GovCon Wednesdays
Estimated Read Time: 5 minutes
The Incurred Cost Submission (ICS) is more than a single document, it is a structured package of schedules designed to reconcile your fiscal year’s direct and indirect costs and certify that all claimed costs comply with FAR 52.216-7. These schedules help the government determine whether your billed costs were reasonable, allowable, and allocable, and they support final indirect rate determinations and contract closeouts. This installment explains what’s included in a standard ICS.
Core Concept: What’s Included in an ICS?
Your slide deck defines an ICS (also known as an ICP or ICRP) as a collection of schedules containing detailed information about a contractor’s incurred costs for the year. These schedules allow the government to reconcile actual costs with prior billings and ensure compliance with FAR cost principles.
Although the exact schedule list varies by agency, all ICS packages contain the same core components.
Business Impact: Key ICS Components
1. Direct Cost Schedules
These schedules detail the direct costs incurred by contract or project, such as:
- Labor
- Materials
- Subcontracts
- Other direct costs
This serves as the foundation for verifying billed direct costs.
2. Indirect Cost Pools & Bases
These show how you grouped and allocated indirect costs into pools such as:
- Fringe
- Overhead
- G&A
Indirect cost bases show the logical allocation of each pool across the contractor’s operations.
3. Final Indirect Rate Calculations
The ICS reconciles:
- Provisional Billing Rates (PBRs) billed during the year
with - Actual incurred indirect costs
These calculations determine over- or under-billings.
4. Cumulative Cost by Contract
This schedule shows all costs incurred to date for each contract, ensuring the government only reimburses allowable costs and that ceiling limits or funding restrictions are not exceeded.
5. Schedule N — Contractor Certification
Your slide deck highlights that the ICS must include a signed certificate (often called Schedule N) certifying that all costs are:
- Allowable
- Reasonable
- Allocable
- Compliant with FAR Part 31 and applicable supplements
This certification is mandatory and must be signed by an authorized official.
What Contractors Should Do
To prepare a complete ICS, contractors should:
✔ Identify all direct and indirect costs by contract and cost pool
✔ Maintain supporting documentation such as timesheets, invoices, and receipts
✔ Review contract terms to confirm allowability and allocability
✔ Reconcile provisional and actual indirect costs
✔ Complete all required schedules, including the certification
✔ Validate cumulative cost data for accuracy and ceiling compliance
A complete, accurate schedule package reduces audit risk and ensures a smooth rate finalization process.
Key Takeaways
- An ICS is a structured package of detailed schedules.
- It includes direct costs, indirect costs, indirect rate calculations, and cumulative costs by contract.
- A signed certification is required to confirm FAR compliance.
- The ICS supports reconciliation, rate finalization, and contract closeout.
- Proper documentation is essential for defending your incurred costs in an audit.
Need Help Preparing or Reviewing Your ICS?
VSINGH CPA supports GovCons in preparing, reviewing, and submitting fully compliant ICS packages, including indirect rate modeling and audit preparation.
👉 Check out our YouTube Shorts for quick GovCon Essentials:
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
✅ ICS Essentials #4: T&M & Mixed Contract Requirements
✅ ICS Essentials #5: Required ICS 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)