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Incurred Cost Submission: An Introduction

If a contractor has received a contract containing the Allowable Cost and Payment clause (FAR 52.216-7), the clause requires preparation of an Indirect Cost Rate Proposal (ICRP).  The clause is applicable to all cost-type contracts.  The proposal also goes by the following industry names “Incurred Cost Proposal” (ICP) and “Incurred Cost Submission” (ICS).  The proposal is prepared using the Defense Contract Audit Agency (DCAA) Incurred Cost Electronic (ICE) Model (DCAA > Customers > Checklists & Tools > ICE Model) and is due six months after the contractor’s fiscal year end.

Under cost-type contracts, contractors utilize a provisional billing rate throughout the year.  The intention of the Incurred Cost Proposal is to true-up a contractor’s provisional billing rate to actual under its cost-type contracts. The actual rate is compared to what was billed and the calculated over/underbill is either credited back to the government or invoiced, respectively.

The proposal includes a series of Schedules from Schedule A through O, including Supplemental Schedules.  Some of the more impactful Schedules Include Schedule A Summary of Indirect Rates, Schedule H Summary of Direct Contract Costs, and Schedule I Cumulative Costs Claimed & Billed.

Upon completion, the Incurred Cost Proposal is submitted to DCAA and your Administrative Contracting Officer (ACO) for audit.  DCAA uses an Incurred Cost Submission Adequacy Checklist (DCAA > Customers > Checklists & Tools > Incurred Cost Submission Adequacy Checklist) to determine if the submission is adequate for audit.  Upon acceptance, DCAA may audit the submission for compliance including accuracy of rate calculations and applications.  This is the most frequent audit performed by DCAA year over year.  Their findings routinely center on unallowable costs pursuant to FAR 31 and exceptions to cost accounting practices used by contractors.

Our customers are often looking for permanent staff in their accounting or compliance groups. Individuals with U.S. Government contracting experience carry a unique skill-set. In our small world, we believe sharing access to resources is a necessity to help clients govern their U.S. Government requirements.

If you are a candidate or a firm looking for assistance in the U.S. Government contracting arena please contact us at rkoenitzer@rkiaccounting.com to discuss how we might be of assistance.

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