Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Rules and Regulations 66319 

(i) Your proposal is for publications or 

subvention projects; or 

(ii) You are an American Indian tribe. 

(2) You will find the staff contacts and 

a list of State historical records 

coordinators on the Commission’s Web 

site at http://www.archives.gov/nhprc. 

§ 1206.60 [Amended] 

■ 23. Amend § 1206.60 in the first 

sentence by removing the word ‘‘Web’’ 

and adding in its place the word ‘‘web’’. 

■ 24. Revise § 1206.64(a) to read as 

follows: 

§ 1206.64 What formal notification will I 

receive, and will it contain other 

information? 

(a) Successful grant applicants will 

receive a formal grant award document. 

The document and attachments specify 

terms of the grant. NHPRC staff notifies 

project directors informally of awards 

and any conditions soon after the 

Archivist approves the grants. 

* * * * * 

Subpart F—[Amended] 

§ 1206.70 [Amended] 

■ 25. Amend § 1206.70 by removing the 

second sentence. 

■ 26. Amend § 1206.72 by revising 

paragraph (a) to read as follows: 

§ 1206.72 What are, and where can I find, 

the regulatory requirements that apply to 

NHPRC grants? 

(a) In addition to this Part 1206, 

NARA has issued other regulations that 

apply to NHPRC grants in 36 CFR Parts 

1200 to 1212 and 2 CFR Part 2600. 

NARA also applies the principles and 

standards in the following regulations 

and Office of Management and Budget 

(OMB) Circular for NHPRC grants: 

(1) 2 CFR Part 25 Universal Identifier 

and Central Contractor Registration; 

(2) 2 CFR Part 170 Reporting 

Subaward and Executive Compensation 

Information; 

(3) 2 CFR Part 220 Cost Principles for 

Educational Institutions (OMB Circular 

A–21); 

(4) 2 CFR Part 225 Cost Principles for 

State, Local, and Indian Tribal 

Governments (OMB Circular A–87); 

(5) 2 CFR Part 230 Cost Principles for 

Non-Profit Organizations (OMB Circular 

A–122); and 

(6) OMB Circular A–133, ‘‘Audits of 

States, Local Governments, and 

Nonprofit Organizations.’’ This circular 

is available at http://www.whitehouse.

gov/omb/circulars_default. 

* * * * * 

§ 1206.74 [Amended] 

■ 27. Amend § 1206.74 in the first 

sentence by removing the word 

‘‘Commission’’ and adding ‘‘NHPRC’’ in 

its place. 

■ 28. Revise § 1206.76 to read as 

follows: 

§ 1206.76 May I receive an extension to my 

grant project? 

Yes, requests for extensions of the 

grant period should be signed by the 

grantee’s authorized representative and 

submitted not more than two months 

before the scheduled end of the grant 

period. The NHPRC will not allow 

extensions unless a project is up-to-date 

in its submission of financial and 

narrative reports. 

§ 1206.80 [Amended] 

■ 29. Amend § 1206.80(a) in the first 

sentence by removing the word ‘‘status’’. 

■ 30. Revise § 1206.82 to read as 

follows: 

§ 1206.82 What is the format and content 

of the financial report? 

Grant recipients must submit 

financial reports on Standard Form 425 

and have them signed by the grantee’s 

authorized representative or by an 

appropriate institutional fiscal officer. 

■ 31. Amend § 1206.84 by revising the 

second sentence of paragraph (a) and 

removing paragraph (c). 

The revision reads as follows: 

§ 1206.84 What is the format and content 

of the narrative report? 

(a) * * * The report should include a 

summary of project activities; whether 

the project proceeded on schedule; any 

revisions of the work plan, staffing 

pattern, or budget; any web address 

created by the project; and any other 

press releases, articles, or presentations 

relating to the grant project or its 

products. * * * 

* * * * * 

■ 32. Revise § 1206.86 to read as 

follows: 

§ 1206.86 What additional materials must I 

submit with the final narrative report? 

You must submit the materials 

required in the NHPRC grant 

announcements and in the grant award 

document. 

§ 1206.88 [Amended] 

■ 33. Amend § 1206.88 by removing the 

phrase ‘‘the National Archives and 

Records Administration (NARA)’’ and 

adding ‘‘NARA’’ in its place. 

Dated: October 18, 2010. 

David S. Ferriero, 

Archivist of the United States. 

[FR Doc. 2010–27282 Filed 10–27–10; 8:45 am] 

BILLING CODE 7515–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Part 95 

RIN 0970–AC33 

State Systems Advance Planning 

Document (APD) Process 

AGENCY: Office of Child Support 

Enforcement (OCSE), Administration for 

Children and Families (ACF), 

Department of Health and Human 

Services (HHS). 

ACTION: Final rule. 

SUMMARY: The Advance Planning 

Document (APD) process governs the 

procedure by which States obtain 

approval for Federal financial 

participation in the cost of acquiring 

automated data processing equipment 

and services. This final rule reduces the 

submission requirements for lower-risk 

information technology (IT) projects and 

procurements and increases oversight 

over higher-risk IT projects and 

procurements by making technical 

changes, conforming changes and 

substantive revisions in the 

documentation required to be submitted 

by States, counties, and territories for 

approval of their Information 

Technology plans and acquisition 

documents. 

DATES: Effective Date: This regulation is 

effective October 28, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Robin Rushton, OCSE Division of State 

and Tribal Systems, (202) 690–1244, 

e-mail: Robin.Rushton@acf.hhs.gov. 

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: 

Statutory Authority 

This final regulation is published 

under the general authority of 5 U.S.C. 

301, 42 U.S.C. 622(b), 629b(a), 652(a), 

652(d) 654A, 671(a), 1302, and 1396a(a). 

This regulation is published under the 

authority granted to the Secretary of the 

U.S. Department of Health and Human 

Services, (the Secretary) by Section 1102 

of the Social Security Act (the Act), 42 

U.S.C. 1302. This section authorizes the 

Secretary to publish regulations that 

may be necessary for the efficient 


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administration of the functions for 

which she is responsible under the Act. 

Background 

The Department of Health and Human 

Services (HHS) provides national 

leadership and direction in planning, 

managing, and coordinating the 

nationwide administration and 

financing of comprehensive State public 

assistance systems to support programs 

for children and families. The Advance 

Planning Document (APD) process 

governs the procedure by which States 

obtain approval for Federal Financial 

Participation (FFP) in the cost of 

acquiring automated data processing 

(ADP) equipment and services. The APD 

process was designed to mitigate 

financial risks, avoid incompatibilities 

among systems and ensure that a system 

supports the program goals and 

objectives and operates as intended by 

law and regulation. The APD process 

also assists in ensuring that the 

expenditure of Federal funds is made in 

accordance with Federal regulation. 

This rule sets forth technical and 

conforming revisions, establishes new 

requirements and modifies existing 

requirements. The technical revisions 

delete or update obsolete references to 

agency names and assistance programs. 

The conforming revisions to regulations 

reflect the inclusion of entitlement 

grants under procurement standards 

found in 45 CFR Part 92, Uniform 

Administrative Requirements for Grants 

and Cooperative Agreements to State, 

Local and Tribal Governments. (Prior to 

this rule, Part 95 cross-referenced 

procurement standards in 45 CFR Part 

74, titled Uniform Administrative 

Requirements for Awards and 

Subawards to Institutions of Higher 

Education, Hospitals, Other Nonprofit 

Organizations, and Commercial 

Organizations). These conforming 

changes are being made in response to 

comments and reflect Federal 

regulations that were published on 

September 8, 2003 [68 FR 52843] to 

promulgate uniform administrative 

requirements for certain Federal grants 

and agreements with State, local and 

tribal governments. The rule eliminates 

and reduces the documentation required 

to be submitted for Federal approval of 

FFP in the costs of acquiring ADP 

equipment or services. 

Technical revisions were prompted in 

part by changes made by the Personal 

Responsibility and Work Opportunity 

Reconciliation Act of 1996, which 

eliminated the Job Opportunities and 

Basic Skills (JOBS) training program and 

replaced the Aid to Families with 

Dependent Children (AFDC) program 

with a Temporary Assistance for Needy 

Families (TANF) block grant that is not 

subject to 45 CFR Part 95. Other 

technical amendments were due to the 

name change from Health Care 

Financing Administration to Centers for 

Medicare & Medicaid Services (CMS). 

The conforming revisions were made 

to reflect the final rule on Uniform 

Administrative Requirements for 

Awards and Subawards to Institutions 

of Higher Education, Hospitals, Other 

Nonprofit Organizations, and 

Commercial Organizations; and Certain 

Grants and Agreements with States, 

Local Governments and Indian Tribal 

Governments and Uniform 

Administrative Requirements for Grants 

and Cooperative Agreements to State 

and Local Governments [68 FR 52843], 

which brought entitlement grant 

programs administered by HHS, such as 

the Child Support Enforcement (CSE) 

program, under the same regulations 

that already applied to non-entitlement 

programs for grants and cooperative 

agreements to State, local, and tribal 

governments. This was done by 

expanding the scope of 45 CFR Part 92 

to include entitlement grant programs 

and removing such programs from the 

scope of Part 74. According to the rules 

published in 68 FR 52843, the affected 

programs under an approved State plan 

for titles I (Grants to States for Old-Age 

Assistance for the Aged), IV–A (Block 

Grants to States for Temporary 

Assistance for Needy Families), IV–B 

(Child and Family Services), IV–D 

(Child Support and Establishment of 

Paternity), IV–E (Federal Payments for 

Foster Care and Adoption Assistance), X 

(Grants to States for Aid to the Blind), 

XIV (Grants to States for Aid to the 

Permanently and Totally Disabled), XVI 

(Grants to States for Aid to the Aged, 

Blind, and Disabled), XIX (Grants to 

States for Medical Assistance Programs), 

and XXI (Children’s Health Insurance 

Program) of the Social Security Act (the 

Act) and title IV, chapter 2 (Refugee 

Assistance) of the Immigration and 

Nationality Act must comply with 

procurement standards in 45 CFR Part 

92. (Please note this final rule on State 

Systems Advance Planning Documents 

(APD) narrows the cross-reference to 

Part 92 by deleting reference to titles I, 

IV–A, X, XIV, XVI of the Act and title 

IV, chapter 2 of the Immigration and 

Nationality Act from § 95.601, titled 

Scope and Applicability, of this final 

rule.) 

Prior to this rule, regulations at 45 

CFR Part 95 (§ 95.605, Definitions, 

§ 95.613, Procurement Standards, 

§ 95.615, Access to Systems and 

Records, § 95.621, ADP Reviews, 

§ 95.705, Equipment Costs—Federal 

Financial Participation, § 95.707, 

Equipment Management and 

Disposition) contained six references to 

Part 74; those references were deleted in 

this final rule and replaced with 

references to Part 92 where applicable. 

(Please refer to the Provisions of the 

Regulation and Changes Made in 

Response to Comments and the 

Response to Comments sections of this 

preamble for additional information.) 

The new and modified requirements 

in this rule were made in response to a 

variety of studies and recommendations 

from Federal, State and private 

organizations over the last decade, 

including the U.S. Government 

Accountability Office (GAO), the 

Technology and Procurement Policy 

Subcommittee of the House Government 

Reform Committee, the National 

Association of State Chief Information 

Officers (NASCIO), the American Public 

Human Service Association (APHSA) 

and the Office of Management and 

Budget (OMB). 

In March 1998, the U.S. General 

Accounting Office, now known as the 

Government Accountability Office 

(GAO) and the Nelson A. Rockefeller 

Institute of Government jointly 

established the GAO/Rockefeller 

Institute Working Seminar on Social 

Program Information Systems. The 

working seminar had about 30 members, 

including congressional staff, Federal 

and State program and information 

technology managers, and welfare 

researchers. The working seminar met 

eight times and discussed how the 

shifting human services landscape had 

transformed States automated systems 

needs. The three key challenges 

identified by participants at this 

conference were: (1) Simplifying the 

approval process for obtaining Federal 

funding for information systems; (2) 

enhancing strategic collaboration among 

different levels of government; and; (3) 

obtaining staff expertise in project 

management and information 

technology. 

In 2002, the GAO reviewed the 

statutory and regulatory requirements 

for Federal approval and funding of 

State IT development and acquisition 

projects. (See GAO–02–347T, July 

2002). The review examined agencies’ 

processes for reviewing, approving, and 

funding State IT development 

acquisition projects and whether these 

processes hinder or delay States’ efforts 

to obtain approval for projects. The 

review also examined how the Food and 

Nutrition Service (FNS) (under the U.S. 

Department of Agriculture (USDA)), 

ACF and CMS ensure that they 

consistently apply the OMB Circular A– 

87 to fund IT development and 

acquisition projects. The GAO found 


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that in fiscal years 2000 and 2001 States 

had submitted 866 planning and 

acquisition documents. In its analysis of 

these submissions, GAO determined 

that 92 to 96 percent of the State 

requests submitted to Child Support 

Enforcement (CSE), Child Welfare, and 

CMS were responded to within the 

required 60 days but only 74 percent of 

the State requests involving multiple 

programs were responded to within the 

60 days. 

On July 9, 2002, the Subcommittee on 

Technology and Procurement Policy, 

House Government Reform Committee, 

held a Congressional hearing on State 

and Local Information Technology 

Management. The hearing included 

testimony from State and Federal IT 

officials, the National Association of 

State Information Resource Executives 

(NASIRE), representatives from the IT 

vendor community, and GAO. Although 

testimony differed on the degree of 

Federal oversight, witnesses agreed that 

the regulations and policies should be 

updated to reflect changes in technology 

over the last two decades. 

The National Association of State 

Chief Information Officers (NASCIO) 

and the American Public Human 

Services Association (APHSA) also have 

been actively involved in this issue and 

submitted proposals on how to reform 

the Federal oversight of State IT projects 

and procurement approval process. 

The Office of Management and Budget 

(OMB) also has raised concerns about 

the information paperwork burden 

imposed on States by the APD prior 

approval process. Normally the renewal 

of the OMB Information Collection 

authority is granted for a three-year 

period, but in 2003 and 2004 OMB 

limited the renewal to one-year 

increments and has asked to be kept 

informed of the Department’s efforts to 

reduce or streamline the APD process. 

In April 2005, OMB approved the 

current APD process for an additional 

three years based partially on the 

progress that has been made on this 

reform effort. Another three-year 

extension was approved through 

February 2, 2011. 

On March 23, 2010, President Obama 

signed into law the Patient Protection 

and Affordable Care Act (Affordable 

Care Act) into law. This law has very 

significant implications for millions of 

Americans who will now be eligible for 

the benefits under Medicaid and the 

Child Health Insurance Program (CHIP). 

The Centers for Medicare and Medicaid 

Services (CMS) anticipates millions of 

newly eligible individuals applying for, 

and being determined to be eligible for, 

these programs. CMS plans to build 

upon the provisions described herein as 

it implements the Affordable Care Act 

and does not expect implementation to 

conflict with measures in this current 

rule. 

Provisions of the Regulation and 

Changes Made in Response to 

Comments 

A Notice of Proposed Rule Making 

(NPRM) was published in the Federal 

Register [73 FR 12341] on March 7, 

2008. During the comment period, we 

received 33 letters generating 153 

comments. On the whole, comments 

were positive and welcomed the 

increased flexibility in the APD 

submission requirements for lower-risk 

projects. Many of the comments 

suggested we retain the term ‘‘Advance 

Planning Document’’ (APD) and 

eliminate use of the proposed term 

‘‘Information Technology Document’’ 

(ITD). Accordingly, we have retained 

the term ‘‘Advance Planning Document’’ 

in all of its permutations and deleted 

‘‘Information Technology Document’’ 

throughout this rule. In response to 

comments, we also revised the 

regulation to clarify that States are 

permitted to transmit electronic 

versions of the APD, acquisition 

solicitation and contract documents as 

long as a valid signature accompanies 

the documentation. We did this by 

replacing the phrase ‘‘in writing’’ with 

‘‘in a record’’ throughout this regulation. 

Other commenters asserted that the 

procurement standards in Part 92 

should be cross-referenced in Subpart F 

(titled Automated Data Processing 

Equipment and Services—Conditions 

for Federal Financial Participation) of 

Part 95, rather than the procurement 

requirements in Part 74. This comment 

also affects proposed § 95.613, 

Procurement Standards, which removed 

the general cross-reference to Part 74, 

but added certain key requirements 

from Part 74 (i.e., recipient’s or grantee’s 

responsibilities, codes of conduct, 

competition, procurement procedures, 

contract provisions) to the proposed 

section. We agreed with these comments 

and have deleted all cross-references to 

Part 74 and removed the proposed 

requirements in § 95.613 of the NPRM 

which were taken from Part 74. Where 

applicable, we have replaced the 

previous reference to Part 74 with a 

cross-reference to Part 92, which 

permits grantees to follow the same 

State procurement rules and standards 

that are used for non-FFP matched 

projects. Accordingly all HHS grantees 

are now subject to the procurement 

standards set forth in 45 CFR Part 92. 

Section 95.613 Procurement 

Standards was revised to provide for a 

limited exception where the Department 

retains the authority to provide greater 

oversight, including requiring a State to 

comply with the competition provisions 

of § 92.36(c) if it determines that a State 

procurement process is an impediment 

to competition that could substantially 

impact project cost or risk of failure. 

Changes made in response to 

comments are discussed in more detail 

under the Response to Comments 

section of this preamble. Following is a 

summary of those changes: 

Section 95.601—Scope and 

Applicability 

Section 95.601 prescribes conditions 

under which the Department of Health 

and Human Services will approve FFP 

in the costs of automated data 

processing services or equipment for 

social service programs under certain 

titles of the Act. In the proposed rule we 

narrowed the scope of this part by 

deleting reference to titles I, IV–A, X, 

XIV, XVI and XXI of the Act and title 

IV, chapter 2 of the Immigration and 

Nationality Act. In response to 

comments, we re-inserted the reference 

to title XXI, titled Children’s Health 

Insurance Program, to clarify that this 

part applies to the automated data 

processing equipment and services 

related to the CHIP program, if a State 

enhances its existing Medicaid 

Management Information System 

(MMIS) to include CHIP functions. 

Consistent with the proposed rule, the 

scope of this final rule does not apply 

to titles I, X, XIV or XVI of the Act as 

these titles have been repealed by the 

Social Security Amendments of 1972 

(P.L. 92–603). Similarly, this rule does 

not apply to title IV–A of the Act since 

PRWORA eliminated the JOBS program 

and replaced AFDC with TANF, a block 

grant. Lastly, this rule does not apply to 

title IV, chapter 2 of the Immigration 

and Nationality Act because the State 

Legalization Impact Assistance Grants 

program, a time-limited program 

previously administered by the Office of 

Refugee Resettlement, has expired. 

Consequently, the scope of this rule is 

limited to titles IV–B (Child and Family 

Services), IV–D (Child Support and 

Establishment of Paternity), IV–E 

(Federal Payments for Foster Care and 

Adoption Assistance), XIX (Grants to 

States for Medical Assistance Programs) 

and XXI of the Act (Children’s Health 

Insurance Program). 

Section 95.605—Definitions 

Section 95.605 sets forth definitions 

as used in this part. Certain defined 

terms in the NPRM, such as Alternative 

approach to the APD requirements, Base 

Contract, Grantee, Project, Service 

Agreement paragraphs (d)–(f) and 


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Service Oriented Architecture are being 

adopted in the final rule without 

revision. The intent of this section is to 

identify and define relevant terms in a 

centralized location at the beginning of 

the regulation to facilitate reading of the 

rule. To that end and in response to 

comments in the final rule, we used 

language from § 95.610(a)(1), (b) and (c) 

and § 95.626(a), to create or revise 

definitions for the terms Acquisition 

Checklist, Advance Planning Document 

(APD), Planning APD, Implementation 

APD, APD Update, Operational APD 

and Independent Verification and 

Validation (IV&V). We also revised the 

definitions of Commercial-off-the-shelf 

(COTS) Software, Software Maintenance 

and Non-Competitive. 

Acquisition Checklist means the 

standard Department checklist that 

States can submit to meet prior written 

approval requirements instead of 

submitting the actual Request for 

Proposal (RFP), contracts or contract 

amendments. The Acquisition Checklist 

allows States to self-certify that their 

acquisition documents, which include 

RFPs, contracts, contract amendments 

or similar documents, meet State and 

Federal procurement requirements, 

contain appropriate language about 

software ownership and licensing rights 

in compliance with § 95.617, and 

provide access to documentation in 

compliance with § 95.615. 

Advance Planning Document, Initial 

advance automated data processing 

planning document or Initial APD 

means a recorded plan of action to 

request funding approval for a project 

which will require the use of ADP 

service or equipment. The term APD 

refers to a Planning APD, or to a 

planning and/or development and 

implementation action document i.e., 

Implementation APD, or to an Advance 

Planning Document Update. 

Requirements are detailed in § 95.610, 

paragraphs (a), (b), and (c). 

Advanced Planning Document Update 

(APDU) means a document or record 

submitted annually (Annual APDU) to 

report project status and/or post 

implementation cost-savings, or on an 

as needed (As Needed APDU) basis, to 

request funding approval for project 

continuation when significant project 

changes are anticipated; for incremental 

funding authority and project 

continuation when approval is being 

granted by phase; or to provide detailed 

information on project and/or budget 

activities as specified in § 95.610(c). 

Planning APD means a plan of action 

in a record which requests FFP to 

determine the need for, feasibility, and 

cost factors of an ADP equipment or 

services acquisition and to perform one 

or more of the following: Prepare a 

Functional Requirements Specification; 

assess other States’ systems for transfer, 

to the maximum extent possible, of an 

existing system; prepare an 

Implementation APD; prepare a request 

for proposal (RFP) and/or develop a 

General Systems Design (GSD). 

Implementation APD means a 

recorded plan of action to request 

Federal financial participation (FFP) in 

the costs of designing, developing and 

implementing the system. 

Operational APD means a record of no 

more than two pages to be submitted 

annually by State programs whose 

system is not in development. The 

Operational APD provides a short 

summary of the activities, method of 

acquisition, and annual budget for 

operations and software maintenance. 

Similarly, in response to commenters, 

we also added a definition for the term 

Independent Verification and Validation 

(IV&V) to this section, which ‘‘means a 

well-defined standard process for 

examining the organizational, 

management, and technical aspects of a 

project to determine the effort’s 

adherence to industry standards and 

best practices, to identify risks, and 

make recommendations for remediation, 

where appropriate.’’ 

Under § 95.605 we revised the 

definitions of the terms Commercial-offthe-shelf (COTS) Software and Software 

Maintenance in response to comments 

that the proposed definitions were too 

limiting. With regard to COTS Software, 

we removed the last sentence of the 

proposed definition which read: 

‘‘Examples of COTS include: Standard 

word processing, database, and 

statistical packages’’ and added that 

language to the preamble discussion of 

COTS. Likewise, comments indicated 

that the last sentence in the proposed 

definition of Software Maintenance 

inappropriately contains a requirement: 

‘‘Software maintenance that 

substantially increases risk or cost or 

functionality will require an as-needed 

ITD.’’ We removed that sentence from 

the definition. For added clarity, an AsNeeded APD is required when Software 

Maintenance results in major changes in 

the scope of the project, system concept 

or developmental approach. We revised 

the definition of acquisition checklist to 

expand the definition to include 

contracts and contract amendments as 

well as RFPs. 

Non-competitive means solicitation of 

a proposal from only one source, or after 

solicitation of a number of sources, 

negotiation with selected sources based 

on a finding that competition is 

inadequate. The definition of noncompetitive was significantly modified 

from the definition proposed in the 

NPRM. This revised definition removes 

specific Federal criteria for sole source 

justifications from the definition of noncompetitive and reflects that each State 

is permitted under 45 CFR 92.36 to use 

the same procurement policies and 

procedures that it uses for procurements 

from non-Federal funds. Several 

commenters recommended HHS 

deference to State procurement policies. 

One commenter noted, ‘‘as always (we) 

take the position that if a state was in 

compliance with its procurement rules, 

that it should be able to self-declare that 

its IT procurement meets all state 

standards and this should be sufficient 

for Federal approval’’. Another 

commenter stated ‘‘We recommend 

using the same approach to 

procurement standards that is used in 

Part 92 of Title 45 of the Code of Federal 

Regulations which governs ‘Uniform 

Administrative Requirements for Grants 

and Cooperative Agreement to State, 

Local and Tribal Governments’. In 

Subpart C, Section 92.36 sets forth the 

requirements related to procurement; 

92.36(a) exempts states from complying 

with the requirements set forth in this 

section. Instead, States are required to 

follow the same policies and procedures 

used for procurements from its nonFederal funds. The procurement 

standards set forth in Section 95.613 

may conflict with or contradict 

procurement standards set forth in State 

law even though both are attempting to 

achieve similar goals.’’ 

As noted below, in the discussion of 

section 95.610(a)(2)(viii)(C), a State that 

uses a non-competitive solicitation will 

need to include a justification for this 

procedure in describing its procurement 

strategy. That justification should make 

reference to the procurement policies 

and procedures used by the State for 

procurement from non-Federal funds. 

Section 95.610—Submission of Advance 

Planning Documents 

We deleted the first sentence of 

proposed § 95.610(a)(1) from the NPRM 

and moved that language to the 

definition of Advance Planning 

Document in § 95.605. We added the 

phrase ‘‘including the use of shared or 

purchased services in lieu of State 

acquired stand-alone resources: To 

§ 95.610 to clarify that it is permissible 

for States to form consortia to acquire 

and maintain development, 

maintenance or other services to address 

their automation needs. We added 

§ 95.610(a)(2)(viii) to specify the need 

for an acquisition summary in the 

Planning APD that will provide for the 

basis for exempting acquisitions from 

prior approval. 


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Section 95.610(c) identifies the 

criteria for submitting an APD Update 

(APDU), including an Annual APDU 

and an As-Needed APDU. In response to 

comments we revised the timeframe for 

submitting the Annual APDU from 60 

days prior to the anniversary date of the 

Planning APD to 60 days prior to the 

expiration of authority for FFP in the 

costs of acquiring automated data 

processing equipment and services. By 

requiring the APDU 60 days before the 

expiration of authority for FFP granted 

in the previous APDU, the process 

decreases the likelihood of a gap in 

approved FFP in the cost of the State’s 

system. 

Section 95.610(c)(1)(viii) of the 

proposed rule related to requesting an 

annual cost benefit analysis has been 

deleted. We received nine comments on 

this provision. The revisions to the 

annual cost benefit analysis in the 

NPRM were supported by all 

commenters, but they suggested a total 

elimination of the cost benefit updates. 

The commenters pointed out that not all 

projects have tangible, measurable 

benefits and that CBA updates are 

unnecessarily burdensome when the 

values often are stable for large software 

application developments. We concur 

that this annual requirement has not 

provided the type of information useful 

to determine whether States are 

pursuing the most cost-effective 

methods to justify the additional burden 

it placed on States. We have modified 

our oversight and monitoring to focus 

on high risk projects and we believe that 

the proposed IV&V and disapproval 

provisions in the final rule are a more 

targeted means of insuring development 

of cost effective human service systems. 

We modified the requirements of 

§ 95.610(c) related to Annual and AsNeeded APDU to require an acquisition 

summary to describe the information 

needed on planned acquisitions in order 

to qualify for an exemption from the 

prior approval requirements of § 95.611. 

The information that must be included 

in the APD in order for the State to 

qualify for an exemption from prior 

approval requirements is now listed in 

§ 95.610(c)(1)(viii) as follows: 

(a) Type and scope of contract— 

Examples of type of contract are: Firm 

fixed price, labor hours, and time and 

materials. Examples of scope of contract 

are: Maintenance and operation, COTS 

software, application software 

development, service contract, and 

licenses. 

(b) Procurement strategy—Examples 

of procurement strategy are: Full and 

open competition, limited competition 

(e.g. master service contract) and sole 

source procurement. If the procurement 

is sole source, the State needs to provide 

a sole source justification, either 

separately or as part of the APDU. That 

justification should make reference to 

the procurement policies and 

procedures used by the State for 

procurement from non-Federal funds. 

(c) Estimated cost or not to exceed 

amount—Describes the total cost of the 

acquisition and annual cost if 

applicable, or the specified number of 

labor hours not to be exceeded for all 

project categories. 

(d) Timeframe of contract—Examples 

of the timeframe of a contract should 

include the years in the initial contract 

with the number of options for 

additional years. This should include 

the estimated begin and end dates of the 

contract. 

(e) A signed certification from the 

authorized State official that the 

proposed acquisition will comply with 

all State and Federal requirements 

including the retention of software 

ownership rights specified in § 95.617. 

The Acquisition Checklist issued in 

OCSE Information Memorandum 05–03 

provides a summary of Federal 

requirements that should be included in 

the acquisition solicitation documents. 

A statement in the APD that the 

acquisitions summarized will comply 

with all applicable State procurement 

requirements and the Federal 

requirement specified in the Acquisition 

Checklist will be sufficient. 

Section 95.611 Prior Approval 

Conditions 

Section 95.611 provides the 

thresholds for prior approval 

conditions. This final rule changes the 

manner in which acquisition 

exemptions from prior Federal approval 

are granted. Currently, only the cost of 

the acquisition triggers prior Federal 

approval. The intent of these regulatory 

revisions is to presumptively approve a 

wider range of acquisitions based on 

risk rather than simply cost of the 

acquisition. Sections 95.611(a)(2) and 

(b) were revised in the final rule to 

substitute ‘‘which is reflected in a 

record’’ or ‘‘in a record’’, instead of the 

current language of ‘‘in writing.’’ The 

revision is in response to comments 

encouraging a move toward egovernment and expediting electronic 

submissions and approvals. Language 

within § 95.611(b)(1)(iii) states ‘‘unless 

specifically exempted by the 

Department,’’ which permits Federal 

programs to grant exemptions for RFPs, 

contracts and contract amendments. All 

Federal programs have granted 

exemptions, but not routinely, and the 

burden to request the exemption is on 

the State. The final rule amends 

§ 95.611(b)(2)(iii) to facilitate the routine 

granting of these exemptions by 

including an acquisition summary in 

the Planning, Annual or As-Needed 

APDUs. Section 95.611(b)(2)(iii) 

specifies that for acquisition documents, 

the exemption request is assumed to be 

approved concurrent with the approval 

of the Planning, Annual or As-Needed 

APDU unless the Federal program office 

specifically indicates in writing which 

acquisition(s) should be submitted for 

prior Federal review and approval. 

Section 95.611(b)(1)(iii) also specifies 

the conditions for assumed approval of 

an exemption. These conditions 

include: Providing sufficient detail to 

base an exemption, no deviation from 

the terms of the exemption, and the 

acquisition is not the initial acquisition 

for a high risk activity such as software 

application development. Examples of 

failure to meet the first two conditions 

include, but are not limited to the 

following: 

• The exemption was based on the 

acquisition summary that indicated the 

procurement would pursue full and 

open competition; the eventual 

acquisition was sole source. 

• The summary indicated the 

acquisition will be a firm fixed price 

contract; the eventual acquisition was 

modified to time and materials. 

• The acquisition summary indicated 

that the scope of the contract will be 

maintenance and operation; the 

eventual acquisition was expanded to 

include software development. 

• The acquisition summary specified 

that the acquisition was for a specific 

functionality, such as document 

generation; the eventual acquisition was 

expanded to include other functionality, 

such as calendaring. 

The third condition for assumed 

approval of an exemption is when ‘‘the 

acquisition is not the initial acquisition 

for a high risk activity, such as software 

application development.’’ Examples of 

situations that may prompt the 

Department to not grant an exemption 

request include, but are not limited to 

the following: The acquisition is for 

high risk activity such as customized 

software development; the RFP and 

contract are related to developing a new 

or replacement system; the project has 

past significant cost overruns and/or 

implementation problems; the State has 

a past pattern of limiting competition; or 

the size of the acquisition does not 

appear to be commensurate with the 

size of the program or caseload. While 

the acquisition summary is not required 

for an Implementation APD, this will 

not prevent a Federal program office 

from exercising existing regulatory 

authority and exempting acquisitions 


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included in an Implementation APD. 

For example, the Department may 

request prior approval of an RFP, but 

exempt the resulting contract from prior 

approval if the State keeps the 

Department informed during the 

procurement process and submits an 

information copy of the signed contract. 

In addition, the Implementation APD 

may summarize several different types 

of procurements in the first year such as 

IV&V, Quality Assurance, or Project 

Management in addition to the software 

development acquisition. While the 

acquisition for software development is 

high risk and subject to prior approval, 

at the program office’s discretion the 

other acquisition in an Implementation 

APD could be exempted, so the State is 

encouraged to provide an acquisition 

summary in the Implementation APD as 

well. 

We have retained the submission 

thresholds for prior approval 

requirements of § 95.611 for those 

requestors who opt not to include a 

description of planned acquisitions in 

their APDU. The Federal program 

offices will continue to review and 

provide comments on any acquisition 

document submitted by the requesting 

State, Territory or Tribe as technical 

assistance. In response to comments, we 

increased the submission threshold for 

regular rate software application 

development from $5 million to $6 

million for competitive procurements. 

In keeping with the comments 

encouraging an increased submission 

threshold, we also revised 

§ 95.611(b)(2)(iv) to increase the 

submission thresholds for enhanced 

funded projects from $300,000 to 

$500,000. 

Section 95.611(d) was revised to 

improve the clarity of the provision. We 

replaced the term ‘‘ACF’’ with ‘‘the 

Department’’ to clarify that this 

provision applies to CMS as well as 

ACF program offices. The term 

‘‘approving components’’ was replaced 

with a new term, ‘‘Federal program 

offices,’’ and clarifies that the 

Department will send the State an 

acknowledgment letter once it has 

received the incoming request from the 

State and will respond within 60 days. 

If the State has not received a response 

from the Federal program office(s) 

within 60 days of the acknowledgment 

letter, then the State can assume that it 

has approval to proceed. The regulation 

uses the term ‘‘provisional approval’’ to 

signify that the Federal program office 

retains the authority to disapprove the 

Initial APD or IT acquisition, but if the 

Federal program office has not provided 

any guidance within those 60 days, then 

the burden shifts to the Federal program 

office to justify subsequent requests for 

more information or disapproval. The 

phrase ‘‘approval, disapproval or request 

for more information’’ is retained in the 

regulation. The term ‘‘written approval’’ 

was replaced with ‘‘which is reflected in 

a record’’ to permit electronic 

transmissions which is intended to 

improve and expedite communications 

between the State and Federal offices. 

However, this revision does not change 

the requirement that the State’s request 

be sent by an authorized requestor and 

that the Federal approval, disapproval 

or request for additional information, 

while no longer required to be in 

writing, must still be reflected in a 

record by the authorized individual in 

the Federal program office. An oral 

request or an e-mail for additional 

information from a Federal program 

office will not ‘‘stop the clock.’’ The 

State should expect an approval, 

disapproval or request for additional 

information from the same Federal 

official to whom the State’s request was 

sent. 

Section 95.611(e) was revised to 

specify which acquisitions are not 

subject to prior approval and clarify that 

the Department retains the authority to 

request submittal of acquisition 

documents regardless of threshold. 

Section 95.613 Procurement Standards 

Section 95.613 provides that the 

procurement standards for ADP 

equipment and services are subject to 

Part 92 instead of Part 74. Since § 92.36 

exempts States from the provisions of 

§ 92.36 paragraphs (b) through (i) the 

State will follow the same procurement 

policies and procedures that they use 

for non-Federal matched ADP State 

projects. The Department retains the 

authority to provide greater oversight, 

including requiring a State to comply 

with the competition provisions in 

§ 92.36(c) if it determines that a State 

procurement process is an impediment 

to competition that could substantially 

impact project cost or risk of failure. 

This revision is in response to multiple 

comments urging the Federal programs 

to defer to State procurement standards, 

especially in the area of limitations on 

competition. 

Section 95.617 Software and 

Ownership Rights 

Section 95.617 provides the software 

and ownership rights that must be 

contained in the contract for all software 

or modifications developed or installed 

with Federal financial participation. In 

response to comments, we eliminated 

the examples of software packages in 

§ 95.617(c) that met the exemption from 

this software ownership provision. 

Section 95.621 ADP Reviews 

Section 95.921 provides the types of 

periodic on-site surveys and reviews of 

State and local agency ADP methods 

that the Department may conduct. 

Paragraph (d) related to acquisitions not 

subject to prior approval was updated to 

delete the previous reference to Part 74 

and substitute Part 92. 

Section 95.623 Reconsideration of 

Denied FFP for Failure To Obtain Prior 

Approval 

Section 95.623 provides a process by 

which a State may request 

reconsideration for FFP which was 

denied due to the State’s failure to 

request Federal prior approval. In 

response to comments requesting 

additional specificity, a new paragraph 

(b) was added that specifies information 

and documentation that must be 

submitted with the request for 

reconsideration. To provide more 

clarification on the criteria that must be 

met to qualify for reconsideration, we 

have revised § 95.623(b) to add the 

criteria that is currently in OSSP-Action 

Transmittal 00–01. However, we 

anticipate that requests for 

reconsideration will abate given the new 

authority in § 95.610 to exempt planned 

acquisitions from prior approval. 

Section 95.624 Consideration for FFP 

in Emergency Situations 

Section 95.624 was revised to change 

the introductory text, paragraph (a) and 

paragraph (b)(2) to eliminate the 

reference to written request and 

substitute ‘‘which is reflected in a 

record’’ or ‘‘reflected in a record.’’ This 

change was prompted by comments 

received that encouraged us to move 

toward e-government and remove any 

requirement for written submissions 

and approvals. This change will 

expedite transmittal of requests from 

States and Territories in emergency 

situations. 

Section 95.626 Independent 

Verification and Validation 

Proposed § 95.626 is revised to correct 

the introductory text and references to 

‘‘Independent Validation and 

Verification’’ and replace it with the 

correct terminology of ‘‘Independent 

Verification and Validation.’’ We also 

made a technical changes to the first 

two triggers, i.e., missing regulatory and 

statutory deadlines and failing to meet 

a critical milestone, by adding lead-in 

language to clarify that the assessment 

is intended to be prospective and not 

reactive if the agency determines that 

the State is ‘‘at risk’’ of these problems. 

In keeping with our focus on high risk 

projects, two additional triggers to IV&V 


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were added to § 95.626. The two triggers 

are: 

(7) State’s procurement policies put 

the project at risk, including a pattern of 

failing to pursue competition to the 

maximum extent feasible. 

(8) State’s failure to adequately 

involve the State program office 

responsible for administering the 

program in the development and 

implementation of the project. 

We included these additional triggers 

for IV&V because past experience tells 

us that the State’s failure to seek full 

and open competition to the maximum 

extent practicable or to involve State 

program offices in the planning/ 

development effort are indicators that 

the project is at risk. Lack of 

competition in itself is not a trigger for 

IV&V; rather, the Department will 

conduct an assessment to determine if 

the pattern of failing to pursue 

competition creates risk to the project. 

This determination may require an 

IV&V assessment review to evaluate the 

impact that the lack of competition has 

had on the project for both increased 

cost and increased risk for system 

failure. A decision on whether an IV&V 

contract is required or the scope of the 

IV&V services will be deferred until 

after the IV&V assessment. Lack of 

involvement of State program offices in 

the development and implementation of 

the project is a trigger for IV&V. During 

the IV&V assessment, the team will 

consult with all stakeholders, which 

includes end users, caseworkers and 

business partners, to assess the user 

involvement and buy-in regarding 

system functionality and the ability of 

the system to support program business 

needs. 

The changes proposed to § 95.631 in 

the NPRM were related to a change in 

terminology from Advance Planning 

Document to Information Technology 

Document. Since the comments 

expressed overwhelming opposition to 

the change, § 95.631 will be unchanged 

in the final rule. 

Several sections in the NPRM are 

being adopted as proposed. Section 

95.612 Disallowance of Federal 

Financial Participation, § 95.615 Access 

to systems and records, § 95.627 

Waivers, 95.635 Disallowance for 

automated system that fails to comply 

with requirements, § 95.705 Equipment 

costs and § 95.707 Equipment 

management and disposition are being 

adopted without revision in the final 

rule. 

Response to Comments 

We received 153 comments from 33 

State Agencies and other interested 

parties. Below is a summary of the 

comments and our response. 

General Comments 

1. Comment: Commenters were 

overwhelmingly supportive of keeping 

the terminology of Advance Planning 

Document (APD) in lieu of the proposed 

term, Information Technology 

Documents (ITD). This proposed change 

generated the most comments, all of 

which supported retaining the term 

APD. One commenter suggested several 

corresponding changes if the 

terminology was changed from APD to 

ITD. 

Response: We agree and the 

terminology of Advance Planning 

Document (APD) is retained in the final 

regulation. 

2. Comment: Several commenters 

urged compatible rules and guidelines 

across Federal human service agencies 

to minimize confusion and allow 

needed automation projects to proceed 

without unnecessary delay. 

Response: We agree and note that the 

USDA’s Food and Nutrition Services, 

which has jurisdiction over the 

Supplemental Nutrition Assistance 

Program (SNAP) systems in commenting 

on the NPRM, stated: ‘‘In the interest of 

sustaining a consistent federal approval 

process for State agencies, we intend to 

minimize differences in the procedures 

to the extent possible. We intend to 

propose similar changes in a proposed 

regulation in the near future.’’ 

3. Comment: One commenter 

requested clarification on why Title I, X, 

XIV, XVI (AABD) and XXI were deleted. 

Response: The NPRM proposed 

deleting reference to title XXI 

(Children’s Health Insurance Program 

(CHIP)) because, in general, CHIP 

programs are not subject to Part 95. 

However, if a State opts to enhance its 

MMIS to include CHIP functions, then 

Part 95 would apply to the MMIS in its 

entirety, including the CHIP portion. 

Consequently, we have re-inserted 

reference to title XXI in § 95.601, titled 

Scope and Applicability, and clarified 

the circumstances by which the CHIP 

programs are subject to Part 95 in the 

preamble. 

The other titles of the Act, as 

identified by the commenter, were 

deleted from this rule because those 

titles were repealed by the Social 

Security Amendments of 1972 (Pub. L. 

92–603) and are no longer applicable. 

(Please note that Pub. L. 92–603, § 303, 

repealed titles I (Grants to States for 

Old-Age Assistance for the Aged), X 

(Grants to States for Aid to the Blind), 

XIV (Grants to States for Aid to the 

Permanently and Totally Disabled) and 

XVI (Grants to States for Aid to the 

Aged, Blind, and Disabled) of the Act, 

except with respect to Puerto Rico, 

Guam, and the Virgin Islands. Also, the 

Commonwealth of the Northern 

Marianas may elect to initiate social 

services programs under these titles if it 

chooses; see Vol. II, Pub. L. 94–241, 

approved March 24, 1976, 90 Stat. 263, 

Covenant to Establish Northern Mariana 

Islands). 

4. Comment: Several commenters 

requested training materials and 

training sessions on the new regulations 

as quickly as possible after the 

regulations are finalized. Several 

commenters specifically requested that 

the Medicaid manual be updated to 

reflect final regulations. 

Response: All Federal agencies 

involved have committed to developing 

training materials and providing 

training and technical assistance on the 

new regulations once the regulations are 

issued in final form. With respect to the 

State Medicaid manual and other 

guidance to States, CMS will update 

these policy guidelines accordingly. 

5. Comment: One commenter 

requested that we submit the NPRM for 

another round of comments. No 

rationale was provided as to why a 

second round of comments was needed. 

Response: The NPRM was widely 

disseminated to State agencies and other 

interested parties with ample 

opportunity to comment. Furthermore, 

the comments received were 

predominately supportive of the 

proposed changes. Thus, we are not 

extending the comment period. 

6. Comment: Several commenters 

applauded the reduction and 

elimination of documentation and noted 

that the ability to submit documents 

electronically is welcome. One 

commenter suggested that the term 

‘‘written’’ be eliminated or redefined 

throughout the regulation to permit 

electronic transmission of the APD and 

related IT documentation. 

Response: We agree and have revised 

the regulation to clarify that States are 

permitted to transmit electronic 

versions of APDs, acquisition 

solicitations and contract documents as 

long as a valid form of the authorized 

requester’s signature accompanies the 

documentation (i.e., signature may be 

transmitted by fax, scanned PDF 

electronic document or electronic 

signature). We note that the elimination 

of the term ‘‘written’’ does not permit 

oral approvals or disapprovals by the 

Federal program offices. The regulation 

still requires that the approval or 

disapproval be recorded. We also stress 

that the State should expect that the 

electronic approval or disapproval will 

be made by the same Federal official to 


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whom the State’s request was 

addressed. An email from a Federal 

program analyst requesting additional 

information in order to complete the 

analysis of the State’s request should be 

considered technical assistance and 

would not constitute an official request 

for additional information under 

§ 95.611(d). If no official response is 

received by the requesting State within 

60 days of the acknowledgment letter, 

the State may assume provisional 

approval. 

Section 95.605—Definitions 

1. Comment: One commenter 

requested additional specificity 

regarding the definition of 

noncompetitive and asked that the 

following terms within the definition 

also be defined: Infeasible; what 

constitutes a delay; what criteria is used 

to determine exigency or emergency; 

and what number of proposals is 

required to satisfy adequate 

competition. 

Response: We have not added 

definitions for the terms identified by 

the commenter because these terms are 

used in previous Federal standards for 

sole source justifications under Part 74 

which is no longer relevant for State 

procurements. For the reasons discussed 

above, definitions of these terms are no 

longer needed. 

2. Comment: One commenter 

suggested a definition of APD and 

suggested that the substantive 

requirements for APD should remain in 

§ 95.610, Submission of advance 

planning documents, but that the initial 

paragraph of § 95.610 as well as 

subparagraph (a)(1) and paragraphs (b) 

and (c) should be moved to § 95.605, 

Definitions. 

Response: We agree with the 

commenter that § 95.605, Definitions, 

should include the definitions for the 

terms Advance Planning Document, 

(APD), Planning APD, Implementation 

APD, APD Update and Operational 

Update. We have taken language from 

§ 95.610(a)(1) and added this language 

as the definition for APD under 

§ 95.605. We have also retained this 

language in § 95.610(a)(1) rather than 

deleting it. We determined that 

paragraphs (b) and (c) set forth 

requirements for submitting APDs and 

are not a part of the definition for APD. 

These paragraphs are appropriately 

placed in § 95.610, Submission of 

advance planning documents, and have 

not been moved to § 95.605, Definitions. 

3. Comment: There were several 

interrelated comments requesting 

clarification of the definitions of 

commercial-off-the-shelf (COTS) 

software, service-oriented architecture 

(SOA) and a recommendation for a new 

definition of Enterprise Architecture. 

Some commenters suggested that the 

examples cited in the regulation be 

deleted; other commenters 

recommended the addition of new 

examples. Several commenters 

suggested that the definition of COTS be 

cross-referenced to § 95.610(b)(3) to 

clarify that enterprise-level COTS 

software meets the definition of COTS 

and requirements for FFP when 

conducting feasibility studies. One 

commenter suggested removing the 

examples in the COTS definition as 

examples might be limiting and urged 

clarification that both SOA and 

enterprise-level COTS software are 

acceptable for consideration in 

feasibility studies, analysis of 

alternatives and overall system 

approach. One commenter suggested 

that we remove the specific term 

‘‘service-oriented architecture’’ from 

regulations because terms and meanings 

change with such frequency and 

technology advances at such a pace that 

such specificity will only be current in 

regulation for a short span of time. 

Another commenter suggested that the 

regulation should concentrate on the 

intent that States can explore other 

alternative technology solutions beyond 

system transfers and new custom 

development. The commenter also 

noted that based on open standards, a 

description of the intent would be 

relevant for a longer period of time. A 

commenter suggested that a requirement 

to provide an explanation of why a 

system transfer is not feasible whenever 

an alternative technology is identified 

implies that system transfer is the 

development approach of choice. 

Another commenter recommended 

allowing enterprise framework 

applications under the examples cited 

in § 95.617, Software ownership rights, 

to simplify State procurements. All the 

comments were related to other 

alternative technology solutions beyond 

system transfers and new custom 

development that can be considered in 

the Feasibility Study/Analysis of 

Alternatives. Some commenters 

requested confirmation that COTS 

software that is not available to the 

general public at a list price or needs 

customization does not meet the 

definition of COTS under this rule. 

Response: We agree that the examples 

in the COTS definition might be 

limiting. We have removed them from 

the regulation and instead reference 

them in the preamble. 

We did not find it necessary to revise 

§ 95.617, Software and ownership 

rights. Federal program agencies, OCSE 

and the Administration for Children, 

Youth and Families, have previously 

issued guidance explaining that 

Enterprise level COTS and SOA are 

acceptable alternatives in a feasibility 

analysis. OCSE issued an Information 

Memorandum IM–05–04, which is titled 

Use of Enterprise Level Commercial-Offthe-Shelf (COTS) Software in 

Automated Human Services Information 

Systems and may be accessed at the 

following link: http://www.acf.hhs.gov/ 

programs/cse/pol/IM/2005/im-05- 

04.htm. The Children’s Bureau has 

issued guidance under ACYF–IM–07– 

03, titled Service Oriented Architecture 

(SOA) and available at http:// 

www.acf.hhs.gov/programs/cb/ 

laws_policies/policy/im/2007/ 

im0703.htm. These policy issuances 

sufficiently explain that the business 

process the Department uses for 

enterprise-level COTS is the same for 

any other information technology 

product. 

We note that a definition of the term 

COTS is needed due to the inclusion of 

a new submission threshold for 

hardware and COTS software. However, 

we believe that commenters may have 

assumed the definition of COTS was 

related to § 95.617, titled Software and 

Ownership rights. Under § 95.617 COTS 

products that are provided at 

established catalog or market prices, not 

developed solely for human service 

programs and sold or leased to the 

general public are exempted from the 

State and Federal government’s software 

ownership provisions. We would like to 

clarify that a COTS product available at 

list price and in need of customization 

(i.e. modifications to meet the State’s 

particular requirements) meets the 

definition of COTS under this rule. An 

example is an Excel application that is 

available at list price but needs 

customization to meet a human service 

program need. The Excel application is 

a COTS product exempt from software 

and ownership provisions of § 95.617. 

In this example, the vendor may charge 

a licensing fee, but any customization to 

the COTS product that was funded with 

FFP would be subject to the software 

and ownership rights in § 95.617 even if 

the customization was made by the 

vendor providing the COTS software. 

We defined the term Service-Oriented 

Architecture (SOA) because we 

introduced it in § 95.610(b)(3) in the 

discussion of criteria for submitting an 

Implementation APD related to 

feasibility studies and analysis of 

alternatives. 

4. Comment: Several commenters 

suggested that Enterprise Architecture 

be defined in § 95.605 as well as defined 

in Medicaid Information Technology 

Architecture (MITA). 


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Response: We have chosen to limit 

the regulatory definitions to terms that 

impact the application of the regulatory 

requirements. As previously mentioned, 

OCSE and the Children’s Bureau have 

issued guidance on Enterprise 

Architecture through IM–05–04, which 

is titled Use of Enterprise Level 

Commercial-Off-the-Shelf (COTS) 

Software in Automated Human Services 

Information Systems and may be 

accessed at the following link: http:// 

www.acf.hhs.gov/programs/cse/pol/IM/ 

2005/im-05-04.htm and ACYF–IM–07– 

03, titled Service Oriented Architecture 

(SOA) and available at http:// 

www.acf.hhs.gov/programs/cb/ 

laws_policies/policy/im/2007/ 

im0703.htm. These policy issuances 

clarify that Enterprise Architecture is 

subject to the same regulatory 

requirements of Part 95. There is 

nothing about Enterprise Architecture 

that impacts the applicability of the 

regulations. The suggestion that CMS 

define Enterprise Architecture in their 

MITA, is outside the scope of this 

regulation. MITA is not defined in this 

final rule because it is outside the scope 

of the NPRM and to introduce it now 

would not provide interested parties 

sufficient notice or an opportunity to 

comment on the definition or 

applicability of MITA for Enterprise 

Architecture and cost allocation. 

5. Comment: One commenter 

suggested that the definition of 

Independent Verification and Validation 

should be moved from § 95.626(a) to the 

definitions section under § 95.605. They 

also pointed out that the words 

verification and validation are 

sometimes transposed and should be 

used consistently. 

Response: We agree and added the 

definition of IV&V based on the 

language from § 95.626(a) to the 

definitions section under § 95.605. We 

also agree that the consistent 

terminology should be Independent 

Verification and Validation (IV&V) and 

have revised the regulation accordingly. 

6. Comment: We received several 

comments on the new definition of 

Software Maintenance. Several 

commenters requested additional 

specification as to quantity, scope, 

criteria, risk, increased functionality 

and level of risk. One commenter asked 

for clarification whether Software 

Maintenance and operation phase 

begins when a project is certified or 

when the project is implemented. 

Response: The Institute of Electrical 

and Electronics Engineers (IEEE) 

definition of maintenance was used as 

the basis for the regulatory definition. 

While we understand the desire for 

additional clarity and specificity, we 

believe that adding specificity in the 

definition would result in less flexibility 

and latitude on the part of the Federal 

and State agencies in meeting their 

program goals in a cost-effective 

manner. Neither system certification nor 

implementation defines when a 

project’s software development and 

maintenance phase begins. It is the 

absence of system development that 

determines whether the State is eligible 

to submit an Operations and Software 

Maintenance (O&SM) APD Update 

under § 95.611(c)(3). 

7. Comment: Several commenters 

asked for clarification of funding 

requirements on a phased 

implementation basis and the 

implications, if any, should phased 

concepts conflict with contract 

approval. 

Response: This is not a new 

requirement. The APDU references 

incremental funding authority and 

project continuation when approval is 

being granted by phase. The contract 

may be approved for a longer period of 

time, but FFP approval is usually 

limited to the planning, development, 

testing, implementation, or maintenance 

phases. The majority of States request 

FFP on an annual basis because their 

State matching funds are appropriated 

on an annual basis. But Federal funding 

by development phases is still permitted 

and used by Federal agencies on a caseby-case basis. The APD and 

procurement approval process has 

always been a two-step process 

regardless of whether FFP is being 

approved on a phased or annual basis. 

Prior approval is required under the 

conditions set forth in § 95.611 for the 

acquisition solicitation and contract 

documents which may be multi-phase 

or multi-year. This is consistent with 

the incremental funding authority under 

the definition of Advance Planning 

Document. Whether FFP is approved on 

a phased or annual basis is in part 

determined by which time period 

(phased or annual) is provided in the 

Annual APD Update. 

8. Comment: Several commenters 

understood that there was a substantive 

requirement embedded in the definition 

of Software Maintenance in § 95.605, 

‘‘Software maintenance that 

substantially increases risk or cost or 

functionality will require an As-Needed 

APD.’’ Other commenters requested that 

the summary section provide 

clarification on what distinguishes a 

high-risk from a low-risk project, 

whether it is related to costs, production 

timetables or a particular phase of 

production. 

Response: We have removed this 

sentence from the definition of Software 

Maintenance and moved it to the 

preamble with additional clarification of 

when changes to Software Maintenance 

would warrant an As-Needed APD. 

9. Comment: Several commenters 

requested a definition of the terms 

Enhanced Match Rate and Regular 

Match Rate. They requested a clear 

definition of the match rate associated 

with those terms. One commenter had a 

specific question on a Statewide 

Automated Child Welfare Information 

System (SACWIS) project whose 

development was initially funded at the 

enhanced FFP rate, but is now receiving 

FFP at the regular match rate for its 

operational costs. This commenter 

asked for clarification as to which 

thresholds and requirements apply. 

Response: Enhanced Match Rate is 

already defined under § 95.605 as 

‘‘Enhanced matching rate means the 

higher than regular rate of FFP 

authorized by Title IV–D, IV–E and XIX 

of the Social Security Act for acquisition 

of services and equipment that conform 

to specific requirements designed to 

improve administration of the Child 

Support Enforcement, Foster Care and 

Adoption Assistance and Medicaid 

programs.’’ We cannot provide the 

percentages associated with the 

enhanced and regular rate in regulation, 

because the percentages are established 

in legislation and vary with both the 

program and the period of time. For 

example, provisions under the GrammRudman-Hollings Balanced Budget and 

Emergency Deficit Control Act of 1985 

(Pub. L. 99–177) impacted the 

percentage rates for both Enhanced and 

Regular Match Rates in the past. Under 

these regulations, if a project was 

initially developed with funding at the 

Enhanced Match Rate but is currently 

being completed or enhanced with 

funding at the Regular Match Rate, then 

the Regular Match Rate submission 

thresholds apply. 

Section 95.610—Submission of Advance 

Planning Documents 

1. Comment: Several commenters 

asked whether ACF would retroactively 

approve FFP in the costs of tasks 

associated with the planning phase if a 

State combines its Planning APD and 

Implementation APD submissions. 

Response: Paragraphs (a) and (b) of 

§ 95.611 require prior approval of a 

Planning APD and Implementation APD 

when the State plans to acquire ADP 

equipment and services that it 

anticipates will have total acquisition 

costs of $5,000,000 or more in Federal 

and State funds. Section 95.605 defines 

the term Total Acquisition Cost to mean 

‘‘all anticipated expenditures (including 

State staff costs) for planning and 


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implementation for the project. For 

purposes of this regulation total 

acquisition cost and project cost are 

synonymous.’’ 

2. Comment: One commenter asked 

why an As-Needed APDU would be 

necessary if the State can request 

additional funding or project extension 

through an Annual APDU. Another 

commenter noted that existing rules 

allow agencies to submit an As-Needed 

APDU with the Annual APDU and 

stated that the proposed rule would 

require a State to submit the As-Needed 

APDU, no later than 60 days after the 

occurrence of project changes. The 

commenter stated that such change 

would represent an increased burden to 

States and would be inconsistent with 

the purpose of the NPRM. 

Response: Neither the proposed rule 

nor this final rule prevents a State from 

including changes in an Annual APD 

Update that otherwise would need to be 

reported in an As-Needed APDU. This 

is not a new provision and is consistent 

with requirements in the former 

§ 95.605(b)(ii) as a part of the definition 

for As-Needed APDU. Additionally, the 

NPRM and this final rule retained the 

following language in § 95.610(c)(2): 

‘‘The As-Needed APDU may be 

submitted any time as a stand-alone 

funding or project continuation request, 

or may be submitted as part of the 

Annual APDU.’’ 

3. Comment: Two commenters 

requested clarification on when 

modernization of a legacy system would 

fall into the Planning APD (PAPD) or 

Implementation APD (IAPD) process. 

One commenter asked for clarification 

on whether a Federal feasibility study 

must be prepared and approved before 

Federal funding is provided for 

modernization tasks that, while 

significant in scope, do not result in a 

new system. 

Response: If the State has an open 

APDU, and wishes to enhance its legacy 

system, an APD Update is the 

appropriate mechanism to obtain 

approval for each incremental 

improvement. If a State is incrementally 

enhancing its system, it would not be 

required to submit a PAPD or an IAPD; 

the State also would not be required to 

conduct a feasibility study or an 

analysis of alternatives. 

We have learned that several States 

opt to conduct feasibility studies and 

include the option of enhancing their 

legacy system as one of their 

alternatives in their analysis of 

alternatives. This practice may be 

especially advantageous when the 

benefit of modernization is in question. 

This point is predicated by the 

commenter’s statement that while 

incremental modernization is significant 

in scope, it does not result in a new 

system. If the incremental enhancement 

results in a substantial departure from 

the base system, HHS reserves the right 

to require additional documentation, 

including a feasibility study. 

4. Comment: A majority of 

commenters welcomed the changes to 

the Cost Benefit Analysis (CBA) 

reporting requirements and indicated 

that the current requirement of annual 

submission is burdensome. One 

commenter indicated that this proposal 

brought the HHS CBA requirements 

closer to those of the Food and Nutrition 

Service (FNS) under the Department of 

Agriculture (USDA). Several 

commenters, while supporting the 

additional flexibility, urged additional 

modifications and flexibility with regard 

to CBA requirements. Commenters 

suggested that we consider information 

technology projects that are not being 

done to generate savings, but mandated 

to comply with Federal requirements. 

The commenters also stated that there 

are many intangible benefits that are 

difficult to quantify and recommend 

permitting a social return on investment 

approach. Two commenters asked if the 

revenue stream model and its report 

were eliminated. One commenter asked 

for clarification on whether the CBA is 

a separate report or can be included in 

the APDU. 

Response: Based on the comments, we 

have removed the requirement for an 

annual cost benefit analysis from 

§ 95.610(c)(1)(viii) related to required 

components of the Annual APDU. In 

response to the numerous comments 

received, we concur that this annual 

requirement has not provided the type 

of information useful to determine 

whether States are pursuing the most 

cost-effective methods to justify the 

additional burden the annual CBA 

placed on States. We have modified our 

oversight and monitoring to focus on 

high risk projects and we believe that 

the proposed IV&V and disapproval 

regulatory provisions in the final rule 

provides more targeted means of 

insuring development of cost effective 

human service systems. Please note, the 

CBA is a required element of the 

Planning APDU and Implementation 

APDU as stated in § 95.610(a)(2)(v) and 

§ 95.610(b)(4), respectively. The CBA 

should not be submitted as a separate 

report. 

HHS has issued several guidance 

documents to assist State human service 

agencies to meet this cost benefit 

analysis requirement. These include: 

(1) Feasibility, Alternatives and Cost/ 

Benefit Analysis Guide—July 1993; 

(2) Companion Guide #2—Cost/Benefit 

Analysis Illustrated—August 1994 

(Revised 2004); (3) An Overview of 

Companion Guide 3—Cost/Benefit 

Analysis Illustrated for Child Support 

Enforcement Systems—September 2004; 

and (4) Companion Guide 3—Cost/ 

Benefit Analysis Illustrated for Child 

Support Enforcement Services— 

September 2000 (Revised June 2004). 

Each of these documents may be 

accessed at the following link: http:// 

www.acf.hhs.gov/programs/cse/stsys/ 

dsts_plan_cba.html. The Children’s 

Bureau has developed three additional 

CBA companion guide chapters 

specifically to assist Child Welfarerelated system projects. They may be 

accessed at the following link: http:// 

www.acf.hhs.gov/programs/cb/systems/ 

sacwis/federal.htm. 

We have also provided technical 

assistance on CBA requirements through 

revenue stream model spreadsheets, 

help files and functional model 

spreadsheets, which are available by 

request. The revenue stream model is a 

mechanism used by State Child Support 

Enforcement (CSE) agencies to meet the 

annual CBA requirement. The Revenue 

Stream Model will not be required 

under this final rule, but will remain 

available to assist States in tracking the 

cost benefit of child support 

automation. 

Lastly, we recognize that there may be 

Congressional or regulatory mandates 

requiring system enhancements that 

will not result in monetary benefits that 

exceed the costs of those system 

enhancements. We expect States to 

analyze and consider the most cost 

effective of the various automation 

alternatives. 

5. Comment: Several commenters 

asked for clarification of situations 

where a State has closed its APD. 

Commenters asked whether the final 

regulation would require them to submit 

an Operational APDU if the Total 

Acquisition Cost exceeds $5 million 

and, if so, whether the Operational 

APDU would be reviewed under new 

streamlined approval requirements. One 

commenter also asked if the final 

regulations require States to submit an 

As-Needed APDU based on the new 

requirements. Another commenter 

asked if the State is required to submit 

an APD if it initially submitted an 

Operation and Software Maintenance 

(O&SM) APDU and then acquired 

hardware and application software that 

do not meet the definition of O&SM but 

the cost of those items was under the 

submission thresholds. This commenter 

also asked if a State is required to 

submit an APD in the situation 

described above, how that requirement 

would impact the State’s project. 


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Response: By definition, an 

Operational APDU is ‘‘to be submitted 

annually by State programs whose 

system is not in development. The 

Operational APD provides a short 

summary of the activities, method of 

acquisition, and annual budget for 

operations and software maintenance.’’ 

Under the final rule States would not 

be required to reopen an 

Implementation APD, but would be 

required to submit an Operational 

APDU that consists of no more than two 

pages of information about summary of 

operational activities, acquisitions and 

annual budget. If the State is only 

acquiring maintenance services as 

defined in the regulation, the State 

would be exempt from submitting 

procurement documents related to those 

operational activities unless requested 

to do so in writing by the Federal 

agency. In response to comments, we 

are also permitting an exemption from 

the prior approval requirement for 

acquisition documents for projects still 

in development mode, if the planned 

acquisitions are sufficiently described in 

the Planning, Annual or As-Needed 

APDU. This regulatory change permits a 

wider range of acquisitions to be 

exempted from prior approval 

regardless of the estimated cost of the 

acquisition. Instead of basing prior 

approval solely on cost, the revision to 

this regulation would place the burden 

on the Federal approving agency to 

notify the requesting State if the 

description was inadequate or if the 

summary of the planned acquisition 

raises concern and requires the full 

acquisition documents to be submitted 

for prior Federal approval. 

If the State is submitting an 

Operational APD, it will not be required 

to submit an APD because hardware 

falls under the definition of operations. 

If the State anticipates acquiring 

software development that does not 

meet the definition of Software 

maintenance, it should submit either an 

Annual or As-Needed APDU and 

summarize the planned acquisition. The 

Federal program office, in its approval 

of the APDU, will either exempt the 

planned acquisition from prior Federal 

approval or specify which acquisitions 

it requires to be submitted in full for 

prior Federal review and approval. If the 

software development occurs after the 

submittal and approval of the annual 

APDU, the State may submit an AsNeeded APDU updating the acquisition 

strategy or submit the acquisition for 

Federal prior approval. 

6. Comment: One commenter 

disagreed with the APD Update due 

date of 60 days prior to the anniversary 

date of the APD. The commenter stated 

that such a due date is inconsistent with 

Food and Nutrition Service (FNS), 

which requires that the APDU be 

submitted after 90 days of the 

anniversary date so agencies can report 

actual expenditures and a full year’s 

activities. 

Response: We have revised the 

regulation at § 95.610(c) to clarify that 

the APD Update is due 60 days prior to 

the expiration of authorized FFP in the 

costs of acquiring automated data 

processing equipment or services. We 

acknowledge the discrepancy with the 

FNS regulations, but do not believe that 

it is in States’ interest to further revise 

the HHS regulation at § 95.610(c). By 

requiring the APDU 60 days before the 

expiration of authority for FFP granted 

in the previous APDU, the HHS process 

decreases the likelihood of a gap in 

approved FFP in the cost of the State’s 

system. 

7. Comment: Several commenters 

supported the new, shorter APD for 

State systems that are in operations and 

maintenance mode. One commenter 

supported the change, but 

recommended stipulating the specific 

information that must be included in 

the report. If it proves insufficient, more 

information or a full APDU could be 

requested by the Federal approving 

agency. 

Response: The comment was focused 

on the Operational APDU, but the final 

rule expands the APDU acquisition 

summary that should be included in a 

Planning, Annual or As-Needed APDU 

to qualify for exemption from prior 

approval. Therefore, § 95.610 has been 

expanded to specify the type of specific 

information that must be included in 

the areas of summary of activities, 

acquisitions and annual budget. 

Section 95.611—Prior Approval 

Conditions 

1. Comment: One commenter 

disagreed with the proposed 

requirement for States to request 

approval of O&SM (Operation and 

Software Maintenance) acquisition 

documents on an exception basis or if 

the acquisition is non-competitive. 

Another commenter requested 

clarification on the threshold for 

submitting non-competitive O&SM 

acquisitions. 

Response: As stated in § 95.611(a)(3) 

of this rule, ‘‘A State shall obtain prior 

approval from the Department, which is 

reflected in a record, for a sole source/ 

non-competitive acquisition of ADP 

equipment or services with a total State 

and Federal acquisition cost of 

$1,000,000 or more.’’ Therefore the 

threshold for submitting sole source or 

noncompetitive operational acquisitions 

is $1 million or more. Please note, the 

final rule now revises § 95.613 to 

reference the procurement standards of 

§ 92.36(a), which indicates that grantees 

will use their own procurement 

procedures which reflect applicable 

State and local laws and regulations, 

provided that the procurements conform 

to applicable Federal law and standards 

identified in this section. Therefore, 

grantees must still submit sole source 

procurements over the $1 million 

threshold for Federal approval, but the 

Federal program offices will consider 

the State procurement laws and policies 

related to acceptable sole source 

justifications used in non-FFP-matched 

State projects. 

2. Comment: One commenter asked 

for clarification on what happens to a 

State’s project if a State contracts for 

custom software that is under the prior 

approval threshold of $1 million and the 

Federal approving agency later asks for 

a full Implementation APD. 

Response: The Advance Planning 

Document is the written plan of action 

to acquire the proposed ADP services or 

equipment. The requirement in the 

current as well as the proposed 

regulation at § 95.611 is for a State to 

obtain prior written approval for an 

Implementation APD when the State 

plans to acquire ADP equipment or 

services with FFP that it anticipates will 

have total acquisition costs of $5 million 

or more. Total acquisition cost is 

defined in § 95.605 as ‘‘all anticipated 

expenditures (including State staff 

costs) for planning and implementation 

for the project. For purposes of this 

regulation, total acquisition cost and 

project costs are synonymous.’’ The fact 

that an individual contract is under the 

threshold for submission for prior 

approval does not affect the threshold 

for the total or negate the need for the 

State to submit an APD and provide a 

detailed description of the activities to 

be undertaken and the methods to be 

used to accomplish the project. This 

would include a report of the tasks/ 

milestones remaining to be completed. 

3. Comment: One commenter wanted 

clarification of which threshold applies 

if the State uses all State staff and does 

not contract for its system development 

or maintenance. 

Response: Total Acquisition Cost is 

defined in § 95.605 as ‘‘all anticipated 

expenditures (including State staff 

costs) for planning and implementation 

for the project. For purposes of this 

regulation total acquisition cost and 

project costs are synonymous.’’ Thus the 

threshold for submission of an APD is 

$5 million in anticipated expenditures, 

whether a State uses its staff or contracts 

with an outside vendor. 


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4. Comment: We received comments 

suggesting that we expand the 

Acquisition Checklist to include 

acquisitions related to § 95.611(a)(1)(iii) 

and § 95.611(a)(2)(iii). (Since 

subparagraphs (a)(1)(iii) and (a)(2)(iii) 

do not exist in § 95.611, Prior approval 

conditions, we assume the comments 

were referring to § 95.611(b)(1)(iii) and 

§ 95.611(b)(2)(iii), which cover specific 

prior approval requirements for regular 

and enhanced FFP requests, 

respectively, for RFP and contracts.) 

Another commenter requested that the 

use of the Acquisition Checklist be 

extended to include the use of master 

contracts. 

Response: We agree. The final rule 

expands the scope of acquisitions that 

are not subject to prior Federal approval 

to contracts, as well as RFPs, noncompetitive acquisitions and 

acquisitions over the previous 

submission thresholds. The definition of 

Acquisition Checklist has been revised 

to reflect that it applies to contracts and 

contract amendments as well as RFPs 

and may include sole source as well as 

competitive procurements. This is 

consistent with the final rule revising 

§ 95.611 to permit an exemption from 

prior approval through the Annual or 

As-Needed APDU process. We are 

retaining the optional vehicle of an 

expanded Acquisition Checklist for use 

by grantees that opt not to include 

acquisition summary information in 

their APD or who prefer the Acquisition 

Checklist approach. Existing policy 

under IM–05–03 (titled Optional 

checklist for states and territories use in 

requesting an exemption of prior 

approval for Information Technology 

acquisition documents and available at 

the following link http:// 

www.acf.hhs.gov/programs/cse/pol/IM/ 

2005/im-05-03.htm) and ACYF–CB–IM– 

05–02, (titled Relationship Of Master 

Contracts For Acquisition Of State 

Information Technology Products Or 

Services And Competition and available 

at the following link http:// 

www.acf.hhs.gov/programs/cb/ 

laws_policies/policy/im/2005/ 

im0502.htm), already provides States 

the option to self-certify that acquisition 

of automated data processing equipment 

and/or services complies with all 

Federal regulations and policies by 

using the Acquisition Checklist. As 

stated in IM–05–03 and ACYF–CB–IM– 

05–02, the Acquisition Checklist 

currently may be used for Request for 

Proposals, Requests for Quote, 

Invitations to Bid, or similar State and 

local acquisition documents seeking 

Federal funding for development or 

maintenance acquisitions at either the 

regular or enhanced matching rate, 

including acquisitions under 

§ 95.611(b)(1)(iii) and § 95.611(b)(2)(iii) 

as noted by the commenter. Guidance 

related to the Acquisition Checklist will 

be updated following the issuance of 

this final rule. The NPRM and this final 

rule include a definition of Acquisition 

Checklist in § 95.605 as follows: 

Acquisition Checklist means the 

standard Department checklist that 

States can submit to meet prior written 

approval requirements instead of 

submitting the actual Request for 

Proposal (RFP) contract or contract 

amendment. The Acquisition Checklist 

allows States to self-certify that their 

acquisition documents, which include 

RFPs, contracts, contract amendments 

or similar documents, meet State and 

Federal procurement requirements, 

contain appropriate language about 

software ownership and licensing rights 

in compliance with § 95.617, and 

provide access to documentation in 

compliance with § 95.615. 

Currently, IM–05–03 and ACYF–CB– 

IM–05–02 limit use of the Acquisition 

Checklist stating that it is not to be used 

for contracts (including master contracts 

as asked by the commenter), Advance 

Planning Documents or sole source 

acquisitions (including contract 

amendments that exceed the regulatory 

submission threshold of $1 million). 

States and territories must continue to 

submit the acquisition document(s) 

associated with these procurements to 

the Department(s) for Federal prior 

approval. However, a State may use the 

Acquisition Checklist when submitting 

a task order solicitation in connection 

with an approved master contract, if the 

initial master contract has been 

submitted and approved by a Federal 

agency, prior to approving the use of 

solicitations in the State’s acquisition 

checklist. We retained the ‘‘unless 

specifically exempted’’ language in 

§ 95.611(b)(1)(iii) and (b)(2)(iii) 

permitting the Federal agencies to 

exempt in writing contracts and contract 

amendments from prior approval on a 

case by case basis. Please note that if the 

State is soliciting services related to a 

high risk project, the Federal agency 

may request the full acquisition 

document rather than the Acquisition 

Checklist. 

5. Comment: One commenter asked if 

the streamlined approval and thresholds 

identified in § 95.611(b)(1)(v) apply to 

States with closed APDs. 

Response: Yes, the acquisition 

submission thresholds of 

§ 95.611(b)(1)(v) apply to States with 

closed as well as open APDs. 

6. Comment: One commenter inquired 

whether States are required to use the 

term Request for Proposal (RFP) or 

acquisition solicitation document and if 

so, asked that we provide examples. 

Response: There is no requirement for 

a State to utilize the terminology of 

either RFP or acquisition solicitation 

document. States can continue to use 

their preferred terminology to refer to 

RFPs or similar documents. The reason 

for the term acquisition solicitation 

document is that States use different 

terminology such as Invitation for Bid 

(IFB) without realizing that the 

provisions of § 95.611 applied to those 

documents as well. 

7. Comment: Several commenters 

stated that although the ability to selfcertify through the Acquisition 

Checklist exists under IM–05–03 and 

ACYF–CB–IM–05–02, they support 

including a definition of Acquisition 

Checklist in this rule. Another 

commenter (a Federal approving 

agency) does not support use of the 

Acquisition Checklist and points out 

that FNS does not accept the 

Acquisition Checklist for its SNAP 

system acquisitions. 

Response: Use of the Acquisition 

Checklist is optional. It is appropriate 

for States to use the Acquisition 

Checklist for solicitation documents 

seeking FFP in the costs of automated 

data processing equipment or services 

from HHS agencies. States seeking 

funding approval from the FNS should 

comply with the rules of that agency. 

8. Comment: One commenter 

expressed concern that HHS agencies 

could nullify or set aside the selfcertification Acquisition Checklist at 

their discretion. 

Response: We would like to reassure 

the commenter that the Acquisition 

Checklist is an authorized tool for a 

State to self-certify that its acquisition of 

automated data processing equipment 

and/or services complies with all 

Federal regulations and policies. As 

previously stated, we have issued 

Federal policy in support of the 

Acquisition Checklist through IM–05– 

03 (titled Optional checklist for states 

and territories use in requesting an 

exemption of prior approval for 

Information Technology acquisition 

documents and available at the 

following link http://www.acf.hhs.gov/ 

programs/cse/pol/IM/2005/im-05- 

03.htm) and ACYF–CB–IM–05–02, 

(titled Relationship Of Master Contracts 

For Acquisition Of State Information 

Technology Products Or Services And 

Competition and available at the 

following link http://www.acf.hhs.gov/ 

programs/cb/laws_policies/policy/im/ 

2005/im0502.htm). 

We believe it is important to note, 

however, that neither the inclusion of a 


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summary of planned acquisitions in the 

APD nor the use of the Acquisition 

Checklist guarantee Federal acceptance. 

The Department is modifying its 

approach to review of acquisitions, from 

a trigger that is based solely on cost of 

the contract, to an approach that is 

based on assessed risk to the project. We 

anticipate that the summary of 

acquisitions included in the State’s 

Annual APD Update will provide us 

with sufficient information to exempt 

the acquisition from prior Federal 

approval; however, we reserve the 

authority to request that specified 

acquisitions be submitted for prior 

Federal review and approval. One 

example of acquisitions that will require 

prior Federal review and approval is the 

initial acquisition for system 

development, but it may also include 

acquisitions for customized software 

development. The final rule shifts the 

burden of requesting that the full 

acquisition documentation be provided 

for prior Federal approval from the 

grantee to the Federal program office. As 

stated in IM–05–03 and ACYF–CB–IM– 

05–02, the Federal approving authority 

will provide a record of acceptance or 

denial of the State’s Acquisition 

Checklist or the APDU within 60 days 

of submittal. 

9. Comment: Several commenters 

urged that the thresholds for large States 

or large multi-program enterprise 

initiatives be increased to $15 million 

for software application development 

and $60 million for hardware including 

COTS software. Several commenters 

suggested utilizing a percentage of total 

project cost rather than a dollar 

threshold. One commenter was 

concerned that the increase in prior 

approval thresholds for enhanced 

funding from $100,000 to $300,000 was 

too low and suggested a percentage 

factor. Alternatively, commenters 

recommended increasing the enhanced 

funding threshold to $500,000, which is 

consistent with their State’s multiple 

award schedule master services 

agreement. One commenter asked if the 

$20 million threshold would apply if a 

State’s enhanced funding has expired 

and the State is currently seeking 

funding at the regular match rate for 

hardware and COTS towards its 

Statewide Automated Child Welfare 

Information System (SACWIS). 

Response: We agree. We amended the 

acquisition threshold for regular rate 

software acquisition development in 

§ 95.611(b)(5)(A) from $5 million to $6 

million for competitive RFP and 

procurements. Section 95.611 has been 

amended to permit exemptions for 

acquisitions over the increased 

thresholds. While sole source 

procurements over $1 million must 

include a justification, that justification 

may be included with the exemption 

request in the Annual or As-Needed 

APDU, and the State’s procurement 

policies regarding sole source 

justifications will be considered in the 

assessment of risk. Section 

95.611(b)(2)(iii) increases the 

submission threshold for acquisition 

solicitation documents and contracts at 

the enhanced match rate from $100,000 

in current regulation to $300,000 

proposed in the NPRM to $500,000 in 

the final rule. In eliminating the 

majority of submission thresholds for 

projects funded at the regular rate, we 

shift the burden to the Federal program 

offices to limit their requests for full 

acquisition documentation to those 

procurements that are either 

insufficiently described in the APD or 

appear to be at high risk. The final rule 

acknowledges that the acquisition 

thresholds for large States or grantees 

seeking funding for multi-program 

projects do not in themselves signify 

that the acquisition is high risk. The 

Federal program offices will consider 

multiple risk factors before requesting 

the full acquisition documentation be 

submitted for prior Federal approval. 

We amended § 95.621 to clarify that 

ADP reviews of acquisitions not subject 

to prior approval include those 

acquisitions exempted from prior 

approval as well as those acquisitions 

under the submission threshold. 

10. Comment: One commenter 

disagreed with the proposal in 

§ 95.611(b)(1)(vi) to eliminate the 

requirement to submit procurement 

documents related to competitive 

Software Maintenance and Operations. 

They pointed out that this will be 

inconsistent with FNS, which requires 

States to submit RFPs and contracts, and 

considers such acquisition documents 

critical to assess the scope of work and 

identify any potential issues with regard 

to program requirements. 

Response: We believe that the 

Operational APD, as defined in § 95.605, 

will provide us with sufficient 

information to highlight potential 

problems. We also believe that the 

Federal programs can assess the risk 

associated with procurements that are 

summarized in the APD and it is 

appropriate to limit requests for 

submitting additional solicitation 

documents for prior Federal approval to 

those acquisition documents 

determined to be at higher risk. 

11. Comment: One commenter asked 

for clarification on whether prior 

approval would be needed if there are 

several RFPs that compromise the scope 

of a project. The commenter also asked 

if a single RFP is defined as the base 

contract or if the cumulative total of 

multiple RFPs that have been awarded 

to accomplish a single agency goal is 

defined as the base contract and 

whether each RFP stands on its own and 

is subject to the 20 percent prior 

approval threshold. We also received 

comments asking if States have to 

submit previous contract amendments 

when the contract amendments exceed 

the 20 percent threshold. Another 

commenter agreed with the proposal as 

long as a copy of the amendments is 

sent to the Federal program office. 

Response: We have retained the 

definition of Base Contract for those 

grantees that opt to not seek an 

exemption or submit an Acquisition 

Checklist. Base Contract is defined in 

§ 95.605 to mean ‘‘the initial contractual 

activity, including all option years, 

allowed during a defined unit of time, 

for example, 2 years. The base contract 

includes option years but does not 

include amendments.’’ The Base 

Contract refers to the contract, not the 

RFP, and is related to each individual 

contract, not multiple contracts 

associated with a specific project or 

agency goal. 

As stated in § 95.611(b)(1)(vi), prior 

approval is not required for contract 

amendments involving contract cost 

increases with a cumulative total that is 

below 20 percent of the base contract 

cost. If the State later learns that the 

amendments for that contract will 

exceed the 20 percent threshold, the 

State should submit all previous 

contract amendments for information 

purposes. Provided that those contract 

amendments comply with the scope of 

the project, the amendments would not 

require prior approval. However, we 

remind States that under § 95.621(d), 

ADP Reviews, Federal agencies retain 

the right to review acquisitions not 

subject to prior approval. 

12. Comment: One commenter 

requested clarification of the term 

‘‘scope’’ or ‘‘change in scope’’ as it 

applies to thresholds for procurements. 

The commenter noted that changes in 

scope can be minor and involve a 

limited number of additional hours and 

resources and have minimal impact on 

timelines; or changes in scope can 

require significant resource and a rebase 

line of the project. 

Response: ‘‘Changes in the scope of 

the contract’’ refers to significant 

changes such as requesting new 

functionality not addressed in the 

original contract or expanding the types 

of expertise needed for the project. 

States that consider their scope changes 

to be minor or have minimal impact 

may submit such rationale as 


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justification for seeking a sole source 

contract amendment, rather than 

conducting a new procurement of that 

task. 

13. Comment: One commenter 

opposed the requirement that a State 

submit acquisition documents under the 

threshold amounts on an exception 

basis if requested to do so in writing. 

The commenter stated that such a 

requirement would create hardship on 

State staff to recreate documentation 

that had been exempt from submission. 

Response: This is not a new 

requirement and is consistent with 

regulations at § 95.621(d) which state 

that the Department will conduct 

periodic on-site reviews and surveys of 

automated data processing equipment 

and services, including acquisitions not 

subject to prior approval. Also, this 

requirement would not require State 

staff to ‘‘recreate’’ documentation, since 

all States receiving Federal Financial 

Participation for a contract are required 

to retain the contract records and 

documentation during the contract 

timeframe and three years after the 

contract has been terminated as 

indicated in § 92.42, Retention and 

access requirements for records. 

Section 95.613—Procurement Standards 

1. Comment: One commenter 

representing a national organization 

indicated that revising the procurement 

standards in § 95.613 to include the 

procurement language currently in Part 

74 makes the proposed rule less 

cumbersome and is a positive action. 

However, the same commenter stated ‘‘if 

a state was in compliance with its 

procurement rules, that it should be able 

to self-declare that its IT procurement 

meets all state standards and this should 

be sufficient for federal approval.’’ Other 

commenters urged that the procurement 

standards in Part 92 (titled Uniform 

Administrative Requirements for Grants 

and Cooperative Agreements to State, 

Local and Tribal Governments) be used 

for Subpart F (titled Automated Data 

Processing Equipment and Services— 

Conditions for Federal Financial 

Participation) of Part 95. The 

commenter asserts that States should be 

permitted to follow the same policies 

and procedures used for procurements 

that do not receive FFP. One commenter 

asked why we are reverting to the 

procurement standards removed in 2003 

when HHS grants were transferred from 

Part 74 (titled Uniform Administrative 

Requirements for Awards and 

Subawards to Institutions of Higher 

Education, Hospitals, Other Nonprofit 

Organizations and Commercial 

Organizations) to Part 92. One 

commenter indicated that State laws 

may conflict with these Federal 

procurement standards. 

Response: We agree with comments 

that States should be permitted to 

follow the same policies and procedures 

used for procurements that do not 

receive FFP. We removed all crossreferences to Part 74 and deleted the 

requirements in proposed § 95.613 that 

require maximum practical full and 

open competition. We have added a 

sentence that retains limited authority 

for the Department to require additional 

oversight, including compliance with 

§ 92.36(c) for acquisitions if it 

determines that a State procurement 

process is an impediment to 

competition that could substantially 

impact project cost or risk of failure. 

Procurements for Electronic Benefit 

Transfer (EBT) remain subject to the 

prior approval requirements and are 

unlikely to be exempted from prior 

approval. The final rule also replaces 

the cross-reference to Part 74 with the 

cross-reference to Part 92. Section 

95.613 as published in this final rule 

subjects procurement of automated data 

processing equipment and services to 

the procurement standards in Part 92 

and prior approval requirements in 

§ 95.611 of this final rule. 

2. Comment: One commenter asked 

for clarification if the simplified 

acquisition threshold remains at 

$100,000. 

Response: Regulations at 

§ 95.613(e)(8)(ii) were deleted in the 

final rule. The threshold amount is 

referenced in § 92.36(d), Methods of 

procurement to be followed, and is 

defined in 41 U.S.C. 403(11), Public 

Contracts—Office of Federal 

Procurement Policy, which currently 

sets the Simplified Acquisition 

Threshold at $100,000. This final rule 

does not change the definition of 

Simplified Acquisition Threshold. 

3. Comment: Several commenters 

recommended excluding the language 

regarding preference for products and 

services that conserve natural resources 

and protect the environment and are 

energy efficient, as this language may be 

burdensome and unenforceable. 

Response: We have deleted the 

specific language in this rule and 

replaced it with a general crossreference to Part 92. Please note that the 

final rule related to procurement 

standards references the procurement 

standards of § 92.36(a) which provides 

that States are exempt from § 92.36(b) 

through (i). 

4. Comment: One commenter was 

unable to find reference to Subpart Q of 

Part 74 and asked for clarification on 

what portion of Part 92 is applicable. 

Response: Subpart Q of Part 74 was 

eliminated in the publication of a final 

rule on March 22, 1996 [61 FR 11743], 

which is the reason that this regulation 

eliminates that and other obsolete 

regulatory references to Part 74 in Part 

95. 

5. Comment: One commenter 

disagreed with the requirement that all 

contracts include language regarding 

partial breach for termination. The 

commenter suggested that the clauses be 

at the State’s discretion. They stated that 

they want the contractor to perform, 

regardless of forces beyond their 

control, because the providers are 

considered critical for business 

continuity purposes. 

Response: We have retained this 

requirement through the cross-reference 

to Part 92 (specifically § 92.44, titled 

Termination for convenience). This is 

not a new requirement as States have 

been subject to these requirements for 

over 15 years. 

Section 95.617—Software and 

Ownership Rights 

1. Comment: Several commenters 

urged that this final rule clarify whether 

enterprise architecture framework 

software such as Curam, Lagan, 

Harmony and @dvantage, which can be 

customized or configured to meet the 

needs of a vast variety of HHS programs, 

meets the COTS criteria and is 

acceptable in place of the traditional 

custom developed model or transfer 

model. One commenter suggested 

replacing the language on proprietary 

software in § 95.617(c) with a reference 

to the new definition of acceptable 

COTS software as the exception to the 

software ownership provisions. The 

commenter stated that the belief that 

custom developed or transfer solutions 

are fundamentally superior to COTS 

software is a false premise and one not 

supported by current market research, 

experience, or Federal regulation. 

Another commenter recommended 

amending the ownership and licensing 

requirements for proprietary software in 

§ 95.617(c) to provide FFP in the costs 

of proprietary applications software 

developed specifically for the public 

assistance programs covered under this 

subpart and recommended that FFP 

should only be considered if the State 

provides: (1) A business justification for 

purchase of the software, and (2) a plan 

detailing how any future transition from 

a proprietary application to any other 

type of application will be 

accomplished. The commenter limited 

the recommendation to proprietary 

applications software developed 

without FFP and noted that the 

ownership requirements in § 95.617(a) 


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and the licensing requirements in 

§ 95.617(b) continue to apply to any 

software designed, developed or 

installed with FFP. 

Response: We did not propose any 

changes to § 95.617, Software and 

ownership rights, in the NPRM, other 

than removal of the example of listed 

software packages. Although we 

appreciate the commenters’ 

recommendations, we do not consider it 

necessary or appropriate to revise 

§ 95.617 at this stage of the regulatory 

process, since the public would not 

have an opportunity to comment on 

what would be a significant change in 

the regulation. However, related 

guidance is available through IM–05–04, 

Use of Enterprise Level Commercial-Offthe-Shelf (COTS) Software in 

Automated Human Services Information 

Systems, which clarifies that enterprise 

architecture framework software are 

acceptable alternatives to be considered 

in a Feasibility Study or Analysis of 

Alternatives. Please refer to the 

following link for a more detailed 

discussion on this topic: http:// 

www.acf.hhs.gov/programs/cse/pol/IM/ 

2005/im-05-04.htm. 

Section 95.623—Reconsideration of 

Denied FFP for Failure To Obtain Prior 

Approval 

1. Comment: One commenter stated 

that they appreciate and support the 

ability of Federal agencies to allow FFP 

in situations where a State inadvertently 

neglected to obtain prior approval. One 

commenter recommended that the 

timeframe for reconsideration of 

disallowance be extended from 30 days 

to 90 days. Another commenter 

requested clarification as to whether the 

30 days was from the date of the letter, 

30 calendar days, State/Federal 

workdays or 30 days from receipt of the 

letter. 

Response: As stated in § 95.623, a 

‘‘State may request reconsideration of 

the disallowance of FFP by written 

request to the head of the Federal 

program office within 30 days of the 

initial written disallowance 

determination.’’ The 30 days are 

calendar days and begin from the 

receipt date stamped on the letter by the 

Federal program office. 

We disagree with the comment to 

extend the timeframe for responding to 

a disallowance from thirty days to 

ninety days. Thirty days was selected as 

the appropriate timeframe to request 

reconsideration to ensure that this rule 

is consistent with the timeframe 

established in the rules and regulations 

that govern the HHS disallowance and 

reconsideration appeal processes as set 

forth in 45 CFR Part 16, titled 

Procedures of the Departmental Grant 

Appeals Board. 

Section 95.626—Independent 

Verification and Validation 

1. Comment: Several commenters 

pointed out an error in transposing 

validation and verification. 

Response: We agree and have 

corrected the error throughout this rule, 

including the definition section under 

§ 95.605. The term is properly denoted 

Independent Verification and Validation 

(IV&V). 

2. Comment: Several commenters 

supported the IV&V for high risk 

projects only. One commenter was 

unclear on the criteria used to 

determine low or high risk projects and 

suggested that providing consistent 

guidelines, such as those used in project 

management methodologies, would 

improve this process. One commenter 

asked that we clarify when a project 

requires IV&V. Commenters 

recommended that such determination 

be based on project risk rating with 

quantifiable ways of measuring risk and 

deriving the rating. One commenter was 

concerned that if the State does not plan 

for IV&V in its budget up front, the 

project could be delayed. Another 

commenter requested further 

clarification of what constitutes 

significant and critical triggers for IV&V. 

Another commenter asked for additional 

clarification on the process used to 

determine whether an IV&V vendor is 

required. 

Response: The circumstances 

specified in § 95.626(a) represent highrisk situations wherein IV&V by an 

entity independent of the State is 

required as stated in § 95.626(b). We 

have revised the language in the first 

two triggers to permit intervention 

before the project misses a statutory or 

regulatory deadline or a critical 

milestone. We also have added two 

additional triggers that we believe put 

the project at risk and justify an IV&V 

assessment review. The first trigger 

relates to the State’s procurement 

practices and whether the State has a 

pattern of failing to pursue competition 

to the maximum extent feasible. Under 

the final rule, the State will follow the 

same policies and procedures it uses for 

procurement from non-Federal funds, 

which means that in most situations, the 

Federal program office will accept the 

States certification that the sole source 

justification or other competition 

limiting terms and conditions are 

consistent with State procurement 

policy used for procurements from nonFederal funds. The Department 

continues to encourage all grantees to 

pursue full and open competition to the 

maximum extent feasible. If we detect a 

pattern of sole source contracts or 

contract amendments or other 

provisions that limit competition, this 

will trigger an IV&V assessment review. 

The IV&V assessment review will 

determine if the pattern of limiting 

competition has put the project at 

higher risk for increased costs or system 

failure. Only if the IV&V assessment 

review determines that the lack of 

competition increases the risk to the 

system project, will IV&V be required 

for that project. 

The other trigger is related to the 

States failure to adequately involve the 

State program offices in the 

development and implementation of the 

project. An analysis of past projects 

indicates that the lack of stakeholder 

involvement was a major indicator of 

system failures or putting the project at 

risk. Again, if a pattern of failure to 

adequately involve the State program 

offices is determined, it will trigger an 

IV&V assessment review. 

The State should plan for IV&V in the 

budget in case any of these events occur. 

The CSE program, which has 

exercised regulatory authority for IV&V 

since 1999, issued additional guidance 

on critical milestones, significant delays 

and cost overruns in OCSE–AT–99–03, 

titled Distribution of the Addendum to 

the State Systems APD Guide for Child 

Support Enforcement Systems and 

available at the following link: http:// 

www.acf.hhs.gov/programs/cse/pol/AT/ 

1999/at-9903.htm. We believe that 

existing policy provides sufficient 

guidance in this area and further 

definition of these terms in regulation 

would unnecessarily reduce flexibility 

in determining when IV&V is required. 

3. Comment: One commenter stated 

that there is a discrepancy between CSE 

regulations that require an IV&V and 

proposed requirements in the NPRM 

which state that IV&V may be required 

(emphasis added). The commenter 

questions whether Part 95 language will 

override CSE language on IV&V. 

Response: CSE regulations referred to 

by the commenter (which can be found 

in § 307.15(b)(10), Approval of advance 

planning documents for computerized 

support enforcement systems) do not 

contradict Part 95. OCSE routinely 

conducts an IV&V assessment when one 

or more of the criteria in § 95.626(a) is 

triggered. (Note the criteria in 

§ 95.626(a) are incorporated into 

§ 307.15(b)(10)(i). Depending on the 

results of that assessment, OCSE may or 

may not determine that IV&V is 

required.) 

4. Comment: One commenter 

recommended that IV&V be funded at 

100 percent because it is mandated. 


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Another commenter requested enhanced 

funding for IV&V. 

Response: Federal funding is available 

for approved IV&V activities at either 

the regular or enhanced match rate as 

defined in § 95.605 of this rule and in 

accordance with the relevant statutes 

governing Federal program(s). 

Section 95.627—Waivers 

1. Comment: Several commenters 

expressed significant concern about the 

risk associated with submitting an APD 

based on a waiver for an alternative 

approach. Some commenters asked if 

the State would be required to forfeit 

FFP entirely, if the APD is not approved 

and there is no appeal. Other 

commenters asked if the State would be 

permitted to submit a new APD for the 

project, if the APD for the alternative 

approach was disapproved and whether 

the State would receive funding from 

the date of original APD submission. 

Commenters also asked about the HHS 

timeline to approve or disapprove a 

waiver. 

Response: If the waiver for an 

alternative approach is not approved, 

the State does not forfeit FFP entirely; 

it can submit a new APD. Regardless of 

whether the APD contains a waiver for 

an alternative approach or not, FFP is 

approved from the date of the HHS 

approval letter, not the date of the 

State’s APD submission, unless the 

Federal program office agrees, as noted 

in a recorded approval, to a different 

approval date. The exception is the 

provisional approval in § 95.611(d) 

where the State can assume approval if 

the Federal program office has not 

provided approval, disapproval or a 

request for information within 60 days 

of the HHS acknowledgment letter. 

If a State is contemplating submitting 

a waiver for an alternative approach, we 

recommend that the State consult with 

the appropriate Federal agency prior to 

submission to expedite the review and 

approval process. 

Section 95.635—Disallowance of 

Federal Financial Participation (FFP) in 

the Costs of Automated Systems That 

Failed To Comply Substantially With 

Requirements 

1. Comment: One commenter opposed 

disallowance of any FFP if the project 

was in compliance and suggested that 

any disallowance should be limited to 

the portion of a contract out of 

compliance. The commenter asked if 

there was an appeal process and 

requested clarification of the phrases 

‘‘certain ITD projects’’ and 

‘‘substantially.’’ One commenter 

recommended deletion of this 

provision. 

Response: There is no reference to 

‘‘certain ITD projects’’ in § 95.635, 

Disallowance of FFP in the costs of 

automated systems that failed to comply 

substantially with requirements. This 

regulation refers to the disallowance of 

FFP for the APD project, not 

disallowance of contract costs which is 

covered in § 95.612. While substantially 

is retained in the title, we have modified 

the language in the final rule by 

replacing ‘‘substantially’’ with ‘‘major 

failure to comply’’ in § 95.635(b). This 

change is consistent with the language 

in § 95.610(c)(2). An example of an APD 

that has a major failure to comply with 

requirements is an APD that meets one 

of the triggers for an As-Needed APDU 

such as schedule extension of more than 

60 days for major milestones, major 

changes in the scope of the project, 

significant changes to its cost 

distribution methodology or distribution 

of costs among Federal programs, as 

defined in § 95.605(b). The authority in 

§ 95.635 permits, but does not require, 

recoupment of all or part of any costs 

from system projects that have a major 

failure to comply with an APD. The 

Federal program offices will consider a 

variety of factors in determining 

whether a project has ‘‘failed’’ and the 

amount of funding subject to 

recoupment. The good faith efforts of 

the grantee and the operational benefits 

arising from the expenditure will be 

among the factors that are considered. A 

funding disallowance is subject to the 

HHS appeal process as detailed in Part 

16, Procedures of the Departmental 

Grant Appeals Board. 

Paperwork Reduction Act 

Under the Paperwork Reduction Act 

of 1995 (44 U.S.C. 3507(d)), HHS is 

required to submit to the Office of 

Management and Budget (OMB) for 

review and approval any reporting or 

record keeping requirements in a 

proposed or final rule. The revisions in 

this final rule to the requirements at 45 

CFR Part 95 reduces the documentation 

required to be submitted by States and 

territories to the Federal government. 

The current information collection 

burden, before this final rule is 

implemented is as follows: 

Instrument 

Estimated 

number of 

respondents 

Proposed 

frequency of 

response 

Average 

burden per 

response 

Total annual 

burden 

Advance Planning Document .................................................................... 50 1 .84 58 5,336 

RFP and Contract ...................................................................................... 50 .75 1 .5 56 .35 

Emergency Funding Request .................................................................... 27 1 1 27 

Service Agreements .................................................................................. 14 1 1 14 

Biennial Security reports ............................................................................ 50 1 1 .5 75 

This regulation will result in the 

following reductions: 

In Advance Planning Documents—a 

reduction in the average burden hours 

for projects that are implemented and in 

Operational mode. Instead of having to 

submit a full Annual or As-Needed 

APDU, States with projects in 

maintenance and operation mode will 

only have to submit a one- to two-page 

document. The Department also plans to 

develop a process for the States to 

submit this Operational APDU 

electronically. Since the majority of 

States and territories appear to be 

continuing to do ongoing software 

enhancements as part of continuing 

performance, we are estimating only a 

small reduction in the average burden 

hours associated with reducing the 

documentation required for annual 

Operational APDU submissions. The 

elimination of the annual cost benefit 

analysis in the APDU was also factored 

into the estimated reduction from 60 

hours to 58 or 5,336 total burden hours 

for information technology documents. 

In RFP and contracts—a reduction is 

made in the average burden hours per 

RFP and acquisition due to the final rule 

providing several options for the grantee 

to avoid submitting their full RFP and 

contracts for prior Federal approval. We 

anticipate that 90% of the prior 

approval submissions of RFP and 

contracts will be eliminated as grantees 

seek exemptions from prior approval or 

opt to utilize the Acquisition Checklist. 

We believe that this will reduce the 

average number of submissions from 50 

to 5 and reduce the total burden hours 

to 11.5 hours. 

The revised annual burden estimates 

based on this regulation is as follows: 


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Instrument 

Estimated 

number of 

respondents 

Proposed 

frequency of 

response 

Average 

burden per 

response 

Total annual 

burden 

Advance Planning Document .................................................................... 50 1 .84 58 5,336 

RFP and Contract ...................................................................................... 5 .75 1 .5 11 .5 

Emergency Funding Request .................................................................... 27 1 1 27 

Service Agreements .................................................................................. 14 1 1 14 

Biennial Security reports ............................................................................ 50 1 1 .5 75 

The respondents affected by this 

information collection are State agencies 

and territories. 

The Department considered 

comments by the public on this 

proposed collection of information in 

the following areas: 

• Evaluating whether the proposed 

collection activity is necessary for the 

proper performance and function of the 

Department, including whether the 

information will have a practical utility; 

• Evaluating the accuracy of the 

Department’s estimate of the burden of 

the proposed collections of information, 

including the validity of the 

methodology and 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. 

No comments were received 

specifically on this information 

collection on the associated burden 

hours, but numerous commenters urged 

the elimination of or higher submission 

thresholds for prior approval of 

acquisition documents. 

Regulatory Flexibility Analysis 

The Secretary certifies, under 5 U.S.C. 

605(b), as enacted by the Regulatory 

Flexibility Act (Pub. L. 96–354), that 

this rule will not result in a significant 

impact on a substantial number of small 

entities. The primary impact is on State 

and Territorial governments. State and 

Territorial governments are not 

considered small entities under the 

Regulatory Flexibility Act. The intent of 

these rules is to reduce the submission 

requirements for lower-risk information 

technology (IT) projects and 

procurements and increase oversight 

over higher-risk IT projects and 

procurements by making technical 

changes, conforming changes and 

substantive revisions in the 

documentation required to be submitted 

by States, counties, and territories for 

approval of their IT plans and 

acquisition documents. 

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 final rule is consistent with 

these priorities and principles. Since it 

significantly reduces the documentation 

required to be submitted by the States 

and Territories related to lower risk IT 

projects and procurement, costs are 

reduced. Examples of documentation 

that is no longer required to be 

submitted for prior approval under this 

final rule are that most acquisitions will 

be exempt from prior approval, and 

instead of having to submit a full 

Annual or As-Needed APDU, States 

with projects in maintenance and 

operation mode will only have to 

submit a document with as few as 2 

pages, depending on the scope of 

activities. The current information 

collection burden is reduced to reflect 

these reduced costs to States and 

Territories. Thus the rule will not 

increase costs and in fact will result in 

some cost savings. To estimate the 

savings we used the same methodology 

and State and contractor average annual 

rate as we recommend that States use 

for their cost estimates in our Planning 

Advance Planning Document training. 

In those training documents we 

recommend an average standard hourly 

rate of $100 for State systems staff and 

$175 for contractor State staff. The 

reduction of 243.25 hours for APDs 

would translate to a cost savings of 

$24,325 for State staff, or $42,568 if the 

RFP is prepared by a Quality Assurance 

contractor. The reduction of 288 hours 

for submission of RFPs would translate 

to a cost savings of $28,800 if prepared 

by State staff and $50,400 if prepared by 

contractor staff. So the estimate of total 

cost savings related to the reduction in 

the information collection budget would 

be $53,125 to $92,968 a year. 

Unfunded Mandates Reform Act of 

1995 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (2 U.S.C. 

1501) 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 

adjusted for inflation, or more in any 

one year. 

If a covered agency must prepare a 

budgetary impact statement, section 205 

further requires that it select the most 

cost-effective and least burdensome 

alternative that achieves the objectives 

of the rule and is consistent with the 

statutory requirements. In addition, 

section 203 requires a plan for 

informing and advising any small 

governments that may be significantly 

or uniquely impacted by the rule. 

We have determined that this rule 

will not 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 

adjusted annually for inflation. The 

current threshold adjusted for inflation 

using the Gross Domestic Price deflator 

is $135 million. Accordingly, we have 

not prepared a budgetary impact 

statement, specifically addressed the 

regulatory alternatives considered, or 

prepared a plan for informing and 

advising any significantly or uniquely 

impacted small governments. 

Congressional Review 

This rule is not a major rule as 

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

Assessment of Federal Regulations and 

Policies on Families 

Section 654 of the Treasury and 

General Government Appropriations 

Act of 1999 requires Federal agencies to 

determine whether a policy or 

regulation may affect family well-being. 

These regulations will not have an 

impact on family well-being as defined 

in the legislation. 

Executive Order 13132 

Executive Order 13132 prohibits an 

agency from publishing any rule that 

has federalism implications if the rule 

either imposes substantial direct 

compliance costs on State and local 

governments and is not required by 

statute, or the rule preempts State law, 

unless the agency meets the 

consultation and funding requirements 

of section 6 of the Executive Order. We 


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do not believe the regulation has 

federalism impact as defined in the 

Executive Order. 

List of Subjects in 45 CFR Part 95 

Administrative practice and 

procedure, Claims, Computer 

technology, Grant programs—health, 

Grant programs, Social programs. 

Approved: July 30, 2010. 

Kathleen Sebelius, 

Secretary of Health and Human Services. 

■ For the reasons set forth above, 45 

CFR Part 95 is amended as follows: 

PART 95—GENERAL 

ADMINISTRATION—GRANT 

PROGRAMS (PUBLIC ASSISTANCE, 

MEDICAL ASSISTANCE AND STATE 

CHILDREN’S HEALTH INSURANCE 

PROGRAMS) 

■ 1. The authority citation for 45 CFR 

Part 95 is revised to read as follows: 

Authority: 5 U.S.C. 301, 42 U.S.C. 622(b), 

629b(a), 652(a), 652(d), 654A, 671(a), 1302, 

and 1396a(a). 

Subpart A—Time Limits for States To 

File Claims 

■ 2. In § 95.4 revise the definition of 

‘‘We, our, and us’’ to read as follows: 

§ 95.4 Definitions. 

* * * * * 

We, our, and us refer to the HHS 

Centers for Medicare & Medicaid 

Services (CMS), and Administration for 

Children and Families (ACF), 

depending on the program involved. 

■ 3. In § 95.31 revise paragraph (a) to 

read as follows: 

§ 95.31 Where to send a waiver request for 

good cause. 

(a) A request which affects the 

program(s) of only one HHS agency, 

CMS or ACF and does not affect the 

programs of any other agency or Federal 

Department should be sent to the 

appropriate HHS agency. 

* * * * * 

Subpart E—Cost Allocation Plans 

■ 4. In § 95.505 revise the definition of 

‘‘Operating Divisions’’ to read as follows: 

§ 95.505 Definitions. 

* * * * * 

Operating Divisions means the 

Department of Health and Human 

Services (HHS) organizational 

components responsible for 

administering public assistance 

programs. These components are the 

Administration for Children and 

Families (ACF) and the Centers for 

Medicare & Medicaid Services (CMS). 

* * * * * 

Subpart F—[Amended] 

■ 5. Remove the authority citation for 

subpart F. 

■ 6. Revise § 95.601 to read as follows: 

§ 95.601 Scope and applicability. 

This subpart prescribes part of the 

conditions under which the Department 

of Health and Human Services will 

approve the Federal Financial 

Participation (FFP) at the applicable 

rates for the costs of automated data 

processing incurred under an approved 

State plan for titles IV–B, IV–D, IV–E, 

XIX or XXI of the Social Security Act. 

The conditions of approval of this 

subpart add to the statutory and 

regulatory requirements for acquisition 

of Automated Data Processing (ADP) 

equipment and services under the 

specified titles of the Social Security 

Act. 

■ 7. Amend § 95.605 by: 

■ a. Adding the definitions ‘‘Acquisition 

Checklist,’’ ‘‘Alternative approach to 

APD requirements,’’ ‘‘Base contract,’’ 

‘‘Commercial off the shelf software,’’ 

‘‘Federal program office,’’ ‘‘Grantee,’’ 

‘‘Independent Verification and 

Validation,’’ ‘‘Noncompetitive,’’ 

‘‘Operational APD,’’ ‘‘Service Oriented 

Architecture’’ and ‘‘Software 

maintenance.’’ 

■ b. Revising the definitions of 

‘‘Advance Planning Document,’’ 

‘‘Implementation APD,’’ and ‘‘Planning 

APD,’’ and ‘‘Advance Planning 

Document Update (APDU).’’ 

■ c. Amending the definition of 

‘‘Acceptance Documents’’ by removing 

the phrase ‘‘written evidence’’ and 

adding in its place ‘‘a record’’. 

■ d. Revising the definition heading 

‘‘Automatic data processing’’ to read 

‘‘Automated data processing.’’ 

■ e. Revising the definition heading of 

‘‘Automatic data processing equipment’’ 

to read ‘‘Automated data processing 

equipment.’’ 

■ f. Removing the definition of 

‘‘Approving component.’’ 

■ g. Revising the definition of ‘‘Project.’’ 

■ h. Revising paragraphs (d), (e), and (f) 

under the definition of ‘‘Service 

agreement.’’ 

§ 95.605 Definitions. 

* * * * * 

Acquisition Checklist means the 

standard Department checklist that 

States can submit to meet prior written 

approval requirements instead of 

submitting the actual Request for 

Proposal (RFP), contracts or contract 

amendments. The Acquisition Checklist 

allows States to self-certify that their 

acquisition documents, which include 

RFPs, contracts, contract amendments 

or similar documents, meet State and 

Federal procurement requirements, 

contain appropriate language about 

software ownership and licensing rights 

in compliance with § 95.617, and 

provide access to documentation in 

compliance with § 95.615. 

Advance Planning Document (APD), 

Initial advance automated data 

processing planning or Initial APD 

means a recorded plan of action to 

request funding approval for a project 

which will require the use of ADP 

service or equipment. The term APD 

refers to a Planning APD, or to a 

planning and/or development and 

implementation action document, i.e., 

Implementation APD, or to an Advance 

Planning Document Update. 

Requirements are detailed in § 95.610, 

paragraphs (a), (b), and (c). 

Advance Planning Document Update 

(APDU) is a document or record 

submitted annually (Annual APDU) to 

report project status and/or post 

implementation cost-savings, or, on an 

as-needed (As-Needed APDU) basis, to 

request funding approval for project 

continuation when significant project 

changes are anticipated; for incremental 

funding authority and project 

continuation when approval is being 

granted by phase; or to provide detailed 

information on project and/or budget 

activities as specified in § 95.610(c). 

Alternative approach to APD 

requirements means that the State has 

developed an APD that does not meet 

all conditions for APD approval in 

§ 95.610, resulting in the need for a 

waiver under § 95.627(a). 

Base contract means the initial 

contractual activity, including all option 

years, allowed during a defined unit of 

time, for example, 2 years. The base 

contract includes option years but does 

not include amendments. 

Commercial-off-the-shelf (COTS) 

software means proprietary software 

products that are ready-made and 

available for sale to the general public 

at established catalog or market prices. 

* * * * * 

Federal program office means the 

Federal program office within the 

Department that is authorized to 

approve requests for the acquisition of 

ADP equipment or ADP services. The 

Federal program offices within the 

Administration for Children and 

Families (ACF) are the Children’s 

Bureau for titles IV–B (child welfare 

services) and IV–E (foster care and 

adoption assistance), the Office of Child 


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Support Enforcement for title IV–D 

(child support enforcement), and the 

Centers for Medicare & Medicaid 

Services (CMS) for titles XIX (Medicaid) 

and XXI (the Children’s Health 

Insurance Program) of the Social 

Security Act. 

* * * * * 

Grantee means an organization 

receiving financial assistance directly 

from an HHS awarding agency to carry 

out a project or program. 

Implementation APD means a 

recorded plan of action to request 

Federal Financial Participation (FFP) in 

the costs of designing, developing, and 

implementing the system. 

Independent Verification and 

Validation—(IV&V) means a welldefined standard process for examining 

the organizational, management, and 

technical aspects of a project to 

determine the effort’s adherence to 

industry standards and best practices, to 

identify risks, and make 

recommendations for remediation, 

where appropriate. 

* * * * * 

Noncompetitive means solicitation of 

a proposal from only one source, or after 

solicitation of a number of sources, 

negotiation with selected sources based 

on a finding that competition is 

inadequate. 

Operational APD—An operational 

APD is a record of no more than two 

pages to be submitted annually by State 

programs whose system is not in 

development. The Operational APD 

provides a short summary of the 

activities, method of acquisition, and 

annual budget for operations and 

software maintenance. 

Planning APD is a plan of action in a 

record which requests FFP, to determine 

the need for, feasibility, and cost factors 

of an ADP equipment or services 

acquisition and to perform one or more 

of the following: prepare a Functional 

Requirements Specification, assess other 

State’s systems for transfer, to the 

maximum extent possible, of an existing 

system; prepare a request for proposal 

(RFP) and/or develop a General Systems 

Design (GSD). 

Project means a defined set of 

information technology related tasks, 

undertaken by the State to improve the 

efficiency, economy and effectiveness of 

administration and/or operation of one 

or more of its human services programs. 

For example, a State may undertake a 

comprehensive, integrated initiative in 

support of its Child Support, Child 

Welfare and Medicaid program’s intake, 

eligibility and case management 

functions. A project may also be a less 

comprehensive activity such as office 

automation, enhancements to an 

existing system or an upgrade of 

computer hardware. 

* * * * * 

Service Agreement * * * 

* * * * * 

(d) Includes assurances that services 

provided will be timely and satisfactory; 

preferably through a service level 

agreement; 

(e) Includes assurances that 

information in the computer system as 

well as access, use and disposal of ADP 

data will be safeguarded in accordance 

with provisions of all applicable federal 

statutes and regulations, including 

§§ 205.50 and 307.13; 

(f) Requires the provider to obtain 

prior approval pursuant to § 95.611(a) 

from the Department for ADP 

equipment and ADP services that are 

acquired from commercial sources 

primarily to support the titles covered 

by this subpart and requires the 

provider to comply with § 95.613 for 

procurements related to the service 

agreement. ADP equipment and services 

are considered to be primarily acquired 

to support the titles covered by this 

subpart when the human service 

programs may reasonably be expected to 

either: be billed for more than 50 

percent of the total charges made to all 

users of the ADP equipment and 

services during the time period covered 

by the service agreement, or directly 

charged for the total cost of the purchase 

or lease of ADP equipment or services; 

* * * * * 

Service Oriented Architecture (SOA), 

also referred to as Service Component 

Based Architecture, describes a means 

of organizing and developing 

Information Technology capabilities as 

collaborating services that interact with 

each other based on open standards. 

Agency SOA artifacts may include 

models, approach documents, 

inventories of services or other 

descriptive documents. 

Software maintenance means routine 

support activities that normally include 

corrective, adaptive, and perfective 

changes, without introducing additional 

functional capabilities. Corrective 

changes are tasks to correct minor errors 

or deficiencies in software. Adaptive 

changes are minor revisions to existing 

software to meet changing requirements. 

Perfective changes are minor 

improvements to application software 

so it will perform in a more efficient, 

economical, and/or effective manner. 

Software maintenance can include 

activities such as revising/creating new 

reports, making limited data element/ 

data base changes, and making minor 

alterations to data input and display 

screen designs. 

* * * * * 

■ 8. Add § 95.610 to read as follows: 

§ 95.610 Submission of advance planning 

documents. 

Advance Planning Document (APD) 

refers to an Initial advance automated 

data processing planning document or 

Initial APD, providing a recorded plan 

of action to request funding approval for 

a project which will require the use of 

ADP services or equipment, including 

the use of shared or purchased services 

in lieu of State acquired stand-alone 

resources. Requirements are detailed in 

paragraph (a), (b) and (c) of this section. 

(a) Planning APD. (1) A separate 

planning effort and Planning APD is 

optional, but highly recommended, and 

generally applies to large statewide 

system developments and/or major 

hardware acquisitions. States with large, 

independent counties requesting 

funding at the regular match rate for 

county systems are strongly encouraged 

to engage in planning activities 

commensurate with the complexity of 

the projected ADP project and to submit 

a Planning APD to allow for time and to 

provide funding for its planning 

activities. Therefore, States must 

consider the scope and complexity of a 

project to determine whether to submit 

a Planning APD as a separate document 

to HHS or whether to combine the two 

phases of planning and implementation 

into one APD covering both the 

Planning APD and the Implementation 

APD requirements. 

(2) The Planning APD is a relatively 

brief document, usually not more than 

6–10 pages, which must contain: 

(i) A statement of the problem/need 

that the existing capabilities can not 

resolve, new or changed program 

requirements or opportunities for 

improved economies and efficiencies 

and effectiveness of program and 

administration and operations; 

(ii) A project management plan that 

addresses the planning project 

organization, planning activities/ 

deliverables, State and contractor 

resource needs, planning project 

procurement activities and schedule; 

(iii) A specific budget for the planning 

phase of the project; 

(iv) An estimated total project cost 

and a prospective State and Federal cost 

allocation/distribution, including 

planning and implementation; 

(v) A commitment to conduct/prepare 

the problem(s) needs assessment, 

feasibility study, alternatives analysis, 

cost benefit analysis, and to develop a 

Functional Requirements Specification 

and/or a General Systems Design (GSD); 


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(vi) A commitment to define the 

State’s functional requirements, based 

on the State’s business needs which 

may be used for the purpose of 

evaluating the transfer of an existing 

system, including the transfer of another 

State’s General System Design that the 

State may adapt to meet State specific 

requirements; 

(vii) Additional Planning APD content 

requirements, for enhanced funding 

projects as contained in § 307.15 and 

§§ 1355.50 through 1355.57; and 

(viii) An acquisition summary for the 

upcoming year or development phase 

that provides the following information 

on proposed acquisitions: 

(A) Type and scope of contract 

(B) Procurement strategy 

(C) Estimated cost or not to exceed 

amount 

(D) Timeframe of contract 

(E) A statement or certification that 

the proposed acquisition will comply 

with all State and Federal requirements 

including the retention of software 

ownership rights specified in § 95.617. 

(b) Implementation APD. The 

Implementation APD shall include: 

(1) The results of the activities 

conducted under a Planning APD, if 

any; 

(2) A statement of problems/needs 

and outcomes/objectives; 

(3) A requirements analysis, 

feasibility study and a statement of 

alternative considerations including, 

where appropriate, the use of serviceorientated architecture and a transfer of 

an existing system and an explanation 

of why such a transfer is not feasible if 

another alternative is identified; 

(4) A cost benefit analysis; 

(5) A personnel resource statement 

indicating availability of qualified and 

adequate numbers of staff, including a 

project director to accomplish the 

project objectives; 

(6) A detailed description of the 

nature and scope of the activities to be 

undertaken and the methods to be used 

to accomplish the project; 

(7) The proposed activity schedule for 

the project; 

(8) A proposed budget (including an 

accounting of all possible 

Implementation APD activity costs, e.g., 

system conversion, vendor and state 

personnel, computer capacity planning, 

supplies, training, hardware, software 

and miscellaneous ADP expenses) for 

the project; 

(9) A statement indicating the 

duration the State expects to use the 

equipment and/or system; 

(10) An estimate of the prospective 

cost allocation/distribution to the 

various State and Federal funding 

sources and the proposed procedures for 

distributing costs; 

(11) A statement setting forth the 

security and interface requirements to 

be employed and the system failure and 

disaster recovery/business continuity 

procedures available or to be 

implemented; and 

(12) Additional requirements, for 

acquisitions for which the State is 

requesting enhanced funding, as 

contained at §§ 1355.54 through 

1355.57, § 307.15 and 42 CFR 

subchapter C, part 433. 

(c) Advance Planning Document 

Update (APDU). (1) The Annual APDU, 

which is due 60 days prior to the 

expiration of the FFP approval, 

includes: 

(i) A reference to the approved APD 

and all approved changes; 

(ii) A project activity report which 

includes the status of the past year’s 

major project tasks and milestones, 

addressing the degree of completion and 

tasks/milestones remaining to be 

completed, and discusses past and 

anticipated problems or delays in 

meeting target dates in the approved 

APD and approved changes to it and 

provides a risk management plan that 

assesses project risk and identifies risk 

mitigation strategies; 

(iii) A report of all project deliverables 

completed in the past year and degree 

of completion for unfinished products 

and tasks; 

(iv) An updated project activity 

schedule for the remainder of the 

project; 

(v) A revised budget for the entirety 

of the project’s life-cycle, including 

operational and development cost 

categories; 

(vi) A project expenditures report that 

consists of a detailed accounting of all 

expenditures for project development 

over the past year and an explanation of 

the differences between projected 

expenses in the approved APD and 

actual expenditures for the past year; 

(vii) A report of any approved or 

anticipated changes to the allocation 

basis in the APD’s approved cost 

allocation methodology; and 

(viii) An acquisition summary for the 

upcoming year or development phase 

that provides the following information 

on proposed acquisitions: 

(A) Type and scope of contract 

(B) Procurement strategy 

(C) Estimated cost or not to exceed 

amount 

(D) Timeframe of contract 

(E) A statement or certification that 

the proposed acquisition will comply 

with all State and Federal requirements 

including the retention of software 

ownership rights specified in § 95.617. 

(2) The As-Needed APDU is a 

document that requests approval for 

additional funding and/or authority for 

project continuation when significant 

changes are anticipated, when the 

project is being funded on a phased 

implementation basis, or to clarify 

project information requested as an 

approval condition of the Planning 

APD, Annual APDU, or Implementation 

APD. The As-Needed APDU may be 

submitted any time as a stand-alone 

funding or project continuation request, 

or may be submitted as part of the 

Annual APDU. The As-Needed APDU is 

submitted: 

(i) When the State anticipates 

incremental project expenditures 

(exceeding specified thresholds); 

(ii) When the State anticipates a 

schedule extension of more than 60 

days for major milestones; 

(iii) When the State anticipates major 

changes in the scope of its project, e.g., 

a change in its procurement plan, 

procurement activities, system concept 

or development approach; 

(iv) When the State anticipates 

significant changes to its cost 

distribution methodology or distribution 

of costs among Federal programs; and/ 

or, 

(v) When the State anticipates 

significant changes to its cost benefit 

projections. The As-Needed APDU shall 

provide supporting documentation to 

justify the need for a change to the 

approved budget. 

(vi) Changes to the acquisition 

summary in the following areas: 

(A) Type and scope of contract 

(B) Procurement strategy 

(C) Estimated cost or not to exceed 

amount 

(D) Timeframe of contract 

(E) A statement or certification that 

the proposed acquisition will comply 

with all State and Federal requirements 

including the retention of software 

ownership rights specified in § 95.617. 

(F) New acquisitions not summarized 

in the Annual APDU. 

(3) The Operational Advance 

Planning Document Update (OAPDU) is 

an annual submission of no more than 

two pages, including: 

(i) Summary of activities; 

(ii) Acquisitions; and, 

(iii) Annual budget by project/system 

receiving funding through the programs 

covered under this part. 

■ 9. In § 95.611, revise paragraphs (a), 

(b)(1)(iii) and (iv), (b)(2)(iii) and (iv), 

(c)(1)(i), (c)(2)(ii)(A), and (d); and add 

paragraphs (b)(1)(v) and (vi) and (e) to 

read as follows: 

§ 95.611 Prior approval conditions. 

(a) General acquisition requirements. 

(1) A State shall obtain prior approval 

from the Department which is reflected 


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in a record, as specified in paragraph (b) 

of this section, when the State plans to 

acquire ADP equipment or services with 

proposed FFP at the regular matching 

rate that it anticipates will have total 

acquisition costs of $5,000,000 or more 

in Federal and State funds. States will 

be required to submit an Operational 

APDU only if they exceed the threshold 

requiring Federal approval, and only 

upon the receipt of a submission 

request, which is reflected in a record, 

from the Department. See definition of 

software maintenance under § 95.605. 

(2) A State shall obtain prior approval 

from the Department which is reflected 

in a record, as specified in paragraph (b) 

of this section, when the State plans to 

acquire ADP equipment or services with 

proposed FFP at the enhanced matching 

rate authorized by § 205.35, Part 307, 

§ 1355.52 or 42 CFR part 433, subpart C, 

regardless of the acquisition cost. 

(3) A State shall obtain prior approval 

from the Department, which is reflected 

in a record, for a sole source/noncompetitive acquisition, of ADP 

equipment or services with a total State 

and Federal acquisition cost of 

$1,000,000 or more. 

(4) Except as provided for in 

paragraph (a)(5) of this section, the State 

shall submit multi-program requests for 

Department approval, signed by the 

appropriate State official, to the 

Department’s Secretary or his/her 

designee. For each HHS agency that has 

federal funding participation in the 

project, an additional copy must be 

provided to the applicable Federal 

program office and respective Regional 

Offices. 

(5) States shall submit requests for 

approval which affect only one 

approving component of HHS (CMS, 

OCSE, or Children’s Bureau), to the 

applicable Federal program office and 

Regional Administrator. 

(6) The Department will not approve 

any Planning or Implementation APD 

that does not include all information 

required in § 95.610. 

(b) Specific prior approval 

requirements. The State agency shall 

obtain approval of the Department in a 

record, prior to the initiation of project 

activity. 

(1) * * * 

(iii) For acquisition documents, an 

exemption from prior Federal prior 

approval shall be assumed in the 

approval of the Planning, Annual or AsNeeded APDU provided that: 

(A) The acquisition summary 

provides sufficient detail to base an 

exemption request; 

(B) The acquisition does not deviate 

from the terms of the exemption; and 

(C) The acquisition is not the initial 

acquisition for a high risk activity, such 

as software application development. 

Acquisitions, whether exempted from 

prior Federal approval or not, must 

comply with the Federal provisions 

contained in § 95.610(c)(1)(viii) or 

(c)(2)(vi) or submit an Acquisition 

Checklist. 

(iv) For noncompetitive acquisitions, 

including contract amendments, when 

the resulting contract is anticipated to 

exceed $1,000,000, States will be 

required to submit a sole source 

justification in addition to the 

acquisition document. The sole source 

justification can be provided as part of 

the Planning, Annual or As-Needed 

APDU. 

(v) If the State does not opt for an 

exemption or submittal of an 

Acquisition Checklist for the contract, 

prior to the execution, the State will be 

required to submit the contract when it 

is anticipated to exceed the following 

thresholds, unless specifically exempted 

by the Department: 

(A) Software application 

development—$6,000,000 or more 

(competitive) and $1,000,000 or more 

(noncompetitive); 

(B) Hardware and Commercial Offthe-Shelf (COTS) software—$20,000,000 

or more (competitive) and $1,000,000 or 

more (noncompetitive); 

(C) Operations and Software 

Maintenance acquisitions combined 

with hardware, COTS or software 

application development—the 

thresholds stated in § 95.611(b)(1)(v)(A) 

and (B) apply. 

(vi) For contract amendments within 

the scope of the base contract, unless 

specifically exempted by the 

Department, prior to execution of the 

contract amendment involving contract 

cost increases which cumulatively 

exceed 20 percent of the base contract 

cost. 

(2) * * * 

(iii) For the acquisition solicitation 

documents and contract, unless 

specifically exempted by the 

Department, prior to release of the 

acquisition solicitation documents or 

prior to execution of the contract when 

the contract is anticipated to or will 

exceed $500,000. 

(iv) For contract amendments, unless 

specifically exempted by the 

Department, prior to execution of the 

contract amendment, involving contract 

cost increases exceeding $500,000 or 

contract time extensions of more than 

60 days. 

* * * * * 

(c) * * * 

(1) * * * 

(i) For an annual APDU for projects 

with a total cost of more than 

$5,000,000, and projects with a total 

estimated cost of less than $5,000,000 

only if requested by the Department. 

* * * * * 

(2) * * * 

(ii) * * * 

(A) A projected cost increase of 

$300,000 or 10 percent of the project 

cost, whichever is less; 

* * * * * 

(d) Prompt action on requests for prior 

approval. The Department will 

promptly send to the approving Federal 

program offices the items specified in 

paragraph (b) of this section. If the 

Department has not provided approval, 

disapproval, or a request for information 

which is reflected in a record, within 60 

days of the date of the Departmental 

letter acknowledging receipt of a State’s 

request, the Department will consider 

the request to have provisionally met 

the prior approval conditions of 

paragraph (b) of this section. 

(e) Acquisitions not subject to prior 

approval. If the Department has not 

specifically requested in a record, the 

submittal of additional acquisition 

documentation for those acquisitions 

summarized in the APD, the approval of 

the Planning, Annual or As-Needed 

APDU will constitute an exemption of 

the acquisition documents from prior 

Federal approval. States will be required 

to submit acquisition documents, 

contracts and contract amendments 

under the threshold amounts on an 

exception basis if requested to do so in 

a record by the Department. 

■ 10. Revise § 95.612 to read as follows: 

§ 95.612 Disallowance of Federal Financial 

Participation (FFP). 

If the Department finds that any ADP 

acquisition approved or modified under 

the provisions of § 95.611 fails to 

comply with the criteria, requirements, 

and other activities described in the 

approved APD to the detriment of the 

proper, efficient, economical and 

effective operation of the affected 

program, payment of FFP may be 

disallowed. In the case of a suspension 

of the approval of a Child Support APD 

for enhanced funding, see § 307.40(a). In 

the case of a suspension of the approval 

of an APD for a State Automated Child 

Welfare Information System (SACWIS) 

project, see § 1355.56. 

■ 11. In § 95.613, revise paragraph (a) to 

read as follows: 

§ 95.613 Procurement Standards. 

(a) General. Procurements of ADP 

equipment and services are subject to 

the procurement standards prescribed 

by Part 92 regardless of any conditions 


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for prior approval. The Department 

retains the authority to provide greater 

oversight including requiring a State to 

comply with § 92.36(c) if the 

Department determines that the State 

procurement process is an impediment 

to competition that could substantially 

impact project cost or risk of failure. 

* * * * * 

■ 12. Revise § 95.615 to read as follows: 

§ 95.615 Access to systems and records. 

The State agency must allow the 

Department access to the system in all 

of its aspects, including pertinent state 

staff, design developments, operation, 

and cost records of contractors and 

subcontractors at such intervals as are 

deemed necessary by the Department to 

determine whether the conditions for 

approval are being met and to determine 

the efficiency, economy and 

effectiveness of the system. 

■ 13. In § 95.617 revise paragraph (c) to 

read as follows: 

§ 95.617 Software and ownership rights. 

* * * * * 

(c) Proprietary software. Proprietary 

operating/vendor software packages 

which are provided at established 

catalog or market prices and sold or 

leased to the general public shall not be 

subject to the ownership provisions in 

paragraphs (a) and (b) of this section. 

FFP is not available for proprietary 

applications software developed 

specifically for the public assistance 

programs covered under this subpart. 

■ 14. In § 95.621 revise paragraphs (d) 

and (e) to read as follows: 

§ 95.621 ADP reviews. 

* * * * * 

(d) Acquisitions not subject to prior 

approval. Reviews will be conducted on 

an audit basis to assure that system and 

equipment acquisitions costing less than 

$200,000 or acquisitions exempted from 

prior approval were made in accordance 

with Part 92 and the conditions of this 

subpart and to determine the efficiency, 

economy and effectiveness of the 

equipment or service. 

(e) State Agency Maintenance of 

Service Agreements. The State agency 

will maintain a copy of each service 

agreement in its files for Federal review. 

* * * * * 

■ 15. In § 95.623, revise the heading, 

introductory text, and paragraph (b) to 

read as follows: 

§ 95.623 Reconsideration of denied FFP 

for failure to obtain prior approval. 

For ADP equipment and services 

acquired by a State without prior 

approval, which is reflected in a record, 

the State may request reconsideration of 

the disallowance of FFP by written 

request to the head of the Federal 

program office within 30 days of the 

initial written disallowance 

determination. In such a 

reconsideration, the agency may take 

into account overall federal interests. 

The Department may grant a request for 

reconsideration if: 

* * * * * 

(b) The State requests reconsideration 

of a denial by submitting in a record 

information that addresses the following 

requirements: 

(1) The acquisition must be 

reasonable, useful and necessary; 

(2) The State’s failure to obtain prior 

approval, which is reflected in a record, 

must have been inadvertent (i.e., the 

State did not knowingly avoid the prior 

approval requirements); 

(3) The request was not previously 

denied by HHS; 

(4) The acquisition must otherwise 

meet all other applicable Federal and 

State requirements, and would have 

been approved under Part 95, Subpart F 

had the State requested in a record, 

prior approval; 

(5) The State must not have a record 

of recurrent failures, under any of the 

programs covered by the prior approval 

regulations, to comply with the 

requirement to obtain prior approval in 

a record, of its automatic data 

processing acquisitions (i.e., 

submissions under these procedures, 

from States that have failed in the past 

to acquire prior approval which is 

reflected in a record, in accordance with 

Part 95, Subpart F, may be denied); 

■ 16. In § 95.624, revise the introductory 

text, paragraph (a), introductory text and 

paragraph (b)(2) to read as follows: 

§ 95.624 Consideration for FFP in 

emergency situations. 

For ADP equipment and services 

acquired by a State after December 1, 

1985 to meet emergency situations, 

which preclude the State from following 

the requirements of § 95.611, the 

Department will consider providing FFP 

upon receipt of a request from the State 

which is reflected in a record. In order 

for the Department to consider 

providing FFP in emergency situations, 

the following conditions must be met: 

(a) The State must submit a request to 

the Department, prior to the acquisition 

of any ADP equipment or services. The 

request must be reflected in a record, 

and include: 

* * * * * 

(b) * * * 

(2) Inform the State in a 

communication reflected in a record, 

that the Department recognizes that an 

emergency exists and that within 90 

days from the date of the State’s initial 

request, the State must submit a formal 

request for approval which includes the 

information specified at § 95.611 in 

order for the ADP equipment or services 

acquisition to be considered for the 

Department’s approval. 

* * * * * 

■ 17. Add § 95.626 to read as follows: 

§ 95.626 Independent Verification and 

Validation. 

(a) An assessment for independent 

verification and validation (IV&V) 

analysis of a State’s system development 

effort may be required in the case of 

APD projects that meet any of the 

following criteria: 

(1) Are at risk of missing statutory or 

regulatory deadlines for automation that 

is intended to meet program 

requirements; 

(2) Are at risk of failing to meet a 

critical milestone; 

(3) Indicate the need for a new project 

or total system redesign; 

(4) Are developing systems under 

waivers pursuant to sections 452(d)(3) 

or 627 of the Social Security Act; 

(5) Are at risk of failure, major delay, 

or cost overrun in their systems 

development efforts; 

(6) Fail to timely and completely 

submit APD updates or other required 

systems documentation. 

(7) State’s procurement policies put 

the project at risk, including a pattern of 

failing to pursue competition to the 

maximum extent feasible. 

(8) State’s failure to adequately 

involve the State program offices in the 

development and implementation of the 

project. 

(b) Independent Verification and 

Validation efforts must be conducted by 

an entity that is independent from the 

State (unless the State receives an 

exception from the Department) and the 

entity selected must: 

(1) Develop a project workplan. The 

plan must be provided directly to the 

Department at the same time it is given 

to the State. 

(2) Review and make 

recommendations on both the 

management of the project, both State 

and vendor, and the technical aspects of 

the project. The IV&V provider must 

give the results of its analysis directly to 

the federal agencies that required the 

IV&V at the same time it reports to the 

State. 

(3) Consult with all stakeholders and 

assess the user involvement and buy-in 

regarding system functionality and the 

system’s ability to support program 

business needs. 

(4) Conduct an analysis of past project 

performance sufficient to identify and 


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Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Rules and Regulations 66341 

make recommendations for 

improvement. 

(5) Provide risk management 

assessment and capacity planning 

services. 

(6) Develop performance metrics 

which allow tracking project completion 

against milestones set by the State. 

(c) The acquisition document and 

contract for selecting the IV&V provider 

(or similar documents if IV&V services 

are provided by other State agencies) 

must include requirements regarding 

the experience and skills of the key 

personnel proposed for the IV&V 

analysis. The contract (or similar 

document if the IV&V services are 

provided by other State agencies) must 

specify by name the key personnel who 

actually will work on the project. The 

acquisition documents and contract for 

required IV&V services must be 

submitted to the Department for prior 

written approval. 

■ 18. Add § 95.627 to read as follows: 

§ 95.627 Waivers. 

(a) Application for a waiver. A State 

may apply for a waiver of any 

requirement in Subpart F by presenting 

an alternative approach. Waiver 

requests must be submitted and 

approved as part of the State’s APD or 

APD Update. 

(b) Waiver approvals. The Secretary, 

or his or her designee, may grant a State 

a waiver if the State demonstrates that 

it has an alternative approach to a 

requirement in this chapter that will 

safeguard the State and Federal 

Governments’ interest and that enables 

the State to be in substantial compliance 

with the other requirements of this 

chapter. 

(c) Contents of waiver request. The 

State’s request for approval of an 

alternative approach or waiver of a 

requirement in this chapter must 

demonstrate why meeting the condition 

is unnecessary, diminishes the State’s 

ability to meet program requirements, or 

that the alternative approach leads to a 

more efficient, economical, and effective 

administration of the programs for 

which federal financial participation is 

provided, benefiting both the State and 

Federal Governments. 

(d) Review of waiver requests. The 

Secretary, or his or her designee, will 

review waiver requests to assure that all 

necessary information is provided, that 

all processes provide for effective 

economical and effective program 

operation, and that the conditions for 

waiver in this section are met. 

(e) Agency’s response to a waiver 

request. When a waiver is approved by 

an agency, it becomes part of the State’s 

approved APD and is applicable to the 

approving agency. A waiver is subject to 

the APD suspension provisions in 

§ 95.611(c)(3). When a waiver is 

disapproved, the entire APD will be 

disapproved. The APD disapproval is a 

final administrative decision and is not 

subject to administrative appeal. 

■ 19. Add § 95.635 to read as follows: 

§ 95.635 Disallowance of Federal financial 

participation for automated systems that 

fail to comply substantially with 

requirements. 

(a) Federal financial participation at 

the applicable matching rate is available 

for automated data processing system 

expenditures that meet the requirements 

specified under the approved APD 

including the approved cost allocation 

plan. 

(b) All or part of any costs for system 

projects that have a major failure to 

comply with an APD approved under 

applicable regulation at § 95.611, or for 

the Title IV–D program contained in 

Part 307, the applicable regulations for 

the Title IV–E and Title IV–B programs 

contained in Chapter 13, subchapter G, 

§ 1355.55, or the applicable regulations 

for the Title XIX program contained in 

42 CFR Chapter 4 Subchapter C, Part 

433, are subject to disallowance by the 

Department. 

Subpart G—Equipment Acquired 

Under Public Assistance Programs 

■ 20. In § 95.705, revise paragraph (a) to 

read as follows: 

§ 95.705 Equipment costs—Federal 

financial participation. 

(a) General rule. In computing claims 

for Federal financial participation, 

equipment having a unit acquisition 

cost of $25,000 or less may be claimed 

in the period acquired or depreciated, at 

the option of the State agency. 

Equipment having a unit acquisition 

cost of more than $25,000 shall be 

depreciated. For purposes of this 

section, the term depreciate also 

includes use allowances computed in 

accordance with the cost principles 

prescribed in part 92. 

* * * * * 

■ 21. In § 95.707, revise paragraphs (a) 

and (b) introductory text to read as 

follows: 

§ 95.707 Equipment management and 

disposition. 

(a) Once equipment, whose costs are 

claimed for Federal financial 

participation (i.e., equipment that is 

capitalized and depreciated or is 

claimed in the period acquired), has 

reached the end of its useful life (as 

defined in an approved APD), the 

equipment shall be subject to the 

property disposal rules in § 92.32, 

Equipment. 

(b) The State agency is responsible for 

adequately managing the equipment, 

maintaining records on the equipment, 

and taking periodic physical 

inventories. Physical inventories may be 

made on the basis of statistical 

sampling. The following requirements 

apply to the disposition of this 

equipment: 

* * * * * 

[FR Doc. 2010–26727 Filed 10–27–10; 8:45 am] 

BILLING CODE P 


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