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DoD is issuing a final rule to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to remove the requirement at DFARS 231.205-18(c)(iii)(C)(4) for contractors to conduct a technical interchange with a DoD Government employee before independent research and development (IR&D) costs are generated for IR&D projects initiated in FY 2017 or later, as a prerequisite for those costs to be determined allowable.  This rule is expected to decrease costs for contractors and offerors.

Statement of Need:

This action is necessary relieve excess burden experienced by industry when deciding to invest in innovative technologies that may benefit the Department.

Summary of the Legal Basis:

This rule is proposed under the authority at 41 U.S.C. 1303, Functions and authority, which provides the authority to issue and maintain the Federal Acquisition Regulation and executive agency implementing regulations. 

Alternatives:

No alternatives to this action are being considered at this time.

Anticipated Costs and Benefits:

Implementing this rule provides a net annualized savings of approximately $2 million. This estimate is based on data available in the Federal Procurement Data System (FPDS) data for FY 2016, which indicates that 307 unique vendors were awarded a non-commercial, cost-type contract subject to cost accounting standards and certified cost and pricing data. IR&D costs are most commonly included in non-commercial, cost-type contracts that are subject to certified cost and pricing data and cost accounting standards. Public comments on the case implementing this requirement in the Defense Federal Acquisition Regulation Supplement indicate that a contractor may invest in numerous IR&D projects that would be incorporated into their proposed IR&D rate. Removing this requirement would relieve contractors from the time burden of preparing for a discussion, locating the appropriate Government contact, discussing with the Government, and documenting a technical interchange for an IR&D project.

Risks:

If this rule is not finalized, the public will experience additional costs to comply with this rule, as well as the possibility of not being reimbursed for IR&D costs under a Government contract.