One afternoon I needed a break from the tedium of putting words on a page for hours on end, so I headed down to see my friends in the Special Events office at City Hall. They were working on an upcoming event called Scarecrow Harvest where elementary classrooms were encouraged to build a scarecrow to put on display throughout the city’s downtown. Not only would this culminate in a day of fun and festivities, complete with prizes for winners of the most creative, realistic, and well-structured scarecrows, but it was a festive way to decorate the area for pedestrians and drivers alike.
And that day there was quite the hullabaloo! The dollar amount needed for hay bales that year reached the tipping point where three quotes were needed from vendors to ensure the purchase was a fair price. The Special Events team argued that they had been using the same vendor for years, his price was reasonable, he knew how and where to deliver all the hay bales, and it was a seamless process that shouldn’t be disturbed. Plus, when were they going to find the time to get three quotes because they had an event that needed to happen soon?
These were my friends, and I felt for them. Seriously, why mess up a good thing? The Finance Department was standing firm, it was their procurement policy after all, and no amount of explanation or pleading was swaying their decision. At the time, it seemed like such a ridiculous thing, and I said as such.
If I could do that conversation all over again, I would be singing a different tune. Procurement policies are created for a reason, and the best way to ensure that funding is well accounted for and used wisely is to stick to the rules. Every time an exception is granted, you are grinding down the purpose and dismantling all the good created with procurement processes.
This is especially true if you are the recipient of grant funding, particularly federal grant funding. The Office of Management and Budget’s (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards – also known as Uniform Guidance and 2 CFR Part 200 – has a lot to say about procurement.
The most important is probably found in § 200.318(a), “Documented procurement procedures. The recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in §§ 200.317 through 200.327.”
To comply with this regulation, the best option is for your organization to have a procurement policy that is equal to or more stringent than the federal procurement policies. That way, you can always follow your own procurement policy and be in compliance with every agency involved.
Section § 200.319(a) also states, “All procurement transactions under the Federal award must be conducted in a manner that provides full and open competition and is consistent with the standards of this section and § 200.320.”
Part (c) of that same section goes on to share, “Examples of situations that may restrict competition include, but are not limited to:
(1) Placing unreasonable requirements on firms for them to qualify to do business;
(2) Requiring unnecessary experience and excessive bonding;
(3) Noncompetitive pricing practices between firms or between affiliated companies;
(4) Noncompetitive contracts to consultants that are on retainer contracts;
(5) Organizational conflicts of interest;
(6) Specifying only a “brand name” product instead of allowing “an equal” product to be offered and describing the performance or other relevant requirements of the procurement; and
(7) Any arbitrary action in the procurement process.”
What does this mean?
As of October 1, 2024, OMB updated the procurement categories (found in § 200.320) to include:
(1) Informal Procurement
This category includes micro purchases and simplified acquisitions. With a micro purchase, you can simply purchase an item without any sort of “procurement process” as long as the threshold of a single item purchased is $15,000 or less. (Dollar amount used to be $10,000.) Also, your organization can complete a self-certification to increase the micro purchase threshold to $50,000.
The simplified acquisition was formerly known as small purchases. This is used if the dollar amount is higher than the micro purchase threshold and up to $350,000 (formerly $250,000). The only requirement is that you must obtain price or rate quotations from an adequate number of sources. Your agency gets to decide what is adequate. Many like to go with three, but that’s not a federal requirement.
And remember, these are the funding levels set by the federal government. Your agency can stick with these levels or decrease them (and include other requirements such as getting purchase orders, approvals, etc.) within your own agency’s procurement policies. Said policy must be equal to or stricter than the federal rules.
(2) Formal – Sealed Bids or Proposals
When the dollar amount of the procurement transaction exceeds the simplified acquisition threshold of your agency, a more formal process is required. There are two options.
If sealed bids are best for things like construction services, where you are comparing apples to apples, then proposals are best used when you are comparing apples to oranges, or maybe even apples to penguins. A proposal certainly factors in the price of the service, but that is not the driving force. Imagine you’re buying new curriculum for your elementary school history classes. You probably want to weigh other factors (such as adherence to the teaching methodology your school follows, the contractor’s experience, etc.) over pricing to find the best fit.
(3) Noncompetitive Procurements
You may have heard this called Sole Source. Some people say this is the unicorn of procurement, but I’d say it’s more like a zebra. Certainly not as common as a horse, but you can find one out in the wild if you know where to look.
In fact, § 200.320(c) spells out the five instances in which you can use the noncompetitive procurement option:
(1) The aggregate amount of the procurement transaction does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section);
(2) The procurement transaction can only be fulfilled by a single source;
(3) The public exigency or emergency for the requirement will not permit a delay resulting from providing public notice of a competitive solicitation;
(4) The recipient or subrecipient requests in writing to use a noncompetitive procurement method, and the Federal agency or pass-through entity provides written approval; or
(5) After soliciting several sources, competition is determined inadequate.
When’s the last time you reviewed your agency’s procurement policy? Heck, when is the last time anyone at your agency reviewed it? In light of the changes in OMB’s guidance, now is as good a time as ever to update your policy (or at least check to see if updates are needed).
It’s important that your agency’s Finance Department understands federal regulations to ensure its procurement policy is as strict, or more so, than the federal guidelines. It’s also important that everyone within the agency understands what the policy says and why it’s so important to follow the rules.
Ever hear the phrase an apple a day keeps the doctor away? Well, following your procurement policy every day will help keep the OIG (Office of the Inspector General) away. When federal funders are reviewing your financial reimbursement requests, they are really looking for the anomalies. When you do not follow your procurement policy, it sticks out like a sore thumb. And that’s when they know there is trouble.
If it’s the policy to always get three quotes for anything over $10,000, then get the three quotes. If you use the sealed bid process for construction projects over $50,000, then do it. And do it every time.
The best way to ensure that procurement is followed when federal grants are in play is to always follow your agency’s procurement policy. Even if you have always used the same contractor for the Scarecrow Harvest hay bales but the event has grown so large you now need three quotes to stay compliant. Get the three quotes. Sure, it seems like a pain, but your Finance team really knows what they are talking about. And trust me, your grant manager and all your funders will notice and appreciate that the rules are being followed!
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