13 Apr 2022


The DoD published a proposed rule in the Federal Register under 84 FR 25228 on May 31, 2019 and proposed to amend the DFARS to implement a recommendation from the Defense Contract Management Agency (DCMA) to raise the threshold of 44,302 (a) from $25 million to $50 million of the Federal Acquisition Regulation (FAR). Currently, paragraph 44,302(a) of the FAR requires the Administrative Contracting Officer (ACO) to determine whether a contractor`s sales to the government are expected to exceed $25 million over the next 12 months and, if so, to conduct a review to determine whether a CSDN is required. The COA uses this dollar threshold in conjunction with the monitoring criteria specified in FAR 44,302(a), i.e., the past performance of the contractor and the volume, complexity and dollar value of subcontracts to make this decision. DCMA performs excess weight of DoD CPSRs. Excluded from this requirement are competitive fixed prices and fixed prices awarded competitively with economic price adjustment contracts and sales of commercial items in accordance with Part 12 of the FAR. Maintaining an approved purchasing system (i.e., one that has adopted a CSDN) benefits the contractor for many reasons, including: (f) withholding payments. If the agent definitively decides to reject the contractor`s supply system and the contract contains clause 252.242-7005, Contractor Business Systems, the agent will withhold payments in accordance with that clause. By Stephen `Chase` Kunk, J.D. – Vice President, Contracts and ProcurementThe Defense Contract Management Agency (DCMA) defined the mission of the contracting purchasing system review (CPSR) Group – “To ensure that [government] suppliers have purchasing systems in place that contribute to effective subcontractor management.

Effective outsourcing management includes the development and implementation of internal policies and procedures, public law, and the appropriateness of cost and price analysis performed at subcontractors. (b) immediately inform the contractor in writing of the granting, maintenance or revocation of the permit. An acceptable purchasing system means a purchasing system that meets the criteria of the system set out in subparagraph (c) of this article. The objective of a contractor procurement system (CPSR) review is to assess the efficiency and effectiveness with which the contractor spends government funds and adheres to government policy when subcontracting. The review provides the Administrative Contracting Officer (COA) with a basis for granting, withholding or withdrawing approval from the contractor`s procurement system. (10) carry out reasonable cost or price analyses and technical evaluations for each subcontractor`s and supplier`s proposal or offer in a timely manner in order to ensure fair and reasonable prices for subcontracting; The process begins with a risk assessment and a series of detailed data questionnaires. Make sure your data is accurate and that YOU understand what the information means so that you can easily answer the examiner`s questions. Answer clearly and in a timely manner so that the examiner can understand the answer. Entrepreneurs who do not have in-house EXPERIENCE with CPSR may find it beneficial to hire a consultant to help prepare for the CPSR. Answer: There is no evidence that low-income entrepreneurs are inherently riskier than those with higher incomes. The $25 million threshold set by FAR 44,302(a) has not changed since 1996. The analysis shows that the threshold could be raised to $50 million, taking into account inflation and acceptable risk.

In accordance with Better Buying Power (BBP) 3.0, the increase in the LAPC threshold is intended to reduce the administrative burden on small entrepreneurs. Small entrepreneurs are often exempted from many of the CPSR review elements because the threshold for obtaining certified cost or price data has recently been raised. (b) General. The Contractor shall establish and maintain an acceptable purchasing system. Failure to maintain an acceptable purchasing system within the meaning of this clause may result in the contract agent disapproval of the system and/or the withholding of payments. Paragraph 44.302(a) of the FAR expressly authorizes the head of the contract management agency to raise or lower the $25 million threshold of the CSDN if it is deemed to be in the best interests of the government. The $25 million threshold of FAR 44,302 has remained unchanged since 1996. In 2016, dcma CPSR Group conducted an analysis to determine whether raising the CPSR threshold would be beneficial.

Based on the panel`s findings, it was found that adjusting the threshold upwards to $50 million would adequately account for inflation, reduce the burden on small entrepreneurs, and allow for a more efficient and effective use of CSDN resources to screen large entrepreneurs where more taxpayers` money is at risk. Three respondents submitted public comments in response to the proposed rule. (b) once an initial determination has been made in accordance with point (a) of this Section, the ACO shall determine, at least every three years, whether a review of the purchasing system is necessary; If necessary, the competent contract management body shall carry out a review of the purchasing system. The COA uses your completed risk assessment form to determine if a CSDN is warranted and needs to be planned. If you`ve reached or are about to reach the $50 million threshold, it`s time to make sure your purchasing system is working in such a way that a CPSR can pass. (18) conduct internal audits or management reviews, train and maintain the policies and procedures of the purchasing department in order to ensure the integrity of the purchasing system; In our experience, it is much easier said than done. In addition, we estimate that at least 75% of the risk to the contractor in an PSR is directly related to what is in the procurement file – the existence and relevance of the documentation. Annually train new employees, the entire department and all other functional areas involved in the purchasing system.

Conduct recurring training when your internal compliance reviews identify issues. Also organize training on the evolution of regulations, laws and government expectations related to your purchasing system. (b) In exceptional circumstances, consent to certain subcontracts or categories of subcontracts may be required even if the contractor`s procurement system has been approved; The notification of system approval shall specify the class(ies) of subcontracts for which authorization is required. One of the reasons for the selection of subcontracts is the fact that a CPSR or ongoing monitoring in a particular area of subcontracting has revealed enough weaknesses to warrant special attention by the COA. The first three of the six contractor systems are audited by the Defense Contract Audit Agency (“DCAA”). The other three are reviewed (unaudited) by the Defense Contract Management Agency (“DCMA”). According to paragraph 252.242.7005(d)(2), it is solely for the contract agent (“CO”) to determine the adequacy of the system. A CSDN requires an assessment of the contractor`s purchasing system. Unless separation of subcontracts is possible, such valuation shall not include subcontracts awarded by the contractor solely in support of government procurement where a fixed fixed price, a competitive fixed price with adjustment of economic prices or a commercial contract is awarded in accordance with Part 12.

The considerations set out in section 44.202-2 for assessing consent to certain subcontracts shall also be used to assess the Contractor`s procurement system, including the Contractor`s policies, procedures and performance under that system. Special attention should be paid — If you can demonstrate to the DCMA that you are effectively monitoring the system, identifying problems and taking corrective action, you will immediately gain more credibility with the CPSR team, while improving the documentation of your file and meeting DFARS` internal review requirements. (a) The ACO shall refuse or revoke approval of a contractor`s purchasing system if there are major weaknesses or if the contractor is unable to provide sufficient information to be able to make a positive decision. The COA may revoke the permit at any time if it is determined that the contractor`s supply system has deteriorated or to protect the interests of the government. Approval is refused or withdrawn if the requirements are not met repeatedly, including, but not limited to: it is increasingly common for evaluation points for tenders with multiple bids to be awarded to contractors who have implemented business systems. The time to start developing a purchasing system is not when the tender is launched. If you have any questions or need help with enterprise systems and CPSRs, please feel free to contact a member of cherry Bekaert`s Government Entrepreneur Services group for assistance. All CSSRs, with the exception of one follow-up review, are based on a risk assessment. Take the time to understand what auditors will be looking for in your purchasing system. .

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