The Infrastructure Investment and Jobs Act – Expanding Opportunities in the Federal Award Landscape

Contributing Authors: Paul Bailey, Partner; Evan Slebrch, Senior Consultant; Brice Bokesch, Senior Consultant, Drew Bean, Consultant; and David Myung, Consultant 

Introduction:

On November 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act (“IIJA”), commonly referred to as the Bipartisan Infrastructure Deal. The primary initiative of IIJA is to authorize funding for construction and manufacturing projects to renovate or rehabilitate infrastructure across all fifty states, as well as territories, tribal, and the District of Columbia. Specific goals of IIJA include expanding access to clean drinking water and high-speed internet for American households, repairing and rebuilding the nation’s roads, bridges, and rails, upgrading operations at domestic airports and ports, and combatting climate change through the reduction of emissions and expansion of America’s green energy capabilities. On May 13th, 2024, the Biden-⁠Harris Administration announced that nearly $454 billion in funding had been authorized by the Federal government, spanning 56,000 different projects and awards across 4,500 communities. To date, investments in public infrastructure, semiconductor manufacturing, and clean energy projects have grown to over $537 billion in support of a diverse collection of projects as summarized below:

Transportation

• $302 billion announced for transportation investments in roads, bridges, public transit, ports and airports, as well as electric school and transit buses, EV charging, and more. Emphasis has been placed on repairing the one-in-five miles of roadways and more than 45,000 bridges in the United States that are rated as in “poor condition.”

Climate Protection and Green Energy

• $70 billion announced for grants, rebates, and other initiatives to accelerate and improve clean energy technologies, power grid modernization, home and business weatherization, and reduction of emissions through clean building and manufacturing programs.
• $23 billion announced to make U.S. communities more resilient to the impacts of climate change (e.g., droughts, heat waves, floods, and wildfires), cybersecurity risks, and other threats.

Utility Access to American Households

• $37 billion announced to improve access to clean water across the U.S. and improve water infrastructure. This includes $5.8 billion dedicated to lead pipe and service line replacement.
• $83 billion in funding to provide affordable, reliable high-speed internet to everyone in the United States.

This historic Federal investment has created a vast amount of opportunities for prospective Federal award recipients to enter the Federal award marketplace. These opportunities have captured the interest of many traditional commercial companies that can greatly benefit from Federal sponsorship in order to supplement research initiatives, accomplish market entry objectives, and expand current operational capabilities.

Navigating the Federal Award Regulatory Framework

The Federal regulatory framework is established by the Code of Federal Regulations (“CFR”). Generally, grants and cooperative agreements are governed by the “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards”, otherwise referred to as “Uniform Guidance” or 2 CFR § 200. Uniform Guidance can be further supplemented by Federal agency-specific requirements (e.g., Department of Energy agency supplement established under 2 CFR § 900), and the terms and conditions incorporated into each award agreement. Navigating the Federal regulatory framework can pose a challenge to commercial entities unfamiliar with the complexities of Federal award regulation. This lack of understanding can present many compliance pitfalls during the administration of  Federally-funded programs which can result in the disallowance of cost or loss of future Federal funding opportunities. Summarized below are some common compliance pitfalls encountered by new Federal award recipients:

Federal Award Administrative Requirements

• 2 CFR 200, Subpart D contains the “post-award” requirements governing the compliant administration of grants and cooperative agreements. These requirements set forth the Standards that must be adopted and fully implemented by award recipients on day one of Federal award performance. These Standards must be reflected in the award recipient’s written policies, procedures and practices, and must address critical areas of award performance such as financial management, personnel management, procurement, record retention, etc. To promote the effective management of Federal awards and avoid possible non-compliance which may result in the disallowance of costs incurred under a Federal program, prospective Federal award recipients are encouraged to conduct assessments of current internal controls (i.e., policies, procedures, practices, and people) in an effort to determine their ability to comply with the Federal administrative requirements prior to pursuing Federal awards.

Determining the Appropriate Cost Principles

• Administrative requirements are based on the agreement type awarded by the Federal agency. This means that grants and cooperative agreements are governed by 2 CFR 200, while Federal procurement-type contracts are governed by the Federal Acquisition Regulation (“FAR”), or CFR Title 48. Contrary to the administrative requirements, the Cost Principles which govern the allowability, allocability, and reasonableness of costs incurred under Federal programs are assigned based on the type of entity receiving the award. Not-for-profit entities are subject to the Cost Principles located under Subpart E of 2 CFR § 200, unless the entity meets one of the exemptions found under Appendix VIII to Part 200. However, for-profit entities must follow the Cost Principles established under the FAR, located at 48 CFR Part 31. Thus, for-profit entities will be subject to both the administrative requirements under 2 CFR § 200 and the Cost Principles located at 48 CFR Part 31.

Electing the De Minimis Rate for Indirect Cost Recovery:

• During the development of a Federal award budget, applicants may elect the de minimis rate as a method for indirect cost recovery. Currently, under this election, recipients may collect 10% of Modified Total Direct Costs (“MTDC”) as defined under 2 CFR 200, Subpart A. The de minimis rate is a Federal award-specific election and is not impacted by the type of entity receiving the Federal award. This means that for-profit or commercial-type companies will still utilize MTDC as the basis for indirect rate application under the de minimis rate election, rather than the Total Cost Input, Value Added Cost Input or Single Element allocation bases commonly elected by government contractors subject to the FAR. The de minimis rate election is set to increase to 15% of MTDC for all awards made on or after October 1, 2024. However, Federal awarding agencies may approve the increase prior to October 1, 2024, at their discretion.

Davis-Bacon Prevailing Wage Requirements

• The Davis-Bacon and Related Acts (“DBRA”) apply to all Federal award recipients, subrecipients, and prime contractors who received an agreement for Federally-funded or assisted construction projects exceeding $2,000. Originally passed by Congress and signed into law in 1931, and since amended, the DBRA tasks the Department of Labor with determining prevailing wages, fringe benefits, and enforcing labor standards. Award recipients subject to DBRA requirements must pay laborers and mechanics no less than the local prevailing wage, inclusive of fringe benefits, for the corresponding work on similar projects in the area, as well as pay overtime for all hours worked over 40 hours in a workweek. Prevailing wage determinations must be made in accordance with the wage determinations reported by the System for Award Management (“SAM.gov”). For the purposes of the DBRA requirements, the term “construction” includes alterations, repairs, remodeling, installation, painting and decorating of public buildings or public works. Any recipient or contractor subject to DBRA should be aware of the requirements referenced here and detailed under Title 29, Parts 1,3, and 5 of the CFR.

A Comprehensive Federal Award Compliance Solution

While the outlook for prospective Federal award recipients has never been more promising, establishing compliance with Federal regulations while simultaneously enabling smooth and timely business operations can be an overwhelming task for commercial or start-up companies new to Federal compliance requirements. In order to alleviate this burden, the Capital Edge Consulting team, comprised of industry-leading experts, provides Federal Award Entry Navigator Services to assist prospective or new award recipients. Capital Edge’s Navigator services provide solutions to the hurdles of accepting Federal awards by leading the journey to establish compliant business systems and internal controls (i.e., policies, procedures, forms, and checklists) that will withstand an audit while optimizing operational efficiency. Navigator removes an additional barrier in business operations by providing back-office services for Federal award administration, including procurement, project finance, accounting, and contract administration. Through this comprehensive service, Capital Edge will work to overcome challenges faced by our clients, while minimizing risk, optimizing program efficiency, increasing potential cost recovery, and ultimately allowing our clients to focus more attention on their core missions, research pursuits, and the industries that they serve.

Sources:

• https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200?toc=1
• https://www.whitehouse.gov/briefing-room/statements-releases/2024/05/13/fact-sheet-biden-harris-administration-kicks-off-infrastructure-week-by-highlighting-historic-results-spurred-by-president-bidens-investing-in-america-agenda/
• https://www.whitehouse.gov/invest/?utm_source=invest.gov
• https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/06/fact-sheet-the-bipartisan-infrastructure-deal/

Capital Edge Consulting is a professional services company comprised of adept problem solvers who deliver tangible results to address today’s most complex U.S. government contracting challenges. Capital Edge helps clients address the challenging regulatory, contractual, and compliance requirements of U.S. federal contracts and we have experience working with a wide variety of industries that provide goods or services to the federal government including industries such as biotech and healthcare, nuclear energy, education, information technology, non-profit, professional services, defense, and software.