Tuesday, April 5, 2016

Estimates for Complying with Government Regulations

From time to time, the FAR Councils publish notices asking for public comments regarding an extension to a previously approved information collection requirement. These notices are required under the provisions of the Paperwork Reduction Act.

These are primarily formalities and most of the time, no one from the public bothers to comment. We don't pay much attention to them either except when they pertain to matters that we write about in this blog and even then, we read them only to learn what the Government's estimate for contractor hours required to comply with the collection requirements.

As an example, today the FAR Councils published a notification pertaining to purchasing systems. FAR Part 44 discusses contractor purchasing system reviews (CPSRs), the objective of which is to evaluate the efficiency and effectiveness with which a contractor spends Government funds and complies with Government policy when subcontracting.

A CPSR provides the administrative contracting officer (ACO) a basis for granting, withholding, or withdrawing approval of a contractor's purchasing system. A review is generally required for contractors expected to receive $25 million or more in the upcoming 12 months but that threshold can be raised or lowered depending upon perceived risk to the Government.

A CPSR covers such things as market research accomplished, price competition obtained, pricing policies and techniques, methods of evaluating subcontractor responsibility, implementation of small business goals, compliance with Cost Accounting Standards, management controls systems, and more.

The FAR Councils estimate that the Government will perform 1,580 CPSR reviews per year. That estimate doesn't sound out of line. But here is what's laughable. They estimate that contractors will expend an average of 25 hours preparing for and supporting each CPSR. We have been involved in many CPSR reviews, primarily as Government auditors in support of DCMA (Defense Contract Management Agency) review teams and have never experienced one where the contractor expends only 25 hours. Contractors are more likely to spend ten times that number of hours by the time the review is completed.

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