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Overview of Procurement and Contracting

Applicants often use contractors to help them perform work in the approved scope of work under Public Assistance Grant awards and subawards.

For example, an Applicant may receive financial assistance under a Public Assistance project award to repair a building damaged by a major disaster. The Applicant may award a contract to a construction company to do the work. FEMA's regulations specifically make contractor costs an "allowable cost" under the Public Assistance Grant Program.

Procurement: The process an Applicant or Recipient follows to solicit contractors, evaluate offers, and select a contractor through the use of evaluation criteria.

Contracting is the method by which an Applicant procures goods and services from a contractor based on a mutual agreement.

FEMA provides Public Assistance funding for contract costs based on the terms of the contract and if the Applicant meets Federal procurement and contracting requirements.

As a condition of receiving FEMA financial assistance for these contractor costs, Recipients and Applicants must comply with applicable Federal laws, regulations, executive orders, and other requirements.

Recipients and Applicants are responsible for managing and administering Federal awards in compliance with the applicable requirements.

Recipients and Applicants have slightly different Federal procurement standards that must be followed.

When procuring goods or services, Recipients must:

• Follow the same policies and procedures they would use for procurements without non-Federal funds (Title 2 of the Code of Federal Regulations, Section 200.317)
  
• Comply with Title 2 of the Code of Federal Regulations Section 200.322, Procurement of Recovered Materials
  
• Ensure that every purchase order or other contract includes any clauses required by Title 2 of the Code of Federal Regulations Section 200.326, Contract Provisions

FEMA encourages Recipients to upload their procurement policy and procedures into Grants Portal during steady-state (non-emergency) conditions. This provides easy access and visibility during a disaster.

Specific procurement requirements for Recipients may be found in the Public Assistance Program and Policy Guide.

Applicants must follow the regulations outlined in Title 2 of the Code of Federal Regulations, Sections 200.318 through 200.326.

Applicants must use their own documented procurement procedures and comply with Federal and state government laws and regulations.

When Federal, State, local, Tribal, or Territorial policies directly conflict, the Applicant should always apply the more restrictive procurement standard.

The Procurement Disaster Assistance Team website provides additional resources on Federal procurement standards for both Recipients and Applicants.

Failure to follow Federal contracting requirements when purchasing goods and services from contractors puts Applicants at risk of not receiving reimbursement for otherwise eligible disaster costs.

FEMA recognizes and reimburses costs incurred using three types of contract payment obligations:

• Fixed-price
• Cost-reimbursement
• Time and materials (in limited circumstances)

However, FEMA advises against the use of time and materials contracts and only reimburses costs incurred if the following apply:

• No other contract was suitable
• The contract includes a ceiling price that the contractor exceeds at its own risk
• The Applicant provides a high degree of oversight to obtain reasonable assurance that the contractor is using efficient methods and effective cost controls

The Applicant must include required provisions in all contracts awarded and maintain oversight to ensure contractors perform according to the conditions and specifications of the contract and any purchase orders.

FEMA does not reimburse costs incurred under a cost plus a percentage of cost contract or a contract with a percentage of construction cost method.

Refer to FEMA's Public Assistance: Contracting Requirements Checklist for key information that Applicants need to consider when utilizing contracted resources.

Public Assistance: Contracting Requirements Checklist: Contracting Requirements Checklist

Under certain circumstances, Recipients and Applicants may decide to waive their own local, State, or Tribal procurement standards or regulations as a result of, or in anticipation of, a disaster or emergency.

For example, a state governor may declare a State of Emergency, temporarily waiving State procurement standards to help expedite the purchase of goods and services.

Recipients and Applicants cannot waive Federal procurement standards. However, Federal regulations do allow for noncompetitive procurements under exigent or emergency conditions.

Generally, Federal procurement standards require that Applicants ensure maximum full-and-open competition. However, Federal regulations allow for noncompetitive procurements under exigent and emergency circumstances.

Exigency: A need to avoid, prevent, or alleviate serious harm or injury, financial or otherwise, to the Applicant, and use of competitive procurement proposals would prevent the urgent action required to address the situation. Thus, a noncompetitive procurement may be appropriate.

Emergency: A threat to life, public health and safety, or improved property requires immediate action to alleviate the threat.

Suggested elements for noncompetitive procurement justification:

• Identify which circumstance apply to this specific instance:
  • Item or service available only from a single source
  • Public exigency or emergency
  • Express authorization from Federal awarding agency or pass-through entity, or
  • After solicitation of a number of sources, competition is determined inadequate
  Repositories for Rules and Regulations

  Applicants should be familiar with where rules and regulations regarding procurement and contracting are located in order to access and review them in times of disaster.

  Repositories for rules and regulations for procurement and contracting include:

  • Public Assistance Program and Policy Guide
  • Appeals Database
  • Procurement Disaster Assistance Team website
  • Recipient tools

  Public Assistance Program and Policy Guide: Public Assistance Program Policy Guide

  Overview: Common Mistakes Leading to Audits and Potential Loss of Federal Funding

  Recipients and Applicants often have difficulty complying with applicable Federal procurement standards. As a result, FEMA established the Procurement Disaster Assistance Team to assist Applicants with interpreting and adhering to Federal procurement standards.

  This team works with Applicants to minimize, reduce, and eliminate common non-compliance issues that routinely result in the de-obligation of grant funding that would otherwise be eligible for full reimbursement.

  Recipients and Applicants interested in a training session are encouraged to contact local FEMA staff who can help arrange in-person trainings as well as live webinars.

  The following slides discuss common mistakes often encountered in contracting and procurement and tips on how to avoid them.

  Common Mistake: Emergency Contracting

  A common mistake Applicants make in procurement and contracting is related to emergency contracting and noncompetitive procurement.

  • Engaging in noncompetitive procurement (i.e., sole-sourcing) without carefully documenting how the situation has created an urgent need to perform the work sooner than a competitive procurement process would allow
  • Continuing work under a sole-source contract after the urgent need has ended, instead of transitioning to a competitively procured contract
  • Piggybacking onto another jurisdiction's contract in a situation that does not allow noncompetitive procurement or where the other contract is materially different in terms of scope or requirements

  State governors, Tribal officials and local officials cannot waive Federal procurement standards. Therefore, even during a governor-declared state of emergency, Recipients and Applicants must remember to follow Federal regulations regarding noncompetitive procurement. This includes ensuring exigent or emergency conditions are met and maintaining proper documentation. Failure to comply with Federal procurement standards may jeopardize grant funding.

  Common Mistake: Time and Materials Contract

  Common Mistake

  Awarding a time and materials contract without a ceiling price that the contractor exceeds at its own risk and without documenting why no other contract type is suitable.

  Avoidance Strategy

  FEMA advises against the use of time and materials contracts and only reimburses costs incurred under these contracts in limited circumstances. Without a ceiling price in the contract, there is very little incentive for the contractor to control costs of the contract.

  To receive reimbursement, Applicants using time and materials contracts must document why no other contract was suitable, include a ceiling price that the contractor exceeds at its own risk, and provide a high degree of oversight to ensure contractor uses efficient methods and effective cost controls.

  Common Mistake: Cost-Plus-Percentage-of-Cost Contracts

  Common Mistake

  Awarding a "cost-plus-percentage-of-cost" or "percentage-of-construction-cost" contract.

  Avoidance Strategy

  These are contracts where the contractor's profit is based on a percentage of the underlying project costs actually incurred. There is very little incentive for the contractor to control the price, since as the cost increases so does their profit. Such contracts are explicitly prohibited by Federal procurement standards and are ineligible for FEMA grant funding because they incentivize the contractor to increase their actual costs in order to increase the associated profit.

  Common Mistake: Omitting Required Contract Clauses

  Common Mistake

  Not including the required contract clauses.

  Avoidance Strategy

  An Applicant's contracts must contain the applicable contract clauses described in Appendix II of the Uniform Rules (Title 2 of the Code of Federal Regulations). These clauses include:

  • Remedies
  • Termination for cause and convenience
  • Equal employment opportunity
  • Contract Work Hours and Safety Standards Act
  • Clean Air Act and the Federal Water Pollution Control Act
  • Debarment and Suspension
  • Byard Anti-Lobbying Amendment
  • Additional FEMA requirements
  • DHS Seal, Logo, and Flags
  • Compliance with Federal law, regulations, and executive orders
  • No obligation by Federal government
  • Program fraud and false or fraudulent statements or related acts

  Additional information on these clauses may be found here in Title 2 of the Code of Federal Regulations section 200.326 and Part 200, Appendix II, Required Contract Clauses.

  Common Mistake: Including Geographic Preference in a Solicitation

  Including a geographic preference in a solicitation (i.e., giving an advantage to local firms.)

  It is important to recognize that the procurement standards are different for Recipients and Applicants. Recipients are not subject to the Federal regulation prohibiting geographic preference and must follow the same policies and procedures it uses for procurements from its nonfederal funds when it procures property and services under a Public Assistance grant award.

  However, Applicants are prohibited from including geographic preferences in the evaluation of bids or proposals.

  Common Mistake: Not Soliciting Small, Minority, and Women Owned Businesses Enterprises

  Common Mistake

  Not making and documenting efforts to solicit small businesses, minority businesses, and woman owned business enterprises.

  Avoidance Strategy

  Title 2 Code of Federal Regulations part 200, Subpart D 200.321 requires Applicants to take all necessary affirmative steps to assure that minority firms, women's business enterprises, and labor area surplus firms are used when possible.

  Notably, this is not an authority to provide set-asides, but rather a requirement aimed at ensuring maximum participation of these types of firms.

  Common Mistake: Not Conducting a Detailed Cost Analysis

  Common Mistake

  Conducting a procurement exceeding $150,000 without conducting a detailed cost or price analysis.

  Avoidance Strategy

  Applicants must perform a cost or price analysis for procurement actions exceeding the small purchase threshold of $150,000 - or the equivalent local or State threshold (whichever is less).

  Price analysis is where the contractor's prices are compared to each other and/or established market or catalogue prices. Using this technique, the Applicant compares the actual prices offered by various contractors to determine the reasonableness of the proposed price.

  Common Mistake: Insufficient Records Detailing a Procurement

  Common Mistake

  Not carefully documenting all steps of a procurement to create a record if questions arise potentially years later.

  Avoidance Strategy

  Applicants must maintain records to detail the significant history of the procurement action. These records should include the rationale and basis for the following:

  • Method of procurement
  • Selection of contract type
  • Contractor selection or rejection
  • Contract price

  Additionally, these records must also include the contract document and any contract modifications with the signatures of all parties.

  The Procurement Disaster Assistance Team (PDAT) Field Manual provides detailed information on the required procurement records and documentation Applicants should maintain.

  For more information, please review Title 2 Code of Federal Regulations §200.320 (b).

  Lesson 2 Summary

  In this lesson, participants learned how to:

  • Explain Federal procurement and contracting requirements

  The next lesson provides an overview of the requirements associated with direct administrative costs.