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Vol 1 February 10, 1995

**[FEDERAL ACQUISITION STREAMLINING ACT OF 1994]{.underline}**

by Eric Moll

The Federal Acquisition Stream- lining Act of 1994 (FASA), Public Law
103-355, signed by President Clinton on October 13, 1994, contains a
provision which may have an impact in the grants arena as well.
Specifically, section 7203 of the FASA amends Title III of the Federal
Property and Administrative Services Act (41 U.S.C. 251 *et seq.*) by
adding a new section 316 at the end.

Subsection (a) of 316 provides that it is the policy of Congress that an
agency should not be required by legislation to award a new grant for
research, development, test, or evaluation to a non-Federal Government
entity. Section 316 also states a preference for merit-based selection
procedures for making awards. In addition, subsection (b) of 316
provides rules of con-struction for determining when a provision of law
may be construed as requiring a new grant to be awarded to a specified
non-Federal Government entity. First, the provision of law must
specifically refer to the rules of construction contained in section
316. Second, the provision of law must specifically identify the
par-ticular non-Federal Government entity involved. Lastly, the
pro-vision of law must specifically state that the award to the entity
is required in contravention of the policy set forth in section 316.

Although the legislative history is sparse on this section, it would
appear that the intent of the section is to address the problem of
earmarking specific amounts to particular grantees in legislation,
presumably appropriation acts. The section purports to make such
earmarking more difficult by man-dating that the three requirements of
subsection (b) be met before a particular earmark can be construed as
requiring a new grant to be awarded to a specified non-Federal
Government entity.

Section 316 raises several inter-esting issues as to its scope. First,
the question arises as to whether the section would apply retroactively
to existing earmarks contained in the Department\'s FY '95
Appropriations Act. The FASA was approved on October 13, 1994, the
effective date of enactment, while the Department\'s Appro-priations Act
was approved on August 26, 1994, for the fiscal year ending September
30, 1995. In the absence of clear intent to apply a statute
retroactively, the general rule is that statutes are to be applied
prospectively. [See]{.underline} Sutherland Stat Const 41.04(4th Ed).
This general rule has been applied in a grant context. [See]{.underline}
[Bennett v. New Jersey]{.underline}, 470 U.S. 632 (1985). Our review
disclosed that there is no clear intent to apply the provisions of
section 316 of the FASA retroactively. Moreover, it is clear that it
would be impossible for the earmarks in the Department\'s FY '95
Appropriations Act to comply with the requirements of section 316 in
light of the chronology of enactment of the two acts. Accordingly, the
rules of construction contained in sub-section (b) would not apply to
earmarks contained in the Department\'s earlier FY '95 Ap-propriations
Act and bureaus of the Department receiving earmarks in their FY '95
appropriations are legally bound to implement them without regard to
section 316.

The primary issue raised by section 316 for future earmarks will be
whether a particular earmark constitutes a grant for \"research,
development, test, or evaluation.\" This question may revolve around
whether the grant must be for scientific research. (Some support for
this interpretation may be found in subsection (d) of 316 which excludes
grants to the National Academy of Sciences.) The bureaus of the
Department most affected by such a restriction would probably be NIST
and NOAA, with the latter particularly affected in its construction
appropriation. In the past, MBDA and ITA have also had earmarks included
in their lump-sum appropriations.

Finally, section 316 applies to \"new grants\", which are defined in
subsection (c) as any grant unless the work provided for in the grant is
a continuation of work performed by the earmarked recipient under a
preceding grant. It is reasonably foreseeable that questions concerning
the applicability of section 316 may include whether the grant is new or
a continuation of a prior award.

Implementation of section 316 by the Department will be effected through
a coordinated effort between the program officials, grants officers, and
the Office of General Counsel. Future earmarks in any lump-sum
appropriation will have to be analyzed to determine if the earmark meets
the definition of a new grant for \"research, development, test, or
evaluation.\" If there is any doubt, grants officers or program
officials should request a written opinion from the Federal Assistance
Law Division.

Whether this provision will result in less earmarking of grants in the
future remains to be seen, since later enacted legislation which is in
conflict would supersede and prevail over section 316. [Tennessee Gas
Pipeline Co. v. Federal Energy Regulatory Commission]{.underline}, 626
F.2d 1020 (D.C. Cir. 1980). It may depend on the proclivity of future
Congresses to refrain from the practice that many describe as \"pork\"
spending.

**[CANCELLATION OF SOLICITATIONS]{.underline}**

by Eric Moll

Grants officers and program officials should be aware of the standards
for canceling a sol-icitation. There is a common misconception when
dealing with discretionary grant programs that the government can cancel
a solicitation at any time for any reason or no reason. Such action
should not be taken lightly, because the Government could be liable for
proposal preparation costs under limited circumstances.

In general, an applicant for federal assistance has a right to

have its proposal fairly and adequately considered by the sol-iciting
Federal agency. [Massachusetts Department of Cor-rection v. Law
Enforcement Assistance Administration]{.underline}, 605 F.2d 21 ( 1st
Cir. 1979). A proposer may recover proposal preparation costs when the
Government breaches its implied duty to honestly consider proposals. The
standard for re-covery of proposal expenses is whether the Government\'s
conduct was arbitrary and capricious toward the claimant. [OAO Corp.v.
United States]{.underline}, 17 Ct.Cl.106 (1989). In a case where the
Government cancels a solicitation, the courts have established an even
higher standard:

bad faith must be shown on the part of the Government based on the
strong presumption that Government officials act properly and on the
Government\'s right to reject uniformly all proposals without liability.
[Id]{.underline}. [See]{.underline} [also]{.underline} [Durable Metals
Products, Inc. v. United States]{.underline}, 27 Fed.Cl.472 (1993).

Thus, while the likelihood that the Government will incur liability for
the cancellation of a solicitation is slight, such action should still
be carried out in good faith with sufficient justification. The
rea-son(s) for the cancellation should be stated in the cancellation
notice and published in the [Federal Register]{.underline}.