These changes were authorized by the National Defense Authorization Act (NDAA) for FY 2018, Pub. L. No. 115-91, which became law on December 12, 2017. Federal grant recipients need to be aware of these changes and may need to update their procurement rules accordingly.
This memorandum from OMB clarified several points regarding the new procurement rules as part of the implementation of 2 CFR Part 200–also known as the “Uniform Guidance.”
And though you will not see these changes in 2 CFR Part 200 quite yet, OMB does intend to revise the Uniform Guidance to conform with the law.
Here are some of the key points:
Changes to the Five Procurement Methods
The Uniform Guidance break down the procurement process into five purchasing methods.
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The update from OMB makes the following changes:
Method #1: Micro-Purchase
Micro-purchases are the simplest and most informal of the procurement methods in the new grant guidance.
Here are the main points:
- Purchases are not to exceed
was $3500Now $10,000
- No quotations required if the price is reasonable
- To the extent practicable, distribute purchases equitably among qualified suppliers
Method #2: Small Purchase
With purchases under the simplified acquisition rules (was
$150,000 NOW $250,000) the process is still relatively simple and there are not extensive bidding requirements.
- Purchases are up to
$150,000NOW $250,000 (the limit for the simplified acquisition rules)
- Get rate quotations from an adequate number of qualified sources (Note, your written procurement procedures should define what is meant by “adequate” for example; more than one.)
- No cost or price analysis is required for purchases under the simplified acquisition limit
Method #3: Sealed Bid
Once you start making purchases over
was $150,000 NOW $250,000. the process gets more complicated and formalized.
- Purchases are over
was $150,000NOW $250,000
- Primarily used in construction projects, such as a firm fixed price contract
- Price is a major factor and a formal process for bidding is generally required
Method #4: Competitive Proposals
Just like the sealed bid method, competitive proposals mean more requirements and documentation.
- Purchases are over
was $150,000NOW $250,000
- Use contracts such as fixed price or cost reimbursement
- Formal Request for Proposal (RFP) with pre-determined evaluation methods for an adequate number of qualified sources
Method #5: Sole Source
Sometimes because of the uniqueness of the goods or services or the immediacy of the need, competition is NOT as open as we would wish in the procurement process. If these cases, the sole-source method must be followed.
- This non-competitive method is available for procurements of any dollar amount
- Because there is no competition it must be authorized by the agency (or Pass-through entity-for sub-recipients)
There are exceptions to pre-approval such as certain unique circumstances or a public emergency.
One-Size-Fits-All Procurement Rules
Regardless of the size of the purchase, these 5 characteristics must be still be met:
#1: The purchase must comply with the non-Federal entity’s documented procurement procedures
#2: The purchase must be necessary to carry out the Federal award.
#3: The purchase must be made with open competition to the extent required.
#4: The organization is in compliance with their conflict of interest policy.
#5: The purchase documentation contains a sufficient and proper history of the purchase.
Implementation Dates for Changes to the Micro-Purchase Threshold
In addition, to the changes in the micro-purchase and simplified acquisition threshold, the memorandum also clarifies the effective date of the change:
- For institutions of higher education and research institutions covered under the NDAA of FY 2017, the effective date is the date this bill was signed into law on December 23, 2016.
- For other types of non-federal entities covered under the NDAA of FY2018, the effective date is for these changes is on the date of issuance of this memo on June 20, 2018.
It’s worth noting that the implementation date for the changes to the micro-purchase and simplified acquisition dates is really an exception to the NDAA of FY2018 legislation that said these higher thresholds would not be effective until implemented in the Federal Acquisition Regulation (FAR) at 48 CFR. Subpart 2. 1 (Definitions).
OMB wanted to provide for maximum flexibility for grant recipients during the implementation of these changes and decided to implement early through the exception process called out for in 2 C.F.R. § 200.102 (Exceptions).
Can You Have a Higher Micro-Purchase Threshold?
Generally speaking, you can have more restrictive rules with your federal grants than the Uniform Guidance, but not less restrictive rules.
However, the NDAA of 2017 in its changes for institutions of higher education and other qualified research institutions does lay out a process for requesting approval for an even higher micro-purchase threshold.
Start by contacting your funding agency to determine the correct points of contact and then submit a request to the institution’s cognizant Federal agency for indirect cost rates.
The request for a higher micro-purchase threshold should include the level being requested and the justification(s) for it based on the criteria above per Section 2 I 7(b) of the NOAA for FY2017.
Is This Change A Big Deal?
For institutions of higher education (IHE) and research institutions, the National Defense Authorization Act of FY 2017 (NDAA-2017) had already raised your micro-purchase limits to $10,000 from the $3,500 everyone else was using.
And for those of you in state, local and tribal governments, you may wonder “What’s the big deal?” as you may already have lower limits that you don’t plan on changing them anytime soon.
So depending on your type of non-federal entity, this may seem like a huge change, or not so much…
But where ever you are working, take the time to see how your existing procurement policies and procedures need to be updated to match up these latest changes in the grant regulations.
An ounce of review will save a pound of pain later on.
Learn More About Grant Management
Want to learn more about the changes for federal grant recipients and feel confident on how to be an even better grant manager?
We offer two-day grant management training online, on-site and at our live training seminars called “Grant Management Boot Camp.”
Lucy Morgan CPA, MBA
CEO, Compliance Warrior