Legal Definitions - DCAA

DCAA stands for the Defense Contract Audit Agency.

The DCAA is an independent agency within the U.S. Department of Defense. Its primary mission is to perform audits of contracts and contractors for the Department of Defense and other federal agencies. The DCAA's role is to ensure that government contractors are charging fair and reasonable prices, complying with contract terms, and adhering to federal acquisition regulations. They review everything from a contractor's proposed costs and accounting systems to the actual costs incurred during a project, ultimately safeguarding taxpayer dollars.

• Example 1: Pre-Award Audit of Proposed Costs

  Imagine a technology firm, "InnovateTech," is bidding on a multi-million dollar contract to develop advanced communication systems for the U.S. Navy. Before the Navy can award the contract, the DCAA might conduct a pre-award audit. This involves reviewing InnovateTech's proposed costs, pricing data, and even their accounting system to ensure that the prices are fair, reasonable, and comply with federal acquisition regulations. This audit helps the government make an informed decision and prevents overpaying.

• Example 2: Post-Award Review of Incurred Costs

  "AeroParts Inc." has a long-term contract to supply specialized components for military aircraft. Annually, AeroParts submits an "incurred cost submission" detailing all the actual expenses they've accumulated for the contract. DCAA auditors will then meticulously review these submissions, examining invoices, payroll records, and other financial documents. Their goal is to verify that the costs claimed are allowable, allocable, and reasonable according to the contract terms and government regulations, ensuring the government only pays for legitimate expenses.

• Example 3: Audit of a Contractor's Accounting System

  A large defense contractor, "Global Defense Solutions," has numerous ongoing contracts with the Department of Defense. The DCAA might perform a comprehensive audit of Global Defense Solutions' entire accounting and estimating systems. This type of audit assesses whether the company's internal controls and processes are robust enough to accurately track costs, bill the government correctly, and comply with all relevant federal accounting standards. A favorable DCAA system audit can streamline future contract negotiations and billing processes.