It’s that time of year to start thinking about the preparation of the incurred cost proposal if you are a Contractor with flexibly priced contracts. The incurred cost proposal is required for cost type, time, and material contracts subject to FAR 52.216-7, “Allowable Cost and Payment.” Cost type and time and material contracts have a cost-reimbursable element that needs to be trued up (i.e., final indirect rates), hence the reason for the incurred cost proposal. There are many subsections listed within the FAR clause 52.216-7(d), thus defining the required schedules for an adequate indirect cost rate proposal.
This incurred cost proposal is provided to your Administrative Contracting Officer (ACO) and Defense Contract Audit Agency (DCAA) with a deadline of six months after the Contractor’s fiscal year-end. Once DCAA receives the Incurred Cost Proposal, they review it for adequacy. DCAA provides a notification to the Contractor, typically via email, that the incurred cost proposal is deemed adequate for audit or outlines changes DCAA believes are necessary. To be deemed “adequate for audit” means DCAA has reviewed the incurred cost proposal and determined that the schedules are properly completed for them to begin the audit potentially.
A Contractor has six months to complete the required schedules within the incurred cost proposal. These schedules compile information that DCAA will audit. The goal is to have an adequate submission and to achieve that goal, it is critical to properly complete the schedules within the incurred cost proposal. This is an important task that can be outsourced to professionals who are experienced in the preparation of incurred cost submission. Below we discuss some benefits of outsourcing the preparation of an incurred cost proposal.
Benefits of Outsourcing vs In-House Preparation of an Incurred Cost Proposal
Efficiency – Saves Time and Resources
Employees tasked with preparing the incurred cost proposal are performing this task in addition to their day-to-day work responsibilities. Outsourcing the preparation of your incurred cost proposal to experienced professionals provides less of a burden to your current employees, who already have plenty of work to complete. Outsourcing not only provides additional resources for your company, but it will also save time. We have the experience and can prepare the schedules in a well-organized and competent way that may be lacking when you only prepare once a year.
An Independent Set of Eyes
For many Contractors, when Redstone GCI is preparing or reviewing their submission, it offers a great deal of reassurance to the Contractor. Our experts include former DCAA and industry veterans who can provide an unbiased view of your indirect rate calculation. Our team asks questions during the preparation and review of every submission with an eye toward maximizing cost recovery while minimizing audit risks.
Properly Completed Schedules Done Right the First Time
Experienced preparers will efficiently use resources by preventing wasted effort to ensure the appropriate information is included within the schedules. This allows for a smooth audit process by ensuring the right information is provided the first time. We prepare many incurred cost submissions and work with DCAA auditors on a day-to-day basis. We are familiar with DCAA expectations with incurred cost proposals to achieve the goal of having an adequate incurred cost proposal and lowering your company’s risk of selection for audit.
Peace of Mind Knowing Your Incurred Cost Proposal (ICP) is Prepared Adequately
Why risk preparing an ICP internally when it can be outsourced to professionals who specialize and study government contract cost and federal regulation and have prepared hundreds of ICPs? Don’t risk rejection, or worse, increased DCAA scrutiny and oversight by preparing your ICP internally. Consider reaching out to a professional.
At Redstone Government Consulting, we work with contractors, large and small, to prepare the annual incurred cost proposal in a timely and adequate manner, using professionals who have prepared hundreds of ICPs and interact with DCAA daily. We understand not only the regulatory requirements for preparation but also know and keep abreast of auditor expectations as well as the elements of the ICP schedules that can cause issues or increase risks. Let us help you to submit a compliant, adequate ICP and take the pressure off you and your staff.
Kimberly is a Managing Consultant with Redstone Government Consulting, Inc. based in our Huntsville, Alabama office. Her areas of expertise include working with government contract accounting and contracting issues and audit. Kimberly specializes in assisting government contractors in the unique accounting, pricing, proposal preparation, and compliance requirements of the U.S. Government. Professional Experience Kimberly’s experience includes preparation of complex incurred cost submissions, compliant accounting infrastructure, preparation and evaluation of policies and procedures, contract closeout process, developing provisional indirect rate budgets, monitoring actual indirect rates, and providing audit support to government contractors. Her primary focus is working pro-actively in preparing small contractors for government contract challenges as well as resolving DCAA issues. Kimberly has almost ten years of experience assisting clients with Federal Acquisition Regulations (FAR) and Cost Accounting Standards (CAS) best practices and compliance. She works with government contractors to comply with critical Federal Acquisition Regulations (FAR) requirements related to cost accounting and proposals. Her sundry experience with various government contract issues and successful resolutions provides insight that benefits our clients. Prior to joining Redstone Government Consulting, Inc., Kimberly specialized in assurance and advisory services with a regional firm (Jackson Thornton), working as a staff accountant conducting compilations and reviews, auditing financial statements and assisting with litigations. Education Kimberly earned a Bachelor of Science degree in Commerce and Business Administration from The University of Alabama in 2007. Affiliations National Contract Management Association Women in Defense