Government Contracts Monitor

Short Take: DoD Seeking Input on Potential Rule to Address How IR&D Expenses Are Considered during Proposal Evaluation

February 16, 2016

By: Eric Whytsell

Last week, the Department of Defense (DoD) issued an advance notice of proposed Rulemaking (81 Fed. Reg. 6844) seeking information it hopes will aid in crafting a revision to Defense Federal Acquisition Regulation Supplement (DFARS) to ensure uniformity in the manner by which DoD evaluates “the use substantial future independent research and development (IR&D) expenses as a means to reduce evaluated bid prices in competitive source selections.”

The request reflects DoD’s concern about cases in which offerors use promised future IRAD expenditures to substantially reduce their bid price on competitive procurements. As noted in last year’s ‘‘Implementation Directive for Better Buying Power 3.0—Achieving Dominant Capabilities Through Technical Excellence and Innovation,’’ dated April 9, 2015, IRAD overhead expenses (spread across the entire business) were not made an allowable cost with the intent so that they could be used to gain a price advantage in a specific competitive bid. The DoD is considering a proposed approach under which: (I) proposals would be required to describe in detail the nature and value of prospective IR&D projects on which the offeror would rely to perform the resultant contract; and (ii) a standard evaluation methodology would take that reliance on IRAD into account by adjusting the total evaluated price to the Government, for evaluation purposes only, to include the value of related future IR&D projects.

DoD is seeking comments on this planned approach in order to assist in the development of a proposed DFARS rule. Specifically, the Department wants to know whether contractors believe the planned approach would achieve the objective of treating the proposed use of substantial future IR&D expenses as a means to reduce evaluated bid prices in competitive source selections in a uniform manner that is consistent with the objective of making IR&D an allowable cost.

Interested parties should submit written comments concerning DFARS Case 2016–D017 on or before April 8, 2016 using the federal eRulemaking Portal at http://www.regulations.gov. or via the other methods detailed in the notice. In addition, a public meeting will be held in the General Services Administration (GSA), Central Office Auditorium, 1800 F Street NW., Washington DC, 20405, on March 3, 2016, from 12:00 p.m. to 4:00 p.m., local time. Individuals wishing to attend should register by February 25, 2016 at the Web site, http:// www.acq.osd.mil/dpap/dars/IR&D.html.

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