Senator Ernst’s Directive on Chips Spending: Critical Insights for Fund Seekers

Senator Joni Ernst (R-IA) has issued a mandate to the Biden Administration: stop the spending spree with the remaining dollars in the CHIPs for America Program.  Senator Ernst’s missive is a direct response to Commerce Secretary Gina Raimondo’s push to have every employee in the Department of Commerce work overtime to spend billions of dollars in CHIPs funding before President Biden leaves office—a push that has already resulted in almost as much spending since the November 5^thelection as was spent in the preceding two years since the CHIPs Act was passed.  Senator Ernst warned, the success of the CHIPs initiative “requires thoughtful planning and strategic spending, not binge buying shopping sprees by bureaucrats shoveling billions out the door before” Biden’s term expires. 

Although Senator Ernst directed her letter to Secretary Raimondo, it is clear that Senator Ernst’s admonition extends far beyond the current Executive Branch and is targeted at the potential recipients of the CHIPs funds.  Taking up the mantle from the senior senator from her state, Senator Ernst channeled Senator Chuck Grassley (R-IA), whose support for the federal False Claims Act is renowned, and cautioned that “shoveling out heaps of taxpayer dollars as fast as possible, with little to no oversight,” has led to billions of dollars being “handed to fraudsters.”  Simply put, the recipients of these funds must understand that the money comes with a heightened scrutiny that may well lead to Congressional investigations and other government enforcement actions.   

To that end, below are three takeaways for individuals and entities petitioning the Biden Administration for CHIPs funds in the next 30 days:

Takeaway No. 1: Because this money comes with increased scrutiny, it is critical that recipients be: (1) accurate and precise in their proposals; (2) capable of delivering on material obligations; and (3) prepared to take immediate steps to perform on material obligations.

Takeaway No. 2: Sometimes the best defense is a good offense.  There are, of course, proactive steps entities can take to protect against civil and criminal liability even if material obligations are not ultimately satisfied.  For instance, creating and implementing an effective compliance program—utilizing the latest guidance from the Department of Justice’s “Evaluation of Effective Compliance Programs”—can minimize government scrutiny and mitigate the penalties that come from noncompliance.  Likewise, allowing that compliance program to have continued and effective oversight over the relevant projects and expenditures, including identifying and remedying problems in real time, will also mitigate against potential liability. 

Takeaway No. 3: Consider retaining outside counsel to advise on both the application process and the performance of the contract, as well as regularly pressure testing compliance efforts.  Retaining outside counsel will ensure accuracy in the contracting process and allow entities to exchange in communications protected by the Attorney Client Privilege when  discussing performance limitations and/or any identified compliance issues.