Clauses · DFARS · Pricing and audit
DFARS 252.242-7004 Material Management and Accounting System
Does the regulation require it to flow down?
No
The clause has no subcontracts paragraph and DFARS 242.7204 addresses only the Government's own contracts — there is no regulatory flow-down. Primes paste it into their DFARS supplements as part of a business-systems block (alongside estimating system, EVMS and accounting system administration) so that a DCMA finding at prime level can be pushed onto the supply chain. 242.7204(a) removes small businesses before any of the system criteria are reached, so a small sub has no covered business system for this clause to reach. That paragraph directs the contracting officer rather than the contractor.
A clause can reach your subcontract without a mandate. Once it is in your document, it is a contract term all the same. The missing mandate is a fact about the regulation. It is not a ruling on your order.
Checked against acquisition.gov on 2026-08-05 · edition JAN 2025 (codified DFARS); republished for DoD use as 252.242-7997, MATERIAL MANAGEMENT AND ACCOUNTING SYSTEM (DEVIATION 2026-O0050)(MAR 2026) · base v0.9.3 Read the text ↗
What it makes you produce
2 items for your checklist, slowest first.
A program you have to be running
You are either running it or you are not, and what the prime asks for is the date it started.
A material management and accounting system that forecasts material requirements, ties purchased and fabricated material cost to valid time-phased requirements, and costs material transactions on consistent, unbiased logic
DFARS 252.242-7004(b)(1)
Something you write
Days to weeks, and nobody outside your company has to agree to it.
Written system policies and procedures, the results of your own internal reviews when the administrative contracting officer asks for them, and a disclosure of any significant change filed at least 30 days before it goes in
DFARS 252.242-7004(c)
When it is used
DFARS 242.7204: use in all solicitations and contracts exceeding the simplified acquisition threshold ($350,000 since 2025-10-01) that are NOT for the acquisition of commercial products or commercial services, and that (a) are not awarded to small businesses, educational institutions, or nonprofit organizations, and (b) are either cost-reimbursement contracts, or fixed-price contracts with progress payments made on the basis of costs incurred as work progresses. All four conditions have to hold. For WhatBinds's reader the first one settles the prescription: a small business is outside it. That is a fact about what the contracting officer was directed to do, and 242.7204 does not lift a term the prime's DFARS supplement has already put in the subcontract. What follows is narrower and it is enough: a small sub has no covered business system for the clause to reach.
Read closely
Paragraph (b)(1) is written flat — the Contractor shall maintain a system — with no size test inside the clause. DFARS 242.7204(a) is where small business is taken out, and that paragraph directs the contracting officer rather than the company holding the order, so a small business meeting this clause in a subcontract has a question for the prime rather than an answer to give: which of my systems does the prime say the ten criteria at paragraph (d) reach, and on what authority. Those criteria carry numbers — 98 percent bill-of-material accuracy and 95 percent master production schedule accuracy as goals, 95 percent record accuracy, audit trails, and no physical commingling of inventory bought against different contract types. The material-weakness machinery at (e) and (f) — a 30-day written response at (e)(2), a correction or corrective action plan within 45 days at (f) — and the payment withholding it feeds under DFARS 252.242-7005 all run between a contracting officer and the company holding the Government contract, so none of it puts paper in a subcontractor's hands.
The 3 templates that name it, with the line
Source: acquisition.gov, DFARS 252.242-7004, DFARS 242.7204 and DFARS 212.301 (verified 2026-08-05); DoD Class Deviation 2026-O0050, Revolutionary FAR Overhaul Part 42 / DFARS Part 242, 2026-03-06, Attachment A1, 242.7200 through 242.7204 and 252.242-7997/-7998/-7999
This is research, not legal advice. It states what the regulation says about this clause and cites the paragraph behind it. It does not rule on your order, and it does not rule on whether a prime's markings are correct.