It’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,
In August 2012 Defense Procurement and Acquisition Policy (DPAP) issued Class Deviation 2012-O0014 which implemented accelerated payments to prime contractors, who were in turn, to accelerate payments to their subcontractors. On February 21, 2013, Richard Ginman, Director, DPAP, issued a letter which rescinded Class Deviation 2012-O0014. This is only the beginning of the effects of sequestration.
The payment acceleration policy was implemented to assist with the cash flow of all small-business contractors, whether they are prime contractors or subcontractors to non-small-businesses. While the policy of accelerating payments has been rescinded the DoD will continue with the policy