OMB Circular A-81 // 2 CFR 200 Procurement Standards - §200.317 - §200.326 and Appendix II Burr...

OMB Circular A-81 // 2 CFR 200Procurement Standards - §200.317 - §200.326 and Appendix IIBurr Millsap, CPA Associate VP for Administration & Finance

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Summary:

To deliver on the promise of a 21st-Century government that is more efficient, effective and transparent, the Office of Management and Budget (OMB) is streamlining the Federal government’s guidance on Administrative Requirements, Cost Principles, and Audit Requirements for Federal awards. These modifications are a key component of a larger Federal effort to more effectively focus Federal resources on improving performance and outcomes while ensuring the financial integrity of taxpayer dollars in partnership with non-Federal stakeholders. This guidance provides a governmentwide framework for grants management which will be complemented by additional efforts to strengthen program outcomes through innovative and effective use of grantmaking models, performance metrics, and evaluation. This reform of OMB guidance will reduce administrative burden for non-Federal entities receiving Federal awards while reducing the risk of waste, fraud and abuse.


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Consolidates and Supersedes:

1. A-21 Cost Principles for Educational Institutions

2. A-50 Audit Followup

3. A-87 Cost Principles for State, Local and Indian Tribal Governments

4. A-89 Catalog of Federal Domestic Assistance

5. A-102 Grants and Cooperative Agreements With State and Local Governments

6. A-110 Uniform Administrative Requirement for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations

7. A-122 Cost Principles for Non-Profit Organizations

8. A-133 Audits of States, Local Governments and Non-Profit Organizations


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Procurement Standards

§200.317 - §200.326

and

Appendix II


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§200.317 Procurement by States

When procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. The state will comply with § 200.322 Procurement of recovered materials and ensure that every purchase order or other contract includes any clauses required by section § 200.326 Contract provisions. All other non-Federal entities, including subrecipients of a state, will follow §§ 200.318 General procurement standards through 200.326 Contract provisions.

(Note: There is a question whether this blanket provision also applies to state-supported colleges and universities. For now, must assume “No.”)


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§200.318 - General Procurement Standards

Purchase must be necessary (FAQ 320-1)

NFE must use its own documented procedures (FAQ 320-1)

Must reflect applicable State and local laws and regulations

But!. . . must conform to applicable Federal law and the 2 CFR 200 Procurement Standards

NFE must maintain oversight to ensure suppliers perform (terms, conditions, specs)


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NFE must

Maintain written standards of conduct and provide for disciplinary action

Conflict of interest (FAQ 320-1), and

Employee performance in selection, award, and administration of procurements

But NFE may set standards for insubstantial financial interest and nominal gifts

Maintain written standards of conduct covering organizational conflicts of interest (parent, affiliate, subsidiary)


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NFE must have procedures that avoid unnecessary or duplicative procurements

Consider consolidating or breaking out procurements to get better price,

Strategic sourcing or bulk purchase (FAQ 320-1 & 320-4), and

Do lease / purchase analyses, or

Do any other analyses to get most economical purchase

NFE should consider state and local intergovernmental agreements or inter-entity agreements where appropriate for common or shared goods / services


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NFE should use Federal excess and surplus property in lieu of new when feasible and cheaper

NFE should use value engineering clauses for construction projects


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NFE must award only to able suppliers (who demonstrate all of the following)

Integrity

Compliance with public policy

Record of past performance

Financial resources

Technical resources


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NFE must maintain good records that detail procurement’s history (all of the following) (FAQ 320-1)

Rationale for procurement method

Selection of contract type

Supplier selection or rejection

Basis for price


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§200.318 - General Procurement Standards NFE should avoid Time-and-Material contracts, but may use

them only after determining: (1) no other contract type is suitable, (2) there is a ceiling price above which supplier has the risk, and (3) NFE asserts strong oversight that supplier uses efficient methods and cost controls


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NFE alone (i.e., not the awarding agency) is responsible for settlement of all contractual and administrative issues (awarding agency is responsible only if matter is of Federal concern; refer law

violations to appropriate local, state, or Federal authority having jurisdiction) (any of the following)

Source evaluation

Protests

Disputes

Claims


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§200.319 - Competition

Full and open (to the extent required by each method) (FAQ 320-1)

Objective > supplier performance

Eliminate unfair supplier advantage

Suppliers that develop specs cannot participate in the solicitation


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Examples of situations that restrict competition (any of the following)

Unreasonable requirements

Unnecessary supplier experience

Excessive bonding

Noncompetitive pricing practices between firms or affiliated companies

Noncompetitive contracts to consultants on retainer

Organizational conflicts of interest

Specifying “brand name” without allowing “or equal”

Any arbitrary action in the procurement process


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No geographic preferences except where Federal law allows or mandates it

But OK for A&E services as long as there is an appropriate number of qualified firms, given the nature and size of the project


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NFE must have written procedures. Solicitations must:

Incorporate clear and accurate description of technical requirements

But no features that unduly restrict competition

May include qualitative statements

When necessary, include minimum essential characteristics and standards

When necessary, OK to use “brand name or equivalent” But the specific features of the named brand must be clearly stated

Identify ALL requirements that respondents must fulfill and all other factors that will be used in evaluation


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NFE must ensure that all lists of prequalified sources are current and include enough of them to ensure maximum open and free competition. Potential sources must not be prevented from qualifying during the solicitation period.


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§200.320 – Methods of Procurement to be Followed

Procurement cards are OK for any method (FAQ 320-5)

The methods apply only to direct costs, not indirect (FAQ 320-6)


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Micro-purchases (subset of small purchase procedures )

Defined at §200.67 // Set by FAR 48 CFR Subpart 2.1

Threshold currently $3,000 ($2,000 for construction subject to Davis-Bacon Act); periodically adjusted for inflation

Expedite lowest-dollar small purchases; minimize associated administrative burden and cost

Do not require competitive quotations if NFE considers price reasonable

NFE must distribute equitably among qualified suppliers to the extent practicable

No cost or price analysis (FAQ 320-1)


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§200.320 – Methods of Procurement to be Followed Small purchase procedures

Aggregate dollar amount less than Simplified Acquisition Threshold Defined at §200.88 // Set by FAR 48 CFR Subpart 2.1

and ICW 41 U.S.C. 1908 Simplified Acquisition Threshold is currently

$150,000; periodically adjusted for inflation Relatively simple and informal Quotations must be obtained from an adequate number

of qualified sources “Adequate” is determined by the NFE (FAQ 320-1) Method (written, oral, price list, on line search) is

determined by the NFE (FAQ 320-1) No cost or price analysis (FAQ 320-1)


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Sealed bids (above the Simplified Acquisition Threshold)

Publicly solicited

Firm fixed price (lump sum or unit)

Awarded to lowest conforming bid / responsible bidder

Preferred for construction


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Sealed bids (above the Simplified Acquisition Threshold)

Conditions under which sealed bids work well (all of the following)

Complete, adequate, realistic specifications

Two or more willing and responsible bidders

The procurement lends itself to a firm fixed price

Selection can be made principally in price


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Sealed bids (above the Simplified Acquisition Threshold) If used, here are the requirements (all of the following)

Solicitations must be publicly advertised

An adequate number of known suppliers must be available

Sufficient response time must be allowed

Specifications and attachments must adequately define the procurement

Bids must be publicly opened at the time and place prescribed

Firm fixed price contract is awarded to the lowest responsible bidder

Where specified in solicitation, factors such as discounts, transportation, and life cycle costs must be considered in determining lowest bid

Payment discounts are used to determine low bid only when experience demonstrates that such discounts are routinely taken

Any or all bids may be rejected if there is a sound documented reason


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Competitive Proposals (above the Simplified Acquisition Threshold)

Normally, more than one source responding Normally, fixed price or cost-reimbursement type contract

is awarded Used when conditions are not appropriate for sealed bids


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§200.320 – Methods of Procurement to be Followed Competitive Proposals (above the Simplified Acquisition Threshold)

If used, here are the requirements (all of the following)

RFPs must be publicized

RFPs must identify all evaluation factors and their relative importance

Any response must be considered to the maximum extent practical

Proposals must be solicited from an adequate number of qualified sources

There must be a written method for conducting technical evaluations of responses and for selecting recipients

Contracts must be awarded to the responsible source whose proposal is most advantageous to the program, with price and other factors considered

When soliciting qualifications-based A&E professional services subject to negotiation, cannot solicit other types of services even though a firm may be able to provide them


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Noncompetitive Proposals (any dollar amount, but – practically speaking - above the micro-purchase threshold [FAQ 320-2])

Solicited only from one source May only be used under any of the following conditions

The item is available only from a single source The public exigency or emergency will not permit the

time required for competition The awarding agency or pass-through entity

expressly authorizes it in response to a written request from the non-Federal entity

After solicitation of a number of sources, competition is determined inadequate

Required for scientific reasons (FAQ 320-2)


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§200.321 – Contracting with Small and Minority Businesses, Women’s Business Enterprises, and Labor Surplus Area Firms

Must take all necessary affirmative steps to assure such entities are used when possible

Affirmative steps include (all of the following) Placing such entities on solicitation lists Assuring that such entities are solicited whenever they are potential

sources Dividing total requirement, when economically feasible, in to smaller

tasks or quantities to permit maximum participation by such entities Establishing delivery schedules, where requirements permit, which

encourage participation by such entities Using such organizations as Small Business Administration and the

Minority Business Development Agency Requiring prime contractors to take the same above affirmative steps

with respect to any subcontractors


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§200.322 – Procurement of Recovered Materials Section 6002 of the Solid Waste Disposal Act, as amended by the

Resource Conservation and Recovery Act

Procuring only items designated in guidelines of the EPA at 40 CFR Part 247 (all of the following)

Contain the highest percentage of recovered materials practicable, consistent with maintaining a satisfactory level of competition, where the purchase price of the item exceeds $10,00 or the value of the quantity acquired by the preceding fiscal year exceeded $10,000

Procuring solid waste management services in a manner that maximizes energy and resource recovery

Establishing an affirmative procurement program for procurement of recovered materials identified in the EPA guidelines


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§200.323 – Contract Cost and Price

Must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold

Method and degree depends on facts surrounding the procurement

As a starting point, must make independent estimates before receiving bids or proposals


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Must negotiate profit as a separate element of price for each contract in which there is no price competition and in all cases where cost analysis is performed

Must consider (all of the following)

Complexity of the work to be performed

Risk borne by the contractor

Contractor’s investment

Amount of subcontracting

Quality of record of past performance

Industry profit rates in the geographical area for similar


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Costs or prices based on estimated costs are allowable only to the extent that costs incurred or cost estimated included in negotiated prices would be allowable under Cost Principles. NFE may reference its own cost principles that comply with Federal cost principles.

Must not use cost plus percentage of cost and percentage of construction cost methods


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§200.324 – Federal Awarding Agency or Pass-Through Entity Review

If Federal awarding agency or pass-through entity requests, NFE must make available technical specs on proposed procurements

Should take place before the specs are incorporated into a solicitation

But may take place after the specs are incorporated; review s/b limited to the technical specs


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If Federal awarding agency or pass-through entity requests, NFE must make available solicitations and cost estimates under the following conditions

NFE’s procurement standards don’t comply with A-81 The procurement may exceed the Simplified Acquisition

Threshold and any of the following conditions apply Procurement is to be awarded without competition Only one response / offer is received Specifies a “brand name” Procurement is sealed bid and is to be awarded to other

than low bid Proposed modification changes the scope or increases the

amount above the Simplified Acquisition Threshold


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If Federal awarding agency or pass-through entity requests, NFE must make available solicitations and cost estimates under the following conditions (continued)

If NFE’s procurement standards do comply with A-81, then it is exempt from §200.324 (b)

NFE may request review for compliance certification by the Federal awarding agency or pass-through entity. Generally, these reviews must occur where

There is high-dollar funding and

Third party contracts are awarded regularly

NFE may self-certify

But Federal awarding agency still has right to survey system and may rely on NFE’s written assurances of compliance

Assurances must cite specific policies, procedures, regulations, or standards

Still, NFE must make system available for review


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§200.325 – Bonding Requirements For construction or facility improvement contracts or subcontracts exceeding the

Simplified Acquisition Threshold

Federal awarding agency or pass-through entity may accept NFE’s bonding policy and requirements if either determines that Federal interests are protected by such policy

If no determination has been made

Each bidder must provide a bid guarantee of 5% of the bid price. . . assuring that the bidder will, upon bid acceptance, execute such contractual documents as may be required within the specified time frame (any of the following)

Bid bond,

Certified check, or

Other negotiable instrument

Contractor must submit a performance bond of 100% of the contract price, to secure fulfillment of all contractor obligations under the contract

Contractor must submit a payment bond of 100% of the contract price, to assure payment of all persons supplying labor and material under the contract


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§200.326 – Contract Provisions (Appendix II)

Remedies for Violation or Breach of Contract. For contracts exceeding Simplified Acquisition Threshold must address administrative, contractual, or legal remedies in instances where contractors violate or breach contract terms, and provide for such sanctions and penalties as appropriate


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Termination for Cause or Convenience. All contracts exceeding $10,000 must address termination for cause and for convenience by the NFE, including the manner by which it will be effected and the basis for settlement


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Equal Employment Opportunity. Contracts that meet the definition of “federally assisted construction contract” (41 CFR Part 60-1.3) must include the equal opportunity clause per 41 CFR Part 60-1.4(b), in accordance with Executive Order 11246, “Equal Employment Opportunity” (30 FR 12319, 12935, 3 CFR Part, 1964-1965 Comp., p. 339) as amended by Executive Order 11375, “Amending Executive Order 11246 Relating to Equal Employment Opportunity,” and implementing regulations at 41 CFR Part 60, “Office of Federal Contract Compliance Programs, Equal Employment Opportunity, Department of Labor.”


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§200.326 – Contract Provisions (Appendix II) Davis-Bacon Act // Prevailing Wage. When required by Federal program legislation, all

prime construction contracts in excess of $2,000 awarded by NFEs must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). Contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. Contractors must be required to pay wages not less than once a week. NFE must place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of the wage determination. NFE must report all suspected or reported violation to the Federal awarding agency. The contracts must also include a provision for compliance with the Copeland “Anti-Kickback” Act (40 U.S.C. 3145), as supplemented by Department of Labor Regulations (29 CFR Part 3, “Contractors and Subcontractors on Public Building or Public Work Finance in Whole or in Part by Loans or Grants from the United States”). The act provides that each contractor or subrecipient must be prohibited from inducing, by any means, any person employed in the construction, completion, or repair of public work, to give up any part of the compensation to which he or she is otherwise entitled. NFE must report all suspected or reported violations to the Federal awarding agency.


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§200.326 – Contract Provisions (Appendix II) Work Hours and Safety Standards. Contracts in excess of $100,000

that involve the employment of mechanics or laborers must include a provision for compliance with 40 U.S.C. 3702 and 3704, as supplemented by Department of Labor regulations (29 CFR Part 5). Each contractor must be required to compute the wages of every mechanic and laborer on the basis of a standard work wee of 40 hours. Work in excess of the standard work week is permissible provided that the worker is compensated at a rate not less than one and a half times the basic rate of pay for all hours worked in excess of 40 hours in the work week. The requirements of 40 U.S.C. 3704 are applicable to construction work and provide that no laborer must be required to work in surroundings or under working conditions which are unsanitary, hazardous, or dangerous. These requirements do not apply to the purchases of supplies or materials or articles ordinarily available on the open market, or contracts for transportation or transmission of intelligence.


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Rights to Inventions. If the Federal award meets the definition of “funding agreement” under 37 CFR §401.2(a) and the recipient or subrecipient wishes to enter into a contract with a small business firm or nonprofit organization regarding the substitution of parties, assignment or performance of experimental, development, or research work under that “funding agreement,” the recipient or subrecipient must comply with the requirements of 37 CFR Part 401, “Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Grants, Contracts and Cooperative Agreements,” and any implementing regulations issued by the awarding agency.


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Clean Air Act // Federal Water Pollution Control Act. Contracts and subgrants of amounts in excess of $150,000 must contain a provision that requires the non-Federal award (NFE?) to agree to comply with all applicable standards, orders or regulations issued pursuant to the Clean Air Act (42 U.S.C. 7401-7671q) and the Federal Water Pollution Control Act as amended (33 U.S.C. 1251-1387). Violations must be reported to the Federal awarding agency and the Regional Office of the EPA.


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Energy Efficiency / Conservation. Mandatory standards and policies relating to energy efficiency which are contained in the state energy conservation plan issued in compliance with the Energy Policy and Conservation Act (42 U.S.C. 6201).


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Debarment / Suspension. A contract award (see 2 CFR 180.220) must not be made to parties listed on the governmentwide Excluded Parties List System in the System for Award Management (SAM), in accordance with OMB guidelines at 2 CFR 180 that implement Executive Orders 12549 (3 CFR Part 1986 Comp., p. 189) and 12689 (3 CFR Part 1989 Comp., p. 235), “Debarment and Suspension.” SAM contains the names of parties debarred, suspended, or otherwise excluded by agencies, as well as partied declared ineligible under statutory or regulatory authority other than Executive Order 12549.


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Anti-Lobbying. Contractors that apply or bid for an award of $100,000 or more must file the required certification. Each tier certifies to the tier above that it will not and has not used Federal appropriated funds to pay any person or organization for influencing or attempting to influence an officer or employee of an agency, a member of Congress, officer or employee of Congress, or an employee of a member of Congress in connection with obtaining any Federal contract, grant or any other award covered by 31 U.S.C. 1352. Each tier must also disclose any lobbying with non-Federal funds that takes place in connection with obtaining any Federal award. Such disclosures are forwarded from tier to tier up to the non-Federal award.


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Procurement of Recovered Materials. See §200.322.

OMB Circular A-81 // 2 CFR 200 Procurement Standards - §200.317 - §200.326 and Appendix II Burr...

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