OMB update: Micro-purchase and simplified acquisition threshold increases

The Office of Management and Budget (OMB) recently issued memorandum M-18-18, which provides guidance on changes to micro-purchases and simplified acquisition threshold requirements. The key changes are:

• Threshold for micro-purchases is increased to $10,000 (or higher in certain limited circumstances).
• Threshold for simplified acquisitions (small purchase procedures limit) increased to $250,000.

These changes are a result of the National Defense Authorization Act (NDAA) of 2017 and 2018. The memorandum does two key things: it clarifies the timing of the threshold changes, and it grants permission to implement the threshold changes.

Let’s review each act in greater detail.

2017 National Defense Authorization Act (NDAA)

The memorandum clarifies for institutions of higher education, or related or affiliated nonprofit entities, nonprofit research organizations, or independent research only (referred to herein as covered entities) that the micro-purchase increase to $10,000 for procurements under grants and cooperative agreements was effective Dec. 23, 2016. The 2017 NDAA also establishes a process for covered entities to request a higher threshold. Please note, the 2017 NDAA will be relevant if you are a covered entity or have covered entity clients that previously adopted the new Uniform Guidance (UG) procurement requirements. In general, the grantee election to apply the change should have occurred prior to the enactment of the 2018 NDAA.

2018 National Defense Authorization Act (NDAA)

The 2018 NDAA impacts all recipients including prime recipients, pass through entities, and subrecipients. The memorandum clarifies that all entities can take advantage of the increases to the micro-purchase threshold of $10,000 and the simplified acquisition threshold of $250,000. This is effective upon the issuance of the OMB memorandum on June 20, 2018, (the date appearing on the memorandum). If you will take advantage of the increase, the increase should be documented in accordance with the general procurement standards of the Uniform Guidance at 2 CFR 200.318.

Key adoption considerations for micro-purchase and simplified acquisition threshold increases

• During the original adoption of UG procurement standards, were specific amounts included in the policy, or were references to the UG sections or amounts as adjusted referenced? If specific amounts were referenced, the grantee will need to update the policy to take advantage of the changes.
• If the policy was written to allow for changes in amounts, grantee procedures will need to be updated to conform.
• If this change is inconsistent with other procurement policies within the organization, you must decide how the policy will be enacted. Remember, state law or other requirements may limit full utilization of the changes.
• Some organizations may not choose to fully adopt the change and maintain lower thresholds. Organizations are not required to use these thresholds but cannot exceed them.
• The 2017 NDAA suggested that the micro-purchase threshold can be greater than $10,000 for covered entities. In order to access higher levels, the grantee must meet certain criteria and obtain grantor approval. If this has not occurred, the $10,000 threshold would apply.
• Note, while not the norm, some federal agencies’ original adoption of the UG procurement requirements created limits on either micro-purchase or simplified acquisition requirements. If the grantee receives funding from such an agency, then the grantee should obtain approval before adjusting its thresholds.

As a final reminder, memorandum M-18-18 directly links the NDAA changes to the UG procurement requirements. As of now, most grantees should have adopted the procurement requirements. The final adoption periods are listed below.

If you’re a nonfederal entity and have not adopted the new procurement standards, the time is now.

Should you have any questions about the implementation of the NDAA 2017 or 2018, please contact us today.