For small businesses that contract with the federal government, navigating the complex landscape of compliance and regulations can be a daunting task. But fully understanding and following these regulations and processes is critical for winning and successfully executing government contracts. For many contractors, this starts with the DCAA Preaward Survey process. The government uses this process to determine a contractor’s ability to meet the requirements of a government contract, so understanding what it entails is crucial for contractors who want to win and keep government contracts.
What Is the DCAA Preaward Survey?
When a small business submits a bid to provide goods or services to the federal government, the first two things the government confirms are:
- Whether the submitted bid meets all of the specifications and requirements
- If the small business submitting the bid has the systems in place that will allow them to meet those requirements and fulfill the terms of the contract
How does the government assess whether a business can meet the requirements of the contract it is bidding on? Before awarding any cost-reimbursable contract, the government starts with requiring the completion of Standard Form 1408 (SF 1408), Preaward Survey of Prospective Contractor (Accounting System).
This process is conducted by the Defense Contract Audit Agency (DCAA). The role of the DCAA is to ensure that government contractors deliver high-quality goods and services to the government at a fair price in order to protect the government’s interests and to ensure that taxpayer funds are utilized responsibly.
This process begins with the DCAA Preaward Survey. The survey is a way of assessing a contractor’s accounting, financial, and business systems to determine if the contractor has the necessary systems, processes, and internal controls in place to allow them to fulfill the accounting requirements of the contract.
Understanding the Survey Process
The DCAA Preaward Survey is a concise but comprehensive way of evaluating a potential government contractor’s accounting practices and ensuring that they are designed to meet SF 1408 criteria. You will be notified if you are required to complete SF 1408, a 22-question survey form. After completing and submitting the form, the information provided is then audited by the DCAA to ensure that it is accurate and, ultimately, to determine if the company has adequate accounting procedures in place to meet the contract requirements.
The questions on SF 1408 cover the accounting practices that must be in place for government contractors.
Accounting Practices for Government Contracts
One focus of the DCAA Preaward Survey process is to determine that potential government contractors have an accounting system that uses accounting practices in accordance with:
- Standards created by the Cost Accounting Standards Board where applicable, or
- Generally Accepted Accounting Principles (GAAP)
These practices are the guidelines for determining when revenue and expenses should be recorded. Under GAAP guidelines, for example, revenue is recognized when work is performed, not when payment is received. Conversely, expenses are recorded when services are provided, not when payments are made to vendors.
Compliant Accounting System Requirements
The preaward survey also includes checklist items that cover the requirements of a DCAA-compliant accounting system. A DCAA-compliant accounting system must be able to:
- Capture and accumulate costs in the general ledger (and segregate between direct and indirect)
- Document how labor is coded to a direct or indirect category
- Segregate costs that are expressly unallowable (and not recoverable under indirect rates) per Federal Acquisition Regulation (FAR) Part 31
- Demonstrate that the company’s accounting system has a consistent and logical method for allocating costs
- Produce timely, accurate, and meaningful reports
Identifying Costs
The survey also includes checklist items with questions focused on determining if the contractor will be able to provide:
- Detailed descriptions of all items being offered
- Detailed pricing (including price per unit, extended price, and total price for the contract)
- Detailed delivery and acceptance terms (both when and where items will be delivered and conditions under which items are inspected and accepted)
- Payment terms (including how and when payments will be made)
Federal Acquisition Regulation (FAR) Clauses
The survey concludes with questions about adherence to specific Federal Acquisition Regulation (FAR) clauses, communication with contracting officers, and the company’s ability to provide reliable data for follow-on contracts.
Tips for a Successful DCAA Preaward Survey
- Robust Accounting Systems: Implement and maintain a reliable accounting system that adheres to the requirements of the Federal Acquisition Regulations (FAR) and the Cost Accounting Standards (CAS). Ensure that your system can generate accurate and detailed cost data and has adequate internal controls in place.
- Documentation and Record-Keeping: Maintain comprehensive and well-organized documentation to support your costs, pricing, labor records, and procurement practices. Ensure that your records are easily accessible and can withstand audits.
- Internal Controls: Implement robust internal controls to safeguard assets, prevent fraud, and ensure compliance. Regularly review and update these controls to address any identified weaknesses or gaps.
- Training and Education: Invest in training and educating your staff on government contract regulations, cost accounting standards, and compliance requirements.
Whether you’re looking to overhaul your accounting system, find DCAA compliance training, or need help preparing to pass an audit, GovCon is here to help. Our team of experts has 20 years of experience helping hundreds of clients stay compliant, pass audits, and win contracts. We’re available to answer any questions you may have. Get in touch anytime.