A new year presents new opportunities for working more efficiently and effectively. When dealing with federal contracts, the Incurred Cost Proposal (ICP) presents one of the biggest opportunities. You're closing 2017 and preparing for taxes anyway. What better time to gather information and documents for the ICP?
Not sure what an Incurred Cost Proposal is or whether you’re required to file one? Here’s a brief primer.
What is the ICP?
The Incurred Cost Proposal (also known as an Incurred Cost Submission) is the annual reconciliation of the costs (direct and indirect) that a contractor expends in fulfilling a federal contract. Under FAR 52.216-7, it applies to cost-reimbursable and flexibly priced contracts. However, fixed price contracts are still documented in the submission.
How is the ICP Used?
The ICP is used to determine your final indirect rates for billings used in interim billing rates and forward pricing rate agreements. FAR 42.1701 provides for systematic review and monitoring of rates.
What is the deadline for submission?
The ICP is due six months after the close of a contractor’s fiscal year, which is June 30 for those that follow a calendar year.
An auditor should verify the adequacy of your submission immediately, but it might take two or more years for the full audit. Any errors can result in penalties and interest, so accurate submissions are of paramount importance.
How to Prepare the ICP
My colleague Suzanne Camden and I gave a presentation on How to Prepare the ICP with Success!for the National Contract Management Association World Congress. It outlines the ICP preparation process, including the various schedules that must be completed.
Start Preparing Today!
June 30 might seem like a long way away, but it will be here before you know it. Don't procrastinate until May or June! Create a folder right now to gather the necessary documents as you perform your month-end, quarter-end, and year-end tasks.
Here are some of the things you can do now to prepare:
- Download the ICP Adequacy Checklist and use that as your guide.
- Download the ICE (Incurred Cost Electronically) Model (template)
- List the required ICP schedules and what you can accomplish or gather right now.
- As you reconcile your 940 and 941s, you can reconcile Schedule L.
- As you're comparing budget to actual for overhead and general and administrative expenses, you can reconcile schedules B, C, and E.
- If you have a Period of Performance that ended 12/31, you can reconcile that contract immediately.
Pro tip: if you do find yourself running behind while preparing the ICP, you can request an extension in writing from the governing office of the Defense Contracting Audit Agency as long as you do so before the deadline. But this should be a last resort.
Be proactive. Make this a better year for your ICP. Get started today!
If you have questions about the ICP and your federal contract, please feel welcome to reach out to Robert@LeftBrainPro.comor call (614) 556-4415.