UPDATE – The micro purchase and simplified acquisition thresholds have been amended since this blog was written. See the blog post titled for more details.
One of the biggest changes that federal grant recipients are grappling with is how to implement and manage to the five approved Uniform Guidance procurement methods.
While many states and local governments have been using similar methods for some time, most nonprofits, colleges, research institutions and other types of nonprofits have not. As a result, they’re having to make some major updates to their procurement policies and procedures to get themselves compliant.
To help you better understand what’s required, we’ve provided a breakdown of the five Uniform Guidance procurement methods below. And to help you when you’re ready to implement these methods, we’ve created a free procurement methodology decision tree that you can download and use to support procurement compliance.
This is the smallest and easiest method to implement. For most entities the micro-purchase threshold will apply to any purchase with a total aggregate value of $3,500 or less. However, the micro-purchase threshold was raised (under the National Defense Authorization Act for Fiscal Year 2017) to a higher level for the following types of organizations:
- Institutions of Higher Education (IHE), as defined in section 101(a) of the Higher Education Act of 1965
- Related or affiliated nonprofit entities of IHE’s
- Nonprofit research organizations
- Independent research institutes
The increased micro-purchase threshold for these organizations is “A) $10,000, or B) such higher threshold as determined appropriate by the head of the relevant executive agency and consistent with clean audit findings under chapter 75 of title 31, internal institutional risk assessment or state law.” (Note: While the increased threshold is in effect, as of the date of this post the Uniform Guidance has not yet been updated to reflect these changes.)
Since micro-purchases are so small, no competitive quotes are required and it’s up to the grantee to determine whether or not the price is reasonable. The standard also requires that purchases be distributed equally among qualified suppliers to the extent practical.
These will likely comprise the largest percentage (in dollars) of purchases for many grantees. They cover simple and informal procurements for services, supplies, or other property that are above the micro-purchase amount but below the Simplified Acquisition Threshold (currently $150,000). Grantees are required to receive quotations from an “adequate number of sources”, though it’s left up to the grantee to define “adequate”.
Uniform Guidance procurement standards get more complicated once the aggregate amount of the procurement exceeds the Simplified Acquisition Threshold, which is currently $150,000. In these cases there are two potential procurement methods, the first of which being the Sealed Bid.
Sealed bids are the government’s preferred procurement method for construction (when certain conditions apply), and for goods/services where price will be the main consideration for selecting the winning bidder. If sealed bids are used, the guidance outlines five explicit requirements to follow including:
- bids must be solicited from an adequate number of known suppliers and provide sufficient time to respond;
- the invitation for bids must be publicly advertised and define the items or services in order for the bidder to properly respond;
- bids must be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly;
- a firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder; and
- any or all bids may be rejected if there is a sound documented reason.
The second method for procurements above $150,000 is the Competitive Proposal. This method is typically used when there are critical factors to consider beyond just price. Both fixed-price or cost-reimbursement type contracts can be used, and certain general requirements must be followed including:
- Requests for Proposals (RFPs) must be publicized;
- all evaluation factors must be identified in the RFP along with their relative importance;
- proposals must be solicited from an adequate number of qualified sources (again – it’s up to the grantee to define “adequate”);
- there must be a written method for conducting technical evaluations of the proposals received and for selecting recipients; and
- contracts must be awarded to the responsible firm whose proposal is most advantageous to the program, with price and other factors considered.
The standard also states that competitive proposal procedures may be used for qualifications-based procurement of architectural/engineering (A/E) professional services.
The outlier under the Uniform Guidance procurement standards is the noncompetitive proposal. This method, also called a “no-bid” contract or sole-source procurement, applies in very specific situations that eliminates the need for competition in your solicitation process.
Noncompetitive proposals apply (practically) to any procurement above the micro-purchase threshold and are used when there is adequate “justification for other than full and open competition.” This can occur when one or more of the following criteria are met:
- the good/service is only available from a single source,
- the grantee needs to meet a public exigency or emergency,
- the Federal awarding agency has provided prior authorization, or
- after soliciting a number of sources, the grantee determines that there is inadequate competition.
Use Our Procurement Methodology Decision Tree to Help Choose the Right Method
The Uniform Guidance procurement methods are going to be difficult to implement for many organizations. While the UG provides guidance, choosing the right method can be difficult at times, especially as purchases get more complex and costly.
You can make the process a little easier for you and your staff by downloading our free UG Procurement Methodology Decision Tree. It’s a handy tool you can use to ensure you select the right method every time, and to ensure you and your staff maintain compliance with the procurement standards.