As a current or prospective federal contractor, you are likely already aware that the federal government is the largest volume purchaser of goods and services in the world. However, while the federal government purchases large volumes, that does not mean every single purchase they make is itself large. Smaller purchases are often made, which helps explain why the government created less cumbersome ordering procedures for transactions under certain dollar thresholds.
After all, it is not worth lengthy price analysis if the time spent completing that analysis costs more than any potential price difference in the purchased product or service. I’d like to introduce you to one of the thresholds the government sets, the Micro-Purchase Threshold (MPT), and explore the benefits of this threshold.
To start things off, it's important to note that despite being called the Micro-Purchase Threshold, the MPT is currently $10,000 for most purchases. However, there are certain instances in which the Micro-Purchase Threshold may differ from the standard $10,000 dollar value. You can find the most current information on the MPT dollar value in FAR 2.101.
Depending on your perspective, you may not consider $10,000 very small. However, it's defined as such because it's the lowest threshold the government sets in terms of ordering procedures, under which the simplest purchases can be made. After all, $10,000 is not a large purchase in the eyes of the federal government.
The great benefit to the Micro-Purchase Threshold for government purchasers is that they can simply make purchases using their Government Purchase Card (GPC) for orders below the MPT. The GPC is like a government issued credit card for federal agency officials. There is no requirement to complete any formal ordering procedures, even those usually governed by the Simplified Acquisition Threshold (SAT). This makes it easy to purchase off sites such as GSA Advantage!.
Generally, government procurement is a competitive process, requiring at minimum analysis or quotes from multiple contractor’s pricing. When under the Micro-Purchase Threshold however, agencies can purchase directly without having to go through that hassle. This means that for purchases of $10,000 and below, no formal competitive ordering procedures are required.
As you can imagine, this makes life a whole lot simpler for government purchasers. They only need to verify price reasonableness if they “suspect or have information to indicate that the price may not be reasonable,” or if there is no comparable pricing information for the purchase per FAR clause 13.203 (a)(3).
The MPT was created to simplify non-complex purchases. Purchasing agencies do not need to conduct thorough market research for purchases under the micro-purchase threshold. This directly reduces administrative costs and allows for more discretion in purchasing. This makes it even simpler than SAT for purchases under $250,000. While purchases under $250,000 are simplified compared to purchases above the SAT, there are still formal ordering procedures and a competitive process, creating substantial differences between purchases made under the MPT and those made between the MPT and the SAT.
Simplifying the procedures for government purchases under the MPT using their Government Purchase Cards means that agencies are more likely to make purchases using this method when available, as the procedures are far easier. This means that you have an opportunity to grow your revenue through federal contracting, increasing your opportunity for award while decreasing the number of bids and proposals you need to submit in response to RFQs and RFPs, as the federal customer does not need to complete the usual competitive pricing analysis.
It is important to note for contractors that purchases made via GPC can come through many different methods such as phone, email, or GSA Advantage!. As such, you may want to develop methods to recognize when a card is a GPC so that you can determine if a sale should be recognized as a government sale.
While the MPT simplifies acquisition procedures, it certainly does not eliminate them entirely. FAR Subpart 13.2 governs ordering procedures at or below the MPT. It is important to note that a purchase cannot be split into multiple transitions, each beneath the MPT, in order to avoid formal ordering procedures. If you are a GSA Schedule holder, you are required to accept the GPC for purchases up to the MPT. While the Micro-Purchase Threshold simplifies government procurement for both contractor and federal purchaser, it does not relieve either of other requirements and regulations that may need to be met.
With your greater knowledge of the MPT, you will better understand why transactions that are lower in price have less administrative burden and will be more prepared to respond to them. Federal agencies often make micro-purchases directly through the GSA Multiple Award Schedule (MAS) program due to the ease of access to contractors and the assurance that the pricing is already fair and reasonable.
Having a contract vehicle such as the GSA Schedule puts you in a better position since your pricing is pre-approved compared to those who do not yet have a contracting vehicle. Whether or not you already have a contract vehicle, if you are interested in experiencing some of the advantages brought about by the frequent purchases federal agencies make under (or above) the micro-purchase threshold, you can reach out to Winvale, and we will be able to better position you for success in your federal contracting journey!