Are Your IR&D Costs Allowable?

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MH910216329It’s time to <RETHINK> how you determine allowability of IR&D costs.  Not rethinking your approach could result in the government deeming your IR&D costs expressly unallowable.  Spending a few minutes reading this blog will provide you with the required knowledge to ensure your IR&D costs continue to be allowable.

Effective January 30, 2012, the DFARS IR&D cost principle (DFARS 231.205-18(c)(iii)(C)) now requires, as a condition of allowability, contractors to report their IR&D projects to the Defense Technical Information Center (DTIC).  Even though this requirement applies only to “major contractors”, as defined in DFARS (DFARS 231.205-18(a)(iii)), the government encourages all contractors to follow this process.

There are additional consequences of not reporting your IR&D project to DTIC.  On April 24, 2014, DCAA issued guidance to their auditors explaining how the failure of complying with the DFARS requirement could impact Forward Pricing, Incurred Cost, Cost Accounting Standards, and Accounting System audits.  For example, DCAA asserts that a failure to comply with the reporting requirement may constitute a CAS 405 noncompliance and an Accounting System deficiency.

Haven’t reported your IR&D projects to DTIC?  Have no fear! Fortunately, the Director Defense Procurement and Acquisition Policy (DPAP) is giving contractors until the end of calendar year 2014 to complete the entries for 2012 and 2013.  Contractors must report their 2014 data no later than 3 months after their fiscal year.

Investing in the appropriate resources is important to ensure you avoid the serious repercussions associated with not reporting your IR&D projects into DTIC. For any questions regarding IR&D and allowability, please contact Adam Eastridge.

About Adam Eastridge

Adam D. Eastridge is a Principal Consultant in Aronson LLC’s Government Contract Services Group. With more than 13 years of experience, he focuses on cost accounting standards (CAS), business systems, federal acquisition regulation (FAR), and audit support. Throughout his career, Adam has served the government contracting community in several capacities, holding positions at DCAA, a major defense contractor and several government contract consulting firms. This diverse experience gives him the ability to perform analysis with an understanding of the motivation of the stakeholders from each sector, and the consequences a decision will have on each stakeholder. As a result, Adam is adept at providing practical solutions that achieve positive results for his clients. Adam earned his bachelor’s degree in accounting from Salisbury University in 2001.

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