(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 and bid and proposal costs.
(b) Costs Allowable as Indirect Expenses.— The regulations prescribed pursuant to subsection (a) shall provide that independent research and development and bid and proposal costs shall be allowable as indirect expenses on covered contracts to the extent that those costs are allocable, reasonable, and not otherwise unallowable by law or under the Federal Acquisition Regulation.
(c) Additional Controls.— Subject to subsection (f), the regulations prescribed pursuant to subsection (a) may include the following provisions:
(1)A limitation on the allowability of independent research and development and bid and proposal costs to work which the Secretary of Defense determines is of potential interest to the Department of Defense.
(2)For each of fiscal years 1993 through 1995, a limitation in the case of major contractors that the total amount of the independent research and development and bid and proposal costs that are allowable as expenses of the contractor’s covered segments may not exceed the contractor’s adjusted maximum reimbursement amount.
(3)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 Department of Defense future needs; and
(B)from contractors to the Department of Defense, in a reasonable manner, of information regarding progress by the contractor on the contractor’s independent research and development programs.
(d) Adjusted Maximum Reimbursement Amount.— For purposes of subsection (c)(2), the adjusted maximum reimbursement amount for a major contractor for a fiscal year is the sum of—
(1)the total amount of the allowable independent research and development and bid and proposal costs incurred by the contractor during the preceding fiscal year;
(2)5 percent of the amount referred to in paragraph (1); and
(3)if the projected total amount of the independent research and development and bid and proposal costs incurred by the contractor for such fiscal year is greater than the total amount of the independent research and development and bid and proposal costs incurred by the contractor for the preceding fiscal year, the amount that is determined by multiplying the amount referred to in paragraph (1) by the lesser of—
(A)the percentage by which the projected total amount of such incurred costs for such fiscal year exceeds the total amount of the incurred costs of the contractor for the preceding fiscal year; or
(B)the estimated percentage rate of inflation from the end of the preceding fiscal year to the end of the fiscal year for which the amount of the limitation is being computed.
(e) Waiver of Adjusted Maximum Reimbursement Amount.— The Secretary of Defense may waive the applicability of any limitation prescribed under subsection (c)(2) to any contractor for a fiscal year to the extent that the Secretary determines that allowing the contractor to exceed the contractor’s adjusted maximum reimbursement amount for such year—
(1)is necessary to reimburse such contractor at least to the extent that would have been allowed under regulations as in effect on December 4, 1991; or
(2)is otherwise in the best interest of the Government.
(f) Limitations on Regulations.— Regulations prescribed pursuant to subsection (c) 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.
(g) Encouragement of Certain Contractor Activities.— The regulations under subsection (a) shall encourage contractors to engage in research and development activities of potential interest to the Department of Defense, including activities intended to accomplish any of the following:
(1)Enabling superior performance of future United States weapon systems and components.
(2)Reducing acquisition costs and life-cycle costs of military systems.
(3)Strengthening the defense industrial base and the technology base of the United States.
(4)Enhancing the industrial competitiveness of the United States.
(5)Promoting the development of technologies identified as critical under section
2506 of this title.
(6)Increasing the development and promotion of efficient and effective applications of dual-use technologies.
(7)Providing 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.
(h) Major Contractors.— A contractor shall be considered to be a major contractor for the purposes of subsection (c) for any fiscal year if for the preceding fiscal year the contractor’s covered segments allocated to Department of Defense contracts a total of more than $10,000,000 in independent research and development and bid and proposal costs.
(i) Definitions.— In this section:
(1) Covered contract.— The term “covered contract” has the meaning given that term in section
2324(l) of this title.
(2) Covered segment.— The term “covered segment”, with respect to a contractor, means a product division of the contractor that allocated more than $1,000,000 in independent research and development and bid and proposal costs to Department of Defense contracts during the preceding fiscal year. In the case of a contractor that has no product divisions, such term means the contractor as a whole.
1992—Subsec. (e)(1). Pub. L. 102–484substituted “on December 4, 1991” for “on the day before the date of the enactment of the National Defense Authorization Act for Fiscal Years 1992 and 1993”.
1991—Pub. L. 102–190substituted section catchline for one which read “Independent research and development” and amended text generally, substituting present provisions for provisions authorizing payment of independent research and development or bid and proposal costs, encouraging contractors to engage in research and development activities, and authorizing advance agreements regarding the manner and extent in which the Department of Defense may pay independent research and development costs or bid and proposal costs.
Subsec. (d)(2)(B). Pub. L. 102–25substituted “subsection (b), including” for “subsection (b) or”.
Section 802(e) ofPub. L. 102–190provided that: “The amendments made by this section [amending this section and section
2330 of this title] shall take effect on October 1, 1992, and shall apply to independent research and development and bid and proposal costs incurred by a contractor during fiscal years of that contractor that begin on or after that date.”
Section 802(b) ofPub. L. 102–190provided that: “The Secretary of Defense shall prescribe proposed regulations to implement the amendment made by subsection (a)(1) [amending this section] not later than April 1, 1992, and shall prescribe final regulations for that purpose not later than June 1, 1992.”
Study by Office of Technology Assessment
Section 802(c) ofPub. L. 102–190directed Director of the Office of Technology Assessment to conduct a study to determine effect of regulations prescribed under this section on the achievement of policy stated in subsec. (g) of this section and submit a report containing results of such study to Committees on Armed Services of Senate and House of Representatives not later than Dec. 1, 1995, prior to repeal by Pub. L. 103–160, div. A, title II, § 266,Nov. 30, 1993, 107 Stat. 1611.
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