UPDATE – The micro purchase threshold has been amended since this blog was written. See the blog post titled OMB Raises Micro-Purchase and Simplified Acquisition Thresholdsfor more details.
Micro-purchases may be the smallest of the five approved methods of procurement under the Uniform Guidance, but they have been creating some big confusion. There are different acceptable levels for different types of federal grant recipients and, to make matters worse, as of the date of this post the UG hasn’t been updated to reflect these differences.
Here’s a breakdown of micro-purchases and the different thresholds that may apply to you.
Definition of Micro-Purchases
The purpose of creating a micro-purchase category was to lessen the burden on non-Federal entities for what the government considers very small purchases. Under the Uniform Guidance, a micro-purchase is defined as “an acquisition of supplies or services using simplified acquisition procedures, the aggregate amount of which does not exceed the micro-purchase threshold.” This threshold is periodically adjusted for inflation.
The definition of micro-purchases in the Uniform Guidance currently lists the threshold at $3,000. This has caused a good deal of confusion because (as you read on in the definition), FAR 48 CFR Subpart 2.1 is what actually governs the threshold. And the current micro-purchase threshold listed in the FAR is $3,500.
For most federal grant recipients, the FAR threshold of $3,500 is the requirement that should be followed. However, to complicate things even further, certain types of organizations are allowed to use an even higher micro-purchase threshold under the National Defense Authorization Act (NDAA) for Fiscal Year 2017. The NDAA applies to 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.)
Specific Requirements for Micro-Purchases
The regulatory requirements for conducting micro-purchases are relatively simple. Purchases can be made without soliciting competitive quotations; it’s up to the grant recipient to evaluate the reasonableness of the price. Also, any standard purchasing method (i.e. commercial purchase cards, purchase orders, petty cash, etc) can be used.
The regulations do note that, to the extent practicable, micro-purchases should also be distributed equitably among qualified suppliers. Each organization will need to determine on its own what ‘practicable’ means to them.
Other Procurement-Related Considerations
- Some other key considerations when performing micro-purchases include the following:
- There can be no conflicts of interest by employees, officers or agents who are engaged in the selection, award and administration of the contract with the winning bidder.
- You must take all necessary affirmative steps to assure that minority businesses, women’s business enterprises, and labor surplus area firms are used when possible.
For some grant recipients, micro-purchases will be the most commonly used purchase methodology. Even though the requirements for micro-purchases are more relaxed when compared to other purchase types, it is still important to have well documented, well communicated policies and procedures for them; furthermore, there should be operational controls established to alleviate fraud and misuse.
Author: Tom Rogers
Job Title: CEO
Organization: Vendor Centric
Tom is the founder and CEO of Vendor Centric, he has been a trusted advisor to nonprofit organizations for 30 years, with a focus on helping them align the right people, processes and systems to mitigate third-party risk and drive more value from third-party contracts and relationships.