NPRM: Automatic Data Processing Equipment and Services; Conditions for FFP
Automatic Data Processing Equipment and Services; Conditions for Federal Financial Participation
November 23, 1984
TO:STATE AGENCIES ADMINISTERING CHILD SUPPORT ENFORCEMENT PLANS UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT AND OTHER INTERESTED INDIVIDUALS
SUBJECT: Automatic Data Processing Equipment and Services; Conditions for Federal Financial Participation
ATTACHMENT: Attached are proposed regulations with a comment period issued by the Office of the Secretary, Department of Health and Human Services (HHS), that change requirements in 45 CFR Part 95, Subpart F for the claiming of Federal matching funds for the acquisition of automatic data processing (ADP) equipment and services in the administration of certain public assistance programs under the Social Security Act (including title IV-D).
PERIOD: Consideration will be given to written comments and suggestions received by the Director, Office of Public and State Data Systems, OMAS, Hubert H. Humphrey Building Room 514-E, 200 Independence Avenue, S.W., Washington, D.C. 20201, on or before January 18, 1985.
REFERENCE: 45 CFR Part 95, Subpart F
REFERENCES: OCSE-AT-78-22, dated November 17, 1978, and OCSE-AT-80-7, dated April 8,1980.
INQUIRIES TO: OCSE Regional Representatives.
Office of Child Support Enforcement
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
45 CFR Part 95
Automatic Data Processing Equipment and Services; Conditions for Federal Financial Participation
AGENCY: Office of the Secretary, HHS.
ACTION: Notice of Proposed Rulemaking (NPRM).
SUMMARY: In September 1978, Health and Human Services (HHS) published a regulation containing requirements that State and local governments must observe to claim Federal reimbursement for the costs of automatic data processing (ADP) equipment and services. The regulations are applicable to certain public assistance programs under the Social Security Act. The regulations were modified in February 1980 to implement certain changes.
These regulations change requirements for the claiming of Federal matching funds for the acquisition of automatic data processing (ADP) equipment and services in the administration of public assistance programs under the Social Security Act
titles I, IV, X, XIV, XVI,(AABD), XIX, and XX.
The change modifies the regulation to conform to recent legislative changes and raises the HHS prior approval threshold for most State and local government acquisitions. The purpose of the change is to:
-Simplify and make these regulations consistent, to the maximum extent possible, with those regulations that govern availability of FFP at the enhanced matching rate for computerized systems that support programs under title IV-A, IV-D and XIX of the Social Security Act;
-Allow States more flexibility in implementing small systems; and
DATES: Comments must be received by January 18, 1985. If we receive substantive comments, HHS will reissue the NPRM at a later date. We will consider comments submitted in response to the present effort to update Office of Management and Budget Circular A-102, to the extent that such comments relate to provisions of these proposed regulations.
ADDRESSES: Send written comments to: Joseph F. Costa, Director, Office of Public and State Data Systems, OMAS, Hubert H. Humphrey Building Room 5l4-E, 200 Independence Ave., SW., Washington, D.C. 20201.
FOR FURTHER INFORMATION CONTACT Joseph F. Costa (202) 245-7458.
SUPPLEMENTARY INFORMATION: HHS, then Health, Education, and Welfare (HEW), published final regulations "Automatic Data Processing Equipment and Services conditions for Federal Financial Participation", Subpart F of 45 CFR Part 95 in the Federal Register, page 44851, on September 29, 1978. These regulations required State and local governments to obtain prior written approval by the Department for the acquisition of ADP equipment or ADP services when the acquisition costs exceeded $25,000. These regulations were modified by a rule change published in the Federal Register, page 10794, on February 19, 1980, to raise the prior approval threshold to $100,000 for acquisitions costing that amount or more in Federal and State funds over a twelve-month period and to $200,000 in Federal and State funds for the total acquisition. The change also required States to submit a brief prior notice of acquisition for ADP equipment and services that cost $25,000 to $100,000 over a twelve-month period.
In analyzing State requests made since the 1980 regulation change, HHS found that State requests for acquisitions costing between $100,000 and $200,000 represent 9.9 percent of the total number of requests but only 1.4 percent of the dollar amount requested. Additionally, HHS found that States had submitted only 109 prior notices during the three-year period. Therefore, HHS is raising the prior approval threshold to $200,000 for acquisitions costing that amount or more in Federal and State funds over a twelve-month period and to $300,000 in Federal and State funds for the total acquisition; and is eliminating the prior notice requirement, thus reducing paperwork requirements. The changes also modify the regulation to conform to recent legislative changes in administration of some Social Security Act programs and to clarify the regulatory language.
Specifics of the changes are:
1. The Adoption Assistance and Child Welfare Act of 1980 (Pub. L. 96-272, June 17, 1980) amended title IV of the Social Security Act by adding Part E-Federal Payments for Foster Care and Adoption Assistance. We are adding title IV-E to the applicable list of programs covered under this regulation. This is based on the provisions in section 474 of the Social Security Act. The title IV-E program is administered by the Office of Human Development Services, HHS. We are retaining title IV-B because of the Interaction of program and information systems requirements between titles IV-A, IV-B and IV-E.
2. The Omnibus Budget Reconciliation Act of 1981 (Pub. L. 97-35) established seven block grant programs to be administered by the Secretary of Health and Human Services. Section 2352 of this Act amends title XX of the Social Security Act to establish a social services block grant. Since the States must assume administration of a block grant in its entirety, all references to the title XX program will be deleted from this regulation. Section 2352 of this Act also deleted the social services programs in Puerto Rico, Guam, the Virgin Islands and the Commonwealth of the Northern Virgin Islands under titles I, IV-A, X, XIV and XVI (AABD). All references to these service programs have also been deleted.
3. Sections 405 and 406 of Pub. L. 96-265 modified title IV-D and title IV-A of the Social Security Act respectively to provide enhanced FFP for States which opt to plan, design, develop, improve and install computerized systems which meet the functional and administrative requirements stated in Pub. L. 96-265 and delineated in regulations promulgated by the Department on September 30, 1981. The regulation citations are 45 CFR Parts 205 and 307. Title XIX of the Social Security Act also authorizes enhanced FFP for Medicaid systems. The title XIX enhanced funding regulation citation is 42 CFR Part 433. Subpart G the proposed changes to Part 95 cross reference the regulations for higher level matching in Federal financial participation available for certain ADP systems.
4. We are making minor amendments to Section 95.605 to include certain definitions now included in regulations governing enhanced funding for titles IV-A, IV-D and XIX. The definitions that are common to multiple programs will be included in 45 CFR Part 95, Subpart F and eliminated from the companion regulations for titles IV-A, IV-D and XIX. This will eliminate redundant and/or conflicting definitions from the regulations governing ADP systems, equipment and services. The term definitions affected are:
-Advance planning document is modified to include the requirement for a statement of alternative considerations and a requirements analysis. Definitions of these terms are added to § 95.605.
-"Automatic data processing equipment" is expanded to include the term "hardware" to be interchangeable with "automatic data processing equipment". Hardware is the terminology used in Pub. L. 96-265 that authorizes titles IV-A and IV-D of the Social Security Act to provide enhanced funding for States that design, develop, improve and install computerized systems which meet the functional and administrative requirements stated in Pub. L. 96-265.
-"Design or system design" was included in § 95.605 under the term "system design". The modified definition standardizes the term as defined in regulations governing enhanced funding for systems authorized under titles IV-A, IV-D and XIX.
-"Development", "Installation", and "Operation" are term definitions not included previously in 45 CFR Part 95, Subpart F but that were included in Parts 205 and 307 of this title for specific requirements for titles IV-A and IV-D and 42 CFR Part 433, Subpart C for specific requirements of title XIX. Inclusion of these definitions in this section standardizes the definitions for the multiple programs and eliminates the repetition of the terms in the companion regulations.
-"Enhanced matching rate" is being added to define the term used for the higher level matching rate for FFP authorized for certain ADP systems by 45 CFR Part 205 and § 307.30 for titles IV-A and IV-D and CFR Part 433, Subpart C for title XIX.
-"Software" is modified to clarify and simplify the term definition.
-Service agreement is modified to define the meaning of the word "primarily" used in item (f) of the current definition, and to add the period of time the agreement covers to its definition (new item (g)), and the requirement for a schedule of expected total charges to the titles covered by this regulation for the period of the service agreement (new item (h)). The current regulation requires the service provider to obtain HHS prior approval for ADP equipment and ADP services that are acquired primarily to support the titles covered by this subpart. ADP equipment and services are considered to be primarily acquired to support the titles covered by this subpart when the titles may reasonably be expected to be billed for more than 50 percent of the total charges made to all users of the equipment and services. If, however, the titles covered by this regulation are to be directly charged for the cost of the purchase or lease of ADP equipment or services acquired for a central processing facility, the provisions of § 95.611(A) apply.
If the public finds these revised definitions to be acceptable, we will rescind other conflicting definitions contained in Parts 205 and 307 of this title and 45 CFR Part 433, Subpart C, to the extent that statutory requirements permit, when we publish these regulations in final form.
5. Section 95.611(a), is modified to raise the prior approval threshold of $100,000 to provide that a State shall obtain prior written approval from the Department when it plans to acquire ADP equipment or services that it anticipates will have total acquisition costs of $200,000 or more in State and Federal funds over a twelve-month period, or $300,000 or more in Federal and State funds for the total acquisition, unless the acquisition is noncompetitive from a commercial source, or the State plans to acquire ADP equipment or services with proposed FFP at the enhanced matching rate. The State requests for funding of ADP acquisitions costing between $100,000 and $200,000 since the February 1980 rule change that raised the threshold to $100,000, represent 1.4 percent of the total dollar amount requested and 9.9 percent of the total number of State requests received. By raising the threshold to $200,000 HHS will continue to prior approve most State expenditures but will substantially reduce the number of required State submittals. The purpose of the change is to allow States to implement small systems or system changes more quickly; simplify the process of State application for Federal financial participation in the costs of ADP systems; and reduce paperwork burden.
Section 95.611(b)(2) is changed to specify when a State is required to obtain HHS prior approval of a service agreement. Section 95.611(b)(3) is changed to modify the requirement for prior approval of request for proposal (RFP). States currently are required to submit each RFP for prior approval. The modified regulation will require prior approval of the RFP only for complex procurements or when the grantee has a history of performance problems.
6. Section 95.612 presently requires a State to notify HHS when it acquires ADP equipment or services that will cost $25,000 to $100,000 over a twelve-month period in Federal and State funds. This requirement is eliminated by these proposed changes. Experience since the implementation of the prior notice rule indicates that most acquisitions are for larger amounts. Since imposition of the prior notice rule in February 1980, States have submitted only 109 prior notices. In order to maintain proper oversight of State acquisitions costing below the proposed new threshold of $200,000, HHS will conduct periodic on-site surveys as required in the proposed new § 95.621(d).
7. Section 95.613 is modified by adding the phrase "regardless of any conditions for prior approval" to the first sentence of the section. The revised sentence will read: "Procurements of ADP equipment and services are subject to the procurement standards prescribed by Subpart P of 45 CFR Part 74 regardless of any conditions for prior approval." This added phrase emphasizes that Federal procurement standards, including free and open competition, apply to all acquisitions notwithstanding the fact that HHS will only require prior approval of acquisitions that cost in excess of $200,000.
8. We are making a minor modification to the title of § 95.615 to clarify the language of the requirement pertaining to access to State agency ADP records and systems. The clarification is intended to emphasize that State agencies must allow HHS access to ADP systems and all records pertaining to the systems from planning through operational stages including cost records of the agency, contractors and subcontractors.
9. We are proposing three changes to § 95.617, Software and ownership rights. The changes, intended as language clarification only are:
-The first sentence under § 95.617(a) is amended to include the phrase "must include a clause in all procurement instruments that provides that the State or local government". The sentence will now read: "The State or local government must include a clause in all procurement instruments that provides that the State or local government will have all ownership rights in software or modification thereof and associated documentation designed, developed or installed with Federal financial participation under this subpart."
-The title of § 95.617(b) is being changed from "Exemption" to "Federal license" because that term more aptly describes the subject of the regulatory provision.
-The regulation provision reference in § 95.617(c) is being changed from "of this subpart" to "in paragraphs (a) and (b) of this section" to point directly to the referenced provisions.
10. We are changing the last phrase in § 95.619 to simplify the language by substituting "a shorter period is justified" for "the elapsed shorter period of time is sufficient to justify the Federal funds involved". The requirement will read: "ADP systems designed, developed, or installed with Federal financial participation shall be used for a period of time specified in the advance planning document, unless the Department determines that a shorter period is justified."
11. We are adding a provision at § 95.621(d) that states that HHS will conduct periodic on-site reviews to assure that State acquisitions costing less than $200,000 were made in accordance with 45 CFR Part 74 and to determine the efficiency, economy and effectiveness of the acquired equipment or service.
12. We are changing § 95.623 to remove the specification that waiver of HHS prior approval can be made only for acquisitions prior to the effective date of these regulations. The change will permit HHS to waive the prior approval requirement in those instances where a State failed to obtain prior approval of acquisitions, as long as a State submits a waiver request within six months following an acquisition, the acquisition is justified and beneficial to the Department's programs, and the Department finds that it would have prior approved the acquisition if a proper request for such approval had been made by the State agency. This change is intended to cover acquisitions under unusual circumstances and is not to be viewed by States as a relaxation of the prior approval requirement.
13. A new § 95.625, increased FFP for certain ADP systems, is being added to cross reference the general regulatory provisions governing ADP acquisitions of this subpart to the specific regulatory provisions that States must meet to qualify for enhanced funding for ADP systems that support State plans for titles IV-A, IV-D and XIX of the Social Security Act. The section states availability of enhanced matching for certain systems and gives the regulatory citations of specific requirements for such systems.
14. The section heading for § 95.631 and § 95.633 is being changed from "Cost Allocation Plan" to "Federal Financial Participation in Costs of ADP Acquisitions" to more accurately reflect the subject of the sections.
15. Section 95.631 is being changed as follows: The title of § 95.631 is changed from "Relationship to the approved cost allocation plan" to "Cost identification for purpose of FFP claims." As with the section heading, this change is being made more accurately title the subject of the section. The provisions of the section have been restated to describe in a straightforward manner, the methods States must use in identifying, accounting for, and claiming FFP for costs incurred in system development and operations and in acquiring service from a State operated central data processing facility.
16. We are revising § 95.641 (now entitled "Exemption from Subpart G of this part") to explain more clearly the relation of Subpart G of Part 95 to ADP equipment and this Subpart F.
Subpart G concerns "Equipment Acquired Under Public Assistance programs." Among other things, Subpart G permits a State to charge the cost of equipment having a unit acquisition cost of more than $25,000 only by means of depreciation or use allowances, not by claiming the full cost in the year of acquisition. Section 95.641 of this Subpart F, as we propose to revise the section, explains that, although that restriction applies to ADP equipment as well as other equipment, the Department will, in the case of ADP equipment, consider requests for waivers of the restriction. The revised text also explains that, if the acquisition of the equipment is part of an advance planning document that is subject to the prior approval requirements of this Subpart F, the State may submit the request for waiver as part of the advance planning document
17. We are deleting § 95.643. The purpose of that section is to waive for HHS public assistance programs any prior approval requirements for ADP costs in the OMB principles for determining allowable costs of governments (OMB Circular A-87). However, we find the section redundant and unnecessary. The charging of ADP equipment under these programs is fully treated in Subpart G of Part 95. ADP services require prior approval only as specifically provided in this Subpart F.
Regulatory Impact Analysis
The Secretary has determined, in accordance with Executive Order 12291, that this rule does not constitute a major rule because it will not have an annual impact on the economy of $100 million or more, result in a major increase in costs or prices for consumers, any industries, any governmental agencies or any geographic regions, or otherwise meet the thresholds of the Executive Order.
Regulatory Flexibility Analysis
Regulatory Flexibility Act (Pub. L. 96-354) requires the Federal government to anticipate and reduce the impact of rules and paperwork requirements on small businesses and other small entities. This rule has no significant effect on a substantial number of small entities. Therefore, a regulatory flexibility analysis is not required.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1980, the Department has previously obtained OMB clearance of the process described in this document under which the States may apply for and obtain Federal financial participation in their ADP acquisitions. The OMB approval number is 0990-0058.
Catalog of Federal Domestic Assistance program Numbers 13.645 Child Welfare Services--State Grants, 13.658, Foster Care, Maintenance, 13.659, Adoption Assistance; 13.679, Child Support Enforcement Program; 13.714, Medical Assistance Program; 13.808, Assistance Payment Maintenance Assistance; 13.810, Assistance Payments - State and Local Training.
List of Subjects In CFR Part 95
Claims, Computer technology, Grant programs - health, Grant programs - social programs, Social Security, Time.
Dated: January 3, 1984.
Margaret M. Heckler,
45 CFR Part 95, Subpart F is amended as set forth below:
1. The Table of Contents is revised to read as follows:
Subpart F - Automatic Data Processing Equipment and Services -Conditions for Federal Financial Participation
95.601 Scope and applicability.
Specific Conditions for FFP
95.611 Prior approval conditions.
95.613 Procurement standards.
95.615 Access to systems and records.
95.617 Software ownership rights.
95.619 Use of ADP systems.
95.621 ADP reviews.
95.623 Waiver of prior approval requirements.
95.625 Increased FFP for certain ADP systems.
Federal Financial Participation in Costs of ADP Acquisitions
95.631 Cost identification for purposes of FFP claims.
95.633 Nondiscrimination requirements.
95.641 Applicability of rules for charging equipment in Subpart G of this part.
Authority: Sec. 1102,49 Stat. 647, 42 U.S.C. 1302.
2. Section 95.601 us revised to read as follows:
95.601 Scope and applicability
This Subpart prescribes the conditions under which the Department of Health and Human Services 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, I-VD, IV-E, X, XIV, XVI(AABD), or IX of the Social Security Act.
(Approved by the Office of Management and Budget under Control Number 0990-0058).
3. Section 95-605 is revised to read as follows:
As used in this part, the term: "Acceptance documents" means written evidence of satisfactory completion of an approved phase of work or contract, and acceptance thereof by the State agency.
"Acquisition" means acquiring ADP equipment or services from commercial sources or from State or local government resources.
"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 statement of alternatives considered; a requirements analysis; 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 taken 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.
"Alternative Considerations" means methods of satisfying the stated needs and objectives (e.g. upgrade or transfer of an existing system), that the State considered in addition to the selected method.
"Approving component" means organization within the Department that is authorized to approve requests for the acquisition of ADP equipment or services; 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 IV-B (child welfare services) and IV-E (foster care and adoption assistance); Office of Child Support Enforcement (OCSE) for title IV-D and Health Care Financing Administration (HCFA) for title XIX 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" or "Hardware" means automatic equipment that accepts and stores data, performs calculations and other processing steps, and produces information. This includes:
(a) Electronic digital computers;
(b) Peripheral or auxiliary equipment used in support of electronic computers;
(c) Data transmission or communications equipment and
(d) Data input 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 or 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, calculate, summarizing, recording, and transmitting.
"Department" means the Department of Health and Human Services.
"Design" or "system design" means a combination of narrative and diagrams describing the structure of a new or more efficient automatic data processing system. This includes the use of hardware to the extent necessary for the design phase.
"Development" means the definition of system requirements, detailing of system-and program specifications, programming and testing. This includes the use of hardware to the extent necessary for the development phase.
"Enhanced matching rate" means the higher than regular rate of FFP authorized by titles IV-A, IV-D, and XIX of the Social Security Act for acquisition or improvement of systems, services and equipment that conform to specific requirements designed to improve administration of the Aid to Families with Dependent Children, Child Support Enforcement and Medicaid programs.
"Feasibility study" means a preliminary study to determine whether it 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, and whether the plan is capable of being accomplished successfully.
"FFP" means Federal financial participation.
"Installation" means the integrated testing of programs and subsystems, system conversion, and turnover to operational status. This includes the use of hardware to the extent necessary for the installation phase.
"Operation" means the automated processing of data used in the administration of State plans for titles I, IV-A, IV-B, IV-E X,XIV, XVI (AABD), or XIX of the Social Security Act. Operation includes the use of supplies, software, hardware, and personnel directly associated with the functioning of the mechanized system. See 45 CFR 205.35 and 307.35(b) for specific requirements for title IV-A and IV-D, and 42 CFR Part 433, Subpart C for specific requirements for title XIX.
"Regular matching rate" means the normal rate of FFP authorized by titles IV-A, IV-B, IV-D, IV-E, X, XIV, XVI(AABD) and XIX of the Social Security Act for State and local agency administration of programs authorized by those titles.
"Requirements Analysis" means determining and documenting the information needs and the functional and technical requirements the proposed computerized system must meet.
"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
(f) Requires the provider to obtain prior approval from the Department for ADP equipment, and ADP services that are acquired primarily to support the titles covered by this subpart and requires the provider to comply with 45 CFR Part 74, Subpart P for procurement related to the service agreement. ADP equipment and services are considered to be primarily acquired to support the titles covered by this subpart when these titles may reasonably be expected to be billed more than 50% of the total charges made to all users of the ADP equipment and services during the time period covered by the service agreement. If, however, the titles covered by this regulation are to he directly charged for the cost, of the purchase or lease of ADP equipment or services acquired for a central processing facility, the provisions of § 96.611(a) apply;
(g) Includes the beginning and ending dates of the period of time covered by the service agreement; and
(h) Includes a schedule of expected total charges to the titles covered by this regulation for the period of the service agreement.
"Software" means a set of computer programs, procedure, and associated documentation used to operate the hardware.
"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 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.
4. Section 95.611 is amended by revising paragraphs (a) and (b) as follows:
Specific Conditions for FFP
§ 95.611 Prior approval conditions.
(a) General Acquisition requirement. A State shall obtain prior written approval from the Department when it plans to acquire ADP equipment or services with proposed FFP at the regular matching rate that it anticipates will have total acquisition costs of $200,000 or more in Federal and State funds over any twelve-month period, or $300,000 or more in Federal and State funds for the total acquisition. A State shall obtain prior written approval from the Department when it plans to acquire ADP equipment or services with proposed FFP at the enhanced matching rate authorized by 45 CFR 205.35,45 CFR Part 307 or 42 CFR Part 433, Subpart C regardless of the acquisition cost. A State shall also obtain prior written approval from the Department when it plans to acquire noncompetitively from a non-governmental source ADP equipment or services that cost more than $25,000 in Federal and State funds. The State shall submit requests for prior systems approval, signed by the appropriate State official, to the Assistant Secretary for Management and Budget (ASMB), Department of Health and Human Services. Requests from States shall indicate clearly the Social Security Act titles under which funding is requested, the estimated cost for the total acquisition, 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), any extension of the period covered by the service agreement, or for changes to any of the other elements of a service agreement listed in § 95.605.
(3) When required, for the request for proposal (RFP), prior to its issuance when service or equipment proposals are being solicited from nongovernmental sources. The Department requires approval of the RFP if the procurement is complex, the grantee has a history of performance problems, or the State proposes to claim FFP at the enhanced matching rate;
(4) When required, for the contract, prior to signature of the contracting officer. The Department requires approval of the contract if the procurement is complex, the grantee has a history of performance problems, or the State proposes to claim FFP at the enhanced matching rate;
(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 § 95.611(b) (3), (4) or (5) for acquisitions for which the State proposes to claim FFP as the regular matching rate. The State shall consider prior approval required for the RFP, contract and system design documents when the State proposes to claim FFP at an enhanced matching rate.
5. Part 95 is amended by removing § 95.612.
6. Section 95.613 is revised to read as follows:
§ 95.613 Procurement standards.
Procurement of ADP equipment and services are subject to the procurement standards prescribed by Subpart P of 45 CFR, Part 74 regardless of any conditions for prior approval. 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. Since it is an acquisition by one government agency from another, the service agreement between the State agency and the State central data processing facility is, in accordance with 45 CFR 74.160, exempt from the procurement standards.
7. Section 95.615 is amended by removing the word "records" from the section heading and inserting in its place the words "systems and records" to read as follows:
§ 95.615 Access to Systems and records.
8. Section 95.617 is amended by revising paragraphs (a), (b) and (c) as follows:
§ 95.617 Software and ownership rights.
(a) General. The State or local government must include a clause in all procurement instruments that provides that 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) Federal license. The Department reserves a royalty-free, nonexclusive, and irrevocable license to reproduce, publish, or otherwise use and to authorize others to use for Federal Government purposes, such software, modifications, 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 revisions in paragraphs (a) and (b) of this section.
9. Section 95.619 is reused to read as follows:
§ 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 advance planning document, unless the Department determines that a shorter period is justified.
10. A new paragraph (d) is added to § 95.621 to read as follows:
§ 95.621 ADP reviews
(d) Acquisitions not subject to prior approval. A review conducted on an audit basis to assure that system and equipment acquisitions costing less than $200,000 were made in accordance with 45 CFR Part 74 and the conditions of this subpart, and to determine the efficiency, economy and effectiveness of the equipment or system.
11. Section 95.623 is revised to read as follows:
§ 95.623 Waiver of prior approval requirement
ADP equipment and services acquired by a State agency without required prior approval of the Department may qualify for FFP provided the Department waives the prior approval requirement. The Department will waive the prior approval requirement provided that:
(a) The State submits a request for retroactive approval within six months following the acquisition that conforms to the conditions specified in 45 CFR 95.611,
(b) The State provides justification for failure to obtain prior approval,
(c) The Department determines that the ADP equipment or service is cost beneficial to the Department's programs, and would have received prior approval had a request for such approval been made by the State agency, and
(d) The Department agrees to the acquisition. 45 CFR 205.37 and 307.15 prohibit waiver of prior approval for ADP acquisitions funded by titles IV-A and IV-D at the enhanced matching rate.
12. A new § 95.625 is added to read as follows:
§ 95.625 Increased FFP for certain ADP systems
(a) General. FFP is available at enhanced matching rates for individual or integrated systems that support State plans for titles IV-A, IV-D and/or XIX provided the systems meet specific regulatory provisions established by the individual programs.
(b) Specific regulatory references. The applicable regulations for the title IV-A program are contained in 45 CFR 205.35. The applicable regulations for the title IV-D program are contained in 45 CFR Part 307. The applicable regulations for the title XIX program are contained in 42 CFR 432, Subpart C and 42 CFR 433, Subpart C.
13. The center heading before §§ 95.631 and 95.633 is revised to read as follows:
Federal Financial Participation In Costs of ADP Acquisitions
14. Section 95.631 is revised to read as follows:
§ 95.631 Cost Identification for purposes of FFP claims
The conditions of this subpart apply notwithstanding the existence of an approved cost allocation plan. State agencies shall assign and claim the costs incurred under an approved APD in accordance with the following criteria:
(a) Development costs. The State agency shall identify the actual development costs incurred under an approved APD in its departmental accounting system, and assign these costs to the project cost center established in accordance with the approved cost allocation plan required by Subpart E of this part. The State must distribute these costs, as incurred, to all funding sources in accordance with the procedure stated in the APD as approved by HHS.
(b) Operational costs. Costs incurred for the operation of an ADP system shall be identified and assigned to funding sources in accordance with the approved cost allocation plan required by Subpart E of this part.
(c) Service agreement costs. States that operate a central data processing facility shall use their approved central service costs allocation plan required by OMB Circular A-87 to identify and assign costs incurred under a service agreement with the State agency. The State agency will then distribute these costs to funding sources in accordance with paragraphs (a) and (b) of this section.
15. Section 95.641 is revised to read as follows:
§95.641 Applicability of rules for charging equipment in Subpart G of this part.
ADP equipment, as well as other equipment acquired under public assistance programs, is subject to Subpart G of this part. Among other things, Subpart G provides that a State may charge only depreciation or use allowances for equipment with a unit acquisition cost of over $25,000. For ADP equipment, however, HHS will consider requests for waivers of that restriction. If the acquisition of the equipment is part of an APD that is subject to the prior approval requirements of this Subpart F, the State may submit the request for a waiver as part of the APD.
16. Section 95.643 is removed.
§ 95.643 [REMOVED]
(FR Doc 84-29342 Filed 11-18-84; 8:45 am)
BILLING CODE 4150-04-M