Distinction and Purpose
Grants and procurement
contracts are two of the more common legal instruments used by the United
States Government to formally express a legally enforceable act, process,
contractual duty, obligation, or right between parties. The Federal Grant and
Cooperative Agreement Act[1] of 1977 implemented legislation restricting
the term “contract” to acquisition relationships and required the use of
alternative instruments, such as grants, to implement assistance relationships.
Prior to this act, Federal agencies frequently used procurement contracts and
grants interchangeably and without consistency to relationship type.
Federal grants are not
governed by the Federal Acquisition Regulation (FAR) the way that procurement
contracts are. The principal purpose of a federal procurement contract is to
acquire property or services for the direct benefit or use of the United States
Government[2], and can be done by
purchase, lease, or barter. The purpose of a grant agreement is to transfer a
thing of value to a party in order to carry out a public purpose of support or
stimulation[3].
Federal grants are governed by regulations in Title 2 of the Code of Federal
Regulations (CFR) part 215. Because the purpose of federal procurement
contracts and grants differ, the instruments also have different requirements
and consequences.
Authority
Federal agencies have an
inherent, constitutional authority to issue procurement contracts[4]. Assistance awards,
however, cannot be executed without identifying appropriate statutory authority
for a particular program. Statutes, or laws passed by Congress, authorize
Federal agencies to use an assistance instrument. Congress gives statutory
authority to Federal agencies through broad legislation or program-specific statutes.
By passing these laws, Congress is also authorizing the award of financial
assistance with contingencies on how the funds can be spent. Absent statutory
authority, assistance instruments may not be used. Assistance affecting
provisions are found in appropriations law, authorization laws, and crosscutting
public policy statutes. Provisions of the Office of Management and Budget (OMB)
Circulars are applicable to all Federal agencies. OMB established Title 2 of
the CFR for grants and other financial assistance and non-procurement
agreements as part of the efforts to implement the Federal Financial Assistance
Management Improvement Act of 1999[5]. The legal availability of
assistance funds is contingent upon funds being obligated and expended for
their appropriated purpose and no other[6], expenses being properly
incurred during the period of availability[7], and funding amount not
exceeding funds appropriated[8].
Synopsis
Congress
annually appropriates funding for grant programs which are listed in the Catalog
of Domestic Federal Assistance and the Federal Registrar. In accordance with
the Federal Funding Accountability and Transparency Act of 2006, each grant
announcement is required to include sponsoring government department, program
title, total budget, application deadline, administrative contact and program
summary.
Competition Requirements
The use of competition in
awarding grants is encouraged[9] and grant officers shall use merit-based,
competitive procedures to the maximum extent practicable. Assistance-specific
competition requirements are found in 10 U.S.C. 2361. Procurement contracts, must
strictly adhere to the Competition in Contracting Act (CICA). CICA is not
applicable to assistance awards.
Assistance programs have
various means of limiting eligible recipients such as setting funding aside for
state and local Governments[10], requiring cost sharing
from all proposers[11], or limiting the
geographical area recipients can be located. Procurement contracts
governed by the FAR have few options in regards to source selection. FAR Part
19 requires small business set-asides to the maximum extent practicable.
Responsibility Determination
The responsibility determination requirements for grants and
procurement contracts are similar. For a grant recipient to be determined
qualified to receive an award in accordance with Title 32 of the CFR[12], they must have
sufficient technical resources, management systems, and financial resources.
Recipients must also have satisfactory record of both executing similar
programs and integrity or business ethics and be otherwise qualified and
eligible. For a prospective contractor of a procurement contract to be
determined responsible in accordance with FAR 9.104, they must have adequate
financial resources, be able to comply with required or proposed delivery or
performance schedule and have a satisfactory performance record and record of
integrity and business ethics. Additionally, the must have the necessary
technical skills and be otherwise qualified and eligible. Both types of award instruments are also
required to check the list of excluded parties prior to award in accordance
with Executive Order 12869-Reciprocity of Procurement and Non-Procurement
Systems in Debarment and Suspension.
Award Announcement
The Federal Funding Accountability and Transparency Act of 2006[13] required the establishment of one single
searchable website, accessible to the public, that includes information on all
of the Federal financial assistance and procurement awards. Any financial
assistance obligation action exceeding $25,000 must be made available on the
website within 30 days. FAR 5.301 requires the same of any procurement agreements
at the same threshold.
Cost Principles
Grant agreements are subject to the requirements as established by the
OMB Circular A-102 – Grants and Cooperative Agreements with State and Local
Governments and OMB Circular A-110 – Uniform Administrative Requirements for
Grants and Other Agreements with Institutions of Higher Education and Other
Non-Profit Organizations. Both grant agreements and procurement contracts are
subject to the requirements as established by OMB Circular A-21 – Cost Principles
for Educational Institutions, OMB Circular A-87 – Cost Principles for
State, Local and Indian Tribe Governments, and OMB Circular A-122 – Cost
Principles for Non-Profit Organizations.
Contract CloseoutThe Federal Acquisition Regulation (FAR) at 4.804-5 provides detailed procedures for the closeout process
OMB Circular A-110, Subpart D, titled After-the-Award Requirements, contains closeout guidance and other procedures for subsequent disallowances and adjustments.
[1]
P.L. 95-224, now codified as 31 U.S.C. chapter 63
[2] 31
U.S.C. 6303
[3] 31
U.S.C. 6304
[4]
Reference Article 1, Section 8 of the US Constitution
[5]
Public Law 106-107
[6] 31
U.S.C. 1301(a)
[7] 31
U.S.C. 1502(a)
[8]
Public Law 97-258
[9] 31
U.S.C. 6301(3)
[10]
10 U.S.C. 2391
[11]
10 U.S.C. 2511
[12]
Reference CFR Title 32 Subtitle A Chapter 1 Subchapter C Part 22-DoD Grants and
Agreements-Award and Administration
[13]
Public Law 109-282
