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Public Contract Law Journal

Public Contract Law Journal Vol. 50, No. 2

Federal Grants Performance Disputes: Bureaucratic Gobbledygook

Roxanne Namba Cassidy


  • Discusses the history of the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance) and its limitations with respect to performance disputes under grants
  • Argues that the Uniform Guidance's lack of uniform administrative procedures for the resolution of grant performance disputes his lack of uniformity is burdensome on grantees, subjects them to inconsistent interpretations of agency and federal government wide regulations, and limits the field of competitors to which the government can award grants, among other problems
  • Proposes an amendment to the Uniform Guidance to (i) make it mandatory and binding on all grantor agencies.; and (ii) include a minimum set of procedures to govern all grants disputes
Federal Grants Performance Disputes: Bureaucratic Gobbledygook
Vacharapong Wongsalab via Getty Images

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Following the release of the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, commonly known as the “Uniform Guidance,” problems persist for federal grant recipients (grantees) when performance disputes arise. Such disputes are not governed by a uniform administrative process, leaving grantees on uncertain footing and with exceedingly limited remedies when grants are suspended, terminated, or costs are disallowed by a grants officer. This lack of uniformity is burdensome on large and small grantees alike. Without a formal process to challenge agency decisions, grantees are subject to inconsistent interpretations of an agency or federal government wide regulation. Further, because grants often go to nonprofit entities, many of the smaller and medium sized organizations do not have the resources to challenge these decisions in court. This is onerous for grantees and limits the field of competitors to which the government can award grants. This Note proposes amending the Uniform Guidance to address these issues.

I. Introduction

As the novel coronavirus spread across the globe in 2020, millions stayed home to mitigate the spread and give global health systems a chance to contain the pandemic. Meanwhile, the world’s financial markets fell precipitously. In response to the ongoing economic collapse, Congress passed the largest economic stimulus package in U.S. history. As part of this effort, the Small Business Administration disbursed funds to small businesses, awarding Economic Injury Disaster Loans and grants of up to $10,000 per applicant. The agency also administered the Paycheck Protection Plan (PPP), which offered loans to small businesses that kept their employees on the payroll for at least eight weeks. If used to pay rent, salaries, mortgages, interest, and utilities, the loans will be forgiven and effectively converted to grants. Grants are more flexible than contracts, making them an attractive funding mechanism during exigent circumstances.

Unlike contracts, which federal agencies use to procure supplies or services for their direct benefit, the federal government uses grants to transfer things of value to “non–Federal entit[ies] to carry out a public purpose.” The federal government uses grants to provide public assistance domestically and abroad to a variety of entities, including state and local governments, nonprofit organizations, educational institutions, and private companies. Significantly, grantor agencies can intervene or monitor grants as they deem appropriate without the administrative hurdles attendant to federal government contracts. This benefits grantor agencies and grantees, as both have broader discretion under a grant than they might under the traditional “arm’s-length contractor-customer relationship” of a federal government contract.

This flexibility, however, comes with significant drawbacks for grantees. Because of this diminished administrative red tape, grantees have fewer rights and protections than federal government contractors. Whereas federal procurement laws and regulations provide an ordered system across the federal government for awarding contracts, prospective grantees have no ability to protest an award decision they suspect to be unfair. More significantly, grantees do not have a statutory means for judicial review of performance disputes.

This lack of uniformity is alarming given the federal government’s increasing use of grants over contracts. Billions of taxpayer dollars are disbursed through the grants process, which one scholar has described as “a convoluted, confused, disparate hotchpotch of bureaucratic gobbledygook.” Accordingly, the federal government has intermittently attempted to streamline the rules and regulations governing federal grant practice. Notably, the Office of Management and Budget (OMB) published the “Uniform Guidance” in December 2013. The Uniform Guidance replaced a host of subject-specific OMB Circulars and eased the burden on grantees grappling with confusing and inconsistent requirements. To date, almost every large grantor agency has implemented these requirements. Consequently, many scholars herald the Uniform Guidance as a “significant milestone in grant system reform.”

Some remain skeptical, however, of its impact on federal grant practice. Alarmingly, there is no uniform administrative process for performance disputes. When a grantor agency determines that a grantee has not complied with its project objectives or relevant laws and regulations, the grantor agency has the authority to withhold payment until the grantee comes into compliance, if at all. The grantee’s ability to appeal the decision depends entirely on the grantor agency’s internal administrative process, which vary widely from agency to agency.

Notwithstanding the federal government’s desire for flexibility in grants administration, it is important that grantees can challenge agency decisions. This will incentivize grantor agencies to clearly lay out their terms and conditions, which will increase the quality and cost efficiency of grants by widening the field of competition. If prospective grantees know they can efficiently challenge a grants officer’s final decisions, they would be more inclined to apply for federal grants.

Proposed solutions include an independent Grants Disputes Board and the formal passage of a Grant Disputes Act. These solutions look to federal procurement statutes and regulations as a model, but do not adequately address the vast differences between federal grants and contracts. The most efficient remedy to the lack of uniformity is to amend the Uniform Guidance in two ways. First, the Uniform Guidance should be made binding on all federal grantor agencies. Second, it should be amended to include a minimum set of rights for grantees to seek review of grants officer decisions. These key changes would allow grantor agencies to maintain control over the grants adjudication process while also providing grantees with the substantive rights they currently lack. This approach requires significantly fewer resources than an independent board or passage of a Grant Disputes Act and would efficiently and fairly adjudicate disputes arising out of exceedingly complex and technical grants.

This Note is organized into four parts. Part II discusses the history of the Uniform Guidance, compares it to the Federal Acquisition Regulation (FAR), and looks at the current regime for grants administration. Part III discusses grants dispute resolution—including agency-specific processes—and judicial review of grants disputes. Finally, Part IV discusses the proposed amendments to the Uniform Guidance and addresses other suggested solutions.

II. Background

A. The History of the Uniform Guidance

The federal government has administered “assistance” throughout most of its history. It was not until 1977, however, that the Federal Grant and Cooperative Agreement Act officially codified the federal grants system. Nevertheless, the system remained largely disjointed despite periodic efforts to increase uniformity. During that time, the administration of grants was governed by agency and subject-specific OMB Circulars, which created a “largely fragmented system, with administrative requirements and cost principles differing depending upon the nature of the grantee entity.” In 2009, President Barack Obama issued Executive Order 13,520; along with a Presidential Memorandum issued in February 2011, these orders directed OMB to review grants policies throughout the federal government in order to reduce the administrative burden on both grantees and the federal government. As part of these efforts, OMB joined the Grants Executive Committee and the Grants Policy Committee to create the Council on Financial Assistance Reform (COFAR), which combined and reformed the disparate OMB circulars. OMB proposed this consolidated regulation in December 2013 and it was finally implemented on December 19, 2014, as the “Uniform Guidance.”

B. Contracts vs. Grants

Grants and contracts differ because they serve fundamentally different purposes. Whereas contracts are meant to procure goods or services for the federal government, grants use non–federal entities to deliver a benefit to the public. Accordingly, grants are solicited and managed differently than contracts. First, this section discusses grant solicitation and award, including the ways in which the Uniform Guidance goes beyond the FAR. Next, it examines the avenues available to grantees for protesting an award of a grant if they suspect that the awarding process was unfair. Finally, it discusses the grants management process.

1. Grant Solicitation and the Uniform Guidance

Unlike the FAR, the Uniform Guidance is not binding on grantor agencies, which has led to the continued fragmentation of the grants system. The Uniform Guidance provides grantor agencies with model regulations, but grantor agencies are free to choose which provisions to implement. In contrast, the FAR is binding on agencies and establishes a minimum set of rights for contractors. Agencies may supplement the FAR—sometimes adding more stringent requirements—but they cannot disregard or negate any of the rules or procedures contained therein. There is no such requirement for the Uniform Guidance.

The solicitation and award process for grants is superficially similar to competitive negotiation. However, because the selection process is not subject to the Competition in Contracting Act (CICA) and there is confusion about bid protest jurisdiction, grantor agencies retain significantly more control over the process than they would when awarding a contract. Notably, there is no grants equivalent to CICA, and grantor agencies are generally free to set their own competition policies for the grants selection process. Indeed, prior to the Uniform Guidance, this level of agency control over the grants award process was arguably unfair to first-time applicants.

As a remedy, the Uniform Guidance suggests that agencies use a competitive selection process. Grantor agencies must publish public notices of funding opportunities; these notices must include sufficient information to allow a grantee to “make an informed decision about whether to submit an application.” Furthermore, the Uniform Guidance contains the “Full Text of Notice of Funding Opportunity,” which includes mandatory and optional information to ensure that agencies provide adequate details to prospective grantees. Such details include substantive and administrative evaluation criteria as well as relevant information pertaining to past awards. Still, the notice need not include specifications, a statement of work, or deliverables.

In evaluating grant applications, grantor agencies must “design and execute a merit review process for applications.” The Uniform Guidance allows agencies to disclose the identities of the individual reviewers, theoretically giving the applicants an opportunity to object and even suggest reviewers. In this respect, the Uniform Guidance goes beyond the FAR and gives grantees greater protections than contractors.

However, it is unclear whether disappointed grants bidders can bring bid protests. Whereas disappointed contract bidders can protest the award of a contract to the Government Accountability Office (GAO), the GAO will not review bid protests for grants. Indeed, short of determining whether the correct instrument was used, (i.e., whether a grant or contract was appropriate in the circumstances), the GAO will not review issues arising from “discretionary federal assistance programs.” Further, it is unclear whether the U.S. Court of Federal Claims (CoFC) has jurisdiction over grants bid protests. In Ozdemir v. United States, CoFC held that it had jurisdiction because it interpreted the Tucker Act to include grants. But grants bid protests are so infrequent that there remains no clear answer in CoFC’s case law demonstrating that a disappointed grants bidder has a clear right to protest.

2. The Grants Management Process

Grants require additional flexibility because they are designed to deliver services outside the federal government’s capabilities. In this way, grantees act as an extension of the federal government and are not allowed to profit from grants. This becomes complicated when grants are administered on an advance payment system. Grantees often draw down more program funds than are required in the event that they overspend their projections. This is problematic because advance payments earn interest if not spent immediately, thereby depriving the federal government of that income. Except to the extent specified in the program, grantees are prohibited from profiting from a particular grant, and any interest earned on advance payments belongs to the United States. Accordingly, grantees must record any interest earned on advance payments and spend those funds according to the terms and conditions of the grant.

In addition, grantees are required to submit regular financial and program reports, which grantor agencies use to review all costs for allowability. Allowable costs include “[e]xpenditures or costs that meet the grant purposes and conditions,” which are determined on a grant-specific basis. The grants officer determines allowability by looking to “the relevant program legislation, regulations, including OMB circulars and the common rules, and the terms of the grant agreement.” For instance, GAO determined that a grantee, the Asia Foundation, could not use general support funds from the U.S. Department of State (DoS) to match federal funds it received from two other federal agencies because it lacked the express statutory authority to do so.

Where the grantor agency disallows costs, the federal government considers the grantee to be in possession of those funds, since the grantee has not yet spent the funds at issue. Put another way, “where a grantee’s costs are disallowed, the grantee has, in effect, spent its own money and not the funds from the grant.” If a grant is administered on a reimbursement basis, the grantor agency will refuse to reimburse the disallowed costs and will not count them against the balance of the grant. If, on the other hand, the grantor agency has already paid out the funds to the grantee, the grantee must return those funds to the federal government. For larger grants, grantees may be compelled to return millions of dollars of ostensibly misspent funds.

3. Performance Disputes for Government Contracts

As noted above, federal procurement statutes and the FAR have created a uniform body of policies and procedures that administer federal government contracts. For instance, the Contracts Disputes Act of 1978 (CDA) governs disputes arising from such contracts. Further, every procurement contract must contain a disputes clause that includes the requirements for submitting and certifying a claim. Under the CDA, a contractor is entitled to a Contracting Officer’s (CO) final decision within sixty days from the date of the claim. The contractor then has six years to seek review of a CO’s decision at CoFC or at the relevant board of contracts appeals. These adjudicatory bodies have a robust body of case law that addresses and provides clarity and guidance to disputes between the federal government and contractors.

III. The Issue: Lack of Uniform Administrative Processes for Performance Dispute Resolution

Federal grants have no such uniform dispute resolution policies or procedures. Grantees lack substantive rights and remain on uncertain footing when challenging a grants officer’s decisions. When an agency determines that a grantee is not in compliance with the program requirements or the terms and conditions of a grant, the grantor agency can impose a remedy against the grantee without notice of noncompliance or an opportunity to cure. While the Uniform Guidance suggests that grantor agencies take corrective action prior to imposing a remedy, such actions are entirely discretionary. Corrective action can involve the imposition of additional award conditions that would limit the risk of the grantee’s continued non–compliance. These additional conditions include paying the grantee on a reimbursement rather than advance basis, as well as additional financial and project monitoring and reporting, requiring that the grantee obtain additional technical assistance, or establishing additional prior approvals. Outside of these requirements, the Uniform Guidance is silent on dispute resolution.

A. Agency Specific Administrative Appeals

In addition to the Uniform Guidance, each grantor agency has a unique process for resolving performance disputes. For example, the Department of Health and Human Services (HHS) maintains the Departmental Appeals Board (DAB), which provides an internal, administrative process for grantees to appeal final HHS decisions. By contrast, the DoS has no such administrative process, and the grants officer’s decisions on cost disallowances, suspension, or even termination are final without further administrative remedies. From there, an aggrieved grantee may go to federal court, but that is simply not feasible for many entities that depend on grants for funding.

1. The Department of Health and Human Services (HHS)

HHS is by far the largest grantor agency, largely because Medicaid and Medicare are disbursed through grants. As mentioned above, the DAB adjudicates performance disputes and was “designed to provide a fair, impartial, quick[,] and flexible process for appeal from written final decisions.” The DAB is arguably the most robust administrative process for performance disputes, hearing upwards of $1 billion in disputes per year. Grantees can appeal a decision to the DAB when: (1) a dispute involves a program that uses the DAB; (2) the grantee received a final written decision from the grants officer and appealed within thirty days of receipt; and (3) the grantee exhausted preliminary remedies, if required by program specific regulations. The DAB then reviews the written record developed by both parties. The DAB may elect to hold an informal conference where a presiding Board member can question the parties about the dispute. Further, the DAB may determine that it is necessary to hold “a hearing involving an opportunity for examining evidence and witnesses, cross-examination, and oral argument.” However, because this process is time and resource intensive, the DAB will only schedule a hearing under certain circumstances. The hearing is “as informal as reasonably possible,” and the presiding Board member will generally “admit evidence unless it is determined to be clearly irrelevant, immaterial or unduly repetitious.” The standard of review in these cases is de novo and the burden of proof is by preponderance of the evidence.

While this flexibility appears beneficial for both parties, the DAB’s structure disadvantages grantees in three significant ways. First, the DAB is “bound by all applicable laws and regulations” and “will not consider equitable arguments no matter how compelling the circumstances may be.” Second, the grantee bears the burden of proof, meaning that it must show by a preponderance of the evidence that it did comply with the terms and conditions of the grant. Therefore, the grantee must identify, document, and justify its disallowed costs. In practical terms, a multi-million dollar grant may contain thousands of line items in its financial reports, which makes the process of providing written justification for those expenses exceedingly time and resource intensive. Third, and perhaps most strikingly, the respondent operating division may “raise new grounds for a disallowance after a disallowance letter is issued as long as the appellant is afforded an opportunity to respond.” While the respondent agency bears “the burden to articulate clearly the basis of the disallowance . . . [with] enough detail to enable the appellant to understand the issues and the respondent’s position,” this ability to move the goalposts mid–proceeding unfairly tilts the process in favor of the agency. Despite these procedural hurdles, grantees at a minimum have an opportunity to discuss disallowed costs or other grant related disputes before the DAB. As discussed below, this is not the case with every grantor agency.

2. The Department of Labor (DoL)

The DoL’s administrative appeals process is the most formal of all of the grantor agencies. The DoL’s regulation requires the grant-making division to designate one of two possible appeals processes for disputes arising under a grant. DoL grantees can appeal directly “to the head of the grantor agency” or to the DoL Office of Administrative Law Judges (OALJ). To appeal to the head of the agency, the grantee must request an appeal “[w]ithin [twenty-one] days of receipt of the grant officer’s final determination.” The request must contain a statement of issues, which enumerates the basis for the review. The grantor agency has the flexibility to “establish procedures for the conduct of hearings,” which is similar to the DAB.

Most grants disputes go through the OALJ, where the process is more formal. Like the appeal to the head of the agency, the grantee must appeal a grants officer’s decision within twenty-one days of receipt and provide a statement of issues. Unlike the HHS’ DAB, OALJ’s regulation explicitly applies the Administrative Procedure Act (APA) and uses the Federal Rules of Civil Procedure “where the OALJ’s specific procedural rules are silent.” OALJ proceedings further depart from the DAB’s in that the OALJ can “[c]ompel the production of documents and appearance of witnesses,” “[i]ssue subpoenas,” “[r]ule on offers of proof and receive relevant evidence,” among other procedural tools. However, similar to the DAB, “the OALJ’s jurisdiction and caseload is not limited to grant disputes.”

3. The United States Agency for International Development (USAID)

By contrast, USAID’s administrative process is inflexible and provides grantees with an exceedingly limited opportunity to defend against cost allowances or grant terminations. Claims arising from a grant are first decided by the USAID Agreement Officer (AO) who is required to provide a written decision to the grantee within sixty days. The grantee then has thirty days to appeal the decision to USAID’s Assistant Administrator for the Bureau for Management (Assistant Administrator) or the decision is final. The grantee can submit written evidence, but USAID does not provide a hearing regardless of circumstances. Upon receipt of the appeal, the AO and Assistant Administrator forward the appeal to the Bureau for Management, Office of Management Policy, Budget, and Performance, Compliance Division (M/MPBP/Compliance), which prepares a recommendation for the Assistant Administrator. The M/MPBP/Compliance must inform the grantee of the status of its claim within sixty days, which need only be whether the claim is “denied, approved, or more time is needed.” Strikingly, there is no additional deadline by which the Assistant Administrator must provide a decision. This is particularly alarming considering how many of USAID’s grantees are nonprofit entities that likely do not have the resources to wait months for a final decision.

4. The Department of State (DoS)

In Fiscal Year 2020, the DoS disbursed over 10,000 grants. Many DoS grants go to small organizations or to poor and remote communities as foreign assistance. As noted above, the DoS regulations have no administrative process to resolve grants performance disputes. In addition, the DoS reserves the right to terminate grants for cause, which includes national security or foreign policy interests. Outside of these interests, the DoS can terminate for cause when a grantee does not comply with the terms and conditions of the grant. To monitor compliance, the DoS requires grantees to submit regular reports that compare program progress against the indicators and deadlines contained in the grant agreement. The broad language of the DoS’ regulation affords grants officers immense discretion to determine whether a grantee complied with the terms and conditions of its grant.

If a grants officer determines that a grantee is not likely to meet the grant’s programmatic requirements, he or she can take additional steps to bring the grantee into compliance without terminating the award. These steps include, but are not limited to, altering the scope or design of the program, modifying program indicators, or providing other technical assistance. However, this authority is discretionary: where one grants officer would redesign a program, another grants officer may choose to terminate the grant. The is particularly troublesome for smaller DoS grantees who do not have the resources to challenge the grant officer’s decisions in court.

B. Judicial Review of Grants Disputes

Jurisdiction for judicial review of grants disputes remains a subject of debate. Regardless, it is clear that grantees must exhaust administrative remedies before they can appeal a claim to a federal district court under the APA. As with other appeals from administrative proceedings, the courts afford great deference to the grantor agency’s decisions and will sustain an agency action “unless it is arbitrary, capricious, an abuse of discretion, not otherwise in accordance with law, procedurally flawed, or unsupported by substantial evidence.” Many believe that this level of deference is necessary in reviewing exceedingly complex and technical programs where the courts may be ill-equipped to make sound cost determinations.

However, judicial review does not resolve or replace the need for a uniform administrative appeals process for two reasons. First, judicial review is far more time and resource intensive than an administrative appeal. Many grantees do not have the resources to bring these claims in court, particularly because the grantee may face jurisdictional hurdles. Second, because grants vary widely from program to program, the courts accord a high degree of “judicial deference . . . to agency findings of fact and interpretations of the applicable statutes and regulations.” This variation means that “what is allowable under one assistance program may not be allowable under another” and that decisions turn on “complex accounting and factual issues that are unique to the particular case.” With this highly deferential standard of review, the courts are unlikely to find in favor of the grantee unless the agency action is particularly egregious.

IV. Proposed Solution: Amend the Uniform Guidance

Amending the Uniform Guidance would solve the lack of a uniform administrative appeals process and attendant issues. Though the Uniform Guidance is not binding on grantor agencies, it has nonetheless succeeded in streamlining and unifying many disparate OMB circulars and agency regulations. Importantly, the Uniform Guidance allows grantor agencies to retain autonomy over their programs, which is exceedingly important given the often technical and complex nature of disputes. To further streamline grants administration and solidify the rights of grantees, OMB should amend the Uniform Guidance in two ways. First, the Uniform Guidance should be made mandatory and binding on all grantor agencies. Second, OMB should amend the Uniform Guidance to include a minimum set of procedures to govern all grants disputes.

A. The FAR as a Model

The amended Uniform Guidance need not reinvent the wheel. The FAR includes a fairly simple disputes clause, but it nonetheless provides contractors with clear directions on how to file a claim. By contrast, the Uniform Guidance is silent on disputes that may arise during grant performance. This amended Uniform Guidance would establish a minimum floor of substantive and procedural rights for grantees. Importantly, the amended Uniform Guidance would incorporate a grants disputes clause to be included in all federal grants. This disputes clause would be modeled on the FAR. Significantly, it would lay out the requirements for grantees to file a claim with the grants officer, include certification requirements, and state deadlines by which the grants officer must provide a final written decision. Further, it would set the default deadline by which the grantee must file a claim at six years. While the disputes clause in the amended Uniform Guidance would be binding, it would not preclude Congress from creating more stringent requirements for a particular set of grants. The Uniform Guidance would simply create a floor of rights and act as a gap filler for grants that are not expressly created or governed by statute.

Likewise, Congress would retain the ability to expressly alter the terms and conditions of grants contemplated by statute, irrespective of the amended Uniform Guidance. For instance, HHS disburses Medicaid federal financial participation funds through grants “to states that choose to provide medical care to persons with low income and resources.” The Medicaid statute requires funds to be disbursed on a quarterly basis and gives states thirty days from the end of the quarter to submit their claims for federal reimbursement. The program allows states to identify any overpayment or underpayment made to the state in the previous quarter and the subsequent quarter’s payment is adjusted up or down accordingly. The statute requires states to claim over or underpayment within two years of the quarter in which the accounting error was made. In creating the two-year limit, Congress intended to discourage states from filing claims “long after they had made the relevant program expenditures, a practice that hampered federal budget planning and administration for Medicaid and other Social Security Act programs.” An amended Uniform Guidance would set a standard for agencies as the FAR does for contractors, while allowing Congress the flexibility to impose program specific policies and procedures for certain grants.

However, the amended Uniform Guidance would deviate from the FAR regarding administrative processes. While the CDA process governs review of contract claims, no such process exists for grants. An analogous “Grant Disputes Act” would not be the most effective means to adjudicate disputes due to the unique nature of grants. Judges at the CoFC or at a hypothetical Board of Grant Appeals do not have the requisite technical expertise to fairly adjudicate disputes of material fact. Instead, an amended Uniform Guidance would require grantor agencies to establish an internal administrative appeals process. Grantor agencies that have such mechanisms, like HHS or DoL, would need only amend their existing policies and procedures. Agencies without such administrative structures would need to create them to implement the amended Uniform Guidance.

Not all grantor agencies would need to establish independent procedures for these disputes. Grantor agencies could collaborate to create a single administrative mechanism for substantively similar grants. For instance, the multiple federal agencies that disburse foreign assistance grants could create a single administrative body. Grantor agencies could insert a provision in such grant agreements that funnel all disputes through an administrative process housed within USAID or one of the larger grantor agencies. Alternatively, if Congress wishes to exert additional control over grants disputes, it could impose supplementary requirements in appropriations bills.

If the Uniform Guidance were binding, Congress and grantor agencies would be incentivized to provide greater detail in grant requirements and further protect the rights of grantees. All of this could be achieved without the establishment of an independent Board of Grant Appeals or forcing grantees to appeal decisions to the CoFC. Since OMB has the authority to suggest and implement changes to the Uniform Guidance, it could publicly propose these revisions and allow interested parties to submit comments before publishing the amended Uniform Guidance.

B. Addressing the Case for a Grant Disputes Act and Independent Dispute Board

1. A “Grants Dispute Act”

Following the implementation of the Uniform Guidance, the next logical step is arguably the creation of a Grant Disputes Act (GDA) modeled after the CDA. Prior to the CDA, the federal procurement system was plagued by many of the issues that currently frustrate grantees. There are five key elements that made the CDA an elegant solution to an ineffective contracts dispute resolution process:

(i) a Contracting Officer’s final decision serving as a clear formal decision; (ii) a statutory source of administrative board authority that is independent of agencies’ organic authority; (iii) contractor election of appeal to either an administrative board or the COFC; (iv) an explicit de novo standard of review at the COFC; and (v) appeal of either a board or COFC decision exclusively to the Federal Circuit.

However, this proposed “GDA” does not adequately account for the unique nature of individual grants. For one, a judge at the CoFC would be ill equipped to handle technical claims arising from programs as varied as those administered through grants. Further, a de novo standard of review might work for issues of law but is inappropriate for genuine disputes of material fact. Absent significant training and expertise, a judge is neither qualified nor situated to substitute his or her own judgment for that of the grantor-agency. Because grants are so unique, what may be an allowable cost under one grant is not allowable under a different grant from the same agency. In this instance, internal agency administrative review is the best option for both the agency and the grantee who are more familiar with the technical requirements of the grant.

2. Independent Board of Grant Appeals

Similarly, an independent Board of Grant Appeals would not account for the variety among grants. HHS grants do not exist within the same universe as those awarded by the DoS or USAID, and judges do not have the expertise to adjudicate genuine disputes of material fact. Though the independent boards of contract appeals are effective arbiters for government contracts disputes, they are ill suited to grants because grants disputes require a deeper understanding and technical expertise of the statutory schemes that govern grant programs.

V. Conclusion

Billions of dollars are disbursed through grants each year and it is imperative that grantees can efficiently challenge agency decisions. Following the implementation of the Uniform Guidance, the next logical step is to make it a binding and mandatory regulation that can be enforced through internal agency administrative proceedings. Further, the language of the Uniform Guidance should be amended so that grantees have greater procedural and substantive rights. This would adequately address issues within the current system, which is imbalanced in favor of the grantor agency, while maintaining the benefits of using grants as a funding mechanism. An amended Uniform Guidance is the best path forward for grants disputes because it balances the needs of grantor agencies against the needs of grantees.