Government contractors need to be DCAA and DCMA compliant to ensure that they are eligible for current and future government contracts. There are key differences between DCAA compliance and DCMA compliance that are important to understand. This review discusses the differences and how they may affect you, as a potential or existing government contractor, and your business.
What Is The DCAA?
DCAA stands for Defense Contract Audit Agency. This is a government agency that is a part of the Defense Department and works on behalf of other government agencies.
Their role is to audit government contracts to ensure compliance with government regulations that are related to the Federal Acquisition Regulation (FAR), Defense Federal Acquisitions Supplement (DFARS), and the Cost Accounting Standards (CAS).
DCAA Compliance
The DCAA conducts audits to ensure that all relevant government regulations and recommendations are followed by government contractors. Any contractor that applies for and accepts government contracts could be chosen for an audit by the DCAA. To be DCAA compliant means that a government contractor follows all guidelines that are established by federal laws.
Who Must Be Compliant?
Contractors that apply for government-issued contracts from the Department of Defense (DOD) and other government entities are required to comply with the guidelines established by the DCAA. Not every government contractor is audited by the DCAA, but all contractors who work on government projects could receive an audit at any time, so it is important to always remain compliant.
DCAA Compliance Requirements
To remain DCAA compliant, government contractors are required to properly document and account for all of their business-related expenditure, hires, equipment needs, and other related financial factors of their organization. There are two primary focuses of DCAA compliant — timekeeping and incurred costs. The DCAA recommends the use of the ICE Model (incurred cost electronically) to adequately report all incurred costs.
Risks Of Noncompliance
If you are chosen for an audit by the DCAA and are determined to not be in compliance, your organization is at risk of not being eligible to apply for future government contracts, specifically contracts that are issued by the Department of Defense (DOD).
What Is The DCMA?
The Defense Contract Management Agency (DCMA) manages all contracts that are issued by the Department of Defense (DOD). The management may include the disbursement of funds and the delivery of materials for government projects, as well as and all other aspects related to the contract between the DOD and government contractors.
DCMA Compliance
Government contractors are required to meet certain expectations and standards to remain DCMA compliant. This may include adhering to a set schedule based on what was laid out in the proposal and using any funds provided by the DCMA in a responsible manner. More notably, accounting tasks are important.
Some primary reasons for failed DCMA compliance is improper bookkeeping, time tracking, and finances. There are 32 specific guidelines that contractors are expected to adhere to remain DCMA compliant.
Who Must Be Compliant?
As is the case with DCAA compliance, any contractor or organization that is awarded government-issued contracts must remain DCMA compliant as well.
DCMA Compliance Requirements
Unlike the DCAA, the DCMA continually monitors a contractor’s performance throughout each project. This means that any issues with your accounting are likely to be detected. The DCMA follows 32 guidelines when determining if a government contractor is in compliance.
Risks Of Noncompliance
Noncompliance with the DCMA guidelines could result in an inability to apply for or secure future contracts you are otherwise qualified for and/or the cancellation of current contracts you were initially awarded.
DCAA vs. DCMA
The DCAA and DCMA are similar but have notable differences that are important to understand. While the penalty for noncompliance is similar with each, the ways in which the DCAA and DCMA interact with government contractors differs.
Similarities Between the Agencies and their Requirements
The DCAA and the DCMA both work on behalf of the Department of Defense (DOD) and other government agencies. While they have separate compliance measures, the penalty for not adhering to the guidelines are generally similar and result in the loss of future government contracts.
Differences Between the Agencies and their Requirements
The primary difference between the DCAA and DCMA is that the DCAA conducts audits to determine if a government contractor is in compliance with accounting and finance requirements, whereas the DCMA oversees and manages each government contract. This means the DCMA is more hands-on and works directly with contractors.