Federal Procurement: The Hoops are Still There, but at Least They’re Getting Bigger

shutterstock_463954487 dog jumping through hoop.jpg

Late last month, the Office of Management and Budget (OMB) released a memo that raises the thresholds for purchases made using federal funds.  The 2017-18 school year was when most school districts had to begin complying with updated purchasing thresholds under the Education Department General Administrative Regulations (EDGAR).   These regulations mandated that purchases made using federal funds adhere to a tiered procurement program. At that time the thresholds were:

Micro-Purchases: Less than $3,500

Small Purchases: $3,500 to $150,000

Large Purchases: Over $150,000

Why the Tiers Matter

The distinction between the tiers is significant.  Micro-Purchases can be made using simplified acquisition procedures.  This means a school does not need competitive quotes, so long as the cost is reasonable.  To the extent practicable districts are required to distribute such purchases amongst qualified suppliers.  Other than those fairly loose restrictions, the purchases can be made with minimal hoop-jumping.

To make Small Purchases, schools are required to get price or rate quotes in advance from a reasonable number of qualified sources.  To make Large Purchases, schools are required to formally advertise for sealed bids and conduct a contract and price analysis on the bidded goods or project.  

New Tiers Announced for 2018

The thresholds for each tier have changed, while the restrictions and requirements of each tier have remained the same.  According to the June 2018 memo from OMB, the new thresholds will be:

Micro-Purchases: Less than $10,000

Small Purchases: $10,000 to $250,000

Large Purchases: Over $250,000

These changes typically take some time to roll out to the Federal Acquisition Regulations (FAR), and are generally not effective until implemented.  However, the recent OMB memorandum stated it is granting an exception to all recipients of federal funds, and the new purchasing thresholds in advance of revisions to the FAR and Uniform Guidance.

How This Helps

The increased thresholds will significantly reduce the paperwork required for school districts that no longer have to meet the strict requirements of sealed bidding for purchases less than $250,000.  This will be particularly relevant to school meal programs. School districts that hire a food service management company and have a meal program that exceeds $150,000 will now fall into the Small Purchase tier and the less-restrictive bidding requirements.  Similarly, all of the food purchases made by in-house school nutrition programs will now be able to take advantage of the higher thresholds for the purchase of food items that the kitchen uses to make students’ meals.

These changes are at the federal level and do not change a school district’s obligations under state law for bidding for construction, remodeling, repair, or site improvement.  The threshold for such projects to be bid remains at $100,000.

What Do School Districts Need to Do?

All schools should consider changing their procurement policies immediately to take advantage of the new thresholds as the new school year begins.  If you are a KSB policy service subscriber you can click below to download the updated policies. If you are not a KSB policy service subscriber, you should check your board’s procurement policy and double check to see if you have adopted individual policies or administrative regulations that govern purchasing for your nutrition program, your special education program as well as Title I.  If that is the case, your board will need to amend each of those policies or procedures separately.

It will take time for these regulation changes to flow out from federal agencies such as the USDA, which oversees the National School Lunch Program.  Auditing tools and documentation may still reflect the lower thresholds as the 2018-2019 school year begins. If you run into an audit issue, or have any questions about procurement using federal funds you should contact your school district’s attorney or call Karen, Steve, Bobby, Tim, or Coady.

If you are a KSB Policy Service subscriber, you can link to updated copies of your procurement policies below.