Administrative Requirements Terms and Conditions for Cost-Type Awards to Nonprofit and Governmental Entities, 78382-78442 [2016-25701]

Download as PDF 78382 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules sradovich on DSK3GMQ082PROD with PROPOSALS2 Preservation Act of 1974 (54 U.S.C. chapter 3125). 12. Relocation and real property acquisition. You must comply with applicable provisions of 49 CFR part 24, which implements the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. 4601, et seq.) and provides for fair and equitable treatment of persons displaced by federally assisted programs or persons whose property is acquired as a result of such programs. 13. Confidentiality of patient records. You must keep confidential any records that you maintain of the identity, diagnosis, prognosis, or treatment of any patient in connection with any program or activity relating to substance abuse education, prevention, training, treatment, or rehabilitation that is assisted directly or indirectly under this award, in accordance with 42 U.S.C. 290dd–2. 14. Pro-Children Act. You must comply with applicable restrictions in the Pro-Children Act of 1994 (Title 20, Chapter 68, Subchapter X, Part B of the U.S. Code) on smoking in any indoor facility: a. Constructed, operated, or maintained under this award and used for routine or regular provision of kindergarten, elementary, or secondary education or library services to children under the age of 18. b. Owned, leased, or contracted for and used under this award for the routine provision of federally funded health care, day care, or early childhood development (Head Start) services to children under the age of 18. 15. Constitution Day. You must comply with Public Law 108–447, Div. J, Title I, Sec. 111 (36 U.S.C. 106 note), which requires each educational institution receiving Federal funds in a Federal fiscal year to hold an educational program on the United States Constitution on September 17th during that year for the students served by the educational institution. 16. Trafficking in persons. You must comply with requirements concerning trafficking in persons specified in the award term at 2 CFR 175.15(b), as applicable. 17. Whistleblower protections. You must comply with 10 U.S.C. 2409, including the: a. Prohibition on reprisals against employees disclosing certain types of information to specified persons or bodies; and b. Requirement to notify your employees in writing, in the predominant native language of the workforce, of their rights and protections under that statute. Section B. Additional Requirements [Reserved] Dated: October 19, 2016. Aaron Siegel, Alternate OSD Federal Register Liaison Officer, Department of Defense. [FR Doc. 2016–25700 Filed 11–4–16; 8:45 am] BILLING CODE 5001–06–P VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 DEPARTMENT OF DEFENSE Office of the Secretary 2 CFR Parts 1126, 1128, 1130, 1132, 1134, 1136, and 1138 [DOD–2016–OS–0054] RIN 0790–AJ49 Administrative Requirements Terms and Conditions for Cost-Type Awards to Nonprofit and Governmental Entities Office of the Secretary of Defense, DoD. ACTION: Proposed rule. AGENCY: This notice of proposed rulemaking (NPRM) is the third of a sequence of six NPRM documents in this section of this issue of the Federal Register that propose updates to the Department of Defense Grant and Agreement Regulations (DoDGARs). This NPRM proposes to add seven new DoDGARs parts to address the administrative requirements included in general terms and conditions of DoD cost-type grants and cooperative agreements awarded to institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes. The administrative requirements are in areas such as financial and program management; property administration; recipient procurement procedures; financial, programmatic, and property reporting; and subawards. The proposed new parts establish a uniform way for approximately 100 DoD Component awarding offices to organize the administrative requirements in their general terms and conditions. The proposed new parts also provide standard wording of terms and conditions for the administrative requirements, with associated regulatory prescriptions for DoD Components to provide latitude to vary from the standard wording where variation is appropriate. DATES: To ensure that they can be considered in developing the final rule, comments must be received at either the Web site or mailing address indicated below by February 6, 2017. ADDRESSES: You may submit comments identified by docket number, or by Regulatory Information Number (RIN) and title, by either of the following methods: The Web site: http:// www.regulations.gov. Follow the instructions at that site for submitting comments. Mail: Department of Defense, Deputy Chief Management Officer, Directorate SUMMARY: PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 for Oversight and Compliance, 4800 Mark Center Drive, ATTN: Box 24, Alexandria, VA 22350–1700. Instructions: All submissions must include the agency name and docket number or RIN for this Federal Register document. The general policy for comments and other submissions from the public is to make the submissions available for public viewing on the Internet at http://www.regulations.gov without change (i.e., as they are received, including any personal identifiers or contact information). FOR FURTHER INFORMATION CONTACT: Wade Wargo, Basic Research Office, telephone 571–372–2941. SUPPLEMENTARY INFORMATION: I. Executive Summary A. Purpose of the Regulatory Action 1. The Need for the Regulatory Action and How the Action Meets That Need The Department of Defense Grant and Agreement Regulations (DoDGARs) implement statutes and Governmentwide guidance for grants and cooperative agreements, as needed in order to ensure that DoD Component offices make and administer assistance awards consistently with agency policy. They are in need of updating, in part due to the issuance of new Office of Management and Budget guidance to Federal agencies on administrative requirements, cost principles, and audit requirements that apply to Federal grants, cooperative agreements, and other assistance instruments (2 CFR part 200). This NPRM provides a major portion of the implementation of that guidance, by addressing the administrative requirements to be included in general terms and conditions of DoD Components’ awards to institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes. 2. Legal Authorities for the Regulatory Action There are two statutory authorities for this NPRM: • 10 U.S.C. 113, which establishes the Secretary of Defense as the head of the Department of Defense; and • 5 U.S.C. 301, which authorizes the head of an Executive department to prescribe regulations for the governance of that department and the performance of its business. B. Summary of the Major Provisions of the Regulatory Action This NPRM establishes seven new DoDGARs parts that collectively govern a DoD Component’s construction of the administrative requirements portion of E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules sradovich on DSK3GMQ082PROD with PROPOSALS2 its general terms and conditions for awards to institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes. The seven proposed new parts comprise a subchapter of the DoDGARs—Subchapter D in Chapter XI of 2 CFR. The first of the proposed parts in the subchapter, 2 CFR part 1126, provides an overview of the subchapter’s content. In addition to addressing the purpose and applicability, the overview part describes what the subchapter’s remaining six parts address and how they are organized. Section II.B of this SUPPLEMENTARY INFORMATION section describes the overview part 1126 in more detail. Each of the subchapter’s other six parts provides both: (1) Standard wording for articles of general terms and conditions specifying requirements for recipients and subrecipients within a given subject matter area; and (2) the associated direction to DoD Components on the use of the standard wording for those articles. Those six parts are described more fully in sections II.C through II.H of this SUPPLEMENTARY INFORMATION section. C. Costs and Benefits The major benefit of this NPRM is greatly increased uniformity across the Department in administrative requirements included in DoD grant and cooperative agreement awards each year to institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes. Uniformity helps to lessen administrative burdens and costs for recipients, thereby increasing the productivity of programs supported by DoD assistance awards. This regulatory action takes a major step in that direction by proposing to establish a standard organization and more uniform wording for administrative requirements included in general terms and conditions of more than 15,000 award actions totaling $4 to $6 billion each year that are issued: • By approximately 100 offices in the Departments of the Army, Navy, and Air Force and 11 other DoD Components that are located across the United States and elsewhere. • Under a variety of programs and to diverse types of recipients. Institutions of higher education receive more than half of the awards, including many awards that support defense research. There also are thousands of awards to other types of recipients and for other defense purposes, such as support to States for the National Guard and economic assistance to communities VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 impacted by defense downsizing or costs associated with education of military dependents. The administrative burdens and associated costs to recipients due to the regulatory action proposed in this NPRM are primarily those resulting from the Governmentwide guidance to agencies that OMB issued in 2 CFR part 200. Some variations from the guidance noted in sections II.C through II.H of this SUPPLEMENTARY INFORMATION section could cause a relatively small increase in burdens, while others reduce burdens and costs. The Department invites input on any area in which potential recipients of DoD awards perceive an increase in burden relative to the OMB guidance that is not justified by the commensurate value of an improvement in DoD’s ability to carry out its responsibilities for good stewardship of Federal taxpayers’ dollars. II. General Background and Detailed Overview of the DoDGARs Parts Proposed in This NPRM A. General Background The first and second NPRMs in the sequence of six notices in this section of this issue of the Federal Register (i.e., the two NPRMs preceding this one) provide additional context pertinent to the seven DoDGARs parts proposed in this NPRM. In particular, the NPRM immediately preceding this one proposes a new DoDGARs part that establishes a standard award format for DoD Components’ grants and cooperative agreements. That format has three major elements, the third of which is the general terms and conditions that address administrative requirements, national policy requirements, and programmatic requirements. This notice proposes seven DoDGARs parts that establish a standard organization and content for the administrative requirements portion of the general terms and conditions in awards to institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes. Those are the types of recipient entities addressed by the OMB guidance to Federal agencies on administrative requirements, cost principles, and audit requirements that is in 2 CFR part 200. Therefore, the seven new DoDGARs parts proposed in this notice also comprise the proposed DoD implementation of that guidance as it applies to general terms and conditions. The seven new parts proposed in this notice are in Subchapter D of Chapter XI in title 2 of the Code of Federal Regulations (note that the first of the six NPRMs in this section of this issue of PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 78383 the Federal Register proposed the establishment of that subchapter). The first of the parts proposed in this notice, 2 CFR part 1126, provides an overview of Subchapter D. Each of the other proposed parts (2 CFR parts 1128, 1130, 1132, 1134, 1136, and 1138) addresses the organization and content of general terms and conditions for one segment of the administrative requirements, such as property administration or recipient procurement procedures. Each of the proposed parts 1128, 1130, 1132, 1134, 1136, and 1138 is organized into subparts and appendices. The appendix to each proposed part provides standard wording of general terms and conditions for one article of general terms and conditions. For each appendix addressing a particular article, the proposed part has an associated subpart that provides the prescription for DoD Components’ use of the standard wording for that article. The subpart associated with each article identifies the portions of the OMB guidance in 2 CFR part 200 that the article implements, as those portions of the guidance apply to general terms and conditions. For example: • Appendix D to the proposed 2 CFR part 1128 contains standard wording of an article of general terms and conditions addressing revisions of budget and program plans under awards; and • The corresponding Subpart D of that proposed part: (1) Contains the prescription for DoD Components’ use of the standard wording in appendix D when constructing that article of their general terms and conditions; and (2) in section 1128.400, lists the portions of the OMB guidance that the article implements. Organizing the proposed parts 2 CFR 1128 through 1138 in that manner more clearly differentiates requirements for recipients from those for DoD awarding officials or administering officials than the DoDGARs have done previously. In the past, it was not unusual for a DoDGARs paragraph on administrative requirements to include requirements for both DoD Components and recipients, which made it more difficult for each intended audience to determine what the regulations required of them. For example, DoDGARs requirements on revisions to budget and program plans for both DoD Components and institutions of higher education or nonprofit recipients were interwoven in section 32.25 of 32 CFR part 32 (the now-superseded DoD implementation of OMB Circular A–110). With the organization of the content in the proposed parts 2 CFR 1128 through 1138, requirements for DoD Component E:\FR\FM\07NOP2.SGM 07NOP2 sradovich on DSK3GMQ082PROD with PROPOSALS2 78384 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules officials are in the subparts of the parts and therefore separate from requirements for recipients, which are communicated through award terms and conditions based on the standard wording in the appendices to the parts. That organization should make it easier for all affected parties to understand the applicable requirements and, therefore, to comply with them. Three other features of the proposed parts with standard wording of general terms and conditions are designed to further promote ease of understanding for those who need to use and comply with them. • The proposed standard wording is in plain language, with use of personal pronouns such as ‘‘you’’ to denote the recipient and ‘‘we’’ to mean the Federal Government. Use of personal pronouns is a recognized means to help a reader better relate to words addressed to him or her and, in the case of regulations, more likely understand his or her responsibilities. • The proposed organization of administrative requirements reflects a conscious attempt to promote clarity by grouping requirements into 39 articles of general terms and conditions that present the subject matter in the most coherent manner possible. For example, the consolidation of requirements related to subawards in twelve articles within the proposed 2 CFR part 1138 is intended to simplify a recipient’s task of determining which requirements of the prime award flow down to subrecipients. • The proposed establishment of the standard wording in the appendices to parts in the Code of Federal Regulations enables a DoD Component to construct the administrative requirements portion of its general terms and conditions by: (1) Incorporating the standard wording of each article by reference; and (2) stating any variations it has from the standard wording of that article. Section 1120.515 in the proposed 2 CFR part 1120—the part that establishes a standard award format (see the NPRM immediately preceding this one in this section of this issue of the Federal Register)—strongly encourages DoD Components to use this method in their general terms and conditions, rather than including the full text of each article. Incorporating the standard wording by reference to the CFR should allow a recipient that receives awards from multiple DoD Component awarding offices to quickly identify how each office’s general terms and conditions vary from the DoD standard wording. It should be noted that the seven parts proposed in this NPRM do not address VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 administrative requirements for DoD Components’ fixed-amount awards, as described in OMB guidance at 2 CFR 200.201. Fixed-amount DoD awards will be addressed by DoDGARs rules to be proposed in the future. To the extent that DoD Components permit recipients or subrecipients to make fixed-amount subawards at lower tiers below cost-type prime awards and subawards, however, the proposed 2 CFR part 1138 includes requirements for those fixed-amount subawards (an overview of that proposed part is in section II.H of this SUPPLEMENTARY INFORMATION section). The remainder of this SUPPLEMENTARY INFORMATION section provides overviews of the seven new DoDGARs parts proposed in this NPRM. Specifically, sections II.B through H address the proposed 2 CFR parts 1126 through 1138, respectively. B. Proposed Part 1126—Subchapter D Overview The proposed 2 CFR part 1126 provides an overview of Subchapter D of chapter XI, title 2 of the CFR. Specifically, it: • Provides general information about the purposes of the subchapter. • Specifies the applicability of the subchapter. It states that the subchapter: (1) Directly applies to DoD Components; and (2) only indirectly applies to recipients through its regulation of DoD Components’ construction of the administrative requirements portion of their general terms and conditions for cost-type grant and cooperative agreement awards to institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes. • Specifies the conditions under which exceptions from the provisions of the subchapter are permitted. The only provision that varies from the conditions for exceptions included in OMB guidance to agencies, at 2 CFR 200.102, is a provision allowing exceptions for small awards. This continues a policy included in DoD’s interim implementation of the OMB guidance at 2 CFR part 1103, which it published in the Federal Register on December 19, 2014 [79 FR 76047], and broadens it to include small awards to States, local governments, and Indian tribes. • Acknowledges the complementary relationship between the parts of the subchapter and two other DoDGARs parts that specify administrative requirements for grant and cooperative agreement awards to for-profit entities and for Technology Investment Agreements. PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 • Provides, in the proposed section 1126.5, a table showing a high-level summary of the contents of the other six parts of the subchapter. The table lists each article of the administrative requirements portion of the general terms and conditions that is addressed in the subchapter. • Describes how each of the other six parts of the subchapter is organized. C. Proposed Part 1128—General Terms and Conditions on Financial and Program Management The proposed part 1128 addresses seven articles of general terms and conditions within the broad area of financial and program management. The seven articles are designated as FMS Articles I through VII of the general terms and conditions. The proposed standard wording for the articles is in the seven appendices to the proposed part 1128. The prescriptions to DoD Components for use of the standard wording of the articles are in the seven associated subparts of the part. The articles with their related prescriptions implement the financial and program management provisions of the OMB guidance in 2 CFR part 200, as that guidance applies to general award terms and conditions. The subjects covered by the seven articles (and the appendices and subparts containing the articles and associated prescriptions) are: • Financial management system standards (in Subpart A and appendix A). • Payments (in Subpart B and appendix B). • Allowable costs, period of availability of funds, and fee or profit (in Subpart C and appendix C). • Revision of budget and program plans (in Subpart D and appendix D). • Non-Federal audits (in Subpart E and appendix E). • Cost sharing or matching (in Subpart F and appendix F). • Program income (in Subpart G and appendix G). The following subsections II.C.1 through 7 of this SUPPLEMENTARY INFORMATION section focus on whether and how the proposed implementation of the OMB guidance in each article and its associated prescription for DoD Components varies from, or clarifies, the related guidance. 1. Financial Management System Standards The proposed FMS Article I, ‘‘Financial management system standards,’’ and associated prescription includes no variations or clarifications relative to the portions of the OMB E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules sradovich on DSK3GMQ082PROD with PROPOSALS2 guidance on financial management systems standards. 2. Payments The proposed FMS Article II, ‘‘Payments,’’ and associated prescription include one variation and one clarification relative to the guidance on payments: • The variation is relative to OMB guidance at 2 CFR 200.305(b)(3), which concerns the timing of awarding agency payments to recipients. The OMB guidance states that an awarding agency must make payment within 30 calendar days after receipt of the billing, unless the agency reasonably believes the request to be improper. The proposed prescription for DoD Components in 2 CFR 1128.215(c)(4) implements that guidance for general terms and conditions of construction awards that specify reimbursement as the payment method. That proposed prescription states that DoD generally makes, rather than ‘‘must’’ make, payment within 30 calendar days after receipt of the request. This continues existing DoD policy for awards to institutions of higher education and nonprofit organizations, which is cited at 2 CFR 1103.205 in DoD’s interim implementation of the OMB guidance, and broadens the policy to States, local governments, and Indian tribes. Note that this proposed wording in FMS Article II is limited to the general terms and conditions of construction awards. For non-construction awards, the reimbursement method should be used only in award-specific terms and conditions because the general terms and conditions of those awards authorize recipients to request advance payments as long as they maintain, or demonstrate the willingness to maintain, written procedures to minimize the time elapsing between their receipt of each payment and disbursement of the funds for program purposes. • The clarification relates to OMB guidance in 2 CFR 200.305(b)(9), which states that a recipient may retain up to $500 per year in interest it earns on advance payments. The proposed paragraph B.6.d of FMS Article II, clarifies that the $500 limit applies to the aggregate amount of interest a recipient earns annually under all of its Federal grants and cooperative agreements and not separately to the amount it earns under each award. 3. Allowable Costs, Period of Availability of Funds, and Fee or Profit The proposed FMS Article III, ‘‘Allowable costs,’’ and associated prescription supplement the OMB VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 guidance, as well as implement it, by providing a central source within the general terms and conditions for requirements on whether and when costs incurred by recipients, subrecipients, and contractors under awards and subawards are allowable. It also includes the long-standing DoDGARs policy on fee or profit. The proposed article includes one variation and two clarifications relative to the OMB guidance in 2 CFR 200.461 on the allowability of costs associated with professional journal publications: • The variation is a specification in Section B of FMS Article III that costs of publishing in professional journals are allowable only if the recipient charges them consistently, either as direct or indirect costs. The purpose of this specification is to ensure that the Government does not pay more than its fair share of journal publication costs that are increasingly being addressed through charges that authors pay prior to publication. That can happen if an institution directly charges those payments for federally supported researchers to their Federal awards while including payments by other researchers in a pool of costs, a share of which the Government reimburses as indirect costs charged to Federal awards. • The first clarification also is in Section B of the article and is intended to help avoid confusion that might result from the use of the wording ‘‘cost of publication or sharing of research results’’ in 2 CFR 200.461(b)(3). That wording could be interpreted to mean something broader than ‘‘charges for professional journal publications,’’ which is the wording in the lead-in 2 CFR 200.461(b) that should circumscribe the costs allowed under § 200.461(b)(3). • The other clarification is in paragraph C.3 of FMS Article III. It clarifies wording in 2 CFR 200.461(b)(3) indicating that a recipient may charge an award up to the time of closeout of the award for costs of publishing in professional journals that are incurred after the end of the period of performance. The proposed clarification provides that the recipient may charge those costs to an award if its request for payment of the costs is received no later than the date on which it submits its final financial report under the award. That clarification is needed because the closeout process relies on the final financial report being the ultimate statement of financial status. Any subsequent change in financial status due to incurrence of additional publication costs would disrupt the ongoing closeout process and create PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 78385 added burdens and costs for DoD’s award administration office, which would have to require the recipient to submit a revised final report. 4. Revision of Budget and Program Plans The proposed FMS Article IV, ‘‘Revision of budget and program plans,’’ and associated prescription include no variations or clarifications relative to the guidance on changes in a recipient’s budget and program plans. 5. Non-Federal Audits The proposed FMS Article V, ‘‘NonFederal audits,’’ and associated prescription supplement, as well as implement, the OMB guidance by providing a central location within the general terms and conditions at which a recipient can find requirements for non-Federal audits of all types of recipients and subrecipients, including for-profit entities. The proposed article and prescription include no variations or clarifications relative to portions of the OMB guidance that they implement. 6. Cost Sharing or Matching The proposed FMS Article VI, ‘‘Cost sharing or matching,’’ and associated prescription include no variations or clarifications relative to the OMB guidance on cost sharing or matching. Paragraph E.2 of the proposed article does refer to a clarification contained in another article of the general terms and conditions, PROP Article I. That clarification, which concerns the Federal interest in property donated to a project under an award, is addressed in the discussion of PROP Article I in subsection II.D.1 of this SUPPLEMENTARY INFORMATION section. 7. Program Income The prescription for DoD Components related to FMS Article VII, ‘‘Program Income,’’ which is in subpart G of the proposed 2 CFR part 1128, includes one clarification from the OMB guidance in 2 CFR part 200. The prescription permits a DoD Component’s general terms and conditions to specify a combination of the three alternatives that the OMB guidance identifies for recipients’ use of program income—i.e., the additive, deductive, and cost sharing or matching alternatives. This is a clarification because the guidance in 2 CFR part 200 does not explicitly recognize that an award may use more than one of the three alternatives. This clarification provides continuity with previous Governmentwide and DoD policy that permitted use of more than one alternative. Specifically, use of a combination of alternatives was allowed for awards to: E:\FR\FM\07NOP2.SGM 07NOP2 78386 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules • Institutions of higher education and other nonprofit organizations under OMB Circular A–110 and the associated DoD implementation in DoDGARs part 32 (32 CFR part 32). • States, local governments, and Indian tribes under the Governmentwide common rule implementing OMB Circular A–102, which was adopted by DoD in DoDGARs part 33 (32 CFR part 33). sradovich on DSK3GMQ082PROD with PROPOSALS2 D. Proposed Part 1130—General Terms and Conditions on Property Administration The proposed part 1130 addresses six articles of general terms and conditions concerning property acquired by recipients under awards and federally owned property furnished to recipients by the Government. The articles are designated as PROP Articles I through VI of the general terms and conditions. The proposed standard wording for the articles is in appendices A through F to the proposed part. The prescriptions for DoD Components’ use of the standard wording is in the associated Subparts A through F of the proposed part. The articles with their related prescriptions implement the property administration provisions of the OMB guidance in 2 CFR part 200, as that guidance pertains to general award terms and conditions. The subjects covered by the six articles (and the appendices and subparts containing the articles and associated prescriptions) are: • Title to property (in Subpart A and appendix A) • Recipients’ property management systems (in Subpart B and appendix B) • Use and disposition of real property (in Subpart C and appendix C) • Use and disposition of equipment and supplies (in Subpart D and appendix D) • Use and disposition of federally owned property (in Subpart E and appendix E) • Intangible property (in Subpart F and appendix F) The following subsections II.D.1 through 6 of this SUPPLEMENTARY INFORMATION section focus on whether and how the proposed implementation of the guidance in each article and its associated prescription for DoD Components varies from, or clarifies, the related OMB guidance. 1. Title to Property The proposed PROP Article I, ‘‘Title to property,’’ and associated prescription implement portions of the OMB guidance that address title vesting and the property trust relationship. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 They implement the guidance with no variations. 2. Property Management System The proposed PROP Article II, ‘‘Property management system,’’ and associated prescription implement portions of the OMB guidance that specify the standards for a recipient’s property management system. The proposed implementation includes one variation from the guidance. The one variation is the inclusion of property management system requirements for federally owned property. Although the OMB guidance in 2 CFR part 200 does not explicitly address those management system requirements, they are needed to ensure proper stewardship of any federally owned property for which a recipient is accountable under an award. The requirements are included for States in Section B of the proposed PROP Article II and for institutions of higher education, nonprofit organizations, local governments, and Indian tribes in Section C of the proposed article. The requirements in the proposed PROP Article II continue long-standing DoD policy in the DoDGARs, for States under 32 CFR 33.32(f) and for other recipients under 32 CFR 32.34(f). Those requirements also were included at 2 CFR 1103.201 in the interim DoD implementation of the guidance in 2 CFR part 200. 3. Use and Disposition of Real Property The proposed PROP Article III, ‘‘Use and disposition of real property,’’ and associated prescription implement the portions of the OMB guidance pertinent to that subject. The proposed implementation includes one variation from the guidance. The variation is that the proposed article authorizes a recipient’s use of real property acquired under an award for other projects or programs either: (1) During its use on the project or program for which it was acquired, on a noninterfering basis; or (2) subsequently, by deferral of final disposition of the property, if the recipient obtains DoD approval for use on other federally sponsored projects or programs with purposes consistent with those supported by the award. The use on a non-interfering basis during the performance period of the award parallels provisions in the OMB guidance at 2 CFR 200.313(c)(2) for equipment acquired under an award. The potential to use real property after the end of the performance period continues long-standing policy in the DoDGARs at 32 CFR 32.32(b) for awards to institutions of higher education, PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 hospitals, and other nonprofit organizations and extends that policy to States, local governments, and Indian tribes. 4. Use and Disposition of Equipment and Supplies The proposed PROP Article IV, ‘‘Use and disposition of equipment and supplies,’’ and associated prescription implement the portions of the OMB guidance on that subject. The proposed implementation includes one variation from the guidance. 5. Use and Disposition of Federally Owned Property The proposed PROP Article V, ‘‘Use and disposition of federally owned property,’’ and associated prescription implement the OMB guidance on that subject, with no variations or clarifications relative to the guidance. 6. Intangible Property The proposed PROP Article VI, ‘‘Intangible property,’’ and associated prescription implement the provisions of the OMB guidance that address copyrights, inventions, and data. The proposed implementation includes one clarification of the guidance. The one clarification, which is in Section D of the proposed article, relates to a patent, patent application, copyright, or other intangible property that is acquired under an award by a means other than being developed or produced under the award. This is an important distinction because policies concerning vesting of title to the property and use and disposition of the property appropriately differ from the corresponding policies for intangible property that is developed or produced under awards. This distinction was previously made in the DoDGARs at 32 CFR 32.36(e) for awards to institutions of higher education, hospitals, and other nonprofit organizations, and was included for awards to those types of recipients in DoD’s interim implementation of the OMB guidance at 2 CFR 1103.215. The incorporation into PROP Article VI extends the distinction to awards DoD Components make to States, local governments, and Indian tribes. E. Proposed Part 1132—General Terms and Conditions on Recipient Procurement Procedures The proposed part 1132 addresses three articles of general terms and conditions specifying procedural requirements for recipients’ purchases of property and services under awards. The articles, which are designated as PROC Articles I through III, are in E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules appendices A through C to the proposed part. The prescriptions for DoD Components’ use of the standard wording of the articles are in the corresponding Subparts A through C of the proposed part. The articles and the associated prescriptions implement the procurement provisions of the OMB guidance in 2 CFR part 200 as they relate to general award terms and conditions. The subjects covered by the articles (and the appendices and subparts containing the articles and associated prescriptions) are: • Procurement standards for States (in Subpart A and appendix A) • Procurement standards for institutions of higher education, nonprofit organizations, local governments, and Indian tribes (in Subpart B and appendix B) • Contract provisions for recipient procurements (in Subpart C and appendix C) The following subsections II.E.1 through 3 of this SUPPLEMENTARY INFORMATION section address whether and how the proposed implementation of the guidance in each article and its associated prescription for DoD Components varies from, or clarifies, the related OMB guidance. 1. Procurement Standards for States The proposed PROC Article I, ‘‘Procurement standards for States,’’ and the associated prescription implement the OMB guidance on those standards, with no variations or clarifications relative to the guidance. sradovich on DSK3GMQ082PROD with PROPOSALS2 2. Procurement Standards for Institutions of Higher Education, Nonprofit Organizations, Local Governments, and Indian Tribes The proposed PROC Article II, ‘‘Procurement standards for institutions of higher education, nonprofit organizations, local governments, and Indian tribes,’’ and the associated prescription implement the OMB guidance on those standards, with no clarifications or variations relative to the guidance. 3. Contract Provisions for Recipient Procurements The proposed PROC Article III, ‘‘Contract provisions for recipient procurements,’’ and the associated prescription implement the OMB guidance on that subject, with no variations or clarifications relative to the guidance. F. Proposed Part 1134—General Terms and Conditions on Reporting The proposed part 1134 addresses four articles of general terms and VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 conditions on recipient reporting requirements. The articles are designated as REP Articles I through IV and are in appendices A through D to the proposed part. The associated prescriptions for DoD Components are in Subparts A through D of the proposed part. The articles and associated prescriptions implement the provisions of the OMB guidance in 2 CFR part 200 on reporting, as those provisions relate to general award terms and conditions. The subjects covered by the articles (and the appendices and subparts containing the articles and associated prescriptions) are: • Performance management, monitoring, and reporting (in Subpart A and appendix A) • Financial reporting (in Subpart B and appendix B) • Reporting on property (in Subpart C and appendix C) • Reporting on subawards and executive compensation (in Subpart D and appendix D) The following subsections II.F.1 through 4 of this Supplementary Information section address whether and how the proposed implementation of the guidance in each article and its associated prescription for DoD Components varies from, or clarifies, the related OMB guidance. 1. Performance Management, Monitoring, and Reporting The proposed REP Article I, ‘‘Performance management, monitoring, and reporting,’’ implements portions of the OMB guidance pertinent to that subject. It does so with no variations or clarifications relative to the guidance. 2. Financial Reporting The proposed REP Article II, ‘‘Financial reporting,’’ implements the OMB guidance on that subject, with one clarification. That clarification is in Section D of the proposed article and the related prescription for DoD Components. Section D authorizes recipients to request extensions of due dates for interim and final financial reports. That authorization continues long-standing DoD policy in: (1) The DoDGARs at 32 CFR 32.52(a) and underlying provisions of OMB Circular A–110 for awards to institutions of higher education, hospitals, and other nonprofit organizations; and (2) the DoDGARs at 32 CFR 33.41(a)(7) and the underlying Governmentwide common rule for awards to States, local governments, and Indian tribes. 3. Property Reporting The proposed REP Article III, ‘‘Property reporting,’’ provides a single PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 78387 location within the general terms and conditions at which a recipient may find all of the property reporting requirements listed. With its associated prescription, it implements portions of the OMB guidance concerning property reporting that are not implemented in other articles of the general terms and conditions. For the reporting requirements that are addressed in other articles, the proposed REP Article III includes references to those articles rather than restating the requirements. The proposed article and prescription include no variations or clarifications relative to the guidance. 4. Reporting on Subawards and Executive Compensation The proposed REP Article IV, ‘‘Reporting on subawards and executive compensation,’’ directly implements the Governmentwide guidance in 2 CFR part 170 that is based on statutory reporting requirements in the Federal Funding Accountability and Transparency Act, as amended. The proposed article also implements portions of the OMB guidance in 2 CFR part 200 that cite those statutory requirements and 2 CFR part 170. The proposed article includes no variations or clarifications relative to the guidance it implements. G. Proposed Part 1136—General Terms and Conditions on Other Administrative Requirements The proposed part 1136 addresses seven articles of general terms and conditions. The seven articles specify the recipients’ and Government’s rights and responsibilities in areas of administrative requirements other than financial and program management, property administration, recipient procurement procedures, and reporting (which are the four areas addressed in the proposed parts 1128, 1130, 1132, and 1134 and discussed in sections II.C through F of this SUPPLEMENTARY INFORMATION section). The articles and associated prescriptions for DoD Components implement the OMB guidance in 2 CFR part 200 in these other areas of administrative requirements, as the guidance relates to general award terms and conditions. The articles are designated as OAR Articles I through VII and are in appendices A through G to the proposed part. The associated prescriptions are in Subparts A through G of the proposed part. The subjects covered by the articles (and the appendices and subparts containing the articles and associated prescriptions) are: E:\FR\FM\07NOP2.SGM 07NOP2 78388 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules • Submitting and maintaining recipient information (in Subpart A and appendix A) • Records retention and access (in Subpart B and appendix B) • Remedies and termination (in Subpart C and appendix C) • Claims, disputes, and appeals (in Subpart D and appendix D) • Collection of amounts due (in Subpart E and appendix E) • Closeout (in Subpart F and appendix F) • Post-closeout adjustments and continuing responsibilities (in Subpart G and appendix G) The following subsections II.G.1 through 7 of this SUPPLEMENTARY INFORMATION section address whether and how the proposed implementation of the guidance in each article and its associated prescription for DoD Components varies from, or clarifies, the related OMB guidance. sradovich on DSK3GMQ082PROD with PROPOSALS2 1. Submitting and Maintaining Recipient Information The proposed OAR Article I, ‘‘Submitting and maintaining recipient information,’’ and related prescription for DoD Components addresses requirements to register in the System for Award Management, report information to the Federal Awardee Performance and Integrity Information System (FAPIIS), and disclose evidence of certain integrity-related matters to the DoD Inspector General. It thereby implements OMB guidance in 2 CFR part 25, 2 CFR 200.113, and 200.210(b)(1)(iii). The article includes one clarification of the guidance. The clarification concerns the guidance in 2 CFR 200.113 that relates to mandatory disclosures of certain violations of Federal criminal law. The proposed implementation in Section C of OAR Article I provides more specifics than the OMB guidance—e.g., by specifying transmission of the information to the DoD Inspector General’s office and grants officer and providing assurances about the safeguarding of the information provided to the Government. 2. Records Retention and Access The proposed OAR Article II, ‘‘Records retention and access,’’ and associated prescription for DoD Components implement the OMB guidance on that subject in 2 CFR part 200. They do so with two clarifications. The first clarification concerns the period during which the Government may disallow costs and recover funds on the basis of an audit or other review of a recipient. The three portions of the OMB guidance in 2 CFR part 200 VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 pertinent to this clarification are in: (1) 2 CFR 200.333(b) on records retention requirements, which states that an agency may extend the records retention period by notifying the recipient in writing; (2) 2 CFR 200.336(c), which states that the Government’s right to access records is not limited to the records retention period but lasts as long as the recipient retains the records; and (3) 2 CFR 200.344 on post-closeout adjustments, which states that an agency must make any cost disallowance determination and notify the recipient within the record retention period. To conform the period during which DoD may disallow costs with the period during which it may access the recipient’s records, the proposed OAR Article II specifies that the recipient is not required to retain records beyond the standard records retention period delineated in 2 CFR 200.333 but, if it elects to do so, the records retention period for purposes of post-closeout adjustments is extended to be the same as the period during which the records are retained. This provision in OAR Article II thereby provides the written notification to recipients that is described in 2 CFR 200.333(b). The second clarification concerns the retention period for records concerning exempt property. The clarification, which is in paragraph A.1 of the proposed article, is that the recipient must keep whatever property records it needs to keep for exempt property acquired under a DoD award, for as long as it needs to keep them, to ensure that any residual Federal share of the value of that property is not later used as a contribution toward cost sharing or matching requirements of another Federal award. effective date. Paragraph C.1 includes one condition not explicitly stated in the OMB guidance, which is that costs resulting from obligations incurred before the date of a termination are allowable only if they are noncancellable after the termination. This will provide good stewardship of Federal funds by restoring a longstanding DoDGARs requirement for allowability of costs in the case of termination, previously in 32 CFR 32.62(c) for awards to institutions of higher education, hospitals, and other nonprofit organizations, and in 32 CFR 33.43(c) for awards to States, local governments, and Indian tribes. The two clarifications are with respect to OMB guidance in: • 2 CFR 200.339(a)(1), which specifies that a Federal agency may unilaterally terminate an award based on a recipient’s failure to comply with award terms and conditions. To make clear that there must be an adequate reason for a DoD Component to unilaterally terminate an award, which is a serious remedy, paragraph B.1.a of the proposed article affirms that the DoD standard is a recipient’s ‘‘material’’ failure to comply with award terms and conditions. • 2 CFR 200.339(a)(2), which adds termination for cause as a basis for unilateral termination of an award by the Government. For added clarity, since ‘‘termination for cause’’ is not defined and likely would be interpreted by DoD officials to be the same as termination for default (i.e., material failure to comply with award terms and conditions), paragraph B.1.a of the proposed article describes that added basis for a DoD Component’s unilateral termination in plain language. 3. Remedies and Termination The proposed OAR Article III, ‘‘Remedies and termination,’’ and related prescription for DoD Components implement the OMB guidance on that subject in 2 CFR part 200. The article and prescription include one variation from, and two clarifications of, the guidance. The one variation is with respect to OMB guidance in 2 CFR 200.342 that describes the conditions under which costs incurred during a suspension or after a termination are allowable. To avoid potential confusion, Section C segregates the implementation of the guidance into two paragraphs: (1) Paragraph C.1, to address costs resulting from obligations incurred by a recipient before the effective date of the suspension or termination; and (2) paragraph C.2, to address costs resulting from obligations incurred after that 4. Claims, Disputes, and Appeals The proposed OAR Article IV, ‘‘Claims, disputes and appeals,’’ and associated prescription for DoD Components implement existing DoDGARs requirements in 32 CFR 22.810. They also implement the OMB guidance in 2 CFR 200.341 on recipients’ opportunities to object to remedies taken for non-compliance. The article and prescription do so with no variations or clarifications relative to the guidance. PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 5. Collection of Amounts Due The proposed OAR Article V, ‘‘Collection of amounts due,’’ and related prescription for DoD Components implement the OMB guidance on that subject, which is in 2 CFR 200.345. The article does not vary from the guidance but does clarify that the existing DoDGARs procedures in 32 E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules CFR 22.820 for issuing demands for payment and transferring debts for collection continue to apply. That same clarification is stated at 2 CFR 1103.225 in DoD’s interim implementation of the OMB guidance in 2 CFR part 200. 6. Closeout The proposed OAR Article VI, ‘‘Closeout,’’ implements the OMB guidance on that subject. The article includes no variations or clarifications relative to the guidance. 7. Post-closeout Adjustments and Continuing Responsibilities The proposed OAR Article VII, ‘‘Postcloseout adjustments and continuing responsibilities,’’ and associated prescription for DoD Components implement the OMB guidance on that subject. It does so with no variations or clarifications relative to the guidance. sradovich on DSK3GMQ082PROD with PROPOSALS2 H. Proposed Part 1138—General Terms and Conditions on Requirements Related to Subawards The proposed part 1138 addresses twelve articles of general terms and conditions related to subawards that institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes make to all types of subrecipient entities under DoD Components’ grants and cooperative agreements. The articles and associated prescriptions for DoD Components implement the OMB guidance in 2 CFR part 200 concerning subawards, as that guidance relates to general terms and conditions. The articles are designated as SUB Articles I through XII and are in appendices A through L to the proposed part. The associated prescriptions are in Subparts A through L of the proposed part. The subjects covered by the articles (and the appendices and subparts containing the articles and associated prescriptions) are: • Distinguishing subawards and procurements (in Subpart A and appendix A) • Pre-award and time of award responsibilities (in Subpart B and appendix B) • Informational content of subawards (in Subpart C and appendix C) • Financial and program management requirements for subawards (in Subpart D and appendix D) • Property requirements for subawards (in Subpart E and appendix E) • Procurement procedures to include in subawards (in Subpart F and appendix F) • Financial, programmatic, and property reporting requirements for VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 subawards (in Subpart G and appendix G) • Other administrative requirements for subawards (in Subpart H and appendix H) • National policy requirements for subawards (in Subpart I and appendix I) • Subrecipient monitoring and other post-award administration (in Subpart J and appendix J) • Requirements concerning subrecipients’ lower-tier subawards (in Subpart K and appendix K) • Fixed-amount subawards (in Subpart L and appendix L) The following subsections II.H.1 through 12 describe these twelve articles and each instance in which an article or its associated prescription for DoD Components varies from, or clarifies, the related OMB guidance in a way not already described in sections II.C through II.G of this SUPPLEMENTARY INFORMATION section. The reason that some variations and clarifications already were described in sections II.C through II.G is that SUB Articles IV through VIII address the administrative requirements that recipients are to include in their subaward terms and conditions. In doing so, SUB Articles IV through VIII often instruct recipients to flow down to subrecipients the same administrative requirement that applies to recipients, which therefore is in one of the 27 articles of general terms and conditions described in sections II.C through II.G of this SUPPLEMENTARY INFORMATION section. For any of those articles that varies from or clarifies the OMB guidance, that variation or clarification is described in sections II.C through II.G and will not be described again in the following subsections II.H.1 through 12. 1. Distinguishing Subawards and Procurements The proposed SUB Article I, ‘‘Distinguishing subawards and procurements,’’ addresses the need for a recipient to determine the nature of each transaction into which it enters at the next lower tier under its award. 2. Pre-award and Time of Award Responsibilities The proposed SUB Article II, ‘‘Preaward and time of award responsibilities,’’ and associated prescription for DoD Components include no variations or clarifications relative to the pertinent portions of the OMB guidance. 3. Informational Content of Subawards The proposed SUB Article III, ‘‘Informational content of subawards,’’ PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 78389 and the related prescription for DoD Components include one variation relative to the OMB guidance. The variation is from the guidance in 2 CFR 200.331(a)(1)(xiii) that provides for the recipient’s inclusion of the subrecipient’s indirect cost rate as an information element in every subaward. Because many nonprofit and for-profit entities deem their indirect cost rates to be proprietary, in order to protect confidential business information, the proposed SUB Article III varies from the guidance by providing flexibility for a recipient in that situation to exclude information about the subrecipient’s indirect cost rate from the subaward. 4. Financial and Program Management Requirements for Subawards The proposed SUB Article IV, ‘‘Financial and program management requirements for subawards,’’ addresses the types of administrative requirements for subawards that FMS Articles I through VII address for awards under which the subawards are made. 5. Property Requirements for Subawards The proposed SUB Article V, ‘‘Property requirements for subawards,’’ covers the property administration requirements for subawards that PROP Articles I through VI cover for awards under which the subawards are made. SUB Article V and the related prescription for DoD Components include one clarification relative to the OMB guidance that sections II.D.1 through 6 of this SUPPLEMENTARY INFORMATION section did not already describe. The added clarification is that a subrecipient would submit a request for property disposition instructions through the recipient, and not directly to DoD as a recipient would do. 6. Procurement Procedures To Include in Subawards The proposed SUB Article VI, ‘‘Procurement procedures to include in subawards,’’ addresses the types of administrative requirements for subawards that PROC Articles I through III address for awards under which the subawards are made. SUB Article VI and the associated prescription for DoD Components include no variations or clarifications relative to the OMB guidance that sections II.E.1 through 3 of this SUPPLEMENTARY INFORMATION section did not already describe. 7. Financial, Programmatic, and Property Reporting Requirements for Subawards The proposed SUB Article VII, ‘‘Financial, programmatic, and property reporting requirements for subawards,’’ E:\FR\FM\07NOP2.SGM 07NOP2 78390 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules covers the types of reporting for subawards that REP Articles I through IV cover for awards under which the subawards are made. SUB Article VII and the related prescription for DoD Components include no variations or clarifications relative to the OMB guidance that sections II.F.1 through 4 of this SUPPLEMENTARY INFORMATION section did not already describe. 8. Other Administrative Requirements for Subawards The proposed SUB Article VIII, ‘‘Other administrative requirements for subawards,’’ covers the administrative requirements for subawards that OAR Articles I through VII cover for awards under which the subawards are made. SUB Article VIII and the related prescription for DoD Components include no variations or clarifications relative to the OMB guidance. sradovich on DSK3GMQ082PROD with PROPOSALS2 9. National Policy Requirements for Subawards The proposed SUB Article IX, ‘‘National policy requirements for subawards,’’ addresses the flow down to subawards of the requirements in NP Articles I–IV, which are addressed in the DoDGARs parts proposed in the NPRM following this one in this section of this issue of the Federal Register. SUB Article IX and the related prescription for DoD Components include two clarifications relative to the pertinent portions of the OMB guidance in 2 CFR part 200. The clarifications are that a recipient must immediately alert the DoD office administering its award if: • An entity to which the recipient is about to make a subaward will not accept a subaward provision requiring the subrecipient’s compliance with an applicable national policy requirement; or • At any time during the performance of a subaward, the recipient learns that—or receives a credible allegation that—the subrecipient is not complying with an applicable national policy requirement. 10. Subrecipient Monitoring and Other Post-Award Administration The proposed SUB Article X, ‘‘Subrecipient monitoring and other post-award administration,’’ addresses requirements for recipients’ monitoring of subrecipients and related post-award administration of subawards that they make under DoD grants and cooperative agreements. SUB Article X and the related prescription for DoD Components include no variations or clarifications relative to the OMB guidance. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 11. Requirements Concerning Subrecipients’ Lower-Tier Subawards The proposed SUB Article XI, ‘‘Requirements concerning subrecipients’ lower-tier subawards,’’ specifies requirements that a recipient must include in any subaward in which it judges that the subrecipient may make lower-tier subawards. SUB Article XI and the associated prescription for DoD Components include no variations or clarifications relative to the OMB guidance that sections II.H.1 through 10 of this Supplementary Information section did not already address. 12. Fixed-Amount Subawards The proposed SUB Article XII, ‘‘Fixed-amount subawards,’’ specifies policy and procedures concerning recipients’ use of fixed-amount subawards under DoD grants and cooperative agreements. The article and associated prescription for DoD Components includes two variations relative to the OMB guidance concerning fixed-amount subawards. Specifically, SUB Article XII does not provide for: • A subrecipient’s certification to the recipient at the end of the subaward that it completed the project or activity or expended the level of effort, as described in the OMB guidance at 2 CFR 200.201(b)(3). A certification is not needed because the article defines appropriate uses of a fixed-amount subaward based on well-defined outcomes that are sufficiently observable and verifiable by the recipient so as to obviate the need to rely on a subrecipient’s assurances. The article clarifies that outcomes are distinct from inputs, such as level of effort, needed to achieve the outcomes. • The need for a recipient’s prior approval for a change in the subrecipient’s principal investigator or other project leader, as described in the OMB guidance at 2 CFR 200.201(b)(5). It is inappropriate to require prior approvals for changes in inputs, such as which individuals carry out the project or program, because the article links the appropriate use of fixed-amount subawards to well-defined outcomes. III. Relationship of Administrative Requirements in This NPRM to Future DoD Implementation of the OMB Guidance As noted in section III of the Supplementary Information section of the first of the NPRMs in this section of this issue of the Federal Register, DoD will complete the remaining needed updates of the DoDGARs in a subsequent set of proposals for public PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 comment. That future set of proposals will include implementation of the OMB guidance on administrative requirements in 2 CFR part 200 as it applies to both: (1) award-specific terms and conditions of DoD Components’ grants and cooperative agreements; and (2) post-award administration. Those future proposals will complement the proposed DoDGARs parts 1128 through 1138 in this NPRM, which implement the guidance on administrative requirements as it applies to general award terms and conditions. The reason for these separate implementations is that they address distinct audiences at different points during the award life cycle. The implementation in this NPRM addresses an individual in a DoD awarding office who is responsible for drafting general terms and conditions to be used in the office’s many future awards under one or more programs with similar requirements (e.g., its research programs or its training programs). In contrast, the implementations of the guidance as it applies to: • Award-specific terms and conditions will address awarding officials in that awarding office who will later be making the individual awards under the programs. The portions of the DoDGARs addressing those officials must be tailored to their responsibilities, which include considering the specific circumstances of each award before deciding which, if any, provisions in the general terms and conditions need to be supplemented or even overridden by terms and conditions specific to that award. • Post-award administration will address officials responsible for subsequently administering the awards. In DoD, those officials often are located in offices specifically designated to provide award administration services that are organizationally and physically separate from the awarding offices. The officials’ responsibilities differ in kind and not just in degree from those of the awarding officials. Again, the portions of the DoDGARs addressing those officials needs to be tailored to their distinct responsibilities. Segregating the DoDGARs implementation of the guidance for these three sets of DoD officials enables the regulations to more clearly address each of the different audiences. Doing so makes it easier for each audience to understand what the regulations require of them, and thereby promotes compliance. IV. Desired Inputs DoD welcomes comments on all aspects of the seven proposed parts in E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules this NPRM, as inputs from affected entities will help make the final regulations better. Questions on which commenters’ inputs would be helpful include: • Do the seven proposed parts appear to include any substantive variations from the OMB guidance in 2 CFR part 200, as that guidance applies to general award terms and conditions—other than those noted in section II of this Supplementary Information section? • In each of the proposed parts 1128 through 1138, does the separation of administrative requirements into two portions—i.e., the wording of terms and conditions for recipients in the appendices to the part and the prescriptions for DoD Components in the corresponding subparts of the part— help make requirements clearer for affected parties? • Does the use of plain language and pronouns improve the readability and understandability of the content of the proposed parts? sradovich on DSK3GMQ082PROD with PROPOSALS2 V. Regulatory Analysis Executive Order 12866, ‘‘Regulatory Planning and Review,’’ and Executive Order 13563, ‘‘Improving Regulation and Regulatory Review’’ Executive Order 12866, as supplemented by Executive Order 13563, directs each Federal agency to: propose regulations only after determining that benefits justify costs; tailor regulations to minimize burdens on society, consistent with achieving regulatory objectives; maximize net benefits when selecting among regulatory approaches; specify performance objectives, to the extent feasible, rather than the behavior or manner of compliance; and seek the views of those likely to be affected before issuing a notice of proposed rulemaking, where feasible and appropriate. The Department of Defense has determined that a regulatory implementation of 2 CFR part 200 that includes standard wording of general terms and conditions for DoD Components’ grant and cooperative agreement awards will maximize longterm benefits in relation to costs and burdens for recipients of those awards. In providing—for the first time— uniformity across research and other awards, the approach will benefit institutions of higher education and other types of recipients that receive awards from diverse defense programs and numerous DoD Component awarding offices. The Department informally consulted representatives of the most affected recipient community during development of this regulatory VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 proposal. This rule has been designated a ‘‘significant regulatory action’’ under section 3(f) of Executive Order 12866, although not an economically significant one. Accordingly, the rule has been reviewed by OMB. Unfunded Mandates Reform Act of 1995 Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded Mandates Act) (2 U.S.C. 1532) requires that a Federal agency prepare a budgetary impact statement before issuing a rule that includes any Federal mandate that may result in the expenditure in any one year by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in 1995 dollars, updated annually for inflation. In 2015, that inflation-adjusted amount in current dollars is approximately $146 million. The Department of Defense has determined that this proposed regulatory action will not result in expenditures by State, local, and tribal governments, or by the private sector, of that amount or more in any one year. Regulatory Flexibility Act The Regulatory Flexibility Act requires an agency that is proposing a rule to provide a regulatory flexibility analysis or to certify that the rule will not have a significant economic impact on a substantial number of small entities. The Department of Defense certifies that this proposed regulatory action will not have a significant economic impact on substantial number of small entities beyond any impact due to provisions of it that implement OMB guidance at 2 CFR part 200. Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35; 5 CFR part 1320, appendix A.1) (PRA), the Department of Defense has determined that there are no new collections of information contained in this proposed regulatory action. Executive Order 13132, ‘‘Federalism’’ Executive Order 13132 establishes certain requirements that an agency must meet when it proposes a regulation that has Federalism implications. This proposed regulatory action does not have any Federalism implications. List of Subjects 2 CFR Part 1126 Cooperative agreements, Grant programs, Grants administration. 2 CFR Part 1128 Accounting, Business and Industry, Cooperative agreements, Grants PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 78391 administration, Hospitals, Indians, Nonprofit organizations, Reporting and recordkeeping requirements, Small business, State and local governments. 2 CFR Part 1130 Cooperative agreements, Grants administration, Hospitals, Indians, Nonprofit organizations, Reporting and recordkeeping requirements, Small business, State and local governments. 2 CFR Part 1132 Business and Industry, Cooperative agreements, Grants administration, Hospitals, Indians, Nonprofit organizations, Reporting and recordkeeping requirements, Small business, State and local governments. 2 CFR Part 1134 Cooperative agreements, Grants administration, Hospitals, Indians, Nonprofit organizations, Reporting and recordkeeping requirements, Small business, State and local governments. 2 CFR Part 1136 Cooperative agreements, Grants administration, Hospitals, Indians, Nonprofit organizations, Reporting and recordkeeping requirements, Small business, State and local governments. 2 CFR Part 1138 Accounting, Business and Industry, Cooperative agreements, Grants administration, Hospitals, Indians, Nonprofit organizations, Reporting and recordkeeping requirements, Small business, State and local governments. ■ Accordingly, under the authority of 5 U.S.C. 301 and 10 U.S.C. 113, 2 CFR chapter XI, subchapter D, is proposed to be amended by adding parts 1126, 1128, 1130, 1132, 1134, 1136, and 1138 to read as follows: PART 1126—SUBCHAPTER D OVERVIEW Sec. 1126.1 Purposes of this subchapter. 1126.2 Applicability of this subchapter. 1126.3 Exceptions from requirements in this subchapter. 1126.4 Relationship to other portions of the DoD grant and agreement regulations. 1126.5 Organization of this subchapter. 1126.6 Organization of the other parts of this subchapter. Authority: 5 U.S.C. 301 and 10 U.S.C. 113. § 1126.1 Purposes of this subchapter. This subchapter of the DoD Grant and Agreement Regulations: (a) Addresses general terms and conditions governing administrative E:\FR\FM\07NOP2.SGM 07NOP2 78392 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules requirements for DoD Components’ costtype grant and cooperative agreement awards to institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes. It does so by providing: (1) A standard organization of the administrative requirements into articles of general terms and conditions, each of which is in a specific subject area. (2) Standard wording for those articles; and (3) Associated prescriptions for DoD Component’s use of the standard wording to construct their general terms and conditions, which allow for adding, omitting, or varying in other ways from the standard wording in certain situations. (b) Thereby implements OMB guidance in 2 CFR part 200 as it relates to general terms and conditions of grant and cooperative agreement awards to institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes. § 1126.2 Applicability of this subchapter. (a) Entities. This subchapter: (1) Applies to DoD Components that make cost-type grant and cooperative agreement awards to institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes. (2) Does not directly impose requirements on a recipient of a DoD Component’s award but does do so indirectly, through the DoD Component’s compliance with this subchapter when it constructs its general award terms and conditions. The terms and conditions delineate the rights and responsibilities of the recipient and the Federal Government under the award. (b) Awards. This subchapter applies to DoD Components’ cost-type grants and cooperative agreements to types of entities identified in paragraph (a)(1) of this section, other than Technology Investment Agreements that are addressed in 32 CFR part 37. § 1126.3 Exceptions from requirements in this subchapter. (a) Exceptions that are not permitted. A DoD Component may not grant any exception to the requirements in this subchapter if the exception is: (1) Prohibited by statute, executive order, or regulation; (2) Inconsistent with the OMB implementation of the Single Audit Act in Subpart F of 2 CFR part 200. (b) Other exceptions. Other exceptions are permitted from requirements in this subchapter for institutions of higher education, nonprofit organizations, States, local governments and Indian tribes, as follows: (1) Statutory or regulatory exceptions. A DoD Component’s general terms and conditions may incorporate a requirement that is inconsistent with the requirements in this subchapter if that requirement is specifically authorized or required by a statute or regulation adopted in the Code of Federal Regulations after opportunity for public comment. (2) Individual exceptions. The Head of the DoD Component or his or her designee may approve an individual exception affecting only one award in accordance with procedures stated in 32 CFR 21.340. (3) Small awards. DoD Components’ terms and conditions for small awards may apply less restrictive requirements than those specified in this subchapter (a small award is an award for which the total value of obligated funding through the life of the award is not expected to exceed the simplified acquisition threshold). (4) Other class exceptions. The Assistant Secretary of Defense for Research and Engineering or his or her designee may approve any class exception affecting multiple awards other than small awards, with OMB concurrence if the class exception is for a requirement that is inconsistent with OMB guidance in 2 CFR part 200. Procedures for DoD Components’ requests for class exceptions are stated in 32 CFR 21.340. § 1126.4 Relationship to other portions of the DoD grant and agreement regulations. The administrative requirements specified in this subchapter complement: (1) Provisions of 32 CFR part 34 that address administrative requirements for DoD Components’ grant and cooperative agreement awards to for-profit entities; and (2) Requirements in 32 CFR part 37 for technology investment agreements. § 1126.5 Organization of this subchapter. This subchapter is organized into six parts in addition to this overview part. Each part provides standard wording and prescriptions for a number of articles of general terms and conditions that address administrative requirements in a particular subject area. The following table shows the subject area and articles corresponding to each part: In . . . Of this subchapter, you will find terms and conditions with associated prescriptions for the following articles related to . . . Part 1128 ................................. Recipient financial and program management (designated as ‘‘FMS’’ when referring to articles prescribed by this part): —FMS Article I—Financial management system standards. —FMS Article II—Payments. —FMS Article III—Allowable costs, period of availability of funds, and fee or profit. —FMS Article IV—Revision of budget and program plans. —FMS Article V—Non-Federal audits. —FMS Article VI—Cost sharing or matching. —FMS Article VII—Program income. Property administration (designated as ‘‘PROP’’ when referring to articles prescribed by this part): —PROP Article I—Title to property. —PROP Article II—Property management system. —PROP Article III—Use and disposition of real property. —PROP Article IV—Use and disposition of equipment and supplies. —PROP Article V—Use and disposition of federally owned property. —PROP Article VI—Intangible property. Recipient procurement procedures (designated as ‘‘PROC’’ when referring to articles prescribed by this part): —PROC Article I—Procurement standards for States. —PROC Article II—Procurement standards for institutions of higher education, nonprofit organizations, local governments, and Indian tribes. —PROC Article III—Contract provisions for recipient procurements. sradovich on DSK3GMQ082PROD with PROPOSALS2 Part 1130 ................................. Part 1132 ................................. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules 78393 In . . . Of this subchapter, you will find terms and conditions with associated prescriptions for the following articles related to . . . Part 1134 ................................. Financial, programmatic, and property reporting (designated as ‘‘REP’’ when referring to articles prescribed by this part): —REP Article I—Performance management, monitoring, and reporting. —REP Article II—Financial reporting. —REP Article III—Reporting on property. —REP Article IV—Reporting on subawards and executive compensation. Other administrative requirements (designated as ‘‘OAR’’ when referring to articles prescribed by this part): —OAR Article I—Submitting and maintaining recipient information. —OAR Article II—Records retention and access. —OAR Article III—Remedies and termination. —OAR Article IV—Claims, disputes, and appeals. —OAR Article V—Collection of amounts due. —OAR Article VI—Closeout. —OAR Article VII—Post-closeout adjustments and continuing responsibilities. Requirements related to subawards (designated as ‘‘SUB’’ when referring to articles prescribed by this part): —SUB Article I—Distinguishing subawards and procurements. —SUB Article II—Pre-award and time of award responsibilities. —SUB Article III—Informational content of subawards. —SUB Article IV—Financial and program management requirements for subawards. —SUB Article V—Property requirements for subawards. —SUB Article VI—Procurement procedures to include in subawards. —SUB Article VII—Financial, programmatic, and property reporting requirements for subawards. —SUB Article VIII—Other administrative requirements for subawards. —SUB Article IX—National Policy Requirements for Subawards. —SUB Article X—Subrecipient monitoring and other post-award administration. —SUB Article XI—Requirements concerning subrecipients’ lower-tier subawards. —SUB Article XII—Fixed-amount subawards. Part 1136 ................................. Part 1138 ................................. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1126.6 Organization of the other parts of this subchapter. (a) Each of parts 1128 through 1138 of this subchapter is organized into a number of subparts and appendices. (1) Each appendix provides the standard wording of general terms and conditions for one of the articles of general terms and conditions that the part addresses. (2) For each appendix addressing a particular article, the part has an associated subpart that provides the prescription for DoD Components’ use of the standard wording for that article. (b) For example, the table in § 1126.5 indicates that 2 CFR part 1128 provides the standard wording of general terms and conditions for FMS Articles I through VII and the prescriptions for DoD Components’ use of that standard wording. (1) FMS Article I on financial management system standards is the first of the articles that 2 CFR part 1128 covers. Appendix A to 2 CFR part 1128 provides the standard wording of general terms and conditions for FMS Article I. The associated subpart of 2 CFR part 1128, subpart A, provides the prescription for DoD Components’ use of the standard wording of that article. (2) Appendices B through G of 2 CFR part 1128 provide the standard wording of general terms and conditions for FMS Articles II through VII, respectively. The associated subparts, subparts B through G, provide the corresponding prescriptions for DoD Components. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 PART 1128—RECIPIENT FINANCIAL AND PROGRAM MANAGEMENT: GENERAL AWARD TERMS AND CONDITIONS Sec. 1128.1 Purpose of this part. 1128.2 Applicability of this part. 1128.3 Exceptions from requirements of this part. 1128.4 Organization of this part. Subpart A—Financial management system standards (FMS Article I) 1128.100 Purpose of FMS Article I. 1128.105 Content of FMS Article I. Subpart B—Payments (FMS Article II) 1128.200 Purpose of FMS Article II. 1128.205 Content of FMS Article II. 1128.210 Payment requirements for States. 1128.215 Payment requirements for institutions of higher education, nonprofit organizations, local governments, and Indian tribes. 1128.220 Electronic funds transfer and other payment procedural instructions or information. Subpart C—Allowable costs, period of availability of funds, and fee or profit (FMS Article III) 1128.300 Purpose of FMS Article III. 1128.305 Content of FMS Article III. 1128.310 Cost principles. 1128.315 Clarification concerning allowability of publication costs. 1128.320 Period of availability of funds. 1128.325 Fee or profit. Subpart D—Revision of Budget and Program Plans (FMS Article IV) 1128.400 Purpose of FMS Article IV. PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 1128.405 Content of FMS Article IV. 1128.410 Approved budget. 1128.415 Prior approvals for nonconstruction activities. 1128.420 Prior approvals for construction activities. 1128.425 Additional prior approval for awards that support both nonconstruction and construction activities. 1128.430 Procedures for prior approvals. Subpart E—Non-Federal Audits (FMS Article V) 1128.500 1128.505 Purpose of FMS Article V. Content of FMS Article V. Subpart F—Cost sharing or Matching (FMS Article VI) 1128.600 Purpose of FMS Article VI. 1128.605 Content of FMS Article VI. 1128.610 General requirement for cost sharing or matching. 1128.615 General criteria for determining allowability as cost sharing or matching. 1128.620 Allowability of unrecovered indirect costs as cost sharing or matching. 1128.625 Allowability of program income as cost sharing or matching. 1128.630 Valuation of services or property contributed or donated by recipients or subrecipients. 1128.635 Valuation of third-party in-kind contributions. Subpart G—Program income (FMS Article VII) 1128.700 Purpose of FMS Article VII. 1128.705 Content of FMS Article VII. 1128.710 What program income includes. 1128.715 Recipient obligations for license fees and royalties. 1128.720 Program income use. E:\FR\FM\07NOP2.SGM 07NOP2 78394 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules 1128.725 Program income after the period of performance. Appendix A to Part 1128—Terms and conditions for FMS Article I, ‘‘Financial management system standards’’ Appendix B to Part 1128—Terms and conditions for FMS Article II, ‘‘Payments’’ Appendix C to Part 1128—Terms and conditions for FMS Article III, ‘‘Allowable costs, period of availability of funds, and fee or profit’’ Appendix D to Part 1128—Terms and conditions for FMS Article IV, ‘‘Revision of budget and program plans’’ Appendix E to Part 1128—Terms and conditions for FMS Article V, ‘‘NonFederal audits’’ Appendix F to Part 1128—Terms and conditions for FMS Article VI, ‘‘Cost sharing or matching’’ Appendix G to Part 1128—Terms and conditions for FMS Article VII, ‘‘Program income’’ Authority: 5 U.S.C. 301 and 10 U.S.C. 113. § 1128.1 Applicability of this part. The types of awards and entities to which this part and other parts in this subchapter apply are described in the subchapter overview at 2 CFR 1126.2. § 1128.3 Exceptions from requirements of this part. Exceptions are permitted from the administrative requirements in this part only as described at 2 CFR 1126.3. § 1128.4 Organization of this part. (a) The content of this part is organized into subparts and associated appendices. (1) Each subpart provides direction to DoD Components on how to construct one article of general terms and conditions for grants and cooperative agreements. (2) For each subpart, there is a corresponding appendix with standard wording for terms and conditions of the article addressed by the subpart. Terms and conditions address rights and responsibilities of the Government and recipients. (b) A DoD Component must use the wording provided in each appendix in accordance with the direction in the corresponding subpart. That direction may permit DoD Components to vary from the standard wording in some situations. (c) The following table shows which article of general terms and conditions may be found in each of appendices A through G to this part (with the associated direction to DoD Components in subparts A through G, respectively): You will find terms and conditions specifying recipients’ rights and responsibilities related to . . . In . . . A ............................ B ............................ C ............................ D ............................ E ............................ F ............................. G ............................ That would appear in an award within FMS article . . . Financial management system standards ................................................... Payments ..................................................................................................... Allowable costs, period of availability of funds, and fee or profit ................ Revision of budget and program plans ....................................................... Non-Federal audits ...................................................................................... Cost sharing or matching ............................................................................. Program income ........................................................................................... I. II. III. IV. V. VI. VII. Subpart A—Financial management system standards (FMS Article I) § 1128.100 Purpose of FMS Article I. FMS Article I specifies standards for recipients’ financial management systems. It thereby implements OMB guidance in: (a) 2 CFR 200.302, 200.303, and 200.328; and (b) 2 CFR 200.301 and 200.328, as they relate to associations between financial data and performance accomplishments and reporting under awards. § 1128.105 sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1128.2 Purpose of this part. (a) This part specifies standard wording of general terms and conditions concerning financial and program management, including recipients’ financial management systems, Appendix Appendix Appendix Appendix Appendix Appendix Appendix payments, cost sharing or matching, program income, budget and program revisions, audits, allowable costs, and periods of availability of funds. (b) It thereby implements OMB guidance in the following portions of 2 CFR part 200, as they apply to general terms and conditions: (1) Sections 200.80, 200.209, and 200.302 through 200.309; (2) Sections 200.301 and 200.328, as they relate to associations between financial data and performance accomplishments and reporting under awards; and (3) Subparts E and F. Content of FMS Article I. (a) Requirement. A DoD Component’s general terms and conditions must address requirements for recipients’ financial management systems. (b) Award terms and conditions—(1) General. Except as provided in paragraph (b)(2) of this section, a DoD Component’s general terms and conditions must include the wording VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 appendix A to this part provides for FMS Article I. (2) Exceptions. A DoD Component’s general terms and conditions may: (i) Reserve Section A of FMS Article I if the DoD Component determines that it is not possible that any States will receive: (A) DoD Component awards using those general terms and conditions; or (B) Subawards from recipients of DoD Component awards using those general terms and conditions. (ii) Reserve paragraph B.6 of FMS Article I if the DoD Component determines that it will not require recipients of awards using those general terms and conditions to relate financial data to performance accomplishments (e.g., through unit costs). Because the nature of research makes the use of unit costs and other relationships between financial data and performance accomplishments generally inappropriate, DoD Components should reserve paragraph B.6 in general terms PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 and conditions for awards supporting research. Subpart B—Payments (FMS Article II) § 1128.200 Purpose of FMS Article II. FMS Article II contains requirements related to payments under an award. It thereby implements OMB guidance in 2 CFR 200.305. § 1128.205 Content of FMS Article II. (a) Requirement. A DoD Component’s general terms and conditions must address payment method; payment timing and amounts, which relate to cash management; frequency of payment requests; and matters related to recipients’ depositories, including interest earned on advance payments. (b) Award terms and conditions. A DoD Component’s general terms and conditions must include the wording appendix B to this part provides for FMS Article II with appropriate additions, deletions, and substitutions as described in §§ 1128.210 through 1128.220. E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1128.210 States. Payment requirements for (a) Policy. Payments to States are subject to requirements in Department of the Treasury regulations at 31 CFR part 205 that implement the Cash Management Improvement Act. Those regulations are in two subparts with distinct requirements that apply to different programs: (1) Subpart A of 31 CFR part 205 contains requirements for payments to States under ‘‘major programs,’’ as defined in that part. The Department of the Treasury negotiates Treasury-State agreements for major programs. Those agreements specify the appropriate timing and amounts of payments. They further specify a State’s interest liability if it receives an advance payment too many days before it disburses the funds for program purposes, as well as the Federal Government’s interest liability if it reimburses the State too many days after the State disburses the funds. Most DoD awards to States are not under major programs, so subpart A applies relatively infrequently. (2) Subpart B of 31 CFR part 205 applies to all other DoD grant and cooperative agreement awards to States—i.e., awards that are not under major programs. (b) Default wording. Because few DoD awards to States are under major programs, appendix B to this part includes default wording for Section A of FMS Article II that specifies the requirements of subpart B of 31 CFR part 205. A DoD Component’s general terms and conditions must include this wording for Section A of FMS Article II if no award using those terms and conditions will be made to a State under a program designated as a major program in the applicable TreasuryState agreement. (c) Exception for awards under major programs. If a DoD Component is establishing general terms and conditions that will be used for awards to States, only some of which are subject to requirements for major programs in subpart A of 31 CFR part 205, then the DoD Component should: (1) Use appendix B’s default wording for Section A of FMS Article II in its general terms and conditions; and (2) In each award subject to subpart A of 31 CFR part 205, include awardspecific terms and conditions that make payments to the recipient subject to the requirements in subpart A of 31 CFR part 205 and the applicable TreasuryState agreement, thereby overriding the wording of Section A of FMS Article II. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 § 1128.215 Payment requirements for institutions of higher education, nonprofit organizations, local governments, and Indian tribes. (a) Policy. OMB guidance in 2 CFR 200.305 addresses the use of three payment methods for awards—advance payments, reimbursement, and working capital advances. Two of the methods pertain to a DoD Component’s general terms and conditions, as described in paragraphs (a)(1) and (2) of this section. (1) Advance payments. With the possible exception of construction awards, as provided in paragraph (a)(2) of this section, a DoD Component’s general terms and conditions must authorize each recipient to request payments in advance as long as the recipient maintains or demonstrates the willingness to maintain both: (i) Written procedures that minimize the time elapsing between its receipt of funds from the Federal Government and its disbursement of the funds for program or project purposes; and (ii) Financial management systems that meet the standards for fund control and accountability specified in the wording of FMS Article I (see subpart A and appendix A to this part). (2) Reimbursement. A DoD Component’s general terms and conditions may specify the reimbursement method if the awards using those terms and conditions will support construction projects financed in whole or in part by the Federal Government. (b) Default award terms and conditions. Appendix B provides default wording for Section B of FMS Article II that a DoD Component: (1) Must use in general terms and conditions for non-construction awards to authorize recipients to request advance payments; and (2) May use in general terms and conditions for construction awards if it elects to authorize recipients of those awards to request advance payments. (c) Alternative award terms and conditions. A DoD Component may develop an alternative to appendix B’s default wording for Section B of FMS Article II to use in general terms and conditions for construction awards, if it elects to specify reimbursement as the payment method for those awards. The alternative: (1) Would replace Appendix B’s default wording for paragraph B.1 with wording to specify the reimbursement method of payment; (2) Must include appendix B’s default wording for paragraphs B.2.b and c, B.4, and B.5, which may be renumbered as appropriate, because those paragraphs PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 78395 apply to reimbursements as well as advance payments; (3) Should omit appendix B’s default wording for paragraphs B.2.a, B.3, and B.6 because those paragraphs apply specifically to advance payments; and (4) Must inform recipients that the DoD payment office generally makes payment within 30 calendar days after receipt of the request for reimbursement by the award administration office, unless the request is reasonably believed to be improper. § 1128.220 Electronic funds transfer and other payment procedural instructions or information. (a) Policy. A DoD Component’s general terms and conditions must specify that payments will be made by electronic funds transfer (EFT) unless a recipient is excepted in accordance with Department of the Treasury regulations at 31 CFR part 208 from the Governmentwide requirement to use EFT. (b) Award terms and conditions—(1) Electronic funds transfer. Appendix B provides default wording for Section C of FMS Article II that a DoD Component must use to specify payment by EFT, when awards are not excepted from the Governmentwide requirement. (2) Other payment procedures or instructions. A DoD Component may insert one or more paragraphs in its general terms and conditions in lieu of the reserved paragraph C.2 in appendix B, to provide procedural instructions or information regarding payments that is common to awards using those terms and conditions. For example, it may insert wording to give detailed instructions on where and how recipients are to submit payment requests. All forms, formats, and data elements for payment requests must be OMB-approved information collections. Subpart C—Allowable costs, period of availability of funds, and fee or profit (FMS Article III) § 1128.300 Purpose of FMS Article III. FMS Article III of the general terms and conditions specifies what costs are allowable as charges to awards and when they are allowable. It also specifies restrictions on payment of fee or profit. It thereby implements OMB guidance in §§ 200.209 and 200.309 and subpart E of 2 CFR part 200. It also partially implements 2 CFR 200.201(b)(1)and 200.323(c), as those sections apply to the cost principles to be used in relation to subawards and contracts, respectively. E:\FR\FM\07NOP2.SGM 07NOP2 78396 § 1128.305 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules Content of FMS Article III. (a) Requirement. A DoD Component’s general terms and conditions must address allowability of costs and permissibility of fee or profit. (b) Award terms and conditions. A DoD Component’s general terms and conditions must include the wording appendix C to this part provides for FMS Article III with appropriate additions, deletions, and substitutions as described in §§ 1128.310 through 1128.325. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1128.310 Cost principles. (a) Policy. The set of Governmentwide cost principles applicable to a particular entity type governs the allowability of costs that may be: (1) Charged to each cost-type: (i) DoD grant or cooperative agreement to a recipient of that entity type; (ii) Subaward to a subrecipient of that entity type at any tier below a DoD grant or cooperative agreement; and (iii) Procurement transaction with a contractor of that entity type awarded by a recipient of a DoD grant or cooperative agreement or a subrecipient that received a subaward at any tier below that grant or cooperative agreement. (2) Considered in establishing the amount of any: (i) Fixed-amount subaward, at any tier under an award, to a subrecipient of that entity type; or (ii) Fixed-price procurement transaction with a contractor of that entity type that is awarded by either a recipient of a DoD award or a subrecipient that received a subaward at any tier below that grant or cooperative agreement. (b) Default wording. Because almost all DoD grants and cooperative agreements are cost-type awards, appendix C includes default wording for Section A of FMS Article III that specifies use of the applicable Governmentwide cost principles in the determination of the allowability of costs. (c) Alternative award terms and conditions. A DoD Component may reserve any paragraph of appendix C’s default wording for Section A of FMS Article III in its general terms and conditions if the Component is certain that no entities of the type to which the paragraph applies could be recipients of awards using those general terms and conditions or recipients of subawards or procurement transactions at any tier under those awards. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 § 1128.315 Clarification concerning allowability of publication costs. (a) Requirement. A DoD Component’s general terms and conditions must clarify that a recipient must charge publication costs consistently as either direct or indirect costs in order for those costs to be allowable charges to DoD grants and cooperative agreements. (b) Award terms and conditions—(1) General. To clarify the allowability of publication costs, a DoD Component’s general terms and conditions must include the wording appendix C to this part provides for Section B of FMS Article III. (2) Exception. A DoD Component may instead reserve Section B of FMS Article III in its general terms and conditions if the DoD Component determines that there will be no publication costs under any of the awards using those general terms and conditions. § 1128.320 Period of availability of funds. (a) Requirement. A DoD Component’s general terms and conditions must specify the period during which Federal funds are available for obligation by recipients for project or program purposes. (b) Award terms and conditions. A DoD Component’s general terms and conditions must include the wording appendix C to this part provides for Section C of FMS Article III to specify the period of availability of funds. § 1128.325 Fee or profit. (a) Requirement. A DoD Component’s general terms and conditions must specify that recipients may neither receive fee or profit nor pay fee or profit to subrecipients. (b) Award terms and conditions. A DoD Component must use the wording appendix C to this part provides for Section D of FMS Article III to specify the limitation on payment of fee or profit. Subpart D–Revision of Budget and Program Plans (FMS Article IV) § 1128.400 Purpose of FMS Article IV. FMS Article IV of the general terms and conditions specifies requirements related to changes in recipients’ budget and program plans. It thereby implements OMB guidance in § 200.308 of 2 CFR part 200 and partially implements § 200.209 and subpart E of that part. § 1128.405 Content of FMS Article IV. (a) Requirement. A DoD Component’s general terms and conditions must specify the changes in budget and program plans for which a recipient is required to request DoD Component PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 prior approval and the procedures for submitting those requests. (b) Award terms and conditions. A DoD Component’s general terms and conditions must include as FMS Article IV the default wording appendix D to this part provides, with any revisions to the wording that are authorized by §§ 1128.410 through 1128.430. § 1128.410 Approved budget. (a) OMB guidance. As described in 2 CFR 200.308(a), the approved budget for a grant or cooperative agreement may include both the Federal and nonFederal shares of funding under the award or only the Federal share. (b) DoD implementation. For DoD grants and cooperative agreements, the approved budget includes the Federal share and any cost sharing or matching that the recipient is required to provide under the award. (c) Award terms and conditions. A DoD Component’s general terms and conditions therefore must include the default wording appendix D to this part provides for Section A of FMS Article IV. § 1128.415 Prior approvals for nonconstruction activities. (a) OMB guidance. OMB guidance in 2 CFR 200.308(c) through (e) addresses prior approval requirements for revisions of a recipient’s budget and program plans under a non-construction award, which includes for the purposes of this section non-construction activities under an award that supports both construction and non-construction. (b) DoD implementation of the guidance. The following paragraphs (c) through (g) of this section provide details of the DoD implementation of the guidance in 2 CFR 200.308(c) through (e) and paragraph (h) specifies the corresponding award terms and conditions. A DoD Component’s general terms and conditions for nonconstruction awards may only require additional prior approvals for budget and program revisions (i.e., prior approvals other than those authorized by this subpart) in accordance with the exceptions provisions of 2 CFR 1126.3. (c) Scope or objective, cost sharing or matching, and additional Federal funds. A DoD Component’s general terms and conditions for non-construction awards must require that a recipient obtain DoD Component prior approval: (1) For a change in scope or objective of the project or program, as described in 2 CFR 200.308(c)(1)(i). (2) For any change in the cost sharing or matching included in the approved budget for which FMS Article VI requires prior approval, as described in E:\FR\FM\07NOP2.SGM 07NOP2 sradovich on DSK3GMQ082PROD with PROPOSALS2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules OMB guidance at 2 CFR 200.308(c)(1)(vii). (3) If the need arises for additional Federal funds to complete the project or program, as described in 2 CFR 200.308(c)(1)(viii). (d) Personnel changes, disengagements, or reductions in time. A DoD Component must include the following prior approval requirements in general terms and conditions of research awards and also may include them in general terms and conditions of other non-construction awards: (1) A change in a key person, as described in 2 CFR 200.308(c)(1)(ii). (2) A principal investigator’s or project director’s disengagement from, or reduction in time devoted to, the project, as described in 2 CFR 200.308(c)(1)(iii). (e) Costs requiring prior approval under the cost principles. With respect to waivers of prior approvals required by the cost principles, as described in 2 CFR 200.308(c)(1)(iv): (1) Any waiver of a cost principles requirement for prior approval by a recipient entity’s cognizant agency for indirect costs is appropriately addressed in award-specific terms and conditions, rather than general terms and conditions, because the general terms and conditions must be appropriate for use in awards to multiple recipient entities. (2) A DoD Component may waive requirements in the cost principles for recipients to request prior approval before charging certain costs as direct costs to awards. However, the DoD Component should carefully consider each prior approval requirement individually and decide: (i) Which, if any, to waive; and (ii) Whether to make the waiver of the prior approval requirement contingent on specified conditions (e.g., a DoD Component might waive the prior approval required for direct charging of special purpose equipment purchases under an award, but elect to waive it only for equipment that is to be used primarily in carrying out the project or program supported by the award). (f) Transfers of funds and subawards. A DoD Component’s general terms and conditions for non-construction awards may include prior approval requirements for: (1) Transfers of funds for participant support costs, as described in 2 CFR 200.308(c)(1)(v). (2) Subawarding of work under an award, as described in 2 CFR 200.308(c)(1)(vi). (3) Transfers of funds among direct cost categories, as described in 2 CFR 200.308(e), but the wording in the VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 general terms and conditions must make clear that the prior approval requirement applies only to awards using those terms and conditions if the Federal share of the total value is in excess of the simplified acquisition threshold. Note that, as a matter of DoD policy, requiring prior approvals for transfers among direct cost categories generally is not appropriate for grants and cooperative agreements that support research. (g) Pre-award costs, carry forward of unobligated balances, and no-cost extensions. (1) A DoD Component’s general terms and conditions may authorize recipients to incur project costs up to 90 calendar days prior to the beginning date of the period of performance, at their own risk, as described in 2 CFR 200.308(d)(1). OMB guidance in 2 CFR 200.308(d)(4) makes that authorization the default policy for research awards and a DoD Component should override the default and require recipients to obtain the DoD Component’s prior approval for preaward costs only in exceptional circumstances. (2) If a DoD Component’s general terms and conditions are used for awards that have multiple periods of performance, the DoD Component should authorize recipients to carry forward unobligated balances to subsequent periods of performance, as described in 2 CFR 200.308(d)(3), unless there are compelling reasons not to do so. (3) A DoD Component’s general terms and conditions may authorize recipients to initiate one-time extensions in the periods of performance of their awards by up to 12 months, subject to the conditions described in 2 CFR 200.308(d)(2), but only if the DoD Component judges that authorizing nocost extensions for awards using the general terms and conditions will not cause the DoD Component to fail to comply with DoD funding policies (e.g., the incremental program budgeting and execution policy for research funding) contained in Volume 2A of the DoD Financial Management Regulation, DoD 7000.14–R. (h) Award terms and conditions. Appendix D to this part provides default wording for inclusion in a DoD Component’s general terms and conditions in accordance with paragraphs (c) through (g) of this section. Specifically: (1) In accordance with paragraph (c) of this section, a DoD Component’s general terms and conditions for nonconstruction awards must include the default wording that appendix D provides for paragraphs B.1.a and B.1.i PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 78397 of FMS Article IV and, if there will be cost sharing or matching required under any awards using the general terms and conditions, paragraph B.1.g. (2) In accordance with paragraph (d) of this section, a DoD Component’s general terms and conditions for research awards must include the default wording that appendix D provides for paragraphs B.1.b and B.1.c of FMS Article IV. A DoD Component also may include paragraphs B.1.b and B.1.c in general terms and conditions for other non-construction awards. (3) In accordance with paragraph (e) of this section, a DoD Component’s general terms and conditions for nonconstruction awards must include the default wording that Appendix D provides for paragraph B.1.d of FMS Article IV unless the DoD Component decides to waive any requirements in the applicable cost principles for recipients to obtain prior approval before including certain types of costs as direct charges to awards. If a DoD Component elects to waive any of those prior approval requirements, it must add wording to paragraph B.1.d to identify the specific types of costs for which recipients need not obtain DoD Component prior approval (thereby leaving in place the other prior approval requirements in the cost principles). (4) In accordance with paragraphs (f) and (g) of this section, a DoD Component’s general terms and conditions for non-construction awards may include the default wording that appendix D provides for paragraphs B.1.e, B.1.f, and B.1.h and Section C of FMS Article IV. A DoD Component may modify the default wording as appropriate to the awards using its general terms and conditions (e.g., to limit the authorization for pre-award costs to a period less than 90 calendar days prior to the beginning date of the period of performance). (5) If no awards using a DoD Component’s general terms and conditions will support nonconstruction activities, the DoD Component may reserve section B.1 of the default wording that appendix D provides for FMS Article IV. § 1128.420 Prior approvals for construction activities. (a) OMB guidance. OMB guidance in 2 CFR 200.308(g)(1) through (4) addresses prior approval requirements for revisions of a recipient’s budget and program plans under a construction award or construction activities under an award that supports both construction and non-construction activities. E:\FR\FM\07NOP2.SGM 07NOP2 78398 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules (b) DoD implementation of the guidance. DoD implements the guidance in 2 CFR 200.308(g)(1) through (4) through terms and conditions of awards for construction. A DoD Component’s general terms and conditions for construction awards may only require additional prior approvals for budget and program revisions (i.e., prior approvals other than those authorized by this subpart) only in accordance with the exceptions provisions of 2 CFR 1126.3. (c) Award terms and conditions. In a DoD Component’s general terms and conditions for construction awards or awards supporting construction activities, the DoD Component: (1) Must include the default wording that appendix D to this part provides for paragraph B.2 of FMS Article IV. (2) May reserve or remove the default wording appendix D to this part provides for paragraph B.1 and Section C of FMS Article IV unless some awards using the general terms and conditions will also support non-construction activities (if the DoD Component elects to remove Section C, it should redesignate Section D in the article as Section C). sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1128.425 Additional prior approval for awards that support both non-construction and construction activities. (a) OMB guidance. Guidance on an additional prior approval requirement for awards that support both construction and non-construction activities is contained in 2 CFR 200.308(g)(5). (b) DoD implementation of the guidance. DoD implements the guidance in 2 CFR 200.308(g)(5) through terms and conditions for awards that support both non-construction and construction activities. (c) Award terms and conditions. If a DoD Component establishes general terms and conditions for awards that support both non-construction and construction activities, the DoD Component may add the prior approval requirement for funding or budget transfers between construction and nonconstruction activities that is described in OMB guidance in 2 CFR 200.308(g)(5). The default wording that appendix D to this part provides for Section B of FMS Article IV includes a reserved paragraph B.3 in which the DoD Component may add appropriate wording to include that prior approval requirement. § 1128.430 Procedures for prior approvals. (a) OMB guidance. Guidance on procedures related to recipient requests VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 for prior approval is contained in 2 CFR 200.308(h) and (i). (b) DoD implementation of the guidance. DoD implements the guidance in 2 CFR 200.308(h) and (i) for prior approval requests through award terms and conditions. (c) Award terms and conditions. A DoD Component must: (1) Include the default wording appendix D to this part provides for paragraph D.1 of FMS Article IV of its general terms and conditions. (2) Insert appropriate wording in lieu of the reserved paragraph D.2 that appendix D to this part includes in FMS Article IV to specify: (i) The format the recipient must use when it requests approval for budget revisions. As described in 2 CFR 200.308(h), the award term may allow the recipient to submit a letter of request but otherwise must specify that the recipient use the same format it used for budget information in its application or proposal. (ii) Any other procedural instructions related to requests for prior approvals for budget or program revisions (e.g., to whom requests must be submitted) that are common to the awards using the general terms and conditions. For procedural instructions that will vary from one award to another, it is appropriate to include wording that points to the award-specific terms and conditions as the source of the information. Subpart E—Non-Federal Audits (FMS Article V) § 1128.500 Purpose of FMS Article V. FMS Article V of the general terms and conditions specifies requirements related to audits required under the Single Audit Act, as amended (31 U.S.C., chapter 75). The article thereby implements OMB guidance in subpart F of 2 CFR part 200. § 1128.505 Content of FMS Article V. (a) Requirement. A DoD Component’s general terms and conditions must address audit requirements. (b) Award terms and conditions—(1) General. A DoD Component’s general terms and conditions must include the default wording appendix E to this part provides for FMS Article V. (2) Exception. A DoD Component may reserve Section B of the default wording in appendix E if there will be no subawards to for-profit entities under any award using those terms and conditions. PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 Subpart F—Cost sharing or Matching (FMS Article VI) § 1128.600 Purpose of FMS Article VI. FMS Article VI sets forth requirements concerning recipients’ cost sharing or matching under awards. It thereby implements OMB guidance in: (a) 2 CFR 200.306 and 200.308(c)(1)(vii); and (b) 2 CFR 200.434, in conjunction with FMS Article III in appendix C to this part. § 1128.605 Content of FMS Article VI. (a) Requirement. General terms and conditions for DoD grants and cooperative agreements under which there may be required cost sharing or matching must specify the criteria for determining allowability, methods for valuation, and requirements for documentation of cost sharing or matching. (b) Award terms and conditions—(1) General. A DoD Component’s general terms and conditions must include as FMS Article VI the default wording appendix F to this part provides, with any revisions to the wording that are authorized by §§ 1128.610 through 1128.635. (2) Exception. A DoD Component may reserve FMS Article VI of its general terms and conditions if it determines that there will be no cost sharing or matching required under any of the awards using those terms and conditions. § 1128.610 General requirement for cost sharing or matching. (a) Requirement. (1) FMS Article VI of the general terms and conditions must tell a recipient that: (i) It may find the amount or percentage of cost sharing or matching required under its award in the award cover pages. (ii) The cost sharing or matching amount or percentage identified in the award includes all required (but not voluntary uncommitted) contributions to the project or program by the recipient and its subrecipients, including any that involve third-party contributions or donations to the recipient and subrecipients. (iii) It must obtain the DoD Component’s prior approval for any change in the required amount or percentage of cost share or match. (2) At a DoD Component’s option, FMS Article VI also may require a recipient to obtain the DoD Component’s prior approval if it wishes to substitute alternative cost sharing or matching contributions in lieu of specific contributions included in the E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules approved budget (e.g., to use a thirdparty in-kind contribution not included in the approved budget). (b) Award terms and conditions. To implement paragraph (a) of this section, a DoD Component’s general terms and conditions must include the default wording Section I of Appendix F to this part provides as Section A of FMS Article VI. A DoD Component may insert wording in lieu of the reserved paragraph A.2.b if it elects to require recipients to obtain prior approval before substituting alternative cost sharing or matching contributions, as described in paragraph (a)(2) of this section. § 1128.615 General criteria for determining allowability as cost sharing or matching. (a) OMB guidance. The OMB guidance in 2 CFR 200.306(b) lists the basic criteria for the allowability of cost sharing or matching under Federal awards. (b) Award terms and conditions—(1) General. A DoD Component’s general terms and conditions must include the default wording Section II of appendix F to this part provides as Section B of FMS Article VI to specify the allowability of cash or third-party inkind contributions as cost sharing or matching. (2) Exception. A DoD Component may reserve paragraph B.4 of Section B of FMS Article VI in its general terms and conditions, or replace it with appropriate alternative wording, if the DoD Component has statutory authority to accept costs reimbursed by other Federal awards as cost sharing or matching under the awards using its general terms and conditions. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1128.620 Allowability of unrecovered indirect costs as cost sharing or matching. (a) OMB guidance. The OMB guidance in 2 CFR 200.306(c) provides that unrecovered indirect costs may only be included as part of cost sharing and matching with the prior approval of the Federal awarding agency. (b) DoD implementation. DoD Components must allow any recipient that either has an approved negotiated indirect cost rate or is using the de minimis rate described in 2 CFR 200.414(f) to count unrecovered indirect costs toward any required cost sharing or matching under awards. The basis for this policy is that recipients’ indirect costs that are allowable and allocable to DoD projects and programs are legitimate costs of carrying out those projects and programs. (c) Award terms and conditions. To implement the policy in paragraph (b) of this section, a DoD Component’s general VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 terms and conditions must include the default wording Section III of appendix F to this part provides as Section C of FMS Article VI unless a statute requires otherwise. § 1128.625 Allowability of program income as cost sharing or matching. (a) OMB guidance. OMB guidance in 2 CFR 200.307(e)(3) specifies that, with the prior approval of the Federal awarding agency, recipients may use program income to meet cost sharing or matching requirements of their awards. (b) Award terms and conditions—(1) General. A DoD Component’s general terms and conditions must include the default wording Section IV of appendix F to this part provides as Section D of FMS Article VI if, in FMS Article VII of those terms and conditions, the DoD Component specifies that recipients dispose of program income using either: (i) The cost sharing or matching alternative described in paragraph (b)(1)(iii) of § 1128.720; or (ii) A combination alternative, as described in paragraph (b)(1)(iv) of § 1128.720, that includes use of at least some program income as cost sharing or matching. (2) Exception. A DoD Component may reserve Section D of FMS Article VI if FMS Article VII of those terms and conditions does not provide that recipients will use any program income as cost sharing or matching. § 1128.630 Valuation of services or property contributed or donated by recipients or subrecipients. (a) OMB guidance. OMB guidance in 2 CFR 200.306(d) specifies: (1) That values for recipients’ and subrecipients’ contributions of services or property toward cost sharing or matching must be established in accordance with the cost principles in subpart E of 2 CFR part 200; and (2) Types of projects or programs under which recipients’ or subrecipients’ donations of buildings or land are allowable as cost sharing or matching, with the prior approval of the Federal awarding agency, and how the donations are to be valued in those cases. (b) DoD implementation. DoD implements the guidance in 2 CFR 200.306(d) through award terms and conditions, with the following clarifications: (1) Cost principles to be used for valuation. (i) Values for recipients’ and subrecipients’ contributions of services or property toward cost sharing or matching must be established in accordance with the cost principles applicable to the entity making the PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 78399 contribution. Note that the applicable cost principles are in subpart E of 2 CFR part 200 only if the entity making the contribution is an institution of higher education, nonprofit organization, State, local government, or Indian tribe. (ii) Consistent with the cost principles, what generally should be charged to awards for real property and equipment is depreciation rather than allowing a recipient’s or subrecipient’s donation of the property (i.e., counting the full value of the property toward cost sharing or matching). Note, however, that depreciation included in a recipient’s or subrecipient’s indirect costs is not appropriate for counting as cost sharing or matching under an individual award. (2) Donations of property to projects or programs under awards. (i) In addition to donations of buildings or land described in 2 CFR 200.306(d), recipients and subrecipients may, with the prior approval of the DoD Component, donate other capital assets described in the cost principles in 2 CFR 200.439(b)(1) through (3). The basis for clarifying that recipients may donate other capital assets to projects or programs under awards is that, with the DoD Component’s approval: (A) Capital expenditures to acquire those types of capital assets are allowable as direct charges to awards; and (B) The costs therefore satisfy the allowability criterion in 2 CFR 200.306(b)(4) and can qualify as cost sharing or matching if they meet the other criteria listed in 2 CFR 200.306(b). (ii) However, when there are alternative ways for recipients to meet requirements for cost sharing or matching, DoD Components should not approve donations of capital assets to projects or programs under awards. Inclusion of the full value of a donated asset as project costs in the approved budget of an award is analogous to inclusion of the acquisition cost for an asset that is purchased under the award. Through the donation, the Government acquires an interest in the donated asset that must be resolved at time of disposition of the asset, which is best avoided if possible. (iii) Whenever a DoD Component permits a recipient to donate a capital asset to a project or program under an award, it should inform the cognizant Federal agency that negotiates the indirect cost rate for that recipient. Doing so enables the cognizant agency to take the donation into account when it establishes the recipient’s indirect cost rate, given that the recipient may not include depreciation for the donated E:\FR\FM\07NOP2.SGM 07NOP2 78400 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules asset as indirect costs that enter into the computation of the rate. (c) Award terms and conditions—(1) General. A DoD Component’s general terms and conditions must use the default wording Section V of appendix F to this part provides as Section E of FMS Article VI. (2) Exception. A DoD Component’s general terms and conditions may reserve paragraph E.2 of the default wording appendix F to this part provides if the DoD Component does not allow recipients to donate buildings, land, or other capital assets to projects or programs under awards using those terms and conditions. § 1128.635 Valuation of third-party in-kind contributions. (a) OMB guidance. OMB guidance in 2 CFR 200.306(e) through (j) and 2 CFR 200.434(b) through (g) specifies how to value and document various types of third-party in-kind contributions or donations for cost sharing or matching purposes. (b) Award terms and conditions—(1) General. To implement the OMB guidance described in paragraph (a) of this section as it applies to valuation and documentation of third-party inkind contributions and donations, a DoD Component’s general terms and conditions must use the default wording Section VI of appendix F to this part provides as Section F of FMS Article VI. (2) Exception. A DoD Component’s general terms and conditions may reserve any paragraph of the default wording Section VI of appendix F to this part provides for Section F of FMS Article VI if the DoD Component determines that there will be no thirdparty in-kind contributions of the type the paragraph addresses under awards using those terms and conditions. Subpart G—Program Income (FMS Article VII) § 1128.700 Purpose of FMS Article VII. FMS Article VII of the general terms and conditions specifies requirements for program income that recipients earn. The article thereby implements OMB guidance in 2 CFR 200.80 and 200.307. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1128.705 Content of FMS Article VII. (a) Requirement. General terms and conditions for DoD grants and cooperative agreements must address the kinds of income included as program income, the way or ways in which a recipient may use it, the duration of the recipient’s accountability for it, and related matters. (b) Award terms and conditions. A DoD Component’s general terms and VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 conditions must include as FMS Article VII the default wording appendix G to this part provides, with any revisions to the wording of Sections A, D, and E of the article that are authorized by §§ 1128.710 through 1128.725. § 1128.710 includes. What program income (a) OMB guidance. Under the definition of ‘‘program income’’ at 2 CFR 200.80, and related OMB guidance at 2 CFR 200.307, an agency’s regulations or award terms and conditions may include as program income: (1) Rebates, credits, discounts, and interest earned on any of them; and (2) Taxes, special assessments, levies, fines and other similar revenue raised by a governmental recipient. (b) DoD implementation. Unless a statute or program regulation adopted in the Code of Federal Regulations after opportunity for public comment specifies otherwise, each DoD Component must exclude the types of income listed in paragraphs (a)(1) and (2) of this section from program income for which recipients are accountable to the Federal Government. (c) Award terms and conditions—(1) General. Except as provided in paragraph (c)(2) of this section, a DoD Component must use the default wording provided in Section I of appendix G to this part as Section A of FMS Article VII in its general terms and conditions. Doing so excludes the types of income listed in paragraphs (a)(1) and (2) of this section from program income for which recipients are accountable to the Federal Government. (2) Exceptions. If a DoD Component has a statutory or regulatory basis for including one or both of the types of income described in paragraphs (a)(1) and (2) of this section, it may do so by appropriately revising the default wording appendix G provides for Section A of FMS Article VII. For example, to include as program income: (i) Rebates, credits, discounts, and interest earned on them, a DoD Component would reserve paragraph A.3.c and insert the wording of that paragraph as a new paragraph at the end of section A.2, thereby adding them to the list of items included as program income subject to FMS Article VII. (ii) Taxes, special assessments, levies, fines and other similar revenue raised by a governmental recipient, a DoD Component would reserve paragraph A.3.d and insert that wording as a new paragraph at the end of section A.2, thereby adding them to the list of items included as program income subject to FMS Article VII. PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 § 1128.715 Recipient obligations for license fees and royalties. (a) Policy. Unless a statute or program regulation adopted in the Code of Federal Regulations after opportunity for public comment provides otherwise, a DoD Component’s general terms and conditions may not specify that recipients have obligations to the Federal Government with respect to program income from license fees and royalties for patents or patent applications, copyrights, trademarks, or inventions produced under DoD awards. (b) Award terms and conditions—(1) General. Except as provided in paragraph (b)(2) of this section, a DoD Component’s general terms and conditions must implement the policy in paragraph (a) of this section by including the default wording provided in Section III of appendix G to this part as Section D of FMS Article VII. (2) Exception. If a DoD Component has a statutory or regulatory basis for establishing recipient obligations for the license fees and royalties described in paragraph (a) of this section, it may reserve Section D of FMS Article VII in its general terms and conditions. § 1128.720 Program income use. (a) OMB guidance. OMB guidance in 2 CFR 200.307(e) identifies alternative ways that a Federal agency might specify that recipients use program income they earn. (b) DoD implementation. A DoD Component’s general terms and conditions must specify how recipients are to use program income under awards using those terms and conditions. (1) The terms and conditions may specify one of the following ways for recipients to use program income: (i) Addition. A recipient under this alternative adds program income to the total amount of the approved budget, which consists of the Federal share of funding and any required matching or cost sharing. (ii) Deduction. A recipient using this alternative subtracts program income from total allowable costs to determine net allowable costs for purposes of determining the Federal share of funding and any required cost sharing or matching. (iii) Cost sharing or matching. A recipient under this alternative counts program income toward its required cost sharing or matching. (iv) Combination. The fourth alternative is a combination of the three described in paragraphs (b)(1)(i) through (iii) of this section. For example, an agency might specify one alternative to be used for program income up to a E:\FR\FM\07NOP2.SGM 07NOP2 sradovich on DSK3GMQ082PROD with PROPOSALS2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules dollar limit and a second alternative for any program income beyond that amount. (2) For research awards, absent compelling reasons to do otherwise for a specific set of general terms and conditions, a DoD Component must specify the addition alternative described in paragraph (b)(1)(i) of this section. (3) For general terms and conditions of other awards, a Component may specify any of the alternatives described in paragraph (a) of this section. However, note that the cost sharing or matching alternative is best used as part of a combination alternative, as described in paragraph (b)(1)(iv) of this section, unless the DoD Component knows at the time awards are made how much program income recipients will earn in relation to the amounts of their required cost sharing or matching. (c) Award terms and conditions. (1) Default—addition alternative. In accordance with the DoD implementation in paragraph (b) of this section, a DoD Component must use the default wording provided in Section IV of appendix G to this part as Section E of FMS Article VII in: (i) Research awards; and (ii) Other awards for which it elects to specify the addition alternative for use of program income. (2) Deduction alternative. A DoD Component electing to specify the deduction alternative for use of program income should modify the default wording appendix G to this part provides for Section E by: (i) Substituting the following wording for the default wording of paragraph E.1: ‘‘1. You must use any program income that you earn during the period of performance under this award as a deduction from the total approved budget of this award. The program income must be used for the purposes and in accordance with the terms and conditions of the award.’’ (ii) Including an additional paragraph E.4 such as the following to inform recipients how the award will change if program income is deducted: ‘‘If you report program income on the SF–425, we will recalculate the Federal share of the budget and the non-Federal share if there is one. We also will modify the award to reflect the recalculated share or shares and the amount of program income you must spend on the project, which is the difference between the originally approved and recalculated budget amounts.’’ (3) Cost-sharing or matching alternative. A DoD Component electing to specify the cost-sharing or matching alternative for use of program income VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 should replace the default wording appendix G to this part provides for Section E with the following wording: ‘‘You must use any program income that you earn during the period of performance under this award to meet any cost-sharing or matching requirement under this award. The program income must be used for the purposes and in accordance with the terms and conditions of the award.’’ (4) A combination of alternatives. A DoD Component electing to specify some combination of addition, deduction, and cost-sharing or matching alternatives must use wording in Section E of FMS Article VII that specifies requirements for each alternative in the combination that is consistent with the requirements specified for that alternative in paragraphs (c)(1), (2), or (3) of this section. § 1128.725 Program income after the period of performance. (a) OMB guidance. OMB guidance in 2 CFR 200.307(f) provides that an agency may specify in agency regulations, award terms and conditions, or agreements negotiated with recipients during the closeout process that a recipient is accountable to the Federal Government for program income earned after the end of the period of performance. (b) DoD implementation. A DoD Component should rarely, if ever, establish a requirement for a recipient to be accountable to the Federal Government for program income earned after the end of the period of performance. (c) Award terms and conditions. A DoD Component’s general terms and conditions must include as Section F of FMS Article VII the default wording for that section that is provided in Section V of appendix G to this part. That wording specifies that recipients are not accountable to the Federal Government for program income earned after the end of the performance period. If an exception is warranted for an individual award, the exception is properly addressed at the time of award in the award-specific terms and conditions. Appendix A to Part 1128—Terms and Conditions for FMS Article I, ‘‘Financial Management System Standards’’ DoD Components must use the following standard wording in FMS Article I in accordance with § 1128.105 of this part: FMS Article I. Financial management system standards. (December 2014) Section A. System standard for States. As a State, you must expend and account for funds under this award in accordance with: PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 78401 1. Applicable State laws; and 2. To the extent they comply with the requirements of Section B of this Article, your procedures for expending and accounting for your own State funds. Section B. System standards for all recipients. Your financial management system must provide for: 1. Inclusion, in your accounts, of the following information about each DoD grant or cooperative agreement that you receive: a. That you received the award from the Department of Defense; b. The number and title listed in the Catalog of Federal Domestic Assistance for the DoD program under which the award was made; c. The DoD award number; d. The year (your fiscal year) in which you received the award; 2. Accurate, current, and complete disclosure of the financial results of the award needed to comply with financial and programmatic reporting requirements that are specified in REP Articles I and II of these general terms and conditions, as supplemented by any award-specific terms and conditions of this award concerning reporting requirements. If you are asked at any time under this award to report financial information on an accrual basis, you: a. Need not establish an accrual accounting system if you maintain your records on a different basis; and b. May develop the accrual data based on an analysis of the data you have on hand. 3. Records that identify adequately the sources of funds for all activities funded by DoD awards, including any required cost sharing or matching, and the application of those funds. This includes funding authorizations; your obligations and expenditures of the funds; unobligated balances; property and other assets under the award; program income; and interest. 4. Effective control over, and accountability for, all funds, property, and other assets under this award. You must adequately safeguard all assets and assure they are used solely for authorized purposes (see Section C of this article for additional requirements concerning internal controls). 5. Comparison of expenditures under this award for project or program purposes with amounts in the approved budget for those purposes. 6. The ability to relate financial data to performance accomplishments under this award if you are required to do so by the programmatic reporting requirements in REP Article I of these general terms and conditions, as supplemented by any awardspecific terms and conditions of this award concerning reporting requirements. 7. Written procedures: a. To implement requirements specified in FMS Article II, ‘‘Payments;’’ b. For determining the allowability of costs, which for this award are determined in accordance with FMS Article III, ‘‘Allowable costs, period of availability of funds, and fee or profit,’’ of these general terms and conditions, as supplemented by any awardspecific terms and conditions of this award that relate to allowability of costs. Section C. Internal controls. Your system of internal controls must conform to OMB E:\FR\FM\07NOP2.SGM 07NOP2 78402 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules guidance in 2 CFR 200.303. With respect to paragraph (e) of 2 CFR 200.303, your internal control system must include measures to safeguard any information that Federal statute, Executive order, or regulation requires to be protected (e.g., personally identifiable or export controlled information), whether generated under the award or provided to you and identified as being subject to protection. sradovich on DSK3GMQ082PROD with PROPOSALS2 Appendix B to Part 1128—Terms and Conditions for FMS Article II, ‘‘Payments’’ DoD Components must use the following default wording in FMS Article II in accordance with §§ 1128.205 through 1128.220 of this part, which permit substitution or addition of wording, or both, when appropriate: FMS Article II. Payments. (December 2014) Section A. Awards to States. If the awardspecific terms and conditions of this award do not identify it as an award subject to subpart A of 31 CFR part 205 (Department of the Treasury regulations implementing the Cash Management Improvement Act), then this award is subject to subpart B of that part. Consistent with subpart B of 31 CFR part 205: 1. Payment method, timing, and amounts. You must: a. Minimize the time between your receipt of a payment under this award and your disbursement of those funds for program purposes. b. Limit the amount of each advance payment request to the minimum amount you need to meet your actual, immediate cash requirements for carrying out the program or project. c. Submit each advance payment request approximately 10 days before you anticipate disbursing the requested amount for program purposes, so that your receipt of the funds will be as close in time as is administratively feasible to your actual cash outlay for direct program or project costs and the proportionate share of any allowable indirect costs. 2. Interest. Unlike awards subject to subpart A of 31 CFR part 205, neither you nor we will incur any interest liability due to a difference in timing between your receipt of payments under this award and your disbursement of those funds for program purposes. Section B. Awards to institutions of higher education, nonprofit organizations, local governments, and Indian tribes. 1. Payment method. Unless the awardspecific terms and conditions of this award provide otherwise, you are authorized to request advance payments under this award. That authorization is contingent on your continuing to maintain, or demonstrating the willingness to maintain, written procedures that minimize the time elapsing between your receipt of each payment and your disbursement of the funds for program purposes. Note that you are not required to request advance payments and may instead, at your option, request reimbursements of funds after you disburse them for program purposes. 2. Amounts requested. You must: VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 a. Limit the amount of any advance payment request to the minimum amount needed to meet your actual, immediate cash requirements for carrying out the purpose of the approved program or project, including direct program or project costs and a proportionate share of any allowable indirect costs. b. Exclude from any payment request amounts you are withholding from payments to contractors to assure satisfactory completion of the work. You may request those amounts when you make the payments to the contractors or to escrow accounts established to assure satisfactory completion of the work. c. Exclude from any payment request amounts from any of the following sources that are available to you for program purposes under this award: program income, including repayments to a revolving fund; rebates; refunds; contract settlements; audit recoveries; and interest earned on any of those funds. You must disburse those funds for program purposes before requesting additional funds from us. 3. Timing of requests. For any advance payment you request, you should submit the request approximately 10 days before you anticipate disbursing the requested amount for program purposes. With time for agency processing of the request, that should result in payment as close as is administratively feasible to your actual disbursements for program or project purposes. 4. Frequency of requests. You may request payments as often as you wish unless you have been granted a waiver from requirements to receive payments by electronic funds transfer (EFT). If you have been granted a waiver from EFT requirements, the award-specific terms and conditions of this award specify the frequency with which you may submit payment requests. 5. Withholding of payments. We will withhold payments for allowable costs under the award at any time during the period of performance only if one or more of the following applies: a. We suspend either payments or the award, or disallow otherwise allowable costs, as a remedy under OAR Article III due to your material failure to comply with Federal statutes, regulations, or the terms and conditions of this award. If we suspend payments and not the award, we will release withheld payments upon your subsequent compliance. If we suspend the award, then amounts of payments are subject to adjustment in accordance with the terms and conditions of OAR Article III. b. You are delinquent in a debt to the United States as defined in OMB Circular A– 129, ‘‘Policies for Federal Credit Programs and Non-Tax Receivables,’’ in which case we may, after reasonable notice, inform you that we will not make any further payments for costs you incurred after a specified date until you correct the conditions or liquidate the indebtedness to the Federal Government. c. The award-specific terms and conditions include additional requirements that provide for withholding of payments based on conditions identified during our pre-award risk evaluation, in which case you should PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 have been notified about the nature of those conditions and the actions needed to remove the additional requirements. 6. Depository requirements. a. There are no eligibility requirements for depositories you use for funds you receive under this award. b. You are not required to deposit funds you receive under this award in a depository account separate from accounts in which you deposit other funds. However, FMS Article I requires that you be able to account for the receipt, obligation, and expenditure of all funds under this award. c. You must deposit any advance payments of funds you receive under this award in insured accounts whenever possible and, unless any of the following apply, you must deposit them in interest-bearing accounts: i. You receive a total of less than $120,000 per year under Federal grants and cooperative agreements. ii. You would not expect the best reasonably available interest-bearing account to earn interest in excess of $500 per year on your cash balances of advance payments under Federal grants and cooperative agreements. iii. The best reasonably available interestbearing account would require you to maintain an average or minimum balance higher than it would be feasible for you to do within your expected Federal and nonFederal cash balances. iv. A foreign government or banking system precludes your use of interest-bearing accounts. d. You may retain for administrative expenses up to $500 per year of interest that you earn in the aggregate on advance payments you receive under this award and other Federal grants and cooperative agreements. You must remit annually the rest of the interest to the Department of Health and Human Services, Payment Management System, using the procedures set forth in OMB guidance in 2 CFR 200.305(b)(9). Section C. Electronic funds transfer and other payment procedural instructions or information. 1. Electronic funds transfer. Unless the award-specific terms and conditions of this award provide otherwise, you will receive payments under this award by electronic funds transfer. 2. [Reserved]. Appendix C to Part 1128—Terms and Conditions for FMS Article III, ‘‘Allowable Costs, Period of Availability of Funds, and Fee or Profit’’ DoD Components must use the following default wording in FMS Article III in accordance with sections 1128.305 through 1128.325 of this part, which permit substitution of alternative wording, addition of supplemental wording, or both, when appropriate: FMS Article III. Allowable costs, period of availability of funds, and fee or profit. (December 2014) Section A. Allowable costs. This section, with the clarification provided in Section B, specifies which Federal cost principles must be used in determining the allowability of costs charged to this award, a subrecipient’s E:\FR\FM\07NOP2.SGM 07NOP2 sradovich on DSK3GMQ082PROD with PROPOSALS2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules costs charged to any cost-type subaward that you make under this award, and a contractor’s costs charged to any cost-type procurement transaction into which you enter under this award. These cost principles also govern the allowable costs that you or a subrecipient of a subaward at any tier below this award may consider when establishing the amount of any fixed-amount subaward or fixed-price procurement transaction at the next lower tier. The set of cost principles to be used in each case depends on the type of entity incurring the cost under the award, subaward, or contract. 1. General case. If you, your subrecipient, or your contractor is: a. An institution of higher education, the allowability of costs must be determined in accordance with provisions of subpart E of OMB guidance in 2 CFR part 200 other than 2 CFR 200.400(g), supplemented by appendix III to that part. b. A hospital, the allowability of costs must be determined in accordance with provisions of appendix IX to 2 CFR part 200, which currently specifies the cost principles in appendix IX to 45 CFR part 75 as the applicable cost principles. c. A nonprofit organization other than a hospital or institution of higher education, the allowability of costs must be determined in accordance with provisions of subpart E of OMB guidance in 2 CFR part 200 other than 2 CFR 200.400(g), supplemented by appendices IV and VIII to that part. In accordance with guidance in 2 CFR 200.401(c), a nonprofit organization listed in appendix VIII to 2 CFR part 200 is subject to the cost principles for for-profit entities specified in paragraph 1.e of this section. d. A State, local government, or Indian tribe, the allowability of costs must be determined in accordance with applicable provisions of subpart E of OMB guidance in 2 CFR part 200 other than 2 CFR 200.400(g), supplemented by appendices V through VII to that part. e. A for-profit entity (other than a hospital) or a nonprofit organization listed in Appendix VIII to 2 CFR part 200: i. The allowability of costs must be determined in accordance with: A. The cost principles for commercial organizations in the Federal Acquisition Regulation (FAR) at subpart 31.2 of 48 CFR part 31, as supplemented by provisions of the Defense Federal Acquisition Regulation Supplement (DFARS) at subpart 231.2 of 48 CFR part 231; and B. For a for-profit entity, the additional provisions on allowability of audit costs, in 32 CFR 34.16(f). ii. The indirect cost rate to use in that determination is: A. The for-profit entity’s federally negotiated indirect cost rate if it has one. B. Subject to negotiation between you and the for-profit entity if it does not have a federally negotiated indirect cost rate. The rate that you negotiate may provide for reimbursement only of costs that are allowable in accordance with the cost principles specified in paragraph A.1.e.i of this article. 2. Exception. You may use your own cost principles in determining the allowability of VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 a contractor’s costs charged to a cost-type procurement transaction under this award— or in pricing for a fixed-price contract based on estimated costs—as long as your cost principles comply with the Federal cost principles that paragraph A.1 of this section identifies as applicable to the contractor. Section B. Clarifications concerning charges for professional journal publications. For an entity that Section A of this article makes subject to the cost principles in subpart E of 2 CFR part 200: 1. Costs of publishing in professional journals are allowable under 2 CFR 200.461(b) only if they are consistently applied across the organization. An organization may not charge costs of journal publications as direct costs to this award if it charges any of the same type of costs for other journal publications as indirect costs. 2. ‘‘Costs of publication or sharing of research results’’ in 2 CFR 200.461(b)(3) are the ‘‘charges for professional journal publications’’ described in 2 CFR 200.461(b) and subject to the conditions of 2 CFR 200.461(b)(1) and (2). Section C. Period of availability of funds. You may charge to this award only: 1. Allowable costs incurred during the period of performance specified in this award, including any subsequent amendments to it; 2. Any pre-award costs that you are authorized (by either the terms and conditions of FMS Article IV or the DoD awarding official) to incur prior to the start of the period of performance, at your own risk, for purposes of the program or project under this award; and 3. Costs of publishing in professional journals incurred after the period of performance, as permitted under 2 CFR 200.461(b)(3), if: a. We receive the request for payment for such costs no later than the date on which REP Article II requires you to submit the final financial report to us (or, if we grant your request for an extension of the due date, that later date on which the report is due); and b. Your reported expenditures on the final financial report include the amount you disbursed for those costs. Section D. Fee or profit. 1. You may not receive any fee or profit under this award. 2. You may not use funds available to you under this award to pay fee or profit for an entity of any type to which you make a subaward. 3. You may pay fee or profit to an entity with which you enter into a procurement transaction to purchase goods or general support services for your use in carrying out the project or program under the award. Appendix D to Part 1128—Terms and Conditions for FMS Article IV, ‘‘Revision of Budget and Program Plans’’ I. SECTION A OF FMS ARTICLE IV. DoD Components must use as Section A of FMS Article IV the following default wording in accordance with § 1128.410 of this part: FMS Article IV. Revision of budget and program plans. (December 2014) PO 00000 Frm 00049 Fmt 4701 Sfmt 4702 78403 Section A. Approved budget. The approved budget of this award: 1. Is the most recent version of the budget that you submitted and we approved (either at the time of the initial award or a more recent amendment), to summarize planned expenditures for the project or program. 2. Includes all Federal funding that we make available to you under this award to use for program or project purposes and any cost sharing or matching that you are required to provide under this award for those same purposes. II. SECTIONS B AND C OF FMS ARTICLE IV. DoD Components must use the following default wording in Sections B and C of FMS Article IV in accordance with §§ 1128.415 through 1128.425 of this part, which permit reserving wording, substitution of alternative wording, and addition of supplemental wording, when appropriate: Section B. Revisions requiring prior approval. 1. Non-construction activities. You must request prior approval from us for any of the following program or budget revisions in non-construction activities: a. A change in the scope or objective of the project or program under this award, even if there is no associated budget revision that requires our prior approval. b. A change in a key person identified in the award cover pages. c. The approved principal investigator’s or project director’s disengagement from the project for more than three months, or a 25 percent reduction in his or her time devoted to the project. d. The inclusion of direct costs that require prior approval in accordance with the applicable cost principles, as identified in FMS Article III. e. The transfer to other categories of expense of funds included in the approved budget for participant support costs, as defined at 2 CFR 200.75. f. A subaward to another entity under which it will perform a portion of the substantive project or program under the award, if it was not included in the approved budget. This does not apply to your contracts for acquisition of supplies, equipment, or general support services you need to carry out the program. g. Any change in the cost sharing or matching you provide under the award, as included in the approved budget, for which FMS Article VI requires prior approval. h. A transfer of funds among direct cost categories or programs, functions, and activities, if the federal share of the total value for your award exceeds the simplified acquisition threshold and the cumulative amount of the transfers exceeds or is expected to exceed 10 percent of the approved budget. i. The need arises for additional Federal funds to complete the project or program. 2. Construction activities. You must request prior approval from us for any of the following program or budget revisions in construction activities: a. A change in the scope or objective of the project or program under this award, even if there is no associated budget revision that requires our prior approval. E:\FR\FM\07NOP2.SGM 07NOP2 78404 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules b. The need arises for additional Federal funds to complete the project. c. The inclusion of direct costs that require prior approval in accordance with the applicable cost principles, as identified in FMS Article III. 3. Funding transfers between construction and non-construction activities. [Reserved.] Section C. Pre-award costs, carry forward of unobligated balances, and one-time nocost extensions. You are authorized, without requesting prior approval from us, to: 1. Charge to this award after you receive it pre-award costs that you incurred, at your own risk, up to 90 calendar days before the start date of the period of performance, as long as they are costs that would be allowable charges to the project or program under the terms and conditions of FMS Article III if they were incurred during the period of performance. 2. Carry forward an unobligated balance to a subsequent period of performance under this award. 3. Initiate a one-time extension of the period of performance by up to 12 months, as long as: a. You notify us in writing with the supporting reasons and revised end date of the period of performance at least 10 calendar days before the current end date. b. The extension does not require any additional Federal funding. c. The extension does not involve any change in the scope or objectives of the project or program. III. SECTION D OF FMS ARTICLE IV. In accordance with § 1128.430 of this part, DoD Components must use the following default wording for paragraph D.1 of Section D of FMS Article IV and insert appropriate wording in lieu of the reserved paragraph D.2: Section D. Procedures. 1. We will review each request you submit for prior approval for a budget or program change and, within 30 calendar days of our receipt of your request, we will respond to you in writing to either: a. Notify you whether your request is approved; or b. Inform you that we still are considering the request, in which case we will let you know when you may expect our decision. 2. [Reserved.] sradovich on DSK3GMQ082PROD with PROPOSALS2 Appendix E to Part 1128—Terms and Conditions for FMS Article V, ‘‘NonFederal Audits’’ DoD Components must use the following default wording in FMS Article V in accordance with section 1128.505 of this part: FMS Article V. Non-Federal audits. (December 2014) Section A. Requirements for entities subject to the Single Audit Act. You and each subrecipient under this award that is an institution of higher education, nonprofit organization, State, local government, or Indian tribe must comply with the audit requirements specified in subpart F of 2 CFR part 200, which is the OMB implementation of the Single Audit Act, as amended (31 U.S.C. chapter 75). VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 Section B. Requirements for for-profit entities. Any for-profit entity that receives a subaward from you under this award is subject to the audit requirements specified in 32 CFR 34.16. Your subaward terms and conditions will require the subrecipient to provide the reports to you if it is willing to do so, so that you can resolve audit findings that pertain specifically to your subaward (e.g., disallowance of costs). If the for-profit entity is unwilling to agree to provide the auditor’s report to you, contact the grants officer for this award to discuss an alternative approach for carrying out audit oversight of the subaward. If the grants officer does not provide an alternative approach within 30 days of receiving your request, you may determine an approach to ensure the forprofit subrecipient’s compliance with the subaward terms and conditions, as described in OMB guidance at 2 CFR 200.501(h). Appendix F to Part 1128—Terms and Conditions for FMS Article VI, ‘‘Cost Sharing or Matching’’ DoD Components that do not reserve FMS Article VI as permitted under § 1128.605 of this part must use the wording provided in this appendix in accordance with §§ 1128.610 through 1128.635. I. SECTION A OF FMS ARTICLE VI. DoD Components must use as Section A of FMS Article VI the following wording in accordance with § 1128.610 of this part: FMS Article VI. Cost sharing or matching. (December 2014) Section A. Required cost sharing or matching. 1. If any cost sharing or matching is required under this award, the total amount or percentage required is shown in the award cover pages and included in the approved budget. That cost sharing or matching includes all: a. Cash and third party in-kind contributions. b. Contributions to the project or program made either by or through (if made by a third party) you and any subrecipients. 2. You must obtain our prior approval if you wish to: a. Change the amount or percentage of cost sharing or matching required under this award. b. [Reserved]. II. SECTION B OF FMS ARTICLE VI. DoD Components must use the following default wording in Section B of FMS Article VI in accordance with § 1128.615 of this part, which permits reserving paragraph B.4 under certain conditions: Section B. Allowability as cost sharing or matching. Each cash or third party in-kind contribution toward any cost sharing or matching required under this award, whether put forward by you or a subrecipient under a subaward that you make, is allowable as cost sharing or matching if: 1. You (or the subrecipient, if it is a subrecipient contribution) maintain records from which one may verify that the contribution was made to the project or program and, if it is a third-party in-kind contribution, its value. PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 2. The contribution is not counted as cost sharing or matching for any other Federal award. 3. The contribution is: a. Allowable under the cost principles applicable to you (or the subrecipient, if it is a subrecipient contribution) under FMS Article III of these terms and conditions; and b. Allocable to the project or program and reasonable. 4. The Government does not pay for the contribution through another Federal award, unless that award is under a program that has a Federal statute authorizing application of that program’s Federal funds to other Federal programs’ cost sharing or matching requirements. 5. The value of the contribution is not reimbursed by the Federal share of this award as either a direct or indirect cost. 6. The contribution conforms to the other terms and conditions of this award, including the award-specific terms and conditions. III. SECTION C OF FMS ARTICLE VI. DoD Components must use the following default wording in Section C of FMS Article VI in accordance with § 1128.620 of this part: Section C. Allowability of unrecovered indirect costs as cost sharing or matching. You may use your own or a subrecipient’s unrecovered indirect costs as cost sharing or matching under this award. Unrecovered indirect costs means the difference between the amount of indirect costs charged to the award and the amount that you and any subrecipients could have charged in accordance with your respective approved indirect cost rates, whether those rates are negotiated or de minimis (as described in 2 CFR 200.414(f)). IV. SECTION D OF FMS ARTICLE VI. DoD Components must use the following default wording in Section D of FMS Article VI or reserve the section, in accordance with § 1128.625 of this part: Section D. Allowability of program income as cost sharing or matching. If FMS Article VII of these general terms and conditions or the award-specific terms and conditions of this award specify that you are to use some or all of the program income you earn to meet cost-sharing or matching requirements under the award, then program income is allowable as cost sharing or matching to the extent specified in those award terms and conditions. V. SECTION E OF FMS ARTICLE VI. DoD Components must use the following default wording in Section E of FMS Article VI in accordance with § 1128.630 of this part: Section E. Valuation of services or property that you or subrecipients contribute or donate. You must establish values for services or property contributed or donated toward cost sharing or matching by you or subrecipients in accordance with the provisions of this section. These contributions or donations are distinct from third-party contributions or donations to you or subrecipients, which are addressed in Section F of this article. 1. Usual valuation of services or property that you or subrecipients contribute or donate. Values established for contributions of services or property by you or a subrecipient must be the amounts allowable E:\FR\FM\07NOP2.SGM 07NOP2 sradovich on DSK3GMQ082PROD with PROPOSALS2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules in accordance with the cost principles applicable to the entity making the contribution (i.e., you or the subrecipient), as identified in FMS Article III. For property, that generally is depreciation. 2. Needed approvals for, and valuation of, property that you or subrecipients donate. a. Types of property that may be donated. i. Buildings or land. If the purposes of this award include construction, facilities acquisition, or long-term use of real property, you may donate buildings or land to the project if you obtain our prior approval. Donation of property to the project, as described in PROP Article I, means counting the value of the property toward cost sharing or matching, rather than charging depreciation. ii. Other capital assets. If you obtain our prior approval, you may donate to the project other capital assets identified in 2 CFR 200.439(b)(1) through (3). b. Usual valuation of donated property. Unless you obtain our approval as described in paragraph E.2.c of this article, the value for the donated property must be the lesser of: i. The value of the remaining life of the property recorded in your accounting records at the time of donation, or ii. The current fair market value. c. Approval needed for alternative valuation of property. If you obtain our approval in the approved budget, you may count as cost sharing or matching the current fair market value of the donated property even if it exceeds the value of the remaining life of the property recorded in your accounting records at the time of donation. d. Federal interest in donated property. Donating buildings, land, or other property to the project, rather than charging depreciation, results in a Federal interest in the property in accordance with PROP Article I of these terms and conditions. VI. SECTION F OF FMS ARTICLE VI. DoD Components must use the following default wording in Section F of FMS Article VI or reserve the section, in accordance with § 1128.635 of this part: Section F. Valuation of third-party in-kind contributions. 1. General. If a third party furnishes goods or services to you or subrecipients that are to be counted toward cost sharing or matching under this award, the entity to which the third party furnishes the goods or services (i.e., you or a subrecipient) must document the fair market value of those in-kind contributions and, to the extent feasible, support those values using the same methods the entity uses internally. 2. Valuation of third-party services. You must establish values for third-party volunteer services and services of third parties’ employees furnished to you or subrecipients as follows: a. Volunteer services. Volunteer services furnished by third party professional and technical personnel, consultants, and other skilled and unskilled labor must be valued in accordance with 2 CFR 200.306(e). b. Services of third parties’ employees. When a third-party organization furnishes the services of its employees to you or a subrecipient, values for the contributions must be established in accordance with 2 CFR 200.306(f). VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 c. Additional requirement for donations to nonprofit organizations. For volunteer services or services of third parties’ employees furnished to a nonprofit organization: i. OMB guidance in 2 CFR 200.434(e) also applies and may require the nonprofit organization to allocate a proportionate share of its applicable indirect costs to the donated services. ii. The indirect costs that the nonprofit organization allocates to the donated services in that case must be considered project costs and may be either reimbursed under the award or counted toward required cost sharing or matching, but not both. 2. Valuation of third-party property. You must establish values for third-party property furnished to you or subrecipients as follows: a. Supplies donated by third parties. When a third party organization donates supplies (e.g., office, laboratory, workshop, or classroom supplies), the value that may be counted toward cost sharing or matching may not exceed the fair market value of the supplies at the time of donation. b. Equipment, buildings, or land donated by third parties. i. The value of third-party donations of equipment, buildings, or land that may be counted toward cost sharing or matching when the third party transferred title to you or a subrecipient depends on the purpose of the award in accordance with the following: A. If one of the purposes of the award is to assist you or the subrecipient in the acquisition of equipment, buildings, or land, you may count the aggregate fair market value of the donated property toward cost sharing or matching. B. If the award’s purposes instead include only the support of activities that require the use of equipment, buildings, or land, you may only charge depreciation unless you obtain our prior approval to count as cost sharing or matching the fair market value of equipment or other capital assets and fair rental charges for land. ii. The values of the donated property must be determined in accordance with the usual accounting policies of the entity to which the third party transferred title to the property, with the qualifications specified in 2 CFR 200.306(i)(1) and (2) for donated land and buildings and donated equipment, respectively. c. Use of space donated by third parties. If a third party makes space available for use by you or a subrecipient, the value that you may count toward cost sharing or matching may not exceed the fair rental value of comparable space as established by an independent appraisal, as described in 2 CFR 200.306(i)(3). d. Equipment loaned by third parties. If a third party loans equipment for use by you or a subrecipient, the value that you may count toward cost sharing or matching may not exceed its fair rental value. Appendix G to Part 1128—Terms and Conditions for FMS Article VII, ‘‘Program Income’’ I. SECTION A OF FMS ARTICLE VII. DoD Components must use as Section A of FMS Article VII either the following default PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 78405 wording in accordance with § 1128.705 of this part, or revised wording compliant with § 1128.710 of this part: FMS Article VII. Program income. (December 2014) Section A. Definition. The term ‘‘program income’’ as used in this award: 1. Is gross income that: a. You earn that is directly generated by a supported activity or earned as a result of this award; or b. A subrecipient earns as a result of a subaward you make under this award. 2. Includes, but is not limited to, income earned under this award from: a. Fees for services performed; b. The use or rental of real or personal property acquired under any Federal award and currently administered under this award; c. The sale of commodities or items fabricated under this award; and d. License fees and royalties on patents and copyrights; e. Payments of principal and interest on loans made with Federal award funds. 3. Does not include for purposes of this award any: a. Interest earned on advance payments, disposition of which is addressed in FMS Article II; b. Proceeds from the sale of real property, equipment or supplies, which is addressed in PROP Articles III and IV; c. Rebates, credits, discounts, and interest earned on any of them; and d. Governmental revenues, including any taxes, special assessments, levies, fines and similar revenues you raise. II. SECTIONS B AND C OF FMS ARTICLE VII. DoD Components must use the following default wording as Sections B and C of FMS Article VII in accordance with § 1128.705 of this part: Section B. Encouragement to earn program income. You are encouraged to earn program income under this award when doing so does not interfere with the program or project the award supports. Section C. Costs of generating program income. You may deduct costs incidental to the generation of program income from the amount that you use in accordance with Section E of this Article, as long as those costs are not charged to this award (which includes their being counted toward any cost sharing or matching you are required to provide). III. SECTION D OF FMS ARTICLE VII. DoD Components must either use the following default wording as Section D of FMS Article VII in accordance with § 1128.705 of this part or reserve the section if doing so complies with § 1128.715 of this part: Section D. License fees and royalties. You have no obligations to the Federal Government with respect to program income earned under this award from license fees and royalties for patents or patent applications, copyrights, trademarks, or inventions developed or produced under the award. IV. SECTION E OF FMS ARTICLE VII. DoD Components must use either the following default wording as Section E of FMS Article VII or alternative wording that complies with § 1128.720 of this part: E:\FR\FM\07NOP2.SGM 07NOP2 78406 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules Section E. Use of program income. 1. You must use any program income that you earn during the period of performance under this award to increase the amount of the award (the sum of the Federal share and any cost sharing or matching you are required to provide), thereby increasing the amount budgeted for the project. The program income must be used for the purposes and under the terms and conditions of the award. 2. Your use of the additional funding is subject to the terms and conditions of this award, including: a. FMS Article II concerning your use of balances of program income before you request additional funds from us; and b. FMS Article III concerning allowability of costs for which the funds may be used. 3. You must report on each Federal Financial Report (SF–425) that you submit in accordance with REP Article II the program income that you earn and any that you use during the reporting period covered by that SF–425. V. SECTION F OF FMS ARTICLE VII. DoD Components must use the following default wording as Section F of FMS Article VII in accordance with § 1128.725 of this part: Section F. Duration of accountability for program income. The requirements concerning disposition of program income in Section E of this Article apply only to program income you earn during the period of performance. There are no requirements under this award applicable to program income you earn after the end of the period of performance. PART 1130—PROPERTY ADMINISTRATION: GENERAL AWARD TERMS AND CONDITIONS Sec. 1130.1 Purpose of this part. 1130.2 Applicability of this part. 1130.3 Exceptions from requirements of this part. 1130.4 Organization of this part. Subpart A—Title to Property (PROP Article I) 1130.100 Purpose of PROP Article I. 1130.105 Title to property acquired under awards. 1130.110 Property trust relationship. 1130.115 Title to federally owned property. 1130.120 Federal interest in donated property. 1130.125 Federal interest in property improved under awards. sradovich on DSK3GMQ082PROD with PROPOSALS2 Subpart B—Property Management System (PROP Article II) 1130.200 Purpose of PROP Article II. Subpart C—Use and Disposition of Real Property (PROP Article III) 1130.300 Purpose of PROP Article III. 1130.305 Use of real property. 1130.310 Disposition of real property. Subpart D—Use and Disposition of Equipment and Supplies (PROP Article IV) 1130.400 Purpose of PROP Article IV. 1130.405 Property subject to PROP Article IV. 1130.410 Requirements for a State’s use and disposition of equipment. 1130.415 Use of equipment by an institution of higher education, nonprofit organization, local government, or Indian tribe. 1130.420 Disposition of equipment by an institution of higher education, nonprofit organization, local government, or Indian tribe. 1130.425 Use and disposition of supplies. Subpart E—Use and disposition of federally owned property (PROP Article V) 1130.500 Purpose of PROP Article V. 1130.505 Content of PROP Article V. Subpart F—Intangible Property (PROP Article VI) 1130.600 Purpose of PROP Article VI. 1130.605 Copyrights asserted in works developed or otherwise acquired under awards. 1130.610 Inventions developed under awards. 1130.615 Data produced under awards. 1130.620 Intangible property acquired, but not developed or produced, under awards. Appendix A to Part 1130—Terms and conditions for PROP Article I, ‘‘Title to property’’ Appendix B to Part 1130—Terms and conditions for PROP Article II, ‘‘Property management system’’ Appendix C to Part 1130—Terms and conditions for PROP Article III, ‘‘Use and disposition of real property’’ Appendix D to Part 1130—Terms and conditions for PROP Article IV, ‘‘Use and disposition of equipment and supplies’’ Appendix E to Part 1130—Terms and conditions for PROP Article V, ‘‘Use and disposition of federally owned property’’ Appendix F to Part 1130—Terms and conditions for PROP Article VI, ‘‘Intangible property’’ Authority: 5 U.S.C. 301 and 10 U.S.C. 113. § 1130.1 Purpose of this part. (a) This part specifies standard wording of general terms and conditions concerning equipment, supplies, and real, intangible, and federally owned property. (b) It thereby implements OMB guidance in 2 CFR 200.310 through 200.316, as that guidance applies to general terms and conditions. § 1130.2 Applicability of this part. The types of awards and entities to which this part and other parts in this subchapter apply are described in the subchapter overview at 2 CFR 1126.2. § 1130.3 Exceptions from requirements of this part. Exceptions are permitted from the administrative requirements in this part only as described at 2 CFR 1126.3. § 1130.4 Organization of this part. (a) The content of this part is organized into subparts and associated appendices. (1) Each subpart provides direction to DoD Components on how to construct one article of general terms and conditions for grants and cooperative agreements. (2) For each subpart, there is a corresponding appendix with standard wording for terms and conditions of the article addressed by the subpart. Terms and conditions address rights and responsibilities of the Government and recipients. (b) A DoD Component must use the wording provided in each appendix in accordance with the direction in the corresponding subpart. That direction may permit DoD Components to vary from the standard wording in some situations. (c) The following table shows which article of general terms and conditions may be found in each of appendices A through F to this part (with the associated direction to DoD Components in subparts A through F, respectively): You will find terms and conditions specifying recipients’ rights and responsibilities related to . . . In . . . Appendix Appendix Appendix Appendix Appendix Appendix 1130.205 Insurance coverage for real property and equipment. 1130.210 Other management system standards for States. 1130.215 Other management system standards for institutions of higher education, nonprofit organizations, local governments, and Indian tribes. A ............................ B ............................ C ............................ D ............................ E ............................ F ............................. VerDate Sep<11>2014 19:05 Nov 04, 2016 That would appear in an award within PROP Article . . . Title to property ............................................................................................ Property management system ..................................................................... Use and disposition of real property ............................................................ Use and disposition of equipment and supplies .......................................... Use and disposition of federally owned property ........................................ Intangible property ....................................................................................... I. II. III. IV. V. VI. Jkt 241001 PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules Subpart A—Title to Property (PROP Article I) § 1130.100 Purpose of PROP Article I. PROP Article I specifies in whom and under what conditions title to property vests under the award. It thereby implements OMB guidance: (a) Pertaining to vesting of title to property, in 2 CFR 200.311(a), 200.312(a), 200.313(a), 200.314(a), and 200.315(a). (b) Pertaining to the property trust relationship in 2 CFR 200.316. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1130.105 awards. Title to property acquired under (a) General policy. Title to tangible property that a recipient acquires under an award (whether by purchase, construction or fabrication, development, or otherwise), and title to intangible property that a recipient acquires other than by developing or producing it under an award, generally vests in the recipient subject to the conditions in PROP Articles II–IV and Section D of PROP Article VI, which protect the Federal interest in the property. (b) Exceptions to the general policy when there is statutory authority—(1) Exempt property in general. If a DoD Component has statutory authority to do so, it may vest title in recipients to property acquired under awards either unconditionally or subject to fewer conditions than those in PROP Articles II–IV and VI. This subpart refers to acquired property for which a DoD Component has such statutory authority—and elects to use it—as ‘‘exempt property.’’ (2) Research awards. (i) Under 31 U.S.C. 6306, a DoD Component may vest title to tangible personal property (i.e., equipment and supplies) in a nonprofit institution of higher education or nonprofit organization whose primary purpose is conducting scientific research—without further obligation to the Government or subject to conditions the DoD Component deems appropriate—if the property is bought with amounts provided under a grant or cooperative agreement for basic or applied research. (ii) As a matter of policy, to enhance the university infrastructure for future performance of defense research and research-related education and training, DoD Components shall make maximum use of the authority of 31 U.S.C. 6306 to vest title to equipment in nonprofit institutions of higher education subject to only the following three conditions: (A) The recipient uses the equipment for the authorized purposes of the VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 project or program until the property is no longer needed for those purposes. (B) The recipient manages the equipment as provided in PROP Article II of the general terms and conditions (see subpart B of this part). This includes maintaining property records that include the percentage of Federal participation in the costs of the project or program under which the recipient acquired the exempt property, so that the recipient may deduct the Federal share if it wishes to use the property in future contributions for cost sharing or matching purposes on Federal awards. (C) The DoD Component reserves the right to transfer title to the equipment to another recipient entity if the Principal Investigator relocates his or her research program to that entity. (c) Award terms and conditions—(1) General. Unless a DoD Component has a statute authorizing it to identify acquired property as exempt property, as described in paragraph (b) of this section, it must use the default wording Appendix A to this part provides for Section A of PROP Article I. (2) Exceptions. (i) If a DoD Component has statutory authority such as described in paragraph (b) of this section, and elects to use that authority for awards subject to its general terms and conditions, it must insert wording in paragraph A.2 of PROP Article I to: (A) Identify the type or types of property it is excepting from the standard requirements for title vesting, use, and disposition contained in PROP Articles II through IV and VI and reporting requirements contained in REP Article III of the general terms and conditions. (B) If it is excepting the property from some, but not all, of the standard requirements, identify the requirements to which the exempt property will be subject. (ii) Paragraph A.2 of PROP Article I in general terms and conditions used for research awards to institutions of higher education generally should provide for vesting of title to acquired equipment in those institutions subject only to the three conditions described in paragraph (b)(2)(ii) of this section. § 1130.110 Property trust relationship. (a) OMB guidance. OMB guidance in 2 CFR 200.316 describes the property trust relationship. It states that: (1) Recipients must hold real property, equipment, and intangible property acquired or improved under grants or cooperative agreements in trust for the beneficiaries of the projects or programs under which the property was acquired or improved; and PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 78407 (2) A Federal agency may require a recipient to record liens or other appropriate notices of record to indicate that personal or real property was acquired or improved under a grant or cooperative agreement, making the property’s use and disposition subject to the award terms and conditions. (b) DoD implementation. A DoD Component’s general terms and conditions must specify that recipients hold title to real property, equipment, and intangible property acquired or improved under DoD grants and cooperative agreements in trust for the beneficiaries of the projects or programs carried out under those awards. (c) Award terms and conditions. A DoD Component’s general terms and conditions: (1) Must include the default wording appendix A to this part provides for paragraph B.1 of PROP Article I, except that a DoD Component may instead reserve Section B if there will be no acquisition or improvement of real property, equipment, or intangible property under awards using those general terms and conditions or subawards under those awards. (2) May add wording to the reserved paragraph B.2 of the default wording of Section B of PROP Article I to require recipients to record liens or other notices of record, as described in paragraph (a) of this section. § 1130.115 property. Title to federally owned (a) Requirement. A DoD Component’s general terms and conditions must include the default wording appendix A to this part provides for Section C of PROP Article I to affirm that title to federally owned property remains with the Government. (b) Exception. A DoD Component may reserve Section C if it provides no federally owned property under its awards. § 1130.120 property. Federal interest in donated (a) Requirement. A DoD Component’s general terms and conditions must inform recipients that the Government acquires an interest in any real property or equipment for which the value of the remaining life of the property in the recipient’s accounting records or the fair market value of the property is counted toward required cost sharing or matching, rather than charging depreciation. (b) Award terms and conditions. A DoD Component’s general terms and conditions therefore must either: (1) Include the default wording appendix A to this part provides for E:\FR\FM\07NOP2.SGM 07NOP2 78408 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules Section D of PROP Article I to specify the Federal interest in donated real property or equipment; or (2) Reserve Section D of PROP Article I if the DoD Component does not permit recipients to count the fair market value of real property or equipment toward cost sharing or matching. § 1130.125 Federal interest in property improved under awards. (a) Requirement. General terms and conditions for DoD grants and cooperative agreements must address the Federal interest in improvements to real property or equipment that results if a recipient directly charges the costs of the improvements to an award. (b) Award terms and conditions. A DoD Component’s general terms and conditions therefore must either: (1) Include the default wording appendix A to this part provides for Section E of PROP Article I to specify the Federal interest in improved real property or equipment; or (2) Reserve Section E of PROP Article I if there will be no improvements to real property or equipment under awards using those general terms and conditions or subawards under those awards. Subpart B—Property Management System (PROP Article II) § 1130.200 Purpose of PROP Article II. (a) PROP Article II prescribes standards for: (1) Insurance coverage for real property and equipment acquired or improved under awards; (2) The system that a recipient uses to manage both equipment that is acquired or improved in whole or in part under awards and federally owned property. (b) It thereby implements OMB guidance in 2 CFR 200.310, and 200.313(d)(1) through (4), and partially implements 2 CFR 200.313(b). sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1130.205 Insurance coverage for real property and equipment. (a) OMB guidance. OMB guidance in 2 CFR 200.310 includes a requirement for recipients’ insurance coverage for real property and equipment acquired or improved under awards and states that federally owned property need not be insured unless required by Federal award terms and conditions. (b) DoD implementation. A DoD Component’s general terms and conditions must require recipients to provide insurance coverage for real property and equipment acquired or improved under awards. However, unless a statute or program regulation adopted in the Code of Federal Regulations after opportunity for public VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 comment specifies otherwise, DoD awards will not require recipients to insure federally owned property. (c) Award terms and conditions. A DoD Component’s general terms and conditions therefore must either: (1) Include the default wording appendix B to this part provides for Section A of PROP Article II; or (2) Reserve Section A of PROP Article II if there will be no real property or equipment acquired or improved under awards using those terms and conditions or subawards under those awards. § 1130.210 Other management system standards for States. (a) Requirement. DoD Components’ general terms and conditions must address the standards for States’ property management systems. (b) Award terms and conditions. A DoD Component’s general terms and conditions therefore must either: (1) Include the default wording appendix B to this part provides for Section B of PROP Article II; or (2) Reserve Section B of PROP Article II if no State will acquire or improve equipment, in whole or in part, or be accountable for federally owned property under awards using those general terms and conditions or subawards under those awards. § 1130.215 Other management system standards for institutions of higher education, nonprofit organizations, local governments, and Indian tribes. (a) Requirement. DoD Components’ general terms and conditions must address the standards for property management systems of institutions of higher education, nonprofit organizations, local governments, and Indian tribes. (b) Award terms and conditions. A DoD Component’s general terms and conditions therefore must either: (1) Include the default wording appendix B to this part provides for Section C of PROP Article II; or (2) Reserve Section C of PROP Article II if no institution of higher education, nonprofit organization, local government, or Indian tribe will acquire or improve equipment, in whole or in part, or be accountable for federally owned property under awards using those general terms and conditions or subawards under those awards. Subpart C—Use and Disposition of Real Property (PROP Article III) § 1130.300 Purpose of PROP Article III. PROP Article III specifies requirements for recipients’ use and disposition of real property acquired or PO 00000 Frm 00054 Fmt 4701 Sfmt 4702 improved under an award. It thereby implements OMB guidance in 2 CFR 200.311(b) and (c). § 1130.305 Use of real property. (a) OMB guidance. OMB guidance in 2 CFR 200.311(b) states that, except as otherwise provided by Federal statute or the Federal awarding agency, a recipient must use real property acquired or improved under an award for the originally authorized purpose as long as needed for that purpose, during which time the recipient must not dispose of the property or encumber its title or other interests. (b) DoD implementation. Unless a statute or program regulation adopted in the Code of Federal Regulations after opportunity for public comment specifies otherwise, DoD awards must permit recipients to do the following: (1) While real property acquired or improved under an award still is needed for the authorized purpose, also use it for other projects or programs that either are supported by DoD Components or other Federal agencies or not federally supported, as long as that use does not interfere with the property’s use for the authorized purpose. (2) After the real property no longer is needed for the authorized purpose, with the written approval of the award administration office, use the property on other federally supported projects or programs that have purposes consistent with those authorized for support by the DoD Component that made the award under which the property was acquired or improved. (c) Award terms and conditions. DoD Component general terms and conditions must either: (1) Include the default wording appendix C to this part provides for Section A of PROP Article III; or (2) If a statute or program regulation in the Code of Federal Regulations specifies different requirements for recipients’ use of real property, substitute alternative wording for Section A to specify those requirements. § 1130.310 Disposition of real property. (a) OMB guidance. OMB guidance in 2 CFR 200.311(c): (1) Addresses the recipient’s responsibility to request disposition instructions for real property when the recipient no longer needs it for the originally authorized purpose; and (2) Identifies three alternative disposition methods those instructions may specify. (b) DoD implementation. DoD implements the guidance in 2 CFR 200.311(c) through award terms and conditions that govern disposition of E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules real property acquired or improved under awards. (c) Award terms and conditions. A DoD Component’s general terms and conditions must include the default wording appendix C to this part provides for Section B of PROP Article III to specify requirements concerning disposition of real property acquired or improved under awards. that govern States’ use and disposition of equipment. (c) Award terms and conditions. A DoD Component’s general terms and conditions must use the default wording appendix D to this part provides for Section B of PROP Article IV to specify the requirements for a State’s use and disposition of equipment in which there is a Federal interest. Subpart D—Use and Disposition of Equipment and Supplies (PROP Article IV) § 1130.415 Use of equipment by an institution of higher education, nonprofit organization, local government, or Indian tribe. § 1130.400 (a) OMB guidance. OMB guidance in: (1) 2 CFR 200.313(a) sets forth basic conditions for use of equipment acquired under an award that apply when title to the equipment is vested in a recipient conditionally, because the awarding agency either does not have statutory authority to vest title in the equipment unconditionally or elects not to do so. (2) 2 CFR 200.313(c) provides for use of equipment by an institution of higher education, nonprofit organization, local government, or Indian tribe. (3) 2 CFR 200.313(d)(5) calls for use of sales procedures to ensure highest possible return when selling equipment. (b) DoD implementation. For equipment in which there is a Federal interest under awards to institutions of higher education, nonprofit organizations, local governments, or Indian tribes, DoD implements through award terms and conditions the following portions of 2 CFR part 200 as they apply to use of equipment prior to the time of its disposition: (1) 2 CFR 200.313(a) and (c); and (2) 2 CFR 200.313(d)(5), as it applies to equipment sales prior to the time of disposition, to offset the acquisition cost of replacement equipment. (c) Award terms and conditions. A DoD Component’s general terms and conditions must use the default wording appendix D to this part provides for Section C of PROP Article IV to specify the requirements for use of equipment described in paragraph (b) of this section. Purpose of PROP Article IV. PROP Article IV specifies requirements for recipients’ use and disposition of equipment and supplies in which there is a Federal interest. It thereby implements OMB guidance in: (a) 2 CFR 200.313(a) through (c), 200.313(d)(5), and 200.313(e) as that guidance applies to requirements for use and disposition of equipment; and (b) 2 CFR 200.314, as that guidance applies to requirements for use and disposition of supplies acquired under an award. § 1130.405 Article IV. Property subject to PROP (a) Requirement. DoD Components’ general terms and conditions must identify the types of non-exempt property to which requirements for use and disposition of equipment and supplies apply. (b) Award terms and conditions. To implement the requirement in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the default wording appendix D to this part provides for Section A of PROP Article IV. That wording identifies the categories of equipment and supplies in which there is a Federal interest, which are the categories to which the requirements for use and disposition apply. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1130.410 Requirements for a State’s use and disposition of equipment. (a) OMB guidance. OMB guidance in: (1) 2 CFR 200.313(a) sets forth basic conditions for use of equipment acquired under an award that apply when title to the equipment is vested in a recipient conditionally, because the awarding agency either does not have statutory authority to vest title in the equipment unconditionally or elects not to do so. (2) 2 CFR 200.313(b) provides that a State must use, manage, and dispose of equipment in accordance with State laws and procedures. (b) DoD implementation. DoD implements 2 CFR 200.313(a) and (b) through award terms and conditions VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 § 1130.420 Disposition of equipment by an institution of higher education, nonprofit organization, local government, or Indian tribe. (a) OMB guidance. OMB guidance in 2 CFR 200.313(e) addresses disposition of original or replacement equipment acquired under an award by an institution of higher education, nonprofit organization, local government, or Indian tribe. (b) DoD implementation. DoD implements 2 CFR 200.313(e) through award terms and conditions that govern PO 00000 Frm 00055 Fmt 4701 Sfmt 4702 78409 disposition of original or replacement equipment acquired under an award by an institution of higher education, nonprofit organization, local government, or Indian tribe when there is a Federal interest in the equipment. (c) Award terms and conditions. A DoD Component’s general terms and conditions must use the default wording appendix D to this part provides for Section D of PROP Article IV to specify the requirements for disposition of equipment described in paragraph (b) of this section. § 1130.425 supplies. Use and disposition of (a) OMB guidance. OMB guidance in 2 CFR 200.314 sets forth requirements for use and disposition of supplies acquired under an award. (b) DoD implementation. DoD implements 2 CFR 200.314 through award terms and conditions that govern use and disposition of supplies acquired under awards either by purchase or by donation as cost sharing or matching. (c) Award terms and conditions. A DoD Component’s general terms and conditions must use the default wording appendix D to this part provides for Section E of PROP Article IV to specify the requirements for use and disposition of acquired supplies. Subpart E—Use and Disposition of Federally Owned Property (PROP Article V) § 1130.500 Purpose of PROP Article V. PROP Article V specifies requirements for recipients’ use and disposition of federally owned property. It implements the portion of OMB guidance in 2 CFR 200.312(a) that applies to disposition of federally owned property. § 1130.505 Content of PROP Article V. A DoD Component’s general terms and conditions must either: (a) Include the default wording appendix E to this part provides for PROP Article V to specify requirements for use and disposition of federally owned property; or (b) Reserve PROP Article V if there is no possibility of recipients or subrecipients being accountable for federally owned property under awards using those terms and conditions. Subpart F—Intangible Property (PROP Article VI) § 1130.600 Purpose of PROP Article VI. PROP Article VI sets forth the rights and responsibilities of recipients and the Government with respect to intangible property. It thereby E:\FR\FM\07NOP2.SGM 07NOP2 78410 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules implements OMB guidance in 2 CFR 200.315. § 1130.605 Copyrights asserted in works developed or otherwise acquired under awards. (a) OMB guidance. OMB guidance in 2 CFR 200.315(b) addresses recipients’ and the Government’s rights related to works that recipients may copyright. (b) DoD implementation. DoD implements 2 CFR 200.315(b) through award terms and conditions that specify recipient and Government rights with respect to copyrightable works. (c) Award terms and conditions. A DoD Component’s general terms and conditions must use the default wording appendix F to this part provides for Section A of PROP Article VI to affirm the recipient’s right to assert copyright in works it develops or otherwise acquires under an award, as well as the Government’s right to use the works for Federal purposes. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1130.610 awards. Inventions developed under (a) OMB guidance. OMB guidance in 2 CFR 200.315(c) states that recipients are subject to applicable regulations concerning patents and inventions, including Department of Commerce regulations at 37 CFR part 401. (b) DoD implementation. In implementing 2 CFR 200.315(c) for awards for the performance of experimental, developmental, or research work, DoD: (1) Extends to other entities the patent rights provisions of chapter 18 of Title 35 of the U.S. Code and 37 CFR part 401 that directly apply to small business firms and nonprofit organizations. This broadened applicability is in accordance with the February 18, 1983, Presidential memorandum on Government patent policy, referred to in Executive Order 12591, ‘‘Facilitating Access to Science and Technology.’’ (2) Establishes a default requirement for recipients to provide final reports listing all subject inventions under their awards or stating there were none, a requirement that 37 CFR 401.5(f)(1) provides as an agency option. (3) Incorporates the prohibition in 35 U.S.C. 212 on asserting Federal Government rights in inventions made by recipients of scholarships, fellowships, training grants, or other awards made primarily for educational purposes. (c) Award terms and conditions. (1) Awards for research, developmental, or experimental work. A DoD Component’s general terms and conditions for awards for the performance of experimental, developmental, or research work funded VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 in whole or in part by the Government must include the default wording appendix F to this part provides for Section B of PROP Article VI, with one permitted exception. The exception is that a DoD Component may reserve or substitute alternative wording for paragraph B.2.b of Section B of PROP Article VI, as appropriate, if it elects to: (i) Omit the requirement for final invention reports; (ii) Substitute ‘‘120 calendar days’’ for ‘‘90 calendar days’’ to provide an additional 30 days for recipient’s submissions of final reports after the end date of the period of performance; or (iii) Include a requirement for recipients to submit information about each patent application they submit for a subject invention, interim listings of all subject inventions, or both, which the Department of Commerce regulations at 37 CFR 401.5(f)(2) and (3) permit agencies to require. (2) Awards for primarily educational purposes. A DoD Component’s general terms and conditions for awards to support scholarships or fellowships, training grants, or other awards for primarily educational purposes must replace the default wording appendix F to this part provides for Section B of PROP Article VI with an alternative award provision stating that the Federal Government will have no rights to inventions made by recipients. (3) Awards for other purposes. A DoD Component developing general terms and conditions for awards other than those described in paragraphs (c)(1) and (2) of this section should: (i) Consult its intellectual property counsel if it anticipates that recipients may develop patentable inventions under its awards, to identify any applicable statutes or regulations and determine an appropriate substitute for the default wording appendix F to this part provides for Section B of PROP Article VI; or (ii) Reserve Section B of PROP Article VI if it does not expect development of any patentable inventions under those awards. § 1130.615 Data produced under awards. (a) OMB guidance. OMB guidance in 2 CFR 200.315(d) and (e) addresses rights in data under awards. (b) DoD implementation. DoD implements 2 CFR 200.315(d) and (e) through award terms and conditions. (c) Award terms and conditions—(1) General. A DoD Component’s general terms and conditions must include the default wording appendix F to this part provides for Section C of PROP Article VI. PO 00000 Frm 00056 Fmt 4701 Sfmt 4702 (2) Exception. A DoD Component may reserve paragraph C.2 of Section C of PROP Article VI in its general terms and conditions if: (i) Those terms and conditions will not be used for research awards; and (ii) The DoD Component determines that no research data as defined in 2 CFR 200.315 will be generated under the awards using those terms and conditions. § 1130.620 Intangible property acquired, but not developed or produced, under awards. (a) OMB guidance. OMB guidance in 2 CFR 200.315(a) addresses use and disposition of intangible property that is acquired under awards (in addition to vesting of title, which is implemented in § 1130.105 and appendix A to this part). (b) DoD implementation. DoD implements 2 CFR 200.315(a) through award terms and conditions that govern use and disposition of intangible property that is acquired, but not developed or produced, under awards. (c) Award terms and conditions. A DoD Component’s general terms and conditions must include the default wording appendix F to this part provides for Section D of PROP Article VI. Appendix A to Part 1130—Terms and Conditions for PROP Article I, ‘‘Title To Property’’ I. SECTION A OF PROP ARTICLE I. DoD Components must use as Section A of PROP Article I the following default wording in accordance with § 1130.105 of this part, which permits addition of wording to paragraph A.2 if statutory authority exists: PROP Article I. Title to Property. (December 2014) Section A. Title to property acquired under this award. 1. General. Other than any property identified in paragraph A.2 of this section as exempt property: a. Title to real property, equipment, and supplies that you acquire (whether by purchase, construction or fabrication, development, or otherwise) and charge as direct project costs under this award vests in you, the recipient. Title to intangible property that you acquire (other than by developing or producing it) under this award also vests in you. b. That title is a conditional title, subject to the terms and conditions in PROP Articles II–IV, Section D of PROP Article VI, and REP Article III of this award. c. There is a Federal interest in the property, other than intangible property that you develop or produce under the award. For real property, equipment, and intangible property, we retain this Federal interest until final disposition of the property under PROP Article III (for real property), PROP Article IV (for equipment), or Section D of PROP Article E:\FR\FM\07NOP2.SGM 07NOP2 sradovich on DSK3GMQ082PROD with PROPOSALS2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules VI (for intangible property that is acquired, other than by developing or producing it), a period that in some cases may extend beyond closeout of this award. 2. Exempt property. [Reserved]. II. SECTION B OF PROP ARTICLE I. DoD Components must use as Section B of PROP Article I the following default wording in accordance with § 1130.110 of this part, which permits insertion of wording in the reserved paragraph B.2 to specify requirements for liens or other notices of record: Section B. Property trust relationship. 1. Basic requirement. Other than intangible property that you develop or produce under the award, you hold any real property, equipment, or intangible property that you acquire or improve under this award in trust for the beneficiaries of the project or program that you are carrying out under the award. 2. Notices of record. [Reserved]. III. SECTION C OF PROP ARTICLE I. DoD Components must use as Section C of PROP Article I the following default wording in accordance with § 1130.115 of this part: Section C. Federally owned property. Title to any federally owned property that we provide to you under this award (or for which accountability is transferred to this award from another Federal award) remains with the Government. IV. SECTION D OF PROP ARTICLE I. DoD Components must either use the following default wording as Section D of PROP Article I, or reserve Section D, in accordance with § 1130.120 of this part: Section D. Federal interest in donated real property or equipment. If real property or equipment is acquired under this award through your donation of the property to the project or program (i.e., counting the value of the remaining life of the property recorded in your accounting records or the fair market value as permitted under FMS Article VI of this award as part of your share of project costs to meet any cost sharing or matching requirements, rather than charging depreciation): 1. The Government acquires through that donation an interest in the real property or equipment, the value of which at any given time is the product of: a. The Federal share of the project costs under this award; and b. The current fair market value of the property at that time. 2. The real property or equipment is subject to Section B of this article and the terms and conditions of PROP Articles II–IV and REP Article III that are applicable to property acquired under the award. 3. The Federal interest in the real property or equipment must be addressed at the time of property disposition. V. SECTION E OF PROP ARTICLE I. DoD Components must either use the following default wording as Section E of PROP Article I, or reserve Section E, in accordance with § 1130.125 of this part: Section E. Federal interest in property improved under the award. 1. The Government has an interest in improvements (as distinct from ordinary repairs and maintenance) you make to an item of real property or equipment if you VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 charge the costs of the improvements as direct costs to this award. 2. We thereby acquire an interest in the property if the Government did not previously have one. If the Government already had an interest in the property, the value of that Federal interest in the property increases by the amount of the Federal interest in the improvements. 3. The property is subject to Section B of this article and the terms and conditions of PROP Articles II–IV and REP Article III that are applicable to real property or equipment acquired under the award. 4. The Federal interest must be addressed at the time of property disposition. Appendix B to Part 1130—Terms and Conditions for PROP Article II, ‘‘Property Management System’’ I. SECTION A OF PROP ARTICLE II. DoD Components must either use the following default wording as Section A of PROP Article II, or reserve Section A, in accordance with § 1130.205 of this part: PROP Article II. Property Management System. (December 2014) Section A. Insurance coverage for real property and equipment. You must, at a minimum, provide the equivalent insurance coverage for real property and equipment acquired or improved under this award as you provide for real property and equipment that you own. II. SECTION B OF PROP ARTICLE II. DoD Components must either use the following default wording as Section B of PROP Article II, or reserve Section B, in accordance with § 1130.210 of this part: Section B. Other management system standards for a State. 1. Equipment. Your property management system for equipment acquired or improved in whole or in part under this award must be in accordance with your State laws and procedures. 2. Federally owned property. You may use your own property management system for any federally owned property for which you are accountable, as long as it meets the following minimum standards: a. Records. Your records must include for each item of federally owned property: i. A description of the item. ii. The location of the item. iii. The serial or other identification number. iv. Which Federal agency holds title. v. The date you received the item. vi. Any data on the ultimate disposition of the item, such as the date of disposal. vii. The Federal award identification number of the award under which you are accountable for the item. b. Inventory. You must take a physical inventory of federally owned property at least biennially and reconcile the results with your records. c. Control system. You must: i. Maintain an internal property control system with adequate safeguards to prevent loss, damage, or theft of federally owned property. PO 00000 Frm 00057 Fmt 4701 Sfmt 4702 78411 ii. Investigate any loss, damage, or theft of federally owned property and promptly notify the award administration office. d. Maintenance. You must maintain the property in good condition. II. SECTION C OF PROP ARTICLE II. DoD Components must use the following default wording as Section C of PROP Article II in accordance with § 1130.215 of this part: Section C. Other management system standards for an institution of higher education, nonprofit organization, local government, or Indian tribe. Your procedures for managing equipment (including replacement equipment) acquired or improved in whole or in part under this award and any federally owned property for which you are accountable under this award must, as a minimum, meet the requirements in this section. 1. Records. You must maintain records that include for each item of equipment or federally owned property: a. A description of the item. b. The serial or other identification number. c. Who holds title (e.g., you or the Government and, if the latter, which Federal agency). d. The source of funding for the equipment, including the award number, or the source of the federally owned property, including the award number of the award under which you are accountable for the property. e. The acquisition date and cost of the equipment (or improvement to the equipment) or the date you received the federally owned property. f. The location, use, and condition of the equipment or federally owned property. g. Information from which one can calculate the amount of the Federal interest in the acquisition or improvement of the item (this amount is zero after you compensate us for the Federal interest in the item or improvement). h. Any data on the ultimate disposition of the item including the date of disposal and sale price. 2. Labelling. You must ensure that property owned by the Federal Government is labeled to identify it as federally owned property. 3. Inventory. You must take a physical inventory of equipment in which there is a Federal interest and reconcile the results with your records at least once every 2 years. 4. Control system. You must: a. Maintain an internal property control system with adequate safeguards to prevent loss, damage, or theft of equipment and federally owned property. b. Investigate any loss, damage, or theft and notify the award administration office if it involved equipment in which there is a Federal interest under the award or federally owned property. 5. Maintenance. You must maintain equipment acquired or improved in whole or in part under the award and federally owned property in good condition. E:\FR\FM\07NOP2.SGM 07NOP2 78412 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules 3. Transfer title to us or a third party we designate, as described in 2 CFR 200.311(c)(3). I. SECTION A OF PROP ARTICLE III. DoD Components must use either the following default wording or alternative wording as Section A of PROP Article III, in accordance with § 1130.305 of this part: sradovich on DSK3GMQ082PROD with PROPOSALS2 Appendix C to Part 1130—Terms and Conditions for PROP Article III, ‘‘Use and Disposition of Real Property’’ Appendix D to Part 1130—Terms and Conditions for PROP Article IV, ‘‘Use and Disposition of Equipment and Supplies’’ PROP Article III. Use and Disposition of Real Property. (December 2014) Section A. Use of real property. 1. You must use real property acquired or improved under this award for the originally authorized purpose as long as needed for that purpose. During that time, you may not: a. Dispose of the property except, with the approval of the award administration office, to acquire replacement property under this award, in which case you may use the proceeds from the disposition as an offset to the cost of the replacement property; or b. Encumber the title or other interests in the property without the approval of the award administration office identified in this award. 2. During the time that the real property is used for the originally authorized purpose, you may make the property available for use on other projects or programs, but only if that use will not interfere with the property’s use as needed for its originally authorized purpose. a. First preference must be given to other projects or programs supported by DoD Components and second preference to those supported by other Federal agencies. b. Third preference is for other projects or programs not currently supported by the Federal Government. You should charge user fees for use of the property in those cases, if it is at all practicable. 3. When the real property is no longer needed for the originally authorized purpose, with the written approval of the award administration office, you may delay final disposition of the property to use it on other federally sponsored projects or programs. A condition for the award administration office’s approval is that the other projects or programs have purposes consistent with those authorized for support by the DoD Component that made the award under which the property was acquired or improved. II. SECTION B OF PROP ARTICLE III. DoD Components must use the following default wording as Section B of PROP Article III in accordance with § 1130.310 of this part: Section B. Disposition of real property. When you no longer need real property for the originally authorized purpose, you must obtain disposition instructions from the award administration office except as provided in paragraph A.3 of this article. Those instructions will provide for one of the following three alternatives, which are that you: 1. Retain title after compensating us for the Federal interest in the property, which is to be computed as specified in the definition of ‘‘Federal interest.’’ 2. Sell the property and compensate us for the Federal interest in the property, as described in 2 CFR 200.311(c)(2). DoD Components must use as Sections A through F of PROP Article IV the following default wording in accordance with §§ 1130.405 through 1130.425 of this part: VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 PROP Article IV. Use and Disposition of Equipment and Supplies. (December 2014) Section A. Property subject to this article. This article specifies requirements for use and disposition of equipment and supplies. If a provision of PROP Article I or an awardspecific term or condition of this award identifies any equipment or supplies as exempt property, requirements of this Article apply to that exempt property only to the extent specified in that provision of PROP Article I or the award-specific term or condition. The types of non-exempt property to which this article applies are: 1. Supplies that you acquire either by purchase or by donation as cost sharing or matching under this award; and 2. Equipment for which title is vested conditionally in you. That includes equipment with a conditional title resulting from your having, either under this award or under a previous award from which you transferred accountability for the equipment to this award: a. Directly charged as project costs, in whole or in part, the acquisition (by purchase, construction or fabrication, or development) of equipment; b. Donated the equipment to the project or program by counting the value of the remaining life of the property recorded in your accounting records or the fair market value toward any cost sharing or matching requirements under the award, rather than charging depreciation (see PROP Article I, Section D); or c. Directly charged as project costs improvements to the equipment that meet the criteria given in paragraph E.1 of PROP Article I. Section B. Requirements for a State’s use and disposition of equipment. You: 1. Must use the equipment for the authorized purposes of the project or program during the period of performance, or until the property is no longer needed for those purposes. 2. May not encumber the property without the prior written approval of the award administration office. 3. Must use and dispose of the equipment in accordance with your State laws and procedures. Section C. Use of equipment by an institution of higher education, nonprofit organization, local government, or Indian tribe. You: 1. Must use the equipment for the authorized purposes of the project or program under this award until the equipment is no longer needed for those purposes, whether or not the project or PO 00000 Frm 00058 Fmt 4701 Sfmt 4702 program continues to be supported by this award. 2. May not encumber the equipment without the prior written approval of the award administration office. 3. During the time that the equipment is used for the project or program under this award: a. You must make the equipment available for use on other projects or programs but only if that use will not interfere with the equipment’s use as needed for the project or program supported by this award. i. First preference must be given to other projects or programs supported or previously supported by DoD Components and second preference to those supported or previously supported by other Federal agencies. ii. Third preference is for other projects or programs not supported by the Federal Government. You should charge user fees for use of the equipment in those cases, if it is at all practicable. b. You may use the equipment, if you need to acquire replacement equipment, as a tradein or sell it (using sales procedures designed to ensure the highest possible return) and use the proceeds from the sale to offset the cost of the replacement equipment. 4. When the equipment is no longer needed for the project or program under this award, you may defer final disposition of the equipment and continue to use it on other federally sponsored projects or programs. You must give first priority to other projects or programs supported by DoD Components. 5. Notwithstanding the encouragement in FMS Article VII to earn program income, you may not use equipment in which there currently is a Federal interest—whether you acquired it under this award or are otherwise accountable for it under this award—to provide services for a fee that is less than private companies charge for equivalent services. Section D. Disposition of equipment by an institution of higher education, nonprofit organization, local government, or Indian tribe. You must request disposition instructions from the award administration office when either original or replacement equipment acquired under this award with a current fair market value that exceeds $5,000 is no longer needed for the original project or program or for other federally sponsored activities as described in paragraph C.4 of this article. For each item of equipment with a current fair market value of $5,000 or less, you may retain, sell, or otherwise dispose of the item with no further obligation to the Federal Government. 1. We may issue disposition instructions that: a. Allow you to retain or sell any item of equipment after compensating us for the Federal interest in the property, which is to be computed as specified in the definition of ‘‘Federal interest.’’; or b. Require you to transfer title to the equipment to a Federal agency or a third party, in which case you are entitled to compensation from us for the non-Federal interest in the equipment, plus any reasonable shipping or interim storage costs incurred. 2. If we fail to provide disposition instructions for any item of equipment E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules within 120 calendar days of receiving your request, you may retain or sell the equipment but you must compensate us for the amount of the Federal interest in the equipment. 3. If you sell the equipment: i. You must use sales procedures designed to ensure the highest possible return; and ii. You may deduct and retain for selling and handling expenses either $500 or ten percent of the proceeds, whichever is less. Section E. Use and disposition of supplies acquired under this award. 1. Use. As long as we retain a Federal interest in supplies acquired under this award either by purchase or by donation as cost sharing or matching, you may not use the supplies to provide services to other organizations for a fee that is less than private companies charge for equivalent services, notwithstanding the encouragement in FMS Article VII to earn program income. 2. Disposition. If you have a residual inventory of unused supplies with aggregate value exceeding $5,000 at the end of the period of performance under this award, and the supplies are not needed for any other Federal award, you must retain the supplies or sell them but must in either case compensate us for the amount of the Federal interest in the supplies. You may deduct and retain for selling and handling expenses either $500 or ten percent of the proceeds, whichever is less. Appendix E to Part 1130—Terms and Conditions for PROP Article V, ‘‘Use and Disposition of Federally Owned Property’’ DoD Components must use as PROP Article V the following default wording in accordance with § 1130.505 of this part: sradovich on DSK3GMQ082PROD with PROPOSALS2 PROP Article V. Use and Disposition of Federally Owned Property. (December 2014) Section A. Use. During the time that federally owned property for which you are accountable under this award is used for the project or program supported by the award, you: 1. Also may make the property available for use on other federally supported projects or programs, but only if that use will not interfere with the property’s use for the project or program supported by this award. You must give first priority to other projects or programs supported by DoD Components. 2. May use the property for purposes other than federally supported projects or programs only with the prior approval of the awarding office or, if you request approval after the award is made, the award administration office. Section B. Disposition. You must request disposition instructions from the award administration office for any federally owned property under this award, including any property for which a subrecipient is accountable under a subaward you make under this award, either: 1. At any time during the period of performance if the property is no longer needed for the project or program supported by this award; or 2. At the end of the period of performance. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 Appendix F to Part 1130—Terms and Conditions for PROP Article VI, ‘‘Intangible Property’’ DoD Components must use as PROP Article VI the following default wording in accordance with §§ 1130.605 through 1130.620 of this part, which permit revisions or reservations of the default wording of Section B and paragraph C.2: PROP Article VI. Intangible Property. (December 2014) Section A. Assertion of copyright. 1. You may assert copyright in any work that is eligible for copyright protection if you acquire ownership of it under this award, either by developing it or otherwise. 2. With respect to any work in which you assert copyright, as described in paragraph A.1 of this section, the Department of Defense reserves a royalty-free, nonexclusive and irrevocable license to: a. Reproduce, publish, or otherwise use the work for Federal Government purposes; and b. Authorize others to reproduce, publish, or otherwise use the work for Federal Government purposes. Section B. Inventions developed under the award. 1. Applicability of Governmentwide clause for research awards. You must comply with the Governmentwide patent rights award clause published at 37 CFR 401.14, with the modifications described in paragraph B.2 of this section. DoD adopts that Governmentwide clause for the following entities, thereby broadening the applicability beyond types of entities included in the definition of ‘‘contractor’’ in 37 CFR part 401: a. Any governmental or nonprofit entity (the types of entities subject to these general terms and conditions) receiving a DoD award for the performance of experimental, research, or developmental work; b. Any governmental, nonprofit, or forprofit entity receiving a subaward to perform experimental, research, or developmental work under an award described in paragraph B.1.a of this section. 2. Modifications to the wording of the Governmentwide clause. DoD adopts the Governmentwide clause at 37 CFR 401.14, as described in paragraph B.1 of this section, with the following modifications: a. Terminology. Throughout the Governmentwide award clause: i. Insert the terms ‘‘recipient’’ and ‘‘subrecipient (or contractor to the recipient or to a subrecipient)’’ to replace the terms ‘‘contractor’’ and ‘‘subcontractor,’’ respectively. ii. Insert the terms ‘‘award’’ and ‘‘subaward (or contract under either the award or a subaward)’’ to replace the terms ‘‘contract’’ and ‘‘subcontract,’’ respectively. b. Final report. Add a new subparagraph (f)(5) to read, ‘‘The recipient must submit a final report listing all subject inventions made under the award or stating that there were none. The final report is due 90 calendar days after the end date of the period of performance unless you request and we grant an extension of the due date.’’ c. Broadening applicability to all entities. Delete paragraphs (g)(2) and (3) of the PO 00000 Frm 00059 Fmt 4701 Sfmt 4702 78413 Governmentwide clause, redesignate paragraph (g)(1) as paragraph (g), and delete the phrase ‘‘to be performed by a small business firm or domestic nonprofit organization’’ from paragraph (g) as redesignated. Section C. Data produced under the award. 1. Data in general. The Federal Government has the right to: a. Obtain, reproduce, publish, or otherwise use the data produced under this award; and b. Authorize others to receive, reproduce, publish, or otherwise use the data produced under this award for Federal Government purposes. 2. Research data requested under the Freedom of Information Act (FOIA). a. If we receive a request under the FOIA for ‘‘research data’’ that are related to ‘‘published research findings’’ produced under this award and that were ‘‘used by the Federal Government in developing an agency action that has the force and effect of law,’’ you must provide the data to us within a reasonable time after we request it from you, so that the data can be made available to the public through procedures established under the FOIA. b. For purposes of the requirement in paragraph C.2.a of this section, 2 CFR 200.315(e) provides definitions of the phrases ‘‘published research findings,’’ ‘‘used by the Federal Government in developing an agency action that has the force and effect of law,’’ and ‘‘research data.’’ Section D. Use and disposition of intangible property acquired, but not developed or produced, under the award. 1. Applicability. This section applies to a patent, patent application, copyright, or other intangible property acquired, but not developed or produced, under this award. 2. Use. You: a. Must use the intangible property for the authorized purpose under this award until the intangible property is no longer needed for that purpose, whether or not that purpose is still being supported by this award. b. May not encumber the intangible property without the prior written approval of the award administration office. 3. Disposition. When the intangible property is no longer needed for the originally authorized purpose, you must contact the award administration office to arrange for disposition in accordance with the procedures specified for disposition of equipment in either section B or D of PROP Article IV, as applicable. PART 1132—RECIPIENT PROCUREMENT PROCEDURES: GENERAL AWARD TERMS AND CONDITIONS Sec. 1132.1 Purpose of this part. 1132.2 Applicability of this part. 1132.3 Exceptions from requirements of this part. 1132.4 Organization of this part. Subpart A—Procurement Standards for States (PROC Article I) 1132.100 Purpose of PROC Article I. 1132.105 Content of PROC Article I. E:\FR\FM\07NOP2.SGM 07NOP2 78414 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules Subpart B—Procurement Standards for Institutions of Higher Education, Nonprofit Organizations, Local Governments, and Indian Tribes (PROC Article II) 1132.200 Purpose of PROC Article II. 1132.205 Procurement procedures. 1132.210 Procurement of recovered materials. 1132.215 Review of recipient procurement documents. 1132.220 Bonding requirements. Subpart C—Contract Provisions for Recipient Procurements (PROC Article III) 1132.300 Purpose of PROC Article III. 1132.305 Administrative requirements. 1132.310 National policy requirements. Appendix A to Part 1132—Terms and Conditions for PROC Article I, ‘‘Procurement standards for States’’ Appendix B to Part 1132—Terms and Conditions for PROC Article II, ‘‘Procurement standards for institutions of higher education, nonprofit organizations, local governments, and Indian tribes’’ Appendix C to Part 1132—Terms and Conditions for PROC Article III, ‘‘Contract provisions for recipient procurements’’ Authority: 5 U.S.C. 301 and 10 U.S.C. 113. Appendix A ............................ Appendix B ............................ Appendix C ............................ sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1132.2 Applicability of this part. The types of awards and entities to which this part and other parts in this subchapter apply are described in the subchapter overview at 2 CFR 1126.2. § 1132.3 Exceptions from requirements of this part. Exceptions are permitted from the administrative requirements in this part only as described at 2 CFR 1126.3. Procurement standards for States ............................................................... Procurement standards for institutions of higher education, nonprofit organizations, local governments, and Indian tribes. Contract provisions for recipient procurements ........................................... I. II. Purpose of PROC Article I. PROC Article I of the general terms and conditions specifies requirements for a State’s procurement of property and services. It thereby implements OMB guidance in 2 CFR 200.317 and partially implements guidance in 2 CFR 200.205(d) and 200.213. 19:05 Nov 04, 2016 Jkt 241001 (i) DoD Component awards using those general terms and conditions; or (ii) Subawards from recipients of DoD Component awards using those general terms and conditions. Subpart B—Procurement Standards for Institutions of Higher Education, Nonprofit Organizations, Local Governments, and Indian Tribes (PROC Article II) § 1132.200 Content of PROC Article I. (a) Requirement. A DoD Component’s general terms and conditions must address requirements for States’ procurement systems. (b) Award terms and conditions. (1) General. Except as provided in paragraph (b)(2) of this section, a DoD Component’s general terms and conditions must use the wording appendix A to this part provides for PROC Article I. (2) Exception. A DoD Component’s general terms and conditions may instead reserve PROC Article I if the DoD Component determines that it is not possible that any States will receive: VerDate Sep<11>2014 (a) This part specifies standard wording of general terms and conditions concerning recipients’ purchases of property (supplies, equipment, and real property) and services with project funds under grants and cooperative agreements. (b) It thereby implements OMB guidance in 2 CFR 200.317 through 200.326, and appendix II to 2 CFR part 200, as those portions of 2 CFR part 200 apply to general terms and conditions. It also partially implements 2 CFR 200.205(d), 200.213, and 200.517. Organization of this part. (a) The content of this part is organized into subparts and associated appendices. (1) Each subpart provides direction to DoD Components on how to construct one article of general terms and conditions for grants and cooperative agreements. (2) For each subpart, there is a corresponding appendix with standard wording for terms and conditions of the article addressed by the subpart. Terms and conditions address rights and responsibilities of the Government and recipients. (b) A DoD Component must use the wording provided in each appendix in accordance with the direction in the corresponding subpart. That direction may permit DoD Components to vary from the standard wording in some situations. (c) The following table shows which article of general terms and conditions may be found in each of appendices A through C to this part (with the associated direction to DoD Components in subparts A through C, respectively): That would appear in an award within PROC Article . . . Subpart A—Procurement Standards for States (PROC Article I) § 1132.105 § 1132.4 Purpose of this part. You will find terms and conditions specifying recipients’ rights and responsibilities related to . . . In . . . § 1132.100 § 1132.1 Purpose of PROC Article II. PROC Article II of the general terms and conditions specifies procurement procedures for a recipient organization other than a State or for-profit entity. It thereby: (a) Implements OMB guidance in 2 CFR 200.318 through 200.323, 200.324(a) and (b), and 200.325; (b) Partially implements 2 CFR 200.205(d) and 200.213; and (c) Implements, in conjunction with PROC Article III, 2 CFR 200.326. § 1132.205 Procurement procedures. (a) Requirement. A DoD Component’s general terms and conditions must address requirements for procurement PO 00000 Frm 00060 Fmt 4701 Sfmt 4702 III. systems of institutions of higher education, nonprofit organizations, local governments, and Indian tribes. (b) Award terms and conditions. In order to implement the requirement described in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording that Section I of appendix B provides for Sections A through F of PROC Article II. § 1132.210 materials. Procurement of recovered (a) Requirement. General terms and conditions for DoD grants and cooperative agreements must address requirements for procurement of recovered materials if State agencies or agencies of a political subdivision of a State may receive awards using those terms and conditions or be subrecipients under those awards. (b) Award terms and conditions. A DoD Component’s general terms and conditions must either: (1) Use the wording that Section II of appendix B provides for Section G of PROC Article II, to specify requirements E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules for a local government or other political subdivision of a State to comply with Resource Conservation and Recovery Act requirements; or (2) Reserve Section G if the DoD Component determines that it is not possible that a political subdivision of a State will receive either: (i) An award using those terms and conditions; or (ii) A subaward under an award using those terms and conditions. bonding policy and requirements, as described in paragraph (a) of this section. (2) Exceptions. A DoD Component’s general terms and conditions may omit Section I if the DoD Component determines that there will be no construction or facility improvement contracts with values in excess of the simplified acquisition threshold under awards using its general terms and conditions. § 1132.215 Review of recipient procurement documents. Subpart C—Contract Provisions for Recipient Procurements (PROC Article III) (a) Requirements. A DoD Component’s general terms and conditions must: (1) Include a requirement for recipients to make technical specifications for proposed procurements available upon the DoD Component’s request, as described in 2 CFR 200.324(a). (2) Reserve the DoD Component’s right to review a recipient’s preprocurement documents when any of the conditions described in 2 CFR 200.324(b)(1) through (5) apply and the recipient is not exempted from the requirement in accordance with 2 CFR 200.324(c). (b) Award terms and conditions. To implement the requirements described in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording that Section III of appendix B to this part provides for Section H of PROC Article II. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1132.220 Bonding requirements. (a) Requirements. General terms and conditions for a DoD Component’s grants and cooperative agreements must require each recipient to meet minimum bonding requirements if it awards any construction or facility improvement contract with a value in excess of the simplified acquisition threshold. A recipient would instead use its own bonding requirements if the DoD Component determined that the recipient’s bonding policy and requirements are adequate to protect Federal interests. (b) Award terms and conditions—(1) General. To implement the requirement in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording that section IV of appendix B to this part provides for Section I of PROC Article II. The DoD Component may include a provision in the award-specific terms and conditions to override Section I of PROC Article II in each award to a recipient for which it made the determination about the recipient’s VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 § 1132.300 Purpose of PROC Article III. PROC Article III of the general terms and conditions specifies provisions that recipients must include in their contracts, as applicable. It thereby: (a) Implements, in conjunction with PROC Articles I and II, OMB guidance concerning recipients’ contract provisions in 2 CFR 200.317 and 200.326; (b) Partially implements guidance in 2 CFR 200.205(d) and 200.213 concerning suspension and debarment requirements; and (c) Partially implements guidance in 2 CFR 200.517 concerning retention and access of auditors’ records. § 1132.305 Administrative requirements. (a) Requirement. A DoD Component’s general terms and conditions must require recipients to include in their contracts standard administrative requirements related to remedies, termination, allowable costs, rights in copyrights and data, records access and retention, and reporting. (b) Award terms and conditions. To implement the requirement described in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording that section I of appendix C to this part provides for Section A of PROC Article III. § 1132.310 National policy requirements. (a) Requirement. A DoD Component’s general terms and conditions must require recipients to include provisions in their contracts that require the contractors to comply with applicable national policy requirements. (b) Award terms and conditions—(1) General. To implement the requirement in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording that Section II of appendix C to this part provides for Section B of PROC Article III. (2) Exceptions. (i) The Wage Rate Requirements (Construction) statute (40 PO 00000 Frm 00061 Fmt 4701 Sfmt 4702 78415 U.S.C. 3141–44, 3146, and 3147) does not apply to a program carried out through grants or cooperative agreements unless another statute makes it apply to that program. A DoD Component’s general terms and conditions therefore should not include the provision that appendix C to this part includes as paragraph B.2 of PROC Article III unless another statute makes the Wage Rate Requirements statute apply to the program using those general terms and conditions. (ii) If a DoD Component determines that any of the other national policy requirements in Section B will not apply to any of the awards subject to its general terms and conditions, the DoD Component may reserve the paragraphs of Section B addressing those requirements. Should a future need arise to include the requirements in a given award, the DoD Component may include them as award-specific terms and conditions. Appendix A to Part 1132—Terms and Conditions for PROC Article I, ‘‘Procurement Standards for States’’ DoD Components must use the following standard wording in PROC Article I in accordance with § 1132.105 of this part: PROC Article I. Procurement Standards for States. (December 2014) Section A. Use of State procurement system. Subject only to the conditions in Sections B through D of this article, you must use the same policies and procedures to procure supplies, equipment, real property, and services under this award that you use when you procure those items for State purposes using non-Federal funds. Section B. Procurement of recovered materials. You must comply with the Resource Conservation and Recovery Act requirements described in OMB guidance in 2 CFR 200.322. Section C. Debarment and suspension. You must comply with restrictions on awarding procurement transactions to excluded or disqualified parties and other requirements specified by OMB guidelines on nonprocurement debarment and suspension at 2 CFR part 180, as implemented by DoD at 2 CFR part 1125. Section D. Contract provisions. You must include provisions in your procurement transactions under this award to require the contractors’ compliance with the requirements specified in PROC Article III, as applicable. Appendix B to Part 1132—Terms and Conditions for PROC Article II, ‘‘Procurement Standards for Institutions of Higher Education, Nonprofit Organizations, Local Governments, and Indian Tribes’’ I. SECTIONS A THROUGH F OF PROC ARTICLE II. DoD Components must use the following standard wording in Sections A E:\FR\FM\07NOP2.SGM 07NOP2 78416 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules sradovich on DSK3GMQ082PROD with PROPOSALS2 through F of PROC Article II in accordance with § 1132.205 of this part: PROC Article II. Procurement Standards for Institutions of Higher Education, Nonprofit Organizations, Local Governments, and Indian Tribes. (December 2014) Section A. General procurement standards. 1. For procurement under this award, you must comply with the following paragraphs of OMB guidance in 2 CFR 200.318: a. 200.318(a) concerning documented procurement procedures; b. 200.318(b) concerning oversight of contractors; c. 200.318(c) concerning standards of conduct and conflicts of interest; d. 200.318(e) concerning intergovernmental or inter-entity agreements; e. 200.318(g) concerning value engineering; f. 200.318(i) concerning procurement records; g. 200.318(j) concerning time and material type contracts; and h. 200.318(k) concerning settlement of issues arising out of procurements. i. 2 CFR 200.318(d) concerning purchases of unnecessary or duplicative items. 2. You must do business only with responsible contractors who are able to perform, as described in OMB guidance in 2 CFR 200.318(h). Related to that, you must comply with restrictions on awarding procurement transactions to excluded or disqualified parties and other requirements specified by OMB guidelines on nonprocurement debarment and suspension at 2 CFR part 180, as implemented by DoD at 2 CFR part 1125. Section B. Competition. You must award procurement transactions under this DoD award in accordance with the competition requirements described in OMB guidance in 2 CFR 200.319. Section C. Procurement methods. You must award procurement transactions under this award using methods described in OMB guidance in 2 CFR 200.320. Section D. Contracting with small and minority businesses, women’s business enterprises, and labor surplus area firms. You must take the affirmative steps described in OMB guidance in 2 CFR 200.321 when awarding procurement transactions under this award. Section E. Contract cost and price. When awarding a contract under this award, you must follow the procedures related to costs and price that are described in OMB guidance in 2 CFR 200.323, using the applicable cost principles specified in FMS Article III. Section F. Contract provisions. You must include provisions in your procurement transactions under this award to require the contractors’ compliance with the requirements of PROC Article III, as applicable. II. SECTION G OF PROC ARTICLE II. DoD Components must use the following standard wording in Section G of PROC Article II in accordance with § 1132.210 of this part: Section G. Procurement of recovered materials. If you are a political subdivision of a State, you must comply with the Resource Conservation and Recovery Act VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 requirements described in OMB guidance in 2 CFR 200.322. III. SECTION H OF PROC ARTICLE II. DoD Components must use the following standard wording in Section H of PROC Article II in accordance with § 1132.215 of this part: Section H. Review of procurement documents. Upon our request, you must make available: 1. Technical specifications on proposed procurements, as described in 2 CFR 200.324(a). 2. Pre-procurement documents for our review, as described in 2 CFR 200.324(b) unless you are exempt from that requirement under 2 CFR 200.324(c). IV. SECTION I OF PROC ARTICLE II. DoD Components must use the following standard wording in Section I of PROC Article II in accordance with § 1132.220 of this part: Section I. Bonding requirements. If you award a construction or facility improvement contract under this award with a value in excess of the simplified acquisition threshold, you must comply with at least the minimum requirements for bidders’ bid guarantees and contractors’ performance and payment bonds described in 2 CFR 200.325(a) through (c), unless a provision in the award-specific terms and conditions of this award excepts you from the requirement based on our determination that your bonding policy and requirements are adequate to protect Federal interests. Appendix C to Part 1132—Terms and Conditions for PROC Article III, ‘‘Contract Provisions for Recipient Procurements’’ I. SECTION A OF PROC ARTICLE III. DoD Components must use the following standard wording in Section A of PROC Article III in accordance with § 1132.305 of this part: PROC Article III. Contract Provisions for Recipient Procurements. (December 2014) Section A. Contract provisions for administrative requirements. 1. Remedies. In any contract under this award for an amount in excess of the simplified acquisition threshold, you must provide for administrative, contractual, or legal remedies, including any appropriate sanctions and penalties, when the contractor violates or breaches the contract terms. 2. Termination. In any contract for an amount in excess of $10,000, you must specify: Conditions under which you may terminate the contract for cause or convenience; the procedures for termination; and the basis to be used for settlement. 3. Allowable costs under cost-type contracts. In any cost-type contract with an entity, you must include a clause to permit the entity to charge to the contract only costs that are allowable under the cost principles that FMS Article III identifies as applicable to that type of entity, as supplemented by any award-specific terms and conditions related to allowability of costs that are included in this award. Your contract clause may permit the contractor to use its own cost principles in determining the allowability of its costs charged to the contract, as long as its cost principles comply with those Federal cost PO 00000 Frm 00062 Fmt 4701 Sfmt 4702 principles supplemented by any awardspecific terms and conditions of this award. 4. Rights in copyright and data. You must include in each contract under this award a provision requiring that the contractor: a. Grant the Government a royalty-free, nonexclusive and irrevocable right to: i. Reproduce, publish, or otherwise use for Federal purposes any work that is subject to copyright and that the contractor develops, or acquires ownership of, under this award; ii. Authorize others to reproduce, publish, or otherwise use such work for Federal purposes; and b. Grant the Government the right to: i. Obtain, reproduce, publish, or otherwise use data produced under this award; ii. Authorize others to receive, reproduce, publish, or otherwise use such data for Federal purposes; and c. Include the Government rights described in subparagraphs 4.a. and 4.b. of this section in any subcontracts. 5. Access to records. a. In any negotiated, cost-type or time and materials contract for an amount in excess of the simplified acquisition threshold, you must provide for access to any of the contractor’s books, documents, papers, and records that are directly pertinent to that contract, to enable and support audits, examinations, excerpts, and transcriptions. The contract provision must provide access to those records for all of the following and their duly authorized representatives: i. You; ii. Us as the Federal awarding agency, including our Inspector General; and iii. The Comptroller General of the United States. b. In any audit services contract for performance of an audit required by the Single Audit Act, as implemented by OMB in subpart F of 2 CFR part 200, you must provide for the access to audit documentation described in 2 CFR 200.517(b). 6. Records retention. a. In any negotiated, cost-type or time and materials contract for an amount in excess of the simplified acquisition threshold, you must provide for retention of all records that are directly pertinent to that contract for three years after you make final payment and all pending matters are closed. b. In any audit services contract for performance of an audit required by the Single Audit Act, as implemented by OMB in subpart F of 2 CFR part 200, you must provide for the retention of audit documentation described in 2 CFR 200.517(a). 7. Reporting. In any contract awarded under this award, you must include any provision for the contractor’s reporting to you that may be needed in order for you to meet your requirements under this award to report to us. II. SECTION B OF PROC ARTICLE III. DoD Components must use the following standard wording in Section B of PROC Article III in accordance with § 1132.310 of this part: Section B. Contract provisions for national policy requirements. 1. Equal employment opportunity. You must include the clause provided in 41 CFR E:\FR\FM\07NOP2.SGM 07NOP2 sradovich on DSK3GMQ082PROD with PROPOSALS2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules 60–1.4(b) in any ‘‘federally assisted construction contract’’ (as defined in 41 CFR 60–1.3) under this award unless provisions of 41 CFR part 60–1 exempt the contract from the requirement. 2. Wage Rate Requirements (Construction), formerly the Davis-Bacon Act. With respect to each construction contract for more than $2,000 to be awarded using funding provided under this award, you must: a. Place in the solicitation under which the contract will be awarded a copy of the current prevailing wage determination issued by the Department of Labor; b. Condition the decision to award the contract upon the contractor’s acceptance of that prevailing wage determination; c. Include in the contract the clauses specified at 29 CFR 5.5(a) in Department of Labor regulations at 29 CFR part 5, ‘‘Labor Standards Provisions Applicable to Contracts Governing Federally Financed and Assisted Construction,’’ to require the contractor’s compliance with the Wage Rate Requirements (Construction), as amended (40 U.S.C. 3141–44, 3146, and 3147); and d. Report all suspected or reported violations to the award administration office identified in this award. 3. Copeland Act prohibition on kickbacks. In each contract under this award to construct, complete, or repair a building or work, you must: a. Include a provision requiring the contractor to comply with the anti-kickback provisions of the Copeland Act (18 U.S.C. 874 and 40 U.S.C. 3145), as supplemented by Department of Labor regulations at 29 CFR part 3, ‘‘Contractors and Subcontractors on Public Building or Public Work Financed in Whole or in Part by Loans or Grants from the United States.’’ b. Report all suspected or reported violations to the award administration office identified in the award notice cover sheet of this award. 4. Contract Work Hours and Safety Standards Act for work involving mechanics or laborers. In each contract for an amount greater than $100,000 that involves the employment of mechanics or laborers and is not a type of contract excepted under 40 U.S.C. 3701, you must include the clauses specified in Department of Labor (DoL) regulations at 29 CFR 5.5(b) to require use of wage standards that comply with the Contract Work Hours and Safety Standards Act (40 CFR, Subtitle II, Part A, Chapter 37), as implemented by the DoL at 29 CFR part 5, ‘‘Labor Standards Provisions Applicable to Contracts Governing Federally Financed and Assisted Construction.’’ 5. Patents and inventions. If you procure the services of a nonprofit organization, small business firm, or other entity for the performance of experimental, developmental or research work, you must include in the contract the clause prescribed in Section B of PROP Article VI to establish contractual requirements regarding subject inventions resulting from the contract and provide for Government rights in those inventions. 6. Clean air and water requirements. You must: a. In each contract for an amount greater than $150,000 under this award, include a VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 clause requiring the contractor to comply with applicable provisions of the Clean Air Act (42 U.S.C. 7401–7671q), Federal Water Pollution Control Act (33 U.S.C. 1251–1387), and standards, orders, or regulations issued under those acts; and b. Report any violations of the Acts, standards, orders, or regulations to both the award administration office identified in this award and the appropriate regional office of the Environmental Protection Agency. 7. Nonprocurement suspension and debarment. Unless you have an alternate method for requiring the contractor’s compliance, you must include a clause in each contract for an amount equal to or greater than $25,000 and in each contract for federally required audit services to require the contractor to comply with OMB guidance on nonprocurement suspension and debarment in 2 CFR part 180, as implemented by DoD regulations at 2 CFR part 1125. 8. Byrd Amendment anti-lobbying requirements. In each contract for an amount exceeding $100,000, you must include a clause requiring the contractor to submit to you the certification and any disclosure forms regarding lobbying that are required under 31 U.S.C. 3152, as implemented by the DoD at 32 CFR part 28. 9. Purchase of recovered materials by States or political subdivisions of States. In each contract under which the contractor may purchase items designated in Environmental Protection Agency (EPA) regulations in 40 CFR part 247, subpart B, you must include a clause requiring the contractor to comply with applicable requirements in those EPA regulations, which implement Section 6002 of the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. 6962). 10. Fly America requirements. In each contract under which funds provided under this award might be used for international air travel for the transportation of people or property, you must include a clause requiring the contractor to: a. Comply with the International Air Transportation Fair Competitive Practices Act of 1974 (49 U.S.C. 40118, also known as the ‘‘Fly America’’ Act), as implemented by the General Services Administration at 41 CFR 301–10.131 through 301–10.143, which provides that U.S. Government-financed international air travel and transportation of personal effects or property must use a U.S. Flag air carrier or be performed under a costsharing arrangement with a U.S. carrier, if such service is available; and b. Include the requirements of the Fly America Act in all subcontracts that might involve international air transportation. 11. Cargo preference for United States flag vessels. In each contract under which equipment, material, or commodities may be shipped by oceangoing vessels, you must include the clause specified in Department of Transportation regulations at 46 CFR 381.7(b) to require that at least 50 percent of equipment, materials or commodities purchased or otherwise obtained with Federal funds under this award, and transported by ocean vessel, be transported on privately owned U.S.-flag commercial vessels, if available. PO 00000 Frm 00063 Fmt 4701 Sfmt 4702 78417 PART 1134—FINANCIAL, PROGRAMMATIC, AND PROPERTY REPORTING: GENERAL AWARD TERMS AND CONDITIONS Sec. 1134.1 Purpose of this part. 1134.2 Applicability of this part. 1134.3 Exceptions from requirements in this part. 1134.4 Organization of this part. Subpart A—Performance Management, Monitoring, and Reporting (REP Article I) 1134.100 Purpose of REP Article I. 1134.105 Performance reporting for construction awards. 1134.110 When to require and when to waive performance reports for nonconstruction awards. 1134.115 Content and forms, formats, or data elements for interim and final performance reporting under nonconstruction awards. 1134.120 Frequency, reporting periods, and due dates for interim performance reporting under non-construction awards. 1134.125 Due dates and reporting periods for final performance reports under nonconstruction awards. 1134.130 Requesting extensions of due dates for performance reports. 1134.135 Reporting significant developments. 1134.140 Performance reporting procedures. 1134.145 Site visits. Subpart B—Financial Reporting (REP Article II) 1134.200 Purpose of REP Article II. 1134.205 Reporting forms, formats, or data elements. 1134.210 Content of REP Article II. Subpart C—Reporting on Property (REP Article III) 1134.300 Purposes of REP Article III. 1134.305 Real property: Reports, notifications, requests, and accounting. 1134.310 Equipment and supplies: Reports, notifications, requests, and accounting. 1134.315 Federally owned property: Inventory, notifications, and requests. 1134.320 Intangible property: Disclosures, reports, and requests. Subpart D—Reporting on Subawards and Executive Compensation (REP Article IV) 1134.400 Purpose of REP Article IV. 1134.405 Content of REP Article IV. Appendix A to Part 1134—Terms and Conditions for REP Article I, ‘‘Performance management, monitoring, and reporting’’ Appendix B to Part 1134—Terms and Conditions for REP Article II, ‘‘Financial reporting’’ Appendix C to Part 1134—Terms and Conditions for REP Article III, ‘‘Reporting on property’’ Appendix D to Part 1134—Terms and Conditions for REP Article IV, ‘‘Reporting on subawards and executive compensation’’ E:\FR\FM\07NOP2.SGM 07NOP2 78418 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules Authority: 5 U.S.C. 301 and 10 U.S.C. 113. § 1134.1 Purpose of this part. (a) This part specifies standard wording of general terms and conditions concerning recipients’ reporting requirements. (b) It thereby implements OMB guidance on reporting in 2 CFR part 170 and the following portions of 2 CFR part 200, as they relate to general terms and conditions: (1) 2 CFR 200.301 and 200.327 through 200.329; and (2) 2 CFR 200.300(b) as it relates to subaward reporting, 200.312(a) as it relates to inventories of federally owned property, and 200.343(a) as it relates to financial and performance reporting. § 1134.3 Exceptions from requirements of this part. Exceptions are permitted from the administrative requirements in this part only as described at 2 CFR 1126.3. § 1134.4 Organization of this part. (a) The content of this part is organized into subparts and associated appendices. (1) Each subpart provides direction to DoD Components on how to construct one article of general terms and conditions for grants and cooperative agreements. (2) For each subpart, there is a corresponding appendix with standard wording for terms and conditions of the article addressed by the subpart. Terms and conditions address rights and responsibilities of the Government and recipients. (b) A DoD Component must use the wording provided in each appendix in accordance with the direction in the corresponding subpart. That direction may permit DoD Components to vary from the standard wording in some situations. (c) The following table shows which article of general terms and conditions may be found in each of appendices A through D to this part (with the associated direction to DoD Components in subparts A through D, respectively): A B C D ............................ ............................ ............................ ............................ That would appear in an award within REP Article . . . Performance management, monitoring, and reporting ................................ Financial reporting ....................................................................................... Reporting on property .................................................................................. Reporting on subawards and executive compensation ............................... I. II. III. IV. Subpart A—Performance Management, Monitoring, and Reporting (REP Article I) § 1134.100 Purpose of REP Article I. REP Article I of the general terms and conditions specifies requirements related to recipient reporting on program performance. It thereby implements OMB guidance in: (a) 2 CFR 200.328; and (b) Portions of 2 CFR 200.301 and 200.343(a) that relate to performance reporting. § 1134.105 Performance reporting for construction awards. sradovich on DSK3GMQ082PROD with PROPOSALS2 Applicability of this part. The types of awards and entities to which this part and other parts in this subchapter apply are described in the subchapter overview at 2 CFR 1126.2. You will find terms and conditions specifying recipients’ rights and responsibilities related to . . . In . . . Appendix Appendix Appendix Appendix § 1134.2 (a) OMB guidance. OMB guidance in 2 CFR 200.328(c) notes that agencies rely heavily on onsite technical inspections and certified percentage of completion data to monitor progress under construction awards and states that agencies may require additional performance reports only when considered necessary. (b) DoD implementation. DoD Components may require performance reports under construction awards only when necessary and, to reduce recipient burdens, should coordinate the performance reporting with financial reporting to the maximum extent practicable. (c) Award terms and conditions. (1) If a DoD Component has general terms and conditions specifically for construction awards and does not need performance reports for those awards, it: VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 (i) Should reserve Sections A through D of REP Article I in those terms and conditions; (ii) Must follow the specifications in §§ 1134.135 and 1134.145 to include the default wording appendix A to this part provides for Sections E and G of REP Article I in those terms and conditions, in order to require recipients to promptly report significant developments and reserve the DoD Component’s right to make site visits. (iii) Must follow the specifications in § 1134.140 to insert wording in Section F of REP Article I in those terms and conditions, to tell recipients where and how to submit any reports of significant developments. (2) If a DoD Component has general terms and conditions specifically for construction awards and determines that it needs performance reports for those awards: (i) It may tailor the template and content that appendix A to this part provides for Sections A through D of REP Article I in those terms and conditions, as needed to specify the reporting requirements or, as appropriate, instead integrate those requirements into REP Article II on financial reporting. The form, format, or data elements that the DoD Component specifies for any of those performance reports must comply with requirements of the Paperwork Reduction Act of 1995, as implemented by OMB at 5 CFR part 1320, to use OMB-approved information PO 00000 Frm 00064 Fmt 4701 Sfmt 4702 collections if more than 9 recipients will be subject to the reporting requirement. (ii) It must follow the specifications in §§ 1134.135 through 1134.145 concerning Sections E through G of REP Article I in those terms and conditions, as described in paragraphs (c)(1)(ii) and (iii) of this section. § 1134.110 When to require and when to waive performance reports for nonconstruction awards. (a) OMB guidance. OMB guidance in 2 CFR 200.328(f) states that an agency may waive any performance report that it does not need. (b) DoD implementation—(1) Interim reports. DoD Components should waive requirements for interim performance reports under non-construction awards, including research awards, only when program managers have an alternative source for the information that the reports provide in support of the need for technical program oversight during the period of performance. (2) Final reports—(i) Research. DoD Components may not waive requirements for final performance reports under research awards, even when program managers have other sources of the information they contain. A primary purpose of a final report under a research award is to document the overall project or program well enough to serve as a long-term reference from which others may understand the purpose, scope, approach, results or E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules outcomes, and conclusions or recommendations of the research. (ii) Non-construction programs other than research. DoD Components should consider the long-term value of final performance reports for documenting program outcomes, as well as any nearterm value, before waiving requirements for final reports under other nonconstruction awards. (c) Award terms and conditions. Appendix A to this part provides a template for REP Article I of the general terms and conditions of research awards or other non-construction awards under which performance reports are required. A DoD Component must either use the default wording that appendix A provides or insert wording into the template, in accordance with §§ 1134.115 through 1134.145, to: (1) Specify the content and form, format, or data elements recipients must use for interim and final performance reporting (see § 1134.115); (2) Specify the reporting frequency, reporting periods, and due dates for interim performance reports (see § 1134.120); (3) Specify the due dates and reporting periods for final performance reports (see § 1134.125); (4) Specify that recipients may request extensions of due dates for performance reports (see § 1134.130); (5) Require recipients to report significant developments (see § 1134.135); (6) Specify reporting procedures (see § 1134.140); and (7) Reserve the DoD Component’s right to make site visits (see § 1134.145). sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1134.115 Content and forms, formats, or data elements for interim and final performance reporting under nonconstruction awards. (a) OMB guidance. OMB guidance in: (1) 2 CFR 200.301 and 200.328(b)(2) state that Federal awarding agencies must require recipients to use standard OMB-approved information collections for reporting performance information. (2) 2 CFR 200.328(b)(2)(i) through (iii) list types of information that performance reports under nonconstruction awards will contain, as appropriate, unless other collections are approved by OMB. (b) DoD implementation. (1) The content of the information collections that a DoD Component’s general terms and conditions specify for nonconstruction awards must include the elements listed in 2 CFR 200.328(b)(2)(i) through (iii) that are appropriate to the projects or programs subject to those general terms and conditions. (2) Forms, formats, and data elements that a DoD Component’s general terms VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 and conditions specify for performance reporting under non-construction awards must comply with requirements of the Paperwork Reduction Act of 1995 to use OMB-approved information collections, as implemented at 5 CFR part 1320. (3) To the maximum extent practicable, a DoD Component’s general terms and conditions for nonconstruction awards must specify that recipients use Governmentwide standard forms, formats, and data elements that also are used by other agencies for similar programs, recipients, and types of awards (e.g., the Research Performance Progress Report format or any successor to it that OMB clears for interim performance progress reports under research awards to institutions of higher education and nonprofit entities). (c) Award terms and conditions. To implement the provisions of paragraphs (a) and (b) of this section, a DoD Component must insert wording in lieu of the reserved Section A of REP Article I of its general terms and conditions for non-construction awards to specify the form, format, or data elements that recipients must use for interim and final performance reports. Section A of REP Article I may specify a different requirement for final performance reports than interim reports. § 1134.120 Frequency, reporting periods, and due dates for interim performance reporting under non-construction awards. (a) OMB guidance. OMB guidance in 2 CFR 200.328(b)(1) addresses performance reporting frequency and due dates. (1) Reporting frequency. The OMB guidance states that interim performance reports should be no less frequent than annually, nor more frequent than quarterly except in unusual circumstances (e.g., when more frequent reporting is necessary for effective program monitoring). (2) Due dates. The OMB guidance states that due dates for interim performance reports must be: (i) 30 calendar days after the end of the reporting period if interim reports are required quarterly or semiannually; and (ii) 90 calendar days after the end of the reporting period if interim reports are required annually, unless the agency elects to require the annual reports before the anniversary dates of multiyear awards. (b) DoD implementation. DoD implements the OMB guidance in 2 CFR 200.328(b)(1) concerning frequency and due dates of interim performance reports through award terms and PO 00000 Frm 00065 Fmt 4701 Sfmt 4702 78419 conditions, with the following clarifications and added specifications concerning reporting periods: (1) Reporting frequency. DoD Components rarely, if ever, should require recipients to submit interim performance reports more often than annually for basic research awards. Before requiring interim performance reports more frequently than annually for other research awards, DoD Components should carefully consider whether the benefits of more frequent reporting are sufficient to offset the potential for slowing the rate of research progress, due to diversion of researchers’ time from research performance to report preparation. (2) Reporting periods. For research awards, a DoD Component should not require any recipient to submit interim performance reports on a cumulative basis—i.e., the second and any subsequent performance report should address only the most recent reporting period and not also address previous reporting periods covered by earlier interim performance reports. (3) Due dates. If a DoD Component requires an interim report more frequently than quarterly due to unusual circumstances, as described in 2 CFR 200.328(a)(1) and paragraph (a)(1) of this section, the DoD Component must specify that the due date for the report is 30 days after the end of the reporting period. For all other interim reports, DoD Components must specify due dates in accordance with paragraph (a)(2) of this section. (c) Award terms and conditions. A DoD Component must insert wording in lieu of the reserved Section B of REP Article I of its general terms and conditions for non-construction awards to specify: (1) The frequency with which recipients must submit interim performance reports; (2) The reporting period each interim performance report must cover; and (3) The due date for each interim performance report, stated as the number of calendar days after the end of the reporting period. § 1134.125 Due dates and reporting periods for final performance reports under non-construction awards. (a) OMB guidance. OMB guidance in 2 CFR 200.328(b)(1) states that each final performance report will be due 90 calendar days after the end date of the period of performance. It also states that an agency may extend the due date if a recipient submits a justified request. (b) DoD implementation—(1) Due dates. Consistent with 2 CFR 200.328(b)(1): E:\FR\FM\07NOP2.SGM 07NOP2 sradovich on DSK3GMQ082PROD with PROPOSALS2 78420 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules (i) General. A DoD Component’s general terms and conditions must specify that the due date for each recipient’s submission of its final performance report is 90 calendar days after the end of the period of performance. (ii) Exception. A DoD Component may pre-approve a 30 day extension to the due date in its general conditions by specifying that each recipient’s final performance report is due 120 calendar days after the end of the period of performance. Doing so would be especially helpful to recipients that have subawards and need time to assimilate subrecipient inputs into the final report for the project or program as a whole. (2) Reporting periods—(i) Nonconstruction programs other than research. A DoD Component’s general terms and conditions for nonconstruction programs other than research may require each recipient to submit a final report that is cumulative and covers the entire period of performance, as that may more effectively document the project or program for future reference. (ii) Research. Final reports for research awards should be cumulative (i.e., each final report should cover the entire period of performance under the award and not just the period since the previous interim performance report) because a primary purpose of a final report for a research award is to document the overall project or program, as described in § 1134.110(b)(2). (c) Award terms and conditions. To implement the provisions of paragraphs (a) and (b) of this section, a DoD Component in its general terms and conditions for non-construction awards: (1) Must either: (i) Specify that the due date for final performance reports is 90 days after the end of the period of performance by including the default wording that appendix A to this part provides for paragraph C.1 of REP Article I; or (ii) Pre-approve a 30-day extension to the due date, as described in paragraph (b)(1)(ii) of this section, by including a revision of the default wording for paragraph C.1 of REP Article I with ‘‘120 calendar days’’ inserted in lieu of ‘‘90 calendar days.’’ (2) Must insert wording in lieu of the reserved paragraph C.2 of REP Article I, to specify the reporting period for final reports (i.e., whether the reports must be cumulative). VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 § 1134.130 Requesting extensions of due dates for performance reports. (a) OMB guidance. OMB guidance in 2 CFR 200.328(b)(1) states that, if a recipient submits a justified request for an extension in the due date for any interim or final performance report, an agency may extend the due date. (b) DoD implementation. A DoD Component’s general terms and conditions for non-construction awards must specify that a recipient may request an extension of the due date for interim or final performance reports. DoD Components should grant requests that provide adequate justification. For a DoD Component that pre-approves a 30-day extension of due dates for final performance reports in its general terms and conditions, as described in § 1134.125(b)(1)(ii) and (c)(1)(ii), any award-specific extensions would be beyond the pre-approved 30-day extension. (c) Award terms and conditions. To implement the provisions of paragraphs (a) and (b) of this section, a DoD Component’s general terms and conditions for non-construction awards must include the default wording that appendix A to this part provides for Section D of REP Article I on extensions of performance reporting due dates. § 1134.135 Reporting significant developments. (a) OMB guidance. OMB guidance in 2 CFR 200.328(d) states that a recipient must promptly notify the awarding agency about significant developments. (b) DoD implementation. A DoD Component’s general terms and conditions must require recipients to report significant developments, as described in 2 CFR 200.328(d). (c) Award terms and conditions. A DoD Component’s general terms and conditions must include the default wording that appendix A to this part provides for Section E of REP Article I on reporting of significant developments. § 1134.140 Performance reporting procedures. (a) Requirement. A DoD Component’s general terms and conditions must inform recipients about performance reporting procedures. (b) Award terms and conditions. (1) To implement the requirement of paragraph (a) of this section, a DoD Component in its general terms and conditions must insert wording in Section F of REP Article I (which is reserved in the template for REP Article I that appendix A to this part provides), to specify: (i) The office or offices to which a recipient must submit its interim and PO 00000 Frm 00066 Fmt 4701 Sfmt 4702 final performance reports, any requests in due dates for those reports, and any reports of significant developments; and (ii) How the recipient is to submit those reports and requests (e.g., email or electronic portal). (2) For research awards, this wording must comply with the distribution and marking requirements of DoD Manual 3200.14, Volume 1. This includes the requirement that all significant scientific or technological findings, recommendations, and results derived from DoD endeavors—which shall include the final performance report at a minimum—are recorded and provided to Defense Technical Information Center (DTIC). § 1134.145 Site visits. (a) OMB guidance. OMB guidance in 2 CFR 200.328(e) states that a Federal awarding agency may make site visits as warranted by program needs. (b) DoD implementation. A DoD Component’s general terms and conditions must state that the Government reserves the right to make site visits as warranted. (c) Award terms and conditions. A DoD Component’s general terms and conditions must include the default wording that appendix A to this part provides for Section G of REP Article I concerning site visits. Subpart B—Financial Reporting (REP Article II) § 1134.200 Purpose of REP Article II. REP Article II of the general terms and conditions specifies requirements related to financial reporting. It thereby implements OMB guidance in 2 CFR 200.327 and the portions of 2 CFR 200.301 and 200.343(a) that are specific to financial reporting. § 1134.205 Reporting forms, formats, or data elements. (a) OMB guidance. OMB guidance in 2 CFR 200.327 states that Federal awarding agencies may require recipients to use only the standard OMB-approved Governmentwide data elements for collection of financial information, unless OMB approves other forms, formats, or data elements for financial information collection. (b) DoD implementation. DoD Components must collect financial information from recipients using OMBapproved forms, formats, or data elements. (1) Unless current approvals expire, approved financial information collections include the Governmentwide Federal Financial Report (SF–425) and Request for Advance or Reimbursement (SF–270). In E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules and when it is due. Note that this section may waive interim reporting requirements if the DoD Component relies on information already provided with payment requests (e.g., on the SF– 270). (i) Consistent with OMB guidance in 2 CFR 200.327, the reporting frequency may be no less often than annually and no more frequently than quarterly except in unusual circumstances (e.g., a need for more frequent reporting for monitoring program performance, in which case financial reporting should be in coordination with performance reporting). (ii) The reporting frequency, reporting periods, and due dates must conform with any guidance on those aspects of financial reporting in the OMBapproved instructions accompanying the form, format, or data elements used. (iii) When a DoD Component’s general terms and conditions provide for advance payments based on § 1134.210 Content of REP Article II. predetermined schedules—which is (a) Requirement. General terms and very rarely if ever appropriate for conditions for DoD grants and research awards—the terms and cooperative agreements must specify conditions should provide for at least what financial information recipients quarterly reporting. This will enable are required to report and how often, post-award administrators to closely when, where, and how they must report. monitor recipients’ balances of cash on (b) Award terms and conditions—(1) hand for compliance with General. Appendix B to this part Governmentwide cash management provides a template into which a DoD standards. Component must insert wording to (4) Final financial report. Appendix B to this part provides default wording for specify the form, format, or data Section C of REP Article II to implement elements recipients must use for OMB guidance in 2 CFR 200.343(a) as financial reporting; the frequency, it applies to final financial reports. reporting periods, and due dates for Given that 2 CFR part 200 provides 90 their financial reports (stated as the days for subrecipients to liquidate number of days after the end of the subaward obligations and submit their reporting period); and where and how final financial reports to recipients, the they must submit the information. (2) Required reporting form, format, or default wording in appendix B gives data elements for interim and final recipients 120 days to submit final financial reports. In Section A of REP financial reports to DoD post-award Article II, which is reserved in appendix administration offices. That provides a B to this part, a DoD Component must reasonable amount of time for recipients insert wording to specify the OMBto incorporate any information they approved form, format, or data elements need from final subaward reports. A that recipients must use for financial DoD Component may alter the default reporting and the Web site where they wording or supplement it if it has a can be found. The section may provide basis to do so in a statute or a regulation a different requirement for final published in the Code of Federal financial reports than interim reports Regulations. (5) Extensions of due dates. A DoD during the period of performance if the DoD Component needs less information Component’s general terms and on interim reports than is needed on the conditions must include the default wording for Section D of REP Article II final report. (3) Interim financial reports: that appendix B to this part provides to frequency, reporting periods, and due authorize recipients to request dates. In Section B of REP Article II, extensions of due dates for interim or which is reserved in appendix B to this final financial reports. (6) Where and how to submit financial part, a DoD Component must insert reports. In Section E of REP Article II, wording to specify the frequency with which is reserved in appendix B to this which recipients must submit interim part, a DoD Component must insert financial reports, as well as the reporting period each report must cover wording to specify the DoD official or sradovich on DSK3GMQ082PROD with PROPOSALS2 the future, they would include any additional information collections that OMB approves. (2) For all but the recipient’s final financial report after the end of the period of performance, a DoD Component may rely on financial information the recipient provides on the SF–270 or other OMB-approved payment request form, format, or data elements if that financial information is sufficient to meet the DoD Component’s needs. For the final report, the DoD Component must require the recipient to use the SF–425 or other OMBapproved financial information collection. (3) A DoD Component must obtain approval for any variations from OMBapproved forms or formats, including use of additional or substitute data elements or modification of the associated instructions for recipient entities submitting the information. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 PO 00000 Frm 00067 Fmt 4701 Sfmt 4702 78421 office to whom a recipient must submit its interim and final financial reports and the method it must use to do so (e.g., email or other electronic submission method). Subpart C—Reporting on Property (REP Article III) § 1134.300 Purposes of REP Article III. REP Article III of the general terms and conditions provides a consolidated source that sets out required reports, notifications, requests, and accountings related to federally owned property and property that is acquired or improved under awards. The article is: (a) The original source of requirements for recipients to: (1) Submit periodic status reports and notifications of critical changes for real property (in paragraphs A.1 and A.2 of the article), which thereby implements OMB guidance in 2 CFR 200.329; (2) Submit an annual inventory of federally owned property (in paragraph C.1 of the article), which thereby partially implements OMB guidance in 2 CFR 200.312(a); (3) Provide information on request about copyrighted works and data produced under awards (in paragraph D.2 of the article). (b) A secondary source provided for the convenience of recipients and DoD post-award administrators that lists and refers to the original sources of requirements for recipients to: (1) Request disposition instructions and account at closeout for real property (in paragraphs A.3 and A.4 of the article), the original sources of which are in PROP Article III and OAR Article VI; (2) Provide notifications of loss, damage, or theft and requests for disposition instructions for equipment (in paragraphs B.2 and B.3 of the article), the original sources of which are in PROP Articles II and IV, respectively; (3) Account at closeout for equipment and supplies (in paragraph B.4 of the article), the original sources of which are in OAR Article VI and PROP Article IV; (4) Provide notifications of loss, damage, or theft and requests for disposition instructions for federally owned property (in paragraphs C.2 and C.3 of the article), the original sources of which are in PROP Articles II and V, respectively; (5) Disclose and report on inventions developed under awards (in paragraph D.1), the original source of which is in PROP Article VI; and (6) Request disposition instructions for intangible property acquired, but not E:\FR\FM\07NOP2.SGM 07NOP2 78422 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules § 1134.310 Equipment and supplies: Reports, notifications, requests, and accounting. developed or produced, under awards (in paragraph D.3 of the article), the original source of which is in PROP Article VI. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1134.305 Real property: reports, notifications, requests, and accounting. (a) Requirement. A DoD Component’s general terms and conditions must specify the real property reporting requirements described in § 1134.300(a)(1) and provide references to the related requirements described in § 1134.300(b)(1). (b) Award terms and conditions. To implement the requirement described in paragraph (a) of this section, the wording of Section A of REP Article III of a DoD Component’s general terms and conditions must comply with either paragraph (b)(1) or (b)(2) of this section. (1) General. Unless a DoD Component determines that there will be no acquisition or improvement of real property under awards using its general terms and conditions, those general terms and conditions must include the default wording appendix C to this part provides for Section A of REP Article III, to which the DoD Component: (i) Must add wording in lieu of the reserved paragraph A.1.a to specify how often a recipient must submit periodic status reports and how long it is required to do so (which should be the duration of the Federal interest in the real property). The wording of paragraph A.1.a must be consistent with OMB guidance in 2 CFR 200.329, which provides different options for reporting frequency depending on the duration of the Federal interest in the real property. (ii) Must add wording in lieu of the reserved paragraph A.1.b to specify the due date for each periodic status report in terms of the number of calendar days after the end of the period covered by the report (e.g., a report on the status of the property as of September 30 might be due 30 calendar days after that date). (iii) May provide wording in lieu of the reserved paragraph A.1.c if there are other instructions—e.g., a form, format, or information elements that a recipient must use (which must be cleared by OMB under the Paperwork Reduction Act) or a particular office to which reports must be submitted, especially if reporting will continue beyond closeout of awards under which the real property was acquired or improved. (2) Exception. A DoD Component may reserve Section A of REP Article III if it determines that there will be no acquisition or improvement of real property under awards using its general terms and conditions. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 (a) Requirement. REP Article III of a DoD Component’s general terms and conditions must clarify that there is no requirement for routine periodic reporting about equipment and provide the references described in § 1134.300(b)(2) and (3) to requirements in other articles for notifications, requests, and accounting related to equipment and supplies. (b) Award terms and conditions. To implement the requirement described in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording appendix C to this part provides for Section B of REP Article III. § 1134.315 Federally owned property: Inventory, notifications, and requests. (a) Requirement. REP Article III of a DoD Component’s general terms and conditions must specify the reporting requirement described in § 1134.300(a)(2) and provide the references described in § 1134.300(b)(4) to requirements in other articles for notifications and requests related to federally owned property. (b) Policy. (1) Except as provided by statute or in regulations adopted in the Code of Federal Regulations after opportunity for public comment, a DoD Component may not specify: (i) Due dates for the annual inventories of federally owned property; or (ii) Forms, formats, or specific data elements for the inventories, notifications, or requests for disposition instructions. Note that any form, format, or data elements that a DoD Component specifies must be cleared by OMB under the Paperwork Reduction Act. (2) Not specifying due dates, forms, formats, or data elements provides flexibility for recipients and DoD postaward administrators to handle these requirements in ways that reduce burdens and costs. For example, a recipient may arrange with a post-award administration office to submit one consolidated inventory annually for federally owned property under all of the awards it receives that are administered by that office, using a format its property management system already generates. (c) Award terms and conditions—(1) General. To implement the requirement described in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording appendix C to this part provides for Section C of REP Article III. The DoD Component may add wording PO 00000 Frm 00068 Fmt 4701 Sfmt 4702 on due dates or on forms, formats, or data elements only as provided in paragraph (b) of this section. (2) Exception. A DoD Component may reserve Section C of REP Article III if it determines that no recipients of awards using its general terms and conditions, or subrecipients of subawards under those awards, will be accountable for federally owned property under those awards or subawards. § 1134.320 Intangible property: Disclosures, reports, and requests. (a) Requirement. REP Article III of a DoD Component’s general terms and conditions must specify the requirement described in § 1134.300(a)(3) and provide the references described in § 1134.300(b)(5) and (6) to requirements in other articles for disclosures, reports, and requests related to intangible property. (b) Award terms and conditions—(1) General. To implement the requirement described in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording appendix C to this part provides for Section D of REP Article III. (2) Exceptions. A DoD Component may reserve: (i) Section D of REP Article III if it determines that no recipients of awards using its general terms and conditions, or subrecipients of subawards under those awards, will have any intangible property for which they will be accountable to the Federal Government; or (ii) Any of paragraphs D.1 through D.3, if it determines that no recipients of awards using its general terms and conditions, or subrecipients of subawards under those awards, will be accountable to the Federal Government for the particular types of intangible property addressed by those paragraphs. Subpart D—Reporting on Subawards and Executive Compensation (REP Article IV) § 1134.400 Purpose of REP Article IV. REP Article IV of the general terms and conditions specifies requirements for recipients to report information about subawards and executive compensation. § 1134.405 Content of REP Article IV. (a) Source of the reporting requirements. The requirements for recipients to report information about subawards and executive compensation originate in the Federal Funding Accountability and Transparency Act of 2006, as amended (31 U.S.C. 6101 note). OMB guidance at 2 CFR part 170 implements those statutory E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules requirements and appendix A to that part provides standard Governmentwide wording of an award provision. (b) Award terms and conditions. To implement the reporting requirements described in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the default wording appendix E to this part provides as REP Article IV. Appendix A to Part 1134—Terms and Conditions for REP Article I, ‘‘Performance Management, Monitoring, and Reporting’’ sradovich on DSK3GMQ082PROD with PROPOSALS2 DoD Components must use the following template for REP Article I, using default wording or inserting wording in lieu of reserved sections or paragraphs in accordance with §§ 1134.105 through 1134.145 of this part: REP Article I. Performance Management, Monitoring, and Reporting. (December 2014) Section A. Required reporting form, format, or data elements for interim and final performance reports. [Reserved.] Section B. Frequency, reporting periods, and due dates for interim performance reports. [Reserved.] Section C. Due date and reporting period for final performance report. 1. Due date. You must submit the final performance report under this award no later than 90 calendar days after the end date of the period of performance unless we approve an extension of that due date as described in Section D of this article. 2. Reporting period. [Reserved.] Section D. Extensions of due dates. You may request extensions of the due dates that Sections B and C of this Article specify for interim and final reports, respectively. You must provide the reasons for your request and we will approve extensions that are adequately justified. Section E. Reporting significant developments. You must report the following information to us as soon as you become aware of it: 1. Problems, delays, or adverse conditions that will materially impair your ability to meet the objectives of this award. This disclosure must include a statement of the action taken, or contemplated, and any assistance needed to resolve the situation. 2. Favorable developments which will enable you to meet schedules and objectives sooner or at less cost than anticipated or produce more or different beneficial results than originally planned. Section F. Performance reporting procedures. [Reserved.] Section G. Site visits. We reserve the right to make site visits as warranted to monitor program performance under this award. Appendix B to Part 1134—Terms and Conditions for REP Article II, ‘‘Financial Reporting’’ DoD Components must use the following template for REP Article II, inserting wording in each of sections A, B, and D and adjusting the default wording of Section E, if needed, in accordance with § 1134.210 of this part: VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 REP Article II. Financial Reporting. (December 2014) Section A. Required reporting form, format, or data elements for interim and final financial reports. [Reserved.] Section B. Interim financial reports: Frequency, reporting periods, and due dates. [Reserved.] Section C. Final financial report. You must submit the final financial report under this award no later than 120 calendar days after the end date of the period of performance. Section D. Extensions of due dates. You may request extensions of the due dates that Sections B and C of this Article specify for interim and final reports, respectively. You must provide the reasons for your request, and we will approve extensions that are adequately justified. Section E. Where and how to submit financial reports. [Reserved.] Appendix C to Part 1134—Terms and Conditions for REP Article III, ‘‘Reporting On Property’’ DoD Components must use the following template for REP Article III in accordance with §§ 1134.305 through 1134.320 of this part: REP Article III. Reporting on Property. (December 2014) Section A. Real property. Paragraphs A.1 through A.4 apply to real property for which you are accountable under this award, for as long as there is a Federal interest in the property (whether that interest is due to you or a subrecipient having acquired or improved the property under this award, or a transfer of the accountability for the property to this award from another award). 1. Periodic status reports. You must submit periodic status reports, as follows: a. Frequency and duration of reporting requirement. [Reserved.] b. Due dates. [Reserved.] c. Other submission instructions. [Reserved.] 2. Notifications of critical changes. You must notify the award administration office of any critical change in the status of real property as soon as feasible after you become aware of it. A critical change is any event with a significant adverse impact on the condition or value of the property, such as damage due to fire; flood, hurricane, or other severe weather; earthquake; or accident. 3. Requests for disposition instructions. You must comply with applicable requirements in PROP Article III to request disposition instructions, either during the period of performance or at closeout. 4. Closeout accounting. You must account to the award administration office for real property at the time of closeout of the award, as required by Section D of OAR Article VI. Section B. Equipment and supplies. Paragraphs B.1 through B.4 apply to equipment or supplies for which you are accountable under this award and in which there is a Federal interest (whether that interest is due to you or a subrecipient having acquired or improved the property under this award, or a transfer of the accountability for the property to this award from another award). PO 00000 Frm 00069 Fmt 4701 Sfmt 4702 78423 1. Periodic status report. There is no requirement for periodic reporting during the period of performance. 2. Notifications of loss, damage, or theft. You must comply with applicable requirements in PROP Article II governing your property management system to promptly notify the award administration office of any loss, damage, or theft of equipment. 3. Requests for disposition instructions. You must comply with applicable requirements in PROP Article IV to request disposition instructions for equipment, either during the period of performance or at closeout. 4. Closeout accounting. a. Equipment. You must account to the award administration office for equipment at the time of closeout of this award, as required by Section D of OAR Article VI. b. Supplies. If you have a residual inventory of unused supplies that meets the criteria specified in paragraph E.2 of PROP Article IV, you must as part of your closeout accounting arrange with the award administration office for the compensation that paragraph specifies for the Federal interest in the supplies. Section C. Federally owned property. Paragraphs C.1 through C.3 apply to federally owned property for which you are accountable under this award. 1. Annual inventory. You must submit annually to the award administration office an inventory of federally owned property. 2. Notifications of loss, damage, or theft. As provided in PROP Article II governing your property management system, you must promptly notify the award administration office of any loss, damage, or theft of federally owned property. 3. Requests for disposition instructions. You must comply with requirements in Section B of PROP Article V to request disposition instructions, either during the period of performance or at closeout. 4. Closeout accounting. Your requests for disposition instructions for federally owned property, as described in paragraph C.3 of this section, satisfy the need to account for federally owned property at closeout (see Section D of OAR Article VI). Section D. Intangible property. Paragraphs D.1 through D.3 apply to intangible property for which you are accountable under this award. 1. Inventions developed under the award. You must submit all reports on subject inventions developed under this award that are required by the modified Governmentwide patent rights award provision specified in Section B of PROP Article VI, which include a disclosure of each subject invention and a final report listing all such subject inventions. 2. Copyrights and data. You are not required to submit periodic reports about data produced under the award or about works for which you acquired ownership under this award, either by development or otherwise, and in which copyright was asserted. However, because the Federal Government has the rights in the works and data that Sections A and C of PROP Article VI specify, you must provide information about the works and data if we request it. E:\FR\FM\07NOP2.SGM 07NOP2 78424 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules 3. Intangible property acquired, but not developed or produced, under the award. You must comply with requirements in Section D of PROP Article VI to request disposition instructions for intangible property acquired, but not developed or produced, under the award. Appendix D to Part 1134—Terms and Conditions for REP Article IV, ‘‘Reporting on Subawards and Executive Compensation’’ DoD Components must use as REP Article IV the following default wording in accordance § 1134.405 of this part: REP Article IV. Reporting on Subawards and Executive Compensation. (December 2014) You must report information about subawards and executive compensation as specified in the award provision in appendix A to 2 CFR part 170, ‘‘Reporting subaward and executive compensation information,’’ modified as follows: 1. To accommodate any future designation of a different Governmentwide Web site for reporting subaward information, the Web site ‘‘http://www.fsrs.gov’’ cited in paragraphs a.2.i. and a.3 of the award provision is replaced by the phrase ‘‘http://www.fsrs.gov or successor OMB-designated Web site for reporting subaward information’’; 2. To accommodate any future designation of a different Governmentwide Web site for reporting executive compensation information, the Web site ‘‘http:// www.sam.gov’’ cited in paragraph b.2.i. of the award provision is replaced by the phrase ‘‘https://www.sam.gov or successor OMBdesignated Web site for reporting information on total compensation’’; and 3. The reference to ‘‘Sec. ___.210 of the attachment to OMB Circular A–133, ‘Audits of States, Local Governments, and Non-Profit Organizations’’’ in paragraph e.3.ii of the award provision is replaced by ‘‘2 CFR 200.330, as implemented in SUB Article I of this award’’. PART 1136—OTHER ADMINISTRATIVE REQUIREMENTS: GENERAL AWARD TERMS AND CONDITIONS Sec. 1136.1 Purpose of this part. 1136.2 Applicability of this part. 1136.3 Exceptions from requirements of this part. 1136.4 Organization of this part. Subpart B—Records Retention and Access (OAR Article II) 1136.200 Purpose of OAR Article II. 1136.205 Records retention period. 1136.210 Extensions of retention period due to litigation, claim, or audit. 1136.215 Records for program income earned after the end of the performance period. 1136.220 Records for joint or long-term use. 1136.225 Methods for collecting, transmitting, and storing information. 1136.230 Access to records. Subpart C—Remedies and Termination (OAR Article III) 1136.300 Purpose of OAR Article III. 1136.305 Content of OAR Article III. Subpart D—Claims, Disputes, and Appeals (OAR Article IV) 1136.400 Purpose of OAR Article IV. 1136.405 Content of OAR Article IV. Subpart E—Collection of Amounts Due (OAR Article V) 1136.500 Purpose of OAR Article V. 1136.505 Content of OAR Article V. Subpart F—Closeout (OAR Article VI) 1136.600 Purpose of OAR Article VI. 1136.605 Content of OAR Article VI. Subpart G—Post-Closeout Adjustments and Continuing Responsibilities (OAR Article VII) 1136.700 Purpose of OAR Article VII. 1136.705 Content of OAR Article VII. Appendix A to Part 1136—Terms and Conditions for OAR Article I, ‘‘Submitting and maintaining recipient information’’ Appendix B to Part 1136—Terms and Conditions for OAR Article II, ‘‘Records retention and access’’ Appendix C to Part 1136—Terms and Conditions for OAR Article III, ‘‘Remedies and termination’’ Appendix D to Part 1136—Terms and Conditions for OAR Article IV, ‘‘Claims, disputes, and appeals’’ Appendix E to Part 1136—Terms and Conditions for OAR Article V, ‘‘Collection of amounts due’’ Appendix F to Part 1136—Terms and Conditions for OAR Article VI, ‘‘Closeout’’ Appendix G to Part 1136—Terms and Conditions for OAR Article VII, ‘‘Postcloseout adjustments and continuing responsibilities’’ Authority: 5 U.S.C. 301 and 10 U.S.C. 113. § 1136.1 1136.100 1136.105 sradovich on DSK3GMQ082PROD with PROPOSALS2 Subpart A—Submitting and Maintaining Recipient Information (OAR Article I) (a) This part specifies standard wording of general terms and conditions Purpose of OAR Article I. Content of OAR Article I. § 1136.2 Applicability of this part. The types of awards and entities to which this part and other parts in this subchapter apply are described in the subchapter overview at 2 CFR 1126.2. § 1136.3 Exceptions from requirements of this part. Exceptions are permitted from the administrative requirements in this part only as described at 2 CFR 1126.3. § 1136.4 Organization of this part. (a) The content of this part is organized into subparts and associated appendices. (1) Each subpart provides direction to DoD Components on how to construct one article of general terms and conditions for grants and cooperative agreements. (2) For each subpart, there is a corresponding appendix with standard wording for terms and conditions of the article addressed by the subpart. Terms and conditions address rights and responsibilities of the Government and recipients. (b) A DoD Component must use the wording provided in each appendix in accordance with the direction in the corresponding subpart. That direction may permit DoD Components to vary from the standard wording in some situations. (c) The following table shows which article of general terms and conditions may be found in each of appendices A through G to this part (with the associated direction to DoD Components in subparts A through G, respectively): You will find terms and conditions specifying recipients’ rights and responsibilities related to . . . In . . . Appendix Appendix Appendix Appendix Appendix Appendix Purpose of this part. concerning submission and maintenance of recipient information; records retention and access; remedies for noncompliance and termination; claims, disputes, and appeals; collection of amounts due; closeout; and after-theaward requirements. (b) It thereby implements OMB guidance in multiple portions of 2 CFR part 200, as those portions apply to general terms and conditions. Specifically, this part implements: (1) 2 CFR 200.113 and 200.210(b)(1)(iii); (2) 2 CFR 200.300(b) as it refers to requirements in 2 CFR part 25; and (3) 2 CFR 200.333 through 200.345. A ............................ B ............................ C ............................ D ............................ E ............................ F ............................. VerDate Sep<11>2014 19:05 Nov 04, 2016 That would appear in an award within OAR Article . . . Submitting and maintaining recipient information ........................................ Records retention and access ..................................................................... Remedies and termination ........................................................................... Claims, disputes, and appeals ..................................................................... Collection of amounts due ........................................................................... Closeout ....................................................................................................... I. II. III. IV. V. VI. Jkt 241001 PO 00000 Frm 00070 Fmt 4701 Sfmt 4702 E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules 78425 In . . . You will find terms and conditions specifying recipients’ rights and responsibilities related to . . . That would appear in an award within OAR Article . . . Appendix G ............................ Post-closeout adjustments and continuing responsibilities ......................... VII. Subpart A—Submitting and Maintaining Recipient Information (OAR Article I) § 1136.100 Purpose of OAR Article I. OAR Article I sets forth requirements for recipients to maintain current information about themselves in the data system the Government specifies as the repository for standard information about its business partners, currently the System for Award Management. The article thereby implements OMB guidance in: (a) 2 CFR 200.113 and 200.210(b)(1)(iii); (b) 2 CFR part 25; and (c) The portion of 2 CFR 200.300(b) that cites 2 CFR part 25 and the System for Award Management). § 1136.105 Content of OAR Article I. To implement the requirement described in § 1136.100, DoD Components’ general terms and conditions must use the standard wording appendix A to this part provides as OAR Article I. A DoD Component may reserve Section B of the article in its general terms and conditions if it is certain that there will be no award using those general terms and conditions for which the Federal share of the award’s total value will exceed $500,000. Subpart B—Records Retention and Access (OAR Article II) § 1136.200 Purpose of OAR Article II. OAR Article II addresses rights and responsibilities concerning retention of records related to awards; access to recipients’ records; and collection, transmission, and storage of information. The article thereby implements OMB guidance in 2 CFR 200.333 through 200.337. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1136.205 Records retention period. (a) OMB guidance. OMB guidance in: (1) The lead-in paragraph of 2 CFR 200.333 sets a standard retention period that is generally applicable to recipient records pertinent to Federal awards. (2) 2 CFR 200.333(c) and (f) provide different standard retention periods specifically for records that are related either to real property and equipment acquired with Federal funds or to indirect cost rate proposals and cost allocation plans. (b) DoD implementation. A DoD Component’s general terms and VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 conditions must specify the standard retention periods described in paragraph (a) of this section. (c) Award terms and conditions—(1) General. A DoD Component’s general terms and conditions must use the wording appendix B to this part provides for Section A of OAR Article II. (2) Exception. A DoD Component’s general terms and conditions may substitute alternative wording for paragraph A.3 of OAR Article II if the awards using those terms and conditions will be renewed quarterly or annually. The alternative wording for awards that will be renewed quarterly or annually would replace the words ‘‘final financial report’’ in paragraph A.3 with ‘‘quarterly financial report’’ or ‘‘annual financial report,’’ respectively. § 1136.210 Extensions of retention period due to litigation, claim, or audit. (a) OMB guidance. OMB guidance in: (1) 2 CFR 200.333(a) provides for an extended retention period for records involved in a litigation, claim, or audit that begins before the end of the standard 3-year retention period. (2) 2 CFR 200.333(b) provides that a recipient also is required to extend the retention period when a Federal awarding, cognizant, or oversight agency notifies it in writing to do so. (b) DoD implementation. (1) A DoD Component’s general terms and conditions must provide for extended retention periods for records involved in a litigation, claim, or audit that begins before the end of the standard 3-year retention period, as described in 2 CFR 200.333(a). (2)(i) With the one exception described in paragraph (b)(2)(ii) of this section, DoD Components may not require recipients to extend the records retention period as described in 2 CFR 200.333(b). (ii) A DoD Component’s general terms and conditions must extend the ‘‘retention period,’’ as that term is used in 2 CFR 200.344(a), to include the entire period during which recipients retain their records, even if that period extends beyond the standard 3-year retention period described in § 1136.205. That extension will enable disallowance of costs and recovery of funds based on an audit or other review of records a recipient elected to retain beyond the standard retention period, even if the audit or review began after PO 00000 Frm 00071 Fmt 4701 Sfmt 4702 the end of that retention period. Without that extension, the ability to disallow costs and recover funds would be limited by 2 CFR 200.344(a), which states that an agency must make any disallowance determination about a recipient’s costs and notify the recipient within the record retention period. (c) Award terms and conditions. A DoD Component’s general terms and conditions must use the wording appendix B to this part provides for Section B of OAR Article II. § 1136.215 Records for program income earned after the end of the performance period. (a) OMB guidance. OMB guidance in 2 CFR 200.333(e) provides the retention period for records related to program income earned after the end of the period of performance, for instances when an agency establishes requirements governing the disposition of program income earned after that time. (b) DoD implementation. A DoD Component’s general terms and conditions should not establish retention requirements for records related to program income earned after the end of the period of performance. Retention requirements for those records in general terms and conditions would be inconsistent with the statement in 2 CFR 1128.725 that a DoD Component should rarely, if ever, establish a requirement for a recipient to be accountable for program income earned after the end of the period of performance. Section 1128.725 provides for use of general terms and conditions wording in FMS Article VII that establishes no such requirement. Section 1128.725 further states that exceptions for individual awards are properly addressed at the time of award in the award-specific terms and conditions. (c) Award terms and conditions. A DoD Component’s general terms and conditions must use the wording appendix B to this part provides for Section C of OAR Article II. If a DoD Component includes a requirement in the award-specific terms and conditions of a particular award for the recipient to be accountable for program income earned after the end of the period of performance, it also may include a requirement in the award-specific terms and conditions for the recipient’s retention of the associated records. E:\FR\FM\07NOP2.SGM 07NOP2 78426 § 1136.220 use. Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules Records for joint or long-term (a) OMB guidance. OMB guidance in: (1) 2 CFR 200.334 states that a Federal awarding agency must request that a recipient transfer records to its custody if the agency determines that the records have value that warrants long-term retention. It also provides that the agency may instead arrange for the recipient to retain records that are continuously needed for joint use. (2) 2 CFR 200.333(d) exempts records transferred to a Federal agency from the standard records retention requirement. (b) DoD implementation. A DoD Component’s general terms and conditions must inform recipients that they may be asked to transfer records, maintain them for joint use, or retain them for a longer period of time. (c) Award terms and conditions. A DoD Component’s general terms and conditions must use the wording appendix B to this part provides for Section D of OAR Article II. § 1136.225 Methods for collecting, transmitting, and storing information. sradovich on DSK3GMQ082PROD with PROPOSALS2 Access to records. (a) OMB guidance. OMB guidance in 2 CFR 200.336 and 200.337 addresses Federal Government and public access to recipient records related to awards. (b) DoD implementation. A DoD Component’s general terms and conditions must provide for Government access to records consistent with 2 CFR 200.336 and address public access to records to implement the guidance in 2 CFR 200.337. (c) Award terms and conditions. A DoD Component’s general terms and conditions must use the wording appendix B to this part provides for Section F of OAR Article II. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 § 1136.300 Purpose of OAR Article III. OAR Article III addresses remedies for noncompliance, including suspension and termination of awards. It thereby implements OMB guidance in 2 CFR 200.338 through 200.340 and 200.342. § 1136.305 Content of OAR Article III. (a) Requirement. A DoD Component’s general terms and conditions must specify remedies available for addressing noncompliance with award terms and conditions, policies and procedures related to termination of awards, and effects of suspension and termination on allowability of costs. (b) Award terms and conditions. To implement the requirement in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording appendix C to this part provides for OAR Article III. Subpart D—Claims, Disputes, and Appeals (OAR Article IV) § 1136.400 (a) OMB guidance. OMB guidance in 2 CFR 200.335 addresses the use of electronic and paper formats in the collection, transmission, and storage of information related to awards. (b) DoD implementation. A DoD Component’s general terms and conditions must include provisions consistent with the guidance in 2 CFR 200.335 for recipients’ use of electronic and paper formats to collect, transmit, and store information. (c) Award terms and conditions. A DoD Component’s general terms and conditions must use the wording appendix B to this part provides for Section E of OAR Article II. § 1136.230 Subpart C—Remedies and Termination (OAR Article III) Purpose of OAR Article IV. OAR Article IV addresses claims, disputes, and appeals under awards. It thereby provides the award terms and conditions required by the DoD Grant and Agreement Regulations at 32 CFR 22.815 and also implements OMB guidance in 2 CFR 200.341. § 1136.405 Content of OAR Article IV. (a) Requirement. The DoD Grant and Agreement Regulations at 32 CFR 22.815 require DoD Components’ general terms and conditions to incorporate the procedures set forth in that section for processing claims and disputes and deciding appeals of grants officer’s decisions. (b) Award terms and conditions—(1) General. To implement the requirement in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording appendix D to this part provides for OAR Article IV, with wording inserted in lieu of the reserved paragraph A.2 to identify the Component’s cognizant Grant Appeal Authority and provide his or her mailing or email address. (2) Exception. A DoD Component may add one or more sections to the wording appendix D to this part provides for OAR Article IV to state a requirement that recipients must provide opportunities to subrecipients for hearings, appeals, or other administrative proceedings with respect to claims, disputes, remedies for noncompliance, or other matters if: PO 00000 Frm 00072 Fmt 4701 Sfmt 4702 (i) That requirement is in a statute or regulation adopted in the Code of Federal Regulations after opportunity for public comment; and (ii) The statutory or regulatory requirement applies to awards using the DoD Component’s general terms and conditions. Subpart E—Collection of Amounts Due (OAR Article V) § 1136.500 Purpose of OAR Article V. OAR Article V addresses procedures for establishing, appealing, and collecting debts under DoD awards. It thereby: (a) Provides requirements for recipients paralleling those for DoD Components in the DoDGARs at 32 CFR 22.820; (b) Augments requirements of OAR Article IV in any case in which a claim leads to a determination that a recipient owes an amount to DoD; and (c) Implements OMB guidance in 2 CFR 200.345. § 1136.505 Content of OAR Article V. (a) Requirement. A DoD Component’s general terms and conditions must specify how grants officers’ decisions establish debts under awards, when debts become delinquent, how and when recipients may appeal, and how debts not paid in a timely manner are referred for debt collection. (b) Award terms and conditions. To implement the requirement in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording appendix E to this part provides for OAR Article V. Subpart F—Closeout (OAR Article VI) § 1136.600 Purpose of OAR Article VI. OAR Article VI addresses recipients’ responsibilities for closeout of awards and subawards under them. The article thereby implements OMB guidance in 2 CFR 200.343. § 1136.605 Content of OAR Article VI. (a) Requirement. A DoD Component’s general terms and conditions must specify requirements related to closeout of awards and subawards, including recipients’ liquidations of obligations, refunds of unobligated balances, and submission of final reports. (b) Award terms and conditions—(1) General. To implement the requirement in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording appendix F to this part provides for OAR Article VI. E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules (2) Exception related to due dates for final reports other than performance, financial, and invention reports. Consistent with OMB guidance in 2 CFR 200.343(a), a DoD Component may grant extensions to due dates for final reports. (i) To pre-approve a 30-day extension for final reports other than performance, financial, and invention reports, a DoD Component may substitute ‘‘120 calendar days’’ for ‘‘90 calendar days’’ in the default wording appendix F to this part provides for paragraph C.4 of OAR Article VI. These pre-approved 30day extensions in the general terms and conditions are for all awards using those terms and conditions; they therefore are separate and distinct from any additional extensions a recipient may later request for an individual award. (ii) The parallel authorities for preapproved extensions of due dates for final performance, financial, and invention reports are elsewhere. DoDGARs provisions in: (A) 2 CFR 1134.125 authorize a DoD Component to pre-approve a 30-day extension for due dates of performance reports by an appropriate substitution of wording in REP Article I of the general terms and conditions. (B) 2 CFR 1134.210 provide default wording in REP Article II that preapproves a 30-day extension for due dates of financial reports. (C) 2 CFR 1130.610 authorize a DoD Component to pre-approve a 30-day extension for due dates of final reports listing subject inventions under awards by an appropriate substitution of wording in PROP Article VI of the general terms and conditions. Subpart G—Post-Closeout Adjustments and Continuing Responsibilities (OAR Article VII) § 1136.700 Purpose of OAR Article VII. OAR Article VII addresses postcloseout funding adjustments and recipients’ continuing responsibilities after award closeout. It thereby implements OMB guidance in 2 CFR 200.344. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1136.705 Content of OAR Article VII. (a) Requirement. A DoD Component’s general terms and conditions must specify the rights and responsibilities of the Government and recipients with respect to funding adjustments and recipients’ continuing responsibilities after award closeout. (b) Award terms and conditions. To implement the requirement in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording appendix G to this part provides for OAR Article VII. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 Appendix A to Part 1136—Terms and Conditions for OAR Article I, ‘‘Submitting and Maintaining Recipient Information’’ DoD Components must use as OAR Article I the following standard wording in accordance with § 1136.105 of this part: OAR Article I. Submitting and Maintaining Recipient Information. (December 2014) Section A. System for award management. 1. Unless you are exempted from this requirement in accordance with OMB guidance in 2 CFR 25.110, you must maintain the currency of information about yourself in the system the Federal Government specifies as the repository for information about its business partners (currently the System for Award Management (SAM)). 2. You must maintain the information in that system until you submit the final financial report required under this award or receive the final payment, whichever is later. 3. You must review and update the information at least annually after your initial registration in the system (unless you are subject to the requirements in Section B) and more frequently if required by changes in your information. Section B. Reporting of performance and integrity information. 1. General reporting requirement. If the total value of your currently active grants, cooperative agreements, and procurement contracts from all Federal agencies exceeds $10,000,000 for any period of time during the period of performance of this award, then during that period of time you must maintain in SAM the currency of information required by paragraph B.2 of this section. Note that: a. This reporting is required under section 872 of Public Law 110–417, as amended (41 U.S.C. 2313). b. As required by section 3010 of Public Law 111–212, all performance and integrity information posted in the designated information system on or after April 15, 2011, except past performance reviews required for Federal procurement contracts, will be publicly available. c. Recipient information is submitted to the OMB-designated integrity and performance system through the SAM, as described in paragraph B.3 of this section. The currently designated integrity and performance information system is the Federal Awardee Performance and Integrity Information System (FAPIIS). 2. Proceedings about which you must report. Submit the information that the designated information system requires about each proceeding that: a. Is in connection with the award or performance of a grant, cooperative agreement, or procurement contract from the Federal Government; b. Reached its final disposition during the most recent 5 year period; and c. Is one of the following: i. A criminal proceeding that resulted in a conviction, as defined in paragraph B.5. of this section; ii. A civil proceeding that resulted in a finding of fault and liability and payment of a monetary fine, penalty, reimbursement, restitution, or damages of $5,000 or more; PO 00000 Frm 00073 Fmt 4701 Sfmt 4702 78427 iii. An administrative proceeding, as defined in paragraph B.5. of this section, that resulted in a finding of fault and liability and your payment of either monetary fine or penalty of $5,000 or more or a reimbursement, restitution, or damages in excess of $100,000; or iv. Any other criminal, civil, or administrative proceeding if: A. It could have led to an outcome described in paragraph B.2.c.i, ii, or iii of this section; B. It had a different disposition arrived at by consent or compromise with an acknowledgment of fault on your part; and C. The requirement in this section to disclose information about the proceeding does not conflict with applicable laws and regulations. 3. Reporting procedures. Submit the information required in paragraph B.2 of this section to the Entity Management functional area of the SAM. a. Current procedures are to submit the information as part of the maintenance of your information in the SAM that Section A of this article requires. b. You do not need to submit the information again under this award if you already reported current information to the SAM under another Federal grant, cooperative agreement, or procurement contract. 4. Reporting frequency. During any period of time when you are subject to the requirement in paragraph B.1 of this section, you must report to SAM at least semiannually following your initial report of any information required in paragraph B.2 of this section, either to provide new information not reported previously or affirm that there is no new information to report. 5. Definitions. For purposes of this section: a. Administrative proceeding means a nonjudicial process that is adjudicatory in nature in order to make a determination of fault or liability (e.g., Securities and Exchange Commission Administrative proceedings, Civilian Board of Contract Appeals proceedings, and Armed Services Board of Contract Appeals proceedings). This includes proceedings at the Federal and State level but only in connection with performance of a Federal contract, grant, or cooperative agreement. It does not include audits, site visits, corrective plans, or inspection of deliverables. b. Conviction means a judgment or conviction of a criminal offense by any court of competent jurisdiction, whether entered upon a verdict or a plea, and includes a conviction entered upon a plea of nolo contendere. c. Total value of currently active grants, cooperative agreements, and procurement contracts includes: i. Only the Federal share of the funding under any Federal agency award with a recipient cost share or match; and ii. The value of all expected funding increments and options, even if not yet exercised, under each Federal agency award. Section C. Disclosure of evidence of integrity-related issues. 1. Disclosure requirement. At any time during the period of performance of this E:\FR\FM\07NOP2.SGM 07NOP2 78428 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules award, if you have evidence that a covered person committed a covered action (see paragraphs C.2 and C.3 of this section) that may affect this award, you must disclose the evidence in writing to the Office of the Inspector General, DoD, with a copy to the grants officer identified in the award cover pages. 2. Covered person. As the term is used in this section, ‘‘covered person’’ means a principal, employee, or agent of either you or a subrecipient under this award, where: a. ‘‘Principal’’ means: i. An officer, director, owner, partner, principal investigator, or other person with management or supervisory responsibilities that relate to this award; or ii. A consultant or other person, whether or not employed by you or a subrecipient or paid with funds under this award, who: A. Is in a position to handle funds under this award; B. Is in a position to influence or control the use of those funds; or C. Occupies a technical or professional position capable of substantially influencing the development or outcome of an activity required to perform the project or program under this award. b. ‘‘Agent’’ means any individual who acts on behalf of, or who is authorized to commit you or the subrecipient, whether or not employed by you or the subrecipient. 3. Covered action. As the term is used in this section, ‘‘covered action’’ means a violation of Federal criminal law in Title 18 of the United States Code involving fraud, bribery, or a gratuity violation. 4. Safeguarding of the information. a. To the extent permitted by law and regulation, we will: i. Safeguard and treat information you disclose to us as confidential if you mark the information as ‘‘confidential’’ or ‘‘proprietary.’’ ii. Not release the information to the public in response to a Freedom of Information Act (5 U.S.C. 552) request without notifying you in advance. b. We may transfer documents you provide to us to any other department or agency within the Executive Branch of the Federal Government if the information relates to matters within that organization’s jurisdiction. Appendix B to Part 1136—Terms and Conditions for OAR Article II, ‘‘Records Retention And Access’’ sradovich on DSK3GMQ082PROD with PROPOSALS2 DoD Components must use the following standard wording in OAR Article II in accordance with §§ 1136.205 through 1136.230 of this part, which allow alternative wording in paragraph A.3: OAR Article II. Records Retention and Access. (December 2014) Section A. Records retention period. Except as provided in Sections B through D of this article: 1. You must keep records related to any real property and equipment acquired, in whole or in part, using Federal funds under the award for 3 years after final disposition of the property. For any item of exempt VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 property with a current fair market value greater than $5,000, and for which final disposition was not a condition of the title vesting, you must keep whatever records you need for as long as necessary to ensure that you can deduct the Federal share if you later use the property in contributions for cost sharing or matching purposes under any Federal award. 2. You must keep records related to rate proposals for indirect or facilities and administration costs, cost allocation plans, and supporting records such as indirect cost rate computations and any similar accounting computations of the rate at which a particular group of costs is chargeable (such as computer usage chargeback or composite fringe benefit rates) as follows: a. If you are required to submit a proposal, plan, or other computations to your Federal cognizant agency for indirect costs, as the basis for negotiation of a rate, you must keep the submissions and all supporting records for 3 years from the date on which you were required to make the submissions. b. If you are not required to submit a proposal, plan, or other computation as the basis for negotiation, you must keep the proposal, plan, other computation, and supporting records for 3 years from the end of the fiscal year or other accounting period covered by the proposal, plan, or other computation. 3. You must keep other financial records, supporting documents, statistical records, and other records pertinent to this award for a period of 3 years from the date you submit your final financial report under the award. Section B. Extensions of retention period due to litigation, claim, or audit. 1. If any litigation, claim, or audit begins before the end of the 3-year retention period specified in Section A of this article and the final action related to the litigation, claim, or audit is not taken before the end of that 3year period, you must retain all records related to this award that may be involved in the litigation, claim, or audit until all findings involving the records have been resolved and final action taken. 2. We may disallow costs and recover funds under this award based on an audit or other review of records you elected to retain beyond the retention period required by this article, even if the audit or review begins after the end of the 3-year retention period specified in Section A of this article. Thus, the ‘‘retention period,’’ as that term is used in OMB guidance in 2 CFR 200.344(a)(1), is extended as described in 2 CFR 200.333(b) to include the entire period during which we and our authorized representatives continue to have access to those records under paragraph F.2 of this article. Section C. Records for program income earned after the end of the performance period. In accordance with Section F of FMS Article VII, there are no requirements under this award applicable to program income you earn after the end of the period of performance and therefore no associated records retention requirements. Section D. Records for joint or long-term use. 1. Joint use. To avoid duplicate recordkeeping for records that you and we PO 00000 Frm 00074 Fmt 4701 Sfmt 4702 both need to use on a continuous basis, we may ask you to make special arrangements with us, by mutual agreement, to make records available for joint and continuous use. 2. Long-term use. If we determine that some records will be needed longer than the 3-year period specified in Section A of this article, we may request that you either: a. Retain the records for a longer period of time; or b. Transfer the records to our custody for long-term retention. 3. Retention requirements for transferred records. For any records transferred to our custody, you are not subject to the records retention requirements in Section A of this article. Section E. Methods for collecting, transmitting, and storing information. 1. You should, whenever practicable, collect, transmit, and store information related to this award in open and machine readable formats rather than in closed formats or on paper. However, if you request it, we will: a. Provide award related-information to you on paper; and b. Accept award related-information from you on paper. In that case, we will not require more than an original and two copies. 2. When your original records are in an electronic form that cannot be altered, you do not need to create and retain paper copies of those records. 3. When your original records are on paper, you may substitute electronic versions produced through duplication or using other forms of electronic media, provided that: a. You conduct periodic quality control reviews of the records; b. You provide reasonable safeguards against alteration of the records; and c. The records remain readable. Section F. Access to records. 1. Scope of Government access rights. a. We as the awarding agency, the Federal Government Inspectors General, the Comptroller General of the United States, and any of our authorized representatives have the right of access to any documents, papers, or other records you have that are pertinent to this award, in order to make audits, examinations, excerpts, and transcripts. b. This right also includes timely and reasonable access to your personnel for the purposes of interview and discussion related to the records. c. As described in OMB guidance at 2 CFR 200.336(b), the access to records described in this section will include access to the true name of a victim of a crime only under extraordinary and rare circumstances. i. You are required to provide that access only in response to a court order or subpoena pursuant to a bona fide confidential investigation, or in response to a request duly authorized by the head of the DoD Component or his or her designee; and ii. You must take appropriate steps to protect this sensitive information. 2. Duration of Government access rights. We have the access rights described in paragraph F.1 of this section as long as you retain the records. 3. Public access. E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules a. You must comply with requirements to protect information that Federal statute, Executive order, or regulation requires to be protected (e.g., personally identifiable or export controlled information), to include both information generated under this award and information provided to you and identified as being subject to protection. Other than those limitations on dissemination of information, we place no restrictions on you that limit public access to your records pertinent to this award. b. We do not place any requirements on you to permit public access to your records separate from any Federal, State, local, or tribal statute that may require you to do so. c. The Freedom of Information Act (FOIA, 5 U.S.C. 552) does not apply to records in your possession but records you provide to us generally will be subject to FOIA, with the applicable exemptions. Appendix C to Part 1136—Terms and Conditions for OAR Article III, ‘‘Remedies and Termination’’ sradovich on DSK3GMQ082PROD with PROPOSALS2 DoD Components must use the following standard wording in OAR Article III in accordance with § 1136.305 of this part: OAR Article III. Remedies and Termination. (December 2014) Section A. Remedies for noncompliance. 1. If you materially fail to comply with a term or condition of this award or an applicable Federal statute or regulation, we may amend this award to impose specific additional conditions as described in OMB guidance in 2 CFR 200.207. If we determine that the imposition of those additional conditions is insufficient to remedy the noncompliance, we may take one or more of the following actions that we deem appropriate to the circumstances: a. Temporarily withhold cash payments pending: i. Your correction of the deficiency; or ii. Our taking more severe enforcement action. b. Disallow (that is, deny both use of funds and any applicable cost-sharing or matching credit for) all or part of the cost of the activity or action not in compliance; c. Suspend or terminate this award, in whole or in part (suspension of an award is a separate and distinct action from suspension of a person under 2 CFR parts 180 and 1125, as noted in paragraph A.3 of this article); d. Withhold further awards to you for the project or program that is not in compliance; e. Take any other action legally available to us under the circumstances. 2. You may raise an objection to our taking any remedy we take under paragraph A.1 of this section and will be given an opportunity to provide information and documentation challenging the action. The procedures are those specified in OAR Article IV for claims and disputes. 3. Our use of any remedy under paragraph A.1 of this section, including suspension or termination of the award, does not preclude our referring the noncompliance to a suspension and debarment official and asking that official to consider initiating a VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 suspension or debarment action under 2 CFR part 1125, the DoD implementation of OMB guidance at 2 CFR part 180. Section B. Termination. 1. This award may be terminated in whole or in part as follows: a. Unilaterally by the Government. We will provide a notice of termination if we unilaterally terminate this award in whole or in part, which we may do for either of the following reasons: i. Your material failure to comply with the award terms and conditions. If we terminate the award for that reason, we will report the termination to the OMB-designated integrity and performance system (currently FAPIIS). In accordance with 41 U.S.C. 2313, each Federal awarding official must review and consider the information in the OMBdesignated integrity and performance system with regard to any proposal or offer before awarding a grant or contract. ii. The program office does not have funding for an upcoming increment if this award is incrementally funded. In that case, the Government’s financial obligation does not exceed the amount currently obligated under the award. b. By mutual agreement. With your consent, we may terminate this award, in whole or in part, for any reason. In that case, you and we must agree to: i. The termination conditions, including the effective date; and ii. In the case of a partial termination, the portion to be terminated. c. Unilaterally by the recipient. You may unilaterally terminate this award, in whole or in part, by sending us written notification that states: i. The reasons for the termination; ii. The effective date; and iii. In the case of partial termination, the portion to be terminated. In that case, however, we may terminate the award in its entirety if we determine that the remaining portion of the award will not accomplish the purposes for which we made the award. 2. If this award is terminated in its entirety before the end of the performance period, you must complete the closeout actions for which you are responsible under OAR Article VI. The due date for each action is to be measured relative to the date of termination. 3. If this award is only partially terminated before the end of the performance period, with a reduced or modified portion of the award continuing through the end of the performance period, then closeout actions will occur at the end of the performance period as specified in OAR Article VI. 4. You will continue to have all of the postcloseout responsibilities that OAR Article VII specifies for you if this award is wholly or partially terminated before the end of the performance period. Section C. Effects of suspension or termination of the award on allowability of costs. If we suspend or terminate this award prior to the end of the period of performance, costs resulting from obligations that you incurred: 1. Before the effective date of the suspension or termination are allowable if: a. You properly incurred those obligations; PO 00000 Frm 00075 Fmt 4701 Sfmt 4702 78429 b. You did not incur the obligations in anticipation of the suspension or termination; c. In the case of termination, the costs resulted from obligations that were noncancellable after the termination; and d. The costs would have been allowable if we had not suspended or terminated the award and it had expired normally at the end of the period of performance. 2. During the suspension or after the termination are not allowable unless we expressly authorize them, either in the notice of suspension or termination or subsequently. Appendix D to Part 1136—Terms and Conditions for OAR Article IV, ‘‘Claims, Disputes, and Appeals’’ DoD Components must use the following standard wording in OAR Article IV in accordance with § 1136.405 of this part: OAR Article IV. Claims, Disputes, and Appeals. (December 2014) Section A. Definitions. 1. Claim. The definition of the term ‘‘claim,’’ as it is used in this article, is in the definitions section of the preamble to these general terms and conditions. 2. Grant Appeal Authority. [Reserved.] Section B. Submission of claims. 1. Your claims. To submit a claim arising out of this award, you must submit it in writing to the grants officer for decision, specify the nature and basis for the relief you are requesting, and include all data that supports your claim. 2. Government claims. You will receive a written grants officer’s decision if a DoD claim arises out of this award. Section C. Alternative dispute resolution. 1. We encourage resolution of all issues related to this award by mutual agreement between you and the grants officer. 2. If you and the grants officer are unable to resolve an issue through unassisted negotiations, we encourage use of Alternative Dispute Resolution (ADR) procedures to try to do so. ADR procedures are any voluntary means, such as mini-trials or mediation, used to resolve issues in controversy. ADR procedures may be used prior to submission of a claim or at any other time prior to the Grant Appeal Authority’s decision on any appeal you submit. Section D. Grants officer decisions for claims you submit. 1. Within 60 calendar days of receiving your claim, the grants officer will either: a. Transmit a written decision that: i. Identifies data on which the decision is based; and ii. Identifies and provides the mailing address for the Grant Appeal Authority to whom you would submit an appeal of the decision if you elect to do so; or b. If more time is required to render a written decision, notify you of a specific date when he or she will render the decision and inform you of the reason for delaying it. 2. The grants officer’s decision will be final unless you decide to appeal, in which case we encourage use of ADR procedures as noted in Section C of this article. E:\FR\FM\07NOP2.SGM 07NOP2 78430 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules Section E. Formal administrative appeals. 1. Right to appeal. You have the right to appeal a grants officer’s decision to the Grant Appeal Authority identified in Section A of this article. 2. Notice of appeal. You may appeal a grants officer’s decision within 90 calendar days of receiving the decision by submitting a written notice of appeal to the Grant Appeal Authority and grants officer. If you elect to use ADR procedures, you are allowed an additional 60 calendar days to submit the written notice of appeal. 3. Appeal file. Within 30 calendar days of the grants officer’s receipt of your notice of appeal, you should receive the appeal file with copies of all documents relevant to the appeal. You may supplement the file with other documents you deem relevant and with a memorandum in support of your position for the Grant Appeal Authority’s consideration. The Grant Appeal Authority may request additional information from you. 4. Decision. Unless the Grant Appeal Authority decides to conduct fact-finding procedures or an oral hearing on the appeal, the appeal will be decided solely on the basis of the written record. Any fact-finding or hearing will be conducted using procedures that the Grant Appeal Authority deems appropriate. Section F. Representation. You may be represented by counsel or any other designated representative in any claim, appeal, or ADR proceeding, as long as the representative is not otherwise prohibited by law or regulation from appearing before the DoD Component concerned. Section G. Non-exclusivity of remedies. Nothing in this article is intended to limit your right to any remedy under the law. Appendix E to Part 1136—Terms and Conditions for OAR Article V, ‘‘Collection Of Amounts Due’’ sradovich on DSK3GMQ082PROD with PROPOSALS2 DoD Components must use the following standard wording in OAR Article V in accordance with § 1136.505 of this part: OAR Article V. Collection of Amounts Due. (December 2014) Section A. Establishing a debt. 1. Any amount paid to you in excess of the amount to which you are determined to be entitled under the terms and conditions of this award constitutes a debt to the Federal Government. 2. A grants officer will attempt to resolve any claim of your indebtedness arising out of this award by mutual agreement. 3. If the grants officer fails to resolve the claim in that manner, you will receive a written notice of the grants officer’s decision formally determining the debt, as described in paragraph B.2 of OAR Article IV. The notice will describe the debt, including the amount, name and address of the official who determined the debt, and a copy of that official’s determination. Section B. Debt delinquency and appeals. 1. Within 30 calendar days of the grants officer’s decision, you must either pay the amount owed to the address provided in the written notice or inform the grants officer that you intend to appeal the decision. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 Appeal procedures are described in OAR Article IV. 2. If you elect not to appeal, any amounts not paid within 30 calendar days of the grants officer’s decision will be a delinquent debt. 3. If you elect to appeal the grants officer’s decision, you will have 90 calendar days after receipt of the grants officer’s decision to file your appeal unless Alternative Dispute Resolution (ADR) procedures are used, as described in section C of OAR Article IV, in which case you will have 150 calendar days. Section C. Demand letter, interest, and debt collection. 1. If within 30 calendar days of the grants officer’s decision, you neither pay the amount due nor provide notice of your intent to appeal the grants officer’s decision, the grants officer will send you a demand letter identifying a payment office that will be responsible for any further debt collection activity. 2. If you do not pay by the due date specified in the written demand letter, the Federal Government may collect part or all of the debt by: a. Making an administrative offset against your requests for reimbursements under Federal awards; b. Withholding advance payments otherwise due to you; and c. Any other action permitted by Federal statute. 3. The debt will bear interest, and may include penalties and other administrative costs, in accordance with applicable provisions of the DoD Financial Management Regulation (DoD 7000.14–R), which implements the Federal Claims Collection Standards. The date from which interest is computed is not extended by litigation or the filing of any form of appeal. Appendix F to Part 1136—Terms and Conditions for OAR Article VI, ‘‘Closeout’’ DoD Components must use the following standard wording in OAR Article VI in accordance with § 1136.605 of this part: OAR Article VI. Closeout. (December 2014) Section A. Liquidation of obligations. Unless the award administration office authorizes an extension of the due date, you must liquidate all obligations that you incurred under this award not later than 120 calendar days after the end date of the period of performance. Section B. Refunds of unobligated balances. You must promptly refund to the award administration office any balances of unobligated cash that we have advanced or paid to you and not authorized you to use on other projects or programs. Section C. Final reports. You must submit the: 1. Final performance report under this award no later than the date specified in Section C of REP Article I, subject to any extensions granted under Section D of that article; 2. Final financial report under this award no later than the date specified in Section C of REP Article II, subject to any extensions granted under Section D of that article; PO 00000 Frm 00076 Fmt 4701 Sfmt 4702 3. Final report listing subject inventions made under the award no later than the date specified in Section B of PROP Article VI; and 4. Other final reports that are required under this award no later than 90 calendar days after the end date of the period of performance, unless you request an extension of the due date and the award administration office approves the request. Section D. Accounting for property. You must account for any real property, equipment, supplies, and intangible property that you and any subrecipients acquired or improved under the award, in accordance with PROP Articles I through IV and VI. Your requests for disposition instructions for any federally owned property, as required by PROP Article V, meet the need described in OMB guidance at 2 CFR 200.343(f) to account for that property at closeout. Appendix G to Part 1136—Terms and Conditions for OAR Article VII, ‘‘PostCloseout Adjustments and Continuing Responsibilities’’ DoD Components must use the following standard wording in OAR Article VII in accordance with § 1136.705 of this part: OAR Article VII. Post-Closeout Adjustments and Continuing Responsibilities. (December 2014) Section A. Adjustments. The closeout of this award does not affect: 1. Our right to disallow costs and recover funds on the basis of a later audit or other review, as long as we make the determination that the costs are disallowed and notify you about that determination within the extended records retention period specified in paragraph B.2 of OAR Article II of these terms and conditions. 2. Your obligation to return any funds due to the Federal Government as a result of later refunds, corrections, or other transactions (to include any adjustments in final indirect cost rates). Section B. Continuing responsibilities. After closeout of this award, you must continue to comply with terms and conditions of this award that have applicability beyond closeout, including requirements concerning: 1. Audits, as specified in FMS Article V that cover periods of time during which you expended funds under this award. 2. Management, use, and disposition of any real property or equipment acquired under this award in which we continue to have a Federal interest after closeout, as specified in PROP Articles I through IV. 3. Retention of, and access to, records related to this award, as specified in OAR Article II. PART 1138—REQUIREMENTS RELATED TO SUBAWARDS: GENERAL AWARD TERMS AND CONDITIONS Sec. 1138.1 1138.2 E:\FR\FM\07NOP2.SGM Purpose of this part. Applicability of this part. 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules 1138.3 Exceptions from requirements of this part. 1138.4 Organization of this part. 1138.5 Authority to omit or reserve portions of SUB Articles I through XII. Subpart A—Distinguishing Subawards and Procurements (SUB Article I) 1138.100 1138.105 Purpose of SUB Article I. Content of SUB Article I. Subpart B—Pre-Award and Time of Award Responsibilities (SUB Article II) 1138.200 1138.205 Purpose of SUB Article II. Content of SUB Article II. Subpart C—Informational Content of Subawards (SUB Article III) 1138.300 1138.305 Purpose of SUB Article III. Content of SUB Article III. Subpart D—Financial and Program Management Requirements for Subawards (SUB Article IV) 1138.400 1138.405 Purpose of SUB Article IV. Content of SUB Article IV. Subpart E—Property Requirements for Subawards (SUB Article V) 1138.500 Purposes of SUB Article V in relation to other articles. 1138.505 Title to property under subawards. 1138.510 Property management system requirements for subawards. 1138.515 Use and disposition of real property, equipment, supplies, and federally owned property under subawards. 1138.520 Intangible property under subawards. Subpart F—Procurement Procedures to Include in Subawards (SUB Article VI) 1138.600 1138.605 Purpose of SUB Article VI. Content of SUB Article VI. Subpart G—Financial, Programmatic, and Property Reporting Requirements for Subawards (SUB Article VII) 1138.700 Purposes of SUB Article VII in relation to other articles. 1138.705 Performance reporting requirements for subawards. 1138.710 Financial reporting requirements for subawards. 1138.715 Reporting on property under subawards. Subpart H—Other Administrative Requirements for Subawards (SUB Article VIII) sradovich on DSK3GMQ082PROD with PROPOSALS2 1138.800 1138.805 Purpose of SUB Article VIII. Content of SUB Article VIII. Subpart J—Subrecipient Monitoring and Other Post-Award Administration (SUB Article X) 1138.1000 Purpose of SUB Article X. 1138.1005 Content of SUB Article X. Subpart K—Requirements Concerning Subrecipients’ Lower-Tier Subawards (SUB Article XI) 1138.1100 Purpose of SUB Article XI. 1138.1105 Content of SUB Article XI. Subpart L—Fixed-Amount Subawards (SUB Article XII) 1138.1200 Purpose of SUB Article XII. 1138.1205 Content of SUB Article XII. Appendix A to Part 1138—Terms and Conditions for SUB Article I, ‘‘Distinguishing subawards and procurements’’ Appendix B to Part 1138—Terms and Conditions for SUB Article II, ‘‘Preaward and time of award responsibilities’’ Appendix C to Part 1138—Terms and Conditions for SUB Article III, ‘‘Informational content of subawards’’ Appendix D to Part 1138—Terms and Conditions for SUB Article IV, ‘‘Financial and program management requirements for subawards’’ Appendix E to Part 1138—Terms and Conditions for SUB Article V, ‘‘Property requirements for subawards’’ Appendix F to Part 1138—Terms and Conditions for SUB Article VI, ‘‘Procurement procedures to include in subawards’’ Appendix G to Part 1138—Terms and Conditions for SUB Article VII, ‘‘Financial, programmatic, and property reporting requirements for subawards’’ Appendix H to Part 1138—Terms and Conditions for SUB Article VIII, ‘‘Other administrative requirements for subawards’’ Appendix I to Part 1138—Terms and Conditions for SUB Article IX, ‘‘National policy requirements for subawards’’ Appendix J to Part 1138—Terms and Conditions for SUB Article X, ‘‘Subrecipient monitoring and other post-award administration’’ Appendix K to Part 1138—Terms and Conditions for SUB Article XI, ‘‘Requirements concerning subrecipients’ lower-tier subawards’’ Appendix L to Part 1138—Terms and Conditions for SUB Article XII, ‘‘Fixedamount subawards’’ Authority: 5 U.S.C. 301 and 10 U.S.C. 113. § 1138.1 Purpose of this part. (a) This part specifies standard wording of general terms and conditions concerning recipients’ award and administration of subawards under DoD grants and cooperative agreements. (b) It thereby implements OMB guidance in subparts A through F of 2 CFR part 200 and 2 CFR parts 25, 170, and 180, as they apply to subawards. § 1138.2 Applicability of this part. The types of awards and entities to which this part and other parts in this subchapter apply are described in the subchapter overview at 2 CFR 1126.2. § 1138.3 Exceptions from requirements of this part. Exceptions are permitted from the administrative requirements in this part only as described at 2 CFR 1126.3. § 1138.4 Organization of this part. (a) The content of this part is organized into subparts and associated appendices. (1) Each subpart provides direction to DoD Components on how to construct one article of general terms and conditions for grants and cooperative agreements. (2) For each subpart, there is a corresponding appendix with standard wording for terms and conditions of the article addressed by the subpart. Terms and conditions address rights and responsibilities of the Government and recipients. (b) A DoD Component must use the wording provided in each appendix in accordance with the direction in the corresponding subpart and the authorization in § 1138.5, which permit a DoD Component to vary from the standard wording in some situations. (c) The following table shows which article of general terms and conditions may be found in each of appendices A through L to this part (with the associated direction to DoD Components in subparts A through L, respectively, as supplemented by the authorization in § 1138.5): You will find terms and conditions specifying recipients’ rights and responsibilities related to . . . In . . . Appendix Appendix Appendix Appendix Appendix Appendix Appendix Subpart I—National Policy Requirements for Subawards (SUB Article IX) 1138.900 Purpose of SUB Article IX. 1138.905 Content of SUB Article IX. 78431 A ............................ B ............................ C ............................ D ............................ E ............................ F ............................. G ............................ VerDate Sep<11>2014 19:05 Nov 04, 2016 That would appear in an award within SUB Article . . . Distinguishing subawards and procurements .............................................. Pre-award and time of award responsibilities ............................................. Informational content of subawards ............................................................. Financial and program management requirements for subawards ............. Property requirements for subawards ......................................................... Procurement procedures to include in subawards ...................................... Financial, programmatic, and property reporting requirements for subawards. I. II. III. IV. V. VI. VII. Jkt 241001 PO 00000 Frm 00077 Fmt 4701 Sfmt 4702 E:\FR\FM\07NOP2.SGM 07NOP2 78432 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules You will find terms and conditions specifying recipients’ rights and responsibilities related to . . . In . . . Appendix Appendix Appendix Appendix Appendix H ............................ I .............................. J ............................. K ............................ L ............................. That would appear in an award within SUB Article . . . Other administrative requirements for subawards ....................................... National policy requirements for subawards ............................................... Subrecipient monitoring and other post-award administration .................... Requirements concerning subrecipients’ lower-tier subawards .................. Fixed-amount subawards ............................................................................. VIII. IX. X. XI. XII. § 1138.5 Authority to omit or reserve portions of SUB Articles I through XII. appendix A to this part provides for SUB Article I. A DoD Component’s general terms and conditions may: (a) Omit SUB Articles II through XII that are the subject of this part if the DoD Component does not allow recipients to make subawards under awards using those terms and conditions. The DoD Component also may amend SUB Article I in that case, to state the prohibition on making subawards and limit the recipient’s responsibility to ensuring that any transaction it awards at the next tier is a procurement transaction. (b) Reserve portions of SUB Articles I through XII that do not apply to the DoD Component’s awards using those terms and conditions. For example, the DoD Component may reserve paragraphs in SUB Articles IV through IX specifying administrative requirements that flow down solely to subawards to States if it determines that there is no possibility of a subaward to a State under any of the awards using its general terms and conditions. Similarly, it may reserve SUB Article XII if it does not permit any fixed-amount subawards under its awards. Subpart A—Distinguishing Subawards and Procurements (SUB Article I) § 1138.100 Purpose of SUB Article I. SUB Article I specifies requirements for a recipient to determine whether each transaction it makes at the next tier below a DoD grant or cooperative agreement is a subaward or a procurement transaction. It thereby implements OMB guidance in 2 CFR 200.201(a) and 200.330. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1138.105 Content of SUB Article I. (a) Requirement. A DoD Component’s general terms and conditions must: (1) Require the recipient to determine the nature of transactions it makes under its award; and (2) Inform the recipient about the effect of that determination on the procedures for awarding the transaction and the transaction’s terms and conditions. (b) Award terms and conditions. A DoD Component’s general terms and conditions must use the wording VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 Subpart B—Pre-Award and Time of Award Responsibilities (SUB Article II) § 1138.200 Purpose of SUB Article II. SUB Article II specifies requirements concerning subrecipients’ unique entity identifiers and pre-award risk assessments. It also references requirements in REP Article IV to report on subawards and subrecipients’ executive compensation. It thereby partially implements OMB guidance in: (a) 2 CFR parts 25 and 170; (b) 2 CFR 200.207; 200.300(b), as it applies to subaward reporting; and 200.331(b); and (c) Subpart C of 2 CFR part 180, as implemented by DoD at 2 CFR part 1125. § 1138.205 Content of SUB Article II. (a) Requirement. A DoD Component’s general terms and conditions must require the recipient to: (1) Obtain an entity’s unique entity identifier before making a subaward to the entity; (2) Notify potential subrecipients in advance about that requirement; and (3) Conduct a pre-award risk assessment of an entity before making a subaward to the entity and adjust subaward terms and conditions if warranted by the results of the assessment. (b) Award terms and conditions. A DoD Component’s general terms and conditions must use the wording appendix B to this part provides for SUB Article II. Subpart C—Informational Content of Subawards (SUB Article III) § 1138.300 Purpose of SUB Article III. SUB Article III specifies information that recipients must include in subawards they make under DoD grants and cooperative agreements. It thereby implements OMB guidance in 2 CFR 200.331(a)(1). § 1138.305 Content of SUB Article III. (a) Requirement. A DoD Component’s general terms and conditions must require recipients to include certain information items in each subaward they make. PO 00000 Frm 00078 Fmt 4701 Sfmt 4702 (b) Award terms and conditions. A DoD Component’s general terms and conditions must use the wording appendix C to this part provides for SUB Article III. Subpart D—Financial and Program Management Requirements for Subawards (SUB Article IV) § 1138.400 Purpose of SUB Article IV. SUB Article IV specifies the financial and program management requirements that recipients must include in subawards they make under DoD grants and cooperative agreements. It thereby implements OMB guidance in the following portions of 2 CFR part 200, as they apply to subawards: (a) Sections 200.209 and 200.302 through 200.309; and (b) Subparts E and F. § 1138.405 Content of SUB Article IV. (a) Requirement. A DoD Component’s general terms and conditions must require recipients to include pertinent requirements concerning financial and program management in each subaward they make. (b) Award terms and conditions. A DoD Component’s general terms and conditions must use the wording appendix D to this part provides for SUB Article IV. Subpart E—Property Requirements for Subawards (SUB Article V) § 1138.500 Purposes of SUB Article V in relation to other articles. (a) Purposes. SUB Article V specifies requirements concerning equipment, supplies, and real, intangible, and federally owned property that recipients must include in subawards they make under DoD grants and cooperative agreements. It thereby: (1) Specifies which of the requirements in PROP Articles I through VI of the award flow down to subawards; and (2) Implements OMB guidance in 2 CFR 200.310 through 200.316, as those sections apply to subawards. (b) Award terms and conditions. A DoD Component’s general terms and conditions must use the default wording appendix E to this part provides as Section A of SUB Article V to inform E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules recipients about the relationship between requirements for the recipient in PROP Articles I through VI and requirements for subawards in SUB Article V. § 1138.505 Title to property under subawards. (a) Requirement. A DoD Component’s general terms and conditions must specify requirements related to title to property under subawards. (b) Award terms and conditions—(1) General. A DoD Component’s general terms and conditions must use the default wording appendix E to this part provides as Section B of SUB Article V to specify the requirements concerning title to property that recipients must include in their subawards. (2) Exception. If a DoD Component has the necessary statutory authority to do so and includes provisions in paragraph A.2 of PROP Article I to identify any property acquired under the award as exempt property, as described in 2 CFR 1130.105, the DoD Component may at its option insert wording in paragraph B.1.b of SUB Article V to allow recipients to pass through those provisions to subrecipients. (i) It is critical, however, that the DoD Component ensures that the wording of paragraph B.1.b is consistent with the statutory authority. (ii) For example, if the statutory authority is 31 U.S.C. 6306—as described in 2 CFR 1130.105(b)(2)(i)— the wording of paragraph B.1.b of SUB Article V may permit a recipient to flow down the substance of the exempt property provision in paragraph A.2 of PROP Article I only to a subrecipient that is a nonprofit institution of higher education or nonprofit organization whose primary purpose is conducting scientific research. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1138.510 Property management system requirements for subawards. (a) Requirement. DoD Components’ general terms and conditions must address the standards for property management systems that apply to subawards. (b) Award terms and conditions. To specify the property management system standards that recipients must include in their subawards, a DoD Component’s general terms and conditions must use the default wording appendix E to this part provides as Section C of SUB Article V. § 1138.515 Use and disposition of real property, equipment, supplies, and federally owned property under subawards. (a) Requirement. A DoD Component’s general terms and conditions must VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 specify the requirements concerning use and disposition of real property, equipment, supplies, and federally owned property that recipients must include in subawards. (b) Award terms and conditions. A DoD Component’s general terms and conditions must use the default wording appendix E to this part provides for Sections D through F of SUB Article V. § 1138.520 Intangible property under subawards. (a) Requirement. A DoD Component’s general terms and conditions must address the provisions concerning intangible property that recipients must include in subawards. (b) Award terms and conditions—(1) General. To specify the intangible property provisions that recipients must include in their subawards, a DoD Component’s general terms and conditions must use the default wording appendix E to this part provides as Section G of SUB Article V. (2) Exception. A DoD Component’s general terms and conditions may delete the reference to ‘‘Section B of PROP Article VI’’ in the default wording appendix E to this part provides for paragraph G.2 of SUB Article V and provide alternative wording if: (i) Those general terms and conditions will be used in awards for purposes other than research or education, as described in 2 CFR 1130.610(c)(3); and (ii) The DoD Component wants to specify that nonprofit and governmental recipients include either: (A) No provisions concerning inventions in subawards to for-profit entities; or (B) Provisions in subawards to forprofit entities that differ from those the DoD Component’s general terms and conditions specify for nonprofit and governmental recipients. Subpart F—Procurement Procedures To Include in Subawards (SUB Article VI) § 1138.600 Purpose of SUB Article VI. SUB Article VI of the general terms and conditions specifies procurement provisions recipients must include in their subaward terms and conditions. It thereby: (a) Specifies which of the requirements in PROC Articles I through III of the award flow down to subawards; and (b) Implements OMB guidance in 2 CFR 200.317 through 200.326 and appendix II to 2 CFR part 200, as those portions of 2 CFR part 200 apply to subawards; and (c) Partially implements OMB guidance in 2 CFR 200.205(d), 200.213, PO 00000 Frm 00079 Fmt 4701 Sfmt 4702 78433 and 200.517, as those sections of 2 CFR part 200 apply to subawards. § 1138.605 Content of SUB Article VI. (a) Requirement. A DoD Component’s general terms and conditions must specify that recipients’ subawards include requirements for subrecipients’ procurement procedures. (b) Award terms and conditions. To specify the requirements for procurement procedures that a recipient must include in its subawards, a DoD Component’s general terms and conditions must use the wording appendix F to this part provides for SUB Article VI. Subpart G—Financial, Programmatic, and Property Reporting Requirements for Subawards (SUB Article VII) § 1138.700 Purposes of SUB Article VII in relation to other articles. (a) Purposes. SUB Article VII of the general terms and conditions specifies provisions concerning reporting that recipients must include in their subaward terms and conditions, as applicable. It thereby implements OMB guidance in the following sections of 2 CFR part 200, as they apply to subawards: (1) 2 CFR 200.301 and 200.327 through 200.329; and (2) 2 CFR 200.315(c), as it relates to invention reporting; and (3) 2 CFR 200.343(a), as it relates to financial and performance reporting. (b) Award terms and conditions. A DoD Component’s general terms and conditions must use the default wording appendix G to this part provides as Section A of SUB Article VII to inform recipients about the relationship between requirements for the recipient in REP Articles I through III and requirements for subawards in SUB Article VII. § 1138.705 Performance reporting requirements for subawards. (a) Requirement. A DoD Component’s general terms and conditions must specify performance reporting requirements for subawards. (b) Award terms and conditions. A DoD Component’s general terms and conditions must use the default wording appendix G to this part provides as Section B of SUB Article VII to specify the performance reporting requirements that recipients must include in their subawards. § 1138.710 Financial reporting requirements for subawards. (a) Requirement. A DoD Component’s general terms and conditions must E:\FR\FM\07NOP2.SGM 07NOP2 78434 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules specify financial reporting requirements for subawards. (b) Award terms and conditions. appendix G to this part provides default wording for Section C of SUB Article VII to specify the financial reporting requirements that recipients must include in their subawards. § 1138.715 Reporting on property under subawards. (a) Requirement. A DoD Component’s general terms and conditions must specify the requirements for reporting on property that recipients must include in their subawards. (b) Award terms and conditions. To implement the requirement described in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the wording appendix G to this part provides as Section D of SUB Article VII. Subpart H—Other Administrative Requirements for Subawards (SUB Article VIII) § 1138.800 Purpose of SUB Article VIII. SUB Article VIII of the general terms and conditions: (a) Specifies provisions that a recipient must include in its subaward terms and conditions concerning submission and maintenance of subrecipient information; records retention and access; remedies and termination; disputes, hearings, and appeals; collection of amounts due; closeout; and post-closeout adjustments and continuing responsibilities. (b) It thereby implements OMB guidance in 2 CFR 200.113 and 200.333 through 200.345, as those sections apply to subawards. sradovich on DSK3GMQ082PROD with PROPOSALS2 § 1138.805 Content of SUB Article VIII. (a) Requirement. A DoD Component’s general terms and conditions must specify the administrative requirements that a recipient must include in its subaward terms and conditions in areas covered by OAR Articles I through VII of the recipient’s prime award. (b) Award terms and conditions—(1) General. To implement the requirement in paragraph (a) of this section, a DoD Component’s general terms and conditions must use the default wording appendix H to this part provides for SUB Article VIII. (2) Exception. A DoD Component’s general terms and conditions may add one or more sections to the default wording that appendix H to this part provides for SUB Article VIII if the DoD Component added requirements to OAR Article IV of its general terms and conditions, in accordance with paragraph 2 CFR 1136.405(b)(2), VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 because a statute or regulation requires recipients to provide opportunities to subrecipients for hearings, appeals, or other administrative proceedings with respect to claims, disputes, remedies for noncompliance, or other matters. The additional wording in SUB Article VIII would address the flow down to subrecipients of the added requirements in OAR Article IV. Subpart I—National Policy Requirements for Subawards (SUB Article IX) post-award administration of subawards. (b) Award terms and conditions. A DoD Component’s general terms and conditions must use the wording appendix J to this part provides for SUB Article X of its general terms and conditions. Subpart K—Requirements Concerning Subrecipients’ Lower-Tier Subawards (SUB Article XI) § 1138.1100 Purpose of SUB Article XI. SUB Article IX addresses national policy requirements that recipients must include in their subaward terms and conditions. It thereby partially implements OMB guidance in 2 CFR 200.331(a)(2). SUB Article XI specifies requirements that a recipient must include in any subaward under which it judges that the subrecipient may make lower-tier subawards. It thereby implements OMB guidance in 2 CFR 200.331(a) through (c) and other portions of 2 CFR part 200 as they apply to lower-tier subawards. § 1138.905 § 1138.1105 § 1138.900 Purpose of SUB Article IX. Content of SUB Article IX. (a) Requirement. A DoD Component’s general terms and conditions must specify which of the national policy requirements in NP Articles I through IV of the award flow down to subawards. (b) Award terms and conditions. A DoD Component’s general terms and conditions: (1) Must use the wording appendix B to this part provides for SUB Article IX if the DoD Component did not add, delete, or otherwise modify any of the wording that appendices A through D of 2 CFR part 1122 provided for NP Articles I through IV of the award (as permitted in accordance with DoDGARs provisions at 2 CFR 1122.115 and 1122.120). (2) May make corresponding alterations to the wording appendix I to this part provides for SUB Article IX if the DoD Component did modify the wording of NP Articles I through IV, in order to conform the national policy requirements in SUB Article IX to the requirements in those modified articles. Subpart J—Subrecipient Monitoring and Other Post-Award Administration (SUB Article X) § 1138.1000 Purpose of SUB Article X. SUB Article X specifies the requirements for recipients’ monitoring of subrecipients and related post-award administration of subawards they make under DoD grants and cooperative agreements. It thereby implements OMB guidance in 2 CFR 200.331(d) through (h) and 2 CFR 200.340(a). § 1138.1005 Content of SUB Article X. (a) Requirement. A DoD Component’s general terms and conditions must specify requirements for recipients’ monitoring of subrecipients and related PO 00000 Frm 00080 Fmt 4701 Sfmt 4702 Content of SUB Article XI. (a) Requirement. A DoD Component’s general terms and conditions must address requirements that recipients must include in subawards to entities that may make lower-tier subawards. (b) Award terms and conditions. A DoD Component’s general terms and conditions must use the wording appendix K to this part provides for SUB Article XI. Subpart L—Fixed-Amount Subawards (SUB Article XII) § 1138.1200 Purpose of SUB Article XII. SUB Article XII specifies policy and procedures concerning recipients’ use of fixed-amount subawards under DoD grants and cooperative agreements. It thereby implements OMB guidance in 2 CFR 200.201(b) and 200.332 and other portions of 2 CFR part 200 as they apply to fixed-amount subawards. § 1138.1205 Content of SUB Article XII. (a) Requirement. A DoD Component’s general terms and conditions must address how a recipient may use a fixed-amount type of subaward, when it requires the Component’s prior approval to do so, and what requirements the recipient must include in those subawards. (b) Award terms and conditions—(1) General. A DoD Component’s general terms and conditions must use the wording appendix L to this part provides for SUB Article XII. (2) Exceptions. (i) In addition to the authorities provided in § 1138.5 to omit or reserve all or portions of the wording appendix L to this part provides for SUB Article XII, a DoD Component’s general terms and conditions may add wording to Section B of the article to authorize E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules recipients to use fixed-amount subawards without obtaining the Component’s prior approval in other situations for which it would be appropriate to do so, given the nature of the program or programs that use its general terms and conditions. (ii) However, a DoD Component’s general terms and conditions should never authorize recipients’ use of fixedamount subawards for basic or applied research, for the reason given in paragraph B.2.a.ii of the wording appendix L provides for SUB Article XII. It is unrealistic to have a subrecipient commit in advance to accomplishing specific, well-defined, and observable research outcomes. Doing so subjects the subrecipient to undue risk of not being reimbursed for research costs it incurred if it fails to fully accomplish the outcomes. Appendix A to Part 1138—Terms and Conditions for SUB Article I, ‘‘Distinguishing Subawards and Procurements’’ sradovich on DSK3GMQ082PROD with PROPOSALS2 DoD Components must use the following standard wording in SUB Article I in accordance with § 1138.105 of this part: SUB Article I. Distinguishing Subawards and Procurements. (December 2014) Section A. Required recipient determination. For each transaction into which you enter with another entity at the next tier below this award, you must determine whether the transaction is a subaward or procurement. Section B. Considerations in making the determination. 1. The primary purpose of the transaction between you and the other entity is the key factor you must use to determine whether the transaction is a subaward or a procurement. a. The transaction is a subaward and the other entity therefore a subrecipient if the transaction’s primary purpose is for you to transfer—-for performance by the other entity—-a portion of the substantive program for which we are providing financial assistance to you through this award. You will continue to be accountable to us for performance of the project or program under the award, including portions performed by any subrecipients. b. The transaction is a procurement and the other entity therefore your contractor if the transaction’s primary purpose is for you to purchase goods or services that you need to perform the substantive program supported by this award. The distinction from a subaward is the contractor is not performing a portion of the substantive program as a result of the transaction. 2. What you call the transaction is not a factor in distinguishing a subaward from a procurement. If the transaction meets the criterion in paragraph B.1.a of this article, it is a subaward for purposes of the requirements of this award even if you call and consider the transaction a ‘‘contract.’’ Section C. Effect of the determination on the next-tier transaction. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 1. Process for awarding the transaction. One important consequence of your determining whether a next-tier transaction is a subaward or procurement is that there are different requirements governing the preaward and time of award processes that you use to award the transaction. a. SUB Article II of this award specifies pre-award and time of award responsibilities for subawards. b. PROC Articles I and II of this award govern pre-award and time of award process for awarding procurement transactions. 2. Transaction terms and conditions. A second important consequence of your determining whether a next-tier transaction is a subaward or procurement is that the terms and conditions you include in a subaward differ from those you include in a procurement transaction. a. Section C of SUB Article II of this award addresses requirements you must include in subaward terms and conditions. Those requirements are generally either identical with or directly related to requirements in the general terms and conditions of this award. They include national policy requirements as well as administrative requirements in areas such as financial and programmatic management, property administration, procurement, and reporting. b. PROC Article III of this award lists requirements you must include in a procurement transaction when applicable to the procurement. Appendix B to Part 1138—Terms and Conditions for SUB Article II, ‘‘PreAward and Time of Award Responsibilities’’ DoD Components must use the following standard wording in SUB Article II in accordance with § 1138.205 of this part: SUB Article II. Pre-Award and Time of Award Responsibilities. (December 2014) Section A. Requirements for unique entity identifiers. 1. Definition of ‘‘entity.’’ For purposes of the unique entity identifier requirements in paragraphs A.2 and 3 of this section, ‘‘entity’’ has the meaning given in paragraph C.3 of appendix A to OMB guidance in 2 CFR part 25. 2. Pre-notification of potential subrecipients. You must notify potential subrecipients that no entity may receive a subaward from you under this award unless it has provided its unique entity identifier to you. 3. Restriction on making subawards. a. General. You may not make a subaward to an entity unless the entity has provided its unique entity identifier to you. b. Exception. You may make a subaward to an entity that has not provided its unique entity identifier to you in rare cases in which you requested and we approved an exemption from the requirement for the entity to provide a unique entity identifier, based on the criteria in OMB guidance in 2 CFR part 25.110(d). Section B. Pre-award risk assessment. 1. Before making a subaward to an entity, you must perform a risk assessment of the prospective subrecipient, as described in 2 PO 00000 Frm 00081 Fmt 4701 Sfmt 4702 78435 CFR 200.331(b). OMB guidance in 2 CFR 200.205(c) provides examples of factors you may consider in evaluating risk. 2. As part of the risk assessment under paragraph B.1 of this article, you must: a. Verify that neither the prospective subrecipient nor its principals under the subaward are excluded or disqualified from participating in the transaction, in accordance with requirements in Subpart C of OMB guidance in 2 CFR part 180, as implemented by DoD at 2 CFR part 1125; and b. If warranted by risks you identify, determine whether to impose award-specific terms and conditions in the subaward to mitigate the risks. i. These award-specific terms and conditions may be in addition to, or differ from, the terms and conditions that SUB Articles IV through IX of this award require you to include in subawards. ii. They may include items such as those listed in OMB guidance in 2 CFR 200.207(b)(1) through (6). iii. Your procedures for imposing and removing the additional or different requirements must comply with the procedural guidance in 2 CFR 200.207(c) and (d). Section C. Subaward content. 1. Cost-type subawards. a. SUB Article III of this award specifies informational content that you must include in each cost-type subaward. b. SUB Articles IV through VIII specify administrative requirements that you must include: i. As applicable, in each cost-type subaward to: A. A domestic U.S. entity (i.e., an entity other than a foreign public entity or a foreign organization); or B. An organizational unit of a foreign organization if that unit has a place of business in the United States; and ii. To the maximum extent practicable in each cost-type subaward to either a foreign public entity or an organizational unit of a foreign organization that does not have a place of business in the United States (regardless of whether another organizational unit of that foreign organization has one). However, absent our prior approval, you may not allow that foreign entity or organization to acquire real property or equipment under a subaward. c. SUB Article IX of this award specifies national policy requirements that you must include, as applicable, in each cost-type subaward. 2. Fixed-amount type subawards. SUB Article XII of this award specifies informational content and administrative and national policy requirements that you must include in any fixed-amount subaward that you make. 3. Additional subaward terms and conditions. You may include other requirements in your subawards that you need in order to meet your responsibilities under this award for performance of the project or program (including portions performed by subrecipients) and compliance with applicable administrative and national policy requirements. Section D. Subaward and executive compensation reporting. You must report E:\FR\FM\07NOP2.SGM 07NOP2 78436 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules subaward obligating actions and information on subrecipients’ executive compensation as required by REP Article IV of this award. Appendix C to Part 1138—Terms and Conditions for SUB Article III, ‘‘Informational Content of Subawards’’ sradovich on DSK3GMQ082PROD with PROPOSALS2 DoD Components must use the following standard wording in SUB Article III in accordance with § 1138.305 of this part: SUB Article III. Informational Content of Subawards. (December 2014) Section A. Informational content in general. You must include in each subaward (and each subsequent amendment to a subaward that alters the amount of the subaward) the information specified in OMB guidance in 2 CFR 200.331(a)(1), ‘‘Federal Award Identification,’’ with the clarifications provided in Sections B through G of this article. Section B. Federal award identification number and award date. The ‘‘Federal Award Identification Number’’ and ‘‘Federal Award Date’’ described in 2 CFR 200.331(a)(1)(iii) and (iv), respectively, are the award number and award date for this award to you. You must provide the information in a way that makes it clear that the subaward is under this DoD award. Section C. Amount of Federal funds obligated. 1. The ‘‘Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient’’ that is described in 2 CFR 200.331(a)(1)(vi) is either: a. The amount of your obligation to the subrecipient, if the terms and conditions of this award do not require you to provide any cost sharing or matching for the project or program the award supports; or b. The amount of the Federal share of your subaward obligation if this award does require cost sharing or matching, which in that case is the product of: i. The Federal share of total project costs under this DoD award to you, as a percentage of those total project costs; and ii. The total amount of project costs obligated for the subaward action. 2. Note that the total project costs of the award and subaward, as used in paragraphs C.1.b.i and ii of this section, include any cost sharing or matching that you or the subrecipient provides if you are counting it toward the cost sharing or matching required under this award. Section D. Total amount obligated to the subrecipient. The ‘‘Total Amount of Federal Funds Obligated to the Subrecipient by the pass-through entity including the current obligation,’’ as described in 2 CFR 200.331(a)(1)(vii), is the cumulative amount to date of the amounts described in Section C of this article. Section E. Total Amount of the Federal Award. The ‘‘Total Amount of the Federal Award committed to the subrecipient by the pass-through entity,’’ as described in 2 CFR 200.331(a)(1)(viii), is the total amount through the end of the subaward that you and the subrecipient mutually agreed upon, to include: funding obligated to date, any future anticipated funding increments, and any options you may exercise in the future. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 Section F. Federal awarding agency, passthrough entity, and awarding official. The ‘‘Name of Federal awarding agency’’ and ‘‘pass-through entity,’’ as those terms are used in 2 CFR 200.331(a)(1)(x) are the Department of Defense and the business name associated with your registration in the System for Award Management. In that same paragraph of 2 CFR part 200, the ‘‘awarding official’’ is the individual in your organization who made the subaward. Section G. Indirect cost rate. With respect to the requirement in 2 CFR 200.331(a)(1)(xiii) for the subaward to include the ‘‘Indirect cost rate for the Federal award:’’ 1. The rate the subaward must include is the subrecipient’s rate, whether it is a rate set by negotiation with a Federal Government agency or you, or is the de minimis rate described in 2 CFR 200.414(f). 2. You are required to include the indirect cost rate only if the subrecipient is willing to share that information with you and assents that information about its rate is not proprietary. If a subrecipient is not willing to share information about its indirect cost rate with you, consult the grants officer for this award to explore alternative ways to assess the reasonableness of costs of the subaward. Appendix D to Part 1138—Terms and Conditions for SUB Article IV, ‘‘Financial and Program Management Requirements for Subawards’’ DoD Components must use the following standard wording in SUB Article IV in accordance with § 1138.405 of this part: SUB Article IV. Financial and Program Management Requirements for Subawards. (December 2014) Section A. Purposes of this article in relation to other articles. 1. This article specifies administrative requirements concerning financial and program management that you must include in the terms and conditions of each cost-type subaward that you make under this award to a domestic entity. 2. It thereby addresses the flow down to subrecipients of requirements with which you must comply under FMS Articles I through VII of this award. 3. SUB Article XII of this award addresses which of these administrative requirements you must include in any fixed-amount subaward that you make, if you are authorized to make fixed-amount subawards under this award. Section B. Financial management system standards. You must include in any subaward you make under this award the requirements of: 1. Sections A through C of FMS Article I of this award if the subrecipient is a state; 2. Sections B and C of FMS Article I if the subrecipient is an institution of higher education, nonprofit organization, local government, or Indian tribe; or 3. 32 CFR 34.11 if the subrecipient is a forprofit entity. Section C. Payments. 1. Subawards to States. You must include the provisions of Section A of FMS Article PO 00000 Frm 00082 Fmt 4701 Sfmt 4702 II of this award in each subaward you make to a State; 2. Subawards to institutions of higher education, nonprofit organizations, local governments, and Indian tribes. The following paragraphs specify requirements you must include in subawards to institutions of higher education, nonprofit organizations, local governments, and Indian tribes. a. Payment method. i. If you are authorized to request advance payments under this award, you must authorize a subrecipient to request advance payments unless: A. The subrecipient does not maintain, or demonstrate the willingness to maintain, written procedures that minimize the time elapsing between its receipt of each payment and its disbursement of the funds for project or program purposes; B. You impose a requirement for the subrecipient to be paid by reimbursement as a result of your risk evaluation of the subrecipient under SUB Article II of this award. C. The subaward is for construction. ii. If you do not authorize advance payments for one of the reasons given in paragraph C.2.a.i of this article, you must specify either reimbursement or working capital advances as the payment method in accordance with OMB guidance in 2 CFR 200.305(b)(3) and (4). b. Payment timing and amount. i. Advances. You must limit advance payments to the minimum amounts needed and time the payments to be in accordance with the subrecipient’s actual, immediate cash requirements in carrying out the project or program under the subaward. The timing and amount of your advance payments to the subrecipient must be as close as is administratively feasible to the subrecipient’s actual disbursements for direct project costs and the proportionate share of any allowable indirect costs. Your subawards also must include the requirements of paragraphs B.2.b and c of FMS Article II to specify costs subrecipients must exclude from amounts of their advance payment requests. ii. Reimbursements or working capital advances. You must follow OMB guidance in 2 CFR 200.305(b)(3) and (4) concerning timing and amount of reimbursements or working capital advances. c. Frequency of requests. You must allow the subrecipient to request advance payments or reimbursements, including those associated with the working capital advance payment method, as often as it wishes if you pay using electronic funds transfers and at least monthly otherwise. d. Other requirements. i. In any subaward that was subject to our consent, you must include the requirements of paragraph B.5 of FMS Article II of this award concerning withholding of payments. ii. You must include the provisions of paragraph B.6 of FMS Article II concerning depositories in each subaward that authorizes the subrecipient to request advance payments. 3. Subawards to for-profit entities. The provision concerning payments in each subaward you make to a for-profit entity E:\FR\FM\07NOP2.SGM 07NOP2 sradovich on DSK3GMQ082PROD with PROPOSALS2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules must conform to the requirements in 32 CFR 34.12. Section D. Allowable costs, period of availability of funds, and fee and profit. 1. You must include in each cost-type subaward a requirement that the allowability of costs under the subaward (and any lowertier subawards or procurement transactions into which the subrecipient enters) must be determined in accordance with the applicable cost principles identified in Section A of FMS Article III of this award, as well as the clarification in Section B of that article if it applies to those cost principles. 2. You must specify in each subaward the period of availability of funds for any project or program purpose so that the period neither begins before nor ends after the period during which you may use funds available to you under this award for that same project or program purpose. 3. You must include in each subaward the provisions concerning fee or profit that are in Section D of FMS Article III of this award. Section E. Revision of budget and program plans. You must include in each subaward provisions requiring the subrecipient to request your approval for any change in the subaward budget or program that would cause a budget or program change under this award for which Section B of FMS Article IV requires you to first obtain our prior approval. You may not approve any budget or program revision that is inconsistent with the purpose or terms and conditions of this award. Section F. Non-Federal audits. You must include a provision in each subaward that you make under this award to require the subrecipient entity to comply with the audit requirements applicable to that entity, as specified in either Section A or Section B of FMS Article V. Section G. Cost sharing or matching requirements. If you make a subaward under which the subrecipient may provide contributions or donations of cash or thirdparty in-kind contributions to be counted toward any cost sharing or matching that is required under this award, you must include provisions in that subaward to specify: 1. The criteria governing the allowability as cost sharing or matching of the types of cash or third-party in-kind contributions that the subrecipient may contribute or donate. Those criteria are specified in: a. Sections B through D of FMS Article VI of this award if the subaward is to a State, institution of higher education, nonprofit organization, local government, or Indian tribe. b. The provisions of 32 CFR 34.13(a) if the subaward is to a for-profit entity. 2. The methods for determining and documenting the values of those contributions or donations to be counted as cost sharing or matching. Those methods are specified in: a. Sections E and F of FMS Article VI of this award if the subaward is to a State, institution of higher education, nonprofit organization, local government, or Indian tribe. b. The provisions of 32 CFR 34.13(b) if the subaward is to a for-profit entity. VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 Section H. Program income. You must include requirements concerning program income in subawards, as follows: 1. In each subaward to a State, institution of higher education, nonprofit organization, local government, or Indian tribe: a. You must require the subrecipient to account to you when it earns any program income under the subaward or uses it, so that you can prepare reports you are required to submit to us. If the award-specific terms and conditions of this award require you to account for program income earned after the period of performance, you must include a corresponding requirement in your subawards. b. You must include the provisions of Sections A through D of FMS Article VII of this award. c. You may specify the deduction, addition, or cost-sharing or matching alternative—-described in 2 CFR 1128.720(b)—or a combination of those alternatives, for the subrecipient’s use of any program income it earns. However, you still must comply with the alternative specified in Section E of FMS Article VII and any applicable award-specific terms and conditions for the total amount of program income earned, which includes amounts earned by you and your subrecipients. For example, if we require you to use the deduction alternative, you may authorize a subrecipient to use the addition alternative if you reduce the funding allocated for portions of the project or program that you or other subrecipients perform to make the required reduction in the total award amount. 2. In each subaward to a for-profit entity, you must include the provisions of 32 CFR 34.14, with the appropriate method specified for disposition of program income. Appendix E to Part 1138—Terms and Conditions for SUB Article V, ‘‘Property Requirements for Subawards’’ DoD Components must use the following standard wording in SUB Article V in accordance with §§ 1138.505 through 1138.520 of this part: SUB Article V. Property Requirements for Subawards. (December 2014) Section A. Purposes of this article in relation to other articles. 1. This article specifies administrative requirements concerning property that you must include in the terms and conditions of each subaward that you make under this award. 2. It thereby addresses the flow down to subrecipients of requirements with which you must comply under PROP Articles I through VI of this award. 3. SUB Article XII of this award addresses which of these administrative requirements you must include in any fixed-amount subaward that you make, if you are authorized to make fixed-amount subawards under this award. Section B. Title to property. 1. Subawards to institutions of higher education, nonprofit organizations, States, local governments, or Indian tribes. a. General. You must include terms and conditions in each subaward to flow down to the subrecipient the provisions of: PO 00000 Frm 00083 Fmt 4701 Sfmt 4702 78437 i. Paragraph A.1 of PROP Article I concerning vesting of title to property acquired under the subaward unless paragraph B.1.b of this section provides otherwise. ii. Sections B through E of PROP Article I that are applicable to types of property that the subrecipient may acquire, improve, donate, or for which it may otherwise be accountable under the subaward. b. Exceptions. [Reserved.] 2. Subawards to for-profit entities. a. Real property and equipment. You must obtain the prior approval of the grants officer before permitting any for-profit subrecipient to acquire or improve real property or equipment under the award. i. If the grants officer does not grant the approval, you must include a subaward provision that prohibits the firm from acquiring or improving real property or equipment under the subaward. ii. If the approval is granted, you must include a subaward provision specifying that title vesting and Federal interest are governed by provisions of 32 CFR 34.21(b) and (c). b. Supplies. You must include a subaward provision specifying that vesting of title to supplies is governed by provisions of 32 CFR 34.24(a), subject to the use and disposition requirements of 32 CFR 34.24(b). c. Federally owned property. You must include a provision in any subaward to a forprofit entity under which the entity may be accountable for federally owned property, to state that title to such property will remain vested in the Federal Government. Section C. Property management system. If you make a subaward under which the subrecipient either may acquire or improve equipment, or may be accountable for federally owned property, you must include in the subaward: 1. If the subrecipient is a State, applicable provisions of: a. Section A of PROP Article II concerning insurance for real property and equipment. b. Section B of PROP Article II concerning other property management system standards. 2. If the subrecipient is an institution of higher education, nonprofit organization, local government, or Indian tribe, applicable provisions of: a. Section A of PROP Article II concerning insurance for real property and equipment. b. Section C of PROP Article II concerning other property management system standards. 3. Applicable provisions of 32 CFR 34.22(a) and 34.23 if the subrecipient is a for-profit entity and: a. The firm may be accountable under the subaward for federally owned property; or b. You obtained the grants officer’s prior approval for the firm’s acquisition of equipment under the subaward. Section D. Use and disposition of real property. If the subrecipient of a subaward you make under this award may acquire or improve real property, then you must include in the subaward: 1. Use. The requirements concerning use of real property: a. In Section A of PROP Article III if the subaward is to an institution of higher E:\FR\FM\07NOP2.SGM 07NOP2 sradovich on DSK3GMQ082PROD with PROPOSALS2 78438 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules education, nonprofit organization, State, local government, or Indian tribe, unless the award-specific terms and conditions of this award provide otherwise; and b. In 32 CFR 34.21(d) if the subaward is to a for-profit entity and you obtained the grants officer’s prior approval for the firm’s acquisition of real property under the subaward. 2. Disposition. Provisions to require the subrecipient to request disposition instructions through you when the property is no longer needed for its originally authorized purpose, so that you can meet your responsibilities to us under Section B of PROP Article III to address the Federal interest in the property. Section E. Use and disposition of equipment and supplies. If you make a subaward under which the subrecipient may acquire or improve equipment, or acquire supplies, you must include in the subaward, as applicable: 1. If the subaward is to a State: a. The requirements in Sections B and E of PROP Article IV concerning use and disposition of equipment and supplies; and b. Provisions such as those in Section A of PROP Article IV that make clear the applicability of those requirements. 2. If the subaward is to an institution of higher education, nonprofit organization, local government, or Indian tribe: a. The requirements in Sections C and E of PROP Article IV concerning use of equipment and use and disposition of supplies; b. Provisions such as those in Section A of PROP Article IV that make clear the applicability of those requirements; and c. Provisions to require the subrecipient to request disposition instructions from you when equipment is no longer needed for its originally authorized purpose, so that you can meet your responsibilities to us under Section D of PROP Article IV to address the Federal interest in the equipment. 3. If the subaward is to a for-profit entity: a. The requirements concerning use and disposition of supplies in 32 CFR 34.24(b); b. And you obtained the grants officer’s prior approval for the firm’s acquisition of equipment under the subaward: i. The requirements concerning use of equipment in 32 CFR 34.21(d); and ii. Provisions such as those in Section A of PROP Article IV that make clear the applicability of those requirements; and iii. Provisions to require the subrecipient to request disposition instructions from you when equipment is no longer needed for its originally authorized purpose, so that you can meet your responsibilities to us under Section B or D of PROP Article IV to address the Federal interest in the equipment. Section F. Use and disposition of federally owned property. If you make a subaward under which the subrecipient may be accountable for federally owned property, you must include subaward provisions specifying that the subrecipient: 1. May use the property for purposes specified in paragraph A.1 of PROP Article V; 2. Must submit requests through you for the award administration office’s approval to VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 use the property for other purposes, as described in paragraph A.2 of PROP Article V; 3. Must request the award administration office’s disposition instructions through you when the property is no longer needed for subaward purposes or the subaward ends. Section G. Intangible property. You must include in a subaward provisions specifying the requirements of: 1. Sections A through D of PROP Article VI if the subaward is to an institution of higher education, nonprofit organization, State, local government, or Indian tribe. 2. Section A of PROP Article VI as it applies to works developed under the subaward, Section B of PROP Article VI, and paragraph C.1 of Section C of PROP Article VI, if the subaward is to a for-profit entity. Appendix F to Part 1138—Terms and Conditions for SUB Article VI, ‘‘Procurement Procedures To Include in Subawards’’ DoD Components must use the following standard wording in SUB Article VI in accordance with § 1138.605 of this part: SUB Article VI. Procurement Procedures To Include in Subawards. (December 2014) Section A. Purposes of this article in relation to other articles. 1. This article specifies administrative requirements concerning procurement procedures that you must include in the terms and conditions of each subaward that you make under this award. 2. It thereby addresses the flow down to subrecipients of requirements with which you must comply under PROC Articles I through III of this award. 3. SUB Article XII of this award addresses which of these administrative requirements you must include in any fixed-amount subaward that you make, if you are authorized to make fixed-amount subawards under this award. Section B. Subaward to a State. In any subaward that you make to a State, you must include the requirements of PROC Article I and applicable sections of PROC Article III of this award. Section C. Subaward to an institution of higher education, nonprofit organization, local government, or Indian tribe. In any subaward that you make to an institution of higher education, nonprofit organization, local government, or Indian tribe: 1. You must include the requirements of Sections A through G of PROC Article II and applicable sections of PROC Article III of this award. 2. You must include the requirement for the subrecipient to make available to you, upon request: a. Technical specifications of proposed procurements, under the conditions described in OMB guidance at 2 CFR 200.324(a); and b. Other procurement documents for preprocurement review, under the conditions described in OMB guidance at 2 CFR 200.324(b). 3. If it is possible that, under a subaward you make, the subrecipient may award a construction or facility improvement contract PO 00000 Frm 00084 Fmt 4701 Sfmt 4702 with a value in excess of the simplified acquisition threshold, you must include provisions in the subaward to require the subrecipient to comply with at least the minimum requirements for bidders’ bid guarantees and contractors’ performance and payment bonds described in 2 CFR 200.325(a) through (c), unless you determine that the subrecipient’s bonding policy and requirements are adequate to protect Federal interests. Section D. Subaward to a for-profit entity. In any subaward you make to a for-profit entity, you must include the requirements in 32 CFR 34.31. Appendix G to Part 1138—Terms and Conditions for SUB Article VII, ‘‘Financial, Programmatic, and Property Reporting Requirements for Subawards’’ DoD Components must use the following standard wording in SUB Article VII in accordance with §§ 1138.705 through 1138.715 of this part: SUB Article VII. Financial, Programmatic, and Property Reporting Requirements for Subawards. (December 2014) Section A. Purposes of this article in relation to other articles. 1. This article specifies administrative requirements concerning reporting that you must include in the terms and conditions of each subaward that you make under this award. 2. It thereby addresses the flow down to subrecipients of requirements with which you must comply under REP Articles I through III of this award. 3. SUB Article XII of this award addresses which of these administrative requirements you must include in any fixed-amount subaward that you make, if you are authorized to make fixed-amount subawards under this award. Section B. Performance reporting. 1. You must include terms and conditions in each subaward to require the subrecipient to provide any performance information you need, by the time you need it, to comply with the performance reporting requirements in REP Article I and other terms and conditions of this award. 2. You may specify a form, format, or data elements the subrecipient uses to provide the information to you (you need not require the subrecipient to use the same form, format, or data elements this article specifies for your reporting to us). Section C. Financial reporting. 1. You must include terms and conditions in each subaward to require the subrecipient to provide any financial information you need, by the time you need it, to comply with the financial reporting requirements in REP Article II and other terms and conditions of this award. 2. You may specify a form, format, or data elements the subrecipient must use to provide the information to you (you need not require the subrecipient to use the same form, format, or data elements that REP Article II specifies for your reporting to us). Section D. Reporting on property. E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules 1. Each subaward you make under this award must include provisions concerning property reporting as described in paragraph D.2 of this section if the subrecipient may, under the subaward: a. Acquire or improve real property or equipment; b. Acquire supplies or intangible property; or c. Be accountable for federally owned property. 2. The subaward provisions must require the subrecipient to give you the information you need about the property in order to meet your responsibilities to us under Sections A through D of REP Article III and PROP Articles II through VI. Appendix H to Part 1138—Terms and Conditions for SUB Article VIII, ‘‘Other Administrative Requirements for Subawards’’ sradovich on DSK3GMQ082PROD with PROPOSALS2 DoD Components must use the following standard wording in SUB Article VIII in accordance with § 1138.805 of this part: SUB Article VIII. Other Administrative Requirements for Subawards. (December 2014) Section A. Purposes of this article in relation to other articles. 1. This article specifies other administrative requirements that you either must or should include in the terms and conditions of each subaward that you make under this award. 2. It thereby addresses the flow down to subrecipients of requirements with which you must comply under OAR Articles I through VII of this award. 3. SUB Article XII of this award addresses which of these administrative requirements you must include in any fixed-amount subaward that you make, if you are authorized to make fixed-amount subawards under this award. Section B. Submission and maintenance of subrecipient information. You must include the substance of the provision in Section C of OAR Article I in any subaward you make under this award. The provision must require the subrecipient’s disclosure of any evidence directly to the Inspector General, DoD. Section C. Records retention and access. In each subaward you make under this award: 1. If the subaward is to an institution of higher education, nonprofit organization, State, local government, or Indian tribe: a. You must include the requirements of Section A of OAR Article II with the additional condition that, for any subrecipient under this award that does not have a federally approved rate for indirect or facilities and administrative costs and that does not use the de minimis rate described in 2 CFR 200.414(f), you must: i. Require the subrecipient to keep records that support its indirect or facilities and administrative costs charged to the subaward for 3 years from the end of the fiscal year (or other accounting period) to which the costs apply; and ii. Keep any plan or computation the subrecipient submits to you to serve as a basis for your determining the reasonableness and allowability of indirect or facilities and VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 administrative costs of the subaward, for 3 years from the end of the fiscal year (or other accounting period) to which the proposal, plan, or computation applies. b. You must include the requirements of Sections B, C, and F of OAR Article II. c. You must include provisions that enable you to comply with the requirements of Section D of OAR Article II concerning records for joint or long-term use. d. You must include provisions that establish the same rights and responsibilities for the subrecipient under the subaward that Section E of OAR Article II establishes for you under this award. e. You may not impose any other record retention or access requirements on the subrecipient. 2. If the subaward is to a for-profit entity, you must include the records retention and access provisions of 32 CFR 34.42. Section D. Remedies and termination. The terms and conditions of each subaward you make under this award should specify your rights and responsibilities and those of the subrecipient if you take a remedial action to address a subrecipient’s noncompliance with an applicable Federal statute or regulation or the terms and conditions of your subaward. Each subaward’s terms and conditions should: 1. Identify remedial actions you may take to address the subrecipient’s noncompliance. Available remedies are described in: a. OMB guidance in 2 CFR 200.338 for a subaward to an institution of higher education, nonprofit organization, State, local government, or Indian tribe; and b. 32 CFR 34.52 for a subaward to a forprofit entity. 2. With respect to termination specifically: a. Identify conditions under which you, the subrecipient, or both (by mutual agreement) may terminate the subaward, in whole or in part, as described in: i. OMB guidance in 2 CFR 200.339(a) for a subaward to an institution of higher education, nonprofit organization, State, local government, or Indian tribe; and ii. 32 CFR 34.51 for a subaward to a forprofit entity. b. Inform the subrecipient that you will provide it with a notice of termination if you unilaterally terminate the award. c. Specify that you and the subrecipient remain responsible for applicable requirements addressed in Sections G and H of this article concerning closeout, postcloseout adjustments, and continuing responsibilities. 3. With respect to either suspension or termination of the subaward, inform the subrecipient about the criteria that you will use to either allow or disallow subaward costs, which are in: a. Section C of OAR Article III for a subaward to an institution of higher education, nonprofit organization, State, local government, or Indian tribe; and b. 32 CFR 34.52(c) for a subaward to a forprofit entity. Section E. Disputes, hearings, and appeals. Each subaward’s terms and conditions should specify any rights the subrecipient has to a hearing, appeal, or other administrative proceeding if it disputes a PO 00000 Frm 00085 Fmt 4701 Sfmt 4702 78439 decision you render in administering its subaward. You must comply with any statute or regulation that affords the subrecipient an opportunity for a hearing, appeal, or other administrative proceeding and is applicable to the dispute. Section F. Collection of amounts due. Although your subaward terms and conditions do not need to include any of the requirements of OAR Article V because those requirements do not flow down to subrecipients, you should consider including provisions to specify what you would need from the subrecipient if you owed a debt to the Government under this award that is related to its subaward. Section G. Closeout. 1. In each subaward that you make to an institution of higher education, nonprofit organization, State, local government, or Indian tribe, you must include provisions to require the subrecipient to: a. Liquidate all obligations that it incurred under the subaward not later than 90 calendar days after the end date of the period of performance of either the subaward or this award, whichever is earlier, unless you grant an extension. b. Promptly refund to you any balances of unobligated cash that you advanced or paid to the subrecipient, unless you received authorization from the DoD award administration office for the subrecipient’s use of those funds on other projects or programs. c. Submit to you: i. Any information you need from the subrecipient to meet your responsibilities to us for an accounting of property, under Section D of OAR Article VI; and ii. Not later than 90 calendar days after the end date of the period of performance of this award, unless you grant the subrecipient an extension, any information you need to meet your responsibilities to us for final reports, under Section C of OAR Article VI. 2. In each subaward that you make to a forprofit entity, you must include the terms and conditions that you deem necessary for you to be able to comply with the requirements in OAR Article VI. Section H. Post-closeout adjustments and continuing responsibilities. You must include provisions in each subaward to require the subrecipient to provide what you need in order to comply with the requirements of OAR Article VII. Appendix I to Part 1138—Terms and Conditions for SUB Article IX, ‘‘National Policy Requirements for Subawards’’ DoD Components must use the following standard wording in SUB Article IX in accordance with § 1138.905 of this part: SUB Article IX. National Policy Requirements for Subawards. (December 2014) Section A. General. 1. You must include provisions in the terms and conditions of each subaward you make to require the subrecipient entity’s compliance with each of the national policy requirements in Sections B through E of this article that you determine is applicable, E:\FR\FM\07NOP2.SGM 07NOP2 78440 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules given the type of entity receiving the subaward and activities it will be carrying out under the subaward. 2. If an entity to which you are about to make a subaward will not accept an award provision requiring its compliance with a national policy requirement that you determine to be applicable, you must alert the award administration office immediately. You may not omit an applicable national policy requirement in order to make the subaward. 3. If at any time during the performance of a subaward, you learn that—-or receive a credible allegation that—-the subrecipient is not complying with an applicable national policy requirement, you must alert the award administration office immediately. Section B. Nondiscrimination national policy requirements. You must include provisions in each subaward to require the subrecipient’s compliance with the nondiscrimination national policy requirements specified in paragraphs A.1 through A.5 of NP Article I, as applicable. Section C. Environmental national policy requirements. You must include provisions in each subaward to require that: 1. The subrecipient comply with all applicable Federal environmental laws and regulations, including those specified in paragraph A.2, A.3, A.5, and A.6 of NP Article II, as applicable. 2. Provide any information you need, when you need it, in order to comply with the requirement to immediately notify us of potential environmental impacts specified in paragraph A.4, A.5, and A.6 of NP Article II, as applicable, due to activities under the award (which includes subaward activities). Section D. National policy requirements concerning live organisms. You must include provisions in each subaward to require the subrecipient’s compliance with the national policy requirements concerning human subjects and animals that are specified in paragraphs A.1 and A.2 of NP Article III, as applicable. Section E. Other national policy requirements. You must include provisions in each subaward to require the subrecipient’s compliance with the national policy requirements in the following portions of NP Article IV of this award, as applicable: 1. Paragraph A.1. 2. Paragraphs A.3.a and b. 3. Paragraphs A.4 through A.17. sradovich on DSK3GMQ082PROD with PROPOSALS2 Appendix J to Part 1138—Terms and Conditions for SUB Article X, ‘‘Subrecipient Monitoring and Other Post-Award Administration’’ DoD Components must use the following standard wording in SUB Article X in accordance with § 1138.1005 of this part: SUB Article X. Subrecipient Monitoring and Other Post-Award Administration. (December 2014) Section A. General requirement for subrecipient monitoring. You must do the post-award monitoring of the subrecipient’s activities under each subaward that is needed in order for you to ensure that: VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 1. The subrecipient carries out the portion of the substantive project or program under this award. 2. The subrecipient is using project funds under the subaward (including any cost sharing or matching the subrecipient provides that is counted as project funds in the approved budget of this award) for authorized purposes. 3. The subrecipient’s performance under the subaward is in compliance with applicable Federal statutes and regulations, and the terms and conditions of your subaward. Section B. Subrecipient monitoring actions. 1. Required monitoring actions. You must, as part of your post-award monitoring of each subrecipient: a. Review the financial and programmatic information that your subaward terms and conditions require the subrecipient to provide, in accordance with Sections B and C of SUB Article VII of this award. b. Follow up and ensure that the subrecipient takes timely and appropriate action to remedy deficiencies detected through any means, including audits and onsite reviews. c. With respect to audits of subrecipients that are required under FMS Article V of this award: i. Verify that the subrecipient is audited in accordance with those requirements, as applicable (note that Section F of SUB Article IV requires you to include those audit requirements for the subrecipient in the subaward’s terms and conditions). ii. Resolve and issue a management decision for audit findings that pertain to your subaward. Doing so is a requirement under either Section A or B of FMS Article V of this award (Section B requires that explicitly and Section A does so by implementing OMB guidance in 2 CFR 200.521, as well as other portions of subpart F of that part). iii. Consider whether you need to adjust your own records related to this award based on results of audits, on-site reviews or other monitoring of the subrecipient and, as applicable, notify the award administration office. 2. Other monitoring actions. OMB guidance in 2 CFR 200.331(e)(1) through (3) describes other actions that may be useful as part of your subrecipient monitoring program, depending on the outcomes of the pre-award risk assessment you conducted in accordance with Section B of SUB Article II. Section C. Remedies and subaward suspension or termination. With respect to any subaward under this award, you must: 1. Consider whether you need to take any remedial action if you determine that the subrecipient is noncompliant with an applicable Federal statute or regulation or the terms and conditions of your subaward, as described in Section D of SUB Article VIII. 2. Provide a notice of termination to the subrecipient if you terminate its subaward unilaterally for any reason prior to the end of the period of performance. 3. In the case of either suspension or termination of a subaward prior to the end of the period of performance, allow or disallow subaward costs in accordance with Section C of OAR Article III. PO 00000 Frm 00086 Fmt 4701 Sfmt 4702 Section D. Subaward closeout. 1. You will close out each subaward when you either: a. Determine that the subrecipient has completed its programmatic performance under the subaward and all applicable administrative actions; or b. Terminate the subaward, if you do so prior to completion of the subrecipient’s programmatic performance. 2. With respect to the closeout of each subaward: a. You must pay the subrecipient promptly for allowable and reimbursable costs. b. Consistent with the terms and conditions of the subaward, you must make a settlement for any upward or downward adjustments to the Federal share of costs after you receive the information you need from the subrecipient to close out the subaward. c. You should complete the closeout of the subaward no later than one year after you receive and accept the final reports and other information from the subrecipient that you need to close out the subaward. Appendix K to Part 1138—Terms and Conditions for SUB Article XI, ‘‘Requirements Concerning Subrecipients’ Lower-Tier Subawards’’ DoD Components must use the following standard wording in SUB Article XI in accordance with § 1138.1105 of this part: SUB Article XI. Requirements Concerning Subrecipients’ Lower-Tier Subawards. (December 2014) Section A. Purpose. This article specifies requirements you must include in any costtype subaward under which you determine that the subrecipient of your subaward may make lower-tier cost-type subawards to other entities. Section B. Requirements for lower-tier subawards. Your cost-type subaward terms and conditions must require your subrecipient, with respect to each lower-tier cost-type subaward that it makes, to: 1. Ensure that the lower-tier transaction is a subaward, rather than a procurement, by making the determination that SUB Article I of this award requires you to make for your subawards. 2. Conduct the pre-award risk assessment of its intended subrecipient that Section B of SUB Article II of this award requires you to make for your subawards. 3. Include in any cost-type subaward it makes at the next tier: a. The informational content that SUB Article III specifies; b. The administrative requirements that SUB Articles IV through VIII of this award specify; c. The national policy requirements that SUB Article IX of this award specifies, as applicable; and d. The requirements of this article if the next-tier subrecipient may make even lowertier cost-type subawards to other entities. 4. Carry out the subrecipient monitoring and other post-award administration responsibilities specified in SUB Article X of this award. E:\FR\FM\07NOP2.SGM 07NOP2 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules Appendix L to Part 1138—Terms and Conditions for SUB Article XII, ‘‘FixedAmount Subawards’’ sradovich on DSK3GMQ082PROD with PROPOSALS2 DoD Components must use the following standard wording in SUB Article XII in accordance with § 1138.1205 of this part: SUB Article XII. Fixed-Amount Subawards. (December 2014) Section A. Limitations on use. 1. You may not use a fixed-amount subaward: a. If the total value over the life of the subaward will exceed the simplified acquisition threshold. b. Unless the project or program scope is specific, with definite outcomes, and you are able to establish a reasonable estimate of the actual costs of accomplishing those outcomes. c. If you will predetermine a set amount or percentage of cost sharing or matching that the subrecipient must provide under the subaward. d. If the subrecipient will acquire any real property or equipment under the subaward. 2. For fixed-amount subawards not prohibited by paragraph 1 of this section and except as provided in Section B of this article, you must obtain our prior approval before making a fixed-amount type of subaward. a. If Section B of FMS Article IV requires you to obtain our prior approval before you make any subaward, and you do not identify the subaward as a fixed-amount subaward when you obtain that approval, then you must subsequently request separate approval before awarding it as a fixed-amount type of subaward. b. If a subaward is identified as a fixedamount type of subaward in the budget you submit for our approval, then our approval of the budget is the required prior approval. Section B. Fixed-amount subawards that do not require prior approval. You are not required to obtain our prior approval before using a fixed-amount type of subaward if: 1. The subaward is to either: a. A foreign public entity; or b. An organizational unit of a foreign organization, if that unit does not have a place of business in the United States, regardless of whether another organizational unit of that foreign organization has one. 2. You determine that the portion of the project or program under this award which the subrecipient will be carrying out under the subaward has one or more specific outcomes with the following characteristics: a. You can define the outcomes well enough to specify them at the time you make the subaward. Note that: i. Outcomes are distinct from inputs needed to achieve the outcomes, such as amounts or percentages of time that subrecipient employees or other participants will spend on the project or program. ii. The inherently unpredictable nature of basic or applied research makes it rarely, if ever, possible to define specific research outcomes in advance, which makes fixedamount subawards inappropriate for research. Note that technical performance reports serve to document research outcomes VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 but are not themselves outcomes, notwithstanding the definition of ‘‘performance goals’’ in OMB guidance at 2 CFR 200.76. b. The accomplishment of each outcome will be observable and verifiable by you when it occurs, so that you will not need to rely solely on the subrecipient’s assurance of that accomplishment. c. The subrecipient associates its projected costs with outcomes in the proposal it submits to you, and you are confident that the costs of accomplishment of the outcomes will equal or exceed the subaward amount. This requires either that you have a high degree of confidence: i. In your estimate of the costs associated with accomplishing the well-defined and observable outcomes, based on the prospective subrecipient’s proposal (and using the applicable cost principles in FMS Article III as a guide); or ii. That those costs will be within a finite range, rather than a specific amount, so that you may provide an amount of funding under the subaward that does not exceed the lower end of the range, with the provision that the subrecipient agrees to provide any balance above that amount that ultimately is needed to accomplish the outcomes. Your subaward then would include a term or condition to reflect the subrecipient’s agreement to provide that balance (which would be in an amount to be post-determined, when the outcomes are accomplished). Note that this is distinct from a situation in which you predetermine a set amount or percentage of cost sharing or matching that the subrecipient must provide under its subaward, a situation in which paragraph A.1.c of this article prohibits use of a fixedamount subaward. 3. a. The subaward is based on a fixed rate per unit of outcome (or ‘‘unit cost’’) and you have both the confidence: i. That is described in paragraph B.2.c of this article in the estimated costs associated with each unit of outcome; and ii. In the subrecipient’s guarantee that it can accomplish at least the number of units of outcome on which your total subaward amount will be based (i.e., the product of the unit cost and the number of units of outcome the subrecipient guarantees to accomplish). b. Note, however, that not every fixed rate subaward is also a fixed-amount subaward. If you have confidence in the unit cost but not also in the subrecipient’s ability to guarantee the number of units of outcome that it will accomplish, then you should set a not-toexceed award amount based on the number of units desired and reduce the subaward amount at the end if the subrecipient accomplishes fewer than that number. Examples of activities for which it may be appropriate to award this type of fixed rate subaward that is not a fixed-amount subaward include: i. A clinical trial for which the unit cost is the cost of treating each participant. The not-to-exceed amount would be based on the number of participants the subrecipient planned to recruit and the final award on the number who actually participated, documentation for which would be subject to audit. PO 00000 Frm 00087 Fmt 4701 Sfmt 4702 78441 ii. Labor costs for performance of a portion of the project or program under this award by a firm that treats its indirect cost rate as proprietary information. The unit cost in that case may be ‘‘loaded’’ labor rates for the firm’s employees that include indirect costs. The final award amount would depend on the number of labor hours the firm’s employees expended under the subaward, documentation for which may be audited without exposing proprietary details associated with the actual costs. Section C. Informational content of fixedamount subawards. You must include in each fixed-amount subaward the informational content, other than the indirect cost rate, that is described in SUB Article III of this award. Section D. Terms and conditions addressing administrative requirements. 1. General. This section: a. Specifies the minimum set of terms and conditions (in lieu of the more extensive set specified in SUB Articles IV through X for cost-type subawards) addressing administrative requirements that you must include in each fixed-amount subaward: i. To an entity other than a foreign organization, as applicable; and ii. To the maximum extent practicable, to a foreign organization. b. Does not preclude the inclusion of other requirements that you need in order to meet your responsibilities under this award for performance of the project or program and compliance with applicable administrative and national policy requirements. 2. Financial and program management requirements. a. Financial management system standards. For a subaward to other than a forprofit entity, your subaward must require the subrecipient to include the information specified in paragraph B.1 of FMS Article I in its financial management system, for the purposes of the non-federal audits required by paragraph 2.d of this section. b. Payments. Your payments must be based on accomplishment of the outcomes and associated costs that you used to establish the award amount, rather than on subrecipient expenditures for project or program purposes. Milestone payments before the end of the subaward’s period of performance may be appropriate if there are outcomes that the subrecipient will accomplish at different times during that period. c. Revision of budget and program plans. If our prior approval was required under paragraph A.2 of this article for use of a fixed-amount type of subaward, then you must: i. Request our prior approval for any change in scope or objective of the subaward; and ii. Therefore include a requirement in the subaward for the subrecipient to request that approval through you. d. Non-federal audits. You must include the requirement for non-Federal audits described in Section F of SUB Article IV. The audits are intended to focus on compliance with the performance requirements in the subaward terms and conditions and not to review actual costs as they would for a costtype subaward. E:\FR\FM\07NOP2.SGM 07NOP2 sradovich on DSK3GMQ082PROD with PROPOSALS2 78442 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Proposed Rules 3. Property requirements. a. Federally owned property. If the subrecipient will be accountable for federally owned property, you must include the property management system, use, and disposition requirements described in Sections C and F of SUB Article V that are applicable to federally owned property. b. Intangible property. You must include the applicable intangible property requirements described in Section G of SUB Article V. 4. Reporting requirements. You must include requirements for reporting that you need in order to meet your responsibilities under this award for reporting to us. 5. Other administrative requirements. a. Integrity-related information. You must include the substance of the provision in Section C of OAR Article I in any subaward you make under this award. The provision must require the subrecipient’s disclosure of any evidence directly to the Inspector General, DoD. b. Records retention and access. i. You must include the requirements for records retention and access in paragraph A.3 and Sections B and F of OAR Article II, as applicable, if the subaward is to an institution of higher education, nonprofit organization, State, local government, or Indian tribe. You may not impose any other records retention or access requirements on the subrecipient. ii. You must include the corresponding requirements of 32 CFR 34.42 if the subaward is to a for-profit entity. c. Remedies and termination. You must include: i. The requirements concerning remedies and termination that are described in paragraphs D.1 and 2 of SUB Article VIII; ii. Provisions addressing any hearing and appeal rights the subrecipient has, as described in Section E of SUB Article VIII; and iii. Terms and conditions addressing adjustment of the amount of the subaward if it is terminated before the subrecipient accomplishes all of the specified outcomes. d. Continuing responsibilities. You must include requirements concerning continuing responsibilities for audits and records retention and access that are described in paragraphs B.1 and 3 of OAR Article VII. e. Collection of amounts due. You should consider including requirements concerning collection of amounts due, as described in Section F of SUB Article VIII. Section E. National policy requirements for fixed-amount subawards. You must include in the terms and conditions of each fixedamount subaward the national policy requirements that SUB Article IX of this award specifies, as applicable. Section F. Subrecipient monitoring and other post-award administration. You must carry out the subrecipient monitoring and post-award administration actions specified in SUB Article X, as applicable. Section G. Fixed-amount subawards at lower tiers. 1. Authority. a. If Section B of this article authorizes you to use a fixed-amount type of subaward without our prior approval in some VerDate Sep<11>2014 19:05 Nov 04, 2016 Jkt 241001 situations, a cost-type subaward that you make may authorize the subrecipient to use fixed-amount subawards at the next lower tier in those same situations without our prior approval. b. If you wish to allow a subrecipient of a cost-type subaward to use fixed-amount subawards at the next tier in other situations (i.e., situations in which this article requires you to obtain our prior approval before using a fixed-amount type of subaward), your subaward terms and conditions must require the subrecipient to submit a request through you to obtain our prior approval for use of that type of subaward. 2. Subaward requirements. If your subrecipient is authorized to use lower-tier fixed-amount subawards, as described in paragraphs 1.a and b of this section, your subaward’s terms and conditions must: a. Require the subrecipient, before it makes any lower-tier fixed-amount subaward, to: i. Ensure that the lower-tier transaction is a subaward, rather than a procurement, by making the determination that SUB Article I of this award requires you to make for your subawards. ii. Conduct the pre-award risk assessment of its intended subrecipient that Section B of SUB Article II of this award requires you to make for your subawards. b. Include the requirements specified in Sections A through F of this article. Dated: October 19, 2016. Aaron Siegel, Alternate OSD Federal Register Liaison Officer, Department of Defense. [FR Doc. 2016–25701 Filed 11–4–16; 8:45 am] BILLING CODE 5001–06–P I. Executive Summary DEPARTMENT OF DEFENSE A. Purpose of the Regulatory Action Office of the Secretary 32 CFR Parts 21, 22, 32, 33, 34, and 37 [DOD–2016–OS–0055] RIN 0790–AJ50 DoD Grant and Agreement Regulations Office of the Secretary, DoD. Proposed rule. AGENCY: ACTION: This notice of proposed rulemaking (NPRM) is the last in a sequence of six NPRM documents in this Federal Register that collectively establishes for DoD grants and cooperative agreements an updated interim implementation of Governmentwide guidance on administrative requirements, cost principles, and audit requirements for Federal awards and make other needed updates to the DoD Grant and Agreement Regulations (DoDGARs). This NPRM removes two existing DoDGARs parts and revises four others in order to conform them with the 11 parts of the DoDGARs proposed in the SUMMARY: PO 00000 Frm 00088 Fmt 4701 Sfmt 4702 NPRMs preceding this one in this section of this Federal Register. DATES: To ensure that they can be considered in developing the final rule, comments must be received at either the Web site or mailing address indicated below by February 6, 2017. ADDRESSES: You may submit comments identified by docket number, or by Regulatory Information Number (RIN) and title, by either of the following methods: The Web site: http:// www.regulations.gov. Follow the instructions at that site for submitting comments. Mail: Department of Defense, Deputy Chief Management Officer, Directorate for Oversight and Compliance, 4800 Mark Center Drive, ATTN: Box 24, Alexandria, VA 22350–1700. Instructions: All submissions received must include the agency name and docket number or RIN for this Federal Register document. The general policy for comments and other submissions from the public is to make the submissions available for public viewing on the Internet at http:// www.regulations.gov without change (i.e., as they are received, including any personal identifiers or contact information). FOR FURTHER INFORMATION CONTACT: Wade Wargo, Basic Research Office, telephone 571–372–2941. SUPPLEMENTARY INFORMATION: 1. The Need for the Regulatory Action and how the Action Meets That Need As explained in the Supplementary Information section of the first of the sequence of six NPRMs in this section of this Federal Register, these NPRMs collectively make a major portion of the updates to the Department of Defense Grant and Agreement Regulations (DoDGARs) that are needed in order to implement OMB guidance at 2 CFR part 200 and for other purposes. The first five NPRMs in the sequence propose eleven new DoDGARs parts located in chapter XI of title 2 of the Code of Federal Regulations (CFR), which will ultimately be the location in the CFR for all of the DoDGARs. This sixth and final NPRM in the sequence proposes conforming changes to the portion of the DoDGARs that will remain for an interim period in subchapter C of chapter I of title 32 of the CFR, which is where all of the DoDGARs were originally located. A second round of DoDGARs updates to be proposed for comment in the future will relocate the E:\FR\FM\07NOP2.SGM 07NOP2

Agencies

[Federal Register Volume 81, Number 215 (Monday, November 7, 2016)]
[Proposed Rules]
[Pages 78382-78442]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25701]


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DEPARTMENT OF DEFENSE

Office of the Secretary

2 CFR Parts 1126, 1128, 1130, 1132, 1134, 1136, and 1138

[DOD-2016-OS-0054]
RIN 0790-AJ49


Administrative Requirements Terms and Conditions for Cost-Type 
Awards to Nonprofit and Governmental Entities

AGENCY: Office of the Secretary of Defense, DoD.

ACTION: Proposed rule.

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SUMMARY: This notice of proposed rulemaking (NPRM) is the third of a 
sequence of six NPRM documents in this section of this issue of the 
Federal Register that propose updates to the Department of Defense 
Grant and Agreement Regulations (DoDGARs). This NPRM proposes to add 
seven new DoDGARs parts to address the administrative requirements 
included in general terms and conditions of DoD cost-type grants and 
cooperative agreements awarded to institutions of higher education, 
nonprofit organizations, States, local governments, and Indian tribes. 
The administrative requirements are in areas such as financial and 
program management; property administration; recipient procurement 
procedures; financial, programmatic, and property reporting; and 
subawards. The proposed new parts establish a uniform way for 
approximately 100 DoD Component awarding offices to organize the 
administrative requirements in their general terms and conditions. The 
proposed new parts also provide standard wording of terms and 
conditions for the administrative requirements, with associated 
regulatory prescriptions for DoD Components to provide latitude to vary 
from the standard wording where variation is appropriate.

DATES: To ensure that they can be considered in developing the final 
rule, comments must be received at either the Web site or mailing 
address indicated below by February 6, 2017.

ADDRESSES: You may submit comments identified by docket number, or by 
Regulatory Information Number (RIN) and title, by either of the 
following methods:
    The Web site: http://www.regulations.gov. Follow the instructions 
at that site for submitting comments.
    Mail: Department of Defense, Deputy Chief Management Officer, 
Directorate for Oversight and Compliance, 4800 Mark Center Drive, ATTN: 
Box 24, Alexandria, VA 22350-1700.
    Instructions: All submissions must include the agency name and 
docket number or RIN for this Federal Register document. The general 
policy for comments and other submissions from the public is to make 
the submissions available for public viewing on the Internet at http://www.regulations.gov without change (i.e., as they are received, 
including any personal identifiers or contact information).

FOR FURTHER INFORMATION CONTACT: Wade Wargo, Basic Research Office, 
telephone 571-372-2941.

SUPPLEMENTARY INFORMATION: 

I. Executive Summary

A. Purpose of the Regulatory Action

1. The Need for the Regulatory Action and How the Action Meets That 
Need
    The Department of Defense Grant and Agreement Regulations (DoDGARs) 
implement statutes and Governmentwide guidance for grants and 
cooperative agreements, as needed in order to ensure that DoD Component 
offices make and administer assistance awards consistently with agency 
policy. They are in need of updating, in part due to the issuance of 
new Office of Management and Budget guidance to Federal agencies on 
administrative requirements, cost principles, and audit requirements 
that apply to Federal grants, cooperative agreements, and other 
assistance instruments (2 CFR part 200). This NPRM provides a major 
portion of the implementation of that guidance, by addressing the 
administrative requirements to be included in general terms and 
conditions of DoD Components' awards to institutions of higher 
education, nonprofit organizations, States, local governments, and 
Indian tribes.
2. Legal Authorities for the Regulatory Action
    There are two statutory authorities for this NPRM:
     10 U.S.C. 113, which establishes the Secretary of Defense 
as the head of the Department of Defense; and
     5 U.S.C. 301, which authorizes the head of an Executive 
department to prescribe regulations for the governance of that 
department and the performance of its business.

B. Summary of the Major Provisions of the Regulatory Action

    This NPRM establishes seven new DoDGARs parts that collectively 
govern a DoD Component's construction of the administrative 
requirements portion of

[[Page 78383]]

its general terms and conditions for awards to institutions of higher 
education, nonprofit organizations, States, local governments, and 
Indian tribes. The seven proposed new parts comprise a subchapter of 
the DoDGARs--Subchapter D in Chapter XI of 2 CFR.
    The first of the proposed parts in the subchapter, 2 CFR part 1126, 
provides an overview of the subchapter's content. In addition to 
addressing the purpose and applicability, the overview part describes 
what the subchapter's remaining six parts address and how they are 
organized. Section II.B of this Supplementary Information section 
describes the overview part 1126 in more detail.
    Each of the subchapter's other six parts provides both: (1) 
Standard wording for articles of general terms and conditions 
specifying requirements for recipients and subrecipients within a given 
subject matter area; and (2) the associated direction to DoD Components 
on the use of the standard wording for those articles. Those six parts 
are described more fully in sections II.C through II.H of this 
Supplementary Information section.

C. Costs and Benefits

    The major benefit of this NPRM is greatly increased uniformity 
across the Department in administrative requirements included in DoD 
grant and cooperative agreement awards each year to institutions of 
higher education, nonprofit organizations, States, local governments, 
and Indian tribes. Uniformity helps to lessen administrative burdens 
and costs for recipients, thereby increasing the productivity of 
programs supported by DoD assistance awards. This regulatory action 
takes a major step in that direction by proposing to establish a 
standard organization and more uniform wording for administrative 
requirements included in general terms and conditions of more than 
15,000 award actions totaling $4 to $6 billion each year that are 
issued:
     By approximately 100 offices in the Departments of the 
Army, Navy, and Air Force and 11 other DoD Components that are located 
across the United States and elsewhere.
     Under a variety of programs and to diverse types of 
recipients. Institutions of higher education receive more than half of 
the awards, including many awards that support defense research. There 
also are thousands of awards to other types of recipients and for other 
defense purposes, such as support to States for the National Guard and 
economic assistance to communities impacted by defense downsizing or 
costs associated with education of military dependents.
    The administrative burdens and associated costs to recipients due 
to the regulatory action proposed in this NPRM are primarily those 
resulting from the Governmentwide guidance to agencies that OMB issued 
in 2 CFR part 200. Some variations from the guidance noted in sections 
II.C through II.H of this Supplementary Information section could cause 
a relatively small increase in burdens, while others reduce burdens and 
costs. The Department invites input on any area in which potential 
recipients of DoD awards perceive an increase in burden relative to the 
OMB guidance that is not justified by the commensurate value of an 
improvement in DoD's ability to carry out its responsibilities for good 
stewardship of Federal taxpayers' dollars.

II. General Background and Detailed Overview of the DoDGARs Parts 
Proposed in This NPRM

A. General Background

    The first and second NPRMs in the sequence of six notices in this 
section of this issue of the Federal Register (i.e., the two NPRMs 
preceding this one) provide additional context pertinent to the seven 
DoDGARs parts proposed in this NPRM. In particular, the NPRM 
immediately preceding this one proposes a new DoDGARs part that 
establishes a standard award format for DoD Components' grants and 
cooperative agreements. That format has three major elements, the third 
of which is the general terms and conditions that address 
administrative requirements, national policy requirements, and 
programmatic requirements.
    This notice proposes seven DoDGARs parts that establish a standard 
organization and content for the administrative requirements portion of 
the general terms and conditions in awards to institutions of higher 
education, nonprofit organizations, States, local governments, and 
Indian tribes. Those are the types of recipient entities addressed by 
the OMB guidance to Federal agencies on administrative requirements, 
cost principles, and audit requirements that is in 2 CFR part 200. 
Therefore, the seven new DoDGARs parts proposed in this notice also 
comprise the proposed DoD implementation of that guidance as it applies 
to general terms and conditions.
    The seven new parts proposed in this notice are in Subchapter D of 
Chapter XI in title 2 of the Code of Federal Regulations (note that the 
first of the six NPRMs in this section of this issue of the Federal 
Register proposed the establishment of that subchapter). The first of 
the parts proposed in this notice, 2 CFR part 1126, provides an 
overview of Subchapter D. Each of the other proposed parts (2 CFR parts 
1128, 1130, 1132, 1134, 1136, and 1138) addresses the organization and 
content of general terms and conditions for one segment of the 
administrative requirements, such as property administration or 
recipient procurement procedures.
    Each of the proposed parts 1128, 1130, 1132, 1134, 1136, and 1138 
is organized into subparts and appendices. The appendix to each 
proposed part provides standard wording of general terms and conditions 
for one article of general terms and conditions. For each appendix 
addressing a particular article, the proposed part has an associated 
subpart that provides the prescription for DoD Components' use of the 
standard wording for that article. The subpart associated with each 
article identifies the portions of the OMB guidance in 2 CFR part 200 
that the article implements, as those portions of the guidance apply to 
general terms and conditions. For example:
     Appendix D to the proposed 2 CFR part 1128 contains 
standard wording of an article of general terms and conditions 
addressing revisions of budget and program plans under awards; and
     The corresponding Subpart D of that proposed part: (1) 
Contains the prescription for DoD Components' use of the standard 
wording in appendix D when constructing that article of their general 
terms and conditions; and (2) in section 1128.400, lists the portions 
of the OMB guidance that the article implements.
    Organizing the proposed parts 2 CFR 1128 through 1138 in that 
manner more clearly differentiates requirements for recipients from 
those for DoD awarding officials or administering officials than the 
DoDGARs have done previously. In the past, it was not unusual for a 
DoDGARs paragraph on administrative requirements to include 
requirements for both DoD Components and recipients, which made it more 
difficult for each intended audience to determine what the regulations 
required of them. For example, DoDGARs requirements on revisions to 
budget and program plans for both DoD Components and institutions of 
higher education or nonprofit recipients were interwoven in section 
32.25 of 32 CFR part 32 (the now-superseded DoD implementation of OMB 
Circular A-110). With the organization of the content in the proposed 
parts 2 CFR 1128 through 1138, requirements for DoD Component

[[Page 78384]]

officials are in the subparts of the parts and therefore separate from 
requirements for recipients, which are communicated through award terms 
and conditions based on the standard wording in the appendices to the 
parts. That organization should make it easier for all affected parties 
to understand the applicable requirements and, therefore, to comply 
with them.
    Three other features of the proposed parts with standard wording of 
general terms and conditions are designed to further promote ease of 
understanding for those who need to use and comply with them.
     The proposed standard wording is in plain language, with 
use of personal pronouns such as ``you'' to denote the recipient and 
``we'' to mean the Federal Government. Use of personal pronouns is a 
recognized means to help a reader better relate to words addressed to 
him or her and, in the case of regulations, more likely understand his 
or her responsibilities.
     The proposed organization of administrative requirements 
reflects a conscious attempt to promote clarity by grouping 
requirements into 39 articles of general terms and conditions that 
present the subject matter in the most coherent manner possible. For 
example, the consolidation of requirements related to subawards in 
twelve articles within the proposed 2 CFR part 1138 is intended to 
simplify a recipient's task of determining which requirements of the 
prime award flow down to subrecipients.
     The proposed establishment of the standard wording in the 
appendices to parts in the Code of Federal Regulations enables a DoD 
Component to construct the administrative requirements portion of its 
general terms and conditions by: (1) Incorporating the standard wording 
of each article by reference; and (2) stating any variations it has 
from the standard wording of that article. Section 1120.515 in the 
proposed 2 CFR part 1120--the part that establishes a standard award 
format (see the NPRM immediately preceding this one in this section of 
this issue of the Federal Register)--strongly encourages DoD Components 
to use this method in their general terms and conditions, rather than 
including the full text of each article. Incorporating the standard 
wording by reference to the CFR should allow a recipient that receives 
awards from multiple DoD Component awarding offices to quickly identify 
how each office's general terms and conditions vary from the DoD 
standard wording.
    It should be noted that the seven parts proposed in this NPRM do 
not address administrative requirements for DoD Components' fixed-
amount awards, as described in OMB guidance at 2 CFR 200.201. Fixed-
amount DoD awards will be addressed by DoDGARs rules to be proposed in 
the future. To the extent that DoD Components permit recipients or 
subrecipients to make fixed-amount subawards at lower tiers below cost-
type prime awards and subawards, however, the proposed 2 CFR part 1138 
includes requirements for those fixed-amount subawards (an overview of 
that proposed part is in section II.H of this Supplementary Information 
section).
    The remainder of this Supplementary Information section provides 
overviews of the seven new DoDGARs parts proposed in this NPRM. 
Specifically, sections II.B through H address the proposed 2 CFR parts 
1126 through 1138, respectively.

B. Proposed Part 1126--Subchapter D Overview

    The proposed 2 CFR part 1126 provides an overview of Subchapter D 
of chapter XI, title 2 of the CFR. Specifically, it:
     Provides general information about the purposes of the 
subchapter.
     Specifies the applicability of the subchapter. It states 
that the subchapter: (1) Directly applies to DoD Components; and (2) 
only indirectly applies to recipients through its regulation of DoD 
Components' construction of the administrative requirements portion of 
their general terms and conditions for cost-type grant and cooperative 
agreement awards to institutions of higher education, nonprofit 
organizations, States, local governments, and Indian tribes.
     Specifies the conditions under which exceptions from the 
provisions of the subchapter are permitted. The only provision that 
varies from the conditions for exceptions included in OMB guidance to 
agencies, at 2 CFR 200.102, is a provision allowing exceptions for 
small awards. This continues a policy included in DoD's interim 
implementation of the OMB guidance at 2 CFR part 1103, which it 
published in the Federal Register on December 19, 2014 [79 FR 76047], 
and broadens it to include small awards to States, local governments, 
and Indian tribes.
     Acknowledges the complementary relationship between the 
parts of the subchapter and two other DoDGARs parts that specify 
administrative requirements for grant and cooperative agreement awards 
to for-profit entities and for Technology Investment Agreements.
     Provides, in the proposed section 1126.5, a table showing 
a high-level summary of the contents of the other six parts of the 
subchapter. The table lists each article of the administrative 
requirements portion of the general terms and conditions that is 
addressed in the subchapter.
     Describes how each of the other six parts of the 
subchapter is organized.

C. Proposed Part 1128--General Terms and Conditions on Financial and 
Program Management

    The proposed part 1128 addresses seven articles of general terms 
and conditions within the broad area of financial and program 
management. The seven articles are designated as FMS Articles I through 
VII of the general terms and conditions. The proposed standard wording 
for the articles is in the seven appendices to the proposed part 1128. 
The prescriptions to DoD Components for use of the standard wording of 
the articles are in the seven associated subparts of the part. The 
articles with their related prescriptions implement the financial and 
program management provisions of the OMB guidance in 2 CFR part 200, as 
that guidance applies to general award terms and conditions. The 
subjects covered by the seven articles (and the appendices and subparts 
containing the articles and associated prescriptions) are:
     Financial management system standards (in Subpart A and 
appendix A).
     Payments (in Subpart B and appendix B).
     Allowable costs, period of availability of funds, and fee 
or profit (in Subpart C and appendix C).
     Revision of budget and program plans (in Subpart D and 
appendix D).
     Non-Federal audits (in Subpart E and appendix E).
     Cost sharing or matching (in Subpart F and appendix F).
     Program income (in Subpart G and appendix G).
    The following subsections II.C.1 through 7 of this Supplementary 
Information section focus on whether and how the proposed 
implementation of the OMB guidance in each article and its associated 
prescription for DoD Components varies from, or clarifies, the related 
guidance.
1. Financial Management System Standards
    The proposed FMS Article I, ``Financial management system 
standards,'' and associated prescription includes no variations or 
clarifications relative to the portions of the OMB

[[Page 78385]]

guidance on financial management systems standards.
2. Payments
    The proposed FMS Article II, ``Payments,'' and associated 
prescription include one variation and one clarification relative to 
the guidance on payments:
     The variation is relative to OMB guidance at 2 CFR 
200.305(b)(3), which concerns the timing of awarding agency payments to 
recipients. The OMB guidance states that an awarding agency must make 
payment within 30 calendar days after receipt of the billing, unless 
the agency reasonably believes the request to be improper. The proposed 
prescription for DoD Components in 2 CFR 1128.215(c)(4) implements that 
guidance for general terms and conditions of construction awards that 
specify reimbursement as the payment method. That proposed prescription 
states that DoD generally makes, rather than ``must'' make, payment 
within 30 calendar days after receipt of the request. This continues 
existing DoD policy for awards to institutions of higher education and 
nonprofit organizations, which is cited at 2 CFR 1103.205 in DoD's 
interim implementation of the OMB guidance, and broadens the policy to 
States, local governments, and Indian tribes. Note that this proposed 
wording in FMS Article II is limited to the general terms and 
conditions of construction awards. For non-construction awards, the 
reimbursement method should be used only in award-specific terms and 
conditions because the general terms and conditions of those awards 
authorize recipients to request advance payments as long as they 
maintain, or demonstrate the willingness to maintain, written 
procedures to minimize the time elapsing between their receipt of each 
payment and disbursement of the funds for program purposes.
     The clarification relates to OMB guidance in 2 CFR 
200.305(b)(9), which states that a recipient may retain up to $500 per 
year in interest it earns on advance payments. The proposed paragraph 
B.6.d of FMS Article II, clarifies that the $500 limit applies to the 
aggregate amount of interest a recipient earns annually under all of 
its Federal grants and cooperative agreements and not separately to the 
amount it earns under each award.
3. Allowable Costs, Period of Availability of Funds, and Fee or Profit
    The proposed FMS Article III, ``Allowable costs,'' and associated 
prescription supplement the OMB guidance, as well as implement it, by 
providing a central source within the general terms and conditions for 
requirements on whether and when costs incurred by recipients, 
subrecipients, and contractors under awards and subawards are 
allowable. It also includes the long-standing DoDGARs policy on fee or 
profit. The proposed article includes one variation and two 
clarifications relative to the OMB guidance in 2 CFR 200.461 on the 
allowability of costs associated with professional journal 
publications:
     The variation is a specification in Section B of FMS 
Article III that costs of publishing in professional journals are 
allowable only if the recipient charges them consistently, either as 
direct or indirect costs. The purpose of this specification is to 
ensure that the Government does not pay more than its fair share of 
journal publication costs that are increasingly being addressed through 
charges that authors pay prior to publication. That can happen if an 
institution directly charges those payments for federally supported 
researchers to their Federal awards while including payments by other 
researchers in a pool of costs, a share of which the Government 
reimburses as indirect costs charged to Federal awards.
     The first clarification also is in Section B of the 
article and is intended to help avoid confusion that might result from 
the use of the wording ``cost of publication or sharing of research 
results'' in 2 CFR 200.461(b)(3). That wording could be interpreted to 
mean something broader than ``charges for professional journal 
publications,'' which is the wording in the lead-in 2 CFR 200.461(b) 
that should circumscribe the costs allowed under Sec.  200.461(b)(3).
     The other clarification is in paragraph C.3 of FMS Article 
III. It clarifies wording in 2 CFR 200.461(b)(3) indicating that a 
recipient may charge an award up to the time of closeout of the award 
for costs of publishing in professional journals that are incurred 
after the end of the period of performance. The proposed clarification 
provides that the recipient may charge those costs to an award if its 
request for payment of the costs is received no later than the date on 
which it submits its final financial report under the award. That 
clarification is needed because the closeout process relies on the 
final financial report being the ultimate statement of financial 
status. Any subsequent change in financial status due to incurrence of 
additional publication costs would disrupt the ongoing closeout process 
and create added burdens and costs for DoD's award administration 
office, which would have to require the recipient to submit a revised 
final report.
4. Revision of Budget and Program Plans
    The proposed FMS Article IV, ``Revision of budget and program 
plans,'' and associated prescription include no variations or 
clarifications relative to the guidance on changes in a recipient's 
budget and program plans.
5. Non-Federal Audits
    The proposed FMS Article V, ``Non-Federal audits,'' and associated 
prescription supplement, as well as implement, the OMB guidance by 
providing a central location within the general terms and conditions at 
which a recipient can find requirements for non-Federal audits of all 
types of recipients and subrecipients, including for-profit entities. 
The proposed article and prescription include no variations or 
clarifications relative to portions of the OMB guidance that they 
implement.
6. Cost Sharing or Matching
    The proposed FMS Article VI, ``Cost sharing or matching,'' and 
associated prescription include no variations or clarifications 
relative to the OMB guidance on cost sharing or matching. Paragraph E.2 
of the proposed article does refer to a clarification contained in 
another article of the general terms and conditions, PROP Article I. 
That clarification, which concerns the Federal interest in property 
donated to a project under an award, is addressed in the discussion of 
PROP Article I in subsection II.D.1 of this Supplementary Information 
section.
7. Program Income
    The prescription for DoD Components related to FMS Article VII, 
``Program Income,'' which is in subpart G of the proposed 2 CFR part 
1128, includes one clarification from the OMB guidance in 2 CFR part 
200. The prescription permits a DoD Component's general terms and 
conditions to specify a combination of the three alternatives that the 
OMB guidance identifies for recipients' use of program income--i.e., 
the additive, deductive, and cost sharing or matching alternatives. 
This is a clarification because the guidance in 2 CFR part 200 does not 
explicitly recognize that an award may use more than one of the three 
alternatives. This clarification provides continuity with previous 
Governmentwide and DoD policy that permitted use of more than one 
alternative. Specifically, use of a combination of alternatives was 
allowed for awards to:

[[Page 78386]]

     Institutions of higher education and other nonprofit 
organizations under OMB Circular A-110 and the associated DoD 
implementation in DoDGARs part 32 (32 CFR part 32).
     States, local governments, and Indian tribes under the 
Governmentwide common rule implementing OMB Circular A-102, which was 
adopted by DoD in DoDGARs part 33 (32 CFR part 33).

D. Proposed Part 1130--General Terms and Conditions on Property 
Administration

    The proposed part 1130 addresses six articles of general terms and 
conditions concerning property acquired by recipients under awards and 
federally owned property furnished to recipients by the Government. The 
articles are designated as PROP Articles I through VI of the general 
terms and conditions. The proposed standard wording for the articles is 
in appendices A through F to the proposed part. The prescriptions for 
DoD Components' use of the standard wording is in the associated 
Subparts A through F of the proposed part. The articles with their 
related prescriptions implement the property administration provisions 
of the OMB guidance in 2 CFR part 200, as that guidance pertains to 
general award terms and conditions. The subjects covered by the six 
articles (and the appendices and subparts containing the articles and 
associated prescriptions) are:

 Title to property (in Subpart A and appendix A)
 Recipients' property management systems (in Subpart B and 
appendix B)
 Use and disposition of real property (in Subpart C and 
appendix C)
 Use and disposition of equipment and supplies (in Subpart D 
and appendix D)
 Use and disposition of federally owned property (in Subpart E 
and appendix E)
 Intangible property (in Subpart F and appendix F)
    The following subsections II.D.1 through 6 of this Supplementary 
Information section focus on whether and how the proposed 
implementation of the guidance in each article and its associated 
prescription for DoD Components varies from, or clarifies, the related 
OMB guidance.
1. Title to Property
    The proposed PROP Article I, ``Title to property,'' and associated 
prescription implement portions of the OMB guidance that address title 
vesting and the property trust relationship. They implement the 
guidance with no variations.
2. Property Management System
    The proposed PROP Article II, ``Property management system,'' and 
associated prescription implement portions of the OMB guidance that 
specify the standards for a recipient's property management system. The 
proposed implementation includes one variation from the guidance.
    The one variation is the inclusion of property management system 
requirements for federally owned property. Although the OMB guidance in 
2 CFR part 200 does not explicitly address those management system 
requirements, they are needed to ensure proper stewardship of any 
federally owned property for which a recipient is accountable under an 
award. The requirements are included for States in Section B of the 
proposed PROP Article II and for institutions of higher education, 
nonprofit organizations, local governments, and Indian tribes in 
Section C of the proposed article. The requirements in the proposed 
PROP Article II continue long-standing DoD policy in the DoDGARs, for 
States under 32 CFR 33.32(f) and for other recipients under 32 CFR 
32.34(f). Those requirements also were included at 2 CFR 1103.201 in 
the interim DoD implementation of the guidance in 2 CFR part 200.
3. Use and Disposition of Real Property
    The proposed PROP Article III, ``Use and disposition of real 
property,'' and associated prescription implement the portions of the 
OMB guidance pertinent to that subject. The proposed implementation 
includes one variation from the guidance.
    The variation is that the proposed article authorizes a recipient's 
use of real property acquired under an award for other projects or 
programs either: (1) During its use on the project or program for which 
it was acquired, on a non-interfering basis; or (2) subsequently, by 
deferral of final disposition of the property, if the recipient obtains 
DoD approval for use on other federally sponsored projects or programs 
with purposes consistent with those supported by the award. The use on 
a non-interfering basis during the performance period of the award 
parallels provisions in the OMB guidance at 2 CFR 200.313(c)(2) for 
equipment acquired under an award. The potential to use real property 
after the end of the performance period continues long-standing policy 
in the DoDGARs at 32 CFR 32.32(b) for awards to institutions of higher 
education, hospitals, and other nonprofit organizations and extends 
that policy to States, local governments, and Indian tribes.
4. Use and Disposition of Equipment and Supplies
    The proposed PROP Article IV, ``Use and disposition of equipment 
and supplies,'' and associated prescription implement the portions of 
the OMB guidance on that subject. The proposed implementation includes 
one variation from the guidance.
5. Use and Disposition of Federally Owned Property
    The proposed PROP Article V, ``Use and disposition of federally 
owned property,'' and associated prescription implement the OMB 
guidance on that subject, with no variations or clarifications relative 
to the guidance.
6. Intangible Property
    The proposed PROP Article VI, ``Intangible property,'' and 
associated prescription implement the provisions of the OMB guidance 
that address copyrights, inventions, and data. The proposed 
implementation includes one clarification of the guidance.
    The one clarification, which is in Section D of the proposed 
article, relates to a patent, patent application, copyright, or other 
intangible property that is acquired under an award by a means other 
than being developed or produced under the award. This is an important 
distinction because policies concerning vesting of title to the 
property and use and disposition of the property appropriately differ 
from the corresponding policies for intangible property that is 
developed or produced under awards. This distinction was previously 
made in the DoDGARs at 32 CFR 32.36(e) for awards to institutions of 
higher education, hospitals, and other nonprofit organizations, and was 
included for awards to those types of recipients in DoD's interim 
implementation of the OMB guidance at 2 CFR 1103.215. The incorporation 
into PROP Article VI extends the distinction to awards DoD Components 
make to States, local governments, and Indian tribes.

E. Proposed Part 1132--General Terms and Conditions on Recipient 
Procurement Procedures

    The proposed part 1132 addresses three articles of general terms 
and conditions specifying procedural requirements for recipients' 
purchases of property and services under awards. The articles, which 
are designated as PROC Articles I through III, are in

[[Page 78387]]

appendices A through C to the proposed part. The prescriptions for DoD 
Components' use of the standard wording of the articles are in the 
corresponding Subparts A through C of the proposed part. The articles 
and the associated prescriptions implement the procurement provisions 
of the OMB guidance in 2 CFR part 200 as they relate to general award 
terms and conditions. The subjects covered by the articles (and the 
appendices and subparts containing the articles and associated 
prescriptions) are:

 Procurement standards for States (in Subpart A and appendix A)
 Procurement standards for institutions of higher education, 
nonprofit organizations, local governments, and Indian tribes (in 
Subpart B and appendix B)
 Contract provisions for recipient procurements (in Subpart C 
and appendix C)

    The following subsections II.E.1 through 3 of this Supplementary 
Information section address whether and how the proposed implementation 
of the guidance in each article and its associated prescription for DoD 
Components varies from, or clarifies, the related OMB guidance.
1. Procurement Standards for States
    The proposed PROC Article I, ``Procurement standards for States,'' 
and the associated prescription implement the OMB guidance on those 
standards, with no variations or clarifications relative to the 
guidance.
2. Procurement Standards for Institutions of Higher Education, 
Nonprofit Organizations, Local Governments, and Indian Tribes
    The proposed PROC Article II, ``Procurement standards for 
institutions of higher education, nonprofit organizations, local 
governments, and Indian tribes,'' and the associated prescription 
implement the OMB guidance on those standards, with no clarifications 
or variations relative to the guidance.
3. Contract Provisions for Recipient Procurements
    The proposed PROC Article III, ``Contract provisions for recipient 
procurements,'' and the associated prescription implement the OMB 
guidance on that subject, with no variations or clarifications relative 
to the guidance.

F. Proposed Part 1134--General Terms and Conditions on Reporting

    The proposed part 1134 addresses four articles of general terms and 
conditions on recipient reporting requirements. The articles are 
designated as REP Articles I through IV and are in appendices A through 
D to the proposed part. The associated prescriptions for DoD Components 
are in Subparts A through D of the proposed part. The articles and 
associated prescriptions implement the provisions of the OMB guidance 
in 2 CFR part 200 on reporting, as those provisions relate to general 
award terms and conditions. The subjects covered by the articles (and 
the appendices and subparts containing the articles and associated 
prescriptions) are:

 Performance management, monitoring, and reporting (in Subpart 
A and appendix A)
 Financial reporting (in Subpart B and appendix B)
 Reporting on property (in Subpart C and appendix C)
 Reporting on subawards and executive compensation (in Subpart 
D and appendix D)

    The following subsections II.F.1 through 4 of this Supplementary 
Information section address whether and how the proposed implementation 
of the guidance in each article and its associated prescription for DoD 
Components varies from, or clarifies, the related OMB guidance.
1. Performance Management, Monitoring, and Reporting
    The proposed REP Article I, ``Performance management, monitoring, 
and reporting,'' implements portions of the OMB guidance pertinent to 
that subject. It does so with no variations or clarifications relative 
to the guidance.
2. Financial Reporting
    The proposed REP Article II, ``Financial reporting,'' implements 
the OMB guidance on that subject, with one clarification. That 
clarification is in Section D of the proposed article and the related 
prescription for DoD Components. Section D authorizes recipients to 
request extensions of due dates for interim and final financial 
reports. That authorization continues long-standing DoD policy in: (1) 
The DoDGARs at 32 CFR 32.52(a) and underlying provisions of OMB 
Circular A-110 for awards to institutions of higher education, 
hospitals, and other nonprofit organizations; and (2) the DoDGARs at 32 
CFR 33.41(a)(7) and the underlying Governmentwide common rule for 
awards to States, local governments, and Indian tribes.
3. Property Reporting
    The proposed REP Article III, ``Property reporting,'' provides a 
single location within the general terms and conditions at which a 
recipient may find all of the property reporting requirements listed. 
With its associated prescription, it implements portions of the OMB 
guidance concerning property reporting that are not implemented in 
other articles of the general terms and conditions. For the reporting 
requirements that are addressed in other articles, the proposed REP 
Article III includes references to those articles rather than restating 
the requirements. The proposed article and prescription include no 
variations or clarifications relative to the guidance.
4. Reporting on Subawards and Executive Compensation
    The proposed REP Article IV, ``Reporting on subawards and executive 
compensation,'' directly implements the Governmentwide guidance in 2 
CFR part 170 that is based on statutory reporting requirements in the 
Federal Funding Accountability and Transparency Act, as amended. The 
proposed article also implements portions of the OMB guidance in 2 CFR 
part 200 that cite those statutory requirements and 2 CFR part 170. The 
proposed article includes no variations or clarifications relative to 
the guidance it implements.

G. Proposed Part 1136--General Terms and Conditions on Other 
Administrative Requirements

    The proposed part 1136 addresses seven articles of general terms 
and conditions. The seven articles specify the recipients' and 
Government's rights and responsibilities in areas of administrative 
requirements other than financial and program management, property 
administration, recipient procurement procedures, and reporting (which 
are the four areas addressed in the proposed parts 1128, 1130, 1132, 
and 1134 and discussed in sections II.C through F of this Supplementary 
Information section). The articles and associated prescriptions for DoD 
Components implement the OMB guidance in 2 CFR part 200 in these other 
areas of administrative requirements, as the guidance relates to 
general award terms and conditions.
    The articles are designated as OAR Articles I through VII and are 
in appendices A through G to the proposed part. The associated 
prescriptions are in Subparts A through G of the proposed part. The 
subjects covered by the articles (and the appendices and subparts 
containing the articles and associated prescriptions) are:


[[Page 78388]]


 Submitting and maintaining recipient information (in Subpart A 
and appendix A)
 Records retention and access (in Subpart B and appendix B)
 Remedies and termination (in Subpart C and appendix C)
 Claims, disputes, and appeals (in Subpart D and appendix D)
 Collection of amounts due (in Subpart E and appendix E)
 Closeout (in Subpart F and appendix F)
 Post-closeout adjustments and continuing responsibilities (in 
Subpart G and appendix G)

    The following subsections II.G.1 through 7 of this Supplementary 
Information section address whether and how the proposed implementation 
of the guidance in each article and its associated prescription for DoD 
Components varies from, or clarifies, the related OMB guidance.
1. Submitting and Maintaining Recipient Information
    The proposed OAR Article I, ``Submitting and maintaining recipient 
information,'' and related prescription for DoD Components addresses 
requirements to register in the System for Award Management, report 
information to the Federal Awardee Performance and Integrity 
Information System (FAPIIS), and disclose evidence of certain 
integrity-related matters to the DoD Inspector General. It thereby 
implements OMB guidance in 2 CFR part 25, 2 CFR 200.113, and 
200.210(b)(1)(iii). The article includes one clarification of the 
guidance.
    The clarification concerns the guidance in 2 CFR 200.113 that 
relates to mandatory disclosures of certain violations of Federal 
criminal law. The proposed implementation in Section C of OAR Article I 
provides more specifics than the OMB guidance--e.g., by specifying 
transmission of the information to the DoD Inspector General's office 
and grants officer and providing assurances about the safeguarding of 
the information provided to the Government.
2. Records Retention and Access
    The proposed OAR Article II, ``Records retention and access,'' and 
associated prescription for DoD Components implement the OMB guidance 
on that subject in 2 CFR part 200. They do so with two clarifications.
    The first clarification concerns the period during which the 
Government may disallow costs and recover funds on the basis of an 
audit or other review of a recipient. The three portions of the OMB 
guidance in 2 CFR part 200 pertinent to this clarification are in: (1) 
2 CFR 200.333(b) on records retention requirements, which states that 
an agency may extend the records retention period by notifying the 
recipient in writing; (2) 2 CFR 200.336(c), which states that the 
Government's right to access records is not limited to the records 
retention period but lasts as long as the recipient retains the 
records; and (3) 2 CFR 200.344 on post-closeout adjustments, which 
states that an agency must make any cost disallowance determination and 
notify the recipient within the record retention period. To conform the 
period during which DoD may disallow costs with the period during which 
it may access the recipient's records, the proposed OAR Article II 
specifies that the recipient is not required to retain records beyond 
the standard records retention period delineated in 2 CFR 200.333 but, 
if it elects to do so, the records retention period for purposes of 
post-closeout adjustments is extended to be the same as the period 
during which the records are retained. This provision in OAR Article II 
thereby provides the written notification to recipients that is 
described in 2 CFR 200.333(b).
    The second clarification concerns the retention period for records 
concerning exempt property. The clarification, which is in paragraph 
A.1 of the proposed article, is that the recipient must keep whatever 
property records it needs to keep for exempt property acquired under a 
DoD award, for as long as it needs to keep them, to ensure that any 
residual Federal share of the value of that property is not later used 
as a contribution toward cost sharing or matching requirements of 
another Federal award.
3. Remedies and Termination
    The proposed OAR Article III, ``Remedies and termination,'' and 
related prescription for DoD Components implement the OMB guidance on 
that subject in 2 CFR part 200. The article and prescription include 
one variation from, and two clarifications of, the guidance.
    The one variation is with respect to OMB guidance in 2 CFR 200.342 
that describes the conditions under which costs incurred during a 
suspension or after a termination are allowable. To avoid potential 
confusion, Section C segregates the implementation of the guidance into 
two paragraphs: (1) Paragraph C.1, to address costs resulting from 
obligations incurred by a recipient before the effective date of the 
suspension or termination; and (2) paragraph C.2, to address costs 
resulting from obligations incurred after that effective date. 
Paragraph C.1 includes one condition not explicitly stated in the OMB 
guidance, which is that costs resulting from obligations incurred 
before the date of a termination are allowable only if they are 
noncancellable after the termination. This will provide good 
stewardship of Federal funds by restoring a long-standing DoDGARs 
requirement for allowability of costs in the case of termination, 
previously in 32 CFR 32.62(c) for awards to institutions of higher 
education, hospitals, and other nonprofit organizations, and in 32 CFR 
33.43(c) for awards to States, local governments, and Indian tribes.
    The two clarifications are with respect to OMB guidance in:
     2 CFR 200.339(a)(1), which specifies that a Federal agency 
may unilaterally terminate an award based on a recipient's failure to 
comply with award terms and conditions. To make clear that there must 
be an adequate reason for a DoD Component to unilaterally terminate an 
award, which is a serious remedy, paragraph B.1.a of the proposed 
article affirms that the DoD standard is a recipient's ``material'' 
failure to comply with award terms and conditions.
     2 CFR 200.339(a)(2), which adds termination for cause as a 
basis for unilateral termination of an award by the Government. For 
added clarity, since ``termination for cause'' is not defined and 
likely would be interpreted by DoD officials to be the same as 
termination for default (i.e., material failure to comply with award 
terms and conditions), paragraph B.1.a of the proposed article 
describes that added basis for a DoD Component's unilateral termination 
in plain language.
4. Claims, Disputes, and Appeals
    The proposed OAR Article IV, ``Claims, disputes and appeals,'' and 
associated prescription for DoD Components implement existing DoDGARs 
requirements in 32 CFR 22.810. They also implement the OMB guidance in 
2 CFR 200.341 on recipients' opportunities to object to remedies taken 
for non-compliance. The article and prescription do so with no 
variations or clarifications relative to the guidance.
5. Collection of Amounts Due
    The proposed OAR Article V, ``Collection of amounts due,'' and 
related prescription for DoD Components implement the OMB guidance on 
that subject, which is in 2 CFR 200.345. The article does not vary from 
the guidance but does clarify that the existing DoDGARs procedures in 
32

[[Page 78389]]

CFR 22.820 for issuing demands for payment and transferring debts for 
collection continue to apply. That same clarification is stated at 2 
CFR 1103.225 in DoD's interim implementation of the OMB guidance in 2 
CFR part 200.
6. Closeout
    The proposed OAR Article VI, ``Closeout,'' implements the OMB 
guidance on that subject. The article includes no variations or 
clarifications relative to the guidance.
7. Post-closeout Adjustments and Continuing Responsibilities
    The proposed OAR Article VII, ``Post-closeout adjustments and 
continuing responsibilities,'' and associated prescription for DoD 
Components implement the OMB guidance on that subject. It does so with 
no variations or clarifications relative to the guidance.

H. Proposed Part 1138--General Terms and Conditions on Requirements 
Related to Subawards

    The proposed part 1138 addresses twelve articles of general terms 
and conditions related to subawards that institutions of higher 
education, nonprofit organizations, States, local governments, and 
Indian tribes make to all types of subrecipient entities under DoD 
Components' grants and cooperative agreements. The articles and 
associated prescriptions for DoD Components implement the OMB guidance 
in 2 CFR part 200 concerning subawards, as that guidance relates to 
general terms and conditions.
    The articles are designated as SUB Articles I through XII and are 
in appendices A through L to the proposed part. The associated 
prescriptions are in Subparts A through L of the proposed part. The 
subjects covered by the articles (and the appendices and subparts 
containing the articles and associated prescriptions) are:

 Distinguishing subawards and procurements (in Subpart A and 
appendix A)
 Pre-award and time of award responsibilities (in Subpart B and 
appendix B)
 Informational content of subawards (in Subpart C and appendix 
C)
 Financial and program management requirements for subawards 
(in Subpart D and appendix D)
 Property requirements for subawards (in Subpart E and appendix 
E)
 Procurement procedures to include in subawards (in Subpart F 
and appendix F)
 Financial, programmatic, and property reporting requirements 
for subawards (in Subpart G and appendix G)
 Other administrative requirements for subawards (in Subpart H 
and appendix H)
 National policy requirements for subawards (in Subpart I and 
appendix I)
 Subrecipient monitoring and other post-award administration 
(in Subpart J and appendix J)
 Requirements concerning subrecipients' lower-tier subawards 
(in Subpart K and appendix K)
 Fixed-amount subawards (in Subpart L and appendix L)

    The following subsections II.H.1 through 12 describe these twelve 
articles and each instance in which an article or its associated 
prescription for DoD Components varies from, or clarifies, the related 
OMB guidance in a way not already described in sections II.C through 
II.G of this Supplementary Information section. The reason that some 
variations and clarifications already were described in sections II.C 
through II.G is that SUB Articles IV through VIII address the 
administrative requirements that recipients are to include in their 
subaward terms and conditions. In doing so, SUB Articles IV through 
VIII often instruct recipients to flow down to subrecipients the same 
administrative requirement that applies to recipients, which therefore 
is in one of the 27 articles of general terms and conditions described 
in sections II.C through II.G of this Supplementary Information 
section. For any of those articles that varies from or clarifies the 
OMB guidance, that variation or clarification is described in sections 
II.C through II.G and will not be described again in the following 
subsections II.H.1 through 12.
1. Distinguishing Subawards and Procurements
    The proposed SUB Article I, ``Distinguishing subawards and 
procurements,'' addresses the need for a recipient to determine the 
nature of each transaction into which it enters at the next lower tier 
under its award.
2. Pre-award and Time of Award Responsibilities
    The proposed SUB Article II, ``Pre-award and time of award 
responsibilities,'' and associated prescription for DoD Components 
include no variations or clarifications relative to the pertinent 
portions of the OMB guidance.
3. Informational Content of Subawards
    The proposed SUB Article III, ``Informational content of 
subawards,'' and the related prescription for DoD Components include 
one variation relative to the OMB guidance. The variation is from the 
guidance in 2 CFR 200.331(a)(1)(xiii) that provides for the recipient's 
inclusion of the subrecipient's indirect cost rate as an information 
element in every subaward. Because many nonprofit and for-profit 
entities deem their indirect cost rates to be proprietary, in order to 
protect confidential business information, the proposed SUB Article III 
varies from the guidance by providing flexibility for a recipient in 
that situation to exclude information about the subrecipient's indirect 
cost rate from the subaward.
4. Financial and Program Management Requirements for Subawards
    The proposed SUB Article IV, ``Financial and program management 
requirements for subawards,'' addresses the types of administrative 
requirements for subawards that FMS Articles I through VII address for 
awards under which the subawards are made.
5. Property Requirements for Subawards
    The proposed SUB Article V, ``Property requirements for 
subawards,'' covers the property administration requirements for 
subawards that PROP Articles I through VI cover for awards under which 
the subawards are made. SUB Article V and the related prescription for 
DoD Components include one clarification relative to the OMB guidance 
that sections II.D.1 through 6 of this Supplementary Information 
section did not already describe. The added clarification is that a 
subrecipient would submit a request for property disposition 
instructions through the recipient, and not directly to DoD as a 
recipient would do.
6. Procurement Procedures To Include in Subawards
    The proposed SUB Article VI, ``Procurement procedures to include in 
subawards,'' addresses the types of administrative requirements for 
subawards that PROC Articles I through III address for awards under 
which the subawards are made. SUB Article VI and the associated 
prescription for DoD Components include no variations or clarifications 
relative to the OMB guidance that sections II.E.1 through 3 of this 
Supplementary Information section did not already describe.
7. Financial, Programmatic, and Property Reporting Requirements for 
Subawards
    The proposed SUB Article VII, ``Financial, programmatic, and 
property reporting requirements for subawards,''

[[Page 78390]]

covers the types of reporting for subawards that REP Articles I through 
IV cover for awards under which the subawards are made. SUB Article VII 
and the related prescription for DoD Components include no variations 
or clarifications relative to the OMB guidance that sections II.F.1 
through 4 of this Supplementary Information section did not already 
describe.
8. Other Administrative Requirements for Subawards
    The proposed SUB Article VIII, ``Other administrative requirements 
for subawards,'' covers the administrative requirements for subawards 
that OAR Articles I through VII cover for awards under which the 
subawards are made. SUB Article VIII and the related prescription for 
DoD Components include no variations or clarifications relative to the 
OMB guidance.
9. National Policy Requirements for Subawards
    The proposed SUB Article IX, ``National policy requirements for 
subawards,'' addresses the flow down to subawards of the requirements 
in NP Articles I-IV, which are addressed in the DoDGARs parts proposed 
in the NPRM following this one in this section of this issue of the 
Federal Register. SUB Article IX and the related prescription for DoD 
Components include two clarifications relative to the pertinent 
portions of the OMB guidance in 2 CFR part 200. The clarifications are 
that a recipient must immediately alert the DoD office administering 
its award if:
     An entity to which the recipient is about to make a 
subaward will not accept a subaward provision requiring the 
subrecipient's compliance with an applicable national policy 
requirement; or
     At any time during the performance of a subaward, the 
recipient learns that--or receives a credible allegation that--the 
subrecipient is not complying with an applicable national policy 
requirement.
10. Subrecipient Monitoring and Other Post-Award Administration
    The proposed SUB Article X, ``Subrecipient monitoring and other 
post-award administration,'' addresses requirements for recipients' 
monitoring of subrecipients and related post-award administration of 
subawards that they make under DoD grants and cooperative agreements. 
SUB Article X and the related prescription for DoD Components include 
no variations or clarifications relative to the OMB guidance.
11. Requirements Concerning Subrecipients' Lower-Tier Subawards
    The proposed SUB Article XI, ``Requirements concerning 
subrecipients' lower-tier subawards,'' specifies requirements that a 
recipient must include in any subaward in which it judges that the 
subrecipient may make lower-tier subawards. SUB Article XI and the 
associated prescription for DoD Components include no variations or 
clarifications relative to the OMB guidance that sections II.H.1 
through 10 of this Supplementary Information section did not already 
address.
12. Fixed-Amount Subawards
    The proposed SUB Article XII, ``Fixed-amount subawards,'' specifies 
policy and procedures concerning recipients' use of fixed-amount 
subawards under DoD grants and cooperative agreements. The article and 
associated prescription for DoD Components includes two variations 
relative to the OMB guidance concerning fixed-amount subawards. 
Specifically, SUB Article XII does not provide for:
     A subrecipient's certification to the recipient at the end 
of the subaward that it completed the project or activity or expended 
the level of effort, as described in the OMB guidance at 2 CFR 
200.201(b)(3). A certification is not needed because the article 
defines appropriate uses of a fixed-amount subaward based on well-
defined outcomes that are sufficiently observable and verifiable by the 
recipient so as to obviate the need to rely on a subrecipient's 
assurances. The article clarifies that outcomes are distinct from 
inputs, such as level of effort, needed to achieve the outcomes.
     The need for a recipient's prior approval for a change in 
the subrecipient's principal investigator or other project leader, as 
described in the OMB guidance at 2 CFR 200.201(b)(5). It is 
inappropriate to require prior approvals for changes in inputs, such as 
which individuals carry out the project or program, because the article 
links the appropriate use of fixed-amount subawards to well-defined 
outcomes.

III. Relationship of Administrative Requirements in This NPRM to Future 
DoD Implementation of the OMB Guidance

    As noted in section III of the Supplementary Information section of 
the first of the NPRMs in this section of this issue of the Federal 
Register, DoD will complete the remaining needed updates of the DoDGARs 
in a subsequent set of proposals for public comment. That future set of 
proposals will include implementation of the OMB guidance on 
administrative requirements in 2 CFR part 200 as it applies to both: 
(1) award-specific terms and conditions of DoD Components' grants and 
cooperative agreements; and (2) post-award administration. Those future 
proposals will complement the proposed DoDGARs parts 1128 through 1138 
in this NPRM, which implement the guidance on administrative 
requirements as it applies to general award terms and conditions.
    The reason for these separate implementations is that they address 
distinct audiences at different points during the award life cycle. The 
implementation in this NPRM addresses an individual in a DoD awarding 
office who is responsible for drafting general terms and conditions to 
be used in the office's many future awards under one or more programs 
with similar requirements (e.g., its research programs or its training 
programs). In contrast, the implementations of the guidance as it 
applies to:
     Award-specific terms and conditions will address awarding 
officials in that awarding office who will later be making the 
individual awards under the programs. The portions of the DoDGARs 
addressing those officials must be tailored to their responsibilities, 
which include considering the specific circumstances of each award 
before deciding which, if any, provisions in the general terms and 
conditions need to be supplemented or even overridden by terms and 
conditions specific to that award.
     Post-award administration will address officials 
responsible for subsequently administering the awards. In DoD, those 
officials often are located in offices specifically designated to 
provide award administration services that are organizationally and 
physically separate from the awarding offices. The officials' 
responsibilities differ in kind and not just in degree from those of 
the awarding officials. Again, the portions of the DoDGARs addressing 
those officials needs to be tailored to their distinct 
responsibilities.
    Segregating the DoDGARs implementation of the guidance for these 
three sets of DoD officials enables the regulations to more clearly 
address each of the different audiences. Doing so makes it easier for 
each audience to understand what the regulations require of them, and 
thereby promotes compliance.

IV. Desired Inputs

    DoD welcomes comments on all aspects of the seven proposed parts in

[[Page 78391]]

this NPRM, as inputs from affected entities will help make the final 
regulations better. Questions on which commenters' inputs would be 
helpful include:
     Do the seven proposed parts appear to include any 
substantive variations from the OMB guidance in 2 CFR part 200, as that 
guidance applies to general award terms and conditions--other than 
those noted in section II of this Supplementary Information section?
     In each of the proposed parts 1128 through 1138, does the 
separation of administrative requirements into two portions--i.e., the 
wording of terms and conditions for recipients in the appendices to the 
part and the prescriptions for DoD Components in the corresponding 
subparts of the part--help make requirements clearer for affected 
parties?
     Does the use of plain language and pronouns improve the 
readability and understandability of the content of the proposed parts?

V. Regulatory Analysis

Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review''
    Executive Order 12866, as supplemented by Executive Order 13563, 
directs each Federal agency to: propose regulations only after 
determining that benefits justify costs; tailor regulations to minimize 
burdens on society, consistent with achieving regulatory objectives; 
maximize net benefits when selecting among regulatory approaches; 
specify performance objectives, to the extent feasible, rather than the 
behavior or manner of compliance; and seek the views of those likely to 
be affected before issuing a notice of proposed rulemaking, where 
feasible and appropriate. The Department of Defense has determined that 
a regulatory implementation of 2 CFR part 200 that includes standard 
wording of general terms and conditions for DoD Components' grant and 
cooperative agreement awards will maximize long-term benefits in 
relation to costs and burdens for recipients of those awards. In 
providing--for the first time--uniformity across research and other 
awards, the approach will benefit institutions of higher education and 
other types of recipients that receive awards from diverse defense 
programs and numerous DoD Component awarding offices. The Department 
informally consulted representatives of the most affected recipient 
community during development of this regulatory proposal. This rule has 
been designated a ``significant regulatory action'' under section 3(f) 
of Executive Order 12866, although not an economically significant one. 
Accordingly, the rule has been reviewed by OMB.
Unfunded Mandates Reform Act of 1995
    Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded 
Mandates Act) (2 U.S.C. 1532) requires that a Federal agency prepare a 
budgetary impact statement before issuing a rule that includes any 
Federal mandate that may result in the expenditure in any one year by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in 1995 dollars, updated 
annually for inflation. In 2015, that inflation-adjusted amount in 
current dollars is approximately $146 million. The Department of 
Defense has determined that this proposed regulatory action will not 
result in expenditures by State, local, and tribal governments, or by 
the private sector, of that amount or more in any one year.
Regulatory Flexibility Act
    The Regulatory Flexibility Act requires an agency that is proposing 
a rule to provide a regulatory flexibility analysis or to certify that 
the rule will not have a significant economic impact on a substantial 
number of small entities. The Department of Defense certifies that this 
proposed regulatory action will not have a significant economic impact 
on substantial number of small entities beyond any impact due to 
provisions of it that implement OMB guidance at 2 CFR part 200.
Paperwork Reduction Act
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35; 5 CFR part 1320, appendix A.1) (PRA), the Department of 
Defense has determined that there are no new collections of information 
contained in this proposed regulatory action.
Executive Order 13132, ``Federalism''
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it proposes a regulation that has Federalism 
implications. This proposed regulatory action does not have any 
Federalism implications.

List of Subjects

2 CFR Part 1126

    Cooperative agreements, Grant programs, Grants administration.

2 CFR Part 1128

    Accounting, Business and Industry, Cooperative agreements, Grants 
administration, Hospitals, Indians, Nonprofit organizations, Reporting 
and recordkeeping requirements, Small business, State and local 
governments.

2 CFR Part 1130

    Cooperative agreements, Grants administration, Hospitals, Indians, 
Nonprofit organizations, Reporting and recordkeeping requirements, 
Small business, State and local governments.

2 CFR Part 1132

    Business and Industry, Cooperative agreements, Grants 
administration, Hospitals, Indians, Nonprofit organizations, Reporting 
and recordkeeping requirements, Small business, State and local 
governments.



2 CFR Part 1134

    Cooperative agreements, Grants administration, Hospitals, Indians, 
Nonprofit organizations, Reporting and recordkeeping requirements, 
Small business, State and local governments.

2 CFR Part 1136

    Cooperative agreements, Grants administration, Hospitals, Indians, 
Nonprofit organizations, Reporting and recordkeeping requirements, 
Small business, State and local governments.

2 CFR Part 1138

    Accounting, Business and Industry, Cooperative agreements, Grants 
administration, Hospitals, Indians, Nonprofit organizations, Reporting 
and recordkeeping requirements, Small business, State and local 
governments.

0
Accordingly, under the authority of 5 U.S.C. 301 and 10 U.S.C. 113, 2 
CFR chapter XI, subchapter D, is proposed to be amended by adding parts 
1126, 1128, 1130, 1132, 1134, 1136, and 1138 to read as follows:

PART 1126--SUBCHAPTER D OVERVIEW

Sec.
1126.1 Purposes of this subchapter.
1126.2 Applicability of this subchapter.
1126.3 Exceptions from requirements in this subchapter.
1126.4 Relationship to other portions of the DoD grant and agreement 
regulations.
1126.5 Organization of this subchapter.
1126.6 Organization of the other parts of this subchapter.


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


Sec.  1126.1   Purposes of this subchapter.

    This subchapter of the DoD Grant and Agreement Regulations:
    (a) Addresses general terms and conditions governing administrative

[[Page 78392]]

requirements for DoD Components' cost-type grant and cooperative 
agreement awards to institutions of higher education, nonprofit 
organizations, States, local governments, and Indian tribes. It does so 
by providing:
    (1) A standard organization of the administrative requirements into 
articles of general terms and conditions, each of which is in a 
specific subject area.
    (2) Standard wording for those articles; and
    (3) Associated prescriptions for DoD Component's use of the 
standard wording to construct their general terms and conditions, which 
allow for adding, omitting, or varying in other ways from the standard 
wording in certain situations.
    (b) Thereby implements OMB guidance in 2 CFR part 200 as it relates 
to general terms and conditions of grant and cooperative agreement 
awards to institutions of higher education, nonprofit organizations, 
States, local governments, and Indian tribes.


Sec.  1126.2   Applicability of this subchapter.

    (a) Entities. This subchapter:
    (1) Applies to DoD Components that make cost-type grant and 
cooperative agreement awards to institutions of higher education, 
nonprofit organizations, States, local governments, and Indian tribes.
    (2) Does not directly impose requirements on a recipient of a DoD 
Component's award but does do so indirectly, through the DoD 
Component's compliance with this subchapter when it constructs its 
general award terms and conditions. The terms and conditions delineate 
the rights and responsibilities of the recipient and the Federal 
Government under the award.
    (b) Awards. This subchapter applies to DoD Components' cost-type 
grants and cooperative agreements to types of entities identified in 
paragraph (a)(1) of this section, other than Technology Investment 
Agreements that are addressed in 32 CFR part 37.


Sec.  1126.3   Exceptions from requirements in this subchapter.

    (a) Exceptions that are not permitted. A DoD Component may not 
grant any exception to the requirements in this subchapter if the 
exception is:
    (1) Prohibited by statute, executive order, or regulation;
    (2) Inconsistent with the OMB implementation of the Single Audit 
Act in Subpart F of 2 CFR part 200.
    (b) Other exceptions. Other exceptions are permitted from 
requirements in this subchapter for institutions of higher education, 
nonprofit organizations, States, local governments and Indian tribes, 
as follows:
    (1) Statutory or regulatory exceptions. A DoD Component's general 
terms and conditions may incorporate a requirement that is inconsistent 
with the requirements in this subchapter if that requirement is 
specifically authorized or required by a statute or regulation adopted 
in the Code of Federal Regulations after opportunity for public 
comment.
    (2) Individual exceptions. The Head of the DoD Component or his or 
her designee may approve an individual exception affecting only one 
award in accordance with procedures stated in 32 CFR 21.340.
    (3) Small awards. DoD Components' terms and conditions for small 
awards may apply less restrictive requirements than those specified in 
this subchapter (a small award is an award for which the total value of 
obligated funding through the life of the award is not expected to 
exceed the simplified acquisition threshold).
    (4) Other class exceptions. The Assistant Secretary of Defense for 
Research and Engineering or his or her designee may approve any class 
exception affecting multiple awards other than small awards, with OMB 
concurrence if the class exception is for a requirement that is 
inconsistent with OMB guidance in 2 CFR part 200. Procedures for DoD 
Components' requests for class exceptions are stated in 32 CFR 21.340.


Sec.  1126.4   Relationship to other portions of the DoD grant and 
agreement regulations.

    The administrative requirements specified in this subchapter 
complement:
    (1) Provisions of 32 CFR part 34 that address administrative 
requirements for DoD Components' grant and cooperative agreement awards 
to for-profit entities; and
    (2) Requirements in 32 CFR part 37 for technology investment 
agreements.


Sec.  1126.5   Organization of this subchapter.

    This subchapter is organized into six parts in addition to this 
overview part. Each part provides standard wording and prescriptions 
for a number of articles of general terms and conditions that address 
administrative requirements in a particular subject area. The following 
table shows the subject area and articles corresponding to each part:

------------------------------------------------------------------------
                                Of this subchapter, you will find terms
                                     and conditions with associated
           In . . .             prescriptions for the following articles
                                            related to . . .
------------------------------------------------------------------------
Part 1128....................  Recipient financial and program
                                management (designated as ``FMS'' when
                                referring to articles prescribed by this
                                part):
                               --FMS Article I--Financial management
                                system standards.
                               --FMS Article II--Payments.
                               --FMS Article III--Allowable costs,
                                period of availability of funds, and fee
                                or profit.
                               --FMS Article IV--Revision of budget and
                                program plans.
                               --FMS Article V--Non-Federal audits.
                               --FMS Article VI--Cost sharing or
                                matching.
                               --FMS Article VII--Program income.
Part 1130....................  Property administration (designated as
                                ``PROP'' when referring to articles
                                prescribed by this part):
                               --PROP Article I--Title to property.
                               --PROP Article II--Property management
                                system.
                               --PROP Article III--Use and disposition
                                of real property.
                               --PROP Article IV--Use and disposition of
                                equipment and supplies.
                               --PROP Article V--Use and disposition of
                                federally owned property.
                               --PROP Article VI--Intangible property.
Part 1132....................  Recipient procurement procedures
                                (designated as ``PROC'' when referring
                                to articles prescribed by this part):
                               --PROC Article I--Procurement standards
                                for States.
                               --PROC Article II--Procurement standards
                                for institutions of higher education,
                                nonprofit organizations, local
                                governments, and Indian tribes.
                               --PROC Article III--Contract provisions
                                for recipient procurements.

[[Page 78393]]

 
Part 1134....................  Financial, programmatic, and property
                                reporting (designated as ``REP'' when
                                referring to articles prescribed by this
                                part):
                               --REP Article I--Performance management,
                                monitoring, and reporting.
                               --REP Article II--Financial reporting.
                               --REP Article III--Reporting on property.
                               --REP Article IV--Reporting on subawards
                                and executive compensation.
Part 1136....................  Other administrative requirements
                                (designated as ``OAR'' when referring to
                                articles prescribed by this part):
                               --OAR Article I--Submitting and
                                maintaining recipient information.
                               --OAR Article II--Records retention and
                                access.
                               --OAR Article III--Remedies and
                                termination.
                               --OAR Article IV--Claims, disputes, and
                                appeals.
                               --OAR Article V--Collection of amounts
                                due.
                               --OAR Article VI--Closeout.
                               --OAR Article VII--Post[dash]closeout
                                adjustments and continuing
                                responsibilities.
Part 1138....................  Requirements related to subawards
                                (designated as ``SUB'' when referring to
                                articles prescribed by this part):
                               --SUB Article I--Distinguishing subawards
                                and procurements.
                               --SUB Article II--Pre-award and time of
                                award responsibilities.
                               --SUB Article III--Informational content
                                of subawards.
                               --SUB Article IV--Financial and program
                                management requirements for subawards.
                               --SUB Article V--Property requirements
                                for subawards.
                               --SUB Article VI--Procurement procedures
                                to include in subawards.
                               --SUB Article VII--Financial,
                                programmatic, and property reporting
                                requirements for subawards.
                               --SUB Article VIII--Other administrative
                                requirements for subawards.
                               --SUB Article IX--National Policy
                                Requirements for Subawards.
                               --SUB Article X--Subrecipient monitoring
                                and other post[dash]award
                                administration.
                               --SUB Article XI--Requirements concerning
                                subrecipients' lower[dash]tier
                                subawards.
                               --SUB Article XII--Fixed[dash]amount
                                subawards.
------------------------------------------------------------------------

Sec.  1126.6   Organization of the other parts of this subchapter.

    (a) Each of parts 1128 through 1138 of this subchapter is organized 
into a number of subparts and appendices.
    (1) Each appendix provides the standard wording of general terms 
and conditions for one of the articles of general terms and conditions 
that the part addresses.
    (2) For each appendix addressing a particular article, the part has 
an associated subpart that provides the prescription for DoD 
Components' use of the standard wording for that article.
    (b) For example, the table in Sec.  1126.5 indicates that 2 CFR 
part 1128 provides the standard wording of general terms and conditions 
for FMS Articles I through VII and the prescriptions for DoD 
Components' use of that standard wording.
    (1) FMS Article I on financial management system standards is the 
first of the articles that 2 CFR part 1128 covers. Appendix A to 2 CFR 
part 1128 provides the standard wording of general terms and conditions 
for FMS Article I. The associated subpart of 2 CFR part 1128, subpart 
A, provides the prescription for DoD Components' use of the standard 
wording of that article.
    (2) Appendices B through G of 2 CFR part 1128 provide the standard 
wording of general terms and conditions for FMS Articles II through 
VII, respectively. The associated subparts, subparts B through G, 
provide the corresponding prescriptions for DoD Components.

PART 1128--RECIPIENT FINANCIAL AND PROGRAM MANAGEMENT: GENERAL 
AWARD TERMS AND CONDITIONS

Sec.
1128.1 Purpose of this part.
1128.2 Applicability of this part.
1128.3 Exceptions from requirements of this part.
1128.4 Organization of this part.
Subpart A--Financial management system standards (FMS Article I)
1128.100 Purpose of FMS Article I.
1128.105 Content of FMS Article I.
Subpart B--Payments (FMS Article II)
1128.200 Purpose of FMS Article II.
1128.205 Content of FMS Article II.
1128.210 Payment requirements for States.
1128.215 Payment requirements for institutions of higher education, 
nonprofit organizations, local governments, and Indian tribes.
1128.220 Electronic funds transfer and other payment procedural 
instructions or information.
Subpart C--Allowable costs, period of availability of funds, and fee or 
profit (FMS Article III)
1128.300 Purpose of FMS Article III.
1128.305 Content of FMS Article III.
1128.310 Cost principles.
1128.315 Clarification concerning allowability of publication costs.
1128.320 Period of availability of funds.
1128.325 Fee or profit.
Subpart D--Revision of Budget and Program Plans (FMS Article IV)
1128.400 Purpose of FMS Article IV.
1128.405 Content of FMS Article IV.
1128.410 Approved budget.
1128.415 Prior approvals for non-construction activities.
1128.420 Prior approvals for construction activities.
1128.425 Additional prior approval for awards that support both non-
construction and construction activities.
1128.430 Procedures for prior approvals.
Subpart E--Non-Federal Audits (FMS Article V)
1128.500 Purpose of FMS Article V.
1128.505 Content of FMS Article V.
Subpart F--Cost sharing or Matching (FMS Article VI)
1128.600 Purpose of FMS Article VI.
1128.605 Content of FMS Article VI.
1128.610 General requirement for cost sharing or matching.
1128.615 General criteria for determining allowability as cost 
sharing or matching.
1128.620 Allowability of unrecovered indirect costs as cost sharing 
or matching.
1128.625 Allowability of program income as cost sharing or matching.
1128.630 Valuation of services or property contributed or donated by 
recipients or subrecipients.
1128.635 Valuation of third-party in-kind contributions.
Subpart G--Program income (FMS Article VII)
1128.700 Purpose of FMS Article VII.
1128.705 Content of FMS Article VII.
1128.710 What program income includes.
1128.715 Recipient obligations for license fees and royalties.
1128.720 Program income use.

[[Page 78394]]

1128.725 Program income after the period of performance.
Appendix A to Part 1128--Terms and conditions for FMS Article I, 
``Financial management system standards''
Appendix B to Part 1128--Terms and conditions for FMS Article II, 
``Payments''
Appendix C to Part 1128--Terms and conditions for FMS Article III, 
``Allowable costs, period of availability of funds, and fee or 
profit''
Appendix D to Part 1128--Terms and conditions for FMS Article IV, 
``Revision of budget and program plans''
Appendix E to Part 1128--Terms and conditions for FMS Article V, 
``Non-Federal audits''
Appendix F to Part 1128--Terms and conditions for FMS Article VI, 
``Cost sharing or matching''
Appendix G to Part 1128--Terms and conditions for FMS Article VII, 
``Program income''


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


Sec.  1128.1   Purpose of this part.

    (a) This part specifies standard wording of general terms and 
conditions concerning financial and program management, including 
recipients' financial management systems, payments, cost sharing or 
matching, program income, budget and program revisions, audits, 
allowable costs, and periods of availability of funds.
    (b) It thereby implements OMB guidance in the following portions of 
2 CFR part 200, as they apply to general terms and conditions:
    (1) Sections 200.80, 200.209, and 200.302 through 200.309;
    (2) Sections 200.301 and 200.328, as they relate to associations 
between financial data and performance accomplishments and reporting 
under awards; and
    (3) Subparts E and F.


Sec.  1128.2   Applicability of this part.

    The types of awards and entities to which this part and other parts 
in this subchapter apply are described in the subchapter overview at 2 
CFR 1126.2.


Sec.  1128.3   Exceptions from requirements of this part.

    Exceptions are permitted from the administrative requirements in 
this part only as described at 2 CFR 1126.3.


Sec.  1128.4   Organization of this part.

    (a) The content of this part is organized into subparts and 
associated appendices.
    (1) Each subpart provides direction to DoD Components on how to 
construct one article of general terms and conditions for grants and 
cooperative agreements.
    (2) For each subpart, there is a corresponding appendix with 
standard wording for terms and conditions of the article addressed by 
the subpart. Terms and conditions address rights and responsibilities 
of the Government and recipients.
    (b) A DoD Component must use the wording provided in each appendix 
in accordance with the direction in the corresponding subpart. That 
direction may permit DoD Components to vary from the standard wording 
in some situations.
    (c) The following table shows which article of general terms and 
conditions may be found in each of appendices A through G to this part 
(with the associated direction to DoD Components in subparts A through 
G, respectively):

------------------------------------------------------------------------
                                  You will find terms
                                    and conditions         That would
                                specifying recipients'    appear in an
           In . . .                   rights and        award within FMS
                                   responsibilities       article . . .
                                   related to . . .
------------------------------------------------------------------------
Appendix A....................  Financial management    I.
                                 system standards.
Appendix B....................  Payments..............  II.
Appendix C....................  Allowable costs,        III.
                                 period of
                                 availability of
                                 funds, and fee or
                                 profit.
Appendix D....................  Revision of budget and  IV.
                                 program plans.
Appendix E....................  Non-Federal audits....  V.
Appendix F....................  Cost sharing or         VI.
                                 matching.
Appendix G....................  Program income........  VII.
------------------------------------------------------------------------

Subpart A--Financial management system standards (FMS Article I)


Sec.  1128.100   Purpose of FMS Article I.

    FMS Article I specifies standards for recipients' financial 
management systems. It thereby implements OMB guidance in:
    (a) 2 CFR 200.302, 200.303, and 200.328; and
    (b) 2 CFR 200.301 and 200.328, as they relate to associations 
between financial data and performance accomplishments and reporting 
under awards.


Sec.  1128.105   Content of FMS Article I.

    (a) Requirement. A DoD Component's general terms and conditions 
must address requirements for recipients' financial management systems.
    (b) Award terms and conditions--(1) General. Except as provided in 
paragraph (b)(2) of this section, a DoD Component's general terms and 
conditions must include the wording appendix A to this part provides 
for FMS Article I.
    (2) Exceptions. A DoD Component's general terms and conditions may:
    (i) Reserve Section A of FMS Article I if the DoD Component 
determines that it is not possible that any States will receive:
    (A) DoD Component awards using those general terms and conditions; 
or
    (B) Subawards from recipients of DoD Component awards using those 
general terms and conditions.
    (ii) Reserve paragraph B.6 of FMS Article I if the DoD Component 
determines that it will not require recipients of awards using those 
general terms and conditions to relate financial data to performance 
accomplishments (e.g., through unit costs). Because the nature of 
research makes the use of unit costs and other relationships between 
financial data and performance accomplishments generally inappropriate, 
DoD Components should reserve paragraph B.6 in general terms and 
conditions for awards supporting research.

Subpart B--Payments (FMS Article II)


Sec.  1128.200   Purpose of FMS Article II.

    FMS Article II contains requirements related to payments under an 
award. It thereby implements OMB guidance in 2 CFR 200.305.


Sec.  1128.205   Content of FMS Article II.

    (a) Requirement. A DoD Component's general terms and conditions 
must address payment method; payment timing and amounts, which relate 
to cash management; frequency of payment requests; and matters related 
to recipients' depositories, including interest earned on advance 
payments.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must include the wording appendix B to this part provides 
for FMS Article II with appropriate additions, deletions, and 
substitutions as described in Sec. Sec.  1128.210 through 1128.220.

[[Page 78395]]

Sec.  1128.210   Payment requirements for States.

    (a) Policy. Payments to States are subject to requirements in 
Department of the Treasury regulations at 31 CFR part 205 that 
implement the Cash Management Improvement Act. Those regulations are in 
two subparts with distinct requirements that apply to different 
programs:
    (1) Subpart A of 31 CFR part 205 contains requirements for payments 
to States under ``major programs,'' as defined in that part. The 
Department of the Treasury negotiates Treasury-State agreements for 
major programs. Those agreements specify the appropriate timing and 
amounts of payments. They further specify a State's interest liability 
if it receives an advance payment too many days before it disburses the 
funds for program purposes, as well as the Federal Government's 
interest liability if it reimburses the State too many days after the 
State disburses the funds. Most DoD awards to States are not under 
major programs, so subpart A applies relatively infrequently.
    (2) Subpart B of 31 CFR part 205 applies to all other DoD grant and 
cooperative agreement awards to States--i.e., awards that are not under 
major programs.
    (b) Default wording. Because few DoD awards to States are under 
major programs, appendix B to this part includes default wording for 
Section A of FMS Article II that specifies the requirements of subpart 
B of 31 CFR part 205. A DoD Component's general terms and conditions 
must include this wording for Section A of FMS Article II if no award 
using those terms and conditions will be made to a State under a 
program designated as a major program in the applicable Treasury-State 
agreement.
    (c) Exception for awards under major programs. If a DoD Component 
is establishing general terms and conditions that will be used for 
awards to States, only some of which are subject to requirements for 
major programs in subpart A of 31 CFR part 205, then the DoD Component 
should:
    (1) Use appendix B's default wording for Section A of FMS Article 
II in its general terms and conditions; and
    (2) In each award subject to subpart A of 31 CFR part 205, include 
award-specific terms and conditions that make payments to the recipient 
subject to the requirements in subpart A of 31 CFR part 205 and the 
applicable Treasury-State agreement, thereby overriding the wording of 
Section A of FMS Article II.


Sec.  1128.215   Payment requirements for institutions of higher 
education, nonprofit organizations, local governments, and Indian 
tribes.

    (a) Policy. OMB guidance in 2 CFR 200.305 addresses the use of 
three payment methods for awards--advance payments, reimbursement, and 
working capital advances. Two of the methods pertain to a DoD 
Component's general terms and conditions, as described in paragraphs 
(a)(1) and (2) of this section.
    (1) Advance payments. With the possible exception of construction 
awards, as provided in paragraph (a)(2) of this section, a DoD 
Component's general terms and conditions must authorize each recipient 
to request payments in advance as long as the recipient maintains or 
demonstrates the willingness to maintain both:
    (i) Written procedures that minimize the time elapsing between its 
receipt of funds from the Federal Government and its disbursement of 
the funds for program or project purposes; and
    (ii) Financial management systems that meet the standards for fund 
control and accountability specified in the wording of FMS Article I 
(see subpart A and appendix A to this part).
    (2) Reimbursement. A DoD Component's general terms and conditions 
may specify the reimbursement method if the awards using those terms 
and conditions will support construction projects financed in whole or 
in part by the Federal Government.
    (b) Default award terms and conditions. Appendix B provides default 
wording for Section B of FMS Article II that a DoD Component:
    (1) Must use in general terms and conditions for non-construction 
awards to authorize recipients to request advance payments; and
    (2) May use in general terms and conditions for construction awards 
if it elects to authorize recipients of those awards to request advance 
payments.
    (c) Alternative award terms and conditions. A DoD Component may 
develop an alternative to appendix B's default wording for Section B of 
FMS Article II to use in general terms and conditions for construction 
awards, if it elects to specify reimbursement as the payment method for 
those awards. The alternative:
    (1) Would replace Appendix B's default wording for paragraph B.1 
with wording to specify the reimbursement method of payment;
    (2) Must include appendix B's default wording for paragraphs B.2.b 
and c, B.4, and B.5, which may be renumbered as appropriate, because 
those paragraphs apply to reimbursements as well as advance payments;
    (3) Should omit appendix B's default wording for paragraphs B.2.a, 
B.3, and B.6 because those paragraphs apply specifically to advance 
payments; and
    (4) Must inform recipients that the DoD payment office generally 
makes payment within 30 calendar days after receipt of the request for 
reimbursement by the award administration office, unless the request is 
reasonably believed to be improper.


Sec.  1128.220   Electronic funds transfer and other payment procedural 
instructions or information.

    (a) Policy. A DoD Component's general terms and conditions must 
specify that payments will be made by electronic funds transfer (EFT) 
unless a recipient is excepted in accordance with Department of the 
Treasury regulations at 31 CFR part 208 from the Governmentwide 
requirement to use EFT.
    (b) Award terms and conditions--(1) Electronic funds transfer. 
Appendix B provides default wording for Section C of FMS Article II 
that a DoD Component must use to specify payment by EFT, when awards 
are not excepted from the Governmentwide requirement.
    (2) Other payment procedures or instructions. A DoD Component may 
insert one or more paragraphs in its general terms and conditions in 
lieu of the reserved paragraph C.2 in appendix B, to provide procedural 
instructions or information regarding payments that is common to awards 
using those terms and conditions. For example, it may insert wording to 
give detailed instructions on where and how recipients are to submit 
payment requests. All forms, formats, and data elements for payment 
requests must be OMB-approved information collections.

Subpart C--Allowable costs, period of availability of funds, and 
fee or profit (FMS Article III)


Sec.  1128.300   Purpose of FMS Article III.

    FMS Article III of the general terms and conditions specifies what 
costs are allowable as charges to awards and when they are allowable. 
It also specifies restrictions on payment of fee or profit. It thereby 
implements OMB guidance in Sec. Sec.  200.209 and 200.309 and subpart E 
of 2 CFR part 200. It also partially implements 2 CFR 200.201(b)(1)and 
200.323(c), as those sections apply to the cost principles to be used 
in relation to subawards and contracts, respectively.

[[Page 78396]]

Sec.  1128.305   Content of FMS Article III.

    (a) Requirement. A DoD Component's general terms and conditions 
must address allowability of costs and permissibility of fee or profit.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must include the wording appendix C to this part provides 
for FMS Article III with appropriate additions, deletions, and 
substitutions as described in Sec. Sec.  1128.310 through 1128.325.


Sec.  1128.310   Cost principles.

    (a) Policy. The set of Governmentwide cost principles applicable to 
a particular entity type governs the allowability of costs that may be:
    (1) Charged to each cost-type:
    (i) DoD grant or cooperative agreement to a recipient of that 
entity type;
    (ii) Subaward to a subrecipient of that entity type at any tier 
below a DoD grant or cooperative agreement; and
    (iii) Procurement transaction with a contractor of that entity type 
awarded by a recipient of a DoD grant or cooperative agreement or a 
subrecipient that received a subaward at any tier below that grant or 
cooperative agreement.
    (2) Considered in establishing the amount of any:
    (i) Fixed-amount subaward, at any tier under an award, to a 
subrecipient of that entity type; or
    (ii) Fixed-price procurement transaction with a contractor of that 
entity type that is awarded by either a recipient of a DoD award or a 
subrecipient that received a subaward at any tier below that grant or 
cooperative agreement.
    (b) Default wording. Because almost all DoD grants and cooperative 
agreements are cost-type awards, appendix C includes default wording 
for Section A of FMS Article III that specifies use of the applicable 
Governmentwide cost principles in the determination of the allowability 
of costs.
    (c) Alternative award terms and conditions. A DoD Component may 
reserve any paragraph of appendix C's default wording for Section A of 
FMS Article III in its general terms and conditions if the Component is 
certain that no entities of the type to which the paragraph applies 
could be recipients of awards using those general terms and conditions 
or recipients of subawards or procurement transactions at any tier 
under those awards.


Sec.  1128.315   Clarification concerning allowability of publication 
costs.

    (a) Requirement. A DoD Component's general terms and conditions 
must clarify that a recipient must charge publication costs 
consistently as either direct or indirect costs in order for those 
costs to be allowable charges to DoD grants and cooperative agreements.
    (b) Award terms and conditions--(1) General. To clarify the 
allowability of publication costs, a DoD Component's general terms and 
conditions must include the wording appendix C to this part provides 
for Section B of FMS Article III.
    (2) Exception. A DoD Component may instead reserve Section B of FMS 
Article III in its general terms and conditions if the DoD Component 
determines that there will be no publication costs under any of the 
awards using those general terms and conditions.


Sec.  1128.320   Period of availability of funds.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify the period during which Federal funds are available for 
obligation by recipients for project or program purposes.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must include the wording appendix C to this part provides 
for Section C of FMS Article III to specify the period of availability 
of funds.


Sec.  1128.325   Fee or profit.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify that recipients may neither receive fee or profit nor pay 
fee or profit to subrecipients.
    (b) Award terms and conditions. A DoD Component must use the 
wording appendix C to this part provides for Section D of FMS Article 
III to specify the limitation on payment of fee or profit.

Subpart D-Revision of Budget and Program Plans (FMS Article IV)


Sec.  1128.400   Purpose of FMS Article IV.

    FMS Article IV of the general terms and conditions specifies 
requirements related to changes in recipients' budget and program 
plans. It thereby implements OMB guidance in Sec.  200.308 of 2 CFR 
part 200 and partially implements Sec.  200.209 and subpart E of that 
part.


Sec.  1128.405   Content of FMS Article IV.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify the changes in budget and program plans for which a 
recipient is required to request DoD Component prior approval and the 
procedures for submitting those requests.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must include as FMS Article IV the default wording appendix 
D to this part provides, with any revisions to the wording that are 
authorized by Sec. Sec.  1128.410 through 1128.430.


Sec.  1128.410   Approved budget.

    (a) OMB guidance. As described in 2 CFR 200.308(a), the approved 
budget for a grant or cooperative agreement may include both the 
Federal and non-Federal shares of funding under the award or only the 
Federal share.
    (b) DoD implementation. For DoD grants and cooperative agreements, 
the approved budget includes the Federal share and any cost sharing or 
matching that the recipient is required to provide under the award.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions therefore must include the default wording appendix D to 
this part provides for Section A of FMS Article IV.


Sec.  1128.415   Prior approvals for non-construction activities.

    (a) OMB guidance. OMB guidance in 2 CFR 200.308(c) through (e) 
addresses prior approval requirements for revisions of a recipient's 
budget and program plans under a non-construction award, which includes 
for the purposes of this section non-construction activities under an 
award that supports both construction and non-construction.
    (b) DoD implementation of the guidance. The following paragraphs 
(c) through (g) of this section provide details of the DoD 
implementation of the guidance in 2 CFR 200.308(c) through (e) and 
paragraph (h) specifies the corresponding award terms and conditions. A 
DoD Component's general terms and conditions for non-construction 
awards may only require additional prior approvals for budget and 
program revisions (i.e., prior approvals other than those authorized by 
this subpart) in accordance with the exceptions provisions of 2 CFR 
1126.3.
    (c) Scope or objective, cost sharing or matching, and additional 
Federal funds. A DoD Component's general terms and conditions for non-
construction awards must require that a recipient obtain DoD Component 
prior approval:
    (1) For a change in scope or objective of the project or program, 
as described in 2 CFR 200.308(c)(1)(i).
    (2) For any change in the cost sharing or matching included in the 
approved budget for which FMS Article VI requires prior approval, as 
described in

[[Page 78397]]

OMB guidance at 2 CFR 200.308(c)(1)(vii).
    (3) If the need arises for additional Federal funds to complete the 
project or program, as described in 2 CFR 200.308(c)(1)(viii).
    (d) Personnel changes, disengagements, or reductions in time. A DoD 
Component must include the following prior approval requirements in 
general terms and conditions of research awards and also may include 
them in general terms and conditions of other non-construction awards:
    (1) A change in a key person, as described in 2 CFR 
200.308(c)(1)(ii).
    (2) A principal investigator's or project director's disengagement 
from, or reduction in time devoted to, the project, as described in 2 
CFR 200.308(c)(1)(iii).
    (e) Costs requiring prior approval under the cost principles. With 
respect to waivers of prior approvals required by the cost principles, 
as described in 2 CFR 200.308(c)(1)(iv):
    (1) Any waiver of a cost principles requirement for prior approval 
by a recipient entity's cognizant agency for indirect costs is 
appropriately addressed in award-specific terms and conditions, rather 
than general terms and conditions, because the general terms and 
conditions must be appropriate for use in awards to multiple recipient 
entities.
    (2) A DoD Component may waive requirements in the cost principles 
for recipients to request prior approval before charging certain costs 
as direct costs to awards. However, the DoD Component should carefully 
consider each prior approval requirement individually and decide:
    (i) Which, if any, to waive; and
    (ii) Whether to make the waiver of the prior approval requirement 
contingent on specified conditions (e.g., a DoD Component might waive 
the prior approval required for direct charging of special purpose 
equipment purchases under an award, but elect to waive it only for 
equipment that is to be used primarily in carrying out the project or 
program supported by the award).
    (f) Transfers of funds and subawards. A DoD Component's general 
terms and conditions for non-construction awards may include prior 
approval requirements for:
    (1) Transfers of funds for participant support costs, as described 
in 2 CFR 200.308(c)(1)(v).
    (2) Subawarding of work under an award, as described in 2 CFR 
200.308(c)(1)(vi).
    (3) Transfers of funds among direct cost categories, as described 
in 2 CFR 200.308(e), but the wording in the general terms and 
conditions must make clear that the prior approval requirement applies 
only to awards using those terms and conditions if the Federal share of 
the total value is in excess of the simplified acquisition threshold. 
Note that, as a matter of DoD policy, requiring prior approvals for 
transfers among direct cost categories generally is not appropriate for 
grants and cooperative agreements that support research.
    (g) Pre-award costs, carry forward of unobligated balances, and no-
cost extensions. (1) A DoD Component's general terms and conditions may 
authorize recipients to incur project costs up to 90 calendar days 
prior to the beginning date of the period of performance, at their own 
risk, as described in 2 CFR 200.308(d)(1). OMB guidance in 2 CFR 
200.308(d)(4) makes that authorization the default policy for research 
awards and a DoD Component should override the default and require 
recipients to obtain the DoD Component's prior approval for pre-award 
costs only in exceptional circumstances.
    (2) If a DoD Component's general terms and conditions are used for 
awards that have multiple periods of performance, the DoD Component 
should authorize recipients to carry forward unobligated balances to 
subsequent periods of performance, as described in 2 CFR 200.308(d)(3), 
unless there are compelling reasons not to do so.
    (3) A DoD Component's general terms and conditions may authorize 
recipients to initiate one-time extensions in the periods of 
performance of their awards by up to 12 months, subject to the 
conditions described in 2 CFR 200.308(d)(2), but only if the DoD 
Component judges that authorizing no-cost extensions for awards using 
the general terms and conditions will not cause the DoD Component to 
fail to comply with DoD funding policies (e.g., the incremental program 
budgeting and execution policy for research funding) contained in 
Volume 2A of the DoD Financial Management Regulation, DoD 7000.14-R.
    (h) Award terms and conditions. Appendix D to this part provides 
default wording for inclusion in a DoD Component's general terms and 
conditions in accordance with paragraphs (c) through (g) of this 
section. Specifically:
    (1) In accordance with paragraph (c) of this section, a DoD 
Component's general terms and conditions for non-construction awards 
must include the default wording that appendix D provides for 
paragraphs B.1.a and B.1.i of FMS Article IV and, if there will be cost 
sharing or matching required under any awards using the general terms 
and conditions, paragraph B.1.g.
    (2) In accordance with paragraph (d) of this section, a DoD 
Component's general terms and conditions for research awards must 
include the default wording that appendix D provides for paragraphs 
B.1.b and B.1.c of FMS Article IV. A DoD Component also may include 
paragraphs B.1.b and B.1.c in general terms and conditions for other 
non-construction awards.
    (3) In accordance with paragraph (e) of this section, a DoD 
Component's general terms and conditions for non-construction awards 
must include the default wording that Appendix D provides for paragraph 
B.1.d of FMS Article IV unless the DoD Component decides to waive any 
requirements in the applicable cost principles for recipients to obtain 
prior approval before including certain types of costs as direct 
charges to awards. If a DoD Component elects to waive any of those 
prior approval requirements, it must add wording to paragraph B.1.d to 
identify the specific types of costs for which recipients need not 
obtain DoD Component prior approval (thereby leaving in place the other 
prior approval requirements in the cost principles).
    (4) In accordance with paragraphs (f) and (g) of this section, a 
DoD Component's general terms and conditions for non-construction 
awards may include the default wording that appendix D provides for 
paragraphs B.1.e, B.1.f, and B.1.h and Section C of FMS Article IV. A 
DoD Component may modify the default wording as appropriate to the 
awards using its general terms and conditions (e.g., to limit the 
authorization for pre-award costs to a period less than 90 calendar 
days prior to the beginning date of the period of performance).
    (5) If no awards using a DoD Component's general terms and 
conditions will support non-construction activities, the DoD Component 
may reserve section B.1 of the default wording that appendix D provides 
for FMS Article IV.


Sec.  1128.420   Prior approvals for construction activities.

    (a) OMB guidance. OMB guidance in 2 CFR 200.308(g)(1) through (4) 
addresses prior approval requirements for revisions of a recipient's 
budget and program plans under a construction award or construction 
activities under an award that supports both construction and non-
construction activities.

[[Page 78398]]

    (b) DoD implementation of the guidance. DoD implements the guidance 
in 2 CFR 200.308(g)(1) through (4) through terms and conditions of 
awards for construction. A DoD Component's general terms and conditions 
for construction awards may only require additional prior approvals for 
budget and program revisions (i.e., prior approvals other than those 
authorized by this subpart) only in accordance with the exceptions 
provisions of 2 CFR 1126.3.
    (c) Award terms and conditions. In a DoD Component's general terms 
and conditions for construction awards or awards supporting 
construction activities, the DoD Component:
    (1) Must include the default wording that appendix D to this part 
provides for paragraph B.2 of FMS Article IV.
    (2) May reserve or remove the default wording appendix D to this 
part provides for paragraph B.1 and Section C of FMS Article IV unless 
some awards using the general terms and conditions will also support 
non-construction activities (if the DoD Component elects to remove 
Section C, it should redesignate Section D in the article as Section 
C).


Sec.  1128.425   Additional prior approval for awards that support both 
non-construction and construction activities.

    (a) OMB guidance. Guidance on an additional prior approval 
requirement for awards that support both construction and non-
construction activities is contained in 2 CFR 200.308(g)(5).
    (b) DoD implementation of the guidance. DoD implements the guidance 
in 2 CFR 200.308(g)(5) through terms and conditions for awards that 
support both non-construction and construction activities.
    (c) Award terms and conditions. If a DoD Component establishes 
general terms and conditions for awards that support both non-
construction and construction activities, the DoD Component may add the 
prior approval requirement for funding or budget transfers between 
construction and non-construction activities that is described in OMB 
guidance in 2 CFR 200.308(g)(5). The default wording that appendix D to 
this part provides for Section B of FMS Article IV includes a reserved 
paragraph B.3 in which the DoD Component may add appropriate wording to 
include that prior approval requirement.


Sec.  1128.430   Procedures for prior approvals.

    (a) OMB guidance. Guidance on procedures related to recipient 
requests for prior approval is contained in 2 CFR 200.308(h) and (i).
    (b) DoD implementation of the guidance. DoD implements the guidance 
in 2 CFR 200.308(h) and (i) for prior approval requests through award 
terms and conditions.
    (c) Award terms and conditions. A DoD Component must:
    (1) Include the default wording appendix D to this part provides 
for paragraph D.1 of FMS Article IV of its general terms and 
conditions.
    (2) Insert appropriate wording in lieu of the reserved paragraph 
D.2 that appendix D to this part includes in FMS Article IV to specify:
    (i) The format the recipient must use when it requests approval for 
budget revisions. As described in 2 CFR 200.308(h), the award term may 
allow the recipient to submit a letter of request but otherwise must 
specify that the recipient use the same format it used for budget 
information in its application or proposal.
    (ii) Any other procedural instructions related to requests for 
prior approvals for budget or program revisions (e.g., to whom requests 
must be submitted) that are common to the awards using the general 
terms and conditions. For procedural instructions that will vary from 
one award to another, it is appropriate to include wording that points 
to the award-specific terms and conditions as the source of the 
information.

Subpart E--Non-Federal Audits (FMS Article V)


Sec.  1128.500   Purpose of FMS Article V.

    FMS Article V of the general terms and conditions specifies 
requirements related to audits required under the Single Audit Act, as 
amended (31 U.S.C., chapter 75). The article thereby implements OMB 
guidance in subpart F of 2 CFR part 200.


Sec.  1128.505   Content of FMS Article V.

    (a) Requirement. A DoD Component's general terms and conditions 
must address audit requirements.
    (b) Award terms and conditions--(1) General. A DoD Component's 
general terms and conditions must include the default wording appendix 
E to this part provides for FMS Article V.
    (2) Exception. A DoD Component may reserve Section B of the default 
wording in appendix E if there will be no subawards to for-profit 
entities under any award using those terms and conditions.

Subpart F--Cost sharing or Matching (FMS Article VI)


Sec.  1128.600   Purpose of FMS Article VI.

    FMS Article VI sets forth requirements concerning recipients' cost 
sharing or matching under awards. It thereby implements OMB guidance 
in:
    (a) 2 CFR 200.306 and 200.308(c)(1)(vii); and
    (b) 2 CFR 200.434, in conjunction with FMS Article III in appendix 
C to this part.


Sec.  1128.605   Content of FMS Article VI.

    (a) Requirement. General terms and conditions for DoD grants and 
cooperative agreements under which there may be required cost sharing 
or matching must specify the criteria for determining allowability, 
methods for valuation, and requirements for documentation of cost 
sharing or matching.
    (b) Award terms and conditions--(1) General. A DoD Component's 
general terms and conditions must include as FMS Article VI the default 
wording appendix F to this part provides, with any revisions to the 
wording that are authorized by Sec. Sec.  1128.610 through 1128.635.
    (2) Exception. A DoD Component may reserve FMS Article VI of its 
general terms and conditions if it determines that there will be no 
cost sharing or matching required under any of the awards using those 
terms and conditions.


Sec.  1128.610   General requirement for cost sharing or matching.

    (a) Requirement. (1) FMS Article VI of the general terms and 
conditions must tell a recipient that:
    (i) It may find the amount or percentage of cost sharing or 
matching required under its award in the award cover pages.
    (ii) The cost sharing or matching amount or percentage identified 
in the award includes all required (but not voluntary uncommitted) 
contributions to the project or program by the recipient and its 
subrecipients, including any that involve third-party contributions or 
donations to the recipient and subrecipients.
    (iii) It must obtain the DoD Component's prior approval for any 
change in the required amount or percentage of cost share or match.
    (2) At a DoD Component's option, FMS Article VI also may require a 
recipient to obtain the DoD Component's prior approval if it wishes to 
substitute alternative cost sharing or matching contributions in lieu 
of specific contributions included in the

[[Page 78399]]

approved budget (e.g., to use a third-party in-kind contribution not 
included in the approved budget).
    (b) Award terms and conditions. To implement paragraph (a) of this 
section, a DoD Component's general terms and conditions must include 
the default wording Section I of Appendix F to this part provides as 
Section A of FMS Article VI. A DoD Component may insert wording in lieu 
of the reserved paragraph A.2.b if it elects to require recipients to 
obtain prior approval before substituting alternative cost sharing or 
matching contributions, as described in paragraph (a)(2) of this 
section.


Sec.  1128.615   General criteria for determining allowability as cost 
sharing or matching.

    (a) OMB guidance. The OMB guidance in 2 CFR 200.306(b) lists the 
basic criteria for the allowability of cost sharing or matching under 
Federal awards.
    (b) Award terms and conditions--(1) General. A DoD Component's 
general terms and conditions must include the default wording Section 
II of appendix F to this part provides as Section B of FMS Article VI 
to specify the allowability of cash or third-party in-kind 
contributions as cost sharing or matching.
    (2) Exception. A DoD Component may reserve paragraph B.4 of Section 
B of FMS Article VI in its general terms and conditions, or replace it 
with appropriate alternative wording, if the DoD Component has 
statutory authority to accept costs reimbursed by other Federal awards 
as cost sharing or matching under the awards using its general terms 
and conditions.


Sec.  1128.620   Allowability of unrecovered indirect costs as cost 
sharing or matching.

    (a) OMB guidance. The OMB guidance in 2 CFR 200.306(c) provides 
that unrecovered indirect costs may only be included as part of cost 
sharing and matching with the prior approval of the Federal awarding 
agency.
    (b) DoD implementation. DoD Components must allow any recipient 
that either has an approved negotiated indirect cost rate or is using 
the de minimis rate described in 2 CFR 200.414(f) to count unrecovered 
indirect costs toward any required cost sharing or matching under 
awards. The basis for this policy is that recipients' indirect costs 
that are allowable and allocable to DoD projects and programs are 
legitimate costs of carrying out those projects and programs.
    (c) Award terms and conditions. To implement the policy in 
paragraph (b) of this section, a DoD Component's general terms and 
conditions must include the default wording Section III of appendix F 
to this part provides as Section C of FMS Article VI unless a statute 
requires otherwise.


Sec.  1128.625   Allowability of program income as cost sharing or 
matching.

    (a) OMB guidance. OMB guidance in 2 CFR 200.307(e)(3) specifies 
that, with the prior approval of the Federal awarding agency, 
recipients may use program income to meet cost sharing or matching 
requirements of their awards.
    (b) Award terms and conditions--(1) General. A DoD Component's 
general terms and conditions must include the default wording Section 
IV of appendix F to this part provides as Section D of FMS Article VI 
if, in FMS Article VII of those terms and conditions, the DoD Component 
specifies that recipients dispose of program income using either:
    (i) The cost sharing or matching alternative described in paragraph 
(b)(1)(iii) of Sec.  1128.720; or
    (ii) A combination alternative, as described in paragraph 
(b)(1)(iv) of Sec.  1128.720, that includes use of at least some 
program income as cost sharing or matching.
    (2) Exception. A DoD Component may reserve Section D of FMS Article 
VI if FMS Article VII of those terms and conditions does not provide 
that recipients will use any program income as cost sharing or 
matching.


Sec.  1128.630   Valuation of services or property contributed or 
donated by recipients or subrecipients.

    (a) OMB guidance. OMB guidance in 2 CFR 200.306(d) specifies:
    (1) That values for recipients' and subrecipients' contributions of 
services or property toward cost sharing or matching must be 
established in accordance with the cost principles in subpart E of 2 
CFR part 200; and
    (2) Types of projects or programs under which recipients' or 
subrecipients' donations of buildings or land are allowable as cost 
sharing or matching, with the prior approval of the Federal awarding 
agency, and how the donations are to be valued in those cases.
    (b) DoD implementation. DoD implements the guidance in 2 CFR 
200.306(d) through award terms and conditions, with the following 
clarifications:
    (1) Cost principles to be used for valuation. (i) Values for 
recipients' and subrecipients' contributions of services or property 
toward cost sharing or matching must be established in accordance with 
the cost principles applicable to the entity making the contribution. 
Note that the applicable cost principles are in subpart E of 2 CFR part 
200 only if the entity making the contribution is an institution of 
higher education, nonprofit organization, State, local government, or 
Indian tribe.
    (ii) Consistent with the cost principles, what generally should be 
charged to awards for real property and equipment is depreciation 
rather than allowing a recipient's or subrecipient's donation of the 
property (i.e., counting the full value of the property toward cost 
sharing or matching). Note, however, that depreciation included in a 
recipient's or subrecipient's indirect costs is not appropriate for 
counting as cost sharing or matching under an individual award.
    (2) Donations of property to projects or programs under awards. (i) 
In addition to donations of buildings or land described in 2 CFR 
200.306(d), recipients and subrecipients may, with the prior approval 
of the DoD Component, donate other capital assets described in the cost 
principles in 2 CFR 200.439(b)(1) through (3). The basis for clarifying 
that recipients may donate other capital assets to projects or programs 
under awards is that, with the DoD Component's approval:
    (A) Capital expenditures to acquire those types of capital assets 
are allowable as direct charges to awards; and
    (B) The costs therefore satisfy the allowability criterion in 2 CFR 
200.306(b)(4) and can qualify as cost sharing or matching if they meet 
the other criteria listed in 2 CFR 200.306(b).
    (ii) However, when there are alternative ways for recipients to 
meet requirements for cost sharing or matching, DoD Components should 
not approve donations of capital assets to projects or programs under 
awards. Inclusion of the full value of a donated asset as project costs 
in the approved budget of an award is analogous to inclusion of the 
acquisition cost for an asset that is purchased under the award. 
Through the donation, the Government acquires an interest in the 
donated asset that must be resolved at time of disposition of the 
asset, which is best avoided if possible.
    (iii) Whenever a DoD Component permits a recipient to donate a 
capital asset to a project or program under an award, it should inform 
the cognizant Federal agency that negotiates the indirect cost rate for 
that recipient. Doing so enables the cognizant agency to take the 
donation into account when it establishes the recipient's indirect cost 
rate, given that the recipient may not include depreciation for the 
donated

[[Page 78400]]

asset as indirect costs that enter into the computation of the rate.
    (c) Award terms and conditions--(1) General. A DoD Component's 
general terms and conditions must use the default wording Section V of 
appendix F to this part provides as Section E of FMS Article VI.
    (2) Exception. A DoD Component's general terms and conditions may 
reserve paragraph E.2 of the default wording appendix F to this part 
provides if the DoD Component does not allow recipients to donate 
buildings, land, or other capital assets to projects or programs under 
awards using those terms and conditions.


Sec.  1128.635   Valuation of third-party in-kind contributions.

    (a) OMB guidance. OMB guidance in 2 CFR 200.306(e) through (j) and 
2 CFR 200.434(b) through (g) specifies how to value and document 
various types of third-party in-kind contributions or donations for 
cost sharing or matching purposes.
    (b) Award terms and conditions--(1) General. To implement the OMB 
guidance described in paragraph (a) of this section as it applies to 
valuation and documentation of third-party in-kind contributions and 
donations, a DoD Component's general terms and conditions must use the 
default wording Section VI of appendix F to this part provides as 
Section F of FMS Article VI.
    (2) Exception. A DoD Component's general terms and conditions may 
reserve any paragraph of the default wording Section VI of appendix F 
to this part provides for Section F of FMS Article VI if the DoD 
Component determines that there will be no third-party in-kind 
contributions of the type the paragraph addresses under awards using 
those terms and conditions.

Subpart G--Program Income (FMS Article VII)


Sec.  1128.700   Purpose of FMS Article VII.

    FMS Article VII of the general terms and conditions specifies 
requirements for program income that recipients earn. The article 
thereby implements OMB guidance in 2 CFR 200.80 and 200.307.


Sec.  1128.705   Content of FMS Article VII.

    (a) Requirement. General terms and conditions for DoD grants and 
cooperative agreements must address the kinds of income included as 
program income, the way or ways in which a recipient may use it, the 
duration of the recipient's accountability for it, and related matters.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must include as FMS Article VII the default wording appendix 
G to this part provides, with any revisions to the wording of Sections 
A, D, and E of the article that are authorized by Sec. Sec.  1128.710 
through 1128.725.


Sec.  1128.710   What program income includes.

    (a) OMB guidance. Under the definition of ``program income'' at 2 
CFR 200.80, and related OMB guidance at 2 CFR 200.307, an agency's 
regulations or award terms and conditions may include as program 
income:
    (1) Rebates, credits, discounts, and interest earned on any of 
them; and
    (2) Taxes, special assessments, levies, fines and other similar 
revenue raised by a governmental recipient.
    (b) DoD implementation. Unless a statute or program regulation 
adopted in the Code of Federal Regulations after opportunity for public 
comment specifies otherwise, each DoD Component must exclude the types 
of income listed in paragraphs (a)(1) and (2) of this section from 
program income for which recipients are accountable to the Federal 
Government.
    (c) Award terms and conditions--(1) General. Except as provided in 
paragraph (c)(2) of this section, a DoD Component must use the default 
wording provided in Section I of appendix G to this part as Section A 
of FMS Article VII in its general terms and conditions. Doing so 
excludes the types of income listed in paragraphs (a)(1) and (2) of 
this section from program income for which recipients are accountable 
to the Federal Government.
    (2) Exceptions. If a DoD Component has a statutory or regulatory 
basis for including one or both of the types of income described in 
paragraphs (a)(1) and (2) of this section, it may do so by 
appropriately revising the default wording appendix G provides for 
Section A of FMS Article VII. For example, to include as program 
income:
    (i) Rebates, credits, discounts, and interest earned on them, a DoD 
Component would reserve paragraph A.3.c and insert the wording of that 
paragraph as a new paragraph at the end of section A.2, thereby adding 
them to the list of items included as program income subject to FMS 
Article VII.
    (ii) Taxes, special assessments, levies, fines and other similar 
revenue raised by a governmental recipient, a DoD Component would 
reserve paragraph A.3.d and insert that wording as a new paragraph at 
the end of section A.2, thereby adding them to the list of items 
included as program income subject to FMS Article VII.


Sec.  1128.715   Recipient obligations for license fees and royalties.

    (a) Policy. Unless a statute or program regulation adopted in the 
Code of Federal Regulations after opportunity for public comment 
provides otherwise, a DoD Component's general terms and conditions may 
not specify that recipients have obligations to the Federal Government 
with respect to program income from license fees and royalties for 
patents or patent applications, copyrights, trademarks, or inventions 
produced under DoD awards.
    (b) Award terms and conditions--(1) General. Except as provided in 
paragraph (b)(2) of this section, a DoD Component's general terms and 
conditions must implement the policy in paragraph (a) of this section 
by including the default wording provided in Section III of appendix G 
to this part as Section D of FMS Article VII.
    (2) Exception. If a DoD Component has a statutory or regulatory 
basis for establishing recipient obligations for the license fees and 
royalties described in paragraph (a) of this section, it may reserve 
Section D of FMS Article VII in its general terms and conditions.


Sec.  1128.720   Program income use.

    (a) OMB guidance. OMB guidance in 2 CFR 200.307(e) identifies 
alternative ways that a Federal agency might specify that recipients 
use program income they earn.
    (b) DoD implementation. A DoD Component's general terms and 
conditions must specify how recipients are to use program income under 
awards using those terms and conditions.
    (1) The terms and conditions may specify one of the following ways 
for recipients to use program income:
    (i) Addition. A recipient under this alternative adds program 
income to the total amount of the approved budget, which consists of 
the Federal share of funding and any required matching or cost sharing.
    (ii) Deduction. A recipient using this alternative subtracts 
program income from total allowable costs to determine net allowable 
costs for purposes of determining the Federal share of funding and any 
required cost sharing or matching.
    (iii) Cost sharing or matching. A recipient under this alternative 
counts program income toward its required cost sharing or matching.
    (iv) Combination. The fourth alternative is a combination of the 
three described in paragraphs (b)(1)(i) through (iii) of this section. 
For example, an agency might specify one alternative to be used for 
program income up to a

[[Page 78401]]

dollar limit and a second alternative for any program income beyond 
that amount.
    (2) For research awards, absent compelling reasons to do otherwise 
for a specific set of general terms and conditions, a DoD Component 
must specify the addition alternative described in paragraph (b)(1)(i) 
of this section.
    (3) For general terms and conditions of other awards, a Component 
may specify any of the alternatives described in paragraph (a) of this 
section. However, note that the cost sharing or matching alternative is 
best used as part of a combination alternative, as described in 
paragraph (b)(1)(iv) of this section, unless the DoD Component knows at 
the time awards are made how much program income recipients will earn 
in relation to the amounts of their required cost sharing or matching.
    (c) Award terms and conditions. (1) Default--addition alternative. 
In accordance with the DoD implementation in paragraph (b) of this 
section, a DoD Component must use the default wording provided in 
Section IV of appendix G to this part as Section E of FMS Article VII 
in:
    (i) Research awards; and
    (ii) Other awards for which it elects to specify the addition 
alternative for use of program income.
    (2) Deduction alternative. A DoD Component electing to specify the 
deduction alternative for use of program income should modify the 
default wording appendix G to this part provides for Section E by:
    (i) Substituting the following wording for the default wording of 
paragraph E.1: ``1. You must use any program income that you earn 
during the period of performance under this award as a deduction from 
the total approved budget of this award. The program income must be 
used for the purposes and in accordance with the terms and conditions 
of the award.''
    (ii) Including an additional paragraph E.4 such as the following to 
inform recipients how the award will change if program income is 
deducted: ``If you report program income on the SF-425, we will 
recalculate the Federal share of the budget and the non-Federal share 
if there is one. We also will modify the award to reflect the 
recalculated share or shares and the amount of program income you must 
spend on the project, which is the difference between the originally 
approved and recalculated budget amounts.''
    (3) Cost-sharing or matching alternative. A DoD Component electing 
to specify the cost-sharing or matching alternative for use of program 
income should replace the default wording appendix G to this part 
provides for Section E with the following wording: ``You must use any 
program income that you earn during the period of performance under 
this award to meet any cost-sharing or matching requirement under this 
award. The program income must be used for the purposes and in 
accordance with the terms and conditions of the award.''
    (4) A combination of alternatives. A DoD Component electing to 
specify some combination of addition, deduction, and cost-sharing or 
matching alternatives must use wording in Section E of FMS Article VII 
that specifies requirements for each alternative in the combination 
that is consistent with the requirements specified for that alternative 
in paragraphs (c)(1), (2), or (3) of this section.


Sec.  1128.725   Program income after the period of performance.

    (a) OMB guidance. OMB guidance in 2 CFR 200.307(f) provides that an 
agency may specify in agency regulations, award terms and conditions, 
or agreements negotiated with recipients during the closeout process 
that a recipient is accountable to the Federal Government for program 
income earned after the end of the period of performance.
    (b) DoD implementation. A DoD Component should rarely, if ever, 
establish a requirement for a recipient to be accountable to the 
Federal Government for program income earned after the end of the 
period of performance.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must include as Section F of FMS Article VII the default 
wording for that section that is provided in Section V of appendix G to 
this part. That wording specifies that recipients are not accountable 
to the Federal Government for program income earned after the end of 
the performance period. If an exception is warranted for an individual 
award, the exception is properly addressed at the time of award in the 
award-specific terms and conditions.

Appendix A to Part 1128--Terms and Conditions for FMS Article I, 
``Financial Management System Standards''

    DoD Components must use the following standard wording in FMS 
Article I in accordance with Sec.  1128.105 of this part:
    FMS Article I. Financial management system standards. (December 
2014)
    Section A. System standard for States. As a State, you must 
expend and account for funds under this award in accordance with:
    1. Applicable State laws; and
    2. To the extent they comply with the requirements of Section B 
of this Article, your procedures for expending and accounting for 
your own State funds.
    Section B. System standards for all recipients. Your financial 
management system must provide for:
    1. Inclusion, in your accounts, of the following information 
about each DoD grant or cooperative agreement that you receive:
    a. That you received the award from the Department of Defense;
    b. The number and title listed in the Catalog of Federal 
Domestic Assistance for the DoD program under which the award was 
made;
    c. The DoD award number;
    d. The year (your fiscal year) in which you received the award;
    2. Accurate, current, and complete disclosure of the financial 
results of the award needed to comply with financial and 
programmatic reporting requirements that are specified in REP 
Articles I and II of these general terms and conditions, as 
supplemented by any award-specific terms and conditions of this 
award concerning reporting requirements. If you are asked at any 
time under this award to report financial information on an accrual 
basis, you:
    a. Need not establish an accrual accounting system if you 
maintain your records on a different basis; and
    b. May develop the accrual data based on an analysis of the data 
you have on hand.
    3. Records that identify adequately the sources of funds for all 
activities funded by DoD awards, including any required cost sharing 
or matching, and the application of those funds. This includes 
funding authorizations; your obligations and expenditures of the 
funds; unobligated balances; property and other assets under the 
award; program income; and interest.
    4. Effective control over, and accountability for, all funds, 
property, and other assets under this award. You must adequately 
safeguard all assets and assure they are used solely for authorized 
purposes (see Section C of this article for additional requirements 
concerning internal controls).
    5. Comparison of expenditures under this award for project or 
program purposes with amounts in the approved budget for those 
purposes.
    6. The ability to relate financial data to performance 
accomplishments under this award if you are required to do so by the 
programmatic reporting requirements in REP Article I of these 
general terms and conditions, as supplemented by any award-specific 
terms and conditions of this award concerning reporting 
requirements.
    7. Written procedures:
    a. To implement requirements specified in FMS Article II, 
``Payments;''
    b. For determining the allowability of costs, which for this 
award are determined in accordance with FMS Article III, ``Allowable 
costs, period of availability of funds, and fee or profit,'' of 
these general terms and conditions, as supplemented by any award-
specific terms and conditions of this award that relate to 
allowability of costs.
    Section C. Internal controls. Your system of internal controls 
must conform to OMB

[[Page 78402]]

guidance in 2 CFR 200.303. With respect to paragraph (e) of 2 CFR 
200.303, your internal control system must include measures to 
safeguard any information that Federal statute, Executive order, or 
regulation requires to be protected (e.g., personally identifiable 
or export controlled information), whether generated under the award 
or provided to you and identified as being subject to protection.

Appendix B to Part 1128--Terms and Conditions for FMS Article II, 
``Payments''

    DoD Components must use the following default wording in FMS 
Article II in accordance with Sec. Sec.  1128.205 through 1128.220 
of this part, which permit substitution or addition of wording, or 
both, when appropriate:
    FMS Article II. Payments. (December 2014)
    Section A. Awards to States. If the award-specific terms and 
conditions of this award do not identify it as an award subject to 
subpart A of 31 CFR part 205 (Department of the Treasury regulations 
implementing the Cash Management Improvement Act), then this award 
is subject to subpart B of that part. Consistent with subpart B of 
31 CFR part 205:
    1. Payment method, timing, and amounts. You must:
    a. Minimize the time between your receipt of a payment under 
this award and your disbursement of those funds for program 
purposes.
    b. Limit the amount of each advance payment request to the 
minimum amount you need to meet your actual, immediate cash 
requirements for carrying out the program or project.
    c. Submit each advance payment request approximately 10 days 
before you anticipate disbursing the requested amount for program 
purposes, so that your receipt of the funds will be as close in time 
as is administratively feasible to your actual cash outlay for 
direct program or project costs and the proportionate share of any 
allowable indirect costs.
    2. Interest. Unlike awards subject to subpart A of 31 CFR part 
205, neither you nor we will incur any interest liability due to a 
difference in timing between your receipt of payments under this 
award and your disbursement of those funds for program purposes.
    Section B. Awards to institutions of higher education, nonprofit 
organizations, local governments, and Indian tribes.
    1. Payment method. Unless the award-specific terms and 
conditions of this award provide otherwise, you are authorized to 
request advance payments under this award. That authorization is 
contingent on your continuing to maintain, or demonstrating the 
willingness to maintain, written procedures that minimize the time 
elapsing between your receipt of each payment and your disbursement 
of the funds for program purposes. Note that you are not required to 
request advance payments and may instead, at your option, request 
reimbursements of funds after you disburse them for program 
purposes.
    2. Amounts requested. You must:
    a. Limit the amount of any advance payment request to the 
minimum amount needed to meet your actual, immediate cash 
requirements for carrying out the purpose of the approved program or 
project, including direct program or project costs and a 
proportionate share of any allowable indirect costs.
    b. Exclude from any payment request amounts you are withholding 
from payments to contractors to assure satisfactory completion of 
the work. You may request those amounts when you make the payments 
to the contractors or to escrow accounts established to assure 
satisfactory completion of the work.
    c. Exclude from any payment request amounts from any of the 
following sources that are available to you for program purposes 
under this award: program income, including repayments to a 
revolving fund; rebates; refunds; contract settlements; audit 
recoveries; and interest earned on any of those funds. You must 
disburse those funds for program purposes before requesting 
additional funds from us.
    3. Timing of requests. For any advance payment you request, you 
should submit the request approximately 10 days before you 
anticipate disbursing the requested amount for program purposes. 
With time for agency processing of the request, that should result 
in payment as close as is administratively feasible to your actual 
disbursements for program or project purposes.
    4. Frequency of requests. You may request payments as often as 
you wish unless you have been granted a waiver from requirements to 
receive payments by electronic funds transfer (EFT). If you have 
been granted a waiver from EFT requirements, the award-specific 
terms and conditions of this award specify the frequency with which 
you may submit payment requests.
    5. Withholding of payments. We will withhold payments for 
allowable costs under the award at any time during the period of 
performance only if one or more of the following applies:
    a. We suspend either payments or the award, or disallow 
otherwise allowable costs, as a remedy under OAR Article III due to 
your material failure to comply with Federal statutes, regulations, 
or the terms and conditions of this award. If we suspend payments 
and not the award, we will release withheld payments upon your 
subsequent compliance. If we suspend the award, then amounts of 
payments are subject to adjustment in accordance with the terms and 
conditions of OAR Article III.
    b. You are delinquent in a debt to the United States as defined 
in OMB Circular A-129, ``Policies for Federal Credit Programs and 
Non-Tax Receivables,'' in which case we may, after reasonable 
notice, inform you that we will not make any further payments for 
costs you incurred after a specified date until you correct the 
conditions or liquidate the indebtedness to the Federal Government.
    c. The award-specific terms and conditions include additional 
requirements that provide for withholding of payments based on 
conditions identified during our pre-award risk evaluation, in which 
case you should have been notified about the nature of those 
conditions and the actions needed to remove the additional 
requirements.
    6. Depository requirements.
    a. There are no eligibility requirements for depositories you 
use for funds you receive under this award.
    b. You are not required to deposit funds you receive under this 
award in a depository account separate from accounts in which you 
deposit other funds. However, FMS Article I requires that you be 
able to account for the receipt, obligation, and expenditure of all 
funds under this award.
    c. You must deposit any advance payments of funds you receive 
under this award in insured accounts whenever possible and, unless 
any of the following apply, you must deposit them in interest-
bearing accounts:
    i. You receive a total of less than $120,000 per year under 
Federal grants and cooperative agreements.
    ii. You would not expect the best reasonably available interest-
bearing account to earn interest in excess of $500 per year on your 
cash balances of advance payments under Federal grants and 
cooperative agreements.
    iii. The best reasonably available interest-bearing account 
would require you to maintain an average or minimum balance higher 
than it would be feasible for you to do within your expected Federal 
and non-Federal cash balances.
    iv. A foreign government or banking system precludes your use of 
interest-bearing accounts.
    d. You may retain for administrative expenses up to $500 per 
year of interest that you earn in the aggregate on advance payments 
you receive under this award and other Federal grants and 
cooperative agreements. You must remit annually the rest of the 
interest to the Department of Health and Human Services, Payment 
Management System, using the procedures set forth in OMB guidance in 
2 CFR 200.305(b)(9).
    Section C. Electronic funds transfer and other payment 
procedural instructions or information.
    1. Electronic funds transfer. Unless the award-specific terms 
and conditions of this award provide otherwise, you will receive 
payments under this award by electronic funds transfer.
    2. [Reserved].

Appendix C to Part 1128--Terms and Conditions for FMS Article III, 
``Allowable Costs, Period of Availability of Funds, and Fee or Profit''

    DoD Components must use the following default wording in FMS 
Article III in accordance with sections 1128.305 through 1128.325 of 
this part, which permit substitution of alternative wording, 
addition of supplemental wording, or both, when appropriate:
    FMS Article III. Allowable costs, period of availability of 
funds, and fee or profit. (December 2014)
    Section A. Allowable costs. This section, with the clarification 
provided in Section B, specifies which Federal cost principles must 
be used in determining the allowability of costs charged to this 
award, a subrecipient's

[[Page 78403]]

costs charged to any cost-type subaward that you make under this 
award, and a contractor's costs charged to any cost-type procurement 
transaction into which you enter under this award. These cost 
principles also govern the allowable costs that you or a 
subrecipient of a subaward at any tier below this award may consider 
when establishing the amount of any fixed-amount subaward or fixed-
price procurement transaction at the next lower tier. The set of 
cost principles to be used in each case depends on the type of 
entity incurring the cost under the award, subaward, or contract.
    1. General case. If you, your subrecipient, or your contractor 
is:
    a. An institution of higher education, the allowability of costs 
must be determined in accordance with provisions of subpart E of OMB 
guidance in 2 CFR part 200 other than 2 CFR 200.400(g), supplemented 
by appendix III to that part.
    b. A hospital, the allowability of costs must be determined in 
accordance with provisions of appendix IX to 2 CFR part 200, which 
currently specifies the cost principles in appendix IX to 45 CFR 
part 75 as the applicable cost principles.
    c. A nonprofit organization other than a hospital or institution 
of higher education, the allowability of costs must be determined in 
accordance with provisions of subpart E of OMB guidance in 2 CFR 
part 200 other than 2 CFR 200.400(g), supplemented by appendices IV 
and VIII to that part. In accordance with guidance in 2 CFR 
200.401(c), a nonprofit organization listed in appendix VIII to 2 
CFR part 200 is subject to the cost principles for for-profit 
entities specified in paragraph 1.e of this section.
    d. A State, local government, or Indian tribe, the allowability 
of costs must be determined in accordance with applicable provisions 
of subpart E of OMB guidance in 2 CFR part 200 other than 2 CFR 
200.400(g), supplemented by appendices V through VII to that part.
    e. A for-profit entity (other than a hospital) or a nonprofit 
organization listed in Appendix VIII to 2 CFR part 200:
    i. The allowability of costs must be determined in accordance 
with:
    A. The cost principles for commercial organizations in the 
Federal Acquisition Regulation (FAR) at subpart 31.2 of 48 CFR part 
31, as supplemented by provisions of the Defense Federal Acquisition 
Regulation Supplement (DFARS) at subpart 231.2 of 48 CFR part 231; 
and
    B. For a for-profit entity, the additional provisions on 
allowability of audit costs, in 32 CFR 34.16(f).
    ii. The indirect cost rate to use in that determination is:
    A. The for-profit entity's federally negotiated indirect cost 
rate if it has one.
    B. Subject to negotiation between you and the for-profit entity 
if it does not have a federally negotiated indirect cost rate. The 
rate that you negotiate may provide for reimbursement only of costs 
that are allowable in accordance with the cost principles specified 
in paragraph A.1.e.i of this article.
    2. Exception. You may use your own cost principles in 
determining the allowability of a contractor's costs charged to a 
cost-type procurement transaction under this award--or in pricing 
for a fixed-price contract based on estimated costs--as long as your 
cost principles comply with the Federal cost principles that 
paragraph A.1 of this section identifies as applicable to the 
contractor.
    Section B. Clarifications concerning charges for professional 
journal publications. For an entity that Section A of this article 
makes subject to the cost principles in subpart E of 2 CFR part 200:
    1. Costs of publishing in professional journals are allowable 
under 2 CFR 200.461(b) only if they are consistently applied across 
the organization. An organization may not charge costs of journal 
publications as direct costs to this award if it charges any of the 
same type of costs for other journal publications as indirect costs.
    2. ``Costs of publication or sharing of research results'' in 2 
CFR 200.461(b)(3) are the ``charges for professional journal 
publications'' described in 2 CFR 200.461(b) and subject to the 
conditions of 2 CFR 200.461(b)(1) and (2).
    Section C. Period of availability of funds. You may charge to 
this award only:
    1. Allowable costs incurred during the period of performance 
specified in this award, including any subsequent amendments to it;
    2. Any pre-award costs that you are authorized (by either the 
terms and conditions of FMS Article IV or the DoD awarding official) 
to incur prior to the start of the period of performance, at your 
own risk, for purposes of the program or project under this award; 
and
    3. Costs of publishing in professional journals incurred after 
the period of performance, as permitted under 2 CFR 200.461(b)(3), 
if:
    a. We receive the request for payment for such costs no later 
than the date on which REP Article II requires you to submit the 
final financial report to us (or, if we grant your request for an 
extension of the due date, that later date on which the report is 
due); and
    b. Your reported expenditures on the final financial report 
include the amount you disbursed for those costs.
    Section D. Fee or profit.
    1. You may not receive any fee or profit under this award.
    2. You may not use funds available to you under this award to 
pay fee or profit for an entity of any type to which you make a 
subaward.
    3. You may pay fee or profit to an entity with which you enter 
into a procurement transaction to purchase goods or general support 
services for your use in carrying out the project or program under 
the award.

Appendix D to Part 1128--Terms and Conditions for FMS Article IV, 
``Revision of Budget and Program Plans''

    I. SECTION A OF FMS ARTICLE IV. DoD Components must use as 
Section A of FMS Article IV the following default wording in 
accordance with Sec.  1128.410 of this part:
    FMS Article IV. Revision of budget and program plans. (December 
2014)
    Section A. Approved budget. The approved budget of this award:
    1. Is the most recent version of the budget that you submitted 
and we approved (either at the time of the initial award or a more 
recent amendment), to summarize planned expenditures for the project 
or program.
    2. Includes all Federal funding that we make available to you 
under this award to use for program or project purposes and any cost 
sharing or matching that you are required to provide under this 
award for those same purposes.
    II. SECTIONS B AND C OF FMS ARTICLE IV. DoD Components must use 
the following default wording in Sections B and C of FMS Article IV 
in accordance with Sec. Sec.  1128.415 through 1128.425 of this 
part, which permit reserving wording, substitution of alternative 
wording, and addition of supplemental wording, when appropriate:
    Section B. Revisions requiring prior approval.
    1. Non-construction activities. You must request prior approval 
from us for any of the following program or budget revisions in non-
construction activities:
    a. A change in the scope or objective of the project or program 
under this award, even if there is no associated budget revision 
that requires our prior approval.
    b. A change in a key person identified in the award cover pages.
    c. The approved principal investigator's or project director's 
disengagement from the project for more than three months, or a 25 
percent reduction in his or her time devoted to the project.
    d. The inclusion of direct costs that require prior approval in 
accordance with the applicable cost principles, as identified in FMS 
Article III.
    e. The transfer to other categories of expense of funds included 
in the approved budget for participant support costs, as defined at 
2 CFR 200.75.
    f. A subaward to another entity under which it will perform a 
portion of the substantive project or program under the award, if it 
was not included in the approved budget. This does not apply to your 
contracts for acquisition of supplies, equipment, or general support 
services you need to carry out the program.
    g. Any change in the cost sharing or matching you provide under 
the award, as included in the approved budget, for which FMS Article 
VI requires prior approval.
    h. A transfer of funds among direct cost categories or programs, 
functions, and activities, if the federal share of the total value 
for your award exceeds the simplified acquisition threshold and the 
cumulative amount of the transfers exceeds or is expected to exceed 
10 percent of the approved budget.
    i. The need arises for additional Federal funds to complete the 
project or program.
    2. Construction activities. You must request prior approval from 
us for any of the following program or budget revisions in 
construction activities:
    a. A change in the scope or objective of the project or program 
under this award, even if there is no associated budget revision 
that requires our prior approval.

[[Page 78404]]

    b. The need arises for additional Federal funds to complete the 
project.
    c. The inclusion of direct costs that require prior approval in 
accordance with the applicable cost principles, as identified in FMS 
Article III.
    3. Funding transfers between construction and non-construction 
activities. [Reserved.]
    Section C. Pre-award costs, carry forward of unobligated 
balances, and one-time no-cost extensions. You are authorized, 
without requesting prior approval from us, to:
    1. Charge to this award after you receive it pre-award costs 
that you incurred, at your own risk, up to 90 calendar days before 
the start date of the period of performance, as long as they are 
costs that would be allowable charges to the project or program 
under the terms and conditions of FMS Article III if they were 
incurred during the period of performance.
    2. Carry forward an unobligated balance to a subsequent period 
of performance under this award.
    3. Initiate a one-time extension of the period of performance by 
up to 12 months, as long as:
    a. You notify us in writing with the supporting reasons and 
revised end date of the period of performance at least 10 calendar 
days before the current end date.
    b. The extension does not require any additional Federal 
funding.
    c. The extension does not involve any change in the scope or 
objectives of the project or program.
    III. SECTION D OF FMS ARTICLE IV. In accordance with Sec.  
1128.430 of this part, DoD Components must use the following default 
wording for paragraph D.1 of Section D of FMS Article IV and insert 
appropriate wording in lieu of the reserved paragraph D.2:
    Section D. Procedures.
    1. We will review each request you submit for prior approval for 
a budget or program change and, within 30 calendar days of our 
receipt of your request, we will respond to you in writing to 
either:
    a. Notify you whether your request is approved; or
    b. Inform you that we still are considering the request, in 
which case we will let you know when you may expect our decision.
    2. [Reserved.]

Appendix E to Part 1128--Terms and Conditions for FMS Article V, ``Non-
Federal Audits''

    DoD Components must use the following default wording in FMS 
Article V in accordance with section 1128.505 of this part:
    FMS Article V. Non-Federal audits. (December 2014)
    Section A. Requirements for entities subject to the Single Audit 
Act. You and each subrecipient under this award that is an 
institution of higher education, nonprofit organization, State, 
local government, or Indian tribe must comply with the audit 
requirements specified in subpart F of 2 CFR part 200, which is the 
OMB implementation of the Single Audit Act, as amended (31 U.S.C. 
chapter 75).
    Section B. Requirements for for-profit entities. Any for-profit 
entity that receives a subaward from you under this award is subject 
to the audit requirements specified in 32 CFR 34.16. Your subaward 
terms and conditions will require the subrecipient to provide the 
reports to you if it is willing to do so, so that you can resolve 
audit findings that pertain specifically to your subaward (e.g., 
disallowance of costs). If the for-profit entity is unwilling to 
agree to provide the auditor's report to you, contact the grants 
officer for this award to discuss an alternative approach for 
carrying out audit oversight of the subaward. If the grants officer 
does not provide an alternative approach within 30 days of receiving 
your request, you may determine an approach to ensure the for-profit 
subrecipient's compliance with the subaward terms and conditions, as 
described in OMB guidance at 2 CFR 200.501(h).

Appendix F to Part 1128--Terms and Conditions for FMS Article VI, 
``Cost Sharing or Matching''

    DoD Components that do not reserve FMS Article VI as permitted 
under Sec.  1128.605 of this part must use the wording provided in 
this appendix in accordance with Sec. Sec.  1128.610 through 
1128.635.
    I. SECTION A OF FMS ARTICLE VI. DoD Components must use as 
Section A of FMS Article VI the following wording in accordance with 
Sec.  1128.610 of this part:
    FMS Article VI. Cost sharing or matching. (December 2014)
    Section A. Required cost sharing or matching.
    1. If any cost sharing or matching is required under this award, 
the total amount or percentage required is shown in the award cover 
pages and included in the approved budget. That cost sharing or 
matching includes all:
    a. Cash and third party in-kind contributions.
    b. Contributions to the project or program made either by or 
through (if made by a third party) you and any subrecipients.
    2. You must obtain our prior approval if you wish to:
    a. Change the amount or percentage of cost sharing or matching 
required under this award.
    b. [Reserved].
    II. SECTION B OF FMS ARTICLE VI. DoD Components must use the 
following default wording in Section B of FMS Article VI in 
accordance with Sec.  1128.615 of this part, which permits reserving 
paragraph B.4 under certain conditions:
    Section B. Allowability as cost sharing or matching. Each cash 
or third party in-kind contribution toward any cost sharing or 
matching required under this award, whether put forward by you or a 
subrecipient under a subaward that you make, is allowable as cost 
sharing or matching if:
    1. You (or the subrecipient, if it is a subrecipient 
contribution) maintain records from which one may verify that the 
contribution was made to the project or program and, if it is a 
third-party in-kind contribution, its value.
    2. The contribution is not counted as cost sharing or matching 
for any other Federal award.
    3. The contribution is:
    a. Allowable under the cost principles applicable to you (or the 
subrecipient, if it is a subrecipient contribution) under FMS 
Article III of these terms and conditions; and
    b. Allocable to the project or program and reasonable.
    4. The Government does not pay for the contribution through 
another Federal award, unless that award is under a program that has 
a Federal statute authorizing application of that program's Federal 
funds to other Federal programs' cost sharing or matching 
requirements.
    5. The value of the contribution is not reimbursed by the 
Federal share of this award as either a direct or indirect cost.
    6. The contribution conforms to the other terms and conditions 
of this award, including the award-specific terms and conditions.
    III. SECTION C OF FMS ARTICLE VI. DoD Components must use the 
following default wording in Section C of FMS Article VI in 
accordance with Sec.  1128.620 of this part:
    Section C. Allowability of unrecovered indirect costs as cost 
sharing or matching. You may use your own or a subrecipient's 
unrecovered indirect costs as cost sharing or matching under this 
award. Unrecovered indirect costs means the difference between the 
amount of indirect costs charged to the award and the amount that 
you and any subrecipients could have charged in accordance with your 
respective approved indirect cost rates, whether those rates are 
negotiated or de minimis (as described in 2 CFR 200.414(f)).
    IV. SECTION D OF FMS ARTICLE VI. DoD Components must use the 
following default wording in Section D of FMS Article VI or reserve 
the section, in accordance with Sec.  1128.625 of this part:
    Section D. Allowability of program income as cost sharing or 
matching. If FMS Article VII of these general terms and conditions 
or the award-specific terms and conditions of this award specify 
that you are to use some or all of the program income you earn to 
meet cost-sharing or matching requirements under the award, then 
program income is allowable as cost sharing or matching to the 
extent specified in those award terms and conditions.
    V. SECTION E OF FMS ARTICLE VI. DoD Components must use the 
following default wording in Section E of FMS Article VI in 
accordance with Sec.  1128.630 of this part:
    Section E. Valuation of services or property that you or 
subrecipients contribute or donate. You must establish values for 
services or property contributed or donated toward cost sharing or 
matching by you or subrecipients in accordance with the provisions 
of this section. These contributions or donations are distinct from 
third-party contributions or donations to you or subrecipients, 
which are addressed in Section F of this article.
    1. Usual valuation of services or property that you or 
subrecipients contribute or donate. Values established for 
contributions of services or property by you or a subrecipient must 
be the amounts allowable

[[Page 78405]]

in accordance with the cost principles applicable to the entity 
making the contribution (i.e., you or the subrecipient), as 
identified in FMS Article III. For property, that generally is 
depreciation.
    2. Needed approvals for, and valuation of, property that you or 
subrecipients donate.
    a. Types of property that may be donated.
    i. Buildings or land. If the purposes of this award include 
construction, facilities acquisition, or long-term use of real 
property, you may donate buildings or land to the project if you 
obtain our prior approval. Donation of property to the project, as 
described in PROP Article I, means counting the value of the 
property toward cost sharing or matching, rather than charging 
depreciation.
    ii. Other capital assets. If you obtain our prior approval, you 
may donate to the project other capital assets identified in 2 CFR 
200.439(b)(1) through (3).
    b. Usual valuation of donated property. Unless you obtain our 
approval as described in paragraph E.2.c of this article, the value 
for the donated property must be the lesser of:
    i. The value of the remaining life of the property recorded in 
your accounting records at the time of donation, or
    ii. The current fair market value.
    c. Approval needed for alternative valuation of property. If you 
obtain our approval in the approved budget, you may count as cost 
sharing or matching the current fair market value of the donated 
property even if it exceeds the value of the remaining life of the 
property recorded in your accounting records at the time of 
donation.
    d. Federal interest in donated property. Donating buildings, 
land, or other property to the project, rather than charging 
depreciation, results in a Federal interest in the property in 
accordance with PROP Article I of these terms and conditions.
    VI. SECTION F OF FMS ARTICLE VI. DoD Components must use the 
following default wording in Section F of FMS Article VI or reserve 
the section, in accordance with Sec.  1128.635 of this part:
    Section F. Valuation of third-party in-kind contributions.
    1. General. If a third party furnishes goods or services to you 
or subrecipients that are to be counted toward cost sharing or 
matching under this award, the entity to which the third party 
furnishes the goods or services (i.e., you or a subrecipient) must 
document the fair market value of those in-kind contributions and, 
to the extent feasible, support those values using the same methods 
the entity uses internally.
    2. Valuation of third-party services. You must establish values 
for third-party volunteer services and services of third parties' 
employees furnished to you or subrecipients as follows:
    a. Volunteer services. Volunteer services furnished by third 
party professional and technical personnel, consultants, and other 
skilled and unskilled labor must be valued in accordance with 2 CFR 
200.306(e).
    b. Services of third parties' employees. When a third-party 
organization furnishes the services of its employees to you or a 
subrecipient, values for the contributions must be established in 
accordance with 2 CFR 200.306(f).
    c. Additional requirement for donations to nonprofit 
organizations. For volunteer services or services of third parties' 
employees furnished to a nonprofit organization:
    i. OMB guidance in 2 CFR 200.434(e) also applies and may require 
the nonprofit organization to allocate a proportionate share of its 
applicable indirect costs to the donated services.
    ii. The indirect costs that the nonprofit organization allocates 
to the donated services in that case must be considered project 
costs and may be either reimbursed under the award or counted toward 
required cost sharing or matching, but not both.
    2. Valuation of third-party property. You must establish values 
for third-party property furnished to you or subrecipients as 
follows:
    a. Supplies donated by third parties. When a third party 
organization donates supplies (e.g., office, laboratory, workshop, 
or classroom supplies), the value that may be counted toward cost 
sharing or matching may not exceed the fair market value of the 
supplies at the time of donation.
    b. Equipment, buildings, or land donated by third parties.
    i. The value of third-party donations of equipment, buildings, 
or land that may be counted toward cost sharing or matching when the 
third party transferred title to you or a subrecipient depends on 
the purpose of the award in accordance with the following:
    A. If one of the purposes of the award is to assist you or the 
subrecipient in the acquisition of equipment, buildings, or land, 
you may count the aggregate fair market value of the donated 
property toward cost sharing or matching.
    B. If the award's purposes instead include only the support of 
activities that require the use of equipment, buildings, or land, 
you may only charge depreciation unless you obtain our prior 
approval to count as cost sharing or matching the fair market value 
of equipment or other capital assets and fair rental charges for 
land.
    ii. The values of the donated property must be determined in 
accordance with the usual accounting policies of the entity to which 
the third party transferred title to the property, with the 
qualifications specified in 2 CFR 200.306(i)(1) and (2) for donated 
land and buildings and donated equipment, respectively.
    c. Use of space donated by third parties. If a third party makes 
space available for use by you or a subrecipient, the value that you 
may count toward cost sharing or matching may not exceed the fair 
rental value of comparable space as established by an independent 
appraisal, as described in 2 CFR 200.306(i)(3).
    d. Equipment loaned by third parties. If a third party loans 
equipment for use by you or a subrecipient, the value that you may 
count toward cost sharing or matching may not exceed its fair rental 
value.

Appendix G to Part 1128--Terms and Conditions for FMS Article VII, 
``Program Income''

    I. SECTION A OF FMS ARTICLE VII. DoD Components must use as 
Section A of FMS Article VII either the following default wording in 
accordance with Sec.  1128.705 of this part, or revised wording 
compliant with Sec.  1128.710 of this part:
    FMS Article VII. Program income. (December 2014)
    Section A. Definition. The term ``program income'' as used in 
this award:
    1. Is gross income that:
    a. You earn that is directly generated by a supported activity 
or earned as a result of this award; or
    b. A subrecipient earns as a result of a subaward you make under 
this award.
    2. Includes, but is not limited to, income earned under this 
award from:
    a. Fees for services performed;
    b. The use or rental of real or personal property acquired under 
any Federal award and currently administered under this award;
    c. The sale of commodities or items fabricated under this award; 
and
    d. License fees and royalties on patents and copyrights;
    e. Payments of principal and interest on loans made with Federal 
award funds.
    3. Does not include for purposes of this award any:
    a. Interest earned on advance payments, disposition of which is 
addressed in FMS Article II;
    b. Proceeds from the sale of real property, equipment or 
supplies, which is addressed in PROP Articles III and IV;
    c. Rebates, credits, discounts, and interest earned on any of 
them; and
    d. Governmental revenues, including any taxes, special 
assessments, levies, fines and similar revenues you raise.
    II. SECTIONS B AND C OF FMS ARTICLE VII. DoD Components must use 
the following default wording as Sections B and C of FMS Article VII 
in accordance with Sec.  1128.705 of this part:
    Section B. Encouragement to earn program income. You are 
encouraged to earn program income under this award when doing so 
does not interfere with the program or project the award supports.
    Section C. Costs of generating program income. You may deduct 
costs incidental to the generation of program income from the amount 
that you use in accordance with Section E of this Article, as long 
as those costs are not charged to this award (which includes their 
being counted toward any cost sharing or matching you are required 
to provide).
    III. SECTION D OF FMS ARTICLE VII. DoD Components must either 
use the following default wording as Section D of FMS Article VII in 
accordance with Sec.  1128.705 of this part or reserve the section 
if doing so complies with Sec.  1128.715 of this part:
    Section D. License fees and royalties. You have no obligations 
to the Federal Government with respect to program income earned 
under this award from license fees and royalties for patents or 
patent applications, copyrights, trademarks, or inventions developed 
or produced under the award.
    IV. SECTION E OF FMS ARTICLE VII. DoD Components must use either 
the following default wording as Section E of FMS Article VII or 
alternative wording that complies with Sec.  1128.720 of this part:

[[Page 78406]]

    Section E. Use of program income.
    1. You must use any program income that you earn during the 
period of performance under this award to increase the amount of the 
award (the sum of the Federal share and any cost sharing or matching 
you are required to provide), thereby increasing the amount budgeted 
for the project. The program income must be used for the purposes 
and under the terms and conditions of the award.
    2. Your use of the additional funding is subject to the terms 
and conditions of this award, including:
    a. FMS Article II concerning your use of balances of program 
income before you request additional funds from us; and
    b. FMS Article III concerning allowability of costs for which 
the funds may be used.
    3. You must report on each Federal Financial Report (SF-425) 
that you submit in accordance with REP Article II the program income 
that you earn and any that you use during the reporting period 
covered by that SF-425.
    V. SECTION F OF FMS ARTICLE VII. DoD Components must use the 
following default wording as Section F of FMS Article VII in 
accordance with Sec.  1128.725 of this part:
    Section F. Duration of accountability for program income. The 
requirements concerning disposition of program income in Section E 
of this Article apply only to program income you earn during the 
period of performance. There are no requirements under this award 
applicable to program income you earn after the end of the period of 
performance.

PART 1130--PROPERTY ADMINISTRATION: GENERAL AWARD TERMS AND 
CONDITIONS

Sec.
1130.1 Purpose of this part.
1130.2 Applicability of this part.
1130.3 Exceptions from requirements of this part.
1130.4 Organization of this part.
Subpart A--Title to Property (PROP Article I)
1130.100 Purpose of PROP Article I.
1130.105 Title to property acquired under awards.
1130.110 Property trust relationship.
1130.115 Title to federally owned property.
1130.120 Federal interest in donated property.
1130.125 Federal interest in property improved under awards.
Subpart B--Property Management System (PROP Article II)
1130.200 Purpose of PROP Article II.
1130.205 Insurance coverage for real property and equipment.
1130.210 Other management system standards for States.
1130.215 Other management system standards for institutions of 
higher education, nonprofit organizations, local governments, and 
Indian tribes.
Subpart C--Use and Disposition of Real Property (PROP Article III)
1130.300 Purpose of PROP Article III.
1130.305 Use of real property.
1130.310 Disposition of real property.
Subpart D--Use and Disposition of Equipment and Supplies (PROP Article 
IV)
1130.400 Purpose of PROP Article IV.
1130.405 Property subject to PROP Article IV.
1130.410 Requirements for a State's use and disposition of 
equipment.
1130.415 Use of equipment by an institution of higher education, 
nonprofit organization, local government, or Indian tribe.
1130.420 Disposition of equipment by an institution of higher 
education, nonprofit organization, local government, or Indian 
tribe.
1130.425 Use and disposition of supplies.
Subpart E--Use and disposition of federally owned property (PROP 
Article V)
1130.500 Purpose of PROP Article V.
1130.505 Content of PROP Article V.
Subpart F--Intangible Property (PROP Article VI)
1130.600 Purpose of PROP Article VI.
1130.605 Copyrights asserted in works developed or otherwise 
acquired under awards.
1130.610 Inventions developed under awards.
1130.615 Data produced under awards.
1130.620 Intangible property acquired, but not developed or 
produced, under awards.
Appendix A to Part 1130--Terms and conditions for PROP Article I, 
``Title to property''
Appendix B to Part 1130--Terms and conditions for PROP Article II, 
``Property management system''
Appendix C to Part 1130--Terms and conditions for PROP Article III, 
``Use and disposition of real property''
Appendix D to Part 1130--Terms and conditions for PROP Article IV, 
``Use and disposition of equipment and supplies''
Appendix E to Part 1130--Terms and conditions for PROP Article V, 
``Use and disposition of federally owned property''
Appendix F to Part 1130--Terms and conditions for PROP Article VI, 
``Intangible property''

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


Sec.  1130.1   Purpose of this part.

    (a) This part specifies standard wording of general terms and 
conditions concerning equipment, supplies, and real, intangible, and 
federally owned property.
    (b) It thereby implements OMB guidance in 2 CFR 200.310 through 
200.316, as that guidance applies to general terms and conditions.


Sec.  1130.2   Applicability of this part.

    The types of awards and entities to which this part and other parts 
in this subchapter apply are described in the subchapter overview at 2 
CFR 1126.2.


Sec.  1130.3   Exceptions from requirements of this part.

    Exceptions are permitted from the administrative requirements in 
this part only as described at 2 CFR 1126.3.


Sec.  1130.4   Organization of this part.

    (a) The content of this part is organized into subparts and 
associated appendices.
    (1) Each subpart provides direction to DoD Components on how to 
construct one article of general terms and conditions for grants and 
cooperative agreements.
    (2) For each subpart, there is a corresponding appendix with 
standard wording for terms and conditions of the article addressed by 
the subpart. Terms and conditions address rights and responsibilities 
of the Government and recipients.
    (b) A DoD Component must use the wording provided in each appendix 
in accordance with the direction in the corresponding subpart. That 
direction may permit DoD Components to vary from the standard wording 
in some situations.
    (c) The following table shows which article of general terms and 
conditions may be found in each of appendices A through F to this part 
(with the associated direction to DoD Components in subparts A through 
F, respectively):

------------------------------------------------------------------------
                                  You will find terms
                                    and conditions         That would
                                specifying recipients'    appear in an
           In . . .                   rights and          award within
                                   responsibilities     PROP Article . .
                                   related to . . .             .
------------------------------------------------------------------------
Appendix A....................  Title to property.....  I.
Appendix B....................  Property management     II.
                                 system.
Appendix C....................  Use and disposition of  III.
                                 real property.
Appendix D....................  Use and disposition of  IV.
                                 equipment and
                                 supplies.
Appendix E....................  Use and disposition of  V.
                                 federally owned
                                 property.
Appendix F....................  Intangible property...  VI.
------------------------------------------------------------------------


[[Page 78407]]

Subpart A--Title to Property (PROP Article I)


Sec.  1130.100   Purpose of PROP Article I.

    PROP Article I specifies in whom and under what conditions title to 
property vests under the award. It thereby implements OMB guidance:
    (a) Pertaining to vesting of title to property, in 2 CFR 
200.311(a), 200.312(a), 200.313(a), 200.314(a), and 200.315(a).
    (b) Pertaining to the property trust relationship in 2 CFR 200.316.


Sec.  1130.105   Title to property acquired under awards.

    (a) General policy. Title to tangible property that a recipient 
acquires under an award (whether by purchase, construction or 
fabrication, development, or otherwise), and title to intangible 
property that a recipient acquires other than by developing or 
producing it under an award, generally vests in the recipient subject 
to the conditions in PROP Articles II-IV and Section D of PROP Article 
VI, which protect the Federal interest in the property.
    (b) Exceptions to the general policy when there is statutory 
authority--(1) Exempt property in general. If a DoD Component has 
statutory authority to do so, it may vest title in recipients to 
property acquired under awards either unconditionally or subject to 
fewer conditions than those in PROP Articles II-IV and VI. This subpart 
refers to acquired property for which a DoD Component has such 
statutory authority--and elects to use it--as ``exempt property.''
    (2) Research awards. (i) Under 31 U.S.C. 6306, a DoD Component may 
vest title to tangible personal property (i.e., equipment and supplies) 
in a nonprofit institution of higher education or nonprofit 
organization whose primary purpose is conducting scientific research--
without further obligation to the Government or subject to conditions 
the DoD Component deems appropriate--if the property is bought with 
amounts provided under a grant or cooperative agreement for basic or 
applied research.
    (ii) As a matter of policy, to enhance the university 
infrastructure for future performance of defense research and research-
related education and training, DoD Components shall make maximum use 
of the authority of 31 U.S.C. 6306 to vest title to equipment in 
nonprofit institutions of higher education subject to only the 
following three conditions:
    (A) The recipient uses the equipment for the authorized purposes of 
the project or program until the property is no longer needed for those 
purposes.
    (B) The recipient manages the equipment as provided in PROP Article 
II of the general terms and conditions (see subpart B of this part). 
This includes maintaining property records that include the percentage 
of Federal participation in the costs of the project or program under 
which the recipient acquired the exempt property, so that the recipient 
may deduct the Federal share if it wishes to use the property in future 
contributions for cost sharing or matching purposes on Federal awards.
    (C) The DoD Component reserves the right to transfer title to the 
equipment to another recipient entity if the Principal Investigator 
relocates his or her research program to that entity.
    (c) Award terms and conditions--(1) General. Unless a DoD Component 
has a statute authorizing it to identify acquired property as exempt 
property, as described in paragraph (b) of this section, it must use 
the default wording Appendix A to this part provides for Section A of 
PROP Article I.
    (2) Exceptions. (i) If a DoD Component has statutory authority such 
as described in paragraph (b) of this section, and elects to use that 
authority for awards subject to its general terms and conditions, it 
must insert wording in paragraph A.2 of PROP Article I to:
    (A) Identify the type or types of property it is excepting from the 
standard requirements for title vesting, use, and disposition contained 
in PROP Articles II through IV and VI and reporting requirements 
contained in REP Article III of the general terms and conditions.
    (B) If it is excepting the property from some, but not all, of the 
standard requirements, identify the requirements to which the exempt 
property will be subject.
    (ii) Paragraph A.2 of PROP Article I in general terms and 
conditions used for research awards to institutions of higher education 
generally should provide for vesting of title to acquired equipment in 
those institutions subject only to the three conditions described in 
paragraph (b)(2)(ii) of this section.


Sec.  1130.110   Property trust relationship.

    (a) OMB guidance. OMB guidance in 2 CFR 200.316 describes the 
property trust relationship. It states that:
    (1) Recipients must hold real property, equipment, and intangible 
property acquired or improved under grants or cooperative agreements in 
trust for the beneficiaries of the projects or programs under which the 
property was acquired or improved; and
    (2) A Federal agency may require a recipient to record liens or 
other appropriate notices of record to indicate that personal or real 
property was acquired or improved under a grant or cooperative 
agreement, making the property's use and disposition subject to the 
award terms and conditions.
    (b) DoD implementation. A DoD Component's general terms and 
conditions must specify that recipients hold title to real property, 
equipment, and intangible property acquired or improved under DoD 
grants and cooperative agreements in trust for the beneficiaries of the 
projects or programs carried out under those awards.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions:
    (1) Must include the default wording appendix A to this part 
provides for paragraph B.1 of PROP Article I, except that a DoD 
Component may instead reserve Section B if there will be no acquisition 
or improvement of real property, equipment, or intangible property 
under awards using those general terms and conditions or subawards 
under those awards.
    (2) May add wording to the reserved paragraph B.2 of the default 
wording of Section B of PROP Article I to require recipients to record 
liens or other notices of record, as described in paragraph (a) of this 
section.


Sec.  1130.115   Title to federally owned property.

    (a) Requirement. A DoD Component's general terms and conditions 
must include the default wording appendix A to this part provides for 
Section C of PROP Article I to affirm that title to federally owned 
property remains with the Government.
    (b) Exception. A DoD Component may reserve Section C if it provides 
no federally owned property under its awards.


Sec.  1130.120   Federal interest in donated property.

    (a) Requirement. A DoD Component's general terms and conditions 
must inform recipients that the Government acquires an interest in any 
real property or equipment for which the value of the remaining life of 
the property in the recipient's accounting records or the fair market 
value of the property is counted toward required cost sharing or 
matching, rather than charging depreciation.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions therefore must either:
    (1) Include the default wording appendix A to this part provides 
for

[[Page 78408]]

Section D of PROP Article I to specify the Federal interest in donated 
real property or equipment; or
    (2) Reserve Section D of PROP Article I if the DoD Component does 
not permit recipients to count the fair market value of real property 
or equipment toward cost sharing or matching.


Sec.  1130.125   Federal interest in property improved under awards.

    (a) Requirement. General terms and conditions for DoD grants and 
cooperative agreements must address the Federal interest in 
improvements to real property or equipment that results if a recipient 
directly charges the costs of the improvements to an award.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions therefore must either:
    (1) Include the default wording appendix A to this part provides 
for Section E of PROP Article I to specify the Federal interest in 
improved real property or equipment; or
    (2) Reserve Section E of PROP Article I if there will be no 
improvements to real property or equipment under awards using those 
general terms and conditions or subawards under those awards.

Subpart B--Property Management System (PROP Article II)


Sec.  1130.200   Purpose of PROP Article II.

    (a) PROP Article II prescribes standards for:
    (1) Insurance coverage for real property and equipment acquired or 
improved under awards;
    (2) The system that a recipient uses to manage both equipment that 
is acquired or improved in whole or in part under awards and federally 
owned property.
    (b) It thereby implements OMB guidance in 2 CFR 200.310, and 
200.313(d)(1) through (4), and partially implements 2 CFR 200.313(b).


Sec.  1130.205   Insurance coverage for real property and equipment.

    (a) OMB guidance. OMB guidance in 2 CFR 200.310 includes a 
requirement for recipients' insurance coverage for real property and 
equipment acquired or improved under awards and states that federally 
owned property need not be insured unless required by Federal award 
terms and conditions.
    (b) DoD implementation. A DoD Component's general terms and 
conditions must require recipients to provide insurance coverage for 
real property and equipment acquired or improved under awards. However, 
unless a statute or program regulation adopted in the Code of Federal 
Regulations after opportunity for public comment specifies otherwise, 
DoD awards will not require recipients to insure federally owned 
property.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions therefore must either:
    (1) Include the default wording appendix B to this part provides 
for Section A of PROP Article II; or
    (2) Reserve Section A of PROP Article II if there will be no real 
property or equipment acquired or improved under awards using those 
terms and conditions or subawards under those awards.


Sec.  1130.210   Other management system standards for States.

    (a) Requirement. DoD Components' general terms and conditions must 
address the standards for States' property management systems.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions therefore must either:
    (1) Include the default wording appendix B to this part provides 
for Section B of PROP Article II; or
    (2) Reserve Section B of PROP Article II if no State will acquire 
or improve equipment, in whole or in part, or be accountable for 
federally owned property under awards using those general terms and 
conditions or subawards under those awards.


Sec.  1130.215   Other management system standards for institutions of 
higher education, nonprofit organizations, local governments, and 
Indian tribes.

    (a) Requirement. DoD Components' general terms and conditions must 
address the standards for property management systems of institutions 
of higher education, nonprofit organizations, local governments, and 
Indian tribes.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions therefore must either:
    (1) Include the default wording appendix B to this part provides 
for Section C of PROP Article II; or
    (2) Reserve Section C of PROP Article II if no institution of 
higher education, nonprofit organization, local government, or Indian 
tribe will acquire or improve equipment, in whole or in part, or be 
accountable for federally owned property under awards using those 
general terms and conditions or subawards under those awards.

Subpart C--Use and Disposition of Real Property (PROP Article III)


Sec.  1130.300   Purpose of PROP Article III.

    PROP Article III specifies requirements for recipients' use and 
disposition of real property acquired or improved under an award. It 
thereby implements OMB guidance in 2 CFR 200.311(b) and (c).


Sec.  1130.305   Use of real property.

    (a) OMB guidance. OMB guidance in 2 CFR 200.311(b) states that, 
except as otherwise provided by Federal statute or the Federal awarding 
agency, a recipient must use real property acquired or improved under 
an award for the originally authorized purpose as long as needed for 
that purpose, during which time the recipient must not dispose of the 
property or encumber its title or other interests.
    (b) DoD implementation. Unless a statute or program regulation 
adopted in the Code of Federal Regulations after opportunity for public 
comment specifies otherwise, DoD awards must permit recipients to do 
the following:
    (1) While real property acquired or improved under an award still 
is needed for the authorized purpose, also use it for other projects or 
programs that either are supported by DoD Components or other Federal 
agencies or not federally supported, as long as that use does not 
interfere with the property's use for the authorized purpose.
    (2) After the real property no longer is needed for the authorized 
purpose, with the written approval of the award administration office, 
use the property on other federally supported projects or programs that 
have purposes consistent with those authorized for support by the DoD 
Component that made the award under which the property was acquired or 
improved.
    (c) Award terms and conditions. DoD Component general terms and 
conditions must either:
    (1) Include the default wording appendix C to this part provides 
for Section A of PROP Article III; or
    (2) If a statute or program regulation in the Code of Federal 
Regulations specifies different requirements for recipients' use of 
real property, substitute alternative wording for Section A to specify 
those requirements.


Sec.  1130.310   Disposition of real property.

    (a) OMB guidance. OMB guidance in 2 CFR 200.311(c):
    (1) Addresses the recipient's responsibility to request disposition 
instructions for real property when the recipient no longer needs it 
for the originally authorized purpose; and
    (2) Identifies three alternative disposition methods those 
instructions may specify.
    (b) DoD implementation. DoD implements the guidance in 2 CFR 
200.311(c) through award terms and conditions that govern disposition 
of

[[Page 78409]]

real property acquired or improved under awards.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must include the default wording appendix C to this part 
provides for Section B of PROP Article III to specify requirements 
concerning disposition of real property acquired or improved under 
awards.

Subpart D--Use and Disposition of Equipment and Supplies (PROP 
Article IV)


Sec.  1130.400   Purpose of PROP Article IV.

    PROP Article IV specifies requirements for recipients' use and 
disposition of equipment and supplies in which there is a Federal 
interest. It thereby implements OMB guidance in:
    (a) 2 CFR 200.313(a) through (c), 200.313(d)(5), and 200.313(e) as 
that guidance applies to requirements for use and disposition of 
equipment; and
    (b) 2 CFR 200.314, as that guidance applies to requirements for use 
and disposition of supplies acquired under an award.


Sec.  1130.405   Property subject to PROP Article IV.

    (a) Requirement. DoD Components' general terms and conditions must 
identify the types of non-exempt property to which requirements for use 
and disposition of equipment and supplies apply.
    (b) Award terms and conditions. To implement the requirement in 
paragraph (a) of this section, a DoD Component's general terms and 
conditions must use the default wording appendix D to this part 
provides for Section A of PROP Article IV. That wording identifies the 
categories of equipment and supplies in which there is a Federal 
interest, which are the categories to which the requirements for use 
and disposition apply.


Sec.  1130.410   Requirements for a State's use and disposition of 
equipment.

    (a) OMB guidance. OMB guidance in:
    (1) 2 CFR 200.313(a) sets forth basic conditions for use of 
equipment acquired under an award that apply when title to the 
equipment is vested in a recipient conditionally, because the awarding 
agency either does not have statutory authority to vest title in the 
equipment unconditionally or elects not to do so.
    (2) 2 CFR 200.313(b) provides that a State must use, manage, and 
dispose of equipment in accordance with State laws and procedures.
    (b) DoD implementation. DoD implements 2 CFR 200.313(a) and (b) 
through award terms and conditions that govern States' use and 
disposition of equipment.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must use the default wording appendix D to this part 
provides for Section B of PROP Article IV to specify the requirements 
for a State's use and disposition of equipment in which there is a 
Federal interest.


Sec.  1130.415   Use of equipment by an institution of higher 
education, nonprofit organization, local government, or Indian tribe.

    (a) OMB guidance. OMB guidance in:
    (1) 2 CFR 200.313(a) sets forth basic conditions for use of 
equipment acquired under an award that apply when title to the 
equipment is vested in a recipient conditionally, because the awarding 
agency either does not have statutory authority to vest title in the 
equipment unconditionally or elects not to do so.
    (2) 2 CFR 200.313(c) provides for use of equipment by an 
institution of higher education, nonprofit organization, local 
government, or Indian tribe.
    (3) 2 CFR 200.313(d)(5) calls for use of sales procedures to ensure 
highest possible return when selling equipment.
    (b) DoD implementation. For equipment in which there is a Federal 
interest under awards to institutions of higher education, nonprofit 
organizations, local governments, or Indian tribes, DoD implements 
through award terms and conditions the following portions of 2 CFR part 
200 as they apply to use of equipment prior to the time of its 
disposition:
    (1) 2 CFR 200.313(a) and (c); and
    (2) 2 CFR 200.313(d)(5), as it applies to equipment sales prior to 
the time of disposition, to offset the acquisition cost of replacement 
equipment.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must use the default wording appendix D to this part 
provides for Section C of PROP Article IV to specify the requirements 
for use of equipment described in paragraph (b) of this section.


Sec.  1130.420   Disposition of equipment by an institution of higher 
education, nonprofit organization, local government, or Indian tribe.

    (a) OMB guidance. OMB guidance in 2 CFR 200.313(e) addresses 
disposition of original or replacement equipment acquired under an 
award by an institution of higher education, nonprofit organization, 
local government, or Indian tribe.
    (b) DoD implementation. DoD implements 2 CFR 200.313(e) through 
award terms and conditions that govern disposition of original or 
replacement equipment acquired under an award by an institution of 
higher education, nonprofit organization, local government, or Indian 
tribe when there is a Federal interest in the equipment.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must use the default wording appendix D to this part 
provides for Section D of PROP Article IV to specify the requirements 
for disposition of equipment described in paragraph (b) of this 
section.


Sec.  1130.425   Use and disposition of supplies.

    (a) OMB guidance. OMB guidance in 2 CFR 200.314 sets forth 
requirements for use and disposition of supplies acquired under an 
award.
    (b) DoD implementation. DoD implements 2 CFR 200.314 through award 
terms and conditions that govern use and disposition of supplies 
acquired under awards either by purchase or by donation as cost sharing 
or matching.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must use the default wording appendix D to this part 
provides for Section E of PROP Article IV to specify the requirements 
for use and disposition of acquired supplies.

Subpart E--Use and Disposition of Federally Owned Property (PROP 
Article V)


Sec.  1130.500   Purpose of PROP Article V.

    PROP Article V specifies requirements for recipients' use and 
disposition of federally owned property. It implements the portion of 
OMB guidance in 2 CFR 200.312(a) that applies to disposition of 
federally owned property.


Sec.  1130.505   Content of PROP Article V.

    A DoD Component's general terms and conditions must either:
    (a) Include the default wording appendix E to this part provides 
for PROP Article V to specify requirements for use and disposition of 
federally owned property; or
    (b) Reserve PROP Article V if there is no possibility of recipients 
or subrecipients being accountable for federally owned property under 
awards using those terms and conditions.

Subpart F--Intangible Property (PROP Article VI)


Sec.  1130.600   Purpose of PROP Article VI.

    PROP Article VI sets forth the rights and responsibilities of 
recipients and the Government with respect to intangible property. It 
thereby

[[Page 78410]]

implements OMB guidance in 2 CFR 200.315.


Sec.  1130.605   Copyrights asserted in works developed or otherwise 
acquired under awards.

    (a) OMB guidance. OMB guidance in 2 CFR 200.315(b) addresses 
recipients' and the Government's rights related to works that 
recipients may copyright.
    (b) DoD implementation. DoD implements 2 CFR 200.315(b) through 
award terms and conditions that specify recipient and Government rights 
with respect to copyrightable works.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must use the default wording appendix F to this part 
provides for Section A of PROP Article VI to affirm the recipient's 
right to assert copyright in works it develops or otherwise acquires 
under an award, as well as the Government's right to use the works for 
Federal purposes.


Sec.  1130.610   Inventions developed under awards.

    (a) OMB guidance. OMB guidance in 2 CFR 200.315(c) states that 
recipients are subject to applicable regulations concerning patents and 
inventions, including Department of Commerce regulations at 37 CFR part 
401.
    (b) DoD implementation. In implementing 2 CFR 200.315(c) for awards 
for the performance of experimental, developmental, or research work, 
DoD:
    (1) Extends to other entities the patent rights provisions of 
chapter 18 of Title 35 of the U.S. Code and 37 CFR part 401 that 
directly apply to small business firms and nonprofit organizations. 
This broadened applicability is in accordance with the February 18, 
1983, Presidential memorandum on Government patent policy, referred to 
in Executive Order 12591, ``Facilitating Access to Science and 
Technology.''
    (2) Establishes a default requirement for recipients to provide 
final reports listing all subject inventions under their awards or 
stating there were none, a requirement that 37 CFR 401.5(f)(1) provides 
as an agency option.
    (3) Incorporates the prohibition in 35 U.S.C. 212 on asserting 
Federal Government rights in inventions made by recipients of 
scholarships, fellowships, training grants, or other awards made 
primarily for educational purposes.
    (c) Award terms and conditions. (1) Awards for research, 
developmental, or experimental work. A DoD Component's general terms 
and conditions for awards for the performance of experimental, 
developmental, or research work funded in whole or in part by the 
Government must include the default wording appendix F to this part 
provides for Section B of PROP Article VI, with one permitted 
exception. The exception is that a DoD Component may reserve or 
substitute alternative wording for paragraph B.2.b of Section B of PROP 
Article VI, as appropriate, if it elects to:
    (i) Omit the requirement for final invention reports;
    (ii) Substitute ``120 calendar days'' for ``90 calendar days'' to 
provide an additional 30 days for recipient's submissions of final 
reports after the end date of the period of performance; or
    (iii) Include a requirement for recipients to submit information 
about each patent application they submit for a subject invention, 
interim listings of all subject inventions, or both, which the 
Department of Commerce regulations at 37 CFR 401.5(f)(2) and (3) permit 
agencies to require.
    (2) Awards for primarily educational purposes. A DoD Component's 
general terms and conditions for awards to support scholarships or 
fellowships, training grants, or other awards for primarily educational 
purposes must replace the default wording appendix F to this part 
provides for Section B of PROP Article VI with an alternative award 
provision stating that the Federal Government will have no rights to 
inventions made by recipients.
    (3) Awards for other purposes. A DoD Component developing general 
terms and conditions for awards other than those described in 
paragraphs (c)(1) and (2) of this section should:
    (i) Consult its intellectual property counsel if it anticipates 
that recipients may develop patentable inventions under its awards, to 
identify any applicable statutes or regulations and determine an 
appropriate substitute for the default wording appendix F to this part 
provides for Section B of PROP Article VI; or
    (ii) Reserve Section B of PROP Article VI if it does not expect 
development of any patentable inventions under those awards.


Sec.  1130.615   Data produced under awards.

    (a) OMB guidance. OMB guidance in 2 CFR 200.315(d) and (e) 
addresses rights in data under awards.
    (b) DoD implementation. DoD implements 2 CFR 200.315(d) and (e) 
through award terms and conditions.
    (c) Award terms and conditions--(1) General. A DoD Component's 
general terms and conditions must include the default wording appendix 
F to this part provides for Section C of PROP Article VI.
    (2) Exception. A DoD Component may reserve paragraph C.2 of Section 
C of PROP Article VI in its general terms and conditions if:
    (i) Those terms and conditions will not be used for research 
awards; and
    (ii) The DoD Component determines that no research data as defined 
in 2 CFR 200.315 will be generated under the awards using those terms 
and conditions.


Sec.  1130.620   Intangible property acquired, but not developed or 
produced, under awards.

    (a) OMB guidance. OMB guidance in 2 CFR 200.315(a) addresses use 
and disposition of intangible property that is acquired under awards 
(in addition to vesting of title, which is implemented in Sec.  
1130.105 and appendix A to this part).
    (b) DoD implementation. DoD implements 2 CFR 200.315(a) through 
award terms and conditions that govern use and disposition of 
intangible property that is acquired, but not developed or produced, 
under awards.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must include the default wording appendix F to this part 
provides for Section D of PROP Article VI.

Appendix A to Part 1130--Terms and Conditions for PROP Article I, 
``Title To Property''

    I. SECTION A OF PROP ARTICLE I. DoD Components must use as 
Section A of PROP Article I the following default wording in 
accordance with Sec.  1130.105 of this part, which permits addition 
of wording to paragraph A.2 if statutory authority exists:

PROP Article I. Title to Property. (December 2014)

    Section A. Title to property acquired under this award.
    1. General. Other than any property identified in paragraph A.2 
of this section as exempt property:
    a. Title to real property, equipment, and supplies that you 
acquire (whether by purchase, construction or fabrication, 
development, or otherwise) and charge as direct project costs under 
this award vests in you, the recipient. Title to intangible property 
that you acquire (other than by developing or producing it) under 
this award also vests in you.
    b. That title is a conditional title, subject to the terms and 
conditions in PROP Articles II-IV, Section D of PROP Article VI, and 
REP Article III of this award.
    c. There is a Federal interest in the property, other than 
intangible property that you develop or produce under the award. For 
real property, equipment, and intangible property, we retain this 
Federal interest until final disposition of the property under PROP 
Article III (for real property), PROP Article IV (for equipment), or 
Section D of PROP Article

[[Page 78411]]

VI (for intangible property that is acquired, other than by 
developing or producing it), a period that in some cases may extend 
beyond closeout of this award.
    2. Exempt property. [Reserved].
    II. SECTION B OF PROP ARTICLE I. DoD Components must use as 
Section B of PROP Article I the following default wording in 
accordance with Sec.  1130.110 of this part, which permits insertion 
of wording in the reserved paragraph B.2 to specify requirements for 
liens or other notices of record:
    Section B. Property trust relationship.
    1. Basic requirement. Other than intangible property that you 
develop or produce under the award, you hold any real property, 
equipment, or intangible property that you acquire or improve under 
this award in trust for the beneficiaries of the project or program 
that you are carrying out under the award.
    2. Notices of record. [Reserved].
    III. SECTION C OF PROP ARTICLE I. DoD Components must use as 
Section C of PROP Article I the following default wording in 
accordance with Sec.  1130.115 of this part:
    Section C. Federally owned property. Title to any federally 
owned property that we provide to you under this award (or for which 
accountability is transferred to this award from another Federal 
award) remains with the Government.
    IV. SECTION D OF PROP ARTICLE I. DoD Components must either use 
the following default wording as Section D of PROP Article I, or 
reserve Section D, in accordance with Sec.  1130.120 of this part:
    Section D. Federal interest in donated real property or 
equipment. If real property or equipment is acquired under this 
award through your donation of the property to the project or 
program (i.e., counting the value of the remaining life of the 
property recorded in your accounting records or the fair market 
value as permitted under FMS Article VI of this award as part of 
your share of project costs to meet any cost sharing or matching 
requirements, rather than charging depreciation):
    1. The Government acquires through that donation an interest in 
the real property or equipment, the value of which at any given time 
is the product of:
    a. The Federal share of the project costs under this award; and
    b. The current fair market value of the property at that time.
    2. The real property or equipment is subject to Section B of 
this article and the terms and conditions of PROP Articles II-IV and 
REP Article III that are applicable to property acquired under the 
award.
    3. The Federal interest in the real property or equipment must 
be addressed at the time of property disposition.
    V. SECTION E OF PROP ARTICLE I. DoD Components must either use 
the following default wording as Section E of PROP Article I, or 
reserve Section E, in accordance with Sec.  1130.125 of this part:
    Section E. Federal interest in property improved under the 
award.
    1. The Government has an interest in improvements (as distinct 
from ordinary repairs and maintenance) you make to an item of real 
property or equipment if you charge the costs of the improvements as 
direct costs to this award.
    2. We thereby acquire an interest in the property if the 
Government did not previously have one. If the Government already 
had an interest in the property, the value of that Federal interest 
in the property increases by the amount of the Federal interest in 
the improvements.
    3. The property is subject to Section B of this article and the 
terms and conditions of PROP Articles II-IV and REP Article III that 
are applicable to real property or equipment acquired under the 
award.
    4. The Federal interest must be addressed at the time of 
property disposition.

Appendix B to Part 1130--Terms and Conditions for PROP Article II, 
``Property Management System''

    I. SECTION A OF PROP ARTICLE II. DoD Components must either use 
the following default wording as Section A of PROP Article II, or 
reserve Section A, in accordance with Sec.  1130.205 of this part:

PROP Article II. Property Management System. (December 2014)

    Section A. Insurance coverage for real property and equipment. 
You must, at a minimum, provide the equivalent insurance coverage 
for real property and equipment acquired or improved under this 
award as you provide for real property and equipment that you own.
    II. SECTION B OF PROP ARTICLE II. DoD Components must either use 
the following default wording as Section B of PROP Article II, or 
reserve Section B, in accordance with Sec.  1130.210 of this part:
    Section B. Other management system standards for a State.
    1. Equipment. Your property management system for equipment 
acquired or improved in whole or in part under this award must be in 
accordance with your State laws and procedures.
    2. Federally owned property. You may use your own property 
management system for any federally owned property for which you are 
accountable, as long as it meets the following minimum standards:
    a. Records. Your records must include for each item of federally 
owned property:
    i. A description of the item.
    ii. The location of the item.
    iii. The serial or other identification number.
    iv. Which Federal agency holds title.
    v. The date you received the item.
    vi. Any data on the ultimate disposition of the item, such as 
the date of disposal.
    vii. The Federal award identification number of the award under 
which you are accountable for the item.
    b. Inventory. You must take a physical inventory of federally 
owned property at least biennially and reconcile the results with 
your records.
    c. Control system. You must:
    i. Maintain an internal property control system with adequate 
safeguards to prevent loss, damage, or theft of federally owned 
property.
    ii. Investigate any loss, damage, or theft of federally owned 
property and promptly notify the award administration office.
    d. Maintenance. You must maintain the property in good 
condition.
    II. SECTION C OF PROP ARTICLE II. DoD Components must use the 
following default wording as Section C of PROP Article II in 
accordance with Sec.  1130.215 of this part:
    Section C. Other management system standards for an institution 
of higher education, nonprofit organization, local government, or 
Indian tribe. Your procedures for managing equipment (including 
replacement equipment) acquired or improved in whole or in part 
under this award and any federally owned property for which you are 
accountable under this award must, as a minimum, meet the 
requirements in this section.
    1. Records. You must maintain records that include for each item 
of equipment or federally owned property:
    a. A description of the item.
    b. The serial or other identification number.
    c. Who holds title (e.g., you or the Government and, if the 
latter, which Federal agency).
    d. The source of funding for the equipment, including the award 
number, or the source of the federally owned property, including the 
award number of the award under which you are accountable for the 
property.
    e. The acquisition date and cost of the equipment (or 
improvement to the equipment) or the date you received the federally 
owned property.
    f. The location, use, and condition of the equipment or 
federally owned property.
    g. Information from which one can calculate the amount of the 
Federal interest in the acquisition or improvement of the item (this 
amount is zero after you compensate us for the Federal interest in 
the item or improvement).
    h. Any data on the ultimate disposition of the item including 
the date of disposal and sale price.
    2. Labelling. You must ensure that property owned by the Federal 
Government is labeled to identify it as federally owned property.
    3. Inventory. You must take a physical inventory of equipment in 
which there is a Federal interest and reconcile the results with 
your records at least once every 2 years.
    4. Control system. You must:
    a. Maintain an internal property control system with adequate 
safeguards to prevent loss, damage, or theft of equipment and 
federally owned property.
    b. Investigate any loss, damage, or theft and notify the award 
administration office if it involved equipment in which there is a 
Federal interest under the award or federally owned property.
    5. Maintenance. You must maintain equipment acquired or improved 
in whole or in part under the award and federally owned property in 
good condition.


[[Page 78412]]



Appendix C to Part 1130--Terms and Conditions for PROP Article III, 
``Use and Disposition of Real Property''

    I. SECTION A OF PROP ARTICLE III. DoD Components must use either 
the following default wording or alternative wording as Section A of 
PROP Article III, in accordance with Sec.  1130.305 of this part:

PROP Article III. Use and Disposition of Real Property. (December 2014)

    Section A. Use of real property.
    1. You must use real property acquired or improved under this 
award for the originally authorized purpose as long as needed for 
that purpose. During that time, you may not:
    a. Dispose of the property except, with the approval of the 
award administration office, to acquire replacement property under 
this award, in which case you may use the proceeds from the 
disposition as an offset to the cost of the replacement property; or
    b. Encumber the title or other interests in the property without 
the approval of the award administration office identified in this 
award.
    2. During the time that the real property is used for the 
originally authorized purpose, you may make the property available 
for use on other projects or programs, but only if that use will not 
interfere with the property's use as needed for its originally 
authorized purpose.
    a. First preference must be given to other projects or programs 
supported by DoD Components and second preference to those supported 
by other Federal agencies.
    b. Third preference is for other projects or programs not 
currently supported by the Federal Government. You should charge 
user fees for use of the property in those cases, if it is at all 
practicable.
    3. When the real property is no longer needed for the originally 
authorized purpose, with the written approval of the award 
administration office, you may delay final disposition of the 
property to use it on other federally sponsored projects or 
programs. A condition for the award administration office's approval 
is that the other projects or programs have purposes consistent with 
those authorized for support by the DoD Component that made the 
award under which the property was acquired or improved.
    II. SECTION B OF PROP ARTICLE III. DoD Components must use the 
following default wording as Section B of PROP Article III in 
accordance with Sec.  1130.310 of this part:
    Section B. Disposition of real property. When you no longer need 
real property for the originally authorized purpose, you must obtain 
disposition instructions from the award administration office except 
as provided in paragraph A.3 of this article. Those instructions 
will provide for one of the following three alternatives, which are 
that you:
    1. Retain title after compensating us for the Federal interest 
in the property, which is to be computed as specified in the 
definition of ``Federal interest.''
    2. Sell the property and compensate us for the Federal interest 
in the property, as described in 2 CFR 200.311(c)(2).
    3. Transfer title to us or a third party we designate, as 
described in 2 CFR 200.311(c)(3).

Appendix D to Part 1130--Terms and Conditions for PROP Article IV, 
``Use and Disposition of Equipment and Supplies''

    DoD Components must use as Sections A through F of PROP Article 
IV the following default wording in accordance with Sec. Sec.  
1130.405 through 1130.425 of this part:

PROP Article IV. Use and Disposition of Equipment and Supplies. 
(December 2014)

    Section A. Property subject to this article. This article 
specifies requirements for use and disposition of equipment and 
supplies. If a provision of PROP Article I or an award-specific term 
or condition of this award identifies any equipment or supplies as 
exempt property, requirements of this Article apply to that exempt 
property only to the extent specified in that provision of PROP 
Article I or the award-specific term or condition. The types of non-
exempt property to which this article applies are:
    1. Supplies that you acquire either by purchase or by donation 
as cost sharing or matching under this award; and
    2. Equipment for which title is vested conditionally in you. 
That includes equipment with a conditional title resulting from your 
having, either under this award or under a previous award from which 
you transferred accountability for the equipment to this award:
    a. Directly charged as project costs, in whole or in part, the 
acquisition (by purchase, construction or fabrication, or 
development) of equipment;
    b. Donated the equipment to the project or program by counting 
the value of the remaining life of the property recorded in your 
accounting records or the fair market value toward any cost sharing 
or matching requirements under the award, rather than charging 
depreciation (see PROP Article I, Section D); or
    c. Directly charged as project costs improvements to the 
equipment that meet the criteria given in paragraph E.1 of PROP 
Article I.
    Section B. Requirements for a State's use and disposition of 
equipment. You:
    1. Must use the equipment for the authorized purposes of the 
project or program during the period of performance, or until the 
property is no longer needed for those purposes.
    2. May not encumber the property without the prior written 
approval of the award administration office.
    3. Must use and dispose of the equipment in accordance with your 
State laws and procedures.
    Section C. Use of equipment by an institution of higher 
education, nonprofit organization, local government, or Indian 
tribe. You:
    1. Must use the equipment for the authorized purposes of the 
project or program under this award until the equipment is no longer 
needed for those purposes, whether or not the project or program 
continues to be supported by this award.
    2. May not encumber the equipment without the prior written 
approval of the award administration office.
    3. During the time that the equipment is used for the project or 
program under this award:
    a. You must make the equipment available for use on other 
projects or programs but only if that use will not interfere with 
the equipment's use as needed for the project or program supported 
by this award.
    i. First preference must be given to other projects or programs 
supported or previously supported by DoD Components and second 
preference to those supported or previously supported by other 
Federal agencies.
    ii. Third preference is for other projects or programs not 
supported by the Federal Government. You should charge user fees for 
use of the equipment in those cases, if it is at all practicable.
    b. You may use the equipment, if you need to acquire replacement 
equipment, as a trade-in or sell it (using sales procedures designed 
to ensure the highest possible return) and use the proceeds from the 
sale to offset the cost of the replacement equipment.
    4. When the equipment is no longer needed for the project or 
program under this award, you may defer final disposition of the 
equipment and continue to use it on other federally sponsored 
projects or programs. You must give first priority to other projects 
or programs supported by DoD Components.
    5. Notwithstanding the encouragement in FMS Article VII to earn 
program income, you may not use equipment in which there currently 
is a Federal interest--whether you acquired it under this award or 
are otherwise accountable for it under this award--to provide 
services for a fee that is less than private companies charge for 
equivalent services.
    Section D. Disposition of equipment by an institution of higher 
education, nonprofit organization, local government, or Indian 
tribe. You must request disposition instructions from the award 
administration office when either original or replacement equipment 
acquired under this award with a current fair market value that 
exceeds $5,000 is no longer needed for the original project or 
program or for other federally sponsored activities as described in 
paragraph C.4 of this article. For each item of equipment with a 
current fair market value of $5,000 or less, you may retain, sell, 
or otherwise dispose of the item with no further obligation to the 
Federal Government.
    1. We may issue disposition instructions that:
    a. Allow you to retain or sell any item of equipment after 
compensating us for the Federal interest in the property, which is 
to be computed as specified in the definition of ``Federal 
interest.''; or
    b. Require you to transfer title to the equipment to a Federal 
agency or a third party, in which case you are entitled to 
compensation from us for the non-Federal interest in the equipment, 
plus any reasonable shipping or interim storage costs incurred.
    2. If we fail to provide disposition instructions for any item 
of equipment

[[Page 78413]]

within 120 calendar days of receiving your request, you may retain 
or sell the equipment but you must compensate us for the amount of 
the Federal interest in the equipment.
    3. If you sell the equipment:
    i. You must use sales procedures designed to ensure the highest 
possible return; and
    ii. You may deduct and retain for selling and handling expenses 
either $500 or ten percent of the proceeds, whichever is less.
    Section E. Use and disposition of supplies acquired under this 
award.
    1. Use. As long as we retain a Federal interest in supplies 
acquired under this award either by purchase or by donation as cost 
sharing or matching, you may not use the supplies to provide 
services to other organizations for a fee that is less than private 
companies charge for equivalent services, notwithstanding the 
encouragement in FMS Article VII to earn program income.
    2. Disposition. If you have a residual inventory of unused 
supplies with aggregate value exceeding $5,000 at the end of the 
period of performance under this award, and the supplies are not 
needed for any other Federal award, you must retain the supplies or 
sell them but must in either case compensate us for the amount of 
the Federal interest in the supplies. You may deduct and retain for 
selling and handling expenses either $500 or ten percent of the 
proceeds, whichever is less.

Appendix E to Part 1130--Terms and Conditions for PROP Article V, ``Use 
and Disposition of Federally Owned Property''

    DoD Components must use as PROP Article V the following default 
wording in accordance with Sec.  1130.505 of this part:

PROP Article V. Use and Disposition of Federally Owned Property. 
(December 2014)

    Section A. Use. During the time that federally owned property 
for which you are accountable under this award is used for the 
project or program supported by the award, you:
    1. Also may make the property available for use on other 
federally supported projects or programs, but only if that use will 
not interfere with the property's use for the project or program 
supported by this award. You must give first priority to other 
projects or programs supported by DoD Components.
    2. May use the property for purposes other than federally 
supported projects or programs only with the prior approval of the 
awarding office or, if you request approval after the award is made, 
the award administration office.
    Section B. Disposition. You must request disposition 
instructions from the award administration office for any federally 
owned property under this award, including any property for which a 
subrecipient is accountable under a subaward you make under this 
award, either:
    1. At any time during the period of performance if the property 
is no longer needed for the project or program supported by this 
award; or
    2. At the end of the period of performance.

Appendix F to Part 1130--Terms and Conditions for PROP Article VI, 
``Intangible Property''

    DoD Components must use as PROP Article VI the following default 
wording in accordance with Sec. Sec.  1130.605 through 1130.620 of 
this part, which permit revisions or reservations of the default 
wording of Section B and paragraph C.2:

PROP Article VI. Intangible Property. (December 2014)

    Section A. Assertion of copyright.
    1. You may assert copyright in any work that is eligible for 
copyright protection if you acquire ownership of it under this 
award, either by developing it or otherwise.
    2. With respect to any work in which you assert copyright, as 
described in paragraph A.1 of this section, the Department of 
Defense reserves a royalty-free, nonexclusive and irrevocable 
license to:
    a. Reproduce, publish, or otherwise use the work for Federal 
Government purposes; and
    b. Authorize others to reproduce, publish, or otherwise use the 
work for Federal Government purposes.
    Section B. Inventions developed under the award.
    1. Applicability of Governmentwide clause for research awards. 
You must comply with the Governmentwide patent rights award clause 
published at 37 CFR 401.14, with the modifications described in 
paragraph B.2 of this section. DoD adopts that Governmentwide clause 
for the following entities, thereby broadening the applicability 
beyond types of entities included in the definition of 
``contractor'' in 37 CFR part 401:
    a. Any governmental or nonprofit entity (the types of entities 
subject to these general terms and conditions) receiving a DoD award 
for the performance of experimental, research, or developmental 
work;
    b. Any governmental, nonprofit, or for-profit entity receiving a 
subaward to perform experimental, research, or developmental work 
under an award described in paragraph B.1.a of this section.
    2. Modifications to the wording of the Governmentwide clause. 
DoD adopts the Governmentwide clause at 37 CFR 401.14, as described 
in paragraph B.1 of this section, with the following modifications:
    a. Terminology. Throughout the Governmentwide award clause:
    i. Insert the terms ``recipient'' and ``subrecipient (or 
contractor to the recipient or to a subrecipient)'' to replace the 
terms ``contractor'' and ``subcontractor,'' respectively.
    ii. Insert the terms ``award'' and ``subaward (or contract under 
either the award or a subaward)'' to replace the terms ``contract'' 
and ``subcontract,'' respectively.
    b. Final report. Add a new subparagraph (f)(5) to read, ``The 
recipient must submit a final report listing all subject inventions 
made under the award or stating that there were none. The final 
report is due 90 calendar days after the end date of the period of 
performance unless you request and we grant an extension of the due 
date.''
    c. Broadening applicability to all entities. Delete paragraphs 
(g)(2) and (3) of the Governmentwide clause, redesignate paragraph 
(g)(1) as paragraph (g), and delete the phrase ``to be performed by 
a small business firm or domestic nonprofit organization'' from 
paragraph (g) as redesignated.
     Section C. Data produced under the award.
    1. Data in general. The Federal Government has the right to:
    a. Obtain, reproduce, publish, or otherwise use the data 
produced under this award; and
    b. Authorize others to receive, reproduce, publish, or otherwise 
use the data produced under this award for Federal Government 
purposes.
    2. Research data requested under the Freedom of Information Act 
(FOIA).
    a. If we receive a request under the FOIA for ``research data'' 
that are related to ``published research findings'' produced under 
this award and that were ``used by the Federal Government in 
developing an agency action that has the force and effect of law,'' 
you must provide the data to us within a reasonable time after we 
request it from you, so that the data can be made available to the 
public through procedures established under the FOIA.
    b. For purposes of the requirement in paragraph C.2.a of this 
section, 2 CFR 200.315(e) provides definitions of the phrases 
``published research findings,'' ``used by the Federal Government in 
developing an agency action that has the force and effect of law,'' 
and ``research data.''
     Section D. Use and disposition of intangible property acquired, 
but not developed or produced, under the award.
    1. Applicability. This section applies to a patent, patent 
application, copyright, or other intangible property acquired, but 
not developed or produced, under this award.
    2. Use. You:
    a. Must use the intangible property for the authorized purpose 
under this award until the intangible property is no longer needed 
for that purpose, whether or not that purpose is still being 
supported by this award.
    b. May not encumber the intangible property without the prior 
written approval of the award administration office.
    3. Disposition. When the intangible property is no longer needed 
for the originally authorized purpose, you must contact the award 
administration office to arrange for disposition in accordance with 
the procedures specified for disposition of equipment in either 
section B or D of PROP Article IV, as applicable.

PART 1132--RECIPIENT PROCUREMENT PROCEDURES: GENERAL AWARD TERMS 
AND CONDITIONS

Sec.
1132.1 Purpose of this part.
1132.2 Applicability of this part.
1132.3 Exceptions from requirements of this part.
1132.4 Organization of this part.
Subpart A--Procurement Standards for States (PROC Article I)
1132.100 Purpose of PROC Article I.
1132.105 Content of PROC Article I.

[[Page 78414]]

Subpart B--Procurement Standards for Institutions of Higher Education, 
Nonprofit Organizations, Local Governments, and Indian Tribes (PROC 
Article II)
1132.200 Purpose of PROC Article II.
1132.205 Procurement procedures.
1132.210 Procurement of recovered materials.
1132.215 Review of recipient procurement documents.
1132.220 Bonding requirements.
Subpart C--Contract Provisions for Recipient Procurements (PROC Article 
III)
1132.300 Purpose of PROC Article III.
1132.305 Administrative requirements.
1132.310 National policy requirements.
Appendix A to Part 1132--Terms and Conditions for PROC Article I, 
``Procurement standards for States''
Appendix B to Part 1132--Terms and Conditions for PROC Article II, 
``Procurement standards for institutions of higher education, 
nonprofit organizations, local governments, and Indian tribes''
Appendix C to Part 1132--Terms and Conditions for PROC Article III, 
``Contract provisions for recipient procurements''

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


Sec.  1132.1   Purpose of this part.

    (a) This part specifies standard wording of general terms and 
conditions concerning recipients' purchases of property (supplies, 
equipment, and real property) and services with project funds under 
grants and cooperative agreements.
    (b) It thereby implements OMB guidance in 2 CFR 200.317 through 
200.326, and appendix II to 2 CFR part 200, as those portions of 2 CFR 
part 200 apply to general terms and conditions. It also partially 
implements 2 CFR 200.205(d), 200.213, and 200.517.


Sec.  1132.2   Applicability of this part.

    The types of awards and entities to which this part and other parts 
in this subchapter apply are described in the subchapter overview at 2 
CFR 1126.2.


Sec.  1132.3   Exceptions from requirements of this part.

    Exceptions are permitted from the administrative requirements in 
this part only as described at 2 CFR 1126.3.


Sec.  1132.4   Organization of this part.

    (a) The content of this part is organized into subparts and 
associated appendices.
    (1) Each subpart provides direction to DoD Components on how to 
construct one article of general terms and conditions for grants and 
cooperative agreements.
    (2) For each subpart, there is a corresponding appendix with 
standard wording for terms and conditions of the article addressed by 
the subpart. Terms and conditions address rights and responsibilities 
of the Government and recipients.
    (b) A DoD Component must use the wording provided in each appendix 
in accordance with the direction in the corresponding subpart. That 
direction may permit DoD Components to vary from the standard wording 
in some situations.
    (c) The following table shows which article of general terms and 
conditions may be found in each of appendices A through C to this part 
(with the associated direction to DoD Components in subparts A through 
C, respectively):

------------------------------------------------------------------------
                                  You will find terms
                                    and conditions         That would
                                specifying recipients'    appear in an
           In . . .                   rights and          award within
                                   responsibilities     PROC Article . .
                                   related to . . .             .
------------------------------------------------------------------------
Appendix A....................  Procurement standards   I.
                                 for States.
Appendix B....................  Procurement standards   II.
                                 for institutions of
                                 higher education,
                                 nonprofit
                                 organizations, local
                                 governments, and
                                 Indian tribes.
Appendix C....................  Contract provisions     III.
                                 for recipient
                                 procurements.
------------------------------------------------------------------------

Subpart A--Procurement Standards for States (PROC Article I)


Sec.  1132.100   Purpose of PROC Article I.

    PROC Article I of the general terms and conditions specifies 
requirements for a State's procurement of property and services. It 
thereby implements OMB guidance in 2 CFR 200.317 and partially 
implements guidance in 2 CFR 200.205(d) and 200.213.


Sec.  1132.105   Content of PROC Article I.

    (a) Requirement. A DoD Component's general terms and conditions 
must address requirements for States' procurement systems.
    (b) Award terms and conditions. (1) General. Except as provided in 
paragraph (b)(2) of this section, a DoD Component's general terms and 
conditions must use the wording appendix A to this part provides for 
PROC Article I.
    (2) Exception. A DoD Component's general terms and conditions may 
instead reserve PROC Article I if the DoD Component determines that it 
is not possible that any States will receive:
    (i) DoD Component awards using those general terms and conditions; 
or
    (ii) Subawards from recipients of DoD Component awards using those 
general terms and conditions.

Subpart B--Procurement Standards for Institutions of Higher 
Education, Nonprofit Organizations, Local Governments, and Indian 
Tribes (PROC Article II)


Sec.  1132.200   Purpose of PROC Article II.

    PROC Article II of the general terms and conditions specifies 
procurement procedures for a recipient organization other than a State 
or for-profit entity. It thereby:
    (a) Implements OMB guidance in 2 CFR 200.318 through 200.323, 
200.324(a) and (b), and 200.325;
    (b) Partially implements 2 CFR 200.205(d) and 200.213; and
    (c) Implements, in conjunction with PROC Article III, 2 CFR 
200.326.


Sec.  1132.205   Procurement procedures.

    (a) Requirement. A DoD Component's general terms and conditions 
must address requirements for procurement systems of institutions of 
higher education, nonprofit organizations, local governments, and 
Indian tribes.
    (b) Award terms and conditions. In order to implement the 
requirement described in paragraph (a) of this section, a DoD 
Component's general terms and conditions must use the wording that 
Section I of appendix B provides for Sections A through F of PROC 
Article II.


Sec.  1132.210   Procurement of recovered materials.

    (a) Requirement. General terms and conditions for DoD grants and 
cooperative agreements must address requirements for procurement of 
recovered materials if State agencies or agencies of a political 
subdivision of a State may receive awards using those terms and 
conditions or be subrecipients under those awards.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must either:
    (1) Use the wording that Section II of appendix B provides for 
Section G of PROC Article II, to specify requirements

[[Page 78415]]

for a local government or other political subdivision of a State to 
comply with Resource Conservation and Recovery Act requirements; or
    (2) Reserve Section G if the DoD Component determines that it is 
not possible that a political subdivision of a State will receive 
either:
    (i) An award using those terms and conditions; or
    (ii) A subaward under an award using those terms and conditions.


Sec.  1132.215   Review of recipient procurement documents.

    (a) Requirements. A DoD Component's general terms and conditions 
must:
    (1) Include a requirement for recipients to make technical 
specifications for proposed procurements available upon the DoD 
Component's request, as described in 2 CFR 200.324(a).
    (2) Reserve the DoD Component's right to review a recipient's pre-
procurement documents when any of the conditions described in 2 CFR 
200.324(b)(1) through (5) apply and the recipient is not exempted from 
the requirement in accordance with 2 CFR 200.324(c).
    (b) Award terms and conditions. To implement the requirements 
described in paragraph (a) of this section, a DoD Component's general 
terms and conditions must use the wording that Section III of appendix 
B to this part provides for Section H of PROC Article II.


Sec.  1132.220   Bonding requirements.

    (a) Requirements. General terms and conditions for a DoD 
Component's grants and cooperative agreements must require each 
recipient to meet minimum bonding requirements if it awards any 
construction or facility improvement contract with a value in excess of 
the simplified acquisition threshold. A recipient would instead use its 
own bonding requirements if the DoD Component determined that the 
recipient's bonding policy and requirements are adequate to protect 
Federal interests.
    (b) Award terms and conditions--(1) General. To implement the 
requirement in paragraph (a) of this section, a DoD Component's general 
terms and conditions must use the wording that section IV of appendix B 
to this part provides for Section I of PROC Article II. The DoD 
Component may include a provision in the award-specific terms and 
conditions to override Section I of PROC Article II in each award to a 
recipient for which it made the determination about the recipient's 
bonding policy and requirements, as described in paragraph (a) of this 
section.
    (2) Exceptions. A DoD Component's general terms and conditions may 
omit Section I if the DoD Component determines that there will be no 
construction or facility improvement contracts with values in excess of 
the simplified acquisition threshold under awards using its general 
terms and conditions.

Subpart C--Contract Provisions for Recipient Procurements (PROC 
Article III)


Sec.  1132.300   Purpose of PROC Article III.

    PROC Article III of the general terms and conditions specifies 
provisions that recipients must include in their contracts, as 
applicable. It thereby:
    (a) Implements, in conjunction with PROC Articles I and II, OMB 
guidance concerning recipients' contract provisions in 2 CFR 200.317 
and 200.326;
    (b) Partially implements guidance in 2 CFR 200.205(d) and 200.213 
concerning suspension and debarment requirements; and
    (c) Partially implements guidance in 2 CFR 200.517 concerning 
retention and access of auditors' records.


Sec.  1132.305   Administrative requirements.

    (a) Requirement. A DoD Component's general terms and conditions 
must require recipients to include in their contracts standard 
administrative requirements related to remedies, termination, allowable 
costs, rights in copyrights and data, records access and retention, and 
reporting.
    (b) Award terms and conditions. To implement the requirement 
described in paragraph (a) of this section, a DoD Component's general 
terms and conditions must use the wording that section I of appendix C 
to this part provides for Section A of PROC Article III.


Sec.  1132.310   National policy requirements.

    (a) Requirement. A DoD Component's general terms and conditions 
must require recipients to include provisions in their contracts that 
require the contractors to comply with applicable national policy 
requirements.
    (b) Award terms and conditions--(1) General. To implement the 
requirement in paragraph (a) of this section, a DoD Component's general 
terms and conditions must use the wording that Section II of appendix C 
to this part provides for Section B of PROC Article III.
    (2) Exceptions. (i) The Wage Rate Requirements (Construction) 
statute (40 U.S.C. 3141-44, 3146, and 3147) does not apply to a program 
carried out through grants or cooperative agreements unless another 
statute makes it apply to that program. A DoD Component's general terms 
and conditions therefore should not include the provision that appendix 
C to this part includes as paragraph B.2 of PROC Article III unless 
another statute makes the Wage Rate Requirements statute apply to the 
program using those general terms and conditions.
    (ii) If a DoD Component determines that any of the other national 
policy requirements in Section B will not apply to any of the awards 
subject to its general terms and conditions, the DoD Component may 
reserve the paragraphs of Section B addressing those requirements. 
Should a future need arise to include the requirements in a given 
award, the DoD Component may include them as award-specific terms and 
conditions.

Appendix A to Part 1132--Terms and Conditions for PROC Article I, 
``Procurement Standards for States''

    DoD Components must use the following standard wording in PROC 
Article I in accordance with Sec.  1132.105 of this part:

PROC Article I. Procurement Standards for States. (December 2014)

     Section A. Use of State procurement system. Subject only to the 
conditions in Sections B through D of this article, you must use the 
same policies and procedures to procure supplies, equipment, real 
property, and services under this award that you use when you 
procure those items for State purposes using non-Federal funds.
     Section B. Procurement of recovered materials. You must comply 
with the Resource Conservation and Recovery Act requirements 
described in OMB guidance in 2 CFR 200.322.
     Section C. Debarment and suspension. You must comply with 
restrictions on awarding procurement transactions to excluded or 
disqualified parties and other requirements specified by OMB 
guidelines on nonprocurement debarment and suspension at 2 CFR part 
180, as implemented by DoD at 2 CFR part 1125.
     Section D. Contract provisions. You must include provisions in 
your procurement transactions under this award to require the 
contractors' compliance with the requirements specified in PROC 
Article III, as applicable.

Appendix B to Part 1132--Terms and Conditions for PROC Article II, 
``Procurement Standards for Institutions of Higher Education, Nonprofit 
Organizations, Local Governments, and Indian Tribes''

    I. SECTIONS A THROUGH F OF PROC ARTICLE II. DoD Components must 
use the following standard wording in Sections A

[[Page 78416]]

through F of PROC Article II in accordance with Sec.  1132.205 of 
this part:

PROC Article II. Procurement Standards for Institutions of Higher 
Education, Nonprofit Organizations, Local Governments, and Indian 
Tribes. (December 2014)

     Section A. General procurement standards.
    1. For procurement under this award, you must comply with the 
following paragraphs of OMB guidance in 2 CFR 200.318:
    a. 200.318(a) concerning documented procurement procedures;
    b. 200.318(b) concerning oversight of contractors;
    c. 200.318(c) concerning standards of conduct and conflicts of 
interest;
    d. 200.318(e) concerning intergovernmental or inter-entity 
agreements;
    e. 200.318(g) concerning value engineering;
    f. 200.318(i) concerning procurement records;
    g. 200.318(j) concerning time and material type contracts; and
    h. 200.318(k) concerning settlement of issues arising out of 
procurements.
    i. 2 CFR 200.318(d) concerning purchases of unnecessary or 
duplicative items.
    2. You must do business only with responsible contractors who 
are able to perform, as described in OMB guidance in 2 CFR 
200.318(h). Related to that, you must comply with restrictions on 
awarding procurement transactions to excluded or disqualified 
parties and other requirements specified by OMB guidelines on 
nonprocurement debarment and suspension at 2 CFR part 180, as 
implemented by DoD at 2 CFR part 1125.
    Section B. Competition. You must award procurement transactions 
under this DoD award in accordance with the competition requirements 
described in OMB guidance in 2 CFR 200.319.
    Section C. Procurement methods. You must award procurement 
transactions under this award using methods described in OMB 
guidance in 2 CFR 200.320.
    Section D. Contracting with small and minority businesses, 
women's business enterprises, and labor surplus area firms. You must 
take the affirmative steps described in OMB guidance in 2 CFR 
200.321 when awarding procurement transactions under this award.
    Section E. Contract cost and price. When awarding a contract 
under this award, you must follow the procedures related to costs 
and price that are described in OMB guidance in 2 CFR 200.323, using 
the applicable cost principles specified in FMS Article III.
    Section F. Contract provisions. You must include provisions in 
your procurement transactions under this award to require the 
contractors' compliance with the requirements of PROC Article III, 
as applicable.
    II. SECTION G OF PROC ARTICLE II. DoD Components must use the 
following standard wording in Section G of PROC Article II in 
accordance with Sec.  1132.210 of this part:
    Section G. Procurement of recovered materials. If you are a 
political subdivision of a State, you must comply with the Resource 
Conservation and Recovery Act requirements described in OMB guidance 
in 2 CFR 200.322.
    III. SECTION H OF PROC ARTICLE II. DoD Components must use the 
following standard wording in Section H of PROC Article II in 
accordance with Sec.  1132.215 of this part:
    Section H. Review of procurement documents. Upon our request, 
you must make available:
    1. Technical specifications on proposed procurements, as 
described in 2 CFR 200.324(a).
    2. Pre-procurement documents for our review, as described in 2 
CFR 200.324(b) unless you are exempt from that requirement under 2 
CFR 200.324(c).
    IV. SECTION I OF PROC ARTICLE II. DoD Components must use the 
following standard wording in Section I of PROC Article II in 
accordance with Sec.  1132.220 of this part:
    Section I. Bonding requirements. If you award a construction or 
facility improvement contract under this award with a value in 
excess of the simplified acquisition threshold, you must comply with 
at least the minimum requirements for bidders' bid guarantees and 
contractors' performance and payment bonds described in 2 CFR 
200.325(a) through (c), unless a provision in the award-specific 
terms and conditions of this award excepts you from the requirement 
based on our determination that your bonding policy and requirements 
are adequate to protect Federal interests.

Appendix C to Part 1132--Terms and Conditions for PROC Article III, 
``Contract Provisions for Recipient Procurements''

    I. SECTION A OF PROC ARTICLE III. DoD Components must use the 
following standard wording in Section A of PROC Article III in 
accordance with Sec.  1132.305 of this part:

PROC Article III. Contract Provisions for Recipient Procurements. 
(December 2014)

    Section A. Contract provisions for administrative requirements.
    1. Remedies. In any contract under this award for an amount in 
excess of the simplified acquisition threshold, you must provide for 
administrative, contractual, or legal remedies, including any 
appropriate sanctions and penalties, when the contractor violates or 
breaches the contract terms.
    2. Termination. In any contract for an amount in excess of 
$10,000, you must specify: Conditions under which you may terminate 
the contract for cause or convenience; the procedures for 
termination; and the basis to be used for settlement.
    3. Allowable costs under cost-type contracts. In any cost-type 
contract with an entity, you must include a clause to permit the 
entity to charge to the contract only costs that are allowable under 
the cost principles that FMS Article III identifies as applicable to 
that type of entity, as supplemented by any award-specific terms and 
conditions related to allowability of costs that are included in 
this award. Your contract clause may permit the contractor to use 
its own cost principles in determining the allowability of its costs 
charged to the contract, as long as its cost principles comply with 
those Federal cost principles supplemented by any award-specific 
terms and conditions of this award.
    4. Rights in copyright and data. You must include in each 
contract under this award a provision requiring that the contractor:
    a. Grant the Government a royalty-free, nonexclusive and 
irrevocable right to:
    i. Reproduce, publish, or otherwise use for Federal purposes any 
work that is subject to copyright and that the contractor develops, 
or acquires ownership of, under this award;
    ii. Authorize others to reproduce, publish, or otherwise use 
such work for Federal purposes; and
    b. Grant the Government the right to:
    i. Obtain, reproduce, publish, or otherwise use data produced 
under this award;
    ii. Authorize others to receive, reproduce, publish, or 
otherwise use such data for Federal purposes; and
    c. Include the Government rights described in subparagraphs 4.a. 
and 4.b. of this section in any subcontracts.
    5. Access to records.
    a. In any negotiated, cost-type or time and materials contract 
for an amount in excess of the simplified acquisition threshold, you 
must provide for access to any of the contractor's books, documents, 
papers, and records that are directly pertinent to that contract, to 
enable and support audits, examinations, excerpts, and 
transcriptions. The contract provision must provide access to those 
records for all of the following and their duly authorized 
representatives:
    i. You;
    ii. Us as the Federal awarding agency, including our Inspector 
General; and
    iii. The Comptroller General of the United States.
    b. In any audit services contract for performance of an audit 
required by the Single Audit Act, as implemented by OMB in subpart F 
of 2 CFR part 200, you must provide for the access to audit 
documentation described in 2 CFR 200.517(b).
    6. Records retention.
    a. In any negotiated, cost-type or time and materials contract 
for an amount in excess of the simplified acquisition threshold, you 
must provide for retention of all records that are directly 
pertinent to that contract for three years after you make final 
payment and all pending matters are closed.
    b. In any audit services contract for performance of an audit 
required by the Single Audit Act, as implemented by OMB in subpart F 
of 2 CFR part 200, you must provide for the retention of audit 
documentation described in 2 CFR 200.517(a).
    7. Reporting. In any contract awarded under this award, you must 
include any provision for the contractor's reporting to you that may 
be needed in order for you to meet your requirements under this 
award to report to us.
    II. SECTION B OF PROC ARTICLE III. DoD Components must use the 
following standard wording in Section B of PROC Article III in 
accordance with Sec.  1132.310 of this part:
    Section B. Contract provisions for national policy requirements.
    1. Equal employment opportunity. You must include the clause 
provided in 41 CFR

[[Page 78417]]

60-1.4(b) in any ``federally assisted construction contract'' (as 
defined in 41 CFR 60-1.3) under this award unless provisions of 41 
CFR part 60-1 exempt the contract from the requirement.
    2. Wage Rate Requirements (Construction), formerly the Davis-
Bacon Act. With respect to each construction contract for more than 
$2,000 to be awarded using funding provided under this award, you 
must:
    a. Place in the solicitation under which the contract will be 
awarded a copy of the current prevailing wage determination issued 
by the Department of Labor;
    b. Condition the decision to award the contract upon the 
contractor's acceptance of that prevailing wage determination;
    c. Include in the contract the clauses specified at 29 CFR 
5.5(a) in Department of Labor regulations at 29 CFR part 5, ``Labor 
Standards Provisions Applicable to Contracts Governing Federally 
Financed and Assisted Construction,'' to require the contractor's 
compliance with the Wage Rate Requirements (Construction), as 
amended (40 U.S.C. 3141-44, 3146, and 3147); and
    d. Report all suspected or reported violations to the award 
administration office identified in this award.
    3. Copeland Act prohibition on kickbacks. In each contract under 
this award to construct, complete, or repair a building or work, you 
must:
    a. Include a provision requiring the contractor to comply with 
the anti-kickback provisions of the Copeland Act (18 U.S.C. 874 and 
40 U.S.C. 3145), as supplemented by Department of Labor regulations 
at 29 CFR part 3, ``Contractors and Subcontractors on Public 
Building or Public Work Financed in Whole or in Part by Loans or 
Grants from the United States.''
    b. Report all suspected or reported violations to the award 
administration office identified in the award notice cover sheet of 
this award.
    4. Contract Work Hours and Safety Standards Act for work 
involving mechanics or laborers. In each contract for an amount 
greater than $100,000 that involves the employment of mechanics or 
laborers and is not a type of contract excepted under 40 U.S.C. 
3701, you must include the clauses specified in Department of Labor 
(DoL) regulations at 29 CFR 5.5(b) to require use of wage standards 
that comply with the Contract Work Hours and Safety Standards Act 
(40 CFR, Subtitle II, Part A, Chapter 37), as implemented by the DoL 
at 29 CFR part 5, ``Labor Standards Provisions Applicable to 
Contracts Governing Federally Financed and Assisted Construction.''
    5. Patents and inventions. If you procure the services of a 
nonprofit organization, small business firm, or other entity for the 
performance of experimental, developmental or research work, you 
must include in the contract the clause prescribed in Section B of 
PROP Article VI to establish contractual requirements regarding 
subject inventions resulting from the contract and provide for 
Government rights in those inventions.
    6. Clean air and water requirements. You must:
    a. In each contract for an amount greater than $150,000 under 
this award, include a clause requiring the contractor to comply with 
applicable provisions of the Clean Air Act (42 U.S.C. 7401-7671q), 
Federal Water Pollution Control Act (33 U.S.C. 1251-1387), and 
standards, orders, or regulations issued under those acts; and
    b. Report any violations of the Acts, standards, orders, or 
regulations to both the award administration office identified in 
this award and the appropriate regional office of the Environmental 
Protection Agency.
    7. Nonprocurement suspension and debarment. Unless you have an 
alternate method for requiring the contractor's compliance, you must 
include a clause in each contract for an amount equal to or greater 
than $25,000 and in each contract for federally required audit 
services to require the contractor to comply with OMB guidance on 
nonprocurement suspension and debarment in 2 CFR part 180, as 
implemented by DoD regulations at 2 CFR part 1125.
    8. Byrd Amendment anti-lobbying requirements. In each contract 
for an amount exceeding $100,000, you must include a clause 
requiring the contractor to submit to you the certification and any 
disclosure forms regarding lobbying that are required under 31 
U.S.C. 3152, as implemented by the DoD at 32 CFR part 28.
    9. Purchase of recovered materials by States or political 
subdivisions of States. In each contract under which the contractor 
may purchase items designated in Environmental Protection Agency 
(EPA) regulations in 40 CFR part 247, subpart B, you must include a 
clause requiring the contractor to comply with applicable 
requirements in those EPA regulations, which implement Section 6002 
of the Resource Conservation and Recovery Act of 1976, as amended 
(42 U.S.C. 6962).
    10. Fly America requirements. In each contract under which funds 
provided under this award might be used for international air travel 
for the transportation of people or property, you must include a 
clause requiring the contractor to:
    a. Comply with the International Air Transportation Fair 
Competitive Practices Act of 1974 (49 U.S.C. 40118, also known as 
the ``Fly America'' Act), as implemented by the General Services 
Administration at 41 CFR 301-10.131 through 301-10.143, which 
provides that U.S. Government-financed international air travel and 
transportation of personal effects or property must use a U.S. Flag 
air carrier or be performed under a cost-sharing arrangement with a 
U.S. carrier, if such service is available; and
    b. Include the requirements of the Fly America Act in all 
subcontracts that might involve international air transportation.
    11. Cargo preference for United States flag vessels. In each 
contract under which equipment, material, or commodities may be 
shipped by oceangoing vessels, you must include the clause specified 
in Department of Transportation regulations at 46 CFR 381.7(b) to 
require that at least 50 percent of equipment, materials or 
commodities purchased or otherwise obtained with Federal funds under 
this award, and transported by ocean vessel, be transported on 
privately owned U.S.-flag commercial vessels, if available.

PART 1134--FINANCIAL, PROGRAMMATIC, AND PROPERTY REPORTING: GENERAL 
AWARD TERMS AND CONDITIONS

Sec.
1134.1 Purpose of this part.
1134.2 Applicability of this part.
1134.3 Exceptions from requirements in this part.
1134.4 Organization of this part.
Subpart A--Performance Management, Monitoring, and Reporting (REP 
Article I)
1134.100 Purpose of REP Article I.
1134.105 Performance reporting for construction awards.
1134.110 When to require and when to waive performance reports for 
non-construction awards.
1134.115 Content and forms, formats, or data elements for interim 
and final performance reporting under non-construction awards.
1134.120 Frequency, reporting periods, and due dates for interim 
performance reporting under non-construction awards.
1134.125 Due dates and reporting periods for final performance 
reports under non-construction awards.
1134.130 Requesting extensions of due dates for performance reports.
1134.135 Reporting significant developments.
1134.140 Performance reporting procedures.
1134.145 Site visits.
Subpart B--Financial Reporting (REP Article II)
1134.200 Purpose of REP Article II.
1134.205 Reporting forms, formats, or data elements.
1134.210 Content of REP Article II.
Subpart C--Reporting on Property (REP Article III)
1134.300 Purposes of REP Article III.
1134.305 Real property: Reports, notifications, requests, and 
accounting.
1134.310 Equipment and supplies: Reports, notifications, requests, 
and accounting.
1134.315 Federally owned property: Inventory, notifications, and 
requests.
1134.320 Intangible property: Disclosures, reports, and requests.
Subpart D--Reporting on Subawards and Executive Compensation (REP 
Article IV)
1134.400 Purpose of REP Article IV.
1134.405 Content of REP Article IV.
Appendix A to Part 1134--Terms and Conditions for REP Article I, 
``Performance management, monitoring, and reporting''
Appendix B to Part 1134--Terms and Conditions for REP Article II, 
``Financial reporting''
Appendix C to Part 1134--Terms and Conditions for REP Article III, 
``Reporting on property''
Appendix D to Part 1134--Terms and Conditions for REP Article IV, 
``Reporting on subawards and executive compensation''


[[Page 78418]]


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


Sec.  1134.1   Purpose of this part.

    (a) This part specifies standard wording of general terms and 
conditions concerning recipients' reporting requirements.
    (b) It thereby implements OMB guidance on reporting in 2 CFR part 
170 and the following portions of 2 CFR part 200, as they relate to 
general terms and conditions:
    (1) 2 CFR 200.301 and 200.327 through 200.329; and
    (2) 2 CFR 200.300(b) as it relates to subaward reporting, 
200.312(a) as it relates to inventories of federally owned property, 
and 200.343(a) as it relates to financial and performance reporting.


Sec.  1134.2   Applicability of this part.

    The types of awards and entities to which this part and other parts 
in this subchapter apply are described in the subchapter overview at 2 
CFR 1126.2.


Sec.  1134.3   Exceptions from requirements of this part.

    Exceptions are permitted from the administrative requirements in 
this part only as described at 2 CFR 1126.3.


Sec.  1134.4   Organization of this part.

    (a) The content of this part is organized into subparts and 
associated appendices.
    (1) Each subpart provides direction to DoD Components on how to 
construct one article of general terms and conditions for grants and 
cooperative agreements.
    (2) For each subpart, there is a corresponding appendix with 
standard wording for terms and conditions of the article addressed by 
the subpart. Terms and conditions address rights and responsibilities 
of the Government and recipients.
    (b) A DoD Component must use the wording provided in each appendix 
in accordance with the direction in the corresponding subpart. That 
direction may permit DoD Components to vary from the standard wording 
in some situations.
    (c) The following table shows which article of general terms and 
conditions may be found in each of appendices A through D to this part 
(with the associated direction to DoD Components in subparts A through 
D, respectively):

------------------------------------------------------------------------
                                  You will find terms
                                    and conditions         That would
                                specifying recipients'    appear in an
           In . . .                   rights and        award within REP
                                   responsibilities       Article . . .
                                   related to . . .
------------------------------------------------------------------------
Appendix A....................  Performance             I.
                                 management,
                                 monitoring, and
                                 reporting.
Appendix B....................  Financial reporting...  II.
Appendix C....................  Reporting on property.  III.
Appendix D....................  Reporting on subawards  IV.
                                 and executive
                                 compensation.
------------------------------------------------------------------------

Subpart A--Performance Management, Monitoring, and Reporting (REP 
Article I)


Sec.  1134.100   Purpose of REP Article I.

    REP Article I of the general terms and conditions specifies 
requirements related to recipient reporting on program performance. It 
thereby implements OMB guidance in:
    (a) 2 CFR 200.328; and
    (b) Portions of 2 CFR 200.301 and 200.343(a) that relate to 
performance reporting.


Sec.  1134.105   Performance reporting for construction awards.

    (a) OMB guidance. OMB guidance in 2 CFR 200.328(c) notes that 
agencies rely heavily on onsite technical inspections and certified 
percentage of completion data to monitor progress under construction 
awards and states that agencies may require additional performance 
reports only when considered necessary.
    (b) DoD implementation. DoD Components may require performance 
reports under construction awards only when necessary and, to reduce 
recipient burdens, should coordinate the performance reporting with 
financial reporting to the maximum extent practicable.
    (c) Award terms and conditions. (1) If a DoD Component has general 
terms and conditions specifically for construction awards and does not 
need performance reports for those awards, it:
    (i) Should reserve Sections A through D of REP Article I in those 
terms and conditions;
    (ii) Must follow the specifications in Sec. Sec.  1134.135 and 
1134.145 to include the default wording appendix A to this part 
provides for Sections E and G of REP Article I in those terms and 
conditions, in order to require recipients to promptly report 
significant developments and reserve the DoD Component's right to make 
site visits.
    (iii) Must follow the specifications in Sec.  1134.140 to insert 
wording in Section F of REP Article I in those terms and conditions, to 
tell recipients where and how to submit any reports of significant 
developments.
    (2) If a DoD Component has general terms and conditions 
specifically for construction awards and determines that it needs 
performance reports for those awards:
    (i) It may tailor the template and content that appendix A to this 
part provides for Sections A through D of REP Article I in those terms 
and conditions, as needed to specify the reporting requirements or, as 
appropriate, instead integrate those requirements into REP Article II 
on financial reporting. The form, format, or data elements that the DoD 
Component specifies for any of those performance reports must comply 
with requirements of the Paperwork Reduction Act of 1995, as 
implemented by OMB at 5 CFR part 1320, to use OMB-approved information 
collections if more than 9 recipients will be subject to the reporting 
requirement.
    (ii) It must follow the specifications in Sec. Sec.  1134.135 
through 1134.145 concerning Sections E through G of REP Article I in 
those terms and conditions, as described in paragraphs (c)(1)(ii) and 
(iii) of this section.


Sec.  1134.110  When to require and when to waive performance reports 
for non-construction awards.

    (a) OMB guidance. OMB guidance in 2 CFR 200.328(f) states that an 
agency may waive any performance report that it does not need.
    (b) DoD implementation--(1) Interim reports. DoD Components should 
waive requirements for interim performance reports under non-
construction awards, including research awards, only when program 
managers have an alternative source for the information that the 
reports provide in support of the need for technical program oversight 
during the period of performance.
    (2) Final reports--(i) Research. DoD Components may not waive 
requirements for final performance reports under research awards, even 
when program managers have other sources of the information they 
contain. A primary purpose of a final report under a research award is 
to document the overall project or program well enough to serve as a 
long-term reference from which others may understand the purpose, 
scope, approach, results or

[[Page 78419]]

outcomes, and conclusions or recommendations of the research.
    (ii) Non-construction programs other than research. DoD Components 
should consider the long-term value of final performance reports for 
documenting program outcomes, as well as any near-term value, before 
waiving requirements for final reports under other non-construction 
awards.
    (c) Award terms and conditions. Appendix A to this part provides a 
template for REP Article I of the general terms and conditions of 
research awards or other non-construction awards under which 
performance reports are required. A DoD Component must either use the 
default wording that appendix A provides or insert wording into the 
template, in accordance with Sec. Sec.  1134.115 through 1134.145, to:
    (1) Specify the content and form, format, or data elements 
recipients must use for interim and final performance reporting (see 
Sec.  1134.115);
    (2) Specify the reporting frequency, reporting periods, and due 
dates for interim performance reports (see Sec.  1134.120);
    (3) Specify the due dates and reporting periods for final 
performance reports (see Sec.  1134.125);
    (4) Specify that recipients may request extensions of due dates for 
performance reports (see Sec.  1134.130);
    (5) Require recipients to report significant developments (see 
Sec.  1134.135);
    (6) Specify reporting procedures (see Sec.  1134.140); and
    (7) Reserve the DoD Component's right to make site visits (see 
Sec.  1134.145).


Sec.  1134.115   Content and forms, formats, or data elements for 
interim and final performance reporting under non-construction awards.

    (a) OMB guidance. OMB guidance in:
    (1) 2 CFR 200.301 and 200.328(b)(2) state that Federal awarding 
agencies must require recipients to use standard OMB-approved 
information collections for reporting performance information.
    (2) 2 CFR 200.328(b)(2)(i) through (iii) list types of information 
that performance reports under non-construction awards will contain, as 
appropriate, unless other collections are approved by OMB.
    (b) DoD implementation. (1) The content of the information 
collections that a DoD Component's general terms and conditions specify 
for non-construction awards must include the elements listed in 2 CFR 
200.328(b)(2)(i) through (iii) that are appropriate to the projects or 
programs subject to those general terms and conditions.
    (2) Forms, formats, and data elements that a DoD Component's 
general terms and conditions specify for performance reporting under 
non-construction awards must comply with requirements of the Paperwork 
Reduction Act of 1995 to use OMB-approved information collections, as 
implemented at 5 CFR part 1320.
    (3) To the maximum extent practicable, a DoD Component's general 
terms and conditions for non-construction awards must specify that 
recipients use Governmentwide standard forms, formats, and data 
elements that also are used by other agencies for similar programs, 
recipients, and types of awards (e.g., the Research Performance 
Progress Report format or any successor to it that OMB clears for 
interim performance progress reports under research awards to 
institutions of higher education and nonprofit entities).
    (c) Award terms and conditions. To implement the provisions of 
paragraphs (a) and (b) of this section, a DoD Component must insert 
wording in lieu of the reserved Section A of REP Article I of its 
general terms and conditions for non-construction awards to specify the 
form, format, or data elements that recipients must use for interim and 
final performance reports. Section A of REP Article I may specify a 
different requirement for final performance reports than interim 
reports.


Sec.  1134.120   Frequency, reporting periods, and due dates for 
interim performance reporting under non-construction awards.

    (a) OMB guidance. OMB guidance in 2 CFR 200.328(b)(1) addresses 
performance reporting frequency and due dates.
    (1) Reporting frequency. The OMB guidance states that interim 
performance reports should be no less frequent than annually, nor more 
frequent than quarterly except in unusual circumstances (e.g., when 
more frequent reporting is necessary for effective program monitoring).
    (2) Due dates. The OMB guidance states that due dates for interim 
performance reports must be:
    (i) 30 calendar days after the end of the reporting period if 
interim reports are required quarterly or semiannually; and
    (ii) 90 calendar days after the end of the reporting period if 
interim reports are required annually, unless the agency elects to 
require the annual reports before the anniversary dates of multiyear 
awards.
    (b) DoD implementation. DoD implements the OMB guidance in 2 CFR 
200.328(b)(1) concerning frequency and due dates of interim performance 
reports through award terms and conditions, with the following 
clarifications and added specifications concerning reporting periods:
    (1) Reporting frequency. DoD Components rarely, if ever, should 
require recipients to submit interim performance reports more often 
than annually for basic research awards. Before requiring interim 
performance reports more frequently than annually for other research 
awards, DoD Components should carefully consider whether the benefits 
of more frequent reporting are sufficient to offset the potential for 
slowing the rate of research progress, due to diversion of researchers' 
time from research performance to report preparation.
    (2) Reporting periods. For research awards, a DoD Component should 
not require any recipient to submit interim performance reports on a 
cumulative basis--i.e., the second and any subsequent performance 
report should address only the most recent reporting period and not 
also address previous reporting periods covered by earlier interim 
performance reports.
    (3) Due dates. If a DoD Component requires an interim report more 
frequently than quarterly due to unusual circumstances, as described in 
2 CFR 200.328(a)(1) and paragraph (a)(1) of this section, the DoD 
Component must specify that the due date for the report is 30 days 
after the end of the reporting period. For all other interim reports, 
DoD Components must specify due dates in accordance with paragraph 
(a)(2) of this section.
    (c) Award terms and conditions. A DoD Component must insert wording 
in lieu of the reserved Section B of REP Article I of its general terms 
and conditions for non-construction awards to specify:
    (1) The frequency with which recipients must submit interim 
performance reports;
    (2) The reporting period each interim performance report must 
cover; and
    (3) The due date for each interim performance report, stated as the 
number of calendar days after the end of the reporting period.


Sec.  1134.125   Due dates and reporting periods for final performance 
reports under non-construction awards.

    (a) OMB guidance. OMB guidance in 2 CFR 200.328(b)(1) states that 
each final performance report will be due 90 calendar days after the 
end date of the period of performance. It also states that an agency 
may extend the due date if a recipient submits a justified request.
    (b) DoD implementation--(1) Due dates. Consistent with 2 CFR 
200.328(b)(1):

[[Page 78420]]

    (i) General. A DoD Component's general terms and conditions must 
specify that the due date for each recipient's submission of its final 
performance report is 90 calendar days after the end of the period of 
performance.
    (ii) Exception. A DoD Component may pre-approve a 30 day extension 
to the due date in its general conditions by specifying that each 
recipient's final performance report is due 120 calendar days after the 
end of the period of performance. Doing so would be especially helpful 
to recipients that have subawards and need time to assimilate 
subrecipient inputs into the final report for the project or program as 
a whole.
    (2) Reporting periods--(i) Non-construction programs other than 
research. A DoD Component's general terms and conditions for non-
construction programs other than research may require each recipient to 
submit a final report that is cumulative and covers the entire period 
of performance, as that may more effectively document the project or 
program for future reference.
    (ii) Research. Final reports for research awards should be 
cumulative (i.e., each final report should cover the entire period of 
performance under the award and not just the period since the previous 
interim performance report) because a primary purpose of a final report 
for a research award is to document the overall project or program, as 
described in Sec.  1134.110(b)(2).
    (c) Award terms and conditions. To implement the provisions of 
paragraphs (a) and (b) of this section, a DoD Component in its general 
terms and conditions for non-construction awards:
    (1) Must either:
    (i) Specify that the due date for final performance reports is 90 
days after the end of the period of performance by including the 
default wording that appendix A to this part provides for paragraph C.1 
of REP Article I; or
    (ii) Pre-approve a 30-day extension to the due date, as described 
in paragraph (b)(1)(ii) of this section, by including a revision of the 
default wording for paragraph C.1 of REP Article I with ``120 calendar 
days'' inserted in lieu of ``90 calendar days.''
    (2) Must insert wording in lieu of the reserved paragraph C.2 of 
REP Article I, to specify the reporting period for final reports (i.e., 
whether the reports must be cumulative).


Sec.  1134.130   Requesting extensions of due dates for performance 
reports.

    (a) OMB guidance. OMB guidance in 2 CFR 200.328(b)(1) states that, 
if a recipient submits a justified request for an extension in the due 
date for any interim or final performance report, an agency may extend 
the due date.
    (b) DoD implementation. A DoD Component's general terms and 
conditions for non-construction awards must specify that a recipient 
may request an extension of the due date for interim or final 
performance reports. DoD Components should grant requests that provide 
adequate justification. For a DoD Component that pre-approves a 30-day 
extension of due dates for final performance reports in its general 
terms and conditions, as described in Sec.  1134.125(b)(1)(ii) and 
(c)(1)(ii), any award-specific extensions would be beyond the pre-
approved 30-day extension.
    (c) Award terms and conditions. To implement the provisions of 
paragraphs (a) and (b) of this section, a DoD Component's general terms 
and conditions for non-construction awards must include the default 
wording that appendix A to this part provides for Section D of REP 
Article I on extensions of performance reporting due dates.


Sec.  1134.135   Reporting significant developments.

    (a) OMB guidance. OMB guidance in 2 CFR 200.328(d) states that a 
recipient must promptly notify the awarding agency about significant 
developments.
    (b) DoD implementation. A DoD Component's general terms and 
conditions must require recipients to report significant developments, 
as described in 2 CFR 200.328(d).
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must include the default wording that appendix A to this 
part provides for Section E of REP Article I on reporting of 
significant developments.


Sec.  1134.140   Performance reporting procedures.

    (a) Requirement. A DoD Component's general terms and conditions 
must inform recipients about performance reporting procedures.
    (b) Award terms and conditions. (1) To implement the requirement of 
paragraph (a) of this section, a DoD Component in its general terms and 
conditions must insert wording in Section F of REP Article I (which is 
reserved in the template for REP Article I that appendix A to this part 
provides), to specify:
    (i) The office or offices to which a recipient must submit its 
interim and final performance reports, any requests in due dates for 
those reports, and any reports of significant developments; and
    (ii) How the recipient is to submit those reports and requests 
(e.g., email or electronic portal).
    (2) For research awards, this wording must comply with the 
distribution and marking requirements of DoD Manual 3200.14, Volume 1. 
This includes the requirement that all significant scientific or 
technological findings, recommendations, and results derived from DoD 
endeavors--which shall include the final performance report at a 
minimum--are recorded and provided to Defense Technical Information 
Center (DTIC).


Sec.  1134.145   Site visits.

    (a) OMB guidance. OMB guidance in 2 CFR 200.328(e) states that a 
Federal awarding agency may make site visits as warranted by program 
needs.
    (b) DoD implementation. A DoD Component's general terms and 
conditions must state that the Government reserves the right to make 
site visits as warranted.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must include the default wording that appendix A to this 
part provides for Section G of REP Article I concerning site visits.

Subpart B--Financial Reporting (REP Article II)


Sec.  1134.200   Purpose of REP Article II.

    REP Article II of the general terms and conditions specifies 
requirements related to financial reporting. It thereby implements OMB 
guidance in 2 CFR 200.327 and the portions of 2 CFR 200.301 and 
200.343(a) that are specific to financial reporting.


Sec.  1134.205   Reporting forms, formats, or data elements.

    (a) OMB guidance. OMB guidance in 2 CFR 200.327 states that Federal 
awarding agencies may require recipients to use only the standard OMB-
approved Governmentwide data elements for collection of financial 
information, unless OMB approves other forms, formats, or data elements 
for financial information collection.
    (b) DoD implementation. DoD Components must collect financial 
information from recipients using OMB-approved forms, formats, or data 
elements.
    (1) Unless current approvals expire, approved financial information 
collections include the Governmentwide Federal Financial Report (SF-
425) and Request for Advance or Reimbursement (SF-270). In

[[Page 78421]]

the future, they would include any additional information collections 
that OMB approves.
    (2) For all but the recipient's final financial report after the 
end of the period of performance, a DoD Component may rely on financial 
information the recipient provides on the SF-270 or other OMB-approved 
payment request form, format, or data elements if that financial 
information is sufficient to meet the DoD Component's needs. For the 
final report, the DoD Component must require the recipient to use the 
SF-425 or other OMB-approved financial information collection.
    (3) A DoD Component must obtain approval for any variations from 
OMB-approved forms or formats, including use of additional or 
substitute data elements or modification of the associated instructions 
for recipient entities submitting the information.


Sec.  1134.210   Content of REP Article II.

    (a) Requirement. General terms and conditions for DoD grants and 
cooperative agreements must specify what financial information 
recipients are required to report and how often, when, where, and how 
they must report.
    (b) Award terms and conditions--(1) General. Appendix B to this 
part provides a template into which a DoD Component must insert wording 
to specify the form, format, or data elements recipients must use for 
financial reporting; the frequency, reporting periods, and due dates 
for their financial reports (stated as the number of days after the end 
of the reporting period); and where and how they must submit the 
information.
    (2) Required reporting form, format, or data elements for interim 
and final financial reports. In Section A of REP Article II, which is 
reserved in appendix B to this part, a DoD Component must insert 
wording to specify the OMB-approved form, format, or data elements that 
recipients must use for financial reporting and the Web site where they 
can be found. The section may provide a different requirement for final 
financial reports than interim reports during the period of performance 
if the DoD Component needs less information on interim reports than is 
needed on the final report.
    (3) Interim financial reports: frequency, reporting periods, and 
due dates. In Section B of REP Article II, which is reserved in 
appendix B to this part, a DoD Component must insert wording to specify 
the frequency with which recipients must submit interim financial 
reports, as well as the reporting period each report must cover and 
when it is due. Note that this section may waive interim reporting 
requirements if the DoD Component relies on information already 
provided with payment requests (e.g., on the SF-270).
    (i) Consistent with OMB guidance in 2 CFR 200.327, the reporting 
frequency may be no less often than annually and no more frequently 
than quarterly except in unusual circumstances (e.g., a need for more 
frequent reporting for monitoring program performance, in which case 
financial reporting should be in coordination with performance 
reporting).
    (ii) The reporting frequency, reporting periods, and due dates must 
conform with any guidance on those aspects of financial reporting in 
the OMB-approved instructions accompanying the form, format, or data 
elements used.
    (iii) When a DoD Component's general terms and conditions provide 
for advance payments based on predetermined schedules--which is very 
rarely if ever appropriate for research awards--the terms and 
conditions should provide for at least quarterly reporting. This will 
enable post-award administrators to closely monitor recipients' 
balances of cash on hand for compliance with Governmentwide cash 
management standards.
    (4) Final financial report. Appendix B to this part provides 
default wording for Section C of REP Article II to implement OMB 
guidance in 2 CFR 200.343(a) as it applies to final financial reports. 
Given that 2 CFR part 200 provides 90 days for subrecipients to 
liquidate subaward obligations and submit their final financial reports 
to recipients, the default wording in appendix B gives recipients 120 
days to submit final financial reports to DoD post-award administration 
offices. That provides a reasonable amount of time for recipients to 
incorporate any information they need from final subaward reports. A 
DoD Component may alter the default wording or supplement it if it has 
a basis to do so in a statute or a regulation published in the Code of 
Federal Regulations.
    (5) Extensions of due dates. A DoD Component's general terms and 
conditions must include the default wording for Section D of REP 
Article II that appendix B to this part provides to authorize 
recipients to request extensions of due dates for interim or final 
financial reports.
    (6) Where and how to submit financial reports. In Section E of REP 
Article II, which is reserved in appendix B to this part, a DoD 
Component must insert wording to specify the DoD official or office to 
whom a recipient must submit its interim and final financial reports 
and the method it must use to do so (e.g., email or other electronic 
submission method).

Subpart C--Reporting on Property (REP Article III)


Sec.  1134.300   Purposes of REP Article III.

    REP Article III of the general terms and conditions provides a 
consolidated source that sets out required reports, notifications, 
requests, and accountings related to federally owned property and 
property that is acquired or improved under awards. The article is:
    (a) The original source of requirements for recipients to:
    (1) Submit periodic status reports and notifications of critical 
changes for real property (in paragraphs A.1 and A.2 of the article), 
which thereby implements OMB guidance in 2 CFR 200.329;
    (2) Submit an annual inventory of federally owned property (in 
paragraph C.1 of the article), which thereby partially implements OMB 
guidance in 2 CFR 200.312(a);
    (3) Provide information on request about copyrighted works and data 
produced under awards (in paragraph D.2 of the article).
    (b) A secondary source provided for the convenience of recipients 
and DoD post-award administrators that lists and refers to the original 
sources of requirements for recipients to:
    (1) Request disposition instructions and account at closeout for 
real property (in paragraphs A.3 and A.4 of the article), the original 
sources of which are in PROP Article III and OAR Article VI;
    (2) Provide notifications of loss, damage, or theft and requests 
for disposition instructions for equipment (in paragraphs B.2 and B.3 
of the article), the original sources of which are in PROP Articles II 
and IV, respectively;
    (3) Account at closeout for equipment and supplies (in paragraph 
B.4 of the article), the original sources of which are in OAR Article 
VI and PROP Article IV;
    (4) Provide notifications of loss, damage, or theft and requests 
for disposition instructions for federally owned property (in 
paragraphs C.2 and C.3 of the article), the original sources of which 
are in PROP Articles II and V, respectively;
    (5) Disclose and report on inventions developed under awards (in 
paragraph D.1), the original source of which is in PROP Article VI; and
    (6) Request disposition instructions for intangible property 
acquired, but not

[[Page 78422]]

developed or produced, under awards (in paragraph D.3 of the article), 
the original source of which is in PROP Article VI.


Sec.  1134.305  Real property: reports, notifications, requests, and 
accounting.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify the real property reporting requirements described in 
Sec.  1134.300(a)(1) and provide references to the related requirements 
described in Sec.  1134.300(b)(1).
    (b) Award terms and conditions. To implement the requirement 
described in paragraph (a) of this section, the wording of Section A of 
REP Article III of a DoD Component's general terms and conditions must 
comply with either paragraph (b)(1) or (b)(2) of this section.
    (1) General. Unless a DoD Component determines that there will be 
no acquisition or improvement of real property under awards using its 
general terms and conditions, those general terms and conditions must 
include the default wording appendix C to this part provides for 
Section A of REP Article III, to which the DoD Component:
    (i) Must add wording in lieu of the reserved paragraph A.1.a to 
specify how often a recipient must submit periodic status reports and 
how long it is required to do so (which should be the duration of the 
Federal interest in the real property). The wording of paragraph A.1.a 
must be consistent with OMB guidance in 2 CFR 200.329, which provides 
different options for reporting frequency depending on the duration of 
the Federal interest in the real property.
    (ii) Must add wording in lieu of the reserved paragraph A.1.b to 
specify the due date for each periodic status report in terms of the 
number of calendar days after the end of the period covered by the 
report (e.g., a report on the status of the property as of September 30 
might be due 30 calendar days after that date).
    (iii) May provide wording in lieu of the reserved paragraph A.1.c 
if there are other instructions--e.g., a form, format, or information 
elements that a recipient must use (which must be cleared by OMB under 
the Paperwork Reduction Act) or a particular office to which reports 
must be submitted, especially if reporting will continue beyond 
closeout of awards under which the real property was acquired or 
improved.
    (2) Exception. A DoD Component may reserve Section A of REP Article 
III if it determines that there will be no acquisition or improvement 
of real property under awards using its general terms and conditions.


Sec.  1134.310   Equipment and supplies: Reports, notifications, 
requests, and accounting.

    (a) Requirement. REP Article III of a DoD Component's general terms 
and conditions must clarify that there is no requirement for routine 
periodic reporting about equipment and provide the references described 
in Sec.  1134.300(b)(2) and (3) to requirements in other articles for 
notifications, requests, and accounting related to equipment and 
supplies.
    (b) Award terms and conditions. To implement the requirement 
described in paragraph (a) of this section, a DoD Component's general 
terms and conditions must use the wording appendix C to this part 
provides for Section B of REP Article III.


Sec.  1134.315   Federally owned property: Inventory, notifications, 
and requests.

    (a) Requirement. REP Article III of a DoD Component's general terms 
and conditions must specify the reporting requirement described in 
Sec.  1134.300(a)(2) and provide the references described in Sec.  
1134.300(b)(4) to requirements in other articles for notifications and 
requests related to federally owned property.
    (b) Policy. (1) Except as provided by statute or in regulations 
adopted in the Code of Federal Regulations after opportunity for public 
comment, a DoD Component may not specify:
    (i) Due dates for the annual inventories of federally owned 
property; or
    (ii) Forms, formats, or specific data elements for the inventories, 
notifications, or requests for disposition instructions. Note that any 
form, format, or data elements that a DoD Component specifies must be 
cleared by OMB under the Paperwork Reduction Act.
    (2) Not specifying due dates, forms, formats, or data elements 
provides flexibility for recipients and DoD post-award administrators 
to handle these requirements in ways that reduce burdens and costs. For 
example, a recipient may arrange with a post-award administration 
office to submit one consolidated inventory annually for federally 
owned property under all of the awards it receives that are 
administered by that office, using a format its property management 
system already generates.
    (c) Award terms and conditions--(1) General. To implement the 
requirement described in paragraph (a) of this section, a DoD 
Component's general terms and conditions must use the wording appendix 
C to this part provides for Section C of REP Article III. The DoD 
Component may add wording on due dates or on forms, formats, or data 
elements only as provided in paragraph (b) of this section.
    (2) Exception. A DoD Component may reserve Section C of REP Article 
III if it determines that no recipients of awards using its general 
terms and conditions, or subrecipients of subawards under those awards, 
will be accountable for federally owned property under those awards or 
subawards.


Sec.  1134.320   Intangible property: Disclosures, reports, and 
requests.

    (a) Requirement. REP Article III of a DoD Component's general terms 
and conditions must specify the requirement described in Sec.  
1134.300(a)(3) and provide the references described in Sec.  
1134.300(b)(5) and (6) to requirements in other articles for 
disclosures, reports, and requests related to intangible property.
    (b) Award terms and conditions--(1) General. To implement the 
requirement described in paragraph (a) of this section, a DoD 
Component's general terms and conditions must use the wording appendix 
C to this part provides for Section D of REP Article III.
    (2) Exceptions. A DoD Component may reserve:
    (i) Section D of REP Article III if it determines that no 
recipients of awards using its general terms and conditions, or 
subrecipients of subawards under those awards, will have any intangible 
property for which they will be accountable to the Federal Government; 
or
    (ii) Any of paragraphs D.1 through D.3, if it determines that no 
recipients of awards using its general terms and conditions, or 
subrecipients of subawards under those awards, will be accountable to 
the Federal Government for the particular types of intangible property 
addressed by those paragraphs.

Subpart D--Reporting on Subawards and Executive Compensation (REP 
Article IV)


Sec.  1134.400  Purpose of REP Article IV.

    REP Article IV of the general terms and conditions specifies 
requirements for recipients to report information about subawards and 
executive compensation.


Sec.  1134.405  Content of REP Article IV.

    (a) Source of the reporting requirements. The requirements for 
recipients to report information about subawards and executive 
compensation originate in the Federal Funding Accountability and 
Transparency Act of 2006, as amended (31 U.S.C. 6101 note). OMB 
guidance at 2 CFR part 170 implements those statutory

[[Page 78423]]

requirements and appendix A to that part provides standard 
Governmentwide wording of an award provision.
    (b) Award terms and conditions. To implement the reporting 
requirements described in paragraph (a) of this section, a DoD 
Component's general terms and conditions must use the default wording 
appendix E to this part provides as REP Article IV.

Appendix A to Part 1134--Terms and Conditions for REP Article I, 
``Performance Management, Monitoring, and Reporting''

    DoD Components must use the following template for REP Article 
I, using default wording or inserting wording in lieu of reserved 
sections or paragraphs in accordance with Sec. Sec.  1134.105 
through 1134.145 of this part:

REP Article I. Performance Management, Monitoring, and Reporting. 
(December 2014)

    Section A. Required reporting form, format, or data elements for 
interim and final performance reports. [Reserved.]
    Section B. Frequency, reporting periods, and due dates for 
interim performance reports. [Reserved.]
    Section C. Due date and reporting period for final performance 
report.
    1. Due date. You must submit the final performance report under 
this award no later than 90 calendar days after the end date of the 
period of performance unless we approve an extension of that due 
date as described in Section D of this article.
    2. Reporting period. [Reserved.]
    Section D. Extensions of due dates. You may request extensions 
of the due dates that Sections B and C of this Article specify for 
interim and final reports, respectively. You must provide the 
reasons for your request and we will approve extensions that are 
adequately justified.
    Section E. Reporting significant developments. You must report 
the following information to us as soon as you become aware of it:
    1. Problems, delays, or adverse conditions that will materially 
impair your ability to meet the objectives of this award. This 
disclosure must include a statement of the action taken, or 
contemplated, and any assistance needed to resolve the situation.
    2. Favorable developments which will enable you to meet 
schedules and objectives sooner or at less cost than anticipated or 
produce more or different beneficial results than originally 
planned.
    Section F. Performance reporting procedures. [Reserved.]
    Section G. Site visits. We reserve the right to make site visits 
as warranted to monitor program performance under this award.

Appendix B to Part 1134--Terms and Conditions for REP Article II, 
``Financial Reporting''

    DoD Components must use the following template for REP Article 
II, inserting wording in each of sections A, B, and D and adjusting 
the default wording of Section E, if needed, in accordance with 
Sec.  1134.210 of this part:

REP Article II. Financial Reporting. (December 2014)

    Section A. Required reporting form, format, or data elements for 
interim and final financial reports. [Reserved.]
    Section B. Interim financial reports: Frequency, reporting 
periods, and due dates. [Reserved.]
    Section C. Final financial report. You must submit the final 
financial report under this award no later than 120 calendar days 
after the end date of the period of performance.
    Section D. Extensions of due dates. You may request extensions 
of the due dates that Sections B and C of this Article specify for 
interim and final reports, respectively. You must provide the 
reasons for your request, and we will approve extensions that are 
adequately justified.
    Section E. Where and how to submit financial reports. 
[Reserved.]

Appendix C to Part 1134--Terms and Conditions for REP Article III, 
``Reporting On Property''

    DoD Components must use the following template for REP Article 
III in accordance with Sec. Sec.  1134.305 through 1134.320 of this 
part:

REP Article III. Reporting on Property. (December 2014)

    Section A. Real property. Paragraphs A.1 through A.4 apply to 
real property for which you are accountable under this award, for as 
long as there is a Federal interest in the property (whether that 
interest is due to you or a subrecipient having acquired or improved 
the property under this award, or a transfer of the accountability 
for the property to this award from another award).
    1. Periodic status reports. You must submit periodic status 
reports, as follows:
    a. Frequency and duration of reporting requirement. [Reserved.]
    b. Due dates. [Reserved.]
    c. Other submission instructions. [Reserved.]
    2. Notifications of critical changes. You must notify the award 
administration office of any critical change in the status of real 
property as soon as feasible after you become aware of it. A 
critical change is any event with a significant adverse impact on 
the condition or value of the property, such as damage due to fire; 
flood, hurricane, or other severe weather; earthquake; or accident.
    3. Requests for disposition instructions. You must comply with 
applicable requirements in PROP Article III to request disposition 
instructions, either during the period of performance or at 
closeout.
    4. Closeout accounting. You must account to the award 
administration office for real property at the time of closeout of 
the award, as required by Section D of OAR Article VI.
    Section B. Equipment and supplies. Paragraphs B.1 through B.4 
apply to equipment or supplies for which you are accountable under 
this award and in which there is a Federal interest (whether that 
interest is due to you or a subrecipient having acquired or improved 
the property under this award, or a transfer of the accountability 
for the property to this award from another award).
    1. Periodic status report. There is no requirement for periodic 
reporting during the period of performance.
    2. Notifications of loss, damage, or theft. You must comply with 
applicable requirements in PROP Article II governing your property 
management system to promptly notify the award administration office 
of any loss, damage, or theft of equipment.
    3. Requests for disposition instructions. You must comply with 
applicable requirements in PROP Article IV to request disposition 
instructions for equipment, either during the period of performance 
or at closeout.
    4. Closeout accounting.
    a. Equipment. You must account to the award administration 
office for equipment at the time of closeout of this award, as 
required by Section D of OAR Article VI.
    b. Supplies. If you have a residual inventory of unused supplies 
that meets the criteria specified in paragraph E.2 of PROP Article 
IV, you must as part of your closeout accounting arrange with the 
award administration office for the compensation that paragraph 
specifies for the Federal interest in the supplies.
    Section C. Federally owned property. Paragraphs C.1 through C.3 
apply to federally owned property for which you are accountable 
under this award.
    1. Annual inventory. You must submit annually to the award 
administration office an inventory of federally owned property.
    2. Notifications of loss, damage, or theft. As provided in PROP 
Article II governing your property management system, you must 
promptly notify the award administration office of any loss, damage, 
or theft of federally owned property.
    3. Requests for disposition instructions. You must comply with 
requirements in Section B of PROP Article V to request disposition 
instructions, either during the period of performance or at 
closeout.
    4. Closeout accounting. Your requests for disposition 
instructions for federally owned property, as described in paragraph 
C.3 of this section, satisfy the need to account for federally owned 
property at closeout (see Section D of OAR Article VI).
    Section D. Intangible property. Paragraphs D.1 through D.3 apply 
to intangible property for which you are accountable under this 
award.
    1. Inventions developed under the award. You must submit all 
reports on subject inventions developed under this award that are 
required by the modified Governmentwide patent rights award 
provision specified in Section B of PROP Article VI, which include a 
disclosure of each subject invention and a final report listing all 
such subject inventions.
    2. Copyrights and data. You are not required to submit periodic 
reports about data produced under the award or about works for which 
you acquired ownership under this award, either by development or 
otherwise, and in which copyright was asserted. However, because the 
Federal Government has the rights in the works and data that 
Sections A and C of PROP Article VI specify, you must provide 
information about the works and data if we request it.

[[Page 78424]]

    3. Intangible property acquired, but not developed or produced, 
under the award. You must comply with requirements in Section D of 
PROP Article VI to request disposition instructions for intangible 
property acquired, but not developed or produced, under the award.

Appendix D to Part 1134--Terms and Conditions for REP Article IV, 
``Reporting on Subawards and Executive Compensation''

    DoD Components must use as REP Article IV the following default 
wording in accordance Sec.  1134.405 of this part:

REP Article IV. Reporting on Subawards and Executive Compensation. 
(December 2014)

    You must report information about subawards and executive 
compensation as specified in the award provision in appendix A to 2 
CFR part 170, ``Reporting subaward and executive compensation 
information,'' modified as follows:
    1. To accommodate any future designation of a different 
Governmentwide Web site for reporting subaward information, the Web 
site ``http://www.fsrs.gov'' cited in paragraphs a.2.i. and a.3 of 
the award provision is replaced by the phrase ``http://www.fsrs.gov 
or successor OMB-designated Web site for reporting subaward 
information'';
    2. To accommodate any future designation of a different 
Governmentwide Web site for reporting executive compensation 
information, the Web site ``http://www.sam.gov'' cited in paragraph 
b.2.i. of the award provision is replaced by the phrase ``https://www.sam.gov or successor OMB-designated Web site for reporting 
information on total compensation''; and
    3. The reference to ``Sec. ___.210 of the attachment to OMB 
Circular A-133, `Audits of States, Local Governments, and Non-Profit 
Organizations''' in paragraph e.3.ii of the award provision is 
replaced by ``2 CFR 200.330, as implemented in SUB Article I of this 
award''.

PART 1136--OTHER ADMINISTRATIVE REQUIREMENTS: GENERAL AWARD TERMS 
AND CONDITIONS

Sec.
1136.1 Purpose of this part.
1136.2 Applicability of this part.
1136.3 Exceptions from requirements of this part.
1136.4 Organization of this part.
Subpart A--Submitting and Maintaining Recipient Information (OAR 
Article I)
1136.100 Purpose of OAR Article I.
1136.105 Content of OAR Article I.
Subpart B--Records Retention and Access (OAR Article II)
1136.200 Purpose of OAR Article II.
1136.205 Records retention period.
1136.210 Extensions of retention period due to litigation, claim, or 
audit.
1136.215 Records for program income earned after the end of the 
performance period.
1136.220 Records for joint or long-term use.
1136.225 Methods for collecting, transmitting, and storing 
information.
1136.230 Access to records.
Subpart C--Remedies and Termination (OAR Article III)
1136.300 Purpose of OAR Article III.
1136.305 Content of OAR Article III.
Subpart D--Claims, Disputes, and Appeals (OAR Article IV)
1136.400 Purpose of OAR Article IV.
1136.405 Content of OAR Article IV.
Subpart E--Collection of Amounts Due (OAR Article V)
1136.500 Purpose of OAR Article V.
1136.505 Content of OAR Article V.
Subpart F--Closeout (OAR Article VI)
1136.600 Purpose of OAR Article VI.
1136.605 Content of OAR Article VI.
Subpart G--Post-Closeout Adjustments and Continuing Responsibilities 
(OAR Article VII)
1136.700 Purpose of OAR Article VII.
1136.705 Content of OAR Article VII.
Appendix A to Part 1136--Terms and Conditions for OAR Article I, 
``Submitting and maintaining recipient information''
Appendix B to Part 1136--Terms and Conditions for OAR Article II, 
``Records retention and access''
Appendix C to Part 1136--Terms and Conditions for OAR Article III, 
``Remedies and termination''
Appendix D to Part 1136--Terms and Conditions for OAR Article IV, 
``Claims, disputes, and appeals''
Appendix E to Part 1136--Terms and Conditions for OAR Article V, 
``Collection of amounts due''
Appendix F to Part 1136--Terms and Conditions for OAR Article VI, 
``Closeout''
Appendix G to Part 1136--Terms and Conditions for OAR Article VII, 
``Post-closeout adjustments and continuing responsibilities''

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


Sec.  1136.1   Purpose of this part.

    (a) This part specifies standard wording of general terms and 
conditions concerning submission and maintenance of recipient 
information; records retention and access; remedies for noncompliance 
and termination; claims, disputes, and appeals; collection of amounts 
due; closeout; and after-the-award requirements.
    (b) It thereby implements OMB guidance in multiple portions of 2 
CFR part 200, as those portions apply to general terms and conditions. 
Specifically, this part implements:
    (1) 2 CFR 200.113 and 200.210(b)(1)(iii);
    (2) 2 CFR 200.300(b) as it refers to requirements in 2 CFR part 25; 
and
    (3) 2 CFR 200.333 through 200.345.


Sec.  1136.2   Applicability of this part.

    The types of awards and entities to which this part and other parts 
in this subchapter apply are described in the subchapter overview at 2 
CFR 1126.2.


Sec.  1136.3   Exceptions from requirements of this part.

    Exceptions are permitted from the administrative requirements in 
this part only as described at 2 CFR 1126.3.


Sec.  1136.4   Organization of this part.

    (a) The content of this part is organized into subparts and 
associated appendices.
    (1) Each subpart provides direction to DoD Components on how to 
construct one article of general terms and conditions for grants and 
cooperative agreements.
    (2) For each subpart, there is a corresponding appendix with 
standard wording for terms and conditions of the article addressed by 
the subpart. Terms and conditions address rights and responsibilities 
of the Government and recipients.
    (b) A DoD Component must use the wording provided in each appendix 
in accordance with the direction in the corresponding subpart. That 
direction may permit DoD Components to vary from the standard wording 
in some situations.
    (c) The following table shows which article of general terms and 
conditions may be found in each of appendices A through G to this part 
(with the associated direction to DoD Components in subparts A through 
G, respectively):

------------------------------------------------------------------------
                                  You will find terms
                                    and conditions         That would
                                specifying recipients'    appear in an
           In . . .                   rights and        award within OAR
                                   responsibilities       Article . . .
                                   related to . . .
------------------------------------------------------------------------
Appendix A....................  Submitting and          I.
                                 maintaining recipient
                                 information.
Appendix B....................  Records retention and   II.
                                 access.
Appendix C....................  Remedies and            III.
                                 termination.
Appendix D....................  Claims, disputes, and   IV.
                                 appeals.
Appendix E....................  Collection of amounts   V.
                                 due.
Appendix F....................  Closeout..............  VI.

[[Page 78425]]

 
Appendix G....................  Post[dash]closeout      VII.
                                 adjustments and
                                 continuing
                                 responsibilities.
------------------------------------------------------------------------

Subpart A--Submitting and Maintaining Recipient Information (OAR 
Article I)


Sec.  1136.100   Purpose of OAR Article I.

    OAR Article I sets forth requirements for recipients to maintain 
current information about themselves in the data system the Government 
specifies as the repository for standard information about its business 
partners, currently the System for Award Management. The article 
thereby implements OMB guidance in:
    (a) 2 CFR 200.113 and 200.210(b)(1)(iii);
    (b) 2 CFR part 25; and
    (c) The portion of 2 CFR 200.300(b) that cites 2 CFR part 25 and 
the System for Award Management).


Sec.  1136.105   Content of OAR Article I.

    To implement the requirement described in Sec.  1136.100, DoD 
Components' general terms and conditions must use the standard wording 
appendix A to this part provides as OAR Article I. A DoD Component may 
reserve Section B of the article in its general terms and conditions if 
it is certain that there will be no award using those general terms and 
conditions for which the Federal share of the award's total value will 
exceed $500,000.

Subpart B--Records Retention and Access (OAR Article II)


Sec.  1136.200   Purpose of OAR Article II.

    OAR Article II addresses rights and responsibilities concerning 
retention of records related to awards; access to recipients' records; 
and collection, transmission, and storage of information. The article 
thereby implements OMB guidance in 2 CFR 200.333 through 200.337.


Sec.  1136.205   Records retention period.

    (a) OMB guidance. OMB guidance in:
    (1) The lead-in paragraph of 2 CFR 200.333 sets a standard 
retention period that is generally applicable to recipient records 
pertinent to Federal awards.
    (2) 2 CFR 200.333(c) and (f) provide different standard retention 
periods specifically for records that are related either to real 
property and equipment acquired with Federal funds or to indirect cost 
rate proposals and cost allocation plans.
    (b) DoD implementation. A DoD Component's general terms and 
conditions must specify the standard retention periods described in 
paragraph (a) of this section.
    (c) Award terms and conditions--(1) General. A DoD Component's 
general terms and conditions must use the wording appendix B to this 
part provides for Section A of OAR Article II.
    (2) Exception. A DoD Component's general terms and conditions may 
substitute alternative wording for paragraph A.3 of OAR Article II if 
the awards using those terms and conditions will be renewed quarterly 
or annually. The alternative wording for awards that will be renewed 
quarterly or annually would replace the words ``final financial 
report'' in paragraph A.3 with ``quarterly financial report'' or 
``annual financial report,'' respectively.


Sec.  1136.210   Extensions of retention period due to litigation, 
claim, or audit.

    (a) OMB guidance. OMB guidance in:
    (1) 2 CFR 200.333(a) provides for an extended retention period for 
records involved in a litigation, claim, or audit that begins before 
the end of the standard 3-year retention period.
    (2) 2 CFR 200.333(b) provides that a recipient also is required to 
extend the retention period when a Federal awarding, cognizant, or 
oversight agency notifies it in writing to do so.
    (b) DoD implementation. (1) A DoD Component's general terms and 
conditions must provide for extended retention periods for records 
involved in a litigation, claim, or audit that begins before the end of 
the standard 3-year retention period, as described in 2 CFR 200.333(a).
    (2)(i) With the one exception described in paragraph (b)(2)(ii) of 
this section, DoD Components may not require recipients to extend the 
records retention period as described in 2 CFR 200.333(b).
    (ii) A DoD Component's general terms and conditions must extend the 
``retention period,'' as that term is used in 2 CFR 200.344(a), to 
include the entire period during which recipients retain their records, 
even if that period extends beyond the standard 3-year retention period 
described in Sec.  1136.205. That extension will enable disallowance of 
costs and recovery of funds based on an audit or other review of 
records a recipient elected to retain beyond the standard retention 
period, even if the audit or review began after the end of that 
retention period. Without that extension, the ability to disallow costs 
and recover funds would be limited by 2 CFR 200.344(a), which states 
that an agency must make any disallowance determination about a 
recipient's costs and notify the recipient within the record retention 
period.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must use the wording appendix B to this part provides for 
Section B of OAR Article II.


Sec.  1136.215   Records for program income earned after the end of the 
performance period.

    (a) OMB guidance. OMB guidance in 2 CFR 200.333(e) provides the 
retention period for records related to program income earned after the 
end of the period of performance, for instances when an agency 
establishes requirements governing the disposition of program income 
earned after that time.
    (b) DoD implementation. A DoD Component's general terms and 
conditions should not establish retention requirements for records 
related to program income earned after the end of the period of 
performance. Retention requirements for those records in general terms 
and conditions would be inconsistent with the statement in 2 CFR 
1128.725 that a DoD Component should rarely, if ever, establish a 
requirement for a recipient to be accountable for program income earned 
after the end of the period of performance. Section 1128.725 provides 
for use of general terms and conditions wording in FMS Article VII that 
establishes no such requirement. Section 1128.725 further states that 
exceptions for individual awards are properly addressed at the time of 
award in the award-specific terms and conditions.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must use the wording appendix B to this part provides for 
Section C of OAR Article II. If a DoD Component includes a requirement 
in the award-specific terms and conditions of a particular award for 
the recipient to be accountable for program income earned after the end 
of the period of performance, it also may include a requirement in the 
award-specific terms and conditions for the recipient's retention of 
the associated records.

[[Page 78426]]

Sec.  1136.220   Records for joint or long-term use.

    (a) OMB guidance. OMB guidance in:
    (1) 2 CFR 200.334 states that a Federal awarding agency must 
request that a recipient transfer records to its custody if the agency 
determines that the records have value that warrants long-term 
retention. It also provides that the agency may instead arrange for the 
recipient to retain records that are continuously needed for joint use.
    (2) 2 CFR 200.333(d) exempts records transferred to a Federal 
agency from the standard records retention requirement.
    (b) DoD implementation. A DoD Component's general terms and 
conditions must inform recipients that they may be asked to transfer 
records, maintain them for joint use, or retain them for a longer 
period of time.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must use the wording appendix B to this part provides for 
Section D of OAR Article II.


Sec.  1136.225   Methods for collecting, transmitting, and storing 
information.

    (a) OMB guidance. OMB guidance in 2 CFR 200.335 addresses the use 
of electronic and paper formats in the collection, transmission, and 
storage of information related to awards.
    (b) DoD implementation. A DoD Component's general terms and 
conditions must include provisions consistent with the guidance in 2 
CFR 200.335 for recipients' use of electronic and paper formats to 
collect, transmit, and store information.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must use the wording appendix B to this part provides for 
Section E of OAR Article II.


Sec.  1136.230   Access to records.

    (a) OMB guidance. OMB guidance in 2 CFR 200.336 and 200.337 
addresses Federal Government and public access to recipient records 
related to awards.
    (b) DoD implementation. A DoD Component's general terms and 
conditions must provide for Government access to records consistent 
with 2 CFR 200.336 and address public access to records to implement 
the guidance in 2 CFR 200.337.
    (c) Award terms and conditions. A DoD Component's general terms and 
conditions must use the wording appendix B to this part provides for 
Section F of OAR Article II.

Subpart C--Remedies and Termination (OAR Article III)


Sec.  1136.300   Purpose of OAR Article III.

    OAR Article III addresses remedies for noncompliance, including 
suspension and termination of awards. It thereby implements OMB 
guidance in 2 CFR 200.338 through 200.340 and 200.342.


Sec.  1136.305   Content of OAR Article III.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify remedies available for addressing noncompliance with award 
terms and conditions, policies and procedures related to termination of 
awards, and effects of suspension and termination on allowability of 
costs.
    (b) Award terms and conditions. To implement the requirement in 
paragraph (a) of this section, a DoD Component's general terms and 
conditions must use the wording appendix C to this part provides for 
OAR Article III.

Subpart D--Claims, Disputes, and Appeals (OAR Article IV)


Sec.  1136.400   Purpose of OAR Article IV.

    OAR Article IV addresses claims, disputes, and appeals under 
awards. It thereby provides the award terms and conditions required by 
the DoD Grant and Agreement Regulations at 32 CFR 22.815 and also 
implements OMB guidance in 2 CFR 200.341.


Sec.  1136.405   Content of OAR Article IV.

    (a) Requirement. The DoD Grant and Agreement Regulations at 32 CFR 
22.815 require DoD Components' general terms and conditions to 
incorporate the procedures set forth in that section for processing 
claims and disputes and deciding appeals of grants officer's decisions.
    (b) Award terms and conditions--(1) General. To implement the 
requirement in paragraph (a) of this section, a DoD Component's general 
terms and conditions must use the wording appendix D to this part 
provides for OAR Article IV, with wording inserted in lieu of the 
reserved paragraph A.2 to identify the Component's cognizant Grant 
Appeal Authority and provide his or her mailing or email address.
    (2) Exception. A DoD Component may add one or more sections to the 
wording appendix D to this part provides for OAR Article IV to state a 
requirement that recipients must provide opportunities to subrecipients 
for hearings, appeals, or other administrative proceedings with respect 
to claims, disputes, remedies for noncompliance, or other matters if:
    (i) That requirement is in a statute or regulation adopted in the 
Code of Federal Regulations after opportunity for public comment; and
    (ii) The statutory or regulatory requirement applies to awards 
using the DoD Component's general terms and conditions.

Subpart E--Collection of Amounts Due (OAR Article V)


Sec.  1136.500   Purpose of OAR Article V.

    OAR Article V addresses procedures for establishing, appealing, and 
collecting debts under DoD awards. It thereby:
    (a) Provides requirements for recipients paralleling those for DoD 
Components in the DoDGARs at 32 CFR 22.820;
    (b) Augments requirements of OAR Article IV in any case in which a 
claim leads to a determination that a recipient owes an amount to DoD; 
and
    (c) Implements OMB guidance in 2 CFR 200.345.


Sec.  1136.505   Content of OAR Article V.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify how grants officers' decisions establish debts under 
awards, when debts become delinquent, how and when recipients may 
appeal, and how debts not paid in a timely manner are referred for debt 
collection.
    (b) Award terms and conditions. To implement the requirement in 
paragraph (a) of this section, a DoD Component's general terms and 
conditions must use the wording appendix E to this part provides for 
OAR Article V.

Subpart F--Closeout (OAR Article VI)


Sec.  1136.600   Purpose of OAR Article VI.

    OAR Article VI addresses recipients' responsibilities for closeout 
of awards and subawards under them. The article thereby implements OMB 
guidance in 2 CFR 200.343.


Sec.  1136.605   Content of OAR Article VI.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify requirements related to closeout of awards and subawards, 
including recipients' liquidations of obligations, refunds of 
unobligated balances, and submission of final reports.
    (b) Award terms and conditions--(1) General. To implement the 
requirement in paragraph (a) of this section, a DoD Component's general 
terms and conditions must use the wording appendix F to this part 
provides for OAR Article VI.

[[Page 78427]]

    (2) Exception related to due dates for final reports other than 
performance, financial, and invention reports. Consistent with OMB 
guidance in 2 CFR 200.343(a), a DoD Component may grant extensions to 
due dates for final reports.
    (i) To pre-approve a 30-day extension for final reports other than 
performance, financial, and invention reports, a DoD Component may 
substitute ``120 calendar days'' for ``90 calendar days'' in the 
default wording appendix F to this part provides for paragraph C.4 of 
OAR Article VI. These pre-approved 30-day extensions in the general 
terms and conditions are for all awards using those terms and 
conditions; they therefore are separate and distinct from any 
additional extensions a recipient may later request for an individual 
award.
    (ii) The parallel authorities for pre-approved extensions of due 
dates for final performance, financial, and invention reports are 
elsewhere. DoDGARs provisions in:
    (A) 2 CFR 1134.125 authorize a DoD Component to pre-approve a 30-
day extension for due dates of performance reports by an appropriate 
substitution of wording in REP Article I of the general terms and 
conditions.
    (B) 2 CFR 1134.210 provide default wording in REP Article II that 
pre-approves a 30-day extension for due dates of financial reports.
    (C) 2 CFR 1130.610 authorize a DoD Component to pre-approve a 30-
day extension for due dates of final reports listing subject inventions 
under awards by an appropriate substitution of wording in PROP Article 
VI of the general terms and conditions.

Subpart G--Post-Closeout Adjustments and Continuing 
Responsibilities (OAR Article VII)


Sec.  1136.700   Purpose of OAR Article VII.

    OAR Article VII addresses post-closeout funding adjustments and 
recipients' continuing responsibilities after award closeout. It 
thereby implements OMB guidance in 2 CFR 200.344.


Sec.  1136.705   Content of OAR Article VII.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify the rights and responsibilities of the Government and 
recipients with respect to funding adjustments and recipients' 
continuing responsibilities after award closeout.
    (b) Award terms and conditions. To implement the requirement in 
paragraph (a) of this section, a DoD Component's general terms and 
conditions must use the wording appendix G to this part provides for 
OAR Article VII.

Appendix A to Part 1136--Terms and Conditions for OAR Article I, 
``Submitting and Maintaining Recipient Information''

    DoD Components must use as OAR Article I the following standard 
wording in accordance with Sec.  1136.105 of this part:

OAR Article I. Submitting and Maintaining Recipient Information. 
(December 2014)

    Section A. System for award management.
    1. Unless you are exempted from this requirement in accordance 
with OMB guidance in 2 CFR 25.110, you must maintain the currency of 
information about yourself in the system the Federal Government 
specifies as the repository for information about its business 
partners (currently the System for Award Management (SAM)).
    2. You must maintain the information in that system until you 
submit the final financial report required under this award or 
receive the final payment, whichever is later.
    3. You must review and update the information at least annually 
after your initial registration in the system (unless you are 
subject to the requirements in Section B) and more frequently if 
required by changes in your information.
    Section B. Reporting of performance and integrity information.
    1. General reporting requirement. If the total value of your 
currently active grants, cooperative agreements, and procurement 
contracts from all Federal agencies exceeds $10,000,000 for any 
period of time during the period of performance of this award, then 
during that period of time you must maintain in SAM the currency of 
information required by paragraph B.2 of this section. Note that:
    a. This reporting is required under section 872 of Public Law 
110-417, as amended (41 U.S.C. 2313).
    b. As required by section 3010 of Public Law 111-212, all 
performance and integrity information posted in the designated 
information system on or after April 15, 2011, except past 
performance reviews required for Federal procurement contracts, will 
be publicly available.
    c. Recipient information is submitted to the OMB-designated 
integrity and performance system through the SAM, as described in 
paragraph B.3 of this section. The currently designated integrity 
and performance information system is the Federal Awardee 
Performance and Integrity Information System (FAPIIS).
    2. Proceedings about which you must report. Submit the 
information that the designated information system requires about 
each proceeding that:
    a. Is in connection with the award or performance of a grant, 
cooperative agreement, or procurement contract from the Federal 
Government;
    b. Reached its final disposition during the most recent 5 year 
period; and
    c. Is one of the following:
    i. A criminal proceeding that resulted in a conviction, as 
defined in paragraph B.5. of this section;
    ii. A civil proceeding that resulted in a finding of fault and 
liability and payment of a monetary fine, penalty, reimbursement, 
restitution, or damages of $5,000 or more;
    iii. An administrative proceeding, as defined in paragraph B.5. 
of this section, that resulted in a finding of fault and liability 
and your payment of either monetary fine or penalty of $5,000 or 
more or a reimbursement, restitution, or damages in excess of 
$100,000; or
    iv. Any other criminal, civil, or administrative proceeding if:
    A. It could have led to an outcome described in paragraph 
B.2.c.i, ii, or iii of this section;
    B. It had a different disposition arrived at by consent or 
compromise with an acknowledgment of fault on your part; and
    C. The requirement in this section to disclose information about 
the proceeding does not conflict with applicable laws and 
regulations.
    3. Reporting procedures. Submit the information required in 
paragraph B.2 of this section to the Entity Management functional 
area of the SAM.
    a. Current procedures are to submit the information as part of 
the maintenance of your information in the SAM that Section A of 
this article requires.
    b. You do not need to submit the information again under this 
award if you already reported current information to the SAM under 
another Federal grant, cooperative agreement, or procurement 
contract.
    4. Reporting frequency. During any period of time when you are 
subject to the requirement in paragraph B.1 of this section, you 
must report to SAM at least semiannually following your initial 
report of any information required in paragraph B.2 of this section, 
either to provide new information not reported previously or affirm 
that there is no new information to report.
    5. Definitions. For purposes of this section:
    a. Administrative proceeding means a non-judicial process that 
is adjudicatory in nature in order to make a determination of fault 
or liability (e.g., Securities and Exchange Commission 
Administrative proceedings, Civilian Board of Contract Appeals 
proceedings, and Armed Services Board of Contract Appeals 
proceedings). This includes proceedings at the Federal and State 
level but only in connection with performance of a Federal contract, 
grant, or cooperative agreement. It does not include audits, site 
visits, corrective plans, or inspection of deliverables.
    b. Conviction means a judgment or conviction of a criminal 
offense by any court of competent jurisdiction, whether entered upon 
a verdict or a plea, and includes a conviction entered upon a plea 
of nolo contendere.
    c. Total value of currently active grants, cooperative 
agreements, and procurement contracts includes:
    i. Only the Federal share of the funding under any Federal 
agency award with a recipient cost share or match; and
    ii. The value of all expected funding increments and options, 
even if not yet exercised, under each Federal agency award.
    Section C. Disclosure of evidence of integrity-related issues.
    1. Disclosure requirement. At any time during the period of 
performance of this

[[Page 78428]]

award, if you have evidence that a covered person committed a 
covered action (see paragraphs C.2 and C.3 of this section) that may 
affect this award, you must disclose the evidence in writing to the 
Office of the Inspector General, DoD, with a copy to the grants 
officer identified in the award cover pages.
    2. Covered person. As the term is used in this section, 
``covered person'' means a principal, employee, or agent of either 
you or a subrecipient under this award, where:
    a. ``Principal'' means:
    i. An officer, director, owner, partner, principal investigator, 
or other person with management or supervisory responsibilities that 
relate to this award; or
    ii. A consultant or other person, whether or not employed by you 
or a subrecipient or paid with funds under this award, who:
    A. Is in a position to handle funds under this award;
    B. Is in a position to influence or control the use of those 
funds; or
    C. Occupies a technical or professional position capable of 
substantially influencing the development or outcome of an activity 
required to perform the project or program under this award.
    b. ``Agent'' means any individual who acts on behalf of, or who 
is authorized to commit you or the subrecipient, whether or not 
employed by you or the subrecipient.
    3. Covered action. As the term is used in this section, 
``covered action'' means a violation of Federal criminal law in 
Title 18 of the United States Code involving fraud, bribery, or a 
gratuity violation.
    4. Safeguarding of the information.
    a. To the extent permitted by law and regulation, we will:
    i. Safeguard and treat information you disclose to us as 
confidential if you mark the information as ``confidential'' or 
``proprietary.''
    ii. Not release the information to the public in response to a 
Freedom of Information Act (5 U.S.C. 552) request without notifying 
you in advance.
    b. We may transfer documents you provide to us to any other 
department or agency within the Executive Branch of the Federal 
Government if the information relates to matters within that 
organization's jurisdiction.

Appendix B to Part 1136--Terms and Conditions for OAR Article II, 
``Records Retention And Access''

    DoD Components must use the following standard wording in OAR 
Article II in accordance with Sec. Sec.  1136.205 through 1136.230 
of this part, which allow alternative wording in paragraph A.3:

OAR Article II. Records Retention and Access. (December 2014)

    Section A. Records retention period. Except as provided in 
Sections B through D of this article:
    1. You must keep records related to any real property and 
equipment acquired, in whole or in part, using Federal funds under 
the award for 3 years after final disposition of the property. For 
any item of exempt property with a current fair market value greater 
than $5,000, and for which final disposition was not a condition of 
the title vesting, you must keep whatever records you need for as 
long as necessary to ensure that you can deduct the Federal share if 
you later use the property in contributions for cost sharing or 
matching purposes under any Federal award.
    2. You must keep records related to rate proposals for indirect 
or facilities and administration costs, cost allocation plans, and 
supporting records such as indirect cost rate computations and any 
similar accounting computations of the rate at which a particular 
group of costs is chargeable (such as computer usage chargeback or 
composite fringe benefit rates) as follows:
    a. If you are required to submit a proposal, plan, or other 
computations to your Federal cognizant agency for indirect costs, as 
the basis for negotiation of a rate, you must keep the submissions 
and all supporting records for 3 years from the date on which you 
were required to make the submissions.
    b. If you are not required to submit a proposal, plan, or other 
computation as the basis for negotiation, you must keep the 
proposal, plan, other computation, and supporting records for 3 
years from the end of the fiscal year or other accounting period 
covered by the proposal, plan, or other computation.
    3. You must keep other financial records, supporting documents, 
statistical records, and other records pertinent to this award for a 
period of 3 years from the date you submit your final financial 
report under the award.
    Section B. Extensions of retention period due to litigation, 
claim, or audit.
    1. If any litigation, claim, or audit begins before the end of 
the 3-year retention period specified in Section A of this article 
and the final action related to the litigation, claim, or audit is 
not taken before the end of that 3-year period, you must retain all 
records related to this award that may be involved in the 
litigation, claim, or audit until all findings involving the records 
have been resolved and final action taken.
    2. We may disallow costs and recover funds under this award 
based on an audit or other review of records you elected to retain 
beyond the retention period required by this article, even if the 
audit or review begins after the end of the 3-year retention period 
specified in Section A of this article. Thus, the ``retention 
period,'' as that term is used in OMB guidance in 2 CFR 
200.344(a)(1), is extended as described in 2 CFR 200.333(b) to 
include the entire period during which we and our authorized 
representatives continue to have access to those records under 
paragraph F.2 of this article.
    Section C. Records for program income earned after the end of 
the performance period. In accordance with Section F of FMS Article 
VII, there are no requirements under this award applicable to 
program income you earn after the end of the period of performance 
and therefore no associated records retention requirements.
    Section D. Records for joint or long-term use.
    1. Joint use. To avoid duplicate recordkeeping for records that 
you and we both need to use on a continuous basis, we may ask you to 
make special arrangements with us, by mutual agreement, to make 
records available for joint and continuous use.
    2. Long-term use. If we determine that some records will be 
needed longer than the 3-year period specified in Section A of this 
article, we may request that you either:
    a. Retain the records for a longer period of time; or
    b. Transfer the records to our custody for long-term retention.
    3. Retention requirements for transferred records. For any 
records transferred to our custody, you are not subject to the 
records retention requirements in Section A of this article.
    Section E. Methods for collecting, transmitting, and storing 
information.
    1. You should, whenever practicable, collect, transmit, and 
store information related to this award in open and machine readable 
formats rather than in closed formats or on paper. However, if you 
request it, we will:
    a. Provide award related-information to you on paper; and
    b. Accept award related-information from you on paper. In that 
case, we will not require more than an original and two copies.
    2. When your original records are in an electronic form that 
cannot be altered, you do not need to create and retain paper copies 
of those records.
    3. When your original records are on paper, you may substitute 
electronic versions produced through duplication or using other 
forms of electronic media, provided that:
    a. You conduct periodic quality control reviews of the records;
    b. You provide reasonable safeguards against alteration of the 
records; and
    c. The records remain readable.
    Section F. Access to records.
    1. Scope of Government access rights.
    a. We as the awarding agency, the Federal Government Inspectors 
General, the Comptroller General of the United States, and any of 
our authorized representatives have the right of access to any 
documents, papers, or other records you have that are pertinent to 
this award, in order to make audits, examinations, excerpts, and 
transcripts.
    b. This right also includes timely and reasonable access to your 
personnel for the purposes of interview and discussion related to 
the records.
    c. As described in OMB guidance at 2 CFR 200.336(b), the access 
to records described in this section will include access to the true 
name of a victim of a crime only under extraordinary and rare 
circumstances.
    i. You are required to provide that access only in response to a 
court order or subpoena pursuant to a bona fide confidential 
investigation, or in response to a request duly authorized by the 
head of the DoD Component or his or her designee; and
    ii. You must take appropriate steps to protect this sensitive 
information.
    2. Duration of Government access rights. We have the access 
rights described in paragraph F.1 of this section as long as you 
retain the records.
    3. Public access.

[[Page 78429]]

    a. You must comply with requirements to protect information that 
Federal statute, Executive order, or regulation requires to be 
protected (e.g., personally identifiable or export controlled 
information), to include both information generated under this award 
and information provided to you and identified as being subject to 
protection. Other than those limitations on dissemination of 
information, we place no restrictions on you that limit public 
access to your records pertinent to this award.
    b. We do not place any requirements on you to permit public 
access to your records separate from any Federal, State, local, or 
tribal statute that may require you to do so.
    c. The Freedom of Information Act (FOIA, 5 U.S.C. 552) does not 
apply to records in your possession but records you provide to us 
generally will be subject to FOIA, with the applicable exemptions.

Appendix C to Part 1136--Terms and Conditions for OAR Article III, 
``Remedies and Termination''

    DoD Components must use the following standard wording in OAR 
Article III in accordance with Sec.  1136.305 of this part:

OAR Article III. Remedies and Termination. (December 2014)

    Section A. Remedies for noncompliance.
    1. If you materially fail to comply with a term or condition of 
this award or an applicable Federal statute or regulation, we may 
amend this award to impose specific additional conditions as 
described in OMB guidance in 2 CFR 200.207. If we determine that the 
imposition of those additional conditions is insufficient to remedy 
the noncompliance, we may take one or more of the following actions 
that we deem appropriate to the circumstances:
    a. Temporarily withhold cash payments pending:
    i. Your correction of the deficiency; or
    ii. Our taking more severe enforcement action.
    b. Disallow (that is, deny both use of funds and any applicable 
cost-sharing or matching credit for) all or part of the cost of the 
activity or action not in compliance;
    c. Suspend or terminate this award, in whole or in part 
(suspension of an award is a separate and distinct action from 
suspension of a person under 2 CFR parts 180 and 1125, as noted in 
paragraph A.3 of this article);
    d. Withhold further awards to you for the project or program 
that is not in compliance;
    e. Take any other action legally available to us under the 
circumstances.
    2. You may raise an objection to our taking any remedy we take 
under paragraph A.1 of this section and will be given an opportunity 
to provide information and documentation challenging the action. The 
procedures are those specified in OAR Article IV for claims and 
disputes.
    3. Our use of any remedy under paragraph A.1 of this section, 
including suspension or termination of the award, does not preclude 
our referring the noncompliance to a suspension and debarment 
official and asking that official to consider initiating a 
suspension or debarment action under 2 CFR part 1125, the DoD 
implementation of OMB guidance at 2 CFR part 180.
    Section B. Termination.
    1. This award may be terminated in whole or in part as follows:
    a. Unilaterally by the Government. We will provide a notice of 
termination if we unilaterally terminate this award in whole or in 
part, which we may do for either of the following reasons:
    i. Your material failure to comply with the award terms and 
conditions. If we terminate the award for that reason, we will 
report the termination to the OMB-designated integrity and 
performance system (currently FAPIIS). In accordance with 41 U.S.C. 
2313, each Federal awarding official must review and consider the 
information in the OMB-designated integrity and performance system 
with regard to any proposal or offer before awarding a grant or 
contract.
    ii. The program office does not have funding for an upcoming 
increment if this award is incrementally funded. In that case, the 
Government's financial obligation does not exceed the amount 
currently obligated under the award.
    b. By mutual agreement. With your consent, we may terminate this 
award, in whole or in part, for any reason. In that case, you and we 
must agree to:
    i. The termination conditions, including the effective date; and
    ii. In the case of a partial termination, the portion to be 
terminated.
    c. Unilaterally by the recipient. You may unilaterally terminate 
this award, in whole or in part, by sending us written notification 
that states:
    i. The reasons for the termination;
    ii. The effective date; and
    iii. In the case of partial termination, the portion to be 
terminated. In that case, however, we may terminate the award in its 
entirety if we determine that the remaining portion of the award 
will not accomplish the purposes for which we made the award.
    2. If this award is terminated in its entirety before the end of 
the performance period, you must complete the closeout actions for 
which you are responsible under OAR Article VI. The due date for 
each action is to be measured relative to the date of termination.
    3. If this award is only partially terminated before the end of 
the performance period, with a reduced or modified portion of the 
award continuing through the end of the performance period, then 
closeout actions will occur at the end of the performance period as 
specified in OAR Article VI.
    4. You will continue to have all of the post-closeout 
responsibilities that OAR Article VII specifies for you if this 
award is wholly or partially terminated before the end of the 
performance period.
    Section C. Effects of suspension or termination of the award on 
allowability of costs. If we suspend or terminate this award prior 
to the end of the period of performance, costs resulting from 
obligations that you incurred:
    1. Before the effective date of the suspension or termination 
are allowable if:
    a. You properly incurred those obligations;
    b. You did not incur the obligations in anticipation of the 
suspension or termination;
    c. In the case of termination, the costs resulted from 
obligations that were noncancellable after the termination; and
    d. The costs would have been allowable if we had not suspended 
or terminated the award and it had expired normally at the end of 
the period of performance.
    2. During the suspension or after the termination are not 
allowable unless we expressly authorize them, either in the notice 
of suspension or termination or subsequently.

Appendix D to Part 1136--Terms and Conditions for OAR Article IV, 
``Claims, Disputes, and Appeals''

    DoD Components must use the following standard wording in OAR 
Article IV in accordance with Sec.  1136.405 of this part:

OAR Article IV. Claims, Disputes, and Appeals. (December 2014)

    Section A. Definitions.
    1. Claim. The definition of the term ``claim,'' as it is used in 
this article, is in the definitions section of the preamble to these 
general terms and conditions.
    2. Grant Appeal Authority. [Reserved.]
    Section B. Submission of claims.
    1. Your claims. To submit a claim arising out of this award, you 
must submit it in writing to the grants officer for decision, 
specify the nature and basis for the relief you are requesting, and 
include all data that supports your claim.
    2. Government claims. You will receive a written grants 
officer's decision if a DoD claim arises out of this award.
    Section C. Alternative dispute resolution.
    1. We encourage resolution of all issues related to this award 
by mutual agreement between you and the grants officer.
    2. If you and the grants officer are unable to resolve an issue 
through unassisted negotiations, we encourage use of Alternative 
Dispute Resolution (ADR) procedures to try to do so. ADR procedures 
are any voluntary means, such as mini-trials or mediation, used to 
resolve issues in controversy. ADR procedures may be used prior to 
submission of a claim or at any other time prior to the Grant Appeal 
Authority's decision on any appeal you submit.
    Section D. Grants officer decisions for claims you submit.
    1. Within 60 calendar days of receiving your claim, the grants 
officer will either:
    a. Transmit a written decision that:
    i. Identifies data on which the decision is based; and
    ii. Identifies and provides the mailing address for the Grant 
Appeal Authority to whom you would submit an appeal of the decision 
if you elect to do so; or
    b. If more time is required to render a written decision, notify 
you of a specific date when he or she will render the decision and 
inform you of the reason for delaying it.
    2. The grants officer's decision will be final unless you decide 
to appeal, in which case we encourage use of ADR procedures as noted 
in Section C of this article.

[[Page 78430]]

    Section E. Formal administrative appeals.
    1. Right to appeal. You have the right to appeal a grants 
officer's decision to the Grant Appeal Authority identified in 
Section A of this article.
    2. Notice of appeal. You may appeal a grants officer's decision 
within 90 calendar days of receiving the decision by submitting a 
written notice of appeal to the Grant Appeal Authority and grants 
officer. If you elect to use ADR procedures, you are allowed an 
additional 60 calendar days to submit the written notice of appeal.
    3. Appeal file. Within 30 calendar days of the grants officer's 
receipt of your notice of appeal, you should receive the appeal file 
with copies of all documents relevant to the appeal. You may 
supplement the file with other documents you deem relevant and with 
a memorandum in support of your position for the Grant Appeal 
Authority's consideration. The Grant Appeal Authority may request 
additional information from you.
    4. Decision. Unless the Grant Appeal Authority decides to 
conduct fact-finding procedures or an oral hearing on the appeal, 
the appeal will be decided solely on the basis of the written 
record. Any fact-finding or hearing will be conducted using 
procedures that the Grant Appeal Authority deems appropriate.
    Section F. Representation. You may be represented by counsel or 
any other designated representative in any claim, appeal, or ADR 
proceeding, as long as the representative is not otherwise 
prohibited by law or regulation from appearing before the DoD 
Component concerned.
    Section G. Non-exclusivity of remedies. Nothing in this article 
is intended to limit your right to any remedy under the law.

Appendix E to Part 1136--Terms and Conditions for OAR Article V, 
``Collection Of Amounts Due''

    DoD Components must use the following standard wording in OAR 
Article V in accordance with Sec.  1136.505 of this part:

OAR Article V. Collection of Amounts Due. (December 2014)

    Section A. Establishing a debt.
    1. Any amount paid to you in excess of the amount to which you 
are determined to be entitled under the terms and conditions of this 
award constitutes a debt to the Federal Government.
    2. A grants officer will attempt to resolve any claim of your 
indebtedness arising out of this award by mutual agreement.
    3. If the grants officer fails to resolve the claim in that 
manner, you will receive a written notice of the grants officer's 
decision formally determining the debt, as described in paragraph 
B.2 of OAR Article IV. The notice will describe the debt, including 
the amount, name and address of the official who determined the 
debt, and a copy of that official's determination.
    Section B. Debt delinquency and appeals.
    1. Within 30 calendar days of the grants officer's decision, you 
must either pay the amount owed to the address provided in the 
written notice or inform the grants officer that you intend to 
appeal the decision. Appeal procedures are described in OAR Article 
IV.
    2. If you elect not to appeal, any amounts not paid within 30 
calendar days of the grants officer's decision will be a delinquent 
debt.
    3. If you elect to appeal the grants officer's decision, you 
will have 90 calendar days after receipt of the grants officer's 
decision to file your appeal unless Alternative Dispute Resolution 
(ADR) procedures are used, as described in section C of OAR Article 
IV, in which case you will have 150 calendar days.
    Section C. Demand letter, interest, and debt collection.
    1. If within 30 calendar days of the grants officer's decision, 
you neither pay the amount due nor provide notice of your intent to 
appeal the grants officer's decision, the grants officer will send 
you a demand letter identifying a payment office that will be 
responsible for any further debt collection activity.
    2. If you do not pay by the due date specified in the written 
demand letter, the Federal Government may collect part or all of the 
debt by:
    a. Making an administrative offset against your requests for 
reimbursements under Federal awards;
    b. Withholding advance payments otherwise due to you; and
    c. Any other action permitted by Federal statute.
    3. The debt will bear interest, and may include penalties and 
other administrative costs, in accordance with applicable provisions 
of the DoD Financial Management Regulation (DoD 7000.14-R), which 
implements the Federal Claims Collection Standards. The date from 
which interest is computed is not extended by litigation or the 
filing of any form of appeal.

Appendix F to Part 1136--Terms and Conditions for OAR Article VI, 
``Closeout''

    DoD Components must use the following standard wording in OAR 
Article VI in accordance with Sec.  1136.605 of this part:

OAR Article VI. Closeout. (December 2014)

    Section A. Liquidation of obligations. Unless the award 
administration office authorizes an extension of the due date, you 
must liquidate all obligations that you incurred under this award 
not later than 120 calendar days after the end date of the period of 
performance.
    Section B. Refunds of unobligated balances. You must promptly 
refund to the award administration office any balances of 
unobligated cash that we have advanced or paid to you and not 
authorized you to use on other projects or programs.
    Section C. Final reports. You must submit the:
    1. Final performance report under this award no later than the 
date specified in Section C of REP Article I, subject to any 
extensions granted under Section D of that article;
    2. Final financial report under this award no later than the 
date specified in Section C of REP Article II, subject to any 
extensions granted under Section D of that article;
    3. Final report listing subject inventions made under the award 
no later than the date specified in Section B of PROP Article VI; 
and
    4. Other final reports that are required under this award no 
later than 90 calendar days after the end date of the period of 
performance, unless you request an extension of the due date and the 
award administration office approves the request.
    Section D. Accounting for property. You must account for any 
real property, equipment, supplies, and intangible property that you 
and any subrecipients acquired or improved under the award, in 
accordance with PROP Articles I through IV and VI. Your requests for 
disposition instructions for any federally owned property, as 
required by PROP Article V, meet the need described in OMB guidance 
at 2 CFR 200.343(f) to account for that property at closeout.

Appendix G to Part 1136--Terms and Conditions for OAR Article VII, 
``Post-Closeout Adjustments and Continuing Responsibilities''

    DoD Components must use the following standard wording in OAR 
Article VII in accordance with Sec.  1136.705 of this part:

OAR Article VII. Post-Closeout Adjustments and Continuing 
Responsibilities. (December 2014)

    Section A. Adjustments. The closeout of this award does not 
affect:
    1. Our right to disallow costs and recover funds on the basis of 
a later audit or other review, as long as we make the determination 
that the costs are disallowed and notify you about that 
determination within the extended records retention period specified 
in paragraph B.2 of OAR Article II of these terms and conditions.
    2. Your obligation to return any funds due to the Federal 
Government as a result of later refunds, corrections, or other 
transactions (to include any adjustments in final indirect cost 
rates).
    Section B. Continuing responsibilities. After closeout of this 
award, you must continue to comply with terms and conditions of this 
award that have applicability beyond closeout, including 
requirements concerning:
    1. Audits, as specified in FMS Article V that cover periods of 
time during which you expended funds under this award.
    2. Management, use, and disposition of any real property or 
equipment acquired under this award in which we continue to have a 
Federal interest after closeout, as specified in PROP Articles I 
through IV.
    3. Retention of, and access to, records related to this award, 
as specified in OAR Article II.

PART 1138--REQUIREMENTS RELATED TO SUBAWARDS: GENERAL AWARD TERMS 
AND CONDITIONS

Sec.
1138.1 Purpose of this part.
1138.2 Applicability of this part.

[[Page 78431]]

1138.3 Exceptions from requirements of this part.
1138.4 Organization of this part.
1138.5 Authority to omit or reserve portions of SUB Articles I 
through XII.
Subpart A--Distinguishing Subawards and Procurements (SUB Article I)
1138.100 Purpose of SUB Article I.
1138.105 Content of SUB Article I.
Subpart B--Pre-Award and Time of Award Responsibilities (SUB Article 
II)
1138.200 Purpose of SUB Article II.
1138.205 Content of SUB Article II.
Subpart C--Informational Content of Subawards (SUB Article III)
1138.300 Purpose of SUB Article III.
1138.305 Content of SUB Article III.
Subpart D--Financial and Program Management Requirements for Subawards 
(SUB Article IV)
1138.400 Purpose of SUB Article IV.
1138.405 Content of SUB Article IV.
Subpart E--Property Requirements for Subawards (SUB Article V)
1138.500 Purposes of SUB Article V in relation to other articles.
1138.505 Title to property under subawards.
1138.510 Property management system requirements for subawards.
1138.515 Use and disposition of real property, equipment, supplies, 
and federally owned property under subawards.
1138.520 Intangible property under subawards.
Subpart F--Procurement Procedures to Include in Subawards (SUB Article 
VI)
1138.600 Purpose of SUB Article VI.
1138.605 Content of SUB Article VI.
Subpart G--Financial, Programmatic, and Property Reporting Requirements 
for Subawards (SUB Article VII)
1138.700 Purposes of SUB Article VII in relation to other articles.
1138.705 Performance reporting requirements for subawards.
1138.710 Financial reporting requirements for subawards.
1138.715 Reporting on property under subawards.
Subpart H--Other Administrative Requirements for Subawards (SUB Article 
VIII)
1138.800 Purpose of SUB Article VIII.
1138.805 Content of SUB Article VIII.
Subpart I--National Policy Requirements for Subawards (SUB Article IX)
1138.900 Purpose of SUB Article IX.
1138.905 Content of SUB Article IX.
Subpart J--Subrecipient Monitoring and Other Post-Award Administration 
(SUB Article X)
1138.1000 Purpose of SUB Article X.
1138.1005 Content of SUB Article X.
Subpart K--Requirements Concerning Subrecipients' Lower-Tier Subawards 
(SUB Article XI)
1138.1100 Purpose of SUB Article XI.
1138.1105 Content of SUB Article XI.
Subpart L--Fixed-Amount Subawards (SUB Article XII)
1138.1200 Purpose of SUB Article XII.
1138.1205 Content of SUB Article XII.
Appendix A to Part 1138--Terms and Conditions for SUB Article I, 
``Distinguishing subawards and procurements''
Appendix B to Part 1138--Terms and Conditions for SUB Article II, 
``Pre-award and time of award responsibilities''
Appendix C to Part 1138--Terms and Conditions for SUB Article III, 
``Informational content of subawards''
Appendix D to Part 1138--Terms and Conditions for SUB Article IV, 
``Financial and program management requirements for subawards''
Appendix E to Part 1138--Terms and Conditions for SUB Article V, 
``Property requirements for subawards''
Appendix F to Part 1138--Terms and Conditions for SUB Article VI, 
``Procurement procedures to include in subawards''
Appendix G to Part 1138--Terms and Conditions for SUB Article VII, 
``Financial, programmatic, and property reporting requirements for 
subawards''
Appendix H to Part 1138--Terms and Conditions for SUB Article VIII, 
``Other administrative requirements for subawards''
Appendix I to Part 1138--Terms and Conditions for SUB Article IX, 
``National policy requirements for subawards''
Appendix J to Part 1138--Terms and Conditions for SUB Article X, 
``Subrecipient monitoring and other post-award administration''
Appendix K to Part 1138--Terms and Conditions for SUB Article XI, 
``Requirements concerning subrecipients' lower-tier subawards''
Appendix L to Part 1138--Terms and Conditions for SUB Article XII, 
``Fixed-amount subawards''

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


Sec.  1138.1   Purpose of this part.

    (a) This part specifies standard wording of general terms and 
conditions concerning recipients' award and administration of subawards 
under DoD grants and cooperative agreements.
    (b) It thereby implements OMB guidance in subparts A through F of 2 
CFR part 200 and 2 CFR parts 25, 170, and 180, as they apply to 
subawards.


Sec.  1138.2   Applicability of this part.

    The types of awards and entities to which this part and other parts 
in this subchapter apply are described in the subchapter overview at 2 
CFR 1126.2.


Sec.  1138.3   Exceptions from requirements of this part.

    Exceptions are permitted from the administrative requirements in 
this part only as described at 2 CFR 1126.3.


Sec.  1138.4   Organization of this part.

    (a) The content of this part is organized into subparts and 
associated appendices.
    (1) Each subpart provides direction to DoD Components on how to 
construct one article of general terms and conditions for grants and 
cooperative agreements.
    (2) For each subpart, there is a corresponding appendix with 
standard wording for terms and conditions of the article addressed by 
the subpart. Terms and conditions address rights and responsibilities 
of the Government and recipients.
    (b) A DoD Component must use the wording provided in each appendix 
in accordance with the direction in the corresponding subpart and the 
authorization in Sec.  1138.5, which permit a DoD Component to vary 
from the standard wording in some situations.
    (c) The following table shows which article of general terms and 
conditions may be found in each of appendices A through L to this part 
(with the associated direction to DoD Components in subparts A through 
L, respectively, as supplemented by the authorization in Sec.  1138.5):

------------------------------------------------------------------------
                                  You will find terms
                                    and conditions         That would
                                specifying recipients'    appear in an
           In . . .                   rights and        award within SUB
                                   responsibilities       Article . . .
                                   related to . . .
------------------------------------------------------------------------
Appendix A....................  Distinguishing          I.
                                 subawards and
                                 procurements.
Appendix B....................  Pre-award and time of   II.
                                 award
                                 responsibilities.
Appendix C....................  Informational content   III.
                                 of subawards.
Appendix D....................  Financial and program   IV.
                                 management
                                 requirements for
                                 subawards.
Appendix E....................  Property requirements   V.
                                 for subawards.
Appendix F....................  Procurement procedures  VI.
                                 to include in
                                 subawards.
Appendix G....................  Financial,              VII.
                                 programmatic, and
                                 property reporting
                                 requirements for
                                 subawards.

[[Page 78432]]

 
Appendix H....................  Other administrative    VIII.
                                 requirements for
                                 subawards.
Appendix I....................  National policy         IX.
                                 requirements for
                                 subawards.
Appendix J....................  Subrecipient            X.
                                 monitoring and other
                                 post-award
                                 administration.
Appendix K....................  Requirements            XI.
                                 concerning
                                 subrecipients' lower-
                                 tier subawards.
Appendix L....................  Fixed-amount subawards  XII.
------------------------------------------------------------------------

Sec.  1138.5   Authority to omit or reserve portions of SUB Articles I 
through XII.

    A DoD Component's general terms and conditions may:
    (a) Omit SUB Articles II through XII that are the subject of this 
part if the DoD Component does not allow recipients to make subawards 
under awards using those terms and conditions. The DoD Component also 
may amend SUB Article I in that case, to state the prohibition on 
making subawards and limit the recipient's responsibility to ensuring 
that any transaction it awards at the next tier is a procurement 
transaction.
    (b) Reserve portions of SUB Articles I through XII that do not 
apply to the DoD Component's awards using those terms and conditions. 
For example, the DoD Component may reserve paragraphs in SUB Articles 
IV through IX specifying administrative requirements that flow down 
solely to subawards to States if it determines that there is no 
possibility of a subaward to a State under any of the awards using its 
general terms and conditions. Similarly, it may reserve SUB Article XII 
if it does not permit any fixed-amount subawards under its awards.

Subpart A--Distinguishing Subawards and Procurements (SUB Article 
I)


Sec.  1138.100   Purpose of SUB Article I.

    SUB Article I specifies requirements for a recipient to determine 
whether each transaction it makes at the next tier below a DoD grant or 
cooperative agreement is a subaward or a procurement transaction. It 
thereby implements OMB guidance in 2 CFR 200.201(a) and 200.330.


Sec.  1138.105   Content of SUB Article I.

    (a) Requirement. A DoD Component's general terms and conditions 
must:
    (1) Require the recipient to determine the nature of transactions 
it makes under its award; and
    (2) Inform the recipient about the effect of that determination on 
the procedures for awarding the transaction and the transaction's terms 
and conditions.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must use the wording appendix A to this part provides for 
SUB Article I.

Subpart B--Pre-Award and Time of Award Responsibilities (SUB 
Article II)


Sec.  1138.200   Purpose of SUB Article II.

    SUB Article II specifies requirements concerning subrecipients' 
unique entity identifiers and pre-award risk assessments. It also 
references requirements in REP Article IV to report on subawards and 
subrecipients' executive compensation. It thereby partially implements 
OMB guidance in:
    (a) 2 CFR parts 25 and 170;
    (b) 2 CFR 200.207; 200.300(b), as it applies to subaward reporting; 
and 200.331(b); and
    (c) Subpart C of 2 CFR part 180, as implemented by DoD at 2 CFR 
part 1125.


Sec.  1138.205   Content of SUB Article II.

    (a) Requirement. A DoD Component's general terms and conditions 
must require the recipient to:
    (1) Obtain an entity's unique entity identifier before making a 
subaward to the entity;
    (2) Notify potential subrecipients in advance about that 
requirement; and
    (3) Conduct a pre-award risk assessment of an entity before making 
a subaward to the entity and adjust subaward terms and conditions if 
warranted by the results of the assessment.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must use the wording appendix B to this part provides for 
SUB Article II.

Subpart C--Informational Content of Subawards (SUB Article III)


Sec.  1138.300   Purpose of SUB Article III.

    SUB Article III specifies information that recipients must include 
in subawards they make under DoD grants and cooperative agreements. It 
thereby implements OMB guidance in 2 CFR 200.331(a)(1).


Sec.  1138.305   Content of SUB Article III.

    (a) Requirement. A DoD Component's general terms and conditions 
must require recipients to include certain information items in each 
subaward they make.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must use the wording appendix C to this part provides for 
SUB Article III.

Subpart D--Financial and Program Management Requirements for 
Subawards (SUB Article IV)


Sec.  1138.400   Purpose of SUB Article IV.

    SUB Article IV specifies the financial and program management 
requirements that recipients must include in subawards they make under 
DoD grants and cooperative agreements. It thereby implements OMB 
guidance in the following portions of 2 CFR part 200, as they apply to 
subawards:
    (a) Sections 200.209 and 200.302 through 200.309; and
    (b) Subparts E and F.


Sec.  1138.405   Content of SUB Article IV.

    (a) Requirement. A DoD Component's general terms and conditions 
must require recipients to include pertinent requirements concerning 
financial and program management in each subaward they make.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must use the wording appendix D to this part provides for 
SUB Article IV.

Subpart E--Property Requirements for Subawards (SUB Article V)


Sec.  1138.500   Purposes of SUB Article V in relation to other 
articles.

    (a) Purposes. SUB Article V specifies requirements concerning 
equipment, supplies, and real, intangible, and federally owned property 
that recipients must include in subawards they make under DoD grants 
and cooperative agreements. It thereby:
    (1) Specifies which of the requirements in PROP Articles I through 
VI of the award flow down to subawards; and
    (2) Implements OMB guidance in 2 CFR 200.310 through 200.316, as 
those sections apply to subawards.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must use the default wording appendix E to this part 
provides as Section A of SUB Article V to inform

[[Page 78433]]

recipients about the relationship between requirements for the 
recipient in PROP Articles I through VI and requirements for subawards 
in SUB Article V.


Sec.  1138.505   Title to property under subawards.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify requirements related to title to property under subawards.
    (b) Award terms and conditions--(1) General. A DoD Component's 
general terms and conditions must use the default wording appendix E to 
this part provides as Section B of SUB Article V to specify the 
requirements concerning title to property that recipients must include 
in their subawards.
    (2) Exception. If a DoD Component has the necessary statutory 
authority to do so and includes provisions in paragraph A.2 of PROP 
Article I to identify any property acquired under the award as exempt 
property, as described in 2 CFR 1130.105, the DoD Component may at its 
option insert wording in paragraph B.1.b of SUB Article V to allow 
recipients to pass through those provisions to subrecipients.
    (i) It is critical, however, that the DoD Component ensures that 
the wording of paragraph B.1.b is consistent with the statutory 
authority.
    (ii) For example, if the statutory authority is 31 U.S.C. 6306--as 
described in 2 CFR 1130.105(b)(2)(i)--the wording of paragraph B.1.b of 
SUB Article V may permit a recipient to flow down the substance of the 
exempt property provision in paragraph A.2 of PROP Article I only to a 
subrecipient that is a nonprofit institution of higher education or 
nonprofit organization whose primary purpose is conducting scientific 
research.


Sec.  1138.510   Property management system requirements for subawards.

    (a) Requirement. DoD Components' general terms and conditions must 
address the standards for property management systems that apply to 
subawards.
    (b) Award terms and conditions. To specify the property management 
system standards that recipients must include in their subawards, a DoD 
Component's general terms and conditions must use the default wording 
appendix E to this part provides as Section C of SUB Article V.


Sec.  1138.515   Use and disposition of real property, equipment, 
supplies, and federally owned property under subawards.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify the requirements concerning use and disposition of real 
property, equipment, supplies, and federally owned property that 
recipients must include in subawards.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must use the default wording appendix E to this part 
provides for Sections D through F of SUB Article V.


Sec.  1138.520   Intangible property under subawards.

    (a) Requirement. A DoD Component's general terms and conditions 
must address the provisions concerning intangible property that 
recipients must include in subawards.
    (b) Award terms and conditions--(1) General. To specify the 
intangible property provisions that recipients must include in their 
subawards, a DoD Component's general terms and conditions must use the 
default wording appendix E to this part provides as Section G of SUB 
Article V.
    (2) Exception. A DoD Component's general terms and conditions may 
delete the reference to ``Section B of PROP Article VI'' in the default 
wording appendix E to this part provides for paragraph G.2 of SUB 
Article V and provide alternative wording if:
    (i) Those general terms and conditions will be used in awards for 
purposes other than research or education, as described in 2 CFR 
1130.610(c)(3); and
    (ii) The DoD Component wants to specify that nonprofit and 
governmental recipients include either:
    (A) No provisions concerning inventions in subawards to for-profit 
entities; or
    (B) Provisions in subawards to for-profit entities that differ from 
those the DoD Component's general terms and conditions specify for 
nonprofit and governmental recipients.

Subpart F--Procurement Procedures To Include in Subawards (SUB 
Article VI)


Sec.  1138.600   Purpose of SUB Article VI.

    SUB Article VI of the general terms and conditions specifies 
procurement provisions recipients must include in their subaward terms 
and conditions. It thereby:
    (a) Specifies which of the requirements in PROC Articles I through 
III of the award flow down to subawards; and
    (b) Implements OMB guidance in 2 CFR 200.317 through 200.326 and 
appendix II to 2 CFR part 200, as those portions of 2 CFR part 200 
apply to subawards; and
    (c) Partially implements OMB guidance in 2 CFR 200.205(d), 200.213, 
and 200.517, as those sections of 2 CFR part 200 apply to subawards.


Sec.  1138.605   Content of SUB Article VI.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify that recipients' subawards include requirements for 
subrecipients' procurement procedures.
    (b) Award terms and conditions. To specify the requirements for 
procurement procedures that a recipient must include in its subawards, 
a DoD Component's general terms and conditions must use the wording 
appendix F to this part provides for SUB Article VI.

Subpart G--Financial, Programmatic, and Property Reporting 
Requirements for Subawards (SUB Article VII)


Sec.  1138.700   Purposes of SUB Article VII in relation to other 
articles.

    (a) Purposes. SUB Article VII of the general terms and conditions 
specifies provisions concerning reporting that recipients must include 
in their subaward terms and conditions, as applicable. It thereby 
implements OMB guidance in the following sections of 2 CFR part 200, as 
they apply to subawards:
    (1) 2 CFR 200.301 and 200.327 through 200.329; and
    (2) 2 CFR 200.315(c), as it relates to invention reporting; and
    (3) 2 CFR 200.343(a), as it relates to financial and performance 
reporting.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must use the default wording appendix G to this part 
provides as Section A of SUB Article VII to inform recipients about the 
relationship between requirements for the recipient in REP Articles I 
through III and requirements for subawards in SUB Article VII.


Sec.  1138.705   Performance reporting requirements for subawards.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify performance reporting requirements for subawards.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must use the default wording appendix G to this part 
provides as Section B of SUB Article VII to specify the performance 
reporting requirements that recipients must include in their subawards.


Sec.  1138.710   Financial reporting requirements for subawards.

    (a) Requirement. A DoD Component's general terms and conditions 
must

[[Page 78434]]

specify financial reporting requirements for subawards.
    (b) Award terms and conditions. appendix G to this part provides 
default wording for Section C of SUB Article VII to specify the 
financial reporting requirements that recipients must include in their 
subawards.


Sec.  1138.715   Reporting on property under subawards.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify the requirements for reporting on property that recipients 
must include in their subawards.
    (b) Award terms and conditions. To implement the requirement 
described in paragraph (a) of this section, a DoD Component's general 
terms and conditions must use the wording appendix G to this part 
provides as Section D of SUB Article VII.

Subpart H--Other Administrative Requirements for Subawards (SUB 
Article VIII)


Sec.  1138.800   Purpose of SUB Article VIII.

    SUB Article VIII of the general terms and conditions:
    (a) Specifies provisions that a recipient must include in its 
subaward terms and conditions concerning submission and maintenance of 
subrecipient information; records retention and access; remedies and 
termination; disputes, hearings, and appeals; collection of amounts 
due; closeout; and post-closeout adjustments and continuing 
responsibilities.
    (b) It thereby implements OMB guidance in 2 CFR 200.113 and 200.333 
through 200.345, as those sections apply to subawards.


Sec.  1138.805  Content of SUB Article VIII.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify the administrative requirements that a recipient must 
include in its subaward terms and conditions in areas covered by OAR 
Articles I through VII of the recipient's prime award.
    (b) Award terms and conditions--(1) General. To implement the 
requirement in paragraph (a) of this section, a DoD Component's general 
terms and conditions must use the default wording appendix H to this 
part provides for SUB Article VIII.
    (2) Exception. A DoD Component's general terms and conditions may 
add one or more sections to the default wording that appendix H to this 
part provides for SUB Article VIII if the DoD Component added 
requirements to OAR Article IV of its general terms and conditions, in 
accordance with paragraph 2 CFR 1136.405(b)(2), because a statute or 
regulation requires recipients to provide opportunities to 
subrecipients for hearings, appeals, or other administrative 
proceedings with respect to claims, disputes, remedies for 
noncompliance, or other matters. The additional wording in SUB Article 
VIII would address the flow down to subrecipients of the added 
requirements in OAR Article IV.

Subpart I--National Policy Requirements for Subawards (SUB Article 
IX)


Sec.  1138.900   Purpose of SUB Article IX.

    SUB Article IX addresses national policy requirements that 
recipients must include in their subaward terms and conditions. It 
thereby partially implements OMB guidance in 2 CFR 200.331(a)(2).


Sec.  1138.905  Content of SUB Article IX.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify which of the national policy requirements in NP Articles I 
through IV of the award flow down to subawards.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions:
    (1) Must use the wording appendix B to this part provides for SUB 
Article IX if the DoD Component did not add, delete, or otherwise 
modify any of the wording that appendices A through D of 2 CFR part 
1122 provided for NP Articles I through IV of the award (as permitted 
in accordance with DoDGARs provisions at 2 CFR 1122.115 and 1122.120).
    (2) May make corresponding alterations to the wording appendix I to 
this part provides for SUB Article IX if the DoD Component did modify 
the wording of NP Articles I through IV, in order to conform the 
national policy requirements in SUB Article IX to the requirements in 
those modified articles.

Subpart J--Subrecipient Monitoring and Other Post-Award 
Administration (SUB Article X)


Sec.  1138.1000  Purpose of SUB Article X.

    SUB Article X specifies the requirements for recipients' monitoring 
of subrecipients and related post-award administration of subawards 
they make under DoD grants and cooperative agreements. It thereby 
implements OMB guidance in 2 CFR 200.331(d) through (h) and 2 CFR 
200.340(a).


Sec.  1138.1005   Content of SUB Article X.

    (a) Requirement. A DoD Component's general terms and conditions 
must specify requirements for recipients' monitoring of subrecipients 
and related post-award administration of subawards.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must use the wording appendix J to this part provides for 
SUB Article X of its general terms and conditions.

Subpart K--Requirements Concerning Subrecipients' Lower-Tier 
Subawards (SUB Article XI)


Sec.  1138.1100  Purpose of SUB Article XI.

    SUB Article XI specifies requirements that a recipient must include 
in any subaward under which it judges that the subrecipient may make 
lower-tier subawards. It thereby implements OMB guidance in 2 CFR 
200.331(a) through (c) and other portions of 2 CFR part 200 as they 
apply to lower-tier subawards.


Sec.  1138.1105   Content of SUB Article XI.

    (a) Requirement. A DoD Component's general terms and conditions 
must address requirements that recipients must include in subawards to 
entities that may make lower-tier subawards.
    (b) Award terms and conditions. A DoD Component's general terms and 
conditions must use the wording appendix K to this part provides for 
SUB Article XI.

Subpart L--Fixed-Amount Subawards (SUB Article XII)


Sec.  1138.1200  Purpose of SUB Article XII.

    SUB Article XII specifies policy and procedures concerning 
recipients' use of fixed-amount subawards under DoD grants and 
cooperative agreements. It thereby implements OMB guidance in 2 CFR 
200.201(b) and 200.332 and other portions of 2 CFR part 200 as they 
apply to fixed-amount subawards.


Sec.  1138.1205  Content of SUB Article XII.

    (a) Requirement. A DoD Component's general terms and conditions 
must address how a recipient may use a fixed-amount type of subaward, 
when it requires the Component's prior approval to do so, and what 
requirements the recipient must include in those subawards.
    (b) Award terms and conditions--(1) General. A DoD Component's 
general terms and conditions must use the wording appendix L to this 
part provides for SUB Article XII.
    (2) Exceptions.
    (i) In addition to the authorities provided in Sec.  1138.5 to omit 
or reserve all or portions of the wording appendix L to this part 
provides for SUB Article XII, a DoD Component's general terms and 
conditions may add wording to Section B of the article to authorize

[[Page 78435]]

recipients to use fixed-amount subawards without obtaining the 
Component's prior approval in other situations for which it would be 
appropriate to do so, given the nature of the program or programs that 
use its general terms and conditions.
    (ii) However, a DoD Component's general terms and conditions should 
never authorize recipients' use of fixed-amount subawards for basic or 
applied research, for the reason given in paragraph B.2.a.ii of the 
wording appendix L provides for SUB Article XII. It is unrealistic to 
have a subrecipient commit in advance to accomplishing specific, well-
defined, and observable research outcomes. Doing so subjects the 
subrecipient to undue risk of not being reimbursed for research costs 
it incurred if it fails to fully accomplish the outcomes.

Appendix A to Part 1138--Terms and Conditions for SUB Article I, 
``Distinguishing Subawards and Procurements''

    DoD Components must use the following standard wording in SUB 
Article I in accordance with Sec.  1138.105 of this part:

SUB Article I. Distinguishing Subawards and Procurements. (December 
2014)

    Section A. Required recipient determination. For each 
transaction into which you enter with another entity at the next 
tier below this award, you must determine whether the transaction is 
a subaward or procurement.
    Section B. Considerations in making the determination.
    1. The primary purpose of the transaction between you and the 
other entity is the key factor you must use to determine whether the 
transaction is a subaward or a procurement.
    a. The transaction is a subaward and the other entity therefore 
a subrecipient if the transaction's primary purpose is for you to 
transfer---for performance by the other entity---a portion of the 
substantive program for which we are providing financial assistance 
to you through this award. You will continue to be accountable to us 
for performance of the project or program under the award, including 
portions performed by any subrecipients.
    b. The transaction is a procurement and the other entity 
therefore your contractor if the transaction's primary purpose is 
for you to purchase goods or services that you need to perform the 
substantive program supported by this award. The distinction from a 
subaward is the contractor is not performing a portion of the 
substantive program as a result of the transaction.
    2. What you call the transaction is not a factor in 
distinguishing a subaward from a procurement. If the transaction 
meets the criterion in paragraph B.1.a of this article, it is a 
subaward for purposes of the requirements of this award even if you 
call and consider the transaction a ``contract.''
    Section C. Effect of the determination on the next-tier 
transaction.
    1. Process for awarding the transaction. One important 
consequence of your determining whether a next-tier transaction is a 
subaward or procurement is that there are different requirements 
governing the pre-award and time of award processes that you use to 
award the transaction.
    a. SUB Article II of this award specifies pre-award and time of 
award responsibilities for subawards.
    b. PROC Articles I and II of this award govern pre-award and 
time of award process for awarding procurement transactions.
    2. Transaction terms and conditions. A second important 
consequence of your determining whether a next-tier transaction is a 
subaward or procurement is that the terms and conditions you include 
in a subaward differ from those you include in a procurement 
transaction.
    a. Section C of SUB Article II of this award addresses 
requirements you must include in subaward terms and conditions. 
Those requirements are generally either identical with or directly 
related to requirements in the general terms and conditions of this 
award. They include national policy requirements as well as 
administrative requirements in areas such as financial and 
programmatic management, property administration, procurement, and 
reporting.
    b. PROC Article III of this award lists requirements you must 
include in a procurement transaction when applicable to the 
procurement.

Appendix B to Part 1138--Terms and Conditions for SUB Article II, 
``Pre-Award and Time of Award Responsibilities''

    DoD Components must use the following standard wording in SUB 
Article II in accordance with Sec.  1138.205 of this part:

SUB Article II. Pre-Award and Time of Award Responsibilities. (December 
2014)

    Section A. Requirements for unique entity identifiers.
    1. Definition of ``entity.'' For purposes of the unique entity 
identifier requirements in paragraphs A.2 and 3 of this section, 
``entity'' has the meaning given in paragraph C.3 of appendix A to 
OMB guidance in 2 CFR part 25.
    2. Pre-notification of potential subrecipients. You must notify 
potential subrecipients that no entity may receive a subaward from 
you under this award unless it has provided its unique entity 
identifier to you.
    3. Restriction on making subawards.
    a. General. You may not make a subaward to an entity unless the 
entity has provided its unique entity identifier to you.
    b. Exception. You may make a subaward to an entity that has not 
provided its unique entity identifier to you in rare cases in which 
you requested and we approved an exemption from the requirement for 
the entity to provide a unique entity identifier, based on the 
criteria in OMB guidance in 2 CFR part 25.110(d).
    Section B. Pre-award risk assessment.
    1. Before making a subaward to an entity, you must perform a 
risk assessment of the prospective subrecipient, as described in 2 
CFR 200.331(b). OMB guidance in 2 CFR 200.205(c) provides examples 
of factors you may consider in evaluating risk.
    2. As part of the risk assessment under paragraph B.1 of this 
article, you must:
    a. Verify that neither the prospective subrecipient nor its 
principals under the subaward are excluded or disqualified from 
participating in the transaction, in accordance with requirements in 
Subpart C of OMB guidance in 2 CFR part 180, as implemented by DoD 
at 2 CFR part 1125; and
    b. If warranted by risks you identify, determine whether to 
impose award-specific terms and conditions in the subaward to 
mitigate the risks.
    i. These award-specific terms and conditions may be in addition 
to, or differ from, the terms and conditions that SUB Articles IV 
through IX of this award require you to include in subawards.
    ii. They may include items such as those listed in OMB guidance 
in 2 CFR 200.207(b)(1) through (6).
    iii. Your procedures for imposing and removing the additional or 
different requirements must comply with the procedural guidance in 2 
CFR 200.207(c) and (d).
    Section C. Subaward content.
    1. Cost-type subawards.
    a. SUB Article III of this award specifies informational content 
that you must include in each cost-type subaward.
    b. SUB Articles IV through VIII specify administrative 
requirements that you must include:
    i. As applicable, in each cost-type subaward to:
    A. A domestic U.S. entity (i.e., an entity other than a foreign 
public entity or a foreign organization); or
    B. An organizational unit of a foreign organization if that unit 
has a place of business in the United States; and
    ii. To the maximum extent practicable in each cost-type subaward 
to either a foreign public entity or an organizational unit of a 
foreign organization that does not have a place of business in the 
United States (regardless of whether another organizational unit of 
that foreign organization has one). However, absent our prior 
approval, you may not allow that foreign entity or organization to 
acquire real property or equipment under a subaward.
    c. SUB Article IX of this award specifies national policy 
requirements that you must include, as applicable, in each cost-type 
subaward.
    2. Fixed-amount type subawards. SUB Article XII of this award 
specifies informational content and administrative and national 
policy requirements that you must include in any fixed-amount 
subaward that you make.
    3. Additional subaward terms and conditions. You may include 
other requirements in your subawards that you need in order to meet 
your responsibilities under this award for performance of the 
project or program (including portions performed by subrecipients) 
and compliance with applicable administrative and national policy 
requirements.
    Section D. Subaward and executive compensation reporting. You 
must report

[[Page 78436]]

subaward obligating actions and information on subrecipients' 
executive compensation as required by REP Article IV of this award.

Appendix C to Part 1138--Terms and Conditions for SUB Article III, 
``Informational Content of Subawards''

    DoD Components must use the following standard wording in SUB 
Article III in accordance with Sec.  1138.305 of this part:

SUB Article III. Informational Content of Subawards. (December 2014)

    Section A. Informational content in general. You must include in 
each subaward (and each subsequent amendment to a subaward that 
alters the amount of the subaward) the information specified in OMB 
guidance in 2 CFR 200.331(a)(1), ``Federal Award Identification,'' 
with the clarifications provided in Sections B through G of this 
article.
    Section B. Federal award identification number and award date. 
The ``Federal Award Identification Number'' and ``Federal Award 
Date'' described in 2 CFR 200.331(a)(1)(iii) and (iv), respectively, 
are the award number and award date for this award to you. You must 
provide the information in a way that makes it clear that the 
subaward is under this DoD award.
    Section C. Amount of Federal funds obligated.
    1. The ``Amount of Federal Funds Obligated by this action by the 
pass-through entity to the subrecipient'' that is described in 2 CFR 
200.331(a)(1)(vi) is either:
    a. The amount of your obligation to the subrecipient, if the 
terms and conditions of this award do not require you to provide any 
cost sharing or matching for the project or program the award 
supports; or
    b. The amount of the Federal share of your subaward obligation 
if this award does require cost sharing or matching, which in that 
case is the product of:
    i. The Federal share of total project costs under this DoD award 
to you, as a percentage of those total project costs; and
    ii. The total amount of project costs obligated for the subaward 
action.
    2. Note that the total project costs of the award and subaward, 
as used in paragraphs C.1.b.i and ii of this section, include any 
cost sharing or matching that you or the subrecipient provides if 
you are counting it toward the cost sharing or matching required 
under this award.
    Section D. Total amount obligated to the subrecipient. The 
``Total Amount of Federal Funds Obligated to the Subrecipient by the 
pass-through entity including the current obligation,'' as described 
in 2 CFR 200.331(a)(1)(vii), is the cumulative amount to date of the 
amounts described in Section C of this article.
    Section E. Total Amount of the Federal Award. The ``Total Amount 
of the Federal Award committed to the subrecipient by the pass-
through entity,'' as described in 2 CFR 200.331(a)(1)(viii), is the 
total amount through the end of the subaward that you and the 
subrecipient mutually agreed upon, to include: funding obligated to 
date, any future anticipated funding increments, and any options you 
may exercise in the future.
    Section F. Federal awarding agency, pass-through entity, and 
awarding official. The ``Name of Federal awarding agency'' and 
``pass-through entity,'' as those terms are used in 2 CFR 
200.331(a)(1)(x) are the Department of Defense and the business name 
associated with your registration in the System for Award 
Management. In that same paragraph of 2 CFR part 200, the ``awarding 
official'' is the individual in your organization who made the 
subaward.
    Section G. Indirect cost rate. With respect to the requirement 
in 2 CFR 200.331(a)(1)(xiii) for the subaward to include the 
``Indirect cost rate for the Federal award:''
    1. The rate the subaward must include is the subrecipient's 
rate, whether it is a rate set by negotiation with a Federal 
Government agency or you, or is the de minimis rate described in 2 
CFR 200.414(f).
    2. You are required to include the indirect cost rate only if 
the subrecipient is willing to share that information with you and 
assents that information about its rate is not proprietary. If a 
subrecipient is not willing to share information about its indirect 
cost rate with you, consult the grants officer for this award to 
explore alternative ways to assess the reasonableness of costs of 
the subaward.

Appendix D to Part 1138--Terms and Conditions for SUB Article IV, 
``Financial and Program Management Requirements for Subawards''

    DoD Components must use the following standard wording in SUB 
Article IV in accordance with Sec.  1138.405 of this part:

SUB Article IV. Financial and Program Management Requirements for 
Subawards. (December 2014)

    Section A. Purposes of this article in relation to other 
articles.
    1. This article specifies administrative requirements concerning 
financial and program management that you must include in the terms 
and conditions of each cost-type subaward that you make under this 
award to a domestic entity.
    2. It thereby addresses the flow down to subrecipients of 
requirements with which you must comply under FMS Articles I through 
VII of this award.
    3. SUB Article XII of this award addresses which of these 
administrative requirements you must include in any fixed-amount 
subaward that you make, if you are authorized to make fixed-amount 
subawards under this award.
    Section B. Financial management system standards. You must 
include in any subaward you make under this award the requirements 
of:
    1. Sections A through C of FMS Article I of this award if the 
subrecipient is a state;
    2. Sections B and C of FMS Article I if the subrecipient is an 
institution of higher education, nonprofit organization, local 
government, or Indian tribe; or
    3. 32 CFR 34.11 if the subrecipient is a for-profit entity.
    Section C. Payments.
    1. Subawards to States. You must include the provisions of 
Section A of FMS Article II of this award in each subaward you make 
to a State;
    2. Subawards to institutions of higher education, nonprofit 
organizations, local governments, and Indian tribes. The following 
paragraphs specify requirements you must include in subawards to 
institutions of higher education, nonprofit organizations, local 
governments, and Indian tribes.
    a. Payment method.
    i. If you are authorized to request advance payments under this 
award, you must authorize a subrecipient to request advance payments 
unless:
    A. The subrecipient does not maintain, or demonstrate the 
willingness to maintain, written procedures that minimize the time 
elapsing between its receipt of each payment and its disbursement of 
the funds for project or program purposes;
    B. You impose a requirement for the subrecipient to be paid by 
reimbursement as a result of your risk evaluation of the 
subrecipient under SUB Article II of this award.
    C. The subaward is for construction.
    ii. If you do not authorize advance payments for one of the 
reasons given in paragraph C.2.a.i of this article, you must specify 
either reimbursement or working capital advances as the payment 
method in accordance with OMB guidance in 2 CFR 200.305(b)(3) and 
(4).
    b. Payment timing and amount.
    i. Advances. You must limit advance payments to the minimum 
amounts needed and time the payments to be in accordance with the 
subrecipient's actual, immediate cash requirements in carrying out 
the project or program under the subaward. The timing and amount of 
your advance payments to the subrecipient must be as close as is 
administratively feasible to the subrecipient's actual disbursements 
for direct project costs and the proportionate share of any 
allowable indirect costs. Your subawards also must include the 
requirements of paragraphs B.2.b and c of FMS Article II to specify 
costs subrecipients must exclude from amounts of their advance 
payment requests.
    ii. Reimbursements or working capital advances. You must follow 
OMB guidance in 2 CFR 200.305(b)(3) and (4) concerning timing and 
amount of reimbursements or working capital advances.
    c. Frequency of requests. You must allow the subrecipient to 
request advance payments or reimbursements, including those 
associated with the working capital advance payment method, as often 
as it wishes if you pay using electronic funds transfers and at 
least monthly otherwise.
    d. Other requirements.
    i. In any subaward that was subject to our consent, you must 
include the requirements of paragraph B.5 of FMS Article II of this 
award concerning withholding of payments.
    ii. You must include the provisions of paragraph B.6 of FMS 
Article II concerning depositories in each subaward that authorizes 
the subrecipient to request advance payments.
    3. Subawards to for-profit entities. The provision concerning 
payments in each subaward you make to a for-profit entity

[[Page 78437]]

must conform to the requirements in 32 CFR 34.12.
    Section D. Allowable costs, period of availability of funds, and 
fee and profit.
    1. You must include in each cost-type subaward a requirement 
that the allowability of costs under the subaward (and any lower-
tier subawards or procurement transactions into which the 
subrecipient enters) must be determined in accordance with the 
applicable cost principles identified in Section A of FMS Article 
III of this award, as well as the clarification in Section B of that 
article if it applies to those cost principles.
     2. You must specify in each subaward the period of availability 
of funds for any project or program purpose so that the period 
neither begins before nor ends after the period during which you may 
use funds available to you under this award for that same project or 
program purpose.
    3. You must include in each subaward the provisions concerning 
fee or profit that are in Section D of FMS Article III of this 
award.
    Section E. Revision of budget and program plans. You must 
include in each subaward provisions requiring the subrecipient to 
request your approval for any change in the subaward budget or 
program that would cause a budget or program change under this award 
for which Section B of FMS Article IV requires you to first obtain 
our prior approval. You may not approve any budget or program 
revision that is inconsistent with the purpose or terms and 
conditions of this award.
    Section F. Non-Federal audits. You must include a provision in 
each subaward that you make under this award to require the 
subrecipient entity to comply with the audit requirements applicable 
to that entity, as specified in either Section A or Section B of FMS 
Article V.
    Section G. Cost sharing or matching requirements. If you make a 
subaward under which the subrecipient may provide contributions or 
donations of cash or third-party in-kind contributions to be counted 
toward any cost sharing or matching that is required under this 
award, you must include provisions in that subaward to specify:
    1. The criteria governing the allowability as cost sharing or 
matching of the types of cash or third-party in-kind contributions 
that the subrecipient may contribute or donate. Those criteria are 
specified in:
    a. Sections B through D of FMS Article VI of this award if the 
subaward is to a State, institution of higher education, nonprofit 
organization, local government, or Indian tribe.
    b. The provisions of 32 CFR 34.13(a) if the subaward is to a 
for-profit entity.
    2. The methods for determining and documenting the values of 
those contributions or donations to be counted as cost sharing or 
matching. Those methods are specified in:
    a. Sections E and F of FMS Article VI of this award if the 
subaward is to a State, institution of higher education, nonprofit 
organization, local government, or Indian tribe.
    b. The provisions of 32 CFR 34.13(b) if the subaward is to a 
for-profit entity.
    Section H. Program income. You must include requirements 
concerning program income in subawards, as follows:
    1. In each subaward to a State, institution of higher education, 
nonprofit organization, local government, or Indian tribe:
    a. You must require the subrecipient to account to you when it 
earns any program income under the subaward or uses it, so that you 
can prepare reports you are required to submit to us. If the award-
specific terms and conditions of this award require you to account 
for program income earned after the period of performance, you must 
include a corresponding requirement in your subawards.
    b. You must include the provisions of Sections A through D of 
FMS Article VII of this award.
    c. You may specify the deduction, addition, or cost-sharing or 
matching alternative---described in 2 CFR 1128.720(b)--or a 
combination of those alternatives, for the subrecipient's use of any 
program income it earns. However, you still must comply with the 
alternative specified in Section E of FMS Article VII and any 
applicable award-specific terms and conditions for the total amount 
of program income earned, which includes amounts earned by you and 
your subrecipients. For example, if we require you to use the 
deduction alternative, you may authorize a subrecipient to use the 
addition alternative if you reduce the funding allocated for 
portions of the project or program that you or other subrecipients 
perform to make the required reduction in the total award amount.
    2. In each subaward to a for-profit entity, you must include the 
provisions of 32 CFR 34.14, with the appropriate method specified 
for disposition of program income.

Appendix E to Part 1138--Terms and Conditions for SUB Article V, 
``Property Requirements for Subawards''

    DoD Components must use the following standard wording in SUB 
Article V in accordance with Sec. Sec.  1138.505 through 1138.520 of 
this part:

SUB Article V. Property Requirements for Subawards. (December 2014)

    Section A. Purposes of this article in relation to other 
articles.
    1. This article specifies administrative requirements concerning 
property that you must include in the terms and conditions of each 
subaward that you make under this award.
    2. It thereby addresses the flow down to subrecipients of 
requirements with which you must comply under PROP Articles I 
through VI of this award.
    3. SUB Article XII of this award addresses which of these 
administrative requirements you must include in any fixed-amount 
subaward that you make, if you are authorized to make fixed-amount 
subawards under this award.
    Section B. Title to property.
    1. Subawards to institutions of higher education, nonprofit 
organizations, States, local governments, or Indian tribes.
    a. General. You must include terms and conditions in each 
subaward to flow down to the subrecipient the provisions of:
    i. Paragraph A.1 of PROP Article I concerning vesting of title 
to property acquired under the subaward unless paragraph B.1.b of 
this section provides otherwise.
    ii. Sections B through E of PROP Article I that are applicable 
to types of property that the subrecipient may acquire, improve, 
donate, or for which it may otherwise be accountable under the 
subaward.
    b. Exceptions. [Reserved.]
    2. Subawards to for-profit entities.
    a. Real property and equipment. You must obtain the prior 
approval of the grants officer before permitting any for-profit 
subrecipient to acquire or improve real property or equipment under 
the award.
    i. If the grants officer does not grant the approval, you must 
include a subaward provision that prohibits the firm from acquiring 
or improving real property or equipment under the subaward.
    ii. If the approval is granted, you must include a subaward 
provision specifying that title vesting and Federal interest are 
governed by provisions of 32 CFR 34.21(b) and (c).
    b. Supplies. You must include a subaward provision specifying 
that vesting of title to supplies is governed by provisions of 32 
CFR 34.24(a), subject to the use and disposition requirements of 32 
CFR 34.24(b).
    c. Federally owned property. You must include a provision in any 
subaward to a for-profit entity under which the entity may be 
accountable for federally owned property, to state that title to 
such property will remain vested in the Federal Government.
    Section C. Property management system. If you make a subaward 
under which the subrecipient either may acquire or improve 
equipment, or may be accountable for federally owned property, you 
must include in the subaward:
    1. If the subrecipient is a State, applicable provisions of:
    a. Section A of PROP Article II concerning insurance for real 
property and equipment.
    b. Section B of PROP Article II concerning other property 
management system standards.
    2. If the subrecipient is an institution of higher education, 
nonprofit organization, local government, or Indian tribe, 
applicable provisions of:
    a. Section A of PROP Article II concerning insurance for real 
property and equipment.
    b. Section C of PROP Article II concerning other property 
management system standards.
    3. Applicable provisions of 32 CFR 34.22(a) and 34.23 if the 
subrecipient is a for-profit entity and:
    a. The firm may be accountable under the subaward for federally 
owned property; or
    b. You obtained the grants officer's prior approval for the 
firm's acquisition of equipment under the subaward.
    Section D. Use and disposition of real property. If the 
subrecipient of a subaward you make under this award may acquire or 
improve real property, then you must include in the subaward:
    1. Use. The requirements concerning use of real property:
    a. In Section A of PROP Article III if the subaward is to an 
institution of higher

[[Page 78438]]

education, nonprofit organization, State, local government, or 
Indian tribe, unless the award-specific terms and conditions of this 
award provide otherwise; and
    b. In 32 CFR 34.21(d) if the subaward is to a for-profit entity 
and you obtained the grants officer's prior approval for the firm's 
acquisition of real property under the subaward.
    2. Disposition. Provisions to require the subrecipient to 
request disposition instructions through you when the property is no 
longer needed for its originally authorized purpose, so that you can 
meet your responsibilities to us under Section B of PROP Article III 
to address the Federal interest in the property.
    Section E. Use and disposition of equipment and supplies. If you 
make a subaward under which the subrecipient may acquire or improve 
equipment, or acquire supplies, you must include in the subaward, as 
applicable:
    1. If the subaward is to a State:
    a. The requirements in Sections B and E of PROP Article IV 
concerning use and disposition of equipment and supplies; and
    b. Provisions such as those in Section A of PROP Article IV that 
make clear the applicability of those requirements.
    2. If the subaward is to an institution of higher education, 
nonprofit organization, local government, or Indian tribe:
    a. The requirements in Sections C and E of PROP Article IV 
concerning use of equipment and use and disposition of supplies;
    b. Provisions such as those in Section A of PROP Article IV that 
make clear the applicability of those requirements; and
    c. Provisions to require the subrecipient to request disposition 
instructions from you when equipment is no longer needed for its 
originally authorized purpose, so that you can meet your 
responsibilities to us under Section D of PROP Article IV to address 
the Federal interest in the equipment.
    3. If the subaward is to a for-profit entity:
    a. The requirements concerning use and disposition of supplies 
in 32 CFR 34.24(b);
    b. And you obtained the grants officer's prior approval for the 
firm's acquisition of equipment under the subaward:
    i. The requirements concerning use of equipment in 32 CFR 
34.21(d); and
    ii. Provisions such as those in Section A of PROP Article IV 
that make clear the applicability of those requirements; and
    iii. Provisions to require the subrecipient to request 
disposition instructions from you when equipment is no longer needed 
for its originally authorized purpose, so that you can meet your 
responsibilities to us under Section B or D of PROP Article IV to 
address the Federal interest in the equipment.
    Section F. Use and disposition of federally owned property. If 
you make a subaward under which the subrecipient may be accountable 
for federally owned property, you must include subaward provisions 
specifying that the subrecipient:
    1. May use the property for purposes specified in paragraph A.1 
of PROP Article V;
    2. Must submit requests through you for the award administration 
office's approval to use the property for other purposes, as 
described in paragraph A.2 of PROP Article V;
    3. Must request the award administration office's disposition 
instructions through you when the property is no longer needed for 
subaward purposes or the subaward ends.
    Section G. Intangible property. You must include in a subaward 
provisions specifying the requirements of:
    1. Sections A through D of PROP Article VI if the subaward is to 
an institution of higher education, nonprofit organization, State, 
local government, or Indian tribe.
    2. Section A of PROP Article VI as it applies to works developed 
under the subaward, Section B of PROP Article VI, and paragraph C.1 
of Section C of PROP Article VI, if the subaward is to a for-profit 
entity.

Appendix F to Part 1138--Terms and Conditions for SUB Article VI, 
``Procurement Procedures To Include in Subawards''

    DoD Components must use the following standard wording in SUB 
Article VI in accordance with Sec.  1138.605 of this part:

SUB Article VI. Procurement Procedures To Include in Subawards. 
(December 2014)

    Section A. Purposes of this article in relation to other 
articles.
    1. This article specifies administrative requirements concerning 
procurement procedures that you must include in the terms and 
conditions of each subaward that you make under this award.
    2. It thereby addresses the flow down to subrecipients of 
requirements with which you must comply under PROC Articles I 
through III of this award.
    3. SUB Article XII of this award addresses which of these 
administrative requirements you must include in any fixed-amount 
subaward that you make, if you are authorized to make fixed-amount 
subawards under this award.
    Section B. Subaward to a State. In any subaward that you make to 
a State, you must include the requirements of PROC Article I and 
applicable sections of PROC Article III of this award.
    Section C. Subaward to an institution of higher education, 
nonprofit organization, local government, or Indian tribe. In any 
subaward that you make to an institution of higher education, 
nonprofit organization, local government, or Indian tribe:
    1. You must include the requirements of Sections A through G of 
PROC Article II and applicable sections of PROC Article III of this 
award.
    2. You must include the requirement for the subrecipient to make 
available to you, upon request:
    a. Technical specifications of proposed procurements, under the 
conditions described in OMB guidance at 2 CFR 200.324(a); and
    b. Other procurement documents for pre-procurement review, under 
the conditions described in OMB guidance at 2 CFR 200.324(b).
    3. If it is possible that, under a subaward you make, the 
subrecipient may award a construction or facility improvement 
contract with a value in excess of the simplified acquisition 
threshold, you must include provisions in the subaward to require 
the subrecipient to comply with at least the minimum requirements 
for bidders' bid guarantees and contractors' performance and payment 
bonds described in 2 CFR 200.325(a) through (c), unless you 
determine that the subrecipient's bonding policy and requirements 
are adequate to protect Federal interests.
    Section D. Subaward to a for-profit entity. In any subaward you 
make to a for-profit entity, you must include the requirements in 32 
CFR 34.31.

Appendix G to Part 1138--Terms and Conditions for SUB Article VII, 
``Financial, Programmatic, and Property Reporting Requirements for 
Subawards''

    DoD Components must use the following standard wording in SUB 
Article VII in accordance with Sec. Sec.  1138.705 through 1138.715 
of this part:

SUB Article VII. Financial, Programmatic, and Property Reporting 
Requirements for Subawards. (December 2014)

    Section A. Purposes of this article in relation to other 
articles.
    1. This article specifies administrative requirements concerning 
reporting that you must include in the terms and conditions of each 
subaward that you make under this award.
    2. It thereby addresses the flow down to subrecipients of 
requirements with which you must comply under REP Articles I through 
III of this award.
    3. SUB Article XII of this award addresses which of these 
administrative requirements you must include in any fixed-amount 
subaward that you make, if you are authorized to make fixed-amount 
subawards under this award.
    Section B. Performance reporting.
    1. You must include terms and conditions in each subaward to 
require the subrecipient to provide any performance information you 
need, by the time you need it, to comply with the performance 
reporting requirements in REP Article I and other terms and 
conditions of this award.
    2. You may specify a form, format, or data elements the 
subrecipient uses to provide the information to you (you need not 
require the subrecipient to use the same form, format, or data 
elements this article specifies for your reporting to us).
    Section C. Financial reporting.
    1. You must include terms and conditions in each subaward to 
require the subrecipient to provide any financial information you 
need, by the time you need it, to comply with the financial 
reporting requirements in REP Article II and other terms and 
conditions of this award.
    2. You may specify a form, format, or data elements the 
subrecipient must use to provide the information to you (you need 
not require the subrecipient to use the same form, format, or data 
elements that REP Article II specifies for your reporting to us).
    Section D. Reporting on property.

[[Page 78439]]

    1. Each subaward you make under this award must include 
provisions concerning property reporting as described in paragraph 
D.2 of this section if the subrecipient may, under the subaward:
    a. Acquire or improve real property or equipment;
    b. Acquire supplies or intangible property; or
    c. Be accountable for federally owned property.
    2. The subaward provisions must require the subrecipient to give 
you the information you need about the property in order to meet 
your responsibilities to us under Sections A through D of REP 
Article III and PROP Articles II through VI.

Appendix H to Part 1138--Terms and Conditions for SUB Article VIII, 
``Other Administrative Requirements for Subawards''

    DoD Components must use the following standard wording in SUB 
Article VIII in accordance with Sec.  1138.805 of this part:

SUB Article VIII. Other Administrative Requirements for Subawards. 
(December 2014)

    Section A. Purposes of this article in relation to other 
articles.
    1. This article specifies other administrative requirements that 
you either must or should include in the terms and conditions of 
each subaward that you make under this award.
    2. It thereby addresses the flow down to subrecipients of 
requirements with which you must comply under OAR Articles I through 
VII of this award.
    3. SUB Article XII of this award addresses which of these 
administrative requirements you must include in any fixed-amount 
subaward that you make, if you are authorized to make fixed-amount 
subawards under this award.
    Section B. Submission and maintenance of subrecipient 
information. You must include the substance of the provision in 
Section C of OAR Article I in any subaward you make under this 
award. The provision must require the subrecipient's disclosure of 
any evidence directly to the Inspector General, DoD.
    Section C. Records retention and access. In each subaward you 
make under this award:
    1. If the subaward is to an institution of higher education, 
nonprofit organization, State, local government, or Indian tribe:
    a. You must include the requirements of Section A of OAR Article 
II with the additional condition that, for any subrecipient under 
this award that does not have a federally approved rate for indirect 
or facilities and administrative costs and that does not use the de 
minimis rate described in 2 CFR 200.414(f), you must:
    i. Require the subrecipient to keep records that support its 
indirect or facilities and administrative costs charged to the 
subaward for 3 years from the end of the fiscal year (or other 
accounting period) to which the costs apply; and
    ii. Keep any plan or computation the subrecipient submits to you 
to serve as a basis for your determining the reasonableness and 
allowability of indirect or facilities and administrative costs of 
the subaward, for 3 years from the end of the fiscal year (or other 
accounting period) to which the proposal, plan, or computation 
applies.
    b. You must include the requirements of Sections B, C, and F of 
OAR Article II.
    c. You must include provisions that enable you to comply with 
the requirements of Section D of OAR Article II concerning records 
for joint or long-term use.
    d. You must include provisions that establish the same rights 
and responsibilities for the subrecipient under the subaward that 
Section E of OAR Article II establishes for you under this award.
    e. You may not impose any other record retention or access 
requirements on the subrecipient.
    2. If the subaward is to a for-profit entity, you must include 
the records retention and access provisions of 32 CFR 34.42.
    Section D. Remedies and termination. The terms and conditions of 
each subaward you make under this award should specify your rights 
and responsibilities and those of the subrecipient if you take a 
remedial action to address a subrecipient's noncompliance with an 
applicable Federal statute or regulation or the terms and conditions 
of your subaward. Each subaward's terms and conditions should:
    1. Identify remedial actions you may take to address the 
subrecipient's noncompliance. Available remedies are described in:
    a. OMB guidance in 2 CFR 200.338 for a subaward to an 
institution of higher education, nonprofit organization, State, 
local government, or Indian tribe; and
    b. 32 CFR 34.52 for a subaward to a for-profit entity.
    2. With respect to termination specifically:
    a. Identify conditions under which you, the subrecipient, or 
both (by mutual agreement) may terminate the subaward, in whole or 
in part, as described in:
    i. OMB guidance in 2 CFR 200.339(a) for a subaward to an 
institution of higher education, nonprofit organization, State, 
local government, or Indian tribe; and
    ii. 32 CFR 34.51 for a subaward to a for-profit entity.
    b. Inform the subrecipient that you will provide it with a 
notice of termination if you unilaterally terminate the award.
    c. Specify that you and the subrecipient remain responsible for 
applicable requirements addressed in Sections G and H of this 
article concerning closeout, post-closeout adjustments, and 
continuing responsibilities.
    3. With respect to either suspension or termination of the 
subaward, inform the subrecipient about the criteria that you will 
use to either allow or disallow subaward costs, which are in:
    a. Section C of OAR Article III for a subaward to an institution 
of higher education, nonprofit organization, State, local 
government, or Indian tribe; and
    b. 32 CFR 34.52(c) for a subaward to a for-profit entity.
    Section E. Disputes, hearings, and appeals. Each subaward's 
terms and conditions should specify any rights the subrecipient has 
to a hearing, appeal, or other administrative proceeding if it 
disputes a decision you render in administering its subaward. You 
must comply with any statute or regulation that affords the 
subrecipient an opportunity for a hearing, appeal, or other 
administrative proceeding and is applicable to the dispute.
    Section F. Collection of amounts due. Although your subaward 
terms and conditions do not need to include any of the requirements 
of OAR Article V because those requirements do not flow down to 
subrecipients, you should consider including provisions to specify 
what you would need from the subrecipient if you owed a debt to the 
Government under this award that is related to its subaward.
    Section G. Closeout.
    1. In each subaward that you make to an institution of higher 
education, nonprofit organization, State, local government, or 
Indian tribe, you must include provisions to require the 
subrecipient to:
    a. Liquidate all obligations that it incurred under the subaward 
not later than 90 calendar days after the end date of the period of 
performance of either the subaward or this award, whichever is 
earlier, unless you grant an extension.
    b. Promptly refund to you any balances of unobligated cash that 
you advanced or paid to the subrecipient, unless you received 
authorization from the DoD award administration office for the 
subrecipient's use of those funds on other projects or programs.
    c. Submit to you:
    i. Any information you need from the subrecipient to meet your 
responsibilities to us for an accounting of property, under Section 
D of OAR Article VI; and
    ii. Not later than 90 calendar days after the end date of the 
period of performance of this award, unless you grant the 
subrecipient an extension, any information you need to meet your 
responsibilities to us for final reports, under Section C of OAR 
Article VI.
    2. In each subaward that you make to a for-profit entity, you 
must include the terms and conditions that you deem necessary for 
you to be able to comply with the requirements in OAR Article VI.
    Section H. Post-closeout adjustments and continuing 
responsibilities.
    You must include provisions in each subaward to require the 
subrecipient to provide what you need in order to comply with the 
requirements of OAR Article VII.

Appendix I to Part 1138--Terms and Conditions for SUB Article IX, 
``National Policy Requirements for Subawards''

    DoD Components must use the following standard wording in SUB 
Article IX in accordance with Sec.  1138.905 of this part:

SUB Article IX. National Policy Requirements for Subawards. (December 
2014)

    Section A. General.
    1. You must include provisions in the terms and conditions of 
each subaward you make to require the subrecipient entity's 
compliance with each of the national policy requirements in Sections 
B through E of this article that you determine is applicable,

[[Page 78440]]

given the type of entity receiving the subaward and activities it 
will be carrying out under the subaward.
    2. If an entity to which you are about to make a subaward will 
not accept an award provision requiring its compliance with a 
national policy requirement that you determine to be applicable, you 
must alert the award administration office immediately. You may not 
omit an applicable national policy requirement in order to make the 
subaward.
    3. If at any time during the performance of a subaward, you 
learn that---or receive a credible allegation that---the 
subrecipient is not complying with an applicable national policy 
requirement, you must alert the award administration office 
immediately.
    Section B. Nondiscrimination national policy requirements. You 
must include provisions in each subaward to require the 
subrecipient's compliance with the nondiscrimination national policy 
requirements specified in paragraphs A.1 through A.5 of NP Article 
I, as applicable.
    Section C. Environmental national policy requirements. You must 
include provisions in each subaward to require that:
    1. The subrecipient comply with all applicable Federal 
environmental laws and regulations, including those specified in 
paragraph A.2, A.3, A.5, and A.6 of NP Article II, as applicable.
    2. Provide any information you need, when you need it, in order 
to comply with the requirement to immediately notify us of potential 
environmental impacts specified in paragraph A.4, A.5, and A.6 of NP 
Article II, as applicable, due to activities under the award (which 
includes subaward activities).
    Section D. National policy requirements concerning live 
organisms. You must include provisions in each subaward to require 
the subrecipient's compliance with the national policy requirements 
concerning human subjects and animals that are specified in 
paragraphs A.1 and A.2 of NP Article III, as applicable.
    Section E. Other national policy requirements. You must include 
provisions in each subaward to require the subrecipient's compliance 
with the national policy requirements in the following portions of 
NP Article IV of this award, as applicable:
    1. Paragraph A.1.
    2. Paragraphs A.3.a and b.
    3. Paragraphs A.4 through A.17.

Appendix J to Part 1138--Terms and Conditions for SUB Article X, 
``Subrecipient Monitoring and Other Post-Award Administration''

    DoD Components must use the following standard wording in SUB 
Article X in accordance with Sec.  1138.1005 of this part:

SUB Article X. Subrecipient Monitoring and Other Post-Award 
Administration. (December 2014)

    Section A. General requirement for subrecipient monitoring. You 
must do the post-award monitoring of the subrecipient's activities 
under each subaward that is needed in order for you to ensure that:
    1. The subrecipient carries out the portion of the substantive 
project or program under this award.
    2. The subrecipient is using project funds under the subaward 
(including any cost sharing or matching the subrecipient provides 
that is counted as project funds in the approved budget of this 
award) for authorized purposes.
    3. The subrecipient's performance under the subaward is in 
compliance with applicable Federal statutes and regulations, and the 
terms and conditions of your subaward.
    Section B. Subrecipient monitoring actions.
    1. Required monitoring actions. You must, as part of your post-
award monitoring of each subrecipient:
    a. Review the financial and programmatic information that your 
subaward terms and conditions require the subrecipient to provide, 
in accordance with Sections B and C of SUB Article VII of this 
award.
    b. Follow up and ensure that the subrecipient takes timely and 
appropriate action to remedy deficiencies detected through any 
means, including audits and on-site reviews.
    c. With respect to audits of subrecipients that are required 
under FMS Article V of this award:
    i. Verify that the subrecipient is audited in accordance with 
those requirements, as applicable (note that Section F of SUB 
Article IV requires you to include those audit requirements for the 
subrecipient in the subaward's terms and conditions).
    ii. Resolve and issue a management decision for audit findings 
that pertain to your subaward. Doing so is a requirement under 
either Section A or B of FMS Article V of this award (Section B 
requires that explicitly and Section A does so by implementing OMB 
guidance in 2 CFR 200.521, as well as other portions of subpart F of 
that part).
    iii. Consider whether you need to adjust your own records 
related to this award based on results of audits, on-site reviews or 
other monitoring of the subrecipient and, as applicable, notify the 
award administration office.
    2. Other monitoring actions. OMB guidance in 2 CFR 200.331(e)(1) 
through (3) describes other actions that may be useful as part of 
your subrecipient monitoring program, depending on the outcomes of 
the pre-award risk assessment you conducted in accordance with 
Section B of SUB Article II.
    Section C. Remedies and subaward suspension or termination. With 
respect to any subaward under this award, you must:
    1. Consider whether you need to take any remedial action if you 
determine that the subrecipient is noncompliant with an applicable 
Federal statute or regulation or the terms and conditions of your 
subaward, as described in Section D of SUB Article VIII.
    2. Provide a notice of termination to the subrecipient if you 
terminate its subaward unilaterally for any reason prior to the end 
of the period of performance.
    3. In the case of either suspension or termination of a subaward 
prior to the end of the period of performance, allow or disallow 
subaward costs in accordance with Section C of OAR Article III.
    Section D. Subaward closeout.
    1. You will close out each subaward when you either:
    a. Determine that the subrecipient has completed its 
programmatic performance under the subaward and all applicable 
administrative actions; or
    b. Terminate the subaward, if you do so prior to completion of 
the subrecipient's programmatic performance.
    2. With respect to the closeout of each subaward:
    a. You must pay the subrecipient promptly for allowable and 
reimbursable costs.
    b. Consistent with the terms and conditions of the subaward, you 
must make a settlement for any upward or downward adjustments to the 
Federal share of costs after you receive the information you need 
from the subrecipient to close out the subaward.
    c. You should complete the closeout of the subaward no later 
than one year after you receive and accept the final reports and 
other information from the subrecipient that you need to close out 
the subaward.

Appendix K to Part 1138--Terms and Conditions for SUB Article XI, 
``Requirements Concerning Subrecipients' Lower-Tier Subawards''

    DoD Components must use the following standard wording in SUB 
Article XI in accordance with Sec.  1138.1105 of this part:

SUB Article XI. Requirements Concerning Subrecipients' Lower-Tier 
Subawards. (December 2014)

    Section A. Purpose. This article specifies requirements you must 
include in any cost-type subaward under which you determine that the 
subrecipient of your subaward may make lower-tier cost-type 
subawards to other entities.
    Section B. Requirements for lower-tier subawards. Your cost-type 
subaward terms and conditions must require your subrecipient, with 
respect to each lower-tier cost-type subaward that it makes, to:
    1. Ensure that the lower-tier transaction is a subaward, rather 
than a procurement, by making the determination that SUB Article I 
of this award requires you to make for your subawards.
    2. Conduct the pre-award risk assessment of its intended 
subrecipient that Section B of SUB Article II of this award requires 
you to make for your subawards.
    3. Include in any cost-type subaward it makes at the next tier:
    a. The informational content that SUB Article III specifies;
    b. The administrative requirements that SUB Articles IV through 
VIII of this award specify;
    c. The national policy requirements that SUB Article IX of this 
award specifies, as applicable; and
    d. The requirements of this article if the next-tier 
subrecipient may make even lower-tier cost-type subawards to other 
entities.
    4. Carry out the subrecipient monitoring and other post-award 
administration responsibilities specified in SUB Article X of this 
award.

[[Page 78441]]

Appendix L to Part 1138--Terms and Conditions for SUB Article XII, 
``Fixed-Amount Subawards''

    DoD Components must use the following standard wording in SUB 
Article XII in accordance with Sec.  1138.1205 of this part:

SUB Article XII. Fixed-Amount Subawards. (December 2014)

    Section A. Limitations on use.
    1. You may not use a fixed-amount subaward:
    a. If the total value over the life of the subaward will exceed 
the simplified acquisition threshold.
    b. Unless the project or program scope is specific, with 
definite outcomes, and you are able to establish a reasonable 
estimate of the actual costs of accomplishing those outcomes.
    c. If you will predetermine a set amount or percentage of cost 
sharing or matching that the subrecipient must provide under the 
subaward.
    d. If the subrecipient will acquire any real property or 
equipment under the subaward.
    2. For fixed-amount subawards not prohibited by paragraph 1 of 
this section and except as provided in Section B of this article, 
you must obtain our prior approval before making a fixed-amount type 
of subaward.
    a. If Section B of FMS Article IV requires you to obtain our 
prior approval before you make any subaward, and you do not identify 
the subaward as a fixed-amount subaward when you obtain that 
approval, then you must subsequently request separate approval 
before awarding it as a fixed-amount type of subaward.
    b. If a subaward is identified as a fixed-amount type of 
subaward in the budget you submit for our approval, then our 
approval of the budget is the required prior approval.
    Section B. Fixed-amount subawards that do not require prior 
approval. You are not required to obtain our prior approval before 
using a fixed-amount type of subaward if:
    1. The subaward is to either:
    a. A foreign public entity; or
    b. An organizational unit of a foreign organization, if that 
unit does not have a place of business in the United States, 
regardless of whether another organizational unit of that foreign 
organization has one.
    2. You determine that the portion of the project or program 
under this award which the subrecipient will be carrying out under 
the subaward has one or more specific outcomes with the following 
characteristics:
    a. You can define the outcomes well enough to specify them at 
the time you make the subaward. Note that:
    i. Outcomes are distinct from inputs needed to achieve the 
outcomes, such as amounts or percentages of time that subrecipient 
employees or other participants will spend on the project or 
program.
    ii. The inherently unpredictable nature of basic or applied 
research makes it rarely, if ever, possible to define specific 
research outcomes in advance, which makes fixed-amount subawards 
inappropriate for research. Note that technical performance reports 
serve to document research outcomes but are not themselves outcomes, 
notwithstanding the definition of ``performance goals'' in OMB 
guidance at 2 CFR 200.76.
    b. The accomplishment of each outcome will be observable and 
verifiable by you when it occurs, so that you will not need to rely 
solely on the subrecipient's assurance of that accomplishment.
    c. The subrecipient associates its projected costs with outcomes 
in the proposal it submits to you, and you are confident that the 
costs of accomplishment of the outcomes will equal or exceed the 
subaward amount. This requires either that you have a high degree of 
confidence:
    i. In your estimate of the costs associated with accomplishing 
the well-defined and observable outcomes, based on the prospective 
subrecipient's proposal (and using the applicable cost principles in 
FMS Article III as a guide); or
    ii. That those costs will be within a finite range, rather than 
a specific amount, so that you may provide an amount of funding 
under the subaward that does not exceed the lower end of the range, 
with the provision that the subrecipient agrees to provide any 
balance above that amount that ultimately is needed to accomplish 
the outcomes. Your subaward then would include a term or condition 
to reflect the subrecipient's agreement to provide that balance 
(which would be in an amount to be post-determined, when the 
outcomes are accomplished). Note that this is distinct from a 
situation in which you predetermine a set amount or percentage of 
cost sharing or matching that the subrecipient must provide under 
its subaward, a situation in which paragraph A.1.c of this article 
prohibits use of a fixed-amount subaward.
    3. a. The subaward is based on a fixed rate per unit of outcome 
(or ``unit cost'') and you have both the confidence:
    i. That is described in paragraph B.2.c of this article in the 
estimated costs associated with each unit of outcome; and
    ii. In the subrecipient's guarantee that it can accomplish at 
least the number of units of outcome on which your total subaward 
amount will be based (i.e., the product of the unit cost and the 
number of units of outcome the subrecipient guarantees to 
accomplish).
    b. Note, however, that not every fixed rate subaward is also a 
fixed-amount subaward. If you have confidence in the unit cost but 
not also in the subrecipient's ability to guarantee the number of 
units of outcome that it will accomplish, then you should set a not-
to-exceed award amount based on the number of units desired and 
reduce the subaward amount at the end if the subrecipient 
accomplishes fewer than that number. Examples of activities for 
which it may be appropriate to award this type of fixed rate 
subaward that is not a fixed-amount subaward include:
    i. A clinical trial for which the unit cost is the cost of 
treating each participant. The not-to-exceed amount would be based 
on the number of participants the subrecipient planned to recruit 
and the final award on the number who actually participated, 
documentation for which would be subject to audit.
    ii. Labor costs for performance of a portion of the project or 
program under this award by a firm that treats its indirect cost 
rate as proprietary information. The unit cost in that case may be 
``loaded'' labor rates for the firm's employees that include 
indirect costs. The final award amount would depend on the number of 
labor hours the firm's employees expended under the subaward, 
documentation for which may be audited without exposing proprietary 
details associated with the actual costs.
    Section C. Informational content of fixed-amount subawards. You 
must include in each fixed-amount subaward the informational 
content, other than the indirect cost rate, that is described in SUB 
Article III of this award.
    Section D. Terms and conditions addressing administrative 
requirements.
    1. General. This section:
    a. Specifies the minimum set of terms and conditions (in lieu of 
the more extensive set specified in SUB Articles IV through X for 
cost-type subawards) addressing administrative requirements that you 
must include in each fixed-amount subaward:
    i. To an entity other than a foreign organization, as 
applicable; and
    ii. To the maximum extent practicable, to a foreign 
organization.
    b. Does not preclude the inclusion of other requirements that 
you need in order to meet your responsibilities under this award for 
performance of the project or program and compliance with applicable 
administrative and national policy requirements.
    2. Financial and program management requirements.
    a. Financial management system standards. For a subaward to 
other than a for-profit entity, your subaward must require the 
subrecipient to include the information specified in paragraph B.1 
of FMS Article I in its financial management system, for the 
purposes of the non-federal audits required by paragraph 2.d of this 
section.
    b. Payments. Your payments must be based on accomplishment of 
the outcomes and associated costs that you used to establish the 
award amount, rather than on subrecipient expenditures for project 
or program purposes. Milestone payments before the end of the 
subaward's period of performance may be appropriate if there are 
outcomes that the subrecipient will accomplish at different times 
during that period.
    c. Revision of budget and program plans. If our prior approval 
was required under paragraph A.2 of this article for use of a fixed-
amount type of subaward, then you must:
    i. Request our prior approval for any change in scope or 
objective of the subaward; and
    ii. Therefore include a requirement in the subaward for the 
subrecipient to request that approval through you.
    d. Non-federal audits. You must include the requirement for non-
Federal audits described in Section F of SUB Article IV. The audits 
are intended to focus on compliance with the performance 
requirements in the subaward terms and conditions and not to review 
actual costs as they would for a cost-type subaward.

[[Page 78442]]

    3. Property requirements.
    a. Federally owned property. If the subrecipient will be 
accountable for federally owned property, you must include the 
property management system, use, and disposition requirements 
described in Sections C and F of SUB Article V that are applicable 
to federally owned property.
    b. Intangible property. You must include the applicable 
intangible property requirements described in Section G of SUB 
Article V.
    4. Reporting requirements. You must include requirements for 
reporting that you need in order to meet your responsibilities under 
this award for reporting to us.
    5. Other administrative requirements.
    a. Integrity-related information. You must include the substance 
of the provision in Section C of OAR Article I in any subaward you 
make under this award. The provision must require the subrecipient's 
disclosure of any evidence directly to the Inspector General, DoD.
    b. Records retention and access.
    i. You must include the requirements for records retention and 
access in paragraph A.3 and Sections B and F of OAR Article II, as 
applicable, if the subaward is to an institution of higher 
education, nonprofit organization, State, local government, or 
Indian tribe. You may not impose any other records retention or 
access requirements on the subrecipient.
    ii. You must include the corresponding requirements of 32 CFR 
34.42 if the subaward is to a for-profit entity.
    c. Remedies and termination. You must include:
    i. The requirements concerning remedies and termination that are 
described in paragraphs D.1 and 2 of SUB Article VIII;
    ii. Provisions addressing any hearing and appeal rights the 
subrecipient has, as described in Section E of SUB Article VIII; and
    iii. Terms and conditions addressing adjustment of the amount of 
the subaward if it is terminated before the subrecipient 
accomplishes all of the specified outcomes.
    d. Continuing responsibilities. You must include requirements 
concerning continuing responsibilities for audits and records 
retention and access that are described in paragraphs B.1 and 3 of 
OAR Article VII.
    e. Collection of amounts due. You should consider including 
requirements concerning collection of amounts due, as described in 
Section F of SUB Article VIII.
    Section E. National policy requirements for fixed-amount 
subawards. You must include in the terms and conditions of each 
fixed-amount subaward the national policy requirements that SUB 
Article IX of this award specifies, as applicable.
    Section F. Subrecipient monitoring and other post-award 
administration. You must carry out the subrecipient monitoring and 
post-award administration actions specified in SUB Article X, as 
applicable.
    Section G. Fixed-amount subawards at lower tiers.
    1. Authority.
    a. If Section B of this article authorizes you to use a fixed-
amount type of subaward without our prior approval in some 
situations, a cost-type subaward that you make may authorize the 
subrecipient to use fixed-amount subawards at the next lower tier in 
those same situations without our prior approval.
    b. If you wish to allow a subrecipient of a cost-type subaward 
to use fixed-amount subawards at the next tier in other situations 
(i.e., situations in which this article requires you to obtain our 
prior approval before using a fixed-amount type of subaward), your 
subaward terms and conditions must require the subrecipient to 
submit a request through you to obtain our prior approval for use of 
that type of subaward.
    2. Subaward requirements. If your subrecipient is authorized to 
use lower-tier fixed-amount subawards, as described in paragraphs 
1.a and b of this section, your subaward's terms and conditions 
must:
    a. Require the subrecipient, before it makes any lower-tier 
fixed-amount subaward, to:
    i. Ensure that the lower-tier transaction is a subaward, rather 
than a procurement, by making the determination that SUB Article I 
of this award requires you to make for your subawards.
    ii. Conduct the pre-award risk assessment of its intended 
subrecipient that Section B of SUB Article II of this award requires 
you to make for your subawards.
    b. Include the requirements specified in Sections A through F of 
this article.

    Dated: October 19, 2016.
Aaron Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2016-25701 Filed 11-4-16; 8:45 am]
 BILLING CODE 5001-06-P