There is no definition of split purchases in the Federal Acquisition Regulation (FAR) or Defense Federal Acquisition Regulation Supplement (DFARS). However, the Defense Contract Management Agency reviews purchase order files for split purchases during a Contractor Purchasing System Review. The Government considers a split purchase when a contractor intentionally breaks down a requirement to stay under a regulatory threshold (e.g., micro-purchase, simplified acquisition threshold, or Truthful Cost or Pricing Data Act (TINA)) in order to circumvent procurement requirements or avoid having to compete.
Does the FAR Address Split Purchases in Other Sections?
Both FAR 52.204-10 Reporting Executive Compensation and First-Tier Subcontract Awards clause and FAR Part 13.003 Policy address split purchases. But it is not really discussed anywhere else.
FAR 52.204-10(e) Reporting Executive Compensation and First-Tier Subcontract Awards is included in solicitations and contracts of $30,000 or more and specifically states:
“The Contractor shall not split or break down first-tier subcontract awards to a value below the threshold specified in FAR 4.1403(a), on the date of subcontract award, to avoid the reporting requirements in paragraph (d) of this clause.”
FAR 13.003(c)(2) states:
“Do not break down requirements aggregating more than the simplified acquisition threshold (or for commercial products and commercial services, the threshold in subpart 13.5), or the micro-purchase threshold into several purchases that are less than the applicable threshold merely to -
- Permit the use of simplified acquisition procedures; or
- Avoid any requirement that applies to purchases exceeding the micro-purchase threshold.”
While split purchases are not one of the criteria in DFARS 252.244-7001 Contractor Purchasing System Administration, the CPSR teams review for split purchases in a purchasing system review because the Government instructions in FAR Part 13 instruct the Contracting Officers not to split purchases. The CPSR team wants to make sure you are not splitting purchases to avoid the threshold requirements.
A Buyer Can’t Split Purchases?
That is not correct. A buyer cannot split a purchase to avoid thresholds. However, there are situations where it is advantageous to split a purchase. This can occur when you want to maintain multiple suppliers to support future competition, and one supplier cannot meet the quantity or delivery schedule on its own, etc.
Takeaway
When splitting a purchase, it is important that the reason for the split be documented and included in the purchase order file. It is also a best practice to ensure that your written policies include situations when a purchase can be split. Most companies' policies indicate that purchases won’t be split to avoid thresholds, but they don’t include the reasons when a split purchase can be made.
Redstone GCI can assist your company or organization in several important ways. We help you understand the Defense Federal Acquisition Regulation Supplement (DFARS) purchasing system requirements, ensuring your team is aware of what is needed for compliance. Our experts can also draft comprehensive policies and procedures tailored to your purchasing system. In addition, we offer staff training, which can be conducted either on-site or virtually, depending on your needs. Finally, we perform GAP assessments of your purchasing system to identify areas for improvement and ensure your processes align with regulatory expectations.
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