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General Counsel (023)
Research Corporation Use Of Appropriated Funds
ASCMD for Research and Development (12)
February 16, 1996
QUESTIONS PRESENTED: May VA use funds appropriated to the Department to reimburse VA
nonprofit research corporations for services provided VA by
corporation employees?
DISCUSSION:
1. You have asked whether VA may transfer (pursuant to 38
U.S.C.
7362) appropriated funds to the nonprofit research corporations (NPRCs) for the purpose of paying the salaries of Research
Corporation personnel. This question arises, you have told us
informally, in instances when Research Service has sufficient funds
to pay for full-time equivalent employees (FTEE), but cannot do so
because of FTEE ceiling limitations. We have concluded that the only
instance when VA can transfer appropriated funds to the NPRCs is
through use of appropriate VA contract authority an discussed below.
BACKGROUND:
2. NPRCs are authorized by Congress pursuant to 38
U.S.C. 7361.
They are subject to specific statutory restrictions. See generally,
38 U.S.C. 7361(a) and 38 U.S.C. 7362. The sole purpose of NPRCs is to
facilitate the research mission of the Department of Veterans Affairs
by providing a flexible funding mechanism for the conduct of approved
research at the medical centers where they have been established. See
38 U.S.C. 7362. Any funds received by the Secretary for the conduct
of research at the medical center other than funds appropriated to
the Department may he transferred to and administered by the NPRC for
that purpose. 18 U.S.C. 7362. Thus, Congress has expressly prohibited
the direct transfer of appropriated funds from VA to the NPRC'S.
Therefore, appropriated funds may not be merely transferred to NPRCs
to permit them to hire employees to work on VA research.
3. We note that Section 17.05 of M-3, Part 1, Chapter 17 states:
"The Corporation may use funds appropriated and available to the
medical center specifically to support VA research. Funds donated to
the General Post Fund specifically to support VA research activities
may be transferred to the Corporation. Appropriated VA funds may not
otherwise be used by or transferred to the Corporation."
Paragraph 17.05 plainly overstates the NPRC's authority to use
funds appropriated to VA for research. The Manual chapter cannot
expand the statutory authority VA has to transfer funds to the NPRCs.
Such transfers are limited to funds other than those appropriated to
the Department by Congress.
Research Corporation Contract Authority
4. While VA cannot transfer appropriated funds to an
NPRC, VA may
be able to enter into certain contracts with an NPRC, subject to VA
contracting authority limitations. NPRCs have authority to enter into
contracts with public and private entities solely to facilitate VA
research. 38 U.S.C. 7364(a)(1). Because VA is a public entity, NPRCs
could enter into contracts with VA.
Limitations on VA Contract Authority
5. Any NPRC contract with VA would be subject to limitations on
VA's contracting authority. For example, VA has authority under 38 U.S.C. 8153 to enter into sharing agreements for specialized medical
services. However, sharing agreements for specialized medical
resources may only be executed "between [VA] health care facilities
and other health-care facilities (including organ banks, blood banks,
or similar institutions), research centers, or medical schools." 38 U.S.C. 8153. As entities created solely to facilitate research, NPRCs
do not meet the definition of research centers (an institution... the
primary function of which is research training of specialists, and
demonstrations and which, in connection therewith, provides
specialized, high quality diagnostic and treatment services for
inpatients and outpatients, 38 U.S.C. 8152 (1)), health-care
facilities or medical schools with which VA could execute a sharing
agreement. VAOPGCADV 57-89 (Sept.15, 1989).
6. In certain limited circumstances, the VA may enter into
contracts with an NPRC for scarce medical specialist services
pursuant to 38 U.S.C. 7409. The definition of scarce medical
specialist which VA may acquire under section 7409 may include
certain research services, see Op.G.C. 2-93,(1-8-93)(the term "scarce
medical specialist" includes medical researchers but does not include
medical equipment, support or resources; see also M-1, Part 1, Ch.34,
paragraph 34.01(b)) however such contracts would be subject to full
and open competition requirements. See 48 C.F.R. 806.302-5(a).
7. The Secretary has statutory authority to enter into "personal
services" contracts pursuant to 38 U.S.C. 513. However, that
authority cannot be used to contract out day-to-day medical care
operations, See VAOPGCADV 14-95 (June 13, 1995). Nor can that
authority be entered into when an employer/employee relationship is
established. See Digested Opinion 4-25-77 (4-8 Contracts-General)
(addressing the predecessor to section 513, section 213, and citing
Comptroller General opinions as to the need to distinguish
independent contractors from the employer-employee relationship). An
employer-employee relationship is established under a service
contract when, as a result of the contracts terms or the manner of
its administration during performance, contractor personnel are
subject to the relatively continuous supervision and control of a
Government officer or employee. Id. Thus, a personal services
contract is proscribed when such a contract merely reflects an
employer-employee relationship. The totality of the facts in a
particular situation determine whether such a relationship exists.
Factors which are indicia of an employer-employee relationship are:
a) serving under the direction and supervision of a Federal
employee;
b) working in space and equipment provided by the Government;
c) having access to agency records and files;
d) analyzing for solution specific agency problems and functions
and presents recommendations and reports;
e) ordinarily serving on more than one occasion on the same
project; and
f) working on dates or at hours set by, or required to be reported
to, the agency.
Id. in instances where NPRC employees would be providing services
to VA under one or more of the above conditions, an employer-employee
relationship may be established. Under such circumstances, contracts
are prohibited.
Held: VA cannot merely transfer appropriated funds to the NPRCs to
pay for the personal services of the Corporation employees. VA may
not enter into a sharing agreement with the NPRCs. Pursuant to 38 U.S.C. 7409, VA may contract with the NPRCs for scarce medical
specialist services (but not medical equipment, support or
resources). Such contracts are subject to full and open competition
requirements. VA may contract with NPRCs pursuant to 38 U.S.C. 513
for nonmedical services and equipment but not for day to day medical
care operations.
Mary Lou Keener
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