Matching funds can come directly from the grant applicant or can be provided by local and state governments using funding from the CARES or the ARPA programs. The BEAD rules don’t allow matching contributions from other federal sources such as the FCC Universal Service Fund, ReConnect grants, or the RDOF subsidy awards. The BEAD rules allow federal broadband loans to be used to supply the matching funds.
While the grant rules allow matching to come from the CARES or ARPA money, there is a big catch. States are required to incentivize matching funds to be directly funded by entities with the financial wherewithal to make such contributions. This means a State might penalize an applicant with a good balance sheet from using state and local matching funds in an application. This is an interesting feature that means that big corporate applicants or other entities with a strong balance sheet probably should be prepared to directly fund all matching and not use other grants as matching. One way to think about this rule is that the NTIA wants to reward applicants that put skin in the game. They don’t want to see entities that come with 75% BEAD grants and 25% local grants. I know that the big ISPs and other strong entities like larger electric cooperatives are seeking to make partnerships to get access to local grant funds – but this rule might mean that is a bad idea.
There is another provision that I think a lot of grant applicants are going to find disturbing. States are required to incentivize matches of more than 25%. This brings an aspect of what feels like the reverse auction into the process, meaning entities willing to contribute higher matching will gain a preference over applicants bringing 25% matching. I label this as disturbing because this could be a way for the well-heeled giant ISPs to snag a lot of grant awards – they can outbid other applicants by bringing more than 25% matching funds. However, unlike a reverse auction, an outbid applicant gets no opportunity to amend their first proposal and make a counter-off. This makes the BEAD application feel like a blind, one-round reverse auction.
At the other extreme, a State has the ability to waive any matching requirements, particularly for small applicants or for areas with extremely high costs. If not done well, this could really gum up getting funding to high-cost areas. Would somebody offering a 5% match automatically beat somebody that is asking for the match waiver?
The BEAD grants also allow for in-kind matches. These are non-cash donations of property, goods, or services that meet federal audit standards. In-kind matches can be complicated and might include things like employee time or volunteer services; equipment; supplies; indirect costs; computer hardware and software; use of facilities; or waiver of fees associated with access to rights of way, pole attachments, conduits, easements, or access to other types of infrastructure. These are worth considering. For example, it would count as a non-cash in-kind match if a local government provided free permitting for a grant project.
These various matching rules add another layer of complication to the grant process. Applicants now have to worry if pursuing local matching funds from ARPA will hurt their chances of winning. Applicants must worry if some big ISP offers more than a 25% match to outbid them to grab a market. A lot of the answers to these questions will depend upon how a given state interprets the NTIA rules – it won’t be surprising to see these requirements handled differently by state. This means that it’s going to be vital to understand the nuances of what your state is proposing because the grant rules are not going to be the same everywhere.