Finding Text
Condition 2025-03 The Organization did not comply with applicable Federal procurement requirements when selecting the general contractor for construction of its new branch building. The Organization did not publicly solicit the construction contract. Instead, the Organization developed a list of potential construction companies using information obtained from Organization team members, professional consultants, members of the board of directors, volunteers, and community partners. The Organization then directly solicited proposals from five construction companies that it determined were qualified based on their experience and ability to perform a construction project of this nature. No other construction companies were given an opportunity to submit proposals because the Organization did not provide public notice of the procurement. Context The Organization entered into the construction contract prior to 2025 and the construction project was underway before the Organization received Coronavirus State and Local Fiscal Recovery Funds (SLFRF). In 2025, the Organization received approximately $1 million of SLFRF funds through a pass-through entity. Treasury's SLFRF Frequently Asked Questions (FAQ 13.7) indicates that recipients may leverage existing contracts for SLFRF activities if the existing contracts conform to the procurement standards in 2 CFR Part 200. Accordingly, the Organization's existing construction contract was required to conform to the applicable Federal procurement standards. Criteria 2 CFR Section 200.319(a) requires procurement transactions under a Federal award to be conducted in a manner providing full and open competition. For procurements exceeding the applicable simplified acquisition threshold, 2 CFR Section 200.320(b) requires the use of formal procurement methods. Under Section 200.320(b)(2), when the competitive proposal method is used, the request for proposals must be through public notice, and proposals must be solicited from multiple qualified entities. The recipient or subrecipient must also have a written method for conducting technical evaluations and making selections. Cause The Organization did not have adequate procurement policies and procedures to ensure that an existing construction contract used for SLFRF-funded activities was procured in accordance with applicable Federal procurement requirements. The Organization's procurement process relied on a limited group of construction firms identified through internal and community sources rather than providing an opportunity for other qualified firms to compete through a publicly noticed solicitation. Effect The Organization's procurement process limited competition by restricting the opportunity to compete for the construction contract to five firms identified by the Organization. The Organization did not demonstrate that the procurement provided full and open competition as required by Federal procurement requirements. Because the existing construction contract was subsequently leveraged for SLFRF-funded activities, the noncompliant procurement affected the Federal award. The Organization charged approximately $1 million of construction expenditures under the contract to the SLFRF award. Recommendation We recommend that the Organization establish and implement procedures to ensure that procurements used for Federal award activities comply with applicable Federal procurement requirements. The Organization should ensure that applicable formal procurements are publicly solicited, provide full and open competition. The Organization should also maintain documentation sufficient to demonstrate compliance with appropriate 2 CFR Sections when using existing contracts for Federal award activities. Views of Responsible Officials In 2026, procedures to ensure that future procurements associated with Federal awards comply with applicable Federal procurement requirements were developed, documented, and implemented. These procedures include requirements for public solicitation and full and open competition when applicable, as well as review of existing contracts before they are used for Federal award activities. The Organization will maintain appropriate documentation demonstrating compliance with applicable Federal procurement requirements.