Impact of OMB Uniform Guidance on Ohio school district procurement

In December 2013, the Office of Management and Budget (OMB) issued the “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards,” commonly referred to as the “Uniform Guidance.”[1] These requirements apply to all procurement by a school district using federal funds, including federal grant funds, nutrition funds and even expenditures that qualify for Medicaid reimbursement. These requirements do not apply to payroll expenses. 

The OMB originally issued a two-year grace period applied to non-federal entities and later extended the grace period for an additional year.[2] For entities with a July 1 to June 30 fiscal year, that final grace period expired on June 30, 2018, and, this year, the Uniform Guidance requirements are now fully applicable to school districts.

The Uniform Guidance has two key effects. First, it establishes five allowable procurement methods for a school district to use when expending federal funds; second, it requires the district to have specific policies and procedures in place to be used when the district expends federal funds.  

Permissible procurement methods

The Uniform Guidance creates five procurement methods: micro-purchases, small purchases, sealed bids, competitive proposals and noncompetitive proposals. Each has its own price thresholds and compliance requirements. As the dollar value of the procurement increase, the Uniform Guidance requires increasingly competitive procedures for procurement. It is important to note that these dollar thresholds represent a maximum “default” threshold. The district is free to set lower thresholds — and, therefore, increasingly competitive procurement — if it sees fit, and the district’s existing policies may very well have lower thresholds in place, especially if the its policies do not differentiate between sources of funds. 

1. Micro-purchases ($10,000 or less). Micro-purchases are purchases in which the contract sum does not exceed the micro-purchase threshold, presently $10,000.[3] Because they represent the lowest dollar amount, micro-purchases are the least restrictive method of procurement. Districts are not required to procure any price quotations; they need only to find the price “reasonable” and to distribute micro-purchases “equitably” among suppliers.[4]

2. Small purchases ($10,001–$250,000). Small purchases are purchases in which the contract price exceeds the micro-purchase threshold but is not more than the “Simplified Acquisition Threshold,” presently $250,000.[5] The district must first solicit an “adequate number” of prices or rate quotations before awarding a contract.[6]

3. Sealed bids ($250,001 or more). When a contract is for a fixed price in excess of the Simplified Acquisition Threshold, the Uniform Guidance provides for the use of sealed bids.[7] The solicitation of bids must be publically advertised, and the contract awarded to the lowest responsive bidder.[8] Additionally, the school district must perform a cost analysis prior to awarding a contract under a sealed bid.[9]

4. Competitive proposals ($250,001 or more). Alternatively, a school district may use the competitive proposals method when the contract price exceeds the Simplified Acquisition Threshold.[10] Similar to the Sealed Bids method, the district is required to publically issue a Request for Proposal. Unlike the Sealed Bid method, however, the district is not limited to selecting the lowest priced proposal. Rather, the district may establish other factors and select the proposal that is “most advantageous” to the district.[11] As with the Sealed Bid method, the school district must perform a cost analysis prior to awarding the contract.[12]

5. Noncompetitive proposals. While the Uniform Guidance describes “noncompetitive proposals” as a fifth method of procurement, this “method” effectively operates as an exception to the competitive procurement requirements. Under this method, the school district may solicit a proposal from only one source and award that source the contract in certain scenarios.[13] This method may be used only when the item to be procured is available from the single source solicited[14]; a public exigency or emergency requires a prompt procurement[15]; noncompetitive proposals are expressly authorized by the federal agency awarding the funds to the district[16]; or the district has solicited a number of sources using another method but has determined that competition is inadequate.[17]

A district spending federal funds must use the appropriate procurement method outlined above. The district cannot simply procure using the state procurement requirements.  Take, for example, a district seeking to use federal funds to install security cameras along the perimeter of a school building. Improvements “for the security and protection of school property” are exempted from competitive procurement under state law.[18] But a district that simply procures that work would violate federal law; the Uniform Guidance does not have a “safety and protection” exception.

Policies and procedures mandated by Uniform Guidance

In addition to the procurement methods, the Uniform Guidance also mandates that a district have certain procurement policies and procedures in place. The district must have documented procurement “procedures;” having a procurement policy alone is not enough to comply with the rules.[19] These procedures must be written to avoid procurement that is “unnecessary or duplicative”[20] and should encourage cost-efficient acquisitions by leveraging group-purchasing arrangements and other cost-saving strategies.[21] The Uniform Guidance also requires documentation throughout the procurement process. Districts must document, at a minimum, the rationale for the method of procurement, the selection of contract type, contractor selection or rejection, and the basis for the contract price.[22]

The Uniform Guidance specifically requires a district to maintain a written conflicts-of-interest policy that applies to purchases using federal funds. The Uniform Guidance does not necessarily require a separate policy applicable only to federal fund procurement; this requirement may be met if the district’s existing procurement policy has a conflict-of-interest provision that complies with the Uniform Guidance’s requirements or if it has a conflicts-of-interest policy that applies to federal fund procurement and, likewise, meets the Uniform Guidance’s requirements.

[1] 78 FR 78589

[2] 82 FR 22609

[3] 2 C.F.R. § 200.320(a).

[4] Id.

[5] § 200.320(b).

[6] Id.

[7] § 200.320(c)

[8] See § 200.320(c)(2).

[9] § 200.323(a).

[10] § 200.320(d)

[11] Id.

[12] § 200.323(a).

[13] § 200.320 (e).

[14] § 200.320 (e)(1).

[15] § 200.320 (e)(2).

[16] § 200.320 (e)(3).

[17] § 200.320(e)(4).

[18] R.C. 3313.46(A).

[19] § 200.318(a).

[20] § 200.318(d).

[21] § 200.318 (e), (f), (g).

[22] § 200.318 (i)