83 FR 42787 - Defense Federal Acquisition Regulation Supplement: Repeal of Independent Research and Development Technical Interchange (DFARS Case 2017-D041)

DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System

Federal Register Volume 83, Issue 165 (August 24, 2018)

DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to remove a requirement for major contractors to have a technical interchange with the Government prior to generating independent research and development costs.

[Federal Register Volume 83, Number 165 (Friday, August 24, 2018)]
[Rules and Regulations]
[Pages 42787-42788]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-18239]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 231

[Docket DARS-2017-0013]
RIN 0750-AJ51


Defense Federal Acquisition Regulation Supplement: Repeal of 
Independent Research and Development Technical Interchange (DFARS Case 
2017-D041)

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

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to remove a requirement for 
major contractors to have a technical interchange with the Government 
prior to generating independent research and development costs.

DATES: Effective August 24, 2018.

FOR FURTHER INFORMATION CONTACT: Ms. Carrie Moore, telephone 571-372-
6093.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD is amending the DFARS to remove the text at DFARS 231.205-
18(c)(iii)(C)(4), which requires major contractors to engage in and 
document a technical interchange with the Government, prior to 
generating independent research and development (IR&D) costs for IR&D 
projects initiated in fiscal year 2017 and later, in order for those 
costs to be determined allowable.
    The removal of this DFARS text supports a recommendation from the 
DoD Regulatory Reform Task Force. On February 24, 2017, the President 
signed Executive Order (E.O.) 13777, ``Enforcing the Regulatory Reform 
Agenda,'' which established a Federal policy ``to alleviate unnecessary 
regulatory burdens'' on the American people. In accordance with E.O. 
13777, DoD established a Regulatory Reform Task Force to review and 
validate DoD regulations, including the DFARS. A public notice of the 
establishment of the DFARS Subgroup to the DoD Regulatory Reform Task 
Force, for the purpose of reviewing DFARS provisions and clauses, was 
published in the Federal Register at 82 FR 35741 on August 1, 2017. No 
public comments were received on this DFARS requirement in response to 
the notice. Subsequently, the DoD Task Force reviewed the requirements 
of DFARS 231.205-18(c)(iii)(C)(4) and determined that the DFARS 
coverage was outmoded and recommended removal, since requiring a 
technical interchange between the Government and major contractors is 
unnecessary. The objective of the interchange can be met through other 
means.

II. Applicability to Contracts At or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This rule only removes an unneeded requirement in the DFARS that 
required a technical interchange between the Government and certain 
contractors. Therefore, the rule does not impose any new requirements 
on contracts at or below the simplified acquisition threshold and for 
commercial items, including commercially available off-the-shelf items.

III. Expected Cost Savings

    Effective November 4, 2016, DFARS 231.205-18(c)(iii)(C)(4) was 
revised to require contractors to engage in a technical interchange 
with the Government, prior to the generation of IR&D costs for IR&D 
projects initiated in fiscal year 2017 and later, in order for those 
costs to be allowable. This requirement causes the contractor to expend 
time preparing for a discussion, contacting appropriate Government 
personnel, and discussing the IR&D project. Since contractors commonly 
pool all of their IR&D project costs to develop a single billing rate, 
this requirement would necessitate contractors having to discuss all of 
the IR&D projects contained in their billing rate. While some 
contractors may have a single project, many have close to 100 or more, 
which could be significantly burdensome.
    This requirement applies to major contractors seeking to include 
IR&D costs as part of their reimbursable costs under a contract. Major 
contractors 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; therefore, small 
entities are not expected to meet the definition of a major contractor 
or to be impacted. IR&D costs are most commonly included in 
noncommercial, cost-type contracts that are subject to certified cost 
and pricing data and cost accounting standards. This rule removes the 
requirement for major contractors to have a technical interchange with 
the Government prior to generating IR&D costs. Removal of this 
requirement will result in freeing contractors to pursue IR&D projects 
without including the Government in those preliminary decisions.
    DoD has performed a regulatory cost analysis on this rule. The 
following is a summary of the estimated public annualized cost savings, 
calculated in 2016 dollars at a 7-percent discount rate in perpetuity:

Annualized 7% -$1.7 million
Present Value 7% -$24.0 million

    To access the full Regulatory Cost Analysis for this rule, go to 
the Federal eRulemaking Portal at www.regulations.gov, search for 
``DFARS Case 2017-D041,'' click ``Open Docket,'' and view ``Supporting 
Documents.''

[[Page 42788]]

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 (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. Executive Order 13771

    This final rule is considered to be an E.O. 13771, Reducing 
Regulation and Controlling Regulatory Costs, deregulatory action. 
Details on the estimated cost savings can be found in section III. of 
this preamble.

VI. Publication of This Final Rule for Public Comment Is Not Required 
by Statute

    The statute that applies to the publication of the Federal 
Acquisition Regulation is the Office of Federal Procurement Policy 
statute (codified at Title 41 of the United States Code). Specifically, 
41 U.S.C. 1707(a)(1) requires that a procurement policy, regulation, 
procedure or form (including an amendment or modification thereof) must 
be published for public comment if it relates to the expenditure of 
appropriated funds, and has either a significant effect beyond the 
internal operating procedures of the agency issuing the policy, 
regulation, procedure, or form, or has a significant cost or 
administrative impact on contractors or offerors. This final rule is 
not required to be published for public comment, because DoD is not 
issuing a new regulation; rather, this rule merely removes an obsolete 
requirement from the DFARS.

VII. Regulatory Flexibility Act

    Because a notice of proposed rulemaking and an opportunity for 
public comment are not required to be given for this rule under 41 
U.S.C. 1707(a)(1) (see section V of this preamble), the analytical 
requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 
are not applicable. Accordingly, no regulatory flexibility analysis is 
required and none has been prepared.

VIII. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) does apply; 
however, these changes to the DFARS do not impose additional 
information collection requirements to the paperwork burden previously 
approved under OMB Control Number 0704-0483, entitled ``Independent 
Research and Development Technical Descriptions.'' Repeal of this rule 
does not impact the IR&D reporting that continues to be required 
annually, when the IR&D project is completed, under OMB Control Number 
0704-0483.

List of Subjects in 48 CFR Part 231

    Government procurement.

Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR part 231 is 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 chapter 1.


231.205-18  [Amended]

0
2. Amend section 231.205-18 by:
0
a. Adding ``and'' to the end of paragraph (c)(iii)(C)(2);
0
b. Removing ``; and'' from the end of paragraph (c)(iii)(C)(3) and 
adding a period in its place; and
0
c. Removing paragraph (c)(iii)(C)(4).

[FR Doc. 2018-18239 Filed 8-23-18; 8:45 am]
 BILLING CODE 5001-06-P