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.
When a small business submits a bid to provide goods or services to the federal government, the first two things the government confirms are:
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.
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.
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:
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.
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:
The survey also includes checklist items with questions focused on determining if the contractor will be able to provide:
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.
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.
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