Subpart 44.3 - Contractors’ Purchasing

Systems Reviews

Parent topic: Part 44 - Subcontracting Policies and Procedures

44.301 Objective.

The objective of a contractor purchasing system review (CPSR) is to evaluate the efficiency and

effectiveness with which the contractor spends Government funds and complies with Government

policy when subcontracting. The review provides the administrative contracting officer (ACO) a basis

for granting, withholding, or withdrawing approval of the contractor’s purchasing system.

44.302 Requirements.

(a) The ACO shall determine the need for a CPSR based on, but not limited to, the past performance

of the contractor, and the volume, complexity and dollar value of subcontracts. If a contractor’s sales

to the Government (excluding competitively awarded firm-fixed-price and competitively awarded

fixed-price with economic price adjustment contracts and sales of commercial supplies and

commercial services pursuant to part 12) are expected to exceed $25 million during the next 12

months, perform a review to determine if a CPSR is needed. Sales include those represented by

prime contracts, subcontracts under Government prime contracts, and modifications. Generally, a

CPSR is not performed for a specific contract. The head of the agency responsible for contract

administration may raise or lower the $25 million review level if it is considered to be in the

Government’s best interest.

(b) Once an initial determination has been made under paragraph (a) of this section, at least every

three years the ACO shall determine whether a purchasing system review is necessary. If necessary,

the cognizant contract administration office will conduct a purchasing system review.

44.303 Extent of review.

A CPSR requires an evaluation of the contractor’s purchasing system. Unless segregation of

subcontracts is impracticable, this evaluation shall not include subcontracts awarded by the

contractor exclusively in support of Government contracts that are competitively awarded firm-fixedprice, competitively awarded fixed-price with economic price adjustment, or awarded for commercial

supplies and commercial services pursuant to part 12. The considerations listed in 44.202-2 for

consent evaluation of particular subcontracts also shall be used to evaluate the contractor’s

purchasing system, including the contractor’s policies, procedures, and performance under that

system. Special attention shall be given to-

(a) The results of market research accomplished;

(b) The degree of price competition obtained;

(c) Pricing policies and techniques, including methods of obtaining certified cost or pricing data, and
data other than certified cost or pricing data;

(d) Methods of evaluating subcontractor responsibility, including the contractor’s use of the System

for Award Management Exclusions (see 9.404) and, if the contractor has subcontracts with parties

on the Exclusions list, the documentation, systems, and procedures the contractor has established to

protect the Government’s interests (see 9.405-2);

(e) Treatment accorded affiliates and other concerns having close working arrangements with the

contractor;

(f) Policies and procedures pertaining to small business concerns, including small disadvantaged,

women-owned, veteran-owned, HUBZone, and service-disabled veteran-owned small business

concerns;

(g) Planning, award, and postaward management of major subcontract programs;

(h) Compliance with Cost Accounting Standards in awarding subcontracts;

(i) Appropriateness of types of contracts used (see 16.103);

(j) Management control systems, including internal audit procedures, to administer progress

payments to subcontractors; and

(k) Implementation of higher-level quality standards.

44.304 Surveillance.

(a) The ACO shall maintain a sufficient level of surveillance to ensure that the contractor is

effectively managing its purchasing program.

(b) Surveillance shall be accomplished in accordance with a plan developed by the ACO with the

assistance of subcontracting, audit, pricing, technical, or other specialists as necessary. The plan

should cover pertinent phases of a contractor’s purchasing system (preaward, postaward,

performance, and contract completion) and pertinent operations that affect the contractor’s

purchasing and subcontracting. The plan should also provide for reviewing the effectiveness of the

contractor’s corrective actions taken as a result of previous Government recommendations.

Duplicative reviews of the same areas by CPSR and other surveillance monitors should be avoided.

44.305 Granting, withholding, or withdrawing approval.

44.305-1 Responsibilities.

The cognizant ACO is responsible for granting, withholding, or withdrawing approval of a

contractor’s purchasing system. The ACO shall-

(a) Approve a purchasing system only after determining that the contractor’s purchasing policies

and practices are efficient and provide adequate protection of the Government’s interests; and
(b) Promptly notify the contractor in writing of the granting, withholding, or withdrawal of approval.

44.305-2 Notification.

(a) The notification granting system approval shall include-

(1) Identification of the plant or plants covered by the approval;

(2) The effective date of approval; and

(3) A statement that system approval-

(i) Applies to all Federal Government contracts at that plant to the extent that cross-servicing

arrangements exist;

(ii) Waives the contractual requirement for advance notification in fixed-price contracts, but not for

cost-reimbursement contracts;

(iii) Waives the contractual requirement for consent to subcontracts in fixed-price contracts and for

specified subcontracts in cost-reimbursement contracts but not for those subcontracts, if any,

selected for special surveillance and identified in the contract Schedule; and

(iv) May be withdrawn at any time at the ACO’s discretion.

(b) In exceptional circumstances, consent to certain subcontracts or classes of subcontracts may be

required even though the contractor’s purchasing system has been approved. The system approval

notification shall identify the class or classes of subcontracts requiring consent. Reasons for

selecting the subcontracts include the fact that a CPSR or continuing surveillance has revealed

sufficient weaknesses in a particular area of subcontracting to warrant special attention by the ACO.

(c) When recommendations are made for improvement of an approved system, the contractor shall

be requested to reply within 15 days with a position regarding the recommendations.

44.305-3 Withholding or withdrawing approval.

(a) The ACO shall withhold or withdraw approval of a contractor’s purchasing system when there are

major weaknesses or when the contractor is unable to provide sufficient information upon which to

make an affirmative determination. The ACO may withdraw approval at any time on the basis of a

determination that there has been a deterioration of the contractor’s purchasing system or to

protect the Government’s interest. Approval shall be withheld or withdrawn when there is a

recurring noncompliance with requirements, including but not limited to-

(1) Certified cost or pricing data (see 15.403);

(2) Implementation of cost accounting standards (see 48 CFR chapter 99); 

(3) Advance notification as required by the clauses prescribed in 44.204; or

(4) Small business subcontracting (see subpart 19.7).
(b) When approval of the contractor’s purchasing system is withheld or withdrawn, the ACO shall

within 10 days after completing the in-plant review (1) inform the contractor in writing, (2) specify

the deficiencies that must be corrected to qualify the system for approval, and (3) request the

contractor to furnish within 15 days a plan for accomplishing the necessary actions. If the plan is

accepted, the ACO shall make a follow-up review as soon as the contractor notifies the ACO that the

deficiencies have been corrected.

44.306 Disclosure of approval status.

Upon request, the ACO may inform a contractor that the purchasing system of a proposed

subcontractor has been approved or disapproved, but shall caution that the Government will not

keep the contractor advised of any changes in the approval status. If the proposed subcontractor’s

purchasing system has not been reviewed, the contractor shall be so advised.

44.307 Reports.

The ACO shall distribute copies of CPSR reports; notifications granting, withholding, or withdrawing

system approval; and Government recommendations for improvement of an approved system,

including the contractor’s response, to at least-

(a) The cognizant contract audit office;

(b) Activities prescribed by the cognizant agency; and

(c) The contractor (except that furnishing copies of the contractor’s response is optional).