Sole Source Justification Under a Federal Grant: The 2 CFR 200.320(c) Conditions

What a sole source justification federal grant file should hold

A finance manager at a grant-funded nonprofit is three weeks from a monitoring visit. The monitor asks for the file on a vendor that received a contract with no competition, and the manager opens the folder. It holds a letter from the vendor saying it is the only provider, an invoice, and an email reading "approved, go ahead."

Nothing in the folder shows who tested the vendor's claim. It does not show which condition in the federal rule was relied on, what the price was compared against, or whether anyone with a stake in the vendor helped make the decision. The vendor's letter is a statement from an interested party, not a record of the recipient's own reasoning.

A noncompetitive award is not a way around the file. It is a method that has to be justified in writing, and the justification is the evidence the recipient is asked to produce. After reading this guide you will be able to list the conditions in 2 CFR 200.320(c), the evidence each one calls for, and the price analysis that belongs beside them.

The five conditions in 2 CFR 200.320(c)

2 CFR 200.320 sets out three types of procurement method: informal (micro-purchases and simplified acquisitions), formal (sealed bids or proposals) and noncompetitive. The first two are covered in the guide to 2 CFR 200.320 procurement methods. Noncompetitive procurement is the narrow one. Under 2 CFR 200.320(c), it may be used only if one of five circumstances applies:

• the aggregate amount does not exceed the micro-purchase threshold;
• the procurement can only be fulfilled by a single source;
• a public exigency or emergency will not permit the delay of public notice for a competitive solicitation;
• the recipient requests in writing to use a noncompetitive method, and the federal agency or pass-through entity gives written approval;
• after soliciting several sources, competition is determined inadequate.

This list is from the current text, as revised effective October 1, 2024 (89 FR 30046); check your award terms for the version that applies to your award. 2 CFR 200.319(g) repeats the point: noncompetitive procurements can only be awarded in accordance with 200.320(c). eCFR describes itself as authoritative but unofficial, and the official edition is the annual CFR on govinfo.gov.

The conditions are alternatives. A sole source justification federal grant monitors can follow names the one condition relied on and explains why it applies, rather than gesturing at several. Whether a given purchase meets any condition is a judgment for your organization, informed by the awarding agency or pass-through entity. Nothing in this guide says that any situation qualifies.

Documenting each condition

The rule gives the permission. The file has to show the facts that support it. For each condition, these are the records a monitor would reasonably look for.

Micro-purchase. Under 2 CFR 200.320(a)(1)(ii), micro-purchases may be awarded without soliciting competitive price or rate quotations if the recipient considers the price reasonable based on research, experience, purchase history or other information, and maintains documents to support that conclusion. Record what you looked at, the date, and who looked. The FAR micro-purchase threshold rose from $10,000 to $15,000 effective October 1, 2025 (FAR Case 2024-001, 90 FR 41872). Under 2 CFR 200.320(a)(1)(iv), an entity may also self-certify a higher threshold, up to $50,000, on an annual basis, with a justification and supporting documentation available to the federal agency or pass-through entity and auditors; above $50,000, the cognizant agency for indirect costs must approve it. Local policy may set a lower figure, and a micro-purchase still needs a reasonable price.

Single source. The justification should explain why only one source can meet the need. Describe the requirement in neutral terms rather than by brand, then record the market search you ran, the dates, the sources contacted, and why each could not meet the need. Under 2 CFR 200.319(b), contractors that develop or draft specifications, requirements, statements of work or invitations for bids must be excluded from competing on those procurements. If the vendor helped define the need, the file should say how that was handled. Under 2 CFR 200.318(c), no one with a real or apparent conflict of interest may take part in the selection or award, so each person who contributed should attest to the absence of one.

Public exigency or emergency. Describe the event, its date, the immediate threat, and why time for competition was not available. Limit the scope of the award to the emergency need, and record who made the determination and when.

Written authorization. Request it in writing from the awarding agency or pass-through entity, and keep both the request and the response. The file should show the scope of what was approved. A verbal assurance is difficult to reconstruct later.

Inadequate competition. Keep the original solicitation, the list of sources solicited, each response or non-response, and the determination that the result was inadequate. The record should show who decided and why the shortfall justified proceeding without competition.

Piggybacking on another entity's existing contract is a separate question with its own rules. The cooperative purchasing guide covers it in general terms, and the awarding agency can say how it applies to your award.

Price reasonableness and the 200.324 analysis

When there is one source, there are no competing offers to show the price is fair. The price analysis carries more weight. Under 2 CFR 200.324(a), a cost or price analysis is required for every procurement transaction above the simplified acquisition threshold, including contract modifications, and as a starting point the recipient or subrecipient must make independent estimates before receiving bids or proposals.

The threshold moved. The FAR simplified acquisition threshold, which 2 CFR 200.1 adopts, rose from $250,000 to $350,000 effective October 1, 2025 (FAR Case 2024-001, 90 FR 41872). An entity sets its own threshold, which, in the words of 2 CFR 200.320, "may be lower than, but must not exceed, the threshold established in the FAR." Confirm with your awarding agency or pass-through entity how the change applies to your award.

The independent estimate is the recipient's own figure, made before the vendor's price arrives. In a sole source justification federal grant file, that matters because the only quote on hand is the vendor's. Build the estimate from other evidence, such as your own purchase history, published prices for comparable items, or prior awards, and record the date you prepared it relative to when you received the vendor's price. The price analysis versus cost analysis guide explains the two techniques in more detail.

Below the threshold, the file still needs a basis for the price, because 2 CFR 200.318(i) asks for it. Local policy may also require an analysis at a lower dollar level.

What the record has to show, how long, and who answers

2 CFR 200.318(i) requires records detailed enough to show the history of each procurement. They must include four elements: the rationale for the procurement method, the contract type selection, contractor selection or rejection, and the basis for the contract price. A noncompetitive file speaks to each. The justification is the method rationale. The selection or rejection element records why this contractor, and which others you considered. The price element is your analysis. The guide to procurement records under 2 CFR 200.318 walks through the full set.

Responsibility stays with the recipient. Under 2 CFR 200.318(k), the recipient or subrecipient is responsible for settling all contractual and administrative issues arising out of its procurement transactions. In the regulation's words: "These issues include, but are not limited to, source evaluation, protests, disputes, and claims." Its own record is the principal evidence it has.

Under 2 CFR 200.334, records are generally kept for three years from the final financial report, unless an exception applies, and local public-records rules may require longer. Where noncompliance cannot be remedied by specific conditions, the remedies under 2 CFR 200.339 include temporarily withholding payments until corrective action is taken, disallowing costs, and suspending or terminating the award in part or in its entirety.

The scale of the problem is documented, though the best-known figure is dated. In a 2016 report, DHS OIG said its audits covering the six years ended September 30, 2014 questioned $352.3 million in FEMA Public Assistance grant costs because subgrantees, which include local governments and nonprofits, did not follow federal rules in awarding contracts (OIG-16-126-D, September 2016). Those figures describe that program and period only. For FEMA-funded work, see the guide to FEMA procurement under grants.

Rules that move, and how to date your file

The Uniform Guidance was substantially revised effective October 1, 2024. On May 29, 2026, OMB published a proposed rule (91 FR 32198) that would revise 2 CFR Part 200 again. As of October 2026 the Federal Register shows no final rule, so confirm its current status before relying on or ignoring it.

State and local rules may be stricter than the federal ones. Where both apply, your file may need to satisfy both, so check your own procedures for a lower threshold than the federal figures given here. Your written procurement procedures are required by 2 CFR 200.318(a), so they should match the thresholds you actually apply.

Record the rule the file followed, its citation and its effective date. A file that does not record these cannot show which rule it followed at the time, and thresholds have changed within the last year.

Before you sign the justification

A short working checklist helps keep the file complete:

• Name the one condition in 2 CFR 200.320(c) you are relying on, and the version of the text you read.
• State the requirement in neutral terms, and record the market search with dates.
• Attach the conflict-of-interest attestations and note any vendor input into the specification.
• Prepare the independent estimate before you receive the vendor's price, and record who prepared it.
• Attach any written authorization from the awarding agency or pass-through entity.
• Record the threshold you applied and the rule's effective date.

Questions about whether a purchase qualifies belong with the awarding agency or pass-through entity, and with counsel where state law is involved.

RFPManagement records and computes. It does not give legal or procurement advice. The award decision stays with your organization.

For a structured place to keep these records, the Noncompetitive Procurement Justification Workbook is available in the store. It is designed to record the condition relied on, the sources considered, the price basis and the approvals, so your sole source justification federal grant file follows the same layout each time.