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The Air Force Helms Innovative Programs with AFWERX SBIR

The U.S. Air Force powers innovation through AFWERX, a team of technological advisers that pilot the agency’s Small Business Innovation Research (SBIR) program.

AFWERX is a U.S. Air Force and the Department of Defense (DoD) program that fosters small business technological innovation. Those innovations are funded via competition in the Air Force Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR), encouraging startups to research and develop products and services.

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Entrepreneurs who pilot startups often encounter three significant obstacles:

  • Coming up with the cash to fund their project.
  • Finding the market to fit the product they’ve developed.
  • Landing their first paying customer.

But when those entrepreneurs are developing commercial technology meant for the Air Force, there’s one group that can accelerate the process of overcoming obstacles and help break the sound barrier of innovation.

The Air Force’s AFWERX team runs a Small Business Innovation Research (SBIR) program, awarding contracts to entrepreneurs who aim high.

What Does AFWERX SBIR Stand For?

The acronym AFWERX does not represent a phrase or name abbreviation; “AF” stands for “Air Force,” and “WERX” is shorthand for “work project.”

It represents a U.S. Air Force program that fosters a culture of innovation within the service.

AFWERX, a team of technology advisors within the Air Force Research Laboratory (AFRL), seeks ground-breaking ideas and invests seed money to move projects from the laboratory into production.

The advisors accomplish this by overseeing the Air Force’s arm of the Department of Defense (DoD) Small Business Innovation Research (SBIR) program.

As part of its effort to attract the best and brightest minds in technology, AFWERX hosts tech competitions, issues exploratory contracts to fund research and development, and matches startups with venture capital investors to spur paradigm-shifting ideas. AFWERX also includes sister organizations, including SOFWERX, MGMWERX, and DEFENSEWERX.



What is the AFWERX SBIR Mission?

First established in 2017 by the Secretary of the Air Force and reporting to the Vice Chief of Staff of the Air Force, AFWERX provides an environment conducive to thoughtful, deliberate, innovation.

Through open topic solicitations, small businesses can submit innovative solutions that have yet to be deployed in service to the DoD.

And we’re not only talking about developing wartime technology like fighter jets and bombers—the Air Force is a large and varied organization that requires a wide range of products in the medical field, construction, law enforcement, communications, energy, and more.

Essentially, any innovative technology that could be applied to a small city could have a use in the Air Force.

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What are AFVentures?

The Department of the Air Force’s commercial investment group, AFVentures, is a division of AFWERX that works to expand the number of small businesses working with the Air Force.

It accomplishes this by awarding small startups a development contract to help them survive the complex qualifying process for a defense contract.

Venture capital firms are often hesitant to work with companies that might not develop a high-margin product capable of quickly growing to produce a far greater return than the firm’s initial investment.

AFVentures levels the playing field, finding funding for startups through various programs—including Strategic Fund Increase, which sees AFVentures match a certain amount of funding already received by the startup via a private investor.

AFVentures give the DoD a window into the innovations outside of large contractors such as Raytheon and Boeing—helping the federal government tap into the valuable work being done to address nontraditional concerns, such as cyberwarfare.

Since it launched in 2018, AFVentures has awarded $710 million in contracts to various small business startups. Meanwhile, through the Air Force SBIR/STTR program, AFVentures even found itself on the frontlines of the nation’s response to the COVID pandemic, gathering and deploying valuable ideas about how to battle the virus.

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Who is Eligible for AFWERX SBIR?

The SBIR/STTR programs affiliated with AFWERX share many of the eligibility requirements of other government agencies. These eligibility requirements are as follows:

SBIR

  • Must be a for-profit business
  • Must be based in the U.S.
  • Must have 500 or fewer employees
  • The Principal Investigator must be primarily employed (more than 50 percent) with the small business applicant

STTR

  • Must be a for-profit business
  • Must be based in the U.S.
  • Must partner with a U.S. research institution
  • Must be a formal cooperative research and development effort
  • At least 40 percent of the work must be performed by the small business, with 30 percent of the work performed by the partnering research institution.


AFWERX SBIR Phases

Like other SBIR programs across the federal landscape, AFWERX comprises two main phases for research and development (R&D) and one ancillary phase mainly for commercialization purposes.

AFWERX SBIR Phase I

Most AFWERX Phase I SBIR program funding is awarded in response to open topic Commercial Solution Openings. CSOs are used to acquire innovative commercial projects, with open topics inviting industries to propose solutions to Air Force problems. To view the issues for which the Air Force seeks solutions, check out the AFVentures Focus Areas for Phase I.

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How Much Funding is Awarded in AFWERX SBIR Phase I?

The Air Force describes its AFWERX Phase I SBIR program funding as “small bets,” doling out between 1,000 and 1,500 Phase I awards to the tune of $50,000 each.

 

How Long Is AFWERX SBIR Phase I?

Each AFWERX SBIR Phase I award of $50,000 covers three months.

AFWERX SBIR Phase II

Approximately a third of Air Force Phase I awards have what it takes to transition to Phase II, which AFWERX describes as “medium bets.”

How Much Funding is Awarded in AFWERX SBIR Phase II?

The “medium bets” placed by AFWERX can total up to $750,000 per small business.

 

How Long Is AFWERX SBIR Phase II?

Each AFWERX SBIR Phase II award of $750,000 covers 15 months of prototype development.

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Yes! While AFWERX does not always guarantee the availability of Direct-to-Phase II (D2P2) opportunities, it is a program that is currently being made available.

D2P2 allows AFWERX to award an SBIR Phase II award to a small business, regardless if that small business was awarded any Phase I funding.

This page from AFWERX AFVentures helps to answer D2P2 specific questions.

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These funding sources enable AFWERX to emphasize big-ticket contracts and are intended to help the small businesses substantially increase the dollar amount received in awarded funds.

Highly beneficial but often tricky to navigate, Supplemental Funding Pilot Programs through AFWERX typically appear in two forms, Strategic Funding Increase (STRATFI) and Tactical Funding Increase (TACFI). Additionally, each supplemental funding opportunity has its own requirements and funding amounts.

Both STRATFI and TACFI are intended for companies that have already won an SBIR/STTR Phase II award in the last three years. These companies become eligible to receive additional funding through these supplemental programs to scale their Phase II efforts further.

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One of AFWERX’s Supplemental Funding Pilot Programs, STRATFI awards are between $3 million and $15 million of SBIR funding and cover up to 48 months of performance.

A matching component requires that non-SBIR funding be put up to receive the award. For every $1 of SBIR/STTR funds, companies must also receive $2 of other government funds or $1 of additional government funds and $2 of private funds.

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What is the Tactical Funding Increase (TACFI)?

Another of AFWERX’s Supplemental Funding Pilot Programs, TACFI, awards amounts from $375,000 to $1.7 million and up to 24 months of activity. For every dollar of SBIR/STTR funds, companies must also receive at least $1 of other government funding (non-SBIR/STTR) or $1 of private funding.

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AFWERX Research Topics

“Research topics” refer to the many diverse technology categories small businesses could research in their SBIR program proposal. The technology categories include: 

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Administration

  • Administrative Services
  • Dress and Appearance
  • Health/Physical Fitness
  • Personnel
  • Training/Learning

General Areas

  • Manufacturing
  • Advanced Materials
  • Base Infrastructure
  • Energy and Power
  • Energy and Efficiency
  • Maintenance

Information Technology

  • Artificial Intelligence and Machine Learning
  • Augmented, mixed, and virtual reality
  • Communication and collaboration
  • Cyber Security
  • Data
  • Data analytics
  • Electronics/Microelectronics
  • Emerging Technologies
  • Information Technology
  • Modeling and Simulation
  • Robotics

Mission Readiness

  • Aeromedical Evacuation
  • Air Refueling
  • Autonomy and Autonomous systems
  • Battle Management
  • Cargo Operations
  • Communications
  • Emergency Response
  • Intelligence, Surveillance, and Reconnaissance (ISR)
  • Personnel Transportation
  • Physical Security/ Security Forces

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What is the Air Force SBIR Open Topic?

The federal agencies participating in the SBIR program present a set collection of topics they want you to research and develop into products and services.

While the Air Force takes part in this type of SBIR program solicitation, they also take a unique approach. 

The U.S. Air Force, through AFWERX, allows organizations to propose solutions for their “open topic” research area. This open topic can be any commercially viable technology that the small business believes could be potentially useful to the Air Force. 

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Essentially, Open Topic allows small businesses to solve problems that the Air Force doesn’t know they have.

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AFWERX SBIR Program Success Stories

Though the process of landing an AFWERX SBIR award from the DoD can be grueling, there are plenty of success stories to inspire you along the way.

Lickenbrock Technologies

Total SBIR Investment: $895,000

Missouri-based Lickenbrock Technologies developed Fast Expectation-Maximization Ordered Subsets (FEMOS), a reconstruction algorithm that creates scans with greater resolution and contrast than commercial computed tomography (CT) scans.

Funding through the Air Force AFWERX SBIR program, an investment of $895,000, helped Lickenbrock accelerate the speed of its algorithm to seven times the original speed, significantly reducing the amount of time it takes to finish a scan. 

The SBIR investment improved the quality of the reconstructions and diversified the variety of specimens the system is capable of scanning.

With further development, Lickenbrock Technologies expects $500,000 to $1 million per year in commercial, industrial use profits. 

Specular Theory

Total SBIR Investment: $1.5 million

With SBIR funding, California-based Specular Theory developed a next-generation virtual reality flight simulation training system explicitly designed to guide pilots in the exact science of in-air refueling. 

Traditional air refueling training costs the Air Force thousands of dollars per flight and requires at least two aircraft and two full crews. 

This is where Specular Theory saw an opportunity for improvement. 

The virtual training program reduces the number of failures and helps reduce the number of times pilots must practice in real aircraft. As a result, the cost savings in that area alone are substantial. 

Traditional air refueling training costs the Air Force thousands of dollars per flight, which requires at least two aircraft and two full crews. 

Students often require extra flights to gain proficiency, adding cost and time. This virtual training program is connected to The Air Force SBIR funding allowing Specular Theory to adapt its existing products into an immersive student experience not typically available in consumer applications. 

SBIR invested close to $1.5 million into the project, while the product has pulled in $5 million in Phase III contracts for Specular Theory. 

iNovex Information Systems

Total SBIR Investment: $899,154

The Air Force’s SBIR program supported Maryland-based iNovex Information Systems in its effort to develop an open-source data collaboration platform known as Mobi-SRE. This platform pulls together and analyzes data for the weapon system design acquisition lifecycle. 

With this development, users can better use pre-existing data, accelerate the process, reduce errors, and increase access to more comprehensive and consistent information. 

This reduces the time it takes to get advanced weapon technology into the hands of the boots on the ground—or in the air. 

iNovex Information Systems utilized the investment to research the specific Air Force needs and limitations. Then, they used that information to specifically build and expand the data platform to address those problems. 

The Air Force SBIR invested $899,154 into the project, and the company has received close to $1.5 million in Phase III contracts. As a result, it is positioned to save the Air Force an estimated $5 million.

Are you a small business owner with innovative ideas? Get your AFWERX accounting in order with Team 80.

Get A Free Consultation for Your AFWERX SBIR Accounting Services
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Team 80 CEO Sarah Sinicki

Sarah Sinicki

Team 80 CEO

Sarah is a leader focused on serving small businesses in various industries. She has worked with a multitude of companies over the last 25 years and loves helping business owners find success. Sarah is genuinely committed to unburdening Team 80 clients so that they have the freedom to focus on their business. In her free time, you can find her spending time with her husband, two kids, and her Yorkies, Marley and Ziggy. When she is not helping business owners, you can find her in a Reb3l Groove class dancing it out. Sarah is also an avid Colorado Avalanche fan, so if you ever want to talk about hockey, she’s your gal.


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Federal Funding Assistance: SBIR Resources by State

Entrepreneurs working toward an SBIR award can access a wealth of resources in every state. 

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are presented by the federal government through a collection of 11 agencies and the U.S. Small Business Administration (SBA). SBIR/STTR programs award capital to small businesses to fund the research and development of a product or service and marketing efforts. 

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Small businesses often need a boost from like-minded organizations—an infusion of wisdom from professionals who have been there, done that, and prospered. 

This is especially true for entrepreneurs diving into the competitive world of government grants and contracts. 

Programs like Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR), two federal efforts that fund ground-breaking ideas across an array of projects, become attainable when you’ve got the support of vital resources.

With so many innovative minds spread throughout the country, these resources are available in every state. 

It coalesces into a comprehensive small business assistance network, from individualized business advisement and technical assistance to in-person counseling and training services. 

But what agencies offer SBIR/STTR support, and how can you, a small entrepreneurial business, receive the help you need to advance your innovation? 

Let’s take care of business and find out.

Resources Available to SBIR/STTR Applicants

In your quest for SBIR/STTR funding, you’re likely to encounter more than a few obstacles.

These barriers to project completion could be a shortage of capital, knowledge gaps in the application process, general business understanding, or a slew of other shortcomings.

It’s important to remember that you are not alone—not only do most small business people face similar challenges but there are pros out there who want to help you!

In this article, we’ll cover state-by-state resources while focusing on these specific programs:



What is the SBDC?

SBDC stands for Small Business Development Centers, a collection of programs spread throughout the country that provide training and counseling to small businesses and informational tools to support business start-ups and existing business expansion. 

Depending on where your business is located, you could have numerous SBDC programs at your disposal. To find the local SBDC serving your region, simply enter your zip code into the search bar on this page presented by the Small Business Administration. 

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Is SBDC the Same as SBA?

While not precisely the same, the SBDC is a partner program of the U.S. Small Business Administration (SBA).

This partnership fosters small businesses and jobs by providing educational resources to business owners and those looking to start a business. 

Meanwhile, the centers are typically hosted by colleges, universities, private sector organizations, and state economic development agencies.

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How Can SBDC Help My Small Business?

As previously mentioned, SBIR and STTR programs are incredibly competitive, and new entrepreneurs might feel overwhelmed by the guidelines and protocols that must be followed to obtain funding. That’s where the SBDC comes in. 

SBDC programs serve as an invaluable resource for business owners, passing along wisdom in the form of professional, high-quality, individualized business advisement and technical assistance. 

This assistance is made available to existing small businesses and pre-venture entrepreneurs. Simply put, SBDCs help you solve problems.

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And as you know, small business life is rife with problems, and SBDC can advise you in areas including:

  • Access to Capital
  • Development and Exchange of New Technologies
  • Business Planning Improvement
  • Strategy Development
  • Operations Streamlining
  • Financial Management
  • Personnel Administration

  • Marketing Expertise
  • Export Assistance
  • Sales Deployment
  • Management Improvement
  • Increased Productivity
  • Growth & Expansion
  • Overall Innovation

Professionally inspired advancement in all areas can significantly increase your chances of SBIR program success!

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What are Procurement Technical Assistance Centers (PTAC)?

Government contracts can be some of the most lucrative business deals that any entrepreneur can hope to obtain. Federal agencies, such as the Department of Defense, offer tremendous financial opportunities, buying all types of products and services—in both large and small quantities—directly from small businesses that develop innovations through the SBIR.

Part of a Federal Contracting Assistance effort managed by the SBA, Procurement Technical Assistance Centers (PTAC) lend a hand to small businesses by providing technical assistance in selling products or services to federal, state, and local governments.

Along with that overall mission, PTACs can help you:

  • Determine if your business is ready for federal contracting
  • Prepare you to register in the proper places
  • Measure your eligibility for small business certifications
  • Assist in the research of previous contracting opportunities

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Guided by Procurement Center Representatives (PCRs), small businesses can win federal contracts by learning procurement strategies before the agreements are even announced to the public.

PCRs can also conduct market research, assist with payment issues, and serve as your guiding light through the entire contracting process.

You can find your state’s local PTAC by entering your zip code in the search bar on this page.

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What is Manufacturing Extension Partnership (MEP)?

Business development resources also extend to other specific small business sectors, including U.S. manufacturers.

The Manufacturing Extension Partnership (MEP) program consists of a nationwide network of centers that provide manufacturers with the tools necessary to enhance growth, reduce costs, improve productivity, and expand capacity.

MEPs are everywhere, with more than 440 locations spread throughout all 50 states and Puerto Rico.

Each center delivers customized services and resources calibrated to match the needs of individual small- and mid-sized manufacturers.

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MEP programs help businesses focus on:

  • Lean and Continuous Improvement 
  • Growth and Innovation
  • Supply Chain Issues
  • Keeping Operations in America
  • Sustainability
  • Technology Acceleration
  • Workforce Challenges

Check out the National Institute of Standards and Technology’s (NIST) MEP resource page for contact information and economic impacts from all 50 states and Puerto Rico. 

Manufacturers can also utilize the NIST interactive map to find a local MEP center or view the MEP Center quick list for phone numbers, email addresses, websites, and more.

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What is the National Institutes of Health (NIH) Proof-of-Concept Center (POCC)?

A Proof-of-Concept Center is part of a more extensive Proof-of-Concept Network (POCN) powered by the National Institutes of Health (NIH). 

The network engages academic innovators to support the conversion of scientific discoveries into actual medical products, while training the biomedical workforce to be globally competitive in technology development and entrepreneurship. 

Spanning more than 100 universities in 34 states and Puerto Rico, the POCN is manifested through three programs: NIH Centers for Accelerated Innovations (NCAI), Research Evaluation and Commercialization Hubs (REACH), and the National Institute of General Medical Sciences’ STTR Regional Technology Transfer Accelerator Hubs for IDeA States

As of December 2021, the POCN has worked with 386 projects by more than 100 startups, resulting in close to 50 SBIR/STTR awards and $1.58 billion in funding. 

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These additional state-by-state resources include:

  • Federal and State Technology (FAST) Partnership Program
  • SBA Growth Accelerator
  • SBA Regional Innovation Cluster
  • Build-to-Scale (B2S)
  • MBDA Business Center

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These additional state-by-state resources include:

  • Federal and State Technology (FAST) Partnership Program
  • SBA Growth Accelerator
  • SBA Regional Innovation Cluster
  • Build-to-Scale (B2S)
  • MBDA Business Center

Illustration of Man sitting a work desk in front of a window next to a plant

To find local SBIR/STTR assistance in your state, access the search functions presented by the SBA on this page or find your state below.

SBIR STATE RESOURCES


Team 80 CEO Sarah Sinicki

Sarah Sinicki

Team 80 CEO

Sarah is a leader focused on serving small businesses in various industries. She has worked with a multitude of companies over the last 25 years and loves helping business owners find success. Sarah is genuinely committed to unburdening Team 80 clients so that they have the freedom to focus on their business. In her free time, you can find her spending time with her husband, two kids, and her Yorkies, Marley and Ziggy. When she is not helping business owners, you can find her in a Reb3l Groove class dancing it out. Sarah is also an avid Colorado Avalanche fan, so if you ever want to talk about hockey, she’s your gal.


accountants sitting at wood table looking at numbers on devices

Everything You Need to Know About DCAA Compliance and Government Approved Accounting

DCAA Compliance and Government Approved Accounting

Your success depends on meeting DCAA (Defense Contract Audit Agency) compliance regulations when working with the government.

Government contracting can be a challenge; when you’ve cleared one hurdle, another one awaits, like finding a government-approved accounting system.

If you want to win defense contracts, you’ll need a DCAA-compliant financial system. Moreover, you’ll learn that responding to proposals without a DCAA compliant accounting system is impossible in some cases.

At Team 80, we ensure small business owners entering the SBIR/STTR program have an accounting system compliant with Federal Acquisition Regulation (FAR) and Defense Contract Auditing Agency (DCAA). If you’re one of those small business owners, this blog is for you.

“Accounting is hard enough without the government as your “partner.” That’s why government contractors should look for an accounting system that already strikes the right balance between ease of use and powerful capabilities.”
 – Sarah Sinicki, Director of Business Development, Team 80

Compare our Prices and Expertise Today.

When creating and pitching a dynamic SBIR proposal, it’s easy to overlook crucial details, like proving you can accurately (and quickly) show how you used their funds. The federal agency you’re working with needs to understand you have an approved system in place before they give you an award. They also want to feel confident you won’t misuse taxpayer dollars or engage in billing fraud (inadvertently or by design).

So, here’s what you’ll need to do: find a DCAA-compliant accounting system.

The government wants you to have an approved accounting system before giving you an SBIR or STTR contract. You also must comply with Federal Acquisition Regulations (FAR). You should familiarize yourself with FAR’s guidebook to learn more about what you can do to ensure everything runs smoothly before the DCAA shows up.

Worker sitting at table next to laptop with DCCA DCAA compliance Paperwork

What is the DCAA?

The Defense Contract Audit Agency is a federal agency under the Department of Defense (DoD); they’re “stewards of taxpayer dollars.” The DCAA delivers high-quality contract audits and services to ensure taxpayers and the military get what they pay for at a reasonable price. Their mission has remained the same since 1965.

In 2019, the DCAA examined nearly $365 billion in DoD contractor costs. Their audits saved taxpayers roughly $3.7 billion. The savings go back into the DoD’s pockets for essential military operations, or the government returns the excess cash to the Treasury.

The DCAA is primarily responsible for DoD contracts. However, they’re also often brought in by other federal agencies (like Nasa and the Department of Energy) for contract audits and financial services.

You’ll have the DCAA knocking on your door if a government agency, the Defense Contract Management Agency (DCMA), for example, requests the DCAAs help with an audit.

If you’re not DCAA-compliant, you’ll be answering their call. And that’s not something you want.

What is DCAA compliance?

When you’re DCAA compliant, you’re following their rules, recommendations, and best practices. If that sounds simple, it’s because it is! So stay on top of your record keeping, and use DCAA compliant accounting systems that’ll pass their audits, and you’re off to the races.

Here are some tips to help you stay DCAA compliant:

  • Establish and document your policies
  • Use a DCAA compliant system capable of tracking multiple cost categories separately
  • Make sure your timekeeping records and cost-accounting are fully integrated
  • Keep detailed records, and make sure your documents are easily accessible for the eventual audit

*You should note that the DCAA won’t give you a certificate of compliance.

What is the DCAA Pre-Award Survey?

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The DCAA conducts pre-award surveys when they’re about to award your small business with a government contract. You shouldn’t confuse the survey with an audit. The survey is simple; it’s an evaluation of your accounting system, and it validates your ability to carry out the government contract tasks.

If you meet the DCAA’s accounting system requirements, and you’re ready to see the contract through financially, you’ll pass. In order to give yourself the best chance of securing a contract, we suggest that you use the pre-award accounting system adequacy checklist. It’ll help you stay compliant and ready for a DCAA

What happens during a DCAA audit?

You shouldn’t fear a DCAA audit, though you should prepare yourself for that eventuality. During an audit, the DCAA will determine if your accounting system adheres to Generally Accepted Accounting Principles (GAAP). They’ll check to ensure you’re recording expenses when you provide a service. Small businesses usually have to overhaul their accounting and record-keeping procedures to comply with GAAP. (If we’ve already sold you on avoiding that headache, let’s talk about how we can help.)

According to the DCAA’s Form 1408 checklist, your accounting system must:

  • Properly segregate direct costs from indirect costs.
  • Correctly identify and accumulate direct costs by contract.
  • Have a logical and consistent method for allocating indirect costs to immediate and final objectives (a contract is considered a final cost objective).
  • Be able to accumulate the costs under a general ledger.
  • Have a timekeeping system that identifies employee’s labor by intermediate or final cost objectives.
  • Have a labor distribution system that charges direct and indirect labor to the appropriate cost objectives.
  • Determine costs charged to a contract through regular posting of books of account at least monthly.
  • Correctly identify, exclude, track allowable costs based on FAR 31 unallowable expenses.
  • Identify costs by contract line item (CLIN).
  • Segregate preproduction costs from production costs.

You’ll probably make it through an audit if your accounting system checks every box on this list. And if you’re feeling uneasy, it’s okay; the DCAA wants you to succeed, so they provide audit process overviews and let you see the checklists auditors use for assessments.

What accounting software is DCAA compliant?

Here’s a mind-bending truth. There’s no DCAA approved software, but there is software optimized for DCAA compliance. DCAA compliant software can include any commercial accounting package capable of tracking job costs. For example, Quickbooks provides accurate data, process flows, and reports that you’ll find helpful during an audit.

Still, your comprehensive, government approved accounting system is only one-half of the battle. Your accounting package is only as reliable as your information. In addition, you must establish policies and procedures for routine finance documentation.

And compliance is eternal. Once your software is compliant, it must remain compliant. With the help of a qualified accounting team (like Team 80), you can feel confident that you meet and exceed regulatory requirements.

You should let Team 80 manage your government-approved accounting needs. Here’s why:

You didn’t start your small business to manage tedious accounting tasks. Instead, we want to help you stay focused on researching and developing your SBIR program passion project. That’s why we offer affordable, turn-key accounting services – so you can stay focused on what matters most to your business.

“Federal accounting regulations are complex and ever-changing, both in their wording and how government auditors choose to interpret and enforce them. Team 80 can help you prosper in this challenging environment. When you’re serious about doing business with the federal government, you need an equally serious accounting partner.” – Sarah Sinicki, Director of Business Development, Team 80

We’ve been doing this for more than 20 years. We’ll ensure your system is DCAA compliant – today and into the future.

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Ben Smith

Chief Accounting Officer at Team 80 LLC

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Ben Smith is a Chief Accounting Officer at Team 80  where he is able to apply his accounting experience and passion helping small business owners make their companies successful in the SBIR industry.


accountants sitting at wood table looking at numbers on devices

Everything You Need to Know About DCAA Compliance and Government Approved Accounting

DCAA Compliance and Government Approved Accounting

Your success depends on meeting DCAA (Defense Contract Audit Agency) compliance regulations when working with the government.

Government contracting can be a challenge; when you’ve cleared one hurdle, another one awaits, like finding a government-approved accounting system.

If you want to win defense contracts, you’ll need a DCAA-compliant financial system. Moreover, you’ll learn that responding to proposals without a DCAA compliant accounting system is impossible in some cases.

At Team 80, we ensure small business owners entering the SBIR/STTR program have an accounting system compliant with Federal Acquisition Regulation (FAR) and Defense Contract Auditing Agency (DCAA). If you’re one of those small business owners, this blog is for you.

“Accounting is hard enough without the government as your “partner.” That’s why government contractors should look for an accounting system that already strikes the right balance between ease of use and powerful capabilities.”
 – Sarah Sinicki, Director of Business Development, Team 80

Compare our Prices and Expertise Today.

When creating and pitching a dynamic SBIR proposal, it’s easy to overlook crucial details, like proving you can accurately (and quickly) show how you used their funds. The federal agency you’re working with needs to understand you have an approved system in place before they give you an award. They also want to feel confident you won’t misuse taxpayer dollars or engage in billing fraud (inadvertently or by design).

So, here’s what you’ll need to do: find a DCAA-compliant accounting system.

The government wants you to have an approved accounting system before giving you an SBIR or STTR contract. You also must comply with Federal Acquisition Regulations (FAR). You should familiarize yourself with FAR’s guidebook to learn more about what you can do to ensure everything runs smoothly before the DCAA shows up.

Worker sitting at table next to laptop with DCCA DCAA compliance Paperwork

What is the DCAA?

The Defense Contract Audit Agency is a federal agency under the Department of Defense (DoD); they’re “stewards of taxpayer dollars.” The DCAA delivers high-quality contract audits and services to ensure taxpayers and the military get what they pay for at a reasonable price. Their mission has remained the same since 1965.

In 2019, the DCAA examined nearly $365 billion in DoD contractor costs. Their audits saved taxpayers roughly $3.7 billion. The savings go back into the DoD’s pockets for essential military operations, or the government returns the excess cash to the Treasury.

The DCAA is primarily responsible for DoD contracts. However, they’re also often brought in by other federal agencies (like Nasa and the Department of Energy) for contract audits and financial services.

You’ll have the DCAA knocking on your door if a government agency, the Defense Contract Management Agency (DCMA), for example, requests the DCAAs help with an audit.

If you’re not DCAA-compliant, you’ll be answering their call. And that’s not something you want.

What is DCAA compliance?

When you’re DCAA compliant, you’re following their rules, recommendations, and best practices. If that sounds simple, it’s because it is! So stay on top of your record keeping, and use DCAA compliant accounting systems that’ll pass their audits, and you’re off to the races.

Here are some tips to help you stay DCAA compliant:

  • Establish and document your policies
  • Use a DCAA compliant system capable of tracking multiple cost categories separately
  • Make sure your timekeeping records and cost-accounting are fully integrated
  • Keep detailed records, and make sure your documents are easily accessible for the eventual audit

*You should note that the DCAA won’t give you a certificate of compliance.

What is the DCAA Pre-Award Survey?

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The DCAA conducts pre-award surveys when they’re about to award your small business with a government contract. You shouldn’t confuse the survey with an audit. The survey is simple; it’s an evaluation of your accounting system, and it validates your ability to carry out the government contract tasks.

If you meet the DCAA’s accounting system requirements, and you’re ready to see the contract through financially, you’ll pass. In order to give yourself the best chance of securing a contract, we suggest that you use the pre-award accounting system adequacy checklist. It’ll help you stay compliant and ready for a DCAA

What happens during a DCAA audit?

You shouldn’t fear a DCAA audit, though you should prepare yourself for that eventuality. During an audit, the DCAA will determine if your accounting system adheres to Generally Accepted Accounting Principles (GAAP). They’ll check to ensure you’re recording expenses when you provide a service. Small businesses usually have to overhaul their accounting and record-keeping procedures to comply with GAAP. (If we’ve already sold you on avoiding that headache, let’s talk about how we can help.)

According to the DCAA’s Form 1408 checklist, your accounting system must:

  • Properly segregate direct costs from indirect costs.
  • Correctly identify and accumulate direct costs by contract.
  • Have a logical and consistent method for allocating indirect costs to immediate and final objectives (a contract is considered a final cost objective).
  • Be able to accumulate the costs under a general ledger.
  • Have a timekeeping system that identifies employee’s labor by intermediate or final cost objectives.
  • Have a labor distribution system that charges direct and indirect labor to the appropriate cost objectives.
  • Determine costs charged to a contract through regular posting of books of account at least monthly.
  • Correctly identify, exclude, track allowable costs based on FAR 31 unallowable expenses.
  • Identify costs by contract line item (CLIN).
  • Segregate preproduction costs from production costs.

You’ll probably make it through an audit if your accounting system checks every box on this list. And if you’re feeling uneasy, it’s okay; the DCAA wants you to succeed, so they provide audit process overviews and let you see the checklists auditors use for assessments.

What accounting software is DCAA compliant?

Here’s a mind-bending truth. There’s no DCAA approved software, but there is software optimized for DCAA compliance. DCAA compliant software can include any commercial accounting package capable of tracking job costs. For example, Quickbooks provides accurate data, process flows, and reports that you’ll find helpful during an audit.

Still, your comprehensive, government approved accounting system is only one-half of the battle. Your accounting package is only as reliable as your information. In addition, you must establish policies and procedures for routine finance documentation.

And compliance is eternal. Once your software is compliant, it must remain compliant. With the help of a qualified accounting team (like Team 80), you can feel confident that you meet and exceed regulatory requirements.

You should let Team 80 manage your government-approved accounting needs. Here’s why:

You didn’t start your small business to manage tedious accounting tasks. Instead, we want to help you stay focused on researching and developing your SBIR program passion project. That’s why we offer affordable, turn-key accounting services – so you can stay focused on what matters most to your business.

“Federal accounting regulations are complex and ever-changing, both in their wording and how government auditors choose to interpret and enforce them. Team 80 can help you prosper in this challenging environment. When you’re serious about doing business with the federal government, you need an equally serious accounting partner.” – Sarah Sinicki, Director of Business Development, Team 80

We’ve been doing this for more than 20 years. We’ll ensure your system is DCAA compliant – today and into the future.

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Ben Smith

Chief Accounting Officer at Team 80 LLC

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Ben Smith is a Chief Accounting Officer at Team 80  where he is able to apply his accounting experience and passion helping small business owners make their companies successful in the SBIR industry.


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The Ultimate Guide for SBIR

SBIR Ultimate Guide

You’re a small business owner with a brilliant idea that could turn into a marketable product or service. You know there’s funding available for research and development through the (SBIR) Small Business Innovation Research and (STTR) Small Business Technology Transfer programs.

But you don’t know how to set the wheels in motion.

Team 80, your SBIR accounting experts, have set up the ultimate guide for SBIR resources to help your small business along your journey to landing Phase I & II awards.

Compare our Prices and Expertise Today.


SBIR FAQs

We understand the challenges small business owners face when it comes to doing business with the federal government. So we decided to pull together a list of frequently asked questions and resources to help you secure SBIR funding:

What is the SBIR Program?

SBIR stands for The Small Business Innovation Research program. It’s a highly competitive United States government program that awards grants and contracts to small businesses conducting early-stage research and development.

SBIR programs encourage domestic small businesses to engage in Federal Research/Research and Development (R&D) for innovative commercial ideas.

SBIR Application Process Illustration

What are the three phases of the SBIR program?

Phase I

Phase I establishes the technical merit, feasibility, and commercial potential of the proposed R&D efforts. The government generally awards $50,000 – $250,000 for six months or one year.

Phase II

Phase II continues the R/R&D efforts initiated in Phase I. The government bases Phase II funding on Phase I results. They also base funding on the scientific and technical merit and commercial potential of the project proposed in Phase II.

Phase III

Phase III helps small businesses pursue commercialization objectives resulting from the Phase I/II R/R&D activities. The SBIR/STTR programs do not fund Phase III. At some Federal agencies, Phase III may involve follow-on non-SBIR/STTR funded R&D or production contracts for products, processes, or services intended for use by the U.S. Government

Do you have to be a Phase I awardee to be eligible for Phase II?

Yes, you must be a Phase I awardee to become eligible for Phase II. Typically, only Phase I awardees are eligible for a Phase II award. SBIR/STTR Phase II awards are generally $750,000 for two years.

Two Asian Researchers in laboratory glassware for the development of medicine

How do I apply for SBIR?

You can follow this link to start your SBIR application process.

How do I find an appropriate topic?

You can find a list of available SBIR topics here at the official U.S. government website for people who make, receive, and manage federal awards.

You can go here to explore the topics currently under trial.

Who is eligible to receive SBIR awards?

Small businesses must meet the following eligibility requirements at the time of Phase I and Phase II awards:

  • Organized for profit, with a place of business located in the United States
  • More than 50% owned and controlled by one or more individuals who are citizens or permanent resident aliens of the United States, or by other small business concerns that are each more than 50% owned and controlled by one or more individuals who are citizens or permanent resident aliens of the United States.
  • No more than 500 employees, including affiliates

Are non-profits eligible for SBIR awards?

No, but small businesses can use nonprofits as subcontractors.

What is an SBIR funding agreement?

An SBIR funding agreement is a contract, grant, or cooperative agreement between a small business and a Federal Agency participating in the SBIR program for research and development.

What are the performance benchmark requirements?

Small businesses must meet minimum performance requirements – you can familiarize yourself with those requirements here.

What agencies participate in the SBIR program?

There are currently eleven agencies participating in the SBIR program. Each agency accepts proposals from small businesses that match an opportunity from a list of designated R&D topics.

Here is a list of participating agencies:

Women in robotics laboratory working on project

SBIR Deadlines

  • Department of Agriculture
    1. USDA SBIR Phase I – 11/3/2022
  • Department of Commerce
    1. NIST –  February 2022
    2. NOAA
    SBIR Phase I – 02/18/2022
  • Department of Defense:
    1. DoD 22.A & 22.1 BAA – 02/10/2022
    2. DoD 22.B & 22.2 BAA – June 2022
    3. DoD 22.C& 22.3 BAA – October 2022
    4. DOD SBIR 2022.2 – 06/15/2022
    5. DOD STTR 2022.B  – 06/15/2022
    6. DOD SBIR 2022.3 – 10/19/2022
    7. DOD STTR 2022.C – 10/19/2022
    8. AF X21.S CSO  STTR 02/17/2022
    9. DoD SBIR 2022.1 – 02/10/2022
    10. DoD STTR 2022.A  STTR – 02/10/2022
    11. Air Force X22.1 CSO SBIR – 02/10/2022
  • Environmental Protection Agency
    1. EPA SBIR Phase I – August 2022
  • Department of Transportation
    1. DOT – 22QSBIR1 – March 2022

  • NASA – 03/09/2022
  • Department of Education – 01/2022
    ED/IES SBIR Phase I & II – 02/01/2022
    ED/IES SBIR Phase II – 02/07/2022
  • Department of Energy
    2022 Phase 1 – 02/14/2022 & 06/26/2022
    2022 Phase 2 – 04/04/2022 & 08/22/2022
    DOE Phase I Release 2 – 02/22/2022
  • Department of Homeland Security 2021.1 – 01/19/2022
  • Department of Health & Human Services (NIH, CDC, FDA)
    1. 01/05/2022
    2. 04/06/2022
    3. 06/24/2022
    4. 09/03/2022
    5. 09/05/2022
    6. 09/06/2022
    7. 09/08/2022
    8. 09/30/2022
    9. 10/07/2022
    10. 10/08/2022
  • National Science Foundation (NSF)
    1. 01/06/2022
    2. March 2022
    3. June 2022
    4. September 2022
    5. December 2022


SBIR Grant Writers


SBIR Events

SBIR.GOV EVENTS
current events from sbir.gov

SBIR/STTR Spring Innovation Conference
JUNE 13-15, 2022 | Washington D.C.

 

Illustration of Conference presentation

SBIR Accountant

Navigating the SBIR program journey can be daunting and time-consuming.

With over 20 years of experience working with agencies that participate in the SBIR program, Team 80 is an SBIR-approved accounting team that offers remote SBIR accounting services to help you navigate your STTR / SBIR Phase I & II journey. Let us take over so that you can get back to focusing on what matters!

  1. Team 80

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SBIR Additional Resources

Department of Energy Lab Partnering Service – this is a resource for connecting investors with DOE experts to quickly answer innovation questions.

FLC Business-Your One-Stop Shop For U.S. Laboratory Information – this is a comprehensive list of federal laboratory resources.


Get in touch today to learn  more about how Team 80 can help with your SBIR accounting needs. There’s money out there for you – it’s time to take advantage of it.

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Sarah Sinicki

Partner at Team 80 LLC

LinkedIn

Sarah Sinicki is a Partner and Director of Business Development with Team 80 in Colorado where she is able to apply her 20 years of experience to tailor an accounting solution for a business owner no matter what industry they might be in.