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Allowable Use of FHWA Financial Assistance for
Activities Related to Discretionary Grants
(May 2024)
The Bipartisan Infrastructure Law (BIL), enacted as the Infrastructure Investment and Jobs Act, Pub. L. 117-58 (Nov. 15, 2021), has introduced several new discretionary grant programs along with greater opportunities for non-State Department of Transportation (DOT) entities1 to receive Federal Highway Administration (FHWA)-administered financial assistance. This document was created as a resource for eligible entities interested in these discretionary grant opportunities, along with FHWA Division Offices responsible for administering the FHWA financial assistance programs. As always, questions of whether a project expense is an allowable cost under an FHWA-administered grant should be discussed with the FHWA Division Offices.
Pre-Grant Award: Grant Application/Grant Writing Questions and Answers
1.a. May non-Federal entities charge the cost of grant application/grant writing activities, including the cost of using a consultant to develop an application for a Federal grant, to FHWA funded awards? If so, is that considered a direct or an indirect cost?
Non-Federal entities2 may charge grant writing activities to FHWA funded awards as an indirect cost3 under certain conditions. In accordance with 2 CFR 200.460, proposal costs, including the costs of preparing bids, proposals, or applications for potential Federal and non-Federal awards or projects, normally should be treated as indirect costs. A non-Federal entity must prepare an indirect cost rate proposal and related documentation to support indirect costs charged to a Federal award. See 2 CFR 200.416 and Appendix VII to part 200, paragraph D.1.a. If a non-Federal entity receives more than $35 million in direct Federal funding, it may charge indirect costs under FHWA awards ONLY if it has received approval from its cognizant agency for indirect costs.4 See 2 CFR part 200, Appendix VII, paragraph D.1.b.
1.b. Are grant application/grant writing activity costs allowable under the State Planning and Research, Surface Transportation Block Grant, or Metropolitan Planning Programs?
Costs associated with grant writing activities are only allowable as indirect costs under the State Planning and Research (SPR) and Surface Transportation Block Grant (STBG) Programs if they are reasonable and necessary to carry out the planning purposes established in 23 U.S.C. 135 and are included in an approved SPR work program. Similarly, costs associated with grant writing activities are only allowable under Metropolitan Planning Program (PL funds) if they are reasonable and necessary to carry out the planning purposes established in 23 U.S.C. 134, included in an approved Metropolitan Unified Planning Work Program (UPWP), and treated as indirect costs. See23 CFR 420.111. For example, a State or MPO applying for a discretionary grant under section 11204 of BIL to develop a project prioritization process could treat the costs of preparing a grant application as indirect costs recoverable under the SPR, PL, and STBG programs if the costs meet the conditions described above.
2. May non-Federal entities directly charge costs to FHWA financial assistance programs for the development of feasibility studies (i.e., planning studies) that may be used in grant applications?
Non-Federal entities may directly charge costs to a FHWA financial assistance program if the development of the feasibility study is specifically authorized in legislation as an allowable cost. Examples of FHWA financial assistance programs where feasibility studies may be eligible include the Promoting Resilient Operations for Transformative, Efficient, and Cost-saving Transportation (PROTECT) program (23 U.S.C 176(c)(3)(E)(i)(I)) and the National Highway Freight Program (NHFP) (23 U.S.C. 167(h)(5)(C)(i)).
Additionally, a State DOT may directly charge to its SPR Program costs incurred to develop feasibility studies if the studies meet the purposes established in 23 U.S.C. 505. Because surface transportation planning programs are an eligible activity under the STBG Program (23 U.S.C. 133(b)(11)), STBG funds could be used for feasibility studies consistent with how SPR funds may be used.
Additionally, an MPO may directly charge to its PL Program costs incurred to develop feasibility studies as long as the studies meet the purposes established in 23 U.S.C. 134 and are included in the UPWP or are included in the Transportation Improvement Program. Because metropolitan planning programs are an eligible activity under the STBG Program (23 U.S.C. 133(b)(11)), STBG funds could be used for feasibility studies consistent with how PL funds may be used.
3. May Local Technical Assistance Program Centers or a Tribal Technical Assistance Program Centers provide assistance with grant writing?
Local Technical Assistance Program (LTAP) and Tribal Technical Assistance Program (TTAP) Centers may provide general grant writing assistance in the form of training and technical assistance if they have that skill set and experience to provide these services and it is included in part of their approved annual workplan, however, LTAPs and TTAP centers will not draft individual grant applications for grant applicants. The grant writing responsibility will remain with the applicant. To connect with an LTAP center, see FHWA - Center for Local Aid Support - LTAP (www.fhwa.dot.gov/clas/ltap). To connect with a TTAP center see the Office to Tribal Transportation website at https://highways.dot.gov/federal-lands/programs-tribal.
4. Once entities are notified of selection under a discretionary grant program, but prior to the actual execution of the grant agreement, are those grant program funds available to the applicants for the direct cost of developing the grant agreement?
No. Grant program funds may not be used for costs of pre-award activities without prior written FHWA approval. See 2 CFR 200.458 and 23 CFR 1.9.
Post-Grant Award: Grant Administration and Grant Execution Questions and Answers
1. May a recipient of a discretionary grant charge program-level administrative costs to the associated FHWA grant Award? If so, is that considered a direct or an indirect cost?
Yes. Recipients of a discretionary grant may charge administrative costs to the associated FHWA grant award. In general, the costs of administering an FHWA grant award would be charged to the award as an indirect cost. Indirect costs may include labor, rent, capital expenditures, and supplies that benefit multiple projects. See 2 CFR 200.1, definition of Indirect (facilities & administrative (F&A)) costs, and Appendix VII, paragraph A. If an eligible entity receives more than $35 million in Federal funding, the entity may charge indirect costs under FHWA financial assistance programs ONLY if it has received approval from its cognizant agency for indirect costs. See 2 CFR part 200, Appendix VII.
However, a recipient of a discretionary grant may charge administrative costs directly to the FHWA grant award (i.e., as a direct cost) if it is specifically authorized in legislation as an allowable expense, if the administrative costs can be identified specifically with the FHWA grant award, or if they can be directly assigned to the grant relatively easily with a high degree of accuracy. See 2 CFR 200.413(a).
2. May non-State DOT recipients reimburse a State DOT to assist with the delivery of a grant project?
Yes, a non-State DOT may reimburse a State DOT for assistance with carrying out a grant project if there is a written contractual agreement to do so and the non-State entity complies with applicable procurement standards. See 2 CFR 200.318 through 200.327. In this relationship, the non-State DOT recipient would reimburse the State DOT for eligible project activities as outlined in their contractual agreement. The non-State DOT’s payments to the State DOT during the grant’s period of performance5 that satisfy the requirements in 2 CFR part 200, subpart E, including 2 CFR 200.403, would be allowable direct costs and eligible for reimbursement by FHWA.
Of note:
- If a State DOT is compensated for activities via a contractual agreement with a non-State DOT recipient, the costs associated with those activities cannot be included under the State DOT’s indirect cost rate. See2 CFR 200.403. It is essential that each item of cost incurred for the same purpose be treated consistently in like circumstances, either as a direct or an indirect cost, in order to avoid possible double-charging of Federal awards. See2 CFR 200.412.
- Any contractual agreement between the State DOT and the non-State DOT recipient is outside of the purview of FHWA.
3. May State DOTs be reimbursed for providing grant administration support services to a non-State DOT recipient outside of a contractual agreement?
Providing grant administration support services to non-State DOT entities outside of a contractual agreement is considered an administrative cost for the State DOT, which may be an allowable indirect cost. State DOTs that assist non-State DOT recipients with grant administration in this manner may recover the costs through the State DOT’s indirect cost rate or through the development of a narrative cost allocation plan. This form of support may be considered an indirect cost to the State DOT because providing such support benefits the State’s surface transportation program as a whole. Indirect costs may include labor, rent, capital expenditures, and supplies that benefit multiple projects. See 2 CFR 200.414, and Appendix VII, paragraph A. State DOTs must have an approved indirect cost rate which allocates those costs to all benefitting programs. See 2 CFR 200.414 and appendix VII to part 200, paragraph D.1.b. If the State DOT does not have an approved indirect cost rate, the State DOT cannot bill indirect costs. See2 CFR part 200, Appendix VII, paragraph D.1.a.
- If this type of assistance creates a distorting impact to the indirect cost allocation of the State DOT, the State DOT may renegotiate their rate with the Federal cognizant agency. See2 CFR part 200, Appendix VII, paragraph E.
4. May a grant recipient use grant funds to pay contractors or consultants to support the execution of the grant award?
Yes, hiring contractors or consultants to support the execution of the grant award and its activities is an allowable direct cost. See2 CFR 200.459. Expenses related to contracting for these services must be incurred during the grant’s period of performance and be reasonable, allocable, and necessary to accomplish the grant objectives/scope of work. See 2 CFR 200.403 through 200.405.
5. May an LTAP or TTAP provide assistance with grant administration?
LTAP and TTAP Centers are equipped to provide technical assistance and training to local agencies who are grant recipients, but these centers do not provide assistance with day-to-day administration of the grants themselves.
If the LTAP and TTAP Centers have the skill set and experience, they may provide grant administration training to grant recipients. LTAP and TTAP Centers may also provide technical assistance with components of grant implementation, such as obtaining project-level permits, but only if they have the skill set and experience and if such activities are included in their approved annual work plan. The Centers cannot assume grant recipient responsibilities for properly administering the terms of the grant agreement.
To connect with locate an LTAP center and learn more about the services these centers can provide, see FHWA - Center for Local Aid Support - LTAP https://www.fhwa.dot.gov/clas/ltap. To connect with a TTAP center, see the Office to Tribal Transportation at https://highways.dot.gov/federal-lands/programs-tribal.
[1] Non-State DOT entities include political subdivisions of a State, local governments, Metropolitan Planning Organizations, Tribes, special-purpose districts, and public authorities.
[2] Non-Federal entity means a State, local government, Indian tribe, Institution of Higher Education (IHE), or nonprofit organization that carries out a Federal award as a recipient or subrecipient.
[3] Indirect costs (sometimes referred to as Facilities and Administration or F&A costs) mean those costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of indirect (F&A) costs. Indirect (F&A) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived. 2 CFR 200.1, Indirect (facilities & administrative (F&A)) costs.
[4] The cognizant agency for indirect costs is the Federal agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost proposals developed under this part on behalf of all Federal agencies. 2 CFR 200.1, Cognizant agency for indirect costs.
[5] Period of Performance is the total estimated time interval between the start of an initial Federal award and the planned end date, which may include one or more funded portions, or budget periods. Identification of the period of performance in the Federal award per 2 CFR 200.211(b)(5) does not commit the awarding agency to fund the award beyond the currently approved budget period. 2 CFR 200.1, Period of Performance.