Guidelines for Carrying Out Section 221(a)(4) of the Flood Control Act of 1970, as Amended, 78200-78206 [2015-31654]

Agencies

• DEPARTMENT OF DEFENSE
• Department of the Army, Corps of Engineers

[Federal Register Volume 80, Number 241 (Wednesday, December 16, 2015)]
[Notices]
[Pages 78200-78206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31654]


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DEPARTMENT OF DEFENSE

Department of the Army, Corps of Engineers


Guidelines for Carrying Out Section 221(a)(4) of the Flood 
Control Act of 1970, as Amended

AGENCY: United States Army Corps of Engineers, Department of Defense.

ACTION: Notice.

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SUMMARY: The U.S. Army Corps of Engineers (Corps) has updated the 
existing guidance for providing in-kind credit under Section 221(a)(4) 
of the Flood Control Act of 1970, as further amended by Section 1018 of 
the Water Resources Reform and Development Act of 2014.

DATES: Effective date: December 16, 2015.

ADDRESSES: U.S. Army Corps of Engineers, 441 G Street NW., Washington, 
DC 20314-1000.

FOR FURTHER INFORMATION CONTACT: Janice E. Rasgus, Planning and Policy 
Division, Washington, DC at 202-761-7674.

SUPPLEMENTARY INFORMATION: ER 1165-2-208 will be posted on the Corps 
Web site in the very near future.

Response to Comments

    The draft ER was published in the August 28, 2015, issue of the 
Federal Register (80 FR 52258) for a 30-day comment period. The comment 
period was extended by 30 days (see 50 FR 60135). The regulations.gov 
docket number is COE-2015-0013. Sixteen comments were received.
    In response to one commenter, the guidance was expanded to clarify 
that in-kind contributions can be provided once the feasibility cost 
sharing agreement is executed and the project management plan is 
developed.
    Several commenters noted that the non-Federal sponsor's costs of 
Coordination Team participation and audits are no longer considered in-
kind contributions that are included as a study or project cost subject 
to cost sharing. The guidance was expanded to clarify that likewise the 
Federal Government's cost of Coordination Team participation and audits 
are not included in study or project costs for cost sharing purposes 
although these costs are included in calculating any limit on Federal 
participation.
    One commenter requested that the guidance be modified to allow the 
value of in-kind contributions to be accepted as cash payments toward 
the additional 10 percent payment required for navigation projects. 
This request cannot be accommodated. The law is explicit that credit 
for in-kind contributions shall not alter any requirement for the non-
Federal sponsor to pay 5 percent cash for flood damage reduction 
project and pay the additional 10 percent cash for navigation projects. 
This requirement was also specified in the in-kind contribution 
authority as enacted in WRDA 2007 and identified in the implementing 
guidance for that earlier provision.
    Additional minor, non-substantive, edits were made to provide 
further clarity.

    Dated: December 10, 2015.
Theodore A. Brown,
Chief, Planning and Policy Division, Directorate of Civil Works.

ER 1165-2-208

    1. Purpose. This regulation provides guidance on the implementation 
of the in-kind contribution credit provisions of Section 221(a)(4) of 
the Flood Control Act of 1970, as further amended by Section 1018 of 
the Water Resources Reform and Development Act of 2014 (WRRDA 2014) (42 
U.S.C. 1962d-5b(a)(4)) (hereinafter referred to as ``Section 221''). 
Section 221(a)(4) of the Flood Control Act of 1970, as amended, and 
Section 1018 of WRRDA 2014 are provided in Appendix A.
    2. Distribution Statement. Approved for public release. 
Distribution is unlimited.
    3. Applicability. This regulation applies to all HQUSACE elements, 
Major Subordinate Commands (MSCs), and district commands having Civil 
Works responsibility and is effective immediately.
    a. The Section 221 crediting provisions apply to the study, design, 
and construction of water resources development projects authorized in 
the Water Resources Development Act (WRDA) of 1986 or later laws, 
including projects initiated after November 16, 1986 without specific 
authorization in law. In addition, the crediting provisions apply to 
the correction of design deficiencies for projects authorized prior to 
WRDA of 1986. Finally, these provisions are also applicable to a 
project under an environmental infrastructure assistance program.
    (1) For a project with a project partnership agreement (PPA) that 
was executed on or after November 8, 2007, such PPA may be amended to 
include work by the non-Federal sponsor that has not yet been initiated 
for credit toward any remaining non-Federal cost share under that 
agreement.
    (2) Furthermore, in general, the crediting provisions of Section 
221 will be used in lieu of Section 104 of WRDA 1986 and Section 215 of 
the Flood Control Act of 1968. However, any eligibility for credit 
under Section 104 of WRDA 1986 that was approved previously by the 
Secretary will be honored.
    b. The authority for credit under Section 221 is in addition to any 
other authority to provide credit for in-kind contributions. Section 
221 credit may be applied in lieu of other crediting provisions if 
requested by the non-Federal sponsor.

[[Page 78201]]

    This regulation supersedes ER 1165-2-208 dated 17 February 2012.
    4. Key Principles.
    a. In General. Section 221 is a comprehensive authority that 
addresses the affording of credit for the value of in-kind 
contributions provided by a non-Federal sponsor toward its required 
cost share (excluding the required 5 percent cash for structural flood 
damage reduction projects and the additional 10 percent cash payment 
over 30 years for navigation projects) if those in-kind contributions 
are determined to be integral to a study or project.
    b. Types of In-Kind Contributions. The types of in-kind 
contributions eligible for credit include planning activities 
(including data collection and other services needed for a feasibility 
study); design related to construction; and construction (including 
management; mitigation; and construction materials and services).
    c. Compliance with Applicable Federal Laws, Regulations, and 
Policies. Eligibility for credit is subject to the non-Federal sponsor 
complying with all applicable Federal laws and implementing 
regulations, including, but not limited to Section 601 of the Civil 
Rights Act of 1964, as amended (42 U.S.C. 2000d), and Department of 
Defense Directive 5500.11 issued pursuant thereto; the Age 
Discrimination Act of 1975 (42 U.S.C. 6102); the Rehabilitation Act of 
1973, as amended (29 U.S.C. 794), and Army Regulation 600-7 issued 
pursuant thereto; and 40 U.S.C. 3141-3148 and 40 U.S.C. 3701-3708 
(labor standards originally enacted as the Davis-Bacon Act, the 
Contract Work Hours and Safety Standards Act, the Copeland Anti-
Kickback Act); and the National Environmental Policy Act (42 U.S.C. 
4321-4347) and other environmental laws and regulations.
    d. In-Kind Memorandum of Understanding (MOU).
    (1) Construction. Section 221 provides that any construction work 
that has not been carried out as of November 8, 2007 is eligible for 
credit only if the non-Federal sponsor executes an agreement with the 
Secretary prior to carrying out such work. For purposes of Section 221 
crediting only, ``carrying out'' construction work means initiation of 
construction using the non-Federal sponsor's labor force or issuance of 
the notice to proceed for such construction if undertaken by contract. 
Therefore, in those cases where there is not yet an executed PPA, the 
non-Federal sponsor must execute an in-kind MOU with the Corps of 
Engineers prior to initiating construction or issuing the notice to 
proceed. Design work associated with that construction is eligible for 
credit as long as an in-kind MOU or PPA is executed prior to the 
construction being carried out. In addition, the construction carried 
out by the non-Federal sponsor is not considered as part of the future 
without project condition.
    (a) Projects Specifically Authorized. For projects that are or will 
be specifically authorized for construction, an In-Kind MOU for 
construction may be executed once there is vertical team concurrence 
with the Tentatively Selected Plan (TSP) at the TSP Milestone. The TSP 
Milestone is the point at which there is vertical team concurrence on 
the plan that will be released in the draft study report for public and 
agency review. Given the new SMART Planning Process, the TSP Milestone 
should occur much earlier in the planning process than what was 
previously achieved. Requests from non-Federal sponsors to execute an 
in-kind MOU for construction prior to the TSP Milestone will be 
considered on a case-by-case basis and must be approved by the 
Assistant Secretary of the Army (Civil Works). Since each project 
presents its own unique combination of circumstances, each request will 
require an individual evaluation that will include consideration of, 
but not limited to, the following criteria:
    (i) Whether the proposed work is a modification of an existing 
Federal project;
    (ii) Whether the proposed work will follow an existing levee 
alignment in the case of a flood risk management project;
    (iii) Whether the proposed work balances and integrates the wise 
use of the flood plain to ensure public safety;
    (iv) Whether the proposed work significantly reduces flood damage 
risk to human life, property or critical infrastructure; and
    (iv) Whether the proposed work will likely be included in the final 
project recommendation.
    (b) Continuing Authority Program. For projects implemented under 
the Continuing Authority Program or a regional authority that does not 
require additional authorization to implement the project, an In-Kind 
MOU for design and implementation may be executed after the MSC 
Commander approves the decision document for the project.
    (2) Design. For projects that are or will be specifically 
authorized for construction, an In-Kind MOU for design may be executed 
after the TSP Milestone.
    (3) Planning.
    (a) Projects Specifically Authorized. For projects that are or will 
be specifically authorized for construction, Section 1002 of WRRDA 2014 
eliminated the full Federal reconnaissance phase that used to be 
undertaken prior to execution of a feasibility cost sharing agreement 
(FCSA). In the past, a project management plan (PMP), which established 
the scope of the planning, including activities needed to carry out the 
study, was developed during this reconnaissance phase. Under the new 
single phase study process mandated by WRRDA 2014, the project 
management plan will not be developed until after execution of FCSA. As 
the PMP, including a determination of the scope of the study, will not 
be developed until after execution of the FCSA, no In-Kind MOU for 
planning is permitted. Following execution of the FCSA and development 
of the PMP, the provision of in-kind contributions is allowed under the 
FCSA.
    (b) Continuing Authority Program. For projects implemented under 
the Continuing Authority Program or a regional authority that does not 
require additional authorization to implement the project, sections 
905(c) and 105(a)(3) of WRDA 1986, as amended, provide that the first 
$100,000 of these studies is a Federal expense. Therefore, once a PMP 
has been developed and the MSC Commander has approved initiation of the 
feasibility study, an In-Kind MOU for planning may be executed.
    (4) Any work undertaken by a non-Federal sponsor pursuant to an In-
Kind MOU is at its own risk and responsibility. An In-Kind MOU provides 
no assurance that the non-Federal sponsor's work will be determined to 
be integral to the Federal project or that any construction undertaken 
by the non-Federal sponsor will be included as part of any ultimately 
recommended Federal project. Execution of an In-Kind MOU in no way 
obligates the Corps to enter into any future agreement for the project.
    (5) In general, once a FCSA, design agreement, or PPA is executed, 
further use of In-Kind MOUs is not appropriate for inclusion of 
additional in-kind contributions under that FCSA, design agreement, or 
PPA, respectively. Special circumstances requiring expedited review and 
execution of an amendment to an executed agreement should be 
coordinated with the HQUSACE RIT.
    (6) MSC Commanders may approve a District Engineer's execution of 
Model In-Kind MOUs for Construction or for Design, provided that the 
In-Kind MOUs do not include any deviations. Any

[[Page 78202]]

proposed deviations must be submitted to HQUSACE for approval prior to 
execution. Models for the In-Kind MOU for construction, including 
design work, and for design work only are available at https://www.usace.army.mil/Missions/CivilWorks/ProjectPartnershipAgreements/model_other.aspx.
    e. Integral Determinations.
    (1) Section 221 provides that credit may be afforded only if the 
Secretary determines that the material or service provided as an in-
kind contribution by a non-Federal sponsor is integral to the study or 
project.\1\ To be integral to the study or project, the material or 
service must be part of the work that the Federal Government would 
otherwise have undertaken for the study or for construction of what is 
ultimately determined to be the Federal project. See Appendix B for 
additional guidance on criteria and procedures for processing integral 
determinations.
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    \1\ The non-Federal Sponsor's costs of Coordination Team 
participation and audits are not in-kind contributions and are not 
included in ``shared costs'' for cost sharing purposes. Likewise, 
the Federal Government's cost of Coordination Team participation and 
audits are not included in ``shared costs'' for cost sharing 
purposes although these costs are included in calculating any limit 
on Federal participation. The costs of the non-Federal Sponsor's 
performance of investigations for hazardous substances are eligible 
for inclusion as a shared costs and for credit as an in-kind 
contribution and do not require a separate integral determination.
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    (2) The approval of integral determinations is delegated to the MSC 
Commander. The approval authority delegated to the MSC Commander is 
subject to the full compliance of each integral determination to law 
and policy and may not be further delegated within the MSC or to the 
District Commander. A separate integral determination is not required 
for planning activities included in the PMP, approved by the MSC 
Commander, as required for the study effort.
    f. Determining the Amount of Credit.
    (1) The amount of in-kind contributions that may be eligible for 
inclusion in shared costs for cost sharing purposes under the 
applicable cost sharing agreement will be subject to an audit by the 
Government to determine the reasonableness, allocability, and 
allowability of such amount.
    (2) The creditable amount is the lesser of the costs incurred by 
the non-Federal sponsor to obtain such materials or services; the 
market value of such materials or services as of the date that the non-
Federal sponsor provides such materials or services for use in the 
study or project; or the Government's estimate of the cost for such 
work if it had been accomplished by the Government. This amount is not 
subject to interest charges or to adjustment to reflect changes in 
price levels between the time the in-kind contributions were completed 
and the time the amount is credited.
    (3) Any in-kind contributions performed or paid for by the non-
Federal sponsor using funds provided by another Federal agency (as well 
as any non-Federal matching share or contribution that was required by 
such Federal agency for such program or grant) are not eligible for 
credit unless the Federal agency providing the Federal portion of such 
funds verifies in writing that the funds are authorized to be used to 
carry out the study or project.
    (4) After execution of the applicable FCSA, Design Agreement (DA), 
or PPA, the non-Federal sponsor will submit to the Government (not less 
frequently than every 6 months or as provided in the agreement) credit 
request(s) for eligible in-kind contributions under that agreement. The 
credit requests will contain the following: written certification by 
the non-Federal sponsor of the payments made to contractors, suppliers, 
or employees for in-kind contributions; copies of all relevant invoices 
and evidence of such payments; written identification of costs that 
have been paid with funds or grants provided by a Federal agency as 
well as any non-Federal matching share or contribution that was 
required by such Federal agency for such program or grant; and a 
written request for credit of a specific amount not in excess of such 
specified payments. Failure to provide sufficient documentation 
supporting the credit request will result in a denial of credit in 
accordance with the terms of the applicable cost sharing agreement.
    (5) In-kind contributions are subject to a review (for feasibility 
level and design activities) or on-site inspection (construction), as 
applicable, and certification by the Government that the work was 
accomplished in a satisfactory manner and in accordance with applicable 
Federal laws, regulations, and policies. The Government will not 
include in the costs to be shared under the applicable cost sharing 
agreement or afford credit for any work the Government determines was 
not accomplished in a satisfactory manner or in accordance with 
applicable Federal laws, regulations, and policies.
    (6) In general, the amount of credit for in-kind contributions that 
can be afforded under a FCSA or a PPA is limited to the amount of the 
non-Federal sponsor's cost share under that agreement. As the costs of 
design under a DA are included in total project costs under a PPA, 
credit for in-kind contributions under a DA is carried over to the PPA, 
and the maximum amount of credit for in-kind contributions under a PPA 
is limited to the non-Federal sponsor's required cost share under the 
PPA. Credit for in-kind contributions may not be afforded toward the 
required 5 percent cash payment for structural flood damage reduction 
projects or the additional 10 percent cash payment for navigation 
projects.
    (7) Credit for in-kind contributions for planning is limited to 
credit that can be afforded under a specific FCSA. In other words, 
excess credit may not be carried over to design or construction of the 
project. Credit for planning work by the non-Federal sponsor is limited 
to its 50 percent of planning costs and will be done in accordance with 
the PMP, under the terms and conditions in the FCSA.
    (8) Credit for in-kind contributions provided by a non-Federal 
sponsor for the construction of a project, or separable element 
thereof, that are in excess of the non-Federal cost share for an 
authorized separable element of a project may be applied toward the 
non-federal cost share for a different authorized separable element of 
the same project. Additional Federal appropriations will be required to 
offset the application of any excess credit to another separable 
element.
    (9) If the value of eligible in-kind contributions exceeds the 
amount of credit that can be afforded pursuant to the provisions of a 
PPA (i.e., exceeds the required non-Federal cost share for all features 
covered by that PPA), only the amount of credit afforded should be 
included in total project costs. Recalculation of total project costs 
will be required to exclude from total project costs the value of in-
kind contributions that exceed the amount of credit that can be 
afforded. In addition, the amount excluded will not be considered part 
of total costs for the purposes of Section 902 of WRDA 1986 
calculations.
    (10) No reimbursements are authorized for in-kind contributions 
under Section 221 except as provided in paragraph 4 g., below.
    g. Lands, Easements, Relocations, Rights-of-Way, and Areas for 
Disposal of Dredged Material (LERRDs). Section 221 does not alter any 
other requirement for the non-Federal sponsor to provide LERRDs for a 
project, and the non-Federal sponsor should coordinate with the 
District to ensure that appropriate real estate interests for the 
project are acquired. Any LERRDs associated with in-kind contributions 
determined to be integral to the project will be credited to the 
project as LERRDs except the LERRs

[[Page 78203]]

needed for fish and wildlife mitigation. (The costs of LERRs needed for 
fish and wildlife mitigation are assigned to the project purpose(s) 
causing the need for such mitigation and are subject to construction 
cost sharing established for that project purpose.) In addition, for a 
navigation project, LERRs are creditable only toward the requirement 
for the non-Federal sponsor to pay an additional 10 percent of the cost 
of the general navigation features.
    (1) Previously, credit for in-kind contributions was afforded only 
toward the non-Federal sponsor's required cash contribution after 
consideration of the value of LERRDs provided by the non-Federal 
sponsor. WRRDA 2014 changes how credit for in-kind contributions is 
calculated. For projects other than navigation projects, to the extent 
that credit for LERRDs combined with credit for the value of in-kind 
contributions exceed the non-Federal share of the cost of a project, 
WRRDA 2014 provides that the Secretary, subject to the availability of 
funds, shall enter into a separate reimbursement agreement to reimburse 
the non-Federal sponsor for the difference between creditable LERRDs 
and in-kind contributions and the non-Federal cost share. Therefore, at 
the final accounting for the project, to the extent funds for the 
project remain available, the Secretary shall execute an agreement with 
the non-Federal sponsor for reimbursement of the difference.
    (2) If funds remaining on a project are insufficient to provide 
full reimbursement under paragraph g.(1), the non-Federal sponsor may 
request reimbursement. The Secretary shall prioritize such requests, 
and enter into reimbursements agreements, in the order the requests 
were received, as funds become available for reimbursements.
    5. Design. Design by the non-Federal sponsor must be performed in 
accordance with the requirements in ER 1110-2-1150, reviewed in 
accordance with ER 1110-1-12, and subject to the applicable peer review 
guidance. In accordance with section 105(c) of WRDA 1986, the costs of 
design shall be shared in the same percentages as the purposes of such 
project.
    a. If the value of eligible in-kind contributions is less than the 
non-Federal sponsor's share of design costs, the non-Federal sponsor 
must contribute sufficient funds to equal its share of total design 
costs.
    b. If the value of eligible in-kind contributions is greater than 
the non-Federal sponsor's share of total design costs, then no cash 
payment from the non-Federal sponsor is required. The value of all of 
the non-Federal sponsor's eligible in-kind contributions (including 
those in excess of its share of total design costs) will be included in 
total project costs in the PPA. The maximum amount of credit that may 
be afforded pursuant to the PPA is limited to the non-Federal sponsor's 
cost share under that agreement.
    6. Construction.
    a. To be eligible for credit, in-kind contributions prior to 
execution of the PPA must have been provided or performed after 
execution of an In-Kind MOU. Credit for in-kind contributions will not 
be afforded toward the non-Federal sponsor's requirement to provide in 
cash 5 percent of the costs for structural flood damage reduction 
projects (either specifically authorized or implemented pursuant to 
Continuing Authority Program Sections 14, 205, or 208 projects); the 
non-Federal sponsor's requirement to pay for betterments or any other 
work performed by the Government on behalf of the non-Federal sponsor; 
the non-Federal sponsor's requirement to provide lands, easements, 
rights-of-way, relocations, or improvements to enable the disposal of 
dredged or excavated material required for the project or separable 
element of the project; or the non-Federal sponsor's additional payment 
of 10 percent of the cost of general navigation features for a 
navigation project.
    b. The non-Federal sponsor may not initiate construction following 
execution of a PPA until the designs, detailed plans and 
specifications, and arrangements for such work have been approved by 
the Government. In addition, any proposed changes to approved designs 
and plans and specifications must be approved by the Government in 
advance of such construction. Upon completion of construction, the non-
Federal sponsor will furnish to the Government a copy of all final as-
built drawings.
    c. For CAP authorities and regional authorities that are 
implemented with a single agreement covering design and implementation, 
if a non-Federal sponsor proposes to provide or perform all or a 
portion of the design for a project as in-kind contributions, a PPA 
addressing both design and construction is required.

FOR THE COMMANDER:


Colonel, Corps of Engineers Chief of Staff

Enclosures: 2 Appendices

Appendix A--Section 221(a)(4) of the Flood Control Act of 1970, as 
amended (42 U.S.C. 1962d-5b(a)(4) Section 221(a)(4) of the Flood 
Control Act of 1970, as amended, and Section 1018 of WRRDA 2014
Appendix B--Criteria for In-Kind Contribution Integral 
Determinations

Appendix A

Section 221(a)(4) of the Flood Control Act of 1970, as Amended (42 
U.S.C. 1962d-5b(a)(4))

    SEC. 221. WRITTEN AGREEMENT REQUIREMENT FOR WATER RESOURCES 
PROJECTS.
    (a) COOPERATION OF NON-FEDERAL INTEREST.--
    (4) Credit for in-kind contributions.
    (A) In general. A partnership agreement described in paragraph 
(1) may provide with respect to a project that the Secretary shall 
credit toward the non-Federal share of the cost of the project, 
including a project implemented without specific authorization in 
law or a project under an environmental infrastructure assistance 
program, the value of in-kind contributions made by the non-Federal 
interest, including--
    (i) the costs of planning (including data collection), design, 
management, mitigation, construction, and construction services that 
are provided by the non-Federal interest for implementation of the 
project;
    (ii) the value of materials or services provided before 
execution of the partnership agreement, including efforts on 
constructed elements incorporated into the project; and
    (iii) the value of materials and services provided after 
execution of the partnership agreement.
    (B) Condition. The Secretary may credit an in-kind contribution 
under subparagraph (A) only if the Secretary determines that the 
material or service provided as an in-kind contribution is integral 
to the project.
    (C) Work performed before partnership agreement.
    (i) Construction.
    (I) In general. In any case in which the non-Federal interest is 
to receive credit under subparagraph (A) for the cost of 
construction carried out by the non-Federal interest before 
execution of a partnership agreement and that construction has not 
been carried out as of November 8, 2007, the Secretary and the non-
Federal interest shall enter into an agreement under which the non-
Federal interest shall carry out such work and shall do so prior to 
the non-Federal interest initiating construction or issuing a 
written notice to proceed for the construction.
    (II) Eligibility. Construction that is carried out after the 
execution of an agreement to carry out work described in subclause 
(I) and any design activities that are required for that 
construction, even if the design activity is carried out prior to 
the execution of the agreement to carry out work, shall be eligible 
for credit.
    (ii) Planning.
    (I) In general. In any case in which the non-Federal interest is 
to receive credit under subparagraph (A) for the cost of planning 
carried out by the non-Federal interest before execution of a 
feasibility cost-sharing agreement, the Secretary and the non-
Federal interest shall enter into an agreement under which the non-
Federal interest shall carry out such work and shall do so prior to 
the non-Federal interest initiating that planning.
    (II) Eligibility. Planning that is carried out by the non-
Federal interest after the

[[Page 78204]]

execution of an agreement to carry out work described in subclause 
(I) shall be eligible for credit.
    (D) Limitations. Credit authorized under this paragraph for a 
project--
    (i) shall not exceed the non-Federal share of the cost of the 
project;
    (ii) shall not alter any other requirement that a non-Federal 
interest provide lands, easements, relocations, rights-of-way, or 
areas for disposal of dredged material for the project;
    (iii) shall not alter any requirement that a non-Federal 
interest pay a portion of the costs of construction of the project 
under sections 101(a)(2) and 103(a)(1)(A) of the Water Resources 
Development Act of 1986 (33 U.S.C. 2211(a)(2); 33 U.S.C. 
2213(a)(1)(A)) of the Water Resources Development Act of 1986 (33 
U.S.C. 2211; 33 U.S.C. 2213); and
    (iv) shall not exceed the actual and reasonable costs of the 
materials, services, or other things provided by the non-Federal 
interest, as determined by the Secretary.
    (E) Analysis of costs and benefits. In the evaluation of the 
costs and benefits of a project, the Secretary shall not consider 
construction carried out by a non-Federal interest under this 
subsection as part of the future without project condition.
    (F) Transfer of credit between separable elements of a project. 
Credit for in-kind contributions provided by a non-Federal interest 
that are in excess of the non-Federal cost share for an authorized 
separable element of a project may be applied toward the non-Federal 
cost share for a different authorized separable element of the same 
project.
    (G) Application of credit.
    (i) In general. To the extent that credit for in-kind 
contributions, as limited by subparagraph (D), and credit for 
required land, easements, rights-of-way, dredged material disposal 
areas, and relocations provided by the non-Federal interest exceed 
the non-Federal share of the cost of construction of a project other 
than a navigation project, the Secretary, subject to the 
availability of funds, shall enter into a reimbursement agreement 
with the non-Federal interest, which shall be in addition to a 
partnership agreement under subparagraph (A), to reimburse the 
difference to the non-Federal interest.
    (ii) Priority. If appropriated funds are insufficient to cover 
the full cost of all requested reimbursement agreements under clause 
(i), the Secretary shall enter into reimbursement agreements in the 
order in which requests for such agreements are received.''; and
    (H) Applicability.
    (i) In general. This paragraph shall apply to water resources 
projects authorized after November 16, 1986, including projects 
initiated after November 16, 1986, without specific authorization in 
law, and to water resources projects authorized prior to the date of 
enactment of the Water Resources Development Act of 1986 (Pub. L. 
99-662) [enacted June 10, 2014], if correction of design 
deficiencies is necessary.
    (ii) Authorization as addition to other authorizations. The 
authority of the Secretary to provide credit for in-kind 
contributions pursuant to this paragraph shall be in addition to any 
other authorization to provide credit for in-kind contributions and 
shall not be construed as a limitation on such other authorization. 
The Secretary shall apply the provisions of this paragraph, in lieu 
of provisions under other crediting authority, only if so requested 
by the non-Federal interest.

Section 1018 of the Water Resources Reform and Development Act of 2014

    Sec. 1018. CREDIT FOR IN-KIND CONTRIBUTIONS.
    (a) In General.--Section 221(a)(4) of the Flood Control Act of 
1970 (42 U.S.C. 1962d-5b(a)(4)) is amended--
    (1) in subparagraph (A), in the matter preceding clause (i), by 
inserting ``or a project under an environmental infrastructure 
assistance program'' after ``law'';
    (2) in subparagraph (C) by striking ``In any case'' and all that 
follows through the period at the end and inserting the following:
    ``(i) CONSTRUCTION.--
    ``(I) In General.--In any case in which the non-Federal interest 
is to receive credit under subparagraph (A) for the cost of 
construction carried out by the non-Federal interest before 
execution of a partnership agreement and that construction has not 
been carried out as of November 8, 2007, the Secretary and the non-
Federal interest shall enter into an agreement under which the non-
Federal interest shall carry out such work and shall do so prior to 
the non-Federal interest initiating construction or issuing a 
written notice to proceed for the construction.
    ``(II) Eligibility.--Construction that is carried out after the 
execution of an agreement to carry out work described in subclause 
(I) and any design activities that are required for that 
construction, even if the design activity is carried out prior to 
the execution of the agreement to carry out work, shall be eligible 
for credit.
    ``(ii) PLANNING.--
    ``(I) In General.--In any case in which the non-Federal interest 
is to receive credit under subparagraph (A) for the cost of planning 
carried out by the non-Federal interest before execution of a 
feasibility cost-sharing agreement, the Secretary and the non-
Federal interest shall enter into an agreement under which the non-
Federal interest shall carry out such work and shall do so prior to 
the non-Federal interest initiating that planning.
    ``(II) Eligibility.--Planning that is carried out by the non-
Federal interest after the execution of an agreement to carry out 
work described in subclause (I) shall be eligible for credit.'';
    (3) in subparagraph (D)(iii) by striking ``sections 101 and 
103'' and inserting ``sections 101(a)(2) and 103(a)(1)(A) of the 
Water Resources Development Act of 1986 (33 U.S.C. 2211(a)(2); 33 
U.S.C. 2213(a)(1)(A))'';
    (4) by redesignating subparagraph (E) as subparagraph (H);
    (5) by inserting after subparagraph (D) the following:
    ``(E) Analysis of Costs and Benefits.--In the evaluation of the 
costs and benefits of a project, the Secretary shall not consider 
construction carried out by a non-Federal interest under this 
subsection as part of the future without project condition.
    ``(F) Transfer of Credit Between Separable Elements of a 
Project.--Credit for in-kind contributions provided by a non-Federal 
interest that are in excess of the non-Federal cost share for an 
authorized separable element of a project may be applied toward the 
non-Federal cost share for a different authorized separable element 
of the same project.
    ``(G) APPLICATION OF CREDIT.--
    ``(i) In General.--To the extent that credit for in-kind 
contributions, as limited by subparagraph (D), and credit for 
required land, easements, rights-of-way, dredged material disposal 
areas, and relocations provided by the non-Federal interest exceed 
the non-Federal share of the cost of construction of a project other 
than a navigation project, the Secretary, subject to the 
availability of funds, shall enter into a reimbursement agreement 
with the non-Federal interest, which shall be in addition to a 
partnership agreement under subparagraph (A), to reimburse the 
difference to the non-Federal interest.
    ``(ii) Priority.--If appropriated funds are insufficient to 
cover the full cost of all requested reimbursement agreements under 
clause (i), the Secretary shall enter into reimbursement agreements 
in the order in which requests for such agreements are received.''; 
and
    (6) in subparagraph (H) (as redesignated by paragraph (4))--
    (A) in clause (i) by inserting ``, and to water resources 
projects authorized prior to the date of enactment of the Water 
Resources Development Act of 1986 (Public Law 99-662), if correction 
of design deficiencies is necessary'' before the period at the end; 
and
    (B) by striking clause (ii) and inserting the following:
    ``(ii) Authorization As Addition to Other Authorizations.--The 
authority of the Secretary to provide credit for in-kind 
contributions pursuant to this paragraph shall be in addition to any 
other authorization to provide credit for in-kind contributions and 
shall not be construed as a limitation on such other authorization. 
The Secretary shall apply the provisions of this paragraph, in lieu 
of provisions under other crediting authority, only if so requested 
by the non-Federal interest.''.
    (b) Applicability.--Section 2003(e) of the Water Resources 
Development Act of 2007 (42 U.S.C. 1962d-5b note) is amended--
    (1) by inserting ``, or construction of design deficiency 
corrections on the project,'' after ``construction on the project''; 
and
    (2) by inserting ``, or under which construction of the project 
has not been completed and the work to be performed by the non-
Federal interests has not been carried out and is creditable only 
toward any remaining non-Federal cost share,'' after ``has not been 
initiated''.
    (c) Effective Date.--The amendments made by subsections (a) and 
(b) take effect on November 8, 2007.
    (d) Guidelines.--
    (1) In General.--Not later than 1 year after the date of 
enactment of this Act, the Secretary shall update any guidance or

[[Page 78205]]

regulations for carrying out section 221(a)(4) of the Flood Control 
Act of 1970 (42 U.S.C. 1962d-5b(a)(4)) (as amended by subsection 
(a)) that are in existence on the date of enactment of this Act or 
issue new guidelines, as determined to be appropriate by the 
Secretary.
    (2) Inclusions.--Any guidance, regulations, or guidelines 
updated or issued under paragraph (1) shall include, at a minimum--
    (A) the milestone for executing an in-kind memorandum of 
understanding for construction by a non-Federal interest;
    (B) criteria and procedures for evaluating a request to execute 
an in-kind memorandum of understanding for construction by a non-
Federal interest that is earlier than the milestone under 
subparagraph (A) for that execution; and
    (C) criteria and procedures for determining whether work carried 
out by a non-Federal interest is integral to a project.
    (3) Public and Stakeholder Participation.--Before issuing any 
new or revised guidance, regulations, or guidelines or any 
subsequent updates to those documents, the Secretary shall--
    (A) consult with affected non-Federal interests;
    (B) publish the proposed guidelines developed under this 
subsection in the Federal Register; and
    (C) provide the public with an opportunity to comment on the 
proposed guidelines.
    (e) Other Credit.--Nothing in section 221(a)(4) of the Flood 
Control Act of 1970 (42 U.S.C. 1962d-5b(a)(4)) (as amended by 
subsection (a)) affects any eligibility for credit under section 104 
of the Water Resources Development of 1986 (33 U.S.C. 2214) that was 
approved by the Secretary prior to the date of enactment of this 
Act.

Appendix B

Criteria and Procedures for In-Kind Contribution Integral 
Determinations

    B-1. Determining if In-Kind Contributions Are Integral to the 
Study/Project. Establishing and allowing credit is a two-step 
process whereby: (1) Eligibility for credit is determined based on 
whether the in-kind contribution is integral to the study or 
project, and (2) actual affording of credit is accomplished based on 
an audit of the non-Federal work by the District Engineer under the 
terms of the FCSA, DA, or PPA, as appropriate. The level of analysis 
to determine if work is integral to the project is scalable. For 
instance, work accomplished by the non-Federal sponsor on its own 
under an In-Kind MOU must be fully analyzed to determine whether it 
is integral to the project, i.e., work that the Government otherwise 
would have performed for the project. In general, for work that will 
be accomplished after execution of a DA or PPA, it will be clearer 
what work is required for the project and therefore integral to the 
project; furthermore, the Government will be approving plans and 
specifications prior to the work being undertaken by the non-Federal 
sponsor.
    a. Approval Level of Integral Determinations. Under the terms of 
Paragraph 4.e. of this regulation, approval of integral 
determinations is delegated to the MSC Commander. This authority may 
not be further delegated.
    b. Timing of Integral Determinations.
    (1) In general, the integral determination should be completed 
immediately prior to review and approval of a DA or PPA, or 
amendment as applicable, that provides for the affording of credit. 
The integral determination for planning efforts is accomplished as 
part of the development of the PMP.
    (2) Include at least 30 days in the project schedule for 
processing at the MSC of the Integral Determinations by the MSC 
Commander. These times are recommended for scheduling purposes and 
should be extended if processing identifies significant issues 
requiring resolution.
    c. Procedures for Processing.
    (1) For a feasibility study, planning activities, including data 
collection, must be included in the approved Project Management Plan 
in order for those contributions to be eligible for credit.
    (2) The District will prepare an Integral Determination Report 
(IDR) for design and construction work that includes at a minimum 
the information contained in the following paragraphs. A suggested 
format for an IDR can be found at https://www.usace.army.mil/Missions/CivilWorks/ProjectPartnershipAgreements/model_other.aspx. 
The IDR should contain a description of the activities required to 
perform the design or construction, as applicable, of the Federal 
project or separable element in sufficient detail to allow a 
comparison with the description of the proposed in-kind 
contributions; a detailed description of the work items proposed to 
be provided or performed as in-kind contributions; a discussion of 
how each work item proposed to be provided or performed as an in-
kind contribution is integral to the project; an estimate of the 
costs of each work item proposed to be provided or performed as an 
in-kind contribution; the estimated amount of credit to be afforded 
for each work item proposed to be provided or performed as an in-
kind contribution; and a District Commander recommendation 
identifying which of the proposed in-kind contributions should be 
considered integral to the project. If the in-kind contributions 
were provided or performed prior to execution of the applicable cost 
sharing agreement, then also include in the IDR the results of the 
review or inspection, as applicable, and certification by the 
District Commander on whether the work was accomplished in a 
satisfactory manner and in accordance with applicable Federal laws, 
regulations, and policies; and documentation of satisfactory 
environmental compliance for the construction portion of the in-kind 
contributions.
    (3) The district will submit the IDR to the MSC District Support 
Team for action. The MSC District Support Team will perform the MSC 
review of the IDR. The MSC review team also will include members 
from the MSC Office of Counsel and from the MSC Planning Community 
of Practice (CoP), MSC Engineering and Construction CoP, MSC Real 
Estate CoP, and other CoPs, as needed. In addition, if the proposed 
in-kind contributions consist of design or construction of dams, 
levees, or bridges, the MSC review team must include the MSC Dam, 
Levee, or Bridge Safety Officer. After satisfactory resolution of 
all comments on the IDR and a determination that the IDR complies 
with all applicable law and policy, the MSC District Support Team 
shall prepare an Integral Determination memo for approval and 
signature by the MSC Commander.
    (4) The Integral Determination approval memo will state whether 
the work identified in the IDR, or a portion thereof, has been 
determined to be integral to the project. In addition, the memo 
should state that the determination of the actual value of the in-
kind contributions and affording credit for such amount will be 
accomplished by the Government in accordance with the limitations, 
conditions, and terms of the applicable cost sharing agreement.
    B-2. Considerations in determining whether the work is integral 
and creditable: The proposed in-kind contributions consist of work 
that the Government would have otherwise provided or performed for 
the project, except for performance of activities that are 
inherently governmental responsibilities (see paragraph B-3 below). 
Examples of activities that are acceptable in-kind contributions: 
Performance of design of all or a portion of the Federal project, 
including data collection related to design work; demolition of 
buildings on lands required for the project; performance of design 
or construction related studies for historic preservation activities 
except data recovery; performance of cost shared monitoring and 
adaptive management; and construction of a portion of the project.
    a. For proposed in-kind contributions performed prior to 
execution of the applicable cost sharing agreement, the in-kind 
contributions have been reviewed or inspected, as applicable, and 
certified by the Government that the work was accomplished in a 
satisfactory manner and in accordance with applicable Federal laws, 
regulations, and policies.
    b. For any proposed in-kind contributions proposed to be 
performed after execution of the PPA, the plans and specifications 
must be approved by the District Commander prior to initiation of 
the construction work.
    c. For materials provided for use in construction work managed 
by the Government, the materials must meet the minimum Government 
requirements for materials and any substitute materials have been 
determined by the Government to be a functional equivalent in 
accordance with policies governing contractor substitution of 
materials.
    d. The non-Federal sponsor should coordinate with the District 
to ensure that appropriate real estate interests to support the in-
kind contributions and project are acquired.
    B-3. The following will not be accepted as in-kind 
contributions:
    a. The proposed in-kind contributions are not part of the 
Federal project.
    b. The proposed in-kind contributions consist of performance of 
activities that are inherently Governmental responsibilities (e.g., 
management of Government contracts; performance of District Quality 
Review,

[[Page 78206]]

Agency Technical Review, Independent External Peer Review, or Policy 
Compliance Review; determining if Value Engineering evaluations are 
acceptable; determining the LERRD required for the project or 
separable element of the project; determining the value of LERRD for 
crediting purposes; or making determinations as to compliance with 
applicable environmental laws and regulations).
    c. The proposed in-kind contributions are features or 
obligations that are a 100 percent non-Federal sponsor 
responsibility (e.g., purposes of land reclamation, local drainage, 
to protect against land or bank erosion, and/or the removal of 
hazardous, toxic, or radioactive wastes; local service facilities; 
betterments; acquisition and performance of LERRD, except for the 
provision of dredged or excavated material disposal facilities for 
commercial navigation projects; and performance of operation, 
maintenance, repair, rehabilitation, or replacement (OMRR&R);
    d. The proposed in-kind contributions have or will create a 
hazard to human life or property.
    e. The proposed in-kind contributions have been determined to be 
environmentally unacceptable.
    f. For proposed in-kind contributions performed prior to 
execution of the applicable cost sharing agreement, after review or 
inspection, as applicable, the Government cannot certify the 
proposed in-kind contributions were accomplished in a satisfactory 
manner and in accordance with applicable Federal laws, regulations, 
and policies.
    g. For proposed in-kind contributions performed prior to 
execution of the applicable cost sharing agreement, the non-Federal 
sponsor has not performed the necessary OMRR&R, resulting in the 
work no longer functioning as needed for the project.

[FR Doc. 2015-31654 Filed 12-15-15; 8:45 am]
BILLING CODE 3720-58-P