As the implementation of the Super Circular nears, federal grantees will be obligated to meet certain new procurement standards not previously required. Indeed, many of these standards may be familiar to nonprofits with federal contracts, as they closely resemble those set out in the Federal Acquisition Regulation (FAR). When implementing their new procurement policies and procedures, nonprofit federal grantees should be mindful of various pitfalls, including the following:
- Grantees must engage in full and open competition. The old regulations required full and open competition to the "maximum extent possible." Adopting a more FAR-like standard, the Super Circular requires all procurement contracts issued above $150,000 to be subject to full and open competition, unless the regulations' articulated exceptions apply. The regulations do not define "full and open competition," but grantees should assume that the previous unofficial rule of obtaining three bids to ensure price reasonableness will no longer be the standard. Thus, we recommend that grantees routinely post their procurement opportunities to a designated location on their websites. Grantees should further train their contractors that all procurement opportunities will be posted on the grantees' websites.
- A cost and price reasonableness analysis is still necessary where a sole-source contract is required. If a procurement contract is competed and more than two offerors respond, the contract is subject to price reasonableness and does not require an additional cost or price reasonableness analysis. However, if a procurement cannot be competed, grantees should write a sole-source justification that contains a cost analysis examining each element of cost, including profit. Contractors, therefore, may need to provide a breakdown of their costs, including overhead markup, to ensure grantees only charge costs that are reasonable and necessary against the grant. In order to receive contractors' confidential pricing information, grantees should prepare nondisclosure agreement templates (that they are prepared to sign) and must take all appropriate measures to ensure that contractors' confidential information is not released.
- Grantees must ask for representations regarding actual or potential conflicts of interest. The new regulations prohibit conflicts of interest, including organizational conflicts of interest. Grantees must request that offerors disclose any and all potential conflicts of interest, including those of their affiliates, in their proposals. Grantees should include language in the RFP stating that by submitting an offer, offerors are acknowledging they and their affiliates have no undisclosed conflicts of interest. For more information on the new conflicts of interest requirements of the Super Circular, see our May 2014 newsletter.
- Grantees must train evaluation teams to provide adequate procurement documentation that clearly explains a grantee's reasoned decision for making an award. Grantees will need to consider whether and under what conditions a procurement award can be protested. These protest rights should be provided in the terms of the grant itself. Even if express protest rights are not granted, adequate procurement documentation is necessary to ensure (i) that grantees have complied with the terms of the competition, and (ii) that enough offerors have provided comparable prices, demonstrating that an appropriate market exists to determine price reasonableness.
For additional information regarding the Super Circular's new procurement regulations, please contact the authors of this newsletter.
Related Information
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For more information, please contact Dismas Locaria, Melanie Jones Totman, or Jeffrey Tenenbaum.
This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can only be provided in response to a specific fact situation.