Notes on Procurement Policy

Procurement of goods and services is one of the most significant ways that your organization spends money, second to hiring your staff. So it's not surprising that the federal Uniform Guidance has a lot to say about procurement. A whole section of Subpart D of 2 CFR 200 (specifically §§ 200.317-200.326) and Appendix II are devoted to defining the standards for procurement of goods and services by recipient organizations.

And right off the bat, § 200.318 (general procurement standards) tells us that the recipient organization must have "its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part."

So what are the basic requirements for your procurement policy? Of course you need to read the regulation, but here are some brief notes on what an NGO's procurement policy must do, with respect to ordinary procurements. (Note that the procurement of construction activities is discussed in greater detail elsewhere.)


  • Provide for Oversight of Contractors vendors) to ensure they perform in accordance with the terms and conditions of contracts you execute with them. (§ 200.318(b))
  • Maintain written standards of conduct that avoid and prevent Conflict of Interest (COI) — both personal COI in procurement transactions (§ 200.318(c)(1)) and organizational COI in dealing with parent or subsidiary organizations. (§ 200.318(c)(2))
  • Avoid acquiring unnecessary or duplicative items. (§ 200.318(d))
  • Award contracts only to responsible parties that are capable of delivering the required goods or services and avoiding contractors that are suspended or debarred from participating in federal awards. (§ 200.318(h))
  • Maintain written records of procurement transactions that detail the history of the transaction, including the rationale for selecting the following:
    • method of procurement,
    • vendor,
    • contract type, and
    • the basis for the contract price. (§ 200.318(i))
  • Limit the use of Time and Material (T&M) type contracts to specific, appropriate circumstances, including requiring a price ceiling for such contracts, as a control on their otherwise open-ended nature. (§ 200.318(j))
  • Assure free and open competition in the conduct of all procurement transactions, including:
    • avoiding certain restrictive practices (§ 200.319(a)),
    • establishing standards for formal solicitations of bids (§ 200.319(c)), and
    • establishing standards for using prequalified lists of suppliers or products (§ 200.319(d)).
  • Define methods of procurement to be followed, with graduated standards based on the dollar value of the transaction (§ 200.320) and the adequacy of competition. The graduated standards must meet the minimum requirements described below. This procurement matrix may be useful in visualizing the graduations.
    • Transactions costing no more than $3000 (increased to USD 10,000 as of 18 JUN 2018, see USAID's AAPD 18-04)are identified as Micro-purchases and may be conducted and documented with minimal administrative burden, following the basic small purchase procedures (see below), but with significantly limited requirements for documentation.(§ 200.320(a)).
    • Transactions costing no more than $150k (which is the federally recognized Simplified Acquisition Threshold (increased to USD 250,000 as of 18 JUN 2018, see USAID's AAPD 18-04) and where adequate competition exists may be conducted using small purchase procedures, which are "relatively simple and informal" methods requiring price quotations from "an adequate number" of qualified sources but not requiring extensive or formal solicitations of bids (§ 200.320(b)). But see below for notes on situations of inadequate competition.
    • Transactions costing more than $150k (increased to USD 250,000 as of 18 JUN 2018, see USAID's AAPD 18-04) require the highest level of care and documentation, with formal advertising of solicitations for bids, preference for sealed bids resulting in fixed price contracts (where circumstances permit — see § 200.320(c))), and use of competitive proposals resulting in cost reimbursement type contracts where sealed bids are inappropriate and/or competition is inadequate(§ 200.320(d)).
  • Define procedures to be used when competition is inadequate, including special care in documenting the necessity of non-competitive proposals (sole source transactions). This may include requiring the use of cost reimbursement type contracts in order to assure cost/price reasonableness in the absence of competition. See Notes on Noncompetitive Procurements.
  • Require "all necessary affirmative steps" to use minority businesses, women's business enterprises, and labor surplus area firms when possible. (§ 200.321)
  • Perform cost and price analysis in connection with every transaction greater than $150k. (§ 200.323)
  • Establish standards for procurement contracts, including that they must include all necessary provisions identified in Appendix II to 2 CFR 200.

The UG's procurement standards also reserve the federal awarding agency's right to review the technical specifications of significant procurement actions. See § 200.324 Federal awarding agency or pass-through entity review.

In addition, federal awarding agencies may impose additional procurement standards. For example:

What about personal services? Contracting with an individual to provide personal services raises questions. Is it a hiring action? Is it a procurement action? This is a topic that deserves its own page. See Personal Services Contracts - Procurement or Personnel?.

And don't forget real property and construction. Several sections of the UG's procurement standards impose further restrictions on these types of procurement. See Real Property Considerations and Construction Activities.

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