Before a local government can build a new town hall building or upgrade its water and sewer infrastructure using federal funds, it needs to navigate a complex maze of federal procurement requirements.

By October 1, the Office of Management and Budget (OMB) will adopt revisions to the Uniform Guidance, which sets out those requirements. The OMB is obligated to review the Uniform Guidance at least every five years, with the last update coming in 2018. The 2024 revisions, first released in April, include a number of important updates that local governments should be aware of. There are various provisions that emphasize the importance of engaging with organized labor and using responsible contractors. The OMB also outlined examples of permitted labor and employment practices that will impact procurement.

The upcoming revisions are a good time to remind local governments about another best practice: how to avoid conflicts of interest. This compliance issue frequently comes up as a question from towns and local governments, particularly smaller ones where everyone knows everyone. Municipalities may end up with the right procurement procedures but find themselves facing tricky conflicts-of-interest challenges.

Here are some takeaways on the latest OMB revisions for local governments on federal procurement compliance as well as what they can be on the lookout for to mitigate conflicts of interest.

Key 2024 Revisions to OMB Federal Procurement Requirements

The OMB intends for its revisions to reduce burdens on agency and federal fund recipients. The OMB also sought to clarify sections that agencies and recipients have interpreted in different ways. One straightforward change was using the terms "recipient," "subrecipient," or both in place of "non-Federal entity." By recipient, the OMB generally means any entity that receives a federal award directly from a federal-awarding agency. A subrecipient is generally an entity that receives a subaward to carry out a portion of the federal award.

One important update is about local governments or other recipients of federal funds considering responsible contractors. Under the Uniform Guidance, recipients must consider a contractor’s integrity, public policy compliance, past performance record, and financial and technical resources.

Recipients must now also consider whether a contractor appropriately classifies its employees consistent with the Fair Labor Standards Act. Other new changes include:

• Allowing recipients to use pre-hire collective bargaining agreements.
   
• Allowing recipients to require construction contractors to use hiring preferences or goals for people residing in high-poverty areas and disadvantaged communities.
   
• Removing the prohibition on using geographic preference requirements imposed at the state, local, or tribal levels in the evaluation of bids or proposals. This revision essentially allows recipients flexibility in supporting or prioritizing support of job growth and business in their local communities.
   
• Allowing recipients to use a scoring system that rewards bidders committing to specific numbers and types of U.S. jobs as well as certain compensation and benefits.
   
• Encouraging recipients to consider contracting with veteran-owned businesses for procurement contracts under a federal award.
   

Mitigating Conflicts of Interest in Federal Procurement

The issue of navigating conflicts of interest continues to be one at the front of mind for local governments and others during the federal procurement process.

As a reminder, the OMB states that no employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest. These conflicts generally arise when those employees have a financial or other interest in or receive a tangible personal benefit from a firm considered for a contract. Conflicts of interest can also arise when they involve that employee’s immediate family, partner, or an organization that employs or is about to employ any involved parties.

Here's what local governments should avoid during the bidding process:

• Personal relationships with a supplier or their employees that could influence the procurement process.
   
• Financial interests such as owning stocks in a supplier’s company.
   
• Accepting gifts or other favors from suppliers.
   
• Negotiating or entertaining job offers with a current supplier during an active procurement process.
   

By developing and maintaining written standards of conduct, local governments can better avoid these conflicts before they arise in the first place. These policies should require the disclosure of potential conflicts of interest, establish a process for investigating alleged conflicts, and a process for recusal.

Final Takeaway

Over the coming days, local governments should familiarize themselves with the 2024 federal procurement revisions released by the OMB. There are important clarifications to the selection of responsible contractors and the types of businesses that can be considered during bidding.

Conflicts of interest, meanwhile, remain a tricky topic for local governments during the procurement process. Policies and standards are the best way to stay ahead of this challenging area.

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