OMB Super Circular New Purchasing Guidelines 1 In

OMB “Super Circular” New Purchasing Guidelines 1

In December 2013, the US Office of Management and Budget (OMB) issued comprehensive grant reform rules titled “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” Two-year grace period – new effective date – the year ending June 30, 2017 2

Overall, these reforms require the non-Federal entity to use its own documented procurement procedures which reflect applicable state and local laws and regulations, provided that the standards also conform to applicable federal laws and standards. Umm, you do have “documented procurement procedures, right? The Comptroller’s City Manual states “The governing body, by ordinance, should establish a purchasing policy. ” It further requires that the purchasing policies must comply with state law or applicable charter or private act provisions related to competitive bidding and purchasing. 3

v Every non-federal entity receiving federal awards must have documented procurement procedures that reflect federal law, Uniform Guidance standards, and any state regulations. v Entities should focus on the most economical solution during the procurement process, and must avoid using federal funds for the acquisition of unnecessary items. Organizations are encouraged to consider the use of shared services and intergovernmental agreements to foster greater economy and efficiency. 4

v Written conflict-of-interest policies are required. No employee or agent of the entity may participate in the selection, award, or administration of a contract funded by federal grant dollars if he or she has an actual or apparent conflict of interest. v The organization must document the procurement steps and activities required to be completed. This includes the basis for the type of procurement, contract type, and the basis for the contractor selection and price. Does your city require employees to annually sign a conflict of interest form? 5

v Ultimately, the recipient of federal awards must maintain an ‘appropriate level of oversight’ to ensure that contractors perform in accordance with the terms of their contract. v The Uniform Guidance also requires full and open competition. Contractors who assist in drafting specifications for requests for proposals (RFP) must be excluded from competing for those opportunities. Has your city ever ask a potential bidder to assist in drawing specifications?

v RFP specifications cannot have unreasonable requirements that are meant to limit competition. v Procurements must be conducted in a manner that prohibits the use of geographical preferences in the evaluation of proposals, except in certain case where federal law explicitly requires or encourages geographic preference or when contracting for architectural and engineering services, provided that specifying geographic location leaves an appropriate number of qualified firms. Does your city have a ‘local preference’ for purchasing? 7

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Five Allowable Procurement Methods • Procurement by micro-purchases • • the acquisition of supplies or services, the aggregate dollar amount of which does not exceed $3, 000 (generally) may be awarded without soliciting competitive quotations if the non-Federal entity considers the price to be reasonable. 9

Five Allowable Procurement Methods • Procurement by small purchase procedures • relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold (currently $150, 000) • Price or rate quotations must be obtained from an adequate number of qualified sources. (not defined) 10

Five Allowable Procurement Methods • Procurement by competitive proposals • normally conducted with more than one source submitting an offer, and either a fixed-price or cost-reimbursement type contract is awarded. • non-Federal entity must have a written method for conducting technical evaluations of the proposals received and for selecting recipients. 12

Five Allowable Procurement Methods • Single (Sole source) purchase (One of the following must apply) • The item is available only from a single source • The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation • federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the city • After solicitation of a number of sources, competition is determined inadequate 13

Conflict of Interest - two types of conflict of interest policies must be maintained by the non. Federal entity Ø Employee Conflict of Interest Ø must maintain written standards of conduct covering conflicts of interest and governing the performance of its employees engaged in the selection, award, and administration of contracts Ø Organizational Conflict of Interest Ø If the city has a parent, affiliate, or subsidiary organization that is not a state government, local government, or Indian tribe the city must also maintain written standards of conduct covering organizational conflicts of interest 14

Must also maintain… • The rationale for the method of procurement • Selection of the contract type • Contractor selection or rejection • Basis for the contract price 15

Other things to note… • Section 200. 319 contains language that prevents contractors who develop or draft specifications, requirements, statements of work, and invitations for bids or requests for proposals from competing for such procurements 16

Other things to note… • You must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of the contract or purchase order (this used to require a ‘a contract administration system’. How the city maintains oversight is a matter of judgment for the city. 17

What do I really need to know… • All non-Federal entities will need to update their internal procurement policies to reflect the changes described in the uniform guidance. It is important that a recipient’s procurement policies identify the five allowable methods • Ensure your organization's current employee conflict of interest policies include the required language 18

What do I really need to know… • Ensure the mandatory organizational conflict of interest policy is written, if applicable 19

New State law pertaining to Internal Control… 20

Tennessee State Law TCA § 9 -18 -102(a), effective June 30, 2016 “Each agency of state government and institution of higher education along with each county, municipality, and metropolitan government shall establish and maintain internal controls, which shall provide reasonable assurance that: (1) Obligations and costs are in compliance with applicable law; (2) Funds, property, and other assets are safeguarded against waste, loss, unauthorized use, or misappropriation; and (3) Revenues and expenditures are properly recorded and accounted for to permit the preparation of accurate and reliable financial and statistical reports and to maintain accountability over the assets. ” 21

Comptroller’s Office References Internal Control and Compliance Manual; Dec 2015 • “Local governments…must establish and maintain an adequate internal control system for purposes of financial reporting, managing operations, and legal compliance. ” • “Various state statutes require the…Comptroller…to prescribe a uniform accounting system…defined as methods and records…to maintain accountability…Those methods…include establishing, documenting, and implementing adequate internal controls. ” 22

THEREFORE, The Comptroller’s Office guidance for establishing , documenting, and implementing an internal control system, in compliance with TCA, is based on the GREEN BOOK 23

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Thank You! Have a safe and productive day. 25