Independent Research and Development Technical Descriptions

Defense Federal Acquisition Regulation Supplement
Part 231—Contract Cost Principles and Procedures

SUBPART 231.2—CONTRACTS WITH COMMERCIAL ORGANIZATIONS
(Revised May 6, 2014)
231.205 Selected costs.
231.205-1 Public relations and advertising costs.
(e) See 225.7303-2(e) for allowability provisions affecting foreign military sales
contracts.
(f) Unallowable public relations and advertising costs include the following:
(1) Monies paid to the Government associated with the leasing of Government
equipment, including lease payments and reimbursements for support services, except
for foreign military sales contracts as provided for at 225.7303-2.
231.205-6 Compensation for personal services.
(f)(1) In accordance with Section 8122 of Pub. L. 104-61, and similar sections in
subsequent Defense appropriations acts, costs for bonuses or other payments in excess
of the normal salary paid by the contractor to an employee, that are part of
restructuring costs associated with a business combination, are unallowable under DoD
contracts funded by fiscal year 1996 or subsequent appropriations. This limitation does
not apply to severance payments or early retirement incentive payments. (See 231.20570(b) for the definitions of “business combination” and “restructuring costs.”)
(m)(1) Fringe benefit costs that are contrary to law, employer-employee agreement,
or an established policy of the contractor are unallowable.
231.205-18 Independent research and development and bid and proposal
costs.
(a) Definitions. As used in this subsection—
(i) “Covered contract” means a DoD prime contract for an amount exceeding the
simplified acquisition threshold, except for a fixed-price contract without cost
incentives. The term also includes a subcontract for an amount exceeding the
simplified acquisition threshold, except for a fixed-price subcontract without cost
incentives under such a prime contract.
(ii) “Covered segment” means a product division of the contractor that allocated
more than $1,100,000 in independent research and development and bid and proposal
(IR&D/B&P) costs to covered contracts during the preceding fiscal year. In the case of a
contractor that has no product divisions, the term means that contractor as a whole. A
product division of the contractor that allocated less than $1,100,000 in IR&D/B&P
costs to covered contracts during the preceding fiscal year is not subject to the
limitations in paragraph (c) of this subsection.
(iii) “Major contractor” means any contractor whose covered segments allocated
a total of more than $11,000,000 in IR&D/B&P costs to covered contracts during the
1998 EDITION

231.2-1

Defense Federal Acquisition Regulation Supplement
Part 231—Contract Cost Principles and Procedures

preceding fiscal year. For purposes of calculating the dollar threshold amounts to
determine whether a contractor meets the definition of “major contractor,” do not
include contractor segments allocating less than $1,100,000 of IR&D/B&P costs to
covered contracts during the preceding fiscal year.
(c) Allowability.
(i) Departments/agencies shall not supplement this regulation in any way that
limits IR&D/B&P cost allowability.
(ii) See 225.7303-2(c) for allowability provisions affecting foreign military sale
contracts.
(iii) For major contractors, the following limitations apply:
(A) The amount of IR&D/B&P costs allowable under DoD contracts shall
not exceed the lesser of—
(1) Such contracts’ allocable share of total incurred IR&D/B&P costs; or
(2) The amount of incurred IR&D/B&P costs for projects having
potential interest to DoD.
(B) Allowable IR&D/B&P costs are limited to those for projects that are of
potential interest to DoD, including activities intended to accomplish any of the
following:
components.

(1) Enable superior performance of future U.S. weapon systems and
(2) Reduce acquisition costs and life-cycle costs of military systems.

States.

(3) Strengthen the defense industrial and technology base of the United
(4) Enhance the industrial competitiveness of the United States.

(5) Promote the development of technologies identified as critical under
10 U.S.C. 2522.
(6) Increase the development and promotion of efficient and effective
applications of dual-use technologies.
(7) Provide efficient and effective technologies for achieving such
environmental benefits as: improved environmental data gathering, environmental
cleanup and restoration, pollution reduction in manufacturing, environmental
conservation, and environmentally safe management of facilities.
(C) For a contractor's annual IR&D costs to be allowable, the IR&D projects
generating the costs must be reported to the Defense Technical Information Center
(DTIC) using the DTIC's on-line input form and instructions at
http://www.dtic.mil/ird/dticdb/index.html. The inputs must be updated at least
1998 EDITION

231.2-2

Defense Federal Acquisition Regulation Supplement
Part 231—Contract Cost Principles and Procedures

annually and when the project is completed. Copies of the input and updates must be
made available for review by the cognizant administrative contracting officer (ACO)
and the cognizant Defense Contract Audit Agency auditor to support the allowability of
the costs. Contractors that do not meet the threshold as a major contractor are
encouraged to use the DTIC on-line input form to report IR&D projects to provide DoD
with visibility into the technical content of the contractors' IR&D activities.
(iv) For major contractors, the ACO or corporate ACO shall—
and

(A) Determine whether IR&D/B&P projects are of potential interest to DoD;
(B) Provide the results of the determination to the contractor.

(v) The cognizant contract administration office shall furnish contractors with
guidance on financial information needed to support IR&D/B&P costs and on technical
information needed from major contractors to support the potential interest to DoD
determination (also see 242.771-3(a)).

1998 EDITION

231.2-3