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What does the ARP say about the costs pertaining to enhancing/incorporating procurement opportunities for minority business enterprises (“MBE”) to expand diversity and inclusion?

With the release of the U. S. Department of the Treasury’s (“Treasury”) Final Rule, Treasury has not provided explicit guidance on enhancing procurement opportunities for minority business enterprises (“MBE”). However, the Final Rule has outlined various means to assist with municipalities seeking to use funding received under the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) to support MBE.

The ARP expressly identifies four broad categories of eligible uses for CSLFRF, and the Final Rule further clarifies the authorized uses of ARP funds. Since Fiscal Recovery Funds are subject to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 C.F.R. 200) (the “Uniform Guidance”), the non-federal entity must take all necessary affirmative steps to assure that minority businesses, women’s business enterprises, and labor surplus area firms are used when possible.[1]  

Furthermore, it may be helpful for municipalities to include training and professional development resources to make accessible the information necessary for MBEs to successfully compete for and win contract and grant opportunities made available with ARP funds. It may also be beneficial to design and implement programs with CSLFRF that respond to the negative economic impacts faced by MBEs due to the public health emergency.[2] For a list of “enumerated eligible uses of funds for assistance to small businesses,” see the Final Rule.[3]

As a final point, the Final Rule indicates the following:

Recipients may also designate a class of small businesses that experienced a negative economic impact or disproportionate negative economic impact (e.g., microbusinesses, small businesses in certain economic sectors), design an intervention to fit the impact, and document that the individual entity is a member of the class.[4]

In short, recipients can “designate a class of small businesses” that have experienced a negative economic impacted due to the pandemic. A recipient could consider designating MBE businesses within this class, as long as the recipient tailors the intervention to address the negative impact of the pandemic and documents that the individual subrecipient is a member of the designated MBE class.

Last Revised: February 3, 2022

[1] Fiscal Recovery Funds as a general matter will be subject to the provisions of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR part 200), including the cost principles and restrictions on general provisions for selected items of cost, https://public-inspection.federalregister.gov/2021-10283.pdf at 85-86.

[2] Treas. Reg. 31 CFR Part 35 at 146-148, available at: SLFRF-Final-Rule.pdf (treasury.gov).

[3] Id., at 150-151.

[4] Id., at 148.