The Government requires contractors performing certain types of “flexibly-priced contracts” (e.g., cost-plus fixed fee) to prepare an annual Incurred Cost Submission (ICS) for to finalize cost reimbursement under the Allowable Cost and Payment clause (FAR 52.216-7).
The ICS basically calculates the company’s actual fringe, overhead and G&A costs and related rates for the year as well as the actual costs and billings on contracts. The ICS also determines the final amount due to or from the government on each contract. Preparing an ICS is a difficult, lengthy and tedious process that is subject to government audit and in some cases, penalties. Fortunately, or perhaps unfortunately, the contractor has six months after year end to prepare and submit its ICS.
Timely and properly prepared ICSs allow contractors to effectively manage cash-flow associated with cost reimbursement on contracts while avoiding penalties related to “unallowable costs.” Properly prepared ICSs also helps to avoid delays due to audit disputes over the adequacy, accuracy or completeness of the ICS.
There is not a one-size-fits-all model for preparing an ICS as contractors operate in a variety of industries; have differing overhead pools and rates; use different accounting systems; and deliver a variety of goods and services to the government under a various contract types. While the DCAA does have a standard Excel template that contractors can use to prepare their ICS, it’s a one-size-fits-all template that is sometimes difficult and clunky to use – and it lacks any internal controls to help ensure accuracy.
CGS has prepared numerous ICS for a variety of clients and industries. We will work closely with your company in both the design and development of the ICS model as well as the actual preparation and submission of the annual ICS. We can help your company to maximize its cost recovery in a compliant and defendable manner. Our proprietary approach to preparing an ICS helps to ensure accuracy and internal consistency through a variety of internal controls.
Depending on your company’s volume of Federal flexibly-priced work and the DCAA’s risk assessment, your ICS may be subject to a DCAA audit – which are often difficult and contentious, and almost always lead to disagreements on allowable costs and overall cost recovery. These disagreements with the DCAA on the allowability of costs can ultimately lead to penalties as well.
We can assist your company in responding to the DCAA’s information requests, and we can help to facilitate the discussions and negotiations with the DCAA and your ACO to achieve a successful outcome.
Please contact us today to see how we can help your company to prepare its ICS and respond to the inevitable DCAA questions and inquiries.