Navigating Federal Procurement: A Guide to 2 CFR 200.320
When organizations receive federal funding, one of the most critical responsibilities they carry is ensuring that procurement of goods and services is done in compliance with federal regulations. Under 2 CFR 200.320, there are three primary procurement methods: informal, formal, and non-competitive. Each comes with its own thresholds, documentation requirements, and best practices. Understanding these methods is essential for grant professionals, administrators, and finance teams seeking to stay compliant while making effective purchasing decisions.
The Three Procurement Paths
At a high level, procurement under federal awards falls into three categories:
Informal Procurement Methods – Used for smaller transactions to reduce administrative burden.
Formal Procurement Methods – Required for larger, competitive purchases.
Non-Competitive Procurement (Sole Sourcing) – Reserved for special, limited circumstances.
Let’s break these down further.
Informal Procurement Methods
Informal methods apply when the cost of goods or services falls below the simplified acquisition threshold, currently $250,000 but increasing to $350,000 on October 1, 2025. Within this category are two key approaches:
1. Micro-Purchases
Threshold: Currently $10,000, rising to $15,000 in October 2025.
Flexibility: No need for competitive quotes or bids. Purchases can be made using procurement cards.
Requirement: Document a justification showing the price is reasonable (through prior purchase history, market research, or professional judgment).
Fairness: To the extent possible, distribute purchases equitably among qualified suppliers to encourage fair competition.
Organizations can set their own internal micro-purchase thresholds, but these must be backed by strong internal controls, risk assessments, and compliance with local/state laws. In some cases, recipients and subrecipients can raise their thresholds up to $50,000 through annual self-certification—as long as they meet conditions such as being a low-risk auditee or conducting annual risk assessments.
For thresholds above $50,000 but under $250,000, approval is required from the cognizant agency for indirect costs.
2. Simplified Acquisitions
These are purchases above the micro-purchase level but below the simplified acquisition threshold. They are governed by the Federal Acquisition Regulation (FAR). While they involve more structure than micro-purchases, they still aim to minimize the administrative burden for medium-sized procurements.
Formal Procurement Methods
When purchases exceed the simplified acquisition threshold ($250,000, rising to $350,000 in October 2025), organizations must use formal procurement methods. These are more rigorous, requiring public notice and competition. Two options are available:
1. Sealed Bids
Typically used for construction projects or straightforward procurements.
Contracts are awarded to the lowest responsible bidder.
Must meet specific conditions: adequate project specifications, at least two bidders, and suitability for a firm fixed-price contract.
2. Proposals
Used when sealed bidding is not appropriate.
May involve fixed-price or cost-reimbursement contracts.
Evaluation goes beyond price, factoring in bidder qualifications, expertise, and overall value to the organization.
Requires written procedures for selection, technical evaluations, and contract award.
For architectural and engineering services, a special qualifications-based procurement method may be used, prioritizing competence and expertise before negotiating fair compensation.
Non-Competitive Procurement (Sole Sourcing)
The third method, non-competitive procurement, is reserved for limited situations where competition is impractical or impossible. It may be used only if one of the following applies:
The purchase falls under the micro-purchase threshold.
Only one source is capable of providing the goods or services.
A public emergency requires immediate procurement, and competitive bidding would cause harmful delays.
The federal agency or pass-through entity grants approval.
After competitive solicitation, inadequate competition is determined.
Regardless of the circumstance, documentation is critical. Organizations must justify why sole sourcing was necessary and ensure alignment with federal rules.
The Importance of Documentation
Across all procurement methods, one theme stands out: document, document, document. Written justifications are not only a compliance requirement but also a safeguard during audits. These records may be the deciding factor in whether an expense is deemed allowable.
Documentation should demonstrate:
Fairness in the process.
Reasonableness of the decision.
Compliance with organizational policies and federal standards.
Key Takeaways for Grant Professionals
Match the method to the expense size: Informal for smaller purchases, formal for large-scale procurements, and non-competitive only under narrow conditions.
Stay ahead of threshold changes: Remember, both micro-purchase and simplified acquisition thresholds increase on October 1, 2025.
Leverage flexibility wisely: If your organization qualifies for higher micro-purchase thresholds, ensure self-certifications and risk assessments are well documented.
Prioritize transparency: Even when competition isn’t required, strive for equitable supplier distribution and fair pricing.
Always document: Decisions, justifications, and procedures must be written, clear, and consistent.
Final Thoughts
Procurement under federal funding isn’t just about buying goods and services—it’s about ensuring compliance, fairness, and stewardship of taxpayer dollars. For grant professionals, mastering the three procurement methods outlined in 2 CFR 200.320 is not optional; it’s essential.
By understanding the thresholds, applying the right method consistently, and maintaining thorough documentation, organizations can navigate procurement confidently, withstand audits, and focus on achieving the mission their federal funds were meant to support.
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