The Pentagon’s chief weapons buyer wants greater insight into future projects where contractors intend to spend internal develop money to drive down the eventual price of a product through a competitive bid.
Beginning in fiscal 2017, contractors will be require to formally alert the appropriate Defense Department acquisition office before undertaking a project that will involve internal research and development funding (IR&D). Undersecretary of Defense for Acquisition, Technology and Logistics Frank Kendall laid out the position in a late August white paper. He reinforced the need for increased visibility into industry IR&D Sept. 2 at a meeting of the Professional Services Council (PSC) outside Washington, D.C.
“This does not require government approval. This does not require government sponsorship of the work, just that you inform the government,” Kendall said. “I think that is a minimal requirement to enhance communication between industry and government…It’s going to be beneficial to everybody with minimal burden.”
Kendall said the rules governing allowable IR&D are “pretty liberal” and “very broad.” What the Defense Department wants to curtail is using IR&D to offset the cost of competing for contracts, using future expenditure of internal dollars as a way to drive down a bid price, he said. A contracting official typically is tasked with deciding how much IR&D is “allowable” during a competition. Kendall does not intend to lay down rules for whether internal project funding will be allowable, only to gather information on when and on what contractors plan to spend internal funding in the future.
The purpose of the rule change is not to reduce industry’s ability to perform internal research, Kendall said. The intent is rather to ensure that industry and DoD customers are on the same page when it comes to future development and to provide both parties with feedback on the relevance and requirements of a particular program.
“IR&D has been an effective tool in building technological superiority for our warfighters. This renewed emphasis on engagement between government and industry will strengthen this capability,” Kendall wrote in the paper published Aug. 26 as an adjunct to his Better Buying Power 3.0 initiative.
Industry for at least two years beginning in fiscal 2017 will be required to meet with the government to outline future IR&D plans and then share the outcome of those projects once they are complete. The aim also is to allow the Defense Department to more efficiently invest in emerging technologies and research, Kendall said.
“By law and DoD policy, 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,” Kendall wrote in his white paper. “These efforts can have the best payoff, both for the 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.”.
Kendall assured the PSC gathering that DoD has no interest in hijacking intellectual property rights.
“We respect property rights,” he said. “We don’t acquire property rights when we don’t need it. We take a minimal approach. But there are cases where we need it and in those case we would like to give a reasonable price for it…The idea that we are going to take property rights and broadcast it out to competitors is just not accurate.”