Dentons Submits Comments And Advises On Problematic DoD Proposed IR&D Costs Rule

Author:Mr Thomas Lemmer, Steven M. Masiello and K. Tyler Thomas

On November 4, 2016, the Department of Defense (DoD) published a proposed rule that continues its efforts to address concerns regarding substantial future independent research and development (IR&D) investments when such effort is undertaken as a means of reducing evaluated bid prices in competitive source selections. The proposed rule, if made final, would establish a new DoD Federal Acquisition Regulation Supplement (DFARS) clause, DFARS 252.215-70XX, "Notification of Inclusion of Evaluation Criteria for Reliance Upon Future Government-reimbursed Independent Research and Development Investments," which would require the government to add costs (for proposal evaluation purposes) to contractor offers for major defense acquisitions and major automated information system acquisitions that rely on IR&D efforts.

Dentons' US Government Contracts and Global Procurement Practice partners Thomas A. Lemmer and Steven M. Masiello, along with Denver associate K. Tyler Thomas, submitted comments on the proposed rule. Notably, the DoD previously sought industry input on the proposed rule through an advanced notice of proposed rulemaking (ANPR). Dentons, along with numerous others in the industry, provided significant comments challenging the ANPR. The DoD, however, disregarded the industry input it received and published the proposed rule containing nearly identical language to the ANPR, thereby failing to abide by the requirements imposed on the DoD when it engages in rulemaking. In light of the DoD's disregard of ANPR responses and its apparent commitment to forging ahead with this proposed rule, we resubmitted our prior comments in their entirety for the DoD's reconsideration.

In addition to resubmitting our prior comments, we provided new comments emphasizing the following four significant flaws related to the proposed rule:

The DoD's failure to define the problem it seeks to alleviate through the proposed rule, resulting in the inability of commenters to provide potential alternative solutions The proposed rule being based upon a fundamentally flawed premise because a contractor's ability to obtain price advantage via reduced costs from the use of IR&D is at least an ancillary purpose acknowledged within the current IR&D statute, as recognized by the US Court of Appeals for the Federal Circuit The proposed rule remaining far too vague, such that practical...

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