If your organization has been awarded a government contract, you need to understand two government contract agencies that require your compliance: DCAA (Defense Audit Contract Agency) vs. DCMA (Defense Contract Management Agency).
As of December 2021, the Department of Defense (DoD) reported working with approximately 20,000 contractors within the DOD’s area of responsibility.
With so many government contract organizations spread throughout the world, it’s crucial that the U.S. government develops and regularly updates regulations that keep the DoD and contract organizations aligned in their goals and according to government regulations.
What Is the the Defense Audit Contract Agency (DCAA)?
The Defense Contract Audit Agency (DCAA) is a government agency connected to the DoD, working on behalf of various government agencies.
The DCAA functions to ensure consistent compliance with government regulations such as Defense Federal Acquisitions Supplement (DFARS), the Cost Accounting Standards (CAS) and the Federal Acquisition Regulation (FAR).
What Does the DCAA Audit Cover, Entail and Establish?
The DCAA performs regular audits on government contracted organizations to ensure that each one follows the government’s recommendations and regulations to the letter. Every contractor that applies for and is awarded a government contract understands that it could be selected to undergo a Defense Audit Contract Agency audit at any time.
DCAA compliance means that, per the outcome of the audit, the government contractor follows the federally established guidelines and may proceed with the contract.
Who Needs to Maintain DCAA Compliance?
Every contractor awarded a government contract from the DOD and other government agencies must follow all the federally established laws and guidelines. It is impossible to know if or when a contractor might receive an audit, so it is imperative that contractors commit to continuous compliance.
How to Stay DCAA Compliant
Government contractors must focus on documenting and accounting for various expenditures related to their business, including:
- Employee time management and payroll
- Equipment needs
- Any other financial factors related to the organization’s ongoing operations
The Risks and Penalties of Non-Compliance
If a government contractor is found to be non-compliant in one or more areas during an audit, they risk not being able to apply for future government contracts offered by the DoD.
What Is DCMA?
The Defense Contract Management Agency (DCMA) focuses on a part of the DoD that works directly with government contractors to ensure the government is getting the most value and highest quality from each mutual engagement. Operating under the direction of the Under Secretary of Defense for Acquisition, Technology and Logistics, the DCMA is a relatively new area and focal point.
The agency manages each contract issued by the DoD and oversees matters like the delivery of materials and disbursement of requested funds for government projects.
The DCMA is more proactive and cooperative, working in tandem with government contractors to ensure mutual success, rather than what is more of an accountability or watchdog function of the DCAA (Defense Contract Auditing Agency).
The Compliance Requirements for the DCMA
Government contractors must meet certain criteria and expectations to ensure DCMA compliance, including setting and adhering to a specific schedule agreed to in the proposal. They must also prove that they are compliant with agreed upon bookkeeping, time tracking and finances.
The DoD provides each government contractor with at least 32 specific guidelines to follow.
Similar to the DCAA non-compliance penalties, government contractors may lose the ability to apply for and secure future government contracts. Worse penalties involve the cancellation of the current contract.
The DCMA vs. DCAA: How Different Are They?
The DCMA and DCAA primarily differ in the way that each agency interacts with government contractors and the overarching requirements.
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