Federal Grant Procurement Requirements: 2 CFR 200.317 to 200.327 for Local Governments and Nonprofits

Every dollar a city, county, school district or nonprofit spends on a contract under a federal award is covered by written buying rules. Those federal grant procurement requirements sit in 2 CFR 200.317 through 200.327, and they apply to a direct recipient and to a subrecipient alike.

The rules turn on two dollar thresholds that the Federal Acquisition Regulation (FAR) raised on October 1, 2025, and on a paper trail that auditors read long after the purchase.

Quick Answer: What Are the Federal Grant Procurement Requirements?

Federal grant procurement requirements, set in 2 CFR 200.317 to 200.327, match the buying method to the dollar value. Since October 1, 2025, micro-purchases up to $15,000 need a documented reasonable price, purchases up to $350,000 need price quotations, larger ones need sealed bids or proposals with public notice, and noncompetitive awards need one of five listed reasons.

Who Must Follow the Federal Grant Procurement Standards

The procurement standards govern what a recipient or subrecipient buys with a federal award, not the award itself. 2 CFR 200.317 divides entities into two groups, and which group you are in decides how much of the rule applies (eCFR, current as of October 2026).

A State or Indian Tribe must follow the same policies and procedures it uses for non-federal funds, and must also comply with 200.321, 200.322, 200.323 and 200.327 whatever its own policies say (2 CFR 200.317). Every other recipient and subrecipient, including subrecipients of a State or Tribe, must follow 200.318 through 200.327 (2 CFR 200.317). A county, city, school district or nonprofit is in that second group, and so is a local agency that holds a pass-through subaward from a state.

The federal standards sit on top of local law. Your documented procedures must be consistent with State, local and tribal laws and regulations (2 CFR 200.318(a), eCFR, current as of October 2026), so a purchasing ordinance with a lower limit stays in force. Pass-through entities can add their own conditions too: one state emergency management agency's quick reference for its subrecipients notes that grant programs "may have specific guidance regarding procurement" in the award terms (Wisconsin Emergency Management, Understanding Procurement Under Grants, revised October 1, 2024, read October 2026).

Contractor or Subrecipient

A contractor is an entity you buy goods or services from, and a subrecipient carries out part of a federal program. The pass-through entity decides which is which case by case, and "the substance of the relationship is more important than the form of the agreement" (2 CFR 200.331, eCFR, current as of October 2026). Our guide to pass-through grant management covers that determination. Once an entity is a contractor, the rules here govern how you select it. The wider rulebook is in our overview of 2 CFR 200 grant management.

General Procurement Standards: Written Procedures, Conflicts of Interest and Competition

The general standards require documented procedures, written conflict-of-interest rules, full and open competition and a record of every procurement, for every purchase under the award.

Documented Procedures

200.318(a) requires the recipient or subrecipient to "maintain and use" documented procedures, so the written policy has to be the one followed. 2 CFR 200.319(d) adds that written procedures must make every solicitation carry a clear description of the technical requirements and name the factors used to evaluate bids or proposals.

Conflicts of Interest

200.318(c)(1) requires written standards of conduct for the people who select, award or administer contracts. No employee, officer, agent or board member with a real or apparent conflict may take part. A conflict exists when that person, an immediate family member, a partner, or an organization that employs or is about to employ any of them has a financial or other interest in an entity considered for a contract. The standards must also bar gratuities from contractors and provide for discipline.

Full and Open Competition

200.319(a) requires full and open competition. A contractor that drafts the specifications, statement of work or invitation for bids must be excluded from competing on that procurement. The text lists practices that may restrict competition: unreasonable qualification requirements, unnecessary experience and excessive bonding, noncompetitive contracts to consultants on retainer, naming only a brand without allowing "an equal," and "any arbitrary action in the procurement process." A prequalified list must stay current and cannot close out bidders during the solicitation period.

Other Standards in 200.318

Procedures must avoid unnecessary or duplicative items. Documented intergovernmental or inter-entity purchasing arrangements "will meet the competition requirements of this part." Contracts go only to responsible contractors, judged on integrity, past performance and financial and technical resources. A time-and-materials contract is allowed only after finding no other contract suitable, and it needs a ceiling price.

2 CFR 200.320 Procurement Methods: Informal, Formal and Noncompetitive

2 CFR 200.320 describes three method families: informal methods for micro-purchases and simplified acquisitions, formal methods through sealed bids or proposals, and noncompetitive procurement (eCFR, current as of October 2026). The dollar value of the transaction picks the family.

Formal methods are required when the value "exceeds the simplified acquisition threshold of the recipient or subrecipient," so an entity that sets a lower threshold moves to formal methods sooner.

Sealed bidding is feasible when a complete specification exists, two or more responsible bidders are willing to compete, and the contract suits a firm fixed price chosen mainly on price. Otherwise proposals are the route, and they may produce a fixed-price or cost-reimbursement contract. A qualifications-based selection that leaves price out is allowed only for architectural and engineering services.

When Noncompetitive Procurement Is Allowed

The noncompetitive method may be used only if one of these circumstances applies:

• The aggregate amount does not exceed the micro-purchase threshold.
• The transaction can be fulfilled only by a single source.
• A public exigency or emergency will not permit the delay of public notice for a competitive solicitation.
• The recipient or subrecipient requests in writing to use the method and the federal agency or pass-through entity gives written approval.
• After soliciting several sources, competition is determined inadequate.

200.319(g) confirms that a noncompetitive procurement can be awarded only under 200.320(c). A sole-source award that cannot be tied to one of the five reasons invites a finding.

Micro-Purchase Threshold for Federal Grants: $15,000, $50,000 and the Simplified Acquisition Threshold

The federal micro-purchase threshold is $15,000 and the simplified acquisition threshold is $350,000, as defined in FAR 2.101 (acquisition.gov, FAR as amended through FAC 2026-01, read October 2026). 2 CFR 200.1 points to the FAR amounts, so they move whenever the FAR is adjusted.

The last adjustment raised the micro-purchase threshold from $10,000 to $15,000 and the simplified acquisition threshold from $250,000 to $350,000, in a final rule published August 27, 2025 and effective October 1, 2025 (FAR inflation adjustment, 90 FR 41872, Federal Register, August 27, 2025). A policy that still treats $10,000 or $250,000 as the federal limit is out of date (FAR 2.101, read October 2026).

The FAR definition also lists exceptions, such as $2,000 for construction subject to Wage Rate Requirements and $2,500 for services subject to Service Contract Labor Standards (FAR 2.101, read October 2026). Part 200 points to the FAR amount without restating them, so ask the awarding agency or pass-through entity whether an exception applies to your award.

Raising Your Own Micro-Purchase Threshold

A recipient or subrecipient may "self-certify a threshold up to $50,000 on an annual basis" (2 CFR 200.320(a)(1)(iv), eCFR, current as of October 2026). The self-certification must include a justification, a clear statement of the threshold and supporting documentation of one of three things:

• Qualification as a low-risk auditee under 2 CFR 200.520 for the most recent audit, which needs two years of timely single audits with clean results.
• An annual internal institutional risk assessment that identifies, mitigates and manages financial risks.
• For public institutions, a higher threshold that is consistent with State law.

The documentation must be kept for the federal agency, the pass-through entity and auditors under 2 CFR 200.334. A threshold above $50,000 needs approval from the cognizant agency for indirect costs, on a request with the same documentation, and it stays valid until a factor it relied on changes (2 CFR 200.320(a)(1)(v)). Any threshold must also be authorized, or not prohibited, under State, local or tribal law. The option is not a 2024 addition: it appears in the version of 200.320 that took effect November 12, 2020 (eCFR version history, read October 2026).

Setting a Lower Simplified Acquisition Threshold

The entity sets its own simplified acquisition threshold from its internal controls, a risk evaluation and its documented procedures, and the figure "may be lower than, but must not exceed, the threshold established in the FAR." In this example, a written policy sets a $15,000 micro-purchase threshold and a $150,000 simplified acquisition threshold, below the federal $350,000, and each purchase falls to the method that policy requires (illustrative figures).

Illustrative figures, not data from a real organization.

Cost or Price Analysis, Contract Clauses and Preferences

Above the simplified acquisition threshold, the recipient must perform a cost or price analysis for every procurement, contract modifications included, and must make independent estimates before bids or proposals arrive (2 CFR 200.324, eCFR, current as of October 2026). The "cost plus a percentage of cost" and "percentage of construction costs" methods of contracting are prohibited, and estimated costs are allowable only to the extent Subpart E would allow them.

Required Contract Provisions

2 CFR 200.327 requires contracts to carry the applicable provisions of Appendix II to Part 200, whose source note shows its last amendment on August 13, 2020. Several turn on dollar levels.

Appendix II also lists provisions without a dollar trigger, including the equal opportunity clause for federally assisted construction contracts. The awarding agency may require more.

Preferences and Reviews

2 CFR 200.321 asks recipients to consider small, minority, women-owned, veteran-owned and labor surplus area firms, through steps such as solicitation lists and dividing purchases to permit their participation. 2 CFR 200.322 says the recipient should, to the greatest extent practicable and consistent with law, prefer goods produced in the United States, and the requirement must appear in all subawards, contracts and purchase orders. State and local agencies also owe the recovered-materials rules in 2 CFR 200.323, which apply to designated items when the purchase price, or the quantity bought in the preceding fiscal year, exceeds $10,000.

The agency or pass-through entity may run a pre-procurement review in listed cases, such as a purchase above the simplified acquisition threshold awarded without competition or with one expected bid, or a contract change adding more than that threshold (2 CFR 200.325). For construction contracts above the threshold, 2 CFR 200.326 sets minimum bonding of a 5 percent bid guarantee and 100 percent performance and payment bonds unless the agency or pass-through entity has accepted the entity's own bonding policy.

Federal Grant Procurement Checklist: The File and What Auditors Report

The procurement file is the evidence that the method matched the value. Under 2 CFR 200.318(i), records must be "sufficient to detail the history of each procurement transaction," including the rationale for the method, the contract type, the contractor selection or rejection and the basis for the contract price.

For audit purposes, the entity's responsibility for contractors is to ensure that procurement, receipt and payment comply with federal statutes, regulations and award terms (2 CFR 200.501(h), eCFR, current as of October 2026). An entity that expends less than $1,000,000 in federal awards in a year is exempt from the federal audit requirement, but its records must stay available for review (2 CFR 200.501(e)). When an audit applies, the auditor reports material noncompliance related to a major program and known questioned costs above $25,000 for a type of compliance requirement (2 CFR 200.516), and the auditee hires that auditor under these same procurement standards (2 CFR 200.509(a)). Our federal grant compliance checklist places procurement among the other audit-ready records, and the guide to local government grant management shows where purchasing fits in a city or county award cycle.

Tracking Which Award Paid for Which Contract

The procurement file lives in your purchasing and finance systems. A grants team still needs a view that ties each contract to an award and a date: which award pays for it, whether the term ends inside the period of performance, and who holds the file.

That view can sit in GrantCue. On every plan, including Free, a team can keep tasks, deadlines, notes and comments against each grant, and the Team plan adds a shared document library per opportunity and budget versus actuals (grantcue.com pricing page, October 2026). A public agency can use those to log a contract's end date, the award it is charged to and where the procurement file sits. GrantCue is not a procurement or contract management system and does not run bids or quotations. See GrantCue for the public sector.

FAQ

What Is the Micro-Purchase Threshold for Federal Grants?

The federal micro-purchase threshold is $15,000 under FAR 2.101, in effect since October 1, 2025 (acquisition.gov, read October 2026), subject to listed exceptions. A recipient may self-certify a higher threshold up to $50,000 a year with a justification and supporting documentation, and may seek cognizant agency approval above that (2 CFR 200.320(a)(1)). State, local or tribal law must allow the threshold.

When Do Federal Grants Require Competitive Bids?

Formal methods, meaning sealed bids or proposals with public notice, are required when a purchase exceeds the recipient's own simplified acquisition threshold, which cannot be higher than the FAR's $350,000 (FAR 2.101, read October 2026). Between the micro-purchase threshold and that figure, quotations from an adequate number of qualified sources are required. Micro-purchases need only a documented reasonable price.

Can a Nonprofit Use Its Own Procurement Policy for Federal Funds?

Yes, if the written policy meets the standards in 2 CFR 200.318 through 200.327 and is consistent with State, local and tribal law. The option to follow non-federal policies instead belongs to States and Indian Tribes under 2 CFR 200.317, not to nonprofits. The policy may set lower thresholds than the federal ones, and it must be the procedure actually followed.

What Is a Noncompetitive Procurement Under 2 CFR 200?

Noncompetitive procurement is a purchase made without competition, allowed under 2 CFR 200.320(c) only in five cases: the amount is within the micro-purchase threshold, only a single source can fulfill it, an emergency will not allow the delay of public notice, the agency or pass-through entity approves a written request, or competition is judged inadequate after soliciting several sources.

Do Procurement Rules Apply to Subrecipients?

Yes. 2 CFR 200.317 states that all recipients and subrecipients other than States and Indian Tribes must follow 200.318 through 200.327, and that includes subrecipients of a State or Tribe. The pass-through entity may add terms. A contractor is different: its own purchasing is not governed by these sections, but your contract with it must carry the Appendix II clauses that apply.

How Long Must Procurement Records Be Kept?

Federal award records, including procurement records, must be kept for three years from the date the final financial report is submitted (2 CFR 200.334, eCFR, current as of October 2026). The period runs longer while litigation, claims or audit findings are unresolved, when the agency or pass-through entity extends it in writing, and for property bought with federal funds until three years after final disposition.

Write the Policy Before the Next Purchase Order

Five steps put a team in good shape before the next contract under an award. Write down the micro-purchase and simplified acquisition thresholds you will use, checked against the current FAR figures and your State law. Decide whether to self-certify a micro-purchase threshold up to $50,000 (2 CFR 200.320(a)(1)(iv)) and, if so, file the justification each year. Put the Appendix II clauses into your contract templates. Adopt a file checklist by method. Then confirm with each pass-through entity whether the award terms add procurement conditions.

OMB's proposed rewrite of Part 200, published May 29, 2026 (Regulation for Federal Financial Assistance, 91 FR 32198), would revise 200.320 on cost-reimbursement contracts and 200.318 on time-and-materials contracts, among other changes. It is a proposal, and the current text quoted here controls until a final rule takes effect. Teams choosing a system to hold the award side of all this can compare options in our guide to grant management software for government.