concept proposals procedures seeking advanc payment for Research and Dev...

United States
Department of
Agriculture

Federal Crop
Insurance
Corporation

FCIC-17030 (06-2017)

APPROVED
PROCEDURES
FOR SUBMISSION
OF CONCEPT
PROPOSALS
SEEKING
ADVANCE
PAYMENT OF
RESEARCH &
DEVELOPMENT
COSTS
Effective upon approval until
obsolete

RISK MANAGEMENT AGENCY
KANSAS CITY, MO 64133
TITLE: APPROVED PROCEDURES FOR NUMBER: FCIC-17030
SUBMISSION OF CONCEPT PROPOSALS
SEEKING ADVANCE PAYMENT OF
RESEARCH AND DEVELOPMENT
COSTS
EFFECTIVE DATE: Upon Approval Until
ISSUE DATE: June 13, 2017
Obsolete
SUBJECT:
OPI: FCIC Board of Directors
APPROVED:
Provides the standards for developing and
RICHARD
submitting concept proposals to the FCIC
FLOURNOY
Board of Director for consideration of
reimbursement for research and
Deputy Administrator for Product
development costs.
Management

Digitally signed by RICHARD FLOURNOY
DN: c=US, o=U.S. Government,
ou=Department of Agriculture, cn=RICHARD
FLOURNOY,
0.9.2342.19200300.100.1.1=12001002203518
Date: 2017.06.13 11:03:08 -05'00'

REASON FOR ISSUANCE
This handbook is issued to provide approved standards for the submission of concept proposals
seeking advance payment of research and development costs. All concept proposals submitted to the
FCIC Board of Directors for approval of advance payments must be submitted in accordance with this
handbook.

June 2017

FCIC-17030

TP 1

APPROVED PROCEDURES FOR SUBMISSION OF CONCEPT PROPOSALS SEEKING
ADVANCE PAYMENT OF RESEARCH AND DEVELOPMENT COSTS
CONTROL CHART
Approved Procedures for Submission of Concept Proposals Seeking Advance Payment of Research
and Development Costs
TP
TC
Text
Exhibit
Exhibit
Directive
Date
Page(s)
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Page(s) Number
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Number
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Entire Handbook
August 2016 FCIC-17030
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Current
Index

Entire Handbook
1-2

1-2

1-10

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FCIC-17030

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FCIC-17030

FILING INSTRUCTIONS
This handbook replaces FCIC-17030, Approved Procedures for Submission of Concept Proposals
Seeking Advance Payment of Research and Development Expenses, dated August 2016. This
handbook is effective upon approval and until obsolete.

June 2017

FCIC-17030

TP 2

APPROVED PROCEDURES FOR SUBMISSION OF CONCEPT PROPOSALS SEEKING
ADVANCE PAYMENT OF RESEARCH AND DEVELOPMENT COSTS
TABLE OF CONTENTS
PAGE NO.
PART 1
1
2
3
4-10
PART 2

GENERAL INFORMATION AND RESPONSIBILITIES
Basis, Purpose, and Applicability .............................................................................................. 1
Confidentiality ........................................................................................................................... 1
Timing and Format .................................................................................................................... 1
(Reserved)
SUBMISSION STANDARDS

11 Contents of a Complete Concept Proposal ................................................................................ 2
12 Progress Reports ........................................................................................................................ 5
13 Presentation to the Board.... ....................................................................................................... 5
15-20 (Reserved)
PART 3

REVIEW AND CONSIDERATION FOR ADVANCE PAYMENTS

21 Review ....................................................................................................................................... 6
22 Advance Payments.....................................................................................................................7
23-30 (Reserved)
PART 4
31

APPROVED CONCEPT PROPOSALS
Development of a Sumbission from an Approved Concept Proposal .....................................10

EXHIBITS
1
2

June 2017

Acronyms and Abbreviations .................................................................................................. 11
Definitions ............................................................................................................................... 12

FCIC-17030

TC 1

PAGE INTENTIONALLY LEFT BLANK

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PART 1 GENERAL INFORMATION
1

Basis, Purpose, and Applicability
These procedures establish guidelines and responsibilities of the FCIC and the applicant for the
submission of a concept proposal to the FCIC Board of Directors (Board) for approval of
advance payment of estimated research and development costs as authorized under section
522(b) of the Act.

2

Confidentiality
Refer to 7 C.F.R. § 400.702 for confidentiality requirements. In addition to the requirements in 7
C.F.R. § 400.702, the applicant must state, within the concept proposal, if the name of the
concept proposal may be used in Board documents, including but not limited to, the agenda,
minutes, and Board memoranda. The applicant cannot use false names to mislead the public
regarding the nature of the concept proposal. If permission is not given to use the name of the
concept proposal, the concept proposal will simply be referred to as a “Section 522(b) concept
proposal.”

3

Timing and Format
Refer to 7 C.F.R. § 400.703 for timing and format requirements.

4-10 (Reserved)

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PART 2 SUBMISSION STANDARDS
11

Contents of a Complete Concept Proposal
A complete concept proposal must contain the following material, as applicable, in the order
given.
(1)

The applicant’s name (entity name), tax identification number, D-U-N-S number, address
or primary business location, phone number, and e-mail address.

(2)

A notation that it is a concept proposal submitted in accordance with FCIC procedures
handbook 17030, Approved Procedures for Submission of Concept Proposals Seeking
Advance Payment of Research and Development Costs.

(3)

A summary of the qualifications of the applicant, including:
(a)

Any prior concept proposals or submissions made to the Board under section 508(h)
of the Act;

(b)

The outcome of those concept proposals or submissions including whether such was
approved, the submitter received a notice of intent to disapprove, or if the concept
proposal or submission was disapproved by the Board and the general reasons for the
latter two actions; and

(c)

If the concept proposal or submission was approved by the Board and implemented, a
summary of the volume of sales, risks protected, states authorized, etc., and a copy of
any review or evaluation that may be publicly available to the submitter.

(4)

A detailed description of the concept (policy or plan of insurance) being proposed.

(5)

A detailed description of:
(a)

For the viability and marketability, provide the amount and value of the commodity
on a national basis (if available) and expected liability in the proposed insured area;

(b)

The need for the policy or plan of insurance that includes:
(i)

A description or complete explanation of what the issue is that the concept
proposal is to specifically address;

(ii)

A discussion of how it has conclusively been determined to be a legitimate issue
citing pros and cons of the issue, benefits, and anticipated impacts to all parties;

(iii) Proposed steps that will be employed to resolve the issue;

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11

Contents of a Complete Concept Proposal (Continued)
(c)

The availability of any insurance product, program, or compensation scheme in either
the private or public sector covering the same risks for the commodity;

(d)

Expected demand for the policy or plan of insurance among affected producers.
Provide the following:

(e)

(i)

Information about the risk exposure and what producers are currently doing to
manage their risk; and

(ii)

What producer needs would be fulfilled by the proposed policy or plan of
insurance (only original, not form or substantially copied, letters of support from
interested parties may be submitted);

A marketability assessment from the applicant AIP who is part of the applicant and
from at least one other AIP. If a marketability assessment is not provided by a
separate AIP who is not part of the applicant, the applicant must provide information
regarding the names of the persons and AIPs contacted and the basis for their refusal
to provide the marketability assessment. The marketability assessment will include:
(i)

An assessment of whether producers will buy the proposed 508(h) submission;

(ii)

An assessment of whether AIPs and their agents will want to sell and service the
proposed 508(h) submission;

(iii) An assessment of the risks associated with the proposed 508(h) submission and
its likely effect under the SRA;
(iv) Estimated computer system impacts and costs;
(v)

Estimated administrative and training requirement and costs;

(vi) An analysis of the complexity of the product; and
(vii) What, if any, efficiency will be gained or potential effects on the workload of
AIPs or others participating in the program.
(6)

One of the criteria for approval is that the concept will likely result in a viable and
marketable policy or plan of insurance. Therefore, a complete concept proposal must
contain:
(a)

June 2017

An identification of the risks the proposed policy will cover, an explanation of how
the identified risks are insurable under the Act, and an explanation of how a loss will
be triggered for the proposed policy;

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Contents of a Complete Concept Proposal (Continued)
(b)

A summary of the data sources available and examples of the available data, that
demonstrate a submission, based on the concept proposal, can reasonably be
developed. Include an explanation of the strengths and limitations of the proposed
data including the expected long term availability of the data and potential issues that
may limit the availability of the data;

(c)

A description of the long-term sustainability of the proposed policy or plan of
insurance (i.e. the submitter's estimation of whether the policy or plan of insurance
will be appropriate for several years and if the necessary data and information needed
to support the policy or plan of insurance will likely continue to be available);

(d)

The type of rating and pricing methodologies under consideration and a preliminary
assessment that actuarially appropriate premium rates and prices can be established
for the risks to be covered using these methods and the data available to support such
methods (indicate the rating and pricing methodology that appears to be the most
appropriate given the available data);

(e)

The anticipated or most likely formulas for liability, premium, and indemnity for the
proposed concept and an explanation of how these formulas will work given:
(i)
(ii)

(f)

(7)

June 2017

The risks to be covered; and
The available data.

A statement and supporting explanation of whether one of the current reinsurance
agreements (Standard Reinsurance Agreement or Livestock Price Reinsurance
Agreement) will likely be appropriate to the policy or plan of insurance to be
developed from the concept proposal, or if a new reinsurance agreement will be
required.

The amount of time the applicant has expended to date and total research and development
costs the applicant expects to incur to develop the idea from the concept proposal into a
complete submission as required in 7 C.F.R. § 400.705. To assist the Board in determining
reasonableness of the estimate of research and development costs for its consideration of
advance payments of a portion of research and development costs, general estimates of
expenses for the following categories are required.
(a)

The number of hours expected to complete a submission as required by 7 C.F.R. §
400.705 by type of work and the hourly rate of each occupation.

(b)

An estimate of wage and benefit costs per hour (by employee) applicable to the
occupations in item (a).

(c)

An estimate of expected contracted expenses.

(d)

An estimate of professional expenses by occupation.

(e)

An estimate of computer system expenses.
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11

Contents of a Complete Concept Proposal (Continued)
(f)

An estimate of travel expenses that will be incurred.

(8)

A statement that “(insert applicant name) will provide progress reports as required by the
Board.”

(9)

A statement of whether the applicant intends to request:
(a)
(b)
(c)

Reinsurance;
Risk subsidy; or
A&O subsidy.

(10) A statement of whether the submitter wants the concept proposal to remain confidential.
12

Progress Reports
If required by the Board, the applicant will provide progress reports that include:

13

(1)

The status of research and development efforts in the process of completing the submission
according to 7 C.F.R. § 400.705; and

(2)

Any other information the Board deems relevant.

Presentation to the Board
Refer to 7 C.F.R. § 400.707 for information on presenting Concept Proposals to the Board.

14-20 (Reserved)

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PART 3 REVIEW AND CONSIDERATION FOR ADVANCE PAYMENTS
21

Review
(1)

In addition to the requirements in 7 C.F.R. § 400.706(a), prior to providing a concept
proposal to the Board, RMA will cross-reference the DO NOT PAY list to ensure the
applicant is eligible for reimbursement. If all the requirements contained herein and in 7
C.F.R. § 400.706(a) are met, RMA will forward the concept proposal and results of RMA’s
initial review to the Board for determination of completeness.

(2)

For concept proposals sent for review, the reviewers will provide, at a minimum:

June 2017

(a)

An assessment of whether the concept proposal meets the requirements in 7 C.F.R §
706(c)(4);

(b)

A determination of whether the proposed policy or plan of insurance meets the
requirements in 7 C.F.R § 706(c)(5);

(c)

A determination of whether all other conditions in subparagraph 1 (2) have been met;

(d)

A determination of whether the proposed policy or plan of insurance would be in the
best interests of producers and taxpayers;

(e)

A determination of the impact of the proposed policy or plan of insurance on
producers, the marketplace, taxpayers, and government (estimated impacts on the
delivery system should be included);

(f)

An analysis of the past experience available for a similar policy or plan of insurance
covering the same commodity and risks, if available;

(g)

A determination explaining how the risk(s) covered by the policy or plan of insurance
conform to the Act and RMA’s regulations, and procedures;

(h)

an assessment of whether the data identified as available for rating and pricing
purposes is from a credible source, would be available as necessary in the future, and
is appropriate and sufficient for the proposed rating and pricing methodologies;

(i)

an assessment that the actuarial methods identified as possibilities for rating and
pricing are actuarially appropriate and will work with the specific data identified as
applicable;

(j)

An assessment on any additional items the Board may deem necessary;

(k)

Any additional information determined relevant that the reviewer identifies as of
potential interest for the Board consideration; and

(l)

A recommendation for approval or disapproval of the concept proposal for advance
payment.

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21

Review (Continued)
(3)

22

In addition to the other provisions of these procedures and the provisions contained in 7
C.F.R. part 400, subpart V, the Board may disapprove advance payments to applicants who:
(a)

Have submitted a prior concept proposal or submission that did not result in a
marketable policy or plan of insurance, was not approved, received a notice of intent
to disapprove, or was no longer reinsured due to a problem or lack of adequate
performance;

(b)

Have submitted a prior concept proposal or submission that was of such of poor
quality that it was not sent for expert review; or

(c)

Are determined to be ineligible to receive federal payments.

(4)

The Board may disapprove an advance payment to an applicant who submits the same
concept proposal to the Board multiple times.

(5)

The time periods and rules specified in 7 C.F.R. § 400.706 (h), (i), and (j) for submissions
apply to all concept proposals.

Advance Payments
(1)

All advance payments are subject to the availability of funds under section 522(b) of the
Act.

(2)

To assist the Board and the submitter in tracking costs and determining reasonableness of
costs, the submitter is required to notify the Board in writing when 90 percent of the
estimated costs in the Estimated Cost Budget provided with the Concept Proposal,
submission, or maintenance request have been expended, and actual costs are expected to
be incurred that will exceed the original Estimated Cost Budget.
(a)

June 2017

The written notice provided by the submitter must include:
(i)

A new Estimated Cost Budget for completion of the work; and

(ii)

A detailed explanation and justification as to why the total costs will be higher
than the budgeted amount.

(b)

The Board will review the notice and provide feedback as appropriate.

(c)

Any costs exceeding the original estimate of costs does not mean those costs are not
reasonable or justified. In the Board meeting, the submitter will be provided an
opportunity to explain to the Board the basis for the increased estimated costs. After
discussion with the submitter, the Board may take actions it deems appropriate
regarding the necessity of additional expenditures and the viability of the product.

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22

Advance Payments (Continued)
(d)

The Board understands that during the development process, unexpected issues may
arise causing costs to escalate, so this requirement is not intended to discourage the
efforts of submitters in bringing products to fruition. Reasonable cost overruns
generally involve expenses that could not be anticipated at the time the budget was
submitted, or improvements that are discovered during the research or review process.
Example 1: A product relies on National Agricultural Statistics Service (NASS) data.
During the development process NASS announces that it will no longer
collect the data. The submitter must do additional research to discover
an alternative data source. The research will increase the budget for the
project to an amount higher than the Board approved amount so the
submitter takes a revised actual and estimated budget to the Board for
discussion.
Example 2: The product proposal was to offer the new product in 3 states. However,
after consultation with the growers, the submitter believes it will be
prudent to add two more states to better serve producers and test the
product. Additional listening sessions will be needed in the added states
to gain the necessary underwriting information. The research will
increase the budget for the project to an amount higher than the Board
approved amount so the submitter brings a revised actual and estimated
budget to the Board for discussion.

(e)

(3)

At any time after an applicant has been approved for an initial advance payment for
research and development costs of up to 50 percent, the applicant may submit a one-time
request for an additional advance payment of up to 25 percent by submitting a written
request.
(a)

June 2017

In accordance with section 400.705(j) of the submission regulation, failure of the
submitter to provide the required notice to the Board may result in the denial of
reimbursement in amounts that exceed the amount contained in the original
Estimated Cost Budget.

The request must include a progress report in accordance with paragraph 12 and the
additional amount of advance payment being requested.

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22

Advance Payments (Continued)
(b)

An explanation of how the intended policy or plan of insurance will provide coverage
for a region or crop that is underserved by the Federal crop insurance program,
including specialty crops.

(c)

The reason the additional funds are needed.

(d)

The Board will evaluate the request to ensure the concept proposal will provide
coverage for a region or crop that is underserved, including specialty crops, and the
submitter is making satisfactory progress towards developing a viable and marketable
508(h) submission.

23-30 (Reserved)

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9

PART 4 APPROVED CONCEPT PROPOSALS
31

Development of a Submission from an Approved Concept Proposal
(1)

If a concept proposal is approved by the Board for advance payment, the applicant is
responsible for developing a complete 508(h) submission as specified in 7 C.F.R. part 400,
subpart V. All aspects of 7 C.F.R. part 400, subpart V apply to the submission.

(2)

If the Board approves an advance payment for a concept proposal, it will establish a date by
which the applicant will present a complete submission in accordance with section 508(h)
of the Act and 7 C.F.R. § 400.705 to the Board for consideration of approval.

(3)

If the concept proposal is successfully developed into a submission and approved as a
policy or plan of insurance under section 508(h) of the Act, the applicant will be eligible for
a payment of reasonable research and development costs, less any payments made pursuant
to paragraph 22.

(4)

Except as specified in subparagraph 31 (5) below, if a concept proposal is developed into a
submission that is not approved by the Board under section 508(h) of the Act, FCIC will:

(5)

June 2017

(a)

Not seek a refund of any payments made under section 522(b); and

(b)

Not make any further research and development cost reimbursements associated with
the submission.

If an applicant receives an advance payment for a portion of the expected research and
development costs for a concept proposal and fails to fulfill the obligation to provide a
complete submission of sufficient quality in accordance with section 508(h) of the Act and
7 C.F.R. § 400.705, without just cause, the applicant must return the amount of the advance
payment plus interest at the rate of 1.25 percent simple interest per calendar month. The
Board will provide a notice of non-compliance to the applicant and allow 30 days for the
applicant to respond prior to requesting a refund of the advance payment with interest.

FCIC-17030

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Exhibit 1
Acronyms and Abbreviations
The following table provides the acronyms and abbreviations used in this handbook.
Approved
Acronym/Abbreviation
C.F.R.
FCIC
RMA
USDA

June 2017

Term
Code of Federal Regulations
Federal Crop Insurance Corporation
Risk Management Agency
United States Department of Agriculture

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11

Exhibit 2
Definitions
The definitions from 7 C.F.R. part 400, subpart V apply to these procedures unless otherwise specified
in this exhibit. In addition to the definitions in subpart V:
Meaningful coverage provides predictable indemnities in the event an insured cause of loss occurs,
which is sufficient to recover a portion of the loss that is consistent with the value of the insured
commodity and the coverage level selected by the insured.
Originality means the materials do not use as a foundation of development or drafting an existing
policy or plan of insurance, or offer innovative risk management protection that is not currently
available under any plan of insurance. For example, creating a new plan of insurance such as
Livestock Gross Margin would be considered original as opposed to adding a new crop to an existing
plan of insurance such as wheat to Revenue Protection. It is possible that certain aspects, such as a
pricing methodology, may be considered original and this will be taken into consideration when
determining complexity.
Reasonable expected market prices are prices that are consistent with prices a producer would expect
to receive in the open market.
Scope is the potential geographic area(s), national or regional, to which the proposed policy is
applicable (the initial approved area where a new policy is placed does not affect the scope).

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