To determine whether the proposed cost or price has been “reduced due to reliance upon future Government-reimbursed projects,” the proposed new solicitation clause at DFARS 252.215-408 (2) requires the offeror to include the following documentation in its proposal: Hen an offeror proposes a cost or price that is reduced due to reliance upon future Government-reimbursed independent research and development projects, the contracting officer shall, for evaluation purposes only, adjust the total evaluated cost or price of the proposal to include the amount by which such investments reduce the price of the proposal. ![]() The proposed rule would add a new DFARS 215.305 (a) (1): The rule’s objective, DoD notes, is to ensure contractors are penalized for reducing their proposed price in reliance on government funding of future IRAD projects through indirect cost rates. The proposed rule turns away from what DoD termed “the laissez faire” approach. The goal of this initiative is to restore the balance between these goals. The laissez faire approach of the last few decades has allowed defense companies to emphasize the former much more than the latter. The intent of the below is to ensure that IRAD meets the complementary goals of providing defense companies an opportunity to exercise independent judgement on investments in promising technologies that will provide a competitive advantage, including the creation of intellectual property, while at the same time pursuing technologies that may improve the military capability of the United States. This is not the intended purpose of making IRAD an allowable cost. In these cases, development price proposals are reduced by using a separate source of government funding (allowable IRAD overhead expenses spread across the total business) to gain a price advantage in a specific competitive bid. A problematic form of this use of IRAD is in cases where promised future IRAD expenditures are used to substantially reduce the bid price on competitive procurements. high fraction of IRAD is being spent on near-term competitive opportunities and on de minimis investments primarily intended to create intellectual property. In a section of the Implementation Guidelines (Attachment 2 to the Implementation Directive) addressing IRAD, DoD noted that: On April 9, 2015, DoD issued its “Implementation Directive” for Better Buying Power 3.0 initiative (the “Implementation Directive”). The proposed rule also would add more complexity to a proposal evaluation process already freighted with rules intended to further social policy goals – sometimes at the expense of rational, price-based proposal evaluation. The proposed rule is antithetical to policy considerations favoring IRAD as a valid and valuable component of a contractor’s indirect costs, purposes strongly endorsed by Congress recently in the National Defense Authorization Act of 2017 (“2017 NDAA”) enacted on December 23, 2016. For the reasons described in this entry, we think this rule is illogical and misguided, and we hope the DoD will retract the rule or substantially revise it as a result of the comments it receives. ![]() Comments on the proposed rule were due on Friday, February 2, 2017. The proposed rule requires DoD agencies to assign an evaluation cost penalty to the proposed price of any contractor expecting to receive reimbursement from the United States Government for any future IRAD expenses through its indirect cost rates. ![]() On November 4, 2016, the Department of Defense proposed a new rule applicable to major defense contractors who expect to use future independent research and development (“IRAD”) to perform DoD contracts.
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