OFCCP issues its first opinion letter

Does receiving Pell Grant funds make you a contractor?

Last November, the Office of Federal Contract Compliance Programs issued a Directive announcing that it would begin issuing opinion letters to provide easily accessible guidance regarding its laws and regulations.

Recently, the OFCCP made good on its promise and issued its very first published opinion letter

The OFCCP tackled a jurisdictional question that has caused confusion among educational institutions: If a college or university enrolls students who receive Pell Grants, does that make the school a “federal contractor”?

In good news for institutions of higher education, the OFCCP has answered, "No."

The opinion letter clarifies that “solely serving as a conduit for Pell Grants does not render a post-secondary higher education institution a covered federal contractor subject to [Executive Order] 11246, Section 503 [of the Rehabilitation Act of 1973], or [the Vietnam Era Veterans' Readjustment Assistance Act].” 

The OFCCP explained its decision by contrasting the definition of a "grant" with the definition of a "federal contract." The Federal Grant and Cooperative Agreement Act explains that the principal purpose of a grant is to transfer a thing of value to a recipient “to carry out a public purpose of support or stimulation . . ..” Grants are used when “substantial involvement is not expected” between the government and the recipient when carrying out the activity contemplated in the agreement.

Pell Grants are based on financial need and are intended to "make available the benefits of postsecondary education to eligible students." Sometimes the grant money is paid to the student, who in turn pays the educational institution. Other times the grant money is paid directly to the educational institution on behalf of the student. In either case, because Pell Grants merely involve the transfer of funds to finance the students' education, the grants are not considered to be government contracts. 

In contrast, a government contract is defined under OFCCP regulations 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.” 

The OFCCP is off to a good start in providing some additional clarity and transparency through opinion letters. We will continue to keep you up to date as the agency issues more opinion letters.

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