DCMA vs. DCAA Compliance: What to Know

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When you’re choosing estimate proposal software or submitting responses to RFPs, in some situations, you may see two terms—DCMA and DCAA.

It’s important to have an understanding of what these are, how they’re different from one another, and how to be compliant.

The following is an overview of what contractors should know.

Defense Contract Management Agency Compliance (DCMA)

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The Defense Contract Management Agency is responsible for executing worldwide Defense Department contracts. A military personnel member leads DCMA, and there are more than 10,000 civilian and military employees.

DCMA manages more than $200 billion in contracts, and they are meant to be an independent, contracted agency that helps ensure compliance on the part of the government and the contractor.

You typically wouldn’t outwardly see much of the work being done by DCMA because while they are involved in most aspects of government contracts, it’s behind the scenes.

Before an organization is awarded a contract, it’s reviewed by the DCMA to ensure the government’s end, the right clauses are included. Then, when you’re awarded a contract, the DCMA approves all of your invoices.

The DCMA will also monitor your progress throughout your contract and make sure everything is going as planned.

The Wide Area Workflow System or WAWF system is managed by DCMA. You enter your invoices into the WAWF system, and that’s how you’re paid. If there’s an issue with an invoice you submit, it’s DCMA that’s responsible for letting you know.

Areas of compliance the DCMA focuses on include changes to pricing and scheduling.

DCMA is mostly focused on industry suppliers, and suppliers are required to adhere to the terms of their Federal or DoD contract.

Defense Contract Audit Agency (DCAA)

DCAA is the government agency that audits DoD contracts. DCAA can also be used in other agencies of the government to help with their audits and provide financial advisory services.

The DCAA audits DoD contracts of all sizes to ensure that the taxpayers are getting value from what they’re paying for.

DCAA compliance is a term that’s often used, and they do audit contractors in many instances.

Instead, if you follow all the guidance they provide, then you should be federally compliant and prepared for audits.

For example, if you’re DCAA compliant, then that means your company has well-documented and standardized policies and procedures that are in-line with DCAA requirements and are strictly followed.

This might, just as an example, mean that you have an accounting system that can track all costs separately from one another.

For government contracts, the biggest concern within the realm of accounting is cost.

DCAA is responsible for scrutinizing all costs.

There are different types of audits that DCAA might do. For example, they could do pre-award audits, compensation and benefits audits, or labor charging.

There can also be requests for audits on very specific parts of a contract.

There’s something else to be aware of that the DCAA will perform called a pre-award survey. If you’re potentially going to win a government contract, the DCAA will do the pre-award survey of your business.

What they’re looking for is that you can perform the duties outlined by the contract.

It’s not an audit because it’s not as in-depth, but it is part of getting a contract.

The DCAA during a pre-award survey, will look to make sure your company has the financial ability to do the tasks that are expected. They’ll look at your SEC filings, payroll tax returns, loan agreements, cash flow forecasts, and other relevant financial documents.

The DCAA will also want to make sure you have an accounting system that can be trusted to track costs.

There’s something called the DCAA Contractor’s Audit Manual that can be used to see the specifics of the audit process.

Finally, two other things to be aware of include the terms FAR and CAS.

FAR stands for Federal Acquisition Regulation, which is the go-to guide to government procurement. It outlines rules for purchasing services and goods.

Then, CAS is Cost Accounting Standards, which was introduced as a way to implement consistency in cost accounting practices. This lets you know how you can charge to contracts and how you’re required to maintain your account systems.

The DCAA Information for Contractors guide can help you learn more about the audit process and other things that could be relevant to you, particularly as a small government contractor.

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