80 FR 67261 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; Direct Grant Programs

DEPARTMENT OF EDUCATION

Federal Register Volume 80, Issue 211 (November 2, 2015)

The Secretary adopts as final regulations of the Department the interim final regulations that were published on December 19, 2014. This action adopts the OMB guidance in title 2 of the CFR as final regulations of the Department. The Secretary amends the interim final regulations to correct technical errors contained in the amendments.

[Federal Register Volume 80, Number 211 (Monday, November 2, 2015)]
[Rules and Regulations]
[Pages 67261-67264]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-27766]



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Rules and Regulations
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Federal Register / Vol. 80, No. 211 / Monday, November 2, 2015 / 
Rules and Regulations

[[Page 67261]]



DEPARTMENT OF EDUCATION

2 CFR Part 3474

34 CFR Parts 74, 75, 76, 77, 80, 101, 206, 222, 225, 226, 270, 280, 
299, 300, 303, 350, 361, 363, 364, 365, 367, 369, 370, 373, 377, 
380, 381, 385, 396, 400, 426, 460, 491, 535, 606, 607, 608, 609, 
611, 614, 628, 636, 637, 642, 643, 644, 645, 646, 647, 648, 650, 
654, 655, 661, 662, 663, 664, 682, 692, 694, and 1100

RIN 1890-AA19


Uniform Administrative Requirements, Cost Principles, and Audit 
Requirements for Federal Awards; Direct Grant Programs

AGENCY: Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary adopts as final regulations of the Department 
the interim final regulations that were published on December 19, 2014. 
This action adopts the OMB guidance in title 2 of the CFR as final 
regulations of the Department. The Secretary amends the interim final 
regulations to correct technical errors contained in the amendments.

DATES: These regulations are effective December 2, 2015.

FOR FURTHER INFORMATION CONTACT: Phillip Juengst, U.S. Department of 
Education, 400 Maryland Avenue SW., Room 6056, PCP, Washington, DC 
20202-4450. Telephone: (202) 245-8030 or by email: 
[email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION:

Executive Summary

    Purpose of This Regulatory Action: On December 19, 2014, all of the 
Federal award-making agencies published a joint Interim Final Rule 
(IFR) in the Federal Register, implementing the Office of Management 
and Budget's (OMB) Uniform Administrative Requirements, Cost 
Principles, and Audit Requirements for Federal awards (Uniform 
Guidance). The purpose of this action is to adopt the Uniform Guidance 
in 2 CFR part 200, except for 2 CFR 200.102(a), CFR 200.207(a). This 
adoption gives regulatory effect to the OMB guidance and supplements 
that guidance, as needed, for the Department. The authority to amend 
chapter XXXIV of title 2 of the Code of Federal Regulations and 
subtitle A and chapters I, II, III, IV, V, and VI of title 34 of the 
Code of Federal Regulations is 20 U.S.C. 1221e-3, 3474, and 2 CFR part 
200, unless otherwise noted.
    Summary of the Major Provisions of This Regulatory Action: This 
rule allows the Department to incorporate into regulation and thus 
bring into effect the Uniform Guidance as required by OMB and reduces 
administrative burden and risk of waste, fraud, and abuse for the funds 
awarded by the Department through grants and cooperative agreements.
    Costs and Benefits: The Secretary believes that these regulations 
do not impose significant costs on entities that would receive 
assistance through Department of Education programs. The benefits of 
the regulations far outweigh any potential costs incurred by entities. 
The benefits of the amendments in these regulations include eliminating 
duplicative and conflicting guidance contained in eight previously 
separate sets of OMB guidance documents; streamlining reporting 
requirements; reducing burden for entities that have never received an 
indirect cost rate; and setting standard business processes using data 
definitions to reduce administrative burden on non-Federal entities 
that conduct business with multiple federal agencies.
    On December 19, 2014, the Secretary published an IFR for these 
amendments in the Federal Register (79 FR 75871).
    Except for minor editorial and technical revisions, there are no 
differences between the IFR and these final regulations.

Technical Changes

    The Secretary makes two amendments to the interim final regulations 
to correct errors made in the adoption of the Uniform Guidance. First, 
in amending Sec.  75.135 to reference the Uniform Guidance, the 
Department failed to amend paragraph (b) of that section to reference 
the correct requirement in part 200. Second, in amending 34 CFR part 
75, the Department inadvertently removed Sec.  75.263 when we should 
have just revised the cross references in that section to refer to the 
appropriate citation in the Uniform Guidance. These two errors are 
corrected in these final regulations.
    Public Comment: In response to our invitation in the IFR, one party 
submitted comments directed at the Department's proposed adoption of 
the interim final regulations in 2 CFR part 200. Generally, we do not 
address technical and other minor changes raised by the comments.
    Analysis of Comments and Changes: An analysis of the comments 
follows.
    Comment: The commenter requested clarification on whether or not 
the Department would grant local educational agencies (LEAs) a one-year 
grace period for implementing the procurement standards in 2 CFR 
200.317 through 200.326. The commenter also sought clarity on the 
specific date that the procurement standards would go into effect for 
LEAs after the grace period.
    Discussion: The Uniform Guidance regulations, as adopted by the 
Department, 79 FR 75872 (December 19, 2014) authorize all non-Federal 
entities (including LEAs) to delay implementation of the procurement 
requirements in 2 CFR 200.318 through 200.326 for one fiscal year after 
the regulations would otherwise apply to a grant. A recent technical 
amendment to the Uniform Guidance expanded that grace period to two 
years. See 80 FR 54407 (September 10, 2015). As such, each LEA will 
have the option of delaying implementation of the procurement standards 
until the end of its second fiscal year that begins after the effective 
date of the Uniform Guidance (December 26, 2014). For LEAs with a 
fiscal year that ends on June 30, 2015 that decide to defer 
implementation for the full two years, the LEA's new procurement 
standards would not have to be effective until July 1, 2017.
    Changes: None.
    Comment: The commenter requested clarification of the phrase 
``tangible

[[Page 67262]]

personal benefit'' in 2 CFR 200.318(c)(1).
    Discussion: The phrase ``tangible personal benefit'' is new 
language added to the general conflict of interest section of the 
general procurement standards that existed previously under the 
Education Department General Administrative Regulations (EDGAR) 34 CFR 
80.36(b)(3) and OMB Circular A-102. The language was expanded from just 
``financial or other interest in'' to also include ``or a tangible 
personal benefit from'' a firm considered for a contract from a 
grantee. This new language stresses the importance of ensuring that 
employees who select, award, and administer contracts supported by a 
Federal award are free from any real or apparent conflict of interest, 
including financial interests and other non-financial benefits that 
result in a personal benefit for the employee (such as improved 
employment opportunities, business referrals, political influence, 
etc.).
    Changes: None.
    Comment: The commenter expressed concern regarding the conflict of 
interest rules in 2 CFR 200.319(a), specifically with regard to vendors 
with specialized expertise that may collaborate with grant applicants, 
because these vendors would be excluded from competing for a contract 
(if the applicant is awarded a grant) due to their organizational 
conflict of interest. The commenter requested that the Department issue 
guidance allowing vendors to provide minimal input to applicants, such 
as LEAs, for the purpose of informing a Request for Proposal (RFP) and 
to not prohibit these vendors from competing for the RFP because of a 
conflict of interest.
    Discussion: The Department understands that an LEA may need to 
inform itself about the capacity and capability of potential 
contractors in order to prepare an RFP. In the course of doing so, an 
LEA may contact a number of vendors to collect information necessary 
for developing the RFP, as long as the LEA poses its request for 
information broadly so that any potential vendor has an opportunity to 
provide input. Soliciting input from one or two vendors would create, 
in most cases, an unfair competitive advantage constituting an 
organizational conflict of interest.
    Changes: None.
    Comment: The commenter raised concerns with regard to the 
prohibition of using ``brand name'' instead of ``an equal'' product in 
order to avoid restrictive competition under 2 CFR 200.319(a)(6). 
Specifically, the commenter noted that in some cases, a school may have 
already invested in a particular technology infrastructure or selected 
a particular instructional framework and it would be impractical or 
impossible to switch to another product or instructional approach. The 
commenter requested that the Department issue guidance to clarify when 
specifying a ``brand name'' might be appropriate and not considered a 
restriction on competition under 2 CFR 200.319(a)(6).
    Discussion: The new procurement requirements in the Uniform 
Guidance do not require an LEA to abandon a technology or instructional 
approach just because a similar technology or instructional approach 
would cost less. The Department also understands that in some limited 
situations, specifying a ``brand name'' may not restrict competition 
under 2 CFR 200.319(a)(6). If an LEA has already invested in a 
particular infrastructure or instructional framework, specifying a 
``brand name'' compatible with the infrastructure or framework may be 
appropriate. However, the procurement regulations are designed to 
ensure competition so the selected proposal is most advantageous to the 
program, with price and other factors considered. Thus, the LEA needs 
to compete to find the lowest cost supplier of the technology or 
instructional approach (other factors) desired by the LEA. The 
Department will consider developing additional guidance on this issue.
    Changes: None.
    Comment: The commenter noted two instances in which it believes 
that procurement by noncompetitive proposals (sole sourcing) should be 
allowed under 2 CFR 200.320(f)(1) where ``the item is available only 
from a single source.'' The first situation involves instances where an 
LEA has an existing technology infrastructure or instructional 
framework and requires specific hardware or software; the second 
situation involves instances where schools engage in pilot trials for 
educational technologies or instructional strategies or materials and 
want to ``scale up'' the piloted product.
    Discussion: Generally, procurement by noncompetitive proposals is 
procurement through solicitation of a proposal from only one source. 
The use of this procurement method is permitted under very limited 
circumstances, but one basis for an authorized sole source contract is 
when the item is available only from a single source (2 CFR 
200.320(f)(1)). If particular software or hardware is required because 
of an LEA's existing technology infrastructure or instructional 
framework and the hardware or software is truly only available from one 
source, noncompetitive procurement may be appropriate. The LEA must 
maintain records documenting the rationale for why sole sourcing was 
used (2 CFR 200.318(i)). If the desired software or hardware is 
available from more than one vendor, the LEA must use a competitive 
process, as described in 2 CFR 200.320(d).
    LEAs that engage in pilot trials of educational technologies or 
instructional materials that then wish to ``scale up'' are not exempted 
from competitive procurement. Procurement transactions must be 
conducted in a manner providing full and open competition, as described 
in 2 CFR 200.319. If an LEA wants to experiment with a new educational 
technology or instructional strategy or material, it may do so without 
violating conflict of interest requirements by holding an open 
procurement competition, identifying the specifications for the 
technology, strategy, or material and stating the initial contract 
would be for a pilot of that product with an option to ``scale up'' the 
product if the pilot proves successful.
    Changes: None.
    Comment: The commenter raised concerns regarding the cost and 
efficiency of competitive bidding required under 2 CFR 200.320, noting 
that it would be more cost effective for the LEA to perform a cost 
analysis rather than use a Request for Proposal (RFP) process. The 
commenter encouraged the Department to allow for instances when the 
small purchase procedures could be used for procurements that exceed 
the Simplified Acquisition Threshold, including when the item is a 
commercially available product.
    Discussion: The Department has allowed for limited instances when 
small purchase procedures may be used for procurements that exceed the 
simplified acquisition threshold. These limited instances are specified 
in a section in EDGAR that was established in 2013, 34 CFR 75.135, 
which authorizes discretionary grant applicants to use the informal 
small purchase procedures to procure evaluation service providers and 
providers of any other service that is essential to the grant, provided 
that the service provider is identified in the grant application. The 
service provider must be needed to meet a statutory, regulatory, or 
priority requirement related to the competition. See the final 
rulemaking document, published at 78 FR 49352, August 13, 2013, for a 
fuller discussion of the requirements in Sec.  75.135. These limited 
exceptions do

[[Page 67263]]

not include allowing the use of small purchase procedures just because 
an item is a commercial (off the self) product and not one that is 
custom-built based on unique specifications.
    Changes: None.
    Comment: The commenter sought clarification from the Department on 
whether or not price comparison under 2 CFR 200.323 could be considered 
a form of price competition, such that a non-federal entity would not 
be required to negotiated price as a separate element.
    Discussion: Price comparison is not a form of price competition 
that would exempt a non-federal entity from negotiating profit as a 
separate element of the price.
    Changes: None.
    Comment: The commenter sought clarification on the definition of 
``procurement'' for determining whether or not the transaction meets 
the small purchase or simplified acquisition threshold.
    Discussion: The word ``procurement'' is used consistently 
throughout the Uniform Guidance and the Department does not intend to 
use that term differently in its implementation of the Uniform 
Guidance. The simplified acquisition threshold is the ``dollar amount 
below which a non-Federal entity may purchase property or services 
using small purchase methods'' (2 CFR 200.88). If a non-Federal entity 
seeks to acquire property or services that have an anticipated dollar 
value exceeding the simplified acquisition threshold, the non-Federal 
entity must use a competitive process and cannot use small purchase 
procedures unless the procurement meets the requirements of 34 CFR 
75.135. Procurement actions must not be split into separate 
procurements to avoid competition thresholds.
    Changes: None.
    After consideration of all the comments regarding the IFR, the 
Secretary makes no changes to the regulations adopting the Uniform 
Guidance that were published on December 19, 2014 except for the two 
technical amendments discussed earlier in this preamble.

Executive Orders 12866 and 13563

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
this regulatory action is ``significant'' and, therefore, subject to 
the requirements of the Executive order and subject to review by the 
Office of Management and Budget (OMB). Section 3(f) of Executive Order 
12866 defines a ``significant regulatory action'' as an action likely 
to result in a rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    This final regulatory action is not a significant regulatory action 
subject to review by OMB under section 3(f) of Executive Order 12866.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only on a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are issuing these final regulations only on a reasoned 
determination that their benefits justify their costs. In choosing 
among alternative regulatory approaches, we selected those approaches 
that maximize net benefits. Based on the analysis that follows, the 
Department believes that these final regulations are consistent with 
the principles in Executive Order 13563.
    We also have determined that this regulatory action does not unduly 
interfere with State, local, or tribal governments in the exercise of 
their governmental functions.
    In accordance with both Executive orders, the Department has 
assessed the potential costs and benefits, both quantitative and 
qualitative, of this regulatory action. The potential costs associated 
with this regulatory action are those resulting from statutory 
requirements and those we have determined as necessary for 
administering the Department's programs and activities.

Paperwork Reduction Act of 1995

    These regulations do not contain any information collection 
requirements.

Intergovernmental Review

    These regulations are subject to the requirements of Executive 
Order 12372 and the regulations in 34 CFR part 79. One of the 
objectives of the Executive order is to foster an intergovernmental 
partnership and a strengthened federalism. The Executive order relies 
on processes developed by State and local governments for coordination 
and review of proposed Federal financial assistance.
    This document provides early notification of our specific plans and 
actions for these regulations.

Assessment of Educational Impact

    In the IFR we requested comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available.
    Based on the response to the IFR and on our review, we have 
determined that these final regulations do not require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.
    Accessible Format: Individuals with disabilities can obtain this 
document in

[[Page 67264]]

an accessible format (e.g., braille, large print, audiotape, or compact 
disc) on request to the contact person listed under FOR FURTHER 
INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. Free 
Internet access to the official edition of the Federal Register and the 
Code of Federal Regulations is available via the Federal Digital System 
at: www.thefederalregister.org/fdsys. At this site you can view this document, as well 
as all other documents of this Department published in the Federal 
Register, in text or Adobe Portable Document Format (PDF). To use PDF 
you must have Adobe Acrobat Reader, which is available free at the 
site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

    Dated: October 27, 2015.
Arne Duncan,
Secretary of Education.

    For the reasons discussed in the preamble, and under the authority 
of 5 U.S.C. 301 and the authorities listed below, the interim rule 
amending chapter XXXIV of 2 CFR and subtitle A and chapter I of title 
34 of the Code of Federal Regulations, which was published at 79 FR 
75871 on December 19, 2014, is adopted as a final rule with the 
following changes:

Title 34--Education

Subtitle A--Office of the Secretary, Department of Education

PART 75--DIRECT GRANT PROGRAMS

0
1. The authority citation for part 75 continues to read as follows:

    Authority: 20 U.S.C. 1221e-3 and 3474, unless otherwise noted.


Sec.  75.135  [Amended]

0
2. Section 75.135(b) is amended by removing ``34 CFR 80.36(d)(1),'' and 
adding in its place ``2 CFR 200.320(b),''.


0
3. Section 75.263 is added to read as follows.


Sec.  75.263  Pre-award costs; waiver of approval.

    A grantee may, notwithstanding any requirement in 2 CFR part 200, 
incur pre-award costs as specified in 2 CFR 200.308(d)(1) unless--
    (a) ED regulations other than 2 CFR part 200 or a statute prohibit 
these costs; or
    (b) The conditions of the award prohibit these costs.

(Authority: 20 U.S.C. 1221e-3 and 3474; 2 CFR 200.308(d)(1))


[FR Doc. 2015-27766 Filed 10-30-15; 8:45 am]
 BILLING CODE 4000-01-P