The NTIA has offered those who want to apply for BEAD funding more options to the former Letter of Credit (LOC) requirement. Smaller rural providers were concerned the LOC requirements were so burdensome they wouldn’t be able to apply for the money. Members of the House and Senate voiced concerns as well.
“The LOC requirement obligates participants to obtain a Federal Deposit Insurance Corporation (FDIC)-issued LOC with a Weiss rating of B- or higher for 25 percent of the award amount,” 13 Senators wrote in a letter, Inside Towers reported. “These LOCs must be collateralized by cash or cash-equivalent, as mandated by FDIC banks. We recognize that the LOC requirement was included in the Notice of Funding Opportunity to ensure that the government had surety to protect the integrity of the program and prevent wasteful spending of taxpayer dollars.”
The LOC provision was meant to prevent wasting taxpayer dollars in the BEAD program. But in a blog post this week, NTIA said being a good steward of that money also means “encouraging robust participation” in the program.
That’s why NTIA has modified the LOC requirement, releasing what it calls a “programmatic waiver” to address concerns in the following ways:
- Allow Credit Unions to Issue LOCs. The Notice of Funding Opportunity (NOFO) requires subgrantees to obtain a LOC from a U.S. bank with a safety rating issued by Weiss of B− or better. The waiver permits subgrantees to fulfill the LOC requirement (or any alternative permitted under the waiver) using any United States credit union that is insured by the National Credit Union Administration and that has a credit union safety rating issued by Weiss of B− or better.
- Allow Use of Performance Bonds. The waiver permits a subgrantee to provide a performance bond equal to 100 percent of the BEAD subaward amount in lieu of a letter of credit, provided that the bond is issued by a company holding a certificate of authority as an acceptable surety on federal bonds as identified in the Department of Treasury Circular 570.
- Allow Eligible Entities to Reduce the Obligation Upon Completion of Milestones. The waiver allows an eligible entity to reduce the amount of the letter of credit obligation below 25 percent over time, or reduce the amount of the performance bond below 100 percent over time, upon a subgrantee meeting deployment milestones specified by the eligible entity.
- Allow for an Alternative Initial LOC or Performance Bond Percentage. The NOFO requires that the initial amount of the letter of credit be 25 percent of the subaward (or the initial amount of the performance bond be 100 percent of the subaward under the option described above). The waiver allows the initial amount of the letter of credit or performance bond to be 10 percent of the subaward amount during the entire period of performance when an eligible entity issues funding on a reimbursable basis consistent with Section IV.C.1.b of the NOFO and reimbursement is for periods of no more than six months each.
“By providing an expanded universe of potential issuers of LOCs and specific, permissible alternatives to the LOC requirement, NTIA remains faithful to our objectives of encouraging robust participation from a broad range of service providers while giving states and territories more ways to ensure that grant recipients can build a high-quality network and operate it for years to come,” says NTIA. It says it will monitor the implementation of this requirement and may provide additional guidance as needed.
States and territories may also request waivers for additional circumstances not covered by the programmatic waiver. Initial proposals outlining how states and territories will implement BEAD are due to the NTIA by December 27, 2023.
By Leslie Stimson, Inside Towers Washington Bureau Chief
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