Whitepaper: The Audit World's Biggest Myths
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Whitepaper: The Audit World's Biggest Myths
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Incurred Cost Submission Compliance Support

Does your organization have contracts containing FAR clause 52.216-7 Allowable Cost and Payment? If so, an annual Final Indirect Cost Rate Proposal, more commonly referred to as the Incurred Cost Proposal or Incurred Cost Submission (collectively ICP / ICS) is required. Incurred Cost Submission (ICS) is a crucial process for contractors working with government contracts. It involves submitting a detailed report of all costs incurred during a contract period to ensure compliance with federal regulations. 

Flexibly-priced contracts, such as Cost-Reimbursement and Time-and-Materials, provide for reimbursement of indirect costs based on estimated indirect expense billing rates. These estimated rates require adjustment on an annual basis to determine final indirect cost rates based on actual incurred costs for the contractor’s fiscal year. These final rates determine whether the contractor owes the Government for overbillings or the Government owes the contractor for underbillings.

Incurred Cost Submission Requirements

The requirement to submit a FAR-based Incurred Cost Submission is contained in FAR clause 52.216-7(d)(2)(i) – Allowable Cost and Payment, which states, “The contractor shall submit an adequate final indirect cost rate proposal to the contracting officer (or cognizant federal agency official) and auditor within the 6-month period following the expiration of each of its fiscal years.” This means the date is June 30th for contractors with a calendar fiscal year end of December 31.

Navigate your ICS with confidence with help from our Government Contract Experts

Fill out the form below or call  (855-227-3343) to connect with our team. 


Navigating Incurred Cost Submissions

As the primary purpose of the Incurred Cost Submission (ICS)/ Incurred Cost Proposal (ICP) is the finalization of indirect expense rates and, secondarily, justification of claimed direct contract costs, including subcontractor billings, compiling the information necessary to prepare the schedules required for an “adequate” – meaning the proposal is adequate as deemed by the Defense Contract Audit Agency (DCAA) in accordance with their ‘Checklist for Determining Adequacy of Contractor Incurred Cost Proposal’ - submission can be a challenge for any contractor.

The information included in the schedules demonstrates a contractor’s compliance with Accounting System requirements for appropriate identification of direct vs. indirect costs, accumulation and allocation of indirect costs to indirect cost pools, exclusion of unallowable costs, and understanding of FAR 31.205 cost principles, and compliance with cost reimbursement contract requirements.

With consequences that can escalate to penalties for claiming expressly unallowable costs and even violations of the False Claims Act, the ICS/ICP is a significant aspect of compliance in contracting with the Federal Government on flexibly-priced contracts. More than just an accounting and finance effort, it requires input from a variety of functional areas within an organization, such as contracts, purchasing, program management, and human resources.

Incurred Cost Submission Audits & Support

Audits of ICP / ICS present their own challenges to the contractor as these audits have historically represented the largest amount of dollars examined by the Defense Contract Audit Agency (DCAA) relative to all other types of audits. Whether it’s preparation of the submission schedules, guidance on cost allowability, audit support, or navigating requirements after receiving final rate determinations, Capital Edge’s team of experts have the expertise and experience to support your organization.

At Capital Edge, our experts have extensive experience supporting contractors ranging from small businesses to Fortune 500 companies across a variety of industries in addressing this complex contract requirement.

Capital Edge can help your organization evaluate your ICS compliance status & settle audit issues.


Who We Are

  • Our team of experts possess unsurpassed qualifications, experience, and certifications and have previous working experience including industry, Government or “Big Four” consulting firms and possess specific relevant experience navigating Federal compliance.
  • We have extensive experience supporting clients with incurred cost proposals from beginning to end, or where support is needed in between.
  • Our experts roll up their sleeves to provide just the right level of support each client needs, including preparing entire incurred cost proposals, preparing certain schedules, reviewing proposals prepared by clients, and supporting incurred cost audits.

Why Choose Us

  • We have a deep bench of finance and accounting subject matter experts who are unrivaled in the market, both from an experience and knowledge standpoint and, also in providing critical consulting and advisory support to our clients resulting in the ultimate objective – receiving the cognizant Federal agency official-issued ICS / ICP adequacy determination letter and ultimately final approved indirect rates.
  • We foster long-term relationships with our clients to ensure that we provide just the right level of support needed for each engagement.

How We Can Help

All of our client’s needs are different.  We tailor our approach to meet the needs and business objectives of each-and-every client.   Our experts have extensive experience supporting Federal contractors with their ICS / ICP needs, including incurred cost audit support. 

  • Full incurred cost submission development
  • Development of specific schedules
  • Review of client prepared incurred cost submissions
  • Preparation of incurred cost proposal revisions
  • Incurred cost audit support

Frequently Asked Questions

Here are the latest questions being asked about ICS

When must the ICS be submitted?

The requirement to submit a FAR Incurred Cost Submission is contained in FAR clause 52.216-7(d)(2)(i) – Allowable Cost and Payment, which states, “The contractor shall submit an adequate final indirect cost rate proposal to the contracting officer (or cognizant federal agency official) and auditor within the 6-month period following the expiration of each of its fiscal years.” This means the date is June 30th for contractors with a calendar fiscal year end of December 31.

  • DFARS 252.244-7001, Contractor Purchasing System Administration
  • FAR Subpart 44.3, Contractors’ Purchasing System Reviews
  • The FAR and DFARS clauses tested for compliance in a CPSR (e.g. FAR 52.204-10, etc.)
  • DCMA CPSR Policies and Procedures Checklist (commonly referred to by some as the “DCMA CPSR Audit Checklist” or “DCMA CPSR Checklist”)
  • DCMA CPSR Guidebook
Tips to Prepare for the Audit While You Prepare the ICP / ICS Audit
  • Documentation is critical for a successful. Frequently during government audits – “if you can’t show me, it didn’t happen”.
  • Spread the knowledge and wealth. Continuity is essential as there will likely be a lag in time between submission and an audit. Internal training and existing policy and procedure will mitigate the loss of knowledge required to successfully support and audit.
  • Prepare supplemental schedules, even though they are not required for a submission to be deemed adequate by DCAA.
  • Keep a “working copy“. This version of the file should be fully linked and contain all completed supplemental schedules. It will prove invaluable during the audit.
  • Understand audit expectations. Clear communication and setting of expectations at the beginning of an audit can smooth the process. Understand the DCAA audit program and applicable audit guidance and request a detailed entrance conference.
What is the current Contractor Compensation limit?

The Office of Federal Procurement Policy (OFPP) has not published the 2020 compensation cap amounts.  However, the OFPP did post the formula to be used to calculate the cap.  The cap has also been released by DCAA in MRD 20-PSP-004(R) dated August 20, 2020.

  • 1/1/22 – 12/31/22: $589,000
  • 1/1/21 – 12/31/21: $568,000
  • 1/1/20 – 12/31/20: $555,000
  • 1/1/19 – 12/31/19: $540,000

Cap is for contracts awarded after June 24, 2014.

Is the DCAA ICE Model required?

No, the DCAA ICE Model is not required, however the required information that it contains is.  Contractors have the ability to submit using their own format or template with the same required information. 

What is the statute of limitations for an ICS?
The statute of limitations for an ICS is 6 years and the clock begins upon submission.

Where can the DCAA Incurred Cost Submission Adequacy Checklist be found?

The DCAA Incurred Cost Submission Adequacy Checklist is can be found here on the DCAA website.

When is Incurred Cost Submission required?

An incurred cost proposal or incurred cost submission is required for Federal contractors who have flexibly priced contracts or subcontracts containing FAR 52.216-7 – Allowable Cost and Payment clause.  It is due within 6 months following the end of the contractor’s fiscal year.  For most contractors with a December 31 fiscal year end, the submission is due the following June 30th.

When does the Incurred Cost Audit occur?

The incurred cost audit can occur anytime after the ICS is submitted.  Typically, the audit happens months to years after submission. 

Given this delay related to incurred cost audits, it is important to ensure that the data supporting the ICS is organized and available when the audit starts.  Check out this video to learn best practices for preparing for the incurred cost audit while preparing the ICS.

Prepare for and execute your ICS successfully with help from our GovCon Consultants


About Capital Edge Consulting

Capital Edge government contract consultants support Government Contractors and Federal Grant Recipients. Our consultants specialize in the regulatory compliance matters you need.

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Call Us: (855) 227-3343

Whitepaper: The Audit World's Biggest Myths
Download Now
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