[Federal Register Volume 62, Number 51 (Monday, March 17, 1997)]
[Rules and Regulations]
[Pages 12718-12719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6321]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 44

[FAC 90-46; FAR Case 94-605; Item XII]
RIN 9000-AG75


Federal Acquisition Regulation; Contractors' Purchasing Systems 
Reviews

AGENCIES: Department of Defense (DOD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council have agreed on a final rule amending 
the Federal Acquisition Regulation (FAR) to revise the requirements 
relating to Contractors' Purchasing Systems Reviews (CPSRs). This 
regulatory action was not subject to Office of Management and Budget 
review under Executive Order 12866, dated September 30, 1993. This is 
not a major rule under 5 U.S.C. 804.

EFFECTIVE DATE: May 16, 1997.

FOR FURTHER INFORMATION CONTACT: Ms. Linda Klein at (202) 501-3775 in 
reference to this FAR case. For general information, contact the FAR 
Secretariat, Room 4037, GS Building, Washington, DC 20405, (202) 501-
4755. Please cite FAC 90-46, FAR case 94-605.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule amends FAR section 44.302, to (1) add a requirement 
for the cognizant contract administration agency to determine the need 
for a CPSR based on, but not limited to, the past performance of the 
contractor; and volume, complexity, and dollar value of the 
subcontracting activity, and (2) delete the requirement for a CPSR to 
be performed initially and at least every 3 years thereafter, for 
contractors over a certain sales level. In addition, sections 44.303 
through 44.307 are amended to conform to the revisions at 44.302.
    A proposed rule was published in the Federal Register at 60 FR 
66472, December 21, 1995. Three sources submitted public comments. The 
public comments were considered in the development of the final rule.

[[Page 12719]]

B. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., because the rule applies to 
only those contractors whose sales (excluding sales under sealed bid 
procedures and sales of commercial items) are expected to exceed $25 
million during the subsequent year.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose recordkeeping or information collection 
requirements, or collections of information from offerors, contractors, 
or members of the public which require the approval of the Office of 
Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 44

    Government procurement.

    Dated: March 7, 1997.
Edward C. Loeb
Director, Federal Acquisition Policy Division.

    Therefore, 48 CFR Part 44 is amended as set forth below:

PART 44--SUBCONTRACTING POLICIES AND PROCEDURES

    1. The authority citation for 48 CFR Part 44 continues to read as 
follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

    2. Section 44.302 is revised to read as follows:


44.302  Requirements.

    (a) Determine the need for a CPSR based on, but not limited to, the 
past performance of the contractor, and volume, complexity and dollar 
value of the subcontracting activity. If a contractor's sales to the 
Government (excluding sales under sealed bid procedures and sales of 
commercial items pursuant to part 12) are expected to exceed $25 
million during the next year, perform a review to determine if a CPSR 
is needed. Such 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 such action 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 3 years the cognizant contract 
administration activity will determine whether a purchasing system 
review is necessary. If necessary, the cognizant contract 
administration activity will conduct a purchasing system review.
    3. Section 44.303 is amended by revising the introductory text to 
read as follows:


44.303  Extent of review.

    A CPSR requires an evaluation of the contractor's purchasing 
system. This evaluation shall not include subcontracts awarded by the 
contractor exclusively in support of Government contracts awarded to 
the contractor that used sealed bid procedures or that are for 
commercial items 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--
* * * * *
    4. Section 44.304 is amended by revising paragraph (a) to read as 
follows:


44.304  Surveillance.

    (a) The ACO shall maintain a sufficient level of surveillance to 
ensure that the contractor is effectively managing its purchasing 
program.
* * * * *
    5. Section 44.305-1 is revised to read as follows:


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.
    6. Section 44.305-2 is amended by revising paragraph (a) to read as 
follows:


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.
* * * * *
    7. Sections 44.306 and 44.307 are revised to read as follows:


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).

[FR Doc. 97-6321 Filed 3-14-97; 8:45 am]
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