Compliance Blog

What are Provisional Billing Rates? How are provisional indirect rates set for cost-reimbursement type contracts? Using strong budgetary and historical data, you can support more precise indirect rates for interim reimbursement of indirect costs incurred to avoid under-billing the government for work performed, or over-billing and owing money back to the government. 

Government contractors gain a competitive advantage with a well-managed budgeting process. A budget provides a financial blueprint for the new year, establishes a plan for recovery of indirect costs through contract pricing, and establishes support for provisional indirect rate proposals.

Government contractors subject to FAR 52.216-7 are required to submit an adequate final indirect cost rate proposal within six months following the contractor’s fiscal year end. Learn the purpose of an Incurred Cost Proposal, the information required, and steps for submitting this report.

The life cycle of indirect rates for a government contract includes estimated indirect rates for pricing, provisional rates for billing indirect costs, and final indirect rates to settle the actual indirect costs reimbursed by the contract. While government contractors focus on pricing to win and recover costs, their accountants determine the actual indirect costs through the company’s books of account.

As we approach year end, government contractors will want to keep an eye on key year-to-date numbers to close out the year on a high note, and prepare for continued success in the new year. We highlight 3 areas to monitor.

ICAT Systems is excited to announce the first on-demand certificate program in government contract cost accounting. This comprehensive course is designed to help government contractors and their accounting professionals master the day-to-day accounting methods and compliance requirements for accounting system compliance, provisional billing rates, and final indirect cost rate proposals.

Understanding the nuances of indirect rates will help government contractors better manage contracts and their business as a whole. Part 3 in our series on indirect rates reviews the role of indirect rates in contract billing, including provisional indirect rates and indirect rate variances.