The Federal Acquisition Regulation has officially been updated to increase the micro-purchase threshold and the simplified acquisition threshold, effective August 31, 2020. Various federal agencies had already increased the thresholds through deviations, but this rule makes it official across the board. A few additional thresholds will increase due to inflation. Read on for the details on how this could impact federal procurement.

The proposed rule to increase the acquisition thresholds came out in October of last year, as we discussed on the blog. The changes to the micro-purchase and simplified acquisition thresholds implemented sections from the 2017 and 2018 NDAA. As readers of the blog may know, there is often a delay between when Congress says a rule should change–and when the agencies actually make the change.

However, some agencies had already made the changes to the thresholds. For instance, GSA, had increased both thresholds in March 2018, while the DoD raised the thresholds in a deviation back in fall 2018.

Here are what the new thresholds will be under the FAR.

• The Micro-Purchase Threshold would be increased from $3,500 to $10,000.
• The Simplified Acquisition Threshold would be increased from $150,000 to $250,000

The rule will also eliminate the specific dollar amounts listed in other parts of the FAR, and simply replace those amounts with the terms “micro-purchase threshold” and “simplified acquisition threshold.” This will save some work when adjusting these thresholds in the future.

The increase in the Micro-Purchase Threshold is expected to allow for increased use of purchases without competition, as micro-purchases may be awarded without soliciting competitive quotations, if the contracting officer or individual appointed considers the price to be reasonable. Those micro-purchases do not have to be set aside for small businesses.

However, increasing the simplified acquisition threshold should result in more small business purchases. Purchases “above the micro-purchase threshold, but not over the simplified acquisition threshold, shall be set aside for small businesses” if there are two or more small business offerors expected to compete. FAR 19.502-2. In addition, purchases under the simplified acquisition threshold are exempt from a number of regulatory requirements, such as certain Contract Work Hours and Safety Standards dealing with Overtime Compensation. FAR 13.005.

Inflation Adjustments

In addition, FAR acquisition-related thresholds are subject to adjustment for inflation every five years under 41 U.S.C. § 1908. However, many of the thresholds, such as the micro-purchase and simplified acquisition thresholds as discussed above, will not go up because they had already been increased by statute. Comments are due by August 31, 2020 on these proposed increases.

Some notable increases for inflation include:

• The prime contractor subcontracting plan (FAR 19.702) floor will increase from $700,000 to $750,000, but the construction threshold of $1.5 million will not change.
• The simplified procedures for certain commercial items ceiling (FAR 13.500) will increase from $7 million to $7.5 million.  

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These acquisition thresholds can have an impact on what procurement procedures are used for purchases meeting these thresholds. Contractors should stay aware of the changing thresholds.

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