Redstone Government Consulting Blog | Incurred Cost Proposal Submission (ICP/ICE) (6)

Since most incurred cost proposals (ICPs) are due June 30, it is a good time for contractors to review the DCAA criteria for audit selection in order to minimize (where possible) the potential that their ICP will be selected for audit. All ICPs with an auditable dollar volume (ADV) greater than $250 million are automatically selected for audit. ICPs with an ADV between $100 million and $250 million of ADV that have not been audited in the last 3 years are also automatically selected for audit. ADV is determined by the amount of cost reimbursable, i.e. cost type and T&M, contract revenue for the fiscal year.

It’s a busy time of year for us and many of our clients, but I wanted to take this opportunity to remind all of our readers of a few upcoming things to keep in mind. For most of our clients, January was a whirlwind of closing 2016 and getting all W-2s and 1099s completed. February will be spent ramping up for financial statement audits and the corporate tax deadline, but for government contractors there’s also a few extra things to do this time of year.

Contractors subject to FAR 52.216-7, “Allowable Cost and Payment” clause are required to submit, to the cognizant contracting officer and DCAA auditor, an electronic final indirect cost rate proposal in accordance with FAR 42.705-1(b)(1) within six months after the end of the contractor’s fiscal period. This final indirect cost rate submission will primarily be used to establish final indirect rates; however, it has evolved to also serve the purpose of establishing total allowable (direct and indirect) contract costs. DCAA has recently released a new version of the ICE Model, which is the electronic version of the “Model Incurred Cost Proposal” which provides contractors with a standard ICE submission for preparing adequate incurred cost proposals in accordance with FAR 52.216-7, “Allowable Cost and Payment.” This version, 2.0.1f (released in October 2016), may be downloaded from the DCAA website. There were no computational changes to the newly released version; only minor changes to headings and abbreviations. The following are the changes:

On September 30, 2016, DCAA issued the following MRD (Memorandum for Regional Directors): Update – Audit Guidance on the Impact of the National Defense Authorization Act on DCAA’s Audit Support to Non-Defense Agencies.   For the record, there isn’t anything captioned “the” National Defense Authorization Act; in this case, it happened to be referring to the 2016 Act, which was presumably “the” Act (to DCAA) because it included Section 893, which prohibits DCAA from providing audit support to non-defense agencies.  

The incurred cost proposal is required for cost type and time and material contracts subject to the 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, which are listed within the clause (52.216-7(d), thus defining the required schedules for an adequate indirect cost rate proposal.

As if you haven’t noticed, this year has been the year of bid proposals for government contractors. My team at Redstone Government Consulting has been working the last six months straight supporting various government contractors in the development and pricing of cost volume proposals. Fortunately for us, we have a team of consultants that can provide support for cost volume proposals and are 100% dedicated to the effort, without the distraction of other projects or responsibilities. Most small business contractors, however, do not have that luxury and the employees working the bid proposal efforts must also continue to complete their daily responsibilities associated with their already busy, “day” job.

DCAA has recently released a new version of the ICE Model, which is the electronic version of the “Model Incurred Cost Proposal” that provides contractors with a standard ICE submission for preparing adequate incurred cost proposals in accordance with FAR 52.216-7, “Allowable Cost and Payment.”  This version 2.0.1e released in December 2015, may be downloaded from DCAA website.  There were no computational changes to the newly released version, however, additional information will be required for Schedule J.  Schedule J provides DCAA with the Subcontract Information such as contact information, subcontract value, period of performance, costs incurred for each subcontractor, and award type.  In the 2.0.1e version, additional information such as prime contract value and subcontractor’s duns number has been added to the required information for this schedule.  This is the second version of the ICE Model released this year.  ICE Version 2.0.1d released in August 2015, had no computational or functional changes to the previous Version 2.0.1c (June 2012).

Most contractors (those with calendar year ends) have incurred cost proposals (ICP) due to the government on June 30 and we know that preparing the incurred cost proposal can be stressful and time consuming.  We have prepared 10 helpful tips for contractors to consider when preparing their ICP this year to help alleviate stress, reduce the amount of time spent preparing the ICP and most importantly to result in ICP adequacy.

It’s that time of year, books are closed, tax data has (maybe) been sent to the CPAs and you are ready to start a new year. However, as a government contractor with cost-reimbursable contracts, for the next 180 days a cloud called the incurred cost submission (due on June 30, 2015) is looming over head. Will this cloud looming become a thunder storm or beautiful clear skies? Well, my friend, that is up to you. Here are the top 5 things to know about the incurred cost submission that will make this year a success in submitting a timely and adequate incurred cost submission.

In a recent Federal Circuit ruling, KBR found out that “simple negligence” in its calculations of a reasonable price range for subcontractor’s price proposal resulted in a “Gross Negligence ruling” by the courts. Kellogg Brown & Root Services, Inc. (KBR) v. U.S., No. 203-5030, slip op. (Fed. Cir. Feb, 3, 2014).