For companies eager to break into the federal market, the compliance landscape can feel like a maze of unfamiliar acronyms and requirements. One of the earliest and most critical checkpoints in this journey is the SF-1408: Pre-Award Survey of Prospective Contractor’s Accounting System. If you are bidding on a cost-reimbursement or time-and-materials contract, you will likely be required to complete this survey and pass a DCAA audit before you can win the award. So, what exactly is the SF-1408, and how can your company prepare for it?
What Is the SF-1408 Form?
The SF-1408 is a standardized form used by the Defense Contract Audit Agency (DCAA) or another federal auditor to evaluate whether your accounting system is adequate for government contracting. This form is utilized by an auditor during their pre-award accounting system review. This review is typically triggered when a federal agency is considering awarding you a cost-type contract, which places more financial risk on the government. They need assurance that your accounting system can track costs accurately, segregate direct and indirect expenses, and prevent billing errors.
Why Is Adherence to the SF-1408 Important?
For companies unfamiliar with federal acquisition rules, it is tempting to view the SF-1408 as a bureaucratic box to check. But this survey can make or break your shot at a contract and your entry into the federal market.
Here’s why it matters:
- Contract Eligibility: You cannot be awarded certain contract types without passing this review.
- Red Flag Avoidance: A failed review could delay award decisions or reduce confidence from the agency.
- Operational Readiness: The SF-1408 assesses whether your systems are mature enough to handle federal funds. This signals to the government that you are ready to scale responsibly.
Companies often assume their existing systems are sufficient. But without proper configuration or supplemental controls, these tools may fall short of federal requirements.
Key Requirements of the SF-1408
The SF-1408 checklist includes more than 15 criteria that auditors use to assess your accounting system. While not exhaustive, here are the core capabilities your system must demonstrate:
- Segregation of Direct and Indirect Costs
You must clearly distinguish between costs directly tied to a contract and overhead expenses. - Job Costing Capabilities
Your system must track costs by project, contract, and task, not just by department or business unit. - Timekeeping Controls
Employees must track time daily with proper approvals and audit trails. Manual or inaccurate timecards are a common reason for failure. - Prevention of Unallowable Costs
Your chart of accounts should separate unallowable costs, such as alcohol or lobbying, from allowable expenses. - Reliable Cost Allocation Methods
You need consistent, supportable methods for allocating indirect costs such as fringe, overhead, and/or G&A. - System Access and Audit Trails
Your system should be secure, with traceable records and access controls. - Accrual-Based Accounting
Cash-based systems do not meet DCAA standards. Your accounting must reflect earned revenue and incurred expenses.
Common Challenges for Proposers
Companies pursuing their first federal contracts often face these hurdles:
- Generic accounting setups without cost centers or project-level tracking
- Informal timekeeping, such as spreadsheets or tools, without audit functionality
- No policies or internal controls for expense approvals, cost allocation, or system access
- Inadequate documentation, especially for indirect rate development and unallowable cost treatment
The good news is that you do not need a massive ERP system to be compliant. But you do need structure, discipline, and documentation.
How EverGlade Consulting Can Help
At EverGlade Consulting, we specialize in helping companies navigate the leap into federal contracting. Whether you are preparing for your first SF-1408 review or scaling into cost-type contracts, we provide:
- System Readiness Assessments
We identify gaps in your accounting processes, timekeeping, and indirect cost structures. - Documentation and Training
We create tailored cost accounting policies, indirect rate structures, SOPs to ensure audit readiness, and complete the SF-1408 for your company. - Ongoing Compliance Partnership
The SF-1408 is just the beginning. We support clients throughout the contract lifecycle from proposal writing and billing to incurred cost submissions and DCAA program specific audits.
Final Thoughts
Getting through the SF-1408 pre-award survey is not just about passing a test. It is about building the financial infrastructure to succeed as a government contractor. With the right guidance and systems in place, even early-stage companies can compete and thrive in the federal space.
If your company has considered applying for federal funding, your federal funding journey starts here. EverGlade Consulting is a national firm that helps organizations win and manage federal awards. We offer services ranging from Pursuit, Proposal and Post-Award support to comply with federal regulations at agencies including BARDA, ARPA-H, NIH, DTRA, JPEO, DOD, DIU, DOE, and DARPA.
