DCAA Compliance FAQ: Answers to the Questions Government Contractors Ask Most
Straight answers to the DCAA compliance questions government contractors ask most: qualifying for a contract, timekeeping and floor checks, labor distribution, cost pools, and what happens when something goes wrong.
Government contractors researching DCAA compliance tend to run into the same handful of questions, whether they're preparing to win their first cost-type contract or getting ready for an incurred cost audit years in. This FAQ collects straight answers to the questions that come up most, organized by where you are in the process: qualifying for a contract, running timekeeping day to day, distributing labor correctly, structuring cost pools, and handling what happens when something goes wrong.
Qualifying for a Contract (SF-1408)
In many cases, yes. The SF-1408 accounting system review is often required in full before the contract is awarded, not after. Passing it early can be what wins the contract, not a step to handle once you already have it.
No. DCAA doesn't certify or endorse any product. It evaluates the system, meaning the software plus the processes around it, not the brand.
The contract isn't awarded until the deficiencies are corrected. Simple issues can be resolved in days; larger ones take longer, and can cost you the contract if the contracting officer can't wait.
Timekeeping and Floor Checks
No. The auditor arrives at your office, or contacts remote employees, without warning.
No. DCAA requires total time accounting: every hour of the workday, direct and indirect, has to be recorded.
The period has to be formally reopened, the correction goes back through approval, and if the entry was already posted, it gets reversed rather than deleted.
Labor Distribution
By dividing the pay-period salary by the hours actually recorded, never by a flat 40-hour assumption.
At minimum monthly, which is SF-1408 criterion 2g, though most contractors run it every payroll period.
Cost Pools: Overhead and G&A
Overhead supports the execution of the work itself, project supervision, for example. G&A supports running the company as a whole: executives, legal, and similar functions.
To segregate costs that can never be billed to the government, like entertainment, alcohol, or lobbying, so they don't inflate the indirect rates that do get charged.
Deficiencies and Subcontractor Risk
It can mean questioned costs that have to be returned, payment withholds of 5-10% under DFARS 252.242-7006, and downstream effects on future contracts, since DCAA reports stay available to other contracting officers.
Prevention runs roughly 1-2% of what remediation costs. A compliant setup costs a few thousand dollars a year; remediating a deficiency can run past $50,000 to $100,000.
Rarely directly, but compliance requirements on the prime contract flow down to the subcontractor.
