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

In its report dated November 27, 2018 (DODIG-2019-029), the IG reviewed 12 of 540 task orders (issued between September 2014 to October 2017) to determine if contractor employees met the contract schedule labor qualifications.  The contract vehicle is the OASIS (One Acquisition Solution for Integrated Services), administered by the GSA, but used by multiple DoD (and other Government) agencies. The good news is that the IG reported 1,175 of 1,287 contractor employees met the labor category qualifications; the bad news is the remaining 112 employees did not meet the labor qualifications, and/or the DoD agency could not document that contractor employees met the labor qualifications. Thus, DoD agencies authorized $28 million of potentially improper payments (based on the IG’s statistical projection), authorized $574K of potential improper payments for employees who did not have qualification documentation, and did not consider the potential impact on contract performance and price before authorizing $6.8 million for employees without relevant education and work experience.

The incurred cost submission is required for all federal contractors holding cost-type or time and materials (T&M) contracts and is a universal requirement regardless of agency customer. All contracts requiring the incurred cost submission will include the Federal Acquisition Regulations "Allowable Cost & Payment Clause" (FAR 52.216-7) and/or the "T&M Payment Clause" (FAR 52.232-7). Following are answers to frequently asked questions and pointers to resources to help you.

This blog was first published on the Deltek Government Contracting Blog as a guest post by Redstone Government Consulting.

The incurred cost submission is required for all federal contractors holding cost-type or time and materials (T&M) contracts and is a universal requirement regardless of agency customer.  All contracts requiring the incurred cost submission will include the Federal Acquisition Regulations “Allowable Cost & Payment Clause” (FAR 52.216-7) and/or the “T&M Payment Clause” (FAR 52.232-7). Following are answers to frequently asked questions and pointers to resources to help you.

As a business owner or executive, it is highly likely that you are not preparing and submitting your business tax return. After all, tax rules are complicated and submission requirements can be a little unnerving. So, for those reasons and for peace of mind knowing that your tax return is prepared correctly, a savvy business owner or executive will outsource their tax preparation to a trusted firm that specializes in taxes.

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.