Procurement Under FEMA Public Assistance Grants

Every FEMA grant program — including Public Assistance — is subject to the federal procurement standards in 2 C.F.R. Part 200, the Uniform Administrative Requirements. FEMA's published policy is blunt about the stakes: FEMA pays contract costs based on the terms of the contract if the applicant meets federal procurement and contracting requirements. If it does not, FEMA's stated remedy is to either deny all costs associated with the contract or, where enough information exists to substantiate the eligible work, reimburse only the portion it determines is reasonable.

There is a real exception for exigent and emergency circumstances that allows noncompetitive ("sole-source") contracting — but it is narrower than many applicants assume. It lasts only as long as the circumstances themselves, it must be documented in writing for each procurement, and several rules never lift — including, for local governments and private nonprofits, the prohibition on cost-plus-percentage-of-cost contracts.

Which procurement rules apply to you

The PAPPG v5 splits applicants into two tracks:

• State and territorial government agencies and Tribal Nations follow 2 C.F.R. § 200.317: they use the same policies and procedures they would use for procurements with non-federal funds, but must also comply with four specific federal standards — consideration of small, minority, women's, veteran-owned, and labor surplus area businesses (2 C.F.R. § 200.321), domestic preferences for U.S.-produced goods (§ 200.322), procurement of recovered materials (§ 200.323), and the required federal contract provisions in every contract awarded (§ 200.327). (Older materials cite recovered materials as § 200.322 — since the November 2020 Uniform Guidance revision that number belongs to domestic preferences.) FEMA reviews the entity's procurement policies or may ask its attorney to certify compliance in writing.
• Local governments and private nonprofits (PNPs) must comply with their own documented procurement procedures, applicable state/local law, and the full federal requirements at 2 C.F.R. §§ 200.318 through 200.327. Where those rules conflict, the applicant must follow the more restrictive requirement.

This distinction matters most in a disaster: the toughest federal rules — the competitive procurement methods and cost or price analysis — bind local governments and PNPs directly, while states and Tribal Nations answer chiefly to their own procurement policies (plus the four standards above).

Full and open competition is the default

For local governments and PNPs, the baseline requirement is full and open competition (2 C.F.R. § 200.319(a)). Current 2 C.F.R. § 200.320 (“Procurement methods”) organizes every procurement into three types of methods: informal procurement methods for small purchases at or below the simplified acquisition threshold — micro-purchases and simplified acquisitions (§ 200.320(a)); formal procurement methods, required above that threshold — sealed bids and proposals (§ 200.320(b)); and noncompetitive procurement (§ 200.320(c)).

A terminology note, because older FEMA materials (and the PAPPG's source-era text) describe five methods — micro-purchase, small purchase procedure, sealed bid (formal advertising), competitive proposal, and noncompetitive proposal: that is the pre-November 2020 organization of § 200.320. The substance largely carries over, but the November 2020 revision adopted the three-category structure, and the Uniform Guidance revision effective October 1, 2024 renamed “small purchase procedures” to “simplified acquisition procedures.”

The general requirements in the PAPPG include:

• Cost or price analysis for every procurement transaction above the simplified acquisition threshold, including contract modifications, with an independent estimate prepared before bids or proposals are received (2 C.F.R. § 200.324(a)). The PAPPG's printed text gives the threshold as $250,000, noting it is periodically adjusted — and it has been: 2 C.F.R. § 200.1 pegs the threshold to the FAR (48 C.F.R. part 2, subpart 2.1), which effective October 1, 2025 sets the simplified acquisition threshold at $350,000 and the micro-purchase threshold at $15,000. Separately, FAR 2.101 sets higher thresholds only for federal agency acquisitions supporting response to an emergency or major disaster under the Stafford Act (42 U.S.C. § 5122) — a $25,000 micro-purchase threshold and a $1,000,000 simplified acquisition threshold for contracts awarded and performed inside the United States — and 2 C.F.R. § 200.320(a)(1)(iv)–(v) lets an applicant self-certify a micro-purchase threshold up to $50,000 (higher only with cognizant-agency approval).
• Six affirmative steps to use small and minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms when possible (2 C.F.R. § 200.321).
• Contractor responsibility checks — evaluating integrity, past performance, and financial and technical resources, and verifying the contractor is not suspended or debarred.
• Excluding conflicted bidders — a contractor that drafted the specifications, statement of work, or solicitation cannot compete for that procurement.
• A written procurement record covering the rationale for the method, the contract type, contractor selection or rejection, and the basis for price.

One trap the PAPPG calls out: a prequalified contractor list is useful research, but it is not a substitute for competition. Applicants must still compete the work and cannot exclude bidders who were not on the list.

Contract types: what is prohibited, what is restricted — and for whom

For local governments and PNPs, cost-plus-percentage-of-cost (CPPC) and percentage-of-construction contracts are prohibited — and FEMA's exigency fact sheet answers the emergency question directly for these non-state entities: no, the prohibition applies to all work, regardless of the circumstances. The PAPPG explains why: the contractor's profit rises as performance costs rise, which gives the contractor a financial interest in increasing costs. FEMA identifies CPPC billing by four markers — a predetermined percentage rate, applied to actual performance costs, with total payment uncertain at contracting and payment increasing commensurately with cost.

Time-and-materials (T&M) contracts are allowed for local governments and PNPs only if all three of the following apply: no other contract type was suitable; the contract has a ceiling price the contractor exceeds at its own risk; and the applicant maintains a high degree of oversight of the contractor's methods and cost controls. FEMA generally limits T&M use to a reasonable timeframe while the scope of work cannot yet be defined — common early in debris removal and emergency work. Time-and-equipment contracts are treated the same way.

State, territorial, and Tribal Nation applicants are on different footing. The federal procurement rules do not prohibit states from using T&M or CPPC contracts, and the PAPPG acknowledges that a state, Tribal Nation, or territorial government may allow no-ceiling T&M and CPPC contracts. But FEMA discourages both because they generally lack provisions that control costs and maximize efficiency, warns that their use carries a high risk of noncompliance with the requirement that all costs be reasonable, and — together with the DHS OIG — closely scrutinizes them for cost reasonableness. States entering T&M contracts are encouraged to write in a ceiling price and a short contract duration, buying time to develop a scope of work and transition to competitive procurement.

Piggyback and cooperative purchasing contracts are discouraged. FEMA advises against piggybacking because the original contract's scope of work belongs to a different entity, and expanded scopes generally were not competed. Pre-positioned (standby) contracts are reimbursable only if the contract was originally procured in compliance with federal requirements, the scope covered the work performed, the work was eligible, and the contract term covered the performance period.

The exigency/emergency exception — and its limits

Under current 2 C.F.R. § 200.320(c), noncompetitive procurement is permissible in five circumstances: the aggregate amount of the transaction does not exceed the micro-purchase threshold; the transaction can only be fulfilled by a single source; the public exigency or emergency will not permit a delay resulting from providing public notice of a competitive solicitation; the applicant requests noncompetitive procurement in writing and FEMA or the pass-through entity provides written approval; or, after soliciting several sources, competition is determined inadequate. Section 200.319(g) reinforces the point: noncompetitive awards may only be made in accordance with § 200.320(c). (Older FEMA materials cite this exception as § 200.320(f) with four circumstances — that is the pre-November 2020 numbering. The current text adds the below-micro-purchase-threshold prong, broadens sole-source to any transaction that can only be fulfilled by a single source, and requires written approval — not merely express authorization — on the written-request route.)

FEMA's fact sheet on exigent and emergency procurement defines both terms as situations demanding immediate aid or action, and distinguishes them: an exigency involves the need to avoid or alleviate serious harm or injury — financial or otherwise — where competitive procurement would prevent the urgent action (the fact sheet's example is a school repair that a 90-day sealed-bid process would push past the start of the school year). An emergency involves a threat to life, public health or safety, or improved property requiring immediate action. Emergencies are generally short-lived; exigent circumstances can persist for weeks or months.

The limits are just as important as the exception:

• It lasts only while the circumstances exist — two days, two weeks, or longer, depending on facts. Upon awarding a sole-source contract, the applicant must immediately begin competitively procuring similar goods and services and transition when the circumstances end. Failure to plan that transition cannot justify continued sole-sourcing.
• FEMA approval is not required, but written justification is — for each instance of noncompetitive procurement, kept in the award records. FEMA may review the justification, and if it determines the circumstances did not exist or did not prevent competition, it may disallow all or part of the contract costs.
• Most other rules still apply during the emergency — for local governments and PNPs that means required contract clauses, bonding for construction contracts above the simplified acquisition threshold, award to a responsible contractor, cost or price analysis above the threshold, the T&M conditions, conflict-of-interest standards — and the CPPC prohibition.

Documentation that survives review

For large projects with costs based on noncompetitive procurement, the PAPPG requires the applicant to identify which of the noncompetitive-procurement circumstances (the five now listed in 2 C.F.R. § 200.320(c)) applied and provide: a description of the product or service and expected amount; an explanation of why sole-sourcing was necessary (including the specific conditions showing competition would have caused unacceptable delay); how long the contract will be used and the impact if it were unavailable; the steps taken to determine full and open competition could not be used; and any known conflicts of interest and the efforts made to identify them.

For all contract costs, Table 15 of the PAPPG lists the supporting records: itemized cost summaries, procurement method and contract type, and — for large projects — the solicitation documents, bids, selection process, procurement policy, cost or price analysis, contracts and change orders, invoices, and (for T&M) logs substantiating a high degree of oversight. Build these files as you go; see the PA documentation checklist.

Why procurement draws so much audit scrutiny

FEMA's fact sheet says plainly that both FEMA and the DHS Office of Inspector General closely review procurement actions and contract selections — with particular emphasis on noncompetitive procurements — and that failing to follow the federal requirements puts entities at risk of not being reimbursed for otherwise eligible costs. Under the PAPPG, records are subject to audit by state auditors, FEMA, the OIG, and the GAO, and FEMA may adjust project funding based on audit findings; any recipient or subrecipient expending $1 million or more in federal funds in a fiscal year must also undergo a single audit. Procurement is where large dollar amounts, urgent timelines, and detailed compliance rules collide — which is why competition and contemporaneous documentation matter.