ACTION: Proposed Rule







DEPARTMENT OF HEALTH AND HUMAN SERVICES



Administration for Children and Families



45 CFR Part 1309



RIN 0970--AB54



 

Head Start Program



AGENCY: Administration on Children, Youth and Families (ACYF), 

Administration for Children and Families (ACF), HHS.



ACTION: Notice of Proposed Rulemaking.



SUMMARY: The Administration on Children, Youth and Families is issuing 

this Notice of Proposed Rulemaking to implement a statutory provision 

that authorizes Head Start grantees to use grant funds to finance the 

construction and major renovation of Head Start facilities.



DATES: In order to be considered, comments on this proposed rule must 

be received on or before April 9, 1999.



ADDRESSES: Please address comments to the Associate Commissioner, Head 

Start Bureau, Administration for Children, Youth and Families, P.O. Box 

1182, Washington, DC 20013. Beginning 14 days after close of the 

comment period, comments will be available for public inspection in 

Room 2219, 330 C Street, SW., Washington, DC 20201, Monday through 

Friday, between the hours of 9 a.m. and 4 p.m.



FOR FURTHER INFORMATION CONTACT: Douglas Klafehn, Deputy Associate 

Commissioner, Head Start Bureau, Administration for Children, Youth and 

Families, P.O. Box 1182, Washington, DC 20013; (202) 205-8572.



SUPPLEMENTARY INFORMATION:



I. Program Purpose



    Head Start is authorized under the Head Start Act (42 U.S.C. 9801 

et seq.). It is a national program providing comprehensive 

developmental services to low-income preschool children, primarily age 

three to the age of compulsory school attendance, and their families. 

To help enrolled children achieve their full potential, Head Start 

programs provide comprehensive

health, nutritional, educational, social and other services. In 

addition, Section 645A of the Head Start Act provides authority to fund 

programs serving infants and toddlers. Programs receiving funds under 

the authority of this section are referred to as Early Head Start 

programs.

    Head Start programs are required to provide for the direct 

participation of the parents of enrolled children in the development, 

conduct, and direction of local programs. Parents also receive training 

and education to foster their understanding of and involvement in the 

development of their children. In fiscal year 1997, Head Start served 

794,000 children through a network of over 2,000 grantees and delegate 

agencies.

    While Head Start is intended to serve primarily children whose 

families have incomes at or below the poverty line, or who receive 

public assistance, Head Start policy permits up to 10 percent of the 

children in local programs to be from families who do not meet these 

low-income criteria. Tribal grantees can exceed this limit under 

certain conditions. The Act also requires that a minimum of 10 percent 

of the enrollment opportunities in each program be made available to 

children with disabilities. Such children are expected to participate 

in the full range of Head Start services and activities with their non-

disabled peers and to receive needed special education and related 

services.



II. Summary of the Proposed Regulation



    The authority for this Notice of Proposed Rulemaking (NPRM) is 

section 644(g) of the Head Start Act (42 U.S.C. 9839). Paragraph (g) 

was added by Public Law 103-252, Title I of the Human Services 

Amendments of 1994. Section 644(g) states that the Secretary may 

authorize the use of federal financial assistance to make payments for 

capital expenditures, such as expenditures for the construction and 

major renovation of facilities. Authorization for the use of grant 

funds in this manner requires a determination by the Secretary that 

suitable facilities are not otherwise available to Indian tribes, rural 

communities, and other low-income communities to carry out Head Start 

programs, that the lack of suitable facilities (including public school 

facilities) will inhibit the operation of such programs, and that 

construction of such facilities is more cost effective than the 

purchase or renovation of available facilities. The Act also provides 

that grant funds may be used to pay the cost of amortizing the 

principal and paying interest on loans. It directs the Secretary to 

establish uniform procedures for Head Start agencies to request 

approval to use grant funds to construct new facilities or make major 

renovations to existing facilities.

    A Notice of Proposed Rulemaking (NPRM) on Purchase of Head Start 

Facilities was published in the Federal Register on December 1, 1994 

(59 FR 61575). The Final Rule on Purchase of Head Start Facilities, 

published elsewhere in this issue of the Federal Register, does not 

address construction or major renovation since the statutory change 

concerning construction and major renovation occurred too close to 

publication of that NPRM to permit the inclusion of procedures covering 

construction and major renovation. We recognize, however, that 

procedures covering the purchase, construction and major renovation of 

facilities using Head Start grant funds should be consistent and should 

be brought together in one place. Therefore, the procedures on 

construction and major renovation when made final will amend the final 

rule on purchase of Head Start facilities so that 45 CFR part 1309 will 

cover, in one single rule, the use of grant funds to purchase, 

construct and make minor renovations to Head Start facilities.

    The proposed rule:

    <bullet> Defines major renovation to mean structural changes to the 

foundation, roof, floor, or exterior or load-bearing walls of a 

facility, or the extension of a facility to increase its floor area. 

Major renovation also means extensive alteration of a facility such as 

to significantly change its function and purpose, even if such 

renovation does not include any structural change to the facility.

    <bullet> Specifies what information the grantee must provide to 

establish eligibility to be awarded grant funds to construct or make a 

major renovation to a Head Start facility.

    <bullet> Requires that a grantee receive approval from HHS of the 

final working drawings and specifications for construction or major 

renovation before it advertises for bids.

    <bullet> Requires that all construction and major renovation 

contracts be on a lump sum fixed-price basis.



III. Section by Section Discussion of the NPRM



    We propose to revise the heading of Part 1309 to reflect the 

addition of major renovation and construction requirements in this 

part. The revised heading is ``Head Start Facilities Purchase, Major 

Renovation and Construction.''



Section 1309.1--Purpose and application



    We propose to revise Sec. 1309.1 to include reference to the 

applicability of part 1309 to the construction or major renovation of 

Head Start facilities in addition to the purchase of such facilities.



Section 1309.3--Definitions



    We propose to revise Sec. 1309.3 by adding five definitions. The 

definition for ``construction,'' a new definition, is based on the 

statutory language found in section 644(g)(2)(A) of the Head Start Act, 

which states that grant funds may be used to pay for ``construction of 

facilities that are not in existence on the date'' the Secretary 

determines the grantee meets the statutory criteria for eligibility. In 

addition, we revised the definition of ``acquire'' to encompass 

construction in whole or part.

    The second definition we propose is ``incidental alterations and 

renovations.'' This definition is added to distinguish such alterations 

and renovations from major renovations which are defined also in this 

proposed rule. Alterations and renovations are considered 

``incidental'' if they readily modify a facility to meet program 

requirements, if the cost of the alterations and renovations do not 

exceed the lesser of $150,000 or 25 percent of total direct costs 

expected to be approved for the grantee's budget period, and the 

renovations or alterations do not meet the definition for major 

renovations described below. A third new definition is for ``major 

renovation,'' which has two parts. Major renovation means structural 

changes to the foundation, roof, floor, or exterior or load-bearing 

walls of a facility, or the extension of an existing facility to 

increase its floor area, or extensive alteration of a facility such as 

to significantly change its function and purpose, even if such 

renovation does not include any structural change to the facility.

    Classification as a major renovation will have two consequences: 

the grantee will be able to pay the principal and interest on a loan to 

finance the work, and the grantee will be required to meet the 

preliminary eligibility and other criteria found in this regulation.

    The fourth and fifth new definitions we propose are for the terms 

``suitable facility'' and ``useable facility.'' The terms are necessary 

because section 644(g) of the Head Start Act requires that a 

determination be made that no ``suitable'' facility is available within 

a community before a grantee can be permitted to use grant funds for 

the

construction or renovation of a facility. The term ``suitable'' means a 

facility in the grantee's service area that is owned by the grantee or 

is available for lease or purchase, is useable as a Head Start 

facility, and is not more expensive to purchase, own or lease than 

other comparable facilities. The term ``useable'' is included and 

intended to describe a facility not in need of renovation to increase 

its size or to bring it into compliance with local licensing and code 

requirements and the access requirements of the Americans with 

Disabilities Act (ADA), if applicable, and section 504 of the 

Rehabilitation Act of 1973.



Section 1309.10--Application



    We propose to revise the heading of Sec. 1309.10 to read 

``Applications for the purchase, construction and major renovation of 

facilities.'' We also propose to revise Sec. 1309.10, which appears in 

the final rule on purchase of Head Start facilities which is published 

today, to include requirements for application for the construction and 

major renovation of facilities with Head Start funds. The proposed 

provision will establish requirements for applications from Head Start 

grantees who wish to obtain funds to: (1) Purchase existing facilities; 

(2) continue to pay costs of purchases begun during the period from 

December 21, 1986 to October 7, 1992; (3) construct new facilities; (4) 

renovate facilities which they own or lease; or (5) purchase facilities 

for the purpose of renovating them to make them usable for their Head 

Start programs. With the exception of existing paragraphs (f) and (r) 

which we have redesignated (e) and (q), we propose modifications in all 

of the existing provisions of Sec. 1309.10 to apply to applications for 

construction and major renovation as well as for purchase of existing 

facilities. We propose to incorporate the existing paragraph (d) into a 

new paragraph (b). In addition, a proposed amendment to the newly 

redesignated paragraph (l) requires that a grantee proposing to 

undertake a major renovation of a leased facility must have a lease 

with a duration of at least five years from the date the renovation is 

completed. We propose to add to the newly redesignated paragraph (m) a 

requirement for an assessment of the impact of proposed construction or 

major renovation under the National Environmental Policy Act of 1969 

(42 U.S.C. 4332(2)(C)). We propose further that before submitting an 

application under proposed section 1309.10, grantees seeking funds for 

construction or for major renovations must establish their eligibility 

under one of two new provisions proposed as Secs. 1309.49 and 1309.50.



Section 1309.11--Cost comparisons for purchase, construction and major 

renovation of facilities



    We are proposing to amend Sec. 1309.11, which appears as a final 

rule published today, to apply to cost comparisons for construction and 

major renovation of facilities. We are proposing to amend the heading 

of this section to read ``Cost comparisons for purchase, construction 

and major renovation of facilities'' to apply the proposed provisions 

of Sec. 1309.11 to cost comparisons for construction and major 

renovation of facilities. Paragraph (a) of the proposed rule requires 

that a cost comparison be conducted subject to the proposed paragraph 

(c) which is expanded to include not only purchase of facilities but 

also comparisons required for construction and major renovations of 

facilities. In conformance with section 644(g)(1) of the Head Start 

Act, paragraph (c)(2) of the proposed rule will require Head Start 

grantees requesting funding for the construction of a new facility to 

compare the cost of constructing to the cost of owning, purchasing or 

leasing an alternative facility which may be made useable as a Head 

Start facility by means of renovation of the facility. Paragraph (c)(3) 

proposes that grantees applying for funding to undertake a major 

renovation of a facility must compare the cost of the proposed 

renovation, including the cost of purchasing the facility to be 

renovated (if the grantee is proposing to purchase the facility) to the 

cost of constructing a facility of similar size. ACF proposes to 

request grantees to furnish this information in order that it may 

properly exercise discretion in selecting grantees to receive funding 

under section 644(g) of the Head Start Act. We are proposing that 

paragraph (e) include clarification that the period of comparison for 

renovations of leased facilities is the period of the lease remaining 

after the major renovation is completed. Paragraph (f) is identical to 

the final rule.



Section 1309.21 Recording of Federal interest and other protection of 

federal interest



    We propose to apply the same provisions for the subordination of 

Federal interest for construction and major renovation of Head Start 

facilities as are found in the final rule for the purchase of 

facilities. We propose to revise paragraph (a) of this section to read 

``The Federal government has an interest in all real property and 

equipment acquired or upon which major renovations have been undertaken 

with grant funds for use as a Head Start facility. The responsible HHS 

official may subordinate the federal interest in such property to that 

of a lender which finances the acquisition or major renovation costs 

subject to the conditions set forth in paragraph (f) of this section.'' 

We are proposing some technical changes in paragraph (d) of this 

section by inserting the words ``or at the commencement of major 

renovation or construction of a facility'' after the word purchasing, 

and in (d)(1) we propose to substitute the words ``acquisition or major 

renovation'' for the word ``purchase'' and finally we propose to revise 

paragraph (f) by substituting the word ``purchased'' with the words 

``acquired or upon which major renovations have been undertaken.''



Section 1309.23 Insurance, bonding and maintenance



    In this section we propose to add a sentence clarifying that for 

facilities which have been constructed or renovated, insurance coverage 

must begin at the commencement of the expenditure of costs in 

fulfillment of construction or renovation work.



Sections 1309.40 through 1309.43



    The proposed revisions to Secs. 1309.40, 1309.41, 1309.42, and 

1309.43 replace the word ``purchase'' with ``acquisition or major 

renovation.'' Sections 1309.41, 1309.42 and 1309.43 contain technical 

edits also.

    A new subpart F has been added to cover very specific requirements 

on construction and major renovation of Head Start Facilities.



Section 1309.49--Eligibility--construction



Section 1309.50--Eligibility--major renovation



    These two sections conform to section 644 (g)(1) in requiring 

applicants to demonstrate that the Head Start program serves an Indian 

Tribe or is available in a low-income or rural community and that the 

lack of a suitable facility in the grantee's service area will inhibit 

the operation of the program.

    Applicants requesting funding for construction of facilities must 

demonstrate that there are no facilities available for lease or 

purchase or facilities that are available are not suitable for use by a 

Head Start program.

    Grantees requesting funds for major renovations must demonstrate 

that there are no facilities available for lease or purchase or that 

facilities available are not suitable for use without major

renovations. Applicants for funding for major renovations and who are 

leasing the facilities must have a lease guaranteeing the use of the 

facility for a minimum period of five years from the time the 

renovations are completed.

    We are proposing further in this rule that all applicants support, 

whenever possible, the determination that there are no suitable 

facilities with a written statement by a licensed real estate 

professional in the grantee's service area.



Section 1309.51--Approval of drawings and specifications



    In this section we propose to require that grantees receive 

approval from the responsible HHS official of the final drawings and 

specifications for the proposed construction or major renovation before 

soliciting bids or awarding a contract for the work. The architect or 

engineer shall make a certification to the responsible HHS official of 

whether in his or her professional opinion the plans and specifications 

conform to Head Start programmatic requirements and are appropriate 

from a cost and technical point of view.



Section 1309.52--Procurement procedures



    Paragraph (a) of this section refers to the Department's 

procurement policy, found in 45 CFR parts 74 and 92, and reiterates the 

basic rule that all facility transactions be conducted in a manner to 

provide, to the maximum extent practicable, open and free competition. 

Paragraph (b) provides that all construction and major renovation 

contracts shall be on a lump sum fixed-price basis, and prohibits the 

grantee from entering into a contract without prior written approval of 

the responsible HHS official. Paragraph (c) requires prior written 

approval of the responsible HHS official for unsolicited modifications 

that would change the scope or objective of the project. In paragraph 

(d) we propose that all contracts for HHS-funded construction or major 

renovation of Head Start facilities contain a clause stating that the 

responsible HHS official or his or her designee shall have access at 

all reasonable times to the work being performed pursuant to the 

contract, at any stage of preparation or progress, and requiring the 

contractor to facilitate such access and inspection.

    The intent of these provisions is to protect the grantee and the 

Department against substandard work and cost overruns.



Section 1309.53--Inspection of work



    This section proposes that the grantee shall provide competent and 

adequate architectural or engineering inspection at the work site to 

insure that the completed work conforms to the approved plans and 

specifications. Also, a final architectural or engineering inspection 

report of the facility must be submitted to the responsible HHS 

official within 30 calendar days of substantial completion of the 

construction or major renovation. This is intended to insure that the 

project is being properly managed and that any problems or unusual 

circumstances are identified and dealt with as early as possible.



Section 1309.54--Davis-Bacon Act



    Construction and major renovation contracts and subcontracts are 

subject to the Davis-Bacon Act (40 U.S.C. 276a et seq.). In this 

section we propose that the grantee must provide an assurance that all 

laborers and mechanics employed by contractors or subcontractors in the 

construction or renovation of Head Start facilities shall be paid wages 

at not less than those prevailing on similar construction in the 

locality, as determined by the Secretary of Labor. Grantees are 

required to comply with the requirements found in the Davis-Bacon Act 

and the regulations of the Department of Labor which implement that 

Act. Those regulations are found in Title 29 of the Code of Federal 

Regulations.



IV. Impact Analysis



Executive Order 12866



    Executive Order 12866 requires that regulations be drafted to 

ensure that they are consistent with the priorities and principles set 

forth in the Executive Order. The Department has determined that this 

rule is consistent with these priorities and principles. This Notice of 

Proposed Rulemaking implements the statutory authority for Head Start 

grantees to apply to use grant funds to construct or make major 

renovations to facilities. Congress made no additional appropriation to 

fund this new authority, however, and so any money spent toward the 

construction or renovation of Head Start facilities is money that would 

have been spent otherwise by the program or other programs from the 

same appropriation amount.



Regulatory Flexibility Act of 1980



    The Regulatory Flexibility Act (5 U.S.C. CH. 6) requires the 

Federal government to anticipate and reduce the impact of rules and 

paperwork requirements on small businesses. For each rule with a 

``significant economic impact on a substantial number of small 

entities'' an analysis must be prepared describing the rule's impact on 

small entities. Small entities are defined by the Act to include small 

businesses, small non-profit organizations and small governmental 

entities. While these regulations would affect small entities, they 

would not affect a substantial number. Furthermore, the cost of the 

application process and other activities undertaken as a result of 

these regulations will not have a significant economic impact because 

the Head Start program covers 80% of the allowable costs of grantees 

under the program. The remaining costs associated with compliance are 

part of the share of costs grantees agree to meet from their own 

resources when they enter the Head Start program. For these reasons, 

the Secretary certifies that this rule will not have a significant 

impact on substantial numbers of small entities.



Paperwork Reduction Act



    Under the Paperwork Reduction Act of 1995, Pub. L. 104-13, all 

Departments are required to submit to the Office of Management and 

Budget (OMB) for review and approval any reporting or recordkeeping 

requirement inherent in a proposed or final rule. This NPRM contains 

information collection and record-keeping requirements in Sec. 1309.10 

(application), 1309.49 (eligibility construction), and 1309.50 (major 

renovation) which will be submitted to OMB for review and approval in 

accordance with the Paperwork Reduction Act.

    The respondents to the information collection requirements in the 

rule are Head Start grantees who may be State or local non-profit 

agencies or organizations. The Department needs to require this 

collection of information in order to assure that grantees who apply 

for approval to construct or make major renovations to a facility with 

Head Start funds have followed certain necessary legal and 

administrative procedures. Also, these collection of information 

requirements are necessary for monitoring purposes.

    The grantees who will be affected by these requirements will be 

those who request approval and are approved to construct or make major 

renovations to a facility for the purpose of operating a Head Start 

program. Based on the average number of grantees who requested approval 

from the Department since the statutory authority became effective, the 

estimated annual number of grantees that will be affected is 200.

    The actual submittal of an application under Sec. 1309.10 from a 

grantee to construct or make a major renovation to a facility is a one 

time activity which is preceded by a number of preparatory activities. 

We estimate the time it will take to prepare the application in 

accordance with the requirements of this rule is 40 hours per grantee, 

calculated over a period of time. On an annual basis, the total hours 

estimated for submittal of applications from grantees are 8,000.

    The Administration for Children and Families (ACF) will consider 

comments by the public on these proposed collection of information in:

    <bullet> Evaluating whether the proposed collections are necessary 

for the proper performance of the functions of ACF, including whether 

the information will have practical utility;

    <bullet> Evaluating the accuracy of ACF's estimate of the burden of 

the proposed collections of information;

    <bullet> Enhancing the quality, usefulness, and clarity of the 

information to be collected; and

    <bullet> Minimizing the burden of the collection of information on 

those who are to respond.

    OMB is required to make a decision concerning the collections of 

information contained in this final rule between 30 and 60 days after 

publication of this document in the Federal Register. Therefore, a 

comment is best assured of having its full effect if OMB receives it 

within 30 days of publication. Written comments to OMB for the proposed 

information collection should be sent directly to the following: Office 

of Management and Budget, Paperwork Reduction Project, 725 17th Street, 

NW, Washington, DC 20503, Attn: Wendy Taylor.



List of Subjects in 45 CFR Part 1309



    Acquisition, Construction, Facilities, Head Start, Real property, 

Renovation



    (Catalog of Federal Domestic Assistance Program Number 93.600, 

Project Head Start)



    Dated: August 3, 1998.

Olivia A. Golden,

Assistant Secretary for Children and Families.

    Approved: September 15, 1998.

Donna E. Shalala,

Secretary.



    For the reasons set forth in the Preamble, 45 CFR part 1309 is 

proposed to be amended as follows:

    1. The authority citation for part 1309 continues to read as 

follows:



    Authority: 42 U.S.C. 9801 et seq.



    2. The heading of part 1309 is revised to read as follows:



PART 1309--HEAD START FACILITIES PURCHASE, MAJOR RENOVATION AND 

CONSTRUCTION



    3. Section 1309.1 is revised to read as follows:





Sec. 1309.1  Purpose and application.



    This part prescribes regulations implementing sections 644(c), (f) 

and (g) of the Head Start Act, 42 U.S.C. 9801 et seq., as they apply to 

grantees operating Head Start programs under the Act. It prescribes the 

procedures for applying for Head Start grant funds to purchase, 

construct, or make major renovations to facilities in which to operate 

Head Start programs. It also details the measures which must be taken 

to protect the Federal interest in facilities purchased, constructed or 

renovated with Head Start grant funds.

    4. Section 1309.3 is amended by revising the definition ``acquire'' 

and adding five new definitions to read as follows:





Sec. 1309.3  Definitions.



* * * * *

    Acquire means purchased or constructed in whole or in part with 

Head Start grant funds through payments made in satisfaction of a 

mortgage agreement (both principal and interest), as a down payment, 

for professional fees, closing costs and any other costs associated 

with the purchase or construction of the property that are usual and 

customary for the locality.

* * * * *

    Construction means new building, and excludes renovations, 

alterations, additions, or work of any kind to existing buildings.

* * * * *

    Incidental alterations and renovations means improvements to a 

facility which can be readily made, which are not considered major or 

structural renovations as defined in this section and the total costs 

of which do not exceed the lesser of $150,000 or 25 percent of total 

direct costs approved for a budget period.

    Major renovation means structural changes to the foundation, roof, 

floor, or exterior or load-bearing walls of a facility, or the 

extension of an existing facility to increase its floor area. Major 

renovation also means extensive alteration of an existing facility such 

as to significantly change its function and purpose, even if such 

renovation does not include any structural change to the facility.

* * * * *

    Suitable Facility means a facility that is owned by the grantee or 

is available for lease or purchase, is useable as a Head Start facility 

and is not more expensive to purchase, own or lease than other 

comparable facilities in the grantee's service area.

    Useable facility means a facility which is large enough to meet the 

foreseeable needs of the Head Start program and which complies with 

local licensing and code requirements and the access requirements of 

the Americans with Disabilities Act (ADA), if applicable, and section 

504 of the Rehabilitation Act of 1973.

    5. Section 1309.10 is revised to read as follows:





Sec. 1309.10  Applications for the purchase, construction and major 

renovation of facilities.



    A grantee which proposes to use grant funds to purchase a facility, 

or a grantee found eligible under section Sec. 1309.49 to apply for 

funds to construct a facility, or section Sec. 1309.50 to undertake 

major renovation of a facility, including facilities purchased for that 

purpose, must submit a written application to the responsible HHS 

official. The application must include the following information:

    (a) A legal description of the site of the facility, and an 

explanation of the appropriateness of the location to the grantee's 

service area, including a statement of the effect that acquisition or 

major renovation of the facility has had or will have on the 

transportation of children to the program, on the grantee's ability to 

collaborate with other child care, social services and health 

providers, and on all other program activities and services.

    (b) Plans and specifications of the facility to be purchased, 

including information on the size and type of structure, the number and 

a description of the rooms, and the lot on which the building is 

located (including the space available for a playground and for 

parking). If incidental alterations and renovations or major 

renovations are being proposed to make a facility useable to carry out 

the Head Start program, a description of the renovations, and the plans 

and specifications submitted must also describe the facility as it will 

be after renovations are complete. In the case of a proposed major 

renovation, a certification by a licensed engineer or architect as to 

the cost and technical appropriateness of the proposed renovation must 

be included.

    (c) The cost comparison described in Sec. 1309.11 of this part.

    (d) The intended uses of the facility proposed for acquisition or 

major renovation, including information demonstrating that the facility 

will be

used principally as a Head Start center or a direct support facility 

for a Head Start program. If the facility is to be used for purposes in 

addition to the operation of the Head Start program, the grantee must 

state what portion of the facility is to be used for such other 

purposes.

    (e) An assurance that the facility complies (or will comply when 

constructed or after completion of the renovations described in 

paragraph (b) of this section) with local licensing and code 

requirements, the access requirements of the Americans with 

Disabilities Act (ADA), if applicable, and section 504 of the 

Rehabilitation Act of 1973. The grantee also will assure that it has 

met the requirements of the Flood Disaster Protection Act of 1973, if 

applicable.

    (f) If the grantee proposing to purchase a facility without 

undertaking major renovations is claiming that the lack of alternative 

facilities will prevent or would have prevented operation of the 

program, a statement of how it was determined that there is or was a 

lack of alternative facilities. This statement must be supported, 

whenever possible, by a written statement from a licensed real estate 

professional in the grantee's service area. If a grantee requesting 

approval of the previous purchase of a facility is unable to provide 

such statements based on circumstances which existed at the time of the 

purchase, the grantee and the licensed real estate professional may use 

present conditions as a basis for making the determination.

    (g) The terms of any proposed or existing loan(s) related to 

acquisition or major renovation of the facility and the repayment plans 

(detailing balloon payments or other unconventional terms, if any), and 

information on all other sources of funding of the acquisition or major 

renovation, including any restrictions or conditions imposed by other 

funding sources.

    (h) A statement of the effect that the acquisition or major 

renovation of the facility would have on the grantee's meeting of the 

non-Federal share requirement of section 640(b) of the Head Start Act, 

including whether the grantee is seeking a waiver of its non-Federal 

share obligation under that section of the Act.

    (i) Certification by a licensed engineer or architect that the 

building proposed to be purchased or previously purchase is 

structurally sound and safe for use as a Head Start facility. The 

applicant must certify that upon the completion of major renovation to 

a facility or construction of a facility that inspection by a licensed 

engineer or architect will be conducted to determine that the facility 

is structurally sound and safe for use as a Head Start facility.

    (j) A statement of the effect that the acquisition or major 

renovation of a facility would have on the grantee's ability to meet 

the limitation on development and administrative costs in section 

644(b) of the Head Start Act. One-time fees and expenses necessary to 

the acquisition or major renovation, such as the down payment, the cost 

of necessary renovation, loan fees and related expenses, and fees paid 

to attorneys, engineers, and appraisers, are not considered to be 

administrative costs.

    (k) A proposed schedule for acquisition, renovation and occupancy 

of the facility.

    (l) Reasonable assurances that the applicant will obtain a fee 

simple or such other estate or interest in the site of the facility to 

be acquired sufficient to assure undisturbed use and possession for the 

purpose of operating the Head Start program. If the grantee proposes to 

acquire a facility without also purchasing the land on which the 

facility is situated, the application must describe the easement, right 

of way or land rental it will obtain or has obtained to allow it 

sufficient access to the facility. If the grantee proposes to undertake 

a major renovation of a leased facility, the grantee must have a lease 

of at least five years duration from the date the renovation is 

completed.

    (m) An assessment of the impact of the proposed purchase on the 

human environment if it involves more than a simple incidental 

alteration and renovation or any significant change in land use, 

including substantial increases in traffic in the surrounding area due 

to the provision of Head Start transportation services and an 

assessment of all proposed construction and major renovation pursuant 

to section 102(2)(C) of the National Environmental Policy Act of 1969 

(42 U.S.C. 4332(2)(C) and its implementing regulations (40 CFR parts 

1500-1508), as well as a report showing the results of tests for 

environmental hazards present in the facility, ground water, and soil 

(or justification why such testing is not necessary). In addition, such 

information as may be necessary to comply with the National Historic 

Preservation Act of 1966 (16 U.S.C. 470f) must be included.

    (n) Assurance that the grantee will comply with the requirements of 

the Uniform Relocation Assistance and Real Property Acquisition 

Policies Act of 1970, as amended (42 U.S.C. 4601 et seq. and 49 CFR 

Part 24), and information about the costs that may be incurred due to 

compliance with this Act.

    (o) A statement of the share of the cost of acquisition or major 

renovation that will be paid with grant funds.

    (p) For a grantee seeking approval of a previous purchase, a 

statement of the extent to which it has attempted to comply and will be 

able to comply with the provisions of Sec. 1309.22 of this part.

    (q) Such additional information as the responsible HHS official may 

require.

    6. Section 1309.11 is revised to read as follows:





Sec. 1309.11  Cost comparisons for purchase, construction and major 

renovation of facilities.



    (a) A grantee proposing to acquire or undertake a major renovation 

of a facility must submit a detailed estimate of the costs of the 

proposed activity and compare the cost of the proposed activity as 

provided under paragraph (c) of this section.

    (b) All costs of acquisition, renovation and ownership must be 

identified, including, but not limited to, professional fees, purchase 

of the facility to be renovated, renovation costs, moving expenses, 

additional transportation costs, maintenance, taxes, insurance, and 

easements, rights of way or land rentals. An independent appraisal of 

the current value of the facility proposed to be purchased, previously 

purchased or renovated, made by a professional appraiser, must be 

included.

    (c)(1) Grantees proposing to purchase a facility, without 

requesting funds for major renovations to the facility, must compare 

the cost of the proposed facility to the cost of the facility currently 

used by the grantee, unless the grantee has no current facility, will 

lose the use of its current facility, intends to continue to use its 

current facility after it purchases the new facility, or has shown to 

the satisfaction of the responsible HHS official that its existing 

facility is inadequate. Where the grantee's current facility is not 

used as the alternate facility, the grantee must use for comparison a 

facility (or facilities) available for lease in the grantee's service 

area and useable as a Head Start facility or which can be made useable 

through incidental alteration or renovation, the cost of which shall be 

included in the cost comparison. In the case of an application for 

approval of the previous purchase of a facility, the cost of the 

present facility must be compared to the cost of the facility used by 

the grantee before purchase of its current facility. If the facility 

used by the grantee before the purchase of its present facility was

deemed inadequate by the responsible HHS official, the grantee had no 

previous facility, or if the grantee continued to use its previous 

facility after it purchased the current facility, the alternative 

facility shall be an available, appropriate facility (or facilities) of 

comparable size that was available for rent in the grantee's service 

area at the time of its purchase of the current facility.

    (2) Grantees proposing to construct a facility must compare the 

costs of constructing the proposed facility to the costs of owning, 

purchasing or leasing an alternative facility which can be made useable 

through incidental alterations and renovations or major renovations. 

The alternative facility is one now owned by the grantee or available 

for lease or purchase in the grantee's service area. If no such 

facility is available, this statement must explain how this fact was 

determined and the claim must be supported, whenever possible, by a 

written statement from a licensed real estate professional in the 

grantee's service area.

    (3) A grantee proposing to undertake a major renovation of a 

facility must compare the cost of the proposed renovation (including 

the cost of purchasing the facility to be renovated, if the grantee is 

proposing to purchase the facility) to the cost of constructing a 

facility of comparable size.

    (d) The grantee must separately delineate the following expenses in 

the application:

    (1) One-time costs, including, but not limited to, cost of 

purchasing the facility to be renovated, the down payment, professional 

fees, moving expenses, the cost of site preparation; and

    (2) Ongoing costs, including, but not limited to, mortgage 

payments, insurance premiums, maintenance costs, and property taxes. If 

the grantee is exempt from the payment of property taxes, this fact 

must be stated.

    (e) The period of comparison for purchase, construction or 

renovation of a facility is twenty years, except that for the purchase 

of a modular unit the period of comparison is ten years and the period 

of comparison for major renovation of a leased facility is the period 

of the lease remaining after the renovations are completed. For 

approvals of previous purchases the period of comparison begins on the 

date the purchase took place.

    (f) If the facility is to be used for purposes in addition to the 

operation of the Head Start program, the cost of use of that part of 

the facility used for such other purposes must be allocated in 

accordance with applicable Office of Management and Budget cost 

principles.

    7. Section 1309.21 is amended by revising paragraphs (a), (d), 

introductory text, (d)(1), and (f), introductory text to read as 

follows:





Sec. 1309.21  Recording of Federal interest and other protection of 

Federal interest.



    (a) The Federal government has an interest in all real property and 

equipment acquired or upon which major renovations have been undertaken 

with grant funds for use as a Head Start facility. The responsible HHS 

official may subordinate the federal interest in such property to that 

of a lender which finances the acquisition or major renovation costs 

subject to the conditions set forth in paragraph (f) of this section.

* * * * *

    (d) Immediately upon purchasing or at the commencement of major 

renovation or construction of a facility, or receiving permission to 

use funds for a previously purchased facility the grantee shall record 

the Notice of Federal Interest in the appropriate official records for 

the jurisdiction is located. The Notice shall include the following 

information:

    (1) The date of the award of grant funds for the acquisition or 

major renovation of the property to be used as a Head Start facility, 

and the address and legal description of the property to be acquired or 

renovated;

* * * * *

    (f) In subordinating its interest in a facility acquired or upon 

which major renovations have been undertaken with grant funds, the 

responsible HHS official does not waive application of paragraph (d) of 

this section and Sec. 1309.22. A written agreement by the responsible 

HHS official to subordinate the Federal interest must provide:

* * * * *

    8. Section 1309.23 is amended by revising paragraph (a) to read as 

follows:





Sec. 1309.23  Insurance, bonding and maintenance.



    (a) At the time of acquiring or undertaking a major renovation of a 

facility or receiving approval for the previous purchase of a facility 

the grantee shall obtain insurance coverage for the facility which is 

not lower in value than coverage it has obtained for other real 

property it owns, and which at least meets the requirements of the 

coverage specified in paragraphs (a)(1) and (2) of this section. For 

facilities which have been constructed or renovated, insurance coverage 

must begin at the commencement of the expenditure of costs in 

fulfillment of construction or renovation work.

* * * * *

    9. Section 1309.40 is revised to read as follows:





Sec. 1309.40  Copies of documents.



    Certified copies of the deed, lease, loan instrument, mortgage, and 

any other legal documents related to the acquisition or major 

renovation of the facility or to the discharge of any debt secured by 

the facility must be submitted to the responsible HHS official within 

ten days of their execution.

    10. Section 1309.41 is revised to read as follows:





Sec. 1309.41  Record retention.



    All records pertinent to the acquisition or major renovation of a 

facility must be retained by the grantee for a period equal to the 

period of the grantee's ownership (or occupancy, in the case of leased 

facilities) of the facility plus three years.

    11. Section 1309.42 is revised to read as follows:





Sec. 1309.42  Audit of mortgage.



    Any audit of a grantee which has acquired or made major renovations 

to a facility with grant funds shall include an audit of any mortgage 

or encumbrance on the facility. Reasonable and necessary fees for this 

audit are payable with grant funds.

    12. Section 1309.43 is revised to read as follows:





Sec. 1309.43  Use of grant funds to pay fees.



    Consistent with the cost principles referred to in 45 CFR part 74 

and 45 CFR part 92, reasonable fees and costs associated with and 

necessary to the acquisition or major renovation of a facility 

(including reasonable and necessary fees and costs incurred to 

establish preliminary eligibility under Sec. 1309.50 of this part, or 

otherwise prior to the submission of an application under Sec. 1309.10 

of this Part or acquisition of the facility) are payable with grant 

funds, but require prior, written approval of the responsible HHS 

official.

    13. A new subpart F is added to read as follows:



Subpart F--Construction and Major Renovation



Sec.

1309.49  Eligibility--Construction.

1309.50  Eligibility--Major renovation.

1309.51  Approval of drawings and specifications.

1309.52  Procurement procedures.

1309.53  Inspection of work.

1309.54  Davis-Bacon Act.



Subpart F--Construction and Major Renovation





Sec. 1309.49  Eligibility--Construction.



    Before submitting an application under section 1309.10 for 

construction of a facility, the grantee must establish that:

    (a) The Head Start program serves an Indian Tribe; or is located in 

a rural or other low-income community; and

    (b) There is a lack of suitable facilities (including public school 

facilities) in the grantee's service area which will inhibit the 

operation of the program, as demonstrated by a statement that neither 

the grantee's current facility nor any facility available for lease or 

purchase in the service area is suitable for use by a Head Start 

program. This statement must explain the factors considered, how it was 

determined that there is a lack of suitable facilities and be supported 

whenever possible by a written statement from a licensed real estate 

professional in the grantee's service area.





Sec. 1309.50  Eligibility--Major renovation.



    (a) Before submitting an application under Sec. 1309.10, the 

grantee must establish that:

    (1) The Head Start program serves an Indian Tribe, or is available 

in a rural or other low-income community; and

    (2) There is a lack of suitable facilities (including public school 

facilities) in the grantee's service area which will inhibit the 

operation of the program, as demonstrated by a statement that neither 

the grantee's current facility nor any facility available for lease or 

purchase in the service area is suitable or could be made suitable 

without major renovation. This statement must explain the factors 

considered, how it was determined that there is a lack of suitable 

facilities and be supported, whenever possible, by a written statement 

from a licensed real estate professional in the grantee's service area.

    (b) In order to receive funding for major renovation of a leased 

facility, the grantee must have a lease that provides the Head Start 

program with a term of occupancy of at least five years from the time 

the renovation will be complete.





Sec. 1309.51  Approval of drawings and specifications.



    (a) The grantee may not advertise for bids or award a contract for 

any part of construction or major renovation funded by grant funds 

until final working drawings and specifications have been approved by 

the responsible HHS official.

    (b) Approval by the responsible HHS official shall be based on the 

certification by a licensed engineer or architect as to the cost and 

technical appropriateness of the proposed construction or renovation, 

and on a determination that the drawings and specifications conform to 

Head Start programmatic requirements.





Sec. 1309.52  Procurement procedures.



    (a) All facility construction and major renovation transactions 

must comply with the procurement procedures in 45 CFR parts 74 and 92, 

and must be conducted in a manner to provide, to the maximum extent 

practicable, open and free competition.

    (b) All construction and major renovation contracts for facilities 

acquired with grant funds require the prior, written approval of the 

responsible HHS official, and shall be on a lump sum fixed-price basis.

    (c) Prior written approval of the responsible HHS official is 

required for unsolicited modifications that would change the scope or 

objective of the project, including proposed modifications that would 

materially alter the costs of the project or increase the amount of 

grant funds needed to complete the project.

    (d) All construction and major renovation contracts for facilities 

acquired with grant funds shall contain a clause stating that the 

responsible HHS official or his or her designee shall have access at 

all reasonable times to the work being performed pursuant to the 

contract, at any stage of preparation or progress, and requiring that 

the contractor shall facilitate such access and inspection.





Sec. 1309.53  Inspection of work.



    (a) The grantee must provide and maintain competent and adequate 

architectural or engineering inspection at the work site to insure that 

the completed work conforms to the approved plans and specifications.

    (b) The grantee must submit a final architectural or engineering 

inspection report of the facility to the responsible HHS official 

within 30 calendar days of substantial completion of the construction 

or renovation.





Sec. 1309.54  Davis-Bacon Act.



    Construction and renovation projects and subcontracts financed with 

funds awarded under the Head Start program are subject to the Davis-

Bacon Act (40 U.S.C. 276a et seq.) and the regulations of the 

Department of Labor, 29 CFR part 5. The grantee must provide an 

assurance that all laborers and mechanics employed by contractors or 

subcontractors in the construction or renovation of affected Head Start 

facilities shall be paid wages at not less than those prevailing on 

similar construction in the locality, as determined by the Secretary of 

Labor.



[FR Doc. 99-2861 Filed 2-5-99; 8:45 am]

BILLING CODE 4184-01-U