Contractors’ Purchasing System Review – Five Hot Topics
In the simplest of terms, a contractor’s purchasing system review (CPSR) is formal Defense Contract Management Agency (DCMA) review of a contractor’s purchasing system with respect to direct purchases of goods and services under certain FAR Part 15 contracts. DFARS 252.244.7001, Contractor Purchasing System Administration, contains the 24 requirements by which the DCMA evaluates a contractor’s purchasing system for adequacy.
Capital Edge would like to share five DCMA CPSR hot topics for you to consider as you undertake your own internal purchasing system reviews and/or prepare for your next CPSR.
(1) Lead Time
Lead time is measured from the date the purchase requisition is received by the procurement organization to the date the goods or services are required. DCMA will review the requisition to ensure the date received and date required are included and reasonable in duration, given the circumstances. DCMA expects an average of 30 days of lead time per procurement. Inadequate lead time is a common CPSR finding and is significant in that lead time provides the procurement team sufficient time to procure the requirement and adequately document the procurement file.
FAR 52.244-5 requires contractors to procure “on a competitive basis to the maximum extent practicable consistent with the objective and requirements of the contract.” In reality, DCMA generally expects documented competition 40% to 70% of the time and considers a competition is achieved on the FAR-defined “adequate price competition” basis. We all know competition is highly desirous and beneficial to the government and contractor for a host of reasons, but maybe the most important to you is how non-competitive awards can impact the procurement file and cause other CPSR risks, such as inadequate source justifications, negotiation memorandum and price analysis, and TINA non-compliance.
(3) Price Analysis
FAR 15.404-1(b) identifies various price analysis techniques and states that the first two techniques cited are preferred. Therefore, the subcontract administrator should follow this preferential order when analyzing price by addressing each FAR 15.404-1(b) technique from an applicability perspective before settling on the technique to be performed in the instant analysis. That is, the recommendation is not to merely skip to the price analysis technique that fits the situation best; rather, first explain in the price analysis why each technique was not employed. For example, if the “comparison of the proposed price to historical prices paid” price analysis technique will be used, first explain why “comparison of proposed prices received in response to the solicitation” was not available (e.g., non-competitive procurement).
A contractor’s reliance on the Excluded Parties List System (or System for Award Management – “Exclusions”) for debarment verification of a subcontractor is not acceptable from a DCMA standpoint. Instead, DCMA interprets FAR 52.204-6 to require written debarment certification of a subcontractor on the day-of-award for purchases (for other than commercially available off-the-shelf items) if the subcontract or order value is expected to exceed $30,000.00.
(5) Determination of Commerciality
DCMA is increasingly questioning “Commercial Item” FAR 2.101(6) (e.g., “catalog price” or “market prices”) commerciality determinations made by contractors. The catalog/market price is a high standard to legitimately substantiate in commerciality determinations for many professional/technical service procurements. Further, DCMA does not consider a GSA schedule as evidence of the availability of the “catalog price” in the commercial marketplace.
It is important to remember the DCMA CPSR Team has ever-changing federal regulation interpretations and resultant expectations (really requirements) when reviewing your purchasing system. This “moving target” reality is an ongoing compliance challenge for all contractors, including those with a currently approved system. No two CPSR analysts are the same, and neither are their interpretations and applications of the federal regulations.
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Capital Edge provides unique backgrounds and experience in consulting, public accounting, industry, and DCAA to provide clients with unmatched government contracting expertise. This breadth of specialized experience enables Capital Edge to provide the exact services and level of expertise federal government contractors need to succeed. Capital Edge has worked with government contractors ranging in size from startup to Fortune 100 companies in industries such as manufacturing, nuclear energy, professional services, biotech/pharmaceuticals, defense, aerospace and software.