Updated November 2026 · VG CPA PC advisors
What billing rates are
Provisional billing rates are interim indirect rates used to invoice cost-reimbursable work until final rates are established. The contracting officer or auditor establishes them, often based on your recent actual rates or budgets.
They are not final. Every year, actual indirect rates are determined through the incurred cost submission and audit or negotiation, and billings are adjusted to match.
Keeping rates current
Compare actual year-to-date rates with billing rates monthly. If actual rates are running higher, request an upward revision to collect the cash you are entitled to; if lower, revise downward to avoid a refund liability.
Under FAR, billing rates may be adjusted during the year at the request of either party to prevent substantial overpayment or underpayment.
The year-end true-up
After final rates are set, you prepare cumulative allowable cost worksheets and adjust each contract's billings. Underbillings are invoiced; overbillings must be credited or refunded.
Contracts cannot be closed until final rates and adjustments are complete, so delays in incurred cost submissions keep contracts open and cash tied up.