Guide · Pre-Award or Post-Award
Pre-award tests the design. Post-award tests the record.
Both reviews look at the same accounting system. A pre-award survey asks whether it is designed to capture contract cost before you win a cost-type award. A post-award review asks whether it has actually been doing that, using your real timesheets, invoices and rates.
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The short answer
A pre-award survey tests whether your accounting system is designed to work. A post-award review tests whether it has been working. Same system, same kind of criteria, very different evidence.
The pre-award survey is recorded on Standard Form 1408, the Pre-Award Survey of Prospective Contractor (Accounting System). The auditor asks whether your system can segregate direct and indirect costs, accumulate cost by contract, track labor, determine cost at least monthly and keep unallowable costs out. The last item on the form asks whether the system is in full operation and, if not, which parts are running, set up, planned or nonexistent. That is why a new company with no government revenue can pass.
The post-award review works from DFARS 252.242-7006, Accounting System Administration (renumbered 252.242-7999 under DoD Class Deviation 2026-O0050, with the same wording). The clause says you “shall establish and maintain an acceptable accounting system” and lists 18 criteria. Once you are billing actual cost, the question is whether you maintained it: labor charged to the right jobs and tied to payroll, billings supported by the books, indirect rates computed and applied, unallowables excluded, and costs determined every month.
So the choice for most small contractors is simple. About to bid your first cost-type contract: prepare for the pre-award survey. Already performing cost-type or T&M work, facing an incurred cost submission, or getting questions from a prime: prepare for a post-award review.
Side by side
Pre-award survey vs post-award review
The criteria overlap a lot. What changes is the evidence: a design you can walk through, or a record you have to produce.
| Pre-award survey (SF 1408) | Post-award accounting system review | |
|---|---|---|
| Question asked | Is the system designed to capture contract cost correctly? | Has the system actually operated that way, month after month? |
| When | Before award, usually after you propose and look likely to win. | After award, once you are performing and billing. |
| Who starts it | The contracting officer, while deciding whether you are responsible for the award. The contract administration office may run it. | The cognizant contracting officer, who decides whether your system is acceptable after consulting the auditor. |
| Standard | The checklist in Section II of the SF 1408. | The 18 criteria in paragraph (c) of DFARS 252.242-7006, now 252.242-7999. |
| Operating history needed | No. The form asks which parts are running, set up, planned or nonexistent. | Yes. The review is about what the system has been doing. |
| Typical evidence | Chart of accounts, written procedures, sample timesheets, a trial balance, and a walkthrough of how a cost would flow, with mock transactions if you are new. | Real timesheets and payroll registers, labor distribution, job cost reconciled to the general ledger, rate calculations, invoices, adjusting entries and signs of management review. |
| Possible results | Acceptable; acceptable with a recommended follow-on review after award; or not acceptable, with a narrative of the deficiencies. | System approved; or material weaknesses, a written response, a final determination, and possibly disapproval. |
| What is at stake | The cost-type award itself. | System approval, deficiencies noted in reviews of your proposals, and on CAS-covered contracts, payment withholding. |
Sources: Standard Form 1408 (Rev. 1/2014); DFARS 242.7502, 242.7503, 252.242-7005 and 252.242-7006 as renumbered under DoD Class Deviation 2026-O0050; FAR 9.104-1, 16.301-3 and 42.302 in the FAR overhaul text. The evidence lists describe what auditors typically ask for, not a complete or official list.
Pre-award
What a pre-award survey tests
It tests design. The auditor checks whether the system you run, or have set up and are about to switch on, would capture the cost of the prospective contract correctly. Nobody expects years of clean government records from a company that has never had a cost-type contract.
Section II of the SF 1408 asks whether the accounting system provides for:
- Accounting in accord with generally accepted accounting principles
- Direct costs segregated from indirect costs, and accumulated by contract
- A logical and consistent method for allocating indirect costs
- Costs accumulated under general ledger control
- Timekeeping and labor distribution by cost objective
- At least monthly determination of contract costs through routine posting
- Exclusion of costs that are unallowable under FAR Part 31
- Costs by line item and unit if the contract requires it, and preproduction costs kept apart from production
- Data for the limitation of cost and limitation on payments clauses and for progress payment requests
- Reliable data for pricing follow-on work, and a system that is in full operation
Who triggers it
The government, never the contractor. A contracting officer has to find you responsible before award, and one standard is having the necessary “accounting and operational controls” (FAR 9.104-1(e)). For cost-type work the bar is specific: a cost-reimbursement contract may be used only when your accounting system “can adequately segregate, accumulate and allocate costs” to it (FAR 16.301-3(a)(3)). Preaward surveys are also a listed contract administration function (FAR 42.302(a)(32)), so the request can come through that office.
What failing looks like
The SF 1408 comes back “no” in Section I, with a narrative of the deficiencies. The contracting officer can find you nonresponsible for the award. If you are a small business, that finding goes to the SBA, which decides whether to issue a Certificate of Competency (FAR 9.104-3(d)(1)). The usual causes are structural: no job cost ledger, no project-level timekeeping, no way to compute a rate from the books, or books posted quarterly.
There is also a middle result. The form lets the auditor answer “yes, with a recommendation that a follow on accounting system review be performed after contract award.” That is the bridge to the next section.
If this is your situation, start with the SF 1408 readiness self-check (11 questions, about 3 minutes), then read our DCAA pre-award audit checklist for what the auditor asks to see on each item.
Post-award
What a post-award review tests
It tests operation. On DoD contracts, DFARS 242.7503 puts the accounting system clause in cost-reimbursement, incentive, time-and-materials and labor-hour contracts, and in contracts with progress payments based on cost. Once it is in your contract, you have agreed to establish and maintain an acceptable system, and the review checks the “maintain” part against your own records.
Most of the 18 criteria will look familiar from the SF 1408. The difference is that each one is now a question about the past months, not the plan. These are the areas small contractors most often need to evidence:
Labor charged correctly and tied to payroll
Timekeeping that identifies labor by cost objective, and labor distribution that charges direct and indirect labor to the right place ((c)(9) and (c)(10)). In practice the auditor samples real timesheets, checks approvals and corrections, and ties hours and dollars to the payroll register and the ledger.
Billings supported
Billings that “can be reconciled to the cost accounts for both current and cumulative amounts claimed and comply with contract terms” ((c)(16)). Expect invoices traced back to job cost, with the indirect rates on them matching the rates you are allowed to bill.
Indirect rates computed and applied
A logical and consistent method for accumulating and allocating indirect costs ((c)(4)), and the information to readily calculate indirect cost rates from the books ((c)(15)(ii)). Pools and bases that changed without a reason show up here.
Unallowables excluded
Costs unallowable under FAR Part 31 kept out of costs charged to government contracts ((c)(12)). FAR 31.201-6 requires expressly unallowable costs, and their directly associated costs, to be identified and excluded from any billing, claim or proposal.
Costs determined every month
Interim, at least monthly, determination of contract cost through routine posting ((c)(11)). Quarterly catch-up bookkeeping leaves months with nothing to test.
Controls around the books
Items that have no separate box on the SF 1408: a sound internal control environment ((c)(1)), reconciliation of subsidiary ledgers to the general ledger ((c)(6)), approved and documented adjusting entries ((c)(7)), and management reviews or internal audits of the system ((c)(8)).
Who triggers it
The cognizant contracting officer, in consultation with the auditor or functional specialist, determines whether your system is acceptable and approves or disapproves it (DFARS 242.7502(b)). The FAR lists determining the adequacy of the accounting system as a contract administration function and says the system “should be adequate during the entire period of contract performance” (FAR 42.302(a)(12)). Common starting points are a follow-on review recommended on your SF 1408, growth in cost-type work, or problems that surface in another audit, such as an incurred cost audit.
The incurred cost submission is worth watching. Under FAR 52.216-7, paragraph (d)(2)(i), a contractor with a cost-reimbursement contract submits a final indirect cost rate proposal within 6 months after each fiscal year ends. It is built from the same books a post-award review tests, so a gap in one tends to show up in the other.
What failing looks like
The process is written into DFARS 242.7502(d) and the clause itself:
Auditor’s report
The auditor reports findings to the contracting officer, describing any material weakness in enough detail to understand it.
Initial determination
The contracting officer notifies you in writing of any material weakness. You respond in writing within 30 days, including why you disagree if you do.
Final determination
If material weaknesses remain, you have 45 days to correct them or submit an acceptable corrective action plan with milestones.
Disapproval and its effects
The system can be disapproved. Field pricing teams discuss identified deficiencies in all reports on your proposals until they are resolved.
A material weakness is a materiality test, not a count of errors. The clause defines it as a deficiency, or combination of deficiencies, in internal control where there is a reasonable possibility that a material misstatement “will not be prevented, or detected and corrected, on a timely basis.” DFARS has used that term in place of “significant deficiency” since January 17, 2025.
Payment withholding is narrower than many owners fear. It comes from DFARS 252.242-7005, Contractor Business Systems (now 252.242-7998), and that clause “only applies to covered contracts that are subject to the Cost Accounting Standards.” Where it applies, the withhold is 5 percent for one or more material weaknesses in a single business system, capped at 10 percent across several, and reduced to 2 percent once the contracting officer accepts your corrective action plan and finds you are carrying it out. On a contract without that clause, the system can still be disapproved, but no money is withheld under it.
From the auditor’s side
How the two reviews feel different
A pre-award walkthrough follows how a cost would flow. A post-award review pulls samples from months that already happened, and the paperwork either exists or it doesn’t.
Decide
Which one should you prepare for?
Look at the contracts you have and the next one you want. That usually answers it.
You are about to bid your first cost-type contract
No cost-type work yet, maybe an SBIR Phase II or a first cost-reimbursement proposal. Build the design, write the procedures, start daily timekeeping and close a month before the survey request comes. Take the self-check first.
You already perform cost-type or T&M work
On DoD work, the accounting system clause is likely in your contract now. The question is whether a sample of last year’s timesheets, invoices and rate calculations would hold up.
An incurred cost submission is coming
It is due 6 months after your fiscal year ends under the standard allowable cost clause, and it exposes the same books. Test them before you sign the submission.
A prime is asking about your system
A prime asking how your system has been working before it hands you a cost-type or T&M subcontract wants operating evidence, not a design.
You passed pre-award with a follow-on recommendation
The auditor already told you the next review is coming. Use the time to make sure what was planned is now running and documented.
You are a nontraditional defense contractor
Section 1826 of the FY2026 NDAA exempts nontraditional defense contractors on DoD work from the DFARS accounting system clause and FAR Part 31 unless waived. A pre-award adequacy review can still apply. See our nontraditional defense contractor guide.
Cost
What getting ready costs
Our SF 1408 pre-award readiness review starts at $2,500 for a company whose books are current: a gap assessment against the SF 1408 criteria, fixes to the chart of accounts and procedures, and a mock review. Cleanup is billed at $160 an hour or quoted.
A post-award readiness review tests your actual transactions the way an auditor would, then lists what to fix before the real review. It starts at $3,500 for a company whose books are current.
The cheapest way to pass a post-award review is to keep the system running every month. Our Cost-Type plan, from $1,500 a month, covers monthly bookkeeping in your own QuickBooks, timesheets reviewed against payroll, monthly indirect rate calculations and provisional billing rates tracked against actuals, and a CPA reviews every month-end close. All GovCon prices are on our pricing page.
We reply to every inquiry within one business day. If a survey or review date is inside two weeks, tell us the date on the first call; if we can’t make it, we tell you the same day.
Questions
Frequently asked
What is the difference between a pre-award survey and a post-award accounting system review?
A pre-award survey, recorded on Standard Form 1408, tests whether your accounting system is designed to capture contract cost before you receive a cost-type award. A post-award review tests whether the system has actually operated that way, using your real timesheets, payroll, invoices and rate calculations, against the 18 criteria in the DFARS accounting system clause.
Can a new company with no government revenue pass a pre-award survey?
Yes. The survey tests design, not history. The SF 1408 asks whether the system is in full operation and, if not, which parts are running, set up, planned or nonexistent. Describe it honestly and expect to show the parts you say are running.
We passed our pre-award survey. Do we still need to prepare for a post-award review?
Yes. A pre-award result reflects the system’s design on the date it was reviewed. The DFARS clause requires you to establish and maintain an acceptable system, and a post-award review looks at whether you did. The SF 1408 even has a box recommending a follow-on accounting system review after award.
Who requests each review?
The government, not the contractor. A pre-award survey usually starts with a contracting officer deciding whether you are responsible for a cost-type award. A post-award review supports the cognizant contracting officer, who decides whether your accounting system is acceptable after consulting the auditor.
What happens if a post-award review finds a material weakness?
The contracting officer sends a written initial determination, and you have 30 days to respond. If a material weakness remains in the final determination, you have 45 days to correct it or submit an acceptable corrective action plan, and the system can be disapproved.
Will the government withhold payments if our accounting system is disapproved?
Only if the contract includes the Contractor Business Systems clause, which applies only to contracts covered by the Cost Accounting Standards. Then the withholding is 5 percent for one system, 10 percent at most across several, and can drop to 2 percent while an accepted corrective action plan is being carried out. On other contracts the system can still be disapproved without a withhold.
Which review should I prepare for?
If you are about to bid your first cost-type contract, prepare for the pre-award survey. If you already perform cost-type or T&M work, have an incurred cost submission coming, or a prime is asking about your system, prepare for a post-award review.
More
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SBIR Phase II accounting system requirements
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SF 1408 readiness self-check
11 questions, about 3 minutes. See which parts of your system an auditor would flag.
Guide: DCAA pre-award audit checklist
Every SF 1408 criterion, what the auditor asks to see, and a 30-day plan to get ready.
SF 1408 pre-award surveys
Gap assessment, fixes, a mock review and support through the real survey.
Post-award & business system reviews
DFARS accounting system reviews, material weaknesses, withholding and corrective action.
Alexander Mungov, CPA
Founder and principal, M2 CPA
Alexander Mungov spent twelve years at the Defense Contract Audit Agency, in the Denver, European and Afghanistan branch offices, finishing as a Supervisory Auditor leading a team of six. He then built and ran the FAR, DFARS and CAS compliance program inside a defense technology company, as the primary liaison with DCAA and DCMA.
He founded M2 CPA to give small and mid-size contractors the compliance support that large primes take for granted. More about Alex.
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