DoD launching new website to help industry comply with independent R&D disclosure rules

The Pentagon is developing a new web portal to make it easier for firms to let the government know about their independent research & development (IR&D) activit...

In what appeared to be a response to industry complaints that new Defense Department rules would disincentivize companies from embarking on new research projects on their own initiative, the Pentagon is developing a new web portal to make it easier for firms to let the government know about their independent research & development (IR&D) activities.

At issue is a final rule DoD published in November. Reasoning that the government needs more insight into the more than $4 billion in reimbursements it issues to contractors for IR&D projects each year, DoD required large firms to hold a “technical interchange” with at least one DoD official before starting work on a R&D project — at least if they wanted to be reimbursed for their allowable costs.

But among other complaints, contractors said the process left them at the mercy of the government and its employees’ ability and willingness to meet with vendors.

Under a new process Frank Kendall, the undersecretary of Defense for acquisition, technology and logistics, outlined in a memo last week, contractors will be able to use a web tool at the Defense Innovation Marketplace to enter a description of the project they’re planning. DoD will then forward the information to the appropriate officials, who will then respond with a dated letter acknowledging they’ve been made aware of the company’s plans.

The web-based process is set to launch by the end of this month, but Kendall also indicated that it’s not the Defense Department’s preferred avenue. He’d prefer companies at least attempt to engage in face-to-face discussions about their IR&D projects with a “knowledgeable DoD government employee,” such as a scientist or engineer, an acquisition official who works on similar sorts of projects or a combatant commander whose troops might one day use the technology the firm is developing.

“I want to emphasize that this is a requirement on industry to communicate its IR&D plans to some relevant government individual and record that this has been done,” he wrote. “The simplest approach for industry is to use existing well-established relationships to meet this requirement as part of the internal corporate IR&D approval process.”

By definition, the government is not supposed to give a thumbs-up or down to any company’s independent R&D plans — as opposed to contracted R&D, where the government pays firms to conduct specific projects.

But as part of DoD’s Better Buying Power initiative, the department argued that both the Pentagon and the Defense industry needed to do a better job of communicating about companies’ IR&D investments, since taxpayers are ultimately on the hook for them.

“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,” the department wrote last year in justifying the new rule.

But several contracting associations and attorneys objected, saying that the requirement to hold technical interchanges amounted to a de-facto government approval process.

For example, the National Defense Industrial Association worried about what might happen if a company discussed its plans with a DoD official who happened not to like the research project it was planning.

“The proposed rule does not clarify whether a negative response during the technical interchange would affect [the government’s cost allowability determination],” James Thomas, NDIA’s legislative policy director, wrote. “This outcome would infringe on the independence of a contractor to choose which technologies to pursue in its IRAD program, as guaranteed by 10 U.S.C. §2372 (f).”

And the American Bar Association’s public contract law section argued that requiring companies to discuss their R&D plans with DoD ahead of time could stifle or delay innovative projects because it would “interrupt the natural flow of research and development programs by requiring a technical interchange meeting before a contractor could initiate a new phase, change course, or revise research objectives from that which previously was briefed to DoD.”

But in his memo to the acquisition workforce, Kendall emphasized that he did not view the rule as setting up a new framework for companies to get Uncle Sam’s permission to conduct independent research — rather, he said, it’s an attempt to gain some baseline level of insight into ongoing work that the government will eventually be asked to pay for.

“I would like to stress this new IR&D rule merely codifies a long-standing practice that many services and DoD agencies already use to engage industry on IR&D projects, to include presentations at official forums, industry visits to government offices and government official visits to contractor offices, laboratories, and manufacturing facilities,” he wrote. “The employee may provide feedback on relevance to DoD missions, but in no case has the authority to stop the project. The DoD Government employee will not issue any official declaration stating whether any project should or should not be pursued and/or whether project costs are reimbursable or that they should be declined.”

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