2 CFR 200.320 Procurement Methods: Thresholds and Requirements

Under 2 CFR 200.320, procurement methods for federal award spending fall into five options across three categories: micro-purchase and small purchase (informal), sealed bid and competitive proposal (formal), and noncompetitive. Which one you must use is driven mainly by the dollar amount of the purchase. As of October 1, 2025, the micro-purchase threshold is $15,000 and the simplified acquisition threshold is $350,000, and those two numbers are the pivots for almost every decision that follows.1Acquisition.GOV. Threshold Changes – October 1st, 2025

Choosing the wrong method is not a paperwork problem. Costs charged under the wrong procurement can be disallowed and clawed back, so the method decision belongs at the front of the transaction, not the end.

Which Method Applies at Which Dollar Amount

The default logic is simple. Total the cost of the acquisition, then match it to the tier:

  • At or below $15,000: micro-purchase.
  • Above $15,000 and below $350,000: small purchase.
  • At or above $350,000: sealed bid or competitive proposal.
  • Any dollar amount, if one of five specific conditions is met: noncompetitive.

Two lower ceilings override the $15,000 micro-purchase number. Construction subject to federal wage rate requirements caps at $2,000, and services subject to the Service Contract Labor Standards cap at $2,500.2Federal Register. Inflation Adjustment of Acquisition-Related Thresholds If either applies, use the lower number.

One tactic to avoid: splitting a larger buy into smaller pieces to duck the $350,000 line. Auditors look for this pattern, and finding it can convert an otherwise clean purchase into a disallowed cost.

Micro-Purchase

For a micro-purchase, you do not have to solicit competitive quotes. You do have to consider the price reasonable based on research, experience, or other information, and you have to distribute micro-purchases equitably among qualified suppliers instead of routing everything to one vendor.3eCFR. 2 CFR 200.320 – Procurement Methods The equitable-distribution requirement is a favoritism check, and auditors do sample for it.

Small Purchase

In the range above the micro-purchase threshold and below $350,000, you have to get price or rate quotations from “an adequate number of qualified sources.”3eCFR. 2 CFR 200.320 – Procurement Methods The rule does not fix a number. Unless your federal agency specifies one, you judge what counts as adequate for the market and the item.

Quotes can come from phone calls, online research, or written correspondence in any mix that supports a fair price comparison. Document every source contacted, the prices offered, and the reason for your final pick. Without that paper trail, the small-purchase method looks the same as a sole-source award to an auditor.

Sealed Bid

Above the $350,000 simplified acquisition threshold, sealed bidding is the preferred method when price is the main selection factor and you can write a complete specification. Construction is the standard use case. Three conditions should be present: a complete, realistic specification; at least two responsible bidders willing to compete; and a procurement that fits a firm-fixed-price contract awarded largely on price.3eCFR. 2 CFR 200.320 – Procurement Methods

Solicit bids from enough qualified sources to produce real competition, and give bidders enough time to respond. Local governments must publicly advertise the invitation and open bids publicly. The award goes to the lowest responsive and responsible bidder as a firm-fixed-price contract, and any bid you reject has to be documented.3eCFR. 2 CFR 200.320 – Procurement Methods

Competitive Proposals

When you need to weigh technical qualifications, past performance, or other non-price factors, sealed bidding does not fit. Competitive proposals do. The resulting contract can be fixed-price or cost-reimbursement depending on the work.3eCFR. 2 CFR 200.320 – Procurement Methods

Requests for proposals must be publicly noticed and must identify every evaluation factor and its relative importance. Written procedures for technical evaluation and selection have to exist before the solicitation goes out. The award goes to the responsible offeror whose proposal is most advantageous, considering price and the other stated factors, and every proposal responsive to the public notice should be considered to the maximum extent practicable.3eCFR. 2 CFR 200.320 – Procurement Methods

When You Can Skip Competition

Noncompetitive procurement, sometimes called sole-source, is available only when one of five conditions is met:3eCFR. 2 CFR 200.320 – Procurement Methods

  • The total amount does not exceed the micro-purchase threshold (with the lower ceilings for construction and covered services).
  • Only one supplier can fulfill the requirement.
  • A public emergency does not allow time for a competitive solicitation.
  • You request noncompetitive procurement in writing and the federal awarding agency or pass-through entity approves it in writing.
  • After soliciting multiple sources, competition is determined inadequate.

Sole-source documentation has to be tight. You need to show the lack of competition was actually necessary and not a product of poor planning or convenience. Vague appeals to urgency or uniqueness are where audit findings tend to originate. Build the justification file as though an auditor will read it, because on this method one usually does.

Rules That Apply No Matter Which Method You Pick

The method decision sits inside a set of standards that run across every procurement under a federal award. Skipping any of these can invalidate a purchase you otherwise ran correctly.

Cost or Price Analysis and Prohibited Contract Types

You must perform a cost or price analysis for every procurement action, including contract modifications. Comparing quotes or proposals usually satisfies this for competitive buys; sole-source and modifications need something more rigorous. Two contract structures are barred outright: cost-plus-a-percentage-of-cost and percentage-of-construction-cost.4eCFR. 2 CFR 200.324 – Contract Cost and Price Costs incurred under either are unallowable.

Competition Restrictions to Watch

Full and open competition is the baseline. Practices flagged as restrictive and prohibited include unreasonable qualification requirements, unnecessary experience or excessive bonding, noncompetitive pricing between affiliated companies, noncompetitive awards to consultants on retainer, brand-name specifications with no equivalent alternatives, and any arbitrary action during the procurement.5eCFR. 2 CFR 200.319 – Competition The brand-name trap catches organizations often. If you need a level of performance, write performance specifications and let vendors propose equivalents.

Conflicts of Interest

Before you start, your organization needs written standards of conduct covering conflicts of interest for anyone selecting, awarding, or administering contracts. No employee, officer, board member, or agent with a real or apparent conflict may take part in a federally funded procurement decision. A conflict exists when that person, a family member, a partner, or an employing organization has a financial interest in or would gain a tangible benefit from a potential contractor. Gifts and favors from contractors are prohibited, though the organization may set a standard for unsolicited items of nominal value. The standards must include disciplinary actions.6eCFR. 2 CFR 200.318 – General Procurement Standards

Buy American and Section 889 Screening

To the greatest extent practicable and consistent with law, give preference to goods, products, and materials produced in the United States. For iron and steel, “produced in the United States” means every manufacturing step from initial melting through final coating happened domestically. Infrastructure projects funded by federal financial assistance must implement the Buy America preferences in 2 CFR Part 184, and the requirement must be passed through in subawards, contracts, and purchase orders.7eCFR. 2 CFR 200.322 – Domestic Preferences for Procurements

Separately, federal funds cannot be used to buy, extend, or renew contracts for certain telecommunications and video surveillance equipment or services covered by Section 889 of Public Law 115-232, including equipment from Huawei Technologies Company, ZTE Corporation, and their subsidiaries or affiliates.8eCFR. 2 CFR 200.216 – Prohibition on Certain Telecommunications and Video Surveillance Equipment or Services This ban runs at every dollar amount, so it belongs in your screening even for micro-purchases.

Outreach to Small, Minority, and Women-Owned Businesses

You must take affirmative steps to give small businesses, minority-owned businesses, women’s business enterprises, and firms in labor surplus areas a fair opportunity to compete. Required actions include placing them on solicitation lists, soliciting them when they are potential sources, breaking large requirements into smaller tasks when economically feasible, and setting delivery schedules that let smaller firms participate when the work allows. Where a prime contractor plans to use subcontractors, the solicitation must require the prime to take these same steps. These are not retroactive; they happen before award.

Required Contract Provisions

Two dollar-driven clauses to remember:

Appendix II lists more required provisions depending on the work, including equal employment opportunity clauses, Davis-Bacon compliance for construction, and Clean Air Act and Clean Water Act provisions for contracts over $150,000. Omitting a required clause can make the whole contract cost unallowable, not just the missing paragraph.

Records

All federal award records, including procurement files, evaluation scores, justification memos, quotes received, and contract documents, must be kept for three years from the date you submit your final financial report. For awards reported quarterly or annually, the clock starts from the relevant report submission date.10eCFR. 2 CFR 200.334 – Record Retention Requirements If audit, litigation, or an unresolved finding is still open when three years passes, keep the records until it closes.

After Award

Regardless of which method got you to the contract, 2 CFR 200.318 requires ongoing oversight of contractor performance against the terms and specifications of the agreement.6eCFR. 2 CFR 200.318 – General Procurement Standards The award is the start of the compliance obligation, not the end of it.