Article
Proposed rule change to DFARS allowable IR&D costs effective in FY2017
Feb. 16, 2016
A proposed rule by the Defense Acquisition Regulations System on Feb. 16, 2016
The long anticipated proposed rule change to allowable Independent Research and Development (IR&D) under Defense Federal Acquisition Regulation (DFARS) 231.205-18 was released on February 16, 2016. Effective in FY2017, contractors who have already surpassed the Defense Technical Information Center (DTIC) reporting threshold for IR&D, will need to have a “technical interchange with a technical or operational DoD Government employee" for all new IR&D projects before they are initiated to be allowable under the proposed rule. First introduced in Better Buying Power 3.0, these proposed changes are intended to better align contractor IR&D investments with the U.S. Department of Defense's (DoD's) long-range technology needs by improving the communications with department technical or operational personnel. Contractors will be required to document the name of the government party when a "technical interchange" took place prior to the initiation of the IR&D project.
Specifically the proposed rule requires:
- For IR&D projects initiated in the contractor's fiscal year 2017 and later, as a prerequisite for the subsequent determination of allowability, major contractors must—
- Engage in a technical interchange with a technical or operational DoD Government employee before IR&D costs are generated so that contractor plans and goals for IR&D projects benefit from the awareness of and feedback by a DoD employee who is informed of related ongoing and future potential interest opportunities;
- Use the online input form for IR&D projects reported to DTIC to document the technical interchange, which includes the name of the DoD Government employee and the date the technical interchange occurred.
Thoughts / questions for contractors
The Defense industry has already voiced its concerns about this next wave of proposed rule changes regarding allowable IR&D, particularly with the requirement for a technical interchange prior to initiating a new IR&D project. Although the federal register announcement and the Better Buying Power 3.0 Implementation Memorandum both state that the intent for technical interchanges “is not to reduce the independence of IR&D investment selection, nor to establish a bureaucratic requirement for government approval prior to initiating an IR&D project”, it certainly seems like we are on a slippery slope in that direction.