1. 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

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

3. 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 s 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.

4. 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.

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

6. 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

7. CPSR Regulatory Guidance
FAR
FAR part 44 – Subcontracting Policies & Procedures
FAR (Alternate I when applicable) – Subcontracts
DFARS
DFARS part 244 – Subcontracting Policies & Procedures
DFARS Contractor Business Systems
DFARS Contractor Purchasing System Administration ( New Business Rules)
Other
DFARS PGI part 244 (Policy Guide & Instructions)
DCMA Memorandum # – DCMA Deviation for Raising the CPSR Threshold

8. CPSR Reviews- The Four Types
Initial - System not yet evaluated and Contractor meets FAR (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

9. 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!

10. 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 (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?

11. 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

12. 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

13. 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)

14. 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 (c)
FAR/DFARS clauses that flow-down from the prime contract awards to subcontracts

15. CPSR Report Based on FY16 CPSR reports
CPSR REPORT MATRIX (Elements 1-15)
DFARS 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)

16. CPSR Report cont’d Based on FY16 CPSR reports
CPSR REPORT MATRIX (Elements 16-30)
DFARS 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)

17. 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

18. FY17 Most Common CPSR Material Deficiencies18
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)

19. FY17 Most Common Non-material Deficiencies19
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)

20. 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

21. 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

22. Questions?

23. Property Management System Discussion
Maura Lachance, Supervisor AQBYB Property Group

24. 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 – Government Property.

25. 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

26. 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.

27. 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.

28. 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.

29. 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.

30. 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.

31. Contractor’s Obligation
Contractors are required to have a property management system in place that is adequate to satisfy the requirements of FAR 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.

32. PMSA Performance
PAs review all applicable elements and processes of the contractor’s PMS as identified at FAR (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

33. 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.

34. 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

35. Questions?