From: The PERT
To: The Senior Procurement Executives
Thru: The Contractor Supply Chain Council
White Paper to revisit the Procurement Evaluation Re-engineering Team (PERT) 3-year review cycle
References: 1) Policy Flash 2012-8: Consent to Subcontracts under Management and Operating (M&O) Contracts (Appendix B)
2) DOE Acquisition Guide: 70.7 Chpt10 Subcontract Management (Appendix C)
3) DOE Acquisition Guide: Chapter 1.3 Balanced Scorecard Assessment (Appendix D)
4) Acquisition Letter 2005-3: Independent Peer Review Program for Contractors' Purchasing Systems (Cancelled in 2006 – Incorporated into the Acquisition Guide Chpt 1.2) (Appendix E)
5) Balanced Scorecard Program (Rev 2004) (Appendix F)
6) FAR 44.3: Contractor Purchasing System Review (Appendix G)
7) DEAR 970.5244-1: Contractor Purchasing System (Appendix H)
Current DOE policy requires the review of each Site Facility Contractor’s purchasing systems on a three year basis by an independent review team. To meet the expectations of the policy, DOE HQ and Field elements, in collaboration with the Contractor procurement community, established the Procurement Evaluation Re-engineering Team (PERT). While the PERT Charter charges the PERT with several objectives, it has become more widely known and respected for carrying out the independent procurement system review function called for by DOE policy. In fact, this particular function is now commonly referred across the complex as PERT Reviews. The review teams are staffed by a cross section of Contractor and Federal procurement experts from DOE and NNSA. The typical PERT review consists of a one-week onsite visit by the PERT team. Onsite reviews are comprised of file reviews, interviews and policy/practice examination. They also require weeks of preparation and post site visit actions by the review team members and the Sites under review. Depending on the complexity of the contractor’s system to be reviewed, the teams require staffing of 5 to 8 reviewers. To maintain the three-year cycle, approximately 9 to 13 reviews are scheduled annually (see attached FY 2012 Schedule Appendix A).
PERT reviews were successfully initiated in (FY 200#?). Teams are now forming to staff the (add#) reviews scheduled for FY 2013. Over the 10 year period since PERT Reviews were established, many of the DOE/NNSA contractor’s procurement systems have seen their systems evaluated as many as three times. The most recent review results indicate that there is extensive communication and adoption of best practices across the contractor community. No reviews, over the past four years have found deficiencies that would require corrective actions or concerns sufficient enough to warrant reduced authorities and delegations. Most Sites have instituted internal mock-PERTs (self-assessments) in preparation for the actual PERT Reviews. Lastly, the complex-wide monthly PERT phone calls continue to provide an extraordinarily forum for the exchange of ideas for the practitioners.
In view of the above it appears that the PERT review process has not only met the expectations of the DOE policy, but exceeds it. As we are seeing in other areas of the Department’s operations, there is an active initiative to reassess policies, Orders and practices for currency, relevance, cost effectiveness and risk. The DOE Acquisition Guide requirement for independent procurement reviews remains a reasonable requirement that aids in the Department’s need to ensure and demonstrate solid and compliant procurement systems. However, the requirement for a three-year assessment cycle[1] appears to no longer be reasonable, efficient nor effective. Even the Federal Acquisition Regulation (FAR) does not require it. In fact, the FAR only requires the Contracting Officer to make a determination every three years whether one is warranted.
Recommendation: In view of the well-established contractor assurance processes put in place across the DOE/NNSA complex, the good results of the past four years of PERT Reviews, the credibility the PERT has established throughout the procurement community, the need for the Department to ensure cost effectiveness, it would seem reasonable to revise the Independent Contractor System Review cycle requirement to either “five(5)-year” or “once during the term of the Contract” PERT reviews. Because the current 3-year review requirement is codified in a Guide, and is not regulatory, the Senior Procurement Executives may administratively change the requirement.
The supporting documents that serve as Agency guidance for PERT Reviews are provided as appendices.
Senior Procurement Executive Approval is requested:
Appendix A
(FY 2012 PERT Review Schedule)
Appendix B
Policy Flash 2012-8: Consent to Subcontracts under Management and Operating (M&O) Contracts
What is the document entitled “Independent Peer Review Program for Contractors’ Purchasing Systems”?
Both AL 2005-03 and the Balanced Scorecard program description mentioned above refer to a document entitled “Independent Peer Review Program for Contractors’ Purchasing Systems.” This document describes the procedures for conduct of a compliance review of contractor purchasing systems for those contractors participating in the Balanced Scorecard program. You may access this document on our internet homepage previously mentioned.
The Balanced Scorecard program requires a compliance review of Federal procurement and contractor purchasing offices at least once every three years. For contractor purchasing offices, the review must be conducted following the procedures contained in the Independent Peer Review Program for Contractors’ Purchasing System. This program was established by the Procurement Evaluation and Reeingineering Team (PERT) and implemented by the Procurement Executive. It represents a partnering of Federal and contractor personnel in evaluating the efficiency and effectiveness of contractor purchasing systems as defined in the prime contract and in applicable statutes and regulations, and as implemented by the contractor’s policies and procedures. The program provides for the establishment of a peer review team that will conduct the compliance review of the contractor’s purchasing system utilizing standardized review criteria.
Appendix C
DOE Acquisition Guide: 70.7 Chpt10 Subcontract Management
(Revised October 19, 2011)
Is the “Independent Peer Review Program for Contractors’ Purchasing Systems” mandatory guidance?
Yes! This program is mandatory for contractors participating in the Balanced Scorecard program. However, since the CO is ultimately responsible for contractor purchasing system review and approval, the CO may determine that a particular peer review needs to be supplemented in some fashion, or replaced by another approach (e.g., a formal CPSR done in accordance with FAR 44.3, etc.). In this event, the CO will need to get concurrence of the Procurement Executive prior to conduct of the compliance review.
Appendix D
DOE Acquisition Guide: Chapter 1.3 Balanced Scorecard Assessment
Overview
This section provides guidance and instruction to Departmental contracting personnel regarding the implementation and administration of the Balanced Scorecard procurement performance assessment programs used by the Department’s federal procurement offices and major site and facility management contractors.
The Balanced Scorecard is the most acceptable alternative to the Contractor Purchasing System Reviews. Contracting Officers, as part of their overall responsibility for oversight of the performance of major site and facility management contractors, including their purchasing activities, are to encourage contractors to implement the Balanced Scorecard methodology described herein.
Appendix E
Acquisition Letter 2005-3: Independent Peer Review Program for Contractors' Purchasing Systems
(Cancelled in 2006 – Incorporated into the Acquisition Guide Chpt 1.3)
What is the Guidance contained in this AL?
The Independent Peer Review Program for Contractors’ Purchasing Systems will apply to all Management and Operating (M&O) Contracts and Major Site and Facility Contracts. The use of the PERT for conducting peer reviews of contractors’ purchasing systems is required unless the contracting officer submits an alternative approach to the DOE or NNSA Senior Procurement Executive for concurrence. Contracting Officers must ensure that contractors comport with this new approach.
The following documents describing the approach for conducting these peer reviews may be found at http://professionals.pr.doe.gov, under Performance Management or by using the following hotlink: Independent Peer Review Program .
(1) Independent Peer Review Program for Contractors’ Purchasing Systems,
(2) Contractor Purchasing System Assurance Criteria,
(3) Final Report Format, and
(4) Contractor Purchasing System Approval Dates.
The new approach provides for the partnering of federal and contractor personnel in conducting peer reviews for contractors’ purchasing systems. This introduces a benefit to the participants of gaining valuable benchmarking information on ways to improve processes as well as acquiring valuable experience in the peer review process.
Appendix F
Balanced Scorecard Program (Rev 2004)
Appendix G
FAR 44.3: Contractor Purchasing System Review
Subpart 44.3 -- Contractors Purchasing Systems Reviews
44.301 -- Objective.
The objective of a contractor purchasing system review (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.
44.302 -- Requirements.
(a) The ACO shall determine the need for a CPSR based on, but not limited to, the past performance of the contractor, and the volume, complexity and dollar value of the subcontracts. If a contractor’s sales to the Government (excluding competitively awarded firm-fixed-price and competitively awarded fixed-price with economic price adjustment contracts and sales of commercial items pursuant to Part 12) are expected to exceed $25 million during the next 12 months, perform a review to determine if a CPSR is needed. 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 it 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 three years the ACO shall determine whether a purchasing system review is necessary. If necessary, the cognizant contract administration office will conduct a purchasing system review.
44.303 -- Extent of Review.
A CPSR requires an evaluation of the contractor’s purchasing system. Unless segregation of subcontracts is impracticable, this evaluation shall not include subcontracts awarded by the contractor exclusively in support of Government contracts that are competitively awarded firm-fixed-price, competitively awarded fixed-price with economic price adjustment, or awarded 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 …………
Appendix H
DEAR 970.5244-1: Contractor Purchasing System
As prescribed in 970.4403 insert the following clause:
CONTRACTOR PURCHASING SYSTEM (AUG 2009)
(a) General. The Contractor shall develop, implement, and maintain formal policies, practices, and procedures to be used in the award of subcontracts consistent with this clause and 48 CFR subpart 970.44. The Contractor's purchasing system and methods shall be fully documented, consistently applied, and acceptable to the Department of Energy (DOE) in accordance with 48 CFR 970.4401-1. The Contractor shall maintain file documentation which is appropriate to the value of the purchase and is adequate to establish the propriety of the transaction and the price paid. The Contractor's purchasing performance will be evaluated against such performance criteria and measures as may be set forth elsewhere in this contract. DOE reserves the right at any time to require that the Contractor submit for approval any or all purchases under this contract. The Contractor shall not purchase any item or service, the purchase of which is expressly prohibited by the written direction of DOE, and shall use such special and directed sources as may be expressly required by the DOE Contracting Officer. DOE will conduct periodic appraisals of the Contractor's management of all facets of the purchasing function, including the Contractor's compliance with its approved system and methods. Such appraisals will be performed through the conduct of Contractor Purchasing System Reviews in accordance with 48 CFR subpart 44.3, or, when approved by the Contracting Officer, through the Contractor's participation in the conduct of the Balanced Scorecard performance measurement and performance management system. The Contractor's approved purchasing system and methods shall include the requirements set forth in paragraphs (b) through (y) of this clause.
[1] DOE Acquisition Guide 70.7 Chpt 10 (pg 10-4): States “The Balanced Scorecard program requires a compliance review of Federal procurement and contractor purchasing offices at least once every three years.”