“It’s not fair!” This cry is not just for toddlers and politicians. The federal government also jumps in the mix when it comes to federal grants. The Uniform Guidance (2 CFR Part 200) requires grant recipients to spread the federal dollars around to businesses that may have been shut out of federal spending in the past.
A $4.85 Million Dollar Grant Management Mistake
I recently 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 key mistakes the local government made included:
- Missing affirmative steps that ensure the use of small and minority firms, 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 whole 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 your procurement of goods and services with federal funds or have a documented (and darn good) reason why you aren’t 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 just “hope” some of these types of business will knocking on your door!
You have to get out there and encourage them to participate.
Let’s look at these two areas in more detail:
Encourage Competitive Practices
The procurement standards require procurement transactions to 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 referred to as 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.
And the decision on awarding bids should be the best outcome after taking into account price, quality, and other relevant factors, such as delivery and warranty.
And while grant recipients do have the right to reject all bids when it is in their best interest to do so, you need to have you “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 do 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 be aware that the procurement standards expressly prohibit awarding work to a contractor that develops the specifications, requirements, statement of work, or other related documents that are used to solicit bids. The goal with this requirement is to prevent a contractor from unduly influencing the solicitation for goods or services.
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.
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.
So, if you are contemplating working on “both sides now” discuss whether this is allowed with the federal funder before you are surprised.
Take Affirmative Steps
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 to allow for participation by small, minority-owned, and women-owned businesses. (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 business, and small businesses is a mandatory procurement requirement in the Uniform Guidance!
Want to Feel More Confident About the Uniform Guidance for Federal Grants?
If it’s been a while since you looked at the grant regulations, our monthly grant management training seminars make it simple to get the grant management training you need…and get it completed quickly.
You’ll also have opportunities to network with other grant professionals and gain from other’s real-life experiences.
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Lucy Morgan CPA, MBA
CEO, Compliance Warrior