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Title: Purchasing Compliance

Brief description:

This entry covers the basics of procurement as well as how they apply to government contracts and regulations. For those subject to Contractor Purchasing System Reviews (CPSR), it also outlines the requirements and how Unanet functionality can be used to track the necessary information for compliance.

What’s covered in this document:


Procurement Basics

Commonly understood terms and definitions

  • Requisition – the act of formally requiring or calling upon someone to perform an action
  • Buy – to acquire possession, ownership, or rights to the use or services of by payment, especially of money
  • Purchase – to gain or acquire
  • Procurement – that act or process of procuring
  • Purchase Order – a formal document that is used by an employee to request that something be purchased by a company
    • Often used for non-complex, smaller dollar value procurements, for materials/goods
  • Subcontract – a contract between a party to an original contract and a third party
    • Often used for more complex, higher dollar value procurements, for services

General procurement process

  1. Acquisition planning
  2. Requirements definition
  3. Purchase Requisition initiated and approved
  4. Market research
  5. Solicitation
  6. Proposal/quote
  7. Negotiations
  8. Award approval
  9. Award (PO/Subcontract)
  10. Delivery/inspection/acceptance
  11. Payment
  12. Closeout

Unanet procurement process

  1. Create Purchase Requisition (PR)
  2. Submit PR for Approval (optional)
  3. Track all research results using the Attachments and UDFs
  4. Create Purchase Order (PO)
  5. Carry over Attachments and UDFs from PR to PO (optional)
  6. Submit PO for Approval (optional)
  7. Use Unanet timesheets for Subcontractors
  8. Create Vendor Invoice from PO
  9. Submit Vendor Invoice for Approval (optional)


Procurement under US Government (USG) Contracts

Overview

The USG has the powers of taxation and spending from the Constitution, and buys more goods and services than any other person/entity. The Department of Defense is the largest buyer (via contract) in the USG. In essence, contractors are spending the tax payer's dollar on behalf of the USG. There is significant risk for the USG and tax payer when contractors procure goods and services in support of USG contracts, so USG procurement is highly regulated environment as a result. Conducting Contractor Purchasing System Reviews (CPSRs) is one of many ways for the USG to manage risk.

CPSR Objective (FAR 44.301)

The objective of the CPSR is to evaluate the efficiency and effectiveness with which the contractor spends USG funds and complies with USG policy when subcontracting. CPSR provides the Administrative Contracting Officer (ACO) a basis for granting, withholding, or withdrawing approval of the contractor's purchasing system. The CPSR looks at direct billable purchases to protect the USG's interests and manage/mitigate risk. The CPSR includes reviewing the purchasing process and ensuring sound practices are in place that are compliant with the FAR and public laws.

Defense Contract Management Agency (DCMA) is charged with reviewing contractors' purchasing systems when the purchasing system is effectively under the cognizant of a DCMA ACO. DCMA CPSR Group's Mission: "Ensure that [Goverment] suppliers have purchasing systems in place that contribute to effective subcontract management. Effective subcontract management includes development of, as well as performance to internal policy and procedures, public law and adequacy of cost and price analyses performed on subcontractors."

For DFARS system criteria, see section 252.244-7001(c) here: https://www.acq.osd.mil/dpap/dars/dfars/html/current/252244.htm

Below are the current DCMA CPSR P&P requirements and report elements:

  1. Policy and Procedure Manual
  2. Truthful Cost or Pricing Data (TINA)
  3. Cost Accounting Standards (CAS)
  4. Prior Consent and Advance Notification
  5. Small Business Subcontracting Plans
  6. Protecting the Government's Interest with Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment
  7. Limitation on Use of Appropriate Funds to Influence Certain Federal Contracting and Financial Transactions (PTI/Anti-Lobbying)
  8. Defense Priorities and Allocations System (DPAS)
  9. Federal Funding Accountability and Transparency Act (FFATA) of 2006
  10. Counterfeit Parts Mitigation and Surveillance
  11. Price Analysis
  12. Source Selection
  13. Negotiations
  14. Make-or-Buy Program
  15. Limitations on Pass-through Charges
  16. Documentation
  17. Training
  18. Internal Review/Self-Audit
  19. Mandatory FARS/DFARS Flow Down Requirements/Terms and Conditions
  20. Purchase Requisition Process
  21. Commercial Item Determination
  22. Subcontract Types
  23. Procurement Authority
  24. Restrictions on the Acquisition of Specialty Metals/Articles containing Specialty Metals
  25. Supply Chain Management Process
  26. Subcontracts/Vendor Closeout Process
  27. Long Term Purchasing Arrangements
  28. Handling Change Orders and Modifications
  29. Intra/Inter-Company, Affiliate, or Subsidiary Transactions
  30. Buy American Act

Risks of a Disapproved Purchasing System

These include:

  • Elevating AN&C to subcontract requirements, which may cause delivery/performance delays
  • Impact to your competitive position, both writing to approved business systems and your overall evaluated price in proposals
  • Influencing Government-wide notification (CBARS) and resultant reactions by procuring agency customers
  • Potential of overall negative perception across your business systems leading to further DCAA/DCMA oversight
  • Payment withholds affecting cash flow under DFARS Business Systems Rules


Unanet Purchasing Functionality

Unanet has built-in functionality to track and maintain the necessary compliance information throughout the course of a contract. These are the tools you will need to be CPSR compliant, but they must be combined with the appropriate policies and procedures in order for your organization to satisfy the requirements.

Attachments

The document management features allow you to keep track of different document versions and attach them to PRs and POs, which allows you to keep documentation on negotiations or other information.

Modifications

PR and PO Mods allow you to track the history of contracts from original through subsequent modifications.

User-Defined Fields (UDFs)

Up to 20 UDFs can be customized and used to track information on PRs and POs. Below are examples of how UDFs could be set up in order to be CPSR compliant.

UDF 1: "Order Type"
    • Note: Hybrid subcontracts should reflect the dominant subcontract type
    • Data Type = Pick List

      CodeDescription
      AFIRM FIXED PRICE (FFP)
      BFIRM FIXED PRICE (FFP)-FAR PART 12 (Commercial Item)
      CFIXED PRICE-LEVEL OF EFFORT (FP-LOE)
      DTIME AND MATERIALS (T&M)/ LABOR HOUR (T&M)
      ETIME AND MATERIALS (T&M)/LABOR HOUR-FAR PART 12 (Commercial Item)
      FCOST PLUS FIXED FEE (CPFF)
      GCOST PLUS AWARD FEE (CPAF)
      HCOST REIMBURSABLE
      ILEASE
UDF 2: "Agreement Indicator"
    • If this order was placed in accordance with an established agreement, indicate which type
    • Data Type = Pick List

      CodeDescription
      ABASIC AGREEMENT (BA)
      BBASIC ORDERING AGREEMENT (BOA)
      CCONSULTING AGREEMENT (CA)
      DCORPORATE COMMODITY AGREEMENT (CCA)
      MMASTER SERVICE PROVIDER AGREEMENT (MSA)
      IINDEFINITE DELIVERY/INDEFINITE QUANTITY (IDIQ)
      VVALUE ADDED RESELLER AGREEMENT (VAR)
      XN/A
UDF 3: "Source Justification"
    • How this order was selected
    • Data Type = Pick List

      CodeDescription
      AADEQUATE PRICE COMPETITION (No SBs solicited)
      BADEQUATE PRICE COMPETITION (SBs solicited)
      CCOMPETITION ATTEMPTED-NOT ACHIEVED
      DCUSTOMER DIRECTED
      EENGINEERING DIRECTED
      FFOLLOW-ON DEVELOPMENT
      GONLY QUALIFIED/APPROVED SOURCE
      HECONOMICALLY JUSTIFIED
      IUNIQUE CONCEPT OR ABILITY
      JTECHNICAL COMPATIBILITY
      MMENTOR-PROTEGE AGREEMENT
      PPROPRIETARY ITEM
      RSB SET-ASIDE
      UREGULATED UTILITY
UDF 4: "Price Analysis Technique"
    • How the price was determined to be fair and reasonable
    • Data Type = Pick List

      CodeDescription
      ---ADEQUATE PRICE COMPETITION (INSERT # OF RESPONSIVE BIDS)
      HHISTORICAL PRICE COMPARISON
      CCATALOG OR MARKET PRICE
      PPARAMETRIC ANALYSIS
      IINDEPENDENT ESTIMATE
      SSIMILAR ITEM COMPARISON
      OUNAUTHORIZED COMMITMENT 
UDF 5: "TINA/CAS Applicability"
    • Data Type = Pick List

      CodeDescription
      MTINA/CAS NOT APPLICABLE
      CCAS COVERED/NO TINA
      TTINA COVERED/NO CAS
      QTINA COVERED/CAS COVERED
UDF 6: "Special Contract Provisions"
    • Data Type = Pick List

      CodeDescription
      AMINIMUM LABOR QUALIFICATIONS
      BSERVICE CONTRACT ACT
      CMINIMUM LABOR QUALIFICATIONS & SERVICE CONTRACT ACT
      DDEFENSE BASE ACT (DBA)
      XNO SPECIAL CONTRACT PROVISIONS
UDF 7: "Small Business Plan (>$700K)"
    • Data Type = Pick List

      CodeDescription
      ALARGE BUSINESS-SB PLAN REQUIRED
      BLARGE BUSINESS-NO SUBCONTRACTING OPPORTUNITIES EXIST
      XSMALL BUSINESS/FOREIGN BUSINESS/COMMERCIAL ITEM-SB PLAN NOT REQUIRED
UDF 8: "Contracting Officer Advance Notification/Consent Required"
    • Data Type = Pick List

      CodeDescription
      AADVANCE NOTIFICATION REQUIRED
      CCONSENT REQUIRED
      XNO REQUIREMENTS FOR CONTRACTING OFFICER ADVANCE NOTIFICATION OR CONSENT
UDF 9: "Audit Status"
    • Data Type = Pick List

      CodeDescription
      1FULLY COMPLIANT FILE
      2MINOR ERRORS THAT CAN BE FIXED TO MAKE FILE FULLY COMPLIANT (FIX AND RE-STATUS)
      3MAJOR ERRORS THAT ARE NON-RECTIFIABLE (MITIGATE RISK AND DOCUMENT FILE ACCORDINGLY)
      4NON-RECTIFIABLE (UNAUTHORIZED COMMITMENT BY NON-PROCUREMENT PERSONNEL)-MANAGEMENT ACTION TAKEN AND ADDRESSED IN FILE
      5NON-RECTIFIABLE (PROCUREMENT ERROR)-MANAGEMENT ACTION TAKEN AND ADDRESSED IN FILE
      QCOMPLIANT RELEASE TO CURRENT YEAR IDIQ W/STATUS 1 OR 2
      MCOMPLIANT RELEASE TO PREVIOUS FY IDIQ W/STATUS 1 OR 2
      LLETTER SUBCONTRACT


Additional Information

KC - Video - Purchasing Compliance

KC - Purchasing - Purchase Requisition and Purchase Order UDFs

KC - Purchasing - Shared Documents

KC - Purchasing - Manage an Existing Purchase Requisition

KC - Purchasing - Manage an Existing Purchase Order


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