Hits And Misses In DOD IR&D Rule

Originally published in Law360, March 20, 2012.

Last March, the U.S. Department of Defense issued a proposed rule regarding the reporting requirements for independent research and development, which raised concerns about how the proposed change would tie recoverability of IR&D costs to new reporting and disclosure requirements.

Recently, Defense Federal Acquisition Regulation Supplement 231.205-18(c) was finalized, with changes. See 77 Fed. Reg. 4632 (Jan. 30, 2012). This final rule is a mixed bag that got some things right, but also leaves some of the most serious issues unresolved.

First — three things that the DOD got right:

1) Elimination of the $50,000 Threshold

The proposed rule required IR&D reports from all major contractors generating more than $50,000 annually in IR&D costs. However, the regulations define "major contractors" as contractors whose covered segments are allocated more than $11,000,000 in total IR&D costs during the preceding fiscal year. The two different dollar thresholds created confusion as to who should be reporting and what projects should be included in these reports.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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