Raising the Roofs: DoD Threshold Increases

On April 13, 2018, Shay D. Assad, director of Defense Procurement and Acquisition Policy (DPAP), issued two class deviation memos of which the defense contractor industry needs to be aware.

Information contained in one memo indicates an increase in thresholds for  which contracting officers need to obtain certified cost or pricing data, as of July 1, 2018. The other memo signals an increase  in thresholds, effective immediately, for micro-purchases and simplified acquisitions. This memo also provides more information about special emergency procurement authority.

Increased Cost or Pricing Data Threshold and What It May Mean for You
Class Deviation 2018-O0012 instructs contracting officers to use $2 million as the new threshold for obtaining certified cost or pricing data under FAR Part 15.403-4. The prior threshold was $750,000. This change is in accordance with the legislative language in the FY 2018 National Defense Authorization Act (NDAA). This increase should help expedite some smaller-sized acquisitions for the government and contractors. Please note that this increase only creates a requirement for contracting officers for applicable procurements at or larger than $2 million to obtain certified cost or pricing data. It is at their discretion that they may require certified cost or pricing data for smaller acquisitions so don’t be surprised if one asks you for a certification for a less than $2 million proposal. Also, be aware that for civilian agency acquisitions this amount has not yet been changed within FAR.

Together with this threshold increase goes the minimum acquisition amount on which Cost Accounting Standards (assuming the contractor is CAS-covered) shall apply. As a result, starting in July, contractors may end up picking up slightly fewer CAS-covered contracts. This is not a retrospective change.

Increased Micro-Purchase and Simplified Acquisition Thresholds and What They May Mean for You
Class Deviation 2018-O0013 instructs contracting officers to use $5,000 (from $3,500) as the new micro-purchase threshold and $250,000 (from $150,000) for the new simplified acquisition threshold. The memo also outlines several higher thresholds and other exceptions for contingency operations (in-theatre/war operations) and responses to cyber-attacks. A higher micro-purchase threshold should drive a bit higher volume in government purchase card acquisitions given the lesser restrictions on these types of transactions. The higher simplified acquisition threshold is a significant benefit to small businesses, who solely benefit from this unique authority. Contracting officers may use simplified acquisition authority (FAR Part 13) to make purchases on a much more informal basis (e.g., less restrictive RFPs, allows for oral quotes). This should generate more opportunities for small businesses.

Note that GSA recently released its own class deviation memo raising its micro-purchase threshold to $10,000 and simplified acquisition authority to $250,000. The expectation is that  more agencies will do the same while we await on the FAR Council to enact these FY 2018 NDAA mandated changes, government-wide.

Gain Insight
For more information about how these increases may impact you, please contact Jeff Shapiro, Senior Manager, Government Contracting  Industry Practice at jeff.shapiro@cohnreznick.com or (703) 286-1709 or Kristen Soles, Partner,  Government Contracting Industry Practice Leader at kristen.soles@cohnreznick.com or (703) 847-4411.

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