Must both IR&D and B&P be together before these B& P indirect costs can be reviewed for allowability, separately, under this DFARS provision? If not, how does the allowabilty of B& P indirect costs determination differ when a firm does not have any IR&D?
One difference is no DTIC requirement. How are these costs reviewed by a DCMA DACO when about 30% of costs are highly classified and the DACO does not special or top secret classified access?
According to the DFARS section cited above:
231.205-18 Independent research and development and bid and proposal costs
(iii) For major contractors, the following limitations apply:
(A) The amount of IR&D/B&P costs allowable under DOD contracts shall not exceed the lesser of—
(1) Such contracts’ allocable share of total incurred IR&D/B&P costs; or
(2) The amount of incurred IR&D/B&P costs for projects having potential interest to DOD.
(B) Allowable IR&D/B&P costs are limited to those for projects that are of potential interest to DOD, including activities intended to accomplish any of the following:
(1) Enable superior performance of future U.S. weapon systems and components.
(2) Reduce acquisition costs and life-cycle costs of military systems.
(3) Strengthen the defense industrial and technology base of the United States.
(4) Enhance the industrial competitiveness of the United States.
(5) Promote the development of technologies identified as critical under 10 U.S.C. 2522.
(6) Increase the development and promotion of efficient and effective applications of dual-use technologies.
(7) Provide efficient and effective technologies for achieving such environmental benefits as: improved environmental data gathering, environmental cleanup and restoration, pollution reduction in manufacturing, environmental conservation, and environmentally safe management of facilities.
Additionally, from CAS 420:
9904.420 Accounting for independent research and development costs and bid and proposal costs.
(2) Bid and proposal (B&P) cost means the cost incurred in preparing, submitting, or supporting any bid or proposal which effort is neither sponsored by a grant, nor required in the performance of a contract.
(6) Independent research and development means the cost of effort which is neither sponsored by a grant, nor required in the performance of a contract, and which falls within any of the following three areas:
(i) Basic and applied research,
(ii) Development, and
(iii) Systems and other concept formulation studies.
As indicated by the above DFARS cite, the criteria for allowability is the same for both IRAD and B&P: potential interest to the DOD. There are no other locations within the existing guidance that provide differing criteria or qualifying conditions where IRAD and B&P are subjected to different allowability conditions.
The CAS provisions shown (which address allocability), under CAS 420, also address IRAD and B&P as a single entity, subject to similar, if not identical accounting treatment. As evidenced by the similar definitions shown above, in particular the references to the phrase “effort is neither sponsored by a grant, nor required in the performance of a contract”, IRAD and B&P are closely related with regard to their relationship to other general contract costs/elements. That is, while they are different in key ways (B&P is incurred with the intent of being awarded a contract in the near future, while IRAD is incurred with a longer time period assumed for possible contractual award), each share the fundamental common trait: neither is supported by an existing contract mechanism. (With important exceptions, see below)
Open full Question Details
Therefore, when reviewing IRAD and B&P, or B&P without IRAD or the converse, the allowability tests and allocability criteria are necessarily the same. This would be true, even if there were no IRAD to review.
Note: One important idea should be considered when speaking of B&P allocability, although it does not concern the question above directly. The Interpretation section of CAS 402 implies that B&P costs that are in direct support of an existing contract should be charged directly to that contract, while all other B&P costs should be charged as indirect. This is a different accounting treatment of B&P based on specific situations, and not related to the presence or non-presence of IRAD, but, none-the-less a situation where B&P might be treated in a different manner. (A different manner than other “normal” B&P costs, not IRAD costs, as the question asked)
Within DCMA, Special Programs maintains coverage on classified programs, with similar CMTs to those as their non-classified counterparts. It might be possible to send the IRAD/B&P materials from the FPRP to the Special Programs team covering the specific contractor and ask that team to give a sanitized/generalized recommendation to the non-classified CMT. The recommendation could refer to dollars and sanitized contract numbers only, so that the person analyzing the FPRP could make some general statements regarding allowability. Contractors with classified programs/contracts would typically include those costs in a standard FPRP submission using generic program identifiers such as “Special Access” of “Special Program” with a top-line contractual value provided.
Additionally, if the Special Programs group had the expertise within the classified group, the non-sensitive CMT might be able to request that the Contractor work directly with the DCMA Special Programs CMT using full program and contract information, and then provide a sanitized version for inclusion into the FPRP, which would contain (likely) dollar amounts and generic contract/program descriptors. If no expertise was available at the location, assistance could be requested within the Special Programs Directorate, using the assist process within the directorate.
Also, typically, special access programs have DCAA field attachments assigned to them, and the DCMA analyst/DACO could request the DCAA office cognizant over the classified segment examine the costs in question to the degree that they felt comfortable. (Given technical expertise limitations) Ideally, the DCAA office could work with the DCMA Special Programs group for the most beneficial outcome.