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Estimated Read Time: 5 minutes

Not every contractor is required to file an Incurred Cost Submission but if your contracts include cost-reimbursable elements, the ICS becomes an annual compliance requirement under FAR 52.216-7.
Understanding whether your contract requires an ICS is essential for staying compliant and avoiding unilateral rate determinations from your ACO.

This article explains exactly who must submit an ICS and which contracts are exempt.

Core Concept: Who Must Submit an ICS?

According to the ICS guidance, the requirement applies to primary contractors and subcontractors with flexibly priced contracts, including:

1. Cost-Reimbursable Contracts

These contracts directly reimburse allowable costs, making the ICS mandatory.
Examples: CPFF, CPIF, CPAF.

2. Time & Materials (T&M) Contracts — if cost-reimbursable elements exist

T&M contracts trigger ICS when they include any of the following reimbursable cost components:

• Materials
• Labor
• Subcontractor costs
• Travel
• Relocation expenses

All reimbursable charges must be supported with documentation such as invoices, timesheets, and receipts.

3. Any Contract with FAR 52.216-7 (Allowable Cost & Payment)

If this clause is in your contract, ICS filing is required unless an exemption applies.

Business Impact: Contract Exemptions

Some contracts do not require an ICS. Based on your slide deck:

1. Fixed-Price Contracts

Fixed-price agreements with no provisions for indirect cost adjustments do not require an ICS.
Even if costs fluctuate, your price is fixed, no need for reconciliation.

2. Commercial Item Contracts

These are exempt under FAR 52.216-7(d)(2)(i).
If the government buys a commercial product or service, ICS rules do not apply.

3. Contracts with No Cost-Reimbursable Elements

If a contract does not reimburse actuals (materials, travel, subcontractors, etc.), an ICS is not required.

4. Contracts Awarded Prior to July 1, 2018 (When Certain Thresholds Don’t Apply)

Older negotiated contracts without cost/pricing data requirements may be exempt depending on clauses and thresholds.

5. Portions of Mixed Contracts

If a contract has both fixed-price and cost-reimbursable portions:

• Only the reimbursable portion requires ICS.
• Examples:
  • Fixed-price deliverables + reimbursable labor hours
  • Fixed-price base + reimbursable materials
  • Fixed-price work + reimbursable travel costs

What Contractors Should Do

To determine if you owe an ICS, review:

✔ Contract type (Cost-type? T&M? Mixed?)
✔ Whether FAR 52.216-7 is included
✔ Whether reimbursable elements exist
✔ Whether the contract involves commercial services
✔ Whether the contract is pre- or post-July 1, 2018

Contractors should also:

• Maintain supporting documentation for all reimbursable costs
• Track timesheets, subcontractor invoices, travel receipts, and materials
• Keep a compliance checklist aligned with FAR Part 31 cost principles

If your contract reimburses actual costs in any form, assume ICS applies unless confirmed otherwise.

Key Takeaways

• ICS is required for flexibly priced contracts.
• Cost-reimbursable and certain T&M contracts trigger ICS.
• Fixed-price and commercial item contracts are exempt.
• Mixed contracts require ICS for the reimbursable portion only.
• Contracts with FAR 52.216-7 almost always require an ICS.
• Proper documentation is essential for compliance.

Need Support Determining ICS Requirements?

VSINGH CPA helps contractors review contract clauses, identify ICS obligations, and prepare fully compliant submissions, including support for mixed contracts and complex T&M structures.

👉 Check out our YouTube Shorts for quick GovCon Essentials:

https://youtube.com/shorts/nU7of5JyB4U

Coming Up in the GovCon ICS Essentials Series

✅ ICS Essentials #1: What Is an Incurred Cost Submission (ICS)?
✅ ICS Essentials #2: Who Must Submit an ICS?
3️⃣ ICS Essentials #3: Thresholds & Deadlines for ICS
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)