Federal Acquisition Regulation; Independent Research and Development/Bid and Proposal Costs for Fiscal Year 1996 and Beyond

SUMMARY: The Civilian Agency Acquisition Council and the Defense

Acquisition Regulations Council are proposing to revise the Federal

Acquisition Regulation (FAR) allowable cost criteria for Independent

Research and Development (IR&D)/Bid and Proposal (B&P) costs for Fiscal

Year (FY) 1996 and beyond, by removing the requirements to calculate or

negotiate a ceiling for IR&D/B&P costs. In addition, the proposed rule

clarifies that costs in pursuit of certain cooperative arrangements are

allowable, to the extent they are allocable, reasonable, and not

otherwise unallowable. This regulatory action was not subject to Office

of Management and Budget review under Executive Order 12866, dated

September 30, 1993. This is not a major rule under 5 U.S.C. 804.

DATES: Comments should be submitted on or before January 13, 1997 to be

considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to:

General Services Administration, FAR Secretariat (MVRS), 18th & F

Streets, NW, Room 4037, Washington, DC 20405.

Please cite FAR case 95-032 in all correspondence related to this

case.

FOR FURTHER INFORMATION CONTACT: Mr. Jeremy Olson at (202) 501-0692 in

reference to this FAR case. For general information, contact the FAR

Secretariat, Room 4037, GS Building, Washington, DC 20405, (202) 501-

4755. Please cite FAR case 95-032.

SUPPLEMENTARY INFORMATION:

A. Background

The current FAR IR&D/B&P cost principle covers the limited

allowability of IR&D/B&P costs for major contractors through a 3-year

transition period (FY93-95) based on the requirements of Section 802 of

the FY92-93 National Defense Authorization Act (Pub. L. 102-190).

Section 802 does not address the allowability of IR&D/B&P costs after

FY95. The proposed rule removes, for FY96 and beyond, requirements to

calculate or negotiate a ceiling for IR&D/B&P costs and relies on

normal allowability, allocability and reasonableness standards.

The rule deletes certain definitions at FAR 31.205-18(a), major

portions of 31.205-18(c), and the entire FAR Subpart 42.10, since (1)

there is no requirement for advance agreement negotiations or formal

IR&D technical reviews and evaluations after completion of the

contractors' FY92, and (2) the transition period of limited

allowability for FY93 through FY95 has ended.

In addition, the rule amends FAR 31.205-18(e) to clarify that costs

incurred in pursuit of certain cooperative arrangements are allowable

to the extent they are allocable, reasonable, and not otherwise

unallowable.

B. Regulatory Flexibility Act

The proposed changes to FAR Parts 31 and 42 are not expected to

have a significant economic impact on a substantial number of small

entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C.

601, et seq., because most contracts awarded to small entities use

simplified acquisition procedures or are awarded on a competitive

fixed-price basis, and do not require application of the FAR cost

principles. In addition, this proposed rule applies to only those

entities that incur IR&D/B&P costs. It removes certain restrictions,

and relies instead on normal allowability, allocability and

reasonableness standards. An Initial Regulatory Flexibility Analysis

has, therefore, not been performed. Comments are invited from small

businesses and interested parties. Comments from small entities

concerning the affected FAR subparts also will be considered in

accordance with Section 610 of the Act. Such comments must be submitted

separately and should cite 5 U.S.C. 601, et seq. (FAR case 95-032), in

correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the proposed

changes to the FAR do not impose recordkeeping or information

collection requirements, or collections of information from offerors,

contractors, or members of the public which require the approval of the

Office of Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 31 and 42

Government procurement.

Dated: November 6, 1996.

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Therefore, it is proposed that 48 CFR Parts 31 and 42 be amended as

set forth below:

1. The authority citation for 48 CFR Parts 31 and 42 continues to

read as follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

2. Section 31.205-18 is amended in paragraph (a) by removing

definitions for ``Contractor'', ``Covered contract'', ``Covered

segment'', and ``Major contractor''; by revising paragraph (c); and

adding at the end of paragraph (e) a sentence to read as follows:

31.205-18 Independent research and development and bid and proposal

costs.

* * * * *

(c) Allowability. Except as provided in paragraphs (d) and (e) of

this subsection, or as provided in agency regulations, costs for IR&D

and B&P are allowable as indirect expenses on contracts to the extent

that those costs are allocable and reasonable.

* * * * *

(e) Cooperative arrangements: * * * Costs incurred in pursuit of

cooperative arrangements are allowable to the extent they are

allocable, reasonable, and not otherwise unallowable.

PART 42--CONTRACT ADMINISTRATION

Subpart 42.10 [Reserved]

3. Subpart 42.10 is removed and reserved.

[FR Doc. 96-29111 Filed 11-13-96; 8:45 am]

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