Contractor Purchasing System Review (CPSR)

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Presentation transcript:

Contractor Purchasing System Review (CPSR) Contractor Purchasing System Review (CPSR) and Property System Discussion Presented By: John C. Foley, Director, DCMA Contractor Purchasing System Review (CPSR) Group Maura Lachance, Supervisor, DCMA Property Group March 7, 2018

Agenda Business Operations Business System Overview CPSR How/Where do Property/CPSR Fit? CPSR Processes explained Property Administration

CONTRACTOR PURCHASING SYSTEM REVIEW (CPSR) GROUP Business Operations Center (AQB) Ensure that suppliers’ have purchasing systems in place that contribute to effective subcontract management. Evaluation of the efficiency and effectiveness with which the contractor spends Government funds and complies with Government policy when subcontracting. The CPSR Group’s recent focus has been on improving supplier Sourcing practices and promoting intelligent pricing decisions. Conducted 129 reviews in FY17. PROPERTY GROUP PLANT CLEARANCE TERMINATIONS CONTRACTOR PURCHASING SYSTEM REVIEW (CPSR) GROUP Ensure that contractors’ property management systems control, use, preserve, protect, repair and maintain the Government property (GP) in their possession.. Perform Property Management System Analysis (PMSA) and investigate Property Loss to determine liability. PMSAs performed FY17 – 978. Total acquisition cost of GP- $120B. CONTRACTOR PURCHASING SYSTEM REVIEW (CPSR) GROUP Total Personnel Authorized: 418 DCMA employs 242 of the 390 1103s in DoD Negotiate settlements for Contracts terminated for the convenience of the Government. Provide technical assistance and guidance to Buying Activities by facilitating policy and procedures and technical support. Conduct post-termination briefings. Approve contractors’ settlements with Subcontractors. Approve interim payments prior to final settlement. Currently have over 500 actions valued at $9.9B in process. Provide timely, cost effective disposal of excess government property in the possession of contractors.  Facilitate the reutilization of Government Property saving time and money that might otherwise be expended in re-procurements. Assure Government Property is disposed of properly and demilitarized when required. Selling surplus Government Property returning proceeds from sales to the Government. Clearing Plant Clearance cases while maintaining data integrity in our case files and PCARSS. FY17 cleared 13.2K cases; Acquisition Cost - $3.8B. CPSR Group – travel cost savings of $115.4K in FY17 as a result of remote access to contractor records and reviews taking less than 2 weeks to complete. Benefits to DOD Customers Property Administrators investigate losses of Government property, and when contractually appropriate, recommend that the contractor be held liable. In FY17, this resulted in the recoupment of $2.5M. Terminations had negotiated savings of $277.0M in FY17 and has saved $3.6M to date in FY18. Plant Clearance reutilized $790M in Gov’t Property and returned $3.5M to the U.S. Treasury through sales of Surplus Gov’t Property in FY17.

Mission Statements The Business Operations Center is designed to consolidate operational business support functions in order to leverage limited resources across the enterprise. The Center is comprised of four Groups that are responsible for the following mission functions: Contractor Purchasing System Reviews (CPSR), Plant Clearance, Property Administration, and Contract Terminations. The Center provides support to the CMOs while working in conjunction with the operational directorates and regional commands. CPSR Group Mission: Provides timely and comprehensive evaluation of a supplier's purchasing system. The evaluation includes an analysis of the supplier's compliance to policy and procedures, public laws and adequacy of price analysis performed on subcontractors. Plant Clearance Group Mission: Provides timely and cost effective reutilization, sale, and disposal of excess Government property in the possession of contractors. Property Group Mission: Ensure that contractors’ property management systems control, use, preserve, protect, repair and maintain the Government property in their possession. Terminations Group Mission: Negotiates equitable settlements of contracts terminated for the convenience of the Government.

Six Business Systems Accounting Property Purchasing (CPSR) MMAS Estimating EVMS

What is the purpose of a CPSR? Evaluation of efficiency and effectiveness with which the contractor spends Government funds and complies with Government policy when subcontracting Complete evaluation of a contractor’s purchasing of material from services, subcontracting, and subcontract management from development of the requirement through completion of the subcontract performance Report findings to Contracting Officer providing a basis for granting, withholding, or withdrawing approval of the purchasing system Review corrective action plan for effectiveness and validate implementation

CPSR Regulatory Guidance FAR FAR part 44 – Subcontracting Policies & Procedures FAR 52.244-2 (Alternate I when applicable) – Subcontracts DFARS DFARS part 244 – Subcontracting Policies & Procedures DFARS 252.242-7005 - Contractor Business Systems DFARS 252.244-7001 - Contractor Purchasing System Administration ( New Business Rules) Other DFARS PGI part 244 (Policy Guide & Instructions) DCMA Memorandum # 16-203 – DCMA Deviation for Raising the CPSR Threshold

CPSR Reviews- The Four Types Initial - System not yet evaluated and Contractor meets FAR 44.302 (CPSRs) dollar threshold requirement Comprehensive - System previously approved and usually conducted 3 years after initial or previous review Follow-up - Validation of Correction Action Plan (CAP) on a disapproved purchasing system and addresses previously identified deficiencies Special - Evaluation of specific risk areas

Read the clauses that are in your contract A CPSR is in Your Future How do I prepare? Read the clauses that are in your contract Best practice is to conduct a prime contract receipt and review Understand why you are being asked to comply in each instance FAR and DFARs give you the understanding you need Why are you doing this? We’re coming to check your files!

No secrets - you can utilize the CPSR Guidebook Helping You Succeed! We actively seek forums like those offered by NCMA to educate contractors on our process No secrets - you can utilize the CPSR Guidebook We provide transparency You follow through DFARS 252.244-7001 (c)(18) Perform internal audits or management reviews, training, and maintain policies and procedures for the purchasing department to ensure the integrity of the purchasing system What’s keeping you from getting prepared now?

CPSR Guidebook Revised and expanded Outlines the whole CPSR process Job Aids provide an extensive explanation of all report elements Addresses compliance (both policy and practice) A living document updated by “Champions” as requirements change All revisions are reviewed by the Agency’s Policy and Legal Groups Posted on the Agency’s external website and available to all contracting officers and contractors http://www.dcma.mil/Portals/31/Documents/CPSR/CPSR_Guidebook_011817.pdf

Decisions Matter! Have a good acquisition strategy Competitive awards Preferred method. Three responsible bidders. Many elements exempted. Commercial Item Determination (CID) Preferred method. Prepare a CID. (Market Analysis and Price Analysis applies) DCMA recently stood up the Commercial Item Group (CIG) Sole Source Acquisitions Often necessary, but is the least preferred resulting in many regulations to follow Sole Source determination is required. Many of the standard review elements are not applicable when you award competitively or make a commercial item determination

CPSR On-site Activities Entrance briefing with contractor and government personnel Physical review based on the 30 CPSR report elements Lead analyst conducts daily briefs to keep the contractor and ACO informed of arising concerns or issues Analyst questions are formally submitted to the contractor in writing and tracked on a question log which is provided at end of review Exit briefing conducted to provide the contractor and ACO with preliminary findings (compilation of the daily briefs)

In the past we evaluated 43 purchasing system elements Review Elements In the past we evaluated 43 purchasing system elements New report format eliminated or combined review elements which resulted in current 30 elements The 30 review elements are based on: The 24 Criteria identified in DFARS 252.244-7001(c) FAR/DFARS clauses that flow-down from the prime contract awards to subcontracts

CPSR Report Based on FY16 CPSR reports CPSR REPORT MATRIX (Elements 1-15) DFARS 252.244-7001 Criteria 1. Policies and Procedures Manual (c) (1), (17), (19), (22) and (24) 2. Truthful Cost or Pricing Data (Truth-In-Negotiations Act (TINA)) (c) (10), (16) and (22) 3. Cost Accounting Standards (CAS) (c) (2) and (19) 4. Prior Consent and Advance Notification (c) (1) 5. Small Business Subcontracting Plans 6. Protecting the Government's Interest when Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment (c) (7) 7. Limitation on Use of Appropriated Funds to Influence Certain Federal Contracting and Financial Transactions (Anti-Lobbying) 8. Defense Priorities and Allocation System (DPAS) Rating 9. Federal Funding Accountability and Transparency Act (FFATA) of 2006 10. Quality Management and Counterfeit Parts Detection and Avoidance Systems (c) (19) and (21) 11. Price Analysis (c) (8), (9), (10), (16) and (22) 12. Source Selection (c) (4), (5), (7), (8), (9), (10), (20), and (21) 13. Negotiations (c) (11) and (12) 14. Make-or-Buy Program (c) (6) 15. Limitations on Pass-through Charges (c) (24) Based on FY16 CPSR reports Protecting the Government’s Interest when Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment (66/126) Limitation on Use of Appropriated Funds to Influence Certain Federal Contracting and Financial Transactions (Anti-Lobbying) (48/126) Price Analysis (43/126) Defense Priorities and Allocation System (DPAS) Rating (34/126) Federal Funding Accountability & Transparency Act (FFATA) (31/126) Sole Source Selection Justification (27/126) Policy and Procedure Manual (20/126) Commercial Item Determination (15/126) Truth in Negotiations Act (TINA) (12/126) Documentation (12/126)

CPSR Report cont’d Based on FY16 CPSR reports CPSR REPORT MATRIX (Elements 16-30) DFARS 252.244-7001 Criteria 16. Documentation (c) (4), (5), and (15) 17. Training (c) (17) and (18) 18. Internal Review/Self-Audit 19. Mandatory FAR/DFARS Flow Down Requirements/Terms and Conditions (c) (2), (16) and (19) 20. Purchase Requisition Process (c) (4) 21. Commercial Item Determination (c) (5) 22. Subcontract Types (c) (13) and (23) 23. Procurement Authority (c) (3) and (20) 24. Supply Chain Management Process (c) (12), (14), (20) and (21) 25. Buy American and Berry Amendment (c) (1) 26. Restrictions on the Acquisition of Specialty Metals/Articles containing Specialty Metals (c) (19) 27. Subcontractor/Vendor Closeout Process 28. Long Term Purchasing Arrangements (c) (23) 29. Handling Change Orders and Modifications (c) (15) 30. Intra/Inter-Company, Affiliate, or Subsidiary Transactions (c) 5) Based on FY16 CPSR reports Protecting the Government’s Interest when Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment (66/126) Limitation on Use of Appropriated Funds to Influence Certain Federal Contracting and Financial Transactions (Anti-Lobbying) (48/126) Price Analysis (43/126) Defense Priorities and Allocation System (DPAS) Rating (34/126) Federal Funding Accountability & Transparency Act (FFATA) (31/126) Sole Source Selection Justification (27/126) Policy and Procedure Manual (20/126) Commercial Item Determination (15/126) Truth in Negotiations Act (TINA) (12/126) Documentation (12/126)

Report Elements in Context ACO with support from the CPSR Functional Specialist determines the significance of a finding Material Findings usually pertain to elements dealing with Public Law or instances where risk is considered significant Example: TINA, Price Analysis Non-Material Findings are everything else requiring attention Example: Documentation, Training We’ll learn from others in the next two slides

FY17 Most Common CPSR Material Deficiencies 18 Protecting the Government’s Interest when Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment (65/129) Cost/Price Analysis (59/129) Defense Priorities and Allocation System (DPAS) Rating (54/129) Limitation on Use of Appropriated Funds to Influence Certain Federal Contracting and Financial Transactions (Anti-Lobbying) (50/129) Federal Funding Accountability & Transparency Act (FFATA) (46/129) Sole Source Selection Justification (43/129) Commercial Item Determination (42/129) Truth in Negotiations Act (TINA) (30/129) Policy and Procedure Manual (23/129) Cost Accounting Standards (CAS) (20/129)

FY17 Most Common Non-material Deficiencies 19 Policy & Procedure Manual (91/129) Documentation (57/129) Internal Review/Self Audit (34/129) Negotiations (32/129) Training (27/129) Sole Source Selection Justification (25/129) Protecting the Government’s interest when subcontracting with Contractors Debarred , Suspended, or Proposed for Debarment (24/129) Handling Change Orders and Modifications (21/129) Cost/Price Analysis (21/129) Commercial Item Determination (20/129)

CPSR Post Review Analyze data and develop statistics Prepare a report addressing the contractor’s policy and practice for each of the review elements Report released to ACO within 30 business days of exit briefing When non-material deficiencies are identified, the procurement analyst will issue a Level II CAR and follow through to closure When material deficiencies are identified, the procurement analyst will prepare a draft level III CAR and the contractor should provide a response to the ACO

ACO System Determination Contracting Officer determines whether a purchasing system is approved or disapproved If no material deficiencies exist, the ACO will issue a final determination approving the system (within 10 days of receipt of CPSR report) If the ACO suspects one or more material deficiencies exist, the ACO will issue an Initial Determination (within 10 days of receipt of CPSR report) The contractor has 30 days to respond to the ACO If the contractor’s response is adequate, the ACO will make a final determination of system approval If not adequate a final determination of disapproval results

Questions?

Property Management System Discussion Maura Lachance, Supervisor AQBYB Property Group

What is our Property mission? The Property Group ensures that Government Property in the possession of contractors is effectively and efficiently managed as required by FAR 52.245-1– Government Property.

What is Government Property? GP consists of Government Furnished Property (GFP) and Contractor Acquired Property (CAP) Any property furnished by the Government, as well as all purchased items for which the Contractor is entitled to be reimbursed as a direct item of cost under the contract are GP, and are subject to applicable property clauses GFP and CAP may be any of the following types of property Material Equipment Special Tooling Special Test Equipment

DCMA Property Administration The DCMA Property Group is DoD’s subject matter expert for Contract Property Administration, around the world. The DCMA Property Group provides surveillance/oversight to ensure contractors are providing effective and efficient stewardship of the Government property in their custody; therefore, assuring its availability for contract performance, reducing the risk to our customers, and fulfilling supporting mission requirements. Our mission does NOT include: tracking property, maintaining contractor’s property records, or performing physical inventories.

How Do We Perform the Mission? By performing Property Management System Analyses (PMSAs). A PMSA is a systematic, objective review and evaluation of a contractor's PMS including the procedures and the implementation of applicable property management processes to determine whether the contractor is complying with contractual terms and conditions relating to property management.

Two Types of PMSAs Standard PMSAs require entrance and exit conferences, involve plant visits, formal examinations with detailed work papers generated and formalized conclusions drawn as to the condition of the contractor's system. The depth and detail of review and analysis are far greater for a standard system analysis than for a limited system analysis. Limited PMSAs or “desk audits” permit less formal testing methods and techniques including contractor responses to a series of questions covering each applicable element of a contractor’s PMS, and interviews of contractor personnel among other methods as appropriate, depending on the risk level, amount and value of property, etc.

How Does Property Schedule PMSAs? New contractors: Identified during contract receipt and review. Contracts that contain the Government Property (GP) clause and/or GP attachment Initial PMSA scheduled within one year. Within six months if there is sensitive property. Established contractors: Type and frequency of PMSAs determined IAW risk level of contractor’s PMS. When sensitive property is involved, PAs perform annual on-site reviews of records, storage, utilization, and physical inventories processes, regardless of the contractor’s risk rating.

Risk Assessments PAs assign each PMS a risk rating of high, moderate or low. High Risk – Requires a Standard PMSA at least annually Moderate Risk - A Standard or Limited PMSA as frequently as conditions warrant, but at least once every 2 years Low Risk - Standard or Limited PMSA as frequently as conditions warrant, but at least once every 3 years PMSA schedules are maintained in the Contract Property Administration System (CPAS) eTool.

Contractor’s Obligation Contractors are required to have a property management system in place that is adequate to satisfy the requirements of FAR 52.245-1 and to effectively and efficiently manage Government property. Contractor’s responsibility extends from the initial acquisition and receipt of property through stewardship, custody, and use until formally relieved of responsibility. To include delivery, consumption, disposition, and completed investigation, evaluation, and final determination for Government property losses.

PMSA Performance PAs review all applicable elements and processes of the contractor’s PMS as identified at FAR 52.245-1(f)(1)(i through x) including: Written procedures Reports Contractor self-assessment Relief of stewardship Acquisition Utilization Receiving Declaration of excess Discrepancies incident to shipment Consumption Identification Movement Records Storage Receipt and issue system Storage – commingling Physical inventory Maintenance Subcontractor awards and flowdown Disposal Subcontractor reviews Closeout

PMSA Reporting Process Upon completion of a PMSA, PAs perform the following actions: Exit Conference Prepare Business System Analysis Summary (BSAS) and complete Audit Report within 30 days Issues corrective actions for processes identified with deficiencies. Submits BSAS and Audit Report to the Contracting Officer for system determination.

After System Status Determination Once the CO makes a final determination, the PA: Provides CO feedback on any CAP(s) Monitors contractor’s corrective action - Completion of milestones Performs reanalysis of non-compliances when contractor completes corrective action, and sufficient transactions are available for testing (if applicable) Prepares BSAS & Audit Report of Reanalysis

Questions?