Friday, September 22, 2017

Technical Interchanges of IR&D Projects No Longer Required as a Condition of Allowability

Good news for major defense contractors.

The Department of Defense issued a class deviation regarding the requirement for Independent Research and Development technical exchanges. (See Class Deviation 2017-O0010 dated September 14, 2017).

Under the existing DFARS (DoD FAR Supplement) Cost Principle (DFARS 231.205-18(c)(iii)(C)(4), major contractors are required to engage in or document a technical interchange as part of the criteria for determining a contractor's annual independent research and development costs to be allowable.

This requirement has been controversial since it was enacted back in 2016 primarily because DoD didn't develop the internal structure to host or coordinate these technical exchanges. DCMA (Defense Contract Management Agency) backed away from any involvement early on saying it didn't have anyone qualified to engage in such technical interchanges. (see Enhancing the Effectiveness of Independent Research and Development for more information on requirement).

As a result of this deviation the actions require by DFARS (engaging in technical interchanges with a technical or operational DoD Government employee prior to the generation of IR&D costs and documenting those interchanges) are no longer part of the criteria a contracting officer must consider in determining a major contractor's IR&D costs to be allowable.

This class deviation is effective until it is incorporated in DFARS or until it is rescinded. Look for it to be incorporated into DFARS. It was bad policy from the beginning.

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