The white paper authors say though this is only a single decision by a single district court it is the only definitive decision of the issue and hence will likely be relied upon heavily by DCAA, contracting officers and the Department of Justice. The authors state not only will the "explicitly required" or "multiple contracts" interpretations used by so many contractors change but now contractors who rely on legal interpretations of the IR&D cost principle that are not challenged are subject to False Claims Act liability.

The authors believe the NNS decision adopts a "remarkably simplistic and entirely unworkable timing rule" for application of the IR&D cost principle. The Court’s decision that cost-charging should proceed along a "temporal" path – that is, the effort can be charged to IR&D up to the point a contract is signed and then must be charged to that contract – runs counter to the history and purpose of the IR&D cost principle. It was created so contractors and the government can derive the benefits of contractual R&D and closely-related IR&D efforts and both will suffer if closely related R&D efforts can no longer be pursued in parallel. GET LAST PAGE AND CONTACT AUTHORS.

As for guidance to contractors, Ms. Manos offers a few suggestions: (1) ensure your employees understand the importance of appropriately characterizing and charging IR&D and B&P efforts (2) before undertaking an IR&D project determine and document your determination that the effort is not required in the performance of a contract or grant (3) when in doubt about the appropriate characterization of certain efforts, consider making a written disclosure of your plan to the cognizant ACO or auditor and if possible, seek an advance agreement and (4) when performing on IR&D projects, ensure there is a mechanism in place for determining whether (and when) you are awarded a contract that requires the same effort.

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