Changes to Federal Procurement Thresholds: What Local Governments Need to Know

Does your local government agency have a procurement adventure planned that will use federal funding? If so, this blog is for you.

Effective October 1, 2025, the Federal Acquisition Regulation (FAR) has been amended to increase the acquisition-related thresholds for inflation, and local agencies that are recipients of federal grants will need to incorporate these new thresholds into their local procedures and policies.

The FAR is the primary regulation governing the acquisition of federally funded supplies and services. For a full description of the new thresholds, see the Federal Register’s Federal Acquisition Regulation: Inflation Adjustment of Acquisition-Related Thresholds

This blog will highlight the impact of these changes and recommend MRSC resources that can help you track these changes for specific project types.

Competitive Processes for Federally Funded Procurements

The Uniform Guidance procurement standards in 2 CFR §200.318-200.327 (except where explicitly excluded by the federal agency) and any additional requirements imposed by the federal agency or pass-through entity must be followed for local procurement projects using federal funds. 

These federal regulations allow for three levels of competition:

• micro-purchases,
• simplified acquisitions, and
• formal procurement.

Acquisition-related thresholds have been changed for micro-purchases and simplified acquisitions.

Micro-purchases

For federal awards made on or after October 1, 2025, the maximum micro-purchase threshold in the FAR has increased from $10,000 to $15,000.

If an agency is making a purchase below the micro-purchase threshold, it can do so without soliciting or obtaining quotations if the price appears to be reasonable based on research, experience, purchase history, or other information gathered. (Importantly, you must document this research in your files.)

Agencies should also distribute micro-purchases equitably among qualified suppliers to the maximum extent practicable.

The micro-purchase procedure can only be used if an agency’s documented procurement procedures include the micro purchase option and the expected procurement cost is at or below the micro-purchase threshold.

An agency must determine and document a purchase threshold based on internal controls, an evaluation of risk, and existing procurement procedures. However, the threshold generally cannot exceed the maximum micro-purchase threshold under federal regulations.

While the maximum federal micro-purchase threshold increase is $15,000, the maximum federal micro-purchase acquisition threshold for public works subject to wage-rate requirements, or the Davis-Bacon Act, remains at $2,000 or less.

To use the increased threshold for non-public works projects, an agency must update its internal policies and procedures accordingly. An agency may use a higher threshold if it meets the requirements in 2 CFR §200.320(a)(1)(iv) and (v), but a lower threshold must apply if state laws or local policies are more restrictive. 

Simplified acquisition

For federal awards made on or after October 1, 2025, the maximum simplified acquisition threshold in the FAR has increased from $250,000 to $350,000.

For procurement under the simplified acquisition threshold, an agency can obtain price or rate quotations from an adequate number (i.e., more than one) of qualified sources. The number of quotations required should already be established in an agency’s documented procurement procedures.

Your agency must determine and document this threshold based on your internal controls, an evaluation of risk, and documented procedures (which must follow the most restrictive of local, state, or federal requirements). An agency’s threshold must not exceed the maximum simplified acquisition threshold ($350,000) under federal regulations.

To use the increased threshold, an agency must update its internal policies and procedures.

Formal procurement

If your agency’s expected procurement price is at or above the simplified acquisition threshold ($350,000), you must perform a cost or price analysis and then choose either sealed bids or proposals as a solicitation method.

How Do the New Thresholds Impact the Small Works Rosters Process?

The new simplified acquisition threshold eliminates a previous challenge that local agencies using both federal funds and the small works roster process for a public works project would encounter: the federal simplified acquisition threshold of $250,000 was less than the state small works roster threshold of $350,000.

Beginning October 1, the federal simplified acquisition threshold will increase from $250,000 to $350,000, which aligns it with the small works roster threshold limit currently in state statute. 

MRSC's guidance is that if your project uses any amount of federal funding, you must follow the most restrictive of your local, state, or federal procurement requirements. Further, our Planning a Small Works Roster Project notes that you should proceed with caution if you plan to use a small works roster process to procure using federal funds. Agencies should work closely with their legal counsel and federal award administrators to determine the procurement requirements. While a competitive roster process might be allowable below the simplified acquisition threshold, our guidance is that direct contracting generally cannot be used because the simplified acquisition procedures require quotations be obtained from an “adequate number of qualified sources” (i.e., more than one).

MRSC Resources

For the small works roster, updates to the thresholds are reflected on our Planning a Small Works Roster Project webpage.

Our Find Your Contracting Requirements tool now reflects the new micro-purchase threshold of $15,000 and the new simplified acquisitions threshold of $350,000 for all project types.