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Procurement

1.  Several of our sub-recipients will be able to take advantage of utility rebates when utilizing EECBG funds to make energy efficiency retrofits in their facilities. The question for DOE is whether a local entity's receipt of any rebates or other financial incentive as a result of using EECBG funds raises any "payment" or "program income" issues under 10 CFR 600.221 or 600.225? If so, how are States to account for such rebates or other financial incentive?

Golden treats the rebate in the following manner: the recipient receives grant funds up front. Upon receiving the rebate, the Recipient would be required to report to DOE receipt of the rebate and adjust its next payment request and the Financial Status Report to account for the rebate. This would effect reporting for incurred costs, but not the total project costs. It simply allows the recipient to do more effort under the award. At the end of the project, it is expected that all rebate funds would be re-dedicated to the project activities and DOE will not adjust the total project costs. If further effort was not required by the sub-recipient, the funds could be provided back to the recipient to carry out authorized activities under the formula grant.

You referenced two parts of DOE's financial assistance regulations. In this respect, 10 CFR 600.225(a) states that "program income" does not include rebates. Program income clearly reduces the total project cost unless the award provides otherwise. There is no such clear statement for rebates. The other section you mentioned, 600.221(f)(2), contemplates that rebates will be used similarly to program income in that grantees "shall disburse program income, rebates, refunds ....before requesting additional cash payments." This description above reflects the method that Golden implements this provision.

2.  Is a formal amendment required for every modification to the line items submitted in the original budget proposal regardless how small? NOTE - Many federal agencies allow movement of these line items up to 10% without a formal amendment.

This inquiry is specifically covered by the DOE financial assistance regulations: 10 CFR 600.230(c) Budget changes (1) Nonconstruction Projects. Except as stated in other regulations or an award document, grantees or subgrantees shall obtain the prior approval of the awarding agency whenever any of the following changes is anticipated under a nonconstruction award: . . . (ii) - Unless waived by the awarding agency, cumulative transfers among direct cost categories, or, if applicable, among separately budgeted programs, projects, functions, or activities which exceed or are expected to exceed ten percent of the current total approved budget, whenever the awarding agency's share exceeds $100,000.

3.  Does DOE have to approve sub-contractors' subcontracts?

If the value of the subcontractor's subcontract is greater than $2,000,000 (two million dollars), the recipient must submit certain information regarding the subcontract for approval by the DOE Contracting Officer. DOE does not approve/review the actual subcontract document.

To further explain, for contractual costs, the recipient must provide the following information for each individual or company that will receive EECBG funding, regardless of dollar amount: Name; DUNS Number; Award Amount; statement of work including applicable activities; and NEPA documentation, as applicable.

For each individual or company that has an estimated cost greater than $2,000,000 (two million dollars), the recipient must submit for approval by the Contracting Officer the following: (1) SF424A Budget Information- Nonconstruction Programs and (2) budget justification. The DOE Contracting Officer may require additional information concerning these individuals or companies prior to providing written approval. This requirement must be met for all subcontracts greater than $2,000,000 (two million dollars), even where the subcontractor subcontracts. Thus, if a subcontractor issues a sub-contract with a value greater than $2,000,000 (two million dollars), the recipient would also be required to submit (1) the SF424A and (2) budget justification for that subcontract. If a subcontractor issues a sub-contract with a value LESS than $2,000,000 (two million dollars), then the SF424A and budget justification is not required for that subcontract.

For example, State of BK enters a $10 million contract with Company AAA, Company AAA enters $5 million subcontract with Corp. BBB, which then issues a $2.5 million subcontract to Company CCC. The recipient must provide the SF424A and budget justification for each of those contracts/subcontracts because they are greater than $2 million.

Please check with your Project Officer or Grants and Agreements Specialist listed in the award document for specific direction if you have a particular question.

4.  Can a weatherization agency have a bid opening and award contracts to more than one bidder? Can the contractors agree to install materials at the lowest price that they bid, not the lowest bid submitted? Can an agency have an annual open ended contract that is based on price per measure, and if so, what contract language should be included by the agency to ensure that the contractors will have the capacity to complete a sufficient number of jobs to complete the contract?  If a bid opening is held and submission are not all in the same format, can that bid still be considered valid, or should it be invalidated and re-bid?

Under DOE's financial assistance regulations, which are incorporated into the weatherization grants, a state government is to follow "the same policies and procedures it uses for procurements from its non-Federal funds."  10 C.F.R. section 600.236(a).  Similarly, other grantees that are local governments are to "use their own procurement procedures which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this section."  10 C.F.R. 600.236(b).  Subsections (c) through (i) of that section include the other standards.  With regard to whether there are conflicts with local public contracts law, DOE does not have the expertise to address this question - that should be referred to counsel for your governmental entity.

5.  Can you clarify the definition of subaward as used in the Revised Special Terms & Conditions applicable to SEP and EECBG awards, and do the flow down provisions apply to subrecipients and vendors for Recovery Act funded projects?

The Special Terms and Conditions applicable to Recovery Act funded projects require that the State flow down the Recovery Act special terms and conditions in any subaward.  The Office of Management and Budget (OMB) has promulgated guidance related to financial assistance funded by the Recovery Act found at Title 2 of the Code of Federal Regulations, Part 176.  This guidance defines the term "subaward” to include a "legal instrument to provide support for the performance of any portion of the substantive project or program for which the recipient received this award and that the recipient awards to an eligible subrecipient."  See 2 C.F.R. § 176.30.  The definition specifically excludes “the recipient’s procurement of property and services needed to carry out the project or program.”  A subrecipient means a "non-Federal entity that expends Federal awards received from a pass-through entity to carry out a Federal program, but does not include an individual that is a beneficiary of such a program.  A subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency."  2 C.F.R. § 176.30.  This section refers to OMB Circular A133 to distinguish between a subrecipient and a vendor. A vendor is defined in OMB Circular A133 as "a dealer, distributor, merchant, or other seller providing goods or services that are required for the conduct of a Federal program. These goods or services may be for an organization's own use or for the use of beneficiaries of the Federal program." Based on the fact that the Special Terms and Conditions flow down to all subawards and the fact that a vendor is not a subawardee or subrecipient, the State is not required to flow down the Recovery Act's Special Terms and Conditions to vendors.  However, please note that the Recovery Act Special Terms and Conditions as well as the DOE Financial Assistance Rules each contain requirements that are applicable to contracts entered into by the State where the contractor is not to a vendor.

6.  Does the Department require the recipient to attach the three specific documents included in an award to a subgrant the recipient issues or is it permissible for the documents to be modified and consolidated into one document that includes only those provisions that are applicable to sub-recipients and eliminate provisions that are not applicable to the sub-recipients or that are redundant of other provisions?

Yes, the State may combine and reformat the requirements applicable to the individual subgrants under its DOE grants so long that in so doing it complies with its responsibilities prescribed by 10 C.F.R. § 600.240 to manage the day-to-day operations of the grant and subgrant supported activities, including monitoring grant and subgrant supported activities to assure compliance with applicable Federal requirements.  Please note, though, that certain terms and conditions are required to be included in their original wording in any consolidated document.  The question specifically mentioned the following documents:
 
The Certifications Regarding Lobbying; Debarment, Suspension and Other Responsibility Matters; And Drug-Free Workplace Requirements document.  This document is directed towards applicants for financial assistance rather than grantees or their subgrantees.  The certifications contained in this document are required to be completed in order to be considered for an award.  This exact document need not be included in each subgrant.  Note, however, that the lobbying section of the certification requires independent certification by the State’s subgrantees.  Paragraph 3 of this section ensures compliance with 31 U.S.C. § 1352 as set forth in DOE regulations in 10 C.F.R Part 601.  The certification required with a FOA response and the regulations at 10 C.F.R. §§ 601.100 and 601.110 require that the State include the exact language of the lobbying certification in all subgrants (at all tiers) issued under the State’s award. 

The National Policy Assurances document.  This document provides DOE assurance that the State, as recipient of a DOE grant, will comply with the enumerated requirements prescribed by statutes, executive orders, policy guidance, and regulation.  The State is required to comply with the listed policies that are applicable to its various awards.  Many of the enumerated policies and requirements require flow down to subgrantees and contractors.  As indicated in section V of this document, the State is responsible for including in any subgrants those requirements that apply to a particular subgrant based on the type of subgrantee organization and the situation surrounding the subgrant. 

The Subgrant Flow Down Provisions for WAP and SEP Awards document.  This document includes terms and conditions applicable to all DOE awards as well as addition terms required in award funded by the Recovery Act.  As stated in § A (p. 10) of the portion of the document falling under the heading “Special Provisions Relating to Work Funded Under American Recovery and Reinvestment Act of 2009” (p. 8), the special terms and conditions specific to Recovery Act awards must be included in any subgrant funded in whole or part by Recovery Act Funds.  Word-for-word flow down of the non-Recovery Act terms and conditions is not legally required.  Even so, certain of these terms are may impact subgrantees and, as stated above, a State is required to assure subgrantee compliance with all applicable terms and conditions.

7.  We are in the final stages of developing a solicitation targeted to businesses in our State that manufacture an energy efficiency product or a renewable energy product. The solicitation would allow them to apply for funding to demonstrate their product in an application in the State. (For your benefit, examples might be a wind turbine at a State Park or photovoltaic panels at a K-12 school location.) We have always worked on the assumption of the term "commercially available." However, we have been questioned if there is a definition of commercially available. We are assuming this would be a good guideline for our solicitation. Is there a definition of commercially available?

You have asked if there is a definition of "commercially available" to use for your solicitation for energy efficient or renewable energy products targeting Arizona businesses. We aren't aware of a generally accepted regulatory definition of that term, but there are some other definitions from federal procurement law that you may find useful for guidelines.
With regard to Federal procurements, the Federal Acquisition Regulation (FAR) provides definitions for Commercially available off-the-shelf (COTS) item and Commercial item at 48 C.F.R. 2.101, as follows:

Commercially available off-the-shelf (COTS) item--

(1) Means any item of supply (including construction material) that is--
 (i) A commercial item (as defined in paragraph (1) of the definition in this section);
 (ii) Sold in substantial quantities in the commercial marketplace; and
 (iii) Offered to the Government, under a contract or subcontract at any tier, without modification, in the same form in which it is sold in the commercial marketplace; and
(2) Does not include bulk cargo, as defined in section 3 of the Shipping Act of 1984 (46 U.S.C. App. 1702), such as agricultural products and petroleum products.

Commercial item means--

(1) Any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes, and--
    (i) Has been sold, leased, or licensed to the general public; or
    (ii) Has been offered for sale, lease, or license to the general public;
(2) Any item that evolved from an item described in paragraph (1) of this definition through advances in technology or performance and that is not yet available in the commercial marketplace, but will be available in the commercial marketplace in time to satisfy the delivery requirements under a Government solicitation;
(3) Any item that would satisfy a criterion expressed in paragraphs (1) or (2) of this definition, but for--
    (i) Modifications of a type customarily available in the commercial marketplace; or
    (ii) Minor modifications of a type not customarily available in the commercial marketplace made to meet Federal Government requirements. Minor modifications means modifications that do not significantly alter the nongovernmental function or essential physical characteristics of an item or component, or change the purpose of a process. Factors to be considered in determining whether a modification is minor include the value and size of the modification and the comparative value and size of the final product. Dollar values and percentages may be used as guideposts, but are not conclusive evidence that a modification is minor;
(4) Any combination of items meeting the requirements of paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;
(5) Installation services, maintenance services, repair services, training services, and other services if--
    (i) Such services are procured for support of an item referred to in paragraph (1), (2), (3), or (4) of this definition, regardless of whether such services are provided by the same source or at the same time as the item; and
    (ii) The source of such services provides similar services contemporaneously to the general public under terms and conditions similar to those offered to the Federal Government;
(6) Services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions. For purposes of these services--
    (i) Catalog price means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer or vendor, is either published or otherwise available for inspection by customers, and states prices at which sales are currently, or were last, made to a significant number of buyers constituting the general public; and
    (ii) Market prices means current prices that are established in the course of ordinary trade between buyers and sellers free to bargain and that can be substantiated through competition or from sources independent of the offerors.
(7) Any item, combination of items, or service referred to in paragraphs (1) through (6) of this definition, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or
(8) A nondevelopmental item, if the procuring agency determines the item was developed exclusively at private expense and sold in substantial quantities, on a competitive basis, to multiple State and local governments.

It is important to note that the FAR definition of a COTS item is much more narrow than Commercial item, insofar as by definition it only includes only paragraph (1) of the commercial item definition.  Although paragraph (1)(ii) of the "commercial item" definition includes items merely "offered for sale, lease, or license to the general public," paragraph (1)(ii) of the "COTS item" definition requires that an item actually have been sold in the commercial marketplace.  Accordingly, while agency selection decisions for some "commercial item" procurements have been challenged for contract awards to vendors whose commercial item(s) had never been sold to the public, in these instances the U.S. Government Accountability Office (GAO) has held that the definition of commercial item does not require that the item must have actually been sold to the public, but merely offered for sale to the public.  Conversely, regarding a solicitation that called for "commercially available" items, GAO held that the definition of COTS item did not require that the item be in current production in order to qualify as commercially available, because it had been sold to the general public in the past.  While Federal procurement law would not apply to your solicitation, in the absence of any other definition in the solicitation (or in state law or regulation), if your solicitation calls for "commercially available" items (and not commercial items), such a requirement could be interpreted to mean that only products already produced, sold, and in current use would satisfy your requirement.

Additionally, while these definitions are instructive, you should be aware that Federal agencies have nevertheless faced challenges to their determination that a requirement can or cannot be satisfied by procurement of a COTS or commercial item.  Businesses have challenged an agency determination when some level of design or customization will be required, for example, when installation of COTS software will require some configuration to be compatible with other software programs and/or the computer network infrastructure.  To the extent that time and/or cost for the overall project consists primarily of design and customization work rather than the provision of the COTS or commercial items, procurement as a COTS or commercial item would likely be inappropriate.  You should consider whether the contemplated projects you provided as examples, the wind turbine at a State park or photovoltaic panels at a K-12 school location, would require a fairly simple and routine standard installation or in fact require more complex, site-specific, and labor-intensive construction work.

8.  I have a question concerning DOE's interpretation of 10 Code of Federal Regulations Section 600.236.  Specifically, are subrecipients of Energy Efficiency and Conservation Block Grant (EECBG) funds subject to the requirements of Sections 600.236(b) through (i)?  I interpret Section 600.236 as providing that subrecipients of EECBG funds are, in the words of Section 600.236(a), "[o]ther grantess and subgrantees," and thus, are subject to the requirements found in Sections 600.236(b) through (i).  However, according to one of our program applicants, DOE has allegedly interpreted this provision as NOT requiring subrecipients of EECBG funds to comply with the requirements found in Sections 600.236(b)-(i).  Further, this program applicant reports that other States are not requiring subrecipients to comply with Sections 600.236(b)-(i) in their procurement procedures.

You asked whether subrecipients of Energy Efficiency and Conservation Block Grant (EECBG) funds are subject to the requirements of Sections 10 C.F.R. 600.236(b) through (i) and point out that DOE has not required all subrecipients to follow these sections. 

DOE's Financial Assistance Rules at 10 C.F.R. Part 600 are divided into five subparts.  Subparts B, C and D apply to various categories of recipients and subrecipients.  Subpart B applies to recipients and subrecipients that are Institutions of Higher Education, Hospitals, and other Nonprofit Organizations.  Subpart C applies to recipients and subrecipients that are State and Local governments. Subpart D applies to recipients and subrecipients that are For-Profit organizations.

The sections you are inquiring about, 10 C.F.R. 600.236(b) through 600.236(i) are in Subpart C, the subpart that applies to State and Local governments.  Thus, the requirements of 10 C.F.R. 600.236(b) through 600.236(i) only apply to recipients and subrecipients that are State and Local governments.  Accordingly, your State, as a recipient of EECBG funding, is governed by the regulations at 10 CFR 600.236(b) through 10 C.F.R. 600.236(i).  Your State's subrecipients that are state and local governments are also governed by the regulations at 10 C.F.R. 600.236 (b) through 600.236(i).

However, your State's subrecipient(s) that are not state or local governments are governed by the regulations in the subparts that correspond to their status.  This means that if the subrecipient(s) are Institutions of Higher Education, Hospitals and Other Nonprofit Organizations, those subrecpients are governed by the regulations in Subpart B, 10 C.F.R. 600.100 - 600.173 and the Appendix to Subpart B.  If the subrecipient(s) are For-Profit Organizations, those subrecipient(s) are governed by the regulations in Subpart D, 10 C.F.R. 600.300 through 10 C.F.R. 600.381 and the Appendices thereto. Only the subrecipients that are state and local governments are subject to the regulations in Subpart C, 10 C.F.R. 600.200 through 600-252.

Therefore, as you point out in your question, DOE would not require the application of 10 C.F.R. 600.236(b)-(i) for all subrecipients.

9.  This question relates to a SEP-funded loan program. Our State uses some of its SEP grant funds from DOE to fund Energy Conservation Assistance Account loans to local governments for energy efficiency projects. What procurement regulations apply in cases of loans, subgrants, or contracts awarded under our State's SEP grant? Our State law allows local governments to use non-competitive procedures in procuring energy conservation equipment. Does 10 CFR § 600.236 require use of a competitive process where State law would allow non-competitive procurements? Specifically, does 10 CFR § 600.236 apply to borrowers under the ECAA loan program, and what procurement provisions would apply to borrowers if 600.236 is not applicable? Finally, would the State be considered the "awarding agency" as the term is used in 10 C.F.R. § 600.236(d)(4)(i)(C) for purposes of approving a subawardee's request for non-competitive procurement? What DOE financial assistance rules regarding procurement should be referenced in contracts let by the State and its subgrantees under SEP and EEBCG awards?

SEP funding is issued to the States through awards of financial assistance. The State, as an SEP grantee, is subject to the DOE Financial Assistance Rules in 10 C.F.R. Part 600, Subparts A and C. There are three basic ways that a grantee may use its funding; through procurements, subgrants, or other authorized program purposes (e.g. a program-specific loan program).

As suggested in your question, a borrower receiving a loan authorized under, and funded by, the State's SEP award is not a subgrantee under 10 C.F.R. § 600.236. Therefore, the procurement standards set forth in 10 C.F.R. § 600.236(b) do not apply to local governments receiving these loans from the State. However, to the extent that the ECAA loans are funded in whole or in part by the American Recovery and Reinvestment Act, Pub. L. No. 111-5, the procurement-related provisions at 2 C.F.R. Part 176 apply, including the subparts addressing Buy American and Davis Bacon requirements. Loan programs that are authorized under the SEP are also governed by the terms of the SEP award.

10.  The document, titled "Subgrant Flow-Down Provisions for WAP and SEP" lists the following date: September 15, 2015 (Pages 9 and 12). In the latter reference is the following statement: "Funds appropriated under the Recovery Act and obligated to this award are available for reimbursement of costs until September 30, 2015." In earlier guidance documents, the dates of March 31, 2012 (WAP) and April 30, 2012 (SEP) has been viewed as the last date (subject to the standard 90 day close out period) for program financial activity. Can you explain the reference to 2015 in this document and what it means?

The source of the statements that funds are available for reimbursement until September 30, 2015, on pages 9 and 12 of the "Subgrant Flow Down Provisions for WAP and SEP Financial Assistance Awards" is the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA placed this time limit on the availability of funds on much of the money appropriated under the Act.

In light of the urgent economic situation facing the country, the Department of Energy decided to shorten the time that WAP and SEP funds were available for reimbursement in order to encourage recipients to put the funds to use quickly. Accordingly, DOE imposed shorter time limits for reimbursement of funds in the WAP and SEP programs. That is the reason for the different dates in the various guidance documents you have seen. 

11.  Related to facility efficiency retrofit projects (non-construction), what flow down requirements do States need to ensure sub-grantees and contractors follow as related to Disadvantaged Business Enterprises Utilization (DBE) for soliciting participation by the DBEs?

There are no specific flow down requirements related to DBE. However, DOE's financial assistance rules, at 10 CFR 600.236(e), state: "Contracting with small and minority firms, women's business enterprise and labor surplus area firms. (1) The grantee and subgrantee will take all necessary affirmative steps to assure that minority firms, women's business enterprises, and labor surplus area firms are used when possible." The "affirmative steps" grantees and subgrantees must take are listed in paragraphs (e)(2) (i) through (vi).

12.  Where can I find information on allowable costs for WAP program? I am looking specifically for allowable public relations costs. OMB Circular A - 87 states that costs of communicating with the public and press pertaining to specific activities or accomplishments which result from performance of Federal awards (these costs are considered necessary as part of the outreach effort for the Federal award) are allowable. But that costs of advertising and public relations designed solely to promote the governmental unit are unallowable. I would like to know if there is any specific guidance on this topic for the WAP program.

As you have seen, OMB Circular A-87, "Cost Principles for State, Local and Indian Tribal Governments," is supplemented by Appendices. Appendix B should be helpful to you because it defines the difference between advertising costs and public relation costs. Section 1, under "Selected Items of Costs," defines advertising costs as the costs of advertising media, such as magazines, newspapers, radio, television, direct mail, exhibits, electronic or computer transmittals, and corollary administration costs. Section 1 defines public relations to include community relations and means those activities dedicated to maintaining the image of the government unit or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public.

Appendix B then defines the allowable and unallowable advertising costs and public relations costs. One allowable advertising cost is the recruitment of personnel. One allowable public relations cost is the communication with the public and press over specific activities or accomplishments that resulted from the performance of the federal award.

Section f of this Appendix provides unallowable advertising and public relations costs. For example, the cost of meetings, conventions, convocations or other events related to other activities of the governmental unit are unallowable.

These guidelines should be helpful to you. However, if they do specifically address your situation, you may look to the cost principles in the Federal Acquisition Regulation at Part 31 for more guidance. Although these regulations govern procurements, they are very similar to the cost guidelines in OMB Circular A-87 and can be helpful as analogies.

FAR 31.603 provides unallowable costs for contracts with States, local and federally recognized Indian tribal governments. For example, it lists the costs incurred to influence legislative action on any matter pending before Congress, a State legislature, or a legislative body of a political subdivision of a State as unallowable. It also lists the costs of advertising designed to promote the contractor or its products as unallowable.

The Armed Service Board of Appeals (Board) has addressed specific advertising and public relation costs to determine if they are allowable or unallowable. In Group Hospitalization, Inc. and Medical Service of the District of Columbia, 83-1 C.P.D.¶ 16,524, the Board applied a broad approach in determining whether advertising costs were necessary and therefore allocable to the contract. The CO disallowed the allocated portion for mass media messages that the appellant characterized as concerning health, education, cost containment, and subscriber services on the basis that they constituted advertising costs, and therefore were specifically prohibited. The Board disagreed, holding that allowable advertising costs are "educational." Unallowable advertising costs are advertising costs that promote the contractor's business (sales).

If you have particular costs that you are concerned about, the grantee may consult with the Contracting Officer for the grant. He or she will follow OMB Circular A-87 and also is guided by the FAR. Ultimately, it is up to the Contracting Officer to determine if the costs are allowable or unallowable under those principles.

13.  Where can I find guidance on the procurement regulations provided at 10 C.F.R. § 600.236?

The GC Hotline has received many inquiries on the procurement regulations provided at 10 C.F.R. § 600.236. We have addressed each question individually, but wanted to provide general guidance on this regulation.

The Office of Energy Efficiency and Renewable Energy issued the following guidance which discusses the terms of 10 C.F.R. § 600.236: http://www1.eere.energy.gov/wip/pdfs/eecbg_procurement_guidance.pdf.

14.  What is the definition of "facility improvements" in terms of applying the requirements for bonding in 10 C.F.R. § 600.148(c) and do the bonding requirements of that regulation cover subrecipients? If so, is there a waiver process?

While there is no formal definition of "facility improvements" in DOE's regulations, when taken in context of 10 C.F.R. § 600.148(c), a facility improvement would be an enhancement, alteration or renovation to fixed equipment, i.e., equipment connected to a building structure, or to real property. Therefore, the bonding requirements in 10 C.F.R. § 600.148(c) would apply to construction or enhancements, alterations, or renovations to fixed equipment or real property.

If the subrecipient is a non-profit, it would be governed by subpart B and 10 C.F.R. § 600.148(c) for the bonding requirements. If the entity is a subrecipient and not a recipient, the entity reads the provision with the term "subrecipient" when "recipient" is used. This regulation states that, for contracts and subcontracts exceeding $100,000, DOE may accept the bonding policy and regulations of the recipient (subrecipient), if DOE has determined that the Federal Government's interest is adequately protected. If DOE has made this determination, the subrecipient would have to follow its own bonding requirement. If DOE has not made this determination, 10 C.F.R. 600.148(c)(1)-(4) provide the requirements for bonding. Other than that provision, there is no waiver procedure. 

15.  My company has been tentatively awarded a subaward by a state under its Recovery Act - funded DOE grant for the SEP Program. The purpose of the subaward is for the subrecipient to purchase certain equipment and install it in the subrecipient's existing plant in the state. The equipment will be used to manufacture flexible solar film for use in solar cells, which will be sold in the commercial marketplace.

10 CFR 600.321 provides that title to real property and equipment ("Property") acquired under a subaward generally vests in the subrecipient (subject to certain conditions) until funding for the project ceases or until the Property is no longer needed for the purposes of the project. Those conditions include using the Property for authorized purposes on the project, not encumbering the property without the Contracting Officer's approval, and requesting disposition instructions that generally will require reimbursing the Federal Government for its share of the then current fair market value of the Property

When the federal funding for the project ceases or the Property is no longer needed for the purposes of the project, the subrecipient must request disposition instructions unless the fair market value of equipment is less than $5000. The subrecipient must indicate in the request whether or not it wishes to retain title to the Property.

Disposition instructions are to inform the subrecipient if it should keep, sell, transfer, or return the Property. If the Property will be retained by the subrecipient or sold, the subrecipient is required to reimburse the Federal Government for its share of the then current fair market value of the p Property.

The project is scheduled to end on March 31, 2012. Since the solar film to be manufactured with the equipment will be a commercial item, it is anticipated that the majority of the customers for the film will be commercial companies. It is possible the Federal Government may purchase some of the solar film.

At what point will my company be required to reimburse the Federal Government for its share of the then current fair market value of the Property? Will it be when the Federal funding ceases (on or before March 31, 2012) or when the equipment is no longer needed make the solar film (i.e., when the Property is no longer needed for purposes of the project)?

If it is the latter period, will the restrictions and conditions on use of the Property in 10 CFR 600.321 continue to apply until disposal of the Property? 

As applicable to for-profit subawardees, DOE's Financial Assistance Regulations at 10 C.F.R. §§ 600.321-325 set forth the uniform standards for management, use, and disposition of equipment purchased with project funds by for-profit organizations. See 10 CFR § 600.301(b)(2). If your company purchases equipment with project funds, the equipment would not be subject to the property disposition requirements until the equipment is no longer needed for the original project or for other activities supported by a Federal agency. 10 CFR § 600.321(f). Under the SEP Program, the end of the award term does not trigger the property disposition requirements unless the end of the award term coincides with the determination that the equipment is no longer needed for purposes of the original project or for other activities supported by a Federal agency. In other words, your company may continue to use the equipment beyond the end of the award period without the obligation to reimburse the Federal Government its share of the fair market value so long as your organization continues to use the equipment for the purposes of the original project or for other activities supported by a Federal agency. Otherwise, your company must follow the property disposition requirements set forth in 10 CFR § 600.321(f) by which, if the fair market value of the equipment is $5,000 or greater at the time of disposition, your company may be required to reimburse the Federal Government for its share of the current fair market value.

If your company continues to use the equipment beyond the term of the award, the equipment must be managed and tracked consistent with the requirements set forth in 10 CFR § 600.321 until disposition of the property is required.

16.  If an EECBG State grantee draws down federal funds into a state account to create a loan loss reserve, and those funds are not expended until the loan is made (consistent with EECBG Program Guidance 09-002B), then would the State have to pay quarterly interest payments to DOE on the "advanced" funds consistent with 10 CFR 600.221(i)?

No, based on the Treasury and SEP regulations and EECBG program guidance interest earned from the time that loan loss reserve funds are advanced to the time they are contractually committed to support specific loans or portfolios of loans are treated as program income and rolled back into the fund, another approved, eligible activity, or returned to the federal government. 10 CFR 600.221(i) states "Unless there are statutory provisions to the contrary, grantees and subgrantees shall promptly, but at least quarterly, remit to the Federal agency interest earned on advances. The grantee or subgrantee may keep interest amounts up to $100 per year for administrative expenses." (emphasis added). In this case, Department of Treasury regulations at 31 CFR 205.15 and 205.25, SEP regulations at 10 CFR 420.18(d) and EECBG program guidance allows for the draw down of SEP and EECBG funds (for States not local governments or Indian tribes) for a RLF and interest earned on the RLF in advance of receipt of loan applications as long as the interest earned on the RLF will be rolled back into the RLF, used for another approved, eligible activity, or returned to the federal government.

31 CFR 205.15(c) states "a State does not incur an interest liability to the Federal government if a Federal statute requires the State to retain or use for Federal assistance program purposes the interest earned on Federal funds, notwithstanding any other provision in this section."

31 CFR 205.25(f) states "Revolving Loan Funds. (1) This part applies to any transfer of funds from the Federal Program Agency to the State for the Revolving Loan Fund. (2) This part does not apply to interest a State earns on Revolving Loan Funds when Federal Program Agency regulations require that all interest earned on invested funds be used for Federal assistance program purposes."

The Treasury regulations anticipate that RLFs could be drawn down in advance as long as the interest earned on the RLF is used for program purposes.

In addition, the SEP regulations at 10 CFR 420.18(d) states "the State may use loan repayments and any interest earned on the [RLF] funds only for activities which are consistent with this subpart and which are included in the State's approved SEP plan." Therefore, the SEP regulations anticipate that interest earned on RLFs is used for program purposes.

For purposes of this issue, DOE is treating RLFs and LLRs are similar instruments that should be treated the same with respect to handling interest.

The EECBG Program Guidance 09-002B was modeled on the Treasury and SEP regulations and states "Interest earned from the time that revolving loan funds are advanced to the time loans are made or from the time that loan loss reserve funds are advanced to the time they are contractually committed to support specific loans or portfolios of loans must be treated as program income and rolled back into the fund or another approved, eligible activity. However, if a grantee chooses not to roll interest earned back into the revolving loan fund or use it for another approved, eligible activity, then they must return it to the federal government. See 31 CFR 205.15 and 205.25; 10 CFR 420.18(d)" 

17.   When a loan is made through a revolving loan fund a certain percentage of the funds are transferred from a loan loss reserve account into the lender's escrow account as a loan loss reserve. Once the loan is paid off, the reserved funds are placed back into the reserve to await the closing of another loan. Is this program income?

The loan loss reserve funds that are placed back into a reserve after a loan closes is considered program income. According to 10 CFR 600.225(g)(2) "When authorized, program income may be added to the funds committed to the grant agreement by the Federal agency and the grantee. The program income shall be used for the purposes and under the conditions of the grant agreement." Therefore, in this situation, according to the EECBG program guidance 09-002B the loan loss reserve funds are subject to the terms and conditions of the original grant.

18.   Can a SEP grantee that is self-administering a revolving loan fund (RLF) capitalized with SEP funds use interest earned on the RLF and repayment of loans for administrative costs associated with administering the RLF?

If the grantee's SEP award agreement with DOE contains "Use of Program Income - Addition" as a term and condition of the award, then if the grantee earns program income during the project period as a result of the award, the grantee may add the program income to the funds committed to the award and use it to further eligible project objectives. Under 10 CFR 600.225(a) program income includes interest earned on the loan funds and loan repayments and 10 CFR 420.18(d) allows for a State to use loan repayments and any interest on the loan funds to pay administrative costs associated with those loans. However, you must check with your DOE Contracting Officer prior to using interest earned on the loan funds and loan repayments to be used for administrative expenses associated with the RLF.

19.  Do American Recovery and Reinvestment Act of 2009 (Recovery Act) requirements apply to energy efficiency improvement activities supported by a revolving loan fund that uses Recovery Act money and that is administered by a third party?

Yes, projects funded under the revolving loan program and for which the underlying loan relies on Recovery Act funds must comply with the applicable Recovery Act requirements.  Loans made under a revolving loan program funded through the State Energy Program using Recovery Act funds must be for activities that are eligible under the State Energy Program.  The recipient of Recovery Act funds from the Department of Energy, is responsible for ensuring that the Recovery Act requirements are met.  All loans made under a revolving loan fund program retain a federal nature.  Under the financial assistance regulations, loans are not subawards, and therefore the mechanism for passing the Recovery Act requirements down to the underlying project that is subject to the revolving loan fund program is not dictated by the financial assistance regulations.  It is for the recipient to determine how best to ensure compliance.

20.  If there is a potential revenue stream associated with an interest rate buy-down program, would that revenue stream be subject to program and ARRA requirements (including reporting)?

To the extent that the revenue is not generated directly by the grant-supported activity and the generation of revenue is not certain, a  potential revenue stream associated with an interest rate buy-down program would not be considered program income [10 C.F.R. 600.101 and 600.225(b)]. Because these funds are not considered program income, they are therefore not subject to program and ARRA requirements (including reporting).

21.  Can Recovery Act grant funds be reserved to be used for unemployment benefits for those term employees whose position will no longer be necessary after the expiration of the ARRA grant?  

ARRA grant funds may be reserved for unemployment benefits for employees only until the expiration date of the grant. 

As an example pertaining to your question, the Department has released an FAQ in the WAP closeout ARRA guidance. It states:

Q: Can Recovery Act funds be used after March 31, 2012 to make contributions to unemployment?

A: No, Recovery Act funds cannot be used after March 31, 2012 for this purpose or any other purpose. The only exception is minimal administrative costs that may be incurred within 90 days after the performance period end date for closeout and final reporting. WPN 12-3.  However, indirect costs incurred due to increased unemployment insurance will be negotiated with the Contract Officer and Contract Specialist during the next grant period. 

See http://www1.eere.energy.gov/wip/pdfs/wap_closeout_faqs.pdf.

Thus, ARRA grant funds may not be reserved for the purpose of unemployment benefits after the grant expires.  Please note that the above date of March 31, 2012 is used as an example, and may be different for each Grantee.

 

 


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