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Federal Register / Vol. 86, No. 7 / Tuesday, January 12, 2021 / Rules and Regulations
regulations to enunciate such principles that may seem unnecessary to be set forth in regulatory text. The Department, accordingly, finalizes 75.300d as proposed.
Comment: Several commenters opposed the proposed rule, arguing that proposed 75.300c creates an inconsistency among the Departments regulations and policies prohibiting discrimination. Specifically, commenters referred to HHSAR
352.23774, which includes a NonDiscrimination in Service Delivery clause that prohibits discrimination based on non-merit factors such as race, color, national origin, religion, sex, gender identity, sexual orientation, and disability physical or mental.
Commenters noted that the Department cited this provision in promulgating current 75.300c; one commenter noted that the alignment of grant programs with contractual requirements helped guarantee uniformity in service delivery and ensured that discrimination had no place in any Department-funded program. Another commenter said that this codification was, according to the Department, based on existing law or HHS policy.
Commenters asserted that removing this consistency goes against the Departments assertion, in its proposed rulemaking, that the amendment will increase predictability and stability, and would subject grants and service contracts to different nondiscrimination requirements. Furthermore, commenters have said that the proposed rule amending 75.300c would remove explicit protections from certain communities, leaving grantees with little clarity or guidance.
Response: The Department respectfully disagrees. This final rule amending 75.300c expressly prohibits discrimination where prohibited by federal statute. While the Departments regulations and policies applicable to federal contracts can serve as persuasive authority for its regulations and policies applicable to grants and cooperative agreements, they do not bind the Department in adopting policies that govern its grant programs.
Furthermore, in basing its decision to adopt current 75.300c on the fact that the HHSAR contains such a provision with respect to service contracts, the Department may have failed to give sufficient consideration to the difference between grants and procurement contracts including service contracts under federal law. Under the Federal Grant and Cooperative Agreement Act, a grant or cooperative agreement is an assistance arrangement, where the purpose is to encourage the recipient of
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funding to carry out activities in furtherance of a public goal: A grant agreement is used when the principal purpose of the relationship is to transfer something of value to the recipient to carry out a public purpose of support or stimulation authorized by a law of the United States and substantial involvement is not expected between the agency and the recipient when carrying out the contemplated activity.
31 U.S.C. 6304.18 In contrast, the primary purpose of a procurement contract is to acquire goods or services for the direct benefit or use of the government: A procurement contract including for service delivery is used when the principal purpose of the instrument is to acquire by purchase, lease, or barter property or services for the direct benefit or use of the United States government. 31 U.S.C. 6303.19
Procurement contracts are subject to a variety of statutory and regulatory requirements that generally do not apply to assistance transactions. GAO
06382SP, Appropriations Law 2006, Vol. II, 1018. And, arguably, because the purpose is to acquire goods or services for the direct benefit or use of the government, the Department may have greater latitude to impose nondiscrimination and other requirements on a contractor than on a grantee, when the Departments purpose is to provide assistance through a grant.20
18 A cooperative agreement is used when the principal purpose of the relationship is to transfer something of value to the recipient to carry out a public purpose of support or stimulation authorized by law of the United States and substantial involve is expected between the agency and the recipient when carrying out the contemplated activity. 31 U.S.C. 6305.
19 The Non-Discrimination in Service Delivery clause is applied to solicitations, contracts, and orders to deliver services under HHS programs directly to the public. See HHSAR 337.103e.
These service contracts are procurement contracts where the federal agency provides assistance to specified recipients by using an intermediary. They are procurement contracts: The agency is acquiring the services for the direct benefit or use of the United States government because it is buying the intermediarys services for its own purposes, to relieve the agency of the need to provide the advice or services with its own staff. See S. Rep. No. 97
180, 3 1981 What is important is whether the federal governments principal purpose is to acquire the intermediarys services, which may happen to take the form of producing a product or carrying out a services that is then delivered to an assistance recipient, or if the governments principal purpose is to assist the intermediary to do the same thing.
Where the recipient of the award is not receiving assistance from the federal agency but is merely used to provide a service to another entity which is eligible for assistance, the proper instrument is a procurement contract..
20 In the proposed rule, the Department expressed concern that the existence of the referenced complaints and legal actions created a lack of predictability and stability for the Department and stakeholders with respect to the viability and
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Comments: With respect to religious liberty issues and RFRA, some commenters opposed the proposed rule based on their view that religious freedom exemptions do not belong in healthcare where lives may be at stake, or in science and medical procedures.
Another commenter contended that the proposed rule would allow religious groups to discriminate, to the detriment of children needing foster care services.
Another disagreed that the 2016 Rule violated religious freedom or RFRA, or required remediation for that reason.
Other commenters contended the proposed rule would permit religious discrimination, including against beneficiaries and participants in direct federally funded programs, or opposed the proposed rule because religious freedom should not be pursued with discriminatory regulations or policies.
Another claimed that the proposed rule is based on a false premise that protecting minorities is inconsistent with RFRA. Some commenters opposed the proposed rule, asserting that it is unconstitutional and violates the Establishment Clause or the separation of church and state; another commenter contended that it would also violate the Equal Protection and Due Process components of the Fifth Amendment.
Conversely, many commenters supported the proposed rule because it protects the religious freedom of faithbased organizations that provide services in federal programs. They stated that the proposed rule corrected the RFRA violations in the 2016 rule, alleviated discrimination against faithbased organizations, and would protect against religious discrimination.
Another commenter supported the proposed rule because the current rule may violate the Free Speech and Free Exercise Clauses of the U.S.
Constitution. Some commenters supported the proposed rule because it is a regulation that frees up longstanding faith-based organizations to help the public good. A number of commenters, specifically addressing foster care and adoption or other child welfare programs, supported the proposed rule to prevent government discrimination against religious enforcement of the current 75.300c and d. 84
FR at 638132. The Department recognizes that, because Congress has been selective in imposing specific nondiscrimination requirements with respect to certain grant programs, grantees may see even the application of statutory nondiscrimination requirements as unpredictable. However, under 75.300a, the Departments awarding agency is required to communicate to the non-Federal entity all relevant public policy nondiscrimination requirements and to incorporate them either directly or by reference in the terms and conditions of the Federal award.

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