Federal Awards: Compliance Tips For Managing Procurement
The rules regarding compliance for organizations receiving federal funds with respect to procurement policies and procedures are complex. The standards are not always black and white with respect to how organizations should handle their procurement activities in certain cases. There are many grey areas. If you are unsure about something, please contact your auditors, your pass thru entity, or your federal agency Single Audit contact listed in Appendix VII of the Compliance Supplement with questions.
This article will provide an update regarding the timeline for adoption of these standards, what the standards require from auditees, and some helpful Q&A tips. A reminder– even if your organization is not mandated to have a Single Audit, if you receive any type of federal funding at all, you must still follow the Uniform Guidance (UG), and this includes all of the new procurement requirements.
When Should My Organization Adopt the New Procurement Policy?
Guess what? You already should have. The grace period for adoption of the new procurement rules has ended. If you haven’t adopted the new procurement rules yet, you must do so immediately to be in compliance.
What Do the New Standards Require?
Procurement Standards are located in section 200.317 thru 200.326. The General Standards are:
- Documented Policies
- Procurement is Necessary
- Full & Open Competition
- Conflict of Interest
-Cost & Price Analysis
The following are the different methods for acquisition of goods and services under the UG. These standards for acquisition must be followed if you received federal funds.
- Procurement by micro-purchase is the acquisition of supplies or services, the aggregate dollar amount of which does not exceed $3,500 (or $2,000 in the case of construction subject to the Davis-Bacon Act).
- The threshold for micro purchases has been increased to $10,000 for procurements under M-18-18 with Federal Agency approval
- For purchases at this level, you are not required to solicit quotations.
- To the extent practicable, there must be an equitable distribution of opportunities among qualified suppliers.
- For small purchases, you can follow simple and informal procurement methods.
- The cost threshold for these purchases is not more than the simplified acquisition threshold - currently $250,000 per M-18-18
- Price and rate quotations must be obtained from an adequate number of qualified sources.
- Sealed bids are required when the cost rises above the simplified threshold (greater than $250,000 under M-18-18)
- Sealed bids are typically preferred for construction projects
- Sealed bids must be publicly advertised.
- The cost threshold for competitive proposals is above the simplified threshold – currently $250,000 under M-18-18
- Request for Proposals must be publicized.
- Proposals must be solicited from an adequate number of qualified sources.
- This process must have a written method of criteria for evaluation and selection of the winning bidder.
- The award must go to the “most advantageous” proposal – taking into consideration cost along with the experience and skills of the contractor.
Sole Source Solicitations – Must Meet at Least One of the Following Criteria:
- Single source availability
- The situation for the procurement was due to a public emergency
- A written request has been made and approved by the federal agency or PTE (Pass Through Entity)
- Competition for the required goods/services is determined to be inadequate.
NDAA 2017 and 2018 revised threshholds upwards but there was confusion over the effectiveness of NDAA threshholds without UG/FAR revisions. OMB issued OMB Memorandum M-18-18, Implementing Statutory Changes to the Micro-Purchase and Simplified Acquisition Threshholds for Financial Assistance to attempt to address confusion. Clarification came after the fact, that the memo was for federal agencies, and not individual nonfederal entities. Confusion still exists. There is some good news, however. See the Q&A below.
Listed below is a helpful Q&A regarding various issues and questions that have arisen regarding the new procurement rules. This list of questions is by no means all encompassing, so please contact your auditors if you are unsure at all regarding your organization’s compliance with the standards.
My organization increased its procurement thresholds in line with the OMB Memorandum M-18-18, and we have amended our policy to reflect these increased thresholds. Will my auditor write a finding for this if I did not get federal agency approval?
No. Appendix VII of the 2019 Supplement indicates that “auditors are not expected to develop audit findings for grant recipients that have implemented increased purchase thresholds after June 20, 2018, as long as the entity documented the decision in its internal procurement policies.”
My organization has chosen to implement more restrictive procurement thresholds than what is required in the UG. Is this okay?
Yes – the policies can be more restrictive. Per Section 200.318 of the UG non-federal entities must use their own documented procurement procedures to reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal law and the standards identified in the UG.
Are procurement thresholds to be applied by non-federal entities in the aggregate fees by vendor?
The UG requires entities to establish written procurement procedures which meet the standards of the UG, including procedures to ensure full and open competition, as well as, ensuring procurement practices that are not restrictive of competition.
Some entities have incorporated written procedures that determine the procurement method based on the contract amount, or, if a contract is not issued, the estimated spend for the entity’s fiscal year and/or federal award period.
My organization receives both federal and non-federal awards. Can we adopt other policies for our non-federal award procurements?
Yes. But keep in mind that having separate policies and procedures for your procurement standards will require additional training time along with placing a heavier demand on your staff as they would need to follow two different sets of procurement procedures. There is an increased likelihood of errors with having two different policies in place. If you receive federal awards, we recommend just adopting one standard in compliance with the UG to reduce confusion and the burden on your staff.
If my organization makes a purchase over the Simplified Acquisition Threshold that is comprised of both federal and state grant funding, do we need to comply with the UG simplified acquisition requirements?
The procurement threshold should be applied to the purchase as a whole, though it may be allocated to several different grant funding sources.
What kinds of things will my auditors be looking at with respect to the new purchasing standards?
Your auditors will ask for your organization’s procurement policies and procedures, so be sure to have them documented and ready for them to review. The auditors will verify that certain policy items are included and will perform testing on your procurements to make sure that you selected the proper procurement method.
What are the common areas being reported as findings relating to procurement?
- Lack of written procurement procedures meeting the requirements of the UG
- Written procedures complied with the UG, but staff were not properly trained and did not follow the written procedures
- Lack of suspension and debarment procedures being performed
- Procurement procedures performed were not adequate for the applicable procurement method.
- Other procurement noncompliance including a lack of documented conflict of interest policy.
To reiterate, the new procurement procedures are one of the most complex compliance areas in the UG. If you are uncertain about any area of compliance, please contact your auditors immediately – they are there to help!
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