Procurement Disaster Assistance Team
October 2021
(FM-207-21-0002)
(PDAT) Field Manual
Procurement Information for FEMA Award Recipients
and Subrecipients
PDAT Field Manual
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III
Contents
FOREWARD ........................................................................................................................................ 1
Chapter 1: Introduction ................................................................................................................ 3
1. Overview ..................................................................................................................................... 3
Navigating the Manual ............................................................................................................... 4
Additional Resources ................................................................................................................. 5
Chapter 2: Applicability of the Federal Procurement Under Grant Standards .......................... 6
Overview of Contracts ................................................................................................................ 6
Use of Contractors by Recipients and Subrecipients .................................................... 6
Role of The Federal Government in Recipient and Subrecipient Contracting ............. 6
Definition of Contract and Distinction from Subaward ................................................. 6
Contract Payment Obligations ........................................................................................ 7
Fixed Price and Cost-Reimbursement Contracts ........................................................... 7
Applicability ................................................................................................................................ 9
Procurement by State Entities ........................................................................................ 9
Procurement by Non-State Entities ............................................................................. 10
Chapter 3: General Procurement Under Grant Standards ...................................................... 15
Mandatory Standards ............................................................................................................. 15
Maintain Oversight ....................................................................................................... 16
Written Standards of Conduct ..................................................................................... 16
Gifts ............................................................................................................................... 16
Conflicts of Interests .................................................................................................... 17
Disciplinary Actions ...................................................................................................... 19
Need Determination ..................................................................................................... 20
Contractor Responsibility Determination .................................................................... 22
Maintain Records ......................................................................................................... 24
Contractor Selection ..................................................................................................... 25
Settlement of Issues .................................................................................................... 27
IV
Time-and-Materials Contracts ................................................................................................ 28
Considerations for State Entities using T&M Contracts ............................................. 28
Encouraged Standards ........................................................................................................... 29
Use of Federal Excess and Surplus Property .............................................................. 29
Use of Value Engineering ............................................................................................. 30
Use of Intergovernmental or Inter-Entity Agreements ................................................ 30
Chapter 4: Competition ............................................................................................................. 32
Restrictions to Competition .................................................................................................... 32
Unreasonable Requirements ....................................................................................... 33
Requiring Unnecessary Experience or Excessive Bonding ........................................ 33
Noncompetitive Pricing Practices ................................................................................ 34
Noncompetitive Contracts to Contractors on Retainer .............................................. 35
Organizational Conflicts of Interest ............................................................................. 36
Specifying Only a Brand Name Product ...................................................................... 37
Any Arbitrary Action in the Procurement Process ....................................................... 38
Geographic Preferences ......................................................................................................... 38
Exclusion of Contractors from Outside a Geographic Area ........................................ 38
Price Matching .............................................................................................................. 38
Reducing Bids ............................................................................................................... 38
Adding Weight to Evaluation Factors .......................................................................... 39
Set Asides ..................................................................................................................... 39
Written Procedures ................................................................................................................. 40
Clear and Accurate Description of Requirements ...................................................... 40
Nonrestrictive Specifications ....................................................................................... 41
Qualitative Requirements ............................................................................................ 41
Product Specifications ................................................................................................. 41
Identify All Requirements/Evaluation Factors ............................................................ 41
Prequalified Lists .................................................................................................................... 41
Chapter 5: Methods of Procurement ........................................................................................ 43
V
Informal Methods .................................................................................................................... 43
Procurement by Micro-Purchases ............................................................................... 43
Competition .................................................................................................................. 44
Prohibited Divisions ..................................................................................................... 44
Documentation ............................................................................................................. 44
Responsibility ............................................................................................................... 44
Procurement by Small Purchases ............................................................................... 44
Formal Methods ...................................................................................................................... 45
Procurement by Sealed Bidding .................................................................................. 45
Procurement by Proposals ........................................................................................... 48
Noncompetitive Procurement ................................................................................................. 51
Procurement by Micro-Purchase ................................................................................. 51
Single Source ................................................................................................................ 51
Public Emergency or Exigency ..................................................................................... 52
Federal Awarding Agency or Pass-Through Entity Approval ....................................... 54
Inadequate Competition .............................................................................................. 55
Justification and Documentation: ............................................................................... 56
Negotiation of Profit: .................................................................................................... 56
Ensure Compliance with Additional Requirements: ................................................... 56
Suggested Elements for Noncompetitive Procurement Justification ........................ 57
Chapter 6: Socioeconomic Contracting .................................................................................... 59
Affirmative Steps ..................................................................................................................... 59
Solicitation Lists ........................................................................................................... 59
Soliciting ........................................................................................................................ 59
Dividing Requirements ................................................................................................. 59
Delivery Schedules ....................................................................................................... 60
Obtaining Assistance .................................................................................................... 60
Prime Contractor Requirements .................................................................................. 60
Definitions for Socioeconomic Firms ..................................................................................... 61
Small Business ............................................................................................................. 61
VI
Women’s Business Enterprise ..................................................................................... 61
Minority Business ......................................................................................................... 61
Labor Surplus Area ....................................................................................................... 62
Labor Surplus Area Firm .............................................................................................. 62
Chapter 7: Domestic Preferences ............................................................................................ 64
Domestic Preferences for Procurement ................................................................................. 64
Applicability ................................................................................................................... 64
Definitions ..................................................................................................................... 64
Chapter 8: Procurement of Recovered Materials .................................................................... 66
Inapplicability to Indian Tribes and Private Nonprofit NFEs .................................................. 66
EPA Product Designation ........................................................................................................ 67
Affirmative Procurement Program .......................................................................................... 67
Solid Waste Disposal Services ............................................................................................... 68
Certifications ........................................................................................................................... 68
Chapter 9: Cost or Price Analysis ............................................................................................. 69
Price Analysis .......................................................................................................................... 69
Cost Analysis ........................................................................................................................... 70
Cost Plus a Percentage of Cost Contracts ............................................................................. 71
Four-Part Analysis ......................................................................................................... 71
Considerations for State Entities using CPPC Contracts ........................................... 72
Chapter 10: Federal Awarding Agency/Pass-Through Entity Review ...................................... 74
Pre-Award Procurement Review ............................................................................................. 74
Technical Specifications .............................................................................................. 74
Procurement Documents ............................................................................................. 74
Exemption ............................................................................................................................... 75
FEMA or Pass-Through Entity Review .......................................................................... 75
Self-Certification ........................................................................................................... 75
Post-Award Procurement Review ........................................................................................... 76
VII
Chapter 11: Bonding Requirements ........................................................................................ 77
Bid Guarantee ......................................................................................................................... 77
Performance Bond .................................................................................................................. 78
Payment Bond ......................................................................................................................... 78
Chapter 12: Contract Provisions .............................................................................................. 80
Required Provisions ................................................................................................................ 80
Contract Remedies ....................................................................................................... 80
Termination for Cause and Convenience ................................................................... 81
Equal Employment Opportunity ................................................................................... 81
Davis-Bacon Act ............................................................................................................ 82
Copeland Anti-Kickback Act ......................................................................................... 83
Contract Work Hours and Safety Standards Act ........................................................ 83
Rights to Inventions Made Under a Contract or Agreement ...................................... 83
Clean Air Act and the Federal Water Pollution Control Act ........................................ 84
Suspension and Debarment ........................................................................................ 84
Byrd Anti-Lobbying Amendment .................................................................................. 85
Procurement of Recovered Materials ......................................................................... 86
Prohibition on Contracting for Covered Telecommunications Equipment or Services
....................................................................................................................................... 86
Domestic Preferences for Procurements .................................................................... 87
FEMA Recommended Provisions............................................................................................ 87
Access to Records ........................................................................................................ 87
Changes and Modifications ......................................................................................... 87
DHS Seal, Logo, and Flags ........................................................................................... 88
Compliance with Federal Law, Regulations, and Executive Orders .......................... 88
No Obligation by the Federal Government .................................................................. 88
Program Fraud and False or Fraudulent Statements or Related Acts ...................... 88
Affirmative Socioeconomic Steps ................................................................................ 89
Copyright ....................................................................................................................... 89
Chapter 13: Beyond the Basics: Important Procurement Considerations ............................. 90
VIII
Considerations for Indian Tribal Governments ...................................................................... 91
Indian Tribal Preferences When Awarding Contracts ................................................. 91
Inapplicability of the Socioeconomic Affirmative Steps ............................................. 92
Contract Changes/Modifications ........................................................................................... 93
Scope of the Contract .................................................................................................. 94
Scope of Competition ................................................................................................... 94
Design-Bid-Build and Design-Build Contracts ........................................................................ 94
Design-Bid-Build ........................................................................................................... 94
Design-Build Contracts ................................................................................................. 95
CMAR Delivery Method ........................................................................................................... 96
Price as a Selection Factor for CMAR ......................................................................... 96
Cooperative Purchasing .......................................................................................................... 97
Joint Procurements ...................................................................................................... 97
Joint Procurements between State and Non-State Entities ...................................... 98
Using Another Jurisdiction’s Contract (Piggybacking) ................................................ 99
Non-State Entities and Piggybacking .......................................................................... 99
State Entities and Piggybacking .................................................................................. 99
Cooperative Purchasing Programs ....................................................................................... 100
Use of General Services Administration Schedules ................................................. 100
Other Supply Schedules and Cooperative Purchasing Programs ........................... 101
Prepositioned Contracts for Disaster Grants ....................................................................... 103
Non-State Entities and Prepositioned Contracts ...................................................... 104
State Entities and Prepositioned Contracts .............................................................. 104
Mutual Aid Agreements ........................................................................................................ 105
Purchasing Agents ................................................................................................................ 106
Non-State Entities and Purchasing Agents ............................................................... 106
State Entities and Purchasing Agents ....................................................................... 107
Chapter 14: Remedies for Procurement Noncompliance ..................................................... 108
Remedies for Noncompliance .............................................................................................. 108
Specific Conditions ............................................................................................................... 109
IX
APPENDIX ................................................................................................................................ 110
ACRONYM REFERENCE ................................................................................................................ 110
DEFINITIONS ................................................................................................................................. 111
PDAT Field Manual
1
FOREWARD
All FEMA awards are subject to the federal procurement standards under the Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards found at 2 C.F.R. §§
200.317-200.327.
1
The Procurement Disaster Assistance Team (PDAT) Field Manual (Manual)
provides guidance regarding the mandatory requirements for FEMA award recipients and
subrecipients using federal funding to finance the procurement of property and services.
PDAT, a subcomponent of FEMA’s Grant Programs Directorate’s (GPD), Office of Enterprise Grant
Services, Policy Division, developed this Manual to provide accurate and updated information to
support both FEMA staff and FEMA award recipients and subrecipients regarding proper compliancy
under the federal procurement standards.
This version of the PDAT Field Manual will:
A. Exemplify the Agency’s mission statement:
Helping people before, during and after disasters;
B. Improve accessibility to all users of this Manual, providing clear and understandable language to
enhance understanding of the federal procurement standards;
C. Provide guidance regarding the Office of Management and Budget (OMB) revisions and final
guidance to the Uniform Rules, 2 C.F.R. Part 200 on August 13, 2020;
D. Illustrate how certain rules apply to an award recipient and/or subrecipient with real world
examples; and
E. Give additional resources, tools, and guidance to help all users develop further knowledge of the
procurement under grants subject matter.
FEMA administers over 45 disaster and non-disaster grant programs that provide over $3 billion in
federal assistance to state entities and non-state entities annually. All recipients and subrecipients
of FEMA awards are subject to the Uniform Rules found at 2 C.F.R. §§ 200.317-200.327
, which
apply to contracts under FEMA awards or Robert T. Stafford Disaster Relief and Emergency
Assistance Act (Stafford Act) disaster declarations issued on or after November 12, 2020. This
Manual is applicable to FEMA awards and Stafford Act disaster declarations issued on or after
November 12, 2020.
For contracts under FEMA awards or Stafford Act declarations issued between December 26, 2014,
and November 11, 2020, please refer to the
Field Manual: Procurement Information for FEMA Public
Assistance Award Recipients and Subrecipients (October 2019).
1
Adopted by DHS at 2 C.F.R. § 3002.10. 79 Fed. Reg. 75871 (Dec. 19, 2014); Revised 2 C.F.R. 200 (Aug. 13, 2020).
PDAT Field Manual
2
For contracts under FEMA awards or Stafford Act declarations issued before December 26, 2014,
please refer to the
Field Manual: Public Assistance Grantee and Subgrantee Procurement
Requirements Under 44 C.F.R. PT. 13 AND 2 C.F.R. PT. 215 (December 2014).
While prior versions of the Field Manual are only directly applicable to FEMA’s Public Assistance
Program, all FEMA award recipients and subrecipients are encouraged to review these resources
since they provide guidance on the federal procurement under grants regulations unless restricted
by statue.
NOTE: FEMA will monitor the implementation of this policy through close coordination with various
program offices, regional staff, and, as appropriate, interagency partners and non-federal
stakeholders. FEMA will consider feedback, as appropriate, from these entities when issuing a final
policy.
3
Chapter 1: Introduction
1. Overview
This version of the Manual incorporates relevant content from both the 2014 Field Manual, the
2016 Supplement to the Field Manual,
2
and the 2019 Field Manual.
3
However, this version now
supersedes both previous resources following OMB revisions of OMB Guidance for Grants and
Agreements found in Title 2 of the Code of Federal Regulations. These revisions are applicable to all
FEMA awards issued on or after November 12, 2020, unless specifically indicated otherwise.
4
These
revisions include changes to the federal procurement standards, which govern how FEMA award
recipients and subrecipients must purchase under a FEMA award. For FEMA declarations made on,
or awards issued prior to November 12, 2020 and after December 26, 2014, please reference the
previous
federal procurement standards. While the Manual is intended to serve as a practical field
reference and has the effect of FEMA policy, it is not all encompassing, nor does it have the force
and effect of law and regulation.
The information provided in the Manual is only intended to
serve as a basic reference and framework for both FEMA
staff involved in the various aspects of administering FEMA
awards as well as the recipients and subrecipients procuring
property and services as identified in the Uniform Rules. It is
not intended to be, nor does it provide or constitute legal
advice for FEMA award recipients and subrecipients.
Adherence to, application of, or use of this document
regarding a procurement subject to FEMA awards does not
guarantee the legal sufficiency of any procurement, nor does
it ensure that an award or subaward will not be audited or
investigated. All legal questions concerning the sufficiency of
a procurement in terms of federal procurement should be
referred to the recipients and subrecipients’ legal counsel.
As a condition of receiving reimbursement for contractor costs relating to FEMA’s federal assistance
programs, FEMA award recipients and subrecipients must comply with all applicable federal laws,
regulations, and executive orders. Each non-Federal Entity (NFE) is responsible for managing and
administering its federal awards in compliance with the applicable requirements, including but not
limited to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
2 Procurement Guidance for Recipients and Subrecipients under 2 C.F.R Part 200 (Uniform Rules) Supplement to the
Public Assistance Procurement Disaster Assistance Team (PDAT) Field Manual, June 21, 2016.
3 Field Manual – Procurement Information for FEMA Public Assistance Award Recipients and Subrecipients, October 2019.
4 2 C.F.R. § 200.216 Prohibition on certain telecommunications and video surveillance services or equipment is applicable
to all FEMA awards issued on or after August 13, 2020.
4
Federal Awards codified at 2 C.F.R. Part 200, which DHS adopted at 2 C.F.R. § 3002.10.
5
Specifically, the regulations at 2 C.F.R. §§ 200.317-200.327 set forth the procurement standards
that NFEs must follow when using FEMA financial assistance to conduct procurements of real
property, goods, or services.
Navigating the Manual
This Manual is structured according to the progression of the federal procurement under grant
requirements listed in 2 C.F.R. §§ 200.317-200.327. Throughout the Manual, icons are used to help
identify key definitions, examples, tools/resources, and common DHS OIG audit findings.
Internal hyperlinks connect sections that are complementary within the Manual.
External hyperlinks connect the Manual with relevant external references or resources.
Blue boxes indicate important terms or sections to know and understand.
Gray boxes indicate an example where procurement under a FEMA award is being used.
Graphics indicate:
5 79 Fed. Reg. 75871 (Dec. 19, 2014); 85 Fed. Reg. 49506 (Aug. 13, 2020).
Definition
Examples
Tools/Resources
Common OIG Findings
St
ate Entities
Non-State Entities
5
Additional Resources
Questions regarding this policy may be directed to your assigned FEMA program analyst or grants
management specialist or the Centralized Scheduling and Information Desk (CSID) at
.
Related Tools and Resources
FEMA Public Assistance Program and Policy Guide (PAPPG)
The Uniform Rules
Top 10 Procurement under Federal Awards Mistakes
OIG DHS Audit Reports related to FEMA
Fire Management Assistance Grant Program Guide (FMAG)
FEMA Preparedness Grants Manual
Assistance to Firefighters Grants (AFG) Program
Hazard Mitigation Assistance Program (HMGP) Guidance
6
Chapter 2: Applicability of the
Federal Procurement Under Grant
Standards
Overview of Contracts
Use of Contractors by Recipients and Subrecipients
Recipients and subrecipients often use contractors to help carry out their FEMA award projects. For
example, a subrecipient may receive financial assistance under a FEMA award to repair a building
damaged by a major disaster, and it may then award a contract to a construction company to
complete the work. FEMA generally views contractor costs as an allowable cost
6
under the FEMA
award, as long as the costs are deemed reasonable.
Such a contract is a commercial transaction between the recipient or subrecipient and its contractor,
and there is privity, or a legally recognized relationship, of contract between the recipient or
subrecipient and its contractor. However, FEMA is not a party to that contract and has no privity of
contract with that contractor. FEMA’s legal relationship is only with the award recipient, not with the
subrecipient or contractors. Therefore, there is no contractual liability on the part of FEMA to the
recipient’s or subrecipient’s contractor.
Role of The Federal Government in Recipient and Subrecipient
Contracting
Although the federal government is not a party to a recipient’s or subrecipient’s contract, it
determines eligibility and reimbursement for a recipient’s or subrecipient’s contracting with outside
sources under the FEMA award. Recipients and subrecipients that use FEMA award funding must
comply with the procurement under grant requirements imposed by federal law, executive orders,
federal regulations, and terms of the grant award.
7
Definition of Contract and Distinction from Subaward
A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the
performance of which the law in some way recognizes as a duty. There are three elements necessary
to form a contract:
6 2 C.F.R. § 200.403.
7 See Illinois Equal Employment Opportunity Regulations for Public Contracts, B-167015, 54 Comp. Gen. 6 (1974); see
also King v. Smith, 392 U.S. 309, 333 n. 34 (1968).
7
Mutual assent;
Consideration or a substitute; and
No defenses to formation;
8
such as duress, misrepresentation or fraud,
mistake and unconscionability.
Co
ntracts are generally governed by the common law, although contracts for the sale of goods such
as movable and tangible property, are governed by Article 2 of the Uniform Commercial Code as well
as common law.
The term “contract” is general and includes several different varieties or types.
9
For example,
contracts can be categorized by subject matter such as construction, research, supply, service or by
the manner in which they can be formed and accepted such as bilateral or unilateral. Recipients and
subrecipients are free to select the type of contract they award consistent with the federal
procurement under grant rules and federal law, applicable state, Tribal, and local laws and
regulations, and within the bounds of good commercial business practice.
The Uniform Rules provide that a contract is for obtaining goods and services for the NFE’s own use
and creates a procurement relationship with the contractor.
10
Characteristics indicative of a
procurement relationship between the NFE and a contractor include when the contractor:
1. Provides the goods and services within normal business operations;
2. Provides similar goods or services to many different purchasers;
3. Normally operates in a competitive environment;
4. Provides goods or services that are ancillary to the operation of the federal program; and
5. Is not subject to compliance requirements of the federal program, as a result of the
agreement, though similar requirements may apply for other reasons.
11
Contract Payment Obligations
There are generally three types of contract payment obligations: fixed-price, cost-reimbursement, and
time-and-materials (T&M). Because the Uniform Rules do not define or fully describe these types of
contracts, the following provides a general overview of these contracts that is largely based on the
concepts and principles from the Federal Acquisition Regulation (FAR).
Fixed Price and Cost-Reimbursement Contracts
With regard to fixed price and cost-reimbursement contracts, the specific contract types range from
firm-fixed price, in which the contractor has full responsibility for the performance costs and resulting
profit or loss, to a cost-plus-fixed-fee, in which the contractor has minimal responsibility for the
performance costs and the negotiated fee or profit is fixed. There are also various incentive contracts
8 Restatement (Second) of Contract, § 1 (1981). Mutual assent also known as offer and acceptance,
9 Id.
10 2 C.F.R. § 200.1.
11 2 C.F.R. § 200.331(b).
8
in which the responsibilities of the contractor for performance costs and the profit or fee incentives
offered are tailored to the uncertainties involved in contract performance.
Fixed price contracts provide for a firm price or, in appropriate cases, an adjustable
price.
12
The risk of performing the required work at the fixed price is borne by the
contractor.
13
Firm-fixed price contracts are generally appropriate where the
requirement, such as scope of work, is well-defined and of a commercial nature.
14
Construction contracts, for example, are often firm-fixed price contracts.
NOTE: T&M contracts and
labor-hour contracts are not firm-fixed price contracts.
15
Cost-reimbursement contracts provide for payment of certain incurred costs to the
extent stipulated in the contract.
16
They normally provide for the reimbursement of
the contractor for its allowable costs, with an agreed-upon fee.
17
There is a limit to the
costs that a contractor may incur at the time of contract award, referred to as a ceiling
price. The contractor may not exceed the ceiling price without the recipient’s or
subrecipient’s approval, or the contractor does so at its own risk.
In a cost-reimbursement contract, the recipient or subrecipient bears more risk than in a firm-fixed
price contract.
18
A cost-reimbursement contract is appropriate when the details of the required
scope of work are not well-defined.
19
There are many variations of cost-reimbursement contracts,
such as cost-plus-fixed-fee, cost-plus-incentive-fee, and cost-plus-award-fee contracts.
20
However,
the cost plus a percentage of cost (CPPC) contract which is discussed in detail later on in this
Manual, is strictly prohibited for non-state entities.
21
12 48 C.F.R. Subpart 16.2 (Fixed-Price Contracts). A fixed price contract can be adjusted, but this normally occurs only
through the operation of contract clauses providing for equitable adjustment or other revisions of the contract price under
certain circumstances. 48 C.F.R. § 16.203 (Fixed-Price Contracts with Economic Price Adjustment).
13 Bowsher v. Merck & Co., 460 U.S. 824, 826 at n. 1 (U.S. 1983) (“A pure fixed-price contract requires the contractor to
furnish the goods or services for a fixed amount of compensation regardless of the costs of performance, thereby placing
the risk of incurring unforeseen costs of performance on the contractor rather than the Government.”).
14 48 C.F.R. § 16.202-2.
15 48 C.F.R. § 16.201(b).
16 48 C.F.R. Subpart 16.3 (Cost-Reimbursement Contracts).
17 48 C.F.R. Subpart 16.3.
18 Kellogg Brown & Root Servs. v. United States, 742 F.3d 967, 971 (Fed. Cir. 2014) (“…cost-reimbursement contracts are
intended to shift to the Government the risk of unexpected performance costs…”).
19 48 C.F.R. § 16.301-2(a).
20 48 C.F.R. Subpart 16.3.
21 See 2 C.F.R. § 200.323(d); DHS Office of Inspector General, Report No. OIG-14-44-D, FEMA Should Recover $5.3
Million of the $52.1 Million of Public Assistance Grant Funds Awarded to the Bay St. Louis Waveland School District in
Mississippi-Hurricane Katrina, p. 4 (Feb. 25, 2014) (“Federal regulations prohibit cost-plus-percentage-of-cost contracts
because they provide no incentive for contractors to control costs—the more contractors charge, the more profit they
make.”). Note, Report No. OIG-14-44-D references 2 C.F.R. § 200.323(d). However, the 2 C.F.R. revisions applicable on or
after November 12, 2020 modified the regulation citation to 2 C.F.R. § 200.324(d). The language found at both citations is
identical and states “The cost plus a percentage of cost and percentage of construction cost methods of contracting must
not be used.” Although the OIG references an old citation, the report is still valid since the regulatory language was
unchanged and the citation was merely updated.
9
Applicability
The procurement under grant standards set forth at 2 C.F.R. §§ 200.317-200.327 apply to all FEMA
awards issued on or after November 12, 2020.
22
Failure to follow the Uniform Rules found in 2
C.F.R. Part 200 when procuring and selecting contractors places FEMA award recipients and
subrecipients at risk of not receiving either their full reimbursement for associated disaster costs or
having obligated funds recouped by FEMA. This Manual focuses on the procurement standards set
forth in 2 C.F.R. Part 200. For procurement guidance associated with disasters declared before
November 12, 2020, please refer to the
Uniform Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards.
There are different sets of procurement rules that apply to
state and non-state entities. A FEMA award recipient,
therefore, must first determine if it is a state or non-state
entity as defined under the federal procurement rules.
Additional guidance for determining an NFE’s entity type
and identifying the procurement standards applicable to
that entity type can be found in the subsections below.
Procurement by State Entities
The federal procurement standards applicable to state entities are set forth in 2 C.F.R. § 200.317.
State
23
entities include:
Any state of the United States,
The District of Columbia,
The Commonwealth of Puerto Rico,
U.S. Virgin Islands,
Guam,
American Samoa,
The Commonwealth of the Northern Mariana Islands, and
Any agency or instrumentality thereof exclusive of local governments.
When procuring property or services under a FEMA award, a state entity must:
Follow the same policies and procedures it uses for procurements from its non-federal funds
found at 2 C.F.R. § 200.317
(procurement by states);
22 85 Fed. Reg. 49506 (Aug. 13, 2020).
23 2 C.F.R. § 200.1 Institutions of Higher Education.
St
ate Entities
10
Follow all necessary affirmative steps found in 2 C.F.R. § 200.321 (contracting with small and
minority businesses, women’s business enterprises, and labor surplus area firms) to assure that
small and minority businesses, women’s owned enterprises, and Labor Surplus Area (LSA) firms
are used when possible;
Provide a preference, to the greatest extent practicable, for the purchase, acquisition, or use of
goods, products or materials produced in the United States found in 2 C.F.R. § 200.322
(domestic preferences for procurements);
Ensure compliance with procurement of recovered materials guidelines found at 2 C.F.R. §
200.323 (procurement of recovered materials); and
Include all necessary contract provisions required by 2 C.F.R. § 200.327 (mandatory contract
provisions).
Even if a state complies with its own policies and procedures used for procurement from non-federal
funds when it procures property or services under a FEMA award, FEMA will still evaluate the
procurement to determine whether the costs conform to the Cost Principles at
2 C.F.R. Part 200,
Subpart E.
24
For example, while state entities are not prohibited by the federal rules to award a CPPC
contract, FEMA may still question the contract costs as unreasonable, since this type of contract
incentivizes the contractor to drive up costs to increase profit. A state must use the Cost Principles at
2 C.F.R. Part 200, Subpart E as a guide in the pricing of fixed-price contracts and subcontracts where
costs are used in determining the appropriate price.
25
Additionally, while more prescriptive conflict of interest rules apply to non-state entities, FEMA,
pursuant to its authorities, requires that all NFEs, including state entities, maintain written conflict of
interest rules, including organizational conflicts of interests rules, governing the actions of their
procurement professionals and disclose any potential conflict of interest to FEMA in writing.
26
Procurement by Non-State Entities
The federal procurement under grant standards applicable to non-state entities when procuring
property or services under an award or cooperative agreement are set forth in 2 C.F.R. §§ 200.317-
327. Non-state entities are eligible FEMA award recipients that do not meet the “state” definition
found at 2 C.F.R. § 200.1 States.
24 A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person
under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is
particularly important when the NFE is predominantly federally funded.
25 2 C.F.R. § 200.401.
26 2 C.F.R. § 200.112.
11
Non-state entities include:
Local
27
and Tribal
28
governments,
Institutions of Higher Education (IHEs)
29
that do not meet the definition
of state,
Hospitals
30
that do not meet the definition of state instrumentality, and
Other PNPs
31.
Although an Indian Tribal Government may potentially be either a recipient or subrecipient under the
Stafford Act and other FEMA financial assistance programs, Indian Tribal Governments are not
defined as a “state” at 2 C.F.R. § 200.1 States. In turn, Indian tribes must comply with the federal
procurement under grant standards applicable to non-state entities. Each of the federal procurement
under grant requirements applicable to non-state entities will be expanded upon in this Manual.
The NFE must have and use documented procurement procedures, consistent with state, local, and
Tribal laws and regulations and the standards of this section, for the acquisition of property or
services required under a Federal award or subaward. As set forth in 2 C.F.R. § 200.318(a),
an NFE
must use its own documented procurement procedures which reflect applicable state, local, and
Tribal laws and regulations, provided that the procurements conform to appliable federal law and the
federal procurement standards identified in §§ 200.317-200.327.
The federal procurement under grant standards only address certain, limited procurement concepts,
and do not focus on all possible procurement issues. Where the federal procurement under grant
standards do not address a specific procurement issue, a non-state entity must abide by the
applicable state, local, and/or Tribal procurement standards or regulations. However, where a
difference exists between a federal procurement standard and a state, local, and/or Tribal
procurement standard or regulation, the non-state entity must apply the rule(s) that allow for
compliance with all applicable levels of governance.
Example: Non-State Entity Application of the Rules
Scenario: Non-state entity procurement under grant standards may, in some cases, be
more restrictive than the federal procurement standards at 2 C.F.R. §§ 200.318-
200.327. For example, the regulation at 2 C.F.R. § 200.320(a)(2) allows a non-state
entity to use procurement by small purchase procedures when the total value of services, property,
or other property acquired remains below the federal Simplified Acquisition Threshold (SAT),which is
27 2 C.F.R. § 200.1 Local government.
28 2 C.F.R. § 200.1 Indian tribe.
29 2 C.F.R. § 200.1 Institutions of Higher Education (IHEs).
30 2 C.F.R. § 200.1 Hospital.
31 2 C.F.R. § 200.1 Nonprofit organizations.
Non-State
Entities
12
$250,000 as of June 2018.
32
However, it may be the case that the applicable state, local, and/or
Indian Tribal procurement standards and regulations do not permit small purchase procedures for
acquisitions over $100,000. Which acquisition threshold is a non-state entity required to comply with
in this scenario?
Answer: In such a circumstance where there is a difference between state, local, and/or Tribal
procurement standards and these federal procurement under grant standards, the non-state entity
is required to follow the rule(s) that allows compliance with all applicable levels of governance. A
more permissive federal procurement standard would not control over a more restrictive applicable
state, local, and/or Tribal standard. In this scenario, complying with the $100,000 threshold allows
for compliance at all levels.
NOTE: This concept of differing and following the rule that allows compliance with all applicable
levels only applies to non-state entities. This underscores the importance of an NFE’s evaluation of
whether it is a state or non-state entity as defined under the federal procurement rules. State
entities will always follow the procurement standards found at 2 C.F.R § 200.317, which directs
them to utilize their own procurement standards, take socioeconomic affirmative steps at 2 C.F.R. §
200.321, provide a preference for the purchase of goods, products, or materials produced in the
United States as required by 2 C.F.R. § 200.322, comply with applicable guidelines regarding
procurement of recovered materials as set forth in 2 C.F.R. § 200.323, and include all necessary
contract provisions required by 2 C.F.R. § 200.327. Conversely, non-state entities must adhere to
their own procurement policies and procedures, applicable state and/or Tribal laws, and the federal
procurement under grant requirements found at 2 C.F.R. §§ 200.318-200.327.
Example: Differing Procurement Standards for State vs. Non-State Entities –
Geographic Preference
Scenario: The President declares a major disaster for the State of Z as the result of a
hurricane, and the declaration authorizes Public Assistance (PA) for all counties in the
State. The hurricane damaged a building of the State Z Agency of Transportation. Following approval
of a
Project Worksheet to repair the damaged building, State Z Agency of Transportation procures
the services of a contractor to complete the repairs to the building by following the same policies and
procedures it uses for procurements from its non-federal funds when it procures construction
services. The State Z Agency, when evaluating the bids for the work, uses a state statutorily imposed
geographic preference and awards a contract, and the contract includes all clauses required by
federal law, regulation, and executive order. Is the use of the geographic preference by State Z
Agency permissible under 2 C.F.R. § 200.317?
32 See 2 C.F.R. § 200.1; 48 C.F.R. § 2.101. While the SAT is periodically adjusted for inflation, it was adjusted to
$250,000 as of June 2018. OMB Memo (M-18-18), available at
https://www.whitehouse.gov/wp-
content/uploads/2018/06/M-18-18.pdf
13
Answer: Yes, the use of the geographic preference is permissible under 2 C.F.R. § 200.317. The
federal regulation at 2 C.F.R. § 200.317 provides, in relevant part, that a state must follow the same
policies and procedures it uses for procurements from its non-federal funds when it procures
property and services under a FEMA award. In this case, the State Z Agency of Transportation
followed these procedures, which included adhering to a statutorily imposed geographic preference
when evaluating the bids.
33
NOTE: It is important to recognize that the procurement standards are different for state and non-
state entities. As it relates to non-state entities, the federal procurement standards under the
Uniform Rules at
2 C.F.R. § 200.319(c) prohibit the use of statutorily or administratively imposed
state, local, and/or Tribal geographic preferences in the evaluation of bids or proposals, except in
those cases where applicable federal statutes expressly mandate or encourage geographic
preferences. However, because the state is not subject to regulation at 2 C.F.R. § 200.319, the
regulation bears no applicability to the question presented in this scenario.
Example: Waivers of State, Local, and/or Tribal Procurement Standards for Non-
State Entities
Scenario: As a result of, or in anticipation of, a disaster or emergency, NFEs may,
pursuant to their own rules, waive their own procurement standards or regulations.
Do such waivers apply to the federal procurement under grant rules for non-state entities?
Answer: No. Even though the appropriate NFE may have waived state, local, and/or Tribal
procurement standards or regulations, the NFE cannot waive the applicable federal procurement
under grant standards. Where state, local, and/or Tribal procurement standards or regulations have
been waived pursuant to the NFE’s own legal requirements, the federal procurement under the
Grant Rules found at 2 C.F.R. §§ 200.318-200.327 continue to apply to a non-state entity
regardless of such a waiver by an NFE.
NOTE: NFEs must follow the federal procurement requirements found at 2 C.F.R. §§ 200.317-
200.327. However, federal regulations allow for noncompetitive procurements under certain
circumstances, including when a non-state entity determines that immediate actions required to
address the public exigency or emergency cannot be delayed by a competitive solicitation. More
information regarding emergency and exigency circumstances are addressed later within this
Manual.
33 Whether or not a geographic preference regime imposed by a state raises Constitutional issues under the dormant
commerce clause is outside the scope of this Manual.
15
Chapter 3: General Procurement
Under Grant Standards
The general procurement under grant standards at 2 C.F.R. § 200.318 set
forth various standards for non-state entities, some of which are mandatory
and some of which are encouraged. There are eleven general procurement
standards: eight are mandatory and three are encouraged. Chapter 3 will
discuss
T&M Contracts and each of the following general procurement
standards:
Mandatory Standards
Non-state entities must use their own documented procurement procedures which reflect applicable
state, local, and Tribal laws and regulations, provided the procurement conforms to applicable
Federal law and the standards set forth in 2 C.F.R. Part 200
.
NOTE: Non-state entities must comply with all other applicable Federal laws, regulations, and
executive orders when procuring services or property under a FEMA award. The requirements
identified in this Manual only address the federal procurement standards. Additional information
regarding FEMA remedies to address NFE noncompliance is outlined in Chapter 14 of this Manual.
Mandatory Standards
Maintain Oversight
Written Standards of Conduct
o Gifts
o Conflict of Interest
Need Determination
Contractor Responsibility
Determination
Maintain Records
Settlement of Issues
Encouraged Standards
Use of Federal Excess/Surplus
Property
Value Engineering
Use of Intergovernmental or Inter-
Entity Agreements
Non-State
Entities
16
Maintain Oversight
A non-state entity must maintain oversight to ensure that contractors perform in accordance with the
terms, conditions, and specifications of their contracts or purchase orders.
34
If a non-state entity
lacks qualified personnel within its organization to undertake such oversight as required by
2 C.F.R.
§ 200.318(b), then FEMA expects the non-state entity to acquire the necessary personnel to provide
these services.
Contractors selected to perform procurement functions
on behalf of the non-state entity are subject to the
Uniform Rules. Examples of this oversight include
making sure contractors comply with contract terms
and conditions, invoices are correct, and goods and
services are received.
Written Standards of Conduct
FEMA expects a recipient or subrecipient, when contracting under a FEMA award, to ensure that
procurement transactions are conducted with impartiality and without preferential treatment.
35
The
regulations require
non-state entities to have written standards of conduct covering conflicts of
interests and governing the actions of employees engaged in the selection, award, and
administration of contracts. These standards must include disciplinary actions in the event of
violations of the standards of conduct.
36
Gifts
The officers, employees, and agents of non-state entities may neither solicit nor accept gifts or
gratuities, favors, or anything of monetary value from contractors or parties to subcontracts.
This
would include entertainment, hospitality, loans, and forbearance. This also includes services as well
as gifts such as training, transportation, personal travel, lodgings, and meals, whether provided in-
kind, by purchase of a ticket, payment in advance, or reimbursement after the expense has been
incurred.
37
DE MINIMIS GIFTS EXCEPTION
A non-state entity may set standards for accepting gratuities in situations in which the financial
interest is not substantial, or the gift is an unsolicited item of nominal value. Federal regulations do
not provide any additional clarity as to what constitutes “substantial” or “nominal intrinsic value,”
such that the content of any such exception is left to the discretion of the non-state entity. The
Standards of Conduct for Employees of the Executive Branch
provide a useful guide in analyzing a
34
2 C.F.R. § 200.318(b).
35
2 C.F.R. § 200.318(c)(1)(2).
36
2 C.F.R. § 200.318(c)(1).
37
Id.
17
non-state entity’s exception.
38
However, the non-state entity will need to look to applicable state,
local, and/or Tribal requirements and consult its servicing attorney to determine if other applicable
rules speak to a specific dollar amount for a de minimis exception.
Conflicts of Interests
No employee, officer, or agent may participate in the selection, award, or administration of a contract
supported by a federal award if he or she has a real or apparent conflict of interest. The purpose of
this prohibition is to ensure, at a minimum, that employees involved in the award and administration
of contracts are free of undisclosed personal or organizational conflicts of interest—both in fact and
appearance.
39
REAL CONFLICT OF INTEREST
A real conflict of interest arises when an employee, officer, any member of his or her immediate
family, his or her partner, or an organization which employs or is about to employ any of the
aforementioned individuals, has a financial or other interest or a tangible personal benefit from a
firm considered for a contract.
FINANCIAL INTEREST
Although the term “financial interest” is not defined or otherwise described in the Uniform Rules, a
financial interest can be considered to be the potential for gain or loss to the employee, officer, or
agent, any member of his or her immediate family, his or her partner, or an organization which
employs or is about to employ any of these parties as a result of the particular procurement. The
prohibited financial interest may arise from:
Ownership of certain financial instruments or investments like stock, bonds, or real estate; or
A salary, indebtedness, job offer, or similar interest that might be affected by the procurement.
Example: Real Conflict of Interest
Scenario: During its annual review of historic properties, the J County identified several
structural problems to its historic courthouse. Working with its State Historic
Preservation Office, J County formed a committee to issue a Request for Proposal (RFP) to rebuild
the courthouse. One of the County Commissioners is selected to serve as the chair of the committee.
The County Commissioner’s brother owns a prominent construction company in J County called
Historic Renovation & Construction Co. This company submitted a proposal for the project, and J
38
Cf. 5 C.F.R. § 2635.203(b) (defining “gift” under the Standards of Conduct for Employees of the Executive Branch).
39
2 C.F.R. § 200.318(c)(2).
18
County awarded it the contract to rebuild the courthouse. Did J County violate the federal
procurement regulations?
Answer: Yes. The regulation at 2 C.F.R. § 200.318(c)(1) prohibits real conflicts of interest which
includes, among other things, awarding contracts to any employee or member of his or her
immediate family with a financial interest in a firm considered for a contract. Here, the County
Commissioner’s brother, a member of their immediate family, has a financial interest in Historic
Renovation & Construction Co. because he owns the company. Therefore, J County violated the
federal procurement regulations.
APPARENT CONFLICT OF INTEREST
An apparent conflict of interest is an existing situation or relationship that creates the appearance
that an employee, officer, or agent, any member of his or her immediate family, his or her partner, or
an organization which employs or is about to employ any of the parties indicated herein, has a
financial or other interest in or a tangible personal benefit from a firm considered for a contract.
Example: Apparent Conflict of Interest
Scenario: Town of Y procured concrete from Company Z because Company Z offered
the best rates and the most competitive delivery schedule. The owner of Company Z
and the Town of Y’s Purchasing Officer were college roommates. Did Town of Y violate
the federal procurement regulations?
Answer: Yes. The regulations at 2 C.F.R. § 200.318(c)(1) prohibit both real and apparent conflicts of
interest. Even though Town of Y procured goods from Company Z based on its rates and delivery
schedule, the relationship between owner of Company Z and Town of Y’s Purchasing Officer creates
the appearance that an employee of Town of Y has a personal interest in awarding the contract to
Company Z. Therefore, Town of Y violated the federal procurement regulations.
ORGANIZATIONAL CONFLICTS OF INTEREST
If a non-state entity has a parent, affiliate, or subsidiary organization that is not a state, local
government, or Indian tribe, the non-state entity must also maintain written standards of conduct
covering organizational conflicts of interest. One type of organizational conflict of interest occurs
when, because of relationships with a parent company, affiliate, or subsidiary organization, the non-
state entity is unable or appears to be unable to be impartial in conducting a procurement action
involving a related organization.
40
40
2 C.F.R. § 200.318(c)(2).
19
Example: Organizational Conflict of Interest
Scenario: A hospital in the Town of E sustained structural damage during a hurricane.
The hospital owns several subsidiary companies, including a local construction firm.
Because of its relationship with the hospital, the construction firm is privy to detailed information
regarding the work needed. The hospital issued an
Invitation for Bids (IFB) and decided to award its
contract to the local construction firm. Did the hospital violate the federal procurement regulations?
Answer: Yes. The regulation at 2 C.F.R. § 200.318(c)(2) requires written standards of conduct
regarding these types of organizational conflicts of interests, and 2 C.F.R. § 200.319(b)(5) prohibits
procurements involving organizational conflicts of interests. This means that a non-state entity is
unable or appears to be unable to be impartial in conducting a procurement action because of a
relationship between a parent company, affiliate, or subsidiary organization that is not a state, local
government, or Indian tribe. In this case, the hospital was unable or appeared to be unable to be
impartial in awarding a contract to its subsidiary construction firm, which was not a state, local
government, or Indian tribe. Therefore, the hospital violated the federal procurement regulations.
Disciplinary Actions
The standards of conduct must provide for disciplinary actions to be applied for violations of such
standards by officers, employees, or agents of the non-state entity.
41
For example, the disciplinary
action for a non-state entity employee may be dismissal.
Another possible way to resolve a conflict of interest, if allowed under the non-state entity’s
procurement procedures and other applicable laws, is recusal. A recusal may be appropriate when
an employee involved in awarding a contract has a financial interest or other business or personal
relationship with a contractor bidding for the award. By removing that employee from the contractor
selection process, a non-state entity may be able to resolve the conflict. A non-state entity is
encouraged to check its state and local procurement rules regarding conflicts of interest and
document any recusals in writing to include in its procurement file.
Example: Recusal
Scenario: Nonprofit X suffered significant flooding to its headquarters building
following a hurricane in City Y. As a result, Nonprofit X issued an IFB for mold
remediation companies to assess the damage. A procurement specialist of Nonprofit X
is part owner of a mold remediation company that plans to bid for the contract to repair the
headquarters building. The procurement specialist of Nonprofit X recused herself and did not
participate in the evaluation or selection of mold remediators. Nonprofit X documented the
41
2 C.F.R. § 200.318(c)(1).
20
procurement specialist’s recusal and included documentation in its procurement file when seeking
federal reimbursement. Did Nonprofit X violate the federal procurement under grant regulations?
Answer: No. Even though the procurement specialist had a conflict of interest because she had a
financial interest in the mold remediation company as part owner, Nonprofit X resolved the conflict of
interest by recusal. By excluding the procurement specialist from the evaluation and selection of
mold remediation companies, Nonprofit X was able to comply with the federal procurement under
grant rules governing conflicts of interest.
Need Determination
A non-state entity must avoid the acquisition of unnecessary or duplicative items and procure goods
and services using the most economical approach when feasible.
42
To this end, the federal
procurement regulations instruct a non-state entity to do the following:
AVOID UNNECESSARY OR DUPLICATIVE ITEMS
A non-state entity must have procedures to avoid the acquisition of unnecessary or duplicative
supplies or services. A non-state entity must limit its procurements to its current and reasonably
expected needs to carry out the scope of work under a FEMA award. A non-state entity may not add
items or quantities unrelated to the scope of work or procure additional items for use later. A non-
state entity may award advance contracts before an incident occurs for the potential performance of
work under a Stafford Act emergency or major disaster. These are also known as prepositioned or
pre-awarded contracts, which are eligible for reimbursement when used to support response and
recovery efforts pursuant to a financial assistance award.
Example: Procurement of Unnecessary Items
Scenario: This year, the Island of X experienced widespread power outages due to a
Super Typhoon striking the region. In particular, the Island’s airport lost power for
weeks. A functioning airport is essential for Island residents because they rely on
imported goods and supplies to function. The airport requires four generators to restore power. This
is the third year in a row that the Island of X suffered a Typhoon and the third consecutive year that
the airport lost power for an extended period. To get the airport up and running, and to prepare for
potential damage from future Typhoons, the Island procured eight generators using FEMA award
funds. Did the Island of X comply with the federal procurement regulations?
Answer: No. Pursuant to 2 C.F.R. § 200.318(d), the Island is prohibited from procuring unnecessary
or duplicative items. In this case, the Island needed only four generators to meet its current
requirement of restoring power to the airport. The federal procurement regulations do not allow for
42
2 C.F.R. § 200.318(d).
21
the acquisition of duplicative items or stockpiling items for future use. Therefore, the Island of X
violated the federal procurement regulations.
CONSOLIDATE OR BREAK OUT PROCUREMENTS
A non-state entity should consider consolidating or breaking out procurements to obtain a more
economical purchase.
43
Example: Breaking Out Procurements
Scenario: County of X solicited and received unit price quotes from 13 debris removal
contractors for various types debris removal work. Contractor A submitted the lowest
bid for removing and disposing of vegetative debris. Contractor B submitted the lowest
bid for removing and disposing of construction and demolition debris. Contractor C submitted the
lowest bid for both tasks combined. Although the combined total was the lowest bid, the unit price
quotes for vegetative debris and construction and demolition debris (each elements of the combined
bid) were higher than Contractors A and B, respectively.
County of X considered the bids submitted and realized that it would be able to obtain a more
economical purchase if it broke up these purchases into separate procurement actions awarded to
Contractor A and B. The County awarded the vegetative debris removal work to Contractor A and the
construction and demolition debris removal work to Contractor B. Is County of X in compliance with
the federal procurement under grant rules by breaking up their procurement in order to obtain a
more cost-effective purchase?
Answer: Yes. In this scenario, the County broke up their procurement into two activities and awarded
two contracts (one for vegetative debris removal work and another for construction and demolition
debris removal work) to contractors that had the lowest bid for each of the two tasks. This decision
resulted in a more economic purchase overall. By awarding two separate contracts, the County
saved costs that would otherwise be unnecessary for efficient contract performance.
NOTE: Non-state entities may break down procurements to obtain a more economical purchase or
permit maximum participation by small and minority businesses, women’s business enterprises, and
LSA firms when economically feasible.
44
However, non-state entities are not allowed to break down
procurements to avoid the additional procurement requirements that apply to larger purchases.
LEASE VERSUS PURCHASE ANALYSIS
A non-state entity must, where appropriate, make an analysis of lease versus purchase alternatives,
and any other appropriate analysis to determine the most economical approach. FEMA may review
43
2 C.F.R. § 200.318(d).
44
2 C.F.R. § 200.321.
22
any costs used in the comparison for reasonableness, realistic current market conditions, and based
on the expected useful service life of the asset.
45
Contractor Responsibility Determination
A non-state entity must award contracts only to responsible contractors possessing the ability to
perform successfully under the terms and conditions of a proposed procurement.
46
FEMA requires
the non-state entity to document its determination that a prospective contractor qualifies as
responsible, as well as its basis for such determination. In making a contractor responsibility
determination, the non-state entity must consider such matters as contractor integrity, compliance
with public policy, record of past performance, and financial and technical resources.
47
CONTRACTOR INTEGRITY
A contractor must have a satisfactory record of integrity and business ethics. In analyzing a
contractor’s integrity, the non-state entity may consider whether the contractor has:
Committed fraud or a criminal offense in connection with obtaining or attempting to obtain a
contract;
Committed embezzlement, theft, forgery, bribery, falsification or destruction of records, or tax
evasion;
Committed any other offense indicating lack of business integrity or business honesty that
seriously and directly affects the present responsibility of the contractor; or
Been indicted for any of the above-mentioned offenses.
PUBLIC POLICY
A contractor must have complied with the public policies of the federal government as well as the
public policies of appropriate states, local governments, or Indian Tribal Governments.
48
The non-
state entity should look at the contractor’s past and current compliance with matters such as:
Equal opportunity and nondiscrimination laws; and
Applicable prevailing wage laws, regulations, and executive orders (EO)
45
2 C.F.R. § 200.318(d).
46
2 C.F.R. § 200.318(h).
47
Id.
48
Id.
23
RECORD OF PAST PERFORMANCE
A contractor must be able to demonstrate that it has enough resources (i.e., personnel and
subcontractors), with adequate experience, to perform the required work. In addition, the contractor
must provide that it has adequate prior experience carrying out similar work, which can be
demonstrated by:
Having the necessary organization, accounting, and operational controls;
Adhering to schedules, including the administrative aspects of performance;
Exhibiting business-like concern for the interest of the customer; and
Meeting quality requirements.
FINANCIAL RESOURCES
A contractor must have adequate financial resources to perform the contract or the ability to obtain
such resources. In making this evaluation, a non-state entity could analyze:
The existing cash flow of the contractor;
Account receivables; and
Other financial data.
49
TECHNICAL RESOURCES
A contractor must have or be able to acquire the required construction, production, and/or technical
facilities, equipment, and other resources to perform the work under the contract.
50
SUSPENSION AND DEBARMENT
Non-state entities, as well as state entities, must ensure the contractor is not suspended or
debarred.
51
NFEs must not make any award or permit any award at any tier to parties listed on the
government-wide exclusions in the System for Award Management (SAM), which can be found at
www.SAM.gov. All contracts must also include the suspension and debarment clause.
Example: Sealed Bidding and the Selection of Responsible Contractors
Scenario: Y Parrish is conducting a solicitation for new firetrucks under the Assistance
to Firefighters Grants Program. Using the sealed bidding method, Y Parrish received
49
2 C.F.R. § 200.318(h).
50
Id.
51
Id.; See also 2 C.F.R. § 200.214.
24
the lowest bid from Affordable Fire Vehicles, Inc. In conducting a responsibility determination, Y
Parrish found that Affordable Fire Vehicles, Inc. previously committed fraud in obtaining a contract
and does not have adequate financial resources to perform the required work within the new
contract. Is Y Parrish required to award the contract to Affordable Fire Vehicles, Inc. because it was
the lowest bid?
Answer: No. Pursuant to 2 C.F.R. § 200.318(h), a non-state entity is required to award contracts only
to responsible contractors possessing the ability to perform successfully under the terms and
conditions of a proposed procurement. In so doing, Y Parrish must look at contractor integrity,
compliance with public policy, record of past performance, and financial and technical resources.
Here the contractor’s integrity is at issue due to committing fraud previously. Moreover, Affordable
Fire Vehicles, Inc. does not have adequate financial resources to perform the required work. Y
Parrish must document its determination that Affordable Fire Vehicles, Inc. is not responsible and
must also document its basis for this determination.
Related Tools and Resources
Contract Provisions Guide
Suspension and Debarment FAQs
OMB Guidelines on Suspension and Debarment
Maintain Records
A non-state entity is required to maintain records sufficient to detail the history of a
procurement.
52
These records include, but are not limited to, the rationale for the
method of procurement, the selection of the contract type, the contractor selection or
rejection, and the basis for the contract price.
53
Additionally, the non-state entity’s records must also
include the contract document and any contract modifications with the signatures of all parties.
Contract documents pertinent to a Federal award must be retained for a period of three years from
the date of submission of the final expenditure report pursuant to 2 C.F.R. § 200.334
.
RATIONALE FOR METHOD OF PROCUREMENT
A non-state entity must document its rationale for the method of procurement used for each contract
(i.e., micro-purchases, small purchase procedures, sealed bidding, proposals, or the noncompetitive
proposal methods). If utilizing the noncompetitive proposal method, the non-state entity must justify
with documentation why this method was necessary.
52
2 C.F.R. § 200.318(i).
53
Id.
25
RATIONALE FOR CONTRACT TYPE
A non-state entity must document its rationale for selecting the type of contract used for the
procurement (i.e., fixed price, cost reimbursement, or T&M). If utilizing a T&M contract, the non-state
entity must ensure compliance with 2 C.F.R. § 200.318(j).
Additional Requirement
“Notwithstanding any other provision of law, the Administrator of the Federal Emergency
Management Agency shall not reimburse a State or local government, Indian Tribal Government
. . ., or the owner or operator of a private nonprofit facility . . . for any activities made pursuant to
a contract entered into after August 1, 2017,
that prohibits the Administrator or the Comptroller
General of the United States from auditing or otherwise reviewing all aspects relating to the
contract
.” (Sec. 1225 of the Disaster Recovery Reform Act of 2018)
Contractor Selection
A non-state entity must document its rationale for
contractor selection or rejection, including a written
responsibility determination for the successful
contractor.
54
PRICE
A non-state entity must document the basis for the contract price. In addition to adequate market
research, including independent cost estimates, non-state entities must include cost or price
analysis documentation for contracts exceeding the federal SAT.
OTHER DOCUMENTATION
A non-state entity should also include the following documentation in its procurement file:
Acquisition planning information and other pre-solicitation documents;
The statement of work/scope of services;
A list of sources solicited;
Copies of published notices of proposed contract action;
Copies of the solicitation documents, as well as any addenda or amendments;
The notice to unsuccessful bidders or offers and a record of any debriefing;
54
2 C.F.R. § 200.320.
26
A record of protests, disputes, and claims;
Copies of bid, performance, payment, and other bond documents;
The notice to proceed; and
Steps taken to comply with the affirmative socioeconomic steps required by 2 C.F.R. § 200.321.
The Uniform Rules provide that FEMA, DHS OIG, the Comptroller General of the United States, and
the pass-through entity, or any of their authorized representatives, must have the right of access to
any documents, papers, or other records of all NFEs which are pertinent to the FEMA award in order
to make audits, examinations, excerpts, and transcripts.
55
All NFEs must acknowledge and agree to
comply with applicable provisions governing DHS access to records, accounts, documents,
information, facilities, and staff. All NFEs must require any contractors, successors, transferees, and
assignees also acknowledge and agree to comply with the regulation.
56
Example: Records Must Detail the History of the Procurement
Scenario: Hurricane John made landfall in the Town of X, causing widespread damage.
As a result, the Town entered a contract to rebuild its courthouse. The lowest bid was
$950,000 from Contractor Y, but when the Town reviewed the bid from Contractor Y,
they determined that the bid was not responsive to the requirements. Specifically, the Town required
the work to be completed within one year and Contractor Y would not be able to complete the work
for one year and six months. The Town reviewed the bid from Contractor Z, the second lowest bidder,
and determined it to be responsive and chose to award the contract to Contractor Z. Two years later,
the DHS OIG requested the procurement file from the Town regarding the courthouse construction
project. The Town included the documentation in their procurement file but failed to include its
rationale behind selecting Contractor Z. The employee who worked on the procurement no longer
works for the Town and the Town is unable to locate any additional documentation. Is the Town in
compliance with the federal procurement under grant regulations?
Answer: No, the Town is not in compliance with the federal procurement under grant regulations.
Pursuant to 2 C.F.R. § 200.318(i), a non-state entity must maintain records sufficient to document
the procurement history, which includes documenting its rationale for contractor selection. In this
scenario, the Town did not award the contract to the lowest bidder based on the lack of
responsiveness of its bid. The Town is required to document and maintain this information in its
procurement file.
55
2 C.F.R. § 200.337; DHS Standard Terms and Conditions.
56
DHS Standard Terms and Conditions.
27
Settlement of Issues
A non-state entity alone is responsible, in accordance with good administrative practice and sound
business judgment, for the settlement of all contractual and administrative issues arising out of
procurements.
57
These issues include, but are not limited to, source evaluation, protests, disputes,
and claims.
58
The Uniform Rules do not relieve the non-state entity of any contractual responsibilities under its
contracts.
59
Additionally, FEMA will not substitute its judgment for that of the non-state entity in
resolving contractual and administrative issues unless the matter is primarily a federal concern.
60
A
matter that is primarily of federal concern includes, but is not limited to, noncompliance with:
Any federal law;
Any of the procurement standards within 2 C.F.R. §§ 200.317-200.327;
Any other federal regulation;
Any federal executive order; or
Any other impropriety, waste, fraud, or abuse.
FEMA and the non-state entity must refer violations of law to the federal, state, local, and/or Tribal
authority having proper jurisdiction.
61
Example: NFE is Responsible for the Settlement of Issues
Scenario: The City of X utilized the competitive proposal method in procuring an
engineer to assist in rebuilding a bridge that was damaged in a hurricane. In its RFP,
the City listed 5 evaluation factors and assigned percentage points to each. The City gave 25% to
prior experience specific to bridges. The City received 4 proposals and selected Contractor Z because
it scored the highest percentage based on the evaluation factors set forth in the RFP. Contractor Y
submitted a proposal but was not awarded the contract. Contractor Y disagrees with the award
selection and believes the City did not properly weigh its prior experience. As a result, Contractor Y
files a protest. Will FEMA assist the City of X in resolving the protest?
Answer: No, the City is required to defend itself against the protest on its own pursuant to 2 C.F.R. §
200.318(k).
57
2 C.F.R. § 200.318(k).
58
Id.
59
Id.
60
Id.
61
Id.
28
Time-and-Materials Contracts
A T&M contract is a contract whose cost to a non-state entity is:
The sum of the actual cost of materials
62
; and
Direct labor hours charged at fixed hourly rates that reflect wages, general and
administrative expenses, and profit.
63
No
fee or profit is allowed except as part of the fixed billing rate for direct labor hours, such that
materials are billed at cost. A non-state entity may use a T&M contract only after determining that:
No other contract is suitable; and
The contract includes a ceiling price that the contractor exceeds at its own risk.
64
Th
e ceiling price must not be so high as to render it meaningless as a cost control measure.
A T&M contract provides no incentive for the contractor to control costs or find labor
efficiencies, because the contractor’s profit increases as the labor hours increase.
Therefore, a ceiling price is required when using T&M contracts. The federal
procurement regulations require the non-state entity to assert a high degree of
oversight to obtain reasonable assurance that the contractor is using efficient
methods and effective cost controls.
65
In some cases, a T&M contract may be appropriate in the immediate response to an incident to
protect lives or public health and safety, as it may be impossible to accurately estimate the extent or
duration of the required scope of work or to anticipate costs with any reasonable degree of
confidence in the immediate aftermath of the incident. Such a contract must still include a contract
ceiling price and the non-state entity should transition into a more appropriate pricing structure as
soon as possible. Specifically, after a period of exigency or emergency has ended, the non-state
entity should normally be able to formulate a detailed scope of work to allow a contract to be
competitively awarded and/or transitioned to a firm fixed price pricing structure.
Considerations for State Entities using T&M Contracts
While the federal procurement standards allow state entities to use a T&M contract when
permissible under state law, state entities should also maintain a high degree of oversight of this
contract type. All NFEs must abide by the Cost Principles found in 2 C.F.R. Part 200, Subpart E to
62
2 C.F.R. § 200.318(j)(1)(i).
63
2 C.F.R. § 200.318(j)(1)(ii).
64
2 C.F.R. § 200.318(j)(1).
65
2 C.F.R. § 200.318(j)(2).
29
ensure that all costs are reasonable. FEMA cautions against the use of T&M contracts because they
provide no positive incentive to the contractor for cost control or labor efficiency.
Example: Use of a T&M Contract
Scenario: The electrical distribution system in the Town of X is destroyed in Hurricane
John. The Town of X does not know the extent of the damage and therefore cannot
fully define the scope of work. The Town of X enters a contract with Contractor X to
repair the damage. The contract includes:
The hourly rates for all employees of Contractor X;
The hourly rates to use the equipment that may be needed for repairs; and
The cost of all materials that may be needed for the repairs.
The Town of X has determined that no other contract type is suitable based on the unclear scope of
work, and the Town of X is prepared to assert a high degree of oversight over the contractor.
However, the contract does not include a ceiling price because the magnitude of the work is unclear
at the time of entering into the contract. Is this contract type permitted?
Answer: No, this is a T&M contract and is not permitted as it is structured. Here, the contractor is
paid based on the cost of materials, the cost of equipment, and the hourly rates of employees
needed to complete the work, making this a T&M contract.
The Town of X determined that no other contract type is suitable based on the unclear scope of work;
however, the contract does not include a ceiling price. Without a ceiling price, the contractor does
not have an incentive to control costs or find labor efficiencies. Even if the Town of X asserted a high
degree of oversight to obtain reasonable assurance that the contractor is using efficient methods
and effective costs controls, this does not negate the requirement of including a ceiling price.
Encouraged Standards
In addition to the mandatory requirements, the federal government encourages non-state entities to
utilize additional standards whenever deemed practical by the entity. The encouraged standards are
in place to incentivize FEMA award recipients to use cost effective methods to obtain goods and
services. Unlike the mandatory requirements, the encouraged standards are not required.
Use of Federal Excess and Surplus Property
The General Services Administration (GSA) carries out the Federal Surplus Personal Property
Donation Program
66
under which GSA will donate surplus federal property to eligible public
66
41 C.F.R. Part 102-37 (Donation of Surplus Personal Property).
30
agencies.
67
The federal rules encourage the use of federal surplus property by non-state entities as
an alternative to purchasing new equipment whenever it is feasible and reduces project costs.
68
The process for requesting surplus property for donation varies depending on what type of eligible
entity is making the request, but as a general matter, most prospective donation recipients should
submit requests directly to the appropriate State Agency for Surplus Property (SASP). The SASP is the
state agency responsible for fair and equitable distribution of property transferred by GSA.
69
For
most public and nonprofit activities, the SASP determines if the recipient or subrecipient is an
eligible entity and able to receive such donations.
Use of Value Engineering
The federal rules encourage non-state recipients and subrecipients to
use value engineering clauses in contracts for construction projects of
sufficient size to offer reasonable opportunities for cost reductions.
70
Value engineering is a systematic and creative analysis of each
contract item or task to ensure that essential functions are provided at
an overall lower cost. It promotes the substitution of materials and
methods with less expensive alternatives without sacrificing
functionality. Under value engineering clauses, contractors are
incentivized to submit change proposals that reduce the cost of
contract performance by promising the contractor a share of the
savings.
71
Use of Intergovernmental or Inter-Entity Agreements
To foster greater economy and efficiency, and in accordance with efforts to promote
cost-effective use of shared services across the federal government, NFEs are
encouraged to enter into state and local intergovernmental agreements or inter-entity
agreements where appropriate for procurement or use of common or shared goods
and services. Competition requirements will be met with documented procurement
actions using strategic sourcing, shared services, and other similar procurement arrangements.
72
Entities wishing to utilize intergovernmental agreements must be able to demonstrate that the
procurements complied with all applicable federal procurement under grant rules. Examples of
encouraged intergovernmental or inter-entity agreements include joint procurements and
cooperative purchasing programs.
67
40 U.S.C. § 549(c)(3); 41 C.F.R. § 102-37.380(b).
68
2 C.F.R. § 200.318(f).
69
40 U.S.C. § 549(a)(3); 41 C.F.R. pt. 102-37, Subpart D (State Agency for Surplus Property).
70
2 C.F.R. § 200.318(g).
71
Cf. 48 C.F.R. § 48.101(a)(1).
72
2 C.F.R. § 200.318(e).
31
Using another jurisdiction’s contract, or “piggybacking” through an intergovernmental or inter-
entity agreement may lead to a non-compliance with the federal procurement under grant
standards. The use of piggybacking is only permissible under strict circumstances. For additional
information regarding piggybacking, please refer to Chapter 13 of this Manual.
Related Tools and Resources
PDAT: GSA Fact Sheet
GSA Programs for State and Local Governments
Purchasing Goods or Services through Cooperative Programs
32
Chapter 4: Competition
The federal procurement rules set forth at 2 C.F.R. § 200.319 require non-
state entities to conduct all procurement transactions for the acquisition of
property or services required under a federal award in a manner providing
“full and open competition” consistent with the standards in this section
and the methods of procurement at 2 C.F.R. § 200.320. Although not
defined in the regulation, “full and open competition” generally means that
a complete requirement is publicly solicited, and all responsible
contractors are permitted to compete.
There are numerous benefits to full and open competition, including:
Increasing the probability of reasonable pricing from qualified contractors;
Preventing favoritism, collusion, fraud, waste, and abuse; and
Allowing the opportunity for small and minority firms, women’s business enterprises, and
LSA firms to participate in federally-funded work.
Failure to provide for full and open competition will be scrutinized by FEMA regardless
of whether such procurement results in the same or lower price than if conducted
through full and open competition. Non-state entities failing to provide for full and
open competition is a common OIG audit finding.
F. This chapter provides additional information on the full and open competition requirements of 2
C.F.R. § 200.319 and identifies prohibited practices that are restrictive of competition and are
non-compliant with the federal procurement under grant rules.
Restrictions to Competition
The federal procurement under grant standards identify seven situations that are considered
restrictive of competition and must be avoided by non-state entities.
73
The list below of other
prohibited restrictions is an illustrative and non-exhaustive list, such that FEMA may consider other
situations as restrictive of competition, even if they are not specifically listed. These seven situations
include:
73
2 C.F.R. § 200.319(b).
Non-State
Entities
33
Unreasonable Requirements
Non-state entities must not place unreasonable requirements on firms for them to qualify to do
business.
74
Solicitation documents must reflect the non-state entity’s actual needs and not include
unnecessary requirements that unduly restrict competition.
Requiring Unnecessary Experience or Excessive Bonding
Non-state entities must not require unnecessary experience and excessive bonding.
75
As it relates to
experience, this could include requiring unnecessary levels or years of experience for the contractors
to be in business, the contractors’ workforce, or the contractors’ key personnel on a project.
As it relates to bonding, non-state entities must not require excessive bonding because it increases
the costs incurred by the contractor and is restrictive of competition. This is particularly the case
regarding small businesses as they may not have the bonding capacity to compete for projects
requiring excessive bonding. Businesses with a limited record of performance may also have
difficulty obtaining bonds. When non-state entities are contracting for construction and facility
improvement projects, certain federal bonding requirements may apply.
Even though bonding can be expensive, a
non-state entity might determine it is
desirable to use bid, performance, or payment
bonds for work other than construction or
facility improvement or in excess of those
amounts set forth at 2 C.F.R. § 200.326. In
these instances, because bonding
requirements can limit contractor
participation, the non-state entity’s bonding
requirements must be reasonable and not
unduly restrictive.
Example: Requiring Unnecessary Experience or Excessive Bonding
Scenario: As the result of a hurricane, the President declares a major disaster for the
State of Z. The declaration authorizes PA funding for all counties in the State. The
hurricane damaged a highway in County X and FEMA approves a
project worksheet for
repair of the highway. The scope of work under the project includes repair of potholes caused by the
storm. There are multiple construction companies qualified and willing to compete for the project,
including Company A which has been in operation for six years. County X, after having worked with
Company D on many previous road projects, would prefer to award the contract to Company D.
Company D has been in operation for eighteen years. County X places a requirement in the pothole
74
2 C.F.R. § 200.319(b)(1).
75
2 C.F.R. § 200.319(b)(2).
34
repair roadwork solicitation that potential construction companies have a minimum 15 years of
experience. Company A does not qualify to compete for County X’s solicitation. Is County X compliant
with the full and open competition requirements of 2 C.F.R. § 200.319?
Answer: No, 2 C.F.R. § 200.319(a)(2) prohibits requiring unnecessary experience and excessive
bonding. In this scenario, both Company A and Company D are qualified to complete the pothole
repair roadwork. However, the solicitation document required 15 years of experience which was
unnecessary under these circumstances. The experience requirement was used to restrict
competition and was not required for the project in question.
Noncompetitive Pricing Practices
Noncompetitive pricing practices between firms or between affiliated companies are prohibited.
76
Non-state entities must undertake reasonable efforts to ensure that prospective contractors have
not engaged in noncompetitive pricing practices when responding to a solicitation. If noncompetitive
pricing practices are identified, the activity should be reported to FEMA. A common noncompetitive
pricing practice is “
bid rigging.”
BID RIGGING
Bid rigging occurs when conspiring competitors raise prices under a process where a purchaser
acquires goods or services by soliciting competing bids. Competitors agree in advance who will
submit the lowest priced or winning bid on a contract. Bid rigging takes many forms, but conspiracies
usually fall into one or more of the following categories: bid suppression, complementary bidding,
and bid rotation.
BID SUPPRESSION
In bid suppression schemes, one or more competitor(s), who otherwise would be expected to bid or
who have previously bid, agree to refrain from bidding or withdraw a previously submitted bid so that
the designated winning competitor’s bid will be accepted.
COMPLEMENTARY BIDDING
Complementary bidding, also known as “cover” or “courtesy” bidding, occurs when some
competitors agree to submit bids that are either too high to be accepted or contain special terms
that will not be acceptable to the buyer. Such bids are not intended to secure the buyer’s acceptance
but are merely designed to give the appearance of genuine competitive bidding while making the
designated winning competitor’s bid appear most attractive. Complementary bidding schemes are a
frequent form of bid rigging. They defraud purchasers by creating the appearance of competition to
conceal secretly inflated prices.
76
2 C.F.R. § 200.319(b)(3).
35
BID ROTATION
In bid rotation schemes, all conspirators submit bids but take turns being the lowest bidder. The
terms of the rotation may vary. For example, competitors may take turns on contracts according to
the size of the contract, allocating equal amounts to each conspirator, or allocating volumes that
correspond to the size of each conspirator company.
Noncompetitive Contracts to Contractors on Retainer
Non-state entities must not make noncompetitive awards to consultants that are on retainer
contracts.
77
A retainer contract is generally any form of agreement for general, unspecified services
or broad types of services such as architectural and engineering, entered into in advance of work to
be done. Under such agreement, the contractor remains available when the client needs services
during a specified period or regarding a specified matter. It is restrictive of competition to use FEMA
financial assistance funds and award a noncompetitive contract to a consultant that is already on
retainer, specifically for property or services not specified under the retainer contract.
Example: Use of Architect-Engineering Firm on Retainer
Scenario: As the result of a tornado and straight-line winds, the President declares a
major disaster for the County of Y. The declaration authorizes PA funding for all towns
in County Y. The winds damaged a building in Town W and FEMA approves a
project
worksheet for repair of the building. The scope of work under the project includes architectural and
engineering services, because of the complexity of the project. Town W has had the same
architectural and engineering firm (Firm) on a retainer contract that was originally awarded 20 years
earlier and has used that firm for all “needed professional services related to construction.” The
retainer contract simply provides for Firm to provide all architectural and engineering services
needed by Town W, and the contract was not procured in compliance with the federal procurement
requirements at 2 C.F.R. §§ 200.317-327. Following approval of the PA project, Town W orders the
architectural and engineering services from Firm, and the services are subject to the rates in the
existing contract between Firm and Town W. Does Town W’s procurement comply with the full and
open competition requirements of 2 C.F.R. § 200.319?
Answer: No. Town W did not conduct the original procurement through full and open competition and
in compliance with 2 C.F.R. §§ 200.317-327. Non-state entities must not make a noncompetitive
award to a contractor that is on retainer.
78
Town W made a noncompetitive contract award for work
to be done under a FEMA award to a consultant that was already on retainer in noncompliance with
the full and open competition requirement found at 2 C.F.R. § 200.319(b)(4).
77
2 C.F.R. § 200.319(b)(4).
78
Id.
36
NOTE: Please see the section on prepositioned contracts for additional information on allowed use of
existing contracts for FEMA awards.
Organizational Conflicts of Interest
Non-state entities must ensure that procurements are free from organizational conflicts of interest.
79
In some cases, an organizational conflict of interest means that, because of relationships with a
parent company, affiliate, or subsidiary organization, a non-state entity is unable or appears to be
unable to be impartial in conducting a procurement action involving a related organization.
80
In
other cases, an organizational conflict of interest means a circumstance where a potential contractor
has either impaired objectivity, unequal access to information, or the ability to set the ground rules.
An organizational conflict of interest can also occur when contractors compete for awards for which
they have developed or drafted specifications, requirements, statements of work, invitations for bids,
or requests for proposals. In order to ensure objective contractor performance and eliminate unfair
competitive advantage, contractors that have developed or drafted the documents listed above must
be excluded from competing for such requirements.
81
FEMA expects non-state entities to analyze each planned acquisition to identify and evaluate
potential organizational conflicts of interest as early in the acquisition process as possible and avoid
or mitigate potential conflicts. Situations in which organizational conflicts of interest arise can be
broadly categorized into the following three categories: circumstances of impaired objectivity,
unequal access to information, and biased ground rules.
IMPAIRED OBJECTIVITY
Impaired objectivity arises where a contractor is unable, or potentially unable, to provide impartial
and objective assistance or advice to the non-state entity due to other relationships, contracts, or
circumstances. This compromises circumstances where a contractor’s work under one contract
could result in it evaluating itself through an assessment of performance under another contract or
an evaluation of proposals. The concern is that the firm’s ability to render impartial advice could
appear to be undermined by its relationship with the entity whose work product is being evaluated.
UNEQUAL ACCESS TO INFORMATION
Unequal access to information occurs when a contractor has access to nonpublic information as part
of its performance under another agreement with the non-state entity, and where that information
may provide the contractor with a competitive advantage.
79 2 C.F.R. § 200.319(b)(5).
80 2 C.F.R. § 200.318(c)(2).
81 2 C.F.R. § 200.319(b).
37
BIASED GROUND RULES
Biased ground rules issues arise where a contractor has in some sense set the ground rules for a
contract as part of its performance of work under another agreement with the non-state entity. An
example of such a situation would be where a contractor prepares a statement of work or
specifications for a non-state entity and later competes for that contract. Such a contractor, whether
intentionally or not, can restrict competition in favor of itself by drafting the specifications in such a
way that will make their own later bid the most attractive.
Example: Organizational Conflict of Interest
Scenario: County X, lacking the technical knowledge surrounding the equipment
necessary to complete a project under the FEMA grant program, seeks the assistance
of The Greatest Tractor Company to draft a statement of work for the acquisition of a
tractor. The County copied the statement of work drafted by The Greatest Tractor Company and
included it in an RFP. After advertising the RFP, the County received 14 proposals, including a
proposal submitted by The Greatest Tractor Company. The Greatest Tractor Company’s proposal best
responded to the requirements in the RFP and was the most advantageous for County X’s project.
County X awards the contract to The Greatest Tractor Company after rating their proposal the
highest. Is County X’s award to The Greatest Tractor Company compliant with the federal
procurement under grant rules?
Answer: No; 2 C.F.R. § 200.319(b) states that contractors that develop or draft specifications,
requirements, statements of work, or invitations for bids or requests for proposals must be excluded
from competing for such procurements. In this case, The Greatest Tractor Company had an unfair
advantage because it drafted the RFP’s statement of work and subsequently competed for the
procurement. In order to ensure a fair procurement process, County X should have excluded The
Greatest Tractor Company from competing for the tractor award.
Related Tools and Resources
The Uniform Rules do not provide further explanations of organizational conflicts of
interest, but for insight on the types of situations in which organizational conflicts of
interest arise, FEMA looks to the FAR Subpart 9.5 and the decisions of the Comptroller
General. These situations can be broadly categorized into the following three groups:
unequal access to information, biased ground rules, and impaired objectivity.
Specifying Only a Brand Name Product
It is restrictive of competition for non-state entities to specify only a “brand name” product instead of
allowing “an equivalent” product to be offered.
82
When it is impractical or uneconomical to write a
clear and accurate description of the technical requirements of the good or services to be acquired,
82
2 C.F.R. § 200.319(b)(6).
38
non-state entities may use a “brand name or equivalent” description as a means to define the
performance or other pertinent requirements of the procurement. If a non-state entity determines
that only a brand name product is acceptable to fulfill a requirement, then that determination must
be documented and justified in the same manner as a noncompetitive procurement.
Any Arbitrary Action in the Procurement Process
Non-state entities must not engage in any arbitrary actions in the procurement process.
83
The term
“arbitrary” generally refers to an action or decision founded on prejudice or preference rather than
on reason or fact; or something that is otherwise unreasonable or unsupported.
84
Arbitrary actions
can include, among other things, discretionary actions that show preference or prejudice towards
certain contractors in a manner not consistent with full and open competition.
Geographic Preferences
During a procurement, non-state entities are prohibited from using geographic preferences in the
evaluation of bids or proposals. This prohibition extends to the use of statutorily or administratively
imposed state, local, and/or Tribal geographic preferences.
85
Prohibited geographic preferences
come in a variety of forms; the most common are as follows:
Exclusion of Contractors from Outside a Geographic Area
A non-state entity might exclude from consideration all contractors incorporated or primarily doing
business outside the state, local, and/or Tribal geographic area in which the non-state entity is
located. In other words, the non-state entity simply sets aside the contract for an in-state or local
contractor.
Price Matching
Price matching is where a non-state entity will allow a local vendor—within a certain percentage of
the lowest bid to a solicitation—to match the lowest bid. If the local vendor does not match the bid,
then the non-state entity awards the contract to the next lowest bidder.
Reducing Bids
Reducing bids, under the sealed bidding method of procurement, is when a non-state entity
considers the bid submitted by a local business to be less than the actual bid amount, usually
reduced by a certain percentage, during the evaluation of bids. For example, a preference may deem
a bid submitted by a resident business to be 5% lower than the bid submitted.
83
2 C.F.R. § 200.319(b)(7).
84
See Black’s Law Dictionary 119 (9
th
ed. 2009).
85
2 C.F.R. 200.319(c).
39
Adding Weight to Evaluation Factors
A non-state entity might add weight to evaluation factors for an in-state or local business as part of a
procurement by competitive proposals. For example, a local preference may provide that, “the
jurisdiction shall award an additional 5% of total weight on all evaluation factors to a resident
business.”
Set Asides
A local jurisdiction might simply set aside certain contracts only for resident companies. There are,
however, several exceptions to geographic preferences set forth in the regulation. These exceptions
are as follows:
STATE LICENSING REQUIREMENTS
Non-state entities are permitted to require contractors to be licensed in accordance with state
licensing requirements.
86
ARCHITECTURAL AND ENGINEERING CONTRACTS
Non-state entities may use geographic location as a selection criterion when contracting for
architectural and engineering services.
87
This exception is permissible if use of the geographic
location, given the nature and size of the project, provides for an appropriate number of qualified
firms competing for the contract.
MANDATED BY FEDERAL LAW
Non-state entities may use a state, local, and/or Tribal geographic preference in the evaluation of
bids or proposals where applicable federal statutes expressly mandate or encourage use of such
geographic preference.
88
INDIAN SELF-DETERMINATION AND EDUCATION ASSISTANCE ACT
Indian Tribal preferences are permissible if certain requirements are met under the Indian Self-
Determination and Education Assistance Act.
89
Pursuant to this Act, an Indian Tribal Government
acting as either a recipient or subrecipient may give a preference in the award of contracts funded in
whole or in part with federal funding to businesses falling within the meaning of “Indian
organizations” or “Indian-owned economic enterprises,” as further defined by section 3 of the Indian
Financing Act of 1974.
90
This determination must be documented by the Indian Tribal Government
claiming such an exception.
86
2 C.F.R. § 200.319(c).
87
Id.
88
2 C.F.R. § 200.319(c).
89
Indian Self-Determination and Education Assistance Act, 25 U.S.C. § 5307(b).
90
Indian Financing Act of 1974, 25 U.S.C. § 1452(e) and (f).
40
Note on Section 307 of the Stafford Act (42 U.S.C. 5150): The federal laws establishing, or
governing FEMA grant and cooperative agreement programs do not mandate or encourage
geographic preferences by non-state entities. Non-state entities often mistakenly believe that
Section 307 of the Stafford Act encourages local preferences in their award of response and
recovery contracts under a grant.
91
Section 307, however, only applies to procurements
conducted by FEMA or other federal agencies.
Example: Use of Geographic Preference in Evaluation of a Bid or Proposal
Scenario: After a severe hurricane, the President declares a major disaster for the
State of Z. The declaration authorizes PA funding for every county within the State of Z.
As a result of the storm, Town X, located within State Z, sustained severe damage to
its town hall facility. Following approval of a Project Worksheet to repair the damaged building, the
Town solicits bids for the work to repair the building. The Town, when evaluating the bids for the
work, uses a state statutorily imposed geographic preference that results in an award to a local
contractor. Is this allowable?
Answer: No. The use of the geographic preference in this situation is not allowable. The federal
regulation at 2 C.F.R. § 200.319(c) provides that a non-state entity must conduct procurements in a
manner that prohibits the use of statutorily or administratively imposed state or local geographic
preferences in the evaluation of bids or proposals, “except in those cases where applicable federal
statutes expressly mandate or encourage geographic preference.” In this instance, no federal statute
authorized the preference. The Town, therefore, has violated the federal procurement standards at 2
C.F.R. § 200.319(c), even though the geographic preference was required by state law.
Written Procedures
The federal procurement rules require all non-state entities to have written procedures for
procurement transactions.
92
These written procedures must ensure that all solicitation documents
meet the following requirements:
Clear and Accurate Description of Requirements
Solicitations must incorporate a clear and accurate description of the technical requirements for the
material, product, or service to be procured.
93
These descriptions enable potential contractors to
understand the requirements and prepare sound proposals to satisfy those requirements.
91
Stafford Act, § 307. Codified as 42 U.S.C. § 5150.
92
2 C.F.R. § 200.319(d).
93
2 C.F.R. § 200.319(d)(1).
41
Nonrestrictive Specifications
The description of technical requirements must not unduly restrict competition.
94
Qualitative Requirements
The description of technical requirements may include a statement of the qualitative nature of the
product or services to be procured, and when necessary, it must describe the minimum essential
characteristics to satisfy the intended use of the product or service.
95
Product Specifications
Detailed product specifications should be avoided, if possible.
96
When it is impractical or
uneconomical to draft a clear and accurate description of the technical requirements without a
detailed product specification, a “brand name or equivalent” description may be used to define the
performance or other requirements of a procurement. Additionally, the required features of the
named brand must be clearly stated in the solicitation.
97
Identify All Requirements/Evaluation Factors
Solicitations must identify all requirements that potential contractors must fulfill as well as other
factors to be used in evaluating bids or proposals.
98
Prequalified Lists
Non-state entities may use prequalified lists of persons, firms, and products when purchasing under
a FEMA award.
99
These prequalified lists, however, are not contracts. They are tools to aid in the
procurement of future requirements by allowing non-state entities to review the qualifications of
prospective contractors prior to a contract award. The federal rules set forth two requirements that
non-state entities must meet when using such a list.
First, they must ensure that all prequalified lists are current and include enough qualified
sources to ensure maximum full and open competition.
100
Se
cond, they must not exclude potential bidders or offerors from qualifying during the solicitation
period.
101
94
2 C.F.R. § 200.319(d)(1).
95
Id.
96
Id.
97
Id.
98
2 C.F.R. § 200.319(d)(2).
99
2 C.F.R. § 200.319(e).
100
Id.
101
Id.
42
Since prequalified lists are not contracts, non-state entities must still comply with all of the other
applicable federal procurement under grant rules when awarding a contract.
102
While a non-state
entity may submit a solicitation directly to those contractors identified on a prequalified list, they
must also publicly issue the solicitation pursuant to the applicable federal rules. They must also
allow any additional interested contractors to submit their qualifications and, if deemed qualified,
submit their bids or proposals in response to the solicitation. The solicitation, evaluation, and
subsequent award of a contract or contracts must also conform to the federal procurement
standards at 2 C.F.R. §§ 200.317-200.327.
Example: Solicitations Using a Prequalified List
Scenario: The Town of Z, following a public solicitation for a Request for Quotation
(RFQ), pre-qualifies five contractors to perform debris removal in their jurisdiction in
the case of a disaster. A year later, the President declares a major disaster because of a hurricane
and the declaration authorizes PA funding in the county in which the Town is located. The hurricane
generated large quantities of debris. The Town solicits sealed bids for debris removal services only
from the list of prequalified contractors and does not allow other contractors to qualify during the
solicitation period. Does this procurement meet the requirements of full and open competition under
the federal rules?
Answer: No. The procurement did not meet the requirements of full and open competition. In this
instance, the Town used a prequalified list and did not allow other contractors to qualify to be on the
list during the solicitation period. This is noncompliant with 2 C.F.R. § 200.319(e). It may be the
case, however, that awarding a short-term, noncompetitive debris removal contract to one of the
contractors on the prequalified list may be permissible if an exigent or emergency circumstance
would make full and open competition infeasible.
103
If the contract is for a long-term operation
lasting weeks or months, however, the contract should be competitively bid in a manner that
complies with full and open competition as soon as possible.
102
2 C.F.R. §§ 200.318-327.
103
2 C.F.R. § 200.320(c)(3).
43
Chapter 5: Methods of Procurement
Non-state entities must use one of the following five methods of
procurement: procurement by micro-purchases; procurement by small
purchase procedures; procurement by sealed bids; procurement by
proposals; or a noncompetitive procurement.
The Uniform Rules divide the methods of procurement into three
categories: informal procurement methods, formal procurement methods,
and noncompetitive procurements. Informal methods of procurement are
to be used for purchases under the federal SAT, whereas formal methods of procurement are to be
exercised for purchases over the federal SAT. NOTE: There is no threshold for a noncompetitive
procurement. A non-state entity may use different terminology for procurement methods, so it is
important to compare the requirements and procedures rather than names when determining what
the applicable state, local, and/or Tribal requirements are.
Informal Methods
Procurement by Micro-Purchases
Procurement by micro-purchase is the acquisition of supplies, property, or services where the
aggregate dollar amount does not exceed the micro-purchase threshold.
104
Presently, the federal
micro-purchase threshold is $10,000 as of June 2018.
105
Micro-purchase procedures comprise a
subset of a non-state entity’s small purchase procedures. A non-state entity uses such procedures to
expedite the completion of its lowest-dollar small purchase transactions and minimize the
associated administrative burden and cost.
Non-state entities may self-certify a micro-purchase threshold up to $50,000 on an annual basis or
request a micro-purchase threshold higher than $50,000 consistent with the requirements at 2
C.F.R. § 200.320(a)(1)(ii)-(v). However, non-state entities should consult their servicing legal counsel
to determine whether any applicable state, local, and/or Tribal equivalent threshold is lower than the
federal micro-purchase threshold.
WHEN TO USE
A non-state entity wishing to purchase supplies or services by micro-purchase should not exceed the
federal micro-purchase threshold, or the applicable state/local/Tribal threshold, whichever is lowest.
104
2 C.F.R. § 200.67 and 48 C.F.R. § 2.101 – The micro-purchase threshold is adjusted from time to time.
105
Section 41 U.S.C. § 1902(a)(1); OMB Memo (M-18-18), available at https://www.whitehouse.gov/wp-
content/uploads/2018/06/M-18-18.pdf.
Non-State
Entities
44
In other words, a non-state entity must follow the micro-purchase threshold that allows for
compliance at all levels.
APPLICABLE PROCEDURES
Competition: A non-state entity may award micro-purchases without soliciting competitive
quotations if it considers the price to be fair and reasonable. To the extent practicable, a non-
state entity must distribute micro-purchases equitably among qualified suppliers.
Prohibited Divisions: A non-state entity must not divide or reduce the size of its procurement to
avoid the additional procurement requirements applicable to larger acquisitions. See
need
determination
.
Documentation: A non-state entity must document its determination that the price is fair and
reasonable, and the basis for that determination
.
Responsibility: A non-state entity must award contracts only to responsible contractors
possessing the ability to perform successfully under the terms and conditions of the solicitation
and contract.
Procurement by Small Purchases
Procurement by small purchase procedures is a relatively simple and informal procurement method
for securing services, supplies, or property that does not exceed the
federal SAT.
106
The simplified
acquisition threshold is $250,000 as of June 2018.
107
Non-state entities should consult their
servicing legal counsel to determine whether any applicable state/local/Tribal equivalent threshold
is lower than the federal simplified acquisition threshold.
WHEN TO USE
A non-state entity wishing to purchase supplies or services by small purchase should not exceed the
simplified acquisition threshold, or the comparable state/local/Tribal threshold, whichever is lowest.
In other words, a non-state entity must follow the federal SAT that allows for compliance at all levels.
Contracts resulting from small purchase procedures should be fixed price or not-to-exceed cost-
reimbursement contracts with assurances that the scope of work can be completed for less than the
simplified acquisition threshold.
106
2 C.F.R. § 200.88 and 48 C.F.R. § 2.101 – The small purchase threshold is adjusted from time to time.
107
Section 805 codified at 41 U.S.C. § 134; OMB Memo (M-18-18), available at https://www.whitehouse.gov/wp-
content/uploads/2018/06/M-18-18.pdf.
45
APPLICABLE PROCEDURES
Competition: A non-state entity must obtain price or rate quotations from an adequate number of
qualified sources. An adequate number of sources will be determined by the non-state entity and
will depend on the facts and circumstances of the procurement.
Prohibited Divisions: A non-state entity must not split a larger procurement merely to bring the
cost of a procurement under the federal SAT. Similarly, a non-state entity must not intentionally
limit the size of a procurement to only a portion of the known requirement to lower the cost of a
procurement to under the simplified acquisition threshold and then issue a follow-on change
order to fulfill the entire requirement that brings the procurement above the simplified
acquisition threshold.
Documentation: A non-state entity must document the procurement history as detailed in 2
C.F.R. § 200.318(i). Documentation should include an independent estimate of the costs of the
procurement that indicates the total estimated cost to fall below the simplified acquisition
threshold.
Responsibility: A non-state entity must award contracts only to responsible contractors
possessing the ability to perform successfully under the terms and conditions of the solicitation
and contract.
FUTURE CHANGES THAT CAUSE THE CONTRACT TO EXCEED THE SIMPLIFIED
ACQUISITION THRESHOLD
It may be the case that a non-state entity properly used small purchase procedures to acquire
services or property below the federal SAT but later needs to modify the contract to an amount above
the threshold to cover unforeseen circumstances or an unexpected overrun in costs.
Such a change may be permissible under certain facts and circumstances, particularly where such a
change falls within the scope of the original contract. The non-state entity should document its
justification. FEMA may utilize this justification along with the non-state entity’s independent
estimate completed before the procurement in reviewing whether the non-state entity’s decision to
use small purchase procedures was permissible.
Formal Methods
Procurement by Sealed Bidding
Procurement by sealed bidding is a method where bids are publicly solicited through formal
advertising. Under this procurement method, the solicitation document used is known as the IFB.
Sealed bidding is often utilized when the non-state entity’s requirements are known and specific in
detail. As a result, a firm fixed price contract, either lump sum or unit price, is awarded to the
46
responsible bidder who submits the lowest price bid and conforms to all the terms and conditions of
the solicitation.
108
WHEN TO USE
The sealed bid method is the preferred method for procuring construction services and is
appropriate when the following conditions are present:
Complete, adequate, and realistic specifications or purchase descriptions are available;
109
Tw
o or more responsible bidders are willing and able to compete effectively for the business;
110
Th
e procurement lends itself to a fixed price contract;
111
and
The non-state entity primarily selects the successful bidder based on price.
112
Th
is includes the price-related factors included within the solicitation. Other than the responsibility
determination, the non-state entity may not select a contractor on the basis of non-price-related
factors.
APPLICABLE PROCEDURES
Public Advertisement: A local or Indian Tribal Government must publicly advertise the IFB. The
regulation does not provide specific guidance regarding the required method of advertising, such
as the number of times the advertisement must be published, the target circulation of any
advertising, or the number of days for potential bidders to provide their submission. The precise
manner of advertising depends upon the facts and circumstances of the procurement, subject to
any applicable state, local, and/or Tribal requirements.
113
Adequate Number of Sources: Non-state entities must solicit bids from an adequate number of
known suppliers. The regulation does not provide specific guidance regarding the method for
soliciting additional bids or what constitutes an adequate number of qualified sources. These
determinations will depend upon the facts and circumstances of the procurement, subject to any
relevant state, local, and/or Tribal requirements.
114
Precise Specifications: The IFB must define the items or services including any specifications and
pertinent attachments so potential bidders can properly respond.
115
108
2 C.F.R. § 200.320(b)(1).
109
2 C.F.R. § 200.320(b)(1)(i)(A).
110
2 C.F.R. § 200.320(b)(1)(i)(B).
111
2 C.F.R. § 200.320(b)(1)(i)(C).
112
Id.
113
2 C.F.R. § 200.320(b)(1)(ii)(A).
114
Id.
115
2 C.F.R. § 200.320(b)(1)(ii)(B).
47
Sufficient Response Time: The entity must provide potential bidders sufficient time to prepare
and submit bids prior to the date set for bid opening. The regulation does not provide specific
guidance regarding how much time is required. This determination is subject to any relevant
state, local, and/or Tribal requirements.
116
Bid Opening: All bids must be opened at the date, time, and location established in the IFB.
117
For
local and Indian Tribal Governments, the bids must be opened publicly.
Bid Selection: After the official bid opening procedures are completed, the non-state entity will
award a firm fixed price contract to the lowest price bid provided by a responsive and
responsible
bidder. If specified in the bidding documents, the non-state entity may consider discounts,
transportation costs, and life cycle costs to determine which bid is the lowest. The non-state
entity will only use payment discounts to determine the lowest bid when prior experience
indicates such discounts are usually taken advantage of.
118
Documentation: If using the Sealed Bidding method of procurement, the non-state entity must
document the
procurement history.
119
They may also reject any or all bids if there is a sound
documented reason.
120
The regulations do not provide guidance regarding what that entails, but
some of the circumstances under which a non-state entity may reject an individual bid include
but are not limited to:
o The bid fails to conform to the essential requirements or applicable specifications as outlined
in the IFB;
o The bid fails to conform to the delivery schedule as outlined in the IFB;
o The bid imposes conditions that would modify the requirements as outlined in the IFB;
o The non-state entity determines that the bid price is unreasonable;
o The bid is submitted by a suspended or debarred vendor; and/or
o A bidder fails to furnish a bid guarantee when such a guarantee is required.
116
2 C.F.R. § 200.320(b)(1)(ii)(A).
117
2 C.F.R. § 200.320(b)(1)(ii)(C)).
118
2 C.F.R. § 200.320(b)(1)(ii)(D)).
119
2 C.F.R. § 200.318(i).
120
2 C.F.R. § 200.320(b)(1)(ii)(E).
48
Procurement by Proposals
Procurement by proposal is an acceptable method of procurement, where non-state entities cannot
base the contract award exclusively on price or price-related factors due to the nature of the service
or property to be acquired.
121
WHEN TO USE
Proposals are an acceptable method of procurement when the nature of the procurement does not
lend itself to sealed bidding and either a fixed-price or cost-reimbursement contract is
appropriate.
122
The solicitation document used is often known as an RFP. Although generally not used for actual
construction, alteration, or repair to real property, the proposal method is most often used for
professional services related to construction projects. These services include program management,
construction management, feasibility studies, preliminary engineering, design, architectural,
engineering, surveying, mapping, and related services. The proposal method of procurement is
appropriate when the following conditions are present:
The non-state entity cannot base the contract award exclusively on price or price-related factors
due to the nature or the service or property to be acquired;
The requirements are less definitive, more development work is required, or there is a greater
r
isk of performance;
Technical capability, past performance, and prior experience considerations play a dominant role
in source selection; and/or
Separate discussions with individual offerors are expected to be necessary after they have
submitted proposals. This is a key distinction from the sealed bidding method of procurement
where discussions with individual bidders are prohibited and the contract will be awarded based
on price and price-related factors alone.
APPLICABLE PROCEDURES
Public Advertisement: The non-state entity must publicize their RFP.
123
The manner of the
advertising depends upon the facts and circumstances of the procurement, subject to state
,
l
ocal, and/or Tribal requirements.
121
2 C.F.R. § 200.320(b)(2).
122
Id.
123
2 C.F.R. 200.320(b)(2)(i).
49
Disclosure of Evaluation Factors: Within the advertisement, the non-state entity must identify all
evaluation factors and their relative importance.
124
The following provides several considerations
for developing evaluation factors:
o The evaluation factors for a specific procurement should reflect the subject matter and
el
ements that are most important to the non-state entity.
o The evaluation factors may include such things as technical design, technical approach,
length of delivery schedules, past performance, and quality of proposed personnel.
o The non-state entity may use any one or a combination of source selection approaches as
permitted under state, local, and/or Tribal laws, regulations, and procedures, and these
approaches will often differ based on the relative importance of price or cost for the
procurement.
o If permitted by the non-state entity, written procurement procedures, and applicable state,
local, and/or Tribal law, the non-state entity may award a contract to the offeror whose
proposal offers the “best value” to the non-state entity. The solicitation must also inform
potential offerors that the award will be made on a “best value” basis, which should include
a statement that the non-state entity reserves the right to award the contract to other than
the lowest-priced offeror.
o The RFP must identify evaluation factors and their relative importance; however, they need
not disclose numerical or percentage ratings or weights.
o FEMA does not require any specific evaluation factors or analytic process, but the evaluation
factors must support the purposes of the grant or cooperative agreement.
Consideration of Proposals: The non-state entity must consider any response to a publicized
request for proposals to the maximum extent practical.
125
Adequate Sources: In addition to publicizing the request for proposals, non-state entities must
solicit proposals from an adequate number of offerors,
126
providing them with sufficient
response time before the date set for the receipt of proposals. Determining an adequate number
of sources will depend upon the facts and circumstances of the procurement, subject to relevant
state, local, and/or Tribal requirements.
Written Method of Evaluation: The non-state entity must have a written method for conducting
their technical evaluations of the proposals received and for selecting offerors.
127
When
evaluating proposals, FEMA expects the non-state entity to consider all evaluation factors
124
Id.
125
Id.
126
Id.
127
2 C.F.R. 200.320(b)(2)(ii).
50
specified in its solicitation documents and evaluate offers only on the evaluation factors included
in the solicitation documents.
A non-state entity may not modify its evaluation factors after proposals have been submitted
without re-opening the solicitation.
In awarding a contract that will include options, FEMA expects
the non-state entity to evaluate proposals for any option quantities or periods contained in the
solicitation if it intends to exercise those options after the contract is awarded.
Award: The contract will be awarded to the responsible offeror whose proposal is most
advantageous to the program with price and other factors considered.
128
CONSIDERATIONS FOR ARCHITECTURAL/ENGINEERING SERVICES
When seeking architectural and/or engineering professional services only, non-state entities are
permitted to use proposal procedures for a qualifications-based procurement. Under this method,
price is not used as an evaluative factor. The non-state entity evaluates each offeror’s qualifications
and selects the most qualified offeror. The contract award is subject to negotiation of fair and
reasonable compensation.
129
If the parties fail to agree on a fair and reasonable price, the non-state
entity may conduct negotiations with the next most qualified offeror. If necessary, the non-state
entity will then conduct negotiations with successive offerors in descending order until a contract
award can be made to the offeror whose price is believed to be fair and reasonable.
This method, where price is not used as a selection factor, can only be used in procurement of
architectural/engineering professional services, and cannot be used to purchase other types of
services (even if an architectural/ engineering firm is the one providing those other types of
services).
130
FEMA considers the following to fall within the scope of architectural/engineering professional
services making them eligible for a qualifications-based procurement:
Professional services of an architectural or engineering nature, as defined by applicable state
law, and which the state law requires to be performed or approved by a registered architect or
engineer;
Professional services of an architectural or engineering nature associated with design or
construction of real property;
Other professional services of an architectural or engineering nature or related services
(including studies, investigations, surveying and mapping, tests, evaluations, consultations,
comprehensive planning, program management, conceptual designs, plans and specifications,
value engineering, construction phase services, soils engineering, drawing reviews, preparation
128
2 C.F.R. 200.320(b)(2)(iii).
129
2 C.F.R. § 200.320(b)(2)(iv).
130
Id.
51
of operating, and maintenance manuals and other related services) that logically or justifiably
require performance by registered architects or engineers or their employees; and
Professional surveying and mapping services of an architectural or engineering nature.
Noncompetitive Procurement
The federal procurement under grant rules set forth requirements that must be met for a non-state
entity to use a noncompetitive procurement, also known as a sole-source
procurement. Noncompetitive procurement is the solicitation of a proposal from one
source or a limited number of sources.
131
A non-state entity may use a
noncompetitive procurement only under certain circumstances or exceptions.
Procurement by Micro-Purchase
Micro-purchases, in addition to being an informal method of procurement, are also considered a
noncompetitive procurement because micro-purchases may be awarded without soliciting
competitive price or rate quotations. Although the price must still be reasonable, the justification
requirements applicable to other noncompetitive procurements do not apply to micro-purchases.
Single Source
A non-state entity may be able to use the single source exception to full and open competition if the
item required is only available from one source. In other words, the item or service is only available
from one contractor and no other property or service will satisfy the non-state entity’s
requirement.
132
The non-state entity may use its own judgment in determining whether this condition has been met,
but it must document its rationale in the procurement record. The following is a non-exhaustive list of
instances in which FEMA might consider property or services as available from only one source.
PATENTS OR RESTRICTED DATA
There are patent or data rights restrictions that would preclude competition.
SUBSTANTIAL DUPLICATION OF COSTS
In the case of a sole-source award to an existing contractor already performing work before a major
disaster occurs, there may be a substantial duplication of costs that would not be expected to be
recovered through competition. This situation would arise, for example, if a contractor was in the
131
2 C.F.R. § 200.320(c).
132
2 C.F.R. § 200.320(c)(2).
52
middle of constructing a facility when the facility was damaged by a major disaster, and the scope of
work under the project was to repair the construction work completed as of the date of the incident.
COMPATIBLE EQUIPMENT
The non-state entity previously had a system or piece of technology installed that was damaged by a
major disaster, and the non-state entity has to order the replacement part from the same
manufacturer or else it would need to replace the entire system and retrain staff. As an example, an
emergency radio system might be installed and part of the system is damaged by a major disaster,
but only one company makes parts that are compatible with the installed radio system.
Example: Noncompetitive Procurement due to Single Source
Scenario: The Town of A is a recipient of a Port Security Grant from FEMA. They need
to purchase IT equipment to upgrade the County Sheriff’s Office computer systems.
The equipment must be compliant with and interoperable with the system already in
place at the local Port Authority. The total cost is $75,000, and the equipment is only available from
single manufacturer, Company B. The Town of A awarded a sole source contract to Company B for
the IT equipment upgrade. Is this procurement permissible under the federal procurement
standards?
Answer: Yes. A non-state entity may use procurement by noncompetitive proposals when an item is
only available from a single source. Because there is only one producer of the required IT equipment,
the Town of A can sole-source the contract award using the single source exception to full and open
competition. It is important to keep in mind that the non-state entity must document its justification
for sole sourcing in its procurement file.
Public Emergency or Exigency
A non-state entity may be able to use the emergency or exigency exception to full and open
competition if it determines that a public exigency or emergency will not permit a delay resulting from
competitive solicitation.
133
The non-state entity may use its own judgment in determining whether
this condition has been met but must document its rationale in the procurement record. When
referring to procurement activity, FEMA defines both exigency and emergency as situations that
demand immediate aid or action. The differences between the two situations are outlined below:
Exigency: There is a need to avoid, prevent, or alleviate serious harm or injury, financial or
otherwise, to the recipient or subrecipient, and use of competitive procurement proposals would
prevent the urgent action required to address the situation. Thus, a noncompetitive procurement
may be appropriate.
133
2 C.F.R. § 200.320(c)(3).
53
Emergency: There is a threat to life, public health or safety, improved property, or some other
form of dangerous situation that requires immediate action to alleviate the threat. Emergenc
y
c
onditions are generally more short-lived than exigency circumstances
.
Use of the public exigency or emergency exception is only permissible during the actual exigent or
emergency circumstances. Exigent or emergency circumstances will vary for each incident, and it is
difficult to determine in advance or assign a particular time frame when noncompetitive
procurements may be warranted. Exigent or emergency circumstances may exist for two days, two
weeks, two months, or even longer in some cases. Non-state entities must ensure that work
performed under the noncompetitively procured contracts is specifically related to the exigent or
emergency circumstance in effect at the time of procurement. Importantly, because the exception to
competitive procurement is available only while the exigent or emergency circumstances exist,
recipients or subrecipients should, upon awarding a noncompetitive contract, immediately begin the
process of competitively procuring similar goods and services to transition to the competitively
procured contracts as soon as the actual exigent or emergency circumstances cease to exist.
FEMA may review a non-state entity’s justification that exigent or emergency circumstances warrant
an exception to full and open competition. An example of an emergency circumstance would be
when a hospital loses power and its backup generators fail at the same time. Keeping patients alive,
as monitored by equipment requiring electricity, is a threat to life and a dangerous situation that
requires immediate action to alleviate the threat.
WAIVERS
NFEs may waive their own procurement standards or regulations in anticipation or a result of a
disaster or emergency. Despite the appropriate NFE waiving state, local, and/or Tribal procurement
standards or regulations, the NFE cannot waive the applicable federal procurement under grant
standards. Where state, local, and/or Tribal procurement standards or regulations have been waived
pursuant to the NFE’s own legal requirements, the federal procurement under grant rules found at 2
C.F.R. §§ 200.317-200.327 continue to apply to a non-state entity regardless of such a waiver by an
NFE.
Example: Noncompetitive Procurement due to Public Emergency
Scenario:
The weather in W Township has been below freezing for the past 2 weeks,
causing a pipe in the Township’s emergency operations center to burst and flood the
first floor. This flood destroyed half of the Township’s radios that its emergency
workers use to communicate with first responding personnel. W Township awarded a contract
through a noncompetitive process to United Contractors, Inc. to help the emergency operations
center come back online to support first responders perform their duties. Under these
circumstances, is this procurement permissible under the federal procurement under grant rules?
Answer: Yes. This would be an example of an “emergency” circumstance. There is a threat to life,
public health or safety, improved property, or some other form of dangerous situation that requires
54
immediate action to alleviate the threat. Use of the public emergency exception is only permissible
during the actual emergency circumstance. Once the emergency circumstances cease to exist, W
Township is expected to transition to a more appropriate method of contracting using full and open
competition. Failure to properly transition to a more appropriate method of contracting at the
cessation of the emergency circumstance is noncompliant with the federal procurement under grant
rules.
Example: Noncompetitive Procurement due to Public Exigency
Scenario: A tornado impacts the City of Z in June and causes widespread and
catastrophic damage, including damage to a city school. The City wants to repair the
school and have it ready for use by the beginning of the school year in September. The City
estimates, based on prior experience, that awarding a contract using a sealed bidding process would
require at least 90 days, and the City’s engineer estimates that the repair work would last another
60 days. This would extend the project beyond the beginning of the school year and the city school
would have to remain closed as a result. Rather than conducting a sealed bidding process, the City—
in compliance with state and local law—wants to sole-source with a contractor it has contracted with
previously. The City documents that its noncompetitive proposal is justifiable based on the public
exigency not permitting the delay that would result from competitive solicitation. Is there an
exception to full and open competition that might allow for this noncompetitive procurement?
Answer: Yes. A non-state entity may be able to use the exigency
exception to full and open competition if it demonstrates that there is
a situation that demands immediate aid or action and a delay caused
by a competitive solicitation would further the threat. In this scenario,
the delay in repairing the school caused by the competitive
procurement process would result in the school remaining closed
beyond the start of the school year. This closure may cause severe
financial hardship on the community because if the school does not
open on time, students may have to stay home, leading to parents
staying home to look after their children. If the City can adequately
justify that the noncompetitive procurement was needed to prevent
severe economic harm to the community, it may be able to use the
exigent circumstances exception.
Federal Awarding Agency or Pass-Through Entity Approval
A non-state entity may use a sole-sourced procurement if FEMA or the pass-through entity expressly
authorizes the noncompetitive proposal in response to a written request from the non-state entity.
134
While identified as a potential exception to full and open competition under the noncompetitive
134
2 C.F.R. § 200.320(c)(4).
55
procurement process, approval for this exception has been exceptionally rare at both the FEMA and
pass-through entity levels.
Inadequate Competition
A non-state entity may use the noncompetitive proposal method when, after the solicitation of an
adequate number of sources, the non-state entity determines competition to be inadequate.
135
Competition is “inadequate” when a non-state entity has complied with all procurement under grant
standards and receives a single offer or bid, a single responsive offer or bid, or no responsive bids or
proposals is caused by conditions outside the non-state entity’s control. FEMA will not consider
competition inadequate where a non-state entity did not sufficiently publicize the requirement,
solicited only a few sources that chose not to submit a proposal, set unduly restrictive specifications,
took arbitrary actions, or failed to take other actions that resulted in the inadequate competition. In
those cases, adequate competition may be possible, but the non-state entity failed to take the
proper steps and actions to ensure such competition.
It is important for a non-state entity to document its justification for why there is inadequate
competition and why it moved forward with a noncompetitive award without revising or cancelling the
solicitation and re-soliciting offers or bids. In making this justification, it may be necessary for a non-
state entity to:
Evaluate whether it sufficiently publicized the IFBs or request for proposals and/or solicited an
adequate number of firms;
Speak to those firms solicited to find out why they did not submit offers or bids. If the reason is
an overly restrictive specification or delivery requirement, then the non-state entity will need to
evaluate whether it should:
o Cancel the solicitation;
o Change the specification to allow for more bids or offers; and
o Re-solicit bids or offers.
If the non-state entity chooses to move forward with the award considering the restrictive
specification, then it should document in the procurement file why the restrictive specification or
delivery requirement was necessary and could not be modified to enable additional competition.
135
2 C.F.R. § 200.320(c)(5).
56
Example: Inadequate Competition
Scenario: Among other jurisdictions, the City of Y is impacted by a tornado that caused
severe damage to its City Hall building. The City of Y advertised its requirement for
repair work, but only one contractor submitted a bid in response. The City of Y
contacted potential contractors asking why they did not submit a bid and realized that most
contractors had already committed their resources to other impacted areas. The City of Y
documented its efforts to contact potential contractors in its procurement file and awards a
noncompetitive contract to the only contractor that submitted a bid. Is this noncompetitive
procurement permissible under the federal procurement under grant regulations?
Answer: Yes. A non-state entity may use procurement by noncompetitive proposals when competition
is determined to be inadequate; however, it must document its justification for why competition was
inadequate as well as why it moved forward with a noncompetitive award without revising or
cancelling the solicitation.
A non-state entity using procurement by noncompetitive proposals, due to any of the circumstances
mentioned above (except micro-purchases), must take the following steps:
Justification and Documentation: The non-state entity must adequately document the
procurement history and justification for the sole source contract considering the requirement for
full and open competition.
Negotiation of Profit: The non-state entity must negotiate profit as a separate element of the
price.
136
Ensure Compliance with Additional Requirements: Although the non-state entity is not required to
comply with the full and open competition requirement by entering into an allowable sole-source
procurement, it must ensure compliance with all other applicable federal procurement under
grant requirements (e.g., cost or price analysis, T&M considerations, contract provisions, etc.).
Additional Considerations:
Where there is sufficient justification warranting a non-state entity to use procurement
through noncompetitive proposals, FEMA will generally consider it infeasible for the non-
state entity to take the six affirmative steps to assure that minority businesses, small
businesses, women’s business enterprises, and LSA firms are used in those
circumstances.
When a non-state entity makes a change to an existing contract that is beyond the scope of
the original contract (a cardinal change), then the non-state entity has essentially made a
136
2 C.F.R. § 200.324(b).
57
sole-source award that must be justified in the same manner as making an original award
through solicitation of a proposal from one source.
Suggested Elements for Noncompetitive Procurement Justification
1. Identify which of the four circumstances listed in 2 C.F.R. § 200.320(c) justify a noncompetitive
procurement:
a. The item is available only from a single source;
b. The public exigency or emergency for the requirement will not permit a delay resulting
from competitive solicitation;
c. The Federal awarding agency or pass-through entity expressly authorizes
noncompetitive proposals in response to a written request from the non-state entity;
or
d. After solicitation of an adequate number of sources, competition is determined
inadequate.
2. Provide a brief description of the product or service being procured, including the expected dollar
amount of the procurement.
3. Explain why a noncompetitive procurement is necessary. If the noncompetitive procurement is
based on exigent or emergency circumstances, then the justification should explain the nature of
the public exigency or emergency. This would include specific conditions and circumstances that
clearly illustrate why procurement other than through noncompetitive proposals would cause
unacceptable delay in addressing the public exigency or emergency. Failure to plan for transition
to competitive procurement cannot be the basis for continued use of noncompetitive
procurement based on public exigency or emergency.
4. State how long the noncompetitively procured contract will be used for the defined scope of
work, and the impact on that scope of work should the noncompetitively procured contract not
be available for that amount of time. Examples to ask are, how long do you anticipate the
exigency or emergency circumstances will continue; how long will it take to identify your
requirements and award a contract that complies with all procurement requirements; or how
long would it take another contractor to reach the same level of competence.
5. Describe the specific steps taken to determine that full and open competition could not have
been met, or was not used, for the scope of work (e.g., research conducted to determine that the
good or service required is only available from one source).
6. Describe any known conflicts of interest and any efforts that were made to identify possible
conflicts of interest before the noncompetitive procurement occurred. If no efforts were made,
explain why.
7. Include any other information justifying the use of noncompetitive procurement in the specific
instance.
59
Chapter 6: Socioeconomic
Contracting
The federal procurement rules require that both
state and non-state entities take all necessary
affirmative steps to assure that small and minority
businesses, women’s business enterprises, and
LSA firms are used when possible.
137
Notably, this
is not a rule that requires or allows for a formal
set-aside for a certain classes of business, but
rather is a requirement designed to ensure
maximum participation by and solicitation of these
types of firms.
Affirmative Steps
NFEs must, at a minimum, take the following six “affirmative steps” to assure that
minority firms, small businesses, women’s business enterprises, and LSA firms are
used when possible:
Solicitation Lists
NFEs must include small and minority businesses and women’s business enterprises on solicitation
lists.
138
NFEs must provide documentation of all prequalified lists or solicitation lists used in the
procurement.
Soliciting
NFEs must ensure that it solicits small and minority businesses and women’s business enterprises
whenever they are potential sources.
139
An NFE must provide documentation to demonstrate
compliance with this step (any communication, email, etc.).
Dividing Requirements
NFEs must divide total requirements, when economically feasible, into smaller tasks or quantities to
permit maximum participation by small and minority businesses and women’s business
enterprises.
140
When applying this requirement, it is important to recognize that intentionally dividing
137
2 C.F.R. § 200.321.
138
2 C.F.R. § 200.321(b)(1).
139
2 C.F.R. § 200.321(b)(2).
140
2 C.F.R. § 200.321(b)(3).
St
ate Entities
Non-State Entities
60
up a large procurement into smaller parts in an effort to fall beneath the federal SAT or the micro-
purchase threshold is prohibited. Additionally, bundling requirements so that small businesses,
minority businesses, and women’s business enterprises would be unable to compete is prohibited.
Delivery Schedules
NFEs must establish delivery schedules, where the requirement permits, which encourage
participation by small and minority businesses and women’s business enterprises.
141
Obtaining Assistance
NFEs must use the services and assistance, as appropriate, of such organizations as the Small
Business Administration (SBA) and the Minority Business Development Agency (MBDA) of the
Department of Commerce.
142
Prime Contractor Requirements
NFEs must require the prime contractor, if subcontracts are anticipated or used, to take the five
previous affirmative steps.
143
FEMA recommends that the NFE include this requirement in the
solicitation, as well as in the contract, to ensure contractor compliance.
NFEs must document its compliance with the six affirmative steps discussed above. Examples of
documentation include prequalified or solicitation lists used, communications, emails, online
searches, etc.
Additional Considerations:
Since the socioeconomic affirmative steps were not applicable to state entities prior to
recent OMB guidance, if a state entity is using a prepositioned contract, entered into prior
to November 12, 2020, in support of declarations and FEMA awards issued on or after
November 12, 2020, FEMA will generally consider it infeasible for the state entity to
comply with the six affirmative steps. While consideration may be given to such
prepositioned contract(s), state entities must review their policies and procedures to
ensure compliance with the socioeconomic affirmative steps at 2 C.F.R. § 200.321.
Where there is sufficient justification warranting a non-state entity to use procurement
through noncompetitive proposals, FEMA will generally consider it infeasible for the non-
state entity to take the six affirmative steps to assure that minority businesses, small
businesses, women’s business enterprises, and LSA firms are used in those
circumstances. Similarly, FEMA will generally consider it infeasible for state entities to
141
2 C.F.R. § 200.321(b)(4).
142
2 C.F.R. § 200.321(b)(5).
143
2 C.F.R. § 200.321(b)(6).
61
comply with the six affirmative steps when awarding a noncompetitive procurement ("sole
source").
A recurring issue within the context of the socioeconomic affirmative steps is whether a
NFE may set-aside a certain percentage of its contracting for small businesses, minority
firms, and women’s business enterprises. NFE must conduct all procurements in a manner
providing full and open competition. There are no provisions for specific exceptions to this
requirement in the case of small businesses, minority firms, women’s business
enterprises, or LSA firms. Set asides and other quotas are not permitted.
Under the Indian Self-Determination and Education Assistance Act, Indian Tribal
Governments do not need to take additional steps to comply with the socioeconomic
affirmative steps found within the federal procurement under grant rules.
144
Definitions for Socioeconomic Firms
The federal procurement under grant rules do not define the terms small business,
minority business, women’s business enterprises, or LSA firms. FEMA will accept the
meaning of small business, minority business, women’s business enterprise, or LSA
firm established under applicable state, local, and/or Tribal laws and regulations. If
state, local, and/or Tribal laws and regulations do not provide such definitions, FEMA uses the
following definitions:
Small Business
A business that is independently owned and operated and is qualified as a small business under the
Small Business Administration criteria and size standards at 13 C.F.R. Part 121.
Women’s Business Enterprise
A business enterprise that is (a) at least 51% owned by one or more women, or in the case of a
publicly owned business, at least 51% of the stock is owned by one or more women; and (b) whose
management and daily operations are controlled by one or more women.
145
Minority Business
A business that is (a) at least 51% owned by one or more minority group members, or in the case of a
publicly owned business, at least 51% of the stock is owned by one or more minority group
members; and (b) whose management and daily operations are controlled by one or more minority
group members.
146
144
25 U.S.C. § 450(f).
145
13 C.F.R. Part 127.
146
13 C.F.R. § 124.103, 13 C.F.R. § 124.102, and 13 C.F.R. § 124.105.
62
Labor Surplus Area
A locality, defined by the Department of Labor’s Employment and Training Administration, that has a
civilian average annual unemployment rate during the previous two calendar years of 20% or more
above the average annual civil unemployment rate for all states during that same period.
147
There is
an “Exceptional Circumstance Consideration Provision” that allows a civil jurisdiction to ask for
inclusion in the LSA list after it is published, due to events such as COVID-19, natural disasters, and
other adverse economic changes.
Labor Surplus Area Firm
A firm that together with its first-tier subcontractors will perform substantially in LSAs as identified by
the Department of Labor in accordance with 20 C.F.R. § 654. Performance is substantially in LSAs if
the costs incurred under the contract on account of manufacturing, production, or performance of
appropriate services in labor surplus areas exceed 50% of the contract price.
148
Example: Awarding to Small Businesses without Taking Affirmative Steps
Scenario: Severe storms and flooding caused approximately $3.2 million in damage to
numerous facilities in the County of X. County X did not take the socioeconomic
affirmative steps, but it awarded an architectural and engineering contract to a small
business and was in the process of awarding a debris removal contract to another small business
when the OIG began an audit. Is County X in compliance with the federal procurement under grant
regulations?
Answer: No, County X is not in compliance with the federal procurement regulations. County X was
required to take the socioeconomic affirmative steps regardless of who it ended up awarding the
contracts to. The rules do not require County X to award the contracts to small businesses, minority
owned businesses, women’s business enterprises, or labor surplus area firms. Rather, the rules
require County X to solicit these types of businesses when they are potential sources to allow them
to fully engage in the process. Awarding the contracts to a disadvantaged business does not negate
the requirement of the federal procurement under grant rules
Example: Following State Equal Opportunity Requirements Instead of Federally
Required Affirmative Steps
Scenario: A hurricane devastated the Town of Y, causing almost $4 million in damage.
Town of Y had no requirement to reach out to disadvantaged firms, and the applicable
state laws required Town of Y to be equal opportunity and affirmative action employers. Town of Y
followed the state laws and awarded four of its contracts to small business and women business
147
20 C.F.R. §§ 654.4-654.5.
148
40 C.F.R. § 33.103.
63
enterprises. Town of Y did not take the specific socioeconomic affirmative steps outlined in the
federal procurement under grant rules. Is Town of Y in compliance?
Answer: No, Town of Y is not in compliance with the federal procurement under grant rules. Town of
Y, as a non-state entity, is required to follow its own rules, which reflect applicable state and local
laws and regulations, provided that the procurement conforms to applicable federal law. Therefore,
Town of Y is required to follow its own rules, but it must also follow the federal rules. Pursuant to the
federal procurement under grant rules, Town of Y was required to take the socioeconomic affirmative
steps regardless of who it awarded its contracts to. Awarding the contracts to a disadvantaged
business does not negate the requirement of the rules.
Example: Taking Socioeconomic Affirmative Steps during a Public Emergency
Situation
Scenario: A tornado devastated the City of Z, leaving the streets scattered with debris.
The main street leading to the hospital was covered with debris and impassable. City
of Z determined this was a public emergency and entered into a sole-source contract with Contractor
B to remove the debris from the street so that the hospital was accessible. Due to the emergency,
City of Z did not take the socioeconomic affirmative steps. Is City of Z in compliance with the federal
procurement under grant regulations?
Answer: Yes, if City of Z can adequately show that this situation qualified as an emergency exception
allowing it to sole source, it is not required to follow the socioeconomic affirmative steps. Generally, if
utilizing the emergency/exigency exception to competitive procurements, the non-state entity is not
required to take the socioeconomic affirmative steps since time is of the essence and the situation
will not permit such a delay.
Related Tools and Resources
Quick Guide to SBA Search Tools
SBA Homepage
Dynamic Small Business Search
Department of Commerce: MBDA
Department of Labor: LSAs
64
Chapter 7: Domestic Preferences
Under the revised sections of the OMB Guidance for
Grants and Agreements, an NFE must comply with
the rules at 2 C.F.R. § 200.322, Domestic
preferences for procurements when procuring
goods and services under a FEMA award.
Domestic Preferences for Procurement
As stated in EO 14005 of January 25, 2021 (Ensuring the Future Is Made in All of America by All of
America's Workers) and EO 13858 of January 21, 2019 (Strengthening Buy American Preferences
for Infrastructure Projects), it is the federal government’s policy to maximize the use of goods,
products, and materials produced in the United States, in federal procurements through the terms
and conditions of federal financial assistance awards consistent with law.
Applicability
The NFE should provide a preference for the purchase, acquisition, or use of goods, products, or
materials produced in the United States. This preference should be applied where appropriate, in a
manner consistent with law, and to the greatest extent practicable under a federal award. The
preference includes, but is not limited to iron, aluminum, steel, cement, and other manufactured
products.
149
FEMA recipients and subrecipients are required to include a domestic preferences contract provision
in all contracts and purchase orders for procurements made under grant awards or declarations
issued on or after November 12, 2020. See the Contract Provisions Guide for sample language.
150
Definitions
Produced in the United States means, for iron and steel products, that all manufacturing processes,
from the initial melting stage through the application of coatings, occurred in the United States.
151
149
See 2 C.F.R. § 200.322.
150
2 C.F.R. Part 200, Appendix II, § L (citing 2 C.F.R. § 200.322). The requirements of 2 C.F.R. § 200.322 must also be
included in all subawards.
151
2 C.F.R. § 322(b)(1).
S
tate Entities
Non-State Entities
65
‘‘Manufactured products’’ means items and construction materials composed in whole or in part of
non-ferrous metals such as aluminum; plastics and polymer-based products such as polyvinyl
chloride pipe; aggregates such as concrete; glass, including optical fiber; and lumber.
152
The requirements of this section must be included as a provision in all subawards and contracts
(including purchase orders) for work or products under the FEMA award.
152
2 C.F.R. § 322(b)(2).
66
Chapter 8: Procurement of
Recovered Materials
The revised sections of the OMB Guidance for
Grants and Agreements require an NFE comply with
2 C.F.R. § 200.323, Procurement of recovered
materials when procuring goods and services under
a FEMA award. An NFE that is a state agency or
agency of a political subdivision of a state and its
contractors must comply with Section 6002 of the
Solid Waste Disposal Act.
153
A political subdivision
is the unit of government that the state determines
to have met the State’s legislative definition of a political subdivision.
154
The requirements of Section 6002 include:
Procuring only items designated in guidelines of the Environmental Protection Agency (EPA) at 40
C.F.R. Part 247 that contain the highest percentage of recovered materials practicable,
consistent with maintaining a satisfactory level of competition, where the purchase price of the
item exceeds $10,000 in a single instance or the value of the quantity acquired during the
preceding fiscal year exceeded $10,000;
Procuring solid waste management services in a manner that maximizes energy and resource
recovery; and
Establishing an affirmative procurement program for procurement of recovered materials
identified in the EPA guidelines.
155
Inapplicability to Indian Tribes and Private Nonprofit
NFEs
The requirements of Section 6002 and its implementing regulations at 40 C.F.R. Part 247 do not
apply to procurements by Indian tribes or private nonprofit NFEs.
156
153
Pub. L. No. 89-272 (1965) (codified as amended by the Resource Conservation and Recovery Act at 42 U.S.C. § 6962).
154
40 C.F.R. § 35.6015(a) Political subdivision.
155
2 C.F.R. § 200.323.
156
Id.
St
ate Entities
Non-State Entities
67
EPA Product Designation
The EPA is required to designate products that are or can be made with recovered materials, and to
recommend best practices for buying these products.
157
Currently, the EPA has designated 61
products across eight categories, which are construction products, landscaping products, non-paper
office products, paper products, park and recreation products, transportation products, vehicular
products, and miscellaneous products.
158
Once EPA designates a product, Section 6002(c)(1) of the Solid Waste Disposal Act
159
requires state
entities (including territorial governments) and local governments to procure that designated item
composed of the highest recovered material content level practicable, consistent with maintaining a
satisfactory level of competition, considering such guidelines.
160
State entities (including territorial governments) and local governments may decide not to procure
such items if they are not available in a reasonable period of time, fail to meet reasonable
performance standards, or are only available at an unreasonable price.
161
Affirmative Procurement Program
S
ection 6002(i) of the Solid Waste Disposal Act
162
provides that each state entity (including
territorial governments) and local governments that purchase items designated by EPA must
establish an affirmative procurement program, containing four specific elements, for procuring such
items containing recovered materials to the maximum extent practicable.
163
The four required
elements of the affirmative procurement program are:
A recovered materials preference program, where an entity includes language in an RFP
e
stablishing a category and point scale for the use of recovered materials and then awards
maximum points to the vendor offering an item composed of the highest percentage of
recovered materials practicable;
An agency program to promote the preference program adopted as required by element;
A program for requiring estimates of the total percentage of recovered material utilized in the
performance of a contract; certification of minimum recovered material content utilized, where
appropriate; and reasonable verification; and
157
Section 6002(e) of the Solid Waste Disposal Act (codified as amended at 42 U.S.C. § 6962(e)).
158
See 40 C.F.R. Part 247, Subpart B.
159
Codified as amended at 42 U.S.C. § 6962(c)(1).
160
40 C.F.R. § 247.2(d).
161
See Section 6002(c) of the Solid Waste Disposal Act (codified as amended at 42 U.S.C. § 6962(c)); 40 C.F.R. §
247.2(d).
162
Codified as amended at 42 U.S.C. § 6962(i).
163
See also 40 C.F.R. § 247.6.
68
Annual review and monitoring of the effectiveness of an agency’s affirmative procurement
program.
Solid Waste Disposal Services
Se
ction 6002(f) of the Solid Waste Disposal Act
164
requires state entities (including territorial
governments) and local governments, to the maximum extent practicable, to manage or arrange for
the procurement of solid waste management services in a manner which maximizes energy and
resource recovery.
Certifications
Se
ction 6002(c)(3) of the Solid Waste Disposal Act
165
and 40 C.F.R. § 247.4 provide that a state
entity (including territorial governments) and local government must require that their vendors:
Certify that the percentage of recovered materials to be used in the performance of the contract
will be at least the amount required by applicable specifications or other contractual
requirements; and
Estimate the percentage of the total material utilized for the performance of the contract which is
recovered materials (for contracts greater than $100,000).
Related Tools and Resources
Contract Provisions Guide
U.S. Environmental Protection Agency’s Comprehensive Procurement
Guideline Program
164
Codified as amended at 42 U.S.C. § 6962(f).
165
Codified as amended at 42 U.S.C. § 6962(c)(3).
69
Chapter 9: Cost or Price Analysis
Non-state entities must perform and document a cost or price analysis in
connection with every procurement action above the federal SAT,
including contract modifications.
166
There are many benefits to a non-
state entity performing a cost or price analysis, including decreasing the
likelihood of unreasonably high or low prices, contractor
misrepresentations, and errors in pricing relative to scope of work. The
method of analysis is dependent on the facts surrounding the
procurement situation; however, the non-state entity must make
independent estimates before receiving bids or proposals.
167
Price Analysis
A price analysis is the examination and evaluation of the total amount of a proposed price without
evaluating its separate cost elements and proposed profit. This type of analysis is typically used
when acquiring commercial items or when using the procurement through sealed bidding method.
Techniques may include:
Comparing offers with one another
;
C
omparing prior proposed prices and contract prices with current proposed prices for the same
or similar goods or services;
Comparing offers with competitive published price lists, published market prices, or similar
indexes;
Comparing proposed prices with independently developed estimates created by the non-sta
te
e
ntity; and
C
omparing proposed prices with prices of the same or similar items obtained through market
research.
Example: Price Analysis Techniques
Scenario:
Following the damage and graffiti of several local places of worship with
hateful speech, Church Y decided to procure security equipment and enhancements
to its physical property. Church Y conducted an independent estimate and determined
that the procurement would exceed the federal SAT. After advertising its requirement and receiving
multiple offers, Church Y compared the offeror prices with one another as required by its
166
2 C.F.R. § 200.324(a).
167
Id.
Non-State Entities
70
procurement policies and procedures. This analysis led Church Y to obtain a fair and reasonable
price for the desired security equipment and enhancements. Is Church Y’s price analysis technique
compliant with the federal procurement under grant rules?
Answer: Yes. In this scenario, Church Y conducted a price analysis in accordance with their own
procurement policies and procedures, which helped ensure a fair and reasonable price for the
security equipment. The federal procurement rules do not impose specific price analysis techniques
on non-state entities; therefore, the non-state entity is responsible for selecting the technique that
will ensure a reasonable price and compliance with applicable rules.
Cost Analysis
A cost analysis is the review and evaluation of the separate cost elements or line items (such as
labor hours, overhead, materials, etc.) and proposed profit in a proposal to determine a fair and
reasonable price for a contract. Some of the ways in which a cost analysis can be performed include:
Verification and evaluation of the cost elements that make up the total price; and
Comparison of costs proposed by contractors.
The method and degree of analysis is dependent on the facts surrounding the procurement
situation; however, non-state entities must make independent cost estimates before receiving bids
or proposals. Additionally, a non-state entity must negotiate profit as a separate element of the price
for each contract in which there is no price competition, and in all cases where a cost
analysis is performed.
168
Costs or prices based on estimated costs for contracts are allowable only to the
extent that costs are allowable under the federal Cost Principles in the Uniform Rules
located at 2 C.F.R. Part 200, Subpart E.
169
Example: Cost Analysis in Competitive Proposals Method of Procurement
Scenario: The City of X experienced a severe hurricane that caused large quantities of
debris to be scattered throughout its jurisdiction, 90% of which was vegetative debris.
The City completed an independent estimate and determined that the cost of the
debris removal effort would exceed the federal SAT. The City advertised its request for proposals and
listed price as its most important evaluation factor. The City conducted a cost analysis by comparing
the proposed rates with one another. Which Contractor’s proposal is most likely to yield the most
economical price in City of X’s cost analysis?
168
2 C.F.R. § 200.324(b).
169
2 C.F.R. § 200.324(c).
71
Line Item
Contractor 1
Contractor 2
Contractor 3
Contractor 4
Vegetative Debris
$25/Cubic Yard
$20/Cubic Yard
$50/Cubic Yard
$60/Cubic Yard
Construction and
Demolition
Debris
$50/Cubic Yard
$50/Cubic Yard
$50/Cubic Yard
$50/Cubic Yard
Hazardous Waste
Removal
$60/Cubic Yard
$60/Cubic Yard
$60/Cubic Yard
$60/Cubic Yard
White Goods
$20/Cubic Yard
$25/Cubic Yard
$60/Cubic Yard
$25/Cubic Yard
Profit
$3/Cubic Yard
$5/Cubic Yard
$10/Cubic Yard
$7/Cubic Yard
Admin. Costs
$1/ Cubic Yard
$.50/ Cubic Yard
$2/Cubic Yard
$1/Cubic Yard
Answer: The proposal from Contractor 2 will yield the most economical price for City of X because
90% of the debris removal work required is for vegetative debris. Contractor 2 offered the most
economical rate for vegetative debris removal and maintained comparable rates for the other types
of debris removal work.
Cost Plus a Percentage of Cost Contracts
Non-state entities are prohibited from using CPPC contract or cost plus a percentage of construction
cost contracts.
170
A CPPC contract is a cost-reimbursement contract containing some element that
commits the non-state entity to pay the contractor an amount in the form of either
profit or cost, undetermined at the time of the contract award, based on a percentage
of future costs.
Four-Part Analysis
FEMA will use the following four-part analysis to determine if a contract is a prohibited CPPC contract
or percentage of construction cost contract:
Payment is made at a pre-determined percentage rate;
170
2 C.F.R. § 200.324(d).
72
The pre-determined percentage rate is applied to actual performance costs;
The contractor’s entitlement is uncertain at the time of contracting; and
The contractor’s entitlement increases commensurately with increased performance costs.
171
The pr
ohibition against CPPC contracts also applies to subcontracts of the prime contractor in the
case where the prime contract is a cost-reimbursement type contract or subject to price
redetermination. Additionally, the inclusion of a ceiling price does not make these forms of contracts
acceptable. The purpose for this rule is to prohibit contracts that incentivize a contractor to increase
its profits by increasing performance costs.
Example: Contractor Charges Percentage Mark-Up
Scenario: Hurricane John causes damage and widespread loss of power throughout
City of X. Rushing to award a contract for the repair work, the City entered what it
thought was a time-and-materials contract with Contractor A for power line repairs.
After the work was completed, the contractor invoiced the city at the rates agreed upon plus a 15%
mark-up. Careful review of the contract revealed that the City had agreed to pay the contractor a
15% mark-up on all incurred costs to account for profit. Was City of X’s contract with Contractor A
compliant with the federal procurement under grant rules?
Answer: No, the City of X inadvertently entered a
prohibited cost plus a percentage of cost contract.
Contractor A had no incentive to control costs because
its profits increased as the cost of labor and materials
increased, and it may have incurred additional costs to
drive up mark-up costs. Consequently, this type of
contract is beneficial for a contractor but is less than
ideal for a non-state entity.
Considerations for State Entities
using CPPC Contracts
Although the federal procurement regulations do not expressly prohibit state entities from using
CPPC contracts when otherwise permissible under state law, state entities should exercise caution
before entering this contract type. All NFEs must abide by the Cost Principles found in the Uniform
Rules located at 2 C.F.R. Part 200, Subpart E to ensure that all costs are reasonable. FEMA
scrutinizes CPPC contracts because they often lead to unreasonable costs.
NOTE: The use of CPPC
contracts is prohibited even during periods of emergency and exigency circumstances.
171
Federal Aviation Administration—Request for Advance Decision, B-195173, 58 Comp. Gen. 654 (1979); Marketing
Consultants International Limited, B-183705, 55 Comp. Gen. 554 (1975).
74
Chapter 10: Federal Awarding
Agency/Pass-Through Entity Review
As the federal awarding agency, FEMA is responsible for monitoring the
financial assistance execution and ensuring proper performance under the
FEMA award. While exercising this responsibility, FEMA may conduct both
pre- and post- procurement reviews of a non-state entity’s procurements for
compliance with the federal procurement regulations.
172
Pre-Award Procurement Review
FEMA or the pass-through entity may conduct pre-procurement reviews of a non-state entity’s
procurements consistent with the terms of 2 C.F.R. §§ 200.317-200.327.
Technical Specifications
Upon request by FEMA or a pass-through entity, a non-state entity must make available technical
specifications of proposed procurements by the non-state entity where FEMA or the pass-through
entity believes such review is needed to ensure that the item or service specified is the one being
proposed for acquisition. This review generally takes place before the time the specification is
incorporated into a solicitation document. However, if the non-state entity requests a procurement
review after a solicitation has been developed, FEMA or a pass-through entity may still review the
specifications, with such review usually limited to the technical aspects of the proposed purchase.
173
Procurement Documents
Upon request by FEMA or a pass-through entity, the non-state entity must make procurement
documents available, such as RFPs, IFBs, or independent cost estimates, when any of the following
conditions are present:
The non-state entity’s procurement procedures fail to comply with the procurement standards in
2 C.F.R. §§ 200.318-200.327;
The procurement is expected to exceed the federal SAT and is to be awarded without
competition or only one bid or offer is received in response to a solicitation;
172
2 C.F.R. § 200.325.
173
2 C.F.R. § 200.325(a).
Non-S
tate
Entities
75
The procurement is expected to exceed the federal SAT and specifies a “brand name” product;
The
proposed contract is more than the federal SAT and is to be awarded to other than the
apparent low bidder under a sealed bid procurement; or
A p
roposed contract modification changes the scope of a contract or increases the contract
amount by more than the federal SAT.
174
Exemption
A non-state entity is exempt from pre-procurement review if FEMA or the pass-through entity
determines that the non-state entity’s procurement process complies with the federal procurement
regulations. There are two possible methods for a non-state entity to use this exemption.
FEMA or Pass-Through Entity Review
The non-state entity may request FEMA or a
pass-through entity to review whether its
procurement system meets the federal
procurement standards for certification.
175
Generally, these reviews must occur when
there is continuous high-dollar funding and
when third-party contracts are awarded on a
regular basis. In all cases where a pass-through
entity reviews a non-state entity’s procurement
system, the pass-through entity must provide
the results of that review to FEMA.
Self-Certification
The non-state entity may self-certify its procurement system. FEMA may rely on written assurances
from the non-state entity that it complied with the federal procurement standards. The non-state
entity must cite specific policies, procedures, regulations, or standards as being compliant with these
requirements and have its system available for review. Self-certification does not limit FEMA's right to
review the system. A non-state entity may still request review by FEMA or a pass-through entity even
if it self-certifies.
176
174
2 C.F.R. § 200.325(b).
175
2 C.F.R. § 200.325(c)(1).
176
2 C.F.R. § 200.325(c)(2).
76
Post-Award Procurement Review
FEMA may review a non-state entity’s procurement documents after the contract award as part of
FEMA’s authority and responsibility to monitor financial assistance execution and ensure proper
performance and compliance with the terms and conditions of the FEMA award. Such a review may
occur during close-out of an individual project under a FEMA award, through a FEMA audit or
monitoring visit.
177
177
2 C.F.R. §§ 200.334-338.
77
Chapter 11: Bonding Requirements
Non-state entities must follow certain federal bonding rules when awarding
construction or facility improvement contracts and subcontracts exceeding
the federal SAT.
178
If the procurement does not meet either of these
conditions, then the federal bonding rules below do not apply.
Although not defined in the federal procurement under grant rules, a
“bond” is generally a written instrument executed by a contractor (the
“principal”), and a second party (the “surety” or “sureties”) to assure
fulfillment of the principal’s obligations to a third party (the “obligee”), identified in the bond. If the
principal’s obligations are not met, the bond assures payment, to the extent stipulated, of any loss
sustained by the obligee.
179
The rules also do not define construction work. FEMA will accept the
meaning of construction work established under applicable state, local, and/or Tribal laws and
regulations. If state, local, and/or Tribal laws and regulations do not provide such definitions, FEMA
uses the definition set forth at 41 C.F.R. § 60-1.3.
FEMA or the pass-through entity may accept the bonding policy and requirements of the non-state
entity after determining that the federal interest is adequately protected. If this determination has
not been made, the non-state entity must meet the following bid guarantee, performance bond, and
payment bond requirements:
Bid Guarantee
A bid guarantee means a form of security assuring that the bidder:
Will not withdraw a bid within the period specified for acceptance; and
Will execute a written contract and furnish required bonds, including any necessary coinsurance
or reinsurance agreements, within the time specified in the bid, unless a longer time is allowed,
aft
er receipt of the specified forms.
180
The
existence of a bid guarantee provides a non-state entity assurance that the bidder has the
financial means to accept the job for the price quoted in the bid and that the bidder will enter into
the required contract and execute the required performance and payment bonds if successful in its
bid. The requirements for a bid guarantee
181
are as follows:
178
2 C.F.R. § 200.326.
179
48 C.F.R. § 28.001, “bond.”
180
48 C.F.R. § 28.001 “bid guarantee.”
181
2 C.F.R. § 200.326(a).
Non-State
Entities
78
Each bidder must provide a bid guarantee equivalent to five percent of the bid price;
The bid guarantee must be a firm commitment that, upon acceptance of the bid, the bidder will
execute such contractual documents as may be required within the time specified; and
The bid guarantee must be in the form of a bid bond, certified check, or other negotiable
instrument.
If the bidder is awarded the contract but fails to enter
the contract as agreed, the bid guarantee will provide
financial protection to the non-state entity by paying
the difference between the bidder’s offer and the next
closest offer. Requiring a bid guarantee ensures that
contractors will not submit frivolous bids, so they will
be obligated to either perform the job or compensate
the non-state entity.
Performance Bond
The contractor must provide a performance bond for 100% of the contract price.
182
A performance
bond is to be executed in connection with the contract and its purpose is to protect the non-state
entity from sustaining losses if the contractor fails to fulfill its requirements under the contract.
Payment Bond
The contractor must provide a payment bond for 100% of the contract price.
183
A payment bond is
executed in connection with a contract to assure payment as required by law for all persons
supplying labor and materials in the execution of the work provided for in the contract. If the
contractor does not fulfill its obligation in paying for the labor and supplies, the bond assures
payment of any loss sustained by the obligation.
Example: Applicability of the Federal Bonding Requirements
Scenario: City of M, located in State of X, is conducting a procurement through sealed
bidding for debris removal services. City of M advertises and holds open the
solicitation for several weeks. The City eventually awards the contract to the contractor
with the lowest price on a cost-reimbursement basis. The estimated total cost of the contract is
$400,000. Neither FEMA nor the State of X has certified the bonding policy and requirements of the
City of M. Is the City’s procurement subject to the bonding requirements of 2 C.F.R. § 200.326?
182
2 C.F.R. § 200.326(b).
183
2 C.F.R. § 200.326(c).
79
Answer: No, City of M’s procurement is not subject to the bonding requirements found at 2 C.F.R. §
200.326. The bonding requirements are only applicable to contracts and subcontracts for
construction or facility improvements above the federal SAT. While the estimated total of the
contract exceeds $250,000, the contract is not for construction or facility improvement.
Although the federal bonding requirements are only required for construction or facility
improvement contracts or subcontracts above the federal SAT, an entity can still have bonding
requirements for other contract types provided that the requirements are not excessive or
arbitrary.
80
Chapter 12: Contract Provisions
This chapter highlights and provides background on
the required provisions. For sample language,
definitions, and references, please see the PDAT
Contract Provisions Guide
. The federal rules require
that NFE contracts contain the applicable provisions
described in Appendix II to Part 200 of the Uniform
Rules (Contract Provisions for Non-Federal Entity
Contracts Under Federal Awards).
184
Additionally, the Uniform Rules authorize FEMA to require additional provisions for NFE contracts.
FEMA, pursuant to this authority, recommends several provisions:
Access to records;
Changes and modifications;
Permission required for the use of DHS seal, logo, or flags;
Compliance with federal law, regulations, executive orders and acknowledgement of federal
funding;
No obligation by the federal government;
Program fraud and false or fraudulent statements or related acts;
Affirmative Socioeconomic Steps; and
Copyrightable subject matter.
185
NOTE: FEMA is permitted to require additional contract provisions.
Required Provisions
Contract Remedies
186
NFEs must include contract provisions addressing administrative, contractual, or legal remedies in
instances where contractors violate or breach contract terms and provide for sanctions and
184
2 C.F.R. § 200.327.
185
2 C.F.R. Part 200, Appendix II.
186
2 C.F.R. Part 200, Appendix II § C.
St
ate Entities
Non-State Entities
81
penalties as may be appropriate. This requirement only applies to contracts in excess of the federal
SAT.
187
A “remedy” is the right of a contracting party when the other party does not fulfill its contractual
obligations.
188
Parties may seek various judicial remedies for breach of contract, including damages,
specific performance, and rescission or restitution.
189
Appendix II to 2 C.F.R. Part 200 simply
requires the NFE to spell out the remedies for breach of contract.
Termination for Cause and Convenience
190
Contracts for more than $10,000 must address termination for cause and for convenience by the
NFE, including the manner by which it will be carried out and the basis for settlement.
“Termination for convenience” is the exercise of an NFE’s right to completely or partially
terminate the contractor’s performance of work under a contract when it is in the NFE’s
interest.
191
On the other hand, “termination for cause” (or “default”) is the exercise of a party’s
right to completely or partially terminate a contract because of the other party’s actual or
anticipated failure to perform its contractual obligations.
192
Equal Employment Opportunity
193
Except as otherwise provided under 41 C.F.R. Part 60, all contracts that meet the definition of
“federally assisted construction contract” in 41 C.F.R. § 60-1.3 must include the equal opportunity
clause provided under 41 C.F.R. § 60-1.4(b), in accordance with Executive Order 11246, Equal
Employment Opportunity (30 Fed. Reg. 12319, 12935, 3 C.F.R. Part, 1964-1965 Comp., p. 339), as
amended by Executive Order 11375, Amending Executive Order 11246 Relating to Equal
Employment Opportunity, and implementing regulations at 41 C.F.R. Part 60 (Office of Federal
Contract Compliance Programs, Equal Employment Opportunity, Department of Labor).
A “federally assisted construction contract” is any agreement or modification thereof between
a
ny recipient or subrecipient and a person for construction work which is paid for in whole or i
n
p
art with funds obtained from the government or borrowed on the credit of the governmen
t
pu
rsuant to any federal program involving a grant, contract, loan, insurance, or guarantee, or
undertaken pursuant to any federal program involving such grant, contract, loan, insurance, or
guarantee, or any application or modification thereof approved by the government for a grant,
187
Id.
188
Restatement (Second) of Contracts, Ch. 16 (Remedies) (1981).
189
Id.
190
2 C.F.R. Part 200, Appendix II § B.
191
48 C.F.R. § 2.101.
192
Id.
193
2 C.F.R. Part 200, Appendix II § C.
82
contract, loan, insurance, or guarantee under which the recipient or subrecipient participates in
the construction work.
194
“Construction work” is the construction, rehabilitation, alteration, conversion, extension,
demolition or repair of buildings, highways, or other changes or improvements to real property,
including facilities providing utility services.
195
The term also includes the supervision, inspection,
and other onsite functions incidental to the actual construction.
Note on Section 308 of the Stafford Act (42 U.S.C. 5151): NFEs must comply with all
applicable civil rights and nondiscrimination laws when administering their federal award.
Specifically, NFEs under Stafford Act awards must comply with Section 308 of the Stafford Act
which states that FEMA, State, local, Tribal, and Territorial (SLTT) partners, and non-
governmental relief and disaster assistance organizations engaged in the “distribution of
supplies, the processing of applications, and other relief and assistance activities shall
[accomplish these activities] in an equitable and impartial manner, without discrimination on
the grounds of race, color, religion, [national origin], sex, age, disability, English proficiency, or
economic status.”
196
Davis-Bacon Act
197
Appendix II to 2 C.F.R. Part 200 requires that NFEs include a contract clause providing for the
compliance with the Davis-Bacon Act (40 U.S.C. §§ 3141-3148) as supplemented by Department of
Labor regulations at 29 C.F.R. Part 5.
198
This requirement, however, only applies to construction
contracts awarded by NFEs in excess of $2,000 when required by federal grant program
legislation.
199
The Davis-Bacon and Copeland Anti-Kickback Acts only apply to the Emergency Management
Preparedness Grant Program, Homeland Security Grant Program, Nonprofit Security Grant
Program, Tribal Homeland Security Grant Program, Port Security Grant Program and Transit
Security Grant Program. These Acts do not apply to other FEMA grant and cooperative
agreement programs, such as the PA Program. However, if the NFE’s own procurement
standards include equivalents to, or adopt the Davis-Bacon and Copeland Anti-Kickback Acts,
under those circumstances, they should be applied to the NFE.
194
41 C.F.R. § 60-1.3.
195
Id.
196
Section 308 of the Stafford Act, 42 U.S.C. § 5151, See also 44 C.F.R. § 206.11(c) (requiring organizations or
governments receiving assistance under the Stafford Act to provide a written assurance of their intent to comply with
regulations relating to nondiscrimination).
197
2 C.F.R. Part 200, Appendix II § D.
198
Id.
199
Id.
83
Copeland Anti-Kickback Act
200
NFE contracts must include a provision for compliance with the Copeland “Anti-Kickback” Act (18
U.S.C. § 874
201
and 40 U.S.C. § 3145
202
), as supplemented by Department of Labor regulations at
29 C.F.R. Part 3 (Contractors and Subcontractors on Public Building or Public Work Financed in
Whole or in Part by Loans or Grants from the United States). This requirement applies only in
situations where the Davis-Bacon Act also applies. In situations where language for compliance with
the Davis-Bacon Act is not required to be included, neither is language for compliance with the
Copeland Anti-Kickback Act.
Contract Work Hours and Safety Standards Act
203
Where applicable (see 40 U.S.C. §§ 3701-3708), all contracts awarded by an NFE in excess of
$100,000 that involve the employment of mechanics or laborers must include a provision for
compliance with 40 U.S.C. §§ 3702 and 3704, as supplemented by Department of Labor regulations
at 29 C.F.R. Part 5.
204
Under 40 U.S.C. § 3702, each contractor must be required to compute the
wages of every mechanic and laborer on the basis of a standard work week of 40 hours. Work in
excess of the standard work week is permissible, provided that the worker is compensated at a rate
of not less than one and a half times the basic rate of pay for all hours worked in excess of 40 hours
in the work week. Further, no laborer or mechanic must be required to work in surroundings or under
working conditions which are unsanitary, hazardous, or dangerous.
Rights to Inventions Made Under a Contract or Agreement
205
If a federal award meets the definition of “funding agreement”
206
and the NFE wishes to enter into a
contract with a small business firm or nonprofit organization regarding the substitution of parties,
assignment or performance of experimental, developmental, or research work under that “funding
agreement,” the NFE must comply with the requirements of 37 C.F.R. Part 401 (Rights to Inventions
200
2 C.F.R. Part 200, Appendix II § D.
201
18 U.S.C. § 874 (Kickbacks from Public Works Employees) (“Whoever, by force, intimidation, or threat of procuring
dismissal from employment, or by any other manner whatsoever induces any person employed in the construction,
prosecution, completion or repair of any public building, public work, or building or work financed in whole or in part by
loans or grants from the United States, to give up any part of the compensation to which he is entitled under his contract of
employment, shall be fined under this title or imprisoned not more than five years, or both.”).
202
40 U.S.C. § 3145 (Regulations Governing Contractors and Subcontractors):
(a) In General.—The Secretary of Labor shall prescribe reasonable regulations for contractors and subcontractors
engaged in constructing, carrying out, completing, or repairing public buildings, public works, or buildings or works
that at least partly are financed by a loan or grant from the Federal Government. The regulations shall include a
provision that each contractor and subcontractor each week must furnish a statement on the wages paid each
employee during the prior week.
(b) Application.—Section 1001 of title 18 applies to the statements.
203
2 C.F.R. Part 200, Appendix II § E.
204
See 2 C.F.R. Part 200, Appendix II § E.
205
2 C.F.R. Part 200, Appendix II § F.
206
The regulation at 37 C.F.R. § 401.2(a) defines “funding agreement” as any contract, grant, or cooperative agreement
entered into between any Federal agency, other than the Tennessee Valley Authority, and any contractor for the
performance of experimental, developmental, or research work funded in whole or in part by the federal government. This
term also includes any assignment, substitution of parties, or subcontract of any type entered into for the performance of
experimental, developmental, or research work under a funding agreement as defined in the preceding sentence.
84
Made by Nonprofit Organizations and Small Business Firms Under Government Grants, Contracts
and Cooperative Agreements), and any implementing regulations issued by that federal agency.
This requirement does not apply to the PA Grant Program, Hazard Mitigation Grant Program,
Fire Management Assistance Grant Program, Crisis Counseling Assistance and Training Grant
Program, Disaster Case Management Grant Program and Federal Assistance to Individuals and
Households – Other Needs Assistance Grant Program, as FEMA awards under these programs
do not meet the definition of “funding agreement.”
Clean Air Act and the Federal Water Pollution Control Act
207
Contracts in excess of $150,000 must contain a provision that requires the contractor to agree to
comply with all applicable standards, orders, or regulations issued pursuant to the Clean Air Act (42
U.S.C. §§ 7401-7671q.) and the Federal Water Pollution Control Act, as amended (33 U.S.C. §§
1251-1387). Violations must be reported to FEMA and the Regional Office of the EPA.
Suspension and Debarment
208
Contracts expected to be equal to or exceed $25,000 must contain a suspension and debarment
clause. NFEs and contractors are subject to the debarment and suspension regulations
implementing Executive Order 12549, Debarment and Suspension (1986) and Executive Order
12689, Debarment and Suspension (1989) at 2 C.F.R. Part 180 and the Department of Homeland
Security’s regulations at 2 C.F.R. Part 3000 (Non-procurement Debarment and Suspension).
Generally, an “excluded” party cannot receive a federal grant award or a contract (including
subawards and subcontracts) under a “covered transaction.”
209
This includes parties that receive
federal funding indirectly, such as contractors to recipients and subrecipients.
Covered Transactions: A “covered transaction” includes the following contracts for goods or
services:
o The contract is awarded by a recipient or subrecipient in the amount expected to equal or
exceed $25,000.
o The contract requires the approval of FEMA, regardless of amount.
o The contract is for federally required audit services.
o It is a subcontract for $25,000 or more.
210
207
2 C.F.R. Part 200, Appendix II § G.
208
2 C.F.R. Part 200, Appendix II § H; 2 C.F.R Part 180.
209
2 C.F.R. §§ 180.200 and 180.945.
210
See 2 C.F.R. § 180.220.
85
Exclusions: The two forms of exclusion are “suspension” and “debarment”
211
and they can be
extended to include subsidiaries, parent companies, and other individuals.
212
Sus
pension is an action taken by the Suspension and Debarment Official (SDO) that excludes a party
from participating in a covered transaction for a temporary period, pending completion of an
investigation and any judicial or administrative proceedings that may ensue.
213
Suspension may be
based on indictments, information, or adequate evidence involving crimes, fraud, poor performance,
nonperformance, or false statements.
214
Suspensions require immediate action by the agency to
protect the public interest.
215
Debarment is an action taken by the SDO to exclude parties from participating in a covered
transaction for a specified period, typically three years.
216
Debarment may be based on convictions,
civil judgments, as well as other causes.
217
Pursuant to DHS regulations, recipients, subrecipients,
and contractors must include a term or condition in any lower-tier covered transaction into which
they enter that requires the participant of the lower-tier transaction to:
o Comply with Subpart C of the OMB guidance in 2 C.F.R. Part 180; and
o Include a similar term or condition in any covered transaction into which it enters at the next
lowest tier.
218
Byrd Anti-Lobbying Amendment
219
NFEs who intend to award contracts of more than $100,000, and their contractors who intend to
award subcontracts of more than $100,000, must include a contract provision prohibiting the use of
federal appropriated funds to influence officers or employees of the federal government. Contractors
that apply or bid for a contract for more than $100,000 must also file the required certification
regarding lobbying.
220
Each tier certifies to the tier above that it will not and has not used federal appropriated funds to pay
any person or organization for influencing or attempting to influence an employee of a federal
agency, a Member of Congress, an employee of Congress, or an employee of a Member of Congress
in connection with receiving any federal contract, grant, or other award covered by 31 U.S.C. § 1352.
211
2 C.F.R § Part 180 Subpart G and Part 180 Subpart H.
212
2 C.F.R. § 180.625.
213
2 C.F.R. §§ 180.985 and 180.1015.
214
2 C.F.R. § 180.715(b).
215
2 C.F.R. § 180.700(c).
216
2 C.F.R. § 180.925.
217
2 C.F.R. § 180.800.
218
2 C.F.R. §§ 3000.332 and 3000.437.
219
2 C.F.R. Part 200, Appendix II § I.
220
See 2 C.F.R. Part 200, Appendix II, § I (citing 31 U.S.C. § 1352); 44 C.F.R. § 18.110.
86
The required certification form is found in FEMA regulations.
221
Each tier must also disclose any
lobbying with non-federal funds that takes place in connection with obtaining any federal funding.
These disclosures are forwarded from tier to tier, all the way up to the federal awarding agency.
222
Procurement of Recovered Materials
223
An NFE that is a state agency or agency of a political subdivision of a state and its contractors must
comply with Section 6002 of the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act.
224
This requirement applies to all contracts awarded by NFEs under
FEMA grant and cooperative agreement programs.
NOTE: This contract provision is not a requirement for Indian Tribal Governments and PNPs.
Prohibition on Contracting for Covered Telecommunications Equipment
or Services
225
Section 889(b)(1) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (FY
2019 NDAA) and 2 C.F.R. § 200.216 prohibit the obligation or expending of federal award funds on
certain telecommunication products or from certain entities for national security reasons. Effective
August 13, 2020, FEMA recipients and subrecipients, as well as their contractors and
subcontractors, may not obligate or expend any FEMA award funds to:
A. Procure or obtain any equipment, system, or service that uses covered telecommunications
equipment or services as a substantial or essential component of any system, or as critical
technology of any system;
B. Enter into, extend, or renew a contract to procure or obtain any equipment, system, or
service that uses covered telecommunications equipment or services as a substantial or
essential component of any system, or as critical technology of any system; or
C. Enter into, extend, or renew contracts with entities that use covered telecommunications
equipment or services as a substantial or essential component of any system, or as critical
technology as part of any system.
Additional information, including definitions for this requirement can be found in
FEMA Policy 405-
143-1, Prohibitions on Expending FEMA Award Funds for Covered Telecommunications Equipment or
Services (Interim).
221
See 44 C.F.R. §§ 18.100, 18.110; 44 C.F.R. Part 18, Appendix A. FEMA’s regulations at 44 C.F.R. Part 18 implement
the requirements of 31 U.S.C. § 1352 and provides, in Appendix A to Part 18, a copy of the certification that is required to
be completed by each entity as described in 31 U.S.C. § 1352.
222
See 44 C.F.R. §§ 18.100, 18.110; 44 C.F.R. Part 18, Appendix B. The specific form for disclosures is referenced in
Appendix B to 44 C.F.R. Part 18 and is SF-LLL, also available at
https://www.grants.gov/web/grants/forms/sf-424-
family.html.
223
2 C.F.R. Part 200, Appendix II § J.
224
See 2 C.F.R. Part 200, Appendix II § J; and 2 C.F.R. § 200.322.
225
2 C.F.R. Part 200, Appendix II § K; and 2 C.F.R. § 200.216.
87
Domestic Preferences for Procurements
226
As appropriate, and to the extent consistent with law, non-federal entities should, to the greatest
extent practicable under a federal award, provide a preference for the purchase, acquisition, or use
of goods, products or materials produced in the United States. This includes, but is not limited to,
iron, aluminum, steel, cement, and other manufactured products.
FEMA Recommended Provisions
In addition to the federally required contract provisions, FEMA recommends that NFEs include the
following contract provisions in their contracts when receiving reimbursement under a FEMA award:
Access to Records
All NFEs must acknowledge and agree to comply with applicable provisions governing DHS access to
records, accounts, documents, information, facilities, and staff. NFEs must give DHS/FEMA access
to, and the right to examine and copy, records, accounts, and other documents and sources of
information related to the federal financial assistance award and permit access to facilities,
personnel, and other individuals and information as may be necessary, as required by DHS
regulations and other applicable laws or program guidance.
227
Additionally, Section 1225 of the Disaster Recovery Reform Act of 2018 prohibits FEMA from
providing reimbursement to any state, local, Tribal or territorial government, or private non-profit for
activities made pursuant to a contract that purports to prohibit audits or internal reviews by the
FEMA administrator or Comptroller General.
FEMA recommends that NFEs include an Access to Records clause in contracts that acknowledges
the legal requirements above which grant DHS and FEMA access to financial and procurement
documents to ensure compliance with federal regulations.
Changes and Modifications
To be eligible for FEMA assistance under the NFE’s FEMA award or cooperative agreement, the cost
of any change, modification, change order, or constructive change must be allowable, allocable,
within the scope of its grant or cooperative agreement, and reasonable for the completion of project
scope.
Therefore, FEMA recommends that an NFE include a changes clause in its contract that describes
how, if at all, changes can be made by either party to alter the method, price, or schedule of the work
226
2 C.F.R. Part 200, Appendix II § L; and 2 C.F.R. § 200.322.
227
See, e.g., DHS Standard Terms and Conditions: Version 11.4 (dated February 17, 2021), available at
https://www.dhs.gov/sites/default/files/publications/fy_2021_dhs_standard_terms_and_conditions_version_11.4_dated
_02-17-2021.pdf.
88
without breaching the contract. The language of the clause may differ depending on the nature of
the contract and the end-item procured.
DHS Seal, Logo, and Flags
NFEs must obtain permission prior to using the DHS seal(s),
logos, crests, or reproductions of flags or likenesses of DHS
agency officials.
228
FEMA recommends that all NFEs insert a
provision that a contractor shall not use the DHS seal(s),
logos, crests, or reproductions of flags or likenesses of DHS
agency officials without specific FEMA pre-approval in their
contracts.
Compliance with Federal Law, Regulations, and Executive Orders
The NFE and its contractors are required to comply with all federal laws, regulations, and executive
orders. FEMA recommends that all NFEs insert an acknowledgement that FEMA financial assistance
will be used to fund the contract along with the requirement that the contractor will comply with all
applicable federal law, regulations, executive orders, and FEMA policies, procedures, and directives
in their contracts.
No Obligation by the Federal Government
FEMA is not a party to any transaction between the NFE and its contractor. FEMA is not subject to
any obligations or liable to any party for any matter relating to the contract. FEMA recommends that
the NFE include a provision in its contract that states that the federal government is not a party to
the contract and is not subject to any obligations or liabilities to the NFE, contractor, or any other
party pertaining to any matter resulting from the contract.
Program Fraud and False or Fraudulent Statements or Related Acts
NFEs must comply with the requirements of The False Claims Act (31 U.S.C. §§ 3729-3733) which
prohibits the submission of false or fraudulent claims for payment to the federal government.
229
FEMA recommends that the NFE include a provision in its contract that the contractor acknowledges
that 31 U.S.C. Chap. 38 (Administrative Remedies for False Claims and Statements) applies to its
actions pertaining to the contract.
228
Id.
229
See DHS Standard Terms and Conditions: Version 11.4 (2021); and 31 U.S.C. §§ 3801-3812.
89
Affirmative Socioeconomic Steps
For procurements under awards or declarations issued on or after November 12, 2020, all non-
federal entities are required to take the six affirmative steps to ensure use of small and minority
businesses, women’s business enterprises, and LSA firms when possible.
230
One of the six steps is
to require the prime contractor, if subcontracts are to be let, to take the five other affirmative steps,
For procurements under awards or declarations issued between December 26, 2014, and November
12, 2020, this requirement only applies to non-state entities.
Copyright
2 C.F.R. § 200.315 concerns intangible property and requires that a NFE provide certain licenses
with respect to copyright to the federal awarding agency. 2 C.F.R. § 200.315(b) provides “a royalty-
free, nonexclusive and irrevocable right to reproduce, publish, or otherwise use [any work that is
subject to copyright] for federal purposes, and to authorize others to do so” to the federal awarding
agency 2 C.F.R. § 200.315(d) provides to the federal government the rights to “obtain, reproduce,
publish, or otherwise use” data produced under a federal award and to authorize others to do the
same.
Related Tools and Resources
Appendix II to Part 200: Contract Provisions for NFE Contracts under Federal
Awards
Contract Provisions Guide
230
See 2 C.F.R. § 200.321; compare 2 C.F.R. § 200.317 (2019), with 2 C.F.R. § 200.317 in Office of Management and
Budget, Guidance for Grants and Agreements, 85 Fed. Reg. 49,506, 49,552 (Aug. 13, 2020).
90
Chapter 13: Beyond the Basics:
Important Procurement
Considerations
NFEs often seek guidance regarding complex issues
that are not explicitly outlined in the federal
procurement under grant rules. Federal rules exist
to protect government funds and must be followed
in all procurements under grants, no matter their
complexity or structure.
Th
is section includes common examples of advanced procurement actions and how FEMA interprets
the Uniform Rules to apply in the following scenarios:
Indian Tribal Government Procurements
Contract Changes/Modifications
Design-Bid-Build and Design-Build Contracts
Construction Manager at Risk (CMAR) Delivery Method
Cooperative Purchasing Program
o Cooperative Purchasing
o Joint Procurements
o Piggybacking
Prepositioned Contracts
Mutual Aid Agreements
Purchasing Agents
When the federal procurement under grant standards do not address a specific procurement
issue, a non-state entity must abide by the applicable state, local, and/or Tribal procurement
standards or regulations – whichever applies to the specific non-state entity.
St
ate Entities
Non-State Entities
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Considerations for Indian Tribal Governments
Indian Tribal Governments may serve as a recipient or a subrecipient under a FEMA award. It is
important to note that in both capacities, they are required to comply with the federal procurement
under grant rules applicable to non-state entities; which include provisions for competition, methods
of procurement, conflicts of interest, cost or price analyses, bonding requirements, etc.
231
The Uniform Rules define an Indian tribe, or “federally recognized Indian tribe” as any
Indian tribe, band, nation, or other organized group or community, including any
Alaska Native village or regional or village corporation as defined in or established
pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. Chapter 33), which is
recognized as eligible for the special programs and services provided by the United
States to Indians because of their status as Indians (25 U.S.C. 450b(e)).
232
Indian Tribal Preferences When Awarding Contracts
Although the federal procurement under grant rules require that recipients and subrecipients
conduct their procurement transactions in a manner providing for full and open competition.
233
Indian tribal preferences may be permissible if certain requirements are met under the Indian Self-
Determination and Education Assistance Act.
The Indian Self-Determination and Education Assistance Act sets forth federal policy
allowing Indian Tribal Governments to apply preference in the award of contracts and
subcontracts to “Indian organizations” or “Indian-owned economic enterprises” in
connection with the administration of any federal award.
234
An Indian organization is the governing body of any federally recognized Indian tribe or an entity
established or recognized by such a governing body.
235
An Indian-owned economic enterprise is any
commercial, industrial, or business activity established or organized by a member of a federally
recognized Indian tribe for the purpose of profit, provided that such Indian Tribal ownership
constitutes 51% or higher of the enterprise.
236
Indian Tribal Governments using a permissible preference are required to document that they have
m
et the requirements under the Indian Self-Determination and Education Act.
237
They must also
231
2 C.F.R. §§ 200.317-200.327.
232
2 C.F.R. § 200.1 Indian tribe. Under the Public Assistance Program, the definition for Indian Tribal Government
excludes Alaskan Native Corporations, the ownership of which is vested in private individuals. See 44 C.F.R. § 206.201(h).
233
2 C.F.R. § 200.319.
234
25 U.S.C. § 5307(b)(1) and (2).
235
25 U.S.C. § 5304(l).
236
25 U.S.C. § 1452(e).
237
2 C.F.R. § 200.318(i).
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ensure compliance with the remainder of federal procurement under grant rules, as well as any
applicable Tribal laws.
238
Inapplicability of the Socioeconomic Affirmative Steps
When complying with the Indian Self-Determination and Education Assistance Act, if using the
preference, Indian Tribal Governments do not need to take additional steps to comply with the
socioeconomic affirmative steps found within the federal procurement under grant rules.
Other Indian Tribal Procurement Considerations
Inapplicability of the Procurement of Recovered Materials Provision: The procurement of
recovered materials provision
239
applies only to state entities or political subdivisions of a
state and its contractors. Indian Tribal Governments are not required to comply with this
provision.
Indian Tribal Preference in Employment: An exception to Title VII of the Civil Rights Act of
1964 allows an Indian tribe or any business enterprise on or near an Indian Tribal
reservation to apply Indian tribal preferences in employment.
240
This exception is often
referenced in contracts awarded by Indian Tribal Governments and is compliant with the
federal procurement under grant standards.
Reasonable Costs: Although Indian tribal preferences may be permissible when awarding
contracts and subcontracts under the Indian Self-Determination and Education Assistance
Act, Indian Tribal Governments still have a responsibility, under the FEMA award, to ensure
that costs are reasonable and document such a determination.
Example: Indian Tribal Preference When Awarding a Contract
Scenario: The Indian Tribal Government of Y, as the result of a flood, sustains
damages to many of its government buildings. When evaluating proposals for the
repair work, Indian Tribal Government of Y applies a preference percentage to Indian-owned
economic enterprises competing for the award. Indian Tribal Government of Y documents in its
procurement file how the preference meets the requirements under the Indian Self-Determination
and Education Assistance Act. Was the use of the Indian tribal preference permissible under the
federal procurement under grant rules?
Answer: Yes. The use of the Indian tribal preference was permissible. The Indian Self-Determination
and Education Assistance Act provides that an Indian Tribal Government may apply preferences in
238
2 C.F.R. §§ 200.318-200.327.
239
2 C.F.R. § 200.323.
240
42 U.S.C. § 2000e-2(i).
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the award of contracts and subcontracts to “Indian organizations” or “Indian-owned economic
enterprises” in connection with the administration of a FEMA award.
Related Tools and Resources
FEMA Tribal Policy
Contract Changes/Modifications
A contract change is any addition, subtraction, or modification of work, costs, or time required under
a contract during contract performance. There are many reasons why an NFE may wish to make
changes to an existing contract. For example, during performance, changes may be required to fix
inaccurate or defective specifications, react to unforeseen circumstances, or modify the work
orders/parameters/etc. to ensure the contract meets the NFE’s requirements.
All contract changes must be within the scope of the original contract. NFEs are not restricted from
making minor adjustments contemplated fairly and reasonably by the parties when they entered the
contract. Cardinal changes present a problem.
A cardinal change is a significant modification in contract work (property or services), costs, or time
that causes:
A major deviation from the original purpose of the work or the intended method of achievement;
or
A revision of contract work, costs, or time so extensive, significant, or cumulative that the
contractor is required to perform very different work from that described in the original contract.
Generally, FEMA will view a cardinal change to a contract as a noncompetitive award and evaluate
whether the NFE meets the necessary conditions for using the procurement through noncompetitive
proposal method (sole sourcing). If an NFE performs a cardinal change without meeting the
exceptions to competitive procurements, then the NFE is noncompliant with the federal procurement
under grant rules.
Issues related to impermissible cardinal changes may arise within the context of an NFE using an
existing contract or obtaining assigned contract rights from another jurisdiction. However,
recognizing a cardinal change to a contract can be difficult. Assigning a specific percentage, dollar
value, number of changes, or other objective measure that would apply to all cases to identify
cardinal changes poses several challenges. In determining whether an NFE has made a prohibited
cardinal change, FEMA generally evaluates whether the change is “within the general scope of the
contract” and “within the scope of competition” on a case-by-case basis.
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Scope of the Contract
In determining whether changes are beyond the
scope of the contract, FEMA may compare the
total work performed by the contractor to the
work called for in the original contract. This
includes evaluating the nature of the work being
performed, the additional amount of effort the
contractor is required to perform for the work, the
difference in cost, and the period of performance
for the change in order for FEMA to assess the
change’s cumulative impact on the contract’s
quantity, quality, cost, and delivery terms.
Scope of Competition
In determining whether changes are beyond the scope of the contract, FEMA may evaluate whether
there is a material difference between the modified contract and the contract that was originally
competed. Consideration will be given to whether the solicitation for the original contract adequately
advised offerors of the potential for the type of changes at issue or whether the changes are of a
nature that potential offerors may have reasonably anticipated.
Example: Out of Scope Changes
Scenario: A powerful storm impacts the City of Z, resulting in flooding and damaging
portions of the City’s sidewalk. The City of Z plans to use a preexisting contract to
replace 5 miles of damaged sidewalk at an estimated expense of $4 million. A review of the existing
contract indicates that disaster related repairs were anticipated, but the contract limits repairs to 1.5
miles in the City’s center and contains a not-to-exceed clause of $750,000. Can the City of Z modify
its existing contract in order to perform the anticipated repair of its sidewalks?
Answer: No. In this scenario, the new requirement for sidewalk repairs would more than double the
services contemplated in the preexisting contract and increase the contract value above the “not-to-
exceed amount” by over 300%. This contract modification would be viewed as a noncompetitive
(sole-sourced) award to the contractor because the new contract work deviates significantly from the
original requirements solicited through full and open competition.
Design-Bid-Build and Design-Build Contracts
Design-Bid-Build
The design-bid-build procurement process is the most common system used to award construction
projects in the United States. Under this delivery method:
95
An architect completes a fully detailed design;
A solicitation for construction bids is advertised based upon the complete design; and
The lowest eligible and responsible bidder is selected to complete the construction project.
In this process, the three phases of planning, design, and construction run seque
ntially, and the
construction contractor is not involved until the construction stage.
Non-state entities may use design-bid-build procurement procedures under a FEMA award if
permitted by state, local, and/or Indian tribal laws and regulations. This process involves two
separate and distinct solicitations and contract awards.
The first solicitation and contract award are for the complete building designs, drawings, and/or
specifications.
T
his is followed by a second solicitation and contract award for construction associated with the
complete building designs, drawings, and/or specifications.
Both procurements must comply with all the federal procurement under grant rules.
A contractor that is awarded a contract to develop designs, drawings, and/or specifications is
prohibited from competing for and receiving an award for the associated construction portion
of the work.
241
Design-Build Contracts
The design-build procurement process consists of contracting for design and construction
simultaneously with a contract awarded to a single contractor, or contractor team. That team will be
responsible for both the project’s design and construction. The federal procurement under grant
rules allow the use of design-build contracts if permitted by state, local, and/or Indian tribal laws and
regulations.
For design-build contracts, a non-state entity must separate the various contract activities to be
undertaken, classify them as either design or construction, and then calculate the estimated total
value of each.
The non-state entity must use the procurement method appropriate for the services having the
greatest cost (e.g., architectural and engineering services or construction services).
Consideration should be given to the following factors:
241
2 C.F.R. § 200.319(b).
96
Construction costs normally comprise a greater estimated total value than design costs. If
this is the case, FEMA expects the non-state entity to use procurement by competitive
proposals or sealed bidding for the entire procurement rather than a qualifications-based
procurement by competitive proposals.
If architectural and engineering services are predominant (which is unusual), then the non-
state entity may use sealed bidding, procurement by competitive proposals, or a
qualifications-based procurement by competitive proposals.
CMAR Delivery Method
Under a typical CMAR delivery method, a recipient or subrecipient hires a construction firm or
construction manager early in the design and planning process to later oversee the project’s
construction.
242
The construction manager advises the design firm during the project’s design and
planning phases and often acts as the general contractor during the construction phase to select,
schedule, and sequence subcontractors to complete the required construction work.
The method is known as construction manager “at risk” because the recipient or subrecipient and
construction manager negotiate a guaranteed maximum price (GMP) during the design phase and
the construction manager will be responsible for any costs that exceed that amount. While CMAR can
be a complex process and the specifics of the delivery method will vary by jurisdiction, if done
properly, it can yield time and cost efficiencies by obtaining construction manager input during the
design phase and beginning aspects of a construction project before the full design is complete.
Certain CMAR procedures may be inconsistent with the federal procurement under grant rules and it
is the NFE’s responsibility to ensure compliance when using this delivery method under a FEMA
award. Because there is no uniform CMAR standard across jurisdictions, particularly regarding the
construction phase and the evaluation thereof, FEMA will review the use of CMAR on a case-by-case-
basis to ensure that the method utilized conforms to the requirements outlined by the federal
procurement under grant rules.
Price as a Selection Factor for CMAR
Price must be considered for the whole procurement, and the entirety of the work needs to have a
price component, unless such items are excepted by the federal rules as architectural and
engineering services.
When procuring a construction manager, non-state entities should review anticipated project costs
and determine if the majority of costs are for actual construction costs or for architectural and
engineering professional services. If a majority of the costs are for the actual cost of construction,
then non-state entities must consider the price for the entire project (design, planning, and
242
This delivery method is sometimes referred to as “CM/GC,” given that the selected construction manager becomes a
project’s general contractor.
97
construction phases) such that there is no part of the construction manager selection (including the
initial selection of qualified contractors) that is done without consideration of cost competition.
Because the majority of costs when using CMAR are often for actual construction costs, not
architectural and engineering professional services, using a qualifications-based procurement for the
CMAR approach may violate the federal procurement rules.
Related Tools and Resources
PDAT: CMAR Fact Sheet
Cooperative Purchasing
Cooperative purchasing is an arrangement for acquiring goods or services that involves aggregating
the demand of two or more entities to obtain a more economical purchase.
Cooperative purchases can take many forms, such as joint procurements, piggybacking, or the
various state and county cooperative purchasing agreements, and cooperative purchasing programs.
NFEs may enter cooperative purchases; however, they must follow the federal procurement
under grant rules. The responsibility is on the NFE to ensure compliance with the rules
applicable to its entity type and be mindful that the rules are different for state entities and
non-state entities.
Joint Procurements
The federal procurement under grant rules encourage non-state entities to enter into
state and local intergovernmental agreements for procurement or use of common
goods and services.
243
FEMA has interpreted this regulation as encouraging recipients
and subrecipients to collaborate in joint procurements.
A joint procurement is a method of contracting in which two or more purchasers agree from the
outset to use a single solicitation document and enter a single contract with a vendor for the delivery
of goods or services. This is typically done to obtain advantages unavailable for smaller
procurements. Joint procurements encourage NFEs to foster greater economy and efficiency by
allowing the opportunity for a cost-effective use of shared resources.
Upon contract award, a non-state entity responsible for undertaking the joint procurement may
assign responsibility to the other participants for administering those parts of the contract affecting
243
2 C.F.R. § 200.318(e).
98
their goods or services. This process, however, does not relieve a participating non-state entity from
the requirement to comply with all federal procurement under grant rules applicable to it. In other
words, each party acting under a joint procurement must ensure that all applicable federal
procurement under grant rules are met in order to maximize the potential for reimbursement for all
eligible expenses incurred under the procurement. It is also important to note that a joint
procurement is not the same as “piggybacking.”
Example: Joint Procurement between Non-State Entities
Scenario: Two neighboring counties have decided to prepare for the upcoming
hurricane season. From prior experience, they know that it is relatively difficult to find
serious bidders since both counties are considerably smaller than the surrounding
counties in their area. To increase the potential for bidders and promote economic efficiency, they
have agreed to enter a joint solicitation for debris removal services covering both counties. Following
the solicitation and receipt of bids, both entities evaluate the responses and jointly award a contract
to the debris removal contractor of their choosing. A major disaster declaration occurs a week later,
and they both use the contract to carry out debris removal services for the following two weeks. Are
the two counties allowed to enter this type of joint procurement?
Analysis: Yes. In this scenario, both entities worked together from the start to prepare the solicitation
and conduct the evaluation process. Both entities are parties to the agreement, and the scope of
work expressly includes the performance of services in both counties. Presuming that the
procurement meets all other requirements of 2 C.F.R. §§ 200.317-200.327, this contract could be
used by both counties for debris removal services during a major disaster.
Joint Procurements between State and Non-State Entities
A state entity may enter a joint procurement with non-state entities for goods and services to be used
by both parties under a FEMA award.
When a state is entering into a procurement with local entities, it is important to remember
that the contract must be procured in compliance with both state and local procurement
regulations, as well as the federal procurement under grant rules found at 2 C.F.R. §§
200.318-200.327. This is a very important caveat because the state would only be required to
comply with 2 C.F.R. § 200.317 if it was procuring the goods or services solely for its own use.
Since the state is procuring with non-state entities, the purchase must comply with the federal
procurement under grant regulations that are applicable to all entity types participating in the
joint procurement.
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Using Another Jurisdiction’s Contract (Piggybacking)
There are times when a NFE sets up a contract with a vendor, then a second NFE
wants to utilize the first entity’s contract. FEMA refers to the assignment of contracts
from one jurisdiction to another in circumstances like this as “piggybacking.” FEMA
discourages the use of piggyback contracts because it is often challenging for an
entity to piggyback off another’s contract while remaining in compliance with the federal
procurement under grant rules. Although FEMA generally discourages the use of piggyback contracts,
an NFE that obtains contractual rights through assignment
244
may use the contract after first
determining that:
The original contract was procured in compliance with the federal procurement under grant rules
that would apply to the entity seeking reimbursement;
The original contract contains appropriate assignability provisions that allow the assignment of
all or a portion of the specified deliverables under the terms originally advertised, competed,
evaluated, and awarded, or contains other appropriate assignment provisions;
The scope of work to be performed falls within the scope of work under the original contract, and
there are no cardinal changes to the contract; and
The contract price is fair and reasonable.
Non-State Entities and Piggybacking
If the above-mentioned criteria are not met, and a non-state entity enters a piggyback contract,
FEMA views the contract as noncompetitive. A non-state entity can only sole-source or conduct a
noncompetitive procurement when it meets certain exceptions.
245
If a non-state entity enters into a
piggyback contract when it does not meet the above-mentioned criteria or the exceptions for
noncompetitive procurements, then the non-state entity is noncompliant with the federal
procurement under grant rules.
State Entities and Piggybacking
Under the federal procurement under grant rules, a state entity must follow its own rules in
determining the appropriateness of piggybacking and whether it can enter a noncompetitive contract
if the above-mentioned criteria are not met.
244
An “assignment” is the transfer of contract rights from one party to another. Black’s Law Dictionary 138 (9th Ed. 2009)
(defining “assignment of rights”).
245
2 C.F.R. § 200.320(c).
100
Example: Using Another Jurisdiction’s Contract
Scenario: City of Z and City of W are two cities located in the State of M. The two cities
are approximately 50 miles from one another. On January 23, 2019, a major storm
impacts both cities, and both require debris removal services. The City of Z procured a
contract with Jackson Debris Removal in May 2018. The contract includes the use of 10 trucks for
debris removal. The City of W was not able to procure a contract pre-disaster but requires the use of
five trucks for debris removal and would like to use the City of Z’s contract to address that need. The
City of Z’s contract includes an assignment provision, indicating that the City of W can use the
contract. The demands of the January 23, 2019 storm require City of Z to use all 10 trucks for its
debris removal. If City of Z followed all procurement standards and the price is reasonable, can the
City of W use the Jackson Debris Removal contract to use five trucks?
Answer: No. The City of W cannot use the contract because it would exceed the original negotiated
quantity amount. City of Z needs 10 trucks and City of Z needs five trucks, with a total need of 15
trucks. The original contract’s scope of work is only for 10 trucks, so the cumulative need exceeds
the scope of the contract. Thus, the City of W’s use of the contract would result in an out of scope
modification to the original contract.
Cooperative Purchasing Programs
Cooperative purchasing programs come in many forms, combining the requirements of their
members to reduce administrative time, expenses and leverage the benefits of volume purchases.
The GSA Multiple Award Schedule (MAS) Purchasing Programs are examples of cooperative
purchasing programs. NFEs may sign up to use a cooperative purchasing program through a
cooperative purchasing agreement. Program membership may provide entities with access to lists of
agreements or contracts for goods and services at pre-negotiated rates or prices. Typically, the
member then purchases the goods or services by negotiating with participating vendors and placing
purchase orders or entering contracts based on the rates or prices listed in the cooperative
purchasing program’s agreements or contracts with vendors.
Use of General Services Administration Schedules
Eligible NFEs that may include states, Indian Tribal governments, local governments, and
educational institutions, may procure goods and services from many GSA MAS Purchasing Programs,
also known as GSA Schedules.
246
NFEs should review the GSA purchasing program guidelines in
order to determine whether their entity is eligible to purchase off of the GSA Schedule. GSA offers
multiple efficient and effective procurement programs for state, tribal, and local governments to
purchase products and services directly from pre-vetted contractors. The GSA Schedules are long-
246
40 U.S.C. § 502(c).
101
term government-wide contracts with commercial firms that provide access to millions of commercial
products and services at volume discount pricing.
USE OF GSA SCHEDULES BY STATE ENTITIES
If a state entity procures goods or services using a GSA Schedule, the state must ensure compliance
with the its own procurement rules. The state entity must also comply with the socioeconomic
affirmative steps, domestic preferences, procurement of recovered materials requirements, and
required contract provisions.
USE OF GSA SCHEDULES BY NON-STATE ENTITES
When purchasing from a GSA schedule, eligible non-state entities that are Indian Tribal governments,
local governments, and educational institutions will satisfy the federal requirements for full and open
competition provided that the GSA ordering procedures are followed. However, the eligible non-state
entities will still need to follow the other federal procurement rules at 2 C.F.R. §§ 200.317-200.327,
to include the socioeconomic affirmative steps, contractor oversight, cost and price analysis, and
required contract provisions.
Other Supply Schedules and Cooperative Purchasing Programs
For NFEs that want to procure goods or services from a cooperative purchasing program, or other
similar program, in order for such procurements to be permissible under federal requirements, the
following must be true.
COOPERATIVE PURCHASING BY A STATE ENTITY
If a state entity procures goods or services through cooperative purchasing, the entity must ensure
compliance with the state’s own procurement rules. The state entity also must comply with the
socioeconomic affirmative steps, domestic preferences, procurement of recovered materials, and
required contract provisions.
COOPERATIVE PURCHASING BY A NON-STATE ENTITY
While the federal procurement under grant rules encourage the use of cooperative purchasing where
appropriate, non-state entities should exercise caution when using such programs and work closely
with the procuring entity to ensure compliance with
the federal procurement standards found at 2
C.F.R. §§ 200.318-200.327. For example, if a non-
state entity enters into a cooperative purchase
with a state entity, the non-state entity must
ensure the state’s procurement complied with the
federal procurement under grant rules for non-
state entities. A non-state entity that decides to
use a cooperative purchasing program must
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document and explain how its use of the program complied with all federal procurement under grant
rules and applicable state, local, and/or Tribal procurement rules and policies. Below are additional
considerations for non-state entities when purchasing from a cooperative purchasing program:
Micro-Purchases and Small Purchases: If a non-state entity wishes to purchase goods and
services through a cooperative purchase where the total cost does not exceed the federal SAT,
the non-state entity must ensure that the purchase complies with the federal procurement under
grant rules for micro-purchases or small purchases (depending on the cost of the purchase).
Purchases Above the SAT: If a non-state entity procures goods or services above the simplified
acquisition threshold through cooperative purchasing, unless there is an emergency or exigency
circumstance, the non-state entity must ensure compliance with the federal procurement under
grant rules for sealed bids or proposals.
Methods of Procurement: Sealed bidding and proposals require that non-state entities publicly
advertise or publicize the solicitations, solicit bids from an adequate number of known suppliers,
and award contracts to the responsible, responsive firm with the lowest price (for sealed bids) or
to the responsive firm whose proposal is most advantageous to the program with price and other
factors considered (for proposals).
Scope of Work Requirements: A non-state entity must ensure that the solicitation used in a
cooperative purchase includes a clear and accurate description of the scope of work or goods to
be procured. Additionally, a cooperative purchase that places overly restrictive requirements in
the solicitation risks noncompliance with the full and open competition standard.
247
Geographic Preferences: Any geographic preferences that a cooperative purchase uses in
evaluating bids or proposals, and any additional terms and conditions in a pre-negotiated
agreement that favor or give preference to local suppliers could violate 2 C.F.R. § 200.319(c)
and be restrictive of competition.
248
Compliance with all other Federal Rules: The non-state entity must ensure compliance with all
applicable Federal procurement standards when acquiring goods and services through a
cooperative purchasing program. These include that socioeconomic affirmative steps are taken
during the cooperative purchase;
249
the purchase order or contract includes all required contract
provisions;
250
and a cost or price analysis is conducted, including an independent cost estimate
pre-solicitation,
251
etc.
247 2 C.F.R. § 200.319.
248 Id.
249 2 C.F.R. § 200.321.
250 2 C.F.R. § 200.327.
251 2 C.F.R. § 200.324.
103
Example: Non-State Entity use of a State-led Cooperative Purchasing Program
Scenario: The courthouse and city hall in the Town of X, which is in State of Y, are
flooded during a hurricane. As a result, the Town of X needs to replace all the furniture
in both buildings with an estimated cost of $350,000. The Town researches and finds a cooperative
purchasing program in which State of Y procures goods and allows local entities within the state to
purchase from by way of purchase orders. The State procures the goods in compliance with its own
rules and does not have any state requirements to take the socioeconomic affirmative steps. One of
the contracts is for furniture, and the Town purchases the furniture needed in the amount of
$350,000. The Town does not take the socioeconomic affirmative steps prior to entering the
purchase order. Is the Town in compliance with the federal procurement under grant regulations?
Answer: No, the Town of X is not in compliance with the federal procurement under grant rules. The
responsibility is on the Town to ensure the procurement follows the federal procurement under grant
rules applicable to it as a non-state entity. Here, the State of Y conducted the procurement and was
not required to take the socioeconomic affirmative steps. The Town of X was required to take the
socioeconomic affirmative steps and failure to do so is noncompliant with the federal procurement
under grant rules.
Related Tools and Resources
Purchasing Goods or Services through Cooperative Programs
PAPPG
PDAT: GSA Fact Sheet
Preparedness Manual
GSA Purchasing Programs
State and Local Governments | GSA
Prepositioned Contracts for Disaster Grants
FEMA encourages NFEs to award prepositioned contracts, or advance contracts, before an incident
occurs for the potential performance of work under the FEMA award. The use of prepositioned
contracts allows recipients and subrecipients to conduct a deliberate procurement process outside
of the pressure and immediate demands of a disaster. It also helps to ensure that NFEs have
contractors ready to perform work quickly after an incident occurs when needed most.
When using prepositioned contracts, NFEs must ensure that:
The contract was procured in compliance with the applicable procurement under grant rules for
its entity type (state or non-state entity rules); and
The work to be performed falls within the scope of work of the prepositioned contract and the
ne
w work does not create a cardinal change to the prepositioned contract. The contract’s scope
of work must adequately encompass the type and extent of future work.
104
Non-State Entities and Prepositioned Contracts
If the above-mentioned scope considerations are not met when a non-state entity utilizes a
prepositioned contract, FEMA will view the contract as a noncompetitive, or sole-sourced,
procurement because the new work was not originally subject to full and open competition. A non-
state entity is permitted to conduct a noncompetitive procurement under exceptional
circumstances.
252
If a non-state entity uses a prepositioned contract, but it is unable to meet the
above-mentioned criteria or the exceptions for noncompetitive procurements, then the non-state
entity is noncompliant with the federal procurement under grant rules.
State Entities and Prepositioned Contracts
When determining the appropriateness of utilizing a prepositioned contract, a state entity must
follow its own documented procurement policies and procedures as well as additional rules pursuant
to 2 C.F.R. § 200.317.
Since, socioeconomic affirmative steps were not applicable to state entities prior to recent
OMB guidance, if a state entity is using a prepositioned contract, entered into prior to
November 12, 2020, in support of declarations and FEMA awards issued on or after November
12, 2020, FEMA will generally consider it infeasible for the state entity to comply with the six
affirmative steps. While consideration may be given to such prepositioned contract(s), state
entities must review their policies and procedures to ensure compliance with the
socioeconomic affirmative steps at 2 C.F.R. § 200.321.
Example: Prepositioned Contract
Scenario: Powerful storms impact the City of P, resulting in torrential rainfall, flooding,
and damage to much of the City’s infrastructure. Eight miles of underground natural
gas pipelines were damaged. Although the damage did not result in a public
emergency or exigency to meet the noncompetitive procurement exception, City of P plans on using a
contractor under an existing contract to repair and replace the eight miles of damaged pipelines for
$3 million. The prepositioned contract was procured in compliance with the federal procurement
under grant rules. Additionally, a review of the existing contract indicates that disaster-related repairs
were anticipated. The contract limits such repair work to no more than 10 miles and includes a not-
to-exceed clause of $5 million. Under this scenario, can the City of P use its existing contract to
repair the damaged pipeline?
Answer: Yes. In this scenario, the City of P wishes to use the prepositioned contract for work that was
contemplated in the original contract. The required work would not result in an out-of-scope
252
2 C.F.R. § 200.320(c).
105
modification of the original contract and was procured in compliance with the federal procurement
under grant rules.
Mutual Aid Agreements
Under the PA Program, NFEs lacking sufficient resources to respond to an incident may request
resources from another jurisdiction through a “mutual aid” agreement. FEMA refers to the entity
requesting resources as the “requesting entity” and to the entity providing the requested resource as
the “providing entity.”
253
NFEs that wish to use mutual aid services must ensure that their
agreements are in compliance with PA Policy. The PA Program generally does not treat a mutual aid
agreement as a procurement for the purposes of 2 C.F.R. Part 200; however, PA staff will review
mutual aid agreements on a case-by-case-basis to determine whether the federal procurement
under grant rules apply.
Examples: Mutual Aid Work Performed Through Contract
Scenario 1: The City of X (requesting entity) requests 30 police officers from the City of
W (providing entity) to perform law enforcement operations immediately following a
tornado in the requesting entity’s jurisdiction. This request is pursuant to an existing
mutual aid agreement for police support. The providing entity contracts with a bus company to
transport the police officers to the requesting entity’s jurisdiction and includes the costs of this
transportation along with its force account labor costs in its bill to the providing entity. Is this
agreement subject to the federal procurement under grant rules?
Analysis: No. Such contract services are incidental to the law enforcement services performed by the
providing entity, and FEMA would treat this instance as a mutual aid agreement so long as all other
requirements of FEMA PA policy are met.
Scenario 2: The City of Z is impacted by a tornado that generates widespread debris throughout the
jurisdiction. Rather than entering a contract directly with a debris removal contractor, the City of Z
enters into an agreement with the City of Y, which already has a debris removal contract, to obtain
rights to its contractor. The agreement assigns contractor rights to City of Z for 120 days. After the
agreement is executed, the Contractor performs debris removal throughout the City of Z for 90 days.
Would this agreement be treated as a procurement?
Analysis: Yes. Since City of Z is exclusively entering into the agreement to acquire rights to City of Y’s
contract, the PA Program may treat this agreement as a piggyback contract, rather than a mutual aid
agreement; hence, this agreement will be subject to the federal procurement under grant standards
at 2 C.F.R. §§ 200.318-200.327.
253
PAPPG, Ch. 6: IX. Mutual Aid (June 2020).
106
Purchasing Agents
A purchasing agent is an agent of an NFE that assists with the procurement of goods
and services. The purchasing agent may assist the entity during the procurement
process by conducting market research, preparing solicitations, evaluating bids or
proposals, negotiating contracts, and screening information about products, among
other tasks.
If the NFE lacks qualified personnel within its organization to undertake the various procurement
tasks required to comply with the federal procurement under grant rules, FEMA expects the entity to
acquire the necessary services from sources outside the organization. The federal procurement
under grant rules do not require an NFE to perform these tasks itself through full-time staff or
otherwise prohibit an NFE’s use of a third-party’s services, such as a purchasing agent during the
procurement process.
Non-State Entities and Purchasing Agents
Non-state entities are required to follow their own documented procurement procedures provided
that they conform with the federal procurement under grant rules.
254
If the non-state entity
anticipates using a purchasing agent for its procurements, the entity should ensure that its
procurement procedures allow for the use of a purchasing agent.
When using a purchasing agent, a non-state entity must ensure that it has written standards of
conduct covering conflicts of interest.
255
These standards apply to both the non-state entity as well
as the purchasing agent conducting a procurement on their behalf. A purchasing agent shall not
participate in the selection, award, or administration of a contract supported by a FEMA award if he
or she has a conflict of interest in the procurement process.
There are two contract administration requirements that cannot be satisfied by purchasing agents:
The non-state entity must maintain oversight over procurements to ensure that contractors
perform in accordance with the terms, conditions, and specifications of the contract;
256
and
The non-state entity must serve as the responsible party regarding the settlement and
satisfaction of all contractual and administrative issues arising out of the procurements entered
into in support of a FEMA award.
257
This includes disputes, claims, protests of award, source
evaluation, or other matters of a contractual nature.
254
2 C.F.R. § 200.318(a).
255
2 C.F.R. § 200.318(c)(1).
256
2 C.F.R. § 200.318(b).
257
2 C.F.R. § 200.318(k).
108
Chapter 14: Remedies for
Procurement Noncompliance
When an NFE fails to comply with the federal
procurement standards, FEMA has the authority to
address the noncompliance by imposing conditions
or remedy actions on the recipient. The Uniform
Rules set out the specific conditions and remedies
available to FEMA to address any such
noncompliance. This section lists how FEMA staff
may administratively implement some of the
remedy actions and specific conditions.
Remedies for Noncompliance
258
A. Temporarily withhold cash payments pending correction of the deficiency—place a hold or stop
payment on the grant award in the appropriate award payment system pending the recipient’s
submission of satisfactory documentation as to correction of the noncompliance;
B. Disallow all or part of the cost of the activity or action not in compliance if the recipient has
already drawn down money;
C. Wholly or partly suspend or terminate the federal award
259
—FEMA may suspend or terminate the
federal award if a recipient fails to comply with the terms and conditions of a federal award. If
FEMA determines in the case of partial termination that the reduced or modified portion of the
federal award will not accomplish the purposes for which the federal award was made, FEMA
may terminate the federal award in its entirety;
D. Initiate suspension or debarment proceedings;
E. Withhold further federal awards for the FEMA grant with respect to the recipient, under one or
more programs, and for specified periods of time; or
F. Take other remedies that may be legally available—for example, FEMA may request the recipient
change the designated official who manages the grant for the recipient.
258
2 C.F.R. § 200.339.
259
2 C.F.R. § 200.339(c).
St
ate Entities
Non-State Entities
109
Specific Conditions
260
A. Require payment on a reimbursement basis rather than advance payment—impose controlled
drawdowns by placing all funds on hold and only releasing funds for drawdown when the
recipient provides a request for reimbursement and full support documentation for the
requested payment;
B. Withhold authority from the recipient to proceed to later phases of its project until FEMA receives
satisfactory evidence of acceptable performance within a given period of performance—place a
hold or stop payment on the grant award in the appropriate Award Payment System pending the
recipient’s submission of satisfactory documentation as to acceptable performance;
C. Require additional, more detailed financial or program progress reports—may require more
frequent reports and/or additional information in reports on an as needed basis or on a recurring
schedule as deemed appropriate based on the noncompliance and circumstances;
D. Require additional project monitoring—require technical assistance visits, desk reviews or site
visits to ensure recipients or subrecipients are taking the appropriate corrective actions to
correct noncompliance or if there is a need to continue monitoring as a result of noncompliance;
E. Require the NFE to get technical assistance or management assistance—require the recipient or
subrecipient to obtain specialized technical or management assistance, including, but not limited
to, webinars targeted at specific issues or concerns, training from FEMA’s Procurement Disaster
Assistance Team, or hiring a contractor to review the recipient’s financial systems and make
recommendations; or
F. Establish additional prior approvals.
Related Tools and Resources
OIG Summary Reports on Procurement Noncompliance:
o OIG-18-29-D Lessons Learned from Prior Reports on Disaster-related
Procurement and Contracting
o OIG-16-126-D FEMA Can Do More to Improve Public Assistance Grantees’
and Subgrantees’ Compliance with Federal Procurement Rules
260
2 C.F.R. § 200.208.
110
APPENDIX
ACRONYM REFERENCE
AFG: Assistance to Firefighters Grants Program
CFR: U.S. Code of Federal Regulations
CMAR: Construction Manager at Risk
CPPC: Cost plus a percentage of cost contract
CSID: Centralized Scheduling and Information Desk
DHS: U.S. Department of Homeland Security
EO: Executive Order
EPA: Environmental Protection Agency
FAR: Federal Acquisition Regulation
FEMA: Federal Emergency Management Agency
GMP: Guaranteed Maximum Price
GPD: Grant Programs Directorate
GSA: General Services Administration
IFB: Invitation for Bids
IHE: Institutions of Higher Education
JFO: Joint Field Office
LSA: Labor Surplus Area
MAS: Multiple Award Schedule
MBDA: Minority Business Development Agency
NFE: Non-Federal Entity
OIG: Office of the Inspector General
111
OMB: Office of Management and Budget
PA: Public Assistance Program
PAPPG: Public Assistance Program Policy Guide
PDAT: Procurement Disaster Assistance Team
PNP: Private Nonprofit Organization
RFP: Request for Proposal
RFQ: Request for Quotation
SAM: System for Award Management
SASP: State Agency for Surplus Property
SAT: Simplified Acquisition Threshold
SBA: Small Business Administration
SDO: Suspension and Debarment Official
T&M: Time-and-materials contract
U.S.C.: United States Code
DEFINITIONS
Contract: A legal instrument by which a FEMA award recipient or subrecipient purchases property
or services needed to carry out the project or program under a federal award.
261
A contract, for
the purposes of this Manual, does not mean a federal award or subaward.
Contractor: Contractor means an entity that receives a contract.
262
Cooperative agreement: A legal instrument of financial assistance between a federal awarding
agency or pass-through entity and a non-federal entity, that is consistent with 31 U.S.C. 6302-
6305.
263
261
2 C.F.R. § 200.1 Contracts.
262
2 C.F.R. § 200.1 Contractor.
263
2 C.F.R. § 200.1 Cooperative agreement.
112
Federal awarding agency: The federal agency that provides a federal award directly to a non-
federal entity (NFE). The federal awarding agency discussed in this Manual is FEMA.
Federal Emergency Management Agency (FEMA): FEMA’s statutory mission is to reduce the loss
of life and property and protect the Nation from all hazards, including natural disasters, acts of
terrorism, and other man-made disasters, by leading and supporting the nation in a risk-based,
comprehensive emergency management system of preparedness, protection, response,
recovery, and mitigation.
264
Among other things:
o FEMA administers its programs and carries out its activities through its headquarters offices
in Washington, D.C.; ten Regional Offices; Area Offices for the Pacific, Caribbean, and Alaska;
various Recovery Offices; and temporary Joint Field Offices (JFO).
o FEMA administers numerous assistance programs annually or on a regular basis to increase
the Nation’s preparedness, readiness, and resilience to all hazards. These assistance
programs are typically available to NFEs including, but not limited to, states, local
governments, Indian tribes, territories, universities, hospitals, and certain PNPs.
o Each program is governed by the applicable federal law, regulations, executive orders and
FEMA program-specific policies. As the Federal awarding agency for these programs, FEMA is
responsible for the proper management and administration of these programs as otherwise
required by law and enforcing the terms of the agreements it enters with NFEs that receive
FEMA financial assistance, consistent with the requirements at 2 C.F.R. Part 200.
Federal award: The financial assistance that an NFE receives either directly from a Federal
awarding agency or indirectly from a pass-through entity.
265
In this Manual, the term is used
interchangeably with “FEMA Award”.
Grant agreement: A legal instrument of financial assistance between a Federal awarding agency
or pass-through entity and an NFE that, consistent with 31 U.S.C. §§ 6302, 6304: Is used to
transfer anything of value from the Federal awarding agency or pass-through entity to the NFE to
carry out a public purpose authorized by a law of the United States (see 31 U.S.C. § 6101(3));
and does not include an agreement that provides only:
o Direct United States government
cash assistance to an individual;
o A subsidy;
264
See Homeland Security Act of 2002, Pub. L. No. 107-296, § 503 (2002) (codified as amended at 6 U.S.C. § 313).
265
2 C.F.R. § 200.1 Federal award.
o A loan;
o A loan guarantee; or
o Insurance.
115
NOTE: In this Manual, grant agreement is used interchangeably with “FEMA Award Agreement.”
266
Hospital: Hospital means a facility licensed as a hospital under the law of any state or a facility
operated as a hospital by the United States, a state, or a subdivision of a state.
267
Indian tribe (or “federally recognized Indian tribe”): Indian tribe means any Indian tribe, band,
nation, or other organized group or community, including any Alaska Native village or regional or
village corporation as defined in or established pursuant to the Alaska Native Claims Settlement
Act (43 U.S.C. Chapter 33), which is recognized as eligible for the special programs and services
provided by the United States to Indians because of their status as Indians (25 U.S.C
.
450b(e)).
268
See annually published Bureau of Indian Affairs list of Indian Entities Recognized
and Eligible to Receive Services. For the purposes of this Manual, used interchangeably with
“Indian Tribal Government.”
Institutions of Higher Education (IHE): IHE is defined at 20 U.S.C. 1001. For the purposes of this
Manual, IHEs can be recognized as state and non-state entities depending on funding structure.
Inspector General Act of 1978: Congress enacted this legislation to ensure integrity and
efficiency in government. The Act created Offices of Inspector General (OIG) within various
departments and agencies across the federal government. Following the establishment of the
U.S. Department of Homeland Security (DHS) in 2002, a new OIG was created in the
Department.
o DHS OIG conducts independent audits, investigations, and inspections of DHS programs and
operations and its components and makes recommendations to change policy and practice. DH
S
O
IG has broad authority to audit FEMA programs and activities including the awarding of financial
assistance to recipients and subrecipients. DHS OIG focuses on issues of noncompliance. Some
of the most common findings resulting from OIG audits involve:
o Nonc
ompetitive contracting practices;
o Failure to include required contract provisions;
o Failure to follow the mandatory affirmative steps to ensure small and minority businesses,
women-owned enterprises, and LSA firms are used when possible; and
o Failure to conduct cost or price analysis when required.
266
2 C.F.R. § 200.1 Grant agreement.
267
2 C.F.R. § 200.1 Hospital.
268
2 C.F.R. § 200.1 Indian tribe.
116
Local government:
Local government
269
means any unit of government within a state, including
a:
o County;
o Borough;
o Municipality;
o City;
o Town;
o Township;
o Parish;
o Special district;
o School district;
o Intrastate district;
o Council of governments,
whether incorporated or
not as a nonprofit
corporation under state
law;
o Local public authority,
including any public
housing agency under
the United States
Housing Act of 1937;
and
o Any other agency or
instrumentality of a
multi-, regional, or intra-
state or local
government
Micro-purchase
:
Micro-purchase means a purchase of supplies or services using simplified
acquisition procedures, the aggregate amount of which does not exceed the micro-purchase
threshold. Micro-purchase procedures comprise a subset of an NFE’s small purchase
procedures. NFEs use such procedures to expedite the completion of their lowest-dollar small
purchase transactions and minimize the associated administrative cost and burden. The federal
micro-purchase threshold is set by the Federal Acquisition Regulation (FAR) at 48 C.F.R. Subpart
2.1 (Definitions).
270
Presently and as of June 2018, the federal micro-purchase threshold is set
at $10,000.
271
Non-Federal Entity: A state, local government, Indian tribe, IHE, or eligible private nonprofit
organization (PNP) that carries out a federal award as a recipient or subrecipient.
272
In this
Manual, NFEs include state and non-state entities.
Non-State Entity: A non-state entity is an eligible FEMA award recipient or subrecipient that does
not meet the definition of a “state” under 2 C.F.R. § 200.1.
Nonprofit organization (in this manual, it is used interchangeably with “Private Nonprofit
Organization or PNP”):
Nonprofit organization
273
means any corporation, trust, association,
cooperative, or other organization, not including IHEs, that:
269
2 C.F.R. § 200.1 Local government.
270
2 C.F.R. § 200.1 Micro-purchase.
271
41 U.S.C. § 1902(a)(1); The Office of Management and Budget, Memorandum for Chief Financial Officers and Heads of
Small Executive Agencies (M-18-18) (June 20, 2018), available at
https://www.whitehouse.gov/wp-
content/uploads/2018/06/M-18-18.pdf (increasing the micro-purchase and simplified acquisition threshold under federal
assistance awards).
272
2 C.F.R. § 200.1 Non-Federal entity.
273
2 C.F.R. § 200.1 Nonprofit organization.
117
o Is operated primarily for scientific, educational, service, charitable, or similar purposes in
the public interest;
o Is not organized primarily for profit; and
o Uses net proceeds to maintain, improve, or expand the operations of the organization.
Recipient: An NFE that receives a federal award directly from a Federal awarding agency to carry
o
ut an activity under a federal program. The term recipient does not include subrecipients.
274
A
recipient is responsible for administering the federal award in accordance with applicable federal
laws. Examples of recipients include state, local, Indian tribe and territorial governments.
Pass-through entity: A recipient that provides a subaward to a subrecipient to carry out part of a
f
ederal program is known as the pass-through entity.
275
Pass-through entities are responsible for
processing subawards to subrecipients and ensuring subrecipient compliance with the terms
and conditions of the FEMA award agreement.
Simplified Acquisition Threshold (SAT)
:
Simplified acquisition threshold means the dollar amount
below which an NFE may purchase property or services using small purchase methods. NFEs
adopt small purchase procedures to expedite the purchase of items costing less than the
simplified acquisition threshold. The federal SAT is set by the FAR at 48 C.F.R. Subpart 2.1
(Definitions) and in accordance with
41 U.S.C. 1908.
276
Presently and as of June 2018, the
federal SAT is $250,000,
277
but is periodically adjusted for inflation.
State: State means any state of the United States, the District of Columbia, the Commonwealth
of Puerto Rico, U.S. Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern
Mariana Islands, and any agency or instrumentality thereof exclusive of local governments.
278
In
t
his Manual, state is used interchangeably with “state entity.”
Subaward: An award provided by a pass-through entity to a subrecipient for the subrecipient to
carry out part of a federal award received by the pass-through entity. It does not include
payments to a contractor or payments to an individual that is a beneficiary of a federal program
.
A
subaward may be provided through any form of legal agreement, including an agreement that
the pass-through entity considers a contract.
279
274
2 C.F.R. § 200.1 Recipient.
275
2 C.F.R. § 200.1 Pass-through entity.
276
2 C.F.R. § 200.1 Simplified acquisition threshold.
277
Section 805 codified at 41 U.S.C. § 134; OMB Memo (M-18-18), available at https://www.whitehouse.gov/wp-
content/uploads/2018/06/M-18-18.pdf.
278
2 C.F.R. § 200.1 State. Some hospitals and IHEs as defined by 2 C.F.R. § 200.1 Hospitals and 2 C.F.R. § 200.1 IHEs
respectively, may meet the definition of a State.
279
2 C.F.R. § 200.1 Subaward.
118
Subrecipient: An NFE that receives a subaward from a pass-through entity to carry out part of a
federal program but does not include an individual that is a beneficiary of such program.
280
Uniform Rules: The series of regulations found at 2 C.F.R. Part 200 that establishes Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for federal awards to
NFEs. The Uniform Rules are referred to by several names throughout the remaining portions of
this document. Some of the names include standards, requirements, rules, and regulations.
280
2 C.F.R. § 200.1 Subrecipient.
