How To Prepare For A CPSR

In this blog post you’ll learn how you can prepare today for a CPSR, or contractor purchasing systems review.  This blog post will give you a few tips on how to have a successful audit and review of your procurement systems. Failure to pass a CPSR can result in loss of revenue for a contractor, so it is in the company’s best interest to prepare in advance for the day a contractor purchasing systems review notice comes in.

Who Is A Candidate For A CPSR, Or Contractor Purchasing System Review?

Any company who is expected to make $50mm in sales volume with the federal government in the next 12 months. These include all contracts/subcontracts, excluding competitively awarded firm-fixed-price, competitively awarded fixed-price with economic price adjustment contracts, or sales of commercial items pursuant to FAR part 12

These may be performed every three years at the administrative contracting officer’s (ACO) determination.

What Is the Purpose Of A CPSR

Contractor Purchasing System Reviews are conducted with the intent to ensure the contracting company’s purchasing systems are adequate and operating effectively, compliant with all applicable rules and regulations, and operating effectively. In essence, the ACO is determining how efficiently and effectively the contractor company is using government funds. These report findings are then used to grant, withhold, or withdraw approval of the purchasing system.

What Are Some Common Issues And Findings In A Contractor Purchasing System Review?

Common issues and findings in a contractor purchasing system review (CPSR) include:

• Contractor does not perform and document effective price or cost analysis for purchase transactions, modifications, and change orders utilizing the guidelines in FAR § 15.404-1. (DFARS § 252.244-7001(c)(10
• Contractor does not obtain adequate certified cost or pricing data for their subcontracts subject to TINA/Truthful Cost or Pricing Data. Source: FAR §§ 52.215-12 and -13
• Establish and maintain selection processes to ensure the most responsive and responsible sources for furnishing required quality parts and materials and to promote competitive sourcing among dependable suppliers so that purchases are from sources that meet contractor quality requirements, including the requirements of 252.246-7007, Contractor Counterfeit Electronic Part Detection and Avoidance System. (DFARS § 252.244-7001(c)(3)
• Not all noncompetitive awards include some type of price analysis. Source: DCMA CPSR Guidebook; May 29, 2018

For more examples, see our CPSR guide & Our Guide to CPSR and Federal Procurement Compliance.

What Happens If We Fail A CPSR?

Any contracting company that fails a CPSR, or contractor purchasing systems review, is subject to withholding of 5%. For more information visit our guide on CPSR audit failures.

How Do We Prepare For A CPSR?

CPSRs never happen on a random, surprise basis. Your company will never be notified that a CPSR will be happening today or tomorrow. Usually, the ACO will let a company new months in advance that a CPSR for the previous 12 months will be happening.

Some tips for a successful CPSR include:

• Adherence to clearly outlined policies and internal procedures that comply with FARS and DFARS requirements
• Implement and carry out regular internal audits and reviews to make sure these policies and procedures are being followed
• Use competitive sourcing whenever possible, not just when it is convenient for the company
• Document all negotiations in accordance with FAR 15
• Take advantage of all possible discounts. These include cash discounts, trade discounts, quantity discounts, etc.
• Study the guidebook and all references that DCMA provides
• Have at least one member of the executive team and all other participants at the entrance meeting
• Choose a point of contact to be a liaison with the CPSR team

The federal government has clearly outlined all the necessary steps in order to stay compliant with regulations and laws. CPSRs are not designed to try to punish companies, but rather to make sure contractors and sub-contractors are using government funds in the most efficient way possible.

Still, there are several ways that a company contracting with the government can accidently slip into non-compliance. Don’t let that company be yours. Contact us today and see how we can help you have a successful CPSR experience.