New rules emerge for independent research.

• Author: Fenster, Herb
• Position: Government Contracting Insights

The life of government contractors with independent research-and-development funding has never been easy or straightforward, and recent regulatory changes have only made the landscape more challenging.

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The Defense Department's Better Buying Power 3.0 initiative has led to new rules that curtail the ability of industry to maintain both the "independent" and the "research" components of independent research and development, or IRAD. Its language and direction seemingly conflict with a law, now simplified and reinforced, intended to protect investments.

Moreover, without a change in direction, the department's support for critical long-term research could continue on its downward spiral. The department must undertake a significant reconsideration of how research and development should be utilized to expand the technological defense industrial base.

The department has recently pushed forward with new regulations that appear focused on placing substantial limitations on IRAD funding. These new regulations require that contractors engage in "technical interchange meetings" prior to undertaking such projects. While the department has tried to assure industry that it does not intend to return to the old days of pre-approving IRAD projects, there remain very real questions for industry, such as whether and how the Defense Contract Management Agency and the Defense Contract Auditing Agency will utilize such technical interchange data.

The department has also proposed a new rule to require that--in procurements for major defense acquisition programs and major automated information systems in a development phase--contracting officials must adjust the total evaluated cost/price of a contractor proposal to account for its proposed reliance on government-funded IRAD projects. The stated goal of the pending rule change is to address the concern in the Better Buying Power 3.0 implementation directive that contractors may use independent R&D to gain a price advantage on specific competitive bids by pushing contract-related costs into IRAD cost pools. This change could be read to conflict with both the language and intent of law protecting such investments.

These rule changes impinge upon the independence of industry decision-making in connection with the projects, and such changes run counter to the very purpose of IRAD.

Industry's mounting concern over the Defense Department's more restrictive policy is rooted at least in part in...