Procurement Under Public Assistance Grants

Contract costs under Public Assistance are only as recoverable as the procurement behind them. Each FEMA grant is subject to the federal procurement standards in the Uniform Guidance, the government-wide grant regulations at 2 C.F.R. Part 200, and FEMA's Public Assistance Program and Policy Guide (PAPPG) describes what that means for applicants: FEMA pays contract costs on the terms of the contract when the applicant met the federal procurement and contracting requirements, and where it did not, FEMA's stated remedy is to deny the costs of the contract or, where the eligible work can be substantiated, to reimburse only the part it finds reasonable. The guide, the regulations and FEMA's procurement fact sheets are the sources for this page.

Who follows which rules

The regulations put applicants on two tracks. States, territories and Tribal Nations follow the same policies and procedures they use for purchases with their own funds, plus a handful of federal standards — consideration of small, minority-owned, women-owned and veteran-owned businesses, domestic preferences, recovered materials (which does not bind Tribal Nations) and the contract provisions the regulations require in each contract; a state or Tribal Nation with no documented procedures of its own follows the full federal standards instead. Local governments and private nonprofits follow their own documented procedures, state and local law, and the full federal standards, and where the rules conflict they follow the more restrictive one. The toughest requirements — competitive procurement methods and cost or price analysis — therefore bind local governments and nonprofits directly.

Which edition of the regulations applies turns on a date: FEMA applies the revised Uniform Guidance to awards whose award or declaration date falls on or after October 1, 2024, and the earlier edition to older awards; FEMA amended its Hurricane Helene agreements so that the revised rules apply to those declarations whatever their date. The edition matters because the revision reorganized and renumbered several of the procurement sections.

Competition as the default

For local governments and nonprofits, the baseline is full and open competition. The regulations organize procurement into informal methods for small purchases at or below the simplified acquisition threshold, formal methods — sealed bids and proposals — above it, and noncompetitive procurement, which is allowed only in the circumstances the regulations list. The dollar thresholds come from the federal acquisition regulations and are adjusted from time to time, and the regulations let an applicant self-certify a higher micro-purchase threshold within limits.

FEMA's guide describes the general requirements that go with competition: a cost or price analysis, with an independent estimate prepared before bids or proposals come in, for each procurement above the simplified acquisition threshold, including contract modifications; the steps for considering small and minority-owned, women-owned and veteran-owned businesses and labor surplus area firms when possible; checks on a contractor's integrity, past performance and resources, including that it is not suspended or debarred; the exclusion of a contractor that helped write the specifications or the solicitation; and a written record of the procurement — the method, the contract type, the selection and the basis for the price. A prequalified list, the guide notes, is research rather than a substitute for competition.

Contract types

For local governments and nonprofits, cost-plus-percentage-of-cost and percentage-of-construction contracts are prohibited, in emergencies as at any other time; the guide's reason is that the contractor's profit rises with its costs, which gives it an interest in increasing them, and FEMA describes the markers it uses to recognize that billing method. Time-and-materials contracts are allowed for those applicants only when no other type was suitable, the contract has a ceiling price the contractor exceeds at its own risk, and the applicant keeps a high degree of oversight of the contractor's methods and costs; FEMA generally limits their use to a reasonable period while the scope of work cannot yet be defined, as it often cannot early in debris removal and emergency work. States, territories and Tribal Nations are not bound by those federal prohibitions, but FEMA's guide discourages both contract types for them, warns that they carry a high risk of failing the reasonable-cost test, and says FEMA and the Inspector General scrutinize them closely. The guide also advises against piggybacking on another entity's contract and treats a pre-positioned contract as reimbursable at reasonable cost when it was originally procured in compliance with the federal procurement requirements, its scope covers the eligible work performed, and its term covers the period when the work was done.

The emergency exception, and its limits

The regulations allow noncompetitive procurement in a short list of circumstances, among them a transaction below the micro-purchase threshold, an item available from only one source, a public exigency or emergency that will not permit the delay of a competitive solicitation, written approval from FEMA or the pass-through entity, and inadequate competition after several sources were solicited. FEMA's fact sheet describes an exigency as the need to avoid serious harm that a competitive process would prevent, and an emergency as a threat to life, public health or safety, or improved property requiring immediate action; emergencies tend to be short, while exigent circumstances can last weeks or months.

The limits are as important as the exception. It lasts only as long as the circumstances do, and FEMA's guide expects an applicant that awards a noncompetitive contract to begin competing similar goods and services at once and to transition when the circumstances end; a failure to plan that transition does not justify continued sole-sourcing. FEMA's approval is not required, but a written justification for each noncompetitive procurement is, kept in the award records, and FEMA may disallow some or all of the costs if it later finds the circumstances did not exist or did not prevent competition. And most other rules still apply during an emergency — the required contract clauses, bonding for larger construction contracts, award to a responsible contractor, cost or price analysis above the threshold, the time-and-materials conditions, conflict-of-interest standards, and for local governments and nonprofits the cost-plus-percentage-of-cost prohibition.

Records and audits

FEMA's guide lists the contract records it expects: itemized cost summaries, the procurement method and contract type, and for large projects the solicitation documents, bids, the selection process, the applicant's procurement policy, the cost or price analysis, the contracts and change orders, the invoices, and for time-and-materials contracts the logs that show oversight. For a large project with costs based on noncompetitive procurement, the guide expects the applicant to say which of the regulation's circumstances applied and to explain the need, the duration, the steps taken and any conflicts of interest. FEMA's fact sheet says plainly that FEMA and the Inspector General review procurement actions closely, noncompetitive ones in particular, and that an entity that does not follow the federal requirements risks not being reimbursed for otherwise eligible costs; the regulations also require a single audit of entities whose spending of federal awards in a fiscal year reaches a threshold the regulations set.