This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

57704 

Vol. 75, No. 183 

Wednesday, September 22, 2010 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Administration for Children and 

Families 

45 CFR Part 1307 

RIN 0970–AC44 

Head Start Program 

AGENCY: Office of Head Start (OHS), 

Administration for Children and 

Families (ACF), Department of Health 

and Human Services (HHS). 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: This regulation proposes to 

amend Head Start Program regulations 

to implement statutory provisions of the 

Improving Head Start for School 

Readiness Act of 2007 for establishing a 

system of designation renewal to 

determine if Head Start and Early Head 

Start agencies are delivering highquality and comprehensive Head Start 

and Early Head Start programs that meet 

the educational, health, nutritional, and 

social needs of the children and families 

they serve, and meet program and 

financial management requirements and 

standards. 

DATES: In order to be considered, 

comments on this proposed rule must 

be received on or before December 21, 

2010. 

ADDRESSES: Interested persons are 

invited to submit comments to the 

Office of Head Start, 1250 Maryland 

Avenue, SW., Washington, DC 20024, 

Attention: Colleen Rathgeb or 

electronically via the Internet at http:// 

www.regulations.gov. If you submit a 

comment, please include your name and 

address, identify the docket number for 

this rulemaking, indicate the specific 

section of this document to which each 

comment applies, and give the reason 

for each comment. You may submit 

your comments and material by 

electronic means, mail, or delivery to 

the address above, but please submit 

your comments and material by only 

one means. A copy of this Notice of 

Proposed Rulemaking may be 

downloaded from http:// 

www.regulations.gov. Comments will be 

available for public inspection at the 

Department’s offices in Portals, 8th 

Floor, 1250 Maryland Avenue, SW., 

Washington, DC 20024, Monday 

through Friday between 8:30 a.m. and 5 

p.m. 

FOR FURTHER INFORMATION CONTACT: 

Colleen Rathgeb, Office of Head Start, 

202–205–7378 (not a toll-free call). Deaf 

and hearing impaired individuals may 

call the Federal Dual Party Relay 

Service at 1–800–877–8339 between 

8 a.m. and 7 p.m. Eastern time. 

SUPPLEMENTARY INFORMATION: 

I. Statutory Authority 

This proposed regulation is published 

under the authority granted to the 

Secretary of Health and Human Services 

by sections 641, 645A(b)(12), and 644(c) 

of the Head Start Act (the Act) (42 

U.S.C. 9801 et seq.), as amended by the 

Improving Head Start for School 

Readiness Act of 2007 (Pub. L. 110– 

134). 

II. Comment Procedures 

Section 641(c)(5) of the Act requires 

the Secretary of HHS to publish a notice 

in the Federal Register describing a 

proposed system for designation 

renewal, including a proposal for the 

transition to such system. The Act 

provides for a period of at least 90 days 

for public comment. 

In making any modifications to this 

notice of proposed rulemaking, we will 

not consider comments received beyond 

the 90-day comment period. To make 

sure your comments are addressed fully, 

we suggest the following: 

• Be specific; 

• Address only issues raised by the 

proposed rule, not the changes to the 

law itself; 

• Explain reasons for any objections 

or recommended changes; 

• Propose appropriate alternatives; 

and 

• Reference the specific section of the 

notice of the proposed rule being 

addressed. 

III. Background 

The Head Start program is a national 

program administered by the Office of 

Head Start (OHS), Administration for 

Children and Families (ACF), 

Department of Health and Human 

Services (HHS), which promotes school 

readiness of low-income children by 

enhancing their cognitive, physical, 

social, and emotional development 

through the provision of health, 

educational, nutritional, social, and 

other services that are determined, 

based on family needs assessments, to 

be necessary. 

The Head Start program provides 

grants to local public and private nonprofit and for-profit agencies to provide 

comprehensive child development 

services to economically disadvantaged 

children and families, with a special 

focus on helping preschoolers develop 

the skills they need to be successful in 

school. In FY 1995, the Early Head Start 

program was established to serve 

families of economically disadvantaged 

children from birth to three years of age 

and pregnant women from such families 

in recognition of the mounting evidence 

that the earliest years matter a great deal 

to children’s growth and development. 

On February 28, 2005, the United 

States Government Accountability 

Office (GAO) issued a report entitled, 

‘‘Head Start: Comprehensive Approach 

to Identifying and Addressing Risks 

Could Help Prevent Grantee Financial 

Management Weaknesses’’ (GAO–05– 

176). The report is available on the GAO 

Web site at: http://www.gao.gov/ 

new.items/d05176.pdf. In that report, 

GAO found that the Administration for 

Children and Families (ACF) did not 

recompete the grants of poorly 

performing grantees. Instead, ACF gave 

continuous funding priority to current 

grantees and as a result, in a number of 

instances, ACF funded poorly 

performing grantees until the grantee 

either relinquished the grant or ACF 

terminated the grant. GAO stated that, 

‘‘When grants are allowed to remain 

with poorly performing grantees, 

children being served may not be getting 

the ‘head start’ they deserve because the 

grantees continuously fail to meet 

program and financial management 

standards.’’ 

In their Recommendations for 

Executive Action, GAO recommended 

that ACF ‘‘take steps to obtain 

competition for the grant if it has 

determined that the current recipient of 

those grant funds fails to meet program, 

financial management, or other 

requirements.’’ In its comments on the 

draft GAO report, ACF expressed 


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uncertainty about the scope of its 

authority to implement the GAO 

recommendation to recompete Head 

Start grants. In response to the ACF 

concerns, GAO asked Congress to 

consider providing ACF with the 

authority to recompete grants when ACF 

determines that a current grantee is not 

meeting Head Start’s program or 

financial management requirements. 

On December 12, 2007, the Improving 

Head Start for School Readiness Act of 

2007 (Pub. L. 110–134) amended the 

Head Start Act (the Act) to provide HHS 

with the authority to recompete grants. 

The Head Start Act, as amended, 

establishes that Head Start grantees will 

be awarded grants for a five-year period 

and only grantees delivering highquality services will be given another 

five-year grant non-competitively. 

Section 641 of the Act requires the 

Secretary of the HHS to develop and 

implement a system for designation 

renewal (e.g., Designation Renewal 

System (DRS)) to determine if a Head 

Start agency is delivering a high-quality 

and comprehensive Head Start program 

that meets the educational, health, 

nutritional, and social needs of the 

children and families it serves. 

This proposed rule responds to those 

requirements. We also propose to 

extend these requirements to Early Head 

Start programs pursuant to the authority 

of section 645A(b)(12) of the Act. Early 

Head Start programs provide familycentered services for low-income 

families—pregnant women, infants and 

toddlers. These are the youngest 

children and most vulnerable families 

we serve. We believe that Early Head 

Start programs must be held to the same 

high standards as all other Head Start 

programs in regard to designation and 

redesignation in order to ensure that 

they provide high-quality services to 

promote the development of the 

youngest children in the community 

and enable parents to move towards self 

sufficiency. 

Section 641(c)(1) of the Act requires 

that the DRS be shaped to determine 

whether a grantee is providing highquality services and meets the program 

and financial management requirements 

and standards described in section 

641A(a)(1) of the Act, based on: 

(A) Annual budget and fiscal 

management data; 

(B) Program reviews conducted under 

section 641A(c); 

(C) Annual audits required under 

section 647; 

(D) Classroom quality as measured 

under section 641A(c)(2)(F); and 

(E) Program Information Reports. 

In the Conference Report that 

accompanied the Improving Head Start 

for School Readiness Act of 2007, the 

Conference Committee stated, ‘‘This 

system is meant to facilitate the 

designation of programs that are in good 

standing and are providing a highquality comprehensive early childhood 

program, for a period of 5 years. The 

Conferees believe that other programs 

not providing a high-quality 

comprehensive early childhood program 

should not receive a designation 

renewal without first entering into an 

open competition.’’ H.R. Conf. Rep. No. 

110–439 at 111 (2007), as reprinted in 

2007 U.S.C.C.A.N. 442, 462. 

The Conference Committee also noted 

that they did not intend the designation 

renewal system to result in competition 

for all Head Start grantees because such 

a process could undermine overall 

program performance. As stated in the 

Conference Report: ‘‘Furthermore, the 

Conferees believe that the policy to limit 

open competition to under-performing 

Head Start agencies will improve overall 

program performance. The Conferees 

strongly believe the majority of Head 

Start programs are delivering highquality services and therefore do not 

intend for this new designation system 

to result in competition for designation 

for the majority of Head Start programs. 

Furthermore, competing high-quality 

programs could undermine overall 

program quality. The Conferees believe 

that in most instances, stability and 

continuity within Head Start promotes 

better quality and greater efficiency.’’ Id. 

Section 641(c) of the Act required the 

Secretary of HHS to convene an expert 

panel (e.g., ‘‘the Committee’’) to inform 

the development of a DRS and ‘‘make 

recommendations to the Secretary on 

the development of a transparent, 

reliable, and valid system for 

designation renewal.’’ The seven 

members of the Committee were 

appointed by the Secretary per the 

requirements in section 641(c)(3) of the 

Act. The Committee convened three 

two-day meetings in March, June, and 

October 2008 and issued a report in 

December 2008. The report, ‘‘A System 

of Designation Renewal of Head Start 

Grantees,’’ is available at the following 

Web site: http://eclkc.ohs.acf.hhs.gov/

hslc/Program%20Design%20and%

20Management/Head%20Start%

20Requirements/Renewal%20of%

20Head%20Start%20Grantees. 

In its Report the Committee’s first and 

overarching recommendation was for 

ACF to ‘‘develop a designation renewal 

system that is— 

• Reliable and valid in terms of the 

criteria and indicators used, and is 

transparent to families, programs and 

the public; 

• Simple and easily understood by all 

stakeholders; and 

• Integrated into ongoing systems for 

program improvement in such a way as 

to add value.’’ 

ACF strongly agrees with this 

recommendation and used reliability 

and validity, simplicity and 

understandability, and connections to 

program improvement systems as the 

guiding principles in designing the 

proposed system. 

The Committee also recommended 

that the DRS be based on ‘‘Automatic 

Indicators’’ and eventually also include 

‘‘Key Quality Indicators.’’ The term 

‘‘Automatic Indicators’’ as defined in the 

report means events whose occurrence 

would require a grantee to compete for 

renewal automatically. The term ‘‘Key 

Quality Indicators’’ refers to poor 

performance in multiple areas that 

would require a grantee to compete for 

renewal. ACF agrees with the 

recommendations of the Committee, and 

we propose a set of conditions that 

would trigger competition. 

In addition, ACF is proposing to 

ensure that a minimum of 25 percent of 

all grantees reviewed during each oneyear cycle will be required to 

recompete. If the conditions outlined in 

the rule do not identify a minimum of 

25 percent of grantees, then other 

indicators of low performance will be 

used to identify other poor performers 

that will be required to recompete. ACF 

believes that the expectation embodied 

in this provision is critical to ensuring 

that the proposed rule realizes its 

potential to improve child outcomes. 

We acknowledge the Committee’s 

expectation that ‘‘no more than 

approximately 15 to 20 percent of all 

grantees should be expected to compete 

for another five-year grant.’’ However, 

the Administration is committed to 

funding only high-performing grantees 

and conducting effective and rigorous 

competitions. Recent research on Head 

Start programs has illustrated the need 

for improvement and for more rigorous 

standards across Head Start programs. 

We understand that neither the 

Committee nor the Congress intended 

for all grantees to recompete for grants 

as required by most Federal grant 

programs. However, given the 

importance of the provision of quality 

services for Head Start children and 

families, we believe that setting a 

minimum 25 percent standard for 

recompetition is appropriate to ensure 

the best services for Head Start children. 

The Administration is deeply 

committed to the mission of Head 

Start—to helping our nation’s most 

vulnerable children get a head start on 

success in school and in life—and as 


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such is deeply committed to improving 

quality across all Head Start programs. 

Participation in high-quality early 

childhood care and education programs 

can affect crucial child outcomes 

dramatically, but participation in lowquality programs has little or no impact. 

Recent research suggests that quality in 

Head Start programs varies 

considerably, and suggests that there is 

significant room for improvement in 

Head Start programs. For example, 

‘‘FACES Findings: New Research on 

Head Start Outcomes and Program 

Quality’’ reports that while average Head 

Start classroom quality is good, there 

was substantial variation. 

Competition for grants is an important 

tool for encouraging excellence, 

establishing accountability for poor 

performance, and opening up Head Start 

to new energetic organizations that may 

have great capacity to run high-quality 

programs. Unless specified in the 

regulations for grantees that have been 

terminated, current grantees will be 

eligible to compete again for their 

current grants, but other potential 

grantees will be able to do so as well. 

Finally, subjecting a fixed percentage of 

grants to recompetition reduces the risk 

of unintended consequences that could 

jeopardize a meaningful assessment of 

grantee performance. 

ACF agrees with the Committee that 

Head Start and Early Head Start grantees 

should have a clear understanding of 

what criteria will be used as ‘‘triggers’’ 

in making the decision to recompete a 

grant and so proposes the concept of 

conditions/criteria that will result in 

recompetition of a grant. The proposed 

conditions/criteria draw substantively 

from both Automatic and Key Quality 

Indicators and allow for a more simple 

and understandable system. ACF also 

believes that the proposed data sources 

that are utilized to support the 

recompetition decisions would be 

reliable, valid, and transparent as 

recommended by the Committee. 

The Committee made specific 

recommendations on determination 

criteria that would automatically require 

a grantee to compete for renewal, 

including: Suspension; bankruptcy or 

debarment; revocation by a State or 

local government of a license to operate 

a child care program; and a significantly 

higher number of deficiencies in OHS 

monitoring than the average grantee has. 

In the discussion of determination 

criteria, the Committee discussed 

program performance indicators in the 

area of Financial Management, 

including: An audit finding of going 

concern risk (going concern is proposed 

to be defined as an organization that 

operates without the threat of 

liquidation for the foreseeable future, a 

period of at least 12 months); and a 

designation of fiscal high risk. The 

Committee discussed the use of Program 

Management determination criteria, 

including: Governance; internal 

controls; eligibility, recruitment, 

selection, enrollment, attendance 

(ERSEA); self-assessment and ongoing 

monitoring; human resources; and 

safety. The Committee discussed 

determination criteria in the area of 

Education, including: Curriculum; 

assessment; and structured learning 

environment. The Committee 

recommended incorporating a practical 

classroom observation tool and effective 

measures of child outcomes and of 

individualization when ACF is satisfied 

it has the appropriate tools and 

measures. The Committee 

recommended determination criteria in 

the area of Comprehensive Services, 

including: Immunization; screening and 

follow-up; meeting the requirement that 

at least 10 percent of actual enrollment 

include children with disabilities that 

have been determined eligible for 

special services under Individuals with 

Disabilities Education Act (IDEA) by the 

agency providing IDEA services in their 

community; and a developmental 

indicator on parent involvement. 

As discussed in the following Section 

by Section Discussion of the Regulatory 

Provisions, we are proposing to adopt 

the majority of the Committee’s 

recommendations in whole or with 

minor modifications. Concurrent with 

publishing this proposed rule, ACF will 

provide a report to Congress that 

provides a detailed description of the 

proposed new system, including a clear 

rationale for any differences between 

the proposed system and the 

recommendations of the Committee. 

Until the new system is developed and 

implemented by the Secretary of HHS, 

section 641(a)(2) of the Act states that 

the interim policy after the enactment of 

Public Law 110–134 is for ACF to award 

grants as it has done prior to the 2007 

Head Start reauthorization. 

Section by Section Discussion of 

Regulatory Provisions 

To address Head Start designation 

renewal, we propose to amend 45 CFR 

Chapter XIII by adding a new Part 1307, 

Policies and Procedures for Designation 

Renewal of Head Start and Early Head 

Start Grantees. 

Section 1307.1—Purpose and Scope 

We propose to add section 1307.1 to 

set forth the purpose and scope of Part 

1307. The purpose of this Part is to set 

forth policies and procedures for the 

designation renewal of Head Start and 

Early Head Start programs. It is 

intended that these programs be 

administered effectively and 

responsibly; that applicants to 

administer programs receive fair and 

equitable consideration; and that the 

legal rights of current Head Start and 

Early Head Start grantees be fully 

protected. The designation renewal 

system is established in this Part to 

determine if Head Start and Early Head 

Start agencies meet the educational, 

health, nutritional, and social needs of 

the children and families they serve and 

qualify to be designated for funding for 

five years without competing for such 

funding as required under section 641(c) 

of the Head Start Act with respect to 

Head Start agencies and pursuant to 

section 645A(b)(12) with respect to 

Early Head Start agencies. A 

competition to select a new Head Start 

or Early Head Start grantee to replace a 

Head Start or Early Head Start agency 

that has been terminated voluntarily or 

involuntarily is not part of the 

designation renewal system established 

in this Part, and is subject instead to the 

requirements of Part 1302, Policies and 

Procedures for Selection, Initial 

Funding and Refunding of Head Start 

Grantees, and for Selection of 

Replacement Grantees. 

Section 1307.2—Definitions 

Section 1307.2 proposes the following 

definitions as applicable to this part: 

ACF, Act, Agency, designated ACF 

official, Early Head Start Agency, going 

concern, Head Start Agency, material 

weakness, and transition period. 

ACF is proposed to be defined as the 

Administration for Children and 

Families in the Department of Health 

and Human Services. 

Act is proposed to be defined as the 

Head Start Act, 45 U.S.C. 9831 et seq. 

Agency is proposed to be defined as 

a public or private non-profit or forprofit entity designated by ACF to 

operate a Head Start or Early Head Start 

program. 

Designated ACF official is proposed to 

be defined as the Official authorized 

under Department of Health and Human 

Services delegations authority to 

perform actions required or authorized 

by statute, regulation, delegation, or 

order of a superior official. 

Early Head Start Agency is proposed 

to be defined as a public or private nonprofit or for-profit entity designated by 

ACF to operate an Early Head Start 

program to serve pregnant women and 

children from birth to age three, 

pursuant to 645A(e) of the Head Start 

Act. 

Going concern is proposed to be 

defined as an organization that operates 


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without the threat of liquidation for the 

foreseeable future, a period of at least 12 

months. One Head Start agency, for 

example, had a ‘‘going concern’’ audit 

finding because it suffered recurring 

losses from operations resulting in a net 

deficit in working capital, which raised 

substantial doubt about its ability to 

continue as a viable operation. 

Head Start Agency is proposed to be 

defined as a local public or private nonprofit or for-profit entity designated by 

ACF to operate a Head Start program to 

serve children age three to compulsory 

school age, pursuant to section 641(b) 

and (d) of the Head Start Act. 

Material weakness means a weakness, 

or a combination of weaknesses, in 

internal control over financial reporting 

such that there is a reasonable 

possibility that a material misstatement 

of the grantee’s annual or interim 

financial statements will not be 

prevented or detected on a timely basis. 

One Head Start agency, for example, 

had an audit finding resulting from its 

failure to pay the payroll taxes for 

personnel as required by the Internal 

Revenue Code. This resulted in the 

agency being subject to Internal 

Revenue Service penalties. 

ACF believes that an agency that is 

determined to have one or more 

material weaknesses or to be unable to 

ensure that it can continue as a going 

concern should result in the grantee 

being required to recompete for renewal. 

If a grantee is not a going concern, it 

will not be able to provide the Head 

Start services it is funded to provide 

because it will have ceased operations 

and be in the process of being 

liquidated. The definition of ‘‘material 

weakness’’ ACF is proposing to use is 

based on the definition of the term in 

the Securities and Exchange 

Commission regulation at 17 CFR 

210.1–02(a)(4). 

ACF is proposing to adopt the 

definitions for going concern and 

material weakness because they reflect 

the way the two terms are used in audits 

of Head Start grantees as required by 

section 647 of the Head Start Act. We 

invite comments on these definitions 

and request that along with any issues 

raised, commenters suggest specific 

alternative definitions. 

The final definition proposed is 

transition period, which ACF proposes 

to mean the three-year time period after 

the effective date of the final rule on the 

Designation Renewal System during 

which ACF will convert all of the 

current continuous Head Start and Early 

Head Start grants into five-year grants 

after reviewing each grantee to 

determine if it meets any of the 

conditions or criteria under section 

1307.3 that would require recompetition 

or if the grantee will receive its first 

five-year grant non-competitively. 

Section 1307.3—Basis for Determining 

Whether a Head Start Agency Will Be 

Subject to an Open Competition 

In section 1307.3, ACF proposes to 

establish a designation renewal system 

in which a minimum of 25 percent of 

all Head Start grantees (including both 

Head Start and Early Head Start 

grantees) reviewed in the same year will 

be required to recompete based on seven 

specified performance conditions. As 

described further below, the rule sets 

forth how other lower performing 

grantees will be selected for 

recompetition if the seven conditions 

specified in the rule—such as having a 

deficiency or license revocation—do not 

result in at least 25 percent of grantees 

being identified for recompetition. 

Under paragraph (a), a minimum of 25 

percent of all Head Start grantees 

(including both Head Start and Early 

Head Start grantees) reviewed in the 

same year will be required to compete 

for their next five years of funding. 

Under paragraph (b), ACF proposes 

seven conditions in three critical areas 

of Head Start program administration 

that would trigger recompetition: 

quality, licensing and operation, and 

fiscal and internal controls. Paragraphs 

(b)(1), (2), and (3) address the quality of 

Head Start programs by proposing that 

an agency is required to recompete if it 

has one or more deficiencies that were 

determined during a single review of the 

Head Start agency; fails to establish and 

use goals for improving schoolreadiness of children in their program; 

or has low performance on one or more 

domains of the Classroom Assessment 

Scoring System Pre-K (CLASS: Pre-K) in 

the two most recent CLASS: Pre-K 

observations. Paragraphs (b)(4) and 

(b)(5) address the area of licensing and 

operation by proposing that an agency is 

required to recompete if it experiences 

a revocation of its license to operate by 

a State or local licensing agency; or a 

suspension of its Head Start grant by 

ACF. Paragraphs (b)(6) and (b)(7) 

address the area of fiscal and internal 

controls by proposing that an agency is 

required to recompete if it is debarred 

by any Federal or State agency from 

receiving Federal or State funds or is 

disqualified from The Child and Adult 

Care Food Program (CACFP); or is 

determined to have one or more 

material weaknesses or determined to be 

unable to ensure that it can continue as 

a going concern. 

The conditions provided under 

paragraph (b) may result in the 

designation of at least 25 percent of 

grantees for recompetition as required 

under proposed paragraph (a). However, 

given the uncertainty regarding the 

impact of this new system and the 

critical need to ensure high-quality 

services for Head Start children, if a 

minimum of 25 percent of all grantees 

reviewed in the same year are not 

required to compete for their next five 

years of funding based on the conditions 

described in proposed paragraphs 

(b)(1)–(7), then objective criteria 

established by the Secretary would 

identify additional low performing 

grantees that will be required to 

recompete such that the total number of 

grantees required to recompete meets 

the 25 percent requirement. We are 

requesting public comments on several 

possible criteria to use to strengthen the 

test for redesignation of poorly 

performing Head Start grantees. We are 

considering two primary structures for 

defining the additional criteria to be met 

by grantees if needed to satisfy the 25 

percent standard and seek public 

comments on the most effective 

approach to ensure high-quality 

performance by all grantees. We also are 

considering use of a combination of the 

two approaches outlined below. 

The first approach would be based on 

a system that would assign values to 

non-compliance findings from reviews 

under section 641A(c)(A), (C), and (D) of 

the Act, with higher values assigned to 

more problematic non-compliance 

findings. This would result in a system 

in which a higher score indicated that 

the grantee had demonstrated a pattern 

of weaker performance. Each grantee 

then would be ranked among all the 

other grantees reviewed in that year. 

Grantees that received the highest scores 

would be identified for recompetition as 

a result of their pattern of poor 

performance compared to all other 

grantees reviewed during the same time 

period. We are seeking public comments 

about the general merits of such a 

system, and specifically on the relative 

weighting of findings, whether some 

non-compliances should be weighted 

more heavily than others, and whether 

the size of the grantee should be a factor 

taken into consideration in the ranking 

system. 

The second approach we are 

considering would introduce the use of 

evidence-based rating instruments into 

the Head Start monitoring review 

system. Such rating instruments 

include: the Early Childhood 

Environment Rating Scale, the Infant 

Toddler Environment Rating Scale, and 

the Family Child Care Environment 

Rating Scale. Low scores determined 

using any of these instruments would 

result in recompetition. Use of these 


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instruments could provide an increased 

ability to distinguish the level of quality 

of services being provided in Head Start 

and Early Head Start classrooms and 

family child care homes with evidencebased measures. We are seeking public 

comments about this structure in 

general, as well as the three particular 

rating instruments mentioned above and 

any alternative tools that interested 

parties wish to identify in their 

comments. We also invite public 

comment on the appropriate scoring 

level for each instrument that would 

indicate poorer than acceptable 

performance as well as the most 

efficient mechanism for incorporating 

these rating instruments into the Head 

Start review process. 

The proposed regulation describes the 

system whereby a Head Start or Early 

Head Start agency shall be required to 

compete for its next five years of 

funding whenever ACF determines that 

one of the specified conditions/criteria 

under section 1307.3 are met during the 

relevant time periods described in 

section 1307.7. Of note, ACF proposes 

two exceptions related to the time 

periods under which data will be 

considered for the conditions described 

in section 1307.3(b)(2) and (3), as 

described below and in section 1307.7. 

ACF is considering publication of the 

various data underlying decisions to 

recompete. Making such information 

public would provide a valuable service 

to parents and other community 

members concerned about the quality of 

Head Start and Early Head Start, and 

also would provide a valuable incentive 

for improvement among Head Start and 

Early Head Start grantees. 

It should be noted that this proposed 

competition process differs from the 

current competition process that is used 

to select a new Head Start or Early Head 

Start grantee to replace a Head Start or 

Early Head Start agency that has been 

terminated voluntarily or involuntarily. 

The replacement grantee process is not 

part of the DRS established in this Part, 

and is subject instead to the 

requirements of Part 1302, Policies and 

Procedures for Selection, Initial 

Funding and Refunding of Head Start 

Grantees, and for Selection of 

Replacement Grantees. 

ACF will begin implementing the DRS 

within 12 months of the publication of 

the final rule. Consistent with section 

641(c)(9) of the Act, ACF will convert 

all of the current continuous grants into 

five-year grants within a three-year 

transition period after the final rule is 

published. Per section 641(c)(9)(C) of 

the Act, ACF is required to establish and 

implement a schedule for reviewing 

each Head Start agency. We propose 

that the designation review will be 

scheduled to occur during the year 

following the year that the grantee has 

its triennial review. In order to initiate 

the designation review process, each 

Head Start or Early Head Start agency 

wishing to be renewed for five years 

without competition shall request that 

status from ACF immediately after its 

review under section 641A(c)(1)(A); the 

request process is explained further in 

section 1307.7(a). Under this plan, onethird of grantees will be reviewed in 

each of the first three years after the 

final rule is published in order for ACF 

to determine if they meet any of the 

conditions/criteria under section 1307.3 

that would require recompetition or if 

they will receive the first five-year grant 

non-competitively. (Section 1307.7 

addresses timing and notice of 

designation decisions.) 

After the three-year transition period 

is finished, all existing Head Start and 

Early Head Start grantees will be subject 

to a five-year grant period, as described 

further in section 1307.7. Grantees for 

which none of the conditions/criteria in 

proposed section 1307.3 are met will 

not be required to recompete and will be 

awarded another five-year grant; 

grantees for which one or more of the 

conditions/criteria in proposed section 

1307.3 are met will be required to 

recompete. 

During the DRS review, ACF proposes 

to examine relevant records about the 

grantee’s performance since June 12, 

2009 consistent with section 

641(c)(9)(B) of the Act, which specifies 

that Head Start agencies are not subject 

to the DRS requirements prior to 18 

months after the enactment of the 2007 

reauthorization of the Head Start Act. 

Therefore, no data prior to June 12, 2009 

will be considered for the conditions 

listed in section 1307.3(b)(1), (b)(2), or 

(b)(4)–(b)(7) or the criteria in paragraph 

(c); for the condition listed in section 

1307.3(b)(3), ACF proposes that no data 

will be considered until after the 

effective date of this Part and then only 

in reviews under section 1307.7(c) 

beginning in the third year of the threeyear transition period. 

The first three conditions ACF 

proposes to use to determine 

designation renewal related to program 

quality are described in section 

1307.3(b)(1)–(3). We are proposing 

several conditions that reflect the 

Committee’s recommendations that 

established conditions should be simple 

and easily understandable and based on 

data that is reliable, valid and 

transparent: (b)(1) one or more 

deficiencies that were determined 

during a single review conducted by 

ACF under section 641A(c)(1)(A), (C), or 

(D) of the Act; (b)(2) lack of 

establishment and use of goals for 

improving school-readiness of children 

in their program as required by section 

641A(g)(2) of the Act; and (b)(3) low 

performance on the relevant number of 

domains depending on the time period 

in which the DRS review occurs of the 

Classroom Assessment Scoring System 

Pre-K (CLASS: Pre-K) in the two most 

recent CLASS: Pre-K observations. 

Paragraph (b)(1) as proposed cites 

deficiency findings through any review 

conducted under section 641A(c)(1)(A), 

(C), or (D) of the Act—full triennial 

reviews, follow-up reviews, or other 

reviews, including unannounced site 

inspections of Head Start centers, as 

appropriate. ‘‘Deficiency’’ is defined in 

section 637(2) of the Act as: (1) A 

systemic or substantial material failure 

of an agency in an area of performance 

that the Secretary determines involves a 

threat to the health, safety, or civil rights 

of children or staff; a denial to parents 

of the exercise of their full roles and 

responsibilities related to program 

operations; a failure to comply with 

standards related to early childhood 

development and health services, family 

and community partnerships, or 

program design and management; the 

misuse of funds received under the Act; 

loss of legal status (as determined by the 

Secretary) or financial viability, loss of 

permits, debarment from receiving 

Federal grants or contracts, or the 

improper use of Federal funds; or failure 

to meet any other Federal or State 

requirement that the agency has shown 

an unwillingness or inability to correct, 

after notice from the Secretary, within 

the period specified; (2) systemic or 

material failure of the governing body of 

an agency to fully exercise its legal and 

fiduciary responsibilities; or (3) an 

unresolved area of non-compliance. 

A grantee that has been determined by 

ACF to have one or more deficiencies in 

a single review has demonstrated poor 

performance that should require the 

grantee to recompete for renewal. ACF 

believes that Head Start programs 

determined to have a failure of this kind 

are considered appropriately to be 

failing to provide children with a highquality and comprehensive Head Start 

program. Failure to correct a deficiency 

within the allotted time, which ACF 

generally establishes as 30 to 45 days for 

health and safety and financial integrity 

issues, and 90 to 180 days for most other 

deficiencies, is grounds to terminate an 

agency from the Head Start or Early 

Head Start program under section 

641A(e)(1)(C) of the Act. We note that 

the reviews conducted under section 

641A of the Act can result in 

deficiencies in each of the areas of 


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education, health, family engagement 

and management and fiscal systems. 

Violations of program requirements 

demonstrating a systemic or substantial 

lack of program integrity, such as the 

absence of effective internal financial 

controls or a failure to properly apply 

eligibility criteria, will result in 

deficiency findings. The deficiencies 

may include findings in the specific 

‘‘Key Quality Indicators’’ noted in the 

Committee’s recommendations. 

Therefore, ACF believes that the 

proposed deficiency condition 

indirectly addresses the specific 

program performance indicators 

recommended by the Committee. 

Proposed paragraph (b)(2) is 

consistent with the Committee’s 

recommendation regarding the 

importance of Head Start agencies 

assessing their own performance in 

relation to achieving agency-determined 

school-readiness goals. An agency 

would be required to recompete if it has 

been determined by the designated ACF 

official through a review conducted 

under section 641A(c)(1)(A), (C), or (D) 

of the Act during the period covered by 

the ACF review under section 1307.7 

not to have assessed its own 

performance regarding school-readiness 

goals. Of note, we propose that the 

criteria that will be considered when 

determining if an agency has assessed 

successfully its own performance 

regarding school-readiness goals will 

differ for the time period prior to the 

effective date of this Part compared to 

the time period after the effective date 

of this Part, as described further in 

§ 1307.7. Specifically, beginning on June 

12, 2009, ACF proposes that the criteria 

to be considered in the recompetition 

review is whether agencies have 

established and taken steps to achieve 

their goals for improving the school 

readiness of children participating in 

their program in accordance with the 

requirements of section 641A(g)(2) of 

the Act. Beginning with the effective 

date of this Part, ACF proposes that the 

criteria to be considered in the 

recompetition review also will include 

whether agencies have: analyzed 

individual child-level assessment data 

in order to determine each child’s status 

and progress with regard to each of the 

domains of the Head Start Child 

Outcomes Framework for Head Start 

programs and the Child Competencies 

listed in the Early Head Start Program 

Performance Measures Framework for 

Early Head Start programs and to plan 

how to individualize experiences and 

instructional approaches to best support 

each child’s progress; and analyzed 

aggregated child assessment data at least 

three times per year, except for 

programs operating less than 90 days, 

which will be required to do so at least 

two times within their program period, 

and program data to support continuous 

program improvement and to inform 

professional development, staffing, and 

other program decisions. We are 

proposing this two-phase process in 

order to provide grantees with sufficient 

time to develop the necessary polices 

and procedures and train staff on 

implementation of analysis of childlevel data and subsequent action steps 

to best support each child’s progress. 

The Head Start Child Outcomes 

Framework is not developed for, and 

will not be utilized in, Early Head Start 

programs. Instead, the Child 

Competencies listed in the Early Head 

Start Program Performance Measures 

Framework will be used as the 

categories for determining the status of 

infants and toddlers enrolled in Early 

Head Start programs. 

The third condition proposed under 

paragraph (b)(3) is the Head Start agency 

score from the Classroom Assessment 

Scoring System: Pre-K (CLASS: Pre-K), 

a system that rates classroom 

interactions on a seven-point scale with 

scores of one to two being in the low 

range; three to five in the mid-range; 

and six to seven in the high range of 

quality. Section 641A(c)(2)(F) of the Act 

requires the Secretary to include as part 

of the Head Start monitoring review 

process ‘‘a valid and reliable researchbased observational instrument, 

implemented by qualified individuals 

with demonstrated reliability, that 

assesses classroom quality, including 

assessing multiple dimensions of 

teacher-child interactions that are 

linked to positive child development 

and later achievement.’’ Section 

641(c)(1)(D) requires that such an 

instrument be used as part of reviews 

and for determining whether the grantee 

meets the program and financial 

management requirements and 

standards described in section 

641A(a)(1) of the Act. CLASS: Pre-K is 

‘‘a valid and reliable research-based 

observational instrument’’ that meets the 

statutory requirements. As discussed in 

the ‘‘CLASS Implementation Guide: 

Measuring and Improving Classroom 

Interactions in Early Childhood 

Settings’’, CLASS has been validated by 

over ten years of research in educational 

settings. The authors cite overarching 

conclusions based on this extensive 

research noting that ‘‘effective teacherchild interactions are a crucial 

ingredient for children’s social and 

academic development’’. 

It should be noted that the regulations 

propose an alternative time period to be 

considered for this condition compared 

to the other six conditions described in 

this paragraph. In addition, the 

regulations propose an alternative 

standard of performance that would 

apply only for the cohort of grantees 

that receive its DRS review during the 

third year of the three-year transition 

period. 

Specifically, ACF proposes that a 

Head Start agency will be required to 

compete for designation renewal if: (1) 

It scores one, on one or more domains 

on CLASS: Pre-K, on the two most 

recent CLASS: Pre-K observations, when 

the observations are conducted after the 

effective date of Part 1307, and the 

findings are identified in a DRS review 

under Part 1307 conducted after the 

beginning of the third year of the 

transition period; and (2) it scores below 

three, on one or more domains on 

CLASS: Pre-K, on the two most recent 

CLASS: Pre-K observations, when the 

observations are conducted after the 

effective date of Part 1307, and the 

findings are identified in a DRS review 

under Part 1307 conducted after the 

close of the transition period. Thus, 

ACF proposes that the results from 

CLASS: Pre-K observations will not be 

considered starting on June 12, 2009 as 

will be the case for the other six 

conditions described in this paragraph 

and instead will be considered starting 

after the effective date of this Part and 

either at the beginning of the third year 

of the transition period or after the close 

of the transition period (depending on 

when the DRS review is conducted for 

each grantee). ACF believes that a 

grantee that has such low scores as 

described above on the two most recent 

CLASS: Pre-K observations is not 

providing children the level of highquality instruction necessary to 

adequately prepare for school, and 

should be required to recompete for 

renewal. ACF is seeking comment on 

this standard. 

The Administration believes that it is 

a major step forward to bring the quality 

of teacher-child interactions to bear on 

redesignation. The use of CLASS: Pre-K 

in particular is warranted by the strong 

research base validating its correlation 

with student outcomes. Use of CLASS: 

Pre-K in redesignation should begin as 

promptly as possible, recognizing also 

that CLASS: Pre-K has not been used in 

this way before. ACF will implement 

the use of CLASS: Pre-K results during 

the third year of the three-year 

transition period rather than waiting 

until the close of the transition period. 

For this third year of the transition 

period, we are proposing an alternative 

standard of performance related to 

CLASS: Pre-K data that would trigger 


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recompetition. For only the cohort of 

agencies reviewed under section 1307.7 

during the third year of the three-year 

transition period, agencies that received 

a score of one, on one or more domains 

of CLASS: Pre-K, on the two most recent 

CLASS: Pre-K observations would be 

required to compete for designation 

renewal. 

ACF is considering incorporating into 

the final rule that the condition based 

on CLASS: Pre-K observations will 

become effective in the second year of 

the transition period. In this case, we 

would use the same criteria stated above 

for the cohort of grantees reviewed in 

the third year of the transition period, 

i.e., if a grantee scores one, on one or 

more domains on CLASS: Pre-K, on the 

two most recent CLASS: Pre-K 

observations. We are interested in 

receiving public comments on both the 

implementation timeframe and the use 

of this alternative standard of 

performance. 

For both time periods, ACF is 

proposing the following methodology 

for determining the domain scores for 

Head Start grantees. The CLASS: Pre-K 

observations will be incorporated into 

the reviews under section 641A(c)(1)(A), 

(C), or (D) of the Act. Except when all 

children are served by a grantee in a 

single classroom, ACF will conduct 

multiple class observations and rate the 

conduct of the classes observed using 

the CLASS: Pre-K instrument. When the 

grantee serves the children in its 

program in a single class, that class will 

be observed and rated using the CLASS: 

Pre-K instrument. The domain scores for 

that single class will be the domain 

scores for the grantee for that CLASS: 

Pre-K observation. For grantees that 

serve children in multiple classrooms, 

ACF will conduct CLASS: Pre-K 

observations on a subset of the 

classrooms. After the observation is 

completed, ACF will report to the 

grantee the scores of the classes 

observed during the CLASS: Pre-K 

observation in each of the domains 

covered by the CLASS: Pre-K 

instrument. ACF will average the scores 

in each of the domains for all 

classrooms assessed during an 

observation to determine the grantee’s 

average score in each domain. ACF has 

provided and will continue to provide 

technical assistance to grantees on the 

CLASS: Pre-K instrument. 

We also are considering a number of 

alternatives related to (b)(3) and the 

method of calculating the recompetition 

trigger using the CLASS: Pre-K scores. 

One option we are considering is to 

apply different absolute thresholds for 

each of the three domains based on the 

national mean scores for those domains. 

For example, an absolute threshold for 

the domains of Emotional Support and 

Classroom Organization could be higher 

than the threshold for Instructional 

Support. This approach would reflect 

research that shows ‘‘the domains of 

Emotional Support and Classroom 

Organization typically are at the 

moderate to high level of quality in 

early childhood classrooms and 

Instructional Support, however, is 

typically at a low level of quality’’ 

(CLASS Implementation Guide, Hamre 

et al, December 2009). Research also is 

exploring whether there are thresholds 

of quality that must be achieved in each 

domain in order to influence children’s 

development. For example, research has 

shown correlations between children’s 

social emotional outcomes in 

classrooms scoring in the mid to high 

range of emotional support and for 

academic outcomes in the lower end of 

the mid range on Instructional Support 

(Threshold analysis of association 

between child care quality and child 

outcomes for low-income children in 

pre-kindergarten programs, Burchinal et 

al, June 2008). 

Another alternative we are 

considering is to base the determination 

on the grantee’s score on each domain 

relative to the scores of the other 

grantees reviewed in the same year and 

then measure a grantee’s performance 

against that threshold. We are interested 

in receiving public comments on these 

alternative approaches and whether 

they provide a more meaningful 

assessment of grantee performance 

and/or avoid possible unintended 

consequences. 

The CLASS: Pre-K was developed as 

part of classroom observation research 

supported by the National Center for 

Early Development and Learning and 

the National Institute for Child Health 

and Human Development (NICHD) 

Study of Early Care and Youth 

Development. It was designed to allow 

a trained outside observer to provide a 

reliable assessment of the quality of 

preschool classrooms. The CLASS: 

Pre-K also has been used extensively for 

professional development to improve 

the quality of classrooms. 

The CLASS: Pre-K is based on 

research and theory suggesting that 

interactions between children and 

adults are the primary mechanism for 

children’s development and learning. 

The CLASS: Pre-K looks at three 

dimensions of quality in preschool 

classrooms: Emotional Support, 

Classroom Organization, and 

Instructional Support. In high-quality 

programs, effective teacher-child 

interactions measured in the Emotional 

Support dimension create positive 

relationships among teachers and 

children. In Classroom Organization, 

high-quality interactions lead to wellmanaged classrooms that provide 

children with frequent, engaging 

learning activities and classrooms. 

High-quality effective interactions as 

measured in the Instructional Support 

domain develop children’s critical 

thinking skills, provide ongoing 

feedback, and facilitate vocabulary 

development. 

The CLASS: Pre-K has been used in 

a number of large scale studies of early 

childhood programs, including those 

mentioned, but also in the Head Start 

Family and Children Experience Study 

(FACES) which provides a nationally 

representative picture of Head Start 

programs. In general across these 

studies, average CLASS: Pre-K scores 

are in the high end of the mid range of 

quality in Emotional Support and 

Classroom Organization and lower in 

the Instructional Support dimension. 

The Office of Head Start has been 

pursuing the use of CLASS: Pre-K both 

as an observational tool and a 

professional development tool. 

The Committee recommended that 

when ACF was satisfied that it had a 

valid, reliable, and practical classroom 

observation tool, we should incorporate 

it into the designation renewal system. 

ACF now is satisfied, based on 

extensive research and testing, that 

CLASS: Pre-K has proven to be a valid, 

reliable, and practical classroom 

observation tool. ACF believes that a 

low score on CLASS is a reliable and 

valid indicator of poor performance in 

preparing Head Start children for 

school, the primary statutory purpose of 

Head Start. 

The CLASS: Pre-K is not developed 

for, and will not be utilized in, either 

Early Head Start programs or Homebased programs. When ACF is satisfied 

with a valid and reliable measure of 

quality interactions for Early Head Start 

programs and Home-based programs, a 

measure will be added as a 

recompetition condition through a 

subsequent rulemaking process. 

The next two conditions are described 

in paragraphs (b)(4) and (b)(5), which 

address the area of licensing and 

operation by proposing that an agency is 

required to recompete if it experiences 

a revocation of its license to operate by 

a State or local licensing agency; or a 

suspension of its Head Start grant by 

ACF. 

Section 1307.3(b)(4) considers 

whether an agency has had its license to 

operate a center or program revoked by 

a State or local licensing agency, and the 

revocation of the license has not been 

overturned or withdrawn. This is 


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consistent with the Committee’s 

recommendations to consider 

revocation of a license to operate a child 

care program as an automatic indicator 

requiring competition under the DRS. A 

license to operate is required in section 

641A(a)(1)(D)(i) of the Act, which states 

that center-based and combination 

program option facilities ‘‘shall meet or 

exceed State and local requirements 

concerning licensing for such facilities.’’ 

Grantees have appeal rights for 

license revocations. It is possible that 

these actions may be overturned. If 

these actions are overturned, or 

withdrawn by the responsible State or 

local agency, before ACF decides to 

require competition, they will not be 

used as a basis for a recompetition 

decision by ACF. The grantee, however, 

could be required to recompete by ACF 

based on the existence in its program of 

any other conditions/criteria listed in 

section 1307.3. ACF does believe that 

license revocations, if not overturned or 

withdrawn, are serious enough to be 

included as conditions that would 

require recompetition of a grant. 

Accordingly, if a challenge to a license 

revocation is pending at the time of a 

final decision by ACF on required 

competition, the grantee would still be 

required to compete for further funding. 

It should be noted that revocation of 

a license to operate either a child care 

facility or program, or any other 

necessary permit, can be grounds for a 

‘‘deficiency’’ finding, as the term is 

defined in section 637(2) of the Act. 

Failure to correct a deficiency within 

the allotted time is grounds to terminate 

an agency from the Head Start or Early 

Head Start program under section 

641A(e)(1)(C) of the Act. An agency that 

has had its license revoked, but 

subsequently has it restored during the 

period for deficiency correction, still 

would be required to recompete for 

funding because of the revocation. ACF 

understands that licensing requirements 

vary based on State and locality, but 

agrees with the Committee that 

licensing standards reflect the standards 

of care for young children in that 

community and a sustained license 

revocation is a serious violation of those 

standards. ACF is aware of the fact that 

some grantees, like local government 

agencies and Indian tribes, are 

responsible both for administering Head 

Start programs and enforcing licensing 

standards applicable to Head Start 

facilities. We are concerned about the 

potential conflict of interest that could 

arise when such agencies are called to 

apply licensing standards to their own 

facilities. ACF is seeking comment on 

this concern and ideas for mitigating 

risks that may be associated with this 

condition. ACF also is seeking comment 

on its impact on large grantees. 

Section 1307.3(b)(5) proposes another 

condition, which was recommended by 

the Committee: Whether an agency has 

been suspended from the Head Start or 

Early Head Start program by ACF. 

‘‘Suspension of a grant’’ is defined at 45 

CFR 1303.2 as the ‘‘temporary 

withdrawal of the grantee’s authority to 

obligate grant funds pending corrective 

action by the grantee.’’ In accordance 

with 45 CFR 1303.12(a), ACF may 

suspend a grant ‘‘in whole or in part 

without prior notice and an opportunity 

to show cause if it is determined that 

immediate suspension is necessary 

because of a serious risk of: (1) 

Substantial injury to property or loss of 

project funds; or (2) violation of a 

Federal, State, or local criminal statute; 

or (3) if staff or participants’ health and 

safety are at risk.’’ A grantee that has 

been suspended by ACF will be 

required to compete for further funding 

unless the suspension has been 

overturned or withdrawn before the date 

of ACF’s decision about requiring 

competition under section 1307.7. A 

grantee that has had its suspension 

withdrawn or overturned before the 

ACF decision under section 1307.7 may 

still be required to compete for further 

funding based on having met one of the 

other conditions/criteria in section 

1307.3. ACF agrees that any Head Start 

agency that has been suspended 

successfully has demonstrated an 

extremely poor performance and should 

be required to recompete. A pending 

challenge to the suspension or 

restoration of the grantee to the Head 

Start program after correction of the 

violation shall not affect application of 

this requirement. If there is a risk of the 

loss of Federal funds as a result of 

mismanagement by a Head Start or Early 

Head Start agency, ACF will suspend 

the agency. 

The final two conditions are 

described in paragraphs (b)(6) and 

(b)(7), which address the area of fiscal 

and internal controls by proposing that 

an agency is required to recompete if it 

is debarred by any Federal or State 

agency from receiving Federal or State 

funds or is disqualified from the Child 

and Adult Care Food Program (CACFP); 

or is determined to have one or more 

material weaknesses or to be unable to 

ensure that it can continue as a going 

concern. 

Section 1307.3(b)(6) proposes as the 

sixth condition, Head Start agency 

debarment by a Federal or State agency 

from receiving Federal or State funds or 

disqualification from the Child and 

Adult Care Food Program (CACFP). 

CACFP disqualification applies to 

individuals who have been disqualified 

from participation in the CACFP as 

principals of institutions, sponsored 

centers, or as operators of day care 

homes, as a result of being determined 

to be responsible for an uncorrected 

serious deficiency in the operation of an 

institution, a sponsored center, or a 

family day care home that participates 

in the program. This is consistent with 

the Committee’s recommendation that 

grantees that have been debarred should 

be considered to be poor performing 

programs that should have to recompete 

for their grants. Debarment is grounds 

for a deficiency finding under section 

637(2) of the Head Start Act. Where a 

deficiency involving debarment exists, 

the means for correction of the 

deficiency would be for an agency to 

obtain a waiver pursuant to 2 CFR 

180.135. A former grantee during the 

period of its debarment would not be 

eligible for grants and other ‘‘Covered 

Transactions,’’ including grants under 

the Head Start Act. 2 CFR 180.130(a). 

An agency that is terminated because it 

has been debarred will not be in the 

position to be refunded without 

undergoing competition because it is no 

longer participating in the Head Start or 

Early Head Start program. While we 

cannot preclude previously debarred 

grantees after their period of debarment 

has ended from applying in an open 

competition, past performance is a 

criterion for funding under section 

641(d)(2)(A) of the Act. 

Section 1307.3(b)(7) proposes the 

final of the seven conditions in 

paragraph (b), which incorporates two 

criteria that are consistent with the 

Committee’s recommendations 

concerning the area of financial 

management. The Committee proposed 

that audit findings that determine an 

agency is unable to ensure it can 

continue as a going concern and/or that 

an agency has received a designation of 

high risk should be used as indicators 

of program performance determination 

criteria for recompetition. ACF believes 

that an agency that is determined to 

have one or more material weaknesses 

or to be unable to ensure that it can 

continue as a going concern is a highrisk agency that has demonstrated poor 

financial performance that should result 

in the grantee being required to 

recompete for renewal. We propose to 

use the definitions described in section 

1307.2 for ‘‘material weakness’’ and 

‘‘going concern.’’ Section 1307.3(b)(7) 

provides that the basis for the two 

criteria in this condition will be 

findings and opinions of either an audit 

conducted in accordance with section 

647 of the Act; an audit, review or 


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investigation by a State agency; a review 

by the National External Audit Review 

(NEAR) Center; or an audit, 

investigation or inspection by the 

Department of Health and Human 

Services Office of Inspector General as 

mandated under Public Law 95–452. We 

considered including as another 

criterion in the area of financial 

management whether the grantee had a 

disallowance of any of its Head Start or 

Early Head Start funds. As defined in 

the HHS Uniform Administrative 

Requirements implemented at 45 CFR 

74.2, ‘‘disallowed costs’’ means ‘‘those 

charges to an award that the HHS 

awarding agency determines to be 

unallowable, in accordance with the 

applicable Federal cost principles or 

other terms and conditions contained in 

the award.’’ However, we recognize that 

an instance of disallowed costs would 

lead to a deficiency finding by ACF in 

most cases and therefore did not include 

this as one of the criteria for 

recompetition. 

In our development of this proposed 

rule, we also considered incorporating 

into the DRS two other conditions: The 

results of Head Start agencies’ Program 

Information Reports (PIR) and agency 

bankruptcy. However, based on the 

rationales described below, we decided 

that the PIR should be used only in a 

limited way and bankruptcy should not 

be included as a DRS condition. 

The PIR is a survey tool used by ACF 

to collect self-reported information 

about Head Start and Early Head Start 

services received by children and 

families enrolled in Head Start 

programs. ACF uses the information 

collected through the PIR to inform the 

public and Congress about the status of 

children in Head Start programs as 

required by the Act. We recognize that 

Congress included the PIR as a source 

of information for the DRS in the 2007 

reauthorization of the Head Start Act. 

Specifically, section 641(c)(1)(E) of the 

Act requires that Program Information 

Reports (PIR) be only one of the sources 

of information that the DRS will use to 

make its determination of whether the 

grantee meets the program and financial 

management requirements and 

standards described in section 

641A(a)(1) of the Act. However, the 

Committee stated in its report that the 

PIR has ‘‘significant limitations,’’ and 

noted in particular ‘‘documented 

reliability problems.’’ In addition, a 

number of public comments were 

received by the Committee arguing 

against use of PIR data as part of the 

DRS due to reliability concerns. We note 

that in carrying out ongoing Federal 

oversight of programs, and as 

preparation for conducting triennial 

reviews, Federal staff already review the 

PIR data of specific programs and look 

for ‘‘red flags’’ that warrant follow-up 

attention. Therefore, ACF proposes to 

continue to utilize PIR data when 

gathering background information about 

programs, including when performing 

DRS reviews, with due regard to its 

limitations. 

Similarly, we considered 

incorporating bankruptcy as another 

condition under the DRS, but instead 

we propose to regard bankruptcy as a 

‘‘red flag’’ that should result in further 

inquiry. We note that the Committee 

recommended that bankruptcy be 

included in the automatic conditions for 

recompetition by stating that it is 

‘‘indicative of instability in the 

program.’’ While we agree that this is a 

very serious situation that raises the 

question of whether a grantee is in 

sound enough fiscal condition to 

continue to be funded to operate a Head 

Start program, we believe that it is 

possible that, in some cases, a grantee 

could file for bankruptcy or agree to a 

reorganization plan as part of a 

bankruptcy settlement, but could 

continue to be able to function as a 

Head Start program if it still has its 

Head Start funding intact. In addition, 

we believe that the two financial 

conditions we propose to establish in 

section 1307.3(b)(7) are sufficient to 

satisfy the Committee’s 

recommendations concerning financial 

management. 

Section 1307.4—Grantee Reporting 

Requirements Concerning Certain 

Conditions 

Section 1307.4 proposes reporting 

requirements concerning the occurrence 

of certain conditions related to 

requirements for grant recompetition 

under section 1307.3. Under proposed 

paragraph (a), Head Start and Early 

Head Start agencies are required to 

report in writing to ACF within ten 

working days of occurrence of any of the 

following events: (1) The agency has 

had a license to operate a center revoked 

by a State or local licensing entity; (2) 

the agency has filed for bankruptcy or 

agreed to a reorganization plan as part 

of a bankruptcy settlement; (3) the 

agency has been debarred from 

receiving Federal or State funds from 

any Federal or State department or 

agency or has been disqualified from 

The Child and Adult Care Food Program 

(CACFP); or (4) the agency has received 

an audit, audit review, investigation or 

inspection report from the agency’s 

auditor, a State agency, or the cognizant 

Federal audit agency containing a 

determination that the agency has one 

or more material weaknesses or is at risk 

for ceasing to function as a going 

concern. 

Currently Head Start and Early Head 

Start agencies are not required to report 

these occurrences. ACF believes that 

timely reporting of the occurrences is 

warranted because of their potential 

seriousness and that ten days is a 

reasonable amount of time for the 

agency to report the occurrence to ACF. 

Failure to comply with the reporting 

requirement may result in additional 

monitoring of the grantee in order to 

determine whether or not there is basis 

for ACF to issue a finding of noncompliance or deficiency. While we 

considered making the failure to report 

any of these occurrences another 

condition that would require 

recompetition automatically, we 

recognized that the majority of grantees 

will comply with these reporting 

requirements. We also would not want 

to force a grantee to recompete based on 

an honest mistake whereby it missed the 

10-day reporting deadline or an 

extenuating circumstance whereby it 

was unable to comply with the 

deadline. However, if we learn through 

the Head Start monitoring process, or 

other measures, that a grantee 

deliberately neglected to report any of 

these occurrences, then ACF will issue 

a deficiency finding and the grantee 

would be required to compete based on 

the condition described in section 

1307.3(b)(1). 

Section 1307.5—Requirements To Be 

Considered for Designation for a FiveYear Period When No Entity in a 

Community Is Determined To Be 

Delivering a High-Quality and 

Comprehensive Head Start Program 

Section 641(d) of the Act requires that 

‘‘if no entity in a community is 

determined to be successfully delivering 

a high-quality and comprehensive Head 

Start program * * * the Secretary shall, 

after conducting an open competition, 

designate for a five-year period a Head 

Start agency from among qualified 

applicants in such community.’’ If a 

grantee is found to meet any of the 

conditions/criteria in section 1307.3, its 

service area will be subject to an open 

competition to determine if it or another 

provider is best able to serve children 

and families in that community. Section 

641(h) of the Act explains that ‘‘for 

purposes of this subchapter, a 

community may be a city, county, or 

multicity or multicounty unit within a 

State, an Indian reservation (including 

Indians in any off-reservation area 

designated by an appropriate tribal 

government in consultation with the 

Secretary), or a neighborhood or other 

area (irrespective of boundaries or 


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political subdivisions) that provides a 

suitable organizational base and 

possesses the commonality of interest 

needed to operate a Head Start 

program.’’ 

Section 1307.5 proposes requirements 

for how to compete for the opportunity 

to be awarded a five-year grant if no 

entity in a community is determined to 

be successfully delivering a high-quality 

and comprehensive Head Start program. 

We are proposing that any agency that 

has had its Head Start or Early Head 

Start grant terminated in the preceding 

five years will be excluded from 

participating in such a competition for 

a period of five years due to the 

extremely serious nature of uncorrected 

deficiencies that would have led to such 

a termination. ACF believes that 

because of their poor performance such 

organizations cannot be considered to 

be ‘qualified applicants’ in a community 

under section 641(d)(1) of the Head 

Start Act. 

Under this section, we propose that in 

order to compete for the opportunity to 

be awarded a five-year grant, an agency 

must submit an application to the 

designated ACF official that 

demonstrates it will deliver a highquality and comprehensive program. 

The application must address the 

criteria for selection listed at section 

641(d)(2) of the Act. 

Section 641(d)(2) of the Act provides 

the factors ACF will consider in 

selecting a grantee, including the 

applicant’s past performance and plans 

to provide comprehensive services, 

attract and retain qualified staff, 

maintain strong fiscal controls and cost 

effective fiscal management, maintain 

child to teacher ratios, meet the program 

performance standards, coordinate and 

collaborate with other early childhood 

education and development entities, 

and facilitate parent involvement in 

their program. 

In cases in which a new grantee is 

selected as a result of recompetition, 

ACF believes that the transition 

generally will proceed without any 

disruption of services to children and 

families in the community served. If 

ACF determines that a particular 

transition poses a risk of disruption of 

services, ACF may exercise its statutory 

authority to utilize the replacement 

process in exceptional circumstances. 

Section 1307.6—Tribal Government 

Consultation Under the Designation 

Renewal System for When an Indian 

Head Start Grant Is Being Considered 

for Competition 

This section proposes a process for 

Tribal government consultation under 

the Designation Renewal System for 

when an Indian Head Start grant is 

being considered for competition. 

American Indian and Alaska Native 

Head Start programs provide Head Start 

services to Tribes, bands, pueblos, or 

other organized groups or communities, 

including native villages, recognized as 

eligible for the special programs and 

services provided by the United States 

to Indians because of their status as 

Indians. 

Section 641(c)(7)(B) of the Act 

prescribes a specific timeframe and 

process for implementing the DRS for 

Indian Head Start agencies, which 

differs from the DRS for other Head 

Start agencies. For instances in which 

an Indian Head Start agency is 

determined to not be delivering a highquality and comprehensive Head Start 

program, the Act requires the Secretary 

of HHS to engage in government-togovernment consultation with the 

appropriate Tribal government or 

governments in order to establish a plan 

to improve the quality of Head Start 

programs operated by the Indian Head 

Start agency. The Act requires that the 

Secretary of HHS reevaluate the 

performance of the Indian Head Start 

agency no more than six months after 

the implementation of the plan. If the 

Indian Head Start agency still is not 

delivering a high-quality and 

comprehensive Head Start program, the 

Secretary shall conduct an open 

competition. 

This section proposes the same 

process that is required by section 

641(c)(7)(B) of the Act. Under paragraph 

(a), when making a designation renewal 

determination, the designated ACF 

official will engage in government-togovernment consultation with the 

appropriate Tribal government or 

governments for the purpose of 

establishing a plan to improve the 

quality of Head Start programs operated 

by the Indian Head Start agency. 

The plan will be established and 

implemented within six months after 

the designated ACF official’s 

determination. Not more than six 

months after the implementation of that 

plan, the designated ACF official will 

reevaluate the performance of the Indian 

Head Start agency and will conduct an 

open competition following a 

determination that the Indian Head Start 

agency still is not delivering a highquality and comprehensive Head Start 

program. 

Per section 641(e) of the Act, a nonIndian Head Start agency will not be 

eligible to receive a grant to carry out an 

Indian Head Start program, unless no 

Indian Head Start agency in the 

community is available for designation 

to carry out an Indian Head Start 

program. In such a circumstance, a nonIndian Head Start agency may receive a 

grant to carry out an Indian Head Start 

program, but only until such time as an 

Indian Head Start agency in such 

community becomes available and is 

designated pursuant to section 641 of 

the Act. 

Accordingly, under proposed 

paragraph (b), a non-Indian Head Start 

or Early Head Start agency will not be 

eligible to receive a grant to carry out an 

Indian Head Start program, unless there 

is no Indian Head Start or Early Head 

Start agency available for designation to 

carry out an Indian Head Start or Indian 

Early Head Start program. 

Under proposed paragraph (c), a nonIndian Head Start or Early Head Start 

agency may receive a grant to carry out 

an Indian Head Start program only until 

such time as an Indian Head Start or 

Indian Early Head Start agency in such 

community becomes available and is 

designated. 

Section 1307.7—Designation Request 

and Review Process 

As discussed earlier in this preamble, 

following publication of the final rule, 

ACF will implement the DRS and, 

consistent with section 641(c)(9) of the 

Act, will transition the current 

continuous grants into five-year grants 

over a three-year period. One-third of 

grantees will be reviewed in each of 

three years to determine if they meet 

any of the conditions/criteria set out in 

section 1307.3 that would require 

recompetition or if they will receive the 

first five-year grant non-competitively. 

The designation review will be 

scheduled to occur during the year 

following the year that the grantee has 

its triennial review. 

ACF’s designation review will 

examine relevant records about the 

grantee’s performance since June 12, 

2009, and no data prior to June 12, 2009 

will be considered in order to comply 

with section 641(c)(9)(B) of the Act, 

which describes the following limitation 

for the transition to the DRS: ‘‘A Head 

Start agency shall not be subject to the 

requirements of the system for 

designation renewal prior to 18 months 

after the date of enactment of the 

Improving Head Start for School 

Readiness Act of 2007.’’ As discussed 

previously, there is one exception to 

this time period. ACF proposes an 

alternative relevant time period to be 

considered for the third condition 

described in section 1307.3(b)(3), which 

considers the results of the classroom 

interaction rating system known as 

‘‘CLASS: Pre-K.’’ ACF proposes to delay 

implementing the consideration of 

results from CLASS: Pre-K until after 


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the effective date of the regulation and 

beginning in the third year of the threeyear transition period because the use of 

CLASS still is relatively new to many 

Head Start agencies. Therefore, results 

from CLASS: Pre-K will not be 

considered starting on June 12, 2009 

and instead will be considered starting 

after the effective date of this Part and 

beginning in the third year of the threeyear transition period. 

Paragraph (a) proposes that agencies 

wishing to be renewed without 

competition must request that status. 

Under paragraph (b)(1), in the three 

years after the effective date of the final 

rule, during the year after review of a 

Head Start or Early Head Start agency 

under section 641(c)(1)(A) of the Act, 

each agency that has requested noncompetitive renewal would be reviewed 

to determine whether the conditions/ 

criteria in proposed section 1307.3 are 

met, using information on the agency’s 

performance since June 12, 2009. 

As provided under paragraph (b)(2), 

ACF proposes to provide preliminary 

notice to each grantee of the results of 

the designation review at least twelve 

months before expiration of their 

current grant. Such notices will be in 

writing by registered mail return receipt 

requested providing preliminary notice 

under paragraph (b)(2)(i), that the 

agency will be required to compete for 

funding for an additional five-year 

period based on a determination that 

one or more conditions/criteria in 

proposed section 1307.3 are met, or 

under (b)(2)(ii), that the agency has been 

determined on a preliminary basis to be 

eligible for renewed funding under 

section 1307.3. 

ACF proposes to provide final notice 

to the grantee of the designation 

decision at least six months before 

expiration of their current grant. A 

grantee determined to be delivering a 

high-quality and comprehensive Head 

Start or Early Head Start program, as 

established by the fact that none of the 

conditions/criteria in proposed section 

1307.3 are met for its program, will be 

awarded a five-year grant noncompetitively. A grantee determined to 

be not delivering a high-quality and 

comprehensive Head Start or Early Head 

Start program, as established by the fact 

that one or more of the conditions/ 

criteria in proposed section 1307.3 are 

met, will be subject to open competition 

for the opportunity to be awarded a fiveyear grant. Proposed paragraph (b)(3) 

provides that at least six months before 

the expiration of the grant of an agency, 

written notice by certified mail return 

receipt requested will be sent of the 

final finding that the agency is eligible 

for renewed funding without 

competition, or that the agency will be 

required to recompete for funding for an 

additional five-year period based on a 

determination under section 1307.3. 

ACF invites grantees to comment on the 

proposed transition plans. 

Following the transition period, all 

existing grantees will be subject to a 

five-year grant period. As provided in 

paragraph (c)(1), during the fourth year 

of the grant period, ACF will review all 

relevant data about a grantee’s 

performance and make a determination, 

based on the conditions/criteria 

established in section 1307.3, of 

whether the grantee is providing highquality, comprehensive services. 

Grantees for which none of the 

conditions/criteria in proposed section 

1307.3 are met will not be required to 

recompete under proposed section 

1307.3 and will be awarded another 

five-year grant. Grantees for which one 

or more of the conditions/criteria in 

proposed section 1307.3 are met will be 

required to compete. 

Following the approach proposed for 

the transition period under paragraph 

(a) and (b), ACF proposes under 

paragraph (c)(2) to provide preliminary 

notice to the grantee of the results of the 

designation review at least twelve 

months before expiration of their 

current five-year grant, subject to 

revision based on developments that 

take place within the ensuing six-month 

period. 

Under paragraph (c)(3), ACF proposes 

to provide final notice to the grantee of 

the designation decision at least six 

months before expiration of their 

current five-year grant. Grantees 

determined to be delivering a highquality and comprehensive program, 

evidenced by not meeting any of the 

conditions/criteria, will be awarded a 

five-year grant non-competitively. For 

grantees determined not to be delivering 

a high-quality and comprehensive Head 

Start or Early Head Start program, ACF 

proposes to provide final notice to the 

grantee at least six months before 

expiration of their current five-year 

grant that they will have to compete for 

the opportunity to be awarded a fiveyear grant. 

Section 1307.8—Use of CLASS: Pre-K 

Instrument in the Designation Review 

System 

ACF is proposing in section 1307.8 

that, except when all children are 

served in a single classroom, ACF will 

conduct multiple class observations and 

rate the conduct of the classes observed 

using the Classroom Assessment 

Scoring System: Pre-K (CLASS: Pre-K) 

instrument. When the grantee serves the 

children in its program in a single class, 

that class will be observed and rated 

using the CLASS: Pre-K instrument. The 

domain scores for that single class will 

be the domain scores for the grantee for 

that observation. For grantees that serve 

children in multiple classrooms, ACF 

will conduct CLASS: Pre-K observations 

on a subset of the classrooms. After the 

CLASS: Pre-K observation is completed, 

ACF will report to the grantee the scores 

of the classes observed during the 

observation in each of the domains 

covered by the CLASS: Pre-K 

instrument. ACF will average the scores 

in each of the domains for all 

classrooms assessed during a CLASS: 

Pre-K observation to determine the 

grantee’s score in each domain. As 

provided in section 1307.3(b)(3), an 

agency that has been determined by 

ACF to have a score of one, on one or 

more domains during the transition 

period or a score below three, on one or 

more domains, for the period after the 

close of the transition period on each of 

the two most recent CLASS: Pre-K 

observations in the time period covered 

by an ACF decision under section 

1307.7 will be required to compete for 

designation renewal. As provided under 

section 1307.3(b)(3), the CLASS: Pre-K 

condition will apply to CLASS: Pre-K 

observations in DRS reviews under 

section 1307.7(c) that take place after 

the effective date of this Part and during 

the third year of the transition period. 

As discussed earlier in the preamble, 

ACF is considering alternatives for 

calculating CLASS: Pre-K scores to 

determine the need to recompete and 

we welcome comments on those 

alternatives. 

IV. Paperwork Reduction Act 

This rule establishes new information 

collection requirements in section 

1307.4. As required by the Paperwork 

Reduction Act of 1995, codified at 44 

U.S.C. 3507, ACF will submit a copy of 

these sections to the Office of 

Management and Budget (OMB) for 

review and they will not be effective 

until they have been approved and 

assigned a clearance number. 


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Requirement Respondents Annual Average burden per 

respondent (hours) 

Total burden 

hours 

Per section 1307.4, Head Start and Early Head Start 

agencies must report to ACF within ten working days of 

occurrence of any of the following: 

12–22 grantees ........ 1 hour or less ........... 1 hour or less ........... 12–22 hours. 

(1) The agency has had a license to operate a center 

revoked by a State or local licensing entity. 

(2) The agency has filed for bankruptcy or agreed to 

a reorganization plan as part of a bankruptcy settlement. 

(3) The agency has been debarred from receiving 

Federal or State funds from any Federal or State 

agency or has been disqualified from the Child and 

Adult Care Food Program (CACFP). 

(4) The agency has received an audit, audit review, 

investigation or inspection report from the agency’s 

auditor, a State agency, or the cognizant Federal 

audit agency containing a determination that the 

agency: Has one or more material weaknesses; or 

is at risk of failing to function as a going concern. 

Per section 1307.7(a), each Head Start or Early Head 

Start agency wishing to be renewed for five years without competition shall request that status from ACF immediately after its review under section 641A(c)(1)(A).

1,600 grantees ......... 1 hour or less ........... 1 hour or less ........... 1,600 hours. 

We estimate the costs of 

implementing these requirements will 

be approximately $20,000 annually. 

We do not anticipate that Head Start 

agencies would be gathering new 

information to accomplish these 

changes. They only will be required to 

inform ACF that the event has occurred 

or that they wish to have their 

designation renewed. 

With respect to these provisions, ACF 

will consider comment by the public on 

this proposed collection of information 

in the following areas: 

• Evaluating whether the proposed 

collection is necessary for the proper 

performance of the functions of ACF, 

including whether the information will 

have practical utility; 

• Evaluating the accuracy of ACF’s 

estimate of the proposed collection of 

information, including the validity of 

the methodology and the assumptions 

used; 

• Enhancing the quality, usefulness, 

and clarity of the information to be 

collected; and 

• Minimizing the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technology, e.g., permitting electronic 

submission of responses. 

OMB is required to make a decision 

concerning the collection of information 

contained in these regulations between 

30 and 60 days after publication of this 

document in the Federal Register. 

Therefore, a comment is best assured of 

having its full effect if OMB receives it 

within 30 days of publication. This does 

not affect the deadline for the public to 

comment to the Department on the 

regulations. Written comments to OMB 

for the proposed information collection 

should be sent directly to the following: 

Office of Management and Budget, 

either by fax to 202–395–6974 or by 

e-mail to OIRA at 

submission@omb.eop.gov. Please mark 

faxes and e-mails to the attention of the 

desk officer for ACF. 

V. Regulatory Flexibility Act 

The Secretary certifies that, under 

5 U.S.C. 605(b), as enacted by the 

Regulatory Flexibility Act (Pub. L. 

96–354), this rule will not result in a 

significant economic impact on a 

substantial number of small entities. 

The actions required of grantees to 

comply with the reporting, 

recordkeeping, and other requirements 

of this rule do not require significant 

expenditures of funds. 

Specifically, as noted under the 

Paperwork Reduction Act section of this 

preamble, we estimate the cost of 

implementing new reporting 

requirements to be approximately 

$20,000 annually, which when applied 

to all 1,600 grantees nationally, results 

in a cost per grantee of less than $20. In 

addition, only a subset of the 1,600 

grantees will be required to compete for 

renewal of a grant under these 

regulations. At least 25 percent of 

grantees reviewed in a year will be 

affected by the regulation. Those 

grantees that need to compete for 

another five-year grant are required to 

submit an application. Since all grantees 

currently are required to submit a 

refunding application each year for their 

noncompetitive grant, there only will be 

an incremental increase in costs for 

grantees that must prepare and submit 

a competitive application. We estimate 

those costs to be less than $1,500 for 

each grantee submitting a competitive 

application. In developing this estimate, 

we assumed that the primary cost factor 

relates to hourly salaries of the staff that 

likely would be involved in a refunding 

application. Further, we assumed that 

grantees could spend up to twice as 

much time preparing this competitive 

application as they do on their regular 

annual refunding application. 

These rules primarily are intended to 

ensure accountability for Federal funds 

consistent with the purposes of the 

Head Start Act and are not duplicative 

of other requirements. In developing 

this notice of proposed rulemaking, we 

sought to implement the new and 

expanded requirements of the Head 

Start Act in a manner that does not 

impinge on a small entity’s ability to 

design and manage effective and 

responsive Head Start programs. At the 

same time, we sought to focus renewed 

attention on strengthening 

accountability for Head Start programs 

and increasing quality outcomes for 

low-income families. We believe this 

rule implements the aims of the Head 

Start Act, as amended, to improve the 

effectiveness of Head Start programs 

while preserving Head Start grantees’ 

abilities to continue using creativity and 

innovation to promote the school 

readiness of low-income children. We 

request public comments on whether we 

have adequately considered all costs for 

small entities and achieved the balance 

described above. 


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VI. 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 notice of proposed rulemaking 

is consistent with these priorities and 

principles. These regulations primarily 

implement statutory changes to the 

Head Start program enacted in the 

Improving Head Start for School 

Readiness Act of 2007 (Pub. L. 110– 

134). We have consulted with the Office 

of Management and Budget (OMB) and 

determined that these rules meet the 

criteria for a significant regulatory 

action under E.O. 12866. Thus, they 

were subject to OMB’s review. 

ACF does not believe there will be a 

significant economic impact from this 

regulatory action. At least 25 percent of 

grantees reviewed in a year will be 

affected by the regulation. Combining 

the costs of implementation of these 

rules for all grantees (approximately 

$20,000 annually) and the costs to those 

subset of grantees that would be 

required to compete in any year 

(estimated to be no more than $1,500 for 

each grantee), the total cost per year 

resulting from this regulation is well 

under $1 million. 

VII. Unfunded Mandates Reform Act of 

1995 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 requires 

that a covered agency prepare a 

budgetary impact statement before 

promulgating a rule that includes any 

Federal mandate that may result in the 

expenditure by State, local, and Tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

in any one year. If an agency must 

prepare a budgetary impact statement, 

section 205 requires that it select the 

most cost-effective and least 

burdensome alternative that achieves 

the objectives of the rule consistent with 

the statutory requirements. Section 203 

requires a plan for informing and 

advising any small government that may 

be significantly or uniquely impacted. 

The Department has determined that 

this rule, in implementing the new 

statutory requirements, would not 

impose a mandate that will result in the 

expenditure by State, local, and Tribal 

governments, in the aggregate, or by the 

private sector, of more than $100 

million in any one year. 

VIII. Congressional Review 

This regulation is not a major rule as 

defined in 5 U.S.C. Chapter 8. 

IX. Executive Order 13132 

Executive Order 13132, Federalism, 

requires that Federal agencies consult 

with State and local government 

officials in the development of 

regulatory policies with federalism 

implications. This rule will not have 

substantial direct impact on the States, 

on the relationship between the 

National Government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. Therefore, in 

accordance with section 6 of Executive 

Order 13132, it is determined that this 

rule does not have sufficient federalism 

implications to warrant the preparation 

of a federalism summary impact 

statement. 

X. Treasury and General Government 

Appropriations Act of 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act of 1999 (Pub. L. 105–277) requires 

Federal agencies to issue a Family 

Policymaking Assessment for any rule 

that may affect family well-being. This 

rule would not have any impact on the 

autonomy or integrity of the family as 

an institution. Accordingly, ACF has 

concluded that it is not necessary to 

prepare a Family Policymaking 

Assessment. 

List of Subjects in 45 CFR Part 1307 

Education of disadvantaged, Grant 

programs-social programs. 

(Catalog of Federal Domestic Assistance 

Program Number 93.600, Head Start) 

Dated: June 14, 2010. 

Carmen R. Nazario, 

Assistant Secretary for Children and Families. 

Approved: June 14, 2010. 

Kathleen Sebelius, 

Secretary. 

For the reasons set forth in the 

preamble, we propose to amend 45 CFR 

Chapter XIII by adding part 1307 to read 

as set forth below: 

PART 1307—POLICIES AND 

PROCEDURES FOR DESIGNATION 

RENEWAL OF HEAD START AND 

EARLY HEAD START GRANTEES 

Sec. 

1307.1 Purpose and scope. 

1307.2 Definitions. 

1307.3 Basis for determining whether a 

Head Start agency will be subject to an 

open competition. 

1307.4 Grantee reporting requirements 

concerning certain conditions. 

1307.5 Requirements to be considered for 

designation for a five-year period when 

no entity in a community is determined 

to be delivering a high-quality and 

comprehensive Head Start program. 

1307.6 Tribal government consultation 

under the Designation Renewal System 

for when an Indian Head Start grant is 

being considered for competition. 

1307.7 Designation request and review 

process. 

1307.8 Use of CLASS: Pre-K Instrument in 

the Designation Review System. 

Authority: 42 U.S.C. 9801 et seq. 

§ 1307.1 Purpose and scope. 

The purpose of this part is to set forth 

policies and procedures for the 

designation renewal of Head Start and 

Early Head Start programs. It is 

intended that these programs be 

administered effectively and 

responsibly; that applicants to 

administer programs receive fair and 

equitable consideration; and that the 

legal rights of current Head Start and 

Early Head Start grantees be fully 

protected. The designation renewal 

system is established in this part to 

determine if Head Start and Early Head 

Start agencies meet the educational, 

health, nutritional, and social needs of 

the children and families they serve and 

qualify to be designated for funding for 

five years without competing for such 

funding as required under section 641(c) 

of the Head Start Act with respect to 

Head Start agencies and pursuant to 

section 645A(b)(12) with respect to 

Early Head Start agencies. A 

competition to select a new Head Start 

or Early Head Start to replace a Head 

Start or Early Head Start agency that has 

been terminated voluntarily or 

involuntarily is not part of the 

designation renewal system established 

in this part, and is subject instead to the 

requirements of part 1302. 

§ 1307.2 Definitions. 

As used in this part— 

ACF means the Administration for 

Children and Families in the 

Department of Health and Human 

Services. 

Act means the Head Start Act, 45 

U.S.C. 9831 et seq. 

Agency means a public or private 

non-profit or for-profit entity designated 

by ACF to operate a Head Start or Early 

Head Start program. 

Designated ACF official means the 

Official authorized under Department of 

Health and Human Services delegations 

authority to perform actions required or 

authorized by statute, regulation, 

delegation, or order of a superior 

official. 

Early Head Start Agency means a 

public or private non-profit or for-profit 

entity designated by ACF to operate an 

Early Head Start program to serve 

pregnant women and children from 

birth to age three, pursuant to section 

645A(e) of the Head Start Act. 


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Going concern means an organization 

that operates without the threat of 

liquidation for the foreseeable future, a 

period of at least 12 months. 

Head Start Agency means a local 

public or private non-profit or for-profit 

entity designated by ACF to operate a 

Head Start program to serve children 

age three to compulsory school age, 

pursuant to section 641(b) and (d) of the 

Head Start Act. 

Material weakness means a weakness, 

or a combination of weaknesses, in 

internal control over financial reporting 

such that there is a reasonable 

possibility that a material misstatement 

of the grantee’s annual or interim 

financial statements will not be 

prevented or detected on a timely basis. 

Transition period means the threeyear time period after the effective date 

of the final rule on the Designation 

Renewal System during which ACF will 

convert all of the current continuous 

Head Start and Early Head Start grants 

into five-year grants after reviewing 

each grantee to determine if it meets any 

of the conditions or criteria under 

§ 1307.3 that would require 

recompetition or if the grantee will 

receive its first five-year grant noncompetitively. 

§ 1307.3 Basis for determining whether a 

Head Start agency will be subject to an 

open competition. 

(a) A minimum of 25 percent of all 

Head Start grantees (including both 

Head Start and Early Head Start 

grantees) reviewed in the same year will 

be required to compete for their next 

five years of funding. 

(b) A Head Start or Early Head Start 

agency shall be required to compete for 

its next five years of funding whenever 

the designated ACF official determines 

that one or more of the following seven 

conditions existed during the relevant 

time periods described under § 1307.7: 

(1) An agency has been determined by 

ACF to have one or more deficiencies on 

a single review conducted under section 

641A(c)(1)(A), (C), or (D) of the Act in 

the period covered by an ACF review 

under § 1307.7. 

(2) An agency has been determined by 

the designated ACF official based on a 

review conducted under section 

641A(c)(1)(A), (C), or (D) of the Act 

during the period covered by the ACF 

review under § 1307.7: 

(i) In the period beginning on June 12, 

2009, not to have established and taken 

steps to achieve its goals for improving 

the school-readiness of children 

participating in their program in 

accordance with the requirements of 

section 641A(g)(2) of the Act; and 

(ii) Beginning with the effective date 

of the part, not to have analyzed 

individual child-level assessment data 

in order to determine each child’s status 

with regard to each of the domains of 

the Head Start Child Outcomes 

Framework for Head Start programs and 

the Child Competencies listed in the 

Early Head Start Program Performance 

Measures Framework for Early Head 

Start programs and to plan how to 

individualize experiences and 

instructional approaches to best support 

each child’s progress; and not to have 

analyzed aggregated child assessment 

data at least three times per year, except 

for programs operating less than 90 

days, which will be required to do so at 

least two times within their program 

period, and program data to support 

continuous improvement and inform 

professional development, staffing, and 

other program decisions. 

(3) An agency has been determined by 

the designated ACF official during the 

period covered by an ACF review under 

§ 1307.7: 

(i) In the period after the effective date 

of part 1307, and for the findings 

identified in a DRS review under part 

1307 conducted during the third year of 

the three-year transition period, but 

before the close of the three-year 

transition period, to have a score of one, 

on one or more domains on CLASS: PreK, on the two most recent CLASS: PreK observations; and 

(ii) In the period after the effective 

date of part 1307, and for the findings 

identified in a DRS review under part 

1307 conducted after the close of the 

three-year transition period, to have a 

score that is below three, on one or more 

domains of the CLASS: Pre-K on the two 

most recent CLASS: Pre-K observations. 

(4) An agency has had its license to 

operate a Head Start or Early Head Start 

center or program revoked by a State or 

local licensing agency in the period 

covered by an ACF review under 

§ 1307.7, and the revocation has not 

been overturned or withdrawn during 

that period. A pending challenge to the 

license revocation or restoration of the 

license after correction of the violation 

shall not affect application of this 

requirement. 

(5) An agency has been suspended 

from the Head Start or Early Head Start 

program by ACF during the period 

covered by the designated ACF official 

review under § 1307.7 and the 

suspension has not been overturned or 

withdrawn before a competition for 

funding for the next five-year period is 

announced. A pending challenge to 

suspension or restoration of the grantee 

to the Head Start program after 

correction of the violation shall not 

affect application of this requirement. 

(6) An agency has been debarred from 

receiving Federal or State funds from 

any Federal or State department or 

agency or has been disqualified from 

The Child and Adult Care Food Program 

(CACFP) any time during the period 

covered by the designated ACF official’s 

review under § 1307.7 but has not yet 

been terminated or denied refunding by 

ACF. (A debarred agency will only be 

eligible to compete for Head Start 

funding if it receives a waiver described 

in 2 CFR 180.135.) 

(7) An agency has been determined by 

ACF within the twelve months 

preceding the designated ACF official’s 

review under § 1307.7 to have either one 

or more material weaknesses or to be at 

risk for failing to continue functioning 

as a going concern. The final 

determination is made by the designated 

ACF official based on a review of the 

findings and opinions of an audit 

conducted in accordance with section 

647 of the Act; an audit, review or 

investigation by a State agency; a review 

by the National External Audit Review 

(NEAR) Center, or an audit, 

investigation or inspection by the 

Department of Health and Human 

Services Office of Inspector General. 

(c) If a minimum of 25 percent of all 

Head Start grantees (including both 

Head Start and Early Head Start 

grantees) reviewed in the same year are 

not required to compete for their next 

five years of funding based on the 

conditions described in paragraphs 

(b)(1) through (7) of this section, then 

additional grantees up to that threshold, 

identified by the Secretary through 

established criteria, will be required to 

compete, pursuant to paragraph (a) of 

this section. 

§ 1307.4 Grantee reporting requirements 

concerning certain conditions. 

(a) Head Start agencies must report in 

writing to the designated ACF official 

within ten working days of occurrence 

any of the following events: 

(1) The agency has had a license to 

operate a center revoked by a State or 

local licensing entity. 

(2) The agency has filed for 

bankruptcy or agreed to a reorganization 

plan as part of a bankruptcy settlement. 

(3) The agency has been debarred 

from receiving Federal or State funds 

from any Federal or State department or 

agency or has been disqualified from 

The Child and Adult Care Food Program 

(CACFP). 

(4) The agency has received an audit, 

audit review, investigation or inspection 

report from the agency’s auditor, a State 

agency, or the cognizant Federal audit 


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57718 Federal Register / Vol. 75, No. 183 / Wednesday, September 22, 2010 / Proposed Rules 

agency containing a determination that 

the agency has one or more material 

weaknesses or is at risk for ceasing to be 

a going concern. 

§ 1307.5 Requirements to be considered 

for designation for a five-year period when 

no entity in a community is determined to 

be delivering a high-quality and 

comprehensive Head Start program. 

In order to compete for the 

opportunity to be awarded a five-year 

grant, an agency must submit an 

application to the designated ACF 

official that demonstrates it will deliver 

a high-quality and comprehensive Head 

Start program. The application must 

address the criteria for selection listed at 

section 641(d)(2) of the Act. Any agency 

that has been terminated as a Head Start 

or Early Head Start agency in the 

preceding five years will be excluded 

from competing in such competition. 

§ 1307.6 Tribal government consultation 

under the Designation Renewal System for 

when an Indian Head Start grant is being 

considered for competition. 

(a) In the case of an Indian Head Start 

or Early Head Start agency determined 

not to be delivering a high-quality and 

comprehensive Head Start or Early Head 

Start program, the designated ACF 

official will engage in government-togovernment consultation with the 

appropriate Tribal government or 

governments for the purpose of 

establishing a plan to improve the 

quality of the Head Start program or 

Early Head Start program operated by 

the Indian Head Start or Indian Early 

Head Start agency. 

(1) The plan will be established and 

implemented within six months after 

the designated ACF official’s 

determination. 

(2) Not more than six months after the 

implementation of that plan, the 

designated ACF official will reevaluate 

the performance of the Indian Head 

Start or Early Head Start agency. 

(3) If the Indian Head Start or Early 

Head Start agency is still not delivering 

a high-quality and comprehensive Head 

Start or Early Head Start program, the 

designated ACF official will conduct an 

open competition to select a grantee to 

provide services for the community 

currently being served by the Indian 

Head Start or Early Head Start agency. 

(b) A non-Indian Head Start or Early 

Head Start agency will not be eligible to 

receive a grant to carry out an Indian 

Head Start program, unless there is no 

Indian Head Start or Early Head Start 

agency available for designation to carry 

out an Indian Head Start or Indian Early 

Head Start program. 

(c) A non-Indian Head Start or Early 

Head Start agency may receive a grant 

to carry out an Indian Head Start 

program only until such time as an 

Indian Head Start or Indian Early Head 

Start agency in such community 

becomes available and is designated 

pursuant to this part. 

§ 1307.7 Designation request and review 

process. 

(a) In the three years after the effective 

date of this part, during the year after 

the review of a Head Start or Early Head 

Start agency under section 

641A(c)(1)(A) of the Act, each Head 

Start or Early Head Start agency wishing 

to be renewed for five years without 

competition shall request that status 

from ACF immediately after its review 

under section 641A(c)(1)(A). 

(b)(1) ACF shall review each Head 

Start and Early Head Start agency which 

has made a request under paragraph (a) 

of this section to determine if any of the 

conditions listed in § 1307.3(b)(1), 

(b)(2), or (b)(4) through (7) or the criteria 

under § 1307.3(c) were met by the 

agency’s program since June 12, 2009 or 

if the condition listed in § 1307.3(b)(3) 

existed in the agency’s program since 

the effective date of this part and 

beginning in the third year of the threeyear transition period. 

(2) Except as provided in § 1307.6, at 

least twelve months before the 

expiration date of a Head Start or Early 

Head Start agency’s then current grant, 

ACF shall give written notice by 

certified mail return receipt requested or 

other system that establishes the date of 

receipt of the notice by the addressee, 

stating: 

(i) The Head Start or Early Head Start 

agency will be required to compete for 

funding for an additional five-year 

period because ACF finds that one or 

more conditions listed in § 1307.3(b)(1), 

(b)(2), or (b)(4) through (7) or the criteria 

under § 1307.3(c) were met by the 

agency’s program after June 12, 2009 or 

if the condition listed in § 1307.3(b)(3) 

existed in the agency’s program since 

the effective date of this part and 

beginning in the third year of the threeyear transition period; or 

(ii) That such agency has been 

determined on a preliminary basis to be 

eligible for renewed funding for five 

years without competition because ACF 

did not find that any conditions listed 

in § 1307.3(b)(1), (b)(2), or (b)(4) through 

(7) or the criteria under § 1307.3(c) were 

met by the agency’s program after June 

12, 2009 or the condition listed in 

§ 1307.3(b)(3) existed in the agency’s 

program since the effective date of this 

part and beginning in the third year of 

the three-year transition period. 

(3) Except as provided in § 1307.6, at 

least six months before the expiration 

date of a Head Start or Early Head Start 

agency’s then-current grant, ACF shall 

give written notice by certified mail 

return receipt requested or other system 

that establishes the date of receipt of the 

notice by the addressee, stating either: 

(i) The Head Start or Early Head Start 

agency will be required to compete for 

funding for an additional five-year 

period because ACF finds that one or 

more conditions or criteria listed in 

§ 1307.3 were met by the agency’s 

program during the relevant time 

periods described in § 1307.7(b), 

identifying the conditions or criteria 

ACF found, and summarizing the basis 

for the finding; or 

(ii) That such agency has been 

determined on a final basis to be eligible 

for renewed funding for five years 

without competition because ACF did 

not find that any conditions or criteria 

listed in § 1307.3 were met by the 

agency’s program during the relevant 

time periods described in § 1307.7(b). 

The letter will include instructions on 

the information it must provide to the 

designated ACF official in order to 

receive funding. 

(c)(1) Beginning with the five-year 

grant period after the transition period 

under paragraph (b) of this section, at 

the beginning of the fourth year of a 

Head Start or Early Head Start agency’s 

then current grant, an agency wishing to 

be renewed without competition shall 

request that status. ACF shall review the 

applicant Head Start and Early Head 

Start agency to determine if any of the 

conditions or criteria listed in § 1307.3 

were met by the agency’s program: 

(i) Since the most recent ACF review 

of the agency under this part, or, 

(ii) After the effective date of this part, 

in the case of the condition described 

under § 1307.3(b)(3). 

(2) Except as provided in § 1307.6, at 

least twelve months before the 

expiration date of a Head Start or Early 

Head Start agency’s grant, ACF shall 

give written notice by certified mail 

return receipt requested, or other system 

that establishes the date of receipt of the 

notice by the addressee, stating either: 

(i) The Head Start or Early Head Start 

agency will be required to compete for 

funding for an additional five-year 

period because ACF finds that one or 

more conditions or criteria listed in 

§ 1307.3 were met by the agency’s 

program during the period established 

in paragraphs (c)(1)(i) or (ii) of this 

section, identifying the conditions or 

criteria ACF found, and summarizing 

the basis for the finding; or 

(ii) That such agency has been 

determined on a preliminary basis to be 

eligible for renewed funding for five 

years without competition because ACF 


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did not find that any conditions or 

criteria listed in § 1307.3 were met by 

the agency’s program in the period 

established in paragraphs (c)(1)(i) or (ii) 

of this section. 

(3) Except as provided in § 1307.6, at 

least six months before the expiration 

date of a Head Start or Early Head Start 

agency’s then current grant, ACF shall 

give written notice by certified mail 

return receipt requested, or other system 

that establishes the date of receipt of the 

notice by the addressee, either stating: 

(i) The Head Start or Early Head Start 

agency will be required to compete for 

funding for an additional five-year 

period because ACF finds that one or 

more conditions or criteria listed in 

§ 1307.3 were met by the agency’s 

program during the period established 

under paragraphs (c)(1)(i) or (ii) of this 

section identifying the conditions or 

criteria ACF found, and summarizing 

the basis for the finding; or 

(ii) That such agency has been 

determined on a final basis to be eligible 

for renewed funding for five years 

without competition because ACF did 

not find that any conditions or criteria 

listed in § 1307.3 existed in the agency’s 

program during the period established 

under paragraphs (c)(1)(i) or (ii) of this 

section. The letter will include 

instructions on the information it must 

provide to the designated ACF official 

in order to receive funding. 

§ 1307.8 Use of CLASS: Pre-K Instrument 

in the Designation Review System. 

Except when all children are served 

in a single classroom, ACF will conduct 

multiple class observations and rate the 

conduct of the classes observed using 

the CLASS: Pre-K instrument. When the 

grantee serves the children in its 

program in a single class, that class will 

be observed and rated using the CLASS: 

Pre-K instrument. The domain scores for 

that class will be the domain scores for 

the grantee for that observation. After 

the observation is completed, ACF will 

report to the grantee the scores of the 

classes observed during the CLASS: PreK observation in each of the domains 

covered by the CLASS: Pre-K 

instrument. ACF will average the scores 

on each domain for all classrooms 

assessed during a CLASS: Pre-K 

observation to determine the grantee’s 

score in each domain. As provided in 

§ 1307.3(b)(3), an agency that has been 

determined by ACF to have a score of 

one, on one or more domains, during 

the transition period or a score below 

three, on one or more domains, for the 

period after the close of the transition 

period on each of the two most recent 

CLASS: Pre-K observations in the time 

period covered by an ACF decision 

under § 1307.7 will be required to 

compete for designation renewal. As 

provided under § 1307.3(b)(3), the 

CLASS: Pre-K condition will apply to 

CLASS: Pre-K observations in DRS 

reviews under § 1307.7(c) that take 

place after the effective date of this part 

and during the third-year of the 

transition period. 

[FR Doc. 2010–23583 Filed 9–21–10; 8:45 am] 

BILLING CODE 4184–01–P 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

48 CFR Part 52 

[FAR Case 2009–034; Docket 2010–0098; 

Sequence 1] 

RIN: 9000–AL73 

Federal Acquisition Regulation; TINA 

Interest Calculations 

AGENCIES: Department of Defense (DoD), 

General Services Administration (GSA), 

and National Aeronautics and Space 

Administration (NASA). 

ACTION: Proposed rule. 

SUMMARY: The Civilian Agency 

Acquisition Council and the Defense 

Acquisition Regulations Council (the 

Councils) are proposing to amend the 

Federal Acquisition Regulation (FAR) to 

revise the clauses at FAR 52.214–27, 

52.215–10 and 52.215–11 to require 

compound interest calculations be 

applied to Government overpayments as 

a result of defective cost or pricing data. 

DATES: Interested parties should submit 

written comments to the Regulatory 

Secretariat on or before November 22, 

2010 to be considered in the 

formulation of a final rule. 

ADDRESSES: Submit comments 

identified by FAR Case 2009–034 by any 

of the following methods: 

• Regulations.gov: http:// 

www.regulations.gov. Submit comments 

via the Federal eRulemaking portal by 

inputting ‘‘FAR Case 2009–034’’ under 

the heading ‘‘Enter Keyword or ID’’ and 

selecting ‘‘Search’’. Select the link 

‘‘Submit a Comment’’ that corresponds 

with ‘‘FAR Case 2009–034’’. Follow the 

instructions provided at the ‘‘Submit a 

Comment’’ screen. Please include your 

name, company name (if any), and ‘‘FAR 

Case 2009–034’’ on your attached 

document. 

• Fax: 202–501–4067. 

• Mail: General Services 

Administration, Regulatory Secretariat 

(MVCB), ATTN: Hada Flowers, 1800 F 

Street, NW., Room 4041, Washington, 

DC 20405. 

Instructions: Please submit comments 

only and cite FAR Case 2009–034, in all 

correspondence related to this case. All 

comments received will be posted 

without change to http:// 

www.regulations.gov, including any 

personal and/or business confidential 

information provided. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Edward Chambers, Procurement 

Analyst, at (202) 501–3221 for 

clarification of content. For information 

pertaining to status or publication 

schedules, contact the Regulatory 

Secretariat at (202) 501–4755. Please 

cite FAR case 2009–034. 

SUPPLEMENTARY INFORMATION: 

A. Background 

On September 14, 2009, the U.S. 

Court of Appeals for the Federal Circuit 

(CAFC) issued a decision regarding the 

method of interest calculation on Cost 

Accounting Standards (CAS) cost 

impacts (See GATES v. Raytheon Co., 

584 F.3d 1062 (Fed. Cir. 2009)). The 

interest on CAS cost impacts is set by 

reference in the enabling statute to 26 

U.S.C. 6621. The CAFC ruled that the 

citation led to calculation of the interest 

using daily compounding. The Truth in 

Negotiation Act (TINA) also references 

26 U.S.C. 6621 for interest calculation. 

This proposed rule replaces the term 

‘‘simple interest’’ as the requirement for 

calculating interest for TINA cost 

impacts with the phrase ‘‘Interest 

compounded daily as required by 26 

U.S.C. 6622.’’ Thus, compound interest 

calculations will be applied to 

Government overpayments as a result of 

defective cost or pricing data. 

This is not a significant regulatory 

action and, therefore, was not subject to 

review under Section 6(b) of Executive 

Order 12866, Regulatory Planning and 

Review, dated September 30, 1993. This 

rule is not a major rule under 5 U.S.C. 

804. 

B. Regulatory Flexibility Act 

The Councils do not expect this 

proposed rule to have a significant 

economic impact on a substantial 

number of small entities within the 

meaning of the Regulatory Flexibility 

Act, 5 U.S.C. 601, et seq., because the 

rule merely clarifies the statutory 

method for calculating interest in the 

rare instances when a contractor is 

found to be in violation of TINA. Since 

TINA requirements generally do not 

apply to contracts with small entities, 


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