United States: OFCCP's First Published Opinion Letter: Pell Grants Do Not Make Universities Federal Contractors

Last Updated: June 10 2019
Article by Guy Brenner

On May 23, 2019, OFCCP issued its first published opinion letter addressing whether universities and other post-secondary higher educational institutions become covered federal contractors by serving as a "conduit" for Pell Grants. According to the OFCCP, "solely serving as a conduit for Pell Grants does not render a post-secondary higher education institution a covered federal contractor..."

The opinion letter's conclusion is not surprising, but given the dearth of clear guidance it provides institutions of higher education with a welcome definitive statement of the agency's current view on the matter. As OFCCP explains in its letter, Pell Grants – federal subsidies awarded as financial aid to low income college students in order to defray the cost of attending school – do not make a university a covered federal contractor because "grants do not constitute federal procurement contracts." OFCCP noted that its implementing regulations define government contracts 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 agency concluded that because Pell Grants are issued "to a recipient in order to further 'a public purpose of support or stimulation[,]'" they do not constitute a government contract that would confer federal contractor status. Therefore, the opinion letter concludes, "solely serving as a conduit for Pell grants" does not render universities, colleges, or other post-secondary higher educational institutions federal contractors for purposes of OFCCP regulations.

In late 2018, OFCCP announced that it would adopt the practice of issuing opinion letters as part of its ongoing efforts to enhance compliance assistance for contractors. As we reported, OFCCP's stated goal was to "provide additional compliance assistance and guidance regarding OFCCP's laws and regulations in a manner that employees and employers can easily access and reasonably rely upon, as they seek to understand their rights and obligations under the law." The OFCCP's opinion letter directive provides that "[a]s a matter of prosecutorial discretion, OFCCP also would consider whether a contractor acted consistently with an Opinion Letter ... when determining whether to cite a violation for related actions." As such, even though opinion letters are not legally binding, they do provide contractors some comfort as they attempt to discern the scope of their OFCCP obligations.

Even though OFCCP's first opinion letter has limited applicability to the contractor community as a whole, we expect future opinion letters to address issues applicable to all contractors. As such, our readers are well advised to stay informed of OFCCP's opinion letters. We will continue to report on note-worthy opinion letters as they become available.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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