Research Administration Office

University of California


Operating Guidance

No. 94-17

August 5, 1994

Subject: California State Defense Conversion Matching Grant Program: Contracts with the State Employment Training Panel and the Employment Development Department


The State of California established the California State Defense Conversion Matching Grant Program to provide State matching funds for solicitations from the federal Technology Reinvestment Project (TRP). The Defense Conversion Matching Grant Program provides matching grants and technical assistance to California entities qualifying for federal funds under the TRP and other programs related to economic conversion.

The Office of Strategic Technology in the California Trade and Commerce Agency, in conjunction with three State Regional Technology Alliances, make up the statewide network for implementing this program. Whenever the TRP issues a solicitation which requires State matching funds, the State Defense Conversion Grant Program also issues a solicitation, such as the one enclosed, which provides information for obtaining the State matching dollars. While the enclosed solicitation was for the June 30, 1994 TRP deadline, it provides general information on the State agencies which participate in the matching grant program and the kinds of projects they are currently interested in funding.

In addition to the four State agencies listed on the June 30th solicitation, the California Environmental Protection Agency and the California Energy Commission also provide matching dollars for selected TRP solicitations. They will be participating in the summer TRP solicitation. Agency staff listed an be contacted directly for more information about their funding priorities and program requirements.

While all of these State agencies' contracts with the University contain terms and conditions which need to be reviewed and negotiated for compliance with University policies and procedures, two in particular, the Employment Training Panel (ETP) and the Employment Development Department Job Training Partnership Act (JTPA), require very careful scrutiny and may be difficult for campuses to implement. This includes funding from either ETP or JTPA to local Private Industry Councils (PICs). The purpose of these programs is to train or retrain workers and place them in employment. Payments are based on successful completion of training, placement, and job retention. This performance based standard means that there is no assurance that all costs incurred by the campuses under these programs will be paid. Specific details on the requirements of these programs are provided below.

Employment Training Panel

The purpose of this program is to retrain workers who are in danger of being laid off as a result of technological advancements or competition or to train unemployed workers. It is funded by a special tax in the State Unemployment Insurance Fund and only employers who pay the additional tax are eligible to participate. Generally public employees cannot be retrained under this fund nor can job placements be with public employers be credited. The basic requirements are completion of a minimum of 100 hours of training and job retention for at least 90 days at the ETP minimum wage currently set at $8.31 per hour for retrainees and lower for new hires.

There are basically two ways for campuses to participate in this program. One is a the contractor with ETP for training new hires. In this role, the campus would be responsible for recruitment, selection, training, and placement of trainees. As payment is based upon successful completion of training and job retention, this type of ETP contract creates a high risk financially for the University. If the trainee does not remain on a job for 90 days, all payments made for that trainee must be returned. The chances of not recovering full costs is significant, as some campuses are now experiencing.

Recognizing these difficulties, ETP recently changed its regulations to provide incentives for programs to participate in new-hire projects. ETP regulations now allow the training agency and consortium contractors who undertake new-hire training programs to recoup the entire ETP funding amount for the placement and retention of 60 percent of the original number of trainees. Once this goal is achieved, the contractor may receive up to an additional 10 percent bonus for a specified number of trainees over and above the 60 percent goal.

ETP has extensive invoicing, recordkeeping, and documentation requirements and the agency restricts how much administrative costs it will pay to comply with these requirements. Both direct administrative costs and indirect costs must either be figured into the fixed price per trainee or itemized in a line item budget within the restrictions ETP will reimburse them. ETP does not pay the full applicable campus indirect cost rate.

The second, and financially safer, way for campuses to participate in ETP is as the training subcontractor to an employer. The campus would either retrain the employer's employees for placement back with the employer or train new hires for the employer. In either case, the subcontract should make it clear that the University would be paid for each successful training completion regardless of employment which would limit the University's financial liability. The employer would be responsible for the 90-day job retention requirement. There are still extensive recordkeeping and invoicing requirements with this method. The employer, as prime contractor, would be responsible for more of the administrative requirements. Again, however, reimbursement for any administrative costs, both direct and indirect, is limited.

Charles Lundberg, ETP Marketing Director, is available to meet with campus program and administrative staff to provide technical assistance on the ETP regulations prior to developing a contract with ETP. His telephone number is: (916) 653-1662.

Job Training Partnership Act and Private Industry Councils

The Job Training Partnership Act (JTPA) under the Employment Development Department provides its funding at the local level through the local Private Industry Council (PIC). The PIC has targeted specific groups of unemployed workers such as those in the aerospace industry, for retraining and job placement. As with the ETP, payment is based on successful completion of training, job placement, and retention. There are, however, more variables in JTPA which are determined-by the requirements of the local PIC and the contractor's proposal. Minimum wage can be lower and job retention may be for only 30 days. Previous payments do not have to be returned if the trainee does not stay on the job for 30 days, but final payment is tied to completion of the retention period.

The cost limitations are 15 % maximum for administrative costs including both direct and indirect, 50% minimum for training, and 255% maximum for job placement assistance. The local PIC determines if it will provide payment on a fixed price basis with payment at benchmarks or on a cost reimbursement basis. Again, the administrative recordkeeping and invoicing requirements are quite burdensome so that the amount allowed for administrative may have to be subsidized by the campus. Indirect costs are limited. Campuses currently participating in JTPA projects have not fully recovered the amounts contracted for.

As with ETP, there is less financial risk for the University if campuses contract only to provide the training and are not responsible for job placement, but there is still some financial risk as trainees may quit or find work before the training is over so that the payment per trainee is reduced.

Campus Actions

Because the programmatic requirements of the JTPA and the ETP outlined above are based on their legislation and board policies, there is little that can be done to alleviate the financial risk and administrative burden inherent in these programs. Campuses have been able to negotiate the reporting burdens onto the prime contractor. Whether payment provisions are negotiable depends on the local PIC. All campuses require approval of a dean or equivalent to provide a statement saying that they understand the financial liability these contracts could incur and that the department or division involved will be responsible for any losses resulting from such contracts.

Refer: Samuela A. Evans

(510) 987-9849

Subject Index: 02

Organization Index: S-115

David F. Mears

Director, Research

Administration Office

Enclosures [not scanned]


Belle Cole

Carol McClain