christine williamson, member, watkins meegan...
TRANSCRIPT
GC-208 Preparing for the CPSR – A Practical Guide Christine Williamson, Member, Watkins Meegan LLC Rich Wilkinson, Director, Watkins Meegan LLC
Background
Where to Start (And, It’s Not Where You Think)
Procurement Policies and Procedures
The Process
A Look Forward
Questions
Session Content
The Contractor Purchasing System Review (CPSR) has been around since the early days of DCAA
DCMA has had primary responsibility for the review at Major Contractors (>$50M of ADV) since 1990 (DCAA did the smaller firms if and when they were reviewed)
DCMA now has sole responsibility for the CPSR under the final DFARS Business Systems Rule (Feb 2012)
DCAA may assist at the request of DCMA
Purchasing System adequacy determination is the sole purview of the Administrative Contracting Officer (ACO)
Background
DFARS defines six (6) contractor systems subject to determination of adequacy (subject to applicability)
Three are audited by DCAA Accounting(1)
Estimating(1)
Material Management Accounting System (MMAS)(2)
The remaining three are reviewed (not audited) by DCMA Purchasing(3)
Government Property(2)
Earned Value Management(2)
(1) Always applicable (2) Applicable only when system is required (3) Applicable, but reviewed only above a threshold or on request
The Business Systems Rule
Authority for adequacy determinations vested solely in the ACO
DCAA issues findings and can recommend, but not determine
DCAA will report findings in subsequent reports as if it was making a determination – nearly the same effect
Threshold for Purchasing System review currently set at $25M in ADV (administrative and subject to revision without notice)
“Review on request” (by PCO) very common in recent experience
More on Business Systems
The Business Systems Rule sets forth 24 system criteria that must be present in all contractor purchasing systems in order for a purchasing system to be “acceptable”
(see DFARS § 252.244-7001(a))
DCMA CPSR “checklist” contains 55 items to be examined (specific policies) with space to indicate presence (or absence) and adequacy
The system criteria of the DFARS and the review checklist have NOT YET BEEN RECONCILED
The Adequacy Criteria
Organization plan that establishes clear lines of authority and responsibility;
Policy to ensure that all purchases are based on authorized requisitions and include documentary support for vendor selected, price paid, and files which are subject to Government review;
Internal audits or reviews, training, and policies for the purchasing department to ensure the integrity of the system
General Company Policies
System description including policies, procedures, and purchasing practices that comply with the requirements of the FAR and DFARS
Organizational and administrative structure to ensure effective and efficient procurement of requirements at the best value from responsible and reliable sources
General Procurement Policies
Procurement Planning/Market Research (2 Criteria)
Conflict of Interest/Misconduct (1 Criterion)
Competition (2 Criteria)
Negotiated Procurement (1 Criterion)
Cost or Pricing Data and Price Reasonableness (5 Criteria)
Source Selection (3 Criteria)
Contract Formation and Content (3 Criteria)
Foreign Purchasing and Performance (3 Criteria)
Procurement Administration (4 Criteria)
Adequacy Criteria Deep Dive
Apply a consistent make-or-buy policy that is in the best interest of the Government
Ensure proper type of contract selection and prohibit issuance of cost-plus-a-percentage-of-cost subcontracts
Procurement Planning/Market Research
Enforce adequate policies on conflict of interest, gifts, and gratuities, including the requirements of the Anti-Kickback Act
Conflict of Interest/Misconduct
Use competitive sourcing to the maximum extent practicable, and ensure debarred or suspended contractors are properly excluded from contract award
Require management level justification and adequate cost or price analysis, as applicable, for any sole or single source award
Competition
A practice of documenting negotiations in accordance with the FAR requirements for negotiation memoranda
Negotiated Procurement
Evaluate price, quality, delivery, technical, and financial capabilities of competing vendors to ensure fair and reasonable prices Perform cost or price analysis and technical evaluation for each proposal or quote to ensure fair and reasonable subcontract prices Document negotiations in accordance with FAR 15.406-3 Take discounts, including cash discounts, trade discounts, quantity discounts, rebates, freight allowances, and company-wide volume discounts Establish and maintain procedures to ensure performance of adequate price or cost analysis on purchasing actions
Cost or Pricing Data and Price Reasonableness
Use competitive sourcing to the maximum extent practicable, and ensure debarred or suspended contractors are properly excluded from contract award
Evaluate price, quality, delivery, technical capabilities, and financial capabilities of competing vendors to ensure fair and reasonable prices
Establish and maintain selection processes to ensure the most responsive and responsible sources and to promote competitive sourcing so that purchases are reasonably priced and from sources that meet quality requirements
Source Selection
Ensure purchase orders and subcontracts contain all flowdown clauses, including terms and conditions, and any other clauses needed to carry out the requirements of the prime contract
Notify the Government of the award of all subcontracts that contain flowdown clauses that allow for Government audit of subcontracts, and ensure the performance of audits of those subcontracts
Ensure purchase orders and subcontracts contain mandatory and applicable flowdown clauses, as required by the FAR and DFARS
Contract Formation and Content
Ensure compliance with all relevant domestic preference requirements
Ensure compliance with export control regulations
Ensure agreements are not executed with prohibited parties
Foreign Purchasing and Performance
Maintain subcontract surveillance to ensure timely delivery and procedures to notify the Government of potential subcontract problems that may impact delivery, quantity, or price Document and justify reasons for subcontract changes that affect cost or price Ensure that proper types of subcontracts are selected, and that there are controls over subcontracting, including oversight and surveillance of subcontracted effort Establish and maintain procedures to timely notify the Contracting Officer, in writing, of excessive pass-through concerns
Procurement Administration
Begins with a request by the ACO to perform a review Should ALWAYS be scheduled, never unannounced Should be reasonably convenient for both parties Unless you KNOW you are well prepared, get as much lead time as
you can
Plan on one to two weeks on-site (your facility) for two or more people (based on recent experience)
One of the participants is often from DCAA
Process Basics
Draft report to the ACO on findings Report is a DCMA document, NOT DCAA Does NOT come under the DCAA Rules of Engagement DCMA usually cooperative on getting contractor input
No set time frame for issuance of determination by ACO Often issued first as a formal draft report with a request for a reponse ACO will sometimes permit follow-up review before issuing final
Once issued, DFARS Business Systems Rule controls “clocks” for the process
No one “passes” on the first try
Process Results
DCMA has undertaken a large number of CPSRs in 2012
DCAA is participating heavily, but may not continue given agency workload
DCMA current backlog estimated at more than one year
Near Term Outlook
Purchasing System status now tracked by DCMA in Business Systems database
Contractors meeting threshold for review will be shown with a (purchasing) system status of “Unassessed” if… Never reviewed Last adequacy determination more than 3 years old
Status of unassessed may adversely affect eligibility for contracts that require an “approved” purchasing system
Growing backlog of CPSRs may put many contractors in exactly that position
Longer Term Outlook
CPSR Flowchart (Word)
DCMA CPSR Checklist (Excel) www.DCMA.gov or
Procurement Policies Checklist (Excel)
CPSR Review Guide www.DCMA.gov or
Resources
8000 Towers Crescent Drive Tysons Corner, VA 22182 www.WatkinsMeegan.com Christine Williamson, Member (703) 847-4412 [email protected] Rich Wilkinson, Director (703) 847-4435 [email protected]
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