After several years of extensions, the new components of the procurement compliance requirement are finally applicable. What does this mean for governmental and non-profit entities? Any governmental or non-profit entity expending federal dollars is required to follow the new components of this compliance requirement.
The new components are effective for entities with year-ends on or after December 31, 2018.
In a nutshell, the compliance requirement contains the following components, discussed in more detail below:
- Entities must have a written procurement policy
- Entities must maintain records to detail the history of the procurement
- One of the approved procurement methods must be utilized
One of the biggest changes within this compliance requirement is the fact that the procurement policy needs to be written. There is not a standard template to utilize, as each entity’s procedures for the purchasing process differ. The policy should contain (1) a statement regarding the entity’s adherence to the applicable state and local laws and regulations, provided such conform to federal law, (2) standards of conduct regarding conflicts of interest surrounding selection, award, or administration of the award by employees, officers, or agents, as well as organization conflicts of interest for a parent, affiliate, or subsidiary that is not a state/local government or Indian tribe, and (3) a statement that the purchase of the product or service must not unduly restrict competition, identify the requirements which the offer must fulfill, and use current prequalified lists to ensure maximum open and free competition.
Next, an entity must maintain records detailing the purchase of items, which will vary based on the type of procurement method utilized. For example, a rationale for the method of procurement selected, the selection or rejection of contractors, and the basis for contract prices.
Once it is determined an item or project needs paid for or funded, the requirements of the applicable procurement method must be followed. The various methods are described below:
- Micro-purchase – The purchase of an item less than $3,500 (adjusted periodically for inflation). When practical, distribute the purchase of such items among qualified suppliers.
- Small purchases – The purchase of an item exceeding the micro-purchase threshold of $3,500, but less than the simplified acquisition threshold of $150,000 (adjusted periodically for inflation)1. For these items, price or rate quotes must be obtained from an “adequate number of qualified sources.” The guidance does not clarify how many is an “adequate number” and such determination must be made by each entity.
- Sealed bid – This method applies to purchases greater than $150,000. Sealed bids must be obtained from an adequate number of known suppliers, it must be publicly advertised, and there must be an invitation to bid and opening the bids.
- Competitive proposal – This method also applies to purchases greater than $150,000. There must be a request for proposal (RFP), an adequate number of qualified sources, a written method for conducting technical evaluations and for selecting recipients, and contracts awarded to the responsible firm based on price and other factors. Qualifications-based procurement may be used for architectural and engineering professional services only.
- Noncompetitive proposal – This method results in solicitation from a sole source and only applies when an item can be purchased from a single source, there is written approval for the specific purchase, an emergency has occurred, and/or competition is deemed inadequate after soliciting proposals.
For governmental entities located within South Dakota, keep the State bidding rules in mind as well, as they contain requirements for bidding at a threshold less than the $150,000 federal requirement. The current bid booklet can be obtained at the following link – http://legislativeaudit.sd.gov/resources/Bid%20Booklet%202018.pdf
The procurement compliance requirement can be accessed within the Electronic Code of Federal Regulations (Title 2, Part 200.317) at the following link –
Please feel free to contact any of the governmental/non-profit experts at Ketel Thorstenson with any questions.
 On June 20, 2018, the Office of Management and Budget (OMB) issued memorandum M-18-18, which clarifies and changes the micro-purchase and simplified acquisition thresholds. However, confusion exists regarding the effective date of such guidance, which will not be clarified until the release of the 2019 Compliance Supplement, which is anticipated by the end of June 2019.