Contractor Purchasing System Review (CPSR) - Chess …

1 Contractor Purchasing System Review (CPSR). Overview of the CPSR Requirements Contractor Purchasing System Reviews Government contract Purchasing System requirements vary The Defense Contract Management Agency ( DCMA ) and depending on a Contractor 's size, types of contracts, and other the Defense Contract Audit Agency ( DCAA ) share risk factors. Federal Acquisition Regulation ( FAR ) Part 44 responsibility for audits of the business systems, with the Subcontracting Policies and Procedures, establishes the DCMA being responsible for audits of Purchasing systems. It requirements for Review , evaluation, and approval of is possible that the DCAA may be engaged to assist with these Contractor Purchasing systems. For government contractors audits depending on various factors, such as availability of expected to exceed $25 million in annual sales within the resources.

2 To conduct CPSR/DFARS Purchasing System following 12 months (excluding competitive firm-fixed-price audits, the DCMA primarily uses the CPSR Guidebook and commercial items contracts), the Administrative (including the 55 criteria checklist), DCMA Manual 2301-01. Contracting Officer ( ACO ) must assess the need for a Contractor Business Systems, FAR subpart , and DFARS. Contractor Purchasing System Review ( CPSR ). For Department of Defense ( DOD ) contractors, the threshold When contractors are selected for a CPSR, CPSR Team Leads requiring Review is $50 million per DOD Federal Acquisition will begin pre-planning activities, including Review of Regulation Supplement ( DFARS ) Part 244. The assessment previous CPSR reports (if applicable) and any Risk is based on the Contractor 's past performance and the volume, Assessments completed.

3 Auditors will then Review policies dollar value, and complexity of its subcontracts. If a and procedures, and contractors will be asked to walk through Contractor 's Purchasing System has not been reviewed, or has them to demonstrate how the System complies with been disapproved, the Contractor is required to provide Purchasing System requirements (including the 55 criteria). advance notice to the ACO and obtain consent prior to Auditors will typically request that process owners provide entering into subcontract agreements. Failing a CPSR may demonstrations, so it is important that these personnel are result in the Contractor being ineligible to bid on future work. knowledgeable of end-to-end processes. Process owners In addition to the assessment requirements defined under should also understand relevant DFARS and FAR criteria, FAR Part (a) and DFARS Part (a), companies and be able to provide documentation ( , flowcharts, that are CAS covered and contract with the DOD will need to narratives, file support, etc.)

4 To auditors to sufficiently support comply with DFARS Part Contractor their understanding of the processes. Once walk-throughs are Purchasing System requirements. This DFARS Part requires complete, testing of the System is performed, during which contractors to establish and maintain compliance with 24 the auditor will Review specific files and supporting specific criteria to be deemed as having an acceptable System . documentation for compliance. On February 24, 2012, the DOD issued the final Business In preparation for Purchasing System reviews, contractors Systems Rule that established, through changes to the should consider performing a self-assessment focused on the DFARS, mandatory requirements for six Contractor business following areas: systems, including the Purchasing System .

5 If contractors do not comply with the criteria, the Business System Rule Policies and procedures;. imposes mandatory financial penalties (5% withholding for Planning and market research;. one System , or up to 10% for two or more systems) for any Price competition;. noncompliance that is deemed a significant deficiency. A Prevention of conflicts of interest and misconduct;. significant deficiency is defined as: shortcomings in the Negotiations;. System that materially affect the ability of officials of the Cost or price reasonableness;. DOD to rely upon information produced by the System that is Source selection;. needed for management purposes. Supplier history and performance ratings;. Flow down of appropriate clauses;. Cybersecurity protocols;. Procurement administration; and Policies and procedure not addressing counterfeit Closeout and evaluation.

6 Electronics; and Policies and procedures not addressing how to deal with Our Approach split awards. Chess Consulting has developed a project plan and approach tailored to support government Contractor compliance with The Chess Consulting Advantage Purchasing System requirements. Our approach includes Our professionals have a track record of success assisting adaptable tools and templates designed to support planning, clients throughout the life cycle of a government contract assessment, remediation, and monitoring of the Purchasing including pre-award, post-award, and dispute-related matters. System to maximize its efficiency and effectiveness. A We bring to each engagement a unique combination of summary of our approach includes, but is not limited to, the government contracting regulatory expertise, technical following: financial accounting and reporting knowledge, and an understanding of our client's business processes, risks, and Identify written policy and procedure gaps to assess challenges.

7 By engaging with Chess Consulting, our clients implications and develop a work plan/approach to walk receive insight into current market trends and industry through the related processes and controls;. practices which add value both in the areas of compliance and Perform walk-throughs of procedures and develop a operations. testing strategy using a risk-based approach;. Review Purchasing files and test effectiveness of existing Professionals within our practice have been assisting with controls supporting the Purchasing System ; Purchasing related matters including regulatory price Verify actual practices are consistent with written reasonableness for decades. Client engagements include: Purchasing policies and procedures, as well as FAR and A publicly traded mid-sized government Contractor .

8 The DFARS requirements;. company engaged Chess Consulting to perform a Verify appropriate supporting documentation and written preliminary CPSR to assess if the Purchasing System was justifications are included in Purchasing files;. ready for the DCMA's Review . The Contractor previously Prepare recommendations to remediate identified failed a CPSR and spent the prior year working to address weaknesses and provide implementation assistance;. deficiencies. Many of the requirements and areas covered Report weaknesses and recommendations to process by the DCMA's audit checklist and the DFARS's owners and company management; and business systems rule were addressed; however, several Monitor regulatory agencies' trends and ensure that key risk areas required remediation including its clients appropriately address compliance risks.

9 Sole/single source justification and supporting Our professionals also keep abreast of any new developments documentation. We worked with the Contractor to and trends within the industry to ensure they are given special address the risk areas identified, and it successfully attention during our engagements. Current industry trends passed the DCMA's next CPSR. that contractors are experiencing include: A large privately owned government Contractor . The Missing or incomplete cost or price analysis; company engaged Chess Consulting to perform a Missing or incomplete written justifications, and/or Purchasing System Review to identify deficiencies and to failure to properly document the use of sole/single source develop and communicate to management the awards; recommendations for improvement.

10 The Review focused Policies and procedures not addressing regulatory on assessing Purchasing manuals/policies and actual requirements; practices to verify consistency as well as compliance with Missing or incomplete evidence/support documented in FAR/DFARS requirements. We interviewed relevant procurement files; personnel, walked through processes, and tested and Not flowing down appropriate clauses to subcontractors; assessed documentation to verify compliance. No evidence of current cost or pricing data for Deficiencies were identified and recommendations for subcontracts subject to the Truth in Negotiations Act; improvement were communicated to management. Inadequate vetting of supplier cybersecurity capabilities and tracking flow down of controlled unclassified information.