Overview
Subpart 44.1 defines the fundamental terminology used throughout FAR Part 44 regarding subcontracting policies and procedures. It establishes the scope of what constitutes a "subcontract" and introduces the Contractor Purchasing System Review (CPSR), which serves as the mechanism for government oversight of a contractor's internal procurement practices.
Key Rules
- Broad Definition of Subcontract: A subcontract is not limited to formal legal agreements; it explicitly includes purchase orders, as well as any changes or modifications to those orders.
- Scope of the CPSR: A Contractor Purchasing System Review is a comprehensive, end-to-end evaluation. It covers the entire lifecycle of a procurement—from the initial development of a requirement to the final completion of subcontract performance.
- Entity Specificity: The term "Contractor" can refer to the entire organization or a specific affiliate, division, or plant, provided that the specific entity performs its own independent purchasing functions.
- Validation of Systems: A purchasing system is only considered "approved" if it has been formally reviewed and cleared in accordance with the procedures outlined in FAR Part 44.
Responsibilities
- Contracting Officer (CO/ACO): While not detailed in the definitions alone, the definitions imply the CO’s role in granting "Approved purchasing system" status based on the results of a CPSR.
- The Contractor: Responsible for managing its internal purchasing system and ensuring that all entities (divisions or affiliates) involved in procurement meet the standards required for a CPSR.
- Subcontractors: Responsible for furnishing supplies or services to prime contractors or higher-tier subcontractors under the terms defined in the subcontract or purchase order.
Practical Implications
- Audit Readiness: Because the definition of a CPSR includes the "development of the requirement," contractors must realize that government auditors will look at internal processes before a solicitation is even sent to a vendor, not just the final contract.
- Administrative Burden: Since purchase orders and modifications are legally "subcontracts" under this subpart, contractors must maintain rigorous documentation even for small-scale transactional purchases to pass a system review.
- Organizational Strategy: Large defense contractors or service providers must decide whether to seek an approved purchasing system at the corporate level or at the individual plant/division level, depending on how decentralized their purchasing operations are. An approved system often reduces the need for the government to provide "consent to subcontract" on individual actions, streamlining operations.