Whitepaper: The Audit World's Biggest Myths
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Whitepaper: The Audit World's Biggest Myths
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CPSR 360: Two-Part Series – Part Two –Newsworthy CPSR Updates

By: Chase Kunk, Vice President, Contracts & Procurement and Michael Carter, Senior Consultant

In December 2016, we released CPSR 360: Part One - Insights from Our Recent CPSR Experiences, which outlined several high-risk procurement file documentation areas we continue to see are a challenge for contractors. As expected, DCMA CPSR teams have been detecting these same documentation noncompliances in their reviews, capturing these deficiencies in CPSR Reports and ultimately triggering DCMA-issued corrective action requests to contractors.

In Part Two, we are exploring some noteworthy changes out of DCMA’s CPSR Group. These changes have been implemented throughout calendar year 2016, with some being revisited and refined by DCMA, and affect all contractors who may be subject to a CPSR.

1. DCMA CPSR Guidebook

The DCMA CPSR Guidebook is a valuable reference document which provides the reader with detailed background on the CPSR process and delves into the CPSR requirements levied upon contractors. DCMA made multiple updates to the guidebook throughout calendar year 2016–including in April, May, July, October, and most recently on November 30, 2016. The primary purpose of these recent updates is to add appendices, commonly known as “Job Aids”, which summarize the CPSR Group’s expectations and approach to evaluating a contractor’s policy, procedure, practice, and documentation relative to each CPSR requirement. Keep an eye out for additional updates to the guidebook–job aids have not been published for all CPSR requirements and additional updates are anticipated. The current guidebook is available at DCMA’s homepage.

2. DCMA Policies and Procedures Checklist

The DCMA Policies and Procedures Checklist is an Excel-based document that the assigned CPSR team lead provides the contractor and must be completed and returned prior to the onsite CPSR. Essentially, this checklist outlines the policies and procedures the CPSR Group expects the contractor to maintain. The contractor completes the checklist by cross-walking the CPSR requirement to the contractor’s specific policy and procedure addressing that requirement. Historically, there have been many versions of this checklist floating around in and outside of the Government with each version containing some differing requirements. Good news–from what we are seeing, there is now a single substantive checklist currently in use across the DCMA CPSR Group. The current checklist now contains 29 requirements while 32 requirements were present in the checklist for much of calendar year 2016. With that said, this checklist still does not describe the elements that must be addressed within each policy and procedure to be determined adequate by DCMA. Please contact Capital Edge for a copy of the current checklist.

3. DCMA CPSR Report

After the onsite CPSR is completed, the CPSR team lead generates a CPSR Report and issues the report to the Administrative Contracting Officer (ACO). The CPSR Group has updated the report template most recently in the last quarter of calendar year 2016. One of the major changes to the CPSR process, and the report, is the reduction and/or consolidation of the CPSR requirements. Similar to the aforementioned policy and procedure checklist, there are now 29 CPSR requirements listed in the report while 34 requirements were present in the report for much of calendar year 2016. As a point of comparison, CPSR reports issued by DCMA in late calendar year 2015-early 2016 contained over 40 requirements.

So what has changed in the report in the last few months? It now includes the section titled “Source Selection” which consolidates the previous sections titled “Competition”, “Sole Source Selection Justification”, and “Best Value.. Further, the report removed “Vendor Rating System” as a standalone section but is now captured as part of the “Supply Chain Management” section.

4. Handling of Deficiencies (Level II vs. Level III Corrective Action Requests)

In early calendar year 2016, the DCMA CPSR Group formally adopted a significant change to how deficiencies are managed and by whom. Prior to January of 2016, all deficiencies contained in the CPSR Report and the associated Corrective Action Requests (CARs) were handled by the cognizant ACO. Further, all contractor responses (i.e. Corrective Action Plans [CAP]) were reviewed and approved or rejected by the cognizant ACO, and validation that the CAP had been implemented effectively was performed by the ACO and supported by CPSR teams as needed.

Starting in calendar year 2016, all Level II deficiencies (i.e. those that may not rise to the level of “significant”) are now managed by the assigned CPSR Team Lead. After discussions with the ACO, the CPSR Team Lead issues all Level II CARs to the contractor, reviews the contractor’s CAP in response to the CAR(s), accepts or rejects the CAP, and is supported by the ACO’s FAR Part 44-based surveillance to ensure the CAP was successfully implemented. Level III CARs remain the responsibility of the ACO and the CPSR Team Lead supports the ACO in determining the adequacy of the CAP provided in response to a Level III CAR. Of course, when needed, the CPSR Group will perform “follow-up” reviews to validate that the CAP has been implemented effectively to resolve the deficiencies previously identified. Notwithstanding, the ACO remains the cognizant agency official charged with approving or disapproving the system under the DFARS business system rules.

Over the last 12 months, we have seen this new process unfold and it seems to benefit both the Government and the contractor.

5. CPSR Dollar Threshold Increase

 FAR 44.302(a) establishes the $25M threshold by which the ACO is required to determine whether a CPSR is “needed” for the contractor. The $25M threshold has been in play since the mid-1990s. It is our understanding that, on October 7, 2016, DCMA Director, Lt. Gen. Masiello, signed a memorandum titled “DCMA Class Deviation for Raising the CPSR Threshold”, thereby authorizing the increase of the threshold from $25M to $50M within DCMA. It is also our understanding that the increase was justified based on several considerations including inflation, the Better Buying Power 3.0 directive, and ultimately, a risk analysis performed by the Government. DCMA would like to see the acquisition regulation councils (CAAC and DARC) formally amend FAR 44.302 with the $50M threshold. As DCMA implements this change, we wait with baited breath while some initial questions come to mind:

  • How, if at all, does this affect contractors currently on the CPSR schedule?
  • Will the number of CPSRs performed by DCMA decrease prospectively?
  • Will the CPSR Group’s analysis of purchasing systems change as a result of a smaller pool of contractors subject to CPSRs?
  • Is there a concern that millions of dollars are spent by contractors who fall below the $50M threshold, yet their purchasing systems are likely not to be reviewed until sometime after the threshold is triggered?
  • Will the acquisition regulation councils approve the proposed threshold increase and update FAR 44.302?
  • Will contractors who currently have an approved system but subsequently fall below the $50M threshold continue to be evaluated every three-to-five years? If not, will those contractors retain their approved status indefinitely?

Are You Ready for Your Next CPSR?

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