OMB's Uniform Grant Guidance: A deeper dive into procurement standards under the new "Super Circular"
The new Super Circular is organized into six different sections, which are called "Subparts," and contains 11 appendices (see chart below). Subparts A through D contain the Administrative Requirements, Subpart E contains the Cost Principles, and Subpart F contains the Audit Requirements.
The procurement standards are a component of Subpart D, Post-Award Requirements, and are contained in Sections 200.317 through 200.326. These sections describe the applicable procurement standards, the methods of procurements that are allowed, and listings of specific items that must be included within contracts under federal awards. In general, the new procurement standards adopt the majority of the language used from Circular A-102, which previously applied to state and local governments. Therefore, non-Federal entities currently subject to Circular A-110 — like higher education, hospital, and other nonprofit organizations — will likely be affected more significantly. However, all organizations should review these changes carefully to determine the impact on their procurement procedures.
Overall, these reforms require the non-Federal entity to use its own documented procurement procedures which reflect applicable state and local laws and regulations, provided that the standards also conform to applicable federal laws and standards.
Allowable Procurement Methods
Five procurement methods are outlined in the Guidance (section 200.320):
- Procurement by micro-purchases – This is the only new procurement method under this new guidance! Procurement by micro-purchase is the acquisition of supplies or services, the aggregate dollar amount of which does not exceed $3,000 (or $2,000 in the case of acquisitions for construction subject to the Davis-Bacon Act). Micro-purchases may be awarded without soliciting competitive quotations if the non-Federal entity considers the price to be reasonable.
- Procurement by small purchase procedures – Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold (currently $150,000). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. The standards do not define how many quotations constitute an "adequate number"; this will be a matter of judgment.
- Procurement by sealed bids (formal advertising) – Bids are publicly solicited and a firm-fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price.
- Procurement by competitive proposals – The technique of competitive proposals is normally conducted with more than one source submitting an offer, and either a fixed-price or cost-reimbursement type contract is awarded. It is generally used when conditions are not appropriate for the use of sealed bids. A new requirement under this method is that the non-Federal entity must have a written method for conducting technical evaluations of the proposals received and for selecting recipients.
- Procurement by noncompetitive proposals – Procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source. The grants reform clarified that this may be used only when one or more of the following circumstances apply:
- The item is available only from a single source;
- The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;
- The federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-Federal entity; or
- After solicitation of a number of sources, competition is determined inadequate.
Required conflict of interest policies
Section 200.318 describes mandatory conflict of interest language each non-Federal entity must have. This conflict of interest guidance was expanded from the existing language in A-102 to include a provision for organizational conflict of interest. This expansion will require non-Federal entities to have strong policies preventing organizational conflicts of interest, which will be used to protect the integrity of procurements under federal awards and subawards.
In general, two types of conflict of interest policies must be maintained by the non-Federal entity:
- Employee conflict of interest
The non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the performance of its employees engaged in the selection, award, and administration of contracts. The grants reform includes the following provisions:
- "No employee, officer, or agent must participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the non-Federal entity must neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity."
- Organizational conflict of interest
This is a new requirement! If the non-Federal entity has a parent, affiliate, or subsidiary organization that is not a state government, local government, or Indian tribe, the non-Federal entity must also maintain written standards of conduct covering organizational conflicts of interest. Organizational conflicts of interest means that because of relationships with a parent company, affiliate, or subsidiary organization, the non-Federal entity is unable or appears to be unable to be impartial in conducting a procurement action involving the related organization.
Please note that paragraph 200.112 of the Super Circular also speaks to conflicts of interest, but do not get the two requirements confused. Paragraph 200.112 indicates that a non-Federal entity must disclose in writing any potential conflict of interest to the federal awarding agency or pass-through entity in accordance with applicable federal awarding policy.
The Uniform Grant Guidance doesn't substantially change the documentation requirements under Circular A-102. However, those previously subject to A-110 will want to closely look at these requirements. An organization must maintain records to sufficiently detail the history of procurement. At a minimum, this includes:
- The rationale for the method of procurement,
- Selection of the contract type,
- Contractor selection or rejection, and
- Basis for the contract price.
Other procurement items to note
- Section 200.319 contains language that prevents contractors who develop or draft specifications, requirements, statements of work, and invitations for bids or requests for proposals from competing for such procurements.
- Written procedures for procurement transactions are still required. (Section 200.319c)
- The non-Federal entity must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of the contract or purchase order. This wording has changed a bit from A-102, which required a contract administration system. How the non-Federal entity maintains oversight is a matter of judgment for the non-Federal entity.
- Appendix II provides for multiple provisions that must be included in contracts of non-Federal entities.
So what do you need to do now?
- All non-Federal entities will need to update their internal procurement policies to reflect the changes described in the uniform guidance. It is important that a recipient’s procurement policies identify the five allowable methods outlined in Section 200.320.
- Ensure your organization's current employee conflict of interest policies include the required language.
- Ensure the mandatory organizational conflict of interest policy is written, if applicable.
- Review Appendix II to ensure your organization's contracts include the required specifications.
The federal government has provided for a grace period for non-Federal entities to comply with the procurement standards in the Uniform Guidance. The grace period allows an extension for implementation of the new procurement rules for one additional full fiscal year after the effective date of the Uniform Guidance. In general non-Federal entities must comply with the terms and conditions of their Federal award, which will specify whether the Uniform Guidance applies. However, in light of the new procurement standards, for procurement policies and procedures, for the non-Federal entity’s first full fiscal year that begins on or after December 26, 2014, the non-Federal entity must document whether it is in compliance with the old or new standard, and must meet the documented standard. For example, the first full fiscal year for a non-Federal entity with a June 30th year end would be the year ending June 30, 2016. The Single Audit Compliance Supplement will instruct auditors to review procurement policies and procedures based on the documented standard. For future fiscal years, all non-Federal entities will be required to comply fully with the uniform guidance.