2 CFR 200 Procurement (§§200.317-327) Explained

2 CFR 200, Subpart D sets the procurement standards a non-federal entity — a university, hospital, nonprofit, state agency, or Indian tribe — must follow when buying goods or services with federal grant funds. Codified at §§200.317–200.327 of the Uniform Guidance, it governs how a purchase must be competed and what must be checked before a contract is signed.

This is a different part of the regulation from Subpart E (the cost principles, §§200.400–200.475), which asks whether a specific cost is allowable at all. Subpart D assumes the purchase is otherwise a legitimate project cost and instead governs the *process* used to make it: how many bids were sought, whether the price was independently analyzed, whether the vendor was screened against the federal exclusion list, and whether the contract includes the clauses the award requires. An institution can buy something entirely allowable under Subpart E and still generate an audit finding under Subpart D because the procurement process itself didn’t meet the standard.

Who has to follow these standards

§200.317 draws one real distinction: states and Indian tribes may follow their own procurement policies and procedures for federal awards, provided those policies conform to applicable federal law, and provided they still comply with the specific requirements in §§200.321, 200.322, 200.323, and 200.327 (small/minority/women-owned business contracting, domestic preferences, recovered materials, and required contract provisions). If a state or tribe has no such policy of its own, it defaults to the full §§200.318–200.327 standards. Every other non-federal entity — including a subrecipient of a state or tribe — follows §§200.318 through 200.327 in full, with no substitution option.

General procurement standards (§200.318)

An institution must maintain and use documented procurement procedures that conform to the standards in this subpart. In practice, a sponsored-programs or procurement office’s written policy is what an auditor asks for first. §200.318 also requires the entity to:

Avoid acquiring unnecessary or duplicative items, and consider consolidating or breaking out procurements to obtain a more economical purchase, where appropriate.
Maintain written standards of conduct covering conflicts of interest for employees engaged in the selection, award, and administration of contracts — including disclosure requirements and disciplinary consequences for violations, and restrictions on employees, officers, or agents accepting gratuities from current or prospective contractors.
Use its own documented normal procurement methods, provided they conform to federal law and the standards in this subpart.
Make positive efforts to use small, minority, women-owned, veteran-owned, and labor-surplus-area businesses (elaborated in §200.321).
Maintain records sufficient to detail the history of each procurement — rationale for the method used, contract type, contractor selection or rejection, and the basis for the contract price.
Award contracts only to responsible contractors possessing the ability to perform successfully, considering integrity, compliance with public policy, past performance, and financial/technical resources.

Competition (§200.319)

All procurement transactions must be conducted in a manner providing full and open competition. §200.319 lists specific practices that are considered restrictive of competition and generally must be avoided, including:

Unreasonable requirements placed on firms in order for them to qualify to do business.
Unnecessary experience or excessive bonding requirements.
Noncompetitive pricing practices between firms, or between affiliates.
Organizational conflicts of interest — e.g. a firm that helped develop the specifications also being allowed to compete for the resulting contract.
Arbitrarily excluding otherwise-qualified firms from a solicitation, and specifying only a “brand name” product instead of allowing “an equal” product to be offered, unless a brand-name-or-equal description is used and justified.

The section also requires the entity to have a documented, written procurement history and to solicit from an adequate number of qualified sources for any procurement conducted using the sealed-bid or competitive-proposal method.

Methods of procurement (§200.320)

§200.320 sets out three categories of procurement method, with the dollar amount of the purchase determining which one applies:

Micro-purchases: purchases at or below the micro-purchase threshold. No competitive quotes are required if the entity considers the price reasonable, based on research, experience, purchase history, or other information, and it distributes micro-purchases equitably among qualified suppliers where practicable. As of the October 1, 2025 federal acquisition-threshold inflation adjustment, the default federal micro-purchase threshold is $15,000 (up from $10,000). A non-federal entity may self-certify a higher micro-purchase threshold up to $50,000 per year, based on its own internal risk-assessment procedures; a threshold above $50,000 requires approval from the entity’s cognizant agency for indirect costs.
Small purchase procedures / simplified acquisitions: purchases above the micro-purchase threshold but at or below the simplified acquisition threshold — $350,000 by default as of the same October 2025 adjustment (up from $250,000). These are relatively simple, informal procurement methods, but still require price or rate quotations from an adequate number of qualified sources.
Sealed bids (formal advertising): publicly solicited bids, awarded to the lowest responsive and responsible bidder, using firm fixed-price contracts. This is the preferred method for construction contracts if the conditions in §200.320 are met — a complete, adequate specification is available, two or more responsible bidders are willing to compete, and award can be made principally on price.
Competitive proposals: used when sealed bidding isn’t appropriate (e.g. price alone isn’t the deciding factor). Requires a request for proposals (RFP), publicized solicitation, identification of all evaluation factors and their relative importance, and a documented review of proposals against those factors, with the award going to the responsible offeror whose proposal is most advantageous, price and other factors considered.
Noncompetitive procurement (sometimes called sole-source): permitted only in specific, limited circumstances — the item is available only from a single source; a public emergency won’t allow the delay of competitive solicitation; the federal awarding agency or pass-through entity expressly authorizes it in response to a written request; or competition is determined inadequate after solicitation from a number of sources. A noncompetitive award still requires the price/cost analysis described below.

Contracting with small, minority, women-owned, veteran-owned, and labor-surplus-area firms (§200.321)

Where practicable, a recipient or subrecipient must take affirmative steps — such as placing qualified small/minority/women-owned/veteran-owned businesses on solicitation lists, ensuring they’re solicited whenever they’re a potential source, dividing total requirements into smaller tasks to permit maximum participation, and encouraging use of the Small Business Administration and the Minority Business Development Agency of the Department of Commerce — to assure these firms are used when possible.

Domestic preferences for procurements (§200.322)

As a matter of policy, §200.322 encourages recipients and subrecipients to, to the greatest extent practicable, provide a preference for goods, products, and materials produced in the United States when procuring items with federal award funds — consistent with Build America, Buy America requirements where those apply to the specific program.

Procurement of recovered materials (§200.323)

A non-federal entity that is a state agency, agency of a political subdivision of a state, or its contractor must comply with EPA’s procurement guidelines for items designated as containing recovered/recycled material, under Section 6002 of the Solid Waste Disposal Act, as amended.

Contract cost and price analysis (§200.324)

This is one of the sections auditors check most closely. The recipient must perform a cost or price analysis for every procurement action, including contract modifications — the level of detail scales with the complexity of the procurement, but some documented analysis is required even for a simplified acquisition. Key elements:

An independent estimate must be made before receiving bids or proposals, so the entity has something to compare quotes against.
Costs or prices must be based on all relevant information, including market prices for comparable goods/services, published price lists, and prior purchase history.
For a cost-reimbursement contract, profit must be negotiated as a separate element of the price, using a documented method (e.g. weighing complexity of work, contractor risk, and comparable market rates) — profit is never simply an automatic markup.
Costs or prices based on estimated costs are only allowable to the extent they’re consistent with the cost principles in Subpart E — this is the specific point where Subpart D and Subpart E connect directly.

Federal awarding agency or pass-through entity review (§200.325)

§200.325 preserves the federal awarding agency’s or pass-through entity’s right to review procurement documents in specific circumstances — for example, a noncompetitive procurement above the simplified acquisition threshold, or a proposed contract modification that changes the scope significantly. Whether this review right is exercised routinely, and how, is generally set out in the award’s specific terms and conditions.

Bonding requirements (§200.326)

For construction or facility-improvement contracts or subcontracts exceeding the simplified acquisition threshold, the federal awarding agency may accept the entity’s own bonding policy and requirements, provided the agency has determined the government’s interest is adequately protected. If it has not made that determination, minimum requirements apply:

Bid guarantee — equivalent to 5 percent of the bid price, from each bidder, to assure a winning bidder will execute the contract and provide the required performance/payment bonds.
Performance bond — 100 percent of the contract price, to secure the contractor’s fulfillment of all contractual obligations.
Payment bond — 100 percent of the contract price, to assure payment of all persons supplying labor and material for the contract.

Contract provisions (§200.327)

Every contract a recipient or subrecipient enters into using federal award funds must contain the applicable provisions described in Appendix II to 2 CFR Part 200. Depending on the contract’s dollar value and type, these can include: remedies for breach; termination for cause and convenience; equal employment opportunity clauses (Executive Order 11246, for contracts over $10,000); the Davis-Bacon Act and Copeland “Anti-Kickback” Act (construction contracts over $2,000); the Contract Work Hours and Safety Standards Act (contracts over $100,000 involving employment of laborers/mechanics); rights-to-inventions clauses implementing the Bayh-Dole framework where federally funded research produces a patentable invention (see CASRAI’s tech-transfer resources for how that plays out after award); Clean Air Act and Federal Water Pollution Control Act requirements (contracts over $150,000); mandatory debarment/suspension screening; the Byrd Anti-Lobbying Amendment certification; and, since 2 CFR 200.216, a prohibition on procuring certain covered telecommunications and video-surveillance equipment.

Debarment and suspension checks

Before a recipient enters into a covered contract, it must verify the contractor isn’t excluded or disqualified from participating in federal transactions — under 2 CFR Part 180 and the specific requirement at 2 CFR 200.214. CASRAI covers the mechanics of this — the three permitted verification methods and the role of SAM.gov Exclusions — in a dedicated debarment/suspension screening entry; the short version is that a check against SAM.gov Exclusions, a contractor certification, or a contract clause addressing the issue will each satisfy the verification requirement, and a debarment under either the procurement (FAR) or nonprocurement (2 CFR Part 180) system blocks covered transactions government-wide.

How Subpart D interacts with Subpart E

Subpart D and Subpart E are frequently confused because both eventually reach the same question — “was this money spent correctly?” — from different directions:

Subpart D (procurement standards, this page) governs the process: how the purchase was competed, documented, priced, and contracted.
Subpart E (cost principles) governs the substance: whether the resulting cost is allowable, allocable, and reasonable on a specific federal award.

A purchase can fail either test independently. A properly competed, well-documented procurement can still produce an unallowable cost if it’s not allocable to the award that paid for it. Conversely, an unquestionably allowable expense — office supplies genuinely needed for the project — can still generate an audit finding if the institution skipped the required cost/price analysis or didn’t solicit an adequate number of quotes. CASRAI’s broader Uniform Guidance overview and Federal Grant Compliance Checklist both touch procurement briefly as part of the full compliance picture; this page is the detailed reference for that one piece.

Frequently asked questions

What’s the current micro-purchase threshold under 2 CFR 200?

The federal default is $15,000, effective from the October 1, 2025 inflation adjustment (up from the prior $10,000). A non-federal entity may self-certify a higher threshold, up to $50,000 annually, using its own documented risk-assessment procedures; anything above $50,000 needs cognizant-agency approval.

What’s the difference between the micro-purchase threshold and the simplified acquisition threshold?

The micro-purchase threshold ($15,000 by default) is the ceiling below which no competitive quotes are required at all. The simplified acquisition threshold ($350,000 by default, also adjusted October 2025) is the ceiling below which an entity can use informal small-purchase procedures — still requiring quotes from an adequate number of sources — instead of formal sealed bidding or competitive proposals.

Do state and local governments have to follow these same procurement standards?

States and Indian tribes may use their own procurement policies for federal awards instead, provided those policies conform to applicable federal law and the entity still meets the specific requirements at §§200.321, 200.322, 200.323, and 200.327. If a state or tribe has no policy of its own, or a subrecipient isn’t a state or tribe, the full §§200.318–200.327 standards apply.

Is a sole-source (noncompetitive) purchase ever allowed?

Yes, in limited circumstances: the item is available from only one source, a public emergency doesn’t allow time for competitive solicitation, the funding agency or pass-through entity expressly authorizes it, or competition was determined inadequate after a genuine solicitation attempt. A documented cost or price analysis is still required even for a noncompetitive award.

What happens if an institution doesn’t perform a required cost or price analysis?

It’s a common audit finding. Auditors and federal awarding agencies expect a documented independent estimate and analysis on file for every procurement action, including contract modifications — the absence of one is flagged even where the eventual price paid looks reasonable in hindsight, because the standard requires the analysis itself, not just a reasonable outcome.

This page summarizes 2 CFR Part 200, Subpart D as codified in the current eCFR text. It is a general reference, not legal advice — an institution’s own sponsored-programs or procurement office, and its cognizant federal agency, are the authoritative source for how these standards apply to a specific award.