FAR 44.302—Requirements.
Plain-English Summary
FAR 44.302 explains when the Administrative Contracting Officer (ACO) must decide whether a contractor needs a Contractor Purchasing System Review (CPSR), and how often that decision must be revisited. It covers the factors the ACO must consider—especially the contractor’s past performance and the volume, complexity, and dollar value of subcontracts—and it establishes a sales-based screening threshold for making a CPSR review determination. The section also defines what counts as sales for this purpose, including prime contracts, subcontracts under Government prime contracts, and modifications, while excluding competitively awarded firm-fixed-price contracts, competitively awarded fixed-price contracts with economic price adjustment, and sales of commercial supplies and commercial services under FAR part 12. It further states that a CPSR is generally not conducted for a single specific contract, and it allows the head of the agency responsible for contract administration to adjust the $25 million review level up or down when doing so is in the Government’s best interest. Finally, it requires the ACO to reassess the need for a purchasing system review at least every three years, and if a review is needed, the cognizant contract administration office conducts it. In practice, this section is the trigger mechanism for Government oversight of a contractor’s purchasing system and is important because it can lead to deeper scrutiny of subcontracting practices, internal controls, and procurement compliance.
Key Rules
ACO must assess CPSR need
The ACO is responsible for determining whether a CPSR is needed. That decision is based on, but not limited to, the contractor’s past performance and the volume, complexity, and dollar value of its subcontracts.
$25 million review threshold
If a contractor’s sales to the Government are expected to exceed $25 million in the next 12 months, the ACO must perform a review to decide whether a CPSR is needed. This is a screening threshold, not an automatic CPSR trigger.
Sales definition for threshold
For this purpose, sales include prime contracts, subcontracts under Government prime contracts, and modifications. The section specifically excludes competitively awarded firm-fixed-price contracts, competitively awarded fixed-price contracts with economic price adjustment, and sales of commercial supplies and commercial services under FAR part 12.
CPSR is not contract-specific
A CPSR is generally not performed for a single contract. The review is aimed at the contractor’s purchasing system as a whole, not at isolated contract performance.
Agency head may adjust threshold
The head of the agency responsible for contract administration may raise or lower the $25 million review level if doing so is in the Government’s best interest. This gives agencies flexibility to tailor oversight to risk and mission needs.
Three-year reassessment
After the initial determination, the ACO must determine at least every three years whether a purchasing system review is necessary. If a review is needed, the cognizant contract administration office conducts it.
Responsibilities
Administrative Contracting Officer (ACO)
Determine whether a CPSR is needed based on contractor performance and subcontracting activity; perform the required review when expected Government sales exceed the threshold; and reassess the need for a purchasing system review at least every three years.
Cognizant Contract Administration Office
Conduct the purchasing system review when the ACO determines that a review is necessary.
Head of the Agency Responsible for Contract Administration
May raise or lower the $25 million review level when it is in the Government’s best interest.
Contractor
Maintain purchasing practices and records that support evaluation of its subcontracting system, especially if its Government sales and subcontract activity may place it within CPSR review scope.
Practical Implications
Contractors approaching the threshold should expect increased scrutiny of their purchasing policies, approval controls, competition practices, and subcontract file documentation.
The $25 million figure is only a review trigger; it does not automatically mean a CPSR will occur, so contractors should not assume review is guaranteed or avoidable based on sales alone.
Because the rule excludes certain contract types from the sales calculation, contractors must track sales carefully and distinguish between included and excluded revenue categories.
The three-year reassessment requirement means a contractor can move into or out of review consideration over time, so both agencies and contractors should monitor changes in sales volume and subcontracting complexity.
A common pitfall is treating the CPSR as contract-specific; in reality, the Government is evaluating the contractor’s overall purchasing system, so weaknesses in one area can affect the entire system review outcome.
Official Regulatory Text
(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 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 supplies and commercial services 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.