Do I Need to Submit an ICE?

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Companies that land government contracts face a government process that has no equivalent in the corporate world: the Incurred Cost Proposal. Submitted electronically, the Incurred Cost Proposal is known as the ICE (Incurred Cost Electronically) Model, and many contractors wonder how and when to submit an ICE, and whether they're even required to do one.

According to Debbie Goode, audit director of Hoyman Dobson CPAs in Florida, If you have a cost-type contract, a time and materials contract or even a fixed fee contract with incentives: basically, any government contractor with cost reimbursable contracts invoking the Allowable Cost and Payment Clause (FAR 52.216-7), you must submit an ICE. According to Goode, there is no dollar threshold for submitting an ICE; the type of contract determines whether an ICE is necessary or not.

The question of when to submit an ICE is more definitive: federal regulations require that contractors submit an ICE within six months of the end of the contractor's – not the government's – fiscal year. Veronica Eyenga, CEO of Maryland accounting and marketing firm VBP OutSourcing, warns firms not to wait until the last minute: The instructions alone are 61 pages. ICE itself is 24 complex spreadsheets, called schedules. It's easy to make a mistake, and mistakes mean audits and possible delayed or reduced payments, as well as an inability to bid on future contracts.

And, as Goode notes, government accounting is a whole different world from corporate accounting, and when the DCAA audits you if you don't look like you know what you're doing, they just keep digging in.

Both Goode and Eyenga emphasize that what DCAA auditors want to see is consistency: ICE numbers that match tax and payroll returns and other documents, indirect expenses that are calculated and allocated in the same way year after year, and footnotes that adequately explain anything out of the ordinary. And never delete a schedule or even a row or column if it doesn't apply to you, Goode emphasized. Mark N/A, so the auditor knows you didn't just skip it.

Contractors are often audited after submitting an ICE, Eyenga and Goode say, and because the DCAA has 24 months after the ICE is submitted to perform an audit, firms are urged to keep all records, including back-up. And if the ICE isn't submitted at all? The DCAA can base expenses on a previous ICE, or a company can lose a contract, Goode noted. We try to educate our clients about what ICE involves and how important it is. Ideally, they should understand the ICE or go to someone who does before beginning work on a contract.