How the micro-purchase threshold might get a little less micro

A bill in Congress would do something that sounds obscure but would affect every federal agency. It would raise the long-standing dollar threshold for micro purchases, or goods or services agencies buy that cost less than $10,000. Such purchases come with fewer rules and are faster to get done. With why this matters, former General Services Administrator Emily Murphy joined the Federal Drive with Tom Temin.

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Interview transcript: 

Emily Murphy It’s great to actually watch this process. The Baroni Center, my colleagues there, we got together last spring and started doing research in this area about what would happen if we raised the Viper purchase threshold. We published our paper in June. We saw a bunch of small business trade associations latch on to that paper and send a letter to Congress then advocating for an increase in the microbe purchase threshold. Then last week, Congressman Burleson introduced a companion bill to the Senate bill, the Fit Procurement Act. And it raises the simplified acquisition threshold to $25,000, I’m sorry, the microbe purchase threshold’s at $25,000, the simplified acquisition threshold to $500,000. That was marked up in committee last week and passed out. And so now the question is, can they get it across the finish line before the end of the year?

Tom Temin Because these types of matters tend to be important to and understood by certain members of Congress that like to get into the weeds and understand the complications of government. But for the big high leadership and all their political aspirations for the next generation, they sometimes miss all of this, don’t they?

Emily Murphy Well, it’s the little things that make the government work more efficiently. And we found that by raising the simplified acquisition threshold for the micro purchase, partial I’m sorry, from $10,000 to $20,000, you’re going to get about $30 million in savings. They’re going to add $30,000 to get up to $45 million in savings. So we’re somewhere in that mid-thirties in savings annually that would be looking at with this kind of change. But more important especially is where at the end of the fiscal year, the thought that you could be able to get dollars out the door faster without needing a contracting officer to be going through the entire process for routine commercial goods. It just it makes sense. It makes it more efficient and means you can spend money elsewhere rather than having to spend it on the procurement process itself.

Tom Temin Right. So if I need a new copier or some furniture and it’s $10,500 right now, I have to go to the simplified, which is not as simplified as the micro. Now, with the micro, if I want to spend up to $25,000, should this bill become law, I can do it with a federal credit card or I can do it quickly without a lot of rigmarole.

Emily Murphy You could do it with a federal credit card. You could do it through the commercial platforms program that GSA established. There are all sorts of ways you could do it and you could do it quickly and you’d still you’re still getting price comparison. And there’s now can even get small business credit under a deal that SBA and GSA signed around the commercial platform program. There’s a lot of good to be found here.

Tom Temin Right. And how did you calculate $30 million savings? Where did that come from?

Emily Murphy So we looked at the cost of actually the cost savings associated with using a purchase card, and it’s about $70 a transaction. And there are a lot of transactions. We looked at the labor costs, the fact that right now anything above the micro purchase threshold requires that you have a contract contracting officer sign off on it, whereas something that’s under it, you only need someone who’s gone through micro purchase training. Doesn’t mean that there aren’t controls in place, doesn’t mean that it’s just free money being spent by all. But it means that you don’t need to have that warrantied contracting officer so it can be done by someone at a lower level, which then saves costs. And it’s can be done a lot faster. You’re talking about a matter of days rather than weeks or months to make an award.

Tom Temin Right. And at this time, the end of the fiscal year then, which we just got finished with contracting officers, the warranted the 1102s are really in demand and sometimes they’re called on by other agencies just to get something through in 1102 at the end of the year. So the vendors would benefit a lot from this.

Emily Murphy Also, vendors will benefit. It also opens the door to bring in more nontraditional vendors, more small businesses and actually get them involved in the federal procurement ecosystem and those that are successful and that hopefully bring them up into doing more traditional government contracting. There’s been a lot written about the decline of the small business industrial base and the industrial base overall. This is a chance to bring in some new new players in that market.

Tom Temin We are speaking with Emily Murphy. She’s former GSA administrator, now a senior fellow at the Baroni Center for Government Contracting at George Mason University. And let’s talk about the simplified acquisition, which is going under this bill if it passes to $500,000. What’s the current threshold and what’s the implications here?

Emily Murphy So the current thresholds, $250,000. And right now, if you’re doing something between 10,000 and $250,000, you need you need a contracting officer. But under the simplified rules, you could go to, say, a GSA schedule. And if it doesn’t require a separate statement of work, you could actually just review three. Priceless. And then make an award. If you justify it, document it, it’s a much, much faster process. And the 809 panel several years back went in and documented the amount of costs and savings associated with just being able to use simplified acquisition procedures over regular procedures under this new rule. We go to $500,000. That dramatically increases that amount where you do it in a simplified process. But what people forget is it’s also going to be really good for small business because under the FA, everything, under the simplified acquisition threshold is supposed to be reserved for small businesses if they can perform it at a fair and reasonable price. So this looks at also increasing the dollars that would go to small businesses.

Tom Temin Right. And this is covering services as well as goods.

Emily Murphy Correct, services as well as goods. Yes.

Tom Temin And is it only for fixed price types of items or could you do some other kind of contract?

Emily Murphy You’d probably be doing fixed price with a simplified acquisition threshold. It’s simplified because you’re not going to have cost accounting standards apply. These are fairly a nuance contracts where it’s very clear what the scope and what’s being delivered is as opposed to something that, you know is going to be more complicated and you’d want to show a more innovative costing system.

Tom Temin And can these also be done without an 1102 contracting officer that you have to still find that person?

Emily Murphy No, you’re still going to need an 1102 above this. Anything above the micro purchase threshold, you need an 1102. But because the process is faster, the 1102s can do it faster. There was a study and this is going back 20 years said that if it was going civil, acquisitions could be done usually in under three months, whereas a standalone could take nine months to do. I’d say that we’ve gotten much faster since then. So things under this that can be done a lot faster than that. You’re talking about a question of weeks usually.

Tom Temin Sure. And just what kind of controls are in place to make sure that a small business that’s offering something under one of the multiple award contracts or GAC or something that was $250,000 because they knew they could get it sold under the simplified acquisition rules, saying now if this becomes law, golly, now it’s $350,000 just because I can stay under simplified.

Emily Murphy Well, so that’s going to reduce the cost for that small business. And that’s a good thing. It’s not going to put them outside their size standard that separate calculations to whether they’re still a small business or not. They’re still going to have to recertify to that as required by SBA. So it shouldn’t create new challenges for the small businesses. It should create new opportunities for them.

Tom Temin No, what I mean is, though, what’s to make what’s to stop them from just raising their prices a lot? But they’d still be under the new threshold for simplified.

Emily Murphy Because under simplified you still have to look at other prices. So for it you’re not. It’s not being done in blind situation. There still is the ability for competition. GSA’s contract specialists are still going to be going in when they award the base contract, for example, and saying what is a fair and reasonable price, you know, and making sure that they’re doing the analysis. I see another piece of legislation that got marked up last week was also the Value and Procurement Act. It deals with the basis of GSA awards and actually GSA to get even better at this. But that’s a fun bill as well. If you probably for another conversation right now.

Tom Temin And they are fine tuning.

Emily Murphy Yeah, they are, there, but there’s nothing, there’s no way that a small business could just go in and hike their prices because it’s now, the SAT is now $500,000. You still have price competition taking place. And a business that tried to do that would find themselves in a lot of trouble pretty quickly.

Tom Temin Right. That thing would probably pop up in some analytical system and notify someone at GSA or whoever the owner of that contract.

Emily Murphy Again, remember, under GSA schedules, if you’re going to you can’t offer a price higher than your your contract price. You can’t sell it. So you have to you can go lower. You can always discount your schedule price, but you can’t increase your schedule price.

Tom Temin Got it. In a practical sense, it’s unlikely this bill would come to the full floor in either house. What are you going to do to make sure that it stays active as the transition and the election and all that happen?

Emily Murphy So I think there’s an opportunity, hopefully, for it to be included in the Defense Authorization Act or other legislation that’s going to pass this year. There are several must pass things that Congress needs to do, and if not, just even having members on the record supporting it, this Congress maybe increases the chance that it moves forward next year in the next Congress, although I’m still hopeful that it’ll make it through before that, before we start the next Congress.

Jared Serbu Emily Murphy is a former GSA administrator, now a senior fellow at the Baroni Center for Government Contracting at George Mason University. We’ll post this interview at federalnewsnetwork.com/federaldrive. And you can hear the Federal Drive on demand. Subscribe wherever you get your podcasts.

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