[Federal Register Volume 61, Number 148 (Wednesday, July 31, 1996)]
[Rules and Regulations]
[Pages 39894-39898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19488]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Administration for Children and Families
45 CFR Part 95
RIN 0970-AB46
Reduction of Reporting Requirements for the State Systems Advance
Planning Document (APD) Process
AGENCY: Administration for Children and Families, HHS.
ACTION: Final rule.
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SUMMARY: This final rule decreases the reporting burden on States
relative to the State systems advance planning document (APD) process
by increasing the threshold amounts above which APDs and related
procurement documents need to be submitted for Federal approval. The
APD process is the procedure by which States obtain approval for
Federal financial participation in the cost of acquiring automatic data
processing equipment and services. Additionally, this rule eliminates
the requirement for State submittal of biennial security plans for
Federal review.
EFFECTIVE DATE: July 31, 1996.
FOR FURTHER INFORMATION CONTACT: Bill Davis, State Systems Policy
Staff, 370 L'Enfant Promenade SW., Washington, DC 20447, telephone
(202) 401-6404.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3507),
information collection requirements relating to automated data
processing and information retrieval systems have been approved by OMB
Approval No. 0992-0005. The provisions of this rule do not contain any
additional reporting and/or recordkeeping requirements subject to OMB
approval.
Statutory Authority
These regulations are published under the general authority of
sections 402(a)(5), 452(a)(1), 1902(a)(4), and 1102 of the Social
Security Act (the Act).
Background and Description of Regulatory Provisions
State public assistance agencies acquire automatic data processing
(ADP) equipment and services for computer operations which support the
Aid to Families with Dependent Children, Adult Assistance, Child
Support Enforcement, Medicaid, Child Welfare, Foster Care and Adoption
Assistance, Job Opportunities and Basic Skills Training (JOBS), and
Refugee Resettlement programs. Conditions and procedures for acquiring
such systems are found at 45 CFR part 95. To reduce the reporting
burden on States and to provide better use of Federal resources, we
issued a notice of proposed rulemaking revising these requirements
which was published in the Federal Register July 24, 1995 (60 FR
37858). We received 23 letters of public comment regarding the proposed
rule from State agencies and other interested parties. Specific
comments and responses follow the discussion of regulatory provisions.
These comments did not generate any changes to the regulatory
provisions outlined in the proposed rule.
Currently any competitive acquisition over $500,000 or any sole
source acquisition over $100,000 in total State and Federal costs which
will be matched at the regular Federal financial participation (FFP)
rate, as defined in Section 95.605 of these rules, requires written
prior approval of an APD. Project cost increases of more than $300,000
require the submission of an APD Update. Also, most procurement
documents (Request for Proposals (RFPs) and contracts) over $300,000,
and contract amendments over $100,000 must be approved by the Federal
funding agencies.
As a first step toward reducing the reporting burden on States and
improving the use of Federal resources, we are raising the threshold
amounts for regular match acquisitions. We will continue to require
written prior approval for all equipment and services acquired at an
enhanced matching rate.
Accordingly, these rules revise 45 CFR 95.611(a)(1), which provides
that States must obtain prior written approval for ADP equipment or
services anticipated to have total acquisition costs of $500,000 or
more in Federal and State funds, to increase the $500,000 threshold
amount to $5 million or more. Similarly, paragraph (a)(4), which
requires prior written approval with respect to State plans to acquire
noncompetitively from a non-government source, ADP equipment and
services, with a total acquisition cost of greater than $100,000, is
revised to require that a State obtain prior written approval of its
justification for a sole source acquisition with total State and
Federal costs of more than $1 million but no more than $5 million and
to provide that noncompetitive acquisitions of greater than $5 million
continue to be subject to the requirements of paragraph (b), which
[[Page 39895]]
provides specific prior written approval requirements.
We are also eliminating paragraph (a)(3), which provides a separate
threshold amount for acquisitions in support of State Medicaid systems
funded at the 75 percent FFP rate. The Health Care Financing
Administration (HCFA) will apply the new thresholds to Title XIX funded
projects. Additionally, we are modifying paragraph (a)(2) to delete a
reference to paragraph (a)(3) and to redesignate paragraphs (a)(4)
through (a)(7) as paragraphs (a)(3) through (a)(6). We are also
revising paragraph (a)(4), as redesignated, to change the reference
from (a)(6) to (a)(5) and to update the office names from Office of
Information Management Systems to Office of State Systems and State
Data Systems Staff to State Systems Policy Staff to reflect a recent
organizational change. And we are correcting a typographical error in
paragraph (a)(6) so that ``ADP'' now reads ``APD''.
Paragraph (b)(1)(iii), which provides that unless specifically
exempted by the Department, written approval must be received prior to
release of a Request for Proposal (RFP) or execution of a contract
where costs are anticipated to exceed $300,000, is revised to increase
the threshold to $5 million with respect to competitive procurements
and $1 million for noncompetitive acquisitions from nongovernment
sources.
With respect to contract amendments, 45 CFR 95.611(b)(1)(iv) is
revised to provide that prior written approval is needed, unless
specifically exempted by the Department, prior to execution of a
contract amendment involving cost increases of greater than $1 million
or time extensions of more than 120 calendar days. In addition, States
will be required to submit for written approval contract amendments
under these threshold amounts on an exception basis or if HHS
determines that the contract amendment was not adequately described and
justified in the APD.
As indicated, with respect to both changes to paragraph (b), HHS
retains the right to review and prior approve all RFPs, contracts, and
contract amendments, regardless of dollar amount, on an exception
basis.
Paragraph (c)(1), which provides specific approval requirements
with respect to regular FFP requests, is also revised to provide
increased thresholds. First, under paragraph (c)(1)(i), the $1 million
threshold with respect to the need for written approval from the
Department of Annual Advanced Planning Document Updates (APDU) is
increased to $5 million. In paragraph (c)(1)(ii)(A), the threshold with
respect to the requirement for approval of an ``as needed'' APDU of
projected cost increases is raised from the lesser of $300,000 or 10
percent of the project cost, to projected cost increases of $1 million
or more.
We are also changing the rules to provide prompt Department action
on State funding requests by providing that if the Department has not
provided a State written approval, disapproval, or a request for
information within 60 calendar days of issuing an acknowledgement of
receipt of a State's request, the request is deemed to have
provisionally met the prior approval requirements.
Accordingly, 45 CFR 95.611(d) is revised to provide that, if the
Department has not provided written approval, disapproval, or a request
for information within 60 calendar days of issuing an acknowledgement
of receipt of a State's request, the request will be provisionally
deemed to have met the prior approval requirements. As indicated in the
proposed rule, provisional approval does not absolve a State from
meeting all Federal requirements which pertain to the computer project
or acquisition. Such projects continue to be subject to Departmental
audit and review, and the determinations made from such audits and
reviews.
Finally, to further the goal of reduced burden and increased
efficiency, these rules amend 45 CFR 95.621(f)(6), by eliminating the
requirement that States submit biennial security reports for Federal
review and approval, to require simply that such reports be maintained
by States for on-site review by HHS. As such, States must continue to
perform security reviews and will be responsible for maintaining review
reports for inspection by HHS staff during on-site reviews.
Response to Comments
We received a total of 23 comments on the proposed rule published
in the Federal Register July 24, 1995 (60 FR 37858) from State agencies
and other interested parties. Specific comments and our responses
follow.
General Comments
1. Comment: Two commenters felt that the changes provided by the
proposed rule did not go far enough to provide significant relief from
the existing burden associated with the APD process. However, the
majority of commenters voiced support for the rule. In fact, 13 of the
respondents offered no other comment than to provide their support.
Response: We disagree. With this rule we are providing a ten-fold
increase in the prior approval threshold for APDs, an even greater
increase for RFPs and contracts, and other significant changes. This
rule will greatly reduce the State burden associated with the APD
process.
Increased Thresholds
1. Comment: Two commenters asked that the increased thresholds also
apply to systems funded at enhanced rates, or at a minimum to Request
for Proposals (RFPs) and contracts after approval of APDs for enhanced
funded projects.
Response: We do not agree with these suggestions. We are convinced
that enhanced funded projects, where the Federal Government pays up to
90 percent of costs, should be given greater attention and scrutiny
than regular match projects. HHS reviews RFPs and contracts to ensure
State plans as expressed in related APDs, and Federal requirements are
being met. Accordingly, thresholds for APDs, RFPs, and contracts for
enhanced funded projects will remain at current levels, even in cases
where enhanced funding becomes available after the beginning of the
project.
2. Comment: One commenter was concerned that the allowance for
review of documents by ``exception'' as stated in the proposed rule,
should truly be used on an exception basis and not become the norm. The
commenter suggested that criteria be developed for exercising the
option and be disseminated to States. The commenter also asked that
when the exception option is used, adequate notice be given to States.
Response: We would like to assure the commenter that we fully
intend that this option will only be exercised on an exception basis.
While we have not developed an exhaustive list of criteria for use of
the exception, as provided in the preamble to the proposed rule, the
criteria ``* * * could include instances where new program requirements
or technology are involved, as in electronic benefits transfer, or when
adequate description and justification has not been provided in the
APD.'' However, States will always receive written notification when
documents must be submitted for review.
3. Comment: One commenter suggested that after Federal review of an
APD, the RFPs and contracts should not be reviewed by HHS.
Response: We do not agree with this suggestion. We will continue to
review RFPs and contracts, in accordance with revised thresholds, to
ensure that State
[[Page 39896]]
plans as expressed in related APDs, and Federal requirements are being
met.
4. Comment: One commenter suggested that HHS should limit its
review of State ADP acquisitions to new development efforts. This
commenter stated that ongoing operations, equipment upgrades, and
systems enhancements should be exempt from Federal review.
Response: We do not agree with this recommendation. Equipment
upgrades and systems enhancements, above the threshold limits, will
continue to be subject to prior approval.
5. Comment: Three commenters recommended that large States should
have higher thresholds than other States. The commenters believe that
because the systems activities of large States are proportionally
larger and more costly than those of other States, large States should
have proportionally more of their systems expenditures exempt from HHS
prior approval.
Response: In establishing the dollar thresholds under which a State
need not obtain HHS' prior approval for an ADP acquisition, HHS sought
to achieve a balance between exercising its responsibility and
providing States a measure of flexibility. HHS is responsible under
Federal law and regulation for ensuring that it provides Federal
matching funds for purposes which are necessary for effective and
efficient program operations. At the same time, however, HHS seeks to
provide flexibility to States who manage and carry-out these ADP
projects.
In establishing a $5,000,000 threshold, HHS is making a ten-fold
increase to the current threshold. We believe that at this time the
increased threshold provides an appropriate balance between its
responsibility for assuring the effective use of Federal dollars and
providing States flexibility of action.
While it is true that large States have commensurately large
systems expenditures, such large expenditures should appropriately
receive a higher level of review to reduce the risk to taxpayers.
6. Comment: One State commenter suggested that HHS should not
review any RFPs, contracts and contract amendments, asserting that
Federal agencies micro-manage State projects and cause delays in nearly
every case where approval is requested. The commenter included a list
of State procedures and approvals required for ADP acquisitions, which
the commenter believes makes Federal approval procedures redundant. The
commenter asserts that Federal review causes delays in nearly every
case.
On the other hand, a commenter from another State could not recall
ever having been delayed by the Federal review process.
Response: As these comments indicate, States are not of a single
mind as to whether the requirement for prior Federal approval delays
States in developing ADP projects. Underlying the first commenter's
assertion is the suggestion that HHS rely on State procedures and
officials to meet its responsibilities for assuring that the
expenditure of Federal funds on State systems is necessary for
effective and efficient operation of the programs.
With the information received through the APD procedures,
accountable HHS officials are able to meet their responsibilities for
assuring that the expenditure of Federal funds on State systems is
necessary for the effective and efficient operation of the programs. As
stated in response to another commenter, HHS intends to continue to
review RFPs, contracts and contract amendments, subject to applicable
dollar thresholds, to ensure that programmatic requirements are being
met.
7. Comment: One commenter noted that the regulation now includes
the Medicaid 75 percent match rate in the regular match category and
noted that now all Medicaid 75 percent acquisitions will require prior
approval.
Response: We believe the commenter misunderstood this provision of
the regulation. The revision now puts Medicaid 75 percent funding in
the $5 million threshold category. HCFA will further clarify this in a
revision to Chapter 11 of the Medicaid Management Manual, which deals
with Medicaid Management Information System requirements.
8. Comment: One State was confused by our statement that some RFPs
and contracts under the threshold amounts would require prior approval.
The commenter was concerned as to how they would know if approval was
required.
Response: Approval of RFPs, contracts, and contract amendments will
be required, on an exception basis, for projects utilizing new
technology, such as Electronic Benefits Transfer (EBT), and in those
cases in which the procurement is not well defined in the approved APD.
States will know when approval of these documents is required because
HHS will inform them, in writing, when these documents must be
submitted for approval.
9. Comment: One commenter noted that contract amendments that are
funded at the regular FFP rate and exceed the $1 million threshold, or
contract time extensions of more than 120 days require prior approval.
The commenter suggested that since a project that costs $1 million will
usually have a duration of more than one year, the number of days
should be changed to 365.
Response: The commenter implies a necessary connection, with which
we do not agree, between increased project cost and the duration of a
project. There are two different issues here. A contract amendment
which exceeds $1 million in cost requires prior approval. Additionally,
a contract amendment for a time extension of more than 120 days
requires prior approval. For example, the cost of a project may
increase with no change in project time frame. Similarly, the time
frame for a project may increase with no increase in project cost.
Federal Response Deadline
1. Comment: One commenter expressed concern that the definition and
use of ``provisional approval'' in the proposed rule was unclear.
Specifically, the commenter noted that the phrases ``deemed to have
provisionally met the prior approval requirements'' and ``provisionally
met the prior approval requirements'' were used interchangeably, but
was concerned that they may in fact have different meanings.
Response: These phrases were not intended to have different
meanings. We use the term ``provisional approval'' rather than
``approval'' to make it clear that States are still subject to all
Federal requirements (other than prior approval). These are the same
requirements, such as those listed in 45 CFR part 74, which States must
comply with for any acquisition in which Federal financial
participation is requested. As stated in the preamble to the proposed
rule, ``Even written prior approval by the Department does not
guarantee absolutely that there will be no subsequent determination of
violation of the pertinent Federal statutes and regulations.''
The proposed rule preamble further states that ``States which are
confident that their project is in compliance would be able, however,
to proceed after the 60-day period has expired without further delay
awaiting Federal approval.'' However, if it is subsequently determined
that the State's project does not meet Federal requirements,
appropriate changes will be necessary.
2. Comment: One commenter suggested that establishing 60 days as
the standard response time may have the effect of lengthening the
response
[[Page 39897]]
time in all situations to a full 60 days. This commenter suggested that
the standard be between 30 and 40 days.
Response: We are not establishing 60 days as the standard response
time. In fact, the Department of Health and Human Services considers
responses to State requests to be ``overdue'' in 30 days. Sixty days is
the outside time period at which point a request will be considered
``provisionally approved.'' If the State has not received a response
within 60 days and is confident that a request meets Federal
requirements, this provision permits the State to proceed as if it had
prior written approval.
3. Comment: One commenter was concerned that we might delay sending
out an acknowledgement letter to effectively increase the 60-day
response time limit.
Response: We would like to assure the commenter that this will not
happen. We will continue our policy of promptly acknowledging State
requests.
Security Review Reports
1. Comment: One commenter suggested that the requirement for
biennial security reports be eliminated.
Response: This regulation eliminates the requirement for States to
submit the biennial security reports to HHS for review. However, the
requirement to conduct the bi-annual reviews and maintain the reports
will remain in place as a minimal requirement to assist States in
assuring the security of their data processing assets and systems.
These reports must be available for review by HHS staff during site
visits to States to assist in assessing the security status of
Federally funded data processing activities.
Other
1. Comment: One commenter stated that the Federal depreciation
requirements should be changed.
Response: Federal depreciation requirements are not set by the
Department of Health and Human Services but by the Office of Management
and Budget under OMB Circular A-87 and thus are not within the purview
of this final rule. However, the Department of Health and Human
Services previously agreed to exempt data processing equipment costing
no more than $5,000 from the depreciation requirements.
Regulatory Impact Analysis
Executive Order 12866 requires that regulations be reviewed to
ensure that they are consistent with the priorities and principles set
forth in the Executive Order. The Department has determined that this
rule is consistent with these priorities and principles. No costs are
associated with this rule as it merely decreases reporting burden on
States.
Regulatory Flexibility Act
Consistent with the Regulatory Flexibility Act (Pub. L. 96-354),
which requires the Federal Government to anticipate and reduce the
impact of rules and paperwork requirements on small businesses and
other small entities, the Secretary certifies that this rule has no
significant effect on a substantial number of small entities.
Therefore, a regulatory flexibility analysis is not required.
List of Subjects in 45 CFR Part 95
Claims, Computer technology, Grant programs--health, Grant
programs, Social programs, Social Security.
(Catalog of Federal Domestic Assistance Program 93.645 Child Welfare
Services--State Grants; 93.658, Foster Care Maintenance; 93.659,
Adoption Assistance; 93.563, Child Support Enforcement Program;
93.174, Medical Assistance Program; 93.570, Assistance Payments--
Maintenance Assistance)
Dated: January 23, 1996.
Mary Jo Bane,
Assistant Secretary for Children and Families.
Approved: April 18, 1996.
Donna E. Shalala,
Secretary.
For the reasons set forth in the preamble, 45 CFR Part 95 is
amended as follows:
PART 95--GENERAL ADMINISTRATION--GRANT PROGRAMS (PUBLIC ASSISTANCE
AND MEDICAL ASSISTANCE)
1. The authority citation for Part 95, Subpart F continues to read
as follows:
Authority: Secs. 402(a)(5), 452(a)(1), 1102, and 1902(a)(4) of
the Social Security Act, 42 U.S.C. 602(a)(5), 652(a)(1), 1302,
1396a(a)(4); 5 U.S.C. 301 and 8 U.S.C. 1521.
2. Section 95.611 is amended by removing paragraph (a)(3);
redesignating paragraphs (a)(4) through (a)(7) as (a)(3) through
(a)(6); revising paragraphs (a)(1), (a)(2), newly redesignated
paragraphs (a)(3), (a)(4) and (a)(6); paragraphs (b)(1)(iii),
(b)(1)(iv), (c)(1)(i), (c)(1)(ii)(A) and (d); and republishing newly
redesignated paragraph (a)(5) to read as follows:
Sec. 95.611 Specific Conditions for FFP.
(a) * * *
(1) A State shall obtain prior written approval from the Department
as specified in paragraph (b) of this section, when the State plans to
acquire ADP equipment or services with proposed FFP at the regular
matching rate that it anticipates will have total acquisition costs of
$5,000,000 or more in Federal and State funds.
(2) A State shall obtain prior written approval from the Department
as specified in paragraph (b) of this section, when the State plans to
acquire ADP equipment or services with proposed FFP at the 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.
(3) A State shall obtain prior written approval from the Department
of its justification for a sole source acquisition, when it plans to
acquire noncompetitively from a nongovernmental source ADP equipment or
services, with proposed FFP at the regular matching rate, that has a
total State and Federal acquisition cost of more than $1,000,000 but no
more than $5,000,000. Noncompetitive acquisitions of more than
$5,000,000 are subject to the provisions of paragraph (b) of this
section.
(4) Except as provided for in paragraph (a)(5) of this section, the
State shall submit requests for Department approval, signed by the
appropriate State official, to the Director, Administration for
Children and Families, Office of State Systems. The State shall send to
ACF one copy of the request for each HHS component, from which the
State is requesting funding, and one for the State Systems Policy
Staff, the coordinating staff for these requests. The State must also
send one copy of the request directly to each Regional program
component and one copy to the Regional Director.
(5) States shall submit requests for approval which involve solely
Title XIX funding (i.e., State Medicaid Systems), to HCFA for action.
(6) The Department will not approve any Planning or Implementation
APD that does not include all information required as defined in
Sec. 95.605.
(b) * * *
(1) * * *
(iii) For the Request for Proposal and Contract, unless
specifically exempted by the Department, prior to release of the RFP or
prior to the execution of the contract when the contract is anticipated
to or will exceed $5,000,000 for competitive procurement and $1,000,000
for noncompetitive acquisitions from nongovernmental sources. States
will be required to submit RFPs and contracts under these threshold
amounts on an exception basis or if the procurement strategy is not
adequately described and justified in an APD.
[[Page 39898]]
(iv) For contract amendments, unless specifically exempted by the
Department, prior to execution of the contract amendment involving
contract cost increases exceeding $1,000,000 or contract time
extensions of more than 120 days. States will be required to submit
contract amendments under these threshold amounts on an exception basis
or if the contract amendment is not adequately described and justified
in an APD.
* * * * *
(c) * * *
(1) * * *
(i) For an annual APDU for projects with a total acquisition cost
of more than $5,000,000, when specifically required by the Department.
(ii) For an ``As Needed APDU'' when changes cause any of the
following:
(A) A projected cost increase of $1,000,000 or more.
* * * * *
(d) Prompt action on requests for prior approval. The ACF will
promptly send to the approving components the items specified in
paragraph (b) of this section. If the Department has not provided
written approval, disapproval, or a request for information within 60
days of the date of the Departmental letter acknowledging receipt of a
State's request, the request will automatically be deemed to have
provisionally met the prior approval conditions of paragraph (b) of
this section.
3. Section 95.621 is amended by revising paragraph (f)(6) to read
as follows:
Sec. 95.621 APD reviews.
* * * * *
(f) * * *
(6) The State agency shall maintain reports of their biennial ADP
system security reviews, together with pertinent supporting
documentation, for HHS on-site review.
[FR Doc. 96-19488 Filed 7-30-96; 8:45 am]
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