The FAR Council issued a proposed rule on November 29, 2024 to amend the FAR to increase acquisition related thresholds for inflation.
Every five years, the FAR Council is required to adjust statutory acquisition related thresholds using Consumer Price Index (CPI). The last time the thresholds were increased was in GFY 2020. Comments are due by January 28, 2025.
These Proposed Threshold Changes are Likely to Impact Your Purchasing System, so What are the Key Changes?
While all of the increases are acquisition related and impact the Contracting Officer’s role in the acquisition process, several of the threshold increases directly impact a contractor’s procurement processes. The proposed threshold changes applicable to contractor purchasing systems are:
- Micro-purchase threshold will increase from $10,000 to $15,000.
- Simplified acquisition threshold will increase from $250,000 to $350,000.
- Threshold for reporting first-tier subcontract information including executive compensation will increase from $30,000 to $40,000.
- Certified cost or pricing data threshold will increase from $2 million to $2.5 million.
- Prime contractor subcontracting plan floor will increase from $750,000 to $950,000. The threshold for construction contractors will increase from $1.5 million to $2 million.
Contractors may experience a reduction in sole source justifications since the micro purchase threshold will increase to $15,000. However, the buyer still needs to determine the price is fair and reasonable for purchases under the micro-purchase threshold. You do not want give your DCAA auditor any easy findings.
While certified cost or pricing data will not be required for acquisitions under $2.5 million or when an exemption in FAR 15.403-1(b) is met (e.g., adequate competition, commercial, modification to commercial contract, etc.), that does not mean the all purchases below this threshold are by default fair and reasonable. The buyer will still need to have adequate support in their files to show that price analysis supports a fair and reasonable price for the purchase. Additionally, FAR 15.403-3 requires that the buyer may have to request uncertified cost data, if price analysis does not get them to a fair and reasonable price.
Your representations and certifications policy for executive compensation and CAS will need to be updated.
While these increases to acquisition thresholds will have an impact on how quickly and easily low dollar items can be purchased by reducing the level of documentation or approvals, buyers will still need to compete to the maximum extent practical and document fair and reasonable prices for all purchases.
Other Acquisition Threshold Changes
The remaining proposed threshold acquisition changes are:
- Threshold for limiting competition to eligible 8(a) awards over $25 million is increased to $30 million.
- Approval thresholds of justifications for other than full and open competition will increase from $750,000 to $950,000. FAR 6.304(a)(3) and (4) will increase from $15 million to $20 million and from $75 million to $95 million, respectively. The $100 million threshold applicable to DoD, NASA, and the Coast Guard will increase to $150 million.
- Ceiling for using simplified procedures for certain commercial products and commercial services will increase from $7.5 million to $9.5 million and commercial acquisitions for defense against or recovery from cyber, nuclear, biological, chemical, or radiological attack, the ceiling will increase from $15 million to $20 million.
- Threshold for justifications of single-award indefinite-delivery contracts will increase from $100 million to $150 million.
While the proposed thresholds are based on the projected CPI as of March 2025, if the actual CPI is higher, the thresholds may be increased when the final rule is published.
Takeaway
Increasing the FAR acquisition thresholds is a positive change and will reduce administrative burdens for contractors and the government by decreasing the time and resources required for procurements. Contractors will need to ensure they are still complying with other requirements – cost/price analysis, sole source justifications and documentation that all purchases are made at fair and reasonable prices. Contractors should be on the lookout for the final rule to ensure they review and update any thresholds identified in procurement and estimating policies as well as provide training to their staff.
Redstone GCI offers comprehensive support to help your company stay compliant and streamline procurement and estimating processes. Our team can assist in drafting or updating written procurement and estimating policies to align with the latest regulations and industry best practices. Our experts can assist you in drafting or revising your written policies to align with the latest regulations and industry standards. We also offer tailored training through engaging webinars or onsite sessions to ensure your team understands the requirements to maintain compliance. By partnering with Redstone GCI, you gain practical solutions and expert guidance to simplify compliance and reduce risk, helping your business operate more efficiently and effectively.
Lynne is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to Commercial Item Determinations and support, Cost Accounting Standards, DFARS Business System Audits, Proposals, and Incurred Cost. Prior to joining Redstone Government Consulting, Lynne served in several capacities with DCAA and DCMA for over 35 years. Professional Experience Lynne began her career working with DCAA in the Honeywell Resident Office, Clearwater, FL in 1984. Lynne’s experience included various positions which involved conducting or reviewing forward proposals or rate audits, financial capability audits, progress payments, accounting and estimating systems, cost accounting standards, claims and disclosure statement reviews. She is an expert in FAR, DFARS, CAS and testified as an expert witness. Lynne assisted in drafting the commercial item guidance for DCAA Headquarters. Lynne was assigned as a Regional Technical Specialist where she provided guidance to 20 field offices on highly complex or technical issues relative to forward pricing, financial capability or progress payment issues. As an Assistant for Quality, she was involved in reviewing and ensuring audit reports were in compliance with policy and GAGAS as well as made NASBA certified presentations to the staff including but not limited to billing reviews, CAS, unallowable cost and progress payments. To enhance her experience in government contracting, Lynne accepted a position with DCMA in 2015 as part of the newly organized DCMA Cadre of Experts in the Commercial Item Group. This included performing reviews of prime contractor’s assertions and/or commercial item determinations as well as performing price analyses. Lynne was a project lead and later became a lead analyst where she engaged with the buying commands on requests and reviewed price analysis reviews performed by a team of 5 analysts. She also assisted the DCMA CPSR team relative to commercial items and co-instructed the Commercial Item Training presented to DCMA. Education Lynne earned a Bachelor of Science Degree in Accounting from the University of Central Florida. Certifications State of Florida Certified Public Accountant State of Alabama Certified Public Accountant Defense Acquisition Workforce Improvement Act (DAWIA) Level III- Auditing DAWIA Level III – Contracting