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Incurred Cost Submission Template

For an introduction to incurred cost proposals, please read What is an Incurred Cost Proposal?

There are six main steps to an incurred cost proposal:

  1. Gather input data from contractor accounting system, and project files
  2. Input data into the rate model
  3. Ensure reconciliation of the model to cost data
  4. Analyze resulting over/under billings by contract
  5. Prepare Incurred Cost Proposal Checklist to ensure adequacy
  6. Prepare and submit the Incurred Cost Submission

1. Gathering Input Data

There are many pieces of data needed to complete an incurred cost proposal. The main source of information is the contractor’s cost accounting data. For indirect costs, the right level of detail to identify the contractor’s cost pool accumulation is needed. Some organizations have separate accounts for each cost pool, while others may utilize cost centers to differentiate between overhead pools, for example. For direct costs, a project ledger that reports costs at the level specified within each given contract (usually at the Contract Line-Item Number, or CLIN, level), along with B&P and IR&D costs is needed.

There are a handful of other data sources and reports required for completion of the incurred cost proposal. These are also identified by schedule, in the next section:

2. Inputting Data into the Incurred Cost Proposal

The first objective of the Incurred Cost Proposal is to calculate the actual indirect rates expended during the cost accounting period. Calculation of the indirect rates using the standard ICE model (Incurred Cost Electronically), is most accepted by the Defense Contract Audit Agency (DCAA). The ICE model is an excel workbook with separate Schedules for each rate pool, and subsequent calculations. The following table illustrates each schedule and its purpose within the Incurred Cost Proposal.

Incurred Cost Submission Template

Schedule Title Description Inputs

(as applicable)

A Rate Summary Summary of all calculated final and intermediate rates showing pool and base values, and resulting rate. Schedules B-E
B General & Administrative (G&A) Pool Includes account balances for all trial balance accounts containing G&A labor and non-labor expenses, related fringe, intermediate allocations (if applicable), Bid & Proposal (B&P), and Independent Research & Development (IR&D) costs. Unallowable G&A costs within displayed accounts are illustrated and removed using the adjustment column. Trial Balance, Schedules D(x), Fringe, H and E
C(x) Overhead Pool(s) The contractor can include as many Overhead (OH) pools as needed labeling the fist as C(1), the second C(2), and so on. Each schedule C should include accounts balances for all trial balance accounts containing OH labor and non-labor expenses, related fringe, and intermediate allocations. Unallowable OH costs within displayed accounts are illustrated and moved to the G&A base. Trial Balance, Schedules D(x), and Fringe
D(x) Intermediate Pool(s)

(as applicable)

Includes account balances for all trial balance accounts containing intermediate expenses (e.g., facilities, IT, etc.), and related fringe. Each of these schedules must also show the allocation base and the resulting intermediate allocations to the G&A and OH pools Trial Balance, and Fringe
Fringe Fringe

(as applicable)

Accumulates all fringe expenses for subsequent allocation to G&A, OH, and/or intermediate pools, unless fringe expenses are included within those pools. Trial Balance, and

Schedule E

E Claimed Allocation Bases Calculates all allocation bases for each final rate (e.g., G&A, OH) by element of cost used to distribute indirect costs. For example, an Overhead base might include contract labor, IR&D labor, and/or B&P labor. Schedule E will also detail whether the G&A base is total cost input or value-added depending on inclusion or subtraction of direct material and subcontracts from the base calculation. All direct costs come from Schedule H. All overhead costs are included in the G&A base, and IR&D and B&P removed for subsequent inclusion in the pool in Schedule B. Schedules B, C(x), and H

(as applicable)

If the contractor maintains Facilities Capital Cost of Money (FCCOM) Rates, Schedule F is included in the Incurred Cost Proposal. This schedule lists all facilities capital costs and related accumulation and distribution of Net Book Value of assets. Schedule F-1
F-1 Calculation of NBV

(as applicable)

Lists all assets by asset class and related distributions. Only applicable if the contractor maintains FCCOM rates. General Ledger Accounts
G Direct Cost Reconciliation Reconciles direct costs by major cost element in Schedule H to the contractor’s General Ledger Schedule H
G-1 Direct Cost Recon 2 Reconciles direct costs by major cost element in the contractor’s general ledger to its job cost ledger Schedule G
Summary H Summary of Schedule H Summarizes direct costs in Schedule H by direct cost element, and details B&P and IR&D costs and applied indirect burdens Schedules H and E
H Direct Costs by Contract/


Lists all direct costs by contract type (i.e., cost type, other flexibly priced, T&M, fixed price, commercial work), by major cost element (i.e., labor, travel, material, ODC, subcontracts. Schedule H also applies the final rates calculated from Schedule A to calculate total actual cost expenditure by contract by Contract Line Item Number (CLIN). Contractor Project Ledger
H (cont.) Gov’t Participation in Direct Cost Bases Lists percentages of each total indirect cost base by contract type. Effectively illustrates percentage of government vs. commercial direct cost by final cost basis. Schedule H
I Cumulative Government Costs Claimed and Billed The “true-up” schedule. Schedule I is perhaps the most important schedule of the ICE model in that it informs both the contractor and government whether the contractor has an overbill or underbill position on each contract. This schedule lists the cumulative costs incurred per contract based on current and historic project accounting bookings, as well as the cumulative costs billed per contract based on historic bill files. The two amounts are compared, and the resulting variance indicates whether the contractor owes the government based on an overbill, or whether the government owes the contractor based on an underbill. This schedule effectively tells all parties (a) whether the contractor’s provisional billing rates are a stable estimate of the contractor’s actual costs incurred, and (b) which contracts are physically complete. Schedules H, K, and Contractor Gov’t Invoices
J Subcontract Information Lists all subcontracts issued under government contracts, including information such as subcontractor name, DUNS number, value, performance period, etc. Must reconcile to direct subcontract cost amounts listed on Schedule H Contractor Subcontract Logs
K Time & Material Contract Details Lists all hours and rates by labor category by Time & Materials contract, and any material and travel costs. Must reconcile to direct cost amounts listed on Schedule H Contractor Labor Distributions
L Payroll Reconciliation Reconciles all labor costs (direct and indirect) included in the ICE model to the contractors IRS Form 941s, payroll accruals and adjustments. Schedules B, C(x), D(x), and H
M Decisions/


Lists any decisions/agreements, or approvals affecting the direct/indirect cost structures, and descriptions of accounting or organization changes. Contractor Accounting Changes
N Certificate of Final Indirect Costs Certification by signature of the contractor’s designated officer, to establish the final indirect cost rates, and state that all unallowable costs have been removed to the best of their knowledge. Contractor Signature
O Contract Closing Information Lists all contracts listed as “physically complete” on Schedule I, and includes period of performance, contract ceiling, fee, and level of effort if applicable. Schedule I
Supplementals Various The ICE model contains several supplemental schedules, which are not required for completion, but may be requested by the Contracting Officer or DCAA auditor. Historic Rate Data, and Contract/ Subcontract Briefings

3. Reconciliation of the Incurred Cost Proposal to Cost Data

In addition to the schedules described above, it is very useful to include a separate worksheet that lists all the expense accounts, which rate pools/bases they map to, and subsequent reconciliation to the rate schedules. Contractors may also want to consider including a “Total Cost Reconciliation”, which shows that all contractors books of accounts reconcile to costs used in the rate model. Effectively, the contractor’s expense Trial Balance, plus or minus certain adjustments and unallowables should equal the total costs in the model.

Expert Tip: any adjustments to rate pools should be accompanied with a footnote explaining the reasonings behind them. The most common adjustments are FAR 31 unallowable costs and other common DCAA questioned costs. The footnote may even be a reference to a separate calculation schedule (e.g., Cost of Ownership). This best practice demonstrates understanding of FAR cost accounting.

4. The Annual “True-up”

The main objective of the Incurred Cost Proposals is to calculate the over or underbill positions the contractor is in for each contract, to understand what it owes or is owed by the government or its prime contractors. As described above, this amount is calculated in Schedule I.

Once the incurred cost proposal has been filled out and reconciled, it is important for the contractor to return to Schedule I and review its position on all contracts and subcontracts to ensure that there are no surprisingly over or underbilled contracts, and develop informed billing strategies going forward. For example, if a given contract has a large unanticipated overbill, it might be prudent to double check the data input source for the correct information, or perhaps to stop claiming indirect costs on future bills.

Expert Tip: In addition to Schedule I, it is best practice to compare the current calculated rates to the latest provisional billing rates and previous final rates. This will inform the contractor not only how the rates changed, but provide an understanding of which accounts or direct cost elements and contracts are the main drivers of change. Having this information in your back pocket will allow you to answer auditors with confidence when they ask why certain rates changed materially.

5. Prepare Incurred Cost Proposal Checklist to Ensure Adequacy

Prior to submission of the Incurred Cost Proposal or ICE model, the contractor should fill out a DCAA ICS Adequacy Checklist as a final internal review, and include it with the submission. Before the actual Incurred Cost Audit, the auditor will perform this preliminary adequacy check of the Incurred Cost Proposal that is submitted to ensure the model is adequate for review.

While the auditor will complete this checklist themselves, performing this exercise prior to submission is not only a tool for quality control, but may demonstrate to DCAA that the contractor has an understanding of the review process.

6. Final Preparation and Submission

Once the schedules have been completed and reconciled, and Schedule I has been reviewed for accuracy, the contractor is ready to begin the submission process. The Incurred Cost Proposal is typically included as an attachment to an email addressed to the assigned DCAA auditor. It is prudent to request confirmation of receipt of the submission from the government to remove liability of delinquency in the timing of your submission.

If your Incurred Cost Audit results in no findings, DCAA will issue a formal letter addressed to the certifier in Schedule N, with the final rates.

We understand that preparation and submission of Incurred Cost Proposals is challenging. Please contact us here if you have any general questions, are in need of indirect rate services, or need Incurred Cost Audit support.

In Need of Incurred Cost Submission Support?

Struggling with incurred cost submission? RKI Accounting is here to help. Our experts specialize in indirect cost rate preparation, ensuring accurate and compliant submissions. Avoid costly mistakes and streamline your process with our professional support. Contact us today to get started and ensure your incurred cost submissions are handled with precision and expertise.

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