RGCI - It is Time for a CPSR Review – Is Your Universe Up-To-Date

What is a CPSR Review?

A CPSR Review is a Contractor Purchasing System Review. This review is performed by the Government on a contractor, in order to:

  • assess the overall health of the purchasing organization,
  • evaluate the efficiency and effectiveness of the contractor’s practices in expending Government funds,
  • perform an independent review of the contractor’s system to optimize its effectiveness in compliance with Government policy, and
  • identify risk to provide the Administrative Contracting Officer (ACO) a basis for approving or disapproving the purchasing system.

The review process includes the Government’s evaluation of your written Purchasing policies and procedures, and the testing of a sample of subcontract and PO files from your universe, to ensure compliance with your own internal policies and procurement regulation.

But, before we go into more detail, let’s first discuss who performs the CPSR and whether your company meets the requirements.

Who Performs a CPSR Review?

Defense Contract Management Agency (DCMA) is the Government organization responsible for performing CPSRs. A DCMA “CPSR Team” will review a contractor’s purchasing policies to determine that they adequately address the 24 criteria in DFARS 252.244-7001(c) Contractor Purchasing System Criteria and more. Additional areas reviewed, but not mentioned in the DFARS, include:

The CPSR team also selects a sample of purchase orders and subcontracts to determine whether file documentation demonstrates that each element addressed in DFARS, and a contractor’s policy have been effectively accomplished.

Will my Company be Selected for a CPSR Review?

FAR 44.302 provides that the ACO will determine, based on risk, if a CPSR is necessary when a contractor’s sales to the Government will exceed $25 million during the next 12 months. For DoD contractors, DFARS 244.302 increased the $25 million threshold to $50 million. Excluded from the calculation of Government sales are competitively awarded firm-fixed-price contracts, fixed-price with economic price adjustment contracts, and sales of commercial products and services under FAR Part 12 contracts.

Is there Advance Warning of a CPSR Review?

Generally, DCMA sends contractors a sixty-to-ninety-day advance notification that a CPSR review is scheduled. A pre-review questionnaire is provided to the contractor to complete. The questionnaire generally requests information about:

  • The identification of at least one prime contract containing FAR clause 52.244-2,
  • Government sales data,
  • Mix of contract type,
  • Sales to the Government as a percent of total sales,
  • Number of purchase orders/subcontracts issued in the most recent year, and
  • Type of business.

The questionnaire is used by DCMA as a risk assessment to determine whether a CPSR review should be performed on the contractor. Within sixty to ninety days before the start of a CPSR, DCMA will request contractors complete a Government Contract Listing. After completion of the Government Contract Listing, DCMA will request a Universe of all purchasing transactions within a 12-month period.

Generating Your Universe of Subcontracts and Purchase Orders, It’s Easy, Right?

If you do not have a process in place to generate the universe of subcontracts and purchase orders, this can be a time-consuming process. Redstone GCI finds that contractors spend a substantial amount of time gathering the information to create a universe of purchase orders and subcontracts over a 12-month period. The two excel documents that DCMA provides to contractors, 1) Government Contract Listing Spreadsheet and 2) Universe Spreadsheet, require a comprehensive list of information be provided. The two spreadsheets are described below.

  1. Government Contract Listing Spreadsheet (List of Government Contracts)

The Government Contract Listing should be populated to include all government prime contracts and subcontracts that you have been awarded during the last 12 months. Contractors must also include competitive and FAR Part 12 (Commercial) prime contracts and subcontracts, even though the subcontracts under a competitive and FAR Part 12 prime contract are not included in the CPSR review. DCMA has found contractors leave out some subcontracts/POs. Therefore, they request a complete universe to ensure all purchase orders/subcontracts are accounted for in the universe populated on this spreadsheet. DCMA will provide the 12-month date range for which the following government contract/subcontract information will need to be provided:

  • Government Contract Number
  • Customer
  • Original Award Value
  • Current Value
  • Fixed or Cost Type
  • Competed or Sole Source
  • Commercial exclusively under FAR Part 12
  • DPAS Rating
  • Is the Company the prime or a subcontractor
  • If subcontractor, provide prime contract number
  • If subcontractor, provide Subcontract number
  1. Universe Spreadsheet

DCMA will request the Universe Spreadsheet be populated to include all purchase orders and subcontracts issued under the Government prime contract or subcontracts that they select from the Government Contract Listing (mentioned above). In addition to purchase orders and subcontracts, intercompany purchases are required, as well as identification as to whether they are issued under a “work order” or a “purchase order.”   The information for purchase orders/subcontracts issued under the contracts selected by DCMA from the Government Contract Listing spreadsheet, above, must include the following:

  • PO Number
  • Description of Good or Service
  • Vendor Name
  • PO Type
  • PO Date
  • Large/small/foreign
  • Commercial Item (yes/no)
  • Letter Contract (yes/no)
  • Award Value
  • Number of Mods (total)
  • Number of Mods (Universe Period)
  • Current Value
  • Closed (Yes/no)
  • DPAS Rating
  • Prime Contract Number
  • Prime Contract Type
  • Subcontract Number

So, What should You Do to Prepare for a CPSR?

Training

As a government contractor, your purchasing team should be adequately trained on the Government’s expectations surrounding the purchases you make. Government expectations and regulations change frequently, therefore regular training on purchasing requirements, industry trends, best practices should be incorporated throughout the purchasing/buying departments.

Contractor Purchasing Policies and Procedures

Because purchasing on behalf of the government is highly regulated and evaluated, contractor purchasing policies and procedures are important and should be maintained, updated, and tested on a regular basis. Regardless of whether a CPSR is on your horizon, we recommend that you ensure your company has solid purchasing policies and procedures that are consistent with government expectations as well as your internal practice. We often see contractors with well written policies but find that the follow through with adhering to those policies and procedures is lacking. It is important that contractor purchasing policies and procedures are accurate, up-to-date, and consistently employed throughout your organization, with supporting documentation well maintained (e.g., well documented purchasing files).

Contract, Subcontract and PO Tracking

As you can see from the previous paragraphs, the universe of subcontracts and purchase orders requires a lot of information other than the subcontract/purchase order number and amount. We recommend you start this process sooner rather than later. Check your accounting system to see if your project or contract modules have fields to track the required information. An important field to identify is the government contract (prime or subcontract) type (e.g., competitive FFP, noncompetitive FFP, Commercial FAR Part 12, cost reimbursable, T&M, etc.) to easily identify the subcontracts/purchase orders that should be included or excluded from the universe. Other important subcontract/purchase order information is dollar amount, contract type, competitive, sole source, commercial, and small business exemptions (exempt from TINA/small business plan). If the accounting modules have fields to identify this information and you are not using them, start inputting the information now so you are ready for a CPSR review. While the modules may not include fields for all the criteria, sometimes there are open fields in a specific contract record to identify additional data or you can assign predefined codes. Take the time to track and/or enter this data, continuously throughout the year, as you are awarded a subcontract/PO. The universe data request is comprehensive and time consuming if the information is not tracked in your accounting system or somewhere else on a regular basis.

Redstone GCI is happy to assist contractors in evaluating their purchasing process to ensure compliance and identify areas for improvement and change. We often review purchasing policies and practices to ensure compliance with DFARS requirements, perform “mock audits” to assess whether purchasing files comply with policies, procedures, and regulation, and provide CPSR related training to contractor purchasing/buying departments.

CPSR Services Brochure DOWNLOAD NOW

Written by Lynne Nalley, CPA

Lynne Nalley, CPA Lynne is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to Commercial Item Determinations and support, Cost Accounting Standards, DFARS Business System Audits, Proposals, and Incurred Cost. Prior to joining Redstone Government Consulting, Lynne served in several capacities with DCAA and DCMA for over 35 years. Professional Experience Lynne began her career working with DCAA in the Honeywell Resident Office, Clearwater, FL in 1984. Lynne’s experience included various positions which involved conducting or reviewing forward proposals or rate audits, financial capability audits, progress payments, accounting and estimating systems, cost accounting standards, claims and disclosure statement reviews. She is an expert in FAR, DFARS, CAS and testified as an expert witness. Lynne assisted in drafting the commercial item guidance for DCAA Headquarters. Lynne was assigned as a Regional Technical Specialist where she provided guidance to 20 field offices on highly complex or technical issues relative to forward pricing, financial capability or progress payment issues. As an Assistant for Quality, she was involved in reviewing and ensuring audit reports were in compliance with policy and GAGAS as well as made NASBA certified presentations to the staff including but not limited to billing reviews, CAS, unallowable cost and progress payments. To enhance her experience in government contracting, Lynne accepted a position with DCMA in 2015 as part of the newly organized DCMA Cadre of Experts in the Commercial Item Group. This included performing reviews of prime contractor’s assertions and/or commercial item determinations as well as performing price analyses. Lynne was a project lead and later became a lead analyst where she engaged with the buying commands on requests and reviewed price analysis reviews performed by a team of 5 analysts. She also assisted the DCMA CPSR team relative to commercial items and co-instructed the Commercial Item Training presented to DCMA. Education Lynne earned a Bachelor of Science Degree in Accounting from the University of Central Florida. Certifications State of Florida Certified Public Accountant State of Alabama Certified Public Accountant Defense Acquisition Workforce Improvement Act (DAWIA) Level III- Auditing DAWIA Level III – Contracting

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: DFARS Business Systems, Contractor Purchasing System Review (CPSR)