Losing a Federal Grant Award—Now What?

With the close of the federal government fiscal year at the end of September, disappointed nonprofit grantees who did not receive the funding they had hoped for may be considering their next steps. Therefore, this month's newsletter is dedicated to understanding a nonprofit grantee's options for challenging a federal award, when to consider challenging an award, and tips for better positioning your organization for future awards.

Understand the Federal Agency's Designated Process for Both Challenging an Award and Soliciting Feedback

An unsuccessful federal grant applicant may believe that little can be done to appeal or protest the grant of a federal award to another applicant. After all, the federal grant regulations and the Government Accountability Office (GAO) do not offer much support to unsuccessful applicants who wish to compel the awarding agency to review an award after it has already been made. While the GAO recognizes that the Federal Grant and Cooperative Agreement Act seeks to "promote increased discipline in selecting and using procurement contracts, grant agreements, and cooperative agreements, maximize competition in making procurement contracts, and encourage competition in making grants and cooperative agreements," 31 U.S.C. § 6301(3), this goal is "merely a statement of purpose," and few legislative statutes provide guidance on how to achieve this objective, GAO Principles of Federal Appropriations Law 3d ed., Vol. II at 10-25 to -26. The GAO has declined, for example, to use its bid-protest procedures used routinely in the federal government contract sphere to review individual grant awards. The federal grant regulations themselves largely leave protest or appeal procedures up to the awarding agency.

Therefore, the process for formal review is agency-specific, with the extent of the review procedures varying significantly by agency. Some agencies have established a multistage review process that progresses through increasingly senior levels within the agency. For example, the National Science Foundation allows unsuccessful applicants to request reconsideration by an assistant director and then subsequently by the Deputy Director of the Foundation. The National Institutes of Health, within the U.S. Department of Health and Human Services, grants unsuccessful applicants the opportunity to file a written appeal that "describes a flaw in the review process for a particular application" that will be considered further by the agency for resolution. Disappointed awardees should quickly avail themselves of these procedures, so it is important for nonprofit grantees applying for a federal grant to understand the appeal process prior to the award.

Other federal agencies, such as the U.S. Department of Education or the U.S. Department of Health and Human Services, provide minimal opportunity to appeal. The U.S. Agency for International Development (USAID) provides an intermediate level of review. Though the decision to fund an award is final and not subject to review, USAID allows unsuccessful applicants to send written requests for additional information within 10 days of receiving their notifications, and the agency should respond within 30 days either orally or in writing with "additional information that would be useful to the applicant in preparing future applications." Similarly, the U.S. Department of Veterans Affairs provides unsuccessful applicants with an initial notice, and then they are permitted to request a complete explanation at a later time. For these agencies, disappointed applicants should consider, through either an informal conversation with the Agency or the formal response process, soliciting feedback from the agency on how to improve the nonprofit's standing in connection with future awards.

Consider Whether the Agency Should Use a Contract Vehicle for the Award

Prior to the agency's issuance of an award, nonprofit grantees may consider whether the rules of a competitive grant process would put their organization at a disadvantage. If so, applicants may consider whether the agency should be awarding a contract instead of a grant, because contracts are subject to the Competition in Contracting Act and the competitive procedures outlined in the Federal Acquisition Regulation. In CMS Contract Management Services v. Massachusetts Housing Finance Agency, the appellants successfully argued that the "cooperative agreement" that the U.S. Department of Housing and Urban Development (HUD) used was more correctly classified as a procurement contract. CMS Contract Mgmt. Servs. v. Mass. Hous. Fin. Agency, 745 F.3d 1379, 1386 (2014), cert. denied, 135 S. Ct. 1842 (2015). Therefore, because HUD did not conduct the solicitation in accordance with the competitive federal procurement laws, the solicitation and award of contract administration services were held to be unlawful. Id. at 1381. Nonprofits considering whether to challenge the nature of an award also should consider the business impact such a decision could have on other awards if the nonprofit receives additional funding from the relevant agency.

* * * * * * * * * *

Unsuccessful applicants for federal grant awards are not always without recourse to challenge an award. The applicant should consider its options both post- and pre-award, as well as the potential adverse impact a challenge may have with the organization's funding agency. Nevertheless, asking questions may improve the organization's chances for future awards and opportunities with an agency.