The grant contract is going to define a lot of important things:
- This is the document that will define the line of credit that must be provided. If an ISP has elected a line of credit that can be decreased over time, make sure that contract defines the specific events that will allow for a reduction in the size of the line of credit.
- The contract is going to define the specific environmental studies that are required, along with the timing of the environmental work. A lot of BEAD grant recipients are going to be disappointed if they are required to complete time-consuming environmental studies before starting any other work. Note that just like the rest of the industry, the folks who do environmental studies are likely to get quickly backlogged with BEAD work and may take a lot longer than normal.
- The contract is going to define how the Broadband Office envisions implementing the many issues that were in the grant application. Regardless of what an ISP might have proposed in the grant application, the Broadband Office is going to try to use the contract to impose their will for items like setting rates. It’s important to note that an ISP doesn’t get what they proposed in the BEAD grant application – the real negotiation for how the grant is going to work happens in agreeing to a contract.
- Perhaps the most important part of the contract is that it is going to define how the ISP will get reimbursed for completed work. There are many States that are talking about reimbursing ISPs based on meeting specific milestones. Be very careful to understand specifically what this means, because it might mean waiting for many quarters, or even a year before seeing a check out of the grant office. The natural inclination of ISPs is to order all of the materials to build a network when the grant is awarded – but that is not a good idea if the payments for that material isn’t coming for a long time. Note that payments tied to milestones likely means an ISP must front all of the money for engineering and labor long before reimbursements are made. This is a use of cash that ISPs might not be expecting. The ideal reimbursement plan is one that pays for invoices on a monthly or quarterly basis as grant work is completed.
- The grant application is going to define the terms of grant compliance. For example, the BEAD grants require a lot of details concerning the grant labor force that haven’t been included in previous grants. The contract is going to define how the ISP proves to the Broadband Office that it is complying with the many BEAD requirements. In the case of labor, and many other requirements, documented full compliance is likely going to be required before a Broadband Office ever writes the first reimbursement check.
- The contract is likely to have an expected contract completion date. The contract might require an ISP to finish the construction in the time that the ISP proposed in the grant application – while also imposing delays with things like environmental studies, compliance, and reimbursement rules that might make it hard for the ISP to meet that schedule.
It’s important to note that ISPs are not required to sign the contract first offered to them. A grant contract is like any contract, and the terms can be negotiated – with the caveat that a Broadband Office can’t negotiate away requirements that were included in the law that created the BEAD grants. Expect to be shocked by some of the requested contract terms included in the first draft of the contract.
Finally, note that signing a contract with terms you don’t like is still binding. There have been ISPs that have walked from other grant programs when the offered contract was too harsh. Don’t be in such a hurry to get started that you sign a contract you can’t live with.