Good morning!  As a government services contractor, we have recently purchased software for a purchasing system.  We understand that all subcontracts should be entered into the system, but I am wondering if we need to enter for audit compliance - items such as rent contracts/Purchase Orders or contracts/Purchase Orders we have with outside firms for support services such as recruiting or marketing.  These obviously impact our rates.  Is it of your opinion that these Purchase Orders be entered into our purchasing system module to be compliant for Government audit?  Thank you!

ElBarz,

Welcome to WIFCON. As you frequent this site and seek information/answers, you will learn the importance of asking a clear question and using the correct terminology. I think I know what you are asking, but it's hard to be sure. When you ask if certain indirect contract vehicles need to be "entered into our purchasing system module to be compliant for Government audit?" are you asking if they are part of the CPSR universe?

If that's your question then I think there are some DCMA CPSR resources you should read. For example, there is a CPSR Guidebook that you can find online. It will answer many of your questions.

However, if you were asking a different question, could you please rephrase it in such a way that I can understand what your concern(s) may be?

 

Hello - and thank you for your response.  I have read the CPSR Guidebook and performed some additional research.  My question is - do items like rental contracts or recruiting services contracts need to be entered into our Deltek Purchasing System module?  I want to make sure we are compliant when we are eventually audited.  

What has your company been doing with such contracts up until now? If Supplier Management actually issues the commitment for such contracts, and there is no other system where they should be entered, and the rest of the company agrees, my opinion is, yes. However, if you do that, you should have some coding associated with all such contracts such that when the system is queried for a data call of purchases in support of a customer contract, they are not included unless they are directly in support of the customer contract required work and not treated as overhead in your system. You should coordinate this project with your Finance function. I have not previously heard of the rental of a building for general employees being entered into the Purchasing Business System records. Nor have I known Supplier Management to have the authority to make such a commitment. 

As Neil Roberts noted (or perhaps implied) this is not a matter of purchasing system compliance. This is a matter of what your company wants to do. That is the answer to your question.

But let me elaborate a bit, please.

In larger firms, there is a facilities function that sources buildings and enters into rental agreements for space; that is a function entirely separate from Purchasing/Procurement/Supplier Management/Supply Chain Management, or whatever your company calls it. In those larger firms, those transactions/agreements would not be considered to fall into the "contracts" umbrella and would likely not be reported in the CPSR universe. I would include in this category such things as utilities and telecommunications, if they are intertwined with the faclities.

Other firms separate indirect purchasing from direct purchasing, under the theory that the needs are entirely different. For example, the quality inspection/acceptance criteria for recruiting or marketing would seem to be entirely different from the criteria related to flight or space hardware. Those transactions and/or agreements are still likely to be considered to be within the overall "contracts" function, but handled by a separate group of folks under separate procedures and processes. IF the CPSR universe encompasses indirect transactions/agreements (and forgive me because it's been a long time since I responded to a CPSR data call so I'm not certain if they are in or out), then such transactions would be reported; but I don't believe the CPSR team would spend much time (if any) reviewing them.

Obviously, as small businesses things are different. People wear many hats and do many things. There is likely to be no clear demarcation between direct, indirect, and other (e.g., facilities) transactions/agreements. On the other hand, it is unlikely that such a business would be subject to a CPSR, given the likely dollar volume. It's firms in the middle--not small but not especially large either--that have to figure out what they want to do and how they want to operate as the compliance requirements scale up with sales growth.

Sorry for the long answer. Bottom-line is that this is a matter of company choice and probably depends on how the "contracts" function is structured from an organizational and authority standpoint.

Hope this helps.

 

Having recently passed an initial CPSR I can confirm that indirect procurements are NOT part of the CPSR universe.  As a small business it is important to track your direct and indirect procurements separately; however that doesn't mean you have to use two different systems.  You can include your indirects in your Deltek system, use a coding convention that differentiates the two so that you can easily generate reports and extract the information you need.

Hope this is helpful.