“It’s not fair!” This cry is not just for toddlers and politicians.
The federal government also jumps in the mix regarding federal grants.
The Uniform Guidance (2 CFR Part 200) requires grant recipients to include small, women, and minority-owned businesses in federal spending.
A $4.85 Million Grant Management Mistake
I shared a case study in Grant Management Boot Camp about a grant recipient that had $4.85 million in costs questioned for what may seem like administrative “red tape.”
The critical mistakes the local government made included:
- Missing affirmative steps that ensure the use of small and minority firms and women’s business enterprises, when possible
- Didn’t perform a cost or price analysis as required
- Didn’t include all required contract provisions in its contracts
These procurement requirements are getting a new level of scrutiny with 2 CFR Part 200 (aka the Uniform Guidance), so don’t miss them!
Federal Grant Requirements for Competition and Affirmative Steps
So, what does this mean for your federal grant?
- You must ensure “free and open” competition in procuring goods and services with federal funds or have a documented (and darn good) reason for not using competition in your purchases.
- You must take affirmative steps to include under-served populations in your procurement process.
Does that mean you must have a quota for small businesses, women-owned business enterprises, and minority-owned firms?
No, but it’s no longer enough to “hope” some of these types of businesses will knock on your door!
You have to get out there and encourage them to participate.
Let’s look at these two areas in more detail:
Decoding Grant Management Tip: Encourage Competitive Practices
The procurement standards require that procurement transactions support “free and open” competition to the “maximum extent practicable.”
Promoting competition in procurement transactions is at the core of this guidance.
- (Please note that the term free and open competition is also called full and open competition in some publications.)
Grant recipients DO have the leeway to award bids that are most advantageous to the recipient, as opposed to awarding bids on such non-competitive factors as personal preferences.
The decision on awarding bids should be the best outcome after considering price, quality, and other relevant factors, such as delivery and warranty.
While grant recipients have the right to reject all bids when it is in their best interest, you need to have your “ducks in a row” to document your decision process when you don’t take the low bid.
It shouldn’t come as a surprise that when you reject the low bid, you may face expensive litigation from the unhappy rejected contractor.
Avoid Non-Competitive Practices
When you have a federal grant you must also avoid non-competitive practices.
And there is a little “gotcha” in the Uniform Guidance that often gets missed by grant recipients…
- Recipients must know that the procurement standards expressly prohibit awarding work to a contractor that develops the specifications, requirements, statement of work, or other documents used to solicit bids. (This requirement prevents a contractor from unduly influencing the solicitation of goods or services.)
2 CFR Part 200 also includes a provision in the procurement standards to require grant recipients to take “affirmative steps” to use minority, women-owned, and small businesses when possible.
Some other examples of non-competitive practices include:
- Awarding work when there is either a real or apparent conflict of interest
- Soliciting work from a sole source without an acceptable written justification
Finally, the federal awarding agency may require the recipient to submit supporting documentation if certain conditions exist during the procurement process, such as:
- Procurement transactions made when the non-federal entity’s procurement process didn’t meet procurement standards contained in 2 CFR Part 200
- Procurements that require a brand name in the specifications
- An award made to someone other than the apparent low bidder
It makes sense…
The greater the amount spent, the greater the responsibility for ensuring a competitive price.
Ultimately, a combination of federal regulations and internal organizational policies determine how much documentation is required to support the procurement with federal funding Decoding Grant Management.
Competition and Affirmative Steps: Warning for Grant Writers and Consultants
If you are a grant writer and consultant, be aware that an increasing number of federal agencies are viewing participating in writing a grant and working on the grant post-award to be a non-competitive practice decoding grant management.
So, if you are contemplating working on “both sides now” discuss whether this is allowed with the federal funder before you are surprised.
Competition and Affirmative Steps: Document It!
2 CFR Part 200 also includes a provision in the procurement standards to require grant recipients take “affirmative steps” to use minority businesses, women-owned businesses, and small businesses when possible.
Affirmative steps include:
- Placing qualified small, minority-owned, and women-owned businesses on solicitation lists
- Making information about upcoming procurements available to small, minority-owned, and women-owned businesses whenever they are potential sources
- Dividing total requirements into smaller tasks or quantities allows small, minority-owned, and women-owned businesses to participate. (For example, if a single procurement is expected to be too large for any one small business, the recipient should encourage the use of consortiums of small businesses to facilitate participation.)
- Planning the time frame for procurements to actively encourage and facilitate patronizing small, minority-owned, and women-owned businesses
- Using the services of organizations such as the Small Business Administration during the solicitation process
- Requiring prime contractors to take similar affirmative steps
Don’t leave this critical requirement to chance!
Taking affirmative steps to use minority businesses, women-owned businesses, and small businesses is a mandatory procurement requirement in the Uniform Guidance!
Feel More Confident About the Uniform Guidance for Federal Grants?
How about you?
Would you like to be a better grant manager?
We have another grant management training seminar coming soon.
Click here to get all the details!
Hope to see you there!
Lucy Morgan CPA, MBA
CEO, Compliance Warrior
Author of “Decoding Grant Management – The Ultimate Success Guide to the Federal Grant Regulations in 2 CFR Part 200.” The 2nd Edition is now available on Amazon in Paperback and Kindle versions.