Overview
This section outlines the criteria and thresholds used by the Administrative Contracting Officer (ACO) to determine when a Contractor Purchasing System Review (CPSR) is required. It establishes a $25 million sales trigger and sets a recurring three-year cycle for re-evaluating the necessity of such reviews.
Key Rules
- ACO Discretion: The ACO determines the need for a CPSR based on the contractor’s past performance, as well as the volume, complexity, and dollar value of subcontracts.
- The $25 Million Threshold: A review to determine the need for a CPSR is required if a contractor’s expected government sales exceed $25 million over the next 12 months.
- Sales Exclusions: When calculating the $25 million threshold, contractors exclude competitively awarded firm-fixed-price (FFP) contracts, competitively awarded fixed-price with economic price adjustment (FP-EPA) contracts, and sales of commercial products or services under FAR Part 12.
- Sales Inclusions: The calculation includes prime contracts, subcontracts under government prime contracts, and all contract modifications.
- Threshold Flexibility: Agency heads responsible for contract administration have the authority to raise or lower the $25 million threshold if it serves the government's best interest.
- Three-Year Cycle: Once an initial determination is made, the ACO must re-evaluate the need for a CPSR at least every three years.
Practical Implications
- Audit Readiness: Contractors exceeding the $25 million threshold (net of exclusions) must maintain a robust, compliant purchasing system, as they are high-priority candidates for a formal DCAA/DCMA audit.
- Risk-Based Oversight: Even if a contractor falls below the $25 million mark, the ACO may still initiate a review if the contractor's subcontracts are deemed high-risk or overly complex.