Tag Archives: OMB

Big Changes in Federal Grants

There was an Executive Order (EO) in August from the White House that made some fundamental changes to the way that federal grants work – some positive and some negative. The EO is titled Improving Oversight of Federal Grantmaking.

The Order instructs the Office of Management and Budget (OMB) to overhaul the Uniform Grant Guidelines (2 C.F.R. Part 200) and other related documents related to all federal grants. The new rules are going to impact every stage of the grant life cycle, from the application process through compliance. The rules don’t only impact future grants but potentially affect all existing grants that are in the process of being implemented. Following are some of the key changes from this EO.

Stronger Oversight and Accountability. Each agency must name a senior appointee who will manage the process for all new grants. Before any new funding opportunity is announced, it must undergo review and approval by the senior appointee. This process mandates input from subject-matter experts, identified by the agency head. Grant announcements must be “written in plain language”. The senior appointee must review all open grant programs every year to assess progress and to make sure the program is still consistent with the agency priorities. Prior to issuing grant awards, the grant panel or program officers who will be making the awards must engage in a meeting with the senior appointee. Until the new review process is in place, agencies are prohibited from issuing new grant opportunities.

Grant Restrictions. Grants cannot be used to fund, promote, encourage, subsidize, or facilitate 1) racial preferences, 2) denial that sex is binary and that sexual preferences are chosen or mutable, 3) illegal immigration, or 4) any initiative that compromises public safety or promotes anti-American values.

Grant Applications. Grant applications must be more accessible and less burdensome. All parts of the application process must be written in plain language. Applications should only include requirements that are strictly necessary for a review of the application. The decision on who wins grants rests with the senior appointee or their designee. Grant awards must be consistent with administration policies and statutory requirements.

Termination for Convenience. All grants must include terms that allow the grant agency to terminate a grant “for convenience”. This means an agency can cancel a grant at any time and doesn’t need a reason. An agency can decide to change priorities and cancel all open grants that don’t meet the new priorities. Current grantees must agree this change for existing grants.

Grant Drawdowns. Grantees will be required to provide a detailed, written justification for each drawdown request. This is to prevent premature use of federal funds and to make sure that disbursements are tied to project milestones and agency oversight.

Limitations on Overhead Costs. The EO directs the OMC to revise the Uniform Guidance to restrict the use of grant funds to cover facilities and administrative expenses. This might include costs like administrative salaries and general institutional support.

What Does This Mean for a Grant Recipient?

It’s positive that grant applications should be easier. Some federal broadband grants have complicated instructions and forms.

The biggest change is that a grant recipient has a new risk that grants that cover multiple years might be canceled before the project is completed. Agencies don’t need a reason to cancel a grant and can do so at their convenience. This adds new risk for accepting a federal grant, with the risk increasing as a project is partially implemented.

It sounds like drawing funds will take more work. Gone will be any grant draws that are not based on actual invoices or milestones.

To some degree, this potentially dilutes grant programs developed by Congress since the Agency in charge of the grant seems to have more discretion in determining the grant rules.

Buy America and BEAD

In the State of the Union speech earlier this year, President Biden made it clear that he wants to see the monies spent on infrastructure projects follow the Buy America rules. The Buy America rules were enacted in 1933. The Act says that purchasing funded by the U.S. government should have a preference for using American-made products. The rules allow for waivers from this provision, but the presumption is that without a waiver that American goods must be used.

The NTIA reacted to the president’s speech by writing a blog talking about the use of the Buy America rules in the upcoming $42.5 billion BEAD grants. The blog states, “The president made clear that while Buy America has been the law of the land since 1933, too many administrations have found ways to skirt its requirements. We will not.”

The NTIA requested waivers from Buy America rules when administering past grant programs, including the recent $1 billion middle-mile grants. The USDA sought a 6-month waiver of these rules that applied to some earlier rounds of the ReConnect grants. But the NTIA has made it clear that it doesn’t see any need for a waiver to buy American fiber optic glass or cable. The NTIA says there should be sufficient time for manufacturers to re-shore or expand U.S. manufacturing to meet the demands from the BEAD grants.

In the requested waiver for the Middle Mile Grant Program, the NTIA identified components of a fiber network that are sourced almost exclusively in Asia. This includes electronics like broadband switching equipment, broadband routing equipment, dense wave division multiplexing transport equipment, and broadband access equipment. It doesn’t seem likely that U.S. vendors are going to step up to create an American source for these components in time to meet the needs of the BEAD grants. And while the BEAD grants are substantial, they are not alone enough inducement to manufacture these goods in this country.

The market reality is that most of the costs of any broadband grant project will be spent on American inputs. The cost of labor is usually the largest component of network costs, and the grants require this work be done by American firms. As the NTIA points out, there are plenty of sources for American fiber and conduit. There are American sources of cabinets, huts, and enclosures. There are American vendors making handholes and pedestals.

But the sticky item is going to be electronics. If the NTIA plays hardball on fiber electronics, it will be nearly impossible that any ISP can fulfill the Buy American provision. I’m not as familiar with where wireless electronics are manufactured, but I assume that WISPs have a lot of the same concerns. Electronics are a relatively tiny slice of the total cost of a fiber network but a larger percentage for a new wireless network. .

The arbiter of the Buy American rules is the U.S. Office of Management and Budget (OMB), which recently solicited nationwide comments about how firmly the Buy American rules should be enforced for projects that will be funded by the Infrastructure Investment and Jobs Act. There is a possibility that the OMB will be stingy with waivers even if the NTIA asks for them, but that’s a bridge that can’t be crossed until it happens.

What’s most disturbing is that this joins a list of other issues that create a lot of uncertainty for ISPs considering the BEAD grants. If we don’t start clearing up the uncertainties, states might find that the ISPs they are hoping will request grants will sit out the BEAD grants. ISPs are naturally attracted to grants, but not if the hurdles are too hard to overcome.