FAR Updates References to OMB Circulars

Back in December 2013, the OMB (Office of Management and Budget) published new guidance a 2 CFR Part 200 entitled Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (OMB Uniform Guidance). The new guidance is often referred to as the "Super-Circular" even though technically, its not a circular. Its now part of the Code of Federal Regulations.

The new guidance became effective a year later, December 2014. The new OMB Uniform Guidance supersedes and streamlines requirements from OMB Circulars A-21 (Cost Principles for Educational Institutions), A-87 (Cost Principles for State, Local and Indian Tribal Governments), A-89 (Catalog of Federal Domestic Assistance), A-102 (Grants and Cooperative Agreements with State and Local Governments), A-122 (Cost Principles for Non-Profit Organizations), and A-133 (Audits of States, Local Governments and Non-Profit Organizations). Cost principles under OMB's Uniform Guidance apply to contracts with non-profits, educational institutions, state and local governments, and Indian tribal governments.

Now that OMB has consolidated and re-titled its administrative requirements, cost principles and audit requirements, the FAR (Federal Acquisition Regulations) require updating to replace obsolete references. The FAR Councils did that earlier this month. The first thing they set about doing was to find a shorter title than the official 2 CFR Part 200 title; Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. They did this by adding a new definition under FAR 2.101. It is now simply referred to as "OMB Uniform Guidance".

In addition to the new definition, the final rule makes about twenty additional changes, removing specific references to OMB circulars and replacing them with the term "OMB Uniform Guidance". A goodly number of these changes impacted the cost principles found at FAR Part 31.

You can read the full text of the changes here.

What Does "Tangible Personal Benefit" Mean

The new Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200) became effective last December. It applies to Federal agencies, non-Federal entities (states, local governments, Indian tribes, institutions of higher education , and nonprofit organizations) that receive Federal awards as a recipient or sub recipient, and their auditors. It more or less replaces a host of OMB Circulars including A-21, A-87, A-110, A-122, A-89, A-102 and A-133 and that's why these new requirements are commonly referred to as the "Super Circular".

One of the requirements of the Super Circular is to ensure that non-Federal entities have effective internal controls over conflicts of interest. In implementing such practices, some such entities have been beguiled by the term "tangible personal benefit". It appears in the section on Procurement Standards (2 CFR 200.318(c)(1)) as follows:

The non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial or the giftis an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity.

The Department of Education, in its implementation of the Super Circular is the first to provide a definition of "tangible personal benefit".

The phrase "tangible personal benefit" is new language added to the general conflict of interest section of the general procurement standards that existed previously under ... OMB Circular A-102. The language was expanded from just "financial or other interest in" to also include "or a tangible personal benefit from" a firm considered for a contract from the grantee. This new language stresses the importance of ensuring that employees who select, award, and administer contracts supported by a Federal award are free from any real or apparent conflict of interest, including financial interests and other non-financial benefits that result in a personal benefit that result in a personal benefit for the employee (such as improved employment opportunities, business referrals, political influence, etc.). (Source)

 Contractors might consider adding this language to their own employee standards of conduct and internal control procedures.