The Federal Grant and Cooperative Agreement Act of 1977
In the 1970's, Congress was concerned over the perceived misuse of assistance agreements - using assistance agreements to circumvent competition and procurement rules. To address these problems, and to ensure uniform agency practices, Congress passed the Federal Grant and Cooperative Agreement Act of 1977 (FGCAA).
The FGCAA establishes government-wide criteria for determining the appropriate legal instrument for funding an extramural activity.
The FGCAA distinguishes between acquisition (procurement/contracts) and assistance (grants and cooperative agreements), based on the principal purpose of the legal relationship between the parties.
If the principle purpose of the funded activity is to provide something for the direct benefit or use of the federal government, then a contract is the appropriate legal instrument to use.
Benefit or use test:
- Is EPA the direct beneficiary or use of the activity?
- Is EPA providing the specifications for the project?
- Is EPA having the project completed based on its own identified needs?
If the purpose of the funded activity is to support or stimulate activities that are not for the direct benefit or use of the federal government, an assistance agreement (grant or cooperative agreement) may be use.
Support or stimulation test:
- Is the applicant performing the project for its own purpose?
- Is EPA merely supporting the project with financial or other assistance?
- Is the benefit to EPA incidental (i.e., do funded activities compliment EPA's mission)?
The distinguishing factor between a grant and a cooperative agreement is the degree of Federal participation or involvement during the performance of the work activities.
If EPA, usually the project officer, participates in project activities, then a cooperative agreement is the proper funding mechanism.
If the funded activities meet the definition of assistance and no substantial involvement by EPA is anticipated, a grant must be used to fund the project.
It should be noted that the FGCAA is not the legal authority by which EPA funds assistance agreements. EPA's legal authorities are obtained from the environmental statutes (Clean Air Act, Clean Water Act, etc.)