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Final Rule: Conditions for FFP in the Costs of Automatic Data Processing

AT-78-22

Published: November 17, 1978
Information About:
State/Local Child Support Agencies
Topics:
Funding, Federal Financial Participation (FFP)
Types:
Policy, Action Transmittals (AT), Regulations
Tags:
Electronic Communication, Procurement/Acquisition

FFP in Costs of ADP under Medical and Public Assistance Programs

REGULATION

ACTION TRANSMITTAL

OCSE-AT-78-22

November 17, 1978

TO:STATE AGENCIES ADMINISTERING CHILD SUPPORT ENFORCEMENT PLANS APPROVED UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT AND OTHER interested INDIVIDUALS

SUBJECT:Conditions for Federal financial participation in the Costs of Automatic Data Processing under Medical and Public Assistance Programs

ATTACHMENT:Final regulations which consolidate and codify in a single part the Department's procedures for implementing the principles of OMB Circular A-90 and the provisions of 45 CFR Part 74, Appendix C, Part II, C.1. with respect to the claiming of Federal financial participation for the acquisition and use of automatic data processing equipment and services. These regulations apply to the administration of the financial assistance, medical assistance, social services and Child Support Enforcement programs under the Social Security Act.

The new Part 95:

1)requires States, and local governments through States, to obtain prior approval from HEW of a written plan of action which contains:

--a statement of needs and objectives.

--a preliminary cost/benefit analysis.

--a description of the scope and the nature of the activities to be undertaken and the method to be used to accomplish the activities.

--a proposed activity schedule.

--an estimate of costs.

Title 45--Public Welfare

SUBTITLE A -- DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, GENERAL ADMINISTRATION

PART 95--GENERAL ADMINISTRATION--GRANT PROGRAMS (PUBLIC ASSISTANCE AND MEDICAL ASSISTANCE)

Conditions for Federal Financial Participation in the Cost of Automatic Data Processing

AGENCY: Department of Health, Education, and Welfare (HEW).

ACTION: Final rule

SUMMARY: The regulation contains requirements for the claiming of Federal matching funds for the acquisition and use of automatic data processing (ADP) equipment and services in the administration of the financial assistance, medical assistance, social services, and child support enforcement programs under the Social Security Act.

EFFECTIVE DATE: This regulation is effective on December 28, 1978, or earlier at State option.

FOR FURTHER INFORMATION CONTACT: L. David Taylor, 202-245-6162.

SUPPLEMENTARY INFORMATION: The regulation consolidates and codifies procedures for implementing the principles of OMB Circular A-90, and the provisions of 45 CFR Part 74, Appendix C, Part II, C. 1, pertaining to the claiming of Federal financial participation for the acquisition and use of automatic data processing equipment and services. This regulation is applicable to the financial assistance, medical assistance, social services, and child support enforcement programs under titles I, IV-A, IV-B, IV-C, IV-D, X, XIV, XVI(AABD), XIX, and XX of the Social Security Act.

45 CFR Part 74, Appendix C, Part II, C. 1, requires prior approval by grantor agencies for the costs of data processing equipment. OMB Circular A-90 requires that Federal agencies insure that systems development activities for which States are requesting Federal funding are well planned and do not involve duplication of effort and expense.

The regulation requires States, and local governments through States, to obtain prior approval from HEW of a written plan of action that contains a statement of needs and objectives, a preliminary cost/benefit analysis, a description of the scope and nature of the activities to be undertaken and the methods to be used to accomplish the activities, a proposed activity schedule, and an estimate of costs. In addition, the regulation requires prior approval for requests for proposals (RFP's) that States estimate to cost in excess of $25,000 permits HEW torequire selectively prior approval of contracts that cost more than $25,000 and emphasizes the competitive procurement requirements in 45 CFR Part 74 Subpart P.

The regulation provides for subsequent HEW review of State and local agency acquired equipment and services to insure that they are used for the purpose for which Federal funds were approved.

The regulation is based on the provisions in sections 3, 403, 422, 433, 455, 1003, 10002, 1403, 1603, 1903, and 2002 of the Social Security Act; 45 CFR Part 74, Appendix C, Part II, C. 1; and OMB Circular A-90.

A notice of proposed rulemaking was published on February 24, 1976, in the Federal Register (41 FR 8065). The Department received comments from 15 State health and welfare departments. The comments suggested only minor changes to the proposed rulemaking. The specific comments and the Department's response are as follows:

1. Comment: The introductory statement on programs coverage does not agree with detailed statements in the text of this regulation.

Response: The preamble to the proposed rulemaking stated that "the program covered under this section are Federal-State programs of public assistance and medical assistance." The term "public assistance" is intended to cover the programs of cash assistance and services other than medical assistance. The preamble and 95.601 defines program coverage to include titles I, IV-A, IV-B, IV-C, IV-D, X, XIV, XVI(AABD), XIX, and XX of the Social Security Act.

2. Comment: Duplication or conflict between proposed 45 CFR Part 95, Subpart F and 42 CFR 450.90 (previously 45 CFR 250.90).

Response: The Health Care Financing Administration will revise 42 CFR 450.90 to incorporate a reference to this subpart and to eliminate any existing duplication. There is no conflict between these two regulations.

3. Comment: Reference to the Social and Rehabilitation Service as "Service" is sometimes confusing with the definition of services, an entirely different matter.

Response: The regulation is changed to use "Department" instead of "Service." Since the publication of the notice of proposed rulemaking, the Social and Rehabilitation Service (SRS) was abolished and the responsibility for SRS programs reassigned to the Social Security Administration (SSA) for cash assistance for titles I, IV-A, X, XIV, and XVI(AABD); Office of Human Development Services (OHDS) for Social Services for titles I, IV-A, IV-B, IV-C, X, XIV, XVI(AABD) and XX; and Health Care Financing Administration (HCFA) for title XIX. To minimize coordination problems caused by the reorganization. State ADP requests are addressed to the Assistant Secretary for Management and Budget (ASMB). That office forwards requests to the appropriate offices and is responsible for coordinating requests that involve more than one HEW component.

4. Comment: The regulation should include a statement that relates to other titles which might become involved, particularly titles II and XVIII.

Response: Titles II and XVIII are programs administered under a separate set of regulations.

5. Comment: The need to obtain an approved acceptance document will require the employment of additional staff.

Response: The Department recognizes that a State may need to augment its staff to plan and monitor projects that are subject to this regulation. We consider this a requirement for good management and expect that the responsible State agency will see that this necessary function is fulfilled.

6. Comment: The Department should require in the advance planning document (APD) a statement that specifies a period of time for which the systems described are to be used.

Response: The Department agrees with this comment. The definition for an APD is amended to add after the word "budget" the phrase "and a statement indicating the period of time for which the systems described are expected to be used."

7. Comment: The activities required to produce an APD are substantial and require the completion of studies related to project scope, feasibility, cost/benefit analysis, project plan, and budget. It is assumed that these activities do qualify for FFP and that the exemption of services that do not exceed $25,000 allows the use of ADP services in the development of the APD.

Response: Such activities do qualify for FFP at the appropriate rate, and HEW prior approval is not required if the expenditures for each study do not exceed $25,000.

8. Comment: The definition of ADP services appears to include services provided by State agency staff, and implies that States need prior approval for agency developed systems and ongoing maintenance.

Response: HEW requires prior approval of State agency developed systems that cost in excess of $25,000. HEW does not require separate approval of ongoing maintenance provided the system request includes the cost of ongoing maintenance.

9. Comment: A question was raised of the desirability of applying the proposed regulation to those situations where ADP services are provided by a State central data processing facility to other State agencies.

Response: The regulation requires that an agreement be signed by both the providing and receiving agencies when services are obtained from a central source. The purpose of this requirement is to assure that services are provided with sufficient quality at an equitable rate and that both parties are fully aware of their individual responsibilities. The Department has required such agreements since 1965.

10. Comment: Provider should be defined so as to exempt a State central data processing facility operating as a service center that earns (cash funds) from the requirement for prior approval.

Response: A State central data processing facility mustcomply with the prior approval requirements when it provides ADP

services to the State agency that exceed $25,000. Specifically § 95.613 requires prior HEW approval of equipment that is acquired by the State central data processing facility primarily to support the programs covered by the regulation, and § 95.611(b) requires prior approval of the service agreement between the State agency and State central data processing facility.

11. Comment: "Software" and "documentation" are not necessarily the same and should be clarified.

Response: Documentation as used in definition for "software" means the detailed specification (program specification, standards, construction, coding, testing, and program management) and description of the software computer programs.

12. Comment: The regulation should make it clear that the proposed amount of $25,000 applies only to programs under the responsibility of HEW and that amounts under $25,000 are not subject to the Federal approval process.

Response: Section 95.601(a) specifies titles I, IV-A, IV-B, IV-C, IV-D, X, XIV, XVI (AABD), XIX, and XX of the Social Security Act as the programs covered by this regulation. System developments or hardware acquisitions in support of other Federal programs are not subject to the requirements of this regulation. Procurements under $25,000 while not subject to prior approval, are subject to periodic review.

13. Comment: Does the exemption from prior approval cited in § 95.623 extend to all subitems in § 95.611(b) (1) through (5)?

Response: The exemption applies to all subitems listed in § 95.611(b)(1) through (5).

14. Comment: What are the criteria for ascertaining when a modification or task in systems maintenance requires prior approval?

Response: Any system modification that increases the contract or service agreement by more than $25,000 requires prior approval. The cost of ongoing maintenance for approved ADP services is an identified charge in the contract or State service agreement; accordingly, HEW does not require separate approval of ongoing maintenance. If the State agency requests a contractor or State central data processing facility to provide additional ADP services, including system modification or maintenance support, that cost $25,000 more than charges covered in the contract or service agreement, then HEW requires prior approval for the additional ADP services.

15. Comment: The $10,000 baseline is low and should be increased to $25,000. It is not clear if the baseline amount applies separately to equipment and services or to the aggregate.

Response: The $10,000 baseline is increased to $25,000. This baseline applies to individual acquisitions of equipment or services.

16. Comment: The regulation should exclude ADP services to handle federally supplied data such as buy-in, Bendex, socialsecurity enumeration, and SSI data. Prior approval of administrative expenses will impede development of effective systems.

Response: Normally, system development changes of this type would not exceed a cost of $25,000 and would not require prior approval. When such efforts do exceed the $25,000 limit, prior approval is required.

17. Comment: It is assumed that changes are exempt from the prior approval requirement if the major system itself was implemented in conformance with these provisions.

Response: Any system modification of enhancement that exceeds $25,000 requires prior departmental approval.

18. Comment: The conventional keypunch service should be further defined.

Response: To clarify the regulation the definition for conventional keypunch services is eliminated and a definition is added for data input equipment. The definition includes, but is not limited to, the following types of data input equipment: Punchcard accounting machines, keypunch, key to disk, key to magnetic tape, optical character recognition, hardcopy and video display terminals, and word processing equipment primarily used to input data.

19. Comment: What does the $25,000 include? Total system cost? Cost per system component, etc.?

Response: The $25,000 limit applies to individual acquisitions of ADP equipment or services for the estimated or actual period of time covered by the advance planning document, RFP, contract, or service agreement. Guidelines for periodic HEW review of acquisitions of $25,000 or less will insure that several small acquisitions are not used as a substitute for a single acquisition in excess of $25,000.

20. Comment: HEW should limit prior approval to new applications with routine maintenance provided by a State central data processing facility explicitly exempted from prior approval provisions.

Response: Prior approval is not required unless a new individual acquisition or development task exceeds $25,000. The response to comment 14 addresses routine maintenance.

21. Comment: The Department should permit telephone clarification of minor technical points. The APD is a basic planning document and should not be regarded as a final design product.

Response: The Department recognizes that the APD is the initial step to a system development effort and may require amendments. The supporting guidelines to this regulation encourage the use of the telephone to clarify minor technical points; such clarification will be confirmed in writing.

22. Comment: The addition of the exception provided for in § 95.613 is a good one and it is realistic. The sentence in question is: "The service agreement between the State agency and the State central data processing facility is exempt from the procurement standards." This exception had not been previouslyprovided for in 45 CFR 74.155.

Response: This provision was added because the procurement standards in subpart P of 45 CFR Part 74 do not require that State and local government agencies compete with the private sector.

23. Comment: Section 95.613 does not acknowledge the complexity of State procurement policy. Most States have a local centralized ADP procurement authority which limits the possibility of strict adherence to competitive bidding. A nonindustrial State finds it very difficult to locate after-the-sale service, and approach the problem through life cycle costing which includes system maintenance.

Response: The procurement standards in 45 CFR part 74, subpart P, provide States the option to use competitive negotiation if formal advertising is not practical or feasible, but under either method of procurement, States must specify all requirements needed for an acceptable bid. Where there is only one supplier of ADP equipment or services, sole source procurement may be justified.

24. Comment: HEW should amend the regulation to say that when sufficient justification exists to replace an ADP system prior to the time delineated in the "Advance Planning Document" the use of the system may be terminated without penalty.

Response: The final clause of § 95.619 states " . . . unless the Department determines that an elapsed shorter period of time is sufficient to justify the Federal funds invested." This paragraph provides HEW with the option to permit termination of a system in a time period shorter than originally stated in the APD when sufficiently justified.

25. Comment: The Department should conduct periodic onsite reviews so as to avoid disruption and assure that the appropriate staff are available.

Response: Section 95.621 now states that "where practical, the Department will develop a mutually acceptable schedule between the Department and State or local agencies prior to conducting onsite surveys and reviews."

26. Comment: Section 95.631 appears to invalidate previously approved cost allocation plans.

Response: The ADP equipment and services approved under § 95.611 may cause the State to change the ADP billing rates or billing methods in the approved cost allocation plan. The relationship between subpart F and the cost allocation plan is explained in § 95.631.

27. Comment: A recommendation was made that automatic approval be granted when the Department fails to respond to a State request within 60 days.

Response: HEW cannot grant automatic approval because the submittal may fail to meet the requirements of Federal laws and regulations. State requests that meet requirements will normally be approved in 30 days. If HEW has not communicated approval or disapproval within 30 days, the ASMB or a HEW component will notify the State regarding the status of the request for priorapproval.

28. Comment: The regulation should specify that this approval authority relates to the technical merit of a system and not to the program policy aspects.

Response: Approvals are based on improvements in program support and the technical merits of the request. In addition, the request must comply with program policy.

29. Comment: The regulation should specify who has the final approval authority. In the past we have identified up to five central offices who thought they were the approval authority.

Response: Offices with authority for prior approvals required as a condition for FFP are specified in the regulation. The ASMB coordinates an HEW reply for requests that involve more than one HEW component. Requests that involve a single component are answered by that component.

Other changes made in response to review within HEW included:

1. Work order changes to make clear that matching rates are not set by the State plan (§ 95.601).

2. New subdivisions (e) and (f) to the definition of service agreement make clear that existing requirements are applicable to agreements with providers of ADP services.

3. A definition of "Department" is added.

4. A definition of "approving component" is added.

5. A definition of "State agency" is added.

6. Section 95.611 is reworded to clarify when and for what prior approval is required.

7. Editorial changes are made in § 95.615.

8. Section 95.619 is revised to clarify the time relationships.

9. Section 95.631 caption is changed to read "Relationship to the approved cost allocation plan."

10. Clarifying language is added to § 95.623.

11. The title of § 95.611(c) is made more specific.

12. A new § 95.641 specifies that the capitalization and depreciation provisions of 45 CFR 205.160(a) and 304.24 do not apply to ADP equipment provided the purchase benefits the Department and provided the Department agrees to the ADP equipment purchase. The purchase of ADP equipment is beneficial when HEW saves money as a result of the purchase.

13. A new § 95.643 is added to exempt ADP equipment and services that cost $25,000 or less from the requirement for prior approval.

14. The notice of proposed rulemaking was published under 45 CFR 204.6. As part of HEW's recodification effort the final regulation is published under 45 CFR Part 95, Subpart F.

The proposed regulation, with the changes discussed above, is hereby adopted.

(Catalog of Federal Domestic Assistance Program Nos. 13.679, Child Support Enforcement Program: 13.70-7, Child Welfare Services: 13.714, Medical Assistance Program: 13.724, PublicAssistance State and Local Training: 13.748, Work Incentive Program - Child Care - Employment Related Supportive Services: 13.754, Public Assistance - Social Services: 13.761, Public Assistance - Maintenance Assistance (State Aid): 13.771, Social Services for Low Income and Public Assistance.)

Note - The Department has determined that this document does not require preparation of an economic impact statement under Executive Order 11821 and 11949 and OMB Circular A-107.

Dated: May 12, 1978.

Robert A Derzon,

Administrator, Health Care Financing Administration.

Arabella Martinez,

Assistant Secretary for Human

Development Services.

Francis D. DeGeorge

Acting Commissioner,

Social Security

Louis B. Hays,

Acting Director, Office of Child Support Enforcement.

Approved: August 28, 1978.

Hale Champion,

Acting Secretary

1. Part 95, Subtitle A, Title 45 of the Code of Federal Regulations is amended by establishing a new part 95 to read as follows:

Part 95 - GENERAL ADMINISTRATION - GRANT PROGRAMS (PUBLIC ASSISTANCE AND MEDICAL ASSISTANCE)

Subpart A-Reserved

Subpart B-Reserved

Subpart C-Reserved

Subpart D-Reserved

Subpart E-Reserved

Subpart F-Automatic data processing equipment and services -conditions for Federal financial participation.

General

Sec.

95.601 Scope and applicability.

95.605 Definitions.

Specific Conditions for FFP

95.611 Prior approval conditions.

95.613 Procurement standards.

95.615 Access to records

95.617 Software ownership rights

95.619 Use of ADP systems

95.621 ADP reviews.

95.623 Waiver of prior approval requirements.

Cost Allocation Plan

95.631 Relationship to the approved cost allocation plan.

Exemptions

95.641 Exemption from 45 CFR 205.160(a) and 304.24.

95.643 Exemption from 45 CFR Part 74, Appendix C, Part II C.1.

Authority: Sec. 1102, 49 Stat. 647, 42 USC 1302, sec. 7(b) 68 Stat. 658,29 USC 37(b), sec. 139, 84 Stat. 1323, 42 USC 2577(b); sec. 144, 81 Stat. 529, 42 USC 2678.

Subpart F - Automatic Data Processing Equipment and Services -Conditions for Federal Financial Participation

General

§ 95.601 Scope and applicability.

This subpart prescribes the conditions under which the Department of Health, Education, and Welfare will approve Federal financial participation (FFP), at the applicable rates, for the costs of automatic data processing incurred under an approved State plan for titles I, IV-A, IV-B, IV-C, IV-D, X, XIV, XVI(AABD), XIX or XX of the Social Security Act.

§ 96.605 Definitions

"Acceptance documents" means written evidence of satisfactory completion of an approved phase of work or contract, and acceptance thereof by the State agency.

"Advance planning document" or "APD" means a written plan of action to acquire the proposed ADP services or equipment. The APD must contain a statement of needs and objectives; a preliminary cost/benefits analysis; a personnel resource statement indicating availability of qualified and adequate staff, including a project director to accomplish the project objectives; a detailed description of the nature and scope of the activities to be undertaken and the methods to be used to accomplish the project; a proposed activity schedule for the project; a proposed budget; and a statement indicating the period of time the State expects to use the ADP service or equipment.

"Approving component" means an organization within the Department that is authorized to approve requests for the acquisition of ADP equipment or ADP services that exceed $25,000 in Federal and State funds; Social Security Administration (SSA)for cash assistance for titles I, IV-A, X, XIV, XVI(AABD), Office of Human Development services (OHDS) for social services for titles I, IV-A, IV-B, IV-C, X, XIV, XVI(AABD) and XX; Office of Child Support Enforcement (OCSE) for title IV-D; and Health Care Financing Administration (HCFA) for title XX of the Social Security Act.

"Automatic data processing" or "ADP" means data processing performed by a system of electronic or electrical machines so interconnected and interacting as to minimize the need for human assistance or intervention.

"Automatic data processing equipment" or "ADP equipment" means: (a) Electronic digital computers, regardless of size, capacity, or price, that accept data, input, store data, perform calculations, and other processing steps and prepare information output:

(b) All peripheral or auxiliary equipment used in support of electronic computers whether selected and acquired with the computer or separately;

(c) Data transmission or communications equipment that is selected and acquired solely or primarily for use with a configuration of ADP equipment which includes an electronic computer and;

(d) Data input equipment that is used to enter data directly or indirectly in to an electronic digital computer; peripheral or auxiliary equipment; or data transmission or communications equipment.

"Automatic data processing services" or "ADP services" means:

(a) Services to operate ADP equipment, either by private sources, or by employees of the State agency, or by State or local organizations other than the State agency; and/or

(b) Services provided by private sources or by employees of the State agency or by State and local organizations other than the State agency to perform such tasks as feasibility studies, system studies, system design efforts, development of system specifications, system analysis, programming and system implementation.

"Data processing" means the preparation of source media containing data or basic elements of information, and the use of such source media according to precise rules of procedures to accomplish such operations as classifying, sorting, calculating, summarizing, recording, and transmitting.

"Department" means the Department of Health, Education, and Welfare.

"Feasibility study" means a preliminary study to determine whether it is sufficiently probable that effective and efficient use of ADP equipment or systems can be made to warrant the substantial investment of staff, time and money.

"FFP" means Federal financial participation.

"Service agreement" means a document signed by the State or local agency and the State or local central data processing facility providing ADP services (provider) which:

(a) Identifies those ADP services the central data processing facility will provide;

(b) Includes, preferably as an amendable attachment, a schedule of charges for each identified ADP service, and a certification that these charges apply equally to all users;

(c) Includes a description of the method(s) of accounting for the services rendered under the agreement and computing services charges;

(d) Includes assurances that services provided will be timely and satisfactory;

(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 45 CFR 205.50 and 45 CFR 302.18; and

(f) Includes a clause that prohibits the provider from discriminating against employees on the basis of their race, sex, religion and age.

(g) Requires the provider to obtain prior approval from the Department for ADP equipment and ADP services that is acquired primarily to support the titles covered by this subpart and requires the provider to comply with 45 CFR Part 74, Subpart P for procurements related to the service agreement.

"Software" means a set of computer programs, procedures and associated documentation by which ADP equipment is used and operated.

"State agency" means the State agency administering or supervising the administration of the State plan that is required by the Department for the Social Security Act programs.

"System design" means the putting together of a new or more efficient ADP system.

"System specifications" means information about the new ADP system - such as workload descriptions, input data, information to be maintained and processed, data processing techniques, and output data - which is required to determine the ADP equipment and software necessary to implement the system design.

"System study" means the examination of existing information flow and operational procedures within an organization. The study essentially consists of three basic phases: data gathering, investigation of the present system and new information requirements; analysis of the data gathered in the investigation; and synthesis, or refitting of the parts and relationships uncovered through the analysis into an efficient system.

SPECIFIC CONDITIONS FOR FFP

§ 95.611 Prior approval conditions.

(a) General--$25,000 acquisition requirement. A State must obtain prior written approval by the Department for acquisition of ADP equipment or ADP services when the acquisition cost of ADP equipment or ADP services exceeds $25,000 in Federal and State funds. The State shall submit requests for prior systemsapproval, signed by the appropriate State official, to the Assistant Secretary for Management and Budget (ASMB), Department of Health, Education, and Welfare. Requests from States shall indicate clearly the Social Security Act titles under which funding is requested, and the estimated amount or percent that is requested for each title. The State shall send three copies of the request for each component to the Department that must approve the request. The Department will acknowledge receipt of the State request.

(b) Specific prior approval requirements. The State agency shall obtain written approval of the Department:

(1) For the advance planning document or any change of the advance planning document prior to entering into contractual agreements or making any other commitment for acquisition of ADP equipment or ADP services;

(2) For the service agreement (when data processing services are to be provided by a State central data processing facility or by another State or local agency);

(3) For the request for proposal (RFP) prior to its issuance when service or equipment proposals are being solicited from commercial sources;

(4) When required, for the contract, prior to signature of the contracting officer. The Department requires approval of the contract for complex procurements, or where the grantee has a history of performance problems.

(5) When required for:

(i) The feasibility study;

(ii) The system study;

(iii) The system design;

(iv) The system specifications; and

(v) The acceptance document.

The Department will notify the State agency if such prior approval is required under paragraphs 95.611(b)(4) or (5).

(C) Prompt action on requests for prior approval. The ASMB will promptly send to the approving components the items specified in paragraph (b) of this section. If the Department has not communicated approval or disapproval within 30 days the ASMB or an approving component will notify the State regarding the status of the request.

§ 95.613 Procurement standards.

Procurements of ADP equipment and services are subject to the procurement standards in subpart P, 45 CFR, Part 74. Those standards include a requirement for maximum practical open and free competition regardless of whether the procurement is formally advertised or negotiated. Those standards, as well as the requirement for prior approval, apply to ADP services and equipment acquired by a State or local agency, and to ADP services and equipment acquired by a State or local central data processing facility primarily to support the Social Security Act programs covered by this subpart. The service agreement betweenthe State agency and the State central data processing facility is exempt from the procurement standards because State and local government agencies are not required to compete with the private sector.

§ 95.615 Access to records.

In accordance with 45 CFR Part 74, Subpart D, the State agency must allow the Department access to the system in all of its aspects, including 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.

§ 95.617 Software and ownership rights.

(a) General. The State or local government will have all ownership rights in software or modifications thereof and associated documentation designed, developed or installed with Federal financial participation under this subpart.

(b) Exemption. The Department reserves a royalty-free-nonexclusive and irrevocable license to reproduce, publish, or otherwise use, and to authorize others to do so, such software, modification and documentation.

(c) Proprietary software. Proprietary software which is provided at established catalog or market prices and sold or leased to the general public shall not be subject to the ownership provisions of this subpart.

§ 95.619 Use of ADP Systems.

ADP systems designed, developed, or installed with Federal financial participation shall be used for a period of time specified in the ADP, unless the Department determines that the elapsed shorter period of time is sufficient to justify the Federal funds invested.

§ 95.621 ADP reviews.

The Department will conduct periodic onsite surveys and reviews of State and local agency ADP methods and practices to determine the adequacy of such methods and practices and to assure that ADP equipment and services are utilized for the purposes consistent with proper and efficient administration under the Act. Where practical, the Department will develop a mutually acceptable schedule between the Department and State or local agencies prior to conducting such surveys or reviews, which may include but are not limited to:

(a) Pre-installation readiness. A pre-installation survey including an onsite evaluation of the physical site and the agency's readiness to productively use the proposed ADP services, equipment or system when installed and operational.

(b) Post-installation. A review conducted after installation of ADP equipment or systems to assure that the objectives forwhich FFP was approved are being accomplished.

(c) Utilization. A continuing review of ADP facilities to determine whether or not the ADP equipment or services are being efficiently utilized in support of approved programs or projects.

§ 95.623 Waiver of prior approval requirements.

ADP equipment and services acquired by a State agency prior to the effective date of these regulations may qualify for FFP provided the Department waives the prior approval requirement. The Department will waive the prior approval requirement when it determines that the ADP equipment or services would have received prior approval had a request for such approval been made by the State agency.

COST ALLOCATION PLAN

§ 95.631 Relationship to the approved cost allocation plan.

(a) General. The conditions of this subpart apply notwithstanding the existence of an approved cost allocation plan. States that operate with a central data processing facility shall use the approved cost allocation plan billing rates and billing methods in the service agreement with the State agency. The State shall bill the Department, at the approved rates, for the ADP equipment and services used by the individual Department programs.

(b) Impact on the cost allocation plan. ADP equipment and services purchased or leased by the State central data processing facility may cause a change to the approved cost allocation plan. (For example, the lease of an additional nondedicated computer.) When a change is necessary, the State shall revise the billing rates and billing methods prior to revising the service agreement.

EXEMPTIONS

§ 95.641 Exemption from 45 CFR 205.160(a) and 304.24.

The capitalization and depreciation provisions of 45 CFR 205.160(a) and 304.24 do not apply to ADP equipment provided the purchase benefits the Department and provided the Department agrees to the ADP equipment purchase.

§ 95.643 Exemption from 45 CFR Part 74; Appendix C, Part II. C.1.

The requirement in 45 CFR Part 74; Appendix C, Part II, C. 1. for prior approval of ADP equipment and services is waived for items that cost $25,000 or less.

[FR Doc. 78-27290 Filed 9-28-78; 8:45 am]