Now is the time to start preparing for incurred cost proposals

As soon as the accounting books are closed, government contractors should begin planning for completion of their annual incurred cost proposal (ICP) submission.

The Defense Contract Audit Agency (DCAA), the agency which audits contracts for the Department of Defense and other government agencies, requires contractors with cost reimbursable contracts invoking the Allowable Cost and Payment Clause (FAR 52.216-7) to file their final ICP with supporting documentation within six months after the end of the fiscal year (i.e. June 30 for December fiscal year ends).

Although the ICP may be filed in paper form, in recent years the DCAA encourages contractors to complete the submission in an electronic format.

The DCAA has developed an electronic version of the ICP which is referred to as the Incurred Cost Electronically (ICE) which consists of 24 complex excel spreadsheets, called schedules, which are designed in accordance with the Federal Acquisition Regulations (FAR).

The ICP submission computes indirect rates, direct costs by contract, and indirect costs by pool, including unallowable cost. Failure to timely complete and submit the ICP timely can result in delayed or reduced payments on existing contracts, as well as an inability to bid on future contracts.

Contractors have a contractual obligation to submit their incurred cost proposal by the due date whereas DCAA has nothing which binds it to a time-line for completing their audit of the contractors’ incurred cost. In fact, because of limited DCAA resources, many contractors don’t expect a final audit of their rates for some time.

  Now is the time to start preparing for incurred cost proposals