5 Purchasing Methods to be Included in Your Uniform Guidance Purchasing Policy

If your organization receives federal funds, it is required to have a written purchasing policy that is at least as restrictive as the Uniform Guidance. Although there were several different postponements for the new rules, they are effective at a minimum for the first fiscal year that begins on or after December 26, 2016.To comply with the Uniform Guidance, five methods of purchasing must be included in this policy. The federal criteria are described below, but if an organization’s policy is more restrictive, that policy must be followed.

Micro-purchases

The first method of purchasing is the micro-purchase method. It is important to look and see exactly how the threshold is listed in your purchasing policy. If there is a dollar amount listed, that is the dollar amount that must be followed. If it is listed as a cross-reference to 2 CFR 200 or 48 CFR 2.1, that amount must be followed. The current maximum threshold allowed is $10,000, based on an OMB memo. However, references to 2 CFR 200 or 48 CFR 2.1 are still at $3,500. To use this method, the aggregate dollar amount of the purchase cannot be more than the threshold ($10,000 being the maximum.) This allows the organization to simply find a vendor, determine the price and, if it appears reasonable, make the purchase. Obviously, this takes the least amount of documentation.

Uniform Guidance says that to the extent practical, these purchases should be made with different vendors. If you have an approved vendor list, start with that list. You should try to purchase the first purchase from ABC, and the second purchase from XYZ so that multiple vendors have a chance. If you know that ABC is cheaper for this product you can, but do not have to, select it; this method is about spreading the purchases around and not about finding the lowest price.

Small purchases

The second method of purchasing is the small purchases. It is important to look and see exactly how the threshold is listed in your purchasing policy. If there is a dollar amount listed, that is the dollar amount that must be followed. If it is listed as a cross reference to 2 CFR 200 or 48 CFR 2.1, that amount must be followed. The current maximum threshold allowed is $250,000, based on an OMB memo. However, references to 2 CFR 200 or 48 CFR 2.1 are still at $150,000. To use this method, the aggregate dollar amount of the purchase cannot be more than the threshold ($250,000 being the maximum). In this case, the organization must obtain price or rate quotations from an “adequate number of qualified sources. “Typically this is interpreted as three or more sources. These price rates or quotes do not have to be formal bids; this could be calling the vendor and asking the cost or searching online. The important thing is that the vendors and the prices must be documented. Document the reasoning why the particular vendor is chosen.

Sealed bids

The third method of purchasing is sealed bids or formal advertising. This works for firm, fixed-price contracts (lump sum or unit price). It is awarded to the responsible bidder whose bid, conforming to all the material terms and conditions of the invitation for bid, is the lowest price. For this method to be used, you have to expect that two or more responsible bidders will compete. You have to have sufficiently detailed specifications so that the bidders know what they are bidding on. The bids have to be advertised publicly and they must be opened at the time and place prescribed in the bid request. The lowest price that is responsive and responsible must be selected. If a vendor does not meet the specifications listed, they should be rejected. If you otherwise have reason to believe the vendor is not responsible, you can reject the bid. Any reasons for rejection must be documented. The advertising of the bid request must be documented in the procurement files. All of the bids received must be documented in the procurement file.

Competitive proposal

The fourth method of purchasing is by competitive proposal. This is typically used for fixed price or cost-reimbursement contracts. Requests for proposals must be publicized (similar to sealed bids). However, the criteria used to evaluate the bids will not be solely dollar amounts, so the evaluation factors and their relative importance must be publicized as well. Proposals must be solicited from an adequate number of qualified sources. There must be a written method for evaluating the technical aspects of the proposal. The contracts must be awarded to the responsible firm whose proposal is “most advantageous” to the program, which includes price and other factors. If architectural or engineering services are being procured, price does not have to be considered in the procurement selection. The proposal request, method of evaluation, proposal responses, evaluation of proposals, and final results should all be kept in the procurement file.

Noncompetitive proposal

The fifth method of purchasing is the most restricted method, noncompetitive proposals. This is procurement where the organization goes to one source and procures the good, without other sources bidding or having a chance to bid. This is only allowed for one of four reasons.

1. First, if the item is only available from a single source, then you obviously cannot get bids from other sources. However, this availability should be limited due to the nature of the item itself and not because the specifications were drawn so narrowly that only one entity could provide it (such as a specific VIN for a car).
2. The second time it is allowed is when there is a public exigency or emergency that will not permit a delay resulting from competitive solicitation. For example, the first floor of the hospital is flooded, we have to get the water out of it immediately so the hospital can function and service patients.
3. The third time is when the awarding or sub-awarding agency has expressly authorized the purchase in a written request.
4. The last time when noncompetitive proposals would be appropriate is when you tried another method and could not get more than one source to respond back to your request.

If you receive federal funds, you need to ensure your purchasing policy is up to date. Consider updating the micro-purchase threshold and small purchase threshold if you have not already done so. Make certain that each procurement has the appropriate documentation to justify why the method was chosen and that the policies were followed. In cases other than micro-purchases, this documentation includes how the vendor was selected; if the lowest bid was not selected, the reasons need to be clearly documented.