Company context — a $90M federal services contractor
The client is a federal professional-services contractor with $90M annual revenue, ~420 employees, running on Deltek Costpoint with Costpoint Time as the timekeeping front-end. The contract portfolio is roughly 60% Time-and-Materials (T&M), 25% Cost-Plus-Fixed-Fee (CPFF), and 15% Firm-Fixed-Price (FFP), spread across 14 prime contracts and 28 active subcontractor agreements. Indirect rate structure is the standard federal services trio — fringe, overhead, G&A — with a separate material-handling rate for the small materials-pass-through portion.
What makes GovCon accounting different from commercial accounting isn't the technology — it's the evidence bar. DCAA can pull audit support on 30 days' notice. Provisional indirect rates need defensible computation against the cost pool definition in the rate-agreement letter. Unallowable costs need to be screened before they hit a billable project, not after. And the Incurred Cost Electronic (ICE) model needs to be defensible at the contract level, the rate level, and the cost-pool level when the year-end submission goes in.
- $90M annual revenue, federal services prime + sub contractor
- ~420 employees with weekly Costpoint Time entry
- 14 prime contracts (60% T&M, 25% CPFF, 15% FFP)
- 28 active subcontractor agreements
- Indirect rate structure: fringe, overhead, G&A, material-handling
- Annual ICE submission, quarterly provisional-rate true-ups
- FAR Part 31 / DFARS 231 cost-allowability framework
- CMMC Level 2 in flight; CUI handling required
Before automation
Timesheet review, labor distribution, indirect rate calculation, and project billing were spread across four systems and six spreadsheets. The three-day cycle from timesheet close to billing meant cash collection ran ~5 days slower than it had to. DCAA audit support pulled 8–10 staff days per cycle and consumed weeks of senior accounting time during the annual ICE submission.
- Timesheet review across multiple supervisors with no exception queue
- Labor distribution spreadsheet recalculated per cycle by hand
- Indirect rate variances tracked manually, often discovered at year-end true-up
- Project billing assembled per project per cycle, off a list maintained in Excel
- DCAA audit pulls required reconstructing evidence each time
- Unallowable cost screening done quarterly, not at point of entry
- Subcontractor labor reconciled to time records and billings manually
- ICE submission consumed ~6 weeks of senior accounting time annually
What Ledger Summit implemented
An automated timesheet-to-billing workflow built on top of Costpoint, with labor distribution, indirect rate calculation, and per-cycle audit pack output. Tool Box AI handled the workflow and exception routing; the controller kept review and sign-off. The architecture preserves Costpoint as the system of record — every transaction still posts there — but adds the workflow, evidence, and exception-handling layer that DCAA actually wants to see.
- Timesheet review with exception queue and supervisor escalation
- Automated labor distribution by project and indirect pool
- Indirect rate calculation with variance flagging vs. provisional rates
- Project-level billing assembly (T&M, FFP, CPFF)
- Per-cycle DCAA audit pack: timesheets, rate calc, billing, evidence
- Unallowable cost screening at timesheet entry per FAR Part 31 categories
- Subcontractor labor reconciliation to time records and billings
- ICE-readiness pack auto-assembled from cycle data
Contract type variants — what changes per type
GovCon billing logic is contract-type-specific. The engine handles each type with type-specific rules for what flows to billing, what gets withheld, and what's evidence-required.
| Contract type | Billing logic | Indirect rate handling | DCAA evidence focus |
|---|
| Time-and-Materials (T&M) | Hours × loaded labor rate; materials pass-through with material-handling burden | Burden built into loaded labor rate; subject to ceiling | Timesheet support; loaded-rate computation; material receipts |
| Cost-Plus-Fixed-Fee (CPFF) | Direct cost + provisional indirect + fixed fee; subject to fee ceiling | Provisional rates applied; year-end true-up to actuals | Cost-allowability per FAR Part 31; rate computation; fee schedule |
| Firm-Fixed-Price (FFP) | Milestone or schedule-based; revenue per ASC 606 over-time-percentage-of-completion typical | Indirect rates affect cost realization, not billing | Cost realization vs. plan; estimate-at-completion (EAC) discipline |
| Cost-Plus-Award-Fee (CPAF) | Direct cost + provisional indirect + award fee per evaluation period | Provisional rates with year-end true-up | Award-fee determination; cost-allowability |
| Cost-Plus-Incentive-Fee (CPIF) | Direct cost + provisional indirect + share-line incentive computation | Provisional rates with year-end true-up | Cost target tracking; share-line computation |
| Indefinite-Delivery-Indefinite-Quantity (IDIQ) | Per task-order, type per task-order | Per task-order indirect rate application | Task-order-level evidence rolled up to contract |
Indirect rate structure and provisional-to-actual mechanics
Provisional indirect rates approved by DCMA at the start of the fiscal year are the basis for all interim billing on cost-reimbursement contracts. At year-end, actual rates are computed from the cost pool and base, and a true-up flows back to each contract: under-billing produces a final-voucher claim, over-billing requires repayment.
The engine tracks provisional vs. actual variance monthly so the controller sees emerging variance instead of discovering it at year-end. A 3% variance on G&A this year produced a $180K under-billing across the contract portfolio that was caught and adjusted in October instead of at the December year-end true-up — a working-capital improvement plus a cleaner ICE submission.
- Fringe rate — fringe pool / total direct labor; includes fringe benefits, employer taxes, paid leave
- Overhead rate — overhead pool / direct labor + applicable fringe; includes facilities, fringe-on-OH-labor, depreciation on direct-charge assets
- G&A rate — G&A pool / total cost input (TCI) base; includes corporate G&A, executive compensation, finance, HR
- Material-handling rate — separate small rate for material pass-through; reduces material-burden impact on billing
- Provisional-to-actual variance — tracked monthly, alerted on threshold breach
- Cost pool integrity — composition tested against rate-agreement letter quarterly
- Base composition — direct labor, TCI, or other base tested for consistency with rate-agreement letter
FAR Part 31 unallowable cost screening — what gets caught at entry
Unallowable costs aren't always obvious. The screening engine catches the FAR Part 31.205 categories at point of entry — far cheaper than removing them at year-end ICE prep. Each rule has a documented citation and reviewer-override capability for legitimate edge cases.
- FAR 31.205-1 — public relations and advertising (with the narrow exceptions)
- FAR 31.205-3 — bad debts
- FAR 31.205-8 — contributions and donations
- FAR 31.205-13 — entertainment costs
- FAR 31.205-14 — interest and other financial costs
- FAR 31.205-22 — lobbying costs
- FAR 31.205-27 — organization costs (mergers, IPOs)
- FAR 31.205-32 — fines and penalties
- FAR 31.205-46 — travel costs (per-diem ceiling enforcement)
- FAR 31.205-47 — defense of fraud proceedings
- FAR 31.205-49 — goodwill
Why this matters for GovCon specifically
GovCon accounting has a higher evidence bar than most industries: DCAA can pull audit support on short notice, indirect rates need defensible computation, and unallowable costs have to be screened before they hit a billable project. Most automation work in this space stays in the Deltek ecosystem — we layer on top of Costpoint or Unanet, keeping the GL where it already is, and add the workflow + evidence layer.