Government buyers care about incurred cost submissions because on cost-reimbursement and time-and-materials contracts, the government pays a contractor's actual allowable costs, and the annual submission is how those costs get verified and settled. Commercial buyers rarely look inside a supplier's books, while a federal buyer paying actual costs must. The submission is due within six months of the contractor's fiscal year end, and being ready for it signals readiness for cost-type work.
In commercial business, the buyer cares about the price and the delivery, and what it costs you to perform is your business. Government buying works the same way on firm-fixed-price contracts, where the agreed price is the deal and your margins stay your own. The split comes with cost-reimbursement and time-and-materials contracts, where the government agrees to pay what performance actually costs, within the rules for what counts as allowable. A buyer paying actual costs from public funds has to verify those costs, which is why these contracts carry an annual accounting obligation that has no commercial equivalent. The incurred cost submission is that obligation, and understanding it before you pursue cost-type work is part of knowing what you are agreeing to.
During the year, a contractor on cost-type work bills indirect costs using provisional rates, which are estimates set in advance. The incurred cost submission is the annual reconciliation of those estimates against reality.
The deadline is six months after the contractor's fiscal year end, and the clause that requires the submission comes standard in these contracts. A submission that runs seriously delinquent carries real consequence, because the government can then set final rates unilaterally, typically with a reduction factor applied. Most contractors build the submission in the government's electronic model, which lays out the expected schedules and has become the standard adequacy baseline.
The submission itself lands after a year of performance, and the readiness that makes it manageable gets built before award. Buyers know this, which is why the underlying accounting capability functions as a screening factor for cost-type awards.
For a business coming from commercial work, this is the practical translation: the habits are learnable and the systems are buildable, and they need to exist before the first cost-type invoice, because retrofitting an accounting system under a live contract is where compliance problems start. USFCR has guided over 500,000 businesses since 2010, and the contractors who move into cost-type work smoothly are the ones who understood the contract type's obligations before they bid, then built the systems to match. USFCR's Federal Contract Consulting helps businesses read what a solicitation's contract type will demand of them before they commit, and the submission itself is work for a qualified government contracts accountant, a pairing that keeps both the pursuit and the compliance on solid ground.
What is an incurred cost submission?
It is the annual filing a contractor makes on cost-reimbursement and time-and-materials contracts, reporting actual costs for the completed fiscal year, establishing final indirect rates in place of the provisional rates billed during the year, and settling any over- or under-billing. The government's audit agency reviews it for adequacy and allowability.
Who has to file an incurred cost submission?
Contractors performing on cost-reimbursement or time-and-materials contracts that include the standard allowable cost and payment terms. Firm-fixed-price contractors do not file one, because the government pays an agreed price rather than actual costs. Many small businesses first encounter the requirement when they win their first cost-type or T&M award.
When is it due and what happens if it is late?
Within six months of the contractor's fiscal year end. A submission that runs seriously delinquent exposes the contractor to a unilateral rate determination, where the government sets final rates itself, typically applying a reduction. Treating the deadline as fixed from the start of each fiscal year is the reliable protection.
Do fixed-price contracts require an incurred cost submission?
No. On firm-fixed-price work the government buys much the way a commercial customer does, paying the agreed price without reviewing the contractor's actual costs. The submission belongs to cost-reimbursement and time-and-materials contracts, where actual costs determine payment and therefore have to be verified and settled each year.
If cost-type work is in your FY2027 plans, the preparation starts with the accounting foundation rather than the proposal. Confirm your system can segregate and accumulate costs by contract, put timekeeping discipline in place, and engage a qualified government contracts accountant before you bid rather than after you win. For contractors weighing whether a cost-type opportunity fits, USFCR's Federal Contract Consulting helps businesses understand what a solicitation will require of them, so the contract type you pursue is one your business is built to perform.