Some view the Incurred Cost Proposal (ICP) as a frustrating task. Learn how to prepare throughout the year and avoid the last-minute rush. Get tips and tricks to simplify the process and incorporate ICP principles into your system design and regular reports. The ICP can be part of your management philosophy – understanding the report can help you understand your rate structure, revenue and expenses by contract type, and guide you to regularly reconcile the information needed at year-end. The Incurred Cost Proposal (ICP) is required if FAR 52.216-7 “Allowable Cost and Payment” is included in your contract(s). ICPs are required for all cost-type or T&M contracts, and fixed price contracts if there is a reimbursable CLIN. If included, you are required to submit a reconciliation of your direct and indirect costs to amounts invoiced within 6 months of the close of your fiscal year. Note that submission of the ICP is required of primes and subs. ICPs are more than a year-end report. They are an annual exam used to review, audit, and approve direct costs and final indirect rates for every year and they are required for contract closeout. Incomplete or inaccurate submissions can lead to increased probability of future audits, penalties, incorrect or inaccurate billings, reduced profit, and cause contract close-out delays. DCAA provides a sample ICP with instructions, including a list of all of the supporting documents necessary to complete the form, and an adequacy checklist. Start gathering data and start early! Review the sample and guidelines provided by DCAA so that you can capture the data in the correct format and detail throughout the year – this eliminates the need to reformat reports at year-end. Know your contracts and contract types! Consider utilizing the services of an outside firm recognizing that they have experience and expertise in creating an accurate and complete ICP. They can also act as a pseudo auditor while in the process of preparing the proposal. However, the data is yours and the proposal is only going to be as good as the supporting data. Attend this seminar to learn more about the ICP and how to incorporate it into your daily, weekly, and monthly contract and accounting practices to help ensure success.

2. How To Complete the Incurred
Cost Proposal with Success!
Breakout Session # E09
Robert E Jones Advisor LeftRobert E. Jones, Advisor, Left
Brain Professionals Inc.
Suzanne Camden, Accounting, g
Manager, Colonna's Shipyard, Inc.
Tuesday, July 29, 2014
2:30 PM to 3:45 PM2:30 PM to 3:45 PM

3. What is the Incurred Cost Proposal?What is the Incurred Cost Proposal?
• Annual reconciliation of contractor's cost
incurred including
– Direct costs
– Indirect costs
3

4. How Do I Know If It Applies to Me?How Do I Know If It Applies to Me?
• FAR 52.216-7
• If you have, have had, or ever intend to
have cost-reimbursable and flexibly pricedy p
contracts, this applies to you.
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5. How Do I Know If It Applies to Me?How Do I Know If It Applies to Me?
5

6. When Is It Due?When Is It Due?
• Six months after the close of the
contractor's fiscal year
– For contractor's on a calendar year – June 30
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7. PitfallPitfall
• Late Submission!
TipTip
• Prior to the due date, contractors can
contact their cognizant DCAA office incontact their cognizant DCAA office in
writing to request an extension to file their
submission at a later timesubmission at a later time.
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8. When Will It Be Evaluated?When Will It Be Evaluated?
• Supposed to evaluated for adequacy
immediately
• It is DCAA policy to audit as promptly as
possible after submissionpossible after submission
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9. ResourcesResources
• Raytheon ASBCA Case
• http://www.asbca.mil/Decisions/2012/57576_5
7679%20Raytheon%20Company%2012.17.13
%20PUBLISH.pdf
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10. Takeaway #1Takeaway #1
• It's never too early to start!
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11. What Types of Contracts?What Types of Contracts?
• Cost-reimbursable and flexibly priced
receive the most attention
• Fixed price contracts are still documentedp
in the submission
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12. Where Is It Submitted?Where Is It Submitted?
• Cognizant DCAA Office
12

13. How Is It Submitted?How Is It Submitted?
• Preferred method is electronic
• Submit in both softcopy Excel and pdf
format
13

14. How Is the ICP Used?How Is the ICP Used?
• To determine your final indirect rates for
true-up of billings used in interim billing
rates (or forward pricing rate agreements)
• FAR 42.1701 provides for systematic
review and monitoring of rates.g
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15. What Kind of Information is Required?What Kind of Information is Required?
• Financial and contract data.
• Contractor format is acceptable, though
DCAA does provide the ICE Model, as anp ,
example.
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16. How Are You Going to Help ME?How Are You Going to Help ME?
• We cannot cover everything in an hour, but
we will give a brief explanation of each
schedule and provide practical tips and
tricks you can use in your organization.
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17. Takeaway #2Takeaway #2
• Avoid the pitfalls and pay attention to
common deficiencies
• Missing or unidentifiable schedules
• Missing documentation
17

18. Start FreshStart Fresh
• Download the ICE model from the DCAA
website
• Use the Quick Start instructions tab to
complete the Setup tab
• Click the “Run Setup” buttonClick the Run Setup button
• Compare the set-up version with last
year’s submission to ensure that theyear s submission to ensure that the
correct pools are accumulating
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19. Start FreshStart Fresh
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20. Schedule A
Summary of Indirect Expense Rates
• No data entry is required on this schedule
• This schedule completes itself with
information populated in other tabsp p
• Final rates are developed by formulas
embedded in the spreadsheetembedded in the spreadsheet
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21. Schedule A
Summary of Indirect Expense Rates
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22. Schedule B, C, D
Indirect Cost Pools
• B – G&A Pool Costs
• C – Overhead Pool Costs (up to 5)
• D – Intermediate Pool Costs (up to 6)D Intermediate Pool Costs (up to 6)
• It will all keep coming back to your trial
balancebalance
Pitfall
• Missing disclosure of intermediate pools and
R&D and B&P not fully burdened
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23. Fringeg
Special Use Tab
• Used to allocate fringe costs• Used to allocate fringe costs
• Enter all fringe accounts and costs on the
h d lschedule
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24. Schedule E
Claimed Allocation Bases
• How you allocate your indirect pools
• Total Labor
• Direct LaborDirect Labor
• Square Footage
# f t k d• # of network drops
• No data entry on this schedule.
Common deficiency - unallowable costs not
24
y
included in G&A base

25. Schedule F
Cost of Money
• Federal agencies are required to use interest
rates computed under the criteria established
by the Renegotiation Act of 1971 (P.L. 92-41).
• Contract Dispute Act of 1978 (P.L. 95-563)
and the Prompt Payment Act (P.L. 97-177)p y ( )
provide for interest due on claims at a rate
established by the Secretary of the Treasuryy y y
pursuant to 31 U.S.C. 3902(a).
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26. Schedule F
Cost of Money
• Rates are published in the Federal Register
• http://www.fms.treas.gov/prompt/rates.html
• COM rate posted twice a year. Use thep y
average for the FCOM calculation
• Average NBV of assets * COM / allocationAverage NBV of assets COM / allocation
base = FCOM
• Optional Add an F 1 tab to include the• Optional – Add an F-1 tab to include the
NBV calculations and detail
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27. Schedule G
Booked and Claimed Direct Costs
• Direct labor
• Materials
• TravelTravel
• ODC
S b t t• Subcontracts
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28. Schedule H
Direct Costs by Contract at Claimed Rates
• Direct costs by contract type. Spreadsheet
applies OH and G&A based on your
claimed amounts.
TipTip
• Populate your database with task name,
contract or PO number and company taskcontract or PO number, and company task
during set up.
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29. Schedule H-1
Government Participation by Pool
• The purpose of this schedule is to provide
a general overview of the extent that cost-
type and flexibly priced contracts
participate in the absorption of indirect
expenses.
• Populated by data from other schedules.
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30. Schedule I
Cumulative Allowable Cost Worksheet
• All claimed and unsettled direct and
indirect costs for contracts that cross
years.
PitfallPitfall
• Government participation not calculated
for all indirect ratesfor all indirect rates
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31. Schedule J
Subcontract Information
• Detailed information on all subcontracts
PitfallPitfall
• Physically complete contracts not listed
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32. Schedule K
Hours and Amounts on T&M Contracts
Pitfall
• Invoiced hours do not add up and/or
balance
Tip
• Institute an invoicing format for T&M• Institute an invoicing format for T&M
invoices that includes cumulative totals for
both hours and amounts for each laborboth hours and amounts for each labor
category for the period, contract, and year
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33. Schedule L
Payroll Reconciliation
• Reconciles all labor accounts to 940/941
filings
• Make sure all labor accounts are marked
as such to allow easy identification for this
reconciliation.
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34. Schedule L
Payroll Reconciliation
Pitfall
• Most difficult of all the schedules to
balance
• Accounts that do not balance
TipTip
• Make sure accounts that are not labor are
l k d th t th t t l blocked so that they cannot accept labor.
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35. Schedule M
Accounting/Organization Changes
• Significant changes to accounting
organization or system such as new or
redefined cost pools, implementation of
new software, mergers and acquisitions,
approved billing rates, etc.
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36. Schedule N
Certificate of Indirect Costs
• Certification by VP or CFO
• This page has to be printed, signed, and
added to the scanned copy of thepy
submission
Pitfall
Mi i tifi ti• Missing certification
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37. Schedule O
Contract Closing Information
• Information on T&M and Cost Type
Contracts
• Requires a closing date be established.q g
• No links to any other schedules.
Pitfall
• Failing to report a contract closed
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38. Supplemental SchedulesSupplemental Schedules
• Supplemental Schedules A, B, C, and D
are Optional
• They are not required for the submission ofy q
the ICE
• The information is required to complete theThe information is required to complete the
audit
• The schedules are a helpful means to• The schedules are a helpful means to
provide the data in a useful format
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39. Supplemental Schedules
A-1 to A-4
• Comparative analysis of indirect expense
pols detailed by account to prior fiscal year
and budgetary data
• A-1 Overhead
• A-2 G&AA 2 G&A
• A-3 Indirect Cost Pools
A 4 Di t C t• A-4 Direct Costs
39

40. Supplemental B
• General organizational information and
executive compensation for the five most
highly compensated executives
• Not required for public companies as it fallsNot required for public companies as it falls
under FPDS. FAR 52.204-1
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41. Supplemental C
• Identification of prime contracts under
which the contractor performed as a
subcontractor
• Lists of ACOs and PCOs for each flexibly
priced contractp
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42. Supplemental O
Contract Briefings
Tip
• Consider adding this schedule to the
contract kick-off process. It will greatly aidp g y
in completing this process at year end.
• Good standard information for a contractGood, standard information for a contract
folder in a consolidated format
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43. Penalties
FAR 42.709
• Claiming expressly unallowable items
43

44. Takeaway #3Takeaway #3
• Start with the end in mind!
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45. Resources
• DCAA ICE Model
• http://www.dcaa.mil/ice_model.html
• DCAA Guidelines for ICE AdequacyDCAA Guidelines for ICE Adequacy
• http://www.dcaa.mil/Guide_for_Determin
ing Adequacy of Contractor Incurred Coing_Adequacy_of_Contractor_Incurred_Co
st_Proposal.pdf
45

46. Resources
Continued
• Help for Small Businesses
• http://www.dcaa.mil/small_business/Incu
rred Cost Submissions.pdf_ _ p
• DCAA Memo - Treatment of Delinquent
Final Indirect Rate ProposalsFinal Indirect Rate Proposals
• http://www.dcaa.mil/mmr/14-PPD-
002 pdf002.pdf
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47. 3 Takeaways3 Takeaways
• It's never too early to start
• Avoid the pitfalls and pay attention to
common deficiencies
• Start with the end in mind
47

48. QuestionsQuestions
Robert E. Jones
robert@leftbrainpro.com
(513) 728-1163( )
Suzanne Camden
suzannecamden@hotmail comsuzannecamden@hotmail.com
(757) 572-1716
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