Accounting System Preapproval for Government Contracts: What is a Pre-Award Survey?

As government contractors prepare to bid on a proposal for a governmental contract that requires an adequate accounting system, a pre-approval known as a “pre-award survey” (Form “SF1408”) assesses the adequacy of a government contractor’s accounting system prior to the award of a cost-reimbursable contract.

A pre-award survey is necessary for contractors with cost-reimbursement contracts, or contractors receiving progress payments. An adequate accounting system is necessary to document that their accounting system is designed to meet specific contract criteria. These surveys are often required as part of a Request for Proposal (“RFP”), therefore contractors who have already performed these surveys gain a competitive edge due to their readiness.

While the Defense Contract Audit Agency (“DCAA”) may perform these surveys, a government contractor may instead choose to engage a public accounting firm to expedite the process and ensure their readiness for future contracts. The accounting firm will examine whether accounting methods are appropriate, policies and procedures are in place, and assess whether cost allocations and allowability is followed in accordance with Title 48 CFR Federal Acquisition Regulations (“FAR”) [48CRF 53.209-1(f)]. The Company’s accounting system must be in compliance with GAAP and allow for appropriate segregations of costs. Once the survey procedures are complete, the accounting firm issues a report to convey whether the contractor’s system is acceptable for use on the contract. This report is subsequently included in the contractor’s response to the RFP.

When government contractors prepare to bid on a proposal, time may be of the essence in order to meet the deadline established by the government agency. One major benefit of engaging a public accounting firm to perform a pre-award survey is that a contractor is ready to bid with the accountant’s report, thereby avoiding any hurdles or time delays which may arise when attempting to schedule an audit through the DCAA. Withum’s Government Contractor Services team is well-versed in performing these surveys and uses the SF 1408 checklist to streamline the process. As a result, these engagements are completed efficiently and in a timely manner, allowing the contractor to be prepared to go out for bid.

Government contractors should be proactive in ensuring that their systems are adequate to avoid missing opportunities for future proposals.

Author: Veronica Jhon, CPA, Senior Manager | [email protected]