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06/29/2018
5 Best Practices to Ensure Your Organization is Ready to Procure Under Federal Awards
Having strong procurement policies and procedures in place ahead of time can help your organization prepare for an emergency and respond quickly during a crisis.
Conducting procurements in accordance with U.S. government regulations, even in the best of times, may be a complicated and time-consuming process. When a disaster strikes, the stakes are raised and it becomes even more difficult to focus on compliance issues. Improper procurement may jeopardize grant funding and expose your organization to wasted resources and embarrassing headlines. Establishing strong purchasing practices ahead of time that encourage open competition will ease the stress of the procurement process and help ensure that you receive the best value for goods and services.
Below are five best practices to employ when implementing an effective, compliant, and reliable procurement program.
- Develop and Maintain a Purchasing Policy – Every organization should have a set of policies and procedures for conducting procurements. The policy should cover the different ways in which your organization acquires goods and services, and be tailored to the way your organization conducts business. You should research and incorporate relevant state and federal purchasing regulations into your policy, to help ensure that your regular practices are compliant. Be sure to develop clear guidance on how your organization may make use of emergency purchases, sole source awards, and purchasing cooperatives or buy boards.
- Ensure Full and Open Competition – Based on the dollar value of the goods or services being purchased, you may need to obtain quotes; issue a request for qualifications or proposals; or conduct a formal sealed bidding process. Publication of a solicitation may be required. To ensure full and open competition, you must demonstrate that all qualified parties were eligible to compete for your contract and had an opportunity to respond. This advertisement should be posted for a reasonable amount of time, depending on your governing policy. Some of the most common methods used are: newspapers, business journals, and the internet. Many cities, counties, and states have online resources for publishing solicitations.
- Select the Appropriate Contract Type – Once the decision is made to procure goods and services, selecting the appropriate contract type is an important next step. Fixed price, time and materials, and cost reimbursement are three commonly used forms of payment method, and each have their own controls to meet your objectives. Depending on your scope of work, level of risk, and needs specific to your project - you should select a reimbursement type that best suits your project and carries the lowest risk to your organization. Be aware, some reimbursement methods such as “cost plus” may not be allowed for U.S. government contracts.
- Seek Out Underutilized Vendors– When you accept federal funds, you agree that you will try to contract with M/WBEs (Minority/Women’s Business Enterprises) to do some, or all, of the work. This means that you should take the extra step of putting M/WBEs on your solicitation lists and, if it is feasible, divide the work into smaller projects to encourage these businesses to bid. The Small Business Administration is a great resource to find qualified M/WBEs to help you get back to pre-disaster conditions. Note that in some areas, these organizations are referred to as Historically Underutilized Businesses or “HUBS”.
- Maintain Records of Purchasing Activity - Nothing is more frustrating than doing what you are supposed to do, but not being able to prove it. Any documents pertaining to procurement for your federal award should be retained for three years from the date of the final submission. This documentation should include evidence that you pursued full and open competition, such as contacting multiple vendors or soliciting responses from a variety of sources. You could be selected for audit, and not having the proper documentation can lead to de-obligation of funds. You may have to give the money that you received (and spent) back to the federal government!
Although there are many factors involved in developing a procurement program and maintaining compliance with regulations, the above best practices can help you avoid jeopardizing your federal funds. Additionally, having strong procurement policies and procedures in place ahead of time can help your organization prepare for an emergency and respond quickly during a crisis.
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For more information on this topic, please contact Frank Banda, CPA, CFE, CGMA, PMP, Managing Partner – Government and Public Sector Advisory, CohnReznick at 301.280.1856 or frank.banda.@cohnreznick.com. Or, contact Adam Wright, CPA, CIA, CFE, Manager, CohnReznick, at 512.499.1437Subject matter expertise
Frank Banda
CPA, CFE, PMP, Managing Partner – Government and Public Sector Advisory
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This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.