NDIA Leads Industry Response to Proposed IR&D Rule

Strongly Opposes and Recommends Its Withdrawal

Arlington, VA – The National Defense Industrial Association (NDIA) served as the lead association for comments submitted Thursday by the Council of Defense and Space Industry Associations (CODSIA) in response to the Department of Defense’s November 4, 2016 proposed rule on Independent Research and Development (IR&D) Expenses. The proposed rule would require contracting officers to adjust evaluations of bid proposals in competitive source selections for major programs by the amount future IR&D investments reduce their bid price.

Excerpts from the letter:

…CODSIA strongly opposes the proposed rule and recommends that it be withdrawn. We also recommend that a dialogue be established between the Department of Defense (DoD) and industry stakeholders to precisely identify DoD’s concerns with current IR&D expense policy and to jointly develop fact-based and balanced solutions, where needed, to address the relevant policy issues. 

The proposed rule would undo an IR&D framework that has been productive for a generation, yet it will not advance the interests of DoD or the industrial base in providing new technology for national security purposes.  Its implementation will: create additional burdens for contractors; dissuade primarily commercial contractors from engaging with DoD (especially those whose R&D portfolios represent most of the value of the company); decelerate existing and future contractor IR&D investment in warfighting technology innovation; lead to more bid protests; and erect another unnecessary barrier to entry into the DoD market…  

Chief among industry concerns: a fundamental disagreement that IR&D is not working as intended in law and regulation, conflicts between the proposed rule and existing statute and relevant case law, and complex procedures installed by the proposed rule. Noting the vast array of unintended consequences of the proposed rule, and the importance of IR&D investment at a time when DoD is highly concerned about losing its technological superiority, CODSIA respectfully requested the proposed rulemaking be withdrawn, and called for further government-industry dialogue to address DoD’s underlying concerns.

The comments reiterate many concerns raised by NDIA Assistant Vice President for Policy James Thomas at a March 3, 2016 public meeting and in written comments to the preceding advanced notice of proposed rulemaking (ANPR) submitted on April 6, 2016 on the same topic.

The full letter can be found here, NDIA’s presentation at the March public meeting here, and NDIA’s written comments on the ANPR here.