When can payments for other than actual costs be made under grants and cooperative agreements? I have seen examples of up-front negotiated pricing for items to be performed under grants included in the budget. For example, a fixed price for each sample of an item that the grant recipient performs a specific test on.

I am having trouble understanding how, when the OMB Circulars specify allowable costs for almost everything imaginable, a grant or cooperative agreement can be written to include negotiated lump sum prices for specific services. I have also seen them written where the Government pays a lump sum price for completing all the work under the agreement (just like a lump sum contract). I can't find anything in the OMB Circulars or our applicable C.F.R. about these types of practices.

Does anyone have any input on how grants or cooperative agreements are to be priced?

By bob antonio on Wednesday, September 27, 2000 - 08:51 am:

Anonymous:

I think the best way to answer your question is to provide you with a citation to the Red Book. Here is the cite

Advance Funding and Allowable Costs

A lot has to deal with the legislation authorizing the grant. The citation is to Volume II of the Red Book. The pages are 10-47 (Advance Payment) and 10-74 (Allowable Cost). If you have a hard copy, use that. The internet version is an 11 MB .pdf file. Unless you have a T1 or T3 internet line, it is nearly useless.

By Anonymous on Wednesday, September 27, 2000 - 01:11 pm:

I read the Red Book citations as you suggested. I understand that page 10-47 (Advance Payment) basically says that grant actions, unlike procurement actions, may be paid by an advancement of funds, if certain conditions are met. I also understand that all costs under a grant action must be considered to be "allowable", as described in the Allowable vs. Unallowable Costs Section, beginning on page 74.

Based on my reading I determine that the Government has a duty to pay only allowable costs under grant actions (also reasonable and allocable costs). If the Government paid lump sum negotiated amounts, it would not have a means (besides an audit) of determining if grant funds were properly spent. And the Government has a duty to ensure that grant funds are properly spent.

These points come across even more when you read the discussion about the Government holding "property interest" in grant funds and property bought with grant funds on pages 10-45 and 46. Terms like "equitable lien" (Govt's right to ensure funds used for authorized purposes) and "reversionary interest" (grant funds that can't be used for grant purpose revert back to Govt), made a big impact to me on the Govt control of grant funds.

Reviewing the Red Book put another question in my mind. My agency has the authority to furnish specialized and technical services on an actual cost recovery basis to States and local units of Government. We enter into "agreements" with these Governmental parties for these arrangements. These "agreements" are not covered under the Federal Grant and Agreement Act.

The question I now raise is whether these units of Government can receive federal assistance funds through a grant with one federal agency and then transfer or provide some of these funds to another federal agency (my agency for example) under an "agreement" arrangement as describe above? The Red Book discusses restrictions of funds provided to grant recipients, beginning on page 10-41, and also provides discussion on recipients entering into contracts with third parties, beginning on page 10-29.

As far as I can tell the Red Book, like the laws and regulations of my agency, is silent on this matter. If nothing else could you or anyone else suggest a reference point to go to?

Thanks.

By bob antonio on Thursday, September 28, 2000 - 08:00 am:

Anon

Here is an excerpt from the NSF Grant Policy Manual on use of federal employees. I did not a chance a chance to look very closely. However, if you click "Grants & Agreements" on the Wifcon Main menu at the left, you will find another link for "Policy." If I was looking for an answer, I would check the policy of NIH and NSF. NASA and DOE policy may also be helpful. They should all be there. NOAA uses DOC policy if I can remember correctly.

On your point about lump sum, I am not sure what they are trying to do. For example, from my memory one agency's grantee was acquiring a "shaking table." They are used for earthquake research and they do exactly as their name suggests. The grant budget form listed the costs by category. A specific amount was for a 2-meter shaking table. After the grant was received, the researchers began to wheel and deal with the manufacturer of shaking tables. They managed to get a good deal for a 3-meter shaking table. Since the grant was cost sharing at a specific rate, the researchers then went to their university sponsor and asked for more funds for the bigger and better shaking table. That table was huge and weighed 5,000 pounds. However, it really could shake things up.

So they spent all of the agency funds (but no more than originally provided) and more of their university funds for something bigger but still the same item. In making their deal, they did notify the agency that provided them with the grant. The agency's program officer was delighted with the researchers' initiative and approved the bigger and better table. If the researchers would have obtained the smaller table, they would have had excess funds. However, they would have been able to go to the agency program officer and ask for approval to spend the funds for something else.

With a simple lump sum disbursement, it appears that the agency doing that loses the little control they have over the grant. Just like a contractor, a grantee will go out and bid-shop. I would assume there would be excess funds in those items that end up bid-shopped.

These issues are covered by the NSF and maybe NIH manuals. NSF unloads at least $3 billion every year and NIH unloads more. I think those two agencies are good examples for regular research grants. For cooperative agreements, I would go to DOE for their guidance.

By Anonymous on Thursday, September 28, 2000 - 09:18 am:

Thanks Bob, you've been a big help. My agency uses 1102's as "Grant Specialists", and the world of grants is somewhat different from the procurement world. Hope that some more "chat" develops here, as I would really like to learn all I can about grants and agreements.

By bob antonio on Thursday, September 28, 2000 - 12:23 pm:

Anon:

I think one of the things preventing people from discussing grants and agreements is the lack of a common language.

Here is a very humble little report I did last year on Research Equipment The report looks at guidance for the management of research equipment. Additionally, research equipment at 4 institutions was observed to see if the equipment was acquired. (By the way, the Legal Services Corporation today published for comment, its manual for the acquisition of equipment by its grantees. It is on the "Today's Grants" page.)

The three agencies involved in the little report all used somewhat different guidance for management of grantee equipment. Additionally, that guidance was a partial adoption of OMB guidance. The grantee institutions I visited all complained about different federal rules for equipment. Perhaps OMB will be more forceful with the enactment of P. L. 106-107. However, I think much of it is beyond their control.

Often, as you say, the grants officer is an 1102 or former 1102. In the world of contracts, grants, and cooperative agreements, the human pecking order is program officer, contracting officer, and grants officer.

By Anonymous on Thursday, September 28, 2000 - 02:57 pm:

The "human" pecking order at my agency is somewhat different. Its something in the order of program officer, engineer, janitor, contracting officer, grants officer, and lab rat. However, the lab rat is on occasion thought of more highly than the contracting officer and grants officer.

Thanks again