Overview
Subpart 44.3 establishes the policies and procedures for conducting a Contractor Purchasing System Review (CPSR), which evaluates how efficiently and effectively a contractor spends government funds and complies with subcontracting policies. The primary objective is to provide the Administrative Contracting Officer (ACO) with the necessary data to grant, withhold, or withdraw approval of a contractor’s purchasing system.
Key Rules
- Threshold for Review: The ACO considers a CPSR necessary if a contractor’s qualifying government sales (excluding competitively awarded firm-fixed-price, competitively awarded fixed-price with EPA, and Part 12 commercial items) are expected to exceed $25 million over the next 12 months.
- Review Frequency: After the initial determination, the ACO must re-evaluate the need for a CPSR at least every three years.
- Scope of Evaluation: The review focuses on market research, price competition, certified cost or pricing data, subcontractor responsibility (including SAM exclusions), small business programs, and compliance with Cost Accounting Standards (CAS).
- Approval Benefits: An approved system waives the requirement for the contractor to provide advance notification and obtain consent for subcontracts in fixed-price contracts and certain subcontracts in cost-reimbursement contracts.
- Causes for Withdrawal: Approval can be withheld or withdrawn for "major weaknesses" or recurring noncompliance regarding certified cost or pricing data, CAS implementation, or small business subcontracting.
- Timeline for Correction: If a system is disapproved, the ACO must notify the contractor within 10 days. The contractor then has 15 days to provide a plan for corrective action.
Responsibilities
- Administrative Contracting Officer (ACO):
- Determines the need for a CPSR.
- Grants, withholds, or withdraws system approval.
- Maintains surveillance of the contractor’s purchasing program.
- Distributes CPSR reports to audit offices and agency activities.
- Head of Agency (Contract Administration): Holds the authority to raise or lower the $25 million review threshold in the government's interest.
- Specialists (Audit, Pricing, Technical): Assist the ACO in developing and executing a surveillance plan to monitor the contractor's system.
- Contractor: Responsible for maintaining efficient purchasing policies, responding to recommendations within 15 days, and implementing corrective action plans if the system is found deficient.
Practical Implications
- Operational Velocity: For contractors, maintaining an "Approved" purchasing system is a major operational advantage. It eliminates the "Consent to Subcontract" bottleneck, allowing the contractor to execute subcontracts faster without waiting for individual government approval.
- Internal Controls Requirement: Contractors must treat a CPSR as a comprehensive audit. To pass, they must demonstrate rigorous internal controls, specifically in how they vet subcontractors via SAM.gov and how they document the "fair and reasonable" nature of subcontract pricing.
- Risk Mitigation for Primes: Prime contractors can ask the ACO about a potential subcontractor’s system status. While the government won't provide updates, knowing a subcontractor has an approved system can reduce the prime's perceived risk in a proposal.
- Significant Consequences of Failure: If approval is withdrawn, a contractor faces increased administrative scrutiny, potentially delayed project timelines due to consent requirements, and a negative impact on past performance evaluations.