Reorganized and Refocused: A Government Contractor’s Guide to the New DCAA

A Major Reorganization Takes Shape

Effective October 1, 2025, DCAA underwent its most significant structural overhaul in years. The agency, which employs approximately 4,500 auditors across the country, moved away from its previous model built around Corporate Audit Directorates (CADs), which were dedicated to specific large contractors like Northrop Grumman, Lockheed Martin, and Boeing, and a network of Field Detachment (FD) offices handling classified contracts.

The new structure organizes audit resources around military branches rather than individual contractors:

Contractors can now be identified by their cognizant DCAA office based on zip code, making it easier to locate the right office. If you’ve received undeliverable email notices from DCAA recently, the reorganization is likely the reason. Old contact information may no longer be valid. 

The driving goals behind the change include a more engaged and specialized workforce, reduced management layers, consolidated offices to eliminate duplicated effort, and a new Centralized Audit Function that moves specialized technical services out of headquarters and directly into the field directorates where they’re needed most. 

The Impact of DOGE and Government Shutdowns 

The past year brought significant turbulence to federal contracting, and DCAA was not immune. Executive orders directing agencies to review and cancel contracts have triggered a surge of terminations for convenience, stop-work orders, suspensions, and contract modifications affecting both Department of Defense (DoD) and non-DoD contracts alike. 

The government shutdown in 2025, which lasted 43 days, created some delays in audit completions. However, DCAA reports that it has largely recovered and is now back on track to where it would have been had the shutdown not occurred. Designated auditors and contracted Independent Public Accounting (IPA) firms were authorized to continue high-priority work even during the shutdown period. 

There was one notable downstream effect. Many agencies, including DoD, extended deadlines for incurred cost submissions to account for the disruption. Extension lengths varied by command and contract complexity, with some contractors receiving as little as 30 additional days. 

Incurred Cost Audits: Timelines and What Triggers Them 

Contractors with cost-type contracts (CPFF, T&M, labor hour) are well acquainted with incurred cost submissions. The standard deadline remains six months after the close of your fiscal year — so December 31 fiscal year-end contractors must submit by June 30. Only the contracting officer (CO), contracting officer representative (COR) with delegated authority, or the administrative contracting officer (ACO) can grant an extension to that deadline — not DCAA itself. 

As for how long audits take once submitted, DCAA has meaningfully improved its timelines: 

• Large contractors: Six to eight months (down from roughly 12 months in prior years) 

• Small businesses: As few as three months, depending on contract volume and complexity 

One important clarification: DCAA only performs audits when formally requested by a federal contracting officer. Contractors cannot self-refer. If you want an audit initiated, the request must come through your CO. 

It’s also worth noting that incurred cost audits are no longer limited to cost-type contracts. DCAA is now receiving requests to audit fixed-price contracts with progress payments tied to costs incurred or percentage of completion. This is a growing trend as contracting officers craft increasingly complex contract structures. Significant modifications to firm fixed-price contracts, such as change orders that introduce new cost elements, may also trigger audit activity. 

2026 Audit Priorities: Where DCAA Is Focusing 

DCAA has identified several key initiative areas for 2026 that contractors should be aware of: 

Financial Improvement and Audit Readiness (FIAR): DoD continues to lack a clean audit opinion on its financial statements. DCAA is dedicating resources to help remedy longstanding material weaknesses, particularly around government-furnished property (GFP). Auditors have found real-world cases where GFP couldn’t be traced, or contractor locations didn’t exist — problems that directly undermine DoD’s auditability. DCAA is coordinating with KPMG, Ernst & Young, and the Inspector General’s office to address these gaps. 

Truth in Negotiations (TINA): DCAA is increasing its support to procurement contracting officers (PCOs) on TINA compliance, helping them understand what data is “readily available,” what constraints exist, and how to properly interpret cost or pricing data certifications. Contractors should be aware that signing a certificate of cost or pricing data significantly elevates the risk of a post-award defective pricing audit — an exposure that arises most often on fixed-price contracts. Of note, the 2026 NDAA raises the TINA certified cost or pricing data threshold from $2 million to $10 million for defense contracts entered into after June 30, 2026, which may reduce audit exposure for some contractors going forward. 

OTA Support: DCAA is becoming more involved in supporting Other Transaction Authority (OTA) agreements. While OTAs are not FAR-based contracts, DCAA’s role can be defined within the specific terms and conditions of each agreement. If you’re working under an OTA, review those terms carefully. 

Reduced Self-Initiated Audits: Going forward, several audit types, including some Cost Accounting Standards (CAS) audits and post-award accounting system reviews, will be performed primarily on request rather than initiated by DCAA on its own. This doesn’t mean these audits are going away, but proactive outreach from the agency in these areas will be less frequent. 

Key Takeaways for Contractors 

The DCAA of 2026 is leaner, more specialized, and more tightly aligned with government-wide priorities. For contractors, that means a few practical steps deserve attention: 

1. Confirm your cognizant DCAA office under the new structure, 
2. Ensure your incurred cost submissions are complete and include the required certifications, and 
3. Stay alert to the expanding scope of what can trigger an audit, particularly if you have fixed-price contracts with cost-based progress payments. When in doubt, your contracting officer remains your first point of contact. 

Next Steps 

As DCAA continues to reorganize and shift its audit priorities, government contractors face heightened risk to their control environments. A reactive approach to compliance is no longer sufficient. Contractors should act now to reassess their audit readiness, confirm their cognizant DCAA office, and verify that their incurred cost systems meet adequacy standards. For most contractors with a December 31, 2025 fiscal year-end, the Incurred Cost Electronically (ICE) submission deadline is June 30, 2026 — leaving little time to identify and address potential gaps. 

GRF has a deep bench of government contracting experts including former DCAA auditors, who can help you prepare and/or review your annual incurred cost submissions. Our team can perform “mock” SF 1408 reviews to test your compliance with the FAR and review your pricing certifications to ascertain adherence to TINA requirements. By leveraging GRF’s experience and local market knowledge, contractors can confidently balance the complexities of compliance with their strategic business goals. 

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