OMB Uniform Guidance on Administrative Requirements – Update for Procurement Standards

Posted on Oct 3, 2014

By Victoria Kitts, CPA, CFE

You may have heard about the new Uniform Guidance for federal funding, (aka the “Super Circular”) that replaces the Office of Management and Budget (OMB) Circulars A-110, A-122, A-133 and others. In a previous Clark Nuber Not-For-Profit Newsletter article by Deby MacLeod, we learned about the biggest changes to the administrative and auditing requirements. As reported by OMB recently, the changes to the procurement standards for federally funded organizations are being granted a grace period for implementation.   This article will go deeper into the procurement standards, which is one of the biggest areas of change for not-for-profit organizations.

The OMB Uniform Guidance on Administrative Requirements takes effect for all non-Federal entities’ fiscal years beginning after December 26, 2014. However, given the potentially significant changes needed in order to meet the new guidance, the OMB is now allowing a grace period for implementation of the revised procurement standards. All other elements of the uniform guidance will be effective as previously reported. Not-for-profit organizations will now have the ability to choose if they will follow the old standards for procurement (A-122) or the new uniform guidance for their first full fiscal year after December 26, 2014. For example, a not-for-profit organization with a June 30 fiscal year can choose to continue following A-110 through its fiscal year ending June 30, 2016. After that, it will need to follow the uniform guidance for procurement.

How is the uniform guidance for procurement different from the old requirements? Under the old guidance, most not-for-profit organizations were subject to the procurement regulations in A-110. In the new uniform guidance, the procurement standards closely resemble those found in A-102, the regulations that applied to state and local governments.

In the new uniform guidance, there are five general standards:

  1. The organization must maintain written policies and procedures over procurement that meet the following standards and any other applicable laws and regulations.
  2. Costs incurred must be necessary and cost-effective.
  3. All procurement transactions must provide full and open competition.
  4. The organization must maintain written standards of conduct covering conflicts of interest.
  5. The organization must maintain documentation addressing cost and price analysis, and vendor selection, as applicable for selected method of procurement (discussed next).

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

  1. Micro-purchases: Less than $3,500 ($2,000 for purchases subject to the Davis-Bacon Act)
    1. No competitive quotes required
    2. Spread purchases out among qualified suppliers
  2. Small purchases: Between $3,500 and $150,000
    1. Rate quotes must be obtained from an “adequate” number of qualified sources – it is left up to the organization to determine what “adequate” is for each procurement
    2. Quotes can be obtained from suppliers or from public websites
  3. Sealed bids: More than $150,000
    1. Two or more qualified bidders
    2. Publicly advertised and solicited from adequate suppliers
    3. Lowest bidder for the fixed price contract wins
  4. Competitive proposals: More than $150,000
    1. Written policy for conducting technical evaluations of reviewing proposals and selecting the recipient
    2. Most advantageous bid wins, price and other factors considered
  5. Sole source: Any amount, must meet one of the following four requirements
    1. Good/service is only available from a single source
    2. Only one source can provide the good/service in the time frame required
    3. Written pre-approval from the Federal awarding agency
    4. Competition is deemed inadequate, after solicitation attempts through one of the other methods

To help visualize these requirements, the OMB has created an image of a “bear claw.”  The first pictorial representation describes the five methods of procurement and the characteristics for each:

bear claw 1

The second image adds in the five overarching standards required for all organizations purchasing goods and services with federal funds:

bear claw 2

The full language of the Uniform Requirements can be found here.

While your organization may decide to continue following the old guidance for another year, take the time now to ensure a successful transition to the new uniform guidance. Read through the guidance and review your written policies and procedures. Avoid future non-compliance and potential audit findings by revising your practices and documentation now.

 

© Clark Nuber PS, 2014.  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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