GovCon Wednesdays

Estimated Read Time: 5 minutes

For contractors with flexibly priced contracts, timely submission of the annual Incurred Cost Submission (ICS) is required under FAR 52.216-7. Missing the deadline can slow down contract closeouts, trigger increased audit scrutiny, or even result in the government setting your indirect rates for you through a unilateral determination.This part of the ICS Essentials Series explains the key thresholds and deadlines that GovCons must understand.

 

Core Concept: ICS Thresholds & Due Dates

ICS Deadline

Contractors must submit their ICS within 6 months after their fiscal year-end, unless they request and receive an extension from their Administrative Contracting Officer (ACO).
This aligns with FAR 52.216-7, which requires contractors to support allowable incurred costs on an annual basis.

 

Business Impact: Award Rules & Thresholds

Your slide deck outlines a key threshold:

Contracts Awarded After July 1, 2018 – $2 Million Rule

Contracts awarded after July 1, 2018 with a net value exceeding $2 million require certified cost or pricing data. This requirement applies to all negotiated contracts with an Allowable Cost and Payment clause (not just cost-plus).

This rule increases the level of documentation and rigor required when preparing your ICS.

Failing to Submit an ICS

If your ICS is late or incomplete, the ACO may issue a unilateral rate determination under FAR 52.216-7. This means:

• The government establishes your indirect rates without your input
• Rates are typically lower to protect federal funds
• You may owe money back if the government determines overbilling
• Future billings and cash flow may be affected

Late submissions also delay contract closeouts and extend audit timelines.

What Contractors Should Do

To stay compliant and avoid year-end surprises:

✔ Track your fiscal year-end and set internal ICS deadlines
✔ Review all contracts for FAR 52.216-7 and cost-reimbursable components
✔ Verify if your contract exceeds the $2M threshold (July 1, 2018 rule)
✔ Maintain complete documentation to support all incurred costs
✔ Request extensions before deadlines if exceptional circumstances arise
✔ Prepare indirect rate calculations early to avoid compression

Being proactive reduces audit risk and ensures smoother closeouts.

 

Key Takeaways

• ICS is due six months after fiscal year-end.
• Contracts awarded after July 1, 2018 over $2M require certified cost/pricing data.
• Failing to submit allows ACOs to impose unilateral indirect rates.
• Early preparation prevents billing issues and supports audit readiness.
• ICS timing affects contract closeouts, cash flow, and compliance posture.

 

Need Help Preparing Your ICS?

VSINGH CPA assists GovCons with ICS preparation, indirect rate modeling, documentation support, and navigating DCAA or agency audits.

👉 Check out our YouTube Shorts for quick GovCon Essentials:

https://youtube.com/shorts/IHFUscFp2zM

 

Coming Up in the GovCon ICS Essentials Series

✅ ICS Essentials #1: What Is an ICS?
✅ ICS Essentials #2: Who Must Submit an ICS?
✅ ICS Essentials #3: Thresholds & Deadlines
4️⃣ ICS Essentials #4: ICS Requirements for Time & Materials (T&M) and Mixed Contracts
5️⃣ ICS Essentials #5: What’s Included in an ICS? Breakdown of Required Schedules
6️⃣ ICS Essentials #6: Who Reviews ICS? DCAA, Agency Auditors & GAO Oversight
7️⃣ ICS Essentials #7: Key FAR Clauses You Must Know for ICS Compliance
8️⃣ ICS Essentials #8: How to Prepare a Compliant ICS (Documentation & Best Practices)