Glossary / Agencies
Defense Contract Audit AgencyDCAA
The Defense Contract Audit Agency (DCAA) performs contract audits for DoW and provides financial advisory services to contracting officers. DCAA audits cover accounting system adequacy, forward pricing rate proposals, incurred cost submissions, CAS compliance, Truth in Negotiations Act compliance, and termination settlements. DCAA audit reports drive contracting officer determinations and can result in disallowed costs, rate adjustments, or referrals for fraud investigation. DCAA does not have final authority (the contracting officer does), but its findings carry substantial weight.
Why it matters to your pipeline
Any contractor doing cost-type or T&M work on DoW contracts will interact with DCAA regularly. A clean audit history helps when a firm bids more cost-type work. Audit failures can suspend progress payments, trigger rate caps, or disqualify a firm from cost-type work entirely. A firm that expects cost-type work should set up an accounting system that meets DCAA's expectations before it bids.
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Example
A 30-person engineering firm submits its first incurred cost proposal. DCAA audits and identifies $180K of unallowable costs (lobbying, alcohol, first-class travel). The firm reimburses the government, updates its accounting policies, and retains a GovCon CPA to review ICPs going forward.
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