What is the Pre-Award Accounting System Survey Known as SF1408?

If you are new to the Government Contracting (GovCon) market, one acronym you must know is DCAA, which stands for the Defense Contract Audit Agency. DCAA’s function is to provide audit and financial advisory services to the Department of Defense (DoD) and other federal entities responsible for acquisition and contract administration. DCAA audits GovCons in an independent and professional manner to help determine if contract costs are allowable, allocable, and reasonable. If you would like more information, visit the DCAA website, dcaa.mil, to help you more thoroughly prepare for impending audits.

DCAA does not just do audits, they also provide helpful resources for contractors to understand the various audits they may undergo and how to prepare for them! DCAA Manual No. 7641.90 provides an introduction to DCAA and explains several audits, including price proposals, incurred cost proposals, Pre-Award Survey, and more. This document is a must-read for anyone new to government contracting. Enclosure 2 of the document focuses on the Pre-Award Survey.

With all that said, let’s focus on the topic of this blog; the Pre-Award Accounting System Survey (SF1408). The Accounting System Survey is considered “pre-award,” and is necessary for the award of any Cost-Type contract.

The Pre-Award Survey is not an audit. It is an evaluation typically made by your contract administration office of your ability to perform a proposed contract. DCAA may be requested to provide information regarding the adequacy of your accounting system to accumulate the type of cost information required by the contract. Before the contracting officer (CO) requests a DCAA audit of your accounting system, the CO will ask you to complete the “Pre-Award Survey of Prospective Accounting System Checklist.” The checklist provides documentation to the auditor on how your accounting system meets the criteria in the SF 1408. The CO will give the checklist to DCAA when they request an audit of your accounting system.

SF1408 is an examination before contract award that determines the acceptability of your accounting system for accumulating costs for your prospective government contract. The audit scope is limited to obtaining an understanding of the design of the prospective accounting system. This is to appropriately complete the SF1408 “Pre-Award Survey of Prospective Contractor Accounting System,” and procedures essential to reach an informed opinion on whether the design of the prospective accounting system is acceptable for accumulating costs and can generate the specific cost information that required to execute a government contract.

Organizations that are looking to get their first government contract may not want or need to install a new, more detailed accounting system. If the potential government contractor anticipates a contract award, it must have developed and designed a system that is operable, though not necessarily in use. In this case, you need to be ready to demonstrate the new system to the auditor and implement the system prior to incurring any costs on the government contract.

Sometimes the auditor may not think the system is acceptable. If this happens, you and your CO will receive a notification that will typically give suggestions on needed corrections. Once you have incorporated the corrective actions, a follow up audit will be completed and hopefully the CO and DCAA will be satisfied.

Once you have won the contract, you may be subject to an accounting system audit. The basic objective of this audit is to ensure your accounting system is adequate for accumulating costs and passing those costs on through invoices presented to the government. The CO requests this audit when there is follow-up recommended from the Pre-Award Survey or if no such survey was done.

This Pre-Award Survey, known as Standard Form (SF) 1408 asks questions about your accounting system. Below are some of the inquiries of the form:

1. Segregation of direct and indirect costs
2. Identification and accumulation of direct costs by contract
3. Consistent allocation method for indirect costs to intermediate and final cost objectives
4. Accumulation of cost under general ledger control
5. A time keeping system that identifies employees’ labor by intermediate or final cost objectives
6. A labor distribution system that charges direct and indirect labor to the final cost objectives
7. Interim determination of costs charged to a contract through routine posting of books of account
8. Exclusion from costs charged to the government contracts of amounts that are not allowable
9. Identification of costs by contract line item and units
10. Segregation of preproduction costs from production costs

FAR 31.202 defines Direct Cost

FAR 31.203 defines Indirect Cost

For an acceptable system, all items above must be checked as Yes or Not Applicable. By utilizing Unanet, you can be confident that you will meet FAR 53.209-I(f) standards.

This overall process can be tricky for new government contractors, and it is highly suggested that you have the right processes and tools in place to assure success. A Unanet partnership means that you have an entire network of GovCon industry experts assisting you at every step of the way. Reach out to our team to start a conversation and ensure the success of your future projects!

For more information, download the SF1408 Overview.