PPP38 Procurement rules

Effective 07/01/18

Procurement rules applicable to federally funded procurements following the Federal Uniform Guidance 2CFR200 Sections 200.317 through 200.326.


All University staff will comply with the procurement rules outlined in 2CFR200 Sections 200.317 through 200.326 effective July 1, 2018 for procurements involving the expenditure of federal funds. Many of these rules are already addressed in the State of Wisconsin Procurement Manual, UW System rules, or UW Madison Policies and Procedures (PPP, IPP). This policy document covers those elements of 2CFR200 that are not otherwise covered in the aforementioned policies.

Procurement Standards:
Time and material costing:

The University may use a time and materials type contract only after a determination that no other contract is suitable and if the contract includes a ceiling price that the contractor exceeds at its own risk. Time and materials type contracts mean a contract whose cost to the University is the sum of: 1) the actual cost of materials: and 2) Direct Labor hours charged at a fixed hourly rate that reflect wages general and administrative expenses, and profit.
Since this formula generates an open-ended contract price, a time-and-materials contract provides no positive profit incentive to the contractor for cost control or labor efficiency. Therefore, each contract must set a ceiling price that the contractor exceeds at its own risk. Further, the University must assert a high degree of oversight in order to obtain reasonable assurance that the contractor is using efficient methods and effective cost controls.


All procurement transactions must be conducted in a manner providing full and open competition consistent with the standards of section 200.319. In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, or and invitations for bids or requests for proposals must be excluded from competing for such procurements.

Best Judgment Purchases:

For purchases under the State of Wisconsin $5000 Best Judgement Limit where the product or service is not on a mandatory contract, properly authorized University employees, to the extent practicable, must distribute purchases equitably among qualified suppliers. Qualifying Best Judgement purchases may be awarded without soliciting competitive quotes if properly trained university staff consider the price to be reasonable.

Contracting with small and minority businesses, women’s business enterprises, and labor surplus areas firms:

The University must take all necessary affirmative steps to assure that minority businesses, women’s business enterprises, and labor surplus area firms are used when possible. Affirmative steps must include:

(1) Placing qualified small & minority businesses and women’s business enterprises on solicitation lists;
(2) Assuring that small and minority businesses, and women’s business enterprises are solicited whenever they are potential sources;
(3) Dividing total requirements, when practicable and economically feasible, into smaller tasks or quantities to permit maximum participation by small and minority businesses, and women’s business enterprises;
(4) Establishing delivery schedules, where the requirement permits, which encourage participation by small and minority businesses, and women’s business enterprises;
(5) Using the services and assistance, as appropriate, of such organizations as the Small Business Administration and the Minority Business Development Agency of the Department of Commerce; and
(6) Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed in (1) through (5) above.

Conflicts of Interest.

No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the University must neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts.

Procurement of recovered materials:

The University and its contractors must comply with section 6002 of the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act. The requirements of Section 6002 include procuring only items designated in guidelines of the Environmental Protection Agency (EPA) at 40 CFR part 247 that contain the highest percentage of recovered materials practicable, consistent with maintaining a satisfactory level of competition, where the purchase price of the item exceeds $10,000 or the value of the quantity acquired during by the preceding fiscal year exceeded $10,000; procuring solid waste management services in a manner that maximizes energy and resource recovery; and establishing an affirmative procurement program for procurement of recovered materials identified in the EPA guidelines.

Resource: https://swap.wisc.edu/

Contract cost and price:

The University must perform a cost or price analysis in connection with every procurement action in excess of the Federal Simplified Acquisition Threshold ($250,000) including all contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the University must make independent estimates before receiving bids or proposals. This information should be communicated to Purchasing Services by way of the External Requisition process.

The University must negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where a cost analysis is performed. To establish a fair and reasonable profit, consideration must be given to the complexity of the work to be performed, the risk borne by the contractor, the contractor’s investment, the amount of subcontracting, the quality of its record of past performance, and industry profit rates in the surrounding geographical area for similar work.

Costs or prices based on estimated costs for contracts under the Federal award are allowable only to the extent that costs incurred or cost estimates included in negotiated prices would be allowable for the University under 2 CFR Part 200, Subpart E – Cost Principles. The University may reference its own cost principles that comply with the Federal cost principles. The cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used.

Bonding requirements:

For construction or facility improvement contracts exceeding the Federal Simplified Acquisition Threshold ($250,000), the University must take necessary actions to make sure the Federal interest is adequately protected. If such a determination cannot be made, the minimum requirements must be as follows:
(1) A bid guarantee from each bidder equivalent to five percent of the bid price. The “bid guarantee” must consist of a firm commitment such as a bid bond, certified check, or other negotiable instrument accompanying a bid as assurance that the bidder will, upon acceptance of the bid, execute such contractual documents as may be required within the time specified.
(2) A performance bond on the part of the contractor for 100 percent of the contract price. A “performance bond” is one executed in connection with a contract to secure fulfillment of all the contractor’s obligations under such contract.
(3) A payment bond on the part of the contractor for 100 percent of the contract price. A “payment bond” is one executed in connection with a contract to assure payment as required by law of all persons supplying labor and material in the execution of the work provided for in the contract.

Contract provisions:

All contracts with federal funds should include the following language:
“Parties agree that any applicable terms required by Uniform Guidance 2CFR200 are hereby incorporated into this contract.”


Electronic Code of Federal Regulations