Finding Text
2024-005 Full and Open Competition
Compliance Requirement Procurement
Finding Type Material Weakness in Internal Controls and Material Noncompliance
Federal Agency US Department of Education
ALN 84.425F and 84.425L
Federal Program COVID-19 - Education Stabilization Fund
Criteria
Entities receiving federal awards are required to conduct procurements in a way that ensures full and open competition. This includes obtaining price or quotes from a sufficient number of qualified sources for purchases exceeding simplified acquisition thresholds, unless a sole-source method is properly justified. All procurement decisions, particularly those involving non-competitive awards, must be supported by appropriate documentation.
2 CFR § 200.319, Competition
All procurement transactions under the Federal award must be conducted in a manner that provides full and open competition and is consistent with the standards of this section and § 200.320.
2 CFR § 200.320, Procurement Methods
c) Noncompetitive procurement. There are specific circumstances in which the recipient or subrecipient may use a noncompetitive procurement method. The noncompetitive procurement method may only be used if one of the following circumstances applies:
The aggregate amount of the procurement transaction does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section);
The procurement transaction can only be fulfilled by a single source;
The public exigency or emergency for the requirement will not permit a delay resulting from providing public notice of a competitive solicitation;
The recipient or subrecipient requests in writing to use a noncompetitive procurement method, and the Federal agency or pass-through entity provides written approval; or
After soliciting several sources, competition is determined inadequate.
Condition
From a sample of twenty-five disbursements selected to test the procurement, we identified four instances where the University utilized sole-source providers for certain purchases. This is permitted under 2 CFR 200.320, provided that proper documentation is maintained. However, the rationale provided was often unclear and did not sufficiently explain why alternative vendors were not considered. Consequently, it was impracticable to determine whether the procurement process fully adhered to competitive standards. To comply with 2 CFR 200.320, future justifications should clearly state the unique nature of the source, any urgent circumstances, specific authorizations, and efforts to solicit competition.
Cause
The rationale provided in the Sole Provider Justification forms was often unclear and did not sufficiently explain why alternative vendors were not considered. This lack of clarity and detail in the documentation led to uncertainty about whether the procurement process fully adhered to competitive standards. Specifically, the justifications did not adequately address the unique nature of the source, any urgent circumstances, specific authorizations, or efforts to solicit competition, as required by federal regulations.
Effect
Noncompliance with 2 CFR 200.319, which mandates full and open competition in procurement transactions, and with 2 CFR 200.320 due to improper documentation of sole-source providers, can lead to financial penalties, resulting in disallowed costs that are not reimbursed by federal funds. Additionally, federal awards could be suspended or terminated, impacting the University's ability to fund its programs and operations. Increased scrutiny in future audits may lead to greater administrative burdens and oversight. In severe cases, the University may face suspension or debarment from receiving future federal funding.
Questioned Costs
$434,785. These costs were identified due to the failure to adhere to competitive procurement processes and proper documentation requirements for sole-source justifications.
Recommendation
We recommend the University's management to include in its Sole Provider Justification forms the criterias specified in 2 CFR 200.320. Future justifications should clearly state that the item or service is only available from one source, describe any urgent circumstances that necessitate immediate procurement, reference any specific authorization from the awarding agency, and detail efforts made to solicit competition and why they were unsuccessful.
Views of responsible official
Refer to Corrective Action Plan (Unaudited)