[Federal Register Volume 62, Number 2 (Friday, January 3, 1997)]
[Proposed Rules]
[Pages 374-375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-43]
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DEPARTMENT OF DEFENSE
48 CFR Parts 225, 231, and 242
[DFARS Case 95-D040]
Defense Federal Acquisition Regulation Supplement; Independent
Research and Development/Bid and Proposal Costs for FY96 and Beyond
AGENCY: Department of Defense (DoD).
ACTION: Proposed rule with request for comment.
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SUMMARY: The Department of Defense is proposing to amend the Defense
Federal Acquisition Regulation Supplement (DFARS) to reflect proposed
changes to the Federal Acquisition Regulation (FAR) to treat
Independent Research and Development and Bid and Proposal cost for
fiscal year 1996 and beyond as fully allowable, subject only to the FAR
normal standards of reasonableness and allocability.
DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before March 4, 1997, to be considered in
the formulation of the final rule.
ADDRESSES: Interested parties should submit written comments to,
Defense Acquisition Regulations Council, Attn: Ms. Sandra G. Haberlin,
PDUSD (A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC
20301-3062, telefax number (703) 602-0350. Please cite DFARS Case 95-
D040 in all correspondence related to this issue.
FOR FURTHER INFORMATION CONTACT:
Ms. Sandra Haberlin, at (703) 602-0131. Please cite DFARS Case 95-D040.
SUPPLEMENTARY INFORMATION:
A. Background
The current Independent Research and Development (IR&D)/Bid and
Proposal (B&P) cost principle at DFARS 231.205-18 covers the limited
allowability of IR&D/B&P costs for major contractors through a 3-year
transition period (fiscal years 1993-1995), based on the requirements
of section 802 of the National Defense Authorization Act for fiscal
years 1992 and 1993 (Pub. L. 102-190). Section 802 does not address the
allowability of IR&D/B&P costs after fiscal year 1995. This proposed
DFARS rule supplements a proposed FAR rule (FAR Case 95-032), which
treats IR&D/B&P costs for fiscal year 1996 and beyond as 100 percent
allowable for all contractors, subject only to the FAR normal standards
of reasonableness and allocability. The proposed FAR rule was published
in the Federal Register on November 14, 1996 (61 FR 58452). In
addition, this DFARS rule continues to require, in accordance with 10
U.S.C. 2372, that IR&D/B&P activities of major contractors have a
potential interest to DoD for the costs to be allowable.
The proposed DFARS rule revises 231.205-18 and 242.771 to delete
(1) the requirement for advance agreement negotiations or formal IR&D
technical reviews and evaluations after contractors' fiscal year 1992;
and (2) the limited allowability restriction of IR&D/B&P costs for
fiscal years 1993-1995. Also, the rule revises 225.7303-2(c) to
indicate that the ``potential interest to DoD'' requirement of DFARS
231.205-18(c)(3) does not apply to contracts for foreign military
sales.
B. Regulatory Flexibility Act
The proposed rule is not expected to have a significant economic
impact on a substantial number of small entities within the meaning of
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because most
contracts awarded to small entities use simplified acquisition
procedures or are awarded on a competitive fixed-price basis and do not
require application of the cost principle contained in this rule. An
initial regulatory flexibility analysis, therefore, has not been
performed. Comments are invited from small businesses and other
interested parties. Comments from small entities concerning the
affected DFARS subparts also will be considered in accordance with
Section 610 of the Act. Such comments must be submitted separately and
cite DFARS Case 95-D040 in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the proposed
rule does not impose any new recordkeeping, information collection
requirements, or collections of information from offerors, contractors,
or members of the public which require the approval of the Office of
Management and Budget under 44 U.S.C. 3501, et seq.
List of Subjects in 48 CFR Parts 225, 231, and 242
Government procurement
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
Therefore, it is proposed that 48 CFR Parts 225, 231, and 242 be
amended as follows:
1. The authority citation for 48 CFR Parts 225, 231, and 242
continues to read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 225--FOREIGN ACQUISITION
2. Section 225.7303-2 is amended by revising paragraph (c) to read
as follows:
225.7303-2 Cost of doing business with a foreign government or an
international organization.
* * * * *
(c) The cost limitation for major contractors on independent
research and development and bid and proposal (IR&D/B&P) costs for
projects which are of potential interest to DoD, in 231.205-18(c)(iii),
does not apply to foreign military sale contracts, except as provided
in 225.7303-5. The
[[Page 375]]
allowability of IR&D/B&P costs on contracts for foreign military sales
not wholly paid for from funds made available on a nonrepayable basis
shall be limited to the contract's allocable share of the contractor's
total IR&D/B&P expenditures. In pricing contracts for such foreign
military sales--
(1) Use the best estimate of reasonable costs in forward pricing.
(2) Use actual expenditures, to the extent that they are
reasonable, in determining final cost.
* * * * *
PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES
3. Section 231.205-18 is revised to read as follows:
231.205-18 Independent research and development and bid and proposal
costs.
(a) Definition. Major contractor, as used in this subsection, means
a contractor with more than $11,000,000 in IR&D/B&P costs in the
preceding fiscal year allocated to DoD prime contracts and subcontracts
whose values exceed the simplified acquisition threshold, except for
fixed-price contracts and subcontracts without cost incentives.
(c) Allowability. (i) Departments/agencies shall not supplement
this regulation in any way that limits IR&D/B&P cost allowability.
(ii) See 225.7303-2(c) for allowability provisions affecting
foreign military sale contracts.
(iii) For major contractors (see paragraph (a) of this subsection),
the following limitation applies--
(A) The amount of IR&D/B&P costs allowable under DoD contracts
shall not exceed the lesser of--
(1) Such contracts' allocable share of total incurred IR&D/B&P
costs; or
(2) The amount of incurred IR&D/B&P costs for projects having
potential interest to DoD.
(B) Allowable IR&D/B&P costs are limited to those for projects
which are of potential interest to the DoD, including activities
intended to accomplish any of the following--
(1) Enable superior performance of future U.S. weapon systems and
components;
(2) Reduce acquisition costs and life-cycle costs of military
systems;
(3) Strengthen the defense industrial and technology base of the
United States;
(4) Enhance the industrial competitiveness of the United States;
(5) Promote the development of technologies identified as critical
under 10 U.S.C. 2522;
(6) Increase the development and promotion of efficient and
effective applications of dual-use technologies;
(7) 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.
(iv) For major contractors, the contracting officer will--
(i) Determine whether IR&D/B&P projects are of potential interest
to DoD; and
(ii) Provide the results of the determination to the contractor.
(v) The cognizant contract administration office shall furnish
contractors with guidance on financial information needed to support
IR&D/B&P costs and on technical information needed from major
contractors to support the potential interest to DoD determination (see
also 242.771-3(a)).
PART 242--CONTRACT ADMINISTRATION
4. Sections 242.771 through 242.771-3 are revised to read as
follows:
242.771 Independent research and development/bid and proposal.
242.771-1 Scope of subpart.
This section implements 10 U.S.C. 2372, Independent research and
development and bid and proposal costs: payments to contractors.
242.771-2 Policy.
Defense contractors are encouraged to engage in IR&D/B&P activities
of potential interest to DoD, including activities cited in 231.205-
18(c)(iii)(B).
242.771-3 Responsibilities.
(a) The cognizant administrative contracting officer (ACO) or
corporate ACO shall--
(1) Determine cost allowability of IR&D/B&P costs as set forth in
231.205-18 and FAR 31.205-18.
(2) Determine whether IR&D/B&P projects performed by major
contractors (see 231.205-18(a)) are of potential interest to DoD.
Notify the contractor promptly of any IR&D/B&P activities which are not
of potential interest to DoD.
(b) The Defense Contract Management Command of the Defense
Logistics Agency or the Military Department responsible for performing
contract administration functions is responsible for--
(1) Providing contractors with guidance on financial information
needed to support IR&D/B&P costs.
(2) Providing Defense Contract Audit Agency (DCAA) with IR&D/B&P
statistical information, as necessary, to assist DCAA in its annual
reporting requirement (see paragraph (c) of this subsection).
(c) The Defense Contract Audit Agency is responsible for submitting
an annual report to the Director of Defense Procurement (USD (A&T) DP)
setting forth required statistical information relating to the DoD-wide
IR&D/B&P program.
(d) The Director, Defense Research and Engineering (USD (A&T)
DDR&E), is responsible for establishing a regular method for
communication--
(1) From DoD to contractors, of timely and comprehensive
information regarding planned or expected DoD future needs; and
(2) From contractors to DoD, of brief technical descriptions of
contractor IR&D projects.
[FR Doc. 97-43 Filed 1-2-97; 8:45 am]
BILLING CODE 5000-04-M
