       .7928
Idaho.......................................................       .4952
Illinois....................................................      5.1943
Indiana.....................................................      2.7678
Iowa........................................................      1.2953
Kansas......................................................       .8803
Kentucky....................................................      1.4618
Louisiana...................................................      1.2625
Maine.......................................................       .7495
Maryland....................................................      2.7777
Massachusetts...............................................      2.9542
Michigan....................................................      4.1306
Minnesota...................................................      1.8691
Mississippi.................................................       .9660
Missouri....................................................      2.4957
Montana.....................................................       .3472
Nebraska....................................................       .5505
Nevada......................................................       .4138
New Hampshire...............................................       .8810
New Jersey..................................................      3.5715
New Mexico..................................................       .3819
New York....................................................     10.6209
North Carolina..............................................      1.9808
North Dakota................................................       .3107
Ohio........................................................      6.4655
Oklahoma....................................................       .9279
Oregon......................................................      1.2974
Pennsylvania................................................      4.3616
Rhode Island................................................       .5252
South Carolina..............................................      1.1766
South Dakota................................................       .3733
Tennessee...................................................      1.5486
Texas.......................................................      4.3634
Utah........................................................       .4457
Vermont.....................................................       .3845
Virginia....................................................      1.9602
Washington..................................................      1.7688

[[Page 475]]

 
West Virginia...............................................      1.7903
Wisconsin...................................................      1.9503
Wyoming.....................................................       .3003
Guam........................................................       .0744
Puerto Rico.................................................      1.1734
Virgin Islands..............................................       .0378
American Samoa..............................................       .0616
Trust Territory of Pacific..................................       .1530
                                                             -----------
      Total.................................................      100.00
------------------------------------------------------------------------

    (b) Based on paragraph (a) of this section, and table 4 of the 
committee print, the following authorizations are allotted among the 
States subject to the limitations of paragraph (c) of this section:

------------------------------------------------------------------------
                                                            For each of
                                            For fiscal      the fiscal
                  State                      year 1978      years 1979,
                                                            1980, 1981
------------------------------------------------------------------------
Alabama.................................     $57,789,000     $64,210,000
Alaska..................................      19,057,500      21,175,000
Arizona.................................      34,906,500      38,785,000
Arkansas................................      33,808,500      37,565,000
California..............................     357,804,000     397,560,000
Colorado................................      41,341,500      45,935,000
Connecticut.............................      49,824,000      55,360,000
Delaware................................      17,982,000      19,980,000
District of Columbia....................      14,368,500      15,965,000
Florida.................................     172,647,000     191,830,000
Georgia.................................      87,381,000      97,090,000
Hawaii..................................      35,676,000      39,640,000
Idaho...................................      22,284,000      24,760,000
Illinois................................     233,743,500     259,715,000
Indiana.................................     124,551,000     138,390,000
Iowa....................................      58,288,500      64,765,000
Kansas..................................      39,613,500      44,015,000
Kentucky................................      65,781,000      73,090,000
Louisiana...............................      56,812,500      63,125,000
Maine...................................      33,727,500      37,475,000
Maryland................................     124,996,500     138,885,000
Massachusetts...........................     132,939,000     147,710,000
Michigan................................     185,877,000     206,530,000
Minnesota...............................      84,109,500      93,455,000
Mississippi.............................      43,470,000      48,300,000
Missouri................................     112,306,500     124,785,000
Montana.................................      15,624,000      17,360,000
Nebraska................................      24,772,500      27,525,000
Nevada..................................      18,621,000      20,690,000
New Hampshire...........................      39,645,000      44,050,000
New Jersey..............................     160,717,500     178,575,000
New Mexico..............................      17,185,500      19,095,000
New York................................     477,940,500     531,045,000
North Carolina..........................      89,136,000      99,040,000
North Dakota............................      13,981,500      15,535,000
Ohio....................................     290,947,500     323,275,000
Oklahoma................................      41,755,500      46,395,000
Oregon..................................      58,383,000      64,870,000
Pennsylvania............................     196,272,000     218,080,000
Rhode Island............................      23,634,000      26,260,000
South Carolina..........................      52,947,000      58,830,000
South Dakota............................      16,798,500      18,665,000
Tennessee...............................      69,687,000      77,430,000
Texas...................................     196,353,000     218,170,000
Utah....................................      20,056,500      22,285,000
Vermont.................................      17,302,500      19,225,000
Virginia................................      88,209,000      98,010,000
Washington..............................      79,596,000      88,440,000
West Virginia...........................      80,563,500      89,515,000
Wisconsin...............................      87,763,500      97,515,000
Wyoming.................................      13,513,500      15,015,000
Guam....................................       3,348,000       3,720,000
Puerto Rico.............................      52,803,000      58,670,000
Virgin Islands..........................       1,701,000       1,890,000
American Samoa..........................       2,772,000       3,080,000
Trust Territory of the Pacific Islands..       6,885,000       7,650,000
                                         -------------------------------
      Total.............................   4,500,000,000   5,000,000,000
------------------------------------------------------------------------

    (c) The authorizations in paragraph (b) of this section depend on 
appropriation. Therefore, the Regional Administrator may not obligate 
any portion of any authorization for a fiscal year until a law is 
enacted appropriating part or all of the sums authorized for that fiscal 
year. If sums appropriated are less than the sums authorized for a 
fiscal year, EPA will apply the percentages in paragraph (a) of this 
section to distribute all appropriated sums among the States, and 
promptly will notify each State of its share. The Regional Administrator 
may not obligate more than the State's share of appropriated sums.
    (d) If supplementary funds are appropriated in any fiscal year under 
section 205(e) of the Act to carry out the purposes of this paragraph, 
no State shall receive less than one-half of 1 percent of the total 
allotment among all States for that fiscal year, except that in the case 
of Guam, the Virgin Islands, American Samoa, and the Trust Territories 
not more than thirty-three one-hundredths of 1 percent of the total 
allotment shall be allotted to all four of those jurisdictions. If for 
any fiscal year the amount appropriated to carry out this paragraph is 
less than the full amount needed, the following States will share in any 
funds appropriated for the purposes of this paragraph in the following 
percentages, drawn from the note to table 3 of committee print numbered 
95-30 of the Committee on Public Works and Transportation of the House 
of Representatives:

------------------------------------------------------------------------
                            State                             Percentage
------------------------------------------------------------------------
Alaska......................................................      5.4449
Delaware....................................................      7.1459
District of Columbia........................................     12.8612
Idaho.......................................................       .3416
Montana.....................................................     10.8755

[[Page 476]]

 
Nevada......................................................      6.1352
New Mexico..................................................      8.4057
North Dakota................................................     13.4733
South Dakota................................................      9.0178
Utah........................................................      3.8648
Vermont.....................................................      8.2206
Wyoming.....................................................     14.2135
                                                             -----------
      Total.................................................    100.0000
------------------------------------------------------------------------



Sec. 35.910-9  Allotment of Fiscal Year 1978 appropriation.

    (a) Public Law 95-240 appropriated $4.5 billion. These allotments 
are available until expended but must be obligated by September 30, 
1979. After that date unobligated balances will be reallotted under 
section 205(b) of the Act (see Sec. 35.910-2(b)).
    (b) These sums were allotted to the States as shown in Sec. 35.910-
8(b).

[43 FR 56200, Nov. 30, 1978]



Sec. 35.910-10  Allotment of Fiscal Year 1979 appropriation.

    (a) Title II of Public Law 95-392 appropriated $4.2 billion. These 
allotments are available until expended but must be obligated by 
September 30, 1980. After that date, unobligated balances will be 
reallotted under section 205(b) of the Act (see Sec. 35.910-2(b)).
    (b) The allotments were computed by applying the percentages in 
Sec. 35.910-8(a) and (b) to the funds appropriated for FY 1979 and 
rounding to the nearest hundred dollars.
    (c) The $4.2 billion are allotted as follows:

------------------------------------------------------------------------
                                                            Allotments
                                                            from funds
                          State                            appropriated
                                                           under Pub. L.
                                                              95-392
------------------------------------------------------------------------
Alabama.................................................     $53,189,100
Alaska..................................................      20,709,000
Arizona.................................................      32,128,000
Arkansas................................................      31,117,400
California..............................................     329,323,400
Colorado................................................      38,050,800
Connecticut.............................................      45,858,100
Delaware................................................      20,709,000
District of Columbia....................................      20,709,000
Florida.................................................     158,904,600
Georgia.................................................      80,425,600
Hawaii..................................................      32,836,300
Idaho...................................................      20,709,000
Illinois................................................     215,137,900
Indiana.................................................     114,637,000
Iowa....................................................      53,648,800
Kansas..................................................      36,460,300
Kentucky................................................      60,545,000
Louisiana...............................................      52,290,300
Maine...................................................      31,042,900
Maryland................................................     115,047,000
Massachusetts...........................................     122,357,300
Michigan................................................     171,081,500
Minnesota...............................................      77,414,600
Mississippi.............................................      40,009,900
Missouri................................................     103,367,100
Montana.................................................      20,709,000
Nebraska................................................      22,800,700
Nevada..................................................      20,709,000
New Hampshire...........................................      36,489,300
New Jersey..............................................     147,924,700
New Mexico..............................................      20,709,000
New York................................................     439,897,200
North Carolina..........................................      82,040,900
North Dakota............................................      20,709,000
Ohio....................................................     267,788,600
Oklahoma................................................      38,431,900
Oregon..................................................      53,735,800
Pennsylvania............................................     180,649,100
Rhode Island............................................      21,752,800
South Carolina..........................................      48,732,500
South Dakota............................................      20,709,000
Tennessee...............................................      64,140,000
Texas...................................................     180,723,600
Utah....................................................      20,709,000
Vermont.................................................      20,709,000
Virginia................................................      81,187,700
Washington..............................................      73,260,300
West Virginia...........................................      74,150,800
Wisconsin...............................................      80,777,700
Wyoming.................................................      20,709,000
American Samoa..........................................       2,551,400
Guam....................................................       3,081,500
Northern Mariana Islands................................         570,300
Puerto Rico.............................................      48,600,000
Trust Territory of Pacific..............................       5,766,700
Virgin Islands..........................................       1,565,600
                                                         ---------------
      Total.............................................   4,200,000,000
------------------------------------------------------------------------


[43 FR 56201, Nov. 30, 1978, as amended at 44 FR 37595, June 27, 1979; 
44 FR 39339, July 5, 1979]



Sec. 35.910-11  Allotment of Fiscal Year 1980 appropriation.

    (a) Title II of Public Law 96-103 appropriated $3.4 billion. These 
allotments are available until expended but must be obligated by 
September 30, 1981. After that date, unobligated balances will be 
reallotted under section 205(b) of the Act (see Sec. 35.910-2(b)).
    (b) The allotments were computed by applying the percentages in 
Sec. 35.910-8 (a) and (d) to the funds appropriated for FY 1980 and 
rounding to the nearest hundred dollars.
    (c) The $3.4 billion are alloted as follows:

[[Page 477]]



------------------------------------------------------------------------
                                                            Allotments
                                                            from funds
                          State                            appropriated
                                                           under Pub. L.
                                                              95-372
------------------------------------------------------------------------
Alabama.................................................     $43,057,800
Alaska..................................................      16,764,500
Arizona.................................................      26,008,400
Arkansas................................................      25,190,300
California..............................................     266,595,100
Colorado................................................      30,803,000
Connecticut.............................................      37,123,200
Delaware................................................      16,764,500
District of Columbia....................................      16,764,500
Florida.................................................     128,637,000
Georgia.................................................      65,106,400
Hawaii..................................................      26,581,700
Idaho...................................................      16,764,500
Illinois................................................     174,159,300
Indiana.................................................      92,801,300
Iowa....................................................      43,430,000
Kansas..................................................      29,515,500
Kentucky................................................      49,012,600
Louisiana...............................................      42,330,300
Maine...................................................      25,129,900
Maryland................................................      93,133,300
Massachusetts...........................................      99,051,100
Michigan................................................     138,494,500
Minnesota...............................................      62,668,900
Mississippi.............................................      32,388,900
Missouri................................................      83,678,100
Montana.................................................      16,764,500
Nebraska................................................      18,457,700
Nevada..................................................      16,764,500
New Hampshire...........................................      29,539,000
New Jersey..............................................     119,748,500
New Mexico..............................................      16,764,500
New York................................................     356,107,300
North Carolina..........................................      66,414,100
North Dakota............................................      16,764,500
Ohio....................................................     216,781,200
Oklahoma................................................      31,111,500
Oregon..................................................      43,500,400
Pennsylvania............................................     146,239,700
Rhode Island............................................      17,609,400
South Carolina..........................................      39,450,100
South Dakota............................................      16,764,500
Tennessee...............................................      51,922,900
Texas...................................................     146,300,100
Utah....................................................      16,764,500
Vermont.................................................      16,764,500
Virginia................................................      65,723,400
Washington..............................................      59,305,900
West Virginia...........................................      60,026,800
Wisconsin...............................................      65,391,400
Wyoming.................................................      16,764,500
American Samoa..........................................       2,065,400
Guam....................................................       2,494,500
Puerto Rico.............................................      39,342,800
Trust Terr..............................................       4,667,200
Virgin Islands..........................................       1,267,400
Northern Marianas.......................................         462,700
                                                         ---------------
      Total.............................................   3,400,000,000
------------------------------------------------------------------------


[45 FR 16486, Mar. 14, 1980]



Sec. 35.910-12  Reallotment of deobligated funds of Fiscal Year 1978.

    (a) Of the 4.5 billion appropriated by Public Law 95-240 for Fiscal 
Year 1978, $23,902,130 remained unobligated as of September 30, 1979 and 
thereby became subject to reallotment.
    (b) The reallotment was computed by applying the percentages in 
Sec. 35.910-8(a), adjusted to account for the absence of Ohio and 
readjusted to comply with the requirements of Sec. 35.910(d) 
establishing a minimum allotment of .5 percent.
    (c) These funds are added to the Fiscal Year 1980 allotments and 
will remain available through September 30, 1981 (see Secs. 35.910-2(b) 
and 35.910-8).
    (d) The $23,902,130 is allotted as follows:

------------------------------------------------------------------------
                           State                                Amount
------------------------------------------------------------------------
Alabama....................................................     $324,543
Alaska.....................................................      118,190
Arizona....................................................      196,050
Arkansas...................................................      189,880
California.................................................    2,009,389
Colorado...................................................      232,191
Connecticut................................................      279,813
Delaware...................................................      118,190
District of Columbia.......................................      118,190
Florida....................................................      969,582
Georgia....................................................      490,736
Hawaii.....................................................      200,367
Idaho......................................................      125,148
Illinois...................................................    1,312,681
Indiana....................................................      699,465
Iowa.......................................................      327,345
Kansas.....................................................      222,494
Kentucky...................................................      369,430
Louisiana..................................................      319,073
Maine......................................................      189,428
Maryland...................................................      701,974
Massachusetts..............................................      746,591
Michigan...................................................    1,043,875
Minnesota..................................................      472,360
Mississippi................................................      244,147
Missouri...................................................      630,710
Montana....................................................      118,190
Nebraska...................................................      139,138
Nevada.....................................................      118,190
New Hampshire..............................................      222,653
New Jersey.................................................      902,590
New Mexico.................................................      118,190
New York...................................................    2,684,060
North Carolina.............................................      500,590
North Dakota...............................................      118,190
Oklahoma...................................................      234,496
Oregon.....................................................      327,888
Pennsylvania...............................................    1,102,234
Rhode Island...............................................      132,719
South Carolina.............................................      297,352
South Dakota...............................................      118,190
Tennessee..................................................      391,354
Texas......................................................    1,102,708
Utah.......................................................      118,190
Vermont....................................................      118,190
Virginia...................................................      495,392
Washington.................................................      447,046
West Virginia..............................................      452,493
Wisconsin..................................................      492,883
Wyoming....................................................      118,190
Guam.......................................................       18,805
Puerto Rico................................................      296,561
Virgin Islands.............................................        9,561
American Samoa.............................................       15,573

[[Page 478]]

 
Tr. Terr. of Pac. Islds....................................       35,192
N. Mariana Islds...........................................        3,480
                                                            ------------
      Total................................................   23,902,130
------------------------------------------------------------------------


[45 FR 83497, Dec. 19, 1980. Correctly designated at 46 FR 9947, Jan. 
30, 1981]



Sec. 35.912  Delegation to State agencies.

    EPA's policy is to maximize the use of staff capabilities of State 
agencies. Therefore, in the implementation of the construction grant 
program, optimum use will be made of available State and Federal 
resources. This will eliminate unnecessary duplicative reviews of 
documents required in the processing of construction grant awards. 
Accordingly, the Regional Administrator may enter into a written 
agreement, where appropriate, with a State agency to authorize the State 
agency's certification of the technical or administrative adequacy of 
specifically required documents. The agreement may provide for the 
review and certification of elements of:
    (a) Facilities plans (step 1),
    (b) plans and specifications (step 2),
    (c) operation and maintenance manuals, and
    (d) such other elements as the Regional Administrator determines may 
be appropriately delegated as the program permits and State competence 
allows. The agreement will define requirements which the State will be 
expected to fulfill as part of its general responsibilities for the 
conduct of an effective preaward applicant assistance program; 
compensation for this program is the responsibility of the State. The 
agreement will also define specific duties regarding the review of 
identified documents prerequisite to the receipt of grant awards. A 
certification agreement must provide that an applicant or grantee may 
request review by the Regional Administrator of an adverse 
recommendation by a State agency. Delegation activities are compensable 
by EPA only under section 106 of the Act or subpart F of this part.



Sec. 35.915  State priority system and project priorty list.

    Construction grants will be awarded from allotments according to the 
State priority list, based on the approved State priority system. The 
State priority system and list must be designed to achieve optimum water 
quality management consistent with the goals and requirements of the 
Act.
    (a) State priority system. The State priority system describes the 
methodology used to rate and rank projects that are considered eligible 
for assistance. It also sets forth the administrative, management, and 
public participation procedures required to develop and revise the State 
project priority list. In developing its annual priority list, the State 
must consider the construction grant needs and priorities set forth in 
certified and approved State and areawide water quality management (WQM) 
plans. The State shall hold a public hearing before submission of the 
priority system (or revision thereto). Before the hearing, a fact sheet 
describing the proposed system (including rating and ranking criteria) 
shall be distributed to the public. A summary of State responses to 
public comment and to any public hearing testimony shall be prepared and 
included in the priority system submission. The Regional Administrator 
shall review and approve the State priority system for procedural 
completeness, insuring that it is designed to obtain compliance with the 
enforceable requirements of the Act as defined in Sec. 35.905. The 
Regional Administrator may exempt grants for training facilities under 
section 109(b)(1) of the Act and Sec. 35.930-1(b) from these 
requirements.
    (1) Project rating criteria. (i) The State priority system shall be 
based on the following criteria:
    (A) The severity of the pollution problem;
    (B) The existing population affected;
    (C) The need for preservation of high quality waters; and
    (D) At the State's option, the specific category of need that is 
addressed.
    (ii) The State will have sole authority to determine the priority 
for each category of need. These categories comprise mutually exclusive 
classes of facilities and include:
    (A) Category I--Secondary treatment;

[[Page 479]]

    (B) Category II--More stringent treatment;
    (C) Category IIIA--Infiltration/inflow correction;
    (D) Category IIIB--Sewer system replacement or major rehabilitation;
    (E) Category IVA--New collectors and appurtenances;
    (F) Category IVB--New interceptors and appurtenances; and
    (G) Category V--Correction of combined sewer overflows.
    (iii) Step 2, step 3 and step 2=3 projects utilizing processes and 
techniques meeting the innovative and alternative guidelines in appendix 
E of this part may receive higher priority. Also 100 percent grants for 
projects that modify or replace malfunctioning treatment works 
constructed with an 85 percent grant may receive a higher priority.
    (iv) Other criteria, consistent with these, may be considered 
(including the special needs of small and rural communities). The State 
shall not consider: The project area's development needs not related to 
pollution abatement; the geographical region within the State; or future 
population growth projections.
    (2) Criteria assessment. The State shall have authority to determine 
the relative influence of the rating criteria used for assigning project 
priority. The criteria must be clearly delineated in the approved State 
priority system and applied consistently to all projects. A project on 
the priority list shall generally retain its priority rating until an 
award is made.
    (b) State needs inventory. The State shall maintain a listing, 
including costs by category, of all needed treatment works. The most 
recent needs inventory, prepared in accordance with section 516(b)(1)(B) 
of the Act, should be used for this purpose. This State listing should 
be the same as the needs inventory and fulfills similar requirements in 
the State WQM planning process. The State project priority list shall be 
consistent with the needs inventory.
    (c) State project priority list. The State shall prepare and submit 
annually a ranked priority listing of projects for which Federal 
assistance is expected during the 5-year planning period starting at the 
beginning of the next fiscal year. The list's fundable portion shall 
include those projects planned for award during the first year of the 5-
year period (hereinafter called the funding year). The fundable portion 
shall not exceed the total funds expected to be available during the 
year less all applicable reserves provided in Sec. 35.915-1 (a) through 
(d). The list's planning portion shall include all projects outside the 
fundable portion that may, under anticipated allotment levels, receive 
funding during the 5-year period. The Administrator shall provide annual 
guidance to the States outlining the funding assumptions and other 
criteria useful in developing the 5-year priority list.
    (1) Project priority list development. The development of the 
project priority list shall be consistent with the rating criteria 
established in the approved priority system, in accordance with the 
criteria in paragraph (a)(1) of this section. In ranking projects, 
States must also consider the treatment works and step sequence; the 
allotment deadline; total funds available; and other management criteria 
in the approved State priority system. In developing its annual priority 
list, the State must consider the construction grant needs and 
priorities set forth in certified and approved State and areawide WQM 
plans. The Regional Administrator may request that a State provide 
justification for the rating or ranking established for specific 
project(s).
    (2) Project priority list information. The project priority list 
shall include the information for each project that is set out below for 
projects on the fundable portion of the list. The Administrator shall 
issue specific guidance on these information requirements for the 
planning portion of the list, including phase-in procedures for the 
fiscal year 1979 priority planning process.
    (i) State assigned EPA project number;
    (ii) Legal name and address of applicant;
    (iii) Short project name or description;
    (iv) Priority rating and rank of each project, based on the approved 
priority system;

[[Page 480]]

    (v) Project step number (step 1, 2, 3, or 2=3);
    (vi) Relevant needs authority/facility number(s);
    (vii) NPDES number (as appropriate);
    (viii) Parent project number (i.e., EPA project number for 
predecessor project);
    (ix) For step 2, 3, or 2=3 projects, indication of alternative 
system for small community;
    (x) For step 2, 3, or 2=3 projects, that portion (if any) of 
eligible cost to apply to alternative techniques;
    (xi) For step 2, 3, or 2=3 projects, that portion (if any) of 
eligible cost to apply to innovative processes;
    (xii) For step 3 or 2=3 projects, the eligible costs in categories 
IIIB, IV, and V (see Sec. 35.915(a)(1)(ii));
    (xiii) Total eligible cost;
    (xiv) Date project is expected to be certified by State to EPA for 
funding;
    (xv) Estimated EPA assistance (not including potential grant 
increase from the reserve in Sec. 35.915-1(b)); and
    (xvi) Indication that the project does or does not satisfy the 
enforceable requirements provision, including (as appropriate) funding 
estimates for those portions which do not meet the enforceable 
requirements of the Act.
    (d) Public participation. Before the State submits its annual 
project priority list to the Regional Administrator, the State shall 
insure that adequate public participation (including a public hearing) 
has taken place as required by subpart G of this part. Before the public 
hearing, the State shall circulate information about the priority list 
including a description of each proposed project and a statement 
concerning whether or not it is necessary to meet the enforceable 
requirements of the Act. The information on the proposed priority list 
under paragraph (c)(2) of this section may be used to fulfill these 
requirements. This public hearing may be conducted jointly with any 
regular public meeting of the State agency. The public must receive 
adequate and timely statewide notice of the meeting (including 
publication of the proposed priority list) and attendees at the meeting 
must receive adequate opportunity to express their views concerning the 
list. Any revision of the State priority list (including project bypass 
and the deletion or addition of projects) requires circulation for 
public comment and a public hearing unless the State agency and the 
Regional Administrator determine that the revision is not significant. 
The approved State priority system shall describe the public 
participation policy and procedures applicable to any proposed revision 
to the priority list.
    (e) Submission and review of project priority list. The State shall 
submit the priority list as part of the annual State program plan under 
subpart G of this part. A summary of State agency response to public 
comment and hearing testimony shall be prepared and submitted with the 
priority list. The Regional Administrator will not consider a priority 
list to be final until the public participation requirements are met and 
all information required for each project has been received. The 
Regional Administrator will review the final priority list within 30 
days to insure compliance with the approved State priority system. No 
project may be funded until this review is complete.
    (f) Revision of the project priority list. The State may modify the 
project priority list at any time during the program planning cycle in 
accordance with the public participation requirements and the procedures 
established in the approved State priority system. Any modification 
(other than clerical) to the priority list must be clearly documented 
and promptly reported to the Regional Administrator. As a minimum, each 
State's priority list management procedure must provide for the 
following conditions:
    (1) Project bypass. A State may bypass a project on the fundable 
portion of the list after it gives written notice to the municipality 
and the NPDES authority that the State has determined that the project 
to be bypassed will not be ready to proceed during the funding year. 
Bypassed projects shall retain their relative priority rating for 
consideration in the future year allotments. The highest ranked projects 
on the planning portion of the list will replace bypassed projects. 
Projects considered for funding in accordance with this provision must 
comply with paragraph (g) of this section.

[[Page 481]]

    (2) Additional allotments. If a State receives any additional 
allotment(s), it may fund projects on the planning portion of the 
priority list without further public participation if:
    (i) The projects on the planning portion have met all administrative 
and public participation requirements outlined in the approved State 
priority system; and
    (ii) The projects included within the fundable range are the highest 
priority projects on the planning portion.

If sufficient projects that meet these conditions are not available on 
the planning portion of the list, the State shall follow the procedures 
outlined in paragraph (e) of this section to add projects to the 
fundable portion of the priority list.
    (3) Project removal. A State may remove a project from the priority 
list only if:
    (i) The project has been fully funded;
    (ii) The project is no longer entitled to funding under the approved 
priority system;
    (iii) The Regional Administrator has determined that the project is 
not needed to comply with the enforceable requirements of the Act; or
    (iv) The project is otherwise ineligible.
    (g) Regional Administrator review for compliance with the 
enforceable requirements of the Act. (1) Unless otherwise provided in 
paragraph (g)(2) of this section, the Regional Administrator may propose 
the removal of a specific project or portion thereof from the State 
project priority list during or after the initial review where there is 
reason to believe that it will not result in compliance with the 
enforceable requirements of the Act. Before making a final 
determination, the Regional Administrator will initiate a public hearing 
on this issue. Questioned projects shall not be funded during this 
administrative process. Consideration of grant award will continue for 
those projects not at issue in accordance with all other requirements of 
this section.
    (i) The Regional Administrator shall establish the procedures for 
the public notice and conduct of any such hearing, or, as appropriate, 
the procedures may be adapted from existing agency procedures such as 
Sec. 6.400 or Secs. 123.32 and 123.34 of this chapter. The procedures 
used must conform to minimum Agency guidelines for public hearings under 
part 25 of this chapter.
    (ii) Within 30 days after the date of the hearing, the Regional 
Administrator shall transmit to the appropriate State agency a written 
determination about the questioned projects. If the Regional 
Administrator determines that the project will not result in compliance 
with the enforceable requirements of the Act, the State shall remove the 
project from the priority list and modify the priority list to reflect 
this action. The Regional Administrator's determination will constitute 
the final agency action, unless the State or municipality files a notice 
of appeal under part 30, subpart J of this subchapter.
    (2) The State may use 25 percent of its funds during each fiscal 
year for projects or portions of projects in categories IIIB, IVA, IVB, 
and V (see Sec. 35.915(a)(1)(ii)). These projects must be eligible for 
Federal funding to be included on the priority list. EPA will generally 
not review these projects under paragraph (g)(1) of this section to 
determine if they will result in compliance with the enforceable 
requirements of the Act. The Regional Administrator will, however, 
review all projects or portions thereof which would use funds beyond the 
25-percent level according to the criteria in paragraph (g)(1) of this 
section.
    (h) Regional Administrator review for eligibility. If the Regional 
Administrator determines that a project on the priority list is not 
eligible for assistance under this subpart, the State and municipality 
will be promptly advised and the State will be required to modify its 
priority list accordingly. Elimination of any project from the priority 
list shall be final and conclusive unless the State or municipality 
files a notice of appeal under part 30, subpart J of this subchapter.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 37595, June 27, 1979; 
44 FR 39339, July 5, 1979]

[[Page 482]]



Sec. 35.915-1  Reserves related to the project priority list.

    In developing the fundable portion of the priority list, the State 
shall provide for the establishment of the several reserves required or 
allowed under this section. The State shall submit a statement 
specifying the amount to be set aside for each reserve with the final 
project priority list.
    (a) Reserve for State management assistance grants. The State may 
(but need not) propose that the Regional Administrator set aside from 
each allotment a reserve not to exceed 2 percent or $400,000, whichever 
is greater, for State management assistance grants under subpart F of 
this part. Grants may be made from these funds to cover the reasonable 
costs of administering activities delegated to a State. Funds reserved 
for this purpose that are not obligated by the end of the allotment 
period will be added to the amounts last allotted to a State. These 
funds shall be immediately available for obligation to projects in the 
same manner and to the same extent as the last allotment.
    (b) Reserve for innovative and alternative technology project grant 
increase. Each State shall set aside from its annual allotment a 
specific percentage to increase the Federal share of grant awards from 
75 percent to 85 percent of the eligible cost of construction (under 
Sec. 35.908(b)(1)) for construction projects which use innovative or 
alternative waste water treatment processes and techniques. The set-
aside amount shall be 2 percent of the State's allotment for each of 
fiscal years 1979 and 1980, and 3 percent for fiscal year 1981. Of this 
amount not less than one-half of 1 percent of the State's allotment 
shall be set aside to increase the Federal grant share for projects 
utilizing innovative processes and techniques. Funds reserved under this 
section may be expended on projects for which facilities plans were 
initiated before fiscal year 1979. These funds shall be reallotted if 
not used for this purpose during the allotment period.
    (c) Reserve for grant increases. The State shall set aside not less 
than 5 percent of the total funds available during the priority list 
year for grant increases (including any funds necessary for development 
of municipal pretreatment programs) for projects awarded assistance 
under Sec. 35.935-11. The funds reserved for this purpose shall be 
reallotted if not obligated. Therefore, if they are not needed for grant 
increases they should be released for funding additional projects before 
the reallotment deadline.
    (d) Reserve for step 1 and step 2 projects. The State may (but need 
not) set aside up to 10 percent of the total funds available in order to 
provide grant assistance to step 1 and step 2 projects that may be 
selected for funding after the final submission of the project priority 
list. The funds reserved for this purpose shall be reallotted if not 
obligated. Therefore, they should be released for funding additional 
projects before the reallotment deadline.
    (e) Reserve for alternative systems for small communities. Each 
State with a rural population of 25 percent or more (as determined by 
population estimates of the Bureau of Census) shall set aside an amount 
equal to 4 percent of the State's annual allotment, beginning with the 
fiscal year 1979 allotment. The set-aside amount shall be used for 
funding alternatives to conventional treatment works for small 
communities. The Regional Administrator may authorize, at the request of 
the Governor of any non-rural State, a reserve of up to 4 percent of 
that State's allotment for alternatives to conventional treatment works 
for small communities. For the purposes of this paragraph, the 
definition of a small community is any municipality with a population of 
3,500 or less, or highly dispersed sections of larger municipalities, as 
determined by the Regional Administrator. In States where the reserve is 
mandatory, these funds shall be reallotted if not obligated during the 
allotment period. In States where the reserve is optional, these funds 
should be released for funding projects before the reallotment deadline.



Sec. 35.917  Facilities planning (step 1).

    (a) Sections 35.917 through 35.917-9 establish the requirements for 
facilities plans.
    (b) Facilities planning consists of those necessary plans and 
studies

[[Page 483]]

which directly relate to the construction of treatment works necessary 
to comply with sections 301 and 302 of the Act. Facilities planning will 
demonstrate the need for the proposed facilities. Through a systematic 
evaluation of feasible alternatives, it will also demonstrate that the 
selected alternative is cost-effective, i.e., is the most economical 
means of meeting established effluent and water quality goals while 
recognizing environmental and social considerations. (See appendix A to 
this subpart.)
    (c) EPA requires full compliance with the facilities planning 
provisions of this subpart before award of step 2 or step 3 grant 
assistance. (Facilities planning initiated before May 1, 1974, may be 
accepted under regulations published on February 11, 1974, if the step 2 
or step 3 grant assistance is awarded before April 1, 1980.)
    (d) Grant assistance for step 2 or step 3 may be awarded before 
approval of a facilities plan for the entire geographic area to be 
served by the complete waste treatment system of which the proposed 
treatment works will be an integral part if:
    (1) The Regional Administrator determines that applicable statutory 
requirements have been met (see Secs. 35.925-7 and 35.925-8); that the 
facilities planning related to the proposed step 2 or step 3 project has 
been substantially completed; and that the step 2 or step 3 project for 
which grant assistance is made will not be significantly affected by the 
completion of the facilities plan and will be a component part of the 
complete system; and
    (2) The applicant agrees to complete the facilities plan on a 
schedule the State accepts (subject to the Regional Administrator's 
approval); the schedule shall be inserted as a special condition in the 
grant agreement.
    (e) Facilities planning may not be initiated before award of a step 
1 grant or written approval of a plan of study (see Sec. 35.920-3(a)(1)) 
accompanied by reservation of funds for a step 1 grant (see 
Secs. 35.925-18 and 35.905). Facility planning must be based on load 
allocations, delineation of facility planning areas and population 
projection totals and disaggregations in approved water quality 
management (WQM) plans. (See paragraph 8a(3) of appendix A.) After 
October 1, 1979, the Regional Administrator shall not approve grant 
assistance for any project under this subpart if such facility-related 
information is not available in an approved WQM plan, unless the 
Regional Administrator determines, in writing, based on information 
submitted by the State or the grantee, that the facility-related 
information was not within the scope of the WQM work program, or that 
award of the grant is necessary to achieve water quality goals of the 
Act.
    (f) If the information required as part of a facilities plan has 
been developed separately, the facilities plan should incorporate it by 
reference. Planning which has been previously or collaterally 
accomplished under local, State, or Federal programs will be utilized 
(not duplicated).



Sec. 35.917-1  Content of facilities plan.

    Facilities planning must address each of the following to the extent 
considered appropriate by the Regional Administrator:
    (a) A description of the treatment works for which construction 
drawings and specifications are to be prepared. This description shall 
include preliminary engineering data, cost estimates for design and 
construction of the treatment works, and a schedule for completion of 
design and construction. The preliminary engineering data may include, 
to the extent appropriate, information such as a schematic flow diagram, 
unit processes, design data regarding detention times, flow rates, 
sizing of units, etc.
    (b) A description of the selected complete waste treatment system(s) 
of which the proposed treatment works is a part. The description shall 
cover all elements of the system, from the service area and collection 
sewers, through treatment, to the ultimate discharge of treated waste 
waters and management and disposal of sludge. Planning area maps must 
include major components of existing and proposed treatment works. For 
individual systems, planning area maps must include those individual 
systems which are proposed for funding under Sec. 35.918.
    (c) Infiltration/inflow documentation in accordance with Sec. 35.927 
et seq.

[[Page 484]]

    (d) A cost-effectiveness analysis of alternatives for the treatment 
works and for the complete waste treatment system(s) of which the 
treatment works is a part. The selection of the system(s) and the choice 
of the treatment works for which construction drawings and 
specifications are to be prepared shall be based on the results of the 
cost-effectiveness analysis. (See appendix A to this subpart.) This 
analysis shall include:
    (1) The relationship of the size and capacity of alternative works 
to the needs to be served, including reserve capacity;
    (2) An evaluation of alternative flow and waste reduction measures, 
including nonstructural methods;
    (3) An evaluation of improved effluent quality attainable by 
upgrading the operation and maintenance and efficiency of existing 
facilities as an alternative or supplement to construction of new 
facilities;
    (4) An evaluation of the capability of each alternative to meet 
applicable effluent limitations. (All step 2, step 3, or step 2=3 
projects shall be based on application of best practicable waste 
treatment technology (BPWTT), as a minimum. Where application of BPWTT 
would not meet water quality standards, the facilities plan shall 
provide for attaining such standards. Such provision shall consider the 
alternative of treating combined sewer overflows.);
    (5) An identification of, and provision for, applying BPWTT as 
defined by the Administrator, based on an evaluation of technologies 
included under each of the following waste treatment management 
techniques:
    (i) Biological or physical-chemical treatment and discharge to 
receiving waters;
    (ii) Systems employing the reuse of waste water and recycling of 
pollutants;
    (iii) Land application techniques;
    (iv) Systems including revenue generating applications; and
    (v) Onsite and nonconventional systems;
    (6) An evaluation of the alternative methods for the ultimate 
disposal of treated waste water and sludge materials resulting from the 
treatment process, and a justification for the method(s) chosen;
    (7) An adequate assessment of the expected environmental impact of 
alternatives (including sites) under part 6 of this chapter. This 
assessment shall be revised as necessary to include information 
developed during subsequent project steps;
    (8) For facilities planning begun after September 30, 1978, whether 
or not prepared under a step 1 grant, an analysis of innovative and 
alternative treatment processes and techniques that reclaim and reuse 
water, productively recycle waste water constituents, eliminate the 
discharge of pollutants, recover energy or otherwise achieve the 
benefits described in appendix E. The provisions of this paragraph are 
encouraged in all cases. They are required in facilities planning for 
new treatment works and for treatment works which are being acquired, 
altered, modified, improved, or extended either to handle a significant 
increase in the volume of treated waste or to reduce significantly the 
pollutant discharges from the system. Where certain categories of 
alternative technologies may not be generally applicable because of 
prevailing climatic or geological conditions, a detailed analysis of 
these categories of alternative technologies is not required. However, 
the reason for such a rejection must be fully substantiated in the 
facilities plan;
    (9) For facilities planning begun after September 30, 1978, whether 
or not prepared under a step 1 grant, an analysis of the primary energy 
requirements (operational energy inputs) for each system considered. The 
alternative selected shall propose adoption of measures to reduce energy 
consumption or to increase recovery as long as such measures are cost-
effective. Where processes or techniques are claimed to be innovative 
technology on the basis of energy reduction criterion contained in 
paragraph 6e(2) of appendix E to this subpart, a detailed energy 
analysis shall be included to substantiate the claim to the satisfaction 
of the Regional Administrator.
    (e) An identification of effluent discharge limitations or, where a 
permit has been issued, the NPDES permit

[[Page 485]]

number, and a brief description of how the proposed project(s) will 
result in compliance with the enforceable requirements of the Act.
    (f) Required comments or approvals of relevant State, interstate, 
regional, and local agencies (see Sec. 30.305-8).
    (g) A final responsiveness summary, consistent with 40 CFR 25.8 and 
Sec. 35.917-5.
    (h) A brief statement demonstrating that the authorities who will be 
implementing the plan have the necessary legal, financial, 
institutional, and managerial resources available to insure the 
construction, operation, and maintenance of the proposed treatment 
works.
    (i) A statement specifying that the requirements of the Civil Rights 
Act of 1964 and of part 7 of this chapter have been met.
    (j) For facilities planning begun after September 30, 1978, whether 
or not prepared under a step 1 grant, a description of potential 
opportunities for recreation, open space, and access to bodies of water 
analyzed in planning the proposed treatment works and the recommended 
actions. The facilities plan shall also describe measures taken to 
coordinate with Federal, State, and local recreational programs and with 
recreational elements of applicable approved areawide WQM plans.
    (k) A municipal pretreatment program in accordance with Sec. 35.907,
    (l) An estimate of total project costs and charges to customers, in 
accordance with guidance issued by the Administrator.
    (m) A statement concerning the availability and estimated cost of 
proposed sites.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 10302, Feb. 16, 1979]



Sec. 35.917-2  State responsibilities.

    (a) Facilities planning areas. Facilities planning should focus upon 
the geographic area to be served by the waste treatment system(s) of 
which the proposed treatment works will be an integral part. The 
facilities plan should include the area necessary to prepare an 
environmental assessment and to assure that the most cost-effective 
means of achieving the established water quality goals can be 
implemented. To assure that facilities planning will include the 
appropriate geographic areas, the State shall:
    (1) Delineate, as a preliminary basis for planning, the boundaries 
of the planning areas. In the determination of each area, appropriate 
attention should be given to including the entire area where cost 
savings, other management advantages, or environmental gains may result 
from interconnection of individual waste treatment systems or collective 
management of such systems;
    (2) Include maps, which shall be updated annually, showing the 
identified areas and boundary determinations, as part of the State 
submission under section 106 of the act;
    (3) Consult with local officials in making the area and boundary 
determinations; and
    (4) Where individual systems are likely to be cost-effective, 
delineate a planning area large enough to take advantage of economies of 
scale and efficiencies in planning and management.
    (b) Facilities planning priorities. The State shall establish 
funding priorities for facilities planning in accordance with 
Secs. 35.915 and 35.915-1.



Sec. 35.917-3  Federal assistance.

    (a) Eligibility. Only an applicant which is eligible to receive 
grant assistance for subsequent phases of construction (steps 2 and 3) 
and which has the legal authority to subsequently construct and manage 
the facility may apply for grant assistance for step 1. If the area to 
be covered by the facilities plan includes more than one political 
jurisdiction, a grant may be awarded for a step 1 project, as 
appropriate, to:
    (1) The joint authority representing such jurisdictions, if 
eligible;
    (2) one qualified (lead agency) applicant; or
    (3) two or more eligible jurisdictions. After a waste treatment 
management agency for an area has been designated in accordance with 
section 208(c) of the Act (see subpart G of this part) the Regional 
Administrator shall not make any grant for construction of treatment 
works within the area except to the designated agency.
    (b) Reports. Where a grant has been awarded for facilities planning 
which is

[[Page 486]]

expected to require more than 1 year to complete, the grantee must 
submit a brief progress report to the Regional Administrator at 3-month 
intervals. The progress report shall contain a minimum of narrative 
description, and shall describe progress in completing the approved 
schedule of specific tasks for the project.



Sec. 35.917-4  Planning scope and detail.

    (a) Initially, the geographic scope of step 1 grant assistance shall 
be based on the area delineated by the State under Sec. 35.917-2, 
subject to the Regional Administrator's review. The Regional 
Administrator may make the preliminary delineation of the boundaries of 
the planning area, if the State has not done so, or may revise 
boundaries selected by the locality or State agency, after appropriate 
consultation with State and local officials.
    (b) Facilities planning shall be conducted only to the extent that 
the Regional Administrator finds necessary in order to insure that 
facilities for which grants are awarded will be cost-effective and 
environmentally sound and to permit reasonable evaluation of grant 
applications and subsequent preparation of designs, construction 
drawings, and specifications.



Sec. 35.917-5  Public participation.

    (a) General. Consistent with section 101(e) of the Clean Water Act 
and 40 CFR part 25, EPA, the States, and grantees shall provide for, 
encourage, and assist public participation in the facilities planning 
process and shall provide citizens with information about and 
opportunities to become involved in the following:
    (1) The assessment of local water quality problems and needs;
    (2) The identification and evaluation of locations for waste water 
treatment facilities and of alternative treatment technologies and 
systems including those which recycle and reuse waste water (including 
sludge), use land treatment, reduce waste water volume, and encourage 
multiple use of facilities;
    (3) The evaluation of social, economic, fiscal, and environmental 
impacts; and
    (4) The resolution of other significant facilities planning issues 
and decisions.
    (b) Basic Public Participation Program. Since waste water treatment 
facilities vary in complexity and impact upon the community, these 
public participation requirements institute a two-tier public 
participation program for facilities planning consisting of a Basic 
Public Participation Program, suitable for less complex projects with 
only moderate community impacts, and a Full-Scale Public Participation 
Program, for more complex projects with potentially significant 
community impacts. All facilities planning projects, except those that 
qualify for the Full-Scale Public Participation Program under paragraph 
(c) of this section and those exempt under paragraph (d) of this 
section, require the Basic Public Participation Program. In conducting 
the Basic Public Participation Program, the grantee shall at a minimum:
    (1) Institute, and maintain throughout the facilities planning 
process, a public information program (including the development and use 
of a mailing list of interested and affected members of the public), in 
accordance with 40 CFR 25.4 and Sec. 35.917-5(a).
    (2) Notify and consult with the public, during the preparation of 
the plan of study, about the nature and scope of the proposed facilities 
planning project. EPA encourages the grantee to consult with the public 
in the selection of the professional consulting engineer.
    (3) Include in the plan of study, submitted with the Step 1 grant 
application, a brief outline of the public participation program, noting 
the projected staff and budget resources which will be devoted to public 
participation, a proposed schedule for public participation activities, 
the types of consultation and informational mechanisms that will be 
used, and the segments of the public that the grantee has targeted for 
involvement.
    (4) Submit to EPA, within 45 days after the date of acceptance of 
the Step 1 grant award, a brief Public Participation Work Plan. In 
addition to meeting the requirements of 40 CFR 25.11, the Work Plan 
shall describe the method of coordination between the appropriate Water 
Quality Management public participation program under subpart G of

[[Page 487]]

this part and the grantee's public participation program as required by 
40 CFR 35.917-5(e). The grantee shall distribute the Work Plan, 
accompanied by a fact sheet on the project, to groups and individuals 
who may be interested in or affected by the project. The fact sheet 
shall describe the nature, scope and location of the project; identify 
the consulting engineer and grantee staff contact; and include a 
preliminary estimate of the total costs of the project, including debt 
service and operation and maintenance, and of the resulting charges to 
each affected household.
    (5) Consult with the public, in accordance with 40 CFR 25.4, early 
in the facilities planning process when assessing the existing and 
future situations and identifying and screening alternatives, but before 
selecting alternatives for evaluation according to the Cost-
Effectiveness Analysis Guidelines (see Appendix A, Cost-Effectiveness 
Analysis Guidelines, paragraph 5). After consultating with the public, 
the grantee shall prepare and distribute a responsiveness summary, in 
accordance with 40 CFR 25.8.
    (6) Hold a meeting to consult with the public, in accordance with 40 
CFR 25.6, when alternatives are largely developed but before an 
alternative or plan has been selected and then prepare and distribute a 
responsiveness summary, in accordance with 40 CFR 25.8.
    (7) Hold a public hearing before final adoption of the facilities 
plan, in accordance with 40 CFR 25.5.
    (8) Include in the final facilities plan a final responsiveness 
summary, in accordance with 40 CFR 25.8.
    (c) Full-Scale Public Participation Program. (1) The Regional 
Administrator shall require a Full-Scale Public Participation Program 
for all Step 1 facilities planning projects that fulfill one or more of 
the following three conditions:
    (i) Where EPA prepares or requires the preparation of an 
Environmental Impact Statement during facilities planning under 40 CFR 
part 6; or
    (ii) Where advanced wastewater treatment (AWT) levels, as defined in 
EPA guidance, may be required; or
    (iii) Where the Regional Administrator determines that more active 
public participation in decision-making is needed because of the 
possibility of particularly significant effects on matters of citizen 
concern, as indicated by one or more of the following:
    (A) Significant change in land use or impact on environmentally 
sensitive areas;
    (B) Significant increase in the capacity of treatment facilities or 
interceptors, significant increase in sewered area, or construction of 
wholly new treatment and conveyance systems;
    (C) Substantial total cost to the community or substantial increased 
cost to users (i.e., cost not reimbursed under the grant);
    (D) Significant public controversy;
    (E) Significant impact on local population growth or economic 
growth;
    (F) Substantial opportunity for implementation of innovative or 
alternative wastewater treatment technologies or systems.
    (2) The grantee shall initiate a Full-Scale Public Participation 
Program as soon as the determination in paragraph (c)(1) of this section 
is made. Generally, the determination should be made before or at the 
time of award of the Step 1 grant. However, if the Regional 
Administrator's determination under paragraph (c)(1) of this section to 
require a Full-Scale Public Participation Program occurs after 
initiation of facilities planning because of newly discovered 
circumstances, the grantee shall initiate and expanded public 
participation program at that point. The Regional Administrator shall 
assure that the expanded program is at least as inclusive as a normal 
Full-Scale Public Participation Program, except for constraints imposed 
by facilities planning activities that have already been completed. If 
the project is segmented, the Regional Administrator shall look at the 
project as a whole when considering whether to require a Full-Scale 
Public Participation Program.
    (3) In conducting the Full-Scale Public Participation Program, the 
grantee shall at a minimum:
    (i) Institute and maintain, throughout the facilities planning 
process, a public information program, in accordance with 40 CFR 25.4 
and Sec. 35.917-5(a);
    (ii) Notify and consult with the public, during the development of 
the plan

[[Page 488]]

of study, about the nature and scope of the proposed facilities planning 
project. EPA encourages the grantee to consult with the public in the 
selection of the professional consulting engineer;
    (iii) Include, in the plan of study submitted with the Step 1 grant 
application, brief outline of the public participation program, noting 
the projected staff and budget resources which will be devoted to public 
participation, a proposed schedule for public participation activities, 
types of information and consultation mechanisms that will be used, and 
the segments of the public that the grantee has targeted for 
involvement;
    (iv) Designate or hire a public participation coordinator and 
establish an advisory group, in accordance with 40 CFR 25.7, immediately 
upon acceptance of the Step 1 grant award.
    (v) Submit to EPA, within 45 days after the date of acceptance of 
the step 1 grant award and after consultation with the advisory group, a 
brief Public Participation Work Plan. In addition to meeting the 
requirements of 40 CFR 25.11, the Work Plan shall describe the method 
for coordination between the appropriate Water Quality Management agency 
public participation program under subpart G of this part, and the 
grantee's public participation program as required by 40 CFR 35.917-
5(e). The grantee shall distribute the Work Plan, accompanied by a fact 
sheet on the project, to groups and individuals who may be interested in 
or affected by the project. The fact sheet shall describe the nature, 
scope and location of the project; identify the consulting engineer and 
grantee staff contact; and include a preliminary estimate of the total 
costs of the project, including debt service and operation and 
maintenance, and of the resulting costs to each affected household;
    (vi) Hold a public meeting to consult with the public, in accordance 
with 40 CFR 25.6, early in the facilities planning process when 
assessing the existing and future situations, and identifying and 
screening alternatives, but before selection of alternatives for 
evaluation according to the Cost-Effectiveness Analysis Guidelines (see 
Appendix A, Cost-Effectiveness Analysis Guidelines, paragraph 5). 
Following the public meeting, the grantee shall prepare and distribute a 
responsiveness summary, in accordance with 40 CFR 25.8;
    (vii) Hold a public meeting to consult with the public, in 
accordance with 40 CFR 25.6, when alternatives are largely developed but 
before an alternative or plan has been selected, and then prepare and 
circulate a responsiveness summary, in accordance with 40 CFR 25.8;
    (viii) Hold a public hearing prior to final adoption of the 
facilities plan, in accordance with 40 CFR 25.5. This public hearing may 
be held in conjunction with the public hearing on the draft 
Environmental Impact Statement under 40 CFR part 6.
    (ix) Include, in the final facilities plan, a final responsiveness 
summary, in accordance with 40 CFR 25.8.
    (d) Exemptions from public participation requirements. (1) Upon 
written request of the grantee, the Regional Administrator may exempt 
projects in which only minor upgrading of treatment works or minor sewer 
rehabilitation is anticipated according to the State Project Priority 
List from the requirements of the Basic and Full-Scale Public 
Participation Programs under paragraphs (b) and (c) of this section, 
except for the public hearing and public disclosure of costs. Before 
granting any exemption, the Regional Administrator shall issue a public 
notice of intent to waive the above requirements containing the facts of 
the situation and shall allow 30 days for response. If responses 
indicate that serious local issues exist, then the Regional 
Administrator shall deny the exemption request.
    (2) During the facilities planning process, if the Regional 
Administrator determines that the project no longer meets the exemption 
criteria stated above, the grantee, in consultation with the Regional 
Administrator, shall undertake public participation activities 
commensurate with the appropriate public participation program but 
adjusted for constraints imposed by facilities planning activities that 
have already been completed.
    (3) If a project is segmented, the Regional Administrator shall look 
at the

[[Page 489]]

project as a whole when considering any petition for exemption.
    (e) Relationship between facilities planning and other environmental 
protection programs. Where possible, the grantee shall further the 
integration of facilities planning and related environmental protection 
programs by coordinating the facilities planning public participation 
program with public participation activities carried out under other 
programs. At a minimum, the grantee shall provide for a formal liaison 
between the facilities planning advisory group (or the grantee, where 
there is no advisory group) and any areawide advisory group established 
under subpart G of this part. The Regional Administrator may request 
review of the facilities plan by any appropriate State or areawide 
advisory group in association with the facilities plan review required 
by 40 CFR 35.1522.
    (f) Mid-project evaluation. In accordance with 40 CFR 25.12(a)(2), 
EPA shall, in conjunction with other regular oversight responsibilities, 
conduct a mid-project review of compliance with public participation 
requirements.

[44 FR 10302, Feb. 16, 1979]



Sec. 35.917-6  Acceptance by implementing governmental units.

    A facilities plan submitted for approval shall include adopted 
resolutions or, where applicable, executed agreements of the 
implementing governmental units, including Federal facilities, or 
management agencies which provide for acceptance of the plan, or 
assurances that it will be carried out, and statements of legal 
authority necessary for plan implementation. The Regional Administrator 
may approve any departures from these requirements before the plan is 
submitted.



Sec. 35.917-7  State review and certification of facilities plan.

    Each facilities plan must be submitted to the State agency for 
review. The State must certify that:
    (a) The plan conforms with requirements set forth in this subpart;
    (b) The plan conforms with any existing final basin plans approved 
under section 303(e) of the Act;
    (c) Any concerned 208 planning agency has been given the opportunity 
to comment on the plan; and
    (d) The plan conforms with any waste treatment management plan 
approved under section 208(b) of the Act.



Sec. 35.917-8  Submission and approval of facilities plan.

    The State agency must submit the completed facilities plan for the 
Regional Administrator's approval. Where deficiencies in a facilities 
plan are discovered, the Regional Administrator shall promptly notify 
the State and the grantee or applicant in writing of the nature of such 
deficiencies and of the recommended course of action to correct such 
deficiencies. Approval of a plan of study or a facilities plan will not 
constitute an obligation of the United States for any step 2, step 3, or 
step 2=3 project.



Sec. 35.917-9  Revision or amendment of facilities plan.

    A facilities plan may provide the basis for several subsequent step 
2, step 3, or step 2=3 projects. A facilities plan which has served as 
the basis for the award of a grant for a step 2, step 3, or step 2=3 
project shall be reviewed before the award of any grant for a subsequent 
project involving step 2 or step 3 to determine if substantial changes 
have occurred. If the Regional Administrator decides substantial changes 
have occurred which warrant revision or amendment, the plan shall be 
revised or amended and submitted for review in the same manner specified 
in this subpart.



Sec. 35.918  Individual systems.

    (a) For references to individual systems, the following definitions 
apply:
    (1) Individual systems. Privately owned alternative wastewater 
treatment works (including dual waterless/gray water systems) serving 
one or more principal residences or small commercial establishments 
which are neither connected into nor a part of any conventional 
treatment works. Normally, these are on-site systems with localized 
treatment and disposal of wastewater with minimal or no conveyance of 
untreated waste water.

[[Page 490]]

Limited conveyance of treated or partially treated effluents to further 
treatment or disposal sites can be a function of individual systems 
where cost-effective.
    (2) Principal residence. Normally the voting residence, the 
habitation of the family or household which occupies the space for at 
least 51 percent of the time annually. Second homes, vacation, or 
recreation residences are not included in this definition. A commercial 
establishment with waste water flow equal to or smaller than one user 
equivalent (generally 300 gallons per day dry weather flows) is 
included.
    (3) Small commercial establishments. Private establishments normally 
found in small communities such as restaurants, hotels, stores, filling 
stations, or recreational facilities with dry weather wastewater flows 
less than 25,000 gallons per day. Private, nonprofit entities such as 
churches, schools, hospitals, or charitable organizations are considered 
small commercial establishments. A commercial establishment with waste 
water flow equal to or smaller than one user equivalent (generally 300 
gallons per day dry weather flow) shall be treated as a residence.
    (4) Conventional system. A collection and treatment system 
consisting of minimum size (6 or 8 inch) gravity collector sewers 
normally with manholes, force mains, pumping and lift stations, and 
interceptors leading to a central treatment plant.
    (5) Alternative waste water treatment works. A waste water 
conveyance and/or treatment system other than a conventional system. 
This includes small diameter pressure and vacuum sewers and small 
diameter gravity sewers carrying partially or fully treated waste water.
    (b) A public body otherwise eligible for a grant under Sec. 35.920-1 
is eligible for a grant to construct privately owned treatment works 
serving one or more principal residences or small commercial 
establishments if the requirements of Secs. 35.918-1, 35.918-2, and 
35.918-3 are met.
    (c) All individual systems qualify as alternative systems under 
Sec. 35.908 and are eligible for the 4-percent set-aside (Sec. 35.915-
1(e)) where cost-effective.



Sec. 35.918-1  Additional limitations on awards for individual systems.

    In addition to those limitations set forth in Sec. 35.925, the grant 
applicant shall:
    (a) Certify that the principal residence or small commercial 
establishment was constructed before December 27, 1977, and inhabited or 
in use on or before that date;
    (b) Demonstrate in the facility plan that the solution chosen is 
cost-effective and selected in accordance with the cost-effectiveness 
guidelines for the construction grants program (see appendix A to this 
subpart);
    (c) Apply on behalf of a number of individual units located in the 
facility planning area;
    (d) Certify that public ownership of such works is not feasible and 
list the reasons in support of such certification;
    (e) Certify that such treatment works will be properly installed, 
operated, and maintained and that the public body will be responsible 
for such actions;
    (f) Certify before the step 2 grant award that the project will be 
constructed and an operation and maintenance program established to meet 
local, State, and Federal requirements including those protecting 
present or potential underground potable water sources;
    (g) Establish a system of user charges and industrial cost recovery 
in accordance with Secs. 35.928 et seq., 35.929 et seq., 35.935-13, and 
35.935-15;
    (h) Obtain assurance (such as an easement or covenant running with 
the land), before the step 2 grant award, of unlimited access to each 
individual system at all reasonable times for such purposes as 
inspection, monitoring, construction, maintenance, operation, 
rehabilitation, and replacement. An option will satisfy this requirement 
if it can be exercised no later than the initiation of construction;
    (i) Establish a comprehensive program for regulation and inspection 
of individual systems before EPA approval of the plans and 
specifications. Planning for this comprehensive program shall be 
completed as part of the facility plan. The program shall include as a 
minimum, periodic testing

[[Page 491]]

of water from existing potable water wells in the area. Where a 
substantial number of onsite systems exist, appropriate additional 
monitoring of the aquifer(s) shall be provided;
    (j) Comply with all other applicable limitations and conditions 
which treatment works projects funded under this subpart must meet.



Sec. 35.918-2  Eligible and ineligible costs.

    (a) Only the treatment and treatment residue disposal portions of 
toilets with composting tanks, oil-flush mechanisms or similar in-house 
systems are grant eligible.
    (b) Acquisition of land in which the individual system treatment 
works are located is not grant eligible.
    (c) Commodes, sinks, tubs, drains, and other wastewater generating 
fixtures and associated plumbing are not grant eligible. Modifications 
to homes or commercial establishments are also excluded from grant 
eligibility.
    (d) Only reasonable costs of construction site restoration to 
preconstruction conditions are eligible. Costs of improvement or 
decoration associated with the installation of individual systems are 
not eligible.
    (e) Conveyance pipes from wastewater generating fixtures to the 
treatment unit connection flange or joint are not eligible where the 
conveyance pipes are located on private property.



Sec. 35.918-3  Requirements for discharge of effluents.

    Best practicable waste treatment criteria published by EPA under 
section 304(d)(2) of the Act shall be met for disposal of effluent on or 
into the soil from individual systems. Discharges to surface waters 
shall meet effluent discharge limitations for publicly owned treatment 
works.



Sec. 35.920  Grant application.

    Grant applications will be submitted and evaluated in accordance 
with part 30, subpart B of this chapter.



Sec. 35.920-1  Eligibility.

    Municipalities (see Sec. 35.905), intermunicipal agencies, States, 
or interstate agencies are eligible for grant assistance.



Sec. 35.920-2  Procedure.

    (a) Preapplication assistance, including, where appropriate, a 
preapplication conference, should be requested from the State agency or 
the appropriate EPA Regional Office for each project for which State 
priority has been determined. The State agency must receive an 
application for each proposed treatment works. The basic application 
shall meet the project requirements in Sec. 35.920-3. Submissions 
required for subsequent related projects shall be in the form of 
amendments to the basic application. The grantee shall submit each 
application through the State agency. It must be complete (see 
Sec. 35.920-3), and must relate to a project for which priority has been 
determined under Sec. 35.915. If any information required by 
Sec. 35.920-3 has been furnished with an earlier application, the 
applicant need only incorporate it by reference and, if necessary, 
revise such information using the previously approved application.
    (b) Grant applications (and, for subsequent related projects, 
amendments to them) are considered received by EPA only when complete 
and upon official receipt of the State priority certification document 
(EPA form 5700-28) in the appropriate EPA Regional Office. In a State 
which has been delegated Federal application processing functions under 
Sec. 35.912 or under subpart F of this part, applications are considered 
received by EPA on the date of State certification. Preliminary or 
partial submittals may be made; EPA may conduct preliminary processing 
of these submittals.



Sec. 35.920-3  Contents of application.

    (a) Step 1: Facilities plan and related step 1 elements. An 
application for a grant for step 1 shall include:
    (1) A plan of study presenting--
    (i) The proposed planning area;
    (ii) An identification of the entity or entities that will be 
conducting the planning;
    (iii) The nature and scope of the proposed step 1 project and public 
participation program, including a schedule for the completion of 
specific tasks;
    (iv) An itemized description of the estimated costs for the project; 
and

[[Page 492]]

    (v) Any significant public comments received.
    (2) Proposed subagreements, or an explanation of the intended method 
of awarding subagreements for performance of any substantial portion of 
the project work;
    (3) Required comments or approvals of relevant State, local and 
Federal agencies, including clearinghouse requirements of Office of 
Management and Budget Circular A-95, as revised (see Sec. 30.305 of this 
subchapter).
    (b) Step 2: Preparation of construction drawings and specifications. 
Before the award of a grant or grant amendment for a step 2 project, the 
applicant must furnish the following:
    (1) A facilities plan (including the environmental assessment 
portion in accordance with part 6 of this chapter) in accordance with 
Secs. 35.917 through 35.917-9;
    (2) Adequate information regarding availability of proposed site(s), 
if relevant;
    (3) Proposed subagreements or an explanation of the intended method 
of awarding subagreements for performance of any substantial portion of 
the project work;
    (4) Required comments or approvals of relevant State, local, and 
Federal agencies, including clearinghouse requirements of Office and 
Management and Budget Circular A-95, as revised (see Sec. 30.305 of this 
subchapter);
    (5) A value engineering (VE) commitment in compliance with 
Sec. 35.926(a) for all step 2 grant applications for projects with a 
projected total step 3 grant eligible construction cost of $10 million 
or more excluding the cost for interceptor and collector sewers. For 
those projects requiring VE, the grantee may propose, subject to the 
Regional Administrator's approval, to exclude interceptor and collector 
sewers from the scope of the VE analysis;
    (6) Proposed or executed (as determined appropriate by the Regional 
Administrator) intermunicipal agreements necessary for the construction 
and operation of the proposed treatment works, for any treatment works 
serving two or more municipalities;
    (7) A schedule for initiation and completion of the project work 
(see Sec. 35.935-9), including milestones; and
    (8) Satisfactory evidence of compliance with:
    (i) Sections 35.925-11, 35.929 et seq. and 35.935-13 regarding user 
charges;
    (ii) Sections 35.925-11, 35.928 et seq. and 35.935-15, regarding 
industrial cost recovery, if applicable;
    (iii) Section 35.925-16, regarding costs allocable to Federal 
facilities, if applicable;
    (iv) Section 35.927-4 regarding a sewer use ordinance;
    (v) Section 30.405-2 and part 4 of this chapter, regarding 
compliance with the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, if applicable; and,
    (vi) Other applicable Federal statutory and regulatory requirements 
(see subpart C of part 30 of this chapter).
    (9) After June 30, 1980, for grantees subject to pretreatment 
requirements under Sec. 35.907(b), the items required by 
Sec. 35.907(d)(1), (2), and (4).
    (10) A public participation work plan, in accordance with 
Sec. 35.917-5(g), if the grantee, after consultation with the public and 
its advisory group (if one exists), determines that additional public 
participation activities are necessary.
    (c) Step 3. Building and erection of a treatment works. Prior to the 
award of a grant or grant amendment for a step 3 project, the applicant 
must furnish the following:
    (1) Each of the items specified in paragraph (b) of this section (in 
compliance with paragraph (b)(6) of this section, the final 
intermunicipal agreements must be furnished);
    (2) Construction drawings and specifications suitable for bidding 
purposes (in the case of an application for step 3 assistance solely for 
acquisition of eligible land, the grantee must submit a plat which shows 
the legal description of the property to be acquired, a preliminary 
layout of the distribution and drainage systems, and an explanation of 
the intended method of acquiring the property);
    (3) A schedule for or evidence of compliance with Secs. 35.925-10 
and 35.935-12 concerning an operation and maintenance program, including 
a preliminary plan of operation; and
    (4) After December 31, 1980, the items required by Sec. 35.907(d)(1) 
through (d)(9), as applicable, for grantees subject to

[[Page 493]]

pretreatment requirements under Sec. 35.907(b).
    (5) A public participation work plan, in accordance with 
Sec. 35.917-5(g), if the grantee determines, after consultation with the 
public, that additional public participation activities are necessary.
    (d) Step 2=3. Combination design and construction of a treatment 
works. Before the award of a grant or grant amendment for a step 2=3 
project, the grantee must furnish:
    (1) Each of the items specified in paragraph (b) of this section, 
and (2) a schedule for timely submission of plans and specifications, 
operation and maintenance manual, user charge and industrial cost 
recovery systems, sewer use ordinance, and a preliminary plan of 
operation.
    (e) Training facility project. An application for grant assistance 
for construction and support of a training facility, facilities or 
training programs under section 109(b) of the Act shall include:
    (1) A statement concerning the suitability of the treatment works 
facility, facilities or training programs for training operations and 
maintenance personnel for treatment works throughout one or more States;
    (2) A written commitment from the State agency or agencies to carry 
out at such facility a program of training approved by the Regional 
Administrator;
    (3) An engineering report (required only if a facility is to be 
constructed) including facility design data and cost estimates for 
design and construction;
    (4) A detailed outline of the training programs, including (for 1-, 
3-, and 5-year projections):
    (i) An assessment of need for training,
    (ii) How the need was determined,
    (iii) Who would be trained,
    (iv) What curriculum and materials would be used,
    (v) What type of delivery system will be used to conduct training, 
(i.e., State vocational education system, State environmental agency, 
universities or private organizations),
    (vi) What resources are available for the program,
    (vii) A budget breakdown on the cost of the program, and
    (viii) The relationship of the facility or programs to other 
training programs.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 10304, Feb. 16, 1979; 
44 FR 37595, June 27, 1979; 44 FR 39339, July 5, 1979]



Sec. 35.925  Limitations on award.

    Before awarding initial grant assistance for any project for a 
treatment works through a grant or grant amendment, the Regional 
Administrator shall determine that all of the applicable requirements of 
Sec. 35.920-3 have been met. He shall also determine the following:



Sec. 35.925-1  Facilities planning.

    That, if the award is for step 2, step 3, or step 2=3 grant 
assistance, the facilities planning requirements in Sec. 35.917 et seq. 
have been met.



Sec. 35.925-2  Water quality management plans and agencies.

    That the project is consistent with any applicable water quality 
management (WQM) plan approved under section 208 or section 303(e) of 
the Act; and that the applicant is the wastewater management agency 
designated in any WQM plan certified by the Governor and approved by the 
Regional Administrator.



Sec. 35.925-3  Priority determination.

    That such works are entitled to priority in accordance with 
Sec. 35.915, and that the award of grant assistance for the proposed 
project will not jeopardize the funding of any treatment works of higher 
priority.



Sec. 35.925-4  State allocation.

    That the award of grant assistance for a particular project will not 
cause the total of all grant assistance which applicants within a State 
received, including grant increases, to exceed the total of all 
allotments and reallotments available to the State under Sec. 35.910.



Sec. 35.925-5  Funding and other capabilities.

    That the applicant has:
    (a) Agreed to pay the non-Federal project costs, and

[[Page 494]]

    (b) The legal, institutional, managerial, and financial capability 
to insure adequate construction, operation, and maintenance of the 
treatment works throughout the applicant's jurisdiction. (Also see 
Sec. 30.340-3 of this subchapter.)



Sec. 35.925-6  Permits.

    That the applicant has, or has applied for, the permit or permits as 
required by the national pollutant discharge elimination system (NPDES) 
with respect to existing discharges affected by the proposed project.



Sec. 35.925-7  Design.

    That the treatment works design will be (in the case of projects 
involving step 2) or has been (in the case of projects for step 3) based 
upon:
    (a) Appendix A to this subpart, so that the design, size, and 
capacity of such works are cost-effective and relate directly to the 
needs they serve, including adequate reserve capacity;
    (b) Subject to the limitations set forth in Sec. 35.930-4, 
achievement of applicable effluent limitations established under the 
Act, or BPWTT (see Sec. 35.917-1(d)(5)), including consideration, as 
appropriate, for the application of technology which will provide for 
the reclaiming or recycling of water or otherwise eliminate the 
discharge of pollutants;
    (c) The sewer system evaluation and rehabilitation requirements of 
Sec. 35.927; and
    (d) The value engineering requirements of Sec. 35.926 (b) and (c).



Sec. 35.925-8  Environmental review.

    (a) That, if the award is for step 2, step 3, or step 2=3, the 
requirements of the National Environmental Policy Act of 1969 (42 U.S.C. 
4321 et seq.) applicable to the project step have been met. The grantee 
or grant applicant must prepare an adequate assessment of expected 
environmental impacts, consistent with the requirements of part 6 of 
this chapter, as part of facilities planning, in accordance with 
Sec. 35.917-1(d)(7). The Regional Administrator must insure that an 
environmental impact statement or a negative declaration is prepared in 
accordance with part 6 of this chapter (particularly Secs. 6.108, 6.200, 
6.212, and 6.504) in conjunction with EPA review of a facility plan and 
issued before any award of step 2 or step 3 grant assistance.
    (b) The Regional Administrator may not award step 2 or step 3 grant 
assistance if the grantee has not made, or agreed to make, pertinent 
changes in the project, in accordance with determinations made in a 
negative declaration or environmental impact statement. He may condition 
a grant to ensure that the grantee will comply, or seek to obtain 
compliance, with such environmental review determinations. The 
conditions may address secondary impacts to the extent deemed 
appropriate by the Regional Administrator.



Sec. 35.925-9  Civil rights.

    That if the award of grant assistance is for a project involving 
step 2 or step 3, the applicable requirements of the Civil Rights Act of 
1964 and part 7 of this chapter have been met.



Sec. 35.925-10  Operation and maintenance program.

    If the award of grant assistance is for a step 3 project, that the 
applicant has made satisfactory provision to assure proper and efficient 
operation and maintenance of the treatment works (including the sewer 
system), in accordance with Sec. 35.935-12, and that the State will have 
an effective operation and maintenance monitoring program to assure that 
treatment works assisted under this subpart comply with applicable 
permit and grant conditions.



Sec. 35.925-11  User charges and industrial cost recovery.

    That, in the case of grant assistance for a project involving step 2 
or step 3, the grantee has complied or will comply with the requirements 
for user charge and industrial cost recovery systems. (See Secs. 35.928 
et seq., 35.929 et seq., 35.935-13, and 35.935-15.)
    (a) Grants awarded before July 1, 1979. Grantees must submit a 
schedule of implementation to show that their user charge and industrial 
cost recovery systems will be approved in accordance with the 
requirements of Secs. 35.935-13 and 35.935-15.

[[Page 495]]

    (b) Grants awarded after June 30, 1979. The grantee's user charge 
and industrial cost recovery systems must be approved before the award 
of step 3 grant assistance.
    (c) Letters of intent. In the case of any grant assistance for a 
project involving step 2 or step 3, the applicant must have received 
signed letters of intent from each significant industrial user stating 
that it will pay that portion of the grant amount allocable to the 
treatment of its wastes. Each such letter shall also include a statement 
of the industrial user's intended period of use of the treatment works. 
A significant industrial user is one that will contribute greater than 
10 percent of the design flow or design pollutant loading of the 
treatment works. In addition, the applicant must agree to require all 
industrial users to pay that portion of the grant amount allocable to 
the treatment of wastes from such users.



Sec. 35.925-12  Property.

    That the applicant has demonstrated to the satisfaction of the 
Regional Administrator that it has met or will met the property 
requirements of Sec. 35.935-3.



Sec. 35.925-13  Sewage collection system.

    That, if the project involves sewage collection system work, such 
work (a) is for the replacement or major rehabilitation of an existing 
sewer system under Sec. 35.927-3(a) and is necessary to the total 
integrity and performance of the waste treatment works serving the 
community, or (b) is for a new sewer system in a community in existence 
on October 18, 1972, which has sufficient existing or planned capacity 
to adequately treat such collected sewage. Replacement or major 
rehabilitation of an existing sewer system may be approved only if cost-
effective; the result must be a sewer system design capacity equivalent 
to that of the existing system plus a reasonable amount for future 
growth. For purposes of this section, a community would include any area 
with substantial human habitation on October 18, 1972, as determined by 
an evaluation of each tract (city blocks or parcels of 5 acres or less 
where city blocks do not exist). No award may be made for a new sewer 
system in a community in existence on October 18, 1972, unless the 
Regional Administrator further determines that:
    (a) The bulk (generally two-thirds) of the expected flow (flow from 
existing plus projected future habitations) from the collection system 
will be for waste waters originating from the community (habitations) in 
existence on October 18, 1972;
    (b) The collection system is cost-effective;
    (c) The population density of the area to be served has been 
considered in determining the cost-effectiveness of the proposed 
project:
    (d) The collection system conforms with any approved WQM plan, other 
environmental laws in accordance with Sec. 35.925-14, Executive Orders 
on Wetlands and Floodplains and Agency policy on wetlands and 
agricultural lands; and
    (e) The system would not provide capacity for new habitations or 
other establishments to be located on environmentally sensitive land 
such as wetlands, floodplains or prime agricultural lands. Appropriate 
and effective grant conditions, (e.g., restricting sewer hook-up) should 
be used where necessary to protect these resources from new development.



Sec. 35.925-14  Compliance with environmental laws.

    That the treatment works will comply with all pertinent requirements 
of applicable Federal, State and local environmental laws and 
regulations. (See Sec. 30.101 and subpart C of part 30 of this chapter 
and the Clean Air Act.)



Sec. 35.925-15  Treatment of industrial wastes.

    That the allowable project costs do not include (a) costs of 
interceptor or collector lines constructed exclusively, or almost 
exclusively, to serve industrial sources or (b) costs allocable to the 
treatment for control or removal of pollutants in wastewater introduced 
into the treatment works by industrial sources, unless the applicant is 
required to remove such pollutants introduced from nonindustrial 
sources. The project must be included in a complete waste treatment 
system, a principal purpose of which project (as defined by

[[Page 496]]

the Regional Administrator; see Secs. 35.903 (d) and 35.905) and system 
is the treatment of domestic wastes of the entire community, area, 
region or the district concerned. See the pretreatment regulations in 
part 403 of this chapter and Sec. 35.907.

[44 FR 39340, July 5, 1979]



Sec. 35.925-16  Federal activities.

    That the allowable step 2 or step 3 project costs do not include the 
proportional costs allocable to the treatment of wastes from major 
activities of the Federal Government. A ``major activity'' includes any 
Federal facility which contributes either (a) 250,000 gallons or more 
per day or (b) 5 percent or more of the total design flow of waste 
treatment works, whichever is less.



Sec. 35.925-17  Retained amounts for reconstruction and expansion.

    That the allowable project costs have been reduced by an amount 
equal to the unexpended balance of the amounts the applicant retains for 
future reconstruction and expansion under Sec. 35.928-2(a)(2)(ii), 
together with interest earned.



Sec. 35.925-18  Limitation upon project costs incurred prior to award.

    That project construction has not been initiated before the approved 
date of initiation of construction (as defined in Sec. 35.905), unless 
otherwise provided in this section.
    (a) Step 1 or Step 2: No grant assistance is authorized for step 1 
or step 2 project work performed before award of a step 1 or step 2 
grant. However, payment is authorized, in conjunction with the first 
award of grant assistance, for all preaward allowable project costs in 
the following cases:
    (1) Step 1 work begun after the date of approval by the Regional 
Administrator of a plan of study, if the State requests and the Regional 
Administrator has reserved funds for the step 1 grant. However, the step 
1 grant must be applied for and awarded within the allotment period of 
the reserved funds.
    (2) Step 1 or step 2 work begun after October 31, 1974, but before 
June 30, 1975, in accordance with an approved plan of study or an 
approved facilities plan, as appropriate, but only if a grant is awarded 
before April 1, 1981.
    (3) Step 1 or step 2 work begun before November 1, 1974, but only if 
a grant is awarded before April 1, 1980.
    (b) Step 3: Except as otherwise provided in this paragraph, no grant 
assistance for a step 3 project may be awarded unless the award precedes 
initiation of the step 3 construction. Preliminary step 3 work, such as 
advance acquisition of major equipment items requiring long lead times, 
acquisition of eligible land or of an option for the purchase of 
eligible land, or advance construction of minor portions of treatment 
works, including associated engineering costs, in emergencies or 
instances where delay could result in significant cost increases, may be 
approved by the Regional Administrator after completion of environmental 
review, but only if (1) the applicant submits a written and adequately 
substantiated request for approval and (2) written approval by the 
Regional Administrator is obtained before initiation of the advance 
acquisition or advance construction. (In the case of authorization for 
acquisition of eligible land, the applicant must submit a plat which 
shows the legal description of the property to be acquired, a 
preliminary layout of the distribution and drainage systems, and an 
explanation of the intended method of acquiring the property.)
    (c) The approval of a plan of study, a facilities plan, or advance 
acquisition of equipment or advance construction will not constitute a 
commitment for approval of grant assistance for a subsequent treatment 
works project, but will allow payment for the previously approved costs 
as allowable project costs upon subsequent award of grant assistance, if 
requested before grant award (see Sec. 35.945(a)). In instances where 
such approval is obtained, the applicant proceeds at its own risk, since 
payment for such costs cannot be made unless grant assistance for the 
project is awarded.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 39340, July 5, 1979]

[[Page 497]]



Sec. 35.925-19  [Reserved]



Sec. 35.925-20  Procurement.

    That the applicant has complied or will comply with the applicable 
provisions of Secs. 35.935 through 35.939 with respect to procurement 
actions taken before the award of step 1, 2, or 3 grant assistance, such 
as submission of the information required under Sec. 35.937-6.



Sec. 35.925-21  Storm sewers.

    That, under section 211(c) of the Act, the allowable project costs 
do not include costs of treatment works for control of pollutant 
discharges from a separate storm sewer system (as defined in 
Sec. 35.905).



Sec. 35.926  Value engineering (VE).

    (a) Value engineering proposal. All step 2 grant applications for 
projects having a projected total step 3 grant eligible cost of $10 
million or more, excluding the cost for interceptor and collector 
sewers, will contain a VE commitment. The VE proposal submitted during 
step 2 must contain enough information to determine the adequacy of the 
VE effort and the justification of the proposed VE fee. Essential 
information shall include:
    (1) Scope of VE analysis;
    (2) VE team and VE coordinator (names and background);
    (3) Level of VE effort;
    (4) VE cost estimate;
    (5) VE schedule in relation to project schedule (including 
completion of VE analysis and submittal of VE summary reports).
    (b) Value engineering analysis. For projects subject to the VE 
requirements of paragraph (a) of this section, a VE analysis of the 
project design shall be performed. When the VE analysis is completed, a 
preliminary report summarizing the VE findings and a final report 
describing implementation of the VE recommendations must be submitted to 
the project officer on a schedule approved by him.
    (c) Implementation. For those projects for which a VE analysis has 
been performed in accordance with paragraph (b) of this section, VE 
recommendations shall be implemented to the maximum extent feasible, as 
determined by the grantee, subject to the approval of the EPA project 
officer. Rejection of any recommendation shall be on the basis of cost-
effectiveness, reliability, extent of project delays, and other factors 
that may be critical to the treatment processes and the environmental 
impact of the project.



Sec. 35.927  Sewer system evaluation and rehabilitation.

    (a) All applicants for step 2 or step 3 grant assistance must 
demonstrate to the Regional Administrator's satisfaction that each sewer 
system discharging into the treatment works project for which grant 
application is made is not or will not be subject to excessive 
infiltration/inflow. A determination of whether excessive infiltration/
inflow exists may take into account, in addition to flow and related 
data, other significant factors such as cost-effectiveness (including 
the cost of substantial treatment works construction delay, see appendix 
A to this subpart), public health emergencies, the effects of plant 
bypassing or overloading, or relevant economic or environmental factors.
    (b) A sewer system evaluation will generally be used to determine 
whether or not excessive infiltration/inflow exists. It will consist of:
    (1) Certification by the State agency, as appropriate; and, when 
necessary,
    (2) An infiltration/inflow analysis; and, if appropriate,
    (3) A sewer system evaluation survey and, if appropriate, a program, 
including an estimate of costs, for rehabilitation of the sewer system 
to eliminate excessive infiltration/inflow identified in the sewer 
system evaluation. Information submitted to the Regional Administrator 
for such determination should be the minimum necessary to enable him to 
make a judgment.
    (c) Guidelines on sewer system evaluation published by the 
Administrator provide further advisory information (see Sec. 35.900(c)). 
Also see Secs. 35.925-7(c) and 35.935-16.



Sec. 35.927-1  Infiltration/inflow analysis.

    (a) The infiltration/inflow analysis shall demonstrate the 
nonexistence or possible existence of excessive infiltration/inflow in 
the sewer system. The analysis should identify the presence,

[[Page 498]]

flow rate, and type of infiltration/inflow conditions which exist in the 
sewer system.
    (b) For determination of the possible existence of excessive 
infiltration/inflow, the analysis shall include an estimate of the cost 
of eliminating the infiltration/inflow conditions. These costs shall be 
compared with estimated total costs for transportation and treatment of 
the infiltration/inflow. Cost-effectiveness analysis guidelines 
(Appendix A to this subpart) should be consulted with respect to this 
determination.
    (c) If the infiltration/inflow analysis demonstrates the existence 
or possible existence of excessive infiltration/inflow a detailed plan 
for a sewer system evaluation survey shall be included in the analysis. 
The plan shall outline the tasks to be performed in the survey and their 
estimated costs.



Sec. 35.927-2  Sewer system evaluation survey.

    (a) The sewer system evaluation survey shall identify the location, 
estimated flow rate, method of rehabilitation and cost of rehabilitation 
versus cost of transportation and treatment for each defined source of 
infiltration/inflow.
    (b) A report shall summarize the results of the sewer system 
evaluation survey. In addition, the report shall include:
    (1) A justification for each sewer section cleaned and internally 
inspected.
    (2) A proposed rehabilitation program for the sewer system to 
eliminate all defined excessive infiltration/inflow.



Sec. 35.927-3  Rehabilitation.

    (a) Subject to State concurrence, the Regional Administrator may 
authorize the grantee to perform minor rehabilitation concurrently with 
the sewer system evaluation survey in any step under a grant if 
sufficient funding can be made available and there is no adverse 
environmental impact. However, minor rehabilitation work in excess of 
$10,000 which is not accomplished with force account labor (see 
Sec. 35.936-14(a)(2)), must be procured through formal advertising in 
compliance with the applicable requirements of Secs. 35.938 et seq. and 
35.939, the statutory requirements referenced in Secs. 30.415 through 
30.415-4 of this subchapter, and other applicable provisions of part 30.
    (b) Grant assistance for a step 3 project segment consisting of 
major rehabilitation work may be awarded concurrently with step 2 work 
for the design of the new treatment works.
    (c) The scope of each treatment works project defined within the 
facilities plan as being required for implementation of the plan, and 
for which Federal assistance will be requested, shall define (1) any 
necessary new treatment works construction and (2) any rehabilitation 
work (including replacement) determined by the sewer system evaluation 
to be necessary for the elimination of excessive infiltration/inflow. 
However, rehabilitation which should be a part of the applicant's normal 
operation and maintenance responsibilities shall not be included within 
the scope of a step 3 treatment works project.
    (d) Only rehabilitation of the grantee's sewage collection system is 
eligible for grant assistance. However, the grantee's costs of 
rehabilitation beyond ``Y'' fittings (see definition of ``sewage 
collection system'' in Sec. 35.905) may be treated on an incremental 
cost basis.



Sec. 35.927-4  Sewer use ordinance.

    Each applicant for grant assistance for a step 2 or step 3 project 
shall demonstrate to the satisfaction of the Regional Administrator that 
a sewer use ordinance or other legally binding requirement will be 
enacted and enforced in each jurisdiction served by the treatment works 
project before the completion of construction. The ordinance shall 
prohibit any new connections from inflow sources into the sanitary sewer 
portions of the sewer system and shall insure that new sewers and 
connections to the sewer system are properly designed and constructed.



Sec. 35.927-5  Project procedures.

    (a) State certification. The State agency may (but need not) certify 
that excessive infiltration/inflow does or does not exist. The Regional 
Administrator will determine that excessive infiltration/inflow does not 
exist on the basis of State certification, if he finds that

[[Page 499]]

the State had adequately established the basis for its certification 
through submission of only the minimum information necessary to enable a 
judgment to be made. Such information could include a preliminary review 
by the applicant or State, for example, of such parameters as per capita 
design flow, ratio of flow to design flow, flow records or flow 
estimates, bypasses or overflows, or summary analysis of hydrological, 
geographical, and geological conditions, but this review would not 
usually be equivalent to a complete infiltration/inflow analysis. State 
certification must be on a project-by-project basis. If, on the basis of 
State certification, the Regional Administrator determines that the 
treatment works is or may be subject to excessive infiltration/inflow, 
no step 2 or step 3 grant assistance may be awarded except as paragraph 
(c) of this section provides.
    (b) Pre-award sewer system evaluation. Generally, except as 
otherwise provided in paragraph (c) of this section, an adequate sewer 
system evaluation, consisting of a sewer system analysis and, if 
required, an evaluation survey, is an essential element of step 1 
facilities planning. It is a prerequisite to the award of step 2 or 3 
grant assistance. If the Regional Administrator determines through State 
Certification or an infiltration/inflow analysis that excessive 
infiltration/inflow does not exist, step 2 or 3 grant assistance may be 
awarded. If on the basis of State certification or the infiltration/
inflow analysis, the Regional Administrator determines that possible 
excessive infiltration/inflow exists, an adequate sewer system 
evaluation survey and, if required, a rehabilitation program must be 
furnished, except as set forth in paragraph (c) of this section before 
grant assistance for step 2 or 3 can be awarded. A step 1 grant may be 
awarded for the completion of this segment of step 1 work, and, upon 
completion of step 1, grant assistance for a step 2 or 3 project (for 
which priority has been determined under Sec. 35.915) may be awarded.
    (c) Exception. If the Regional Administrator determines that the 
treatment works would be regarded (in the absence of an acceptable 
program of correction) as being subject to excessive infiltration/
inflow, grant assistance may be awarded if the applicant establishes to 
the Regional Administrator's satisfaction that the treatment works 
project for which grant application is made will not be significantly 
changed by any subsequent rehabilitation program or will be a component 
part of any rehabilitated system. The applicant must agree to complete 
the sewer system evaluation and any resulting rehabilitation on an 
implementation schedule the State accepts (subject to approval by the 
Regional Administrator), which shall be inserted as a special condition 
in the grant agreement.
    (d) Regional Administrator review. Municipalities may submit through 
the State agency the infiltration/inflow analysis and, when appropriate, 
the sewer system evaluation survey to the Regional Administrator for his 
review at any time before application for a treatment works grant. Based 
on such a review, the Regional Administrator shall provide the 
municipality with a written response indicating either his concurrence 
or nonconcurrence. In order for the survey to be an allowable cost, the 
Regional Administrator must concur with the sewer system evaluation 
survey plan before the work is performed.



Sec. 35.928  Requirements for an industrial cost recovery system.

    (a) The Regional Administrator shall approve the grantee's 
industrial cost recovery system and the grantee shall implement and 
maintain it in accordance with Sec. 35.935-15 and the requirements in 
Secs. 35.928-1 through 35.928-4. The grantee shall be subject to the 
noncompliance provisions of Sec. 35.965 for failure to comply.
    (b) Grantees awarded step 3 grants under regulations promulgated on 
February 11, 1974, or grantees who obtained approval of their industrial 
cost recovery systems before April 25, 1978, may amend their systems to 
correspond to the definition of industrial users in Sec. 35.905 or to 
provide for systemwide industrial cost recovery under Sec. 35.928-1(g).

[[Page 500]]



Sec. 35.928-1  Approval of the industrial cost recovery system.

    The Regional Administrator may approve an industrial cost recovery 
system if it meets the following requirements:
    (a) General. Each industrial user of the treatment works shall pay 
an annual amount equal to its share of the total amount of the step 1, 
2, and 3 grants and any grant amendments awarded under this subpart, 
divided by the number of years in the recovery period. An industrial 
user's share shall be based on factors which significantly influence the 
cost of the treatment works. Volume of flow shall be a factor in 
determining an industrial user's share in all industrial cost recovery 
systems; other factors shall include strength, volume, and delivery flow 
rate characteristics, if necessary, to insure that all industrial users 
of the treatment works pay a proportionate distribution of the grant 
assistance allocable to industrial use.
    (b) Industrial cost recovery period. The industrial cost recovery 
period shall be equal to 30 years or to the useful life of the treatment 
works, whichever is less.
    (c) Frequency of payment. Except as provided in Sec. 35.928-3, each 
industrial user shall pay not less often than annually. The first 
payment by an industrial user shall be made not later than 1 year after 
the user begins use of the treatment works.
    (d) Reserve capacity. If an industrial user enters into an agreement 
with the grantee to reserve a certain capacity in the treatment works, 
the user's industrial cost recovery payments shall be based on the total 
reserved capacity in relation to the design capacity of the treatment 
works. If the discharge of an industrial user exceeds the reserved 
capacity in volume, strength or delivery flow rate characteristics, the 
user's industrial cost recovery payment shall be increased to reflect 
the actual use. If there is no reserve capacity agreement between the 
industrial user and the grantee, and a substantial change in the 
strength, volume, or delivery flow rate characteristics of an industrial 
user's discharge share occurs, the user's share shall be adjusted 
proportionately.
    (e) Upgrading and expansion. (1) If the treatment works are 
upgraded, each existing industrial user's share shall be adjusted 
proportionately.
    (2) If the treatment works are expanded, each industrial user's 
share shall be adjusted proportionately, except that a user with 
reserved capacity under paragraph (d) of this section shall incur no 
additional industrial cost recovery charges unless the user's actual use 
exceeded its reserved capacity.
    (f) [Reserved]
    (g) Collection of industrial cost recovery payments. Industrial cost 
recovery payments may be collected on a systemwide or on a project-by-
project basis. The total amount collected from all industrial users on a 
systemwide basis shall equal the sum of the amounts which would be 
collected on a project-by-project basis.
    (h) Adoption of system. One or more municipal legislative enactments 
or other appropriate authority must incorporate the industrial cost 
recovery system. If the project is a regional treatment works accepting 
waste-waters from other municipalities, the subscribers receiving waste 
treatment services from the grantee shall adopt industrial cost recovery 
systems in accordance with section 204(b)(1)(B) of the Act with 
Secs. 35.928 through 35.928-4. These industrial cost recovery systems 
shall also be incorporated in appropriate municipal legislative 
enactments or other appropriate authority of all municipalities 
contributing wastes to the treatment works. The public shall be 
consulted prior to adoption of the industrial cost recovery system, in 
accordance with 40 CFR part 25.
    (i) Inconsistent agreements. The grantee may have pre-existing 
agreements which address (1) the reservation of capacity in the 
grantee's treatment works or (2) the charges to be collected by the 
grantee in providing waste water treatment services or reserving 
capacity. The industrial cost recovery system shall take precedence over 
any terms or conditions of agreements or contracts between the grantee 
and industrial users which are inconsistent with the requirements of 
section

[[Page 501]]

204(b)(1)(B) of the Act and these industrial cost recovery regulations.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 10304, Feb. 16, 1979; 
44 FR 39340, July 5, 1979]



Sec. 35.928-2  Use of industrial cost recovery payments.

    (a) The grantee shall use industrial cost recovery payments received 
from industrial users as follows:
    (1) The grantee shall return 50 percent of the amounts received from 
industrial users, together with any interest earned, to the U.S. 
Treasury annually.
    (2) The grantee shall retain 50 percent of the amount recovered from 
industrial users.
    (i) A portion of the amounts which the grantee retains may be used 
to pay the incremental costs of administration of the industrial cost 
recovery system. The incremental costs of administration are those costs 
remaining after deducting all costs reasonably attributable to the 
administration of the user charge system. The incremental costs shall be 
segregated from all other administrative costs of the grantee.
    (ii) A minimum of 80 percent of the amounts the grantee retains 
after paying the incremental costs of administration, together with any 
interest earned, shall be used for the allowable costs (see Sec. 35.940) 
of any expansion, upgrading or reconstruction of treatment works 
necessary to meet the requirements of the Act. The grantee shall obtain 
the written approval of the Regional Administrator before the commitment 
of the amounts retained for expansion, upgrading, or reconstruction.
    (iii) The remainder of the amounts retained by the grantee may be 
used as the grantee sees fit, except that they may not be used for 
construction of industrial pretreatment facilities or rebates to 
industrial users for costs incurred in complying with user charge or 
industrial cost recovery requirements.
    (b) Pending the use of industrial cost recovery payments, as 
described in paragraph (a) of this section, the grantee shall:
    (1) Invest the amounts received in obligations of the U.S. 
Government or in obligations guaranteed as to principal and interest by 
the U.S. Government or any agency thereof; or
    (2) Deposit the amounts received in accounts fully collateralized by 
obligations of the U.S. Government or any agency thereof.



Sec. 35.928-3  Implementation of the industrial cost recovery system.

    (a) When a grantee's industrial cost recovery system is approved, 
implementation of the approved system shall become a condition of the 
grant.
    (b) The grantee shall maintain all records that are necessary to 
document compliance with these regulations.



Sec. 35.928-4  Moratorium on industrial cost recovery payments.

    (a) EPA does not require that industrial users defined in paragraphs 
(a) and (b) of the definition in Sec. 35.905 pay industrial cost 
recovery for charges incurred during the period after December 31, 1977, 
and before July 1, 1979. Any industrial cost recovery charges incurred 
for accounting periods or portions of periods ending before January 1, 
1978, shall be paid by industrial users. These funds are to be used as 
described in Sec. 35.928-2.
    (b) Grantees may either defer industrial cost recovery payments, or 
require industrial users as defined in paragraphs (a) and (b) of the 
definition in Sec. 35.905 to pay industrial cost recovery payments for 
the period after December 31, 1977, and before July 1, 1979. If grantees 
require payment, the amount held by the municipality for eventual return 
to the U.S. Treasury under Sec. 35.928-2(a)(1) shall be invested as 
required under Sec. 35.928-2(b) until EPA advises how such sums shall be 
distributed. Grantees shall implement or continue operating approved 
industrial cost recovery systems and maintain their activities of 
monitoring flows, calculating payments due, and submitting bills to 
industrial users informing them of their current or deferred obligation.
    (c) Industrial users as defined in paragraphs (a) and (b) of the 
definition in Sec. 35.905 who are served by grantees who defer payment 
during the 18-month period ending June 30, 1979, shall make industrial 
cost recovery

[[Page 502]]

payments for that period in a lump sum by June 30, 1980, or in equal 
annual installments prorated from July 1, 1979, over the remaining 
industrial cost recovery period.



Sec. 35.929  Requirements for user charge system.

    The Regional Administrator shall approve the grantee's user charge 
system and the grantee shall implement and maintain it in accordance 
with Sec. 35.935-13 and the requirements in Secs. 35.929-1 through 
35.929-3. The grantee shall be subject to the noncompliance provisions 
of Sec. 35.965 for failure to comply.



Sec. 35.929-1  Approval of the user charge system.

    The Regional Administrator may approve a user charge system based on 
either actual use under paragraph (a) of this section or ad valorem 
taxes under paragraph (b) of this section. The general requirements in 
Secs. 35.929-2 and 35.929-3 must also be satisfied.
    (a) User charge system based on actual use. A grantee's user charge 
system based on actual use (or estimated use) of waste water treatment 
services may be approved if each user (or user class) pays its 
proportionate share of operation and maintenance (including replacement) 
costs of treatment works within the grantee's service area, based on the 
user's proportionate contribution to the total waste water loading from 
all users (or user classes). To insure a proportional distribution of 
operation and maintenance costs to each user (or user class), the user's 
contribution shall be based on factors such as strength, volume, and 
delivery flow rate characteristics.
    (b) User charges based on ad valorem taxes. A grantee's user charge 
system (or the user charge system of a subscriber, i.e., a constituent 
community receiving waste treatment services from the grantee) which is 
based on ad valorem taxes may be approved if it meets the requirements 
of paragraphs (b)(1) through (b)(7) of this section. If the Regional 
Administrator determines that the grantee did not have a dedicated ad 
valorem tax system on December 27, 1977, meeting the requirements of 
paragraphs (b)(1) through (b)(3) of this section, the grantee shall 
develop a user charge system based on actual use under Sec. 35.929-1(a).
    (1) The grantee (or subscriber) had in existence on December 27, 
1977, a system of ad valorem taxes which collected revenues to pay the 
cost of operation and maintenance of waste water treatment works within 
the grantee's service area and has continued to use that system.
    (2) The grantee (or subscriber) has not previously obtained approval 
of a user charge system on actual use.
    (3) The system of ad valorem taxes in existence on December 27, 
1977, was dedicated ad valorem tax system.
    (i) A grantee's system will be considered to be dedicated if the 
Regional Administrator determines that the system meets all of the 
following criteria:
    (A) The ad valorem tax system provided for a separate tax rate or 
for the allocation of a portion of the taxes collected for payment of 
the grantee's costs of waste water treatment services;
    (B) The grantee's budgeting and accounting procedures assured that a 
specified portion of the tax funds would be used for the payment of the 
costs of operation and maintenance;
    (C) The ad valorem tax system collected tax funds for the costs of 
waste water treatment services which could not be or historically were 
not used for other purposes; and
    (D) The authority responsible for the operation and maintenance of 
the treatment works established the budget for the costs of operation 
and maintenance and used those specified amounts solely to pay the costs 
of operation and maintenance.
    (ii) A subscriber's system based on ad valorem taxes will be 
considered to be dedicated if a contractual agreement or a charter 
established under State law existed on December 27, 1977, which required 
the subscriber to pay its share of the cost of waste water treatment 
services.
    (4) A user charge system funded by dedicated ad valorem taxes shall 
establish, as a minimum, the classes of users listed below:
    (i) Residential users, including single-family and multifamily 
dwellings,

[[Page 503]]

and small nonresidential users, including nonresidential commercial and 
industrial users which introduce no more than the equivalent of 25,000 
gallons per day of domestic sanitary wastes to the treatment works:
    (ii) Industrial and commercial users;
    (A) Any nongovernmental user of publicly owned treatment works which 
discharges more than 25,000 gallons per day (gpd) of sanitary waste; or 
a volume of process waste, or combined process and sanitary waste, 
equivalent to 25,000 gpd of sanitary waste. The grantee, with the 
Regional Administrator's approval, shall define the strength of the 
residential discharges in terms of parameters including, as a minimum, 
biochemical oxygen demand (BOD) and suspended solids (SS) per volume of 
flow. Dischargers with a volume exceeding 25,000 gpd or the weight of 
BOD or SS equivalent to that weight found in 25,000 gpd of sanitary 
waste are considered industrial users.
    (B) Any nongovernmental user of a publicly owned treatment works 
which discharges wastewater to the treatment works which contains toxic 
pollutants or poisonous solids, liquids, or gases in sufficient quantity 
either singly or by interaction with other wastes, to contaminate the 
sludge of any municipal systems, or to injure or to interfere with any 
sewage treatment process, or which constitutes a hazard to humans or 
animals, creates a public nuisance, or creates any hazard in or has an 
adverse effect on the waters receiving any discharge from the treatment 
works.
    (iii) Users which pay no ad valorem taxes or receive substantial 
credits in paying such taxes, such as tax exempt institutions or 
governmental users, but excluding publicly owned facilities performing 
local governmental functions (e.g., city office building, police 
station, school) which discharge solely domestic wastes.
    (5) The grantee must be prepared to demonstrate for the Regional 
Administrator's approval that its system of evaluating the volume, 
strength, and characteristics of the discharges from users or categories 
of users classified within the subclass of small nonresidential users is 
sufficient to assure that such users or the average users in such 
categories do not discharge either toxic pollutants or more than the 
equivalent of 25,000 gallons per day of domestic wastewater.
    (6) The ad valorem user charge system shall distribute the operation 
and maintenance costs for all treatment works in the grantee's 
jurisdiction to the residential and small nonresidential user class, in 
proportion to the use of the treatment works by this class. The 
proportional allocation of costs for this user class shall take into 
account the total waste water loading of the treatment works, the 
constituent elements of the wastes from this user class and other 
appropriate factors. The grantee may assess one ad valorem tax rate to 
this entire class of users or, if permitted under State law, the grantee 
may assess different ad valorem tax rates for the subclass of 
residential users and the subclass of small nonresidential users 
provided the operation and maintenance costs are distributed 
proportionately between these subclasses.
    (7) Each member of the industrial and commercial user class 
described under paragraph (b)(4)(ii) of this section and of the user 
class which pays no ad valorem taxes or receives substantial credits in 
paying such taxes described under paragraph (b)(4)(iii) of this section 
shall pay its share of the costs of operation and maintenance of the 
treatment works based upon charges for actual use (in accordance with 
Sec. 35.929-1(a)). The grantee may use its ad valorem tax system to 
collect, in whole or in part, those charges from members of the 
industrial and large commercial class where the following conditions are 
met:
    (i) A portion or all of the ad valorem tax rate assessed to members 
of this class has been specifically designated to pay the costs of 
operation and maintenance of the treatment works, and that designated 
rate is uniformly applied to all members of this class:
    (ii) A system of surcharges and rebates is employed to adjust the 
revenues from the ad valorem taxes collected from each user of this 
class in accordance with the rate designated under paragraph (b)(7)(i) 
of this section, such that each member of the class pays a total charge 
for its share

[[Page 504]]

of the costs of operation and maintenance based upon actual use.



Sec. 35.929-2  General requirements for all user charge systems.

    User charge systems based on actual use under Sec. 35.929-1(a) or ad 
valorem taxes under Sec. 35.929-1(b) shall also meet the following 
requirements:
    (a) Initial basis for operation and maintenance charges. For the 
first year of operation, operation and maintenance charges shall be 
based upon past experience for existing treatment works or some other 
method that can be demonstrated to be appropriate to the level and type 
of services provided.
    (b) Biennial review of operation and maintenance charges. The 
grantee shall review not less often than every 2 years the waste water 
contribution of users and user classes, the total costs of operation and 
maintenance of the treatment works, and its approved user charge system. 
The grantee shall revise the charges for users or user classes to 
accomplish the following:
    (1) Maintain the proportionate distribution of operation and 
maintenance costs among users and user classes as required herein;
    (2) Generate sufficient revenue to pay the total operation and 
maintenance costs necessary to the proper operation and maintenance 
(including replacement) of the treatment works; and
    (3) Apply excess revenues collected from a class of users to the 
costs of operation and maintenance attributable to that class for the 
next year and adjust the rate accordingly.
    (c) Toxic pollutants. The user charge system shall provide that each 
user which discharges any toxic pollutants which cause an increase in 
the cost of managing the effluent or the sludge of the grantee's 
treatment works shall pay for such increased costs.
    (d) Charges for operation and maintenance for extraneous flows. The 
user charge system shall provide that the costs of operation and 
maintenance for all flow not directly attributable to users (i.e., 
infiltration/inflow) be distributed among all users of the grantee's 
treatment works system based upon either of the following:
    (1) In the same manner that it distributes the costs of operation 
and maintenance among users (or user classes) for their actual use, or
    (2) Under a system which uses one of any combination of the 
following factors on a reasonable basis:
    (i) Flow volume of the users;
    (ii) Land area of the users;
    (iii) Number of hookups or discharges to the users;
    (iv) Property valuation of the users, if the grantee has a user 
charge system based on ad valorem taxes approved under Sec. 35.929-1(b).
    (e) Adoption of system. One or more municipal legislative enactments 
or other appropriate authority must incorporate the user charge system. 
If the project is a regional treatment system accepting wastewaters from 
other municipalities, the subscribers receiving waste treatment services 
from the grantee shall adopt user charge systems in accordance with 
section 204(b)(1)(A) of the Act and Secs. 35.929 through 35.929-3. These 
user charge systems shall also be incorporated in appropriate municipal 
legislative enactments or other appropriate authority of all 
municipalities contributing wastes to the treatment works. The public 
shall be informed of the financial impact of the user charge system on 
them and shall be consulted prior to adoption of the system, in 
accordance with 40 CFR part 25.
    (f) Notification. Each user charge system must provide that each 
user be notified, at least annually, in conjunction with a regular bill, 
of the rate and that portion of the user charges or ad valorem taxes 
which are attributable to waste water treatment services.
    (g) Inconsistent agreements. The grantee may have preexisting 
agreements which address: (1) The reservation of capacity in the 
grantee's treatment works, or (2) the charges to be collected by the 
grantee in providing wastewater treatment services or reserving 
capacity. The user charge system shall take precedence over any terms or 
conditions of agreements or contracts between the grantee and users 
(including industrial users, special districts, other municipalities, or 
Federal agencies or installations) which are inconsistent with the 
requirements of section 204(b)(1)(A) of the Act and these regulations.

[[Page 505]]

    (h) Costs of pretreatment program. A user charge system submitted by 
a municipality with an approved pretreatment program shall provide that 
the costs necessary to carry out the program and to comply with any 
applicable requirements of section 405 of the Act and related 
regulations are included within the costs of operation and maintenance 
of the system and paid through user charges, or are paid in whole or in 
part by other identified sources of funds.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 10304, Feb. 16, 1979]



Sec. 35.929-3  Implementation of the user charge system.

    (a) When a grantee's user charge system is approved, implementation 
of the approved system shall become a condition of the grant.
    (b) The grantee shall maintain such records as are necessary to 
document compliance with these regulations.
    (c) Appendix B to this subpart contains guidelines with illustrative 
examples of acceptable user charge systems.
    (d) The Regional Administrator may review, no more often than 
annually, a grantee's user charge system to assure that it continues to 
meet the requirements of Secs. 35.929-1 through 35.929-3.



Sec. 35.930  Award of grant assistance.

    The Regional Administrator's approval of an application or 
amendments to it through execution of a grant agreement (including a 
grant amendment), in accordance with Sec. 30.345 of this subchapter, 
shall constitute a contractual obligation of the United States for the 
payment of the Federal share of the allowable project costs, as 
determined by the Regional Administrator. Information about the approved 
project furnished in accordance with Sec. 35.920-3 shall be considered 
incorporated in the grant agreement.



Sec. 35.930-1  Types of projects.

    (a) The Regional Administrator is authorized to award grant 
assistance for the following types of projects:
    (1) Step 1. A facilities plan and related step 1 elements (see 
Sec. 35.920-3(b)), if he determines that the applicant has submitted the 
items required under Sec. 35.920-3(a); (In the case of grant assistance 
awarded solely for the acquisition of eligible land, the following 
provisions are deferred until the award of the ensuing step 3 assistance 
for the construction of facilities: Secs. 35.925-10, 35.925-11(b), 
35.935-12 (c) and (d), 35.935-13(c), 35.935-15(c), 35.935-16 (b) and 
(c));
    (2) Step 2. Construction drawings and specifications, if he 
determines that the applicant has submitted the items required under 
Sec. 35.920-3(b);
    (3) Step 3. Building and erection of a treatment works, if he 
determines that the applicant has submitted the items required under 
Sec. 35.920-3(c); or
    (4) Steps 2 and 3. A combination of design (step 2) and construction 
(step 3) for a treatment works (see Sec. 35.909) if he determines that 
the applicant has submitted the items required under Sec. 35.920-3(d).
    (b) The Regional Administrator may award Federal assistance by a 
grant or grant amendment from any allotment or reallotment available to 
a State under Sec. 35.910 et seq. for payment of 100 percent of the cost 
of construction of treatment works required to train and upgrade waste 
treatment works operations and maintenance personnel and for the costs 
of other operator training programs. Costs of other operator training 
programs are limited to mobile training units, classroom rental, 
specialized instructors, and instructional material, under section 
109(b) of the Act.
    (1) Where a grant is made to serve two or more States, the 
Administrator is authorized to make an additional grant for a 
supplemental facility in each State. The Federal funds awarded under 
section 109(b) to any State for all training facilities or programs 
shall not exceed $500,000.
    (2) Any grantee who received a grant under section 109(b) before 
December 27, 1977, is eligible to have the grant increased by funds made 
available under the Act, not to exceed 100 percent of eligible costs.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 39340, July 5, 1979]



Sec. 35.930-2  Grant amount.

    The grant agreement shall set forth the amount of grant assistance. 
The grant amount may not exceed the

[[Page 506]]

amount of funds available from the State allotments and reallotments 
under Sec. 35.910 et seq. Grant payments will be limited to the Federal 
share of allowable project costs incurred within the grant amount or any 
increases effected through grant amendments (see Sec. 35.955).



Sec. 35.930-3  Grant term.

    The grant agreement shall establish the period within which the 
project must be completed, in accordance with Sec. 30.345-1 of this 
chapter. This time period is subject to extension for excusable delay, 
at the discretion of the Regional Administrator.



Sec. 35.930-4  Project scope.

    The grant agreement must define the scope of the project for which 
Federal assistance is awarded under the grant. The project scope must 
include a step or an identified segment. Grant assistance may be awarded 
for a segment of step 3 treatment works construction, when that segment 
in and of itself does not provide for achievement of applicable effluent 
discharge limitations, if:
    (a) The segment is to be a component of an operable treatment works 
which will achieve the applicable effluent discharge limitations; and
    (b) A commitment for completion of the entire treatment works is 
submitted to the Regional Administrator and that commitment is reflected 
in a special condition in the grant agreement.



Sec. 35.930-5  Federal share.

    (a) General. The grant shall be 75 percent of the estimated total 
cost of construction that the Regional Administrator approves in the 
grant agreement, except as otherwise provided in paragraphs (b) and (c) 
of this section and in Secs. 35.925-15, 35.925-16, 35.925-17, 35.930-
1(b), and paragraph 10 of appendix A.
    (b) Innovative and alternative technology. In accordance with 
Sec. 35.908(b), the amount of any step 2, step 3, or step 2=3 grant 
assistance awarded from funds allotted for fiscal years 1979, 1980, and 
1981 shall be 85 percent of the estimated cost of construction for those 
eligible treatment works or significant portions of them that the 
Regional Administrator determines meet the criteria for innovative or 
alternative technology in appendix E. These grants depend on the 
availability of funds from the reserve under Sec. 35.915-1(b). The 
proportional State contribution to the non-Federal share of construction 
costs for 85-percent grants must be the same as or greater than the 
proportional State contribution (if any) to the non-Federal share of 
eligible construction costs for all treatment works which receive 75-
percent grants in the State.
    (c) Modification and replacement of innovative and alternative 
projects. In accordance with Sec. 35.908(c) and procedures published by 
EPA, the Regional Administrator may award grant assistance to fund 100 
percent of the eligible costs of the modification or replacement of any 
treatment works constructed with grant assistance based upon a Federal 
share of 85 percent under paragraph (b) of this section.



Sec. 35.930-6  Limitation on Federal share.

    The grantee must exert its best efforts to perform the project work 
as specified in the grant agreement within the approved cost ceiling. If 
at any time the grantee believes that the costs which it expects to 
incur in the performance of the project will exceed or be substantially 
less than the previously approved estimated total project costs, the 
grantee must notify the Regional Administrator and the State agency 
promptly in writing. As soon as practicable, the grantee must give the 
revised estimate of total cost for the performance of the project (see 
Sec. 30.900 of this subchapter). Delay in submission of the notice and 
excess cost information may prejudice approval of an increase in the 
grant amount. The United States shall not be obligated to pay for costs 
incurred in excess of the approved grant amount or any amendment to it 
until the State has approved an increase in the grant amount from 
available allotments under Sec. 35.915 and the Regional Administrator 
has issued a written grant amendment under Sec. 35.955.



Sec. 35.935  Grant conditions.

    In addition to the EPA general grant conditions (subpart C and 
appendix A to part 30 of this subchapter), each

[[Page 507]]

treatment works grant shall be subject to the following conditions:



Sec. 35.935-1  Grantee responsibilities.

    (a) Review or approval of project plans and specifications by or for 
EPA is for administrative purposes only and does not relieve the grantee 
of its responsibility to design, construct, operate, and maintain the 
treatment works described in the grant application and agreement.
    (b) By its acceptance of the grant, the grantee agrees to complete 
the treatment works in accordance with the facilities plan, plans and 
specifications, and related grant documents approved by the Regional 
Administrator, and to maintain and operate the treatment works to meet 
the enforceable requirements of the Act for the design life of the 
treatment works. The Regional Administrator is authorized to seek 
specific enforcement or recovery of funds from the grantee, or to take 
other appropriate action (see Sec. 35.965), if he determines that the 
grantee has failed to make good faith efforts to meet its obligations 
under the grant.
    (c) The grantee agrees to pay, pursuant to section 204(a)(4) of the 
Act, the non-Federal costs of treatment works construction associated 
with the project and commits itself to complete the construction of the 
operable treatment works and complete waste treatment system (see 
definitions in Sec. 35.905) of which the project is a part.
    (d) The Regional Administrator may include special conditions in the 
grant or administer this subpart in the manner which he determines most 
appropriate to coordinate with, restate, or enforce NPDES permit terms 
and schedules.



Sec. 35.935-2  Procurement.

    The grantee and party to any subagreement must comply with the 
applicable provisions of Secs. 35.935 through 35.939 with respect to 
procurement for step 1, 2, or 3 work. The Regional Administrator will 
cause appropriate review of grantee procurement to be made.



Sec. 35.935-3  Property.

    (a) The grantee must comply with the property provisions of 
Sec. 30.810 et seq. of this subchapter with respect to all property 
(real and personal) acquired with project funds.
    (b) With respect to real property (including easements) acquired in 
connection with the project, whether such property is acquired with or 
in anticipation of EPA grant assistance or solely with funds furnished 
by the grantee or others:
    (1) The acquisition must be conducted in accordance with part 4 of 
this chapter;
    (2) Any displacement of a person by or as a result of any 
acquisition of the real property shall be conducted under the applicable 
provisions of part 4 of this chapter; and
    (3) The grantee must obtain (before initiation of step 3 
construction), and must thereafter retain, a fee simple or such estate 
or interest in the site of a step 3 project, and rights of access, as 
the Regional Administrator finds sufficient to assure undisturbed use 
and possession for the purpose of construction and operation for the 
estimated life of the project. If a step 3 project serves more than one 
municipality, the grantee must insure that the participating 
municipalities have, or will have before the initiation of step 3 
construction, such interests or rights in land as the Regional 
Administrator finds sufficient to assure their undisturbed utilization 
of the project site for the estimated life of the project.
    (c) With respect to real property acquired with EPA grant 
assistance, the grantee must defer acquisition of such property until 
approval of the Regional Administrator is obtained under Sec. 35.940-3.



Sec. 35.935-4  Step 2=3 projects.

    A grantee which has received step 2=3 grant assistance must make 
submittals required by Sec. 35.920-3(c), together with approvable user 
charge and industrial cost recovery systems and a preliminary plan of 
operation. The Regional Administrator shall give written approval of 
these submittals before advertising for bids on the step 3 construction 
portion of the step 2=3

[[Page 508]]

project. The cost of step 3 work initiated before such approval is not 
allowable. Failure to make the above submittals as required is cause for 
invoking sanctions under Sec. 35.965.



Sec. 35.935-5  Davis-Bacon and related statutes.

    Before soliciting bids or proposals for step 3-type work, the 
grantee must consult with the Regional Administrator concerning 
compliance with Davis-Bacon and other statutes referenced in Sec. 30.415 
et seq. of this subchapter.



Sec. 35.935-6  Equal employment opportunity.

    Contracts involving step 3-type work of $10,000 or more are subject 
to equal employment opportunity requirements under Executive Order 11246 
(see part 8 of this chapter). The grantee must consult with the Regional 
Administrator about equal employment opportunity requirements before 
issuance of an invitation for bids where the cost of construction work 
is estimated to be more than $1 million or where required by the grant 
agreement.



Sec. 35.935-7  Access.

    The grantee must insure that EPA and State representatives will have 
access to the project work whenever it is in preparation or progress. 
The grantee must provide proper facilities for access and inspection. 
The grantee must allow the Regional Administrator, the Comptroller 
General of the United States, the State agency, or any authorized 
representative, to have access to any books, documents, plans, reports, 
papers, and other records of the contractor which are pertinent to the 
project for the purpose of making audit, examination, excerpts, copies 
and transcriptions. The grantee must insure that a party to a 
subagreement will provide access to the project work, sites, documents, 
and records. See Secs. 30.605 and 30.805 of this subchapter, clause 9 of 
appendix C-1 to this subpart, and clause 10 of appendix C-2 to this 
subpart.



Sec. 35.935-8  Supervision.

    In the case of any project involving Step 3, the grantee will 
provide and maintain competent and adequate engineering supervision and 
inspection of the project to ensure that the construction conforms with 
the approved plans and specifications.



Sec. 35.935-9  Project initiation and completion.

    (a) The grantee agrees to expeditiously initiate and complete the 
step 1, 2, or 3 project, or cause it to be constructed and completed, in 
accordance with the grant agreement and application, including the 
project progress schedule, approved by the Regional Administrator. 
Failure of the grantee to promptly initiate and complete step 1, 2, or 3 
project construction may result in annulment or termination of the 
grant.
    (b) No date reflected in the grant agreement, or in the project 
completion schedule, or extension of any such date, shall modify any 
compliance date established in an NPDES permit. It is the grantee's 
obligation to request any required modification of applicable permit 
terms or other enforceable requirements.
    (c) The invitation for bids for step 3 project work is expected to 
be issued promptly after grant award. Generally this action should occur 
within 90 to 120 days after award unless compliance with State or local 
laws requires a longer period of time. The Regional Administrator shall 
annul or terminate the grant if initiation of all significant elements 
of step 3 construction has not occurred within 12 months of the award 
for the step 3 project (or approval of plans and specifications, in the 
case of a step 2=3 project). (See definition of ``initiation of 
construction'' under ``construction'' in Sec. 35.905.) However, the 
Regional Administrator may defer (in writing) the annulment or 
termination for not more than 6 additional months if:
    (1) The grantee has applied for and justified the extension in 
writing to the Regional Administrator;
    (2) The grantee has given written notice of the request for 
extension to the NPDES permit authority;
    (3) The Regional Administrator determines that there is good cause 
for the delay in initiation of project construction; and

[[Page 509]]

    (4) The State agency concurs in the extension.



Sec. 35.935-10  Copies of contract documents.

    In addition to the notification of project changes under Sec. 30.900 
of this chapter, a grantee must promptly submit to the Regional 
Administrator a copy of any prime contract or modification of it and of 
revisions to plans and specifications.



Sec. 35.935-11  Project changes.

    (a) In addition to the notification of project changes required 
under Sec. 30.900-1 of this chapter, the Regional Administrator's and 
(where necessary) the State agency's prior written approval is required 
for:
    (1) Project changes which may--
    (i) Substantially alter the design and scope of the project;
    (ii) Alter the type of treatment to be provided;
    (iii) Substantially alter the location, size, capacity, or quality 
of any major item of equipment; or
    (iv) Increase the amount of Federal funds needed to complete the 
project.

However, prior EPA approval is not required for changes to correct minor 
errors, minor changes, or emergency changes; and
    (2) Subagreement amendments amounting to more than $100,000 for 
which EPA review is required under Secs. 35.937-6(b) and 35.938-5 (d) 
and (g).
    (b) No approval of a project change under Sec. 30.900 of this 
chapter shall obligate the United States to any increase in the amount 
of the grant or grant payments unless a grant increase is also approved 
under Sec. 35.955. This does not preclude submission or consideration of 
a request for a grant amendment under Sec. 30.900-1 of this chapter.



Sec. 35.935-12  Operation and maintenance.

    (a) The grantee must make provision satisfactory to the Regional 
Administrator for assuring economic and effective operation and 
maintenance of the treatment works in accordance with a plan of 
operation approved by the State water pollution control agency or, as 
appropriate, the interstate agency.
    (b) As a minimum, the plan shall include provision for:
    (1) An operation and maintenance manual for each facility;
    (2) An emergency operating and response program;
    (3) Properly trained management, operation and maintenance 
personnel;
    (4) Adequate budget for operation and maintenance;
    (5) Operational reports;
    (6) Provisions for laboratory testing and monitoring adequate to 
determine influent and effluent characteristics and removal efficiencies 
as specified in the terms and conditions of the NPDES permit;
    (7) An operation and maintenance program for the sewer system.
    (c) Except as provided in paragraphs (d) and (e) of this section, 
the Regional Administrator shall not pay--
    (1) More than 50 percent of the Federal share of any step 3 project 
unless the grantee has furnished a draft of the operation and 
maintenance manual for review, or adequate evidence of timely 
development of such a draft; or
    (2) More than 90 percent of the Federal share unless the grantee has 
furnished a satisfactory final operation and maintenance manual.
    (d) In projects where segmenting of an operable treatment works has 
occurred, the Regional Administrator shall not pay--
    (1) More than 50 percent of the Federal share of the total of all 
interdependent step 3 segments unless the grantee has furnished a draft 
of the operation and maintenance manual for review, or adequate evidence 
of timely development of such a draft, or
    (2) More than 90 percent of the Federal share of the total of all 
interdependent step 3 segments unless the grantee has furnished a 
satisfactory final operation and maintenance manual.
    (e) In multiple facility projects where an element or elements of 
the treatment works are operable components and have been completely 
constructed and placed in operation by the grantee, the Regional 
Administrator shall not make any additional step 3 payment unless the 
operation and maintenance manual (or those portions associated with the 
operating elements of the

[[Page 510]]

treatment works) submitted by the grantee has been approved by the 
Regional Administrator.



Sec. 35.935-13  Submission and approval of user charge systems.

    The grantee shall obtain the approval of the Regional Administrator 
of its system of user charges. (See also Sec. 35.929 et seq.)
    (a) Step 3 grant assistance awarded under regulations promulgated on 
February 11, 1974, (1) Except as paragraph (a)(2) of this section 
provides, the grantee must obtain the Regional Administrator's approval 
of its system of user charges based on actual use which complies with 
Sec. 35.929-1(a). The Regional Administrator shall not pay more than 50 
percent of the Federal share of any step 3 project unless the grantee 
has submitted adequate evidence of timely development of its system of 
user charges nor shall the Regional Administrator pay more than 80 
percent of the Federal share unless he has approved the system.
    (2) A grantee which desires approval of a user charge system based 
on ad valorem taxes in accordance with Sec. 35.929-1(b) shall submit to 
the Regional Administrator by July 24, 1978, evidence of compliance of 
its system with the criteria in Sec. 35.929-1 (b)(1) through (b)(3). As 
soon as possible, the Regional Administrator shall advise the grantee if 
the system complies with Sec. 35.929-1 (b)(1). The Regional 
Administrator's determination may be appealed in accordance with subpart 
J, ``Disputes,'' of part 30 of this subchapter.
    (i) Grantees whose ad valorem tax systems meet the criteria of 
Sec. 35.929-1 (b)(1) through (b)(3). Any step 3 payments held by the 
Regional Administrator at 50 percent or 80 percent for failure to comply 
with the requirement for development of a user charge system shall be 
released. However, the grantee shall obtain approval of its user charge 
system by June 30, 1979 or no further payments will be made until the 
sytem is approved and the grants may be terminated or annulled.
    (ii) Grantees whose ad valorem tax systems do not meet the criteria 
of Sec. 35.929-1 (b)(1) through (b)(3). Step 3 grants will continue to 
be administered in accordance with paragraph (a)(1) of this section.
    (b) Step 3 grant assistance awarded after April 24, 1978, but before 
July 1, 1979. The grantee must obtain approval of its user charge system 
based on actual use or ad valorem taxes before July 1, 1979. The 
Regional Administrator may not make any payments on these grants, may 
terminate or annul these grants, and may not award any new step 3 grants 
to the same grantee after June 30, 1979, if the user charge system has 
not been approved. The Regional Administrator shall approve the 
grantee's user charge or ad valorem tax rates and the ordinance required 
under Sec. 35.929-2(e) and the grantee shall enact them before the 
treatment works constructed with the grant are placed in operation.
    (c) Step 3 grant assistance awarded after June 30, 1979. The 
Regional Administrator may not award step 3 grant assistance unless he 
has approved the user charge system based on actual use or ad valorem 
taxes. The Regional Administrator shall approve the grantee's user 
charge or ad valorem tax rates and the ordinance required under 
Sec. 35.929-2(e) and the grantee shall enact them before the treatment 
works constructed with the grant are placed in operation.



Sec. 35.935-14  Final inspection.

    The grantee shall notify the Regional Administrator through the 
State agency of the completion of step 3 project construction. The 
Regional Administrator shall cause final inspection to be made within 60 
days of the receipt of the notice. When final inspection is completed 
and the Regional Administrator determines that the treatment works have 
been satisfactorily constructed in accordance with the grant agreement, 
the grantee may make a request for final payment under Sec. 35.945(e).



Sec. 35.935-15  Submission and approval of industrial cost recovery system.

    The grantee shall obtain the approval of the Regional Administrator 
of its system of industrial cost recovery. (See also Sec. 35.928 et 
seq.)

[[Page 511]]

    (a) Step 3 grant assistance awarded under regulations promulgated on 
February 11, 1974. (1) The grantee must obtain the approval of the 
Regional Administrator for the system of industrial cost recovery (see 
Sec. 35.928 et seq.). The Regional Administrator shall not pay more than 
50 percent of the Federal share of any step 3 project unless the grantee 
has submitted adequate evidence of timely development of its system of 
industrial cost recovery nor shall the Regional Administrator pay more 
than 80 percent of the Federal share unless he has approved the system.
    (2) Payments of grantees held under paragraph (a)(1) of this section 
shall be released after April 25, 1978. However, the grantee shall 
obtain approval of its industrial cost recovery system by June 30, 1979, 
or no further payments will be made until the system is approved.
    (b) Step 3 grant assistance awarded after April 24, 1978, but before 
July 1, 1979. The grantee must obtain approval of its industrial cost 
recovery system under these regulations, except for the ordinance and 
rates, before July 1, 1979. The Regional Administrator shall not make 
any payments on these grants and shall not award any new step 3 grants 
to the same grantee after June 30, 1979, if the industrial cost recovery 
system, except for the ordinance and rates, has not been approved. The 
grantee shall enact the ordinance required under Sec. 35.928-1(h) and 
submit the ordinance and industrial cost recovery system rates to the 
Regional Administrator who must approve the ordinance before the 
treatment works are placed in operation.
    (c) Step 3 grant assistance awarded after June 30, 1979. The grantee 
must obtain the Regional Administrator's approval of the industrial cost 
recovery system under these regulations, except for the ordinance and 
rates, before grant award. The grantee shall enact the ordinance 
required under Sec. 35.928-1(h) and submit the ordinance and industrial 
cost recovery system rates to the Regional Administrator who must 
approve the ordinance before the treatment works are placed in 
operation.



Sec. 35.935-16  Sewer use ordinance and evaluation/rehabilitation program.

    (a) The grantee must obtain the approval of the Regional 
Administrator of its sewer use ordinance under Sec. 35.927-4.
    (b) Except as provided in paragraphs (c) and (d) of this section, 
the Regional Administrator shall not pay more than 80 percent of the 
Federal share of any step 3 project unless he has approved the grantee's 
sewer use ordinance, and the grantee is complying with the sewer system 
evaluation and rehabilitation schedule incorporated in the grant 
agreement under Sec. 35.927-5.
    (c) In projects where segmenting of an operable treatment works has 
occurred, the Regional Administrator shall not pay more than 80 percent 
of the Federal share of the total of all interdependent step 3 segments 
unless he has approved the grantee's sewer use ordinance and the grantee 
is complying with the sewer system evaluation and rehabilitation 
schedule incorporated in the grant agreement under Sec. 35.927-5.
    (d) In mulitple facility projects where an element or elements of 
the treatment works are operable components and have been completely 
constructed and placed in operation by the grantee, the Regional 
Administrator shall not make any additional step 3 payment unless he has 
approved the grantee's sewer use ordinance and the grantee is complying 
with the sewer system evaluation and rehabilitation schedule 
incorporated in the grant agreement under Sec. 35.927-5.



Sec. 35.935-17  Training facility.

    If assistance has been provided for the construction of a treatment 
works required to train and upgrade waste treatment personnel under 
Secs. 35.930-1(b) and 35.920-3(e), the grantee must operate the 
treatment works as a training facility for a period of at least 10 years 
after construction is completed.



Sec. 35.935-18  Value engineering.

    A grantee must comply with the applicable value engineering 
requirements of Sec. 35.926.

[[Page 512]]



Sec. 35.935-19  Municipal pretreatment program.

    The grantee must obtain approval by the Regional Administrator of 
the municipal pretreatment program in accordance with part 403 of this 
chapter. Prior to granting such approval, the Regional Administrator 
shall not pay more than 90 percent of the Federal share of any step 3 
project or cost of step 3 work under a step 2=3 project awarded after 
October 1, 1978, except that for any such grant assistance awarded 
before December 31, 1980, the Regional Administrator may continue grant 
payments if he determines that significant progress has been made (and 
is likely to continue) toward the development of an approvable 
pretreatment program and that withholding of grant payments would not be 
in the best interest of protecting the environment.



Sec. 35.935-20  Innovative processes and techniques.

    If the grantee receives 85-percent grant assistance for innovative 
processes and techniques, the following conditions apply during the 5-
year period following completion of construction:
    (a) The grantee shall permit EPA personnel and EPA designated 
contractors to visit and inspect the treatment works at any reasonable 
time in order to review the operation of the innovative processes or 
techniques.
    (b) If the Regional Administrator requests, the grantee will provide 
EPA with a brief written report on the construction, operation, and 
costs of operation of the innovative processes or techniques.



Sec. 35.936  Procurement.

    (a) Sections 35.936 through 35.939 set forth policies and minimum 
standards for procurement of architectural or engineering services as 
defined in Sec. 35.937 and construction contracts as described in 
Sec. 35.938 by grantees under all steps of grants for construction of 
treatment works. Acquisition of real property shall be conducted in 
accordance with part 4, subpart F of this chapter. Other procurements of 
goods and services shall be conducted in accordance with the provisions 
of part 33 of this subchapter.
    (b) This subpart does not apply to work beyond the scope of the 
project for which grant assistance is awarded (i.e., ineligible work).



Sec. 35.936-1  Definitions.

    As used in Secs. 35.936 through 35.939, the following words and 
terms shall have the meaning set forth below. All terms not defined 
herein shall have the meaning given to them in Sec. 30.135 of this 
subchapter, and in Sec. 35.905.
    (a) Grant agreement. The written agreement and amendments thereto 
between EPA and a grantee in which the terms and conditions governing 
the grant are stated and agreed to by both parties under Sec. 30.345 of 
this subchapter.
    (b) Subagreement. A written agreement between an EPA grantee and 
another party (other than another public agency) and any tier of 
agreement thereunder for the furnishing of services, supplies, or 
equipment necessary to complete the project for which a grant was 
awarded, including contracts and subcontracts for personal and 
professional services, agreements with consultants and purchase orders, 
but excluding employment agreements subject to State or local personnel 
systems. (See Secs. 35.937-12 and 35.938-9 regarding subcontracts of any 
tier under prime contracts for architectural or engineering services or 
construction awarded by the grantee--generally applicable only to 
subcontracts in excess of $10,000.)
    (c) Contractor. A party to whom a subagreement is awarded.
    (d) Grantee. Any municipality which has been awarded a grant for 
construction of a treatment works under this subpart. In addition, where 
appropriate in Secs. 35.936 through 35.939, grantee may also refer to an 
applicant for a grant.



Sec. 35.936-2  Grantee procurement systems; State or local law.

    (a) Grantee procurement systems. Grantees may use their own 
procurement systems and procedures which meet applicable requirements of 
State, territorial, or local laws and ordinances to the extent that 
these systems and procedures do not conflict

[[Page 513]]

with the minimum requirements of this subchapter.
    (b) State or local law. The Regional Administrator will generally 
rely on a grantee's determination regarding the application of State or 
local law to issues which are primarily determined by such law. The 
Regional Administrator may request the grantee to furnish a written 
legal opinion adequately addressing any such legal issues. The Regional 
Administrator will accept the grantee's determination unless he finds 
that it does not have a rational basis.
    (c) Preference. State or local laws, ordinances, regulations or 
procedures which effectively give local or in-State bidders or proposers 
preference over other bidders or proposers shall not be employed in 
evaluating bids or proposals for subagreements under a grant.



Sec. 35.936-3  Competition.

    EPA's policy is to encourage free and open competition appropriate 
to the type of project work to be performed.



Sec. 35.936-4  Profits.

    Only fair and reasonable profits may be earned by contractors in 
subagreements under EPA grants. See Sec. 35.937-7 for discussion of 
profits under negotiated subagreements for architectural or engineering 
services, and Sec. 35.938-5(f) for discussion of profits under 
negotiated change orders to construction contracts. Profit included in a 
formally advertised, competitively bid, fixed price construction 
contract awarded under Sec. 35.938 is presumed reasonable.



Sec. 35.936-5  Grantee responsibility.

    (a) The grantee is responsible for the administration and successful 
accomplishment of the project for which EPA grant assistance is awarded. 
The grantee is responsible for the settlement and satisfaction of all 
contractual and administrative issues arising out of subagreements 
entered into under the grant (except as Sec. 35.936-6 provides) in 
accordance with sound business judgment and good administrative 
practice. This includes issuance of invitations for bids or requests for 
proposals, selection of contractors, award of contracts, protests of 
award, claims, disputes, and other related procurement matters.
    (b) With the prior written approval of the Regional Administrator, 
the grantee may retain an individual or firm to perform these functions. 
Such an agent acts for the grantee and is subject to the provisions of 
this subpart which apply to the grantee.
    (c) In accordance with Sec. 35.970, a grantee may request technical 
and legal assistance from the Regional Administrator for the 
administration and enforcement of any contract related to treatment 
works that are assisted by an EPA grant. The Regional Administrator's 
assistance does not release the grantee from those responsibilities 
identified in paragraph (a) of this section.



Sec. 35.936-6  EPA responsibility.

    Generally, EPA will only review grantee compliance with Federal 
requirements applicable to a grantee's procurement. However, where 
specifically provided in this chapter (e.g., Secs. 8.8(j) and 35.939), 
EPA is responsible for determining compliance with Federal requirements.



Sec. 35.936-7  Small and minority business.

    Grantees shall make positive efforts to use small business and 
minority-owned business sources of supplies and services. Such efforts 
should allow these sources the maximum feasible opportunity to compete 
for subagreements to be performed using Federal grant funds.



Sec. 35.936-8  Privity of contract.

    Neither EPA nor the United States shall be a party to any 
subagreement (including contracts or subcontracts), nor to any 
solicitation or request for proposals. (See Secs. 35.937-9(a), 35.938-
4(c)(5), and appendices C-1 and C-2 to this subpart for the required 
solicitation statement and contract provisions.) However, in accordance 
with Sec. 35.970 the Regional Administrator, if a grantee requests, may 
provide technical and legal assistance in the administration and 
enforcement of any contract related to treatment works for which an EPA 
grant was made.

[[Page 514]]



Sec. 35.936-9  Disputes.

    Only an EPA grantee may initiate and prosecute an appeal to the 
Administrator under the disputes provision of a grant with respect to 
its subagreements (see subpart J of part 30 of this subchapter). Neither 
a contractor nor a subcontractor may prosecute an appeal under the 
disputes provisions of a grant in its own name or interest.



Sec. 35.936-10  Federal procurement regulations.

    Regulations applicable to direct Federal procurement shall not be 
applicable to subagreements under grants except as stated in this 
subchapter.



Sec. 35.936-11  General requirements for subagreements.

    Subagreements must:
    (a) Be necessary for and directly related to the accomplishment of 
the project work;
    (b) Be in the form of a bilaterally executed written agreement 
(except for small purchases of $10,000 or less);
    (c) Be for monetary or in-kind consideration; and
    (d) Not be in the nature of a grant or gift.



Sec. 35.936-12  Documentation.

    (a) Procurement records and files for purchases in excess of $10,000 
shall include the following:
    (1) Basis for contractor selection;
    (2) Justification for lack of competition if competition appropriate 
to the type of project work to be performed is required but is not 
obtained; and
    (3) Basis for award cost or price.
    (b) The grantee or contractors of the grantee must retain 
procurement documentation required by Sec. 30.805 of this subchapter and 
by this subpart, including a copy of each subagreement, for the period 
of time specified in Sec. 30.805. The documentation is subject to all 
the requirements of Sec. 30.805. A copy of each subagreement must be 
furnished to the project officer upon request.



Sec. 35.936-13  Specifications.

    (a) Nonrestrictive specifications. (1) No specification for bids or 
statement of work in connection with such works shall be written in such 
a manner as to contain proprietary, exclusionary, or discriminatory 
requirements other than those based upon performance, unless such 
requirements are necessary to test or demonstrate a specific thing or to 
provide for necessary interchangeability of parts and equipment, or at 
least two brand names or trade names of comparable quality or utility 
are listed and are followed by the words ``or equal.'' If brand or trade 
names are specified, the grantee must be prepared to identify to the 
Regional Administrator or in any protest action the salient requirements 
(relating to the minimum needs of the project) which must be met by any 
offeror. The single base bid method of solicitation for equipment and 
parts for determination of a low, responsive bidder may not be utilized. 
With regard to materials, if a single material is specified, the grantee 
must be prepared to substantiate the basis for the selection of the 
material.
    (2) Project specifications shall, to the extent practicable, provide 
for maximum use of structures, machines, products, materials, 
construction methods, and equipment which are readily available through 
competitive procurement, or through standard or proven production 
techniques, methods, and processes, except to the extent that innovative 
technologies may be used under Sec. 35.908 of this subpart.
    (b) Sole source restriction. A specification shall not require the 
use of structures, materials, equipment, or processes which are known to 
be available only from a sole source, unless the Regional Administrator 
determines that the grantee's engineer has adequately justified in 
writing that the proposed use meets the particular project's minimum 
needs or the Regional Administrator determines that use of a single 
source is necessary to promote innovation (see Sec. 35.908). Sole source 
procurement must be negotiated under Sec. 33.500 et seq., including full 
cost review.
    (c) Experience clause restriction. The general use of experience 
clauses requiring equipment manufacturers to have a record of 
satisfactory operation for a specified period of time or of bonds or 
deposits to guarantee replacement in the event of failure is restricted 
to special cases where the grantee's engineer adequately justifies

[[Page 515]]

any such requirement in writing. Where such justification has been made, 
submission of a bond or deposit shall be permitted instead of a 
specified experience period. The period of time for which the bond or 
deposit is required should not exceed the experience period specified. 
No experience restriction will be permitted which unnecessarily reduces 
competition or innovation.
    (d) Buy American--(1) Definitions. As used in this subpart, the 
following definitions apply:
    (i) Construction material means any article, material, or supply 
brought to the construction site for incorporation in the building or 
work.
    (ii) Component means any article, material, or supply directly 
incorporated in construction material.
    (iii) Domestic construction material means an unmanufactured 
construction material which has been mined or produced in the United 
States, or a manufactured construction material which has been 
manufactured in the United States if the cost of its components which 
are mined, produced, or manufactured in the United States exceeds 50 
percent of the cost of all its components.
    (iv) Nondomestic construction material means a construction material 
other than a domestic construction material.
    (2) Domestic preference. Domestic construction material may be used 
in preference to nondomestic materials if it is priced no more than 6 
percent higher than the bid or offered price of the nondomestic 
materials including all costs of delivery to the construction site, any 
applicable duty, whether or not assessed. Computations will normally be 
based on costs on the date of opening of bids or proposals.
    (3) Waiver. The Regional Administrator may waive the Buy American 
provision based upon those factors that he considers relevant, 
including:
    (i) Such use is not in the public interest;
    (ii) The cost is unreasonable;
    (iii) The Agency's available resources are not sufficient to 
implement the provision, subject to the Deputy Administrator's 
concurrence;
    (iv) The articles, materials, or supplies of the class or kind to be 
used or the articles, materials, or supplies from which they are 
manufactured are not mined, produced, or manufactured in the United 
States in sufficient and reasonably available commercial quantities or 
satisfactory quality for the particular project; or
    (v) Application of this provision is contrary to multilateral 
government procurement agreements, subject to the Deputy Administrator's 
concurrence.
    (4) Contract provision. Notwithstanding any other provision of this 
subpart, bidding documents and construction contracts for any step 3 
project for which the Regional Administrator receives an application 
after February 1, 1978, shall contain the ``Buy American'' provision 
which requires use of domestic construction materials in preference to 
nondomestic construction materials.
    (5) Substitution. If a nondomestic construction material or 
component is proposed for use, a bidder or contractor may substitute an 
approved domestic material or component (at no change in price), if 
necessary to comply with this subsection.
    (6) Procedures. The Regional Administrator may use the appropriate 
procedures of Sec. 35.939 in making the determinations with respect to 
this subsection. He shall generally observe the Buy American procedures, 
regulations, precedents, and requirements of other Federal departments 
and agencies.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 37596, June 27, 1979; 
44 FR 39340, July 5, 1979]



Sec. 35.936-14  Force account work.

    (a) A grantee must secure the project officer's prior written 
approval for use of the force account method for (1) any step 1 or step 
2 work in excess of $10,000; (2) any sewer rehabilitation work in excess 
of $25,000 performed during step 1 (see Sec. 35.927-3(a)); or (3) any 
step 3 work in excess of $25,000; unless the grant agreement stipulates 
the force account method.
    (b) The project officer's approval shall be based on the grantee's 
demonstration that he possesses the necessary competence required to 
accomplish such work and that (1) the work

[[Page 516]]

can be accomplished more economically by the use of the force account 
method, or (2) emergency circumstances dictate its use.
    (c) Use of the force account method for step 3 construction shall 
generally be limited to minor portions of a project.



Sec. 35.936-15  Limitations on subagree-ment award.

    No subagreement shall be awarded:
    (a) To any person or organization which does not meet the 
responsibility standards in Sec. 30.340-2 (a) through (d) and (g) of 
this subchapter;
    (b) If any portion of the contract work not exempted by Sec. 30.420-
3(b) of this subchapter will be performed at a facility listed by the 
Director, EPA Office of Federal Activities, in violation of the 
antipollution requirements of the Clean Air Act and the Clean Water Act, 
as set forth in Sec. 30.420-3 of this subchapter and 40 CFR part 15 
(Administration of the Clean Air Act and the Federal Water Pollution 
Control Act with respect to Federal contracts, grants, or loans); or
    (c) To any person or organization which is ineligible under the 
conflict of interest requirements of Sec. 30.420-4 of this subchapter.



Sec. 35.936-16  Code or standards of conduct.

    (a) The grantee must maintain a code or standards of conduct which 
shall govern the performance of its officers, employees, or agents in 
the conduct of project work, including procurement and expenditure of 
project funds. The grantee's officers, employees, or agents shall 
neither solicit nor accept gratuities, favors, or anything of monetary 
value from contractors or potential contractors. The grantee must avoid 
personal or organizational conflicts of interest or noncompetitive 
procurement practices which restrict or eliminate competition or 
otherwise restrain trade.
    (b) To the extent permissible by State or local law or formal 
institutional requirements and procedures, the standards shall provide 
for penalties, sanctions, or other adequate disciplinary actions to be 
instituted for project-related violations of law or of the code or 
standards of conduct by either the grantee officers, employees, or 
agents, or by contractors or their agents.
    (c) The grantee must inform the project officer in writing of each 
serious allegation of a project-related violation and of each known or 
proven project-related violation of law or code or standards of conduct, 
by its officers, employees, contractors, or by their agents. The grantee 
must also inform the project officer of the prosecutive or disciplinary 
action the grantee takes, and must cooperate with Federal officials in 
any Federal prosecutive or disciplinary action. Under Sec. 30.245 of 
this subchapter, the project officer must notify the Director, EPA 
Security and Inspection Division, of all notifications from the grantee.
    (d) EPA shall cooperate with the grantee in its disciplinary or 
prosecutive actions taken for any apparent project-related violations of 
law or of the grantee's code or standards of conduct.



Sec. 35.936-17  Fraud and other unlawful or corrupt practices.

    All procurements under grants are covered by the provisions of 
Sec. 30.245 of this subchapter relating to fraud and other unlawful or 
corrupt practices.



Sec. 35.936-18  Negotiation of subagree-ments.

    (a) Formal advertising, with adequate purchase descriptions, sealed 
bids, and public openings shall be the required method of procurement 
unless negotiation under paragraph (b) of this section is necessary to 
accomplish sound procurement.
    (b) All negotiated procurement shall be conducted in a manner to 
provide to the maximum practicable extent open and free competition 
appropriate to the type of project work to be performed. The grantee is 
authorized to negotiate subagreements in accordance with the applicable 
procedures of this subchapter (see Secs. 35.937 et seq. and 35.500 et 
seq.) if any of the following conditions exist:
    (1) Public exigency will not permit the delay incident to formally 
advertised procurement (e.g., an emergency procurement).

[[Page 517]]

    (2) The aggregate amount involved does not exceed $10,000 (see 
Sec. 35.936-19 for small purchases).
    (3) The material or service to be procured is available from only 
one person or entity. If the procurement is expected to aggregate more 
than $10,000, the grantee must document its file with a justification of 
the need for noncompetitive procurement, and provide such documentation 
to the project officer on request.
    (4) The procurement is for personal or professional services 
(including architectural or engineering services) or for any service 
that a university or other educational institution may render.
    (5) No responsive, responsible bids at acceptable price levels have 
been received after formal advertising, and, with respect to procurement 
under Sec. 35.938-4, the Regional Administrator's prior written approval 
has been obtained.
    (6) The procurement is for materials or services where the prices 
are established by law.
    (7) The procurement is for technical items or equipment requiring 
standardization and interchangeability of parts with existing equipment.
    (8) The procurement is for experimental, developmental or research 
services.



Sec. 35.936-19  Small purchases.

    (a) A small purchase is the procurement of materials, supplies, and 
services when the aggregate amount involved in any one transaction does 
not exceed $10,000. The small purchase limitation of $10,000 applies to 
the aggregate total of an order, including all estimated handling and 
freight charges, overhead, and profit to be paid under the order. In 
arriving at the aggregate amount involved in any one transaction, all 
items which should properly be grouped together must be included. 
Reasonable competition shall be obtained.
    (b) Subagreements for small purchases need not be in the form of a 
bilaterally executed written agreement. Where appropriate, unilateral 
purchase orders, sales slips, memoranda of oral price quotations, and 
the like may be used to minimize paperwork. Retention in the purchase 
files of these documents and of written quotations received, or 
references to catalogs or printed price lists used, will suffice as the 
record supporting the price paid.



Sec. 35.936-20  Allowable costs.

    (a) Incurring costs under subagreements which are not awarded or 
administered in compliance with this part or part 33 of this subchapter, 
as appropriate, shall be cause for disallowance of those costs.
    (b) Appropriate cost principles which apply to subagreements under 
EPA grants are identified in Sec. 30.710 of this subchapter. Under that 
section, the contractor's actual costs, direct and indirect, eligible 
for Federal participation in a cost reimbursement contract shall be 
those allowable under the applicable provisions of 41 CFR 1-15.2 
(Principles and Procedures for Use in Cost-Reimbursement Type Supply and 
Research Contracts With Commercial Organizations) and 41 CFR 1-15.4 
(Construction and Architect-Engineer Contracts).
    (c) Reasonable costs of compliance with the procurement and project 
management requirements of these regulations are allowable costs of 
administration under the grant. Costs of announcement, selection, 
negotiation, and cost review and analysis in connection with procurement 
of architectural or engineering services are allowable, even when 
conducted before award of the grant. Legal and engineering costs which a 
grantee is required to incur in a protest action under Sec. 35.939 are 
allowable.



Sec. 35.936-21  Delegation to State agencies; certification of procurement systems.

    (a) Under Sec. 35.912 and subpart F of this part, the Regional 
Administrator may delegate authority to a State agency to review and 
certify the technical and administrative adequacy of procurement 
documentation required under these sections.
    (b) If a State agency believes that State laws which govern 
municipal procurement include the same requirements or operate to 
provide the same protections as do Secs. 35.936, 35.937 and

[[Page 518]]

35.938, the State may request the Administrator to approve the State 
system instead of the procedures of these sections. EPA shall review the 
State system to determine its adequacy.
    (c) If a State agency determines that an applicant's procurement 
ordinances or applicable statutes include the same requirements or 
operate to provide the same protections as do Secs. 35.936, 35.937 and 
35.938, the State may certify (accompanied by appropriate documentation) 
the adequacy of the municipality's ordinances and statutes and request 
the Administrator to approve the municipality's system instead of the 
procedures of these sections. EPA shall conduct or may request the State 
to conduct a review of the municipality's system to determine its 
adequacy.



Sec. 35.936-22  Bonding and insurance.

    (a) On contracts for the building and erection of treatment works or 
contracts for sewer system rehabilitation exceeding $100,000, each 
bidder must furnish a bid guarantee equivalent to 5 percent of the bid 
price. In addition, the contractor awarded a construction contract for 
the building and erection of treatment works or sewer system 
rehabilitation must furnish performance and payment bonds, each of which 
shall be in an amount not less than 100 percent of the contract price. 
Construction contracts less than $100,000 shall be subject to State and 
local requirements for bid guarantees, performance bonds, and payment 
bonds. For contracts or subcontracts in excess of $100,000 the Regional 
Administrator may authorize the grantee to use its own bonding policies 
and requirements if he determines, in writing, that the Government's 
interest is adequately protected.
    (b) Contractors should obtain such construction insurance (e.g., 
fire and extended coverage, workmen's compensation, public liability and 
property damage, and ``all risk'' builder's risk or installation floater 
coverage) as is required by State or local law or the grantee or as is 
customary and appropriate. Under the Flood Disaster Protection Act of 
1973, a contractor must purchase flood insurance to cover his risk of 
loss if the grantee has not purchased the insurance (see Sec. 30.405-10 
of this subchapter).



Sec. 35.937  Subagreements for architectural or engineering services.

    (a) Applicability. Except as Sec. 35.937-2 otherwise provides, the 
provisions of Secs. 35.937 through 35.937-11 apply to all subagreements 
of grantees for architectural or engineering services where the 
aggregate amount of services involved is expected to exceed $10,000. The 
provisions of Secs. 35.937-2, 35.937-3, and 35.937-4 are not required, 
but may be followed, where the population of the grantee municipality is 
25,000 or less according to the most recent U.S. census. When $10,000 or 
less of services (e.g., for consultant or consultant subcontract 
services) is required, the small purchase provisions of Sec. 35.936-19 
apply.
    (b) Policy. Step 1, step 2, or administration or management of step 
3 project work may be performed by negotiated procurement of 
architectural or engineering services. The Federal Government's policy 
is to encourage public announcement of the requirements for personal and 
professional services, including engineering services. Subagreements for 
engineering services shall be negotiated with candidates selected on the 
basis of demonstrated competence and qualifications for the type of 
professional services required and at fair and reasonable prices. All 
negotiated procurement shall be conducted in a manner that provides to 
the maximum practicable extent, open and free competition. Nothing in 
this subpart shall be construed as requiring competitive bids or price 
competition in the procurement of architectural or engineering services.
    (c) Definitions. As used in Secs. 35.937 through 35.937-11 the 
following words and terms mean:
    (1) Architectural or engineering services. Those professional 
services associated with research, development, design and construction, 
alteration, or repair of real property, as well as incidental services 
that members of these professions and those in their employ may 
logically or justifiably perform,

[[Page 519]]

including studies, investigations, surveys, evaluations, consultations, 
planning, programing, conceptual designs, plans and specifications, cost 
estimates, inspections, shop drawing reviews, sample recommendations, 
preparation of operation and maintenance manuals, and other related 
services.
    (2) Engineer. A professional firm or individual engaged to provide 
services as defined in paragraph (c)(1) of this section by subagreement 
under a grant.



Sec. 35.937-1  Type of contract (subagreement).

    (a) General. Cost-plus-percentage-of-cost and percentage-of-
construction-cost contracts are prohibited. Cost reimbursement, fixed 
price, or per diem contracts or combinations of these may be negotiated 
for architectural or engineering services. A fixed price contract is 
generally used only when the scope and extent of work to be performed is 
clearly defined. In most other cases, a cost reimbursement type of 
contract is more appropriate. A per diem contract may be used if no 
other type of contract is appropriate. An incentive fee may be used if 
the grantee submits an adequate independent cost estimate and price 
comparison under Sec. 35.937-6.
    (b) Cost reimbursement contracts. Each cost reimbursement contract 
must clearly establish a cost ceiling which the engineer may not exceed 
without formally amending the contract and a fixed dollar profit which 
may not be increased except in case of a contract amendment to increase 
the scope of work.
    (c) Fixed price contracts. An acceptable fixed price contract is one 
which establishes a guaranteed maximum price which may not be increased 
unless a contract amendment increases the scope of work.
    (d) Compensation procedures. If, under either a cost reimbursement 
or fixed price contract, the grantee desires to use a multiplier type of 
compensation, all of the following must apply:
    (1) The multiplier and the portions of the multiplier allocable to 
overhead and allocable to profit have been specifically negotiated;
    (2) The portion of the multiplier allocable to overhead includes 
only allowable items of cost under the cost principles of 41 CFR 1-15.2 
and 1-15.4;
    (3) The portions of the multiplier allocable to profit and allocable 
to overhead have been separately identified in the contract; and
    (4) The fixed price contract includes a guaranteed maximum price for 
completion of the specifically defined scope of work; the cost 
reimbursement contract includes a fixed dollar profit which may not be 
increased except in case of a contract amendment which increases the 
scope of work.
    (e) Per diem contracts. A per diem agreement expected to exceed 
$10,000 may be utilized only after a determination that a fixed price or 
cost reimbursement type contract is not appropriate. Per diem agreements 
should be used only to a limited extent, e.g., where the first task 
under a step 1 grant involves establishing the scope and cost of 
succeeding step 1 tasks, or for incidental services such as expert 
testimony or intermittent professional or testing services. (Resident 
engineer and resident inspection services should generally be 
compensated under paragraph (b) or (c) of this section.) Cost and profit 
included in the per diem rate must be specifically negotiated and 
displayed separately in the engineer's proposal. The contract must 
clearly establish a price ceiling which may not be exceeded without 
formally amending the contract.



Sec. 35.937-2  Public notice.

    (a) Requirement. Adequate public notice as paragraph (a)(1) or (2) 
of this section provide, must be given of the requirement for 
architectural or engineering services for all subagreements with an 
anticipated price in excess of $25,000 except as paragraph (b) of this 
section provides. In providing public notice under paragraphs (a)(1) and 
(2) of this section, grantees must comply with the policies in 
Secs. 35.936-2(c), 35.936-3, and 35.936-7.
    (1) Public announcement. A notice of request for qualifications 
should be published in professional journals, newspapers, or 
publications of general circulation over a reasonable area and, in 
addition, if desired, through posted public notices or written 
notification directed to interested person, firms, or

[[Page 520]]

professional organizations inviting the submission of statements of 
qualifications. The announcement must clearly state the deadline and 
place for submission of qualification statements.
    (2) Prequalified list. As an alternative to publishing public notice 
as in paragraph (b) of this section, the grantee may secure or maintain 
a list of qualified candidates. The list must:
    (i) Be developed with public notice procedures as in paragraph 
(a)(1) of this section;
    (ii) Provide for continuous updating; and
    (iii) Be maintained by the grantee or secured from the State or from 
a nearby political subdivision.
    (b) Exceptions. The public notice requirement of this section and 
the related requirements of Secs. 35.937-3 and 35.937-4 are not 
applicable, but may be followed, in the cases described in paragraphs 
(b) (1) through (3) of this section. All other appropriate provisions of 
this section, including cost review and negotiation of price, apply.
    (1) Where the population of the grantee municipality is 25,000 or 
less according to the latest U.S. census.
    (2) For step 2 or step 3 of a grant, if:
    (i) The grantee is satisfied with the qualifications and performance 
of an engineer who performed all or any part of the step 1 or step 2 
work;
    (ii) The engineer has the capacity to perform the subsequent steps; 
and
    (iii) The grantee desires the same engineer to provide architectural 
or engineering services for the subsequent steps.
    (3) For subsequent segments of design work under one grant if:
    (i) A single treatment works is segmented into two or more step 3 
projects;
    (ii) The step 2 work is accordingly segmented so that the initial 
contract for preparation of construction drawings and specifications 
does not cover the entire treatment works to be built under one grant; 
and
    (iii) The grantee desires to use the same engineering firm that was 
selected for the initial segment of step 2 work for subsequent segments.



Sec. 35.937-3  Evaluation of qualifications.

    (a) The grantee shall review the qualifications of firms which 
responded to the announcement or were on the prequalified list and shall 
uniformly evaluate the firms.
    (b) Qualifications shall be evaluated through an objective process 
(e.g., the appointment of a board or committee which, to the extent 
practicable, should include persons with technical skills).
    (c) Criteria which should be considered in the evaluation of 
candidates for submission of proposals should include:
    (1) Specialized experience and technical competence of the candidate 
or firm and its personnel (including a joint venture, association or 
professional subcontract), considering the type of services required and 
the complexity of the project;
    (2) Past record of performance on contracts with the grantee, other 
government agencies or public bodies, and with private industry, 
including such factors as control of costs, quality of work, and ability 
to meet schedules;
    (3) The candidate's capacity to perform the work (including any 
specialized services) within the time limitations, considering the 
firm's current and planned workload;
    (4) The candidate's familiarity with types of problems applicable to 
the project; and
    (5) Avoidance of personal and organizational conflicts of interest 
prohibited under State and local law and Sec. 35.936-16.



Sec. 35.937-4  Solicitation and evaluation of proposals.

    (a) Requests for professional services proposals must be sent to no 
fewer than three candidates who either responded to the announcement or 
who were selected from the prequalified list. If, after good faith 
effort to solicit qualifications in accordance with Sec. 35.937-2, fewer 
than three qualified candidates respond, all qualified candidates must 
be provided requests for proposals.
    (b) Requests for professional services proposals must be in writing 
and must contain the information necessary to enable a prospective 
offeror to prepare a proposal properly. The request for

[[Page 521]]

proposals must include the solicitation statement in Sec. 35.937-9(a) 
and must inform offerors of the evaluation criteria, including all those 
in paragraph (c) of this section, and of the relative importance 
attached to each criterion (a numerical weighted formula need not be 
utilized).
    (c) All proposals submitted in response to the request for 
professional services proposals must be uniformly evaluated. Evaluation 
criteria shall include, as a minimum, all criteria stated in 
Sec. 35.937-3(c) of this subpart. The grantee shall also evaluate the 
candidate's proposed method to accomplish the work required, including, 
where appropriate, demonstrated capability to explore and develop 
innovative or advanced techniques and designs. The grantee's evaluation 
shall comply with Sec. 35.936-7.
    (d) Proposals shall be evaluated through an objective process (e.g., 
the appointment of a board or committee which, to the extent 
practicable, should include persons with technical skills. Oral 
(including telephone) or written interviews should be conducted with top 
rated proposers, and information derived therefrom shall be treated on a 
confidential basis, except as required to be disclosed under State or 
local law or to EPA under Sec. 35.937-6.
    (e) At no point during the procurement process shall information be 
conveyed to any candidate which would provide an unfair competitive 
advantage.



Sec. 35.937-5  Negotiation.

    (a) Grantees are responsible for negotiation of their contracts for 
architectural or engineering services. Contract procurement including 
negotiation may be performed by the grantee directly or by another non-
Federal governmental body, person or firm retained for the purpose. 
Contract negotiations may include the services of technical, legal, 
audit, or other specialists to the extent appropriate.
    (b) Negotiations may be conducted in accordance with State or local 
requirements, as long as they meet the minimum requirements as set forth 
in this section. In the absence of State or local statutory or code 
requirements, negotiations may be conducted by the grantee under 
procedures it adopts based upon Public Law 92-582, 40 U.S.C. 541-544 
(commonly known as the ``Brooks Bill'') or upon the negotiation 
procedures of 40 CFR 33.510-2.
    (c) The object of negotiations with any candidate shall be to reach 
agreement on the provisions of the proposed contract. The grantee and 
the candidate shall discuss, as a minimum:
    (1) The scope and extent of work and other essential requirements;
    (2) Identification of the personnel and facilities necessary to 
accomplish the work within the required time, including where needed, 
employment of additional personnel, subcontracting, joint ventures, 
etc.;
    (3) Provision of the required technical services in accordance with 
regulations and criteria established for the project; and
    (4) A fair and reasonable price for the required work, to be 
determined in accordance with the cost and profit considerations set 
forth in Secs. 35.937-6 and 35.937-7, and payment provisions.



Sec. 35.937-6  Cost and price considerations.

    (a) General. EPA policy is that the cost or price of all 
subagreements and amendments to them must be considered. For each 
subagreement in excess of $10,000 but not greater than $100,000, 
grantees shall use the procedures described in paragraph (c) of this 
section, or an equivalent process.
    (b) Subagreements over $100,000. For each subagreement expected to 
exceed $100,000, or for two subagreements which aggregate more than 
$100,000 awarded to an engineer for work on one step, or where 
renegotiation or amendment of a subagreement will result in a contract 
price in excess of $100,000, or where the amendment itself is in excess 
of $100,000, the provisions of this paragraph (b) shall apply.
    (1) The candidate(s) selected for negotiation shall submit to the 
grantee for review sufficient cost and pricing data as described in 
paragraph (c) of this section to enable the grantee to ascertain the 
necessity and reasonableness of costs and amounts proposed, and the 
allowability and eligibility of costs proposed.

[[Page 522]]

    (2) The grantee shall submit to the EPA Project Officer for review 
(i) documentation of the public notice of need for architectural or 
engineering services, and selection procedures used, in those cases 
where Secs. 35.937-2, 35.937-3 and 35.937-4 are applicable; (ii) the 
cost and pricing data the selected engineer submitted; (iii) a 
certification of review and acceptance of the selected engineer's cost 
or price; and (iv) a copy of the proposed subagreement. The EPA Project 
Officer will review the complete subagreement action and approve the 
grantee's compliance with appropriate procedures before the grantee 
awards the subagreement. The grantee shall be notified upon completion 
of review.
    (c) Cost review. (1) The grantee shall review proposed subagreement 
costs.
    (2) As a minimum, proposed subagreement costs shall be presented on 
EPA form 5700-41 on which the selected engineer shall certify that the 
proposed costs reflect complete, current, and accurate cost and pricing 
data applicable to the date of anticipated subagreement award.
    (3) In addition to the specific elements of cost, the estimated 
amount of profit shall be set forth separately in the cost summary for 
fixed price contracts and a maximum total dollar amount of profit shall 
be set forth separately in the cost summary for cost reimbursement 
contracts.
    (4) The grantee may require more detailed cost data than the form 
requires in order to substantiate the reasonableness of proposed 
subagreement costs. EPA normally requires more detailed documentation 
only when the selected engineer is unable to certify that the cost and 
pricing data used are complete, current, and accurate. EPA may, on a 
selected basis, perform a pre-award cost analysis on any subagreement. 
Normally, a provisional overhead rate will be agreed upon before 
contract award.
    (5) Appropriate consideration should be given to Sec. 30.710 of this 
subchapter which contains general cost principles which must be used to 
determine the allowability of costs under grants. The engineer's actual 
costs, direct and indirect, allowable for Federal participation shall be 
determined in accordance with the terms and conditions of the 
subagreement, this subpart and the cost principles included in 41 CFR 1-
15.2 and 1-15.4. Examples of cost which are not allowable under those 
cost principles include entertainment, interest on borrowed capital and 
bad debts.
    (6) The engineer shall have an accounting system which accounts for 
costs in accordance with generally accepted accounting principles. This 
system shall provide for the identification, accumulation, and 
segregation of allowable and unallowable project costs among projects. 
Allowable project costs shall be determined in accordance with paragraph 
(c)(5) of this section. The engineer must propose and account for costs 
in a manner consistent with his normal accounting procedures.
    (7) Subagreements awarded on the basis of review of a cost element 
summary and a certification of complete, current, and accurate cost and 
pricing data shall be subject to downward renegotiation or recoupment of 
funds where the Regional Administrator determines that such 
certification was not based on complete, current, and accurate cost and 
pricing data or not based on costs allowable under the appropriate FPR 
cost principles (41 CFR 1-15.2 and 1-15.4) at the time of award.



Sec. 35.937-7  Profit.

    The objective of negotiations shall be the exercise of sound 
business judgment and good administrative practice including the 
determination of a fair and reasonable profit based on the firm's 
assumption of risk and input to total performance and not merely the 
application of a predetermined percentage factor. For the purpose of 
subagreements under EPA grants, profit is defined as the net proceeds 
obtained by deducting all allowable costs (direct and indirect) from the 
price. (Because this definition of profit is based on Federal 
procurement principles, it may vary from the firm's definition of profit 
for other purposes.) Profit on a subagreement and each amendment to a 
subagreement under a grant should be sufficient to attract engineers who 
possess talents and skills necessary to the accomplishment of project 
objectives,

[[Page 523]]

and to stimulate efficient and expeditious completion of the project. 
Where cost review is performed, the grantee should review the estimate 
of profit as he reviews all other elements of price.



Sec. 35.937-8  Award of subagreement.

    After the close of negotiations and after review and approval by the 
EPA Project Officer if required under Sec. 35.937-6(b), the grantee may 
award the contract. Unsuccessful candidates should be notified promptly.



Sec. 35.937-9  Required solicitation and subagreement provisions.

    (a) Required solicitation statement. Requests for qualifications or 
proposals must include the following statement, as well as the proposed 
terms of the subagreement.

    Any contract awarded under this request for (qualifications/
professional proposals) is expected to be funded in part by a grant from 
the United States Environmenal Protection Agency. This procurement will 
be subject to regulations contained in 40 CFR 35.936, 35.937, and 
35.939. Neither the United States nor the United States Environmental 
Protection Agency is nor will be a party to this request for 
(qualifications/professional proposals) or any resulting contract.

    (b) Content of subagreement. Each subagreement must adequately 
define:
    (1) The scope and extent of project work;
    (2) The time for performance and completion of the contract work, 
including where appropriate, dates for completion of significant project 
tasks;
    (3) Personnel and facilities necessary to accomplish the work within 
the required time;
    (4) The extent of subcontracting and consultant agreements; and
    (5) Payment provisions in accordance with Sec. 35.937-10.

If any of these elements cannot be defined adequately for later tasks or 
steps at the time of contract execution, the contract should not include 
the subsequent tasks or steps at that time.
    (c) Required subagreement provisions. Each consulting engineering 
contract must include the provisions set forth in appendix C-1 to this 
subpart.



Sec. 35.937-10  Subagreement payments--architectural or engineering services.

    The grantee shall make payment to the engineer in accordance with 
the payment schedule incorporated in the engineering agreement or in 
accordance with paragraph 7b of appendix C-1 to this subpart. Any 
retainage is at the option of the grantee. No payment request made by 
the Engineer under the agreement may exceed the estimated amount and 
value of the work and services performed.



Sec. 35.937-11  Applicability to existing contracts.

    Some negotiated engineering subagreements already in existence may 
not comply with the requirements of Secs. 35.936 and 35.937. Appendix D 
to this subpart contains EPA policy with respect to these subagreements 
and must be implemented before the grant award action for the next step 
under the grant.



Sec. 35.937-12  Subcontracts under subagreements for architectural or engineering services.

    (a) Neither award and execution of subcontracts under a prime 
contract for architectural or engineering services, nor the procurement 
and negotiation procedures used by the engineer in awarding such 
subcontracts are required to comply with any of the provisions, 
selection procedures, policies or principles set forth in Sec. 35.936 or 
Sec. 35.937 except as provided in paragraphs (b), (c), and (d) of this 
section.
    (b) The award or execution of subcontracts in excess of $10,000 
under a prime contract for architectural or engineering services and the 
procurement procedures used by the engineer in awarding such 
subcontracts must comply with the following:
    (1) Section 35.936-2 (Grantee procurement systems; State or local 
law);
    (2) Section 35.936-7 (Small and minority business);
    (3) Section 35.936-15 (Limitations on subagreement award);
    (4) Section 35.936-17 (Fraud and other unlawful or corrupt 
practices);
    (5) Section 35.937-6 (Cost and price considerations);
    (6) Section 35.937-7 (Profit);

[[Page 524]]

    (7) Prohibition of percentage-of-construction-cost and cost-plus-
percentage-of-cost contracts (see Sec. 35.937-1); and
    (8) Applicable subagreement clauses (see appendix C-1, clauses 9, 
17, 18; note clause 10).
    (c) The applicable provisions of this subpart shall apply to lower 
tier subagreements where an engineer acts as an agent for the grantee 
under a management subagreement (see Sec. 35.936-5(b)).
    (d) If an engineer procures items or services (other than 
architectural or engineering services) which are more appropriately 
procured by formal advertising or competitive negotiation procedures, 
the applicable procedures of Sec. 35.938 or of part 33 shall be 
observed.



Sec. 35.938  Construction contracts (subagreements) of grantees.



Sec. 35.938-1  Applicability.

    This section applies to construction contracts (subagreements) in 
excess of $10,000 awarded by grantees for any step 3 project.



Sec. 35.938-2  Performance by contract.

    The project work shall be performed under one or more contracts 
awarded by the grantee to private firms, except for force account work 
authorized by Sec. 35.936-14.



Sec. 35.938-3  Type of contract.

    Each contract shall be a fixed price (lump sum or unit price or a 
combination of the two) contract, unless the Regional Administrator 
gives advance written approval for the grantee to use some other 
acceptable type of contract. The cost-plus-percentage-of-cost contract 
shall not be used in any event.



Sec. 35.938-4  Formal advertising.

    Each contract shall be awarded after formal advertising, unless 
negotiation is permitted in accordance with Sec. 35.936-18. Formal 
advertising shall be in accordance with the following:
    (a) Adequate public notice. The grantee will cause adequate notice 
to be given of the solicitation by publication in newspapers or journals 
of general circulation beyond the grantee's locality (statewide, 
generally), inviting bids on the project work, and stating the method by 
which bidding documents may be obtained or examined. Where the estimated 
cost of step 3 construction is $10 million or more, the grantee must 
generally publish the notice in trade journals of nationwide 
distribution. The grantee should, in addition, solicit bids directly 
from bidders if it maintains a bidders list.
    (b) Adequate time for preparing bids. Adequate time, generally not 
less than 30 days, must be allowed between the date when public notice 
under paragraph (a) of this section is first published and the date by 
which bids must be submitted. Bidding documents (including 
specifications and drawings) shall be available to prospective bidders 
from the date when such notice is first published.
    (c) Adequate bidding documents. The grantee shall prepare a 
reasonable number of bidding documents (invitations for bids) and shall 
furnish them upon request on a first-come, first-served basis. The 
grantee shall maintain a complete set of bidding documents and shall 
make them available for inspection and copying by any party. The bidding 
documents shall include:
    (1) A complete statement of the work to be performed, including 
necessary drawings and specifications, and the required completion 
schedule. (Drawings and specifications may be made available for 
inspection and purchase, instead of being furnished.);
    (2) The terms and conditions of the contract to be awarded;
    (3) A clear explanation of the method of bidding and the method of 
evaluation of bid prices, and the basis and method for award of the 
contract;
    (4) Responsibility requirements or criteria which will be employed 
in evaluating bidders;
    (5) The following statement:

    Any contract or contracts awarded under this invitation for bids are 
expected to be funded in part by a grant from the U.S. Environmental 
Protection Agency. Neither the United States nor any of its departments, 
agencies or employees is or will be a party to this invitation for bids 
or any resulting contract. This procurement will be subject to 
regulations contained in 40 CFR 35.936, 35.938, and 35.939.;


[[Page 525]]



and
    (6) A copy of Secs. 35.936, 35.938, and 35.939.
    (d) Sealed bids. The grantee shall provide for bidding by sealed bid 
and for the safeguarding of bids received until public opening.
    (e) Addenda to bidding documents. If a grantee desires to amend any 
part of the bidding documents (including drawings and specifications) 
during the period when bids are being prepared, the addenda shall be 
communicated in writing to all firms which have obtained bidding 
documents in time to be considered before the bid opening time.
    (f) Bid modifications. A firm which has submitted a bid shall be 
allowed to modify or withdraw its bid before the time of bid opening.
    (g) Public opening of bids. The grantee shall provide for a public 
opening of bids at the place, date and time announced in the bidding 
documents.
    (h) Award to the low, responsive, responsible bidder. (1) After bids 
are opened, the grantee shall evaluate them in accordance with the 
methods and criteria set forth in the bidding documents.
    (2) The grantee may reserve the right to reject all bids. Unless all 
bids are rejected for good cause, award shall be made to the low, 
responsive, responsible bidder.
    (3) If the grantee intends to make the award to a firm which did not 
submit the lowest bid, he shall prepare a written statement before any 
award, explaining why each lower bidder was deemed nonresponsible or 
nonresponsive, and shall retain it in his files.
    (4) State or local laws, ordinances, regulations or procedures which 
are designed or which operate to give local or in-State bidders 
preference over other bidders shall not be employed in evaluating bids.
    (5) If an unresolved procurement review issue or a protest relates 
only to award of a subcontract or procurement of a subitem under the 
prime contract, and resolution of that issue or protest is unduly 
delaying performance of the prime contract, the Regional Administrator 
may authorize award and performance of the prime contract before 
resolution of the issue or protest, if the Regional Administrator 
determines that:
    (i) Resolution of the protest--
    (A) Will not affect the placement of the prime contract bidders; and
    (B) Will not materially affect initial performance of the prime 
contract; and that
    (ii) Award of the prime contract--
    (A) Is in the Government's best interest;
    (B) Will not materially affect resolution of the protest; and
    (C) Is not barred by State law.
    (6) The grantee shall not reject a bid as nonresponsive for failure 
to list or otherwise indicate the selection of a subcontractor(s) or 
equipment, unless the grantee has unambiguously stated in the 
solicitation documents that such failure to list shall render a bid 
nonresponsive and shall cause rejection of a bid.



Sec. 35.938-5  Negotiation of contract amendments (change orders).

    (a) Grantee responsibility. Grantees are responsible for negotiation 
of construction contract change orders. This function may be performed 
by the grantee directly or, if authorized, by his engineer. During 
negotiations with the contractor the grantee shall:
    (1) Make certain that the contractor has a clear understanding of 
the scope and extent of work and other essential requirements;
    (2) Assure that the contractor demonstrates that he will make 
available or will obtain the necessary personnel, equipment and 
materials to accomplish the work within the required time; and
    (3) Assure a fair and reasonable price for the required work.
    (b) Changes in contract price or time. The contract price or time 
may be changed only by a change order. When negotiations are required, 
they shall be conducted in accordance with paragraph (c) or (d) of this 
section, as appropriate. The value of any work covered by a change order 
or of any claim for increase or decrease in the contract price shall be 
determined by the method set forth in paragraphs (b) (1) through (3) of 
this section which is most advantageous to the grantee.

[[Page 526]]

    (1) Unit prices--(i) Original bid items. Unit prices previously 
approved are acceptable for pricing changes of original bid items. 
However, when changes in quantities exceed 15 percent of the original 
bid quantity and the total dollar change of that bid item is 
significant, the grantee shall review the unit price to determine if a 
new unit price should be negotiated.
    (ii) New items. Unit prices of new items shall be negotiated.
    (2) A lump sum to be negotiated.
    (3) Cost reimbursement--the actual cost for labor, direct overhead, 
materials, supplies, equipment, and other services necessary to complete 
the work plus an amount to be agreed upon to cover the cost of general 
overhead and profit to be negotiated.
    (c) For each change order not in excess of $100,000 the contractor 
shall submit sufficient cost and pricing data to the grantee to enable 
the grantee to determine the necessity and reasonableness of costs and 
amounts proposed, and the allowability and eligibility of costs 
proposed.
    (d) For each change order in excess of $100,000, the contractor 
shall submit to the grantee for review sufficient cost and pricing data 
as described in paragraphs (d) (1) through (6) of this section to enable 
the grantee to ascertain the necessity and reasonableness of costs and 
amounts proposed, and the allowability and eligibility of costs 
proposed.
    (1) As a minimum, proposed change order costs shall be presented on 
EPA Form 5700-41 on which the contractor shall certify that proposed 
costs reflect complete, current, and accurate cost and pricing data 
applicable to the date of the change order.
    (2) In addition to the specific elements of cost, the estimated 
amount of profit shall be set forth separately in the cost summary for 
fixed price change orders and a specific total dollar amount of profit 
will be set forth separately in the cost summary for cost reimbursement 
change orders.
    (3) The grantee may require more detailed cost data than the form 
requires in order to substantiate the reasonableness of proposed change 
order costs. EPA normally requires more detailed documentation only when 
the contractor is unable to certify that proposed change order cost data 
are complete, current, and accurate. EPA may, on a selected basis, 
perform a detailed cost analysis on any change order.
    (4) Appropriate consideration should be given to Sec. 30.710 of this 
subchapter which contains general cost principles which must be used for 
the determination and allowability of costs under grants. The 
contractor's actual costs, direct and indirect, allowable for Federal 
participation shall be determined in accordance with the terms and 
conditions of the contract, this subpart and the cost principles 
included in 41 CFR 1-15.2 and 1-15.4. Examples of costs which are not 
allowable under those cost principles include, but are not limited to, 
entertainment, interest on borrowed capital and bad debts.
    (5) For costs under cost reimbursement change orders, the contractor 
shall have an accounting system which accounts for such costs in 
accordance with generally accepted accounting principles. This system 
shall provide for the identification, accumulation and segregation of 
allowable and unallowable change orders. Allowable change order costs 
shall be determined in accordance with paragraph (d)(4) of this section. 
The contractor must propose and account for such costs in a manner 
consistent with his normal accounting procedures.
    (6) Change orders awarded on the basis of review of a cost element 
summary and a certification of complete, current, and accurate cost and 
pricing data shall be subject to downward renegotiation or recoupment of 
funds where subsequent audit substantiates that such certification was 
not based on complete, current and accurate cost and pricing data and on 
costs allowable under the appropriate FPR cost principles (41 CFR 1-15.2 
and 1-15.4) at the time of change order execution.
    (e) EPA review. In addition to the requirements of Secs. 35.935-10 
(copies of contract documents) and 35.935-11 (project changes), the 
grantee shall submit, before the execution of any change order in excess 
of $100,000, to the EPA Project Officer for review:
    (1) The cost and pricing data the contractor submitted;

[[Page 527]]

    (2) A certification of review and acceptance of the contractor's 
cost or price; and
    (3) A copy of the proposed change order.
    (f) Profit. The objective of negotiations shall be the exercise of 
sound business judgment and good administrative practice including the 
determination of a fair and reasonable profit based on the contractor's 
assumption of risk and input to total performance and not merely the 
application of a predetermined percentage factor. For the purpose of 
negotiated change orders to construction contracts under EPA grants, 
profit is defined as the net proceeds obtained by deducting all 
allowable costs (direct and indirect) from the price. The grantee should 
review the estimate or profit as he reviews all other elements of price.
    (g) Related work. Related work shall not be split into two 
amendments or change orders merely to keep it under $100,000 and thereby 
avoid the requirements of paragraph (d) of this section. For change 
orders which include both additive and deductive items:
    (1) If any single item (additive or deductive) exceeds $100,000, the 
requirements of paragraph (d) of this section shall be applicable.
    (2) If no single additive or deductive item has a value of $100,000, 
but the total price of the change order is over $100,000, the 
requirements of paragraph (d) of this section shall be applicable.
    (3) If the total of additive items of work in the change order 
exceeds $100,000, or the total of deductive items of work in the change 
order exceeds $100,000, and the net price of the change order is less 
than $100,000, the requirements of paragraph (d) of this section shall 
apply.



Sec. 35.938-6  Progress payments to contractors.

    (a) Policy. EPA policy is that, except as State law otherwise 
provides, grantees should make prompt progress payments to prime 
contractors and prime contractors should make prompt progress payment to 
subcontractors and suppliers for eligible construction, material, and 
equipment costs, including those of undelivered specifically 
manufactured equipment, incurred under a contract under an EPA 
construction grant.
    (b) Conditions of progress payments. For purposes of this section, 
progress payments are defined as follows:
    (1) Payments for work in place.
    (2) Payments for materials or equipment which have been delivered to 
the construction site, or which are stockpiled in the vicinity of the 
construction site, in accordance with the terms of the contract, when 
conditional or final acceptance is made by or for the grantee. The 
grantee shall assure that items for which progress payments have been 
made are adequately insured and are protected through appropriate 
security measures. Costs of such insurance and security are allowable 
costs in accordance with Sec. 35.940.
    (3) Payments for undelivered specifically manufactured items or 
equipment (excluding off-the-shelf or catalog items), as work on them 
progresses. Such payments must be made if provisions therefor are 
included in the bid and contract documents. Such provisions may be 
included at the option of the grantee only when all of the following 
conditions exist:
    (i) The equipment is so designated in the project specifications;
    (ii) The equipment to be specifically manufactured for the project 
could not be readily utilized on nor diverted to another job; and
    (iii) A fabrication period of more than 6 months is anticipated.
    (c) Protection of progress payments made for specifically 
manufactured equipment. The grantee will assure protection of the 
Federal interest in progress payments made for items or equipment 
referred to in paragraph (b)(3) of this section. This protection must be 
acceptable to the grantee and must take the form of:
    (1) Securities negotiable without recourse, condition or 
restrictions, a progress payment bond, or an irrevocable letter of 
credit provided to the grantee through the prime contractor by the 
subcontractor or supplier; and,
    (2) For items or equipment in excess of $200,000 in value which are 
manufactured in a jurisdiction in which the Uniform Commercial Code is 
applicable, the creation and perfection of a security interest under the 
Uniform

[[Page 528]]

Commercial Code reasonably adequate to protect the interests of the 
grantee.
    (d) Limitations on progress payments for specifically manufactured 
equipment. (1) Progress payments made for specifically manufactured 
equipment or items shall be limited to the following:
    (i) A first payment upon submission by the prime contractor of shop 
drawings for the equipment or items in an amount not exceeding 15 
percent of the contract or item price plus appropriate and allowable 
higher tier costs; and
    (ii) Subsequent to the grantee's release or approval for 
manufacture, additional payments not more frequently than monthly 
thereafter up to 75 percent of the contract or item price plus 
appropriate and allowable higher tier costs. However, payment may also 
be made in accordance with the contract and grant terms and conditions 
for ancillary onsite work before delivery of the specifically 
manufactured equipment or items.
    (2) In no case may progress payments for undelivered equipment or 
items under paragraph (d)(1)(i) or (d)(1)(ii) of this section be made in 
an amount greater than 75 percent of the cumulative incurred costs 
allocable to contract performance with respect to the equipment or 
items. Submission of a request for any such progress payments must be 
accompanied by a certification furnished by the fabricator of the 
equipment or item that the amount of progress payment claimed 
constitutes not more than 75 percent of cumulative incurred costs 
allocable to contract performance, and in addition, in the case of the 
first progress payment request, a certification that the amount claimed 
does not exceed 15 percent of the contract or item price quoted by the 
fabricator.
    (3) As used in this section, the term costs allocable to contract 
performance with respect to undelivered equipment or items includes all 
expenses of contract performance which are reasonable, allocable to the 
contract, consistent with sound and generally accepted accounting 
principles and practices consistently applied, and which are not 
excluded by the contract.
    (e) Enforcement. A subcontractor or supplier which is determined by 
the Regional Administrator to have frustrated the intent of the 
provisions regarding progress payments for major equipment or 
specifically manufactured equipment through intentional forfeiture of 
its bond or failure to deliver the equipment may be determined 
nonresponsible and ineligible for further work under EPA grants.
    (f) Contract provisions. Where applicable, appropriate provisions 
regarding progress payments must be included in each contract and 
subcontract. Grantees must use clauses acceptable to the EPA Regional 
Administrator.
    (g) Implementation. The foregoing progress payments policy should be 
implemented in invitations for bids under step 3 grants. If provision 
for progress payments is made after contract award, it must be for 
consideration that the grantee deems adequate.



Sec. 35.938-7  Retention from progress payments.

    (a) The grantee may retain a portion of the amount otherwise due the 
contractor. Except as State law otherwise provides, the amount the 
grantee retains shall be limited to the following:
    (1) Withholding of not more than 10 percent of the payment claimed 
until work is 50 percent complete;
    (2) When work is 50 percent complete, reduction of the withholding 
to 5 percent of the dollar value of all work satisfactorily completed to 
date, provided that the contractor is making satisfactory progress and 
there is no specific cause for greater withholding;
    (3) When the work is substantially complete (operational or 
beneficial occupancy), the withheld amount shall be further reduced 
below 5 percent to only that amount necessary to assure completion.
    (4) The grantee may reinstate up to 10 percent withholding if the 
grantee determines, at its discretion, that the contractor is not making 
satisfactory progress or there is other specific cause for such 
withholding.
    (5) The grantee may accept securities negotiable without recourse, 
condition or restrictions, a release of retainage bond, or an 
irrevocable letter of credit provided by the contractor instead of all 
or part of the cash retainage.
    (b) The foregoing retention policy shall be implemented with respect 
to

[[Page 529]]

all step 3 projects for which plans and specifications are approved 
after March 1, 1976. Appropriate provision to assure compliance with 
this policy must be included in the bid documents for such projects 
initially or by addendum before the bid submission date, and as a 
special condition in the grant agreement or in a grant amendment. For 
all previous active projects, the grantee may implement the foregoing 
policy through contract amendment upon written request to the grantee by 
the contractor upon consideration that the grantee deems adequate.
    (c) Under Sec. 30.620-3 of this subchapter, a grantee who delays 
disbursement of grant funds will be required to credit to the United 
States all interest earned on those funds.



Sec. 35.938-8  Required construction contract provisions.

    Each construction contract must include the ``Supplemental General 
Conditions'' set forth in appendix C-2 to this subpart.



Sec. 35.938-9  Subcontracts under construction contracts.

    (a) The award or execution of subcontracts by a prime contractor 
under a construction contract awarded to the prime contractor by the 
grantee, and the procurement and negotiation procedures used by prime 
contractors in awarding or executing subcontracts are not required to 
comply with any of the provisions, selection procedures, policies or 
principles set forth in Sec. 35.936 or Sec. 35.938 except those 
specifically stated in this section. In addition, the bid protest 
procedures of Sec. 35.939 are not available to parties executing 
subcontracts with prime contractors except as specifically provided in 
that section.
    (b) The award or execution of subcontracts by a prime contractor 
under a formally advertised, competitively bid, fixed price construction 
contract awarded to the prime contractor by the grantee, and the 
procurement and negotiation procedures used by such prime contractors in 
awarding or executing such subcontracts must comply with the following:
    (1) Section 35.936-2 (Grantee procurement systems; State or local 
law);
    (2) Section 35.936-7 (Small and minority business);
    (3) Section 35.936-13 (Specifications);
    (4) Section 35.936-15 (Limitations on subagreement award);
    (5) Section 35.936-17 (Fraud and other unlawful or corrupt 
practices);
    (6) Section 35.938-5(d) (Negotiation of contract amendments); and
    (7) Applicable subagreement clauses (see appendix C-2, clauses 8, 
10, 14, 15, 16; note clause 11).
    (c) The award of subcontracts under construction contracts not 
described above in paragraph (b) of this section and the procurement and 
negotiation procedures of prime contractors on contracts not meeting 
that description must comply with paragraphs (b)(1) through (4) of this 
section as well as the principles of Sec. 35.938-5.



Sec. 35.939  Protests.

    (a) General. A protest based upon an alleged violation of the 
procurement requirements of Secs. 35.936 through 35.938-9 of this 
subpart may be filed against a grantee's procurement action by a party 
with an adversely affected direct financial interest. Any such protest 
must be received by the grantee within the time period in paragraph 
(b)(1) of this section. The grantee is responsible for resolution of the 
protest before the taking of the protested action, in accordance with 
paragraph (d) of this section, except as otherwise provided by paragraph 
(j) or (k) or Sec. 35.938-4(h)(5). The Regional Administrator will 
review grantee protest determinations in accordance with paragraph (e) 
of this section, if a timely request for such review is filed under 
paragraph (b)(2) of this section. In the case of protests which he 
determines are untimely, frivolous, or without merit, the Regional 
Administrator may take such actions as are described in paragraphs 
(f)(7), (i)(2), and (k) of this section.
    (b) Time limitations. (1) A protest under paragraph (d) of this 
section should be made as early as possible during the procurement 
process (for example, immediately after issuance of a solicitation for 
bids) to avoid disruption of or unnecessary delay to the procurement 
process. A protest authorized by paragraph (d) of this section must be 
received by the grantee within 1

[[Page 530]]

week after the basis for the protest is known or should have been known, 
whichever is earlier (generally, for formally advertised procurement, 
after bid opening, within 1 week after the basis for the protest is, or 
should have been, known).
    (i) However, in the case of an alleged violation of the 
specification requirements of Sec. 35.936-13 (e.g., that a product fails 
to qualify as an ``or equal'') or other specification requirements of 
this subpart, a protest need not be filed prior to the opening of bids. 
But the grantee may resolve the issue before receipt of bids or 
proposals through a written or other formal determination, after notice 
and opportunity to comment is afforded to any party with a direct 
financial interest.
    (ii) In addition, where an alleged violation of the specification 
requirements of Sec. 35.936-13 or other requirements of this subpart 
first arises subsequent to the receipt of bids or proposals, the grantee 
must decide the protest if the protest was received by the grantee 
within 1 week of the time that the grantee's written or other formal 
notice is first received.
    (2) A protest appeal authorized by paragraph (e) of this section 
must be received by the Regional Administrator within 1 week after the 
complainant has received the grantee's determination.
    (3) If a protest is mailed, the complaining party bears the risk of 
nondelivery within the required time period. It is suggested that all 
documents transmitted in accordance with this section be mailed by 
certified mail (return receipt requested) or otherwise delivered in a 
manner which will objectively establish the date of receipt. Initiation 
of protest actions under paragraph (d) or (e) of this section may be 
made by brief telegraphic notice accompanied by prompt mailing or other 
delivery of a more detailed statement of the basis for the protest. 
Telephonic protests will not be considered.
    (c) Other initial requirements. (1) The initial protest document 
must briefly state the basis for the protest, and should--
    (i) Refer to the specific section(s) of this subpart which allegedly 
prohibit the procurement action;
    (ii) Specifically request a determination pursuant to this section;
    (iii) Identify the specific procurement document(s) or portion(s) of 
them in issue; and
    (iv) Include the name, telephone number, and address of the person 
representing the protesting party.
    (2) The party filing the protest must concurrently transmit a copy 
of the initial protest document and any attached documentation to all 
other parties with a direct financial interest which may be adversely 
affected by the determination of the protest (generally, all bidders or 
proposers who appear to have a substantial and reasonable prospect of 
receiving an award if the protest is denied or sustained) and to the 
appropriate EPA Regional Administrator.
    (d) Grantee determination. (1) The grantee is responsible for the 
initial resolution of protests based upon alleged violations of the 
procurement requirements of this subpart.
    (2) When the grantee receives a timely written protest, he must 
defer the protested procurement action (see paragraph (h) of this 
section) and:
    (i) Afford the complaining party and interested parties an 
opportunity to present arguments in support of their views in writing or 
at a conference or other suitable meeting (such as a city council 
meeting),
    (ii) Inform the complainant and other interested parties of the 
procedures which the grantee will observe for resolution of the protest;
    (iii) Obtain an appropriate extension of the period for acceptance 
of the bid and bid bond(s) of each interested party, where applicable; 
failure to agree to a suitable extension of such bid and bid bond(s) by 
the party which initiated the protest shall be cause for summary 
dismissal of the protest by the grantee or the Regional Administrator; 
and
    (iv) Promptly deliver (preferably by certified mail, return receipt 
requested, or by personal delivery) its written determination of the 
protest to the complaining party and to each other participating party.
    (3) The grantee's determination must be accompanied by a legal 
opinion addressing issues arising under State,

[[Page 531]]

territorial, or local law (if any) and, where step 3 construction is 
involved, by an engineering report, if appropriate.
    (4) The grantee should decide the protest as promptly as possible--
generally within 3 weeks after receipt of a protest, unless extenuating 
circumstances require a longer period of time for proper resolution of 
the protest.
    (e) Regional Administrator review. (1) A party with a direct 
financial interest adversely affected by a grantee determination made 
under paragraph (d) with respect to a procurement requirement of this 
subpart may submit a written request to the Regional Administrator for 
his review of such determination. Any such request must be in writing, 
must adequately state the basis for the protest (including reference to 
the specific section(s) of this subpart alleged to prohibit the 
procurement action), and must be received by the Regional Administrator 
within 1 week after the complaining party has received the grantee's 
determination of the protest. A copy of the grantee's determination and 
other documentation in support of the request for review shall be 
transmitted with the request.
    (2) The Regional Counsel or his delegee will afford both the grantee 
and the complaining party, as well as any other party with a financial 
interest which may be adversely affected by determination of the 
protest, an opportunity to present arguments in support of their views 
in writing or at a conference at a time and place convenient to the 
parties as determined by the Regional Counsel or his delegee, and he 
shall thereafter promptly submit in writing his report and 
recommendations (or recommended determination) concerning the protest to 
the Regional Administrator.
    (3) Any such conference should be held within not more than 10 days 
after receipt of the request for review and the report should be 
transmitted to the Regional Administrator within 10 days after the date 
set for receipt of the participants' written materials or for the 
conference. The Regional Administrator should transmit his determination 
of the protest with an adequate explanation thereof to the grantee and 
simultaneously to each participating party within 1 week after receipt 
of the report and recommendations. His determination shall constitute 
final agency action, from which there shall be no further administrative 
appeal. The Regional Counsel may extend these time limitations, where 
appropriate.
    (4) The Regional Administrator may review the record considered by 
the grantee, and any other documents or arguments presented by the 
parties, to determine whether the grantee has complied with this subpart 
and has a rational basis for its determination.
    (5) If a determination is made by the Regional Administrator which 
is favorable to the complainant, the grantee's procurement action (for 
example, contract award) must be taken in accordance with such 
determination.
    (f) Procedures. (1) Where resolution of an issue properly raised 
with respect to a procurement requirement of this subpart requires prior 
or collateral resolution of a legal issue arising under State or local 
law, and such law is not clearly established in published legal 
decisions of the State or other relevant jurisdiction, the grantee or 
Regional Administrator may rely upon:
    (i) An opinion of the grantee's legal counsel adequately addressing 
the issue (see Sec. 35.936-2(b));
    (ii) The established or consistent practice of the grantee, to the 
extent appropriate; or
    (iii) The law of other States or local jurisdictions as established 
in published legal decisions; or
    (iv) If none of the foregoing adequately resolve the issue, 
published decisions of the Comptroller General of the United States 
(U.S. General Accounting Office) or of the Federal courts addressing 
Federal requirements comparable to procurement requirements of this 
subpart.
    (2) For the determination of Federal issues presented by the 
protest, the Regional Administrator may rely upon:
    (i) Determinations of other protests decided under this section, 
unless such protests have been reversed; and
    (ii) Decisions of the Comptroller General of the United States or of 
the Federal courts addressing Federal requirements comparable to 
procurement requirements of this subpart.

[[Page 532]]

    (3) The Regional Counsel may establish additional procedural 
requirements or deadlines for the submission of materials by parties or 
for the accomplishment of other procedures. Where time limitations are 
established by this section or by the Regional Counsel, participants 
must seek to accomplish the required action as promptly as possible in 
the interest of expediting the procurement action.
    (4) A party who submits a document subsequent to initiation of a 
protest proceeding under paragraph (d) or (e) of this section must 
simultaneously furnish each other party with a copy of such document.
    (5) The procedures established by this section are not intended to 
preclude informal resolution or voluntary withdrawal of protests. A 
complainant may withdraw its appeal at any time, and the protest 
proceeding shall thereupon be terminated.
    (6) The Regional Administrator may utilize appropriate provisions of 
this section in the discharge of his responsibility to review grantee 
procurement under 40 CFR 35.935-2.
    (7) A protest may be dismissed for failure to comply with procedural 
requirements of this section.
    (g) Burden of proof. (1) In proceedings under paragraphs (d) and (e) 
of this section, if the grantee proposes to award a formally advertised, 
competitively bid, fixed price contract to a party who has submitted the 
apparent lowest price, the party initiating the protest will bear the 
burden of proof in the protest proceedings.
    (2) In the proceedings under paragraph (e) of this section--
    (i) If the grantee proposes to award a formally advertised, 
competitively bid, fixed-price contract to a bidder other than the 
bidder which submitted the apparent lowest price, the grantee will bear 
the burden of proving that its determination concerning responsiveness 
is in accordance with this subchapter; and
    (ii) If the basis for the grantee's determination is a finding of 
nonresponsibility, the grantee must establish and substantiate the basis 
for its determination and must adequately establish that such 
determination has been made in good faith.coverage) as is required by 
State or local law or the grantee or as is customary and appropriate. 
Under the Flood Disaster Protection Act of 1973, a contractor must 
purchase flood insurance to cover his risk of loss if the grantee has 
not purchased the insurance (see Sec. 30.405-10 of this subchapter).



Sec. 35.940  Determination of allowable costs.

    The grantee will be paid, upon request in accordance with 
Sec. 35.945, for the Federal share of all necessary costs within the 
scope of the approved project and determined to be allowable in 
accordance with Sec. 30.705 of this chapter, this subpart, and the grant 
agreement.



Sec. 35.940-1  Allowable project costs.

    Allowable costs include:
    (a) Costs of salaries, benefits, and expendable material the grantee 
incurs for the project, except as provided in Sec. 35.940-2(g);
    (b) Costs under construction contracts;
    (c) Professional and consultant services;
    (d) Facilities planning directly related to the treatment works;
    (e) Sewer system evaluation (Sec. 35.927);
    (f) Project feasibility and engineering reports;
    (g) Costs required under the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970 (42 U.S.C. 4621 et seq., 4651 
et seq.), and part 4 of this chapter;
    (h) Costs of complying with the National Environmental Policy Act, 
including costs of public notices and hearings;
    (i) Preparation of construction drawings, specifications, estimates, 
and construction contract documents;
    (j) Landscaping;
    (k) Removal and relocation or replacement of utilities, for which 
the grantee is legally obligated to pay;
    (l) Materials acquired, consumed, or expended specifically for the 
project;
    (m) A reasonable inventory of laboratory chemicals and supplies 
necessary to initiate plant operations;
    (n) Development and preparation of an operation and maintenance 
manual;

[[Page 533]]

    (o) A plan of operation, in accordance with guidance issued by the 
Administrator;
    (p) Start-up services for new treatment works, in accordance with 
guidance issued by the Administrator;
    (q) Project identification signs (Sec. 30.625-3 of this chapter);
    (r) Development of a municipal pretreatment program approvable under 
part 403 of this chapter, and purchase of monitoring equipment and 
construction of facilities to be used by the municipal treatment works 
in the pretreatment program;
    (s) Costs of complying with the procurement requirements of these 
regulations (see Sec. 35.936-20).
    (t) Reasonable costs of public participation incurred by grantees 
which are identified in a public participation work plan, or which are 
otherwise approved by EPA, shall be allowable.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 10304, Feb. 16, 1979]



Sec. 35.940-2  Unallowable costs.

    Costs which are not necessary for the construction of a treatment 
works project are unallowable. Such costs include, but are not limited 
to:
    (a) Basin or areawide planning not directly related to the project;
    (b) Bonus payments not legally required for completion of 
construction before a contractual completion date;
    (c) Personal injury compensation or damages arising out of the 
project, whether determined by adjudication, arbitration, negotiation, 
or otherwise;
    (d) Fines and penalties due to violations of, or failure to comply 
with, Federal, State, or local laws;
    (e) Costs outside the scope of the approved project;
    (f) Interest on bonds or any other form of indebtedness required to 
finance the project costs;
    (g) Ordinary operating expenses of local government, such as 
salaries and expenses of a mayor, city council members, or city 
attorney, except as provided in Sec. 35.940-4;
    (h) Site acquisition (for example, sewer rights-of-way, sewage 
treatment plantsite, sanitary landfills and sludge disposal areas) 
except as otherwise provided in Sec. 35.940-3(a);
    (i) Costs for which payment has been or will be received under 
another Federal assistance program;
    (j) Costs of equipment or material procured in violation of 
Sec. 35.938-4(h);
    (k) Costs of studies under Sec. 35.907 (d)(6) and (7) when performed 
solely for the purpose of seeking an allowance for removal of pollutants 
under part 403 of this chapter;
    (l) Costs of monitoring equipment used by industry for sampling and 
analysis of industrial discharges to municipal treatment works;
    (m) Construction of privately-owned treatment works, including 
pretreatment facilities, except as authorized by section 201(h) of the 
Act and Sec. 35.918;
    (n) Preparation of a grant application, including a plan of study.



Sec. 35.940-3  Costs allowable, if approved.

    Certain direct costs are sometimes necessary for the construction of 
a treatment works. The following costs are allowable if reasonable and 
if the Regional Administrator approves them in the grant agreement.
    (a) Land acquired after October 17, 1972, that will be an integral 
part of the treatment process, or that will be used for ultimate 
disposal of residues resulting from such treatment (for example, land 
for spray irrigation of sewage effluent).
    (b) Land acquired after December 26, 1977, that will be used for 
storage of treated wastewater in land treatment systems before land 
application.
    (c) Land acquired after December 26, 1977, that will be used for 
composting or temporary storage of compost residues which result from 
wastewater treatment, if EPA has approved a program for use of the 
compost.
    (d) Acquisition of an operable portion of a treatment works. This 
type of acquisition is generally not allowable except when determined by 
the Regional Administrator in accordance with guidance issued by the 
Administrator.
    (e) Rate determination studies required under Sec. 35.925-11.
    (f) A limited amount of end-of-pipe sampling and associated analysis 
of industrial discharges to municipal treatment works as provided in 
Sec. 35.907(f).

[[Page 534]]



Sec. 35.940-4  Indirect costs.

    Indirect costs shall be allowable in accordance with an indirect 
cost agreement negotiated and incorporated in the grant agreement. An 
indirect cost agreement must identify those cost elements allowable 
under Sec. 35.940-1. Where the benefits derived from indirect services 
cannot be readily determined, a lump sum for overhead may be negotiated 
if EPA determines that this amount will be approximately the same as the 
actual indirect costs.



Sec. 35.940-5  Disputes concerning allowable costs.

    The grantee should seek to resolve any questions relating to cost 
allowability or allocation at its earliest opportunity (if possible, 
before execution of the grant agreement). Final determinations 
concerning the allowability of costs shall be conclusive unless appealed 
within 30 days in accordance with the ``Disputes'' provisions of part 
30, subpart J, of this subchapter.



Sec. 35.945  Grant payments.

    The grantee shall be paid the Federal share of allowable project 
costs incurred within the scope of an approved project and which are 
currently due and payable from the grantee (i.e., not including withheld 
or deferred amounts), subject to the limitations of Secs. 35.925-18, 
35.930-5, 35.930-6, and 35.965 (b) and (c), up to the grant amount set 
forth in the grant agreement and any amendments thereto. Payments for 
engineering services for step 1, 2 or 3 shall be made in accordance with 
Sec. 35.937-10 and payments for step 3 construction contracts shall be 
made in accordance with Secs. 35.938-6 and 35.938-7. All allowable costs 
incurred before initiation of construction of the project must be 
claimed in the application for grant assistance for that project before 
the award of the assistance or no subsequent payment will be made for 
the costs.
    (a) Initial request for payment. Upon award of grant assistance, the 
grantee may request payment for the unpaid Federal share of actual or 
estimated allowable project costs incurred before grant award subject to 
the limitations of Sec. 35.925-18. Payment for such costs shall be made 
in accordance with the negotiated payment schedule included in the grant 
agreement.
    (b) Interim requests for payment. The grantee may submit requests 
for payments for allowable costs in accordance with the negotiated 
payment schedule included in the grant agreement. Upon receipt of a 
request for payment, subject to the limitations set forth in 
Sec. 30.615-3 of this subchapter and Secs. 35.935-12, 35.935-13, and 
35.935-16, the Regional Administrator shall cause to be disbursed from 
available appropriated funds such amounts as are necessary so that the 
total amount of Federal payments to the grantee for the project is equal 
to the Federal share of the actual or estimated allowable project costs 
incurred to date, as certified by the grantee in its most recent request 
for payment. Generally, payments will be made within 20 days after 
receipt of a request for payment.
    (c) Adjustment. At any time before final payment under the grant, 
the Regional Administrator may cause any request(s) for payment to be 
reviewed or audited. Based on such review or audit, any payment may be 
reduced for prior overpayment or increased for prior underpayment.
    (d) Refunds, rebates, credits, etc. The Federal share of any 
refunds, rebates, credits, or other amounts (including any interest) 
that accrue to or are received by the grantee for the project, and that 
are properly allocable to costs for which the grantee has been paid 
under a grant, must be credited to the current State allotment or paid 
to the United States. Reasonable expenses incurred by the grantee for 
the purpose of securing such refunds, rebates, credits, or other amounts 
shall be allowable under the grant when approved by the Regional 
Administrator.
    (e) Final payment. After completion of final inspection under 
Sec. 35.935-14, approval of the request for payment which the grantee 
designates as the ``final payment request,'' and the grantee's 
compliance with all applicable requirements of this subchapter and the 
grant agreement, the Regional Administrator shall pay to the grantee

[[Page 535]]

any balance of the Federal share of allowable project costs which has 
not already been paid. The grantee must submit the final payment request 
promptly after final inspection.
    (f) Assignment and release. By its acceptance of final payment, the 
grantee agrees to assign to the United States the Federal share of 
refunds, rebates, credits or other amounts (including any interest) 
properly allocable to costs for which the grantee has been paid by the 
Government under the grant. The grantee thereby also releases and 
discharges the United States, its officers, agents, and employees from 
all liabilities, obligations, and claims arising out of the project work 
or under the grant, subject only to exceptions previously specified in 
writing between the Regional Administrator and the grantee.
    (g) Payment of costs incurred under the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act. Notwithstanding 
the provisions of paragraph (a) of this section, if the Regional 
Administrator determines it is necessary for the expeditious completion 
of a project, he may make advance payment after grant award under 
Sec. 4.502(c) of this subchapter for the EPA share of the cost of any 
payment of relocation assistance by the grantee. The requirements in 
Sec. 30.615-1 (b) and (d) of this subchapter apply to any advances of 
funds for assistance payments.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 39340, July 5, 1979]



Sec. 35.950  Suspension, termination or annulment of grants.

    Grants may be suspended under Sec. 30.915, or terminated or annulled 
under Sec. 30.920. The State agency shall be concurrently notified in 
writing of any such action.



Sec. 35.955  Grant amendments to increase grant amounts.

    Grant agreements may be amended under Sec. 30.900-1 of this chapter 
for project changes which have been approved under Secs. 30.900 and 
35.935-11 of this subchapter. However, no grant agreement may be amended 
to increase the amount of a grant unless the State agency has approved 
the grant increase from available State allotments and reallotments 
under Sec. 35.915.



Sec. 35.960  Disputes.

    (a) The Regional Administrator's final determination on the 
ineligibility of a project (see Sec. 35.915(h)) or a grant applicant 
(see Sec. 35.920-1), on the Federal share (see Sec. 35.930-5(b)), or on 
any dispute arising under a grant shall be final and conclusive unless 
the applicant or grantee appeals within 30 days from the date of receipt 
of the final determination. (See subpart J of part 30 of this 
subchapter.)
    (b) The EPA General Counsel will publish periodically as a Notice 
document in the Federal Register a digest of grant appeals decisions.



Sec. 35.965  Enforcement.

    If the Regional Administrator determines that the grantee has failed 
to comply with any provision of this subpart, he may impose any of the 
following sanctions:
    (a) The grant may be terminated or annulled under Sec. 30.920 of 
this subchapter;
    (b) Project costs directly related to the noncompliance may be 
disallowed;
    (c) Payment otherwise due to the grantee of up to 10 percent may be 
withheld (see Sec. 30.615-3 of this chapter);
    (d) Project work may be suspended under Sec. 30.915 of this 
subchapter;
    (e) A noncomplying grantee may be found nonresponsible or ineligible 
for future Federal assistance or a noncomplying contractor may be found 
nonresponsible or ineligible for approval for future contract award 
under EPA grants;
    (f) An injunction may be entered or other equitable relief afforded 
by a court of appropriate jurisdiction;
    (g) Such other administrative or judicial action may be instituted 
if it is legally available and appropriate.



Sec. 35.970  Contract enforcement.

    (a) Regional Administrator authority. At the request of a grantee, 
the Regional Administrator is authorized to provide technical and legal 
assistance in the administration and enforcement of any contract related 
to treatment works for which an EPA grant was

[[Page 536]]

made and to intervene in any civil action involving the enforcement of 
such contracts, including contract disputes which are the subject of 
either arbitration or court action. Any assistance is to be provided at 
the discretion of the Regional Administrator and in a manner determined 
to best serve the public interest. Factors which the Regional 
Administrator may consider in determining whether to provide assistance 
are:
    (1) Available agency resources.
    (2) Planned or ongoing enforcement action.
    (3) The grantee's demonstration of good faith to resolve contract 
matters at issue.
    (4) The grantee's adequate documentation.
    (5) The Federal interest in the contract matters at issue.
    (b) Grantee request. The grantee's request for technical or legal 
assistance should be submitted in writing and be accompained by 
documentation adequate to inform the Regional Administrator of the 
nature and necessity of the requested assistance. A grantee may orally 
request assistance from the Regional Administrator on an emergency 
basis.
    (c) Privity of contract. The Regional Administrator's technical or 
legal involvement in any contract dispute will not make EPA a party to 
any contract entered into by the grantee. (See Sec. 35.936-8.)
    (d) Delegation to States. The authority to provide technical and 
legal assistance in the administration of contract matters described in 
this section may be delegated to a State agency under subpart F of this 
part if the State agency can demonstrate that it has the appropriate 
legal authority to undertake such functions.

    Appendix A to Subpart E of Part 35--Cost-Effectiveness Analysis 
                               Guidelines

    1. Purpose. These guidelines represent Agency policies and 
procedures for determining the most cost-effective waste treatment 
management system or component part.
    2. Authority. These guidelines are provided under sections 212(2)(C) 
and 217 of the Clean Water Act.
    3. Applicability. These guidelines, except as otherwise noted, apply 
to all facilities planning under step 1 grant assistance awarded after 
September 30, 1978. The guidelines also apply to State or locally 
financed facilities planning on which subsequent step 2 or step 3 
Federal grant assistance is based.
    4. Definitions. Terms used in these guidelines are defined as 
follows:
    a. Waste treatment management system. Used synonymously with 
``complete waste treatment system'' as defined in Sec. 35.905 of this 
subpart.
    b. Cost-effectiveness analysis. An analysis performed to determine 
which waste treatment management system or component part will result in 
the minimum total resources costs over time to meet Federal, State, or 
local requirements.
    c. Planning period. The period over which a waste treatment 
management system is evaluated for cost-effectiveness. The planning 
period begins with the system's initial operation.
    d. Useful life. The estimated period of time during which a 
treatment works or a component of a waste treatment management system 
will be operated.
    e. Disaggregation. The process or result of breaking down a sum 
total of population or economic activity for a State or other 
jurisdiction (i.e., designated 208 area or SMSA) into smaller areas or 
jurisdictions.
    5. Identification, selection, and screening of alternatives. a. 
Identification of alternatives. All feasible alternative waste 
management systems shall be initially identified. These alternatives 
should include systems discharging to receiving waters, land application 
systems, on-site and other non-centralized systems, including revenue 
generating applications, and systems employing the reuse of wastewater 
and recycyling of pollutants. In identifying alternatives, the applicant 
shall consider the possibility of no action and staged development of 
the system.
    b. Screening of alternatives. The identified alternatives shall be 
systematically screened to determine those capable of meeting the 
applicable Federal, State and local criteria.
    c. Selection of alternatives. The identified alternatives shall be 
initially analyzed to determine which systems have cost-effective 
potential and which should be fully evaluated according to the cost-
effectiveness analysis procedures established in the guidelines.
    d. Extent of effort. The extent of effort and the level of 
sophistication used in the cost-effectiveness analysis should reflect 
the project's size and importance. Where processes or techniques are 
claimed to be innovative technology on the basis of the cost reduction 
criterion contained in paragraph 6e(1) of appendix E to this subpart, a 
sufficiently detailed cost analysis shall be included to substantiate 
the claim to the satisfaction of the Regional Administrator.

[[Page 537]]

    6. Cost-effectiveness analysis procedures.
    a. Method of analysis. The resources costs shall be determined by 
evaluating opportunity costs. For resources that can be expressed in 
monetary terms, the analysis will use the interest (discount) rate 
established in paragraph 6e. Monetary costs shall be calculated in terms 
of present worth values or equivalent annual values over the planning 
period defined in section 6b. The analysis shall descriptively present 
nonmonetary factors (e.g., social and environmental) in order to 
determine their significance and impact. Nonmonetary factors include 
primary and secondary environmental effects, implementation capability, 
operability, performance reliability and flexibility. Although such 
factors as use and recovery of energy and scarce resources and recycling 
of nutrients are to be included in the monetary cost analysis, the non-
monetary evaluation shall also include them. The most cost-effective 
alternative shall be the waste treatment management system which the 
analysis determines to have the lowest present worth or equivalent 
annual value unless nonmonetary costs are overriding. The most cost-
effective alternative must also meet the minimum requirements of 
applicable effluent limitations, groundwater protection, or other 
applicable standards established under the Act.
    b. Planning period. The planning period for the cost-effectiveness 
analysis shall be 20 years.
    c. Elements of monetary costs. The monetary costs to be considered 
shall include the total value of the resources which are attributable to 
the waste treatment management system or to one of its component parts. 
To determine these values, all monies necessary for capital construction 
costs and operation and maintenance costs shall be identified.
    (1) Capital construction costs used in a cost-effective analysis 
shall include all contractors' costs of construction including overhead 
and profit, costs of land, relocation, and right-of-way and easement 
acquisition; costs of design engineering, field exploration and 
engineering services during construction; costs of administrative and 
legal services including costs of bond sales; startup costs such as 
operator training; and interest during construction. Capital 
construction costs shall also include contingency allowances consistent 
with the cost estimate's level of precision and detail.
    (2) The cost-effectiveness analysis shall include annual costs for 
operation and maintenance (including routine replacement of equipment 
and equipment parts). These costs shall be adequate to ensure effective 
and dependable operation during the system's planning period. Annual 
costs shall be divided between fixed annual costs and costs which would 
depend on the annual quantity of waste water collected and treated. 
Annual revenues generated by the waste treatment management system 
through energy recovery, crop production, or other outputs shall be 
deducted from the annual costs for operation and maintenance in 
accordance with guidance issued by the Administrator.
    d. Prices. The applicant shall calculate the various components of 
costs on the basis of market prices prevailing at the time of the cost-
effectiveness analysis. The analysis shall not allow for inflation of 
wages and prices, except those for land, as described in paragraph 6h(1) 
and for natural gas. This stipulation is based on the implied assumption 
that prices, other than the exceptions, for resources involved in 
treatment works construction and operation, will tend to change over 
time by approximately the same percentage. Changes in the general level 
of prices will not affect the results of the cost-effectiveness 
analysis. Natural gas prices shall be escalated at a compound rate of 4 
percent annually over the planning period, unless the Regional 
Administrator determines that the grantee has justified use of a greater 
or lesser percentage based upon regional differentials between 
historical natural gas price escalation and construction cost 
escalation. Land prices shall be appreciated as provided in paragraph 
6h(1). Both historical data and future projections support the gas and 
land price escalations relative to those for other goods and services 
related to waste water treatment. Price escalation rates may be updated 
periodically in accordance with Agency guidelines.
    e. Interest (discount) rate. The rate which the Water Resources 
Council establishes annually for evaluation of water resource projects 
shall be used.
    f. Interest during construction. (1) Where capital expenditures can 
be expected to be fairly uniform during the construction period, 
interest during construction may be calculated at I=1/2PCi where:

I=the interest accrued during the construction period,
P=the construction period in years,
C=the total capital expenditures,
i=the interest rate (discount rate in section 6e).

    (2) Where expenditures will not be uniform, or when the construction 
period will be greater than 4 years, interest during construction shall 
be calculated on a year-by-year basis.
    g. Useful life. (1) The treatment works' useful life for a cost-
effectiveness analysis shall be as follows:

Land--permanent.
Waste water conveyance structures (includes collection systems, outfall 
pipes, interceptors, force mains, tunnels, etc.)--50 years.
Other structures (includes plant building, concrete process tankage, 
basins, lift stations structures, etc.)--30-50 years.

[[Page 538]]

Process equipment--15-20 years.
Auxiliary equipment--10-15 years.

    (2) Other useful life periods will be acceptable when sufficient 
justification can be provided. Where a system or a component is for 
interim service, the anticipated useful life shall be reduced to the 
period for interim service.
    h. Salvage value. (1) Land purchased for treatment works, including 
land used as part of the treatment process or for ultimate disposal of 
residues, may be assumed to have a salvage value at the end of the 
planning period at least equal to its prevailing market value at the 
time of the analysis. In calculating the salvage value of land, the land 
value shall be appreciated at a compound rate of 3 percent annually over 
the planning period, unless the Regional Administrator determines that 
the grantee has justified the use of a greater or lesser percentage 
based upon historical differences between local land cost escalation and 
construction cost escalation. The land cost escalation rate may be 
updated periodically in accordance with Agency guidelines. Right-of-way 
easements shall be considered to have a salvage value not greater than 
the prevailing market value at the time of the analysis.
    (2) Structures will be assumed to have a salvage value if there is a 
use for them at the end of the planning period. In this case, salvage 
value shall be estimated using straight line depreciation during the 
useful life of the treatment works.
    (3) The method used in paragraph 6h(2) may be used to estimate 
salvage value at the end of the planning period for phased additions of 
process equipment and auxiliary equipment.
    (4) When the anticipated useful life of a facility is less than 20 
years (for analysis of interim facilities), salvage value can be claimed 
for equipment if it can be clearly demonstrated that a specific market 
or reuse opportunity will exist.
    7. Innovative and alternative wastewater treatment processes and 
techniques.
    a. Beginning October 1, 1978, the capital costs of publicly owned 
treatment works which use processes and techniques meeting the criteria 
of appendix E to this subpart and which have only a water pollution 
control function, may be eligible if the present worth cost of the 
treatment works is not more than 115 percent of the present worth cost 
of the most cost-effective pollution control system, exclusive of 
collection sewers and interceptors common to the two systems being 
compared, by 115 percent, except for the following situation.
    b. Where innovative or alternative unit processes would serve in 
lieu of conventional unit processes in a conventional waste water 
treatment plant, and the present worth costs of the nonconventional unit 
processes are less than 50 percent of the present worth costs of the 
treatment plant, multiply the present worth costs of the replaced 
conventional processes by 115 percent, and add the cost of nonreplaced 
unit processes.
    c. The eligibility of multipurpose projects which combine a water 
pollution control function with another function, and which use 
processes and techniques meeting the criteria of appendix E to this 
subpart, shall be determined in accordance with guidance issued by the 
Administrator.
    d. The above provisions exclude individual systems under 
Sec. 35.918. The regional Administrator may allow a grantee to apply the 
15-percent preference authorized by this section to facility plans 
prepared under step 1 grant assistance awarded before October 1, 1978.
    8. Cost-effective staging and sizing of treatment works.
    a. Population projections. (1) The disaggregation of State 
projections of population shall be the basis for the population 
forecasts presented in individual facility plans, except as noted. These 
State projections shall be those developed in 1977 by the Bureau of 
Economic Analysis (BEA), Department of Commerce, unless, as of June 26, 
1978, the State has already prepared projections. These State 
projections may be used instead of the BEA projections if the year 2000 
State population does not exceed that of the BEA projection by more than 
5 percent. If the difference exceeds this amount, the State must either 
justify or lower its projection. Justification must be based on the 
historical and current trends (e.g., energy and industrial development, 
military base openings) not taken into account in the BEA projections. 
The State must submit for approval to the Administrator the request and 
justification for use of State projections higher than the BEA 
projections. By that time, the State shall issue a public notice of the 
request. Before the Administrator's approval of the State projection, 
the Regional Administrator shall solicit public comments and hold a 
public hearing if important issues are raised about the State 
projection's validity. State projections and disaggregations may be 
updated periodically in accordance with Agency guidelines.
    (2) Each State, working with designated 208 planning agencies, 
organizations certified by the Governor under section 174(a) of the 
Clean Air Act, as amended, and other regional planning agencies in the 
State's nondesignated areas, shall disaggregate the State population 
projection among its designated 208 areas, other standard metropolitan 
statistical areas (SMSA's) not included in the 208 area, and non-SMSA 
counties or other appropriate jurisdictions. States that had enacted 
laws, as of June 26, 1978, mandating disaggregation of State population 
totals to each county for areawide 208 planning may retain this 
requirement. When

[[Page 539]]

disaggregating the State population total, the State shall take into 
account the projected population and economic activities identified in 
facility plans, areawide 208 plans and municipal master plans. The sum 
of the disaggregated projections shall not exceed the State projection. 
Where a designated 208 area has, as of June 26, 1978, already prepared a 
population projection, it may be used if the year 2000 population does 
not exceed that of the disaggregated projection by more than 10 percent. 
The State may then increase its population projection to include all 
such variances rather than lower the population projection totals for 
the other areas. If the 208 area population forecast exceeds the 10 
percent allowance, the 208 agency must lower its projection within the 
allowance and submit the revised projection for approval to the State 
and the Regional Administrator.
    (3) The State projection totals and the disaggregations will be 
submitted as an output of the statewide water quality management 
process. The submission shall include a list of designated 208 areas, 
all SMSA's, and counties or other units outside the 208 areas. For each 
unit the disaggregated population shall be shown for the years 1980, 
1990, and 2000. Each State will submit its projection totals and 
disaggregations for the Regional Administrator's approval before October 
1, 1979. Before this submission, the State shall hold a public meeting 
on the disaggregations and shall provide public notice of the meeting 
consistent with part 25 of this chapter. (See Sec. 35.917(e).)
    (4) When the State projection totals and disaggregations are 
approved they shall be used thereafter for areawide water quality 
management planning as well as for facility planning and the needs 
surveys under section 516(b) of the Act. Within areawide 208 planning 
areas, the designated agencies, in consultation with the States, shall 
disaggregate the 208 area projections among the SMSA and non-SMSA areas 
and then disaggregate these SMSA and non-SMSA projections among the 
facility planning areas and the remaining areas. For those SMSA's not 
included within designated 208 planning areas, each State, with 
assistance from appropriate regional planning agencies, shall 
disaggregate the SMSA projection among the facility planning areas and 
the remaining areas within the SMSA. The State shall check the facility 
planning area forecasts to ensure reasonableness and consistency with 
the SMSA projections.
    (5) For non-SMSA facility planning areas not included in designated 
areawide 208 areas, the State may disaggregate population projections 
for non-SMSA counties among facility planning areas and remaining areas. 
Otherwise, the grantee is to forecast future population growth for the 
facility planning area by linear extrapolation of the recent past (1960 
to present) population trends for the planning area, use of correlations 
of planning area growth with population growth for the township, county 
or other larger parent area population, or another appropriate method. A 
population forecast may be raised above that indicated by the extension 
of past trends where likely impacts (e.g., significant new energy 
developments, large new industries, Federal installations, or 
institutions) justify the difference. The facilities plan must document 
the justification. These population forecasts should be based on 
estimates of new employment to be generated. The State shall check 
individual population forecasts to insure consistency with overall 
projections for non-SMSA counties and justification for any difference 
from past trends.
    (6) Facilities plans prepared under step 1 grant assistance awarded 
later than 6 months after Agency approval of the State disaggregations 
shall follow population forecasts developed in accordance with these 
guidelines.
    b. Wastewater flow estimates. (1) In determining total average daily 
flow for the design of treatment works, the flows to be considered 
include the average daily base flows (ADBF) expected from residential 
sources, commercial sources, institutional sources, and industries the 
works will serve plus allowances for future industries and nonexcessive 
infiltration/inflow. The amount of nonexcessive infiltration/inflow not 
included in the base flow estimates presented herein, is to be 
determined according to the Agency guidance for sewer system evaluation 
or Agency policy on treatment and control of combined sewer overflows 
(PRM 75-34).
    (2) The estimation of existing and future ADBF, exclusive of flow 
reduction from combined residential, commercial and institutional 
sources, shall be based upon one of the following methods:
    (a) Preferred method. Existing ADBF is estimated based upon a fully 
documented analysis of water use records adjusted for consumption and 
losses or on records of wastewater flows for extended dry periods less 
estimated dry weather infiltration. Future flows for the treatment works 
design should be estimated by determining the existing per capita flows 
based on existing sewered resident population and multiplying this 
figure by the future projected population to be served. Seasonal 
population can be converted to equivalent full time residents using the 
following multipliers:
Day-use visitor..................................................0.1-0.2
Seasonal visitor.................................................0.5-0.8
The preferred method shall be used wherever water supply records or 
wastewater flow data exist. Allowances for future increases of per 
capita flow over time will not be approved.

[[Page 540]]

    (b) Optional method. Where water supply and wastewater flow data are 
lacking, existing and future ADBF shall be estimated by multiplying a 
gallon per capita per day (gpcd) allowance not exceeding those in the 
following table, except as noted below, by the estimated total of the 
existing and future resident populations to be served. The tabulated 
ADBF allowances, based upon several studies of municipal water use, 
include estimates for commercial and institutional sources as well as 
residential sources. The Regional Administrator may approve exceptions 
to the tabulated allowances where large (more than 25 percent of total 
estimated ADBF) commercial and institutional flows are documented.

------------------------------------------------------------------------
                                                             Gallons per
                        Description                           capita per
                                                                 day
------------------------------------------------------------------------
Non-SMSA cities and towns with projected total 10-year             60-70
 populations of 5,000 or less..............................
Other cities and towns.....................................        65-80
------------------------------------------------------------------------

    c. Flow reduction. The cost-effectiveness analysis for each facility 
planning area shall include an evaluation of the costs, cost savings, 
and effects of flow reduction measures unless the existing ADBF from the 
area is less than 70 gpcd, or the current population of the applicant 
municipality is under 10,000, or the Regional Administrator exempts the 
area for having an effective existing flow reduction program. Flow 
reduction measures include public education, pricing and regulatory 
approaches or a combination of these. In preparing the facilities plan 
and included cost effectiveness analysis, the grantee shall, as a 
minimum:
    (1) Estimate the flow reductions implementable and cost effective 
when the treatment works become operational and after 10 and 20 years of 
operation. The measures to be evaluated shall include a public 
information program; pricing and regulatory approaches; installation of 
water meters, and retrofit of toilet dams and low-flow showerheads for 
existing homes and other habitations; and specific changes in local 
ordinances, building codes or plumbing codes requiring installations of 
water saving devices such as water meters, water conserving toilets, 
showerheads, lavatory faucets, and appliances in new homes, motels, 
hotels, institutions, and other establishments.
    (2) Estimate the costs of the proposed flow reduction measures over 
the 20-year planning period, including costs of public information, 
administration, retrofit of existing buildings and the incremental 
costs, if any, of installing water conserving devices in new homes and 
establishments.
    (3) Estimate the energy reductions; total cost savings for 
wastewater treatment, water supply and energy use; and the net cost 
savings (total savings minus total costs) attributable to the proposed 
flow reduction measures over the planning period. The estimated cost 
savings shall reflect reduced sizes of proposed wastewater treatment 
works plus reduced costs of future water supply facility expansions.
    (4) Develop and provide for implementing a recommended flow 
reduction program. This shall include a public information program 
highlighting effective flow reduction measures, their costs, and the 
savings of water and costs for a typical household and for the 
community. In addition, the recommended program shall comprise those 
flow reduction measures which are cost effective, supported by the 
public and within the implementation authority of the grantee or another 
entity willing to cooperate with the grantee.
    (5) Take into account in the design of the treatment works the flow 
reduction estimated for the recommended program.
    d. Industrial flows. (1) The treatment works' total design flow 
capacity may include allowances for industrial flows. The allowances may 
include capacity needed for industrial flows which the existing 
treatment works presently serves. However, these flows shall be 
carefully reviewed and means of reducing them shall be considered. 
Letters of intent to the grantee are required to document capacity needs 
for existing flows from significant industrial users and for future 
flows from all industries intending to increase their flows or relocate 
in the area. Requirements for letters of intent from significant 
industrial dischargers are set forth in Sec. 35.925-11(c).
    (2) While many uncertainties accompany forecasting future industrial 
flows, there is still a need to allow for some unplanned future 
industrial growth. Thus, the cost-effective (grant eligible) design 
capacity and flow of the treatment works may include (in addition to the 
existing industrial flows and future industrial flows documented by 
letters of intent) a nominal flow allowance for future nonidentifiable 
industries or for unplanned industrial expansions, provided that 208 
plans, land use plans and zoning provide for such industrial growth. 
This additional allowance for future unplanned industrial flow shall not 
exceed 5 percent (or 10 percent for towns with less than 10,000 
population) of the total design flow of the treatment works exclusive of 
the allowance or 25 percent of the total industrial flow (existing plus 
documented future), whichever is greater.
    e. Staging of treatment plants. (1) The capacity of treatment plants 
(i.e., new plants, upgraded plants, or expanded plants) to be funded 
under the construction grants program shall not exceed that necessary 
for wastewater flows projected during an initial staging period 
determined by one of the following methods:
    (a) First method. The grantee shall analyze at least three 
alternative staging periods (10

[[Page 541]]

years, 15 years, and 20 years). He shall select the least costly (i.e., 
total present worth or average annual cost) staging period.
    (b) Second method. The staging period shall not exceed the period 
which is appropriate according to the following table.

                  Staging Periods for Treatment Plants
------------------------------------------------------------------------
                                                                Staging
             Flow growth factors (20 years) \1\               period \2\
                                                                (years)
------------------------------------------------------------------------
Less than 1.3...............................................          20
1.3 to 1.8..................................................          15
Greater than 1.8............................................          10
------------------------------------------------------------------------
\1\ Ratio of wastewater flow expected at end of 20 year planning period
  to initial flow at the time the plant is expected to become
  operational.
\2\ Maximum initial staging period.

    (2) A municipality may stage the construction of a treatment plant 
for a shorter period than the maximum allowed under this policy. A 
shorter staging period might be based upon environmental factors 
(secondary impacts, compliance with other environmental laws under 
Sec. 35.925-14, energy conservation, water supply), an objective 
concerning planned modular construction, the utilization of temporary 
treatment plants, or attainment of consistency with locally adopted 
plans including comprehensive and capital improvement plans. However, 
the staging period in no case may be less than 10 years, because of 
associated cost penalties and the time necessary to plan, apply for and 
receive funding, and construct later stages.
    (3) The facilities plan shall present the design parameters for the 
proposed treatment plant. Whenever the proposed treatment plant 
components' size or capacity would exceed the minimum reliability 
requirements suggested in the EPA technical bulletin, ``Design Criteria 
for Mechanical, Electric, and Fluid System and Component Reliability,'' 
a complete justification, including supporting data, shall be provided 
to the Regional Administrator for his approval.
    f. Staging of interceptors. Since the location and length of 
interceptors will influence growth, interceptor routes and staging of 
construction shall be planned carefully. They shall be consistent with 
approved 208 plans, growth management plans and other environmental laws 
under Sec. 35.925-14 and shall also be consistent with Executive orders 
for flood plains and wetlands.
    (1) Interceptors may be allowable for construction grant funding if 
they eliminate existing point source discharges and accommodate flows 
from existing habitations that violate an enforceable requirement of the 
Act. Unless necessary to meet those objectives, interceptors should not 
be extended into environmentally sensitive areas, prime agricultural 
lands and other undeveloped areas (density less than one household per 2 
acres). Where extension of an interceptor through such areas would be 
necessary to interconnect two or more communities, the grantee shall 
reassess the need for the interceptor by further consideration of 
alternative wastewater treatment systems. If the reassessment 
demonstrates a need for the interceptor, the grantee shall evaluate the 
interceptor's primary and secondary environmental impacts, and provide 
for appropriate mitigating measures such as rerouting the pipe to 
minimize adverse impacts or restricting future connections to the pipe. 
Appropriate and effective grant conditions (e.g., restricting sewer 
hookups) should be used where necessary to protect environmentally 
sensitive areas or prime agricultural lands from new development. NPDES 
permits shall include the conditions to insure implementation of the 
mitigating measures when new permits are issued to the affected 
treatment facilities in those cases where the measures are required to 
protect the treatment facilities against overloading.
    (2) Interceptor pipe sizes (diameters for cylindrical pipes) 
allowable for construction grant funding shall be based on a staging 
period of 20 years. A larger pipe size corresponding to a longer staging 
period not to exceed 40 years may be allowed if the grantee can 
demonstrate, wherever water quality management plans or other plans 
developed for compliance with laws under Sec. 35.925-14 have been 
approved, that the larger pipe would be consistent with projected land 
use patterns in such plans and that the larger pipe would reduce overall 
(primary plus secondary) environmental impacts. These environmental 
impacts include:
    (a) Primary impacts. (i) Short-term disruption of traffic, business 
and other daily activities.
    (ii) Destruction of flora and fauna, noise, erosion, and 
sedimentation.
    (b) Secondary impacts. (i) Pressure to rezone or otherwise 
facilitate unplanned development.
    (ii) Pressure to accelerate growth for quicker recovery of the non-
Federal share of the interceptor investments.
    (iii) Effects on air quality and environmentally sensitive areas by 
cultural changes.
    (3) The estimation of peak flows in interceptors shall be based upon 
the following considerations:
    (a) Daily and seasonal variations of pipe flows, the timing of flows 
from the various parts of the tributary area, and pipe storage effects.
    (b) The feasibility of off-pipe storage to reduce peak flows.
    (c) The use of an appropriate peak flow factor that decreases as the 
average daily flow to be conveyed increases.
    9. State guidelines. If a State has developed or chooses to develop 
comprehensive guidelines on cost-effective sizing and staging of

[[Page 542]]

treatment works, the Regional Administrator may approve all or portions 
of the State guidance for application to step 1 facility plans. Approved 
State guidance may be used instead of corresponding portions of these 
guidelines, if the following conditions are met:
    a. The State guidance must be at least as stringent as the 
provisions of these guidelines.
    b. The State must have held at least one public hearing on proposed 
State guidance, under regulations in part 25 of this chapter, before 
submitting the guidance for Agency approval.
    10. Additional capacity beyond the cost-effective capacity. 
Treatment works which propose to include additional capacity beyond the 
cost-effective capacity determined in accordance with these guidelines 
may receive Federal grant assistance if the following requirements are 
met:
    a. The facilities plan shall determine the most cost-effective 
treatment works and its associated capacity in accordance with these 
guidelines. The facilities plan shall also determine the actual 
characteristics and total capacity of the treatment works to be built.
    b. Only a portion of the cost of the entire proposed treatment works 
including the additional capacity shall be eligible for Federal funding. 
The portion of the cost of construction which shall be eligible for 
Federal funding under sections 203(a) and 202(a) of the Act shall be 
equivalent to the estimated construction costs of the most cost-
effective treatment works. For the eligibility determination, the costs 
of construction of the actual treatment works and the most cost-
effective treatment works must be estimated on a consistent basis. Up-
to-date cost curves published by EPA's Office of Water Program 
Operations or other cost estimating guidance shall be used to determine 
the cost ratios between cost-effective project components and those of 
the actual project. These cost ratios shall be multiplied by the step 2 
cost and step 3 contract costs of actual components to determine the 
eligible step 2 and step 3 costs.
    c. The actual treatment works to be built shall be assessed. It must 
be determined that the actual treatment works meets the requirements of 
the National Environmental Policy Act and all applicable laws, 
regulations, and guidance, as required of all treatment works by 
Secs. 35.925-8 and 35.925-14. Particular attention should be given to 
assessing the project's potential secondary environmental effects and to 
ensuring that air quality standards will not be violated. The actual 
treatment works' discharge must not cause violations of water quality 
standards.
    d. The Regional Administrator shall approve the plans, 
specifications, and estimates for the actual treatment works under 
section 203(a) of the Act, even though EPA will be funding only a 
portion of its designed capacity.
    e. The grantee shall satisfactorily assure the Agency that the funds 
for the construction costs due to the addtional capacity beyond the 
cost-effective treatment works' capacity as determined by EPA (i.e., the 
ineligible portion of the treatment works), as well as the local share 
of the grant eligible portion of the construction costs will be 
available.
    f. The grantee shall execute appropriate grant conditions or 
releases providing that the Federal Government is protected from any 
further claim by the grantee, the State, or any other party for any of 
the costs of construction due to the additional capacity.
    g. Industrial cost recovery shall be based upon the portion of the 
Federal grant allocable to the treatment of industrial wastes.
    h. The grantee must implement a user charge system which applies to 
the entire service area of the grantee, including any area served by the 
additional capacity.

Appendix B to Subpart E of Part 35--Federal Guidelines--User Charges for 
       Operation and Maintenance of Publicly Owned Treatment Works

    (a) Purpose. To set forth advisory information concerning user 
charges based on actual use pursuant to section 204 of the Clean Water 
Act, hereinafter referred to as the Act. Applicable requirements are set 
forth in subpart E (40 CFR part 35).
    (b) Authority. The authority for establishment of the user charge 
guidelines is contained in section 204(b)(2) of the Act.
    (c) Background. Section 204(b)(1) of the Act provides that after 
March 1, 1973, Federal grant applicants shall be awarded grants only 
after the Regional Administrator has determined that the applicant has 
adopted or will adopt a system of charges to assure that each recipient 
of waste treatment services will pay its proportionate share of the 
costs of operation and maintenance, including replacement. The intent of 
the Act with respect to user charges is to distribute the cost of 
operation and maintenance of publicly owned treatment works to the 
pollutant source and to promote self-sufficiency of treatment works with 
respect to operation and maintenance costs. The 1977 Amendments amended 
section 204(b) to allow grantees to establish user charge systems based 
on ad valorem taxes. This appendix does not apply to ad valorem user 
charge systems.
    (d) Definitions--(1) Replacement. Expenditures for obtaining and 
installing equipment,

[[Page 543]]

accessories, or appurtenances which are necessary to maintain the 
capacity and performance during the service life of the treatment works 
for which such works were designed and constructed. The term ``operation 
and maintenance'' includes replacement.
    (2) User charge. A charge levied on users of treatment works for the 
cost of operation and maintenance of such works.
    (e) Classes of users. At least two basic types of user charge 
systems are common. The first is to charge each user a share of the 
treatment works operation and maintenance costs based on his estimate of 
measured proportional contribution to the total treatment works loading. 
The second system establishes classes for users having similar flows and 
waste water characteristics; i.e., levels of biochemical oxygen demand, 
suspended solids, etc. Each class is then assigned its share of the 
waste treatment works operation and maintenance costs based on the 
proportional contribution of the class to the total treatment works 
loading. Either system is in compliance with these guidelines.
    (f) Criteria against which to determine the adequacy of user 
charges. The user charge system shall be approved by the Regional 
Administrator and shall be maintained by the grantee in accordance with 
the following requirements:
    (1) The user charge system must result in the distribution of the 
cost of operation and maintenance of treatment works within the 
grantee's jurisdiction to each user (or user class) in proportion to 
such user's contribution to the total wastewater loading of the 
treatment works. Factors such as strength, volume, and delivery flow 
rate characteristics shall be considered and included as the basis for 
the user's contribution to ensure a proportional distribution of 
operation and maintenance costs to each user (or user class).
    (2) For the first year of operation, operation and maintenance costs 
shall be based upon past experience for existing treatment works or some 
other rational method that can be demonstrated to be applicable.
    (3) The grantee shall review user charges annually and revise them 
periodically to reflect actual treatment works operation and maintenance 
costs.
    (4) The user charge system must generate sufficient revenue to 
offset the cost of all treatment works operation and maintenance 
provided by the grantee.
    (5) The user charge system must be incorporated in one or more 
municipal legislative enactments or other appropriate authority. If the 
project is a regional treatment works accepting wastewaters from 
treatment works owned by others, then the subscribers receiving waste 
treatment services from the grantee shall have adopted user charge 
systems in accordance with these guidelines. Such user charge systems 
shall also be incorporated in the appropriate municipal legislative 
enactments or other appropriate authority.
    (g) Model user charge systems. The user charge system adopted by the 
applicant must result in the distribution of treatment works operation 
and maintenance costs to each user (or user class) in approximate 
proportion to his contribution to the total wastewater loading of the 
treatment works. The following user charge models can be used for this 
purpose; however, the applicant is not limited to their use. The symbols 
used in the models are as defined below:

CT = Total operation and maintenance (O. & M.) costs per unit 
          of time.
Cu = A user's charge for O. & M. per unit of time.
Cs = A surcharge for wastewaters of excessive strength.
Vc = O&M cost for transportation and treatment of a unit of 
          wastewater volume.
Vu = Volume contribution from a user per unit of time.
VT = Total volume contribution from all users per unit of 
          time.
Bc = O&M cost for treatment of a unit of biochemical oxygen 
          demand (BOD).
Bu = Total BOD contribution from a user per unit of time.
BT = Total BOD contribution from all users per unit of time.
B = Concentration of BOD from a user above a base level.
Sc = O&M cost for treatment of a unit of suspended solids.
Su = Total suspended solids contribution from a user per unit 
          of time.
S = Concentration of SS from a user above a base level.
Pc = O&M cost for treatment of a unit of any pollutant.
Pu = Total contribution of any pollutant from a user per unit 
          of time.
PT = Total contribution of any pollutant from all users per 
          unit of time.
P = Concentration of any pollutant from a user above a base level.

    (1) Model No. 1. If the treatment works is primarily flow dependent 
or if the BOD, suspended solids, and other pollutant concentrations 
discharged by all users are approximately equal, then user charges can 
be developed on a volume basis in accordance with the model below:

       Cu = CT/VT(Vu)

    (2) Model No. 2.--When BOD, suspended solids, or other pollutant 
concentrations from a user exceed the range of concentration of these 
pollutants in normal domestic sewage, a surcharge added to a base 
charge, calculated by means of Model No. 1, can be levied. The surcharge 
can be computed by the model below:

[[Page 544]]

                            Cs = 
       [Bc(B)=Sc(S)=Pc(P)]Vu

    (3) Model No. 3.--This model is commonly called the 
``quantity/quality formula'':

       Cu = Vc Vu=Bc 
     Bu=Sc Su=Pc Pu

    (h) Other considerations.--(1) Quantity discounts to large 
volume users will not be acceptable. Savings resulting from economies of 
scale should be apportioned to all users or user classes.
    (2) User charges may be established based on a percentage of the 
charge for water usage only in cases where the water charge is based on 
a constant cost per unit of consumption.

[39 FR 5270, Feb. 11, 1974]

 Appendix C-1 to Subpart E of Part 35--Required Provisions--Consulting 
                         Engineering Agreements

1. General
2. Responsibility of the Engineer
3. Scope of Work
4. Changes
5. Termination
6. Remedies
7. Payment
8. Project Design
9. Audit; Access to Records
10. Price Reduction for Defective Cost or Pricing Data
11. Subcontracts
12. Labor Standards
13. Equal Employment Opportunity
14. Utilization of Small or Minority Business
15. Covenant Against Contingent Fees
16. Gratuities
17. Patents
18. Copyrights and Rights in Data

                               1. general

    (a) The owner and the engineer agree that the following provisions 
apply to the EPA grant-eligible work to be performed under this 
agreement and that such provisions supersede any conflicting provisions 
of this agreement.
    (b) The work under this agreement is funded in part by a grant from 
the U.S. Environmental Protection Agency. Neither the United States nor 
the U.S. Environmental Protection Agency (hereinafter, ``EPA'') is a 
party to this agreement. This agreement which covers grant-eligible work 
is subject to regulations contained in 40 CFR 35.936, 35.937, and 35.939 
in effect on the date of execution of this agreement. As used in these 
clauses, the words ``the date of execution of this agreement'' mean the 
date of execution of this agreement and any subsequent modification of 
the terms, compensation or scope of services pertinent to unperformed 
work.
    (c) The owner's rights and remedies provided in these clauses are in 
addition to any other rights and remedies provided by law or this 
agreement.

                    2. responsibility of the engineer

    (a) The engineer shall be responsible for the professional quality, 
technical accuracy, timely completion, and the coordination of all 
designs, drawings, specifications, reports, and other services furnished 
by the engineer under this agreement. The engineer shall, without 
additional compensation, correct or revise any errors, omissions, or 
other deficiencies in his designs, drawings, specifications, reports, 
and other services.
    (b) The engineer shall perform such professional services as may be 
necessary to accomplish the work required to be performed under this 
agreement, in accordance with this agreement and applicable EPA 
requirements in effect on the date of execution of this agreement.
    (c) The owner's or EPA's approval of drawings, designs, 
specifications, reports, and incidental engineering work or materials 
furnished hereunder shall not in any way relieve the engineer of 
responsibility for the technical adequacy of his work. Neither the 
owner's nor EPA's review, approval or acceptance of, nor payment for, 
any of the services shall be construed to operate as a waiver of any 
rights under this agreement or of any cause of action arising out of the 
performance of this agreement.
    (d) The engineer shall be and shall remain liable, in accordance 
with applicable law, for all damages to the owner or EPA caused by the 
engineer's negligent performance of any of the services furnished under 
this agreement, except for errors, omissions or other deficiencies to 
the extent attributable to the owner, owner-furnished data or any third 
party. The engineer shall not be responsible for any time delays in the 
project caused by circumstances beyond the engineeer's control. Where 
innovative processes or techniques (see 40 CFR 35.908) are recommended 
by the engineer and are used, the engineer shall be liable only for 
gross negligence to the extent of such use.

                            3. scope of work

    The services to be performed by the engineer shall include all 
services required to complete the task or Step in accordance with 
applicable EPA regulations (40 CFR part 35, subpart E in effect on the 
date of execution of this agreement) to the extent of the scope of work 
as defined and set out in the engineering services agreement to which 
these provisions are attached.

                               4. changes

    (a) The owner may, at any time, by written order, make changes 
within the general scope of this agreement in the services or work to be 
performed. If such changes cause

[[Page 545]]

an increase or decrease in the engineer's cost of, or time required for, 
performance of any services under this agreement, whether or not changed 
by any order, an equitable adjustment shall be made and this agreement 
shall be modified in writing accordingly. The engineer must assert any 
claim for adjustment under this clause in writing within 30 days from 
the date of receipt by the engineer of the notification of change, 
unless the owner grants a further period of time before the date of 
final payment under this agreement.
    (b) No services for which an additional compensation will be charged 
by the engineer shall be furnished without the written authorization of 
the owner.
    (c) In the event that there is a modification of EPA requirements 
relating to the services to be performed under this agreement after the 
date of execution of this agreement, the increased or decreased cost of 
performance of the services provided for in this agreement shall be 
reflected in an appropriate modification of this agreement.

                             5. termination

    (a) Either party may terminate this agreement, in whole or in part, 
in writing, if the other party substantially fails to fulfill its 
obligations under this agreement through no fault of the terminating 
party. However, no such termination may be affected unless the other 
party is given (1) not less than ten (10) calendar days written notice 
(delivered by certified mail, return receipt requested) of intent to 
terminate and (2) an opportunity for consultation with the terminating 
party before termination.
    (b) The owner may terminate this agreement, in whole or in part, in 
writing, for its convenience, if the termination is for good cause (such 
as for legal or financial reasons, major changes in the work or program 
requirements, initiation of a new step) and the engineer is given (1) 
not less than ten (10) calendar days written notice (delivered by 
certified mail, return receipt requested) of intent to terminate, and 
(2) an opportunity for consultation with the terminating party before 
termination.
    (c) If the owner terminates for default, an equitable adjustment in 
the price provided for in this agreement shall be made, but (1) no 
amount shall be allowed for anticipated profit on unperformed services 
or other work, and (2) any payment due to the engineer at the time of 
termination may be adjusted to the extent of any additional costs the 
owner incurs because of the engineer's default. If the engineer 
terminates for default or if the owner terminates for convenience, the 
equitable adjustment shall include a reasonable profit for services or 
other work performed. The equitable adjustment for any termination shall 
provide for payment to the engineer for services rendered and expenses 
incurred before the termination, in addition to termination settlement 
costs the engineer reasonably incurs relating to commitments which had 
become firm before the termination.
    (d) Upon receipt of a termination action under paragraph (a) or (b) 
of this section 5., the engineer shall (1) promptly discontinue all 
services affected (unless the notice directs otherwise), and (2) deliver 
or otherwise make available to the owner all data, drawings, 
specifications, reports, estimates, summaries, and such other 
information and materials as the engineer may have accumulated in 
performing this agreement, whether completed or in process.
    (e) Upon termination under paragraph (a) or (b) of this section 5., 
the owner may take over the work and prosecute the same to completion by 
agreement with another party or otherwise. Any work the owner takes over 
for completion will be completed at the owner's risk, and the owner will 
hold harmless the engineer from all claims and damages arising out of 
improper use of the engineer's work.
    (f) If, after termination for failure of the engineer to fulfill 
contractual obligations, it is determined that the engineer had not so 
failed, the termination shall be deemed to have been effected for the 
convenience of the owner. In such event, adjustment of the price 
provided for in this agreement shall be made as paragraph (c) of this 
clause provides.

                               6. remedies

    Except as this agreement otherwise provides, all claims, counter-
claims, disputes, and other matters in question between the owner and 
the engineer arising out of or relating to this agreement or the breach 
of it will be decided by arbitration if the parties hereto mutually 
agree, or in a court of competent jurisdiction within the State in which 
the owner is located.

                               7. payment

    (a) Payment shall be made in accordance with the payment schedule 
incorporated in this agreement as soon as practicable upon submission of 
statements requesting payment by the engineer to the owner. If no such 
payment schedule is incorporated in this agreement, the payment 
provisions of paragraph (b) of this clause shall apply.
    (b) The engineer may request monthly progress payments and the owner 
shall make them as soon as practicable upon submission of statements 
requesting payment by the engineer to the owner. When such progress 
payments are made, the owner may withhold up to ten (10) percent of the 
vouchered amount until satisfactory completion by the engineer of work 
and services within a step called for under this agreement. When the 
owner determines that the work under this

[[Page 546]]

agreement or any specified task hereunder is substantially complete and 
that the amount of retained percentages is in excess of the amount 
considered by him to be adequate for his protection, he shall release to 
the engineer such excess amount.
    (c) No payment request made under paragraph (a) or (b) of this 
clause shall exceed the estimated amount and value of the work and 
services performed by the engineer under this agreement. The engineer 
shall prepare the estimates of work performed and shall supplement them 
with such supporting data as the owner may require.
    (d) Upon satisfactory completion of the work performed under this 
agreement, as a condition precedent to final payment under this 
agreement or to settlement upon termination of the agreement, the 
engineer shall execute and deliver to the owner a release of all claims 
against the owner arising under or by virtue of this agreement, other 
than such claims, if any, as may be specifically exempted by the 
engineer from the operation of the release in stated amounts to be set 
forth therein.

                            8. project design

    (a) In the performance of this agreement, the engineer shall, to the 
extent practicable, provide for maximum use of structures, machines, 
products, materials, construction methods, and equipment which are 
readily available through competitive procurement, or through standard 
or proven production techniques, methods, and processes, consistent with 
40 CFR 35.936-3 and 35.936-13 in effect on the date of execution of this 
agreement, except to the extent to which innovative technology may be 
used under 40 CFR 35.908 in effect on the date of execution of this 
agreement.
    (b) The engineer shall not, in the performance of the work under 
this agreement, produce a design or specification which would require 
the use of structures, machines, products, materials, construction 
methods, equipment, or processes which the engineer knows to be 
available only from a sole source, unless the engineer has adequately 
justified the use of a sole source in writing.
    (c) The engineer shall not, in the performance of the work under 
this agreement, produce a design or specification which would be 
restrictive in violation of section 204(a)(6) of the Clean Water Act. 
This statute requires that no specification for bids or statement of 
work shall be written in such a manner as to contain proprietary, 
exclusionary, or discriminatory requirements other than those based upon 
performance, unless such requirements are necessary to test or 
demonstrate a specific thing, or to provide for necessary 
interchangeability of parts and equipment, or at least two brand names 
or trade names of comparable quality or utility are listed and are 
followed by the words ``or equal.'' With regard to materials, if a 
single material is specified, the engineer must be prepared to 
substantiate the basis for the selection of the material.
    (d) The engineer shall report to the owner any sole-source or 
restrictive design or specification giving the reason or reasons why it 
is necessary to restrict the design or specification.
    (e) The engineer shall not knowingly specify or approve the 
performance of work at a facility which is in violation of clean air or 
water standards and which is listed by the Director of the EPA Office of 
Federal Activities under 40 CFR part 15.

                       9. audit; access to records

    (a) The engineer shall maintain books, records, documents, and other 
evidence directly pertinent to performance on EPA grant work under this 
agreement in accordance with generally accepted accounting principles 
and practices consistently applied, and 40 CFR 30.605, 30.805, and 
35.935-7 in effect on the date of execution of this agreement. The 
engineer shall also maintain the financial information and data used by 
the engineer in the preparation or support of the cost submission 
required under 40 CFR 35.937-6(b) in effect on the date of execution of 
this agreement and a copy of the cost summary submitted to the owner. 
The U.S. Environmental Protection Agency, the Comptroller General of the 
United States, the U.S. Department of Labor, owner, and [the State water 
pollution control agency] or any of their duly authorized 
representatives shall have access to such books, records, documents, and 
other evidence for inspection, audit, and copying. The engineer will 
provide proper facilities for such access and inspection.
    (b) The engineer agrees to include paragraphs (a) through (e) of 
this clause in all his contracts and all tier subcontracts directly 
related to project performance that are in excess of $10,000.
    (c) Audits conducted under this provision shall be in accordance 
with generally accepted auditing standards and established procedures 
and guidelines of the reviewing or audit agency(ies).
    (d) The engineer agrees to the disclosure of all information and 
reports resulting from access to records under paragraphs (a) and (b) of 
this clause, to any of the agencies referred to in paragraph (a), 
provided that the engineer is afforded the opportunity for an audit exit 
conference and an opportunity to comment and submit any supporting 
documentation on the pertinent portions of the draft audit report and 
that the final audit report will include written comments of reasonable 
length, if any, of the engineer.
    (e) The engineer shall maintain and make available records under 
paragraphs (a) and

[[Page 547]]

(b) of this clause during performance on EPA grant work under this 
agreement and until 3 years from the date of final EPA grant payment for 
the project. In addition, those records which relate to any ``Dispute'' 
appeal under an EPA grant agreement, to litigation, to the settlement of 
claims arising out of such performance, or to costs or items to which an 
audit exception has been taken, shall be maintained and made available 
until 3 years after the date of resolution of such appeal, litigation, 
claim, or exception.

         10. price reduction for defective cost or pricing data

    (This clause is applicable if the amount of this agreement exceeds 
$100,000.)
    (a) If the owner or EPA determines that any price, including profit, 
negotiated in connection with this agreement or any cost reimbursable 
under this agreement was increased by any significant sums because the 
engineer or any subcontractor furnished incomplete or inaccurate cost or 
pricing data or data not current as certified in his certification of 
current cost or pricing data (EPA form 5700-41), then such price, cost, 
or profit shall be reduced accordingly and the agreement shall be 
modified in writing to reflect such reduction.
    (b) Failure to agree on a reduction shall be subject to the remedies 
clause of this agreement.
    (Note: Since the agreement is subject to reduction under this clause 
by reason of defective cost or pricing data submitted in connection with 
certain subcontracts, the engineer may wish to include a clause in each 
such subcontract requiring the subcontractor to appropriately indemnify 
the engineer. It is also expected that any subcontractor subject to such 
indemnification will generally require substantially similar 
indemnification for defective cost or pricing data required to be 
submitted by his lower tier subcontractors.)

                            11. subcontracts

    (a) Any subcontractors and outside associates or consultants 
required by the engineer in connection with services under this 
agreement will be limited to such individuals or firms as were 
specifically identified and agreed to during negotiations, or as the 
owner specifically authorizes during the performance of this agreement. 
The owner must give prior approval for any substitutions in or additions 
to such subcontractors, associates, or consultants.
    (b) The engineer may not subcontract services in excess of thirty 
(30) percent (or ------ percent, if the owner and the engineer hereby 
agree) of the contract price to subcontractors or consultants without 
the owner's prior written approval.

                           12. labor standards

    To the extent that this agreement involves ``construction'' (as 
defined by the Secretary of Labor), the engineer agrees that such 
construction work shall be subject to the following labor standards 
provisions, to the extent applicable:
    (a) Davis-Bacon Act (40 U.S.C. 276a--276a-7);
    (b) Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333);
    (c) Copeland Anti-Kickback Act (18 U.S.C. 874); and
    (d) Executive Order 11246 (Equal Employment Opportunity);

and implementing rules, regulations, and relevant orders of the 
Secretary of Labor or EPA. The engineer further agrees that this 
agreement shall include and be subject to the ``Labor Standards 
Provisions for Federally Assisted Construction Contracts'' (EPA form 
5720-4) in effect at the time of execution of this agreement.

                    13. equal employment opportunity

    In accordance with EPA policy as expressed in 40 CFR 30.420-5, the 
engineer agrees that he will not discriminate against any employee or 
applicant for employment because of race, religion, color, sex, age, or 
national origin.

             14. utilization of small and minority business

    In accordance with EPA policy as expressed in 40 CFR 35.936-7, the 
engineer agrees that qualified small business and minority business 
enterprises shall have the maximum practicable opportunity to 
participate in the performance of EPA grant- assisted contracts and 
subcontracts.

                  15. covenant against contingent fees

    The engineer warrants that no person or selling agency has been 
employed or retained to solicit or secure this contract upon an 
agreement or understanding for a commission, percentage, brokerage, or 
contingent fee, excepting bona fide employees. For breach or violation 
of this warranty the owner shall have the right to annul this agreement 
without liability or in its discretion to deduct from the contract price 
or consideration, or otherwise recover, the full amount of such 
commission, percentage, brokerage, or contingent fee.

                             16. gratuities

    (a) If it is found, after notice and hearing, by the owner that the 
engineer, or any of the engineer's agents or representatives, offered or 
gave gratuities (in the form of entertainment, gifts, or otherwise), to 
any official, employee, or agent of the owner, of the State, or of EPA 
in an attempt to secure a

[[Page 548]]

contract or favorable treatment in awarding, amending, or making any 
determinations related to the performance of this agreement, the owner 
may, by written notice to the engineer, terminate the right of the 
engineer to proceed under this agreement. The owner may also pursue 
other rights and remedies that the law or this agreement provides. 
However, the existence of the facts upon which the owner bases such 
findings shall be in issue and may be reviewed in proceedings under the 
remedies clause of this agreement.
    (b) In the event this agreement is terminated as provided in 
paragraph (a) hereof, the owner shall be entitled: (1) To pursue the 
same remedies against the engineer as it could pursue in the event of a 
breach of the contract by the engineer, and (2) as a penalty, in 
addition to any other damages to which it may be entitled by law, to 
exemplary damages in an amount (as determined by the owner) which shall 
be not less than 3 nor more than 10 times the costs the engineer incurs 
in providing any such gratuities to any such officer or employee.

                               17. patents

    If this agreement involves research, developmental, experimental, or 
demonstration work and any discovery or invention arises or is developed 
in the course of or under this agreement, such invention or discovery 
shall be subject to the reporting and rights provisions of subpart D of 
40 CFR part 30, in effect on the date of execution of this agreement, 
including appendix B of part 30. In such case, the engineer shall report 
the discovery or invention to EPA directly or through the owner, and 
shall otherwise comply with the owner's responsibilities in accordance 
with subpart D of 40 CFR part 30. The engineer agrees that the 
disposition of rights to inventions made under this agreement shall be 
in accordance with the terms and conditions of appendix B. The engineer 
shall include appropriate patent provisions to achieve the purpose of 
this condition in all subcontracts involving research, developmental, 
experimental, or demonstration work.

                    18. copyrights and rights in data

    (a) The engineer agrees that any plans, drawings, designs, 
specifications, computer programs (which are substantially paid for with 
EPA grant funds), technical reports, operating manuals, and other work 
submitted with a step 1 facilities plan or with a step 2 or step 3 grant 
application or which are specified to be delivered under this agreement 
or which are developed or produced and paid for under this agreement 
(referred to in this clause as ``Subject Data'') are subject to the 
rights in the United States, as set forth in subpart D of 40 CFR part 30 
and in appendix C to 40 CFR part 30, in effect on the date of execution 
of this agreement. These rights include the right to use, duplicate, and 
disclose such subject data, in whole or in part, in any manner for any 
purpose whatsoever, and to have others do so. For purposes of this 
clause, ``grantee'' as used in appendix C refers to the engineer. If the 
material is copyrightable, the engineer may copyright it, as appendix C 
permits, subject to the rights in the Government in appendix C, but the 
owner and the Federal Government reserve a royalty-free, nonexclusive, 
and irrevocable license to reproduce, publish, and use such materials, 
in whole or in part, and to authorize others to do so. The engineer 
shall include appropriate provisions to achieve the purpose of this 
condition in all subcontracts expected to produce copyrightable subject 
data.
    (b) All such subject data furnished by the engineer pursuant to this 
agreement are instruments of his services in respect of the project. It 
is understood that the engineer does not represent such subject data to 
be suitable for reuse on any other project or for any other purpose. If 
the owner reuses the subject data without the engineer's specific 
written verification or adaptation, such reuse will be at the risk of 
the owner, without liability to the engineer. Any such verification or 
adaptation will entitle the engineer to further compensation at rates 
agreed upon by the owner and the engineer.

Appendix C-2 to Subpart E of Part 35--Required Provisions--Construction 
                                Contracts

                     supplemental general conditions

1. General
2. Changes
3. Differing Site Conditions
4. Suspension of Work
5. Termination for Default; Damages for Delay; Time Extensions
6. Termination for Convenience
7. Remedies
8. Labor Standards
9. Utilization of Small or Minority Business
10. Audit; Access to Records
11. Price Reduction for Defective Cost or Pricing Data
12. Covenant Against Contingent Fees
13. Gratuities
14. Patents
15. Copyrights and Rights in Data
16. Prohibition Against Listed Violating Facilities
17. Buy American

                               1. general

    (a) The owner and the contractor agree that the following 
supplemental general provisions apply to the work to be performed under 
this contract and that these provisions supersede any conflicting 
provisions of this contract.

[[Page 549]]

    (b) This contract is funded in part by a grant from the U.S. 
Environmental Protection Agency. Neither the United States nor any of 
its departments, agencies or employees is a party to this contract. This 
contract is subject to regulations contained in 40 CFR 35.936, 35.938, 
and 35.939 in effect on the date of execution of this contract.
    (c) The owner's rights and remedies provided in these clauses are in 
addition to any other rights and remedies provided by law or under this 
contract.

                               2. changes

    (a) The owner may, at any time, without notice to the sureties, by 
written order designated or indicated to be a change order, make any 
change in the work within the general scope of the contract, including 
but not limited to changes--
    (1) In the specifications (including drawings and designs);
    (2) In the method or manner of performance of the work;
    (3) In the owner-furnished facilities, equipment, materials, 
services, or site; or
    (4) Directing acceleration in the performance of the work.
    (b) Any other written order or an oral order (which terms as used in 
this paragraph (b) shall include direction, instruction, interpretation, 
or determination) from the owner, which causes any such change, shall be 
treated as a change order under this clause, if the contractor gives the 
owner written notice stating the date, circumstances, and source of the 
order and if the contractor regards the order as a change order.
    (c) Except as provided in this clause, no order, statement, or 
conduct of the owner shall be treated as a change under this clause or 
shall entitle the contractor to an equitable adjustment.
    (d) If any change under this clause causes an increase or decrease 
in the contractor's cost of, or the time required for, the performance 
of any part of the work under this contract, whether or not changed by 
any order, an equitable adjustment shall be made and the contract 
modified in writing accordingly. However, except for claims based on 
defective specifications, no claim for any change under paragraph (b) of 
this section 2., shall be allowed for any costs incurred more than 20 
days before the contractor gives written notice as there required. Also, 
in the case of defective specifications for which the owner is 
responsible, the equitable adjustment shall include any increased cost 
reasonably incurred by the contractor in attempting to comply with such 
defective specifications.
    (e) If the contractor intends to assert a claim for an equitable 
adjustment under this clause, he must, within 30 days after receipt of a 
written change order under (a) above or the furnishing of a written 
notice under paragraph (b) of this section 2., submit to the owner a 
written statement setting forth the general nature and monetary extent 
of such claim, unless the owner extends this period. The statement of 
claim hereunder may be included in the notice under paragraph (b) of 
this section 2.
    (f) No claim by the contractor for an equitable adjustment hereunder 
shall be allowed if asserted after final payment under this contract.

                      3. differing site conditions

    (a) The contractor shall promptly, and before such conditions are 
disturbed, notify the owner in writing of: (1) Subsurface or latent 
physical conditions at the site differing materially from those 
indicated in this contract, or (2) unknown physical conditions at the 
site, of an unusual nature, differing materially from those ordinarily 
encountered and generally recognized as inhering in work of the 
character provided for in this contract. The owner shall promptly 
investigate the conditions. If he finds that such conditions do 
materially differ and cause an increase or decrease in the contractor's 
cost of, or the time required for, performance of any part of the work 
under this contract, whether or not changed as a result of such 
conditions, an equitable adjustment shall be made and the contract 
modified in writing accordingly.
    (b) No claim of the contractor under this clause shall be allowed 
unless the contractor has given the notice required in paragraph (a) of 
this clause, except that the owner may extend the prescribed time.
    (c) No claim by the contractor for an equitable adjustment hereunder 
shall be allowed if asserted after final payment under this contract.

                          4. suspension of work

    (a) The owner may order the contractor in writing to suspend, delay, 
or interrupt all or any part of the work for such period of time as he 
may determine to be appropriate for the convenience of the owner.
    (b) If the performance of all or any part of the work is, for an 
unreasonable period of time, suspended, delayed, or interrupted by an 
act of the owner in administration of this contract, or by his failure 
to act within the time specfied in this contract (or if no time is 
specified, within a reasonable time), an adjustment shall be made for 
any increase in the cost of performance of this contract (excluding 
profit) necessarily caused by such unreasonable suspension, delay, or 
interruption, and the contract modified in writing accordingly. However, 
no adjustment shall be made under this clause for any suspension, delay, 
or interruption to the extent (1) that performance would have been so 
suspended, delayed, or interrupted by any other

[[Page 550]]

cause, including the fault or negligence of the contractor or (2) for 
which an equitable adjustment is provided for or excluded under any 
other provision of this contract.
    (c) No claim under this clause shall be allowed (1) for any costs 
incurred more than 20 days before the contractor shall have notified the 
owner in writing of the act or failure to act involved (but this 
requirement shall not apply as to a claim resulting from a suspension 
order), and (2) unless the claim, in an amount stated, is asserted in 
writing as soon as practicable after the termination of such suspension, 
delay, or interruption, but not later than the date of final payment 
under the contract.

     5. termination for default; damages for delay; time extensions

    (a) If the contractor refuses or fails to prosecute the work, or any 
separable part of the work, with such diligence as will insure its 
completion within the time specified in this contract, or any extension 
thereof, or fails to complete said work within such time, the owner may, 
by written notice to the contractor, terminate his right to proceed with 
the work or such part of the work as to which there has been delay. In 
such event the owner may take over the work and prosecute the same to 
completion, by contract or otherwise, and may take possession of and use 
in completing the work such materials, appliances, and plant as may be 
on the site of the work and necessary therefor. Whether or not the 
contractor's right to proceed with the work is terminated, he and his 
sureties shall be liable for any damage to the owner resulting from his 
refusal or failure to complete the work within the specified time.
    (b) If the contract provides for liquidated damages, and if the 
owner terminates the contractor's right to proceed, the resulting damage 
will consist of such liquidated damages until such reasonable time as 
may be required for final completion of the work together with any 
increased costs the owner incurs in completing the work.
    (c) If the contract provides for liquidated damages and if the owner 
does not terminate the contractor's right to proceed, the resulting 
damage will consist of such liquidated damages until the work is 
completed or accepted.
    (d) The contractor's right to proceed shall not be terminated nor 
the contractor charged with resulting damage if:
    (1) The delay in the completion of the work arises from causes other 
than normal weather beyond the control and without the fault or 
negligence of the contractor, including, but not restricted to, acts of 
God, acts of the public enemy, acts of the owner in either its sovereign 
or contractual capacity, acts of another contractor in the performance 
of a contract with the owner, fires, floods, epidemics, quarantine 
restrictions, strikes, freight embargoes, unusually severe weather, or 
delays of subcontractors or suppliers arising from causes other than 
normal weather beyond the control and without the fault or negligence of 
both the contractor and such subcontractors or suppliers; and
    (2) The contractor, within 10 days from the beginning of any such 
delay (unless the owner grants a further period of time before the date 
of final payment under the contract), notifies the owner in writing of 
the causes of delay. The owner shall ascertain the facts and the extent 
of the delay and extend the time for completing the work when, in his 
judgment, the findings of fact justify such an extension. His findings 
of fact shall be final and conclusive on the parties, subject only to 
appeal as the remedies clause of this contract provides.
    (e) If, after notice of termination of the contractor's right to 
proceed under the provisions of this clause, it is determined for any 
reason that the contractor was not in default under this clause, or that 
the delay was excusable under this clause, the rights and obligations of 
the parties shall be the same as if the notice of termination has been 
issued under the clause providing for termination for convenience of the 
owner.
    (f) The rights and remedies of the owner provided in this clause are 
in addition to any other rights and remedies provided by law or under 
this contract.
    (g) As used in paragraph (d)(1) of this clause, the term 
``subcontractors or suppliers'' means subcontractors or suppliers at any 
tier.

                     6. termination for convenience

    (a) The owner may terminate the performance of work under this 
contract in accordance with this clause in whole, or from time to time 
in part, whenever the owner shall determine that such termination is in 
the best interest of the owner. Any such termination shall be effected 
by delivery to the contractor of a notice of termination specifying the 
extent to which performance of work under the contract is terminated, 
and the date upon which such termination becomes effective.
    (b) After receipt of a notice of termination, and except as 
otherwise directed by the owner, the contractor shall:
    (1) Stop work under the contract on the date and to the extent 
specified in the notice of termination;
    (2) Place no further orders or subcontracts for materials, services, 
or facilities except as necessary to complete the portion of the work 
under the contract which is not terminated;
    (3) Terminate all orders and subcontracts to the extent that they 
relate to the performance of work terminated by the notice of 
termination;

[[Page 551]]

    (4) Assign to the owner, in the manner, at the times, and to the 
extent directed by the owner, all of the right, title, and interest of 
the contractor under the orders and subcontracts so terminated. The 
owner shall have the right, in its discretion, to settle or pay any or 
all claims arising out of the termination of such orders and 
subcontracts;
    (5) Settle all outstanding liabilities and all claims arising out of 
such termination of orders and subcontracts, with the approval or 
ratification of the owner to the extent he may require. His approval or 
ratification shall be final for all the purposes of this clause;
    (6) Transfer title to the owner, and deliver in the manner, at the 
times, and to the extent, if any, directed by the owner, (i) the 
fabricated or unfabricated parts, work in process, completed work, 
supplies, and other material produced as a part of, or acquired in 
connection with the performance of, the work terminated by the notice of 
termination, and (ii) the completed or partially completed plans, 
drawings, information, and other property which, if the contract had 
been completed, would have been required to be furnished to the owner;
    (7) Use his best efforts to sell, in the manner, at the times, to 
the extent, and at the price or prices that the owner directs or 
authorizes, any property of the types referred to in paragraph (b)(6) of 
this clause, but the contractor (i) shall not be required to extend 
credit to any purchaser, and (ii) may acquire any such property under 
the conditions prescribed and at a price or prices approved by the 
owner. The proceeds of any such transfer or disposition shall be applied 
in reduction of any payments to be made by the owner to the contractor 
under this contract or shall otherwise be credited to the price or cost 
of the work covered by this contract or paid in such other manner as the 
owner may direct;
    (8) Complete performance of such part of the work as shall not have 
been terminated by the notice of termination; and
    (9) Take such action as may be necessary, or as the owner may 
direct, for the protection and preservation of the property related to 
this contract which is in the possession of the contractor and in which 
the owner has or may acquire an interest.
    (c) After receipt of a notice of termination, the contractor shall 
submit to the owner his termination claim, in the form and with the 
certification the owner prescribes. Such claim shall be submitted 
promptly but in no event later than 1 year from the effective date of 
termination, unless one or more extensions in writing are granted by the 
owner upon request of the contractor made in writing within such 1-year 
period or authorized extension. However, if the owner determines that 
the facts justify such action, he may receive and act upon any such 
termination claim at any time after such 1-year period or extension. If 
the contractor fails to submit his termination claim within the time 
allowed, the owner may determine, on the basis of information available 
to him, the amount, if any, due to the contractor because of the 
termination. The owner shall then pay to the contractor the amount so 
determined.
    (d) Subject to the provisions of paragraph (c), the contractor and 
the owner may agree upon the whole or any part of the amount or amounts 
to be paid to the contractor because of the total or partial termination 
of work under this clause. The amount or amounts may include a 
reasonable allowance for profit on work done. However, such agreed 
amount or amounts, exclusive of settlement costs, shall not exceed the 
total contract price as reduced by the amount of payments otherwise made 
and as further reduced by the contract price of work not terminated. The 
contract shall be amended accordingly, and the contractor shall be paid 
the agreed amount. Nothing in paragraph (e) of this clause, prescribing 
the amount to be paid to the contractor in the event of failure of the 
contractor and the owner to agree upon the whole amount to be paid to 
the contractor because of the termination of work under this clause, 
shall be deemed to limit, restrict, or otherwise determine or affect the 
amount or amounts which may be agreed upon to be paid to the contractor 
pursuant to this paragraph (d).
    (e) If the contractor and the owner fail to agree, as paragraph (d) 
of this section 6., provides, on the whole amount to be paid to the 
contractor because of the termination of work under this clause, the 
owner shall determine, on the basis of information available to him, the 
amount, if any, due to the contractor by reason of the termination and 
shall pay to the contractor the amounts determined as follows:
    (1) For all contract work performed before the effective date of the 
notice of termination, the total (without duplication of any items) of--
    (i) The cost of such work;
    (ii) The cost of settling and paying claims arising out of the 
termination of work under subcontracts or orders as paragraph (b)(5) of 
this clause provides. This cost is exclusive of the amounts paid or 
payable on account of supplies or materials delivered or services 
furnished by the subcontractor before the effective date of the notice 
of termination. These amounts shall be included in the cost on account 
of which payment is made under paragraph (1)(i) of this section 6.; and
    (iii) A sum, as profit on paragraph (1)(i) of this section 6., that 
the owner determines to be fair and reasonable. But, if it appears that 
the contractor would have sustained a loss on the entire contract had it 
been completed, no profit shall be included or allowed under this 
paragraph (1)(iii) of this section 6., and

[[Page 552]]

an appropriate adjustment shall be made reducing the amount of the 
settlement to reflect the indicated rate of loss; and
    (2) The reasonable cost of the preservation and protection of 
property incurred under paragraph (b)(9) of this clause; and any other 
reasonable cost incidental to termination of work under this contract, 
including expense incidental to the determination of the amount due to 
the contractor as the result of the termination of work under this 
contract. The total sum to be paid to the contractor under paragraph 
(e)(1) of this clause shall not exceed the total contract price as 
reduced by the amount of payments otherwise made and as further reduced 
by the contract price of work not terminated. Except for normal 
spoilage, and except to the extent that the owner shall have otherwise 
expressly assumed the risk of loss, there shall be excluded from the 
amounts payable to the contractor under paragraph (1) of this clause 6., 
the fair value, as determined by the owner of property which is 
destroyed, lost, stolen, or damaged, to the extent that it is un-
deliverable to the owner, or to a buyer under paragraph (b)(7) of this 
clause.
    (f) The contractor shall have the right to dispute under the clause 
of this contract entitled ``Remedies,'' from any determination the owner 
makes under paragraph (c) or (e) of this clause. But, if the contractor 
has failed to submit his claim within the time provided in paragraph (c) 
of this clause and has failed to request extension of such time, he 
shall have no such right of appeal. In any case where the owner has 
determined the amount due under paragraph (c) or (e) of this clause, the 
owner shall pay to the contractor the following: (1) If there is no 
right of appeal hereunder or if no timely appeal has been taken, the 
amount so determined by the owner or (2) if a ``Remedies'' proceeding is 
initiated, the amount finally determined in such ``Remedies'' 
proceeding.
    (g) In arriving at the amount due the contractor under this clause 
there shall be deducted (1) all unliquidated advance or other payments 
on account theretofore made to the contractor, applicable to the 
terminated portion of this contract, (2) any claim which the owner may 
have against the contractor in connection with this contract, and (3) 
the agreed price for, or the proceeds of sale of, any materials, 
supplies, or other things kept by the contractor or sold, under the 
provisions of this clause, and not otherwise recovered by or credited to 
the owner.
    (h) If the termination hereunder be partial, before the settlement 
of the terminated portion of this contract, the contractor may file with 
the owner a request in writing for an equitable adjustment of the price 
or prices specified in the contract relating to the continued portion of 
the contract (the portion not terminated by the notice of termination). 
Such equitable adjustment as may be agreed upon shall be made in the 
price or prices. Nothing contained herein shall limit the right of the 
owner and the contractor to agree upon the amount or amounts to be paid 
to the contractor for the completion of the continued portion of the 
contract when the contract does not contain an established contract 
price for the continued portion.

                               7. remedies

    Unless this contract provides otherwise, all claims, counterclaims, 
disputes and other matters in question between the owner and the 
contractor arising out of or relating to this agreement or its breach 
will be decided by arbitration if the parties mutually agree, or in a 
court of competent jurisdiction within the State in which the owner is 
located.

                           8. labor standards

    The contractor agrees that ``construction'' work (as defined by the 
Secretary of Labor) shall be subject to the following labor standards 
provisions, to the extent applicable:
    (a) Davis-Bacon Act (40 U.S.C. 276a--276a-7);
    (b) Contract Work Hours and Safety Standards Act (40 U.S.C. 327-33);
    (c) Copeland Anti-Kickback Act (18 U.S.C. 874); and
    (d) Executive Order 11246 (equal employment opportunity);

and implementing rules, regulations, and relevant orders of the 
Secretary of Labor or EPA. The contractor further agrees that this 
contract shall include and be subject to the ``Labor Standards 
Provisions for Federally assisted Construction Contracts'' (EPA form 
5720-4) in effect at the time of execution of this agreement.

              9. utilization of small and minority business

    In accordance with EPA policy as expressed in 40 CFR 35.936-7, the 
contractor agrees that small business and minority business enterprises 
shall have the maximum practicable opportunity to participate in the 
performance of EPA grant-assisted contracts and subcontracts.

                      10. audit; access to records

    (a) The contractor shall maintain books, records, documents and 
other evidence directly pertinent to performance on EPA grant work under 
this contract in accordance with generally accepted accounting 
principles and practices consistently applied, and 40 CFR 30.605, 
30.805, and 35.935-7 in effect on the date of execution of this 
contract. The contractor shall also maintain the financial information 
and data used by the contractor in the preparation or support of the 
cost submission required under 40 CFR 35.938-5 in effect on the date of 
execution of this contract for any negotiated contract or

[[Page 553]]

change order and a copy of the cost summary submitted to the owner. The 
U.S. Environmental Protection Agency, the Comptroller General of the 
United States, the U.S. Department of Labor, owner, and (the State water 
pollution control agency) or any of their authorized representatives 
shall have access to such books, records, documents and other evidence 
for the purpose of inspection, audit and copying. The contractor will 
provide proper facilities for such access and inspection.
    (b) If this contract is a formally advertised, competitively 
awarded, fixed price contract, the contractor agrees to make paragraphs 
(a) through (f) of this clause applicable to all negotiated change 
orders and contract amendments affecting the contract price. In the case 
of all other types of prime contracts, the contractor agrees to include 
paragraphs (a) through (f) of this clause in all his contracts in excess 
of $10,000 and all tier subcontracts in excess of $10,000 and to make 
paragraphs (a) through (f) of this clause applicable to all change 
orders directly related to project performance.
    (c) Audits conducted under this provision shall be in accordance 
with generally accepted auditing standards and established procedures 
and guidelines of the reviewing or audit agency(ies).
    (d) The contractor agrees to the disclosure of all information and 
reports resulting from access to records under paragraphs (a) and (b) of 
this clause, to any of the agencies referred to in paragraph (a) of this 
clause 10., provided that the contractor is afforded the opportunity for 
an audit exit conference, and an opportunity to comment and submit any 
supporting documentation on the pertinent portions of the draft audit 
report and that the final EPA audit report will include written comments 
of reasonable length, if any, of the contractor.
    (e) Records under paragraphs (a) and (b) of this clause 10., shall 
be maintained and made available during performance on EPA grant work 
under this contract and until 3 years from the date of final EPA grant 
payment for the project. In addition, those records which relate to any 
``Dispute'' appeal under an EPA grant agreement, to litigation, to the 
settlement of claims arising out of such performance, or to costs or 
items to which an audit exception has been taken, shall be maintained 
and made available until three years after the date of resolution of 
such appeal, litigation, claim or exception.
    (f) The right of access which this clause confers will generally be 
exercised (with respect to financial records) under (1) negotiated prime 
contracts, (2) negotiated change orders or contract amendments in excess 
of $10,000 affecting the price of any formally advertised, competitively 
awarded, fixed price contract, and (3) subcontracts or purchase orders 
under any contract other than a formally advertised, competitively 
awarded, fixed price contract. However, this right of access will 
generally not be exercised with respect to a prime contract, 
subcontract, or purchase order awarded after effective price 
competition. In any event, such right of access may be exercised under 
any type of contract or subcontract (1) with respect to records 
pertaining directly to contract performance, excluding any financial 
records of the contractor, (2) if there is any indication that fraud, 
gross abuse, or corrupt practices may be involved or (3) if the contract 
is terminated for default or for convenience.

         11. price reduction for defective cost or pricing data

    (This clause is applicable to (1) any negotiated prime contract in 
excess of $100,000; (2) negotiated contract amendments or change orders 
in excess of $100,000 affecting the price of a formally advertised, 
competitively awarded, fixed price contract; or (3) any subcontract or 
purchase order in excess of $100,000 under a prime contract other than a 
formally advertised, competitively awarded, fixed price contract. Change 
orders shall be determined to be in excess of $100,000 in accordance 
with 40 CFR 35.938-5(g). However, this clause is not applicable for 
contracts or subcontracts to the extent that they are awarded on the 
basis of effective price competition.)
    (a) If the owner or EPA determines that any price (including profit) 
negotiated in connection with this contract, or any cost reimbursable 
under this contract, was increased by any significant sums because the 
contractor, or any subcontractor furnished incomplete or inaccurate cost 
or pricing data or data not current as certified in his certification of 
current cost or pricing data (EPA form 5700-41), then such price or cost 
or profit shall be reduced accordingly and the contract shall be 
modified in writing to reflect such reduction.
    (b) Failure to agree on a reduction shall be subject to the Remedies 
clause of this contract.

    (Note: Since the contract is subject to reduction under this clause 
by reason of defective cost or pricing data submitted in connection with 
certain subcontracts, the contractor may wish to include a clause in 
each such subcontract requiring the subcontractor to appropriately 
indemnify the contractor. It is also expected that any subcontractor 
subject to such indemnification will generally require substantially 
similar indemnification for defective cost or pricing data required to 
be submitted by his lower tier subcontractors.)

                  12. covenant against contingent fees

    The contractor warrants that no person or selling agency has been 
employed or retained to solicit or secure this contract upon an

[[Page 554]]

agreement or understanding for a commission, percentage, brokerage, or 
contingent fee, excepting bona fide employees or bona fide established 
commercial or selling agencies maintained by the contractor for the 
purpose of securing business. For breach or violation of this warranty 
the owner shall have the right to annul this contract without liability 
or in its discretion to deduct from the contract price or consideration, 
or otherwise recover, the full amount of such commission, percentage, 
brokerage, or contingent fee.

                             13. gratuities

    (a) If the owner finds, after notice and hearing, that the 
contractor or any of the contractor's agents or representatives offered 
or gave gratuities (in the form of entertainment, gifts, or otherwise) 
to any official, employee or agent of the owner, of the State, or of EPA 
in an attempt to secure a contract or favorable treatment in the 
awarding, amending, or making any determinations related to the 
performance of this contract, the owner may, by written notice to the 
contractor, terminate the right of the contractor to proceed under this 
contract. The owner may also pursue other rights and remedies that the 
law or this contract provides. However, the existence of the facts upon 
which the owner makes such findings shall be in issue and may be 
reviewed in proceedings under the remedies clause of this contract.
    (b) In the event this contract is terminated as provided in 
paragraph (a) of this clause, the owner shall be entitled (1) to pursue 
the same remedies against the contractor as it could pursue in the event 
of a breach of the contract by the contractor, and (2) as a penalty in 
addition to any other damages to which it may be entitled by law, to 
exemplary damages in an amount (as determined by the owner) which shall 
be not less than 3 nor more than 10 times the costs the contractor 
incurs in providing any such gratuities to any such officer or employee.

                               14. patents

    If this contract involves research, developmental, experimental, or 
demonstration work, and any discovery or invention arises or is 
developed in the course of or under this contract, such invention or 
discovery shall be subject to the reporting and rights provisions of 
subpart D of 40 CFR part 30, in effect on the date of execution of this 
contract, including appendix B of part 30. In such case, the contractor 
shall report the discovery or invention to EPA directly or through the 
owner, and shall otherwise comply with the owner's responsibilities in 
accordance with subpart D of 40 CFR part 30. The contractor agrees that 
the disposition of rights to inventions made under this contract shall 
be in accordance with the terms and conditions of appendix B. The 
contractor shall include appropriate patent provisions to achieve the 
intent of this condition in all subcontracts involving research, 
developmental, experimental, or demonstration work.

                    15. copyrights and rights in data

    The contractor agrees that any plans, drawings, designs, 
specifications, computer programs (which are substantially paid for with 
EPA grant funds), technical reports, operating manuals, and other work 
submitted with a proposal or grant application or which are specified to 
be delivered under this contract or which are developed or produced and 
paid for under this contract (referred to in this clause as ``Subject 
Data'') are subject to the rights in the United States, as set forth in 
subpart D of 40 CFR part 30 and in appendix C to 40 CFR part 30, in 
effect on the date of execution of this contract. These rights include 
the right to use, duplicate and disclose such Subject Data, in whole or 
in part, in any manner for any purpose whatsoever, and to have others do 
so. For purposes of this clause, ``grantee'' as used in appendix C 
refers to the contractor. If the material is copyrightable, the 
contractor may copyright it, as appendix C permits, subject to the 
rights in the Government as set forth in appendix C, but the owner and 
the Federal Government reserve a royalty-free, nonexclusive, and 
irrevocable license to reproduce, publish and use such materials, in 
whole or in part, and to authorize others to do so. The contractor shall 
include provisions appropriate to achieve the intent of this condition 
in all subcontracts expected to produce copyrightable Subject Data.

           16. prohibition against listed violating facilities

    (Applicable only to a contract in excess of $100,000 and when 
otherwise applicable under 40 CFR part 15.)
    (a) The contractor agrees as follows:
    (1) To comply with all the requirements of section 114 of the Clean 
Air Act, as amended (42 U.S.C. 1857, et seq., as amended by Pub. L. 92-
604) and section 308 of the Clean Water Act (33 U.S.C. 1251, as 
amended), respectively, which relate to inspection, monitoring, entry, 
reports, and information, as well as other requirements specified in 
section 114 and section 308 of the Air Act and the Water Act, 
respectively, and all regulations and guidelines issued thereunder 
before the award of this contract.
    (2) That no portion of the work required by this prime contract will 
be performed in a facility listed on the Environmental Protection Agency 
list of violating facilities on the date when this contract was awarded 
unless and until the EPA eliminates the name of such facility or 
facilities from the listing.

[[Page 555]]

    (3) To use his best efforts to comply with clean air and clean water 
standards at the facilities in which the contract is being performed.
    (4) To insert the substance of the provisions of this clause, 
including this paragraph (4), in any nonexempt subcontract.
    (b) The terms used in this clause have the following meanings:
    (1) The term Air Act means the Clean Air Act, as amended (42 U.S.C. 
1857 et seq.).
    (2) The term Water Act means the Clean Water Act, as amended (33 
U.S.C. 1251 et seq.).
    (3) The term Clean Air Standards means any enforceable rules, 
regulations, guidelines, standards, limitations, orders, controls, 
prohibitions, or other requirements which are contained in, issued 
under, or otherwise adopted under the Air Act or Executive Order 11738, 
an applicable implementation plan as described in section 110(d) of the 
Air Act (42 U.S.C. 1857c-5(d)), an approved implementation procedure or 
plan under section 111(c) or section 111(d), or an approved 
implementation procedure under section 112(d) of the Air Act (42 U.S.C. 
1857c-7(d)).
    (4) The term Clean Water Standards means any enforceable limitation, 
control, condition, prohibition, standard, or other requirement which is 
promulgated under the Water Act or contained in a permit issued to a 
discharger by the Environmental Protection Agency or by a State under an 
approved program, as authorized by section 402 of the Water Act (33 
U.S.C. 1342), or by a local government to ensure compliance with 
pretreatment regulations as required by section 307 of the Water Act (33 
U.S.C. 1317).
    (5) The term Compliance means compliance with clean air or water 
standards. Compliance shall also mean compliance with a schedule or plan 
ordered or approved by a court of competent jurisdiction, the 
Envrionmental Protection Agency or an Air or Water Pollution Control 
Agency in accordance with the requirements of the Air Act or Water Act 
and regulations.
    (6) The term Facility means any building, plant, installation, 
structure, mine, vessel, or other floating craft, location, or site of 
operations, owned, leased, or supervised by a contractor or 
subcontractor, to be used in the performance of a contract or 
subcontract. Where a location or site of operations contains or includes 
more than one building, plant, installation, or structure, the entire 
location or site shall be deemed to be a facility except where the 
Director, Office of Federal Activities, Environmental Protection Agency, 
determines that independent facilities are located in one geographical 
area.

                            17. buy american

    In accordance with section 215 of the Clean Water Act, and 
implementing EPA regulations and guidelines, the contractor agrees that 
preference will be given to domestic construction material by the 
contractor, subcontractors, materialmen, and suppliers in the 
performance of this contract.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 37596, June 27, 1979; 
44 FR 39340, July 5, 1979]

  Appendix D to Subpart E of Part 35--EPA Transition Policy--Existing 
                    Consulting Engineering Agreements

                       a. access to records--audit

    1. Access clause. After June 30, 1975, a construction grant for 
Steps 1, 2 or 3 will not be awarded nor will initiation of Step 1 work 
be approved under 40 CFR 35.917(e) or 35.925-18(a)(3), unless an 
acceptable records and access clause is included in the consulting 
engineering subagreement. The clause contained in appendix C-1 shall be 
used on or after March 1, 1976. The clause required by former PG-53 or 
approved as an alternate thereto may be used for all contracts under 
grants awarded before March 1, 1976.
    2. EPA exercise of right of access to records. Under applicable 
statutory and regulatory provisions, EPA has a broad right of access to 
grantees' consulting engineers' records pertinent to performance of EPA 
project work. The extent to which EPA will exercise this right of access 
will depend upon the nature of the records and upon the type of 
agreement.
    a. In order to determine where EPA shall exercise its right of 
access, engineers' project-related records have been divided into three 
categories:
    (1) Category A: Records that pertain directly to the professional, 
technical and other services performed, excluding any type of financial 
records of the consulting engineer.
    (2) Category B: Financial records of the consulting engineer 
pertaining to the direct costs of professional, technical and other 
services performed, excluding financial records pertaining to profit and 
overhead or other indirect costs.
    (3) Category C: Financial records of the consulting engineer 
excluded from category B.
    b. In all cases, EPA will exercise its right of access to Category A 
records. Also, where there is an indication that fraud, gross abuse, or 
corrupt practices may be involved, EPA will exercise its right of access 
to records in all categories. Otherwise, access to consulting engineers' 
financial records (categories B and C) will depend principally upon the 
method(s) of compensation stipulated in the agreement:
    (1) Agreements based upon a percentage of construction cost. 
Category B and C records will not be audited. However, terms of the

[[Page 556]]

agreement, including the total amount of compensation, will be evaluated 
for fairness, reasonableness, and consistency with historical and 
advisory guidelines in general use and acceptable locally. These 
guidelines include those in ASCE manual 45 or other analyses or data 
which the contracting parties relied on or used in negotiation of the 
agreement. Such evaluation shall also consider comparable contracts for 
which EPA grants have been awarded.
    (2) Agreements based upon salary cost times a multiplier including 
profit. Category B records will be audited. Category C records will not 
be audited. However, terms of the agreement, including the total amount 
of compensation and the multiplier, will be evaluated for fairness and 
reasonableness and consistency with historical and advisory guidelines 
in general use and acceptable locally. These guidelines include those in 
ASCE manual 45 or other analyses or data which the contracting parties 
relied on or used in negotiation of the agreement. Such evaluation shall 
also consider comparable contracts for which EPA grants have been 
awarded. Items of overhead or other indirect costs will only be audited 
to the extent necessary to assure that types of costs found both in 
overhead and reimbursable direct costs, if any, are properly charged.
    (3) Per diem agreements. Category B records will be audited. 
Category C records will not be audited. Audit will be performed to the 
extent necessary to determine that hours claimed and classes of 
personnel used were properly supported. The per diem rates will be 
evaluated according to the appropriate portions of paragraphs A.2.b. (1) 
and (2) of this appendix.
    (4) Cost plus a fixed fee (profit). All direct costs, overhead, and 
other indirect costs claimed will be audited to determine that they are 
reasonable, allowable, and properly supported by the consulting 
engineer's records. The amount of fixed fee will not be questioned 
unless the total compensation appears unreasonable when evaluated 
according to paragraphs A.2.b. (1) and (2) of this appendix.
    (5) Fixed price lump sum contracts. Category B and C records will 
not be audited. The contract amount will not be questioned unless the 
total compensation appears unreasonable when evaluated in accordance 
with appropriate portions of paragraphs A.2.b. (1) and (2) of this 
appendix.
    c. If an agreement covers both grant-eligible and ineligible work, 
access to records will be exercised to the extent necessary to allocate 
contract work or costs between work grant-eligible for title II 
construction grant assistance and ineligible work or costs.
    d. Under agreements that use two or more methods of compensation, 
each part of the agreement will be separately audited according to the 
appropriate paragraph of paragraph (b)(2) of this section.
    e. Any audited firm and the grantee will be afforded opportunity for 
an audit exit conference and an opportunity to receive and comment upon 
the pertinent portions of each draft audit report. The final audit 
report will include the written comments, if any, of the audited parties 
in addition to those of the appropriate State and/or Federal 
agency(ies).

                           b. type of contract

    1. The percentage-of-construction-cost type of contract, and the 
multiplier contract, where the multiplier includes profit, may not be 
used for step 1 or step 2 work initiated after June 30, 1975, when the 
step 1 or step 2 grant is awarded after June 30, 1975. (A multiplier 
type of compensation may be used only under acceptable types of 
contracts; see 40 CFR 35.937-1(d).)
    2. Step 1 and step 2 work performed under the percentage-of-
construction-cost type of contract and the multiplier contract, where 
the multiplier includes profit, will be reimbursed and such contracts 
will not be questioned where such costs are reimbursed in conjunction 
with a step 3 grant award within the scope of step 2 work contracted for 
prior to July 1, 1975. However, the current step 2 work will not be 
continued indefinitely for multiple, subsequent step 3 projects in order 
to avoid modifying the consultant agreement.
    3. Where step 2 work is initiated after June 30, 1975, under 
contracts prohibited by paragraphs B.1. and B.2. of this appendix, EPA 
approval may not be given nor grant assistance awarded until the 
contract's terms of compensation have been renegotiated.
    4. Establishing an ``upset'' figure (an upper limit which cannot be 
exceeded without a formal amendment to the agreement) under a multiplier 
contract, where the multiplier includes profit, is not acceptable where 
renegotiation of such contracts is required. In such renegotiation, the 
amount of profit must be specifically identified.
    5. Total allowable contract costs for grant payment for a contract 
based on a percentage-of-construction-cost will be based on the 
following:
    a. Where work for the design step is essentially continuous from 
start of design to bidding, and bid opening for step 3 construction 
occurs within 1 year after substantial completion of step 2 design work, 
the total allowable contract costs for grant payment may not exceed an 
amount based upon the low, responsive, responsible bid for construction.
    b. Where work for the design step is not essentially continuous from 
start of design to bidding, or 1 year or more elapses between 
substantial completion of step 2 design work and bid opening for step 3 
construction, the

[[Page 557]]

total allowable contract costs for grant payment may not exceed an 
amount based upon the lower of:
    (1) The consulting engineer's construction cost estimate provided at 
the time of such substantial completion plus an escalation of this 
construction cost estimate of up to 5 percent, but not to exceed the 
consulting engineer's total compensation based on the low, responsive, 
responsible bid for construction, or
    (2) The consulting engineer's construction cost estimate provided at 
the time of such substantial completion plus a consulting engineer's 
compensation esclation not to exceed $50,000, but not to exceed the 
consulting engineer's total compensation based upon the low, responsive, 
responsible bid for construction.
    c. Where the low, responsive, responsible bid for construction would 
have resulted in a higher consulting engineer's total compensation than 
paragraph b. of this clause, provides, the Regional Administrator may 
also consider a reasonable additional compensation for updating the 
plans and specifications, revising cost estimates, or similar services.
    d. The limitations of paragraph B5 apply to all grants awarded under 
subpart E except that--
    (1) If the Regional Administrator had made final payment on a 
project before December 17, 1975, the limitations do not apply; and
    (2) For other projects on which construction for the building and 
erection of a treatment works was initiated prior to December 17, 1975, 
the limitations do not apply to any request for engineering fee 
increases attributable to construction contract awards or change orders 
approved by the grantee prior to December 17, 1975.
    6. Where renegotiation is required under this appendix D, such 
renegotiation is subject to 40 CFR 35.937-1, 35.937-6, 35.937-7, 35.937-
9, and 35.937-10.

                      c. announcement and selection

    The requirements of 40 CFR 35.937-2 through 35.937-4 shall not apply 
to step 1 work where the step 1 grant was awarded or the initiation of 
step 1 work was approved by EPA (under 40 CFR 35.917(e)) before March 1, 
1976, nor to subsequent step 2 and step 3 work in accordance with 40 CFR 
35.937-2(d), if the grantee is satisfied with the qualifications and 
performance of the engineer employed.

              d. required consulting engineering provisions

    Effective March 1, 1976, the subagreement clauses required under 
appendix C-1 must be included in the consulting engineering subagreement 
before grant assistance for step 1, 2 or 3 will be awarded and before 
initiation of step 1 work will be approved under 40 CFR 35.917(e) or 
35.925-18(a) 3.

                             e. enforcement

    1. Refusal by a consulting engineer to insert the required access 
clause, or to allow access to its records, or to renegotiate a 
consulting engineering contract according to the foregoing requirements, 
will render costs incurred under such contract unallowable. Accordingly, 
all such costs will be questioned and disallowed pending compliance with 
this appendix.
    2. Where the Regional Administrator determines that the time 
required to comply with the access to records and type of contract 
provisions of this appendix will unduly delay award of grant assistance, 
he may award the grant assistance conditioned upon compliance with this 
appendix within a specified period of time. In such event, no grant 
payments for the affected engineering work may be made until such 
compliance has been obtained.

     Appendix E to Subpart E of Part 35--Innovative and Alternative 
                          Technology Guidelines

    1. Purpose. These guidelines provide the criteria for identifying 
and evaluating innovative and alternative waste water treatment 
processes and techniques. The Administrator may publish additional 
information.
    2. Authority. These guidelines are provided under section 304(d)(3) 
of the Clean Water Act.
    3. Applicability. These guidelines apply to:
    a. The analysis of innovative and alternative treatment processes 
and techniques under Sec. 35.917-1(d)(8);
    b. Increased grants for eligible treatment works under Secs. 35.930-
5 (b) and (c) and 35.908(b)(1);
    c. The funding available for innovative and alternative processes 
and techniques under Sec. 35.915-1(b);
    d. The funding available for alternatives to conventional treatment 
works for small communities under Sec. 35.915-1(e);
    e. The cost-effectiveness preference given innovative and 
alternative processes and techniques in section 7 of appendix A to this 
subpart;
    f. The treatment works that may be given higher priority on State 
project priority lists under Sec. 35.915(a)(1)(iii);
    g. Alternative and innovative treatment systems in connection with 
Federal facilities;
    h. Individual systems authorized by Sec. 35.918, as modified in that 
section to include unconventional or innovative sewers;
    i. The access and reports conditions in Sec. 35.935-20.
    4. Alternative processes and techniques. Alternative waste water 
treatment processes

[[Page 558]]

and techniques are proven methods which provide for the reclaiming and 
reuse of water, productively recycle waste water constituents or 
otherwise eliminate the discharge of pollutants, or recover energy.
    a. In the case of processes and techniques for the treatment of 
effluents, these include land treatment, aquifer recharge, aquaculture, 
silviculture, and direct reuse for industrial and other nonpotable 
purposes, horticulture and revegetation of disturbed land. Total 
containment ponds and ponds for the treatment and storage of waste water 
prior to land application and other processes necessary to provide 
minimum levels of preapplication treatment are considered to be part of 
alternative technology systems for the purpose of this section.
    b. For sludges, these include land application for horticultural, 
silvicultural, or agricultural purposes (including supplemental 
processing by means such as composting or drying), and revegetation of 
disturbed lands.
    c. Energy recovery facilities include codisposal measures for sludge 
and refuse which produce energy; anaerobic digestion facilities 
(Provided, That more than 90 percent of the methane gas is recovered and 
used as fuel); and equipment which provides for the use of digester gas 
within the treatment works. Self-sustaining incineration may also be 
included provided that the energy recovered and productively used is 
greater than the energy consumed to dewater the sludge to an autogenous 
state.
    d. Also included are individual and other onsite treatment systems 
with subsurface or other means of effluent disposal and facilities 
constructed for the specific purpose of septage treatment.
    e. The term ``alternative'' as used in these guidelines includes the 
terms ``unconventional'' and ``alternative to conventional'' as used in 
the Act.
    f. The term ``alternative'' does not include collector sewers, 
interceptors, storm or sanitary sewers or the separation thereof; or 
major sewer rehabilitation, except insofar as they are alternatives to 
conventional treatment works for small communities under Sec. 35.915-
1(e) or part of individual systems under Sec. 35.918.
    5. Innovative processes and techniques. Innovative waste water 
treatment processes and techniques are developed methods which have not 
been fully proven under the circumstances of their contemplated use and 
which represent a significant advancement over the state of the art in 
terms of meeting the national goals of cost reduction, increased energy 
conservation or recovery, greater recycling and conservation of water 
resources (including preventing the mixing of pollutants with water), 
reclamation or reuse of effluents and resources (including increased 
productivity of arid lands), improved efficiency and/or reliability, the 
beneficial use of sludges or effluent constituents, better management of 
toxic materials or increased environmental benefits. For the purpose of 
these guidelines, innovative waste water treatment processes and 
techniques are generally limited to new and improved applications of 
those alternative processes and techniques identified in accordance with 
paragraph 4 of these guidelines, including both treatment at centralized 
facilities and individual and other onsite treatment. Treatment 
processes based on the conventional concept of treatment (by means of 
biological or physical/chemical unit processes) and discharge to surface 
waters shall not be considered innovative waste water treatment 
processes and techniques except where it is demonstrated that these 
processes and techniques, as a minimum, meet either the cost-reduction 
or energy-reduction criterion described in section 6 of these 
guidelines. Treatment and discharge systems include primary treatment, 
suspended-growth or fixed-growth biological systems for secondary or 
advance waste water treatment, physical/chemical treatment, 
disinfection, and sludge processing. The term ``innovative'' does not 
include collector sewers, interceptors, storm or sanitary sewers or the 
separation of them, or major sewer rehabilitation, except insofar as 
they meet the criteria in paragraph 6 of these guidelines and are 
alternatives to conventional treatment works for small communities under 
Sec. 35.915-1(e) or part of individual systems under Sec. 35.918.
    6. Criteria for determining innovative processes and techniques. a. 
The Regional Administrator will use the following criteria in 
determining whether a waste water treatment process or technique is 
innovative. The criteria should be read in the context of paragraph 5. 
These criteria do not necessarily preclude a determination by the 
Regional Administrator that a treatment system is innovative because of 
local variations in geographic or climatic conditions which affect 
treatment plant design and operation or because it achieves significant 
public benefits through the advancement of technology which would 
otherwise not be possible. The Regional Administrator should consult 
with EPA headquarters about determinations made in other EPA regions on 
similar processes and techniques.
    b. New or improved applications of alternative waste water treatment 
processes and techniques may be innovative for the purposes of this 
regulation if they meet one or more of the criteria in paragraphs e(1) 
through e(6) of this paragraph. Treatment and discharge systems (i.e., 
systems which are not new or improved applications of alternative waste 
water treatment processes and techniques in accordance with paragraph 4 
of these guidelines) must meet the criteria

[[Page 559]]

of either paragraph 6e(1) or 6e(2), as a minimum, in order to be 
innovative for the purposes of these guidelines.
    c. These six criteria are essentially the same as those used to 
evaluate any project proposed for grant assistance. The principal 
difference is that some newly developed processes and techniques may 
have the potential to provide significant advancements in the state of 
the art with respect to one or more of these criteria. Inherent in the 
concept of advancement of technology is a degree of risk which is 
necessary to initially demonstrate a method on a full, operational scale 
under the circumstances of its contemplated use. This risk, while 
recognized to be a necessary element in the implementation of innovative 
technology, must be minimized by limiting the projects funded to those 
which have been fully developed and shown to be feasible through 
operation on a smaller scale. The risk must also be commensurate with 
the potential benefits (i.e., greater potential benefits must be 
possible in the case of innovative technology projects where greater 
risk is involved).
    d. Increased Federal funding under Sec. 35.908(b) may be made only 
from the reserve in Sec. 35.915-1(b). The Regional Administrator may 
fund a number of projects using the same type of innovative technology 
if he desires to encourage certain innovative processes and techniques 
because the potential benefits are great in comparison to the risks, or 
if operation under differing conditions of climatic, geology, etc., is 
desirable to demonstrate the technology.
    e. The Regional Administrator will use the following criteria to 
determine whether waste water treatment processes and techniques are 
innovative:
    (1) The life cycle cost of the eligible portion of the treatment 
works excluding conventional sewer lines is at least 15 percent less 
than that for the most cost-effective alternative which does not 
incorporate innovative waste water treatment processes and techniques 
(i.e., is no more than 85 percent of the life cycle cost of the most 
cost-effective noninnovative alternative).
    (2) The net primary energy requirements for the operation of the 
eligible portion of the treatment works excluding conventional sewer 
lines are at least 20 percent less than the net energy requirements of 
the least net energy alternative which does not incorporate innovative 
waste water treatment processes and techniques (i.e., the net energy 
requirements are no more than 80 percent of those for the least net 
energy noninnovative alternative). The least net energy noninnovative 
alternative must be one of the alternatives selected for analysis under 
section 5 of appendix A.
    (3) The operational reliability of the treatment works is improved 
in terms of decreased susceptibility to upsets or interference, reduced 
occurrence of inadequately treated discharges and decreased levels of 
operator attention and skills required.
    (4) The treatment works provides for better management of toxic 
materials which would otherwise result in greater environmental hazards.
    (5) The treatment works results in increased environmental benefits 
such as water conservation, more effective land use, improved air 
quality, improved ground water quality, and reduced resource 
requirements for the construction and operation of the works.
    (6) The treatment works provide for new or improved methods of joint 
treatment and management of municipal and industrial wastes that are 
discharged into municipal systems.

[43 FR 44049, Sept. 27, 1978, as amended at 44 FR 37596, June 27, 1979; 
44 FR 39340, July 5, 1979]

Subparts F-G [Reserved]



Subpart H--Cooperative Agreements for Protecting and Restoring Publicly 
                         Owned Freshwater Lakes

    Authority: Sections 314, 501 and 518, Clean Water Act (86 Stat. 816, 
33 U.S.C. 1251 et seq.).

    Source: 45 FR 7792, Feb. 5, 1980, unless otherwise noted.



Sec. 35.1600  Purpose.

    This subpart supplements the EPA general grant regulations and 
procedures (part 31 of this chapter) and establishes policies and 
procedures for cooperative agreements to assist States and Indian tribes 
treated as States in carrying out approved methods and procedures for 
restoration (including protection against degradation) of publicly owned 
freshwater lakes.

[45 FR 7792, Feb. 5, 1980, as amended at 54 FR 14359, Apr. 11, 1989]



Sec. 35.1603  Summary of clean lakes assistance program.

    (a) Under section 314 of the Clean Water Act, EPA may provide 
financial assistance to States to implement methods and procedures to 
protect and restore publicly owned freshwater lakes. Although 
cooperative agreements may be awarded only to States, these regulations 
allow States, through

[[Page 560]]

substate agreements, to delegate some or all of the required work to 
substate agencies.
    (b) Only projects that deal with publicly owned freshwater lakes are 
eligible for assistance. The State must have assigned a priority to 
restore the lake, and the State must certify that the lake project is 
consistent with the State Water Quality Management Plan (Sec. 35.1521) 
developed under the State/EPA Agreement. The State/EPA Agreement is a 
mechanism for EPA Regional Administrators and States to coordinate a 
variety of programs under the Clean Water Act, the Resource Conservation 
and Recovery Act, the Safe Drinking Water Act and other laws 
administered by EPA.
    (c) These regulations provide for Phase 1 and 2 cooperative 
agreements. The purpose of a Phase 1 cooperative agreement is to allow a 
State to conduct a diagnostic-feasibility study to determine a lake's 
quality, evaluate possible solutions to existing pollution problems, and 
recommend a feasible program to restore or preserve the quality of the 
lake. A Phase 2 cooperative agreement is to be used for implementing 
recommended methods and procedures for controlling pollution entering 
the lake and restoring the lake. EPA award of Phase 1 assistance does 
not obligate EPA to award Phase 2 assistance for that project. 
Additionally, a Phase 1 award is not a prerequisite for receiving a 
Phase 2 award. However, a Phase 2 application for a proposed project 
that was not evaluated under a Phase 1 project shall contain the 
information required by appendix A.
    (d) EPA will evaluate all applications in accordance with the 
application review criteria of Sec. 35.1640-1. The review criteria 
include technical feasibility, public benefit, reasonableness of 
proposed costs, environmental impact, and the State's priority ranking 
of the lake project.
    (e) Before awarding funding assistance, the Regional Administrator 
shall determine that pollution control measures in the lake watershed 
authorized by section 201, included in an approved 208 plan, or required 
by section 402 of the Act are completed or are being implemented 
according to a schedule that is included in an approved plan or 
discharge permit. Clean lakes funds may not be used to control the 
discharge of pollutants from a point source where the cause of pollution 
can be alleviated through a municipal or industrial permit under section 
402 of the Act or through the planning and construction of wastewater 
treatment facilities under section 201 of the Act.



Sec. 35.1605  Definitions.

    The terms used in this subpart have the meanings defined in sections 
502 and 518(h) of the Act. In addition, the following terms shall have 
the