In interpreting the term "sponsored" as used in the cost principle, the Armed Services Board of Contract Appeal (ASBCA) has held that the cost of research projects in excess of contributions from outside sources are allowable as IR&D costs because, at least to that extent, the projects are not "sponsored" by outside sources (General Dynamics Corp., ASBCA No. 10254). In that case the Board adopted the contractor’s "common sense" argument that because there was no question the costs were allowable if the contractor had undertaken the research without any financial assistance from outside help, the contractor should not be penalized for obtaining private contributions that effectively reduced the government’s cost.

Cases that construe the term "required by" are not consistent. One case involved costs incurred under a cost-plus-fixed-fee contract where after reaching the funds limitation amount the contractor continued to work, charging the costs to its IR&D account. The government argued the effort was "required" under the terms of the contract and therefore should be an unallowable cost overrun. The ASBCA disagreed holding the costs were properly charged to IR&D because the contractor was not contractually obligated to perform the work (Unisys Corp., No. 41135).

In another rather famous case, the contractor was working on a firm fixed price (best efforts) contract to develop two prototypes for the Divisional Air Defense System (DIVAD) where the nature of the contract required the contractor to only provide its "best efforts" to meet the contract requirements and had no obligation to continue work so when it did so it charged its IR&D accounts. Apparently not aware of the difference between a firm fixed price contract and a firm fixed price (best efforts) contract, the government erroneously claimed the contractor mischarged over $8 million asserting even if the work was not required the costs had to be charged directly to the DIVAD contract because the work could be specifically identified with that contract and hence could not be charged to IR&D. The Court disagreed stating the IR&D regulations state work required in the performance of a contract cannot be charged to IR&D but they never use the term "specifically identifiable" nor do they in any way suggest the term has significance with respect to what is and is not IR&D. The Court stated that the proper inquiry into determining whether something should be charged direct to the contract or to IR&D is to determine what is required under the contract’s statement of work (General Dynamics Corp. v. United States, No. CV89-6726).

Another case, however, leaves the door open for disallowing IR&D when it is "implicitly required" under the contract. The government alleged the contractor intentionally underbid a contract to design and build a Supersonic Low Altitude Target (SLAT) with the intent of recovering excess costs through IR&D. The contractor argued that the IR&D work, while in support of the SLAT contract, had potential applicability to other future contracts. The Court alluded to the "grey" area of the debate noting that some assert if a task is not explicitly called for in the contract it may be charged to IR&D while the alternative view is that a contract includes everything implicitly necessary to carry it out. Since the parties agreed that the tasks were required by the SLAT it disallowed the IR&D costs leaving undecided whether the "implicitly required" work can qualify as IR&D (United States ex rel. Mayman v. Martin Marietta Corp. F894 F. Supp. 218).

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