Chapter 12: Contracts and Subawards

Note: This chapter contains language that was revised based on the Bipartisan Budget Act of 2018. View the revisions. (PDF - 583 KB)

Authority

Section 330(k)(3)(I) and Section 330(q) of the PHS Act; 42 CFR 51c.113, 42 CFR 56.114, 42 CFR 51c.303(t), and 42 CFR 56.303(t); 45 CFR Part 75 Subpart D; and Section 1861(aa)(4)(A)(ii) and Section 1905(l)(2)(B)(ii) of the Social Security Act

Requirements

Contracts: Procurement and Monitoring1

  • The health center must determine2 whether an individual agreement that will result in disbursement of Federal funds will be carried out through a contract or a subaward and structure the agreement accordingly.3
  • The health center must request and receive approval from HRSA to contract for [substantive programmatic] work4 under its Health Center Program award.
  • The health center must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that for procurement actions paid for in whole or in part under the Federal award, the procurements conform with 45 CFR Part 75.
  • The health center must perform a cost or price analysis in connection with every procurement action paid for in whole or in part by the Federal award in excess of the Simplified Acquisition Threshold.5
  • The health center must conduct all procurement transactions paid for in whole or in part by the Federal award, in a manner that provides full and open competition consistent with the standards of 45 CFR 75.328. Procurements by non-competitive proposals6 are allowable only when:
    • The item is available only from a single source;
    • The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;
    • The non-competitive proposal is specifically authorized by HRSA (or, in the case of a subrecipient, the Federal award recipient) in response to a written request from the Federal award recipient or subrecipient; or
    • Competition is determined to be inadequate after soliciting a number of sources.
  • Health center contracts with other providers for the provision of health services within the HRSA-approved scope of project must include a schedule of rates and method of payment for such services.
  • The health center must oversee contractors to ensure their performance is in accordance with the terms, conditions, and specifications of their contracts and to assure compliance with applicable Federal requirements.7
  • The health center must retain financial records, supporting documents, statistical records, and all other records pertinent to the Health Center Program award carried out under contracts for a period of three years from the date of the submission of the final expenditures report to HHS.

Subawards: Monitoring and Management

  • The Health Center Program awardee must determine whether an individual agreement that will result in disbursement of Federal funds will be carried out through a contract or a subaward and structure the agreement accordingly.8 With respect to subawards:
    • The health center awardee must make documented, case-by-case determinations whether the agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient, consistent with the characteristics outlined in 45 CFR 75.351; 9
    • The health center awardee must identify subawards as such to the subrecipient, and provide all applicable information to the subrecipient as described in 45 CFR 75.352(a)(1), including the total amount of the Federal Award committed to the subrecipient by the health center awardee;
    • If any of the data elements contained in 45 CFR 75.352(a)(1) change, the health center awardee must include the change(s) in a subsequent subaward modification.
  • The Health Center Program awardee must request and receive approval from HRSA to make a subaward under the Federal award.
  • The Health Center Program awardee must ensure that, at the time of making a subaward, each subrecipient, which is a subawardee of Federal funds, complies with all applicable requirements specified in the Federal award (including those found in section 330 of the PHS Act, implementing program regulations, and grants regulations in 45 CFR Part 75).
  • The Health Center Program awardee must monitor the ongoing activities of the subrecipient to ensure that the subaward is used for authorized purposes and that the subrecipient maintains compliance with all applicable requirements specified in the Federal award (including those found in section 330 of the PHS Act, implementing program regulations, and grants regulations in 45 CFR Part 75).
  • The Health Center Program awardee must retain financial records, supporting documents, statistical records, and all other records pertinent to the Health Center Program award as carried out under any subawards for a period of three years from the date of the submission of the final expenditures report to the health center awardee.
  • The Health Center Program awardee must consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the Health Center Program awardee's own records and whether the Health Center Program awardee must consider taking enforcement action against noncompliant subrecipients as described in 45 CFR 75.371.

Demonstrating Compliance

A health center would demonstrate compliance with these requirements by fulfilling all of the following:

Contracts: Procurement and Monitoring

  1. The health center has written procurement procedures that comply with Federal procurement standards, including a process for ensuring that all procurement costs directly attributable to the Federal award are allowable, consistent with Federal Cost Principles.10
  2. The health center has records for procurement actions paid for in whole or in part under the Federal award that include the rationale for method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. This would include documentation related to noncompetitive procurements.
  3. The health center retains final contracts and related procurement records, consistent with Federal document maintenance requirements, for procurement actions paid for in whole or in part under the Federal award.11
  4. The health center has access to contractor records and reports related to health center activities in order to ensure that all activities and reporting requirements are being carried out in accordance with the provisions and timelines of the related contract (for example, performance goals are achieved, Uniform Data System (UDS) data are submitted by appropriate deadlines, funds are used for authorized purposes).
  5. If the health center has arrangements with a contractor to perform substantive programmatic work,12 the health center requested and received prior approval from HRSA as documented by:
    • An approved competing continuation/renewal of designation application or other competitive application, which included such an arrangement; or
    • An approved post-award request for such arrangements submitted within the project period (for example, change in scope).
  6. The health center’s contracts that support the HRSA-approved scope of project include provisions that address the following:
    • The specific activities or services to be performed or goods to be provided;
    • Mechanisms for the health center to monitor contractor performance; and
    • Requirements for the contractor to provide data necessary to meet the recipient’s applicable Federal financial and programmatic reporting requirements, as well as provisions addressing record retention and access, audit, and property management.13

Subawards: Monitoring and Management

  1. If the health center has made a subaward, the health center requested and received prior approval from HRSA as documented by:
    • An approved competing continuation/renewal of designation application or other competitive application, which included the subrecipient arrangement; or
    • An approved post-award request for such subrecipient arrangements submitted within the project period (for example, change in scope).
  2. The health center’s subaward(s) that supports the HRSA-approved scope of project includes provisions that address the following:
    • The specific portion of the HRSA-approved scope of project to be performed by the subrecipient;
    • The applicability of all Health Center Program requirements to the subrecipient;
    • The applicability to the subrecipient of any distinct statutory, regulatory, and policy requirements of other Federal programs associated with their HRSA- approved scope of project;14
    • Mechanisms for the health center to monitor subrecipient compliance and performance;
    • Requirements for the subrecipient to provide data necessary to meet the health center’s applicable Federal financial and programmatic reporting requirements, as well as provisions addressing record retention and access, audit, and property management;15 and
    • Requirements that all costs paid for by the Federal subaward are allowable consistent with Federal Cost Principles.16
  3. The health center monitors the activities of its subrecipient to ensure that the subaward is used for authorized purposes and that the subrecipient maintains compliance with all applicable requirements specified in the Federal award (including those found in section 330 of the PHS Act, implementing program regulations and grants regulations in 45 CFR Part 75). Specifically, the health center’s monitoring of the subrecipient includes:
    • Reviewing financial and performance reports required by the health center in order to ensure performance goals are achieved, UDS data are submitted by appropriate deadlines, and funds are used for authorized purposes;
    • Ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the subaward that may be identified through audits, on-site reviews, and other means; and
    • Issuing a management decision for audit findings pertaining to the subaward.17
  4. The health center retains final subrecipient agreements and related records, consistent with Federal document maintenance requirements.18

The following points describe areas where health centers have discretion with respect to decision-making or that may be useful for health centers to consider when implementing these requirements:

  • The health center determines the methods it will utilize to monitor contractor activities and performance. Such monitoring could include:
    • Periodic evaluations of contractor performance (for example, results from reviews of invoices and records, reports from staff of contractor activity) that are shared with the board and management staff; and/or
    • Documentation at the time of contract completion or renewal that the contractor has met the terms, conditions, and specifications of the contract.
  • The health center determines the methods it will utilize to settle any contractual or administrative issues arising out of procurements, with respect to contracts (for example protests, disputes, claims) or how to take enforcement actions in the case of subawards.
  • The health center determines the methods it will utilize to monitor subrecipient compliance and performance with Health Center Program requirements. Such monitoring could include:
    • Receiving/reviewing copies of the subrecipient governing board’s meeting minutes;
    • Performing site visits;
    • Conducting regular check-in calls and updates regarding Health Center Program requirements or new Health Center Program policies;
    • Receiving/reviewing the subrecipient’s annual audit;
    • Conducting periodic joint meetings between the two entities’ boards, or between the health center’s key management staff and the subrecipient’s board;
    • Receiving/reviewing periodic written reports from the subrecipient; and/or
    • Sharing data and creating systems for the sharing of financial and medical records for the purpose of Health Center Program data reporting.

Footnotes

  1. All procurement standards included in 45 CFR Part 75 apply for procurement actions paid for in whole or in part under the Federal award. These standards do not relieve the non-Federal entity of any contractual responsibilities under its contracts. HRSA will not substitute its judgment for that of the non-Federal entity unless the matter is primarily a Federal concern. Violations of law will be referred to the local, tribal, state, or Federal authority having proper jurisdiction.
  2. Per 45 CFR 75.351(c): “In determining whether an agreement between a pass-through entity [Health Center Program awardee] and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above [see 45 CFR 75.351(a) and (b)] may not be present in all cases, and the pass-through entity [Health Center Program awardee] must use judgment in classifying each agreement as a subaward or a procurement contract.”
  3. Specifically, the purpose of a subaward is to carry out a portion of the Federal award and creates a Federal assistance relationship with the subrecipient, while the purpose of a contract is to obtain goods or services for the health center‘s own use and creates a procurement relationship with the contractor.
  4. For the purposes of the Health Center Program, contracting for substantive programmatic work applies to contracting with a single entity for the majority of health care providers. The acquisition of supplies, material, equipment, or general support services is not considered programmatic work. Substantive programmatic work may be further defined within HRSA Notices of Funding Opportunity (NOFOs) and applications.
  5. Simplified acquisition threshold means the dollar amount below which a non-Federal entity may purchase property or services using small purchase methods. Non-Federal entities adopt small purchase procedures in order to expedite the purchase of items costing less than the simplified acquisition threshold. The simplified acquisition threshold is set by the Federal Acquisition Regulation at 48 CFR subpart 2.1 and in accordance with 41 U.S.C. 1908. The acquisition threshold is periodically adjusted for inflation.
  6. As defined by 45 CFR 75.329(f), procurement by “non-competitive proposals” is procurement through solicitation of a proposal from only one source.
  7. The health center is responsible, in accordance with good administrative practice and sound business judgment, for the settlement of all contractual and administrative issues arising out of procurements paid for in whole or in part under the Federal award. These issues include, but are not limited to, source evaluation, protests, disputes, and claims.
  8. Specifically, the purpose of a subaward is to carry out a portion of the Federal award and create a Federal assistance relationship with the subrecipient, while the purpose of a contract is to obtain goods or services for the health center’s own use and creates a procurement relationship with the contractor.
  9. Per 45 CFR 75.351(c): “In determining whether an agreement between a pass-through entity [Health Center Program awardee] and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above [see 45 CFR 75.351(a) and (b)] may not be present in all cases, and the pass-through entity [Health Center Program awardee] must use judgment in classifying each agreement as a subaward or a procurement contract.”
  10. See 45 CFR 75 Subpart E: Cost Principles.
  11. See 45 CFR 75.361 for HHS retention requirements for records.
  12. For the purposes of the Health Center Program, contracting for substantive programmatic work applies to contracting with a single entity for the majority of health care providers. The acquisition of supplies, material, equipment, or general support services is not considered programmatic work. Substantive programmatic work may be further defined within HRSA Notices of Funding Opportunity (NOFOs) and applications.
  13. For further guidance on these requirements, see the HHS Grants Policy Statement, at https://www.hrsa.gov/grants/hhsgrantspolicy.pdf (PDF - 1.3 MB).
  14. Subrecipients are generally eligible to receive FQHC payment rates under Medicaid and Medicare, 340B Drug Pricing, and Federal Tort Claims Act (FTCA) coverage. However, such benefits are not automatically conferred and may require additional actions and approvals (for example, submission and approval of a subrecipient FTCA deeming application).
  15. For further guidance on these requirements, see the HHS Grants Policy Statement, at https://www.hrsa.gov/grants/hhsgrantspolicy.pdf (PDF - 1.3 MB).
  16. See 45 CFR 75 Subpart E: Cost Principles.
  17. Per 45 CFR 75.521, the management decision [issued by the health center to the subrecipient] must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action.
  18. See 45 CFR 75.361 for HHS retention requirements for records.

 

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Date Last Reviewed:  January 2018


Health Center Compliance Manual

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