How to Ensure Your Procurement Policy is in Compliance

Blog
August 6, 2020

Procurement is always a hot topic that raises a lot of questions for federal grant recipients. The Compliance Supplement Part 3, Section I is a good place to start. Some of the basic guidelines under Uniform Guidance include the following:

  • “Recipients must establish procedures to ensure that materials and services are obtained in an effective manner. Appropriate bidding is required and must be documented.” Thorough documentation is critical, particularly when sole source procurement is used.
  • “Procurement procedures must incorporate reviewing potential contracting parties in the System for Award Management (sam.gov) to ensure that federal funding is not being passed to debarred or suspended people or entities.” Your auditors are going to be looking for documentation of this vendor check so grab a screenshot or a printout of the result of your search and then keep this on file. Note that there is not a threshold specified for when to conduct a vendor check.

Procurement policies need to be formalized in a written policy manual and updated regularly as regulations change. In accordance with 2 CFR 200.318 General Procurement Standards, the policy should address:

  • Avoiding acquisition of unnecessary or duplicative items.
  • Consideration of contractor integrity, compliance, past performance, and technical and financial resources.
  • Records must be maintained in sufficient detail including:
    • Justification of the need for the work.
    • Comparison to different vendors.
    • Documentation of the vendor’s specialized skills or knowledge.
    • Justification if sole source procurement.
    • Payment rates, with justification.

The four procurement methods, and your organization’s procedures for each, need to be addressed in the written policy manual as well. Currently the four methods are defined as follows:

  1. Micropurchase$10,000. Price or rate analysis is not required but selection of vendors must be equitably distributed across vendors and purchases must be reasonable. This threshold is determined using the aggregate purchases by vendor annually.  The term “reasonable” is not defined but is generally assumed to be what a prudent person would do in similar circumstances. If your policy doesn’t include the term “micropurchase” it is likely not up to date.
  2. Small-purchase>$10,000 but <$250,000 . Price or rate quotations and analysis is required.
  3. Simplified Acquisition>$250,000. This is where sealed bids and competitive proposals come into the picture. Sealed bids are required if the procurement is for construction of property.
  4. Sole-source – Can only be used if one of the four qualifications are met:
  • The situation is truly unique.
  • The situation is a public emergency that cannot wait for a bidding process.
  • The procurement is pre-authorized by the granting agency.
  • If after soliciting competition, it is determined that competition is inadequate.

Documentation for sole-source justification must be retained on file and note that “continuity” didn’t make the list of when you can use the sole-source method.

General guidelines for procurement under Uniform Guidance:

  • There are no unreasonable requirements on companies in order for them to qualify to do business.
  • There are no requirements for unnecessary experience.
  • There is no unnecessary specifying of “brand name” only product.
  • There are no organizational or personal conflicts of interest
    • Defined as having 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 may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts.
    • 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 a related organization.

Vendor diversity is required to be considered. In accordance with Uniform Guidance, all affirmative steps must be taken to ensure that Small Minority Business Enterprises and Women-owned Business Enterprises are included in the population of vendors to select from.

Guidance regarding procurement for federal grants can be found at 2 CFR 200.317 through 2 CFR 200.326 starting here.

If you have any questions on this or other federal grant topics, reach out to Carol Barnard, CPA, CFE at cbarnard@aronsonllc.com