[Title 32 CFR ]
[Code of Federal Regulations (annual edition) - July 1, 2008 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

          32


          Parts 1 to 190

                         Revised as of July 1, 2008


          National Defense
          
 


________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of July 1, 2008
          With Ancillaries
                    Published by
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

[[Page ii]]

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 32:
    Subtitle A--Department of Defense
          Chapter I--Office of the Secretary of Defense              5
  Finding Aids:
      Table of CFR Titles and Chapters........................     801
      Alphabetical List of Agencies Appearing in the CFR......     821
      List of CFR Sections Affected...........................     831

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                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 32 CFR 2.1 refers to 
                       title 32, part 2, section 
                       1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
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    To determine whether a Code volume has been amended since its 
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EFFECTIVE AND EXPIRATION DATES

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OMB CONTROL NUMBERS

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Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
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OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
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the period beginning January 1, 1986, a ``List of CFR Sections 
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INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
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This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    Properly approved incorporations by reference in this volume are 
listed in the Finding Aids at the end of this volume.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed in 
the Finding Aids of this volume as an approved incorporation by 
reference, please contact the agency that issued the regulation 
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20408, or call 202-741-6010.

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the daily Federal Register.
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the revision dates of the 50 CFR titles.

[[Page vii]]


REPUBLICATION OF MATERIAL

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    Raymond A. Mosley,
    Director,
    Office of the Federal Register.
    July 1, 2008.







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                               THIS TITLE

    Title 32--National Defense is composed of six volumes. The parts in 
these volumes are arranged in the following order: parts 1-190, parts 
191-399, parts 400-629, parts 630-699, parts 700-799, and part 800 to 
End. The contents of these volumes represent all current regulations 
codified under this title of the CFR as of July 1, 2008.

    The current regulations issued by the Department of Defense appear 
in the volumes containing parts 1-189 and parts 190-399; those issued by 
the Department of the Army appear in the volumes containing parts 400-
629 and parts 630-699; those issued by the Department of the Navy appear 
in the volume containing parts 700-799, and those issued by the 
Department of the Air Force, Defense Logistics Agency, Selective Service 
System, National Counterintelligence Center, Central Intelligence 
Agency, Information Security Oversight Office, National Security 
Council, Office of Science and Technology Policy, Office for Micronesian 
Status Negotiations, and Office of the Vice President of the United 
States appear in the volume containing parts 800 to end.

    For this volume, Susannah C. Hurley and Moja N. Mwaniki were Chief 
Editors. The Code of Federal Regulations publication program is under 
the direction of Michael L. White, assisted by Ann Worley.

[[Page 1]]



                       TITLE 32--NATIONAL DEFENSE




                   (This book contains parts 1 to 190)

  --------------------------------------------------------------------
                                                                    Part

                    SUBTITLE A--Department of Defense

chapter i--Office of the Secretary of Defense...............           2

[[Page 3]]

                    Subtitle A--Department of Defense

[[Page 5]]



              CHAPTER I--OFFICE OF THE SECRETARY OF DEFENSE




                            (Parts 1 to 190)

  --------------------------------------------------------------------

                        SUBCHAPTER A--ACQUISITION
Part                                                                Page
1

[Reserved]

2               Pilot program policy........................          11
3               Transactions other than contracts, grants, 
                    or cooperative agreements for prototype 
                    projects................................          13
4-8

[Reserved]

                   SUBCHAPTER B--MILITARY COMMISSIONS
9               Procedures for Trials by Military 
                    Commissions of Certain Non-United States 
                    Citizens in the War Against Terrorism...          22
10              Military Commission Instructions............          31
11              Crimes and Elements of Trials by Military 
                    Commission..............................          32
12              Responsibilities of the Chief Prosecutor, 
                    Prosecutors, and Assistant Prosecutors..          43
13              Responsibilities of the Chief Defense 
                    Counsel, Detailed Defense Counsel, and 
                    Civilian Defense Counsel................          45
14              Qualification of Civilian Defense Counsel...          48
15              Reporting Relationships for Military 
                    Commission Personnel....................          53
16              Sentencing..................................          54
17              Administrative Procedures...................          55
18              Appointing Authority for Military 
                    Commissions.............................          57
19-20

[Reserved]

            SUBCHAPTER C--DOD GRANT AND AGREEMENT REGULATIONS
21              DoD grants and agreements--General matters..          61
22              DoD grants and agreements--Award and 
                    administration..........................          73

[[Page 6]]

26              Governmentwide requirements for drug-free 
                    workplace (financial assistance)........         106
28              New restrictions on lobbying................         112
32              Administrative requirements for grants and 
                    agreements with institutions of higher 
                    education, hospitals, and other non-
                    profit organizations....................         124
33              Uniform administrative requirements for 
                    grants and cooperative agreements to 
                    State and local governments.............         153
34              Administrative requirements for grants and 
                    agreements with for-profit organizations         181
37              Technology investment agreements............         200
             SUBCHAPTER D--PERSONNEL, MILITARY AND CIVILIAN
44              Screening the Ready Reserve.................         255
45              Certificate of release or discharge from 
                    active duty (DD Form 214/5 Series)......         259
47              Active duty service for civilian or 
                    contractual groups......................         274
48              Retired serviceman's family protection plan.         279
50              Personal commercial solicitation on DoD 
                    installations...........................         289
53              Wearing of the uniform......................         299
54              Allotments for child and spousal support....         300
56              Nondiscrimination on the basis of handicap 
                    in programs and activities assisted or 
                    conducted by the Department of Defense..         304
57              Provision of early intervention and special 
                    education services to eligible DoD 
                    dependents..............................         324
64              Management and mobilization of regular and 
                    reserve retired military members........         356
67              Educational requirements for appointment of 
                    reserve component officers to a grade 
                    above first lieutenant or lieutenant 
                    (junior grade)..........................         358
69              School boards for Department of Defense 
                    domestic dependent elementary and 
                    secondary schools.......................         360
70              Discharge review board (DRB) procedures and 
                    standards...............................         364
74              Appointment of doctors of osteopathy as 
                    medical officers........................         397
77              Program to encourage public and community 
                    service.................................         398
78              Voluntary State tax withholding from retired 
                    pay.....................................         408

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80              Provision of early intervention services to 
                    eligible infants and toddlers with 
                    disabilities and their families, and 
                    special education children with 
                    disabilities within the section 6 school 
                    arrangements............................         411
81              Paternity claims and adoption proceedings 
                    involving members and former members of 
                    the Armed Forces........................         435
85              Health promotion............................         436
86              Criminal history background checks on 
                    individuals in child care services......         440
88              Transition assistance for military personnel         452
93              Acceptance of service of process; release of 
                    official information in litigation; and 
                    testimony by NSA personnel as witnesses.         455
94              Naturalization of aliens serving in the 
                    Armed Forces of the United States and of 
                    alien spouses and/or alien adopted 
                    children of military and civilian 
                    personnel ordered overseas..............         459
96              Acquisition and use of criminal history 
                    record information by the military 
                    services................................         463
97              Release of official information in 
                    litigation and testimony by DoD 
                    personnel as witnesses..................         464
99              Procedures for States and localities to 
                    request indemnification.................         468
100             Unsatisfactory performance of ready reserve 
                    obligation..............................         470
101             Participation in Reserve training programs..         475
104             Civilian employment and reemployment rights 
                    of applicants for, and Service members 
                    and former Service members of the 
                    Uniformed Services......................         477
107             Personal services authority for direct 
                    health care providers...................         487
110             Standardized rates of subsistence allowance 
                    and commutation instead of uniforms for 
                    members of the Senior Reserve Officers' 
                    Training Corps..........................         489
112             Indebtedness of military personnel..........         495
113             Indebtedness procedures of military 
                    personnel...............................         498
142             Copyrighted sound and video recordings......         514
143             DoD policy on organizations that seek to 
                    represent or organize members of the 
                    Armed Forces in negotiation or 
                    collective bargaining...................         515
144             Service by members of the Armed Forces on 
                    State and local juries..................         518
145             Cooperation with the Office of Special 
                    Counsel of the Merit Systems Protection 
                    Board...................................         520

[[Page 8]]

147             Adjudicative guidelines for determining 
                    eligibility for access to classified 
                    information.............................         525
148             National policy and implementation of 
                    reciprocity of facilities...............         538
149             Policy on technical surveillance 
                    countermeasures.........................         541
        SUBCHAPTER E--REGULATIONS PERTAINING TO MILITARY JUSTICE
150             Courts of criminal appeals rules of practice 
                    and procedure...........................         543
151             Status of forces policies and information...         551
152             Review of the Manual for Courts-Martial.....         557
153             Criminal jurisdiction over civilians 
                    employed by or accompanying the armed 
                    forces outside the United States, 
                    certain service members, and former 
                    service members.........................         561
                         SUBCHAPTER F--SECURITY
154             Department of Defense personnel security 
                    program regulation......................         582
155             Defense industrial personnel security 
                    clearance program.......................         645
156             Department of Defense Personnel Security 
                    Program (DoDPSP)........................         652
                    SUBCHAPTER G--DEFENSE CONTRACTING
160             Defense acquisition regulatory system.......         654
162             Productivity Enhancing Capital Investment 
                    (PECI)..................................         656
165             Recoupment of nonrecurring costs on sales of 
                    U.S. items..............................         660
168a            National defense science and engineering 
                    graduate fellowships....................         664
169             Commercial activities program...............         665
169a            Commercial activities program procedures....         669
171             Implementation of Wildfire Suppression 
                    Aircraft Transfer Act of 1996...........         711
172             Disposition of proceeds from DoD sales of 
                    surplus personal property...............         714
173             Competitive information certificate and 
                    profit reduction clause.................         720
                 SUBCHAPTER H--CLOSURES AND REALIGNMENT
174             Revitalizing base closure communities and 
                    addressing impacts of realignment.......         724
175

[Reserved]

[[Page 9]]

176             Revitalizing base closure communities and 
                    community assistance--Community 
                    redevelopment and homeless assistance...         738
179             Munitions Response Site Prioritization 
                    Protocol (MRSPP)........................         747
                       SUBCHAPTER I--CIVIL DEFENSE
185             Military Support to Civil Authorities (MSCA)         777
                       SUBCHAPTERS J-K [RESERVED]
                        SUBCHAPTER L--ENVIRONMENT
187             Environmental effects abroad of major 
                    Department of Defense actions...........         789
188-190

[Reserved]

[[Page 11]]



                        SUBCHAPTER A_ACQUISITION



                            PART 1 [RESERVED]



PART 2_PILOT PROGRAM POLICY--Table of Contents




Sec.
2.1 Purpose.
2.2 Statutory relief for participating programs.
2.3 Regulatory relief for participating programs.
2.4 Designation of participating programs.
2.5 Criteria for designation of participating programs.

    Authority: 10 U.S.C. 2340 note.

    Source: 62 FR 17549, Apr. 10, 1997, unless otherwise noted.



Sec. 2.1  Purpose.

    Section 809 of Public Law 101-510, ``National Defense Authorization 
Act for Fiscal Year 1991,'' as amended by section 811 of Public Law 102-
484, ``National Defense Authorization Act for Fiscal Year 1993'' and 
Public Law 103-160, ``National Defense Authorization Act for Fiscal Year 
1994,'' authorizes the Secretary of Defense to conduct the Defense 
Acquisition Pilot Program. In accordance with section 809 of Public Law 
101-510, the Secretary may designate defense acquisition programs for 
participation in the Defense Acquisition Pilot Program.
    (a) The purpose of the pilot programs is to determine the potential 
for increasing the efficiency and effectiveness of the acquisition 
process. Pilot programs shall be conducted in accordance with the 
standard commercial, industrial practices. As used in this policy, the 
term ``standard commercial, industrial practice'' refers to any 
acquisition management practice, process, or procedure that is used by 
commercial companies to produce and sell goods and services in the 
commercial marketplace. This definition purposely implies a broad range 
of potential activities to adopt commercial practices, including 
regulatory and statutory streamlining, to eliminate unique Government 
requirements and practices such as government-unique contracting 
policies and practices, government-unique specifications and standards, 
and reliance on cost determination rather than price analysis.
    (b) Standard commercial, industrial practices include, but are not 
limited to:
    (1) Innovative contracting policies and practices;
    (2) Performance and commercial specifications and standards;
    (3) Innovative budget policies;
    (4) Establishing fair and reasonable prices without cost data;
    (5) Maintenance of long-term relationships with quality suppliers;
    (6) Acquisition of commercial and non-developmental items (including 
components); and
    (7) Other best commercial practices.



Sec. 2.2  Statutory relief for participating programs.

    (a) Within the limitations prescribed, the applicability of any 
provision of law or any regulation prescribed to implement a statutory 
requirement may be waived for all programs participating in the Defense 
Acquisition Pilot Program, or separately for each participating program, 
if that waiver or limit is specifically authorized to be waived or 
limited in a law authorizing appropriations for a program designated by 
statute as a participant in the Defense Acquisition Pilot Program.
    (b) Only those laws that prescribe procedures for the procurement of 
supplies or services; a preference or requirement for acquisition from 
any source or class of sources; any requirement related to contractor 
performance; any cost allowability, cost accounting, or auditing 
requirements; or any requirement for the management of, testing to be 
performed under, evaluation of, or reporting on a defense acquisition 
program may be waived.
    (c) The requirements in section 809 of Public Law 101-510, as 
amended by section 811 of Public Law 102-484, the requirements in any 
law enacted on or after the enactment of Public Law 101-510 (except to 
the extent that a waiver or limitation is specifically authorized for 
such a defense acquisition program by statute), and any provision of law 
that ensures the financial integrity of

[[Page 12]]

the conduct of a Federal Government program or that relates to the 
authority of the Inspector General of the Department of Defense may not 
be considered for waiver.



Sec. 2.3  Regulatory relief for participating programs.

    (a) A program participating in the Defense Acquisition Pilot Program 
will not be subject to any regulation, policy, directive, or 
administrative rule or guideline relating to the acquisition activities 
of the Department of Defense other than the Federal Acquisition 
Regulation (FAR) \1\, the Defense FAR Supplement (DFARS) \2\, or those 
regulatory requirements added by the Under Secretary of Defense for 
Acquisition and Technology, the Head of the Component, or the DoD 
Component Acquisition Executive.
---------------------------------------------------------------------------

    \1\ Copies of this Department of Defense publication may be obtained 
from the Government Printing Office, Superintendent of Documents, 
Washington, DC 20402.
    \2\ See footnote 1 to Sec. 2.3(a).
---------------------------------------------------------------------------

    (b) Provisions of the FAR and/or DFARS that do not implement 
statutory requirements may be waived by the Under Secretary of Defense 
for Acquisition and Technology using appropriate administrative 
procedures. Provisions of the FAR and DFARS that implement statutory 
requirements may be waived or limited in accordance with the procedures 
for statutory relief previously mentioned.
    (c) Regulatory relief includes relief from use of government-unique 
specifications and standards. Since a major objective of the Defense 
Acquisition Pilot Program is to promote standard, commercial industrial 
practices, functional performance and commercial specifications and 
standards will be used to the maximum extent practical. Federal or 
military specifications and standards may be used only when no practical 
alternative exists that meet the user's needs. Defense acquisition 
officials (other than the Program Manager or Commodity Manager) may only 
require the use of military specifications and standards with advance 
approval from the Under Secretary of Defense for Acquisition and 
Technology, the Head of the DoD Component, or the DoD Component 
Acquisition Executive.



Sec. 2.4  Designation of participating programs.

    (a) Pilot programs may be nominated by a DoD Component Head or 
Component Acquisition Executive for participation in the Defense 
Acquisition Pilot Program. The Under Secretary of Defense for 
Acquisition and Technology shall determine which specific programs will 
participate in the pilot program and will transmit to the Congressional 
defense committees a written notification of each defense acquisition 
program proposed for participation in the pilot program. Programs 
proposed for participation must be specifically designated as 
participants in the Defense Acquisition Pilot Program in a law 
authorizing appropriations for such programs and provisions of law to be 
waived must be specifically authorized for waiver.
    (b) Once included in the Defense Acquisition Pilot Program, decision 
and approval authority for the participating program shall be delegated 
to the lowest level allowed in the acquisition regulations consistent 
with the total cost of the program (e.g., under DoD Directive 5000.1, 
\3\ an acquisition program that is a major defense acquisition program 
would be delegated to the appropriate Component Acquisition Executive as 
an acquisition category IC program)
---------------------------------------------------------------------------

    \3\ Copies may be obtained, at cost, from the National Technical 
Information Service, 5285 Port Royal Road, Springfield, VA 22161.
---------------------------------------------------------------------------

    (c) At the time of nomination approval, the Under Secretary of 
Defense for Acquisition and Technology will establish measures to judge 
the success of a specific program, and will also establish a means of 
reporting progress towards the measures.



Sec. 2.5  Criteria for designation of participating programs.

    (a) Candidate programs must have an approved requirement, full 
program funding assured prior to designation, and low risk. Nomination 
of a candidate program to participate in the Defense Acquisition Pilot 
Program should occur as early in the program's life-cycle as possible. 
Developmental programs will only be considered on an exception basis.

[[Page 13]]

    (b) Programs in which commercial or non-developmental items can 
satisfy the military requirement are preferred as candidate programs. A 
nominated program will address which standard commercial, industrial 
practices will be used in the pilot program and how those practices will 
be applied.
    (c) Nomination of candidate programs must be accompanied by a list 
of waivers being requested to Statutes, FAR, DFARS, DoD Directives \4\ 
and Instructions,\5\ and where applicable, DoD Component regulations. 
Waivers being requested must be accompanied by rationale and 
justification for the waiver. The justification must include:
---------------------------------------------------------------------------

    \4\ See footnote 3 to Sec. 2.4(b).
    \5\ See footnote 3 to Sec. 2.4(b).
---------------------------------------------------------------------------

    (1) The provision of law proposed to be waived or limited.
    (2) The effects of the provision of law on the acquisition, 
including specific examples.
    (3) The actions taken to ensure that the waiver or limitation will 
not reduce the efficiency, integrity, and effectiveness of the 
acquisition process used for the defense acquisition program; and
    (4) A discussion of the efficiencies or savings, if any, that will 
result from the waiver or limitation.
    (d) No nominated program shall be accepted until the Under Secretary 
of Defense has determined that the candidate program is properly 
planned.



PART 3_TRANSACTIONS OTHER THAN CONTRACTS, GRANTS, OR COOPERATIVE AGREEMENTS FOR PROTOTYPE PROJECTS--Table of Contents




Sec.
3.1 Purpose.
3.2 Background.
3.3 Applicability.
3.4 Definitions.
3.5 Appropriate use.
3.6 Limitations on cost-sharing.
3.7 Comptroller General access.
3.8 DoD access to records policy.
3.9 Follow-on production contracts.

    Authority: Sec. 845, Pub. L. 103-160, 107 Stat. 1547, as amended.

    Source: 66 FR 57383, Nov. 15, 2001, unless otherwise noted.



Sec. 3.1  Purpose.

    This part consolidates rules that implement section 845 of the 
National Defense Authorization Act for Fiscal Year 1994, Public Law 103-
160, 107 Stat. 1547, as amended, and have a significant impact on the 
public. Section 845 authorizes the Secretary of a Military Department, 
the Director of Defense Advanced Research Projects Agency, and any other 
official designated by the Secretary of Defense, to enter into 
transactions other than contracts, grants, or cooperative agreements in 
certain situations for prototype projects that are directly relevant to 
weapons or weapon systems proposed to be acquired or developed by the 
Department of Defense.

[67 FR 54956, Aug. 27, 2002]



Sec. 3.2  Background.

    ``Other transactions'' is the term commonly used to refer to the 10 
U.S.C. 2371 authority to enter into transactions other than contracts, 
grants or cooperative agreements. ``Other transactions'' are generally 
not subject to the Federal laws and regulations limited in applicability 
to contracts, grants or cooperative agreements. As such, they are not 
required to comply with the Federal Acquisition Regulation (FAR) and its 
supplements (48 CFR).

[67 FR 54956, Aug. 27, 2002]



Sec. 3.3  Applicability.

    This part applies to the Secretary of a Military Department, the 
Directors of the Defense Agencies, and any other official designated by 
the Secretary of Defense to enter into transactions other than 
contracts, grants or cooperative agreements for prototype projects that 
are directly relevant to weapons or weapon systems proposed to be 
acquired or developed by the Department of Defense, under authority of 
10 U.S.C. 2371. Such transactions are commonly referred to as ``other 
transaction'' agreements and are hereafter referred to as agreements.

[65 FR 35576, June 5, 2000. Redesignated at 67 FR 54956, Aug. 27, 2002]

[[Page 14]]



Sec. 3.4  Definitions.

    Agency point of contact (POC). The individual identified by the 
military department or defense agency as its POC for prototype OTs.
    Agreements Officer. An individual with the authority to enter into, 
administer, or terminate OTs for prototype projects and make related 
determinations and findings.
    Approving Official. The official responsible for approving the OTs 
acquisition strategy and resulting OT agreement. This official must be 
at least one level above the Agreements Officer and at no lower level 
than existing agency thresholds associated with procurement contracts.
    Awardee. Any business unit that is the direct recipient of an OT 
agreement.
    Business unit. Any segment of an organization, or an entire business 
organization which is not divided into segments.
    Contracting activity. An element of an agency designated by the 
agency head and delegated broad authority regarding acquisition 
functions. It includes elements designated by the Director of a Defense 
Agency which has been delegated contracting authority through its agency 
charter.
    Contracting Officer. A person with the authority to enter into, 
administer, and/or terminate contracts and make related determinations 
and findings as defined in Chapter 1 of Title 48, CFR, Federal 
Acquisition Regulation, Section 2.101(b).
    Cost-type OT. Agreements where payments are based on amounts 
generated from the awardee's financial or cost records or that require 
at least one third of the total costs to be provided by non-Federal 
parties pursuant to statute or require submittal of financial or cost 
records/reports to determine whether additional effort can be 
accomplished for the fixed amount.
    Fixed-price type OT. Agreements where payments are not based on 
amounts generated from the awardee's financial or cost records.
    Head of the contracting activity (HCA). The official who has overall 
responsibility for managing the contracting activity.
    Nontraditional Defense contractor. A business unit that has not, for 
a period of at least one year prior to the date of the OT agreement, 
entered into or performed on (1) any contract that is subject to full 
coverage under the cost accounting standards prescribed pursuant to 
section 26 of the Office of Federal Procurement Policy Act (41 U.S.C. 
422) and the regulations implementing such section; or (2) any other 
contract in excess of $500,000 to carry out prototype projects or to 
perform basic, applied, or advanced research projects for a Federal 
agency, that is subject to the Federal Acquisition Regulation.
    Procurement contract. A contract awarded pursuant to the Federal 
Acquisition Regulation.
    Project Manager. The government manager for the prototype project.
    Qualified Independent Public Accountant. An accountant that is 
licensed or works for a firm that is licensed in the state or other 
political jurisdiction where they operate their professional practice 
and comply with the applicable provisions of the public accountancy law 
and rules of the jurisdiction where the audit is being conducted.
    Segment. One of two or more divisions, product departments, plants, 
or other subdivisions of an organization reporting directly to a home 
office, usually identified with responsibility for profit and/or 
producing a product or service.
    Senior Procurement Executive. The following individuals:
    (1) Department of the Army--Assistant Secretary of the Army 
(Acquisition, Logistics and Technology);
    (2) Department of the Navy--Assistant Secretary of the Navy 
(Research, Development and Acquisition);
    (3) Department of the Air Force--Assistant Secretary of the Air 
Force (Acquisition).
    (4) The Directors of Defense Agencies who have been delegated 
authority to act as Senior Procurement Executive for their respective 
agencies.
    Single Audit Act. Establishes uniform audit requirements for audits 
of state and local government, universities, and non-profit 
organizations that expend Federal awards.
    Subawardee. Any business unit of a party, entity or subordinate 
element

[[Page 15]]

performing effort under the OT agreement, other than the awardee.
    Traditional Defense contractor. Any business unit that does not meet 
the definition of a nontraditional Defense contractor.

[68 FR 27457, May 20, 2003, as amended at 69 FR 16482, Mar. 30, 2004]



Sec. 3.5  Appropriate use.

    In accordance with statute, this authority may be used only when:
    (a) At least one nontraditional Defense contractor is participating 
to a significant extent in the prototype project; or
    (b) No nontraditional Defense contractor is participating to a 
significant extent in the prototype project, but at least one of the 
following circumstances exists:
    (1) At least one third of the total cost of the prototype project is 
to be paid out of funds provided by non-Federal parties to the 
transaction.
    (2) The Senior Procurement Executive for the agency determines in 
writing that exceptional circumstances justify the use of a transaction 
that provides for innovative business arrangements or structures that 
would not be feasible or appropriate under a procurement contract.

[67 FR 54956, Aug. 27, 2002]



Sec. 3.6  Limitations on cost-sharing.

    (a) When a nontraditional Defense contractor is not participating to 
a significant extent in the prototype project and cost-sharing is the 
reason for using OT authority, then the non-Federal amounts counted as 
provided, or to be provided, by the business units of an awardee or 
subawardee participating in the performance of the OT agreement may not 
include costs that were incurred before the date on which the OT 
agreement becomes effective. Costs that were incurred for a prototype 
project by the business units of an awardee or subawardee after the 
beginning of negotiations, but prior to the date the OT agreement 
becomes effective, may be counted as non-Federal amounts if and to the 
extent that the Agreements Officer determines in writing that:
    (1) The awardee or subawardee incurred the costs in anticipation of 
entering into the OT agreement; and
    (2) It was appropriate for the awardee or subawardee to incur the 
costs before the OT agreement became effective in order to ensure the 
successful implementation of the OT agreement.
    (b) As a matter of policy, these limitations on cost-sharing apply 
any time cost-sharing may be recognized when using OT authority for 
prototype projects.

[67 FR 54956, Aug. 27, 2002]



Sec. 3.7  Comptroller General access.

    (a) A clause must be included in solicitations and agreements for 
prototype projects awarded under authority of 10 U.S.C. 2371, that 
provide for total government payments in excess of $5,000,000 to allow 
Comptroller General access to records that directly pertain to such 
agreements.
    (b) The clause referenced in paragraph (a) of this section will not 
apply with respect to a party or entity, or subordinate element of a 
party or entity, that has not entered into any other contract, grant, 
cooperative agreement or ``other transaction'' agreement that provides 
for audit access by a government entity in the year prior to the date of 
the agreement. The clause must be included in all agreements described 
in paragraph (a) of this section in order to fully implement the law by 
covering those participating entities and their subordinate elements 
which have entered into prior agreements providing for Government audit 
access, and are therefore not exempt. The presence of the clause in an 
agreement will not operate to require Comptroller General access to 
records from any party or participating entity, or subordinate element 
of a party or participating entity, or subordinate element of a party or 
participating entity, which is otherwise exempt under the terms of the 
clause and the law.
    (c)(1) The right provided to the Comptroller General in a clause of 
an agreement under paragraph (a) of this part, is limited as provided by 
subparagraph (c)(2) of this part in the case of a party to the 
agreement, an entity that participates in the performance of the 
agreement, or a subordinate element of

[[Page 16]]

that party or entity, if the only cooperative agreements or ``other 
transactions'' that the party, entity, or subordinate element entered 
into with government entities in the year prior to the date of that 
agreement are cooperative agreements or transactions that were entered 
into under 10 U.S.C. 2371 or Section 845 of the National Defense 
Authorization Act for Fiscal Year 1994 (Pub. L. 103-160; 10 U.S.C. 2371 
note).
    (c)(2) The only records of a party, other entity, or subordinate 
element referred to in subparagraph (c)(1) of this part that the 
Comptroller General may examine in the exercise of the right referred to 
in that subparagraph, are records of the same type as the records that 
the government has had the right to examine under the audit access 
clauses of the previous cooperative agreements or transactions referred 
to in such subparagraph that were entered into by that particular party, 
entity, or subordinate element.
    (d) The head of the contracting activity (HCA) that is carrying out 
the agreement may waive the applicability of the Comptroller General 
access requirement if the HCA determines it would not be in the public 
interest to apply the requirement to the agreement. The waiver will be 
effective with respect to the agreement only if the HCA transmits a 
notification of the waiver to the Committees on Armed Services of the 
Senate and the House of Representatives, the Comptroller General, and 
the Director, Defense Procurement before entering into the agreement. 
The notification must include the rationale for the determination.
    (e) The HCA must notify the Director, Defense Procurement of 
situations where there is evidence that the Comptroller General Access 
requirement caused companies to refuse to participate or otherwise 
restricted the Department's access to companies that typically do not do 
business with the Department.
    (f) In no case will the requirement to examine records under the 
clause referenced in paragraph (a) of this section apply to an agreement 
where more than three years have passed after final payment is made by 
the government under such an agreement.
    (g) The clause referenced in paragraph (a) of this section, must 
provide for the following:
    (1) The Comptroller General of the United States, in the discretion 
of the Comptroller General, shall have access to and the right to 
examine records of any party to the agreement or any entity that 
participates in the performance of this agreement that directly pertain 
to, and involve transactions relating to, the agreement.
    (2) Excepted from the Comptroller General access requirement is any 
party to this agreement or any entity that participates in the 
performance of the agreement, or any subordinate element of such party 
or entity, that, in the year prior to the date of the agreement, has not 
entered into any other contract, grant, cooperative agreement, or 
``other transaction'' agreement that provides for audit access to its 
records by a government entity.
    (3)(A) The right provided to the Comptroller General is limited as 
provided in subparagraph (B) in the case of a party to the agreement, 
any entity that participates in the performance of the agreement, or a 
subordinate element of that party or entity if the only cooperative 
agreements or ``other transactions'' that the party, entity, or 
subordinate element entered into with government entities in the year 
prior to the date of that agreement are cooperative agreements or 
transactions that were entered into under 10 U.S.C. 2371 or Section 845 
of the National Defense Authorization Act for Fiscal Year 1994 (Pub. L. 
103-160; 10 U.S.C. 2371 note).
    (B) The only records of a party, other entity, or subordinate 
element referred to in subparagraph (A) that the Comptroller General may 
examine in the exercise of the right referred to in that subparagraph 
are records of the same type as the records that the government has had 
the right to examine under the audit access clauses of the previous 
agreements or transactions referred to in such subparagraph that were 
entered into by that particular party, entity, or subordinate element.
    (4) This clause shall not be construed to require any party or 
entity, or any

[[Page 17]]

subordinate element of such party or entity, that participates in the 
performance of the agreement, to create or maintain any record that is 
not otherwise maintained in the ordinary course of business or pursuant 
to a provision of law.
    (5) The Comptroller General shall have access to the records 
described in this clause until three years after the date the final 
payment is made by the United States under this agreement.
    (6) The recipient of the agreement shall flow down this provision to 
any entity that participates in the performance of the agreement.

[65 FR 35576, June 5, 2000. Redesignated at 67 FR 54956, Aug. 27, 2002]



Sec. 3.8  DoD access to records policy.

    (a) Applicability. This section provides policy concerning DoD 
access to awardee and subawardee records on OT agreements for prototype 
projects. This access is separate and distinct from Comptroller General 
access.
    (1) Fixed-price type OT agreements. (i) General--DoD access to 
records is not generally required for fixed-price type OT agreements. In 
order for an agreement to be considered a fixed-price type OT agreement, 
it must adequately specify the effort to be accomplished for a fixed 
amount and provide for defined payable milestones, with no provision for 
financial or cost reporting that would be a basis for making adjustment 
in either the work scope or price of the effort.
    (ii) Termination considerations. The need to provide for DoD access 
to records in the case of termination of a fixed-price type OT can be 
avoided by limiting potential termination settlements to an amount 
specified in the original agreement or to payment for the last completed 
milestone. However, if a fixed-price agreement provides that potential 
termination settlement amounts may be based on amounts generated from 
cost or financial records and the agreement exceeds the specified 
threshold, the OT should provide that DoD will have access to records in 
the event of termination.
    (2) Cost-type OT agreements. (i) Single Audit Act--In accordance 
with the requirements of Public Law 98-502, as amended by Public Law 
104-156, 110 STAT. 1396-1404, when a business unit that will perform the 
OT agreement, or a subawardee, meets the criteria for an audit pursuant 
to the Single Audit Act, the DoD must have sufficient access to the 
entity's records to assure compliance with the provisions of the Act.
    (ii) Traditional Defense contractors. The DoD shall have access to 
records on cost-type OT agreements with traditional Defense contractors 
that provide for total Government payments in excess of $5,000,000. The 
content of the access to records clause shall be in accordance with 
paragraph (c) of this section. The value establishing the threshold is 
the total value of the agreement including all options.
    (iii) Nontraditional Defense contractors. The DoD should have access 
to records on cost-type OT agreements with nontraditional Defense 
contractors that provide for total Government payments in excess of 
$5,000,000. The content of the access to records clause should be in 
accordance with paragraph (c) of this section. The value establishing 
the threshold is the total value of the agreement including all options.
    (iv) DoD access below threshold. The Agreements Officer has the 
discretion to determine whether to include DoD access to records when 
the OT does not meet any of the requirements in (a)(2)(i) through 
(a)(2)(iii) of this section. The content of that access to records 
clause should be tailored to meet the particular circumstances of the 
agreement.
    (v) Examples of cost-type OT agreements. (A) An agreement that 
requires at least one-third cost share pursuant to statute.
    (B) An agreement that includes payable milestones, but provides for 
adjustment of the milestone amounts based on actual costs or reports 
generated from the awardee's financial or cost records.
    (C) An agreement that is for a fixed-Government amount, but the 
agreement provides for submittal of financial or cost records/reports to 
determine whether additional effort can be accomplished for the fixed 
amount.
    (3) Subawardees. When a DoD access to records provision is included 
in the OT agreement, the awardee shall use the criteria established in 
paragraphs

[[Page 18]]

(a)(2)(i) through (a)(2)(iii) of this section to determine whether DoD 
access to records clauses should be included in subawards.
    (b) Exceptions--(1) Nontraditional Defense contractors--(i) The 
Agreements Officers may deviate, in part or in whole, from the 
application of this access to records policy for a nontraditional 
Defense contractor when application of the policy would adversely impact 
the government's ability to incorporate commercial technology or execute 
the prototype project.
    (ii) The Agreements Officer will document:
    (A) What aspect of the audit policy was not applied;
    (B) Why it was problematic;
    (C) What means will be used to protect the Government's interest; 
and
    (D) Why the benefits of deviating from the policy outweigh the 
potential risks.
    (iii) This determination will be reviewed by the approving official 
as part of the pre-award approval of the agreement and submitted to the 
agency POC within 10 days of award.
    (iv) The agency POC will forward all such documentation received in 
any given fiscal year, to the Director, Defense Procurement by 15 
October of each year.
    (2) Traditional Defense contractor. (i) Any departure from this 
policy for other than nontraditional Defense contractors must be 
approved by the Head of the Contracting Activity prior to award and set 
forth the exceptional circumstances justifying deviation.
    (ii) Additionally, the justification will document:
    (A) What aspect of the policy was not applied;
    (B) Why it was problematic;
    (C) What means will be used to protect the Government's interest; 
and
    (D) Why the benefits of deviating from the policy outweigh the 
potential risks.
    (iii) The HCA will forward documentation associated with such 
waivers in any given fiscal year, to the Director, Defense Procurement 
by 15 October of each year.
    (3) DoD access below the threshold. When the Agreements Officer 
determines that access to records is appropriate for an agreement below 
the $5,000,000 threshold, the content, length and extent of access may 
be mutually agreed to by the parties, without documenting reasons for 
departing from the policy of this section.
    (4) Flow down provisions. The awardee shall submit justification for 
any exception to the DoD access to records policy to the Agreements 
Officer for subawardees. The Agreements Officer will review and obtain 
appropriate approval, as set forth in paragraphs (b)(1) and (b)(2) of 
this section.
    (c) Content of DoD access to records clause. When a DoD access to 
records clause is included as part of the OT agreement, address the 
following areas during the negotiation of the clause:
    (1) Frequency of audits. Audits will be performed when the 
Agreements Officer determines it is necessary to verify statutory cost 
share or to verify amounts generated from financial or cost records that 
will be used as the basis for payment or adjustment of payment.
    (2) Means of accomplishing audits. (i) Business units subject to the 
Single Audit Act--When the awardee or subawardee is a state government, 
local government, or nonprofit organization whose Federal cost 
reimbursement contracts and financial assistance agreements are subject 
to the Single Audit Act (Public Law 98-502, as amended by Public Law 
104-156, 110 STAT. 1396-1404), the clause must apply the provisions of 
that Act for purposes of performing audits of the awardee or subawardee 
under the agreement.
    (ii) Business units not subject to the Single Audit Act currently 
performing on procurement contracts. The clause must provide that DCAA 
will perform any necessary audits if, at the time of agreement award, 
the awardee or subawardee is not subject to the Single Audit Act and is 
performing a procurement contract that is subject to the Cost Principles 
Applicable to Commercial Organizations (48 CFR part 31.2) and/or the 
Cost Accounting Standards (48 CFR part 99).
    (iii) Other business units. DCAA or a qualified IPA may perform any 
necessary audit of a business unit of the awardee or subawardee if, at 
the time of agreement award, the business unit

[[Page 19]]

does not meet the criteria in (c)(2)(i) or (c)(2)(ii) of this section. 
The clause must provide for the use of a qualified IPA if such a 
business unit will not accept the agreement if the Government has access 
to the business unit's records. The Agreements Officer will include a 
statement in the file that the business unit is not performing on a 
procurement contract subject to the Cost Principles or Cost Accounting 
Standards at the time of agreement award, and will not accept the 
agreement if the government has access to the business unit's records. 
The Agreements Officer will also prepare a report (Part III to the 
annual report submission) for the Director, Defense Procurement that 
identifies, for each business unit that is permitted to use an IPA: the 
business unit's name, address and the expected value of its award. When 
the clause provides for use of an IPA to perform any necessary audits, 
the clause must state that:
    (A) The IPA will perform the audit in accordance with Generally 
Accepted Government Auditing Standards (GAGAS). Electronic copies of the 
standards may be accessed at www.gao.gov. Printed copies may be 
purchased from the U.S. Government Printing Office (for ordering 
information, call (202) 512-1800 or access the Internet Site at 
www.gpo.gov).
    (B) The Agreements Officers' authorized representative has the right 
to examine the IPA's audit report and working papers for 3 years after 
final payment or three years after issuance of the audit report, 
whichever is later, unless notified otherwise by the Agreements Officer.
    (C) The IPA will send copies of the audit report to the Agreements 
Officer and the Assistant Inspector General (Audit Policy and Oversight) 
[AIG(APO)], 400 Army Navy Drive, Suite 737, Arlington, VA 22202.
    (D) The IPA will report instances of suspected fraud directly to the 
DoDIG.
    (E) The Government has the right to require corrective action by the 
awardee or subawardee if the Agreements Officer determines (subject to 
appeal under the disputes clause of the agreement) that the audit has 
not been performed or has not been performed in accordance with GAGAS. 
The Agreements Officer should take action promptly once the Agreements 
Officer determines that the audit is not being accomplished in a timely 
manner or the audit is not performed in accordance with GAGAS but 
generally no later than twelve (12) months of the date requested by the 
Agreements Officer. The awardee or subawardee may take corrective action 
by having the IPA correct any deficiencies identified by the Agreements 
Officer, having another IPA perform the audit, or electing to have the 
Government perform the audit. If corrective action is not taken, the 
Agreements Officer has the right to take one or more of the following 
actions:
    (1) Withhold or disallow a specified percentage of costs until the 
audit is completed satisfactorily. The agreement should include a 
specified percentage that is sufficient to enhance performance of 
corrective action while also not being unfairly punitive.
    (2) Suspend performance until the audit is completed satisfactorily; 
and/or
    (3) Terminate the agreement if the agreements officer determines 
that imposition of either (c)(2)(iii)(E)(1) or (c)(2)(iii)(e)(2) of this 
section is not practical.
    (F) If it is found that the awardee or subawardee was performing a 
procurement contract subject to Cost Principles Applicable to Commercial 
Organizations (48 CFR part 31.2) and/or Cost Accounting Standards (48 
CFR part 99) at the time of agreement award, the Agreements Officer, or 
an authorized representative, has the right to audit records of the 
awardee or subawardee to verify the actual costs or reporting 
information used as the basis for payment or to verify statutorily 
required cost share under the agreement, and the IPA is to be paid by 
the awardee or subawardee. The cost of an audit performed in accordance 
with this policy is reimbursable based on the business unit's 
established accounting practices and subject to any limitations in the 
agreement.
    (3) Scope of audit. The Agreements Officer should coordinate with 
the auditor regarding the nature of any audit envisioned.

[[Page 20]]

    (4) Length and extent of access. (i) Clauses that do not provide for 
use of an IPA--The clause must provide for the Agreements Officer's 
authorized representative to have access to directly pertinent records 
of those business units of the awardee or subawardee's performing effort 
under the OT agreement, when needed to verify the actual costs or 
reporting used as the basis for payment or to verify statutorily 
required cost share under the agreement.
    (ii) Clauses that provide for use of an IPA to perform the audits. 
The clause must:
    (A) Provide the Agreements Officer's authorized representative 
access to the IPA's audit reports and working papers to ensure that the 
IPA has performed the audit in accordance with GAGAS.
    (B) State that the Government will make copies of contractor records 
contained in the IPA's work papers if needed to demonstrate that the 
audit was not performed in accordance with GAGAS.
    (C) State that the Government has no direct access to any awardee or 
subawardee records unless it is found that the awardee or subawardee was 
performing a procurement contract subject to Cost Principles (48 CFR 
part 31) and/or Cost Accounting Standards (48 CFR part 99) at the time 
of agreement award.
    (iii) Business Units subject to the Single Audit Act. The clause 
must provide access to the extent authorized by the Single Audit Act.
    (iv) Record Retention/Period of Access. The clause must require that 
the awardee and subawardee retain, and provide access to, the records 
referred to in (c)(4)(i) and (c)(4)(ii) of this section for three years 
after final payment, unless notified of a shorter or longer period by 
the Agreements Officer.
    (5) Awardee flow down responsibilities. Agreements must require 
awardees to include the necessary provisions in subawards that meet the 
conditions set forth in this DoD access to records policy.
    (d) DoDIG and GAO access. In accordance with statute, if an 
agreement gives the Agreements Officer or another DoD component official 
access to a business unit's records, the DoDIG or GAO are granted the 
same access to those records.

[68 FR 27457, May 20, 2003]



Sec. 3.9  Follow-on production contracts.

    (a) Authority. A competitively awarded OT agreement for a prototype 
project that satisfies the condition set forth in law that requires non-
Federal parties to the OT agreement to provide at least one-third of the 
costs of the prototype project may provide for the award of a follow-on 
production contract to the awardee of the OT prototype agreement for a 
specific number of units at specific target prices, without further 
competition.
    (b) Conditions. The Agreements Officer must do the following in the 
award of the prototype project:
    (1) Ensure non-Federal parties to the OT prototype agreement offer 
at least one-third of the costs of the prototype project pursuant to 
subsection (d)(1)(B)(i), 10 U.S.C. 2371 note.
    (2) Use competition to select parties for participation in the OT 
prototype agreement and evaluate the proposed quantity and target prices 
for the follow-on production units as part of that competition.
    (3) Determine the production quantity that may be procured without 
further competition, by balancing of the level of the investment made in 
the project by the non-Federal parties with the interest of the Federal 
Government in having competition among sources in the acquisition of the 
product or products prototyped under the project.
    (4) Specify the production quantity and target prices in the OT 
prototype agreement and stipualte in the agreement that the Contracting 
Officer for the follow-on contract may award a production contract 
without further competition if the awardee successfully completes the 
prototype project and agrees to production quantities and prices that do 
not exceed those specified in the OT prototype agreement (see part 
206.001 of the Defense Federal Acquisition Regulation Supplement).
    (c) Limitation. As a matter of policy, establishing target prices 
for production units should only be considered when the risk of the 
prototype project permits realistic production pricing

[[Page 21]]

without placing undue risks on the awardee.
    (d) Documentation. (1) The Agreements Officer will need to provide 
information to the Contracting Officer from the agreement and award file 
that the conditions set forth in paragraph (b) of this section have been 
satisfied.
    (2) The information shall contain, at a minimum:
    (i) The competitive procedures used;
    (ii) How the production quantities and target prices were evaluated 
in the competition;
    (iii) The percentage of cost-share; and
    (iv) The production quantities and target prices set forth in the OT 
agreement.
    (3) The Project Manager will provide evidence of successful 
completion of the prototype project to the Contracting Officer.

[69 FR 16482, Mar. 30, 2004]

                          PARTS 4	8 [RESERVED]

[[Page 22]]



                    SUBCHAPTER B_MILITARY COMMISSIONS





PART 9_PROCEDURES FOR TRIALS BY MILITARY COMMISSIONS OF CERTAIN NON-UNITED STATES CITIZENS IN THE WAR AGAINST TERRORISM--Table of Contents




Sec.
9.1 Purpose.
9.2 Establishment of Military Commissions.
9.3 Jurisdiction.
9.4 Commission personnel.
9.5 Procedures accorded the accused.
9.6 Conduct of the trial.
9.7 Regulations.
9.8 Authority.
9.9 Protection of State secrets.
9.10 Other.
9.11 Amendment.
9.12 Delegation.

    Authority: 5 U.S.C. 552(1)(a)(1)(C) and (D).

    Source: 68 FR 39374, July 1, 2003, unless otherwise noted.



Sec. 9.1  Purpose.

    This part implements policy, assigns responsibilities, and 
prescribes procedures under the United States Constitution, Article II, 
section 2 and Military Order of November 13, 2001, ``Detention, 
Treatment, and Trial of Certain Non-Citizens in the War Against 
Terrorism'' (3 CFR, 2001 comp., p. 918, 66 FR 57833), for trials before 
military commissions of individuals subject to the President's Military 
Order. These procedures shall be implemented and construed so as to 
ensure that any such individual receives a full and fair trial before a 
military commission, as required by the President's Military Order. 
Unless otherwise directed by the Secretary of Defense, and except for 
supplemental procedures established pursuant to the President's Military 
Order or this part, the procedures prescribed herein and no others shall 
govern such trials.



Sec. 9.2  Establishment of Military Commissions.

    In accordance with the President's Military Order, the Secretary of 
Defense or a designee (``Appointing Authority'') may issue orders from 
time to time appointing one or more military commissions to try 
individuals subject to the President's Military Order and appointing any 
other personnel necessary to facilitate such trials.



Sec. 9.3  Jurisdiction.

    (a) Over persons. A military commission appointed under this part 
(``Commission'') shall have jurisdiction over only an individual or 
individuals (``the Accused''):
    (1) Subject to the President's Military Order; and
    (2) Alleged to have committed an offense in a charge that has been 
referred to the Commission by the Appointing Authority.
    (b) Over offenses. Commissions established hereunder shall have 
jurisdiction over violations of the laws of war and all other offenses 
triable by military commission.
    (c) Maintaining integrity of commission proceedings. The Commission 
may exercise jurisdiction over participants in its proceedings as 
necessary to preserve the integrity and order of the proceedings.



Sec. 9.4  Commission personnel.

    (a) Members--(1) Appointment. The Appointing Authority shall appoint 
the members and the alternate member or members of each Commission. The 
alternate member or members shall attend all sessions of the Commission, 
but the absence of an alternate member shall not preclude the Commission 
from conducting proceedings. In case of incapacity, resignation, or 
removal of any member, an alternate member shall take the place of that 
member. Any vacancy among the members or alternate members occurring 
after a trial has begun may be filled by the Appointing Authority, but 
the substance of all prior proceedings and evidence taken in that case 
shall be made known to that new member or alternate member before the 
trial proceeds.
    (2) Number of members. Each Commission shall consist of at least 
three but

[[Page 23]]

no more than seven members, the number being determined by the 
Appointing Authority. For each such Commission, there shall also be one 
or two alternate members, the number being determined by the Appointing 
Authority.
    (3) Qualifications. Each member and alternate member shall be a 
commissioned officer of the United States armed forces (``Military 
Officer''), including without limitation reserve personnel on active 
duty, National Guard personnel on active duty in Federal service, and 
retired personnel recalled to active duty. The Appointing Authority 
shall appoint members and alternate members determined to be competent 
to perform the duties involved. The Appointing Authority may remove 
members and alternate members for good cause.
    (4) Presiding Officer. From among the members of each Commission, 
the Appointing Authority shall designate a Presiding Officer to preside 
over the proceedings of that Commission. The Presiding Officer shall be 
a Military Officer who is a judge advocate of any United States armed 
force.
    (5) Duties of the Presiding Officer. (i) The Presiding Officer shall 
admit or exclude evidence at trial in accordance with section 6(d) of 
this part. The Presiding Officer shall have authority to close 
proceedings or portions of proceedings in accordance with Sec. 
9.6(b)(3) of this part and for any other reason necessary for the 
conduct of a full and fair trial.
    (ii) The Presiding Officer shall ensure that the discipline, 
dignity, and decorum of the proceedings are maintained, shall exercise 
control over the proceedings to ensure proper implementation of the 
President's Military Order and this part, and shall have authority to 
act upon any contempt or breach of Commission rules and procedures. Any 
attorney authorized to appear before a Commission who is thereafter 
found not to satisfy the requirements for eligibility or who fails to 
comply with laws, rules, regulations, or other orders applicable to the 
Commission proceedings or any other individual who violates such laws, 
rules, regulations, or orders may be disciplined as the Presiding 
Officer deems appropriate, including but not limited to revocation of 
eligibility to appear before that Commission. The Appointing Authority 
may further revoke that attorney's or any other person's eligibility to 
appear before any other Commission convened under this part.
    (iii) The Presiding Officer shall ensure the expeditious conduct of 
the trial. In no circumstance shall accommodation of counsel be allowed 
to delay proceedings unreasonably.
    (iv) The Presiding Officer shall certify all interlocutory 
questions, the disposition of which would effect a termination of 
proceedings with respect to a charge, for decision by the Appointing 
Authority. The Presiding Officer may certify other interlocutory 
questions to the Appointing Authority as the Presiding Officer deems 
appropriate.
    (b) Prosecution--(1) Office of the Chief Prosecutor. The Chief 
Prosecutor shall be a judge advocate of any United States armed force, 
shall supervise the overall prosecution efforts under the President's 
Military Order, and shall ensure proper management of personnel and 
resources.
    (2) Prosecutors and Assistant Prosecutors. (i) Consistent with any 
supplementary regulations or instructions issued under Sec. 9.7(a), the 
Chief Prosecutor shall detail a Prosecutor and, as appropriate, one or 
more Assistant Prosecutors to prepare charges and conduct the 
prosecution for each case before a Commission (``Prosecution''). 
Prosecutors and Assistant Prosecutors shall be:
    (A) Military Officers who are judge advocates of any United States 
armed force, or
    (B) Special trial counsel of the Department of Justice who may be 
made available by the Attorney General of the United States.
    (ii) The duties of the Prosecution are:
    (A) To prepare charges for approval and referral by the Appointing 
Authority;
    (B) To conduct the prosecution before the Commission of all cases 
referred for trial; and
    (C) To represent the interests of the Prosecution in any review 
process.
    (c) Defense--(1) Office of the Chief Defense Counsel. The Chief 
Defense Counsel shall be a judge advocate of any

[[Page 24]]

United States armed force, shall supervise the overall defense efforts 
under the President's Military Order, shall ensure proper management of 
personnel and resources, shall preclude conflicts of interest, and shall 
facilitate proper representation of all Accused.
    (2) Detailed Defense Counsel. Consistent with any supplementary 
regulations or instructions issued under Sec. 9.7(a), the Chief Defense 
Counsel shall detail one or more Military Officers who are judge 
advocates of any United States armed force to conduct the defense for 
each case before a Commission (``Detailed Defense Counsel''). The duties 
of the Detailed Defense Counsel are:
    (i) To defend the Accused zealously within the bounds of the law 
without regard to personal opinion as to the guilt of the Accused; and
    (ii) To represent the interests of the Accused in any review process 
as provided by this part.
    (iii) Choice of Counsel. (A) The Accused may select a Military 
Officer who is a judge advocate of any United States armed force to 
replace the Accused's Detailed Defense Counsel, provided that Military 
Officer has been determined to be available in accordance with any 
applicable supplementary regulations or instructions issued under Sec. 
9.7(a). After such selection of a new Detailed Defense Counsel, the 
original Detailed Defense Counsel will be relieved of all duties with 
respect to that case. If requested by the Accused, however, the 
Appointing Authority may allow the original Detailed Defense Counsel to 
continue to assist in representation of the Accused as another Detailed 
Defense Counsel.
    (B) The Accused may also retain the services of a civilian attorney 
of the Accused's own choosing and at no expense to the United States 
Government (``Civilian Defense Counsel''), provided that attorney:
    (1) Is a United States citizen;
    (2) Is admitted to the practice of law in a State, district, 
territory, or possession of the United States, or before a Federal 
court;
    (3) Has not been the subject of any sanction or disciplinary action 
by any court, bar, or other competent governmental authority for 
relevant misconduct;
    (4) Has been determined to be eligible for access to information 
classified at the level SECRET or higher under the authority of and in 
accordance with the procedures prescribed in DoD 5200.2-R \1\; and
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    (5) Has signed a written agreement to comply with all applicable 
regulations or instructions for counsel, including any rules of court 
for conduct during the course of proceedings. Civilian attorneys may be 
pre-qualified as members of the pool of available attorneys if, at the 
time of application, they meet the relevant criteria, or they may be 
qualified on an ad hoc basis after being requested by an Accused. 
Representation by Civilian Defense Counsel will not relieve Detailed 
Defense Counsel of the duties specified in paragraph (c)(2) of this 
section. The qualification of a Civilian Defense Counsel does not 
guarantee that person's presence at closed Commission proceedings or 
that person's access to any information protected under Sec. 9.6(d)(5).
    (4) Continuity of representation. The Accused must be represented at 
all relevant times by Detailed Defense Counsel. Detailed Defense Counsel 
and Civilian Defense Counsel shall be herein referred to collectively as 
``Defense Counsel.'' The Accused and Defense Counsel shall be herein 
referred to collectively as ``the Defense.''
    (d) Other Personnel. Other personnel, such as court reporters, 
interpreters, security personnel, bailiffs, and clerks may be detailed 
or employed by the Appointing Authority, as necessary.



Sec. 9.5  Procedures accorded the accused.

    The following procedures shall apply with respect to the Accused:
    (a) The Prosecution shall furnish to the Accused, sufficiently in 
advance of trial to prepare a defense, a copy of the charges in English 
and, if appropriate, in another language that the Accused understands.
    (b) The Accused shall be presumed innocent until proven guilty.
    (c) A Commission member shall vote for a finding of Guilty as to an 
offense if and only if that member is convinced

[[Page 25]]

beyond a reasonable doubt, based on the evidence admitted at trial, that 
the Accused is guilty of the offense.
    (d) At least one Detailed Defense Counsel shall be made available to 
the Accused sufficiently in advance of trial to prepare a defense and 
until any findings and sentence become final in accordance with Sec. 
9.6(h)(2).
    (e) The Prosecution shall provide the Defense with access to 
evidence the Prosecution intends to introduce at trial and with access 
to evidence known to the Prosecution that tends to exculpate the 
Accused. Such access shall be consistent with Sec. 9.6(d)(5) and 
subject to Sec. 9.9.
    (f) The Accused shall not be required to testify during trial. A 
Commission shall draw no adverse inference from an Accused's decision 
not to testify. This subsection shall not preclude admission of evidence 
of prior statements or conduct of the Accused.
    (g) If the Accused so elects, the Accused may testify at trial on 
the Accused's own behalf and shall then be subject to cross-examination.
    (h) The Accused may obtain witnesses and documents for the Accused's 
defense, to the extent necessary and reasonably available as determined 
by the Presiding Officer. Such access shall be consistent with the 
requirements of Sec. 9.6(d)(5) and subject to Sec. 9.9. The Appointing 
Authority shall order that such investigative or other resources be made 
available to the Defense as the Appointing Authority deems necessary for 
a full and fair trial.
    (i) The Accused may have Defense Counsel present evidence at trial 
in the Accused's defense and cross-examine each witness presented by the 
Prosecution who appears before the Commission.
    (j) The Prosecution shall ensure that the substance of the charges, 
the proceedings, and any documentary evidence are provided in English 
and, if appropriate, in another language that the Accused understands. 
The Appointing Authority may appoint one or more interpreters to assist 
the Defense, as necessary.
    (k) The Accused may be present at every stage of the trial before 
the Commission, consistent with Sec. 9.6(b)(3), unless the Accused 
engages in disruptive conduct that justifies exclusion by the Presiding 
Officer. Detailed Defense Counsel may not be excluded from any trial 
proceeding or portion thereof.
    (l) Except by order of the Commission for good cause shown, the 
Prosecution shall provide the Defense with access before sentencing 
proceedings to evidence the Prosecution intends to present in such 
proceedings. Such access shall be consistent with Sec. 9.6(d)(5) of 
this part and subject to Sec. 9.9.
    (m) The Accused may make a statement during sentencing proceedings.
    (n) The Accused may have Defense Counsel submit evidence to the 
Commission during sentencing proceedings.
    (o) The Accused shall be afforded a trial open to the public (except 
proceedings closed by the Presiding Officer), consistent with Sec. 
9.6(b).
    (p) The Accused shall not again be tried by any Commission for a 
charge once a Commission's finding on that charge becomes final in 
accordance with Sec. 9.6(h)(2).



Sec. 9.6  Conduct of the trial.

    (a) Pretrial procedures--(1) Preparation of the Charges. The 
Prosecution shall prepare charges for approval by the Appointing 
Authority, as provided in Sec. 9.4(b)(2)(i).
    (2) Referral to the Commission. The Appointing Authority may approve 
and refer for trial any charge against an individual or individuals 
within the jurisdiction of a Commission in accordance with Sec. 9.3(a) 
and alleging an offense within the jurisdiction of a Commission in 
accordance with Sec. 9.3(b).
    (3) Notification of the accused. The Prosecution shall provide 
copies of the charges approved by the Appointing Authority to the 
Accused and Defense Counsel. The Prosecution also shall submit the 
charges approved by the Appointing Authority to the Presiding Officer of 
the Commission to which they were referred.
    (4) Plea Agreements. The Accused, through Defense Counsel, and the 
Prosecution may submit for approval to the Appointing Authority a plea 
agreement mandating a sentence limitation or any other provision in 
exchange for an agreement to plead guilty, or any other consideration. 
Any agreement to plead

[[Page 26]]

guilty must include a written stipulation of fact, signed by the 
Accused, that confirms the guilt of the Accused and the voluntary and 
informed nature of the plea of guilty. If the Appointing Authority 
approves the plea agreement, the Commission will, after determining the 
voluntary and informed nature of the plea agreement, admit the plea 
agreement and stipulation into evidence and be bound to adjudge findings 
and a sentence pursuant to that plea agreement.
    (5) Issuance and service of process; obtaining evidence. (i) The 
Commission shall have power to:
    (A) Summon witnesses to attend trial and testify;
    (B) Administer oaths or affirmations to witnesses and other persons 
and to question witnesses;
    (C) Require the production of documents and other evidentiary 
material; and
    (D) Designate special commissioners to take evidence.
    (ii) The Presiding Officer shall exercise these powers on behalf of 
the Commission at the Presiding Officer's own initiative, or at the 
request of the Prosecution or the Defense, as necessary to ensure a full 
and fair trial in accordance with the President's Military Order and 
this part. The Commission shall issue its process in the name of the 
Department of Defense over the signature of the Presiding Officer. Such 
process shall be served as directed by the Presiding Officer in a manner 
calculated to give reasonable notice to persons required to take action 
in accordance with that process.
    (b) Duties of the Commission during trial. The Commission shall:
    (1) Provide a full and fair trial.
    (2) Proceed impartially and expeditiously, strictly confining the 
proceedings to a full and fair trial of the charges, excluding 
irrelevant evidence, and preventing any unnecessary interference or 
delay.
    (3) Hold open proceedings except where otherwise decided by the 
Appointing Authority or the Presiding Officer in accordance with the 
President's Military Order and this part. Grounds for closure include 
the protection of information classified or classifiable under Executive 
Order 12958; information protected by law or rule from unauthorized 
disclosure; the physical safety of participants in Commission 
proceedings, including prospective witnesses; intelligence and law 
enforcement sources, methods, or activities; and other national security 
interests. The Presiding Officer may decide to close all or part of a 
proceeding on the Presiding Officer's own initiative or based upon a 
presentation, including an ex parte, in camera presentation by either 
the Prosecution or the Defense. A decision to close a proceeding or 
portion thereof may include a decision to exclude the Accused, Civilian 
Defense Counsel, or any other person, but Detailed Defense Counsel may 
not be excluded from any trial proceeding or portion thereof. Except 
with the prior authorization of the Presiding Officer and subject to 
section 9 of this part, Defense Counsel may not disclose any information 
presented during a closed session to individuals excluded from such 
proceeding or part thereof. Open proceedings may include, at the 
discretion of the Appointing Authority, attendance by the public and 
accredited press, and public release of transcripts at the appropriate 
time. Proceedings should be open to the maximum extent practicable. 
Photography, video, or audio broadcasting, or recording of or at 
Commission proceedings shall be prohibited, except photography, video, 
and audio recording by the Commission pursuant to the direction of the 
Presiding Officer as necessary for preservation of the record of trial.
    (4) Hold each session at such time and place as may be directed by 
the Appointing Authority. Members of the Commission may meet in closed 
conference at any time.
    (5) As soon as practicable at the conclusion of a trial, transmit an 
authenticated copy of the record of trial to the Appointing Authority.
    (c) Oaths. (1) Members of a Commission, all Prosecutors, all Defense 
Counsel, all court reporters, all security personnel, and all 
interpreters shall take an oath to perform their duties faithfully.
    (2) Each witness appearing before a Commission shall be examined 
under oath, as provided in paragraph (d)(2)(ii) of this section.

[[Page 27]]

    (3) An oath includes an affirmation. Any formulation that appeals to 
the conscience of the person to whom the oath is administered and that 
binds that person to speak the truth, or, in the case of one other than 
a witness, properly to perform certain duties, is sufficient.
    (d) Evidence--(1) Admissibility. Evidence shall be admitted if, in 
the opinion of the Presiding Officer (or instead, if any other member of 
the Commission so requests at the time the Presiding Officer renders 
that opinion, the opinion of the Commission rendered at that time by a 
majority of the Commission), the evidence would have probative value to 
a reasonable person.
    (2) Witnesses--(i) Production of witnesses. The Prosecution or the 
Defense may request that the Commission hear the testimony of any 
person, and such testimony shall be received if found to be admissible 
and not cumulative. The Commission may also summon and hear witnesses on 
its own initiative. The Commission may permit the testimony of witnesses 
by telephone, audiovisual means, or other means; however, the Commission 
shall consider the ability to test the veracity of that testimony in 
evaluating the weight to be given to the testimony of the witness.
    (ii) Testimony. Testimony of witnesses shall be given under oath or 
affirmation. The Commission may still hear a witness who refuses to 
swear an oath or make a solemn undertaking; however, the Commission 
shall consider the refusal to swear an oath or give an affirmation in 
evaluating the weight to be given to the testimony of the witness.
    (iii) Examination of witnesses. A witness who testifies before the 
Commission is subject to both direct examination and cross-examination. 
The Presiding Officer shall maintain order in the proceedings and shall 
not permit badgering of witnesses or questions that are not material to 
the issues before the Commission. Members of the Commission may question 
witnesses at any time.
    (iv) Protection of witnesses. The Presiding Officer shall consider 
the safety of witnesses and others, as well as the safeguarding of 
Protected Information as defined in paragraph (d)(5)(i) of this section, 
in determining the appropriate methods of receiving testimony and 
evidence. The Presiding Officer may hear any presentation by the 
Prosecution or the Defense, including an ex parte, in camera 
presentation, regarding the safety of potential witnesses before 
determining the ways in which witnesses and evidence will be protected. 
The Presiding Officer may authorize any methods appropriate for the 
protection of witnesses and evidence. Such methods may include, but are 
not limited to: testimony by telephone, audiovisual means, or other 
electronic means; closure of the proceedings; introduction of prepared 
declassified summaries of evidence; and the use of pseudonyms.
    (3) Other evidence. Subject to the requirements of paragraph (d)(1) 
of this section concerning admissibility, the Commission may consider 
any other evidence including, but not limited to, testimony from prior 
trials and proceedings, sworn or unsworn written statements, physical 
evidence, or scientific or other reports.
    (4) Notice. The Commission may, after affording the Prosecution and 
the Defense an opportunity to be heard, take conclusive notice of facts 
that are not subject to reasonable dispute either because they are 
generally known or are capable of determination by resort to sources 
that cannot reasonably be contested.
    (5) Protection of Information--(i) Protective Order. The Presiding 
Officer may issue protective orders as necessary to carry out the 
Military Order and this part, including to safeguard ``Protected 
Information,'' which includes:
    (A) Information classified or classifiable pursuant to Executive 
Order 12958;
    (B) Information protected by law or rule from unauthorized 
disclosure;
    (C) Information the disclosure of which may endanger the physical 
safety of participants in Commission proceedings, including prospective 
witnesses;
    (D) Information concerning intelligence and law enforcement sources, 
methods, or activities; or
    (E) Information concerning other national security interests. As 
soon as practicable, counsel for either side will

[[Page 28]]

notify the Presiding Officer of any intent to offer evidence involving 
Protected Information.
    (ii) Limited disclosure. The Presiding Officer, upon motion of the 
Prosecution or sua sponte, shall, as necessary to protect the interests 
of the United States and consistent with Sec. 9.9, direct:
    (A) The deletion of specified items of Protected Information from 
documents to be made available to the Accused, Detailed Defense Counsel, 
or Civilian Defense Counsel;
    (B) The substitution of a portion or summary of the information for 
such Protected Information; or
    (C) The substitution of a statement of the relevant facts that the 
Protected Information would tend to prove. The Prosecution's motion and 
any materials submitted in support thereof or in response thereto shall, 
upon request of the Prosecution, be considered by the Presiding Officer 
ex parte, in camera, but no Protected Information shall be admitted into 
evidence for consideration by the Commission if not presented to 
Detailed Defense Counsel.
    (iii) Closure of proceedings. The Presiding Officer may direct the 
closure of proceedings in accordance with paragraph (b)(3) of this 
section.
    (iv) Protected information as part of the record of trial. All 
exhibits admitted as evidence but containing Protected Information shall 
be sealed and annexed to the record of trial. Additionally, any 
Protected Information not admitted as evidence but reviewed in camera 
and subsequently withheld from the Defense over Defense objection shall, 
with the associated motions and responses and any materials submitted in 
support thereof, be sealed and annexed to the record of trial as 
additional exhibits. Such sealed material shall be made available to 
reviewing authorities in closed proceedings.
    (e) Proceedings during trial. The proceedings at each trial will be 
conducted substantially as follows, unless modified by the Presiding 
Officer to suit the particular circumstances:
    (1) Each charge will be read, or its substance communicated, in the 
presence of the Accused and the Commission.
    (2) The Presiding Officer shall ask each Accused whether the Accused 
pleads ``Guilty'' or ``Not Guilty.'' Should the Accused refuse to enter 
a plea, the Presiding Officer shall enter a plea of ``Not Guilty'' on 
the Accused's behalf. If the plea to an offense is ``Guilty,'' the 
Presiding Officer shall enter a finding of Guilty on that offense after 
conducting sufficient inquiry to form an opinion that the plea is 
voluntary and informed. Any plea of Guilty that is not determined to be 
voluntary and informed shall be changed to a plea of Not Guilty. Plea 
proceedings shall then continue as to the remaining charges. If a plea 
of ``Guilty'' is made on all charges, the Commission shall proceed to 
sentencing proceedings; if not, the Commission shall proceed to trial as 
to the charges for which a ``Not Guilty'' plea has been entered.
    (3) The Prosecution shall make its opening statement.
    (4) The witnesses and other evidence for the Prosecution shall be 
heard or received.
    (5) The Defense may make an opening statement after the 
Prosecution's opening statement or prior to presenting its case.
    (6) The witnesses and other evidence for the Defense shall be heard 
or received.
    (7) Thereafter, the Prosecution and the Defense may introduce 
evidence in rebuttal and surrebuttal.
    (8) The Prosecution shall present argument to the Commission. 
Defense Counsel shall be permitted to present argument in response, and 
then the Prosecution may reply in rebuttal.
    (9) After the members of the Commission deliberate and vote on 
findings in closed conference, the Presiding Officer shall announce the 
Commission's findings in the presence of the Commission, the 
Prosecution, the Accused, and Defense Counsel. The individual votes of 
the members of the Commission shall not be disclosed.
    (10) In the event a finding of Guilty is entered for an offense, the 
Prosecution and the Defense may present information to aid the 
Commission in determining an appropriate sentence. The Accused may 
testify and shall be subject to cross-examination regarding any such 
testimony.

[[Page 29]]

    (11) The Prosecution and, thereafter, the Defense shall present 
argument to the Commission regarding sentencing.
    (12) After the members of the Commission deliberate and vote on a 
sentence in closed conference, the Presiding Officer shall announce the 
Commission's sentence in the presence of the Commission, the 
Prosecution, the Accused, and Defense Counsel. The individual votes of 
the members of the Commission shall not be disclosed.
    (f) Voting. Members of the Commission shall deliberate and vote in 
closed conference. A Commission member shall vote for a finding of 
Guilty as to an offense if and only if that member is convinced beyond a 
reasonable doubt, based on the evidence admitted at trial, that the 
Accused is guilty of the offense. An affirmative vote of two-thirds of 
the members is required for a finding of Guilty. When appropriate, the 
Commission may adjust a charged offense by exceptions and substitutions 
of language that do not substantially change the nature of the offense 
or increase its seriousness, or it may vote to convict of a lesser-
included offense. An affirmative vote of two-thirds of the members is 
required to determine a sentence, except that a sentence of death 
requires a unanimous, affirmative vote of all of the members. Votes on 
findings and sentences shall be taken by secret, written ballot.
    (g) Sentence. Upon conviction of an Accused, the Commission shall 
impose a sentence that is appropriate to the offense or offenses for 
which there was a finding of Guilty, which sentence may include death, 
imprisonment for life or for any lesser term, payment of a fine or 
restitution, or such other lawful punishment or condition of punishment 
as the Commission shall determine to be proper. Only a Commission of 
seven members may sentence an Accused to death. A Commission may 
(subject to rights of third parties) order confiscation of any property 
of a convicted Accused, deprive that Accused of any stolen property, or 
order the delivery of such property to the United States for 
disposition.
    (h) Post-trial procedures--(1) Record of Trial. Each Commission 
shall make a verbatim transcript of its proceedings, apart from all 
Commission deliberations, and preserve all evidence admitted in the 
trial (including any sentencing proceedings) of each case brought before 
it, which shall constitute the record of trial. The court reporter shall 
prepare the official record of trial and submit it to the Presiding 
Officer for authentication upon completion. The Presiding Officer shall 
transmit the authenticated record of trial to the Appointing Authority. 
If the Secretary of Defense is serving as the Appointing Authority, the 
record shall be transmitted to the Review Panel constituted under 
paragraph (h)(4) of this section.
    (2) Finality of findings and sentence. A Commission finding as to a 
charge and any sentence of a Commission becomes final when the President 
or, if designated by the President, the Secretary of Defense makes a 
final decision thereon pursuant to section 4(c)(8) of the President's 
Military Order and in accordance with paragraph (h)(6) of this section. 
An authenticated finding of Not Guilty as to a charge shall not be 
changed to a finding of Guilty. Any sentence made final by action of the 
President or the Secretary of Defense shall be carried out promptly. 
Adjudged confinement shall begin immediately following the trial.
    (3) Review by the Appointing Authority. If the Secretary of Defense 
is not the Appointing Authority, the Appointing Authority shall promptly 
perform an administrative review of the record of trial. If satisfied 
that the proceedings of the Commission were administratively complete, 
the Appointing Authority shall transmit the record of trial to the 
Review Panel constituted under paragraph (h)(4) of this section. If not 
so satisfied, the Appointing Authority shall return the case for any 
necessary supplementary proceedings.
    (4) Review Panel. The Secretary of Defense shall designate a Review 
Panel consisting of three Military Officers, which may include civilians 
commissioned pursuant to section 603 of title 10, United States Code. At 
least one member of each Review Panel shall have experience as a judge. 
The Review Panel shall review the record of trial and, in its 
discretion, any written submissions from the Prosecution and the Defense 
and shall deliberate in closed

[[Page 30]]

conference. The Review Panel shall disregard any variance from 
procedures specified in this part or elsewhere that would not materially 
have affected the outcome of the trial before the Commission. Within 
thirty days after receipt of the record of trial, the Review Panel shall 
either:
    (i) Forward the case to the Secretary of Defense with a 
recommendation as to disposition, or
    (ii) Return the case to the Appointing Authority for further 
proceedings, provided that a majority of the Review Panel has formed a 
definite and firm conviction that a material error of law occurred.
    (5) Review by the Secretary of Defense. The Secretary of Defense 
shall review the record of trial and the recommendation of the Review 
Panel and either return the case for further proceedings or, unless 
making the final decision pursuant to a Presidential designation under 
section 4(c)(8) of the President's Military Order, forward it to the 
President with a recommendation as to disposition.
    (6) Final decision. After review by the Secretary of Defense, the 
record of trial and all recommendations will be forwarded to the 
President for review and final decision (unless the President has 
designated the Secretary of Defense to perform this function). If the 
President has so designated the Secretary of Defense, the Secretary may 
approve or disapprove findings or change a finding of Guilty to a 
finding of Guilty to a lesser-included offense, or mitigate, commute, 
defer, or suspend the sentence imposed or any portion thereof. If the 
Secretary of Defense is authorized to render the final decision, the 
review of the Secretary of Defense under paragraph (h)(5) of this 
section shall constitute the final decision.



Sec. 9.7  Regulations.

    (a) Supplementary regulations and instructions. The Appointing 
Authority shall, subject to approval of the General Counsel of the 
Department of Defense if the Appointing Authority is not the Secretary 
of Defense, publish such further regulations consistent with the 
President's Military Order and this part as are necessary or appropriate 
for the conduct of proceedings by Commissions under the President's 
Military Order. The General Counsel shall issue such instructions 
consistent with the President's Military Order and this part as the 
General Counsel deems necessary to facilitate the conduct of proceedings 
by such Commissions, including those governing the establishment of 
Commission-related offices and performance evaluation and reporting 
relationships.
    (b) Construction. In the event of any inconsistency between the 
President's Military Order and this part, including any supplementary 
regulations or instructions issued under paragraph (a) of this section, 
the provisions of the President's Military Order shall govern. In the 
event of any inconsistency between this part and any regulations or 
instructions issued under paragraph (a) of this section, the provisions 
of this part shall govern.



Sec. 9.8  Authority.

    Nothing in this part shall be construed to limit in any way the 
authority of the President as Commander in Chief of the Armed Forces or 
the power of the President to grant reprieves and pardons. Nothing in 
this part shall affect the authority to constitute military commissions 
for a purpose not governed by the President's Military Order.



Sec. 9.9  Protection of State secrets.

    Nothing in this part shall be construed to authorize disclosure of 
state secrets to any person not authorized to receive them.



Sec. 9.10  Other.

    This part is not intended to and does not create any right, benefit, 
or privilege, substantive or procedural, enforceable by any party, 
against the United States, its departments, agencies, or other entities, 
its officers or employees, or any other person. No provision in this 
part shall be construed to be a requirement of the United States 
Constitution. Section and subsection captions in this document are for 
convenience only and shall not be used in construing the requirements of 
this part. Failure to meet a time period specified in this

[[Page 31]]

part, or supplementary regulations or instructions issued under Sec. 
9.7(a), shall not create a right to relief for the Accused or any other 
person. DoD Directive 5025.1 \2\ shall not apply to this part or any 
supplementary regulations or instructions issued under Sec. 9.7(a).
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Sec. 9.11  Amendment.

    The Secretary of Defense may amend this part from time to time.



Sec. 9.12  Delegation.

    The authority of the Secretary of Defense to make requests for 
assistance under section 5 of the President's Military Order is 
delegated to the General Counsel of the Department of Defense. The 
Executive Secretary of the Department of Defense shall provide such 
assistance to the General Counsel as the General Counsel determines 
necessary for this purpose.



PART 10_MILITARY COMMISSION INSTRUCTIONS--Table of Contents




Sec.
10.1 Purpose.
10.2 Authority.
10.3 Applicability.
10.4 Policies and procedures.
10.5 Construction.
10.6 Non-creation of right.
10.7 Reservation of authority.
10.8 Amendment.

    Authority: 10 U.S.C. 113Id) and 140(b).

    Source: 68 FR 39380, July 1, 2003, unless otherwise noted.



Sec. 10.1  Purpose.

    This part establishes policies for the issuance and interpretation 
of Military Commission Instructions promulgated pursuant to 32 CFR part 
9, and Military Order of November 13, 2001, ``Detention, Treatment, and 
Trial of Certain Non-Citizens in the War Against Terrorism,'' (3 CFR, 
2001 comp., p. 918, 66 FR 57833).



Sec. 10.2  Authority.

    This part is issued pursuant to 32 CFR 9.7(a) and in accordance with 
10 U.S.C. 113(d) and 140(b).



Sec. 10.3  Applicability.

    This part, and, unless stated otherwise, all other Military 
Commission Instructions apply throughout the Department of Defense, 
including to the Office of the Secretary of Defense, the Military 
Departments, the Chairman and Vice Chairman of the Joint Chiefs of Staff 
and the Joint Staff, the Combatant Commands, the Office of the Inspector 
General of the Department of Defense, the Defense Agencies, the 
Department of Defense Field Activities, and all other organizational 
entities within the Department of Defense, to any special trial counsel 
of the Department of Justice who may be made available by the Attorney 
General of the United States to serve as a prosecutor in trials before 
military commissions pursuant to 32 CFR 9.4(b)(2), to any civilian 
attorney who seeks qualification as a member of the pool of qualified 
Civilian Defense Counsel authorized in 32 CFR 9.4(c)(3)(ii), and to any 
attorney who has been qualified as a member of that pool.



Sec. 10.4  Policies and procedures.

    (a) Promulgation. Military Commission Instructions will be issued by 
the General Counsel of the Department of Defense (hereinafter General 
Counsel). Each Instruction will issue over the signature of the General 
Counsel and, unless otherwise specified therein, shall take effect upon 
the signature of the General Counsel. Instructions will be numbered in 
sequence.
    (b) Professional responsibility. Compliance with these Instructions 
shall be deemed a professional responsibility obligation for the 
practice of law within the Department of Defense.
    (c) Compliance breaches. Failure to adhere to these Instructions or 
any other failure to comply with any rule, regulation, or Instruction 
applicable to trials by military commission convened pursuant to 32 CFR 
part 9, and Military Order of November 13, 2001, ``Detention, Treatment, 
and Trial of Certain Non-Citizens in the War Against Terrorism,'' may be 
subject to appropriate action by the Appointing Authority, the General 
Counsel of the

[[Page 32]]

Department of Defense, or the Presiding Officer of a military 
commission. Such action may include permanently barring an individual 
from participating in any military commission proceeding convened 
pursuant to 32 CFR part 9, and Military Order of November 13, 2001, 
``Detention, Treatment, and Trial of Certain Non-Citizens in the War 
Against Terrorism,'' punitive measures imposed under 10 U.S.C. 898, and 
any other lawful sanction.



Sec. 10.5  Construction.

    Military Commission Instructions shall be construed in a manner 
consistent with 32 CFR part 9, and Military Order of November 13, 2001, 
``Detention, Treatment, and Trial of Certain Non-Citizens in the War 
Against Terrorism.'' Nothing in these Military Commission Instructions 
applies with respect to the trial of crimes by military commissions 
convened under other authority. In the event of an inconsistency, the 
provisions of 32 CFR part 9, and Military Order of November 13, 2001, 
``Detention, Treatment, and Trial of Certain Non-Citizens in the War 
Against Terrorism,'' shall govern as provided in Section 7(B) of 
Military Order of November 13, 2001, ``Detention, Treatment, and Trial 
of Certain Non-Citizens in the War Against Terrorism.'' Pronouns 
referring to the male gender shall be construed as applying to both male 
and female.



Sec. 10.6  Non-creation of right.

    Neither this part nor any Military Commission Instruction issued 
hereafter, is intended to and does not create any right, benefit, 
privilege, substantive or procedural, enforceable by any party, against 
the United States, its departments, agencies, or other entities, its 
officers or employees, or any other person. Alleged noncompliance with 
an Instruction does not, of itself, constitute error, give rise to 
judicial review, or establish a right to relief for the Accused or any 
other person.



Sec. 10.7  Reservation of authority.

    Neither this part nor any Military Commission Instruction issued 
hereafter shall be construed to limit, impair, or otherwise affect any 
authority granted by the Constitution or laws of the United States or 
Department of Defense regulation or directive.



Sec. 10.8  Amendment.

    The General Counsel may issue, supplement, amend, or revoke any 
Military Commission Instruction at any time.



PART 11_CRIMES AND ELEMENTS FOR TRIALS BY MILITARY COMMISSION--Table of Contents




Sec.
11.1 Purpose.
11.2 Authority.
11.3 General.
11.4 Applicable principles of law.
11.5 Definitions.
11.6 Crimes and elements.

    Authority: 10 U.S.C. 821.

    Source: 68 FR 39381, July 1, 2003, unless otherwise noted.



Sec. 11.1  Purpose.

    This part provides guidance with respect to crimes that may be tried 
by military commissions established pursuant to 32 CFR part 9, and 
Military Order of November 13, 2001, ``Detention, Treatment, and Trial 
of Certain Non-Citizens in the War Against Terrorism,'' (3 CFR, 2001 
comp., p. 918, 66 FR 57833) and enumerates the elements of those crimes.



Sec. 11.2  Authority.

    This part is issued pursuant to 32 CFR 9.7(a) and in accordance with 
Military Order of November 13, 2001, ``Detention, Treatment, and Trial 
of Certain Non-Citizens in the War Against Terrorism,'' (66 FR 57833) 
and 10 U.S.C. 113(d), 140(b), and 821. The provisions of 32 CFR part 10 
are applicable to this part.



Sec. 11.3  General.

    (a) Background. The following crimes and elements thereof are 
intended for use by military commissions established pursuant to 32 CFR 
part 9, and Military Order of November 13, 2001, ``Detention, Treatment, 
and Trial of Certain Non-Citizens in the War Against Terrorism,'' the 
jurisdiction of which extends to offenses or offenders that by statute 
or the law of armed

[[Page 33]]

conflict may be tried by military commission as limited by Military 
Order of November 13, 2001, ``Detention, Treatment, and Trial of Certain 
Non-Citizens in the War Against Terrorism.'' No offense is cognizable in 
a trial by military commission if that offense did not exist prior to 
the conduct in question. These crimes and elements derive from the law 
of armed conflict, a body of law that is sometimes referred to as the 
law of war. They constitute violations of the law of armed conflict or 
offenses that, consistent with that body of law, are triable by military 
commission. Because this document is declarative of existing law, it 
does not preclude trial for crimes that occurred prior to its effective 
date.
    (b) Effect of other laws. No conclusion regarding the applicability 
or persuasive authority of other bodies of law should be drawn solely 
from the presence, absence, or similarity of particular language in this 
part as compared to other articulations of law.
    (c) Non-exclusivity. This part does not contain a comprehensive list 
of crimes triable by military commission. It is intended to be 
illustrative of applicable principles of the common law of war but not 
to provide an exclusive enumeration of the punishable acts recognized as 
such by that law. The absence of a particular offense from the corpus of 
those enumerated herein does not preclude trial for that offense.



Sec. 11.4  Applicable principles of law.

    (a) General intent. All actions taken by the Accused that are 
necessary for completion of a crime must be performed with general 
intent. This intent is not listed as a separate element. When the mens 
rea required for culpability to attach involves an intent that a 
particular consequence occur, or some other specific intent, an intent 
element is included. The necessary relationship between such intent 
element and the conduct constituting the actus reus is not articulated 
for each set of elements, but is presumed; a nexus between the two is 
necessary.
    (b) The element of wrongfulness and defenses. Conduct must be 
wrongful to constitute one of the offenses enumerated herein or any 
other offense triable by military commission. Conduct is wrongful if it 
is done without justification or excuse cognizable under applicable law. 
The element of wrongfulness (or the absence of lawful justification or 
excuse), which may be required under the customary law of armed 
conflict, is not repeated in the elements of crimes in Sec. 11.6. 
Conduct satisfying the elements found herein shall be inferred to be 
wrongful in the absence of evidence to the contrary. Similarly, this 
part does not enunciate defenses that may apply for specific offenses, 
though an Accused is entitled to raise any defense available under the 
law of armed conflict. Defenses potentially available to an Accused 
under the law of armed conflict, such as self-defense, mistake of fact, 
and duress, may be applicable to certain offenses subject to trial by 
military commission. In the absence of evidence to the contrary, 
defenses in individual cases shall be presumed not to apply. The burden 
of going forward with evidence of lawful justification or excuse or any 
applicable defense shall be upon the Accused. With respect to the issue 
of combatant immunity raised by the specific enumeration of an element 
requiring the absence thereof, the prosecution must affirmatively prove 
that element regardless of whether the issue is raised by the defense. 
Once an applicable defense or an issue of lawful justification or lawful 
excuse is fairly raised by the evidence presented, except for the 
defense of lack of mental responsibility, the burden is on the 
prosecution to establish beyond a reasonable doubt that the conduct was 
wrongful or that the defense does not apply. With respect to the defense 
of lack of mental responsibility, the Accused has the burden of proving 
by clear and convincing evidence that, as a result of a severe mental 
disease or defect, the Accused was unable to appreciate the nature and 
quality of the wrongfulness of the Accused's acts. As provided in 32 CFR 
9.5(c), the prosecution bears the burden of establishing the Accused's 
guilt beyond a reasonable doubt in all cases tried by a military 
commission. Each element of an offense enumerated herein must be proven 
beyond a reasonable doubt.

[[Page 34]]

    (c) Statute of limitations. Violations of the laws of war listed 
herein are not subject to any statute of limitations.



Sec. 11.5  Definitions.

    (a) Combatant immunity. Under the law of armed conflict, only a 
lawful combatant enjoys ``combatant immunity'' or ``belligerent 
privilege'' for the lawful conduct of hostilities during armed conflict.
    (b) Enemy. ``Enemy'' includes any entity with which the United 
States or allied forces may be engaged in armed conflict, or which is 
preparing to attack the United States. It is not limited to foreign 
nations, or foreign military organizations or members thereof. ``Enemy'' 
specifically includes any organization of terrorists with international 
reach.
    (c) In the context of and was associated with armed conflict. 
Elements containing this language require a nexus between the conduct 
and armed hostilities. Such nexus could involve, but is not limited to, 
time, location, or purpose of the conduct in relation to the armed 
hostilities. The existence of such factors, however, may not satisfy the 
necessary nexus (e.g., murder committed between members of the same 
armed force for reasons of personal gain unrelated to the conflict, even 
if temporally and geographically associated with armed conflict, is not 
``in the context of'' the armed conflict). The focus of this element is 
not the nature or characterization of the conflict, but the nexus to it. 
This element does not require a declaration of war, ongoing mutual 
hostilities, or confrontation involving a regular national armed force. 
A single hostile act or attempted act may provide sufficient basis for 
the nexus so long as its magnitude or severity rises to the level of an 
``armed attack'' or an ``act of war,'' or the number, power, stated 
intent or organization of the force with which the actor is associated 
is such that the act or attempted act is tantamount to an attack by an 
armed force. Similarly, conduct undertaken or organized with knowledge 
or intent that it initiate or contribute to such hostile act or 
hostilities would satisfy the nexus requirement.
    (d) Military Objective. ``Military objectives'' are those potential 
targets during an armed conflict which, by their nature, location, 
purpose, or use, effectively contribute to the opposing force's war-
fighting or war-sustaining capability and whose total or partial 
destruction, capture, or neutralization would constitute a military 
advantage to the attacker under the circumstances at the time of the 
attack.
    (e) Object of the attack. ``Object of the attack'' refers to the 
person, place, or thing intentionally targeted. In this regard, the term 
includes neither collateral damage nor incidental injury or death.
    (f) Protected property. ``Protected property'' refers to property 
specifically protected by the law of armed conflict such as buildings 
dedicated to religion, education, art, science or charitable purposes, 
historic monuments, hospitals, or places where the sick and wounded are 
collected, provided they are not being used for military purposes or are 
not otherwise military objectives. Such property would include objects 
properly identified by one of the distinctive emblems of the Geneva 
Conventions but does not include all civilian property.
    (g) Protected under the law of war. The person or object in question 
is expressly ``protected'' under one or more of the Geneva Conventions 
of 1949 or, to the extent applicable, customary international law. The 
term does not refer to all who enjoy some form of protection as a 
consequence of compliance with international law, but those who are 
expressly designated as such by the applicable law of armed conflict. 
For example, persons who either are hors de combat or medical or 
religious personnel taking no active part in hostilities are expressly 
protected, but other civilians may not be.
    (h) Should have known. The facts and circumstances were such that a 
reasonable person in the Accused's position would have had the relevant 
knowledge or awareness.



Sec. 11.6  Crimes and elements.

    (a) Substantive offenses--war crimes. The following enumerated 
offenses, if applicable, should be charged in separate counts. Elements 
are drafted to

[[Page 35]]

reflect conduct of the perpetrator. Each element need not be 
specifically charged.
    (1) Willful killing of protected persons--(i) Elements. (A) The 
accused killed one or more persons;
    (B) The accused intended to kill such person or persons;
    (C) Such person or persons were protected under the law of war;
    (D) The accused knew or should have known of the factual 
circumstances that established that protected status; and
    (E) The killing took place in the context of and was associated with 
armed conflict.
    (ii) Comments. The intent required for this offense precludes its 
applicability with regard to collateral damage or injury incident to a 
lawful attack.
    (2) Attacking civilians.--(i) Elements. (A) The accused engaged in 
an attack;
    (B) The object of the attack was a civilian population as such or 
individual civilians not taking direct or active part in hostilities;
    (C) The accused intended the civilian population as such or 
individual civilians not taking direct or active part in hostilities to 
be an object of the attack; and
    (D) The attack took place in the context of and was associated with 
armed conflict.
    (ii) Comments. The intent required for this offense precludes its 
applicability with regard to collateral damage or injury incident to a 
lawful attack.
    (3) Attacking civilian objects.--(i) Elements. (A) The accused 
engaged in an attack;
    (B) The object of the attack was civilian property, that is, 
property that was not a military objective;
    (C) The accused intended such property to be an object of the 
attack;
    (D) The accused knew or should have known that such property was not 
a military objective; and
    (E) The attack took place in the context of and was associated with 
armed conflict.
    (ii) Comments. The intent required for this offense precludes its 
applicability with regard to collateral damage or injury incident to a 
lawful attack.
    (4) Attacking Protected Property--(i) Elements. (A) The accused 
engaged in an attack;
    (B) The object of the attack was protected property;
    (C) The accused intended such property to be an object of the 
attack;
    (D) The accused knew or should have known of the factual 
circumstances that established that protected status; and
    (E) The attack took place in the context of and was associated with 
armed conflict.
    (ii) Comments. The intent required for this offense precludes its 
applicability with regard to collateral damage or injury incident to a 
lawful attack.
    (5) Pillaging--(i) Elements. (A) The accused appropriated or seized 
certain property;
    (B) The accused intended to appropriate or seize such property for 
private or personal use;
    (C) The appropriation or seizure was without the consent of the 
owner of the property or other person with authority to permit such 
appropriation or seizure; and
    (D) The appropriation or seizure took place in the context of and 
was associated with armed conflict.
    (ii) Comments. As indicated by the use of the term ``private or 
personal use,'' legitimate captures or appropriations, or seizures 
justified by military necessity, cannot constitute the crime of 
pillaging.
    (6) Denying quarter--(i) Elements. (A) The accused declared, 
ordered, or otherwise indicated that there shall be no survivors or 
surrender accepted;
    (B) The accused thereby intended to threaten an adversary or to 
conduct hostilities such that there would be no survivors or surrender 
accepted;
    (C) It was foreseeable that circumstances would be such that a 
practicable and reasonable ability to accept surrender would exist;
    (D) The accused was in a position of effective command or control 
over the subordinate forces to which the declaration or order was 
directed; and
    (E) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) Comments. Paragraph (a)(6)(i)(C) of this section precludes this 
offense

[[Page 36]]

from being interpreted as limiting the application of lawful means or 
methods of warfare against enemy combatants. For example, a remotely 
delivered attack cannot give rise to this offense.
    (7) Taking Hostages--(i) Elements. (A) The accused seized, detained, 
or otherwise held hostage one or more persons;
    (B) The accused threatened to kill, injure, or continue to detain 
such person or persons;
    (C) The accused intended to compel a State, an international 
organization, a natural or legal person, or a group of persons to act or 
refrain from acting as an explicit or implicit condition for the safety 
or release of such person or persons; and
    (D) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) Comments. Consistent with Sec. 11.4(b), this offense cannot be 
committed by lawfully detaining enemy combatants or other individuals as 
authorized by the law of armed conflict.
    (8) Employing poison or analogous weapons--(i) Elements. (A) The 
accused employed a substance or a weapon that releases a substance as a 
result of its employment;
    (B) The substance was such that exposure thereto causes death or 
serious damage to health in the ordinary course of events, through its 
asphyxiating, poisonous, or bacteriological properties;
    (C) The accused employed the substance or weapon with the intent of 
utilizing such asphyxiating, poisonous, or bacteriological properties as 
a method of warfare;
    (D) The accused knew or should have known of the nature of the 
substance or weapon; and
    (E) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) Comments. (A) The ``death or serious damage to health'' 
required by paragraph (a)(8)(i)(B) of this section must be a direct 
result of the substance's effect or effects on the human body (e.g., 
asphyxiation caused by the depletion of atmospheric oxygen secondary to 
a chemical or other reaction would not give rise to this offense).
    (B) The clause ``serious damage to health'' does not include 
temporary incapacitation or sensory irritation.
    (C) The use of the ``substance or weapon'' at issue must be 
proscribed under the law of armed conflict. It may include chemical or 
biological agents.
    (D) The specific intent element for this offense precludes liability 
for mere knowledge of potential collateral consequences (e.g., mere 
knowledge of a secondary asphyxiating or toxic effect would be 
insufficient to complete the offense).
    (9) Using protected persons as shields--(i) Elements. (A) The 
accused positioned, or took advantage of the location of, one or more 
civilians or persons protected under the law of war;
    (B) The accused intended to use the civilian or protected nature of 
the person or persons to shield a military objective from attack or to 
shield, favor, or impede military operations; and
    (C) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) [Reserved]
    (10) Using protected property as shields--(i) Elements. (A) The 
accused positioned, or took advantage of the location of, civilian 
property or property protected under the law of war;
    (B) The accused intended to shield a military objective from attack 
or to shield, favor, or impede military operations; and
    (C) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) [Reserved]
    (11) Torture--(i) Elements. (A) The accused inflicted severe 
physical or mental pain or suffering upon one or more persons;
    (B) The accused intended to inflict such severe physical or mental 
pain or suffering;
    (C) Such person or persons were in the custody or under the control 
of the accused; and
    (D) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) Comments. (A) Consistent with Sec. 11.4(b), this offense does 
not include pain or suffering arising only from, inherent in, or 
incidental to, lawfully imposed punishments. This offense does

[[Page 37]]

not include the incidental infliction of pain or suffering associated 
with the legitimate conduct of hostilities.
    (B) Severe ``mental pain or suffering'' is the prolonged mental harm 
caused by or resulting from:
    (1) The intentional infliction or threatened infliction of severe 
physical pain or suffering;
    (2) The administration or application, or threatened administration 
or application, of mind-altering substances or other procedures 
calculated to disrupt profoundly the senses or the personality;
    (3) The threat of imminent death; or
    (4) The threat that another person will imminently be subjected to 
death, severe physical pain or suffering, or the administration or 
application of mind-altering substances or other procedures calculated 
to disrupt profoundly the senses or personality.
    (C) ``Prolonged mental harm'' is a harm of some sustained duration, 
though not necessarily permanent in nature, such as a clinically 
identifiable mental disorder.
    (D) Paragraph (a)(11)(i)(C) of this section does not require a 
particular formal relationship between the accused and the victim. 
Rather, it precludes prosecution for pain or suffering consequent to a 
lawful military attack.
    (12) Causing serious injury--(i) Elements. (A) The accused caused 
serious injury to the body or health of one or more persons;
    (B) The accused intended to inflict such serious injury;
    (C) Such person or persons were in the custody or under the control 
of the accused; and
    (D) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) Comments. ``Serious injury'' includes fractured or dislocated 
bones, deep cuts, torn members of the body, and serious damage to 
internal organs.
    (13) Mutilation or maiming--(i) Elements. (A) The accused subjected 
one or more persons to mutilation, in particular by permanently 
disfiguring the person or persons, or by permanently disabling or 
removing an organ or appendage;
    (B) The accused intended to subject such person or persons to such 
mutilation;
    (C) The conduct caused death or seriously damaged or endangered the 
physical or mental health or appearance of such person or persons.
    (D) The conduct was neither justified by the medical treatment of 
the person or persons concerned nor carried out in the interest of such 
person or persons;
    (E) Such person or persons were in the custody or control of the 
accused; and
    (F) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) [Reserved]
    (14) Use of treachery or perfidy--(i) Elements. (A) The accused 
invited the confidence or belief of one or more persons that they were 
entitled to, or were obliged to accord, protection under the law of war;
    (B) The accused intended to betray that confidence or belief;
    (C) The accused killed, injured, or captured one or more persons;
    (D) The accused made use of that confidence or belief in killing, 
injuring, or capturing such person or persons; and
    (E) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) [Reserved]
    (15) Improper use of flag of truce--(i) Elements. (A) The accused 
used a flag of truce;
    (B) The accused made such use in order to feign an intention to 
negotiate, surrender, or otherwise to suspend hostilities when there was 
no such intention on the part of the accused; and
    (C) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) [Reserved]
    (16) Improper use of protective emblems--(i) Elements. (A) The 
accused used a protective emblem recognized by the law of armed 
conflict;
    (B) The accused undertook such use for combatant purposes in a 
manner prohibited by the law of armed conflict;

[[Page 38]]

    (C) The accused knew or should have known of the prohibited nature 
of such use; and
    (D) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) Comments. ``Combatant purposes,'' as used in paragraph 
(a)(16)(i)(B) of this section, means purposes directly related to 
hostilities and does not include medical, religious, or similar 
activities.
    (17) Degrading treatment of a dead body--(i) Elements. (A) The 
accused degraded or otherwise violated the dignity of the body of a dead 
person;
    (B) The accused intended to degrade or otherwise violate the dignity 
of such body;
    (C) The severity of the degradation or other violation was of such 
degree as to be generally recognized as an outrage upon personal 
dignity; and
    (D) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) Comments. Paragraph (a)(17)(i)(B) of this section precludes 
prosecution for actions justified by military necessity.
    (18) Rape--(i) Elements. (A) The accused invaded the body of a 
person by conduct resulting in penetration, however slight, of any part 
of the body of the victim or of the accused with a sexual organ, or of 
the anal or genital opening of the victim with any object or any other 
part of the body;
    (B) The invasion was committed by force, threat of force or 
coercion, or was committed against a person incapable of giving consent; 
and
    (C) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) Comments. (A) Paragraph (a)(18)(i)(B) of this section 
recognizes that consensual conduct does not give rise to this offense.
    (B) It is understood that a person may be incapable of giving 
consent if affected by natural, induced, or age-related incapacity.
    (C) The concept of ``invasion'' is linked to the inherent 
wrongfulness requirement for all offenses. In this case, for example, a 
legitimate body cavity search could not give rise to this offense.
    (D) The concept of ``invasion'' is gender neutral.
    (b) Substantive offenses--other offenses triable by military 
commission. The following enumerated offenses, if applicable, should be 
charged in separate counts. Elements are drafted to reflect conduct of 
the perpetrator. Each element need not be specifically charged.
    (1) Hijacking or hazarding a vessel or aircraft--(i) Elements. (A) 
The accused seized, exercised control over, or endangered the safe 
navigation of a vessel or aircraft;
    (B) The accused intended to so seize, exercise control over, or 
endanger such vessel or aircraft; and
    (C) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) Comments. A seizure, exercise of control, or endangerment 
required by military necessity, or against a lawful military objective 
undertaken by military forces of a State in the exercise of their 
official duties, would not satisfy the wrongfulness requirement for this 
crime.
    (2) Terrorism--(i) Elements. (A) The accused killed or inflicted 
bodily harm on one or more persons or destroyed property;
    (B) The accused:
    (1) Intended to kill or inflict bodily harm on one or more persons; 
or
    (2) Intentionally engaged in an act that is inherently dangerous to 
another and evinces a wanton disregard of human life;
    (C) The killing, harm or destruction was intended to intimidate or 
coerce a civilian population, or to influence the policy of a government 
by intimidation or coercion; and
    (D) The killing, harm or destruction took place in the context of 
and was associated with armed conflict.
    (ii) Comments. (A) Paragraph (b)(2)(i)(A) of this section includes 
the concept of causing death or bodily harm, even if indirectly.
    (B) The requirement that the conduct be wrongful for this crime 
necessitates that the conduct establishing this offense not constitute 
an attack against a lawful military objective undertaken by military 
forces of a State in the exercise of their official duties.

[[Page 39]]

    (3) Murder by an unprivileged belligerent--(i) Elements. (A) The 
accused killed one or more persons;
    (B) The accused:
    (1) Intended to kill or inflict great bodily harm on such person or 
persons; or
    (2) Intentionally engaged in an act that is inherently dangerous to 
another and evinces a wanton disregard of human life;
    (C) The accused did not enjoy combatant immunity; and
    (D) The killing took place in the context of and was associated with 
armed conflict.
    (ii) Comments. (A) The term ``kill'' includes intentionally causing 
death, whether directly or indirectly.
    (B) Unlike the crimes of willful killing or attacking civilians, in 
which the victim's status is a prerequisite to criminality, for this 
offense the victim's status is immaterial. Even an attack on a soldier 
would be a crime if the attacker did not enjoy ``belligerent privilege'' 
or ``combatant immunity.''
    (4) Destruction of property by an unprivileged belligerent--(i) 
Elements. (A) The accused destroyed property;
    (B) The property belonged to another person, and the destruction was 
without that person's consent;
    (C) The accused intended to destroy such property;
    (D) The accused did not enjoy combatant immunity; and
    (E) The destruction took place in the context of and was associated 
with armed conflict.
    (ii) [Reserved]
    (5) Aiding the enemy--(i) Elements. (A) The accused aided the enemy;
    (B) The accused intended to aid the enemy; and
    (C) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) Comments. (A) Means of accomplishing paragraph (b)(5)(i)(A) of 
this section include, but are not limited to: providing arms, 
ammunition, supplies, money, other items or services to the enemy; 
harboring or protecting the enemy; or giving intelligence or other 
information to the enemy.
    (B) The requirement that conduct be wrongful for this crime 
necessitates that the accused act without proper authority. For example, 
furnishing enemy combatants detained during hostilities with subsistence 
or quarters in accordance with applicable orders or policy is not aiding 
the enemy.
    (C) The requirement that conduct be wrongful for this crime may 
necessitate that, in the case of a lawful belligerent, the accused owe 
allegiance or some duty to the United States of America or to an ally or 
coalition partner. For example, citizenship, resident alien status, or a 
contractual relationship in or with the United States or an ally or 
coalition partner is sufficient to satisfy this requirement so long as 
the relationship existed at a time relevant to the offense alleged.
    (6) Spying--(i) Elements. (A) The accused collected or attempted to 
collect certain information;
    (B) The accused intended to convey such information to the enemy;
    (C) The accused, in collecting or attempting to collect the 
information, was lurking or acting clandestinely, while acting under 
false pretenses; and
    (D) The conduct took place in the context of and was associated with 
armed conflict.
    (ii) Comments. (A) Members of a military organization not wearing a 
disguise and others who carry out their missions openly are not spies, 
if, though they may have resorted to concealment, they have not acted 
under false pretenses.
    (B) Related to the requirement that conduct be wrongful or without 
justification or excuse in this case is the fact that, consistent with 
the law of war, a lawful combatant who, after rejoining the armed force 
to which that combatant belongs, is subsequently captured, can not be 
punished for previous acts of espionage. His successful rejoining of his 
armed force constitutes a defense.
    (7) Perjury or false testimony--(i) Elements. (A) The accused 
testified at a military commission, in proceedings ancillary to a 
military commission, or provided information in a writing executed under 
an oath to tell the truth or a declaration acknowledging the 
applicability of penalties of perjury in connection with such 
proceedings;
    (B) Such testimony or information was material;

[[Page 40]]

    (C) Such testimony or information was false; and
    (D) The accused knew such testimony or information to be false.
    (ii) [Reserved]
    (8) Obstruction of justice related to military commissions--(i) 
Elements. (A) The accused did an act;
    (B) The accused intended to influence, impede, or otherwise obstruct 
the due administration of justice; and
    (C) The accused did such act in the case of a certain person against 
whom the accused had reason to believe:
    (1) There were or would be proceedings before a military commission; 
or
    (2) There was an ongoing investigation of offenses triable by 
military commission.
    (ii) [Reserved]
    (c) Other forms of liability and related offenses. A person is 
criminally liable as a principal for a completed substantive offense if 
that person commits the offense (perpetrator), aids or abets the 
commission of the offense, solicits commission of the offense, or is 
otherwise responsible due to command responsibility. Such a person would 
be charged as a principal even if another individual more directly 
perpetrated the offense. In proving culpability, however, the below 
listed definitions and elements are applicable. Additionally, if a 
substantive offense was completed, a person may be criminally liable for 
the separate offense of accessory after the fact. If the substantive 
offense was not completed, a person may be criminally liable of the 
lesser-included offense of attempt or the separate offense of 
solicitation. Finally, regardless of whether the substantive offense was 
completed, a person may be criminally liable of the separate offense of 
conspiracy in addition to the substantive offense. Each element need not 
be specifically charged.
    (1) Aiding or abetting--(i) Elements. (A) The accused committed an 
act that aided or abetted another person or entity in the commission of 
a substantive offense triable by military commission;
    (B) Such other person or entity committed or attempted to commit the 
substantive offense; and
    (C) The accused intended to or knew that the act would aid or abet 
such other person or entity in the commission of the substantive offense 
or an associated criminal purpose or enterprise.
    (ii) Comments. (A) The term ``aided or abetted'' in paragraph 
(c)(1)(i)(A) of this section includes: assisting, encouraging, advising, 
instigating, counseling, ordering, or procuring another to commit a 
substantive offense; assisting, encouraging, advising, counseling, or 
ordering another in the commission of a substantive offense; and in any 
other way facilitating the commission of a substantive offense.
    (B) In some circumstances, inaction may render one liable as an 
aider or abettor. If a person has a legal duty to prevent or thwart the 
commission of a substantive offense, but does not do so, that person may 
be considered to have aided or abetted the commission of the offense if 
such noninterference is intended to and does operate as an aid or 
encouragement to the actual perpetrator.
    (C) An accused charged with aiding or abetting should be charged 
with the related substantive offense as a principal.
    (2) Solicitation--(i) Elements. (A) The accused solicited, ordered, 
induced, or advised a certain person or persons to commit one or more 
substantive offenses triable by military commission; and
    (B) The accused intended that the offense actually be committed.
    (ii) Comments. (A) The offense is complete when a solicitation is 
made or advice is given with the specific wrongful intent to induce a 
person or persons to commit any offense triable by military commission. 
It is not necessary that the person or persons solicited, ordered, 
induced, advised, or assisted agree to or act upon the solicitation or 
advice. If the offense solicited is actually committed, however, the 
accused is liable under the law of armed conflict for the substantive 
offense. An accused should not be convicted of both solicitation and the 
substantive offense solicited if criminal liability for the substantive 
offense is based upon the solicitation.
    (B) Solicitation may be by means other than speech or writing. Any 
act or conduct that reasonably may be

[[Page 41]]

construed as a serious request, order, inducement, advice, or offer of 
assistance to commit any offense triable by military commission may 
constitute solicitation. It is not necessary that the accused act alone 
in the solicitation, order, inducement, advising, or assistance. The 
accused may act through other persons in committing this offense.
    (C) An accused charged with solicitation of a completed substantive 
offense should be charged for the substantive offense as a principal. An 
accused charged with solicitation of an uncompleted offense should be 
charged for the separate offense of solicitation. Solicitation is not a 
lesser-included offense of the related substantive offense.
    (3) Command/superior responsibility--perpetrating--(i) Elements. (A) 
The accused had command and control, or effective authority and control, 
over one or more subordinates;
    (B) One or more of the accused's subordinates committed, attempted 
to commit, conspired to commit, solicited to commit, or aided or abetted 
the commission of one or more substantive offenses triable by military 
commission;
    (C) The accused either knew or should have known that the 
subordinate or subordinates were committing, attempting to commit, 
conspiring to commit, soliciting, or aiding or abetting such offense or 
offenses; and
    (D) The accused failed to take all necessary and reasonable measures 
within his power to prevent or repress the commission of the offense or 
offenses.
    (ii) Comments. (A) The phrase ``effective authority and control'' in 
paragraph (c)(3)(i)(A) of this section includes the concept of relative 
authority over the subject matter or activities associated with the 
perpetrator's conduct. This may be relevant to a civilian superior who 
should not be held responsible for the behavior of subordinates involved 
in activities that have no relationship to such superior's sphere of 
authority. Subject matter authority need not be demonstrated for command 
responsibility as it applies to a military commander.
    (B) A commander or other military or civilian superior, not in 
command, charged with failing adequately to prevent or repress a 
substantive offense triable by military commission should be charged for 
the related substantive offense as a principal.
    (4) Command/superior responsibility--misprision--(i) Elements. (A) 
The accused had command and control, or effective authority and control, 
over one or more subordinates;
    (B) One or more of the accused's subordinates had committed, 
attempted to commit, conspired to commit, solicited to commit, or aided 
or abetted the commission of one or more substantive offenses triable by 
military commission;
    (C) The accused knew or should have known that the subordinate or 
subordinates had committed, attempted to commit, conspired to commit, 
solicited, or aided or abetted such offense or offenses; and
    (D) The accused failed to submit the matter to competent authorities 
for investigation or prosecution as appropriate.
    (ii) Comments. (A) The phrase, ``effective authority and control'' 
in paragraph (c)(4)(i)(A) of this section includes the concept of 
relative authority over the subject matter or activities associated with 
the perpetrator's conduct. This may be relevant to a civilian superior 
who cannot be held responsible under this offense for the behavior of 
subordinates involved in activities that have nothing to do with such 
superior's sphere of authority.
    (B) A commander or superior charged with failing to take appropriate 
punitive or investigative action subsequent to the perpetration of a 
substantive offense triable by military commission should not be charged 
for the substantive offense as a principal. Such commander or superior 
should be charged for the separate offense of failing to submit the 
matter for investigation and/or prosecution as detailed in these 
elements. This offense is not a lesser-included offense of the related 
substantive offense.
    (5) Accessory after the fact--(i) Elements. (A) The accused 
received, comforted, or assisted a certain person;
    (B) Such person had committed an offense triable by military 
commission;

[[Page 42]]

    (C) The accused knew that such person had committed such offense or 
believed such person had committed a similar or closely related offense; 
and
    (D) The accused intended to hinder or prevent the apprehension, 
trial, or punishment of such person.
    (ii) Comments. Accessory after the fact should be charged separately 
from the related substantive offense. It is not a lesser-included 
offense of the related substantive offense.
    (6) Conspiracy--(i) Elements. (A) The accused entered into an 
agreement with one or more persons to commit one or more substantive 
offenses triable by military commission or otherwise joined an 
enterprise of persons who shared a common criminal purpose that 
involved, at least in part, the commission or intended commission of one 
or more substantive offenses triable by military commission;
    (B) The accused knew the unlawful purpose of the agreement or the 
common criminal purpose of the enterprise and joined in it willfully, 
that is, with the intent to further the unlawful purpose; and
    (C) One of the conspirators or enterprise members, during the 
existence of the agreement or enterprise, knowingly committed an overt 
act in order to accomplish some objective or purpose of the agreement or 
enterprise.
    (ii) Comments. (A) Two or more persons are required in order to have 
a conspiracy. Knowledge of the identity of co-conspirators and their 
particular connection with the agreement or enterprise need not be 
established. A person may be guilty of conspiracy although incapable of 
committing the intended offense. The joining of another conspirator 
after the conspiracy has been established does not create a new 
conspiracy or affect the status of the other conspirators. The agreement 
or common criminal purpose in a conspiracy need not be in any particular 
form or manifested in any formal words.
    (B) The agreement or enterprise must, at least in part, involve the 
commission or intended commission of one or more substantive offenses 
triable by military commission. A single conspiracy may embrace multiple 
criminal objectives. The agreement need not include knowledge that any 
relevant offense is in fact ``triable by military commission.''
    (C) The overt act must be done by one or more of the conspirators, 
but not necessarily the accused, and it must be done to effectuate the 
object of the conspiracy or in furtherance of the common criminal 
purpose. The accused need not have entered the agreement or criminal 
enterprise at the time of the overt act.
    (D) The overt act need not be in itself criminal, but it must 
advance the purpose of the conspiracy. It is not essential that any 
substantive offense be committed.
    (E) Each conspirator is liable for all offenses committed pursuant 
to or in furtherance of the conspiracy by any of the co-conspirators, 
after such conspirator has joined the conspiracy and while the 
conspiracy continues and such conspirator remains a party to it.
    (F) A party to the conspiracy who withdraws from or abandons the 
agreement or enterprise before the commission of an overt act by any 
conspirator is not guilty of conspiracy. An effective withdrawal or 
abandonment must consist of affirmative conduct that is wholly 
inconsistent with adherence to the unlawful agreement or common criminal 
purpose and that shows that the party has severed all connection with 
the conspiracy. A conspirator who effectively withdraws from or abandons 
the conspiracy after the performance of an overt act by one of the 
conspirators remains guilty of conspiracy and of any offenses committed 
pursuant to the conspiracy up to the time of the withdrawal or 
abandonment. The withdrawal of a conspirator from the conspiracy does 
not affect the status of the remaining members.
    (G) That the object of the conspiracy was impossible to effect is 
not a defense to this offense.
    (H) Conspiracy to commit an offense is a separate and distinct 
offense from any offense committed pursuant to or in furtherance of the 
conspiracy, and both the conspiracy and any related offense may be 
charged, tried, and punished separately. Conspiracy should be charged 
separately from the related substantive offense. It is not a lesser-

[[Page 43]]

included offense of the substantive offense.
    (7) Attempt--(i) Elements. (A) The accused committed an act;
    (B) The accused intended to commit one or more substantive offenses 
triable by military commission;
    (C) The act amounted to more than mere preparation; and
    (D) The act apparently tended to effect the commission of the 
intended offense.
    (ii) Comments. (A) To constitute an attempt there must be a specific 
intent to commit the offense accompanied by an act that tends to 
accomplish the unlawful purpose. This intent need not involve knowledge 
that the offense is in fact ``triable by military commission.''
    (B) Preparation consists of devising or arranging means or measures 
apparently necessary for the commission of the offense. The act need not 
be the last act essential to the consummation of the offense. The 
combination of specific intent to commit an offense, plus the commission 
of an act apparently tending to further its accomplishment, constitutes 
the offense of attempt. Failure to complete the offense, whatever the 
cause, is not a defense.
    (C) A person who purposely engages in conduct that would constitute 
the offense if the attendant circumstances were as that person believed 
them to be is guilty of an attempt.
    (D) It is a defense to an attempt offense that the person 
voluntarily and completely abandoned the intended offense, solely 
because of the person's own sense that it was wrong, prior to the 
completion of the substantive offense. The voluntary abandonment defense 
is not allowed if the abandonment results, in whole or in part, from 
other reasons, for example, the person feared detection or apprehension, 
decided to await a better opportunity for success, was unable to 
complete the crime, or encountered unanticipated difficulties or 
unexpected resistance.
    (E) Attempt is a lesser-included offense of any substantive offense 
triable by military commission and need not be charged separately. An 
accused may be charged with attempt without being charged with the 
substantive offense.



PART 12_RESPONSIBILITIES OF THE CHIEF PROSECUTOR, PROSECUTORS, AND ASSISTANT PROSECUTORS--Table of Contents




Sec.
12.1 Purpose.
12.2 Authority.
12.3 Office of the Chief Prosecutor.
12.4 Duties and responsibilities of the prosecution.
12.5 Policies.

    Authority: 10 U.S.C. 113(d) and 140(b).

    Source: 68 FR 39388, July 1, 2003, unless otherwise noted.



Sec. 12.1  Purpose.

    This part establishes the responsibilities of the Office of the 
Chief Prosecutor and components thereof.



Sec. 12.2  Authority.

    This part is issued pursuant to 32 CFR 9.7(a) and in accordance with 
Military Order of November 13, 2001, ``Detention, Treatment, and Trial 
of Certain Non-Citizens in the War Against Terrorism,'' (3 CFR, 2001 
comp., p. 918, 66 FR 57833) and 10 U.S.C. 113(d) and 140(b). The 
provisions of 32 CFR part 10 are applicable to this part.



Sec. 12.3  Office of the Chief Prosecutor.

    (a) General. The Office of the Chief Prosecutor shall be a component 
of the Office of Military Commissions and shall be comprised of the 
Chief Prosecutor, Prosecutors, and other persons properly under the 
supervision of the Chief Prosecutor.
    (b) Chief Prosecutor. (1) The Chief Prosecutor shall be a judge 
advocate of any United States armed force and shall be designated by the 
General Counsel of the Department of Defense.
    (2) The Chief Prosecutor shall report directly to the Deputy General 
Counsel (Legal Counsel) of the Department of Defense.
    (3) The Chief Prosecutor shall have authority to subpoena any 
individual to appear as a witness, to testify, or to produce any 
evidence in a case referred to military commissions or in a criminal 
investigation associated with a case that may be referred to a military 
commission.
    (4) The Chief Prosecutor shall direct the overall prosecution effort 
pursuant

[[Page 44]]

to 32 CFR part 9, and Military Order of November 13, 2001, ``Detention, 
Treatment, and Trial of Certain Non-Citizens in the War Against 
Terrorism,'' ensuring proper supervision and management of all personnel 
and resources assigned to the Office of the Chief Prosecutor.
    (5) The Chief Prosecutor shall ensure that all personnel assigned to 
the Office of the Chief Prosecutor review, and attest that they 
understand and will comply with, 32 CFR part 9, and Military Order of 
November 13, 2001,'' Detention, Treatment, and Trial of Certain Non-
Citizens in the War Against Terrorism,'' and all Supplementary 
Regulations and Instructions issued in accordance therewith.
    (6) The Chief Prosecutor shall inform the Deputy General Counsel 
(Legal Counsel) of all requirements for personnel, office space, 
equipment, and supplies to ensure the successful functioning and mission 
accomplishment of the Office of the Chief Prosecutor.
    (7) The Chief Prosecutor shall supervise all Prosecutors and other 
personnel assigned to the Office of the Chief Prosecutor including any 
special trial counsel of the Department of Justice who may be made 
available by the Attorney General of the United States.
    (8) The Chief Prosecutor, or his designee, shall fulfill applicable 
performance evaluation requirements associated with Prosecutors and 
other personnel properly under the supervision of the Office of the 
Chief Prosecutor.
    (9) The Chief Prosecutor shall detail a Prosecutor and, as 
appropriate, one or more Assistant Prosecutors to perform the duties of 
the prosecution as set forth in 32 CFR 9.4(b)(2). The Chief Prosecutor 
may detail himself to perform such duties.
    (10) The Chief Prosecutor shall ensure that all Prosecutors and 
Assistant Prosecutors faithfully represent the United States in 
discharging their prosecutorial duties before military commissions 
conducted pursuant to 32 CFR part 9, and Military Order of November 13, 
2001, ``Detention, Treatment, and Trial of Certain Non-Citizens in the 
War Against Terrorism.''
    (11) The Chief Prosecutor shall ensure that all Prosecutors and 
Assistant Prosecutors have taken an oath to perform their duties 
faithfully.
    (12) The Chief Prosecutor shall ensure that all personnel properly 
under the supervision of the Office of the Chief Prosecutor possess the 
appropriate security clearances.
    (c) Prosecutors. (1) Prosecutors shall be detailed by the Chief 
Prosecutor and may be either judge advocates of any United States armed 
force or special trial counsel of the Department of Justice who may be 
made available by the Attorney General of the United States.
    (2) Prosecutors shall represent the United States as Prosecutors or 
Assistant Prosecutors as directed by the Chief Prosecutor and in 
accordance with 32 CFR part 9, and Military Order of November 13, 2001, 
``Detention, Treatment, and Trial of Certain Non-Citizens in the War 
Against Terrorism.''
    (3) Prosecutors shall fulfill all responsibilities detailed in 32 
CFR part 9, and Military Order of November 13, 2001, ``Detention, 
Treatment, and Trial of Certain Non-Citizens in the War Against 
Terrorism,'' those set forth in this part, and those assigned by the 
Chief Prosecutor.
    (4) Prosecutors shall ensure that all court reporters, security 
personnel, and interpreters who are to perform duties in relation to a 
military commission proceeding have taken an oath to perform their 
duties faithfully. As directed by the Presiding Officer, Prosecutors 
also shall administer appropriate oaths to witnesses during military 
commission proceedings.



Sec. 12.4  Duties and responsibilities of the prosecution.

    (a) Regular duties. The Prosecution shall perform all duties 
specified or implied in 32 CFR part 9 as responsibilities of the 
Prosecution.
    (b) Administrative duties. The Prosecution shall, as directed by the 
Presiding Officer or the Appointing Authority, prepare any documentation 
necessary to facilitate the conduct of military commissions proceedings. 
The Prosecution shall, as directed by the Deputy General Counsel (Legal 
Counsel), prepare a trial guide to provide a standardized administrative 
plan for the

[[Page 45]]

conduct of military commission proceedings. Unless directed otherwise by 
the Appointing Authority, the Presiding Officer may, in his discretion, 
depart from this guide as appropriate.
    (c) Special duties. The Prosecution shall perform all other 
functions, consistent with 32 CFR part 9, and Military Order of November 
13, 2001, ``Detention, Treatment, and Trial of Certain Non-Citizens in 
the War Against Terrorism,'' as may be directed by the Appointing 
Authority or the General Counsel of the Department of Defense.



Sec. 12.5  Policies.

    (a) Prohibition on Prosecutors serving as Defense Counsel. Judge 
advocates assigned to the Office of the Chief Prosecutor shall be deemed 
unavailable for service as Defense Counsel under 32 CFR 9.4(c)(3)(i).
    (b) Prohibition on certain disclosures. All Prosecutors must 
strictly comply with 32 CFR 9.6(d)(5) and 9.9 to ensure they do not 
improperly disclose classified information, national security 
information, or state secrets to any person not specifically authorized 
to receive such information.
    (c) Statements to the media. Consistent with DoD Directive 5122.5 
\1\, the Assistant Secretary of Defense for Public Affairs shall serve 
as the sole release authority for DoD information and audiovisual 
materials regarding military commissions. Personnel assigned to the 
Office of the Chief Prosecutor may communicate with news media 
representatives regarding cases and other matters related to military 
commissions only when approved by the Appointing Authority or the 
General Counsel of the Department of Defense.
---------------------------------------------------------------------------

    \1\ Available at http://www.dtic.mil/whs/directives.
---------------------------------------------------------------------------



PART 13_RESPONSIBILITIES OF THE CHIEF DEFENSE COUNSEL, DETAILED DEFENSE COUNSEL, AND CIVILIAN DEFENSE COUNSEL--Table of Contents




Sec.
13.1 Purpose.
13.2 Authority.
13.3 Office of the Chief Defense Counsel.
13.4 Duties and responsibilities of the defense.
13.5 Policies.

    Authority: 10 U.S.C. 113(d) and 140(b).

    Source: 68 FR 39389, July 1, 2003, unless otherwise noted.



Sec. 13.1  Purpose.

    This part establishes the responsibilities of the Office of Chief 
Defense Counsel and components thereof.



Sec. 13.2  Authority.

    This part is issued pursuant to 32 CFR 9.7(a) and in accordance with 
Military Order of November 13, 2001, ``Detention, Treatment, and Trial 
of Certain Non-Citizens in the War Against Terrorism,'' (3 CFR, 2001 
comp., p. 918, 66 FR 57833) and 10 U.S.C. 113(d) and 140(b). The 
provisions of 32 CFR part 10 are applicable to this part.



Sec. 13.3  Office of the Chief Defense Counsel.

    (a) General. The Office of the Chief Defense Counsel shall be a 
component of the Office of Military Commissions and shall be comprised 
of the Chief Defense Counsel, Defense Counsel, and other such persons 
properly under the supervision of the Chief Defense Counsel.
    (b) Chief Defense Counsel. (1) The Chief Defense Counsel shall be a 
judge advocate of any United States armed force and shall be designated 
by the General Counsel of the Department of Defense.
    (2) The Chief Defense Counsel shall report directly to the Deputy 
General Counsel (Personnel and Health Policy) of the Department of 
Defense.
    (3) The Chief Defense Counsel shall supervise all defense activities 
and the efforts of Detailed Defense Counsel and other office personnel 
and resources pursuant to 32 CFR part 9, and Military Order of November 
13, 2001, ``Detention, Treatment, and Trial of Certain Non-Citizens in 
the War Against Terrorism,'' ensuring proper supervision and management 
of all personnel and resources assigned to the Office of the Chief 
Defense Counsel and facilitating the proper representation of all 
Accused referred to trial before a military commission appointed 
pursuant to 32

[[Page 46]]

CFR part 9, and Military Order of November 13, 2001, ``Detention, 
Treatment, and Trial of Certain Non-Citizens in the War Against 
Terrorism.''
    (4) The Chief Defense Counsel shall ensure that all personnel 
assigned to the Office of the Chief Defense Counsel review, and attest 
that they understand and will comply with, 32 CFR part 9, and Military 
Order of November 13, 2001, ``Detention, Treatment, and Trial of Certain 
Non-Citizens in the War Against Terrorism,'' and all Supplementary 
Regulations and Instructions issued in accordance therewith. 
Furthermore, the Chief Defense Counsel shall regulate the conduct of 
Detailed Defense Counsel as deemed necessary, consistent with 32 CFR 
part 9, and Military Order of November 13, 2001, ``Detention, Treatment, 
and Trial of Certain Non-Citizens in the War Against Terrorism,'' and 
subordinate instructions and regulations, and specifically shall ensure 
that Detailed Defense Counsel have been directed to conduct their 
activities consistent with applicable prescriptions and proscriptions 
specified in Section II of the Affidavit And Agreement By Civilian 
Defense Counsel at Appendix B to 32 CFR part 14.
    (5) The Chief Defense Counsel shall inform the Deputy General 
Counsel (Personnel and Health Policy) of the Department of Defense of 
all requirements for personnel, office space, equipment, and supplies to 
ensure the successful functioning and mission accomplishment of the 
Office of the Chief Defense Counsel.
    (6) The Chief Defense Counsel shall supervise all Defense Counsel 
and other personnel assigned to the Office of the Chief Defense Counsel.
    (7) The Chief Defense Counsel, or his designee, shall fulfill 
applicable performance evaluation requirements associated with Defense 
Counsel and other personnel properly under the supervision of the Chief 
Defense Counsel.
    (8) The Chief Defense Counsel shall detail a judge advocate of any 
United States armed force to perform the duties of the Detailed Defense 
Counsel as set forth in 32 CFR 9.4(c)(2) and shall detail or employ any 
other personnel as directed by the Appointing Authority or the Presiding 
Officer in a particular case. The Chief Defense Counsel may not detail 
himself to perform the duties of Detailed Defense Counsel, nor does he 
form an attorney-client relationship with accused persons or incur any 
concomitant confidentiality obligations.
    (i) The Chief Defense Counsel may, when appropriate, detail an 
additional judge advocate as Assistant Detailed Defense Counsel to 
assist in performing the duties of the Detailed Defense Counsel.
    (ii) The Chief Defense Counsel may structure the Office of the Chief 
Defense Counsel so as to include subordinate supervising attorneys who 
may incur confidentiality obligations in the context of fulfilling their 
supervisory responsibilities with regard to Detailed Defense Counsel.
    (9) The Chief Defense Counsel shall take appropriate measures to 
preclude Defense Counsel conflicts of interest arising from the 
representation of Accused before military commissions. The Chief Defense 
Counsel shall be provided sufficient information (potentially including 
protected information) to fulfill this responsibility.
    (10) The Chief Defense Counsel shall take appropriate measures to 
ensure that each Detailed Defense Counsel is capable of zealous 
representation, unencumbered by any conflict of interest. In this 
regard, the Chief Defense Counsel shall monitor the activities of all 
Defense Counsel (Detailed and Civilian) and take appropriate measures to 
ensure that Defense Counsel do not enter into agreements with other 
Accused or Defense Counsel that might cause them or the Accused they 
represent to incur an obligation of confidentiality with such other 
Accused or Defense Counsel or to effect some other impediment to 
representation.
    (11) The Chief Defense Counsel shall ensure that an Accused tried 
before a military commission pursuant to 32 CFR part 9, and Military 
Order of November 13, 2001, ``Detention, Treatment, and Trial of Certain 
Non-Citizens in the War Against Terrorism,'' is represented at all 
relevant times by Detailed Defense Counsel.
    (12) The Chief Defense Counsel shall administer all requests for 
replacement Detailed Defense Counsel requested in

[[Page 47]]

accordance with 32 CFR 9.4(c)(3). He shall determine the availability of 
such counsel in accordance with this part.
    (13) The Chief Defense Counsel shall administer the Civilian Defense 
Counsel pool, screening all requests for pre-qualification and ad hoc 
qualification, making qualification determinations and recommendations 
in accordance with 32 CFR part 9, this part, and 32 CFR part 14, and 
ensuring appropriate notification to an Accused of civilian attorneys 
available to represent Accused before a military commission.
    (14) The Chief Defense Counsel shall ensure that all Detailed 
Defense Counsel and Civilian Defense Counsel who are to perform duties 
in relation to a military commission have taken an oath to perform their 
duties faithfully.
    (15) The Chief Defense Counsel shall ensure that all personnel 
properly under the supervision of the Office of the Chief Defense 
Counsel possess the appropriate security clearances.
    (c) Detailed Defense Counsel. (1) Detailed Defense Counsel shall be 
judge advocates of any United States armed force.
    (2) Detailed Defense Counsel shall represent the Accused before 
military commissions when detailed in accordance with 32 CFR part 9, and 
Military Order of November 13, 2001, ``Detention, Treatment, and Trial 
of Certain Non-Citizens in the War Against Terrorism.'' In this regard 
Detailed Defense Counsel shall: defend the Accused to whom detailed 
zealously within the bounds of the law and without regard to personal 
opinion as to guilt; represent the interests of the Accused in any 
review process as provided by 32 CFR part 9; and comply with the 
procedures accorded the Accused pursuant to 32 CFR 9.5 and 9.6. Detailed 
Defense Counsel shall so serve notwithstanding any intention expressed 
by the Accused to represent himself.
    (3) Detailed Defense Counsel shall have primary responsibility to 
prevent conflicts of interest related to the handling of the cases to 
which detailed.
    (4) Detailed Defense Counsel shall fulfill all responsibilities 
detailed in 32 CFR part 9, and Military Order of November 13, 2001, 
``Detention, Treatment, and Trial of Certain Non-Citizens in the War 
Against Terrorism,'' those set forth in this part, and those assigned by 
the Chief Defense Counsel.
    (d) Selected Detailed Defense Counsel. (1) The Accused may select a 
judge advocate of any United States armed force to replace the Accused's 
Detailed Defense Counsel, provided that judge advocate has been 
determined to be available by the Chief Defense Counsel in consultation 
with the Judge Advocate General of that judge advocate's military 
department.
    (2) A judge advocate shall be determined not to be available if 
assigned duties: as a general or flag officer; as a military judge; as a 
prosecutor in the Office of Military Commissions; as a judge advocate 
assigned to the Department of Defense Criminal Investigation Task Force 
or Joint Task Force Guantanamo; as a principal legal advisor to a 
command, organization, or agency; as an instructor or student at a 
service school, academy, college or university; or in any other capacity 
that the Judge Advocate General of the Military Department concerned may 
determine not to be available because of the nature or responsibilities 
of their assignments, exigent circumstances, military necessity, or 
other appropriate reasons.
    (3) Consistent with 32 CFR 9.6(b), the selection and replacement of 
new Detailed Defense Counsel shall not unreasonably delay military 
commission proceedings.
    (4) Unless otherwise directed by the Appointing Authority or the 
General Counsel of the Department of Defense, the Chief Defense Counsel 
will, after selection of a new Detailed Defense Counsel, relieve the 
original Detailed Defense Counsel of all duties with respect to that 
case.
    (e) Qualified Civilian Defense Counsel. (1) The Accused may, at no 
expense to the United States, retain the services of a civilian attorney 
of the Accused's own choosing to assist in the conduct of his defense 
before a military commission, provided that the civilian attorney 
retained has been determined to be qualified pursuant to 32 CFR 
9.4(c)(3)(ii).
    (2) Consistent with 32 CFR 9.6(b), the retention of Civilian Defense 
Counsel shall not unreasonably delay military commission proceedings.

[[Page 48]]

    (3) Representation by Civilian Defense Counsel will not relieve 
Detailed Defense Counsel of the duties specified in 32 CFR 9.4(c)(2).
    (4) Neither qualification of a Civilian Defense Counsel for 
membership in the pool of available Civilian Defense Counsel nor the 
entry of appearance in a specific case guarantees that counsel's 
presence at closed military commission proceedings or access to 
information protected under 32 CFR 9.6(d)(5).
    (5) The Chief Defense Counsel shall monitor the conduct of all 
qualified Civilian Defense Counsel for compliance with all rules, 
regulations, and instructions governing military commissions. The Chief 
Defense Counsel will report all instances of noncompliance with the 
rules, regulations, and instructions governing military commissions to 
the Appointing Authority and to the General Counsel of the Department of 
Defense with a recommendation as to any appropriate action consistent 
with 32 CFR part 9 and this part.



Sec. 13.4  Duties and responsibilities of the defense.

    (a) Regular duties. The Defense shall perform all duties specified 
or implied in 32 CFR part 9 as responsibilities of the Defense.
    (b) Special duties. The Office of the Chief Defense Counsel shall 
perform such other functions, consistent with 32 CFR part 9, and 
Military Order of November 13, 2001, ``Detention, Treatment, and Trial 
of Certain Non-Citizens in the War Against Terrorism,'' and the mission 
of the Office of the Chief Defense Counsel, as may be directed by the 
Appointing Authority or the General Counsel of the Department of 
Defense.



Sec. 13.5  Policies.

    (a) Prohibition on certain agreements. No Defense Counsel may enter 
into agreements with any detainee other than his client, or such 
detainee's Defense Counsel, that might cause him or the client he 
represents to incur an obligation of confidentiality with such other 
detainee or Defense Counsel or to effect some other impediment to 
representation.
    (b) Prohibition on certain disclosures. All Defense Counsel must 
strictly comply with 32 CFR 9.6(d)(5) and 9.9 to ensure they do not 
improperly disclose classified information, national security 
information, or state secrets to an Accused or potential Accused or to 
any other person not specifically authorized to receive such 
information.
    (c) Statements to the media. Consistent with DoD Directive 5122.5 
\1\, the Assistant Secretary of Defense for Public Affairs shall serve 
as the sole release authority for DoD information and audiovisual 
materials regarding military commissions. Personnel assigned to the 
Office of the Chief Defense Counsel, as well as all members of the 
Civilian Defense Counsel pool and associated personnel may communicate 
with news media representatives regarding cases and other matters 
related to military commissions only when approved by the Appointing 
Authority or the General Counsel of the Department of Defense.
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PART 14_QUALIFICATION OF CIVILIAN DEFENSE COUNSEL--Table of Contents




Sec.
14.1 Purpose.
14.2 Authority.
14.3 Policies and procedures.

Appendix A to Part 14--United States of America Authorization for 
          Release of Information
Appendix B to Part 14--Affidavit and Agreement by Civilian Defense 
          Counsel

    Authority: 10 U.S.C. 113(d) and 140(b).

    Source: 68 FR 39392, July 1, 2003, unless otherwise noted.



Sec. 14.1  Purpose.

    This part establishes policies and procedures for the creation and 
management of the pool of qualified Civilian Defense Counsel authorized 
in 32 CFR 9.4 (c)(3)(ii) in accordance with Military Order of November 
13, 2001, ``Detention, Treatment, and Trial of Certain Non-Citizens in 
the War Against Terrorism,'' (3 CFR 2001 Comp., 918, 66 FR 57833).

[[Page 49]]



Sec. 14.2  Authority.

    This part is issued pursuant to 32 CFR 9.7(a) and in accordance with 
Military Order of November 13, 2001, ``Detention, Treatment, and Trial 
of Certain Non-Citizens in the War Against Terrorism,'' and 10 U.S.C. 
113(d) and 140(b). The provisions of 32 CFR part 10 are applicable to 
this part.



Sec. 14.3  Policies and procedures.

    (a) Application procedures. (1) Civilian attorneys may be 
prequalified as members of the pool of attorneys eligible to represent 
Accused before military commissions at no expense to the United States 
if, at the time of application, they meet the eligibility criteria set 
forth in 32 CFR 9.4(c)(3)(ii) as further detailed in this part, or they 
may be qualified on an ad hoc basis after being requested by an Accused. 
In both cases, qualification results in membership in the pool of 
available Civilian Defense Counsel.
    (2) An attorney seeking qualification as a member of the pool of 
available Civilian Defense Counsel shall submit an application, by 
letter, to: Office of the General Counsel, Department of Defense, (Attn: 
Chief Defense Counsel, Office of Military Commissions), 1600 Defense 
Pentagon, Washington, DC 20301-1600. Applications will be comprised of 
the letter requesting qualification for membership, together with the 
following documents that demonstrate satisfaction of the criteria set 
forth in 32 CFR 9.4(c)(3)(ii):
    (i) Civilian Defense Counsel shall be United States citizens (32 CFR 
9.4(c)(3)(ii)(A)). Applicants will provide proof of citizenship (e.g., 
certified true copy of passport, birth certificate, or certificate of 
naturalization).
    (ii) Civilian Defense Counsel shall be admitted to the practice of 
law in a State, district, territory or possession of the United States, 
or before a Federal court (32 CFR 9.4(c)(3)(ii)(B)). Applicants will 
submit an official certificate showing that the applicant is an active 
member in good standing with the bar of a qualifying jurisdiction. The 
certificate must be dated within three months of the date of the Chief 
Defense Counsel's receipt of the application.
    (iii) Civilian Defense Counsel shall not have been the subject of 
any sanction or disciplinary action by any court, bar, or other 
competent governmental authority for relevant misconduct (32 CFR 
9.4(c)(2)(iii)).
    (A) An applicant shall submit a statement detailing all sanctions or 
disciplinary actions, pending or final, to which he has been subject, 
whether by a court, bar or other competent governmental authority, for 
misconduct of any kind. The statement shall identify the jurisdiction or 
authority that imposed the sanction or disciplinary action, together 
with any explanation deemed appropriate by the applicant. Additionally, 
the statement shall identify and explain any formal challenge to the 
attorney's fitness to practice law, regardless of the outcome of any 
subsequent proceedings. In the event that no sanction, disciplinary 
action or challenge has been imposed on or made against an applicant, 
the statement shall so state. Further, the applicant's statement shall 
identify each jurisdiction in which he has been admitted or to which he 
has applied to practice law, regardless of whether the applicant 
maintains a current active license in that jurisdiction, together with 
any dates of admission to or rejection by each such jurisdiction and, if 
no longer active, the date of and basis for inactivation. The 
information shall be submitted either in the form of a sworn notarized 
statement or as a declaration under penalty of perjury of the laws of 
the United States. The sworn statement or declaration must be executed 
and dated within three months of the date of the Chief Defense Counsel's 
receipt of the application.
    (B) Further, applicants shall submit a properly executed 
Authorization for Release of Information (Appendix A to this part), 
authorizing the Chief Defense Counsel or his designee to obtain 
information relevant to qualification of the applicant as a member of 
the Civilian Defense Counsel pool from each jurisdiction in which the 
applicant has been admitted or to which he has applied to practice law.
    (iv) Civilian Defense Counsel shall be determined to be eligible for 
access to information classified at the level SECRET or higher under the 
authority of

[[Page 50]]

and in accordance with the procedures described in Department of Defense 
Regulation, DoD 5200.2-R, ``Personnel Security Program.'' \1\ (32 CFR 
9.4(c)(2)(iv)
    (A) Civilian Defense Counsel applicants who possess a valid current 
security clearance of SECRET or higher shall provide, in writing, the 
date of their background investigation, the date such clearance was 
granted, the level of the clearance, and the adjudicating authority.
    (B) Civilian Defense Counsel applicants who do not possess a valid 
current security clearance of SECRET or higher shall state in writing 
their willingness to submit to a background investigation in accordance 
with DoD 5200.2-R and to pay any actual costs associated with the 
processing of the same. The security clearance application, 
investigation, and adjudication process will not be initiated until the 
applicant has submitted an application that otherwise fully complies 
with this part and the Chief Defense Counsel has determined that the 
applicant would otherwise be qualified for membership in the Civilian 
Defense Counsel pool. Favorable adjudication of the applicant's 
personnel security investigation must be completed before an applicant 
will be qualified for membership in the pool of Civilian Defense 
Counsel. The Chief Defense Counsel may, at his discretion, withhold 
qualification and wait to initiate the security clearance process until 
such time as the Civilian Defense Counsel's services are likely to be 
sought.
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    (v) Civilian Defense Counsel shall have signed a written agreement 
to comply with all applicable regulations or instructions for counsel, 
including any rules of court for conduct during the course of 
proceedings (32 CFR 9.4(c)(2)(v)). This requirement shall be satisfied 
by the execution of the Affidavit And Agreement By Civilian Defense 
Counsel at Appendix B to this part. The Affidavit And Agreement By 
Civilian Defense Counsel shall be executed and agreed to without change, 
(i.e., no omissions, additions or substitutions). Proper execution shall 
require the notarized signature of the applicant. The Affidavit And 
Agreement By Civilian Defense Counsel shall be dated within three months 
of the date of the Chief Defense Counsel's receipt of the application.
    (3) Applications mailed in a franked U.S. Government envelope or 
received through U.S. Government distribution will not be considered. 
Telefaxed or electronic mail application materials will not be accepted. 
Failure to provide all of the requisite information and documentation 
may result in rejection of the application. A false statement in any 
part of the application may preclude qualification and/or render the 
applicant liable for disciplinary or criminal sanction, including under 
18 U.S.C. 1001.
    (b) Application review. (1) The Chief Defense Counsel or his 
designee shall review all Civilian Defense Counsel pool applications for 
compliance with 32 CFR part 9 and Military Order of November 13, 2001, 
``Detention, Treatment, and Trial of Certain Non-Citizens in the War 
Against Terrorism,'' and with this part.
    (2) The Chief Defense Counsel shall consider all applicants for 
qualification as members of the Civilian Defense Counsel pool without 
regard to race, religion, color, sex, age, national origin, or other 
non-disqualifying physical or mental disability.
    (3) The Chief Defense Counsel may reject any Civilian Defense 
Counsel application that is incomplete or otherwise fails to comply with 
32 CFR part 9 and Military Order of November 13, 2001, ``Detention, 
Treatment, and Trial of Certain Non-Citizens in the War Against 
Terrorism,'' or with this part.
    (4) Subject to review by the General Counsel of the Department of 
Defense, the Chief Defense Counsel shall determine the number of 
qualified attorneys that shall constitute the pool of available Civilian 
Defense Counsel. Similarly, subject to review by the General Counsel of 
the Department of Defense, the Chief Defense Counsel shall determine the 
qualification of applicants for membership in such pool. This shall 
include determinations as to whether any sanction, disciplinary action, 
or

[[Page 51]]

challenge is related to relevant misconduct that would disqualify the 
Civilian Defense Counsel applicant.
    (5) The Chief Defense Counsel's determination as to each applicant's 
qualification for membership in the pool of qualified Civilian Defense 
Counsel shall be deemed effective as of the date of the Chief Defense 
Counsel's written notification publishing such determination to the 
applicant. Subsequent to this notification, the retention of qualified 
Civilian Defense Counsel is effected upon written entry of appearance, 
communicated to the military commission through the Chief Defense 
Counsel.
    (6) The Chief Defense Counsel may reconsider his determination as to 
an individual's qualification as a member of the Civilian Defense 
Counsel pool on the basis of subsequently discovered information 
indicating material nondisclosure or misrepresentation in the 
application, or material violation of obligations of the Civilian 
Defense Counsel, or other good cause, or the matter may be referred to 
the Appointing Authority or the General Counsel of the Department of 
Defense, who may revoke or suspend the qualification of any member of 
the Civilian Defense Counsel pool.



 Sec. Appendix A to Part 14--United States of America Authorization for 
                         Release of Information

                        United States of America

                Authorization for Release of Information

(Carefully read this authorization to release information about you, 
then sign and date it in ink.)

    I authorize the Chief Defense Counsel, Office of Military 
Commissions, Department of Defense, his designee or other duly 
authorized representative of the Department of Defense who may be 
charged with assessing or determining my qualification for membership in 
the pool of Civilian Defense Counsel available to represent Accused 
before military commissions, to obtain any information from any court, 
the bar of any State, locality, district, territory or possession of the 
United States, or from any other governmental authority.
    This information may include, but is not limited to, information 
relating to: Any application for a security clearance; my admission or 
application for admission to practice law in any jurisdiction, including 
action by the jurisdiction upon such application, together with my 
current status with regard to the practice of law in such jurisdiction; 
any sanction or disciplinary action to which I have been subject for 
misconduct of any kind; and any formal challenge to my fitness to 
practice law, regardless of the outcome of subsequent proceedings.
    I authorize custodians of such records or information and other 
sources of information pertaining to me to release such at the request 
of the officials named above, regardless of any previous agreement to 
the contrary.
    I understand that for certain custodians or sources of information a 
separate specific release may be required and that I may be contacted 
for the purposes of executing such at a later date.
    I understand that the records or information released by custodians 
and other sources of information are for official use by the Department 
of Defense, only for the purposes provided herein, and that they may be 
redisclosed by the Department of Defense only as authorized by law.
    Copies of this authorization that show my signature are as valid as 
the original signed by me. This authorization is valid for five (5) 
years from the date signed or upon termination of my affiliation with 
the Department of Defense, whichever is later.

________________________________________________________________________
Signature (sign in ink) SSN

________________________________________________________________________
Date



Sec. Appendix B to Part 14--Affidavit and Agreement by Civilian Defense 
                                 Counsel

           Affidavit and Agreement by Civilian Defense Counsel

    Pursuant to Section 4(C)(3)(b) of Department of Defense Military 
Commission Order No. 1, ``Procedures for Trials by Military Commissions 
of Certain Non-United States Citizens in the War Against Terrorism,'' 
dated March 21, 2002 (``MCO No. 1''), Military Commission Instructions 
No. 4, ``Responsibilities of the Chief Defense Counsel, Detailed Defense 
Counsel, and Civilian Defense Counsel'' (``MCI No. 4'') and No. 5, 
``Qualification of Civilian Defense Counsel'' (``MCI No. 5''), and in 
accordance with the President's Military Order of November 13, 2001, 
``Detention, Treatment, and Trial of Certain Non-Citizens in the War 
Against Terrorism,'' 66 FR 57833 (Nov. 16, 2001) (``President's Military 
Order''), I [Name of Civilian Attorney], make this Affidavit and 
Agreement for the purposes of applying for qualification as a member of 
the pool of Civilian Defense Counsel available to represent Accused 
before military commissions and serving in that capacity.

[[Page 52]]

    I. Oaths or Affirmations. I swear or affirm that the following 
information is true to the best of my knowledge and belief:
    A. I have read and understand the President's Military Order, MCO 
No. 1, MCI No. 4, MCI No. 5, and all other Military Commission Orders 
and Instructions concerning the rules, regulations and instructions 
applicable to trial by military commissions. I will read all future 
Orders and Instructions applicable to trials by military commissions.
    B. I am aware that my qualification as a Civilian Defense Counsel 
does not guarantee my presence at closed military commission proceedings 
or guarantee my access to any information protected under Section 
6(D)(5) or Section 9 of MCO No. 1.
    II. Agreements. I hereby agree to comply with all applicable 
regulations and instructions for counsel, including any rules of court 
for conduct during the course of proceedings, and specifically agree, 
without limitation, to the following:
    A. I will notify the Chief Defense Counsel and, as applicable, the 
relevant Presiding Officer immediately if, after the execution of this 
Affidavit and Agreement but prior to the conclusion of proceedings 
(defined as the review and final decision of the President or, if 
designated, the Secretary of Defense), if there is any change in any of 
the information provided in my application, including this Affidavit and 
Agreement, for qualification as member of the Civilian Defense Counsel 
pool. I understand that such notification shall be in writing and shall 
set forth the substantive nature of the changed information.
    B. I will be well-prepared and will conduct the defense zealously, 
representing the Accused throughout the military commission process, 
from the inception of my representation through the completion of any 
post trial proceedings as detailed in Section 6(H) of MCO No. 1. I will 
ensure that these proceedings are my primary duty. I will not seek to 
delay or to continue the proceedings for reasons relating to matters 
that arise in the course of my law practice or other professional or 
personal activities that are not related to military commission 
proceedings.
    C. The Defense Team shall consist entirely of myself, Detailed 
Defense Counsel, and other personnel provided by the Chief Defense 
Counsel, the Presiding Officer, or the Appointing Authority. I will make 
no claim against the U.S. Government for any fees or costs associated 
with my conduct of the defense or related activities or efforts.
    D. Recognizing that my representation does not relieve Detailed 
Defense Counsel of duties specified in Section 4(C)(2) of MCO No. 1, I 
will work cooperatively with such counsel to ensure coordination of 
efforts and to ensure such counsel is capable of conducting the defense 
independently if necessary.
    E. During the pendency of the proceedings, unless I obtain approval 
in advance from the Presiding Officer to do otherwise, I will comply 
with the following restrictions on my travel and communications:
    1. I will not travel or transmit documents from the site of the 
proceedings without the approval of the Appointing Authority or the 
Presiding Officer. The Defense Team and I will otherwise perform all of 
our work relating to the proceedings, including any electronic or other 
research, at the site of the proceedings (except that this shall not 
apply during post-trial proceedings detailed in Section 6(H) of MCO No. 
1).
    2. I will not discuss or otherwise communicate or share documents or 
information about the case with anyone except persons who have been 
designated as members of the Defense Team in accordance with this 
Affidavit and Agreement and other applicable rules, regulations and 
instructions.
    F. At no time, to include any period subsequent to the conclusion of 
the proceedings, will I make any public or private statements regarding 
any closed sessions of the proceedings or any classified information or 
material, or document or material constituting protected information 
under MCO No. 1.
    G. I understand and agree to comply with all rules, regulations and 
instructions governing the handling of classified information and 
material. Furthermore, no document or material constituting protected 
information under MCO No. 1, regardless of its classification level, may 
leave the site of the proceedings.
    H. I understand that there may be reasonable restrictions on the 
time and duration of contact I may have with my client, as imposed by 
the Appointing Authority, the Presiding Officer, detention authorities, 
or regulation.
    I. I understand that my communications with my client, even if 
traditionally covered by the attorney-client privilege, may be subject 
to monitoring or review by government officials, using any available 
means, for security and intelligence purposes. I understand that any 
such monitoring will only take place in limited circumstances when 
approved by proper authority, and that any evidence or information 
derived from such communications will not be used in proceedings against 
the Accused who made or received the relevant communication. I further 
understand that communications are not protected if they would 
facilitate criminal acts or a conspiracy to commit criminal acts, or if 
those communications are not related to the seeking or providing of 
legal advice.
    J. I agree that I shall reveal to the Chief Defense Counsel and any 
other appropriate authorities, information relating to the 
representation of my client to the extent that I reasonably believe 
necessary to prevent the

[[Page 53]]

commission of a future criminal act that I believe is likely to result 
in death or substantial bodily harm, or significant impairment of 
national security.
    K. I understand and agree that nothing in this Affidavit and 
Agreement creates any substantive, procedural, or other rights for me as 
counsel or for my client(s).
 /s/____________________________________________________________________
 Print Name:____________________________________________________________
 Address:_______________________________________________________________
 Date:__________________________________________________________________

State of )
County of )

    Sworn to and subscribed before me, by ----------, this ---- day of 
--------, 20----.

                                 Notary

 My commission expires:_________________________________________________



PART 15_REPORTING RELATIONSHIPS FOR MILITARY COMMISSION PERSONNEL--Table of Contents




Sec.
15.1 Purpose.
15.2 Authority.
15.3 Policies and procedures.

    Authority: 10 U.S.C. 113(d) and 140(b).

    Source: 68 FR 39395, July 1, 2003, unless otherwise noted.



Sec. 15.1  Purpose.

    This part establishes supervisory and performance evaluation 
relationships for military commission personnel.



Sec. 15.2  Authority.

    This part is issued pursuant to 32 CFR 9.7(a) and in accordance with 
Military Order of November 13, 2001, ``Detention, Treatment, and Trial 
of Certain Non-Citizens in the War Against Terrorism,'' (3 CFR 2001 
Comp., p. 918, 66 FR 57833) and 10 U.S.C. 113(d) and 140(b). The 
provisions of 32 CFR part 10 are applicable to this part.



Sec. 15.3  Policies and Procedures.

    (a) Supervisory and performance evaluation relationships. 
Individuals appointed, assigned, detailed, designated or employed in a 
capacity related to the conduct of military commission proceedings 
conducted in accordance with 32 CFR part 9 and Military Order of 
November 13, 2001, ``Detention, Treatment, and Trial of Certain Non-
Citizens in the War Against Terrorism,'' shall be subject to the 
relationships set forth in paragraphs (a)(1) through (a)(9) of this 
section. Unless stated otherwise, the person to whom an individual 
``reports,'' as set forth in paragraphs (a)(1) through (a)(9) of this 
section, shall be deemed to be such individual's supervisor and shall, 
to the extent possible, fulfill all performance evaluation 
responsibilities normally associated with the function of direct 
supervisor in accordance with the subordinate's Military Service 
performance evaluation regulations.
    (1) Appointing Authority: Any Appointing Authority designated by the 
Secretary of Defense pursuant to 32 CFR part 9 shall report to the 
Secretary of Defense in accordance with 10 U.S.C. 113(d).
    (2) Legal Advisor to Appointing Authority: The Legal Advisor to the 
Appointing Authority shall report to the Appointing Authority.
    (3) Chief Prosecutor: The Chief Prosecutor shall report to the 
Deputy General Counsel (Legal Counsel) of the Department of Defense and 
then to the General Counsel of the Department of Defense.
    (4) Prosecutors and Assistant Prosecutors: Prosecutors and Assistant 
Prosecutors shall report to the Chief Prosecutor and then to the Deputy 
General Counsel (Legal Counsel) of the Department of Defense.
    (5) Chief Defense Counsel: The Chief Defense Counsel shall report to 
the Deputy General Counsel (Personnel and Health Policy) of the 
Department of Defense and then to the General Counsel of the Department 
of Defense.
    (6) Detailed Defense Counsel: Detailed Defense Counsel shall report 
to the Chief Defense Counsel and then to the Deputy General Counsel 
(Personnel and Health Policy) of the Department of Defense.
    (7) Review Panel members: Members of the Review Panel shall report 
to the Secretary of Defense.
    (8) Commission members: Commission members shall continue to report 
to their parent commands. The consideration or evaluation of the 
performance of duty as a member of a military commission is prohibited 
in preparing effectiveness, fitness, or evaluation reports of a 
commission member.

[[Page 54]]

    (9) Other personnel: All other military commission personnel, such 
as court reporters, interpreters, security personnel, bailiffs, and 
clerks detailed or employed by the Appointing Authority pursuant to 32 
CFR 9.4(d), if not assigned to the Office of the Chief Prosecutor or the 
Office of the Chief Defense Counsel, shall report to the Appointing 
Authority or his designee.
    (b) Responsibilities of supervisory/reporting officials. Officials 
designated in this part as supervisory/reporting officials shall:
    (1) Supervise subordinates in the performance of their duties.
    (2) Prepare fitness or performance evaluation reports and, as 
appropriate, process awards and citations for subordinates. To the 
extent practicable, a reporting official shall comply with the rated 
subordinate's Military Service regulations regarding the preparation of 
fitness or performance evaluation reports and in executing related 
duties.



PART 16_SENTENCING--Table of Contents




Sec.
16.1 Purpose.
16.2 Authority.
16.3 Available sentences.
16.4 Sentencing procedures.

    Authority: 10 U.S.C. 113(d) and 140(b).

    Source: 68 FR 39396, July 1, 2003, unless otherwise noted.



Sec. 16.1  Purpose.

    This part promulgates policy, assigns responsibilities, and 
prescribes procedures for matters related to sentencing of persons with 
regard to whom a finding of guilty is entered for an offense referred 
for trial by a military commission appointed pursuant to 32 CFR part 9 
and Military Order of November 13, 2001, ``Detention, Treatment, and 
Trial of Certain Non-Citizens in the War Against Terrorism'' (3 CFR 2001 
Comp., p. 918, 66 FR 57833).



Sec. 16.2  Authority.

    This part is issued pursuant to 32 CFR 9.7(a) and in accordance with 
Military Order of November 13, 2001, ``Detention, Treatment, and Trial 
of Certain Non-Citizens in the War Against Terrorism,'' and 10 U.S.C. 
113(d) and 140(b). The provisions of 32 CFR part 10 are applicable to 
this part.



Sec. 16.3  Available sentences.

    (a) General. 32 CFR part 9 permits a military commission wide 
latitude in sentencing. Any lawful punishment or condition of punishment 
is authorized, including death, so long as the prerequisites detailed in 
32 CFR part 9 are met. Detention associated with an individual's status 
as an enemy combatant shall not be considered to fulfill any term of 
imprisonment imposed by a military commission. The sentence 
determination should be made while bearing in mind that there are 
several principal reasons for a sentence given to those who violate the 
law. Such reasons include: punishment of the wrongdoer; protection of 
society from the wrongdoer; deterrence of the wrongdoer and those who 
know of his crimes and sentence from committing the same or similar 
offenses; and rehabilitation of the wrongdoer. In determining an 
appropriate sentence, the weight to be accorded any or all of these 
reasons rests solely within the discretion of commission members. All 
sentences should, however, be grounded in a recognition that military 
commissions are a function of the President's war-fighting role as 
Commander-in-Chief of the Armed Forces of the United States and of the 
broad deterrent impact associated with a sentence's effect on adherence 
to the laws and customs of war in general.
    (b) Conditions of imprisonment. Decisions regarding the location 
designated for any imprisonment, the conditions under which a sentence 
to imprisonment is served, or the privileges accorded one during any 
period of imprisonment should generally not be made by the commission. 
Those decisions and actions, however, may be appropriate subjects for 
recommendation to the person making a final decision on the sentence in 
accordance with of 32 CFR 9.6(h).
    (c) Prospective recommendations for sentence modification. A 
sentence imposed by military commission may be accompanied by a 
recommendation to suspend, remit, commute or otherwise modify the 
adjudged sentence in concert with one or more conditions upon

[[Page 55]]

which the suspension, remission, commutation, or other modification is 
contingent (usually relating to the performance, behavior or conduct of 
the Accused). Unless otherwise directed, a decision or action in 
accordance with such a recommendation will be effected by direction or 
delegation to the Appointing Authority by the official making a final 
decision on the sentence in accordance with of 32 CFR 9.6(h).



Sec. 16.4  Sentencing procedures.

    (a) General. 32 CFR part 9 permits the military commission 
substantial discretion regarding the conduct of sentencing proceedings. 
Sentencing proceedings should normally proceed expeditiously. In the 
discretion of the Presiding Officer, as limited by the Appointing 
Authority, reasonable delay between the announcement of findings and the 
commencement of sentencing proceedings may be authorized to facilitate 
the conduct of proceedings in accordance with of 32 CFR 9.6(b).
    (b) Information relevant to sentencing. 32 CFR 9.6(e)(10) permits 
the Prosecution and Defense to present information to aid the military 
commission in determining an appropriate sentence. Such information may 
include a recommendation of an appropriate sentence, information 
regarding sentence ranges for analogous offenses (e.g., the sentencing 
range under the Federal Sentencing Guidelines that could be applicable 
to the Accused for the most analogous federal offenses), and other 
relevant information. Regardless of any presentation by the Prosecution 
or Defense, the military commission shall consider any evidence admitted 
for consideration prior to findings regarding guilt. The Presiding 
Officer may limit or require the presentation of certain information 
consistent with 32 CFR part 9 and Military Order of November 13, 2001, 
``Detention, Treatment, and Trial of Certain Non-Citizens in the War 
Against Terrorism'.
    (c) Cases involving plea agreements. In accordance with 32 CFR 
9.6(a)(4), after determining the voluntary and informed nature of a plea 
agreement approved by the Appointing Authority, the military commission 
is bound to adjudge findings and a sentence pursuant to that plea 
agreement. Accordingly, the Presiding Officer may exercise the authority 
granted in of 32 CFR 9.6(e) to curtail or preclude the presentation of 
information and argument relative to the military commission's 
determination of an appropriate sentence.
    (d) Special duties. In cases involving plea agreements or 
recommendations for certain conditions of imprisonment or prospective 
sentence modification, the Prosecution and Defense shall provide 
whatever post-trial information or recommendation as is relevant to any 
subsequent decision regarding such condition or suspension, remission, 
commutation, or other modification recommendation associated with the 
sentence.



PART 17_ADMINISTRATIVE PROCEDURES--Table of Contents




Sec.
17.1 Purpose.
17.2 Authority.
17.3 Commission personnel.
17.4 Interlocutory questions.
17.5 Implied duties of the presiding officer.
17.6 Disclosures.

    Authority: 10 U.S.C. 113(d) and 140(b).

    Source: 68 FR 39397, July 1, 2003, unless otherwise noted.



Sec. 17.1  Purpose.

    This part promulgates policy, assigns responsibilities, and 
prescribes procedures for the conduct of trials by a military commission 
appointed pursuant to 32 CFR part 9 and Military Order of November 13, 
2001, ``Detention, Treatment, and Trial of Certain Non-Citizens in the 
War Against Terrorism,'' (3 CFR 2001 Comp., p. 918, 66 FR 57833).



Sec. 17.2  Authority.

    This part is issued pursuant to 32 CFR 9.7(a) and in accordance with 
Military Order of November 13, 2001, ``Detention, Treatment, and Trial 
of Certain Non-Citizens in the War Against Terrorism,'' and 10 U.S.C. 
113(d) and 140(b). The provisions of 32 CFR part 10 are applicable to 
this part.



Sec. 17.3  Commission personnel.

    (a) Appointment and removal of Commission members. (1) In accordance 
with

[[Page 56]]

32 CFR part 9, the Appointing Authority shall appoint at least three but 
no more than seven members and one or two alternate members. The 
Appointing Authority may remove members and alternate members for good 
cause. In the event a member (or alternate member) is removed for good 
cause, the Appointing Authority may replace the member, direct that an 
alternate member serve in the place of the original member, direct that 
proceedings simply continue without the member, or convene a new 
commission. In the absence of guidance from the Appointing Authority 
regarding replacement, the Presiding Officer shall select an alternate 
member to replace the member in question.
    (2) The Presiding Officer shall determine if it is necessary to 
conduct or permit questioning of members (including the Presiding 
Officer) on issues of whether there is good cause for their removal. The 
Presiding Officer may permit questioning in any manner he deems 
appropriate. Consistent with 32 CFR part 9, any such questioning shall 
be narrowly focused on issues pertaining to whether good cause may exist 
for the removal of any member.
    (3) From time to time, it may be appropriate for a Presiding Officer 
to forward to the Appointing Authority information and, if appropriate, 
a recommendation relevant to the question of whether a member (including 
the Presiding Officer) should be removed for good cause. While awaiting 
the Appointing Authority's decision on such matter, the Presiding 
Officer may elect either to hold proceedings in abeyance or to continue. 
The Presiding Officer may issue any appropriate instructions to the 
member whose continued service is in question. A military commission 
shall not engage in deliberations on findings or sentence prior to the 
Appointing Authority's decision in any case in which the Presiding 
Officer has recommended a member's removal.
    (b) Military commission security officer. The Appointing Authority 
may detail a Security Officer to advise a military commission on matters 
related to classified and protected information. In addition to any 
other duties assigned by the Appointing Authority, the Security Officer 
shall ensure that all classified or protected evidence and information 
is appropriately safeguarded at all times and that only personnel with 
the appropriate clearances and authorizations are present when 
classified or protected materials are presented before military 
commissions.
    (c) Other military commission personnel. The Appointing Authority 
may detail court reporters, interpreters, security personnel, bailiffs, 
clerks, and any other personnel to a military commission as deemed 
necessary. In the absence of a detailing by the Appointing Authority, 
the Chief Prosecutor shall be responsible to ensure the availability of 
necessary or appropriate personnel to facilitate the impartial and 
expeditious conduct of full and fair trials by military commission.



Sec. 17.4  Interlocutory questions.

    (a) Certification of interlocutory questions. The Presiding Officer 
shall generally adjudicate all motions and questions that arise during 
the course of a trial by military commission. In accordance with 32 CFR 
9.4(a)(5)(iv), however, the Presiding Officer shall certify all 
interlocutory questions, the disposition of which would effect a 
termination of proceedings with respect to a charge, for decision by the 
Appointing Authority. In addition, the Presiding Officer may certify 
other interlocutory questions to the Appointing Authority as the 
Presiding Officer deems appropriate.
    (b) Submission of interlocutory questions. The Presiding Officer 
shall determine what, if any, documentary or other materials should be 
forwarded to the Appointing Authority in conjunction with an 
interlocutory question.
    (c) Effect of interlocutory question certification on proceedings. 
While decision by the Appointing Authority is pending on any certified 
interlocutory question, the Presiding Officer may elect either to hold 
proceedings in abeyance or to continue.



Sec. 17.5  Implied duties of the presiding officer.

    The Presiding Officer shall ensure the execution of all ancillary 
functions necessary for the impartial and expeditious conduct of a full 
and fair trial by military commission in accordance

[[Page 57]]

with 32 CFR part 9. Such functions include, for example, scheduling the 
time and place of convening of a military commission, ensuring that an 
oath or affirmation is administered to witnesses and military commission 
personnel as appropriate, conducting appropriate in camera meetings to 
facilitate efficient trial proceedings, and providing necessary 
instructions to other commission members. The Presiding Officer shall 
rule on appropriate motions or, at his discretion consistent with 32 CFR 
part 9, may submit them to the commission for decision or to the 
Appointing Authority as a certified interlocutory question.



Sec. 17.6  Disclosures.

    (a) General. Unless directed otherwise by the Presiding Officer upon 
a showing of good cause or for some other reason, counsel for the 
Prosecution and the Defense shall provide to opposing counsel, at least 
one week prior to the scheduled convening of a military commission, 
copies of all information intended for presentation as evidence at 
trial, copies of all motions the party intends to raise before the 
military commission, and names and contact information of all witnesses 
a party intends to call. Motions shall also be provided to the Presiding 
Officer at the time they are provided to opposing counsel. Unless 
directed otherwise by the Presiding Officer, written responses to any 
motions will be provided to opposing counsel and the Presiding Officer 
no later than three days prior to the scheduled convening of a military 
commission.
    (b) Notifications by the prosecution. The Prosecution shall provide 
the Defense with access to evidence known to the Prosecution that tends 
to exculpate the Accused as soon as practicable, and in no instance 
later than one week prior to the scheduled convening of a military 
commission.
    (c) Notifications by the defense. The Defense shall give notice to 
the Prosecution of any intent to raise an affirmative defense to any 
charge at least one week prior to the scheduled convening of a military 
commission.
    (d) Evidence related to mental responsibility. If the Defense 
indicates an intent to raise a defense of lack of mental responsibility 
or introduce expert testimony regarding an Accused's mental condition, 
the prosecution may require that the Accused submit to a mental 
examination by a military psychologist or psychiatrist, and both parties 
shall have access to the results of that examination.



PART 18_APPOINTING AUTHORITY FOR MILITARY COMMISSIONS--Table of Contents




Sec.
18.1 Purpose
18.2 Applicability and scope.
18.3 Organization.
18.4 Responsibilities and functions.
18.5 Relationships.
18.6 Authorities.

    Authority: 10 U.S.C. 113 and 131(b)(8).

    Source: 69 FR 31292, June 3, 2004, unless otherwise noted.



Sec. 18.1  Purpose.

    Pursuant to the authority vested in the Secretary of Defense under 
the U.S. Constitution, Article II, Section 2, Clause 2, 10 U.S.C. 113 
and 131(b)(8) and Military Order of November 13, 2001, ``Detention, 
Treatment, and Trial of Certain Non-Citizens in the War Against 
Terrorism,'' (66 FR 57833 (November 16, 2001)) (``President's Military 
Order'') this part establishes the position and office of the Appointing 
Authority for Military Commissions, with the responsibilities, 
functions, relationships, and authorities as prescribed herein.



Sec. 18.2  Applicability and scope.

    This part applies to:
    (a) The Office of the Secretary of Defense (OSD), the Military 
Departments, the Chairman of the Joint Chiefs of Staff, the Combatant 
Commands, the Office of the Inspector General of the Department of 
Defense, the Defense Agencies, the DoD Field Activities, all other 
organizational entities in the Department of Defense (hereafter referred 
to collectively as ``the DoD Components'').
    (b) Any special trial counsel of the Department of Justice who may 
be made available by the Attorney General of the United States to serve 
as a prosecutor in trials before military commissions pursuant to 
section

[[Page 58]]

4(B)(2) of DoD Military Commission Order No. 1,\1\ ``Procedures for 
Trials by Military Commissions of Certain Non-United States Citizens in 
the War Against Terrorism,'' March 21, 2002.
---------------------------------------------------------------------------

    \1\ DoD Military Commission Orders and Instructions referenced in 
this Directive can be found at http://www.dtic.mil/whs/directives/
corres/mco.htm.
---------------------------------------------------------------------------

    (c) Any civilian attorney who seeks qualification as a member of a 
pool of qualified Civilian Defense Counsel authorized in section 
4(C)(3)(b) of DoD Military Commission Order No. 1; and to any attorney 
who has been qualified as a member of that pool.



Sec. 18.3  Organization.

    (a) The Appointing Authority for Military Commissions is established 
in the Office of the Secretary of Defense under the authority, 
direction, and control of the Secretary of Defense.
    (b) The Office of the Appointing Authority shall consist of the 
Appointing Authority, the Legal Advisor to the Appointing Authority, and 
such other subordinate officials and organizational elements as are 
established by the General Counsel of the Department of Defense within 
the resources assigned by the Secretary of Defense.



Sec. 18.4  Responsibilities and functions.

    (a) The Appointing Authority for Military Commissions is an officer 
of the United States appointed by the Secretary of Defense pursuant to 
the U.S. Constitution and 10 U.S.C. In this capacity, the Appointing 
Authority for Military Commissions shall exercise the duties prescribed 
in DoD Military Commission Order No. 1 and this part and shall:
    (1) Issue orders from time to time appointing one or more military 
commissions to try individuals subject to the President's Military Order 
and DoD Military Commission Order No. 1; and appoint any other personnel 
necessary to facilitate military commissions.
    (2) Appoint military commission members and alternate members, based 
on competence to perform the duties involved. Remove members and 
alternate members for good cause pursuant to Military Commission 
Instruction No. 8.
    (3) Designate a Presiding Officer from among the members of each 
military commission to preside over the proceedings of that military 
commission. The Presiding Officer shall be a military officer who is a 
judge advocate of any United States Armed Force.
    (4) Approve and refer charges prepared by that Prosecution against 
an individual or individuals subject to Military Order of November 13, 
2001.
    (5) Approve plea agreements with an Accused.
    (6) Decide interlocutory questions certified by the Presiding 
Officer.
    (7) Ensure military commission proceedings are open to the maximum 
extent practicable. Decide when military commission proceedings should 
be closed pursuant to Military Order of November 13, 2001 and DoD 
Military Commission Order No. 1.
    (8) Make decisions related to attendance at military commission 
proceedings by the public and accredited press and the public release of 
transcripts. Such matters, including policy and plans for media coverage 
shall be coordinated with the Assistant Secretary of Defense for Public 
Affairs (ASD(PA)) and, as appropriate, the Assistant Secretary of 
Defense for Special Operations/Low Intensity Conflict (ASD(SO/LIC)) 
under the Under Secretary of Defense for Policy (USD(P)).
    (9) Approve or disapprove requests from the Prosecution and Defense 
to communicate with news media representatives regarding cases and other 
matters related to military commissions. Such matters shall be 
coordinated with the ASD(PA).
    (10) Detail or employ personnel such as court reporters, 
interpreters, security personnel, bailiffs, and clerks to support 
military commissions, as necessary. When such details effect resources 
committed to operational missions, coordinate with the ASD (SO/LIC) 
under the USD(P) and the Heads of appropriate DoD Components.
    (11) Order that such investigative or other resources be made 
available to Defense Counsel and the Accused ad deemed necessary for a 
full and fair trial, including appointing interpreters.

[[Page 59]]

    (12) Promptly review military commission records of trial for 
administrative completeness and determine appropriate disposition, 
either transmitting the record of trial to the Review Panel or returning 
it to the military commission for any necessary supplementary 
proceedings.
    (13) Implement directions of officials with final decision-making 
authority for sentences.
    (14) Perform supervisory and performance evaluation duties pursuant 
to this part and DoD Military Commission Instruction No. 6.
    (15) Coordinate matters involving members of the Congress, including 
correspondence, with the Assistant Secretary of Defense for Legislative 
Affairs; and coordinate and exchange data and information with other OSD 
officials, the Heads of the DoD Components, and other Federal officials 
having collateral or related functions.
    (16) Establish, maintain, and preserve records that serve as 
evidence of the organization, functions, policies, decisions, 
procedures, operations, and other activities of the Office of the 
Appointing Authority for Military Commissions in accordance with Title 
44 U.S.C.
    (17) Perform such other functions as the Secretary of Defense may 
prescribe.
    (b) The General Counsel of the Department of Defense shall:
    (1) Review and approve such regulations, instructions, memoranda, 
and other DoD publications prepared by the Appointing Authority (see 
Sec. 18.6(c)) for the conduct of proceedings by military commissions 
established pursuant to Military Order of November 13, 2001 and DoD 
Military Commission Order No. 1.
    (2) Provide guidance and issue instructions necessary to facilitate 
the conduct of proceedings by military commissions established pursuant 
to Military Order of November 13, 2001 and DoD Military Commission Order 
No. 1, including but not limited to instructions pertaining to military 
commission-related offices, performance evaluations and reporting 
relationships.
    (c) The Chairman of the Joint Chiefs of Staff and the OSD Principal 
Staff Assistants shall exercise their designated authorities and 
responsibilities as established by law or DoD guidance to support the 
Appointing Authority for Military Commissions in the implementation of 
the responsibilities and functions specified herein.
    (d) The Secretaries of the Military Departments shall support the 
personnel requirements of the Appointing Authority as validated by the 
General Counsel of the Department of Defense and provide other requested 
assistance and support within their capabilities.



Sec. 18.5  Relationships.

    (a) In the performance of assigned functions and responsibilities, 
the Appointing Authority for Military Commission shall:
    (1) Report directly to the Secretary of Defense.
    (2) Use existing facilities and services of the Department of 
Defense and other Federal Agencies, whenever practicable, to avoid 
duplication and to achieve an appropriate level of efficiency and 
economy.
    (b) Other OSD officials and the Heads of the DoD Components shall 
coordinate with the Appointing Authority for Military Commissions on all 
matters related to the responsibilities and functions cited in Sec. 
18.4.
    (c) Nothing herein shall be interpreted to subsume or replace the 
responsibilities, functions, or authorities of the OSD Principal Staff 
Assistants, the Secretaries of the Military Departments, the Chairman of 
the Joint Chiefs of Staff, the Commanders of Combatant Commands, or the 
Heads of Defense Agencies or the Department of Defense Field Activities 
prescribed by law or Department of Defense guidance.



Sec. 18.6  Authorities.

    The Appointing Authority for Military Commissions is hereby 
delegated authority to:
    (a) Obtain reports and information, consistent with DoD Directive 
8910.1 as necessary to carry out assigned functions.
    (b) Communicate directly with the Heads of the DoD Components as 
necessary to carry out assigned functions, including the transmission of 
requests for advice and assistance. Communications to the Military 
Departments

[[Page 60]]

shall be transmitted through the Secretaries of the Military 
Departments, their designees, or as otherwise provided in law or 
directed by the Secretary of Defense in other Department of Defense 
issuances. Communications to the Commanders of the Combatant Commands, 
except in unusual circumstances, shall be transmitted through the 
Chairman of the Joint Chiefs of Staff.
    (c) Subject to the approval of the General Counsel of the Department 
of Defense, issue DoD Publications and one-time directive-type memoranda 
consistent with DoD 5025.1-M; Military Commission Instructions 
consistent with DoD Military Commission Instruction No. 1; and such 
other regulations as are necessary or appropriate for the conduct of 
proceedings by military commissions established pursuant to Military 
Order of November 13, 2001 and DoD Military Commission Order No. 1. 
Instructions to the Military Departments shall be issued through the 
Secretaries of the Military Departments. Instructions to the Combatant 
Commands, except in unusual circumstances, shall be communicated through 
the Chairman of the Joint Chiefs of Staff.
    (d) Communicate with other Government officials, representatives of 
the Legislative Branch, members of the public, and representatives of 
foreign governments, as applicable, in carrying out assigned functions.

                         PARTS 19	20 [RESERVED]

[[Page 61]]



            SUBCHAPTER C_DoD GRANT AND AGREEMENT REGULATIONS





PART 21_DoD GRANTS AND AGREEMENTS_GENERAL MATTERS--Table of Contents




                         Subpart A_Introduction

Sec.
21.100 What are the purposes of this part?

         Subpart B_Defense Grant and Agreement Regulatory System

21.200 What is the Defense Grant and Agreement Regulatory System 
          (DGARS)?
21.205 What types of instruments are covered by the DGARS?
21.210 What are the purposes of the DGARS?
21.215 Who is responsible for the DGARS?
21.220 What publications are in the DGARS?

            Subpart C_The DoD Grant and Agreement Regulations

21.300 What instruments are subject to the DoD Grant and Agreement 
          Regulations (DoDGARs)?
21.305 What is the purpose of the DoDGARs?
21.310 Who ensures DoD Component compliance with the DoDGARs?
21.315 May DoD Components issue supplemental policies and procedures to 
          implement the DoDGARs?
21.320 Are there areas in which DoD Components must establish policies 
          and procedures to implement the DoDGARs?
21.325 Do acquisition regulations also apply to DoD grants and 
          agreements?
21.330 How are the DoDGARs published and maintained?
21.335 Who can authorize deviations from the DoDGARs?
21.340 What are the procedures for requesting and documenting 
          deviations?

Subpart D_Authorities and Responsibilities for Making and Administering 
                            Assistance Awards

21.400 To what instruments does this subpart apply?
21.405 What is the purpose of this subpart?
21.410 Must a DoD Component have statutory authority to make an 
          assistance award?
21.415 Must the statutory authority specifically mention the use of 
          grants or other assistance instruments?
21.420 Under what types of statutory authorities do DoD Components award 
          assistance instruments?
21.425 How does a DoD Component's authority flow to awarding and 
          administering activities?
21.430 What are the responsibilities of the head of the awarding or 
          administering activity?
21.435 Must DoD Components formally select and appoint grants officers 
          and agreements officers?
21.440 What are the standards for selecting and appointing grants 
          officers and agreements officers?
21.445 What are the requirements for a grants officer's or agreements 
          officer's statement of appointment?
21.450 What are the requirements for a termination of a grants officer's 
          or agreements officer's appointment?
21.455 Who can sign, administer, or terminate assistance instruments?
21.460 What is the extent of grants officers' and agreements officers' 
          authority?
21.465 What are grants officers' and agreements officers' 
          responsibilities?

 Subpart E_Information Reporting on Awards Subject to 31 U.S.C. Chapter 
                                   61

21.500 What is the purpose of this subpart?
21.505 What is the Catalog of Federal Domestic Assistance (CFDA)?
21.510 Why does the DoD report information to the CFDA?
21.515 Who reports the information for the CFDA?
21.520 What are the purposes of the Defense Assistance Awards Data 
          System (DAADS)?
21.525 Who issues policy guidance for the DAADS?
21.530 Who operates the DAADS?
21.535 Do DoD Components have central points for collecting DAADS data?
21.540 What are the duties of the DoD Components' central points for the 
          DAADS?
21.545 Must DoD Components report every obligation to the DAADS?
21.550 Must DoD Components relate reported actions to listings in the 
          CFDA?
21.555 When and how must DoD Components report to the DAADS?
21.560 Must DoD Components assign numbers uniformly to awards?
21.565 Must DoD Components' electronic systems accept Data Universal 
          Numbering System (DUNS) numbers?

                          Subpart F_Definitions

21.605 Acquisition.
21.610 Agreements officer.
21.615 Assistance.

[[Page 62]]

21.620 Award.
21.625 Contract.
21.630 Contracting activity.
21.635 Contracting officer.
21.640 Cooperative agreement.
21.645 Deviation.
21.650 DoD Components.
21.655 Grant.
21.660 Grants officer.
21.665 Nonprocurement instrument.
21.670 Procurement contract.
21.675 Recipient.
21.680 Technology investment agreements.

Appendix A to Part 21--Instruments to Which DoDGARs Portions Apply

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

    Source: 68 FR 47153, Aug. 7, 2003, unless otherwise noted.



                         Subpart A_Introduction



Sec. 21.100  What are the purposes of this part?

    This part of the DoD Grant and Agreement Regulations:
    (a) Provides general information about the Defense Grant and 
Agreement Regulatory System (DGARS).
    (b) Sets forth general policies and procedures related to DoD 
Components' overall management of functions related to assistance and 
certain other nonprocurement instruments subject to the DGARS (see Sec. 
21.205(b)).



         Subpart B_Defense Grant and Agreement Regulatory System



Sec. 21.200  What is the Defense Grant and Agreement Regulatory System (DGARS)?

    The Defense Grant and Agreement Regulatory System (DGARS) is the 
system of regulatory policies and procedures for the award and 
administration of DoD Components' assistance and other nonprocurement 
awards. DoD Directive 3210.6\1\ established the DGARS.
---------------------------------------------------------------------------

    \1\ Electronic copies may be obtained at the Washington Headquarters 
Services Internet site http://www.dtic.mil/whs/directives. Paper copies 
may be obtained, at cost, from the National Technical Information 
Service, 5285 Port Royal Road, Springfield, VA 22161.
---------------------------------------------------------------------------



Sec. 21.205  What types of instruments are covered by the DGARS?

    The Defense Grant and Agreement Regulatory System (DGARS) applies to 
the following types of funding instruments awarded by DoD Components:
    (a) All grants, cooperative agreements, and technology investment 
agreements.
    (b) Other nonprocurement instruments, as needed to implement 
statutes, Executive orders, or other Federal Governmentwide rules that 
apply to those other nonprocurement instruments, as well as to grants 
and cooperative agreements.



Sec. 21.210  What are the purposes of the DGARS?

    The purposes of the DGARS are to provide uniform policies and 
procedures for DoD Components' awards, in order to meet DoD needs for:
    (a) Efficient program execution, effective program oversight, and 
proper stewardship of Federal funds.
    (b) Compliance with relevant statutes; Executive orders; and 
applicable guidance, such as Office of Management and Budget (OMB) 
circulars.
    (c) Collection from DoD Components, retention, and dissemination of 
management and fiscal data related to awards.



Sec. 21.215  Who is responsible for the DGARS?

    The Director of Defense Research and Engineering, or his or her 
designee, develops and implements DGARS policies and procedures. He or 
she does so by issuing and maintaining the DoD publications that 
comprise the DGARS.



Sec. 21.220  What publications are in the DGARS?

    A DoD publication (DoD 3210.6-R \2\) entitled ``The DoD Grant and 
Agreement Regulations'' is the principal element of the DGARS. The 
Director of Defense Research and Engineering also may publish DGARS 
policies and procedures in DoD instructions and other DoD publications, 
as appropriate.
---------------------------------------------------------------------------

    \2\ See footnote 1 to Sec. 21.200.

---------------------------------------------------------------------------

[[Page 63]]



            Subpart C_The DoD Grant and Agreement Regulations



Sec. 21.300  What instruments are subject to the DoD Grant and Agreement Regulations (DoDGARs)?

    (a) The types of instruments that are subject to the DoDGARs vary 
from one portion of the DoDGARs to another. The types of instruments 
include grants, cooperative agreements, and technology investment 
agreements. Some portions of the DoDGARs apply to other types of 
assistance or nonprocurement instruments. The term ``awards,'' as 
defined in subpart D of this part, is used in this part to refer 
collectively to all of the types of instruments that are subject to one 
or more portions of the DoDGARs.
    (b) Note that each portion of the DoDGARs identifies the types of 
instruments to which it applies. However, grants officers and agreements 
officers must exercise caution when determining the applicability of 
some Governmentwide rules that are included within the DoDGARs, because 
a term may be defined differently in a Governmentwide rule than it is 
defined elsewhere in the DoDGARs. One example is part 33 of the DoDGARs 
(32 CFR part 33), which contains administrative requirements for awards 
to State and local governments. That DoDGARs part is the DoD's 
codification of the Governmentwide rule implementing OMB Circular A-
102.\3\ Part 33 states that it applies to grants, but defines the term 
``grant'' to include cooperative agreements and other forms of financial 
assistance.
---------------------------------------------------------------------------

    \3\ Electronic copies may be obtained at the Internet site http://
www.whitehouse.gov/OMB. For paper copies, contact the Office of 
Management and Budget, EOP Publications, 725 17th St., NW., New 
Executive Office Building, Washington, DC 20503.
---------------------------------------------------------------------------

    (c) For convenience, the table in Appendix A to this part provides 
an overview of the applicability of the various portions of the DoDGARs.



Sec. 21.305  What is the purpose of the DoDGARs?

    The DoD Grant and Agreement Regulations provide uniform policies and 
procedures for the award and administration of DoD Components' awards. 
The DoDGARs are the primary DoD regulations for achieving the DGARS 
purposes described in Sec. 21.210.



Sec. 21.310  Who ensures DoD Component compliance with the DoDGARs?

    The Head of each DoD Component that makes or administers awards, or 
his or her designee, is responsible for ensuring compliance with the 
DoDGARs within that DoD Component.



Sec. 21.315  May DoD Components issue supplemental policies and procedures to implement the DoDGARs?

    Yes, Heads of DoD Components or their designees may issue 
regulations, procedures, or instructions to implement the DGARS or 
supplement the DoDGARs to satisfy needs that are specific to the DoD 
Component, as long as the regulations, procedures, or instructions do 
not impose additional costs or administrative burdens on recipients or 
potential recipients.



Sec. 21.320  Are there areas in which DoD Components must establish policies and procedures to implement the DoDGARs?

    Yes, Heads of DoD Components or their designees must establish 
policies and procedures in areas where uniform policies and procedures 
throughout the DoD Component are required, such as for:
    (a) Requesting class deviations from the DoDGARs (see Sec. Sec. 
21.335(b) and 21.340(a)) or exemptions from the provisions of 31 U.S.C. 
6301 through 6308, that govern the appropriate use of contracts, grants, 
and cooperative agreements (see 32 CFR 22.220).
    (b) Designating one or more Grant Appeal Authorities to resolve 
claims, disputes, and appeals (see 32 CFR 22.815).
    (c) Reporting data on assistance awards and programs, as required by 
31 U.S.C. chapter 61 (see subpart E of this part).
    (d) Prescribing requirements for use and disposition of real 
property acquired under awards, if the DoD Component makes any awards to 
institutions of higher education or to other nonprofit organizations 
under which real property is acquired in whole or in

[[Page 64]]

part with Federal funds (see 32 CFR 32.32).



Sec. 21.325  Do acquisition regulations also apply to DoD grants and agreements?

    Unless the DoDGARs specify that they apply, policies and procedures 
in the following acquisition regulations that apply to procurement 
contracts do not apply to grants, cooperative agreements, technology 
investment agreements, or to other assistance or nonprocurement awards:
    (a) The Federal Acquisition Regulation (FAR)(48 CFR parts 1-53).
    (b) The Defense Federal Acquisition Regulation Supplement (DFARS)(48 
CFR parts 201-270).
    (c) DoD Component supplements to the FAR and DFARS.



Sec. 21.330  How are the DoDGARs published and maintained?

    (a) The DoD publishes the DoDGARs in the Code of Federal Regulations 
(CFR) and in a separate internal DoD document (DoD 3210.6-R).
    (1) The location of the DoDGARs in the CFR currently is in 
transition. They are moving from Chapter I, Subchapter C, Title 32, to a 
new location in Chapter XI, Title 2 of the CFR. During the transition, 
there will be some parts of the DoDGARs in each of the two titles.
    (2) The DoD document is divided into parts, subparts, and sections, 
to parallel the CFR publication. Cross references within the DoD 
document are stated as CFR citations (e.g., a reference to section 
21.215 in part 21 would be to 32 CFR 21.215), which also is how they are 
stated in the CFR publication of the DoDGARs.
    (b) The DoD publishes updates to the DoDGARs in the Federal 
Register. When finalized, the DoD also posts the updates to the internal 
DoD document on the World Wide Web at http://www.dtic.mil/whs/
directives.
    (c) A standing working group recommends revisions to the DoDGARs to 
the Director of Defense Research and Engineering (DDR&E). The DDR&E, 
Director of Defense Procurement, and each Military Department must be 
represented on the working group. Other DoD Components that make or 
administer awards may also nominate representatives. The working group 
meets when necessary.

[68 FR 47153, Aug. 7, 2003, as amended at 72 FR 34986, June 26, 2007]



Sec. 21.335  Who can authorize deviations from the DoDGARs?

    (a) The Head of the DoD Component or his or her designee may 
authorize individual deviations from the DoDGARs, which are deviations 
that affect only one award, if the deviations are not prohibited by 
statute, executive order or regulation.
    (b) The Director of Defense Research and Engineering (DDR&E) or his 
or her designee must approve in advance any class deviation that affects 
more than one award. Note that OMB concurrence also is required for 
class deviations from two parts of the DoDGARs, 32 CFR parts 32 and 33, 
in accordance with 32 CFR 32.4 and 33.6, respectively.



Sec. 21.340  What are the procedures for requesting and documenting deviations?

    (a) DoD Components must submit copies of justifications and agency 
approvals for individual deviations and written requests for class 
deviations to: Deputy Director of Defense Research and Engineering, 
ATTN: Basic Research, 3080 Defense Pentagon, Washington, DC 20301-3080.
    (b) Grants officers and agreements officers must maintain copies of 
requests and approvals for individual and class deviations in award 
files.



Subpart D_Authorities and Responsibilities for Making and Administering 
                            Assistance Awards



Sec. 21.400  To what instruments does this subpart apply?

    This subpart applies to grants, cooperative agreements, and 
technology investment agreements, which are legal instruments used to 
reflect assistance relationships between the United States Government 
and recipients.

[[Page 65]]



Sec. 21.405  What is the purpose of this subpart?

    This subpart describes the sources and flow of authority to make or 
administer assistance awards, and assigns the broad responsibilities 
associated with DoD Components' use of those instruments.



Sec. 21.410  Must a DoD Component have statutory authority to make an assistance award?

    Yes, the use of an assistance instrument to carry out a program 
requires authorizing legislation. That is unlike the use of a 
procurement contract, for which Federal agencies have inherent, 
Constitutional authority.



Sec. 21.415  Must the statutory authority specifically mention the use of grants or other assistance instruments?

    No, the statutory authority described in Sec. 21.410 need not 
specifically say that the purpose of the program is assistance or 
mention the use of any type of assistance instrument. However, the 
intent of the statute must support a judgment that the use of an 
assistance instrument is appropriate. For example, a DoD Component may 
judge that the principal purpose of a program for which it has 
authorizing legislation is assistance, rather than acquisition. The DoD 
Component would properly use an assistance instrument to carry out that 
program, in accordance with 31 U.S.C. chapter 63.



Sec. 21.420  Under what types of statutory authorities do DoD Components award assistance instruments?

    DoD Components may use assistance instruments under a number of 
statutory authorities that fall into three categories:
    (a) Authorities that statutes provide to the Secretary of Defense. 
These authorities generally are delegated by the Secretary of Defense to 
Heads of DoD Components, usually through DoD directives, instructions, 
or policy memoranda that are not part of the Defense Grant and Agreement 
Regulatory System. Examples of statutory authorities in this category 
are:
    (1) Authority under 10 U.S.C. 2391 to award grants or cooperative 
agreements to help State and local governments alleviate serious 
economic impacts of defense program changes (e.g., base openings and 
closings, contract changes, and personnel reductions and increases).
    (2) Authority under 10 U.S.C. 2413 to enter into cooperative 
agreements with entities that furnish procurement technical assistance 
to businesses.
    (b) Authorities that statutes may provide directly to Heads of DoD 
Components. When a statute authorizes the Head of a DoD Component to use 
a funding instrument to carry out a program with a principal purpose of 
assistance, use of that authority requires no delegation by the 
Secretary of Defense. For example, 10 U.S.C. 2358 authorizes the 
Secretaries of the Military Departments, in addition to the Secretary of 
Defense, to perform research and development projects through grants and 
cooperative agreements. Similarly, 10 U.S.C. 2371 provides authority for 
the Secretaries of the Military Departments and Secretary of Defense to 
carry out basic, applied, or advanced research projects using assistance 
instruments other than grants and cooperative agreements. A Military 
Department's use of the authority of 10 U.S.C. 2358 or 10 U.S.C. 2371 
therefore requires no delegation by the Secretary of Defense.
    (c) Authorities that arise indirectly as the result of statute. For 
example, authority to use an assistance instrument may result from:
    (1) A federal statute authorizing a program that is consistent with 
an assistance relationship (i.e., the support or stimulation of a public 
purpose, rather than the acquisition of a good or service for the direct 
benefit of the Department of Defense). In accordance with 31 U.S.C. 
chapter 63, such a program would appropriately be carried out through 
the use of grants or cooperative agreements. Depending upon the nature 
of the program (e.g., research) and whether the program statute includes 
authority for any specific types of instruments, there also may be 
authority to use other assistance instruments.
    (2) Exemptions requested by the Department of Defense and granted by 
the Office of Management and Budget

[[Page 66]]

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



Sec. 21.425  How does a DoD Component's authority flow to awarding and administering activities?

    The Head of a DoD Component, or his or her designee, may delegate to 
the heads of contracting activities (HCAs) within the Component, that 
Component's authority to make and administer awards, to appoint grants 
officers and agreements officers (see Sec. Sec. 21.435 through 21.450), 
and to broadly manage the DoD Component's functions related to 
assistance instruments. The HCA is the same official (or officials) 
designated as the head of the contracting activity for procurement 
contracts, as defined at 48 CFR 2.101. The intent is that overall 
management responsibilities for a DoD Component's functions related to 
nonprocurement instruments be assigned only to officials that have 
similar responsibilities for procurement contracts.



Sec. 21.430  What are the responsibilities of the head of the awarding or administering activity?

    When designated by the Head of the DoD Component or his or her 
designee (see 32 CFR 21.425), the head of the awarding or administering 
activity (i.e., the HCA) is responsible for the awards made by or 
assigned to that activity. He or she must supervise and establish 
internal policies and procedures for that activity's awards.



Sec. 21.435  Must DoD Components formally select and appoint grants officers and agreements officers?

    Yes, each DoD Component that awards grants or enters into 
cooperative agreements must have a formal process (see Sec. 21.425) for 
selecting and appointing grants officers and for terminating their 
appointments. Similarly, each DoD Component that awards or administers 
technology investment agreements must have a process for selecting and 
appointing agreements officers and for terminating their appointments.



Sec. 21.440  What are the standards for selecting and appointing grants officers and agreements officers?

    In selecting grants officers and agreements officers, DoD Components 
must use the following minimum standards:
    (a) In selecting a grants officer, the appointing official must 
judge whether the candidate has the necessary experience, training, 
education, business acumen, judgment, and knowledge of assistance 
instruments and contracts to function effectively as a grants officer. 
The appointing official also must take those attributes of the candidate 
into account when deciding the complexity and dollar value of the grants 
and cooperative agreements to be assigned.
    (b) In selecting an agreements officer, the appointing official must 
consider all of the same factors as in paragraph (a) of this section. In 
addition, the appointing official must consider the candidate's ability 
to function in the less structured environment of technology investment 
agreements, where the rules provide more latitude and the individual 
must have a greater capacity for exercising judgment. Agreements 
officers therefore should be individuals who have demonstrated expertise 
in executing complex assistance and acquisition instruments.



Sec. 21.445  What are the requirements for a grants officer's or agreements officer's statement of appointment?

    A statement of a grants officer's or agreements officer's 
appointment:
    (a) Must be in writing.
    (b) Must clearly state the limits of the individual's authority, 
other than limits contained in applicable laws or regulations. 
Information on those limits of a grants officer's or agreements 
officer's authority must be readily available to the public and agency 
personnel.
    (c) May, if the individual is a contracting officer, be incorporated 
into his or her statement of appointment as a contracting officer (i.e., 
there does not need to be a separate written statement of appointment 
for assistance instruments).

[[Page 67]]



Sec. 21.450  What are the requirements for a termination of a grants officer's or agreements officer's appointment?

    A termination of a grants officer's or agreements officer's 
authority:
    (a) Must be in writing, unless the written statement of appointment 
provides for automatic termination.
    (b) May not be retroactive.
    (c) May be integrated into a written termination of the individual's 
appointment as a contracting officer, as appropriate.



Sec. 21.455  Who can sign, administer, or terminate assistance instruments?

    Only grants officers are authorized to sign, administer, or 
terminate grants or cooperative agreements (other than technology 
investment agreements) on behalf of the Department of Defense. 
Similarly, only agreements officers may sign, administer, or terminate 
technology investment agreements.



Sec. 21.460  What is the extent of grants officers' and agreements officers' authority?

    Grants officers and agreements officers may bind the Government only 
to the extent of the authority delegated to them in their written 
statements of appointment (see Sec. 21.445).



Sec. 21.465  What are grants officers' and agreements officers' responsibilities?

    Grants officers and agreements officers should be allowed wide 
latitude to exercise judgment in performing their responsibilities, 
which are to ensure that:
    (a) Individual awards are used effectively in the execution of DoD 
programs, and are made and administered in accordance with applicable 
laws, Executive orders, regulations, and DoD policies.
    (b) Sufficient funds are available for obligation.
    (c) Recipients of awards receive impartial, fair, and equitable 
treatment.



 Subpart E_Information Reporting on Awards Subject to 31 U.S.C. Chapter 
                                   61



Sec. 21.500  What is the purpose of this subpart?

    This subpart prescribes policies and procedures for compiling and 
reporting data related to DoD awards and programs that are subject to 
information reporting requirements of 31 U.S.C. chapter 61. That chapter 
of the U.S. Code requires the Office of Management and Budget to 
maintain a Governmentwide information system to collect data on Federal 
agencies' domestic assistance awards and programs.



Sec. 21.505  What is the Catalog of Federal Domestic Assistance (CFDA)?

    The Catalog of Federal Domestic Assistance (CFDA) is a 
Governmentwide compilation of information about domestic assistance 
programs. It covers all domestic assistance programs and activities, 
regardless of the number of awards made under the program, the total 
dollar value of assistance provided, or the duration. In addition to 
programs using grants and agreements, covered programs include those 
providing assistance in other forms, such as payments in lieu of taxes 
or indirect assistance resulting from Federal operations.



Sec. 21.510  Why does the DoD report information to the CFDA?

    The Federal Program Information Act (31 U.S.C. 6101 through 6106), 
as implemented through OMB Circular A-89,\4\ requires the Department of 
Defense and other Federal agencies to provide certain information about 
their domestic assistance programs to the OMB and the General Services 
Administration (GSA). The GSA makes this information available to the 
public by publishing it in the Catalog of Federal Domestic Assistance 
(CFDA) and maintaining the Federal Assistance Programs Retrieval System, 
a computerized data base of the information.
---------------------------------------------------------------------------

    \4\ See footnote 3 to Sec. 21.300(b).

---------------------------------------------------------------------------

[[Page 68]]



Sec. 21.515  Who reports the information for the CFDA?

    (a) Each DoD Component that provides domestic financial assistance 
must:
    (1) Report to the Director of Information, Operations and Reports, 
Washington Headquarters Services (DIOR, WHS) all new programs and 
changes as they occur or as the DoD Component submits its annual updates 
to existing CFDA information.
    (2) Identify to the DIOR, WHS a point-of-contact who will be 
responsible for reporting the program information and for responding to 
inquiries related to it.
    (b) The DIOR, WHS is the Department of Defense's single office for 
collecting, compiling and reporting such program information to the OMB 
and GSA.



Sec. 21.520  What are the purposes of the Defense Assistance Awards Data System (DAADS)?

    Data from the Defense Assistance Awards Data System (DAADS) are used 
to provide:
    (a) DoD inputs to meet statutory requirements for Federal 
Governmentwide reporting of data related to obligations of funds by 
assistance instrument.
    (b) A basis for meeting Governmentwide requirements to report to the 
Federal Assistance Awards Data System (FAADS) maintained by the 
Department of Commerce and for preparing other recurring and special 
reports to the President, the Congress, the General Accounting Office, 
and the public.
    (c) Information to support policy formulation and implementation and 
to meet management oversight requirements related to the use of awards.



Sec. 21.525  Who issues policy guidance for the DAADS?

    The Deputy Director, Defense Research and Engineering (DDDR&E), or 
his or her designee, issues necessary policy guidance for the Defense 
Assistance Awards Data System.



Sec. 21.530  Who operates the DAADS?

    The Director of Information Operations and Reports, Washington 
Headquarters Services (DIOR, WHS), consistent with guidance issued by 
the DDDR&E:
    (a) Processes DAADS information on a quarterly basis and prepares 
recurring and special reports using such information.
    (b) Prepares, updates, and disseminates instructions for reporting 
information to the DAADS. The instructions are to specify procedures, 
formats, and editing processes to be used by DoD Components, including 
record layout, submission deadlines, media, methods of submission, and 
error correction schedules.



Sec. 21.535  Do DoD Components have central points for collecting DAADS data?

    Each DoD Component must have a central point for collecting DAADS 
information from contracting activities within that DoD Component. The 
central points are as follows:
    (a) For the Army: As directed by the U.S. Army Contracting Support 
Agency.
    (b) For the Navy: As directed by the Office of Naval Research.
    (c) For the Air Force: As directed by the Office of the Secretary of 
the Air Force, Acquisition Contracting Policy and Implementation 
Division (SAF/AQCP).
    (d) For the Office of the Secretary of Defense, Defense Agencies, 
and DoD Field Activities: Each Defense Agency must identify a central 
point for collecting and reporting DAADS information to the DIOR, WHS, 
at the address given in Sec. 21.555(a). DIOR, WHS serves as the central 
point for offices and activities within the Office of the Secretary of 
Defense and for DoD Field Activities.



Sec. 21.540  What are the duties of the DoD Components' central points for the DAADS?

    The office that serves, in accordance with Sec. 21.535, as the 
central point for collecting DAADS information from contracting 
activities within each DoD Component must:
    (a) Establish internal procedures to ensure reporting by contracting 
activities that make awards subject to 31 U.S.C. chapter 61.

[[Page 69]]

    (b) Collect information required by DD Form 2566,\5\ ``DoD 
Assistance Award Action Report,'' from those contracting activities, and 
report it to DIOR, WHS, in accordance with Sec. Sec. 21.545 through 
21.555.
---------------------------------------------------------------------------

    \5\ Department of Defense forms are available at Internet site 
http://www.dior.whs.mil/ICDHOME/FORMTAB.HTM.
---------------------------------------------------------------------------

    (c) Submit to the DIOR, WHS, any recommended changes to the DAADS.



Sec. 21.545  Must DoD Components report every obligation to the DAADS?

    Yes, DoD Components' central points must collect and report the data 
required by the DD Form 2566 for each individual action that involves 
the obligation or deobligation of Federal funds for an award that is 
subject to 31 U.S.C. chapter 61.



Sec. 21.550  Must DoD Components relate reported actions to listings in the CFDA?

    Yes, DoD Components' central points must report each action as an 
obligation or deobligation under a specific programmatic listing in the 
Catalog of Federal Domestic Assistance (CFDA, see Sec. 21.505). The 
programmatic listing to be shown is the one that provided the funds 
being obligated or deobligated. For example, if a grants officer or 
agreements officer in one DoD Component obligates appropriations of a 
second DoD Component's programmatic listing, the grants officer or 
agreements officer must show the CFDA programmatic listing of the second 
DoD Component on the DD Form 2566.



Sec. 21.555  When and how must DoD Components report to the DAADS?

    DoD Components' central points must report:
    (a) On a quarterly basis to DIOR, WHS. For the first three quarters 
of the Federal fiscal year, the data are due by close-of-business (COB) 
on the 15th day after the end of the quarter (i.e., first-quarter data 
are due by COB on January 15th, second-quarter data by COB April 15th, 
and third-quarter data by COB July 15th). Fourth-quarter data are due by 
COB October 25th, the 25th day after the end of the quarter. If any due 
date falls on a weekend or holiday, the data are due on the next regular 
workday. The mailing address for DIOR, WHS is 1215 Jefferson Davis 
Highway, Suite 1204, Arlington, VA 22202-4302.
    (b) On a floppy diskette or by other means permitted either by the 
instructions described in Sec. 21.530(b) or by agreement with the DIOR, 
WHS. The data must be reported in the format specified in the 
instructions.



Sec. 21.560  Must DoD Components assign numbers uniformly to awards?

    Yes, DoD Components must assign identifying numbers to all awards 
subject to this subpart, including grants, cooperative agreements, and 
technology investment agreements. The uniform numbering system parallels 
the procurement instrument identification (PII) numbering system 
specified in 48 CFR 204.70 (in the ``Defense Federal Acquisition 
Regulation Supplement''), as follows:
    (a) The first six alphanumeric characters of the assigned number 
must be identical to those specified by 48 CFR 204.7003(a)(1) to 
identify the DoD Component and contracting activity.
    (b) The seventh and eighth positions must be the last two digits of 
the fiscal year in which the number is assigned to the grant, 
cooperative agreement, or other nonprocurement instrument.
    (c) The 9th position must be a number:
    (1) ``1'' for grants.
    (2) ``2'' for cooperative agreements, including technology 
investment agreements that are cooperative agreements (see Appendix B to 
32 CFR part 37).
    (3) ``3'' for other nonprocurement instruments, including technology 
investment agreements that are not cooperative agreements.
    (d) The 10th through 13th positions must be the serial number of the 
instrument. DoD Components and contracting activities need not follow 
any specific pattern in assigning these numbers and may create multiple 
series of letters and numbers to meet internal needs for distinguishing 
between various sets of awards.

[[Page 70]]



Sec. 21.565  Must DoD Components' electronic systems accept Data Universal Numbering System (DUNS) numbers?

    The DoD Components must comply with paragraph 5.e of the Office of 
Management and Budget (OMB) policy directive entitled, ``Requirement for 
a DUNS number in Applications for Federal Grants and Cooperative 
Agreements.'' \6\ Paragraph 5.e requires electronic systems that handle 
information about grants and cooperative agreements (which, for the DoD, 
include Technology Investment Agreements) to accept DUNS numbers. Each 
DoD Component that awards or administers grants or cooperative 
agreements must ensure that DUNS numbers are accepted by each such 
system for which the DoD Component controls the system specifications. 
If the specifications of such a system are subject to another 
organization's control and the system can not accept DUNS numbers, the 
DoD Component must alert that organization to the OMB policy directive's 
requirement for use of DUNS numbers with a copy to: Director for Basic 
Sciences, ODDR&E, 3040 Defense Pentagon, Washington, DC 20301-3040.
---------------------------------------------------------------------------

    \6\ This OMB policy directive is available at the Internet site 
http://www.whitehouse.gov/omb/grants/grants--docs.html.

[72 FR 34986, June 26, 2007]



                          Subpart F_Definitions



Sec. 21.605  Acquisition.

    The acquiring (by purchase, lease, or barter) of property or 
services for the direct benefit or use of the United States Government 
(see more detailed definition at 48 CFR 2.101). In accordance with 31 
U.S.C. 6303, procurement contracts are the appropriate legal instruments 
for acquiring such property or services.



Sec. 21.610  Agreements officer.

    An official with the authority to enter into, administer, and/or 
terminate technology investment agreements.



Sec. 21.615  Assistance.

    The transfer of a thing of value to a recipient to carry out a 
public purpose of support or stimulation authorized by a law of the 
United States (see 31 U.S.C. 6101(3)). Grants, cooperative agreements, 
and technology investment agreements are examples of legal instruments 
used to provide assistance.



Sec. 21.620  Award.

    A grant, cooperative agreement, technology investment agreement, or 
other nonprocurement instrument subject to one or more parts of the DoD 
Grant and Agreement Regulations (see appendix A to this part).



Sec. 21.625  Contract.

    See the definition for procurement contract in this subpart.



Sec. 21.630  Contracting activity.

    An activity to which the Head of a DoD Component has delegated broad 
authority regarding acquisition functions, pursuant to 48 CFR 1.601.



Sec. 21.635  Contracting officer.

    A person with the authority to enter into, administer, and/or 
terminate contracts and make related determinations and findings. A more 
detailed definition of the term appears at 48 CFR 2.101.



Sec. 21.640  Cooperative agreement.

    A legal instrument which, consistent with 31 U.S.C. 6305, is used to 
enter into the same kind of relationship as a grant (see definition 
``grant''), except that substantial involvement is expected between the 
Department of Defense and the recipient when carrying out the activity 
contemplated by the cooperative agreement. The term does not include 
``cooperative research and development agreements'' as defined in 15 
U.S.C. 3710a.



Sec. 21.645  Deviation.

    The issuance or use of a policy or procedure that is inconsistent 
with the DoDGARs.



Sec. 21.650  DoD Components.

    The Office of the Secretary of Defense, the Military Departments, 
the

[[Page 71]]

Defense Agencies, and DoD Field Activities.



Sec. 21.655  Grant.

    A legal instrument which, consistent with 31 U.S.C. 6304, is used to 
enter into a relationship:
    (a) Of which the principal purpose is to transfer a thing of value 
to the recipient to carry out a public purpose of support or stimulation 
authorized by a law of the United States, rather than to acquire 
property or services for the Department of Defense's direct benefit or 
use.
    (b) In which substantial involvement is not expected between the 
Department of Defense and the recipient when carrying out the activity 
contemplated by the grant.



Sec. 21.660  Grants officer.

    An official with the authority to enter into, administer, and/or 
terminate grants or cooperative agreements.



Sec. 21.665  Nonprocurement instrument.

    A legal instrument other than a procurement contract. Examples 
include instruments of financial assistance, such as grants or 
cooperative agreements, and those of technical assistance, which provide 
services in lieu of money.



Sec. 21.670  Procurement contract.

    A legal instrument which, consistent with 31 U.S.C. 6303, reflects a 
relationship between the Federal Government and a State, a local 
government, or other recipient when the principal purpose of the 
instrument is to acquire property or services for the direct benefit or 
use of the Federal Government. See the more detailed definition for 
contract at 48 CFR 2.101.



Sec. 21.675  Recipient.

    An organization or other entity receiving an award from a DoD 
Component.



Sec. 21.680  Technology investment agreements.

    A special class of assistance instruments used to increase 
involvement of commercial firms in defense research programs and for 
other purposes related to integrating the commercial and defense sectors 
of the nation's technology and industrial base. Technology investment 
agreements include one kind of cooperative agreement with provisions 
tailored for involving commercial firms, as well as one kind of other 
assistance transaction. Technology investment agreements are described 
more fully in 32 CFR part 37.

[[Page 72]]



 Sec. Appendix A to Part 21--Instruments to Which DoDGARs Portions Apply

[GRAPHIC] [TIFF OMITTED] TR26JN07.007

[[Page 73]]


[72 FR 34986, June 26, 2007]



PART 22_DoD GRANTS AND AGREEMENTS_AWARD AND ADMINISTRATION--Table of Contents




                            Subpart A_General

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

             Subpart B_Selecting the Appropriate Instrument

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

                          Subpart C_Competition

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

     Subpart D_Recipient Qualification Matters_General Policies and 
                               Procedures

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

                    Subpart E_National Policy Matters

22.505 Purpose.
22.510 Certifications, representations, and assurances.
22.515 Provisions of annual appropriations acts.
22.520 Campus access for military recruiting and Reserve Officer 
          Training Corps (ROTC).
22.525 Paperwork Reduction Act.
22.530 Metric system of measurement.

                             Subpart F_Award

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

                     Subpart G_Field Administration

22.700 Purpose.
22.705 Policy.
22.710 Assignment of grants administration offices.
22.715 Grants administration office functions.

                   Subpart H_Post-Award Administration

22.800 Purpose and relation to other parts.
22.805 Post-award requirements in other parts.
22.810 Payments.
22.815 Claims, disputes, and appeals.
22.820 Debt collection.
22.825 Closeout audits.

Appendix A to Part 22--Proposal Provision for Required Certification.
Appendix B to Part 22--Suggested Award Provisions for National Policy 
          Requirements That Often Apply.
Appendix C to Part 22--Administrative Requirements and Issues To Be 
          Addressed in Award Terms and Conditions.

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

    Source: 63 FR 12164, Mar. 12, 1998, unless otherwise noted.



                            Subpart A_General



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

    (a) This part outlines grants officers' and DoD Components' 
responsibilities related to the award and administration of grants and 
cooperative agreements.
    (b) In doing so, it also supplements other parts of the DoD Grant 
and Agreement Regulations (DoDGARs) that are either Governmentwide rules 
or DoD implementation of Governmentwide guidance in Office of Management 
and Budget (OMB) Circulars. Those other parts of the DoDGARs, which are 
referenced as appropriate in this part, are:
    (1) The DoD implementation, in 2 CFR part 1125, of OMB guidance on 
nonprocurement debarment and suspension.
    (2) The Governmentwide rule on drug-free workplace requirements, in 
32 CFR part 26.
    (3) The Governmentwide rule on lobbying restrictions, in 32 CFR part 
28.
    (4) Administrative requirements for grants and agreements awarded to 
specific types of recipients:

[[Page 74]]

    (i) For State and local governmental organizations, in the 
Governmentwide rule at 32 CFR part 33.
    (ii) For institutions of higher education and other nonprofit 
organizations, at 32 CFR part 32.
    (iii) For for-profit organizations, at 32 CFR part 34.
    (c) The organization of this part parallels the award and 
administration process, from pre-award through post-award matters. It 
therefore is organized in the same manner as the parts of the DoDGARs 
(32 CFR parts 32, 33, and 34) that prescribe administrative requirements 
for specific types of recipients.

[63 FR 12164, Mar. 12, 1998, as amended at 70 FR 49464, Aug. 23, 2005; 
72 FR 34988, June 26, 2007]



Sec. 22.105  Definitions.

    Other than the terms defined in this section, terms used in this 
part are defined in 32 CFR part 21, subpart F.
    Administrative offset. An action whereby money payable by the United 
States Government to, or held by the Government for, a recipient is 
withheld to satisfy a delinquent debt the recipient owes the Government.
    Advanced research. Advanced technology development that creates new 
technology or demonstrates the viability of applying existing technology 
to new products and processes in a general way. Advanced research is 
most closely analogous to precompetitive technology development in the 
commercial sector (i.e., early phases of research and development on 
which commercial competitors are willing to collaborate, because the 
work is not so coupled to specific products and processes that the 
results of the work must be proprietary). It does not include 
development of military systems and hardware where specific requirements 
have been defined. It is typically funded in Advanced Technology 
Development (Budget Activity 3 and Research Category 6.3A) programs 
within Research, Development, Test and Evaluation (RDT&E).
    Applied research. Efforts that attempt to determine and exploit the 
potential of scientific discoveries or improvements in technology such 
as new materials, devices, methods and processes. It typically is funded 
in Applied Research (Budget Activity 2 and Research Category 6.2) 
programs within Research, Development, Test and Evaluation (RDT&E). 
Applied research normally follows basic research but may not be fully 
distinguishable from the related basic research. The term does not 
include efforts whose principal aim is the design, development, or 
testing of specific products, systems or processes to be considered for 
sale or acquisition; these efforts are within the definition of 
``development.''
    Basic research. Efforts directed toward increasing knowledge and 
understanding in science and engineering, rather than the practical 
application of that knowledge and understanding. It typically is funded 
within Basic Research (Budget Activity 1 and Research Category 6.1) 
programs within Research, Development, Test and Evaluation (RDT&E). For 
the purposes of this part, basic research includes:
    (1) Research-related, science and engineering education, including 
graduate fellowships and research traineeships.
    (2) Research instrumentation and other activities designed to 
enhance the infrastructure for science and engineering research.
    Claim. A written demand or written assertion by one of the parties 
to a grant or cooperative agreement seeking as a matter of right, the 
payment of money in a sum certain, the adjustment or interpretation of 
award terms, or other relief arising under or relating to a grant or 
cooperative agreement. A routine request for payment that is not in 
dispute when submitted is not a claim. The submission may be converted 
to a claim by written notice to the grants officer if it is disputed 
either as to liability or amount, or is not acted upon in a reasonable 
time.
    Debt. Any amount of money or any property owed to a Federal Agency 
by any person, organization, or entity except another United States 
Federal Agency. Debts include any amounts due from insured or guaranteed 
loans, fees, leases, rents, royalties, services, sales of real or 
personal property, or overpayments, penalties, damages, interest, fines 
and forfeitures, and all other claims and similar sources.

[[Page 75]]

Amounts due a nonappropriated fund instrumentality are not debts owed 
the United States, for the purposes of this subchapter.
    Delinquent debt. A debt:
    (1) That the debtor fails to pay by the date specified in the 
initial written notice from the agency owed the debt, normally within 30 
calendar days, unless the debtor makes satisfactory payment arrangements 
with the agency by that date; and
    (2) With respect to which the debtor has elected not to exercise any 
available appeals or has exhausted all agency appeal processes.
    Development. The systematic use of scientific and technical 
knowledge in the design, development, testing, or evaluation of 
potential new products, processes, or services to meet specific 
performance requirements or objectives. It includes the functions of 
design engineering, prototyping, and engineering testing.
    Electronic commerce. The conduct of business through the use of 
automation and electronic media, in lieu of paper transactions, direct 
personal contact, telephone, or other means. For grants and cooperative 
agreements, electronic commerce can include the use of electronic data 
interchange, electronic mail, electronic bulletin board systems, and 
electronic funds transfer for: program announcements or solicitations; 
applications or proposals; award documents; recipients' requests for 
payment; payment authorizations; and payments.
    Electronic data interchange. The exchange of standardized 
information communicated electronically between business partners, 
typically between computers. It is DoD policy that DoD Component EDI 
applications conform to the American National Standards Institute 
(ANSI), Accredited Standards Committee (ASC) X-12 standard.\1\
---------------------------------------------------------------------------

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

    Electronic funds transfer. A system that provides the authority to 
debit or credit accounts in financial institutions by electronic means 
rather than source documents (e.g., paper checks). Processing typically 
occurs through the Federal Reserve System and/or the Automated Clearing 
House (ACH) computer network. It is DoD policy that DoD Component EFT 
transmissions conform to the American National Standards Institute 
(ANSI), Accredited Standards Committee (ASC) X-12 standard.
    Historically Black colleges and universities. Institutions of higher 
education determined by the Secretary of Education to meet the 
requirements of 34 CFR 608.2. Each DoD Component's contracting 
activities and grants officers may obtain a list of historically Black 
colleges and universities from that DoD Component's Small and 
Disadvantaged Business Utilization office.
    Institution of higher education. An educational institution that 
meets the criteria in section 1201(a) of the Higher Education Act of 
1965 (20 U.S.C. 1141(a)). Note, however, that institution of higher 
education has a different meaning in Sec. 22.520, as given at Sec. 
22.520(b)(2).
    Minority institutions. Institutions of higher education that meet 
the criteria for minority institutions specified in 10 U.S.C. 2323. Each 
DoD Component's contracting activities and grants officers may obtain 
copies of a current list of institutions that qualify as minority 
institutions under 10 U.S.C. 2323 from that DoD Component's Small and 
Disadvantaged Business Utilization office (the list of minority 
institutions changes periodically, based on Department of Education data 
on institutions' enrollments of minority students).
    Research. Basic, applied, and advanced research, as defined in this 
section.
    Subaward. An award of financial assistance in the form of money, or 
property in lieu of money, made under a DoD grant or cooperative 
agreement by a recipient to an eligible subrecipient. The term includes 
financial assistance for substantive program performance by the 
subrecipient of a portion of the program for which the DoD grant or 
cooperative agreement was made. It

[[Page 76]]

does not include the recipient's procurement of goods and services 
needed to carry out the program.

[63 FR 12164, Mar. 12, 1998, as amended at 68 FR 47160, Aug. 7, 2003]



             Subpart B_Selecting the Appropriate Instrument



Sec. 22.200  Purpose.

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



Sec. 22.205  Distinguishing assistance from procurement.

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



Sec. 22.210  Authority for providing assistance.

    (a) Before a grant or cooperative agreement may be used, the grants 
officer must:
    (1) Identify the program statute, the statute that authorizes the 
DoD Component to carry out the activity the principal purpose of which 
is assistance (see 32 CFR 21.410 through 21.420.
    (2) Review the program statute to determine if it contains 
requirements that affect the:
    (i) Solicitation, selection, and award processes. For example, 
program statutes may authorize assistance to be provided only to certain 
types of recipients; may require that recipients meet certain other 
criteria to be eligible to receive assistance; or require that a 
specific process shall be used to review recipients' proposals.
    (ii) Terms and conditions of the award. For example, some program 
statutes require a specific level of cost sharing or matching.
    (b) The grants officer shall ensure that the award of DoD 
appropriations through a grant or cooperative agreement for a research 
project meets the standards of 10 U.S.C. 2358, DoD's broad authority to 
carry out research, even if the research project is authorized under a 
statutory authority other than 10 U.S.C. 2358. The standards of 10 
U.S.C. 2358 are that, in the opinion of the Head of the DoD Component or 
his or her designee, the projects must be:
    (1) Necessary to the responsibilities of the DoD Component.

[[Page 77]]

    (2) Related to weapons systems and other military needs or of 
potential interest to the DoD Component.

[63 FR 12164, Mar. 12, 1998, as amended at 68 FR 47160, Aug. 7, 2003]



Sec. 22.215  Distinguishing grants and cooperative agreements.

    (a) Once a grants officer judges, in accordance with Sec. Sec. 
22.205 and 22.210, that either a grant or cooperative agreement is the 
appropriate instrument, the grants officer shall distinguish between the 
two instruments as follows:
    (1) Grants shall be used when the grants officer judges that 
substantial involvement is not expected between the Department of 
Defense and the recipient when carrying out the activity contemplated in 
the agreement.
    (2) Cooperative agreements shall be used when the grants officer 
judges that substantial involvement is expected. The grants officer 
should document the nature of the substantial involvement that led to 
selection of a cooperative agreement. Under no circumstances are 
cooperative agreements to be used solely to obtain the stricter controls 
typical of a contract.
    (b) In judging whether substantial involvement is expected, grants 
officers should recognize that ``substantial involvement'' is a 
relative, rather than an absolute, concept, and that it is primarily 
based on programmatic factors, rather than requirements for grant or 
cooperative agreement award or administration. For example, substantial 
involvement may include collaboration, participation, or intervention in 
the program or activity to be performed under the award.



Sec. 22.220  Exemptions.

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

[63 FR 12164, Mar. 12, 1998, as amended at 68 FR 47160, Aug. 7, 2003; 70 
FR 49464, Aug. 23, 2005]



                          Subpart C_Competition



Sec. 22.300  Purpose.

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



Sec. 22.305  General policy and requirement for competition.

    (a) It is DoD policy to maximize use of competition in the award of 
grants and cooperative agreements. This also conforms with:
    (1) 31 U.S.C. 6301(3), which encourages the use of competition in 
awarding all grants and cooperative agreements.
    (2) 10 U.S.C. 2374(a), which sets out Congressional policy that any 
new grant for research, development, test, or evaluation be awarded 
through merit-based selection procedures.

[[Page 78]]

    (b) Grants officers shall use merit-based, competitive procedures 
(as defined by Sec. 22.315) to award grants and cooperative agreements:
    (1) In every case where required by statute (e.g., 10 U.S.C. 2361, 
as implemented in Sec. 22.310, for certain grants to institutions of 
higher education).
    (2) To the maximum extent practicable in all cases where not 
required by statute.



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

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

[[Page 79]]

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



Sec. 22.315  Merit-based, competitive procedures.

    Competitive procedures are methods that encourage participation in 
DoD programs by a broad base of the most highly qualified performers. 
These procedures are characterized by competition among as many eligible 
proposers as possible, with a published or widely disseminated notice. 
Competitive procedures include, as a minimum:
    (a) Notice to prospective proposers. The notice may be a notice of 
funding availability or Broad Agency Announcement that is publicly 
disseminated, with unlimited distribution, or a specific notice that is 
distributed to eligible proposers (a specific notice must be distributed 
to at least two eligible proposers to be considered as part of a 
competitive procedure). Requirements for notices are as follows:
    (1) The format and content of each notice must conform with the 
Governmentwide format for announcements of funding opportunities 
established by the Office of Management and Budget (OMB) in a policy 
directive entitled, ``Format for Financial Assistance Program 
Announcements.'' \2\
---------------------------------------------------------------------------

    \2\ This OMB policy directive is available at the Internet site 
http://www.whitehouse.gov/omb/grants/grants--docs.html (the link is 
``Final Policy Directive on Financial Assistance Program 
Announcements'').
---------------------------------------------------------------------------

    (2) In accordance with that OMB policy directive, DoD Components 
also must post on the Internet any notice under which domestic entities 
may submit proposals, if the distribution of the notice is unlimited. 
DoD Components are encouraged to simultaneously publish the notice in 
other media (e.g., the Federal Register), if doing so would increase the 
likelihood of its being seen by potential proposers. If a DoD Component 
issues a specific notice with limited distribution (e.g., for national 
security considerations), the notice need not be posted on the Internet.
    (3) To comply with an OMB policy directive entitled, ``Requirement 
to Post Funding Opportunity Announcement Synopses at Grants.gov and 
Related Data Elements/Format,'' \3\ DoD Components must post on the 
Internet a synopsis for each notice that, in accordance with paragraph 
(a)(2) of this section, is posted on the Internet. The synopsis must be 
posted at the Governmentwide site designated by the OMB (currently 
http://www.FedGrants.gov). The synopsis for each notice must provide 
complete instructions on where to obtain the notice and should have an 
electronic link to the Internet location at which the notice is posted.
---------------------------------------------------------------------------

    \3\ This OMB policy directive is available at the Internet site 
http://www.whitehouse.gov/omb/grants/grants--docs.html (the link is 
``Office of Federal Financial Management Policy Directive on Use of 
Grants.Gov FIND'').
---------------------------------------------------------------------------

    (4) In accordance with an OMB policy directive entitled, 
``Requirement for a DUNS Number in Applications for Federal Grants and 
Cooperative Agreements,'' \4\ each notice must include a requirement for 
proposers to include Data Universal Numbering System (DUNS) numbers in 
their proposals. If a notice provides for submission of application 
forms, the forms must incorporate the DUNS number. To the extent that 
unincorporated consortia of separate organizations may submit proposals, 
the notice should explain that an unincorporated consortium

[[Page 80]]

would use the DUNS number of the entity proposed to receive DoD payments 
under the award (usually, a lead organization that consortium members 
identify for administrative matters).
---------------------------------------------------------------------------

    \4\ This OMB policy directive is available at the Internet site 
http://www.whitehouse.gov/omb/grants/grants--docs.html (the link is 
``Use of a Universal Identifier by Grant Applicants'').
---------------------------------------------------------------------------

    (b) At least two eligible, prospective proposers.
    (c) Impartial review of the merits of applications or proposals 
received in response to the notice, using the evaluation method and 
selection criteria described in the notice. For research and development 
awards, in order to be considered as part of a competitive procedure, 
the two principal selection criteria, unless statute provides otherwise, 
must be the:
    (1) Technical merits of the proposed research and development; and
    (2) Potential relationship of the proposed research and development 
to Department of Defense missions.

[63 FR 12164, Mar. 12, 1998, as amended at 70 FR 49464, Aug. 23, 2005; 
72 FR 34988, June 26, 2007]



Sec. 22.320  Special competitions.

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



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

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



     Subpart D_Recipient Qualification Matters_General Policies and 
                               Procedures



Sec. 22.400  Purpose.

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



Sec. 22.405  Policy.

    (a) General. Grants officers normally shall award grants or 
cooperative agreements only to qualified recipients that meet the 
standards in Sec. 22.415. This practice conforms with the 
Governmentwide policy to do business only with responsible persons, 
which is stated in OMB guidance at 2 CFR 180.125(a) and implemented by 
the Department of Defense in 2 CFR part 1125.
    (b) Exception. In exceptional circumstances, grants officers may 
make awards to recipients that do not fully meet the standards in Sec. 
22.415 and include special award conditions that are appropriate to the 
particular situation, in accordance with 32 CFR 32.14, 33.12, or 34.4.

[63 FR 12164, Mar. 12, 1998, as amended at 70 FR 49464, Aug. 23, 2005; 
72 FR 34988, June 26, 2007]



Sec. 22.410  Grants officers' responsibilities.

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

[[Page 81]]

an award to a recipient that does not fully meet the standards.



Sec. 22.415  Standards.

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



Sec. 22.420  Pre-award procedures.

    (a) The appropriate method to be used and amount of effort to be 
expended in deciding the qualification of a potential recipient will 
vary. In deciding on the method and level of effort, the grants officer 
should consider factors such as:
    (1) DoD's past experience with the recipient;
    (2) Whether the recipient has previously received cost-type 
contracts, grants, or cooperative agreements from the Federal 
Government; and
    (3) The amount of the prospective award and complexity of the 
project to be carried out under the award.
    (b) There is no DoD-wide requirement to obtain a pre-award credit 
report, audit, or any other specific piece of information. On a case-by-
case basis, the grants officer will decide whether there is a need to 
obtain any such information to assist in deciding whether the recipient 
meets the standards in Sec. 22.415 (a), (b), and (c).
    (1) Should the grants officer in a particular case decide that a 
pre-award credit report, audit, or survey is needed, he or she should 
consult first with the appropriate grants administration office 
(identified in Sec. 22.710), and decide whether pre-existing surveys or 
audits of the recipient, such as those of the recipient's internal 
control systems under OMB Circular A-133 \5\ will satisfy the need (see 
Sec. 22.715(a)(1)).
---------------------------------------------------------------------------

    \5\ Electronic copies may be obtained at Internet site http://
www.whitehouse.gov/OMB. For paper copies, contact the Office of 
Management and Budget, EOP Publications, 725 17th St. NW., New Executive 
Office Building, Washington, DC 20503.
---------------------------------------------------------------------------

    (2) If, after consulting with the grants administration office, the 
grants officer decides to obtain a credit report, audit, or other 
information, and the report or other information discloses that a 
potential recipient is delinquent on a debt to an agency of the United 
States Government, then:
    (i) The grants officer shall take such information into account when 
determining whether the potential recipient is qualified with respect to 
the grant or cooperative agreement; and
    (ii) If the grants officer decides to make the award to the 
recipient, unless there are compelling reasons to do otherwise, the 
grants officer shall delay the award of the grant or cooperative 
agreement until payment is made or satisfactory arrangements are made to 
repay the debt.
    (c) In deciding whether a recipient is otherwise qualified and 
eligible in accordance with the standard in Sec. 22.415(d), the grants 
officer shall ensure that the potential recipient:
    (1) Is not identified in the Governmentwide Excluded Parties List 
System (EPLS) as being debarred, suspended, or otherwise ineligible to 
receive the award. In addition to being a requirement for every new 
award, note that checking the EPLS also is a requirement for subsequent 
obligations of additional funds, such as incremental funding actions, in 
the case of pre-existing awards to institutions of higher education, as 
described at 32 CFR 22.520(e)(5). The grants officer's responsibilities 
include (see the OMB guidance at 2 CFR 180.425 and 180.430, as 
implemented by the Department of Defense at 2 CFR 1125.425) checking the 
EPLS for:
    (i) Potential recipients of prime awards; and
    (ii) A recipient's principals (as defined in OMB guidance at 2 CFR 
180.995, implemented by the Department of Defense in 2 CFR part 1125), 
potential recipients of subawards, and principals of

[[Page 82]]

those potential subaward recipients, if DoD Component approval of those 
principals or lower-tier recipients is required under the terms of the 
award (e.g., if a subsequent change in a recipient's principal 
investigator or other key person would be subject to the DoD Component's 
prior approval under 32 CFR 32.25(c)(2), 33.30(d)(3), or 
34.15(c)(2)(i)).
    (2) Has provided all certifications and assurances required by 
Federal statute, Executive order, or codified regulation, unless they 
are to be addressed in award terms and conditions at the time of award 
(see Sec. 22.510).
    (3) Meets any eligibility criteria that may be specified in the 
statute authorizing the specific program under which the award is being 
made (see Sec. 22.210(a)(2)).
    (d) Grants officers shall obtain each recipient's Taxpayer 
Identification Number (TIN, which may be the Social Security Number for 
an individual and Employer Identification Number for a business or non-
profit entity) and notify the recipient that the TIN is being obtained 
for purposes of collecting and reporting on any delinquent amounts that 
may arise out of the recipient's relationship with the Government. 
Obtaining the TIN and so notifying the recipient is a statutory 
requirement of 31 U.S.C. 7701, as amended by the Debt Collection 
Improvement Act of 1996 (section 31001(i)(1), Pub. L. 104-134).

[63 FR 12164, Mar. 12, 1998, as amended at 70 FR 49464, Aug. 23, 2005; 
72 FR 34988, June 26, 2007]



                    Subpart E_National Policy Matters



Sec. 22.505  Purpose.

    The purpose of this subpart is to supplement other regulations that 
implement national policy requirements, to the extent that it is 
necessary to provide additional guidance to DoD grants officers. The 
other regulations that implement national policy requirements include:
    (a) The other parts of the DoDGARs (32 CFR parts 32, 33, and 34) 
that implement the Governmentwide guidance in OMB Circulars A-102 \6\ 
and A-110 \7\ on administrative requirements for grants and cooperative 
agreements. Those parts address some national policy matters that appear 
in the OMB Circulars.
---------------------------------------------------------------------------

    \6\ See footnote 5 to Sec. 22.420(b)(1).
    \7\ See footnote 5 to Sec. 22.420(b)(1).
---------------------------------------------------------------------------

    (b) DoD regulations other than the DoDGARs.
    (c) Other Federal agencies' regulations.

[63 FR 12164, Mar. 12, 1998, as amended at 70 FR 49464, Aug. 23, 2005]



Sec. 22.510  Certifications, representations, and assurances.

    (a) Certifications--(1) Policy. Certifications of compliance with 
national policy requirements are to be obtained from recipients only for 
those national policies where a statute, Executive order, or codified 
regulation specifically states that a certification is required. Other 
national policy requirements may be addressed by obtaining 
representations or assurances (see paragraph (b) of this section). 
Grants officers should utilize methods for obtaining certifications, in 
accordance with Executive Order 12866 (3 CFR, 1993 Comp., p. 638), that 
minimize administration and paperwork.
    (2) Procedures. (i) When necessary, grants officers may obtain 
individual, written certifications.
    (ii) Whenever possible, and to the extent consistent with statute 
and codified regulation, grants officers should identify the 
certifications that are required for the particular type of recipient 
and program, and consolidate them into a single certification provision 
that cites them by reference.
    (A) If a grants officer elects to have proposers incorporate 
certifications by reference into their proposals, he or she must do so 
in one of the two following ways. When required by statute or codified 
regulation, the solicitation must include the full text of the 
certifications that proposers are to provide by reference. In other 
cases, the grants officer may include language in the solicitation that 
informs the proposers where the full text may be found (e.g., in 
documents or computer network sites that are readily available to the 
public) and offers to provide it to proposers upon request.

[[Page 83]]

    (B) Appendix A to this part provides language that may be used for 
incorporating by reference the certification on lobbying, which 
currently is the only certification requirement that commonly applies to 
DoD grants and agreements. Because that certification is required by law 
to be submitted at the time of proposal, rather than at the time of 
award, Appendix A includes language to incorporate the certification by 
reference into a proposal.
    (C) Grants officers may incorporate certifications by reference in 
award documents when doing so is consistent with statute and codified 
regulation (that is not the case for the lobbying certification 
addressed in paragraph (a)(2)(ii)(B) of this section). The provision 
that a grants officer would use to incorporate certifications in award 
documents, when consistent with statute and codified regulation, would 
be similar to the provision in Appendix A to this part, except that it 
would be modified to state that the recipient is providing the required 
certifications by signing the award document or by accepting funds under 
the award.
    (b) Representations and assurances. Many national policies, either 
in statute or in regulation, require recipients of grants and 
cooperative agreements to make representations or provide assurances 
(rather than certifications) that they are in compliance with the 
policies. As discussed in Sec. 22.610(b), Appendix B to this part 
suggests award terms and conditions that may be used to address several 
of the more commonly applicable national policy requirements. These 
terms and conditions may be used to obtain required assurances and 
representations, if the grants officer wishes to do so at the time of 
award, rather than through the use of the standard application form (SF-
424 \8\) or other means at the time of proposal.
---------------------------------------------------------------------------

    \8\ For copies of Standard Forms listed in this part, contact 
regional grants administration offices of the Office of Naval Research. 
Addresses for the offices are listed in the ``Federal Directory of 
Contract Administration Services (CAS) Components,'' which may be 
accessed through the Defense Contract Management Agency homepage at: 
http://www.dcma.mil.

[63 FR 12164, Mar. 12, 1998, as amended at 70 FR 49464, Aug. 23, 2005]



Sec. 22.515  Provisions of annual appropriations acts.

    An annual appropriations act can include general provisions stating 
national policy requirements that apply to the use of funds (e.g., 
obligation through a grant or cooperative agreement) appropriated by the 
act. Because these requirements are of limited duration (the period 
during which a given year's appropriations are available for 
obligation), and because they can vary from year to year and from one 
agency's appropriations act to another agency's, the grants officer must 
know the agency(ies) and fiscal year(s) of the appropriations being 
obligated by a given grant or cooperative agreement, and may need to 
consult legal counsel if he or she does not know the requirements 
applicable to those appropriations.



Sec. 22.520  Campus access for military recruiting and Reserve Officer Training Corps (ROTC).

    (a) Purpose. (1) The purpose of this section is to implement 10 
U.S.C. 983 as it applies to grants. Under that statute, DoD Components 
are prohibited from providing funds to institutions of higher education 
that have policies or practices, as described in paragraph (c) of this 
section, restricting campus access of military recruiters or the Reserve 
Officer Training Corps (ROTC).
    (2) By addressing the effect of 10 U.S.C. 983 on grants and 
cooperative agreements, this section supplements the DoD's primary 
implementation of that statute in 32 CFR part 216, ``Military Recruiting 
and Reserve Officer Training Corps Program Access to Institutions of 
Higher Education.'' Part 216 establishes procedures by which the 
Department of Defense identifies institutions of higher education that 
have a policy or practice described in paragraph (c) of this section.
    (b) Definition specific to this section. ``Institution of higher 
education'' in this section has the meaning given at 32 CFR 216.3, which 
is different than the meaning given at Sec. 22.105 for other sections 
of this part.

[[Page 84]]

    (c) Statutory requirement of 10 U.S.C. 983. No funds made available 
to the Department of Defense may be provided by grant to an institution 
of higher education (including any subelement of such institution) if 
the Secretary of Defense determines that the institution (or any 
subelement of that institution) has a policy or practice that either 
prohibits, or in effect prevents:
    (1) The Secretary of a Military Department from maintaining, 
establishing, or operating a unit of the Senior ROTC (in accordance with 
10 U.S.C. 654 and other applicable Federal laws) at that institution (or 
any subelement of that institution);
    (2) A student at that institution (or any subelement of that 
institution) from enrolling in a unit of the Senior ROTC at another 
institution of higher education;
    (3) The Secretary of a Military Department or Secretary of Homeland 
Security from gaining access to campuses, or access to students (who are 
17 years of age or older) on campuses, for purposes of military 
recruiting in a manner that is at least equal in quality and scope to 
the access to campuses and to students that is provided to any other 
employer; or
    (4) Access by military recruiters for purposes of military 
recruiting to the following information pertaining to students (who are 
17 years of age or older) enrolled at that institution (or any 
subelement of that institution):
    (i) Names, addresses, and telephone listings.
    (ii) Date and place of birth, levels of education, academic majors, 
degrees received, and the most recent educational institution enrolled 
in by the student.
    (d) Policy. (1) Applicability to cooperative agreements. As a matter 
of DoD policy, the restrictions of 10 U.S.C. 983, as implemented by 32 
CFR part 216, apply to cooperative agreements, as well as grants.
    (2) Deviations. Grants officers may not deviate from any provision 
of this section without obtaining the prior approval of the Director of 
Defense Research and Engineering. Requests for deviations shall be 
submitted, through appropriate channels, to: Director for Basic 
Sciences, ODUSD(LABS), 3040 Defense Pentagon, Washington, D.C. 20301-
3040.
    (e) Grants officers' responsibility. (1) A grants officer shall not 
award any grant or cooperative agreement to an institution of higher 
education that has been identified pursuant to the procedures of 32 CFR 
part 216. Such institutions are identified as being ineligible on the 
Governmentwide Excluded Parties List System (EPLS). The cause and 
treatment code on the EPLS indicates the reason for an institution's 
ineligibility, as well as the effect of the exclusion. Note that OMB 
guidance in 2 CFR 180.425 and 180.430, as implemented by the Department 
of Defense at 2 CFR part 1125, require a grants officer to check the 
EPLS prior to determining that a recipient is qualified to receive an 
award.
    (2) A grants officer shall not consent to a subaward of DoD funds to 
such an institution, under a grant or cooperative agreement to any 
recipient, if the subaward requires the grants officer's consent.
    (3) A grants officer shall include the following award term in each 
grant or cooperative agreement with an institution of higher education 
(note that this requirement does not flow down and that recipients are 
not required to include the award term in subawards):

    ``As a condition for receipt of funds available to the Department of 
Defense (DoD) under this award, the recipient agrees that it is not an 
institution of higher education (as defined in 32 CFR part 216) that has 
a policy or practice that either prohibits, or in effect prevents:
    (A) The Secretary of a Military Department from maintaining, 
establishing, or operating a unit of the Senior Reserve Officers 
Training Corps (in accordance with 10 U.S.C. 654 and other applicable 
Federal laws) at that institution (or any subelement of that 
institution);
    (B) Any student at that institution (or any subelement of that 
institution) from enrolling in a unit of the Senior ROTC at another 
institution of higher education;
    (C) The Secretary of a Military Department or Secretary of Homeland 
Security from gaining access to campuses, or access to students (who are 
17 years of age or older) on campuses, for purposes of military 
recruiting in a manner that is at least equal in quality and scope to 
the access to campuses and to students that is provided to any other 
employer; or

[[Page 85]]

    (D) Access by military recruiters for purposes of military 
recruiting to the names of students (who are 17 years of age or older 
and enrolled at that institution or any subelement of that institution); 
their addresses, telephone listings, dates and places of birth, levels 
of education, academic majors, and degrees received; and the most recent 
educational institutions in which they were enrolled.

If the recipient is determined, using the procedures in 32 CFR part 216, 
to be such an institution of higher education during the period of 
performance of this agreement, the Government will cease all payments of 
DoD funds under this agreement and all other DoD grants and cooperative 
agreements to the recipient, and it may suspend or terminate such grants 
and agreements unilaterally for material failure to comply with the 
terms and conditions of award.''

    (4) If an institution of higher education refuses to accept the 
award term in paragraph (e)(3) of this section, the grants officer 
shall:
    (i) Determine that the institution is not qualified with respect to 
the award. The grants officer may award to an alternative recipient.
    (ii) Transmit the name of the institution, through appropriate 
channels, to the Director for Accession Policy, Office of the Deputy 
Under Secretary of Defense for Military Personnel Policy (ODUSD(MPP)), 
4000 Defense Pentagon, Washington, DC 20301-4000. This will allow 
ODUSD(MPP) to decide whether to initiate an evaluation of the 
institution under 32 CFR part 216, to determine whether it is an 
institution that has a policy or practice described in paragraph (c) of 
this section.
    (5) With respect to any pre-existing award to an institution of 
higher education that currently is listed on the EPLS pursuant to a 
determination under 32 CFR part 216, a grants officer:
    (i) Shall not obligate additional funds available to the DoD for the 
award. A grants officer therefore must check the EPLS before approving 
an incremental funding action or other additional funding for any pre-
existing award to an institution of higher education. The grants officer 
may not obligate the additional funds if the cause and treatment code 
indicates that the reason for an institution's EPLS listing is a 
determination under 32 CFR part 216 that institutional policies or 
practices restrict campus access of military recruiters or ROTC.
    (ii) Shall not approve any request for payment submitted by such an 
institution (including payments for costs already incurred).
    (iii) Shall:
    (A) Terminate the award unless he or she has a reason to believe, 
after consulting with the ODUSD(MPP), 4000 Defense Pentagon, Washington, 
DC 20301-4000), that the institution may be removed from the EPLS in the 
near term and have its eligibility restored; and
    (B) Suspend any award that is not immediately terminated, as well as 
all payments under it.
    (f) Post-award administration responsibilities of the Office of 
Naval Research (ONR). As the DoD office assigned responsibility for 
performing field administration services for grants and cooperative 
agreements with institutions of higher education, the ONR shall 
disseminate the list it receives from the ODUSD(MPP) of institutions of 
higher education identified pursuant to the procedures of 32 CFR part 
216 to:
    (1) ONR field administration offices, with instructions to:
    (i) Disapprove any payment requests under awards to such 
institutions for which post-award payment administration was delegated 
to the ONR; and
    (ii) Alert the DoD offices that made the awards to their 
responsibilities under paragraphs (e)(5)(i) and (e)(5)(iii) of this 
section.
    (2) Awarding offices in DoD Components that may be identified from 
data in the Defense Assistance Awards Data System (see 32 CFR 21.520 
through 21.555) as having awards with such institutions for which post-
award payment administration was not delegated to ONR. The ONR is to 
alert those offices to their responsibilities under paragraph (e)(5) of 
this section.

[70 FR 49465, Aug. 23, 2005, as amended at 72 FR 34988, June 26, 2007]



Sec. 22.525  Paperwork Reduction Act.

    Grants officers shall include appropriate award terms or conditions, 
if a recipient's activities under an award will be subject to the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3500, et seq.):

[[Page 86]]

    (a) Generally, the Act only applies to Federal agencies--it requires 
agencies to obtain clearance from the Office of Management and Budget 
before collecting information using forms, schedules, questionnaires, or 
other methods calling either for answers to:
    (1) Identical questions from ten or more persons other than 
agencies, instrumentalities, or employees of the United States.
    (2) Questions from agencies, instrumentalities, or employees of the 
United States which are to be used for statistical compilations of 
general public interest.
    (b) The Act applies to similar collections of information by 
recipients of grants or cooperative agreements only when:
    (1) A recipient collects information at the specific request of the 
awarding Federal agency; or
    (2) The terms and conditions of the award require specific approval 
by the agency of the information collection or the collection 
procedures.



Sec. 22.530  Metric system of measurement.

    (a) Statutory requirement. The Metric Conversion Act of 1975, as 
amended by the Omnibus Trade and Competitiveness Act of 1988 (15 U.S.C. 
205) and implemented by Executive Order 12770 (3 CFR, 1991 Comp., p. 
343), states that:
    (1) The metric system is the preferred measurement system for U.S. 
trade and commerce.
    (2) The metric system of measurement will be used, to the extent 
economically feasible, in federal agencies' procurements, grants, and 
other business-related activities.
    (3) Metric implementation shall not be required to the extent that 
such use is likely to cause significant inefficiencies or loss of 
markets to United States firms.
    (b) Responsibilities. DoD Components shall ensure that the metric 
system is used, to the maximum extent practicable, in measurement-
sensitive activities supported by programs that use grants and 
cooperative agreements, and in measurement-sensitive outputs of such 
programs.



                             Subpart F_Award



Sec. 22.600  Purpose.

    This subpart sets forth grants officers' responsibilities relating 
to the award document and other actions at the time of award.



Sec. 22.605  Grants officers' responsibilities.

    At the time of award, the grants officer is responsible for ensuring 
that:
    (a) The award instrument contains the appropriate terms and 
conditions, in accordance with Sec. 22.610.
    (b) Information about the award is provided to the office 
responsible for preparing reports for the Defense Assistance Award Data 
System (DAADS), to ensure timely and accurate reporting of data required 
by 31 U.S.C. 6101-6106 (see 32 CFR part 21, subpart E).
    (c)(1) In addition to the copy of the award document provided to the 
recipient, a copy is forwarded to the office designated to administer 
the grant or cooperative agreement, and another copy is forwarded to the 
finance and accounting office designated to make the payments to the 
recipient.
    (2) For any award subject to the electronic funds transfer (EFT) 
requirement described in Sec. 22.810(b)(2), the grants officer shall 
include a prominent notification of that fact on the first page of the 
copies forwarded to the recipient, the administrative grants officer, 
and the finance and accounting office. On the first page of the copy 
forwarded to the recipient, the grants officer also shall include a 
prominent notification that the recipient, to be paid, must submit a 
Payment Information Form (Standard Form SF-3881\9\) to the responsible 
DoD payment office, if that payment office does not currently have the 
information (e.g., bank name and account number) needed to pay the 
recipient by EFT.
---------------------------------------------------------------------------

    \9\ See footnote 8 to Sec. 22.510(b).

[63 FR 12164, Mar. 12, 1998, as amended at 68 FR 47160, Aug. 7, 2003; 70 
FR 49465, Aug. 23, 2005]

[[Page 87]]



Sec. 22.610  Award instruments.

    (a) Each award document shall include terms and conditions that:
    (1) Address programmatic requirements (e.g., a statement of work or 
other appropriate terms or conditions that describe the specific goals 
and objectives of the project). The grants officer shall develop such 
terms and conditions in coordination with program officials.
    (2) Provide for the recipient's compliance with:
    (i) Pertinent Federal statutes or Executive orders that apply 
broadly to Federal or DoD assistance awards.
    (ii) Any program-specific requirements that are prescribed in the 
program statute (see Sec. 22.210(a)(2)), or appropriation-specific 
requirements that are stated in the pertinent Congressional 
appropriations (see Sec. 22.515).
    (iii) Pertinent portions of the DoDGARs or other Federal 
regulations, including those that implement the Federal statutes or 
Executive orders described in paragraphs (a)(2) (i) and (ii) of this 
section.
    (3) Specify the grants officer's instructions for post-award 
administration, for any matter where the post-award administration 
provisions in 32 CFR part 32, 33, or 34 give the grants officer options 
for handling the matter. For example, under 32 CFR 32.24(b), the grants 
officers must choose among possible methods for the recipient's 
disposition of program income. It is essential that the grants officer 
identify the option selected in each case, to provide clear instructions 
to the recipient and the grants officer responsible for post-award 
administration of the grant or cooperative agreement.
    (b) To assist grants officers:
    (1) Appendix B to this part provides model clauses to implement 
certain Federal statutes, Executive orders, and regulations (see 
paragraph (a)(2)(i) of this section) that frequently apply to DoD grants 
and cooperative agreements. Grants officers may incorporate the model 
clauses into award terms and conditions, as appropriate. It should be 
noted that Appendix B to this part is an aid, and not an exhaustive list 
of all requirements that apply in all cases. Depending on the 
circumstances of a given award, other statutes, Executive orders, or 
codified regulations also may apply (e.g., Appendix B to this part does 
not list program-specific requirements described in paragraph (a)(2)(ii) 
of this section).
    (2) Appendix C to this part is a list of administrative requirements 
that apply to awards to different types of recipients. It also 
identifies post-award administration issues that the grants officer must 
address in the award terms and conditions.



                     Subpart G_Field Administration



Sec. 22.700  Purpose.

    This subpart prescribes policies and procedures for administering 
grants and cooperative agreements. It does so in conjunction with 32 CFR 
parts 32, 33, and 34, which prescribe administrative requirements for 
particular types of recipients.



Sec. 22.705  Policy.

    (a) DoD policy is to have each recipient deal with a single office, 
to the maximum extent practicable, for post-award administration of its 
grants and cooperative agreements. This reduces burdens on recipients 
that can result when multiple DoD offices separately administer grants 
and cooperative agreements they award to a given recipient. It also 
minimizes unnecessary duplication of field administration services.
    (b) To further reduce burdens on recipients, the office responsible 
for performing field administration services for grants and cooperative 
agreements to a particular recipient shall be, to the maximum extent 
practicable, the same office that is assigned responsibility for 
performing field administration services for contracts awarded to that 
recipient.
    (c) Contracting activities and grants officers therefore shall use 
cross-servicing arrangements whenever practicable and, to the maximum 
extent possible, delegate responsibility for post-award administration 
to the cognizant grants administration offices identified in Sec. 
22.710.

[[Page 88]]



Sec. 22.710  Assignment of grants administration offices.

    In accordance with the policy stated in Sec. 22.705(b), the DoD 
offices (referred to in this part as ``grants administration offices'') 
that are assigned responsibility for performing field administration 
services for grants and cooperative agreements are (see the ``Federal 
Directory of Contract Administration Services (CAS) Components'' \10\ 
for specific addresses of administration offices):
---------------------------------------------------------------------------

    \10\ The ``Federal Directory of Contract Administration Services 
(CAS) Components'' may be accessed through the Defense Contract 
Management Agency hompage at http://www.dcma.mil.
---------------------------------------------------------------------------

    (a) Regional offices of the Office of Naval Research, for grants and 
cooperative agreements with:
    (1) Institutions of higher education and laboratories affiliated 
with such institutions, to the extent that such organizations are 
subject to the university cost principles in OMB Circular A-21.\11\
---------------------------------------------------------------------------

    \11\ See footnote 5 to Sec. 22.420(b)(1).
---------------------------------------------------------------------------

    (2) Nonprofit organizations that are subject to the cost principles 
in OMB Circular A-122,\12\ if their principal business with the 
Department of Defense is research and development.
---------------------------------------------------------------------------

    \12\ See footnote 5 to Sec. 22.420(b)(1).
---------------------------------------------------------------------------

    (b) Field offices of the Defense Contract Management Command, for 
grants and cooperative agreements with all other entities, including:
    (1) For-profit organizations.
    (2) Nonprofit organizations identified in Attachment C of OMB 
Circular A-122 that are subject to for-profit cost principles in 48 CFR 
part 31.
    (3) Nonprofit organizations subject to the cost principles in OMB 
Circular A-122, if their principal business with the Department of 
Defense is other than research and development.
    (4) State and local governments.

[63 FR 12164, Mar. 12, 1998, as amended at 70 FR 49466, Aug. 23, 2005; 
72 FR 34989, June 26, 2007]



Sec. 22.715  Grants administration office functions.

    The primary responsibility of cognizant grants administration 
offices shall be to advise and assist grants officers and recipients 
prior to and after award, and to help ensure that recipients fulfill all 
requirements in law, regulation, and award terms and conditions. 
Specific functions include:
    (a) Conducting reviews and coordinating reviews, audits, and audit 
requests. This includes:
    (1) Advising grants officers on the extent to which audits by 
independent auditors (i.e., public accountants or Federal auditors) have 
provided the information needed to carry out their responsibilities. If 
a recipient has had an independent audit in accordance with OMB Circular 
A-133, and the audit report disclosed no material weaknesses in the 
recipient's financial management and other management and control 
systems, additional preaward or closeout audits usually will not be 
needed (see Sec. Sec. 22.420(b) and 22.825(b)).
    (2) Performing pre-award surveys, when requested by a grants 
officer, after providing advice described in paragraph (a)(1) of this 
section.
    (3) Reviewing recipients' systems and compliance with Federal 
requirements, in coordination with any reviews and compliance audits 
performed by independent auditors under OMB Circular A-133, or in 
accordance with the terms and conditions of the award. This includes:
    (i) Reviewing recipients' financial management, property management, 
and purchasing systems, to determine the adequacy of such systems.
    (ii) Determining that recipients have drug-free workplace programs, 
as required under 32 CFR part 26.
    (iii) Determining that governmental, university and nonprofit 
recipients have complied with requirements in OMB Circular A-133, as 
implemented at 32 CFR 32.26 and 33.26, to have single audits and submit 
audit reports to the Federal Audit Clearinghouse. If a recipient has not 
had a required audit, appropriate action must be taken (e.g., contacting 
the recipient and coordinating with the Office of the Assistant 
Inspector General for Audit Policy and Oversight (OAIG(P&O)), Office of 
the Deputy Inspector General for Inspections and Policy, Office of the 
Inspector General of the Department of Defense (OIG, DoD), 400 Army-Navy 
Drive, Arlington, VA 22202).

[[Page 89]]

    (4) Issuing timely management decisions, in accordance with DoD 
Directive 7640.2, ``Policy for Follow-up on Contract Audit Reports,'' 
\13\ on single audit findings referred by the OIG, DoD, under DoD 
Directive 7600.10, ``Audits of States, Local Governments, and Non-Profit 
Organizations.'' \14\
---------------------------------------------------------------------------

    \13\ Electronic copies may be obtained at the Washington 
Headquarters Services Internet site http://www.dtic.mil/whs/directives. 
Paper copies may be obtained, at cost, from the National Technical 
Information Service, 5285 Port Royal Road, Springfield, VA 22161.
    \14\ See footnote 13 to Sec. 22.715(a)(4).
---------------------------------------------------------------------------

    (b) Performing property administration services for Government-owned 
property, and for any property acquired by a recipient, with respect to 
which the recipient has further obligations to the Government.
    (c) Ensuring timely submission of required reports.
    (d) Executing administrative closeout procedures.
    (e) Establishing recipients' indirect cost rates, where the 
Department of Defense is the cognizant or oversight Federal agency with 
the responsibility for doing so.
    (f) Performing other administration functions (e.g., receiving 
recipients' payment requests and transmitting approved payment 
authorizations to payment offices) as delegated by applicable cross-
servicing agreements or letters of delegation.

[63 FR 12164, Mar. 12, 1998, as amended at 70 FR 49466, Aug. 23, 2005; 
72 FR 34989, June 26, 2007]



                   Subpart H_Post-Award Administration



Sec. 22.800  Purpose and relation to other parts.

    This subpart sets forth grants officers' and DoD Components' 
responsibilities for post-award administration, by providing DoD-
specific requirements on payments; debt collection; claims, disputes and 
appeals; and closeout audits.



Sec. 22.805  Post-award requirements in other parts.

    Grants officers responsible for post-award administration of grants 
and cooperative agreements shall administer such awards in accordance 
with the following parts of the DoDGARs, as supplemented by this 
subpart:
    (a) Awards to domestic recipients. Standard administrative 
requirements for grants and cooperative agreements with domestic 
recipients are specified in other parts of the DoDGARs, as follows:
    (1) For awards to domestic institutions of higher education and 
other nonprofit organizations, requirements are specified in 32 CFR part 
32, which is the DoD implementation of OMB Circular A-110.
    (2) For awards to State and local governments, requirements are 
specified in 32 CFR part 33, which is the DoD codification of the 
Governmentwide common rule to implement OMB Circular A-102.
    (3) For awards to domestic for-profit organizations, requirements 
are specified in 32 CFR part 34, which is modeled on the requirements in 
OMB Circular A-110.
    (b) Awards to foreign recipients. DoD Components shall use the 
administrative requirements specified in paragraph (a) of this section, 
to the maximum extent practicable, for grants and cooperative agreements 
to foreign recipients.



Sec. 22.810  Payments.

    (a) Purpose. This section prescribes policies and grants officers' 
post-award responsibilities, with respect to payments to recipients of 
grants and cooperative agreements.
    (b) Policy. (1) It is Governmentwide policy to minimize the time 
elapsing between any payment of funds to a recipient and the recipient's 
disbursement of the funds for program purposes (see 32 CFR 32.22(a) and 
33.21(b), and the implementation of the Cash Management Improvement Act 
at 31 CFR part 205).
    (2) It also is a Governmentwide requirement to use electronic funds 
transfer (EFT) in the payment of any grant for which an application or 
proposal was submitted or renewed on or after July 26, 1996, unless the 
recipient has obtained a waiver by submitting to the head of the 
pertinent Federal agency a certification that it has neither an

[[Page 90]]

account with a financial institution nor an authorized payment agent. 
This requirement is in 31 U.S.C. 3332, as amended by the Debt Collection 
Improvement Act of 1996 (section 31001(x)(1)(A), Pub. L. 104-134), and 
as implemented by Department of Treasury regulations at 31 CFR part 208. 
As a matter of DoD policy, this requirement applies to cooperative 
agreements, as well as grants. Within the Department of Defense, the 
Defense Finance and Accounting Service implements this EFT requirement, 
and grants officers have collateral responsibilities at the time of 
award, as described in Sec. 22.605(c), and in postaward administration, 
as described in Sec. 22.810(c)(3)(iv).
    (3) Expanding on these Governmentwide policies, DoD policy is for 
DoD Components to use electronic commerce, to the maximum extent 
practicable, in the portions of the payment process for grants and 
cooperative agreements for which grants officers are responsible. In 
cases where recipients submit each payment request to the grants 
officer, this includes using electronic methods to receive recipients' 
requests for payment and to transmit authorizations for payment to the 
DoD payment office. Using electronic methods will improve timeliness and 
accuracy of payments and reduce administrative burdens associated with 
paper-based payments.
    (c) Post-award responsibilities. In cases where the recipient 
submits each payment request to the grants officer, the administrative 
grants officer designated to handle payments for a grant or cooperative 
agreement is responsible for:
    (1) Handling the recipient's requests for payments in accordance 
with DoD implementation of Governmentwide guidance (see 32 CFR 32.22, 
33.21, or 34.12, as applicable).
    (2) Reviewing each payment request to ensure that:
    (i) The request complies with the award terms.
    (ii) Available funds are adequate to pay the request.
    (iii) The recipient will not have excess cash on hand, based on 
expenditure patterns.
    (3) Maintaining a close working relationship with the personnel in 
the finance and accounting office responsible for making the payments. A 
good working relationship is necessary, to ensure timely and accurate 
handling of financial transactions for grants and cooperative 
agreements. Administrative grants officers:
    (i) Should be generally familiar with policies and procedures for 
disbursing offices that are contained in Chapter 19 of Volume 10 of the 
DoD Financial Management Regulation (the FMR, DoD 7000.14-R\15\).
---------------------------------------------------------------------------

    \15\ See footnote 13 to Sec. 22.715(a)(4).
---------------------------------------------------------------------------

    (ii) Shall forward authorizations to the designated payment office 
expeditiously, so that payments may be made in accordance with the 
timely payment guidelines in Chapter 19 of Volume 10 of the FMR. Unless 
alternative arrangements are made with the payment office, 
authorizations should be forwarded to the payment office at least 3 
working days before the end of the period specified in the FMR. The 
period specified in the FMR is:
    (A) No more than seven calendar days after receipt of the 
recipient's request by the administrative grants officer, whenever 
electronic commerce is used (i.e., EDI to request and authorize payments 
and electronic funds transfer (EFT) to make payments).
    (B) No more than thirty calendar days after receipt of the 
recipient's request by the administrative grants officer, when it is not 
possible to use electronic commerce and paper transactions are used.
    (C) No more than seven calendar days after each date specified, when 
payments are authorized in advance based on a predetermined payment 
schedule, provided that the payment schedule was received in the 
disbursing office at least 30 calendar days in advance of the date of 
the scheduled payment.
    (iii) Shall ensure that the recipients' Taxpayer Identification 
Number (TIN) is included with each payment authorization forwarded to 
the payment office. This is a statutory requirement of 31 U.S.C. 3325, 
as amended by the Debt Collection Improvement Act of 1996 (section 
31001(y), Pub. L. 104-134).

[[Page 91]]

    (iv) For each award that is required to be paid by EFT (see Sec. 
22.605(c) and (Sec. 22.810(b)(2)), shall prominently indicate that fact 
in the payment authorization.

[63 FR 12164, Mar. 12, 1998, as amended at 70 FR 49467, Aug. 23, 2005]



Sec. 22.815  Claims, disputes, and appeals.

    (a) Award terms. Grants officers shall include in grants and 
cooperative agreements a term or condition that incorporates the 
procedures of this section for:
    (1) Processing recipient claims and disputes.
    (2) Deciding appeals of grants officers' decisions.
    (b) Submission of claims--(1) Recipient claims. If a recipient 
wishes to submit a claim arising out of or relating to a grant or 
cooperative agreement, the grants officer shall inform the recipient 
that the claim must:
    (i) Be submitted in writing to the grants officer for decision;
    (ii) Specify the nature and basis for the relief requested; and
    (iii) Include all data that supports the claim.
    (2) DoD Component claims. Claims by a DoD Component shall be the 
subject of a written decision by a grants officer.
    (c) Alternative Dispute Resolution (ADR)--(1) Policy. DoD policy is 
to try to resolve all issues concerning grants and cooperative 
agreements by mutual agreement at the grants officer's level. DoD 
Components therefore are encouraged to use ADR procedures to the maximum 
extent practicable. ADR procedures are any voluntary means (e.g., mini-
trials or mediation) used to resolve issues in controversy without 
resorting to formal administrative appeals (see paragraph (e) of this 
section) or to litigation.
    (2) Procedures. (i) The ADR procedures or techniques to be used may 
either be agreed upon by the Government and the recipient in advance 
(e.g., when agreeing on the terms and conditions of the grant or 
cooperative agreement), or may be agreed upon at the time the parties 
determine to use ADR procedures.
    (ii) If a grants officer and a recipient are not able to resolve an 
issue through unassisted negotiations, the grants officer shall 
encourage the recipient to enter into ADR procedures. ADR procedures may 
be used prior to submission of a recipient's claim or at any time prior 
to the Grant Appeal Authority's decision on a recipient's appeal (see 
paragraph (e)(3)(iii) of this section).
    (d) Grants officer decisions. (1) Within 60 calendar days of receipt 
of a written claim, the grants officer shall either:
    (i) Prepare a written decision, which shall include the reasons for 
the decision; shall identify all relevant data on which the decision is 
based; shall identify the cognizant Grant Appeal Authority and give his 
or her mailing address; and shall be included in the award file; or
    (ii) Notify the recipient of a specific date when he or she will 
render a written decision, if more time is required to do so. The notice 
shall inform the recipient of the reason for delaying the decision 
(e.g., the complexity of the claim, a need for more time to complete ADR 
procedures, or a need for the recipient to provide additional 
information to support the claim).
    (2) The decision of the grants officer shall be final, unless the 
recipient decides to appeal. If a recipient decides to appeal a grants 
officer's decision, the grants officer shall encourage the recipient to 
enter into ADR procedures, as described in paragraph (c) of this 
section.
    (e) Formal administrative appeals--(1) Grant appeal authorities. 
Each DoD Component that awards grants or cooperative agreements shall 
establish one or more Grant Appeal Authorities to decide formal, 
administrative appeals in accordance with paragraph (e)(3) of this 
section. Each Grant Appeal Authority shall be either:
    (i) An individual at a grade level in the Senior Executive Service, 
if civilian, or at the rank of Flag or General Officer, if military; or
    (ii) A board chaired by such an individual.
    (2) Right of appeal. A recipient has the right to appeal a grants 
officer's decision to the Grant Appeal Authority (but note that ADR 
procedures, as described in paragraph (c) of this section, are the 
preferred means for resolving any appeal).

[[Page 92]]

    (3) Appeal procedures--(i) Notice of appeal. A recipient may appeal 
a decision of the grants officer within 90 calendar days of receiving 
that decision, by filing a written notice of appeal to the Grant Appeal 
Authority and to the grants officer. If a recipient elects to use an ADR 
procedure, the recipient is permitted an additional 60 calendar days to 
file the written notice of appeal to the Grant Appeal Authority and 
grants officer.
    (ii) Appeal file. Within 30 calendar days of receiving the notice of 
appeal, the grants officer shall forward to the Grant Appeal Authority 
and the recipient the appeal file, which shall include copies of all 
documents relevant to the appeal. The recipient may supplement the file 
with additional documents it deems relevant. Either the grants officer 
or the recipient may supplement the file with a memorandum in support of 
its position. The Grant Appeal Authority may request additional 
information from either the grants officer or the recipient.
    (iii) Decision. The appeal shall be decided solely on the basis of 
the written record, unless the Grant Appeal Authority decides to conduct 
fact-finding procedures or an oral hearing on the appeal. Any fact-
finding or hearing shall be conducted using procedures that the Grant 
Appeal Authority deems appropriate.
    (f) Representation. A recipient may be represented by counsel or any 
other designated representative in any claim, appeal, or ADR proceeding 
brought pursuant to this section, as long as the representative is not 
otherwise prohibited by law or regulation from appearing before the DoD 
Component concerned.
    (g) Non-exclusivity of remedies. Nothing in this section is intended 
to limit a recipient's right to any remedy under the law.



Sec. 22.820  Debt collection.

    (a) Purpose. This section prescribes procedures for establishing 
debts owed by recipients of grants and cooperative agreements, and 
transferring them to payment offices for collection.
    (b) Resolution of indebtedness. The grants officer shall attempt to 
resolve by mutual agreement any claim of a recipient's indebtedness to 
the United States arising out of a grant or cooperative agreement (e.g., 
by a finding that a recipient was paid funds in excess of the amount to 
which the recipient was entitled under the terms and conditions of the 
award).
    (c) Grants officer's decision. In the absence of such mutual 
agreement, any claim of a recipient's indebtedness shall be the subject 
of a grants officer decision, in accordance with Sec. 22.815(b)(2). The 
grants officer shall prepare and transmit to the recipient a written 
notice that:
    (1) Describes the debt, including the amount, the name and address 
of the official who determined the debt (e.g., the grants officer under 
Sec. 22.815(d)), and a copy of that determination.
    (2) Informs the recipient that:
    (i) Within 30 calendar days of the grants officer's decision, the 
recipient shall either pay the amount owed to the grants officer (at the 
address that was provided pursuant to paragraph (c)(1) of this section) 
or inform the grants officer of the recipient's intention to appeal the 
decision.
    (ii) If the recipient elects not to appeal, any amounts not paid 
within 30 calendar days of the grants officer's decision will be a 
delinquent debt.
    (iii) If the recipient elects to appeal the grants officer's 
decision the recipient has 90 calendar days, or 150 calendar days if ADR 
procedures are used, after receipt of the grants officer's decision to 
file the appeal, in accordance with Sec. 22.815(e)(3)(i).
    (iv) The debt will bear interest, and may include penalties and 
other administrative costs, in accordance with the debt collection 
provisions in Chapters 29, 31, and 32 of Volume 5 and Chapters 18 and 19 
of Volume 10 of the DoD Financial Management Regulation (DoD 7000.14-R). 
No interest will be charged if the recipient pays the amount owed within 
30 calendar days of the grants officer's decision. Interest will be 
charged for the entire period from the date the decision was mailed, if 
the recipient pays the amount owed after 30 calendar days.
    (d) Follow-up. Depending upon the response from the recipient, the 
grants officer shall proceed as follows:

[[Page 93]]

    (1) If the recipient pays the amount owed within 30 calendar days to 
the grants officer, the grants officer shall forward the payment to the 
responsible payment office.
    (2) If within 30 calendar days the recipient elects to appeal the 
grants officer's decision, further action to collect the debt is 
deferred, pending the outcome of the appeal. If the final result of the 
appeal is a determination that the recipient owes a debt to the Federal 
Government, the grants officer shall send a demand letter to the 
recipient and transfer responsibility for further debt collection to a 
payment office, as described in paragraph (d)(3) of this section.
    (3) If within 30 calendar days the recipient has neither paid the 
amount due nor provided notice of intent to file an appeal of the grants 
officer's decision, the grants officer shall send a demand letter to the 
recipient, with a copy to the payment office that will be responsible 
for collecting the delinquent debt. The payment office will be 
responsible for any further debt collection activity, including issuance 
of additional demand letters (see Chapter 19 of volume 10 of the DoD 
Financial Management Regulation, DoD 7000.14-R). The grants officer's 
demand letter shall:
    (i) Describe the debt, including the amount, the name and address of 
the official that determined the debt (e.g., the grants officer under 
Sec. 22.815(d)), and a copy of that determination.
    (ii) Notify the recipient that the debt is a delinquent debt that 
bears interest from the date of the grants officer's decision, and that 
penalties and other administrative costs may be assessed.
    (iii) Identify the payment office that is responsible for the 
collection of the debt, and notify the recipient that it may submit a 
proposal to that payment office to defer collection, if immediate 
payment is not practicable.
    (e) Administrative offset. In carrying out the responsibility for 
collecting delinquent debts, a disbursing officer may need to consult 
grants officers, to determine whether administrative offset against 
payments to a recipient owing a delinquent debt would interfere with 
execution of projects being carried out under grants or cooperative 
agreements. Disbursing officers may also ask grants officers whether it 
is feasible to convert payment methods under grants or cooperative 
agreements from advance payments to reimbursements, to facilitate use of 
administrative offset. Grants officers therefore should be familiar with 
guidelines for disbursing officers, in Chapter 19 of Volume 10 of the 
Financial Management Regulation (DoD 7000.14-R), concerning withholding 
and administrative offset to recover delinquent debts.



Sec. 22.825  Closeout audits.

    (a) Purpose. This section establishes DoD policy for obtaining 
audits at closeout of individual grants and cooperative agreements. It 
thereby supplements the closeout procedures specified in:
    (1) 32 CFR 32.71 and 32.72, for awards to institutions of higher 
education and other nonprofit organizations.
    (2) 32 CFR 33.50 and 33.51, for awards to State and local 
governments.
    (3) 32 CFR 34.61 and 34.62, for awards to for-profit entities.
    (b) Policy. Grants officers shall use their judgment on a case-by-
case basis, in deciding whether to obtain an audit prior to closing out 
a grant or cooperative agreement (i.e., there is no specific DoD 
requirement to obtain an audit prior to doing so). Factors to be 
considered include:
    (1) The amount of the award.
    (2) DoD's past experience with the recipient, including the presence 
or lack of findings of material deficiencies in recent:
    (i) Audits of individual awards; or
    (ii) Systems-wide financial audits and audits of the compliance of 
the recipient's systems with Federal requirements, under OMB Circular A-
133, where that Circular is applicable. (See Sec. 22.715(a)(1)).

[[Page 94]]



      Sec. Appendix A to Part 22--Proposal Provision for Required 
                              Certification

[GRAPHIC] [TIFF OMITTED] TR23AU05.028

[70 FR 49468, Aug. 23, 2005]

[[Page 95]]



  Sec. Appendix B to Part 22--Suggested Award Provisions for National 
                  Policy Requirements That Often Apply

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[72 FR 34989, June 26, 2007]

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Sec. Appendix C to Part 22--Administrative Requirements and Issues To Be 
                 Addressed in Award Terms and Conditions

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[65 FR 14411, Mar. 16, 2000]



PART 26_GOVERNMENTWIDE REQUIREMENTS FOR DRUG-FREE WORKPLACE (FINANCIAL ASSISTANCE)--Table of Contents




                     Subpart A_Purpose and Coverage

Sec.
26.100 What does this part do?

[[Page 107]]

26.105 Does this part apply to me?
26.110 Are any of my Federal assistance awards exempt from this part?
26.115 Does this part affect the Federal contracts that I receive?

      Subpart B_Requirements for Recipients Other Than Individuals

26.200 What must I do to comply with this part?
26.205 What must I include in my drug-free workplace statement?
26.210 To whom must I distribute my drug-free workplace statement?
26.215 What must I include in my drug-free awareness program?
26.220 By when must I publish my drug-free workplace statement and 
          establish my drug-free awareness program?
26.225 What actions must I take concerning employees who are convicted 
          of drug violations in the workplace?
26.230 How and when must I identify workplaces?

        Subpart C_Requirements for Recipients Who Are Individuals

26.300 What must I do to comply with this part if I am an individual 
          recipient?
26.301 [Reserved]

     Subpart D_Responsibilities of DOD Component Awarding Officials

26.400 What are my responsibilities as a DOD Component awarding 
          official?

           Subpart E_Violations of This Part and Consequences

26.500 How are violations of this part determined for recipients other 
          than individuals?
26.505 How are violations of this part determined for recipients who are 
          individuals?
26.510 What actions will the Federal Government take against a recipient 
          determined to have violated this part?
26.515 Are there any exceptions to those actions?

                          Subpart F_Definitions

26.605 Award
26.610 Controlled substance.
26.615 Conviction.
26.620 Cooperative agreement.
26.625 Criminal drug statute.
26.630 Debarment.
26.632 DOD Component.
26.635 Drug-free workplace.
26.640 Employee.
26.645 Federal agency or agency.
26.650 Grant.
26.655 Individual.
26.660 Recipient.
26.665 State.
26.670 Suspension.

    Authority: 41U.S.C.701, et seq.

    Source: 68 FR 66557, 66609, Nov. 26, 2003, unless otherwise noted.



                     Subpart A_Purpose and Coverage



Sec. 26.100  What does this part do?

    This part carries out the portion of the Drug-Free Workplace Act of 
1988 (41 U.S.C. 701 et seq., as amended) that applies to grants. It also 
applies the provisions of the Act to cooperative agreements and other 
financial assistance awards, as a matter of Federal Government policy.



Sec. 26.105  Does this part apply to me?

    (a) Portions of this part apply to you if you are either--
    (1) A recipient of an assistance award from the DOD Component; or
    (2) A(n) DOD Component awarding official. (See definitions of award 
and recipient in Sec. Sec. 26.605 and 26.660, respectively.)
    (b) The following table shows the subparts that apply to you:

------------------------------------------------------------------------
             If you are . . .                    see subparts . . .
------------------------------------------------------------------------
(1) A recipient who is not an individual..  A, B and E.
(2) A recipient who is an individual......  A, C and E.
(3) A(n) DOD Component awarding official..  A, D and E.
------------------------------------------------------------------------



Sec. 26.110  Are any of my Federal assistance awards exempt from this part?

    This part does not apply to any award that the Head of the DOD 
Component or his or her designee determines that the application of this 
part would be inconsistent with the international obligations of the 
United States or the laws or regulations of a foreign government.



Sec. 26.115  Does this part affect the Federal contracts that I receive?

    It will affect future contract awards indirectly if you are debarred 
or suspended for a violation of the requirements of this part, as 
described in Sec. 26. 510(c). However, this part does not apply 
directly to procurement contracts. The portion of the Drug-Free 
Workplace Act of 1988 that applies to

[[Page 108]]

Federal procurement contracts is carried out through the Federal 
Acquisition Regulation in chapter 1 of Title 48 of the Code of Federal 
Regulations (the drug-free workplace coverage currently is in 48 CFR 
part 23, subpart 23.5).



      Subpart B_Requirements for Recipients Other Than Individuals



Sec. 26.200  What must I do to comply with this part?

    There are two general requirements if you are a recipient other than 
an individual.
    (a) First, you must make a good faith effort, on a continuing basis, 
to maintain a drug-free workplace. You must agree to do so as a 
condition for receiving any award covered by this part. The specific 
measures that you must take in this regard are described in more detail 
in subsequent sections of this subpart. Briefly, those measures are to--
    (1) Publish a drug-free workplace statement and establish a drug-
free awareness program for your employees (see Sec. Sec. 26.205 through 
26.220); and
    (2) Take actions concerning employees who are convicted of violating 
drug statutes in the workplace (see Sec. 26.225).
    (b) Second, you must identify all known workplaces under your 
Federal awards (see Sec. 26.230).



Sec. 26.205  What must I include in my drug-free workplace statement?

    You must publish a statement that--
    (a) Tells your employees that the unlawful manufacture, 
distribution, dispensing, possession, or use of a controlled substance 
is prohibited in your workplace;
    (b) Specifies the actions that you will take against employees for 
violating that prohibition; and
    (c) Lets each employee know that, as a condition of employment under 
any award, he or she:
    (1) Will abide by the terms of the statement; and
    (2) Must notify you in writing if he or she is convicted for a 
violation of a criminal drug statute occurring in the workplace and must 
do so no more than five calendar days after the conviction.



Sec. 26.210  To whom must I distribute my drug-free workplace statement?

    You must require that a copy of the statement described in Sec. 
26.205 be given to each employee who will be engaged in the performance 
of any Federal award.



Sec. 26.215  What must I include in my drug-free awareness program?

    You must establish an ongoing drug-free awareness program to inform 
employees about--
    (a) The dangers of drug abuse in the workplace;
    (b) Your policy of maintaining a drug-free workplace;
    (c) Any available drug counseling, rehabilitation, and employee 
assistance programs; and
    (d) The penalties that you may impose upon them for drug abuse 
violations occurring in the workplace.



Sec. 26.220  By when must I publish my drug-free workplace statement and establish my drug-free awareness program?

    If you are a new recipient that does not already have a policy 
statement as described in Sec. 26.205 and an ongoing awareness program 
as described in Sec. 26.215, you must publish the statement and 
establish the program by the time given in the following table:

------------------------------------------------------------------------
                 If . . .                          then you . . .
------------------------------------------------------------------------
(a) The performance period of the award is  must have the policy
 less than 30 days.                          statement and program in
                                             place as soon as possible,
                                             but before the date on
                                             which performance is
                                             expected to be completed.
(b) The performance period of the award is  must have the policy
 30 days or more.                            statement and program in
                                             place within 30 days after
                                             award.
(c) You believe there are extraordinary     may ask the DOD Component
 circumstances that will require more than   awarding official to give
 30 days for you to publish the policy       you more time to do so. The
 statement and establish the awareness       amount of additional time,
 program.                                    if any, to be given is at
                                             the discretion of the
                                             awarding official.
------------------------------------------------------------------------



Sec. 26.225  What actions must I take concerning employees who are convicted of drug violations in the workplace?

    There are two actions you must take if an employee is convicted of a 
drug violation in the workplace:

[[Page 109]]

    (a) First, you must notify Federal agencies if an employee who is 
engaged in the performance of an award informs you about a conviction, 
as required by Sec. 26.205(c)(2), or you otherwise learn of the 
conviction. Your notification to the Federal agencies must--
    (1) Be in writing;
    (2) Include the employee's position title;
    (3) Include the identification number(s) of each affected award;
    (4) Be sent within ten calendar days after you learn of the 
conviction; and
    (5) Be sent to every Federal agency on whose award the convicted 
employee was working. It must be sent to every awarding official or his 
or her official designee, unless the Federal agency has specified a 
central point for the receipt of the notices.
    (b) Second, within 30 calendar days of learning about an employee's 
conviction, you must either--
    (1) Take appropriate personnel action against the employee, up to 
and including termination, consistent with the requirements of the 
Rehabilitation Act of 1973 (29 U.S.C. 794), as amended; or
    (2) Require the employee to participate satisfactorily in a drug 
abuse assistance or rehabilitation program approved for these purposes 
by a Federal, State or local health, law enforcement, or other 
appropriate agency.



Sec. 26.230  How and when must I identify workplaces?

    (a) You must identify all known workplaces under each DOD Component 
award. A failure to do so is a violation of your drug-free workplace 
requirements. You may identify the workplaces--
    (1) To the DOD Component official that is making the award, either 
at the time of application or upon award; or
    (2) In documents that you keep on file in your offices during the 
performance of the award, in which case you must make the information 
available for inspection upon request by DOD Component officials or 
their designated representatives.
    (b) Your workplace identification for an award must include the 
actual address of buildings (or parts of buildings) or other sites where 
work under the award 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).
    (c) If you identified workplaces to the DOD Component awarding 
official at the time of application or award, as described in paragraph 
(a)(1) of this section, and any workplace that you identified changes 
during the performance of the award, you must inform the DOD Component 
awarding official.



        Subpart C_Requirements for Recipients Who Are Individuals



Sec. 26.300  What must I do to comply with this part if I am an individual recipient?

    As a condition of receiving a(n) DOD Component award, if you are an 
individual recipient, you must agree that--
    (a) You will not engage in the unlawful manufacture, distribution, 
dispensing, possession, or use of a controlled substance in conducting 
any activity related to the award; and
    (b) If you are convicted of a criminal drug offense resulting from a 
violation occurring during the conduct of any award activity, you will 
report the conviction:
    (1) In writing.
    (2) Within 10 calendar days of the conviction.
    (3) To the DOD Component awarding official or other designee for 
each award that you currently have, unless Sec. 26.301 or the award 
document designates a central point for the receipt of the notices. When 
notice is made to a central point, it must include the identification 
number(s) of each affected award.



Sec. 26.301  [Reserved]



     Subpart D_Responsibilities of DOD Component Awarding Officials



Sec. 26.400  What are my responsibilities as a(n) DOD Component awarding official?

    As a(n) DOD Component awarding official, you must obtain each 
recipient's

[[Page 110]]

agreement, as a condition of the award, to comply with the requirements 
in--
    (a) Subpart B of this part, if the recipient is not an individual; 
or
    (b) Subpart C of this part, if the recipient is an individual.



           Subpart E_Violations of this Part and Consequences



Sec. 26.500  How are violations of this part determined for recipients other than individuals?

    A recipient other than an individual is in violation of the 
requirements of this part if the Head of the DOD Component or his or her 
designee determines, in writing, that--
    (a) The recipient has violated the requirements of subpart B of this 
part; or
    (b) The number of convictions of the recipient's employees for 
violating criminal drug statutes in the workplace is large enough to 
indicate that the recipient has failed to make a good faith effort to 
provide a drug-free workplace.



Sec. 26.505  How are violations of this part determined for recipients who are individuals?

    An individual recipient is in violation of the requirements of this 
part if the Head of the DOD Component or his or her designee determines, 
in writing, that--
    (a) The recipient has violated the requirements of subpart C of this 
part; or
    (b) The recipient is convicted of a criminal drug offense resulting 
from a violation occurring during the conduct of any award activity.



Sec. 26.510  What actions will the Federal Government take against a recipient determined to have violated this part?

    If a recipient is determined to have violated this part, as 
described in Sec. 26.500 or Sec. 26.505, the DOD Component may take 
one or more of the following actions--
    (a) Suspension of payments under the award;
    (b) Suspension or termination of the award; and
    (c) Suspension or debarment of the recipient under 32 CFR Part 25, 
for a period not to exceed five years.



Sec. 26.515  Are there any exceptions to those actions?

    The Secretary of Defense or Secretary of a Military Department may 
waive with respect to a particular award, in writing, a suspension of 
payments under an award, suspension or termination of an award, or 
suspension or debarment of a recipient if the Secretary of Defense or 
Secretary of a Military Department determines that such a waiver would 
be in the public interest. This exception authority cannot be delegated 
to any other official.



                          Subpart F_Definitions



Sec. 26.605  Award.

    Award means an award of financial assistance by the DOD Component or 
other Federal agency directly to a recipient.
    (a) The term award includes:
    (1) A Federal grant or cooperative agreement, in the form of money 
or property in lieu of money.
    (2) A block grant or a grant in an entitlement program, whether or 
not the grant is exempted from coverage under the Governmentwide rule 32 
CFR Part 33 that implements OMB Circular A-102 (for availability, see 5 
CFR 1310.3) and specifies uniform administrative requirements.
    (b) The term award does not include:
    (1) Technical assistance that provides services instead of money.
    (2) Loans.
    (3) Loan guarantees.
    (4) Interest subsidies.
    (5) Insurance.
    (6) Direct appropriations.
    (7) 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).



Sec. 26.610  Controlled substance.

    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.

[[Page 111]]



Sec. 26.615  Conviction.

    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.



Sec. 26.620  Cooperative agreement.

    Cooperative agreement means an award of financial assistance that, 
consistent with 31 U.S.C. 6305, is used to enter into the same kind of 
relationship as a grant (see definition of grant in Sec. 26.650), 
except that substantial involvement is expected between the Federal 
agency and the recipient when carrying out the activity contemplated by 
the award. The term does not include cooperative research and 
development agreements as defined in 15 U.S.C. 3710a.



Sec. 26.625  Criminal drug statute.

    Criminal drug statute means a Federal or non-Federal criminal 
statute involving the manufacture, distribution, dispensing, use, or 
possession of any controlled substance.



Sec. 26.630  Debarment.

    Debarment means an action taken by a Federal agency to prohibit a 
recipient from participating in Federal Government procurement contracts 
and covered nonprocurement transactions. A recipient so prohibited is 
debarred, in accordance with the Federal Acquisition Regulation for 
procurement contracts (48 CFR part 9, subpart 9.4) and the common rule, 
Government-wide Debarment and Suspension (Nonprocurement), that 
implements Executive Order 12549 and Executive Order 12689.



Sec. 26.632  DOD Component.

    DOD Component means the Office of the Secretary of Defense, a 
Military Department, a Defense Agency, or the Office of Economic 
Adjustment.

[68 FR 66609, Nov. 26, 2003]



Sec. 26.635  Drug-free workplace.

    Drug-free workplace means a site for the performance of work done in 
connection with a specific award at which employees of the recipient are 
prohibited from engaging in the unlawful manufacture, distribution, 
dispensing, possession, or use of a controlled substance.



Sec. 26.640  Employee.

    (a) Employee means the employee of a recipient directly engaged in 
the performance of work under the award, including--
    (1) All direct charge employees;
    (2) All indirect charge employees, unless their impact or 
involvement in the performance of work under the award is insignificant 
to the performance of the award; and
    (3) Temporary personnel and consultants who are directly engaged in 
the performance of work under the award and who are on the recipient's 
payroll.
    (b) This definition does not include workers not on the payroll of 
the recipient (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).



Sec. 26.645  Federal agency or agency.

    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.



Sec. 26.650  Grant.

    Grant means an award of financial assistance that, consistent with 
31 U.S.C. 6304, is used to enter into a relationship--
    (a) The principal purpose of which is to transfer a thing of value 
to the recipient to carry out a public purpose of support or stimulation 
authorized by a law of the United States, rather than to acquire 
property or services for the Federal Government's direct benefit or use; 
and
    (b) In which substantial involvement is not expected between the 
Federal agency and the recipient when carrying out the activity 
contemplated by the award.

[[Page 112]]



Sec. 26.655  Individual.

    Individual means a natural person.



Sec. 26.660  Recipient.

    Recipient means any individual, corporation, partnership, 
association, unit of government (except a Federal agency) or legal 
entity, however organized, that receives an award directly from a 
Federal agency.



Sec. 26.665  State.

    State means any of the States of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, or any territory or 
possession of the United States.



Sec. 26.670  Suspension.

    Suspension means an action taken by a Federal agency that 
immediately prohibits a recipient from participating in Federal 
Government procurement contracts and covered nonprocurement transactions 
for a temporary period, pending completion of an investigation and any 
judicial or administrative proceedings that may ensue. A recipient so 
prohibited is suspended, in accordance with the Federal Acquisition 
Regulation for procurement contracts (48 CFR part 9, subpart 9.4) and 
the common rule, Government-wide Debarment and Suspension 
(Nonprocurement), that implements Executive Order 12549 and Executive 
Order 12689. Suspension of a recipient is a distinct and separate action 
from suspension of an award or suspension of payments under an award.



PART 28_NEW RESTRICTIONS ON LOBBYING--Table of Contents




                            Subpart A_General

Sec.
28.100 Conditions on use of funds.
28.105 Definitions.
28.110 Certification and disclosure.

                  Subpart B_Activities by Own Employees

28.200 Agency and legislative liaison.
28.205 Professional and technical services.
28.210 Reporting.

            Subpart C_Activities by Other Than Own Employees

28.300 Professional and technical services.

                   Subpart D_Penalties and Enforcement

28.400 Penalties.
28.405 Penalty procedures.
28.410 Enforcement.

                          Subpart E_Exemptions

28.500 Secretary of Defense.

                        Subpart F_Agency Reports

28.600 Semi-annual compilation.
28.605 Inspector General report.

Appendix A to Part 28--Certification Regarding Lobbying
Appendix B to Part 28--Disclosure Form To Report Lobbying

    Authority: Section 319, Public Law 102-121 (31 U.S.C. 1352); 5 
U.S.C. section 301; 10 U.S.C. 113.

    Source: 55 FR 6737, 6752, Feb. 26, 1990, unless otherwise noted. 
Redesignated at 57 FR 6199, Feb. 21, 1992.

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



                            Subpart A_General



Sec. 28.100  Conditions on use of funds.

    (a) No appropriated funds may be expended by the recipient of a 
Federal contract, grant, loan, or cooperative ageement 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.

[[Page 113]]

    (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. 28.105  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 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

[[Page 114]]

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 perfessional 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 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. 28.110  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

[[Page 115]]

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.
    (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. 28.200  Agency and legislative liaison.

    (a) The prohibition on the use of appropriated funds, in Sec. 
28.100 (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

[[Page 116]]

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.

[55 FR 6737 and 6752, Feb. 26, 1990. Redesignated and amended at 57 FR 
6199 and 6200, Feb. 21, 1992]



Sec. 28.205  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in Sec. 
28.100 (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 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.

[55 FR 6737 and 6752, Feb. 26, 1990. Redesignated and amended at 57 FR 
6199 and 6200, Feb. 21, 1992]



Sec. 28.210  Reporting.

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

[[Page 117]]



            Subpart C_Activities by Other Than Own Employees



Sec. 28.300  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in Sec. 
28.100 (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 requirments in Sec. 28.110 (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 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 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.
    (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.

[55 FR 6737 and 6752, Feb. 26, 1990. Redesignated and amended at 57 FR 
6199 and 6200, Feb. 21, 1992]



                   Subpart D_Penalties and Enforcement



Sec. 28.400  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

[[Page 118]]

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. 28.405  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. 
sections 3803 (except subsection (c)), 3804, 3805, 3806, 3807, 3808, and 
3812, insofar as these provisions are not inconsistent with the 
requirements herein.



Sec. 28.410  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. 28.500  Secretary of Defense.

    (a) Exemption authority. 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) Policy. It is the policy of the Department of Defense that 
exemptions under paragraph (a) of this section shall be requested only 
rarely and in exceptional circumstances.
    (c) Procedures. Each DoD Component that awards or administers 
Federal grants, Federal cooperative agreements, or Federal loans subject 
to this part shall establish procedures whereby:
    (1) A grants officer wishing to request an exemption for a grant, 
cooperative agreement, or loan shall transmit such request through 
appropriate channels to: Director for Research, ODDR&E(R), 3080 Defense 
Pentagon, Washington, DC. 20301-3080.
    (2) Each such request shall explain why an exemption is in the 
national interest, a justification that must be transmitted to Congress 
for each exemption that is approved.

[63 FR 12188, Mar. 12, 1998]



                        Subpart F_Agency Reports



Sec. 28.600  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.
    (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

[[Page 119]]

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. 28.605  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.



      Sec. Appendix A to Part 28--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 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

[[Page 120]]

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 121]]



     Sec. Appendix B to Part 28--Disclosure Form To Report Lobbying

[GRAPHIC] [TIFF OMITTED] TC23OC91.000

[[Page 122]]

[GRAPHIC] [TIFF OMITTED] TC23OC91.001

[[Page 123]]


[GRAPHIC] [TIFF OMITTED] TC23OC91.002


[[Page 124]]





PART 32_ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, AND OTHER NON-PROFIT ORGANIZATIONS--Table of Contents




                            Subpart A_General

Sec.
32.1 Purpose.
32.2 Definitions
32.3 Effect on other issuances.
32.4 Deviations.
32.5 Subawards.

                    Subpart B_Pre-Award Requirements

32.10 Purpose.
32.11 Pre-award policies.
32.12 Forms for applying for Federal assistance.
32.13 Debarment and suspension.
32.14 Special award conditions.
32.15 Metric system of measurement.
32.16 Resource Conservation and Recovery Act (RCRA).
32.17 Certifications and representations.

                    Subpart C_Post-Award Requirements

                    Financial and Program Management

32.20 Purpose of financial and program management.
32.21 Standards for financial management systems.
32.22 Payment.
32.23 Cost sharing or matching.
32.24 Program income.
32.25 Revision of budget and program plans.
32.26 Non-Federal audits.
32.27 Allowable costs.
32.28 Period of availability of funds.

                           Property Standards

32.30 Purpose of property standards.
32.31 Insurance coverage.
32.32 Real property.
32.33 Federally-owned and exempt property.
32.34 Equipment.
32.35 Supplies.
32.36 Intangible property.
32.37 Property trust relationship.

                          Procurement Standards

32.40 Purpose of procurement standards.
32.41 Recipient responsibilities.
32.42 Codes of conduct.
32.43 Competition.
32.44 Procurement procedures.
32.45 Cost and price analysis.
32.46 Procurement records.
32.47 Contract administration.
32.48 Contract provisions.
32.49 Resource Conservation and Recovery Act.

                           Reports and Records

32.50 Purpose of reports and records.
32.51 Monitoring and reporting program performance.
32.52 Financial reporting.
32.53 Retention and access requirements for records.

                       Termination and Enforcement

32.60 Purpose of termination and enforcement.
32.61 Termination.
32.62 Enforcement.

                 Subpart D_After-the-Award Requirements

32.70 Purpose.
32.71 Closeout procedures.
32.72 Subsequent adjustments and continuing responsibilities.
32.73 Collection of amounts due.

Appendix A to Part 32--Contract Provisions

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

    Source: 63 FR 12188, Mar. 12, 1998, unless otherwise noted.



                            Subpart A_General



Sec. 32.1  Purpose.

    (a) General. This part implements OMB Circular A-110 \1\ and 
establishes uniform administrative requirements for awards and subawards 
to institutions of higher education, hospitals, and other non-
governmental, non-profit organizations.
---------------------------------------------------------------------------

    \1\ For copies of the Circular, contact the Office of Management and 
Budget, EOP Publications, 725 17th St. NW, New Executive Office 
Building, Washington, DC 20503.
---------------------------------------------------------------------------

    (b) Relationship to other parts. This part is an integral part of 
the DoD Grant and Agreement Regulations (DoDGARs), which comprise this 
subchapter of the Code of Federal Regulations. This part includes 
references to other parts of the DoDGARs that implement Governmentwide 
guidance and provide uniform internal policies and procedures for DoD 
Components that make or administer awards. Although parts 21 and 22 of 
this subchapter do not impose any direct requirements on recipients, and 
recipients therefore are not required to be familiar with those parts, 
the information in those parts

[[Page 125]]

concerning internal policies and procedures should be helpful to 
recipients of DoD awards.
    (c) Prime awards. DoD Components shall apply the provisions of this 
part to awards to recipients that are institutions of higher education, 
hospitals, and other non-profit organizations. DoD Components shall not 
impose additional or inconsistent requirements, except as provided in 
Sec. Sec. 32.4 and 32.14, or unless specifically required by Federal 
statute or executive order.
    (d) Subawards. Any legal entity that receives an award from a DoD 
Component shall apply the provisions of this part to subawards with 
institutions of higher education, hospitals, and other non-profit 
organizations. Thus, a governmental or for-profit organization, whose 
prime award from a DoD Component is subject to 32 CFR part 33 or part 
34, respectively, applies this part to subawards with institutions of 
higher education, hospitals, or other non-profit organizations. It 
should be noted that subawards are for the performance of substantive 
work under awards, and are distinct from contracts for procuring goods 
and services. It should be further noted that non-profit organizations 
that implement Federal programs for the States are also subject to State 
requirements.



Sec. 32.2  Definitions.

    The following are definitions of terms used in this part. Grants 
officers are cautioned that terms may be defined differently in this 
part than they are in other parts of the DoD Grant and Agreement 
Regulations, because this part implements OMB Circular A-110 and uses 
definitions as stated in that Circular. In such cases, the definition 
given in this section applies to the term as it is used in this part, 
and the definition given in other parts applies to the term as it is 
used in those parts. For example, ``suspension'' is defined in this 
section to mean temporary withdrawal of Federal sponsorship under an 
award, but is defined in the part of the DoD Grant and Agreement 
Regulations on nonprocurement suspension and debarment (2 CFR part 1125, 
which implements OMB guidance at 2 CFR part 180) to be an action taken 
to exclude a person from participating in a grant, cooperative 
agreement, or other covered transaction (see definition at 2 CFR 
180.1015).
    Accrued expenditures. 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.
    Accrued income. 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.
    (2) Amounts becoming owed to the recipient for which no current 
services or performance is required by the recipient.
    Acquisition cost of equipment. 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.
    Advance. 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.
    Award. 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

[[Page 126]]

are required to be entered into and administered under procurement laws 
and regulations.
    Cash contributions. The recipient's cash outlay, including the 
outlay of money contributed to the recipient by third parties.
    Closeout. The process by which the grants officer administering an 
award made by a DoD Component determines that all applicable 
administrative actions and all required work of the award have been 
completed by the recipient and DoD Component.
    Contract. A procurement contract under an award or subaward, and a 
procurement subcontract under a recipient's or subrecipient's contract.
    Cost sharing or matching. That portion of project or program costs 
not borne by the Federal Government.
    Date of completion. 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.
    Disallowed costs. Those charges to an award that the grants officer 
administering an award made by a DoD Component determines to be 
unallowable, in accordance with the applicable Federal cost principles 
or other terms and conditions contained in the award.
    DoD Component. A Military Department, Defense Agency, DoD field 
activity, or organization within the Office of the Secretary of Defense 
that provides or administers an award to a recipient.
    Equipment. 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 $5,000 or more per unit. However, 
consistent with recipient policy, lower limits may be established.
    Excess property. Property under the control of any DoD Component 
that, as determined by the head thereof, is no longer required for its 
needs or the discharge of its responsibilities.
    Exempt property. Tangible personal property acquired in whole or in 
part with Federal funds, where the DoD Component 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.
    Federal funds authorized. The total amount of Federal funds 
obligated by a DoD Component 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.
    Federal share (of real property, equipment, or supplies). That 
percentage of the property's acquisition costs and any improvement 
expenditures paid with Federal funds.
    Funding period. The period of time when Federal funding is available 
for obligation by the recipient.
    Intangible property and debt instruments. Property that includes, 
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.
    Obligations. 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.
    Outlays or expenditures. 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

[[Page 127]]

other payees and other amounts becoming owed under programs for which no 
current services or performance are required.
    Personal property. 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.
    Prior approval. Written approval by an authorized official 
evidencing prior consent.
    Program income. 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. 32.24(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 earned on advances 
of Federal funds is not program income. Except as otherwise provided in 
program 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.
    Project costs. 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.
    Project period. The period established in the award document during 
which Federal sponsorship begins and ends.
    Property. Real property and personal property (equipment, supplies, 
intangible property and debt instruments), unless stated otherwise.
    Real property. Land, including land improvements, structures and 
appurtenances thereto, but excluding movable machinery and equipment.
    Recipient. An organization receiving financial assistance directly 
from DoD Components 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 also 
includes consortia comprised of any combination of universities, other 
nonprofit organizations, governmental organizations, for-profit 
organizations, and other entities, to the extent that the consortia are 
legally incorporated as nonprofit organizations. 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.
    Research and development. 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.
    Small award. An award not exceeding the simplified acquisition 
threshold fixed at 41 U.S.C. 403(11) (currently $100,000).
    Subaward. 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

[[Page 128]]

from the definition of ``award'' in this section.
    Subrecipient. The legal entity to which a subaward is made and which 
is accountable to the recipient for the use of the funds provided.
    Supplies. 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 and Small Business Firms Under 
Government Grants, Contracts, and Cooperative Agreements.''
    Suspension. An action by a DoD Component that temporarily withdraws 
Federal sponsorship under an award, pending corrective action by the 
recipient or pending a decision to terminate the award by the DoD 
Component. Suspension of an award is a separate action from suspension 
of a participant under 2 CFR part 1125.
    Termination. The cancellation of an award, in whole or in part, at 
any time prior to the date of completion.
    Third party in-kind contributions. 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 the value of goods and services directly benefiting and specifically 
identifiable to the project or program.
    Unliquidated obligations. The amount of obligations incurred by the 
recipient:
    (1) That have not been paid, if financial reports are prepared on a 
cash basis.
    (2) For which an outlay has not been recorded, if reports are 
prepared on an accrued expenditure basis.
    Unobligated balance. The portion of the funds authorized by a DoD 
Component that has not been obligated by the recipient and is determined 
by deducting the cumulative obligations from the cumulative funds 
authorized.
    Unrecovered indirect cost. The difference between the amount awarded 
and the amount which could have been awarded under the recipient's 
approved negotiated indirect cost rate.
    Working capital advance. A procedure whereby funds are advanced to 
the recipient to cover its estimated disbursement needs for a given 
initial period.

[63 FR 12188, Mar. 12, 1998, as amended at 70 FR 49477, Aug. 23, 2005; 
72 FR 34998, June 26, 2007]



Sec. 32.3  Effect on other issuances.

    For awards subject to this part, all administrative requirements of 
codified program regulations, program manuals, handbooks and other 
nonregulatory materials which are inconsistent with the requirements of 
this part shall be superseded, except to the extent they are required by 
statute, or authorized in accordance with the deviations provision in 
Sec. 32.4.



Sec. 32.4  Deviations.

    (a) Individual deviations. Individual deviations affecting only one 
award may be approved by DoD Components in accordance with procedures 
stated in 32 CFR 21.335(a) and 21.340.
    (b) Small awards. DoD Components may apply less restrictive 
requirements than the provisions of this part when awarding small 
awards, except for those requirements which are statutory.
    (c) Other class deviations. (1) For classes of awards other than 
small awards, the Director of Defense Research and Engineering (DDR&E), 
or his or her designee, may grant exceptions from the requirements of 
this part:
    (i) With the written concurrence of the Office of the Management and 
Budget (OMB). The DDR&E, or his or her designee, shall provide written 
notification to OMB of the Department of Defense's intention to grant a 
class deviation; and
    (ii) When exceptions are not prohibited by statute.
    (2) DoD Components shall request approval for such deviations in 
accordance with 32 CFR 21.335(b) and 21.340. However, in the interest of 
maximum

[[Page 129]]

uniformity, exceptions from the requirements of this part shall be 
permitted only in unusual circumstances.

[63 FR 12188, Mar. 12, 1998, as amended at 68 FR 47160, Aug. 7, 2003]



Sec. 32.5  Subawards.

    Unless sections of this part specifically exclude subrecipients from 
coverage, the provisions of this part 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 32 CFR 
part 33. Subrecipients that are for-profit organizations are subject to 
32 CFR part 34.



                    Subpart B_Pre-Award Requirements



Sec. 32.10  Purpose.

    Sections 32.11 through 32.17 prescribe application forms and 
instructions and other pre-award matters.



Sec. 32.11  Pre-award policies.

    (a) Use of grants, cooperative agreements, and contracts. (1) OMB 
Circular A-110 states that:
    (i) In each instance, the Federal awarding agency shall decide on 
the appropriate award instrument (i.e., grant, cooperative agreement, or 
contract).
    (ii) The Federal Grant and Cooperative Agreement Act (31 U.S.C. 
6301-6308) governs the use of grants, cooperative agreements, and 
contracts. Under that Act:
    (A) 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.
    (B) Contracts shall be used when the principal purpose is 
acquisition of property or services for the direct benefit or use of the 
Federal Government.
    (C) 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.''
    (2) In selecting the appropriate award instruments, DoD Components' 
grants officers shall comply with the DoD implementation of the Federal 
Grant and Cooperative Agreement Act at 32 CFR part 22, subpart B.
    (b) Public notice and priority setting. As a matter of 
Governmentwide policy, Federal awarding agencies shall notify the public 
of intended funding priorities for programs that use discretionary 
awards, unless funding priorities are established by Federal statute. 
For DoD Components, compliance with competition policies and statutory 
requirements implemented in 32 CFR part 22, subpart C, shall constitute 
compliance with this Governmentwide policy.

[63 FR 12188, Mar. 12, 1998, as amended at 68 FR 47160, Aug. 7, 2003]



Sec. 32.12  Forms for applying for Federal assistance.

    (a) DoD Components 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 in place of or as a supplement 
to the Standard Form 424 \2\ (SF-424) series.
---------------------------------------------------------------------------

    \2\ For copies of Standard Forms listed in this part, contact 
regional grants administration offices of the Office of Naval Research. 
Addresses for the offices are listed in the ``DoD Directory of Contract 
Administration Services Components,'' DLAH 4105.4, which can be obtained 
from: Defense Logistics Agency, Publications Distribution Division 
(DASC-WDM), 8725 John J. Kingman Rd., Suite 0119, Fort Belvoir, VA 
22060-6220.
---------------------------------------------------------------------------

    (b) Applicants shall use the SF-424 series or those forms and 
instructions prescribed by DoD Components.
    (c) For Federal programs covered by E.O. 12372 (3 CFR, 1982 Comp., 
p. 197), ``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 the DoD 
Component or the Catalog of Federal Domestic Assistance. The

[[Page 130]]

SPOC shall advise the applicant whether the program for which 
application is made has been selected by that State for review.
    (d) DoD Components that do not use the SF-424 form should indicate 
whether the application is subject to review by the State under E.O. 
12372.



Sec. 32.13  Debarment and suspension.

    DoD Components and recipients shall comply with the policy and 
procedural requirements in the OMB guidance on nonprocurement debarment 
and suspension (2 CFR part 180), as implemented by the Department of 
Defense in 2 CFR part 1125. Those policies and procedures restrict 
subawards and contracts with certain parties that are debarred, 
suspended or otherwise excluded from or ineligible for participation in 
Federal assistance programs or activities.

[72 FR 34998, June 26, 2007]



Sec. 32.14  Special award conditions.

    (a) DoD Components may impose additional requirements as needed, 
over and above those provided in this part, if an applicant or 
recipient:
    (1) Has a history of poor performance;
    (2) Is not financially stable;
    (3) Has a management system that does not meet the standards 
prescribed in this part;
    (4) Has not conformed to the terms and conditions of a previous 
award; or
    (5) Is not otherwise responsible.
    (b) Before imposing additional requirements, DoD Components shall 
notify the applicant or recipient in writing as to:
    (1) The nature of the additional requirements;
    (2) The reason why the additional requirements are being imposed;
    (3) The nature of the corrective action needed;
    (4) The time allowed for completing the corrective actions; and
    (5) The method for requesting reconsideration of the additional 
requirements imposed.
    (c) Any special conditions shall be promptly removed once the 
conditions that prompted them have been corrected.
    (d) Grants officers:
    (1) Should coordinate the imposition and removal of special award 
conditions with the cognizant grants administration office identified in 
32 CFR 22.710.
    (2) Shall include in the award file the written notification to the 
recipient, described in paragraph (b) of this section, and the 
documentation required by 32 CFR 22.410(b).



Sec. 32.15  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, and for 
Federal agencies' procurements, grants, and other business-related 
activities. DoD grants officers shall comply with requirements 
concerning the use of the metric system at 32 CFR 22.530.



Sec. 32.16  Resource Conservation and Recovery Act (RCRA).

    Recipients' procurements shall comply with applicable requirements 
of the Resource Conservation and Recovery Act (RCRA), as described at 
Sec. 32.49.



Sec. 32.17  Certifications and representations.

    (a) OMB Circular A-110 authorizes and encourages each Federal 
agency, unless prohibited by statute or codified regulation, to 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. 
The Circular further states that annual certifications and 
representations, when used, shall be signed by responsible officials 
with the authority to ensure recipients' compliance with the pertinent 
requirements.
    (b) DoD grants officers shall comply with the provisions concerning 
certifications and representations at 32 CFR 22.510. Those provisions 
ease burdens on recipients to the extent possible, given current 
statutory and regulatory impediments to obtaining all certifications on 
an annual basis. The provisions thereby also comply with the intent of 
OMB Circular A-110, to use less

[[Page 131]]

burdensome methods for obtaining certifications and representations, as 
such methods become feasible.



                    Subpart C_Post-Award Requirements

                    Financial and Program Management



Sec. 32.20  Purpose of financial and program management.

    Sections 32.21 through 32.28 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. 32.21  Standards for financial management systems.

    (a) DoD Components shall require recipients to relate financial data 
to performance data and develop unit cost information whenever 
practical. For awards that support research, it should be noted that it 
is generally not appropriate to develop unit cost information.
    (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. 32.52. If a DoD 
Component requires reporting on an accrual basis from a recipient that 
maintains its records on other than an accrual 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. As discussed in paragraph (a) of this 
section, unit cost data is generally not appropriate for awards that 
support research.
    (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 
should 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 (see Sec. 32.27) and the 
terms and conditions of the award.
    (7) Accounting records including cost accounting records that are 
supported by source documentation.
    (c) Where the Federal Government guarantees or insures the repayment 
of money borrowed by the recipient, the DoD Component, at its 
discretion, may require 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) The DoD Component may require adequate fidelity bond coverage 
where the recipient lacks sufficient coverage to protect the Federal 
Government's interest.
    (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.''

[[Page 132]]



Sec. 32.22  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 agreements under the Cash Management 
Improvement Act (CMIA) (31 U.S.C. 3335 and 6503) or default procedures 
in 31 CFR part 205.
    (b) Recipients are to be paid in advance, provided they maintain or 
demonstrate the willingness to maintain:
    (1) Written procedures that minimize the time elapsing between the 
transfer of funds and disbursement by the recipient; and
    (2) Financial management systems that meet the standards for fund 
control and accountability as established in Sec. 32.21. 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 DoD Component 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.
    (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,\3\ ``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 inconsistent with DoD 
procedures for electronic funds transfer.
---------------------------------------------------------------------------

    \3\ See footnote 2 to Sec. 32.12(a).
---------------------------------------------------------------------------

    (e) Reimbursement is the preferred method when the requirements in 
paragraph (b) of this section cannot be met. DoD Components 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, the responsible DoD 
payment office generally makes payment within 30 calendar days after 
receipt of the billing by the office designated to receive the billing, 
unless the billing is improper (for further information about timeframes 
for payments, see 32 CFR 22.810(c)(3)(ii)).
    (2) Recipients shall be authorized to submit requests for 
reimbursement at least monthly when electronic funds transfers are not 
used.
    (f) If a recipient cannot meet the criteria for advance payments and 
the grants officer, in consultation with the program manager, has 
determined that reimbursement is not feasible because the recipient 
lacks sufficient working capital, the award may provide for cash on a 
working capital advance basis. Under this procedure, the award shall 
provide for advancing cash to the recipient to cover its estimated 
disbursement needs for an initial period generally geared to the 
awardee's disbursing cycle. Thereafter, the award shall provide for 
reimbursing 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.

[[Page 133]]

    (h) Unless otherwise required by statute, grants officers shall not 
withhold payments for proper charges made by recipients at any time 
during the project period unless:
    (1) A recipient has failed to comply with the project objectives, 
the terms and conditions of the award, or Federal reporting 
requirements; or
    (2) The recipient or subrecipient is delinquent in a debt to the 
United States under OMB Circular A-129, ``Managing Federal Credit 
Programs'' (see definitions of ``debt'' and ``delinquent debt,'' at 32 
CFR 22.105). Under such conditions, the grants officer 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 
(also see 32 CFR 22.420(b)(2) and 22.820).
    (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, DoD Components 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:
    (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; or
    (3) The depository would require an average or minimum balance so 
high that it would not be feasible within the expected Federal and non-
Federal cash resources.
    (l)(1) Interest earned on Federal advances deposited in interest 
bearing accounts shall be remitted annually to Department of Health and 
Human Services, Payment Management System, PO Box 6021, Rockville, MD 
20852.
    (2) 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 FEDWIR Deposit System. 
Electronic remittances should be in the format and should include any 
data that are specified by the grants officer as being necessary to 
facilitate direct deposit in HHS' account at the Department of the 
Treasury.
    (3) Recipients that do not have electronic remittance capability 
should use a check.
    (4) Interest amounts up to $250 per year may be retained by the 
recipient for administrative expense.
    (m) Except as noted elsewhere in this part, only the following forms 
shall be authorized for the recipients in requesting advances and 
reimbursements. DoD Components shall not require more than an original 
and two copies of these forms.
    (1) SF-270, Request for Advance or Reimbursement. Each DoD Component 
shall adopt the SF-270 as a standard form for all nonconstruction 
programs when electronic funds transfer or predetermined advance methods 
are not used. DoD Components, however, have the option of using this 
form for construction programs in lieu of the SF-271,\4\ ``Outlay Report 
and Request for Reimbursement for Construction Programs.''
---------------------------------------------------------------------------

    \4\ See footnote 2 to Sec. 32.12(a).
---------------------------------------------------------------------------

    (2) SF-271, Outlay Report and Request for Reimbursement for 
Construction Programs. Each DoD Component shall adopt the SF-271 as the 
standard form to be used for requesting reimbursement for construction 
programs. However, a DoD Component may substitute the SF-270 when the 
DoD Component determines that it provides adequate information to meet 
Federal needs.

[[Page 134]]



Sec. 32.23  Cost sharing or matching.

    (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 provided for in the approved budget when required by the DoD 
Component.
    (7) Conform to other provisions of this part, as applicable.
    (b) Unrecovered indirect costs (see definition in Sec. 32.2) may be 
included as part of cost sharing or matching.
    (c) Values for recipient contributions of services and property 
shall be established in accordance with the applicable cost principles. 
If a DoD Component authorizes recipients to donate buildings or land for 
construction/facilities acquisition projects or long-term use, the value 
of the donated property for cost sharing or matching shall be the lesser 
of:
    (1) The certified value of the remaining life of the property 
recorded in the recipient's accounting records at the time of donation; 
or
    (2) The current fair market value. However, when there is sufficient 
justification, the DoD Component 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. The DoD Component may 
accept the use of any reasonable basis for determining the fair market 
value of the property.
    (d) Volunteer services furnished by professional and technical 
personnel, 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 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 the 
purpose of the award is to:
    (1) 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; or
    (2) 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 DoD Component 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.

[[Page 135]]

    (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.
    (i) The following requirements pertain to the recipient's supporting 
records for in-kind contributions from third parties:
    (1) Volunteer services shall be documented and, to the extent 
feasible, supported by the same methods used by the recipient for its 
own employees.
    (2) The basis for determining the valuation for personal service and 
property shall be documented.



Sec. 32.24  Program income.

    (a) DoD Components 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 the terms and conditions of the award, 
shall be used in one or more of the following ways:
    (1) Added to funds committed to the project by the DoD Component and 
recipient and used 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 a program regulation or award authorizes the disposition of 
program income as described in paragraphs (b)(1) or (b)(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 program regulations or the terms and 
conditions of the award do not specify 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 the 
terms and conditions specify another alternative or the recipient is 
subject to special award conditions, as indicated in Sec. 32.14.
    (e) Unless program 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 program 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 
Sec. Sec. 32.30 through 32.37).
    (h) Unless program 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. Note 
that the Patent and Trademark Amendments (35 U.S.C. chapter 18) apply to 
inventions made under an experimental, developmental, or research award.



Sec. 32.25  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. It may include either the 
sum of the Federal and non-Federal shares, or only the Federal share, 
depending upon DoD Component requirements. It shall be

[[Page 136]]

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, recipients shall request prior 
approvals from the cognizant grants officer for one or more of the 
following program or budget related reasons.
    (1) Change in the scope or the objective of the project or program 
(even if there is no associated budget revision requiring prior written 
approval).
    (2) Change in a key person specified in the application or award 
document.
    (3) 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.
    (4) The need for additional Federal funding.
    (5) The transfer of amounts budgeted for indirect costs to absorb 
increases in direct costs, or vice versa, if approval is required by the 
DoD Component. DoD Components should require this prior approval only in 
exceptional circumstances. The requirement in each such case must be 
stated in the award document.
    (6) The inclusion, unless waived by the DoD Component, of costs that 
require prior approval in accordance with OMB Circular A-21,\5\ ``Cost 
Principles for Institutions of Higher Education,'' OMB Circular A-
122,\6\ ``Cost Principles for Non-Profit Organizations,'' or Appendix E 
to 45 CFR part 74, ``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. However, it should be noted that many of the prior approvals 
in these cost principles are appropriately waived only after 
consultation with the cognizant federal agency responsible for 
negotiating the recipient's indirect costs.
---------------------------------------------------------------------------

    \5\ See footnote 1 to Sec. 32.1(a).
    \6\ See footnote 1 to Sec. 32.1(a).
---------------------------------------------------------------------------

    (7) The transfer of funds allotted for training allowances (direct 
payment to trainees) to other categories of expense.
    (8) Unless described in the application and funded in the approved 
awards, the subaward, transfer or contracting out of any work under an 
award. This provision does not apply to the purchase of supplies, 
material, equipment or general support services.
    (9) If required by the DoD Component, the transfer of funds among 
direct cost categories that is described in paragraph (e) of this 
section.
    (d) (1) Except for requirements listed in paragraphs (c)(1) and 
(c)(4) of this section, OMB Circular A-110 authorizes DoD Components, at 
their option, to waive cost-related and administrative prior written 
approvals required by this part and OMB Circulars A-21 and A-122 (but 
see cautionary note at end of paragraph (c)(5) of this section).
    (2) The two prior approvals listed in paragraphs (d)(2)(i) and (ii) 
of this section are automatically waived unless the award document 
states otherwise. DoD Components should override this automatic waiver 
and require the prior approvals, especially for research awards, only in 
exceptional circumstances. Absent an override in the award terms and 
conditions, recipients need not obtain prior approvals before:
    (i) Incurring pre-award costs 90 calendar days prior to award 
(incurring pre-award costs more than 90 calendar days prior to award 
would still require the prior approval of the DoD Component). All pre-
award costs are incurred at the recipient's risk (i.e., the DoD 
Component 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).
    (ii) Carrying forward unobligated balances to subsequent funding 
periods.
    (3) Under certain conditions, a DoD Component may authorize a 
recipient to initiate, without prior approval, a one-time, no-cost 
extension (i.e., an extension in the expiration date of an award that 
does not require additional Federal funds) for a period of up to twelve 
months, as long as the no-cost extension does not involve a change in 
the approved objectives or scope of the

[[Page 137]]

project. The conditions for waiving this prior approval requirement are 
that the DoD Component must:
    (i) Judge that the recipient's subsequently initiating a one-time, 
no-cost extension would not cause the DoD Component to fail to comply 
with DoD funding policies (for further information on the location of 
DoD funding policies, grants officers may refer to Appendix C to 32 CFR 
part 22).
    (ii) Require a recipient that wishes to initiate a one-time, no-cost 
extension to so notify the office that made the award at least 10 
calendar days before the original expiration date of the award.
    (e) The DoD Component may, at its option, restrict the transfer of 
funds among direct cost categories, 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 the DoD Component. As a 
matter of DoD policy, requiring prior approvals for such transfers 
generally is not appropriate for grants to support research. No DoD 
Component shall 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.
    (f) For construction awards, recipients shall request prior written 
approval promptly from grants officers for budget revisions whenever:
    (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; or
    (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. 32.27.
    (g) When a DoD Component makes an award that provides support for 
both construction and nonconstruction work, the DoD Component may 
require the recipient to request prior approval from the grants officer 
before making any fund or budget transfers between the two types of work 
supported.
    (h) No other prior approval requirements for specific items may be 
imposed unless a deviation has been approved, in accordance with the 
deviation procedures in Sec. 32.4(c).
    (i) For both construction and nonconstruction awards, DoD Components 
shall require recipients to notify the grants officer 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.
    (j) When requesting approval for budget revisions, recipients shall 
use the budget forms that were used in the application unless the grants 
officer indicates a letter of request suffices.
    (k) Within 30 calendar days from the date of receipt of the request 
for budget revisions, the grants officer 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, the grants officer shall inform the recipient in writing of the 
date when the recipient may expect the decision.



Sec. 32.26  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,\7\ ``Audits of States, Local Governments, and Non-Profit 
Organizations.''
---------------------------------------------------------------------------

    \7\ See footnote 1 to Sec. 32.1(a).
---------------------------------------------------------------------------

    (b) State and local governments that are subrecipients 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) Hospitals that are subrecipients and are not covered by the 
audit provisions of revised OMB Circular A-133

[[Page 138]]

shall be subject to the audit requirements specified in award terms and 
conditions.
    (d) For-profit organizations that are subrecipients shall be subject 
to the audit requirements specified in 32 CFR 34.16.



Sec. 32.27  Allowable costs.

    (a) General. For each kind of recipient or subrecipient of a cost-
type assistance award, or each contractor receiving a. cost-type 
contract under an assistance award, 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.
    (b) Governmental organizations. Allowability of costs incurred by 
State, local or federally-recognized Indian tribal governments that may 
be subrecipients or contractors under awards subject to this part is 
determined in accordance with the provisions of OMB Circular A-87,\8\ 
``Cost Principles for State and Local Governments.''
---------------------------------------------------------------------------

    \8\ See footnote 1 to Sec. 32.1(a).
---------------------------------------------------------------------------

    (c) Non-profit organizations. The allowability of costs incurred by 
non-profit organizations that may be recipients or subrecipients of 
awards subject to this part, or contractors under such awards, is 
determined in accordance with the provisions of OMB Circular A-122, 
``Cost Principles for Non-Profit Organizations.''
    (d) Higher educational institutions. The allowability of costs 
incurred by institutions of higher education that may be recipients, 
subrecipients, or contractors is determined in accordance with the 
provisions of OMB Circular A-21, ``Cost Principles for Educational 
Institutions.''
    (e) Hospitals. The allowability of costs incurred by hospitals that 
are recipients, subrecipients, or contractors is determined in 
accordance with the provisions of Appendix E to 45 CFR part 74, 
``Principles for Determining Costs Applicable to Research and 
Development Under Grants and Contracts with Hospitals.''
    (f) For-profit organizations. The allowability of costs incurred by 
subrecipients or contractors that are either for-profit organizations or 
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; however, the grants officer or the 
award terms and conditions may in rare cases authorize a determination 
of allowable costs that are in accordance with uniform cost accounting 
standards and comply with cost principles acceptable to the Department 
of Defense.



Sec. 32.28  Period of availability of funds.

    Where a funding period is specified, a recipient may charge to the 
award only allowable costs resulting from obligations incurred during 
the funding period and any pre-award costs (see Sec. 32.25(d)(2)(i)) 
authorized by the DoD Component.

                           Property Standards



Sec. 32.30  Purpose of property standards.

    Sections 32.31 through 32.37 set forth uniform standards governing 
management and disposition of property furnished by the Federal 
Government and property whose cost was charged to a project supported by 
a Federal award. DoD Components 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 Sec. Sec. 32.31 through 32.37.



Sec. 32.31  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. 32.32  Real property.

    Each DoD Component that makes awards under which real property is 
acquired in whole or in part with Federal funds shall prescribe 
requirements for

[[Page 139]]

recipients concerning the use and disposition of such property. 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 the DoD Component.
    (b) The recipient shall obtain written approval by the grants 
officer 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 the DoD Component.
    (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 the DoD Component or its successor Federal 
agency. The responsible Federal agency 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 the DoD Component 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. 32.33  Federally-owned and exempt property.

    (a) Federally-owned property. (1) Title to federally-owned property 
remains vested in the Federal Government. Recipients shall submit 
annually an inventory listing of federally-owned property in their 
custody to the DoD Component that made the award. Upon completion of the 
award or when the property is no longer needed, the recipient shall 
report the property to the DoD Component for further Federal agency 
utilization.
    (2) If the DoD Component that made the award has no further need for 
the property, it shall be declared excess and either:
    (i) Reported to the General Services Administration, in accordance 
with the Federal Property and Administrative Services Act of 1949 (40 
U.S.C. 483(b)(2)), as implemented by General Services Administration 
regulations at 41 CFR 101-47.202; or
    (ii) Disposed of by alternative methods pursuant to other specific 
statutory authority. For example, DoD Components are authorized by the 
Federal Technology Transfer Act (15 U.S.C. 3710(i)), to donate research 
equipment to educational and non-profit organizations for the conduct of 
technical and scientific education and research activities--donations 
under this Act shall be in accordance with the DoD implementation of 
E.O. 12999 (3 CFR, 1996 Comp., p. 180), ``Educational Technology: 
Ensuring Opportunity for All Children in the Next Century,'' as 
applicable. Appropriate instructions shall be issued to the recipient by 
the DoD Component.
    (b) Exempt property. (1) When statutory authority exists, a DoD 
Component may vest title to property acquired with Federal funds in the 
recipient without further obligation to the Federal Government and under 
conditions the DoD Component considers appropriate. For example, under 
31 U.S.C. 6306, DoD Components may so vest title to tangible personal 
property

[[Page 140]]

under a grant or cooperative agreement for basic or applied research in 
a nonprofit institution of higher education or a nonprofit organization 
whose primary purpose is conducting scientific research. Such property 
is ``exempt property.''
    (2) As a matter of policy, DoD Components shall make maximum use of 
the authority of 31 U.S.C. 6306 to vest title to exempt property in 
institutions of higher education, without further obligation to the 
Government, to enhance the university infrastructure for future 
performance of defense research and related, science and engineering 
education.
    (3) DoD Components may establish conditions, in regulation or in 
award terms and conditions, for vesting title to exempt property. Should 
a DoD Component not establish conditions, title to exempt property upon 
acquisition shall vest in the recipient without further obligation to 
the Federal Government.



Sec. 32.34  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 the DoD Component that made 
the award. 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:
    (1) First, activities sponsored by the DoD Component that funded the 
original project.
    (2) Second, activities sponsored by other DoD Components.
    (3) Then, activities sponsored by other Federal 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 the DoD Component that 
financed the equipment; second preference shall be given to projects or 
programs sponsored by other DoD Components; and third preference shall 
be given to projects or programs sponsored by other Federal agencies. If 
the property is owned by the Federal Government, use on other activities 
not sponsored by the Federal Government shall be permissible if 
authorized by the DoD Component that financed the property. 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 the DoD Component that financed the equipment.
    (f) The recipient's property management standards for equipment 
acquired with Federal funds and federally-owned property shall include 
all of the following:
    (1) Records for equipment and federally-owned property shall be 
maintained accurately and shall include the following information:
    (i) A description of the equipment or federally-owned property.
    (ii) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or other identification number.
    (iii) Source of the equipment or federally-owned property, including 
the award number.
    (iv) Whether title vests in the recipient or the Federal Government.
    (v) Acquisition date (or date received, if the property was 
furnished by the Federal Government) and cost.
    (vi) Information from which one can calculate the percentage of 
Federal

[[Page 141]]

participation in the cost of the equipment (not applicable to property 
furnished by the Federal Government).
    (vii) Location and condition of the equipment or federally-owned 
property 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 the DoD Component that made the award for its 
share.
    (2) Property owned by the Federal Government shall be identified to 
indicate Federal ownership.
    (3) A physical inventory of equipment and federally-owned property 
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 or 
federally-owned property.
    (4) A control system shall be in effect to insure adequate 
safeguards to prevent loss, damage, or theft of the equipment or 
federally-owned property. Any loss, damage, or theft of equipment or 
federally-owned property shall be investigated and fully documented; if 
the property was owned by the Federal Government, the recipient shall 
promptly notify the DoD Component.
    (5) Adequate maintenance procedures shall be implemented to keep the 
equipment or federally-owned property 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.
    (1) For equipment with a current per unit fair market value of 
$5,000 or more, the recipient may retain the equipment for other uses 
provided that compensation is made to the DoD Component that originally 
made the award 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.
    (2) If the recipient has no need for the equipment, the recipient 
shall request disposition instructions from the DoD Component. The DoD 
Component shall issue instructions to the recipient no later than 120 
calendar days after the recipient's request and the following procedures 
shall govern:
    (i) The grants officer, in consultation with the program manager, 
shall judge whether the age and nature of the equipment warrant a 
screening procedure to determine whether the equipment is useful to a 
DoD Component or other Federal agency. If a screening procedure is 
warranted:
    (A) The DoD Component shall determine whether the equipment can be 
used to meet DoD requirements.
    (B) If no DoD requirement exists, the availability of the equipment 
shall be reported to the General Services Administration by the DoD 
Component to determine whether a requirement for the equipment exists in 
other Federal agencies.
    (ii) 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 the DoD Component that made the 
award 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.
    (iii) 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

[[Page 142]]

shipping or interim storage costs incurred.
    (iv) If the recipient is instructed to otherwise dispose of the 
equipment, the recipient shall be reimbursed by the DoD Component that 
made the award for such costs incurred in its disposition.
    (h) The DoD Component 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.
    (1) The equipment shall be appropriately identified in the award or 
otherwise made known to the recipient in writing. For exempt property, 
in accordance with Sec. 32.33(b)(3), note that this identification must 
occur by the time of award, or title to the property vests in the 
recipient without further obligation to the Government.
    (2) The DoD Component shall issue disposition instructions within 
120 calendar days after receipt of a final inventory. The final 
inventory shall list all equipment acquired with award funds and 
federally-owned property. If the DoD Component fails to issue 
disposition instructions for equipment within the 120 calendar day 
period, the recipient shall apply the standards of paragraph (g) of this 
section.
    (3) When the DoD Component exercises its right to take title, the 
equipment shall be subject to the provisions for federally-owned 
property.



Sec. 32.35  Supplies.

    (a) Title to supplies shall vest in the recipient upon acquisition. 
If there is a residual inventory of unused supplies exceeding $5,000 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. 32.36  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. DoD Components reserve 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 Governmentwide 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 
DoD Component that made the award 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 DoD Component that made the award 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

[[Page 143]]

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 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 (rather than developed or produced under the 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 the DoD 
Component that made the award. When no longer needed for the originally 
authorized purpose, disposition of the intangible property shall occur 
in accordance with the provisions of Sec. 32.34(g).

[63 FR 12188, Mar. 12, 1998, as amended at 65 FR 14407, 14416, Mar. 16, 
2000]



Sec. 32.37  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. DoD 
Components 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. 32.40  Purpose of procurement standards.

    Sections 32.41 through 32.48 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.



Sec. 32.41  Recipient responsibilities.

    The standards contained in this section do not relieve the recipient 
of the contractual responsibilities arising under its contract(s). The 
recipient is the responsible authority, without recourse to the DoD 
Component that made the award, 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.

[[Page 144]]



Sec. 32.42  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 disciplinary actions to be 
applied for violations of such standards by officers, employees, or 
agents of the recipient.



Sec. 32.43  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. 32.44  Procurement procedures.

    (a) All recipients shall establish written procurement procedures. 
These procedures shall provide, at a minimum, that:
    (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; and
    (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.

[[Page 145]]

    (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.
    (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 the DoD implementation, in 2 CFR part 1125, of OMB 
guidance on nonprocurement debarment and suspension (2 CFR part 180)
    (e) Recipients shall, on request, make available for the DoD 
Component's pre-award review, 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 this part.
    (2) The procurement is expected to exceed the simplified acquisition 
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 simplified 
acquisition threshold, specifies a ``brand name'' product.
    (4) The proposed award over the simplified acquisition 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 
simplified acquisition threshold.

[63 FR 12188, Mar. 12, 1998, as amended at 72 FR 34998, June 26, 2007]



Sec. 32.45  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. 32.46  Procurement records.

    Procurement records and files for purchases in excess of the 
simplified acquisition threshold shall include the following at a 
minimum:
    (a) Basis for contractor selection;
    (b) Justification for lack of competition when competitive bids or 
offers are not obtained; and
    (c) Basis for award cost or price.



Sec. 32.47  Contract administration.

    A system for contract administration shall be maintained to ensure 
contractor conformance with the terms,

[[Page 146]]

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. 32.48  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 simplified acquisition 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 simplified acquisition threshold 
shall contain 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, the DoD 
Component may accept the bonding policy and requirements of the 
recipient, provided the grants officer 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 in 
Sec. Sec. 32.40 through 32.49, 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 
simplified acquisition threshold) awarded by recipients shall include a 
provision to the effect that the recipient, the Department of Defense, 
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 those for amounts less than the 
simplified acquisition threshold, by recipients and their contractors 
shall contain the procurement provisions of Appendix A to this part, as 
applicable.



Sec. 32.49  Resource Conservation and Recovery Act.

    Under the Resource Conservation and Recovery Act (RCRA) (section 
6002, Pub. L. 94-580, 42 U.S.C. 6962), any State agency or agency of a 
political subdivision of a State which is using

[[Page 147]]

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 the Environmental Protection Agency (EPA) (40 
CFR parts 247-254). 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 the EPA guidelines.

                           Reports and Records



Sec. 32.50  Purpose of reports and records.

    Sections 32.51 through 32.53 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. 32.51  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. 32.26.
    (b) The award terms and conditions 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 award 
year; quarterly or semi-annual reports shall be due 30 calendar days 
after the reporting period. DoD Components 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.
    (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. However, unit costs are generally 
inappropriate for research (see Sec. 32.21 (a) and (b)(4)).
    (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 the grants officer 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) DoD Components' representatives may make site visits, as needed.
    (h) DoD Components shall comply with applicable clearance 
requirements of 5 CFR part 1320 when requesting performance data from 
recipients.



Sec. 32.52  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 \9\ or SF-269A,\10\ Financial Status Report. (i) DoD 
Components shall require recipients to use the SF-269 or SF-269A to 
report the status of funds for all nonconstruction projects or programs. 
A DoD Component may, however, have the option of not requiring the SF-
269 or SF-269A when the SF-270,

[[Page 148]]

Request for Advance or Reimbursement, or SF-272,\11\ Report of Federal 
Cash Transactions, is determined to provide adequate information to meet 
agency 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.
---------------------------------------------------------------------------

    \9\ See footnote 2 to Sec. 32.12(a).
    \10\ See footnote 2 to Sec. 32.12(a).
    \11\ See footnote 2 to Sec. 32.12(a).
---------------------------------------------------------------------------

    (ii) The DoD Component shall prescribe whether the report shall be 
on a cash or accrual basis. If the award 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) The DoD Component 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 award.
    (iv) The DoD Component shall require recipients to submit the SF-269 
or SF-269A (an original and no more than two copies) no later than 30 
calendar 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 the 
grants officer upon request of the recipient.
    (2) SF-272, Report of Federal Cash Transactions. (i) When funds are 
advanced to recipients the DoD Component shall require each recipient to 
submit the SF-272 and, when necessary, its continuation sheet, SF-
272a.\12\ The grants officer shall use this report to monitor cash 
advanced to recipients and to obtain disbursement information for each 
award to the recipients.
---------------------------------------------------------------------------

    \12\ See footnote 2 to Sec. 32.12(a).
---------------------------------------------------------------------------

    (ii) DoD Components may require forecasts of Federal cash 
requirements in the ``Remarks'' section of the report.
    (iii) When practical and deemed necessary, DoD Components may 
require recipients to report in the ``Remarks'' section the amount of 
cash advances received in excess of three working 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 two copies of the SF-272 15 calendar days following the end 
of each quarter. DoD Components may require a monthly report from those 
recipients receiving advances totaling $1 million or more per year.
    (v) DoD Components 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 the grants officer's opinion, the recipient's accounting 
controls are adequate to minimize excessive Federal advances; or
    (C) When electronic payment mechanisms or SF-270 forms provide 
adequate data.
    (b) When the DoD Component needs additional information or more 
frequent reports, the following shall be observed:
    (1) When additional information is needed to comply with legislative 
requirements, grants officers shall issue instructions to require 
recipients to submit such information under the ``Remarks'' section of 
the reports.
    (2) When a grants officer, after consultation with the Federal 
agency assigned cognizance for a recipient's audit and audit resolution, 
determines that the recipient's accounting system does not meet the 
standards in Sec. 32.21, 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. The grants 
officer, in obtaining this information, shall comply with applicable 
report clearance requirements of 5 CFR part 1320.

[[Page 149]]

    (3) Grants officers are encouraged to shade out any line item on any 
report if not necessary.
    (4) DoD Components are encouraged to accept the identical 
information from the recipients in machine readable format or computer 
printouts or electronic outputs in lieu of prescribed formats.
    (5) DoD Components may provide computer or electronic outputs to 
recipients when it expedites or contributes to the accuracy of 
reporting.



Sec. 32.53  Retention and access requirements for records.

    (a) This section sets forth requirements for record retention and 
access to records for awards to recipients. DoD Components 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. 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 the DoD 
Component that made the award, the 3-year retention requirement is not 
applicable to the recipient.
    (4) Indirect cost rate proposals, cost allocations plans, and 
related records, for which retention requirements are specified in 
paragraph (g) of this section.
    (c) Copies of original records may be substituted for the original 
records if authorized by the grants officer.
    (d) The grants officer shall request that recipients transfer 
certain records to DoD Component custody when he or she determines that 
the records possess long term retention value. However, in order to 
avoid duplicate recordkeeping, a grants officer may make arrangements 
for recipients to retain any records that are continuously needed for 
joint use.
    (e) DoD Components, the Inspector General, Comptroller General of 
the United States, or any of their duly authorized representatives, have 
the right of timely and unrestricted access to 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.
    (f) Unless required by statute, no DoD Component shall place 
restrictions on recipients that limit public access to the records of 
recipients that are pertinent to an award, except when the DoD Component 
can demonstrate 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 the DoD 
Component making the award.
    (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 an 
indirect-cost proposal, plan, or other computation to the Federal agency 
responsible for negotiating the recipient's indirect cost rate, as the 
basis for negotiation of the rate, or the subrecipient submits such a 
proposal, plan, or computation to the recipient, 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

[[Page 150]]

to the cognizant Federal agency 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.
    (h) If the information described in this section is maintained on a 
computer, recipients shall retain the computer data on a reliable medium 
for the time periods prescribed. Recipients may transfer computer data 
in machine readable form from one reliable computer medium to another. 
Recipients' computer data retention and transfer procedures shall 
maintain the integrity, reliability, and security of the original 
computer data. Recipients shall also maintain an audit trail describing 
the data transfer. For the record retention time periods prescribed in 
this section, recipients shall not destroy, discard, delete, or write 
over such computer data.

                       Termination and Enforcement



Sec. 32.60  Purpose of termination and enforcement.

    Sections 32.61 and 32.62 set forth uniform suspension, termination 
and enforcement procedures.



Sec. 32.61  Termination.

    (a) Awards may be terminated in whole or in part only as follows:
    (1) By the grants officer, if a recipient materially fails to comply 
with the terms and conditions of an award;
    (2) By the grants officer 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; or
    (3) By the recipient upon sending to the grants officer written 
notification setting forth the reasons for such termination, the 
effective date, and, in the case of partial termination, the portion to 
be terminated. The recipient must provide such notice at least 30 
calendar days prior to the effective date of the termination. However, 
if the grants officer determines in the case of partial termination that 
the reduced or modified portion of the award will not accomplish the 
purposes for which the award was made, he or she may terminate the award 
in its entirety.
    (b) If costs are allowed under an award, the responsibilities of the 
recipient referred to in Sec. 32.71, 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. 32.62  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, 
the grants officer may, in addition to imposing any of the special 
conditions outlined in Sec. 32.14, 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 the 
grants officer and DoD Component.
    (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, the DoD 
Component 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. Award terms or conditions will incorporate the procedures of 
32 CFR 22.815 for processing recipient claims and disputes and for 
deciding appeals of grants officers' decisions.
    (c) Effects of suspension and termination. Costs of a recipient 
resulting

[[Page 151]]

from obligations incurred by the recipient during a suspension or after 
termination of an award are not allowable unless the grants officer 
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 the costs:
    (1) 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; and
    (2) 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 2 CFR part 1125.

[63 FR 12188, Mar. 12, 1998, as amended at 72 FR 34998, June 26, 2007]



                 Subpart D_After-the-Award Requirements



Sec. 32.70  Purpose.

    Sections 32.71 through 32.73 contain closeout procedures and other 
procedures for subsequent disallowances and adjustments.



Sec. 32.71  Closeout procedures.

    (a) Recipients shall submit, within 90 calendar days after the date 
of completion of the award, all financial, performance, and other 
reports required by the terms and conditions of the award. The grants 
officer may approve extensions when requested by the recipient.
    (b) Unless the grants officer 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) The responsible grants officer and payment office shall expedite 
completion of steps needed to close out awards and make prompt, final 
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 the DoD Component has advanced or paid and that is not 
authorized to be retained by the recipient for use in other projects. 
OMB Circular A-129\13\ governs unreturned amounts that become delinquent 
debts (see 32 CFR 22.820).
---------------------------------------------------------------------------

    \13\ See footnote 1 to Sec. 32.1(a).
---------------------------------------------------------------------------

    (e) When authorized by the terms and conditions of the award, the 
grants officer shall make a settlement for any upward or downward 
adjustments to the Federal 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 Sec. Sec. 32.31 through 32.37.
    (g) In the event a final audit has not been performed prior to the 
closeout of an award, the DoD Component shall retain the right to 
recover an appropriate amount after fully considering the 
recommendations on disallowed costs resulting from the final audit.



Sec. 32.72  Subsequent adjustments and continuing responsibilities.

    (a) The closeout of an award does not affect any of the following:
    (1) The right of the Department of Defense 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. 32.26.
    (4) Property management requirements in Sec. Sec. 32.31 through 
32.37.
    (5) Records retention as required in Sec. 32.53.
    (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 
the grants officer and the recipient, provided the responsibilities of 
the recipient referred to in Sec. 32.73(a), including those for 
property management as applicable, are

[[Page 152]]

considered and provisions made for continuing responsibilities of the 
recipient, as appropriate.



Sec. 32.73  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.
    (b) OMB Circular A-110 informs each Federal agency that:
    (1) If a debt is not paid within a reasonable period after the 
demand for payment, the Federal agency may reduce the debt by:
    (i) Making administrative offset against other requests for 
reimbursement.
    (ii) Withholding advance payments otherwise due to the recipient.
    (iii) Taking other action permitted by statute.
    (2) Except as otherwise provided by law, the Federal awarding agency 
shall charge interest on an overdue debt in accordance with 4 CFR 
Chapter II, ``Federal Claims Collection Standards.''
    (c) DoD grants officers shall follow the procedures in 32 CFR 22.820 
for issuing demands for payment and transferring debts to DoD payment 
offices for collection. Recipients will be informed about pertinent 
procedures and timeframes through the written notices of grants 
officers' decisions and demands for payment.



             Sec. Appendix A to Part 32--Contract Provisions

    All contracts awarded by a recipient, including those for amounts 
less than the simplified acquisition threshold, shall contain the 
following provisions as applicable:
    1. Equal Employment Opportunity--All contracts shall contain a 
provision requiring compliance with E.O. 11246 (3 CFR, 1964-1965 Comp., 
p. 339), ``Equal Employment Opportunity,'' as amended by E.O. 11375 (3 
CFR, 1966-1970 Comp., p. 684), ``Amending Executive Order 11246 Relating 
to Equal Employment Opportunity,'' and as supplemented by regulations at 
41 CFR ch. 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 subawards in excess of $2000 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 the responsible DoD 
Component.
    3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--This Act 
applies to procurements under awards only when the Federal program 
legislation specifically makes it apply (i.e., Davis-Bacon does not by 
itself apply to procurements under awards). In cases where another 
statute does make the Davis-Bacon Act apply, all construction contracts 
awarded by the recipients and subrecipients of more than $2,000 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 wage 
determination. The recipient shall report all suspected or reported 
violations to the Federal awarding agency.
    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 or other purposes 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\1/2\ times the basic rate of pay for all hours worked in 
excess of 40 hours in the work week. Section

[[Page 153]]

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, Grant or Cooperative 
Agreement--Contracts, grants, or cooperative 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.''
    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 subawards 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 
responsible DoD Component and 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 $100,000 or more 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 (E.O.s 12549 and 12689)--A contract 
award with an amount expected to equal or exceed $25,000 and certain 
other contract awards (see 2 CFR 1125.220, which implements OMB guidance 
at 2 CFR 180.220) shall not be made to parties listed on the 
Governmentwide Excluded Parties List System, in accordance with the DoD 
adoption at 2 CFR part 1125 of the OMB guidance implementing E.O.s 12549 
(3 CFR, 1986 Comp., p. 189) and 12689 (3 CFR, 1989 Comp., p. 235), 
``Debarment and Suspension.'' The Excluded Parties List System 
accessible on the Internet at www.epls.gov contains the names of parties 
debarred, suspended, or otherwise excluded by agencies, as well as 
parties declared ineligible under statutory or regulatory authority 
other than E.O. 12549.

[63 FR 12188, Mar. 12, 1998, as amended at 70 FR 49477, Aug. 23, 2005; 
72 FR 34998, June 26, 2007]



PART 33_UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS--Table of Contents




                            Subpart A_General

Sec.
33.1 Purpose and scope of this part.
33.2 Scope of subpart.
33.3 Definitions.
33.4 Applicability.
33.5 Effect on other issuances.
33.6 Additions and exceptions.

                    Subpart B_Pre-Award Requirements

33.10 Forms for applying for grants.
33.11 State plans.
33.12 Special grant or subgrant conditions for ``high-risk'' grantees.

                    Subpart C_Post-Award Requirements

                        Financial Administration

33.20 Standards for financial management systems.
33.21 Payment.
33.22 Allowable costs.
33.23 Period of availability of funds.
33.24 Matching or cost sharing.
33.25 Program income.
33.26 Non-Federal audit.

                    Changes, Property, and Subawards

33.30 Changes.
33.31 Real property.
33.32 Equipment.
33.33 Supplies.
33.34 Copyrights.
33.35 Subawards to debarred and suspended parties.
33.36 Procurement.
33.37 Subgrants.

               Reports, Records Retention, and Enforcement

33.40 Monitoring and reporting program performance.
33.41 Financial reporting.
33.42 Retention and access requirements for records.
33.43 Enforcement.
33.44 Termination for convenience.

[[Page 154]]

                 Subpart D_After-the-Grant Requirements

33.50 Closeout.
33.51 Later disallowances and adjustments.
33.52 Collections of amounts due.

Subpart E--Entitlements [Reserved]

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

    Source: 53 FR 8070, 8087, Mar. 11, 1988, unless otherwise noted. 
Redesignated at 57 FR 6200, Feb. 21, 1992.



                            Subpart A_General



Sec. 33.1  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. 33.2  Scope of subpart.

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



Sec. 33.3  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 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

[[Page 155]]

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 United States 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 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.

[[Page 156]]

    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 by deducting the cumulative obligations from the cumulative 
funds authorized.



Sec. 33.4  Applicability.

    (a) General. Subparts A through 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. 33.6, 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

[[Page 157]]

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. 33.4(a) (3) through (8) are subject to subpart E.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6200, Feb. 21, 1992]



Sec. 33.5  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 they are required by statute, or authorized in accordance 
with the exception provision in Sec. 33.6.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6200, Feb. 21, 1992]



Sec. 33.6  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.

[[Page 158]]



                    Subpart B_Pre-Award Requirements



Sec. 33.10  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. 33.11  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 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. 33.12  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

[[Page 159]]

    (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.



                    Subpart C_Post-Award Requirements

                        Financial Administration



Sec. 33.20  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 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

[[Page 160]]

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. 33.21  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 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

[[Page 161]]

be released to the grantee upon subsequent compliance. When a grant is 
suspended, payment adjustments will be made in accordance with Sec. 
33.43(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.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6200, Feb. 21, 1992]



Sec. 33.22  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   OMB 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.
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. 33.23  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. 33.24  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

[[Page 162]]

borne by non-Federal grants or by others 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. 33.25, 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. 33.25(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 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

[[Page 163]]

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 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. 33.22, 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.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6200, Feb. 21, 1992]



Sec. 33.25  Program income.

    (a) General. Grantees are encouraged to earn income to defray 
program costs. Program income includes income

[[Page 164]]

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. 33.34.)
    (f) Property. Proceeds from the sale of real property or equipment 
will be handled in accordance with the requirements of Sec. Sec. 33.31 
and 33.32.
    (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 
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.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6200, Feb. 21, 1992]



Sec. 33.26  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

[[Page 165]]

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 $500,000 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. 33.36 
shall be followed.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6200, Feb. 21, 1992; 62 FR 45939, 45943, Aug. 29, 1997; 70 FR 
49477, Aug. 23, 2005]

                    Changes, Property, and Subawards



Sec. 33.30  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. 33.22) 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 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

[[Page 166]]

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. 33.36 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. 33.22) 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.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6200, Feb. 21, 1992]



Sec. 33.31  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:
    (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

[[Page 167]]

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. 33.32  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. 33.25(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.
    (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.

[[Page 168]]

    (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 part 
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 Sec. 33.32(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.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6201, Feb. 21, 1992]



Sec. 33.33  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. 33.34  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.



Sec. 33.35  Subawards to debarred and suspended parties.

    Grantees and subgrantees must comply with the requirements of OMB 
guidance in Subpart C, 2 CFR part 180, as implemented by the Department 
of Defense in 2 CFR part 1125. Those requirements include restrictions 
on entering into a covered transaction with 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.''

[53 FR 8070, 8087, Mar. 11, 1988, as amended at 70 FR 49477, Aug. 23, 
2005; 72 FR 34998, June 26, 2007]



Sec. 33.36  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

[[Page 169]]

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 and the standards identified in this section.
    (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 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--

[[Page 170]]

    (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. 33.36. 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 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

[[Page 171]]

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.
    (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 Sec. 33.36(d)(2)(i) apply.
    (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,

[[Page 172]]

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 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

[[Page 173]]

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. 33.22). 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 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,

[[Page 174]]

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)
    (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

[[Page 175]]

Energy Policy and Conservation Act (Pub. L. 94-163, 89 Stat. 871).

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6201, Feb. 21, 1992; 60 FR 19639, Apr. 19, 1995]



Sec. 33.37  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. 33.42 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 33.10;
    (2) Section 33.11;
    (3) The letter-of-credit procedures specified in Treasury 
Regulations at 31 CFR part 205, cited in Sec. 33.21; and
    (4) Section 33.50.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6201, Feb. 21, 1992]

              Reports, Records, Retention, and Enforcement



Sec. 33.40  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

[[Page 176]]

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.



Sec. 33.41  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 extend 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

[[Page 177]]

269A, Financial Status Report, to report the status of funds for all 
nonconstruction grants and for construction grants when required in 
accordance with Sec. 33.41(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 accural 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 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. 33.41(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. 33.41(d), instead of this form.
    (ii) The frequency for submitting reimbursement requests is treated 
in Sec. 33.41(b)(3).

[[Page 178]]

    (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. 33.41(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. 33.41(d).
    (iii) The Federal agency may substitute the Financial Status Report 
specified in Sec. 33.41(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. 33.41(b)(2).

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6201, Feb. 21, 1992]



Sec. 33.42  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. 33.36(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.
    (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.

[[Page 179]]

    (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.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6201, Feb. 21, 1992]



Sec. 33.43  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:
    (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,
    (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,

[[Page 180]]

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. 33.35).

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6201, Feb. 21, 1992]



Sec. 33.44  Termination for convenience.

    Except as provided in Sec. 33.43 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. 33.43 
or paragraph (a) of this section.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6201, Feb. 21, 1992]



                 Subpart D_After-The-Grant Requirements



Sec. 33.50  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, 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. 33.32(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.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6201, Feb. 21, 1992]



Sec. 33.51  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. 33.42;
    (d) Property management requirements in Sec. Sec. 33.31 and 33.32; 
and

[[Page 181]]

    (e) Audit requirements in Sec. 33.26.

[53 FR 8070 and 8087, Mar. 11, 1988. Redesignated and amended at 57 FR 
6199 and 6201, Feb. 21, 1992]



Sec. 33.52  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]



PART 34_ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH FOR-PROFIT ORGANIZATIONS--Table of Contents




                            Subpart A_General

Sec.
34.1 Purpose.
34.2 Definitions.
34.3 Deviations.
34.4 Special award conditions.

                    Subpart B_Post-Award Requirements

                    Financial and Program Management

34.10 Purpose of financial and program management.
34.11 Standards for financial management systems.
34.12 Payment.
34.13 Cost sharing or matching.
34.14 Program income.
34.15 Revision of budget and program plans.
34.16 Audits.
34.17 Allowable costs.
34.18 Fee and profit.

                           Property Standards

34.20 Purpose of property standards.
34.21 Real property and equipment.
34.22 Federally owned property.
34.23 Property management system.
34.24 Supplies.
34.25 Intellectual property developed or produced under awards.

                          Procurement Standards

34.30 Purpose of procurement standards.
34.31 Requirements.

                           Reports and Records

34.40 Purpose of reports and records.
34.41 Monitoring and reporting program and financial performance.
34.42 Retention and access requirements for records.

                       Termination and Enforcement

34.50 Purpose of termination and enforcement.
34.51 Termination.
34.52 Enforcement.
34.53 Disputes and appeals.

                 Subpart C_After-the-Award Requirements

34.60 Purpose.
34.61 Closeout procedures.
34.62 Subsequent adjustments and continuing responsibilities.
34.63 Collection of amounts due.

Appendix A to Part 34--Contract Provisions

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

    Source: 63 FR 12204, Mar. 12, 1998, unless otherwise noted.



                            Subpart A_General



Sec. 34.1  Purpose.

    (a) This part prescribes administrative requirements for awards to 
for-profit organizations.
    (b) Applicability to prime awards and subawards is as follows:
    (1) Prime awards. DoD Components shall apply the provisions of this 
part to awards to for-profit organizations. DoD Components shall not 
impose requirements that are in addition to, or inconsistent with, the 
requirements provided in this part, except:
    (i) In accordance with the deviation procedures or special award 
conditions in Sec. 34.3 or Sec. 34.4, respectively; or
    (ii) As required by Federal statute, Executive order, or Federal 
regulation

[[Page 182]]

implementing a statute or Executive order.
    (2) Subawards. (i) Any legal entity (including any State, local 
government, university or other nonprofit organization, as well as any 
for-profit entity) that receives an award from a DoD Component shall 
apply the provisions of this part to subawards with for-profit 
organizations. It should be noted that subawards (see definition in 
Sec. 34.2) are financial assistance for substantive programmatic 
performance and do not include recipients' procurement of goods and 
services.
    (ii) For-profit organizations that receive prime awards covered by 
this part shall apply to each subaward the administrative requirements 
that are applicable to the particular type of subrecipient (e.g., 32 CFR 
part 33 specifies requirements for subrecipients that are States or 
local governments, and 32 CFR part 32 contains requirements for 
universities or other nonprofit organizations).



Sec. 34.2  Definitions.

    The following are definitions of terms as used in this part. Grants 
officers are cautioned that terms may be defined differently in this 
part than they are in other parts of the DoD Grant and Agreement 
Regulations (DoDGARs).
    Advance. 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.
    Award. A grant or a cooperative agreement other than a technology 
investment agreement (TIA). TIAs are covered by part 37 of the DoDGARs 
(32 CFR part 37). Portions of this part may apply to a TIA, but only to 
the extent that 32 CFR part 37 makes them apply.
    Cash contributions. The recipient's cash outlay, including the 
outlay of money contributed to the recipient by third parties.
    Closeout. The process by which the grants officer administering an 
award made by a DoD Component determines that all applicable 
administrative actions and all required work of the award have been 
completed by the recipient and DoD Component.
    Contract. Either:
    (1) A procurement contract made by a recipient under a DoD 
Component's award or by a subrecipient under a subaward; or
    (2) A procurement subcontract under a contract awarded by a 
recipient or subrecipient.
    Cost sharing or matching. That portion of project or program costs 
not borne by the Federal Government.
    Disallowed costs. Those charges to an award that the grants officer 
administering an award made by a DoD Component determines to be 
unallowable, in accordance with the applicable Federal cost principles 
or other terms and conditions contained in the award.
    DoD Component. A Military Department, Defense Agency, DoD Field 
Activity, or organization within the Office of the Secretary of Defense 
that provides or administers an award to a recipient.
    Equipment. Tangible nonexpendable personal property charged directly 
to the award having a useful life of more than one year and an 
acquisition cost of $5,000 or more per unit. That definition applies for 
the purposes of the Federal administrative requirements in this part. 
However, the recipient's policy may be to use a lower dollar value for 
defining ``equipment,'' and nothing in this part should be construed as 
requiring the recipient to establish a higher limit for purposes other 
than the administrative requirements in this part.
    Excess property. Property under the control of any DoD Component 
that, as determined by the head thereof, is no longer required for its 
needs or the discharge of its responsibilities.
    Expenditures. See the definition for outlays in this section.
    Federally owned property. Property in the possession of, or directly 
acquired by, the Government and subsequently made available to the 
recipient.
    Funding period. The period of time when Federal funding is available 
for obligation by the recipient.

[[Page 183]]

    Intellectual property. Intangible personal property such as patents 
and patent applications, trademarks, copyrights, technical data, and 
software rights.
    Obligations. 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.
    Outlays or expenditures. 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.
    Personal property. Property of any kind except real property. It may 
be:
    (1) Tangible, having physical existence (i.e., equipment and 
supplies); or
    (2) Intangible, having no physical existence, such as patents, 
copyrights, data and software.
    Prior approval. Written or electronic approval by an authorized 
official evidencing prior consent.
    Program income. Gross income earned by the recipient that is 
directly generated by a supported activity or earned as a result of the 
award. 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 
earned on advances of Federal funds is not program income. Except as 
otherwise provided in program 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.
    Project costs. 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.
    Project period. The period established in the award document during 
which Federal sponsorship begins and ends.
    Property. Real property and personal property (equipment, supplies, 
and intellectual property), unless stated otherwise.
    Real property. Land, including land improvements, structures and 
appurtenances thereto, but excludes movable machinery and equipment.
    Recipient. A for-profit organization receiving an award directly 
from a DoD Component to carry out a project or program.
    Research. Basic, applied, and advanced research activities. Basic 
research is defined as efforts directed toward increasing knowledge or 
understanding in science and engineering. Applied research is defined as 
efforts that attempt to determine and exploit the potential of 
scientific discoveries or improvements in technology, such as new 
materials, devices, methods, and processes. ``Advanced research,'' 
advanced technology development that creates new technology or 
demonstrates the viability of applying existing technology to new 
products and processes in a general way, is most closely analogous to 
precommercialization or precompetitive technology development in the 
commercial sector (it does not include development of military systems 
and hardware where specific requirements have been defined).
    Small award. An award not exceeding the simplified acquisition 
threshold fixed at 41 U.S.C. 403(11) (currently $100,000).

[[Page 184]]

    Small business concern. A concern, including its affiliates, that is 
independently owned and operated, not dominant in the field of operation 
in which it has applied for an award, and qualified as a small business 
under the criteria and size standards in 13 CFR part 121. For more 
details, grants officers should see 48 CFR part 19 in the ``Federal 
Acquisition Regulation.''
    Subaward. Financial assistance in the form of money, or property in 
lieu of money, provided 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 the term includes neither 
procurement of goods and services nor any form of assistance which is 
excluded from the definition of ``award'' in this section.
    Subrecipient. The legal entity to which a subaward is made and which 
is accountable to the recipient for the use of the funds provided.
    Supplies. Tangible expendable personal property that is charged 
directly to the award and that has a useful life of less than one year 
or an acquisition cost of less than $5000 per unit.
    Suspension. An action by a DoD Component that temporarily withdraws 
Federal sponsorship under an award, pending corrective action by the 
recipient or pending a decision to terminate the award by the DoD 
Component. Suspension of an award is a separate action from suspension 
of a participant under 2 CFR part 1125.
    Termination. The cancellation of an award, in whole or in part, 
under an agreement at any time prior to either:
    (1) The date on which all work under an award is completed; or
    (2) The date on which Federal sponsorship ends, as given on the 
award document or any supplement or amendment thereto.
    Third party in-kind contributions. 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.
    Unobligated balance. The portion of the funds authorized by a DoD 
Component that has not been obligated by the recipient and is determined 
by deducting the cumulative obligations from the cumulative funds 
authorized.

[63 FR 12204, Mar. 12, 1998, as amended at 68 FR 47160, Aug. 7, 2003; 72 
FR 34998, June 26, 2007]



Sec. 34.3  Deviations.

    (a) Individual deviations. Individual deviations affecting only one 
award may be approved by DoD Components in accordance with procedures 
stated in 32 CFR 21.335(a) and 21.340.
    (b) Small awards. DoD Components may apply less restrictive 
requirements than the provisions of this part when awarding small 
awards, except for those requirements which are statutory.
    (c) Other class deviations. For classes of awards other than small 
awards, the Director, Defense Research and Engineering, or his or her 
designee, may grant exceptions from the requirements of this part when 
exceptions are not prohibited by statute. DoD Components shall request 
approval for such deviations in accordance with 32 CFR 21.335 (b) and 
21.340.

[63 FR 12204, Mar. 12, 1998, as amended at 68 FR 47160, Aug. 7, 2003]



Sec. 34.4  Special award conditions.

    (a) Grants officers may impose additional requirements as needed, 
over and above those provided in this part, if an applicant or 
recipient:
    (1) Has a history of poor performance;
    (2) Is not financially stable;
    (3) Has a management system that does not meet the standards 
prescribed in this part;
    (4) Has not conformed to the terms and conditions of a previous 
award; or
    (5) Is not otherwise responsible.
    (b) Before imposing additional requirements, DoD Components shall 
notify the applicant or recipient in writing as to:
    (1) The nature of the additional requirements;
    (2) The reason why the additional requirements are being imposed;

[[Page 185]]

    (3) The nature of the corrective action needed;
    (4) The time allowed for completing the corrective actions; and
    (5) The method for requesting reconsideration of the additional 
requirements imposed.
    (c) Any special conditions shall be promptly removed once the 
conditions that prompted them have been corrected.
    (d) Grants officers:
    (1) Should coordinate the imposition and removal of special award 
conditions with the cognizant grants administration office identified in 
32 CFR 22.710.
    (2) Shall include in the award file the written notification to the 
recipient, described in paragraph (b) of this section, and the 
documentation required by 32 CFR 22.410(b).



                    Subpart B_Post-award Requirements

                    Financial and Program Management



Sec. 34.10  Purpose of financial and program management.

    Sections 34.11 through 34.17 prescribe standards for financial 
management systems; methods for making payments; and rules for cost 
sharing and matching, program income, revisions to budgets and program 
plans, audits, allowable costs, and fee and profit.



Sec. 34.11  Standards for financial management systems.

    (a) Recipients shall be allowed and encouraged to use existing 
financial management systems established for doing business in the 
commercial marketplace, to the extent that the systems comply with 
Generally Accepted Accounting Principles (GAAP) and the minimum 
standards in this section. As a minimum, a recipient's financial 
management system shall provide:
    (1) Effective control of all funds. Control systems must be adequate 
to ensure that costs charged to Federal funds and those counted as the 
recipient's cost share or match are consistent with requirements for 
cost reasonableness, allowability, and allocability in the applicable 
cost principles (see Sec. 34.17) and in the terms and conditions of the 
award.
    (2) Accurate, current and complete records that document for each 
project funded wholly or in part with Federal funds the source and 
application of the Federal funds and the recipient's required cost share 
or match. These records shall:
    (i) Contain information about receipts, authorizations, assets, 
expenditures, program income, and interest.
    (ii) Be adequate to make comparisons of outlays with budgeted 
amounts for each award (as required for programmatic and financial 
reporting under Sec. 34.41. Where appropriate, financial information 
should be related to performance and unit cost data. Note that unit cost 
data are generally not appropriate for awards that support research.
    (3) To the extent that advance payments are authorized under Sec. 
34.12, procedures that minimize the time elapsing between the transfer 
of funds to the recipient from the Government and the recipient's 
disbursement of the funds for program purposes.
    (4) The recipient shall have a system to support charges to Federal 
awards for salaries and wages, whether treated as direct or indirect 
costs. Where employees work on multiple activities or cost objectives, a 
distribution of their salaries and wages will be supported by personnel 
activity reports which must:
    (i) Reflect an after the fact distribution of the actual activity of 
each employee.
    (ii) Account for the total activity for which each employee is 
compensated.
    (iii) Be prepared at least monthly, and coincide with one or more 
pay periods.
    (b) Where the Federal Government guarantees or insures the repayment 
of money borrowed by the recipient, the DoD Component, at its 
discretion, may require 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.
    (c) The DoD Component may require adequate fidelity bond coverage 
where the recipient lacks sufficient coverage to protect the Federal 
Government's interest.

[[Page 186]]

    (d) 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. 34.12  Payment.

    (a) Methods available. Payment methods for awards with for-profit 
organizations are:
    (1) Reimbursement. Under this method, the recipient requests 
reimbursement for costs incurred during a time period. In cases where 
the recipient submits each request for payment to the grants officer, 
the DoD payment office reimburses the recipient by electronic funds 
transfer or check after approval of the request by the grants officer 
designated to do so.
    (2) Advance payments. Under this method, a DoD Component makes a 
payment to a recipient based upon projections of the recipient's cash 
needs. The payment generally is made upon the recipient's request, 
although predetermined payment schedules may be used when the timing of 
the recipient's needs to disburse funds can be predicted in advance with 
sufficient accuracy to ensure compliance with paragraph (b)(2)(iii) of 
this section.
    (b) Selecting a method. (1) The preferred payment method is the 
reimbursement method, as described in paragraph (a)(1) of this section
    (2) Advance payments, as described in paragraph (a)(2) of this 
section, may be used in exceptional circumstances, subject to the 
following conditions:
    (i) The grants officer, in consultation with the program official, 
must judge that advance payments are necessary or will materially 
contribute to the probability of success of the project contemplated 
under the award (e.g., as startup funds for a project performed by a 
newly formed company). The rationale for the judgment shall be 
documented in the award file.
    (ii) Cash advances shall be limited to the minimum amounts needed to 
carry out the program.
    (iii) Recipients and the DoD Component shall maintain procedures to 
ensure that the timing of cash advances is as close as is 
administratively feasible to the recipients' disbursements of the funds 
for program purposes, including direct program or project costs and the 
proportionate share of any allowable indirect costs.
    (iv) Recipients shall maintain advance payments of Federal funds in 
interest-bearing accounts, and remit annually the interest earned to the 
administrative grants officer responsible for post-award administration 
(the grants officer shall forward the payment to the responsible payment 
office, for return to the Department of Treasury's miscellaneous 
receipts account), unless one of the following applies:
    (A) The recipient receives less than $120,000 in Federal awards per 
year.
    (B) The best reasonably available interest bearing account would not 
be expected to earn interest in excess of $250 per year on Federal cash 
balances.
    (C) 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.
    (c) Frequency of payments. For either reimbursements or advance 
payments, recipients shall be authorized to submit requests for payment 
at least monthly.
    (d) Forms for requesting payment. DoD Components may authorize 
recipients to use the SF-270, \1\ ``Request for Advance or 
Reimbursement;'' the SF-271, \2\ ``Outlay Report and Request for 
Reimbursement for Construction Programs;'' or prescribe other forms or 
formats as necessary.
---------------------------------------------------------------------------

    \1\ For copies of Standard Forms listed in this part, contact 
regional grants administration offices of the Office of Naval Research. 
Addresses for the offices are listed in the ``DoD Directory of Contract 
Administration Services Components,'' DLAH 4105.4, which can be obtained 
from either: Defense Logistics Agency, Publications Distribution 
Division (DASC-WDM), 8725 John J. Kingman Rd., Suite 0119, Fort Belvoir, 
VA 22060-6220; or the Defense Contract Management Command home page at 
http://www.dcmc.dcrb.dla.mil.
    \2\ See footnote 1 to this paragraph (d).

---------------------------------------------------------------------------

[[Page 187]]

    (e) Timeliness of payments. Payments normally will be made within 30 
calendar days of the receipt of a recipient's request for reimbursement 
or advance by the office designated to receive the request (for further 
information about timeframes for payments, see 32 CFR 22.810(c)(3)(ii)).
    (f) Precedence of other available funds. Recipients shall disburse 
funds available from program income, rebates, refunds, contract 
settlements, audit recoveries, and interest earned on such funds before 
requesting additional cash payments.
    (g) Withholding of payments. Unless otherwise required by statute, 
grants officers shall not withhold payments for proper charges made by 
recipients during the project period for reasons other than the 
following:
    (1) A recipient has failed to comply with project objectives, the 
terms and conditions of the award, or Federal reporting requirements, in 
which case the grants officer may suspend payments in accordance with 
Sec. 34.52.
    (2) The recipient is delinquent on a debt to the United States (see 
definitions of ``debt'' and ``delinquent debt'' in 32 CFR 22.105). In 
that case, the grants officer may, upon reasonable notice, withhold 
payments for obligations incurred after a specified date, until the debt 
is resolved.



Sec. 34.13  Cost sharing or matching.

    (a) Acceptable contributions. All contributions, including cash 
contributions and third party in-kind contributions, shall be accepted 
as part of the recipient's cost sharing or matching when such 
contributions meet all of the following criteria:
    (1) They are verifiable from the recipient's records.
    (2) They are not included as contributions for any other federally-
assisted project or program.
    (3) They are necessary and reasonable for proper and efficient 
accomplishment of project or program objectives.
    (4) They are allowable under Sec. 34.17.
    (5) They are not paid by the Federal Government under another award, 
except:
    (i) Costs that are authorized by Federal statute to be used for cost 
sharing or matching; or
    (ii) Independent research and development (IR&D) costs. In 
accordance with the for-profit cost principle in 48 CFR 31.205-18(e), 
use of IR&D as cost sharing is permitted, whether or not the Government 
decides at a later date to reimburse any of the IR&D as allowable 
indirect costs. In such cases, the IR&D must meet all of the criteria in 
paragraphs (a) (1) through (4) and (a) (6) through (8) of this section.
    (6) They are provided for in the approved budget, when approval of 
the budget is required by the DoD Component.
    (7) If they are real property or equipment, whether purchased with 
recipient's funds or donated by third parties, they must have the grants 
officer's prior approval if the contributions' value is to exceed 
depreciation or use charges during the project period (paragraphs (b)(1) 
and (b)(4)(ii) of this section discuss the limited circumstances under 
which a grants officer may approve higher values). If a DoD Component 
requires approval of a recipient's budget (see paragraph (a)(6) of this 
section), the grants officer's approval of the budget satisfies this 
prior approval requirement, for real property or equipment items listed 
in the budget.
    (8) They conform to other provisions of this part, as applicable.
    (b) Valuing and documenting contributions--(1) Valuing recipient's 
property or services of recipient's employees. Values shall be 
established in accordance with the applicable cost principles in Sec. 
34.17, which means that amounts chargeable to the project are determined 
on the basis of costs incurred. For real property or equipment used on 
the project, the cost principles authorize depreciation or use charges. 
The full value of the item may be applied when the item will be consumed 
in the performance of the award or fully depreciated by the end of the 
award. In cases where the full value of a donated capital asset is to be 
applied as cost sharing or matching, that full value shall be the lesser 
of the following:
    (i) The certified value of the remaining life of the property 
recorded in the recipient's accounting records at the time of donation; 
or

[[Page 188]]

    (ii) The current fair market value. However, when there is 
sufficient justification, the grants officer 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. The grants 
officer may accept the use of any reasonable basis for determining the 
fair market value of the property.
    (2) Valuing services of others' employees. When an employer other 
than the recipient furnishes the services of an employee, those services 
shall be valued at the employee's regular rate of pay plus an amount of 
fringe benefits and overhead (at an overhead rate appropriate for the 
location where the services are performed) provided these services are 
in the same skill for which the employee is normally paid.
    (3) Valuing volunteer services. Volunteer services furnished by 
professional and technical personnel, 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.
    (4) Valuing property donated by third parties. (i) Donated supplies 
may include such items as office supplies or laboratory 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.
    (ii) Normally only depreciation or use charges for equipment and 
buildings may be applied. However, the fair rental charges for land and 
the full value of equipment or other capital assets may be allowed, when 
they will be consumed in the performance of the award or fully 
depreciated by the end of the award, provided that the grants officer 
has approved the charges. When use charges are applied, values shall be 
determined in accordance with the usual accounting policies of the 
recipient, with the following qualifications:
    (A) 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.
    (B) The value of loaned equipment shall not exceed its fair rental 
value.
    (5) Documentation. 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 services 
and property shall be documented.



Sec. 34.14  Program income.

    (a) DoD Components shall apply the standards in this section to the 
disposition of program income from projects financed in whole or in part 
with Federal funds.
    (b) Recipients shall have no obligation to the Government, unless 
the terms and conditions of the award provide otherwise, for program 
income earned:
    (1) From license fees and royalties for copyrighted material, 
patents, patent applications, trademarks, and inventions produced under 
an award. Note, however, that the Patent and Trademark Amendments (35 
U.S.C. Chapter 18), as implemented in Sec. 34.25, apply to inventions 
made under a research award.
    (2) After the end of the project period. If a grants officer 
anticipates that an award is likely to generate program income after the 
end of the project period, the grants officer should indicate in the 
award document whether the recipient will have any obligation to the 
Federal Government with respect to such income.
    (c) If authorized by the terms and conditions of the award, costs 
incident to the generation of program income may be deducted from gross 
income to determine program income, provided

[[Page 189]]

these costs have not been charged to the award.
    (d) Other than any program income excluded pursuant to paragraphs 
(b) and (c) of this section, program income earned during the project 
period shall be retained by the recipient and used in one or more of the 
following ways, as specified in program regulations or the terms and 
conditions of the award:
    (1) Added to funds committed to the project by the DoD Component and 
recipient and used 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.
    (e) If the terms and conditions of an award authorize the 
disposition of program income as described in paragraph (d)(1) or (d)(2) 
of this section, and stipulate a limit on the amounts that may be used 
in those ways, program income in excess of the stipulated limits shall 
be used in accordance with paragraph (d)(3) of this section.
    (f) In the event that the terms and conditions of the award do not 
specify how program income is to be used, paragraph (d)(3) of this 
section shall apply automatically to all projects or programs except 
research. For awards that support research, paragraph (d)(1) of this 
section shall apply automatically unless the terms and conditions 
specify another alternative or the recipient is subject to special award 
conditions, as indicated in Sec. 34.4.
    (g) Proceeds from the sale of property that is acquired, rather than 
fabricated, under an award are not program income and shall be handled 
in accordance with the requirements of the Property Standards (see 
Sec. Sec. 34.20 through 34.25).



Sec. 34.15  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. It may include either the 
sum of the Federal and non-Federal shares, or only the Federal share, 
depending upon DoD Component requirements. 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) Recipients shall immediately request, in writing, prior approval 
from the cognizant grants officer when there is reason to believe that 
within the next seven calendar days a programmatic or budgetary revision 
will be necessary for certain reasons, as follows:
    (1) The recipient always must obtain the grants officer's prior 
approval when a revision is necessary for either of the following two 
reasons (i.e., these two requirements for prior approval may never be 
waived):
    (i) A 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) A need for additional Federal funding.
    (2) The recipient must obtain the grants officer's prior approval 
when a revision is necessary for any of the following six reasons, 
unless the requirement for prior approval is waived in the terms and 
conditions of the award (i.e., if the award document is silent, these 
prior approvals are required):
    (i) A 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 inclusion of any additional costs that require prior 
approval in accordance with applicable cost principles for Federal funds 
and recipients' cost share or match, in Sec. 34.17 and Sec. 34.13, 
respectively.
    (iv) The inclusion of pre-award costs. All such costs are incurred 
at the recipient's risk (i.e., the DoD Component 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).
    (v) A ``no-cost'' extension of the project period that does not 
require additional Federal funds and does not

[[Page 190]]

change the approved objectives or scope of the project.
    (vi) Any subaward, transfer or contracting out of substantive 
program performance under an award, unless described in the application 
and funded in the approved awards. This provision does not apply to the 
purchase of supplies, material, or general support services, except that 
procurement of equipment or other capital items of property always is 
subject to the grants officer's prior approval under Sec. 34.21(a), if 
it is to be purchased with Federal funds, or Sec. 34.13(a)(7), if it is 
to be used as cost sharing or matching.
    (3) The recipient also must obtain the grants officer's prior 
approval when a revision is necessary for either of the following 
reasons, if specifically required in the terms and conditions of the 
award document (i.e., if the award document is silent, these prior 
approvals are not required):
    (i) The transfer of funds among direct cost categories, 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 
the DoD Component. No DoD Component shall 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.
    (ii) For awards that provide support for both construction and 
nonconstruction work, any fund or budget transfers between the two types 
of work supported.
    (d) Within 30 calendar days from the date of receipt of the 
recipient's request for budget revisions, the grants officer 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, the grants officer shall inform the recipient 
in writing of the date when the recipient may expect the decision.



Sec. 34.16  Audits.

    (a) Any recipient that expends $500,000 or more in a year under 
Federal awards shall have an audit made for that year by an independent 
auditor, in accordance with paragraph (b) of this section. The audit 
generally should be made a part of the regularly scheduled, annual audit 
of the recipient's financial statements. However, it may be more 
economical in some cases to have the Federal awards separately audited, 
and a recipient may elect to do so, unless that option is precluded by 
award terms and conditions, or by Federal laws or regulations applicable 
to the program(s) under which the awards were made.
    (b) The auditor shall determine and report on whether:
    (1) The recipient has an internal control structure that provides 
reasonable assurance that it is managing Federal awards in compliance 
with Federal laws and regulations, and with the terms and conditions of 
the awards.
    (2) Based on a sampling of Federal award expenditures, the recipient 
has complied with laws, regulations, and award terms that may have a 
direct and material effect on Federal awards.
    (c) The recipient shall make the auditor's report available to DoD 
Components whose awards are affected.
    (d) The requirement for an annual independent audit is intended to 
ascertain the adequacy of the recipient's internal financial management 
systems and to curtail the unnecessary duplication and overlap that 
usually results when Federal agencies request audits of individual 
awards on a routine basis. Therefore, a grants officer:
    (1) Shall consider whether the independent audit satisfies his or 
her requirements, before requesting any additional audits; and
    (2) When requesting an additional audit, shall:
    (i) Limit the scope of such additional audit to areas not adequately 
addressed by the independent audit.
    (ii) Coordinate the audit request with the Federal agency with the 
predominant fiscal interest in the recipient, as the agency responsible 
for the scheduling and distribution of audits. If DoD has the 
predominant fiscal interest in the recipient, the Defense Contract 
Management Command (DCMC) is responsible for monitoring audits, ensuring 
resolution of audit findings, and

[[Page 191]]

distributing audit reports. When an additional audit is requested and 
DoD has the predominant fiscal interest in the recipient, DCMC shall, to 
the extent practicable, ensure that the additional audit builds upon the 
independent audit or other audits performed in accordance with this 
section.
    (e) There may be instances in which Federal auditors have recently 
performed audits, are performing audits, or are planning to perform 
audits, of a recipient. In these cases, the recipient and its Federal 
cognizant agency should seek to have the non-Federal, independent 
auditors work with the Federal auditors to develop a coordinated audit 
approach, to minimize duplication of audit work.
    (f) Audit costs (including a reasonable allocation of the costs of 
the audit of the recipient's financial statement, based on the relative 
benefit to the Government and the recipient) are allowable costs of DoD 
awards.

[63 FR 12204, Mar. 12, 1998, as amended at 70 FR 49477, Aug. 23, 2005]



Sec. 34.17  Allowable costs.

    Allowability of costs shall be determined in accordance with the 
cost principles applicable to the type of entity incurring the costs, as 
follows:
    (a) For-profit organizations. Allowability of costs incurred by for-
profit organizations that are recipients of prime awards from DoD 
Components, and those that are subrecipients under prime awards to other 
organizations, is to be determined in accordance with:
    (1) The for-profit cost principles in 48 CFR parts 31 and 231 (in 
the Federal Acquisition Regulation, or FAR, and the Defense Federal 
Acquisition Regulation Supplement, or DFARS, respectively).
    (2) The supplemental information on allowability of audit costs, in 
Sec. 34.16(f).
    (b) Other types of organizations. Allowability of costs incurred by 
other types of organizations that may be subrecipients under a prime 
award to a for-profit organization is determined as follows:
    (1) Institutions of higher education. Allowability is determined in 
accordance with OMB Circular A-21,\3\ `` Cost Principles for Educational 
Institutions.''
---------------------------------------------------------------------------

    \3\ For copies of the Circular, contact the Office of Management and 
Budget, EOP Publications, 725 17th St. N.W., New Executive Office 
Building, Washington, D.C. 20503.
---------------------------------------------------------------------------

    (2) Other nonprofit organizations. Allowability is determined in 
accordance with OMB Circular A-122,\4\ ``Cost Principles for Non-Profit 
Organizations.'' Note that Attachment C of the Circular identifies 
selected nonprofit organizations for whom cost allowability is 
determined in accordance with the FAR cost principles for for-profit 
organizations.
---------------------------------------------------------------------------

    \4\ See footnote 3 to paragraph (b)(1) of this section.
---------------------------------------------------------------------------

    (3) Hospitals. Allowability is determined in accordance with the 
provisions of 45 CFR part 74, Appendix E, ``Principles for Determining 
Costs Applicable to Research and Development Under Grants and Contracts 
with Hospitals.''
    (4) Governmental organizations. Allowability for State, local, or 
federally recognized Indian tribal governments is determined in 
accordance with OMB Circular A-87,\5\ ``Cost Principles for State and 
Local Governments.''
---------------------------------------------------------------------------

    \5\ See footnote 3 to paragraph (b)(1) of this section.
---------------------------------------------------------------------------



Sec. 34.18  Fee and profit.

    In accordance with 32 CFR 22.205(b), grants and cooperative 
agreements shall not:
    (a) Provide for the payment of fee or profit to the recipient.
    (b) Be used to carry out programs where fee or profit is necessary 
to achieving program objectives.

                           Property Standards



Sec. 34.20  Purpose of property standards.

    Sections 34.21 through 34.25 set forth uniform standards for 
management, use, and disposition of property. DoD Components shall 
encourage recipients to use existing property-management systems, to the 
extent that the systems meet these minimum requirements.



Sec. 34.21  Real property and equipment.

    (a) Prior approval for acquisition with Federal funds. Recipients 
may purchase

[[Page 192]]

real property or equipment in whole or in part with Federal funds under 
an award only with the prior approval of the grants officer.
    (b) Title. Title to such real property or equipment shall vest in 
the recipient upon acquisition. Unless a statute specifically authorizes 
a DoD Component to vest title in the recipient without further 
obligation to the Government, and the DoD Component elects to do so, the 
title shall be a conditional title. Title shall vest in the recipient 
subject to the conditions that the recipient:
    (1) Use the real property or equipment for the authorized purposes 
of the project until funding for the project ceases, or until the 
property is no longer needed for the purposes of the project.
    (2) Not encumber the property without approval of the grants 
officer.
    (3) Use and dispose of the property in accordance with paragraphs 
(d) and (e) of this section.
    (c) Federal interest in real property or equipment offered as cost-
share. A recipient may offer the full value of real property or 
equipment that is purchased with recipient's funds or that is donated by 
a third party to meet a portion of any required cost sharing or 
matching, subject to the prior approval requirement in Sec. 
34.13(a)(7). If a recipient does so, the Government has a financial 
interest in the property, a share of the property value attributable to 
the Federal participation in the project. The property therefore shall 
be considered as if it had been acquired in part with Federal funds, and 
shall be subject to the provisions of paragraphs (b)(1), (b)(2) and 
(b)(3) of this section, and to the provisions of Sec. 34.23.
    (d) Use. If real property or equipment is acquired in whole or in 
part with Federal funds under an award, and the award provides that 
title vests conditionally in the recipient, the real property or 
equipment is subject to the following:
    (1) During the time that the real property or 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 real property or equipment was originally acquired. Use of the real 
property or equipment on other projects will be in the following order 
of priority:
    (i) Activities sponsored by DoD Components' grants, cooperative 
agreements, or other assistance awards;
    (ii) Activities sponsored by other Federal agencies' grants, 
cooperative agreements, or other assistance awards;
    (iii) Activities under Federal procurement contracts, or activities 
not sponsored by any Federal agency. If so used, use charges shall be 
assessed to those activities. For real property or equipment, the use 
charges shall be at rates equivalent to those for which comparable real 
property or equipment may be leased. The use charges shall be treated as 
program income.
    (2) After Federal funding for the project ceases, or when the real 
property or equipment is no longer needed for the purposes of the 
project, the recipient may use the real property or equipment for other 
projects, insofar as:
    (i) There are Federally sponsored projects for which the real 
property or equipment may be used. If the only use for the real property 
or equipment is for projects that have no Federal sponsorship, the 
recipient shall proceed with disposition of the real property or 
equipment, in accordance with paragraph (e) of this section.
    (ii) The recipient obtains written approval from the grants officer 
to do so. The grants officer shall ensure that there is a formal change 
of accountability for the real property or equipment to a currently 
funded, Federal award.
    (iii) The recipient's use of the real property or equipment for 
other projects is in the same order of priority as described in 
paragraph (d)(1) of this section.
    (e) Disposition. (1) When an item of real property or equipment is 
no longer needed for Federally sponsored projects, the recipient shall 
proceed as follows:
    (i) If the property that is no longer needed is equipment (rather 
than real property), the recipient may wish to replace it with an item 
that is needed

[[Page 193]]

currently for the project. In that case, the recipient may use the 
original equipment as trade-in or sell it and use the proceeds to offset 
the costs of the replacement equipment, subject to the approval of the 
responsible agency (i.e., the DoD Component or the Federal agency to 
which the DoD Component delegated responsibility for administering the 
equipment).
    (ii) The recipient may elect to retain title, without further 
obligation to the Federal Government, by compensating the Federal 
Government for that percentage of the current fair market value of the 
real property or equipment that is attributable to the Federal 
participation in the project.
    (iii) If the recipient does not elect to retain title to real 
property or equipment (see paragraph (e)(1)(ii) of this section), or 
request approval to use equipment as trade-in or offset for replacement 
equipment (see paragraph (e)(1)(i) of this section), the recipient shall 
request disposition instructions from the responsible agency.
    (2) If a recipient requests disposition instructions, in accordance 
with paragraph (e)(1)(iii) of this section, the responsible grants 
officer shall:
    (i) For equipment (but not real property), consult with the Federal 
program manager and judge whether the age and nature of the equipment 
warrant a screening procedure, to determine whether the equipment is 
useful to a DoD Component or other Federal agency. If a screening 
procedure is warranted, the responsible agency shall determine whether 
the equipment can be used to meet a DoD Component's requirement. If no 
DoD requirement is found, the responsible agency shall report the 
availability of the equipment to the General Services Administration, to 
determine whether a requirement for the equipment exists in other 
Federal agencies.
    (ii) For either real property or equipment, issue instructions to 
the recipient for disposition of the property no later than 120 calendar 
days after the recipient's request. The grants officer's options for 
disposition are to direct the recipient to:
    (A) Transfer title to the real property or equipment 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 real property or 
equipment, plus any reasonable shipping or interim storage costs 
incurred. If title is transferred to the Federal Government, it shall be 
subject thereafter to provisions for Federally owned property in Sec. 
34.22.
    (B) Sell the real property or equipment and pay the Federal 
Government for that percentage of the current fair market value of the 
property that is attributable to the Federal participation in the 
project (after deducting actual and reasonable selling and fix-up 
expenses, if any, from the sale proceeds). When the recipient is 
authorized or required to sell the real property or equipment, proper 
sales procedures shall be established that provide for competition to 
the extent practicable and result in the highest possible return.
    (3) If the responsible agency fails to issue disposition 
instructions within 120 calendar days of the recipient's request, as 
described in paragraph (e)(2)(ii) of this section, the recipient shall 
dispose of the real property or equipment through the option described 
in paragraph (e)(2)(ii)(B) of this section.



Sec. 34.22  Federally owned property.

    (a) Annual inventory. Recipients shall submit annually an inventory 
listing of all Federally owned property in their custody (property 
furnished by the Federal Government, rather than acquired by the 
recipient with Federal funds under the award), to the DoD Component or 
other Federal agency responsible for administering the property under 
the award.
    (b) Use on other activities. (1) Use of federally owned property on 
other activities is permissible, if authorized by the DoD Component 
responsible for administering the award to which the property currently 
is charged.
    (2) Use on other activities will be in the following order of 
priority:
    (i) Activities sponsored by DoD Components' grants, cooperative 
agreements, or other assistance awards;
    (ii) Activities sponsored by other Federal agencies' grants, 
cooperative

[[Page 194]]

agreements, or other assistance awards;
    (iii) Activities under Federal procurement contracts, or activities 
not sponsored by any Federal agency. If so used, use charges shall be 
assessed to those activities. For real property or equipment, the use 
charges shall be at rates equivalent to those for which comparable real 
property or equipment may be leased. The use charges shall be treated as 
program income.
    (c) Disposition of property. Upon completion of the award, the 
recipient shall report the property to the responsible agency. The 
agency may:
    (1) Use the property to meet another Federal Government need (e.g, 
by transferring accountability for the property to another Federal award 
to the same recipient, or by directing the recipient to transfer the 
property to a Federal agency that needs the property, or to another 
recipient with a currently funded award).
    (2) Declare the property to be excess property and either:
    (i) Report the property to the General Services Administration, in 
accordance with the Federal Property and Administrative Services Act of 
1949 (40 U.S.C. 483(b)(2)), as implemented by General Services 
Administration regulations at 41 CFR 101-47.202; or
    (ii) Dispose of the property by alternative methods, if there is 
statutory authority to do so (e.g., DoD Components are authorized by 15 
U.S.C. 3710(i), the Federal Technology Transfer Act, to donate research 
equipment to educational and nonprofit organizations for the conduct of 
technical and scientific education and research activities. Such 
donations shall be in accordance with the DoD implementation of E.O. 
12999 (3 CFR, 1996 Comp., p. 180), ``Educational Technology: Ensuring 
Opportunity for All Children in the Next Century,'' as applicable.) 
Appropriate instructions shall be issued to the recipient by the 
responsible agency.



Sec. 34.23  Property management system.

    The recipient's property management system shall include the 
following, for property that is Federally owned, and for equipment that 
is acquired in whole or in part with Federal funds, or that is used as 
matching share:
    (a) Property records shall be maintained, to include the following 
information:
    (1) A description of the property.
    (2) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or any other identification number.
    (3) Source of the property, including the award number.
    (4) Whether title vests in the recipient or the Federal Government.
    (5) Acquisition date (or date received, if the property was 
furnished by the Federal Government) and cost.
    (6) Information from which one can calculate the percentage of 
Federal participation in the cost of the property (not applicable to 
property furnished by the Federal Government).
    (7) The location and condition of the property and the date the 
information was reported.
    (8) Ultimate disposition data, including date of disposal and sales 
price or the method used to determine current fair market value where a 
recipient compensates the Federal Government for its share.
    (b) Federally owned equipment shall be marked, to indicate Federal 
ownership.
    (c) A physical inventory shall be taken and the results reconciled 
with the property 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 property.
    (d) A control system shall be in effect to insure adequate 
safeguards to prevent loss, damage, or theft of the property. Any loss, 
damage, or theft of property shall be investigated and fully documented; 
if the property was owned by the Federal Government, the recipient shall 
promptly notify the Federal agency responsible for administering the 
property.
    (e) Adequate maintenance procedures shall be implemented to keep the 
property in good condition.

[[Page 195]]



Sec. 34.24  Supplies.

    (a) Title shall vest in the recipient upon acquisition for supplies 
acquired with Federal funds under an award.
    (b) Upon termination or completion of the project or program, the 
recipient shall retain any unused supplies. If the inventory of unused 
supplies exceeds $5,000 in total aggregate value and the items are not 
needed for any other Federally sponsored project or program, the 
recipient shall retain the items for use on non-Federal sponsored 
activities or sell them, but shall, in either case, compensate the 
Federal Government for its share.



Sec. 34.25  Intellectual property developed or produced under awards.

    (a) Patents. Grants and cooperative agreements with:
    (1) Small business concerns shall comply with 35 U.S.C. Chapter 18, 
as implemented by 37 CFR part 401, which applies to inventions made 
under grants and cooperative agreements with small business concerns for 
research and development. 37 CFR 401.14 provides a standard clause that 
is required in such grants and cooperative agreements in most cases, 37 
CFR 401.3 specifies when the clause shall be included, and 37 CFR 401.5 
specifies how the clause may be modified and tailored.
    (2) For-profit organizations other than small business concerns 
shall comply with 35 U.S.C. 210(c) and Executive Order 12591 (3 CFR, 
1987 Comp., p. 220) (which codifies a Presidential Memorandum on 
Government Patent Policy, dated February 18, 1983).
    (i) The Executive order states that, as a matter of policy, grants 
and cooperative agreements should grant to all for-profit organizations, 
regardless of size, title to patents made in whole or in part with 
Federal funds, in exchange for royalty-free use by or on behalf of the 
Government (i.e., it extends the applicability of 35 U.S.C. Chapter 18, 
to the extent permitted by law, to for-profit organizations other than 
small business concerns).
    (ii) 35 U.S.C. 210(c) states that 35 U.S.C. Chapter 18 is not 
intended to limit agencies' authority to agree to the disposition of 
rights in inventions in accordance with the Presidential memorandum 
codified by the Executive order. It also states that such grants and 
cooperative agreements shall provide for Government license rights 
required by 35 U.S.C. 202(c)(4) and march-in rights required by 35 
U.S.C. 203.
    (b) Copyright, data and software rights. Requirements concerning 
data and software rights are as follows:
    (1) The recipient may copyright any work that is subject to 
copyright and was developed under an award. DoD Components reserve 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.
    (2) Unless waived by the DoD Component making the award, the Federal 
Government has the right to:
    (i) Obtain, reproduce, publish or otherwise use for Federal 
Government purposes the data first produced under an award.
    (ii) Authorize others to receive, reproduce, publish, or otherwise 
use such data for Federal purposes.

                          Procurement Standards



Sec. 34.30  Purpose of procurement standards.

    Section 34.31 sets forth requirements necessary to ensure:
    (a) Compliance of recipients' procurements that use Federal funds 
with applicable Federal statutes and executive orders.
    (b) Proper stewardship of Federal funds used in recipients' 
procurements.



Sec. 34.31  Requirements.

    The following requirements pertain to recipients' procurements 
funded in whole or in part with Federal funds or with recipients' cost-
share or match:
    (a) Reasonable cost. Recipients procurement procedures shall make 
maximum practicable use of competition, or shall use other means that 
ensure reasonable cost for procured goods and services.
    (b) Pre-award review of certain procurements. Prior to awarding a 
procurement contract under an award, a recipient may be required to 
provide the grants officer administering the award with pre-award 
documents (e.g., requests for

[[Page 196]]

proposals, invitations for bids, or independent cost estimates) related 
to the procurement. Recipients will only be required to provide such 
documents for the grants officer's pre-award review in exceptional cases 
where the grants officer judges that there is a compelling need to do 
so. In such cases, the grants officer must include a provision in the 
award that states the requirement.
    (c) Contract provisions. (1) Contracts in excess of the simplified 
acquisition 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.
    (2) All contracts in excess of the simplified acquisition threshold 
shall contain suitable provisions for termination for default by the 
recipient or for termination due to circumstances beyond the control of 
the contractor.
    (3) All negotiated contracts in excess of the simplified acquisition 
threshold shall include a provision permitting access of the Department 
of Defense, the Comptroller General of the United States, or any of 
their duly authorized representatives, to any books, documents, papers, 
and records of the contractor that are directly pertinent to a specific 
program, for the purpose of making audits, examinations, excerpts, and 
transcriptions.
    (4) All contracts, including those for amounts less than the 
simplified acquisition threshold, awarded by recipients and their 
contractors shall contain the procurement provisions of Appendix A to 
this part, as applicable.

                           Reports and Records



Sec. 34.40  Purpose of reports and records.

    Sections 34.41 and 34.42 prescribe requirements for monitoring and 
reporting financial and program performance and for records retention.



Sec. 34.41  Monitoring and reporting program and financial performance.

    Grants officers may use the provisions of 32 CFR 32.51 and 32.52 for 
awards to for-profit organizations, or may include equivalent technical 
and financial reporting requirements that ensure reasonable oversight of 
the expenditure of appropriated funds. As a minimum, equivalent 
requirements must include:
    (a) Periodic reports (at least annually, and no more frequently than 
quarterly) addressing both program status and business status, as 
follows:
    (1) The program portions of the reports must address progress toward 
achieving program performance goals, including current issues, problems, 
or developments.
    (2) The business portions of the reports shall provide summarized 
details on the status of resources (federal funds and non-federal cost 
sharing or matching), including an accounting of expenditures for the 
period covered by the report. The report should compare the resource 
status with any payment and expenditure schedules or plans provided in 
the original award; explain any major deviations from those schedules; 
and discuss actions that will be taken to address the deviations.
    (3) When grants officers previously authorized advance payments, 
pursuant to Sec. 34.12(a)(2), they should consult with the program 
official and consider whether program progress reported in the periodic 
report, in relation to reported expenditures, is sufficient to justify 
continued authorization of advance payments.
    (b) Unless inappropriate, a final performance report that addresses 
all major accomplishments under the award.



Sec. 34.42  Retention and access requirements for records.

    (a) This section sets forth requirements for records retention and 
access to records for awards to 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. 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.

[[Page 197]]

    (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 the DoD 
Component that made the award, the 3-year retention requirement is not 
applicable to the recipient.
    (4) Indirect cost rate proposals, cost allocations plans, and 
related records, for which retention requirements are specified in Sec. 
34.42(g).
    (c) Copies of original records may be substituted for the original 
records if authorized by the grants officer.
    (d) The grants officer shall request that recipients transfer 
certain records to DoD Component custody when he or she determines that 
the records possess long term retention value. However, in order to 
avoid duplicate recordkeeping, a grants officer may make arrangements 
for recipients to retain any records that are continuously needed for 
joint use.
    (e) DoD Components, the Inspector General, Comptroller General of 
the United States, or any of their duly authorized representatives, have 
the right of timely and unrestricted access to 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.
    (f) Unless required by statute, no DoD Component shall place 
restrictions on recipients that limit public access to the records of 
recipients that are pertinent to an award, except when the DoD Component 
can demonstrate 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 the DoD 
Component making the award.
    (g) Indirect cost proposals, cost allocation plans, and other cost 
accounting documents (such as documents related to computer usage 
chargeback rates), along with their supporting records, shall be 
retained for a 3-year period, as follows:
    (1) If a recipient is required to submit an indirect-cost proposal, 
cost allocation plan, or other computation to the cognizant Federal 
agency, for purposes of negotiating an indirect cost rate or other 
rates, the 3-year retention period starts on the date of the submission. 
This retention requirement also applies to subrecipients submitting 
similar documents for negotiation to the recipient.
    (2) If the recipient or the subrecipient is not required to submit 
the documents or supporting records for negotiating an indirect cost 
rate or other rates, the 3-year retention period for the documents and 
records starts at the end of the fiscal year (or other accounting 
period) covered by the proposal, plan, or other computation.
    (h) If the information described in this section is maintained on a 
computer, recipients shall retain the computer data on a reliable medium 
for the time periods prescribed. Recipients may transfer computer data 
in machine readable form from one reliable computer medium to another. 
Recipients' computer data retention and transfer procedures shall 
maintain the integrity, reliability, and security of the original 
computer data. Recipients shall also maintain an audit trail describing 
the data transfer. For the record retention time periods prescribed in 
this section, recipients shall not destroy, discard, delete, or write 
over such computer data.

                       Termination and Enforcement



Sec. 34.50  Purpose of termination and enforcement.

    Sections 34.51 through 34.53 set forth uniform procedures for 
suspension, termination, enforcement, and disputes.



Sec. 34.51  Termination.

    (a) Awards may be terminated in whole or in part only in accordance 
with one of the following:
    (1) By the grants officer, if a recipient materially fails to comply 
with the terms and conditions of an award.

[[Page 198]]

    (2) By the grants officer 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 the grants officer written 
notification setting forth the reasons for such termination, the 
effective date, and, in the case of partial termination, the portion to 
be terminated. The recipient must provide such notice at least 30 
calendar days prior to the effective date of the termination. However, 
if the grants officer determines in the case of partial termination that 
the reduced or modified portion of the award will not accomplish the 
purposes for which the award was made, he or she may terminate the award 
in its entirety.
    (b) If costs are allowed under an award, the responsibilities of the 
recipient referred to in Sec. 34.61(b), 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. 34.52  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, 
the grants officer may, in addition to imposing any of the special 
conditions outlined in Sec. 34.4, 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 the 
grants officer and DoD Component.
    (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. In the 
case of termination, the recipient will be reimbursed for allowable 
costs incurred prior to termination, with the possible exception of 
those for activities and actions described in paragraph (a)(2) of this 
section.
    (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, the 
grants officer and DoD Component 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 (see Sec. 34.53 and 32 CFR 22.815).
    (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 the grants 
officer 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 the costs:
    (1) 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; and
    (2) 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 2 CFR part 1125.

[63 FR 12188, Mar. 12, 1998, as amended at 72 FR 34998, June 26, 2007]



Sec. 34.53  Disputes and appeals.

    Recipients have the right to appeal certain decisions by grants 
officers. In resolving such issues, DoD policy is to use Alternative 
Dispute Resolution (ADR) techniques, to the maximum practicable extent. 
See 32 CFR 22.815 for standards for DoD Components' dispute resolution 
and formal, administrative appeal procedures.

[[Page 199]]



                 Subpart C_After-the-Award Requirements



Sec. 34.60  Purpose.

    Sections 34.61 through 34.63 contain procedures for closeout and for 
subsequent disallowances and adjustments.



Sec. 34.61  Closeout procedures.

    (a) The cognizant grants officer shall, at least six months prior to 
the expiration date of the award, contact the recipient to establish:
    (1) All steps needed to close out the award, including submission of 
financial and performance reports, liquidation of obligations, and 
decisions on property disposition.
    (2) A schedule for completing those steps.
    (b) The following provisions shall apply to the closeout:
    (1) The responsible grants officer and payment office shall expedite 
completion of steps needed to close out awards and make prompt, final 
payments to a recipient for allowable reimbursable costs under the award 
being closed out.
    (2) The recipient shall promptly refund any unobligated balances of 
cash that the DoD Component has advanced or paid and that is not 
authorized to be retained by the recipient for use in other projects. 
For unreturned amounts that become delinquent debts, see 32 CFR 22.820.
    (3) When authorized by the terms and conditions of the award, the 
grants officer shall make a settlement for any upward or downward 
adjustments to the Federal share of costs after closeout reports are 
received.
    (4) The recipient shall account for any real property and personal 
property acquired with Federal funds or received from the Federal 
Government in accordance with Sec. Sec. 34.21 through 34.25.
    (5) If a final audit is required and has not been performed prior to 
the closeout of an award, the DoD Component shall retain the right to 
recover an appropriate amount after fully considering the 
recommendations on disallowed costs resulting from the final audit.



Sec. 34.62  Subsequent adjustments and continuing responsibilities.

    (a) The closeout of an award does not affect any of the following:
    (1) The right of the Department of Defense 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. 34.16.
    (4) Property management requirements in Sec. Sec. 34.21 through 
34.25.
    (5) Records retention as required in Sec. 34.42.
    (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 
the grants officer and the recipient, provided the responsibilities of 
the recipient referred to in Sec. 34.61(a), including those for 
property management as applicable, are considered and provisions made 
for continuing responsibilities of the recipient, as appropriate.



Sec. 34.63  Collection of amounts due.

    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. 
Procedures for issuing the demand for payment and pursuing 
administrative offset and other remedies are described in 32 CFR 22.820.



             Sec. Appendix A to Part 34--Contract Provisions

    All contracts awarded by a recipient, including those for amounts 
less than the simplified acquisition threshold, shall contain the 
following provisions as applicable:
    1. Equal Employment Opportunity--All contracts shall contain a 
provision requiring compliance with E.O. 11246 (3 CFR, 1964-1965 Comp., 
p. 339), ``Equal Employment Opportunity,'' as amended by E.O. 11375 (3 
CFR, 1966-1970 Comp., p. 684), ``Amending Executive Order 11246 Relating 
to Equal Employment Opportunity,'' and as supplemented by regulations at 
41 CFR chapter 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 subawards in excess of $2000 for construction 
or

[[Page 200]]

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 the responsible DoD 
Component.
    3. 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 and other purposes 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\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.
    4. Rights to Inventions Made Under a Contract, Grant or Cooperative 
Agreement--Contracts, grants, or cooperative 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.''
    5. 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 subawards 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 
responsible DoD Component and the Regional Office of the Environmental 
Protection Agency (EPA).
    6. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors who 
apply or bid for an award of $100,000 or more 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.
    7. Debarment and Suspension (E.O.s 12549 and 12689)--A contract 
award with an amount expected to equal or exceed $25,000 and certain 
other contract awards (see 2 CFR 1125.220, which implements OMB guidance 
at 2 CFR 180.220) shall not be made to parties listed on the 
Governmentwide Excluded Parties List System, in accordance with the DoD 
adoption at 2 CFR part 1125 of the OMB guidance implementing E.O.s 12549 
(3 CFR, 1986 Comp., p. 189) and 12689 (3 CFR, 1989 Comp., p. 235), 
``Debarment and Suspension.'' The Excluded Parties List System 
accessible on the Internet at www.epls.gov contains the names of parties 
debarred, suspended, or otherwise excluded by agencies, as well as 
parties declared ineligible under statutory or regulatory authority 
other than E.O. 12549.

[63 FR 12204, Mar. 12, 1998, as amended at 70 FR 49477, Aug. 23, 2005; 
72 FR 34998, June 26, 2007]



PART 37_TECHNOLOGY INVESTMENT AGREEMENTS--Table of Contents




                            Subpart A_General

Sec.
37.100 What does this part do?
37.105 Does this part cover all types of instruments that 10 U.S.C. 2371 
          authorizes?
37.110 What type of instruments are technology investment agreements 
          (TIAs)?
37.115 For what purposes are TIAs used?
37.120 Can my organization award or administer TIAs?
37.125 May I award or administer TIAs if I am authorized to award or 
          administer other assistance instruments?
37.130 Which other parts of the DoD Grant and Agreement Regulations 
          apply to TIAs?

[[Page 201]]

      Subpart B_Appropriate Use of Technology Investment Agreements

37.200 What are my responsibilities as an agreements officer for 
          ensuring the appropriate use of TIAs?
37.205 What judgments must I make about the nature of the project?
37.210 To what types of recipients may I award a TIA?
37.215 What must I conclude about the recipient's commitment and cost 
          sharing?
37.220 How involved should the Government program official be in the 
          project?
37.225 What judgment must I make about the benefits of using a TIA?
37.230 May I use a TIA if a participant is to receive fee or profit?

  Subpart C_Expenditure-Based and Fixed-Support Technology Investment 
                               Agreements

37.300 What is the difference between an expenditure-based and fixed-
          support TIA?
37.305 When may I use a fixed-support TIA?
37.310 When would I use an expenditure-based TIA?
37.315 What are the advantages of using a fixed-support TIA?

                       Subpart D_Competition Phase

37.400 Must I use competitive procedures to award TIAs?
37.405 What must my announcement or solicitation include?
37.410 Should my announcement or solicitation state that TIAs may be 
          awarded?
37.415 Should I address cost sharing in the announcement or 
          solicitation?
37.420 Should I tell proposers that we will not disclose information 
          that they submit?

                 Subpart E_Pre-Award Business Evaluation

37.500 What must my pre-award business evaluation address?
37.505 What resources are available to assist me during the pre-award 
          business evaluation?

                         Recipient Qualification

37.510 What are my responsibilities for determining that a recipient is 
          qualified?
37.515 Must I do anything additional to determine the qualification of a 
          consortium?

                              Total Funding

37.520 What is my responsibility for determining that the total project 
          funding is reasonable?

                              Cost Sharing

37.525 What is my responsibility for determining the value and 
          reasonableness of the recipient's cost sharing contribution?
37.530 What criteria do I use in deciding whether to accept a 
          recipient's cost sharing?
37.535 How do I value cost sharing related to real property or 
          equipment?
37.540 May I accept fully depreciated real property or equipment as cost 
          sharing?
37.545 May I accept costs of prior research as cost sharing?
37.550 May I accept intellectual property as cost sharing?
37.555 How do I value a recipient's other contributions?

               Fixed-Support or Expenditure-Based Approach

37.560 Must I be able to estimate project expenditures precisely in 
          order to justify use of a fixed-support TIA?
37.565 May I use a hybrid instrument that provides fixed support for 
          only a portion of a project?

               Accounting, Payments, and Recovery of Funds

37.570 What must I do if a CAS-covered participant accounts differently 
          for its own and the Federal Government shares of project 
          costs?
37.575 What are my responsibilities for determining milestone payment 
          amounts?
37.580 What is recovery of funds and when should I consider including it 
          in my TIA?

 Subpart F_Award Terms Affecting Participants' Financial, Property, and 
                           Purchasing Systems

37.600 Which administrative matters are covered in this subpart?
37.605 What is the general policy on participants' financial, property, 
          and purchasing systems?
37.610 Must I tell participants what requirements they are to flow down 
          for subrecipients' systems?

                            Financial Matters

37.615 What standards do I include for financial systems of for-profit 
          firms?
37.620 What financial management standards do I include for nonprofit 
          participants?
37.625 What cost principles or standards do I require for for-profit 
          participants?
37.630 Must I require a for-profit firm to use Federally approved 
          indirect cost rates?
37.635 What cost principles do I require a nonprofit participant to use?
37.640 Must I include a provision for audits of for-profit participants?

[[Page 202]]

37.645 Must I require periodic system audits, as well as award-specific 
          audits, of for-profit participants?
37.650 Who must I identify as the auditor for a for-profit participant?
37.655 Must I specify the frequency of IPAs' periodic audits of for-
          profit participants?
37.660 What else must I specify concerning audits of for-profit 
          participants by IPAs?
37.665 Must I require nonprofit participants to have periodic audits?
37.670 Must I require participants to flow down audit requirements to 
          subrecipients?
37.675 Must I report when I enter into a TIA allowing a for-profit firm 
          to use an IPA?
37.680 Must I require a participant to report when it enters into a 
          subaward allowing a for-profit firm to use an IPA?

                                Property

37.685 May I allow for-profit firms to purchase real property and 
          equipment with project funds?
37.690 How are nonprofit participants to manage real property and 
          equipment?
37.695 What are the requirements for Federally owned property?
37.700 What are the requirements for supplies?

                               Purchasing

37.705 What standards do I include for purchasing systems of for-profit 
          firms?
37.710 What standards do I include for purchasing systems of nonprofit 
          organizations?

      Subpart G_Award Terms Related to Other Administrative Matters

37.800 Which administrative matters are covered in this subpart?

                                Payments

37.805 If I am awarding a TIA, what payment methods may I specify?
37.810 What should my TIA's provisions specify for the method and 
          frequency of recipients' payment requests?
37.815 May the Government withhold payments?
37.820 Must I require a recipient to return interest on advance 
          payments?

                  Revision of Budget and Program Plans

37.825 Must I require the recipient to obtain prior approval from the 
          Government for changes in plans?
37.830 May I let a recipient charge pre-award costs to the agreement?

                             Program Income

37.835 What requirements do I include for program income?

                          Intellectual Property

37.840 What general approach should I take in negotiating data and 
          patent rights?
37.845 What data rights should I obtain?
37.850 Should I require recipients to mark data?
37.855 How should I handle protected data?
37.860 What rights should I obtain for inventions?
37.865 Should my patent provision include march-in rights?
37.870 Should I require recipients to mark documents related to 
          inventions?
37.875 Should my TIA include a provision concerning foreign access to 
          technology?

                  Financial and Programmatic Reporting

37.880 What requirements must I include for periodic reports on program 
          and business status?
37.885 May I require updated program plans?
37.890 Must I require a final performance report?
37.895 How is the final performance report to be sent to the Defense 
          Technical Information Center?
37.900 May I tell a participant that information in financial and 
          programmatic reports will not be publicly disclosed?
37.905 Must I make receipt of the final performance report a condition 
          for final payment?

                Records Retention and Access Requirements

37.910 How long must I require participants to keep records related to 
          the TIA?
37.915 What requirement for access to a for-profit participant's records 
          do I include in a TIA?
37.920 What requirement for access to a nonprofit participant's records 
          do I include in a TIA?

                       Termination and Enforcement

37.925 What requirements do I include for termination and enforcement?

                      Subpart H_Executing the Award

37.1000 What are my responsibilities at the time of award?

                           The Award Document

37.1005 What are my general responsibilities concerning the award 
          document?
37.1010 What substantive issues should my award document address?
37.1015 How do I decide who must sign the TIA if the recipient is an 
          unincorporated consortium?

                  Reporting Information About the Award

37.1020 What must I document in my award file?

[[Page 203]]

37.1025 Must I report information to the Defense Assistance Awards Data 
          System?
37.1030 What information must I report to the Defense Technical 
          Information Center?
37.1035 How do I know if my TIA uses the 10 U.S.C. 2371 authority and I 
          must report additional data under Sec. 37.1030(b)?
37.1040 When and how do I report information required by Sec. 37.1035?

                Distributing Copies of the Award Document

37.1045 To whom must I send copies of the award document?

                   Subpart I_Post-Award Administration

37.1100 What are my responsibilities generally as an administrative 
          agreements officer for a TIA?
37.1105 What additional duties do I have as the administrator of a TIA 
          with advance payments or payable milestones?
37.1110 What other responsibilities related to payments do I have?
37.1115 What are my responsibilities related to participants' single 
          audits?
37.1120 When and how may I request an award-specific audit?

            Subpart J_Definitions of Terms Used in this Part

37.1205 Advance.
37.1210 Advanced research.
37.1215 Agreements officer.
37.1220 Applied research.
37.1225 Articles of collaboration.
37.1230 Assistance.
37.1235 Award-specific audit.
37.1240 Basic research.
37.1245 Cash contributions.
37.1250 Commercial firm.
37.1255 Consortium.
37.1260 Cooperative agreement.
37.1265 Cost sharing.
37.1270 Data.
37.1275 DoD Component.
37.1280 Equipment.
37.1285 Expenditure-based award.
37.1290 Expenditures or outlays.
37.1295 Grant.
37.1300 In-kind contributions.
37.1305 Institution of higher education.
37.1310 Intellectual property.
37.1315 Nonprofit organization.
37.1320 Participant.
37.1325 Periodic audit.
37.1330 Procurement contract.
37.1335 Program income.
37.1340 Program official.
37.1345 Property.
37.1350 Real property.
37.1355 Recipient.
37.1360 Research.
37.1365 Supplies.
37.1370 Termination.
37.1375 Technology investment agreements.

Appendix A to Part 37--What Is the Civil-Military Integration Policy 
          That Is the Basis for Technology Investment Agreements?
Appendix B to Part 37--What Type of Instrument Is a TIA and What 
          Statutory Authorities Does It Use?
Appendix C to Part 37--What Is the Desired Coverage for Periodic Audits 
          of For-Profit Participants To Be Audited by IPAs?
Appendix D to Part 37--What Common National Policy Requirements May 
          Apply and Need To Be Included in TIAs?
Appendix E to Part 37--What Provisions May a Participant Need To Include 
          When Purchasing Goods or Services Under a TIA?

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

    Source: 68 FR 47160, Aug. 7, 2003, unless otherwise noted.



                            Subpart A_General



Sec. 37.100  What does this part do?

    This part establishes uniform policies and procedures for the DoD 
Components' award and administration of technology investment agreements 
(TIAs).



Sec. 37.105  Does this part cover all types of instruments that 10 U.S.C. 2371 authorizes?

    No, this part covers only TIAs, some of which use the authority of 
10 U.S.C. 2371 (see appendix B to this part). This part does not cover 
assistance instruments other than TIAs that use the authority of 10 
U.S.C. 2371. It also does not cover acquisition agreements for prototype 
projects that use 10 U.S.C. 2371 authority augmented by the authority in 
section 845 of Public Law 103-160, as amended.



Sec. 37.110  What type of instruments are technology investment agreements (TIAs)?

    TIAs are assistance instruments used to stimulate or support 
research. As discussed in appendix B to this part, a TIA may be either a 
kind of cooperative agreement or a type of assistance transaction other 
than a grant or cooperative agreement.

[[Page 204]]



Sec. 37.115  For what purposes are TIAs used?

    The ultimate goal for using TIAs, like other assistance instruments 
used in defense research programs, is to foster the best technologies 
for future defense needs. TIAs differ from and complement other 
assistance instruments available to agreements officers, in that TIAs 
address the goal by fostering civil-military integration (see appendix A 
to this part). TIAs therefore are designed to:
    (a) Reduce barriers to commercial firms' participation in defense 
research, to give the Department of Defense (DoD) access to the broadest 
possible technology and industrial base.
    (b) Promote new relationships among performers in both the defense 
and commercial sectors of that technology and industrial base.
    (c) Stimulate performers to develop, use, and disseminate improved 
practices.



Sec. 37.120  Can my organization award or administer TIAs?

    Your office may award or administer TIAs if it has a delegation of 
the authorities in 10 U.S.C. 2371, as well as 10 U.S.C. 2358. If your 
office is in a Military Department, it must have a delegation of the 
authority of the Secretary of that Military Department under those 
statutes. If your office is in a Defense Agency, it must have a 
delegation of the authority of the Secretary of Defense under 10 U.S.C. 
2358 and 2371. Your office needs those authorities to be able to:
    (a) Enter into cooperative agreements to stimulate or support 
research, using the authority of 10 U.S.C. 2358, as well as assistance 
transactions other than grants or cooperative agreements, using the 
authority of 10 U.S.C. 2371. The reason that both authorities are needed 
is that a TIA, depending upon its patent rights provision (see appendix 
B to this part), may be either a cooperative agreement or a type of 
assistance transaction other than a grant or cooperative agreement.
    (b) Recover funds from a recipient and reuse the funds for program 
purposes, as authorized by 10 U.S.C. 2371 and described in Sec. 37.580.
    (c) Exempt certain information received from proposers from 
disclosure under the Freedom of Information Act, as authorized by 10 
U.S.C. 2371 and described in Sec. 37.420.



Sec. 37.125  May I award or administer TIAs if I am authorized to award or administer other assistance instruments?

    (a) You must have specific authorization to award or administer 
TIAs. Being authorized to award or administer grants and cooperative 
agreements is not sufficient; a grants officer is an agreements officer 
only if the statement of appointment also authorizes the award or 
administration of TIAs.
    (b) You receive that authorization in the same way that you receive 
authority to award other assistance instruments, as described in 32 CFR 
21.425 and 21.435 through 21.445.



Sec. 37.130  Which other parts of the DoD Grant and Agreement Regulations apply to TIAs?

    (a) TIAs are explicitly covered in this part and part 21 of the DoD 
Grant and Agreement Regulations (DoDGARs). Part 21 (32 CFR part 21) 
addresses deviation procedures and other general matters that relate to 
the DoDGARs, to DoD Components' authorities and responsibilities for 
assistance instruments, and to requirements for reporting information 
about assistance awards.
    (b) Two additional parts of the DoDGARs apply to TIAs, although they 
do not mention TIAs explicitly. They are:
    (1) Part 1125 (2 CFR part 1125) on nonprocurement debarment and 
suspension, which applies because it covers nonprocurement instruments 
in general;
    (2) Part 26 (32 CFR part 26), on drug-free workplace requirements, 
which applies because it covers financial assistance in general; and
    (3) Part 28 (32 CFR part 28), on lobbying restrictions, which 
applies by law (31 U.S.C. 1352) to TIAs that are cooperative agreements 
and as a matter of DoD policy to all other TIAs.
    (c) Portions of four other DoDGARs parts apply to TIAs only as cited 
by reference in this part. Those parts of

[[Page 205]]

the DoDGARs are parts 22, 32, 33, and 34 (32 CFR parts 22, 32, 33, and 
34).

[68 FR 47160, Aug. 7, 2003, as amended at 70 FR 49477, Aug. 23, 2005; 72 
FR 34999, June 26, 2007]



      Subpart B_Appropriate Use of Technology Investment Agreements



Sec. 37.200  What are my responsibilities as an agreements officer for ensuring the appropriate use of TIAs?

    You must ensure that you use TIAs only in appropriate situations. To 
do so, you must conclude that the use of a TIA is justified based on:
    (a) The nature of the project, as discussed in Sec. 37.205;
    (b) The type of recipient, addressed in Sec. 37.210;
    (c) The recipient's commitment and cost sharing, as described in 
Sec. 37.215;
    (d) The degree of involvement of the Government program official, as 
discussed in Sec. 37.220; and
    (e) Your judgment that the use of a TIA could benefit defense 
research objectives in ways that likely would not happen if another type 
of assistance instrument were used. Your answers to the four questions 
in Sec. 37.225 should be the basis for your judgment.



Sec. 37.205  What judgments must I make about the nature of the project?

    You must:
    (a) Conclude that the principal purpose of the project is 
stimulation or support of research (i.e., assistance), rather than 
acquiring goods or services for the benefit of the Government (i.e., 
acquisition);
    (b) Decide that the basic, applied, or advanced research project is 
relevant to the policy objective of civil-military integration (see 
appendix A of this part); and
    (c) Ensure that, to the maximum extent practicable, any TIA that 
uses the authority of 10 U.S.C. 2371 (see appendix B of this part) does 
not support research that duplicates other research being conducted 
under existing programs carried out by the Department of Defense. This 
is a statutory requirement of 10 U.S.C. 2371.
    (d) When your TIA is a type of assistance transaction other than a 
grant or cooperative agreement, satisfy the condition in 10 U.S.C. 2371 
to judge that the use of a standard grant or cooperative agreement for 
the research project is not feasible or appropriate. As discussed in 
appendix B to this part:
    (1) This situation arises if your TIA includes a patent provision 
that is less restrictive than is possible under the Bayh-Dole statute 
(because the patent provision is what distinguishes a TIA that is a 
cooperative agreement from a TIA that is an assistance transaction other 
than a grant or cooperative agreement).
    (2) You satisfy the requirement to judge that a standard cooperative 
agreement is not feasible or appropriate when you judge that execution 
of the research project warrants a less restrictive patent provision 
than is possible under Bayh-Dole.



Sec. 37.210  To what types of recipients may I award a TIA?

    (a) As a matter of DoD policy, you may award a TIA only when one or 
more for-profit firms are to be involved either in the:
    (1) Performance of the research project; or
    (2) The commercial application of the research results. In that 
case, you must determine that the nonprofit performer has at least a 
tentative agreement with specific for-profit partners who plan on being 
involved when there are results to transition. You should review the 
agreement between the nonprofit and for-profit partners, because the 
for-profit partners' involvement is the basis for using a TIA rather 
than another type of assistance instrument.
    (b) Consistent with the goals of civil-military integration, TIAs 
are most appropriate when one or more commercial firms (as defined at 
Sec. 37.1250) are to be involved in the project.
    (c) You are encouraged to make awards to consortia (a consortium may 
include one or more for-profit firms, as well as State or local 
government agencies, institutions of higher education, or other 
nonprofit organizations). The reasons are that:
    (1) When multiple performers are participating as a consortium, they 
are more equal partners in the research performance than usually is the 
case

[[Page 206]]

with a prime recipient and subawards. All of them therefore are more 
likely to be directly involved in developing and revising plans for the 
research effort, reviewing technical progress, and overseeing financial 
and other business matters. That feature makes consortia well suited to 
building new relationships among performers in the defense and 
commercial sectors of the technology and industrial base, a principal 
objective for the use of TIAs.
    (2) In addition, interactions among the participants within a 
consortium potentially provide a self-governance mechanism. The 
potential for additional self-governance is particularly good when a 
consortium includes multiple for-profit participants that normally are 
competitors within an industry.
    (d) TIAs also may be used for carrying out research performed by 
single firms or multiple performers in prime award-subaward 
relationships. In awarding TIAs in those cases, however, you should 
consider providing for greater involvement of the program official or a 
way to increase self-governance (e.g., a prime award with multiple 
subawards arranged so as to give the subrecipients more insight into and 
authority and responsibility for programmatic and business aspects of 
the overall project than they usually have).



Sec. 37.215  What must I conclude about the recipient's commitment and cost sharing?

    (a) You should judge that the recipient has a strong commitment to 
and self-interest in the success of the project. You should find 
evidence of that commitment and interest in the proposal, in the 
recipient's management plan, or through other means. A recipient's self-
interest might be driven, for example, by a research project's potential 
for fostering technology to be incorporated into products and processes 
for the commercial marketplace.
    (b) You must seek cost sharing. The purpose of cost share is to 
ensure that the recipient incurs real risk that gives it a vested 
interest in the project's success; the willingness to commit to 
meaningful cost sharing therefore is one good indicator of a recipient's 
self-interest. The requirements are that:
    (1) To the maximum extent practicable, the non-Federal parties 
carrying out a research project under a TIA are to provide at least half 
of the costs of the project. Obtaining this cost sharing, to the maximum 
extent practicable, is a statutory condition for any TIA under the 
authority of 10 U.S.C. 2371, and is a matter of DoD policy for all other 
TIAs.
    (2) The parties must provide the cost sharing from non-Federal 
resources that are available to them unless there is specific authority 
to use other Federal resources for that purpose (see Sec. 37.530(f)).
    (c) You may consider whether cost sharing is impracticable in a 
given case, unless there is a non-waivable, statutory requirement for 
cost sharing that applies to the particular program under which the 
award is to be made. Before deciding that cost sharing is impracticable, 
you should carefully consider whether there are other factors that 
demonstrate the recipient's self-interest in the success of the current 
project.



Sec. 37.220  How involved should the Government program official be in the project?

    (a) TIAs are used to carry out cooperative relationships between the 
Federal Government and the recipient, which requires a greater level of 
involvement of the Government program official in the execution of the 
research than the usual oversight of a research grant or procurement 
contract. For example, program officials will participate in recipients' 
periodic reviews of research progress and will be substantially involved 
with the recipients in the resulting revisions of plans for future 
effort. That increased programmatic involvement before and during 
program execution with a TIA can reduce the need for some Federal 
financial requirements that are problematic for commercial firms.
    (b) Some aspects of their involvement require program officials to 
have greater knowledge about and participation in business matters that 
traditionally would be your exclusive responsibility as the agreements 
officer. TIAs

[[Page 207]]

therefore also require closer cooperation between program officials and 
you, as the one who decides business matters.



Sec. 37.225  What judgment must I make about the benefits of using a TIA?

    Before deciding that a TIA is appropriate, you also must judge that 
using a TIA could benefit defense research objectives in ways that 
likely would not happen if another type of assistance instrument were 
used (e.g., a cooperative agreement subject to all of the requirements 
of 32 CFR part 34). You, in conjunction with Government program 
officials, must consider the questions in paragraphs (a) through (d) of 
this section, to help identify the benefits that may justify using a TIA 
and reducing some of the usual requirements. In accordance with Sec. 
37.1030, you will report your answers to these questions to help the DoD 
measure the Department-wide benefits of using TIAs and meet requirements 
to report to the Congress. Note that you must give full concise answers 
only to questions that relate to the benefits that you perceive for 
using the TIA, rather than another type of funding instrument, for the 
particular research project. A simple ``no'' or ``not applicable'' is a 
sufficient response for other questions. The questions are:
    (a) Will the use of a TIA permit the involvement in the research of 
any commercial firms or business units of firms that would not otherwise 
participate in the project? If so:
    (1) What are the expected benefits of those firms' or divisions' 
participation (e.g., is there a specific technology that could be 
better, more readily available, or less expensive)?
    (2) Why would they not participate if an instrument other than a TIA 
were used? You should identify specific provisions of the TIA or 
features of the TIA award process that enable their participation.
    (b) Will the use of a TIA allow the creation of new relationships 
among participants at the prime or subtier levels, among business units 
of the same firm, or between non-Federal participants and the Federal 
Government that will help the DoD get better technology in the future? 
If so:
    (1) Why do these new relationships have the potential for helping 
the DoD get technology in the future that is better, more affordable, or 
more readily available?
    (2) Are there provisions of the TIA or features of the TIA award 
process that enable these relationships to form? If so, you should be 
able to identify specifically what they are. If not, you should be able 
to explain specifically why you think that the relationships could not 
be created if an assistance instrument other than a TIA were used.
    (c) Will the use of a TIA allow firms or business units of firms 
that traditionally accept Government awards to use new business 
practices in the execution of the research that will help us get better 
technology, help us get new technology more quickly or less expensively, 
or facilitate partnering with commercial firms? If so:
    (1) What specific benefits will the DoD potentially get from the use 
of these new practices? You should be able to explain specifically why 
you foresee a potential for those benefits.
    (2) Are there provisions of the TIA or features of the TIA award 
process that enable the use of the new practices? If so, you should be 
able to identify those provisions or features and explain why you think 
that the practices could not be used if the award were made using an 
assistance instrument other than a TIA.
    (d) Are there any other benefits of the use of a TIA that could help 
the Department of Defense better meet its objectives in carrying out the 
research project? If so, you should be able to identify specifically 
what they are, how they can help meet defense objectives, what features 
of the TIA or award process enable the DoD to realize them, and why the 
benefits likely would not be realized if an assistance instrument other 
than a TIA were used.



Sec. 37.230  May I use a TIA if a participant is to receive fee or profit?

    In accordance with 32 CFR 22.205(b), you may not use a TIA if any 
participant is to receive fee or profit. Note that this policy extends 
to all performers of the research project carried

[[Page 208]]

out under the TIA, including any subawards for substantive program 
performance, but it does not preclude participants' or subrecipients' 
payment of reasonable fee or profit when making purchases from suppliers 
of goods (e.g., supplies and equipment) or services needed to carry out 
the research.



  Subpart C_Expenditure-Based and Fixed-Support Technology Investment 
                               Agreements



Sec. 37.300  What is the difference between an expenditure-based and fixed-support TIA?

    The fundamental difference between an expenditure-based and fixed-
support TIA is that:
    (a) For an expenditure-based TIA, the amounts of interim payments or 
the total amount ultimately paid to the recipient are based on the 
amounts the recipient expends on project costs. If a recipient completes 
the project specified at the time of award before it expends all of the 
agreed-upon Federal funding and recipient cost sharing, the Federal 
Government may recover its share of the unexpended balance of funds or, 
by mutual agreement with the recipient, amend the agreement to expand 
the scope of the research project. An expenditure-based TIA therefore is 
analogous to a cost-type procurement contract or grant.
    (b) For a fixed-support TIA, the amount of assistance established at 
the time of award is not meant to be adjusted later if the research 
project is carried out to completion. In that sense, a fixed-support TIA 
is somewhat analogous to a fixed-price procurement contract (although 
``price,'' a concept appropriate to a procurement contract for buying a 
good or service, is not appropriate for a TIA or other assistance 
instrument for stimulation or support of a project).



Sec. 37.305  When may I use a fixed-support TIA?

    You may use a fixed-support TIA if:
    (a) The agreement is to support or stimulate research with outcomes 
that are well defined, observable, and verifiable;
    (b) You can reasonably estimate the resources required to achieve 
those outcomes well enough to ensure the desired level of cost sharing 
(see example in Sec. 37.560(b)); and
    (c) Your TIA does not require a specific amount or percentage of 
recipient cost sharing. In cases where the agreement does require a 
specific amount or percentage of cost sharing, a fixed-support TIA is 
not practicable because the agreement has to specify cost principles or 
standards for costs that may be charged to the project; require the 
recipient to track the costs of the project; and provide access for 
audit to allow verification of the recipient's compliance with the 
mandatory cost sharing. You therefore must use an expenditure-based TIA 
if you:
    (1) Have a non-waivable requirement (e.g., in statute) for a 
specific amount or percentage of recipient cost sharing; or
    (2) Have otherwise elected to include in the TIA a requirement for a 
specific amount or percentage of cost sharing.



Sec. 37.310  When would I use an expenditure-based TIA?

    In general, you must use an expenditure-based TIA under conditions 
other than those described in Sec. 37.305. Reasons for any exceptions 
to this general rule must be documented in the award file and must be 
consistent with the policy in Sec. 37.230 that precludes payment of fee 
or profit to participants.



Sec. 37.315  What are the advantages of using a fixed-support TIA?

    In situations where the use of fixed-support TIAs is permissible 
(see Sec. Sec. 37.305 and 37.310), their use may encourage some 
commercial firms' participation in the research. With a fixed-support 
TIA, you can eliminate or reduce some post-award requirements that 
sometimes are cited as disincentives for those firms to participate. For 
example, a fixed-support TIA need not:
    (a) Specify minimum standards for the recipient's financial 
management system.
    (b) Specify cost principles or standards stating the types of costs 
the recipient may charge to the project.

[[Page 209]]

    (c) Provide for financial audits by Federal auditors or independent 
public accountants of the recipient's books and records.
    (d) Set minimum standards for the recipient's purchasing system.
    (e) Require the recipient to prepare financial reports for 
submission to the Federal Government.



                       Subpart D_Competition Phase



Sec. 37.400  Must I use competitive procedures to award TIAs?

    DoD policy is to award TIAs using merit-based, competitive 
procedures, as described in 32 CFR 22.315:
    (a) In every case where required by statute; and
    (b) To the maximum extent practicable in all other cases.



Sec. 37.405  What must my announcement or solicitation include?

    Your announcement, to be considered as part of a competitive 
procedure, must include the basic information described in 32 CFR 
22.315(a). Additional elements for you to consider in the case of a 
program that may use TIAs are described in Sec. Sec. 37.410 through 
37.420.



Sec. 37.410  Should my announcement or solicitation state that TIAs may be awarded?

    Yes, once you consider the factors described in subpart B of this 
part and decide that TIAs are among the types of instruments that you 
may award pursuant to a solicitation, it is important for you to state 
that fact in the solicitation. You also should state that TIAs are more 
flexible than traditional Government funding instruments and that 
provisions are negotiable in areas such as audits and intellectual 
property rights that may cause concern for commercial firms. Doing so 
should increase the likelihood that commercial firms will be willing to 
submit proposals.



Sec. 37.415  Should I address cost sharing in the announcement or solicitation?

    To help ensure a competitive process that is fair and equitable to 
all potential proposers, you should state clearly in the solicitation:
    (a) That, to the maximum extent practicable, the non-Federal parties 
carrying out a research project under a TIA are to provide at least half 
of the costs of the project (see Sec. 37.215(b)).
    (b) The types of cost sharing that are acceptable;
    (c) How any in-kind contributions will be valued, in accordance with 
Sec. Sec. 37.530 through 37.555; and
    (d) Whether you will give any consideration to alternative 
approaches a proposer may offer to demonstrate its strong commitment to 
and self-interest in the project's success, in accordance with Sec. 
37.215.



Sec. 37.420  Should I tell proposers that we will not disclose information that they submit?

    Your solicitation should tell potential proposers that:
    (a) For all TIAs, information described in paragraph (b) of this 
section is exempt from disclosure requirements of the Freedom of 
Information Act (FOIA)(codified at 5 U.S.C. 552) for a period of five 
years after the date on which the DoD Component receives the information 
from them.
    (b) As provided in 10 U.S.C. 2371, disclosure is not required, and 
may not be compelled, under FOIA during that period if:
    (1) A proposer submits the information in a competitive or 
noncompetitive process that could result in their receiving a 
cooperative agreement for basic, applied, or advanced research under the 
authority of 10 U.S.C. 2358 or any other type of transaction authorized 
by 10 U.S.C. 2371 (as explained in appendix B to this part, that 
includes all TIAs); and
    (2) The type of information is among the following types that are 
exempt:
    (i) Proposals, proposal abstracts, and supporting documents; and
    (ii) Business plans and technical information submitted on a 
confidential basis.
    (c) If proposers desire to protect business plans and technical 
information for five years from FOIA disclosure requirements, they must 
mark them with a legend identifying them as documents submitted on a 
confidential

[[Page 210]]

basis. After the five-year period, information may be protected for 
longer periods if it meets any of the criteria in 5 U.S.C. 552(b) (as 
implemented by the DoD in subpart C of 32 CFR part 286) for exemption 
from FOIA disclosure requirements.



                 Subpart E_Pre-Award Business Evaluation



Sec. 37.500  What must my pre-award business evaluation address?

    (a) You must determine the qualification of the recipient, as 
described in Sec. Sec. 37.510 and 37.515.
    (b) As the business expert working with the program official, you 
also must address the financial aspects of the proposed agreement. You 
must:
    (1) Determine that the total amount of funding for the proposed 
effort is reasonable, as addressed in Sec. 37.520.
    (2) Assess the value and determine the reasonableness of the 
recipient's proposed cost sharing contribution, as discussed in 
Sec. Sec. 37.525 through 37.555.
    (3) If you are contemplating the use of a fixed-support rather than 
expenditure-based TIA, ensure that its use is justified, as explained in 
Sec. Sec. 37.560 and 37.565.
    (4) Address issues of inconsistent cost accounting by traditional 
Government contractors, should they arise, as noted in Sec. 37.570.
    (5) Determine amounts for milestone payments, if you use them, as 
discussed in Sec. 37.575.



Sec. 37.505  What resources are available to assist me during the pre-award business evaluation?

    Administrative agreements officers of the Defense Contract 
Management Agency and the Office of Naval Research can share lessons 
learned from administering other TIAs. Program officials can be a source 
of information when you are determining the reasonableness of proposed 
funding (e.g., on labor rates, as discussed in Sec. 37.520) or 
establishing observable and verifiable technical milestones for payments 
(see Sec. 37.575). Auditors at the Defense Contract Audit Agency can 
act in an advisory capacity to help you determine the reasonableness of 
proposed amounts, including values of in-kind contributions toward cost 
sharing.

                         Recipient Qualification



Sec. 37.510  What are my responsibilities for determining that a recipient is qualified?

    Prior to award of a TIA, your responsibilities for determining that 
the recipient is qualified are the same as those of a grants officer who 
is awarding a grant or cooperative agreement. Those responsibilities are 
described in subpart D of 32 CFR part 22. When the recipient is a 
consortium that is not formally incorporated, you have the additional 
responsibility described in Sec. 37.515.



Sec. 37.515  Must I do anything additional to determine the qualification of a consortium?

    (a) When the prospective recipient of a TIA is a consortium that is 
not formally incorporated, your determination that the recipient meets 
the standard at 32 CFR 22.415(a) requires that you, in consultation with 
legal counsel, review the management plan in the consortium's 
collaboration agreement. The purpose of your review is to ensure that 
the management plan is sound and that it adequately addresses the 
elements necessary for an effective working relationship among the 
consortium members. An effective working relationship is essential to 
increase the research project's chances of success.
    (b) The collaboration agreement, commonly referred to as the 
articles of collaboration, is the document that sets out the rights and 
responsibilities of each consortium member. It binds the individual 
consortium members together, whereas the TIA binds the Government and 
the consortium as a group (or the Government and a consortium member on 
behalf of the consortium, as explained in Sec. 37.1015). The document 
should discuss, among other things, the consortium's:
    (1) Management structure.
    (2) Method of making payments to consortium members.
    (3) Means of ensuring and overseeing members' efforts on the 
project.
    (4) Provisions for members' cost sharing contributions.

[[Page 211]]

    (5) Provisions for ownership and rights in intellectual property 
developed previously or under the agreement.

                              Total Funding



Sec. 37.520  What is my responsibility for determining that the total project funding is reasonable?

    In cooperation with the program official, you must assess the 
reasonableness of the total estimated budget to perform the research 
that will be supported by the agreement. Additional guidance follows 
for:
    (a) Labor. Much of the budget likely will involve direct labor and 
associated indirect costs, which may be represented together as a 
``loaded'' labor rate. The program official is an essential advisor on 
reasonableness of the overall level of effort and its composition by 
labor category. You also may rely on your experience with other awards 
as the basis for determining reasonableness. If you have any unresolved 
questions, two of the ways that you might find helpful in establishing 
reasonableness are to:
    (1) Consult the administrative agreements officers or auditors 
identified in Sec. 37.505.
    (2) Compare loaded labor rates of for-profit firms that do not have 
expenditure-based Federal procurement contracts or assistance awards 
with a standard or average for the particular industry. Note that the 
program official may have knowledge about customary levels of direct 
labor charges in the particular industry that is involved. You may be 
able to compare associated indirect charges with Government-approved 
indirect cost rates that exist for many nonprofit and for-profit 
organizations that have Federal procurement contracts or assistance 
awards (note the requirement in Sec. 37.630 for a for-profit 
participant to use Federally approved provisional indirect cost rates, 
if it has them).
    (b) Real property and equipment. In almost all cases, the project 
costs may include only depreciation or use charges for real property and 
equipment of for-profit participants, in accordance with Sec. 37.685. 
Remember that the budget for an expenditure-based TIA may not include 
depreciation of a participant's property as a direct cost of the project 
if that participant's practice is to charge the depreciation of that 
type of property as an indirect cost, as many organizations do.

                              Cost Sharing



Sec. 37.525  What is my responsibility for determining the value and reasonableness of the recipient's cost sharing contribution?

    You must:
    (a) Determine that the recipient's cost sharing contributions meet 
the criteria for cost sharing and determine values for them, in 
accordance with Sec. Sec. 37.530 through 37.555. In doing so, you must:
    (1) Ensure that there are affirmative statements from any third 
parties identified as sources of cash contributions.
    (2) Include in the award file an evaluation that documents how you 
determined the values of the recipient's contributions to the funding of 
the project.
    (b) Judge that the recipient's cost sharing contribution, as a 
percentage of the total budget, is reasonable. To the maximum extent 
practicable, the recipient must provide at least half of the costs of 
the project, in accordance with Sec. 37.215.



Sec. 37.530  What criteria do I use in deciding whether to accept a recipient's cost sharing?

    You may accept any cash or in-kind contributions that meet all of 
the following criteria:
    (a) In your judgment, they represent meaningful cost sharing that 
demonstrates the recipient's commitment to the success of the research 
project. Cash contributions clearly demonstrate commitment and they are 
strongly preferred over in-kind contributions.
    (b) They are necessary and reasonable for accomplishment of the 
research project's objectives.
    (c) They are costs that may be charged to the project under Sec. 
37.625 and Sec. 37.635, as applicable to the participant making the 
contribution.
    (d) They are verifiable from the recipient's records.

[[Page 212]]

    (e) They are not included as cost sharing contributions for any 
other Federal award.
    (f) They are not paid by the Federal Government under another award, 
except:
    (1) Costs that are authorized by Federal statute to be used for cost 
sharing; or
    (2) Independent research and development (IR&D) costs, as described 
at 32 CFR 34.13(a)(5)(ii), that meet all of the criteria in paragraphs 
(a) through (e) of this section. IR&D is acceptable as cost sharing, 
even though it may be reimbursed by the Government through other awards. 
It is standard business practice for all for-profit firms, including 
commercial firms, to recover their research and development (R&D) costs 
(which for Federal procurement contracts is recovered as IR&D) through 
prices charged to their customers. Thus, the cost principles at 48 CFR 
part 31 allow a for-profit firm that has expenditure-based, Federal 
procurement contracts to recover through those procurement contracts the 
allocable portion of its R&D costs associated with a technology 
investment agreement.



Sec. 37.535  How do I value cost sharing related to real property or equipment?

    You rarely should accept values for cost sharing contributions of 
real property or equipment that are in excess of depreciation or 
reasonable use charges, as discussed in Sec. 37.685 for for-profit 
participants. You may accept the full value of a donated capital asset 
if the real property or equipment is to be dedicated to the project and 
you expect that it will have a fair market value that is less than 
$5,000 at the project's end. In those cases, you should value the 
donation at the lesser of:
    (a) The value of the property as shown in the recipient's accounting 
records (i.e., purchase price less accumulated depreciation); or
    (b) The current fair market value. You may accept the use of any 
reasonable basis for determining the fair market value of the property. 
If there is a justification to do so, you may accept the current fair 
market value even if it exceeds the value in the recipient's records.



Sec. 37.540  May I accept fully depreciated real property or equipment as cost sharing?

    You should limit the value of any contribution of a fully 
depreciated asset to a reasonable use charge. In determining what is 
reasonable, you must consider:
    (a) The original cost of the asset;
    (b) Its estimated remaining useful life at the time of your 
negotiations;
    (c) The effect of any increased maintenance charges or decreased 
performance due to age; and
    (d) The amount of depreciation that the participant previously 
charged to Federal awards.



Sec. 37.545  May I accept costs of prior research as cost sharing?

    No, you may not count any participant's costs of prior research as a 
cost sharing contribution. Only the additional resources that the 
recipient will provide to carry out the current project (which may 
include pre-award costs for the current project, as described in Sec. 
37.830) are to be counted.



Sec. 37.550  May I accept intellectual property as cost sharing?

    (a) In most instances, you should not count costs of patents and 
other intellectual property (e.g., copyrighted material, including 
software) as cost sharing, because:
    (1) It is difficult to assign values to these intangible 
contributions;
    (2) Their value usually is a manifestation of prior research costs, 
which are not allowed as cost share under Sec. 37.545; and
    (3) Contributions of intellectual property rights generally do not 
represent the same cost of lost opportunity to a recipient as 
contributions of cash or tangible assets. The purpose of cost share is 
to ensure that the recipient incurs real risk that gives it a vested 
interest in the project's success.
    (b) You may include costs associated with intellectual property if 
the costs are based on sound estimates of market value of the 
contribution. For example, a for-profit firm may offer the use of 
commercially available software for

[[Page 213]]

which there is an established license fee for use of the product. The 
costs of the development of the software would not be a reasonable basis 
for valuing its use.



Sec. 37.555  How do I value a recipient's other contributions?

    For types of participant contributions other than those addressed in 
Sec. Sec. 37.535 through 37.550, the general rule is that you are to 
value each contribution consistently with the cost principles or 
standards in Sec. 37.625 and Sec. 37.635 that apply to the participant 
making the contribution. When valuing services and property donated by 
parties other than the participants, you may use as guidance the 
provisions of 32 CFR 34.13(b)(2) through (5).

               Fixed-Support or Expenditure-Based Approach



Sec. 37.560  Must I be able to estimate project expenditures precisely in order to justify use of a fixed-support TIA?

    (a) To use a fixed-support TIA, rather than an expenditure-based 
TIA, you must have confidence in your estimate of the expenditures 
required to achieve well-defined outcomes. Therefore, you must work 
carefully with program officials to select outcomes that, when the 
recipient achieves them, are reliable indicators of the amount of effort 
the recipient expended. However, your estimate of the required 
expenditures need not be a precise dollar amount, as illustrated by the 
example in paragraph (b) of this section, if:
    (1) The recipient is contributing a substantial share of the costs 
of achieving the outcomes, which must meet the criteria in Sec. 
37.305(a); and
    (2) You are confident that the costs of achieving the outcomes will 
be at least a minimum amount that you can specify and the recipient is 
willing to accept the possibility that its cost sharing percentage 
ultimately will be higher if the costs exceed that minimum amount.
    (b) To illustrate the approach, consider a project for which you are 
confident that the recipient will have to expend at least $800,000 to 
achieve the specified outcomes. You must determine, in conjunction with 
program officials, the minimum level of recipient cost sharing that you 
want to negotiate, based on the circumstances, to demonstrate the 
recipient's commitment to the success of the project. For purposes of 
this illustration, let that minimum recipient cost sharing be 40% of the 
total project costs. In that case, the Federal share should be no more 
than 60% and you could set a fixed level of Federal support at $480,000 
(60% of $800,000). With that fixed level of Federal support, the 
recipient would be responsible for the balance of the costs needed to 
complete the project.
    (c) Note, however, that the level of recipient cost sharing you 
negotiate is to be based solely on the level needed to demonstrate the 
recipient's commitment. You may not use a shortage of Federal Government 
funding for the program as a reason to try to persuade a recipient to 
accept a fixed-support TIA, rather than an expenditure-based instrument, 
or to accept responsibility for a greater share of the total project 
costs than it otherwise is willing to offer. If you lack sufficient 
funding to provide an appropriate Federal Government share for the 
entire project, you instead should rescope the effort covered by the 
agreement to match the available funding.



Sec. 37.565  May I use a hybrid instrument that provides fixed support for only a portion of a project?

    Yes, for a research project that is to be carried out by a number of 
participants, you may award a TIA that provides for some participants to 
perform under fixed-support arrangements and others to perform under 
expenditure-based arrangements. This approach may be useful, for 
example, if a commercial firm that is a participant will not accept an 
agreement with all of the post-award requirements of an expenditure-
based award. Before using a fixed-support arrangement for that firm's 
portion of the project, you must judge that it meets the criteria in 
Sec. 37.305.

[[Page 214]]

               Accounting, Payments, and Recovery of Funds



Sec. 37.570  What must I do if a CAS-covered participant accounts differently 

for its own and the Federal Government shares of project costs?

    (a) If a participant has Federal procurement contracts that are 
subject to the Cost Accounting Standards (CAS) in part 30 of the Federal 
Acquisition Regulation (FAR) and the associated FAR Appendix (48 CFR 
part 30 and 48 CFR 9903.201-1, respectively), you must alert the 
participant during the pre-award negotiations to the potential for a CAS 
violation, as well as the cognizant administrative contracting officer 
(ACO) for the participant's procurement contracts, if you learn that the 
participant plans to account differently for its own share and the 
Federal Government's share of project costs under the TIA. This may 
arise, for example, if a for-profit firm or other organization subject 
to the FAR cost principles in 48 CFR parts 31 and 231 proposes to 
charge:
    (1) Its share of project costs as independent research and 
development (IR&D) costs to enable recovery of the costs through Federal 
Government procurement contracts, as allowed under the FAR cost 
principles; and
    (2) The Federal Government's share to the project, rather than as 
IR&D costs.
    (b) The reason for alerting the participant and the ACO is that the 
inconsistent charging of the two shares could cause a noncompliance with 
Cost Accounting Standard (CAS) 402. Noncompliance with CAS 402 is a 
potential issue only for a participant that has CAS-covered Federal 
procurement contracts (note that CAS requirements do not apply to a for-
profit participant's TIAs).
    (c) For for-profit participants with CAS-covered procurement 
contracts, the cognizant ACO in most cases will be an individual within 
the Defense Contract Management Agency (DCMA). You can identify a 
cognizant ACO at the DCMA by querying the contract administration team 
locator that matches contractors with their ACOs (currently on the World 
Wide Web at http://alerts.dcmdw.dcma.mil/support, a site that also can 
be accessed through the DCMA home page at http://www.dcma.mil).



Sec. 37.575  What are my responsibilities for determining milestone payment amounts?

    (a) If you select the milestone payment method (see Sec. 37.805), 
you must assess the reasonableness of the estimated amount for reaching 
each milestone. This assessment enables you to set the amount of each 
milestone payment to approximate the Federal share of the anticipated 
resource needs for carrying out that phase of the research effort.
    (b) The Federal share at each milestone need not be the same as the 
Federal share of the total project. For example, you might deliberately 
set payment amounts with a larger Federal share for early milestones if 
a project involves a start-up company with limited resources.
    (c) For an expenditure-based TIA, if you have minimum percentages 
that you want the recipient's cost sharing to be at the milestones, you 
should indicate those percentages in the agreement or in separate 
instructions to the post-award administrative agreements officer. That 
will help the administrative agreements officer decide when a project's 
expenditures have fallen too far below the original projections, 
requiring adjustments of future milestone payment amounts (see Sec. 
37.1105(c)).
    (d) For fixed-support TIAs, the milestone payments should be 
associated with the well-defined, observable and verifiable technical 
outcomes (e.g., demonstrations, tests, or data analysis) that you 
establish for the project in accordance with Sec. Sec. 37.305(a) and 
37.560(a).



Sec. 37.580  What is recovery of funds and when should I consider including it in my TIA?

    (a) Recovery of funds refers to the use of the authority in 10 
U.S.C. 2371 to include a provision in certain types of agreements, 
including TIAs, that require a recipient to make payments to the 
Department of Defense or another Federal agency as a condition of the 
agreement. Recovery of funds is a good

[[Page 215]]

tool in the right circumstances, at the discretion of the agreements 
officer and the awarding organization, but its purpose is not to augment 
program budgets. It may be used to recover funds provided to a recipient 
through a TIA or another Federal procurement or assistance instrument, 
and the recovery should not exceed the amounts provided. Recovery of 
funds is distinct from program income, as described in Sec. 37.835.
    (b) In accordance with 10 U.S.C. 2371, as implemented by policy 
guidance from the Office of the Under Secretary of Defense 
(Comptroller), the payment amounts may be credited to an existing 
account of the Department of Defense and used for the same program 
purposes as other funds in that account.
    (c) Before you use the authority to include a provision for recovery 
of funds, note that 10 U.S.C. 2371 requires you to judge that it would 
not be feasible or appropriate to use for the research project a 
standard grant or cooperative agreement (in this instance, a ``standard 
cooperative agreement'' means a cooperative agreement without a 
provision for recovery of funds). You satisfy that 10 U.S.C. 2371 
requirement when you judge that execution of the research project 
warrants inclusion of a provision for recovery of funds.



 Subpart F_Award Terms Affecting Participants' Financial, Property, and 
                           Purchasing Systems



Sec. 37.600  Which administrative matters are covered in this subpart?

    This subpart addresses ``systemic'' administrative matters that 
place requirements on the operation of a participant's financial 
management, property management, or purchasing system. Each 
participant's systems are organization-wide and do not vary with each 
agreement. Therefore, all TIAs should address systemic requirements in a 
uniform way for each type of participant organization.



Sec. 37.605  What is the general policy on participants' financial, property, and purchasing systems?

    The general policy for expenditure-based TIAs is to avoid 
requirements that would force participants to use different financial 
management, property management, and purchasing systems than they 
currently use for:
    (a) Expenditure-based Federal procurement contracts and assistance 
awards in general, if they receive them; or
    (b) Commercial business, if they have no expenditure-based Federal 
procurement contracts and assistance awards.



Sec. 37.610  Must I tell participants what requirements they are to flow down for subrecipients' systems?

    If it is an expenditure-based award, your TIA must require 
participants to flow down the same financial management, property 
management, and purchasing systems requirements to a subrecipient that 
would apply if the subrecipient were a participant. For example, a for-
profit participant would flow down to a university subrecipient the 
requirements that apply to a university participant. Note that this 
policy applies to subawards for substantive performance of portions of 
the research project supported by the TIA, and not to participants' 
purchases of goods or services needed to carry out the research.

                            Financial Matters



Sec. 37.615  What standards do I include for financial systems of for-profit firms?

    (a) To avoid causing needless changes in participants' financial 
management systems, your expenditure-based TIAs will make for-profit 
participants that currently perform under other expenditure-based 
Federal procurement contracts or assistance awards subject to the same 
standards for financial management systems that apply to those other 
awards. Therefore, if a for-profit participant has expenditure-based DoD 
assistance awards other than TIAs, your TIAs are to apply the standards 
in 32 CFR 34.11. You may grant an exception and allow a for-profit 
participant that has other expenditure-based Federal Government awards 
to use an alternative set of standards that meets the minimum criteria 
in paragraph (b) of this section, if there is a compelling programmatic 
or business reason to do so. For each case in which you grant an

[[Page 216]]

exception, you must document the reason in the award file.
    (b) For an expenditure-based TIA, you are to allow and encourage 
each for-profit participant that does not currently perform under 
expenditure-based Federal procurement contracts or assistance awards 
(other than TIAs) to use its existing financial management system as 
long as the system, as a minimum:
    (1) Complies with Generally Accepted Accounting Principles.
    (2) Effectively controls all project funds, including Federal funds 
and any required cost share. The system must have complete, accurate, 
and current records that document the sources of funds and the purposes 
for which they are disbursed. It also must have procedures for ensuring 
that project funds are used only for purposes permitted by the agreement 
(see Sec. 37.625).
    (3) Includes, if advance payments are authorized under Sec. 37.805, 
procedures to minimize the time elapsing between the payment of funds by 
the Government and the firm's disbursement of the funds for program 
purposes.



Sec. 37.620  What financial management standards do I include for nonprofit participants?

    So as not to force system changes for any State, local government, 
institution of higher education, or other nonprofit organization, your 
expenditure-based TIA's requirements for the financial management system 
of any nonprofit participant are the same as those that apply to the 
participant's other Federal assistance awards. Specifically, the 
requirements are those in:
    (a) 32 CFR 33.20 for State and local governments; and
    (b) 32 CFR 32.21(b) for other nonprofit organizations, with the 
exception of Government-owned, contractor-operated (GOCO) facilities and 
Federally Funded Research and Development Centers (FFRDCs) that are 
excepted from the definition of ``recipient'' in 32 CFR part 32. 
Although it should occur infrequently, if a nonprofit GOCO or FFRDC is a 
participant, you must specify appropriate standards that conform as much 
as practicable with requirements in that participant's other Federal 
awards.



Sec. 37.625  What cost principles or standards do I require for for-profit participants?

    (a) So as not to require any firm to needlessly change its cost-
accounting system, your expenditure-based TIAs are to apply the 
Government cost principles in 48 CFR parts 31 and 231 to for-profit 
participants that currently perform under expenditure-based Federal 
procurement contracts or assistance awards (other than TIAs) and 
therefore have existing systems for identifying allowable costs under 
those principles. If there are programmatic or business reasons to do 
otherwise, you may grant an exception from this requirement and use 
alternative standards as long as the alternative satisfies the 
conditions described in paragraph (b) of this section; if you do so, you 
must document the reasons in your award file.
    (b) For other for-profit participants, you may establish alternative 
standards in the agreement as long as that alternative provides, as a 
minimum, that Federal funds and funds counted as recipients' cost 
sharing will be used only for costs that:
    (1) A reasonable and prudent person would incur in carrying out the 
research project contemplated by the agreement. Generally, elements of 
cost that appropriately are charged are those identified with research 
and development activities under the Generally Accepted Accounting 
Principles (see Statement of Financial Accounting Standards Number 2, 
``Accounting for Research and Development Costs,'' October 1974 \1\). 
Moreover, costs must be allocated to DoD and other projects in 
accordance with the relative benefits the projects receive. Costs 
charged to DoD projects must be given consistent treatment with costs 
allocated to the

[[Page 217]]

participants' other research and development activities (e.g., 
activities supported by the participants themselves or by non-Federal 
sponsors).
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    \1\ Copies may be obtained from the Financial Accounting Standards 
Board (FASB), 401 Merritt 7, P.O. Box 5116, Norwalk, CT 06856-5116. 
Information about ordering also may be found at the Internet site http:/
/www.fasb.org or by telephoning the FASB at (800) 748-0659.
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    (2) Are consistent with the purposes stated in the governing 
Congressional authorizations and appropriations. You are responsible for 
ensuring that provisions in the award document address any requirements 
that result from authorizations and appropriations.



Sec. 37.630  Must I require a for-profit firm to use Federally approved indirect cost rates?

    In accordance with the general policy in Sec. 37.605, you must 
require a for-profit participant that has Federally approved indirect 
cost rates for its Federal procurement contracts to use those rates to 
accumulate and report costs under an expenditure-based TIA. This 
includes both provisional and final rates that are approved up until the 
time that the TIA is closed out. You may grant an exception from this 
requirement if there are programmatic or business reasons to do 
otherwise (e.g., the participant offers you a lower rate). If you grant 
an exception, the participant must accumulate and report the costs using 
an accounting system and practices that it uses for other customers 
(e.g., its commercial customers). Also, you must document the reason for 
the exception in your award file.



Sec. 37.635  What cost principles do I require a nonprofit participant to use?

    So as not to force financial system changes for any nonprofit 
participant, your expenditure-based TIA will provide that costs to be 
charged to the research project by any nonprofit participant must be 
determined to be allowable in accordance with:
    (a) OMB Circular A-87,\2\ if the participant is a State or local 
governmental organization.
---------------------------------------------------------------------------

    \2\ Electronic copies may be obtained at Internet site http://
www.whitehouse.gov/OMB. For paper copies, contact the Office of 
Management and Budget, EOP Publications, 725 17th St. NW., New Executive 
Office Building, Washington, DC 20503.
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    (b) OMB Circular A-21,\3\ if the participant is an institution of 
higher education.
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    \3\ See footnote 2 to Sec. 37.635(a).
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    (c) 45 CFR part 74, appendix E, if the participant is a hospital.
    (d) OMB Circular A-122, if the participant is any other type of 
nonprofit organization (the cost principles in 48 CFR parts 31 and 231 
are to be used by any nonprofit organization that is identified in 
Circular A-122 as being subject to those cost principles).



Sec. 37.640  Must I include a provision for audits of for-profit participants?

    If your TIA is an expenditure-based award, you must include in it an 
audit provision that addresses, for each for-profit participant:
    (a) Whether the for-profit participant must have periodic audits, in 
addition to any award-specific audits, as described in Sec. 37.645. 
Note that the DCAA or the Office of the Inspector General, DoD (OIG, 
DoD), can provide advice on the types and scope of audits that may be 
needed in various circumstances.
    (b) Whether the DCAA or an independent public accountant (IPA) will 
perform required audits, as discussed in Sec. 37.650.
    (c) How frequently any periodic audits are to be performed, 
addressed in Sec. 37.655.
    (d) Other matters described in Sec. 37.660, such as audit coverage, 
allowability of audit costs, auditing standards, and remedies for 
noncompliance.



Sec. 37.645  Must I require periodic audits, as well as award-specific audits, of for-profit participants?

    You need to consider requirements for both periodic audits and 
award-specific audits (as defined in Sec. 37.1325 and Sec. 37.1235, 
respectively). The way that your expenditure-based TIA addresses the two 
types of audits will vary, depending upon the type of for-profit 
participant.
    (a) For for-profit participants that are audited by the DCAA or 
other Federal auditors, as described in Sec. Sec. 37.650(b) and 37.655, 
you need not add specific requirements for periodic audits because the 
Federal audits should be sufficient to address whatever may be needed.

[[Page 218]]

Your inclusion in the TIA of the standard access-to-records provision 
for those for-profit participants, as discussed in Sec. 37.915(a), 
gives the necessary access in the event that you or administrative 
agreements officers later need to request audits to address award-
specific issues that arise.
    (b) For each other for-profit participant, you:
    (1) Should require that the participant have an independent auditor 
(i.e., the DCAA or an independent public accountant) conduct periodic 
audits of its systems if it expends $500,000 or more per year in TIAs 
and other Federal assistance awards. A prime reason for including this 
requirement is that the Federal Government, for an expenditure-based 
award, necessarily relies on amounts reported by the participant's 
systems when it sets payment amounts or adjusts performance outcomes. 
The periodic audit provides some assurance that the reported amounts are 
reliable.
    (2) Must ensure that the award provides an independent auditor the 
access needed for award-specific audits, to be performed at the request 
of the cognizant administrative agreements officer if issues arise that 
require audit support. However, consistent with the government-wide 
policies on single audits that apply to nonprofit participants (see 
Sec. 37.665), you should rely on periodic audits to the maximum extent 
possible to resolve any award-specific issues.



Sec. 37.650  Who must I identify as the auditor for a for-profit participant?

    The auditor that you will identify in the expenditure-based TIA to 
perform periodic and award-specific audits of a for-profit participant 
depends on the circumstances, as follows:
    (a) You may provide that an IPA will be the auditor for a for-profit 
participant that does not meet the criteria in paragraph (b) of this 
section, but only if the participant will not agree to give the DCAA 
access to the necessary books and records for audit purposes. Note that 
the allocable portion of the costs of the IPA's audit may be 
reimbursable under the TIA, as described in Sec. 37.660(b). The IPA 
should be the one that the participant uses to perform other audits 
(e.g., of its financial statement), to minimize added burdens and costs. 
You must document in the award file the participant's unwillingness to 
give the DCAA access. The DCAA is to be the auditor if the participant 
grants the necessary access.
    (b) Except as provided in paragraph (c) of this section, you must 
identify the DCAA as the auditor for any for-profit participant that is 
subject to DCAA audits because it is currently performing under a 
Federal award that is subject to the:
    (1) Cost principles in 48 CFR part 31 of the Federal Acquisition 
Regulation (FAR) and 48 CFR part 231 of the Defense FAR Supplement; or
    (2) Cost Accounting Standards in 48 CFR chapter 99.
    (c) If there are programmatic or business reasons that justify the 
use of an auditor other than the DCAA for a for-profit participant that 
meets the criteria in paragraph (b) of this section, you may provide 
that an IPA will be the auditor for that participant if you obtain prior 
approval from the Office of the Inspector General, DoD. You must submit 
requests for prior approval to the Assistant Inspector General 
(Auditing), 400 Army-Navy Drive, Arlington, VA 22202. Your request must 
include the name and address of the business unit(s) for which IPAs will 
be used. It also must explain why you judge that the participant will 
not give the DCAA the necessary access to records for audit purposes 
(e.g., you may submit a statement to that effect from the participant). 
The OIG, DoD, will respond within five working days of receiving the 
request for prior approval, either by notifying you of the decision 
(approval or disapproval) or giving you a date by which they will notify 
you of the decision.



Sec. 37.655  Must I specify the frequency of IPAs' periodic audits of for-profit participants?

    If your expenditure-based TIA provides for periodic audits of a for-
profit participant by an IPA, you must specify the frequency for those 
audits. You should consider having an audit performed during the first 
year of the award, when the participant has its IPA do its next 
financial statement audit, unless the participant already

[[Page 219]]

had a systems audit due to other Federal awards within the past two 
years. The frequency thereafter may vary depending upon the dollars the 
participant is expending annually under the award, but it is not 
unreasonable to require an updated audit every two to three years to 
reverify that the participant's systems are reliable (the audit then 
would cover the two or three-year period between audits). The DCAA is a 
source of advice on audit frequencies if your TIA provides for audits by 
IPAs.



Sec. 37.660  What else must I specify concerning audits of for-profit participants by IPAs?

    If your expenditure-based TIA provides for audits of a for-profit 
participant by an IPA, you also must specify:
    (a) What periodic audits are to cover. It is important that you 
specify audit coverage that is only as broad as needed to provide 
reasonable assurance of the participant's compliance with award terms 
that have a direct and material effect on the research project. Appendix 
C to this part provides guidance to for-profit participants and their 
IPAs that you may use for this purpose. The DCAA and the OIG, DoD, also 
can provide advice to help you set appropriate limits on audit 
objectives and scope.
    (b) Who will pay for periodic and award-specific audits. The 
allocable portion of the costs of any audits by IPAs may be reimbursable 
under the TIA. The costs may be direct charges or allocated indirect 
costs, consistent with the participant's accounting system and 
practices.
    (c) The auditing standards that the IPA will use. Unless you receive 
prior approval from the OIG, DoD, to do otherwise, you must provide that 
the IPA will perform the audits in accordance with the Generally 
Accepted Government Auditing Standards.\4\
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    \4\ The electronic document may be accessed at www.gao.gov. Printed 
copies may be purchased from the U.S. Government Printing Office; for 
ordering information, call (202) 512-1800 or access the Internet site at 
www.gpo.gov.
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    (d) The available remedies for noncompliance. The agreement must 
provide that the participant may not charge costs to the award for any 
audit that the agreements officer, with the advice of the OIG, DoD, 
determines was not performed in accordance with the Generally Accepted 
Government Auditing Standards or other terms of the agreement. It also 
must provide that the Government has the right to require the 
participant to have the IPA take corrective action and, if corrective 
action is not taken, that the agreements officer has recourse to any of 
the remedies for noncompliance identified in 32 CFR 34.52(a).
    (e) The remedy if it later is found that the participant, at the 
time it entered into the TIA, was performing on a procurement contract 
or other Federal award subject to the Cost Accounting Standards at 48 
CFR part 30 and the cost principles at 48 CFR part 31. Unless the OIG, 
DoD, approves an exception (see Sec. 37.650(c)), the TIA's terms must 
provide that the DCAA will perform the audits for the agreement if it 
later is found that the participant, at the time the TIA was awarded, 
was performing under awards described in Sec. 37.650(b) that gave the 
DCAA audit access to the participant's books and records.
    (f) Where the IPA is to send audit reports. The agreement must 
provide that the IPA is to submit audit reports to the administrative 
agreements officer and the OIG, DoD. It also must require that the IPA 
report instances of fraud directly to the OIG, DoD.
    (g) The retention period for the IPA's working papers. You must 
specify that the IPA is to retain working papers for a period of at 
least three years after the final payment, unless the working papers 
relate to an audit whose findings are not fully resolved within that 
period or to an unresolved claim or dispute (in which case, the IPA must 
keep the working papers until the matter is resolved and final action 
taken).
    (h) Who will have access to the IPA's working papers. The agreement 
must provide for Government access to working papers.



Sec. 37.665  Must I require nonprofit participants to have periodic audits?

    Yes, expenditure-based TIAs are assistance instruments subject to 
the Single Audit Act (31 U.S.C. 7501-7507), so nonprofit participants 
are subject to

[[Page 220]]

their usual requirements under that Act and OMB Circular A-133.\5\ 
Specifically, the requirements are those in:
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    \5\ See footnote 2 to Sec. 37.635(a).
---------------------------------------------------------------------------

    (a) 32 CFR 33.26 for State and local governments; and
    (b) 32 CFR 32.26 for other nonprofit organizations. Note that those 
requirements also are appropriate for Government-owned, contractor-
operated (GOCO) facilities and Federally Funded Research and Development 
Centers (FFRDCs) that are excluded from the definition of ``recipient'' 
in 32 CFR part 32, because nonprofit GOCOs and FFRDCs are subject to the 
Single Audit Act.



Sec. 37.670  Must I require participants to flow down audit requirements to subrecipients?

    (a) Yes, in accordance with Sec. 37.610, your expenditure-based TIA 
must require participants to flow down the same audit requirements to a 
subrecipient that would apply if the subrecipient were a participant.
    (b) For example, a for-profit participant that is audited by the 
DCAA:
    (1) Would flow down to a university subrecipient the Single Audit 
Act requirements that apply to a university participant.
    (2) Could enter into a subaward allowing a for-profit participant, 
under the circumstances described in Sec. 37.650(a), to use an IPA to 
do its audits.
    (c) This policy applies to subawards for substantive performance of 
portions of the research project supported by the TIA, and not to 
participants' purchases of goods or services needed to carry out the 
research.



Sec. 37.675  Must I report when I enter into a TIA allowing a for-profit firm to use an IPA?

    Yes, you must include that information with the data you provide for 
your DoD Component's annual submission to the Defense Technical 
Information Center (DTIC), as provided in Sec. 37.1030(c).



Sec. 37.680  Must I require a participant to report when it enters into a subaward allowing a for-profit firm to use an IPA?

    Yes, your expenditure-based TIA must require participants to report 
to you when they enter into any subaward allowing a for-profit 
subawardee to use an IPA, as described in Sec. 37.670(b)(2). You must 
provide that information about the new subaward under the TIA for your 
DoD Component's annual submission to the DTIC, even though the TIA may 
have been reported in a prior year and does not itself have to be 
reported again.

                                Property



Sec. 37.685  May I allow for-profit firms to purchase real property and equipment with project funds?

    (a) With the two exceptions described in paragraph (b) of this 
section, you must require a for-profit firm to purchase real property or 
equipment with its own funds that are separate from the research 
project. You should allow the firm to charge to an expenditure-based TIA 
only depreciation or use charges for real property or equipment (and 
your cost estimate for a fixed-support TIA only would include those 
costs). Note that the firm must charge depreciation consistently with 
its usual accounting practice. Many firms treat depreciation as an 
indirect cost. Any firm that usually charges depreciation indirectly for 
a particular type of property must not charge depreciation for that 
property as a direct cost to the TIA.
    (b) In two situations, you may grant an exception and allow a for-
profit firm to use project funds, which includes both the Federal 
Government and recipient shares, to purchase real property or equipment 
(i.e., to charge to the project the full acquisition cost of the 
property). The two circumstances, which should be infrequent for 
equipment and extremely rare for real property, are those in which you 
either:
    (1) Judge that the real property or equipment will be dedicated to 
the project and have a current fair market value that is less than 
$5,000 by the time the project ends; or

[[Page 221]]

    (2) Give prior approval for the firm to include the full acquisition 
cost of the real property or equipment as part of the cost of the 
project (see Sec. 37.535).
    (c) If you grant an exception in either of the circumstances 
described in paragraphs (b)(1) and (2) of this section, you must make 
the real property or equipment subject to the property management 
standards in 32 CFR 34.21(b) through (d). As provided in those 
standards, the title to the real property or equipment will vest 
conditionally in the for-profit firm upon acquisition. Your TIA, whether 
it is a fixed-support or expenditure-based award, must specify that any 
item of equipment that has a fair market value of $5,000 or more at the 
conclusion of the project also will be subject to the disposition 
process in 32 CFR 34.21(e), whereby the Federal Government will recover 
its interest in the property at that time.



Sec. 37.690  How are nonprofit participants to manage real property and equipment?

    For nonprofit participants, your TIA's requirements for vesting of 
title, use, management, and disposition of real property or equipment 
acquired under the award are the same as those that apply to the 
participant's other Federal assistance awards. Specifically, the 
requirements are those in:
    (a) 32 CFR 33.31 and 33.32, for participants that are States and 
local governmental organizations.
    (b) 32 CFR 32.32 and 32.33, for other nonprofit participants, with 
the exception of nonprofit GOCOs and FFRDCs that are exempted from the 
definition of ``recipient'' in 32 CFR part 32. Although it should occur 
infrequently, if a nonprofit GOCO or FFRDC is a participant, you must 
specify appropriate standards that conform as much as practicable with 
requirements in that participant's other Federal awards. Note also that:
    (1) If the TIA is a cooperative agreement (see appendix B to this 
part), 31 U.S.C. 6306 provides authority to vest title to tangible 
personal property in a nonprofit institution of higher education or in a 
nonprofit organization whose primary purpose is conducting scientific 
research, without further obligation to the Federal Government; and
    (2) Your TIA therefore must specify any conditions on the vesting of 
title to real property or equipment acquired by any such nonprofit 
participant, or the title will vest in the participant without further 
obligation to the Federal Government, as specified in 32 CFR 
32.33(b)(3).



Sec. 37.695  What are the requirements for Federally owned property?

    If you provide Federally owned property to any participant for the 
performance of research under a TIA, you must require that participant 
to account for, use, and dispose of the property in accordance with:
    (a) 32 CFR 34.22, if the participant is a for-profit firm.
    (b) 32 CFR 33.32(f), if the participant is a State or local 
governmental organization. Note that 32 CFR 33.32(f) requires you to 
provide additional information to the participant on the procedures for 
managing the property.
    (c) 32 CFR 32.33(a) and 32.34(f), if the participant is a nonprofit 
organization other than a GOCO or FFRDC (requirements for nonprofit 
GOCOs and FFRDCs should conform with the property standards that apply 
to their Federal procurement contracts).



Sec. 37.700  What are the requirements for supplies?

    Your expenditure-based TIA's provisions should permit participants 
to use their existing procedures to account for and manage supplies. A 
fixed-support TIA should not include requirements to account for or 
manage supplies.

                               Purchasing



Sec. 37.705  What standards do I include for purchasing systems of for-profit firms?

    (a) If your TIA is an expenditure-based award, it should require 
for-profit participants that currently perform under DoD assistance 
instruments subject to the purchasing standards in 32 CFR 34.31 to use 
the same requirements for TIAs, unless there are programmatic or 
business reasons to do otherwise (in which case you must document the 
reasons in the award file).

[[Page 222]]

    (b) You should allow other for-profit participants under 
expenditure-based TIAs to use their existing purchasing systems, as long 
as they flow down the applicable requirements in Federal statutes, 
Executive orders or Governmentwide regulations (see appendix E to this 
part for a list of those requirements).
    (c) If your TIA is a fixed-support award, you need only require for-
profit participants to flow down the requirements listed in appendix F 
to this part.



Sec. 37.710  What standards do I include for purchasing systems of nonprofit organizations?

    (a) So as not to force system changes for any nonprofit participant, 
your expenditure-based TIA will provide that each nonprofit 
participant's purchasing system comply with:
    (1) 32 CFR 33.36, if the participant is a State or local 
governmental organization.
    (2) 32 CFR 32.40 through 32.49 if the participant is a nonprofit 
organization other than a GOCO or FFRDC that is excepted from the 
definition of ``recipient'' in 32 CFR part 32. Although it should occur 
infrequently, if a nonprofit GOCO or FFRDC is a participant, you must 
specify appropriate standards that conform as much as practicable with 
requirements in that participant's other Federal awards.
    (b) If your TIA is a fixed-support award, you need only require 
nonprofit participants to flow down the requirements listed in appendix 
E to this part.



      Subpart G_Award Terms Related to Other Administrative Matters



Sec. 37.800  Which administrative matters are covered in this subpart?

    This subpart addresses ``non-systemic'' administrative matters that 
do not impose organization-wide requirements on a participant's 
financial management, property management, or purchasing system. Because 
an organization does not have to redesign its systems to accommodate 
award-to-award variations in these requirements, a TIA that you award 
may differ from other TIAs in the non-systemic requirements that it 
specifies for a given participant, based on the circumstances of the 
particular research project. To eliminate needless administrative 
complexity, you should handle some non-systemic requirements, such as 
the payment method, in a uniform way for the agreement as a whole.

                                Payments



Sec. 37.805  If I am awarding a TIA, what payment methods may I specify?

    Your TIA may provide for:
    (a) Reimbursement, as described in 32 CFR 34.12(a)(1), if it is an 
expenditure-based award.
    (b) Advance payments, as described in 32 CFR 34.12(a)(2), subject to 
the conditions in 32 CFR 34.12(b)(2)(i) through (iii).
    (c) Payments based on payable milestones. These are payments made 
according to a schedule that is based on predetermined measures of 
technical progress or other payable milestones. This approach relies 
upon the fact that, as research progresses throughout the term of the 
agreement, observable activity will be taking place. The recipient is 
paid upon the accomplishment of the predetermined measure of progress. 
Fixed-support TIAs must use this payment method and each measure of 
progress appropriately would be one of the well-defined outcomes that 
you identify in the agreement (this does not preclude use of an initial 
advance payment, if there is no alternative to meeting immediate cash 
needs). There are cash management considerations when this payment 
method is used as a means of financing for an expenditure-based TIA (see 
Sec. 37.575 and Sec. 37.1105).



Sec. 37.810  What should my TIA's provisions specify for the method and frequency of recipients' payment requests?

    The procedure and frequency for payment requests depend upon the 
payment method, as follows:
    (a) For either reimbursements or advance payments, your TIA must 
allow recipients to submit requests for payment at least monthly. You 
may authorize the recipients to use the forms or formats described in 32 
CFR 34.12(d).

[[Page 223]]

    (b) If the payments are based on payable milestones, the recipient 
will submit a report or other evidence of accomplishment to the program 
official at the completion of each predetermined activity. The agreement 
administrator may approve payment to the recipient after receiving 
validation from the program manager that the milestone was successfully 
reached.



Sec. 37.815  May the Government withhold payments?

    Your TIA must provide that the administrative agreements officer may 
withhold payments in the circumstances described in 32 CFR 34.12(g), but 
not otherwise.



Sec. 37.820  Must I require a recipient to return interest on advance payments?

    If your expenditure-based TIA provides for either advance payments 
or payable milestones, the agreement must require the recipient to:
    (a) Maintain in an interest-bearing account any advance payments or 
milestone payment amounts received in advance of needs to disburse the 
funds for program purposes unless:
    (1) The recipient receives less than $120,000 in Federal grants, 
cooperative agreements, and TIAs per year;
    (2) The best reasonably available interest-bearing account would not 
be expected to earn interest in excess of $1,000 per year on the advance 
or milestone payments; or
    (3) The depository would require an average or minimum balance so 
high that it would not be feasible within the expected Federal and non-
Federal cash resources for the project.
    (b) Remit annually the interest earned to the administrative 
agreements officer.

                  Revision of Budget and Program Plans



Sec. 37.825  Must I require the recipient to obtain prior approval from the Government for changes in plans?

    If it is an expenditure-based award, your agreement must require the 
recipient to obtain the agreement administrator's prior approval if 
there is to be a change in plans that results in a need for additional 
Federal funding (this is unnecessary for a fixed-support TIA because the 
recipient is responsible for additional costs of achieving the 
outcomes). Other than that, the program official's substantial 
involvement in the project should ensure that the Government has advance 
notice of changes in plans.



Sec. 37.830  May I let a recipient charge pre-award costs to the agreement?

    Pre-award costs, as long as they are otherwise allowable costs of 
the project, may be charged to an expenditure-based TIA only with the 
specific approval of the agreements officer. All pre-award costs are 
incurred at the recipient's risk (i.e., no DoD Component is obligated to 
reimburse the costs if for any reason the recipient does not receive an 
award or if the award is less than anticipated and inadequate to cover 
the costs).

                             Program Income



Sec. 37.835  What requirements do I include for program income?

    Your TIA should apply the standards of 32 CFR 34.14 for program 
income that may be generated. Note the need to specify whether the 
recipient is to have any obligation to the Federal Government with 
respect to program income generated after the end of the project period 
(the period, as established in the award document, during which Federal 
support is provided). Doing so is especially important if the TIA 
includes a provision for the recipient to return any amounts to the 
Federal Government (see Sec. 37.580).

                          Intellectual Property



Sec. 37.840  What general approach should I take in negotiating data and patent rights?

    (a) You should confer with program officials and legal counsel to 
develop an overall strategy for intellectual property that takes into 
account inventions and data that may result from the project and future 
needs the Government may have for rights in them. The strategy should 
take into account any intellectual property the Government is furnishing 
and any pre-existing proprietary information that the recipient is 
furnishing, as well as data

[[Page 224]]

and inventions that may be generated under the award (recognizing that 
new data and inventions may be less valuable without pre-existing 
information). All pre-existing intellectual property, both the 
Government's and the recipient's, should be marked to give notice of its 
status.
    (b) Because TIAs entail substantial cost sharing by recipients, you 
must use discretion in negotiating Government rights to data and 
patentable inventions resulting from research under the agreements. The 
considerations in Sec. Sec. 37.845 through 37.875 are intended to serve 
as guidelines, within which you necessarily have considerable latitude 
to negotiate provisions appropriate to a wide variety of circumstances 
that may arise. Your goal should be a good balance between DoD interests 
in:
    (1) Gaining access to the best technologies for defense needs, 
including technologies available in the commercial marketplace, and 
promoting commercialization of technologies resulting from the research. 
Either of these interests may be impeded if you negotiate excessive 
rights for the Government. One objective of TIAs is to help incorporate 
defense requirements into the development of what ultimately will be 
commercially available technologies, an objective that is best served by 
reducing barriers to commercial firms' participation in the research. In 
that way, the commercial technology and industrial base can be a source 
of readily available, reliable, and affordable components, subsystems, 
computer software, and other technological products and manufacturing 
processes for military systems.
    (2) Providing adequate protection of the Government's investment, 
which may be weakened if the Government's rights are inadequate. You 
should consider whether the Government may require access to data or 
inventions for Governmental purposes, such as a need to develop defense-
unique products or processes that the commercial marketplace likely will 
not address.



Sec. 37.845  What data rights should I obtain?

    (a) You should seek to obtain what you, with the advice of legal 
counsel, judge is needed to ensure future Government use of technology 
that emerges from the research, as long as doing so is consistent with 
the balance between DoD interests described in Sec. 37.840(b). You 
should consider data in which you wish to obtain license rights and data 
that you may wish to be delivered; since TIAs are assistance instruments 
rather than acquisition instruments, however, it is not expected that 
data would be delivered in most cases. What generally is needed is an 
irrevocable, world-wide license for the Government to use, modify, 
reproduce, release, or disclose for Governmental purposes the data that 
are generated under TIAs (including any data, such as computer software, 
in which a recipient may obtain a copyright). A Governmental purpose is 
any activity in which the United States Government participates, but a 
license for Governmental purposes does not include the right to use, or 
have or permit others to use, modify, reproduce, release, or disclose 
data for commercial purposes.
    (b) You may negotiate licenses of different scope than described in 
paragraph (a) of this section when necessary to accomplish program 
objectives or to protect the Government's interests. Consult with legal 
counsel before negotiating a license of different scope.
    (c) In negotiating data rights, you should consider the rights in 
background data that are necessary to fully utilize technology that is 
expected to result from the TIA, in the event the recipient does not 
commercialize the technology or chooses to protect any invention as a 
trade secret rather than by a patent. If a recipient intends to protect 
any invention as a trade secret, you should consult with your 
intellectual property counsel before deciding what information related 
to the invention the award should require the recipient to report.



Sec. 37.850  Should I require recipients to mark data?

    To protect the recipient's interests in data, your TIA should 
require the recipient to mark any particular data that it wishes to 
protect from disclosure with a legend identifying the data

[[Page 225]]

as licensed data subject to use, release, or disclosure restrictions.



Sec. 37.855  How should I handle protected data?

    Prior to releasing or disclosing data marked with a restrictive 
legend (as described in Sec. 37.850) to third parties, you should 
require those parties to agree in writing that they will:
    (a) Use the data only for governmental purposes; and
    (b) Not release or disclose the data without the permission of the 
licensor (i.e., the recipient).



Sec. 37.860  What rights should I obtain for inventions?

    (a) You should negotiate rights in inventions that represent a good 
balance between the Government's interests (see Sec. 37.840(b)) and the 
recipient's interests. As explained in appendix B to this part:
    (1) You have the flexibility to negotiate patent rights provisions 
that vary from what the Bayh-Dole statute (Chapter 18 of Title 35, 
U.S.C.) requires in many situations. You have that flexibility because 
TIAs include not only cooperative agreements, but also assistance 
transactions other than grants or cooperative agreements.
    (2) Your TIA becomes an assistance instrument other than a grant or 
cooperative agreement if its patent rights provision varies from what 
Bayh-Dole requires in your situation. However, you need not consider 
that difference in the type of transaction until the agreement is 
finalized, and it should not affect the provision you negotiate.
    (b) As long as it is consistent with the balance between DoD 
interests described in Sec. 37.840(b) and the recipient's interests, 
you should seek to obtain for the Government, when an invention is 
conceived or first actually reduced to practice under a TIA, a 
nonexclusive, nontransferrable, irrevocable, paid-up license to practice 
the invention, or to have it practiced, for or on behalf of the United 
States throughout the world. The license is for Governmental purposes, 
and does not include the right to practice the invention for commercial 
purposes.
    (c) To provide for the license described in paragraph (b) of this 
section, your TIA generally would include the patent-rights clause that 
37 CFR 401.14 specifies to implement the Bayh-Dole statute's 
requirements. Note that:
    (1) The clause is designed specifically for grants, contracts, and 
cooperative agreements awarded to small businesses and nonprofit 
organizations, the types of funding instruments and recipients to which 
the entire Bayh-Dole statute applies. As explained in appendix B to this 
part, only two Bayh-Dole requirements (in 35 U.S.C. sections 202(c)(4) 
and 203) apply to cooperative agreements with other performers, by 
virtue of an amendment to Bayh-Dole at 35 U.S.C. 210(c).
    (2) You may use the same clause, suitably modified, in cooperative 
agreements with performers other than small businesses and nonprofit 
organizations. Doing so is consistent with a 1983 Presidential 
memorandum that calls for giving other performers rights in inventions 
from Federally supported research that are at least as great as the 
rights that Bayh-Dole gives to small businesses and nonprofit 
organizations (see appendix B to this part for details). That 
Presidential memorandum is incorporated by reference in Executive Order 
12591 (52 FR 13414, 3 CFR, 1987 Comp., p. 220), as amended by Executive 
Order 12618 (52 FR 48661, 3 CFR, 1987 Comp., p. 262).
    (3) The clause provides for flow-down of Bayh-Dole patent-rights 
provisions to subawards with small businesses and nonprofit 
organizations.
    (4) There are provisions in 37 CFR part 401 stating when you must 
include the clause (37 CFR 401.3) and, in cases when it is required, how 
you may modify and tailor it (37 CFR 401.5).
    (d) You may negotiate Government rights of a different scope than 
the standard patent-rights provision described in paragraph (c) of this 
section when necessary to accomplish program objectives and foster the 
Government's interests. If you do so:
    (1) With the help of the program manager and legal counsel, you must 
decide what best represents a reasonable arrangement considering the 
circumstances, including past investments, contributions under the 
current TIA, and potential commercial markets. Taking past investments 
as an

[[Page 226]]

example, you should consider whether the Government or the recipient has 
contributed more substantially to the prior research and development 
that provides the foundation for the planned effort. If the predominant 
past contributor to the particular technology has been:
    (i) The Government, then the TIA's patent-rights provision should be 
at or close to the standard Bayh-Dole provision.
    (ii) The recipient, then a less restrictive patent provision may be 
appropriate, to allow the recipient to benefit more directly from its 
investments.
    (2) You should keep in mind that obtaining a nonexclusive license at 
the time of award, as described in paragraph (b) of this section, is 
valuable if the Government later requires access to inventions to enable 
development of defense-unique products or processes that the commercial 
marketplace is not addressing. If you do not obtain a license at the 
time of award, you should consider alternative approaches to ensure 
access, such as negotiating a priced option for obtaining nonexclusive 
licenses in the future to inventions that are conceived or reduced to 
practice under the TIA.
    (3) You also may consider whether you want to provide additional 
flexibility by giving the recipient more time than the standard patent-
rights provision does to:
    (i) Notify the Government of an invention, from the time the 
inventor discloses it within the for-profit firm.
    (ii) Inform the Government whether it intends to take title to the 
invention.
    (iii) Commercialize the invention, before the Government license 
rights in the invention become effective.



Sec. 37.865  Should my patent provision include march-in rights?

    Your TIA's patent rights provision should include the Bayh-Dole 
march-in rights clause at paragraph (j)(1) of 37 CFR 401.14, or an 
equivalent clause, concerning actions that the Government may take to 
obtain the right to use subject inventions, if the recipient fails to 
take effective steps to achieve practical application of the subject 
inventions within a reasonable time. The march-in provision may be 
modified to best meet the needs of the program. However, only 
infrequently should the march-in provision be entirely removed (e.g., 
you may wish to do so if a recipient is providing most of the funding 
for a research project, with the Government providing a much smaller 
share).



Sec. 37.870  Should I require recipients to mark documents related to inventions?

    To protect the recipient's interest in inventions, your TIA should 
require the recipient to mark documents disclosing inventions it desires 
to protect by obtaining a patent. The recipient should mark the 
documents with a legend identifying them as intellectual property 
subject to public release or public disclosure restrictions, as provided 
in 35 U.S.C. 205.



Sec. 37.875  Should my TIA include a provision concerning foreign access to technology?

    (a) Consistent with the objective of enhancing the national security 
by increasing DoD reliance on the U.S. commercial technology and 
industrial bases, you must include a provision in the TIA that addresses 
foreign access to technology developed under the TIA.
    (b) The provision must provide, as a minimum, that any transfer of 
the:
    (1) Technology must be consistent with the U.S. export laws, 
regulations and policies (e.g., the International Traffic in Arms 
Regulation at chapter I, subchapter M, title 22 of the CFR (22 CFR parts 
120 through 130), the DoD Industrial Security Regulation in DoD 5220.22-
R,\6\ and the Department of Commerce Export Regulation at chapter VII, 
subchapter C, title 15 of the CFR (15 CFR parts 730 through 774), as 
applicable.
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    \6\ Electronic copies may be obtained at the Washington Headquarters 
Services Internet site http://www.dtic.mil/whs/directives. Paper copies 
may be obtained, at cost, from the National Technical Information 
Service, 5285 Port Royal Road, Springfield, VA 22161.
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    (2) Exclusive right to use or sell the technology in the United 
States must, unless the Government grants a waiver, require that 
products embodying the technology or produced through

[[Page 227]]

the use of the technology will be manufactured substantially in the 
United States. The provision may further provide that:
    (i) In individual cases, the Government may waive the requirement of 
substantial manufacture in the United States upon a showing by the 
recipient that reasonable but unsuccessful efforts have been made to 
transfer the technology under similar terms to those likely to 
manufacture substantially in the United States or that under the 
circumstances domestic manufacture is not commercially feasible.
    (ii) In those cases, the DoD Component may require a refund to the 
Government of some or all the funds paid under the TIA for the 
development of the transferred technology.
    (c) You may, but are not required to, seek to negotiate a domestic 
manufacture condition for transfers of nonexclusive rights to use or 
sell the technology in the United States, to parallel the one described 
for exclusive licenses in paragraph (b)(2) of this section, if you judge 
that nonexclusive licenses for foreign manufacture could effectively 
preclude the establishment of domestic sources of the technology for 
defense purposes.

                  Financial and Programmatic Reporting



Sec. 37.880  What requirements must I include for periodic reports on program and business status?

    Your TIA must include either:
    (a) The requirements in 32 CFR 32.51 and 32.52 for status reports on 
programmatic performance and, if it is an expenditure-based award, on 
financial performance; or
    (b) Alternative requirements that, as a minimum, include periodic 
reports addressing program and, if it is an expenditure-based award, 
business status. You must require submission of the reports at least 
annually, and you may require submission as frequently as quarterly 
(this does not preclude a recipient from electing to submit more 
frequently than quarterly the financial information that is required to 
process payment requests if the award is an expenditure-based TIA that 
uses reimbursement or advance payments under Sec. 37.810(a)). The 
requirements for the content of the reports are as follows:
    (1) The program portions of the reports must address progress toward 
achieving program performance goals, including current issues, problems, 
or developments.
    (2) The business portions of the reports, applicable only to 
expenditure-based awards, must provide summarized details on the status 
of resources (federal funds and non-federal cost sharing), including an 
accounting of expenditures for the period covered by the report. The 
report should compare the resource status with any payment and 
expenditure schedules or plans provided in the original award; explain 
any major deviations from those schedules; and discuss actions that will 
be taken to address the deviations. You may require a recipient to 
separately identify in these reports the expenditures for each 
participant in a consortium and for each programmatic milestone or task, 
if you, after consulting with the program official, judge that those 
additional details are needed for good stewardship.



Sec. 37.885  May I require updated program plans?

    In addition to reports on progress to date, your TIA may include a 
provision requiring the recipient to annually prepare updated technical 
plans for the future conduct of the research effort. If your TIA does 
include a requirement for annual program plans, you also must require 
the recipient to submit the annual program plans to the agreements 
officer responsible for administering the TIA.



Sec. 37.890  Must I require a final performance report?

    You need not require a final performance report that addresses all 
major accomplishments under the TIA. If you do not do so, however, there 
must be an alternative that satisfies the requirement in DoD Instruction 
3200.14\7\ to document all DoD Science and Technology efforts and 
disseminate the results through the Defense Technical Information Center 
(DTIC). An example

[[Page 228]]

of an alternative would be periodic reports throughout the performance 
of the research that collectively cover the entire project.
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    \7\ See footnote 6 to Sec. 37.875(b)(1).
---------------------------------------------------------------------------



Sec. 37.895  How is the final performance report to be sent to the Defense Technical Information Center?

    (a) Whether your TIA requires a final performance report or uses an 
alternative means under Sec. 37.890,\8\ you may include an award term 
or condition or otherwise instruct the recipient to submit the 
documentation, electronically if available, either:
---------------------------------------------------------------------------

    \8\ Additional information on electronic submission to the DTIC can 
be found online, currently at http://www.dtic.mil/dtic/submitting/elec--
subm.html.
---------------------------------------------------------------------------

    (1) Directly to the DTIC; or
    (2) To the office that is administering the award (for subsequent 
transmission to the DTIC).
    (b) If you specify that the recipient is to submit the report 
directly to the DTIC, you also:
    (1) Must instruct the recipient to include a fully completed 
Standard Form 298, ``Report Documentation Page,'' with each document, so 
that the DTIC can recognize the document as being related to the 
particular award and properly record its receipt; and
    (2) Should advise the recipient to provide a copy of the completed 
Standard Form 298 to the agreements officer responsible for 
administering the TIA.



Sec. 37.900  May I tell a participant that information in financial and programmatic reports will not be publicly disclosed?

    You may tell a participant that:
    (a) We may exempt from disclosure under the Freedom of Information 
Act (FOIA) a trade secret or commercial and financial information that a 
participant provides after the award, if the information is privileged 
or confidential information. The DoD Component that receives the FOIA 
request will review the information in accordance with DoD procedures at 
32 CFR 286.23(h) (and any DoD Component supplementary procedures) to 
determine whether it is privileged or confidential information under the 
FOIA exemption at 5 U.S.C. 552(b)(4), as implemented by the DoD at 32 
CFR 286.12(d).
    (b) If the participant also provides information in the course of a 
competition prior to award, there is a statutory exemption for five 
years from FOIA disclosure requirements for certain types of information 
submitted at that time (see Sec. 37.420).



Sec. 37.905  Must I make receipt of the final performance report a condition for final payment?

    If a final report is required, your TIA should make receipt of the 
report a condition for final payment. If the payments are based on 
payable milestones, the submission and acceptance of the final report by 
the Government representative will be incorporated as an event that is a 
prerequisite for one of the payable milestones.

                Records Retention and Access Requirements



Sec. 37.910  How long must I require participants to keep records related to the TIA?

    Your TIA must require participants to keep records related to the 
TIA (for which the agreement provides Government access under Sec. 
37.915) for a period of three years after submission of the final 
financial status report for an expenditure-based TIA or final 
programmatic status report for a fixed-support TIA, with the following 
exceptions:
    (a) The participant must keep records longer than three years after 
submission of the final financial status report if the records relate to 
an audit, claim, or dispute that begins but does not reach its 
conclusion within the 3-year period. In that case, the participant must 
keep the records until the matter is resolved and final action taken.
    (b) Records for any real property or equipment acquired with project 
funds under the TIA must be kept for three years after final 
disposition.



Sec. 37.915  What requirement for access to a for-profit participant's records do I include in a TIA?

    (a) If a for-profit participant currently grants access to its 
records to the DCAA or other Federal Government auditors, your TIA must 
include

[[Page 229]]

for that participant the standard access-to-records requirements at 32 
CFR 34.42(e). If the agreement is a fixed-support TIA, the language in 
32 CFR 34.42(e) may be modified to provide access to records concerning 
the recipient's technical performance, without requiring access to the 
recipient's financial or other records. Note that any need to address 
access to technical records in this way is in addition to, not in lieu 
of, the need to address rights in data (see Sec. 37.845).
    (b) For other for-profit participants that do not currently give the 
Federal Government direct access to their records and are not willing to 
grant full access to records pertinent to the award, there is no set 
requirement to include a provision in your TIA for Government access to 
records. If the audit provision of an expenditure-based TIA gives an IPA 
access to the recipient's financial records for audit purposes, the 
Federal Government must have access to the IPA's reports and working 
papers and you need not include a provision requiring direct Government 
access to the recipient's financial records. For both fixed-support and 
expenditure-based TIAs, you may wish to negotiate Government access to 
recipient records concerning technical performance. Should you negotiate 
a provision giving access only to specific Government officials (e.g., 
the agreements officer), rather than a provision giving Government 
access generally, it is important to let participants know that the OIG, 
DoD, has a statutory right of access to records and other materials to 
which other DoD Component officials have access.



Sec. 37.920  What requirement for access to a nonprofit participant's records do I include in a TIA?

    Your TIA must include for any nonprofit participant the standard 
access-to-records requirement at:
    (a) 32 CFR 33.42(e), for a participant that is a State or local 
governmental organization.
    (b) 32 CFR 32.53(e), for a participant that is a nonprofit 
organization. The same requirement applies to any nonprofit GOCO or 
FFRDC, even though nonprofit GOCOs and FFRDCs are exempted from the 
definition of ``recipient'' in 32 CFR part 32.

                       Termination and Enforcement



Sec. 37.925  What requirements do I include for termination and enforcement?

    Your TIA must apply the standards of 32 CFR 34.51 for termination, 
32 CFR 34.52 for enforcement, and your organization's procedures 
implementing 32 CFR 22.815 for disputes and appeals.



                      Subpart H_Executing the Award



Sec. 37.1000  What are my responsibilities at the time of award?

    At the time of the award, you must:
    (a) Ensure that the award document contains the appropriate terms 
and conditions and is signed by the appropriate parties, in accordance 
with Sec. Sec. 37.1005 through 37.1015.
    (b) Document your analysis of the agreement in the award file, as 
discussed in Sec. 37.1020.
    (c) Provide information about the award to offices responsible for 
reporting, as described in Sec. Sec. 37.1025 through 37.1035.
    (d) Distribute copies of the award document, as required by Sec. 
37.1045.

                           The Award Document



Sec. 37.1005  What are my general responsibilities concerning the award document?

    You are responsible for ensuring that the award document is complete 
and accurate. Your objective is to create a document that:
    (a) Addresses all issues;
    (b) States requirements directly. It is not helpful to readers to 
incorporate statutes or rules by reference, without sufficient 
explanation of the requirements. You generally should not incorporate 
clauses from the Federal Acquisition Regulation (48 CFR parts 1-53) or 
Defense Federal Acquisition Regulation Supplement (48 CFR parts 201-
253), because those provisions are designed for procurement contracts 
that are used to acquire goods and services, rather than for TIAs or 
other assistance instruments.

[[Page 230]]

    (c) Is written in clear and concise language, to minimize potential 
ambiguity.



Sec. 37.1010  What substantive issues should my award document address?

    You necessarily will design and negotiate a TIA individually to meet 
the specific requirements of the particular project, so the complete 
list of substantive issues that you will address in the award document 
may vary. Every award document must address:
    (a) Project scope. The scope is an overall vision statement for the 
project, including a discussion of the project's purpose, objectives, 
and detailed military and commercial goals. It is a critical provision 
because it provides a context for resolving issues that may arise during 
post-award administration. In a fixed-support TIA, you also must clearly 
specify the well-defined outcomes that reliably indicate the amount of 
effort expended and serve as the basis for the level of the fixed 
support (see Sec. Sec. 37.305 and 37.560(a)).
    (b) Project management. You should describe the nature of the 
relationship between the Federal Government and the recipient; the 
relationship among the participants, if the recipient is an 
unincorporated consortium; and the overall technical and administrative 
management of the project. TIAs are used to carry out collaborative 
relationships between the Federal Government and the recipient. 
Consequently, there must be substantial involvement of the DoD program 
official (see Sec. 37.220) and usually the administrative agreements 
officer. The program official provides technical insight, which differs 
from the usual technical oversight of a project. The management 
provision also should discuss how you and the recipient will make any 
modifications to the TIA.
    (c) Termination, enforcement, and disputes. Your TIA must provide 
for termination, enforcement remedies, and disputes and appeals 
procedures, in accordance with Sec. 37.925.
    (d) Funding. You must:
    (1) Show the total amount of the agreement and the total period of 
performance.
    (2) If the TIA is an expenditure-based award, state the Government's 
and recipient's agreed-upon cost shares. The award document should 
identify values for any in-kind contributions, determined in accordance 
with Sec. Sec. 37.530 through 37.555, to preclude later disagreements 
about them.
    (3) Specify the amount of Federal funds obligated and the 
performance period for those obligated funds.
    (4) State, if the agreement is to be incrementally funded, that the 
Government's obligation for additional funding is contingent upon the 
availability of funds and that no legal obligation on the part of the 
Government exists until additional funds are made available and the 
agreement is amended. You also must include a prior approval requirement 
for changes in plans requiring additional Government funding, in 
accordance with Sec. 37.825.
    (e) Payment. You must choose the payment method and tell the 
recipient how, when, and where to submit payment requests, as discussed 
in Sec. Sec. 37.805 through 37.815. Your payment method must take into 
account sound cash management practices by avoiding unwarranted cash 
advances. For an expenditure-based TIA, your payment provision must 
require the return of interest should excess cash balances occur, in 
accordance with Sec. 37.820. For any TIA using the milestone payment 
method described in Sec. 37.805(c), you must include language notifying 
the recipient that post-award administrators may adjust amounts of 
future milestone payments if a project's expenditures fall too far below 
the projections that were the basis for setting the amounts (see Sec. 
37.575(c) and Sec. 37.1105(c)).
    (f) Records retention and access to records. You must include the 
records retention requirement at Sec. 37.910. You also must provide for 
access to for-profit and nonprofit participants' records, in accordance 
with Sec. 37.915 and Sec. 37.920.
    (g) Patents and data rights. In designing the patents and data 
rights provision, you must set forth the minimum required Federal 
Government rights in intellectual property generated under the award and 
address related matters, as provided in Sec. Sec. 37.840 through 
37.875. It

[[Page 231]]

is important to define all essential terms in the patent rights 
provision.
    (h) Foreign access to technology. You must include a provision, in 
accordance with Sec. 37.875, concerning foreign access and domestic 
manufacture of products using technology generated under the award.
    (i) Title to, management of, and disposition of tangible property. 
Your property provisions for for-profit and nonprofit participants must 
be in accordance with Sec. Sec. 37.685 through 37.700.
    (j) Financial management systems. For an expenditure-based award, 
you must specify the minimum standards for financial management systems 
of both for-profit and nonprofit participants, in accordance with 
Sec. Sec. 37.615 and 37.620.
    (k) Allowable costs. If the TIA is an expenditure-based award, you 
must specify the standards that both for-profit and nonprofit 
participants are to use to determine which costs may be charged to the 
project, in accordance with Sec. Sec. 37.625 through 37.635, as well as 
Sec. 37.830.
    (l) Audits. If your TIA is an expenditure-based award, you must 
include an audit provision for both for-profit and nonprofit 
participants and subrecipients, in accordance with Sec. Sec. 37.640 
through 37.670 and Sec. 37.680.
    (m) Purchasing system standards. You should include a provision 
specifying the standards in Sec. Sec. 37.705 and 37.710 for purchasing 
systems of for-profit and nonprofit participants, respectively.
    (n) Program income. You should specify requirements for program 
income, in accordance with Sec. 37.835.
    (o) Financial and programmatic reporting. You must specify the 
reports that the recipient is required to submit and tell the recipient 
when and where to submit them, in accordance with Sec. Sec. 37.880 
through 37.905.
    (p) Assurances for applicable national policy requirements. You must 
incorporate assurances of compliance with applicable requirements in 
Federal statutes, Executive orders, or regulations (except for national 
policies that require certifications). Appendix D to this part contains 
a list of commonly applicable requirements that you need to augment with 
any specific requirements that apply in your particular circumstances 
(e.g., general provisions in the appropriations act for the specific 
funds that you are obligating).
    (q) Other routine matters. The agreement should address any other 
issues that need clarification, including who in the Government will be 
responsible for post-award administration and the statutory authority or 
authorities for entering into the TIA (see appendix B to this part for a 
discussion of statutory authorities). In addition, the agreement must 
specify that it takes precedence over any inconsistent terms and 
conditions in collateral documents such as attachments to the TIA or the 
recipient's articles of collaboration.



Sec. 37.1015  How do I decide who must sign the TIA if the recipient is an unincorporated consortium?

    (a) If the recipient is a consortium that is not formally 
incorporated and the consortium members prefer to have the agreement 
signed by all of them individually, you may execute the agreement in 
that manner.
    (b) If they wish to designate one consortium member to sign the 
agreement on behalf of the consortium as a whole, you should not decide 
whether to execute the agreement in that way until you review the 
consortium's articles of collaboration with legal counsel.
    (1) The purposes of the review are to:
    (i) Determine whether the articles properly authorize one 
participant to sign on behalf of the other participants and are binding 
on all consortium members with respect to the research project; and
    (ii) Assess the risk that otherwise could exist when entering into 
an agreement signed by a single member on behalf of a consortium that is 
not a legal entity. For example, you should assess whether the articles 
of collaboration adequately address consortium members' future 
liabilities related to the research project (i.e., whether they will 
have joint and severable liability).
    (2) After the review, in consultation with legal counsel, you should 
determine whether it is better to have all of the consortium members 
sign the agreement individually or to allow them to designate one member 
to sign on all members' behalf.

[[Page 232]]

                  Reporting Information About the Award



Sec. 37.1020  What must I document in my award file?

    You should include in your award file an agreements analysis in 
which you:
    (a) Briefly describe the program and detail the specific military 
and commercial benefits that should result from the project supported by 
the TIA. If the recipient is a consortium that is not formally 
incorporated, you should attach a copy of the signed articles of 
collaboration.
    (b) Describe the process that led to the award of the TIA, including 
how you and program officials solicited and evaluated proposals and 
selected the one supported through the TIA.
    (c) Explain how you decided that a TIA was the most appropriate 
instrument, in accordance with the factors in Subpart B of this part. 
Your explanation must include your answers to the relevant questions in 
Sec. 37.225(a) through (d).
    (d) Explain how you valued the recipient's cost sharing 
contributions, in accordance with Sec. Sec. 37.530 through 37.555. For 
a fixed-support TIA, you must document the analysis you did (see Sec. 
37.560) to set the fixed level of Federal support; the documentation 
must explain how you determined the recipient's minimum cost share and 
show how you estimated the expenditures required to achieve the project 
outcomes.
    (e) Document the results of your negotiation, addressing all 
significant issues in the TIA's provisions. For example, this includes 
specific explanations if you:
    (1) Specify requirements for a participant's systems that vary from 
the standard requirements in Sec. Sec. 37.615(a), 37.625(a), 37.630, or 
37.705(a) in cases where those sections provide flexibility for you to 
do so.
    (2) Provide that any audits are to be performed by an IPA, rather 
than the DCAA, where permitted under Sec. 37.650. Your documentation 
must include:
    (i) The names and addresses of business units for which IPAs will be 
the auditors;
    (ii) Estimated amounts of Federal funds expected under the award for 
those business units; and
    (iii) The basis (e.g., a written statement from the recipient) for 
your judging that the business units do not currently perform under 
types of awards described in Sec. 37.650(b)(1) and (2) and are not 
willing to grant the DCAA audit access.
    (3) Include an intellectual property provision that varies from 
Bayh-Dole requirements.
    (4) Determine that cost sharing is impracticable.



Sec. 37.1025  Must I report information to the Defense Assistance Awards Data System?

    Yes, you must give the necessary information about the award to the 
office in your organization that is responsible for preparing DD Form 
2566, ``DoD Assistance Award Action Report,'' reports for the Defense 
Assistance Award Data System, to ensure timely and accurate reporting of 
data required by 31 U.S.C. 6101-6106 (see 32 CFR part 21, subpart E).



Sec. 37.1030  What information must I report to the Defense Technical Information Center?

    (a) For any TIA, you must give your answers to the questions in 
Sec. 37.225(a) through (d) to the office in your DoD Component that is 
responsible for providing data on TIAs to the DTIC. Contact DTIC staff 
either by electronic mail at aq@dtic.mil, by telephone at 1-800-225-
3842, or at DTIC-OCA, 8725 John J. Kingman Rd., Suite 0944, Fort 
Belvoir, VA 22060-6218, if you are unsure about the responsible office 
in your DoD Component. The DTIC compiles the information to help the 
Department of Defense measure the Department-wide benefits of using TIAs 
and assess the instruments' value in helping to meet the policy 
objectives described in Sec. 37.205(b) and appendix A to this part.
    (b) If the TIA uses the authority of 10 U.S.C. 2371, as described in 
Sec. 37.1035, your information submission for the DTIC under paragraph 
(a) of this section must include the additional data required for the 
DoD's annual report to Congress.
    (c) If, as permitted under Sec. 37.650, the TIA includes a 
provision allowing a for-

[[Page 233]]

profit participant to have audits performed by an IPA, rather than the 
DCAA, you must report that fact with the other information you submit 
about the TIA. Note that you also must include information about any use 
of IPAs permitted by subawards that participants make to for-profit 
firms, as provided in Sec. 37.670. Information about a subaward under 
the TIA must be reported even if you receive the information in a 
subsequent year, when information about the TIA itself does not need to 
be reported.
    (d) The requirements in this section to report information to the 
DTIC should not be confused with the post-award requirement to forward 
copies of technical reports to the DTIC, as described at Sec. Sec. 
37.890 and 37.895. The reporting requirements in this section are 
assigned the Report Control Symbol DD-AT&L(A) 1936.



Sec. 37.1035  How do I know if my TIA uses the 10 U.S.C. 2371 authority and I must report additional data under Sec. 37.1030(b)?

    As explained in appendix B to this part, a TIA uses the authority of 
10 U.S.C. 2371 and therefore must be included in the DoD's annual report 
to Congress on the use of 10 U.S.C. 2371 authorities if it:
    (a) Is an assistance transaction other than a grant or cooperative 
agreement, by virtue of its patent rights provision; or
    (b) Includes a provision to recover funds from a recipient, as 
described at Sec. 37.580.



Sec. 37.1040  When and how do I report information required by Sec. 37.1035?

    Information that you report, in accordance with Sec. 37.1030, to 
the office that your DoD Component designates as the central point for 
reporting to the DTIC must be:
    (a) Submitted by the dates that your central point establishes 
(which is consistent with the schedule DTIC specifies to DoD 
Components).
    (b) In the format that your central point provides (which is 
consistent with the format that the DTIC specifies to DoD Components).

                Distributing Copies of the Award Document



Sec. 37.1045  To whom must I send copies of the award document?

    You must send a copy of the award document to the:
    (a) Recipient. You must include on the first page of the recipient's 
copy a prominent notice about the current DoD requirements for payment 
by electronic funds transfer (EFT).
    (b) Office you designate to administer the TIA. You are strongly 
encouraged to delegate post-award administration to the regional office 
of the Defense Contract Management Agency or Office of Naval Research 
that administers awards to the recipient. When delegating, you should 
clearly indicate on the cover sheet or first page of the award document 
that the award is a TIA, to help the post-award administrator 
distinguish it from other types of assistance instruments.
    (c) Finance and accounting office designated to make the payments to 
the recipient.



                   Subpart I_Post-Award Administration



Sec. 37.1100  What are my responsibilities generally as an administrative agreements officer for a TIA?

    As the administrative agreements officer for a TIA, you have the 
responsibilities that your office agreed to accept in the delegation 
from the office that made the award. Generally, you will have the same 
responsibilities as a post-award administrator of a grant or cooperative 
agreement, as described in 32 CFR 22.715. Responsibilities for TIAs 
include:
    (a) Advising agreements officers before they award TIAs on how to 
establish award terms and conditions that better meet research 
programmatic needs, facilitate effective post-award administration, and 
ensure good stewardship of Federal funds.
    (b) Participating as the business partner to the DoD program 
official to ensure the Government's substantial involvement in the 
research project. This may involve attendance with program officials at 
kickoff meetings or post-award conferences with recipients.

[[Page 234]]

It also may involve attendance at the consortium management's periodic 
meetings to review technical progress, financial status, and future 
program plans.
    (c) Tracking and processing of reports required by the award terms 
and conditions, including periodic business status reports, programmatic 
progress reports, and patent reports.
    (d) Handling payment requests and related matters. For a TIA using 
advance payments, that includes reviews of progress to verify that there 
is continued justification for advancing funds, as discussed in Sec. 
37.1105(b). For a TIA using milestone payments, it includes making any 
needed adjustments in future milestone payment amounts, as discussed in 
Sec. 37.1105(c).
    (e) Coordinating audit requests and reviewing audit reports for both 
single audits of participants' systems and any award-specific audits 
that may be needed, as discussed in Sec. Sec. 37.1115 and 37.1120.
    (f) Responding, after coordination with program officials, to 
recipient requests for permission to sell or exclusively license 
intellectual property to entities that do not agree to manufacture 
substantially in the United States, as described in Sec. 37.875(b). 
Before you grant approval for any technology, you must secure assurance 
that the Government will be able to use the technology (e.g., a 
reasonable license for Government use, if the recipient is selling the 
technology) or seek reimbursement of the Government's investments.
    (g) Notifying the agreements officer who made the award if a 
participant informs you about a subaward allowing a for-profit 
subrecipient to have audits performed by an IPA, rather than the DCAA. 
You should alert the awarding official that he or she must report the 
information, as required by Sec. 37.1030(c).



Sec. 37.1105  What additional duties do I have as the administrator of a TIA with advance payments or payable milestones?

    Your additional post-award responsibilities as an administrative 
agreements officer for an expenditure-based TIA with advance payments or 
payable milestones are to ensure good cash management. To do so, you 
must:
    (a) For any expenditure-based TIA with advance payments or payable 
milestones, forward to the responsible payment office any interest that 
the recipient remits in accordance with Sec. 37.820(b). The payment 
office will return the amounts to the Department of the Treasury's 
miscellaneous receipts account.
    (b) For any expenditure-based TIA with advance payments, consult 
with the program official and consider whether program progress reported 
in periodic reports, in relation to reported expenditures, is sufficient 
to justify your continued authorization of advance payments under Sec. 
37.805(b).
    (c) For any expenditure-based TIA using milestone payments, work 
with the program official at the completion of each payable milestone or 
upon receipt of the next business status report to:
    (1) Compare the total amount of project expenditures, as recorded in 
the payable milestone report or business status report, with the 
projected budget for completing the milestone; and
    (2) Adjust future payable milestones, as needed, if expenditures lag 
substantially behind what was originally projected and you judge that 
the recipient is receiving Federal funds sooner than necessary for 
program purposes. Before making adjustments, you should consider how 
large a deviation is acceptable at the time of the milestone. For 
example, suppose that the first milestone payment for a TIA you are 
administering is $50,000, and that the awarding official set the amount 
based on a projection that the recipient would have to expend $100,000 
to reach the milestone (i.e., the original plan was for the recipient's 
share at that milestone to be 50% of project expenditures). If the 
milestone payment report shows $90,000 in expenditures, the recipient's 
share at this point is 44% ($40,000 out of the total $90,000 expended, 
with the balance provided by the $50,000 milestone payment of Federal 
funds). For this example, you should adjust future milestones if you 
judge that a 6% difference in the recipient's share at the first 
milestone is too large, but not otherwise. Remember

[[Page 235]]

that milestone payment amounts are not meant to track expenditures 
precisely at each milestone and that a recipient's share will increase 
as it continues to perform research and expend funds, until it completes 
another milestone to trigger the next Federal payment.



Sec. 37.1110  What other responsibilities related to payments do I have?

    If you are the administrative agreements officer, you have the 
responsibilities described in 32 CFR 22.810(c), regardless of the 
payment method. You also must ensure that you do not withhold payments, 
except in one of the circumstances described in 32 CFR 34.12(g).



Sec. 37.1115  What are my responsibilities related to participants' single audits?

    For audits of for-profit participant's systems, under Sec. Sec. 
37.640 through 37.660, you are the focal point within the Department of 
Defense for ensuring that participants submit audit reports and for 
resolving any findings in those reports. Nonprofit participants send 
their single audit reports to a Governmentwide clearinghouse. For those 
participants, the Office of the Assistant Inspector General (Auditing) 
should receive any DoD-specific findings from the clearinghouse and 
refer them to you for resolution, if you are the appropriate official to 
do so.



Sec. 37.1120  When and how may I request an award-specific audit?

    Guidance on when and how you should request additional audits for 
expenditure-based TIAs is identical to the guidance for grants officers 
in 32 CFR 34.16(d). If you require an award-specific examination or 
audit of a for-profit participant's records related to a TIA, you must 
use the auditor specified in the award terms and conditions, which 
should be the same auditor who performs periodic audits of the 
participant. The DCAA and the OIG, DoD, are possible sources of advice 
on audit-related issues, such as appropriate audit objectives and scope.



            Subpart J_Definitions of Terms Used in This Part



Sec. 37.1205  Advance.

    A payment made to a recipient before the recipient disburses the 
funds for program purposes. Advance payments may be based upon 
recipients' requests or predetermined payment schedules.



Sec. 37.1210  Advanced research.

    Research that creates new technology or demonstrates the viability 
of applying existing technology to new products and processes in a 
general way. Advanced research is most closely analogous to 
precompetitive technology development in the commercial sector (i.e., 
early phases of research and development on which commercial competitors 
are willing to collaborate, because the work is not so coupled to 
specific products and processes that the results of the work must be 
proprietary). It does not include development of military systems and 
hardware where specific requirements have been defined. It is typically 
funded in Research, Development, Test and Evaluation programs within 
Budget Activity 3, Advanced Technology Development.



Sec. 37.1215  Agreements officer.

    An official with the authority to enter into, administer, and/or 
terminate TIAs (see Sec. 37.125).



Sec. 37.1220  Applied research.

    Efforts that attempt to determine and exploit the potential of 
scientific discoveries or improvements in technology such as new 
materials, devices, methods and processes. It typically is funded in 
Research, Development, Test and Evaluation programs within Budget 
Activity 2, Applied Research (also known informally as research category 
6.2) programs. Applied research normally follows basic research but may 
not be fully distinguishable from the related basic research. The term 
does not include efforts whose principal aim is the design, development, 
or testing of specific products, systems or processes to be considered 
for sale or acquisition; these efforts are within the definition of 
``development.''

[[Page 236]]



Sec. 37.1225  Articles of collaboration.

    An agreement among the participants in a consortium that is not 
formally incorporated as a legal entity, by which they establish their 
relative rights and responsibilities (see Sec. 37.515).



Sec. 37.1230  Assistance.

    The transfer of a thing of value to a recipient to carry out a 
public purpose of support or stimulation authorized by a law of the 
United States (see 31 U.S.C. 6101(3)). Grants, cooperative agreements, 
and technology investment agreements are examples of legal instruments 
used to provide assistance.



Sec. 37.1235  Award-specific audit.

    An audit of a single TIA, usually done at the cognizant agreements 
officer's request, to help resolve issues that arise during or after the 
performance of the research project. An award-specific audit of an 
individual award differs from a periodic audit of a participant (as 
defined in Sec. 37.1325).



Sec. 37.1240  Basic research.

    Efforts directed toward increasing knowledge and understanding in 
science and engineering, rather than the practical application of that 
knowledge and understanding. It typically is funded within Research, 
Development, Test and Evaluation programs in Budget Activity 1, Basic 
Research (also known informally as research category 6.1).



Sec. 37.1245  Cash contributions.

    A recipient's cash expenditures made as contributions toward cost 
sharing, including expenditures of money that third parties contributed 
to the recipient.



Sec. 37.1250  Commercial firm.

    A for-profit firm or segment of a for-profit firm (e.g., a division 
or other business unit) that does a substantial portion of its business 
in the commercial marketplace.



Sec. 37.1255  Consortium.

    A group of research-performing organizations that either is formally 
incorporated or that otherwise agrees to jointly carry out a research 
project (see definition of ``articles of collaboration,'' in Sec. 
37.1225).



Sec. 37.1260  Cooperative agreement.

    A legal instrument which, consistent with 31 U.S.C. 6305, is used to 
enter into the same kind of relationship as a grant (see definition of 
``grant,'' in Sec. 37.1295), except that substantial involvement is 
expected between the Department of Defense and the recipient when 
carrying out the activity contemplated by the cooperative agreement. The 
term does not include ``cooperative research and development 
agreements'' as defined in 15 U.S.C. 3710a.



Sec. 37.1265  Cost sharing.

    A portion of project costs that are borne by the recipient or non-
Federal third parties on behalf of the recipient, rather than by the 
Federal Government.



Sec. 37.1270  Data.

    Recorded information, regardless of form or method of recording. The 
term includes technical data, which are data of a scientific or 
technical nature, and computer software. It does not include financial, 
cost, or other administrative information related to the administration 
of a TIA.



Sec. 37.1275  DoD Component.

    The Office of the Secretary of Defense, a Military Department, a 
Defense Agency, or a DoD Field Activity.



Sec. 37.1280  Equipment.

    Tangible property, other than real property, that has a useful life 
of more than one year and an acquisition cost of $5,000 or more per 
unit.



Sec. 37.1285  Expenditure-based award.

    A Federal Government contract or assistance award for which the 
amounts of interim payments or the total amount ultimately paid (i.e., 
the sum of interim payments and final payment) are subject to 
redetermination or adjustment, based on the amounts expended by the 
recipient in carrying out the purposes for which the award was made. 
Most Federal Government grants and cooperative agreements are 
expenditure-based awards.

[[Page 237]]



Sec. 37.1290  Expenditures or outlays.

    Charges made to the project or program. They may be reported either 
on a cash or accrual basis, as shown in the following table:
[GRAPHIC] [TIFF OMITTED] TR07AU03.001



Sec. 37.1295  Grant.

    A legal instrument which, consistent with 31 U.S.C. 6304, is used to 
enter into a relationship:
    (a) The principal purpose of which is to transfer a thing of value 
to the recipient to carry out a public purpose of support or stimulation 
authorized by a law of the United States, rather than to acquire 
property or services for the Department of Defense's direct benefit or 
use.
    (b) In which substantial involvement is not expected between the 
Department of Defense and the recipient when carrying out the activity 
contemplated by the grant.



Sec. 37.1300  In-kind contributions.

    The value of non-cash contributions made by a recipient or non-
Federal third parties toward cost sharing.



Sec. 37.1305  Institution of higher education.

    An educational institution that:
    (a) Meets the criteria in section 101 of the Higher Education Act of 
1965 (20 U.S.C. 1001); and
    (b) Is subject to the provisions of OMB Circular A-110, 
``Administrative Requirements for Grants and Agreements with 
Institutions of Higher Education, Hospitals, and Other Non-Profit 
Organizations,'' as implemented by the Department of Defense at 32 CFR 
part 32.



Sec. 37.1310  Intellectual property.

    Inventions, data, works of authorship, and other intangible products 
of intellectual effort that can be owned by a person, whether or not 
they are patentable or may be copyrighted. The term also includes mask 
works, such as

[[Page 238]]

those used in microfabrication, whether or not they are tangible.



Sec. 37.1315  Nonprofit organization.

    (a) Any corporation, trust, association, cooperative or other 
organization that:
    (1) Is operated primarily for scientific, educational, service, or 
similar purposes in the public interest.
    (2) Is not organized primarily for profit; and
    (3) Uses its net proceeds to maintain, improve, or expand the 
operations of the organization.
    (b) The term includes any nonprofit institution of higher education 
or nonprofit hospital.



Sec. 37.1320  Participant.

    A consortium member or, in the case of an agreement with a single 
for-profit entity, the recipient. Note that a for-profit participant may 
be a firm or a segment of a firm (e.g., a division or other business 
unit).



Sec. 37.1325  Periodic audit.

    An audit of a participant, performed at an agreed-upon time (usually 
a regular time interval), to determine whether the participant as a 
whole is managing its Federal awards in compliance with the terms of 
those awards. Appendix C to this part describes what such an audit may 
cover. A periodic audit of a participant differs from an award-specific 
audit of an individual award (as defined in Sec. 37.1235).



Sec. 37.1330  Procurement contract.

    A Federal Government procurement contract. It is a legal instrument 
which, consistent with 31 U.S.C. 6303, reflects a relationship between 
the Federal Government and a State, a local government, or other 
recipient when the principal purpose of the instrument is to acquire 
property or services for the direct benefit or use of the Federal 
Government. See the more detailed definition of the term ``contract'' at 
48 CFR 2.101.



Sec. 37.1335  Program income.

    Gross income earned by the recipient or a participant that is 
generated by a supported activity or earned as a direct result of a TIA. 
Program income includes but is not limited to: income from fees for 
performing services; the use or rental of real property, equipment, or 
supplies acquired under a TIA; the sale of commodities or items 
fabricated under a TIA; and license fees and royalties on patents and 
copyrights. Interest earned on advances of Federal funds is not program 
income.



Sec. 37.1340  Program official.

    A Federal Government program manager, scientific officer, or other 
individual who is responsible for managing the technical program being 
carried out through the use of a TIA.



Sec. 37.1345  Property.

    Real property, equipment, supplies, and intellectual property, 
unless stated otherwise.



Sec. 37.1350  Real property.

    Land, including land improvements, structures and appurtenances 
thereto, but excluding movable machinery and equipment.



Sec. 37.1355  Recipient.

    An organization or other entity that receives a TIA from a DoD 
Component. Note that a for-profit recipient may be a firm or a segment 
of a firm (e.g., a division or other business unit).



Sec. 37.1360  Research.

    Basic, applied, and advanced research, as defined in this subpart.



Sec. 37.1365  Supplies.

    Tangible property other than real property and equipment. Supplies 
have a useful life of less than one year or an acquisition cost of less 
than $5,000 per unit.



Sec. 37.1370  Termination.

    The cancellation of a TIA, in whole or in part, at any time prior to 
either:
    (a) The date on which all work under the TIA is completed; or
    (b) The date on which Federal sponsorship ends, as given in the 
award document or any supplement or amendment thereto.

[[Page 239]]



Sec. 37.1375  Technology investment agreements.

    A special class of assistance instruments used to increase 
involvement of commercial firms in defense research programs and for 
other purposes (described in appendix A to this part) related to 
integrating the commercial and defense sectors of the nation's 
technology and industrial base. A technology investment agreement may be 
a cooperative agreement with provisions tailored for involving 
commercial firms (as distinct from a cooperative agreement subject to 
all of the requirements in 32 CFR part 34), or another kind of 
assistance transaction (see appendix B to this part).

[[Page 240]]



   Sec. Appendix A to Part 37--What Is the Civil-Military Integration 

     Policy That Is the Basis for Technology Investment Agreements?

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[[Page 241]]

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[[Page 242]]





 Sec. Appendix B to Part 37--What Type of Instrument Is a TIA and What 

                   Statutory Authorities Does It Use?

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 Sec. Appendix C to Part 37--What Is the Desired Coverage for Periodic 

        Audits of For-Profit Participants To Be Audited by IPAs?

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Sec. Appendix D to Part 37--What Common National Policy Requirements May 
                 Apply and Need To Be Included in TIAs?

    Whether your TIA is a cooperative agreement or another type of 
assistance transaction, as discussed in Appendix B to this part, the 
terms and conditions of the agreement must provide for recipients' 
compliance with applicable Federal statutes and regulations. This 
appendix lists some of the more common requirements to aid you in 
identifying ones that apply to your TIA. The list is not intended to be 
all-inclusive, however, and you may need to consult legal

[[Page 253]]

counsel to verify whether there are others that apply in your situation 
(e.g., due to a provision in the appropriations act for the specific 
funds that you are using or due to a statute or rule that applies to a 
particular program or type of activity).

                            A. Certifications

    One requirement that applies to all TIAs currently requires you to 
obtain a certification at the time of proposal. That requirement is in a 
Governmentwide common rule about lobbying prohibitions, which is 
implemented by the DoD at 32 CFR part 28. The prohibitions apply to all 
financial assistance. Appendix A to 32 CFR part 22 includes a sample 
provision that you may use, to have proposers incorporate the 
certification by reference into their proposals.

                  B. Assurances That Apply to All TIAs

    DoD policy is to use a certification, as described in the preceding 
paragraph, only for a national policy requirement that specifically 
requires one. The usual approach to communicating other national policy 
requirements to recipients is to incorporate them as award terms or 
conditions, or assurances. Appendix B to 32 CFR part 22 lists national 
policy requirements that commonly apply to grants and cooperative 
agreements. It also has suggested language for assurances to incorporate 
the requirements in award documents. Of those requirements, the 
following six apply to all TIAs:
    1. Requirements concerning debarment and suspension in the OMB 
guidance in 2 CFR part 180, as implemented by the DoD at 2 CFR part 
1125. The requirements apply to all nonprocurement transactions.
    2. Requirements concerning drug-free workplace in the Governmentwide 
common rule that the DoD has codified at 32 CFR part 26. The 
requirements apply to all financial assistance.
    3. Prohibitions on discrimination on the basis of race, color, or 
national origin in Title VI of the Civil Rights Act of 1964 (42 U.S.C. 
2000d, et seq.). These apply to all financial assistance. They require 
recipients to flow down the prohibitions to any subrecipients performing 
a part of the substantive research program (as opposed to suppliers from 
whom recipients purchase goods or services). For further information, 
see item a. under the heading ``Nondiscrimination'' in Appendix B to 32 
CFR part 22.
    4. Prohibitions on discrimination on the basis of age, in the Age 
Discrimination Act of 1975 (42 U.S.C. 6101, et seq.). They apply to all 
financial assistance and require flow down to subrecipients. For further 
information, see item d. under the heading ``Nondiscrimination'' in 
Appendix B to 32 CFR part 22.
    5. Prohibitions on discrimination on the basis of handicap, in 
section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794). They 
apply to all financial assistance and require flow down to 
subrecipients. For further information, see item e.1. under the heading 
``Nondiscrimination'' in Appendix B to 32 CFR part 22.
    6. Preferences for use of U.S.-flag air carriers in the 
International Air Transportation Fair Competitive Practices Act of 1974 
(49 U.S.C. 40118), which apply to uses of U.S. Government funds.

                           C. Other Assurances

    Additional requirements listed in Appendix B to 32 CFR part 22 may 
apply in certain circumstances, as follows:
    1. If construction work is to be done under a TIA or its subawards, 
it is subject to the prohibitions in Executive Order 11246 on 
discrimination on the basis of race, color, religion, sex, or national 
origin. For further information, see item b. under the heading 
``Nondiscrimination'' in Appendix B to 32 CFR part 22.
    2. If the research involves human subjects or animals, it is subject 
to the requirements in item a. or b., respectively, under the heading 
``Live organisms'' in Appendix B to 32 CFR part 22.
    3. If the research involves actions that may affect the environment, 
it is subject to the National Environmental Policy Act, which is item 
b.1. under the heading ``Environmental Standards'' in Appendix B to 32 
CFR part 22. It also may be subject to one or more of the other 
requirements in items b.2. through b.6. under that heading, which 
concern flood-prone areas, coastal zones, coastal barriers, wild and 
scenic rivers, and underground sources of drinking water.
    4. If the project may impact a historic property, it is subject to 
the National Historic Preservation Act of 1966 (16 U.S.C. 470, et seq.), 
as described under the heading ``National Historic Preservation'' in 
Appendix B to 32 CFR part 22.

[68 FR 47160, Aug. 7, 2003, as amended at 70 FR 49477, Aug. 23, 2005; 72 
FR 34999, June 26, 2007]



 Sec. Appendix E to Part 37--What Provisions May a Participant Need To 
         Include When Purchasing Goods or Services Under a TIA?

    A. As discussed in Sec. 37.705, you must inform recipients of any 
national policy requirements that flow down to their purchases of goods 
or services (e.g., supplies or equipment) under their TIAs. Note that 
purchases of goods or services differ from subawards, which are for 
substantive research program performance.

[[Page 254]]

    B. Appendix A to 32 CFR part 34 lists seven national policy 
requirements that commonly apply to firms' purchases under grants or 
cooperative agreements. Of those seven, two that apply to all 
recipients' purchases under TIAs are:
    1. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352). A contractor 
submitting a bid to the recipient for a contract award of $100,000 or 
more must file a certification with the recipient that it has not and 
will not use Federal appropriations for certain lobbying purposes. The 
contractor also must disclose any lobbying with non-Federal funds that 
takes place in connection with obtaining any Federal award. For further 
details, see 32 CFR part 28, the DoD's codification of the 
Governmentwide common rule implementing this amendment.
    2. Debarment and suspension. A contract award with an amount 
expected to equal or exceed $25,000 and certain other contract awards 
(see 2 CFR 1125.220, which implements OMB guidance in 2 CFR 180.220) 
shall not be made to parties listed on the Governmentwide Excluded 
Parties List System, in accordance with the DoD adoption at 2 CFR part 
1125 of the OMB guidance implementing E.O.s 12549 (3 CFR, 1986 Comp., p. 
189) and 12689 (3 CFR, 1989 Comp., p. 235), ``Debarment and 
Suspension.'' The Excluded Parties List System accessible on the 
Internet at www.epls.gov contains the names of parties debarred, 
suspended, or otherwise excluded by agencies, as well as parties 
declared ineligible under statutory or regulatory authority other than 
E.O. 12549.
    C. One other requirement applies only in cases where construction 
work is to be performed under the TIA with Federal funds or recipient 
funds counted toward required cost sharing:
    1. Equal Employment Opportunity. Although construction work should 
happen rarely under a TIA, the agreements officer in that case should 
inform the recipient that Department of Labor regulations at 41 CFR 60-
1.4(b) prescribe a clause that must be incorporated into construction 
awards and subawards. Further details are provided in Appendix B to Part 
22 of the DoDGARs (32 CFR part 22), in section b. under the heading 
``Nondiscrimination.''

[68 FR 47160, Aug. 7, 2003, as amended at 70 FR 49478, Aug. 23, 2005; 72 
FR 34999, June 26, 2007]

[[Page 255]]



              SUBCHAPTER D_PERSONNEL, MILITARY AND CIVILIAN



    Cross Reference: For a revision of Standards for a Merit System of 
Personnel Administration, see 5 CFR part 900.



PART 44_SCREENING THE READY RESERVE--Table of Contents




Sec.
44.1 Purpose.
44.2 Applicability.
44.3 Definitions.
44.4 Policy.
44.5 Responsibilities.

Appendix A to Part 44--Guidance

    Authority: 10 U.S.C. 10145.

    Source: 64 FR 72027, Dec. 23, 1999, unless otherwise noted.



Sec. 44.1  Purpose.

    Updates DoD policy and responsibilities for the screening of Ready 
Reservists under 10 U.S.C. 1003, 1005, and 1209.



Sec. 44.2  Applicability.

    This part applies to the Office of the Secretary of Defense, the 
Military Departments (including the Coast Guard, when it is not 
operating as a Military Service in the Navy by agreement with the 
Department of Transportation), the Chairman of the Joint Chiefs of 
Staff, the Combatant Commands, the Inspector General of the Department 
of Defense, the Defense Agencies, the DoD Field Activities and all other 
organizational entities within the Department of Defense (hereafter 
referred to collectively as the ``DoD Components''). The term ``Military 
Services'' as used in this part, refers to the Army, the Navy, the Air 
Force and the Marine Corps.



Sec. 44.3  Definitions.

    For purposes of this part, the following definitions apply:
    Extreme community hardship. A situation that, because of a 
Reservist's mobilization, may have a substantially adverse effect on the 
health, safety, or welfare of the community. Any request for a 
determination of such hardship shall be made by the Reservist and must 
be supported by documentation, as required by the Secretary concerned.
    Extreme personal hardship. An adverse impact on a Reservist's 
dependents resulting from his or her mobilization. Any request for a 
determination of such hardship shall be made by the Reservist and must 
be supported by documentation, as required by the Secretary concerned.
    Individual Ready Reserve. Within the Ready Reserve of each of the 
Reserve Components there is an Individual Ready Reserve. The Individual 
Ready Reserve consists of members of the Ready Reserve who are not in 
the Selected Reserve or the Inactive National Guard.
    Key employee. Any Federal employee occupying a key position.
    Key position. A Federal position that shall not be vacated during a 
national emergency or mobilization without SERIOUSLY impairing the 
capability of the parent Federal Agency or office to function 
effectively. The four categories of Federal key positions are set out in 
this paragraph. The first three categories are, by definition, key 
positions. However, the third category, Article III Judges, provides for 
exceptions on a case-by-case basis. The fourth category requires a case-
by-case determination and designation as described in the following:
    (1) The Vice President of the United States or any official 
specified in the order of presidential succession as in 3 U.S.C. 19.
    (2) The members of the Congress and the heads of the Federal 
Agencies appointed by the President with the consent of the Senate. For 
this part, the term ``the heads of the Federal Agencies'' does not-
include any person appointed by the President with the consent of the 
Senate to a Federal Agency as a member of a multimember board or 
commission. Such positions may be designated as key positions only in 
accordance with paragraph (4) of this definition.
    (3) Article III Judges. However, each Article III Judge, who is a 
member of the Ready Reserve and desires to remain in the Ready Reserve, 
must have his or her position reviewed by the

[[Page 256]]

Chief Judge of the affected Judge's Circuit. If the Chief Judge 
determines that mobilization of the Article III Judge concerned will not 
seriously impair the capability of the Judge's court to function 
effectively, the Chief Judge will provide a certification to that effect 
to the Secretary of the Military Department concerned. Concurrently, the 
affected Judge will provide a statement to the Secretary concerned 
requesting continued service in the Ready Reserve and acknowledging that 
he or she may be involuntarily called to active duty (AD) under the laws 
of the United States and the Directives and Regulations of the 
Department of Defense and pledging not to seek to be excused from such 
orders based upon his or her judicial duties.
    (4) Other Federal positions determined by the Federal Agency heads, 
or their designees, to be key positions in accordance with the 
guidelines in the appendix to this part.
    Mobilization. Involuntary call-up of Reserve component members in 
accordance with 10 U.S.C. 12301, 12302, or 12304. That includes full 
mobilization, partial mobilization and, selective mobilization 
(Presidential Reserve Call-Up Authority).
    Ready reserve. Reserve unit members or individual Reserve and 
National Guard members, or both, liable for AD, as provided in 10 U.S.C. 
12301, 12302, and, for some members, 10 U.S.C. 12304. It consists of the 
Selected Reserve, the Individual Ready Reserve, and the Inactive 
National Guard.
    Selected reserve. A category of the Ready Reserve in each of the 
Reserve components. The Selected Reserve consists of units, and, as 
designated by the Secretary concerned, of individual Reserve members, 
trained as prescribed in 10 U.S.C. 10147(a)(1) or 32 U.S.C. 502(a), as 
appropriate.
    Standby reserve. The Standby Reserve consists of those units or 
members, or both, of the Reserve components, other than those in the 
Ready Reserve or the Retired Reserve, who are liable for active duty 
only as provided for in 10 U.S.C. 12301 and 12306. The Standby Reserve 
consists of personnel who are maintaining their military affiliation 
without being in the Ready Reserve, but have been designated ``key 
civilian employees,'' or have a temporary hardship or disability. Those 
individuals are not required to perform training and are not part of the 
Ready Reserve. The Standby Reserve is a pool of trained individuals who 
may be mobilized as needed to fill manpower needs in specific skills. 
The Standby Reserve consists of the active status list and the inactive 
status list categories.



Sec. 44.4  Policy.

    It is DoD policy that:
    (a) Members of the Ready Reserve shall be screened (see the appendix 
to this part for specific screening guidance) at least annually to meet 
the provisions of 10 U.S.C. 10149 and to provide a Ready Reserve force 
composed of members who:
    (1) Meet Military Service wartime standards of mental, moral, 
professional, and physical fitness.
    (2) Possess the military qualifications required in the various 
ranks, ratings, and specialties.
    (3) Are available immediately for active duty (AD) during a 
mobilization or as otherwise required by law.
    (b) On mobilization under 10 U.S.C. 12301(a) or 10 U.S.C. 12302, all 
personnel actions relating to the screening program shall be held in 
abeyance, and all members remaining in the Ready Reserve shall be 
considered immediately available for AD service. After such a 
mobilization is ordered, no deferment, delay, or exemption from 
mobilization shall be granted to Ready Reservists because of their 
civilian employment. On involuntary activation of Reserve members under 
10 U.S.C. 12304 (Presidential Reserve Call-Up Authority), the Secretary 
of Defense, or designee, shall make a determination regarding the 
continuation or cessation of personnel actions related to the screening 
program.
    (c) All Ready Reservists shall be retained in the Ready Reserve for 
the entire period of their statutory obligation or voluntary contract. 
Exceptions to that policy are made in paragraphs (g), (h), and (i) of 
this section, or may be made by the Secretaries concerned, in accordance 
with 10 U.S.C. 10145 and 10146.
    (d) A member of the Army National Guard of the United States or the 
Air

[[Page 257]]

National Guard of the United States may be transferred to the Standby 
Reserve only with the consent of the governor or other applicable 
authority of the State, commonwealth, or territory concerned (including 
the District of Columbia) in accordance with 10 U.S.C. 10146.
    (e) Any eligible member of the Standby Reserve may be transferred 
back to the Ready Reserve when the reason for the member's transfer to 
the Standby Reserve no longer exists in accordance with 10 U.S.C. 10150 
and DoD Instruction 1200.15. \1\
---------------------------------------------------------------------------

    \1\ Copies may be obtained at http://web7.whs.osd.mil/corres.htm.
---------------------------------------------------------------------------

    (f) Ready Reservists whose immediate recall to AD during an 
emergency would create an extreme personal or community hardship shall 
be transferred to the Standby Reserve or the Retired Reserve, or shall 
be discharged, as applicable, except as specified in paragraph (b) of 
this section.
    (g) Ready Reservists who are designated key employees or who occupy 
key positions, as defined in this section, shall be transferred to the 
Standby Reserve or the Retired Reserve, or shall be discharged, as 
appropriate, except as specified in paragraph (b) of this section.
    (h) Ready Reservists who are also DoD civilian employees may not 
hold a mobilization assignment to the same positions that they fill as 
civilian employees. Those Ready Reservists shall be reassigned or 
transferred, as applicable. Reserve component military technicians (dual 
status), as members of Reserve units, are excluded from this provision.
    (i) Ready Reservists who are preparing for the ministry in an 
accredited theology or divinity school cannot be involuntarily called to 
AD or required to participate in inactive duty training (IDT) in 
accordance with 10 U.S.C. 12317. Accordingly, such Ready Reservists 
(other than those participating in a military Chaplain Candidate or 
Theology Student Program) shall be transferred to the Standby Reserve 
(active status list) for the duration of their ministerial studies and 
duties at accredited theology or divinity schools. Ready Reservists 
participating in a military Chaplain Candidate or Theology Student 
Program may continue their Ready Reserve affiliation and engage in AD 
and IDT.
    (j) Ready Reservists may not be transferred from the Ready Reserve 
solely because they are students, interns, residents, or fellows in the 
healthcare professions. On mobilization, they either shall be deferred 
or shall be mobilized in a student, intern, resident, or fellow status 
until qualified in the applicable medical specialty, as prescribed by 
the Secretaries of the Military Departments.
    (k) The Secretaries concerned, or their designees, shall make 
determinations for mobilization availability on a case-by-case basis, 
consistent with this part, and not by class or group determinations.



Sec. 44.5  Responsibilities.

    (a) The Deputy Secretary of Defense shall adjudicate, before 
mobilization, conflicts between the mobilization manpower needs of the 
civilian sector and the military that the Ready Reserve Screening 
process has identified, but has not resolved.
    (b) The Assistant Secretary of Defense for Reserve Affairs, under 
the Under Secretary of Defense for Personnel and Readiness, shall:
    (1) Provide oversight and policy support to the overall Ready 
Reserve screening program, and manage and control the Federal sector 
screening program in accordance with 10 U.S.C. 10149, Executive Order 
11190, and pp. 63-66 of House Appropriations Committee Report 95-451, 
which is available from the Government Printing Office, Washington, DC 
20401.
    (2) Annually, provide Federal Agencies with a listing of all Federal 
employees who are also Ready Reservists to assist them in conducting 
employer screening activities.
    (3) Prepare an annual report on the status of Ready Reservists 
employed by the Federal Government.
    (4) Employ the guidance in appendix A of this part in coordinating 
the screening program with employers of Ready Reservists.

[[Page 258]]

    (5) Coordinate conflicts between the mobilization manpower needs of 
the civilian sector and the military identified but not resolved through 
the Ready Reserve Screening process.
    (c) The Secretaries of the Military Departments shall:
    (1) Screen, at least annually, all Ready Reservists under their 
jurisdiction to ensure their immediate availability for active duty (AD) 
and to ensure compliance with 10 U.S.C. 10149.
    (2) Ensure coordination with the Assistant Secretary of Defense for 
Reserve Affairs to resolve conflicts (identified, but not resolved 
through the Ready Reserve screening process) between the mobilization 
manpower needs of the civilian sector and the military.
    (3) Review recommendations for removal of both Federal and other 
civilian employees from the Ready Reserve submitted by employers and 
take applicable action.
    (4) After making a removal determination in response to a petition 
for such action, promptly transmit the results of that determination to 
the Ready Reservist concerned and his/her employer.
    (5) Transfer Ready Reservists identified as occupying key positions 
to the Standby Reserve or the Retired Reserve, or discharge them, as 
applicable.
    (6) Ensure that Ready Reservists not on AD are examined as to 
physical fitness in accordance with DoD Directive 1332.18. \2\
---------------------------------------------------------------------------

    \2\ See footnote 1 to Sec. 44.4(e).
---------------------------------------------------------------------------

    (7) Process members of the Ready Reserve who do not participate 
satisfactorily in accordance with DoD Instruction 1200.15 and DoD 
Directive 1215.13.\3\
---------------------------------------------------------------------------

    \3\ See footnote 1 to Sec. 44.4(e).
---------------------------------------------------------------------------

    (8) Ensure that all Ready Reservists have a favorably completed 
background check for military service suitability on file (e.g., 
Entrance National Agency Check (ENTNAC), NAC).
    (9) Ensure that personnel records systems incorporate information on 
any factors that limit the mobilization availability of a Ready 
Reservist.
    (10) Develop and maintain current information pertaining to the 
mobilization availability of Ready Reservists.



                  Sec. Appendix A to Part 44--Guidance

                       Deputy Secretary of Defense

    The Deputy Secretary of Defense shall adjudicate, before 
mobilization, conflicts between the mobilization manpower needs of the 
civilian sector and the military that the Ready Reserve screening 
process has identified, but has not resolved.

                      Employers of Ready Reservists

                          (a) Federal Employers

    (1) To ensure that Federal employees essential to the continuity of 
the Federal Government are not retained as members of the Ready Reserve, 
the following guidance is provided:
    (i) Conduct annual screening program as provided for by the 
Assistant Secretary of Defense for Reserve Affairs.
    (ii) Responses from Federal Agencies shall be reported under 
Interagency Report Control Number 0912-DoD-AN, ``Ready Reservists in the 
Federal Government,'' in accordance with DoD 8910.1-M. \4\
---------------------------------------------------------------------------

    \4\ See footnote 1 to Sec. 44.4(e).
---------------------------------------------------------------------------

    (iii) Federal Agency heads, or their designees, concerned shall 
designate those positions that are of essential nature to, and within, 
the organization as ``key positions,'' and shall require that they shall 
NOT be filled by Ready Reservists to preclude such positions from being 
vacated during a mobilization. Upon request from Federal Agencies, 
Secretaries of the Military Departments shall verify the essential 
nature of the positions being designated as ``key,'' and shall transfer 
Ready Reservists occupying key positions to the Standby Reserve or the 
Retired Reserve or shall discharge them, as applicable, under 10 U.S.C. 
10149, except as specified in Sec. 44.4 (b).
    (iv) In determining whether or not a position should be designated 
as a ``key position,'' the following questions should be considered by 
the Federal Agency concerned:
    (A) Can the position be filled in a reasonable time after 
mobilization?
    (B) Does the position require technical or managerial skills that 
are possessed uniquely by the incumbent employee?
    (C) Is the position associated directly with defense mobilization?
    (D) Does the position include a mobilization or relocation 
assignment in an Agency having emergency functions, as designated by 
Executive Order 12656?
    (E) Is the position directly associated with industrial or manpower 
mobilization, as designated in Executive Orders 12656 and 12919?
    (F) Are there other factors related to the national defense, health, 
or safety that will make the incumbent of the position unavailable for 
mobilization?

[[Page 259]]

    (2) [Reserved]
    (b) Non-Federal Employers of Ready Reservists. Non-Federal employers 
of Ready Reservists, particularly in the fields of public health and 
safety and defense support industries, are encouraged to adopt personnel 
management procedures designed to preclude conflicts between the 
emergency manpower needs of civilian activities and the military during 
a mobilization. Employers also are encouraged to use the Federal key 
position guidelines contained in this appendix for making their own key 
position designations and, when applicable, for recommending key 
employees for removal from the Ready Reserve.
    (c) All employers who determine that a Ready Reservist is a key 
employee, in accordance with the guidelines in this appendix, should 
promptly report that determination, using the letter format at the end 
of this appendix, to the applicable Reserve personnel center, requesting 
the employee be removed from the Ready Reserve.

                       Individual Ready Reservists

    (a) Each Ready Reservist who is not a member of the Selected Reserve 
is obligated to notify the Secretary concerned of any change of address, 
marital status, number of dependents, or civilian employment and any 
other change that would prevent a member from meeting mobilization 
standards prescribed by the Military Service concerned (10 U.S.C. 
10205).
    (b) All Ready Reservists shall inform their employers of their 
Reserve military obligation.

      List of Reserve Personnel Centers to Which Reserve Screening 
          Determination and Removal Requests Shall be Forwarded

                              Army Reserve

Army Reserve Personnel Command
1 Reserve Way
ATTN: ARPC-PSP-T
St. Louis, MO 63132

                              Naval Reserve

Commander
Navy Personnel Command (Pers 91)
5720 Integrity Drive
Millington, TN 38055-9100

                          Marine Corps Reserve

Commanding General
Marine Corps Reserve Support Command
ATTN: IRR Division
15303 Andrews Road
Kansas City, MO 64147-1207

                            Air Force Reserve

Commander
Air Reserve Personnel Center/DPAF
6760 E. Irvington Pl. 2600
Denver, CO 80280-2600

                       Army and Air National Guard

    Submit requests to the adjutant general of the applicable State, 
commonwealth, or territory (including the District of Columbia).

                           Coast Guard Reserve

Commander (CGPC-RPM)
U.S. Coast Guard Personnel Command
2100 Second St. S.W.
Washington, DC 20593

 Letter Format To Reserve Personnel Centers Requesting That Employee Be 
                     Removed From the Ready Reserve

From: (Employer-Agency or Company)
To: (Appropriate Reserve Personnel Center)
Subject: Request for Employee To Be Removed From the Ready Reserve

    This is to certify that the employee identified below is vital to 
the nation's defense efforts in (his or her) civilian job and cannot be 
mobilized with the Military Services in an emergency for the following 
reasons: [STATE REASONS]
    Therefore, I request that (he/she) be removed from the Ready Reserve 
and that you advise me accordingly when this action has been completed.
    The employee is:

1. Name of employee (last, first, M.I.):
2. Military grade and Reserve component:
3. Social security number:
4. Current home address (street, city, State, and ZIP code):
5. Military unit to which assigned (location and unit number):
6. Title of employee's civilian position:
7. Grade or salary level of civilian position:
8. Date (YYMMDD) hired or assigned to position:

Signature and Title of Agency or Company Official.



PART 45_CERTIFICATE OF RELEASE OR DISCHARGE FROM ACTIVE DUTY (DD FORM 214/5 SERIES)--Table of Contents




Sec.
45.1 Purpose.
45.2 Applicability and scope.
45.3 Policy and procedures.
45.4 Responsibilities.

Appendix A to Part 45--DD Form 214
Appendix B to Part 45--DD Form 214WS
Appendix C to Part 45--DD Form 215
Appendix D to Part 45--State Directors of Veterans Affairs

    Authority: 10 U.S.C. 1168 and 972.

    Source: 54 FR 7409, Feb. 21, 1989, unless otherwise noted.

[[Page 260]]



Sec. 45.1  Purpose.

    (a) This document revises 32 CFR part 45.
    (b) Prescribes procedures concerning the preparation and 
distribution of revised DD Form 214 to comport with the requirements of 
10 U.S.C. 1168, 972, and 32 CFR part 41 and the control and publication 
of separation program designators (SPDs).



Sec. 45.2  Applicability and scope.

    (a) The provisions of this part apply to the Office of the Secretary 
of Defense, the Military Services, the Joint Staff, and the Defense 
Agencies (hereafter referred to as ``DoD Components''). The term 
``Military Services,'' as used here, refers to the Army, Navy, the Air 
Force, the Marine Corps and, by agreement with the Department of 
Transportation, to the Coast Guard.
    (b) Its provisions include procedures on the preparation and 
distribution of DD Forms 214, 214WS, 215 (Appendices A, B, and C) which 
record and report the transfer or separation of military personnel from 
a period of active duty. (NOTE: Computer-generated formats are 
acceptable substitutes provided Assistant Secretary of Defense (Force 
Management and Personnel) approval is obtained.) DD Forms 214 and 215 
(or their substitutes) will provide:
    (1) The Military Services with a source of information relating to 
military personnel for administrative purposes, and for making 
determinations of eligibility for enlistment or reenlistment.
    (2) The Service member with a brief, clear-cut record of the 
member's active service with the Armed Forces at the time of transfer, 
release, or discharge, or when the member changes status or component 
while on active duty.
    (3) Appropriate governmental agencies with an authoritative source 
of information which they require in the administration of Federal and 
State laws applying to personnel who have been discharged, otherwise 
released, or transferred to a Reserve component while on active duty.
    (c) Its provisions include procedures on the control and 
distribution of all lists of SPDs.



Sec. 45.3  Policy and procedures.

    (a) Administrative issuance or reissuance of DD Forms 214 and 215.
    (1) The DD Form 214 will normally be issued by the command from 
which the member was separated. In those instances where a DD Form 214 
was not issued, the Services concerned may establish procedures for 
administrative issuance.
    (2) The DD Form 214, once issued, will not be reissued except:
    (i) When directed by appropriate appellate authority, Executive 
Order, or by the Secretary concerned.
    (ii) When it is determined by the Service concerned that the 
original DD Form 214 cannot be properly corrected by issuance of a DD 
Form 215 or if the correction would require issuance of more than two DD 
Forms 215.
    (iii) When two DD Forms 215 have been issued and an additional 
correction is required.
    (3) Whenever a DD Form 214 is administratively issued or reissued, 
an appropriate entry stating that fact and the date of such action will 
be made in Block 18, Remarks, of the DD Form 214 unless the appellate 
authority, Executive Order, or Secretarial directive specifies 
otherwise.
    (b) The Military Services will ensure that every member (except as 
limited in paragraph (b)(2) of this section and excluding those listed 
in paragraph (c) of this section being separated from the Military 
Services is given a completed DD Form 214 describing relevant data 
regarding the member's service, and the circumstances of termination. DD 
Form 214 may also be issued under other circumstances prescribed by the 
Military Service concerned. A continuation sheet, if required, will be 
bond paper, and will reference: The DD Form 214 being continued; 
information from blocks 1 through 4; the appropriate block(s) being 
continued; the member's signature, date; and the authorizing official's 
signature. DD Forms 214 are not intended to have any legal effect on 
termination of the member's service.
    (1) Release or discharge from active service. (i) The original of DD 
Form 214 showing separation from a period of active service with a 
Military Service, including release from a status that is legally 
determined to be void, will be

[[Page 261]]

physically delivered to the separate prior to departure from the 
separation activity on the effective date of separation; or on the date 
authorized travel time commences.
    (A) Copy No. 4, containing the statutory or regulatory authority, 
reentry code, SPD code, and narrative reason for separation also will be 
physically delivered to the separatee prior to departure, if he/she so 
requested by initiating Block 30, Member Requests Copy 4.
    (B) Remaining copies of DD Form 214 will be distributed on the day 
following the effective date of separation.
    (ii) When separation is effected under emergency conditions which 
preclude physical delivery, or when the recipient departs in advance of 
normal departure time (e.g., on leave in conjunction with retirement; or 
at home awaiting separation for disability), the original DD Form 214 
will be mailed to the recipient on the effective date of separation.
    (iii) If the separation activity is unable to complete all items on 
the DD Form 214, the form will be prepared as completely as possible and 
delivered to the separatee. The separatee will be advised that a DD Form 
215 will be issued by the Military Service concerned when the missing 
information becomes available; and that it will not be necessary for the 
separatee to request a DD Form 215 for such information.
    (iv) If an optical character recognition format is utilized by a 
Military Service, the first carbon copy of the document will be 
physically delivered or mailed to the separatee as prescribed in 
paragraphs (b) (i) through (iii) of this section.
    (2) Release from active duty for training, full-time training duty, 
or active duty for special work. Personnel being separated from a period 
of active duty for training, full-time training duty, or active duty for 
special work will be furnished a DD Form 214 when they have served 90 
days or more, or when required by the Secretary concerned for shorter 
periods. Personnel shall be furnished a DD Form 214 upon separation for 
cause or for physical disability regardless of the length of time served 
on active duty.
    (3) Continuing on active duty. Members who change their status or 
component, as outlined below, while they are serving on active duty will 
be provided a completed DD form 214 upon:
    (i) Discharge for immediate enlistment or reenlistment (optional--at 
the discretion of the Military Services). However, Military Services not 
providing the DD Form 214 will furnish the member a DD Form 256, 
``Honorable Discharge Certificate,'' and will issue instructions 
requiring those military offices which maintain a member's records to 
provide necessary Service data to the member for application to 
appropriate civilian individuals, groups, and governmental agencies. 
Such data will include Service component, entry data and grades.
    (ii) Termination of enlisted status to accept an appointment to 
warrant or commissioned officer grade.
    (iii) Termination of a temporary appointment to accept a permanent 
warrant or commission in the Regular or Reserve components of the Armed 
Forces.
    (iv) Termination of an officer appointment in one of the Military 
Services to accept appointment in another Service.
    (c) DD Form 214 need not be prepared for: (1) Personnel found 
disqualified upon reporting for active duty and who do not enter 
actively upon duties in accordance with orders.
    (2) Personnel whose active duty, active duty for training, full-time 
training duty or active duty for special work is terminated by death.
    (3) Personnel being removed from the Temporary Disability Retired 
List.
    (4) Enlisted personnel receiving temporary appointments to warrant 
or commissioned officer grades.
    (5) Personnel whose temporary warrant or commissioned officer status 
is terminated and who remain on active duty to complete an enlistment.
    (6) Personnel who terminate their Reserve component status to 
integrate into a Regular component.
    (7) Personnel separated or discharged who have been furnished a 
prior edition of this form, unless that form is in need of reissuance 
for some other reason.

[[Page 262]]

    (d) Preparation. The Military Departments will issue instructions 
governing the preparation of DD Form 214, consistent with the following:
    (1) DD Form 214 is an important record of service which must be 
prepared accurately and completely. Any unavoidable corrections and 
changes made in the unshaded areas of the form during preparation shall 
be neat, legible and initialed on all copies by the authenticating 
official. The recipient will be informed that making any unauthorized 
change or alteration of the form will render it void.
    (2) Since DD Form 214 is often used by civilian personnel, 
abbreviations should be avoided.
    (3) Copies of DD Form 214 transmitted to various governmental 
agencies shall be legible, especially those provided to the Veterans 
Administration (Department of Veterans Affairs, effective March 15, 
1989, in accordance with section 18(a), Public Law 100-527 and the 
Department of Labor).
    (4) The authority for a member's transfer or discharge will be cited 
by reference to the appropriate Military Service regulation, 
instruction, or manual, followed by the appropriate separation program 
designator on copies 2, 4, 7, and 8 only. A narrative description to 
identify the reason for transfer or separation will not be used on copy 
1.
    (5) To assist the former Service member in employment placement and 
job counseling, formal inservice training courses successfully completed 
during the period covered by the form will be listed in Block 14, 
Military Education; e.g., medical, dental, electronics, supply, 
administration, personnel or heavy equipment operations. Training 
courses for combat skills will not be listed. See 1978 Guide to the 
Evaluation of Educational Experiences in the Armed Services for commonly 
accepted course titles and abbreviations.
    (6) For the purpose of reemployment rights (DoD Directive 1205.12) 
\1\) all extensions of service, except those under 10 U.S.C. 972, are 
considered to be at the request and for the convenience of the 
Government. In these cases, Block 18 of DD Form 214 will be annotated to 
indicate ``Extension of service was at the request and for the 
convenience of the Government.''
---------------------------------------------------------------------------

    \1\ Copies may be obtained if needed, from the U.S. Naval 
Publications and forms Center, Attn: Code 1062, 5801 Tabor Avenue, 
Philadelphia, PA.
---------------------------------------------------------------------------

    (7) When one or more of the data items on the DD Form 214 are not 
available and the document is issued to the separatee, the applicable 
block(s) will be annotated ``See Remarks.'' In such cases, Block 18 will 
contain the entry ``DD Form 215 will be issued to provide missing 
information.'' When appropriate, Block 18 will also reflect the amount 
of disability pay, and the inclusive dates of any nonpay/excess leave 
days.
    (8) The authorizing official (E-7, GS-7 or above) will sign the 
original in ink ensuring that the signature is legible on all carbon 
copies. If not, a second signature may be necessary on a subsequent 
carbon copy. The authorized official shall be an E-7, GS-7, or higher 
grade, except that the Service concerned may authorize chiefs of 
installation separation activities (E-5, GS-5, or above) to serve in 
this capacity if designated in writing by the responsible commander and/
or director (0-4, or above).
    (9) The following are the only authorized entries in Block 24, 
Character of Service, as appropriate: ``Honorable,'' ``Under Honorable 
Conditions (General),'' ``Under Other Than Honorable Conditions,'' ``Bad 
Conduct,'' ``Dishonorable,'' or ``Uncharacterized.'' When a discharge 
has been upgraded, the DD Form 214 will be annotated on copies 2 through 
8 in Block 18 to indicate the character of service has been upgraded; 
the date the application for upgrade was made; and the effective date of 
the corrective action.
    (10) The date entered in Block 12.a. shall be the date of enlistment 
for the earliest period of continuous active service for which a DD Form 
214 was not previously issued. For members who have previously 
reenlisted without being issued a DD Form 214, and who are being 
separated with any discharge characterization except ``Honorable,'' the 
following statement shall appear as the first entry in Block 18., 
``Remarks,'' on the DD Form 214: ``CONTINUOUS HONORABLE ACTIVE

[[Page 263]]

SERVICE FROM (applicable date) UNTIL (applicable date).'' The ``from'' 
date shall be the date of initial entry into active duty, or the first 
day of service for which a DD Form 214 was not previously issued, as 
applicable; the ``until'' date shall be the date before commencement of 
the current enlistment.
    (11) For Service members retiring from active duty enter in Block 
18., ``Subject to active duty recall by Service Secretary.''
    (12) For Service members being transferred to the Individual Ready 
Reserve, enter in Block 18., ``Subject to active duty recall and/or 
annual screening.''
    (e) Distribution. The Military Services will prescribe procedures 
governing the distribution of copies of the DD Forms 214 and 215, 
consistent with their internal requirements, and the following:
    (1) DD Form 214--(i) Copy No. 1 (original). To the member.
    (ii) Copy No. 2. To be used as the Military Services' record copy.
    (iii) Copy No. 3. To the Veterans Administration (Department of 
Veterans Affairs, effective March 15, 1989, in accordance with section 
18(a), Data Processing Center (214), 1614 E. Woodword Street, Austin, 
Texas 78772. A reproduced copy will also be provided to the hospital 
with the medical records if the individual is transferred to a VA 
hospital. If the individual completes VA Form 21-5267, ``Veterans 
Application for Compensation or Pension,'' include a copy of the DD Form 
214 with medical records forwarded to the VA regional office having 
jurisdiction over the member's permanent address. When an individual is 
in Service and enlisting or reenlisting in an active duty status or 
otherwise continuing on active duty in another status, copy No. 3 will 
not be forwarded to the VA.
    (iv) Copy No. 4. To the member, if the member so requested by having 
initialed Block 30. If the member does not request this copy, it may be 
retained in the master military personnel record, to be available in 
case the member requests a copy later.
    (v) Copy No. 5. To Louisiana UCX/UCFE, Claims Control Center, 
Louisiana Department of Labor, P.O. Box 94246, Capitol Station, Baton 
Rouge, Louisiana 70804-9246.
    (vi) Copy No. 6. To the appropriate State Director of Veterans 
Affairs (see enclosure 4), if the member so requested by having checked 
``Yes'' in Block 20, ``Member Requests Copy Be Sent to Director of 
Veterans Affairs.'' The member must specify the State. If the member 
does not request the copy be mailed, it may be utilized as prescribed by 
the Military Service concerned.
    (vii) Copies No. 7 and 8. To be distributed in accordance with 
regulations issued by the Military Service concerned.
    (viii) Additional Copy Requirements. Discharged Alien Deserters. 
Provide one reproduced copy of Copy No. 1 to the U.S. Department of 
State, Visa Office--SCA/VO, State Annex No. 2, Washington, DC 20520, to 
assist the Visa Office in precluding the unwarranted issuance of visas 
to discharged and alien deserters in accordance with DoD Directive 
1325.2 \2\. Place of birth will be entered in Block 18.
---------------------------------------------------------------------------

    \2\ See footnote 1 to Sec. 545.3(d)(6).
---------------------------------------------------------------------------

    (2) DD Form 214-ws. Utilized to facilitate the preparation of DD 
Form 214. The document will be used and disposed of in accordance with 
regulations issued by the Military Service concerned.
    (3) DD Form 215. Utilized to correct errors in DD Form 214 
discovered after the original has been delivered and/or distribution of 
copies of the form has been made, and to furnish to separatee 
information not available when the DD Form 214 was prepared. The 
distribution of DD Form 215 will be identical to the distribution of DD 
Form 214.
    (4) Requests for Copies of DD Form 214 Subsequent to Separation. 
Agencies maintaining a separatee's DD Form 214 will provide a copy only 
upon written request by the member. Agencies will provide the member 
with 1 copy with the Special Additional Information section, and 1 copy 
with that information deleted. In the case of DD Form 214 issued prior 
to July 1, 1979, agencies will provide the member with 1 copy containing 
all items of information completed, and 1 copy with the following items 
deleted from the form:

[[Page 264]]

Specific authority and narrative reason for separation, reenlistment 
eligibility code, and separation program designator/number.
    (i) In those cases where the member has supplied an authorization to 
provide a copy of the DD Form 214 to another individual or group, the 
copy furnished will not contain the Special Additional Information 
section or, in the case of DD forms issued prior to July 1, 1979, those 
items listed in paragraph (e)(4) of this section.
    (ii) A copy will be provided to authorized personnel for official 
purposes only.
    (f) Procurement. Arrangements for procurement of DD Forms 214, 214-
ws, and 215 will be made by the Military Services.
    (g) Modification of Forms. The modification of the content or format 
of DD Forms 214, 214-ws, and 215 may not be accomplished without prior 
authorization of the Assistant Secretary of Defense (Force Management 
and Personnel) (ASD(FM&P)). Requests to add or delete information will 
be coordinated with the other Military Services in writing, prior to 
submission to the ASD(FM&P). If a Military Service uses computer 
capability to generate forms, the items of information may be arranged, 
the size of the information blocks may be increased or decreased, and 
copies 7 and/or 8 may be deleted at the discretion of the Service.



Sec. 45.4  Responsibilities.

    (a) The DD Forms 214 and 215 are a source of significant and 
authoritative information used by civilian and governmental agencies to 
validate veteran eligibility for benefits. As such, they are valuable 
forms and, therefore, vulnerable to fraudulent use. Since they are 
sensitive, the forms must be safeguarded at all times. They will be 
transmitted, stored, and destroyed in a manner which will prevent 
unauthorized use. The Military Services will issue instructions 
consistent with the following:
    (1) All DD Forms 214 will be surprinted with a reproducible screen 
tint using appropriate security ink on Blocks 1, 3, 4.a, 4.b, 12, and 18 
through 30. In addition Blocks 1, 3, 5, and 7 of the DD Form 215 will be 
similarly surprinted to make alterations readily discernible. No 
corrections will be permitted in the screened areas.
    (2) All forms will be secured after duty hours.
    (3) All obsolete forms will be destroyed.
    (4) All forms to be discarded, including those which are blank or 
partially completed, and reproduced copies of DD Form 214, will be 
destroyed. No forms will be discarded intact.
    (5) Blank forms given to personnel for educational or instructional 
purposes, and forms maintained for such use, are to be clearly voided in 
an unalterable manner.
    (6) The commander or commanding officer of each unit or activity 
authorized to issue DD Form 214 will appoint, in writing, a commissioned 
officer, warrant officer, enlisted member (grade E-7 or above), or DoD 
civilian (GS-7 or above) who will requisition, control, and issue blank 
DD Forms 214 and 215. The Service concerned may authorize an E-5 or GS-5 
to serve in this capacity.
    (7) The Military Services will monitor the use of DD Form 214 and 
review periodically its issuance to insure compliance with procedures 
for safeguarding.
    (b) The DD Form 214-ws will contain the word ``WORKSHEET'' on the 
body of the form (see Appendix B). This DD Form 214-ws will be treated 
in the same manner as the DD Form 214.
    (c) The Military Services will issue appropriate instructions to 
separation activities stressing the importance of the DD Forms 214 and 
215 in obtaining veterans benefits, reemployment rights, and 
unemployment insurance.
    (d) Standard separation program designator (SPD) codes for officer 
and enlisted personnel developed under the provisions of DoD Instruction 
5000.12 \3\ are published in DoD 5000.12-M.
---------------------------------------------------------------------------

    \3\ See footnote 1 to Sec. 45.3(d)(6).
---------------------------------------------------------------------------

    (1) Requests to add, change, or delete an SPD code shall be 
forwarded by the DoD Component concerned with appropriate justification 
to the Assigned Responsible Agency accountable for evaluating, 
recommending approval of, and maintaining such codes: Department of the 
Navy, Office of The Chief of Naval

[[Page 265]]

Operations, (Attention: OP-161), room 1514, Arlington Annex, Washington, 
DC 20350-2000.
    (2) Requests to add, change, or delete an SPD code will be submitted 
in accordance with section V., DoD Instruction 5000.12 with prior 
written approval by the ASD (FM&P), or his/her designee.
    (e) All lists of SPD codes, including supplemental lists, published 
by the DoD Components will be stamped ``For Official Use Only'' and will 
not be furnished to any agency or individual outside the Department of 
Defense.
    (1) Appropriate provisions of the Freedom of Information Act will be 
used to deny the release of the lists to the public. An individual being 
separated or discharged is entitled access only to his/her SPD code. It 
is not intended that these codes stigmatize an individual in any manner. 
They are intended for internal use by the Department of Defense in 
collecting data to analyze statistical reporting trends that may, in 
turn, influence changes in separation policy.
    (2) Agencies or individuals who come into the possession of these 
lists are cautioned on their use because a particular list may be 
outdated and not reveal correctly the full circumstances relating to an 
individual's separation or discharge.

[[Page 266]]



                 Sec. Appendix A to Part 45--DD Form 214
[GRAPHIC] [TIFF OMITTED] TC23OC91.003


[[Page 267]]


[GRAPHIC] [TIFF OMITTED] TC23OC91.004


[[Page 268]]


[GRAPHIC] [TIFF OMITTED] TC23OC91.005


[[Page 269]]


[GRAPHIC] [TIFF OMITTED] TC23OC91.006


[54 FR 9985, Mar. 9, 1989]

[[Page 270]]



                Sec. Appendix B to Part 45--DD Form 214ws

[GRAPHIC] [TIFF OMITTED] TC23OC91.007

[[Page 271]]



                 Sec. Appendix C to Part 45--DD Form 215

[GRAPHIC] [TIFF OMITTED] TC21OC91.050

[[Page 272]]





     Sec. Appendix D to Part 45--State Directors of Veterans Affairs

                                 Alabama

Director, Department of Veterans Affairs, P.O. Box 1509, Montgomery, AL 
36192-3701.

                                 Alaska

Director, Division of Veterans Affairs, Department of Military & 
Veterans Affairs, 3601 C Street, suite 620, Anchorage, AK 99503.

                             American Samoa

Veterans Affairs Officer, Office of Veterans Affairs, American Samoa 
Government, P.O. Box 2586, Pago Pago, AS 96799.

                                 Arizona

Director of Veterans Affairs, Arizona Veterans Service Commission, 3225 
N. Central Avenue, suite 910, Phoenix, AZ 85012.

                                Arkansas

Director, 1200 West 3rd, room 105, Box 1280, Little Rock, AR 72201.

                               California

Director, Department of Veterans Affairs, 1227 O Street, room 200A, 
Sacramento, CA 95814.

                                Colorado

Director, Division of Veterans Affairs, Department of Social Services, 
1575 Sherman Street, room 122, Denver, CO 80203.

                                Delaware

Chairman, Commission of Veterans Affairs, P.O. Box 1401, Dover, DE 
19901.

                          District of Columbia

Chief, Office of Veterans Affairs, 941 North Capitol Street NE., room 
1211 F, Washington, DC 20421.

                                 Florida

Director, Division of Veterans Affairs, P.O. Box 1437, St. Petersburg, 
FL 33731.

                                 Georgia

Commissioner, Department of Veterans Service, Floyd Veterans Memorial 
Bldg, suite E-970, Atlanta, GA 30334.

                                  Guam

Office of Veterans Affairs, P.O. Box 3279, Agana, Guam 96910.

                                 Hawaii

Director, Department of Social Services & Housing, Veterans Affairs 
Section, 3949 Diamond Head Road, Honolulu, HI 96809-0339.

                                  Idaho

Administrator, Division of Veterans Service, P.O. Box 6675, Boise, ID 
83707.

                               Connecticut

Commandant, Veterans Home and Hospital, 287 West Street, Rocky Hill, CT 
06067.

                                 Indiana

Director, Department of Veterans Affairs, 707 State Office Building, 100 
N. Senate Avenue, Indianapolis, IN 46204.

                                  Iowa

Administrator, Veterans Affairs Division, 7700 NW. Beaver Drive, Camp 
Dodge, Johnston, IA 50131-1902.

                                 Kansas

Executive Director, Kansas Veterans Commission, Jayhawk Tower, suite 
701, 700 SW. Jackson Street, Topeka, KS 66603-3150.

                                Kentucky

Director, Kentucky Center for Veterans Affairs, 600 Federal Place room 
1365, Louisville, KY 40202.

                                Louisiana

Executive Director, Department of Veterans Affairs, P.O. Box 94095, 
Capitol Station, Baton Rouge, LA 70804-4095.

                                  Maine

Director, Bureau of Veterans Services, State Office Building Station 
117, Augusta, ME 04333.

                                Maryland

Executive Director, Maryland Veterans Commission, Federal Bldg.--room 
110, 31 Hopkins Plaza, Baltimore, MD 21201.

                                Illinois

Director, Department of Veterans Affairs, 208 West Cook Street, 
Springfield, IL 62705.

                                Michigan

Director, Michigan Veterans Trust Fund, P.O. Box 30026, Ottawa Bldg, No. 
Tower, 3rd Floor, Lansing, MI 48909.

                                Minnesota

Commissioner, Department of Veterans Affairs, Veterans Service Building, 
2nd Floor, St. Paul, MN 55155.

                               Mississippi

President, State Veterans Affairs Board, 120 North State Street, War 
Memorial Building, room B-100, Jackson, MS 39201.

[[Page 273]]

                                Missouri

Director, Division of Veterans Affairs, P.O. Drawer 147, Jefferson City, 
MO 65101.

                                 Montana

Administrator, Veterans Affairs Division, P.O. Box 5715, Helena, MT 
59604.

                                Nebraska

Director, Department of Veterans Affairs, P.O. Box 95083, State Office 
Building, Lincoln, NE 68509.

                                 Nevada

Commissioner, Commission for Veterans Affairs, 1201 Terminal Way, room 
108, Reno, NV 89520.

                              Massachusetts

Commissioner, Department of Veterans Services, 100 Cambridge Street--
room 1002, Boston, MA 02202.

                               New Jersey

Director, Division of Veterans Programs & Special Services, 143 E. State 
Street, room 505, Trenton, NJ 08608.

                               New Mexico

Director, Veterans Service Commission, P.O. Box 2324, Santa Fe, NM 
87503.

                                New York

Director, Division of Veterans Affairs, State Office Building 
6A-19, Veterans Highway, Hauppauge, NY 11788.

                             North Carolina

Asst Secretary for Veterans Affairs, Division of Veterans Affairs, 227 
E. Edenton Street, Raleigh, NC 27601.

                              North Dakota

Commissioner, Department of Veterans Affairs, 15 North Broadway, suite 
613, Fargo, ND 58102.

                                  Ohio

Director, Division of Soldiers Claims & Veterans Affairs, State House 
Annex, room 11, Columbus, OH 43215.

                                Oklahoma

Director, Department of Veterans Affairs, P.O. Box 53067, Oklahoma City, 
OK 73152.

                              New Hampshire

Director, State Veterans Council, 359 Lincoln Street, Manchester, NH 
03103.

                                 Oregon

Director, Department of Veterans Affairs, Oregon Veterans Building, 700 
Summer Street NE., suite 150, Salem, OR 97310-1270.

                              Pennsylvania

Director, Department of Military Affairs, Bureau for Veterans Affairs, 
Fort Indiantown Gap, Bldg 5-0-47, Annville, PA 17003-5002.

                               Puerto Rico

Director, Bureau of Veterans Affairs & Human Resources, Department of 
Labor, 505 Munoz Rivera Avenue, Hato Rey, PR 00918.

                              Rhode Island

Chief, Veterans Affairs Office, Metacom Avenue, Bristol, RI 02809.

                             South Carolina

Director, Department of Veterans Affairs, Brown State Office Building, 
1205 Pendleton Street, Columbia, SC 29201.

                              South Dakota

Director, Division of Veterans Affairs, 500 East Capitol Avenue, State 
Capitol Building, Pierre, SD 57501-5083.

                                Tennessee

Commissioner, Department of Veterans Affairs, 215 8th Avenue, North, 
Nashville, TN 37203.

                                  Texas

Executive Director, Veterans Affairs Commission of Texas, Box 12277, 
Capitol Station, Austin, TX 78711.

                                  Utah

No DVA.

                                 Vermont

Director, Veterans Affairs Office, State Office Building, Montpelier, VT 
05602.

                                Virginia

Director, Division of War Veterans Claims, 210 Franklin Road, SW., room 
1002, P.O. Box 809, Roanoke, VA 24004.

                             Virgin Islands

Director, Division of Veterans Affairs, P.O. Box 890, Christiansted, St. 
Croix, VI 00820.

                               Washington

Director, Department of Veterans Affairs, P.O. Box 9778, Mail Stop PM-
41, Olympia, WA 95804.

[[Page 274]]

                              West Virginia

Director, Department of Veterans Affairs, 605 Atlas Building, 
Charleston, WV 25301-9778.

                                Wisconsin

Secretary, Department of Veterans Affairs, P.O. Box 7843, 77 North 
Dickinson Street, Madison, WI 53707.



PART 47_ACTIVE DUTY SERVICE FOR CIVILIAN OR CONTRACTUAL GROUPS--Table of Contents




Sec.
47.1 Purpose.
47.2 Applicability and scope.
47.3 Definitions.
47.4 Policy.
47.5 Responsibilities.
47.6 Procedures.

Appendix A to Part 47--Instructions for Submitting Group Applications 
          Under Public Law 95-202
Appendix B to Part 47--The DoD Civilian/Military Service Review Board 
          and the Advisory Panel

    Authority: 38 U.S.C. 106 note.

    Source: 54 FR 39993, Sept. 29, 1989, unless otherwise noted.



Sec. 47.1  Purpose.

    This document:
    (a) Revises 32 CFR part 47 and implements Public Law 95-202.
    (b) Directs the Secretary of the Air Force to determine if an 
established group of civilian employees or contract workers provided 
service to the U.S. Armed Forces in a manner considered active military 
service for Department of Veterans Affairs (VA) benefits.
    (c) Establishes the DoD Civilian/Military Service Review Board and 
the Advisory Panel.
    (d) Establishes policy, assigns responsibilities, prescribes 
application procedures for groups and individuals, and clarifies the 
factors used to determine active duty (AD) service.



Sec. 47.2  Applicability and scope.

    This part:
    (a) Applies to the Office of the Secretary of Defense (OSD), the 
Military Departments, and by agreement with the Department of 
Transportation (DoT), the U.S. Coast Guard.
    (b) Applies to any group application considered under Public Law 95-
202 after September 11, 1989 and to any individual who applies for 
discharge documents as a member of a group recognized by the Secretary 
of the Air Force.



Sec. 47.3  Definitions.

    Armed conflict. A prolonged period of sustained combat involving 
members of the U.S. Armed Forces against a foreign belligerent. The term 
connotes more than a military engagement of limited duration or for 
limited objectives, and involves a significant use of military and 
civilian forces.
    (a) Examples of armed conflict are World Wars I and II, and the 
Korean and Vietnam Conflicts.
    (b) Examples of military actions that are not armed conflicts are as 
follows:
    (1) The incursion into Lebanon in 1958, and the peacekeeping force 
there in 1983 and 1984.
    (2) The incursions into the Dominican Republic in 1965 and into 
Libya in 1986.
    (3) The intervention into Grenada in 1983.
    Civilian or contractual group. An organization similarly situated to 
the Women's Air Forces Service Pilots (a group of Federal civilian 
employees attached to the U.S. Army Air Force in World War II). Those 
organization members rendered service to the U.S. Armed Forces during a 
period of armed conflict in a capacity that was then considered civilian 
employment with the Armed Forces, or the result of a contract with the 
U.S. Government, to provide direct support to the Armed Forces.
    Recognized group. A group whose service the Secretary of the Air 
Force administratively has determined to have been ``active duty for the 
purposes of all laws administered by the Department of Veterans 
Affairs''; i.e., VA benefits under 38 U.S.C. 101.
    Similarly situated. A civilian or contractual group is similarly 
situated to the Women's Air Forces Service Pilots when it existed as an 
identifiable group at the time the service was being rendered to the 
U.S. Armed Forces during a period of armed conflict. Persons who 
individually provided support through civilian employment or contract, 
but

[[Page 275]]

who were not members of an identifiable group at the time the services 
were rendered, are not ``similarly situated'' to the Women's Air Forces 
Service Pilots of World War II.



Sec. 47.4  Policy.

    (a) Eligibility for consideration. To be eligible to apply for 
consideration under Public Law 95-202 and this part, a group must:
    (1) Have been similarly situated to the Women's Air Forces Service 
Pilots of World War II.
    (2) Have rendered service to the United States in what was 
considered civilian employment with the U.S. Armed Forces either through 
formal Civil Service hiring or less formal hiring if the engagement was 
created under the exigencies of war, or as the result of a contract with 
the U.S. Government to provide direct support to the U.S. Armed Forces.
    (3) Have rendered that service during a period of armed conflict.
    (4) Consist of living persons to whom VA benefits can accrue.
    (5) Not have already received benefits from the Federal Government 
for the service in question.
    (b) A determination of AD service that is considered to be 
equivalent to active military service is made on the extent to which the 
group was under the control of the U.S. Armed Forces in support of a 
military operation or mission during an armed conflict. The extent of 
control exerted over the group must be similar to that exerted over 
military personnel and shall be determined by, but not necessarily 
limited to, the following:
    (1) Incidents favoring equivalency--(i) Uniqueness of service. 
Civilian service (civilian employment or contractual service) is a vital 
element of the war-fighting capability of the Armed Forces. Civilian 
service during a period of armed conflict is not necessarily equivalent 
to active military service, even when performed in a combat zone. 
Service must be beyond that generally performed by civilian employees 
and must be occasioned by unique circumstances. For civilian service to 
be recognized under this part, the following factors must be present:
    (A) The group was created or organized by U.S. Government 
authorities to fill a wartime need or, if a group was not created 
specifically for a wartime need, but existed before that time, then its 
wartime mission was of a nature to substantially alter the 
organization's prewar character.
    (B) If the application is based on service in a combat zone, the 
mission of the group in a combat zone must have been substantially 
different from the mission of similar groups not in a combat zone.
    (ii) Organizational authority over the group. The concept of 
military control is reinforced if the military command authority 
determines such things as the structure of the civilian organization, 
the location of the group, the mission and activities of the group, and 
the staffing requirements to include the length of employment and pay 
grades of the members of the group.
    (iii) Integration into the military organization. Integrated 
civilian groups are subject to the regulations, standards, and control 
of the military command authority.
    (A) Examples include the following:
    (1) Exchanging military courtesies.
    (2) Wearing military clothing, insignia, and devices.
    (3) Assimilating the group into the military organizational 
structure.
    (4) Emoluments associated with military personnel; i.e., the use of 
commissaries and exchanges, and membership in military clubs.
    (B) A group fully integrated into the military would give the 
impression that the members of the group were military, except that they 
were paid and accounted for as civilians.
    (C) Integration into the military may lead to an expectation by 
members of the group that the service of the group imminently would be 
recognized as active military service. Such integration acts in favor of 
recognition.
    (iv) Subjection to military discipline. During past armed conflicts, 
U.S. military commanders sometimes restricted the rights or liberties of 
civilian members as if they were military members.
    (A) Examples include the following:
    (1) Placing members under a curfew.
    (2) Requiring members to work extended hours or unusual shifts.

[[Page 276]]

    (3) Changing duty assignments and responsibilities.
    (4) Restricting proximity travel to and from the military 
installation.
    (5) Imposing dress and grooming standards.
    (B) Consequences for noncompliance might include a loss of some 
privilege, dismissal from the group, or trial under military law. Such 
military discipline acts in favor of recognition.
    (v) Subjection to military justice. Military members are subject to 
the military criminal justice system. During times of war, ``persons 
serving with or accompanying an Armed Force in the field'' are subject 
to the military criminal justice code. Those who were serving with the 
U.S. Armed Forces may have been treated as if they were military and 
subjected to court-martial jurisdiction to maintain discipline. Such 
treatment is a factor in favor of recognition.
    (vi) Prohibition against members of the group joining the armed 
forces. Some organizations may have been formed to serve in a military 
capacity to overcome the operation of existing laws or treaty or because 
of a governmentally established policy to retain individuals in the 
group as part of a civilian force. These factors act in favor of 
recognition.
    (vii) Receipt of military training and/or achievement of military 
capability. If a group employed skills or resources that were enhanced 
as the result of military training or equipment designed or issued for 
that purpose, this acts toward recognition.
    (2) Incidents not favoring equivalency--(i) Submission to the U.S. 
Armed Forces for protection. A group that seeks protection and 
assistance from the U.S. Armed Forces and submits to military control 
for its own well-being is not deemed to have provided service to the 
Armed Forces equivalent to AD military service, even though the group 
may have been as follows:
    (A) Armed by the U.S. military for defensive purposes.
    (B) Routed by the U.S. military to avoid the enemy.
    (C) Instructed by the U.S. military for the defense of the group 
when attacked by, or in danger of attack by, the enemy.
    (D) Otherwise submitted themselves to the U.S. military for 
sustenance and protection.
    (ii) Permitted to resign. The ability of members to resign at will 
and without penalty acts against military control. Penalty may be direct 
and severe, such as confinement, or indirect and moderate, such as 
difficult and costly transportation from an overseas location.
    (iii) Prior recognition of group service. Recognition of a group's 
service by agencies of State or local government does not provide 
support in favor of recognition under this part.
    (3) Status of group in international law. In addition to other 
factors, consideration will be given to whether members of the group 
were regarded and treated as civilians, or assimilated to the Armed 
Forces as reflected in treaties, customary international law, judicial 
decisions, and U.S. diplomatic practice.
    (c) Reconsideration. Applications by groups previously denied a 
favorable determination by the Secretary of the Air Force shall be 
reconsidered under this part if the group submits evidence that is new, 
relevant, and substantive. Any request that the DoD Civilian/Military 
Service Review Board established hereunder (see Sec. 47.5(b)) 
determines does not provide new, relevant, and substantive evidence 
shall be returned to the applicant with the reasons for nonacceptance.
    (d) Counsel Representation. Neither the Department of Defense nor 
Department of Transportation shall provide representation by counsel or 
defray the cost of such representation with respect to any matter 
covered by this part.



Sec. 47.5  Responsibilities.

    (a) The Assistant Secretary of Defense (Force Management and 
Personnel) (ASD(FM&P)) shall:
    (1) Appoint a primary and an alternate member in the grade of O-6 or 
GM-15 or higher to the DoD Civilian/Military Service Review Board.
    (2) Exercise oversight over the Military Departments and the U.S. 
Coast Guard for compliance with this Directive and in the issuance of 
discharge documents and casualty reports to members of recognized 
groups.

[[Page 277]]

    (b) The Secretary of the Air Force, as the designated Executive 
Agent of the Secretary of Defense for the administration of Public Law 
95-202 shall:
    (1) Establish the DoD Civilian/Military Service Review Board and the 
Advisory Panel.
    (2) Appoint as board president a member or employee of the Air Force 
in grade O-6 or GM-15 or higher.
    (3) Request the Secretary of Transportation to appoint an additional 
voting member from the U.S. Coast Guard when the board is considering 
the application of a group claiming active Coast Guard service.
    (4) Provide a recorder and an assistant to maintain the records of 
the board and administer the functions of this part.
    (5) Provide nonvoting legal advisors and historians.
    (6) Publish notices of group applications and other Public Law 95-
202 announcements in the Federal Register.
    (7) Consider the rationale and recommendations of the DoD Civilian/
Military Service Review Board.
    (8) Determine whether the service rendered by a civilian or 
contractual group shall be considered AD service to the U.S. Armed 
Forces for all laws administered by the VA. The decision of the 
Secretary of the Air Force is final. There is no appeal.
    (9) Notify the following persons in writing when a group 
determination is made (if the Secretary of the Air Force disagrees with 
the rationale or recommendations of the board, the Secretary of the Air 
Force shall provide the decision and reasons for it in writing to these 
persons):
    (i) The applicant(s) for the group.
    (ii) The Secretary of the Department of Veterans Affairs.
    (iii) The Secretary of the Army.
    (iv) The Secretary of the Navy.
    (v) The ASD (FM&P).
    (vi) The Secretary of Transportation (when a group claims active 
Coast Guard service).
    (c) The Secretary of the Army, Secretary of the Navy, Secretary of 
the Air Force, and Commandant of the Coast Guard shall:
    (1) Appoint to the board a primary and an alternate member in the 
grades of O-6 or GM-15 or higher from their respective Military 
Services.
    (2) Process applications for discharge documents from individuals 
claiming membership in a recognized group in accordance with applicable 
laws, Directives, the Secretary of the Air Force rationale and 
instrument effecting a group determination, and any other instructions 
of the board.
    (3) Determine whether the applicant was a member of a recognized 
group after considering the individual's evidence of membership and 
verifying the service against available Government records.
    (4) Issue a DD Form 214, ``Certificate of Release or Discharge from 
Active Duty,'' and a DD Form 256, ``Honorable Discharge Certificate,'' 
or a DD Form 257, ``General Discharge Certificate,'' as appropriate, 
consistent with DoD Instruction 1336.1 \1\ and DoD Directive 1332.14 \2\ 
and the implementing documents of the appropriate statutes of the 
Military Department concerned or the DoT and the instructions of the DoD 
Civilian/Military Service Review Board.
---------------------------------------------------------------------------

    \1\ Copies may be obtained, if needed, from the U.S. Naval 
Publications and Forms Center, Attn: 1053, 5801 Tabor Avenue, 
Philadelphia, PA 19120.
    \2\ See footnote 1 to Sec. 47.5(c)(4).
---------------------------------------------------------------------------

    (5) Issue a DD Form 1300, ``Report of Casualty,'' in accordance with 
DoD Instruction 1300.9 \3\ if a verified member was killed during the 
period of AD service.
---------------------------------------------------------------------------

    \3\ See footnote 1 to Sec. 47.5(c)(4).
---------------------------------------------------------------------------

    (6) Ensure that each DD Form 214, ``Certificate of Release or 
Discharge from Active Duty,'' and each DD Form 1300, ``Report of 
Casualty,'' have the following statement entered in the ``Remarks'' 
section:

    This document, issued under Public Law 95-202 (38 U.S.C. 106 Note), 
administratively establishes active duty service for the purposes of 
Department of Veterans Affairs benefits.

    (7) Determine the equivalent military pay grade, when required by 
the Department of Veterans Affairs. For VA benefits, a pay grade is 
needed only in cases when an individual was killed or received service-
connected injuries or disease during the recognized period

[[Page 278]]

of AD service. A DD Form 1300 shall be issued with the equivalent pay 
grade annotated for a member who died during the recognized period of 
service. A DD Form 214 shall not include pay grade, unless the 
Department of Veterans Affairs requests that a grade determination be 
given. Determinations of equivalent grade shall be based on the 
following criteria in order of importance:
    (i) Officially recognized organizational grade or equivalent rank.
    (ii) The corresponding rank for civilian pay grade.
    (iii) If neither of the criteria in paragraphs (c)(7) (i) and (ii) 
of this section, and applies, only one of three grades may be issued; 
i.e., O-1, E-4, or E-1. Selection depends on the nature of the job 
performed, the level of supervision exercised, and the military 
privileges to which the individual was entitled.
    (8) Adjudicate applicant challenges to the period of AD service, 
characterization of service, or other administrative aspects of the 
discharge documents issued.



Sec. 47.6  Procedures.

    (a) Submitting group applications. Applications on behalf of a 
civilian or contractual group shall be submitted to the Secretary of the 
Air Force using the instructions in appendix A to this part.
    (b) Processing group applications. (1) When received, the recorder 
shall review the application for sufficiency and either return it for 
more information or accept it for consideration and announce acceptance 
in the Federal Register.
    (2) The recorder shall send the application to the appropriate 
advisory panel for historical review and analysis.
    (3) When received, the recorder shall send the advisory panel's 
report to the applicant for comment. The applicant's comments shall be 
referred to the advisory panel if significant disagreement requires 
resolution. Additional comments from the historians also shall be 
referred to the applicant for comment.
    (4) The DoD Civilian/Military Service Board shall consider the group 
application, as established, in paragraph (a) and paragraphs (b) (1) 
through (3) of this section.
    (5) After the Secretary of the Air Force makes a decision, the 
recorder shall notify the applicant of the decision and announce it in 
the ``Federal Register.''
    (c) Submitting individual applications. When a group is recognized, 
individual members may apply to the appropriate Military Department or 
to the Coast Guard for discharge documents. Submit applications on DD 
Form 2168, ``Application for Discharge of Member or Survivor of Member 
of Group Certified to Have Performed Active Duty with the Armed Forces 
of the United States.'' An application on behalf of a deceased or 
incompetent member submitted by the next of kin must be accompanied by 
proof of death or incompetence.



     Sec. Appendix A to Part 47--Instructions for Submitting Group 

                  Applications Under Public Law 95-202

    A. In Submitting a Group Application: 1. Define the group to include 
the time period that your group provided service to the U.S. Armed 
Forces.
    2. Show the relationship that the group had with the U.S. Armed 
Forces, the manner in which members of the group were employed, and the 
services the members of the group provided to the Armed Forces.
    3. Address each of the factors in Sec. 47.4.
    4. Substantiate and document the application. (The burden of proof 
rests with the applicant.)
    B. Send Completed Group Applications To: Secretary of the Air Force 
(SAF/MRC), DoD Civilian/Military Service Review Board, Washington, DC 
20330-1000.



  Sec. Appendix B to Part 47--The DoD Civilian/Military Service Review 

                      Board and the Advisory Panel

                     A. Organization and Management

    1. The board shall consist of a president selected from the 
Department of the Air Force and one representative each from the OSD, 
the Department of the Army, the Department of the Navy, the Department 
of the Air Force, and the U.S. Coast Guard (when the group claims active 
Coast Guard service). Each member shall have one vote except that the 
president shall vote only to break a tie. The board's decision is 
determined by majority vote. The president and two voting members shall 
constitute a quorum.
    2. The advisory panel shall act as a nonvoting adjunct to the board. 
It shall consist

[[Page 279]]

of historians selected by the Secretaries of the Military Departments 
and, if required, by the Secretary of Transportation. The respective 
Military Departments and the DOT shall ensure that the advisory panel is 
provided with administrative and legal support.

                              B. Functions

    1. The board shall meet in executive session at the call of the 
president, and shall limit its reviews to the following:
    a. Written submissions by an applicant on behalf of a civilian or 
contractual group. Presentations to the board are not allowed.
    b. Written report(s) prepared by the advisory panel.
    c. Any other relevant written information available.
    d. Factors established in this part for determining AD service.
    2. The board shall return to the applicant any application that does 
not meet the eligibility criteria established in Sec. 47.4(a). The 
board only needs to state the reasons why the group is ineligible for 
consideration under this part.
    3. If the board determines that an application is eligible for 
consideration under Sec. 47.4(a), the board shall provide, to the 
Secretary of the Air Force, a recommendation on the AD service 
determination for the group and the rationale for that recommendation 
that shall include, but not be limited to, a discussion of the factors 
listed in Sec. 47.4.
    a. No factors shall be established that require automatic 
recognition. Neither the board nor the Secretary of the Air Force shall 
be bound by any method in reaching a decision.
    b. Prior group determinations made under Public Law 95-202 do not 
bind the board or the Secretary of the Air Force. The board and the 
Secretary of the Air Force fully and impartially shall consider each 
group on its own merit in relation to the factors listed in section D. 
of this Directive.



PART 48_RETIRED SERVICEMAN'S FAMILY PROTECTION PLAN--Table of Contents




                      Subpart A_General Information

Sec.
48.101 Purpose.
48.102 Definitions.

                      Subpart B_Election of Options

48.201 Options.
48.202 Limitation on number of annuities.
48.203 Election of options.
48.204 Change or revocation of election.
48.205 Election form.
48.206 Information regarding elections.

                 Subpart C_Designation of Beneficiaries

48.301 Designation.
48.302 Substantiating evidence regarding dependency and age of 
          dependents.
48.303 Condition affecting entitlement of widow or widower.

                   Subpart D_Reduction of Retired Pay

48.401 Computation of reduction.
48.402 Effective date of reduction.
48.403 Payment of nonwithheld reduction of retired pay.
48.404 Ages to be used.
48.405 Action upon removal from temporary disability retired list.
48.406 Withdrawal and reduction of percentage or amount of 
          participation.

                            Subpart E_Annuity

48.501 General information.
48.502 Effective date of annuity.
48.503 Claims for annuity payments.
48.504 Payment to children.
48.505 Establishing eligibility of annuitants.
48.506 Recovery of erroneous annuity payments.
48.507 Restriction on participation.
48.508 Certain 100 percent disability retirements.

                         Subpart F_Miscellaneous

48.601 Annual report.
48.602 Organization.
48.603 Correction of administrative deficiencies.
48.604 Transition and protective clauses.

    Authority: Sec. 1444, 70A Stat. 111; 10 U.S.C. 1444.

    Source: 34 FR 12092, July 18, 1969, unless otherwise noted.



                      Subpart A_General Information



Sec. 48.101  Purpose.

    The purpose of the Retired Serviceman's Family Protection Plan is to 
permit each member of the uniformed services to elect to receive a 
reduced amount of any retired pay which may be awarded him as a result 
of service in his uniformed service in order to provide an annuity 
payable after his death (while entitled to retired pay) to his widow, 
child, or children, subject to certain limitations specified in the law 
and elaborated in the regulations in this part.

[[Page 280]]



Sec. 48.102  Definitions.

    (a) The terms Plan or RSFPP as hereinafter used means the Retired 
Serviceman's Family Protection Plan (formerly called the Uniformed 
Services Contingency Option Act).
    (b) The term uniformed services means the Army, Navy, Air Force, 
Marine Corps, Coast Guard, Commissioned Corps of Environmental Science 
Services Administration, and Commissioned Corps of Public Health 
Service.
    (c) The term member means a commissioned officer, commissioned 
warrant officer, warrant officer, nurse, flight officer, or a person in 
an enlisted grade (including an aviation cadet) of any of the uniformed 
services, and a person in any of these categories who is entitled to or 
is in receipt of retired pay, except persons excluded in title 10, U.S. 
Code, section 1431(a), as amended.
    (d) The term widow includes widower and refers to the lawful spouse 
of the member on the date of retirement with pay.
    (e) The term child means, in all cases, a member's child, who is 
living on the date of retirement of the member with pay and who meets 
the following requirements:
    (1) A legitimate child under 18 years of age and unmarried.
    (2) A stepchild, under 18 years of age and unmarried, who is in fact 
dependent on the member for support (see paragraphs (f) and (g) of this 
section).
    (3) A legally adopted child, under 18 years of age and unmarried.
    (4) A child, as defined above, who is 18 or more years of age and 
unmarried, and who is incapable of self-support because of being 
mentally defective or physically incapacitated if that condition existed 
prior to reaching age 18.
    (5) A child as defined above, who is at least 18, but under 23 years 
of age and unmarried, who is pursuing a full-time course of study or 
training in a high school, trade school, technical or vocational 
institute, junior college, college, university, or comparable recognized 
educational institution. (Applicable only in the case of members who 
retired on or after Nov. 1, 1968).
    (6) A child loses his eligibility for an annuity under this part if 
he is adopted by a third person before the parent-member's death. His 
eligibility is not affected if he is adopted by a third person after the 
parent-member's death (36 Comp. Gen. 325).
    (f) The term stepchild means a child of a member's spouse by a 
former marriage. The stepchild relationship terminates upon the divorce 
of the parent spouse, but not upon the death of the parent spouse.
    (g) The term in fact dependent means that the stepchild must be 
dependent on the member for over half of his or her support.
    (h) The term retirement means retirement with eligibility to receive 
retired pay.
    (i) The term retired pay includes retired, retirement, equivalent 
and retainer pay awarded as a result of service in the uniformed 
services.
    (j) The term reduced retired pay means the retired pay remaining 
after the cost of participation in RSFPP has been subtracted.
    (k) The term department concerned means (1) the Department of the 
Army with respect to the Army, (2) the Department of the Navy with 
respect to the Navy and Marine Corps, (3) the Department of the Air 
Force with respect to the Air Force, (4) the Department of 
Transportation with respect to the Coast Guard, (5) the Department of 
Commerce with respect to the Environmental Science Services 
Administration, and (6) the Department of Health, Education, and Welfare 
with respect to the Public Health Service.
    (l) The term dependent means the prospective annuitants described in 
paragraphs (d) and (e) of this section.
    (m) The term Board of Actuaries means the Government Actuary in the 
Department of the Treasury, the Chief Actuary of the Social Security 
Administration, and a member of the Society of Actuaries appointed by 
the President to advise the Secretary of Defense on the administration 
of the Plan.
    (n) The term Joint Board means representatives of the uniformed 
services appointed under the provisions of Sec. 48.602.
    (o) The term years of service means years of service creditable in 
the computation of basic pay.
    (p) The term election means the choice of options made by the member 
under the RSFPP. This term includes a

[[Page 281]]

modification of a previous election or an election submitted after a 
revocation of a previous option(s) elected.
    (q) The term elections in effect means valid elections existing on 
the day of retirement.
    (r) A recognized educational institution is defined as a high 
school, trade school, technical or vocational institute, junior college, 
college, university, or comparable recognized educational institution 
which meets one or more of the following criteria:
    (1) It is operated or directly supported by the United States, or a 
State, or local governmental agency.
    (2) It is accredited by a nationally recognized or State recognized 
accrediting agency.
    (3) It is approved as an educational institution by a State or local 
governmental agency.
    (4) Its credits are accepted for transfer (or for admission) by 
three or more accredited schools on the same basis as credits from an 
accredited school.



                      Subpart B_Election of Options



Sec. 48.201  Options.

    As provided in Sec. 48.203, a member may elect one or more of the 
following annuities. The amount must be specified at time of election, 
and may not be for more than 50 per centum nor less than 12\1/2\ per 
centum of his retired pay, in no case may be less than a $25 monthly 
annuity be elected. If the election is made in terms of dollars, the 
amount may be more than 50 per centum of the retired pay that he would 
receive if he were to retire at the time of election; however, if such 
elected amount exceeds 50 per centum of his retired pay when he does 
retire, it shall be reduced to an amount equal to such 50 per centum. 
Also, if the dollar amount elected is less than 12\1/2\ per centum of 
his retired pay when he does retire, it shall be increased to an amount 
equal to such 12\1/2\ per centum.
    (a) Option 1 is an annuity payable to or on behalf of his widow, the 
annuity to terminate upon her death or remarriage.
    (b) Option 2 is an annuity payable to or on behalf of his surviving 
child or children as defined in Sec. 48.102, the annuity to terminate 
when there ceases to be at least one such surviving child eligible to 
receive the annuity. Each payment under such annuity shall be paid in 
equal shares to or on behalf of the surviving children remaining 
eligible at the time the payment is due. A member who had this option in 
effect on the date of retirement, and who retired on or after November 
1, 1968, may apply to the Secretary concerned to have a child (other 
than a child described in Sec. 48.102(e)(4)) who is at least 18 but 
less than 23 years of age considered not to be an eligible beneficiary 
under this paragraph (b) or Sec. 48.202. Normally such applications 
will be approved.
    (c) Option 3 is an annuity to or on behalf of his widow and 
surviving child or children. Such annuity shall be paid to the widow 
until death or remarriage, and thereafter each payment under such 
annuity shall be paid in equal shares to or on behalf of the surviving 
children remaining eligible at the time the payment is due. A member may 
provide for allocating, during the period of the surviving spouse's 
eligibility, a part of the annuity under this subpart B for payment to 
those of his surviving children who are not children of that spouse. The 
sum allotted will not exceed the equitable share for which such children 
would be eligible after the death of the widow.
    (d) When no eligible beneficiary remains to benefit from the option 
elected, the member's retired pay will be restored (except as provided 
in Sec. 48.604, for certain members retired before Aug. 13, 1968). All 
elections on file on Aug. 13, 1968, for members not entitled to receive 
retired pay will be considered to include the restoration feature with 
attendant cost factors being applied at time of retirement. For the 
purpose of this paragraph, a child (other than a child described in 
Sec. 48.102(e)(4)) who is at least 18 but less than 23 years of age, 
and is not pursuing a course of study as defined in Sec. 48.102(e)(5), 
shall be considered an eligible beneficiary unless an approved 
application by the member pursuant to Sec. 48.201(b) that such a child 
is not to be considered an eligible beneficiary is in effect (for 
members who retire on or after Nov. 1, 1968).

[[Page 282]]



Sec. 48.202  Limitation on number of annuities.

    When a member desires to provide both the annuity provided by Option 
1 and Option 2, he may elect amounts that, in total, meet the 
limitations specified in Sec. 48.201. The cost of each annuity, and the 
amount of each annuity shall be determined separately. A member may not 
elect the combination of Options 1 and 3 or Options 2 and 3 in any case. 
The combined amount of the annuities may not be more than 50 per centum 
nor less than 12\1/2\ per centum of his retired pay. In no case may less 
than a $25 per month combined annuity be provided.



Sec. 48.203  Election of options.

    (a) A member who has completed less than 19 years of service as 
defined in Sec. 48.102(o) may elect to receive a reduced amount of 
retired pay in order to provide one or more of the annuities as 
specified in Sec. Sec. 48.201 and 48.202, payable after his death while 
entitled to retired pay to or on behalf of his surviving widow, child, 
or children. To be effective, the election by such a member must be 
dated, signed, witnessed, and delivered to appropriate service 
officials, or postmarked not later than midnight on the day in which he 
completes 19 years of service. Such an election will become effective 
immediately upon subsequent retirement. The latest election, change, or 
revocation made in accordance with this subsection will, if otherwise 
valid, be the effective election, unless superseded by a change as 
provided in paragraph (b) of this section.
    (b) Except as provided in paragraph (c) of this section, a member 
who fails or declines to make an election before completion of 19 years 
of service may make an election after that time. However, unless the 
election is made at least 2 years prior to the date the member becomes 
entitled to receive retired pay, it will not be effective. The same 
applies to subsequent changes or revocations made prior to retirement.
    (c) If an election, revocation, or change was made prior to August 
13, 1968, the 19-year and 2-year provisions are automatically in effect 
on August 13, 1968, for members who were not entitled to retired pay on 
such date, unless the member applies under Sec. 48.604(d) to remain 
under the provisions of the law prior to August 13, 1968. In this case 
the ``18 years of service'' and ``3 years prior to receipt of retired 
pay'' rules will apply.
    (d) A member retired for physical disability on or after November 1, 
1968 who is awarded retired pay prior to completion of 19 years of 
service may make an election which is subject to the restrictions set 
forth in Sec. 48.507. The election by such member shall be made before 
the first day for which he is entitled to retired pay. Elections made 
under this paragraph prior to November 1, 1968, must be made by the 
member retiring for physical disability prior to completing 18 years.
    (e) If, because of military operations, a member is assigned to an 
isolated station, or is missing, interned in a neutral country, captured 
by a hostile force, or beleaguered or besieged, and for that reason is 
unable to make an election before completing 19 years of service, he may 
make the election within 1 year after he ceases to be assigned to that 
station or returns to the jurisdiction of his service as the case may 
be, and such election shall become effective immediately upon subsequent 
retirement.
    (f) A member to whom retired pay is granted retroactively, and who 
is otherwise eligible to make an election, may make the election within 
90 days after receiving notice that such pay has been granted him.
    (g) Whenever a member is determined to be mentally incompetent by 
medical officers of the uniformed services or of the Veterans 
Administration, or is adjudged mentally incompetent by a court of 
competent jurisdiction and because of such mental incompetency is 
incapable of making any election within the time limitations prescribed 
by the Plan, the Secretary of the Department concerned may make the 
appropriate election on behalf of such member upon request of the 
spouse, or if there be no spouse, by or on behalf of the child or 
children of such member. If such member is subsequently determined to be 
mentally competent by the Veterans Administration or a court of 
competent jurisdiction, he may, within 180 days after such determination 
or

[[Page 283]]

judgment, change or revoke the election made on his behalf. In such a 
case, the change or revocation will be effective on the date of the 
member's request for such change or revocation. Deductions previously 
made shall not be refunded.
    (h) All elections on file on August 13, 1968, for members not 
entitled to receive retired pay shall be subject to the provisions of 
this section unless the member makes the application specified in Sec. 
48.604(d).
    (i) A person who was a former member of the armed forces on November 
1, 1953, and who is granted retired pay after that date, may, at the 
time he is granted that pay, make an election as provided in Sec. 
48.201.



Sec. 48.204  Change or revocation of election.

    (a) A change of election is a change in the amount of the annuity or 
annuities under any option, or a change in any option or options 
selected. A revocation is a cancellation of a previous election and 
constitutes a withdrawal from coverage under the Plan.
    (b) A member may change or revoke his election as often as he 
desires prior to the completion of 19 years of service. Such a change or 
revocation must be dated, signed, witnessed, and delivered to 
appropriate service officials, or postmarked not later than midnight on 
the day in which the member completes 19 years of service. The latest 
election, change, or revocation which is submitted in accordance with 
this subsection will be effective at retirement.
    (c) A member who desires to make an election or change or revoke his 
election after he has completed 19 years of service may do so prior to 
his retirement. However, such an election, change or revocation will be 
effective only if at least 2 years elapse between the date of the 
election, change, or revocation and the date of eligibility to receive 
retired pay.
    (d) A revocation will not prohibit the filing of a new election at a 
later date which will become valid under applicable validation 
provisions.
    (e) A member may, on or after November 1, 1968, at any time prior to 
his retirement, change or revoke his election (provided the change does 
not increase the amount of the annuity elected) to reflect a change in 
the marital or dependency status of the member of his family caused by 
death, divorce, annulment, remarriage, or acquisition of a child, if 
such change or revocation is made within 2 years of such change in 
status.
    (f) Notification of a change in family status is not a change of 
election.
    (g) All changes and revocations on file on August 13, 1968, for 
members not entitled to retired pay shall be subject to the provisions 
of this section unless the member makes the application specified in 
Sec. 48.604(d).



Sec. 48.205  Election form.

    The form for making election after October 31, 1968, is prescribed 
as Election of Options, Retired Serviceman's Family Protection Plan, DD 
Form 1688. \1\ It will be submitted as directed herein. All copies will 
be signed, and any otherwise complete, signed copy, when properly 
submitted, may be used to substantiate the fact of election, 
modification, revocation, or change in family status.
---------------------------------------------------------------------------

    \1\ Filed as part of the original document. Copies may be obtained 
from Military Personnel Office.
---------------------------------------------------------------------------



Sec. 48.206  Information regarding elections.

    (a) All members of the Reserve component who will have accumulated 
sufficient service to be eligible for retired pay at age 60, will be 
counseled on the Plan before reaching their 57th birth dates in order to 
insure that valid elections can be made prior to their 58th birth dates. 
An election, modification, or revocation submitted subsequent to 
attaining age 58 will be valid only if it is made and submitted at least 
2 years prior to the first date for which retired pay is granted.
    (b) It is the responsibility of the department concerned to provide 
election forms and to promulgate information concerning the benefits of 
the Plan to all members so as to allow a timely election.
    (c) Members retiring for physical disability prior to the completion 
of 19

[[Page 284]]

years of service will, prior to retirement, be counseled and furnished 
information concerning the operation of the Plan.



                 Subpart C_Designation of Beneficiaries



Sec. 48.301  Designation.

    (a) All legal beneficiaries described in Sec. 48.102 must be named 
at the date of retirement pursuant to the option elected. Although a 
member without dependents may make an election, it will not be effective 
unless he has eligible dependents at the time of his retirement.
    (b) When a change in family status occurs prior to retirement which 
would effect a change as provided in Sec. 48.204(e), new DD Form 1688, 
\1\ Election of Options, Retired Servicemen's Family Protection Plan, 
should be filed to evidence such change.
---------------------------------------------------------------------------

    \1\ See footnote 1 to Sec. 48.205.
---------------------------------------------------------------------------



Sec. 48.302  Substantiating evidence regarding dependency and age of dependents.

    At the time of submitting the election, or prior to retirement, the 
member must indicate his wife's and youngest child birth date as 
applicable to the option elected. At or before the time of his 
retirement, he must submit proof of final dissolution of prior 
marriages, if any, both for himself and his spouse. The age of the 
dependents must be substantiated by a birth certificate or other 
competent evidence. The birth date of a member must be verified by his 
service record. All required substantiating evidence must be at the 
disbursing office which would normally pay the member retired pay or 
retainer pay immediately following retirement so as to permit the 
establishment of accurate pay accounts and to prevent the creation of 
indebtedness or overpayments.



Sec. 48.303  Condition affecting entitlement of widow or widower.

    A member may have a different lawful spouse at the time of 
retirement from the lawful spouse he had at the time of election. The 
lawful spouse at the time of retirement is the spouse eligible for an 
annuity at the time of member's death. Divorce of the member will remove 
the former spouse as a prospective annuitant.



                   Subpart D_Reduction of Retired Pay



Sec. 48.401  Computation of reduction.

    (a) The reduction to be made in the retired pay of a member who has 
made an election shall be computed by the uniformed service concerned in 
each individual case, based upon tables of factors prepared by the Board 
of Actuaries. The computation shall be based upon the applicable table 
in effect on the date of retirement.
    (b) An adjustment may be made in the reduction of retired pay upon 
the finding of an administrative error or a mistake of fact (see Sec. 
48.603).
    (c) If a member elects to be covered by option 3, and on the date he 
is awarded retired pay has no children eligible to receive the annuity, 
or has only a child or children aged 18-22 (other than a child described 
in Sec. 48.102(e)(4) and elects, at retirement, that such child or 
children shall not be considered to be eligible beneficiaries, he shall 
have his costs computed as though he had elected option 1. If he elects 
option 3, and on the date he is awarded retired pay has no wife eligible 
for the annuity, he shall have his costs computed as though he had 
elected option 2.
    (d) If a member elects option 3, and after he becomes entitled to 
retired pay, there is no eligible spouse because of death or divorce, 
upon the retired member's application, no deductions from his retired 
pay shall be made after the last day of the month in which there ceases 
to be an eligible spouse. Children otherwise eligible will continue to 
be eligible for the annuity in event of the member's death. No amounts 
by which the member's retired pay is reduced before that date may be 
refunded to or credited on behalf of that person.
    (e) The amount of reduction in retired pay and the annuity payable 
established for each individual at the time of his retirement shall 
remain unaltered except as provided in Sec. 48.203(g), paragraphs (b) 
and (d) of this

[[Page 285]]

section, and Sec. 48.406, regardless of future pay increases or 
decreases.



Sec. 48.402  Effective date of reduction.

    The effective date of reduction in retired pay will be the effective 
date of retirement with pay. The reduction in retired pay will be 
terminated on the date the member ceases to be entitled to retired pay 
or on the first day of the month following that in which there is no 
eligible beneficiary (for exception to this rule see Sec. 48.604).



Sec. 48.403  Payment of nonwithheld reduction of retired pay.

    (a) A member of a uniformed service who is entitled to retired pay 
and has made an election shall, during any period in which he is not 
receiving retired pay (including periods of active duty), deposit the 
amount which would have been withheld from his retired pay had he been 
receiving that pay.
    (b) Such deposit will be payable to Treasurer of the United States 
and shall be forwarded monthly to the disbursing office which would 
normally pay the member his retired pay.
    (c) The disbursing office will in all cases inform the member of the 
amount to be deposited and when such deposits are to be made.
    (d) In the event deposits are not made within 30 days of the due 
date, the disbursing office will inform the member concerned that he is 
delinquent from such due date and thereafter his designated 
beneficiaries will not be eligible for the annuity provided under the 
Plan until the arrears have been paid. The notification of delinquency 
will advise the member that 15 additional days have been granted to him 
in which to remit his deposit, and that if the arrears are not deposited 
within that period, the member will be charged interest to include the 
first day of delinquency. In no case will the expiration date of the 15 
days exceed a date later than 45 days from the date the deposit was due. 
The interest will be computed monthly and the rate will be that used in 
computing the cost tables in effect on the date of the member's 
retirement. If such member later becomes in receipt of retired pay, any 
arrears with compound interest will be withheld.



Sec. 48.404  Ages to be used.

    Ages to be used for calculating reductions of retired pay will be 
the ages of the member and his eligible dependents on their nearest 
birth dates as of the date of the member's retirement.



Sec. 48.405  Action upon removal from temporary disability retired list.

    (a) Any member on the temporary disability retired list established 
pursuant to title 10, United States Code, chapter 61, who has elected to 
receive reduced retired pay in order to provide one or more of the 
annuities specified in the Plan, and who is subsequently removed from 
the list due to any reason other than permanent retirement, shall have 
refunded to him a sum which represents the difference between the amount 
by which his retired pay has been reduced and the cost of an amount of 
term insurance which is equal to the protection provided his dependents 
during the period he was on the temporary disability retired list.
    (b) If the member concerned is returned to active duty, his election 
as previously made will continue or he may change or revoke the election 
as provided in Sec. 48.204.
    (c) Time creditable for the purpose of the two year interval 
required to make a change, revocation or new election valid includes 
service before, during, and after temporary disability retirement. (See 
Sec. Sec. 48.203 and 48.204 and Comptroller Decision B-144158, Dec. 23, 
1960.) Active duty after removal from a temporary disability retired 
list is a necessity in such a case.



Sec. 48.406  Withdrawal and reduction of percentage or amount of participation.

    A retired member who is participating in the Plan may revoke his 
election and withdraw from participation, or he may reduce the amount of 
the survivor annuity; however, an approved withdrawal or reduction will 
not be effective earlier than the first day of the seventh month 
beginning after the date his application is received by the Finance 
Center controlling his pay record. (For special rules covering 
participating members retired before Aug. 13, 1968, without option 4, 
see Sec. 48.604.)

[[Page 286]]

No application for reduction will be approved which requests a change in 
options. A request to reduce an annuity or to withdraw from the Plan is 
irrevocable, and a retired member who withdraws may never again 
participate in the Plan. Approval of a request for a reduction will not 
be made when such reduction results in an annuity of less than 12\1/2\ 
per centum of the member's retired pay or less than a $25 monthly 
annuity. The new cost, after such reduction in survivor annuity, will be 
computed from the applicable cost table at the time of retirement. No 
amounts by which a member's retired pay is reduced may be refunded to, 
or credited on behalf of, the member by virtue of an application made by 
him under this section.



                            Subpart E_Annuity



Sec. 48.501  General information.

    Except as provided in Sec. 48.506(a), no annuity payable under the 
Plan shall be assignable, or subject to execution, levy, attachment, 
garnishment, or other legal process. Annuities payable under this Plan 
shall be in addition to any pensions or other payments to which the 
beneficiaries may now or hereafter be entitled under other provisions of 
law (except as provided in Sec. 48.507), and may not be considered as 
income under any law administered by the Veterans Administration, except 
for the purpose of title 38 U.S. Code, section 415(g) and chapter 15.



Sec. 48.502  Effective date of annuity.

    All annuities payable under this Plan except those payable to 
beneficiaries described in Sec. 48.102(e)(5) shall accrue from the 
first day of the month in which the retired member dies and shall be due 
and payable not later than the 15th day of each month following that 
month and in equal monthly installments thereafter, except that no 
annuity shall accrue or be paid for the month in which entitlement to 
that annuity terminates.



Sec. 48.503  Claims for annuity payments.

    Upon official notification of the death of a retired member who has 
elected under the Plan, the department concerned shall forward to the 
eligible surviving beneficiaries the necessary information and forms (DD 
Form 768. Application for Annuity Under Retired Serviceman's Family 
Protection Plan) for making application for annuity payments. Such 
information shall include the place to which the application should be 
forwarded and to which questions regarding annuity payments should be 
addressed.



Sec. 48.504  Payment to children.

    (a) Annuities for a child or children will be paid to the child's 
guardian, or if there is no guardian, to the person(s) who has care, 
custody, and control of the child or children.
    (b) Annuities payable to or on behalf of an eligible child as 
defined in Sec. 48.102(e)(5) accrue as of the first day of the month in 
which--
    (1) The member (upon whose retired pay the annuity is based) dies if 
the eligible child's 18th birthday occurs in the same or a preceding 
month, or
    (2) The 18th birthday of an eligible child occurs if the member 
(upon whose retired pay the annuity is based) died in a preceding month, 
or
    (3) A child first becomes (or again becomes) eligible, if that 
eligible child's 18th birthday and the death of the member (upon whose 
retired pay the annuity is based) both occurred in a preceding month or 
months. An eligible child under this paragraph might become ineligible 
at age 18 and again become eligible by furnishing proof of pursuit of a 
full time course of study or training as enumerated in Sec. 
48.102(e)(5).



Sec. 48.505  Establishing eligibility of annuitants.

    (a) Eligibility for the annuity will be established by such evidence 
as may be required by the department concerned.
    (b) If a child as defined in Sec. 48.102(e)(4) is a designated 
annuitant, the department concerned shall require proof that the 
incapacity for self-support existed prior to the child's reaching age 
18. Proof that continued incapacitation exists will be required every 2 
years after the child passes the age of 18 years, except in a case where 
medical prognosis indicates recovery is impossible.
    (c) If a child as defined in Sec. 48.102(e)(5) is a designated 
annuitant, as specified

[[Page 287]]

in Sec. 48.504(b), the department concerned shall require proof from 
the institution at least semiannually that the child is pursuing a full-
time course of training as prescribed. For the purpose of proving 
eligibility, a child is considered to be pursuing a full-time course of 
study or training during an interval between school periods that does 
not exceed 150 days if he has demonstrated to the satisfaction of the 
department concerned that he has a bona fide intention of commencing, 
resuming, or continuing to pursue a full-time course of study or 
training in a recognized educational institution immediately after that 
interval.



Sec. 48.506  Recovery of erroneous annuity payments.

    (a) The Secretary of the Department concerned is empowered to use 
any means provided by law to recover amounts of annuities erroneously 
paid to any individual under the Plan. He may authorize such recovery by 
adjustment in subsequent payments to which the individual is entitled.
    (b) There need be no recovery when in the judgment of the Secretary 
of the Department concerned and the Comptroller General of the United 
States, the individual to whom the erroneous payment was made is without 
fault and recovery would be contrary to the purpose of the Plan or would 
be against equity and good conscience.



Sec. 48.507  Restriction on participation.

    (a) If a person who has made an election under the Plan retires with 
a physical disability before the completion of 19 years of service and 
then dies in retirement, his widow and eligible children can receive 
monthly survivor annuities only if they are not eligible for Dependency 
and Indemnity Compensation payments from the Veterans Administration. If 
either the widow or children are eligible for dependency and indemnity 
compensation payments, then payment of annuities under the Plan may not 
be made to any member of the family. If the retired member's death was 
not service connected and his widow or children are not eligible for 
payments from the Veterans Administration, they may receive the provided 
annuity payments under the Plan.
    (b) If the beneficiaries on whose behalf the election was made are 
restricted as in paragraph (a) of this section, from receiving 
annuities, the amounts withheld from the elector's retired pay as a 
result of the election will be refunded to the beneficiaries, less the 
amount of any annuity paid, and without interest.
    (c) Upon notification of the death of the member in such a case, the 
department concerned will take the following actions:
    (1) Notify the Central Office of the Veterans Administration of the 
death of the member and request that the department concerned be advised 
if an award is made under chapter 11 or 13, title 38 U.S. Code.
    (2) Request the Central Office of the Veterans Administration to 
forward to the eligible widow and/or children an application form for 
survivor benefits under chapter 11 or 13, title 38 U.S. Code, with 
instructions for completion and submission.



Sec. 48.508  Certain 100 percent disability retirement.

    An election filed on or after August 13, 1968 is not effective if 
the member dies within 30 days following retirement from a disability of 
100 per centum (under the standard schedule of rating disabilities in 
use by the Veterans Administration) for which he was retired under 
chapter 61, title 10 U.S. Code, unless--
    (a) Such disability was the result of injury or disease received in 
line of duty as a direct result of armed conflict, or
    (b) His widow or children are not entitled to dependency and 
indemnity compensation under chapter 13, title 38 U.S. Code.



                         Subpart F_Miscellaneous



Sec. 48.601  Annual report.

    Information and data for the preparation of the annual report of the 
Board of Actuaries will be compiled by the Office of the Secretary of 
Defense after promulgation of appropriate instructions to each of the 
uniformed services.

[[Page 288]]

These instructions will be in consonance with Executive Order 10499 
directing the Secretary of Defense to administer the provisions of the 
law.



Sec. 48.602  Organization.

    (a) The Joint Board for the Retired Serviceman's Family Protection 
Plan shall consist of a principal and alternate member for each of the 
uniformed services appointed by the Department Secretary concerned. 
Alternate members will be authorized to act in the absence of the 
principal. The Board shall meet on call of the Chairman. A quorum shall 
consist of representatives of at least four of the participating 
services.
    (b) The Board shall establish procedures for the orderly conduct of 
business to be approved by the Assistant Secretary of Defense (Manpower 
and Reserve Affairs).
    (c) The duties of the Board will include but not be limited to the 
following:
    (1) Making recommendations to the Secretary of Defense for:
    (i) Changes to the Executive order delegating to him functions 
conferred on the President by law,
    (ii) Changes to these regulations,
    (iii) Changes to the law, and
    (iv) Measures to insure uniform operating policies.
    (2) Promulgating tables of annuity costs as prescribed by the Board 
of Actuaries.
    (3) Promulgating cost of term insurance as required in Sec. 48.405.
    (d) The Chairmanship of the Joint Board will be designated by the 
Assistant Secretary of Defense (Manpower and Reserve Affairs).



Sec. 48.603  Correction of administrative deficiencies.

    (a) The Secretary of the Department concerned may correct any 
election or any change or revocation of an election when he considers it 
necessary to correct an administrative error. Information on such 
corrections shall be compiled by each department for inclusion in the 
report prescribed by Sec. 48.601.
    (b) Except when procured by fraud, a correction under the section is 
final and conclusive on all officers of the United States.
    (c) Information on all corrections to elections under this Plan 
which are made under title 10, section 1552, United States Code, shall 
be compiled and this information forwarded to the Board of Actuaries for 
an actuarial analysis.



Sec. 48.604  Transition and protective clauses.

    (a) A retired member who is participating in the Plan without 
inclusion of former option 4, which provided for restoration of retired 
pay when no eligible beneficiary remained in his election, may before 
September 1, 1969, elect to have that option included in his election. 
The election to include such option 4 becomes effective on the first day 
of the month following the month in which that election was made. The 
retired member must on or before the effective date agree to pay to the 
Treasury both the total additional amount to cover the option had it 
been effective when he retired, and the interest which would have 
accrued on the additional amount up to the effective date of the new 
option 4. No such additional amount (except interest) shall accrue for 
months after the first month for which the individual had no eligible 
beneficiary. However, if undue hardship or financial burden would 
result, payments may be made in from 2 to 12 monthly installments when 
the monthly amount involved is $25 or less, or in from 2 to 36 
installments when the monthly amounts involved exceed $25. No amounts by 
which a member's retired pay was reduced may be refunded to, or credited 
on behalf of, the retired member by virtue of an application made by him 
under this section. A retired member who does not make the additional 
election provided under this section within the time limits will not be 
allowed to reduce an annuity or withdraw from participation in the Plan 
as provided by Sec. 48.406.
    (b) Members who have elected and are not yet retired will 
automatically participate under the provisions of Sec. 48.201.
    (c) Elections in effect on August 13, 1968, will remain under the 
cost tables applicable on the date of the member's retirement.

[[Page 289]]

    (d) Any member who has filed an election, modification, or 
revocation prior to August 13, 1968, may before September 1, 1969, 
submit a written application to the Secretary concerned requesting that 
such election, modification, or revocation remain under the time-of-
election provisions of the law applicable on the date it was filed.



PART 50_PERSONAL COMMERCIAL SOLICITATION ON DOD INSTALLATIONS--Table of Contents




                           General Provisions

Sec.
50.1 Purpose.
50.2 Applicability.
50.3 Definitions.
50.4 Policy.
50.5 Responsibilities.
50.6 Procedures.
50.7 Information requirements.

Appendix A to Part 50--Life Insurance Products and Securities
Appendix B to Part 50--Overseas Life Insurance Registration Program

    Authority: 5 U.S.C. 301.

    Source: 71 FR 38764, July 10, 2006, unless otherwise noted.

                           General Provisions



Sec. 50.1  Purpose.

    This part:
    (a) Implements section 577 of Public Law No. 109-163 (2006) and 
establishes policy and procedures for personal commercial solicitation 
on DoD installations.
    (b) Continues the established annual DoD registration requirement 
for the sale of insurance and securities on DoD installations overseas.
    (c) Identifies prohibited practices that may cause withdrawal of 
commercial solicitation privileges on DoD installations and establishes 
notification requirements when privileges are withdrawn.
    (d) Establishes procedures for persons solicited on DoD 
installations to evaluate solicitors.
    (e) Prescribes procedures for providing financial education programs 
to military personnel.



Sec. 50.2  Applicability.

    This part:
    (a) Applies to the Office of the Secretary of Defense, the Military 
Departments, the Chairman of the Joint Chiefs of Staff, the Combatant 
Commands, the Office of the Inspector General of the Department of 
Defense, the Defense Agencies, the DoD Field Activities, and all other 
organizational entities in the Department of Defense (hereafter referred 
to collectively as the ``DoD Components'').
    (b) Does not apply to services furnished by residential service 
companies, such as deliveries of milk, laundry, newspapers, and related 
services to personal residences on the installation requested by the 
resident and authorized by the installation commander.
    (c) Applies to all other personal commercial solicitation on DoD 
installations. It includes meetings on DoD installations of private, 
non-profit, tax-exempt organizations that involve commercial 
solicitation. Attendance at these meetings shall be voluntary and the 
time and place of such meetings are subject to the discretion of the 
installation commander or his or her designee.



Sec. 50.3  Definitions.

    Agent. An individual who receives remuneration as a salesperson or 
whose remuneration is dependent on volume of sales of a product or 
products. (Also referred to as ``commercial agent'' or ``producer''). In 
this part, the term ``agent'' includes ``general agent'' unless the 
content clearly conveys a contrary intent.
    ``Authorized'' Bank and/or Credit Union. Bank and/or credit union 
selected by the installation commander through open competitive 
solicitation to provide exclusive on-base delivery of financial services 
to the installation under a written operating agreement.
    Banking institution. An entity chartered by a State or the Federal 
Government to provide financial services.
    Commercial sponsorship. The act of providing assistance, funding, 
goods, equipment (including fixed assets), or services to an MWR program 
or event by an individual, agency, association,

[[Page 290]]

company or corporation, or other entity (sponsor) for a specified 
(limited) period of time in return for public recognition or advertising 
promotions. Enclosure 9 of DoD Instruction 1015.10 \1\ provides general 
policy governing commercial sponsorship.
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    \1\ Copies may be obtained at http://www.dtic.mil/whs/directives/.
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    Credit union. A cooperative nonprofit association, incorporated 
under the Credit Union Act (12 U.S.C. 1751), or similar state statute, 
for the purpose of encouraging thrift among its members and creating a 
source of credit at a fair and reasonable rate of interest.
    DoD installation. For the purposes of this part, any Federally 
owned, leased, or operated base, reservation, post, camp, building, or 
other facility to which DoD personnel are assigned for duty, including 
barracks, transient housing, and family quarters.
    DoD personnel. For the purposes of this part, all active duty 
officers (commissioned and warrant) and enlisted members of the Military 
Departments and all civilian employees, including nonappropriated fund 
employees and special Government employees, of the Department of 
Defense.
    Financial services. Those services commonly associated with 
financial institutions in the United States, such as electronic banking 
(e.g., ATMs), in-store banking, checking, share and savings accounts, 
fund transfers, sale of official checks, money orders and travelers 
checks, loan services, safe deposit boxes, trust services, sale and 
redemption of U.S. Savings Bonds, and acceptance of utility payments and 
any other consumer-related banking services.
    General agent. A person who has a legal contract to represent a 
company. See the definition of ``Agent'' in this section.
    Insurance carrier. An insurance company issuing insurance through an 
association reinsuring or coinsuring such insurance.
    Insurance product. A policy, annuity, or certificate of insurance 
issued by an insurer or evidence of insurance coverage issued by a self-
insured association, including those with savings and investment 
features.
    Insurer. An entity licensed by the appropriate department to engage 
in the business of insurance.
    Military services. See Joint Publication 1-02, ``DoD Dictionary of 
Military and Associated Terms.'' \2\
---------------------------------------------------------------------------

    \2\ See http://www.dtic.mil/doctrine/jel/doddict/indexs.html.
---------------------------------------------------------------------------

    Normal home enterprises. Sales or services that are customarily 
conducted in a domestic setting and do not compete with an 
installation's officially sanctioned commerce.
    Personal commercial solicitation. Personal contact, to include 
meetings, meals, or telecommunications contact, for the purpose of 
seeking private business or trade.
    Securities. Mutual funds, stocks, bonds, or any product registered 
with the Securities and Exchange Commission except for any insurance or 
annuity product issued by a corporation subject to supervision by State 
insurance authorities.
    Suspension. Temporary termination of privileges pending completion 
of a commander's inquiry or investigation.
    Withdrawal. Termination of privileges for a set period of time 
following completion of a commander's inquiry or investigation.



Sec. 50.4  Policy.

    (a) It is DoD policy to safeguard and promote the welfare of DoD 
personnel as consumers by setting forth a uniform approach to the 
conduct of all personal commercial solicitation and sales to them by 
dealers and their agents. For those individuals and their companies that 
fail to follow this policy, the opportunity to solicit on military 
installations may be limited or denied as appropriate.
    (b) Command authority includes authority to approve or prohibit all 
commercial solicitation covered by this part. Nothing in this part 
limits an installation commander's inherent authority to deny access to 
vendors or to establish time and place restrictions on commercial 
activities at the installation.



Sec. 50.5  Responsibilities.

    (a) The Principal Deputy Under Secretary of Defense for Personnel 
and

[[Page 291]]

Readiness (PDUSD(P&R)), under the Under Secretary of Defense for 
Personnel and Readiness, shall:
    (1) Identify and publish policies and procedures governing personal 
commercial solicitation on DoD installations consistent with the policy 
set forth in this part.
    (2) Maintain and make available to installation commanders and 
appropriate Federal personnel the current master file of all individual 
agents, dealers, and companies who have their privileges withdrawn at 
any DoD installation.
    (3) Develop and maintain a list of all State Insurance 
Commissioners' points of contact for DoD matters and forward this list 
to the Military Services.
    (b) The Heads of the DoD Components shall:
    (1) Ensure implementation of this part and compliance with its 
provisions.
    (2) Require installations under their authority to report each 
instance of withdrawal of commercial solicitation privileges.
    (3) Submit lists of all individuals and companies who have had their 
commercial solicitation privileges withdrawn at installations under 
their authority to the PDUSD(P&R) in accordance with this part.



Sec. 50.6  Procedures.

    (a) General. (1) No person has authority to enter a DoD installation 
to transact personal commercial solicitation as a matter of right. 
Personal commercial solicitation may be permitted only if the following 
requirements are met:
    (i) The solicitor is duly licensed under applicable Federal, State, 
or municipal laws and has complied with installation regulations.
    (ii) A specific appointment has been made for each meeting with the 
individual concerned. Each meeting is conducted only in family quarters 
or in other areas designated by the installation commander.
    (iii) The solicitor agrees to provide each person solicited the 
personal commercial solicitation evaluation included in DD Form 2885 \3\ 
during the initial appointment. The person being solicited is not 
required to complete the evaluation. However, completed evaluations 
should be sent by the person who was solicited to the office designated 
by the installation commander on the back of the evaluation form.
---------------------------------------------------------------------------

    \3\ Copies may be obtained from http://www.dtic.mil/whs/directives/
infomgt/forms/forminfo/forminfopage2239.html.
---------------------------------------------------------------------------

    (iv) The solicitor agrees to provide DoD personnel with a written 
reminder, prior to their making a financial commitment, that free legal 
advice is available from the Office of the Staff Judge Advocate.
    (2) Solicitors on overseas installations shall be required to 
observe, in addition to the above, the applicable laws of the host 
country. Upon request, the solicitor must present documentary evidence 
to the installation commander that the company they represent, and its 
agents, meet the applicable licensing requirements of the host country.
    (b) Life insurance products and securities. (1) Life insurance 
products and securities offered and sold to DoD personnel shall meet the 
prerequisites described in Sec. 50.3.
    (2) Installation commanders may permit insurers and their agents to 
solicit on DoD installations if the requirements of paragraph (a) of 
this section are met and if they are licensed under the insurance laws 
of the State where the installation is located. Commanders will ensure 
the agent's license status and complaint history are checked with the 
appropriate State or Federal regulators before granting permission to 
solicit on the installation.
    (3) In addition, before approving insurance and financial product 
agents' requests for permission to solicit, commanders shall review the 
list of agents and companies currently barred, banned, or limited from 
soliciting on any or all DoD installations. This list may be viewed via 
the Personal Commercial Solicitation Report ``quick link'' at http://
www.commanderspage.com. In overseas areas, the DoD Components shall 
limit insurance solicitation to those insurers registered under the 
provisions of appendix B to this part.

[[Page 292]]

    (4) The conduct of all insurance business on DoD installations shall 
be by specific appointment. When establishing the appointment, insurance 
agents shall identify themselves to the prospective purchaser as an 
agent for a specific insurer.
    (5) Installation commanders shall designate areas where interviews 
by appointment may be conducted. The opportunity to conduct scheduled 
interviews shall be extended to all solicitors on an equitable basis. 
Where space and other considerations limit the number of agents using 
the interviewing area, the installation commander may develop and 
publish local policy consistent with this concept.
    (6) Installation commanders shall make disinterested third-party 
insurance counseling available to DoD personnel desiring counseling. 
Financial counselors shall encourage DoD personnel to seek legal 
assistance or other advice from a disinterested third-party before 
entering into a contract for insurance or securities.
    (7) In addition to the solicitation prohibitions contained in 
paragraph (d) of this section, DoD Components shall prohibit the 
following:
    (i) The use of DoD personnel representing any insurer, dealing 
directly or indirectly on behalf of any insurer or any recognized 
representative of any insurer on the installation, or as an agent or in 
any official or business capacity with or without compensation.
    (ii) The use of an agent as a participant in any Military Service-
sponsored education or orientation program.
    (iii) The designation of any agent or the use by any agent of titles 
(for example, ``Battalion Insurance Counselor,'' ``Unit Insurance 
Advisor,'' ``Servicemen's Group Life Insurance Conversion Consultant,'') 
that in any manner, states, or implies any type of endorsement from the 
U.S. Government, the Armed Forces, or any State or Federal agency or 
government entity.
    (iv) The use of desk space for interviews for other than a specific 
prearranged appointment. During such appointment, the agent shall not be 
permitted to display desk signs or other materials announcing his or her 
name or company affiliation.
    (v) The use of an installation ``daily bulletin,'' marquee, 
newsletter, Web page, or other official notice to announce the presence 
of an agent and/or his or her availability.
    (c) Supervision of on-base commercial activities. (1) All pertinent 
installation regulations shall be posted in a place easily accessible to 
those conducting and receiving personal commercial solicitation on the 
installation.
    (2) The installation commander shall make available a copy of 
installation regulations to anyone conducting on-base commercial 
solicitation activities warning that failure to follow the regulations 
may result in the loss of solicitation privileges.
    (3) The installation commander, or designated representative, shall 
inquire into any alleged violations of this part or of any questionable 
solicitation practices. The DD Form 2885 is provided as a means to 
supervise solicitation activities on the installation.
    (d) Prohibited practices. The following commercial solicitation 
practices shall be prohibited on all DoD installations:
    (1) Solicitation of recruits, trainees, and transient personnel in a 
group setting or ``mass'' audience and solicitation of any DoD personnel 
in a ``captive'' audience where attendance is not voluntary.
    (2) Making appointments with or soliciting military or DoD civilian 
personnel during their normally scheduled duty hours.
    (3) Soliciting in barracks, day rooms, unit areas, transient 
personnel housing, or other areas where the installation commander has 
prohibited solicitation.
    (4) Use of official military identification cards or DoD vehicle 
decals by active duty, retired or reserve members of the Military 
Services to gain access to DoD installations for the purpose of 
soliciting. When entering the installation for the purpose of 
solicitation, solicitors with military identification cards and/or DoD 
vehicle decals must present documentation issued by the installation 
authorizing solicitation.
    (5) Procuring, attempting to procure, supplying, or attempting to 
supply non-public listings of DoD personnel

[[Page 293]]

for purposes of commercial solicitation, except for releases made in 
accordance with DoD Directive 5400.7.\4\
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    \4\ See footnote 1 to Sec. 50.3.
---------------------------------------------------------------------------

    (6) Offering unfair, improper, or deceptive inducements to purchase 
or trade.
    (7) Using promotional incentives to facilitate transactions or to 
eliminate competition.
    (8) Using manipulative, deceptive, or fraudulent devices, schemes, 
or artifices, including misleading advertising and sales literature. All 
financial products, which contain insurance features, must clearly 
explain the insurance features of those products.
    (9) Using oral or written representations to suggest or give the 
appearance that the Department of Defense sponsors or endorses any 
particular company, its agents, or the goods, services, and commodities 
it sells.
    (10) DoD personnel making personal commercial solicitations or sales 
to DoD personnel who are junior in rank or grade, or to the family 
members of such personnel, except as authorized in Section 2-205 and 5-
409 of the Joint Ethics Regulation, DoD 5500.7-R.\5\
---------------------------------------------------------------------------

    \5\ See footnote 1 to Sec. 50.3.
---------------------------------------------------------------------------

    (11) Entering into any unauthorized or restricted area.
    (12) Using any portion of installation facilities, including 
quarters, as a showroom or store for the sale of goods or services, 
except as specifically authorized by DoD Directive 1330.17 \6\ and DoD 
Instructions 1015.10, 1000.15 \7\ and 1330.21.\8\ This does not apply to 
normal home enterprises that comply with applicable State and local laws 
and installation rules.
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    \6\ See footnote 1 to Sec. 50.3.
    \7\ See footnote 1 to Sec. 50.3.
    \8\ See footnote 1 to Sec. 50.3.
---------------------------------------------------------------------------

    (13) Soliciting door to door or without an appointment.
    (14) Unauthorized advertising of addresses or telephone numbers used 
in personal commercial solicitation activities conducted on the 
installation, or the use of official positions, titles, or organization 
names, for the purpose of personal commercial solicitation, except as 
authorized in DoD 5500.7-R. Military grade and Military Service as part 
of an individual's name (e.g., Captain Smith, U.S. Marine Corps) may be 
used in the same manner as conventional titles, such as ``Mr.'', 
``Mrs.'', or ``Honorable''.
    (15) Contacting DoD personnel by calling a government telephone, 
faxing to a government fax machine, or by sending e-mail to a government 
computer, unless a pre-existing relationship (i.e., the DoD member is a 
current client or requested to be contacted) exists between the parties 
and the DoD member has not asked for contact to be terminated.
    (e) Denial, suspension, and withdrawal of installation solicitation 
privileges. (1) The installation commander shall deny, suspend, or 
withdraw permission for a company and its agents to conduct commercial 
activities on the base if such action is in the best interests of the 
command. The grounds for taking these actions may include, but are not 
limited to, the following:
    (i) Failure to meet the licensing and other regulatory requirements 
prescribed in this part or violations of the State law where the 
installation is located. Commanders will request that appropriate state 
officials determine whether a company or agent violated State law.
    (ii) Commission of any of the practices prohibited in paragraphs 
(b)(6) and (d) of this section.
    (iii) Substantiated complaints and/or adverse reports regarding the 
quality of goods, services, and/or commodities, and the manner in which 
they are offered for sale.
    (iv) Knowing and willful violations of Public Law 90-321.
    (v) Personal misconduct by a company's agent or representative while 
on the installation.
    (vi) The possession of, and any attempt to obtain supplies of direct 
deposit forms, or any other form or device used by Military Departments 
to direct a Service member's pay to a third party, or possession or use 
of facsimiles thereof. This includes using or assisting in using a 
Service member's ``MyPay'' account or other similar Internet medium for 
the purpose of establishing a direct deposit for the purchase of 
insurance or other investment product.

[[Page 294]]

    (vii) Failure to incorporate and abide by the Standards of Fairness 
policies contained in DoD Instruction 1344.9.\9\
---------------------------------------------------------------------------

    \9\ See footnote 1 to Sec. 50.3.
---------------------------------------------------------------------------

    (2) The installation commander may determine that circumstances 
dictate the immediate suspension of solicitation privileges while an 
investigation is conducted. Upon suspending solicitation privileges, the 
commander shall promptly inform the agent and the company the agent 
represents, in writing.
    (3) In suspending or withdrawing solicitation privileges, the 
installation commander shall determine whether to limit such action to 
the agent alone or extend it to the company the agent represents. This 
decision shall be based on the circumstances of the particular case, 
including, but not limited to, the nature of the violations, frequency 
of violations, the extent to which other agents of the company have 
engaged in such practices and any other matters tending to show the 
culpability of an individual and the company.
    (4) If the investigation determines an agent or company does not 
possess a valid license or the agent, company, or product has failed to 
meet other State or Federal regulatory requirements, the installation 
commander shall immediately notify the appropriate regulatory 
authorities.
    (5) In a withdrawal action, the commander shall allow the individual 
or company an opportunity to show cause as to why the action should not 
be taken. To ``show cause'' means an opportunity must be given for the 
aggrieved party to present facts on an informal basis for the 
consideration of the installation commander or the commander's designee. 
The installation commander shall make a final decision regarding 
withdrawal based upon the entire record in each case. Installation 
commanders shall report concerns or complaints involving the quality or 
suitability of financial products or concerns or complaints involving 
marketing methods used to sell these products to the appropriate State 
and Federal regulatory authorities. Also, installation commanders shall 
report any suspension or withdrawal of insurance or securities products 
solicitation privileges to the appropriate State or Federal regulatory 
authorities.
    (6) The installation commander shall inform the Military Department 
concerned of any denial, suspension, withdrawal, or reinstatement of an 
agent or company's solicitation privileges and the Military Department 
shall inform the Office of the PDUSD(P&R), which will maintain a list of 
insurance and financial product companies and agents currently barred, 
banned, or otherwise limited from soliciting on any or all DoD 
installations. This list may be viewed at http://www.commanderspage.com. 
If warranted, the installation commander may recommend to the Military 
Department concerned that the action taken be extended to other DoD 
installations. The Military Department may extend the action to other 
military installations in the Military Department. The PDUSD(P&R), 
following consultation with the Military Department concerned, may order 
the action extended to other Military Departments.
    (7) All suspensions or withdrawals of privileges may be permanent or 
for a set period of time. If for a set period, when that period expires, 
the individual or company may reapply for permission to solicit through 
the installation commander or Military Department originally imposing 
the restriction. The installation commander or Military Department 
reinstating permission to solicit shall notify the Office of the 
PDUSD(P&R) and appropriate State and Federal regulatory agencies when 
such suspensions or withdrawals are lifted.
    (8) The Secretaries of the Military Departments may direct the Armed 
Forces Disciplinary Control Boards in all geographical areas in which 
the grounds for withdrawal action have occurred to consider all 
applicable information and take action that the Boards deem appropriate.
    (9) Nothing in this part limits the authority of the installation 
commander or other appropriate authority from requesting or instituting 
other administrative and/or criminal action against any person, 
including those who violate the conditions and restrictions upon which 
installation entry is authorized.

[[Page 295]]

    (f) Advertising and commercial sponsorship. (1) The Department of 
Defense expects voluntary observance of the highest business ethics by 
commercial enterprises soliciting DoD personnel through advertisements 
in unofficial military publications when describing goods, services, 
commodities, and the terms of the sale (including guarantees, 
warranties, and the like).
    (2) The advertising of credit terms shall conform to the provisions 
of 15 U.S.C. 1601 as implemented by Federal Reserve Board Regulation Z 
according to 12 CFR part 226.
    (3) Solicitors may provide commercial sponsorship to DoD Morale, 
Welfare and Recreation programs or events according to DoD Instruction 
1015.10. However, sponsorship may not be used as a means to obtain 
personal contact information for any participant at thes