IRD (Independent Research And Development)

What is IRD (Independent Research And Development)?

Independent Research and Development (IRD) refers to a contractor's self-funded research and development efforts that are not directly sponsored by a government contract. These projects aim to advance the contractor's knowledge, expertise, and technological capabilities in areas relevant to government interests. IRD costs, under certain conditions, can be recovered as indirect costs in government contracts.

Definition

IRD is defined as technical effort of a scientific or engineering nature that is: (a) conducted by a contractor; (b) not sponsored by a contract, grant, or other arrangement; and (c) intended to increase the contractor’s knowledge or improve its products or services. FAR Part 31.205-18 addresses IRD and its allowability as an indirect cost. The allowability of IRD costs is subject to negotiation and the cost principles outlined in the FAR.

IRD matters to government contractors because it can significantly improve their competitiveness in securing future contracts. By investing in IRD, contractors can demonstrate their commitment to innovation, develop proprietary technologies, and gain a competitive edge in the government marketplace. Successfully managing and documenting IRD projects is crucial for cost recovery and maintaining compliance with government regulations.

Key Points

• Allowability: IRD costs are allowable as indirect expenses to the extent they are reasonable, allocable, and consistently treated. DCAA will scrutinize IRD claims.
• Documentation: Contractors must maintain detailed records of IRD projects, including project objectives, technical approach, costs incurred, and potential benefits.
• Negotiation: The allowability and allocation of IRD costs are subject to negotiation with the government, typically during the forward pricing rate agreement process.
• Reasonableness: IRD projects must be reasonable in scope and cost relative to the contractor's business and the potential benefits to the government.

Practical Examples

1. Developing a New Cybersecurity Protocol: A cybersecurity firm invests in IRD to develop a novel protocol for securing sensitive government data. The firm anticipates that this protocol will enhance its service offerings and make it more competitive for future government contracts.
2. Improving Unmanned Aerial Vehicle (UAV) Technology: An aerospace company conducts IRD to improve the flight stability and payload capacity of its UAVs. This investment is expected to result in a more reliable and versatile UAV platform that can be used in various government applications, such as surveillance and reconnaissance.
3. Creating Advanced Data Analytics Tools: A software company uses IRD to create advanced data analytics tools tailored to the needs of government agencies. The goal is to provide agencies with more efficient and effective ways to analyze data and make informed decisions.