1. Is approval for any such grants manual is required to be provided by Contracting Officer?
2. If yes, under what regulation is it required?
3. What is the reason behind if it has to be approved by contracting officer, since it is a contractor's document? Does this not shift responsibility on the contracting officer for contractor's work?
Based on the information provided, it's unclear who the contract is with and there are not enough specifics about what's in the contract to determine who has approval authority and what the obligations and responsibilities are for either the government or the contractor under the contract. Normally, the Contracting Officer (CO) is the approval authority unless this specific authority was delegated to a Contracting Officer Representative (COR). Even if the CO has delegated this to the COR, the CO is ultimately responsible for ensuring we get what we paid for, but the COR is delegated to make sure we get what we asked for, especially since they may be the only ones on site. If this document is not a deliverable on your contract, but rather it's what a reasonable and prudent contractor would need to do in order to perform the work required by the contract, then this may be the contractor's responsibility, and, in that case, it would be inappropriate for the Government to approve their process unless the contract stated otherwise.
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I recommend talking to the CO because there should be a something in the contract, maybe a CDRL that discusses the approval process for your contract and, if necessary, your legal advisor if you still have questions regarding the rights and responsibilities of either party under the contract.