A Few Things To Know About Submitting Incurred Costs

Posted by dcaa Consultant on November 26th, 2020

Do you want to know what the DCAA aims to do by informing you about incurred costs? It’s mandatory for all federal contractors holding cost-type or time and materials (T&M) contracts. It’s also a universal requirement, regardless of agency customer. Any contract that has to submit incurred costs will include the Federal Acquisition Regulations “Allowable Cost & Payment Clause” and the “T&M Payment Clause.” Just like you, a lot of people out there wish to learn more about incurred costs, and this topic should be helpful to all.

About submitting incurred costs

The process of incurred cost submission goes by many names and acronyms. For instance, you may recognize it as the final indirect rate proposal, incurred cost electronic submission, indirect cost rate submission, incurred cost proposal, ICS, ICES, or ICP. Regardless of the name, it’s just the mechanism for the true-up of your actual indirect cost to the indirect costs provisionally billed for in a single-contractor fiscal year. It typically covers six areas, including schedules A to E, schedule H/H-1/summary H, schedule I, schedule K, schedule N, and schedules F, J, L, O, supplemental schedules.

When to file

You have to submit the details concerning the incurred cost within six months after the end of the fiscal year. So, if your fiscal year ends on 12/31, you have to make sure that you submit the relevant data no later than the following June 30th for each fiscal year in which the cost incurred will be under an applicable contract type. There are a few special considerations to make if you encounter circumstances like mergers, acquisitions, or changes in the fiscal year. These events can necessitate a partial fiscal year submission of the incurred cost. During these instances, you must seek an advanced agreement with your administrative contracting officer.

When it becomes vital

So, how do you recognize the right moment to submit data concerning incurred costs? You have to make sure that you provide it for each business unit that holds applicable contracts subject to the Allowable Cost and Payment clause. Just like Cost Accounting Standards or CAS disclosure statements, submitting data about incurred costs is also vital for Home Office entities or Shared Service Business Units. These are entities where the costs originate and eventually flow into the business units holding applicable contract types and requiring an Incurred Cost Proposal or ICP.

Final words

Submitting data regarding incurred costs is akin to providing income tax returns required for all Americans. Under the cost-type and T&M contracts, when you bill the costs you incurred, you use provisional or estimated indirect rates. It’s just like withholding the process for income tax purposes. As soon as the fiscal year ends, you will know what actual costs you incurred. Understandably, you can calculate final indirect rates based on the actual costs, instead of the estimated costs used in establishing provisional billing rates.