Federal Procurement Requirements

Procurement Manual
Section IV

OVERVIEW OF FEDERAL PROCUREMENT REQUIREMENTS

Harvard University receives approximately $500 million annually in Federal research funds and is required to maintain a Federally approved purchasing system. An approved purchasing system complies with Federal procurement regulations and internal purchasing policies and procedures. The Office of Naval Research (ONR) conducts a Contractor Procurement Systems Review (CPSR) at Harvard every three years to evaluate compliance. A CPSR involves an examination of the purchasing system for Federal funds. Purchases made with Federal funds are reviewed for compliance with the Federal Acquisition Regulation and the Office of Management and Budget Circular A-110, Attachment O. Departments are required to retain back-up documentation, such as bids, quotes, and cost/price analyses on file for Federal auditors.

As part of the CPSR, ONR selects a random sample of corporate vendor payments from the Accounts Payable Corporate Vendor File. The Procurement Management Department is responsible for providing the ONR review team with the documentation required to support these purchases. Required documentation for Federally funded purchases can include purchase orders, invoices, copies of competitive quotes or proposals, justification for sole source selection, and cost/price analysis. Most of these documentation requirements can be met by completing the Vendor Justification Form and by retaining copies of quotes and proposals in department files. The Vendor Justification Form must be used for documenting all purchase orders $5,000 and over made with Federal funds. Section A and Section B of the Vendor Justification Form cover vendor selection justification. Section C covers cost/price analysis requirements.

Any questions concerning Federal procurement regulations should be directed to 495-5401.

PURCHASING WITH CONTRACT FUNDS:
THE FEDERAL ACQUISITION REGULATION

NOTE:  Please read Overview of Federal Procurement Requirements before continuing.

Identifying Contract Funds

A buyer making purchases with contract funds is required to adhere to the Federal Acquisition Regulation (FAR). This regulation is public law. To verify the type of funding (grant or contract) check the type of award specified in the Action Memo from the Office for Sponsored Programs (OSP). The Action Memo notifies the Principal Investigator that his/her research has been funded and that Harvard has established a new account for the project. A line item at the bottom of the Action Memo, Award Type, specifies the type of funding. Example: Award Type: Federal Contract. If the buyer does not have access to the Action Memo, he/she should contact the Principal Investigator or the contract or department administrator.

Small Purchase Procedures

The Federal Acquisition Regulation defines a small purchase as $25,000 or less. Harvard University requires that any purchase order over $5,000 (20% of the small dollar purchase threshold of $25,000) comply with Competition and Price Reasonableness procedures.

For Procedures for Reporting Purchasing Accomplishments under Federal Contracts, see Section V.

Competitive Bidding for Contracts

Harvard University requires competitive bidding and documentation for every purchase order $5,000 and over. Buyers are expected to promote competition and ensure advantageous pricing by soliciting bids from a minimum of three vendors and to select the lowest bidder able to meet the requirements. Quotations can be solicited orally, with the exception of construction contracts over $2,000. The buyer should record the bid/quote results on Section A of the Vendor Justification Form (VJF) and retain copies of written bids/quotations in department files for audit purposes. If the buyer receives only one quote/bid in response to his Request for Quotation / Request for Proposal, indicate the bidder on Section A and complete cost/price analysis Section C (see below) of the VJF.

Non-Competitive Vendor Selection:
SELECTED and SOLE SOURCES

Occasionally, a buyer is unable or chooses not to competitively bid his requirements. These situations involve selected or sole sources. A selected source: alternative vendors exist in the competitive market, but the buyer chooses a particular vendor because of technical requirements (precision, reliability) or past performance by other vendors (poor service, availability of parts). A Sole Source: no other vendor capable of fully meeting the requirements exists. The buyer should complete Section B and Section C of the Vendor Justification Form for selected or sole source purchases. Sole sources should be the exception, not the rule.

Cost/Price Analysis for Contracts

Harvard University also requires documentation verifying that the purchase price is fair and reasonable. The buyer must provide documentation of cost/price analysis for all non-competitive purchase orders $5,000 and over. Documentation can be based on the price of previous and similar purchases, current price lists, catalogues, advertisements, and negotiated pricing agreements (vendor partnerships). Section C of the Vendor Justification Form lists cost/price analysis options. The buyer should check all that apply.

Using the Vendor Justification Form for Contract-Funded Purchases

The VJF must be completed by the person selecting the vendor. Instructions for completing the VJF are on the form itself. However, to summarize:

• Record competitive bids on Section A.
• Record selected or sole source justification on Section B.
• Check cost/price analysis options on Section C.

The completed Vendor Justification Form must be attached with a copy of the invoice and appropriate payment voucher and kept on file for general audit purposes. If progress payments $5,000 and over are being made, copy the original VJF and attach it to a copy of each invoice and appropriate payment voucher. OSP post-audits these transactions. Please do not send VJFs to Procurement Management.

PURCHASING WITH GRANT FUNDS: OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-110

NOTE:  Please read Overview of Federal Procurement Requirements before continuing.

Identifying Grant Funds:

A buyer making purchases with grant funds is required to adhere to OMB Circular A-110, Attachment O. Circular A-110 explains administrative requirements for colleges, universities, hospitals, and other non-profit organizations with federally funded grants and agreements. Attachment O of A-110 deals specifically with Procurement. Harvard identifies Federal funds by assigning an account code to each contract and grant/agreement. To verify type of funding (grant or contract) check the type of award specified in the Action Memo from OSP. The Action Memo notifies the Principal Investigator that his/her research has been funded and that Harvard has established a new account for the project. A line item at the bottom of the Action Memo, Award Type, specifies the type of funding. Example: Award Type: Federal Grant. If the buyer does not have access to the Award Memo, he/she should contact the Principal Investigator, or the contract or department administrator.

Grant Purchases $10,000 and Over:

Harvard University requires:

• basis for vendor selection
• justification for selected or sole source purchases, and
• basis for the price of the purchase

for each purchase order $10,000 and over. If the buyer competitively bids the purchase, Section A of the Vendor Justification Form should be completed. If the vendor is a selected source (alternative vendors exist but the buyer chooses a particular vendor based on technical requirements or past performance by the other vendors) or sole source (no other vendor capable of meeting the requirements exists), the buyer should complete Section B and Section C (cost/price analysis) of the Vendor Justification Form.

Grant Purchases $5,000 - $9,999:

Harvard University requires cost / price analysis for every purchase. For each purchase order of $5,000 - $9,999, the buyer must complete Section C (Cost / Price Analysis) of the Vendor Justification Form. Vendor selection justification (Section A or Section B) is not required for purchase orders under $10,000.

Grant purchases under $5,000:

Harvard University requires some form of price or cost analysis be made for every purchase to ensure a fair and reasonable price. Buyers are not required to complete a Vendor Justification Form for purchase orders under $5,000. Nevertheless, buyers should make an effort to use and verify Harvard discounts, check market prices, review past purchase orders for similar items, and demonstrate good business practices.

Using the Vendor Justification Form for Grant-Funded Purchases:

The VJF must be completed by the person selecting the vendor. Instructions for completing the VJF are on the form itself. However, to summarize:

• Complete Section A or B and Section C for purchase orders $10,000 and over.
• Complete Section C for all purchase orders $5,000 and over.

SUBCONTRACTING PLANS FOR SMALL AND SMALL DISADVANTAGED BUSINESSES

1. The Subcontracting Plan

The Federal Acquisition Regulation (52.219-9) requires a Subcontracting Plan for Small and Small Disadvantaged Businesses for each contract $500,000 and over. Prime contractors, such as Harvard, must agree to purchase a percentage of the supplies and services required for the performance of the contract from small and minority businesses. Some Federal agencies set specific goals. Most rely on the prime contractor to make a "good faith effort." The Subcontracting Plan specifies:

• which items / commodities will be purchased from small and minority businesses,
• the total dollars to be spent each with small and minority businesses, and
• the percentage of total dollars budgeted for supplies and services that these purchases represent.

The Subcontracting Plan is submitted by the Principal Investigator with his/her research proposal and budget. Once the award has been made, the Subcontracting Plan becomes part of the contract and the Principal Investigator is expected to meet the goals set in the Plan.

2. Principal Investigators, contract administrators, and buyers should be familiar with the Definitions of Small, Small Disadvantaged, and Women-Owned Businesses.
• A Small Business:
  generally has fewer than 500 employees including affiliates, is independently owned and operated, and is not dominant in its field of operation.
• A Small Disadvantaged Business:
  is a small business concern which is at least 51% owned, managed, and operated on a daily basis by a member of a definable minority group. Definable minority groups include African Americans, Hispanic Americans, Asian Americans, Native Americans, Native Hawaiians, Inuit, and Asian-Pacific Americans.
• A Women-Owned Business:
  is a small business concern which is at least 51% owned, managed, and operated on a daily basis by a woman / women who is a United States citizen. Women-Owned businesses are not considered disadvantaged, unless owned by a woman who is also a member of a definable minority group.
3. Preparing a Subcontracting Plan

The Office for Sponsored Programs notifies the Principal Investigator when a plan is required and whether or not the contracting agency has set specific goals. In either case, the plan must set separate goals for small and small disadvantaged businesses. The Procurement Management team is available to assist the Primary Investigator with the identification of vendors that meet specific minority, women owned, small business or other requirements.

4. The Subcontracting Plan Form

Once subcontracting opportunities have been identified and dollars and percentage goals calculated, this information is entered on a Subcontracting Plan form. Some contracting agencies provide these forms. The National Institute of Health (NIH), for instance, will not accept a subcontracting plan that is not on an NIH form. However, most agencies are flexible as long as the required information is included. The Subcontracting Plan form is modeled on the NIH form and widely accepted by federal contracting agencies. The completed Subcontracting Plan must be signed by the individual submitting it and sent to the contracting agency for approval.

5. Subcontracting Plan Reporting - Form 294

The contracting agency requires the Principal Investigator to submit semi-annual reports charting his/her progress in meeting subcontracting goals. Completing semi-annual 294s is a contract requirement. This form is available from the contracting agency and can be copied. Form 294 Buyers should be alerted to subcontracting goals and should identify small and minority businesses at the start of the contract. It is difficult to meet goals after the money has been spent. Failure to produce a "good faith effort" can result in the prime contractor being assessed liquidated damages. The completed form must indicate the name of the administrator of the plan.

6. EPA Grant/Cooperative Agreement Requirements - Form 5700-52A

University recipients of EPA grants and cooperative agreements are required to set a Fair Share goal. The Principal Investigator must report his progress annually to the EPA on Form 5700-52A. This form is available from the EPA and can be copied. Form 5700-52A

Regardless of the dollar value of a project awarded a Grant, the Federal State Revolving Fund (SRF) Grant Program requires that any prime contracts or subcontracts for services, construction, goods, or equipment procured by a Grantee to implement the project funded from the Grant must contain the applicable Federal Fair Share Minority and Women-Owned Business Enterprises (M / WBE) Utilization Goals.

The Federal Fair Share M / WBE Utilization Goals are as follows:

The applicable M / WBE goals depend on the predominate character of the specific contract being procured. For example:

• If the single contract being procured is solely for services (e.g., design or monitoring), then apply the M / WBE goals for services (11% / MBE; 5% / WBE).
• If the single contract being procured is solely for furnishing equipment, apply the M / WBE goals for equipment (5% / MBE; 2% / WBE).
• If the single contract being procured is for both services and equipment, use the M / WBE Goals applicable to the predominate character (as evidenced by the project or scope of services and/or the dollar amounts) of that single contract. Thus, if the single contract is primarily for monitoring services with the incidental purchase of monitoring equipment, apply the M / WBE goals for service.

The Federal Fair Share M / WBE Utilization goal is calculated on total dollars budgeted for supplies and services. Positive or negative standing must be reported. Salaries, overhead, and fringe benefits should be excluded.

The Procurement Management team is available to assist the Principal Investigator with the identification of vendors that meet specific minority, women owned, small business or other requirements.

DEBARMENT

The Federal Acquisition Regulation
(FAR) 52.209-5 requires that Harvard obtain written certification from vendors receiving a purchase order of $25,000 and over and made with Federal funds that they have not been debarred (prohibited) from doing business with the Federal Government. A prime contractor such as Harvard, who knowingly does business with a debarred vendor, risks having its Federal contract terminated.

Causes for Debarment
A vendor is debarred for serious criminal offenses such as embezzlement, theft, forgery, bribery, and other offenses indicating a lack of business integrity. Depending on the specific cause, the length of the debarment can be anywhere from three years to indefinitely.

Certification Requirements
The buyer making the purchase is required to send the Debarment Certification forms certification form to the vendor at the time the purchase is made. The vendor can mail or fax the completed form to the buyer. When the buyer receives the invoice, the debarment certification form should be attached to a copy of the invoice along with the Vendor Justification Form and filed locally for audit purposes.

Identifying Debarred Vendors

Section V - Procedures for Reporting Purchasing Accomplishments under Federal Contracts