(a) The Secretary arranges for a bypass if—

(1) An agency, consortium, or entity is prohibited by law from providing for the participation in programs of children enrolled in, or teachers or other educational personnel from, private elementary and secondary schools, on an equitable basis; or

(2) The Secretary determines that the agency, consortium, or entity has substantially failed, or is unwilling, to provide for that participation as required by section 1117 or 8501 of the ESEA, as applicable.

(b) If the Secretary determines that a bypass is appropriate after following the requirements in §§ 299.21 through 299.26, the Secretary—

(1) Waives the requirements under section 1117 or 8501 of the ESEA, as applicable, for the agency, consortium, or entity; and

(2) Arranges for the provision of equitable services to those children, teachers or other educational personnel, and families, as applicable, through arrangements subject to the requirements of section 1117 or 8501 of the ESEA, as applicable, and sections 8503 and 8504 of the ESEA.