[Federal Register Volume 81, Number 30 (Tuesday, February 16, 2016)]
[Proposed Rules]
[Pages 7721-7723]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03039]


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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.

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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