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Is your purchasing system ready for a DCMA Contractor Purchasing System Review?  Time to dust off those policies and procedures, and make sure your employees are trained on FAR and DFARS requirements.

DCMA has been hard at work reviewing contractor purchasing systems, making several updates in 2016 to the CPSR Guidebook, the most recent being January 18, 2016.  In addition, in October 2016, the Director of DCMA issued a Class Deviation from FAR 44.302(a), increasing the CPSR threshold from $25 million to $50 million.  Questions remain on how this will impact contractors whose contracts include FAR 44.3 and who are on DCMA’s review schedule.  The threshold can be lowered if the ACO determines a contractor’s risk level warrants a review.  We have already seen the lower threshold enforced in the early part of 2017 for a couple of our clients.

What You Need to Know and How to Ensure You Are Update

Recent reviews have focused on 29 Elements based on the 24 Criteria identified in DFARS 252.244-7001 (c).  Make sure your policies and procedures include the following elements (topics) in your policies and procedures: 

 

CPSR Report Elements

DFARS Criteria

1

Policy and Procedure Manual

(c)(1), (17), (19), (22), and (24)

2

Truthful Cost or Pricing Data (TINA) (Public Law 87-653

(c)(10), (16), and (22)

3

Cost Accounting Standards (CAS) (Public Law 100-679)

(c)(2) and (19)

4

Prior Consent and Advance Notification (10 ?U.S.C. 2306 (e))

(c)(1)

5

Small Business Subcontracting Plans (Public Law 95-507)

(c)(2) and (19)

6

Protecting the Government’s Interest When Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment (FAR 52.209-6)

(c)(7)

7

Limitation on Use of Appropriated Funds to Influence Certain Federal Contracting and Financial Transactions (Public Law 101-121 (Anti-Lobbying))

(c)(2) and (19)

8

Defense Priorities and Allocation System (DPAS) Rating (15 CFR 700)

(c)(1)

9

Federal Funding Accounting and Transparency Act (FFATA) of 2006

(c)(2) and (19)

10

Counterfeit Parts Mitigation and Surveillance

(c)(19) and (21)

11

Price Analysis

(c)(8), (9), (10), (16), and (22)

12

Source Selection

(c)(4), (5),(7), (8), (9),  (10), (20, and (21)

13

Negotiations

(c) (11) and (12)

14

Make-or-Buy Program

(c) (6)

15

Limitations on Pass-through Charges

(c) (24)

16

Documentation

(c)(4), (5), and (15)

17

Training

(c)(17) and (18)

18

Internal Review/Self-Audit

(c)(17) and (18)

19

Mandatory FAR/DFARS Flow Down Requirements/Terms and Conditions

(c)(2), (16), and (19)

20

Purchase Requisition Process

(c)(4)

21

Buyer Lead-Time

(c)(5)

22

Subcontract Types

(c)(13), and (23)

23

Procurement Authority

(c)(3)and (20)

24

Supply Chain Management Process

(12), (14), (21) and (21)

25

Restrictions on the Acquisition of Specialty Metals/Articles containing Specialty Metals (10 U.S.C. 2533a)

(c)(19)

26

Subcontractor/Vendor Closeout Process

(c)(4)

27

Long Term Purchasing Arrangements

(c)(23)

28

Handling Change Orders and Modifications

(c)(15)

29

Intra/Inter-Company, Affiliate, or Subsidiary Transactions

(c)(5)

Most Common Material Deficiencies Found During 2016 Reviews (based on 126 reports)

  • Protecting the Government’s Interest when Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment (66/126)
  • Limitation on Use of Appropriated Funds to Influence Certain Federal Contracting and Financial Transactions (Anti-Lobbying) (48/126)
  • Price Analysis (43/126)
  • Defense Priorities and Allocation System (DPAS) Rating (34/126)
  • Federal Funding Accountability & Transparency Act (FFATA) (31/126)
  • 6.Sole Source Selection Justification (27/126)
  • Policy and Procedure Manual (20/126)
  • Commercial Item Determination (15/126)
  • Truth in Negotiations Act (TINA) (12/126)
  • Documentation (12/126)

Most Common Non-Material Deficiencies Found During 2016 Reviews (based on 126 reports)

  • Policy and Procedure Manual (74/126)
  • Documentation (52/126)
  • Flow Downs/Terms & Conditions (31/126)
  • Training (25/126)
  • Internal Reviews/Self Audits (24/126)
  • Purchase Requisition Process (20/126)
  • Sole Source Selection Justification (18/126)
  • Negotiations (18/126)
  • Price Analysis (17/126)
  • Protecting the Government’s Interest when Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment (15/126)

Other Focus Areas of DCMA

DCMA has created a Commercial Item Determination (CID) group, with renewed focus on contractor’s commercial item determination process and documentation.  Contractors need to ensure they perform and document market research of items/services being obtained, as well as obtaining evidence of commerciality from suppliers/subcontractors.   Contractors should perform and document adequate price analysis in support of the commercial item(s) price and commercial item determination.

Recommendations

  • Make sure policies and procedures are up to date and adhere to the requirements of FARS and DFARS - include the 29 elements.
  • Establish forms and techniques to adequately document the procurement.
  • Ensure appropriate flow-down clauses  
  • Ensure terms and conditions are current and protect both your company and government’s interests.
  • Use checklist to ensure required documentation is included in procurement files.
  • Make sure files are organized and consistent.
  • Train buyers and other employees that are involved in the procurement process on FAR and DFARS requirements, adequate documentation, price analysis and negotiation techniques.
  • Consider independent compliance assessments to confirm that policies, procedures and practices are compliant or to identify and remediate gaps.

 Don’t rest on laurels!  DCMA is extremely focused on the procurement process and ensuring contractors are protecting the government’s interest and obtaining fair and reasonableness pricing.  CPSR’s are no longer just about how many files an auditor can get through; they are focused on the substance of the polices and the documentation within the files.  So be prepared and make sure your company is ready when they arrive!    

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Written by Redstone Team

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Compliant Accounting Infrastructure, Contractor Purchasing System Review (CPSR)