81 FR 7721 - Defense Federal Acquisition Regulation Supplement: Enhancing the Effectiveness of Independent Research and Development (DFARS Case 2016-D002)

DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System

Federal Register Volume 81, Issue 30 (February 16, 2016)

Page Range		7721-7723
FR Document		2016-03039

DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to improve the effectiveness of independent research and development investments by the defense industrial base that are reimbursed as allowable costs.

Federal Register, Volume 81 Issue 30 (Tuesday, February 16, 2016)

[Federal Register Volume 81, Number 30 (Tuesday, February 16, 2016)]
[Proposed Rules]
[Pages 7721-7723]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-03039]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 231

[Docket DARS-2015-0070]
RIN 0750-AI81


Defense Federal Acquisition Regulation Supplement: Enhancing the 
Effectiveness of Independent Research and Development (DFARS Case 2016-
D002)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to improve the effectiveness of 
independent research and development investments by the defense 
industrial base that are reimbursed as allowable costs.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before April 18, 2016, to be considered 
in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2016-D002, using 
any of the following methods:
     Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by entering ``DFARS Case 
2016-D002'' under the heading ``Enter keyword or ID'' and selecting 
``Search.'' Select the link ``Submit a Comment'' that corresponds with 
``DFARS Case 2016-D002.'' Follow the instructions provided at the 
``Submit a Comment'' screen. Please include your name, company name (if 
any), and ``DFARS Case 2016-D002'' on your attached document.
     Email: [email protected]. Include DFARS Case 2016-D002 in 
the subject line of the message.
     Fax: 571-372-6094.
     Mail: Defense Acquisition Regulations System, Attn: Mr. 
Mark Gomersall, OUSD(AT&L)DPAP/DARS, Room 3B941, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided. To 
confirm receipt of your comment(s), please check www.regulations.gov, 
approximately two to three days after submission to verify posting 
(except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, telephone 571-372-
6099.

SUPPLEMENTARY INFORMATION: 

I. Background

    Better Buying Power (BBP) is the implementation of best practices 
to strengthen DoD's buying power, improve industry productivity, and 
provide an affordable, value-added military capability to the 
warfighter (see http://bbp.dau.mil/.) Launched in 2010, BBP encompasses 
a set of fundamental acquisition principles to achieve greater 
efficiencies through affordability, cost control, elimination of 
unproductive processes and bureaucracy, and

[[Page 7722]]

promotion of competition. BBP initiatives also incentivize productivity 
and innovation in industry and Government, and improve tradecraft in 
the acquisition of services.
    The Independent Research and Development (IR&D) initiative outlined 
in BBP 3.0 is intended to improve the effectiveness of IR&D investments 
by the defense industrial base that are reimbursed as allowable costs. 
As stated in the Under Secretary of Defense for Acquisition, 
Technology, and Logistics BBP 3.0 Implementation Memorandum, dated 
April 9, 2015 (see http://bbp.dau.mil/references.html), IR&D 
investments need to meet 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. To achieve this goal, both DoD and the 
industrial base need to work together to ensure that DoD has visibility 
into the opportunity created by Government-reimbursed IR&D efforts 
performed by defense contractors.
    In accordance with 10 U.S.C. 2372(f), contractor IR&D investments 
are not directed by the Government--they are identified by individual 
companies and are intended to advance a particular company's ability to 
develop and deliver superior and more competitive products to the 
warfighter. However, these efforts can have the best payoff, both for 
DoD and for individual performing companies, when the Government is 
well informed of the investments that companies are making, and when 
companies are well informed about related investments being made 
elsewhere in the Government's research and development portfolios and 
about Government plans for potential future acquisitions where this 
IR&D may be relevant.

II. Discussion and Analysis

    DoD is proposing to revise DFARS 231.205-18, Independent Research 
and Development and Bid and Proposal Costs, to require that proposed 
new IR&D efforts be communicated to appropriate DoD personnel prior to 
the initiation of these investments, and that results from these 
investments should also be shared with appropriate DoD personnel. The 
intent of such engagement is not to reduce the independence of IR&D 
investment selection, nor to establish a bureaucratic requirement for 
Government approval prior to initiating an IR&D project. Instead, the 
objective of this engagement is to ensure that both IR&D performers and 
their potential DoD customers have sufficient awareness of each other's 
efforts and to provide industry with some feedback on the relevance of 
proposed and completed IR&D work.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is a significant regulatory action and, therefore, was subject to 
review under section 6(b) of E.O. 12866, Regulatory Planning and 
Review, dated September 30, 1993. This rule is not a major rule under 5 
U.S.C. 804.

IV. Regulatory Flexibility Act

    DoD does not expect this proposed rule 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. 
However, an initial regulatory flexibility analysis has been prepared 
and is summarized as follows:
    DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to improve the effectiveness of 
independent research and development (IR&D) investments by the defense 
industrial base that are reimbursed as allowable costs in accordance 
with Federal Acquisition Regulation 31.205-18(c). The IR&D initiative 
outlined in Better Buying Power 3.0 is intended to improve the 
effectiveness of IR&D investments by the defense industrial base that 
are reimbursed as allowable costs. To achieve this goal, both DoD and 
the industrial base need to work together to ensure the Department has 
visibility into the opportunity created by Government-reimbursed IR&D 
efforts performed by defense contractors. The rule proposes to revise 
DFARS 231.205-18, Independent Research and Development and Bid and 
Proposal Costs, to require that proposed new IR&D efforts be 
communicated to appropriate DoD personnel prior to the initiation of 
these investments, and that results from these investments should also 
be shared with appropriate DoD personnel.
    At this time DoD is unable to estimate the number of small entities 
to which this rule will apply. However, DoD does not expect the rule to 
have a significant economic impact on a substantial number of small 
entities, because DFARS 231.205-18(c)(iii) applies only to major 
contractors, which are defined as those whose covered segments 
allocated a total of more than $11,000,000 in independent research and 
development and bid and proposal costs to covered contracts during the 
preceding fiscal year.
    There is no change to reporting and recordkeeping as a result of 
this rule. The recordkeeping is limited to that required to properly 
record and report IR&D projects to the Defense Technical Information 
Center (DTIC) using DTIC's online IR&D database.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules. There are no known significant alternative approaches to 
the rule that would meet the requirements.
    DoD invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2016-D002), in 
correspondence.

V. Paperwork Reduction Act

    The rule affects the information collection requirements at Defense 
Federal Acquisition Regulation Supplement (DFARS) 231.205-18, currently 
approved under the Office of Management and Budget (OMB) Control Number 
0704-0483, entitled, ``Independent Research and Development Technical 
Descriptions,'' in accordance with the Paperwork Reduction Act (44 
U.S.C. chapter 35); however, the impact of this rule is negligible. 
Currently, contractors are required to (1) report Independent Research 
and Development (IR&D) projects to the Defense Technical Information 
Center (DTIC) using the DTIC's on-line IR&D database and (2) update 
these inputs at least annually and when the project is completed. This 
rule merely changes the web address for submission of this report and 
requires major contractors to include in the report the name of the 
Government employee with which a technical interchange was held prior 
to initiation of the IR&D effort and the date of such interchange.

[[Page 7723]]

List of Subjects in 48 CFR Parts 231

    Government procurement.

Jennifer L. Hawes,
Editor, Defense Acquisition Regulations System.

    Therefore, 48 CFR part 231 is proposed to be amended as follows:

PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES

0
1. The authority citation for part 231 continues to read as follows:

    Authority:  41 U.S.C. 1303 and 48 CFR chapter 1.

0
2. In section 231.205-18, revise paragraph (c)(iii)(C) to read as 
follows:


231.205-18  Independent research and development and bid and proposal 
costs.

* * * * *
    (c) * * *
    (iii) * * *
    (C) For annual IR&D costs to be allowable--
    (1) The IR&D projects generating the costs must be reported to the 
Defense Technical Information Center (DTIC) using the DTIC's on-line 
input form and instructions at http://www.defenseinnovationmarketplace.mil/;
    (2) The inputs must be updated with a summary of results at least 
annually and when the project is completed;
    (3) Copies of the input and updates must be made available for 
review by the cognizant administrative contracting officer (ACO) and 
the cognizant Defense Contract Audit Agency auditor to support the 
allowability of the costs;
    (4) Contractors that do not meet the threshold as a major 
contractor are encouraged to use the DTIC on-line input form to report 
IR&D projects to provide DoD with visibility into the technical content 
of the contractors' IR&D activities; and
    (5) For IR&D projects initiated in the contractor's fiscal year 
2017 and later, as a prerequisite for the subsequent determination of 
allowability, major contractors must--
    (i) Engage in a technical interchange with a technical or 
operational DoD Government employee before IR&D costs are generated so 
that contractor plans and goals for IR&D projects benefit from the 
awareness of and feedback by a DoD employee who is informed of related 
ongoing and future potential interest opportunities; and
    (ii) Use the online input form for IR&D projects reported to DTIC 
to document the technical interchange, which includes the name of the 
DoD Government employee and the date the technical interchange 
occurred.
* * * * *
[FR Doc. 2016-03039 Filed 2-12-16; 8:45 am]
 BILLING CODE 5001-06-P

7722 Federal Register / Vol. 81, No. 30 / Tuesday, February 16, 2016 / Proposed Rules

promotion of competition. BBP Instead, the objective of this engagement At this time DoD is unable to estimate
initiatives also incentivize productivity is to ensure that both IR&D performers the number of small entities to which
and innovation in industry and and their potential DoD customers have this rule will apply. However, DoD does
Government, and improve tradecraft in sufficient awareness of each other’s not expect the rule to have a significant
the acquisition of services. efforts and to provide industry with economic impact on a substantial
The Independent Research and some feedback on the relevance of number of small entities, because
Development (IR&D) initiative outlined proposed and completed IR&D work. DFARS 231.205–18(c)(iii) applies only
in BBP 3.0 is intended to improve the to major contractors, which are defined
effectiveness of IR&D investments by the III. Executive Orders 12866 and 13563
as those whose covered segments
defense industrial base that are Executive Orders (E.O.s) 12866 and allocated a total of more than
reimbursed as allowable costs. As stated 13563 direct agencies to assess all costs $11,000,000 in independent research
in the Under Secretary of Defense for and benefits of available regulatory and development and bid and proposal
Acquisition, Technology, and Logistics alternatives and, if regulation is costs to covered contracts during the
BBP 3.0 Implementation Memorandum, necessary, to select regulatory preceding fiscal year.
dated April 9, 2015 (see http:// approaches that maximize net benefits There is no change to reporting and
bbp.dau.mil/references.html), IR&D (including potential economic, recordkeeping as a result of this rule.
investments need to meet the environmental, public health and safety The recordkeeping is limited to that
complementary goals of providing effects, distributive impacts, and required to properly record and report
defense companies an opportunity to equity). E.O. 13563 emphasizes the IR&D projects to the Defense Technical
exercise independent judgement on importance of quantifying both costs Information Center (DTIC) using DTIC’s
investments in promising technologies and benefits, of reducing costs, of online IR&D database.
that will provide a competitive harmonizing rules, and of promoting
The rule does not duplicate, overlap,
advantage, including the creation of flexibility. This is a significant
or conflict with any other Federal rules.
intellectual property, while at the same regulatory action and, therefore, was
There are no known significant
time pursuing technologies that may subject to review under section 6(b) of
alternative approaches to the rule that
improve the military capability of the E.O. 12866, Regulatory Planning and
would meet the requirements.
United States. To achieve this goal, both Review, dated September 30, 1993. This
rule is not a major rule under 5 U.S.C. DoD invites comments from small
DoD and the industrial base need to
804. business concerns and other interested
work together to ensure that DoD has
parties on the expected impact of this
visibility into the opportunity created IV. Regulatory Flexibility Act rule on small entities.
by Government-reimbursed IR&D efforts
performed by defense contractors. DoD does not expect this proposed DoD will also consider comments
In accordance with 10 U.S.C. 2372(f), rule to have a significant economic from small entities concerning the
contractor IR&D investments are not impact on a substantial number of small existing regulations in subparts affected
directed by the Government—they are entities within the meaning of the by this rule in accordance with 5 U.S.C.
identified by individual companies and Regulatory Flexibility Act 5 U.S.C. 601, 610. Interested parties must submit such
are intended to advance a particular et seq. However, an initial regulatory comments separately and should cite 5
company’s ability to develop and flexibility analysis has been prepared U.S.C. 610 (DFARS Case 2016–D002), in
deliver superior and more competitive and is summarized as follows: correspondence.
products to the warfighter. However, DoD is proposing to amend the
V. Paperwork Reduction Act
these efforts can have the best payoff, Defense Federal Acquisition Regulation
both for DoD and for individual Supplement (DFARS) to improve the The rule affects the information
performing companies, when the effectiveness of independent research collection requirements at Defense
Government is well informed of the and development (IR&D) investments by Federal Acquisition Regulation
investments that companies are making, the defense industrial base that are Supplement (DFARS) 231.205–18,
and when companies are well informed reimbursed as allowable costs in currently approved under the Office of
about related investments being made accordance with Federal Acquisition Management and Budget (OMB) Control
elsewhere in the Government’s research Regulation 31.205–18(c). The IR&D Number 0704–0483, entitled,
and development portfolios and about initiative outlined in Better Buying ‘‘Independent Research and
Government plans for potential future Power 3.0 is intended to improve the Development Technical Descriptions,’’
acquisitions where this IR&D may be effectiveness of IR&D investments by the in accordance with the Paperwork
relevant. defense industrial base that are Reduction Act (44 U.S.C. chapter 35);
reimbursed as allowable costs. To however, the impact of this rule is
II. Discussion and Analysis achieve this goal, both DoD and the negligible. Currently, contractors are
DoD is proposing to revise DFARS industrial base need to work together to required to (1) report Independent
231.205–18, Independent Research and ensure the Department has visibility Research and Development (IR&D)
Development and Bid and Proposal into the opportunity created by projects to the Defense Technical
Costs, to require that proposed new Government-reimbursed IR&D efforts Information Center (DTIC) using the
IR&D efforts be communicated to performed by defense contractors. The DTIC’s on-line IR&D database and (2)
appropriate DoD personnel prior to the rule proposes to revise DFARS 231.205– update these inputs at least annually
initiation of these investments, and that 18, Independent Research and and when the project is completed. This
mstockstill on DSK4VPTVN1PROD with PROPOSALS

results from these investments should Development and Bid and Proposal rule merely changes the web address for
also be shared with appropriate DoD Costs, to require that proposed new submission of this report and requires
personnel. The intent of such IR&D efforts be communicated to major contractors to include in the
engagement is not to reduce the appropriate DoD personnel prior to the report the name of the Government
independence of IR&D investment initiation of these investments, and that employee with which a technical
selection, nor to establish a bureaucratic results from these investments should interchange was held prior to initiation
requirement for Government approval also be shared with appropriate DoD of the IR&D effort and the date of such
prior to initiating an IR&D project. personnel. interchange.

VerDate Sep<11>2014 21:46 Feb 12, 2016 Jkt 238001 PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 E:\FR\FM\16FEP1.SGM 16FEP1

Document Created: 2016-02-13 03:13:53
Document Modified: 2016-02-13 03:13:53

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Proposed rule.
Dates		Comments on the proposed rule should be submitted in writing to
Contact		Mr. Mark Gomersall, telephone 571-372- 6099.
FR Citation		81 FR 7721
RIN Number		0750-AI81

81 FR 7721 - Defense Federal Acquisition Regulation Supplement: Enhancing the Effectiveness of Independent Research and Development (DFARS Case 2016-D002)

DEPARTMENT OF DEFENSEDefense Acquisition Regulations System

Federal Register Volume 81, Issue 30 (February 16, 2016)

DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System