[Federal Register Volume 69, Number 67 (Wednesday, April 7, 2004)]
[Notices]
[Pages 18380-18382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7867]


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ENVIRONMENTAL PROTECTION AGENCY

[FRL-7644-5]


Interpretation of Regulations Related to Payments to Consultants 
Under Grants

AGENCY: Environmental Protection Agency.

ACTION: Notice.

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SUMMARY: EPA's Appropriation Act limits the Agency's participation in 
the amounts recipients pay to consultants to the maximum daily rate of 
pay for Level IV of the Executive Schedule. Recently, questions have 
been posed regarding how to interpret both the statutory consultant fee 
limitation and the EPA regulation. The purpose of the attached document 
is to provide EPA grant specialists and project officers guidance 
regarding the Agency's interpretation of the appropriation act language 
as well as the regulatory provisions. This notice explains for EPA 
applicants and recipients how EPA applies the payment limit.

DATES: The attached document becomes effective on April 7, 2004.

FOR FURTHER INFORMATION CONTACT: William Hedling, 1200 Pennsylvania 
Ave., Mail Stop 3903 R, Washington, DC 20460, Telephone--202-564-5377, 
[email protected].

SUPPLEMENTARY INFORMATION: EPA's appropriation act limits the Agency's 
participation in the amounts recipients pay consultants to the maximum 
daily rate of pay for Level IV of the Executive Schedule. This limit 
was first established in EPA's Fiscal Year 1978 appropriation act and 
Congress clarified the scope of the limit in EPA's Fiscal Year 1979 
appropriation act. The Agency applies the limit to EPA assistance 
agreements through EPA's Uniform Administrative Requirements and 
Agreements with Institutions of Higher Education, Hospitals, and Other 
Nonprofit Organizations (40 CFR 30.27(b)) and Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments (40 CFR 31.36(j)). In addition, EPA's regulations provide 
that contracts with firms for services which are awarded using the 
prescribed procurement requirements are not subject to the consultant 
fee limitations (40 CFR 30.27(b) and 31.36 (j)).
    Recently, there have been some questions raised regarding EPA's 
application of the limit. The purpose of the attached document is to 
provide EPA grant specialists and project officers guidance regarding 
the Agency's interpretation of the appropriation act language as well 
as the regulatory provisions. This notice provides information to EPA 
applicants and recipients to make them aware of how EPA applies the 
payment limit. This guidance clarifies existing EPA policy and applies 
to all EPA assistance agreements, regardless of award dates.
    This document reiterates the limits under EPA's appropriation act 
and makes clear that:
     If a recipient, or its contractor, chooses to 
pay more than the consultant fee cap ($524.72 per day in 2004), the 
recipient must use its own funds to pay the difference. Also, if the 
assistance agreement includes a recipient indirect cost rate, the 
recipient can apply it only to allowable costs, not to amounts in 
excess of the consultant fee cap. Finally, recipients cannot use the 
amount in excess of the consultant fee cap for cost sharing purposes. 
(The consultant fee cap does not apply to reasonable consultant 
overhead or travel direct costs. Recipients may reimburse these direct 
costs in accordance with their normal practices.)
     If a consultant is paid on an hourly basis, EPA 
will not participate in more than the hourly equivalent of the rate 
($65.59 per hour for 2004), nor will EPA participate in more than the 
maximum daily rate if a consultant paid on an hourly basis works more 
than 8 hours in a day. Further, if a consultant works less than 8 hours 
in a day, EPA will not participate in more than the hourly equivalent 
rate for each hour worked even if the consultant is paid on a daily 
basis. There may be cases where recipients believed that EPA would 
participate in the maximum daily rate, even if the consultant worked 
less than 8 hours in a day. In such cases, recipients and EPA Grants 
Management Offices should document the situation and may request the 
Director, Grants Administration Division, to waive the hourly limit 
under section 9 of the EPA Order.
     The consultant fee cap does not apply to 
contracts with firms or individuals that are awarded pursuant to the 
procurement procedures under 40 CFR Parts 30 and 31 (40 CFR 30.27(b) 
and 40 CFR 31.36(j)(2)) so long as the terms of the contract do not 
provide the recipient with responsibility for the selection, direction, 
and control of the individual(s) who will be providing services under 
the contract. Conversely, the consultant fee cap does apply to 
contracts with firms or individuals that are awarded under the 
procurement procedures of 40 CFR Parts 30 and 31 if the terms of the 
contract provide the recipient with responsibility for the selection, 
direction, and control of the individuals who will be providing 
services under the contract at an hourly or daily rate of compensation. 
The cap does not apply to fixed priced or lump sum contracts for 
specified products such as reports or delivery of a training course. 
Applicants or recipients who have questions concerning whether an 
individual is a consultant subject to the fee cap should contact the 
appropriate EPA project officer or grants specialist.
     The consultant fee cap does not apply to 
contracts for technical advisory services awarded competitively under 
EPA's Superfund Technical Assistance Grant (TAG) program regulations at 
40 CFR 35.4205 provided that the terms of the contract indicate that 
the technical advisor has the discretion of an independent contractor 
and do not vest the TAG recipient with responsibility

[[Page 18381]]

for the direction and control of the technical advisor.
    The ``Consultant Fees Under EPA Assistance Agreements Policy'' (GPI 
04-04), is attached following this announcement.

    Authority: Pub. L. 95-119, 40 CFR 30 and 31.

    Dated: April 1, 2004.
David J. O'Connor,
Acting Assistant Administrator, Office of Administration and Resources 
Management.

GPI-04-04

Consultant Fees Under EPA Assistance Agreements

    1. Purpose: This policy clarifies the Environmental Protection 
Agency's (EPA) interpretation of the statutory and regulatory 
provisions regarding EPA's participation in the amounts recipients pay 
to consultants under EPA assistance agreements. The policy also shows 
how EPA calculates and applies the daily and hourly rates.
    2. Background: EPA's appropriation act limits the Agency's 
participation in the amounts recipients pay to consultants to the 
maximum daily rate of pay for Level IV of the Executive Schedule. This 
limit was first established in EPA's 1978 appropriation act and is made 
applicable to EPA assistance agreements by EPA's Uniform Administrative 
Requirements and Agreements with Institutions of Higher Education, 
Hospitals, and Other Nonprofit Organizations (40 CFR 30.27(b)) and 
EPA's Uniform Administrative Requirements for Grants and Cooperative 
Agreements to State and Local Governments (40 CFR 31.36(j)). In 
addition, EPA's regulations provide that contracts with firms for 
services which are awarded using the prescribed procurement 
requirements are not subject to the consultant fee limitations (40 CFR 
30.27(b) and 31.36 (j)). Recently, questions have been posed regarding 
how to interpret the EPA regulations implementing the statutory 
consultant fee limitation. The purpose of this document is to provide 
EPA staff with information regarding EPA's interpretation of the 
appropriation act language as well as the regulatory provisions.
    3. Definitions:
    Consultant--For the purposes of this policy, a consultant is an 
individual with specialized skills who, although not on the recipient's 
payroll as an employee, provides personal services to the recipient 
under an agreement which essentially establishes an employer-employee 
relationship between the recipient and the individual providing the 
services. Consultants are typically individuals who are experts with 
excellent qualifications and are usually regarded as authorities or 
practitioners of unusual competence and skill by other individuals 
engaged in the same profession. An employer-employee relationship may 
be found to exist when the recipient selects the individual based on 
expertise in a particular field, directs the individual's work, and 
exercises day-to-day control of the individual's activities.
    Consultant fee cap--The daily or hourly salary of Federal employees 
at Level IV of the Executive Schedule. EPA will not participate in any 
amount greater than that rate; recipients may, however, pay more. The 
2004 annual salary for Level IV of the Executive Schedule is $136,900 
per year. The current maximum daily rate (the consultant fee cap) of 
$524.72 is computed as follows: $136,900/2087 hours per year = $65.59 
per hour x 8 hours per day = $524.72 per day. If a consultant works 
less than 8 hours in a day, the hourly consultant fee cap is $65.59 per 
hour.
    4. Authority: The consultant fee cap first appeared in Section 409 
of the Fiscal Year (FY) 1978 Appropriations Act for the Department of 
Housing and Urban Development and Independent Agencies, including EPA 
(Pub. L. 95-119). It limited the amount EPA could participate in to the 
rate paid to a Federal employee at the GS-18 level. The consultant fee 
cap in Section 408 of the FY 2002 Departments of Veterans Affairs, and 
Housing and Urban Development and Independent Agencies Appropriation 
Act, (Pub. L. 107-272), which covers EPA, is identical to that 
contained in the FY 1978 appropriations act except that the limit is 
based on the daily rate for a Federal employee at the ES-IV level.
    EPA implemented the consultant fee cap in its regulations at 40 CFR 
30.27(b) for grants made to non-profit organizations and universities, 
and at 40 CFR 31.36.(j)(2) for grants to States, local governments, and 
Indian Tribes.
    5. Policy: It is EPA policy, consistent with the relevant 
appropriation acts and regulations, to limit EPA's participation in the 
amounts recipients pay to consultants to the consultant fee cap 
($524.72 per day and $65.59 per hour in 2004). Recipients may pay more 
than the consultant fee cap, but EPA will not participate in any amount 
over the maximum. The consultant fee cap also applies to consultants 
hired by a recipient's contractors.
    If the recipient, or its contractor, chooses to pay more than the 
consultant fee cap, the recipient must use its own funds to pay the 
difference. ( If the assistance agreement includes a recipient indirect 
cost rate, the recipient can apply it only to allowable costs, not to 
amounts in excess of the consultant fee cap). Further, recipients 
cannot use the amount in excess of the consultant fee cap for cost 
sharing purposes. The consultant fee cap does not apply to reasonable 
consultant overhead or travel direct costs. Recipients may reimburse 
these costs in accordance with their normal practices.
    The consultant fee cap does not apply to contracts awarded to firms 
or individuals that are awarded under the procurement procedures under 
40 CFR Parts 30 and 31 (40 CFR Sec.  30.27(b) and 40 CFR Sec.  
31.36(j)(2)) so long as the terms of the contract do not provide the 
recipient with responsibility for the selection, direction, and control 
of the individual(s) who will be providing services under the contract. 
Conversely, the consultant fee cap does apply to contracts awarded to 
firms or individuals that are awarded under the procurement procedures 
of 40 CFR Parts 30 and 31 if the terms of the contract provide the 
recipient with responsibility for the selection, direction, and control 
of the individuals who will be providing services under the contract at 
an hourly or daily rate of compensation. The cap does not apply to 
fixed priced or lump sum contracts for specified products such as 
reports or delivery of a training course.
    For example, a contract with a multi-person firm that does not 
require the firm to provide to the recipient the services of a 
particular individual, and that does not require the recipient to 
exercise control and direction over the individual, would not be 
subject to the cap. On the other hand, the consultant fee cap would 
apply to a contract awarded to a firm with one or more persons that is 
justified on the basis of the qualifications of a designated individual 
with specialized skills if the terms of the contract require the firm 
to provide the recipient with the services of that individual at an 
hourly or daily rate of compensation and the recipient will exercise 
direction and control over that individual in the performance of the 
contract. Questions regarding whether a particular individual under a 
contract may be performing as a consultant and thus be subject to the 
consultant fee cap should be directed to the Office of General Counsel 
or Office of Regional Counsel, as appropriate.
    In addition, the consultant fee cap does not apply to contracts for 
technical advisory services awarded competitively under EPA's Superfund 
Technical Assistance Grant (TAG) program regulations at 40 CFR 35.4205

[[Page 18382]]

provided that the terms of the contract indicate that the technical 
advisor has the discretion of an independent contractor and do not vest 
the TAG recipient with responsibility for the direction and control of 
the technical advisor.
    6. Roles and Responsibilities: Program Offices. Project officers 
should alert Grants Management Offices (GMOs) if they find indications 
that a recipient is using consultants, e.g., statements in workplans or 
findings as a result of post award monitoring activities. GMOs Grant 
Specialists must review applications for indications that a recipient 
may use consultants. If the application or other information, including 
the budget, indicates the recipient will use funds for contracts or 
consultants, the Grants Specialist must include the ``Consultant Fee'' 
Term and Condition in the award document. Also, as required by the 
protocols for both On-Site and Desk Reviews, Grant Specialists must 
verify that consultant fees do not exceed the consultant fee cap. GMOs 
should, in cases where it is determined in accordance with Section 5 of 
this Order, that a recipient may be obtaining consultant services under 
a contract, refer the cases to the Office of Regional or General 
Counsel for consideration.
    7. Award Term and Condition: The current Integrated Grants 
Management System Consultant Fee Term and Condition is shown below:

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                             Award condition
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              Short title                   A28 Individual consultants
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                  Type                            Administrative
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Payment to consultants. EPA participation in the salary rate (excluding
 overhead and travel) paid to individual consultants retained by
 recipients or by a recipient's contractors or subcontractors shall be
 limited to the maximum daily rate for Level IV of the Executive
 Schedule, to be adjusted annually. This limit applies to consultation
 services of designated individuals with specialized skills who are paid
 at a daily or hourly rate. As of January 1, 2004, the limit is $524.72
 per day and $65.59 per hour. The rate does not include overhead or
 travel costs and the recipient may pay these in accordance with its
 normal travel practices.
Subagreements with firms for services which are awarded using the
 procurement requirements in 40 CFR Parts 30 or 31, as applicable, are
 not affected by this limitation unless the terms of the contract
 provide the recipient with responsibility for the selection, direction,
 and control of the individuals who will be providing services under the
 contract at an hourly or daily rate of compensation. See 40 CFR
 31.36(j)(2) or 30.27(b), as applicable.
------------------------------------------------------------------------

    EPA updates this term and condition annually based on changes in 
Level IV of the Executive Schedule maximum pay.
    8. Examples:
    A. If a consultant bills the recipient for 3 days of service at 
$2,000.00/day, EPA will limit its participation to the consultant fee 
cap which would be 3 x $524.72 = $1,574.16, provided the consultant 
works 8 or more hours each day. If the recipient pays the consultant 
more than $1,574.16, the additional amount is not EPA allowable and 
cannot be used for cost sharing.
    B. If a consultant works 3 hours in a day, EPA will allow only 3 x 
$65.59 or $196.77. If the recipient pays the consultant more than 
$196.77, the additional amount is not EPA allowable and cannot be used 
for cost sharing.
    C. If a consultant works more than 8 hours in a given day and, as a 
result, the recipient must pay the consultant more than the daily 
consultant fee cap, EPA will limit its participation to $524.72 (NOT, 
for example, 10 x $65.59 or $655.90). If the recipient pays the 
consultant more than $524.72, the additional amount is not EPA 
allowable and cannot be used for cost sharing.
    9. Waivers: This policy makes clear that, if a consultant works 
less than 8 hours in a day, the maximum amount allowable would be the 
number of hours worked times the maximum hourly rate. In the past, 
recipients may have believed that EPA would participate in the maximum 
daily rate even if a consultant worked less than 8 hours in a day. In 
such cases, recipients and Grants Management Offices should document 
the facts of the situation and may request a waiver of the hourly limit 
from the Director, Grants Administration Division.
    10. Anticipated Outcomes/Results: EPA's Regions and Headquarters 
offices will apply the consultant fee cap consistently.
    11. Sunset/Review Date: The Grants Administration Division will 
review this policy annually to determine if adjustments are needed 
because of changes in the daily and hourly salary of Federal employees 
at the ES-IV level. Adjustments will be reflected in revisions to the 
consultant fee assistance agreement term and condition.
    12. Supercedes/Cancels: This Grants Policy Issuance (GPI) revises 
and rescinds GPI 03-02 to further clarify EPA's policy with respect to 
the consultant fee cap.

[FR Doc. 04-7867 Filed 4-6-04; 8:45 am]
BILLING CODE 6560-50-P