Why a Government Contracting CPA Is an Important Partner for Your Business

Federal contracting can be a highly rewarding market, but it is also one of the most complicated. With FAR (Federal Acquisition Regulation) and DCAA (Defense Contract Audit Agency ) audits, indirect rate structures, and strict cost allowability rules, financial missteps are not just expensive; they are potentially business-threatening. That is why a specialized partner, a Government Contracting CPA, is essential to your business.

For firms that want to win more work, remain audit-ready, and scale sustainably, generalist accounting advice is not enough. The unique regulatory, financial, and tax environment of government contracting demands a CPA who understands the rules, anticipates compliance issues, and integrates business goals into every financial decision. This expertise makes a strategic difference.

Compliance Is Just the Beginning

Government contract accounting is governed by rules far beyond GAAP (generally accepted accounting principles). Staying compliant with federal requirements is the baseline for doing business with the government. A CPA who specializes in government contracts is well-versed in:

• FAR Part 31: Cost principles for determining allowability
• CAS (Cost Accounting Standards): Required for larger contracts and contractors
• DCAA audit readiness: From timekeeping systems to indirect rate submissions

A Government Contracts CPA builds internal systems that align with these rules not only to avoid disallowances but also to create transparency that contracting officers and auditors value. Proactive compliance also means fewer surprises during incurred cost audits and better competitiveness in pricing proposals.

Strategic Indirect Rate Structuring

Profitability depends on how you structure your overhead and G&A (General and Administrative expenses). Indirect rates (fringe, overhead, G&A) directly impact how your costs are recovered and your margins are preserved. A Government Contracts CPA can:

• Optimize your indirect rate structure to match your contract mix (Time and Materials, Cost-Plus-Fixed-Fee, Firm-Fixed-Price)
• Help you calculate and submit provisional billing rates that reflect actual costs
• Analyze your indirect cost pools to ensure allowability and recoverability

This is especially critical for growing contractors who need scalable rate models that support both prime and subcontracting work without sacrificing profitability.

Proposal Support and Pricing Strategy

Bidding without accurate pricing is a gamble. Developing compliant and competitive cost proposals is a core function of any federal contractor. A Government Contracting CPA helps you:

• Price proposals with realistic cost projections that align with RFP requirements
• Calculate accurate burdened labor rates that consider indirect costs and escalation
• Avoid pitfalls that trigger cost realism reviews or post-award scrutiny

They can also assist in preparing Forward Pricing Rate Proposals (FPRP) when appropriate, which can streamline future pricing negotiations and reduce administrative burden.

Audit Defense and Incurred Cost Submissions

Avoiding adverse findings starts with preparation. DCAA audits, especially for incurred cost submissions (ICS), can be high stakes. A Government Contracting CPA supports your business by:

• Preparing compliant ICS using the DCAA’s ICE model
• Reconciling your trial balance, general ledger, and cost pools
• Addressing potential questioned costs before submission
• Providing representation or support during audits and follow-ups

This reduces the risk of delayed payments, contract terminations, or reputational damage that can follow negative audit findings.

Integrated Tax and Government Contract Planning

What is allowable under FAR may not be deductible by the IRS and vice versa. There is often tension between IRS tax rules and government contract allowability rules. A specialized CPA helps navigate this by:

• Structuring your chart of accounts for both DCAA and IRS compliance
• Identifying deductible costs that are not allowable and vice versa
• Timing expenses to minimize taxable income while remaining compliant
• Coordinating depreciation, R&D credits, and fringe benefits to optimize tax outcomes

This integrated view prevents tax inefficiencies and ensures your business is maximizing both compliance and cash retention.

Growth, Mergers & Acquisitions, and Strategic Planning

A CPA who speaks the language of contracts can help you scale with confidence. As your business grows, so do the complexities. Government Contracts CPAs can:

• Build cost and revenue models to support strategic decision-making
• Advise on indirect rate changes needed to absorb more headcount or contracts
• Prepare financials for investor due diligence or acquisition opportunities
• Help transition from small business set-asides to full-and-open competition

They become your strategic partner not just for compliance, but for growth.

Your Government Contracting CPA is a Strategic Partner

Government contracting is about executing profitably, remaining compliant, and building a business that can weather audits, rate changes, and evolving regulations. A Government Contracts CPA brings the financial clarity, compliance assurance, and strategic insight needed to operate with confidence in this space.

From proposal pricing to audit readiness to scalable indirect rates, their guidance extends far beyond tax season. If you are ready to shift from reactive to proactive financial management, a CPA who understands the intricacies of federal contracting is your most valuable ally.

Contact us to discuss how specialized financial leadership can support your government contracting goals. We are here to help.