The incurred cost submission
The incurred cost submission is the annual reconciliation of what you actually spent to what you billed. It sets final indirect rates for the year, and until it is filed and settled, none of the affected contracts can close.
Who files and when
If a contract or subcontract carries FAR 52.216-7, Allowable Cost and Payment, you owe a final indirect cost rate proposal. That clause is standard on cost-reimbursement work and appears on many T&M contracts for the portion where material is reimbursed at cost.
The clause requires an adequate proposal within six months after the end of your fiscal year. For a December 31 year end, that is June 30. Extensions require a written request, granted in advance.
Final rate determination is delayed, contract closeout stalls, and the contracting officer may unilaterally establish rates — typically with a decrement applied against you.
The schedules
DCAA publishes the Incurred Cost Electronically model, a workbook of schedules aligned to the requirements at FAR 52.216-7(d)(2)(iii)(A) through (O). You are not required to use it — any format satisfying the clause works — but the schedules define what adequate means, and using them keeps the conversation short.
| Schedule | Contents |
|---|---|
| A | Summary of claimed indirect rates, with pool, base, and calculated rate. |
| B, C, D | Overhead pool, G&A pool, and any intermediate pools such as fringe or occupancy, with their allocations. |
| E | Claimed allocation bases. |
| F | Facilities capital cost of money, where claimed. |
| G | Reconciliation of books of account to the claimed costs. |
| H | Direct cost by contract, at claimed indirect rates. H-1 covers government participation in the pools. |
| I | Cumulative direct and indirect costs claimed and billed, by contract. |
| J | Subcontract information. |
| K | Reconciliation of claimed labor to payroll tax returns. |
| L | Decisions or agreements affecting the rates. |
| M, N | Accounting and organizational information; the signed certificate of final indirect costs. |
| O | Contract closing information for contracts completed during the year. |
The certificate has to be signed by someone no lower than a vice president or chief financial officer, and the signed original kept for examination.
Deficiencies that get submissions returned
- Certificate missing, or signed below the required level.
- Subcontract information incomplete.
- Intermediate pool allocations not fully disclosed.
- Unallowable costs left out of the G&A base.
- Bid and proposal or IR&D not fully burdened.
- Physically complete contracts not carried onto the closing schedules.
- Government participation not computed for every final rate.
- Claimed labor not reconciling to payroll tax filings.
- Schedules that do not tie to the books of account.
Making it a filing rather than a project
Contractors who dread the submission are usually rebuilding the year in the spring. Contractors who file in a week have been assembling it all along.
- Screen unallowable costs at every close, not in April.
- Compute actual indirect rates monthly and keep the working papers.
- Reconcile job cost to the general ledger to billings at every close.
- Keep cumulative billed-by-contract current — Schedule I is a report, not a reconstruction, if you do.
- Collect subcontractor data as subcontracts are awarded and closed, not at year end.
- Reconcile labor to payroll tax filings quarterly.
After settlement, remember the back end: FAR 52.216-7 requires billings on all contracts to be updated to the final settled rates, and the cumulative schedule updated, within sixty days of settlement.
Frequently asked
When is the incurred cost submission due?
Within six months after the end of your fiscal year, under FAR 52.216-7. For a December 31 year end that is June 30. Extensions have to be requested in writing and granted in advance.
Do we have to use the DCAA ICE model?
No. Any format that satisfies FAR 52.216-7(d)(2)(iii)(A) through (O) is acceptable. The ICE model is convenient because it contains every required schedule, which makes adequacy review straightforward.
What happens if we file late?
Final rate determination and contract closeout stall, and the contracting officer may unilaterally establish rates — usually applying a decrement that reduces your reimbursement. Repeated lateness also affects how your business systems are viewed.
Who has to sign the certificate of final indirect costs?
An officer of the company no lower than a vice president or chief financial officer. Keep the signed original available for the auditor.
Related
Indirect rate structure: fringe, overhead, and G&A
How the three-tier pool and base structure works, how the rates stack, and what changes when you use a value-added G&A base.
Read →Provisional billing rates
How provisional rates get set under FAR 42.704, why they need monitoring every month, and how contractors end up owing money back at year end.
Read →Unallowable costs and how to segregate them
What FAR Part 31 makes unallowable, how to screen for it during the year rather than at year end, and why segregation has to be structural.
Read →