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CPSR

A Contractor Purchasing System Review (CPSR) evaluates the function and operations of purchasing. The auditor considers compliance with applicable laws (not limited to FAR), efficiency, effectiveness, and internal controls. Only findings with significant risks to the U.S. Government are reported.

Formal policies and procedures, which reveal the intent of management, often contrast actual practices. Observed practices and source documents (supplier quotes, comparative-website printouts, price analyses, etc.) evidence the documented results of actual practices. Supporting documents for the source justification and the price justification (two separate requirements) comprise a high-risk focus. Justification supporting a sole source supplier does not allow the contractor to "write a blank check" using government funds. Further, the argument that the contract is fixed price is invalid; cost history becomes the basis for future purchases on new proposals and awards. Because even commercial purchases might become the basis of future government cost and pricing data, consistently followed procedures are recommended throughout the purchasing function. Implementation of good procedures and matching practices accumulates the audit trail for the CPSR.

In addition to the contrast between formal and actual operations, plus the adequacy of source and price justifications, internal controls (balanced with reasonable efficiency and effectiveness) represent a vital CPSR consideration. Requisition, approvals, and purchase are segregated among employees and their chain of command. Neither the buyer nor the buyer's supervisor requisitions goods and services purchased by that particular buyer. The cost analysis of a subcontractor's proposal is not approved as an adequate price justification by that cost analyst's supervisor. The technical superiority of goods is supported, not by the buyer but, by a company representative with the technical knowledge to explain why the goods uniquely meet requirements. Segregation of duties minimizes risk of misuse of government funds.