When is your company at risk for this government evaluation?
If your company has begun to approach an annual government sales threshold of $25 million, your government administrative contracting representatives may be lining you up for a purchasing system review, otherwise known as a CPSR
Under the provisions of FAR Part 44.3, government contractors that are expected to exceed $25 million in current year sales to the government are to be considered for such an analysis. And if your company has never been exposed to such an evaluation, you may be in for a rude awakening as to the extent of purchasing and subcontracting procedures and practices that the government expects you to have in place.
What is the purpose of a CPSR
The purpose of a CPSR is to determine that company purchasing and subcontracting practices contain sufficient controls to ensure that the government receives maximum savings when purchased or subcontracted services and products are passed on to the government. A team of government administrative contracting specialists will analyze your purchasing functions and practices onsite, and may invite DCAA into the review process. The evaluation can be extensive and require significant resources of your procurement personnel.
The government analysts will, at a minimum:
- Determine the extent of written policies and procedures related to the purchasing/subcontracting functions, and ascertain that these procedures contain all necessary guidelines;
- Review selected purchase order files and subcontracts for compliance to government regulations and your company’s established procedures, and;
- Evaluate your compliance with regulatory provisions of FAR related to subcontracting and purchasing practices
Prior to scheduling the onsite review, the government will provide a checklist of statistical and purchasing policy information that they expect you to have available for their analysis. This checklist of information will assist them in determining the extent of their analysis and assist them in focusing their efforts on the more important aspects of your purchasing function. Perhaps the most significant expectation that the CPSR team has of your company is sufficient and detailed written purchasing policies and procedures that illustrate your company’s ability and commitment to procure services and products efficiently and within contract guidelines.
Once your purchasing system is deemed adequate, a purchasing system certification can pay huge dividends in future dealings with your government customers. Not only will a certified purchasing system reduce the level of government contract administrative oversight for future contracts, it will also open doors for more government business opportunities. In case you haven’t noticed, many prime contract and subcontract solicitations implicitly contain the requirement that your purchasing system be approved before your company may be considered for an award. And if you can state that your company’s purchasing system has been approved by the government, you have elevated your chances of receiving those contract awards since your purchasing system is considered reliable.
Most government contractors do not get through the CPSR during the first review without a few recommendations for improvement. Some companies will even fail the review miserably because they are completely unprepared for this review. In any case, those companies requiring corrective action are given a time frame to make necessary repairs to the system and later demonstrate that corrective action to the government. However, a continuous inadequate purchasing system will lower the likelihood for future contract awards.
The best way to successfully get through this analysis is to be prepared for the review. Sometimes a great deal of work is involved in preparing for the CPSR, but having the necessary information and proper purchasing controls in place will minimize the risk of adverse findings and extensive recommendation for corrective action.
For more information about the Government Procurement process please contact The Law Office of Adam A. Habibi.