In December 2013, the US Office of Management and Budget (OMB) issued comprehensive grant reform rules titled “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.” With that issuance, there were important updates made to specific areas of Uniform Guidance. Procurement is one of the areas that had significant changes. Understanding how those changes impact practices within an organization will set the foundation for compliance.
While the new Uniform Guidance is effective for new federal awards and changes to funding increments with changed terms and conditions issued after December 26, 2014, there is a grace period after the effective date of the Uniform Guidance for implementing the new procurement requirements. The new general requirements and five methods of procurement most closely follow the previous OMB Circular A-102, Grants and Cooperative Agreements with State and Local Governments.
Even if your organization is a local government that previously followed OMB Circular A-102, now is a good time for everyone to review the grant contract requirements in the Uniform Guidance to ensure that your contracts are in compliance with these rules. While we have outlined many of the key requirements below, it is important to fully read the procurement sections of the Uniform Guidance, located at 2 CFR 200.318, to ensure your compliance.
Some of the general standards over procurement include:
- Every non-federal entity receiving federal awards must have documented procurement procedures that reflect federal law, Uniform Guidance standards, and any state regulations.
- Entities should focus on the most economical solution during the procurement process, and must avoid using federal funds for the acquisition of unnecessary items. Organizations are encouraged to consider the use of shared services and intergovernmental agreements to foster greater economy and efficiency.
- Written conflict-of-interest policies are required. No employee or agent of the entity may participate in the selection, award, or administration of a contract funded by federal grant dollars if he or she has an actual or apparent conflict of interest.
- The organization must document the procurement steps and activities required to be completed. This includes the basis for the type of procurement, contract type, and the basis for the contractor selection and price.
- Ultimately, the recipient of federal awards must maintain an appropriate level of oversight to ensure that contractors perform in accordance with the terms of their contract.
As evident above, there is a high level of formal documentation required to meet the procurement standards, beginning with required organizational policies and procedures through individual contract award and oversight activities.
The Uniform Guidance also requires full and open competition. Contractors who assist in drafting specifications for requests for proposals (RFP) must be excluded from competing for those opportunities. In addition, RFP specifications cannot have unreasonable requirements that are meant to limit competition. Also, procurements must be conducted in a manner that prohibits the use of geographical preferences in the evaluation of proposals, except in certain case where federal law explicitly requires or encourages geographic preference or when contracting for architectural and engineering services, provided that specifying geographic location leaves an appropriate number of qualified firms.
The Uniform Guidance outlines five methods of procurement:
- Micro-purchase: Purchases where the aggregate dollar amount does not exceed $3,000 (or $2,000 if the procurement is construction and subject to Davis-Bacon). When practical, the entity should distribute micro-purchases equitably among qualified suppliers. No competitive quotes are required if management determines that the price is reasonable.
- Small purchase: Includes purchases up to the Simplified Acquisition threshold, which is currently $150,000. Informal purchasing procedures are acceptable, but price or rate quotes must be obtained from an adequate number of sources.
- Sealed bids: Used for purchases over the Simplified Acquisition Threshold, which is currently $150,000. Under this purchase method, formal solicitation is required, and the fixed price (lump sum or unit price) is awarded to the responsible bidder who conformed to all material terms and is the lowest in price. This method is the most common procurement method for construction contracts.
- Competitive proposals: Used for purchases over the Simplified Acquisition Threshold, which is currently $150,000. This procurement method requires formal solicitation, fixed-price or cost-reimbursement contracts, and is used when sealed bids are not appropriate. The contract should be awarded to the responsible firm whose proposal is most advantageous to the program, with price being one of the various factors.
- Noncompetitive proposals: Also known as sole-source procurement, this may be appropriate only when specific criteria are met. Examples include when an item is available only from one source, when a public emergency does not allow for the time of the competitive proposal process, when the federal awarding agency authorizes, or after a number of attempts at a competitive process, the competition is deemed inadequate.
All recipients of federal awards should familiarize themselves with the changes in the Uniform Guidance. Baker Tilly created a webpage dedicated to resources to help you with your implementation, including links to Federal Register and frequently asked questions documents, recordings of our webinars, and tools to aid your implementation. Visit bakertilly.com/grantreform to access these resources.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.