[Federal Register Volume 73, Number 46 (Friday, March 7, 2008)]
[Proposed Rules]
[Pages 12341-12354]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-4009]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Part 95
RIN 0970-AC33
State Systems Advance Planning Document (APD) Process
AGENCY: Administration for Children and Families, HHS.
ACTION: Notice of Proposed Rulemaking.
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SUMMARY: The Advance Planning Document (APD) process governs the
procedure by which States obtain approval for Federal financial
participation in the cost of acquiring automated data processing
equipment and services. This NPRM reduces the submission requirements
for lower-risk information technology (IT) projects and procurements
and increases oversight over higher-risk IT projects and procurements
by making technical changes, conforming changes and substantive
revisions in the documentation required to be submitted by States,
counties, and territories for approval of their Information Technology
plans and acquisition documents.
DATES: Consideration will be given to comments received by May 6, 2008.
ADDRESSES: Send comments to: Office of Child Support Enforcement,
Administration for Children and Families, 370 L'Enfant Promenade, SW.,
4th floor, Washington, DC 20447. Attention: Director, Division of State
and Tribal Systems; Mail Stop: ACF/OCSE/DSTS 4th floor West. Comments
will be available for public inspection Monday through Friday from 8:30
a.m. to 5 p.m. on the 4th floor of the Department's offices at the
above address.
In addition, a copy of this regulation may be downloaded from
www.regulations.gov. You may transmit written comments electronically
via the Internet. To transmit comments electronically, via the Internet
go to http://regulations.acf.hhs.gov and follow any instructions
provided.
FOR FURTHER INFORMATION CONTACT: Robin Rushton, Director, Division of
State and Tribal Systems, Office of Child Support Enforcement, (202)
690-1244. E-mail: [email protected]. Do not e-mail comments on
the Proposed Rule to this address.
SUPPLEMENTARY INFORMATION:
I. Statutory Authority
This notice of proposed rulemaking (NPRM) is published under the
general authority of 5 U.S.C. 301, 42 U.S.C. 622(b), 629b(a), 652(a),
652(d) 654A, 671(a), 1302, and 1396a(a) of the Act. The notice of
proposed rulemaking is published under the authority granted to the
Secretary of the U.S. Department of Health and Human Services, (the
Secretary) by Section 1102 of the Social Security Act (the Act), 42
U.S.C. 1302. This section authorizes the Secretary to publish
regulations that may be necessary for the efficient administration of
the functions for which he is responsible under the Act.
II. Background
State public assistance agencies acquire automated data processing
(ADP) equipment and services for computer operations that support the
Child Support Enforcement, Medicaid, Child Welfare, Foster Care and
Adoption Assistance programs. Prior to the enactment of the Personal
Responsibility and Work Opportunity Act of 1996 (PRWORA), the Aid to
Families with Dependent Children (AFDC) and Job Opportunities and Basic
Skills (JOBS) programs were also covered by these rules. The references
to these programs are being deleted from the rules. Additionally, the
reference to the Office of Refugee Resettlement is no longer necessary,
since the State Legalization Impact Assistance Grants program, which
was subject to these regulations, was a time-limited program that has
expired. The Department of Health and Human Services (HHS) provides
national leadership and direction in planning, managing, and
coordinating the nationwide administration and financing of these
comprehensive State systems to support programs for children and
families--to
[[Page 12342]]
ensure that they are being operated as intended by law and regulation
and that the expenditure of Federal funds is made in accordance with
Federal regulation.
The APD process was designed to mitigate financial risks, avoid
incompatibilities among systems, and ensure that the system supports
the program goals and objectives.
The regulations at 45 CFR part 95 require the States to submit
three different types of documents for Federal approval. These three
types of documents are Implementation Advance Planning Documents (APD),
updates to these APDs, and acquisition documents.
Implementation Advance Planning Documents can include a statement
of needs and objectives; a requirements analysis, feasibility study, a
cost-benefit analysis; a statement of the alternatives considered; a
project management plan, a proposed budget, and prospective cost
allocations (if applicable). There are two major types of APD
submissions, planning and implementation, which are used at different
stages in the State development and acquisition process.
APD updates to the planning and implementation document are used to
keep the agency informed of the project status and to request funding
approval for the system development. There are two types of APD
Updates, an Annual APD Update and an As-needed APD Update. The As-
needed APD Update is required if there is a project cost increase of $1
million or more for regular funded projects and $100,000 or more for
enhanced funded projects, a schedule extension of major milestones of
more than 60 days, a significant change in the procurement approach, a
change in system concept or scope, or a change to the approved cost
allocation methodology.
Prior approval of Information Technology (IT) acquisition documents
is required. States, counties, and territories must request prior
approval of specific procurement documents related to IT system
projects that exceed defined cost parameters. Contracts and contract
amendments must be submitted to the Federal government for prior
approval. Failure to obtain prior approval results in denial of the
Federal match for that acquisition.
Need for Regulatory Revisions
The NPRM groups the discussion of the proposed revisions in the
following manner:
Part 1--Technical revisions that delete or update obsolete
references,
Part 2--Conforming revisions to regulations that
previously cross-referenced grant provisions in 45 CFR part 74, and
Part 3--New or modified revisions that eliminate or reduce
the documentation required to be submitted for Federal approval.
Technical revisions listed in part 1 of the Summary of Regulatory
Revisions are prompted in part by changes made by the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996, which
eliminated the JOBS program and replaced the AFDC program with a
Temporary Assistance for Needy Families (TANF) block grant that is not
subject to 45 CFR part 95. Other technical amendments are due to the
name change from Health Care Financing Administration to Centers for
Medicare & Medicaid Services.
The conforming revisions that are listed in part 2 were required by
the transfer of HHS entitlement programs from 45 CFR part 74 to part
92. The final rule relating to the transfer was published in the
Federal Register (68 FR 52843) and became effective on September 8,
2003. The affected programs must comply with part 95, which addresses
program-specific rules that large State public assistance programs must
follow. However, the current regulations at 45 CFR part 95 contain six
references to part 74 that must be updated.
Part 3 provides substantive revisions prompted by a variety of
studies and recommendations from a wide range of State, Federal and
private organizations over the last decade. They include the following
sources:
In March 1998, the U.S. General Accounting Office, now known as the
Government Accountability Office (GAO), and the Nelson A. Rockefeller
Institute of Government jointly established the GAO/Rockefeller
Institute Working Seminar on Social Program Information Systems. The
working seminar had about 30 members, including congressional staff,
Federal and State program and information technology managers, and
welfare researchers. The working seminar met eight times and discussed
how shifting human services landscape had transformed States automated
systems needs. The three key challenges identified by participants at
this conference were: (1) Simplifying the approval process for
obtaining Federal funding for information systems, (2) enhancing
strategic collaboration among different levels of government and (3)
obtaining staff expertise in project management and information
technology.
On July 9, 2002, the Subcommittee on Technology and Procurement
Policy, House Government Reform Committee, held a congressional hearing
on State and Local Information Technology Management. The hearing
included testimony from State and Federal IT officials, the National
Association of State Information Resource Executives (NASIRE),
representatives from the IT vendor community, and GAO.
The National Association of State Chief Information Officers
(NASCIO) and the American Public Human Services Association (APHSA)
have also been actively involved in this issue and submitted proposals
on how to reform the Federal oversight of State IT projects and
procurement approval process.
In 2002, GAO reviewed the statutory and regulatory requirements for
Federal approval and funding of State IT development and acquisition
projects. The review examined how Agency processes for reviewing,
approving, and funding State IT development acquisition projects for
these programs hinder or delay States' efforts to obtain approval for
these projects, and how Food and Nutrition Service (FNS), ACF and
Centers for Medicare & Medicaid Services (CMS) ensure that they
consistently apply the OMB Circular A-87 to fund IT development and
acquisition projects. The GAO found that in fiscal years 2000 and 2001
States had submitted 866 planning and acquisition documents.
In their analysis of these submissions, GAO determined that 92 to
96 percent of the State requests submitted to child support
enforcement, child welfare, and CMS were responded to within the
required 60 days but only 74 percent of the State requests involving
multiple programs were responded to within the 60 days.
The Office of Management and Budget (OMB) has also raised concerns
about the information paperwork burden imposed on States by the APD
prior approval process. Normally the renewal of the OMB Information
Collection authority is granted for a three-year period, but in 2003
and 2004 OMB limited the renewal to one year increments and has asked
to be kept informed of the Agencies' efforts to reduce or streamline
the APD process. In April 2005, OMB approved the current APD process
for an additional three years based partially on the progress that has
been made on this reform effort.
The revisions to the regulations in Part 3 are designed to address
the concerns of States and other parties that the APD regulations have
not kept pace with advances in technology by redefining submission
requirements to be based on risk, to develop risk criteria
[[Page 12343]]
other than just financial, and to revise the submission thresholds so
they are based on the type of services or, in the case of acquisition
documents, the risk associated with the type of procurement. For
example, a project that has been developed and implemented and is
currently in Operations and Software Maintenance mode is inherently
less risky than a project in planning or implementation of new software
application development. A procurement of IT hardware services involves
less risk than a procurement of new software application development.
Sole source procurement involves higher risk than a competitive
procurement for the same IT services. The exercise of an option year on
a multi-year contract involves less risk and needs less oversight than
a contract amendment. A contract amendment that is within the initial
scope and within a certain percentage of the costs associated with the
base contract involves less risk than a contract that exceeds the scope
of the original contract or substantially exceeds the initial contract
amount.
These proposed regulations are intended to be consistent with OMB
Circular A-87. However, if there is any inconsistency between the
provisions and OMB A-87, the OMB A-87 would take precedent.
III. Summary of Regulatory Revisions
Part 1--Technical Updates
Many of the proposed revisions simply update terminology, such as
replacing ``Health Care Financing Administration (HCFA)'' with
``Centers for Medicare & Medicaid Services (CMS),'' or deleting
references to AFDC and JOBS. These revisions include:
Section 95.4 Definitions--delete references to obsolete
``Office of Human Development Services'' and to the ``Office of Child
Support Enforcement'' and replace with ``Administration for Children
and Families.''
Section 95.31 Waiver for good cause--update names of
components. Update reference from Health Care Financing Administration
to ``.'' Delete references to ``Office of Human Development Services'',
``Social Security Administration'', ``Office of Refugee Resettlement''
and ``Office of Child Support Enforcement'' and replace with
``Administration for Children and Families.''
Section 95.505 Definition of Operating Division--update
references to obsolete ``Office of Human Development Services'' and
replace with ``Administration for Children and Families.''
Section 95.601 Scope and applicability--eliminate title
IV-A, and title IV chapter 2 of the Immigration and Nationality Act as
these programs are no longer subject to subpart F.
Section 95.605 Definitions--replace the definition of
``Advance Planning Document'' in all its permutations with
``Information Technology Document.'' Therefore, ``Planning Advance
Planning Document'' is now called ``Planning Information Technology
Document''; the ``Implementation Advance Planning Document'' is now
called ``Implementation Information Technology Document''; the ``Annual
and As-Needed Advance Planning Document Updates'' are now called
``Annual and As-Needed Information Technology Document Updates.''
(These new terms now are addressed in a separate regulatory section,
rather than in the Definitions section.) This change is proposed for
the purpose of consistency with terminology used in the State approval
process for information technology services and also to avoid any
confusion with the abbreviation, ADP, which refers to Automated Data
Processing.
Section 95.605 Definition of Automated Data Processing--
replace the word ``Automatic'' with ``Automated,'' so the phrase reads
``Automated Data Processing.'' The definition of ADP does not change.
Section 95.605 Definition of Approving components--revise
references in definition of approving components to remove obsolete
terms.
Section 95.605 Definition of Project--revise to eliminate
reference to ``AFDC.''
Section 95.611(a)(3) Prior approval conditions--no change
in intent, but reword section for better clarity.
Section 95.611(a)(4) Prior approval conditions--replace
reference to ``Office of State Systems'' with ``Department's Secretary
and his/her designee,'' and clarify how many copies should be sent to
which offices.
Section 95.611(a)(5) Prior approval conditions, request
submission--explain that requests that affect the program of only one
entity (CMS, OCSE, Children's Bureau) should be sent to that applicable
entity's office and regional office.
Section 95.611(a)(6) Prior approval conditions,
Information prior to approval--replace the term ``APD'' with ``ITD''
and refer to the new section on the submission of the ITD.
Sections 95.611(b)(1)(i), (b)(1)(ii), (b)(2)(i), and
(b)(2)(ii) Prior approval conditions, Specific prior approval
requirements--replace the term ``APD'' with ``ITD.''
Section 95.611(b)(1)(iii) Prior approval conditions,
Specific prior approval requirements--replace the terminology ``RFP''
with the broader term, ``acquisition solicitation documents,'' and move
last sentence to a separate section. Delete language from paragraph
(iii) and (iv) related to the threshold amounts for submitting
acquisition documents and move to new Sec. 95.611(b)(1)(v).
Section 95.611(c)(2)(ii)(B) Prior approval conditions,
Specific approval requirements--eliminate the ``AFDC'' reference.
Section 95.611 (c)(2)(ii)(B) Disallowance of Federal
Financial participation (FFP)--delete reference to suspension of APD
for enhanced funding for AFDC, which is no longer applicable now that
the AFDC program has been replaced with TANF, a block grant.
Section 95.621(e)(2) ADP review, service agreement--delete
all of paragraph (2) as it is no longer applicable.
Section 95.612 Disallowance of Federal Financial
Participation (FFP)--update terminology: ``advance planning document''
is changed to ``information technology document''; ``APD'' is changed
to ``ITD''. Revise the last sentence of 95.612 related to suspension of
approval of an APD to update the citations under child support and
child welfare regulations related to enhanced funding for systems.
Eliminate the reference to 45 CFR 205.37(c), which is no longer
applicable because TANF systems are funded through a block grant and no
longer subject to the Part 95. Eliminate the child support reference to
45 CFR 307.35(d), which is no longer valid. Add a reference to 45 CFR
1355.56, to reflect the authority under the child welfare regulations.
Section 95.623 Waiver of prior approval requirements--
remove the provisions of this section on waiver of prior approval
requirements, which referred to a situation occurring prior to December
1, 1985. Create a new Sec. 95.623 related to reconsideration of denied
FFP for failure to obtain prior approval, described in Part 3 of this
preamble summary of regulatory revisions.
Section 95.631 Cost identification for purpose of FFP
claims--replace the term ``APD'' with ``ITD.''
Section 95.641 Applicability of rules for charging
equipment in Subpart G of this part--In the final sentence, replace the
term ``APD'' with ``ITD.''
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Part 2--Conforming Amendments
These proposed changes reflect transfer of HHS grant authority from
45 CFR part 74 to part 92. Specifically:
Section 95.605 Definition of Service agreement--in Sec.
95.605(f) eliminate the phrase ``and requires the provider to comply
with 45 CFR part 74 Subpart P for procurements related to service
agreement.'' Subpart P was eliminated in 1996. This notice of proposed
rulemaking revises the reference to make service agreements subject to
45 CFR 95.613.
Section 95.613 Procurement standards--revise to
incorporate much of the procurement language currently in 45 CFR part
74. Maintain the long-standing procurement standards for State
information technology contracts, specifically for the definition of
sole source justification, requiring all procurement transactions to be
conducted in a manner to provide, to the maximum extent practical, open
and free competition. Address grantee responsibilities, codes of
conduct, competition, procurement procedures, and access to records.
Section 95.615 Access to systems and records--eliminate
the reference to 45 CFR part 74.
Section 95.621(d) ADP reviews (authority to conduct
reviews on procurements under the submission threshold)--eliminate the
phrase ``were made in accordance with 45 CFR part 74.'' This notice of
proposed rulemaking would replace reference to 45 CFR part 74 with 45
CFR 95.613.
Section 95.705 Equipment costs--FFP, General rule--
eliminate the references to cost principles in subpart Q of 45 CFR part
74. Substitutes the cost principles in 45 CFR part 92.
Section 95.707 Equipment management and disposition--
eliminate the reference to the property rules in subpart O of 45 CFR
part 74. Substitutes the property rules in 45 CFR part 92.32.
Part 3--Revisions to the Current Requirements and New Regulatory
Provisions Designed To Reduce the Amount of Federal Oversight and
Monitoring Based on Risk
Section 95.605 Definitions--
We add new definitions for Acquisition checklist, Alternative
Approach to IT requirements, Base contract, Commercial off the shelf
software (COTS), Grantee, Noncompetitive, Service Oriented
Architecture, and Software maintenance, which are necessitated by
proposed revisions to Sec. Sec. 95.610 and 95.611.
The revision in 95.611(b)(1)(iii) to permit exemption from prior
approval of certain acquisition solicitation documents requires a
definition of Acquisition checklist, which can be utilized in lieu of
State's submittal of a competitive RFP. The revisions in Sec.
95.611(a) and Sec. 95.611(b)(1)(v)(B) to base submission thresholds on
the type of information technology services requires a definition of
Software maintenance and COTS software.
The revision to Sec. 95.611(b)(1)(iv) to exempt contract
amendments that cumulatively do not exceed 20 percent of the base
contract requires a definition of Base contract.
The elimination of the cross reference to Part 74 in Sec. 95.613
procurement standards requires a definition of Noncompetitive
acquisitions.
The creation of a new section Sec. 95.610(c)(3) on Operations and
Software Maintenance ITDU requires a definition of Software
maintenance.
Section 95.610 New section on Advance Planning Document
requirements--
Under the current regulations, the requirements of the Advance
Planning Document, including Annual and As-Needed Updates, are
contained in the Definition section, Sec. 95.605. This notice of
proposed rulemaking would move this regulatory authority to a newly
created section, Sec. 95.610, specifying the requirements for
Planning, Implementation, Annual and As-Needed Information Technology
Documents. In addition to moving the language on Advance Planning
Documents from the definitions in Sec. 95.605 to its own new section,
there is a global change to replace Advance Planning Document with
Information Technology Document, throughout the regulation. This change
is proposed to make the terminology more consistent with the
terminology used in the State Information Technology approval process.
Almost all States called their similar State approval process,
Information Technology review or Information Systems approval. No State
or territory had an approval process called APD approval. In addition,
the States indicated that APD was often confused with ADP or Automated
Data Processing. Therefore, this notice of proposed rulemaking amends
every section to replace the term ``Advance Planning'' with the term
``Information Technology.''
We propose to change ``Planning Advance Planning Document (PAPD)''
at Sec. 95.605 under Advance Planning Document (1) to a ``Planning
Information Technology Document (PITD)'' at Sec. 95.610(a).
We proposed to change ``Implementation Advance Planning Document
(IAPD)'' at Sec. 95.605 under Advance Planning Document (2) to an
``Implementation Information Technology Document (IITD)'' at Sec.
95.610(b). We propose to insert the phrase ``the use of service
oriented architecture'' into the description of a Feasibility Study to
reflect Information Memorandum 05-04 which clarified that States and
Territories are free to consider, along with new application
development and system transfer, the use of service oriented
architecture software in the development of automated human services
systems.
We propose to change ``Annual Advance Planning Document Update
(AAPDU)'' at Sec. 95.605 under Advance Planning Document (3)(a) to an
``Annual Information Technology Document Update (AITDU)'' at Sec.
95.610(c)(1).
We propose to change ``As-Needed Advance Planning Document Update
(AN-APDU)'' at Sec. 95.605(3)(b) under Advance Planning Document to
``As-Needed Information Technology Document Update (AN-ITDU)'' at Sec.
95.610(3)(c)(2).
This notice of proposed rulemaking would transfer the requirements
for Information Technology Document Updates (ITDU) from the definitions
section and create a new Sec. 95.610(c) that provides the requirements
for ITD Updates. In keeping with the intent to base the degree of
Federal oversight on the risk of the IT services, we propose to
establish a new type of Annual Information Technology Document Update
for Operations and Software Maintenance (O&SM). Instead of the detail
required in an Annual or As-Needed ITD, if the project has transitioned
to Operations and Software Maintenance mode with no system development,
then the lower risk justifies a reduced level of Federal oversight and
the requirements for submission would be limited to an annual report of
as few as two pages, depending on the scope of the activities, which
includes a summary of O&SM activities, acquisitions, and budget. This
limited information is required to authorize funding in the
Department's financial system and track activities that may be of
interest to other states or entities. This limited annual submission
will also allow the identification of potential problems that could
have an impact on the funding a state receives.
This NPRM proposes under Sec. 95.610(c)(1)(viii) to amend current
requirements for an annual report on cost benefits in the Annual ITD
update and to change the requirement for an annual cost benefit
analysis report. The
[[Page 12345]]
current regulations under Advance Planning Document Update at Sec.
95.605(3)(a)(vii) require the submittal of an annual cost benefit
analysis update. This notice of proposed rulemaking revises the
requirements of an Annual ITD Update to eliminate the need for an
annual cost benefit analysis report to be provided in the annual ITD
update report. Consistent with other provisions designed to focus on
high risk IT projects and procurements, we believe that the Independent
Validation and Verification requirements in Sec. 95.626 and
disallowance of FFP provisions in Sec. 95.612 provide the needed
information and authority to encourage States to select the most cost
effective methods for automating a program requirement. Nevertheless,
we also propose to revise the requirements of the Annual ITD Update to
require a close-out cost benefit report to be submitted no later than
two years after full implementation and at three-year intervals until
the cost benefit is achieved.
Section 95.611 Prior approval conditions--
We propose adding a sentence to Sec. 95.611(a)(1), General
acquisition requirements, to clarify that acquisitions that are limited
to only operations and software maintenance are exempt from prior
approval.
This notice of proposed rulemaking would revise the language in
Sec. 95.611(b)(1)(iii) to make the technical amendments noted in Part
I of this preamble. The current regulations at Sec. 95.611(b)(1)(iii)
contain language that requires Requests for Proposals (RFPs) and
contracts to be submitted for prior approval, unless ``specifically
exempted by the Department.'' However, during discussions with State
systems representatives in 2003 and 2004, the State staff stated that
this exemption authority is not well publicized, and different analysts
in the different Federal programs often had different and sometimes
conflicting interpretations of those requirements. Therefore, the
agencies subject to 45 CFR part 95 and the Food and Nutrition Service,
which has separate regulations regarding the Food Stamp automation,
jointly developed an acquisition checklist that would standardize the
type of information that needs to be submitted by the States seeking an
exemption from prior approval of the RFP. While Sec. 95.611(b)(1)(iii)
retains authority for exemption from prior approval for contracts and
contract amendments, the workgroup agreed to limit the initial use of
the checklist to a competitively procured Request for Proposal (RFP) or
Invitation for Bid (IFB). This acquisition checklist enables the States
to self-certify that they are in compliance with the Federal and State
procurement requirements. The States retain the option of submitting
the RFP or IFB to the Federal government for Federal review, analysis
and prior approval. The information in the acquisition checklist in
Information Memorandum 05-03 dated May 2, 2005, provides the Federal
agency with essential information including the type of the
procurement, estimated cost, and the competitive nature of the
procurement, and the time frame for vendors to respond to the
solicitation.
Although Sec. 95.611 already provides the Federal agencies with
discretion to exempt a RFP, contract or contract amendment from prior
approval, we propose to add a new definition of ``Acquisition
checklist'' to the definitions in Sec. 95.605. Furthermore, we propose
to modify Sec. 95.611 to improve clarity and to move the last sentence
about submission of acquisition documents under the submission
threshold in Sec. 95.611(b)(1)(iii) to a new Sec. 95.611(b)(1)(v) to
clarify that this provision applies to all acquisitions not otherwise
subject to prior approval.
We propose to amend Sec. 95.611(a)(1), General acquisition
requirements, to eliminate the need to submit competitive acquisitions
for Operations and Software Maintenance RFPs, contracts and contract
amendments.
Current regulations at Sec. 95.611(b)(1) base submission
thresholds for IT acquisitions on only one risk category, the size of
the acquisition, regardless of the type of IT service being acquired.
This notice of proposed rulemaking would establish different dollar
submission thresholds based on the different types of competitive
procurements. The threshold in the current regulation is $5 million for
all types of acquisitions, and the proposed change would retain the $5
million threshold for software application development, which continues
to be the highest risk type. However it would establish a $20 million
threshold for hardware procurements and eliminate the requirement that
competitively procured contracts limited to Operations and Software
Maintenance be submitted for prior approval. If the procurement
combines different types of activities, for example, hardware
acquisition with software application development, then the lower
threshold applies.
In addition, the current requirement for submission of contract
amendments for prior Federal approval is $1,000,000. We propose to
amend Sec. 95.611(b)(1)(vi) to permit contract amendments to a
competitively procured contract that do not exceed 20 percent of the
base contract and are within the scope of the initial contract to be
exempt from prior approval and sole source justification. We propose to
add a new definition of ``Base contract'' to Sec. 95.605. A Base
contract is defined as the initial contract activity that is allowed
during a defined period of time. The base contract does include option
years but does not include amendments. This flexibility of 20 percent
over the base contract applies to all types of IT services being
procured such as hardware, software application development, additional
Commercial off the Shelf (COTS) software licenses, but does not extend
to situations where the amendment expands the scope of the contract nor
does it permit a fragmentation of the amendments to circumvent the
percentage threshold. The 20 percent over base contract is a cumulative
amount. Whenever the cumulative amount of contract amendments exceeds
20 percent of the base contract, then we propose that submission to the
Federal agency for prior approval is required. As specified earlier,
competitively procured O&M contracts and contract amendments are
exempted from prior approval.
We propose to amend Sec. 95.611(b)(2)(iii) and (iv) to increase
prior submission acquisition requirements for enhanced funded projects
for RFPs, contracts, and contract amendments from $100,000 to $300,000.
Section 95.611(c)(2) regarding enhanced funded As-Needed, would be
changed from the current $100,000 submission threshold to $300,000.
We propose to amend Sec. 96.611(c), Specific approval requirements
for enhanced funded projects, the threshold for submitting an As-Needed
APD Update, by raising the threshold from $100,000 to $300,000.
Both Sec. 95.611(b)(1)(iii) Request for Proposal and Contract and
Sec. 95.611(b)(iv) Contract Amendments of the current regulations
contain language that requires the State to submit RFP, contract and
contract amendments under these threshold amounts on an exception basis
or if the acquisition strategy is not adequately described and
justified in an ITD. This NPRM proposes a new regulatory section to
specify that this authority addresses not just acquisitions under the
threshold, but ITD submissions including the new Operations and
Software Maintenance ITDU. States will be required to submit
acquisition documents, and ITDUs that were otherwise under the
submission threshold amount if requested to do so in writing by the
Department.
[[Page 12346]]
Section 95.623 New Section on Reconsideration of denied
FFP for failure to obtain plan approval--
Section 95.623, waiver of prior approval requirements, of the
current regulations is limited to situations prior to December 1, 1985.
We propose deleting this language and replacing it with new regulatory
language that specifies the conditions for requesting reconsideration
of FFP denial for failure to request prior approval. This codifies in
regulation, the process and procedure that was outlined in Action
Transmittal OSSP-00-01 dated March 13, 2000. Under proposed Sec.
95.623, for ADP equipment and services acquired by a State without
prior written approval, the Department may waive the prior approval
requirement if the State requests reconsideration of a denial by
request to the head of the grantor agency within 30 days of the initial
written disallowance determination.
Section 95.626 New Section on Independent Validation and
Verification--
This notice of proposed rulemaking would also create a new Sec.
95.626 to require Independent Validation and Verification (IV&V)
Services for certain ITD projects. This regulatory provision is derived
from existing authority and language in 45 CFR 307.15(b)(10) of the
child support automation regulations. In addition to Sec.
307.15(b)(10), other Federal programs have required IV&V services for
troubled ITD projects based on the authority granted to them under 45
CFR 92.12.
Section 95.627 New Section on waiver authority--
This notice of proposed rulemaking would create a new Sec. 95.627
that permits a waiver of any ITD requirement in 45 CFR part 95 by
presenting an alternative approach. This authority currently exists in
the child support automation regulations in 45 CFR 307.5(b) and is
intended to give the Secretary increased authority to grant waivers of
ITD and acquisition prior approvals beyond the authority specified in
part 95.
Under the proposed rule, a State may apply for a waiver of any
requirement in 45 CFR Subpart F by presenting an alternative approach.
Waiver requests must be submitted and approved as part of a State's ITD
or ITD Update. The Secretary may grant a State a waiver if the State
demonstrates that it has an alternative approach to a requirement in
this chapter that will safeguard the State and Federal governments'
interest and that enables the State to be in substantial compliance
with the other requirements of this chapter.
Under this proposed new section, the State's requests for approval
of an alternative approach or waiver of a requirement in this chapter
must demonstrate why meeting the condition is unnecessary, diminishes
the State's ability to meet program requirements, or that the
alternative approach leads to a more efficient, economical, and
effective administration of the programs for which federal financial
participation is provided, benefiting both the State and Federal
Governments.
The Secretary, or his or her designee, will review waiver requests
to assure that all necessary information is provided, that all
processes provide for effective economical and effective program
operation, and that the conditions for waiver in this section are met.
When a waiver is approved by an agency, it becomes part of the State's
approved ITD and is applicable to the approving agency. A waiver is
subject to the ITD suspension provisions in Sec. 95.611(c)(3). When a
waiver is disapproved, the entire ITD will be disapproved. The ITD
disapproval is a final administrative decision and is not subject to
administrative appeal.
Section 95.635 New Section on Disallowance of Federal
Financial participation in automated systems that fail to comply
substantially with program regulations--
We propose to create a new section that permits the Federal agency
to disallow all or part of any costs in systems projects that fail to
comply substantially with applicable regulations for the applicable
programs.
IV. Impact Analysis
Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), HHS
is required to submit to the Office of Management and Budget (OMB) for
review and approval any reporting or record keeping requirements in a
proposed or final rule. In April 2005, OMB approved the current APD
process for three years based partially on the progress that has been
made on this reform effort. The proposed revisions in this NPRM to the
requirements at 45 CFR part 95 reduce the documentation required to be
submitted by States and territories to the Federal government. The
current information collection burden, before this proposed rule is
implemented is as follows:
----------------------------------------------------------------------------------------------------------------
Estimated Proposed
Instrument number of frequency of Average burden Total annual
respondents response per response burden
----------------------------------------------------------------------------------------------------------------
Advance Planning Document..................... 50 1.84 60 5,520
RFP and Contract.............................. 50 1.54 1.5 115.5
Emergency Funding Request..................... 27 1 1 27
Service Agreements............................ 14 1 1 14
Biennial Security reports..................... 50 1 1.5 75
----------------------------------------------------------------------------------------------------------------
The NPRM will result in the following reductions:
In Advance Planning Documents--a reduction in the average burden
hours for projects that are implemented and in Operations and Software
Maintenance mode. Instead of having to submit a full Annual or As-
Needed ITDU, States with projects in maintenance and operation mode
will only have to submit a one- to two-page document. The Department
also plans to develop a process for the states to submit this O&SM IT
document update electronically. Since the majority of States and
territories appear to be continuing to do ongoing software enhancements
as part of continuing performance, we are estimating only a small
reduction in the average burden hours associated with reducing the
documentation required for annual O&SM IT submissions. We estimate a
reduction from 60 hours to 58 or 5,336 total burden hours for
information technology Documents. The proposal to require a close-out
cost benefit report also is factored into this net burden reduction.
In RFP and contracts--a reduction is made in the average burden
hours per RFP due to several revisions including: An increased use of
the Acquisition Checklist, an elimination of maintenance and operation
RFPs, higher submission thresholds for contracts and contract
amendments, elimination of the need to submit hardware and commercial
software acquisition documents under $20 million if
[[Page 12347]]
competitively procured and an elimination of the need to submit
contract amendments if within scope and cumulatively the amendments do
not exceed 20 percent of the base contract. We believe that this will
reduce the average frequency of responses by half, from 1.54 to .75 and
reduce the total burden hours to 56.25 hours.
The revised annual burden estimates based on this NPRM is as
follows:
----------------------------------------------------------------------------------------------------------------
Estimated Proposed
Instrument number of frequency of Average burden Total annual
respondents response per response burden
----------------------------------------------------------------------------------------------------------------
Advance Planning Document...................... 50 1.84 58 5,336
RFP and Contract............................... 50 .75 1.5 56.25
Emergency Funding Request...................... 27 1 1 27
Service Agreements............................. 14 1 1 14
Biennial Security reports...................... 50 1 1.5 75
----------------------------------------------------------------------------------------------------------------
The respondents affected by this information collection are State
agencies and territories.
The Department will consider comments by the public on this
proposed collection of information in the following areas:
Evaluating whether the proposed collection activity is
necessary for the proper performance and function of the Department,
including whether the information will have a practical utility;
Evaluating the accuracy of the Department's estimate of
the burden of the proposed collections of information, including the
validity of the methodology and assumptions used,
Enhancing the quality, usefulness, and clarity of the
information to be collected; and
Minimizing the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical or other technology, e.g. permitting
electronic submission of responses.
OMB is required to make a decision concerning the collection of
information contained in these proposed regulations between 30 and 60
days after publication of this document in the Federal Register.
Therefore, a comment is best assured of having its full effect if OMB
receives it within 30 days of publication. This does not affect the
deadline for the public to comment to the Department of the proposed
regulations. Written comments may be sent to OMB for the proposed
information collection either by FAX to 202 395-6974 or by e-mail to
[email protected]. Please mark all comments ``Attn: Desk
Officer for ACF.''
We are submitting this information collection to OMB for approval.
Copies of the proposed collection may be obtained by writing to the
Administration for Children and Families, Office of Administration,
Office of Information Services, 370 L'Enfant Promenade, SW.,
Washington, DC 20447 ATTN: ACF Reports Clearance Officer. All requests
should be identified by the title of the information collection. The e-
mail address is [email protected].
Regulatory Flexibility Analysis
The Secretary certifies, under 5 U.S.C. 605(b), as enacted by the
Regulatory Flexibility Act (Pub. L. 96-354), that this rule will not
result in a significant impact on a substantial number of small
entities. The primary impact is on State and Territorial governments.
State and Territorial governments are not considered small entities
under the Act. The intent of these proposed rules is to reduce the
submission requirements for lower-risk information technology (IT)
projects and procurements and increase oversight over higher-risk IT
projects and procurements by making technical changes, conforming
changes and substantive revisions in the documentation required to be
submitted by States, counties, and territories for approval of their
Information Technology plans and acquisition documents.
Regulatory Impact Analysis
Executive Order 12866 requires that regulations be reviewed to
ensure that they are consistent with the priorities and principles set
forth in the Executive Order. The Department has determined that this
proposed rule is consistent with these priorities and principles. Since
it significantly reduces the documentation required to be submitted by
the States and Territories related to lower risk Information Technology
projects and procurement, costs are reduced. Examples of documentation
that is no longer required to be submitted for prior approval under
this proposed rule are competitive hardware acquisitions under $20
million instead of the current $5 million threshold and instead of
having to submit a full annual or As-Needed ITDU, States with projects
in maintenance and operation mode will only have to submit a document
with as few as 2 pages, depending on the scope of activities. The
current information collection burden is reduced to reflect these
reduced costs to States and Territories. To estimate the savings we are
utilizing the same methodology and State and contractor average annual
rate as we recommend to the States to use for their costs estimates in
our Planning Advance Planning Document training. In those training
documents we recommend an average standard hourly rate of $100 for
state systems staff and $175 for contractor state staff. So the
reduction of 59.25 hours for APD's would translate to a cost savings of
$5,925 for State staff or $10,368, if the RFP is prepared by a Quality
Assurance contractor. The reduction of 184 hours for submission of
RFP's would translate to a cost savings of $18,400 if prepared by State
staff and $32,000 if prepared by contractor staff. So the estimate of
cost savings related to the reduction in information collection budget
would be $24,325 to $49,493.
Assessment of Federal Regulations and Policies on Families
Section 654 of the Treasury and General Government Appropriations
Act of 1999 requires Federal agencies to determine whether a proposed
policy or regulation may affect family well-being. If the agency's
determination is affirmative, then the agency must prepare an impact
assessment addressing seven criteria specified in the law. These
regulations will not have an impact on family well-being as defined in
the legislation.
Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that a covered agency prepare a budgetary impact statement before
promulgating a rule that includes any Federal mandate that may result
in the expenditure by State, local, and Tribal governments in the
aggregate, or by the private sector, of $100 million adjusted for
inflation, or more in any one year.
[[Page 12348]]
If a covered agency must prepare a budgetary impact statement,
section 205 further requires that it select the most cost-effective and
least burdensome alternative that achieves the objectives of the rule
and is consistent with the statutory requirements. In addition, section
203 requires a plan for informing and advising any small governments
that may be significantly or uniquely impacted by the rule.
We have determined that this rule will not result in the
expenditure by State, local, and Tribal governments in the aggregate,
or by the private sector, of more than $100 million in any one year.
Accordingly, we have not prepared a budgetary impact statement,
specifically addressed the regulatory alternatives considered, or
prepared a plan for informing and advising any significantly or
uniquely impacted small governments.
Congressional Review
This rule is not a major rule as defined in 5 U.S.C. chapter 8.
Executive Order 13132
Executive Order 13132 prohibits an agency from publishing any rule
that has federalism implications if the rule either imposes substantial
direct compliance costs on State and local governments and is not
required by statute, or the rule preempts State law, unless the agency
meets the consultation and funding requirements of section 6 of the
Executive Order. We do not believe the regulation has federalism impact
as defined in the Executive Order. Consistent with Executive Order
13132, the Department specifically solicits comments from State and
local government officials on this proposed rule.
List of Subjects in 45 CFR Part 95
Administrative practice and procedure, Claims, Computer Technology,
Grant programs--health, Grant programs, Social programs.
Approved: November 29, 2007.
Michael O. Leavitt,
Secretary of Health and Human Services.
For the reasons set forth above, HHS proposes to amend title 45 CFR
part 95 as follows:
PART 95--GENERAL ADMINISTRATION--GRANT PROGRAMS (PUBLIC ASSISTANCE,
MEDICAL ASSISTANCE AND STATE CHILDREN'S HEALTH INSURANCE PROGRAMS)
1. The authority citation for 45 CFR part 95 is revised to read as
follows:
Authority: 5 U.S.C. 301, 42 U.S.C. 622(b), 629b(a), 652(a),
652(d), 654A, 671(a), 1302, and 1396a(a).
Subpart A--Time Limits for States to File Claims
2. In Sec. 95.4 revise the definition of ``We, our and us'' to
read as follows:
Sec. 95.4 Definitions.
* * * * *
We, our, and us refer to HHS' Centers for Medicare & Medicaid
Services and the Administration for Children and Families, depending on
the program involved.
3. In Sec. 95.31 revise paragraph (a) to read as follows:
Sec. 95.31 Where to send a waiver request for good cause.
(a) A request which affects the program(s) of only one HHS agency
[(CMS), or the Administration for Children and Families (ACF)] and does
not affect the programs of any other agency or Federal Department
should be sent to the appropriate HHS agency.
* * * * *
Subpart E--Cost Allocation Plans
4. In Sec. 95.505 revise the definition of ``Operating Divisions''
to read as follows:
Sec. 95.505 Definitions.
* * * * *
Operating Divisions means the Department of Health and Human
Services (HHS) organizational components responsible for administering
public assistance programs. These components are the Administration for
Children and Families (ACF) and the Centers for Medicare & Medicaid
Services (CMS).
* * * * *
Subpart F--Automated Data Processing Equipment and Services--
Conditions for Federal Financial Participation (FFP)
5. Remove the authority citation for subpart F.
6. Revise Sec. 95.601 to read as follows:
Sec. 95.601 Scope and applicability.
This subpart prescribes part of the conditions under which the
Department of Health and Human Services will approve the Federal
Financial Participation (FFP) at the applicable rates for the costs of
automated data processing incurred under an approved State plan for
titles IV-B, IV-D, IV-E, or XIX of the Social Security Act. The
conditions of approval of this subpart add to the statutory and
regulatory requirements for acquisition of Automated Data Processing
(ADP) equipment and services under the specified titles of the Social
Security Act.
7. Amend Sec. 95.605 to:
a. Remove the definitions of ``Advance Planning Document,''
including its sub-definitions ``Planning APD,'' ``Implementation APD,''
``Advance Planning Document Update.''
b. Add the definitions ``Acquisition checklist,'' ``Alternative
approach to IT requirements,'' ``Base contract,'' ``Commercial off the
shelf software,'' ``Grantee,'' ``Noncompetitive,'' ``Service Oriented
Architecture,'' and ``Software maintenance.''
c. Revise the definition of ``Approving component.''
d. Remove the definition heading ``Automatic data processing'' and
add in its place ``Automated data processing.''
e. Remove the definition heading ``Automatic data processing
equipment'' and add in its place ``Automated data processing
equipment.''
f. Remove the definition heading ``Automatic data processing
services'' and add in its place ``Automated data processing services.''
g. Revise the definition of ``Project.''
h. Revise paragraphs (d), (e), and (f) under the definition of
``Service agreement.''
Sec. 95.605 Definitions.
* * * * *
Acquisition checklist means the standard Department checklist that
States can submit to meet prior written approval requirements instead
of submitting the actual Request for Proposal (RFP). The Acquisition
Checklist allows States to self-certify that their RFPs, or similar
document, meet State and Federal procurement requirements, are
competitive, contain appropriate language about software ownership and
licensing rights in compliance with Sec. 95.617, and provide access to
documentation in compliance with Sec. 95.615.
* * * * *
Alternative approach to IT requirements means that the State has
developed an ITD that does not meet all conditions for ITD approval in
Sec. 95.610 resulting in the need for a waiver under Sec. 95.627(a).
Approving component means an organization within the Department
that is authorized to approve requests for the acquisition of ADP
equipment or ADP services. The approving component is the
Administration for Children and Families (ACF) for titles IV-B (child
welfare services), IV-E (foster care and adoption assistance), and IV-D
(child
[[Page 12349]]
support enforcement), and the Centers for Medicare & Medicaid Services
(CMS) for title XIX (Medicaid) of the Social Security Act.
Base contract means the initial contractual activity, including all
option years, allowed during a defined unit of time, for example, 2
years. The base contract includes option years but does not include
amendments.
Commercial off the shelf (COTS) software means proprietary software
products that are ready-made and available for sale to the general
public at established catalog or market prices. Examples of COTS
include: Standard word processing, database, and statistical packages.
Grantee means an organization receiving financial assistance
directly from an HHS awarding agency to carry out a project or program.
* * * * *
Noncompetitive means solicitation of a proposal from only one
source, or after solicitation of a number of sources, negotiation with
selected sources based on a finding that competition is inadequate.
Procurement by noncompetitive proposals may be used only when
competitive award of a contract is infeasible and one of the following
circumstances applies:
(i) The item is available only from a single source;
(ii) The public exigency or emergency for the requirement will not
permit a delay resulting from competitive solicitation;
(iii) The federal awarding agency authorizes noncompetitive
proposals; or
(iv) After solicitation of a number of sources, competition is
determined inadequate.
Project means a defined set of information technology related
tasks, undertaken by the State to improve the efficiency, economy and
effectiveness of administration and/or operation of one or more of its
human services programs. For example, a State may undertake a
comprehensive, integrated initiative in support of its Child Support,
Child Welfare and Medicaid programs' intake, eligibility and case
management functions. A project may also be a less comprehensive
activity such as office automation, enhancements to an existing system
or an upgrade of computer hardware.
* * * * *
Service agreement * * *
(d) Includes assurances that services provided will be timely and
satisfactory; preferably through a service level agreement;
(e) Includes assurances that information in the computer system as
well as access, use and disposal of ADP data will be safeguarded in
accordance with provisions of all applicable federal statutes and
regulations, including 45 CFR 205.50 and 307.13;
(f) Requires the provider to obtain prior approval pursuant to 45
CFR 95.611(a) from the Department for ADP equipment and ADP services
that are acquired from commercial sources primarily to support the
titles covered by this subpart and requires the provider to comply with
45 CFR 95.613 for procurements related to the service agreement. ADP
equipment and services are considered to be primarily acquired to
support the titles covered by this subpart when the human service
programs may reasonably be expected to either: be billed for more than
50 percent of the total charges made to all users of the ADP equipment
and services during the time period covered by the service agreement,
or directly charged for the total cost of the purchase or lease of ADP
equipment or services;
* * * * *
Service Oriented Architecture (SOA), also referred to as Service
Component Based Architecture, describes a means of organizing and
developing Information Technology capabilities as collaborating
services that interact with each other based on open standards. Agency
SOA artifacts may include models, approach documents, inventories of
services or other descriptive documents.
Software maintenance means routine support activities that normally
include corrective, adaptive, and perfective changes, without
introducing additional functional capabilities. Corrective changes are
tasks to correct minor errors or deficiencies in software. Adaptive
changes are minor revisions to existing software to meet changing
requirements. Perfective changes are minor improvements to application
software so it will perform in a more efficient, economical, and/or
effective manner. Software maintenance can include activities such as
revising/creating new reports, making limited data element/data base
changes, and making minor alterations to data input and display screen
designs. Software maintenance that substantially increases risk or cost
or functionality will require an as-needed ITD.
* * * * *
8. Add a new Sec. 95.610 to read as follows:
Sec. 95.610 Submission of information technology documents.
Initial Information Technology document or Initial ITD is a written
plan of action to request funding approval for a project which will
require the use of ADP services or equipment. The term ITD refers to a
Planning ITD, or to a planning and/or development and implementation
action document, i.e., Implementation ITD, or Information Technology
Document Update. Requirements are detailed in paragraphs (a), (b), and
(c) of this section.
(a) Planning ITD.
(1) A Planning ITD is a written plan of action which requests FFP
to determine the need for, feasibility, and cost factors of an ADP
equipment or services acquisition and to perform one or more of the
following: Prepare a Functional Requirements Specification; assess
other States' systems for transfer, to the maximum extent possible, of
an existing system; prepare an Implementation ITD; prepare a request
for proposal (RFP) and/or develop a General Systems Design (GSD).
(2) A separate planning effort and Planning ITD is optional, but
highly recommended, and generally applies to large Statewide system
developments and/or major hardware acquisitions. States with large,
independent counties requesting funding at the regular match rate for
county systems are strongly encouraged to engage in planning activities
commensurate with the complexity of the projected IT project and to
submit a Planning ITD to allow for time and to provide funding for its
planning activities. Therefore, states must consider the scope and
complexity of a project to determine whether to submit a Planning ITD
as a separate document to HHS or whether to combine the two phases of
planning and implementation into one ITD covering both the Planning ITD
and the Implementation ITD requirements.
(3) The Planning ITD is a relatively brief document, usually not
more than 6-10 pages, which must contain:
(i) A statement of the problem/need that the existing capabilities
can not resolve, new or changed program requirements or opportunities
for improved economies and efficiencies and effectiveness of program
and administration and operations;
(ii) A project management plan that addresses the planning project
organization, planning activities/deliverables, State and contractor
resource needs, planning project procurement activities and schedule;
(iii) A specific budget for the planning phase of the project;
(iv) An estimated total project cost and a prospective State and
Federal cost allocation/distribution, including planning and
implementation;
(v) A commitment to conduct/prepare the problem(s) needs
assessment,
[[Page 12350]]
feasibility study, alternatives analysis, cost benefit analysis, and to
develop a Functional Requirements Specification and/or a General
Systems Design (GSD);
(vi) A commitment to define the State's functional requirements,
based on the state's business needs which may be used for the purpose
of evaluating the transfer of an existing system, including the
transfer of another State's General System Design that the State may
adapt to meet State specific requirements; and
(vii) Additional Planning ITD content requirements, for enhanced
funding projects as contained in 45 CFR 307.15 and 1355.50 through
1355.57.
(b) Implementation ITD. The Implementation ITD is a written plan of
action to acquire the proposed ITD services or equipment. The
Implementation ITD shall include:
(1) The results of the activities conducted under a Planning ITD,
if any;
(2) A statement of problems/needs and outcomes/objectives;
(3) A requirements analysis, feasibility study and a statement of
alternative considerations including, where appropriate, the use of
service oriented architecture and a transfer of an existing system and
an explanation of why such a transfer is not feasible if another
alternative is identified;
(4) A cost benefit analysis;
(5) A personnel resource statement indicating availability of
qualified and adequate numbers of staff, including a project director
to accomplish the project objectives;
(6) A detailed description of the nature and scope of the
activities to be undertaken and the methods to be used to accomplish
the project;
(7) The proposed activity schedule for the project;
(8) A proposed budget (including an accounting of all possible
Implementation ITD activity costs, e.g., system conversion, vendor and
state personnel, computer capacity planning, supplies, training,
hardware, software and miscellaneous ADP expenses) for the project;
(9) A statement indicating the duration the State expects to use
the equipment and/or system;
(10) An estimate of the prospective cost allocation/distribution to
the various State and Federal funding sources and the proposed
procedures for distributing costs;
(11) A statement setting forth the security and interface
requirements to be employed and the system failure and disaster
recovery/business continuity procedures available or to be implemented;
and
(12) Additional requirements, for acquisitions for which the State
is requesting enhanced funding, as contained at 45 CFR 1355.54 through
1355.57, 45 CFR 307.15 and 42 CFR subchapter C, part 433.
(c) Information Technology Document Update (ITDU). The Information
Technology Document Update (ITDU) is a document submitted annually
(Annual ITDU) to report project status and/or post implementation cost-
savings, or, on an as needed (As Needed ITDU) basis, to request funding
approval for project continuation when significant project changes are
anticipated; for incremental funding authority and project continuation
when approval is being granted by phase; or to provide detailed
information on project and/or budget activities, as follows:
(1) The Annual ITDU, which is due 60 days prior to the anniversary
date of the Planning ITD, Implementation ITD, or prior Annual ITD
Update approved anniversary and includes:
(i) A reference to the approved ITD and all approved changes;
(ii) A project activity report which includes the status of the
past year's major project tasks and milestones, addressing the degree
of completion and tasks/milestones remaining to be completed, and
discusses past and anticipated problems or delays in meeting target
dates in the approved ITD and approved changes to it and provides a
risk management plan that assesses project risk and identifies risk
mitigation strategies;
(iii) A report of all project deliverables completed in the past
year and degree of completion for unfinished products and tasks;
(iv) An updated project activity schedule for the remainder of the
project;
(v) A revised budget for the life of the project's entire life-
cycle, including operational and development cost categories;
(vi) A project expenditures report that consists of a detailed
accounting of all expenditures for project development over the past
year and an explanation of the differences between projected expenses
in the approved ITD and actual expenditures for the past year;
(vii) A report of any approved or anticipated changes to the
allocation basis in the ITD's approved cost allocation methodology; and
(viii) Once the State begins operation, either on a pilot basis or
under a phased implementation, it must track costs, benefits and
savings. The State will submit an initial cost-savings report no later
than 2 years after initial implementation and every 3 years after that
until HHS determines projected cost savings and benefits have been
achieved. The cost benefit report is not required if the project is
limited to only O&M.
(2) The As Needed ITDU is a document that requests approval for
additional funding and/or authority for project continuation when
significant changes are anticipated, when the project is being funded
on a phased implementation basis, or to clarify project information
requested as an approval condition of the Planning ITD, Annual ITDU, or
Implementation ITD. The As Needed ITDU may be submitted any time as a
stand-alone funding or project continuation request, or may be
submitted as part of the Annual ITDU. The As Needed ITDU is submitted:
(i) When the State anticipates incremental project expenditures
(exceeding specified thresholds);
(ii) When the State anticipates a schedule extension of more than
60 days for major milestones;
(iii) When the State anticipates major changes in the scope of its
project, e.g., a change in its procurement plan, procurement
activities, system concept or development approach;
(iv) When the State anticipates significant changes to its cost
distribution methodology or distribution of costs among Federal
programs; and/or,
(v) When the State anticipates significant changes to its cost-
benefit projections.
The As needed ITDU shall provide supporting documentation to
justify the need for a change to the approved budget.
(3) The Operations & Software Maintenance Information Technology
Document Update, (O & M ITDU) is an annual report of no more than two
pages, including:
(i) Summary of activities;
(ii) Acquisitions and,
(iii) Annual budget by project/system receiving funding through the
programs covered under this part.
9. In Sec. 95.611 revise paragraphs (a)(1), (a)(3) through (a)(6),
(b)(1)(i) through (b)(1)(iv), (b)(2)(i) through (b)(2)(iv), (c)(1)(i)
through (c)(1)(ii), and (c)(2); and add paragraphs (b)(1)(v),
(b)(1)(vi), and (e) to read as follows:
Sec. 95.611 Prior approval conditions.
(a) General acquisition requirements. (1) A State shall obtain
prior written approval from the Department as specified in paragraph
(b) of this section, when the State plans to acquire ADP equipment or
services with proposed FFP at the regular matching rate that it
anticipates will have total
[[Page 12351]]
acquisition costs of $5,000,000 or more in Federal and State funds.
States will be required to submit Operations and Software Maintenance
(O&M) only acquisitions if they are non-competitive and exceed the
threshold requiring Federal approval, or for competitive procurements
on an exception basis after the receipt of a written request from the
Department. See definition of software maintenance under Sec. 95.605.
* * * * *
(3) A State shall obtain prior written approval from the Department
for a sole source/non-competitive acquisition, for ADP equipment or
services, that has a total State and Federal acquisition cost of
$1,000,000 or more.
(4) Except as provided for in paragraph (a)(5) of this section, the
State shall submit multi-program requests for Department approval,
signed by the appropriate State official, to the Department's Secretary
or his/her designee. For each HHS component that has federal funding
participation in the project, an additional copy must be provided to
the applicable program office and respective Regional Administrator(s).
(5) States shall submit requests for approval which affect only one
entity of HHS (CMS, OCSE, or Children's Bureau), to the applicable
entity's office and Regional Administrator.
(6) The Department will not approve any Planning or Implementation
ITD that does not include all information required in Sec. 95.610.
(b) * * *
(1) * * *
(i) For the Planning ITD subject to the dollar thresholds specified
in paragraph (a) of this section.
(ii) For the Implementation ITD subject to the dollar thresholds
specified in paragraph (a) of this section.
(iii) For acquisition solicitation documents, unless specifically
exempted by the Department, prior to release when the resulting base
contract is anticipated to exceed $5,000,000 for competitive
procurement and $1,000,000 for noncompetitive procurements.
(iv) For noncompetitive acquisitions, including contract
amendments, when the resulting contract is anticipated to exceed
$1,000,000, States will be required to submit a sole source
justification in addition to the acquisition document.
(v) For the contract, prior to the execution, States will be
required to submit the contract when it is anticipated to exceed the
following thresholds, unless specifically exempted by the Department:
(A) Software application development--$5,000,000 or more
(competitive) and $1,000,000 or more (noncompetitive);
(B) Hardware including Commercial Off the Shelf (COTS) software--
$20,000,000 or more (competitive) and $1,000,000 or more
(noncompetitive);
(C) Operations and Software Maintenance acquisitions combined with
hardware, COTS or software application development--the thresholds
stated in Sec. 95.611(b)(1)(v)(A) and (B) would apply.
(vi) For contract amendments within the scope of the base contract,
unless specifically exempted by the Department, prior to execution of
the contract amendment involving contract cost increases which
cumulatively exceed 20 percent of the base contract cost. For example:
If the base contract is $20 million with three option years of $5
million each, the base contract value would be $35 million. When a
single contract amendment or the accumulated value of all contract
amendments exceeds $7 million (20 percent of the $35 million base
contract value), prior approval requirements would apply.
(2) * * *
(i) For the Planning ITD.
(ii) For the Implementation ITD.
(iii) For the acquisition solicitation documents and contract,
unless specifically exempted by the Department, prior to release of the
acquisition solicitation documents or prior to execution of the
contract when the contract is anticipated to or will exceed $300,000.
(iv) For contract amendments, unless specifically exempted by the
Department, prior to execution of the contract amendment, involving
contract cost increases exceeding $300,000 or contract time extensions
of more than 60 days.
* * * * *
(c) * * *
(1) * * *
(i) For an annual ITDU for projects with a total cost of more than
$5,000,000, when specifically required by the Department for projects
with a total cost of less than $5,000,000.
(ii) (A) For an As Needed ITDU when changes cause any of the
following:
(1) A projected cost increase of $1,000,000 or more.
(2) A schedule extension of more than 60 days for major milestones;
(3) A significant change in procurement approach, and/or scope of
procurement activities beyond that approved in the ITD;
(4) A change in system concept, or a change to the scope of the
project;
(5) A change to the approved cost allocation methodology.
(B) The State shall submit the As Needed ITDU to the Department, no
later than 60 days after the occurrence of the project changes to be
reported in the As Needed ITDU.
(2) For enhanced FFP requests.
(i) For an Annual ITDU.
(ii) For an ``As needed'' ITDU when changes cause any of the
following:
(A) A projected cost increase of $300,000 or 10 percent of the
project cost, whichever is less;
(B) A schedule extension of more than 60 days for major milestones;
(C) A significant change in procurement approach, and/or a scope of
procurement activities beyond that approved in the ITD;
(D) A change in system concept or scope of the project;
(E) A change to the approved cost methodology;
(F) A change of more than 10 percent of estimated cost benefits.
The State shall submit the ``As Needed ITDU'' to the Department, no
later than 60 days after the occurrence of the project changes to be
reported in the ``As Needed ITDU''.
* * * * *
(e) Acquisitions not subject to prior approval. States will be
required to submit acquisition documents, contracts and contract
amendments under the threshold amounts on an exception basis if
requested to do so in writing by the Department.
10. Revise Sec. 95.612 to read as follows:
Sec. 95.612 Disallowance of Federal Financial Participation (FFP).
If the Department finds that any ADP acquisition approved or
modified under the provisions of Sec. 95.611 fails to comply with the
criteria, requirements, and other activities described in the approved
information technology document to the detriment of the proper,
efficient, economical and effective operation of the affected program,
payment of FFP may be disallowed. In the case of a suspension of the
approval of a Child Support ITD for enhanced funding, see 45 CFR
307.40(a). In the case of a suspension of an ITD for a State Automated
Child Welfare Information System (SACWIS) project, see 45 CFR 1355.56.
11. Revise Sec. 95.613 to read as follows:
Sec. 95.613 Procurement Standards.
(a) General. Procurements of ADP equipment and services are subject
to the following procurement standards in paragraphs (b), (c), (d),
(e), and (f) of this section regardless of any conditions for prior
approval. These standards include
[[Page 12352]]
a requirement for maximum practical open and free competition
regardless of whether the procurement is formally advertised or
negotiated. These standards are established to ensure that such
materials and services are obtained in a cost effective manner and in
compliance with the provisions of applicable Federal statutes and
executive orders. The standards apply where the cost of the procurement
is treated as a direct cost of an award.
(b) Grantee responsibilities. The standards contained in this
section do not relieve the Grantee of the contractual responsibilities
arising under its contract(s). The grantee is the responsible
authority, without recourse to the HHS awarding agency, regarding the
settlement and satisfaction of all contractual and administrative
issues arising out of procurements entered into in support of an award
or other agreement. This includes disputes, claims, and protests of
award, source evaluation or other matters of a contractual nature.
Matters concerning violation of statute are to be referred to such
Federal, State or local authority as may have proper jurisdiction.
(c) Codes of conduct. The grantee shall maintain written standards
of conduct governing the performance of its employees engaged in the
award and administration of contracts. No employee, officer, or agent
shall participate in the selection, award, or administration of a
contract supported by Federal funds if a real or apparent conflict of
interest would be involved. Such a conflict would arise when the
employee, officer, or agent, or any member of his or her immediate
family, his or her partner, or an organization which employs or is
about to employ any of the parties indicated herein, has a financial or
other interest in the firm selected for an award. The officers,
employees, and agents of the grantee shall neither solicit nor accept
gratuities, favors, or anything of monetary value from contractors, or
parties to subagreements. However, grantees may set standards for
situations in which the financial interest is not substantial or the
gift is an unsolicited item of nominal value. The standards of conduct
shall provide for disciplinary actions to be applied for violations of
such standards by officers, employers, or agents of the grantees.
(d) Competition. All procurement transactions shall be conducted in
a manner to provide, to the maximum extent practical, open and free
competition. The grantee shall be alert to organizational conflicts of
interest as well as noncompetitive practices among contractors that may
restrict or eliminate competition or otherwise restrain trade. In order
to ensure objective contractor performance and eliminate unfair
competitive advantage, contractors that develop or draft grant
applications, or contract specifications, requirements, statements of
work, invitations for bids and/or requests for proposals shall be
excluded from competing for such procurements. Awards shall be made to
the bidder or offeror whose bid or offer is responsive to the
solicitation and is most advantageous to the grantee, price, quality
and other factors considered. Solicitations shall clearly set forth all
requirements that the bidder or offeror shall fulfill in order for the
bid or offer to be evaluated by the grantee. Any and all bids or offers
may be rejected when it is in the grantee's interest to do so.
(e) Procurement procedures. (1) All grantees shall establish
written procurement procedures. These procedures shall provide, at a
minimum, that:
(i) Grantees avoid purchasing unnecessary items;
(ii) Where appropriate, an analysis is made of lease and purchase
alternatives to determine which would be the most economical and
practical procurement for the grantee and the Federal Government; and
(iii) Solicitations for goods and services provide for all of the
following:
(A) A clear and accurate description of the technical requirements
for the material, product or service to be procured. In competitive
procurements, such a description shall not contain features which
unduly restrict competition.
(B) Requirements which the bidder/offeror must fulfill and all
other factors to be used in evaluating bids or proposals.
(C) A description, whenever practicable, of technical requirements
in terms of functions to be performed or performance required,
including the range of acceptable characteristics or minimum acceptable
standards.
(D) The specific features of brand name or equal descriptions that
bidders are required to meet when such items are included in the
solicitation.
(E) The acceptance, to the extent practicable and economically
feasible, of products and services dimensioned in the metric system of
measurement.
(F) Preference, to the extent practicable and economically
feasible, for products and services that conserve natural resources and
protect the environment and are energy efficient.
(2) Positive efforts shall be made by grantees to utilize small
businesses, minority-owned firms, and women's business enterprises,
whenever possible. Grantees of HHS awards shall take all of the
following steps to further this goal.
(i) Ensure that small businesses, minority-owned firms, and women's
business enterprises are used to the fullest extent practicable.
(ii) Make information on forthcoming opportunities available and
arrange time frames for purchases and contracts to encourage and
facilitate participation by small businesses, minority-owned firms, and
women's business enterprises.
(iii) Consider in the contract process whether firms competing for
larger contracts intend to subcontract with small businesses, minority-
owned firms, and women's business enterprises.
(iv) Encourage contracting with consortiums of small businesses,
minority-owned firms and women's business enterprises when a contract
is too large for one of these firms to handle individually.
(v) Use the services and assistance, as appropriate, of such
organizations as the Small Business Administration and the Department
of Commerce's Minority Business Development Agency in the solicitation
and utilization of small businesses, minority-owned firms and women's
business enterprises.
(3) The type of procuring instruments used (e.g., fixed price
contracts, cost reimbursable contracts, purchase orders, and incentive
contracts) shall be determined by the grantee but shall be appropriate
for the particular procurement and for promoting the best interest of
the program or project involved. The ``cost-plus-a-percentage-of-cost''
or ``percentage of construction cost'' methods of contracting shall not
be used.
(4) Contracts shall be made only with responsible contractors who
possess the potential ability to perform successfully under the terms
and conditions of the proposed procurement. Consideration shall be
given to such matters as contractor integrity, record of past
performance, financial and technical resources or accessibility to
other necessary resources. In certain circumstances, contracts with
certain parties are restricted by agencies' implementation of E.O.s
12549 and 12689, ``Debarment and Suspension.'' (See 45 CFR part 76.)
(5) Some form of cost or price analysis shall be made and
documented in the procurement files in connection with every
procurement action. Price analysis may be accomplished in various ways,
including the comparison of price quotations submitted, market prices
and similar indicia, together with discounts. Cost analysis is the
review and evaluation of each element of cost to
[[Page 12353]]
determine reasonableness, allocability and allowability.
(6) Procurement records and files for purchases in excess of the
simplified acquisition threshold shall include the following at a
minimum:
(i) Basis for contractor selection;
(ii) Justification for lack of competition when competitive bids or
offers are not obtained; and
(iii) Basis for award cost or price.
(7) A system for contract administration shall be maintained to
ensure contractor conformance with the terms, conditions and
specifications of the contract and to ensure adequate and timely follow
up of all purchases. Grantees shall evaluate contractor performance and
document, as appropriate, whether contractors have met the terms,
conditions and specifications of the contract.
(8) The grantee shall include, in addition to provisions to define
a sound and complete agreement, the following provisions in all
contracts, which shall also be applied to subcontracts:
(i) Contracts in excess of the simplified acquisition threshold
shall contain contractual provisions or conditions that allow for
administrative, contractual, or legal remedies in instances in which a
contractor violates or breaches the contract terms, and provide for
such remedial actions as may be appropriate.
(ii) All contracts in excess of the simplified acquisition
threshold (currently $100,000) shall contain suitable provisions for
termination by the grantee, including the manner by which termination
shall be effected and the basis for settlement. In addition, such
contracts shall describe conditions under which the contract may be
terminated for default as well as conditions where the contract may be
terminated because of circumstances beyond the control of the
contractor.
(f) All negotiated contracts (except those for less than the
simplified acquisition threshold) awarded by grantees shall include a
provision to the effect that the grantee, the HHS awarding agency, the
U.S. Comptroller General, or any of their duly authorized
representatives, shall have access to any books, documents, papers and
records and staff of the contractor which are directly pertinent to a
specific program for the purpose of making audits, examinations,
excerpts and transcriptions.
12. Revise Sec. 95.615 to read as follows:
Sec. 95.615 Access to systems and records.
The State agency must allow the Department access to the system in
all of its aspects, including pertinent state staff, design
developments, operation, and cost records of contractors and
subcontractors at such intervals as are deemed necessary by the
Department to determine whether the conditions for approval are being
met and to determine the efficiency, economy and effectiveness of the
system.
13. In Sec. 95.621 revise paragraphs (d) and (e) to read as
follows:
Sec. 95.621 ADP Reviews.
* * * * *
(d) Acquisitions not subject to prior approval. Reviews will be
conducted on an audit basis to assure that system and equipment
acquisition costing less than $200,000 were made in accordance with 45
CFR 95.613 and the conditions of this subpart and to determine the
efficiency, economy and effectiveness of the equipment or service.
(e) State Agency Maintenance of Service Agreements. The State
agency will maintain a copy of each service agreement in its files for
Federal review.
* * * * *
14. Revise Sec. 95.623 to read as follows:
Sec. 95.623 Reconsideration of denied FFP for failure to obtain prior
approval.
For ADP equipment and services acquired by a State without prior
written approval, the State may request reconsideration of the
disallowance of FFP by written request to the head of the grantor
agency within 30 days of the initial written disallowance
determination. In such a reconsideration, the agency may take into
account overall federal interests.
15. Add new Sec. 95.626 to read as follows:
Sec. 95.626 Independent Validation and Verification.
(a) Independent Verification and Validation (IV&V), refers to a
well-defined standard process for examining the organizational,
management, and technical aspects of a project to determine the
effort's adherence to industry standards and best practices, to
identify risks, and make recommendations for remediation, where
appropriate. These activities will be performed by an agency that is
not under the control of the organization that is developing the
software.
(b) An assessment for independent validation and verification
(IV&V) analysis of a State's system development effort may be required
in the case of ITD projects that:
(1) Miss statutory or regulatory deadlines for automation that is
intended to meet program requirements;
(2) Fail to meet a critical milestone;
(3) Indicate the need for a new project or total system redesign;
(4) Are developing systems under waivers pursuant to sections
452(d)(3) or 627 of the Social Security Act;
(5) Are at risk of failure, significant delay, or significant cost
overrun in their systems development efforts; or
(6) Fail to timely and completely submit ITD updates or other
required systems documentation.
(c) Independent validation and verification efforts must be
conducted by an entity that is independent from the State (unless the
State receives an exception from the Department) and the entity
selected must:
(1) Develop a project workplan. The plan must be provided directly
to the Department at the same time it is given to the State.
(2) Review and make recommendations on both the management of the
project, both State and vendor, and the technical aspects of the
project. The IV&V provider must give the results of its analysis
directly to the federal agencies that required the IV&V at the same
time it reports to the State.
(3) Consult with all stakeholders and assess the user involvement
and buy-in regarding system functionality and the system's ability to
support program business needs.
(4) Conduct an analysis of past project performance sufficient to
identify and make recommendations for improvement.
(5) Provide risk management assessment and capacity planning
services.
(6) Develop performance metrics which allow tracking project
completion against milestones set by the State.
(d) The RFP and contract for selecting the IV&V provider (or
similar documents if IV&V services are provided by other State
agencies) must include requirements regarding the experience and skills
of the key personnel proposed for the IV&V analysis. The contract (or
similar document if the IV&V services are provided by other State
agencies) must specify by name the key personnel who actually will work
on the project. The RFP and contract for required IV&V services must be
submitted to the Department for prior written approval.
16. Add new Sec. 95.627 to read as follows:
Sec. 95.627 Waivers.
(a) Application for a waiver. A State may apply for a waiver of any
requirement in 45 CFR subpart F by presenting an alternative approach.
Waiver requests must be submitted and approved as part of the State's
ITD or ITD Update.
[[Page 12354]]
(b) Waiver approvals. The Secretary may grant a State a waiver if
the State demonstrates that it has an alternative approach to a
requirement in this chapter that will safeguard the State and Federal
governments' interest and that enables the State to be in substantial
compliance with the other requirements of this chapter.
(c) Contents of waiver request. The State's request for approval of
an alternative approach or waiver of a requirement in this chapter must
demonstrate why meeting the condition is unnecessary, diminishes the
State's ability to meet program requirements, or that the alternative
approach leads to a more efficient, economical, and effective
administration of the programs for which federal financial
participation is provided, benefiting both the State and Federal
Governments.
(d) Review of waiver requests. The Secretary, or his or her
designee, will review waiver requests to assure that all necessary
information is provided, that all processes provide for effective
economical and effective program operation, and that the conditions for
waiver in this section are met.
(e) Agency's response to a waiver request. When a waiver is
approved by an agency, it becomes part of the State's approved ITD and
is applicable to the approving agency. A waiver is subject to the ITD
suspension provisions in Sec. 95.611(c)(3). When a waiver is
disapproved, the entire ITD will be disapproved. The ITD disapproval is
a final administrative decision and is not subject to administrative
appeal.
17. Amend Sec. 95.631 by removing ``APD'' and adding in its place
``ITD'' in the introductory text, and by revising paragraph (a) to read
as follows:
Sec. 95.631 Cost identification for purpose of FFP claims.
* * * * *
(a) Development costs. (1) Using its normal departmental accounting
system to the extent consistent with the cost principles set forth in
OMB Circular A-87, the State agency shall specifically identify what
items of costs constitute development costs, assign these costs to
specific project cost centers, and distribute these costs to funding
sources based on the specific identification, assignment and
distribution outlined in the approved ITD;
(2) The methods for distributing costs set forth in the ITD should
provide for assigning identifiable costs, to the extent practicable,
directly to program/functions. The State agency shall amend the cost
allocation plan required by subpart E of this part to include the
approved ITD methodology for the identification, assignment and
distribution of the development costs.
* * * * *
18. Add new Sec. 95.635 to read as follows:
Sec. 95.635 Disallowance of Federal financial participation automated
systems that failed to comply substantially with requirements.
(a) Federal financial participation at the applicable matching rate
is available for automated data processing (ADP) system expenditures
that meet the requirements specified under the approved ITD including
the approved cost allocation plan.
(b) All or part of any costs for system projects that fail to
comply substantially with an ITD approved under applicable regulation
at 45 CFR part 95.611, or for the Title IV-D program contained in 45
CFR part 307, the applicable regulations for the Title IV-E and Title
IV-B programs contained in Chapter 13, subchapter G, 45 CFR 1355.55, or
the applicable regulations for the Title XIX program contained in 42
CFR chapter 4 subchapter C, part 433, are subject to disallowance by
the Department.
19. Amend Sec. 95.641 by removing ``APD'' and adding in its place
``ITD'' wherever it appears.
Subpart G--Equipment Acquired Under Public Assistance Programs
20. Revise paragraph (a) of Sec. 95.705 to read as follows:
Sec. 95.705 Equipment costs--Federal financial participation.
(a) General rule. In computing claims for Federal financial
participation, equipment having a unit acquisition cost of $25,000 or
less may be claimed in the period acquired or depreciated, at the
option of the State agency. Equipment having a unit acquisition cost of
more than $25,000 shall be depreciated. For purposes of this section,
the term depreciate also includes use allowances computed in accordance
with the cost principles prescribed in 45 CFR part 92.
* * * * *
21. Revise paragraph (a) and the introductory text of paragraph (b)
of Sec. 95.707 to read as follows:
Sec. 95.707 Equipment management and disposition.
(a) Once equipment, whose costs are claimed for Federal financial
participation (i.e., equipment that is capitalized and depreciated or
is claimed in the period acquired), has reached the end of its useful
life (as defined in an approved ITD), the equipment shall be subject to
the property disposal rules in 45 CFR 92.32.
(b) The State agency is responsible for adequately managing the
equipment, maintaining records on the equipment, and taking periodic
physical inventories. Physical inventories may be made on the basis of
statistical sampling.
* * * * *
[FR Doc. E8-4009 Filed 3-6-08; 8:45 am]
BILLING CODE 4184-01-P