The Department of Defense is always looking for the newest and best technology and to encourage the defense industry to continue to conduct research and development. This has allowed companies to indirectly charge contracts to create funding streams for companies to conduct this work. Independent Research & Development (IR&D) is a technical research and development effort by industry that is not sponsored by nor required in performance of a contract. It consists of projects that are within the areas of basic and Applied Research & Development and other concept formulation studies. Contractors are permitted under the Cost Accounting Standards to recover a portion of their IR&D costs, that are allocable and reasonable, by including them as an allowable indirect expense on government contracts.
In addition, DoD permits major defense contractors to include allowable IR&D costs as indirect expenses on defense contracts to the extent that the IR&D activities are of potential interest to DoD. Major contractors are defined as those whose covered segments allocated a total of more than $11 million in IR&D and bid and proposal costs to covered contracts during the preceding fiscal year.
There are seven areas of interest to DoD:
- Enable superior performance of future U.S. weapon systems and components.
- Reduce acquisition costs and life-cycle costs of military systems.
- Strengthen the defense industrial and technology base of the United States.
- Enhance the industrial competitiveness of the United States.
- Promote the development of technologies identified as critical under 10 U.S.C. 2522 “Armament retooling and manufacturing.”
- Increase the development and promotion of efficient and effective applications of dual-use technologies.
- Provide efficient and effective technologies for achieving such environmental benefits as: improved environmental data gathering, environmental cleanup, and restoration, pollution reduction in manufacturing, environmental conservation, and environmentally safe management of facilities.
FAR 31.205-18 provides the necessary framework to account for the cost to companies engaged in R&D effort independent of a particular contract or customer. The Government hopes that the independence of the R&D would help incentivize a Contractor to develop new technologies, where it would be able to recoup some of these costs. DoD would get products through the development process at a greater speed. A good example is the unmanned vehicle industry, which has taken great advantage of IR&D, developing a variety of UAVs. Resulting in capability being fielded quickly to meet emerging needs of DoD.
The Defense Technical Information Center (DTIC) collects and maintains thousands of IR&D project summaries submitted by defense contractors in a restricted-access database. The database contains a short description of each IR&D project and a contractor point of contact. Contractor submissions are voluntary, but most major defense contractors provide project information. The IR&D database offers contractors a means of publicizing technical capabilities to potential DoD customers.
