OFCCP's Jurisdiction Related to Pell Grants

May 23, 2019

Dear Name*,

This letter responds to your request for an opinion concerning the Office of Federal Contract Compliance Programs' (OFCCP) jurisdiction. In particular, this letter seeks to address your inquiry and that of other post-secondary higher education institutions as to whether a college's status as a conduit for Pell Grants makes it a covered federal contractor for the purposes of Executive Order 11246, as amended, ("E.O. 11246"), Section 503 of the Rehabilitation Act of 1973, as amended, ("Section 503"), 29 U.S.C. § 793, and/or the Vietnam Era Veterans' Readjustment Assistance Act of 1974, as amended, ("VEVRAA"), 38 U.S.C. § 4212.

BACKGROUND

First originating with the Higher Education Amendments of 1972, Pell Grants, named after Senator Claiborne Pell in 1978, were implemented to "make available the benefits of postsecondary education to eligible students" by providing supplemental educational opportunity grants to students with demonstrated financial need. See 20 U.S.C. § 1070(a)(1)-(5). In addition, the Higher Education Amendments provide supplemental funding to States and institutions of higher education to further increase the availability of financial aid. See id. Federal Pell Grants are defined as supplementary financial assistance "that in combination with reasonable family and student contribution" are designed to meet a percentage of a student's cost of attendance. See id. § 1070a(b)(1)-(2).

GENERAL LEGAL PRINCIPLES

OFCCP enforces E.O. 11246, Section 503, and VEVRAA. Collectively, these laws prohibit covered federal contractors and subcontractors from discriminating on the basis of race, color, sex, sexual orientation, gender identity, religion, national origin, disability, and protected veteran status. Contractors also are prohibited from discriminating against applicants or employees because they inquire about, discuss, or disclose their compensation or that of others, subject to certain limitations. Finally, OFCCP's laws require federal contractors and subcontractors to take affirmative steps to ensure equal employment opportunity in all aspects of their employment practices. Federal contracting agencies must include an equal opportunity clause in their contracts, and prime contractors and subcontractors must include the clause in each of their nonexempt subcontracts. 41 CFR 60-1.4(a), (c); 60-300.5(a), (b); 60-741.5(a), (b).

OFCCP's regulations implementing these laws define a government contract as "any agreement or modification thereof between any contracting agency and any person for the purchase, sale or use of personal property or nonpersonal services." See 41 C.F.R. §§ 60-1.3; 60-300.2; 60-741.2. The term has generally not been extended to arrangements in which the primary purpose is extending help or support by conferring grants or other benefits under Federal assistance programs. Thus, with the exception of federally-assisted construction contracts, which are specifically covered by Part III, Sections 301-304 of E.O. 11246, neither E.O. 11246, Section 503, nor VEVRAA apply to arrangements involving Federal financial assistance. See Partridge v. Reich, 141 F.3d 920, 925-26 (9th Cir. 1998); OFCCP v. USAA Federal Savings Bank, No. 87-OFC-27, ALJ's Recommended Decision & Order on Motions for Summary Judgment, Oct. 4, 1990, pp. 3, 8.

The Federal Grant and Cooperative Agreement Act ("Grant Act"), 31 U.S.C. § 6301, et seq., prescribes certain criteria for uniform use by executive agencies in deciding when to use a contract, a grant, or a cooperative agreement as the legal instrument reflecting a relationship between the United States Government and a State, a local government, or other recipient. See 31 U.S.C. § 6301. The Grant Act requires an executive branch agency to use a procurement contract when "the principal purpose . . . is to acquire (by purchase, lease or barter) property or services for the direct benefit or use of the United States Government . . . ." Id. § 6303(1). The Grant Act requires an executive agency to employ a grant agreement when "the principal purpose of the relationship is to transfer a thing of value" to a recipient in order "to carry out a public purpose of support or stimulation . . . ." as opposed to acquiring by purchase, lease or barter "property or services for the direct benefit of the United States Government." Id. § 6304(1). In addition, a grant instrument is to be used when "substantial involvement is not expected between the executive agency and the State, local government or other recipient when carrying out the activity contemplated in the agreement." Id. 6304(2).

OPINION

Due to their separate statutory definitions, grants do not constitute federal procurement contracts. See University of Rochester v. Hartman, 618 F.2d 170, 176 (2nd Cir. 1980) (holding that a benefit claim was not compensable as a government contract under the Defense Base Act as the Government did not solicit the work nor did it "retain close control over the objectives, methods, or timetable of the project"). As E.O. 11246 applies only to government contracts, defined as "any agreement, or modification of an agreement, between any contracting agency and any person for the purchase, sale or use of personal property or non-personal services[,]" grants, as transfers that do not acquire "property or services for the direct benefit of the United States government" do not constitute federal procurement contracts and therefore are not sufficient to invoke jurisdiction under OFCCP laws and regulations. See 41 C.F.R. § 60-1.3.

Pell Grants involve the government transferring a sum of value to a recipient in order to further "a public purpose of support or stimulation[,]" in this case, that of a percentage of the recipient's education. See 20 U.S.C. § 1070(b)(1); 31 U.S.C. §6304(1). They do not constitute an agreement "for the purchase, sale, or use of personal property or non-personal services," that would qualify for contractor status. Therefore, solely serving as a conduit for Pell Grants does not render a post-secondary higher education institution a covered federal contractor subject to E.O. 11246, Section 503, or VEVRAA.

We trust that this letter is responsive and affords clarification to your inquiry.

Sincerely,

/S/
Craig E. Leen
Director

*Note: The actual name(s) was removed to protect privacy in accordance with 5 U.S.C. § 552(b)(7).

The contents of this document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.

Last updated on May 23, 2019