Incurred Cost Submission Supplemental Schedule B

Incurred Cost Submission Supplemental Schedule B

As noted in our prior blog post on contractor compensation limits, the Bipartisan Budget Act (BBA) cap for 2023 was $619,000 per employee for costs incurred between 1/1/2023 and 12/31/2023.  Contractors who are starting to prepare their 2023 Incurred Cost Submission (ICS), should be mindful of this limitation when preparing Supplemental Schedule B.

Supplemental Schedule B requires compensation information for a contractor’s five most highly compensated executives.  DCAA uses this schedule to obtain the total proposed compensation for each of the listed employees.  Proposed compensation will include the following, as applicable:

  1. Base Salary
  2. Bonus or Incentive Compensation
  3. Employer 401(k) Match
  4. Employer Paid Health or Life Insurance Premiums
  5. Auto or Travel Allowances
  6. The current year cost of Deferred Compensation
  7. The current year cost of Long-Term Incentive (LTI) – e.g., Stock Options, Performance Unit Plans, etc.
  8. Personal Use of a Company Vehicle
  9. LESS any Voluntary Deletions (recorded in Unallowable Cost accounts) for compensation in excess of cap limitations.

Each of the items above must be taken into account when totaling the executives’ proposed compensation.  Remember, even if your proposed compensation is less than the BBA cap, DCAA may still find that a portion of the compensation is unallowable because the compensation must still be reasonable under FAR 31.205-6 and FAR 31.201-3.  To aid in DCAA’s reasonableness assessment, Supplemental Schedule B includes a section where the contractor must indicate the basis for their compensation.  Contractors can select from several options including market pricing data (compensation surveys), third party consultants, written plans and policies, etc.  It’s critical to maintain comprehensive documentation to support whatever compensation basis you’ve selected.  For all bonus amounts, be sure to maintain records which (1) prove that bonus awards were paid pursuant to a plan communicated to employees before services were rendered and (2) support a consistent basis for award.

As always, WEC’s Advisory Team is available to assist with any questions you may have regarding executive compensation and preparation of your Incurred Cost Submission.  For further assistance, please contact Karl Belka at

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