CSP (Contractors Purchasing System Review)

What is CSP (Contractors Purchasing System Review)?

A Contractors Purchasing System Review (CSP) is a comprehensive evaluation conducted by the U.S. Government, typically by the Defense Contract Management Agency (DCMA), to assess the adequacy and efficiency of a government contractor's purchasing system. The primary goal of a CSP is to ensure that the contractor's system complies with applicable laws, regulations, and contract terms, and that subcontracts are awarded and managed in a fair and cost-effective manner.

Definition

A CSP is essentially an audit of a contractor's policies, procedures, and practices related to subcontracting. It examines how a contractor selects, awards, administers, and pays its subcontractors. The legal basis for CSPs is found within the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS). Specifically, FAR Subpart 44.3 and DFARS 244.3 outlines requirements for contractor purchasing systems. A satisfactory CSP is critical for contractors because it allows them to receive government consent to subcontract, which is often a prerequisite for awarding subcontracts under government contracts. Furthermore, a disapproved purchasing system can lead to significant restrictions on a contractor’s ability to perform and ultimately impact profitability.

Key Points

• Compliance Focus: The review focuses on compliance with FAR and DFARS regulations regarding subcontracting, including socio-economic considerations and competition requirements.
• Risk Assessment: DCMA uses a risk-based approach to determine which contractors and purchasing systems to review. Factors include the dollar value of subcontracts, complexity, and past performance.
• Written Policies & Procedures: Contractors must have documented purchasing policies and procedures that address key areas such as source selection, price analysis, and subcontract administration.
• Corrective Action Required: If deficiencies are identified during the CSP, the contractor will be required to develop and implement a Corrective Action Plan (CAP) to address the issues and demonstrate compliance.

Practical Examples

1. Subcontractor Selection Process: A CSP might examine how a contractor identifies potential subcontractors, evaluates their qualifications, and ensures fair competition among them. For example, the review may assess whether the contractor solicited quotes from multiple vendors and documented the basis for its selection decision.
2. Price Analysis & Negotiation: The review will evaluate if a contractor performs adequate price or cost analysis on subcontract proposals and effectively negotiates fair and reasonable prices. For example, the review may include comparing proposed prices to market rates or independent government estimates.
3. Subcontract Administration: A CSP will scrutinize how a contractor manages its subcontracts, including monitoring performance, approving payments, and resolving disputes. For example, the review may assess whether the contractor properly documented any changes to the subcontract scope or price.