CONTRACTOR PURCHASING SYSTEM REVIEW (CPSR)
“CPSR Audit” & Federal Procurement Compliance
The Contractor Purchasing System Review (CPSR) meaning, commonly referred to by some as a “CPSR Audit” or a “CPSR Review“, is the Government’s evaluation of the effectiveness with which the contractor complies with certain public law, regulations and contract requirements in their policies, procedures and procurement and subcontracting activities. Because the CPSR is ultimately an evaluation of the adequacy of the policies, procedures and practices reviewed, a successful CPSR experience and outcome is never a forgone conclusion. This is where Capital Edge comes in – our CPSR services are performed by a group of CPSR compliance subject matter experts (SME) committed to helping you prepare for, go through, and recover from your next CPSR. Our personnel are directly aligned with your objective – securing an approved purchasing system, a CPSR certification and maintaining CPSR compliance.
Our approach to contractor purchasing system compliance has always been “one size does not fit all”; rather, make the public laws and contractual and regulatory requirements work for your business operations and existing internal processes and practices. This practical approach has become the cornerstone of our reputation and yields positive results for our clients. We can help you prepare for, successfully navigate the review and sustain your CPSR compliance posture prospectively, while your purchasing function remains an operationally efficient and customer-focused organization.
Our ability to provide customer satisfaction in an ever-changing regulatory environment and unstable CPSR-centric landscape can largely be attributed to one single factor – our people. Capital Edge is unique in the market in that our solution includes former DCMA CPSR Group personnel, DCMA administrative contracting officers, Government procuring contracting officers and procurement experts who were previously responsible for CPSR compliance while working for major industry players serving DoD, the Intelligence Community and civilian agencies.
This blend of fully dedicated CPSR experts and their collective experiences ensure the critical perspectives – the Government reviewer, system approval authority and the Federal procurement practitioner – are available for the benefit of our clients.
The DCMA CPSR Group's Mission
The Defense Contract Management Agency (DCMA) has defined the Contractor Purchasing System Review (CPSR) Group’s mission – “Ensure that [Government] suppliers’ have purchasing systems in place that contribute to effective subcontract management. Effective subcontract management includes the development of, as well as performance to internal policy and procedures, public law and adequacy of cost and price analyses performed on subcontractors.”
Consistent with this mission statement, the Federal Acquisition Regulation (FAR) CPSR objective in Subpart 44.3, Contractors’ Purchasing System Reviews, states that the “objective of a contractor purchasing system review (CPSR) is to evaluate the efficiency and effectiveness with which the contractor spends Government funds and complies with Government policy when subcontracting….”
Understanding DCMA’s CPSR mission and objective, contractors must realistically evaluate their current purchasing system. As part of this evaluation, contractors should use the primary authoritative regulations and DCMA guidance around the CPSR, including, without limitation:
Common Questions About CPSR Compliance:
CPSR stands for Contractor Purchasing System Review and is commonly referred to by some as a “CPSR Audit” or “CPSR Review”. In layman’s terms, a CPSR is an adequacy evaluation of a contractor’s policies, procedures and practices against certain FAR and DFARS requirements.
Yes. Except for certain transactions excluded under FAR 44, your purchasing and subcontracting activities are within CPSR scope. DFARS 252.244-7001 defines the purchasing system to include the “…the system or systems for purchasing and subcontracting…”
A CPSR is not an “audit” but a “review.” Within the Department of Defense (DoD), the Defense Contract Management Agency (DCMA), specifically the DCMA CPSR Group, is responsible for reviewing the contractors’ purchasing systems. The DCMA CPSR Group is comprised of “analysts;” not “auditors.” In some cases, DCMA also reviews the purchasing system of contractors’ that do not hold DoD contracts.
According to DCMA CPSR Reports issued in GFY2019, DCMA identified that the “most common material deficiencies” related to:
- Payments to Influence
- Cost Analysis / Price Analysis
- Sole Source Justification
- Policy & Procedure Manual
- Commercial Item Determinations (CID)
- Truthful Cost in Pricing Data (formerly known as Truth-in-Negotiations Act or TINA)
A DCMA purchasing system disapproval can cause many issues for a contractor, including:
- Increased oversight of contractor’s business (e.g. audits and reviews of other business systems, etc.) and delay in the government acquisition process;
- Increased application of government consent to subcontract requirements;
- Potential withhold of payments;
- Competitive disadvantage in responding to Government requirements; and
- Disclosure via Contractor Business Analysis Repository.
A CPSR is performed on a discretionary basis, if deemed necessary by the Administrative Contracting Officer (ACO). The ACO’s decision to determine the need can be, in part, influenced by the contractor’s anticipated FAR-44 qualifying sales volume and results of the contractor risk assessment.
- FAR 44.302: Greater than $25M in the next 12 months.
- DFARS 244.302: Greater than $50M in the next 12 months.
Caution: The CPSR dollar threshold is discretionary and may be lowered or raised. (FAR 44.303).
The Contractor Purchasing System Review (CPSR) Guidebook is published by the DCMA. The purpose of the DCMA Guidebook is to provide “…guidance and procedures to Government personnel for evaluating contractor purchasing systems and preparing the CPSR reports.”
The phrase “CPSR certification” is a misnomer. Rather, a CPSR is a review conducted by the government that results in a report which provides the basis, at least in part, for the cognizant federal agency official to make a decision – e.g. that the system is acceptable and approved. FAR 44.305 is very clear as to who has purchasing system approval authority – “The cognizant ACO is responsible for granting, withholding, or withdrawing approval of a contractor’s purchasing system.”
Contractor Purchasing System Reviews (CPSR)
Why should my company remain committed to Federal purchasing system compliance?
Do you know the vast majority of requirements evaluated in a CPSR are contractual obligations imposed by specific Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) clauses expressly incorporated into your contracts?
Are you discussing the Government’s proposal evaluation/source selection factors tied to purchasing system requirements during your “go/no go” bid and Probability-of-Win (“Pwin”) meetings?
Are you subject to recurring and burdensome advance notice and consent to subcontract requirements? And are these requirements impacting timely performance and delivery and causing less than favorable past performance evaluations by your customers?
Is FAR 52.244-2 incorporated into one or more of your contracts? This clause expressly reserves the Government’s right to review your federal purchasing system.
Has the Defense Contract Audit Agency, Defense Contract Management Agency (DCMA) or other cognizant agency conducted audits or reviews of your proposals and/or other business systems? Have these agencies observed a concern during those audits and associated the concern to your purchasing system?
Do you have one or more contracts with DFARS 252.244-7001? Among other critical elements, this clause defines “significant deficiency” and requires the contracting officer to impose payment withholds if the system is disapproved.