B. 10. Grants and Cooperative
The bona fide needs rule applies to all
federal government activities
carried out with appropriated funds, not just contracts, including
and cooperative agreements.
B-289801, Dec. 30, 2002; 73 Comp. Gen.
78–79 (1994). Because of the fundamentally different purposes of
and grants, a bona fide needs analysis in the context of grants and
cooperative agreements is different from an analysis in a contract
The purpose of a contract is to acquire goods or services; the
purpose of a
grant is to provide financial assistance. It is for that reason that
we do not
import into a grant analysis the contract concepts of supplies and
particularly severable and nonseverable services. In the world of
the analysis focuses, necessarily, on the agency’s need for the
services for which it has contracted. In that context, these
particular relevance. The agency’s “need” in the grant context,
to make a grant in furtherance of the goals Congress hoped to
it enacted the grant-making authority. In this context, the agency’s
to make a grant, and the grantee’s use of grant funds has no
relevance in the
assessment of agency needs.
For that reason, a bona fide needs analysis in the grant context
whether the grant was made during the period of availability of the
appropriation charged and furthers the authorized purpose of program
legislation. B-289801, Dec. 30, 2002. Thus, where a statute
to be made for up to 5 years to support childhood education, an
award of a
5-year grant fulfills a bona fide need in the year that the grant is
even though the 5-year grant is funded with a fiscal year
However, where the “School Improvement Programs” appropriation for
fiscal year 2002 authorizes grants only for “academic year
grants providing funding for the 2002–03 academic year are a bona
need of the fiscal year 2002 appropriation, notwithstanding that the
program statute authorizes grants for up to 4 years. Id.
application of contract concepts to grants has not been without
Prior to our 2002 decision, the application of the severability
grants and cooperative agreements had evolved over the years. In
where agencies did not have explicit multiyear award authority, GAO
to treat grants and cooperative agreements in much the same way that
treated service contracts with regard to severability. In
(1985), GAO held that since the National Institutes of Health (NIH)
program did not contemplate a required outcome or product but,
sought to stimulate research that would be needed year after year,
required to use appropriations available in the year that services
rendered to fund the grants.
However, GAO significantly departed from that reasoning in a 1988
decision involving Small Business Administration (SBA) grants. In
decision, GAO stated that when reviewing grants or cooperative
agreements in the context of the bona fide needs rule, the principle
severability is irrelevant. B-229873, Nov. 29, 1988. GAO held that
not violate the bona fide needs rule when it used its current
on September 30, the last day of the fiscal year, to award
agreements to Small Business Development Centers that would use the
money in the next fiscal year. GAO concluded that, unlike a
cooperative agreement satisfies the bona fide need of the agency—to
financially assist the awardee—at the time SBA makes the award to
Small Business Development Centers. Id. Thus, the dates on which the
Centers actually used the financial assistance are irrelevant for
assessing SBA’s bona fide need. Id.
Building on the SBA decision, GAO held that the Department of
could use 1-year appropriations to award multiyear grants where the
legislation creating the grant program explicitly stated that the
last multiple years and even in instances where the legislation did
address the duration of the grants.
B-289801, Dec. 30, 2002. The
determining factor is that the grants, at the time of award, further
objective of the grant legislation. Thus, GAO held that Education
its fiscal year appropriations to fund a 4-year grant when the
directed the agency to award grants “for periods of not more than 4
See 20 U.S.C. § 6651(e)(2)(B)(i). Furthermore, GAO determined that
Education could use its fiscal year appropriation to provide 5- and
grants even though the statutes creating the grants were silent with
to grant duration. See 20 U.S.C. §§ 1070a-21 et seq. and Pub. L. No.
app. A, 114 Stat. 2763A-33–34 (Dec. 21, 2000). GAO reasoned that, in
addition to authorizing awards, the grant statutes conferred broad
discretion on Education to help ensure the accomplishment of grant
objectives; and it was within that discretion for Education to
whether the grant objectives would best be accomplished through the
of multiyear grant awards.
B-289801, Dec. 30, 2002.