Controversial R&D rule may get important tweak

The Defense Department may tweak a controversial policy put into place last year for companies using government research money.

The rule requires companies to consult with the Pentagon about research done partly on the government’s dime.

But Allison Stiller who is performing the duties of principal civilian deputy assistant secretary of the Navy for research, development and acquisition said the actual implementation of the rule has been flawed in its execution.

“The rule was you have to talk to someone in government about what you’re working on so that they are informed. But, it got interpreted you had to [consult with government] at the very highest levels and that really wasn’t the intent,” Stiller said Feb. 23 at a Navy League event in Arlington, Va. “In the Navy’s case if you’re working with somebody in a laboratory or a warfare center on an idea, that’s perfectly fine and that’s how we’ve been implementing the rule.”

That doesn’t necessarily mean it’s been implemented that way for other services and DoD components, however. Stiller said for that reason the rule will probably be clarified by DoD.

“We’ve tried to make it from a Navy perspective as painless as possible for industry,” Stiller said.

DoD implemented the independent research and development (IRAD) rule to crack down on industry’s use of public funds. DoD feels IRAD is used for near-term goals, like reducing the price on a competitive item, and not to actually create intellectual property. The Pentagon said there was a disconnect between what the government was expecting and what industry was providing.

“What I am looking for … is that there is some meaningful technical content in the award that’s been put out, that’s really the fundamental point,” Former DoD acquisition chief Frank Kendall said in 2015. “By requiring industry to tell government what it’s doing will encourage more meaningful content.”

Industry has fought the rule at every turn.

Lexington Institute Vice President Dan Goure said requiring companies to report to DoD harms industry’s intellectual independence.

“Essentially, companies can’t do their own thing without in effect getting approval from the government, which totally wipes out the ‘independent’ in IRAD,” Goure said. “These two rules basically make it less likely that companies will spend the IRAD on really new and interesting things and increasingly IRAD will be spent where contracting officers or program managers think it should be spent, which is the wrong way to do it.”

Goure said the whole point of IRAD is to let industry research new and interesting things only the government would buy.

Goure said government oversight might compromise what industry invests in.

“Contract officers tend to be very conservative people,” Goure said. “The Department of Defense is notorious for either not seeing good ideas or being late to the game. If Steve Jobs had gone to the DoD with the iPhone or Mac Pro, they would have rejected it.”

On the other hand, some experts side with DoD and think industry takes advantage of IRAD funds.

“It seems to me that what [is spent out of IRAD funding] in the name of research … is relatively small,” Subrata Ghoshroy, a former senior defense analyst at the Government Accountability Office, told Federal News Radio. “The science and technology is an area in my opinion where actual scientific research takes place. The rest of the budget is not really doing that much research. … It is any area where the corporations tend to make a lot more money by building prototypes and often they don’t go anywhere.”

In a 2011 article in the Bulletin of Atomic Scientists, Ghoshroy writes, “Congressional military committees have for years grossly abused the Defense R&D budget, using it to channel money to contractors in their districts via the earmarking process.”

Industry has been fighting another IRAD rule as well.

Late last year a handful of defense organizations asked the Pentagon to suspend a rule that would take a harder IRAD expenses when they are used to reduce the price of a contract.

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