The Basics of ARPA Procurement
The American Rescue Plan Act of 2021 (ARPA), signed into law by President Biden on March 11, 2021, established a $1.9 trillion economic stimulus bill that was passed by Congress with the intention of ameliorating the devastating effects of the COVID-19 pandemic. As part of its nationwide economic recovery strategy, ARPA provided $126 billion for K-12 schools across the nation to be used as subgrants to local educational agencies in two installments: the first installment to occur within 60 days of its enactment and the second installment no later than two years thereafter. This round of funding comes on the heels of the $13 billion investment that Congress made through the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 .
Due to the unprecedented amount of funding being distributed, Congress also adopted a set of emergency procurement policy provisions that largely mirror the rules adopted under the CARES Act. These provisions include increased flexibility and reduced competition requirements in the interest of accelerating the spending of public funds efficiently and in a timely manner. However, unlike emergency provisions in the CARES Act, Congress did not eliminate the regular termination for convenience and default provisions and publication requirements or micropurchase and simplified acquisition procedures that it had previously waived. The contrast makes sense. The CARES Act was unprecedented in the amount of federal spending, but it was enacted during an unprecedented national emergency. In March 2021, although the pandemic was still affecting economic markets, the most severe impacts of the pandemic were subsiding.
The Main Features of ARPA Procurement
Key Elements of ARPA Procurement Requirements
The ARPA procurement requirements are outlined in 2 CFR 200.317-326. The procurement standards apply to "all purchases made by a non-federal entity using Federal funds." It is important to note that a non-federal entity is broadly defined to include all government agencies and public and private nonprofit and for-profit organizations and institutions of higher education. In other words, as long as you are providing services or purchasing equipment with federal ARPA funds, the procurement regulations apply to you.
The performance period determines what set of regulations apply:
Non-federal agencies have broad latitude to establish specific procurement procedures, as long as they are compliant with the general standards set forth in 2 CFR § 200.318. Agencies are permitted to develop their own detailed procurement standards, as long as they include a few key elements:
These requirements overlap generally, but require different approaches to compliance. For example, in addition to general requirements that applicable laws and regulations be followed, the procurement standard requirements include two new considerations:
In addition to these new requirements, the procurement standards require that all "proposals received" be "carefully evaluated by persons who don’t have a competing interest." 2 CFR 200.318(g). The goal is to help ensure fairness and objectivity in the procurement process.
Protests are occasionally levied by contractors who wish to, or have, or believe that they should have, received contracts for goods and services that have been awarded to other contractors, grant recipients or subaward recipients. These protests can come in the form of formal challenges to the procurement process, or informal suggestions that something amiss has occurred. In either case, due to the application of the procurement standard requirements, specifically 2 CFR § 200.317-326, such challenges may be avoided by ensuring transparency and openly and fairly evaluating all proposals.
How to Fulfill ARPA Procurement Requirements
Before commencing a procurement, the organization should define the objective of the procurement (e.g., construction of a building or structured cabling system), and the scope and expectation of the resulting work. Upon such a definition, the organization should define each contract and the method of procurement for each contract. For example, all construction contracts could be lumped into a single contract and procured by competitive sealed bid, or the organization could procure the construction contracts separately pursuant to the limited competition method.
Once the foregoing has been defined, the organization should walk through the following steps to assure compliance.
Step 1: Documented Procurement Plan
The organization should document its procurement plan, detailing:
Step 2: Approval of Documents
The organization should then submit its documentation to TDHCA for review and approval. A favorable review from TDHCA will constitute approval of the corresponding procurement and satisfy any requirement for higher-level approval of procurements.
Step 3: Pre-procurement Requirements
Prior to commencing a procurement, the organization should assure that it has satisfied any pre-procurement requirements. At a minimum, the organization is required to:
The organization must also assure that the staff member overseeing the procurement, the person best situated to assure compliance with the federal procurement requirements, is familiar with the federal procurement requirements applicable to the procurement. A previous participant in federally funded programs should have sufficient experience with the federal procurement requirements. However, a new participant may need to receive training on the federal procurement requirements. TDHCA has available on its website a list of individuals familiar with the federally procurement requirements. However, it is the organization that has the ultimate responsibility to assure compliance with the federal procurement requirements, and in selecting its staff, the organization should consider the experience and familiarity of its staff with the federal procurement requirements.
Step 4: Procedures Manual
Next, the organization is required to adopt written procedures for procuring goods and services. This may be satisfied through an amendment to the organization’s existing procurement policies or procedures, or by creating a separate set of procedures for procuring Goods and Services, incorporating by reference any preexisting procurement policies or procedures and highlighting any differences as a result of the federal procurement requirements.
Step 5: Written Procurement Policies
Finally, the organization must implement written procurement policies or procedures to reflect the requirements for public procurement generally, and the federal requirements specifically.
Common Challenges when it Comes to ARPA Compliance
ARPA’s general applicability to all procurement activities raises a host of challenges that will catch most organizations off guard. First, ARPA’s five-year look back period causes some to assume that only those awards made after April 30, 2020 are subject to ARPA’s new requirements. This is incorrect; ARPA’s new requirements apply to ARPA-funded projects first awarded and subsequently modified after May 18, 2021.
Second, ARPA’s application of procurement requirements to subawards is problematic for organizations that routinely make subawards without following the detailed federal procurement regulations. Even if your organization is not covered by the federal procurement regulations, most federally funded subawards should at least follow some of the procurement requirements; otherwise you risk paying too much for the goods and services you procure through subawards.
Third, to meet ARPA’s requirements, organizations may have to re-do new contracts they thought previously were compliant—sunk costs are not a permissible excuse. To be clear, those contracts that have pass-through clauses must work for ARPA. If they do not, ARPA may work for you.
Fourth, certain aspects of ARPA’s requirements may conflict with your organization’s normal practices. Approving payment requests is not a normal practice; approving all sole source purchases is not a normal practice; registering and confirming an entity’s registration in the System for Award Management is not a normal practice. Any time an organization must rethink its normal contracting practices there is potential for disruption, confusion, and—if employees are not properly instructed—non-compliance.
The following are three steps that a COMPLIANT organization can take to help minimize the pain associated with ARPA’s new requirements:
- Notify your legal counsel and your finance team of ARPA’s new requirements, including reporting and publication requirements.
- Review all federal contracts and subcontracts to determine what clauses must be included in and/or flowed through to subawards.
- Train staff responsible for reviewing and approving contracting actions on ARPA’s new requirements.
Failure to take these steps will likely lead most organizations down a path fraught with regulatory pain, confusion, risk, and cost.
Keys to Successful ARPA Procurement
Ensuring compliance with ARPA procurement requirements can be difficult and time-consuming. To assist with compliance, the following best practices are recommended:
- Conduct an ARPA procurement assessment of current procurement practices as soon as possible. This assessment should include a review of applicability of ARPA to the entity, the date of the covered program in question (ARPA applies only to procurements after November 12, 2021), comparison of current procurement practices to ARPA requirements, and recognition of any unique procurements.
- Determine applicability of the ARPA procurement requirements to programs and/or services provided by or to the entity. Once an entity knows whether ARPA applies, it can better understand its procurement requirements. Once applicability is confirmed, identify the scope and date of the ARPA-covered program. As a reminder, ARPA applies to contracts and other procurement agreements entered into after November 12, 2021, and does not apply to any cost-reimbursement contracts governed by the Federal Acquisition Regulation (FAR) (48 C.F.R. Part 31).
- Identify whether specific exclusions apply. In addition to the scope, entities should consider whether any narrow exemptions apply. For example, ARPA does not apply to any procurement (1) of publicly traded commercial products or commercially available off-the-shelf (COTS) technologies, (2) with affiliates of the entity that either (i) are owned and controlled by the entity or (ii) independently developed the technologies but wish to collaborate with the entity to sell the technology to the entity. (In this second example , the required process is to submit a protocol to the entity’s Board for prior approval.)
- Compare current procurement practices to identify gaps. Entities will then want to compare their current procurement processes to the ARPA procurement requirements and identify any gaps that may be remedied through policy changes. Some of the changes may be minimal (e.g., simply revise guidelines and policies to reference the ARPA procurement requirements). Other changes may require more significant policy modifications (e.g., development of new policies on cost-sharing requirements).
- Communicate any vendor concerns or exceptions. ARPA includes a similar "vendor bill of rights" like the one contained in FAR. Essentially, ARPA requires (in terms that are similar to FAR) that if an entity requires the use of a particular product or service, the contract must (and if the contract has been finalized, the entity must amend the contract to include): (a) a list of alternate vendors that could provide the required products or services and (b) a written explanation of why each vendor was not selected. These requirements will be critical for entities concerned about single vendor negotiations, and managing these requirements will be critical for the procurement process.
- Revise current solicitation templates to ensure compliance with ARPA requirements. Entities will need to analyze and update their solicitation templates and procedures to identify and close any gaps.
- For new procurements, consider issuing public notices sufficiently in advance. When advertising a new procurement, entities should consider providing public notice that exceeds the 14-day ARPA requirement. Although not technically required, extending the notice will promote more robust vendor interest. Many entities have instituted practices of advertising opportunities through e-notices and emails to known vendors.
The Consequences of ARPA Non-Compliance
Contracts and purchases made in contravention of federal or state law are void. As a result, it is not possible to hold a contractor liable to the federal government for breaching a contract that had to be voided because of non-compliance with federal law. Moreover, because ARPA authorizes the imposition of the same penalties and administrative remedies applicable in situations covered by the federal version of the procurement regulations, State and local governments are also subject to the remedies associated with the non-compliance. And states may also seek federal reimbursement of certain related costs. Finally, the Office of Inspector General has a unique responsibility to investigate non-compliance with federal procurement laws and regulations.
Resources for Comprehending ARPA Requirements
A wealth of knowledge exists in the public domain for organizations seeking to better grasp the details surrounding the ARPA procurement requirements. Industry Administration – The Federal Government has a comprehensive set of guidelines to help facilitate ARPA grant-funded projects: Guidance for Contracts and Subawards under the American Recovery and Reinvestment Act of 2009 (pdf) Department of Energy: DOE Guidelines for Grants and Cooperative Agreements Financial Assistance to Schools and State, Local, and Tribal Governments (pdf) Department of Environmental Protection: Technical Guidance for Implementing ARRA Funding (pdf) Department of Transportation: Recovery Act: Projects and Results (webpage) Public Wellbeing Sector Subgrants (pdf) On-Demand Learning – Over the years, many firms have hosted webinars covering ARPA-related topics. These can be particularly valuable for organizations first starting to come to grips with ARPA requirements , as it is often more efficient to learn from experts who can present the facts in a clear and easily digestible way. Frequently these webinars are recorded, making it even easier to access the information at your convenience. Examples: Compliance Assistance Webinars: Webinar on Section 902 Sustainability and Recovery, Part 1 (webinar) Using ARRA to Support Your State’s Strategic Plan for Health Care Reform (webinar) Talking With Experts – For further reading and occasional free consultation services, local and national industry associations are invaluable resources. Some examples of groups that specialize in ARRA-related support include the National State Auditors Association, the National Association of State Budget Officers, and the National Association of State Treasurers.