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Are your procurement procedures up to snuff?

The new Federal procurement standards should be implemented by all organizations receiving Federal funding. There are five general procurement standards that cover the purchase of property, supplies, and services under the Uniform Guidance:

  1. The organization must maintain written policies and procedures for procurement covering the methods available under these regulations. The organization’s documentation should include procedures that reflect Federal laws, Uniform Guidance standards, and any relevant state regulations.
  2. Costs must be reasonable and necessary. Avoid using Federal funds for unnecessary items.
  3. There must be full and open procurement competition. The procurement steps and activities must be documented to ensure this. The organization must maintain documentation addressing cost and price analysis and vendor selections, where applicable, based on the method of procurement used.
  4. The organization must maintain written standards of conduct covering internal and external conflicts of interest.
  5. The organization must maintain an appropriate level of oversight to ensure contractors perform in accordance with the terms of the agreement or contract met.

The dollar amount of the organization’s purchase will determine the procurement method to follow. For purchases of goods and services up to $3,500, it is not necessary to solicit competitive quotes. These are called “micro-purchases.” Small purchases for goods and services from $3,501 up to $150,000 require price quotes from several different sources. The procedures for obtaining quotes can be informal – three sources are generally considered an adequate number.

If your organization purchases goods or services exceeding $150,000, it must select suppliers and vendors based on competitive proposals or sealed bids. Competitive proposals requires formal solicitation, have fixed-price or cost-reimbursement contracts, and are used when sealed bids are not appropriate. The contract should be awarded to the responsible vendor whose proposal is most advantageous to the Federal program, with price being one of the factors considered. Sealed bid proposals are typically used as the procurement method for construction projects. Under this procurement method, a formal solicitation is required and the contract is awarded to the party whose bid conformed to all material terms and had the lowest price.

An organization can also use noncompetitive proposals or sole-source procurement if certain criteria are met. This procurement method is appropriate only when an item is only available from one source, an emergency does not allow for the time needed to complete a competitive bid process, or if the Federal award agency authorizes this method after attempts are made at the competitive bid process.

Complying with this process is essential; not complying with it means the organization risks losing its Federal funding. Soliciting bids or obtaining quotes under these guidelines likely will take longer than it has in the past. Organizations may need to change their mindset and move away from doing things the same old way, and perhaps moving away from vendors that have always been used. It means that management and staff will need to be on board to implement the changes and internal procedures will need to be updated and trainings performed.

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