Recently, we issued an article that provided an update from the Office of Management and Budget (OMB) on the National Defense Authorization Act (NDAA) of 2017. This update increased the micro-purchase threshold from $3,500 to $10,000 for certain types of entities. In addition, the National Defense Authorization Act of 2018 increased the micro-purchase threshold from $3,500 to $10,000 and the simplified acquisition threshold from $150,000 to $250,000 for all entities, except states.
In the previous article, we discussed interim guidance that was provided in the 2018 OMB Compliance Supplement on both NDAA’s, but we were still waiting for more guidance from the OMB. The OMB has now issued OMB Memo M-18-18 (M-18-18). In this article, we provide an update on both the NDAA of 2017 and the NDAA of 2018.
Institutions of Higher Education, Nonprofit Research Organizations, and Independent Research Institutes
For these entity types, the NDAA of 2017, Section 217 (Pub. L. No. 114-328, 130 Stat. 6 (2051)) and 41 USC 1902(a)(2) contained the following provisions.
- Raise the micro-purchase threshold to $10,000 for procurements under grants and cooperative agreements to institutions of higher education or related or affiliated nonprofit entities, nonprofit research organizations, and independent research institutes.
- Allow a threshold higher than $10,000 as determined appropriate by the head of the relevant executive agency.
M-18-18 clarified that the provisions of the NDAA of 2017 were effective when signed into law on December 23, 2016. In addition, M-18-18 provides further instructions on the process for these entities to request a micro-purchase threshold of higher than $10,000 provided the entity meets the criteria for a low-risk auditee in accordance with 2 CFR Part 200.520. The entity must also have an acceptable internal institutional risk assessment.
Several of these entity types have already been successful in obtaining approval for higher micro-purchase thresholds from their cognizant federal agency.
All Other Entities Except for States
For all other entities except states, the NDAA of 2018 increases the simplified acquisition threshold to $250,000 and the micro-purchase threshold to $10,000 for all auditees. The NDAA of 2018 was to update the definitions in the Federal Acquisition Regulations (FAR) at 48 CFR Part 2.1. The 2018 OMB Compliance Supplement made clear that entities were not to implement the higher thresholds until the FAR definitions were updated and became effective. M-18-18 changed this and allows for early adoption.
By issuing M-18-18, the OMB is requiring all federal agencies to adopt exceptions to the FAR definitions, making the increases in both the micro-purchase and simplified acquisition thresholds effective as of the date of M-18-18, June 20, 2018. As such, there is no longer a need to wait until the FAR updates their definitions to make effective these higher thresholds. Entities are not required to increase the micro-purchase and simplified acquisition thresholds but, if they wish to do so, must update their procurement policies and procedures to reflect the change in thresholds. They cannot retroactively make these changes effective prior to June 20, 2018.
The increase in these purchase thresholds is a welcome relief for many entities, especially as it relates to the increase in the micro-purchase threshold. If questions exist after reading M-18-18, entities are encouraged to send questions to the OMB contacts included in the memo.
Please click here for a link to the OMB Memo M-18-18.
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