Rose Report: Issue 8
Gearing Up for ICE Submissions
For many contractors, the deadline for their incurred cost proposals is fast approaching. These submissions to the government provide the detail that supports the actual indirect rates incurred throughout the year. Contractors must get approval for these rates before certain contracts can be closed out and final payments made, so clearly, turning in these proposals is an essential step to doing business with the government. Since these documents, also known as ICE submissions, are due six months after the end of a contractor’s fiscal year, June is typically the month that companies are racing to file them by.
Contractors can obtain a model of the incurred cost proposal through the DCAA’s website. This step-by-step electronic process is relatively easy to follow, but ensuring the information they’re turning in is complete and accurate is not always so simple. Contractors must provide complete documentation supporting the rates they are claiming. They also have to file historical data, showing what they billed the government in prior years. Last, but not least, the various schedules must reconcile to each other.
There are multiple components of ICE submissions. A contractor must first lay out the details involved in calculating its rates, including summaries of the indirect expenses such as fringe benefits, overhead and general administration, as well as the direct costs that are related to projects. Additional pieces of the submission require supplying details about cost allocations and contract-specific information, such as hours spent completing T&M projects. The DCAA also asks for information about subcontracts, including contract amounts and points of contact within the subcontractors. To avoid getting overwhelmed by the process of gathering all of this information in time for their ICE submission deadlines, it’s vital for companies to stay organized throughout the year.
Once a contractor submits its proposal, the DCAA will determine whether the information provided is “adequate” and ready for an audit. If it’s deemed “inadequate,” the DCAA will send the proposal back to the contractor and require that it be corrected. The DCAA currently has a four to five year-plus backlog of ICE submission audits. However, the agency is making a serious effort to catch up.
For instance, it’s not uncommon for the DCAA to audit multiple years’ worth of submissions for a single contractor at one time. And it’s no longer a given that a submission will be audited at all. The agency now takes a “risk-based” approach when determining which contractors to audit. All incurred cost proposals exceeding $250 million are audited. The others are categorized as either low or high risk. A small percentage of the low risk submissions will be selected for an audit, with the remaining low risk submissions getting fast-tracked to closure.
Still, a contractor should never count on dodging an audit. There’s no excuse for failing to file accurate, complete documentation—and the clock is ticking.