State Systems Advance Planning Document (APD) Process, 66319-66341 [2010-26727]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 75, Number 208 (Thursday, October 28, 2010)]
[Rules and Regulations]
[Pages 66319-66341]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-26727]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 95

RIN 0970-AC33


State Systems Advance Planning Document (APD) Process

AGENCY: Office of Child Support Enforcement (OCSE), Administration for 
Children and Families (ACF), Department of Health and Human Services 
(HHS).

ACTION: Final rule.

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SUMMARY: The Advance Planning Document (APD) process governs the 
procedure by which States obtain approval for Federal financial 
participation in the cost of acquiring automated data processing 
equipment and services. This final rule reduces the submission 
requirements for lower-risk information technology (IT) projects and 
procurements and increases oversight over higher-risk IT projects and 
procurements by making technical changes, conforming changes and 
substantive revisions in the documentation required to be submitted by 
States, counties, and territories for approval of their Information 
Technology plans and acquisition documents.

DATES: Effective Date: This regulation is effective October 28, 2010.

FOR FURTHER INFORMATION CONTACT: Robin Rushton, OCSE Division of State 
and Tribal Systems, (202) 690-1244, e-mail: Robin.Rushton@acf.hhs.gov. 
Deaf and hearing impaired individuals may call the Federal Dual Party 
Relay Service at 1-800-877-8339 between 8 a.m. and 7 p.m. Eastern Time.

SUPPLEMENTARY INFORMATION:

Statutory Authority

    This final regulation is published under the general authority of 5 
U.S.C. 301, 42 U.S.C. 622(b), 629b(a), 652(a), 652(d) 654A, 671(a), 
1302, and 1396a(a). This regulation is published under the authority 
granted to the Secretary of the U.S. Department of Health and Human 
Services, (the Secretary) by Section 1102 of the Social Security Act 
(the Act), 42 U.S.C. 1302. This section authorizes the Secretary to 
publish regulations that may be necessary for the efficient

[[Page 66320]]

administration of the functions for which she is responsible under the 
Act.

Background

    The Department of Health and Human Services (HHS) provides national 
leadership and direction in planning, managing, and coordinating the 
nationwide administration and financing of comprehensive State public 
assistance systems to support programs for children and families. The 
Advance Planning Document (APD) process governs the procedure by which 
States obtain approval for Federal Financial Participation (FFP) in the 
cost of acquiring automated data processing (ADP) equipment and 
services. The APD process was designed to mitigate financial risks, 
avoid incompatibilities among systems and ensure that a system supports 
the program goals and objectives and operates as intended by law and 
regulation. The APD process also assists in ensuring that the 
expenditure of Federal funds is made in accordance with Federal 
regulation.
    This rule sets forth technical and conforming revisions, 
establishes new requirements and modifies existing requirements. The 
technical revisions delete or update obsolete references to agency 
names and assistance programs. The conforming revisions to regulations 
reflect the inclusion of entitlement grants under procurement standards 
found in 45 CFR Part 92, Uniform Administrative Requirements for Grants 
and Cooperative Agreements to State, Local and Tribal Governments. 
(Prior to this rule, Part 95 cross-referenced procurement standards in 
45 CFR Part 74, titled Uniform Administrative Requirements for Awards 
and Subawards to Institutions of Higher Education, Hospitals, Other 
Nonprofit Organizations, and Commercial Organizations). These 
conforming changes are being made in response to comments and reflect 
Federal regulations that were published on September 8, 2003 [68 FR 
52843] to promulgate uniform administrative requirements for certain 
Federal grants and agreements with State, local and tribal governments. 
The rule eliminates and reduces the documentation required to be 
submitted for Federal approval of FFP in the costs of acquiring ADP 
equipment or services.
    Technical revisions were prompted in part by changes made by the 
Personal Responsibility and Work Opportunity Reconciliation Act of 
1996, which eliminated the Job Opportunities and Basic Skills (JOBS) 
training program and replaced the Aid to Families with Dependent 
Children (AFDC) program with a Temporary Assistance for Needy Families 
(TANF) block grant that is not subject to 45 CFR Part 95. Other 
technical amendments were due to the name change from Health Care 
Financing Administration to Centers for Medicare & Medicaid Services 
(CMS).
    The conforming revisions were made to reflect the final rule on 
Uniform Administrative Requirements for Awards and Subawards to 
Institutions of Higher Education, Hospitals, Other Nonprofit 
Organizations, and Commercial Organizations; and Certain Grants and 
Agreements with States, Local Governments and Indian Tribal Governments 
and Uniform Administrative Requirements for Grants and Cooperative 
Agreements to State and Local Governments [68 FR 52843], which brought 
entitlement grant programs administered by HHS, such as the Child 
Support Enforcement (CSE) program, under the same regulations that 
already applied to non-entitlement programs for grants and cooperative 
agreements to State, local, and tribal governments. This was done by 
expanding the scope of 45 CFR Part 92 to include entitlement grant 
programs and removing such programs from the scope of Part 74. 
According to the rules published in 68 FR 52843, the affected programs 
under an approved State plan for titles I (Grants to States for Old-Age 
Assistance for the Aged), IV-A (Block Grants to States for Temporary 
Assistance for Needy Families), IV-B (Child and Family Services), IV-D 
(Child Support and Establishment of Paternity), IV-E (Federal Payments 
for Foster Care and Adoption Assistance), X (Grants to States for Aid 
to the Blind), XIV (Grants to States for Aid to the Permanently and 
Totally Disabled), XVI (Grants to States for Aid to the Aged, Blind, 
and Disabled), XIX (Grants to States for Medical Assistance Programs), 
and XXI (Children's Health Insurance Program) of the Social Security 
Act (the Act) and title IV, chapter 2 (Refugee Assistance) of the 
Immigration and Nationality Act must comply with procurement standards 
in 45 CFR Part 92. (Please note this final rule on State Systems 
Advance Planning Documents (APD) narrows the cross-reference to Part 92 
by deleting reference to titles I, IV-A, X, XIV, XVI of the Act and 
title IV, chapter 2 of the Immigration and Nationality Act from Sec.  
95.601, titled Scope and Applicability, of this final rule.)
    Prior to this rule, regulations at 45 CFR Part 95 (Sec.  95.605, 
Definitions, Sec.  95.613, Procurement Standards, Sec.  95.615, Access 
to Systems and Records, Sec.  95.621, ADP Reviews, Sec.  95.705, 
Equipment Costs--Federal Financial Participation, Sec.  95.707, 
Equipment Management and Disposition) contained six references to Part 
74; those references were deleted in this final rule and replaced with 
references to Part 92 where applicable. (Please refer to the Provisions 
of the Regulation and Changes Made in Response to Comments and the 
Response to Comments sections of this preamble for additional 
information.)
    The new and modified requirements in this rule were made in 
response to a variety of studies and recommendations from Federal, 
State and private organizations over the last decade, including the 
U.S. Government Accountability Office (GAO), the Technology and 
Procurement Policy Subcommittee of the House Government Reform 
Committee, the National Association of State Chief Information Officers 
(NASCIO), the American Public Human Service Association (APHSA) and the 
Office of Management and Budget (OMB).
    In March 1998, the U.S. General Accounting Office, now known as the 
Government Accountability Office (GAO) and the Nelson A. Rockefeller 
Institute of Government jointly established the GAO/Rockefeller 
Institute Working Seminar on Social Program Information Systems. The 
working seminar had about 30 members, including congressional staff, 
Federal and State program and information technology managers, and 
welfare researchers. The working seminar met eight times and discussed 
how the shifting human services landscape had transformed States 
automated systems needs. The three key challenges identified by 
participants at this conference were: (1) Simplifying the approval 
process for obtaining Federal funding for information systems; (2) 
enhancing strategic collaboration among different levels of government; 
and; (3) obtaining staff expertise in project management and 
information technology.
    In 2002, the GAO reviewed the statutory and regulatory requirements 
for Federal approval and funding of State IT development and 
acquisition projects. (See GAO-02-347T, July 2002). The review examined 
agencies' processes for reviewing, approving, and funding State IT 
development acquisition projects and whether these processes hinder or 
delay States' efforts to obtain approval for projects. The review also 
examined how the Food and Nutrition Service (FNS) (under the U.S. 
Department of Agriculture (USDA)), ACF and CMS ensure that they 
consistently apply the OMB Circular A-87 to fund IT development and 
acquisition projects. The GAO found

[[Page 66321]]

that in fiscal years 2000 and 2001 States had submitted 866 planning 
and acquisition documents. In its analysis of these submissions, GAO 
determined that 92 to 96 percent of the State requests submitted to 
Child Support Enforcement (CSE), Child Welfare, and CMS were responded 
to within the required 60 days but only 74 percent of the State 
requests involving multiple programs were responded to within the 60 
days.
    On July 9, 2002, the Subcommittee on Technology and Procurement 
Policy, House Government Reform Committee, held a Congressional hearing 
on State and Local Information Technology Management. The hearing 
included testimony from State and Federal IT officials, the National 
Association of State Information Resource Executives (NASIRE), 
representatives from the IT vendor community, and GAO. Although 
testimony differed on the degree of Federal oversight, witnesses agreed 
that the regulations and policies should be updated to reflect changes 
in technology over the last two decades.
    The National Association of State Chief Information Officers 
(NASCIO) and the American Public Human Services Association (APHSA) 
also have been actively involved in this issue and submitted proposals 
on how to reform the Federal oversight of State IT projects and 
procurement approval process.
    The Office of Management and Budget (OMB) also has raised concerns 
about the information paperwork burden imposed on States by the APD 
prior approval process. Normally the renewal of the OMB Information 
Collection authority is granted for a three-year period, but in 2003 
and 2004 OMB limited the renewal to one-year increments and has asked 
to be kept informed of the Department's efforts to reduce or streamline 
the APD process. In April 2005, OMB approved the current APD process 
for an additional three years based partially on the progress that has 
been made on this reform effort. Another three-year extension was 
approved through February 2, 2011.
    On March 23, 2010, President Obama signed into law the Patient 
Protection and Affordable Care Act (Affordable Care Act) into law. This 
law has very significant implications for millions of Americans who 
will now be eligible for the benefits under Medicaid and the Child 
Health Insurance Program (CHIP). The Centers for Medicare and Medicaid 
Services (CMS) anticipates millions of newly eligible individuals 
applying for, and being determined to be eligible for, these programs. 
CMS plans to build upon the provisions described herein as it 
implements the Affordable Care Act and does not expect implementation 
to conflict with measures in this current rule.

Provisions of the Regulation and Changes Made in Response to Comments

    A Notice of Proposed Rule Making (NPRM) was published in the 
Federal Register [73 FR 12341] on March 7, 2008. During the comment 
period, we received 33 letters generating 153 comments. On the whole, 
comments were positive and welcomed the increased flexibility in the 
APD submission requirements for lower-risk projects. Many of the 
comments suggested we retain the term ``Advance Planning Document'' 
(APD) and eliminate use of the proposed term ``Information Technology 
Document'' (ITD). Accordingly, we have retained the term ``Advance 
Planning Document'' in all of its permutations and deleted 
``Information Technology Document'' throughout this rule. In response 
to comments, we also revised the regulation to clarify that States are 
permitted to transmit electronic versions of the APD, acquisition 
solicitation and contract documents as long as a valid signature 
accompanies the documentation. We did this by replacing the phrase ``in 
writing'' with ``in a record'' throughout this regulation.
    Other commenters asserted that the procurement standards in Part 92 
should be cross-referenced in Subpart F (titled Automated Data 
Processing Equipment and Services--Conditions for Federal Financial 
Participation) of Part 95, rather than the procurement requirements in 
Part 74. This comment also affects proposed Sec.  95.613, Procurement 
Standards, which removed the general cross-reference to Part 74, but 
added certain key requirements from Part 74 (i.e., recipient's or 
grantee's responsibilities, codes of conduct, competition, procurement 
procedures, contract provisions) to the proposed section. We agreed 
with these comments and have deleted all cross-references to Part 74 
and removed the proposed requirements in Sec.  95.613 of the NPRM which 
were taken from Part 74. Where applicable, we have replaced the 
previous reference to Part 74 with a cross-reference to Part 92, which 
permits grantees to follow the same State procurement rules and 
standards that are used for non-FFP matched projects. Accordingly all 
HHS grantees are now subject to the procurement standards set forth in 
45 CFR Part 92.
    Section 95.613 Procurement Standards was revised to provide for a 
limited exception where the Department retains the authority to provide 
greater oversight, including requiring a State to comply with the 
competition provisions of Sec.  92.36(c) if it determines that a State 
procurement process is an impediment to competition that could 
substantially impact project cost or risk of failure.
    Changes made in response to comments are discussed in more detail 
under the Response to Comments section of this preamble. Following is a 
summary of those changes:

Section 95.601--Scope and Applicability

    Section 95.601 prescribes conditions under which the Department of 
Health and Human Services will approve FFP in the costs of automated 
data processing services or equipment for social service programs under 
certain titles of the Act. In the proposed rule we narrowed the scope 
of this part by deleting reference to titles I, IV-A, X, XIV, XVI and 
XXI of the Act and title IV, chapter 2 of the Immigration and 
Nationality Act. In response to comments, we re-inserted the reference 
to title XXI, titled Children's Health Insurance Program, to clarify 
that this part applies to the automated data processing equipment and 
services related to the CHIP program, if a State enhances its existing 
Medicaid Management Information System (MMIS) to include CHIP 
functions.
    Consistent with the proposed rule, the scope of this final rule 
does not apply to titles I, X, XIV or XVI of the Act as these titles 
have been repealed by the Social Security Amendments of 1972 (P.L. 92-
603). Similarly, this rule does not apply to title IV-A of the Act 
since PRWORA eliminated the JOBS program and replaced AFDC with TANF, a 
block grant. Lastly, this rule does not apply to title IV, chapter 2 of 
the Immigration and Nationality Act because the State Legalization 
Impact Assistance Grants program, a time-limited program previously 
administered by the Office of Refugee Resettlement, has expired. 
Consequently, the scope of this rule is limited to titles IV-B (Child 
and Family Services), IV-D (Child Support and Establishment of 
Paternity), IV-E (Federal Payments for Foster Care and Adoption 
Assistance), XIX (Grants to States for Medical Assistance Programs) and 
XXI of the Act (Children's Health Insurance Program).

Section 95.605--Definitions

    Section 95.605 sets forth definitions as used in this part. Certain 
defined terms in the NPRM, such as Alternative approach to the APD 
requirements, Base Contract, Grantee, Project, Service Agreement 
paragraphs (d)-(f) and

[[Page 66322]]

Service Oriented Architecture are being adopted in the final rule 
without revision. The intent of this section is to identify and define 
relevant terms in a centralized location at the beginning of the 
regulation to facilitate reading of the rule. To that end and in 
response to comments in the final rule, we used language from Sec.  
95.610(a)(1), (b) and (c) and Sec.  95.626(a), to create or revise 
definitions for the terms Acquisition Checklist, Advance Planning 
Document (APD), Planning APD, Implementation APD, APD Update, 
Operational APD and Independent Verification and Validation (IV&V). We 
also revised the definitions of Commercial-off-the-shelf (COTS) 
Software, Software Maintenance and Non-Competitive.
    Acquisition Checklist means the standard Department checklist that 
States can submit to meet prior written approval requirements instead 
of submitting the actual Request for Proposal (RFP), contracts or 
contract amendments. The Acquisition Checklist allows States to self-
certify that their acquisition documents, which include RFPs, 
contracts, contract amendments or similar documents, meet State and 
Federal procurement requirements, contain appropriate language about 
software ownership and licensing rights in compliance with Sec.  
95.617, and provide access to documentation in compliance with Sec.  
95.615.
    Advance Planning Document, Initial advance automated data 
processing planning document or Initial APD means a recorded plan of 
action to request funding approval for a project which will require the 
use of ADP service or equipment. The term APD refers to a Planning APD, 
or to a planning and/or development and implementation action document 
i.e., Implementation APD, or to an Advance Planning Document Update. 
Requirements are detailed in Sec.  95.610, paragraphs (a), (b), and 
(c).
    Advanced Planning Document Update (APDU) means a document or record 
submitted annually (Annual APDU) to report project status and/or post 
implementation cost-savings, or on an as needed (As Needed APDU) basis, 
to request funding approval for project continuation when significant 
project changes are anticipated; for incremental funding authority and 
project continuation when approval is being granted by phase; or to 
provide detailed information on project and/or budget activities as 
specified in Sec.  95.610(c).
    Planning APD means a plan of action in a record which requests FFP 
to determine the need for, feasibility, and cost factors of an ADP 
equipment or services acquisition and to perform one or more of the 
following: Prepare a Functional Requirements Specification; assess 
other States' systems for transfer, to the maximum extent possible, of 
an existing system; prepare an Implementation APD; prepare a request 
for proposal (RFP) and/or develop a General Systems Design (GSD).
    Implementation APD means a recorded plan of action to request 
Federal financial participation (FFP) in the costs of designing, 
developing and implementing the system.
    Operational APD means a record of no more than two pages to be 
submitted annually by State programs whose system is not in 
development. The Operational APD provides a short summary of the 
activities, method of acquisition, and annual budget for operations and 
software maintenance.
    Similarly, in response to commenters, we also added a definition 
for the term Independent Verification and Validation (IV&V) to this 
section, which ``means a well-defined standard process for examining 
the organizational, management, and technical aspects of a project to 
determine the effort's adherence to industry standards and best 
practices, to identify risks, and make recommendations for remediation, 
where appropriate.''
    Under Sec.  95.605 we revised the definitions of the terms 
Commercial-off-the-shelf (COTS) Software and Software Maintenance in 
response to comments that the proposed definitions were too limiting. 
With regard to COTS Software, we removed the last sentence of the 
proposed definition which read: ``Examples of COTS include: Standard 
word processing, database, and statistical packages'' and added that 
language to the preamble discussion of COTS. Likewise, comments 
indicated that the last sentence in the proposed definition of Software 
Maintenance inappropriately contains a requirement: ``Software 
maintenance that substantially increases risk or cost or functionality 
will require an as-needed ITD.'' We removed that sentence from the 
definition. For added clarity, an As-Needed APD is required when 
Software Maintenance results in major changes in the scope of the 
project, system concept or developmental approach. We revised the 
definition of acquisition checklist to expand the definition to include 
contracts and contract amendments as well as RFPs.
    Non-competitive means solicitation of a proposal from only one 
source, or after solicitation of a number of sources, negotiation with 
selected sources based on a finding that competition is inadequate. The 
definition of non-competitive was significantly modified from the 
definition proposed in the NPRM. This revised definition removes 
specific Federal criteria for sole source justifications from the 
definition of non-competitive and reflects that each State is permitted 
under 45 CFR 92.36 to use the same procurement policies and procedures 
that it uses for procurements from non-Federal funds. Several 
commenters recommended HHS deference to State procurement policies. One 
commenter noted, ``as always (we) take the position that if a state was 
in compliance with its procurement rules, that it should be able to 
self-declare that its IT procurement meets all state standards and this 
should be sufficient for Federal approval''. Another commenter stated 
``We recommend using the same approach to procurement standards that is 
used in Part 92 of Title 45 of the Code of Federal Regulations which 
governs `Uniform Administrative Requirements for Grants and Cooperative 
Agreement to State, Local and Tribal Governments'. In Subpart C, 
Section 92.36 sets forth the requirements related to procurement; 
92.36(a) exempts states from complying with the requirements set forth 
in this section. Instead, States are required to follow the same 
policies and procedures used for procurements from its non-Federal 
funds. The procurement standards set forth in Section 95.613 may 
conflict with or contradict procurement standards set forth in State 
law even though both are attempting to achieve similar goals.''
    As noted below, in the discussion of section 95.610(a)(2)(viii)(C), 
a State that uses a non-competitive solicitation will need to include a 
justification for this procedure in describing its procurement 
strategy. That justification should make reference to the procurement 
policies and procedures used by the State for procurement from non-
Federal funds.

Section 95.610--Submission of Advance Planning Documents

    We deleted the first sentence of proposed Sec.  95.610(a)(1) from 
the NPRM and moved that language to the definition of Advance Planning 
Document in Sec.  95.605. We added the phrase ``including the use of 
shared or purchased services in lieu of State acquired stand-alone 
resources: To Sec.  95.610 to clarify that it is permissible for States 
to form consortia to acquire and maintain development, maintenance or 
other services to address their automation needs. We added Sec.  
95.610(a)(2)(viii) to specify the need for an acquisition summary in 
the Planning APD that will provide for the basis for exempting 
acquisitions from prior approval.

[[Page 66323]]

    Section 95.610(c) identifies the criteria for submitting an APD 
Update (APDU), including an Annual APDU and an As-Needed APDU. In 
response to comments we revised the timeframe for submitting the Annual 
APDU from 60 days prior to the anniversary date of the Planning APD to 
60 days prior to the expiration of authority for FFP in the costs of 
acquiring automated data processing equipment and services. By 
requiring the APDU 60 days before the expiration of authority for FFP 
granted in the previous APDU, the process decreases the likelihood of a 
gap in approved FFP in the cost of the State's system.
    Section 95.610(c)(1)(viii) of the proposed rule related to 
requesting an annual cost benefit analysis has been deleted. We 
received nine comments on this provision. The revisions to the annual 
cost benefit analysis in the NPRM were supported by all commenters, but 
they suggested a total elimination of the cost benefit updates. The 
commenters pointed out that not all projects have tangible, measurable 
benefits and that CBA updates are unnecessarily burdensome when the 
values often are stable for large software application developments. We 
concur that this annual requirement has not provided the type of 
information useful to determine whether States are pursuing the most 
cost-effective methods to justify the additional burden it placed on 
States. We have modified our oversight and monitoring to focus on high 
risk projects and we believe that the proposed IV&V and disapproval 
provisions in the final rule are a more targeted means of insuring 
development of cost effective human service systems.
    We modified the requirements of Sec.  95.610(c) related to Annual 
and As-Needed APDU to require an acquisition summary to describe the 
information needed on planned acquisitions in order to qualify for an 
exemption from the prior approval requirements of Sec.  95.611. The 
information that must be included in the APD in order for the State to 
qualify for an exemption from prior approval requirements is now listed 
in Sec.  95.610(c)(1)(viii) as follows:
    (a) Type and scope of contract--Examples of type of contract are: 
Firm fixed price, labor hours, and time and materials. Examples of 
scope of contract are: Maintenance and operation, COTS software, 
application software development, service contract, and licenses.
    (b) Procurement strategy--Examples of procurement strategy are: 
Full and open competition, limited competition (e.g. master service 
contract) and sole source procurement. If the procurement is sole 
source, the State needs to provide a sole source justification, either 
separately or as part of the APDU. That justification should make 
reference to the procurement policies and procedures used by the State 
for procurement from non-Federal funds.
    (c) Estimated cost or not to exceed amount--Describes the total 
cost of the acquisition and annual cost if applicable, or the specified 
number of labor hours not to be exceeded for all project categories.
    (d) Timeframe of contract--Examples of the timeframe of a contract 
should include the years in the initial contract with the number of 
options for additional years. This should include the estimated begin 
and end dates of the contract.
    (e) A signed certification from the authorized State official that 
the proposed acquisition will comply with all State and Federal 
requirements including the retention of software ownership rights 
specified in Sec.  95.617. The Acquisition Checklist issued in OCSE 
Information Memorandum 05-03 provides a summary of Federal requirements 
that should be included in the acquisition solicitation documents. A 
statement in the APD that the acquisitions summarized will comply with 
all applicable State procurement requirements and the Federal 
requirement specified in the Acquisition Checklist will be sufficient.

Section 95.611 Prior Approval Conditions

    Section 95.611 provides the thresholds for prior approval 
conditions. This final rule changes the manner in which acquisition 
exemptions from prior Federal approval are granted. Currently, only the 
cost of the acquisition triggers prior Federal approval. The intent of 
these regulatory revisions is to presumptively approve a wider range of 
acquisitions based on risk rather than simply cost of the acquisition. 
Sections 95.611(a)(2) and (b) were revised in the final rule to 
substitute ``which is reflected in a record'' or ``in a record'', 
instead of the current language of ``in writing.'' The revision is in 
response to comments encouraging a move toward e-government and 
expediting electronic submissions and approvals. Language within Sec.  
95.611(b)(1)(iii) states ``unless specifically exempted by the 
Department,'' which permits Federal programs to grant exemptions for 
RFPs, contracts and contract amendments. All Federal programs have 
granted exemptions, but not routinely, and the burden to request the 
exemption is on the State. The final rule amends Sec.  
95.611(b)(2)(iii) to facilitate the routine granting of these 
exemptions by including an acquisition summary in the Planning, Annual 
or As-Needed APDUs. Section 95.611(b)(2)(iii) specifies that for 
acquisition documents, the exemption request is assumed to be approved 
concurrent with the approval of the Planning, Annual or As-Needed APDU 
unless the Federal program office specifically indicates in writing 
which acquisition(s) should be submitted for prior Federal review and 
approval. Section 95.611(b)(1)(iii) also specifies the conditions for 
assumed approval of an exemption. These conditions include: Providing 
sufficient detail to base an exemption, no deviation from the terms of 
the exemption, and the acquisition is not the initial acquisition for a 
high risk activity such as software application development. Examples 
of failure to meet the first two conditions include, but are not 
limited to the following:
     The exemption was based on the acquisition summary that 
indicated the procurement would pursue full and open competition; the 
eventual acquisition was sole source.
     The summary indicated the acquisition will be a firm fixed 
price contract; the eventual acquisition was modified to time and 
materials.
     The acquisition summary indicated that the scope of the 
contract will be maintenance and operation; the eventual acquisition 
was expanded to include software development.
     The acquisition summary specified that the acquisition was 
for a specific functionality, such as document generation; the eventual 
acquisition was expanded to include other functionality, such as 
calendaring.
    The third condition for assumed approval of an exemption is when 
``the acquisition is not the initial acquisition for a high risk 
activity, such as software application development.'' Examples of 
situations that may prompt the Department to not grant an exemption 
request include, but are not limited to the following: The acquisition 
is for high risk activity such as customized software development; the 
RFP and contract are related to developing a new or replacement system; 
the project has past significant cost overruns and/or implementation 
problems; the State has a past pattern of limiting competition; or the 
size of the acquisition does not appear to be commensurate with the 
size of the program or caseload. While the acquisition summary is not 
required for an Implementation APD, this will not prevent a Federal 
program office from exercising existing regulatory authority and 
exempting acquisitions

[[Page 66324]]

included in an Implementation APD. For example, the Department may 
request prior approval of an RFP, but exempt the resulting contract 
from prior approval if the State keeps the Department informed during 
the procurement process and submits an information copy of the signed 
contract. In addition, the Implementation APD may summarize several 
different types of procurements in the first year such as IV&V, Quality 
Assurance, or Project Management in addition to the software 
development acquisition. While the acquisition for software development 
is high risk and subject to prior approval, at the program office's 
discretion the other acquisition in an Implementation APD could be 
exempted, so the State is encouraged to provide an acquisition summary 
in the Implementation APD as well.
    We have retained the submission thresholds for prior approval 
requirements of Sec.  95.611 for those requestors who opt not to 
include a description of planned acquisitions in their APDU. The 
Federal program offices will continue to review and provide comments on 
any acquisition document submitted by the requesting State, Territory 
or Tribe as technical assistance. In response to comments, we increased 
the submission threshold for regular rate software application 
development from $5 million to $6 million for competitive procurements. 
In keeping with the comments encouraging an increased submission 
threshold, we also revised Sec.  95.611(b)(2)(iv) to increase the 
submission thresholds for enhanced funded projects from $300,000 to 
$500,000.
    Section 95.611(d) was revised to improve the clarity of the 
provision. We replaced the term ``ACF'' with ``the Department'' to 
clarify that this provision applies to CMS as well as ACF program 
offices. The term ``approving components'' was replaced with a new 
term, ``Federal program offices,'' and clarifies that the Department 
will send the State an acknowledgment letter once it has received the 
incoming request from the State and will respond within 60 days. If the 
State has not received a response from the Federal program office(s) 
within 60 days of the acknowledgment letter, then the State can assume 
that it has approval to proceed. The regulation uses the term 
``provisional approval'' to signify that the Federal program office 
retains the authority to disapprove the Initial APD or IT acquisition, 
but if the Federal program office has not provided any guidance within 
those 60 days, then the burden shifts to the Federal program office to 
justify subsequent requests for more information or disapproval. The 
phrase ``approval, disapproval or request for more information'' is 
retained in the regulation. The term ``written approval'' was replaced 
with ``which is reflected in a record'' to permit electronic 
transmissions which is intended to improve and expedite communications 
between the State and Federal offices. However, this revision does not 
change the requirement that the State's request be sent by an 
authorized requestor and that the Federal approval, disapproval or 
request for additional information, while no longer required to be in 
writing, must still be reflected in a record by the authorized 
individual in the Federal program office. An oral request or an e-mail 
for additional information from a Federal program office will not 
``stop the clock.'' The State should expect an approval, disapproval or 
request for additional information from the same Federal official to 
whom the State's request was sent.
    Section 95.611(e) was revised to specify which acquisitions are not 
subject to prior approval and clarify that the Department retains the 
authority to request submittal of acquisition documents regardless of 
threshold.

Section 95.613 Procurement Standards

    Section 95.613 provides that the procurement standards for ADP 
equipment and services are subject to Part 92 instead of Part 74. Since 
Sec.  92.36 exempts States from the provisions of Sec.  92.36 
paragraphs (b) through (i) the State will follow the same procurement 
policies and procedures that they use for non-Federal matched ADP State 
projects. The Department retains the authority to provide greater 
oversight, including requiring a State to comply with the competition 
provisions in Sec.  92.36(c) if it determines that a State procurement 
process is an impediment to competition that could substantially impact 
project cost or risk of failure. This revision is in response to 
multiple comments urging the Federal programs to defer to State 
procurement standards, especially in the area of limitations on 
competition.

Section 95.617 Software and Ownership Rights

    Section 95.617 provides the software and ownership rights that must 
be contained in the contract for all software or modifications 
developed or installed with Federal financial participation. In 
response to comments, we eliminated the examples of software packages 
in Sec.  95.617(c) that met the exemption from this software ownership 
provision.

Section 95.621 ADP Reviews

    Section 95.921 provides the types of periodic on-site surveys and 
reviews of State and local agency ADP methods that the Department may 
conduct. Paragraph (d) related to acquisitions not subject to prior 
approval was updated to delete the previous reference to Part 74 and 
substitute Part 92.

Section 95.623 Reconsideration of Denied FFP for Failure To Obtain 
Prior Approval

    Section 95.623 provides a process by which a State may request 
reconsideration for FFP which was denied due to the State's failure to 
request Federal prior approval. In response to comments requesting 
additional specificity, a new paragraph (b) was added that specifies 
information and documentation that must be submitted with the request 
for reconsideration. To provide more clarification on the criteria that 
must be met to qualify for reconsideration, we have revised Sec.  
95.623(b) to add the criteria that is currently in OSSP-Action 
Transmittal 00-01. However, we anticipate that requests for 
reconsideration will abate given the new authority in Sec.  95.610 to 
exempt planned acquisitions from prior approval.

Section 95.624 Consideration for FFP in Emergency Situations

    Section 95.624 was revised to change the introductory text, 
paragraph (a) and paragraph (b)(2) to eliminate the reference to 
written request and substitute ``which is reflected in a record'' or 
``reflected in a record.'' This change was prompted by comments 
received that encouraged us to move toward e-government and remove any 
requirement for written submissions and approvals. This change will 
expedite transmittal of requests from States and Territories in 
emergency situations.

Section 95.626 Independent Verification and Validation

    Proposed Sec.  95.626 is revised to correct the introductory text 
and references to ``Independent Validation and Verification'' and 
replace it with the correct terminology of ``Independent Verification 
and Validation.'' We also made a technical changes to the first two 
triggers, i.e., missing regulatory and statutory deadlines and failing 
to meet a critical milestone, by adding lead-in language to clarify 
that the assessment is intended to be prospective and not reactive if 
the agency determines that the State is ``at risk'' of these problems.
    In keeping with our focus on high risk projects, two additional 
triggers to IV&V

[[Page 66325]]

were added to Sec.  95.626. The two triggers are:
    (7) State's procurement policies put the project at risk, including 
a pattern of failing to pursue competition to the maximum extent 
feasible.
    (8) State's failure to adequately involve the State program office 
responsible for administering the program in the development and 
implementation of the project.
    We included these additional triggers for IV&V because past 
experience tells us that the State's failure to seek full and open 
competition to the maximum extent practicable or to involve State 
program offices in the planning/development effort are indicators that 
the project is at risk. Lack of competition in itself is not a trigger 
for IV&V; rather, the Department will conduct an assessment to 
determine if the pattern of failing to pursue competition creates risk 
to the project. This determination may require an IV&V assessment 
review to evaluate the impact that the lack of competition has had on 
the project for both increased cost and increased risk for system 
failure. A decision on whether an IV&V contract is required or the 
scope of the IV&V services will be deferred until after the IV&V 
assessment. Lack of involvement of State program offices in the 
development and implementation of the project is a trigger for IV&V. 
During the IV&V assessment, the team will consult with all 
stakeholders, which includes end users, caseworkers and business 
partners, to assess the user involvement and buy-in regarding system 
functionality and the ability of the system to support program business 
needs.
    The changes proposed to Sec.  95.631 in the NPRM were related to a 
change in terminology from Advance Planning Document to Information 
Technology Document. Since the comments expressed overwhelming 
opposition to the change, Sec.  95.631 will be unchanged in the final 
rule.
    Several sections in the NPRM are being adopted as proposed. Section 
95.612 Disallowance of Federal Financial Participation, Sec.  95.615 
Access to systems and records, Sec.  95.627 Waivers, 95.635 
Disallowance for automated system that fails to comply with 
requirements, Sec.  95.705 Equipment costs and Sec.  95.707 Equipment 
management and disposition are being adopted without revision in the 
final rule.

Response to Comments

    We received 153 comments from 33 State Agencies and other 
interested parties. Below is a summary of the comments and our 
response.

General Comments

    1. Comment: Commenters were overwhelmingly supportive of keeping 
the terminology of Advance Planning Document (APD) in lieu of the 
proposed term, Information Technology Documents (ITD). This proposed 
change generated the most comments, all of which supported retaining 
the term APD. One commenter suggested several corresponding changes if 
the terminology was changed from APD to ITD.
    Response: We agree and the terminology of Advance Planning Document 
(APD) is retained in the final regulation.
    2. Comment: Several commenters urged compatible rules and 
guidelines across Federal human service agencies to minimize confusion 
and allow needed automation projects to proceed without unnecessary 
delay.
    Response: We agree and note that the USDA's Food and Nutrition 
Services, which has jurisdiction over the Supplemental Nutrition 
Assistance Program (SNAP) systems in commenting on the NPRM, stated: 
``In the interest of sustaining a consistent federal approval process 
for State agencies, we intend to minimize differences in the procedures 
to the extent possible. We intend to propose similar changes in a 
proposed regulation in the near future.''
    3. Comment: One commenter requested clarification on why Title I, 
X, XIV, XVI (AABD) and XXI were deleted.
    Response: The NPRM proposed deleting reference to title XXI 
(Children's Health Insurance Program (CHIP)) because, in general, CHIP 
programs are not subject to Part 95. However, if a State opts to 
enhance its MMIS to include CHIP functions, then Part 95 would apply to 
the MMIS in its entirety, including the CHIP portion. Consequently, we 
have re-inserted reference to title XXI in Sec.  95.601, titled Scope 
and Applicability, and clarified the circumstances by which the CHIP 
programs are subject to Part 95 in the preamble.
    The other titles of the Act, as identified by the commenter, were 
deleted from this rule because those titles were repealed by the Social 
Security Amendments of 1972 (Pub. L. 92-603) and are no longer 
applicable. (Please note that Pub. L. 92-603, Sec.  303, repealed 
titles I (Grants to States for Old-Age Assistance for the Aged), X 
(Grants to States for Aid to the Blind), XIV (Grants to States for Aid 
to the Permanently and Totally Disabled) and XVI (Grants to States for 
Aid to the Aged, Blind, and Disabled) of the Act, except with respect 
to Puerto Rico, Guam, and the Virgin Islands. Also, the Commonwealth of 
the Northern Marianas may elect to initiate social services programs 
under these titles if it chooses; see Vol. II, Pub. L. 94-241, approved 
March 24, 1976, 90 Stat. 263, Covenant to Establish Northern Mariana 
Islands).
    4. Comment: Several commenters requested training materials and 
training sessions on the new regulations as quickly as possible after 
the regulations are finalized. Several commenters specifically 
requested that the Medicaid manual be updated to reflect final 
regulations.
    Response: All Federal agencies involved have committed to 
developing training materials and providing training and technical 
assistance on the new regulations once the regulations are issued in 
final form. With respect to the State Medicaid manual and other 
guidance to States, CMS will update these policy guidelines 
accordingly.
    5. Comment: One commenter requested that we submit the NPRM for 
another round of comments. No rationale was provided as to why a second 
round of comments was needed.
    Response: The NPRM was widely disseminated to State agencies and 
other interested parties with ample opportunity to comment. 
Furthermore, the comments received were predominately supportive of the 
proposed changes. Thus, we are not extending the comment period.
    6. Comment: Several commenters applauded the reduction and 
elimination of documentation and noted that the ability to submit 
documents electronically is welcome. One commenter suggested that the 
term ``written'' be eliminated or redefined throughout the regulation 
to permit electronic transmission of the APD and related IT 
documentation.
    Response: We agree and have revised the regulation to clarify that 
States are permitted to transmit electronic versions of APDs, 
acquisition solicitations and contract documents as long as a valid 
form of the authorized requester's signature accompanies the 
documentation (i.e., signature may be transmitted by fax, scanned PDF 
electronic document or electronic signature). We note that the 
elimination of the term ``written'' does not permit oral approvals or 
disapprovals by the Federal program offices. The regulation still 
requires that the approval or disapproval be recorded. We also stress 
that the State should expect that the electronic approval or 
disapproval will be made by the same Federal official to

[[Page 66326]]

whom the State's request was addressed. An email from a Federal program 
analyst requesting additional information in order to complete the 
analysis of the State's request should be considered technical 
assistance and would not constitute an official request for additional 
information under Sec.  95.611(d). If no official response is received 
by the requesting State within 60 days of the acknowledgment letter, 
the State may assume provisional approval.

Section 95.605--Definitions

    1. Comment: One commenter requested additional specificity 
regarding the definition of noncompetitive and asked that the following 
terms within the definition also be defined: Infeasible; what 
constitutes a delay; what criteria is used to determine exigency or 
emergency; and what number of proposals is required to satisfy adequate 
competition.
    Response: We have not added definitions for the terms identified by 
the commenter because these terms are used in previous Federal 
standards for sole source justifications under Part 74 which is no 
longer relevant for State procurements. For the reasons discussed 
above, definitions of these terms are no longer needed.
    2. Comment: One commenter suggested a definition of APD and 
suggested that the substantive requirements for APD should remain in 
Sec.  95.610, Submission of advance planning documents, but that the 
initial paragraph of Sec.  95.610 as well as subparagraph (a)(1) and 
paragraphs (b) and (c) should be moved to Sec.  95.605, Definitions.
    Response: We agree with the commenter that Sec.  95.605, 
Definitions, should include the definitions for the terms Advance 
Planning Document, (APD), Planning APD, Implementation APD, APD Update 
and Operational Update. We have taken language from Sec.  95.610(a)(1) 
and added this language as the definition for APD under Sec.  95.605. 
We have also retained this language in Sec.  95.610(a)(1) rather than 
deleting it. We determined that paragraphs (b) and (c) set forth 
requirements for submitting APDs and are not a part of the definition 
for APD. These paragraphs are appropriately placed in Sec.  95.610, 
Submission of advance planning documents, and have not been moved to 
Sec.  95.605, Definitions.
    3. Comment: There were several interrelated comments requesting 
clarification of the definitions of commercial-off-the-shelf (COTS) 
software, service-oriented architecture (SOA) and a recommendation for 
a new definition of Enterprise Architecture. Some commenters suggested 
that the examples cited in the regulation be deleted; other commenters 
recommended the addition of new examples. Several commenters suggested 
that the definition of COTS be cross-referenced to Sec.  95.610(b)(3) 
to clarify that enterprise-level COTS software meets the definition of 
COTS and requirements for FFP when conducting feasibility studies. One 
commenter suggested removing the examples in the COTS definition as 
examples might be limiting and urged clarification that both SOA and 
enterprise-level COTS software are acceptable for consideration in 
feasibility studies, analysis of alternatives and overall system 
approach. One commenter suggested that we remove the specific term 
``service-oriented architecture'' from regulations because terms and 
meanings change with such frequency and technology advances at such a 
pace that such specificity will only be current in regulation for a 
short span of time. Another commenter suggested that the regulation 
should concentrate on the intent that States can explore other 
alternative technology solutions beyond system transfers and new custom 
development. The commenter also noted that based on open standards, a 
description of the intent would be relevant for a longer period of 
time. A commenter suggested that a requirement to provide an 
explanation of why a system transfer is not feasible whenever an 
alternative technology is identified implies that system transfer is 
the development approach of choice. Another commenter recommended 
allowing enterprise framework applications under the examples cited in 
Sec.  95.617, Software ownership rights, to simplify State 
procurements. All the comments were related to other alternative 
technology solutions beyond system transfers and new custom development 
that can be considered in the Feasibility Study/Analysis of 
Alternatives. Some commenters requested confirmation that COTS software 
that is not available to the general public at a list price or needs 
customization does not meet the definition of COTS under this rule.
    Response: We agree that the examples in the COTS definition might 
be limiting. We have removed them from the regulation and instead 
reference them in the preamble.
    We did not find it necessary to revise Sec.  95.617, Software and 
ownership rights. Federal program agencies, OCSE and the Administration 
for Children, Youth and Families, have previously issued guidance 
explaining that Enterprise level COTS and SOA are acceptable 
alternatives in a feasibility analysis. OCSE issued an Information 
Memorandum IM-05-04, which is titled Use of Enterprise Level 
Commercial-Off-the-Shelf (COTS) Software in Automated Human Services 
Information Systems and may be accessed at the following link: https://www.acf.hhs.gov/programs/cse/pol/IM/2005/im-05-04.htm. The Children's 
Bureau has issued guidance under ACYF-IM-07-03, titled Service Oriented 
Architecture (SOA) and available at https://www.acf.hhs.gov/programs/cb/laws_policies/policy/im/2007/im0703.htm. These policy issuances 
sufficiently explain that the business process the Department uses for 
enterprise-level COTS is the same for any other information technology 
product.
    We note that a definition of the term COTS is needed due to the 
inclusion of a new submission threshold for hardware and COTS software. 
However, we believe that commenters may have assumed the definition of 
COTS was related to Sec.  95.617, titled Software and Ownership rights. 
Under Sec.  95.617 COTS products that are provided at established 
catalog or market prices, not developed solely for human service 
programs and sold or leased to the general public are exempted from the 
State and Federal government's software ownership provisions. We would 
like to clarify that a COTS product available at list price and in need 
of customization (i.e. modifications to meet the State's particular 
requirements) meets the definition of COTS under this rule. An example 
is an Excel application that is available at list price but needs 
customization to meet a human service program need. The Excel 
application is a COTS product exempt from software and ownership 
provisions of Sec.  95.617. In this example, the vendor may charge a 
licensing fee, but any customization to the COTS product that was 
funded with FFP would be subject to the software and ownership rights 
in Sec.  95.617 even if the customization was made by the vendor 
providing the COTS software. We defined the term Service-Oriented 
Architecture (SOA) because we introduced it in Sec.  95.610(b)(3) in 
the discussion of criteria for submitting an Implementation APD related 
to feasibility studies and analysis of alternatives.
    4. Comment: Several commenters suggested that Enterprise 
Architecture be defined in Sec.  95.605 as well as defined in Medicaid 
Information Technology Architecture (MITA).

[[Page 66327]]

    Response: We have chosen to limit the regulatory definitions to 
terms that impact the application of the regulatory requirements. As 
previously mentioned, OCSE and the Children's Bureau have issued 
guidance on Enterprise Architecture through IM-05-04, which is titled 
Use of Enterprise Level Commercial-Off-the-Shelf (COTS) Software in 
Automated Human Services Information Systems and may be accessed at the 
following link: https://www.acf.hhs.gov/programs/cse/pol/IM/2005/im-05-04.htm and ACYF-IM-07-03, titled Service Oriented Architecture (SOA) 
and available at https://www.acf.hhs.gov/programs/cb/laws_policies/policy/im/2007/im0703.htm. These policy issuances clarify that 
Enterprise Architecture is subject to the same regulatory requirements 
of Part 95. There is nothing about Enterprise Architecture that impacts 
the applicability of the regulations. The suggestion that CMS define 
Enterprise Architecture in their MITA, is outside the scope of this 
regulation. MITA is not defined in this final rule because it is 
outside the scope of the NPRM and to introduce it now would not provide 
interested parties sufficient notice or an opportunity to comment on 
the definition or applicability of MITA for Enterprise Architecture and 
cost allocation.
    5. Comment: One commenter suggested that the definition of 
Independent Verification and Validation should be moved from Sec.  
95.626(a) to the definitions section under Sec.  95.605. They also 
pointed out that the words verification and validation are sometimes 
transposed and should be used consistently.
    Response: We agree and added the definition of IV&V based on the 
language from Sec.  95.626(a) to the definitions section under Sec.  
95.605. We also agree that the consistent terminology should be 
Independent Verification and Validation (IV&V) and have revised the 
regulation accordingly.
    6. Comment: We received several comments on the new definition of 
Software Maintenance. Several commenters requested additional 
specification as to quantity, scope, criteria, risk, increased 
functionality and level of risk. One commenter asked for clarification 
whether Software Maintenance and operation phase begins when a project 
is certified or when the project is implemented.
    Response: The Institute of Electrical and Electronics Engineers 
(IEEE) definition of maintenance was used as the basis for the 
regulatory definition. While we understand the desire for additional 
clarity and specificity, we believe that adding specificity in the 
definition would result in less flexibility and latitude on the part of 
the Federal and State agencies in meeting their program goals in a 
cost-effective manner. Neither system certification nor implementation 
defines when a project's software development and maintenance phase 
begins. It is the absence of system development that determines whether 
the State is eligible to submit an Operations and Software Maintenance 
(O&SM) APD Update under Sec.  95.611(c)(3).
    7. Comment: Several commenters asked for clarification of funding 
requirements on a phased implementation basis and the implications, if 
any, should phased concepts conflict with contract approval.
    Response: This is not a new requirement. The APDU references 
incremental funding authority and project continuation when approval is 
being granted by phase. The contract may be approved for a longer 
period of time, but FFP approval is usually limited to the planning, 
development, testing, implementation, or maintenance phases. The 
majority of States request FFP on an annual basis because their State 
matching funds are appropriated on an annual basis. But Federal funding 
by development phases is still permitted and used by Federal agencies 
on a case-by-case basis. The APD and procurement approval process has 
always been a two-step process regardless of whether FFP is being 
approved on a phased or annual basis. Prior approval is required under 
the conditions set forth in Sec.  95.611 for the acquisition 
solicitation and contract documents which may be multi-phase or multi-
year. This is consistent with the incremental funding authority under 
the definition of Advance Planning Document. Whether FFP is approved on 
a phased or annual basis is in part determined by which time period 
(phased or annual) is provided in the Annual APD Update.
    8. Comment: Several commenters understood that there was a 
substantive requirement embedded in the definition of Software 
Maintenance in Sec.  95.605, ``Software maintenance that substantially 
increases risk or cost or functionality will require an As-Needed 
APD.'' Other commenters requested that the summary section provide 
clarification on what distinguishes a high-risk from a low-risk 
project, whether it is related to costs, production timetables or a 
particular phase of production.
    Response: We have removed this sentence from the definition of 
Software Maintenance and moved it to the preamble with additional 
clarification of when changes to Software Maintenance would warrant an 
As-Needed APD.
    9. Comment: Several commenters requested a definition of the terms 
Enhanced Match Rate and Regular Match Rate. They requested a clear 
definition of the match rate associated with those terms. One commenter 
had a specific question on a Statewide Automated Child Welfare 
Information System (SACWIS) project whose development was initially 
funded at the enhanced FFP rate, but is now receiving FFP at the 
regular match rate for its operational costs. This commenter asked for 
clarification as to which thresholds and requirements apply.
    Response: Enhanced Match Rate is already defined under Sec.  95.605 
as ``Enhanced matching rate means the higher than regular rate of FFP 
authorized by Title IV-D, IV-E and XIX of the Social Security Act for 
acquisition of services and equipment that conform to specific 
requirements designed to improve administration of the Child Support 
Enforcement, Foster Care and Adoption Assistance and Medicaid 
programs.'' We cannot provide the percentages associated with the 
enhanced and regular rate in regulation, because the percentages are 
established in legislation and vary with both the program and the 
period of time. For example, provisions under the Gramm-Rudman-Hollings 
Balanced Budget and Emergency Deficit Control Act of 1985 (Pub. L. 99-
177) impacted the percentage rates for both Enhanced and Regular Match 
Rates in the past. Under these regulations, if a project was initially 
developed with funding at the Enhanced Match Rate but is currently 
being completed or enhanced with funding at the Regular Match Rate, 
then the Regular Match Rate submission thresholds apply.

Section 95.610--Submission of Advance Planning Documents

    1. Comment: Several commenters asked whether ACF would 
retroactively approve FFP in the costs of tasks associated with the 
planning phase if a State combines its Planning APD and Implementation 
APD submissions.
    Response: Paragraphs (a) and (b) of Sec.  95.611 require prior 
approval of a Planning APD and Implementation APD when the State plans 
to acquire ADP equipment and services that it anticipates will have 
total acquisition costs of $5,000,000 or more in Federal and State 
funds. Section 95.605 defines the term Total Acquisition Cost to mean 
``all anticipated expenditures (including State staff costs) for 
planning and

[[Page 66328]]

implementation for the project. For purposes of this regulation total 
acquisition cost and project cost are synonymous.''
    2. Comment: One commenter asked why an As-Needed APDU would be 
necessary if the State can request additional funding or project 
extension through an Annual APDU. Another commenter noted that existing 
rules allow agencies to submit an As-Needed APDU with the Annual APDU 
and stated that the proposed rule would require a State to submit the 
As-Needed APDU, no later than 60 days after the occurrence of project 
changes. The commenter stated that such change would represent an 
increased burden to States and would be inconsistent with the purpose 
of the NPRM.
    Response: Neither the proposed rule nor this final rule prevents a 
State from including changes in an Annual APD Update that otherwise 
would need to be reported in an As-Needed APDU. This is not a new 
provision and is consistent with requirements in the former Sec.  
95.605(b)(ii) as a part of the definition for As-Needed APDU. 
Additionally, the NPRM and this final rule retained the following 
language in Sec.  95.610(c)(2): ``The As-Needed APDU may be submitted 
any time as a stand-alone funding or project continuation request, or 
may be submitted as part of the Annual APDU.''
    3. Comment: Two commenters requested clarification on when 
modernization of a legacy system would fall into the Planning APD 
(PAPD) or Implementation APD (IAPD) process. One commenter asked for 
clarification on whether a Federal feasibility study must be prepared 
and approved before Federal funding is provided for modernization tasks 
that, while significant in scope, do not result in a new system.
    Response: If the State has an open APDU, and wishes to enhance its 
legacy system, an APD Update is the appropriate mechanism to obtain 
approval for each incremental improvement. If a State is incrementally 
enhancing its system, it would not be required to submit a PAPD or an 
IAPD; the State also would not be required to conduct a feasibility 
study or an analysis of alternatives.
    We have learned that several States opt to conduct feasibility 
studies and include the option of enhancing their legacy system as one 
of their alternatives in their analysis of alternatives. This practice 
may be especially advantageous when the benefit of modernization is in 
question. This point is predicated by the commenter's statement that 
while incremental modernization is significant in scope, it does not 
result in a new system. If the incremental enhancement results in a 
substantial departure from the base system, HHS reserves the right to 
require addi