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Procurements

What procurement processes govern use of ARP funds?

Although the Treasury Department has begun issuing guidance and has promulgated an Interim Final Rule relating to the ARP, Treasury has not yet issued detailed guidance related to the formal procurement process for funds provided by the ARP. However, municipalities may prepare based on general guidelines and past experiences and should follow their own internal processes and procedures and any local procurement and contracting laws or requirements.[1]

Federal funding is generally subject to the federal procurement requirements outlined in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), found at Title 2 of the Code of Federal Regulations, Part 200.[2] These requirements outline the broad, general rules for the procurement of goods and services using federally awarded funds. Some federal awards may have additional requirements for procurement and contracts, generally identified in the terms and conditions or guidance for the specific award.

In select cases, federal funding may not be subject to the federal procurement requirements – such as funding classified as “other Federal assistance,”[3] including the Coronavirus Relief Fund (“CRF”) of the CARES Act.[4] Based on Treasury’s Interim Final Rule on the Coronavirus State and Local Fiscal Recovery Funds[5] and the related Frequently Asked Questions,[6] it remains unclear whether federal procurement requirements will apply; Treasury has stated that “payments from the Fiscal Recovery Funds as a general matter will be subject to the provisions of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR part 200) (the Uniform Guidance), including the cost principles and restrictions on general provisions for selected items of cost.”[7] This broad language may indicate that the CSLFRF may be subject to more requirements, including procurement and contracting, that were not applicable to the CRF. It is possible that ARP funds may in the future be subjected to: (1) federal procurement requirements detailed in the Uniform Guidance; or (2) other requirements specific to ARP funds and set forth in the terms and conditions of the award or in published guidance from the Treasury. Procurement and contracting requirements are in place as best practices to mitigate the risk of fraud, waste, or abuse of federal funds, and are designed to ensure that federally funded contracts are competitive and fair.[8]

A few requirements drawn from the Uniform Guidance, which will apply to the ARP as a best practice unless future Treasury guidance specifically states that Uniform Guidance is not applicable to CSLFRF, include the following:

  • Adhering to local procurement and contracting policies, standards, or procedures, including applicable local or state laws.[9] In cases where the federal requirements and local requirements conflict, a municipality typically should adhere to the more stringent requirement.[10] Auditors or oversight authorities will look to published policies and procedures governing procurement of federally funded contracts, as well as local laws, to ensure that both local and federal requirements were met.[11] 
  • Maintaining clear policies governing conflicts of interest for employees involved with developing solicitations, evaluating or awarding contracts, or managing or monitoring vendors.[12]
  • Publishing and documenting clear standards in procurement solicitations and evaluation criteria on how a municipality will determine a vendor is to be determined as “responsive and responsible.”[13]
  • Utilizing the appropriate procurement method based on the size of the proposed scope of services of volume of goods to ensure adequate competition.[14] For services under the simplified acquisition threshold ($250,000),[15] procurement may follow informal procurement methods,[16] for solicitations over the simplified acquisition threshold, procurement should follow formal procurement methods,[17] such as sealed bidding or competitive proposals.
    • If procurement is only possible through non-competitive methods, municipalities will need to justify use of a non-competitive procurement process.[18] Clearly documenting conditions surrounding the award or specialized circumstances will be critical to demonstrate compliance, especially if inability to follow competitive procurement is due to exigency or emergency of an imminent threat to public health, safety, or welfare.
    • Where feasible, municipalities should consider taking steps to ensure competition is accessible to minority- or women-owned businesses.[19]
  • Justifying and documenting the selection of vendors, including (1) that a vendor is responsive to the requirements outlined in the procurement, (2) responsible, (3) not debarred from doing business with the federal government, and (4) offering a reasonable, competitive cost, based on cost or price analysis completed by the municipality.[20]
  • Including appropriate federal requirements or language in the executed contract, including bonding provisions,[21] documentation and reporting requirements, or applicable contract provisions as identified in Appendix II: Contract Provisions for Non-Federal Entity Contracts Under Federal Awards.[22]

Municipalities may have existing contracts or working relationships with vendors for similar services that they may wish to use for ARP-funded work. To utilize a pre-existing contract, municipalities can consider the following requirements to assess whether the contract meets federal procurement requirements, which should be necessary unless the Treasury guidance does not mandate compliance:

  • Was the contract competitively procured, consistent with local procurement and contracting requirements and applicable laws? If so, are there differences between the local and federal requirements that may be in conflict?
  • Is the contract active and does it include the goods or services being sought?
    • For example, a municipality may have an existing contract for providing workforce development services that they wish to use starting July 1, 2021, but the contract expired in March 2021. Extending the contract to include additional time may be deemed noncompetitive, because the contract expired before services began.
    • For example, a municipality may have an engineering and construction firm contracted to build a new community center and wants to use the same firm to perform citywide water and sewer infrastructure projects as permitted by the ARP Local Fiscal Recovery Funds (“LFRF”). This scope is very different than what is included in the current contract, and may be considered noncompetitive.
  • Has the vendor demonstrated capacity and financial responsibility to provide the goods or services being sought?
  • Are there other vendors or organizations that could also reasonably and responsibly provide the good and service that may object to the lack of competition available for federal funds?
  • Can the municipality clearly document and justify the reasoning to utilize an existing vendor relationship in lieu of following normal procurement and contracting processes? This may include justification of exigent or emergency circumstances, imminent threat to public health and safety, or substantive demonstration that no alternatives were feasible.

In some cases, existing relationships established through a Memorandum of Understanding (“MOU”) or a Memorandum of Agreement (“MOA”) can be expanded for the provision of services that may fall under the intended use of ARP funding, such as non-profits or other public entities, like local public school districts or institutions of higher education, which provide public services including housing support, healthcare, food distribution, or job training programs. Municipalities may explore utilizing existing MOUs or MOAs, or establishing new MOUs or MOAs, with non-profits or public entities to provide additional services utilizing ARP funding. MOUs and MOAs should still include the required contract provisions,[23] monitoring and oversight requirements,[24] and cost principles[25] as identified by federal or local requirements, though likely will not follow the same procurement process. Municipalities should also be prepared to justify and document the selection of the MOU or MOA as the most appropriate, reasonable, and cost-effective method to provide services utilizing ARP funds.

Last Revised: May 28, 2021

[1] 2 CFR 200.303

[2] 2 CFR 200.317-331

[3] 2 CFR 200.40

[5] U.S. Department of Treasury Coronavirus State and Local Fiscal Recovery Funds, 31 CFR Part 35 RIN 1505-AC77, https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[6] Coronavirus State and Local Fiscal Recovery Funds; Frequently Asked Questions (FAQ) as of May 10, 2021, FAQ #46.

[7] U.S. Department of Treasury Coronavirus State and Local Fiscal Recovery Funds, 31 CFR Part 35 RIN 1505-AC77, at 86, https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[8] 2 CFR 200.319(a)

[9] 2 CFR 200.303

[10] 2 CFR 200.318 and 2 CFR 200.319(c)

[11] 2 CFR 200.319(d)

[12] 2 CFR 200.318(c)

[13] 2 CFR 200.319(d)

[14] 2 CFR 200.320

[16] 2 CFR 200.320(a)

[17] 2 CFR 200.320(b)

[18] 2 CFR 200.320(c)

[19] 2 CFR 200.321

[20] 2 CFR 200.324-325

[21] 2 CFR 200.326

[22] 2 CFR 200.327

[23] 2 CFR 200.327

[24] 2 CFR 200.331-332

[25] 2 CFR 200.324-325, 2 CFR 200 Subpart E