Clarifying the Methods of Noncompetitive Procurements to Help Ensure Compliance with U.S. Government Regulations

Posted on Apr 7, 2020

This post originally appeared on the Humentum blog.

Procurement policies are in place in organizations to help prevent fraud, waste and abuse. Many organizations end up setting their policies based on their own risk assessment of the operating environment in which they work. This risk assessment, and thus policies, often vary by country within an organization. It makes sense to have lower thresholds in countries that are ranked high on the Corruption Perception List, such as Somalia, than a country that are lower on the list, such as Denmark.

If you’re procuring goods or services under a U.S. Government grant or cooperative agreement from USAID, Department of State, or other federal agency, then you need to comply with the procurement regulations found in 2CFR200.317-326. A component of these regulations details the methods of procurement to be followed, which promote organizations to use a competitive process, “full and fair competition: as the regulations state.”

In the eyes of the U.S. Government, there are only four reasons in which you can limit competition in a procurement through a solicitation of only one source, regardless of the dollar amount of the procurement. These four reasons are:

1) The item is only available from a single source.

Meaning you can not get the goods/service from anywhere else in the world. There are very few items that meet this threshold. Typically, it would have to be something that has a patent or propriety. Be careful in using this reason, an organization must be able to demonstrate that it is truly is only available from one source. Make sure that you’re not saying it is because it is slightly different than the competition and its what you want to use.

2) The public exigency or emergency will not allow a competitive process to delay the procurement.

Take special note of the word public in this sentence – this is not an emergency that is created internally at an organization. The U.S. Government is referring to instances such as providing relief to victims of a recent earthquake. The goal of the program is to get the relief to those in need ASAP. The U.S. Government would not agree that a lack of planning by an organization in a 5-year award needing to use the emergency exception for procurement because the organization is running behind on your implementation.

3) Written approval from Federal awarding agency.

You can request explicit approval to forgo competitive procurement. However, be cautious of asking your Agreement Officer for this as what message are you sending him/her that you need an exception from the standard regulations? How likely will the U.S. Government approve non-compete procurements given that the regulations want all procurements to occur under fair and full competition?

4) After seeking competition, competition is deemed inadequate.

In essence if you follow your procurement process and there is only one provider for the goods/services, you do not need to redo your procurement process. You can keep your documentation showing you attempted to obtain adequate competition, and no one responded. This is more common than one might think and a normal part of how markets respond. Often, we see organizations change the justification or hide that there were not enough responses – Do Not Go Down This Road! It may feel like you did not do something right, but remember you cannot control who will or will not respond to your request – let the market do its business. Develop a good procurement process, follow it, and then document it to show you made reasonable efforts for procurement and move on.

If you cannot mark “yes” to any of the four reasons above, you must compete your procurement to comply with the U.S. Government regulations. There are no other reasons, no matter how wonderful of a story you tell. Sorry, I don’t make the rules!

It is important to remember that these regulations apply to more than procuring goods – they also must be followed for procuring services which includes consultants. Often, we see organizations struggle with following the regulations for consultants as you often know who you want to do the work. As an auditor, I am not here to judge who is the best consultant, but I do have a responsibility to look at the process and ensure it complies with the regulations. There are very few circumstances in which an individual is so uniquely qualified that no one else in the WORLD can provide the same services. It is easy to go down that road because you know they will give you the BEST service since they know your organization and the work you are trying to do. Be careful and cautious, consultants are vendors just like any other vendor. Your procurement documentation needs to show how you considered other consultants as well.

As an auditor, I think it is important to point out the importance if you are using a noncompetitive procurement (and really, all procurements) to document your process. The U.S. Government was very clear in setting out the four options above, so the last thing you want is to fully comply with the spirit of the noncompetitive regulation and then have an auditor question the rationale 10 months after the fact because reading the documentation isn’t clear. When you complete your documentation, someone not involved in the procurement should be able to read the documentation and understand what was done to arrive at your conclusion of utilizing one of the four noncompetitive procurement methods without having to make any assumptions in the process. I can tell you for certain, that is what your auditor will be looking at!

I hope you find this information helpful as you continue navigating U.S. Government regulations while doing the important work everyone in this industry does on a daily basis! If you have any questions or comments, please feel free to reach out to me via LinkedIn or the Clark Nuber website. If there are any topics you’d like to get an auditor perspective on, please let me know for future blogs!

© Clark Nuber PS, 2020. All Rights Reserved

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This article or blog contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.

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