Perhaps no aspect of grants management creates more anxiety for a grant recipient than maintaining compliance with the procurement requirements under the Office of Management and Budget’s uniform guidance (2 C.F.R. Part 200). With sufficient planning up front, procurement of goods and services funded with your federal grant dollars can be done very effectively and efficiently. Here are a few reminders that will help you stay compliant when making procurements under financial assistance programs.
- Develop a price expectation — Once you decide you need to procure a good or service, you need to determine what a reasonable price for that good or service should be. This is called an independent price estimate in the uniform guidance (§200.324(a)). While this is technically only required, for federal grant purposes, for purchases greater than $250,000, getting such an independent price estimate is a best practice. It will help you demonstrate that you received a reasonable price for the good or service that your procured.
- Document your procurement policies and procedures — You must have written procurement policies and procedures that you follow, not only for your federally funded procurements, but for your regularly funded procurements as well (§200.318(a)). The uniform guidance requires that “the nonfederal entity must have and use documented procurement procedures, consistent with state, local and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a federal award or subaward.”
- Document your conflicts of interest policies — This is a common finding in federal award audits. The uniform guidance at §200.318(c)(1) requires that the nonfederal entity “must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer or agent may participate in the selection, award, or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees and agents of the nonfederal entity may neither solicit nor accept gratuities, favors or anything of monetary value from contractors or parties to subcontracts.”
This is especially important for a nonprofit organization whose board members may desire to conduct business with the organization. The business of a board member is not precluded from conducting business with the nonprofit; however, the nonprofit must ensure that the board member recuses himself or herself from the selection, award or administration of the contract between the organization and the board member’s business.
- Establish reasonable purchasing thresholds — The uniform guidance (§200.320(a)) permits grantees to use informal purchasing methods for purchases below a certain level. Grant recipients should establish such purchasing thresholds that are reasonable for their size organization. Most organizations set their micro-purchasing level at a low level, say $25,000 or less. For purchases below that micro-purchasing level, we recommend that the grantee obtain at least three verbal quotations for the price of the good or service it is purchasing. You must seek federal approval if you want to establish a micro-purchasing threshold of greater than $50,000.
The next key purchasing threshold is the simplified acquisition threshold (SAT). You need to obtain at least three written quotes for purchases above your micro-purchasing threshold, but less than your SAT. Your simplified acquisition threshold cannot be greater than $250,000. But, again, this simplified acquisition threshold level should be set so it is reasonable for its size organizations. Most organizations set their SAT at $50,000 to $100,000.
- Consider co-operative procurement, especially for large purchases — The uniform guidance (§200.318(e)) encourages the use of co-operative purchasing agreements. These agreements are state and local intergovernmental agreements or inter-entity agreements that have already been executed in accordance with federal procurement requirements which your entity can access. Competition requirements will be met with documented procurement actions using strategic sourcing, shared services and other similar procurement arrangements.
- Document your formal procurement method — For your purchases above your SAT, you must document your formal procurement method (§200.320(b)). These methods are generally sealed bids or proposals, and will demonstrate that you generated competition for your purchase. However, there may be instances where it is impractical to compete the purchase.
You can only do a noncompetitive procurement if one or more of the following conditions exist: (1) the acquisition of property or services, the aggregate dollar amount of which does not exceed your micro-purchase threshold; (2) the item is available only from a single source; (3) the public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) the federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the nonfederal entity; or (5) after solicitation of a number of sources, competition is determined inadequate. Bottom line – you can do noncompetitive procurements, but you must document how that procurement complies with the uniform guidance.
- Document your evaluation criteria — You must incorporate a clear and accurate description of the technical requirements for the material, product or service to be procured. The description may include a statement of the qualitative nature of the material, product or service to be procured and, when necessary, must set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use. You also must identify all requirements that the offerors must fulfill and all other factors to be used in evaluating bids or proposals. I always suggest a statement that indicates that you will further select the vendor that provides the best value to your organization.
- You don’t always have to go with the lowest price — As long as you have clearly described your evaluation criteria (see number 6 above) and have kept your scoring sheets to demonstrate how each bid was scored, you don’t necessarily need to select the vendor with the lowest price. However, you do have to document why you have selected the vendor you have selected.
- Document your pricing methodology — The uniform guidance presumes that you will execute a firm fixed price contract. If you are using any other pricing method, such as time and materials, you must document why this is the most advantageous way to establish the pricing for the contract (§200.318(j)(2)). The uniform guidance indicates that a nonfederal entity “may use a time-and-materials type contract only after a determination that no other contract is suitable and if the contract includes a ceiling price that the contractor exceeds at its own risk.”
- Monitor your contractors — While the contract is underway, you should continue to correspond with your contractors to ensure that they are performing as you expect them to. In addition, you should document your correspondence with your contractor to demonstrate that you are overseeing their activities.
Lastly, the running theme through all of this is developing and maintaining robust documentation supporting all facets of your procurement of goods and services funded with federal grant dollars. Maintaining this documentation is the basis for demonstrating your compliance with the uniform guidance.
Written by Jack Reagan. Originally published by Thompson Grants.