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Contractor PurchasingSystem Review (CPSR)GuidebookDEPARTMENTOF DEFENSE(DOD)June 14, 2019DEFENSECONTRACTMANAGEMENTAGENCY (DCMA)1

This Guidebook revision supersedes all previous versions and has been approved.OBERMEYER.ANDREW.C.1150704916Digitally signed byOBERMEYER.ANDREW.C.1150704916Date: 2019.06.14 16:22:51 -04'00'Andrew C. ObermeyerDirector, Business Operations CenterDefense Contract Management AgencyRelease Date:-XQH 2019Change LogDocumentSectionChangeDate1Validation of contractor actions will be conducted as acomprehensive review when a contractor's system is in adisapproved state for more that 12 months.1.4.32/26/20192Universe category updated to align with new SimplifiedAcquisition Threshold.2.1.2.1.1 and2.1.2.2.102/26/20193Supply Chain Management (SCM) Job Aid updated toemphasize the requirements of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dd DFARS 252.204-7008, as appropriate in SCM Job Aid6.24 4 128SGDWH 0LFUR SXUFKDVH WKUHVKROG IURP WR 06/14/19Change#Description

Table of ContentsPart 1 – Introduction . 51.1 Scope of Guidebook.51.2 Application of Guidebook . 51.3 Definitions . 51.4 Types of CPSR Reviews . 61.4.1 Initial / Comprehensive Review . 61.4.2 Special Review . 81.4.3 Follow-Up Review .9Part 2 – Planning for a CPSR.92.1 Responsibilities . 92.1.1 CO Responsibilities . 92.1.2 DCMA CPSR Group Responsibilities .102.2 Scope of the CPSR . 13Part 3 – In-plant CPSR . 143.1 Entrance Conference . 153.2 Conduct In-Plant Review . 153.3 Exit Conference . 16Part 4 – CPSR Report . 164.1 CPSR Report . 164.2 Contractor’s Effectiveness in Major Purchasing Areas . 174.2.1 Contractor’s Current Effectiveness in Major Purchasing Areas . 17Part 5 – Contractor’s Approved Purchasing System . 18Part 6 – Appendixes for Reference. 186.1 Policies and Procedures .196.2 Truthful Cost or Pricing Data/Truth in Negotiations Act (TINA) .226.3 Cost Accounting Standards (CAS) .256.4 Prior Consent and Advance Notification 306.5 Small Business Subcontracting Plans .336.6 Protecting the Government’s Interest when Subcontracting with Contractors Debarred, Suspended,or Proposed for Debarment . . .366.7 Limitation on Use of Appropriated Funds to Influence Certain Federal Transactions Certification(Anti-lobbying) .406.8 Defense Priorities and Allocation System (DPAS) Rating 426.9 Federal Funding Accountability and Transparency Act of 2006 .466.10 Counterfeit Parts Mitigation and Surveillance .496.11 Price Analysis .546.12 Source Selection .576.13 Negotiations .606.14 Make-or-Buy Program .636.15 Limitation on Pass-through Charges 656.16 Documentation .686.17 Training 746.18 Internal Review/Self Audit .776.19 Mandatory FAR and DFARS Flow Down Requirements/Terms and Conditions .836.20 Purchase Requisition Process .876.21 Commercial Item Determination .896.22 Subcontract Types 946.23 Procurement Authority .966.24 Supply Chain Management Process .973

6.25 Buy American .1086.26 Restrictions on the Acquisition of Specialty Metals/Articles Containing Specialty Metals .1136.27 Subcontractor/Vendor Closeout Process .1156.28 Long Term Purchasing Arrangements. . .1176.29 Handling Change Orders and Modifications . 1206.30 Intra/Inter-Company, Affiliate, or Subsidiary Transactions 1224

CONTRACTOR PURCHASING SYSTEM REVIEW (CPSR) PROGRAMFAR 44.3, FAR 44.202-2, and DFARS 244.31.0 – Introduction 1.1Scope of GuidebookThis Guidebook provides guidance and procedures to Government personnel for evaluating contractorpurchasing systems and preparing the CPSR reports.1.2 Application of GuidebookWhile the prime contractor has the responsibility of managing its purchasing system, the DCMA CPSRTeam is responsible for evaluating the contractor’s overall purchasing system to ensure that it isefficient and effective in the expenditure of Government funds and in compliance with contractrequirements. The objective of a contractor purchasing system review (CPSR) is to evaluate theefficiency and effectiveness with which the contractor spends Government funds and complies withGovernment policy when subcontracting. The review provides the administrative contracting officer(ACO) a basis for granting, withholding, or withdrawing approval of the contractor’s purchasingsystem.The CPSR shall be conducted in accordance with this Guidebook, DCMA instruction 109, the FederalAcquisition Regulation (FAR) subpart 44.3, and the Defense Federal Acquisition RegulationSupplement (DFARS) subpart 244.3. A CPSR is conducted when a contractor’s annual sales to theGovernment are expected to exceed 50M in a 12 month period. These Government sales include allGovernment contracts/subcontracts minus those competitively awarded firm-fixed-price, competitivelyawarded fixed-price with economic price adjustment, or sales of commercial items pursuant to FAR part12. Ultimately, the ACO shall determine the need for a CPSR based on, but not limited to, the pastperformance of the contractor, and the volume, complexity and dollar value of subcontracts. All CPSRs,except a Follow-up review, are predicated on a Risk Assessment (RA) evaluation.1.3 Definitions1.3.1Subcontracts – any contract as defined in FAR subpart 2.1 entered into by a subcontractorto furnish supplies or services for performance of a prime contract or a subcontract. Itincludes but is not limited to Purchase Orders (POs) and changes and modifications to POs.1.3.2Subcontractors – any supplier, distributor, vendor, or firm that furnishes supplies orservices to or for a prime contractor or another subcontractor.1.3.3Sole Source Purchasing – means a contract for the purchase of supplies or services that isentered into or proposed to be entered into by a contracor after soliciting and negotiatingwith only one source.1.3.4Contractor Purchasing System Review (CPSR) – the complete evaluation of acontractor’s purchasing of material and services, subcontracting, and subcontract5

management from development of the requirement through completion of subcontractperformance.1.3.5Procurement Analyst (PA) – a Government functional specialist who may assist a TeamLead (TL) with a CPSR review or may be assigned as the TL.1.3.6Team Lead (TL) – the designated PA assigned to manage the CPSR and lead the CPSR team.The TL is the CO’s primary POC and is responsible for the performance and completion ofthe review, preparation of the report, and review of contractor responses/CAPs.1.3.7Contracting Officer (CO) – the designated Government representative authorized to requesta CPSR per FAR 44.302 and issue the initial and/or final determinations for approval ordisapproval of a contractor’s purchasing system. For this Guidebook, the term CO is usedwhen referring to the respective authorized representative, whether the representative is aProcuring Contracting Officer (PCO), Administrative Contracting Officer (ACO), DivisionalAdministrative Contracting Officer (DACO) or Corporate Administrative Contracting Officer(CACO).1.3.8Risk Assessment (RA) – used to perform an evaluation of the contractor’s sales andprocurement data to determine if they meet the qualifications for a CPSR in accordance withFAR Part 44. With the exception of a Follow-up, a RA must be performed prior to theassignment of a CPSR to a PA. The contractor should populate the data in Part I of the form,and the CO must complete Part II and then sign the form as the official request to perform aCPSR.1.4 Types of CPSR Reviews1.4.1 Initial / Comprehensive ReviewAn initial review is a complete, first-time analysis of a contractor’s purchasing system. Acomprehensive review is performed if a contractor has an approved purchasing system. The CO shalldetermine at least every three years if a CPSR is needed. If so, a comprehensive review is performed.Both the initial and comprehensive CPSRs evaluate the contractor’s compliance with the same 30elements in the purchasing system analysis per DFARS 252.244-7001(c). At a minimum, thecontractor’s purchasing system shall:1.4.1.1Have an adequate system description including policies, procedures, and purchasingpractices that comply with the Federal Acquisition Regulation (FAR) and the DefenseFederal Acquisition Regulation Supplement (DFARS);1.4.1.2Ensure that all applicable POs and subcontracts contain all flowdown clauses, includingterms and conditions and any other clauses needed to carry out the requirements of theprime contract;1.4.1.3Maintain an organization plan that establishes clear lines of authority and responsibility;1.4.1.4Ensure all POs are based on authorized requisitions and include a complete and accuratehistory of purchase transactions to support vendor selected, price paid, and documentthe subcontract/PO files which are subject to Government review;6

1.4.1.5Establish and maintain adequate documentation to provide a complete and accuratehistory of purchase transactions to support vendors selected and prices paid;1.4.1.6Apply a consistent make-or-buy policy that is in the best interest of the Government;1.4.1.7Use competitive sourcing to the maximum extent practicable, and ensure debarred orsuspended contractors are properly excluded from contract award;1.4.1.8Evaluate price, quality, delivery, technical capabilities, and financial capabilities ofcompeting vendors to ensure fair and reasonable prices;1.4.1.9Require management level justification and adequate cost or price analysis, as applicable,for any sole or single source award;1.4.1.10Perform timely and adequate cost or price analysis and technical evaluation for eachsubcontractor and supplier proposal or quote to ensure fair and reasonable subcontractprices;1.4.1.11Document negotiations in accordance with FAR 15.406-3;1.4.1.12Seek, take, and document economically feasible purchase discounts, including cashdiscounts, trade discounts, quantity discounts, rebates, freight allowances, and companywide volume discounts;1.4.1.13Ensure proper type of contract selection and prohibit issuance of cost-plus-a-percentageof-cost subcontracts;1.4.1.14Maintain subcontract surveillance to ensure timely delivery of an acceptable product andprocedures to notify the Government of potential subcontract problems that may impactdelivery, quantity, or price;1.4.1.15Document and justify reasons for subcontract changes that affect cost or price;1.4.1.16Notify the Government of the award of all subcontracts that contain the FAR and DFARSflow down clauses that allow for Government audit of those subcontracts, and ensure theperformance of audits of those subcontracts;1.4.1.17Enforce adequate policies on conflict of interest, gifts, and gratuities, including therequirements of 41 U.S.C. Chapter 87, Kickbacks;1.4.1.18Perform internal audits or management reviews, training, and maintain policies andprocedures for the purchasing department to ensure the integrity of the purchasingsystem;1.4.1.19Establish and maintain policies and procedures to ensure POs and subcontracts containmandatory and applicable flowdown clauses, as required by the FAR and DFARS,including terms and conditions required by the prime contract and any clauses requiredto carry out the requirements of the prime contract, including the requirements ofDFARS 252.246-7007, Contractor Counterfeit Electronic Part Detection and Avoidance7