Incurred Cost Submissions (ICS) can have many names, including Incurred Cost Electronically (ICE), Incurred Cost Proposal (ICP), and the Final Indirect Rate Proposal. The purpose of an incurred cost submission is to reconcile provisionally billed indirect costs with the contractor’s actual indirect costs for the fiscal year, which, in turn, facilitates contract closeout.

Why Incurred Cost Submissions Matter

To those in the contracting world, the ICS is more than a box-ticking exercise; it’s a vital instrument in the symphony of financial governance. Here’s why contractors can’t afford to overlook this submission:

• Contract Closeout Catalyst: The ICS stands as the bridge that connects the provisional billing of indirect costs with the actual costs incurred, a significant factor in finalizing contracts.

• Compliance Checkpoint: For federal contractors, maintaining a stringent level of compliance is not only a standard practice but a regulatory requirement.

• Rate Realignment: The ICS process recalibrates indirect rates, ensuring that all costs billed to the government are supported by substantiated financial data.

The Who and When of Incurred Cost Submissions

Before wading into the technical aspects, it’s critical to understand who is obliged to prepare and submit an ICS, and the timing that governs this regulatory requirement.

Mandatory Submitters

While not an exhaustive list, the following entities are usually prime candidates for ICS submission:

• Prime contractors: They often call the shots on cost reimbursable or time-and-material contracts, making ICS a vital task in their schedule.

• Subcontractors: While not always mandatory, subcontractors typically find themselves under similar pressures if clauses are expanded past the Prime.

The Countdown to Submission

The due date for an ICS submission is not merely a suggestion; it’s a regulatory lifeline. Key points to remember are:

• Six Months Post Fiscal Year End: Contractors must submit their ICS no later than 180 days after the fiscal year’s closure, making the process an immediate post-year ordeal.

• Compliance is Key to Extension: While the 180-day rule is unwavering, Contracting Officers may grant extensions, but these are exceptions, not norms.

Late to the Filing Party: Understanding the Consequences

It’s one thing to understand that submission is critical; quite another to appreciate the repercussions of tardiness. Here’s what happens if you miss the deadline:

• Six Months Overdue: Late submissions are like red flags to auditors, indicating potential non-compliance and financial risk.

• Unilateral Determinations Loom: Overdue submissions may lead to a unilateral determination by the Contracting Officer, a process that reflects costs using decrement factors or company-wide averages.

• Implications on Future Contracting: The fallout from unilateral determinations transcends immediate financial implications, often influencing future contract bids and awards.

Preparing for an ICS Submission

Understanding the cost submission is step one; preparing for it is a multi-faceted endeavor. Details on the nitty-gritty of submission preparation, including adequate supporting data and FAR clauses, are crucial for a seamless ICS process.

Registration and Training

To equip yourself for the ICS, consider registering for training webinars and programs that specialize in government contracting compliance. Familiarize yourself with the regulatory framework that underscores the submission process, such as FAR 42.7, 52.216-7(d), and 52.232-7.

Organizational and Recordkeeping Best Practices

Solid record-keeping and stringent organization are your best comrades in the ICS preparation battle. Ensure that your financial records align with submission requirements, and that you can readily produce documentation to support your cost accumulation.

Proactive Engagement with Auditing Agencies

Staying ahead of potential compliance risks is a strategic move. Establish open lines of communication with the Defense Contract Audit Agency (DCAA) and other auditing agencies. Proactive dialogue can elevate your understanding of their expectations and help identify and rectify compliance issues prior to the submission.

Submission Software and Tools

Leverage technology solutions, such as accounting software tailored to government contracting, to streamline your ICS preparations. These tools can facilitate data organization, accuracy, and even electronic submission, reducing the margin for error and late submission. Deltek Costpoint is a great option for companies looking for a compliant ERP solution.

The Path Forward

In your quest for ICS preparedness, remember that education and proactive measures are your allies. Compliance with ICS mandates is not a periodic chore but an ongoing commitment to financial transparency and responsibility in the context of government contracts. Register for our upcoming webinar to learn how to best prepare, link below!

You Might Also Like:

[Upcoming Webinar] Register for PCI’s ICS Webinar Here!
[DCAA Compliance Services] Guarantee government contracting compliance with confidence. Learn more about PCI’s compliance support.
[On Demand Webinar] What Makes an Accounting System Compliant