Issues for Non-Profit Corporations

The federal, state, and local governments all work with non-profit companies, organizations, and entities to provide needed benefits and services to taxpayers. A national survey conducted by researchers from the Urban Institute found that roughly one-third of all 501(c)(3) non-profit revenue is attributed to governmental grants and contracts. In fact, the same study found that government agencies entered into contracting relationships with more than 56,000 nonprofits handling approximately 350,000 government contracts. In all, the U.S. government paid out approximately $137 billion to non-profit organizations during the 2012 fiscal year.

However, there are problems organizations receiving government contracts must contend with. Almost 50 percent of contracting non-profits reported issues with limits on the percent of government funds that could be used for program costs. Other organizations reported concerns regarding government cutbacks and cost-saving measures enacted during the Great Recession and thereafter.

2014’s Super Circular Changed the Rules of Government Contracting for Non-Profits

Non-profit entities engaged in government contracting matters probably already know that the Super Circular that went into effect after December 26,2014, for the 2015 fiscal year has brought fundamental changes to government contracting matters. IN general, changes to the solicitation and bid process include:

  • Establishment of conflict of interest provisions
  • Greater clarity by referring to “vendors” as “contractors”
  • There is a new emphasis on reporting and performance goals
  • There is an increased emphasis of internal process controls
  • An emphasis on micro purchases
  • Changes to contract administration management systems requirements
  • Termination of federal contracts
  • De minimis indirect cost rates
  • Clarifications regarding exceptions to the generalized ban on coverage of entertainment costs
  • Clarified Language regarding travel costs and conference costs
  • Changes to Type A/B threshold

IN short, the Super Circular resulted in a myriad of fundamental changes to the processes and procedures with which non-profit organizations have become familiar. The experienced lawyers of Meredith & Narine can assist your organization in addressing these changes.

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Nonprofit Grantees Must Engage in “Full & Open” Competition

While under the old regulations full and open competition was required to the, “maximum extent possible,” the new regulations better clarifies this requirement. The new regulation requires full and open competition for all solicitations greater than $150,000—unless an exception applies. While the regulations do not fully define “full and open competition,” grantees should take certain actions to increase the likelihood that this requirement is met. Contractor’s need to understand the new processes and procedures grantees will engage in.

Where a Sole-Source Contract is Necessary, A Cost and Price Reasonableness Analysis Must Occur

If there are more than two bids on a procurement contract, the new regulations mandate that the contract be subject to price reasonableness, but does not necessarily require a cost or price reasonableness analysis. Contractors may be required to provide a breakdown of costs that includes overhead mark-up. Contractors may be required to sign a non-disclosure agreement and disclose confidential pricing information. This process may seem especially jarring and perhaps slight bizarre to non-profits more familiar with commercial contracts.

Antitrust Laws and Court Room

OMB Rules Require Reimbursement of Non-Profit Overhead Costs

All federal, state, and local governments are now required to reimburse non-profits for their reasonable indirect costs. Indirect costs are sometimes termed overhead or administrative expenses. In additional to this potential additional source of funding, other changes were made. Under the 2014 Super Circular changes implemented by the Office of Management & Budget (OMB), more of a nonprofit’s expenses and costs are treated as reimbursable. Other changes, such as merging overlapping previous OMB circulars, are intended to increase efficiency and reduce administrative burdens. Still other changes by the OMB are targeted at identifying and eliminating fraud, waste, and abuse.

Grantees Must Provide Contractors with Procurement Documentation that Clearly Explains the Grounds for Award

Under the new regulations, grantees must provide contractors with written decisions that clearly set forth the grounds for the grantee’s decision-making process. Ideally, grantees should consider and include potential grounds for a bid protest in their procurement documentation. Furthermore, even in the absence of expressly articulated bid protest rights, sufficient procurement documentation must be provided to the contractors. Providing this documentation can allow a intending contractor to verify that the grantee complied with the competition terms and that price and cost reasonableness grounds have been addressed.

Rely on Our Experienced Government Contracting Attorneys

The experienced government contracting attorneys of Meredith & Narine are well-versed in handling the unique issues presented by the government contracting bid process when applied to non-profit entities. To schedule a confidential legal consultation with an experienced lawyer call us at 215-995-2769 or contact us online.

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