As a government contractor your systems serve two important functions. The first is to ensure your organization, documentation, and processes are working effectively and efficiently. The second is to satisfy the government’s compliance rules and regulations. Having an approved purchasing system protects both parties and ensures optimal use of resources. Utilizing an approved purchasing system is a win-win, yet sometimes it can be unclear what classifies an approved purchasing system, who needs one, and how it benefits the Government and the contractor.
What is a government approved purchasing system?
A government approved purchasing system is a system used by a contractor or subcontractor that has been evaluated by the government and deemed appropriate for use with government contracts. That may seem awfully vague, and that is mostly because there is no definitive list of systems that are approved/not approved by the government. Whether a system will be appropriate for use when handling a government contract depends on the contractor and the contract. In the most basic sense, the purchasing system must display and promote the efficiency and effectiveness with which the contractor spends government funds and complies with government policy when contracting/subcontracting. This includes all the activities required by FAR Subpart 44 that relates to a contractor’s purchasing of goods and services.
Who needs a government approved purchasing system?
The basic guidelines for needing an approved purchasing system are as follows:
If the contractor’s sales to the government are expected to exceed $25 million during the next 12 months, excluding: Competitively awarded fixed price contracts and/or Sales of FAR part 12 commercial items
The Administrative Contracting Officer (ACO) determines a Contractor Purchasing System Review (CPSR) is needed based on past performance, volume, complexity, and dollar value.
The contractor wants to practice due diligence, look attractive to the government for future contracts, and/or minimize government oversight of its procurement activities.
How does your purchasing system get approved?
Once a Contractor Purchasing System Review (CPSR) has been scheduled, an evaluator will come in to review your purchasing system. During the review they will be referring to two checklists:
The Business Systems Rule specifies 24 system criteria that must be present in all contractor purchasing systems for them to be considered “acceptable” (DFARS § 252.244-7001 (a))
The DCMA CPSR “Checklist” contains 61 items to be examined to indicate presence/absence and adequacy/inadequacy
But will generally be ensuring your purchasing system meets the following criteria:
Written policies and procedures that adequately address FAR or DFARS requirements
Compliance with public laws, regulations, and prime contract requirements
Adequate Lead Time
Adequately perform and/or document price analysis and source selection
Adequate FAR/DFARS flow-downs
Adequately representations and certifications package
Adequately conduct and document commercial item determinations
Obtain required certifications at time of award
Proper documentation on vendor selection, prices paid, and files which are subject to government review
Organization plan that established clear lines of authority and responsibility
Policy to ensure that all purchases are based on authorized requisitions
Organizations and administrative structure to ensure effective and efficient procurement of requirements at the best value from responsible and reliable sources
Why should you have an approved purchasing system?
If you spend a lot of time working with the government and government contracts, then it is in your best interest to invest in a government approve purchasing system. These systems are created to assist contractors in interacting with the government and documenting and providing the necessary materials required to stay compliant. With a system built around the government’s needs you can save time when requesting and receiving government consent prior to purchasing or subcontracting. You can also ensure compliance with government procurement policies. These systems are used to maximize the efficiency with which the contractor spends government funds and reduce contractor workload using standardized processes and procedures. The best part is not only are you making your job and the government’s job easier, but you are also portraying yourself as a competent, compliant, and competitive contractor for future bids.
If you have any follow up questions, please feel free to reach out to us for more information. We love sharing our knowledge and helping contractors navigate some of these trickier government regulations. If you want to see what a government approved purchasing software can look like, check out Costpoint and get in touch with us for a free demo.