Pentagon formally removes requirement for 'technical interchange' related to IR&D

By Marjorie Censer / August 24, 2018

The Defense Department today moved to eliminate text in defense acquisition regulations that required major contractors to engage in "technical interchanges" with Pentagon employees to ensure independent research and development costs were considered allowable.

In today's Federal Register, DOD published a final rule to remove the requirement, noting this action follows a recommendation from the DOD Regulatory Reform Task Force, which is reviewing Pentagon regulations following an executive order calling for reducing unnecessary regulatory burdens.

The task force "determined that the [Defense Federal Acquisition Regulation Supplement] coverage was outmoded and recommended removal, since requiring a technical interchange between the Government and major contractors is unnecessary," the notice reads. "The objective of the interchange can be met through other means."

The move caps off a multiyear debate over how the Pentagon could better oversee contractors' independent research and development efforts.

In 2016, the Pentagon issued a final rule requiring major contractors, starting in fiscal year 2017, to engage "in a technical interchange with a technical or operational DOD Government employee before IR&D costs are generated" for the costs to be considered allowable.

The interchange with a Pentagon employee was meant to ensure "IR&D projects benefit from the awareness of and feedback by a DOD Government employee who is informed of related ongoing and future potential interest opportunities," DOD said at the time.

But contractors argued the rule would make independent research far less independent and would also generate new bureaucracy and damage the Pentagon's ability to access innovative efforts.

Last year, the Pentagon issued a memo rolling back the controversial requirement. The document said contractors no longer needed to have these meetings and they were "no longer a part of the criteria a contracting officer must consider in determining a major contractor's annual IR&D costs to be allowable."