GovCon Wednesdays

Estimated Read Time: 5 minutes

One of the most common ICS misunderstandings in GovCon comes from Time & Materials (T&M) and mixed contracts. Many contractors assume T&M or partially fixed-price agreements do not require an ICS but under FAR rules, ICS requirements depend on whether the contract reimburses actual allowable costs.

This installment explains exactly when T&M and mixed contracts trigger ICS filing.

Core Concept: When T&M Contracts Require an ICS

Your slide deck clarifies that ICS is required on T&M contracts when they contain cost-reimbursable elements. Under FAR 16.307 and FAR 52.232-7, these elements typically include:

1. Materials

Reimbursed based on actual invoices, receipts, or vendor documentation.

2. Labor (if billed as actual cost, not fixed T&M labor categories)

Must be supported with timesheets and payroll documentation.

3. Subcontractor Costs

Require subcontract agreements and invoices as proof of allowability.

4. Travel & Relocation Expenses

Airfare, lodging, per diem, and relocation must follow FAR travel cost principles and be supported with receipts and travel authorizations.

All of these cost categories are considered reimbursable actuals, and therefore must be included in your ICS.

Business Impact: Fixed-Price vs. Mixed Contracts

Fixed-Price Contracts (Typically Exempt)

Fixed-price contracts do not require an ICS if there are no provisions for indirect cost adjustments.
These contracts do not reimburse actuals, so there is nothing to reconcile in an ICS.

Mixed Contracts (Portions Still Require ICS)

Many GovCons operate under contracts that include both fixed-price elements and reimbursable components. In these cases:

➡ Only the reimbursable portion requires inclusion in the ICS.
Your slides provide the following common examples:

• Fixed-price project + reimbursable labor hours
  (e.g., consulting services billed by actual hours)
• Fixed-price deliverable + reimbursable materials
  (materials reimbursed at cost even if labor is fixed-price)
• Fixed-price scope + reimbursable travel
  (travel often falls under FAR guidelines even in fixed-price work)

If any portion of a contract reimburses actual incurred costs, that portion must be captured in the ICS even if the rest of the contract is fixed-price.

What Contractors Should Do

To stay compliant on T&M and mixed agreements, contractors should:

✔ Review contract clauses for FAR 16.307 and FAR 52.232-7
✔ Identify any reimbursable elements (materials, travel, subs, labor actuals)
✔ Track supporting documentation for all reimbursable costs
✔ Separate fixed-price and reimbursable activities in your accounting system
✔ Include only the reimbursable portion in the ICS
✔ Maintain timesheets, invoices, and receipts to support allowability

This clarity prevents questioned costs and supports accurate final indirect rates.

Key Takeaways

• T&M contracts trigger ICS if they contain reimbursable actual costs.
• Materials, subcontractors, travel, and reimbursable labor must be included.
• Fixed-price contracts remain exempt if no reimbursable elements exist.
• Mixed contracts require ICS for the reimbursable portion only.
• Documentation is critical for audit readiness and allowability.

Need Support with Mixed or T&M Contract Compliance?

VSINGH CPA helps GovCons analyze contract structures, identify reimbursable elements, and prepare ICS submissions that satisfy FAR and audit requirements.

👉 Check out our YouTube Shorts for quick GovCon Essentials:

https://youtube.com/shorts/j_Y-m57C548

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
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)