Yes, they upgrade for free when at war. If however you want it to become a major IC before going to war you must pay 20 IPC as normal per IC.
Alpha 3 question
if i wanna play the alpha 3 rules and setup, do i have enough information with the rulebook and alpha 3 rule changes or do i need alpha 2,1 rules aswel?
if so where can i find them?
I would also suggest reading the whole Alpha 3 thread and maybe even the Alpha 2 thread at http://www.harrisgamedesign.com/phpBB3/viewtopic.php?f=40&t=6149 so you know why and how the rules came about. It would, I feel, answer some of the more basic questions on how the rules apply.
oh thanks for the fast replys
and keep up the good work, alpha 3 looks really cool