Section 872 Changes Affect Uniform Guidance; Call for Nonfederal Entity Integrity Review

August 7, 2015 | By Jerry Ashworth | Post a Comment

sandcastle-1253855After returning to the office this week after a week-long beach vacation, I had to hit the ground running to report on a July 22 Federal Register final guidance issued by the Office of Management and Budget about Section 872 of the Duncan Hunter National Defense Authorization Act of 2009. The final guidance requires federal agencies to take extensive measures to evaluate the integrity of nonfederal entities, affecting both pre-award and post-award processes. The act was previously directed toward contractors, particularly defense industry contractors, and has now become applicable to grants and cooperative agreements.

Of key interest to those who have spent the last year or so learning all the provisions in the uniform guidance is that the Section 872 guidance adds new provisions, and amends several others, within the uniform grant guidance, to incorporate federal review of both applicants and recipients based on integrity and prior performance. Not only has it expanded federal review, but also it added a new Appendix XII to the uniform guidance that outlines the terms and conditions for nonfederal entities to report on criminal, civil and other administrative proceedings, when applicable, as part of mandatory disclosures (§200.113).

The requirements from the Section 872 guidance on recipient integrity were immediately incorporated into the language of the uniform guidance as of July 30, but will become applicable Jan. 1, 2016. This will allow the federal government to migrate the Federal Awardee Performance and Integrity Information System (FAPIIS) and its associated website into SAM.gov, which requires time to implement. Additionally, federal awarding agencies that had formally adopted 2 C.F.R. 180 (on debarment and suspension) and 2 C.F.R. 200 (the uniform guidance) must update their policies and apply these provisions as of Jan. 1, 2016. Even though the applicability date is extended until January, nonfederal entities would greatly benefit from understanding the new and revised language in the uniform guidance.

Since I just returned from the beach, a couple of aspects of the new Section 872 guidance reminded me of sandcastles. With these new provisions in place, federal awarding agencies must update their policies and apply these provisions in January. This comes on the heels of  federal agencies updating their regulations to comply with the uniform guidance in the first place. It’s almost like building a sandcastle; once you have it built and looking the way you want it, a wave comes, and then you have to start over with the rebuilding. The Section 872 guidance is similar to that wave, causing agencies to update their policies yet again.

In addition, a new §200.205(a)(2) added to the uniform guidance as a result of the Section 872 guidance requires federal agencies to include a review of integrity information available in FAPIIS prior to making a federal award when the federal share is expected to exceed the $150,000 simplified acquisition threshold over the period of performance. Integrity information can include criminal, civil and administrative proceedings such as appeals hearings. Upon reviewing this information, a federal agency may make a determination that a nonfederal entity is unqualified to receive a federal award, which would be reported in FAPIIS for a five-year period.

This leads to my other reference to sandcastles. The integrity, or to be more specific, the structural integrity of a sandcastle is very weak. Likewise, the integrity of nonfederal entities with prior criminal or civil convictions or penalties in administrative proceedings also is weak. Nonfederal entities should take steps to assess their potential risks to bolster their integrity, and should be aware of the updated provisions in the uniform guidance and how they will affect their awards going forward.

Thompson’s grants publications will include several articles on the Section 872 final guidance.

Let us know your thoughts about the Section 872 final guidance. How will this affect your award programs?

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