SEC. 824. TREATMENT OF INDEPENDENT
RESEARCH AND DEVELOPMENT COSTS ON CERTAIN CONTRACTS.
(a) Independent Research And Development Costs: Allowable
Costs.—
(1) IN GENERAL.—Section 2372 of title
10, United States Code, is amended to read as follows:
Ҥ 2372. Independent research and
development costs: allowable costs
“(a) Regulations.—The Secretary of Defense shall prescribe
regulations governing the payment by the Department of Defense
of expenses incurred by contractors for independent research and
development costs. Such regulations shall provide that expenses
incurred for independent research and development shall be
reported independently from other allowable indirect costs.
“(b) Costs Treated As Fair And Reasonable, And Allowable,
Expenses.—The regulations prescribed under subsection (a) shall
provide that independent research and development costs shall be
considered a fair and reasonable, and allowable, indirect
expense on Department of Defense contracts.
“(c) Additional Controls.—Subject to subsection (d), the
regulations prescribed under subsection (a) may include the
following provisions:
“(1) Controls on the reimbursement of
costs to the contractor for expenses incurred for independent
research and development to ensure that such costs were
incurred for independent research and development.
“(2) Implementation of regular methods for transmission—
“(A) from the Department of Defense
to contractors, in a reasonable manner, of timely and
comprehensive information regarding planned or expected
needs of the Department of Defense for future technology and
advanced capability; and
“(B) from contractors to the Department of Defense, in a
reasonable manner, of information regarding progress by the
contractor on the independent research and development
programs of the contractor.
“(d) Limitations On
Regulations.—Regulations prescribed under subsection (a) may not
include provisions that would infringe on the independence of a
contractor to choose which technologies to pursue in its
independent research and development program if the chief
executive officer of the contractor determines that expenditures
will advance the needs of the Department of Defense for future
technology and advanced capability as transmitted pursuant to
subsection (c)(3)(A).
“(e) Effective Date.—The regulations prescribed under subsection
(a) shall apply to indirect costs incurred on or after October
1, 2017.”.
(2) CLERICAL AMENDMENT.—The table of sections at the beginning
of chapter 139 is amended by striking the item relating to
section 2372 and inserting the following new item:
“2372. Independent research and development costs: allowable
costs”.
(b) Bid And Proposal Costs: Allowable Costs.—
(1) IN GENERAL.—Chapter 139 of title
10, United States Code, is amended by inserting after section
2372 the following new section:
Ҥ 2372a. Bid and proposal costs:
allowable costs
“(a) Regulations.—The Secretary of Defense shall prescribe
regulations governing the payment by the Department of Defense
of expenses incurred by contractors for bid and proposal costs.
Such regulations shall provide that expenses incurred for bid
and proposal costs shall be reported independently from other
allowable indirect costs.
“(b) Costs Allowable As Indirect Expenses.—The regulations
prescribed under subsection (a) shall provide that bid and
proposal costs shall be allowable as indirect expenses on
covered contracts, as defined in section 2324(l) of this title,
to the extent that those costs are allocable, reasonable, and
not otherwise unallowable by law or under the Federal
Acquisition Regulation.
“(c) Goal For Reimbursable Bid And Proposal Costs.—The Secretary
shall establish a goal each fiscal year limiting the amount of
reimbursable bid and proposal costs paid by the Department of
Defense to an amount equal to not more than one percent of the
total aggregate industry sales to the Department of Defense. To
achieve such goal, the Secretary may not limit the payment of
allowable bid and proposal costs for the covered year.
“(d) Panel.— (1) If the Department of Defense exceeds the goal
established under subsection (c) for a fiscal year, within 180
days after exceeding the goal, the Secretary shall establish an
advisory panel. The panel shall be supported by the Defense
Acquisition University and the National Defense University,
including administrative support.
“(2) The panel shall be composed of
nine individuals who are recognized experts in acquisition and
procurement policy appointed by the Secretary. In making such
appointments, the Secretary shall ensure that the members of
the panel reflect diverse experiences in the public and
private sector.
“(3) The panel shall review laws, regulations, and practices
that contribute to the expenses incurred by contractors for
bids and proposals in the fiscal year concerned and recommend
changes to such laws, regulations, and practices that may
reduce expenses incurred by contractors for bids and
proposals.
“(4) (A) Not later than six months after the establishment of
the panel, the panel shall submit to the Secretary and the
congressional defense committees an interim report on the
findings of the panel.
“(B) Not later than one year after
the establishment of the panel, the panel shall submit to
the Secretary and the congressional defense committees a
final report on the findings of the panel.
“(5) The panel shall terminate on the
day the panel submits the final report under paragraph (4)(B).
“(6) The Secretary of Defense may use amounts available in the
Department of Defense Acquisition Workforce Development Fund
established under section 1705 of this title to support the
activities of the panel established under this subsection.
“(e) Effective Date.—The regulations
prescribed under subsection (a) shall apply to indirect costs
incurred on or after October 1, 2017.”.
(2) CLERICAL AMENDMENT.—The table of sections at the beginning
of chapter 139 of such title is amended by inserting the
following new item:
“2372a. Bid and proposal costs: allowable costs”.
(c) Report On Elements Contributing To
Expenses Incurred By Contractors For Bids And Proposals.—
(1) IN GENERAL.—Not later than 90 days
after the date of the enactment of this Act, the Secretary of
Defense shall enter into a contract with an independent entity
to study the laws, regulations, and practices relating to
expenses incurred by contractors for bids and proposals.
(2) REPORT.—Not later than 180 days after receipt of the
contract required by paragraph (1), the independent entity
shall submit to the Department of Defense and the
congressional defense committees a report on the laws,
regulations, or practices relating to expenses incurred by
contractors for bids and recommendations for changes to such
laws, regulations, or practices that may reduce expenses
incurred by contractors for bids and proposals.
(d) Defense Contract Audit Agency:
Annual Report.—
(1) IN GENERAL.—Subsection (a) of
section 2313a of title 10, United States Code, is amended—
(A) by redesignating paragraphs (4)
and (5) as paragraphs (6) and (7), respectively; and
(B) by inserting after paragraph (3) the following new
paragraphs:
“(3) a summary, set forth separately by dollar amount and
percentage, of indirect costs for independent research and
development incurred by contractors in the previous fiscal
year;
“(4) a summary, set forth separately by dollar amount and
percentage, of indirect costs for bid and proposal costs
incurred by contractors in the previous fiscal year;”.
(2) EFFECTIVE DATE.—The amendments
made by this subsection shall take effect on October 1, 2018.
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Treatment of independent research and
development costs on certain contracts (sec. 824)
The Senate bill contained a provision
(sec. 814) that would amend section 2372 of title 10, United
States Code, to clarify in what circumstances independent
research and development costs are considered fair, reasonable,
and allowable expenses on Department of Defense contracts.
The House amendment contained no similar
provision.
The House recedes with an amendment that
would create a new section 2372a of title 10, United States
Code, that would specify that bid and proposal expenses
considered as allowable indirect costs on cost-reimbursement
contracts should be reported independently of independent
research and development costs under section 2372 of title 10, United States Code. The
amendment would establish for the Department of Defense a goal
that Department-wide bid and proposal costs should not exceed
one percent of the amount of contractor sales to the Department.
The conferees do not intend for the Department to achieve this
goal by arbitrarily limiting the amount of bid and proposal
costs contractors may have reimbursed, but to instead address
the factors driving bid and proposal costs. The amendment would
also require the Department to contract with an outside,
independent entity to study the laws, regulations, and practices
driving bid and proposal costs and provide recommendations to
the Department on how to reduce these costs. If, in any year the
Department fails to meet the one percent goal, the amendment
would require that an advisory panel pursuant to the Federal
Advisory Committees Act (5 U.S.C. app) be established to provide
recommendations on changes to statute, regulation, and practice
to reduce bid and proposal costs. The amendment also would
require the Department to report on bid and proposal costs and
independent research and development costs as part of the report
required under 2313a of title 10, United States Code. |
