Overview
FAR 44.303 defines the scope and specific focus areas of a Contractor Purchasing System Review (CPSR), establishing the criteria the government uses to evaluate a contractor’s purchasing policies, procedures, and internal controls. It identifies specific types of subcontracts that are generally exempt from review and lists eleven critical areas—ranging from price competition to small business compliance—that require special auditor attention.
Key Rules
- Scope of Evaluation: The review evaluates the contractor’s entire purchasing system, including written policies, operating procedures, and actual performance (execution).
- Exemptions: Unless segregation is impracticable, the evaluation excludes subcontracts supporting:
- Competitively awarded firm-fixed-price (FFP) contracts.
- Competitively awarded fixed-price contracts with economic price adjustment.
- Contracts for commercial supplies or services awarded under FAR Part 12.
- Standard of Review: Auditors must use the considerations for "consent to subcontract" found in FAR 44.202-2 as the baseline for the system evaluation.
- Critical Focus Areas: The regulation mandates "special attention" to specific administrative and compliance functions, including:
- Market research and the degree of price competition obtained.
- Methods for obtaining certified cost or pricing data and determining subcontractor responsibility (via SAM Exclusions).
- Treatment of affiliates and compliance with Small Business programs.
- Compliance with Cost Accounting Standards (CAS) and the appropriateness of contract types used.
- Management of progress payments and implementation of quality standards.
Practical Implications
- Audit Readiness: Contractors must ensure their procurement files for non-commercial, non-competitive, or cost-reimbursement subcontracts are meticulously documented, as these are the primary targets of a CPSR.
- System Integrity: To maintain an "approved" status, a contractor must demonstrate not just that they have policies in place, but that their internal audit and management control systems (especially regarding subcontractor responsibility and pricing) are actively functioning to protect the government's interests.