We recently received an interesting query from a CPO about how states handle contingency contracting & purchase thresholds in the wake of natural disasters. A relevant question to be sure given the tremendous damage in Texas and now Florida, and the clean up effort that awaits.
As readers of our Newswire may recall, GSA recently increased purchase thresholds to enable contracting officers to more easily assist in disaster relief. Specifically, that meant raising the micro-purchase threshold from $3,500 to $20,000 and raising the simplified acquisition threshold to $750,000.
But that’s at the federal level. How do states and localities handle this? I’d be surprised if there weren’t already some policies in place that permit state contracting professionals to spend above and beyond thresholds in the event of a disaster, say when the Governor has declared a state of emergency. However, it’s an interesting thought experiment to consider the amount of that increase.
Clearly, some states are more disaster-prone than others, or at the very least have different types of disasters and cost issues. Do floods require a higher threshold amount, or different contingency contracting mechanisms, than wildfire or tornado damages?
We are curious to learn whether others in the community have worked with contingency contracting thresholds, particularly at the state and local levels. If you’re reading this and would care to link to any relevant policies, procedures or reports (like the NASPO report & others linked below), we’d definitely appreciate it.
http://www.naspo.org/dnn/portals/16/documents/
EmergencyPreparednessforStateProcurementOfficials.pdf
Part 2. Recovery Planning | FEMA.gov
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Frank McNally
Director, Learning & Content Development
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My experience is dated, but Hurricsne Katrina hit in September 2005 when I was Chief Procurement Official for the state of Colorado. We became an evacuee location because the decommissioned Lowry Air Force Base (a former training base) had vacant student barracks. 
So I have to caveat this response with the caution that we had no “recovery” phase. We needed to get abandoned barracks renovated and furnished quickly, and essential clothing and incidentals purchased for men, women, and children.
By way of context, we had already raised small purchase ┬álimits to align with federal limits, although our discretionary limits were higher. The overall financial test for the state controller’s approval of “commitment vouchers” (contracts, POs, and authorized payment-on-invoice/informal written agreements) was “fair and reasonable price.”
Here is what I did after activation of the Emergency Action Center. 
– I issued a blanket emergency sole source determination under the procurement code and notified ┬áthe EOC. I coordinated it with the state controller. This suspended our small purchase and competition requirements for Katrina-related purchases.┬á
– I raised the single card limits on the procurement card for contingency purchasing agents to $500K, after coordinating with the bank and controller. We notified the merchants and set up accounts.┬á
We didn’t get FEMA push-back except on a copier acquisition for the EAC, because a lease-purchase analysis was not completed. O
The other thing that was helpful was our approach to “splitting requirements.” ┬áSome thought me perhaps too liberal. But I had issued previous guidance to the state procurement delegates telling them that we didn’t add-up annual volume with a supplier for purposes of evaluating compliance with small purchase limits. We looked at requirements individually, especially helpful for contingencies, even if there was a blanket purchase order defining terms of future purchases. Of course, if the relationship had a minimum quantity requirement or was a requirements contract, the minimum quantity or estimate would implicate competitive requirements. We encouraged those contract types to get reduced pricing, but our compliance outlook was based on the requirement when it arose.┬á
So even without my Katrina emergency declaration, most of our purchases of clothes, port-a- potties, handheld portable radios, etc, would have satisfied small purchase limits. 
The competition rules were the least of our problems. Availability was. Even with our state contracts, federal priority on rated orders made things like barriers and tents hard to find. Having the National Guard involved and in the EAC helped. 
So my final reminder: I wasn’t dealing with FEMA recovery rules. And my successors may have changed the outlook on application of small purchase rules to indefinite delivery situations.┬á
Great topic! I’ve always believed more thought could be given to how and why we set small purchase limits.┬á
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Richard Pennington
General Counsel
NASPO ValuePoint
Glendale CO
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Original Message:
Sent: 09-14-2017 22:20
From: Frank McNally
Subject: Purchase thresholds in the event of natural disasters
We recently received an interesting query from a CPO about how states handle contingency contracting & purchase thresholds in the wake of natural disasters. A relevant question to be sure given the tremendous damage in Texas and now Florida, and the clean up effort that awaits.
As readers of our Newswire may recall, GSA recently increased purchase thresholds to enable contracting officers to more easily assist in disaster relief. Specifically, that meant raising the micro-purchase threshold from $3,500 to $20,000 and raising the simplified acquisition threshold to $750,000.
But that’s at the federal level. How do states and localities handle this? I’d be surprised if there weren’t already some policies in place that permit state contracting professionals to spend above and beyond thresholds in the event of a disaster, say when the Governor has declared a state of emergency. However, it’s an interesting thought experiment to consider the amount of that increase.
Clearly, some states are more disaster-prone than others, or at the very least have different types of disasters and cost issues. Do floods require a higher threshold amount, or different contingency contracting mechanisms, than wildfire or tornado damages?
We are curious to learn whether others in the community have worked with contingency contracting thresholds, particularly at the state and local levels. If you’re reading this and would care to link to any relevant policies, procedures or reports (like the NASPO report & others linked below), we’d definitely appreciate it.
EmergencyPreparednessforStateProcurementOfficials.pdf
Part 2. Recovery Planning | FEMA.gov
——————————
Frank McNally
Director, Learning & Content Development
——————————
One other thought/question. The Uniform Guidance distinguishes between states and other government entities with respect to procurement standards. States are required to follow their own laws and regulations. The Federal Transit Administration three years ago approved of local governments purchasing from their state’s “GSA-like” schedules, which was a bit a nod to federalism in granting some deference to states’ procurement laws.┬á
I wonder if FEMA has moved that way at all. It’s my understanding that they see their financial rules, especially the recovery rules, not as procurement standards but financial compliance standards. E.g., the lease-purchase analysis I mentioned in my previous post was not a Colorado state procurement requirement, but FEMA expected to see it
I’m not sure how if at all this affects small purchase limits in disasters.
Hi Richard,
Thanks for sharing – great information here and a good “plan of action” that others can follow as they prepare for or react to a disaster contingency.
One question – you mentioned raising your p-card limit to $500k – what was it before you raised?
Interesting also to learn of the blanket sole source determination. How long did it take to coordinate that with the controller? Might be helpful for others to have some baseline expectation for the amount of time something like that could take, so they can write in the need in an SOP or other guidance.
I am definitely curious to learn from others as well. We plan to take all the information and resources we receive and write up some more content about this, so let’s keep the conversation going people!
-Frank
——————————
Frank McNally
Director, Learning & Content Development
——————————
——————————————-
Original Message:
Sent: 09-15-2017 10:47
From: Richard Pennington
Subject: Purchase thresholds in the event of natural disasters
One other thought/question. The Uniform Guidance distinguishes between states and other government entities with respect to procurement standards. States are required to follow their own laws and regulations. The Federal Transit Administration three years ago approved of local governments purchasing from their state’s “GSA-like” schedules, which was a bit a nod to federalism in granting some deference to states’ procurement laws.
I wonder if FEMA has moved that way at all. It’s my understanding that they see their financial rules, especially the recovery rules, not as procurement standards but financial compliance standards. E.g., the lease-purchase analysis I mentioned in my previous post was not a Colorado state procurement requirement, but FEMA expected to see it
I’m not sure how if at all this affects small purchase limits in disasters.
Frank, I can’t recall the exact limits on the Emrgency Action Center cards that were distributed on EAC activation. Typically we had two card limits that agencies established with our card program administrator: a single transaction limit and a monthly billing cycle limit, tied to our discretionary purchasing limits. At the time, that limit was $10K for commodities. I’m guessing that was the card limit that I raised to $500K. (Amother important disaster response POC: the card provider’s emergency contact info)
With respect to state controller coordination, it was a phone call. I was division director of Finance and Procurement, that included the Office of the State Controller and the State Purchasing Office . He and I had a close working relationship, including discussions of forms of commitment vouchers/contracts/POs, small purchase limits, pre- v post- transsction internal controls on procurement cards, etc.  
Hope this helps. PS: I found the NASPO (www.NASPO.org) white paper on contingency planning a terrific planning resource.
——————————
Richard Pennington
General Counsel
NASPO ValuePoint
Glendale CO
——————————
——————————————-
Original Message:
Sent: 09-18-2017 14:02
From: Frank McNally
Subject: Purchase thresholds in the event of natural disasters
Hi Richard,
Thanks for sharing – great information here and a good “plan of action” that others can follow as they prepare for or react to a disaster contingency.
One question – you mentioned raising your p-card limit to $500k – what was it before you raised?
Interesting also to learn of the blanket sole source determination. How long did it take to coordinate that with the controller? Might be helpful for others to have some baseline expectation for the amount of time something like that could take, so they can write in the need in an SOP or other guidance.
I am definitely curious to learn from others as well. We plan to take all the information and resources we receive and write up some more content about this, so let’s keep the conversation going people!
-Frank
——————————
Frank McNally
Director, Learning & Content Development
——————————
Original Message:
Sent: 09-15-2017 10:47
From: Richard Pennington
Subject: Purchase thresholds in the event of natural disasters
One other thought/question. The Uniform Guidance distinguishes between states and other government entities with respect to procurement standards. States are required to follow their own laws and regulations. The Federal Transit Administration three years ago approved of local governments purchasing from their state’s “GSA-like” schedules, which was a bit a nod to federalism in granting some deference to states’ procurement laws.
I wonder if FEMA has moved that way at all. It’s my understanding that they see their financial rules, especially the recovery rules, not as procurement standards but financial compliance standards. E.g., the lease-purchase analysis I mentioned in my previous post was not a Colorado state procurement requirement, but FEMA expected to see it
I’m not sure how if at all this affects small purchase limits in disasters.
Right on, thanks for the baseline info on the p-card limits. Pegging limit increases to federal actions is probably a good call, but I presume every procurement official would need to look at their current transaction limits and similar disaster spending and make some kind of prediction about what those levels would be raised to.
And then to your point, know who your card POC is at the bank to ensure that you would be able to raise to that limit quickly, and the procedure for when the action needs to take place. Also sounds like your relationships on the job were well leveraged to issue the stay on competition requirements. They say networking is valuable – never more true!
We did cover an interesting story in the Newswire yesterday about the Federal Aviation Administration authorizing the use of drones in the Hurricane Irma relief effort. We’ll be discussing the acquisition of drones and drone services in an upcoming webinar, so if any proc pros out there did happen to make an acquisition in this effort (or had previously purchased drones or drone services), we’d like to hear from you.
——————————
Frank McNally
Director, Learning & Content Development
——————————
——————————————-
Original Message:
Sent: 09-19-2017 08:50
From: Richard Pennington
Subject: Purchase thresholds in the event of natural disasters
Frank, I can’t recall the exact limits on the Emrgency Action Center cards that were distributed on EAC activation. Typically we had two card limits that agencies established with our card program administrator: a single transaction limit and a monthly billing cycle limit, tied to our discretionary purchasing limits. At the time, that limit was $10K for commodities. I’m guessing that was the card limit that I raised to $500K. (Amother important disaster response POC: the card provider’s emergency contact info)
With respect to state controller coordination, it was a phone call. I was division director of Finance and Procurement, that included the Office of the State Controller and the State Purchasing Office . He and I had a close working relationship, including discussions of forms of commitment vouchers/contracts/POs, small purchase limits, pre- v post- transsction internal controls on procurement cards, etc.
Hope this helps. PS: I found the NASPO (www.NASPO.org) white paper on contingency planning a terrific planning resource.
——————————
Richard Pennington
General Counsel
NASPO ValuePoint
Glendale CO
——————————
Original Message:
Sent: 09-18-2017 14:02
From: Frank McNally
Subject: Purchase thresholds in the event of natural disasters
Hi Richard,
Thanks for sharing – great information here and a good “plan of action” that others can follow as they prepare for or react to a disaster contingency.
One question – you mentioned raising your p-card limit to $500k – what was it before you raised?
Interesting also to learn of the blanket sole source determination. How long did it take to coordinate that with the controller? Might be helpful for others to have some baseline expectation for the amount of time something like that could take, so they can write in the need in an SOP or other guidance.
I am definitely curious to learn from others as well. We plan to take all the information and resources we receive and write up some more content about this, so let’s keep the conversation going people!
-Frank
——————————
Frank McNally
Director, Learning & Content Development
Original Message:
Sent: 09-15-2017 10:47
From: Richard Pennington
Subject: Purchase thresholds in the event of natural disasters
One other thought/question. The Uniform Guidance distinguishes between states and other government entities with respect to procurement standards. States are required to follow their own laws and regulations. The Federal Transit Administration three years ago approved of local governments purchasing from their state’s “GSA-like” schedules, which was a bit a nod to federalism in granting some deference to states’ procurement laws.
I wonder if FEMA has moved that way at all. It’s my understanding that they see their financial rules, especially the recovery rules, not as procurement standards but financial compliance standards. E.g., the lease-purchase analysis I mentioned in my previous post was not a Colorado state procurement requirement, but FEMA expected to see it
I’m not sure how if at all this affects small purchase limits in disasters.
Saw this article today about 5 ways that FEMA has changed since Katrina, and 5 ways that its still the same. Not much from a procurement/contingency contracting angle, but still an interesting read nonetheless.
5 Things That Have Changed About FEMA Since Katrina – And 5 That Haven’t
——————————
Frank McNally
Director, Learning & Content Development
——————————
——————————————-
Original Message:
Sent: 09-20-2017 10:16
From: Frank McNally
Subject: Purchase thresholds in the event of natural disasters
Right on, thanks for the baseline info on the p-card limits. Pegging limit increases to federal actions is probably a good call, but I presume every procurement official would need to look at their current transaction limits and similar disaster spending and make some kind of prediction about what those levels would be raised to.
And then to your point, know who your card POC is at the bank to ensure that you would be able to raise to that limit quickly, and the procedure for when the action needs to take place. Also sounds like your relationships on the job were well leveraged to issue the stay on competition requirements. They say networking is valuable – never more true!
We did cover an interesting story in the Newswire yesterday about the Federal Aviation Administration authorizing the use of drones in the Hurricane Irma relief effort. We’ll be discussing the acquisition of drones and drone services in an upcoming webinar, so if any proc pros out there did happen to make an acquisition in this effort (or had previously purchased drones or drone services), we’d like to hear from you.
——————————
Frank McNally
Director, Learning & Content Development
——————————
Original Message:
Sent: 09-19-2017 08:50
From: Richard Pennington
Subject: Purchase thresholds in the event of natural disasters
Frank, I can’t recall the exact limits on the Emrgency Action Center cards that were distributed on EAC activation. Typically we had two card limits that agencies established with our card program administrator: a single transaction limit and a monthly billing cycle limit, tied to our discretionary purchasing limits. At the time, that limit was $10K for commodities. I’m guessing that was the card limit that I raised to $500K. (Amother important disaster response POC: the card provider’s emergency contact info)
With respect to state controller coordination, it was a phone call. I was division director of Finance and Procurement, that included the Office of the State Controller and the State Purchasing Office . He and I had a close working relationship, including discussions of forms of commitment vouchers/contracts/POs, small purchase limits, pre- v post- transsction internal controls on procurement cards, etc.
Hope this helps. PS: I found the NASPO (www.NASPO.org) white paper on contingency planning a terrific planning resource.
——————————
Richard Pennington
General Counsel
NASPO ValuePoint
Glendale CO
Original Message:
Sent: 09-18-2017 14:02
From: Frank McNally
Subject: Purchase thresholds in the event of natural disasters
Hi Richard,
Thanks for sharing – great information here and a good “plan of action” that others can follow as they prepare for or react to a disaster contingency.
One question – you mentioned raising your p-card limit to $500k – what was it before you raised?
Interesting also to learn of the blanket sole source determination. How long did it take to coordinate that with the controller? Might be helpful for others to have some baseline expectation for the amount of time something like that could take, so they can write in the need in an SOP or other guidance.
I am definitely curious to learn from others as well. We plan to take all the information and resources we receive and write up some more content about this, so let’s keep the conversation going people!
-Frank
——————————
Frank McNally
Director, Learning & Content Development
Original Message:
Sent: 09-15-2017 10:47
From: Richard Pennington
Subject: Purchase thresholds in the event of natural disasters
One other thought/question. The Uniform Guidance distinguishes between states and other government entities with respect to procurement standards. States are required to follow their own laws and regulations. The Federal Transit Administration three years ago approved of local governments purchasing from their state’s “GSA-like” schedules, which was a bit a nod to federalism in granting some deference to states’ procurement laws.
I wonder if FEMA has moved that way at all. It’s my understanding that they see their financial rules, especially the recovery rules, not as procurement standards but financial compliance standards. E.g., the lease-purchase analysis I mentioned in my previous post was not a Colorado state procurement requirement, but FEMA expected to see it
I’m not sure how if at all this affects small purchase limits in disasters.