The calendar year ended December 31st, and you are closing your books and gathering information for your incurred cost submission, due June 30th. There is one more requirement you should consider that may have been overlooked. Does your company meet the requirement to input independent research and development (IR&D) costs into the Defense Technical Information Center (DTIC)?
What is the Defense Technical Information Center (DTIC)?
DTIC is the Defense Technical Information Center, which provides a centralized resource for Department of Defense Acquisition, Science, and Technology professionals on industry’s independent research and development activities.
How Do I Know if My Company is Required to Report IR&D Project Costs?
If you qualify as a “major contractor,” you must input your IR&D costs in DTIC no later than 3 months after your fiscal year end. You may say, “I am not a major contractor.” After all, you are not one of the top 10 defense contractors (e.g., Lockheed, Boeing, etc.), nor do you meet DCAA’s definition of a “major contractor,” which is a government contractor with $100 million of auditable dollar volume (ADV). Well, there is another definition of a “major contractor,” and it may impact your company.
What is a Major Contractor?
DFARS 231.205-18 defines a “major contractor” as a government contractor whose covered segments allocated a total of more than $11,000,000 in IR&D/B&P costs to covered contracts during the preceding fiscal year.
What is a Covered Contract?
A covered contract is a DoD prime or subcontract above the simplified acquisition threshold (currently $250,000), other than firm-fixed price contracts. Firm-fixed-price contracts with incentives are considered covered contracts.
Am I Considered a “Covered Segment”?
A covered segment is a product division that allocated more than $1,100,000 in IR&D/B&P to covered contracts during the preceding fiscal year. Government contractors with divisions that do not meet the $1,100,000 in IR&D/B&P threshold or do not have covered contracts would not be included in determining whether the government contractor is a “major contractor.” DoD has made this as clear as mud.
Is the $11,000,000 Based on IR&D Costs in the Prior Year?
While the requirement is to report IR&D costs in DTIC, the criterion is $11,000,000 of IR&D and B&P costs in the preceding year. That is correct: B&P is added to the $11,000,000 equation to determine whether the “major contractor” threshold is met.
When Do I Have to Report the Information to DTIC?
Government contractors are required to report the IR&D projects in DTIC using the form on the DTIC website, no later than 3 months after the company's year-end. THIS IS VERY IMPORTANT. In addition to entering the IR&D project costs, this data must be updated annually and upon project completion. Copies of the information must be available for the DCMA Administrative Contracting Officer (ACO) and the DCAA auditor to support the allowability of the costs. While DFARS 231.205-18 does not reference the 3-month time period, it is included in the Director, Defense Procurement and Acquisition Policy Memorandum on Clarification of Defense Federal Acquisition Regulation Supplement Requirement of Major Contractors to Report Independent Research and Development Projects, dated February 3, 2014.
What Happens if I Don’t Report IR&D Project Costs Within the 3-Month Time Period After Year End?
If a government contractor meets the reporting criteria in DFARS 231.205-18 and fails to report IR&D project data in DTIC no later than 3 months after the government contractor's FYE, DCAA will question these costs as expressly unallowable and subject to penalties. DFARS 231.205-18(c)(iii)(C) states that for annual IR&D costs to be allowable, they must be reported to DTIC using the DTIC’s online input form and must be updated at least annually and when the project is completed.
DTIC Reporting Considerations for Government Contractors
There is no expectation that the IR&D costs recorded in the DTIC database reflect the actual amounts claimed in the incurred cost proposal, but government contractors are required to input project costs, update them annually and enter them when the project is complete. Government contractors not meeting the threshold for a major contractor are encouraged to report IR&D projects in DTIC to provide DoD visibility, but this is not required. Reporting of classified IR&D projects is not required.
Aligning IR&D Reporting with Incurred Cost Compliance
Redstone GCI helps government contractors evaluate whether DFARS 231.205-18 IR&D reporting requirements apply by reviewing covered contracts, covered segments, and prior year IR&D and B&P allocations, then aligning DTIC reporting with incurred cost proposal preparation and FAR Part 31 allowability requirements. This support includes reviewing contract and subcontract information that affects covered contract determinations, reconciling IR&D and B&P costs to accounting records, organizing supporting documentation for DCAA auditor and DCMA ACO review, developing procedures for annual DTIC updates and project completion entries, and training accounting, contracts, and leadership teams on how reporting requirements affect cost recovery and audit risk.
Lynne is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to Commercial Item Determinations and support, Cost Accounting Standards, DFARS Business System Audits, Proposals, and Incurred Cost. Prior to joining Redstone Government Consulting, Lynne served in several capacities with DCAA and DCMA for over 35 years. Professional Experience Lynne began her career working with DCAA in the Honeywell Resident Office, Clearwater, FL in 1984. Lynne’s experience included various positions which involved conducting or reviewing forward proposals or rate audits, financial capability audits, progress payments, accounting and estimating systems, cost accounting standards, claims and disclosure statement reviews. She is an expert in FAR, DFARS, CAS and testified as an expert witness. Lynne assisted in drafting the commercial item guidance for DCAA Headquarters. Lynne was assigned as a Regional Technical Specialist where she provided guidance to 20 field offices on highly complex or technical issues relative to forward pricing, financial capability or progress payment issues. As an Assistant for Quality, she was involved in reviewing and ensuring audit reports were in compliance with policy and GAGAS as well as made NASBA certified presentations to the staff including but not limited to billing reviews, CAS, unallowable cost and progress payments. To enhance her experience in government contracting, Lynne accepted a position with DCMA in 2015 as part of the newly organized DCMA Cadre of Experts in the Commercial Item Group. This included performing reviews of prime contractor’s assertions and/or commercial item determinations as well as performing price analyses. Lynne was a project lead and later became a lead analyst where she engaged with the buying commands on requests and reviewed price analysis reviews performed by a team of 5 analysts. She also assisted the DCMA CPSR team relative to commercial items and co-instructed the Commercial Item Training presented to DCMA. Education Lynne earned a Bachelor of Science Degree in Accounting from the University of Central Florida. Certifications State of Florida Certified Public Accountant State of Alabama Certified Public Accountant Defense Acquisition Workforce Improvement Act (DAWIA) Level III- Auditing DAWIA Level III – Contracting