Top Story

Compliant Subcontract Management 101: An Introduction for New Procurement Professionals in the Federal Space

Jessica Schick • Apr 2019

Download PDF
F02_Schick

As a new buyer or subcontract administrator (hereafter referred to as a “procurement professional”), the onus of staying in federal compliance may seem quite overwhelming.

There are the ever-changing regulations, the sometimes-oppressive workloads,[1] and the now-typical high turnover within departments.[2] This is exacerbated by the fact that many new procurement professionals do not have a background or degree in contracts, procurement, or supply chain management.[3] Thus, the learning curve can be steep.

Therefore, it may be helpful to reframe the position of the procurement professional. After all, success in any profession starts with a focus on self.[4] To thrive in procurement, think of yourself as a “Custodian,” a “Historian,” and a “Student.”

The Custodian: Why Is What You Do Important?

For the Government

On a broad level, you are an agent of the American public; ensuring purchases made with federal funding (i.e., your tax dollars) deliver the best-value product or service to the customer. Best value must be viewed from a broad perspective and is achieved by balancing the many competing interests in the Federal Acquisition System, including maintaining the public’s trust and fulfilling public policy objectives.[5]

To fulfill your role as a Custodian, you should understand the processes of the system[6] and to ensure balance of interests while complying with all public laws and regulations when completing procurements. Compliance with the latter area, at the very least, means attending to the following interests:

  • Competition,
  • Commerciality,
  • Contractor responsibility, and
  • Thresholds.
  • Competition

    As a procurement professional, you should guarantee a source selection process that provides for full and open competition to the maximum practical extent.[7] “Full and open competition,”when used with respect to a contract action, means that all responsible sources are permitted to compete.[8] When procurements are awarded competitively, it is assumed that the government is getting a fair and reasonable price for the products or services, so many of the documentation (e.g., source justifications or more time-consuming price analyses) and public law requirements (e.g., Certificates of Current Cost or Pricing Data) that serve to protect the government’s interests are usually unnecessary. This means less tedious paperwork for you.

  • Commerciality

    As with competition, procurement professionals should also guarantee a source selection process that provides that, to the maximum extent practicable, the prime contractor shall incorporate, and require its subcontractors at all tiers to incorporate, commercial items or nondevelopmental items as components of items to be supplied.[9] This implements the government’s preference for the acquisition of commercial items by establishing acquisition policies more closely resembling those of the commercial marketplace and encouraging the acquisition of commercial items and components.[10] Making commercial purchases also relieves you of some documentation (e.g., fewer flow-downs) and public law requirements (e.g., Certificates of Current Cost or Pricing Data).

  • Contractor Responsibility

    Most Federal Acquisition Regulation (FAR) requirements are centered on responsible contracting. FAR 9.103 states that purchases shall be made from, and contracts shall be awarded to, responsible prospective contractors only. “Responsible” generally means being financially sound; having the capability and capacity to perform to requirements and to schedule; having satisfactory past performance, including integrity and ethics; and being eligible and qualified under applicable laws and regulations.[11] Procurement professionals ensure contractor responsibility through various documentations, including, but not limited to, representations and certifications, vendor ratings, financial health reports (e.g., Dun & Bradstreet), and day of award certifications.

  • Thresholds

    While there are many rules, policies, and procedures codified in the FAR, procurement professionals should be alert to and stay current with the thresholds shown in FIGURE 1. When you see that your procurements or modifications meet or exceed these thresholds, it should prompt you to generate certain documents and to obtain additional certifications from the subcontractor to conform to public laws and regulations.

F02_Schick_Figure1

For the Company

On a more micro-level, procurement professionals are central to a company. Their role is absolutely value-added and strategic.[12] They interface with almost all company departments—accounting, security, contracts, operations, business development, legal, and compliance—to complete the requirements of their positions and, ultimately, to achieve the obligations of their prime contracts. In addition, the work of procurement professionals is essential for a company to pass a Defense Contract Management Agency (DCMA) Contractor Purchasing System Review (CPSR) and obtain purchasing system approval.

The objective of a 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.[13]

ACO approval of your company’s purchasing system after a CPSR can streamline the entire purchasing process for your company, as there are less consent requirements in FAR 52.244-2. In addition, having an approved purchasing system makes it easier for your company to compete and win government contracts.

However, if DCMA finds significant deficiencies[14] in your company’s purchasing system, your company becomes less competitive in the marketplace. The ACO can even determine to withhold payments for current contracts until those deficiencies are cured.

Therefore, in your role as Custodian for both the government and your company, it is essential that your procurement files include all required documentation and comply with public laws.

The Historian: How Do You Do Your Job?

While part of your responsibility is to confirm public laws and regulatory obligations are met, another large part of compliance is to maintain documentation to allow anyone who picks up the procurement file to know exactly when and how the procurement proceeded, who was involved, and why the subcontractor was chosen for award. This is the Historian’s focus, since timing and documentation are vital to how you do your job.

Timing

Chronology is crucial in your procurement file. During a CPSR, DCMA will review the sequence of events of the procurement to ascertain it makes sense and is in accordance with your company’s policies and procedures. For example, the date of requisition approval should be before the date of award and/or period of performance—preferably demonstrating adequate lead time.

F02_Schick_Figure2

Furthermore, DCMA will look at dates to verify that subcontractors completed certifications during appropriate phases of award and in compliance with public laws. For example, representations and certifications must be completed before award. In addition, subcontractors must acknowledge DO- and DX-rated orders by 15 and 10 days, respectively, to comply with Defense Priorities and Allocations System (DPAS) requirements.

Documenting Decisions

Procurement professionals are responsible for documenting decisions made during the procurement process, including, but not limited to, contract type, other than small business award, commercial item determinations, price and cost analysis, source justifications, and

negotiation memos. These items allow for transparency; they demonstrate to reviewers the thoughtfulness and thoroughness with which awards were made.

The Student: How Well Are You Doing Your Job?

The final role you need to perform to thrive in procurement is the Student. This role has two facets:

  • Assessment, and
  • Life-long learning.

Assessment

While a DCMA CPSR is an evaluation of your company’s purchasing system, it is essentially an assessment of procurement professionals’ performance against a rubric—i.e., the 24 criteria listed in the CPSR Guidebook, which is a required textbook. In particular, it is quite useful to review the 30 Major Purchasing Areas listed in the Appendices,[15] as well as shown in FIGURE 2, as they give guidance on what DCMA reviewers are trying to determine with their reviews.

Life-Long Learning

As previously mentioned, many procurement professionals do not have backgrounds or degrees in the field, and regulations are ever-changing. This is why adopting the mindset of a life-long learner is imperative.

Deloitte’s 2017 Global Chief Procurement Officer (CPO) Survey found that 87% of CPOs surveyed agreed that talent is the single greatest factor driving procurement performance.[16] This means if you have the soft skills needed to succeed (like communication), then education in the field can be accomplished while on the job.

As a Student, you should take every advantage to train, whether it is internally for compliance with a company’s policies and procedures and knowledge management or externally with a professional organization or university. Training should receive management support as it covers two of the 24 elements listed in DFARS 252.244-7001(c)(17)–(18), as well as the Kickbacks statute.[17]

If you have even stronger management support at your company, you may want to take advantage of any mentoring opportunities and creating a culture of learning and collaboration. This can help limit any feelings of work overload and turnover as well.[18]

F02_Schick_Sidebar

Conclusion

As a new procurement professional, you have many responsibilities, and it can be difficult to do them all while remaining in compliance with all applicable rules and regulations. The main challenge of this profession is to learn to juggle; to manage and to balance all these roles at once. However, once you become proficient at this, the government, your company, and you will reap the benefits.

Of course, having supportive management that sees you as value-added and empowers you to learn and to make strategic decisions is key, but compliant subcontract management begins with you. Are you up to the challenge? CM

Jessica Schick, CFCM

  • Project Manager, ProcureLinx, LLC
  • Member, NCMA Dulles Corridor Chapter

Endnotes

[1] See, e.g., Onvia, Inc., “40% of Public Sector Buyers Report Being Overworked,” CISION PR Newswire (June 20, 2017), available at https://www.prnewswire.com/news-releases/40-of-public-sector-buyers-report-being-overworked-according-to-onvias-2017-survey-of-government-procurement-professionals-300476313.html.

[2] Per the 2018 Contract Management Salary Survey, only 38% of professionals surveyed are not looking for new job. (2018 Contract Management Salary Survey (Ashburn, VA: NCMA, 2018): 14.)

[3] Charles Dominick, “Deciding on the Education Procurement Candidates Should Have,” My Purchasing Center.com (August 3, 2016), available at http://www.mypurchasingcenter.com/purchasing/blogs/deciding-education-procurement-candidates-should-have/.

[4] Todd Whitaker, What Great Teachers Do Differently (New York: Routledge, 2013): 41.

[5] As per Federal Acquisition Regulation (FAR) 1.102.

[6] For more on basics of the “system,” see Ryan Burke, “A Beginner’s Guide to Subcontract Management,” Contract Management Magazine (January 2017).

[7] As per FAR 52.244-5.

[8] As per FAR 2.101.

[9] As per FAR 52.244-6.

[10] As per FAR 12.000.

[11] As per FAR 9.104-1.

[12] Rana Tassabehji and Andrew Moorhouse, “The Changing Role of Procurement: Developing Professional Effectiveness,” Journal of Purchasing and Supply Management 14 (2008).

[13] As per FAR 44.301.

[14] Per Defense FAR Supplement (DFARS) 252.244-7001(a), a significant deficiency means a shortcoming in the system that materially affects the ability of officials of the Department of Defense to rely upon information produced by the system that is needed for management purposes.

[15] There are 30 appendices in the May 29, 2018, edition of the CPSR Guidebook.

[16] Deloitte MCS Limited, Growth: The Cost and Digital Imperative, The Deloitte Global CPO Survey 2017 (London: Deloitte MCS, 2017): 18, available at https://www2.deloitte.com/mm/en/pages/operations/articles/cpo-survey-2017.html.

[17] 41 USC 87 (formerly known as the Anti-Kickback Act).

[18] See, generally, Timothy G. Hawkins and William A. Muir, “An Exploration of Knowledge-Based Factors Affecting Procurement Compliance,” Journal of Public Procurement, Volume 14, Issue 1 (January 2014).