On August 13, 2020, the Office of Management and Budget (OMB) implemented statutory changes to 2 CFR Part 200, including updates to the procurement standards related to micro-purchases, sole source procurements, and contract provisions for federal grant recipients.
Federal award recipients should be aware of these changes and have updated their procurement policies accordingly.
These updates clarified several points regarding the procurement standards in 2 CFR Part 200–also known as the “Uniform Guidance.”
And though you may wish the rules would quit changing, OMB reaffirmed its plan to update the guidance every five years.
The next major update was released in April 2024 and there is likely to be a lively debate as these rules get implemented in the future.
Here are some of the key points and how things may be different with the 2024 updates:
Changes to the Five Procurement Methods
The Uniform Guidance breaks down the procurement process into five purchasing methods.
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Method #1: Micro-Purchase
Micro-purchases are the simplest and most informal procurement methods in the Uniform Guidance.
Here are the main points:
- Purchases are not to exceed $10,000
- No quotations are required, provided the price is reasonable
- To the extent practicable, distribute purchases equitably among qualified suppliers
In the recent updates, OMB provided additional guidance on how to document “reasonableness.”
Here is the specific guidance from 2 CFR Part 200.320 (a)(1):
Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity.
The OMB also provided paths for increasing the micro-purchase limits to $50,000 and beyond in sections 2 CFR Part 200.320 (a)(1)(iii)-(v):
For award recipients wanted to increase the micro-purchase threshold to $50,000, it starts with a self-certification of eligibility for that increase on an annual basis, provided the following:
- Documentation is made available to the federal awarding agency and auditors consistent with 2 CFR Part 200.334
- Self-certification includes a justification, clear identification of the micro-purchase threshold
- Supporting documentation is maintained showing; (1) Qualification as a low-risk auditee from the most recent audit, (2) A yearly annual internal institutional risk assessment to identify, mitigate, and manage financial risks and, (3) If a public institution, evidence that the higher threshold does not violate State law
Want an even higher micro-purchase threshold?
That will require the approval of the cognizant agency for indirect costs.
Method #2: Small Purchase
With purchases under the simplified acquisition rules with a threshold of up to $250,000, the process is still relatively informal, and there are not extensive bidding requirements.
- Purchases are up to $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 $250,000, the process gets more complicated and formalized.
- Purchases are over $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: Proposals (also known as Competitive Proposals)
Like the sealed bid method, competitive proposals mean more requirements and documentation.
- Purchases are over $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.
Here are the conditions under which sole source purchase may be allowed according to 2 CFR Part 200.320 (c):
(1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section);
(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 non-Federal entity; or
(5) After solicitation of a number of sources, competition is determined inadequate.
Talk with your federal awarding agency about sole source requirements when in doubt.
Better safe than sorry!
One-Size-Fits-All Procurement Rules
Regardless of the size of the purchase, these 5 characteristics must 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 complies with its conflict of interest policy.
#5: The purchase documentation contains a sufficient and proper purchase history.
Is This Change A Big Deal?
For institutions of higher education (IHE) and research institutions, you may have already elected to go with an even higher micro-purchase limit.
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.
Supporting Responsible Contractors
One of the focus areas for the 2024 revisions is the area of responsible contractors.
Here are some of the changes that support this are in the area of labor use:
§ 200.318 General procurement standards.
(h) Responsible contractors. The recipient or subrecipient must award contracts only to responsible contractors that possess the ability to perform successfully under the terms and conditions of a proposed contract. The recipient or subrecipient must consider contractor integrity, public policy compliance, proper classification of employees (see the Fair Labor Standards Act, 29 U.S.C. 201, chapter 8), past performance record, and financial and technical resources when conducting a procurement transaction.
§ 200.318 General procurement standards. (l) Examples of labor and employment practices.
(1) The procurement standards in this subpart do not prohibit recipients or subrecipients from:
(i) Using Project Labor Agreements (PLAs) or similar forms of pre-hire collective bargaining agreements;
(ii) Requiring construction contractors to use hiring preferences or goals for people residing in high-poverty areas, disadvantaged communities as defined by the Justice40 Initiative (see OMB Memorandum M-21-28), or high-unemployment census tracts within a region no smaller than the county where a federally funded construction project is located. The hiring
preferences or goals should be consistent with the policies and procedures of the recipient or subrecipient, and must not prohibit interstate hiring;
(iii) Requiring a contractor to use hiring preferences or goals for individuals with barriers to employment (as defined in section 3 of the Workforce Innovation and Opportunity Act (29 U.S.C. 3102(24)), including women and people from underserved communities as defined by Executive Order 14091;
(iv) Using agreements intended to ensure uninterrupted delivery of services; using agreements intended to ensure community benefits; or
(v) Offering employees of a predecessor contractor rights of first refusal under a new contract.
(2) Recipients and subrecipients may use the practices listed in paragraph (1) if consistent with the U.S. Constitution, applicable Federal statutes and regulations, the objectives and purposes of the applicable Federal financial assistance program, and other requirements of this part.
There are also changed in the competition requirements supporting US workers.
§ 200.319 Competition. (f) To the extent consistent with established practices and legal requirements applicable to the recipient or subrecipient, this subpart does not prohibit recipients or subrecipients from developing written procedures for procurement transactions that incorporate a scoring mechanism that rewards bidders that commit to specific numbers and types of U.S. jobs, minimum compensation, benefits, on-the-job-training for employees making work products or providing services on a contract, and other worker protections. This subpart also does not prohibit recipients and subrecipients from making inquiries of bidders about these subjects and assessing the responses. Any scoring mechanism must be consistent with the U.S. Constitution, applicable Federal statutes and regulations, and the terms and conditions of the Federal award.
And next, labor is supported through the contract cost and price section:
§ 200.324 Contract cost and price. (a) The recipient or subrecipient must perform a cost-benefit or price analysis for every procurement transaction, including contract modifications, in excess of the simplified acquisition threshold. The method and degree of analysis conducted depend on the facts surrounding the particular procurement transaction. For example, the recipient or subrecipient should consider potential workforce impacts in their analysis if the procurement transaction will displace public sector employees. However, as a starting point, the recipient or subrecipient must make independent estimates before receiving bids or proposals.”
See more on the recent changes at CFO.gov with this download: https://www.cfo.gov/assets/files/Uniform%20Guidance%20_Reference%20Guides%20FINAL%204-2024.pdf
The Last Word: Contract Provisions in Appendix
Once again, federal award recipients need to update their contract provisions to comply with 2 CFR Part 200.
If the revision date on your contract template is before August of 2024, you are likely missing required contract provisions.
An ounce of review will save a pound of pain later on.
Don’t delay!
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Rachel Werner, MPA, GPC, PMP
MyFedTrainer Principal, Compliance Champion
