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American Forces Press Service

New DOD Rule Supports Independent Research, Development

By Cheryl Pellerin
American Forces Press Service

WASHINGTON, Feb. 6, 2012 – A new rule published Jan. 30 that modifies the way major defense contractors report to the Defense Department on their independent research and development projects enhances communication between government and industry, a senior Pentagon official said last week.

Independent research and development, known as IR&D, is a contractor’s own investment in basic and applied research and development and some kinds of studies that DOD will reimburse the company for making.

Every year the Defense Department invests about $4 billion in defense firms’ IR&D. From this investment come new and improved devices, materials and other products, and advances in technology that ultimately benefit the department and its warfighters, said Ronald J. Kurjanowicz, Senior Advisor to the Assistant Secretary of Defense for Research and Engineering .

The rule, published in the Federal Register, applies to defense contractors that claim more than $11 million in a year on IR&D and bid and proposal costs, Kurjanowicz said.

“It’s asking firms to submit project data on their IR&D projects to the government [through a secure website] called the Defense Innovation Marketplace,” he explained. The site is an industry portal that offers answers to frequently asked questions, contracting news, information about the new rule and other industry resources.

DOD contracting officials can search the site, he said, “and see where the innovation is, and then communicate back with industry the areas that we think are very strong and the areas where there are probably gaps that we can work with. So it will be a communication mechanism.”

Contracts awarded on or after Jan. 30 are subject to the new requirements, a senior procurement analyst in Kurjanowicz’s office said.

Major contractors must comply with the new rule, Kurjanowicz said, but the rule also allows other contractors to submit IR&D project data to the website for greater visibility by government contracting officials.

“We in the government have to know what [defense contracting firms] are working on, because as we build acquisition programs we want to get a sense of what’s available out there,” he added.

Defense officials decided on a rule rather than a voluntary move to the website “because we wanted to level the playing field and give everybody a chance to submit the information,” he said.

“Industry wants to know where we’re going, particularly now in this era, at this inflection point, … so we have to communicate with industry the sort of capabilities we’ll need for that environment,” Kurjanowicz said.

With that communication, he added, “industry will begin to vector their IR&D in that direction.”

IR&D communication mechanisms between DOD and contractors have evolved over the years. “In the 1980s,” Kurjanowicz said, “we actually sent people on site” to contracting firms.

“We called them tri-service reviews, and they would review a contractor’s entire portfolio,” he added. They then would take the information back to their organizations, and based on their findings, the reviewers determined a company’s reimbursement rate, he explained.

In that scenario, Kurjanowicz added, major contractors who could afford to do more IR&D than smaller contractors had an advantage. Today, he said, administrative contract officers do the reviews.

“Firms submit their IR&D projects every year, and everyone does it differently,” Kurjanowicz said. “Some firms submit detailed reports, and others send in a list with dollar values, and the administrative contract officer is supposed to look through that and come up with a rate.”

The problem, he added, is that the administrative contract officers don’t always have the technical expertise to evaluate the submissions, “so we’re losing insight into what the industry is working on.”

Defense contracting officials thought that the easiest and fairest way to fix it for all was to update the Defense Federal Acquisition Regulations with a rule, Kurjanowicz said.

“The fundamental word in IR&D is independent,” he added. “We want to communicate our needs, but the firm has the option as to what technology they pursue. The leadership is very keen on that, because we can’t say that we have all the good ideas, and … we rely on industry to give us alternatives. So it’s about capabilities, and [defense contractors] determine the technology.”

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