Article • Published 3/07/2017 To Bid or Not to Bid, That is the Question - Procurement Standards

 

Uniform Guidance should have made some waves throughout your organization over the past year.  While clarifications and adoptions of new policies and procedures have directly impacted the Federal departments and non-Federal entities, both continue to struggle with understanding what really has changed and how they should approach various areas of the standards.  For non-Federal entities this is especially true when some of these regulations differ significantly with state laws and regulations.

Procurement for goods, services, and purchases of property has had a history of complexity resulting in non-compliance by federal agencies and their grant recipients.  Understanding the complexities surrounding these standards is important in determining the appropriate procurement process to undertake. In an effort to foster a greater understanding, the OMB postponed the effective date for implementing these standards.

Effective Date

A grace period of two full fiscal years after the effective date of the Uniform Guidance, December 26, 2014, was provided for adherence to all of the procurement regulations.  The chart below will assist you in determining based on your fiscal year end whether you are in the first or second full fiscal year for your organization and the start date for implementing these new procurement standards.

 

Fiscal Year Ending	First Fiscal Year	Second Fiscal Year
December 31, 2016	January 1, 2015 – December 31, 2015	January 1, 2016 – December 31, 2016
June 30, 2017	July 1, 2015 – June 30, 2016	July 1, 2016 – June 30, 2017

 

 

Therefore, an entity with a December 31 year-end must implement the new procurement standards of the UG on January 1, 2017. An entity with a June 30 fiscal year-end must implement the new standards on July 1, 2017.

A non-Federal entity must first adhere to the terms and conditions of its federal award and determine whether the Uniform Guidance applies.  In the first full fiscal year after the effective date the non-Federal entity must document whether it is in compliance with the old or new standard, and must meet this documented standard.    After the second full fiscal year you are required to comply with these new standards. 

Requirements

The Office of Management and Budget created a pictorial diagram represented by a bear claw to help simplify the requirements of these new standards.  See the procurement “claw” below.

There are five general procurement standards which cover the purchase of property, supplies and services under the Uniform Guidance:

1. The organization must maintain written policies and procedures over procurement covering the methods available under these regulations.
2. Costs must be reasonable and necessary
3. Must provide for full and open competition
4. The organization must maintain written standards of conduct covering internal and external conflicts of interest
5. The organization must maintain documentation addressing cost and price analysis and vendor selections where applicable based on the method of procurement used.

Then, there are five available methods of procurement for each purchase which are summarized below:

1. Micro-purchases: Less than $3,000 ($2,000 for purchases subject to the Davis-Bacon Act)

• No competitive quotes are required
• Spread purchases out among qualified suppliers

2. Small purchases: Between $3,000 and $150,000

• Rate quotes must be obtained from an “adequate” number of qualified sources – the organization is to determine what “adequate” is for each procurement
• Quotes can be obtained from suppliers or from public websites

3. Sealed bids: More than $150,000

• Preferred method for procuring construction
• Two or more qualified bidders
• Publicly advertised and solicited from “adequate” suppliers
• Lowest bidder for the fixed price contract wins

4. Competitive proposals: More than $150,000

• Used for either a fixed price or cost reimbursement contract and sealed bids are not appropriate
• Written policy for conducting technical evaluations of reviewing proposals and selecting the recipient
• Most advantageous bid wins, price and other factors considered

5. Sole source: Any amount, must meet one of the following four requirements:

• Only available from a single source
• Only one source can provide the good or service in the time frame required
• Written pre-approval from the Federal awarding agency
• Competition is deemed inadequate, after solicitation attempts through one of the other methods

The above summarizes the requirements for each method of procurement.  However, although simplistically displayed above these standards are complex and require those responsible for ensuring compliance with these standards to read the federal regulations in their entirety.  It is also important to note that these standards are significantly different from the State of Louisiana’s bid laws, which also apply to Louisiana Governments when expending federal funds.  For example, the State of Louisiana does not require professional services to be procured through a bid or RFP process, but the Uniform Guidance does require if the amount to be paid exceeds $150,000. Another example is the purchase of materials and supplies. Such purchases, when they exceed $30,000, must be done through the sealed bid process under state law. As you can see from the categories above, these purchases, if solely applying the UG, would not have to be bid. For Louisiana governments, the more restrictive of the two sets of rules should be applied.

It is imperative that you prepare now for the upcoming changes, develop written policies and procedures, and train your employees regarding these differences when purchases are being funded with federal awards versus other revenue sources.