31.205-18
Independent research and development and bid and proposal costs
FAR 31.205-18 allows IR&D and B&P costs as indirect expenses if they are properly defined, allocated, and reasonable, but imposes strict rules for deferred costs and cooperative arrangements.
Overview
FAR 31.205-18 addresses the allowability, allocation, and definitions of Independent Research and Development (IR&D) and Bid and Proposal (B&P) costs for government contractors. It clarifies what constitutes IR&D and B&P costs, how these costs should be allocated under different Cost Accounting Standards (CAS) coverage scenarios, and under what conditions such costs are allowable as indirect expenses. The section also covers the treatment of deferred IR&D costs and IR&D costs incurred under cooperative arrangements with non-Federal entities.
Key Rules
- Definitions and Scope
- Provides detailed definitions for applied research, basic research, development, IR&D, B&P costs, and cooperative arrangements.
- Cost Allocation
- Requires compliance with 48 CFR 9904.420 for cost allocation, with specific rules for fully-CAS-covered, modified CAS-covered, and non-CAS-covered contracts.
- Allowability of Costs
- IR&D and B&P costs are generally allowable as indirect expenses if allocable and reasonable, except as otherwise specified.
- Deferred IR&D Costs
- Deferred IR&D costs are unallowable except under strict conditions, including identification, proration, and absence of government business during the period incurred.
- Cooperative Arrangements
- IR&D costs from joint efforts with non-Federal entities may be allowable if they would have been allowable as contractor IR&D without the arrangement.
Responsibilities
- Contracting Officers: Ensure contractors allocate and claim IR&D and B&P costs in accordance with CAS and FAR requirements; review and approve alternative allocation bases if needed; document acceptance of deferred IR&D costs.
- Contractors: Properly define, segregate, and allocate IR&D and B&P costs; comply with CAS 420 where applicable; maintain documentation for deferred and cooperative arrangement costs; ensure costs are allocable, reasonable, and not otherwise unallowable.
- Agencies: Oversee compliance and provide guidance on agency-specific regulations or exceptions.
Practical Implications
- This section ensures consistent treatment of IR&D and B&P costs across contracts, preventing improper charging of such costs to the government. Contractors must be diligent in cost allocation and documentation, especially when dealing with deferred costs or cooperative research. Common pitfalls include misallocating costs, failing to meet allowability criteria, or not following CAS requirements.