81 FR 78008 - 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 214 (November 4, 2016)
Defense Acquisition Regulations System
Federal Register Volume 81, Issue 214 (November 4, 2016)
| Page Range | 78008-78011 | |
| FR Document | 2016-26366 |
[Federal Register Volume 81, Number 214 (Friday, November 4, 2016)] [Rules and Regulations] [Pages 78008-78011] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-26366] [[Page 78007]] Vol. 81 Friday, No. 214 November 4, 2016 Part V Department of Defense ----------------------------------------------------------------------- Defense Acquisition Regulations System ----------------------------------------------------------------------- 48 CFR Parts 202, 212, 215, et al. Federal Acquisition Regulations; Final and Proposed Rules Federal Register / Vol. 81 , No. 214 / Friday, November 4, 2016 / Rules and Regulations [[Page 78008]] ----------------------------------------------------------------------- DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 231 and 242 [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: Final rule. ----------------------------------------------------------------------- SUMMARY: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to improve the effectiveness of independent research and development (IR&D) investments by the defense industrial base, by requiring contractors to engage in technical interchanges with DoD before costs are generated. DATES: Effective November 4, 2016. FOR FURTHER INFORMATION CONTACT: Mr. Tom Ruckdaschel, telephone 571- 372-6088. SUPPLEMENTARY INFORMATION: I. Background DoD published a proposed rule in the Federal Register at 81 FR 7723 on February 16, 2016, 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 be shared with appropriate DoD personnel. Nine respondents submitted public comments in response to the proposed rule. II. Discussion and Analysis DoD reviewed the public comments in the development of this final rule. A discussion of the comments and the changes made to the rule as a result of those comments is provided, as follows: A. Summary of Changes From the Proposed Rule in Response to Public Comments 1. The requirement at DFARS 231.205-18(c)(iii)(C)(2) to include a ``summary of results'' with the annual update to online inputs is removed in the final rule. 2. DFARS 231.205-18(c)(iii)(C)(4)(i) is revised to cite the Office of the Assistant Secretary of Defense for Research and Engineering (OASD R&E) as a resource for contractors who do not have a point of contact for the technical interchange. Contact information for OASD R&E can be found at http://www.acq.osd.mil/rd/contacts/. B. Analysis of Public Comments 1. Support for the Rule Comment: Three respondents expressed positive support of the rule and DoD's effort to enhance communications between industry and DoD regarding IR&D efforts. Response: DoD acknowledges the respondents' support for the rule. 2. Favor Certain Projects/Different Priorities Comment: One respondent, though generally supportive of the goals of the rulemaking effort, believed the proposed rule will make it more difficult to pursue IR&D projects at their infancy for the following reason: ``. . . by requiring technical interchange with Government employees before generating IR&D costs, defense contractors will shift toward IR&D projects that are of perceived interest to identifiable DoD officials.'' One respondent stated that the rule will favor companies that have their IR&D (efforts) preapproved. One respondent, though supportive of technical interchanges, was concerned that DoD individuals participating in the interchanges may not share the long- term priorities outlined in Better Buying Power 3.0. Another respondent is concerned that ``bona fide'' technical interchanges exist outside of the contractor's controls and that the proposed rule penalizes contractors without an ``ARDEC like'' agency as their customer. Response: DoD anticipates that defense contractors will pursue IR&D projects intended to advance their ability to develop and deliver a superior and more competitive product to the warfighter. The requirement to hold a technical interchange is not a de facto approval process and will not favor one company over another. These technical interchanges are informal engagements designed to promote transparency, communication, and dialogue between IR&D participants and DoD. The intended outcome 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. Consistent with that objective, the rule requires only that a technical interchange take place and that the date of the interchange and name of the DoD personnel contacted be reported to the defense innovation marketplace. 3. Existing Regulations and Practices Comment: One respondent stated that the rule is not necessary and that the current text at DFARS 231.205-18 is sufficient. Another respondent questioned the proposed rule's statement that ``there are no known significant approaches to the rule that would meet the requirements'' when agencies are already successfully holding voluntary technical interchanges that are achieving the regulation's goals. Response: The existing language at DFARS 231.205-18 does not include a requirement for technical interchanges. These technical interchanges are key to ensuring that both IR&D performers and their potential DoD customers have sufficient awareness of each other's effort. The fact that voluntary technical interchanges already exist, and are successfully achieving the regulation's goals, is consistent with the overall approach to the rulemaking effort. 4. Adverse Impact on Innovation Comment: Several respondents stated that the proposed rule will adversely impact innovative ideas. Another respondent cautioned that the rule will create a barrier to innovation and entry to the marketplace. Response: DoD believes that this rule supports and promotes innovative ideas and technologies, and will incentivize entry into the marketplace by ensuring that IR&D performers and their potential DoD customers have sufficient awareness of each other's efforts and that DoD can provide industry with feedback on the relevance of proposed and completed IR&D work. 5. Cost/Administrative Burden Comment: A number of respondents stated that the rule will cost taxpayers more. One respondent stated that the rule will impose an administrative burden on contractors, administrative contracting officers (ACOs), and DoD personnel. Another respondent expressed concern with the significant costs associated with planning and conducting technical interchanges and the costs accrued prior to the technical interchange. Response: While acknowledging that this rule imposes a slight administrative burden on contractors, ACOs, and DoD personnel, such burdens are overshadowed by the net benefit of ensuring that IR&D performers and their potential DoD customers have sufficient awareness of each other's efforts and [[Page 78009]] that DoD can provide industry with feedback on the relevance of proposed and completed IR&D work. Moreover, the long-term priorities outlined in Better Buying Power 3.0 are a strategic imperative for DoD. 6. Process Issues and Practicality Comment: A number of respondents stated that the rule will create an unnecessary bureaucracy, citing concerns that the rule will create a ``bottleneck'' that will slow down industry IR&D efforts and require the shifting of DoD technical resources to evaluate the IR&D projects and respond to contractors. The respondents claimed that the requirement to conduct and document the interchange of information between contractor and DoD personnel with respect to IR&D projects prior to their commencement is not practical. Response: The rule does not establish a requirement for DoD to evaluate or approve IR&D projects; rather, the rule requires contractors to communicate new IR&D efforts to appropriate DoD personnel via a technical interchange prior to the initiation of the investment. The requirement for technical interchanges is an extension of DoD's long-standing policy to engage in robust communication with all entities supporting the defense industrial base and promote transparent engagement with IR&D participants regarding research and development, including basic research, applied research, and development. This policy is outlined in DoD Instruction 3204.01, ``DoD Policy for Oversight of Independent Research and Development (IR&D).'' The technical interchanges are intended to be informal communications between IR&D participants and DoD. Their objective 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. Note, the requirement for including a summary of results in the annual update on IR&D projects is removed in the final rule, thus easing any administrative burden. 7. Statutory Concerns Comment: A number of respondents stated that the rule is in violation of existing statute and recreates the historic DoD technical reviews rejected by Congress. Response: This rule is consistent with 10 U.S.C 2372 subsection (a), Regulations, which states that the Secretary of Defense shall prescribe regulations governing the payment, by the Department of Defense, of expenses incurred by contractors for independent research and development and bid and proposal (B&P) costs. To that extent, subsection (c), Additional Controls, states that the regulations prescribed pursuant to subsection (a) may include implementation of regular methods for transmission from contractors to the Department of Defense, in a reasonable manner, of information regarding progress by the contractor on the contractor's independent research and development programs. 8. DoD Responsiveness Comment: A number of respondents expressed concern with DoD responsiveness to requests for technical interchanges, citing that the rule fails to outline DoD's obligations and unfairly saddles contractors with the full consequence of DoD's failure to take part in a technical interchange. One respondent is concerned that the proposed rule creates practical, time, resource, and data disclosure challenges for conducting technical interchanges, and that DoD Components will not have an adequate number of personnel designated to conduct the technical interchanges in the time mandated. Another respondent questioned the recourse contractors will have if DoD personnel refuse to engage. Response: To assist contractors in ensuring that technical interchanges take place in a timely manner, the rule has been revised to identify the primary DoD focal point for technical interchanges as OASD R&E. Contact information for this office is available at http://www.acq.osd.mil/rd/contacts/. If a Contractor experiences difficulties scheduling a technical interchange, or does not have a point of contact for the technical interchange, the contractor may contact OASD R&E. 9. Protection of Data Comment: Several respondents were concerned about reporting and protection of proprietary and classified information. Response: This rule merely requires reporting of the name of the technical or operational DoD Government employee and the date of the technical interchange. The requirement to include a summary of results of the technical interchange in the annual update is removed in the final rule. There is an existing requirement at DFARS 231.205- 18(c)(iii)(C) for submission of project summaries and annual updates to the DTIC Web site. It remains DoD policy to protect proprietary information in accordance with applicable laws and agency regulations. Firms have discretion regarding presentation of information they regard as sensitive when they submit project summaries; however, only unclassified IR&D project summary information should be provided. Both database screens and printouts will be marked ``Proprietary.'' Any markings on attachments provided by a contractor will not be altered. Adequate controls are in place to protect information from compromise. It is DoD policy to protect national security information in accordance with national-level policy issuances. In accordance with DoD Instruction 5200.01, DoD Information Security Program and Protection of Sensitive Compartmented Information, DoD shall--Identify and protect national security information and controlled unclassified information (CUI) in accordance with national level policy issuances. Promote information sharing, facilitate judicious use of resources, and simplify management through implementation of uniform and standardized processes. Protect CUI from unauthorized disclosure by appropriately marking, safeguarding, disseminating, and destroying such information. 10. Additional Information Comment: One respondent stated that DFARS language should be added stating that the Government may require additional information from the contractor. Response: The objective of the technical interchanges 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. Within that framework, the DoD personnel involved in technical interchanges will not be seeking additional information, i.e., formal documentation from the contractor. 11. Reporting Burden Comment: One respondent stated that the proposed rule inaccurately suggests that it does not require changes to reporting or recordkeeping. Another respondent stated that the rule adds to the contractor's existing reporting burden. Response: As stated in the proposed rule, the impact of this rule on a contractor's reporting burden is negligible. Currently, contractors are required to (1) report IR&D projects to the Defense Technical Information [[Page 78010]] Center (DTIC) using the DTIC's online 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. In addition, the requirement to include a summary of results in the annual update on IR&D projects is removed in the final rule. 12. DoD Government Employee Comment: One respondent stated that the rule does not specify the needed level of detail for the technical interchange or ``who'' in DoD should receive the technical information. Another respondent is concerned that the proposed rule does not adequately define the term ``DoD Government employee.'' Response: In accordance with the rule, contractors shall engage in technical interchanges with a technical or operational DoD Government employee who is informed of related ongoing and future potential interest opportunities. If the contractor does not have a point of contact for the technical interchange, the contractor may contact OASD R&E. Contact information for OASD R&E can be found at http://www.acq.osd.mil/rd/contacts/. 13. Advance Approval Requirement Comment: One respondent recommended eliminating the DoD advance approval requirement of contractor's IR&D efforts. Response: The rule does not contain a requirement for DoD to approve a contractor's IR&D efforts in advance. 14. Administrative Guidance/Standards for Technical Interchanges Comment: One respondent asked if DoD will write additional administrative rules to outline DoD's obligation to participate in technical interchanges. Another respondent suggested that DoD adopt administrative rules, best practices, and guidance to counter the inconsistent support among DoD agencies and provide uniformity to the technical interchange process. Response: The rule is intentionally crafted to allow informal technical interchanges to ensure that IR&D performers and their potential DoD customers have sufficient awareness of each other's efforts and that DoD can provide industry with feedback on the relevance of proposed and completed IR&D work. 15. Cost Allowability Comment: One respondent recommended DoD reconsider the prerequisite for a determination of allowability. Another recommended the rule include a proviso allowing costs expended before the effective date of the final rule. One respondent states that DoD should not make allowability of IR&D costs contingent on the timing of technical exchange meetings. One respondent was concerned that the proposed rule restricts the allowability of costs related to mandatory technical interchanges; specifically, the proposed rule states that the contractor must engage in a technical interchange ``before IR&D costs are generated.'' Another respondent was concerned of the lack of specificity regarding verification for purposes of allowability determinations. Response: The requirement to determine the allowability of IR&D costs is a preestablished requirement in DFARS 231.205-18(c)(iii)(C), which sets forth the requirement that for a contractor's annual IR&D costs to be allowable, the IR&D projects generating the costs must be reported to DTIC using the DTIC's online input form. This rule merely adds the requirement that contractors also engage in a technical interchange with a technical or operational DoD Government employee, and record the name of the employee and the date the technical interchange occurred using DTIC's online form. The rule applies to IR&D projects initiated in the contractor's fiscal year 2017 and later. However, as with all DFARS rules, unless otherwise stated, the rule is only effective upon publication. Therefore, IR&D costs incurred prior to the effective date of this rule are not subject to the requirements of this rule. 16. Dollar Threshold Comment: Two respondents suggested DoD establish a dollar threshold for requiring technical interchanges. Response: The requirements of this rule only apply to major contractors. Establishing an IR&D project dollar threshold would require speculative estimate of the IR&D project costs and, as such, would be impossible to administer, thus defeating the purpose of the technical interchange. 17. Cost Bases and Pools Comment: Two respondents stated that the rule will require contractors to establish multiple accounting costs bases and pools. Response: This rule does not impose new cost accounting requirements. The IR&D cost principle at Federal Acquisition Regulation (FAR) 31.205-18(b) states, ``The requirements of 48 CFR 9904.420, Accounting for independent research and development costs and B&P costs, are incorporated in their entirety. . . .'' The cost accounting standard at 48 CFR 9904.420-40, Fundamental requirement, paragraph (a) states, ``The basic unit for identification and accumulation of IR&D and B&P costs shall be the individual IR&D or B&P project.'' 18. Annual Briefings/Frequency Comment: A number of respondents questioned the frequency of the technical interchanges and whether they will be required annually. One respondent stated that many IR&D projects span several years, changing and evolving through the process, and that it is not clear whether these projects would need to be stopped and briefed annually. One respondent noted that one of the benefits of contractor IR&D is the ability to rapidly change direction as result of discovery or in response to a shifting market or defense environment. Response: There is no requirement to brief IR&D projects annually. The rule requires the technical interchange to occur at the onset of the IR&D project, prior to generating any costs, for the annual IR&D costs to be considered allowable. C. Other Changes This final rule includes the following technical amendments: 1. The proposed paragraph regarding contractors that do not meet the threshold of major contractor is renumbered as DFARS 231.205- 18(c)(iv) in the final rule. 2. At DFARS 242.771-3, the entity responsible for a regular method for communication is changed from the ``Director, Defense Research and Engineering (USD(A&T)DDR&E)'' to the ``Office of the Assistant Secretary of Defense for Research and Engineering (OASD R&E).'' III. Applicability to Contracts at or Below the Simplified Acquisition Threshold and for Commercial Items, Including Commercially Available Off-the-Shelf Items This rule does not add any new provisions or clauses or impact any existing provisions or clauses. IV. 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 [[Page 78011]] (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 not a significant regulatory action and, therefore, was not 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. V. Regulatory Flexibility Act A final regulatory flexibility analysis has been prepared consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., and is summarized as follows: The objective of this final rule is to (1) ensure that both independent research and development (IR&D) performers and their potential DoD customers have sufficient awareness of each other's efforts and (2) provide industry with feedback on the relevance of proposed and completed IR&D work. There were no significant issues raised by the public in response to the initial regulatory flexibility analysis. DoD does not expect this final 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 million in IR&D and bid and proposal costs to covered contracts during the preceding fiscal year. The final rule requires major contractors to communicate proposed new IR&D efforts to DoD personnel in a technical interchange prior to the initiation of such investments. This rule impacts existing reporting and recordkeeping requirements in a very minor way. Only one element is being added to the existing reporting requirement to require major contractors to include the name of the DoD employee with which a technical interchange was held and the date of such interchange. There are no known significant alternatives to the rule. The rule impacts major contractors and, as such, will have minimal impact on small entities. VI. Paperwork Reduction Act The final 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 IR&D projects to DTIC using the DTIC's online 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 DoD Government employee with which a technical interchange was held and the date of such interchange. List of Subjects in 48 CFR Parts 231 and 242 Government procurement. Jennifer L. Hawes, Editor, Defense Acquisition Regulations System. Therefore, 48 CFR parts 231 and 242 are amended as follows: 0 1. The authority citation for 48 CFR parts 231 and 242 continues to read as follows: Authority: 41 U.S.C. 1303 and 48 CFR chapter 1. PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES 0 2. Amend section 231.205-18 by-- 0 a. Revising paragraph (c)(iii)(C); 0 b. Redesignating paragraphs (c)(iv) and (v) as paragraphs (c)(v) and (vi), respectively; and 0 c. Adding a new paragraph (c)(iv). The revision and addition 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 online input form and instructions at http://www.defenseinnovationmarketplace.mil/; (2) The inputs must be updated 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; and (4) For IR&D projects initiated in the contractor's fiscal year 2017 and later, as a prerequisite for the subsequent determination of allowability, the contractor shall-- (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 Government employee who is informed of related ongoing and future potential interest opportunities. If the contractor does not have a point of contact for the technical interchange, the contractor may contact the Office of the Assistant Secretary of Defense for Research and Engineering (OASD R&E). Contact information for OASD R&E can be found at http://www.acq.osd.mil/rd/contacts/; 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. (iv) Contractors not meeting the threshold of a major contractor are encouraged to use the DTIC online input form to report IR&D projects to provide DoD with visibility into the technical content of the contractors' IR&D activities. * * * * * PART 242--CONTRACT ADMINISTRATION AND AUDIT SERVICES 242.771-3 [Amended] 0 3. In section 242.771-3, amend paragraph (d) introductory text by removing ``Director, Defense Research and Engineering (OUSD(AT&L)DDR&E)'' and adding ``Office of the Assistant Secretary of Defense for Research and Engineering (OASD R&E)'' in its place. [FR Doc. 2016-26366 Filed 11-3-16; 8:45 am] BILLING CODE 5001-06-P
![78008 Federal Register / Vol. 81, No. 214 / Friday, November 4, 2016 / Rules and Regulations
DEPARTMENT OF DEFENSE Engineering (OASD R&E) as a resource name of the DoD personnel contacted be
for contractors who do not have a point reported to the defense innovation
Defense Acquisition Regulations of contact for the technical interchange. marketplace.
System Contact information for OASD R&E can
3. Existing Regulations and Practices
be found at http://www.acq.osd.mil/rd/
48 CFR Parts 231 and 242 contacts/. Comment: One respondent stated that
the rule is not necessary and that the
[Docket DARS–2015–0070] B. Analysis of Public Comments current text at DFARS 231.205–18 is
RIN 0750–AI81 1. Support for the Rule sufficient. Another respondent
questioned the proposed rule’s
Defense Federal Acquisition Comment: Three respondents statement that ‘‘there are no known
Regulation Supplement: Enhancing the expressed positive support of the rule significant approaches to the rule that
Effectiveness of Independent Research and DoD’s effort to enhance would meet the requirements’’ when
and Development (DFARS Case 2016– communications between industry and agencies are already successfully
D002) DoD regarding IR&D efforts. holding voluntary technical
Response: DoD acknowledges the
AGENCY: Defense Acquisition interchanges that are achieving the
respondents’ support for the rule.
Regulations System, Department of regulation’s goals.
Defense (DoD). 2. Favor Certain Projects/Different Response: The existing language at
Priorities DFARS 231.205–18 does not include a
ACTION: Final rule.
requirement for technical interchanges.
Comment: One respondent, though
SUMMARY: DoD is issuing a final rule These technical interchanges are key to
generally supportive of the goals of the
amending the Defense Federal ensuring that both IR&D performers and
rulemaking effort, believed the proposed
Acquisition Regulation Supplement their potential DoD customers have
rule will make it more difficult to
(DFARS) to improve the effectiveness of sufficient awareness of each other’s
pursue IR&D projects at their infancy for
independent research and development effort. The fact that voluntary technical
the following reason: ‘‘. . . by requiring
(IR&D) investments by the defense interchanges already exist, and are
technical interchange with Government
industrial base, by requiring contractors successfully achieving the regulation’s
employees before generating IR&D costs,
to engage in technical interchanges with goals, is consistent with the overall
defense contractors will shift toward
DoD before costs are generated. approach to the rulemaking effort.
IR&D projects that are of perceived
DATES: Effective November 4, 2016. interest to identifiable DoD officials.’’ 4. Adverse Impact on Innovation
FOR FURTHER INFORMATION CONTACT: Mr. One respondent stated that the rule will Comment: Several respondents stated
Tom Ruckdaschel, telephone 571–372– favor companies that have their IR&D that the proposed rule will adversely
6088. (efforts) preapproved. One respondent, impact innovative ideas. Another
SUPPLEMENTARY INFORMATION: though supportive of technical respondent cautioned that the rule will
interchanges, was concerned that DoD create a barrier to innovation and entry
I. Background individuals participating in the to the marketplace.
DoD published a proposed rule in the interchanges may not share the long- Response: DoD believes that this rule
Federal Register at 81 FR 7723 on term priorities outlined in Better Buying supports and promotes innovative ideas
February 16, 2016, to revise DFARS Power 3.0. Another respondent is and technologies, and will incentivize
231.205–18, Independent Research and concerned that ‘‘bona fide’’ technical entry into the marketplace by ensuring
Development and Bid and Proposal interchanges exist outside of the that IR&D performers and their potential
Costs, to require that proposed new contractor’s controls and that the DoD customers have sufficient
IR&D efforts be communicated to proposed rule penalizes contractors awareness of each other’s efforts and
appropriate DoD personnel prior to the without an ‘‘ARDEC like’’ agency as that DoD can provide industry with
initiation of these investments, and that their customer. feedback on the relevance of proposed
results be shared with appropriate DoD Response: DoD anticipates that and completed IR&D work.
personnel. Nine respondents submitted defense contractors will pursue IR&D
projects intended to advance their 5. Cost/Administrative Burden
public comments in response to the
proposed rule. ability to develop and deliver a superior Comment: A number of respondents
and more competitive product to the stated that the rule will cost taxpayers
II. Discussion and Analysis warfighter. The requirement to hold a more. One respondent stated that the
DoD reviewed the public comments in technical interchange is not a de facto rule will impose an administrative
the development of this final rule. A approval process and will not favor one burden on contractors, administrative
discussion of the comments and the company over another. These technical contracting officers (ACOs), and DoD
changes made to the rule as a result of interchanges are informal engagements personnel. Another respondent
those comments is provided, as follows: designed to promote transparency, expressed concern with the significant
communication, and dialogue between costs associated with planning and
A. Summary of Changes From the IR&D participants and DoD. The conducting technical interchanges and
Proposed Rule in Response to Public intended outcome is to ensure that both the costs accrued prior to the technical
Comments IR&D performers and their potential interchange.
asabaliauskas on DSK3SPTVN1PROD with RULES
1. The requirement at DFARS DoD customers have sufficient Response: While acknowledging that
231.205–18(c)(iii)(C)(2) to include a awareness of each other’s efforts and to this rule imposes a slight administrative
‘‘summary of results’’ with the annual provide industry with some feedback on burden on contractors, ACOs, and DoD
update to online inputs is removed in the relevance of proposed and personnel, such burdens are
the final rule. completed IR&D work. Consistent with overshadowed by the net benefit of
2. DFARS 231.205–18(c)(iii)(C)(4)(i) is that objective, the rule requires only that ensuring that IR&D performers and their
revised to cite the Office of the Assistant a technical interchange take place and potential DoD customers have sufficient
Secretary of Defense for Research and that the date of the interchange and awareness of each other’s efforts and
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![Federal Register / Vol. 81, No. 214 / Friday, November 4, 2016 / Rules and Regulations 78011
(including potential economic, Development Technical Descriptions,’’ a prerequisite for the subsequent
environmental, public health and safety in accordance with the Paperwork determination of allowability, the
effects, distributive impacts, and Reduction Act (44 U.S.C. chapter 35); contractor shall—
equity). E.O. 13563 emphasizes the however, the impact of this rule is (i) Engage in a technical interchange
importance of quantifying both costs negligible. Currently, contractors are with a technical or operational DoD
and benefits, of reducing costs, of required to (1) report IR&D projects to Government employee before IR&D
harmonizing rules, and of promoting DTIC using the DTIC’s online IR&D costs are generated so that contractor
flexibility. This is not a significant database and (2) update these inputs at plans and goals for IR&D projects benefit
regulatory action and, therefore, was not least annually and when the project is from the awareness of and feedback by
subject to review under section 6(b) of completed. This rule merely changes the a DoD Government employee who is
E.O. 12866, Regulatory Planning and web address for submission of this informed of related ongoing and future
Review, dated September 30, 1993. This report and requires major contractors to potential interest opportunities. If the
rule is not a major rule under 5 U.S.C. include in the report the name of the contractor does not have a point of
804. DoD Government employee with which contact for the technical interchange,
a technical interchange was held and the contractor may contact the Office of
V. Regulatory Flexibility Act
the date of such interchange. the Assistant Secretary of Defense for
A final regulatory flexibility analysis Research and Engineering (OASD R&E).
has been prepared consistent with the List of Subjects in 48 CFR Parts 231 and
Contact information for OASD R&E can
Regulatory Flexibility Act, 5 U.S.C. 601, 242
be found at http://www.acq.osd.mil/rd/
et seq., and is summarized as follows: Government procurement. contacts/; and
The objective of this final rule is to (1) (ii) Use the online input form for IR&D
Jennifer L. Hawes,
ensure that both independent research projects reported to DTIC to document
and development (IR&D) performers and Editor, Defense Acquisition Regulations
System. the technical interchange, which
their potential DoD customers have includes the name of the DoD
sufficient awareness of each other’s Therefore, 48 CFR parts 231 and 242 Government employee and the date the
efforts and (2) provide industry with are amended as follows: technical interchange occurred.
feedback on the relevance of proposed ■ 1. The authority citation for 48 CFR (iv) Contractors not meeting the
and completed IR&D work. parts 231 and 242 continues to read as threshold of a major contractor are
There were no significant issues follows: encouraged to use the DTIC online input
raised by the public in response to the Authority: 41 U.S.C. 1303 and 48 CFR form to report IR&D projects to provide
initial regulatory flexibility analysis. chapter 1. DoD with visibility into the technical
DoD does not expect this final rule to content of the contractors’ IR&D
have a significant economic impact on PART 231—CONTRACT COST activities.
a substantial number of small entities, PRINCIPLES AND PROCEDURES
because DFARS 231.205–18(c)(iii) * * * * *
applies only to major contractors, which ■ 2. Amend section 231.205–18 by—
■ a. Revising paragraph (c)(iii)(C); PART 242—CONTRACT
are defined as those whose covered ADMINISTRATION AND AUDIT
segments allocated a total of more than ■ b. Redesignating paragraphs (c)(iv)
and (v) as paragraphs (c)(v) and (vi), SERVICES
$11 million in IR&D and bid and
proposal costs to covered contracts respectively; and 242.771–3 [Amended]
■ c. Adding a new paragraph (c)(iv).
during the preceding fiscal year. The 3. In section 242.771–3, amend
The revision and addition read as ■
final rule requires major contractors to paragraph (d) introductory text by
follows:
communicate proposed new IR&D removing ‘‘Director, Defense Research
efforts to DoD personnel in a technical 231.205–18 Independent research and and Engineering (OUSD(AT&L)DDR&E)’’
interchange prior to the initiation of development and bid and proposal costs.
and adding ‘‘Office of the Assistant
such investments. * * * * * Secretary of Defense for Research and
This rule impacts existing reporting (c) * * * Engineering (OASD R&E)’’ in its place.
and recordkeeping requirements in a (iii) * * *
very minor way. Only one element is (C) For annual IR&D costs to be [FR Doc. 2016–26366 Filed 11–3–16; 8:45 am]
being added to the existing reporting allowable— BILLING CODE 5001–06–P
requirement to require major contractors (1) The IR&D projects generating the
to include the name of the DoD costs must be reported to the Defense
employee with which a technical Technical Information Center (DTIC) DEPARTMENT OF DEFENSE
interchange was held and the date of using the DTIC’s online input form and
Defense Acquisition Regulations
such interchange. instructions at http://
System
There are no known significant www.defenseinnovation
alternatives to the rule. The rule impacts marketplace.mil/;
(2) The inputs must be updated at 48 CFR Part 247
major contractors and, as such, will
have minimal impact on small entities. least annually and when the project is [Docket DARS–2016–0036]
completed;
VI. Paperwork Reduction Act (3) Copies of the input and updates
RIN 0750–AJ09
asabaliauskas on DSK3SPTVN1PROD with RULES
The final rule affects the information must be made available for review by Defense Federal Acquisition
collection requirements at Defense the cognizant administrative contracting Regulation Supplement: Contiguous
Federal Acquisition Regulation officer (ACO) and the cognizant Defense United States (DFARS Case 2016–
Supplement (DFARS) 231.205–18, Contract Audit Agency auditor to D005)
currently approved under the Office of support the allowability of the costs;
Management and Budget (OMB) Control and AGENCY: Defense Acquisition
Number 0704–0483, entitled (4) For IR&D projects initiated in the Regulations System, Department of
‘‘Independent Research and contractor’s fiscal year 2017 and later, as Defense (DoD).
VerDate Sep<11>2014 21:31 Nov 03, 2016 Jkt 241001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 E:\FR\FM\04NOR6.SGM 04NOR6](https://thefederalregister.org/doc/81_FR_78222/page/4.svg)
Document Created: 2018-02-14 08:26:22
Document Modified: 2018-02-14 08:26:22
| 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 | Rules and Regulations | |
| Action | Final rule. | |
| Dates | Effective November 4, 2016. | |
| Contact | Mr. Tom Ruckdaschel, telephone 571- 372-6088. | |
| FR Citation | 81 FR 78008 | |
| RIN Number | 0750-AI81 | |
| CFR Citation | 48
CFR
231 48 CFR 242 |
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