Advance Payments

[ferdi]

I am new to the WIFCON forum, but I have been reading some of the topics and comments. I wish I joined a long time ago because there is a wealth of experience and expertise that I can appreciate from members of the forum.

My question is really related to advance payments.

My agency is looking at setting up contracts with local governments for work that we have used MOUs in the past (last 30+ years) as the contract vehicle to perform our required services. Our Legal Counsel Division made the decision that MOUs are no longer the appropriate vehicle to transfer funds to the local governments to perform the work. There are also some Privacy Act issues being discussed that is affecting this decision to use contracts as oppose to MOUs. We also have to get certain FAR clauses waivers and provide an explanation of the clauses to the local government being that those clauses were not used in the MOUs that were in place. Also, it is important to note that by statute, my agency has to have the work performed by these particular local governments.

In order to perform the required work, the local governments will need their advance budgets (70-80% of the funds) about 3-4 months prior to beginning the work. It is vitally important that the local governments get the advance payments becauses they have very limited financial and legal resources available to them.

How would my agency justify making the advance payments (in such large amounts) to these local governments? I am curious to know have any of you had to deal with a matter such as this before? I appreciate any feedback or comments that are provided.

[formerfed]

Without knowing the purpose of what the MOUs/contracts are for, most agencies use grants or cooperative agreements with states and locals. This is from OMB Circular A-120 - Grants and Coopeartve Agreements with State and Local Governments:

"Use of grants and cooperative agreements. Sections 6301-08, title 31, United States Code govern the use of grants, contracts and cooperative agreements. A grant or cooperative agreement shall be used only when the principal purpose of a transaction is to accomplish a public purpose of support or stimulation authorized by Federal statute. Contracts shall be used when the principal purpose is acquisition of property or services for the direct benefit or use of the Federal Government. The statutory criterion for choosing between grants and cooperative agreements is that for the latter, "substantial involvement is expected between the executive agency and the State, local government, or other recipient when carrying out the activity contemplated in the agreement."

Did you and your lawyers consider grants or coooperative agreements first?

[Guest Vern Edwards]

I'm with formerfed. Cooperative agreement is the way to go. A contract awarded pursuant to FAR is absolutely the wrong vehicle to use with a local government. I find it hard to believe that a knowledgeable federal agency lawyer would recommend awarding a FAR contract to a local government. The result would be a legal catastrophe.

[ferdi]

I'm with formerfed. Cooperative agreement is the way to go. A contract awarded pursuant to FAR is absolutely the wrong vehicle to use with a local government. I find it hard to believe that a knowledgeable federal agency lawyer would recommend awarding a FAR contract to a local government. The result would be a legal catastrophe.

Thank you all very much for those responses. I did not hear the mention of Cooperative agreements or grants from the lawyers. I will research further and keep you all posted on what feedback I get receive. Thanks again.

[Guest carl r culham]

ferdi - The mere fact that you are dealing with a local Government does not dictate or set the priority for the vehicle, the intent/purpose of the relationship does. This is made clear at the beginning of the attachment to OMB Circular A-102, rather than Circular A-120 that was mentioned in a post in this thread, which states -

"Use of grants and cooperative agreements. Sections 6301-08, title 31, United States Code govern the use of grants, contracts and cooperative agreements. A grant or cooperative agreement shall be used only when the principal purpose of a transaction is to accomplish a public purpose of support or stimulation authorized by Federal statute. Contracts shall be used when the principal purpose is acquisition of property or services for the direct benefit or use of the Federal Government. The statutory criterion for choosing between grants and cooperative agreements is that for the latter, "substantial involvement is expected between the executive agency and the State, local government, or other recipient when carrying out the activity contemplated in the agreement."

The difference is also supported, or not, but authority of legislation that is providing the funding for the services being obtained from the local government.

As you plow the ground as to the appropriate tool these criterion should be kept in mind.

If after the matter is fully researched and the contract route is the tool of choice do not forget FAR 31.6 and FAR 32.4. In fact in direct response to your question FAR 32.4 would help you on the advance payment matter, along with any department or agency supplement that regards the same.

[ferdi]

I had researched and the Cooperative Agreement or Grant would have been the perfect fit as you all suggested. However, I was informed that my agency does not have the authority to do Cooperative Agreements or Grants. Also, the MOU is no longer the way to way to transfer funds. No final decisions have been made as of yet, however, there is talk of putting in place a fixed price contract with economic price adjustments. Does anyone know of good samples out there from other agencies that I could take a look at? Let me know.

ferdi - The mere fact that you are dealing with a local Government does not dictate or set the priority for the vehicle, the intent/purpose of the relationship does. This is made clear at the beginning of the attachment to OMB Circular A-102, rather than Circular A-120 that was mentioned in a post in this thread, which states -

"Use of grants and cooperative agreements. Sections 6301-08, title 31, United States Code govern the use of grants, contracts and cooperative agreements. A grant or cooperative agreement shall be used only when the principal purpose of a transaction is to accomplish a public purpose of support or stimulation authorized by Federal statute. Contracts shall be used when the principal purpose is acquisition of property or services for the direct benefit or use of the Federal Government. The statutory criterion for choosing between grants and cooperative agreements is that for the latter, "substantial involvement is expected between the executive agency and the State, local government, or other recipient when carrying out the activity contemplated in the agreement."

The difference is also supported, or not, but authority of legislation that is providing the funding for the services being obtained from the local government.

As you plow the ground as to the appropriate tool these criterion should be kept in mind.

If after the matter is fully researched and the contract route is the tool of choice do not forget FAR 31.6 and FAR 32.4. In fact in direct response to your question FAR 32.4 would help you on the advance payment matter, along with any department or agency supplement that regards the same.

[formerfed]

I had researched and the Cooperative Agreement or Grant would have been the perfect fit as you all suggested. However, I was informed that my agency does not have the authority to do Cooperative Agreements or Grants. Also, the MOU is no longer the way to way to transfer funds. No final decisions have been made as of yet, however, there is talk of putting in place a fixed price contract with economic price adjustments. Does anyone know of good samples out there from other agencies that I could take a look at? Let me know.

How did you come to the conclusion your agency doesn't have cooperative agreement authority? That simply isn't true. Some agecies require specific langauge in their appropriation for grants such as this:

EMERGENCY MANAGEMENT PERFORMANCE GRANTS

For necessary expenses for emergency management performance grants, as authorized by the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.), the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.), the Earthquake Hazards Reduction Act of 1977 (42 U.S.C. 7701 et seq.), and Reorganization Plan No. 3 of 1978 (5 U.S.C. App.), $300,000,000: Provided, That total administrative costs shall not exceed 3 percent of the total amount appropriated under this heading.

But cooperative agreements can use any money. I may be wrong but I don't think so.

[Guest carl r culham]

formerfed - Sorry but you are wrong. The Federal Grants and Cooperative Agreement Act provides the standards to use, inclusive of whether a procurement is the way to go. Authority to use a grant or cooperative agreement is authorized through statute, either through a specific authority or through appropriation, while use of a procurement vehicle is inherent authority for agency to complete its mission.

[Guest Vern Edwards]

Authority to use a grant or cooperative agreement is authorized through statute, either through a specific authority or through appropriation, while use of a procurement vehicle is inherent authority for agency to complete its mission.

I don't understand that statement, especially the part of about "through a specific authority or through appropriation." What does that mean? Agencies must have authority and appropriations in order to spend any money, whether by grant, cooperative agreement, or procurement contract. Are you saying that a statute or appropriation must expressly specify use of a grant or cooperative agreement? Are you saying that the statute or appropriation must say "grant" or "cooperative agreement"? If that's what you're saying, can you cite some official basis for the statement? OMB A-102 does not say that. Or did I miss it?

[Guest carl r culham]

Vern - I am travleing and do not have all my usual references so I did some quick Google research and maybe this will help.

From "Its the Law" published January 28, 1998 by the OGC for the Dept of Commerce - www.ogc.doc.gov/ogc/fl/fald/itl/voL-10.doc - in case the link will not work.

The Federal Grant and Cooperative Agreement Act (FGCAA) establishes standards that agencies are to use in selecting the most appropriate funding vehicle ? a procurement contract, a grant, or a cooperative agreement. According to the FGCAA, various relationships exist between an agency and a state, local government, university or other organization, depending on the principal purpose of the agreement. The principal or primary purpose determines the appropriate legal instrument to be used to effect the rights and obligations of the parties. The FGCAA, however, does not provide authorizing legislation for an agency to make a grant or cooperative agreement. Each agency must have specific statutory authority to make a financial assistance award which includes grants and cooperative agreements. This may be provided in its authorizing legislation or within its appropriation act. Financial assistance is an award of Federal appropriations provided as an exercise of Congressional spending powers under the Constitution and therefore must be clearly authorized by an Act of Congress. Procurement contracts, however, are inherently authorized fulfilling the agency?s mission expressed in its organic act.

The same publication notes this GAO Decision, not quite on point but does discuss -

Bloomsbury West, Inc., B-194229

Finally there is the Catalog of Federal Domestic Assistance which helps identify most of the areas where agencies do have the authority for grants and cooperative agreements. http://www.cfda.gov/

[Acq_4_life]

I have a similar question to address to this discussion. What would be the appropriate contract vehicle to use to establish an agreement between the U.S. Government and its U.S. Territory to perform activities that involve both parties to accomplish a public need? MOAs have been used in the past to transfer funds to the U.S. Territory; however, it has been determined that MOAs are not the appropriate vehicle. Recommendations made by a contracting official, suggest that a sole source contract would be contemplated in order to allow advance payments to the U.S. Territory without having concerns relating to the Privacy Act. I am not familiar with this type of contract vehicle, so I'm very interested in knowing your thoughts.