Although the most common form of agreement between a private entity and a federal agency is the procurement contract, there are a number of instances, particularly in the area of research and development (R&D), when companies, non-profit organizations, or even state and local government agencies, compete for awards of “contracts” other than typical procurement contracts. These other forms of agreement, generally grants or cooperative agreements, place different requirements on competitors, and create a different relationship between agency and awardee. These differences, which on the surface may seem minor, bring with them the potential for rude surprises to the unprepared award-seeker.
The Federal Grant and Cooperative Agreement Act (FGCA), 31 U.S.C. §§ 6301-6308, governs agency use of such “non-standard” agreements. The FGCA calls for the use of a procurement contract when “the principal purpose of the instrument is to acquire (by purchase, lease, or barter) property or services for the direct benefit or use of the United States Government,” or when “the agency decides in a specific instance that the use of a procurement contract is appropriate.” 31 U.S.C. § 6303. Grants and cooperative agreements, on the other hand, are required when “the principal purpose of the relationship is to transfer a thing of value [i.e., money] to the State or local government or other recipient to carry out a public purpose of support or stimulation authorized by a law of the United States instead of acquiring (by purchase, lease, or barter) property or services for the direct benefit or use of the United States Government.” 31 U.S.C. §§ 6304, 6305. The only distinction between a grant and a cooperative agreement is the degree of agency involvement in carrying out the contemplated activity. A grant is called for when “substantial involvement is not expected,” whereas a cooperative agreement is the appropriate legal instrument when such involvement “is expected.” Id.
Use of grants and cooperative agreements in R&D initiatives is covered in FAR Part 35, which offers the following guidance:
Contracts shall be used only when the principal purpose is the acquisition of supplies or services for the direct benefit or use of the Federal Government. Grants or cooperative agreements should be used when the principal purpose of the transaction is to stimulate or support research and development for another public purpose.
FAR 35.003(a). (Emphasis added.)
While R&D is perhaps the most visible area of use for grants and cooperative agreements, increased agency use of “outsourcing” has led to the use of grants and cooperative agreements for the performance of functions that formerly would have been carried out by agency personnel. If you are competing to do business with the Department of Health and Human Services, for example, chances are you will be seeking award of a grant or cooperative agreement, rather than a procurement contract.
Although the competition process for grants and contracts may appear similar in certain respects, there are some critical distinctions to keep in mind when competing for grant money. First and foremost, the FAR, by definition, does not apply to competitions for grants or cooperative agreements, but only to acquisitions “by contract . . . by and for the use of the Federal Government.” FAR 2.101 (Emphasis added). Even FAR Part 35, supra, sets forth procedures only for R&D contracts. Similarly, the Competition in Contracting Act (CICA) does not apply to non-contract instruments. Agencies have broad discretion in conducting a competition for grant funding, and opportunities for abuse are ever present.
In addition to the lack of regulatory guidance, a second critical distinction may help to explain the fondness developed by some agencies for grants and cooperative agreements. The decision to award a grant or cooperative agreement to a particular competitor, unlike the decision to award a procurement contract, is not protestable before GAO. As held in Energy Conversion Devices, Inc., B-260514, 95-2 CPD ¶ 121, at 2, GAO reviews “protests concerning alleged violations of procurement statutes or regulations by federal agencies in the award or pro posed award of contracts for the procurement of goods and services, and solicitations leading to such awards.” (Emphasis added.) Accordingly, GAO “generally do[es] not review protests of the award, or solicitations for the award, of cooperative agreements or other nonprocurement instruments because they do not involve the award of a ‘contract.’”
It is important to note, however, that an agency’s decision to use an instrument other than a procurement contract, in contrast to an award decision, is protestable:
We will review, however, a timely protest that an agency improperly is using a cooperative agreement or other nonprocurement instrument, where under the FGCA a “procurement contract” is required, to ensure that an agency is not attempting to avoid the requirements of procurement statutes and regulations.
Id., at 2; see also SBMA, Inc., B-255780, 93-2 CPD ¶ 292. Under GAO timeliness requirements, such a protest must be brought not later than 10 days after learning of the decision to use a grant or cooperative agreement. 4 C.F.R. § 21.2. In other words, once an award decision is announced, the time for protesting at the GAO has generally long ago expired.
So what options remain for a disappointed competitor in a grant competition? First, there is the agency option. In certain cases, the grant program announcement (the grant counterpart to a solicitation document) generally includes some agency-level review procedure. Even where no such procedure is published, a disappointed competitor may still consider sending a letter to an appropriate agency official setting forth facts justifying reconsideration of an award decision. While the chances of successfully changing an award decision by such a letter are admittedly slim, a concise letter, if written in a professional, non-threatening tone, may provide an opportunity to stake one’s claim to an award in a subsequent round of competition.
The last, best hope for a disappointed competitor to overturn an agency’s grant award decision appears to lie in the U.S. Court of Federal Claims. The court has jurisdiction under the Tucker Act “to render judgment upon any claim against the United States, founded . . . upon any express or implied contract with the United States.” 28 U.S.C. § 1491(a)(1). In Thermalon Industries, Ltd. v. United States, 34 Fed.Cl. 411 (1995), the court decided that its jurisdiction encompassed a dispute arising out of a National Science Foundation research grant. The court looked to the elements of a binding contract (mutual intent, offer, acceptance, and consideration) with the United States, elements which “are identical for both express and implied contracts,” Id. at 414, and having found the essential elements to be present in the grant agreement at issue, the court concluded “that the parties intended to be bound contractually,” and thus the court retained jurisdiction over the matter, Id. at 415.
The court’s reasoning was recently echoed by the U.S. Court of Appeals for the Federal Circuit in Trauma Service Group v. United States, 104 F.3d 1321 (Fed. Cir. 1997). Citing Thermalon, the Federal Circuit held:
any agreement can be a contract within the meaning of the Tucker Act, provided that it meets the requirements for a contract with the Government, specifically: mutual intent to contract including an offer and acceptance, consideration, and a Government representative who had actual authority to bind the Government.
Id. at 1326. See also Total Medical Management, Inc. v. United States, 104 F.3d 1314, 1319 (Fed. Cir. 1997).
Although Thermalon is not a protest decision, it appears clear that a protest of the award of a grant or cooperative agreement could survive a jurisdictional challenge. While this is far from a guarantee of success on the merits, given the deferential treatment accorded any agency decision in a protest matter, the holding in Thermalon does confirm the availability of the Court of Federal Claims as a forum in which to challenge a grant or cooperative agreement award decision.
In summary, agency use of grants and co-operative agreements is a two-edged sword providing both a maximum of agency discretion and a minimum of outside oversight. This may sound like good news for a competitor who believes it has an “inside track” for award, but it may quickly become very bad news if the inside track turns out to be a dead end. The broad discretion accorded agencies makes this an area fraught with peril for the unwary. To be assured of a level playing field, a prudent competitor must be on the alert for unfair or improper practices, and must be willing to take prompt action to protect its rights.
— Chris Jensen
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