Updated November 2026 · VG CPA PC advisors
What the survey checks
The SF 1408 checklist asks whether your system properly segregates direct costs from indirect costs, identifies and accumulates direct costs by contract, allocates indirect costs to contracts on a logical and consistent basis, and identifies and excludes unallowable costs.
It also looks at timekeeping that records labor by contract, a labor distribution that ties time to payroll, interim cost data that supports billing, exclusion of costs after contract completion, and the ability to provide information needed for price redetermination or incurred cost submissions.
Preparing your system
Set up a chart of accounts with separate direct, indirect and unallowable accounts; a job costing structure by contract and task; written policies for timekeeping, unallowable costs and indirect rate calculations; and a timekeeping system with daily entries and supervisor approval.
Run a mock contract through the system: record labor and other direct costs, compute provisional indirect rates, and generate a sample invoice. Reviewers want to see the system work, not just policies on paper.
During and after the review
DCAA or DCMA reviewers will interview management, walk through the timekeeping process and ask for sample reports. Clear documentation and a knowledgeable point of contact shorten the review.
A finding of inadequacy delays awards, but deficiencies can usually be corrected and the system re-reviewed. Maintaining the system after award matters, because later audits test whether it is still followed.