Indirect Cost Rates

Provisional Rates
ICE proposal preparation starts with separation of indirect versus direct costs, segregation of unallowable costs (per the applicable OMB Circular or FAR and FAR Supplements), and assessment of pool-to-base matching. Which, of the (supplied) pre-designed spreadsheets are used, is dependent upon the causal/beneficial relationship of particular pools and bases. Each tab in the pre-designed workbook explains its purpose, though not all tabs/sheets need be used. Separate pools of indirect costs might include:

Facilities
Fringe Benefits
Material Overhead
Labor Overhead
Computer-related
General and Administrative

Actual Incurred Cost (AIC) Rates
After the fiscal year end, ICE spreadsheets are supported by the general ledger; the general ledger is supported by source documents (such as vendor bills and timesheets). If actual ICE rates are lower than provisional/projected rates, cost reimbursements are adjusted; if actual ICE rates are higher, negotiations with the local might recoup under-invoiced cost reimbursements.

Grant Indirect Cost Rate (ICR)
One all-encompassing rate is often applied to USG grants and, generally, applies to a base of all direct costs. The one-rate encompasses all overheads, general and administrative, and other indirect cost pools.

For organizations that hold U.S. Government contracts of very large dollar values, the Defense Contract Management Agency (DCMA) or other government administrator typically negotiates Provisional Rates, often called forward pricing rates. DCMA requests that the Defense Contract Audit Agency (DCAA) evaluate contractor-proposed indirect rates based on the Incurred Cost Electronically (ICE) model. Provisional rates are consistently used in proposals and invoices. For cost-type contracts, actual incurred costs (AIC) are audited after the end of each fiscal year for the contractor; cost-type contracts remain open until differences between provisional and actual indirect rates can be calculated and payment/re-payment settled. The government administrator, not the contractor, determines whether negotiation of projected rates is cost-effective for the government.

Usually, indirect costs include Labor Overhead, Facilities Overhead, plus General and Administrative pools, each allocated among jobs or contracts. The DCAA ICE model allows for other pools/rates, such as Material Overhead and Information Technology. Indirect rates are unique for each organization, but consistently accumulate multiple-contract costs in a pool divided by a causal or beneficial basis. Typically, grants (especially for non-profit organizations) use one combined Indirect Cost Rate (ICR).